Published: Sat, January 05, 2019
Markets | By Jeffery Armstrong

Is it the China slowdown or is it just Apple?

Is it the China slowdown or is it just Apple?

Any new product offering from Apple is unlikely to be revealed before September, when the company traditionally unveils its new iPhones.

Analysts see iPhone's high price point and lack of major updates as the major reasons for the Chinese market's lukewarm reaction to its new iPhone releases.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China".

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russian Federation for a lower-than-anticipated sales estimates for the company's fiscal first quarter. Counterpoint reported iPhone sales dropped by 17% year-over-year during the third quarter due to the weak initial performance of the new models. [MKTS/GLOB] Developments in a patent dispute between Apple and Qualcomm in Germany also rattled investors. The market value of Apple at Thursday's open was around $680 million.

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Cook said the new iPhone models were released earlier than the flagship iPhone X last year, which created a hard year-over-year comparison. "We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there".

The statement from one of the world's largest companies will further rattle investors already anxious about the slowing Chinese economy.

"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. With iPhone's production lines in China, Apple has been caught in between the world's two largest economies.

Many analysts and investors had anxious about a slowdown in iPhone sales since the company said in November it would stop disclosing unit sales data for its phones and other hardware products.

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A senior White House economic adviser said he expected trade uncertainty to hit earnings at many US companies, but that sales at Apple and others with large exposure to China would recover once Washington and Beijing strike a trade deal.

"It's not going to be just Apple", CEA chairman Kevin Hassett said in an interview on CNN.

The timing of Apple's announcement blaming its shortcomings partly on President Donald Trump's trade war with China may increase pressure on American officials to ease the tensions quickly.

According to that report, most analysts had expected Apple to pull in $91.3 billion in revenue during the Holiday quarter - which is ~$7.3 billion more than Cook's updated estimates.

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Buried deep in the letter is Cook's admission that some of the devoted Apple fans who used to buy new devices every year are now "taking advantage of significantly reduced pricing for iPhone battery replacements". Apple is appealing the decision. "It will be interesting to see how Apple shares react if there's a China trade agreement".

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