Apple shares slide after iPhone maker issues rare revenue warning

Apple CEO Tim Cook leaves the stage after speaking at a high school

The iPhone maker made a rare cut to its sales outlook Wednesday, blaming a bigger deceleration in emerging markets, especially China.

Apple finds itself in a tricky position in China, a key market for sales and where it manufactures the bulk of the iconic products it sells worldwide, after the high-profile arrest in Canada of the CFO of domestic rival Huawei Technologies Co Ltd.

Cook's revelation about the fact that the latest iPhones aren't selling to expectations - particularly in China - caused the company to revise its earnings.

While Huawei still has a way to go in catching up to Apple in terms of revenue, it is making huge inroads in markets across the globe and its high-end models are increasingly popular.

While Cook said the main factor for the weakening iPhone demand is the trade war between the United States and China, many believe the high prices of the 2018 iPhones are actually what convinced many potential buyers to hold on to their purchases. Cook also noted supply constraints to new models of the Apple Watch, iPad Pro and AirPods.

Cook also said that Apple hurt its bottom line when it slashed the price of iPhone battery replacements early a year ago after it was caught red-handed slowing down older iPhones to preserve their aging batteries.

The CEO attributed much of the company's "shortfall" in its outlook to struggles in China that he pinned on the economy and "rising trade tensions" with the U.S.

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed", Mr Cook wrote in the letter.

Apple isn't the only company facing difficulties in a slowing Chinese economy and escalating trade tensions. With iPhone's production lines in China, Apple has been caught in between the world's two largest economies. While we don't have the exact numbers, it's likely that many iPhone customers chose to pay the $30 to extend the life of their current handsets rather than shell out hundreds of dollars for a new model.

"That is having an impact on earnings and it's not going to be just Apple", White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with CNN.

Apple, which was until recently the largest publically trade company in the U.S., is now worth less than Microsoft, Amazon and Google's parent company, Alphabet.

KitGuru Says: I still like both the iPhone and the iPad but Apple's price increases over the last few years have been taking a toll. The yield on the 10-year Treasury surged to 2.64 percent.

Apple's decision to cut its sales outlook, "isn't a huge shock at this point", said Shannon Cross of Cross Research.

Peter Richardson, a research director at Hong Kong-based Counterpoint Research, said it was hard to see a catalyst that would help Apple recover lost ground in China.

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