News You Might Have Missed: Week of July 27th, 2018

Amazon’s 2Q Earnings

Net sales increased 39% to $52.9 billion in the second quarter, compared with $38.0 billion in second quarter 2017. Excluding the $760 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 37% compared with the second quarter of 2017.

Operating income increased to $3.0 billion in the second quarter, compared with operating income of $628 million in the second quarter 2017.

Net income increased to $2.5 billion in the second quarter, or $5.07 per diluted share, compared with net income of $197 million, or $0.40 per diluted share, in second quarter 2017.

Via Amazon 

  • Amazon raised the price of its Prime memberships in the US by 20 percent, but so far that isn’t harming renewals said Amazon’s finance chief Brian Olsavsky. Also highlighted during the call was how the recent Prime Day generated the highest number of sign-ups for Prime Membership in a single day. This is, of course, crucial for Amazon not so much for the direct revenue generated by the membership but for the opportunity this growing base offers for future monetization.
  • Amazon’s competitors took advantage of Amazon’s difficulties on Prime Day offering their own version of Prime Day with heavy discounts. They also took to marketing to point out that buyers did not have to fork out $119 to take advantage of these discounts. Target, for instance, said it saw its highest traffic and sales day of 2018 on Tuesday thanks to its rival sale.
  • Despite the competition dig at the membership. I strongly believe that consumers understand the full benefits of their investment. Predictable and prompt deliveries worry- free returns, wide choice of sellers, as well as great customer services, are worth more to people every day than a single day of discounts. While competitors are following up with many of these traits it is hard to find all of them in one.
  • Highly profitable ad sales were a bright spot in the quarter. The company said revenue from the category and some other items grew 132 percent to $2.2 billion. This was slightly higher than analysts expected. The big focus on AI behind Amazon cloud will certainly benefit advertising as Amazon is pitching better data analytics to its potential customers. While still a relatively small business compared to Google and Facebook, I do start to wonder if Amazon might start to look like a safer option compared to Facebook both in terms of better analytics and engagement.

Qualcomm walks away from NXP

Qualcomm Incorporated (NASDAQ: QCOM) (“Qualcomm” or “the Company”) today announced the termination of the acquisition of NXP Semiconductors N.V. (NASDAQ: NXPI) (“NXP”) by Qualcomm River Holdings B.V., an indirect wholly owned subsidiary of Qualcomm, effective immediately. In accordance with the terms of the purchase agreement, Qualcomm River Holdings will pay a termination fee of $2 billion to NXP on July 26, 2018.  In connection with this termination, Qualcomm River Holdings has terminated its previously announced cash tender offer to acquire all of the outstanding shares of NXP.

Steve Mollenkopf, Chief Executive Officer, Qualcomm Incorporated, commented, “Our core strategy of driving Qualcomm technologies into higher growth industries remains unchanged.  We will continue to focus on our strong momentum in these growth industries with projected revenues of approximately $5 billion for the fiscal year 2018, up greater than 70 percent from the fiscal year 2016.  We believe our technology leadership and disciplined execution will drive significant value creation for our stockholders.”

Via Qualcomm 

  • This ends a wait of almost two years as the deal had been announced in October 2016. The takeover faced international regulatory hurdles but it had been approved in eight other jurisdictions, including the European Union and South Korea. China was the one big market still holding out.
  • Sadly for Qualcomm, the current trade war between the US and China did not help out this time. This is the second time that the current US/China relations interfere with a deal involving Qualcomm. The first time was when President Trump intervened to stop the Broadcom hostile takeover of Qualcomm.
  • China, of course, denied that the lack of approval had anything to do with the current political climate and referred to antitrust regulations.
  • The China/US battle also indirectly affected Qualcomm when the US government imposed a seven-year ban on US technologies on Chinese manufacturer ZTE. This was later lifted.
  • While disappointing for NXP, the end of a deal does not leave the company in a bad spot. NXP reported quarterly earnings that included a 4 percent increase in total corporate revenue and roughly flat profits.
  • Qualcomm is under less pressure from investors than it was back in 2016 when everybody wanted to see growth coming from outside the smartphone market. This is because, over the past two years, Qualcomm has shown to be able to grow such revenue on its own.
  • While not ideal, the end of this deal is a good thing for Qualcomm that can focus on looking ahead with its strategy and investment.
  • Qualcomm stock was impacted more negatively by the news that Apple will use intel only chips in its next product cycle than for the NXP deal.

Samsung’s Unbreakable Screen

Samsung Display announced this week that its recently-developed, unbreakable smartphone panel has just been officially verified by UL (Underwriters Laboratories), an official testing company for OSHA, the Occupational Safety and Health Administration of the U.S. Department of Labor. Samsung Display said that in addition to being used on smartphones, the newly developed display is expected to find viable markets with other electronic products such as display consoles for automobiles, mobile military devices, portable game consoles and tablet PCs for e-learning.

According to UL, the unbreakable display developed by Samsung Display passed the rigorous real-time durability test that is based on military standards set by the U.S. Department of Defense. After a drop test administered at 1.2 meters (nearly 4 feet) above the ground 26 times in succession, and accompanying high (71 degrees) and low (-32 degrees) temperature tests, the Samsung unbreakable panel continued to function normally with no damage to its front, sides or edges.

Via Samsung 

  • Samsung is, of course, an iPhone supplier but I would not get too excited to see these screens in the next iPhone. No time to market was given at all.
  • What I find interesting, as I am sure it has implications on the quality of the overall display, is that it is covered by plastic rather than glass.
  • Just last week I wrote about the impressive Gorilla Glass 6. The latest iteration of the Gorilla Glass technology which is capable to survive 14 drops from around one meter.
  • Considering how much Samsung is pushing into the enterprise we might see these screens first adopted in rugged devices aimed at the military and first respondents.
  • It might also be, that, before seeing these displays on mobile phones, their bendable nature might make them more suitable for watches or VR/AR glasses.

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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