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

[UK-MacAddict]

Steve Jobs predicted this:

“they cared about making a lot of money… they got very greedy and instead of following the original trajectory of the original vision which was to make this thing an appliance and get this out there to as many people as possible, they went for profits, and they made outlandish profits for about 4 years, one of the most profitable companies in America for 4 years, and what that cost them was their future, because what they should have been doing was making rational profits…”

Starts at minute 38:00:

You can never replace the passion and vision of a founding member of a company.

Yes Steve wanted to make money on his products but he also truly believed in his vision of making the best product possible for the consumer and it wasn’t 100% about the money like Apple is today.

Apple today can harp on about how it continues to follow Steve’s vision and values but they don’t truly embrace them like he did.

As much as I love Apple they need to be knocked down a peg or two to regain some focus.

 

[LovingTeddy]

Nice try. Your assertion I'm blaming the situation on trade tariffs is simply a lie. I am saying that when trade tariffs kick in starting March things will get a lot worse. Pay attention to the word starting.

You may want to educate yourself and understand how consumer spending in China has massively declined starting in October of last year and progressively getting worse, which has greatly and adversely impacted iPhone sales in China. It takes just a bit of reading, assuming you really want to understand the underlying forces at play.

Reading by the data from China’s National Bureau of Statistic, Retails sales on November was up 8.2% while it is 0.5% lower than October, but it was not massive by all means. Retail sales are overall up by average of around 8%. There is no doubt consumer spending is slowing down, but I won’t call it massive by any means.

Even with slower consumer spending, Huawei and some other Chinese phones makers are able to post growth, so why Apple is struggling in China? Simply blame on China is not telling whole story to me.

 

[UK-MacAddict]

The only perceptible difference (to me) is the increased screen size—which is the ONLY reason I upgraded. I purchased the X at release knowing that there would probably be a larger-sized phone the following year...and I figured I would see if I preferred the smaller screen. Since I've used a "Plus" sized iPhone since the 6. Ultimately, the problem I had was that the screen on the X was too narrow, and the unusable areas blocked off for controls was too large in area when compared to the total screen area. Video is TINY on the X, due to the unusual screen ratio/dimensions. I don't watch that much video on my phone, but I do watch some short segments, and the really small size and black box area on the X really bothered me.

I know that the Xs Max (I shudder at the name...whomever thought that one up should be locked into a public pillory and pelted with rotten food and worse!) does not feel any faster than the X did.

The processors in the new iPhones are very powerful. No regular consumer would ever come close to using it to its full potential.

The average consumer will just browse the web, watch some videos, play games and make some video calls etc, none of which taxes the processor.

 

[JoeCassara]

China. Right. Listen -- you either blame China/Trump for Apple’s guidance correction on Wednesday, or you live in reality. These are mutually exclusive.

 

[UK-MacAddict]

Haha. Yeah, the most successful CEO in the history of the world, revenue of approximately $84 billion. He must be on his way out. Come on people. Get a grip. Tim's not going anywhere.

Tim might not be going anywhere but his pricing strategy will eventually kill Apple if it continues. I’ve bought the iPhone every year since 2007 but if the prices increases in September this year again I won’t be buying.

iPhones from the last 3 years have no perceptible difference except for design. The iPhone XS Max performs the same as the X did last year for everyday tasks.

 

[krazzix]

Wait, they estimate they made $84,000,000,000 last quarter instead of $88,300,000,000 last year?

Apple clearly is doomed.

 

[nzcatfood]

Cook conveniently omitted the 20% across the board price hike which would is undoubtedly a significant driver of their sales decline. I love Apple products but the management team has repeatedly shown themselves to be total wankers in the way they have treated their customers over the years with their constant nickel and diming and poor product design fiascoes. Apple's financial pain will hopefully force them to reevaluate their strategy looking forward and be a good thing for customers. Otherwise, Apple really can go screw themselves.

 

[ivassilis]

They won’t drop the prices of their phones. They’ll just do more to try and get you to buy them.

Give me then an iPhone Google Edition, where I can choose what will be my default apps for mail/browsing/messages and I will happily return as a customer. After ten years of owning iPhones, I recently switched to Android and am very happy with the performance and the flexibility of a device (Xiaomi A2) that costs a fifth of the iPhone XS and still delivers a great experience.

 

[dfs]

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

Tim worries about China. Meanwhile, by not marketing a cheap entry-level iPhone Apple is writing off the entire subcontinent of India. Shrewd move!

