Tag Archives: googl

Microsoft, Amazon, Google Cloud Growth Lifts Fiber-Optics Firms

You might think the race to the cloud mostly benefits leading cloud services providers, such as  Microsoft ( MSFT ),  Amazon.com ( AMZN ) and  Alphabet ‘s ( GOOGL ) Google. Of all the electronics, communications and digitally inspired IBD industry groups, the Telecom-Fiber Optics industry group ranks the highest. It’s No. 6, up from No. 9 a month ago, No. 95 two months ago and No. 168 three months ago. What’s different from a few months ago? On March 9, Microsoft Azure Chief Technology Officer Mark Russinovich told the Open Compute Project summit that Microsoft will grow from 22 to 28 data centers in 2016. Azure is Microsoft’s cloud business. Also, Google announced March 22 that it would add 12 new data center regions globally by the end of 2017, including two in the U.S., nearly doubling its existing 14 regions. And cloud leader Amazon Web Services, a rising business of Amazon.com, will grow from 12 regional clouds to 17 “in the coming year,” CEO Jeff Bezos said April 6 in his annual letter to shareholders. Fiber-optic developers that create the high-speed lines and connections for data centers will be among those companies benefiting from this expansion. “The first two new data centers (Oregon and Tokyo) will come online later this year, with the others to be launched in 2017,” said Jefferies analyst George Notter, regarding the Google announcement, in a March research note. “Based on our conversations with industry contacts, we think the additional investments are great news for Infinera ( INFN ), Ciena ( CIEN ), and to a much lesser extent, Alcatel-Lucent.” He cited the three as Google’s vendors for wavelength division multiplexing (WDM, an optics technology) and Infinera’s Cloud Xpress as Google’s preferred metro data center interconnect (DCI) platform, “although we wouldn’t be surprised if they (Google) eventually operationalized other vendors as well.” Infinera Down After Analyst Calls Stock ‘Way Too Cheap’ At the time, March 24, Infinera was trading near 15 — “way too cheap,” Notter said. He reiterated Infinera’s buy rating with a 22.50 price target. Since then Infinera stock has fallen, after tumbling 2.7% Tuesday to 14.58, 42% off a nine-year high of 25.24 touched Aug. 18. But it was a tough day for the sector overall. Rival Ciena, however, fell 3% Tuesday, to 17.27, 33% off a 16-month high 25.77 touched July 23. Heading toward its first-quarter earnings release April 27 after the market close, Infinera is expected to report continuing choppy earnings growth on slower sales growth. Analysts polled by Thomson Reuters expect earnings up 6% to 17 cents per share minus items, on sales up 31% to $246 million. While earnings are expected to top the year-earlier 16 cents per share, it’s a tough comparison to the Q1 2015’s 433% EPS growth. With a market cap of $2.06 billion, Infinera is the second-largest company in the IBD fiber group, following Ciena’s $2.4 billion, but neither is among the healthiest. Ciena carries an IBD Composite Rating of 72, and Infinera has a 67. The healthiest, both with CRs of 97, are Lumentum Holdings ( LITE ) with $1.45 billion in market value, and little Clearfield ( CLFD ), with a $222 million market cap. The third- and fourth-largest among these small caps both carry 87 CRs: Finisar ( FNSR ) with $1.8 billion in market value, and Viavi Solutions ( VIAV ) with a $1.5 billion market cap. Finisar fell 2.9% Tuesday, and Viavi slipped 1.1%. Image provded by Shutterstock .

Google Shopping Beating Amazon; How Far Will EU Android Probe Go?

