Equity futures are getting hammered tonight after Apple Makes Rare Cut to Sales Guidance.
Apple Inc. lowered its sales forecast for its fiscal first quarter, a rare revision to its guidance, blaming slowing sales of smartphones and other devices in China.
Apple Chief Executive Tim Cook said in a letter to investors on Wednesday that the company now predicts revenue of around $84 billion for the quarter ended Dec. 29. Previously the company said revenue would be between $89 billion and $93 billion for the quarter. Analysts surveyed by FactSet forecast more than $91 billion.
“Most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Mr. Cook wrote.
“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,” he wrote in the letter.
Uncertainty – What a Joke
Blaming uncertainty is a joke. No one can ever be sure of economic forecasts.
Facts of the Matter
- Apple sells a commodity.
- The competition has phones that are just as good, if not better, for cheaper
- At some point, consumers will no longer pay for a name.
- At some point, consumers decided new features are not worth the price.
Only Surprise
The only surprise is how long it took to get to points 3 and 4.
Looking Ahead
5G won’t be a savior. Apple could easily fall in half from here.
Expect all kinds of unexpected negative surprises in 2019.
Recession looms.
Mike “Mish” Shedlock
I checked out market share data, and Apple seems to increasingly be a US/Japan/Great Britain-centric phone. Their market share in the US remains strong, and in fact, seems to be growing, and they are #1 in the US by far. During the first 3 quarters of 2018, Apple had about a 39% market share in the US, whereas in 2016 and 2017 they had a 32% market share. Meanwhile their market share has been falling worldwide, and was down to 13% of the world market.
I’m surprised this didn’t happen years ago. Last time I shopped for a phone was 3 years ago and Apple was way overpriced compared to android phones. I guess their reputation has carried them for a lot longer than I expected.
Apple priced their damn phones too high and now they are starting to pay the price for it. GREED.
Looks to me like a recession is already here.
I am at points 3 and 4 – picked up a temporary LG android phone at Walmart for $40.00 after my iphone 6 screen cracked (badly). This LG works great – fast, easy to use, and if it falls overboard I can get a new one for the price of a monthly payment on a new Iphone. After using 3 generations of Iphones, I think I made the permanent switch. My kids laugh until their iphone batteries are dead and mine is still going strong..
5G is important in 2 ways: it provides enough speed and capacity to replace your cable tv system, and for the “Internet of Things”. I don’t see how it benefits your phone in any way, unless you prefer watching Netflix on your phone screen instead of a nice 60″ screen.
I’ve been locked into the Apple world for a decade or so. I’ll be moving towards a Linux/Android world when my current iPhone and Mac need replacement.
But, but…Trump said “It’s easy to win Trade Wars”.
No, it’s called these overpriced , manipulated markets are on thin ice and if it werent for trade wars it will be something else that sets the downside in motion. Regardless of trade war opinions, this was bound to happen eventually. Of course, all trump haters will use the trade wars and shutdown to their advantage and pin it on him. Rather they believe it or not.
Sales are in the ditch for Apple in China. 6 Chinese companies are copying their phones and selling them for around 200 dollars, while China complains that Apple doesn’t share.
On my trip to Vancouver I saw mostly Huawei phones. Canada is rethinking things with respect to China.
I told everyone it would be hard for consumers to justify paying more for the same features with the mobile revolution. You can only do so much on a 5.5 inch computer.
A little history. Back in the 80’s Apple developed some great software for computers. They decided they were a hardware company, not a software company, so they declined to license their software to other manufacturers. Meanwhile, Microsoft decided it was a software company, and licensed their software to anyone, and in time, their software more or less caught up with the Apple software. Also, meanwhile, with dozens of manufacturers innovating and slashing prices, computers running Microsoft software were always cheaper and faster than Apple computers. Apple’s market share stagnated, and dropped, after peaking in 1993 or so.
The stock price languished for years, until they reinvented themselves as a maker of iPods, and then iPhones. But, they once again decided they were a hardware company, not a software company, and refused to license their software. Meanwhile, Google (and some Chinese companies), developed software for phones that they sold to anyone. Now there are dozens of makers of cell phones, innovating, and competing on price. Once again, Apple has been losing market share.
What will the future bring? Will history repeat itself? Will the iPhone become as irrelevant as the Lisa and MacIntosh became? Or, has Apple reached a critical mass, where they can innovate and price reduce ahead of everyone else because they can afford the largest R&D? If Apple does fade, can they, once again, re-invent themselves as the maker of yet another product?
I guess we’ll find out. For history to repeat itself wouldn’t overly surprise me. It does that sometimes.
I don’t think Apple ever developed any innovative product. Instead, they took some good ideas that other people had, made them shinier, and marketed them.
