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Apple blames weak iPhone China sales as it cuts revenue forecast | News

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US tech giant Apple has taken the rare step of slashing its quarterly sales forecast, acknowledging that demand for iPhones is slowing and confirming investor concerns that its most profitable product has lost some of its consumer appeal amid competition from cheaper rivals.

In a letter to shareholders, Chief Executive Officer Tim Cook said Apple’s revenue for the October-December quarter – including the crucial holiday shopping season – will drop well below the company’s earlier projections and those of analysts.

Apple now expects revenue of $84bn for the period, below analysts’ estimate of $91.5bn, according to IBES data from Refinitiv. Apple originally forecast revenue of between $89bn and $93bn. The official results are scheduled to be released on January 29.

The news sent Apple shares tumbling 7.7 percent in after-hours trade, triggering a broader selloff in the stock market and dragging the company’s market value below $700bn.

Cook traced most of the revenue drop to China, where the economy has been slowing and Apple has faced tougher competition from smartphone makers such as Huawei and Xiaomi. US President Donald Trump has also raised fresh tensions between Washington and Beijing by imposing tariffs on more than $200bn in goods, although so far the iPhone has not been affected directly.

China’s “economy began to slow there for the second half”, Cook said during an interview with CNBC on Wednesday afternoon. “The trade tensions between the United States and China put additional pressure on their economy.”

In his letter, Cook, who became Apple’s CEO in 2011, Cook said the company anticipated challenges in key emerging markets but “did not foresee the magnitude of the economic deceleration, particularly in Greater China”.

“In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” he wrote.

Cook also acknowledged that consumers in other markets are not buying as many of the latest iPhones, released last autumn, as Apple had anticipated – a factor that could stem from a starting price of $1,000 for Apple’s top-of-the-line iPhones.






The economic toll of China-US trade war

“What Apple would like to do, as much as possible, is to cite China and the trade war as the cause of this – but over the last couple of years Apple has significantly increased the price of the iPhone,” Shaun Nichols, technology reporter at The Register, a tech news and opinion website, told Al Jazeera.

“Tim Cook’s official explanation for this a kind of a combination – the trade war is causing problems in China, worries over the economy and that’s making people less likely to go and purchase Apple products.”

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook’s comments on the impact of the US trade tensions with China “might be a dig at Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they’ve made over the last year”.

Analysts say Apple must now try to find a way to win back Wall Street’s confidence and reverse a steep decline that has erased $350bn in shareholder wealth in just three months.

“This is Apple’s darkest day during the Cook era,” Wedbush Securities analyst Daniel Ives said. “No one expected China to just fall off a cliff like this.”

While Trump’s trade war with China is not helping Apple and other US technology companies, Ives believes Apple’s price miscalculation created an opening for rivals with less costly alternatives that still worked well.

The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September last year to seize the number two spot behind industry leader Samsung, according to the research firm International Data Corp.





Apple’s board of directors named Tim Cook as the company’s chief executive officer in 2011 [File: Marcio Jose Sanchez/The Associated Press]

Premium pricing strategy

Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

Apple’s move was not entirely a surprise, however.






COUNTING THE COST: The big tech lash – Tech giants under scrutiny

In November, the Cupertino, California-based company said it would stop disclosing unit sales data for iPhones and other hardware items, leading many analysts to worry that a drop in iPhone sales was coming. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russia for a lower-than-anticipated sales estimates for the company’s fiscal first quarter. But Cook specifically said he “would not put China in that category” of countries with troubled growth.

That all came before the damage to the Chinese economy from trade tensions with the US and long-simmering structural issues became evident.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co all previously said they planned to cut production in the country.

But Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy.

“The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise,” James Cordwell, an analyst at Atlantic Equities, told Reuters news agency.

In the latest fiscal year, ended on September 29, unit sales of the iPhone were essentially flat from the prior year, while iPhone revenue expanded 18 percent to $166.7bn. That growth came entirely from higher prices.

But some investors were heartened by Apple’s plans on using its cash pile.

In his letter, Cook said Apple has $130bn in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks.

“We would anticipate the company increasing share buybacks on the weakness to return capital to shareholders at discount prices,” said Trip Miller, managing partner at Apple shareholder Gullane Capital Partners.

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Ottawa transit commission hopes to prioritize COVID-19 vaccines for OC Transpo workers

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Ottawa’s transit commission is pushing local and provincial health officials to recognize the role OC Transpo operators have played in keeping the city running during the COVID-19 pandemic, hoping to bump train and bus drivers in the vaccination queue amid a recent surge in coronavirus infections affecting transit workers.

More than 100 OC Transpo staff across the entire organization have tested positive for the coronavirus since the start of the pandemic, according to an update at Wednesday morning’s transit commission meeting.

Of those cases, 26 employees are currently recovering from the disease in self-isolation.

OC Transpo has seen a recent jump in COVID-19 cases, with Ottawa city council receiving reports of eight operators testing positive for the virus over a recent eight-day period.

Transit commissioner Sarah Wright-Gilbert attempted to find out how many of the total cases are traced to workplace transmission, but OC Transpo boss John Manconi said he’s been advised by medical officer of health Dr. Vera Etches that he can’t share that information for privacy reasons.

Transit operators are listed in the second priority group of essential workers as part of Ontario’s COVID-19 vaccine sequencing plans, but several commissioners speaking Wednesday wanted to get the city’s bus and train drivers bumped higher in the order.

