Dow Falls 500 Points after Tim Cook Slashes Apple Revenue Forecast

Apple CEO Tim Cook leaves the stage after speaking at a high school

Apple CEO Tim Cook leaves the stage after speaking at a high school

In his letter, Cook explained that his company was selling less iPhones than expected because of China's slowing economic growth, something that's not being helped by its ongoing trade war with the United States.

Apple has become the target of nationalist sentiment over the arrest of Huawei's chief financial officer in Canada at the behest of the U.S. for alleged Iran sanctions violations.

But the uptick didn't continue. Blaming mostly macro headwinds, he failed to admit the launch of new iPhones haven't successfully lured consumers and acknowledge growing competition from domestic players.

Cook said other factors will also pull down Apple's revenue, including the timing of its iPhone launches a year ago and a strong dollar that means lower revenues when converted to United States currency.

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"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", Cook said. Apple's stock dropped by almost 10 percent once trading resumed. She attributes the weaker sales to competition from Huawei, which just had a strong 2018. Trade tensions between Beijing and Washington have also intensified with tit-for-tat tariffs.

The announcement, made in a letter from Cook to investors, comes after weeks of signals from inside Apple and its supply chain indicating the Cupertino, California-based company is struggling to sell the latest iPhones released in September. Still, the threat of from China against Apple due to Trump's trade war lingers in the air. Apple said the smartphone market in China has been contracting, and that's true. Companies such as General Motors, Caterpillar and Daimler have all said recently that trade tensions and slower growth in China are damaging their businesses. The company said wearables sales grew by nearly 50% over last year's holiday quarter, the Apple Watch and AirPods being especially popular this year.

The firm had warned investors in November that a strengthening dollar and economic weakness in some overseas markets would be likely to hurt sales in the last three months of the year.

Meanwhile, Huawei and Oppo - two of Apple's competitors in Chinese markets - have reported higher valued market shares within the previous year.

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The S&P 500 lost 62.14 points Thursday, closing at 2,447.89.

The reckoning came in a letter from Apple CEO Tim Cook to the company's shareholders released after the stock market closed Wednesday.

In December, Bloomberg News reported the company was facing a "fire drill" to boost iPhone sales.

Offering trade-ins for Android phones is a rare move for Apple and suggests that the Silicon Valley giant is having a hard time in China not just getting existing iOS users to upgrade to the latest model, but also luring users from homegrown Android phones.

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"This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone", Cook said.

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