Big week for Big Tech as quarterly earnings loom

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WASHINGTON, Jan 27, 2019 (BSS/AFP) – Big Tech firms face a critical test in
the coming days with quarterly updates that may offer clues on whether the
world’s largest companies are seeing growth or retrenchment ahead.

Apple reports its latest quarterly earnings on Tuesday, with Facebook and
Microsoft on deck a day later, followed by Amazon on Thursday. Google parent
Alphabet rounds out group with its update on February 4.

The results come after a roller-coaster period with drops of more than 20
percent in the value or Apple and Amazon, which have lost their trillion-
dollar status, and with Facebook and Google seeing increased pressure to deal
with concerns on privacy and data protection.

Here are some of the challenges facing the major technology firms:

– Apple: another reinvention? –

Apple, facing sluggish growth in the global smartphone market, has been
pushing harder in services but still relies on the iPhone for the lion’s
share of revenue and profit.

For the upcoming results, Apple will no longer detail the exact number of
iPhones sold in the quarter, leaving analysts to guess the mix of devices
based on revenues.

Apple delivered a stunning admission earlier this month that iPhone sales
and overall revenues would be below most forecasts, citing economic weakness
in China and trade frictions between Washington and Beijing.

“The mobile market is reaching saturation, and so is the smartphone
market,” says Benedict Evans of the investment firm Andreessen Horowitz, in a
recent blog post.

“This is not ‘the fall of Apple’ — it’s just the shift of smartphones to
boring maturity, as we look for what’s next.”

Analysts will be looking at growth in services such as Apple Music and
Apple Pay, and what might be coming for a Netflix-rival streaming television
service from the Cupertino company.

– Facebook: safety first –

2018 was a horrific year for Facebook, marked by a series of scandals over
privacy and concerns that the leading social network had been manipulated by
foreign interests for political purposes. Shares were down as much as 40
percent from their peak at one point in the year.

Facebook boosted revenues and profits during the year and managed to
increase its user base to more than 2.2 billion although growth appears to
have stalled in North America and Europe.

In 2019, Facebook is likely to see further scrutiny with US lawmakers
mulling privacy regulations — potentially impacting how Facebook monetizes
its user data with its sophisticated advertising technology — following new
rules in the European Union.

“Costs are still likely to rise much more quickly than revenues as Facebook
is having to recruit humans to police its content because its AI (artificial
intelligence) is not up to the job,” said Richard Windsor said, an analyst
who writes the Radio Free Mobile blog.

– Microsoft: steady in the cloud –

Microsoft has been the steadiest of the major tech firms of late and has
been jockeying with Amazon for the title of the world’s most valuable company
in recent weeks.

While Microsoft has stepped back from many consumer offerings including the
smartphone business, it has leveraged its strength with business customers to
bolster its cloud computing platform known as Azure.

“People are now seeing Microsoft as a growth company,” said analyst Jack
Gold of J. Gold Associates. – Amazon: limits on growth? –

Amazon’s seemingly unstoppable growth has been one of the main stories in
technology in recent years as it expands into groceries, robotics, artificial
intelligence, streaming media and more.

But Amazon’s value has dropped some 20 percent since it peaked at $1
trillion last year.

“Amazon is really multiple companies,” said Gold, noting that its highly
profitable cloud computing segment has enabled Amazon to invest in ecommerce
and media.

Amazon claims some 100 million subscribers to its Prime service, giving it
a consistent revenue stream. But in the US market, Amazon may have trouble
growing that base further, with an estimated 60 percent of US households
already members.

One new segment that appears promising for Amazon is advertising, according
to some analysts who point out that its customer relationships could help it
challenge the online ad “duopoly” of Google and Facebook.

Amazon founder Jeff Bezos — now facing divorce proceedings — has been
known for favoring investment over profits and will likely continue that,
according to Gold.

– Alphabet/Google: coping with regulators –

As the dominant player in online advertising, Google remains the profit
engine for its parent firm Alphabet, which has ventured into autonomous
vehicles, life sciences and other fields.

But Google is a key target of “techlash” with probes in Europe on monopoly
abuse in search, advertising its Android mobile ecosystem, and could be
impacted by proposed privacy rules in the United States.

Gold argued that Google is unlikely to be hurt by tougher regulations and
may even be helped because smaller rivals would face relatively higher costs
of compliance.

“Google has huge scale and when you have that scale and you need to
implement something it’s less costly on a per user basis,” Gold said.

While Google will face higher costs, he said, “the financial impact is
relatively trivial.”