In a letter to investors earlier, Tim Cook expressed that the earning for the first quarter make be weaker than Apple may have expected. He cites that the reason being is “fewer iPhone upgrades than we had anticipated.” This weak demand is due mainly from China while Tim Cook states that there were some developing markets where the demand was not as strong for iPhone upgrades.
In this letter, Cook expressed the some reasoning for the lack of earnings, stating that the strength of the US dollar, overall weakness in economic markets, supply chain constraints, along with the launch timing of the new iPhone XS and XS Max. While these were some of the areas of concerns, the main area of concern is people are simply not purchasing the new iPhones that Apple are creating as they used to be.
According to Tim Cook’s letter, “Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.” While iPhone sales were lower than expected, Cook explains that Apple’s different divisions saw a growth of nearly 19 percent. While this news may be positive, Apple’s basic foundation is their iPhone, and if they struggle to sell the product, the company takes a large hit.
Tim Cook expresses the results of the unexpected result by saying, “the trade tensions between the United States and China put additional pressure on their economy,” in a CNBC interview. Cook also says that the large difference in price for lowered battery replacement for old models and less carrier subsidiaries are also some of the factors that contributed to short sales outcome.
Altogether, Apple’s original Q1 forecast is off by around $9 billion in overall revenue compared to their current sales. Partly due to this, Apple’s stock plummeted nearly 10 percent.