Author: Jack Nicas and Keith Bradsher / Source: New York Times
An Apple store in Beijing. In a letter to shareholders, Apple’s chief executive, Timothy D. Cook, said poor sales in China had forced the company to reduce expectations for its most recent quarter. Greg Baker/Agence France-Presse — Getty Images
SAN FRANCISCO — Apple reduced its revenue expectations for the first time in 16 years on Wednesday because of poor iPhone sales in China, an unexpected development that underscored the slowing of China’s economy and raised fears of further turmoil in global markets.
Apple’s surprise announcement was the clearest confirmation yet that the Chinese economy is in serious trouble. Beijing’s effort last spring to clamp down on credit, which sparked a slowdown, and an intensifying trade war with the United States have unnerved consumers and businesspeople alike.
“Apple is a bellwether,” said Mark Zandi, chief economist at Moody’s Analytics. “The iPhone is something that everyone knows and buys, and if people aren’t buying it, then that’s a pretty good sign they’re having a hard time.”
It is not clear whether this is a problem particular to Apple or whether China’s slowing economy will affect other American companies, especially the tech giants and Detroit automakers. Either way, investors are bound to grow nervous, especially after the stock market’s recent gyrations. Tech stocks, which drove much of the bull market of the past few years, have become a drag on it.
With more than 40 stores and hundreds of millions of iPhones sold in the country, few American companies have been as successful as Apple in China — or have as much to lose. China is Apple’s third-largest market, with nearly $52 billion in sales in the company’s most recent fiscal year, mostly from iPhone sales.
The company said it expected revenue of about $84 billion in the quarter that ended Saturday, down from a previous estimate of $89 billion to $93 billion. That would be a nearly 5 percent decline from the same quarter a year ago.
Apple’s chief executive, Timothy D. Cook, said the sales decline in China, Hong Kong and Taiwan would exceed the $4.3 billion overall drop in revenue.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Mr. Cook said in a letter to investors. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”
Apple’s revenue warnings sent its shares down more than 7 percent in after-hours trading Wednesday evening, dropping its market value to less than $700 billion. Apple had become the first company to surpass a $1 trillion…
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