Carl Icahn to Apple: Time’s Up!
Carl Icahn, the billionaire giant, has sold his Apple shares due to the threat on China’s economy and its disappointing revenues. He bought his shares in the third quarter of 2013 and had profited from high revenue growth in the recent years.
However, the quarterly revenue sales reported a drop of $50.56bn from $58bn last year marking the first decline in the company’s sale since 2003. Apple sold 51.2 million iPhones in that quarter, down from 61.2 million in the same quarter of 2015.
Trouble in Paradise
The slowing sales of shares had never previously been an issue for Apple Company. However, with China’s economy crumbling, the problem is now visible as is the slow shares of 20% over the recent years.
A decline in the sales of iPhones led to Apple registering its first drop in revenue in thirteen years.
A Recap about Apple Company and its Products
Apple, headquartered in Cupertino, California, is a giant American technological company. It’s typically a company which focuses on the designing, developing and selling of electronics.
The Apple Company prides itself on its hardware, software, and online services which all contribute to its massive revenues. The devices we are raving about here include;
- IPhone tablets, media players, and smartphones
- Mac personal computers
- OS x and IOS operating systems
- iTunes media players and Safari website
- iLife and iWork creativity and productivity suites
Just to name a few.
Apple is the world’s most valuable brand, with a value of $118.9bn by the Inter-brand best global brands report in 2014. An impressive 84% of people favor its products.
China’s Relation with Apple
The Greater China segment has had a close relationship with Apple products. The major revenue makers are
- Mainland China
- Hong Kong.
Apple sells more of its merchandise in China than in the whole of Europe.
China’s economy is slowing, leading to much of the drop in revenue. China consumer technology sector has often been flux and Yuan, but Apple came to overthrow them.
Though it has been the second largest market after the US, the value of Apple in China has reduced by more than a quarter. In previous months, the company reported revenue of $12.5bn, which is well short of the $18.4bn made in the second quarter of 2015.
China passed a law that resulted in shutting down Apple’s iBooks and iTunes movies services in the country. The law expected all content viewed in China to be stored on the Chinese mainland servers.
Relationship Gone Wrong! Carl Icahn’s Claims
Icahn decided to sell his large shareholding due to his fears. He owns 53 million shares worth $6.5bn.
Icahn claims that his business no longer has a position with Apple and blames this on China’s slowing economy. He also cites worries about the interference of the government as his reasons for selling out of Apple.
He has been one of the prominent activists declaring the company to be worth less than its value. He bought his shares in 2003 when he thought that it was a no-brainer.
Most of his claims concern the barriers to trade put in place by the Chinese government. With these allegations, he hopes to answer the question of whether the ban of Apple in China escalates and what its effects on the profits will be.
He claims that the shares of iPhone were 90% more than what they had been trading. In his open letter to the CEO of Apple, he stated that the market cap of Apple would have been $1.4tn.
Should the Consumers Just Wait for It to Blow Over?
The shocking drop in the Apple profits has left consumers with more questions than answers. As if that isn’t enough, the majority shareholder proclaims doom for Apple and sells his shares.
After the claims by Carl Icahn, the pressure of selling increased, leading to the closing down of the Dow Jones industrials with Apple falling by more than 3% to $94.83, and ending at 210 points.
Does this augur well for the product? Of course not! The CFO of Apple spoke of being optimistic about the Chinese market in the long run, and that they are committed to continuing investment in China.
Hope For a Better Future All the Same
Apple had warned investors of the incoming impact but is still hopeful that sales will pick up. The Greater China segment has been an area of significant revenue growth for Apple products, and Apple shareholders and investors are hopeful for a repeat of the trend.
Apple revenues have now decreased by more than 10 % during the week. Despite it all, the reassuring words of the CEO of Apple that it will pass over is what the investors, shareholders and consumers hold as a glimmer of hope.