Tech Earnings To Finish With A Bang With Apple, Facebook
Tech investors last week discovered business at Intel and IBM isn’t as slow as some feared, that Google’s plan for Internet domination is still humming along and that Yahoo’s core business — minus cash and its Alibaba stake — is probably only worth about $3 or $4 a share.
This week, they’ll find out whether Apple’s iPad sales are helping or hurting growth, how much competition Facebook is giving Google in the online ad market, and what the post-layoff plan is from Microsoft CEO Satya Nadella.
When Apple reports fiscal third-quarter results Tuesday, the year-over-year comparisons for its iPad business will be set relatively low, as the company’s tablet sales plummeted 27% in last year’s period.
In April, Apple said iPad sales fell 13% for the three months ended in March, compared with a year earlier, and slipped 2% during the prior nine months on that same basis.
While the iPhone still contributes more than half of Apple’s revenue and most of its profit, it was a surge in iPad sales two years ago that helped spur the company’s stock price to an all-time high.
Thanks to a dividend boost for income investors and a stock split to help market Apple shares, they’re now priced within 10% of their record high of September 2012.
Yet Wall Street expects Apple’s sales to climb a meager 6% for the fiscal year ending in September.
With the iPhone still the favorite of high-end U.S. consumers but struggling to be more than a niche device in Asia, CEO Tim Cook is searching elsewhere for growth.
A day may come when smart watches, smart TVs or headphones from Beats Electronics become large enough businesses to move the Apple growth meter.
But the iPad remains the company’s second-most important product line. If sales there continue to fall, Cook will have a harder time holding on to growth investors.
For Facebook CEO Mark Zuckerberg, the growth story is a question of how much business the company’s sales teams can wring from the corporate brands now stampeding to buy more video and mobile ads.
Wall Street analysts expect Facebook to report that sales rose 55% for the quarter ended in June, as the company benefits from a surge in social media advertising.
That’s two-and-a-half times faster than the 22% revenue growth Google reported last week as the two companies fight for online ad dominance.
Researcher eMarketer predicted last week that Google would capture just under a third of all online advertising this year and 50% of mobile ad dollars.
While that leaves Facebook in second place, its share of the total ad market is expected to climb to 22%, from 18% last year, as it places more video ads in user news feeds.
Also this week, Microsoft investors will get more details on how Nadella plans to implement his strategy of prioritizing the company for the mobile and cloud computing markets.
Shedding 12,500 of the workers the company added when it acquired Finnish device maker Nokia — and 18,000 employees overall — may be a good start in re-aligning the company with its markets. Microsoft employs 125,000.
While lower operating expenses should help its stock price, Nadella also is looking hard for more sales growth, which analysts expect was 11% for the fiscal year ended last month.
With the company’s smartphone efforts yielding no more than niche market share, the results of its high-priced push on a new Surface Pro tablet are still unknown.
We’ll be listening on the Microsoft conference call Tuesday as Wall Street queries Nadella on whether he can squeeze more sales and profit out of the company’s traditional markets while trying to develop the Surface platform into a mobile game-changer.