Microsoft (MSFT) Stock Down 2% as Company Warns Coronavirus May Impact Q3 Earnings
Feb 27, 2020 at 12:22 pm UTC by Teuta Franjkovic · 3 min read
Microsoft (MSFT) stock fell 1.76% in pre-market trading on Thursday, a day after the company said it doesn’t expect to meet the quarterly revenue guidance it previously provided for the segment that includes Windows.
Microsoft Corporation (NASDAQ: MSFT) said on Wednesday it probably will not meet the quarterly revenue guidance due to the coronavirus it previously said it will. In the official statement, the company said that on January 29, as part of its second quarter of the fiscal year 2020 earnings call, the company issued quarterly revenue guidance for the More Personal Computing segment between $10.75 and $11.15 billion.
Because of closely monitoring the impact of the coronavirus health emergency, the Microsoft company announced:
“For the third quarter of the 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.”
Windows OEM revenue, which comes from selling Windows licenses to device makers, includes licenses for commercial and non-commercial PCs. Revenue from licenses for commercial Windows devices makes up approximately 40% of total Windows revenue. Revenue from licenses for non-commercial devices represents around 20% of total Windows revenue.
Microsoft Shifting Production from China to Vietnam due to Coronavirus
Be it as it may, just a few hours after releasing this announcement about the influence of the coronavirus, Microsoft together with another behemoth Googleconfirmed it is rapidly shifting production from China to countries in Southeast Asia as the coronavirus outbreak shows no signs of abating.
The company confirmed it is set to start producing some of its notebook and desktop computers in Vietnam. Last year, many tech companies began considering other countries for the manufacturing of their products due to escalating trade tensions between China and the United States, and tariffs that resulted from the dispute.
According to its latest earnings for the second quarter, where it beat the analysts’ expectations, revenue jumped 14% compared to the same quarter a year earlier, landing at $36.9 billion, while earnings per share were reported at $1.51 in Q2. Meanwhile, Microsoft’s cloud business reached $12.5 billion in sales, a 39% surge year over year.
Bill Gates’ Altruism All the Way in Spite of the Coronavirus
Still, let’s not forget that Microsoft is dealing in a way the big altruist and its co-founder Bill Gates wants it. Two weeks ago it announced, the second wave of donations, both in cash and technology support, to fight the Novel Coronavirus in China.
The second round of support raises the company’s total contribution to RMB 45.78 million, including RMB 4.78 million from Microsoft employee cash donations from Greater China Region and the U.S.
Apple Shifting Production to Taiwan
However, Microsoft isn’t the only one who felt the consequences from the COVID-19 spread. American technology giant Apple Inc (NASDAQ: AAPL) stated two weeks ago that it also expects its revenue will miss the expectations in the quarter ending March due to disruptions caused by the coronavirus outbreak in China.
Apple claimed that the main factors which affected the forecast are slower return to normal working conditions in China than it was originally expected, as well as lowered demand for its products on the Chinese market. The company said it is moving the production of its flagship products out of the country to Taiwan, as it tries to diversify its supply chain. The list of products that will allegedly be produced in Taiwan includes AirPods Pro Lite, iPad and Apple Watch.
Microsoft (MSFT) stock fell 1.76% to $167.17 in premarket trading at 5:17 am ET while Apple (AAPL) was down by 1.07% to $289.53 at the same time.
Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.
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