Earnings took center-stage last week, since most technology bellwethers like Apple AAPL, Facebook FB, Amazon AMZN and Microsoft MSFT announced other results.
The rest of this roundup covers tidbits like Facebook’s new ride-sharing technology, its live video service across the U.S. and its ad network going mobile. In case of Alphabet GOOGL, there was an interesting agreement that could bring AI to the smartphone, its moving against Oracle ORCL in court and its self-driving car appeal to California’s Department of Motor Vehicles. And as always, there’s also an assortment of the key numbers announced this past week.
So here are the top stories-
Earnings
Facebook: Facebook’s fourth-quarter earnings soared 84% over last year, blowing past the Zacks Consensus Estimate. Driving these results was revenue growth of around 60%, which was in turn driven by mobile ad revenue of 81% (total ad revenue grew 66%). Monthly active users (MAUs) and mobile MAUs were up a respective 14% and 21% in contrast, underscoring strength in pricing.
High engagement, broad reach and effective measurement tools are the reasons advertisers like Facebook. The company has really doubled down on its video efforts and it is widely believed that a Facebook service like YouTube is in the making. Forrester Research projects digital video ad revenues to touch $12.6 billion by 2019. Zuckerberg said on the call that users are currently watching 100 million hours of video a day.
Apple: Apple’s quarter was more or less as expected, with the company managing to beat earnings estimates while missing on the top line. Similar to most other technology companies, Apple was negatively impacted by FX. iPhone sales (more than two-thirds of the business) were more or less consistent with year-ago levels. The rest of the revenue was split in four: iPad sales dropped double-digits, Mac sales dropped low single-digits, and Services and Other Products grew strong double-digits. China grew just 14%. So basically, the traditional hardware business was disappointing while other areas of the business were encouraging.
Amazon: The leading online retailer grew revenue 21.9% and earnings 122.2% from last year, but the results still fell short of the Zacks Consensus Estimate. FX was a net positive for the quarter. The fourth quarter was more about retail as may be expected, so AWS share of revenue shrank a couple of points, but still ended up contributing 39% of profits. Importantly, global Prime subscriptions grew 51%. Amazon really piles on the goodies for Prime subscribers, which also tend to spend more, so it has a good history of retaining these profitable high-volume consumers.
Microsoft: Microsoft’s second-quarter earnings beat the Zacks Consensus Estimate by 13.0% although revenues missed by 5.1%. Macro concerns in China, Japan, Russia and Brazil persisted. Overall, the Productivity business performed in line with guidance, Intelligent Cloud better than guided and More Personal Computing much better than guided. Microsoft’s cloud offerings are closely tied with its other offerings, so it will continue to see synergies going forward. Windows 10 is already a big positive for its search business and the OS itself will start contributing once the free period is over and enterprises also start buying. Xbox is really not exciting at the moment despite the seasonal strength in the last quarter as XB1 is clearly losing out to Sony’s PS4.
Electronic Arts: Electronic Arts’ solid third-quarter earnings beat couldn’t stop its shares tanking as a result of its disappointing guidance. The fact that physical sales of Star Wars: Battlefront did better than digital sales (with the corresponding negative impact on margins) couldn’t have helped either. Both physical and digital sales grew double-digits however, typical for the seasonally strong quarter. While mobile games also grew, subscriptions, advertising and other declined.
|
Company |
Last Week |
Last 6 Months |
|
AAPL |
-4.27% |
-19.75% |
|
FB |
+14.57% |
+19.16% |
|
YHOO |
-0.81% |
-22.00% |
|
GOOGL |
+2.12% |
+15.66% |
|
MSFT |
+5.34% |
+21.48% |
|
INTC |
+3.66% |
+9.41% |
|
CSCO |
+1.80% |
-15.67% |
Other stories you might have missed–
Corporate
Apple R&D Complex in San Jose: The San Jose City Council has approved Apple’s building 4.15 million square feet of office space on an 86 acre property near the airport. Christina Rapse, senior director of real estate for Apple reportedly said, "We’re still studying the site to determine the best use for us. At this point, it looks like it will be office and R&D".
Facebook Hires Ex-Twitter Executive: Kevin Weil, who headed Twitter’s Product development efforts will move to Facebook’s Instagram to operate in a similar capacity, according to a person familiar with the matter.
