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Technology Round Up - May 2, 2013
There have been many noteworthy developments in the technology space recently. Some of these will likely have a material impact on the companies in the sector and the markets they serve.
Netflix Continues to Outperform
Shares of Netflix (NFLX) jumped following the company’s first-quarter earnings release. The top line advanced roughly 18%, to $1.024 billion. Domestic streaming additions increased to 29.17 million in the first quarter (up 7% sequentially and 27% from the year-earlier period). The number of international members advanced roughly 17%. Share earnings of $0.31 were a nice improvement over the loss of $0.08 per share reported in the prior-year period. Readers are advised that our share-net presentation for the recent period excludes an aftertax debt-extinguishment loss of $16 million ($0.26 per share).
Google Posts Healthy Results
Google (GOOG) reported solid performance for the first quarter, benefiting from improving advertising trends, especially within the mobile sector. Revenues of $13.97 billion increased 31%, on a year-over-year basis. Share net of $9.87 was a nice improvement from the prior-year tally of $8.75. Google continues to benefit from growth in aggregate paid clicks. Average cost-per-click, which measures how much the company receives from advertisers for each ad clicked on, declined around 4%, compared to the prior year. Still, this represents an improvement from the 6% decrease experienced in the fourth quarter of 2012. The company has made significant progress in the mobile arena, which has helped performance in recent periods.
A Disappointing Quarter for IBM
International Business Machines (IBM – Free IBM Stock Report) reported disappointing performance for the March period. The top line declined roughly 5% for the quarter. This was due to weakness in the systems business and only a modest gain from the software line. Despite healthy results in January, IBM ended the quarter well short of its revenue target for software and system Z mainframe computers. Moreover, its Power systems, Systems x mainframes, and storage systems lines also posted unimpressive results. On the bright side, the services line registered a solid performance, with currency-adjusted backlog increasing 5%. Revenue related to its Smarter Planet and business analytics growth initiatives also increased at a good clip. Overall, the company reported share net of $2.70 for the quarter, a modest year-over-year increase, but below our estimate of $2.90.
Apple’s iBond Offering
Apple (AAPL) has announced its first bond sale in over ten years. The company has priced $17 billion worth of bonds this week. Despite the uncertainty associated with technology companies, the bonds have excellent credit quality, which we believe is the result of Apple’s ample cash balance. Importantly, the debt offering could work out favorably for owners of Apple stock, as the company expects to use the proceeds of the bond offering to increase shareholder value.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.