Apple cites Wuhan Coronavirus, tones down quarterly revenue guidance

China accounts for 15% of Apple's revenue or $13.6 billion per quarter but in view of COVID-19, the company may experience severe losses this quarter

In view of the global public health crisis due to COVID-19, Apple Inc has sent out negative revenue guidance for the current quarter due to suppy-side constraints and a decline in demand in China, bringing back memories of SARS-struck Chinese market that played havoc around the world bringing recession to the doorsteps of the world's largest populated economy in 2003.

Sharing its thoughts with the affected people in China, Apple said in a statement, "Our thoughts remain with the communities and individuals most deeply affected by the disease, and with those working around the clock to contain its spread and to treat the ill. Apple is more than doubling our previously announced donation to support this historic public health effort."

Earlier forecast in January

In late January, Apple had forecast $63 billion to $67 billion in revenue for the quarter ending in March. It did not offer a new revenue estimate but said that it expected lower returns this quarter. China accounted for 15% of Apple's revenue, or $13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter, according to Reuters.

The workforce in China to return soon after the end of the extended Chinese New Year holiday on February 10 is slower than normal, which may spill over in lower production capacities, said the company in its note. "We do not expect to meet the revenue guidance we provided for the March quarter due to (these) main factors," it said.

The company foresees impact as worldwide iPhone supply will be temporarily constrained with the iPhone manufacturing partner sites located inside Hubei province not opened while those outside Hubei have reopened but ramping up more slowly than anticipated. "These iPhone supply shortages will temporarily affect revenues worldwide," said the company in its note.

Demand to go down drastically this quarter

On demand side of the story, Apple is expecting the demand for its products in China to be affected as all its stores and partner stores in China have been closed owing to the COVID-19. Even those opened are constrained to fewer hours and are experiencing very low customer traffic.

"Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations," said the iPhone maker. The company said it would provide more information during the next earnings call in April but stressed that their first priority is the health and safety of its employees, supply chain partners, customers and the communities.

This article was first published on February 18, 2020