Apple: Coronavirus will cause iPhone shortage and Q2 guidance miss

Chris Davies - Feb 17, 2020, 3:20 pm CST
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Apple: Coronavirus will cause iPhone shortage and Q2 guidance miss

Apple has warned that coronavirus will cause iPhone shortages and likely cause the company to miss its March quarter revenue guidance, while also confirming that it will be significantly boosting its donations to help address the COVID-19 outbreak. The spread of the respiratory illness – and attempts to curtail it – have forced many facilities in China to extend their Chinese New Year holidays, leaving production lines idle.

Analysts warned that the downtime could well impact some familiar names in the tech world, and that pessimism seems to have been well-placed. Apple is among the first to confirm that coronavirus will indeed affect how close it comes to its previous investor guidance.

“Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10,” the Cupertino firm said in a statement today. “Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.”

First of those factors is a shortage of iPhone supplies worldwide, Apple warns. The reality is that, though Apple’s partner sites where iPhone manufacturing takes place are all outside of the Hubei province, and have indeed reopened, “they are ramping up more slowly than we had anticipated,” it’s explained. “These iPhone supply shortages will temporarily affect revenues worldwide.”

Meanwhile, demand for Apple products within China has also been affected by COVID-19. “All of our stores in China and many of our partner stores have been closed,” Apple says. “Additionally, stores that are open have been operating at reduced hours and with very low customer traffic.”

The impact will be a temporary one, Apple says, and it makes clear that demand outside of China has been in line with previous expectations. In the face of the health crisis, Apple says it is “more than doubling our previously announced donation” to the public health response to coronavirus. “The health and well-being of every person who helps make these products possible is our paramount priority,” it adds, “and we are working in close consultation with our suppliers and public health experts as this ramp continues.”

Back in January 2020, Apple had given guidance of revenues between $63 billion and $67 billion for the fiscal 2020 second quarter. Gross margin, the company said, would likely fall between 38- and 39-perenty, while operating expenses would be between $9.6 billion and $9.7 billion.

“The situation is evolving, and we will provide more information during our next earnings call in April,” Apple said today. “Apple is fundamentally strong, and this disruption to our business is only temporary. Our first priority — now and always — is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.”


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