Even More Bad News For Apple

For those who thought that the latest news that Apple was slashing iPhone production again, this time by 10%, for the second time in 2 months was as bad as it would get, we have some bad news.

Earlier, when commenting on the latest production cut, we had a modest proposal: "Maybe, just maybe, they should consider cutting prices?"

Any other day, such a proposition would be apocryphal: after all, Apple never makes wholesale price cuts - after all the key part of its cache and "coolness factor" is that its products are so unnecessarily expensive they are a status symbol.

Only in this time, it appears that Apple listened to our "advice", and according to the National Business Daily, prices of iPhone models at some Chinese vendors in Shenzhen have been cut. According to the paper, wholesale vendors in electronics product markets in Shenzhen city received price change notice from the U.S. on Jan. 8. The resulting price cut was for models including iPhone XR, iPhone 8, iPhone 8 Plus, iPhone X, iPhone XS and iPhone XS Max; Separately, the prices of new iPhone devices started to drop in a wholesale market in Shenzhen, where the iPhone XR had the biggest price cut of 450 yuan ($66.02) at channel vendors.

"What does that matter?" Apple bulls will counter: after all, the world's formerly biggest company is no longer a product company (at least since the shocking announcement that it would stop disclosing iPhone sales numbers late last year) and is instead only focusing on services.

Well, there is a problem here too, because as Nomura's Jeffrey Kvaal writes, Apple last week "offered a bit of a paradox."

Specifically, Apple announced record F1Q Services revenue that easily exceeded consensus, before offering a "rather uninspiring" account of its holiday week Services revenue growth. However, on Tuesday night Apple unexpectedly restated FY18 Services revenues for ASC 606, and as a result, Kvaal concludes that "the uninspiring view is the correct one" as Apple missed in Services too; this, in turn, has prompted the Nomura analyst to retain his view that "Services growth is in part dependent on now wobbling iPhone unit volumes".

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Gary Anderson 2 months ago Contributor's comment

So #Apple $AAPL will continue to bleed its US customers while giving sweet deals to the Chinese who know the Iphone is no longer a status symbol, but is in fact inferior to Huawei and Samsung.