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Apple set for big sales decline as investors await AI in iPhones

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Apple's (AAPL.O), opens new tab plan to add generative AI to its iPhones and revive sagging sales in the crucial Chinese market will be in focus on Thursday, when the tech giant is expected to report its biggest quarterly revenue decline in more than a year, Reuters reported.

Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling more than 10% this year as fears mount about its slow roll-out of artificial intelligence services and as a resurgent Huawei (HWT.UL) takes market share in China.

Analysts on average see iPhone sales, which account for about half of Apple's revenue, falling 10.4% in the first three months of 2024, according to LSEG. That drop would be the steepest in more than three years.

The year-ago iPhone revenue that the 10.4% iPhone sales drop is measured against was unusually high as Apple satisfied pent-up demand after the COVID pandemic, company executives previously noted.

At least $5 billion of the $51.3 billion in iPhone sales a year ago was essentially catching up from disruptions in the December 2022 quarter when COVID lockdowns in China hampered iPhone production, executives said.

Even with that factored in, Wall Street expects a slight decline in iPhone sales, and analysts estimate Apple's total revenue declined 5% in its fiscal second quarter ended in March. That would be Apple's biggest revenue decline since the December 2022 quarter, when revenue fell 5.5%, read the report.

Apple earlier this year lost the crown of the world's most valuable company to Microsoft (MSFT.O), opens new tab. Its market value stands at $2.68 trillion after the share price declined 11.24% so far this year.

Weak revenue and falling shares have pressured Apple to spruce up its flagship device after years without major upgrades.

The company is in talks with OpenAI and Alphabet-owned Google to add genAI features for the iPhone that could be unveiled at what is expected to be its biggest-ever annual developer conference in June, Bloomberg News has reported.

According to Reuters analysts believe such an AI integration could drive demand for the next iPhone series, expected to be announced in the fall.

While executives at Microsoft, Alphabet (GOOGL.O), opens new tab, Meta Platforms (META.O), opens new tab and other major technology firms have talked up their AI strategies on quarterly conference calls in recent months, Apple CEO Tim Cook has discussed his plans for the emerging technology much less.

Adding AI features to iPhones could also help Apple to compete better with Huawei and Samsung Electronics (005930.KS), opens new tab, which reclaimed the title of the world's top smartphone vendor from Apple this year, driven by demand for the AI features in its Galaxy S24 smartphones.

"Replacement cycle tailwinds and incremental generative AI features set up Apple well for a strong iPhone 16 cycle," Bernstein analyst Toni Sacconaghi said this week as he upgraded the company's shares to "outperform" from "market-perform."

"We believe prevailing weakness in China is more cyclical than structural, and note historically Apple's China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base."

Thursday's earnings will also be watched closely for updates on the company's stock buyback plan and the Vision Pro, Apple's first major product in years that hit the shelves in February.

After initial enthusiasm, there have been signs that demand slowed for the $3,500 device, with an analyst saying this month that Apple has pulled back its production estimates for the mixed-reality headset.

The rest of the company's hardware business is also reeling from soft demand, with iPads and Mac sales expected to fall 11.4% and 4.3%, respectively, in the March quarter, Reuters reported.

Apple has signaled it is sharpening its focus on the devices, which have also been hobbled by a lack of major upgrades.

At an Apple event this month, a revamped iPad line-up is expected to be unveiled and media reports have said that it plans to update every Mac model with faster, AI-focused M4 processors.

The services business, which includes App Store and subscription services such as Apple TV, is expected to remain a bright spot with revenue growth of 7.7%.

Apple shares closed down 0.6% at $169.30 on Wednesday.

Science & Technology

US Treasury says Chinese hackers stole documents in ‘major incident’

A spokesperson for the Chinese Embassy in Washington rejected any responsibility for the hack, saying that Beijing “firmly opposes the U.S.’s smear attacks against China without any factual basis.”

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Chinese state-sponsored hackers breached the U.S. Treasury Department's computer security guardrails this month and stole documents in what Treasury called a "major incident," according to a letter to lawmakers, that Treasury officials provided to Reuters on Monday.

The hackers compromised third-party cybersecurity service provider BeyondTrust and were able to access unclassified documents, the letter said.

According to the letter, hackers "gained access to a key used by the vendor to secure a cloud-based service used to remotely provide technical support for Treasury Departmental Offices (DO) end users. With access to the stolen key, the threat actor was able to override the service’s security, remotely access certain Treasury DO user workstations, and access certain unclassified documents maintained by those users."

