Apple's bomb and the issue of a trillion dollars

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Washington (AFP) – Apple's explosive news – significantly lower revenue prospects and lower iPhone device sales – have raised questions about the future of the California giant, until the end of the week. then considered the undisputed leader of innovation in the technology sector.

Apple's rare admission on Wednesday cited a stronger-than-expected "economic deceleration" in China and emerging markets, and pointed out that trade frictions between Washington and Beijing were having a negative impact on smartphone sales.

But the news has sparked questions about whether Apple – the first to reach a valuation of $ 1 trillion and until recently the world's most valuable company – comes up against an obstacle or starts to get out of his leadership position.

Some analysts point out Apple's reliance on iPhone sales to generate revenue and profits, even as it attempts to diversify its product base and add services such as as music and digital payments.

"The iPhone has been supporting the company for over a decade," said Roger Kay, an analyst at Endpoint Technologies Associates.

"The world does not end for Apple but it's a major turning point." Until now, Apple has defied gravity by growing faster than any other company in the market, but mathematically it was impossible to beat the market forever. "

Apple shares fell nearly 10% Thursday, with a loss of about 38% since their valuation reached $ 1 trillion last year.

Kay said the valuation of one trillion dollars was "irrational" and, according to growth forecasts, it is unlikely that Apple will achieve this result without a new catalyst.

Apple, which is growing in China despite the absence of a dominant position, is under pressure from tariffs and other commercial problems, further aggravated by the arrest of the Chinese company's chief financial officer. Huawei in Canada, at the request of the United States.

Huawei has surpassed Apple to become the world's third-largest maker of smartphones, despite a limited presence in the United States.

– & # 39; At the crossroads & # 39; –

The update suggests a disappointing figure for iPhone sales, the leading revenue and earnings engine of the California technology giant.

Apple said it expects weak iPhone sales in other emerging markets, resulting in a decline in its sales despite positive signs in developed markets and its other products. and services.

The company cut its revenue forecast for the first quarter of 2019, ended December 29, to $ 84 billion, well below analysts' forecasts, averaging $ 91 billion.

"The Apple action is now at a crossroads," said Thursday a research note from Gene Munster and Will Thompson of the investment company Wolf Ventures.

"Some investors are going to think the stock is broken … but we've been following the company long enough to know that the relationship between Apple and the market is cyclical."

Munster and Thompson said it would require "a new product category" or a major acquisition to allow Apple to regain momentum.

– Tactical errors? –

Some analysts have said that Apple has made a mistake by raising the price of its new iPhones to over $ 1,000 in a global smartphone market largely saturated and facing tougher competition.

"I think the main villain is the very high prices charged by Apple for its new iPhones," said Richard Windsor, technology analyst at the Free Mobile Radio blog.

"This is not a disaster nor a sign of Apple 's loss of control in the smartphone market, but simply a miscalculation on the part of Apple as to the amount of it. money that people will pay for an iPhone. "

The latest news sparked discussions about the "Nokia moment" for Apple – a reference to the Finnish-based firm that dominated the mobile phone market in the early 2000s.

But Windsor said: "I do not think in any way that this represents the" Nokia "moment of Apple just because there is still nothing to seriously challenge the iPhone in the high-end segment. "

Carolina Milanesi of Creative Strategies said that Apple is unique among smartphone manufacturers because it offers a wide range of applications and services generating revenue.

"While it's true that no other product has benefited Apple as much as the iPhone, its global product offering still places Apple ahead of any other vendor that could sell larger volumes but has no direct way to monetize their users once the sale has taken place, "said Milanesi in a blog.

Patrick Moorhead of Moor Insights & Strategy said that Apple may not be able to generate double-digit growth that many Wall Street were waiting for, given the current smartphone market.

"I'm not worried about the company, but it's likely that investors will not see the value of the company as long as it can not see the way to double-digit revenue growth," said Moorhead.