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Apple blames weak iPhone China sales as it cuts revenue forecast

US tech giant Apple has taken the rare step of slashing its quarterly sales forecast, acknowledging that demand for iPhones is slowing and confirming investor concerns that its most profitable product has lost some of its consumer appeal amid competition from cheaper rivals. In a letter to shareholders, Chief Executive Officer Tim Cook said Apple’s revenue for the…

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Apple blames weak iPhone China sales as it cuts revenue forecast

US tech giant Apple has taken the rare step of slashing its quarterly sales forecast, acknowledging that demand for iPhones is slowing and confirming investor concerns that its most profitable product has lost some of its consumer appeal amid competition from cheaper rivals.

In a letter to shareholders, Chief Executive Officer Tim Cook said Apple’s revenue for the October-December quarter – including the crucial holiday shopping season – will drop well below the company’s earlier projections and those of analysts.

Apple now expects revenue of $84bn for the period, below analysts’ estimate of $91.5bn, according to IBES data from Refinitiv. Apple originally forecast revenue of between $89bn and $93bn. The official results are scheduled to be released on January 29.

The news sent Apple shares tumbling 7.7 percent in after-hours trade, triggering a broader selloff in the stock market and dragging the company’s market value below $700bn.

Cook traced most of the revenue drop to China, where the economy has been slowing and Apple has faced tougher competition from smartphone makers such as Huawei and Xiaomi. US President Donald Trump has also raised fresh tensions between Washington and Beijing by imposing tariffs on more than $200bn in goods, although so far the iPhone has not been affected directly.

China’s “economy began to slow there for the second half”, Cook said during an interview with CNBC on Wednesday afternoon. “The trade tensions between the United States and China put additional pressure on their economy.”

In his letter, Cook, who became Apple’s CEO in 2011, Cook said the company anticipated challenges in key emerging markets but “did not foresee the magnitude of the economic deceleration, particularly in Greater China”.

“In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” he wrote.

Cook also acknowledged that consumers in other markets are not buying as many of the latest iPhones, released last autumn, as Apple had anticipated – a factor that could stem from a starting price of $1,000 for Apple’s top-of-the-line iPhones.

The economic toll of China-US trade war

“What Apple would like to do, as much as possible, is to cite China and the trade war as the cause of this – but over the last couple of years Apple has significantly increased the price of the iPhone,” Shaun Nichols, technology reporter at The Register, a tech news and opinion website, told Al Jazeera.

“Tim Cook’s official explanation for this a kind of a combination – the trade war is causing problems in China, worries over the economy and that’s making people less likely to go and purchase Apple products.”

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook’s comments on the impact of the US trade tensions with China “might be a dig at Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they’ve made over the last year”.

Analysts say Apple must now try to find a way to win back Wall Street’s confidence and reverse a steep decline that has erased $350bn in shareholder wealth in just three months.

“This is Apple’s darkest day during the Cook era,” Wedbush Securities analyst Daniel Ives said. “No one expected China to just fall off a cliff like this.”

While Trump’s trade war with China is not helping Apple and other US technology companies, Ives believes Apple’s price miscalculation created an opening for rivals with less costly alternatives that still worked well.

The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September last year to seize the number two spot behind industry leader Samsung, according to the research firm International Data Corp.

Apple’s board of directors named Tim Cook as the company’s chief executive officer in 2011 [File: Marcio Jose Sanchez/The Associated Press]

Premium pricing strategy

Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

Apple’s move was not entirely a surprise, however.

COUNTING THE COST: The big tech lash – Tech giants under scrutiny

In November, the Cupertino, California-based company said it would stop disclosing unit sales data for iPhones and other hardware items, leading many analysts to worry that a drop in iPhone sales was coming. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russia for a lower-than-anticipated sales estimates for the company’s fiscal first quarter. But Cook specifically said he “would not put China in that category” of countries with troubled growth.

That all came before the damage to the Chinese economy from trade tensions with the US and long-simmering structural issues became evident.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co all previously said they planned to cut production in the country.

But Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy.

“The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise,” James Cordwell, an analyst at Atlantic Equities, told Reuters news agency.

In the latest fiscal year, ended on September 29, unit sales of the iPhone were essentially flat from the prior year, while iPhone revenue expanded 18 percent to $166.7bn. That growth came entirely from higher prices.

But some investors were heartened by Apple’s plans on using its cash pile.

In his letter, Cook said Apple has $130bn in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks.

