Commenting on Apple’s Q1 revenue guidance and implications for the global economy, Ms. Ana Nicholls, Director, Industry operations at The Economist Intelligence Unit (The EIU), said:
“Apple's Tim Cook has partly blamed the US-China trade war for his company's falling share price. The new tariffs have dampened China's economic growth, exacerbating the problems Apple was already facing from the strong US dollar. But the slowdown has not affected some of Apple's rivals - particularly its local Chinese ones - suggesting that the US company is also lagging in terms of its product appeal. Having once been the market leader for smartphones, the US company has now been overtaken by Huawei, Oppo and Vivo, which have a combined market share of 66.4%. Apple has also slipped down the global rankings to number three in terms of smartphone sales, behind Samsung and Huawei. Moreover, some fairly disappointing new launches during 2018 showed that Apple can no longer rely on product upgrades to generate excitement.
Yet, despite the share price drop, the underlying picture is that Apple is still doing quite nicely. While its device sales may be struggling, they are becoming less important as its customers stop focusing on getting the latest handset and focus more on getting bundled services. As a result, Apple's services revenue is booming: they were up by 17% to US$10bn in the fourth quarter of fiscal 2018 (ending September 29th)—a record high. The company's net profits for the full year were up 23%. Although this year's figures may not match that, services are not so vulnerable to trade wars or to a Chinese slowdown as smartphone sales. In fact, the company plans to stop reporting sales for its iPhones and other devices this year, in order to help it manage investors' expectations. The company's challenge, though, is to prove that it is as innovative in developing new services as it has always been with devices.”
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