Apple AAPL was the star performer last week, but there were also other encouraging earnings reports from Twitter TWTR, Alibaba BABA, Expedia EXPE, etc. as well as other hot news.
Tech Earnings Pouring In
Apple: Apple reported another blowout quarter, with earnings sailing past the Zacks Consensus Estimate. And despite all the China macro concerns that have plagued other companies, Apple’s China sales grew 99%. iPhones continue to pull results, growing double-digits in both volumes and revenues. Mac sales were softer due to the sluggish PC market, although they too were up. Tablets, however, continued to decline double-digits.
Twitter: Social networking company Twitter beat the Zacks Consensus Estimateon both the top and bottom lines. But investors have just about had enough of the decelerating user growth rate, sending the shares crashing post-announcement. Engagement did improve in the quarter but pricing weakened. Moreover, guidance disappointed, indicating that management needs to do more. And fast.
Alibaba: Alibaba posted a solid quarter, beating the Zacks Consensus Estimate by 18.8%. The company fired on all cylinders, with both retail and wholesale businesses in China growing more than 30% year over year and particular strength in mobile. International growth was slower, but double-digit with cloud computing revenue growing triple digits. Net income soared over 600%.
Expedia: Expedia numbers disappointed, but management initiatives to boost growth through international expansion, acquisitions and investments in mobile were welcomed by investors. Similar to other U.S. tech companies, the dollar played a spoiler, but volume growth across both hotels, air tickets and rental car days were 30%+.
Corning: Corning GLW matched the Zacks Consensus Estimate on earnings but missed on revenues with management attributing the weakness to the stronger dollar and macro weakness in China. These two factors affected every segment of the business, but cost management enabled the company to report in-line results. The Optical business continued to do better than the rest and management said that GG4 was growing faster than expected.
Android, Chrome Getting Closer Together
It likely won’t be long before Android gets some Chrome features, people familiar with the matter tell the WSJ. Media reports are saying now that such a new OS could be previewed next year before an official launch in 2017. Alphabet GOOGL-owned Google is not commenting on “rumor or speculation,” but persons privy to the happenings say that the two teams have gotten closer together over the past two years. Indeed, they now have a common SVP in Hiroshi Lockheimer.
All sources say that neither OS will be killed off immediately. But there are positives in each that the other would do well adopting: in case of Chrome, it’s the automatic updates and strength in the academic segment and in case of Android it’s the world’s largest app ecosystem and user base.
Facebook Revamps Notification Tab
Facebook FB is making its Notification tab somewhat Googly. In addition to the likes and comments on your posts or those that you’ve already interacted with, it is adding other information you may be interested in. This could be information/updates regarding pages you’ve liked, friends’ birthdays and life events, or upcoming events you’ve joined. But if you share your local information, it will give you special treatment: weather alerts, local or community news, and also movies and places to eat near you (plus links to their Facebook pages that have reviews).
Facebook says that the changes were made in response to user demand, but it may be too early to comment on this. How this meshes with Google Now on Android or Siri on iOS is also something to think about, since it definitely looks like it’s headed in the same direction. It’s hard to imagine Apple and Alphabet’s Google sitting around and waiting for the Facebook assistant to take over.
|
Company |
Last Week |
Last 6 Months |
|
AAPL |
+0.35% |
-4.50% |
|
FB |
-0.19% |
+29.48% |
|
YHOO |
+7.36% |
-16.33% |
|
GOOGL |
+2.50% |
+34.36% |
|
MSFT |
-0.39% |
+8.27% |
|
INTC |
-2.98% |
+4.01% |
|
CSCO |
-1.70% |
+0.07% |
Other stories you might have missed–
Corporate
Microsoft Flagship Store: Microsoft has chosen New York City’s Fifth Avenue for its flagship store, a 5-storey building with each floor dedicated to specific activity. The 22,639 sq ft facility will be used to showcase all things Microsoft, whether it’s Xbox, Band, Surface, or video games.
