China looms large in Apple's earnings report amid coronavirus outbreak
China figured prominently throughout Apple's earnings report on Tuesday, helping fuel the company's record holiday quarter, but also playing a role in the uncertainty hanging over the current quarter.
Why it matters: Apple is the latest company to flag that China's coronavirus outbreak could harm near-term business.
- A year after weakness in Greater China prompted a rare earnings warning, Apple returned to growth in the region. The company said it saw double-digit growth in sales of the iPhone and in its services and wearables businesses.
Yes, but: China was also the source of caution throughout Apple's conference call on Tuesday. Specifically, CEO Tim Cook noted that:
- The company's $63 billion to $67 billion revenue outlook for the current quarter, though better than some analysts had forecast, had a wider range due to uncertainty over the impact of the coronavirus.
- Apple has closed one of its stores in China, while third-party retailers have closed some distribution points and reduced the operating hours at others. Also, traffic is down at retail stores outside Wuhan.
- Some suppliers are based around Wuhan, thought to be ground zero for the outbreak, though Apple said it had other sources for all the components it gets there. The impact on suppliers outside of Wuhan is less clear.
- Factories in China are starting back up later than normal following the Lunar New Year holiday, Cook said, with production due to resume Feb. 10.
- Apple has limited travel of its employees to China to "business critical" situations. But Apple, of course, has a lot of critical business in China, since nearly all its hardware is manufactured there.
The bottom line: It's too soon to say how great the human impact of the outbreak will be, but it's already a major source of economic risk.
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