Microsoft says it will not meet its previous revenue guidance for its More Personal Computing business segment because of the effects of the COVID-19 virus, which is now rapidly spreading internationally.
The company said: “On 29 January, as part of our second quarter of fiscal year 2020 earnings call, we issued third quarter revenue guidance for our More Personal Computing segment of between $10.75bn and $11.15bn, which included a wider than usual range to reflect uncertainty related to the public health situation in China.
“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.”
It said: “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 (devices) are more negatively impacted than previously anticipated.”
It added: “All other components of our Q3 guidance remain unchanged.” This presumably includes its cloud services business spread across the other reporting segments of its operations.
On the virus itself, Microsoft said: “Our top priority remains the health and safety of our employees, customers, partners and communities. Our global health response team is acting to help protect our employees in accordance with global health authorities’ guidance. Worldwide, Microsoft employees are working to support organisations addressing the challenges on the ground.
“Microsoft also continues to make donations to relief and containment efforts, including directly providing technology to help hospitals and medical workers.”
Slimane Allab, EMEA general manager at Llamasoft, a global AI and logistics solutions provider that works with high-tech clients that have facilities in China, said: “The tech sector’s true reliance on Chinese suppliers has been exposed by the coronavirus outbreak. Microsoft is just the latest in a list of global tech giants, which includes the likes of Apple and Samsung, to report that the plant closures in China have left them short of parts and capacity.”
He said: “If the fears of tech firms are realised, coronavirus will ultimately affect sales, leading to revenues falling across the board. Our research found the sourcing costs of high-tech companies could increase 34%. Companies are racing to find extra capacity as a stop-gap until the issues in China are resolved.
“Companies must learn from this and implement robust contingency planning with backup sources of supply on different continents to assure a flow of critical components when unforeseen events impact a source country.”
Meanwhile, the mayor of Barcelona earlier this week confirmed the city’s first case of the virus, which would have been in the middle of the annual Mobile World Congress (Europe’s biggest technology event), if the show hadn’t been cancelled by the organisers beforehand because of the threat.
