It’s been a rough few days for the tech sector with share prices for most tech stocks plummeting this week. First it was Apple, whose share price is down nearly 7% since announcing on Tuesday it had had the best quarterly results of any public company in the history of the world.
Yeah, despite announcing a world-record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, the stock took a beating because Apple forecast its first-ever iPhone sales decline next quarter, coming in below analysts expectations on guidance. In announcing the much lower guidance, Cook said 2016 could be a rough year for smartphone sales. "We're seeing extreme conditions unlike anything we have ever experienced before," he said on Apple’s financial conference call.
Those "extreme conditions" refer to the apparent slowdown in the global economy, spurred by the slowest growth in China’s economy for 25 years. Added to that are plummeting foreign exchange rates, which make buying smartphones more expensive for the overseas customers who make up 60% of Apple’s business. These factors combined, Cook said, will make tech sales tough in 2016.
Now joining Apple is Samsung, who had nowhere near as good a holiday quarter as Apple—it missed expectations by a whopping 40%. What Samsung does have in common with the iPhone maker is that it is forecasting a similarly gloomy 2016 for tech sales with "eroding demand for computers and smartphones," says Bloomberg.
On Samsung’s financial call, Lee Kyeong Tae, vice president of the company’s mobile communications business, said: "The overall smartphone market will remain difficult throughout this year but we still see growth in the lower-end segment, although competition will be tougher." The company went on to forecast just single-digit smartphone growth in 2016–-that's after only 6% growth in the entire global smartphone market in 2015.
But while the slowing economic growth in China and stagnation in the global economy and wildly fluctuating currency rates are out of Apple and Samsung’s control, both companies are doing what they can to make 2016 the best it can be.
Samsung will introduce at least two new models to its flagship Galaxy smartphone line at Mobile World Congress in Barcelona next month. Meanwhile, Apple is expected to introduce a new 4-inch "iPhone 5se" in March in order to appeal to people who miss smaller handsets. The company will follow that introduction up with a completely redesigned iPhone 7 in September. Both companies are hoping their announcements can help move sales in the right direction in 2016.