Tech wrap: Earnings hit as Apple reigns
Quarterly earnings suffered at major technology and telecoms companies in part because of demand for gadgets made by Apple, one day after core suppliers to Apple savored strong earnings results posted by the iPhone and iPad maker on Tuesday.
AT&T posted a $6.7 billion quarterly loss as it was weighed down by a hefty break-up fee for its failed T-Mobile USA merger and other big charges on top of costly subsidies for smartphones such as Apple’s iPhone. While the wireless provider beat analysts’ expectations for subscriber additions, the growth came at a massive cost as its wireless service margins plummeted. On top of the $4 billion break-up package charge, AT&T also took a big impairment charge for its telephone directory business, which it said it was considering selling.
Nokia reported a 73 percent fall in fourth-quarter earnings as sales of its new Windows Phones failed to dent the dominance of Apple’s iPhone or compensate for diving sales of its own old smartphones. Apple reported earlier this week sales of 37 million iPhones for the December quarter. Nokia has sold over 1 million Windows “Lumia” smartphones since its launch in mid-November. Nokia said it expected its phone business’ underlying earnings to be around breakeven in the first quarter, well below analysts’ forecasts, with sales falling more than usual in the seasonally weaker quarter.
Motorola Mobility posted a quarterly loss after it warned earlier this month that it was having a tough time competing in the smartphone market amid intense competition from rivals such as the Apple iPhone. The company, which is seeking approval to be bought by Google, reported a net loss of $80 million or 27 cents per share compared with a profit of $80 million or 27 cents per share in the same quarter the year before. Revenue rose slightly to $3.436 billion from $3.425 billion in the year ago quarter.
Nintendo posted a sharp drop in quarterly profit and forecast a bigger-than-expected full-year loss, as it battles a strong yen and its games devices lose ground to gadgets such as Apple’s iPhone. Nintendo now expects an annual operating loss of 45 billion yen ($575 million), dwarfing expectations of a 4.2 billion yen loss, based on the average of 21 analyst forecasts.
“To say that (the days of consoles) are over is likely an overstatement, but social network and Internet delivered games are growing and structurally changing the future of the industry, which is a strong wind against Nintendo,” said Shigeo Sugawara, at Sompo Japan Nipponkoa Asset Management.
Lawmakers on the House Energy and Commerce Committee asked Google to provide answers about recent changes to the search engine’s privacy policy. On Tuesday, Google announced that it was unifying its privacy policy across 60 of its Web services, which allows the company to share data between any of those services. In a letter to Google Chief Executive Larry Page, the lawmakers said the company’s announcement “raises questions about whether consumers can opt-out of the new data sharing system either globally or on a product-by-product basis.”
GoogleTV: Another partner says bye-bye
Remember those television commercials featuring actor Kevin Bacon touting GoogleTV?
Well, the company selling those GoogleTV devices, Logitech, now says the whole thing was an expensive mistake.
During an investor conference this week, Logitech CEO Guerrino De Luca delivered an amazingly strong-worded indictment of GoogleTV and of the company’s set-top box that offered the service, known as the Revue.
Logitech basically went to market with a half-cooked “beta” product “and it cost us dearly,” De Luca confessed, according to a report in the technology blog The Verge. Logitech will finish off its inventory of Revue devices this quarter, and has no plans to introduce a replacement, the report quoted De Luca as saying.
For those keeping score, that’s the second major GoogleTV launch partner to drop out. Earlier this year, Intel said it would cease making the chips used to power GoogleTV devices.
Google’s struggles parlaying its tech and Web expertise onto the television screen is hardly unique: even the almighty Apple has had a tough time in the market.
Google meanwhile has just released a new, 2.0 version of the software for GoogleTV. And a new crop of hardware devices from Samsung and Vizio are expected in 2012.
Tech wrap: Can Nook tablet take on Kindle Fire?
Let the low-end tablet wars begin. Barnes & Noble unveiled a Nook-branded tablet on Monday, the company’s answer to Amazon.com’s recently announced Kindle Fire. At $249, the 7-inch Nook tablet is a bit pricier than the $199 Fire, but Barnes & Noble is betting that consumers will pay the extra $50 for the device because it offers faster processing speeds and 16 gigabytes of storage space compared to the Amazon tablet’s 8 gigabytes. Both devices hit shelves next week. Barnes & Noble, which operates a chain of 700 U.S. bookstores, also lowered the price on its Nook e-book devices in an effort to take on Amazon’s line of Kindle e-readers, which were recently reduced in price.