Google Shopping outpaced Amazon.com ( AMZN ) in same-store sales in each month in Q1, says Monness Crespi Hardt in a research note Tuesday, but the investment also notes “uncertainty on how far the European Union will go” in its pursuit of Alphabet ( GOOGL ) unit Google’s Android operations in Europe. Alphabet is set to report Q1 earnings after the close Thursday. Alphabet stock was down more than 1% in afternoon trading in the stock market today , near 777. Alphabet stock is up 44% the past 12 months but down 4% from its all-time high of 810.35, touched on Feb. 2. The EU investigation of Alphabet “ is the one area that gives us pause, given the uncertainty on how far the EU will go,” wrote Monness Crespi Hardt analyst James Cakmak in the research report.  “In short, we believe Google can handle adverse rulings on the Google Shopping charges, but any forced un-bundling of Android and Google services (e.g. Search, Maps) can become a detriment to data collection and targeting capabilities.” According to a story in the Wall Street Journal on Tuesday,  the European Union is preparing to file formal antitrust charges on Wednesday against Alphabet over the U.S. tech company’s conduct with its Android mobile-operating system. Google Apps Required For Android Phone Makers? The WSJ reported EU competition chief Margrethe Vestager as saying that the commission was focused on Google’s demand that smartphone makers and mobile carriers using Android load Google apps on their devices if they offer any of the company’s services — including search — on their phones. Google’s contract requires phone makers to pre-install a folder of 11 apps within one click of the home screen, the WSJ said. Vestager expressed concern that Google was shutting out rival app developers with the contracts because they prevent consumers from deciding for themselves which apps to download, the WSJ said. Google has said that consumers do have the last word about which apps they want to use on their devices, according to the WSJ. Vestager opened a formal investigation into Google’s conduct with its Android operating system in April 2015. That same month, the EU Commission charged Google with favoring its own shopping comparison service in its own search results. At that time, Google Senior Vice President Kent Walker said in a blog post that the commission’s conclusions were “wrong as a matter of fact, law, and economics.” Cakmak expects Google to report a 25% rise in paid clicks in Q1, and a 5% decline in average cost per clicks. He also said Alphabet is putting forth better-optimized mobile ads and is expanding content on video wing YouTube to “augment engagement.” “We are also encouraged by the continued strength in Google Shopping trends where same-store sales have outpaced Amazon every month in Q1,” said Cakmak. “For pricing, gains in mobile search should also translate to improving cost per clicks, while abating foreign exchange headwinds.” Alphabet’s ‘Other Bets’ Will Remain An Earnings Focus Wall Street also wants to see that the sultan of search is serious about monetizing its various so-called “moonshot” initiatives. The diverse group that Alphabet calls its “Other Bets” range from self-driving cars to smart home device maker Nest. Capital expenditures for the “Other Bets” segment are expected to increase this year, although no details have been offered yet. When Alphabet released Q4 earnings in February, the tech giant revealed that it logged an operating loss of $3.6 billion on such moonshot projects in 2015. The company broke out its spending on its search core and “Other Bets” for the first time in Q4 2015. For Q1, analysts polled by Thomson Reuters expect Alphabet to see total sales — including TAC (“traffic acquisition costs” or fees paid to bring traffic to its site) — rise 18% year over year to $20.36 billion. They are modeling EPS ex items of $7.97, up 23% from $6.47 in Q1 2015. Excluding TAC, revenue is expected to rise 19% to $16.54 billion, according to FactSet. Google, which dominates the global digital ad market, will see its net ad revenue rise 9% this year, while No. 2 Facebook ‘ ( ) net ad revenue will jump 31%, says eMarketer’s latest ad spending forecast , released in March. Amazon stock was down nearly 2% Tuesday afternoon, while Facebook stock was up a fraction. Image provided by Shutterstock .

Cable Firms Prepare To Fight Set-Top Rules That Help Google, Apple

Cable TV companies are readying a court challenge if the Federal Communications Commission approves new set-top box regulations that would let companies like Apple ( AAPL ), Alphabet ( GOOGL ), Amazon.com ( AMZN ) and others sell devices that provide access to cable programming. The National Cable & Telecommunications Association has hired Theodore Olson, an attorney at the noted law firm Gibson, Dunn & Crutcher, to battle the FCC’s set-top box proposal. Olson, a former solicitor general, represented George W. Bush in the contested 2000 election vs. Al Gore that ultimately was decided by the U.S. Supreme Court. Apple also recently hired Olson and Gibson, Dunn & Crutcher in its battle vs. the Federal Bureau of Investigation involving a court order to unlock an iPhone used by an assailant in the San Bernardino terror attack. President Obama last week stated his support for opening up the set-top box market for more competition. The proposal would require pay-TV and technology companies to jointly develop new standards for devices providing access to cable TV networks. The cable TV industry pays programmers billions of dollars for content rights, and it’s unclear how that business model would be impacted. Comcast ( CMCSA ) and phone company AT&T ( T ), also a pay-TV provider, have criticized the set-top box initiative. The FCC, with three Democratic members and two Republicans, is expected to vote on the plan after a public comment period closes. FCC Chairman Tom Wheeler says the plan will make it easier for consumers to switch from pay-TV companies’ set-top boxes leased monthly to new devices sold on a retail basis by consumer electronics or Internet companies. Gibson, Dunn ‘Most Certainly Preparing For Litigation’ “We are most certainly preparing for litigation in the event the FCC moves forward with its invasive and illegal plan to restructure the video programming market,” said a spokesperson for Gibson, Dunn & Crutcher. Brian Dietz, a NCTA spokesman said, “We are exploring all options.” The NCTA previously hired Gibson, Dunn & Crutcher to challenge the FCC’s Title II-based net neutrality rules that were enforced in mid-2015. The U.S. Court of Appeals for the District of Columbia Circuit is expected to rule soon on the net neutrality case. Pay-TV companies may have an uphill legal battle vs. the FCC’s set-top box rules, says Paul Gallant, an analyst at Guggenheim Partners. “Cable/telcos will almost certainly challenge any FCC final new set-top rules in court,” Gallant said in a February research report. “They will likely argue, among other things, that the FCC lacks authority to give app makers access to programming/guide information. “It’s far too early to predict the court outcome, but it’s important to note that the FCC is operating under a clear congressional mandate to make the set-top business competitive. That doesn’t necessarily mean the FCC will prevail, but the agency probably will feel good about its chances with that statutory starting point.” Under the proposed new set-top rules, the FCC says that only pay-TV subscribers will gain access to programming, and that copyright protections will be preserved. Google, critics say, aims to swap its own advertising for the local ads sold by cable TV companies.