Tuesday, June 25, 2019
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Little warning for Apple – The Cross

The sales and profits of the American giant are down, mainly because of the high price of its products.

Apple should make a little less profit than expected during the first quarter (October-December) of its fiscal year 2018-2019: $ 84 billion (73.4 billion euros) instead of 91 billion dollars (79, 5 billion euros) expected. This simple announcement, made Wednesday, January 2, has tumbled all technology stocks, Apple in the lead, on the New York Stock Exchange.

In the space of three months, the capitalization of Apple has melted by 40%. The downfall is severe for a business, previously praised, which was the first last year to reach worth $ 1 trillion on Wall Street.

Admittedly, there is no danger in the house and all this could finally seem very anecdotal. But behind this stock market plunge, many questions are emerging about the strategy of the company, which is evolving in an ever more competitive environment, in a complicated geopolitical context and with a great dependence on the iPhone, its flagship phone, which still accounts for 60% of its sales.

Huawei, a Chinese giant who worries

Decline in sales in China

"We expected economic weakness in several emerging markets. It had a lot more impact than we expected. "Apple's boss Tim Cook said in a letter to investors, pointing to rising trade tensions between China and the United States. For the last quarter of 2018, the decline in sales, estimated between 5 and 10%, is mainly related to the decline in sales in China where Apple's market share is now around 9%, against more 15% in 2015.

But the slowdown of the Chinese economy is not the only explanation for the difficulties of the American giant. Of course, Apple is the victim of the rise of patriotic sentiment in the country, but it suffers mainly from the high price of its smartphones, sold at more than $ 1,000, three times more expensive than those of local competitors, like Huawei, Oppo or Vivo, for comparable technologies.

Consumers expect innovations

Many analysts wonder today if the group founded by Steve Jobs will be able to hold this commercial policy for a long time in a saturated market and without proposing revolutionary innovations likely to push the consumers to break the piggy bank.

Some, like Goldman Sachs analyst Rod Hall, recall the case of the Finnish Nokia, who dominated the mobile market, before collapsing ten years ago, for lack of adapting to the demand of its customers. Apple's luck is still to remain globally a little ahead of its competitors in terms of technology and to have a large base of loyal customers. But everything is going so fast …

Jean-Claude Bourbon

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