Apple’s Service, Vietnam’s Boon

Apple made plenty of moolah in its fiscal Q3, some $53.3B, nearly half of that ($26B) from iPhones. The story: Its services was up 1% YOY to $10.2B. Wearables, Home, and Accessories generated $5.5B, a 50% YOY increase. Diversification for Apple, good, dependency on iPhone moolah, bad.

Contrast those numbers with Samsung’s, which posted an operating profit of $5.6B on revenue of $47.4B, down 4% YOY. Hurry up and make that Fold fold faster!

Some crypto news that caught my eye: Coindesk is reporting that Chinese importers in Russia are buying up to $30M a day of tether from Moscow’s OTC trading desks. They apparently use the cryptocurrency to send large sums back to China, and they use tether instead of bitcoin because tether is designed to maintain U.S. dollar parity.

Speaking of China, who’s now benefiting from Chimerica? Good morning, Vietnam!, where Samsung already assembles half its handsets. Vietnam has greatly benefited from the U.S. tariffs on China, and even Apple and Nintendo are also said to be shifting certain workloads from China to Vietnam. 

T-Mobile Doesn’t Fold

Apple’s deal for obtaining the majority of Intel’s smartphone modem business is a done deal. Estimated transaction value: $1B

To help pay for the deal, Bloomberg is reporting that Apple and Goldman Sachs are issuing a credit card targeted to launch as early as the first half of August.

When Apple starts issuing credit cards, it could be time to start looking for a new phone.

Alphabet (Google) announced earnings yesterday PM, reporting Q2 revenue of $38.9B, up 19% YOY. On its earnings call, the company said its sound business now has an $8B annual revenue rate, double that reported last year.

And Amazon reported Q2 revenue of $63.4B, up 20% YOY, with AWS up 37% YOY – the first sub-40% growth rate since Amazon began sharing AWS figures.

Following up on the revitalized Samsung Galaxy Fold, don’t look for it at T-Mobile, a spokesperson for which indicated that “T-Mobile will not carry the Galaxy Fold because we already offer customers a wide range of the largest smartphones.

Yes, but do any of them fold when they fold?

IBM Reports 1Q 2019 Results, Accelerates Cloud Revenue

IBM announced its first quarter 2019 financial results this afternoon, with the lead being it both accelerated its cloud revenue growth and continued its margin expansion.

The top line: 

• GAAP EPS from continuing operations of $1.78
• Operating (non-GAAP) EPS of $2.25
• Revenue of $18.2 billion, down 4.7 percent (down 0.9 percent adjusting for currency)
• Cloud revenue growth accelerated in the quarter; now $19.5 billion over the last 12 months, up 10 percent (up 12 percent adjusting for currency)
• As-a-service annual exit run rate for cloud revenue of $11.7 billion, up 10 percent year to year (up 15 percent adjusting for currency)
• Gross profit margin: GAAP, up 100 basis points; Operating (non-GAAP), up 90 basis points — GBS gross profit margin up 280 basis points; GTS up 110 basis points
• Pre-tax income margin: GAAP, up 440 basis points; Operating (non-GAAP), up 320 basis points
• Maintains full-year EPS and free cash flow expectations ARMONK, N.Y.

“In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting,” said Ginni Rometty, IBM chairman, president and chief executive officer. “IBM’s investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention.”

IBM Earnings: Rising Demand for AI, Cloud

Different chatter coming in from different sources on IBM’s 4Q18 earnings.

One of my favorite email newsletters that I actually try to read most days, the “Morning Download,” from The Wall Street Journal, had this to say:

Good day, CIOs. International Business Machine Corp.’s  fourth-quarter financial results reflect the continuing rise of artificial intelligence and cloud computing as central to corporate technology investment.

The big financial picture. Overall, revenue fell 3.5%, a second consecutive quarterly drop that underscores significant challenges the technology giant faces in recapturing growth, the Journal’s Jay Greene reports. Even so, IBM said it expects adjusted per-share earnings to hit $13.90 in the current fiscal year, compared with $13.81 for 2018. Shares rose more than 6 percent in after hours trading.

Where’s the growth? It’s in the company’s four so-called strategic imperatives. Those businesses—cloud computing and data analytics, among others—grew 5% in the quarter to $11.5 billion, the Journal reports. The cloud business grew 12 percent to $19.2 billion in 2018, according to Reuters. Last fall, IBM announced it would buy Red Hat Inc. to boost its efforts in the cloud. It recently struck new cloud deals with Vodafone Group PLC’s business services division and French bank BNP Paribas.

Cognitive leap. “The company’s cognitive software business, which houses artificial intelligence platform Watson, analytics and cybersecurity services, reported sales of $5.46 billion, compared with analysts’ expectation of $5.25 billion,” Reuters reports.

There was this from CNBC: 

Earnings: $4.87 per share, excluding certain items, vs. $4.82 per share as expected by analysts, according to Refinitiv.
Revenue: $21.76 billion, vs. $21.71 billion as expected by analysts, according to Refinitiv.

