Five ways to look at Apple’s surprise bad news

“In an ugly New Year’s surprise Wednesday afternoon, Apple announced unexpectedly that it was cutting its first-quarter revenue guidance from $91.5 billion to $84 billion,” Alexis C. Madrigal writes for The Atlantic. “The move is highly unusual. Apple reportedly last revised a projection like this in 2002.”
Here are five ways to look at the announcement:
1. “Chimerica” in action: For many years, China has been important to American companies as a site of production, but over the past 15 years, Chinese consumption of American products has become a major part of global corporations’ business models. So a Chinese economic slowdown is bad for American business.
2. Apple is an iPhone company: While Apple makes laptop and desktop computers, tablets, and speakers, the sheer size of the smartphone market has meant that Apple has become, roughly, an iPhone company.
3. Smartphones are (almost) commodities: If you already sell an ungodly amount of phones, it’s hard to keep selling an even more ungodly amount of phones.
4. For most tech companies, corporate growth and profitability are dependent on overseas markets: The American economy isn’t the only place where American companies make money.
5. As a sign for the global economy, this is … not good: Analysts expect that the [Chinese] economy will slow down and go through a structural transformation away from manufacturing. But everyone basically hopes that doesn’t happen too quickly, resulting in a “hard landing.”
Much more in the full article here.
MacDailyNews Take: Pessimistically is one way to look at things. Another is to think that when – not if – a new U.S.-China trade deal is agreed upon and in place, business for companies like Apple can improve dramatically.
If you look at our results, our shortfall is over 100% from iPhone and it’s primarily in greater China. And so as we look at what’s going on in China — it’s clear that the economy begins to slow there for the second half. And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy… I’ve had obviously many, many discussions [with the Trump administration] over the course of many months to be constructed and to give sort of my perspective on trade and the importance of it to the American economy as well. And I feel like I’m — that I’m being listened to in that respect. And so I’m actually encouraged by what I’ve heard most recently coming from the U.S. and from China and hopefully we’ll see some changes. – Apple CEO Tim Cook, January 2, 2019
SEE ALSO:
Wall Street analysts slash Apple target prices – January 3, 2019
Advisor to President Trump: Apple’s sales should pick up when U.S.-China strike trade deal – January 3, 2019
Two things Tim Cook just did that make Apple look guilty today – January 3, 2019
CEO Cook issues memo to employees after Apple slashes revenue outlook for the first time in almost two decades – January 3, 2019
Apple’s earnings warning means CEO Tim Cook now has a major credibility problem – January 3, 2019
Loup Ventures: We continue to expect AAPL to outperform the rest of FAANG in 2019 – January 3, 2019
Open thread: Does Apple need new leadership? – January 2, 2019
CEO Tim Cook on why Apple lowered first-quarter revenue forecasts – January 2, 2019
Apple CEO Tim Cook issues public letter to investors, lowers guidance – January 2, 2019
[Thanks to MacDailyNews Reader “Ladd Morse” for the heads up.]