Tech earnings kicked off in a week where President Trump made headlines for his revised policy on H 1B Visas. This isn't the first time the government decided to keep the fast-track approvals on hold but something that is usually done to clear the regular approval backlog.
This time is only different because unlike in the past when the order was always for a month or so, this time the period isn't mentioned. It's hard to tell the impact exactly, but the worst affected will be outsourcing companies that bring in international talent at short notice to service domestic demand. While companies hiring permanent workers for the long term will likely not be affected much, there is the fear that the order will ultimately lead to at least a partial immigration ban.
With that let's jump to the earnings-
Netflix NFLX : Netflix earnings renews the feeling of to believe or not to believe (in management strategy). Whether the strategy is succeeding is an open question: earnings beat the Zacks Consensus Estimate by a couple of cents on revenue that was slightly short of estimates; subscriber adds of 4.95 million were short of management estimated 5.20 million; cash burn was $343.9 million (that's up from 228.6 million a year ago, but if it continues at this rate, balance sheet cash will be used up in 4-5 quarters).
So of course Netflix is raising a billion dollars in debt (it says European markets have lower interest rates but this will increase cash burn). Management believes in original content: there will be 30 original movies this year with spending on original content to be $6 billion in 2017 plus another billion dollars on marketing.
International Business Machines IBM : IBM reported another quarter of revenue decline accompanied by an earnings beat . The business is now generally discussed in two segments, the first being its strategic imperatives (cloud, analytics, mobility and security) and the second being the traditional business. Since revenue declined again for the 20th straight quarter, it's clear that the new, higher-margin strategic imperatives business, although comprising 42% of sales, still doesn't offset the decline in the traditional business.
The positive take from the results is that revenue should accelerate through the rest of the year because of cloud agreements in the pipeline while related costs are expected to come down. These along with expected efficiencies will likely enable the company to generate stronger margins going forward.
Lam Research LRCX : Lam Research beat the Zacks Consensus Estimates for both revenue and earnings. Revenue, gross profit dollars and pretax income were up strong double digits from both the previous and year-ago quarters. The solid results were also backed with a robust outlook for the rest of the year. Spending trends are rational and strategic by management estimates and there remains significant opportunity in 3D NAND. Moreover, DRAM spending is also expected to double this year.
eBay EBAY : eBay beat the Zacks Consensus Estimates on both the top and bottom lines. The company has been investing in technology and artificial intelligence to improve the shopping experience on its properties. It has also taken action to reduce the sale of counterfeit items through eBay authenticate (items are reviewed by a network of professional authenticators before delivery and if still found to be counterfeit by the buyers, eBay undertakes to refund the whole amount).
The resultant increase in customer satisfaction may be partly responsible for the incremental 2 million active buyers last quarter. Starting in May this year, eBay will display fewer ads and more promoted listings in an attempt to drive traffic to the sellers using the platform rather than those merely advertising on it. This could encourage sellers to stick with eBay while increasing choice for buyers.
At the same time, it has increased take rates and reduced discounts for some sellers because to recover the cost of investment in new seller tools and technologies that will roll out through this year. The company said that revenue would grow 5-7% in the current quarter and 6-8% in 2017 (both on an FX-neutral basis).
Facebook FB F8
Facebook had encouraging announcements for its 100,000 odd developers at its annual F8 event.
Group bots and bot discovery : the company launched group bots through chat extensions so people can do simple things like watch a game or book a flight or a table inside Messenger. Bot providers include Kayak, OpenTable, NBA, Spotify, Food Network, Mastercard and so forth, so Messenger just got much more useful. It also introduced a bot discovery tab that helps users view recently used bots and search for others. This should make the bots more appealing and help them reach new customers.
Litho open sourced : The framework that Facebook developed for building better interfaces for Android is now open to developers so they can use it for other applications. Facebook continues to use the tech internally to improve Facebook for Android since the standard tools available from Android don't always provide the rendering required in apps where dynamic scrolling constantly surfaces new pieces of UI on the screen.
Facebook Analytics : The company's data tools are coming together under this head and will include a tool called Automated Insights that will dig into all the data it has on users to identify trends and behaviors that will facilitate decision making for businesses.
Brain tech : Facebook has a team of 60 engineers headed by Regina Dugan who came to Facebook from DARPA. The team is working on the possibility of technology that will automatically write what you intend to share through speech by scanning your brain 100x per second with the goal of producing 100 words per second. The reason this is so exciting is that this will be done simply by scanning and without any intrusive implantation.
Research and collaboration partners include UC San Francisco, UC Berkeley, Johns Hopkins Medicine, Johns Hopkins University's Applied Physics Laboratory and Washington University School of Medicine in St. Louis. And that isn't all: there is also tech that will enable people to hear with their skin by replicating the cochlea in the ear into frequencies that the brain can understand.
Facebook Spaces beta launch : The app allows up to four people to use their Facebook accounts to log in for chatting, drawing, watching 360 videos, making video calls on Messenger and taking VR selfies. VR is still in its very early stages and Facebook itself doesn't expect the technology to go mainstream until another 10 years, and of course there aren't many affordable devices enabling satisfactory VR experiences yet. So it's all very experimental at this stage but something interesting that the company is working on.
And finally, to help 360 content creation, Facebook announced that it would license two 360 camera designs (x24 with 24 cameras and x6 with 6 cameras) to select partners for shipment later this year. The cameras allow six degrees of freedom (DoF), which basically means that the VR experience appears real and continuous even when you move your head because the cameras capture more.
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