The Doyle Report: What the Latest Tech Earnings Say About Today’s Tech Industry
Alphabet (Google), Amazon, Apple, Microsoft, Nokia, Symantec and others released quarterly financials recently. Their collective results suggest a healthy albeit changing market.
Here’s what you need to know from a review of four of tech’s largest titans.
Alphabet
Did you see the headlines about Google’s parent Alphabet? Shares plunged this week after the Mountain View, California, company released earnings. The company missed expectations and spooked analysts when it said that costs were rising. Also, the company took a hit from the new Tax Act, which pushed its quarterly GAAP results into the red.
That’s the bad news.
The good news at Google is that sales rose 24 percent year-over-year for the three months ended Dec. 30, 2017. What is more, the company’s cloud business is now generating revenue in excess of $1 billion per quarter, and growing faster than Microsoft, AWS or any other major public cloud provider, according to CNBC.
Google is still first and foremost an advertising company. But its investments in partner recruitment, cloud services and office productivity tools are having a bigger impact on the channel than most people realize.
Bottom line: Google is more than a stock ticker, a search engine or ad machine: It’s also a top 10 provider of cloud services and more to channel partners.
Amazon
Remember the days (think years) when Amazon never posted a profit? They are so yesterday.
This week, Amazon posted results for the fiscal fourth quarter ended Dec. 31, 2017. For the period, Amazon recorded its first $1 billion quarterly profit. More to the point, it very nearly posted its first $2 billion quarterly profit, coming in at $1.9 billion on sales of $60.5 billion. Sales for the quarter jumped 38 percent year-over-year. For perspective, Amazon’s quarterly sales growth is roughly twice the annual revenue of Salesforce, one of the fastest growing companies in all of tech. It’s mind-boggling big, in other words.
So how did the company do in cloud? For the period, AWS sales jumped to $5.1 billion from $3.5 billion. For the year, AWS posted net sales of $17.5 billion, an increase of more than $5 billion over 2016. In fiscal 2017, the company introduced 1,430 new services and features for AWS. The company also said that Disney, Expedia, CapitalOne, Honeywell and others made significant commitments to it.
Love it or loathe it, you cannot escape the fact that Amazon (and AWS by extension) is the single, most disruptive force in not just retail but arguably technology, too. As it gets deeper into AI, managed services, the IoT, containers and more, watch for Amazon to drive new business models, present existential challenges and create new opportunities at the same time.
Amazonazing!
Apple
Talk about a money machine. Apple now generates more revenue per quarter from the sale of iPhones alone than Cisco generates in total annual revenue in a year — by a wide margin. (The sum is greater than $10 billion.)
For the first fiscal 2018 quarter ended Dec. 30, 2017, Apple sales rose to $88.3 billion, up 13 percent year-over-year. Earnings, meanwhile, jumped to a whopping $20 billion. (Yes, the company nets more than $1 for every $4.42 that it sells.)
If measured by its quarterly profits alone, Apple would still qualify for a spot on the annual Fortune 500. As it is, Apple is nestled near the top of the list, which measures revenue, just behind Walmart and Berkshire Hathaway.
For the period, Apple’s results were buoyed by price increases on iPhones. The latest iPhone X, which was released in November with an eye-opening price of $1,000, helped lift the overall average price of iPhones sold by the company in the December quarter by 15 percent. At a time when other tech companies are expected to cut prices on products and services, this is a remarkable thing.
Alas, not everything is going right in Apple’s world.
The company still trails Amazon, Google and others in sales of voice-activated search devices. It’s not a dominant player in music streaming services or cloud computing. And despite rising watch and wireless earbud sales, the company simply hasn’t come forth with a dazzling, must-have breakthrough innovation in years.
To this reporter, it feels as though Apple, for all its prowess and financial success, has stumbled into a Microsoft-like malaise, circa 2010.
One hit could change everything. But what? many Apple fans wonder.
Microsoft
Like many of the other tech titans, Microsoft turned in what can only be described as “another strong quarter.” In fact, that’s precisely how CFO Amy Hood described the quarter in the company’s corporate earnings release. CEO Satya Nadella put his own spin on the three-month period ended Dec. 31, 2017, during which sales jumped an impressive 12 percent. (They were better than expected.)
“This quarter’s results speak to the differentiated value we are delivering to customers across our productivity solutions and as the hybrid cloud provider of choice,” said Nadella. “Our investments in IoT, data, and AI services across cloud and the edge position us to further accelerate growth.”
So what’s hot at Microsoft? A lot, actually. Surprisingly, sales of consumer productivity products and cloud services are growing faster than commercial ones. (Watch out, Apple.) And sales of what Microsoft calls “Intelligent Cloud” products and services, which includes Azure, jumped 15 percent.
While AWS may very well be the most disruptive company in tech today, Microsoft has to be its most successful grinder. Last month, for example, CNBC reported that Microsoft may have taken market share from AWS in the fourth quarter. That’s a big deal.
It’s also a big reason channel companies, when asked, tend to say that Microsoft is leading the channel into the future. In past years they might have said IBM, HP or Cisco. But not today.
Credit Nadella and his team. They don’t necessarily produce the most dazzling breakthroughs. But they deliver some of the most strategic ones.
In Summary
By almost all accounts, the December 2017 quarter will go down as one of the tech industry’s best in a long time. There are ample reasons why.
For the first time in seemingly ages, all of the world’s major economies are growing. No wonder CompTIA’s 2018 Industry Outlook report concludes that “if everything falls into place, the upside of the [tech] forecast could push growth into the 7 percent-plus range.”
Little wonder partners seem to have as much work as they can handle.
The bottom line on these and other bottom lines is that we are off to a good start in 2018. War with North Korea, turnover in the White House and other factors could change things. But the industry is making gains.
While you are racking up new sales, keep an eye, however, on evolving business models. They will impact the channel far more than the rise or fall of any one vendor in a given quarter.