Councillors Riley Brockington and Glen Gower both put forward motions looking to get front-line OC Transpo employees prioritization in vaccine sequencing, but others pointed out that the much-debated public health topic of who gets the vaccine and when is well beyond the scope of the transit commission.

“We are not in a position in transit commission to be decreeing, or making an edict, about what group of essential workers is more at risk than others and should be prioritized. That should be left up to public health experts,” Wright-Gilbert said.

Knoxdale-Merivale Coun. Keith Egli, who also chairs the Ottawa Board of Health, reflected on the board’s four-plus-hour meeting on Monday evening, during which vaccine sequencing and prioritizing essential workers dominated the conversation.

“Vaccine sequencing is obviously a very difficult maze to get through,” he said.

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COVID-19: Ottawa police announce end of 24-7 presence at Ontario-Quebec border

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Less than two days after the Ontario government’s latest COVID-19 restrictions came into effect, calling for non-essential traffic to be stopped at the province’s borders with Quebec and Manitoba, the Ottawa Police Service has announced it is stopping its 24-hour checkpoints.

According to a statement issued by the service Tuesday evening, the around-the-clock border checkpoints were set to end as of 8 p.m. on Tuesday in favour of rotating checkpoints across the city throughout the day until Ontario’s temporary regulations end.

“Since the onset of the border operations, the OPS has been working closely with Ottawa Public Health (OPH) along with local stakeholders and interprovincial stakeholders (the City of Ottawa, the City of Gatineau, the Ontario Provincial Police etc.) to assess any local public health, traffic and safety impacts. The assessment resulted in today’s operational changes,” the statement said.

“The operational changes announced today are designed to better ensure the health and safety of all, to minimize delays and/or hazards for travellers and to ensure essential workers can get to their places of employment on time.”

The statement also said the police service, while working to comply with the provincial order, was focused on education and enforcement actions that “support improved public health outcomes and respect the concerns of our most marginalized and racialized communities”

Officers said they will be conducting daily assessments on border crossings and that there could be further changes.

In a statement to Global News, a spokesperson for Solicitor General Sylvia Jones said that the border closures are ultimately subject to the discretion of local police enforcing the regulations.

“Local police services are best positioned to determine the operational deployments necessary to ensure the continued safety of their communities,” the spokesperson said, noting that the order’s regulations still apply to individuals entering the province.

The temporary order restricts Quebec residents from entering Ontario. If prompted, individuals must stop when directed by an enforcement officials and provide their reason for entering the province.

The main exemptions to the restrictions include if the person’s main home is in the province, if they work in Ontario, if they’re transporting goods, if they’re exercising Indigenous or treaty rights, if they need health care or if there’s a basis on compassionate grounds.

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COVID-19 vaccines in Ottawa: Nearly half of all residents in their 60s have at least one dose

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OTTAWA — Ottawa Public Health’s latest COVID-19 vaccination update shows that nearly half of all residents 60 to 69 years old have had at least one dose of a COVID-19 vaccine, a figure that has all but doubled in the past week.

OPH’s COVID-19 vaccination dashboard shows 58,000 residents 60 to 69 have had at least one dose of a COVID-19 vaccine, accounting for 49.3 per cent of that age group’s population in Ottawa. Last Wednesday, OPH reported 30,000 residents 60 to 69 had had at least one dose, which was 25.4 per cent.

As age demographics get younger, the population grows larger and the coverage by percentage may appear to grow more slowly, even if clinics are vaccinating greater numbers of people. For example, the latest figures show that 83 per cent of people aged 70 to 79 have had at least one dose. By raw population that’s 60,000 people, only slightly higher than half of all people in their 60s.

Vaccinations are open through the Ontario portal to anyone 60 and older and, this week, the AstraZeneca vaccine was approved for administration at pharmacies and primary care clinics to anyone in Ontario 40 and older.

OPH reported a new shipment this week of 25,740 doses of the Pfizer-BioNTech vaccine. To date, Ottawa has received 305,130 doses of COVID-19 vaccines from the provincial government.

The number of eligible residents (i.e. 16 and older) with at least one dose of a vaccine is now up to 28 per cent.

Tuesday was Ottawa’s second-busiest day for vaccinations overall, with the OPH reporting 9,729 shots administered. Last Friday saw 9,887 shots administered in a single day.

QUICK STATS

  • Ottawa residents with at least one dose: 248,668
  • Ottawa residents with two doses: 26,722
  • Percent of eligible population (residents 16 and older) with at least one dose: 28 per cent
  • Percent of eligible population (residents 16 and older) with two doses: 3 per cent
  • Percent of total population with at least one dose: 24 per cent
  • Percent of total population with two doses: 3 per cent

VACCINATION COVERAGE BY AGE FOR OTTAWA RESIDENTS WITH AT LEAST ONE DOSE

  • 10-19: 1.6 per cent (1,804 people)
  • 20-29: 8.3 per cent (13,452 people)
  • 30-39: 9.5 per cent (14,999 people)
  • 40-49: 12.9 per cent (17,350 people)
  • 50-59: 28.8 per cent (40,320 people)
  • 60-69: 49.3 per cent (58,627 people)
  • 70-79: 82.9 per cent (62,808 people)
  • 80-89: 87.5 per cent (29,358 people)
  • 90+: 89.2 per cent (7,893 people)
  • Unknown age: 2,057 people 

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