The Treasury Department said it was alerted to the breach by BeyondTrust on Dec. 8 and that it was working with the U.S. Cybersecurity and Infrastructure Security Agency and the FBI to assess the hack's impact.

Treasury officials didn't immediately respond to an email seeking further details about the hack. The FBI did not immediately respond to Reuters' requests for comment, while CISA referred questions back to the Treasury Department.

A spokesperson for the Chinese Embassy in Washington rejected any responsibility for the hack, saying that Beijing "firmly opposes the U.S.'s smear attacks against China without any factual basis."

A spokesperson for BeyondTrust, based in Johns Creek, Georgia, told Reuters in an email that the company "previously identified and took measures to address a security incident in early December 2024" involving its remote support product. BeyondTrust "notified the limited number of customers who were involved," and law enforcement was notified, the spokesperson said. "BeyondTrust has been supporting the investigative efforts."

The spokesperson referred to a statement posted on the company'swebsite, on Dec. 8 sharing some details from the investigation, including that a digital key had been compromised in the incident and that an investigation was under way. That statement was last updated Dec. on 18.

Tom Hegel, a threat researcher at cybersecurity company SentinelOne (S.N), said the reported security incident "fits a well-documented pattern of operations by PRC-linked groups, with a particular focus on abusing trusted third-party services - a method that has become increasingly prominent in recent years," he said, using an acronym for the People's Republic of China."

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Science & Technology

Iran lifts ban on WhatsApp and Google Play, state media says

Social media platforms were widely used in anti-government protests in Iran.

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Iranian authorities have lifted a ban on Meta's instant messaging platform WhatsApp and Google Play as a first step to scale back internet restrictions, Iranian state media reported on Tuesday.

The Islamic Republic has some of the strictest controls on Internet access in the world, but its blocks on U.S.-based social media such as Facebook, Twitter and YouTube are routinely bypassed by tech-savvy Iranians using virtual private networks, Reuters reported.

"A positive majority vote has been reached to lift limitations on access to some popular foreign platforms such as WhatsApp and Google Play", Iran's official IRNA news agency said on Tuesday, referring to a meeting on the matter headed by President Masoud Pezeshkian.

"Today the first step in removing internet limitations... has been taken," IRNA cited Iran's Minister of Information and Communications Technology Sattar Hashemi as saying.

Social media platforms were widely used in anti-government protests in Iran.

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Science & Technology

Trump says it could be worth keeping TikTok in US for a little while

Trump met with TikTok’s CEO on Monday. Trump said at a news conference the same day that he had a “warm spot” for TikTok thanks to his campaign’s success on the app.

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President-elect Donald Trump indicated on Sunday that he favored allowing TikTok to keep operating in the United States for at least a little while, saying he had received billions of views on the social media platform during his presidential campaign, Reuters reported.

Trump's comments before a crowd of conservative supporters in Phoenix, Arizona, were one of the strongest signals yet that he opposes a potential exit of TikTok from the U.S. market.

The U.S. Senate passed a law in April requiring TikTok's Chinese parent company, ByteDance, to divest the app, citing national security concerns.

TikTok's owners have sought to have the law struck down, and the U.S. Supreme Court has agreed to hear the case. But if the court does not rule in ByteDance's favor and no divestment occurs, the app could be effectively banned in the United States on Jan. 19, one day before Trump takes office.

It is unclear how Trump would go about undoing the TikTok divestiture order, which passed overwhelmingly in the Senate, read the report.

"I think we're going to have to start thinking because, you know, we did go on TikTok, and we had a great response with billions of views, billions and billions of views," Trump told the crowd at AmericaFest, an annual gathering organized by conservative group Turning Point.

"They brought me a chart, and it was a record, and it was so beautiful to see, and as I looked at it, I said, 'Maybe we gotta keep this sucker around for a little while'," he said.

Trump met with TikTok's CEO on Monday. Trump said at a news conference the same day that he had a "warm spot" for TikTok thanks to his campaign's success on the app.

The Justice Department has argued that Chinese control of TikTok poses a continuing threat to national security, a position supported by most U.S. lawmakers, Reuters reported.

TikTok says the Justice Department has misstated the social media app's ties to China, arguing that its content recommendation engine and user data are stored in the United States on cloud servers operated by Oracle Corp (ORCL.N), opens new tab, while content moderation decisions that affect U.S. users are made in the United States.

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