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Tech Roundup: AAPL Earnings, YELP's Eat24 Goes to GRUB

Joining companies like Alphabet GOOGL, Facebook FB and Workday, Microsoft MSFT has announced that it will switch to GAAP reporting, warning that this will materially change its financial results as licensing revenues will then be recognized upfront. GAAP-only reporting will become compulsory by January 2018, so results of public companies are uniform and therefore, easier to understand.    

Now for the top stories-

Apple Reports

Apple AAPL reported revenue and earnings that were ahead of the Zacks Consensus Estimates. iPhone revenues grew 3% with the mix continuing to improve, services up 22% driven by the large and growing installed base, iPads up 15% driven by increasing sales in the U.S, China and Japan, Macs 1% and other products 23%. The September quarter guidance indicated a jump in iPhone sales allaying fears of a delay in the iPhone 8 launch and offsetting the disappointing performance in China to send up share prices.

Yelp Sells Eat24 To GrubHub

Yelp YELP is selling Eat24, the food delivery service it picked up a couple of years ago to competing service GrubHub. It’s getting a very good price too ($287.5 million, or more than double the $134 million it paid for it). Plus there’s a five year deal that will allow it to send customers to Groupon’s network of 55,000 restaurants. It also enables Yelp to focus on what it does well, which is the creation of a database of review content to help customers make choices. All this is subject to customary closing conditions today.

As far as GrubHub GRUB is concerned, the deal helps it become the leading player in online and mobile food delivery and gives it access to a valuable content database. It also eliminates a competitor. Yelp CEO Jeremy Stoppelman has said that “Eighteen months ago, one in five orders going to Eat24 was coming from Yelp, today it is one out of three orders,” and that the volume growth is “north of 50%.” This is just what GrubHub needed to fend off competition that comes from a mega player like Amazon entering the market.

Nanya Expanding Memory Chip Output

Reuters reports that Taiwan-based Nanya Technology has said that it will be investing $1.85 billion to expand its DRAM capacity so it can build a new headquarters, a fabrication plant and purchasing equipment, thus increasing its total production capacity to 68,000 wafers per month and facilitating its move to 20-nanometer process technology. The investment, which is specifically targeted at IoT devices in vehicles, homes and offices, will also add T$20 billion to its annual revenue next year.

Nanya hasn’t developed its own process technology but licenses it instead from market leader Micron MU, to which it earlier sold its stake in Inotera.  The agreement promises Micron an equity stake in Nanya as well as royalties based on revenues. But there are caps on production so it can’t offer effective competition for Micron and which also limit its share to 3% of the market, according to AnandTech.

Ticker

Price Change Last Week

Price Change Last 6 Months

AAPL

+5.15%

+21.16%

FB

+0.22%

+29.50%

GOOGL

+0.03%

+18.01%

MSFT

-0.03%

+14.13%

INTC

+3.10%

-6.13%

CSCO

+1.11%

+3.00%

AMZN

-0.02%

+24.03%

Other stories

Corporate

Oppenheimer Negative on Apple China Chances: Oppenheimer analyst Andrew Uerkwitz feels that WeChat, which lets you pay bills, transfer money, order takeout, download games, message other users and more is the real threat for Apple in China and the reason that Apple is seeing erosion in its China market share.

Although Tim Cook said on the earnings call that WeChat had integrated many iOS features and its broad-based usage actually helped customers to switch from other platforms to Apple’s, Uerkwitz said the argument was without merit. The fact is that since WeChat lets you do so much (all the above plus business communications), it operates much like an operating system itself. So customers have less of a reason to prefer Apple. Facebook’s Messenger strategy is following in WeChat’s footsteps.

Google Hires New Smart Home Design Chief: Former VP of Design at smartwatch startup Pebble and former head of user experience at Essential, Andy Rubin’s smartphone startup, Liron Damir has been picked to head up the unit responsible for the design of Google Home products. The goal is to improve the user experience. With Apple and Microsoft expected to enter the market later this year, this may be a good time to spruce up Home to tackle the increased competition.

