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Apple cuts sales forecast as US-China trade war bites

Apple boss Tim Cook has blamed the US-China trade war as he warned that quarterly sales for the iPhone maker would fall short.

Shares in the California-based tech giant fell 8% in after-hours trading after Mr Cook said it now expected revenues of around $84bn (£67bn) in the three months to 29 December, down from previous guidance of $89bn-$93bn.

Mr Cook said that while Apple had expected challenges in key emerging markets, it “did not foresee the magnitude of the economic deceleration, particularly in Greater China”.

He also pointed to a lower than expected number of iPhone upgrades in some developed markets and said the tech firm had launched an initiative to make it easier to trade in handsets in stores, finance the purchase over time, and get help transferring data.

The warning, which came after trading in New York closed on Wednesday, looked likely to rattle already-volatile stock markets when they reopen on Thursday – with stock index futures pointing to Wall Street falls.

Fears over the impact of Donald Trump’s trade spat with Beijing have been among the key factors that saw the FTSE 100 and wider global markets endure their worst year in 2018 since the financial crisis.

The letter to shareholders from Mr Cook on Wednesday was the first time Apple has issued a warning on revenue ahead of quarterly results since the iPhone was launched in 2007.

The chief executive pointed to slowing growth in China, the world’s second-biggest economy, as the key factor.

CUPERTINO, CA - SEPTEMBER 12: Apple CEO Tim Cook speaks during an Apple special event at the Steve Jobs Theatre on the Apple Park campus on September 12, 2017 in Cupertino, California. Apple is holding their first special event at the new Apple Park campus where they are expected to unveil a new iPhone. (Photo by Justin Sullivan/Getty Images)
Apple boss Tim Cook said the guidance cut was disappointing

He added: “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.

“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.

“And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.”

Mr Cook said that lower than anticipated iPhone sales, primarily in Greater China, accounted for all of the company’s revenue shortfall compared to previous guidance.

The new revenue expectation compares with a figure of $88bn reported in the same period last year.

Apple had already forecast some of the challenges it would face in the key Christmas quarter when it published its last set of results two months ago.

Those included a tough comparison with the same period last year because of the timing of iPhone X shipments as well as the strength of the US dollar.

But economic weakness in some emerging markets had a “significantly greater impact than we had projected” while there had also been fewer iPhone upgrades in developed markets than anticipated.

Mr Cook said: “While it’s disappointing to revise our guidance, our performance in many areas showed remarkable strength in spite of these challenges.”

The warning comes after some analysts had already cut their first-quarter estimates for Apple, after financial updates from component makers offered clues that it was having a tough time.

Apple’s after-hours shares fall saw its market value dip below $700bn, having already declined significantly since it became the first company to become worth more than $1tn last August.

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