The consumer gets the Microsoft experience from the large digital screens on the sides and back, the “living room” section in the front and new Microsoft products that can be touched or tried on. Go up one floor to play Xbox games, hang out or get your questions answered. The third floor is about the Dell-Microsoft combo experience with the next two floors being reserved for employees.
Microsoft Sells $13 Billion in Bonds: Microsoft raised $13 billion from the bond market last week with a Moodys rating of Aaa. The company said it will use the proceeds for working capital or to repay its existing debt or to repurchase shares. According to Bloomberg, the longest of the 7-part deal was for 40 years yielding 1.8X government debt.
Google Project Loon in Indonesia: Google is now in deals with Indonesian telecom companies Indosat, Telkomsel, and XL Axiata to launch its balloons over the 17,000 Indonesian islands. The rocky terrain and dense forests in the region make the Loon way ideal to spread high-speed LTE Internet access. This will reportedly be the largest deployment of Google’s balloons to date with the potential to reach 100,000 users over time. But the project won’t take off until next year with the telecoms testing the service and determining rates in the meantime while Google irons out technical details.
Google Fiber Expansion Plans: Alphabet, Google’s holding company is thinking of expanding Fiber Gigabit Internet to Jacksonville, Tampa and Oklahoma City in Florida. The choice of locations likely depended on their potential to develop into tech hubs, existing infrastructure and the local governments’ cooperation. Setting up Google Fiber is an expensive process, so Google has carefully considered the pros and cons before launching in any city.
New Technology/Products
Facebook to Use Slideshow Ads in Emerging Markets: Facebook has introduced a new ad format comprising a slideshow (5-7 slides) lasting up to 15 seconds that will replace traditional videos in places where connections are slow and data is expensive. It has also announced “2G Tuesdays,” which involves getting employees to spend part of their time on 2G speeds so they can appreciate the situation in markets they are targeting.
One of the launch partners was Coca Cola, which said that its slideshow ads in Kenya and Nigeria performed better than expected. The slideshow format takes over only when it detects a slower Internet connection, so people who pay a higher rate for faster data speeds will continue to be taxed with regular video ads.
Amazon VR: Amazon has filed a patent for a virtual reality glass/goggles that will reply on a smartphone or other device to process the images. Since Amazon already sells a ton of games and video, it could be thinking of 3D versions to complement this device and boost Prime memberships. But not much more is known right now, so it’s probably better not to play the guessing game and hope the devices don’t disappoint as they sometimes have in the past.
Amazon Shopping Channel: The media is now reporting that Amazon is likely using some technology it inherited from Twitch to launch its own shopping TV channel because consumers can use the touch interface to buy right off the screen. Earlier, Bloomberg reported that Amazon was thinking of its own TV channel and that it was in talks with NBC Universal and CBS to include their content. This is more along the lines of a regular TV channel and different from the on-demand video it calls Prime Instant Video.
M&A and Collaborations
Intel Buys Saffron AI: Intel has bought this startup, in which it has been one of several investors. The firm develops artificial intelligence with a difference: unlike the deep learning that Facebook and Google are investing in, Saffron’s technique is called associative memory. The company, which started out selling software to the Department of Defense, will help Intel embed artificial intelligence into chips for new devices, big data, cyber security, healthcare and IoT applications.
Intel-Oracle Tie Up: Intel’s x-86 Xeon processors have done well in the data center, but there’s still a segment of that market the company would like to grow into, and that’s the very high end. That segment is still dominated by IBM servers built on its own Power chips (IBM has exited all other hardware lines and is now focusing on cloud software and services). So Intel has tied with competitor Oracle to push common enemy IBM out of the space.
IBM and Oracle compete in both chips and servers, while all the three compete in chips. This background laid the foundation for Project Apollo, which is a joint effort by engineers from Intel and Oracle to develop competing silicon offering faster speeds.