 

[ivassilis]

Apple lately reminds me of Nokia in its late full of hubris days, when they would launch new phone designs with mininal incremental hardware and OS update, still exorbitant priced. We know how it went for them.. The last Nokia product I used was their J bluetooth device, that I dropped and bought Apples' AirPods, that I kept when I sold my iPhone 7. Let's hope Apple learn from the short (but very tough) phone history.

 

[The Game 161]

Just hard to see them rising prices again due to this...hopefully means good news for this years phones

 

[Soccertess]

And it took two months at the end of 2018 for Chinese consumption to dramatically crash.

When did you spot it?

If you think this is all because of the chinese market slowing, I recommend you stop drinking Tim’s toilet water.

Android dominates every market except USA and japan. Mac hardware has been on a decline, Mac sales are down, windows is back on the rise, iPhone isn’t attracting new users, and android is growing in every market.

Chinese sales aren’t down because the Chinese don’t have money because of some crash, Chinese have more cash than any one (maybe not the saudies). Just look who is buying all the land from around the world.

Sales are down because there are cheaper and better products! Tim Cook has dwindled away Apple’s competitive advatage and the Chinese are buying better products with better hardware and software.

 

[WatchFromAfar]

Smartest thing Microsoft ever did: Azure.

I'd go one further; smartest thing any tech company has done recently: Amazon AWS. Amazon has no dog in the hunt with regards to what you run on it as long as you are running on it.

 

[Shiro_Simba]

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

Reading the thread, you seem to have all the answers , Maybe call Tim

Sarcasm is a wonderful beast

 

[dampfnudel]

They won’t drop the prices of their phones. They’ll just do more to try and get you to buy them.

When the tricks fail, and that trade-in scheme is probably doing so at this very moment, lowering the prices will be the only option left for Tim...if he’s still in charge by that point. The iPhone 11 should be the model that brings Apple back in sync with the economic reality faced by the majority of Apple customers. Being out of sync when it comes to pricing with the majority of your customers can bite you hard in the a...apple as Tim & company is beginning to learn.

 

[Dave-Z]

In the last month I purchased 2 Surface Pro 6 and returned a 22.9” iPad Pro. Almost bought an iPhone but still couldn’t get past the price.

Yup. I was ready to purchase a 2018 12.9" iPad Pro with accessories. Saw the price. Bought a Lenovo 2-in-1 laptop instead.

(Earlier in 2018, after waiting a couple years for a good iMac, I gave up and built a Linux desktop machine.)

I have spent a ton of money with Apple over the years, but now their prices are too high for what's being offered and the competition is basically offering the same (or in some cases, better) hardware for a fraction of the price. I don't need a relvolutionary product every year or five. What I need is a computer that has current generation hardware. Yes, USB-C is the future (for now), but USB-A is still here; so why not include both on your laptop? iOS is a decade old (name changes aside) and more than half that time we've had the iPad, yet I still cannot share files via a USB key on my "What's-A-Computer-iPad". And I won't get started on this butterfly keyboard...

I like Apple. I like their products. But not at these prices; what's being offered (across the board) is so vastly overpriced.

Edit: I cannot understand what Apple is doing with their money and personnel. They can't deliver a pro desktop machine in under a year? Really!? I could build one with off the shelf parts and it would only take me as long as the delivery times. What is Apple actually doing that requires YEARS to design a box to house mostly OEM parts?

 

[Davelfc]

Hiking prices, putting underpowered chargers in the boxes of their premium phones, removing the ‘dongle’ from Iphone boxes. Everything screams cheap except their prices.

The battery replacement thing has bitten them in the ass too. People are discovering that their old phone with a new battery flies along and coupled with the crazy costs of phones these days many are just continuing with their old phone.

I’m deeply embedded in the whole Apple world, iPad, MacBook, Apple TV, Apple Watch and iPhone. I wish there was a platform out there I could move to that was as easy and intuitative to use, there isn’t and while they have that monopoly they will continue to charge premium prices for average tech.

 

[bobob]

iPhone prices need to come down, period.

That will mean no high end iPhones with cutting edge technology. Why would anyone want that?

For those who can't afford the current flagship XS, you can walk into an Apple Store today and buy a brand new unlocked iPhone 7 for $449 which will receive new operating systems and security updates for almost three more years. Or they can buy a new battery for their old iPhone.

 

[sofila]

The battery replacement thing has bitten them in the ass too. People are discovering that their old phone with a new battery flies along

Apple deliberately milking his loyal customers with its old battery policy went public on the record

 

[Nuvi]

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.

What about making actually a better and cheaper phones? That might actually help. Trade-ins, monthly pricing and services are something you need to do when you have weak product. Apple should really fix the product strategy instead.

