Microsoft issues financial warning as coronavirus disrupts its Chinese supply chain for Windows and Surface devices
- Microsoft’s sales for this quarter had been projected at $10.75–$11.15 billion
- The firm has not yet provided a revised estimated based on the virus’ impact
- Microsoft does not expect its cloud-computing business to be affected, however
- The warning came just one week after rival Apple made a similar announcement
Microsoft has issued a financial warning as the coronavirus outbreak disrupts its Chinese supply chain for Windows and Surface devices.
The Washington-based tech firm has cautioned it will not reach the sales predictions for this quarter that it had issued to investors last month as production hits delays.
Sales had previously been anticipated at 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 impinge on the firm’s developing cloud-computing business.
The announcement from Microsoft comes just a week after Apple revealed that is was facing similar constraints.
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Microsoft has issued a financial warning as the coronavirus outbreak disrupts its Chinese supply chain for Windows and Surface devices
‘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 at the time of our Q2 earnings call,’ Microsoft wrote in a statement.
‘As a result, for the third quarter of fiscal year 2020, we do not expect to meet our More Personal Computing segment guidance as Windows OEM and Surface are more negatively impacted than previously anticipated.’
After market trading closed on Wednesday evening, Microsoft’s stock was seen to have fallen by around 1 per cent.
Personal computing — which includes device sales and Windows installations on hardware made by other firms — accounts for around a third of Microsoft’s revenues.
‘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,’ Wedbush Securities’ Dan Ives told the NYTimes.
The developments underscore the vulnerability of technology supply chains in China, he added.
While some have begun to relocate to other countries like Vietnam, many US tech firms are heavily reliant on large factories in China as part of their operations.
Last week, Apple similarly warned that it was forced to lower its sales projections in the wake of the coronavirus outbreak, which forced the firm last month to close its 42 physical stores with the count — only seven of which have reopened.
Apple is heavily invested in the Chinese market, with the current quarter — containing the busy shopping period around the Chinese New Year — typically being of particular importance to the company.
In contrast to Apple, Microsoft makes relatively few sales within China itself — with the nation’s market accounting for less than 2 per cent of the firm’s overall revenue.
The Washington-based tech firm has revised the sales predictions for this quarter that it had issued to investors last month as production hits delays
Following Apple and Microsoft’s warnings, competing firms may find their competitors compelled to make similar admissions to follow suit, corporate governance expert David Larcker of the Stanford Graduate School of Business.
Before issuing such unusual financial disclosures, firms must consider their responsibility to inform shareholders, the imperative to get ahead of potentially bad news as well as the need to keep some information from competitors, he added.
‘It may be they are still trying to understand this,’ Professor Larcker noted.
‘It may not be a satisfying answer, but it’s a truthful one.’
