Apple’s Arrogance Causes Market-Wide Drop

Apple CEO Tim Cook

Just a day after China reported December manufacturing woes, Apple has now released new revenue guidance that will only intensify market fears of an economic slowdown further. The company’s Q4 slump led the way to a market-wide drop this morning, contributing to a tumble across several major indexes.

But no one should be surprised about Apple’s lackluster Q1 2019 guidance revision, considering that investors have been jumping ship since October 2018 – back when the trade war kicked into high gear, threatening Apple’s Far East ambitions.

In a rare letter addressed to investors, Cook weighed in on what he believes caused a disappointing Q4, placing much of the blame on a stressed-out global economy:

“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.”

This is something investors saw coming from miles away, as evidenced by the 30% drop in share price that’s occurred since mid-October. Hopefully, Cook and co. were expecting it as well.

Analysts, too, had been preparing for the worst, like Tom Forte from D.A. Davidson, who lowered his price target on Apple well before Cook penned his letter to investors:

“This didn’t come out of the blue. Expectations leading up to today have been lowered.”

But based on global smartphone sales data, it looks like Apple can’t place all the blame on President Trump’s tariffs (from which iPhones are exempt), nor on the Chinese. iPhone sales have stagnated over the last two years (not just since October) and Apple has only been able to increase revenues by producing increasingly expensive phones – NOT by selling more units.

It’s simple math, but as a business model it might not make sense long-term. If iPhone prices keep rising at the current rate, Apple might price itself out of the marketplace altogether, and the need to produce a Q1 2019 guidance revision looks to be the first sign of that.

As a result, it doesn’t seem fair to offload the company’s recent failures on the Chinese, like Cook did in his letter. The root of their problem is their smartphone development methodology, NOT a slowing a global economy – which by the way, could make things much worse for Apple if they continue producing pricier iPhones. Products from budget manufacturers have gotten more sophisticated as well, gobbling up market share from the “ritzy” Apple offerings.

This is especially true in a “low demand” environment, like in China, where high-end products are far less attractive to the average consumer.

As of right now, Apple investors have a lot to be nervous about. Company leadership has some soul searching to do, and that’s not a good position to be in as one of the most valuable companies in the world, nor as one of its shareholders.

Will Cook manage to get his house in order in time for the next earnings report?

Based on his recent guidance revision, sadly it seems investors shouldn’t hold their breath. Deflecting blame like they’ve done is a puzzling choice, when the company should really be looking inwards for the cause of disappointing revenues – something Apple seems incapable of doing under the current regime.


  1. The iPhone 10 line has pretty limited differentiation versus the growing Chinese competitors as well as the Android competitors xChina. The 23% price increase last September priced them out of the Chinese market with softening economy and higher than high quality Android competitors like Samsung and Google. Since Apple has all it’s “apples in one basket”, it has no other option to grow revenue than raise prices in a low inflation environment. But their arrogance has led them to deny price elasticity. Because Tim Cook has failed to build out any other revenue platforms of substance he has painted the shareholders into a corner with little prospects of a good outcome. He blew headstarts in voice (Siri crushed by Alexa & Google), television (Apple TV getting crushed by Amazon, Google and Roku), autonomous driving (Waymo and many others), pay (ApplePay smoked by Google, PayPal, WeChatPay, etc.) with nothing really in the pipeline. He is now looking like Motorola, Nokia and Blackberry who all were dominant telephone players that blew their leadership. What does he think will change the script?? Apple Music? Other services to a declining/static user base?

  2. Instead of complaining that Apple sales are down because of the Chinese slowdown and the global slowdown he should cut the cost of his products 25 per cent and show that he is taking positive steps to help his stock holders and trying to help the situation . Cook using the economy as a scapegoat shows that he is a sub par leader. His products no longer deserve the supreme price as in reality, there have been no significant upgrades that warrant his price increase.

  3. Cook is over done. He has done nothing to improve Siri and expand its usefulness. Why he did not have Apple acquire Ring and Simply Safe to get a jumpstart in the smarthome biz seems blind. He is increasingly political in his comments and positions alienating half his customers, not to mention the battery scandal to force me to upgrade my phone when there was no compelling reason to do so other than my brand sabotaged me.

    I am one weary fanboy. Cook should be fried.


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