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Technology Round Up - February 4, 2014
Bitcoin’s Growing Acceptance
Peer-to-peer payment system and digital currency, Bitcoin, has benefited from increasing acceptance in recent months. Bitcoin was originally created as open source software in 2009, and uses cryptography to control the creation and transfer of money. It has experienced growing acceptance as a form of payment in recent times. Merchants have an incentive to accept Bitcoin, as transaction fees are lower than those usually imposed by credit card processors. A number of large establishments now accept Bitcoins. This includes the Sacramento Kings (the National Basketball Association franchise), online retailer Overstock.com (OSTK), and social games provider Zynga (ZNGA). Virgin Group subsidiary Virgin Galactic also accepts the digital currency. Social news and entertainment Web site Reddit, along with online dating and social networking site OKCupid, accept Bitcoin, too.
Bitcoin has increased dramatically in price since early in 2013. However, commercial use of Bitcoin remains relatively small, in comparison to its use by speculators. This has resulted in considerable price volatility, which undermines its ability to act as a currency. Moreover, it has been subject to government scrutiny resulting from links to criminal activity. Bitcoins can be stolen, and chargebacks are not possible. In addition, certain countries may believe that the digital currency is being used to circumvent capital controls, and may attempt to increase restrictions on its use.
A number of technology companies have reported earnings recently. eBay (EBAY), for one, posted healthy results. Revenues and share earnings of $4.53 billion and $0.65, respectively, increased nicely from the prior-year figures. PayPal benefited from growing momentum in its merchant services business. Net total payment volume increased 25% for the December period. PayPal gained 5.2 million active registered accounts, to finish the year with 143 million. Meanwhile, gross merchandise volume advanced 13% at the Marketplaces line. This business gained 4.5 million users during the period, to finish 2013 with 128 million.
Netflix (NFLX) also finished last year on a positive note. Revenues of nearly $1.2 billion increased roughly 24%. Share earnings of $0.79 were a considerable improvement over the $0.13 generated in the fourth quarter of 2012, and surpassed consensus expectations, too. The company’s domestic business continued to benefit from the popularity of its streaming offering. The international operation experienced strong growth in members and revenues for the period, and a lower contribution loss, as well. Efforts by Netflix to develop its own original content also appear to be contributing.
Meanwhile, Microsoft (MSFT) exceeded investors’ expectations with revenues and share earnings of $24.5 billion and $0.78 per share for the recent quarter. The company’s Devices & Consumer segment benefited from the introduction of next-generation game console Xbox One and greater demand for a variety of tablet products under the Surface brand. Office revenues declined, though much of this was the result of users moving to Office 365. Elsewhere, the Commercial Segment posted good results. Here the company has gained from an improved spending environment and the move to system virtualization and the adoption of cloud services.
Elsewhere, Facebook (FB) reported revenue of nearly $2.6 billion, a year-over-year advance of over 60%. Share earnings of $0.20 improved considerably from the $0.03 earned in the prior-year period. Monthly active users were 1.23 billion, a year-to-year increase of 16%. Mobile monthly active users advanced 39% year-over-year, to 945 million. Mobile advertising represented roughly 53% of total ad revenue for the December period, compared to 49% in the September quarter.
In addition, Google (GOOG) posted revenue of $16.9 billion for the fourth quarter, an increase of 17%. Earnings per share advanced 14%, to $9.91. The company benefited from strong growth in paid clicks, which were up 31% in the recent period. This drove healthy ad sales, despite declines in the costs per click metric.
Last but not least, shares of Amazon.com (AMZN) sold off after the company reported its fourth-quarter results. Revenues of $25.6 billion advanced 20% over the prior-year figure, but fell short of our estimate, suggesting a weaker-than-expected holiday season. Moreover, share earnings of $0.51 were well shy of expectations, due to ongoing investments in infrastructure and technology. Disappointing earnings guidance for the first-quarter also discouraged investors. The company’s ongoing focus on its investment initiatives should continue to weigh heavy on the bottom line. Operating income is expected to range between a loss of $200 million and a gain of $200 million for the March period.
Google to Sell Motorola to Lenovo
Google has agreed to sell smartphone unit Motorola to Lenovo (LNVGY), the Chinese technology company, for roughly $2.9 billion. Motorola has been unable to gain traction in the rapidly changing smartphone market in recent years. Even so, Google appears to have gotten what they wanted from Motorola. This includes patents, engineering talent, and greater knowledge of the mobile device market. Lenovo expects this acquisition will make it a strong global competitor in the smartphone market. It will look to make Motorola an important player within the Android ecosystem.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.