Microsoft Expects To Lose Money Due To Coronavirus

Microsoft Expects To Lose Money Due To Coronavirus
Image: Microsoft

The impact of the COVID-19 Coronavirus continues to hit tech companies, with Microsoft revising its profit forecasts for its OEM and Surface businesses as a result of the disruption it’s causing in China.

Microsoft overnight issued an update to its 3rd quarter 2020 financial guidance ” it’s a publicly traded company, so it’s obliged to keep shareholders aware of expected shifts in revenue ” noting that it doesn’t expect to meet its revenue guidance in the third quarter of its financial year. The COVID-19 Coronavirus is seen as a significant threat to its supply chain, and that means it’ll have less product to sell, as well as a restricted Chinese market in which to sell it.

In typically dry terms, it states that:

“On Jan. 29, as part of our second quarter of fiscal year 2020 earnings call, we issued quarterly revenue guidance for our More Personal Computing segment between $10.75 and $11.15 billion, 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.

“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.”

Yes, financial reporting really is that dull. So what’s the likely impact for those of us who don’t actually own Microsoft shares?

While it’s a very carefully guarded statement in the main, with no particular figures for how bad Microsoft expect it to get, fewer OEM licences almost certainly relates to the production of laptops to place those lucrative Windows 10 licences onto.

That’s certainly the case for Microsoft’s Surface device line, and could impact existing devices such as the Microsoft Surface Pro X as well as upcoming devices such as the Microsoft Surface Duo and Microsoft Surface Neo.

Microsoft is far from the only tech company to feel COVID-19’s sting. Apple has revised its revenue forecasts due to production uncertainty, which could be quite profound if rumours of a March budget iPhone launch do in fact pan out. Apple has also closed all of its Chinese stores in response to the outbreak.

Mobile World Congress got flat out cancelled affecting the launch plans of hundreds of tech companies, with many phone makers instead opting for “virtual” launches of their products. Although Huawei did opt for its Huawei Mate Xs launch to be livestreamed from Barcelona anyway.