Apple Cites "Mounting Uncertainty": APPL Down 7% AH, Nasdaq Futures Down 2.3%

Mike Mish Shedlock

Apple Blames "Mounting Uncertainty" in Rare Guidance Cut. Futures hammered.

Equity futures are getting hammered tonight after Apple Makes Rare Cut to Sales Guidance.

Apple Inc. lowered its sales forecast for its fiscal first quarter, a rare revision to its guidance, blaming slowing sales of smartphones and other devices in China.

Apple Chief Executive Tim Cook said in a letter to investors on Wednesday that the company now predicts revenue of around $84 billion for the quarter ended Dec. 29. Previously the company said revenue would be between $89 billion and $93 billion for the quarter. Analysts surveyed by FactSet forecast more than $91 billion.

“Most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Mr. Cook wrote.

“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” he wrote in the letter.

Uncertainty - What a Joke

Blaming uncertainty is a joke. No one can ever be sure of economic forecasts.

Facts of the Matter

  1. Apple sells a commodity.
  2. The competition has phones that are just as good, if not better, for cheaper
  3. At some point, consumers will no longer pay for a name.
  4. At some point, consumers decided new features are not worth the price.

Only Surprise

The only surprise is how long it took to get to points 3 and 4.

Looking Ahead

5G won't be a savior. Apple could easily fall in half from here.

Expect all kinds of unexpected negative surprises in 2019.

Recession looms.

Mike "Mish" Shedlock

Comments (40)
No. 1-22
ReadyKilowatt
ReadyKilowatt

The problem is a little more nuanced than “phones are a commodity.” It isn’t that phones are all the same, it’s that the apps are driving the product, and the apps are all just interfaces to their cloud service. We’ve come full circle, from mainframe to extremely personal computer (desktop then pocket), and now back to mainframe. But don’t call it a mainframe, now it’s “cloud computing” and the only way to make it work is to put as generic a UI and experience as possible. Not killing the battery or requiring a lot of local memory is a bonus too.

Enjoy your VT-100, idiots.

mkestrel
mkestrel

A lack of real leadership and stock buy backs.

Irondoor
Irondoor

The Trumpster-In-Chief will probably tweet something about AAPL tonight or tomorrow. The question is: what will he say? Will he say AAPL shouldn't have put all their eggs in the Chicom basket or opened plants there and should build a plant in the US? Or will he somehow throw AAPL a lifeline by tweeting about another fine phone call with President 11 where he mentioned that AAPL is a fine product and he appreciates President 11 not putting tariffs on AAPL products?

Whatever he tweets, it has one objective and one only; pump up the stock market.

Bam_Man
Bam_Man

To anyone whose financial future depends on the continuing strength of this so-called stock "market" - I truly fear for you and wish you the best.

shamrock
shamrock

apple does not sell a commodity, samsung sells a commodity. But technology is supposed to get better AND cheaper, instead apple wants 4 figures for a phone that has a better camera but many times has features that people like removed.

pi314
pi314

It may be Warren Buffett's worst investment (in $ amount).

shamrock
shamrock

Earnings hit maybe $1/share? Not counting any "writedowns".

Irondoor
Irondoor

What did I tell you. Here it is; "President Donald Trump told reporters Wednesday that there was a "glitch" in the stock market last month, but that equities should recover as the U.S. completes trade deals with countries like China".

That should be good for a couple hundred Dow points on the futures tonight or in the early morning. I'll check right now; Nope, still down -230, but improved from -330 an hour or so ago. Guess everyone hasn't checked their twitter yet.

Carl_R
Carl_R

A little history. Back in the 80's Apple developed some great software for computers. They decided they were a hardware company, not a software company, so they declined to license their software to other manufacturers. Meanwhile, Microsoft decided it was a software company, and licensed their software to anyone, and in time, their software more or less caught up with the Apple software. Also, meanwhile, with dozens of manufacturers innovating and slashing prices, computers running Microsoft software were always cheaper and faster than Apple computers. Apple's market share stagnated, and dropped, after peaking in 1993 or so.

The stock price languished for years, until they reinvented themselves as a maker of iPods, and then iPhones. But, they once again decided they were a hardware company, not a software company, and refused to license their software. Meanwhile, Google (and some Chinese companies), developed software for phones that they sold to anyone. Now there are dozens of makers of cell phones, innovating, and competing on price. Once again, Apple has been losing market share.

What will the future bring? Will history repeat itself? Will the iPhone become as irrelevant as the Lisa and MacIntosh became? Or, has Apple reached a critical mass, where they can innovate and price reduce ahead of everyone else because they can afford the largest R&D? If Apple does fade, can they, once again, re-invent themselves as the maker of yet another product?

I guess we'll find out. For history to repeat itself wouldn't overly surprise me. It does that sometimes.

thimk
thimk

The chinese are avoiding American branded products. go figure

Casual_Observer
Casual_Observer

I told everyone it would be hard for consumers to justify paying more for the same features with the mobile revolution. You can only do so much on a 5.5 inch computer.

Casual_Observer
Casual_Observer

On my trip to Vancouver I saw mostly Huawei phones. Canada is rethinking things with respect to China.

gregggg
gregggg

Sales are in the ditch for Apple in China. 6 Chinese companies are copying their phones and selling them for around 200 dollars, while China complains that Apple doesn't share.

Sechel
Sechel

p.c.'s are better today than they were a decade or two earlier. profit margins today are not higher but lower. I have no doubt apple makes a good product. i also have little doubt that apple is reaching fewer and fewer new buyers and like the p.c. is selling those devices at lower profit margins

i also believe that as phone prices increase consumers will hold onto their devices longer which will not be good for apple either. i replaced my lap top after 7 years. it costs about the same as my phone.

Bam_Man
Bam_Man

But, but...Trump said "It's easy to win Trade Wars".

JonSellers
JonSellers

5G is important in 2 ways: it provides enough speed and capacity to replace your cable tv system, and for the "Internet of Things". I don't see how it benefits your phone in any way, unless you prefer watching Netflix on your phone screen instead of a nice 60" screen.

I've been locked into the Apple world for a decade or so. I'll be moving towards a Linux/Android world when my current iPhone and Mac need replacement.

onetimer
onetimer

I am at points 3 and 4 - picked up a temporary LG android phone at Walmart for $40.00 after my iphone 6 screen cracked (badly). This LG works great - fast, easy to use, and if it falls overboard I can get a new one for the price of a monthly payment on a new Iphone. After using 3 generations of Iphones, I think I made the permanent switch. My kids laugh until their iphone batteries are dead and mine is still going strong..

Ted R
Ted R

Looks to me like a recession is already here.

Ted R
Ted R

Apple priced their damn phones too high and now they are starting to pay the price for it. GREED.

KidHorn
KidHorn

I'm surprised this didn't happen years ago. Last time I shopped for a phone was 3 years ago and Apple was way overpriced compared to android phones. I guess their reputation has carried them for a lot longer than I expected.

Carl_R
Carl_R

I checked out market share data, and Apple seems to increasingly be a US/Japan/Great Britain-centric phone. Their market share in the US remains strong, and in fact, seems to be growing, and they are #1 in the US by far. During the first 3 quarters of 2018, Apple had about a 39% market share in the US, whereas in 2016 and 2017 they had a 32% market share. Meanwhile their market share has been falling worldwide, and was down to 13% of the world market.

Cocoa
Cocoa

The phones are boring. The MacBook line quality is getting worse-battery life and hardware quality. The Touch Bar is dumb


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