Go on, show us your Faangs
Could the tail-risk of user disengagement and punitive regulation be lagging Facebook’s blockbuster earnings report?
How has Microsoft adapted to fight off the competition?
Is Apple’s record EPS truly indicative of its sales position?
Facebook returned blockbuster results, thanks to their virtual monopoly on small business advertising, believes Techeconomy founder David Kirkpatrick commenting for Bloomberg, “With Facebook, the numbers are going to continue to be great because advertisers don’t really have anywhere else to go.”
Revenue exceeded its internal forecast, at $16.91billion vs the $16.39bn predicted. Its user base was bang on the forecast of 2.3billion users. However there was concern about the company culture and its ability to manage the platform and user information responsibly; that the tail-risk of potentially mass disengagement might be lagging earnings.
Kirkpatrick commented that as along as advertisers continued to pay to use the platform, a boycott would not have a dramatic effect on revenue. However, he agreed that concerns about the tech giants’ power over individual data and their use and abuse of that privilege was a subject of discussion among government officials and business leaders at the Davos summit he had recently attended.
There was a widely held belief that there are major problems with the ethics of the business model the social media platforms are using; that they are sacrificing consumer rights for greater revenue. A recent scandal surrounded a covert data collection app Facebook was marketing at children as a ‘research app’. This led to a fallout with Apple, which revoked development credentials for the app.
Apple said in a statement, “Facebook has been using their membership to distribute a data-collecting app to consumers, which is clear breach of their agreement with Apple.”
Kirkpatrick confided that several governments including the US expressed the belief that it would be desirable for the technology and social media behemoths such as Facebook, Instagram and WhatsApp — now owned by Facebook — to be broken up into their smaller parts.
What’s with the big Apple?
Apple was upfront about missing its revenue targets for this year, with year-on-year growth down 5% at $84.3billion (3% according for foreign exchange). A number of factors were cited, including FX headwinds and supply constraints on certain products.
But predominantly — they said 100% of the yoy revenue fall — was caused by a slowdown across device sales in Greater China, down by $4.8billion from last year. The Chinese slowdown has been well documented and needs no analysis here but we can observe that it comprises 51% of annual global GDP so while not surprising it has had a dramatic effect on revenue, and both other companies seemingly factored into their risk assessment as it did not come as a surprise.
Apple also noted that quarterly iphone upgrades were lower than anticipated, and that changing the launch timing of the latest iphone model had negatively affected demand and sales. However, the company and its stock continue to perform strongly and reward its investors, with new records set in the Americas, Western, Central and Eastern Europe; and the Eastern Pacific segment.
“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” said Tim Cook, Apple’s CEO. “Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”
Luca Maestri, Apple’s CFO said, “We generated very strong operating cash flow of $26.7 billion during the December quarter and set an all-time EPS record of $4.18,” said. “We returned over $13 billion to our investors during the quarter through dividends and share repurchases. Our net cash balance was $130 billion at the end of the quarter, and we continue to target a net cash neutral position over time.”
Apple announced a dividend of $0.73 per share, payable on November 15, 2018 to shareholders of record as of the close of business on November 12, 2018. In total it boasted a return of over $23billion in dividends and share repurchases in the September quarter, bringing total capital to $90billion.
It’s coming home for Microsoft
Microsoft has assimilated all the big technology trends for its different product divisions and is a market leader in key areas.
AI and automation have powered not only an enhanced user experience, with learned preferences which inform personalised time-saving features… they have delivered an industry first with the ‘Power Platform’, part of enterprise package Dynamics 365, which allows anyone in the organisation to build an app to manage workflow.
The Power Platform is apparently the only low-code or no-code app development platform with self-service analytics, and robotic process automation. Another new capability is inventory tracking, presumably utilising blockchain technology or a private chain “to manage inventory in real-time from shelf to warehouse to farm”.
Dynamics 365 grew 51% this quarter, contributing in large part to the 19% increase in revenue; and a 29% increase in operating income, of which a significant portion was paid out in the $6.1 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2019, an increase of 27% compared to the first quarter of fiscal year 2018.
Its major new consumer features are its AI capabilities, including real-time meeting transcriptions, enhanced search experiences and other personalised items such as proactive Cortana remarks. Microsoft is working hard to eliminate the need to remember passwords, with new capabilities which span multiple devices and draw on existing identification procedures like fingerprint scanning and other biometric methods.
It is also making major inroads into the cyber security arena, drawing on the scale of its operations — for example, it scans 400billion emails for malware every month — “Massive signals” that “generate insights which fuel security innovations for customers.” The new security scorecard for organisations yields a dynamic dashboard rating their security performance. Microsoft itself targets four key areas of cyber security practice: identifying threats, informing the cyber vigilance community, device protection software, and threat analysis