The Point

Andreas Scherer on Business and Science

Facebook Q3 2012 Earnings

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Facebook’s earnings report was better than expected. The company had revenues of $1.262 billion in Q3 2012. That’s a 32.285% increase from the same period last year. GAAP Net income was a loss of $59 million mainly due to share based compensation costs and related tax roll expenses. Otherwise the company posted solid operating margins. Wall Street expectations had been slightly lower.

During the earnings call Mark Zuckerberg highlighted some major breakthroughs. First, Facebook has more than a billion people using the site each month. Second, 600 million people are using mobile devices to share and connect. The last three months were crucial for Facebook in terms of its mobile strategy. Facebook made $153 million in sales from mobile advertisements, a revenue stream that didn’t exist seven months ago. Mobile revenue is 14% of advertising revenue in Q3.

Zuckerberg made mobile a strong priority for the company. And it showed. Facebook completed the rebuild of its app for iOS. It improved of the platform for mobile developers by launching new software development kits for iOS and Android as well as a deeper integrating into iOS 6.0.

Facebook had a positive Q3 2012. But the exciting results of its mobile ad business are not the answer to all questions either. Facebook is still playing catch-up. eMarketer estimated the size of mobile at revenue at $2.61 billion this year. $153 million mobile ad revenue is just a fraction to the total market opportunity. Investors will keep watching how aggressively Facebook is able to ramp up its mobile business.

You can read the full article here.

eBay Earnings Q3 2012

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Yesterday I had commented on eBay’s latest earnings. Here is the upshot.

eBay reported GAAP net income of 45 cents per share or $597 million. This is up 22% compared to  same period a year ago. Revenue was $3.4 billion in the quarter, up 15% from $2.97 billion in the year-ago period. The adjusted net income was 55 cents per share or $718 million. This is an increase of 14% from the last year Q3 numbers. Profits were a tad higher than expected. Revenue a tad lower. Overall a good performance.

It’s worth to point out that its PayPal unit did well. It reported 117.4 million active accounts. This is an increase of 14% from a year. Revenue was $1.367 billion, up 23% from a year ago. PayPal is a success story within eBay.

Still, eBay has the image of selling used goods. Of course this is not what company is all about these days. Many retailers use the site as an outlet to sell their goods online. eBay responded earlier this month. It has given its website a make-over with a fresher Pinterest-like touch and feel. Around the same time, it launched eBay Now, a new same day shipping service that enables people to get products delivered from local retailers. This positions eBay well against Walmart that is piloting a similar service in selected markets. It also counters Amazon strategy of deploying more local warehouses.

The holiday season is ahead of us. Prime time for eCommerce retailers. eBay appears to be ready.

You can read the entire article here.

Google Q3 2012

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Talked with ECommerce Times about Google’s Q3 numbers.

Google earnings report came as a surprise. It was earlier than expected. It was worse than expected. The company posted third-quarter earnings excluding items of $9.03 per share, down from $9.72 a share a year ago. However, revenue increased 51 percent to $11.33 billion from $7.51 billion a year ago.

The good news first. There is growth. The company is operating relatively well in a slow macroeconomic environment. But even Google is feeling the heat – at least a little.

First, the company revealed that its average cost-per-click declined 15 percent compared to the third quarter a year ago. This is a key metric to watch since it is core to Google’s business and income potential. Click prices have been under pressure for a number of quarters. It’s in Google’s best interest to stop this trend.

Second, Google has to absorb operational losses from Motorola Mobility. Investors hope that this will be only a temporary phenomenon as executives are working hard to turn this business unit around.

A 51% top line growth year over year would be for most business excellent news. For Google the expectations were higher. It missed analyst expectations by $530 million. The market has hoped that they would report earnings excluding items of $10.65 a share. They didn’t. Google slipped in Q3 of 2012.

You can read the article here.

IBM Q3 2012 Earnings

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It’s earnings season. Talked to ECommerce Times this morning on IBM’s Q3.

IBM reported third-quarter sales of $24.7 billion . This is below Wall Street expectations of $25.4 billion. The weak performance was across all IBM business segments, including services and software. IBM hardware sales fell 13% to $3.9 billion. Net income was flat at $3.8 billion, which means IBM did a good job managing its costs. It was able to increase its gross profit margin by 0.9%. Well done. The big issue is growth.

IBM is dealing with two major issues.

Like any other tech companies IBM is battling a weak world economy. Things in the US are slow. The Europeans trying to avoid an economic Armageddon with Greece being on the brink of default and Spain being on the verge of having to request a bailout. These countries are followed by Italy, Portugal and Ireland. Other European economies do better but overall things are not looking good. China has slowed down as well. IBM’s business depends heavily on companies making expensive infrastructure decisions. Those are easily postponed in times of uncertainty.

The second problem for IBM is that it doesn’t have any “cool gadgets”. They sell PCs which are more like office workhorses than fun devices. However, people buy with their discretionary income tablets, smart tvs, smartphones and gaming consoles. IBM has no market share in these market segments.

It’s unlikely that IBM will be competing against the Apple’s of this world anytime soon. For IBM the hope is that its bets on higher-profit software and services, such as data analysis and cloud computing, are paying off.

You can read the full article here.