Were you enjoying your first day back at work in 2019? Well, Apple CEO Tim Cook would like to iFuck that up for you now...
To Apple investors:
Today we are revising our guidance for Apple’s fiscal 2019 first quarter, which ended on December 29. We now expect the following:
- Revenue of approximately $84 billion
- Gross margin of approximately 38 percent
- Operating expenses of approximately $8.7 billion
- Other income/(expense) of approximately $550 million
- Tax rate of approximately 16.5 percent before discrete items
And, yes, this is going to bleed well beyond Apple only pulling down $84 billion in revenue for a single quarter, because...
While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. 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. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.
But while our president's ludicrous Chinese trade war sucks, sayeth Cook, so do iPhone sales...in China.
Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.
Looking beyond the fact that Apple has not really done anything revolutionary on the product side in almost a decade thus allowing much of the consumer tech sector to catch up with it and tarnish its image as the most innovative company in the world, a downward revision of $9 billion is basically Tim Cook throwing 9 billion theoretical dollars into the raging bonfire of debate over global trade and hoping that the smoke turns into a Rorschach test for investors primed to blame the Trump administration for literally everything. The rather tenuous grip on counterfactual optimism that has powered markets for the last few unconnected days could be pretty well undone by a concrete example of fallout from a global trade war and massive selling on the stock of a company with a market cap of $750 billion. That would make Apple's shitty quarter the world's problem, and that's just good management.
And, if he prays to the shrine of Steve Jobs hard enough, we think Cook might just get away with it. But judging from a 7% decline in AAPL after-hours trading, it's gonna be hella tight.