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Tech Roundup: OTA Earnings, INTC Mobile Loss, GOOGL Auto

Earnings season is winding down and there were just a few hot companies reporting last week, including Priceline PCLN, TripAdvisor TRIP, Alibaba BABA, Yelp YELP and Fitbit FIT. But there were some other interesting headlines such as Intel INTC abandoning some SoFIA chips and Alphabet GOOGL officially announcing its Ford connection.

Here are the top stories-

Earnings Reports

Priceline: Online travel agent (OTA) Priceline.com topped first quarter guidance on all counts and easily beat the Zacks Consensus Estimate on revenue and earnings. All the key performance metrics were strong. The biggest growth engine, hotel room nights continued to grow strongly, as did rental car days. Air tickets were weaker. Bookings on the agency model (70% of bookings) were up very strong double-digits, an indication of the health of the busness.

Management expects FX to have a negligible impact on second quarter results, but still produced inexplicably weak guidance, especially given that it now also has vacation rental properties (integrated into Booking.com), which grew 40% in the last quarter. But three things could be at play: first that management tends to guide conservatively; second, they are expecting some early bookings related to summer travel to be realized in the third quarter; and third, the travel market is slowing down.

The first one is more likely because the second factor is seasonality and would be roughly comparable year to year making the guidance below-seasonal. The third reason is also unlikely because market research projections point to a strong travel market.

TripAdvisor: Unlike Priceline, TripAdvisor missed the Zacks Consensus Estimate on both revenue and earnings as both subscription and advertising sales declined. The core Hotel business, which makes up 86% of revenue, was weak, with the Other segment growing. North America was the only region that grew sales. The weakness in Hotels is tied to the rollout of the Instant Booking feature, which defers revenue recognition to when the traveler stays at the hotel rather than when the hotel is booked, which gives the impression that’s ales were weaker. So its impact is less apparent in areas like North America, where it was rolled out first.

Alibaba: The Chinese ecommerce company reported earnings that missed the Zacks Consensus Estimate on revenues that surpassed. The last quarter’s results validated Alibaba’s position that a weaker Chinese economy wouldn’t dampen investor appetite to use its services. The company did particularly well in mobile where GMV soared 71% and mobile monthly active users jumped 42%. Cloud revenue, while at just 4% of revenue, grew triple digits.

GrubHub: The online and mobile food ordering company reported first-quarter 2016 results, wherein net income decreased 6% on a year-over-year basis although earnings were in line with the Zacks Consensus Estimate. Management called out Amazon and Uber Eats as new bogeys, which probably hurt share prices. But management remains confident about its growth prospects, stressing on the fact that delivery times can’t be speeded up with more bikes on the road but with sending more orders to restaurants, something it is confident it will manage. And true enough, it reportedly has partnerships with 40K takeout restaurants across 1,000 plus U.S. cities with millions of users availing the service. So it’s definitely not a write-off yet.

Yelp: The company’s loss was greater than the Zacks Consensus Estimate while revenue was ahead. But management chose to be optimistic with the statement “We hit a major milestone in the first quarter, surpassing 100 million cumulative reviews.” But it was encouraging to see that local ad revenue grew 40% with local ad accounts growing 34%. Another important metric was app unique devices, which grew 32%.

Fitbit: Fitbit’s top and bottom lines beat the respective Zacks Consensus Estimates. The company will however be spending more on R&D (so it can come out with more innovative and cost effective products) and marketing, which is vital for any consumer products company. Apple can come in with a Watch and take immediate market share because it already has a loyal customer base and brand value. For a company of Fitbit’s stature, it’s not just a question of maintaining its brand image but also building it, especially as it targets markets across the world. So these expenses are necessary and not extravagant, certainly no reason to punish the shares.

ActiVision: The company beat the Zacks Consensus Estimate for both revenue and earnings. The acquisition of King Digital Entertainment, increasing digital revenues and continued strength in the Call of Duty title were the drivers.

Intel Dumps SoFIA, Broxton

Intel shocked the investor and analyst communities when it announced the 11% reduction in its workforce and everyone has been wondering whether there was some specific area that was getting the axe. No one is saying that it’s all coming from mobile that Intel broke out for a couple of years before hiding it behind the PC business. But Intel’s mobile efforts have struggled and failed to make an impact on the market that continues to be dominated by ARM architecture and Qualcomm chips. The fact that Intel hasn’t been able to get its mobile chips out fast enough also meant that it missed important opportunity windows.  

Now Intel is saying that doing away with some SoFIA (Smart or Feature Phone on Intel Architecture) chips, specifically 3Gx, LTE, LTE2 and the Broxton SoC for smartphones and tablets will help it move resources to “products that deliver higher returns and advance our strategy.” We don’t doubt it.

But the question seems to be what these products might be. If you’re thinking data center, cloud etc, think again. Intel may have fallen back in the mobile race, but it refuses to bow out. It’s now saying that it will invest to make a comeback when it’s time for 5G adoption. Well... that’s still several years away, so we can chill on Intel mobile for now.

