Apple Lowers Revenue Guidance for Q1 2019 Citing 'Fewer iPhone Upgrades' Than Anticipated

Discussion in 'MacRumors.com News Discussion' started by MacRumors, Jan 2, 2019.

  1. MacRumors macrumors bot

    MacRumors

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    Apple today published a letter from Apple CEO Tim Cook addressed to Apple investors announcing changes to the guidance for the first fiscal quarter of 2019.

    Apple is expecting revenue of approximately $84 billion and gross margin of 38 percent, which is quite a bit lower than the estimate provided in November when fourth quarter earnings were revealed.

    At that time, Apple said its guidance included expected revenue of $89 to $93 billion and gross margin between 38 and 38.5 percent. From Cook's letter:
    At $84 billion, Apple will see a year-over-year revenue drop in 2019 after pulling in $88.3 billion during the first fiscal quarter of 2018.

    Cook offered up a number of explanations for the decline, some of which were mentioned during the fourth quarter earnings call.

    Cook says that the timing of the iPhone XS, XS Max, and XR launch compared to the timing of the iPhone X launch last year will impact year-over-year comparisons, as will the strength of the U.S. dollar.

    Apple Watch Series 4, iPad Pro, MacBook Air, and AirPods were constrained during the holiday season, leading to an inability to keep up with demand, as did economic weakness in emerging markets played a major role in the guidance change.

    Cook says that customers taking advantage of "significantly reduced pricing for iPhone battery replacements" is also a factor that led to fewer upgrades in 2018. Starting in January 2018, Apple began offering battery replacements for $29 after a snafu that saw the company quietly introducing software that throttled the iPhone's performance without letting customers know. Apple faced multiple accusations that it deliberately slows down iPhones to encourage people to buy new devices, and while that may not be the case, offering cheaper battery replacements does appear to have impacted sales of new devices.

    In China specifically, Apple saw a significant decline in sales, especially during the second half of 2018, which Cook says was in part due to rising trade tensions with the United States.
    Cook says that Apple saw "fewer iPhone upgrades" than anticipated as a result of the aforementioned factors, requiring the company to lower its expected revenue estimates.
    At the end of his letter, Cook highlights positive results from the December quarter, such as a growth in active devices, and increased revenue outside of the iPhone business in areas that include services and wearables. Apple, says Cook, is confident in its business and the "pipeline of future products and services."
    Cook's full letter to investors can be read on Apple's Newsroom site.

    Update: Apple CEO Tim Cook sat down for an exclusive interview with CNBC, where he further explained the guidance revision. He said the shortfall is over 100 percent from iPhone and primarily from Greater China due to a slowing economy during the second half of 2018.

    Cook says trade tensions with the U.S. put additional pressure on the Chinese economy, leading to less traffic in stores and lower sales. Cook also blamed fewer carrier subsidies, a stronger dollar, and the $29 battery replacement program, suggesting that those factors led to fewer iPhone upgrades than expected. Going forward, Cook says Apple will focus "really deeply" on things it can control, boosting future sales through trade-in program marketing, monthly pricing options, and more focus on in-store services such as data transfer.

    Article Link: Apple Lowers Revenue Guidance for Q1 2019 Citing 'Fewer iPhone Upgrades' Than Anticipated
     
  2. MTW macrumors regular

    Joined:
    Apr 13, 2015
    #2
    Good. Time for Tim to stop the grift. Price products appropriately. Customers first, not shareholders. A return to the days of a 30% 'Apple Tax' (as opposed to whatever eye-watering number it is at now) is long overdue.
     
  3. KPOM macrumors G5

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    #3
    We’ll see if this leads to a change in pricing strategy this year, particularly in China and emerging markets.
     
  4. kerplunknet macrumors regular

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  5. sinsin07, Jan 2, 2019
    Last edited: Jan 2, 2019

    sinsin07 macrumors 68040

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    Mar 28, 2009
    #5
    Simple
    Lower prices
    $1500 iPhones
    $1800 IPads
    Not rocket science

    Tim wanted to test what the market could bear.
    Now the bear is bitting back.

    Tim fell into his own Reality Distortion Field.

    UPDATE:
    55 billion dollars wiped out in 1 afternoon due to hubris.
     
  6. Enclavean macrumors regular

    Enclavean

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    #6
    Tim gonna blame everything except for the high prices lol
     
  7. Eriamjh1138@DAN, Jan 2, 2019
    Last edited: Jan 3, 2019

    Eriamjh1138@DAN macrumors 6502a

    Eriamjh1138@DAN

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    #7
    My iphone7 plus is going for three years instead of upgrading after 2 because price.

