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Apple Cuts Guidance For Quarter, Citing Low iPhone Upgrades

CEO Tim Cook penned a letter to shareholders blaming the guidance reduction entirely on the iPhone.

Apple CEO Tim Cook said in a letter to shareholders on Wednesday that "lower than anticipated iPhone revenue" has led the company to slash its guidance for its fiscal first quarter of 2019, which ended Dec. 29.

Cook blamed the soft iPhone revenue on lower-than-expected demand in China and other emerging markets, as well as in "some developed markets."

[Related: The 10 Biggest Apple News Stories Of 2018]

Apple ultimately saw "fewer iPhone upgrades than we had anticipated" during the quarter, he wrote.

"While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be," Cook wrote.

Along with macroeconomic challenges, he wrote, “we believe there are other factors broadly impacting our iPhone performance.” Those include “consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements,” Cook wrote.

Cook said the iPhone "accounts for all of our revenue shortfall," whereas other products in Apple's lineup such as the Mac and iPad are seeing strong growth.

Apple cut its revenue guidance for its fiscal first quarter of 2019 to $84 billion, down from guidance of between $89 billion and $93 billion previously.

The disclosure follows a number of recent troubling signs about Apple's iPhone business, including flat unit sales in the company's iPhone business in the previous quarter and reduced expectations from leading analysts. Apple has also recently signaled that its iPhone business may be struggling by launching special promotions for buying new iPhones--an extremely rare move by the company.

Some companies in China have also reportedly boycotted Apple products as a result of the arrest in Canada of Meng Wanzhou, chief financial officer of Chinese smartphone maker Huawei, in December.

Apple's stock price was down 7 percent, to $146.90, in after-hours trading on Wednesday.

While the iPhone had continued to generate major revenue growth for Apple in previous quarters, that had mostly come thanks to the higher prices being charged for the OLED models in the lineup such as the iPhone X, iPhone XS and iPhone XS Max.

"We can't change macroeconomic conditions, but we are undertaking and accelerating other initiatives to improve our results," Cook wrote in the letter to shareholders, citing steps being taken around easier trade-ins and financing of iPhone purchases.

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