Last week was a flurry of activity with Intel INTC, AMD and Netflix NFLX reporting; the EU Charging Google; and Yahoo YHOO-Microsoft MSFT amending their search deal.

Earnings Highlights

Intel: Intel managed to beat earnings estimates although revenue was just slightly short. The PC market and FX pressures continue to play spoilsport, but results were also impacted by customers waiting for Windows 10 and the lean channel inventory being further reduced. Data Center, IoT and memory revenues are expected to strengthen through the year, but there are a few margin headwinds this year.

Advanced Micro Devices: Unsurprisingly, AMD missed the Zacks Consensus Estimateon both the top and bottom lines. There are multiple issues in the business in addition to the PC market weakness and currency issues. While AMD was also somewhat impacted by customers waiting for Windows 10, its PC/CPU/GPU business is doing worse than Intel’s suggesting share losses.

Not just that -- AMD is quitting the dense server business (Sea Micro), which was supposed to challenge Intel, competition from NVIDIA is intensifying, it has a commitment to take or pay for $1 billion dollars worth of wafers from GlobalFoundries (it bought just $161 million worth in quarter one) and it is burning cash. The saving grace is that its $2.27 billion of debt doesn’t have short-term maturities. Management hopes are pinned on Win 10 and new products.

Netflix: The video streaming company posted a solid increase in its user base that sent shares soaring. Earnings beat the Zacks Consensus Estimate of revenue that missed. The company remains focused on content addition and international expansion, both of which require increased spending. Food for thought: the high-margin U.S. market is maturing and international subscriptions could generate lower prices and entail increased spending meaning margin pressure. Currency impact will also increase in line with international exposure.

Semi Equipments Makers Slump

Semiconductor equipment suppliers Applied Materials AMAT, Lam Research and KLA-Tencor fell a respective 4.5%, 3.3% and 1.9% last week as first Intel and then TSM lowered capex expectations for the year. Weak demand and currency are the primary reasons impacting spending. Intel capex went from $10.0 billion to $8.5 billion and TSM went from $11.75 billion to $10.75 billion. Samsung, the third big spender on capital equipment, is yet to report, but may not follow suit, since it is on the verge of creating a new unit to serve Apple and its own phone business is also reportedly getting back on track.

The good news for equipment companies is that semiconductor fabrication is getting more complicated and the demand for lower costs is very high as the ICs increasingly get into everyday devices in the phenomenon called IoT. So secular tailwinds for the industry remain in place.

EU Charges Google for Anti-Competitive Behavior

The EU has sent Google a Statement of Objections, which usually precede formal charges unless the case is settled otherwise. Google can respond to the EU in 10 weeks, but it wasted little time in trying the case in the press. General Counsel Kent Walker and SVP Search Amit Singhal published blogs that touched on Google’s side of the story denying the charges.

In a nutshell, Google said that companies like Yelp, Expedia and TripAdvisor that were responsible for most of the noise hadn’t in fact suffered because of Google’s services (Flight Search, Maps, Local results, etc). They also displayed charts based on ComScore data for Germany, France and the UK indicating that competition was in fact thriving in these markets with Google Shopping still a significantly smaller player.

Google also said that mobile was changing things as customers on mobile devices spent more time on apps than on browsers, making these arguments of the EU somewhat redundant. Microsoft had earlier taken an active part in the war against Google, but both Google and Microsoft were surprisingly quiet about each other.

Regarding Android, which the EU is investigating, Google said it has a strong defense because Android has helped lower costs for consumers, given them the choice to download the apps they choose and that competitor apps are available on Android devices. They didn’t comment on the fact that Android device makers are forced to preload many Google apps, but it has been reported that Apple devices also come pre-loaded with many Apple apps.

Microsoft-Yahoo Search Partnership Is Amended

The search agreement between Yahoo and Microsoft has been amended to slightly sweeten things for Yahoo, while the longer-term implications remain somewhat unclear. While the revenue sharing deal remains in place, the percentage to be paid to Yahoo was increased from 88% to 90%. Yahoo can also partner with others (like Google) in search.

Microsoft is also required to sell its own ads now (previously a Yahoo responsibility), as Yahoo focuses on ad sales on its own properties. Yahoo also got the flexibility to choose the way it displays search results on its own properties.

Company

Last Week

Last  6 Months

AAPL

-1.85%

+27.73%

FB

-1.54%

+5.88%

YHOO

-1.62%

+8.59%

GOOG

-2.96%

-7.04%

MSFT

-0.25%

-8.59%

INTC

+1.69%

-2.99%

CSCO

-0.45%

+13.31%

Other stories you might have missed-

Corporate

Samsung Making Screens For Apple

Kurt DelBene Returns to Microsoft: Kurt DelBene is rejoining Microsoft as executive VP of Corporate Strategy and Planning reporting directly to CEO Satya Nadella. DelBene was previously in charge of the Office division at Microsoft before leaving in 2013 to serve as a senior advisor to the Secretary of Health and Human Services for the implementation and improvement of Healthcare.gov. He has also worked with a number of startups.

