Feb 26, 2020 - Technology

Microsoft says PC unit will fall short of guidance due to coronavirus

Photo: Nicolas Economou/NurPhoto via Getty Images

Microsoft does not expect its PC unit, which includes Windows and Surface, to meet its previous quarterly revenue guidance due to the impact of the coronavirus on computer production, the company said in a Wednesday statement.

Our thought bubble, via Axios' Ina Fried: It's PC supply, not demand, that is below expectations, as the supply chain — much of which is in China — has been slower to return to full production.

  • Apple warned last week that it would miss estimates, citing the dual impact of the coronavirus both slowing hardware production and decreasing demand in China as consumer spending slowed.

Where it stands: 69% of U.S. consumers are concerned about the coronavirus outbreak's impact on the U.S. economy, according to a Morning Consult poll conducted from Feb. 24–26.

  • Roughly 2,000 adults were surveyed by Morning Consult with a margin of error of ±2%.

What they're saying:

"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.
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. All other components of our Q3 guidance remain unchanged."
— Microsoft's statement

Go deeper: Apple's coronavirus warning foreshadows broader threat for tech

Go deeper

Microsoft and other tech firms sound alarm over coronavirus impact

Illustration: Aïda Amer/Axios

More companies are saying publicly that disruptions caused by the coronavirus are hitting their bottom lines. Microsoft warned Wednesday that its personal computing unit, which includes Windows and Surface, will likely miss revenue expectations due to a slower-than-expected return to production after the Lunar New Year.

The big picture: Although Apple was the first big tech company to warn of a financial impact from the outbreak, most industry watchers said they expected the impact to be felt broadly across the industry, which depends heavily on China for manufacturing.

Coronavirus dents tech's supply chain

Illustration: Sarah Grillo/Axios

The novel coronavirus has just begun to shut down offices and public gatherings across the U.S., but its impact on hardware and components production in China started weeks ago, and the flow of goods out of China's factories has been slow to recover.

Why it matters: The global tech economy's just-in-time supply chain has never faced a disruption quite like this one. And while many observers are guardedly optimistic, no one knows for sure yet how this crisis will play out or what sorts of shortages the industry might still face.

Coronavirus has disrupted supply chains for nearly 75% of U.S. companies

Employees produce medical masks at Madaran Medical Manufacturing Company in Robat Karim district of Tehran, Iran. Photo: Fatemeh Bahrami/Anadolu Agency via Getty Images

The COVID-19 outbreak has caused supply chain disruptions for nearly three-quarters of U.S. companies, and many are already pricing in revenue losses this year as a result, according to a special ISM survey.

What's happening: Data show global production out of China fell to an all-time low last month, with freight and shipping slowing dramatically as the virus has shuttered factories and container ports.