Facebook (FB) last week held an earnings conference call, and the 2014 numbers were impressive, to say the least.
CEO Mark Zuckerberg reported that 1.39 billion people now use Facebook each month, and 890 million people visit it daily—increases of 165 million monthly actives and 133 million daily actives over the past year. Time spent per person per day continues to rise, growing by more than 10% in the last quarter, year over year.
More than two billion photos are now shared daily across Facebook, Instagram, Messenger, and WhatsApp. Video is even bigger, with more than three billion video views per day. For 2014, the number of videos posted per person on Facebook increased 75% globally and 94% in the US, compared with 2013. In addition, there are more than two billion interactions every week on Facebook between public figures and their fans.
On the financial side, for the full year 2014, FB’s revenue grew 58% to approximately $12.5 billion, and it generated over $3.6 billion in free cash flow. Total revenue in Q4 was $3.9 billion, up 49% year over year. Ad revenue was $3.6 billion, up 53%.
FB is also going mobile in a big way. Mobile ad revenue in Q4 more than doubled, to $2.5 billion or 69% of ad revenue compared to approximately $1.2 billion or 53% of ad revenue in 2013. Even desktop ad revenue increased a little, up approximately 1% despite the fact that overall desktop usage was down.
Slogging through a transcript of the earnings call involves fighting your way past all manner of drowsiness-inducing jargon like “right-hand rail” (the ad strip on the right side of the page), “organic impressions” (the number of times your content was displayed in a user’s News Feed, ticker, or on your page), and MAU and DAU (monthly and daily active users). But if you stick with it, you can also get clued in to what Zuckerberg is thinking.
In his words, it’s Facebook’s “mission to connect the entire world, welcoming billions of people to our community, and connecting many more people to the Internet through Internet.org.” Zuckerberg is “very excited” about continuing to expand into new territory after having already launched free basic Internet services in Zambia, Tanzania, Ghana, Kenya, and Colombia.
“More than 150 million people living in these countries now have the option to connect to the Internet using Internet.org,” Zuckerberg says. “We’ve already connected 6 million of them to the Internet who didn’t have access before.”
Virtual reality is another field that excites him, hence FB’s $2 billion acquisition of Oculus last summer. His aim is to continue “to make progress towards the future of immersive VR experiences that are part of daily life for millions of people.”
Those goals emerge from Zuckerberg’s visionary side. But as FB rakes in the dough, might the vision fade? Doesn’t the company run the risk, as one Fortune writer put it, of just becoming a “mind-numbingly technocratic/grind-it-out money-making machine”? No, Zuckerberg says. He believes—or at least says he does—that Facebook will do well by doing good.
Overall, in his words:
[O]ur strategy is much less about increasing the volume of ads and much more about increasing the quality of the content and the quality of the targeting to get the right content to the right people. This is a pretty controversial strategy internally and we weren’t sure if that was going to work out. But for the last year it’s really fueled our growth in a good way and we feel very confident that this is the right path going forward, as well.
We wake up every day and make decisions because we want to help connect the world. That’s what we’re doing here.
Whatever else may be said about him, the man does not think small.
Last Wednesday, Qualcomm (QCOM) reported results that beat analyst estimates, but the stock fell over 7% on a weak outlook.
In Q1, the mobile chip giant posted sales of $7.1 billion, up 7% year over year and ahead of the consensus estimate of $6.9 billion. Adjusted earnings per share totaled $1.34, up 6% from the year-ago quarter and ahead of the consensus estimate of $1.25.
For the full year, Qualcomm expects $27 billion in sales, down from the previous estimate of $27.8 billion. The company sees adjusted earnings per share of $4.90, down from the previous estimate of $5.20.
The reduced forecast was mainly due to the anticipated loss of central processor business in an unnamed smartphone maker’s flagship device. Rumor is that company is Samsung, which is reportedly going with its own processor for the upcoming Galaxy S6 handset. Samsung claims Qualcomm’s central processor overheats. Qualcomm and LG denied those claims.
Last Thursday, Synaptics (SYNA) delivered results that handily beat expectations, sending the stock up over 13% to $79 per share, a new three-month high.
In Q2, Synaptics posted sales of $462 million, up 125% from the year-ago quarter and ahead of the consensus estimate of $449 million. Adjusted earnings came in at $1.46, up 70% from a year ago and smashing the consensus estimate of $1.22.
The company’s results were buoyed by demand for its display drivers, touch chips, and fingerprint sensors, all of which are used in the booming mobile device market. Synaptics’ mobile sales were up 198% year over year to $398.3 million, accounting for 86% of total sales, while PC chips comprised the rest.