Net Neutrality in India: Net neutrality concerns have escalated amongst the world’s third largest Internet population, after Bharti Airtel announced that companies could pay charges for providing free apps to their customers. Internet.org, which was formed by a group of companies including Facebook FB to provide some stripped-down Internet services to people (mostly in rural areas) came under fire.

The concept is seen as providing unfair advantage to some sites at the expense of others and startups have said that it puts them against unfair competition. Notable protestors include travel site ClearTrip, news portal NewsHunt and TV company NDTV.

Amazon Finally Clinches Deal with HarperCollins: Amazon AMZN has been under a lot of pressure from publishers, which claimed that the company’s pricing policy and revenue sharing arrangements were detrimental to the interests of both publishers and writers alike. Publishers have been working on expanding their distribution channels, but Amazon remains a force to reckon with because of its reach and popularity.

When publishers refused to play ball last year, Amazon at least came to terms with all of them that essentially allow them to fix prices with Amazon incentivizing them when they priced lower. Such deals, between Amazon and Simon & Schuster in October, Hachette Book Group in November and Macmillan in December helped ease relations. HarperCollins was the latest to sign on.  

Alibaba Integrates Pharmacy Business

Twitter Redesigns Home Page: In an attempt to monetize and attract users that do not log in to use the site, Twitter has redesigned its home page, displaying content categorized into Entertainment, News, Technology and Science, Sports, Lifestyle and so forth.

Legal/Regulatory

Amazon Sues Review Websites: Amazon has for some time been trying to crack down on sites offering spurious reviews in bulk that were undermining its credibility. Last week, it sued four such organizations called buyazonreviews.com, buyamazonreviews.com, bayreviews.net and bayreviewsnow.com. Yelp has faced similar problems in the past and also proceeded against the wrongdoers.

Yelp Up on Google Woes

China Suspends Bank Technology Rules: The China Banking Regulatory Commission (CBRC) has said that it will suspend rules that required banks and financial institutions to stop using foreign technology products and replace them with domestic ones. The rules are not being withdrawn altogether, but will be implemented after modification, according to the CRBC and Ministry of Industry and Information Technology.

Protests against the rules weren’t just from foreign governments and corporations, but were also opposed internally by the banks. Apparently, it’s still too early to go ahead with this plan.  

New Technology/Products

Apple Announces ResearchKit: Apple has announced its ResearchKit software so developers can make use of the growing volumes of patient data collected from Apple devices to come up with solutions to facilitate healthcare research.

Google’s Cardboard Project Makes Headway: Google’s cardboard project is clearly making progress because the sheer number of devices now requires a system to certify and regulate them. “Works with Google Cardboard” is a way for Google to tell potential buyers which devices will work for them based on their requirements and budgets. Google also published guidelines that will help device makers to avoid simple mistakes and thereby hasten the certification of the devices created by them.

Collaborations and M&A

Intel Could Buy VIA Telecom: The market is bent upon seeing Intel acquire something to boost its mobile business and after the Altera talks fell through they are now talking about VIA Telecom, a company that makes x86 based chips for PC, client, ultra mobile and embedded markets. Formed by VIA Technologies after it bought LSI’s baseband division in 2002, VIA Telecom would be a good fit for Intel, expanding its presence in desired geographies and product lines. The news was first reported in the Taipei-based Next Magazine, which also said that the chances of a takeover were 80%.

Yahoo Buying Foursquare Rumors: While some media sites were saying that Yahoo was making progress in its talks to buy Foursquare for $900 million, others quoted sources with knowledge of the matter saying that such was not the case. Yahoo could be thinking of a way to further boost its position in mobile, but CEO Mayer is currently under a lot of pressure about cash usage, so it’s not surprising that neither company commented on the rumor.

Microsoft Acquires Datazen

Solar City-Nest Collaboration: Google’s Nest Labs is now in a collaboration with Solar City according to which the residential solar panel installer will offer a free Nest thermostat to the first 10,000 customers signing up. A Nest thermostat can lower heating costs by 10-12% and cooling costs by up to 15%.

IBM Makes Big Push In Healthcare

FLEX Could Buy ALU China Business: Singapore-based contract manufacturing and services provider Flextronics is in talks to buy part of Alcatel Lucent’s manufacturing operations in China. Alcatel operated in China through a 50-50 joint venture with the Chinese government. The manufacturing unit employs 1,000 people. The price is under negotiation.  

Some Numbers

Facebook/Google Lead Smartphone Apps:  A report from comScore indicates that Facebook and Google apps are the most dominant on smartphones in the U.S. The report says that 71.2% of users above 18 had the Facebook app installed. Google apps accounted for the second (YouTube with 56.4%), third (Google Search 52.2%) and fourth (Google Play 51.4%) spots. Facebook Messenger, Google Maps and Gmail took the next three spots.

WhatsApp Gets to 800 Million Users: WhatsApp founder and CEO Jan Koum has put out a Facebook post saying that the service had touched 800 million active users. User growth has been very strong over the last few months, but Facebook CEO has said that there would be no monetization until the user base touched a billion and this could be achieved by year-end.

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