Five ways to look at Apple’s surprise bad news

“In an ugly New Year’s surprise Wednesday afternoon, Apple announced unexpectedly that it was cutting its first-quarter revenue guidance from $91.5 billion to $84 billion,” Alexis C. Madrigal writes for The Atlantic. “The move is highly unusual. Apple reportedly last revised a projection like this in 2002.”

Here are five ways to look at the announcement:

1. “Chimerica” in action: For many years, China has been important to American companies as a site of production, but over the past 15 years, Chinese consumption of American products has become a major part of global corporations’ business models. So a Chinese economic slowdown is bad for American business.

2. Apple is an iPhone company: While Apple makes laptop and desktop computers, tablets, and speakers, the sheer size of the smartphone market has meant that Apple has become, roughly, an iPhone company.

3. Smartphones are (almost) commodities: If you already sell an ungodly amount of phones, it’s hard to keep selling an even more ungodly amount of phones.

4. For most tech companies, corporate growth and profitability are dependent on overseas markets: The American economy isn’t the only place where American companies make money.

5. As a sign for the global economy, this is … not good: Analysts expect that the [Chinese] economy will slow down and go through a structural transformation away from manufacturing. But everyone basically hopes that doesn’t happen too quickly, resulting in a “hard landing.”

Much more in the full article here.

MacDailyNews Take: Pessimistically is one way to look at things. Another is to think that when – not if – a new U.S.-China trade deal is agreed upon and in place, business for companies like Apple can improve dramatically.

If you look at our results, our shortfall is over 100% from iPhone and it’s primarily in greater China. And so as we look at what’s going on in China — it’s clear that the economy begins to slow there for the second half. And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy… I’ve had obviously many, many discussions [with the Trump administration] over the course of many months to be constructed and to give sort of my perspective on trade and the importance of it to the American economy as well. And I feel like I’m — that I’m being listened to in that respect. And so I’m actually encouraged by what I’ve heard most recently coming from the U.S. and from China and hopefully we’ll see some changes.Apple CEO Tim Cook, January 2, 2019

SEE ALSO:
Wall Street analysts slash Apple target prices – January 3, 2019
Advisor to President Trump: Apple’s sales should pick up when U.S.-China strike trade deal – January 3, 2019
Two things Tim Cook just did that make Apple look guilty today – January 3, 2019
CEO Cook issues memo to employees after Apple slashes revenue outlook for the first time in almost two decades – January 3, 2019
Apple’s earnings warning means CEO Tim Cook now has a major credibility problem – January 3, 2019
Loup Ventures: We continue to expect AAPL to outperform the rest of FAANG in 2019 – January 3, 2019
Open thread: Does Apple need new leadership? – January 2, 2019
CEO Tim Cook on why Apple lowered first-quarter revenue forecasts – January 2, 2019
Apple CEO Tim Cook issues public letter to investors, lowers guidance – January 2, 2019

[Thanks to MacDailyNews Reader “Ladd Morse” for the heads up.]

14 Comments

  1. I see this as generally good news. Buy apple, it is stupidly under valued.

    Despite china melting down, apple still had an amazing quarter, and yoy grew! Record sales in US and most other countries.

    If apple wakes up and builds some factories outside of china so it’s not so reliant on them (stop with the eggs all in the one china basket), it shows china, in the grand scheme of things, not that important.

  2. Remember how many times I have been saying to remove Tim Cook as a CEO? I know, I am a CEO to multiple companies and help many different businesses in many industries, so I walk the talk.

    Or my request to remove Tim on Change.org to see if I could get enough of you to send a message to the board of directors
    https://www.change.org/p/apple-board-of-directors-remove-tim-cook-as-ceo-of-apple

    Or my “Dear Apple” letter that fell on deaf ears when attempting to post on the Apple “suggestions” website.
    (I usually get paid to give this type of info to a company)

    Dear Apple,

    1 – MacPro
    Update the MacPro every year with any updates that exist – more ram, faster graphics, MORE I/O ( not less ), more storage, expandability and upgradability. THIS is what a PRO user wants and needs. No reason not to update this yearly. In the Q1 timeframe, a time when companies allocate funds towards equipment and the consumer market slows down. It’s not a fluke why the consumer electronics show, NAMM, auto show, etc.. all pimp new products in Jan/Feb.. now sell to them. 5 YEARS since last update.. unacceptable.

    2 – Displays
    No reason to blow this market off. You proudly advertise how great your retina display is, yet you ignore making a desktop one? Confusing. Make displays to compliment your MacPro and MacMini. Not to mention having a Apple logo in front of millions of users helps sustain the brand in people’s minds. 5 YEARS since last update.. unacceptable.

    3 – Mac Mini
    I still think this product is used and should still be made, just update it.

    4 – iMac
    WHY is this not a priority to Apple? Make NEW iMacs every year. Announce AND release it in Q3 for the Holiday season; and make sure you manufacturer enough to meet the demand. Not having inventory available for the holiday season is unacceptable.

