Topic: Financials
Samsung Electronics Announces Fourth Quarter and FY 2016 Results – Samsung (Jan 23, 2017)
Samsung released preliminary numbers a few days ago, and rather shocked everyone by previewing some of its best results in a long time (and its best operating margin ever). Until today, though, we didn’t know the precise breakdown by segment behind those numbers – now we do: the mobile business rebounded decently from last quarter, but is still a shadow of its former self in terms of both revenues and profits, while the semiconductor business is going gangbusters. The latter provided a quarter of revenues but a little over half of operation profits for Samsung Electronics last quarter, and was the major driver of that fantastic overall operating margin. An increasing focus on premium products and rising prices driven by tight supply versus demand both helped that division, while on the mobile side Samsung seems to have done a good job selling Galaxy S7 phones to those who might otherwise have bought a Note7. It looks like Q1 might be a little tough on the mobile side – we won’t get a Galaxy S8 at Mobile World Congress in February, meaning Q1 will be the lull quarter before a likely launch in Q2. But overall this is a pretty decent set of results for a company dealing with the fallout of the Note7 recall.
via Samsung Electronics Announces Fourth Quarter and FY 2016 Results – Samsung (Samsung’s earnings deck with lots more detail here and there’s more coverage on Techmeme. You might also be interested in the Samsung Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service)
Yahoo Reports Fourth Quarter and Full Year 2016 Results – Yahoo (Jan 23, 2017)
Yahoo’s results seem to have been well received, though it also announced that the Verizon acquisition now likely won’t close until Q2. The results themselves are a mixed bag, really – there’s been an interesting switch between search and display advertising performance over the past year, with erstwhile strength search taking something of a dive, while display advertising actually performs better. Overall revenue after traffic acquisition costs is still down year on year, but Q4 was stronger by far than the rest of 2016. Yahoo has changed the presentation of so many of its metrics that many of them are impossible to compare on a like for like basis year on year, but positive change overall is still hard to find in the results. Mostly, they’re probably better described as less bad rather than actually good. There’s plenty here for Verizon to sink its teeth into when the deal eventually does close.
via Yahoo Reports Fourth Quarter and Full Year 2016 Results – Yahoo (further coverage on Techmeme)
Can Snapchat’s Culture of Secrecy Survive an IPO? – Bloomberg (Jan 17, 2017)
It’s an interesting change to see a story like this written about a company other than Apple, which is usually the focus of articles about obsessive secrecy. Snap is of course a private company at this point, and so has had to share very little about its business with very few people, but that will all change with its IPO, so it’s going to have to get better at divulging at least some things to its investors. On the other hand, I always feel like the media likes stories about how secrecy makes things harder for companies – perhaps because it makes things harder for reporters – and yet there’s very little evidence to back up the claim. Some of the best companies are the best at keeping secrets about their products, precisely because they want to control the narrative when the products are ready for release, rather than have others write the narrative for them based on leaks and rumors.
via Can Snapchat’s Culture of Secrecy Survive an IPO? – Bloomberg
Eyeballs Are No Longer Enough for Netflix – WSJ (Jan 17, 2017)
This piece is largely speculation – there’s no evidence presented that investors are impatient for Netflix to start churning out bigger profits or reducing its cash burn. Rather, those investors seem to understand that rapid international expansion at the expense of short-term profits is key to longer term success for Netflix, because it drives much faster overall growth and helps spread the cost of content over more users. Netflix’s domestic business is already very profitable on a contribution basis, while its international business is profitable on the same basis in some markets. Growing and getting past the early high investment in customer acquisition in other international markets should put Netflix in the black there too. Netflix definitely does need that growth – at the rate it’s increasing content spending, it has to grow revenues to stay ahead of costs – but on balance I’m fairly bullish about Netflix’s ability to make its strategy pay off.
via Eyeballs Are No Longer Enough for Netflix – WSJ
Parrot is laying off a third of its drone division – Recode (Jan 9, 2017)
I’ve tagged this one against the Hardware is Hard narrative, because it seems the perfect illustration – thin margins in the face of aggressively priced competition from China is the perfect encapsulation of much of what ails the hardware industry. On the other hand, it’s also notable that Parrot is heading deeper into the enterprise drone market and pulling back from the consumer side – that seems an entirely sensible move in the face of the competition, and should work out better for the company. DJI, though, seems increasingly dominant here, while I’m curious about how GoPro will fare – it faces the same issues as Parrot across its entire business, and may well see similar results in drones specifically.
via Parrot is laying off a third of its drone division – Recode
Lyft Co-Founder John Zimmer Drives And Dishes On Automation, Car Subscriptions, And Cash – BuzzFeed News (Jan 6, 2017)
An interesting tidbit in here – Lyft is already profitable on a per-ride basis, and the $150m or less it aims to lose each quarter is down to customer acquisition costs – free rides and so on. In that sense, it’s like many enterprise SaaS companies, and the burn rate is a factor of the rate of growth versus the base of customers. Lyft is much smaller than Uber, but also losing a lot less money. The key question therefore is whether it can at some point shift that balance between growth and profitability despite its smaller scale.
