The year has been a miserable one for the stock market thus far with oil, China, Europe, the stronger dollar all contributing to the feeling that there's no light at the end of the tunnel. But just as the one naughty child in a group of five makes all the noise and grabs all the attention, so it is with the stock market.
Companies like Twitter TWTR , for example, have been going downhill for so long that an analyst downgrade or two can only do so much more damage. But it immediately makes the headlines and affects market sentiments.
Then take a behemoth like Apple AAPL : so much as a sneeze from the CEO will send investors into a tizzy. So what if Alphabet GOOGL passed it in market cap for a few seconds? The game hasn't changed, has it?
But there you have it, that's the beauty of a hyper-volatile stock market that level-headed investors can exploit with the right tools.
So let's take a look at a few hard numbers (after all, we are in the middle of earnings season). Nearly 69% of technology companies in the S&P 500 have reported thus far, with 75% beating our estimates on earnings and 61% beating on revenues. This compares with the S&P 500 average of 69% and 47% for earnings and revenue, respectively. Not too bad is it?
Top earnings announcements from last week-
Alphabet : Alphabet's fourth quarter results beat the Zacks Consensus Estimate on both revenue and earnings. The company saw strength across the U.S., Europe and Other markets although the international businesses were greatly impacted by currency.
Pricing remains an issue in the search business and similar to last quarter, FX and lower-priced TrueView ads had a negative impact. But volumes surged, making up for the negative mix. The Other Bets business, broken out for the first time also grew. Capex will be up this year but so will share repurchases.
Yahoo : Yahoo YHOO reported fourth quarter earnings that missed the Zacks Consensus Estimate . The company wrote down goodwill by $4.6 billion, of which $1.2 billion related to acquisitions made by CEO Marissa Mayer.
The company previously announced a 15% reduction in its workforce and management commentary indicated that there could be further cuts if businesses underperformed. They seem to be focused on maintaining margins while investing in important areas like Mavens, so businesses that aren't yielding much are being severed. Only thing is, Mavens revenue growth continues to decelerate, partly on account of the search element, which is maturing.
Symantec : Symantec SYMC reported third-quarter revenue and earnings that were both ahead of the Zacks Consensus Estimate s. Both the newly formed Consumer Security and Enterprise Security segments declined but the weakness was more pronounced on the consumer side. A fresh $500 million investment by Silver Lake Partners helped the company announce a special dividend of $4 a share and $2.3 billion worth of share repurchases.
LinkedIn : The professional networking company LinkedIn beat the Zacks Consensus Estimate on both top and bottom lines. The company saw double-digit growth in cumulative memberships and even stronger increase in page views, indicating higher engagement. It is clearly seeing traction in mobile with 57% of member visits now from mobile devices.
Also look below the table for a recap of other news from last week, including Apple's Irish data center, executive departures, Amazon bookstores, an update on the Cisco-Arista lawsuits, Alphabet's new drone, Qualcomm's agreement with Intel and much more. Then there are the key numbers for the week to wrap up.
Last 6 Months
Other stories you might have missed-
Apple May Use Less AWS : A Morgan Stanley analyst sees Apple using less AWS capacity as it increases investment in its own data centers this year. The analyst expects Apple to build 2.5 million square feet of data center capacity for iCloud storage, iTunes, App Store and other services. It is in the process of building three data centers in Arizona (to start operation in 2016), and Ireland and Denmark (in 2017).
Meanwhile, Apple's Ireland data center has hit something of a snag as local people have objected on account environmental disturbances. The reviewing committee will reportedly give its final decision in June, so Apple's activities will be kept on hold until then.
Another Yahoo Executive Departs : The executive is Arjun Sethi, who joined Yahoo after selling his messaging startup MessageMe to the company in 2014. While at Yahoo, his team developed an unsuccessful app called Livetext through which users could soundlessly transfer live text and video. Sethi is joining venture-capital firm Social Capital Partnership as an investing partner.
Google Search Chief Calls It Quits : Long-time Googler and search chief Amit Singhal is leaving the company to pursue philanthropic dreams and his position is being filled up by John Giannandra, who joined Google through its acquisition of Metaweb Technologies in 2010. He head Google's artificial intelligence efforts including the email auto response, photo recognition and Google Now On Tap. Machine learning and AI are becoming more relevant to service search queries as Google's growth is increasingly tied to success in non-English speaking countries.
