Daily Management Review

Rare Revenue Warning By Apple Hits Global Markets


01/05/2019




Rare Revenue Warning By Apple Hits Global Markets
Following announcement by Apple of holiday-quarter revenue shortfall because of weak China demand, the shares of the company dropped by as much as 10 per cent on Thursday. The announcement by the iPhone maker spooked many investors raising concerns about the larger slowing of global growth indicated by the rare stumble by Apple.
 
Even as the shares of Apple dropped the most in terms of intra-day percentage in six years, the ripples of the fall was felt right across the global financial markets. The fall in the stock price of Apple left the company with a stock market value of under $700 billion which is well below it peak market value of $1.1 trillion that was reached by it in October last year.
 
This was the first time that in almost 12 years that Apple issued a revenue warning and this resulted in a sell out of stocks of chipmakers and other tech stocks and instead chose to invest their money in the so called safe havens such as U.S. Treasuries and the Japanese yen. Investors have also been rattled by the developments in a patent dispute between Apple and Qualcomm in Germany.
 
Earnings at many U.S. companies could take a hit because of the trade uncertainty, said a senior White House economic adviser. The adviser however said that as soon as a trade deal is struck between Washington and Beijing over trade, those companies that have large exposure to the Chinese market such as Apple would recover.
 
“That is having an impact on earnings and it’s not going to be just Apple,” White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with the news channel CNN.
 
“I think there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year.”
 
Apple Chief Executive Officer Tim Cook said on Wednesday that the company had been taken off guard by the economic slowdown in the Chinese economy and consumer spending on smartphones was being hurt in China because of the trade tensions between Washington and Beijing.
 
In November, when Apple gave first-quarter sales estimates that were lower than expected, Cook had blamed the slowdown of its growth in the emerging markets such as Brazil, India and Russia. But sat that time he had also said that he “would not put China in that category” of countries where Apple was giving trouble with growth.
 
In addition to its challenges in China, Apple is also facing some issues in some of its other largest markets.
 
In a separate statement, US chipmaker Qualcomm said that it had posted security bonds so that it could enforce a court order which bans the sale of some iPhone models in Germany. This means that Apple would possibly have to stop sale of iPhone 7 and 8 models from its 15 stores in Germany.
 
(Source:www.ft.com)






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