CRUNCH TIME
Apple sales fall, triggering global slowdown fears
Apple yesterday fed fears that the global economy could be slowing faster than expected by announcing it would miss its first-quarter revenue estimate, a rare misfire the company blamed on challenges in the Chinese economy and the trade conflict between the United States and China.
Months after unveiling two new iPhones in time for the holiday season, Apple CEO Tim Cook said in a note to investors that the company had lowered its revenue guidance to US$84 billion ($126.6b), compared to its previous estimate of revenue between US$89b and $93b. The news sent Apple’s stock plunging.
In explaining the change, Cook said Apple “did not foresee the magnitude of the economic deterioration” in markets including greater China.
Cook said that most of the revenue shortfall to the company’s initial guidance “occurred in greater China across iPhone, Mac and iPad”.
Along with slowed growth there in the second half of last year, Cook said that the “economic environment in China has been further impacted by rising trade tensions with the United States”.
“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” Cook said.
The announcement is likely to add further volatility to the stock market, where US technology stocks have helped drive a major correction in recent months.
It also comes as the Trump administration and the Chinese are trying — so far without success — to resolve a simmering trade conflict that has put hundreds of billions of Chinese exports to the United States under tariff. The Apple earnings miss suggests that the effects of the China slowdown could be reaching US. shores fairly quickly.
The earnings miss shows how the trade war is enveloping one of the biggest US brand names, which had worked hard to gets its product exempted from tariff lists released by the Trump administration.