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Apple and the coronavirus

Fully Charged
Bloomberg

Hey y'all, it's Austin. As the coronavirus continues to spread, Apple Inc. on Tuesday became one of the first tech companies to discuss the impact of the outbreak on its bottom line. During an earnings call, the company told analysts sales expectations were uncertain as a result, and Chief Executive Officer Tim Cook said Apple would be performing "deep cleaning" frequently on some of its stores on the mainland.

The call was a reminder of the wide-ranging repercussions of the virus, which at last count had sickened more than 6,000 people. Apple has located much of its supply chain in China, and is a bellwether for an industry that heavily relies on Chinese manufacturing. And, of course, it's not just tech bracing for an impact: Companies from Volkswagen AG to Starbucks Corp. have also had to make major concessions for safety.

The starkest sign of potential coronavirus fallout was seen in Apple's sales outlook, which Chief Financial Officer Luca Maestri indicated is expected to range between $63 billion and $67 billion next quarter. "The wider-than-usual revenue range represents uncertainty related to the recently unfolding public health situation in China," Maestri said. Already, Apple noted it has seen slower retail traffic in China over the past few days.  

Cook also said Apple will take several steps in response to the outbreak. Those include donating to groups working to contain the virus's spread; conducting temperature checks of employees in China; and limiting travel to "business-critical situations" in affected areas. Facebook Inc., too, has suspended nonessential travel to the country. And WeWork has closed some locations.

For Apple, the most significant challenge will likely be the upkeep of its supply chain in the country, where millions of workers at partner manufacturers such as Foxconn's Hon Hai Precision Industry Co. and Pegatron Corp. churn out products like the iPhone and Apple Watch for consumers around the globe.

Cook said that there are alternative sources for its suppliers in the Wuhan area. "We're obviously working on mitigation plans to make up for any expected production loss," he said. As for suppliers outside Wuhan, Cook said "the impact is less clear at this time," and acknowledged that some factories will be closed longer than usual for the Chinese New Year, reopening on Feb.10. 

Overall, despite the growing global anxiety about the spread of the disease, the tone of Apple's earnings call was buoyant—the company hit App Store milestones and beat revenue expectations for the quarter. Some analysts expected more attention would be paid to the outbreak on the call, but only a few minutes were devoted to talking about the business dynamics of the disease. The U.S. stock market, too, mostly shook off virus-related fears on Tuesday after a panicked start to the week. But in a world that's more interconnected than ever, Apple's response is a sign that no one is invulnerable. Austin Carr

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