Apple Downgrade Underscores Coronavirus Uncertainty

By Glenn Dyer | More Articles by Glenn Dyer

Apple has surprised markets by warning that disruption in China from the coronavirus will cause its revenues to fall short in the current quarter.

The warning, issued late on the holiday Monday in the US underlines the still evolving impact from the virus and again underlines how premature it is for investors and markets to assume that the worst is over.

It was the second time in a little over a year that weakness in China has forced the world’s most valuable technology company to issue a financial caution.

Apple said that it had assumed that work would return to normal in China after the new year holiday that ended on February 10. Instead, it said it was “experiencing a slower return to normal conditions than we had anticipated.”

Last month, the company gave a sales guidance range of $US63.0 billion to $US67.0 billion for its fiscal second quarter.

At the time of that forecast, Apple said the wider-than-usual forecast for revenue reflected the uncertain impact of the virus.

Now the iPhone giant says the outbreak’s impact is larger than it had expected.

Apple said in the statement that all of its iPhone manufacturing facilities are outside Hubei province, the epicenter of the outbreak, and all have been reopened. But the company said production is ramping up slowly.

“The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” Apple said in the statement.

Apple says demand for iPhones is also down in China because many of Apple’s 42 retail stores there are closed or operating with reduced hours. China is Apple’s third-largest retail market for iPhones, after the U.S. and Europe.

Outside China, Apple said iPhone demand has been strong and is in line with the company’s expectations.

Apple says the situation is evolving and it will provide more information on its next earnings call in April after the March 30 quarterly results are issued.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →