Apple has issued a warning that it will not meet its financial guidance for the second quarter due to the outbreak of the coronavirus in China, which has led to a significant reduction in the production of its iPhones.
Latest on the Coronavirus
The fight to contain the virus in China is ongoing, and there are positive signs with the number of new cases reported falling below 2000 for the first time this month. According to reports in the Global Times, a ‘dragnet style’ shakeup has begun in Wuhan, where the virus broke out, to ensure that everyone who has been infected will be ’rounded up’. This is expected to continue for three days and will play a significant role in reducing the further impact of the virus.
Issues for Apple
Apple had initially projected net sales to be between $63 and $67 billion in its second fiscal quarter, but this is no longer thought to be the case. They did not provide a new outlook for the period when releasing the disappointing news on Monday. Instead, they suggested that they had provided a wider range than usual late last month, with the uncertainty around the coronavirus outbreak very much in their thinking at the time.
Downturn in Demand
Apple has stated that demand for the iPhone is down in China because many of the 42 retail stores in the Asian nation are closed or open on a reduced hours schedule, which is significantly impacting sales. Although demand is down in China, the company has stressed that sales have been strong outside that region, with territories like Europe and America remaining strong and no significant difference from original expectations has been seen.
Apple expects the evolving situation of the outbreak in China to allow them to release more information on their earnings and forecasts in April, but they have made no secret of the fact that they expect to fall below expectations for their second quarter.