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| Apple CEO Tim Cook acknowledged that iPhone sales in the past quarter would be disappointing, amid weakness in China and other emeging markets (AFP Photo/ NOAH BERGER) |
Washington
(AFP) - Apple's bombshell news -- a sharply weaker revenue outlook and lower
iPhone sales -- has raised questions over the future of the California giant,
which until recently had been seen as the undisputed innovation leader in the
tech sector.
Apple's
rare admission on Wednesday cited steeper-than-expected "economic
deceleration" in China and emerging markets and noted that trade frictions
between Washington and Beijing were taking a toll on its smartphone sales.
But the
news raised questions on whether Apple -- the first to reach a $1 trillion
valuation and until recently the world's most valuable company -- is seeing a
bump in the road or is starting to slide back from its leadership position.
Some
analysts point to Apple's dependence on iPhone sales to drive revenue and
profits, even as it tries to diversify its product base and add services such
as music and digital payments.
"The
iPhone has been supporting the company for than a decade," said Roger Kay,
analyst at Endpoint Technologies Associates.
 |
Apple said
iPhone sales in China would be lower than forecast due to steeper
than expected
"economic deleration" (AFP Photo/Greg Baker)
|
"The
world isn't coming to an end for Apple but it's a major inflection point. Up to
now, Apple has defied gravity by growing faster than any other company in the
market, but mathematically it was impossible to beat the market forever."
Apple
shares skidded nearly nine percent in morning trade Thursday, and have lost
more than 30 percent the company's valuation hit $1 trillion last year.
Kay said
the trillion-dollar valuation was "irrational" and based on growth
projections Apple is unlikely to achieve without a new catalyst.
Apple,
which has been growing in China even though it lacks a dominant position, is
pressured by tariffs and other trade issues, further inflamed by the arrest of
China-based Huawei's chief financial officer in Canada at the behest of the
United States.
Huawei has
overtaken Apple as the third largest global smartphone maker despite limited
presence in the United States.
 |
Apple has
sought to diversify its revenue base with new products like its smartwatch
and
a range of services but still relies heavily on the iPhone (AFP Photo/
JUSTIN
SULLIVAN)
|
'At a
crossroads'
The update
suggested a disappointing figure for iPhone sales, the key driver of revenue
and profit for the California tech giant.
Apple said
that it expects weak iPhone sales in other emerging markets, driving down
revenue despite some positive signs in developed markets and in its other
products and services.
The company
slashed its revenue guidance for the first fiscal quarter of 2019, ended
December 29, to $84 billion -- sharply lower than analyst forecasts averaging
$91 billion.
"Apple
stock is now at a crossroads," said a research note Thursday from Gene
Munster and Will Thompson of the investment firm Loup Ventures.
"Some
investors will consider the stock broken.. but we've followed the company long
enough to know there is cyclicality in the market's relationship with
Apple."
Munster and
Thompson said it would take "a new product category," or large
acquisition to allow Apple to regain its momentum.
 |
Apple's
troubles in China come with the Chinese smartphone maker Huawei
targeted in the
United States over security issues (AFP Photo/WANG ZHAO)
|
Tactical
errors?
Some
analysts said Apple erred in boosting the price of its new iPhones to well over
$1,000 in a global smartphone market that is largely saturated and facing
tougher competition.
"I
think the main villain is the very high prices that Apple is charging for its
new iPhones," said Richard Windsor, a technology analyst who writes the
Radio Free Mobile blog.
"This
is not a catastrophe nor is it a sign that Apple is losing its grip on the
smartphone market but merely a misjudgement by Apple with regard to how much
money people will pay for an iPhone."
Patrick
Moorhead of Moor Insights & Strategy said Apple may be unable to deliver
the double-digit growth than many on Wall Street have been expecting given the
current smartphone market.
"The
company is growing its services and 'other' categories, just not enough to
drive overall revenue growth," Moorhead said.
"I am
not concerned for the company, but it's likely investors will not see the
company value it was at until it can see a likely path to double-digit revenue
growth."
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