Tech co Q4 earnings: Being mobile wise & acquisition friendly

As the heavy hitters in the digital technology and media space, including Apple, Yahoo, Google, Facebook and Microsoft report their quarterly earnings, a closer look at the highlights reiterates that not all have got their future growth strategies in order.

Mobile matters
Google was slightly behind growth expectations due to declining ad prices and foreign exchange issues, cited by almost everyone (15 per cent in year-on-year growth). Google continues to struggle to monetise mobile, which has resulted in fewer advertising units in smaller screens not to mention cheaper inventory (a drop of 3 per cent on cost per click rates). Faced with increased regulatory scrutiny, particularly in the European Union, Google faces some serious challenges to keep its core business on track, which is an increasing necessity to fund all its ‘moonshots’. In contrast, Facebook continues to be the industry leader when it comes to mobile (nearly 70 per cent of its advertising revenue), which resulted in a staggering 49 per cent year-on-year growth rate. What is notable about the figures was the growth in mobile video viewing (three billion videos a day on Facebook), which bodes well for the company’s investment in online video advertising. As for Microsoft, it met expectations, which essentially were for a fall in quarterly profits. Sluggish comes to mind. New CEO, Satya Nadella, has a lot of work to do.

Apple: Splendid iSolation
Without a doubt the brightest star of the week. Absolutely crushed market expectations in Q4 2014 with new iPhones flying off the shelves (74.5 million), particularly in China (a 70 per cent year-on-year increase) where any direct threat from homegrown Apple look-a-like Xiaomi now seems like a stretch. To put things in perspective, a company once again written off in the press as being past its prime has now achieved the highest quarterly net margin in history (USD 18 billion) and has enough cash (USD 142 billion) stocked up that it could outright buy any of the 480 businesses that make up the Fortune 500… Not to forget that Apple Watch hasn’t even launched yet and Apple Pay is only getting started. Two things to ponder: what is Apple going to do with USD 142 billion in cash (the Beats acquisition only cost USD 3 billion), and will iPad sales (a drop of 22 per cent year-on-year) continue to diminish due to cheaper competition and/or people now using larger smartphones and, gulp, laptops. Yes, laptops are back. But Apple sells those as well.

Yahoo: A tale of two companies
Yahoo has been riding on the success of its twin investments in Chinese ecommerce giant Alibaba and Yahoo Japan. In fact, as reported by Forbes last year, Yahoo’s stake in those two entities was estimated to be worth USD 45 billion, more than its total USD 39 billion market value at the time. In other words, Yahoo on its own was worth less than zero, a reflection of a sustained and steady decline in its advertising revenue (a 4 per cent year-on-year drop), which has moved to rivals like Facebook and Google. With a declining stock price, CEO Marissa Mayer has been under pressure to show investors some return, and she has used this quarter’s earnings report to do just that. Yahoo will spin-off its remaining equity stake (15 per cent) in Alibaba into a separately listed investment company called SpinCo (yes, really), with Yahoo shareholders benefiting from the continued success of Alibaba without the perceived dead weight of Yahoo’s historical business. In theory, this will enable Mayer to focus on the Yahoo turnaround, which is actually showing some signs of light, particularly with Tumblr, the fastest-growing social network with scale (+400 million users) and BrightRoll, a premium video network, providing needed inventory to advertisers seeking to move TV spend online.

Via Digital Market Asia

Copenhagen INK

Lars is the owner of Copenhagen INK and is an experienced and passionate marketer with a proven track record of driving business impact through innovative commercial marketing initiatives.

You may also like...