China is not the only apple problem

45 months in green. 14 quarters breaking their own ceilings. Three and a half years reaping more income than last time. That was the time that Apple had not given bad news to the markets. Something that has broken this Thursday. The Cupertino company, the only one of the big technology companies that seemed capable of escaping the crisis that has gripped all of Silicon Valley, has fulfilled the worst forecasts. The apple, which has presented the results corresponding to its first fiscal quarter, has fallen in both revenue and profit. A stumbling block that comes after the Christmas season, the most important time for your business. In addition to the economic situation, Californians have encountered an additional problem: the covid crisis in China, which has had a full impact on its manufacturing capacity

In the past three months, revenue fell 5.5 percent to $117.2 billion. The forecast of analysts, who pointed to 121,100 million, has not been fulfilled. Worse has been the fall in benefits, which have remained at 30,000 million dollars, 13.4% less than what they achieved 12 months ago. Sales of the iPhone, the company’s main business, fell 8.2% to $65.8 billion.

The one with their phones has not been the only business that has been weighed down. Mac sales plummeted 29%, after posting sales of $7.74 billion. The truth is that this was to some extent predictable. It must be borne in mind that in the final stretch of 2022 the computer market had cooled down significantly and the company had been running since the summer, when it launched the MacBook Air with M2, without presenting a single novelty that would spur sales. News that have been reserved for this quarter. In mid-January, Apple introduced its new MacBook Pro and its new Mac Mini. A change in strategy that is due to an attempt to boost sales during the initial stage of the course.

Something similar is what they have done with the HomePods. Apple’s new smart speakers were presented alongside its latest computers. Something especially atypical because it means launching it after Christmas and, therefore, they lose an interesting launch window. The company expects it to help improve the results of the Accessories division, which has also been one of the bad news this quarter, with a decline of 8.3 percent to $13.5 billion.

Apple’s darkest quarter also had two good news. On the one hand, the division of Services, which includes the App Store, Music, Apple Care or Apple TV +, among others. Revenues increased by 6.4% in the last three months, reaching a record of 20.8 billion. The other good news has come thanks to the sales of the iPadwhich rose almost 30%, to 9,400 million.

The main problem of the apple and the main reason for the results of the iPhone have been diminished has been China. The zero covid policy led Foxconn, the company that assembles 7 out of 10 iPhones, to experience a real drama in its main factory in the country, the one it has in Zhengzhou. A center of titanic dimensions that, at maximum revolutions, can house a total of 350,000 souls, the same population as a city like Bilbao. An uncontrolled outbreak ended thousands of employees fleeing on foot from that facility. That translated into problems to keep up with the pace of production, which made the company I had to advise that the availability of the iPhone 14 Pro and Pro Max would be limited during Christmas.

China, iPhone 14 and dollar strength

You have to understand that the apple had played the iPhone 14 Pro card this year. It applied a notable price increase and to justify it, it introduced advantages in the superior model compared to the standard model. The differences are no longer the quality and size of the screen and having a third camera, but have extended to other fields, such as the processor or the quality of the lenses themselves. This left the iPhone 14 dry as a minimal renewal, it was practically the same terminal as last year. The novelty came with a Plus model, which increased the screen size to 6.8 inches. The proposal did not materialize in terms of sales and they quickly realized that their forecasts would hardly be met. It should not be forgotten that the cheap iPhone model has been the best seller of each generation since the advent of the Xr.

With the best-selling model stripped of all appeal and the availability of the iPhone Pro limited, it is much better to understand the remarkable drop that Apple’s great business has suffered. The company’s gyrfalcons have shown their conviction that if the collapse of Zhengzhou had not occurred, the results would have been different. The question now is to see if the demand from buyers who could not get hold of a unit at Christmas moves to the current quarter.

Another point, recognized by Tim Cook himself, has been the strength of the dollar. The company had already warned three months ago that the exchange rate could mean a drop of up to 10 percentage points. They estimated that they could pass a bill of 12,000 million dollars. Finally, the impact has been 8%, thanks to the fact that the currency in which Apple operates has weakened.

45 months in green. 14 quarters breaking their own ceilings. Three and a half years reaping more income than last time. That was the time that Apple had not given bad news to the markets. Something that has broken this Thursday. The Cupertino company, the only one of the big technology companies that seemed capable of escaping the crisis that has gripped all of Silicon Valley, has fulfilled the worst forecasts. The apple, which has presented the results corresponding to its first fiscal quarter, has fallen in both revenue and profit. A stumbling block that comes after the Christmas season, the most important time for your business. In addition to the economic situation, Californians have encountered an additional problem: the covid crisis in China, which has had a full impact on its manufacturing capacity