Microsoft warned late Wednesday that it doesn’t expect to meet its revenue forecast for its More Personal Computer division because of the coronavirus impact on the supply chain in China.
Microsoft’s stock dropped more than 3% to $163.19 when markets opened Thursday morning.
In a statement, Microsoft said “Windows OEM and Surface are more negatively impacted than earlier expected” because the supply chain affecting those products is returning to normal operations but “at a slower pace than anticipated.”
On Jan. 29, Microsoft had said the PC division was expected to yield revenues between $10.75 billion and $11.15 billion. The company didn’t peg a specific dollar amount for what it now expects, only saying that it didn’t expect to meet the earlier guidance. The division accounted for 36% of Microsoft revenues in the second fiscal quarter that ended Dec. 31, or $13.2 billion of total revenues of $36.9 billion.
Microsoft’s update is another expression of the economic impact that the virus is taking on a wide array of electronics companies including Apple. Dell and HP both make PCs based on Windows and saw declines of 5.5% and 3.2% respectively early Thursday, while Apple was down 5.8%.
Semiconductor companies have been hit especially hard, and the Philadelphia Semiconductor Sector group of 30 semi stocks was down more than 3% on Thursday.
PC-related chip producers that declined early Thursday include Intel (down 3%), AMD (down 5%), Micron (down 2.7%) and Nvidia (down 4%). The Nasdaq opened Thursday down 3% after a down week for a broad array of stocks, including airlines that have cancelled flights. Overall, the markets have suffered their worst week since the 2008 financial crisis.
On Wednesday, President Trump appointed Vice President Mike Pence to take charge of the federal response to the virus. The president said in a news conference, “We’re very, very ready for this, for anything, whether it is going to be a breakout of larger proportions or whether or not, we’re at that very low level…The risk to the American people remains very low.”
Markets have dropped on news that the virus is spreading outside of China to other Asian countries and countries in Europe and even South America. Health officials put the Thursday count at 82,588 cases and 2,814 deaths.