On the conference call, the company announced it’s ramping up production of its new display/touch chip. Synaptics estimates the market for this chip will reach 500 million units in 2018, up from virtually nothing in 2014. Synaptics has a big head start in this emerging growth market, according to Feltl and Company analyst Jeffrey Schreiner: “There is no one else that can do touch display driver integration right now. There is no other competitor.” Back in September, Feltl rated Synaptics one of its top picks.
Last Thursday, Alibaba (BABA) reported mixed results which, along with regulatory concerns, sent the stock tumbling over 10%.
In Q3, the Chinese e-commerce juggernaut generated sales of $4.18 billion, up 40% year over year but below the consensus estimate of $4.4 billion. Adjusted earnings per share were $0.81, rising 13% year over year and ahead of the average estimate of $0.76.
Along with the topline miss, another area of concern for investors is recent criticism from Chinese regulators, who claim Alibaba isn’t doing enough to limit sale of counterfeit products on its online marketplaces. Alibaba vows to tackle the problem, which could result in the closure of a large number of seller accounts and lead to near-term revenue headwinds for the company.
Last Thursday, Align Technology (ALGN) released results that essentially met analyst expectations. But guidance was light, and the stock fell 5%.
In Q4, the dental device maker reported sales of $198 million, up 11% from the year-ago period and edging out the consensus estimate of $197 million. Adjusted earnings per share came in at $0.48, down 6% from the year-ago quarter and below the consensus estimate by a penny.
Results were driven by Invisalign, a teeth alignment device that is virtually invisible and can be easily removed, making it an attractive alternative to traditional wire braces, especially for minor and mild cases of malocclusion (crooked teeth). Worldwide, there are approximately 2.6 million cases of mild and minor malocclusion annually, of which Align has about 18% share, leaving the company plenty of room for growth in this segment.
Align is also tackling more complex cases of malocclusion, a larger market with 4.2 million annual cases. On the conference call, management claimed that new products aimed at this market are gaining traction with dentists and orthodontists.
For the current quarter, the company sees sales of $187 million to $192 million and adjusted earnings of $0.29 to $0.32 per share. Analysts expected revenue in the range of $195 million to $199 million, with earnings per share of $0.40 to $0.49.
The weak outlook was based on anticipated lower average selling prices for the company’s products due to currency headwinds, especially in Europe. Also, Align’s expansion efforts will result in an uptick in operating expenses, which will weigh on profitability in the current quarter.
Last Thursday, Google (GOOG) released results, which fell below analysts’ expectations on both the top and bottom lines. But that didn’t affect the stock much, with shares trending sideways following the report.
In Q4, the search giant reported sales of $18.1 billion, an 8% increase from the year-ago quarter but below the consensus estimate of $18.5 billion. Adjusted earnings per share were $6.88, falling short of analysts’ estimates of $7.08. The topline miss was largely due to currency headwinds. After adjusting for currency, the company’s sales were essentially in line with estimates.
In the quarter, Google’s search ad business accounted for more than two-thirds of sales, which is becoming a growing concern for some, especially in light of the fact the company is plowing cash into non-search projects that don’t seem to be yielding much of a return.
Speaking of cash, the company didn’t initiate a dividend this quarter, much to the dismay of one columnist.
On Monday, Stratasys (SSYS) released 2014 preliminary results and 2015 projections that were below expectations, which sent the stock tumbling 30%.
For 2014, the 3D printing company expects revenue in the $748 to $750 million range, down from a prior estimate of $750 to $770 million. Stratsys expects adjusted earnings per share between $1.97 and $2.03, down from a prior forecast of $2.25 to $2.35. The company said fourth-quarter numbers were impacted by slower than anticipated growth in its MakerBot unit, which grew by about 7% year over year.
In addition to the weak 2014 forecast, the company gave a disappointing 2015 outlook, calling for sales to fall between $940 and $960 million and adjusted earnings between $2.07 and $2.24 per share. Analysts expected earnings of $2.91 per share on revenue of $1.01 billion. The weak earnings outlook was due to higher operating expenses, which the company views as necessary to maintain its leadership position in the 3D-printing market, especially with the likes of HP entering the fray.
Stratasys’ diminished outlook was met with a few downgrades. But to some, analysts are missing the larger picture. “Analyst outlooks for Stratasys could be far too low,” claims Tasha Keeney of Ark Investment Management, who cites a $4 billion 3D-printing market that could explode to $490 billion by 2025.
On Monday, Lenovo (LNGVY) reported Q3 results that beat estimates for operating and net profits by 20% and 17% respectively. In next-day trading on the Hong Kong Exchange, the stock jumped 7%, and another 5% on Wednesday.
Lenovo’s Q3 revenues of $14.1 billion were 31% higher than last year, an increase driven primarily by sales generated from the recent acquisitions of Motorola (from Google) and IBM’s x86 server business.