Early reaction to the device was varied. One analyst characterized it to Reuters as a “wow” product, while another said it will keep “Barnes & Noble shoppers loyal.” All Things D’s Peter Kafka called Barnes & Noble’s product pitch “a bit muddled” when it came to explaining how people will access content on the device: “Unlike Amazon and its Kindle Fire, Barnes & Noble isn’t marketing its tablet with a proprietary cloud service that will get you access to music, movies and TV shows. Instead, the bookseller is leaving that up to other cloud-based services, like Netflix and Pandora. But make no mistake — these are cloud-based services,” he writes. Why then was the company so eager to play up the Nook Tablet’s extra storage capacity if it expects you’ll be streaming most content, not storing it, wonders Kafka. Engadget takes the new tablet through its paces in a hands-on video.
Google+ expanded its circles to make room for businesses who are looking to reach out to customers on the social network. Called Google+ Pages, the new service will allow corporate brands and businesses to set up a special page within the social network . Google said that 20 businesses, including Toyota, Pepsi and retailer Macy’s, have set up special pages so far, and that any organization will soon be able to join as well. Until now, only individual users have been able to sign up for Google+. Businesses are increasingly using online social services, such as Facebook, to reach new customers and to cement relationships with loyal customers through special offers and promotions.
A German court granted a preliminary injunction against Apple in a patent infringement case that banned the California company from selling some devices in Germany. But the ruling should not impact Apple’s sales in Germany as the company sells all its product there through a local subsidiary, which was not covered by the injunction, reports Reuters correspondent Poornima Gupta. The district court in Mannheim, Germany, said on Friday Apple may not sell certain mobile devices in Germany that infringe on two Motorola Mobility patents related to wireless technology. If Apple does sell the devices, it has to pay a fine of up to 250,000 euros, according to the court.
HTC said on Monday it will put equal investment weight on emerging markets next year as it does in developed ones like the U.S. and Europe, and will dip its toes back into the tablet market with a new model next year, reports Reuters correspondent Clare Jim from Taipei. HTC CEO Peter Chou told a media briefing HTC would not give up its “premium brand” image by expanding in emerging markets through cheap phones. Regarding tablets, Chou said: “Tablet is a market we would like to try and test, to see whether we can make ourselves stand out and prevent a me-too product.”
Microsoft: mobile getting better, no numbers yet
Microsoft made a big deal of the launch of three U.S. phones running its Windows Phone 7.5 software, the latest upgrade to Windows Phone 7, which represents a complete overhaul of the Microsoft mobile phone software. They built a giant model of a phone in Herald Square, New York City and had rappers and dancers performing around it on Monday, while pizza was handed out to bemused onlookers.
Andy Lees, who leads Microsoft’s phone business, was on hand to talk up the software, which he said has been very well received by consumers.
“When people use it they love it,” he told reporters. “We’re definitely on to something.”
But he was very cagey about how many phone sales exactly this translates to, in the first year of the revamped Windows Phone offerings.
“We sold more than Android in its first year,” Lees said, referring to Google’s Android launch in the fall of 2008. Research firm IDC estimated that about 3.6 million Android phones were sold in its first 12 months, starting in the fourth quarter of 2008. It did not give an estimate for Microsoft’s market share in the third quarter of 2011.
Comscore says Microsoft’s share of the U.S. market actually fell by 0.2 percentage points from the second quarter of 2011 to a 5.6 percent share in the third quarter this year, while Google’s share rose by 4.6 percentage points to 44.8 percent. So Microsoft has a long way to go to establish itself as a major player alongside Android and Apple’s iPhone.
You know what they say about manufacturers who show off their big phones…
teeny, itty-bitty subscriber numbers.
Motorola bets on recycled Razr brand
Razr is back. After being criticized for depending on the four letter brand for too long, Motorola is hoping to draw some more blood from the stone with the new Droid Razr in the U.S. market. It will be called plain old Razr in the rest of the world.
Analysts are already predicting that the new phones won’t reach the 130 million unit sales that Motorola boasts for Razr over several years. But the jury is still out on whether using the old brand that came to symbolize the company’s downfall will help sales of the latest phone, which it is touting as the world’s thinnest smartphone.
“We tend to see it more in the auto industry where Dodge brought back the Charger and Volkswagen brought back the Beetle. Volkswagen did well,” said NPD analyst Ross Rubin. But the modern Beetle is an updated model that is recognizable as a descendent of an old car that dates back to pre-war Germany. The Droid Razr is a tablet-like device with a 4.3 inch display that looks nothing like the original flip-phone Razr.
“It probably creates a weaker association than if the product had been a flip-phone,” said Rubin, adding that while the retro-branding was “not a bad idea”, it would be unlikely to make a huge difference to Motorola’s sales of the gadget.
