Apple missed sales targets in the Christmas business significantly

Apple has to admit a rare setback: In the important Christmas quarter, the group missed its forecast. The problem was mainly the iPhone sales in Chinahave been, explains chief executive Tim Cook . But experts also see other reasons.

Cupertino (AP) – The past Christmas business has gone significantly worse for Applethan expected. The iPhone group lowered its revenue forecast for the past three months to $ 84 billion, compared with $ 89-93 billion in November.

The strong correction goes back mainly to the weaker iPhone sales in China , stressed CEO Tim Cook on Wednesday. Apple has underestimated the general economic slowdown in the country and its consequences. The trade conflict between the US and China also contributed to this downturn .

But even in some developed markets, not so many users have switched to new iPhones as thought, admitted Cook . The affected countries did not name Apple .

Apple sold about 64 million iPhones in the Christmas quarter, estimated the finance company BTIG. That would be 18 percent less than a year ago. For the current quarter, BTIG analyst Walt Piecyk expects 42.5 million iPhones sold, down 19 percent.

At the same time, Apple’s problems in China are fueling concerns that the economic slowdown is affecting consumer spending and affecting other international companies that are heavily dependent on the giant market. The US- Donald Trump trade dispute intensifies the uncertainty – even if, for example, Apple devices have not been directly affected. At the same time, some analysts believe that the conflict is causing consumers to buy domestic goods more patriotically.

The Christmas quarter is traditionally the most lucrative for Apple . The group set several records in terms of sales and profits in these three months. In 2017, there was a quarterly revenue of $ 88.3 billion and $ 20 billion profit. In China , Apple made about a fifth of its business at that time.

The iPhone is the most important Apple product and last brought about 60 percent of total revenue. Already in the current Christmas business , the alarm signals piled up. Several media reported that Apple had reduced production orders to iPhone pavers. Especially in China , local smartphone providers such as Xiaomi , Huawei or Vivo have been on the rise for years and have pushed back the global market leader Samsung .

At the same time, Apple once again released more expensive new models of its smartphone last year. The cheapest fresh phone was the iPhone XR, which is available in Europe from 849 euros. The larger iPhone XS Max costs 1649 euros in the most expensive version.

So far, it is unclear to what extent the hefty prices could have kept consumers from buying new iPhones . The investment company Needham threw on Thursday at least the question of whether the “aggressive pricing strategy” contributed to the difficulties. At the same time, however, the high prices are likely to cause sales to fall less sharply than the number of units sold.

Analyst Daniel Ives of Wedbush Securities told the financial service Bloomberg , Apple CEO Tim Cook was faced with the choice either to admit that the high-price policy on the iPhone was a mistake – or “continue with pride” as before. On the other hand, the strategy to do without cheap iPhones made Apple the most profitable company in the world in recent years.

Apple has already announced that it will no longer release any units of sold devices from the Christmas quarter – which was considered by some market observers as a sign of a weakening in iPhone sales. However, in the past, the group has repeatedly succeeded in refuting skeptics.

Apple boss Cook also pointed out now that mobile phone providers had shut down the subsidies for new smartphones – and consumers adapted to it and rarely replaced the devices. Apple wants to counteract, among other things with the repurchase of iPhones and easier financing. In addition, some customers have extended the life of their iPhones with the cheaper offers for battery replacement. Apple had the price for the battery change temporarily reduced sharply, after it became known that the group throttled the performance of older devices with exhausted batteries in part.

At the same time, the sales of several other new products such as the iPad Pro, the current Apple Watch and the laptop MacBook Air have been hampered by production bottlenecks, said Cook .

Analysts saw a “silver lining” among other things in the rise in service revenue to $ 10.8 billion last quarter. A year ago, it had been 8.5 billion.

Apple has traditionally earned its money primarily from selling equipment, but has been trying for some time to build a steady revenue stream in the services business. These include, for example, the online storage iCloud, the streaming service AppleMusic and also the share of the Group in the selling price of apps. Cook emphasized that Apple’s remaining revenue outside the iPhone business increased 19 percent year-on-year.

The Apple share lost to the US trade start around nine percent. Also papers from suppliers were affected on Thursday. For example, shares of semiconductor manufacturer Dialog Semiconductor fell temporarily by 8 percent.

Apple wants to publish more detailed figures for the Christmas quarter on 29 January.