Tech

Microsoft warns it will miss guidance for segment that includes Windows because of coronavirus

Key Points
  • Microsoft's revenue guidance for the More Personal Computing unit had already been wider than usual to account for impact from the health situation in China, where the coronavirus had first been identified.
  • Apple announced that it wouldn't be able to hit its own revenue guidance last week.
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Microsoft warns on coronavirus concerns

Microsoft shares fell 2% in extended trading on Wednesday after the company said it doesn't expect to meet the quarterly revenue guidance it previously provided for the segment that includes Windows.

The move comes during a week that has seen a market selloff amid fears about the virus. Last week Apple disclosed that it did not expect to reach its own quarterly revenue guidance as a result of impact from COVID-19. Earlier this week HP, one of the biggest sellers of Windows PCs, said that corporate updates to Windows 10 could slip into future quarters.

"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 a statement. "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."

Windows OEM revenue, which derives from selling Windows licenses to device makers, includes licenses for commercial and non-commercial PCs. Revenue from licenses for commercial Windows devices represents 40% of Windows revenue, while revenue from licenses for non-commercial devices makes up about 20% of total Windows revenue.

At $10.75 to $11.15 billion, Microsoft's guidance for the segment for the quarter was wider than usual specifically because of the public health situation that had been emerging in China. The company did not issue updated guidance. It said the other guidance it had provided for the fiscal third quarter, which ends on March 31, still stands.

The More Personal Computing Segment accounted for about 36% of total revenue and about 30% of operating income in the fiscal second quarter. In addition to Windows and Surface, it includes PC accessories, gaming, search and MSN advertising.

Shares of Intel, whose chips go in Windows PCs, moved 1% lower in extended trading after Microsoft made the announcement. Shares of Windows PC maker Dell were also 1% lower.

Microsoft stock had declined 4.7% in the past week before the warning, while the Dow Jones Industrial Average has fallen 6.6% in the same period.