Avaian Securities analyst Matthew Thornton was more enthusiastic: “I like it. If you think about the Motorola brand and what it’s tied to, it is Razr. I think it’s a smart play. The thing the Razr stood for was thinness.”
He pointed to Sony’s success transferring the brand of the Walkman portable cassette player to a cellphone line and its use of the Cybershot camera brand for camera phones. The Sony phones were popular until consumers’ focus turned to more powerful smartphones such as the iPhone.
“The products themselves were fine. They just missed what was next,” Thornton said, speaking about both Motorola and Sony.
I hope that the engineers have redesigned the hinge between the screen and the key pad. Dealers have acknowledged that the brushes wear out and the screen becomes inoperable, rendering the phone useless.
Tech wrap: AT&T preps plan to salvage T-Mobile deal
AT&T was expected to soon present a two-track plan that allows the company to try to find a settlement before the government lawsuit to block its planned $39 billion acquisition of smaller rival T-Mobile USA reaches the court. Details of AT&T’s proposed settlement were not available, but it is expected to include pledges to maintain T-Mobile’s relatively cheap mobile subscription plans, and asset sales.
TechCrunch founder Michael Arrington created a venture capital fund to invest in promising start-ups, sparking controversy over possible conflicts of interest involving the fund and questions about the integrity of the blog. Included in the debate was Arrington’s employment status, with one AOL spokesperson claiming that Arrington was no longer employed by the owners TechCrunch, and another claiming he was. Arrington’s creation of the “CrunchFund” comes months after he publicly announced that he had begun to actively invest in start-up companies, which also triggered a lively debate within the industry.
A senior exec from Acer said Microsoft will be the winner in Google’s buy of Motorola Mobility as the deal makes Google a direct rival to its phone-making clients. “They work against some of their clients,” said Walter Deppeler, president of Acer’s operations in Europe, Middle East and Africa. “It was a good gift to Microsoft,” he told Reuters. Acer uses operating software from both Microsoft and Google in its smartphones and tablets. Deppeler said Acer would consider the implications of the deal before deciding on future platform choices.
Pay-TV operator Starz Entertainment decided to stop providing its content for streaming on Netflix. Starz content includes exclusive rights to first-run Sony and Walt Disney movies and shows, but account for just 8 percent of U.S. subscribers’ viewing, Netflix said. Netflix shares ended the day down 8.6 percent. UBS analyst Brian Fitzgerald said the announcement underscores the long-term concern that rising content costs and increasing competition will continue to weigh on the company’s stock.
The New York Times, the Guardian, Der Spiegel, Spain’s El Pais and France’s Le Monde which collaborated with WikiLeaks condemned the website and its founder Julian Assange for making public thousands of “unredacted State Department cables, which may put sources at risk.” In a message posted on its Twitter feed, which Assange is believed personally to control, WikiLeaks confirmed on Friday it had released “251,287 US embassy cables in searchable format.” Earlier this week, WikiLeaks issued a lengthy statement accusing a Guardian journalist and a former WikiLeaks spokesman of having “negligently” disclosed top secret passwords to a copy of the cable database which had been floating, unnoticed, around the Internet for months.
Tech wrap: HP investors running for cover
Shares of Hewlett-Packard slumped by more than 20 percent to a six-year low on Friday as investors wiped about $16 billion off the market value of the world’s biggest PC maker in a resounding rejection of its plan for a major shake-up.
Blog Zero Hedge posted an article by Tyler Durden, titled “Here Is Who Is Getting Creamed On Today’s Hewlett Packard Bloodbath“, that includes a chart of the the top 40 holders of HPQ stock.
Reuters blogger Felix Salmon credits Durden with breaking the “real” news yesterday about HP, after Bloomberg broke the M&A news of the IT firm’s internal shakeup and it’s $10 billion acquisition of UK company Autonomy. Salmon on the scoop: “…looks like an attempt by HP to manage media coverage and to distract attention from its dreadful earnings guidance.”
Technology company Apple is now worth as much as the 32 biggest euro zone banks. That’s the stark result from a steep fall in the share price of banks including Spain’s Santander, France’s BNP Paribas, Germany’s Deutsche Bank and Italy’s Unicredit, compared to a steady rise in Apple’s valuation, according to Thomson Reuters data.
Earlier on Friday the DJ STOXX euro zone banks index fell 4 percent, valuing its 32 members at $340 billion. In contrast, Apple’s market capitalization has soared to $340 billion.
Wired contributor Steven Levy compares Google’s $12.5 billion purchase of mobile handset maker Motorola to the Internet search company’s Book Search Settlement.
