January 3, 2019
New year began with a bang for most of us. But while we were celebrating, peeps at Apple were busy evaluating their sales figures and quarterly projections. And it seems that things are not going as well for Apple as the company had hoped for. As the company has cut its quarterly revenue for the final quarter of 2018.
The announcement about the revised quartely guidance came from Apple chief executive officer Tim Cook, who in a letter to the investors, said that the company was expecting lower revenue in the past quarter than previously anticipated.
Cook attributed this revised guidance to several factors including its battery replacement program.
Last year, the Cupertino, California-based company admitted to throttling older iPhones in order to compensate for degrading batteries. The company later cut down the cost of battery replacement from $79 to $29. This, however, hurt the company’s iPhone sales as iPhone users found it easier (and more cost effective) to replace an old degrading battery than buying a new iPhone which costed well over $1,000. Swapping a new battery with an old old also solved a bunch of problems that came along with the degrading battery, giving iPhone users one less reason to upgrade their phones. This, apparently, didn’t turn out to be a good move for company’s revenue growth.
“…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,” Cook wrote in the letter.
Apple’s China woes
Notably, Apple not only attributed the revised quarterly guidance to its battery replacement program but also to China. Cook, in his letter to the investors, said that the iPhone sales in Greater China were not as strong as anticipated and the low GDP growth in China coupled with the mounting trade tensions between China and the United States made the conditions worse.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States. 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,” Cook wrote.
Revised quarterly guidance
As per the revised guidance figures for Apple’s fiscal 2019 first quarter, which ended on December 29, the company now anticipates a revenue of around $84 billion with an approximate operating expense of $8.7 billion. The company also expects a gross margin of approximately 38 per cent and other expenses to sit around $550 million approximately.