The problem is apple offers no differentiating features compared to most other vendors. Huawei will eat apples lunch in China and other countries. LG, Samsung and Huawei will take more market share away. The iTunes and other apple specific stuff is expensive compared to hacking stuff for free on other platforms. automated hacking is going to present a problem.
I always enjoyed reading the ‘tards on Seeking Alpha trumpeting how Apple stock was headed to the moon, how their position as company was unassailable (and going to grow for eternity), how Wall Street analysts had it wrong and how investing in AAPL (at any price) was a surefire way to riches.
RIP Apple bulls. You deserve it.
LOL, Anyone who bought Apple stock before 2017 Summer is still at profit. Pretty much like anyone who bought into S&P 500 index.
What other stocks (and stock holders) you don’t like?
Sort of an odd historical account. Apple only sold their OS without hardware for a brief time in the late 1990s, nearly killed the company. The primary reason they had struggled in the 1990s and early 2000s was because they had no focus and no understanding of how the PC market was changing. The biggest change Jobs did was cut SKUs and deliver them the very modern NeXT OS. Those two things brought Apple back into the game. The iPod and iPhone were just improving an existing product (Nokia had smart-ish N-series phones well before the iPhone, just that no US carriers offered them, instead going for cheap feature phones from Korea and Motorola).
They did sell the OS without hardware for a very brief time, but so far as I know, only one or two hardware makers took advantage of it, and neither were ever major factors in the hardware market. By the time they did it, It was a decade too late. The time to have done so would have been the late 80’s. It was unique then, and would have preceded the first really functional version of Windows, Windows 95, by about 8 years. I have always believed that had they taken that step in the 80’s, then they would have preempted the market that Microsoft later occupied.
You’re absolutely right about Apple in the 80s and 90s. Microsoft recognized the value of software while Apple and IBM viewed software as something that helped sell hardware.
Indeed, KidHorn. Amazing as it seems in retrospect, only Microsoft seemed to realized that the true value (and the profit) was in the software. Over time, hardware has become cheaper, faster, more generic, and less profitable, while software has become more expensive, and remained profitable. For the original IBM PC, IBM actually released it with 3 operating systems, CPM-86, the UCSD p-System, and PC-Dos (rebranded MSDOS), two of which were horrible. I worked with CPM-86, and there is a reason Digital Research ceased to exist; it was awful.
IBM later realized their mistake, and wrote an excellent operating system, OS-2, but it was too late, beaten to the market by Windows 95.
What did I tell you. Here it is; “President Donald Trump told reporters Wednesday that there was a “glitch” in the stock market last month, but that equities should recover as the U.S. completes trade deals with countries like China”.
That should be good for a couple hundred Dow points on the futures tonight or in the early morning. I’ll check right now; Nope, still down -230, but improved from -330 an hour or so ago. Guess everyone hasn’t checked their twitter yet.
Earnings hit maybe $1/share? Not counting any “writedowns”.
It may be Warren Buffett’s worst investment (in $ amount).
Not to worry, if there’s another TARP, dear old Uncle Warren will get bailed out again. Meanwhile he’ll keep marketing himself as a folksy, humble Nebraskan done well.
So many retail investors justified their decision to buy the stock every time Uncle Warren did so. They clearly haven’t read their history == if they’d done so, they’d have discovered he’s made some terrible investment decisions over the years.
apple does not sell a commodity, samsung sells a commodity. But technology is supposed to get better AND cheaper, instead apple wants 4 figures for a phone that has a better camera but many times has features that people like removed.
To anyone whose financial future depends on the continuing strength of this so-called stock “market” – I truly fear for you and wish you the best.
The Trumpster-In-Chief will probably tweet something about AAPL tonight or tomorrow. The question is: what will he say? Will he say AAPL shouldn’t have put all their eggs in the Chicom basket or opened plants there and should build a plant in the US? Or will he somehow throw AAPL a lifeline by tweeting about another fine phone call with President 11 where he mentioned that AAPL is a fine product and he appreciates President 11 not putting tariffs on AAPL products?
Whatever he tweets, it has one objective and one only; pump up the stock market.
A lack of real leadership and stock buy backs.
The problem is a little more nuanced than “phones are a commodity.” It isn’t that phones are all the same, it’s that the apps are driving the product, and the apps are all just interfaces to their cloud service. We’ve come full circle, from mainframe to extremely personal computer (desktop then pocket), and now back to mainframe. But don’t call it a mainframe, now it’s “cloud computing” and the only way to make it work is to put as generic a UI and experience as possible. Not killing the battery or requiring a lot of local memory is a bonus too.
Enjoy your VT-100, idiots.
I used a VT-100.
VT = Virtual Terminal.
Games games games, all mostly running on the phone.
Casual gamers (the majority of the market) don’t really need much processing power. Hardcore gamers are using Nintendo Switch.