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.”
Tech wrap: Huawei takes slimmest smartphone crown
Huawei, China’s largest maker of telecommunications gear, unveiled the “Ascend” smartphone, touting it as the slimmest on the market as it moves to boost its share on the global consumer market. Huawei unveiled the Ascend smartphones – available in black, white and pink – at the Consumer Electronics Show in Las Vegas. The 6.68-mm thin phone will be available in April 2012 in markets from North America, Europe to Asia and will cost roughly $400, but the final price has not been set, the company said.
AT&T announced plans to launch seven new smartphones and a tablet computer early this year for a new wireless network it is building. The product line-up will include a phone with a 16 megapixel camera from HTC using Microsoft software along with Microsoft-based smartphone from Nokia. AT&T said it will also sell three new high-speed smartphones from Samsung as well as a high-speed phone from Sony and Pantech. In an unusual pricing move, AT&T also announced that it would sell Pantech Element, a waterproof tablet based on Google Android software with a smartphone, the Pantech Burst, for a combined price of $249.
Olympus sued its current president and three ex-directors for several million dollars in compensation, sources told Reuters, as the company seeks to draw a line under one of the nation’s worst accounting scandals. The company filed suit against its president, Shuichi Takayama, with the Tokyo district court on Sunday, along with three former executives identified by investigators as having engineered or helped cover up a $1.7 billion fraud at the firm, the sources said.
Netflix launched in Britain and Ireland, taking on BSkyB’s premium drama and movies offerings and prompting Amazon-owned rival Lovefilm to offer a new cut-price service. Lovefilm, which has 2 million customers in its core British market, immediately announced Lovefilm Instant — an Internet streaming-only offer to undercut Netflix — in addition to its current offer that combines streaming and DVD rental by post.
Deutsche Telekom is overhauling its strategy for its U.S. wireless unit T-Mobile USA after AT&T last month dropped its planned $39 billion takeover of the unit, a person familiar with the strategy planning said, adding that no date had been set to unveil the plan but it would certainly not be before 2011 results are published on February 23. The company’s Chief Financial Officer Tim Hoettges said one of the first steps could be to sell and lease-back the company’s mobile phone masts.
A group of Chinese authors sued Apple for 11.9 million yuan ($1.9 million) in compensation for allegedly providing copyright-infringing books for download through its online store, Chinese financial magazine Caixin reported. The group of nine authors, under the mantle of the China Written Works Copyright Society (CWWCS), sued Apple in Beijing’s No. 2 Intermediate People’s Court for copyright infringement of 37 works, Caixin reported on Friday.
Tech wrap: AT&T, T-Mobile pull plug on mega-merger
AT&T said it had agreed with Deutsche Telekom to drop its $39 billion bid to buy the German company’s U.S. wireless unit amid increasing regulatory obstacles to the planned deal. AT&T said in a statement on Monday that it will enter a roaming agreement with Deutsche Telekom. AT&T’s plan to buy T-Mobile USA, first announced in March, has met with opposition from the U.S. Department of Justice and the Federal Communications Commission.
The upstart wireless company that is being bankrolled by Philip Falcone’s $5 billion Harbinger Capital Partners hedge fund could run out of money during the second quarter of 2012, according to the company’s financial statement. LightSquared, which registered a $427 million net loss during the first nine months of this year, may not be able to “continue as a going concern” unless it can raise additional capital and financing, the statement reviewed by Reuters said.
Prince Alwaleed bin Talal, the Saudi billionaire and an investor in some of the world’s top companies, has bought a stake in microblogging site Twitter for $300 million, gaining another foothold in the global media industry. The Twitter stake, bought jointly by Alwaleed and his Kingdom Holding Co investment firm, was a secondary market transaction, meaning that Alwaleed and Kingdom bought the Twitter shares from existing shareholders, rather than making a direct investment, according to a person familiar with the matter.
The precipitous decline in the price of Research In Motion stock has left the market capitalization of the BlackBerry maker below the value of its cash, receivables and other current assets. Shares in the Canadian smartphone maker fell another 4 percent, to less than $13, on the Nasdaq on Monday. They have lost more than half their value since the day before reporting second quarter earnings back in September. The fall gives RIM a market capitalization of less than $7 billion. RIM last week said it had current assets – which include short-term investments and discounted inventory – of $7.2 billion.
Zynga shares fell as much as 13 percent below their IPO price, in their second trading session, as investors worried about the online game publisher’s growth prospects. “Investors aren’t interested in Zynga – not at these prices,” said Sterne Agee analyst Arvind Bhatia. “The demand post-IPO is what drives the stock price and it’s just not there.” With these latest losses, Zynga has a market value of $7.8 billion, down from $8.9 billion when it went public.