IBM’s largest business segment, Technology Services and Cloud Platforms, posted $8.9 billion in revenue. Analysts polled by FactSet were expecting $9.04 billion in revenue from the segment.

The next-largest business segment, Cognitive Solutions, did $5.5 billion in revenue. That exceeded the FactSet consensus estimate, which was $5.27 billion.

IBM’s Global Business Services segment collected $4.3 billion in revenue, exceeding the $4.15 billion estimate, and the Systems segment came in at $2.6 billion, below the $2.77 billion estimate. The Global Financing segment contributed $402 million in revenue, under the $426 million estimate.

In the quarter IBM announced its intent to pay $34 billion to acquire Red Hat, announced a chip manufacturing deal from Samsung and sold software assets to HCL Technologies for $1.8 billion. The Red Hat deal is expected to close in the second half of 2019.

And this from The Street: 

IBM Corp. (IBM – Get Report) shares were indicated sharply higher in pre-market trading Wednesday after the iconic tech firm posted stronger-than-expected fourth quarter earnings and said its recent acquisition of Red Hat Inc. (RHT – Get Report) would help boost cloud computing sales in 2019.

 IBM said adjusted earnings for the three months ending in December came in at $4.87 per share, down 5% from the same period last year but ahead of the Street consensus of $4.82 per share. Group sales were also softer than the prior period, falling 1% to $21.76 billion, but the figure topped estimates and IBM said it sees free cash flow for 2019 of around $12 billion, largely in-line with its tally over the past year.

Cloud computing sales, too, were impressing, rising 12% to $19.2 billion over the whole of 2018, helping build an overall backlog of orders across its businesses to around $116 billion as of the end of last year. Looking ahead, IBM sees 2019 operating earnings of $13.90 per share, but said that figure won’t include the impact of its $34 billion takeover of software group Red Hat last October.

“We see the strong bookings Red Hat recently reported as further evidence of clients’ confidence in the value,” IBM CFO Jim Kavanaugh told investors on a conference call late Tuesday. “Remember, the quarter ended a month after the transaction was announced. From a value perspective, in addition to the growing Red Hat business itself, we see an opportunity to lift all of IBM by selling more of our own IBM Cloud and by selling more of our analytics and AI capabilities on OpenShift across multiple platforms.”

IBM Reports 4Q18 Earnings, Margin Expansion, Return to Full-Year Revenue Growth

IBM announced 4Q18 earnings this afternoon.

The top line:

• GAAP EPS from continuing operations of $2.15
• Includes charge of $1.9 billion related to the U.S. Tax Cuts and Jobs Act of 2017
• Operating (non-GAAP) EPS of $4.87
• Revenue of $21.8 billion, down 3 percent (down 1 percent adjusting for currency)
• Global Business Services and Cognitive Solutions revenue grew year to year
• Gross profit margin up 10 basis points year to year; pre-tax income margin up more than 50 basis points year to year
• Continued strong services gross profit margin expansion year to year
• Full Year:
• GAAP EPS from continuing operations of $9.51
• Includes charge of $2.0 billion related to the U.S. Tax Cuts and Jobs Act of 2017
• Operating (non-GAAP) EPS of $13.81
• Revenue of $79.6 billion, up 1 percent (flat year to year adjusting for currency)
• Strategic imperatives revenue of $39.8 billion, up 9 percent
• Cloud revenue of $19.2 billion, up 12 percent
• As-a-service annual exit run rate for cloud revenue of $12.2 billion in the quarter, up 18 percent year to year (up 21 percent adjusting for currency) IBM)

“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics and security,” said Ginni Rometty, IBM chairman, president and chief executive officer. “Major clients worldwide, such as BNP Paribas, are turning to the IBM Cloud and our unmatched industry expertise to transform their businesses and drive innovation.”

IBM Reports 2018 Third-Quarter Results

IBM today announced its 2018 third-quarter results, generating its best year-to-year gross margin performance in three years, which reflected the company’s move towards higher value businesses.

Highlights are as follows:

• GAAP EPS from continuing operations of $2.94; Operating (non-GAAP) EPS of $3.42
• Revenue of $18.8 billion, down 2 percent (flat adjusting for currency)
• Strategic imperatives revenue of $39.5 billion over last 12 months, up 13 percent (up 11 percent adjusting for currency)
• Cloud revenue of $19.0 billion over last 12 months, up 20 percent (up 18 percent adjusting for currency) 
• As-a-service annual exit run rate for cloud revenue of $11.4 billion in the quarter, up 21 percent year to year (up 24 percent adjusting for currency)
• Strong services gross profit margin expansion year to year
• Maintains full-year operating (non-GAAP) EPS and free cash flow expectations

“IBM’s progress and momentum this year in the emerging, high-value segments of the IT industry are driven by our innovative technology, deep industry expertise and commitment to trust and security,” said Ginni Rometty, IBM chairman, president and chief executive officer.  “Our leadership in the technology and services that deliver hybrid cloud, AI, blockchain, analytics and security has helped drive our overall performance, and is helping our clients unleash the full business value of these innovations.”