Martin Sorrell Positive on Snap: Advertising giant Martin Sorrell says he will increase his stake in Snap from $100 million to $200 million this year as he thinks the social network is "more competitive as the third force," whatever that means. For comparison purposes, his investment in Facebook is expected to rise from $1.7 billion last year to $2 billion this year.

Legal/Regulatory

AWS China Gets Government Order: China's Ministry of Industry and Information Technology (MIIT) has ordered Beijing Sinnet Technology, Amazon’s AWS operator in China to send letters to users asking them to stop using virtual private networks (VPNs) that allow them to circumvent the country's Internet restrictions. A failure to comply may lead to the shutting down of the offered services and their websites. This follows Apple’s decision to comply with a similar order, which led to the removal of VPN apps from its App Store.

Amazon Under Federal Scrutiny: Amazon has admitted that it sold $300 worth of consumer goods to at least one person on the government’s black list of people and entities associated with terrorism under Executive Order 13224. The person or entity in question is in Iran. An earlier filing mentioned sales worth $1,300 but it isn’t clear if the two dealings were with the same person.

It now also appears that Amazon may have sold other high value items that put it in contravention of the Iran Threat Reduction and Syria Human Rights Act or other U.S. sanctions and export-control laws. It also sold several other products to various Iranian embassies between January 2012 and June 2017.

New Products/Technology

Microsoft Surface Payment Plans: Microsoft has unveiled two payment plans, the first one targeted at students and the second at businesses. The Surface Plus for students is designed to lock them into the Microsoft ecosystem and requires them to pay monthly installments for two years and then return the device in good condition for an automatic upgrade to the later version.

The second one is an installment system for businesses (mainly SMBs) based on the older Surface Membership program that allows employers to buy Surface devices for employees and pay in 18, 24, or 30-month installments.

Windows Eye-Tracking Technology: Microsoft is bringing a new eye-tracking feature that will allow people with disabilities to control things like an on-screen mouse and keyboard, while also operating a text-to-speech feature just using eye movements. The technology was inspired by former NFL player Steve Gleason, who suffers from ALS, a progressive neuro degenerative disease that gradually removes the person’s ability to move by denying nourishment to his muscles.

New HP POS System: Aaron Weiss, VP and general manager of retail at HP says, “The new HP ElitePOS solution is built for versatility with a sleek and stunning design that can adapt to multiple retail and hospitality environments, while still offering the security, performance and long-term durability that our customers expect from HP.” The system is designed to bridge the experience gap between digital and brick-and-mortar retail and encourage more traffic to the store.

M&A And Collaborations

Amazon Invests in TrackR: Amazon has invested in a Series B funding round for a Santa Barbara based startup that develops apps to help you find personal belongings provided they are Bluetooth enabled. Its integration with Amazon Echo enables the smart home device to find a phone that has the TrackR app installed. The company has raised $60 million so far, of which $50 million was raised in the last round. The other investors in this round were Revolution Growth, Foundry Group, DoCoMo Capital, The Glenmede Trust and Bespoke Strategies.

Alibaba-Kering Have A Deal: Kering, owner of leading fashion brands such as Gucci and Saint Laurent, has reached a deal with Alibaba. Accordingly, the company will be withdrawing its 2015 lawsuit against the ecommerce giant wherein it alleged that Alibaba had knowingly allowed counterfeits to be sold on its Taobao marketplace. Going forward, it will join with Alibaba to deal with the problem, exchanging information as necessary and going to law enforcement when required to “take appropriate action against any infringers of Kering’s brands identified with Alibaba’s advanced technology capabilities.”

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Yelp Inc. (YELP): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
Alphabet Inc. (GOOGL): Free Stock Analysis Report
 
GrubHub Inc. (GRUB): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
Micron Technology, Inc. (MU): Free Stock Analysis Report
 
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