Apple is to be investigated by an investor rights law firm for potential securities fraud following yesterday's revised Q1 2019 earnings guidance for the company, it emerged on Wednesday.

Apple Store Sanlitun, Beijing, China
Bernstein Liebhard LLP, which calls itself "a nationally acclaimed investor rights law firm," announced on its website that it was investigating the fraud claims on behalf of Apple shareholders, based on "allegations that Apple and/or its executives may have issued materially misleading business information to the investing public."

The firm's complaint with Apple focuses on comments about China made by CEO Tim Cook in his November Q4 2018 earnings call, compared to what he told investors yesterday.

In his letter on Wednesday, Cook revealed that Apple expected to end the quarter with $84 billion in revenue, which is down more than 7 percent from the $89 billion to $93 billion forecast the company predicted at the end of the last fiscal quarter 2018.

Cook put the revised guidance down to "lower than anticipated iPhone revenue, primarily in Greater China, [which] accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline."

The statement contrasts with Cook's comments on China during Apple's November Q4 2018 earnings call, in which he told investors that "our business in China was very strong last quarter. We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there."

Essentially, Bernstein Liebhard claims that the difference between the two statements represents "materially misleading business information" that has subsequently "damaged investors." It remains unclear how those allegations will stand up to scrutiny in a law court, however.

Following Cook's earnings call yesterday, Apple's stock fell almost $12 per share, or over 7.5 percent, during aftermarket trading hours. The downgrade also sent shares in other companies with exposure to China tumbling over fears that the slowdown could affect other markets.

Cook said that the timing of the iPhone XS, XS Max, and XR launch compared to the timing of the iPhone X launch last year were set to impact year-over-year comparisons, as would the strength of the U.S. dollar. Cook also said that customers taking advantage of "significantly reduced pricing for iPhone battery replacements" was also a factor that led to fewer upgrades in 2018.

Top Rated Comments

Bearxor Avatar
88 months ago
Following Cook's earnings call yesterday, Apple's stock fell to almost $12 per share, or over 7.5 percent, during aftermarket trading hours.
It didn’t fall TO $12. It fell $12.
Score: 9 Votes (Like | Disagree)
djcerla Avatar
88 months ago
"Furthermore, Bernstein Liebhard LLP is reportedly providing Apple a crystal ball for future, more accurate predictions".
[doublepost=1546515278][/doublepost]
There will be a bunch of law firms jumping on the bandwagon. They smell blood in the water.
A losing bandwagon, that is.

Guidance is not a guaranteed result by any means, and the firm correctly warned investors about the revenue miss well before earnings, also confirming an all-time record EPS for the quarter.
Score: 6 Votes (Like | Disagree)
philvid2 Avatar
88 months ago
I don’t think it is that clear that the case is merit less.

Cook in November:
“our business in China was very strong [Q4]. We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there”

Cook now:
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China ... China’s economy began to slow in the second half of 2018 (includes Apple’s Q4). The government-reported GDP growth during the September quarter was the second lowest in the last 25 years.”

I guess the argument is that Apple knew, or ought to have known, of China’s economic conditions by the November statement, and that making such a positive statement was misleading given that Apple knew of the economy slowing down.
Score: 6 Votes (Like | Disagree)
Millah Avatar
88 months ago
The thing is, the law firm is correct. In the space of two months, Tim Cook has given two completely different versions of events to Apple's investors. In November he basically says the future is bright in China, business grew 16%. This is good news for investors, hence they would be investing more in Apple businesses in China. Now, a month later, Tim Cook say's the complete opposite, that growth in Greater China has been slow and it is something they knew about. If that was the case he should have given a more cautious investor outlook speech back in November. The fact he didn't clearly shows Apple mislead it's investors.

The FTC could also investigate because the very positive speech in November would have increased Apples stock value immensely, meaning a few people would have made a few extra billion. Then a month later to announce to investors that things have not worked out, which would naturally have an affect on Apples stock, critics could argue that it is stock market manipulation, something which is against the law.

Apple would have known way in advance if there was a possibility of China's growth slowing or not, that is why companies such as Apple pay economists the huge sums they do to be able to predict a countries economic growth or slowdown.
Cooks comments were for the quarter he was commenting on. It was not a future forecast. He has every right to comment with enthusiasm that the reported quarter had double digit growth in China. It did not provide any forward looking statements. And if he did, I’m almost positive that forward looking statements are always marked with an asterisk.

Apples revenue guidance for this quarter had already included the concerns reported yesterday. If I remember correctly, Apples guidance was lower than analysts were expecting/hoping. The problem that required the letter yesterday is the magnitude of these concerns being far greater than previously expected 60 days ago.

I don’t recall Tim Cook making any statement that “growth is off the charts in China with no end in sight! We’re going to kill it next quarter!”
Score: 5 Votes (Like | Disagree)
H3LL5P4WN Avatar
88 months ago
So... Apple admits that sales weren't on the educated guess mark from a quarter ago, and this is somehow fraud?

