5 takeaways from Apple's stark China warning

The Dow Jones Industrial Average S&P 500 and Nasdaq have had a rocky start to 2019

Tim Cook, chief executive, said fewer customers than expected had bought Apple's new iPhones, Macs and iPads, particularly in China, where the company "did not foresee the magnitude of the economic deceleration".

A key White House adviser said in response that the ongoing tensions were going to mean that a "heck of a lot" of United States firms with sales in China - not just Apple (Swiss: AAPL-EUR.SW - news) - would see their earnings downgraded until the two countries reach a deal.

The announcement caused Apple to temporarily halt trading in its shares, and when the stock resumed trading after-hours, investors promptly dropped its price to the tune of 7.5 per cent. ®.

Wall Street stocks have slid sharply in the wake of a warning from Apple (NasdaqGS: AAPL - news) that its revenues would fall short because of a slowdown in China. Cook's update on Wednesday revealed that guidance has now plummeted to $84 billion in revenue for the quarter.

Apple Inc. plunged to its lowest price in a year-and-a-half after the company cut its revenue outlook for the first time in nearly two decades, citing weaker demand in China.

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While usually Apple would be celebrating another successful holiday season, things didn't quite go to plan this time around. Apple has shaken the business world by lowering its sales and revenue forecast for the next quarter.

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But Cook told employees that Apple expects to "set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam". These figures apply to the first quarter of fiscal 2019.

The rare revenue warning - the company's first in almost 12 years - sent shockwaves through global financial markets with chipmakers that supply to Apple being the hardest hit.

Although many analysts were anxious over Apple's iPhone issues, one remains unconcerned and upgraded Apple shares to "neutral" instead of "sell." as CNBC noted. Cook also noted supply constraints to new models of the Apple Watch, iPad Pro and AirPods.

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed", Mr Cook wrote in the letter. There are likely many others, too, that will be forced to announce lower-than-expected earnings, according to the chairman of the White House Council of Economic Advisers.

Under the new guidance, Apple says revenue will be around $84bn, well short of the $89-93bn range Apple had estimated and a sizeable drop from the $88.3bn revenue haul Apple reported in Q1 FY 2018. These analysts said in a research note that services represent a huge business opportunity for Apple.

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