Apple needs cheap iPhone to crack India

Apple needs cheap iPhone to crack India

Apple needs cheap iPhone to crack India

News that the iPhone maker cut its first-quarter revenue forecast, described by one analyst as Apple's "darkest day in the iPhone era", had something for everyone who has panicked over USA stocks in the past few months.

In a letter to investors on Wednesday, chief executive Tim Cook said the firm's sales problems were primarily in its Greater China region, which includes Hong Kong and Taiwan and accounts for nearly 20 percent of its revenue.

"The iPhone has been supporting the company for than a decade", said Roger Kay, analyst at Endpoint Technologies Associates.

The precipitous decline in Apple shares was accompanied by plunges for companies that produce parts for Apple devices.

The update suggested a disappointing figure for iPhone sales, the key driver of revenue and profit for the California tech giant.

Several companies have offered employees subsidies for Huawei phone purchases, while others have even warned staff against buying Apple products. On Wednesday, Apple lowered its revenue forecast to $84 billion for its first quarter ended December 29, below analysts' estimate of $88.05 billion.

New York-based law firm Bernstein Liebhart has filed a class action lawsuit on behalf of Apple shareholders this afternoon, citing "allegations that Apple and/or its executives may have issued materially misleading business information to the investing public".

Why it's important: While Apple has blamed support for Chinese brands and a slowing economy on its revenue drop, analysts pointed out that the company itself may be to blame.

Apple and other tech stocks managed to gain back some momentum on January 4.

"Apple's iPhones are facing a saturated premium smartphone market, with slowing growth rates and increased competition in China", Anshul Gupta, a research director at Gartner Inc., said last month when the firm released its latest smartphone sales tallies.

"I think the main villain is the very high prices that Apple is charging for its new iPhones", said Richard Windsor, a technology analyst who writes the Radio Free Mobile blog.

But with the most expensive iPhone costing more than the average annual wage, Apple (AAPL) faces an uphill battle to take a much bigger share of India's market than its current 2%.

Apple shares slid some 7.6 per cent in after-hours trade on the news.

"The question now is will Apple change its strategy or stick to its hubris", Ives said.

Perhaps in part because there are no easy fixes, Apple failed to acknowledge the possibility that current iPhone prices are simply too high (stunningly, we note that iPhones prices are almost 5x higher than the average non-Apple smartphone sold globally). "It's going to be tough for Apple to get out of its way here, given the saturation in the smartphone market".

On Wednesday, the iPhone maker said it expected revenue of about $84 billion (£67 billion) for the last three months of 2018, down from a forecast of at least $89 billion.

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