    5 – iPhone
    Make a 4″ Option. Don’t neglect the 4″ size, just because Samsung made you think the world wants huge phones… not everyone does. Loose the “s”, it makes no sense on the marketing side to the consumer. And if you are going to do a keynote, and release a new model, make sure it has more than “look how thin it is”. THIS is WHY your iPhone sales are lacking.

    6 – Apple Watch
    Utilize the board of directors you built on this device to help recognize heart attack and stroke symptoms before they happen. Having the watch excel in the medical and health field will reap dividends for years to come… making it a must-have product.

    7 – AppleTV
    The i/o again is lacking for systems that run like Control4 that needs better options for i/o. Get the deals done with the networks to help consumers rid the stranglehold on cable companies that over-charge for a million channels.

    8 – MacBook Pro
    Bring back i/o!!!! If you want to be respected as a PRO machine, allow there PROS to USE it without 1,000 cables coming out of it. Pro users do not want to deal with dongles.

    9 – MacBook / MacBook Air
    Give them a refresh more often than 3 years
    I really don’t understand the difficulty to update these yearly, without the need for a re-design…

    10 – Stock
    Keep buying back diluted shares so it’s harder to be manipulated. AAPL is one of the most manipulated stocks on the market.

    11- Aquisitions
    Make sure what you are looking to acquire is not something Apple can achieve on it’s own with the talent within. (See Beats). And whoever is negotiating these deals needs to grow a pair. learn how to get better deals, and not waste so much money on some of these companies. When I see what Apple pays for these acquisitions, I shake my head. Paying $3B for beats was a terrible decision. Tim didn’t get the memo that Apple CREATES ecosystems and doesn’t just buy them.
    If you’re gonna acquire a company, acquire Adobe; for the assets.

    12 – Diversify Manufacturing
    Apple needs to diversify manufacturing to more than one resource to meet the demand. Be the leader in bringing back manufacturing on a large scale back to America. Utilize China, Mexico and India to meet demand for products so the consumer can purchase the products you are advertising.

    13 – Advertising
    More money needs to be spent on Advertising and aggressive advertising. Apple has gotten a little weak on ads. Marketing is everything.

    14 – iTunes
    Fix iTunes. It’s such a pain and over-bloated. iTunes 2010 runs better than iTunes 2018… that is messed up.

    15 – Software
    Fix Mail. Fix spotlight. Bring back Aperture.
    Allocate staff to interact with users of your software and aggressively update them based on the users input. It’s not that difficult.. the users will give you the answers to the quiz. Listen to them and your software will shine.

    16 – iCloud
    This is kind of embarrassing. Other companies offer better services for less money. it almost makes more sense to roll $5 – $10 more into each product and offer iCloud for free with a generous space to sustain the user base, offering tons of services with all that content. 1TB free is what I would offer.
    Get the servers out of China and on U.S. soil for security reasons.

    17 – Retail
    Allocate more employees to help people at the help desk. Every store I go in has 10-20 sales people, mostly talking to one another, meanwhile 2-3 tech people are backlogged with pissed off customers. This is mis-managed and can be better handled.

    18 – Keynotes
    Tim, step aside and let someone with passion, excitement, and a great stage presence, do the keynotes. Make them count. Don’t assemble the press and your fan base to come to one of these events to tell them the new iPhone is thinner. Don’t waste everyone’s time and understand when you have the stage.. perform… sell… and if you lack things to talk about, then it should be telling to your allocation of the talent around you and how you utilized them.

    19 – Apple Pay
    WHY is this not being advertised like crazy? No excuse for the lazy approach to this. Advertise this everywhere. Co-Brand with world brands. Do a co-brand commercial with subway showing people buying a sandwich and paying with their phone in seconds. Show how easy and secure it is. Almost every person I tell about Apple Pay has no clue about how much more secure it is than the other choices. Even the retail staff doesn’t know. Who’s job is that to tell them? Apple! Run ads showcasing that strength.

    20 – HomeKit
    See how users use products like Control4 and start building the ecosystem for that. I feel this, along with CarPlay, can be a game-changer if done right. You create great things like HomeKit, yet trying to educate the consumer about it is lacking. There should a fun section on the website all about these technologies you have. Consumers should not have to dig for that info. The website and marketing should be promoting them more aggressively. This is a under utilized sector for Apple.

    21 – iPad
    iPad should be updated every year and announced and released Q3 for holiday quarter sales.

    22 – R&D
    Make sure the products are tested enough so you don’t have issues after the release (see maps, EarPods, Macbook pro 2016 battery, etc.. )

    23 – Fix your Christmas failures
    2017 – missed releasing HomePod release for Christmas
    2016 – missed AirPod inventory to sell
    2015 – missed inventory on iPhone to meet demand
    2014 – missed iMac inventory to sell thru Christmas
    This is a ongoing problem. The date for Christmas has not changed in 2017 years.

    Take around 1% of your revenue $200 – $250B and hire 50,000 workers averaging $50,000 each
    and diversify them into manufacturing plants: 20,000 in the U.S., 10,000 in China, 10,000 in Mexico and
    10,000 in India to meet your product demand so the cycles of the products are announced, released and
    exercised in ONE financial quarter so your analytic data points are more accurate sand consumers are better served.