Alphabet Self-Driving Cars Enter More Cities : An Alphabet request to the Federal Communications Commission to renew a license to test radio transmitters in the 76 GHz range is being thought to be for its self driving cars. The request suggests that Google is seeking to extend the license for Mountain View and Austin, while adding four more cities. The names of the four cities haven't been made public.
Amazon Bookstores : A casual comment by Sandeep Mathrani, Chief Executive of General Growth Properties about Amazon's AMZN plans of opening physical book stores really got the rumor mill going. While the news wasn't confirmed by Amazon and led Mathrani to later modify his comment, enthusiastic bloggers ensured publicity. The WSJ said that there would be 300-400 stores with frills . They will also offer Amazon's other hardware like Kindle and Echo.
Autodesk Job Cuts : Autodesk is taking out 925 jobs or about 10% of its workforce as it plans to transfer its computer aided design (CAD) software to a cloud-based as-a-service model. Related pre-tax charges are expected to be $85-95 million that will result in cost savings in 2017 and beyond.
Citi Slashes Estimates on HP : Jim Suva of Citi says that HP Inc is likely to see continued margin pressure until there is more sustainable demand for computers and printers. Growth prospects are limited in the latter segment, which makes up 80% of the profit while contributing 40% of revenue. He expects price pressure to continue until earnings estimates are lowered to more reasonable levels.
Apple Contesting Ruling to Pay VirnetX : Apple has filed for mistrial in a case by Nevada-based patent troll VirnetX wherein it was asked to pay $625 million for patent infringement. The patent was filed in Tyler, Texas, which has a history of ruling in favor of patent holders. VirnetX doesn't make any products but generates revenue from litigation, so paying up in these cases is detrimental to consumer interest. Apple has alleged that the plaintiff's lawyers openly misinterpreted testimonies by Apple witnesses and argued on matters not presented in evidence.
Cisco Wins Against Arista : Cisco CSCO and Arista have been suing and counter-suing each other in a manner typical of technology companies. In this respect Cisco has said that "all patents we asserted against Arista were invented either by Cisco employees who became Arista executives, or by engineers who worked for Arista executives when employed at Cisco." An ITC judge found in this case that Arista infringed on three Cisco patents for software features used in its switching systems.
The ITC has the authority to ban import of products based on infringing technology, which can however be overturned in an appeals court, or by the U.S. President. Arista disagrees with the decision, but hopes to have modified technology out next quarter. It has earlier alleged that Cisco lures competitors to use the concerned technology as an industry standard and later claims that it is protected by copyright.
Instagram Video Ads Get Longer : Facebook is appealing to TV advertisers by extending the length of video ads on its Instagram platform to 60 seconds. The social platform now has over 400 million highly-engaged users, who can now be monetized better with the higher-priced video ads. This will also allow advertisers to use the longer-format ads they've already made for TV and YouTube, thus improving their ROI. It could be detrimental to user experience however, something that will likely unravel as more long-format ads get on the platform.
Microsoft Band 2 Updates : Following the fresh hardware with better display, memory, sensors, and most importantly, comfort, Microsoft has taken it a step further with the Browser agnostic Microsoft Health Dashboard. This enables you to share your workout, track your weight, enter power saver mode, set activity reminders and also use its tile-based approach to access things like news headlines and sports scores.
Alphabet Brings Free High-Speed Internet to Some : Last year, Alphabet signed on to President Obama's ConnectHome initiative that has set the goal of connecting 275,000 low-income households to the Internet and Alphabet now appears to be making good on that promise. The company has said that it will extend its high-speed (1Gbps) Internet to 1,300 public housing residents initially in Kansas City, KS and Kansas City, MO later extending it to all cities it takes Fiber to.
Alphabet's New Drone Project Called Skybender : Google has a solar-powered 5G Internet beaming drone in the works called Project Skybender, the Guardian has learnt. The company is using them at Spaceport America in New Mexico to test millimeter-wave radio transmissions, a spectrum that is less crowded simply because it is less effective. So the process is likely to be less energy efficient and more expensive, which are the challenges the company will have to tackle in addition to effectiveness.
Amazon Echo Now Offers Spotify : Spotify Premium users can now use Amazon's Echo to listen to music. They can select Echo from the devices enlisted within the app and then direct Alexa to do the rest, i.e., select by playlist, artist, genre and more from Spotify's catalog. For Echo users, this adds another service to a list that includes Amazon Music, Prime Music, iHeartRadio, Pandora and TuneIn.
