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Apple slashes guidance on weak iPhone sales

Apple smartwatches

Apple braced for a significant year-on-year decline in revenue in the key December quarter, shaving upwards of $5 billion from its guidance estimate in the wake of weaker than expected iPhone sales, with China in particular suffering.

In a letter to investors, Apple CEO Tim Cook warned the company now anticipates $84 billion in revenue for its fiscal Q1 rather than the $89 billion to $93 billion originally forecast. The revised figure represents a substantial decrease from the $88.3 billion in revenue Apple posted in the same quarter a year ago.

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Cook said Greater China accounted for the “vast majority” of year-over-year iPhone revenue declines, noting economic and political factors weighed on both financial markets and consumers. As a result, traffic to Apple’s retail stores and channel partners dropped as the quarter progressed, he added.

The CEO did not discuss whether a ’sales ban on Apples older iPhone models in the country issued in early December had any impact on revenue. Neither did he break out unit sales to correspond to the revenue drop, though the omission was unsurprising given Apple’s recent decision to halt shipment report.

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Other markets

Cook also acknowledged the newest iPhone line also fell flat in markets outside China, with fewer than expected upgrades in an unspecified number of developed markets.

“While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including 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,” he wrote.

He added sales of Apple’s Watch series 4, iPad Pro, AirPods and Macbook Air were also “constrained much or all of the quarter”, but said the company’s Services, Wearables and Mac units all posted record revenue for the period. Overall, revenue outside of iPhone grew nearly 19 per cent year on year, Cook said.

Meanwhile, Apple’s grip on the smartwatch market declined in the second half of 2018 to below 45 per cent, despite steady growth across the sector, ABI Research figures showed.

The analyst firm said Apple’s share of the market in Q2 and Q3 fell to 43.35 per cent, its lowest point since the same time in 2017. The company however still holds a significant lead over rivals Fitbit, Huawei and Samsung, which have roughly 8 per cent each, while the “others” category also saw an increase in its share during the period.

Between 2018 and 2023, ABI forecasted that the smartwatch market will see shipment increases from 40 million to more than 99 million, with the devices forming a major part of the overall wearables sector.

Stephanie Tomsett, research analyst at ABI Research, explained smartwatches now offer consumers a large number of wearable features, such as fitness tracking, notifications and heart rate monitoring from the wrist, with more options becoming available for consumers other than the Apple Watch.

“As the number of flagship and budget smartwatches continues to grow, consumers are increasingly opting for devices from companies other than Apple,” she added.

ABI noted that the latest Apple smartwatch, the Apple Watch 4, is an advanced device, not only offering notifications and fitness capabilities, but also LTE access, voice assistant Siri and other features such as a fall sensor and ECG heart readings in the US.

While few devices offer similar options, consumers may be tempted by other offerings from companies such as Fitbit, Huawei and Samsung which are cheaper in price, come with a long battery life and improved smartphone capability.

“Consumers are increasingly weighing up the benefits and costs between the extra features and the longer battery life/cheaper price,” added ABI

 

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