Facebook Irish Data Center Details: Facebook plans to build its second European data center in Cloney, Ireland to help it meet its clean and renewable energy goals. On the one hand it will make use of available wind power in Ireland and on the other its Open Compute Cloud server and storage hardware to reduce power requirements. The data center will start operations by 2017-end or early 2018. Facebook’s goal is to get 50% of its infrastructure on renewable energy by 2018.
Yahoo Shuts Down Mexico, Argentina Ops: A memo to company employees confirmed by a Yahoo spokeswoman said that the company was shutting down its offices in these under-performing markets. There were no details on plans for other markets or the number of job cuts/resultant cost savings in these markets. Recode mentioned unnamed sources as saying that Yahoo had an Invest/Maintain/Kill strategy in place, wherein search was in the “invest” bucket, Yahoo Finance in “maintain” and international operations in “kill”.
More Investor Advice For Yahoo: New York-based SpringOwl Asset Management managing director Eric Jackson is the latest with an opinion on how Yahoo can drive value for investors. Jackson said that Yahoo could benefit from a Buffet-like strategic investment and such a member on its board. He pointed to Goldman Sachs which saw a $5 billion investment from Warren Buffet.
Legal/Regulatory
Alphabet On Autonomous Car Regulation: California’s Department of Motor Vehicles organized an event for autonomous cars, at which Google representative Chris Urmson had a few things to say. According to Urmson, fully automated cars could be made safer than those where the user could take control as they didn’t always do it well.
An Alphabet-funded study in 2014 by Duke University researchers studied human interaction with machines and found that once the persons were reasonably certain of the machine doing its job, they switched off. The attention span of long-distance drivers was found to wane after 21 minutes. This may explain the reason.
At any rate, Alphabet’s self-driving cars had 272 problems in test driving last year, of which 13 could have been accidents without human intervention. So the Department is likely to stick with its Dec 2015 preliminary rules that require a driver to take control when required.
Google Wants Sanctions Against Oracle: Google is asking the court for permission to file a motion against Oracle for violating a protective order covering sensitive financial information about itself and its partners. It is also asking that the Oracle lawyer be denied access to its confidential information or that related to a third party.
Oracle let out that Google’s default search on Apple devices cost it a billion dollars in 2014 in drawing an estimate of Android’s earnings. Oracle is trying to make Google pay for the use of a miniscule amount of Java code in Android. The courts have already ruled that Google copied the code.
The question being decided now is whether it was “fair use.” Google doesn’t charge for Android but monetizes through a bundle of apps that comes with it, so it’s a very complicated case and could be rather difficult for Oracle (or the courts) to estimate damages to Oracle.
New Technology/Products
Facebook Patent for Ride-Sharing Tech: Facebook is beefing up its Events page. In a recent patent filing the company seeks to add detail to its response options. While the current options include “Going,” “Not Going” and “Interested,” the patent seeks to add “Going and Driving” and “Going but not Driving” sub categories to the “Going” response.
The people driving can then arrange to pick up friends and people that Facebook data mining suggests have similar interests. The people not driving can also select the drivers similarly.
It doesn’t stop there: Facebook is arranging for turn-by-turn instructions and suggesting a route so the driver can pick up his companions conveniently on the way to the event. This definitely makes Facebook more useful and may be an alert to current ride hailing services.
Facebook Live Video In the U.S.: iPhone users in the U.S. will now be able to live stream video on Facebook. The company hasn’t ruled out the possibility of the service going to other platforms and geographies, but for now, it’s an iPhone advantage. This could be a very big deal for Facebook going forward, helping to increase engagement and grow advertising revenue. Video ads are more lucrative for the distributor, so Facebook has been improving its video capabilities. Doing a live stream also takes the video to the timeline, thus making it easily accessible in the future.
Facebook Ad Network Goes Mobile: The mobile web is sure getting more important. Google has been driving companies to create mobile friendly sites and it also has a technology to speed up page loading. Its interest is obvious: Google wants to get more people to the browser because it helps to keep them using its own services. Now Facebook is also paying attention to these content providers.
The company announced last week that it’s Audience Network that previously catered to mobile applications only, would now sell ads on mobile websites as well. The WSJ quoted a June 2015 comScore study as saying that 93% of visits to 25 news publishers came through mobile web browsers with the mobile web accounting for 55% of time spent.
