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

[jayrull]

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, and economic weakness in emerging markets played a major role in the guidance change.

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 through over on Apple's Newsroom site.

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

Expect more iPhone users to switch to Android platform.

 

[GuruZac]

Come on Apple. We all know many people who are shocked by the new pricing. You've effectively increased the cost of your flagship phone from 2016, an iPhone 7 Plus, by $500 to the $1449 XS Max. Even forgetting about the increased storage, it's a large jump in cost. That combined with iOS 12 running smoothly on older devices no doubt affects the sales.

 

[autrefois]

The fact that they don't mention the increased pricing of their products (which is not solely due to currency fluctuations) as a possible reason for the decline means that either they are trying to put a positive spin on things or are missing a key possible factor.

If Apple knows/strongly suspects that pricing is a factor, and they purposely don't mention it to investors, could they get in any sort of trouble?

 

[Abazigal]

A field day, the haters shall have today.

The revenue decline was driven by China, while developed countries are actually expected to post higher revenue.

Meanwhile, many products remain supply constrained. Meaning that demand outstrips supply.

This shows that pricing isn’t really a key factor. By and large, consumers are still willing to buy Apple products at Apple prices.

Do people even read articles before commenting anymore?

 

[I7guy]

Apple is only going to make $84 billion dollars this quarter? They are definitely doomed and are currently imploding. /s

 

[sinsin07]

Quick! Tell Apple's CFO that you've figured it all out.

Why?
Tim’s letter to investors should cover that.

 

[jonblatho]

The fact that they don't mention the increased pricing of their products (which is not solely due to currency fluctuations) as a possible reason for the decline means that either they are trying to put a positive spin on things or are missing a key possible factor.

If Apple knows/strongly suspects that pricing as a factor, and they purposely don't mention it to investors, could they get in any sort of trouble?

If they suspected that pricing was a problem, they're legally required to say as much if they say anything at all before their scheduled quarterly report. It is against the law to lie to investors.

 

[xxray]

Tim gonna blame everything except for the high prices lol

Admitting this publicly would be horrible for PR and sales. I don’t know why people here expect Apple or any company to say that.

 

[hexor]

$1000 phones? Years old new phones sold for what was the top of the line pricing tier in years past? wonder why they have problem getting people to upgrade. Other big problem is they put all their energy into market of selling people new phone hardware. World market can only support so many phones.

Smartest thing Microsoft ever did: Azure.

 

[I7guy]

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)

Old tech gets cheaper. New tech is always more expensive.

 

[newyorksole]

Wow. I’ve never seen Apple release this kind of statement and with this kind of length. Sheesh.

Idk what the future has in store.

 

[TechFounder]

Tim gonna blame everything except for the high prices lol

And you guys will blame everything except Tim. There’s an old saying, “fish stinks from the head down.”

 

[KPOM]

It doesn't.

They need to do something. Obviously the XS isn’t selling as well as expected, particularly in China. Selling old phones doesn’t seem to be working, either, since Huawei and other local companies are competing for the premium customers.

 

[DakotaGuy]

Time for Tim Cook to retire and enter politics. Hire someone with some passion and product vision to run Apple.

 

[charleswhalley]

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.

Agree - Cook has got it spectacularly wrong! The love of Apple is dwindling. He needs to learn from Steve Jobs and make sure Apple are innovators. His obsession with a second rate mac product range for premium pricing will be his undoing!

 

[Spoon!]

Old tech gets cheaper. New tech is always more expensive.

The jump in 2018 in prices has been comical though.

 

[chucker23n1]

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)

Those $399 were a subsidized price in a way the $749 for the XR are not.

Also, why was the original iPhone the "flagship"? There was only one model. The original iPad was also $499, and its successor these days is the $329 iPad. That doesn't make that the flagship. Nothing wrong with bifurcating a line.

 

[Baymowe335]

I'll be the first to say, as a big defender of Apple, I am very disappointed in the sales execution and I was wrong about their ability to push the new products successfully.

They will have to change strategy.

I'd like to see the full numbers, but I don't expect good news when we get the actual data.

Seems many of the reports were correct (for once). I don't give those reports much credit as they always say the same thing, but they were finally right. Apple will have to regroup and perhaps lower pricing and/or entice users with better features.

 

[macjoshua]

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)

In 2007, phones were subsidized by the phone carriers. That's not the case anymore, hence higher prices. That said, Apple's prices have become ludicrous the last couple of years.

 

[I7guy]

And you guys will blame everything except Tim. There’s an old saying, “fish stinks from the head down.”

Blame? Blame for what? $84B is still an astronomical amount of money.

 

[phoenix_jet]

iPhone XS, XS Max, and XR... Who even knows what all these models mean?

Guess it's time for Apple to start tanking the OS to force people into buying new phones.

Whatever happened to iPhone I, II, III, IV, V.....

That's how people have been trained.

 

[dannyyankou]

Price has to do with it, but phones just last a lot longer than they did 5 years ago.

 

[KPOM]

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.

Interestingly, they said that non-iPhone revenue was up 19%, as expected. This is all about the iPhone, particularly about what comes next since that category has plateaued. It remains to be seen whether foldable devices and 5G will be enough to reignite the market. 5G likely isn’t coming until 2020, since companies are just now starting to roll out the network (and the technical standard isn’t even finalized).

 

[trifid]

A field day, the haters shall have today.

Maybe it's time for the Apple and and its apologists to come down to Earth and realize that product pricing is out of touch with consumers. Today's news is a slap in the face that this is the case. I personally would have upgraded if it didn't cost a fortune, but I'm skipping it because cost/value is ridiculous.

 

[macsimcon]

I remember when John Sculley kept increasing the price of the Mac to raise Apple's earnings. You just can't give people anemic features and then raise prices, it never works in the long run. You can shear a sheep many times, but skin him only once.

This tells me consumers in China are more savvy, or are hurting more economically, than consumers in the U.S. It's nice that the other product categories were up 19%, but Apple makes around two-thirds of its sales from iPhones.

A savvy CEO would cut prices and introduced great new features. As Tim is the new John Sculley, that's not going to happen. He should have been spending hundreds of billions of dollars over the last 10 years in R&D to come up with the next big thing.

This is just the beginning, the recession is on the way. I would not be in the market right now, I'd be in cash. But that's just me.