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POV: Tech & Media Quarterly Earnings Roundup

Mindshare Point of View:

Background
Apple, Yahoo, Google, Facebook, LinkedIn, Twitter, Microsoft and Amazon have all recently reported their latest earnings. Most showed positive momentum in terms of revenue and beat earnings forecasts; Amazon even turned a profit and had it not been for currency fluctuations the results would have been even stronger. However, each company has an area of growing concern and that has the market questioning the future earning potential for these companies.

Implications
Apple: The company launched the Apple Watch and Apple Music, has iOS 9 coming out soon, is finally updating Apple TV, rumored to be working on an iPhone 7, and had a 112% growth in China. Yet the market is concerned over its reliance on China for growth and the future of that economy and whether Apple Watch will stick. But the future of Apple isn’t really in question. What’s more in question is what’s next for Apple. Or better yet, what exactly will it do with that stockpile of $203bn in cash it is sitting on?

Facebook: This quarter was seen as a quiet quarter for Facebook even though the company reported: a user base of 1.49bn (with 844M daily active users on mobile); advertising revenue up 43% (with 75% of that revenue coming from mobile) and a growing revenue stream through video and Instagram. However, expenditure was also up by 82%.

Amazon: Turned 20 this year, beat revenue forecasts by 20% and surprised the market by turning a profit this quarter. The company is spending a lot of time testing and experimenting with Dash (button attached to surfaces which facilitates reordering), Echo (wireless speaker and voice-powered personal assistant), and Prime (service allowing unlimited streaming of movies and TV shows). Amazon also launched Prime Day in July, a flash sale which returned over a $1bn in sales and showed the market place just how powerful Amazon is when it comes to retail.

IPO Rumors: Beyond the publicly listed companies the “unicorn” companies (dubbed as such, due to the perceived rarity of a private tech start-up being worth $1bn). Just a few of those are Snapchat, Pinterest and Spotify. We expect to see both Snapchat and Spotify move to IPO in the next 12 months – Evan Spiegel, Founder & CEO of Snapchat is quoted as saying, “We need to IPO. We have a plan to do that. “– While Pinterest has confirmed that it has no “short-term” plans to go public.

Summary
Many are speculating that there is another “tech bubble” getting ready to burst. There are concerns over competition in mobile and EU regulators for Google, Twitter’s worry is user growth, Yahoo needs to regain its place in the frontline in consumer minds whilst Microsoft has moved away from selling its advertising product. All while most of these companies outperformed earnings results. But this “tech bubble” is showing a number of bright spots as innovation is showing no signs of slowing – e.g. Amazon Dash, Spotify Running, and Snapchat 3V ads – and companies are diversifying – e.g. Facebook’s Atlas and Apple’s rumored mobile network.