Sunday, July 28, 2013

Shift to mobile hits tech giants' bottom line

Pakistan News & Features Services

With the shift to mobile Internet gaining pace, some of the big tech firms are adapting and others are not. The latest earnings from the sector show that mobile is hitting the bottom line, either in positive or negative ways, at giants like Facebook, Microsoft, Google, Amazon and Apple. 

Facebook's recent quarterly report showed how the world's biggest social network profited from that shift, as it delivered earnings of $331 million and drew 41 percent of its ad revenues from mobile. Shares jumped 30 percent after the earnings, helping Facebook approach its price after its public offering in May 2012. 

Analyst Jordan Rohan at Stifel Nicolaus said that based on Facebook's ability to leverage mobile users, "this is the type of quarter that makes an investor step back to re-evaluate his or her opinion of a company." 

For Microsoft, it was a different story, as the shift to mobile devices hurt its core Windows franchise, and the Surface tablet hit the market with a thud, forcing an "inventory adjustment" writedown of $900 million, limiting profits to $4.97 billion. 

Microsoft shares slid more than 11 percent after the news, which fueled concerns about its future in a post-PC world, despite its Windows 8 operating system designed for a range of devices. 

The research firm Trefis said Microsoft "faces headwinds" in the tablet market, which is growing rapidly while PC sales are slipping. "Since the competitive tablet industry has already established products such as Apple's iPad and Google's Android tablets, Windows 8 faces strong headwinds as it tries to increase market penetration," the firm said in a note. 

Gerry Purdy, analyst with the research firm MobileTrax, said companies need to start thinking about mobile first, and that Facebook successfully did so. 

"Mobile is becoming the center of the information technology world. Many companies launch with mobile and then figure out Web and desktop. Mobile is a lead rather than a follower. Microsoft has not produced the best user experience in its tablets or in Windows-power phones. Microsoft has a long way to go to be a successful player in the pure mobile sector," Purdy reckoned. 

Google delivered mixed results for the past quarter, taking a loss from the Motorola handset unit it acquired last year and seeing slower growth from its mobile ads. 

Google, which saw its profits rise modestly to $3.23 billion, gets less on a ‘cost-per-click’ basis, according to analysts who ho questioned whether it can maintain growth. 

Amazon's shares recovered from initial weakness after the online retail giant reported a surprise loss of $7 million, when most observers were expecting a modest profit. 

The results showed Amazon investing heavily in marketing, technology and content as it seeks to expand its footprint and digital content offerings while promoting its Kindle line of tablets. Apple, which is the pre-eminent mobile company with its iPhones, iPads and iTunes, managed to beat Wall Street estimates with a profit of $6.9 billion thanks to strong smartphone sales. 

But many analysts look to the future and wonder whether its pace of innovation will keep it ahead of rising competitors as the California giant has been losing market share in smartphones and tablets, which threatens its ecosystem.

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