IBM Announces 2Q18 Earnings, Revenue Up 4% YOY

IBM announced its 2Q 2018 earnings a few moments ago.

Some highlights:

• GAAP EPS from continuing operations of $2.61; Operating (non-GAAP) EPS of $3.08; both up 5 percent
• GAAP Pre-tax income up 14 percent; Operating (non-GAAP) pre-tax income up 11 percent — Pre-tax margins expanded more than 100 basis points year to year
• Revenue of $20.0 billion, up 4 percent (up 2 percent adjusting for currency)
• Strategic imperatives revenue of $39.0 billion over last 12 months, up 15 percent (up 12 percent adjusting for currency); represents 48 percent of IBM revenue
• Cloud revenue of $18.5 billion over last 12 months, up 23 percent (up 20 percent adjusting for currency)
• As-a-service annual exit run rate for cloud revenue of $11.1 billion in the quarter, up 26 percent year to year (up 24 percent adjusting for currency)
• Maintains full-year operating (non-GAAP) EPS and free cash flow expectations

“We delivered strong revenue and profit growth in the quarter, underscoring IBM’s progress and momentum in the emerging, high-value segments of the IT industry,” said Ginni Rometty, IBM chairman, president and chief executive officer. “More clients are engaging IBM on their journey to the cloud, and deploying IBM Cloud, Watson AI, analytics, blockchain and security solutions. This demonstrates IBM’s unique leadership in providing innovative technology coupled with deep industry expertise, trust and security.”

IBM 1Q18 Earnings: EPS Beats @ $2.45

IBM’s 1Q18 earnings were just announced, and beat estimates on EPS of $2.42 per share at $2.45, and revenue at $19.1 billion (vs. estimates of $18.84 billion).

CNBC’s report highlights:

Last quarter, IBM announced revenue growth from the year-ago quarter for the first time in more than five years. That streak is now continuing for a second quarter.

But the company reaffirmed its previous guidance of $13.80 in earnings per share, excluding certain items, for the full year of 2018, while analysts polled by FactSet had expected $13.83 per share, according to Thomson Reuters.

Cantor Fitzgerald analysts led by Joseph Foresi said in a Friday note that they expect IBM to report gains from companies upgrading to IBM’s latest mainframe computer, the z14.

IBM continues to seek growth from its strategic imperatives, which include social, mobile, analytics and cloud. In the fourth quarter that group contributed 49 percent of all revenue, and the Cantor analysts expect that balance to be unchanged in the first quarter.

With respect to guidance, for the second quarter analysts expect IBM to forecast $3.05 in earnings per share, excluding certain items, on $19.9 billion in revenue, according to Thomson Reuters.

Open Sesame

Lest my blog become too Western-centric, it’s time to return to the China Internet watch, this time for Alibaba’s earnings.

Please remember, Jack Ma’s empire is vast and ever-expanding, with businesses that include two of the world’s largest and most popular online retail marketplaces, Taobao and Tmall, an affiliation with Ant Financial, its new Digital Media and Entertainment Group, and Alibaba.com and Alipay (among others).

Earlier today, Alibaba Group Holding Ltd. indicated its third-quarter revenue jumped 56 percent, beating expectations, according to a report from Reuters.

The group also raised its full year forecast, and announced its 33 percent stake in Ant Financial. 

As Reuters reports, Alibaba is looking for new areas such as cloud computing, payments, and offline retail to maintain its rapid growth rates that make it one of the world’s most valuable companies, with a current market cap of $523 billion.

Alibaba’s cloud business was reported to have crossed 1 million customers globally in the quarter ended last September.

In other words, Alibaba is huuugggeee, and getting huger all the time.

Apple Earnings

Apple announced its fiscal 2018 first quarter earnings this afternoon, posting quarterly revenue of $88.3 billion, a 13 percent YOY increase and all-time record. International sales accounted for 65 percent of its quarter’s revenue, according to a press release put out by Apple.

We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone lineup. iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November,” said Tim Cook, Apple’s CEO. “We’ve also achieved a significant milestone with our active installed base of devices reaching 1.3 billion in January. That’s an increase of 30 percent in just two years, which is a testament to the popularity of our products and the loyalty and satisfaction of our customers.

9to5 Mac helped break Apple’s unit sales down by product line:

• 77.3 million iPhones
• 13.2 million iPads
• 5.1 million Macs

The company earned $20.1 billion in profit.

But Engadget notes that this was “the first time iPhone sales have declined during a holiday quarter since the phone launched, best as we can tell,” suggesting an iPhone market saturation.

Yet even if Apple overshot its forecast for iPhone X sales and is ramping down production, “Apple says the iPhone X has been the top-selling iPhone every week since it shipped in early November.”

One other bright spot: The “other products” category, which includes the Apple Watch, AirPods, Beats hardware, and other products, where revenue increased 70 percent YOY up to $5.5 billion.

Perhaps AirPods have finally hit their stride, with supply now starting to finally match demand (they appeared 6-week backlogged for the better part of a year!).