Cablevision Systems Corp said Monday that it would dismiss a lawsuit it filed earlier this month against Verizon Communications Inc for allegedly misleading consumers about the speed of Cablevision’s Internet services. In the lawsuit filed December 6 in Brooklyn federal court, Cablevision accused Verizon of running a deceptive advertising campaign based on a study from the Federal Communications Commission showing that the company only delivered up to 59 percent of its advertised Internet speeds during peak hours.
Tech wrap: Will switch to QNX save RIM?
Research In Motion has already doled out a big helping of bad news ahead of its financial results on Thursday, but surprises could still await investors hungry for details about what many see as a new, make-or-break BlackBerry.
Investors are desperate to know whether RIM will stand by its current timetable to switch its smartphones to the new QNX operating system by early next year. The transition is considered the Canadian company’s last, best chance to reverse its declining fortunes.
T-Mobile USA plans to market the Lumia 710 phone from Nokia to first-time smartphone buyers as the two companies push to recoup market share losses of recent years.
CNET’s Roger Cheng doesn’t hold any punches about the move.
Bloomberg reports that eBay’s PayPal business, aiming to challenge Groupon and LivingSocial.com in the market for online daily deals, plans to start offering coupons tailored to users’ buying habits and mobile-phone locations.
Google is making $11.5 million in grants to fight modern slavery and its hold on 27 million people worldwide, the technology company said on Wednesday.
AT&T/T-Mobile: Will consumer intuition prove correct?
By Eleanor M. Fox The opinions expressed are her own.
Just as I was bracing for the headline, “U.S. approves AT&T’s acquisition of its fiercest competitor subject to a few conditions,” I had a happy surprise. “U.S. Files Lawsuit to Block Merger of Phone Rivals.” In another era, this would not have been a surprise. The surprise would have been that AT&T would have had the audacity to propose a merger with T-Mobile and confidently predict that it will close (betting a 6 billion dollar break-up fee that it will). After all, US antitrust law prohibits mergers where “the effect … may be substantially to lessen competition.”
AT&T accounts for about 32 percent of the wireless mobile service market, Verizon has 34 percent, and T-Mobile nearly 12 percent. The only other possibly significant national player is Sprint Nextel, whose survival is unassured. Thus, the merger would create the nation’s largest wireless carrier and in the post-merger world the top two would have more than 75 percent and possibly more than 90 percent of the market in the near future. Immediately after the merger, in more than half of the Cellular Market Areas (areas used by the FCC to license mobile wireless services), AT&T-Mobile would occupy more than 50 percent.
T-Mobile is a maverick. According to the DOJ complaint, “T-Mobile has positioned itself as the value option for wireless services, focusing on aggressive pricing, value, leadership, and innovation.” T-Mobile viewed itself as “the No. 1 value challenger of the established big guys in the market.” It designed a “disruptive” rate plan. It provided the first Android handset, Blackberry wireless e-mail, national hot spot access, and a nation-wide network based on advanced 4G technology. AT&T innovated in response to T-Mobile’s “threat.”
How could this not be a merger whose “effect … may be substantially to lessen competition”?
The question would have answered itself some years ago, before antitrust became a technologically specialized field and the law became undergirded by presumptions that markets work, businesses act efficiently, and firms’ incentives almost always align with the best interests of consumers.
The shift in the law was not all bad. Beginning in the 1980s, antitrust gained a strong appreciation of the pro-consumer qualities of many business acts, and “antitrust” (anthropomorphically) began to listen carefully to the stories of putative monopolists and large merging firms to try to understand:
The future is calling, AT&T, and it’s not T-Mobile
By John C Abell The opinions expressed are his own.
The proposed AT&T/T-Mobile merger is shaping up to be an iconic business case saga and a judicial milestone. Who would have thought that nearly 40 years after the U.S. Department of Justice convinced a judge to break up “Ma Bell” that the DoJ might be able to convince another judge to tell that same company you can’t get too big again?
But of course AT&T can get big again, and become so dominant again that it is a feared monopoly that must be dealt with — if it should be so lucky. But getting there will take build, not buy.
Getting so large that you could control a market to the real or potential peril of the consuming public happened a lot in the industrial age, with railroads and oil, and even the movie business, which was ordered in 1948 to divest itself of theaters. But that was at a snail’s pace. These days eyebrows are raised by the Microsofts and Apples and Googles of the world who manage, in what seems like a blink of an eye, to provide goods or services so many people want that competitors have a hard time keeping up.
Unlike the industrial age, it seems like anyone with the right idea and execution (and garage) can do it. Who could have imagined Apple would become the most significant handset maker in the world. Frankly, who could have imagined Apple at all? Or that Google would come up with mobile phone software that now sets the pace? Or even that Microsoft, when it decided it wanted to, would choke investor-beloved Netscape to death in no time flat?
