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Microsoft: Coronavirus To Put Damper on Windows Business

Microsoft's third-quarter results will likely take a hit from the global coronavirus emergency and its impact on the supply chain, Microsoft warned investors this week.

The warning comes less than one month after Microsoft's Q2 earnings results, in which surprisingly strong demand for Windows, partly driven by end-of-support deadlines, helped the company exceed Wall Street expectations.

Even in its Q2 earnings call, however, Microsoft was already priming investors for a potential effect from the coronavirus, also known as COVID-19, which arose in Wuhan and has led to mass quarantines and industrial shutdowns in China. At the time, Microsoft provided what it called a wider-than-usual range of quarterly revenue guidance of $10.75 billion to $11.15 billion for the More Personal Computing segment, which includes Windows and Surface.

"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," Microsoft said in its statement Wednesday. "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."

Microsoft did not provide a new range for the current quarter, which runs through the end of March. Revenues for other business units are not expected to be affected.

In the large stock market losses earlier in the week, Microsoft shares declined, but at a slightly lower rate. In extended trading after the announcement, Microsoft shares dropped a further 2%. Also following Microsoft's announcement, chipmaker Intel's shares declined about 1% and PC maker Dell's shares fell by about the same amount.

Posted by Scott Bekker on February 27, 2020


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