T-Mobile Delivers Strong Customer Growth Once Again | T-Mobile (Jan 5, 2017)
The headline here is strong growth, though compared to last year’s results there aren’t huge differences. Total branded net adds were actually down slightly, largely because of lower mobile broadband (tablet) net adds, while wholesale adds were up slightly (these may both have been caused by a shift of subscribers from retail to wholesale last quarter in connection with a Walmart deal), and overall net adds were up slightly too. As the traditional phone market slows down, it’s going to be tougher for T-Mobile to keep driving growth in net adds, and it doesn’t yet seem to have cracked new categories beyond phones, which continues to be my main concern about its longer term prospects.
Samsung Electronics forecasts fourth-quarter profit at over three-year high | Reuters (Jan 5, 2017)
These are remarkable results in the quarter after the Note7 fiasco began, and the quarter in which the recall itself really began. Revenues are very close to last year’s, while operating profits are the third highest ever after two quarters back in 2013. We’ll have to wait for the final results to come out later this month to see the breakdown, but the Reuters report makes it sound like both smartphones and semiconductors did well, which would be impressive if it’s true.
via Samsung Electronics forecasts fourth-quarter profit at over three-year high | Reuters
Snap’s IPO Roadshow Message: We’re the Next Facebook, Not the Next Twitter – WSJ (Dec 29, 2016)
One of the most interesting questions Snap has to answer as it approaches a possible IPO is which company will serve as a better benchmark for its potential – Twitter or Facebook. Part of making the pitch for the latter is demonstrating that Snap is more than just a messaging app, which means focusing on its content offerings and partnerships and the potential ad revenue they might drive. Snap’s recent rebranding and launch of Spectacles are all part of a significant evolution of the company and its identity.
via Snap’s IPO Roadshow Message: We’re the Next Facebook, Not the Next Twitter – WSJ
Lessons From Fitbit’s Troubled Revenue Multiple – Mattermark (Dec 28, 2016)
The concluding line of Alex’s piece is “hardware is hard”, and that’s certainly becoming something of a narrative in its own right. But this is also a story about increasing market skepticism about wearables companies, and their potential to grow and generate profits. Fitbit has been the exception as an independent wearables-focused vendor, but I and others have questions about its ability to sustain its growth and profitability going forward.
via Lessons From Fitbit’s Troubled Revenue Multiple – Mattermark
Google Lowered 2015 Taxes by $3.6 Billion Using ‘Dutch Sandwich’ – Bloomberg (Dec 21, 2016)
Alphabet and Amazon continue to be the highest-profile examples of US companies seeking to minimize their overseas tax burdens, and of course the EU has already taken action against Apple in this regard. A US tax holiday in 2017 could start to change this narrative, but until then it’s likely to continue to draw unwanted attention.
via Google Lowered 2015 Taxes by $3.6 Billion Using ‘Dutch Sandwich’ – Bloomberg
Uber’s Loss Decelerates, Reflecting China Exit — The Information (Dec 19, 2016)
Uber may have long since outgrown the startup label, but its financial state continues to suggest its aptitude. Its loss-leading strategy to win market share doesn’t seem to have fazed repeated rounds of investors, but continues to generate headlines. The big question remains whether there’s a path to profitability anytime soon here, in well-established individual markets at least.
via Uber’s Loss Decelerates, Reflecting China Exit — The Information
see also Bloomberg
Samsung Cuts Q3 Guidance Over Note7 (Oct 12, 2016)
The financial impact of the Note7 debacle began to become clear, as Samsung formally reduced its revenue and profit guidance by several billion dollars (its final results for Q3 would be broadly in line with this guidance).
Apple Owes $14.5 Billion in Back Taxes to Ireland, E.U. Says – The New York Times (Aug 30, 2016)
An investigation which began in 2014 concluded in August 2016 with the EU finding that Apple’s tax arrangement with the Irish government contravened EU tax policy, and requiring that Ireland recoup $14.5 billion in back taxes. The EU had also made similar moves with regard to Starbucks and Fiat as a result of similar investigations, but the numbers involved in the Apple case are far larger. Apple argues that it creates essentially all the value in its products in the US – iPhones and other products are famously “Designed by Apple in California” – and that therefore it repatriates all its profits to the US to be taxed there. The Irish arrangement recognized this argument and the Irish government has been happy to have Apple build a big base in Ireland on this basis, but the EU feels that Ireland’s treatment of Apple is an example of unequal treatment. Part of the reason for all this is that Apple has been keeping huge amounts of cash overseas for years in anticipation of an eventual tax holiday in the US, and so this isn’t just about Apple and the EU but also about a larger battle between US and European tax authorities.
via New York Times