M&A and Collaborations
Intel-Qualcomm Deal : Intel and Qualcomm have agreed to bury the hatchet in the larger interest, at least on certain matters. The two are now going to enable interoperability in the 802.11ad Wi-fi standard popularly known as WiGig. To demystify that, the Wireless Gigabit Alliance (WiGig) developed wireless technology of multi-gigabit speeds operating above the unlicensed 60GHZ band and certifies companies building on these technologies. But because there are proprietary aspects to the products thus designed, they aren't always interoperable, thus limiting their broader adoption. This is where the alliance will prove useful.
At the same time, it probably makes sense to keep in mind the limitations of the 60GHZ standard: the high frequency means shorter wave length, so transmission will be for shorter distances, thus limiting the application of the technology.
Cisco Buying Jasper Technologies : Cisco is forking out $1.4 billion in cash to acquire IoT platform provider Jasper Technologies. Specifically, the company enables customers to scale by managing their apps and monitoring usage as the IoT systems that install these apps connect to the cloud. Most importantly, Jasper's SaaS-based system already works with 27 service provider groups to serve 3,500 enterprises worldwide, significantly growing Cisco's reach in IoT.
Microsoft Acquires Swiftkey : Microsoft has acquired smart keyboard maker Swiftkey for around $250 million. While the company's popular application is installed on more than 300 million Android and iOS devices in 89 languages, Microsoft has already developed something similar in-house. The reasons for the purchase therefore aren't too clear, except that the company's most recent keyboard uses artificial intelligence, which may be of value to Microsoft.
Google Considering Qualcomm Server Chips : A Pacific Crest report created a bit of a stir last week as Brent Bracelin, the analyst covering Cloud, Analytics and Data Infrastructure said that Google might be considering using Qualcomm chips over Intel ones in its data centers. Google intends to spend $12 billion on capex this year, which the analyst feels will translate to a million server units with two Intel processors per unit. While he admits that Google is unlikely to transfer the entire business to the newbie, he places the incremental opportunity for Qualcomm at 8 cents bottom line impact. For Intel, the negative impact is estimated to be 10 cents.
But this isn't the first time that Google has publicly endorsed a competing technology. A report from IDG News Service points out a similar incident with IBM's Power server back in 2014, but that effort doesn't appear to have come very far. The point is, it makes sense for Google to expand beyond x-86 if only to second source. And if it doesn't work out cost-wise, it's still a good way to keep Intel on its toes.
Alibaba Invests in Magic Leap : Mixed-reality maker Magic Leap has just closed a $793.5 million funding round led by Alibaba and including investors like Qualcomm and Google. These two companies also invested in the prior funding round in 2014 when the company raised $542 million. Magic Leap appears to have made the greatest progress in developing VR technology. Its first product (still in the works) is a mobile and wearable device for the eyes, which will also use proprietary software.
IDC Reports Worldwide Tablet Shipments : IDC said that total tablet shipments in the December quarter continued to decline (13.7% year over year), pulled down by slate tablets which declined 21.1%. Detachables on the other hand, doubled from a year ago as customers appeared to be using them as replacements for PCs.
The strength was driven by iPad Pro and Microsoft Surface Pro. Amazon's latest Kindle was the hottest selling slate. The top vendors were Apple, Samsung, Amazon, Lenovo and Huawei with respective market shares of 24.5%, 13.7%, 7.9%, 4.8% and 3.4%.
Global Mobile Payments Spike : TrendForce says that 2015 mobile payments volume touched $450 million for the first time and estimates that it will grow to $620 million this year, or up 37.8%. In the next three years the growth rate will moderate to 25.8%, 19.2% and 16.1%, respectively to reach $10.8 billion by 2018. Apple Pay and Samsung Pay are expected to be the biggest drivers.
Wal-Mart Pay and Target Pay are expected to add to volumes. Meanwhile, Apple has said that its payments service can now be used in 2 million retail outlets and that its second half-2015 payments revenues doubled over the first half.
Gartner on Cloud Email Market : Of the 40K companies across the world that Gartner considered in its recent cloud email report, the research firm found that 8.7% used Office 365, 4.7% used Google Apps, with the balance relying on on-premises, hybrid, hosted or private cloud email managed by smaller vendors. Microsoft was more popular with big organizations (80% of companies with revenue over $10 billion) while Google was more popular with smaller companies (50% of companies with revenue below $50 million).
Some Companies Reporting This Week : Twitter, Groupon, Activision, Pandora, EFX, NetApp, NCR, Paychex, Cognizant, Fidelity, Akamai, DNB and Verisign.
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