Has The Downfall Of Apple Begun?
The short answer is no-- but changes will need to be made to save it from demise.
Tech giant Apple sent shock-waves through the global exchange market this week when it announced its revenue for the critical holiday period would fall short.
The rare profit downgrade saw panicked investors immediately abandon stock with the Dow Jones dropping 660 points and leaving Apple shares to plunge 10 percent on Thursday.
It was potentially the worst day for the tech giant since the release of the iPhone in 2007.
Apple CEO Tim Cook blamed weak demand in China in a letter released to shareholders on Wednesday.
"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," Cook wrote in the letter.
But Cook admitted iPhone upgrades in some developed markets were also not strong enough and contributed to the shortfall.
He said this was brought on by various factors including iPhone users taking advantage of the significantly reduced cost of battery replacements.
Naturally, the announcement had many wondering whether the must-have gadget of the last decade is finally beginning to lose its shine.
Is This The End OF Apple As We Know It
Industry Professor at UTS Business School Warren Hogan said while it certainly wouldn't be the downfall of the world's most successful tech company, it's likely the end of their investment story.
"It tells you that the period of super strong growth where the iPhone really exploded in the last six to seven years, is over," Hogan said.
He believes increased competition and consumer choice means it's unlikely the tech giant would see the same investment prowess it had relied on in the last decade.
"Everybody who wants an iPhone has already got one," Hogan added.
But Hogan believes this revenue shortfall will simply spur Apple, which has substantial financial power to recover from this week -- to revise and strengthen their strategy.
Director of the International Economy Program at the Lowy Institute, Roland Rajah agreed and said it was clear Apple was placing the blame squarely on the fluctuation in China and the global economy generally.
"They're not suggesting it has something to do with their business in particular," Rajah said.
"The Chinese economy is slowing for its own domestically driven reasons," he explained.
Rajah said the Chinese government has been trying to leverage its economy by tightening credit growth and lending which has greatly contributed to its economic slowdown.
"On top of that, you then have the effect of the trade war (with the U.S.) that is a much smaller factor but its definitely starting to bite".
Will It Have A Global Impact?
Hogan said while there has been "very significant volatility" in the global share markets in recent weeks, it was important to avoid 'over-reading' the contributing factors.
"The market is very sensitive to bad days," Hogan told 10 daily, adding that while the Christmas period sees strong spending, it's also when much of the financial sector is on break, meaning less trade.
Nevertheless, Hogan insisted it's important for consumers and investors to be "very cautious" and watch the market carefully in the coming months to see if current plunges continue -- which would reflect a slowing U.S. market
Rajah agreed and said there is always volatility in the market but the Apple saga was potentially telling that global stock conditions are lowering.
"It would be unwise to read too much into a single stock movement or single day on the market," Rajah warned.
"It is an important signal, but it's more of sign that things are softening rather than falling off a cliff".
What Does It Mean For The Aussie Dollar
On Thursday some traders claimed Apple was to blame for horror repercussions seen on the Australian market.
The Aussie dollar plunged three percent against the US dollar and six percent against the Japanese yen in just seven minutes.
It eventually reached its lowest level since 2009 but quickly made up half its losses in another five minutes and recovered most of its losses against the greenback by the afternoon.
But Rajah said the dismal day was not yet cause for consumer concern, insisting it was natural for nervous investors to pull back to "safe haven economies", including the U.S. and Japan.
He said because Apple is such a dominant consumer company their announcement was taken as a sign of worsening global economic conditions and people became worried.
"The Aussie dollar goes down when risk and uncertainty goes up," Rajah explained.
Hogan also said the Australian dollar is inextricably linked to the global economy through our exports.
He added that at the moment there was no evidence to suggest drastic shortfalls in our Christmas spending, meaning this week's flailing market is unlikely to harm the average Australian consumer.
So was this week the beginning of the end for the tech superpower? Probably not... but Siri, send some well wishes to Apple just in case.
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