It’s Official: Alphabet and Ford Chrysler Have Deal

In the previous week I commented on a fresh rumor involving Alphabet and Fiat Chrysler, wherein the two were thought to be collaborating on self-driving cars. Fiat is carrying a huge debt pile so resources to fund this new technology were scarce. Alphabet, on the other hand, is widely believed to have a headstart in the development of self driving technology, having already tested it across several million miles.

Last week, Google confirmed the rumor saying that it would be loading its technology into 100 new 2017 Chrysler Pacifica Hybrid minivans with the expectation that the first few would hit the roads by year-end. This is the first time that the company is working directly with an auto manufacturer (its previous attempts involved a ready-made vehicle from Toyota and another it built from scratch).

It is a non-exclusive deal on both sides, meaning that both the companies have the option of seeking other partners.

Company

Last Week

Last  6 Months

AAPL

-1.09%

-23.41%

FB

+1.62%

+15.66%

YHOO

+1.72%

+5.55%

GOOGL

+2.43%

-3.02%

MSFT

+1.04%

-5.34%

INTC

-0.79%

-11.92%

CSCO

-3.49%

-7.79%

AMZN

+2.18%

+7.25%

Other stories you might have missed-

Corporate

Tim Cook Visits China: Investors are generally concerned about Apple (AAPL) since some of its services (iBooks Store and iTunes Movies) were banned in China last month and Apple had perhaps its most disappointing quarter with a declining China business and weakness in overall iPhone sales. People have in fact started questioning its innovation engine. So Tim Cook finally took to media to say that “he could not be more optimistic.” It appears that he’s also going to China later this month to iron out issues.

India Rejects Used iPhones: N.N. Kaul, a spokesman from India’s telecom ministry has reportedly said that “India does not encourage dumping or recycling of hazardous materials" after a newly formed lobby group including local phone makers Karbonn, Micromax and Intex as well as Korean phone maker Samsung applied to the government saying that allowing used iPhone sales violated India’s anti-dumping rules, hurt them directly and made a mockery of Prime Minister Modi’s “make in India” initiative besides increasing electronic waste.

Apple does have a Plan B: its smaller $399 (plus import duty) iPhone SE that will be attractive for some. At the same time, SE doesn’t come as cheap as the $150 average price of a smartphone in the country. Tim Cook has said that demand for LTE phones will drive future demand for iPhones in India.  

Apple Hires Illustrious Google-Ex: Apple has hired Yoky Matsuoka, co-founder of Google X. She also worked as technology head at Nest after co-founding it and before it was acquired by Google, taught at Carnegie Mellon University and the University of Washington,  and finally, as CEO of Cambridge, MA-based startup Quanttus. At Apple, she is reporting directly to Jeff Williams, who is in charge of Apple Watch and the company’s health initiatives, such as its HealthKit, ResearchKit and CareKit.

Cisco Has New Brand Campaign: Cisco has started a new branding campaign titled “There’s never been a better time”. The campaign has been directed at not just companies, but also their employees and business partners. It includes a global advertising campaign with regional focus on impact stories (so more relatable) and a reseller-focused co-branding initiative (including immediate training and access to assets). The campaign is also being run digital-first mobile-first, meaning that it kicks off on mobile devices with TV and other media ads following up later.

Yahoo Sale to Make Mayer Rich: Yahoo has revealed in a regulatory filing that its CEO will receive a severance package of $55 million if the Yahoo sale leads to the loss of her job before a year is out. Mayer’s pay has been going down in recent years ($42 million in 2014 to $36 million in 2015) as she failed to meet performance targets. The value of her options has also been declining with Yahoo’s share price. So the severance package does look attractive. Mayer is not the only one benefiting, however: Chief Revenue Officer Lisa Utzschneider could get about $20 million while Chief Financial Officer Ken Goldman may receive $16 million in same eventuality.

Millions of Emails Hacked: Hold Security has discovered that a young Russian hacker has stolen credentials for millions of email accounts. While Russia’s most popular Mail.ru is the biggest casualty with 57 million compromised accounts, Yahoo Mail has 40 million, Microsoft Outlook 33 million and Gmail 24 million accounts. Various German and Chinese email service providers are also on the list. Meanwhile, Facebook just awarded $10k to a 10-year old Finnish boy for exposing a security flaw in its photo sharing service Instagram.

Google Offers Credit Card Alternative in India: Google has tied with Idea Cellular to facilitate purchases of apps, digital books and games on Android that can be charged to their phone bills. Idea has enlisted British company Bango to integrate the technology. The alternative will help payments by users without credit or debit cards.