    24 – Better communication
    Way too many PR nightmare from one CEO for such a small sku product line. Throttling the iOS without
    letting people know was one of the worst executions this company has ever done.. again under Tim Cook.

    25 – Fix the OS plug-ins that financial institutions need to be able to have check scanners and other banking needs work.

    Those are some of my ideas.
    Richard Hofherr

    1. Most of what you are talking about has been addressed a while ago and acted upon…..and discussed here even longer.. ..

      Stop toothing your own horn ceo ! . And how about staying up to date..
      🤦‍♂️

    2. Only a basementCEO™️ would post such obvious long-winded posturing and deluded crap. Yeah, right. CEO to many companies with time on his hands to post in this little sewer out back of the real world!
      Such a big man, a legend to yourself no less.
      ROFLOL

    3. Dude, you don’t even know the Mac mini was very substantially updated in just the past few months, and you expect anyone to take you seriously? Seriously?
      Yeah, you take yourself way too seriously.

  3. This is how i look at it :

    Again.. why is this being overlooked so conveniently.
    1-Most of the problem is directly related to China and its economy.

    ***2- even at revised level.. 84 billion revenue is the 2nd largest quarterly revenue for Apple ever!

    ***3- quote ““While we are disappointed to be falling short of our quarterly revenue goal, our fiscal first quarter was also a record setter for revenue from Services, Wearables and the Mac. iPad revenue grew double-digits over the year-ago quarter, and iPhone activations in the U.S. and Canada set new Christmas Day records. We expect to set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam. Our worldwide installed base of active devices also hit a new all-time high, reflecting the loyalty of our customers and their appreciation for the work you do.”

    And as for clean up..

    1-The biggest problem at Apple is Angela Ahrendts and the BS Burburry culture/image she brought with her and probably had great sucess influcing the managemnet with.
    Apple should be high-end, for masses.. not luxury for few.

    2 Ives is good but overated.. and he is pushing unnecessary idiosyncratic esthetic obsessions way over function.. the balance is off !

    3- Eddy Cue. Mr Convolution … !

    Tim , clean up the bs.

    1. Regarding your point “2 …..he is pushing unnecessary idiosyncratic esthetic obsessions way over function.. the balance is off !”

      I totally agree with you, and more…I thing he must be…fired…to protect HIS own legacy, he did great things, but it is been a while since someone has criticized Apple products for being thick and/or heavy, and yet MANY have complained about dongles, less ports, batteries not lasting enough. Both situations are related !!!

  4. I’m not going to bother touching on relations between the US and China as it has been done to death. Likewise I’ll not bother to comment on Apple’s lack of diversification other than state the bloody obvious.

    Let’s assume that Apple has become a phone selling company. With that assumption and knowledge that the phone market is saturated why the hell would you come out with phones at a premium price? Frankly I think that decision was just plain stupid. So when and where does the buck stop with? Who is going to take responsibility? In other companies the CEO falls on their sword.

    For the record in late 2015 I bought a 27 inch iMac with what was eventually determined was a faulty logic board. I had to drag Apple screaming and kicking to admit responsibility. I had to quote Australian consumer law before they came to the party). Prior to that the only hardware issue I ever experienced was a damaged internal modem. Apple was so cool in how they handled that issue. Not any more.

    One of my wife’s colleagues is now on his second MacBook Pro in two years and the second one is playing up as well.

    So Apple expects us to pay premium prices for phones in a slowing market (and then they drop the prices). Apple expects us to pay premium prices for below par computers that are underpowered and late to the market? Yeah right! However it still raises the issue as to who will take responsibility. Finally what is the whizzbang replacement for iPhone? Hello, is there anyone at home at Cupertino? Obviously not.

    A lot of people on this site think Steve Jobs was without fault and that view is incorrect. Steve Jobs was a far superior CEO to Cook but he made a huge mistake in choosing the latter as a replacement.

  5. Wait ’til you see what AMD is about to announce at CES and still want to pay nearly £5000 for the base model iMac Pro, currently Apple’s most powerful computer?

    Up to 64 core Threadrippers coming around May will make Tim Cook’s modular 2019 Mac Pro a dead on arrival product in the creative Professional community. He won’t be able to blame China for this turkey.

    Apple forced me off the Mac Pro onto the PC through lack of Pro options, my partner and I stopped upgrading our iPhones and iPads because they already do everything we need and the price rose beyond ‘insta-buy fuck it let’s treat ourselves’ price to ‘fuck me, they’re having a laugh’ prices which means we’ll only buy when we absolutely need to. This is why Apple missed earnings target because happy long time customers stopped spending their money because Apple got greedy.

  6. Apple may NOT understand this, but the center of their EXISTENCE is the Mac. The iPhone is the Mac’s offspring, as is everything else that Apple does. The sooner they LEARN this, the sooner they will get back on track and figure out where they need to go. If Apple thinks of themselves as an iPhone company, then they will lose their direction, which they appear to have already done. Tim Cook has seen better days and needs to go. And I simply do NOT care what he thinks of politics or social issues.

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