Mergers can be a fast way of taking the lead or getting back on track. But they seem better suited for a zero-sum game, as when Sirius and XM radio tied up so satellite radio wouldn’t die because there wasn’t really room for two players at that stage of the tech’s evolution. Or when Thomson and Reuters combined to become as big as Bloomberg had become.
On the Internet, we are at the leading edge of a land grab, a gold rush, oil mania [insert cliche here]. There is absolutely no doubt that wireless is going to be the most important medium in the history of this world. There is already an insatiable appetite for it among the haves, which are largely in the Western world and concentrated in urban centers, and who will only be wanting more/faster/cheaper.
The issue is not the demand for bandwidth, it’s that people don’t really pay much attention to network quality when they buy a phone. They pay attention to price, and device type. That’s why Verizon isn’t stealing millions of customers from AT&T despite a much better network. Thus, it doesn’t make sense to make a massive investment in network quality because the subscriber growth won’t justify it. Instead, they can run the network at the minimum possible service level and rake in money.
Tech wrap: Is the DoJ right to oppose the AT&T, T-Mobile deal?
The Justice Department sued to block AT&T’s $39 billion deal to buy T-Mobile USA because eliminating T-Mobile as a competitor would be disastrous for consumers and would raise prices, particularly because the smaller provider offers low prices, the lawsuit said. The lawsuit is a serious attempt to halt a “fundamentally flawed” deal, not a tactic to wring out-sized concessions from AT&T, a source familiar with the lawsuit said.
Dan Frommer says blocking the deal won’t help make service quality any better. A merger would create more spectrum to offer better, faster, more reliable service, Frommer writes. Also, its shortsighted to look at today’s pricing and market and use them as strict guides for the future, as voice and SMS service are disrupted by Internet technology, and as carriers try to charge more for 4G LTE access than they did for 3G access, Frommer added.
Breakingviews columnists Robert Cox, Robert Cyran and Richard Beales say the wireless industry in the U.S. is essentially a duopoly and that the DoJ suit against the AT&T, T-Mobile deal protects smaller providers.
Earlier, AT&T promised to bring 5,000 wireless call-center jobs back to the U.S. if the deal wins approval.
Sony put price tags on its long-awaited debut tablets that could hurt the company’s chances to grab the No. 2 spot in the tablet market. Two versions of Sony’s main tablet cost $499 and $599, which matches the price of Apple’s iPads for models with the same memory and will turn off consumers, analysts said.
“Consumers want tablets but they are not prepared to pay the same amount they’d pay for an iPad for something that’s not an iPad,” said Gartner analyst Carolina Milanesi. Research firm Forrester also put out a blog post saying that Sony’s pricing “raises a red flag” and could sink tablet sales.
The Financial Times pulled its iPad and iPhone apps from Apple’s App Store after losing a battle to keep control of customer data obtained through subscriptions. Apple recently begun to insist that subscriptions to apps that it hosts must go through its own store, giving Apple ownership of valuable data about customers from those transactions, as well as a 30 percent cut of revenues. In a move to reduce its dependence on Apple and develop apps more quickly for rival tablet computers, the FT in June launched a Web-based version of its mobile app, the first of its kind by a major publisher.
This result isn’t all bad news for AT&T — they can still return 5,000 jobs to the U.S. market, they can still invest in 4G LTE infrastructure, and they can certainly work on improving the quality of their customer service.
Finally, they can compete more effectively for T-Mobile customers, with a value-based offer, and thereby convince consumers that they are worthy.
Perhaps AT&T’s CEO did under-estimate the anti-Bell sentiment towards his company, but they can recover — as they’ve done in the past, from their numerous setbacks.
Why consumers still lose if AT&T can’t buy T-Mobile
By Dan Frommer The opinions expressed are his own.
The government’s opposition to AT&T’s takeover of T-Mobile seems to be about competition and price: It’s not comfortable with the idea of three carriers (instead of four) representing 90% of wireless connections, and it doesn’t want T-Mobile’s low-cost strategy being removed from the market.
Perhaps that’s worth fighting for. But here are the problems with those lines of thinking:
First, the Feds aren’t necessarily helping consumers at all when it comes to service quality.
As an AT&T subscriber, I am stuck with pretty lousy phone service in New York City, compared to what many people in the developed world have access to. It is often a struggle to use my phone. In theory, this is something that the merger with T-Mobile would be solving in the future: More spectrum to offer better, faster, more reliable service. Now AT&T will have to figure out something else, and I might be stuck with crappy service for longer. Thanks a lot, DOJ!