These two acquisitions were each $2 billion-plus deals. Analysts and investors are typically skeptical of any company’s ability to seamlessly integrate large acquisitions while simultaneously maintaining market share and profitability in its legacy business. But Lenovo appears to be succeeding where so many have failed. Already the world’s top PC maker, the company raised its worldwide market share to a record high 20% in calendar Q4, while achieving better than expected results from the Motorola and x86 acquisitions.
Barclays believes stronger than expected margins “could have been driven by Lenovo’s core personal computer business, a better Motorola turnaround and higher IBM contribution.” Meanwhile, Lenovo’s CEO crowed: “[T]he results show that we have the right strategy, we made the right acquisitions and we executed well globally, so I am confident we are ready to win. Our core PC business maintained its leading position and further improved profitability. The two newly acquired businesses are achieving great momentum in their first quarter of integration.”
Bits & Bytes
A number of the biggest names in tech are making news this week.
First off, is Google (GOOG) slipping? The big kahuna still rules the Net, but its competitive edge has eroded just a bit, as its search share fell below 75% in January for the first time since at least mid-2008. Firefox was the big gainer. Google’s lead in another market may also begin to narrow if Uber is successful in its partnership with Carnegie Mellon University to develop its own driverless car and mapping technology. One source says that Uber is hiring more than 50 senior scientists from Carnegie Mellon as well as from the National Robotics Engineering Center, a CMU-affiliated research entity, and that Uber has “cleaned out” the Robotics Institute. And in a bizarre twist to relations between the companies, reports recently circulated that Google (a $250 million investor in Uber) was planning to launch a competitive ride service. Google pooh-poohed the idea, claiming the “proposal” was merely an internal tool for employee carpooling. Hmmm…
After Amazon’s (AMZN) all-out assault on brickfront retail outlets, you might think that the last thing the company would do was go brickfront itself. But rumor has it that Amazon is privately negotiating to acquire an unspecified number of stores (up to 4,000) from embattled electronics chain Radio Shack. This would be a major ramp up from Amazon’s announced plan to settle brickfronts on college campuses.
Last week, we talked a lot about the buzz surrounding the upcoming release of Windows 10. This week, we learned that the humble Raspberry Pi (the $35 computer) is offering a 2-B model that features a hardware upgrade to a quad core processor, thereby enabling the Pi to run Windows 10. And speaking of Windows 10, will its arrival help to stem the decline in worldwide tablet sales? Some analysts think so.
Okay, here’s a question: why does a company with $178 billion in cash need to raise more? You’ll have to phone Cupertino for the whole story, because that’s what Apple (AAPL) has done with its latest round of bond sales that totaled $6.5 billion. Short answer: the company is protecting the huge part of its cash hoard held abroad in order to avoid repatriation taxes.
Tech giants eBay (EBAY) and PayPal, whose marriage once seemed made in heaven, this week released details of pending layoffs prior to the announced split of the two companies into separate publicly traded entities.
Verizon (VZ) is reported to be on the verge of divesting itself of upward of $10 billion in assets, including sales of cellphone towers and parts of its landline phone business.
The price of gasoline may be down, but UPS rates are going up. The company announced that surcharges will be applied to residential packages after it suffered a disappointing holiday season.
On the security front, if you use the popular Flash Player, you may want to be cautious with it until Adobe (ADBE) releases patches to fix a recently discovered vulnerability to outside attack. It’s the third “zero-day” flaw found in Flash Player in a month.
Yesterday, FCC Chairman Tom Wheeler dropped some hints about how the agency proposes to resolve the fierce debate among Internet content providers and service providers regarding “Net Neutrality.” In its forthcoming ruling on the issue, Wheeler said he will submit a proposal this week for new FCC rules that would ban paid prioritization on both wired and mobile networks. Wheeler is also urging his fellow commissioners to block state laws that would prevent cities and towns from building out their own government-run Internet services.
Where do we stand with wearable computers? One scientist argues that public response is currently comprised of maybe 20% limited penetration vs. 40% abandonment, meaning that wearables lie very early on the technology adoption life cycle. But little Pebble, for one, is doing well, having shipped its one millionth smartwatch at the end of last year. Big hardware/software changes are due to its product in 2015.
Nanoscale monitors in your bloodstream that provide early detection of a pending heart attack may be closer than you think, according to researchers at Scripps Health San Diego.
Do you have problems with your home Wi-Fi network? A new company may have an answer with its smart router. It’s currently taking preorders.
And finally, you may know League of Legends as the world’s most popular online video game, with 27 million daily users. But did you also know that it’s a megascale experiment in behavior modification?