NYT’s Bits blog reports the Federal Trade Commission will not investigate Ashton Kutcher, after the actor failed to fully disclose his investments in a slew of tech companies profiled in the latest version of Details magazine’s online publication for which he served as a guest editor.
Google dials it up by pocketing Motorola
For a company that is all about world domination via the hardware-agnostic cloud, Google sure seems fascinated with being in the computer game these days.
There are those Chromebook laptops, a partnership with Samsung and Acer that is primarily a means to extend the reach of Google’s cloud-based services courtesy of a delivery system of inexpensive computers that don’t do much of anything else. But that’s a play against Microsoft and its office software suite, not the world’s top computer makers.
And it makes core sense: Google still makes nearly 100 percent of its roughly $30 billion annual revenue from small text ads on web pages, and, to a much lesser extent, its cloud-based services. Anything that drives traffic to those pages is money in Google’s bank.
So of course selling and leasing cheap hardware tethered to those services and to the internet in general makes perfect strategic sense, even though a) we are entering the post PC era and b) for the most part, computers are a commodity item.
Then there was Google’s first foray into mobile phones: the most important accessory most of us carry. This is where Apple reigns supreme: I can’t tell you how many people I know who own iPhones and iPads, but tap only a small fraction of their functionality and could just as well use cheaper phones and data plans.
Google’s experience was, shall we say, character building. The Nexus One, from HTC, was (is) an excellent phone, but Google’s approach to retailing and customer care didn’t so much upend the mobile phone business, as some predicted it would, as devolve into a quagmire of broken dreams.
Tech wrap: Google targets Apple with Motorola buy
Setting its sights on rival Apple, Google announced its biggest deal ever, a $12.5 billion cash acquisition of mobile phone maker Motorola Mobility.
Google’s biggest foray into hardware comes weeks after a failed attempt to buy patents from bankrupt Nortel, and gives it an intellectual property library in wireless telephony to wage war on Apple and Microsoft.
However, analysts agreed that that buy was more about the patents and less about the hardware.
The news sent shock waves throughout the tech sector on Monday. Shares of InterDigital plunged 23 percent on the news, while Nokia shares jumped over 10 percent.
In earlier news, video games publisher Electronic Arts is upbeat about Christmas holiday sales as it expects to release top titles and prepares its most high profile launch ever: “Star Wars: The Old Republic”.
Also China’s Huawei Technologies, the world’s No.2 network equipment maker, posted an 11 percent rise in its first-half sales as it closes in on market leader Ericsson.
Tech wrap: Amazon impresses
Amazon wowed investors when it reported a 51 percent surge in sales for the second quarter and said revenue for the current quarter would beat expectations. Shares of the e-commerce giant shot up more than 6 percent on the figures in after-hours trade, even though second-quarter net profits fell as the company’s margins continued to be pressured by heavy spending on distribution, technology and digital content.
Netflix shares took another beating on Tuesday after it warned a day earlier it was expecting subscriber growth to stall in the third quarter in response to price hikes announced this month. That didn’t stop several analysts from raising their price targets on the video rental company’s stock, though, as they took the company at its word that the effects of the subscriber slowdown would be temporary. According to one analyst interviewed by Reuters, the gain in average revenue per user in the fourth quarter will “more than offset” the expected cancellations from the higher prices. Another expressed optimism about the company’s plans to expand into Latin America early next year.
Wal-Mart’s answer to Netflix, Vudu, has a new home on the Walmart.com website. The retailer decided to move its video streaming and rental service to its flagship site in a bid to drum up more use as it competes with a host of other similar services. Starting Tuesday, consumers can order a DVD for mail delivery or pickup or rent or buy releases digitally directly from Wal-Mart’s website. The retailer bought the video company last year but had operated it separately until now.
Facebook has taken steps to put yet another privacy controversy behind it by making it easier for users to opt-out of its facial-recognition technology for photographs. The social network began running ads on members’ home pages this month notifying them about its “tag suggestions” feature and giving them the option of disabling it completely in their account’s privacy settings. The technology – which scans photos just added to the site, compares the faces in the shots with previous pictures and then suggests name tags – came under scrutiny last month after Connecticut Attorney General George Jespen wrote a letter to the company saying the feature compromised users’ rights to privacy by analyzing faces in photographs posted on Facebook and then cataloging them.
Motorola Solutions Inc lost a bid to dismiss a class-action lawsuit accusing it of misleading shareholders about deteriorating prospects for its cellphone business, resulting in investment losses. In a decision on Monday, U.S. District Judge Amy St. Eve in Chicago said there is a “genuine dispute” as to whether predecessor company Motorola Inc in 2006 and early 2007 hid key information about its ability to compete with such rivals as Nokia Oyj and Samsung Electronics Co Ltd.
