There have been many noteworthy developments in the technology space recently. Some of these will likely have a material impact on the companies in the sector and the markets they serve.
Noteworthy Earnings Announcements
A number of companies have recently announced their March quarter earnings. Amazon.com (AMZN) posted revenues of $19.7 billion, an advance of roughly 23%. Operating expenses increased at about the same pace. Still, share earnings grew nearly 28%, to $0.23. Regardless, the stock sold off following the announcement. Investors appeared unnerved by Amazon’s warning that higher spending will persist, and the company will likely incur a loss for the second quarter.
Microsoft (MSFT - Free Microsoft Stock Report) has reported revenues and earnings of $20.4 billion and $0.68 per share, respectively, for the March period. Share net surpassed our estimate of $0.64. Investors responded well to the earnings release, bidding up the shares moderately. The company’s Commercial segment benefitted from enterprise customers’ moves into cloud computing. Meanwhile, the Devices and Consumer group posted healthy growth.
Facebook (FB) reported year-over-year revenue growth exceeding 70% for the March quarter. Monthly active users grew 15%, and mobile monthly active users increased 34%. Mobile advertising revenue represented around 59% of total ad revenue, up from about 30% in the first quarter of 2013. Top-line growth exceeded that of operating expenses, and earnings per share of $0.25 more than doubled the prior-year figure.
Meanwhile, Netflix (NFLX) reported revenues of $1.27 billion for the recent period, an advance of roughly 24%. Share earnings of $0.86 were much improved from the $0.25 posted in the first quarter of 2013. The company has experienced healthy demand for its streaming offerings in both the domestic and international arenas. Total streaming members increased by 4 million during the quarter, to 48.4 million. Domestic streaming has been the most important performance driver here. Meanwhile, contribution losses at the international business continued to decline.
Elsewhere, Apple (AAPL) impressed investors with its second quarter results (the company’s fiscal year ends in late September). The top line advanced roughly 5% on a year-over-year basis, to $45.6 billion. Share earnings of $11.62 surpassed consensus and our own expectations. The company benefited from greater-than-expected demand for its high-margin iPhone line. iPhone shipments totaled 43.7 million during the March quarter, with particular strength in certain emerging markets. This was able to more than offset less favorable iPad performance. A lower share count also contributed to growth in earnings per share.
Last but not least, eBay (EBAY) reported revenue of $4.3 billion for the recent period, an advance of 14%. Total enabled commerce volume increased 24%, to $58 billion. Mobile enabled commerce volume grew 70%, reaching $11 billion. At payments business PayPal, net total payment volume advanced 27%, with growth in Merchant Services volume leading the way. Meanwhile, the company’s Marketplaces line experienced a 12% increase in gross merchandise volume. eBay posted a share loss of $1.82 for the recent period, but this figure included a massive one-time charge of roughly $3.0 billion, related to foreign earnings that had previously not been subject to U.S. tax. Excluding this figure, earnings per share would approximate $0.56 for the March period.
Netflix to Raise Prices
Entertainment subscription service provider Netflix (NFLX) has indicated that it plans to increase subscription prices by $1 or $2 per month for new customers. Existing customers will keep their current prices for another year or two. Healthy demand for its offerings appears to provide Netflix with the leeway to make such a move. The company will use the additional revenue to purchase more movies and television programs, and improve service quality. It will be able to license more content and deliver it in high-quality video. Netflix is also investing to expand its original content offerings, which can be effective at attracting and retaining members.
Amazon’s Deal with HBO
Amazon.com (AMZN) has struck a deal with Time Warner’s (TWX) HBO. Per the agreement, Amazon’s Prime streaming service will now offer some HBO series. Importantly, Amazon Prime customers will only have access to older shows. Current series, which are still airing new episodes, will not be available until three years after their original broadcast. This may give Amazon’s Prime offering a slight advantage over Netflix’s streaming service, where HBO programming is not available. Even so, customers can rent old HBO shows through Netflix’s DVD service. Moreover, Netflix offers shows from other premium channels, such as Showtime. Perhaps Time Warner will benefit the most from this deal, which has allowed it an additional revenue stream for some of its older programs.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.