And second, it’s shortsighted to look at today’s pricing and market and use them as strict guides for the future.
Several things about mobile service pricing are going to change in the future, as voice and SMS service are increasingly disrupted by Internet technology, and as carriers try to charge more for 4G LTE access than they did for 3G access. Phone bills may go up or down by quite a bit, and the price discrepancy between AT&T and T-Mobile subscribers (and the rest of the industry) may not be the same for long. Heck, two-thirds of Americans don’t even have smartphones yet.
Mr Frommer I spent 30 years in telecom and I cannot buy any of your arguments.
Tech wrap: Facebook smear campaign blows up
Facebook admitted to hiring PR firm Burson-Marsteller to plant negative stories about Google, The Daily Beast reported. Burson urged journalists to investigate claims that Google was invading people’s privacy and offered to help privacy advocate Christopher Soghoian write an op-ed on the matter for national newspapers. The plot backfired when Soghoian rejected Burson’s offer and posted online an email exchange between them.
Facebook adopted a warning service to help users avoid clicking on dubious Internet links. The new warning service by Finnish startup Web of Trust calculates the reputation of 31 million Web pages and updates the ratings twice an hour, based on feedback from some 20 million users.
The recent hacker attack at Sony and other corporate data breaches are attracting more class-action lawyers eager to score a payday, though huge monetary settlements may be elusive, writes Dan Levine. At least 25 lawsuits have been filed against Sony in U.S. federal courts over the theft of user data from the PlayStation game network, according to Westlaw, a Thomson Reuters legal database. The challenge for plaintiffs’ lawyers lies in establishing a loss of value or additional costs suffered because of a hack, Levine adds.
NTT DoCoMo and Twitter will jointly develop a location-based alerting service for smartphone users based on tweets, the Nikkei business daily said. The deal will be announced on Friday and the services are expected to be launched this winter. Twitter will remove data that could identify users, before using the stored tweets for the service, the business daily said.
AT&T promised to give Deutsche Telekom $6 billion in assets, services and cash as a break-up fee if U.S. regulators reject its proposed $39 billion buy of the German company’s T-Mobile USA, sources said.
Microsoft’s legal battle, once a distraction to its top executives when they could have been at their most creative, ended as court oversight of Microsoft expired with little or no fanfare, writes Diane Bartz. And now that it is schooled in antitrust law, Microsoft wants Google to be regulators’ next focus, Bartz adds.
Tech wrap: New Apple iMacs built for speed
Apple refreshed its lineup of iMac computers with new Intel processors that it says are up to 70 percent faster and with USB-like ports that are up to 20 times as fast. Thunderbolt ports support displays and devices. The new iMacs also feature a new HD Web camera. Apple said the iMacs are on sale online and at its retail stores starting at $1,199.
Sony CEO Howard Stringer faced harsh criticism of his leadership after the company revealed hackers may have stolen the data of another 25 million accounts in a second massive security breach. The breach of the Sony Online Entertainment PC games network may also have led to the theft of 10,700 direct debit records from customers in Austria, Germany, the Netherlands and Spain and 12,700 non-U.S. credit or debit card numbers, Sony said. Investors said Sony and Stringer had botched the data security crisis. “The way Sony handled the whole thing goes to show that it lacks the ability to manage crises,” Michael On of Beyond Asset Management in Taipei said.
Microsoft CEO Steve Ballmer announced that RIM will use Microsoft’s Bing search engine and maps as default options on its new BlackBerry devices. RIM’s move, coupled with its close partnership with Adobe Systems, sketches out a strategy of cooperation in a mobile market now dominated by Apple and Google. The strategy illustrates that the mobile market is entering a new phase that focuses on feature consolidation and “co-opetition,” writes GigaOM’s Kevin Tofel. The old strategy, which lasted from 2007 until recently, focused on new platforms, user interfaces and the emergence of the mobile app economy, Tofel adds.
Google is violating the spirit of the open access it bid $4.6 billion to protect by making tethering apps unavailable at its Android Market, writes Chris Ziegler. DroidLife’s Kellex wrote last week that tethering apps were unavailable for all of his phones running on AT&T’s network. Engadget yesterday found no tethering apps available on the Android Market for phone networks running on AT&T and T-Mobile and only one on Verizon. Tethering apps make it easier for users to circumvent the official tethering capabilities offered on smartphones that carry a plan surcharge.
Twitter made an offer to acquire TweetDeck, the popular third-party software application for Twitter and other social networking services, for up to $50 million, according to a person with knowledge of the matter. The deal would give Twitter an application that has won praise among sophisticated users for its slick interface and enhanced capabilities, while closing out a potential threat to Twitter’s fast-growing service.
