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Confidence in US high-tech stocks has wavered as investors worry a tougher global operating environment was partly to blame for Apple Inc posting its first annual revenue decline in 15 years.
This week, Apple reported its third consecutive quarterly revenue decline, with net income dropping 19 per cent to $US9 billion ($11.8 billion).
And although net income for the full year to September 24, was down 14 per cent to $US45.7 billion, Apple held onto its crown as the most profitable US company.
Analysts were quick to blame tepid demand in the smartphone market for the company's lacklustre performance. In the fourth quarter, Apple sold 45.5 million iPhones, down 5 per cent year over year.
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Investors showed their disappointment by pushing Apple's share price 2.3 per cent lower in trading overnight.
But the share price of the world's most valuable company is still up nearly 10 per cent so far this year, partly reflecting hopes Apple could benefit from the setbacks suffered by Samsung Electronics, its South Korean rival.
Samsung is recalling its Galaxy Note 7 smartphone after a series of battery fires and overheating incidents.
But it's clear Apple's problems extend far further than its over-dependence on iPhone sales, which accounted for more 60 per cent of revenue in its just-completed fiscal year.
Knock-on effect
And, even more worryingly, Apple's problems are likely to impact other major US high-tech firms.
In the first place, there's the Chinese market. Apple's performance in the critical Chinese market – which has previously been a major driver of growth for the company – is deteriorating, with profits in China falling by almost a fifth in its last financial year.
Apple is coming under intense pressure from competition from Chinese manufacturers, such as Huawei, Oppo, Vivo and Xiaomi. And as a result, its market share is declining.
Some analysts argue investors are being too complacent about the threat posed by the Chinese tech sector, which is often dismissed as only being capable of producing copycat products.
Instead, they argue Chinese tech firms now have highly sophisticated engineering, product development and research capabilities, which is being directed into areas such as advanced artificial intelligence.
What's more, they note Chinese tech firms also have the financial muscle to take on their US rivals. For instance, the market capitalisation of giant Chinese internet firms Tencent Holdings and Alibaba Group are now close to those of their US counterparts Facebook and Amazon.
Tax dispute
At the same time, US high-tech firms are keeping a close watch on Apple's dispute with the European Union's antitrust regulator, which in late August demanded Ireland recoup roughly €13 billion ($18.5 billion) of unpaid taxes the world's most valuable company allegedly accumulated over more than a decade.
Ireland has signalled it intends to appeal the decision – the largest ever demanded under the EU's rules that forbid companies using illegal state aid to gain advantages over competitors.
But, until this appeal is lodged, and the European Court of Justice delivers a ruling, Apple will have to pay the record penalty, and it theoretically has until the end of December to do so.
That's because, under European law, illegal state aid must be repaid within four months of the company being notified.
Some analysts point out that Apple will probably be able to delay making the payment. They note Belgium has still not collected money owing from 35 multinationals, after a EU ruling on illegal state aid in January.
But even if Apple is able to delay, or even avoid, repaying the unpaid taxes, Brussels is gearing up for a major assault on tax avoidance by multinationals, including US high-tech firms.
This week, European Economics Commissioner Pierre Moscovici unveiled new corporate tax reforms, that would impose the same rules for calculating tax payments across the region.
The new uniform corporate tax system – which would apply to all companies with more than €750 million in annual turnover – would radically simplify tax arrangements for companies that do business across Europe.
But they also eliminate the differences between national tax systems, which multinationals such as Apple have been adept in using to reduce their tax bills.