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Apple Sounds Alarm Bell In China, Won’t Hit Current Quarter Sales Target

Jill Goldsmith

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Apple, which sounded an alarm bell on China in late January, acknowledged Monday the situation had precipitated more quickly than anticipated and it wouldn’t meet revenue forecasts it made then as the coronavirus decimates production and demand for its products in the key nation.

“Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter,” the company said in an update to investors.

Apple had forecast $63 billion-$67 billion in revenue for the current quarter ending in March. It did not give a new estimate.

Apple cited “a temporary constraint of worldwide iPhone supplies” due to manufacturing complications in China. Factories outside Hubei province – the epicenter of the virus – have reopened but are ramping up more slowly than anticipated, it said. That’s going to cause iPhone supply shortages that will curb sales.

“The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” Apple said.

The other major hit is falling demand for products within China. The world’s largest market for smartphones accounted for 15% of Apple’s revenue last quarter. Apple stores in China and many of its partner stores have been closed. Stores that are open have been operating at reduced hours and with very low customer traffic.

“We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout,” Apple said.

Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations, the company noted.

The situation is evolving, Apple said, and it will provide more guidance in April at its next earnings call. “Our first priority — now and always — is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency,” the company said.

Recent tallies put the deal toll at 1,770 in China with over 70,000 people infected and millions of others staying indoors.

More from Deadline

In late January, Apple forecast $63 billion to $67 billion in revenue for the quarter ending in March. It did not offer a new estimate

Apple’s contract manufacturers have added far more locations inside China than outside, with major supplier Foxconn expanding from 19 locations in 2015 to 29 in 2019 and another supplier, Pegatron Corp , going from eight to 12 locations, according to data from Apple reported by Reuters.

U.S. markets were closed for President’s Day holiday but analysts believe the stock is likely to take a hit Tuesday.

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