Published: Fri, January 04, 2019
Money | By Ralph Mccoy

5 takeaways from Apple's stark China warning

5 takeaways from Apple's stark China warning

Fallout from the Apple news also caused chip stocks such as Advanced Micro Devices, Nvidia and Qorvo to fall, along with Skyworks which dropped more than 10 percent.

However, the excuses Cook comes up with fails to mention any arrogance or stupidity on Apple's part. The S&P 500 index plunged almost 2.5 percent and the tech-heavy Nasdaq lost more than three percent. The second largest economy is slowing, and could be a convenient excuse for companies missing forecasts, but two veteran global investors say Apple's problems are largely self-inflicted, not a harbinger of a looming catastrophe in emerging markets. Secondly, Tim Cook thinks the weakening United States dollar is to blame for Apple's lowered profits, as well as the company's flagship device, the iPhone, experiences its worst sales run in recent memory due to competition from overseas.

It is a company that is always tight-lipped about its finances between its quarterly results, so Wednesday's letter from Tim Cook warning Apple investors that the outlook had suddenly darkened was a bombshell which rocked the market. Apple has been steadily raising the price of its newest and most powerful iPhones each year, with some models now topping $1,000.

In a note titled "Apple's Miss: Bridging the Gap Between Perception and Reality", long-time Apple analyst Gene Munster from Loup Ventures said while the revenue miss was largely expected, the magnitude of the miss was disappointing.

In an interview with CNBC Wednesday, Cook said that the company will look to shore up sales by marketing trade-ins and installment plans in hopes of reducing the sticker shock of the latest crop of iPhones, whose prices range from $749 to as high as $1,449.

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It's a matter of sustaining this level but if he's able to, James Harden could bring home back-to-back MVP trophies. Steph Curry led the Warriors with 35 points and six assists, while Kevin Durant added 26 points and seven rebounds.

"This year has the potential to be a tough year for western brands", said Benjamin Cavender, a Shanghai-based analyst at consultant China Market Research Group.

At least six Wall Street firms, including BTIG and RBC, lowered their share price forecasts by more than 15 percent after Cook's letter. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter. "The iPhone is something that everyone knows and buys, and if people aren't buying it, then it's a pretty good sign they're having a hard time". China's smartphone market has been down 6% year-over-year in the third quarter of 2018 and is expected to drop by 3% in the fourth quarter of 2018, according to IDC.

"I think there are a heck of a lot of USA companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year".

Chief Executive Tim Cook blamed weak demand in China as President Trump's trade war escalates. When the suspension on selling was lifted, Apple shares fell 7.45%. With Apple suddenly launching several new products in the quarter-including iPhones, Apple Watches, and Macs-it experienced "supply constraints" that would "gate" (slow) sales of "certain products" during the quarter. Apple is appealing the decision.

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