Microsoft issues financial warning because of coronavirus

click to enlarge Microsoft issues financial warning because of coronavirus
Stuart Isett/The New York Times
A hallway in a building on the Microsoft campus in Redmond, Wash., Sept. 7, 2017.
By Karen Weise
The New York Times Company

SEATTLE — Microsoft on Wednesday said its sales in the current quarter would be lower than it had previously predicted because of coronavirus-related disruptions in Chinese manufacturing.

While its fast-growing cloud computing business is not affected, the company said its personal computing business, which includes Windows installations and its Surface laptops and tablets, would record lower sales than it told investors to expect last month.

“Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated,” the company said in a statement.

Roughly a week ago, Apple warned it was cutting sales projections because of the public health crisis from the coronavirus.

Apple said the factories that make its iPhones were slower to reopen after the Chinese Lunar New Year than it had expected, and the company experienced lower demand for its products from Chinese consumers. At the time, all of its stores in China were closed, though some have since begun to reopen.

The financial warnings from Microsoft and Apple — two of the most valuable publicly traded companies in the world — underscore the vulnerability of technology supply chains in China, said Dan Ives, a managing director at Wedbush Securities. Many tech companies in the United States rely on large factories in China, though some have started to shift to other countries like Vietnam.

“When bellwethers like Microsoft come out and talk about the supply chain and how it will negatively impact PC demand, it fans the flames of some of the worries out there for the broader supply chain,” he said.

Microsoft’s stock fell about 1% in after-market trading on Wednesday evening.

Personal computing, which includes hardware sales as well as Windows installed on computers that other companies produce and sell, accounts for roughly a third of Microsoft’s revenue.

In January, the company said it expected to have between $10.75 billion and $11.15 billion in sales for the segment, a wider-than-normal range reflecting the uncertainty at the time.

Unlike Apple, Microsoft does not sell much in China, and the market accounts for less than 2% of the company’s revenue.

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