Apple Says Coronavirus Outbreak in China Will Hurt RevenueIndustry News
Apple doesn’t expect to meet its revenue guidance for the March quarter due to work slowdowns and lower demand due to the outbreak of novel coronavirus in China.
The company said that the iPhone, which generates the bulk of Apple’s revenue, is temporarily constrained due to production ramping up more slowly than anticipated. “Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement Monday. In addition, demand for iPhones has been reduced because stores in China have been closed or operating with reduced hours and few customers, the company said.
Apple had forecast revenue of $63 billion to $67 billion for the fiscal second-quarter ending in March. Analysts on average estimated $65.23 billion, according to data compiled by Bloomberg. The company said in January when it announced its guidance that it anticipated factories reopening beginning Feb. 10. That process, however, has been slow as factory workers and manufacturing partners look to contain the virus, which has resulted in about 1,800 reported deaths in China, from spreading further.
“This is the double-edged sword of being in China,” said longtime Apple analyst and Loup Ventures co-founder Gene Munster. “They’re the only big company with China exposure, so they are working through the pain of what has largely been a success for the company over the past decade.” Apple is the only major U.S. technology giant to offer the majority of its products and services in China. Products from Facebook Inc., Alphabet Inc.’s Google, Amazon.com Inc., and Netflix Inc. are either limited or unavailable.
Still, Apple isn’t the only big tech company impacted by the virus. Nintendo is likely to struggle with the production of its Switch gaming device due to coronavirus, while Facebook previously said that it will see the production of its Oculus VR headsets drop due to the epidemic.
Apple said that, outside of China, products and services sales have been “strong to date and in line with our expectations.”
The Cupertino, California-based technology giant didn’t say what its new revenue outlook is for March but that situation is “evolving.” The company said it will share more information during its April earnings call. The disclosure marks the second time in two years that Apple has readjusted its earnings forecast due to China-related factors. For fiscal 2019, it cut holiday earnings projections on slower than expected iPhone sales in China, which it attributed in part to the trade war with the U.S.