Published: Sun, January 06, 2019
Money | By Ralph Mccoy

Apple Is the New Nokia, Analyst Warns

Apple Is the New Nokia, Analyst Warns

Stock trading was temporarily halted Wednesday while Apple lowered its guidance.

Wall Street stocks have slid sharply in the wake of a warning from Apple (NasdaqGS: AAPL - news) that its revenues would fall short because of a slowdown in China.

The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September a year ago to seize the number two spot behind industry leader Samsung, according to the research firm International Data Corp.

In recent weeks, Chinese media have reported stories of companies awarding stipends to employees who ditch their iPhones to buy Huawei, said Shen Dingli, a well-known worldwide relations commentator in Shanghai.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States", Cook added.

Apple briefly became the world's first trillion-dollar public company in 2018, before a disappointing set of results in its fourth quarter caused its share price to begin a steady decline.

Investors were shaken this week as Apple warned late Wednesday it would miss revenue expectations for its fiscal first-quarter.

Apple originally forecast a revenue of between $89 billion and $93 billion.

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The company also anticipated some economic challenges in emerging markets, although "this turned out to have a significantly greater impact than we had projected", Cook wrote.

Apple's first profit warning since 2002 has clearly generated a significant amount of finger-pointing at the Cupertino giant's headquarters, so much so that in the letter to investors Apple may have said more than it had planned on saying. China's economy has been pinched by the ongoing Sino-US trade war which is spilling over to other Asian economies. The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3 percent, to 6,463.50.

Apple's first instance of revised earnings guidance since 2002 has the potential to rattle the financial markets as it puts the spotlight on China's woes and the dependence of the largest US companies on strong growth in the world's second-largest economy.

The fact that Apple took the dramatic step of halting trading is an indication that the company was taken by surprise by the iPhone sales shortfall.

A slew of brokerages had reduced their first-quarter production estimates for iPhones after several makers forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets. That's well below analysts' consensus estimates of $91.36 billion. But Cook specifically said he "would not put China in that category" of countries with troubled growth. Smartphone users in the US and many other established markets are holding on to their gadgets longer than they used to - more than three years on average in the USA, up from about two years in 2014, according to mobile industry consultant Chetan Sharma. "As growths in China and Eurozone have been clearly slowing, investor fears that moderating global demand will start to dampen USA growth momentum", she added. Apple's problems in China may continue deep into 2019. During the same quarter in the prior year, the firm posted $2.07 earnings per share.

At the news conference, Trump also voiced his displeasure with Apple for making products in China, although he falsely asserted Apple CEO Tim Cook would soon change that.

But some investors were heartened by Apple's plans on using its cash pile. The shares had already fallen 32 per cent from their peak in early October when investors still had high hopes for the new iPhone models.

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