Project Apollo has been hush-hush so far, but now the companies are saying that qualifying Power system users can check out a free proof-of-concept for a simple database migration to Oracle/Intel systems. For Oracle, this means lost revenue for its Sparc processor, but the company recognizes the importance of growing server market share at least, which is the reason for the alliance.
Intel/LG In Mobile Chip Deal: Intel and LG are collaborating in chips so the mobile device maker gets more leverage against Qualcomm. LG’s previous attempts have not been that’s successful, so it makes sense to go with a process leader that can also help the chip integration process. The chip isn’t likely to hit the market any time soon, but it’s a big deal for LG because it will reduce dependence on Qualcomm and it’s also a big deal for Intel because it offers another way of driving penetration in the mobile market.
Cisco Buys Lancope: Cisco will be paying the Alpharetta, Georgia-based company $452.5 million for its corporate network security products and employees. The two companies have worked closely together in the past, so integration shouldn’t be a problem. Cisco signaled its interest in security earlier with its $2.7 billion acquisition of Sourcefire in 2013.
The company’s traditional networking hardware hasn’t done well in recent times because of the market’s preference for lower-cost standardized hardware that is optimized, controlled and managed using sophisticated software. Cisco has developed its own products for the software defined networking or SDN space as it is called but hasn’t seen significant traction there yet. Security is an emerging area on the other hand and the number of data breaches in recent times has ensured increased demand for security products.
Google/IAC Renew Search Deal: IAC has renewed its search deal with Google, which will commence on April 1 2016 when the ongoing deal ends and extend to 2020. Google will serve results and ads on IAC properties and its partner sites and pay IAC a portion of ad revenue depending on whether they are displayed on IAC or partner properties and whether on desktops, mobiles or tablets. The deal is similar to the one signed with Yahoo earlier.
Some Numbers
IDC Market Share Stats: Recent numbers from IDC on smartphone and tablet market share are positive for Apple. The iPhone maker saw very strong growth of 22.2% in the third quarter remaining the second-largest player in the space. Samsung maintained lead but grew just 6.1%, Huawei was at number 3 growing 60.9%, followed by Lenovo (ex-Motorola) and Xiaomi with 11.1% and 5.6% growth, respectively.
In tablets, Apple remains the unquestioned leader despite the 19.7% decline in shipments. Samsung declined 17.1%, closing the gap a bit. They were followed by Lenovo (up 0.9%), Asus (down 43.4%) and Huawei (up 147.9%). Huawei’s strength in both categories is coming from the Chinese market and ASUS saw weakness in detachables that was partially offset by continued strength in low-cost Android devices.
Cisco Publishes Cloud Traffic Stats: Cisco’s Global Cloud index Report for 2014-2019 projects forecasts that global cloud traffic will more than quadruple in the forecast period, from 2.1 to 8.6 zettabytes (ZB), outpacing the growth of total global data center traffic, which will grow from 3.4 to 10.4 ZB. Cloud-reliant mobile devices, public cloud services for business, increased virtualization in private clouds and the growth of machine to machine connections were mentioned as the likely drivers.
Yahoo NFL Stream Viewers: Yahoo paid $17 million for live streaming rights to the NFL game on Sunday and said that 15.2 million people tuned in, of which a third were located outside the U.S. All ad slots were sold out at $100,000 a piece. Yahoo counts a view after 3 seconds, while standard TV viewing is counted by Nielsen as a view after a minute. Yahoo and the NFL said that 2.36 million people were viewing the event at any given time, much lower than normal TV viewership in the U.S. of similar games at 20 million viewers per minute. Still, it wasn’t too bad for a first-time effort.
Companies That Reported Last Week: Ametek, Western Digital, Seagate, Yelp, F5 Networks, Check Point, Equinix, Moodys are some other technology companies that reported last week.
Companies Reporting This Week: Facebook, Zynga, Activision, Groupon, King, TripAdvisor, CSC, NVIDIA, Symantec, Paychex, Paylocity, Dun & Bradstreet are some technology companies reporting this week.
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