Since when is telling the truth, or correcting a statement to be more truthful, fraud?
Score: 4 Votes (Like | Disagree)
Ramchi Avatar
88 months ago
If people visit MR, they shouldn't be surprised to see this coming. Most of it common sense. Stock Market is always considered a regulated gambling, people making money out of it must learn to live with losses as well. Investors can't be that much stupid not to see potential earnings drop after Apple stopped revealing iPhone numbers...
Score: 4 Votes (Like | Disagree)

Popular Stories

iOS 26 Feature

iOS 26.1 to iOS 26.4 Will Add These New Features to Your iPhone

Wednesday October 1, 2025 1:26 pm PDT by
iOS 26 was released last month, but the software train never stops, and iOS 26.1 beta testing is already underway. So far, iOS 26.1 makes both Apple Intelligence and Live Translation on compatible AirPods available in additional languages, and it includes some other minor changes across Apple Music, Calendar, Photos, and Safari. More features and changes will follow in future versions,...
iPhone 17 vs Air and Pros Feature

New iPhones See 'Stronger Than Expected' Demand With One Exception

Thursday October 2, 2025 7:26 am PDT by
Nearly two weeks after the iPhone 17 series launched, analysts at investment banking firm Morgan Stanley said demand for the devices has been "modestly stronger than we originally expected," based on a combination of extended shipping estimates on Apple's online store and information it gathered from Apple's supply chain. There has been strong early demand for the iPhone 17, iPhone 17 Pro,...
space black mbp

Here's Every New Apple Product That Leaked Yesterday

Wednesday October 1, 2025 8:27 am PDT by
A handful of upcoming Apple products leaked yesterday, through a combination of YouTube videos out of Russia and U.S. Federal Communications Commission (FCC) documents that were released, despite Apple's confidentiality requests. The leaked products include an iPad Pro with an M5 chip, as well as updated MacBook Pro and Apple Vision Pro models. All of these devices had already been rumored...
Apple 2025 Thumb 1

Apple's 2025 Product Roadmap: What's Still Coming

Wednesday October 1, 2025 3:56 pm PDT by
Apple's two big yearly events, WWDC and the iPhone launch, are done and over with, but there are still some new products that we're expecting to see before the end of the year. Apple TV The Apple TV hasn't been updated since 2022, so it's due for a refresh. It doesn't look like Apple is going to change the design of its set-top box, but we can expect a faster chip Apple code suggests...
macbook air prime day 2025

M5 MacBook Air: Release Date, Features, and Performance Predictions

Friday October 3, 2025 3:39 am PDT by
The MacBook Air is Apple's most popular laptop – a thin, fanless machine that wields quiet power thanks to the efficiency of Apple silicon. While the M4 model isn't exactly old, attention is already turning to its successor. Apple doesn't telegraph new product launches ahead of time, but we can draw a surprisingly clear picture of what to expect by looking at Apple's silicon roadmap,...
Tim Cook Rainbow

Apple Event in October? Here's What to Expect

Monday September 29, 2025 9:31 am PDT by
Apple's annual iPhone event is in the rearview mirror, but rumors suggest the company plans to release a handful of additional products before the year ends. Will there be another Apple event this October? We discuss the possibility below. Apple in October Apple's most recent October events were in 2021 and 2023. In 2022 and 2024, Apple did not host an October event. Instead, it...
apple wallet drivers license feature iPhone 15 pro teal 1

Apple's iPhone Driver's License Feature Now Available in 11 U.S. States

Tuesday September 30, 2025 6:40 am PDT by
In select U.S. states, residents can add their driver's license or state ID to the Wallet app on the iPhone and Apple Watch, providing a convenient and contactless way to display proof of identity or age at select airports and businesses, and in select apps. Apple recently revealed that the feature would soon be available in North Dakota, and starting today, the feature has officially gone...
iPhone 17e Feature 1

iPhone 17e: All the Rumors So Far

Thursday October 2, 2025 4:55 am PDT by
Earlier this year, Apple released the $599 iPhone 16e – a budget-friendly late addition to its iPhone 16 series and a replacement for its long-running entry-level iPhone SE line. Given the iPhone 17 lineup has now launched, can we expect an iPhone 17e anytime soon? If you're holding out for a more affordable device with the 17 moniker attached, here's everything we know so far about the...
iOS 26 Everything New Feature

26 Hidden iOS 26 Tricks to Change How You Use Your iPhone

Wednesday October 1, 2025 9:16 am PDT by
Apple released iOS 26 in mid-September, bringing a range of new features and changes to iPhones across the globe. But not all of the included improvements have been showcased with Apple's typical fanfare, and many are likely to have been overlooked. Below, we've highlighted 26 lesser known additions and enhancements that could potentially change how you use your iPhone on a daily basis. Got...