Far From The Tree

Apple shock profit warning

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What's going on?

Late on Wednesday, Apple warned investors that its revenue in the last quarter of 2018 would be significantly lower than expected – and its stock dropped 9%. It’s now fallen 30% since November (tweet this).

What does this mean?

China was the biggest worm in Apple’s core: the company said the slowdown in the Chinese economy’s growth is primarily to blame for its revenue shortfall. Weaker industrial activity and slowing consumer spending were also cited by Chinese tech titan Alibaba when lowering its own forecasts last year.

But it’s not just China: customers around the world appear to have held off expensive iPhone upgrades over the all-important holiday period – perhaps turning instead to cheaper Chinese models in spite of growing security concerns. The result? Apple now expects to announce quarterly revenue of $84 billion, some 8% lower than it promised investors in November. It’s the first time the company has cut its revenue forecast in 16 years.

Why should I care?

For markets: Apple’s drop rolled around the world.

Apple’s shock warning also hit shares of the companies that supply its technology on Thursday (although some investors saw the way the wind was blowing a while back). Dialog Semiconductor (which signed a major licensing deal with Apple in October) lost 10%, while Austrian chipmaker AMS saw its shares fall 23%. Currencies were on the move, too. Investors valued the Australian dollar at ten-year lows: the country’s fortunes are closely linked to Asia-Pacific trade, which will slow if Apple ships fewer products. But investors clamored for Japanese yen: a “safe haven” in times of uncertainty, the currency had its biggest one-day jump in two years.

The bigger picture: Harsh judgment for Apple?

Apple’s also been taking a beating in the courtroom lately. Major American chipmaker Qualcomm alleged that Apple violated a number of its patents – leading judges in China to ban the sale of some of its older, cheaper iPhones in December. Apple also suffered another nightmare before Christmas when judges in Germany curbed its iPhone sales there.

Originally posted as part of the Finimize daily email.

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