Legal/Regulatory

Facebook Lawsuit Over Photo Tagging: A San Francisco Judge has ruled against Facebook’s appeal that photo tagging proceedings against it be ended. In 2008, the Biometric Information Privacy Act was passed in Illinois, requiring companies to obtain explicit permission from consumers before collecting or storing biometric data. Facebook policy documents do have a related clause and the company says people can opt out of the option, but the point is, it is turned on by default. Facebook may pull out of this fight as it did in Canada and Europe and remove the feature altogether. It’s not the only one under fire though; in March, Google was also hit with a lawsuit because its photo-tagging feature violates Illinois law.     

WhatsApp Blocked in Brazil: WhatsApp’s failure to turn over data in a criminal investigation led to an order calling for its blocking in Brazil. This is the second time in six months that the messaging service has been penalized in this way. The fine for not cutting off the service has been decided at around $143K a day.

New Technology/Products

Amazon Food Delivery: Amazon added San Francisco to its restaurant delivery list comprising Portland (OR), Seattle, Chicago, San Diego, Los Angeles, Austin and Baltimore. Of course the service is only for Prime members (people who sign up for $99 dollars a year for free two-day shipping and other perks such as this). The San Francisco launch includes 33 zip codes and includes 117 different restaurant choices. Amazon doesn’t seem to care that there’s plenty of competition in the market what with UberEats, GrubHub, Caviar, Munchery and Postmates since unlike the others, it isn’t charging customers for the service. 

Google Files for Electric Vehicle Charging Patent:  Last week, Google applied for a patent for “methods, systems and apparatus, including computer programs encoded on a computer storage medium, for smart electric vehicle charging and a mediator device for the same.” Kurt Adelberger, one of the inventors listed in the application, left Google for Apple last July. So the patent application increased speculation that Apple is continues to make progress with respect to its electric car. Apple maintains its tradition of not announcing its product until it is ready for a much-hyped release.  

Google Awarded Patent for Drone Delivery: Google’s Project Wing finally has a patent called “A bystander communication module” describing a drone that lowers goods to the ground using a tether. While dropping off the package, there will be some sort of alerting mechanism that will let out a beep, a message asking people not to approach or red and yellow lights, or any combination of these, in order to facilitate safe landing and avoid injury.

M&A

Apple, SAP Partnership: Building on its app-making relationship with IBM, Apple announced a partnership with SAP. The enterprise software maker will not only build corporate apps for Apple’s mobile devices based on its Swift programming language, but also create a software development kit that can help enterprises build their own apps for Apple devices. Notable is the fact that IBM and SAP are pretty close collaborators in the cloud with IBM consulting services and SAP’s back office systems being widely used across enterprises. Apple seems to be strengthening in the segment through its collaborations.

Microsoft Buys Solair: Microsoft has snapped up an Italian IoT service platform called Solair for an undisclosed amount. Solair helps customers gather data from the IoT devices they sell in order to improve their marketing and sales. Solair is a small company, but it has done some work with Italian espresso machine manufacturer Rancilio Group and food processing machine company Minerva Omega Group.

Amazon Partners with Atlas Air Next: After the deal with ATSG, which fetched 20 jets for package delivery and ended up with Amazon buying a 10% stake in the company, last week, Amazon said it was leasing another 20 from Atlas Air Worldwide Holdings (AAWH). This time too, Amazon has the option of buying up to 30% of the company at $37.50 a share after the company’s shares are issued. Amazon can buy 20% over five years and another 10% over seven years.

Pivotal Gets Some Big Investors: A $253 million investment round that values Pivotal at $2.8 billion saw Ford as the lead investor and Microsoft as a first-time investor. EMC (which spun off the company some years back), VMware and GE (which owns the 10% stake it acquired in 2013 for $105 million) are other investors in this round. Pivotal, which is a software tools and service provider with relationships with all the leading cloud infrastructure providers (Amazon, Microsoft and Google) reportedly has an annual order runrate of $115 million.

Some Numbers

Chrome Leads in Browsers: Fresh Net Marketshare statistics say that Google’s Chrome has overtaken Microsoft to become the company with the most used browser. Google Chrome’s market share has gone to 21.79%, with Internet Explorer 11 falling behind at 19.88%, Mozilla Firefox at 9.76%, Apple Safari at 4.91% and Opera at 1.89%.

Some Other Companies That Reported Last Week: Paycom, Equinix, Paylocity, GoDaddy, Insperity, Fiserv, Zynga, QLogic, Teradata, Monster Worldwide, Cognizant.

Some Companies Reporting This Week: On Semiconductor, Dun & Bradstreet, Electronic Arts, CA Inc, NVIDIA, Symantec

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PRICELINE.COM (PCLN): Free Stock Analysis Report
 
INTEL CORP (INTC): Free Stock Analysis Report
 
YELP INC (YELP): Free Stock Analysis Report
 
TRIPADVISOR INC (TRIP): Free Stock Analysis Report
 
ALPHABET INC-A (GOOGL): Free Stock Analysis Report
 
ALIBABA GROUP (BABA): Free Stock Analysis Report
 
FITBIT INC (FIT): Free Stock Analysis Report
 
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