 

[Tacitus]

Years ago when Sony were one of the brand leaders in the HiFi world, their prices were similarly at the high end of the range. In order to cover the lower priced buyer they owned a subsidiary company - Aiwa I think it was - which sold similar products at a lower price to the equivalent Sony model. The Aiwa models didn't have the latest cutting edge stuff of the Sony kit but offered a solid product at a lower price.

Why don't Apple do something similar - say Orange computers, in order to revitalise the Mac or possibly the iPhone? They could market these at perhaps a 15% or so discount to the equivalent Apple model and leave out some of the cutting edge stuff in order to differentiate, but still offer a solid value product.

The effect would be to retain Apple as the premium or luxury brand whilst offering those who can't or won't pay the price, a value product that keeps them in the Apple ecosystem rather than lose them completely.

 

[Rob_2811]

My quoted line wasn't a reference to any of your words but rather common ones by others in this thread. I see it all the time, and I get tired of it.

I don't disagree that perception matters. But that's actually an entirely different topic. Many people (not you) have alleged that Apple has "changed" under Tim Cook and has moved away from some Steve Jobs vision of innovation at affordable prices, and that's why iPhones are so expensive. It's a tidy and cute narrative, but it isn't supported by the facts. And that's the gist of what I'm addressing.

All Cook is doing is the exact same thing that Jobs did, just with later stage, more boring tech where the marginal innovation is less impressive and yet more expensive. That's common in many product life cycles. I don't blame Cook for it.

Anyway, getting back to my original post in this thread, and tangentially touching on your "average customer cased" part...there's no evidence to suggest that if Apple, say, sold the XR at $649 and the XS at $899 that they'd make more money. In fact, I'd be willing to bet they'd make less money. Why? Because if there's one thing you can say about Cook, it's that he understands the accounting side better. And I know how sensitivity and elasticity of demand analysis is done, and that Apple employs gobs of people to work on exactly that. If that was the better approach, I'm pretty damn confident that that's the route they wold have gone.

Corporate finance is a decades-old science at this point. It's pretty formulaic. That's not to say it's perfect; it isn't. After all, we're here talking about missed guidance! But it's far more accurate and unbiased than the finger-in-the-wind "Gee I wish I could get a new phone cheaper" than 99% of the posters on here are doing.

Depends on your point of view.

The flagship iPhone the Xs and Xs Max and lasts years iPhone X are more expensive than an iPhone has ever been, this is a fact, to the consumer they now have to pay more if they want the best. Ultimately the only thing that matters is how Apples customer perceives these price increases.

Apple has aggressively chased a higher ASP as an attempt to appease Wall Street at at time when iPhone sales were flat this comes at a cost to the customer.

Re the higher prices vs higher unit sales argument Apple has chosen the higher pricing at the expense of market share, iOS market share has dwindled in the US, Japan and the four biggest markets in Europe in recent years. Chasing profits over market share was something Jobs always cautioned against.

I think the perception that Apple has changed under Tim Cook comes from a feeling that they are keener to please Wall Street than their own customer these days. Hard to imagine this happing under Jobs really.

 

[haydn!]

That will mean no high end iPhones with cutting edge technology. Why would anyone want that?

For those who can't afford the current flagship XS, you can walk into an Apple Store today and buy a brand new unlocked iPhone 7 for $449 which will receive new operating systems and security updates for almost three more years. Or they can buy a new battery for their old iPhone.

It doesn’t need to mean that at all. The technological evolutions in the X compared to the 7 it replaced are no different to previous evolutions between generations and they were all achieved then (and by competitors today) at the same price points as previous generations.

Apple marketed the X as something from the future to justify the higher price and new super premium tier. But in reality, there is nothing in that device that shouldn’t or couldn’t have been in the next generation anyway.

And for the prices Apple are charging for 1-2 year old tech/designs - other competitors are offering their latest and greatest. That approach your suggesting - the one Apple is doing right now - isn’t working.

 

[FrozenDarkness]

Considering margins are unchanged and more of apples rev is from services, the dirty truh is that apples products cost more because they actually cost more to make. I alos personally cant stomach all the price increases but i find it funny that so many parrots come out of the woodworks crying foul of tim cook. All parroting the same talking points. Arent people tired. Yes steve jobs ismdead. Yes tim cook isnt a visionary. Get a life.

 

[iSayuSay]

Not

Expect more iPhone users to switch to Android platform.

Not really, yeah iPhone is getting ridiculously expensive, but many Apple users already investing so deep into the ecosystem.

They also own iPad, Mac, Homepod,  Music subscription and may be countless iTunes purchases that may be unplayable by switching phone

I’d say grab 2017 iPhone like 8 Plus for much cheaper instead of switching.