As Coronavirus Pandemic Looms, US Companies Scramble to Warn About 2020 Revenue

Tesla began production at its Shanghai Gigafactory in December, 2019. HECTOR RETAMAL/AFP via Getty Images

Over the past two months, the coronavirus outbreak from the Chinese city of Wuhan has quickly escalated from a regional public health crisis to a global pandemic that has rattled normal life for billions of people and disrupted economy and business on an international level.

While situation in the U.S. seems under control for now, with the number of confirmed cases under 60, a rapid increase in cases of infection in countries other than China has caused global financial markets, including major U.S. indexes, to tumble for a fourth consecutive day this week.

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As of Thursday, several U.S. tech giants with significant global exposure, particularly supply chain in China, have issued warnings to investors about the inevitable financial impact of the deadly virus. Here is a look at who they are and their top concerns.

Apple

With its assembly line almost entirely based in China and a big chunk of revenue coming from Chinese consumers, Apple was, by no surprise, one of the first companies to ring the alarm on the coronavirus.

Last week, the iPhone maker said it would have to cut sales projections for the first quarter this year, due to production delays at its supplier, Foxconn, and a dip in consumer demand in China.

“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” Apple said in a press release dated February 17.

Some Wall Street analysts are expecting worse. “Apple is heavily exposed. It confirms the worst fears that the iPhone impact was going to be more dramatic than expected,” Daniel Ives, managing director of equity research at Wedbush Securities, told The New York Times last week.

Microsoft

The Windows PC maker, which also relies heavily on Chinese manufacturing, issued a similar warning on Wednesday, saying that coronavirus-related disruption in its China factories would likely affect its first-quarter sales in the personal computer business, which includes Surface laptops and tablets, as well as Windows installations. Its cloud computing business, though, isn’t expected to see much of an impact.

“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,” the company said in a statement to investors on Wednesday.

Tesla

Tesla opened its first China factory in Shanghai and began local production just three months ago. But unlike Apple and Microsoft, the electric carmaker said last month that the manufacturing hiccup due to the epidemic would only cause a 1.5-week delay in production.

But earlier this month, seeing the situation had gotten worse, Tesla changed its tone and said in a regulatory filing that the coronavirus may eventually have a “material adverse impact” on its business.

PayPal

Online payment service PayPal doesn’t have any physical business or supply facilities in China, but the firm also issued a warning on first-quarter revenue, saying a decrease in global e-commerce due to the virus would eventually affect its business.

“We currently estimate the negative impact from COVID-19 to be an approximate one percentage point reduction,” the company said in a press release on Thursday.

Hundreds More

The impact of the coronavirus goes beyond just big tech. On a broader scale, nearly half of U.S. companies operating in China expect their revenue to decrease this year if business can’t return to normal by the end of April, according to The Wall Street Journal, citing a poll conducted from February 17 to February 20 by the American Chamber of Commerce in China, or AmCham.

Of the 169 companies that responded to the poll, one in five said 2020 revenue from China would decline more than half if the epidemic continues through August.

As Coronavirus Pandemic Looms, US Companies Scramble to Warn About 2020 Revenue