Topic: Q3 2017
Samsung today announced its preliminary results for Q3, but also announced that its CEO, Oh-Hyun Kwon, will step down in March 2018. The preliminary results are very much in keeping with results for the last several quarters, with record revenues and profits for any quarter, likely again driven by very strong memory sales and higher memory prices, though the smartphone business also likely did well again. Samsung’s management structure is a little different from most western tech companies: it technically has three CEOs, who each run a big chunk of the business, with Kwon overseeing the Device Solutions segment while also being chairman of the board of directors and therefore the closest thing to an overall CEO the company has. That Device Solutions business, interestingly, is the home of memory and other component products at Samsung, which have been the source of its great financial strength, so Kwon’s resignation certainly isn’t a response to poor performance. Rather, it seems likely to be a response to the broader scandals that have engulfed the Samsung group of companies, including Jae-Yong Lee, grandson of the company’s founder, who is currently in jail (and was also technically a vice chairman at Samsung Electronics). His resignation later certainly makes it sound like he is resigning as a matter of honor and to allow the company to move on under fresh leadership, rather than an indication that he’s tainted at all by association with the scandals.
AT&T has pre-announced some figures for its third quarter results in an SEC filing, including nearly 300,000 DirecTV Now streaming subscriber additions in the quarter, but around 90k traditional pay TV losses. Assuming that latter number is reported on the same basis as in the past and therefore excludes the DirecTV Now customers, it would represent a significant improvement, as the company lost over 300k subs in Q3 2016, and over 200k subs in Q2 this year. But losses are losses, and although the company through hurricanes into the mix as a driver, it’s clear that the underlying drivers that caused previous declines are still big factors too, and those include competition (and have in the past included the challenge AT&T faces of not being able to provide broadband-TV bundles in big chunks of the US).
Two wireless items in the filing are also worth noting. Firstly, the company said it saw 900k fewer postpaid phone upgrades in the quarter, a continuation of a long-standing trend at AT&T of lower upgrades over time, which has seen it fall to by far the lowest upgrade rates among the big four US carriers. Secondly, it’s breaking out certain prepaid IoT connections – notably those associated with connected cars – in its reporting for the first time, and it sounds like it has just over half a million of those as of the end of the quarter. That’s a tiny fraction of its overall connected car connections, which stood at a cumulative 13 million connections as of the end of Q2, the vast majority of which are low-revenue telematics connections sold to car manufacturers rather than directly to end users.
Tesla today released its customary quarterly update on car production and deliveries, for Q3 2017. The overall number of cars produced was 26 thousand, just 5% up on last year’s total for the quarter, with just 220 Model 3 cars produced relative to the 1500 the company had projected. The company delivered to customers slightly fewer cars, including 260 Model 3s, indicating that it’s still a very long way from the mass production of these cheaper cars which it’s been forecasting. Tesla’s statement on the lower than expected Model 3 production is worth quoting in full: “Model 3 production was less than anticipated due to production bottlenecks. Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected. It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.” All of this is classic Tesla – in effect: we fell short of our targets, unexpectedly, but we’ll still be able to meet our previously stated targets in the end. Past experience shows Tesla does generally recover from such setbacks, but not usually enough to deliver on original goals – something that’s been pointed out repeatedly by me and by others, but which still seems to engender remarkably little skepticism about its public pronouncements by many investors.