Tim Cook admitted the pandemic, which has already infected 6,000 people and killed at least 132, is fuelling "uncertainty". Photo / AP
Tim Cook admitted the pandemic, which has already infected 6,000 people and killed at least 132, is fuelling "uncertainty". Photo / AP
It's not bad for a month's work. Since December 31, Apple's market value has surged by nearly US$90bn ($138bn) from US$1.3 trillion to US$1.39 trillion – a monthly increase equivalent to roughly double the total capitalisation of Barclays Bank.
A powerful New Year stockmarket rally has helped naturally, but Apple'sshare price was also pepped up late on Tuesday by something else: bumper holiday sales of its iPhones, AirPods and smartwatches which sent the group's first quarter profits rocketing to a record US$22.2bn on revenues of US$91.8bn.
For Tim Cook – who just a year ago was facing a mounting chorus of criticism over stagnating sales of the iPhone, especially in China – the company's latest results announcement must have felt particularly sweet.
Apple may not yet have a killer product to replace the iPhone waiting in the wings - but who cares when sales of its signature smartphone alone delivered a stunning US$56bn, up 8pc on the previous year and equivalent to 60pc of total revenues?
Apple's push into services and the launch of a new video streaming service represent part of Cook's strategy to cut the company's heavy reliance on sales of devices.
That business line delivered solid growth of 17pc to US$12.7bn – but this was slightly lower than some had hoped for.
It also remains a relatively small share of overall sales, partly because Apple is offering consumers cut-price subscriptions of US$4.99 per month as it seeks to crack into a market still dominated by Netflix, Amazon Prime Video and other rivals.
Either way, Apple's blowout results left shareholders grinning and a warm glow in the hearts of the company's executives at its swish donut-shaped Cupertino headquarters.
One potentially ominous cloud on the horizon comes in the form of what Xi Jinping has called the "demon virus" ripping through Wuhan and some of China's other big cities.
The crisis may be unfolding thousands of miles away across the Pacific Ocean, but Cook admitted the pandemic, which has already infected 6,000 people and killed at least 132, is fuelling "uncertainty" which is affecting Apple's operations in China – a key market both in terms of manufacturing and sales.
The virus was a key reason why Apple said it expected sales of between US$63bn and US$67bn in the first three months of 2020 – a wider than usual range.
Passenger from Beijing pass through a scanner as they are screened as part of measures to prevent coronavirus infection at Hazrat Shahjalal International airport in Dhaka, Bangladesh. Photo / AP
Coronavirus fallout
The coronavirus outbreak is already hitting sales and forcing Apple to shut stores, reduce opening hours and restrict staff travel to and within China.
China is Apple's biggest market outside the US while Wuhan is a major centre for the electronics industry and home to several of Apple's suppliers.
If the situation deteriorates further, it could force it to switch production to alternative suppliers to prevent supply chain disruptions.
"We're obviously working on mitigation plans to make up any expected production loss," Cook said on a conference call to accompany the results.
Currently, many Chinese factories are either closed or operating under limited production schedules because of the lunar New Year holiday.
That shutdown is set to persist for longer than usual this year with many expected to remain shuttered until around Feb 10 on government orders designed to control the spread of the disease.
Since smartphone manufacturers typically keep a few weeks of inventory on site, that in itself should not significantly affect production. However, a more sustained shutdown could start to impact Apple's supply chain.
Foxconn, a key supplier and China's biggest private sector employer with 1.4m staff, issued a statement on Wednesday insisting the situation was under control, saying: "We can confirm that we have measures in place to ensure that we can continue to meet all global manufacturing obligations."
Could it get worse?
In truth, nobody knows just how bad the coronavirus outbreak could get or how long the disruption could last.
But Apple is more heavily exposed than many other big global companies because of the heavy concentration of its manufacturing in the country.
There is a risk that the disruption could become significantly worse - as the virus spreads to other big Chinese cities such as Shenzhen and Shanghai, which play a more critical role in Apple's production process than Wuhan.
More than 56 million people are already facing travel restrictions in Hubei province, where the virus was first idenitifed.
Public transport has been suspended in Wuhan, a city of 11 million people and 17 other cities, with train stations shut, events cancelled and theatres and libraries closed.
If Beijing tightens these rules or extends them to other provinces, the economic impact across China could be chilling – for Apple and many other companies with supply chains deeply embedded in the world's most populous country.
