Apple’s CEO Tim Cook published a letter yesterday to investors advising the company is expecting lower than anticipated iPhone sales for the first fiscal quarter of 2019. The announcement doesn’t exactly come as a surprise given the fact reports have surfaced indicating the company’s latest iPhones weren’t performing as well as they were originally hoping, likely due to their similarities to older models and the fact they can go up to as much as $1,449 when fully specced out.
Cook basically repeats these reports verbatim, citing lower and expected demand in markets such as China. Interestingly, he also says weaker than expected sales occurred “in some developed markets,” hinting the United States might fall into this particular category.
Still, though, China has definitely taken a hit on the trillion-dollar company. In an interview with CNBC, Cook said the reason behind the iPhone’s decline in sales in China is the result of trade tensions between the U.S. and the country which puts additional pressure on China’s economy, leading to fewer customers interested in buying a new phone.
China’s not the only reason Apple is reducing its iPhone sales guidance, however. Cook also mentioned in his interview fewer carrier subsidiaries are also to blame. Then there’s the fact Apple reduced the price to replace your current iPhone’s battery to just $29 following a major controversy that accussed the company of deliberately slowing down older iPhones. By replacing the battery, your device’s out-of-box performance was restored, giving potential iPhone buyers hesitation when it came to pulling the trigger on a newer model.
Of course, Apple doesn’t have just bad news to share when it comes to the iPhone’s performance this quarter. In fact, Cook said in a memo to employees (obtained by Bloomberg) that “iPhone activations in the US and Canada set new Christmas Day records.” This doesn’t mean the iPhone XS or XR are to thank for this since it’s possible older, cheaper models like the iPhone X and 8 are to blame, but it does at least provide a shimmer of light on an otherwise dark cloud the company is under.
So how much money is Apple losing due to lower than expected iPhone sales? According to Cook, the number sits at around $9 billion, although this won’t be confirmed until Apple releases its earnings on January 21st. It’s easy to say $9 billion is nothing to a company like Apple (and it really isn’t), but considering the iPhone is such a core part of the company’s business, to see this segment struggle at all sends shockwaves throughout the rest of Apple
Speaking of the rest of Apple, Cook did state other areas of the company are gearing up to see record profits, with some reaching near a 19 percent increase year-over-year. So while the rest of Apple is going strong, it’s the iPhone the company clearly needs to work on.
So far, we haven’t heard anything as to what Apple plans to do in order to bounce back from this unexpected hit. Of course, we’ll keep you posted if anything is announced or confirmed.
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