Microsoft gives a financial warning because coronavirus disrupts its Chinese supply chain for Windows and Surface devices
- Microsoft’s revenue for this quarter was estimated at $ 10.75 – $ 11.15 billion
- The company has not yet provided a revised estimate based on the impact of the virus
- However, Microsoft does not expect its cloud computing activities to be affected
- The warning came just a week after rival Apple made a similar announcement
Microsoft has issued a financial warning because the coronavirus outbreak is disrupting its Chinese supply chain for Windows and Surface devices.
The Washington-based technology company has warned that it will not achieve the sales forecasts for this quarter that it had issued to investors last month due to production delays.
Previously, sales were expected to be between $ 10.75 billion – $ 11.15 billion (£ 8.33 billion – £ 8.64 billion). Microsoft has not yet provided a revised estimate.
The complications caused by coronavirus are not expected to affect the company’s evolving cloud computing activities.
Microsoft’s announcement comes just a week after Apple revealed that it had similar restrictions.
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Microsoft has issued a financial warning because the coronavirus outbreak is disrupting its Chinese supply chain for Windows and Surface devices
“Although we see the strong Windows demand in line with our expectations, the supply chain is returning to normal business at a slower pace than expected at the time of our Q2 profit call,” Microsoft wrote in a statement.
“As a result, we do not expect for the third quarter of fiscal year 2020 that we will reach our segment guidance for more personal computing, because Windows OEM and Surface have more negative consequences than previously expected.”
After the market was closed on Wednesday evening, Microsoft’s share fell by around 1 percent.
Personal computing – including device sales and Windows installations on hardware from other companies – accounts for approximately one third of Microsoft’s revenue.
“When bellwethers like Microsoft come out and talk about the supply chain and how it has a negative impact on PC demand, it fuels the flames of some of the concerns for the wider supply chain,” Wedbush Securities said New York times.
The developments underline the vulnerability of technological supply chains in China, he added.
Although some have started moving to other countries such as Vietnam, many American technology companies are largely dependent on large factories in China as part of their activities.
Last week, Apple warned in the same way that it was forced to lower its sales forecasts due to the corona virus outbreak, which forced the company to close its 42 physical stores with the count last month – only seven of which were reopened.
Apple is heavily invested in the Chinese market, with the current quarter – with the busy shopping season around the Chinese New Year – generally of particular interest to the company.
Unlike Apple, Microsoft sells relatively little revenue in China itself – with the country’s market representing less than 2 percent of the company’s total revenue.
The Washington-based technology company revised the sales forecasts for this quarter that it had issued to investors last month due to production delays
Following Apple and Microsoft warnings, competing companies may find that their competitors are forced to give similar permission to follow this example, David Larcker, corporate governance expert, from the Stanford Graduate School of Business.
Before such unusual financial disclosures are published, companies should consider their responsibility to inform shareholders, to stay ahead of potentially bad news, as well as the need to keep competitors’ information, he added.
“Maybe they’re still trying to understand this,” Professor Larcker commented.
“It may not be a satisfactory answer, but it is a truthful answer.”
CORONAVIRUS: WHAT WE KNOW AGAIN
What is this virus?
The SARS-CoV-2 virus has been identified as a new type of corona virus. Coronaviruses are a large family of pathogens, most of which cause mild lung infections, such as the common cold.
But coronaviruses can also be deadly. SARS, or severe acute respiratory syndrome, is caused by a corona virus and killed hundreds of people in China and Hong Kong in the early 2000s.
Can the Wuhan coronavirus kill?
Yes – more than 2,700 people have died so far after a positive test for the virus.
What are the symptoms?
The infection that causes the virus is called COVID-19. Some people who get it have no symptoms at all, or only very mild ones such as sore throat or headache.
Others may suffer from fever, cough or breathing problems.
And a small proportion of patients will develop a serious infection that can damage the lungs or cause pneumonia, a life-threatening condition that causes swelling and fluid retention in the lungs.
How is it detected?
The genetic sequencing of the virus has been released by scientists in China and countries around the world have used this to make laboratory tests that must be performed to confirm an infection.
Delays in these tests, in test results and in people going to hospitals in China mean that the number of confirmed cases is expected to be only a fraction of the actual extent of the outbreak.
How did it start and spread?
The first cases identified were people connected to the Huanan Seafood Wholesale Market in Wuhan.
Cases have since been identified throughout China and have been known to spread from person to person.
What do countries do to prevent spread?
Countries around the world have forbidden foreign travelers from crossing their borders if they have been to China in the last two weeks. Many airlines have canceled or drastically reduced flights to and from mainland China.
Is it similar to something we’ve ever seen before?
Experts have compared it to the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003. The epidemic started in South China and killed more than 700 people in mainland China, Hong Kong and elsewhere.
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