For the first time in years, Apple adjusted its first-quarter earnings for the upcoming fiscal year, its 2019 estimates reading as follows:
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
While most of these numbers aren’t that different from the guidance Apple issued back November, the company has projected its revenue to be down about $5-9B from the company’s previous $89-93B estimate.
In the revision, Apple CEO Tim Cook detailed four reasons for the expected dip. First, the iPhone XS and XS Max launched in the Q4 2018 timeframe, while the iPhone X last year launched in the company’s first financial quarter. Second, the strong U.S. dollar made for a tough exchange rate that made overseas sales difficult. Third, there were a lot of new products launching in this quarter, and some were supply constrained (Cook mentioned the Apple Watch Series 4 and iPad Pro specifically, as well as MacBook Air and AirPods). And finally, the “economic weakness in some emerging markets” turned out to be more severe than anticipated.
The letter also detailed “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.”
On the other end of this, consumers have noted that Apple’s products became significantly more expensive in the past year. Nearly every product Apple launched in 2018 has an entry price significantly higher than the one it replaced. Analysts have speculated that this has led to lower unit sales, especially of the iPhone.
Apple had boosted iPhone trade-in values over the holidays, and had promoted trade-in prices, which could have been considered an attempt to pump up lower-then-expected iPhone upgrade numbers in the U.S.
It’s hard to say what’s coming down the pipe, especially since Apple isn’t expected to release new products until March at the very earliest.
As always, stay tuned for additional details as they become available.
Via Macworld