News That Caught My Eye: Week of Oct 26, 2018

Twitter Stock Up After Earnings

Stock up 17% on Thursday after earnings results are out.

Key data points:

  • Earnings per share of 21 cents (adjusted) vs. 14 cents expected by analysts
  • Revenue: $758 million vs $702.6 million, according to the survey
  • Monthly active users (MAUs): 326 million vs. 330.1 million projected by FactSet and StreetAccount

Via Twitter

  • It seems that investors are starting to look at the signs that point to a long-term benefit to the platform rather than focusing so much on the MAU numbers, a number that Twitter missed for the second quarter in a row.
  • Twitter Daily Average Users (DAUs) went up by 9 percent this past quarter, marking eight quarters of consecutive growth. This is a more telling data point in my view that benefits from the previous one going down.
  • In other words, overall users are decreasing mostly due to the continued purging of bots, fake accounts, and abusive users. The elimination of some of the noise and hostility is helping drive engagement.
  • Other than engagement, a cleaner, and healthier platform will likely drive more advertising revenue. Twitter revenue was up 29 percent year over year. Advertising revenue, in particular, reached $650 million, also a yearly increase of 29 percent.
  • What is also encouraging to the Street is that after ten years Twitter is finally profitable and profitably is lasting. In the past four quarters, Twitter’s net profit is just over $1 billion. In the four quarters prior, Twitter lost $367 million.
  • There is still a lot that needs to be addressed by Twitter, but at least from a business performance perspective things are looking positive.

Andy Rubin and Sexual Misconduct in Tech

The story in four bullets:

  1. Google’s creator of Android software accused of sexual misconduct by employees
  2. Google found the allegation credible
  3. Then-CEO Larry Page asked for his resignation
  4. He left with a $90 million payout & public congratulations from Google

Via New York Times

  • This is an amazing scoop by the New York Time. As you might remember many reported on the allegations over a year ago but there was just not the same level of evidence available to make it into the story published this week.
  • As the story points out, Rubin was not the only high-level executive involved in sexual misconduct at Google, but he is the most high-profile one for the role he played in tech with Android.
  • There are a few points I would like to make about the story which I think are important but by no means exhaust the conversation we should have around sexual misconduct in Silicon Valley
  • First, tech has proven to be quite forgiving over the years. Once there is judgment, that is not always the case, it passes quickly. People involved apologize, fly low for a while and they come back in a different role/form and all seems forgotten, if not forgiven.
  • Second, while the allegations might have not been as solid as they are today speculations on the reasons behind Rubin’s departure from Google have been around for over a year. Yet this did not stop Rubin from closing a door in tech and opening another under a lot of cheers with his Essential endeavor.
  • Most importantly though, as I woman, it is hard to get over the fact that despite the allegations that now turn out Google was able to validate, Rubin left Google 90 million Dollars rich.
  • It is hard because if you think it is wrong when women are paid for their silence it is even worse to think that a man gets rewarded despite what transpired. It is really making those women feel abused all over again.
  • Google’s Sundar Pichai in a memo to employees said the company is dead serious about sexual harassment and misconduct. He went on to say that over the past two years 48 people have been fired from Google over sexual harassment allegations over the past two years, Pichai said, 13 of whom were senior managers and above. None was compensated when they left.
  • The high number of people who were fired is not my concern. I would rather see a high number and think something is being done about it than see a low number and think that in a company as big as Google everything is just unicorns and rainbows.
  • Tech already has a diversity problem and stories like this are not helping women to feel the company they are working for has their back. The memo from Pichai helps a little, but Google must come out with a stronger statement to their employees both female and male. It would be good to hear from Paige as some have asked on social media.
  • Nothing will speak more than how employees will be treater in the future by HR of course, but maybe in the meantime, Google could donate money to an organization of their choice that helps victims of abuse. Showing money is not used to reward wrong-doers but to help the ones being wronged.

Amazon’s 3Q18 Earnings

Net sales increased 29% to $56.6 billion in the third quarter, compared with $43.7 billion in the third quarter of 2017. Excluding the $260 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared with third quarter 2017.

Operating income increased to $3.7 billion in the third quarter, compared with operating income of $347 million in the third quarter of 2017.

Net income increased to $2.9 billion in the third quarter, or $5.75 per diluted share, compared with net income of $256 million, or $0.52 per diluted share, in third quarter 2017.

Via Amazon 

  • There were some data points that worried investors and they had to do with Amazon’s core business. Sales growth slowed to 11% year over year. This coupled with a slow down in third-party reseller sales is showing signs of saturation which some might think could be related to this being the quarter just before the holidays. However, Amazon’s guidance for next quarter was quite conservative which is what made overall results concerning.
  • The conservative outlook for 4Q18 is not due to the increased in the minimum wage that Amazon announced earlier this month, although this will, of course, add to its operational costs. Rather, Amazon is being cautious about actual sales revenue.
  • Long-term the added cost will help with personnel retention but most of all it will help with minimizing the strong criticism Amazon has been under over the past few months in relation to working conditions at its dispatching facilities.
  • Of course, when you compare Amazon’s online sales and revenue to any leading retailer the growth they see could only be dreamed of.
  • Reading through the release it is staggering the number of devices that Amazon announced over the quarter. While most of the devices were announced at an event in Seattle last month, a lot more was sprinkled throughout the quarter.
  • Even more amazing is to see that Amazon is saying that the number of Alexa-compatible smart home devices has quintupled year to date to more than 20,000 devices from over 3,500 brands. That is an amazing growth for an ecosystem which leads Alexa well ahead of Google.
  • The problem with the Echo ecosystem is that despite its breath in products its reach is limited by the number of languages Alexa supports at the moment, which makes Amazon’s short-term opportunity mostly reliant on the US market.
  • AWS grew 46% and advertising which is not directly disclosed but makes up the vast majority of the “others” category more than doubled growing to $2.5 billion. Both are great numbers but still small in the overall revenue pie.

 

Published by

Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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