Google will close its Chinese offices in response to the coronavirus outbreak. Will the disease impact the company's fourth quarter result?
Google-parent Alphabet Inc. (NASDAQ:GOOGL) is the latest American tech company to scale back operations in China on the back of the growing Wuhan coronavirus outbreak.
The disease, provisionally known as 2019-nCoV, has spread to 16 countries with over 7,000 confirmed cases in China alone.
Although Google doesn’t operate its core web services in China, the company has four offices in the country and works with Chinese suppliers on hardware like Google Pixel and Google Home speakers.
Alphabet’s fourth-quarter earnings report is scheduled for Feb. 4, and investors still anticipate growth despite these challenges.
Alphabet isn’t the first American tech company to scale back its Chinese operations. Earlier this week, Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) announced employee restrictions on doing business in China. Apple, which depends on China for its iPhone supply chain and a huge percentage of revenue, will still be conducting “business-critical” operations in the country.
So far the coronavirus’ economic impacts have not shown up on tech company earnings reports. Apple released its Q1 results on Jan. 28 with better than expected top and bottom-line numbers. But because the company’s fiscal 2020 Q1 represents the three months ended Dec. 28 2019, investors can expect to see the full coronavirus impact revealed in the Q2 result.
Alphabet is slated to report its Q4 fiscal 2019 on Feb. 3 – and, like Apple, the coronavirus impact may not show up in that quarter. Investors should also note that Google, and its video platform YouTube, are currently blocked in China. But there is speculation that the company may be planning to re-enter the market through a censored search engine.
Google’s Chinese offices are already closed for the extended Chinese Lunar New Year holiday. The Chinese government extended the holiday, which should have ended on Monday, to encourage people to stay home and slow the spread of coronavirus.
Chinese authorities have also closed the Shanghai and Shenzhen stock exchanges with trading expected to resume on Feb 3.
In addition to keeping offices closed, Google will place business and travel restrictions on mainland China and Hong Kong. It’s also encouraging its employees currently in China to return home. This is in addition to self-quarantining themselves by working from home for at least 14 days after leaving the country.
So far, Alphabet’s stock hasn’t reacted to the news. Shares remain flat as of the market close on Jan. 29. Chinese equities are also flat as the market becomes increasingly satisfied with the Chinese government’s response to the crisis. Both tickers still trade below weekly highs.
This article was edited by Sam Bourgi.