    Also, it’s a damn nice phone.

    Edit: Jet Black, btw. (Thanks for the likes!)
     
  8. gsmornot macrumors 68030

    gsmornot

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    #8
    Too many years of pretty much the same phone. I do still enjoy my iPhone but I concede its basically the same year to year. Better display, faster, etc but generally the same. It's hard to tell people why to upgrade when they ask.
     
  9. julesme macrumors regular

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    San Jose
    #9
    The iPhone is an increasingly mature platform. How much “better” is the XS vs the X?

    The price increases didn’t help, though.
     
  10. jonblatho macrumors 6502a

    jonblatho

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    #10
    Their corporate profit margin has generally hovered in the 35-40% range for many years now.
     
  11. haydn! macrumors 6502a

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    UK
    #11
    And people still refuse to accept Apples latest products are not landing well.

    The end is far from near, but there is a need for change in pricing.
     
  12. KPOM macrumors G5

    Joined:
    Oct 23, 2010
    #12
    Maybe this improves the chance of an iPhone SE 2. This also raises the stakes in the recent trade war with China, as well as the dispute with Huawei over the Iran sanctions. The US government nearly bankrupted ZTE but saved it in a last minute deal. Will we do the same to Huawei?
     
  13. coolbreeze macrumors 68000

    coolbreeze

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    #13
    Remember all those people cramming into the Apple store by 12/31/2018 for a $29 battery?

    Yeah, they will be ready to give Apple more money in....like 2021.

    Good luck Tim, yikes. Lower prices, include a pencil on the iPhone XI (ala Note series) and pray.
     
  14. jonblatho macrumors 6502a

    jonblatho

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    #14
    Quick! Tell Apple's CFO that you've figured it all out.
     
  15. appleofmyibook macrumors member

    appleofmyibook

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    #15
    They won’t drop the prices of their phones. They’ll just do more to try and get you to buy them.
     
  16. diamond3 macrumors 6502a

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    Oct 6, 2005
    #16
    AAPL will take another big hit. This will be interesting to see how it plays out over the next year. This could potentially be the best time to buy stock in the coming 6 months.

    I think apple is playing the game of reduce the price, still sell a similar amount of phones with a lower profit margin thus reducing reducing revenue even further or keep prices higher and trust that people will buy it regardless. As a consumer, I say lower the price of the phone. As a shareholder, I'm not sure the route to take. If the stock keeps tanking, you'd hope they'd try to make some significant changes.
     
  17. jonblatho macrumors 6502a

    jonblatho

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    #17
    It doesn't.
     
  18. Steve121178 macrumors 601

    Steve121178

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    Bedfordshire, UK
    #18
    That’ll teach the greedy sods.

    Don’t bite the hand that feeds you. Ever.
     
  19. robjulo macrumors 65816

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    #19
    Funny how all the armchair Wall Street experts who post on Macrumors dismissed all the warnings from a month ago.
     
  20. mlrproducts macrumors 6502

    Joined:
    Apr 18, 2004
    #20
    Let's see:

    2007 - iPhone is $399 (after initial flub)
    2019 - that would be $487 with inflation - where is my $499 flagship phone? (which honestly should still be $399 as tech gets cheaper, certainly storage is)
     
  21. KPOM macrumors G5

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    #21
    It may require a broader change in strategy, particularly in China. Huawei is starting to really compete on the high end there.
     
  22. ghostface147 macrumors 68030

    ghostface147

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    May 28, 2008
    #22
    I'll still be a buyer when I need things. My X should last me at least through 2020 with one battery replacement.
     
  23. trifid macrumors 68000

    trifid

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    #23
    Well duh, if you price iPhones to cost a fortune don't expect mass sales. iPhone prices need to come down, period.
     
  24. haydn! macrumors 6502a

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    Location:
    UK
    #24
    That’s not the same as the “Apple tax”. Apple tax is best described as the difference between Apple and similar competitor products. For example, the almost £1000 difference between the 15” MacBook Pro and a similar spec 15” XPS.
     
  25. Uofmtiger macrumors 68020

    Uofmtiger

    Joined:
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    Location:
    Memphis
    #25
    Same here. The current pricing strategy has made me re-evaluate the beauty of the 7Plus. The more I see the XS Max prices, the more beautiful my iPhone 7plus looks.
     

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