Apple to miss Q2 guidance as coronavirus hits iPhone supply and Chinese sales

Worldwide supply of iPhones is constrained after China extended its Lunar New Year break.
Written by Chris Duckett, Contributor

Apple announced on Monday that it would be missing its second quarter guidance due to the coronavirus outbreak hitting its iPhone supply chain and a lowering demand in China following the temporary closure of its stores in the Middle Kingdom.

Following the outbreak of coronavirus in China, Beijing extended the nation's Lunar New Year holiday, with factories being slower to reopen across the country.

The tech giant said on Monday its guidance that was issued alongside its first quarter earnings is now incorrect since it is taking longer for its supply chain to return to normal.

One factor impacting its guidance was a temporary drop in iPhone supplies.

"While our iPhone manufacturing partner sites are located outside the Hubei province -- and while all of these facilities have reopened -- they are ramping up more slowly than we had anticipated," the company said.

"These iPhone supply shortages will temporarily affect revenues worldwide."

The other factor cited by Apple was reduced demand in China, with all of its stores and many partner stores having been closed over the break, it said.

"Stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can," Apple said.

Outside of China, Apple said it is seeing the customer demand it had expected.

The company said on January 28 it had expected second quarter revenue of between $63 billion and $67 billion with a gross margin between 38% and 39%. For its first quarter, Apple reported revenue of almost $92 billion, up 9% year on year.

"We do have some suppliers in the Wuhan area. All of these suppliers, there are alternate sources, and we're obviously working on mitigation plans to make up any expected production loss," Apple CEO Tim Cook said when delivering the Q1 results last month.

Last week, MWC was cancelled in Barcelona due to coronavirus concerns, while Black Hat Asia 2020 was postponed for similar reasons.

The death toll from the virus, at the time of writing, sits at 1,800 persons.

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