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Here's how poor iPhone sales erased $450 billion in market value for Apple

Here's how poor iPhone sales erased $450 billion in market value for Apple

Here's how poor iPhone sales erased $450 billion in market value for Apple
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By Nidhi Chugh  Jan 30, 2019 3:31:29 PM IST (Updated)

Here's how poor iPhone sales erased $450 billion in market value for Apple.

US-based Apple Inc on Wednesday announced a sales forecast cut stating three reasons — the iPhone sales, the economic slowdown and the trade war in China, which has led its market capitalisation to fall by over $450 billion in three months.

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The $450 billion market capitalisation loss includes the billions of dollars the company lost after the forecast cut announcement. Before the three-month period, Apple's market capitalisation had a valuation of over $1 trillion.
The current market capitalisation of Apple stands at about $674 billion, the lowest the company has seen since it closed at about $678.4 billion on February 3, 2017, according to FactSet. Since October 3, Apple shares have fallen by 39.1 percent.
The shocking part is that iPhone, which is the major driver of the Apple business, is the reason chief executive officer Tim Cook stated for the forecast cut for the quarter.
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.
"We did not set a new record for iPhone sales in Q1. However, due to a number of factors — some macroeconomic, and some specific to Apple and the smartphone industry," Cook, wrote in a letter to his employees on Wednesday. Apple starts its fiscal year in October each year.
China's central bank magazine on Wednesday said the country's economic growth could fall below 6.5 percent in the fourth quarter as companies face increased difficulties there.
Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company.
“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.
Cook, in a letter to investors, admitted that China is not the only issue with iPhone sales.
"While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements," the letter read.
Apple recorded sales of $88.5 billion in the third quarter, in the holiday quarter of 2017, with $61.6 billion in iPhone sales.
In the fourth quarter of 2018, ending in September of every year,  46.89 million iPhones were sold worldwide.
However, Cook said the 'categories outside of iPhone — Services, Mac, iPad, Wearables/Home/Accessories — combined to grow almost 19 percent year-over-year' and was confident that the company will still report an overall good quarter with the help of share buybacks.
This, however, is not the first time Apple cut its revenue forecast. In 2002, for the June quarter, Steve Jobs, co-founder, said the quarterly revenue numbers would fall $200 million short of its estimates citing a slowdown in sales.
“Like others in our industry, we are experiencing a slowdown in sales this quarter. As a result, we’re going to miss our revenue projections by around 10 percent, resulting in slightly lower profits,” he wrote. He had warned that there had been potential risks of continued competitive pressures in the marketplace and economic factors.
In 2002, Apple's prime driver of business was their computers and iPods. iPhones were first launched in 2007.
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