Apple Warns That Coronavirus Will Hurt Revenue


SAN FRANCISCO — Apple said on Monday that it was cutting its sales expectations because of the coronavirus in China, in a sign of how the outbreak has hit global business and is set to exact a steep toll.

The iPhone maker, which is highly dependent on Chinese factories and Chinese consumers, said in a statement that its supply of smartphones would be hurt because production was ramping up more slowly than expected as China reopened its factories. Apple also said that demand for its devices in China had been hurt by the outbreak; it closed all 42 of its stores in the country last month and most have yet to reopen.

“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” said Apple, one of the world’s most valuable public companies.

Apple is one of the first companies to publicly disclose the extent of the chain effect from China and the virus on the business world. Many global firms rely on factories in China to manufacture goods as varied as socks and laptop computers. And Chinese consumers, who had ridden a wave of rising wealth, had been avid buyers of luxury goods, iPhones and many other items.

Fears over the coronavirus’s impact on the global economy and business have been growing. Countries such as Japan and Germany, which rely on Chinese consumers and Chinese manufacturing, have already been grappling with slowing growth. Japan, which sees a lucrative flow of Chinese tourists and exports to that country’s enormous market of consumers, may potentially fall into a recession. And there are concerns the coronavirus could limit Europe’s already weak growth.

Updated Feb. 10, 2020

What is a Coronavirus?It is a novel virus named for the crown-like spikes that protrude from its surface. The coronavirus can infect both animals and people, and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.

How contagious is the virus?According to preliminary research, it seems moderately infectious, similar to SARS, and is possibly transmitted through the air. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.

How worried should I be?While the virus is a serious public health concern, the risk to most people outside China remains very low, and seasonal flu is a more immediate threat.

Who is working to contain the virus?World Health Organization officials have praised China’s aggressive response to the virus by closing transportation, schools and markets. This week, a team of experts from the W.H.O. arrived in Beijing to offer assistance.

What if I’m traveling? The United States and Australia are temporarily denying entry to noncitizens who recently traveled to China and several airlines have canceled flights.

How do I keep myself and others safe?Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.

As the crisis over the virus has deepened, large companies have indicated that their production will also be hurt and that the damage may spill over into their financial results. China’s giant network of factories, which accounts for a quarter of the world’s manufacturing output, was slow to ramp up after the extended Lunar New Year holiday and because of the outbreak.

Fiat Chrysler Automobiles recently temporarily shut a factory in Serbia because of shortages of Chinese parts. The European aerospace giant Airbus has indicated it is only slowly restarting its assembly line, and automakers like General Motors and Toyota have begun only limited production in recent days.

The next signal of the virus’ impact is expected to come on Tuesday when Walmart is scheduled to report quarterly results.

Apple declined to comment beyond its statement.

“It’s the first of many we’re going to see around the coronavirus impact,” Daniel Ives, managing director of equity research at Wedbush Securities, said of Apple’s action on Monday. “Apple is heavily exposed. It confirms the worst fears that the iPhone impact was going to be more dramatic than expected.”

Apple, which is widely regarded as a bellwether of global supply and demand for goods, has bet big on China in recent years. Timothy D. Cook, Apple’s chief executive, worked with China’s telecom providers to introduce the iPhone in the country last decade. After that, Apple’s already substantial sales took off further. China is now the company’s second largest market after the United States. Apple also assembles most of its products there.

For Apple to warn that it will miss sales expectations is highly unusual. The Silicon Valley company has been one of the world’s most profitable firms and currently sits on a cash pile of more than $200 billion. The last time it cut its sales forecast was in January 2019 — the first time in 16 years it reduced its revenue guidance — because of poor iPhone sales in China.

Last month, Apple had forecast that its sales would rise 9 percent to 15 percent in the current quarter. At the time, Mr. Cook said it had provided investors with a wider than expected estimate range because it was uncertain about the rapidly spreading coronavirus.

Apple has 42 retail stores in China and has reopened seven of them, but with limited hours. The company is following government guidelines on where it can reopen stores and the hours they can operate.

This is a developing story. Check back for updates.

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