Tim Cook’s Letter to Apple Investors is a Mix Bag of Ups and Downs

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The letter was written as an explanation to revision of guidance for Apple’s fiscal 2019 first quarter. It suggests that Apple is estimating its revenue figures lower than it had anticipated earlier

Pic credits – Apple

Struggling in terms of sales worldwide, Apple’s CEO Tim Cook has now written a letter to Apple investors explaining challenges and positive results that the brand is facing. Tim, in the letter, has written that Apple is expecting to exit the quarter with approximately US$ 130 billion in net cash.

He wrote, “As we exit a challenging quarter, we are as confident as ever in the fundamental strength of our business. We manage Apple for the long term, and Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability and creativity and to emerge better as a result.”

First quarter impacted by macroeconomic and Apple-specific factors

Tim, explaining the reason behind less sales, explained that macroeconomic as well as Apple-specific factors have impacted the first quarter figures for Apple. He has written that the company already knew that different timings of iPhone launches would affect Apple’s year-over-year compares.

The letter read, “Our top models, iPhone XS and iPhone XS Max, shipped in Q4’18 — placing the channel fill and early sales in that quarter, whereas last year iPhone X shipped in Q1’18, placing the channel fill and early sales in the December quarter. We knew this would create a difficult compare for Q1’19, and this played out broadly in line with our expectations.”

However, the question that remains unanswered is the fact that if Apple was aware of the outcome of launching iPhone models at different timings, why did it proceed with the move?

The Apple CEO has also termed the strong US dollar as one of the factors impacting Apple’s business. He wrote that the brand’s anticipation about the strong US dollar creating foreign exchange headwinds has played out broadly in line.

Economic weakness in some emerging markets has also been termed as a factor impacting Apple’s business. Tim explaining the same to investors wrote, “We expected economic weakness in some emerging markets. This turned out to have a significantly greater impact than we had projected.”

Emphasis on the Greater China market

The letter seems to lay special emphasis on the Greater China market. It is to be noted here that Apple has been sued by Qualcomm in China. There were reports indicating that Apple may have to ban sales of some iPhone models in the country.

Tim Cook wrote, “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

Positive results for Apple in the December quarter

The installed base of active Apple devices, as per Tim Cook, hit a new all-time high during the December quarter. This size has grown by more than 100 million units in 12 months.

Tim wrote, “There are more Apple devices being used than ever before, and it’s a testament to the ongoing loyalty, satisfaction and engagement of our customers.”

Apple’s revenue from services outside the iPhone business has also grown 19 per cent year-over-year. Services, wearable devices and Mac generated all-time record revenue figures as per the Apple CEO. He wrote, “Services generated over US$ 10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.”

The letter further read, “Wearables grew by almost 50 per cent year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers; launches of MacBook Air and Mac mini powered the Mac to year-over-year revenue growth and the launch of the new iPad Pro drove the iPad to year-over-year double-digit revenue growth.”

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