“We would anticipate the company increasing share buybacks on the weakness to return capital to shareholders at discount prices,” said Trip Miller, managing partner at Apple shareholder Gullane Capital Partners.

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UK spy chief warns China, Russia racing to master AI

MI6 chief Richard Moore says Beijing and Moscow ‘pouring money’ into technological advances that will reshape espionage and geopolitics.The chief of the United Kingdom’s foreign spy service is to warn that China and Russia are racing to master artificial intelligence in a way that could revolutionise geopolitics over the next 10 years. Richard Moore, who…

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UK spy chief warns China, Russia racing to master AI

MI6 chief Richard Moore says Beijing and Moscow ‘pouring money’
into technological advances that will reshape espionage and geopolitics.The chief of the United Kingdom’s foreign spy service is to warn that China and Russia are racing to master artificial intelligence in a way that could revolutionise geopolitics over the next 10 years.
Richard Moore, who heads the Secret Intelligence Service, known as MI6, is due to make his first public speech since becoming chief of the organisation on Tuesday.
In extracts of the speech released in advance by the British government he will say quantum engineering, engineered biology, vast troves of data and advances in computer power pose a threat that needs to be addressed by democratic powers.
“Our adversaries are pouring money and ambition into mastering artificial intelligence, quantum computing and synthetic biology, because they know that mastering these technologies will give them leverage,” Moore, who rarely makes public speeches, will say when he sets out his view of current threats.
The world’s spies are trying to grapple with seismic advances in technology that are challenging traditional human-led spying operations, which have dominated espionage for thousands of years.
Moore, a former diplomat, became MI6 chief in October 2020.
Speaking at the Institute for International and Strategic Studies think tank, he will stress that technological progress over the next decade could outstrip all the tech advances made over the past century.
“As a society, we have yet to internalise this stark fact and its potential impact on global geopolitics. But it is a white-hot focus for MI6,” he will say.
Of particular concern to the spies in the world’s liberal democracies are Russian and Chinese intelligence agencies, which have rushed to harness the power of a range of sophisticated technologies, sometimes at a faster pace than in the West.
Western intelligence agencies fear Beijing could dominate all key emerging technologies within decades, particularly artificial intelligence, synthetic biology and genetics.
China’s economic and military rise over the past 40 years is considered one of the most significant geopolitical events of recent times, alongside the 1991 fall of the Soviet Union, which ended the Cold War.
MI6, depicted by novelists as the employer of some of the most memorable fictional spies from John le Carré’s George Smiley to Ian Fleming’s James Bond, operates overseas and is tasked with defending the UK and its interests.
Moore says the service will have to give up some of its deep-rooted secrecy and work with technology firms to combat the rapidly developing threats.
MI6 and western intelligence agencies will have to “become more open to stay secret” in a world of destabilising technological change, he will say.
“We cannot hope to replicate the global tech industry, so we must tap into it.”
The agency has become more open in recent years, even allowing publication of an authorised history although it only covers the period up until 1949.
MI6 began publicly naming its chief, who uses the code name C and is the only publicly identifiable member of the organisation, in the 1990s.

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Pentagon to review deadly 2019 US bombings in Syria

US will look into whether procedures were followed after NY Times reported dozens of civilians were killed in bombings.United States Secretary of Defense Lloyd Austin has ordered a review into US military bombings in Syria in March 2019 that the New York Times recently reported killed dozens of civilians during the battle for the final…

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Pentagon to review deadly 2019 US bombings in Syria