This explains the renewed interest from Facebook, as it’s a lot of eyeballs to monetize. Facebook says that the publishers that have already tested its service include Hearst, Slate, Answers.com, Elite Daily, Diply, Cracked, Vuclip, La Place Media, USA Today Sports Media Group and Time Inc.
Microsoft News App for iOS: Microsoft Garage, a motley crowd of Microsoft employees, has a new app for iOS that resembles Apple’s own news app. So if by any chance an iOS user wants to try out the service, it can offer sector or interest-specific stories as pulled up by its Bing search engine. It also requires you to log in through a social network like Facebook or LinkedIn so it can use your preferences and things you liked on the social networks to customize your experience.
Google AI for Smartphones: Google is deepening ties with Project Tango chip supplier Movidius. The company has announced that it will use Movidius technology in new machine learning solutions that will be embedded in smartphones.
The idea presumably is to speed up capabilities like speech and picture recognition currently available on these devices by localizing the processing on the device itself. This should also increase energy efficiency so batteries don’t get run down and enable offline intelligence (since the information doesn’t need to be processed in the cloud).
M&A and Collaborations
Apple Acquires Learnsprout: Apple hasn’t mentioned what it paid for this educational technology startup, but it’s likely to enhance its offerings and market in education. Learnsprout’s software is currently used in over 2,500 school districts in 42 U.S. states. The company has raised $4 million from investors including Andressen Horowitz.
IBM, Western Digital Patent Agreement: Western Digital has acquired more than 100 IBM patents in distributed storage, object storage and emerging non-volatile memory segments. The companies also simultaneously entered into a cross-licensing agreement. Other details of the transaction weren’t made public.
Some Numbers
IDC on Smartphone Shipments: IDC has named the top 5 vendors for both the fourth quarter and 2015. For the quarter, Samsung retained top spot with 21.4% share (up 14.0%) with Apple a bit short of that at 18.7% (up 0.4%). Three Chinese companies made it to the top 3: Huawei growing 37.0% to 8.1% share, Lenovo growing an even stronger 43.6% to 5.1% and Xiaomi 10.0% to 4.6%.
For the year, Huawei grew the strongest (up 44.3% for 7.4% share), Lenovo was second (up 24.5% to 5.2%), Xiaomi third (up 22.8% to 4.9%), Apple fourth (up 20.2% to 16.2%) and Samsung fifth (up 2.1% to 22.7%).
Motorola saw significant declines, pulling total Lenovo (including Motorola) sales down 18.1% in the quarter and 21.1% in the year.
Google Cardboard VR Sales: Google announced some numbers for its VR unit formed early this year. It has shipped 5 million Cardboard VR viewers. Users have watched 350K hours of VR video on YouTube and taken 750K VR photos using the viewer.
Top Tech Lobbying Costs In 2015: Alphabet was the leader, having spent $16.66 million, followed by Facebook, which spent $9.85 million, Amazon $9.07 million, Microsoft $8.49 million and Apple $4.48 million. The numbers were compiled by Statista. Lobbying is what companies spend to influence people in government to legislate or decide in their favor. The amount spent by the big five is miniscule compared to their revenue or profits.
CIRP Estimates on Amazon: A new report from Consumer Intelligence Research Partners (CIRP) estimates that there are currently 54 million Prime members in the U.S. with 47% of Amazon shoppers having subscribed to the service. Members’ average spending is $1100 a year compared to $600 for non-members. Prime memberships are still growing double-digits (up 35% in December according to CIRP).
Amazon Payments Transactions Volume: Pay With Amazon, which is an alternative to services like PayPal, Apple Pay and Samsung Pay, seems to have had a good 2015. Amazon has said that the service grew 150% in 2015 with the number of merchants using it growing 200%. The average order size processed by Amazon Payments was $84, with Amazon charging 2.9% of order value +30 cents. Significantly, 23 million Amazon customers have used the service on non-Amazon sites, thus enabling Amazon to make money out of sales on competing sites.
Other Companies That Reported Last Week: Texas Instruments, Corning, Alibaba, SanDisk, Western Digital, Seagate, CA Inc, Juniper, Check Point, Fortinet, VMware, EMC Corp, Harman and Qlogic.
Some Companies Reporting This Week: Alphabet, Yahoo, Symantec, LinkedIn, NXP Semiconductors, Roper, Fiserv, Advanced Data Processing, ENR, Moody’s, Changyou, GLU Mobile, Take Two, Teradata.
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