Apple said revenue for the first quarter of last year, which ended in December, was significantly lower than expected, the iPhone giant announced in a press release on Wednesday.
Apple had previously told investors to expect revenues between $ 89 billion and $ 93 billion.
On Wednesday, it revised the estimate down to $ 84 billion, 7.6% lower than expected.
"If you look at our results, our lack is over 100% from the iPhone, and it's primarily in larger China," says Apple CEO Tim Cook at CNBC.
"So we have some sort of collection of items going on , some that are macroeconomic and some Apple specific, "he continued.
Issues this quarter quoted by Apple include:
- Difficult comparisons due to the iPhone start time.
- A strong dollar.
- Supply restrictions. [1
- iPhone upgrades weaker than expected.
- Fewer transport subsidies that artificially reduce the sticker price of a smartphone.
- A program where Apple replaced iPhone batteries for $ 29.  "These and other factors resulted in fewer iPhone upgrades than we had anticipated," Apple said in a letter to investors attributed to Cook.
Apple shares fell over 8% in retrospect. Already fell over 30% from high in October after Apple said it would no longer provide sales figures to investors.
Before Wednesday's news, analysts and investors had already become increasingly strong at Apple's stock over the past ten years. In addition, many Apple products were announced with discounted rates by facility, which suggested the sale was slow.
Apple will officially report its holiday quarterly earnings on January 29.
Here's the whole letter:
To Apple Investors:
Today, we are revising our guidance for Apple's fiscal 2019 first quarter, which ended in December 29. We now expect the following:
Revenue of around $ 84 billion Gross margin of about 38 percent Operating expenses of approximately $ 8.7 billion Other income / expense of approximately $ 550 million Tax rate of approx. 16.5 per cent before discrete items We expect that the number of shares used in calculating diluted EPS will be about NOK 4.77 billion.
Based on these estimates, our earnings will be lower than our original quarterly guidance, with other items largely in line with our guidance.
Although it will be several weeks before we finish and report our final results, we wanted to get preliminary information to you now. Our final results may differ slightly from these preliminary estimates.
When we discussed our first-quarter guidance with you about 60 days ago, we knew that the first quarter would be affected by both macroeconomic and Apple-specific factors. Based on our best estimates of how these should flush out, we predicted that we would report a small growth in sales in the quarter for the quarter. As you may recall, we discussed four factors:
First, we knew that the different timing of our iPhone launches would affect our annual comparison. Our top models, the iPhone XS and the iPhone XS Max, are shipped in Q4 & # 39; Channel Fill Placement & Early Sales in that quarter, while last year's iPhone X is shipped in Q1 & # 39; and adds channel fill and early sales in December. quarter. . We knew this would make a difficult comparison for Q1 & # 39; 19, and this was largely in line with our expectations.
Secondly, we knew that the strong US dollar would create the exchange rate and expected this to reduce our revenue growth by around 200 basis points over the previous year. This also played mostly in line with our expectations.
Thirdly, we knew we had an unprecedented number of new products in the quarter and predicted that supply constraints would cause our sales of some products to close during the first quarter. Again, this played mostly in line with our expectations. The sale of the Apple Watch Series 4 and iPad Pro was limited much or the whole quarter. AirPods and MacBook Air were also limited.
Fourth, we expected financial weakness in some emerging markets. This proved to have a significantly greater impact than we had estimated.
In addition, these and other factors resulted in fewer iPhone upgrades than we expected.
These last two points have led us to reduce our revenue guidance. I'd love to go a little deeper on both.
Emerging Market Challenges
While we anticipated some challenges in key emerging markets, we did not anticipate the size of economic deceleration, especially in Greater China. In fact, most of our revenue losses occurred to our guidance, and over 100 percent of our worldwide revenue fall throughout the year, in Greater China over the iPhone, Mac and iPad.
China's economy began to slow down in the second half of 2018. The ruling reported GDP growth in the quarter in September was the second lowest in the last 25 years. We believe that the economic environment in China has been further influenced by growing trade tensions with the United States. As the climate of uncertainty in the growth of the financial markets, the effects also seemed to reach consumers, with traffic to our stores and our channel partners in China falling as the quarter progressed. And market data has shown that the contraction in the Chinese smartphone market has been particularly sharp.
Despite these challenges, we believe that our business in China has a bright future. The IOS developer community in China is among the most innovative, creative and vibrant in the world. Our products have a strong demand among customers, with a very high degree of commitment and satisfaction. Our performance in China includes a new record for service turnover, and our installed base of units grew over the past year. We are proud to attend the Chinese marketplace.
Lower than expected iPhone revenue, mainly in Great China, accounts for all our revenue failures to our guidance and for much more than our entire full-year sales. In fact, categories outside of the iPhone (Services, Mac, iPad, Wearables / Home / Accessories) are combined with growing almost 19 percent year on year.
While major China and other emerging markets accounted for the vast majority of the iPhone sales fall during the year, in some developed markets, neither were as strong as we thought they would be. While macroeconomic challenges in some markets were an important contributor to this trend, we believe there are other factors that greatly affect our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar-related price increases. and some customers take advantage of significantly reduced pricing for replacing iPhone batteries.
Many Positive Results in the December Quarter
Although it is disappointing to revise our guidance, the performance in many areas showed a remarkable strength despite these challenges.
Our installed base of active units hit a new all-time high-rise with over 100 million units in 12 months. There are more Apple devices used than ever before, and it is proof of the ongoing loyalty, satisfaction, and commitment of our customers.
Also, as mentioned earlier, sales outside of the iPhone business increased by nearly 19 percent the year before, including all-time record revenue from Services, Wearables and Mac. Our non-iPhone businesses have less exposure to emerging markets, and the vast majority of service revenue is related to the size of the installed base, not the current sales.
Services generated over $ 10.8 billion in revenue in the quarter, growing to a new quarterly listing in each geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.
Wearables grew nearly 50 percent year-on-year, as Apple Watch and AirPods were popular among retailers; Launches of MacBook Air and Mac mini drove Mac into this year's transition growth, and the launch of the new iPad Pro drew iPad to this year's double-digit revenue growth.
We also expect to include all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. And while we were facing challenges in some emerging markets, others set up, including Mexico, Poland, Malaysia and Vietnam.
Finally, we also expect to report a new all-time record for Apple's earnings per share.
Our profitability and cash flow generation are strong, and we expect to end the quarter by about $ 130 billion in net cash. As we have said before, we plan to become net cash neutral over time.
When we leave a challenging quarter, we are as secure as ever in the fundamental strength of our business. We manage Apple in the long term, and Apple has always used periods of adversity to rethink our approach, to take advantage of our culture of flexibility, adaptability and creativity, and to get better as a result.
Most importantly, we are confident and happy about our pipeline of future products and services. Apple innovates like no other company on earth, and we don't take the foot off the gas.
We cannot change macroeconomic conditions, but we undertake and accelerate other measures to improve our performance. Such an initiative makes it easy to shop in a phone in stores, fund the purchase over time, and get help transferring data from current to the new phone. This is not only good for the environment, it's good for the customer, as their existing phone acts as a supplement for their new phone, and it's great for developers, as it can help grow our installed base.
This is one of several steps we take to answer. We can make these adjustments because Apple's strength is in our resilience, talent and creativity of our team, and the deep passion for the work we do every day.
Expectations are high for Apple because they should be. We are committed to exceeding these expectations every day.
It's always been the Apple road and it will always be.