Tim Cook says Apple iPhone Misses Sales Target By 5 Billion Dollars

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Yesterday we saw a rare announcement come out of Apple as CEO Tim Cook published a letter to Apple Investors to revise its guidance for Q1 earnings in 2019. The letter states that Apple is now expected lower revenue from key products that it initially projected over the holiday season.

Tim Cook points our that ongoing struggles in China with the foreign exchange have impacted Apple’s revenue.

"While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements." - Tim Cook, Apple CEO

Overall Apple is expected to make 5 Billion Dollars less than it initially predicted and 4 Billion less than last years Q1.

The one good point to pull from this announcement appears to be that iPhone activations in Canada, and the USA set new Christmas Day records suggesting that the iPhone was still a hot holiday gift in North America.

“We expect to set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam.”

Tim Cook even appeared on CNBC to talk about the shortfall.

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My Take

This announcement is a very uncharacteristic move for Apple, we haven't seen the company miss its targets in this manner since 2013, but there are many factors that could have lead to this outcome.

  1. Last year Apple raised the prices for all their iPhone models making it more difficult for users to afford the upgrade.

  2. After the release of the iPhone X, many users didn't find it necessary to update to this year's models since the difference in features was very low.

  3. The last big reason could be that the smartphone market is utterly saturated. Most users interested in a smartphone already own one and are less likely to upgrade to a newer model.

Overall it will be interesting to see how Apple responds to all this. I expect them to possibly lower prices on their 2019 iPhone line and maybe re-introduce lower cost models like the iPhone SE. We may also see Apple take a more aggressive stance in changing the iPhone every 1 to 2 years like they used to do with the iPod line. Introducing new colours every year could incentivize users to upgrade.

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