Apple is facing a rocky start to 2019, as it’s published a letter from CEO Tim Cook to shareholders explaining that the company expects a $9 billion drop in revenue in the first quarter of 2019 (down from a high forecast of $93 billion to an updated figure of $84 billion).
The company is chalking that up to poor iPhone sales, particularly in China. Its revenues from wearables, computers, and services divisions have grown revenues year-on-year by almost 19 percent. Here’s Cook explaining what’s going wrong:
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.
You might wonder whether this is really a big deal for a trillion-dollar company. But it’s worth noting that, according to Apple blogger John Gruber, this is the firm’s first earnings warning since June 2002. Additionally, Bloomberg’s Mark Gurman noted that Cook is slated to address Apple staff about the decline in sales on Thursday – another sign that the company is worried about these numbers.
Apple will have to figure out ways to brave macroeconomic woes like this, and that might mean learning to make more money from non-iPhone products in its catalog. It won’t be easy, but if that’s the direction Apple chooses, it could mean a more compelling product portfolio in the coming years. Here’s hoping that’s what Cook & Co. have in store in the near future.