Apple finally acknowledges lower-than-expected iPhone sales

Today, Apple released an open letter to investors revising its guidance for Q1 of this year. The “guidance” is the information a company provides as a way to predict its future earnings. This is a rare occurrence, especially for a company with a status as grand as Apple.

Essentially, Apple is lowering its guidance (expected revenue) for the first quarter of 2019 from (previously) between $89 billion and $93 billion down to $84 billion. This is compared to Apple’s reported $88.3 billion in revenue for Q1 of 2018. The full letter can be found at the Source link below but here is the key takeaway regarding weaker iPhone sales.

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. In fact, categories outside of iPhone (Services, Mac, iPad, wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.

Of course, there are so many factors that affect sales for a company with a world-wide presence such as Apple. However, the one factor that Apple failed to mention was the iPhones’ price points. Apple even cited the “significantly reduced pricing for iPhone battery replacements” as a factor.

Apple acknowledges that the Chinese market was the biggest factor in its need to revise its guidance. Aside from the cited signs of China’s economy beginning to decline, Apple is facing much fiercer competition in the Chinese market from other big Chinese players like Huawei, Oppo, vivo, and Xiaomi. Besides, with much higher price points, the Chinese consumer preferred to spend a fraction of the cost of a new iPhone on something more affordable.

It’s not all bad, however. Even though Apple’s iPhone sales aren’t doing as well as previous years, it still shows promise in its ever-increasing revenue sources outside of the iPhone. Apple cites “all-time record revenues from Services, Wearables, and Mac.” Which includes Apple Music and iCloud, the increasing popularity of the Apple Watch, and Apple’s computer business.

Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.

Apple is sure feeling the heat of 2018 as it gears into 2019. For its iPhone business, Apple needs a new approach now that it exhausted its strategy of slowly knocking up the average price of the iPhone over the years. The market is fighting back and Apple needs a new strategy for the iPhone business in 2019.

Source