Tech companies feel growing impact of coronavirus outbreak

Major American tech companies are facing a new challenge as they take steps to grapple with the outbreak of the coronavirus in China.

In recent days, tech companies have closed stores and offices, restricted executives and workers from traveling to the country and warned about the potential effects on their supply chains.

The pneumonia-like disease has infected at least 17,000 people and has led to more than 300 deaths, all but one of which have been in China. The rapid spread of the disease has already had economic repercussions in China, where stocks dropped 8 percent Monday after markets reopened for the first trading session since Jan. 23.

Experts have warned that the outbreak in the world’s most populous country and an economic superpower could threaten global growth this year.

But the effects could be particularly felt by the U.S. tech industry, which has depended on China both as a major market for its goods and as a critical supplier of components for a number of consumer products.

Financial analysts at Goldman Sachs on Monday predicted Chinese gross domestic product growth would drop 1.6 percentage points compared to first quarter last year, which they estimate would slow growth 1 percentage point globally over the same period.

Producers of smartphones and other consumer electronics could face steeper hits from the loss of revenue and productivity, according to the firm’s equity research team. Beyond the factories in Wuhan, where the disease originated, manufacturing throughout China could be affected. The outbreak coincided with the Chinese Lunar New Year, which sees millions traveling throughout the country.

“I would guess that just about every factory in the great coastal manufacturing hubs of Guangdong Province and Shenzhen, the Shanghai — Suzhou — Nanjing corridor, or around Chongqing in Sichuan Province has some workers who went home to Wuhan or another contagion area for the holiday,” Willy Shih, a Harvard business school professor, wrote in Forbes.

Several tech companies quickly limited travel by their own employees, following a recommendation by the Centers for Disease Control and Prevention (CDC).

Facebook was the first major U.S.-based employer to halt travel. The company, which does not operate in China, suspended nonessential travel by workers to the mainland in accordance with the CDC guidance, a spokesperson for the platform told The Hill.

The company has also asked workers who have recently traveled to China to work from home.

Amazon followed suit, implementing some travel restrictions for employees going to and from the country.

Tech companies that have actual operations in China have had to take more stringent steps.

Microsoft issued a travel restriction and instructed its employees based in China to stay home as a safety precaution.

“The health and safety of our employees and their families is a top priority,” a spokesperson for the company, which has operated in China since 1992, told The Hill in a statement.

“Based on the evaluation of risk communicated by global health authorities we have advised employees in China to work from home and cancel all non-essential business travel until February 9, 2020.”

Google has also placed travel restrictions on flying to mainland China and Hong Kong and temporarily shut down its four offices in the country, a spokesperson confirmed to The Hill.

Travel restrictions to China are a significant burden for the companies, given the country’s role as the largest manufacturing hub in the world and a place where employees travel to frequently.

Apple went even further, shuttering its Chinese offices and all of its 42 stores.

“Out of an abundance of caution and based on the latest advice from leading health experts, we’re closing all our corporate offices, stores and contact centers in mainland China through February 9. Apple’s online store in China remains open,” the company said in a statement. “We will continue to closely monitor the situation and we look forward to reopening our stores as soon as possible.”

Tesla is closing its new plant in Shanghai until at least Feb. 9 at the recommendation of the Chinese government, the company said in an earnings call last week.

The coronavirus comes at a critical time for the tech industry, which ended 2019 on a positive note as President Trump saw his trade deal with Mexico and Canada approved by Congress, signed off on a “phase one” trade deal with China and struck a deal with France to delay an online tax that would have hit Silicon Valley’s biggest companies.

But the virus has brought new challenges to the industry. Social media companies in recent days have been struggling to crack down on a wave of misinformation on their platforms, including conspiracy theories about the origin of the virus and misleading health information.

And the longer the outbreak persists, the greater the damage to the industry’s supply chain and bottom line.

The coronavirus may impact the ability of China to meet its end of the phase one trade deal with the U.S. by boosting consumer demand, according to a S&P Global analysis published Monday. That could make it harder for tech companies to recover from the damages they suffered in the tariff war between Washington and Beijing.

Apple CEO Tim Cook on an earnings call last week spoke of the “uncertainty” over the virus and said the company was taking steps to address that.

“We do have some suppliers in the Wuhan area. All of the suppliers there are alternate sources and we’re obviously working on mitigation plans to make up any expected production loss,” Cook said, according to reports.

“We factored our best thinking in the guidance that we provided you. With respect to supply sources that are outside the Wuhan area, the impact is less clear at this time.”

https://thehill.com/policy/technology/481298-tech-companies-feel-growing-impact-of-coronavirus-outbreak

Haemonetics EPS beats by $0.18, beats on revenue

Haemonetics (NYSE:HAE): Q3 Non-GAAP EPS of $0.94 beats by $0.18; GAAP EPS of $0.58 beats by $0.01.

Revenue of $258.97M (+4.7% Y/Y) beats by $3.57M.

Press Release

https://seekingalpha.com/news/3537750-haemonetics-eps-beats-0_18-beats-on-revenue

Zimmer Biomet EPS beats by $0.03, beats on revenue

Zimmer Biomet (NYSE:ZBH): Q4 Non-GAAP EPS of $2.30 beats by $0.03; GAAP EPS of $1.54 misses by $0.13.

Revenue of $2.13B (+2.9% Y/Y) beats by $20M.

