Apple, Yahoo, Microsoft shares slump after earnings reports – Livemint

Apple reported a 38% increase in profit, to $ 10.7 billion, from a year ago, with revenue surging 33% to $ 49.6 billion. Photo: AFP

New Delhi: Tuesday was a disappointing day at the Wall Street with a trio of tech companies—Apple Inc, Yahoo Inc, and Microsoft Corp—reporting disappointing quarterly results.

Shares of all three companies slumped: Apple tumbled 6.2 % to $ 122.65, Microsoft lost 3.5% to $ 45.65 and Yahoo shed 2.2% to $ 38.85.

Here is a detailed analysis on each of the companies earnings reports.

Apple profit up by 38%, iPhone and Apple Watch sales disappoint

Apple reported a 38% increase in profit, to $ 10.7 billion, from a year ago, with revenue surging 33% to $ 49.6 billion. Sales of the company's biggest revenue and profit generator, the iPhone, soared 35% to 47.5 million units. According to financial analysts, this is a mind-boggling growth for a company that produces more than $ 200 billion in annual revenue and clocks in with a market capitalization of $ 753 billion. But the market expected more from Apple.

According to reports in The New York Times , the quarter underscored duelling narratives: the astonishing strength of iPhone 6 and 6 Plus sales, and mounting doubt over the long-term sales credibility of Apple Watch. This has led some industry experts to ponder if Apple is becoming a one-trick pony for products.

Undoubtedly, the iPhone is Apple's most important product, accounting for nearly two-thirds of Apple's revenue, thus overshadowing the rest of Apple's businesses. However, iPhone sales faced some tough sequential comparisons. The 47.5 million units sold in the quarter was below the roughly 50 million that analysts had calculated Apple would sell, and was also down from the 40% growth in the previous quarter and the 46% growth two quarters earlier.

Additionally, iPhone unit sales of 47.5 million fell by about 23% from its fiscal second quarter, a steeper rate of decline than the previous two years when quarter-on-quarter sales fell by 19% and 17%, respectively. Apple said that part of the shortfall was the result of it lowering iPhone inventory by 600,000 units during the quarter, a sign that it sold more phones than it manufactured.

Analyst are also uncertain about the Apple Watch, the company's first all-new hardware product since it introduced the iPad in 2010. Apple didn't provide a breakdown of the Watch's sales, which began during the June quarter, lumping the product's sales in with the iPod, Apple TV and Beats accessories in the "other products" category. Sales of that segment rose 49% to $ 2.64 billion. When pressed about Apple Watch which still remains a mystery to many, Apple CEO Tim Cook insisted in the earnings conference call that the company is "convinced the Watch will be one of the top gifts of the holiday season".

Analysts on Tuesday calculated that the company had sold between 1.5 million and three million watches, far less than the three million to five million watches they had predicted ahead of Apple's earnings report.

There is also a widespread view that the iPad and tablet computers are facing an existential crisis. They aren't quite as essential as the smartphone but not quite as functional as a notebook computer. Moreover, early iPad users don't see a huge reason to upgrade to more recent models. And while Apple has struck deals with International Business Machines Corp. and other companies to position the iPad as a device for the workplace, so far those efforts have done little to stem the iPad's slide. Read all the details here.

Yahoo mobile growth strong but search revenue sees decline

Analysts and shareholders were disappointed with Yahoo reporting mixed results in its second-quarter earnings, which showed solid growth from the company's mobile revenue and a stabilization of its desktop display unit but a decrease in the company's search advertising business. The New York Post reports that revenue from the so-called Mavens businesses of mobile, video, native ads and social rose by 60% year-on-year. And the company's older display ad business also improved, posting its best performance since 2010. But Yahoo continues to lose marketshare in key areas such as mobile advertising because competitors are growing faster, according to Martin Utreras, a senior forecasting analyst at eMarketer, a research firm.

"They were a little bit late to the game in mobile," he said. "In the US, advertising is growing at the market rate, and internationally, it's growing at less than the market rate." As a result, the company's share price was down about 2% in after-hours trading.

Yahoo Search seems to be the biggest culprit behind the disappointing revenue according to analysts. Yahoo Search, saw its revenue minus traffic-acquisition costs fall to $ 406 million, down more than 5% compared to the same period last year. Those results seem to show that Yahoo's November deal to become Firefox's default search engine is costing the company more money than advertising sales are generating. For more details, read here.

Microsoft loses due to Nokia write down and Windows Phone

Microsoft announced its first quarterly loss in three years, caused primarily by a $ 7.5 billion write-down the company took related to its acquisition of Nokia's devices and services business. Additionally, Windows Phone put a significant drag on Microsoft's fourth-quarter earnings, said a report in the International Business Times . Revenue for the troubled platform decreased by $ 552 million, or 68%. Both Lumia and non-Lumia phone revenue declined, which Microsoft attributes to lower volumes and lower-priced devices. Revenue from sales of Windows to device makers fell 22% during the quarter, as a result of slower PC sales a year after the end of support for Windows XP.

Analysts are, however, optimistic about the company's future with Microsoft's future plans: acquisition of field service software company FieldOne, the launch of the Cortana Analytics Suite, and the company's plans to reach $ 20 billion in cloud computing revenue in 2018. And, of course, Windows 10 is just days away from launch. Analysts on tech website Wired.com reckon that ultimately it seems that if Microsoft can keep convincing the world that it's a new company with new priorities and new products worth buying, the worst could be over for the tech giant.