Apple admits lower iPhone sales will hurt Q1 2019

Chris Burns - Jan 2, 2019, 4:06 pm CST
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Apple admits lower iPhone sales will hurt Q1 2019

Apple announced a lower-than-expected guidance for the upcoming quarterly report. This isn’t unprecedented, but it might come as a bit of a shock to those investors that’ve seen quarter after quarter of big iPhone sales and revenue aplenty across the board for the company. Apple released a brief report today that showed expectations of revenue at $84 billion with a gross margin of approximately 38 percent.

Today we’re taking a look at Apple’s new (revised) fiscal 2019 first quarter expectations. This is the quarter that ended on December 29th, 2018. This is also the fourth quarter of the year for 2018 – but, again, the first financial quarter for Apple for 2019. As an Apple representative wrote, “While it will be a number of weeks before we complete and report our final results, we wanted to get some preliminary information to you now.”

Apple suggested they’d likely have around $8.7 billion in operating expenses and other income/(expense) of around $550 million. This quarter will likely show a tax rate of approximately 16.5 percent before discrete items. Apple also suggested that they expected the number of shares used in computing diluted EPS to be around $4.77 billion USD.

Apple suggested that two points led the company to reduce revenue guidance – to suggest they probably didn’t do quite as well as expected over the last three months. One reason was “economic weakness in some emerging markets,” and the other was fewer iPhone upgrades than the company anticipated.

iPhone unit sales lower than expected

“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,” wrote an Apple representative. “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.”

Those proposed reasons are, again:
• Consumers adapting to … fewer carrier subsidies
• US dollar strength-related price increases
• Reduced pricing for iPhone battery replacements

China / Trade tensions with USA

One of the major reasons fewer people in China were buying iPhones than expected was a slowing economy. The other was as follows: “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.”

Meanwhile: Growth anyway

Apple also reported that their installed base of active devices hit an all-time high this year, “growing by more than 100 million units in 12 months.” Investors will be glad to hear Apple’s expecting to report “a new all-time record for Apple’s earnings per share.”

Apple also set all-time revenue records in a number of “developed countries” such as United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. Apple also reported hitting “records” in “emerging markets” such as Mexico, Poland, Malaysia, and Vietnam. We’ll know more info when Apple releases its full earnings report in a few weeks.


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