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Apple could slash iPhone prices as China pressures affect sales

The iPhone maker's latest results do little to boost its share price which is 30% down from its peak.

Apple could slash iPhone prices as China pressures affect sales

Apple has signalled lower iPhone prices may be on the way after its latest set of financial results confirmed falling sales.

The figures covering its first financial quarter to the end of December were issued after the US markets closed and followed a revenue warning issued by the company earlier in the month which flagged weaker-than-expected China sales and poor phone upgrade numbers.

 

Apple reported a 5% fall in overall revenue to $84.3bn (£64.5bn) - in line with its lower guidance and down 5% on the same period last year.

But it said iPhone revenues - which make up the bulk of its revenue - were 15% lower.

In an interview with the Reuters news agency, chief executive Tim Cook signalled that price rises to help account for the expected sales slowdown would be tempered to help drive a recovery.

 

He said iPhone prices - also raised outside the US because of a stronger dollar - would be set at local currency rates in future.

Customers walk past an Apple logo inside of an Apple store at Grand Central Station in New York
Image: Apple sees the outlook brightening despite the continuing US-China trade war

Apple had warned on 2 January that sales would be hit by weaker than anticipated economic growth in key emerging markets,

The company has also been grappling strong smartphone competition from Asia rivals, especially Huawei.

Apple CEO Tim Cook speaks during the 2018 Apple Worldwide Developer Conference (WWDC) at the San Jose Convention Center on June 4, 2018 in San Jose, California. Apple CEO Tim Cook kicked off the WWDC that runs through June 8.
Image: Apple CEO Tim Cook is more optimistic over the trade war's conclusion than he was last year

Apple shares - which have been trading at levels seen last February amid a broader tech slowdown in recent months - were 3% up in after-hours trading.

That was seen as a response to an improved outlook for the second quarter after an improved January.

Apple's share price is down almost a third on last October following a collapse in tech stocks last year over worries about over-valuation, the US/China trade war and resulting global slowdown.

It saw Apple lose its crown as the world's most valuable listed company.

Both Amazon and Microsoft overtook Apple in market value terms as 2018 drew towards a close.

While Apple was first to achieve a market cap of $1trn (£765bn) it has since sunk towards $750bn (£574bn).

 

That demise has been attributed to its China troubles but analysts say it highlights Apple's continued reliance on one product - the iPhone - for the bulk of its sales.

It is under pressure to innovate and the results were poorly-timed as they coincided with an admission that the group chat function in its FaceTime function had been suspended because of a gremlin.

The company said it was planning to roll out a fix shortly after iPhone users reported a bug allowing callers to activate another user's microphone remotely.

This was the first set of quarterly results from Apple in which it did not give full iPhone sale figures.

It had previously argued that a 90-day trading period was too short to give a true picture of its performance.

Its other main figures contained no surprises.

Services revenue - which includes App Store sales - reached a record of almost $11bn (£8.4bn).

Mr Cook said the company is targeting 500 million subscribers to Apple and third party services by 2020.

He told shareholders: "While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate that the underlying strength of our business runs deep and wide.

"Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments.

"That's a great testament to the satisfaction and loyalty of our customers, and it's driving our Services business to new records thanks to our large and fast-growing ecosystem."

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