'Just about every vendor is pushing out delivery dates' - channel reacts as vendors reveal coronavirus impact

Partners wade in on why Microsoft and Nutanix both cited the coronavirus as the reason for revisions to their respective revenue guidance and the continuing lack of communication around supply chains

Vendors are beginning to push back delivery dates as a result of the coronavirus, partners have told CRN, as Microsoft and Nutanix become the latest vendors to warn of financial impacts.

Nutanix saw its share price crash over 25 per cent when markets reopened after it revised its revenue guidance for the fiscal year and postponed its recruitment drive in a Q2 earnings call. CEO Dheeraj Pandey attributed this to the current "murky" environment caused by the infectious illness.

Microsoft's share price had a less dramatic 4.5 per cent slip when it announced it expected to miss revenue targets for its More Personal Computing segment, which houses its Surface and Windows products.

"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," it stated.

"As a result, for the third quarter of fiscal year 2020, we do not expect to meet our More Personal Computing segment guidance [between $10.75bn and $11.15bn] as Windows OEM and Surface are more negatively impacted than previously anticipated. All other components of our Q3 guidance remain unchanged."

Partners reported that they have not experienced a decrease in demand from customers for both vendors' products, but speculated that this is likely a supply chain issue.

Alex Tatham, MD of Microsoft partner Westcoast, said that vendors are starting to push out lead times for products.

"I haven't got a magic wand here; we are encouraging our customers to carry on buying normally, but making sure that we'll be able to give some indications of delivery dates as they come, to buy things that are in stock as opposed to configure-to-order products that have to be made. We've got plenty of stock," he stated.

"We're seeing the supply side, ie the manufacturing side, affected. Just about every vendor is beginning to push out the delivery dates.

"The demand is there, so it's really a supply side issue."

Ian Nethercot, supply chain director at Microsoft partner Probrand, has also seen lead times "continuing to slip" which he has been told is a direct result of the virus outbreak. He said that the lowered revenue forecast from Microsoft isn't due to a decrease in demand but rather stock limitations.

He recounted a recent meeting with a vendor that told him that it is having problems with its logistics, where the vendor's products are in a transport hub in China, waiting to be exported but can't due to the travel restrictions in place to curb the spread of the virus.

"Even if the goods or materials are there, they just aren't being moved around as they should be," he said.

"In terms of product delay, they've actually got the product, they just can't get it exported into Europe or the UK."

Jonathan Lassman, director of Nutanix partner Epaton, said that he hasn't had any delays on orders so far, and was more dubious about the vendors' revisions.

"It's definitely not impacted us; 98 per cent of our business is in the UK, so the travelling and the fear, uncertainty and doubt isn't existing for us," he explained.

"It's not going to impact on our orders in the UK. It may impact on the backend if we're sourcing components out of China and they start to shut down production. But the reality is it's not going to stop the order book.

"I think, on a regional level, maybe it's convenient [for them]. I think Nutanix and Microsoft using coronavirus as a way to reduce sales expectations does seem like a smokescreen to ‘we haven't got our strategy right'."

No communication

At the beginning of this month, Proband's Nethercot told CRN that there hadn't been much in the way of formal communication from vendors about how the outbreak could affect supply chains He said that this has not changed despite the recent global surge in reported cases of the virus.

"We're starting to hear more, but in terms of official communication, it's still very limited," he stated.

"I believe that the vendors don't want to communicate too much about it because they're probably fearful of customers steering away from their products and their brand and buying other things.

"We hear more information where we're chasing them and say ‘look this product is on backorder, what's going on with this' and now we're starting to hear the reason is shipments delays due to coronavirus.

"But proactive information coming from higher up in the supply chain is extremely limited."

Nethercot added that he hasn't heard any more detail, other than "the coronavirus" - for example, whether components factories have been shut, whether there is a raw materials shortage or if it's a logistics problem.

"That kind of information is extremely hard to come by; they're using ‘because of coronavirus' which is pretty vague," he mused.

Westcoast's Tatham echoed this frustration at the absence of formal communication around supplies and logistics but said that due to the changing nature of the outbreak, there's "no point" in vendors trying to be definitive about progress.

"The difficulty is nowadays is that the situation develops almost hourly," he said.

"The situation is so fluid; they could put out a statement and it'd out of date within an hour. So they can't really get a definitive line out there because things change all the time.

"I think we'll have to be much more fluid about it and understand that there are going to be delays.

"You've got to go to your customers and say ‘there are potential supply side issues. However, here are some alternative products that are in stock you can have now'."

Probrand's Nethercot added that the coronavirus outbreak could lead to a turbulent few months for the channel: "The busiest time of year for the channel is February and certainly March, so it's certainly going to be a testing time for us really."