Microsoft's Windows OEM, Surface sales looking a bit peaky as coronavirus takes toll on China supply chain

Redmond no longer expects to meet quarter guidance for personal computing unit


In response to the effect of the coronavirus outbreak on Chinese suppliers, Microsoft has cut its sales forecast for Surface tablets and Windows OEM licences.

In a statement to investors last night, the global software powerhouse said although it had accounted for the impact of the virus on its operations in January's second-quarter guidance, it now expects the supply chain to return to normal more slowly than predicted.

"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 are more negatively impacted than previously anticipated," Redmond said.

However, Windows sales are not a huge source of growth for Microsoft, neither is hardware, which is not being helped by reports that new Surface laptops can break at the hint of a sneeze. The software giant is a well-diversified biz – unlike a certain fruit-based phone flinger.

On 17 February, Apple said the virus-related shutdown of Chinese factories had resulted in a shortage of iPhone components.

The "temporarily constrained" supply of iPhones and a fall in Chinese shopper numbers meant it would fail to meet its quarterly revenue target, the company said. HP also warned that the outbreak would have an impact on company performance, resulting in a $0.08 hit on earnings per share, though CFO Steve Fieler added: "We do view the situation as a temporary situation."

COVID-19 has taken out IT industry events across the globe, too. GSMA called off Mobile World Congress, due in February, as big names including Cisco, Nokia, Facebook and BT all cancelled their plans to attend.

Analyst firm Forrester said the quarantine in China's Wuhan city and Hubei province would affect production of electronic components. "Some factories, including auto plants and tech production facilities, are starting to reopen but at reduced levels," it said.

But for computer and communications equipment, demand in China would be delayed but recover quickly, Forrester said. "Sales of durable goods that might have occurred in Q1 2020 will resurface in Q2 or Q3 when quarantines are lifted, and production returns to normal. Of all the segments of the tech market, sales of computer and communications equipment are most likely to see this pattern."

Fellow analyst IDC has predicted that China's device sales would fall between 30 and 40 per cent in the first quarter before recovering. But Antonio Wang, associate vice president at IDC China, said there would be "a positive side" as Chinese consumers become aware of the importance of access to internet information as a result of the outbreak.

As Romania, Estonia and Norway report their first COVID-19 cases this morning, and Northern California reports an instance with no known contact with other virus carriers, The Register suspects it is too soon to be looking for upsides. ®


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