US will look into whether procedures were followed after NY Times reported dozens of civilians were killed in bombings.United States Secretary of Defense Lloyd Austin has ordered a review into US military bombings in Syria in March 2019 that the New York Times recently reported killed dozens of civilians during the battle for the final stronghold of ISIL (ISIS).
Pentagon Press Secretary John Kirby announced the probe on Monday, saying it would be led by General Michael Garrett, the head of US Army Forces Command.
Earlier this month, the US military acknowledged that civilians may have been killed in the bombings in Baghouz, near the Iraqi border in 2019. At the time, the US-backed Syrian Democratic Forces (SDF) were leading the fight on the ground with American air support.
“Likely a majority of those killed were also combatants at the time of the strike. However, it is also highly likely that there were additional civilian casualties,” Bill Urban, a US military spokesman, said in a statement on November 14.
He added that “investigations were unable to conclusively characterize the status of more than 60 other casualties that resulted from these strikes”.
US Defense Secretary Lloyd Austin ordered the review into the 2019 US military bombings, the Pentagon spokesman announced [File: Patrick Semansky/AP Photo]Urban’s statement came a day after the New York Times, citing anonymous sources and classified documents,  published a report that accused the US military of concealing the bombings.
The newspaper reported that the bombing struck a “crowd of women and children”, killing 64 people.
“Without warning, an American F-15E attack jet streaked across the drone’s high-definition field of vision and dropped a 500-pound bomb on the crowd, swallowing it in a shuddering blast. As the smoke cleared, a few people stumbled away in search of cover. Then a jet tracking them dropped one 2,000-pound bomb, then another, killing most of the survivors,” the Times wrote.
On Monday, Kirby said the review would look into “record keeping and reporting procedures” and “whether mitigation measures identified in previous investigations into the incident were in fact implemented effectively”.
The probe, which is due in 90 days, will also assess whether “accountability measures” will be appropriate, Kirby added.
The US-led coalition started a bombing campaign against the ISIL (ISIS) group in Syria and Iraq in 2014, and the American military maintains troops in both countries with the stated goal of preventing the group’s resurgence.

Former US President Donald Trump touted the territorial defeat of ISIL (ISIS) as a major policy achievement in his failed 2020 re-election bid.
Rights groups previously accused the US-led coalition of killing civilians during their bombing campaign. A 2019 investigation by Amnesty International, for instance, found that the coalition had killed 1,600 civilians in Raqqa, the ISIL (ISIS) group’s former de-facto capital.
The Associated Press news agency reported on Monday that after the New York Times story was published, Austin received a briefing on the Syria bombings from General Frank McKenzie, the head of US Central Command.
AP reported that McKenzie’s command said “an initial investigation concluded that the strike constituted legitimate self-defence in support of Syrian partner forces under fire from ISIL”.
The probe into the Syria bombings comes after the Pentagon admitted in September that a US drone attack previously described as “righteous” by a top general had killed 10 civilians, including children, in Kabul during the chaotic US withdrawal from Afghanistan.
But a subsequent internal review by the Pentagon concluded that the bombing did not violate the laws of war or amount to criminal conduct or negligence, prompting outrage.

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Arab Coalition carries out 15 strikes against Houthi militants in Marib

JEDDAH: An influential watchdog body of the Organization of Islamic Cooperation has called for an end to Israel’s occupation of Palestine as the only way to stop ongoing human rights abuses against Palestinians. The OIC’s Independent Permanent Human Rights Commission made its appeal on Monday to coincide with the UN-run International Day of Solidarity with…

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Arab Coalition carries out 15 strikes against Houthi militants in Marib

JEDDAH: An influential watchdog body of the Organization of Islamic Cooperation has called for an end to Israel’s occupation of Palestine as the only way to stop ongoing human rights abuses against Palestinians.

The OIC’s Independent Permanent Human Rights Commission made its appeal on Monday to coincide with the UN-run International Day of Solidarity with the Palestinian People 2021.

In a statement, the IPHRC pointed out that the solidarity day highlighted the urgent need for the global community to recognize the inalienable right to self-determination of Palestinian people.

“Today is not only an opportunity for the international community to remember that the question of Palestine remains unresolved, but it is also an opportunity to focus attention on the increasing suffering of the Palestinian people, under the Israeli occupation, and to unify all efforts for assisting them to attain their fundamental rights, including the right to self-determination and the right to return for Palestinian refugees to their homes and property, from which they have been displaced,” the commission said.

It also expressed grave concerns over the increasing, “range of violations committed by Israel … particularly the recent draconian measures against Palestinian prisoners and detainees as well as the harassment of Sheikh Jarrah (neighborhood of East Jerusalem) families who remain under the threat of eviction from their houses under baseless and illegal arguments.”

The IPHRC statement urged all human rights groups to raise awareness of what it described as “egregious human rights violations” aimed at “separating Al-Quds (Jerusalem) from its original inhabitants, which is yet another vicious attack on the right to self-determination of the Palestinian people.”

In addition, commission members condemned the recent Israeli designation of six Palestinian human rights and civil society groups as terrorist organizations, a move the IPHRC claimed represented Israel’s misuse of counterterrorism and security legislation to silence opponents and innocent Palestinians.

Israel’s demolition of Palestinian homes and forced evictions of residents in Jerusalem and other areas was also slammed by the commission.

It added that there was a “need to investigate these abuses by relevant international mechanisms with a view to holding Israel, the occupying power, accountable for violating international human rights and humanitarian laws.”

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