- Apple has agreed to pay $490 million to settle a class-action lawsuit over CEO Cook’s alleged false statements regarding the company’s performance in China, which led to a $9 billion revenue forecast cut in 2019.
- Investors accused Cook of misleading them, claiming Apple knew of its poor Chinese market performance earlier but failed to disclose it.
- Counterpoint Research data shows a 24% year-on-year decline in iPhone sales in China, while Huawei’s sales surged 64%, indicating Apple’s market challenges.
Apple has stated in a legal document that it will pay $490 million to settle a class-action lawsuit alleging CEO Tim Cook‘s false statements about the company’s performance in the Chinese market, leading to a $9 billion revenue forecast cut on January 2, 2019.
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Cook made false remarks about the company’s performance
The lawsuit originated from an unexpected announcement by Apple on January 2, 2019, where the company abruptly lowered its quarterly revenue expectations by up to $9 billion. According to the lawsuit, Cook had informed investors during a November 1, 2018 analyst call that despite sales pressures in markets with weakened currencies like Brazil, India, Russia, and Turkey, “I wouldn’t put China in that category. Our business in China was very strong last quarter.” However, a few days after Cook made these remarks, Apple informed suppliers of production cuts. In January 2019, the company suddenly announced its first revenue forecast cut since the iPhone’s launch in 2007, resulting in a 10% drop in its stock price the next day, wiping out $74 billion in market value.
Investors alleged that Cook’s statements misled them into making incorrect investment decisions, asserting that Apple “knew its performance in the Chinese market was poor and should have disclosed it earlier.” They argued that Apple’s business indicators and financial prospects were not as robust as the company led the market to believe. Apple believes the settlement is in the best interests of both parties and does not admit to any wrongdoing by the company or Cook. Apple emphasises that the settlement amount will be paid by the company to resolve all related allegations and bring about reconciliation for the company and its shareholders.
iPhone sales in China dropped by 24% yoy in the first six weeks of the year
According to data from Counterpoint Research on March 5, iPhone sales in China dropped by 24% year-on-year in the first six weeks of the year, ranking fourth among Chinese smartphone vendors with a market share declining from 19% in 2023 to 15.7%. Counterpoint data also shows that in the first six weeks of the year, Huawei‘s sales surged by 64%, surpassing Apple with a market share rise from 9.4% to 16.5%. Signs of weak iPhone sales were evident before the Lunar New Year, as Apple initiated rare “Spring Festival Limited-time Offers,” including discounts on iPhone 15 models and other products.
Traditionally, Apple’s promotional activities usually start after the Lunar New Year or during the 6.18 shopping festival, continuing its price-for-volume strategy during International Women’s Day promotions with significant discounts on iPhone 15 models. It was noted that during the International Women’s Day promotion, iPhone 15 once again saw a significant price drop, with discounts exceeding a thousand yuan. Upon checking, it was found that after stacking store coupons and platform coupons, the price of the same iPhone 15 Pro 256G in the official Apple flagship store on Taobao was only 7999 yuan, far below the official price of 8999 yuan.
Apple’s revenue in the Greater China region is far below analysts’ expectations
On February 1, local time, Apple released its first-quarter report for the 2024 fiscal year (i.e., the fourth quarter of 2023). The report showed that Apple’s quarterly revenue was $119.58 billion, higher than analysts’ expected $117.97 billion, marking a year-on-year revenue growth, with iPhone revenue for the first quarter reaching $69.7 billion, higher than the expected $68.55 billion. It is worth noting that Apple’s revenue in the Greater China region for the first quarter was $20.82 billion, far below analysts’ expectations of $23.5 billion. Apple stated that while it achieved sales growth in all regions outside of Greater China, sales in the Greater China region declined by nearly 13% compared to the same period last year.
