Joe Rossignol
Apple has agreed to pay $490 million to settle a class-action lawsuit that alleges Apple CEO Tim Cook defrauded shareholders by hiding falling demand for iPhones in China, Reuters reported, citing a court filing today. The proposed settlement requires the approval of U.S. District Judge Yvonne Gonzalez Rogers in California.
At a 1 In a November 2018 earnings call with analysts, Cook said Apple faces pressure in emerging markets where local currencies are weakening, such as Turkey, India, Brazil and Russia, but he did not include China in the list:
Emerging markets where we are seeing pressure include markets such as Turkey, India, Brazil, Russia. These are markets where currencies have weakened over the recent period. In some cases, this resulted in us raising prices and those markets did not grow as we would have liked.
During the call, Cook said the following about China:
During the conference call, Cook said the following:
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Regarding China specifically, I would not put China in this category. Our China business was very strong last quarter. We grew by 16%, which we are very happy about. The iPhone in particular had very strong, very strong, double-digit growth. Our other product category was also stronger, even slightly stronger than even the overall company.
A few months later, in January 2019, Cook shared a letter to investors indicating that Apple's revenue for the fourth quarter of 2018 will be approximately $84 billion, which is lower than the initial forecast of $89–93 billion for the quarter. On January 29, 2019, Apple reported revenue of $84.3 billion for the quarter.
Apple's stock price fell approximately 25% between November 1, 2018 and January 31, 2019.
In his letter, Cook said the slowing economy in the Greater China region was largely to blame for Apple's quarterly revenue decline:
While we expected some challenges in key emerging markets, we did not anticipated the magnitude of the economic downturn, especially in Greater China. In fact, the majority of our revenue missed our forecast, and more than 100 percent of our year-over-year worldwide revenue decline occurred in Greater China on iPhone, Mac and iPad.
The letter added that The entire revenue shortfall is attributable to lower-than-expected iPhone revenue, primarily in Greater China:
Lower-than-expected iPhone revenue, primarily in Greater China, accounts for all of our revenue in line with our forecast and much larger than the overall year-over-year decline in revenue.
Investors argued that Cook knew iPhone demand was falling in China at the time of the November 2018 earnings release . called but didn't report it. Apple has denied the allegations and has not admitted any wrongdoing. Apple agreed to the proposed settlement only to avoid additional costs and time associated with litigation, the document said.
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