Baidu Inc., also called China’s Google, seems to have created some issues for Apple Inc. (NASDAQ:AAPL) in China, which already faces headwinds in the world’s biggest smartphone market. According to a research report by Baidu, Apple’s revenue in China may see a 20% year-over-year (YoY) decline in the second quarter of the year. It forecasted results based on mapping query data and search platform, as it has nearly 70–80% market share in search in China.
Baidu in its research found that map query volumes surged 15.4% YoY in the last quarter of 2015, which also corresponded with a 14% jump in the iPhonemaker’s revenue in China in the same period. Map queries in the first quarter of this year fell 24.5% YoY, which was perfectly in line with the 26% decline in the company’s revenue. "The impressively strong correlation indicates that map query data provides possibilities for us to 'nowcast' the company's revenues and reveal the future trends,” Baidu said.
The research added to bearish sentiment among investors; since the release of the report on Thursday, Apple shares have lost about 1.3% of their value on trading screen. Investors have adopted a cautious stance as China is the biggest iPhone market abroad.
According to analysts, such research reports will be useful for investors and hedge funds to promptly take investment decisions. However, it would also add to volatility in the company shares in case of inaccuracy in such forecasts, which generally don’t take all market aspects into account.
Apple is already struggling in the country to retain its market shares due to fierce competition from local manufacturers along with several other setbacks. A short time after releasing weak earnings in greater China, authorities in the country shut down Apple’s iTunes and iBook services in the country on the basis of a newly inducted law. The law states that all foreign firms are required to store content, to be shown on servers based in China. The company also lost a legal battle to a local Chinese leather firm over the exclusive use of the “iPhone” trademark.
Growing headwinds in Apple’s biggest overseas market led to the surprise visit of CEO Tim Cook to China. Mr. Cook made efforts to defuse tensions between Apple and the government, which has demanded source code of the company technology twice. However, the visit failed to achieve its objective of promoting a constructive relationship between the company and the Chinese authorities.
To retain its market share and expand presence in China, Apple adopted a somewhat unique revival strategy and invested $1 billion in the Chinese ride-hailing firm, Didi Chuxing, formallyknown as Didi Kuaidi. Now riders use Apple Pay to pay their bills, which is expected to improve iPhone sales, as Didi dominates the ride-hailing industry in China. The Chinese firm handles nearly 11 million riders every day, and serves nearly 300 million customers across 400 cities in the country.
Apple will announce its third-quarter earnings on Tuesday, with the market expecting another decline in iPhone sales. Baidu’s report has already turned investors bearish as the company stock dropped 0.77% on the final trading day of the week.