Apple CEO Tim Cook has written a letter to investors issuing revisions to the company’s outlook for the first fiscal quarter, which ended December 29.

The main headline grabber was that gross revenue is now expected to top out at around $84 billion, compared to the forecast of $89 billion to $93 billion provided at the beginning of the quarter. Other income is expected to be greater than initially thought at $550 million versus $300 million.

[table]

Forecasts,Start of 1Q19,End of 1Q19

Revenue,$91 billion*,$84 billion

Gross margin,38.25%*,38%

Operating expenses,$8.75 billion*,$8.7 billion

Other income,$300 million,$550 million

Tax rate,16.5%,16.5%[/table]

*figure is mean of provided range

If the estimates hold out, it would mark a 5 percent drop in revenues from last year and be the first annual decline for a holiday season since 2000.

Cook laid out several factors for the dismal performance. One of them, the release timeframes for the new iPhones, was a technical factor — whereas last year’s iPhone X launched in November, this year’s more premium iPhone XS models began sales at the end of the summer reporting season, affecting numbers slightly. Per Apple’s pledge with the last earnings call, the company has not provided raw sales numbers for its hardware.

The company also had a glut of new products — Apple Watch Series 4, new iPad and iPad Pro models, a refreshed MacBook Air — which the supply chain had to manage. Apple fully expected a bottleneck in sales of those devices as well as the AirPods. While constrained of their full potential, sales of Macs, Apple Watches and services are still up from a year ago.

A strong US Dollar and protracted economic weakness in emerging markets compounded drag in foreign earnings with China as the heaviest weight out of all mentioned factors. US-China trade tensions were seen as the primary cause for lower sales in the country.

However, cybersecurity concerns have also played their role with the arrest of Huawei CFO Meng Wanzhou on suspicions of sanction breaches and fraud led to a backlash against the West: domestic companies started discouraging their employees from purchasing Apple products and incentivizing buying from Huawei.

Apple officially reports earnings on January 29.

[alert variation=”alert-warning”]Update: This story has been updated for reading clarity.[/alert]



Jules Wang is News Editor for Pocketnow and one of the hosts of the Pocketnow Weekly Podcast. He came onto the team in 2014 as an intern editing and producing videos and the podcast while he was studying journalism at Emerson College. He graduated the year after and entered into his current position at Pocketnow, full-time.

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