In an ugly New Year’s surprise Wednesday afternoon, Apple announced unexpectedly that it was cutting its first-quarter revenue guidance from $91.5 billion to $84 billion. The move is highly unusual. Apple reportedly last revised a projection like this in 2002.
CEO Tim Cook sent a letter to investors that attempted to explain what had changed so much over the past 60 days. An economic slowdown in China chopped down the company’s iPhone business there, Cook explained. And then in developed markets, it couldn’t make up the shortfall, because fewer people upgraded than had been expected.
It’s a big announcement for one of the world’s largest companies, and for the tech business at large, which is exposed directly to every major economy in the world.
Here are five ways to look at the announcement.
1. “Chimerica” in action
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote. “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.”
The American and Chinese economies are inextricably linked. Niall Ferguson and Moritz Schularick coined this symbiosis “Chimerica.” Our own James Fallows has detailed the many linkages not just of financial systems, but of all kinds of enterprise. “No other nation outside North America is as tightly integrated with U.S. corporate production, consumption, distribution, and marketing systems,” Fallows wrote last year.