Press Release

https://seekingalpha.com/news/3537748-zimmer-biomet-eps-beats-0_03-beats-on-revenue

Centene EPS in-line, beats on revenue

Centene (NYSE:CNC): Q4 Non-GAAP EPS of $0.73 in-line; GAAP EPS of $0.49 misses by $0.06.

Revenue of $18.86B (+13.9% Y/Y) beats by $410M.

Press Release

https://seekingalpha.com/news/3537745-centene-eps-in-line-beats-on-revenue

France Investigates Sanofi Over Epilepsy Drug

Sanofi SA (SAN.FR) said Monday that its unit Sanofi Aventis France is being investigated by Paris prosecutors over its Depakine drug used to treat epilepsy.
The French pharmaceutical giant said the investigation is related to pregnant women suffering from epilepsy and using Depakine, which, when the treatment is suddenly interrupted, could cause birth malfunctions and risk the mother’s life.
The investigation will allow the company to defend itself and prove that it has fulfilled its duty of transparency, Sanofi said.

https://www.marketscreener.com/SANOFI-4698/news/Sanofi-France-Investigates-Sanofi-Over-Epilepsy-Drug-29937206/

Takeda sees surprise full-year operating profit on post-merger saving

Takeda Pharmaceutical Co Ltd expects to make an operating profit this fiscal year, compared with its previous forecast for a loss, thanks to sales growth in its core brands and savings from its purchase of Shire Plc, it said on Tuesday.

Japan’s largest drugmaker expects an operating profit of 10 billion yen ($92 million) for the year ending in March, versus its previous estimate for a loss of 110 billion yen, it said alongside its third-quarter results.
That compares with analysts’ average forecast for a full-year loss of 75.6 billion yen from a poll of 13 by Refinitiv.
“The way business is progressing, the way we are delivering our synergies and managing our margin is very encouraging for next year,” Takeda CEO Christophe Weber said on conference call.
Takeda surprised markets in May last year when it reversed its full-year profit forecast to a loss, citing costs linked to its $59 billion Shire deal. It later revised the forecast to a smaller loss on strong sales of its core drugs.
The Shire acquisition, completed in January 2019, expanded Takeda’s pipeline and diversified its global sales, with half now coming from the United States.
The drugmaker, now the 15th largest in the world by revenue, told investors in November it expected to launch 14 new products through fiscal 2024 that combined would deliver about $10 billion in peak yearly sales.
But while the Shire purchase gave Takeda global heft, it left the drugmaker with a large debt pile, which stood at about $40 billion at the end of December.
To pare down debt, Takeda has pledged to dispose of $10 billion worth of non-core assets.
It completed $7 billion of divestments in calendar 2019, including assets in the Middle East and Africa and a dry-eye drug sold for $5.3 billion to Novartis, Refinitiv data show.
The company’s 14 global drug brands saw sales growth of 20% in the nine months through December, led by ulcer drug Entyvio. Overall revenue jumped 83% to 2.5 trillion yen in the period, while operating profit slid 43% to 162.5 billion yen.
Takeda is focusing on five key business areas: oncology, gastroenterology, neuroscience, rare diseases, and plasma-derived therapies.
Takeda’s shares rose 0.9% in Tokyo before the release of the results, versus a 0.5% gain in the broader market.

https://www.marketscreener.com/TAKEDA-PHARMACEUTICAL-COM-6491073/news/Takeda-sees-surprise-full-year-operating-profit-on-post-merger-savings-29936283/

Hong Kong medical workers striking to demand closing border with China

More than 2,500 Hong Kong medical workers went on strike Monday morning, seeking to pressure the government to bar travel to the semi-autonomous city amid the ongoing coronavirus outbreak.
Chief Executive Carrie Lam’s government announced that it will close additional border checkpoints even as some strikers demand a complete shutdown, The New York Times reported. Lam reduced inbound flights, closed several checkpoints and shut down cross-border trains last week, as well as barring entry from Hubei Province, the epicenter of the virus outbreak, which she said has slashed arrivals from mainland residents by 62 percent.
However, Lam declined to impose a blanket ban on Chinese arrivals, saying it would be “a discriminatory approach” citing recommendations from the World Health Organization that noted blanket travel bans can make travelers harder to track.

“To use extreme means in such a sensitive time would inevitably affect the rights of the patient and add immensely to the burdens of the already beleaguered Hospital Authority leaders,” she added in reference to the striking hospital workers.
Members of the recently formed Hospital Authority Employees Alliance picketed public hospitals Monday morning before a meeting with a Hospital Authority official, where they said they were unable to reach an agreement.
“Our discussions have fallen apart,” Winnie Yu, the chairwoman of the union, said Monday, adding that the next stage of the strike will involve a work stoppage by emergency doctors and nurses beginning Tuesday and lasting the rest of the week.
About 9,000 of the union’s 18,000 members have signed pledges to strike.
In the meantime, many Hong Kong residents have expressed concerns that bans on Chinese travelers could affect them as well, citing the case of Vietnam, which initially included Hong Kong in a ban on most incoming flights from China and Taiwan before backtracking. Most of the cases of coronavirus in the city have involved patients who recently traveled to China but the most recent appears to have involved a woman contracting it from her son, who recently traveled to Wuhan, according to the Times.
https://thehill.com/policy/healthcare/481232-hong-kong-medical-workers-striking-to-demand-closing-border-with-china