Apple Inc on Wednesday took the rare step of cutting its quarterly sales forecast, with Chief Executive Tim Cook blaming slowing iPhone sales in China, whose economy has been dragged down by uncertainty around U.S.-China trade relations.

The news sent Apple shares tumbling in after-hours trade and triggered a broader selloff in the stock market.

The revenue cut for the just-ended quarter raises questions about whether Apple, the face of American business in many parts of the world, is being punished by Chinese officials or consumers in favor of local rivals such as Huawei Technology Cos Ltd, whose pricey smart phones compete with the iPhone.

Huawei has been targeted by the Trump administration for a possible sales ban over suggestions that its telecommunications equipment could be used to spy on Americans.

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company.

“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.

Some analysts, however, questioned the impact of Apple's own actions, such as its unyielding pursuit of high selling prices for its products.

Apple on Wednesday lowered its forecast to $84 billion in revenue for its fiscal first quarter ended Dec. 29, below analysts' estimate of $91.5 billion, according to IBES data from Refinitiv.

Apple originally forecast revenue of between $89 billion and $93 billion.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," Cook said in a letter to investors. "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."

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Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

Apple shares skidded 7.7 percent in after-hours trade, dragging the company's market value below $700 billion. In the broader market, the S&P 500 futures fell 1.5 percent.

Precursors to a warning

Apple's move was not entirely a surprise. In November the California-based company said it would quit disclosing unit sales data for iPhones and other hardware items, leading many analysts to worry that a drop in iPhone sales was coming.

And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russia for a lower-than-anticipated sales estimates for the company's fiscal first quarter. But Cook specifically said he "would not put China in that category" of countries with troubled growth.

That all came before the damage to the Chinese economy from trade tensions with the United States and long-simmering structural issues became evident.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business.

Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co all previously said they planned to cut production in the country.

But Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy.

"The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise," James Cordwell, an analyst at Atlantic Equities, told Reuters.

(REUTERS)