Apple Down 2% Following Foxconn’s 90% Q1 Net Income Drop
Given its supply chain dependence on China, Cupertino tech giant Apple Inc took some of the biggest shocks to its manufacturing and operations following the outbreak of the coronavirus in China last year and the resulting lockdowns that paralyzed economic activity in the East Asian country early this year. Apple's revenue and net income dropped significantly in the company's second quarter of the fiscal year 2020, and despite some belief that the worst might be behind it, investors were graced with another shocking report earlier this month from KeyBanc.
The bank's data showed that during the month of April, Apple's iPhone sales dropped by a staggering 77% from the month before. This fact nipped any ray of optimism for investors and management following an easing of lockdowns in China, and today's earnings results for Apple's primary manufacturing partner Foxconn (Hon Hai Precision Co Ltd) paint an equally depressive picture.
Apple Down In Premarket Trading As Foxconn Reports Staggering Year-Over-Year Net Profit Drop
At the end of business hours today in China, Foxconn reported its earnings results for the first quarter of the calendar year 2020. During the three months ending in March, which bore the brunt of the coronavirus' impact, the contract manufacturer has reported a 12% year-over-year drop in revenue and a shocking 90% year-over-year drop in net profit (net income). During the quarter, Hon Hai earned $70.3 million in net profit and $31 billion in revenue. Estimates for revenue are based on monthly revenue figures available on Hon Hai's website and converted using the exchange rate at 10:57 am UTC.
February was the worst-hit month for Foxconn, as the company's revenues dropped by 18% year-over-year. The worst seems to be behind Foxconn for now, since its revenue in April has mostly recovered the significant drops exhibited in the previous months, by standing it at NT$ 381 billion in a 0.3% drop.
Foxconn expects that revenues during the current quarter will grow over the previous, but it also cautions that they will still continue to drop year-over-year. The gloomy outlook isn't the first of its kind shared by a company. Earnings reports from Nintendo and Sony Corporation have carried similar sentiments, with Sony sharing its belief that the coronavirus will be behind us only by the end of the current calendar year.
And while Foxconn expects enterprise and computing to post 15% quarterly revenue growth in the current quarter and 10% annual revenue growth, the company's management has also honestly accepted that consumer electronics are headed for a record drop in revenue this year. According to the details, the manufacturer expects the division (which includes smartphones and other gadgets) to post a 15% annual revenue decline this year owing to an overall drop in purchasing power following the restrictions in economic and other activities following the coronavirus outbreak.
Echoing sentiments shared by its corporate counterparts in Asia and North America, Foxconn also abstained from providing guidance for the full year 2020. And while life is resuming in China, Europe and North America continue to battle with negative public sentiment for lockdowns and the need to ensure that medical facilities are not overburdened with patients.
Shares of Apple Inc closed 0.61% higher over Wednesday's close yesterday, and they are down by 2.2% in pre-market trading today on 7:26 am ET, after Foxconn's earnings report and outlook for consumer electronics. Apple, which had been preparing for a massive 5G iPhone launch later this year should undoubtedly be at odds internally on whether to proceed with upgrading the iPhone or whether to take a step back.
If the current situation persists, the world's largest tech company might have no other choice then to bite the bullet and take a conservative approach in regards to its smartphone upgrade.
Stay in the loop
GET A DAILY DIGEST OF LATEST TECHNOLOGY NEWS
Straight to your inbox
Subscribe to our newsletter