T-Mobile shows a rare profit as its growth spurt continues

John Legere’s Uncarrier campaign may have landed T-Mobile plenty of customers over the last two years, but Uncarrier’s numerous consumer enticements haven’t exactly been friendly to the actual carrier’s bottom line. T-Mobile has posted quarterly losses far more often than it’s reported gains, but the fourth quarter was a welcome exception to the rule.

[company]T-Mobile U.S.[/company] reported a net Q4 profit of $101 million, which, coupled with its even more gainful second quarter, put T-Mobile in the black for the year with a total net income of $247 million. That may pale in comparison to the $12 billion in profits posted by Verizon in 2014, but it should help quiet some of the criticism that T-Mobile is gaining customers at the expense of profits.

T-Mobile added 2.1 million new connections to its networks in Q4, capping off 2014 with 8.3 million more customers than it had at the beginning of the year. T-Mobile now has 55 million connections total and is now nearly tied with the country’s third largest carrier, Sprint (which ended the year with 56 million subscribers).

In 2015 T-Mobile is projecting another big growth year, though not quite as big as 2014. In its forward-looking guidance, T-Mobile said it expects to add between 2.2 million and 3.2 million postpaid subscribers (customers who subscribe to its core Simple Choice plans) in 2015, compared to the 4.9 million postpaid customers it attracted in 2014.

T-Mo’s outspoken CEO also had a few choice words about the blockbuster spectrum auction that ended last month with a record $41.3 billion raised. Of the major carriers that participated, T-Mobile wound up winning the fewest new airwaves, paying $1.77 billion, compared to the $10 billion–plus paid by [company]AT&T[/company], [company]Verizon[/company] and [company]Dish Network[/company]. On T-Mobile’s Issues and Insights blog, Legere called the auction a disaster for American consumers because it placed even more spectrum in the hands of the country’s most dominant carriers, and he accused Dish of gaming the system.

Instead of winning licenses directly, Dish bid through shell companies in order to gain massive discounts ($3.3 billion, to be specific). It’s a pretty despicable practice, but it’s a practice that all of the major carriers have engaged in in one form another. That’s why you aren’t hearing much complaining from the other operators.

In fact, T-Mobile is going into the next auction — which will reallocate valuable low-band frequencies from the TV broadcast industry to the mobile carriers — with a very big advantage. In that auction, the Federal Communications Commission is setting aside blocks of airwaves in every major market for carriers that don’t own much low-band spectrum, meaning T-Mobile and Sprint will likely get new 600 MHz licenses at sizable discounts over AT&T and Verizon.

New Relic boosts revenue growth in first post-IPO earnings

New Relic’s first earnings report since going public last December seemed to please investors as the application-performance and analytics company took in $29 million in revenue in what it considers its third quarter 2015 earnings. That’s a 14 percent quarter-over-quarter increase from the second quarter of 2015 and a 69 percent year-over-year increase from the third quarter in 2014.

The San Francisco-based company also said it now has 11,270 paid business accounts as of December 31, 2014, which is up from the 10,590 paid business accounts it had as of September 30, 2014, as disclosed in an SEC filing.

New Relic also signed on some new customers during the quarter including [company]Capital One Services[/company], [company]Hootsuite Media[/company] and [company]Walgreens Boots Alliance[/company].

Seventy-five percent of [company]New Relic[/company]’s customer base is made up of small to medium-size businesses with the other 25 percent coming from companies with over 100 employees. However, those bigger clients account for roughly half of the company’s revenue, said New Relic CFO Mark Sachleben in a conference call.

New Relic sees its recently launched Insights real-time analytics product line as the main differentiator from competitors, and is part of the company’s “land and expand” strategy that involves selling a product line to a client and then persuading it to purchase more goods, explained Sachleben.

The company has also seen “quite a bit of success” in migrating clients from monthly billing cycles to up-front annual payments, which is something larger enterprises are more prone to do, said Sachleben.

In an interview with Gigaom after the conference call, New Relic CEO Lew Cirne wouldn’t say which of its many product lines has been the fastest growing in the past quarter, but he did say that the company is looking to boost staff in Dublin and London as it attempts to grow its market share in those regions. Cirne said 34 percent of New Relic’s business comes from outside the U.S., but the company doesn’t currently have a large global salesforce. So far, the plans are to expand outside the U.S. starting with Europe, but Cirne said the company has “nothing yet to share beyond those markets” at this time.

Here’s some of the numbers based on the company’s earnings report:

  • Revenue for the third quarter of 2015 was $29 million, which is a 14 percent increase from the second quarter of 2015 and a 69 percent increase from the third quarter in 2014.
  • New Relic took $15.6 million in GAAP loss from operations for the third quarter of 2015, which was an increase from the $11.7 million GAAP loss from operations it took in the third quarter of 2014.
  • The company ended up raising $119.9 million in net proceeds during its IPO.
  • For the fourth quarter of fiscal 2015, New Relic is projecting revenue between $30.0 million and $30.5 million and expects a non-GAAP loss from operations ranging between $11.0 million and $12.0 million.

Twitter retracts “iOS 8 bug” explanation for slow user growth

On Twitter’s earnings call yesterday, CEO Dick Costolo said its nearly flat user growth in the fourth quarter was partially the result of an iOS 8 bug. He didn’t explain it very well confusing analysts and journalists alike. On Friday, Twitter backtracked on that explanation. It tweeted, “To clarify from yesterday’s call: there was no bug or issue with iOS 8. It is an issue on Twitter’s side as users upgraded.” For a deeper explanation on what might have happened, read this.

Why Twitter finally caved and returned to Google

Following the release of its fourth-quarter earnings results, Twitter CEO Dick Costolo confirmed the company’s previously rumored new partnership with Google. Twitter had partnered with Google before to surface tweets in search results, but in 2011 it chose not to renew their deal because the terms weren’t favorable enough for the social media company. So why now, years later?

Costolo explained his thought process during a conference call following Twitter’s fourth-quarter results.. Since growth of monthly active users of Twitter is slowing, the company is starting to double down on measuring its impact outside of the core Twitter experience. It’s pushing new metrics, like logged-out users and syndicated views (when Twitter shows up places like Flipboard or CNN).

As a result, the time is ripe for a partnership with Google, which could be one more place to serve up tweets outside Twitter. “We’ve got the ability to drive attention and aggregate eyeballs to logged out topics and events,” Costolo said. “That’s one of the reasons it makes a lot more sense for us now.”

He didn’t go into any of the business deals of the agreement, and he said we shouldn’t expect to see the partnership come to fruition for a few months. In other words, it’s not going to impact Twitter’s bottom line during its next earnings call.

The other key point discussed in Twitter’s earnings call is, as I pointed out earlier, strong revenue and nearly flat growth in the fourth quarter. People considered what that meant for Twitter’s business model on (where else) Twitter.

Josh Elman, a Greylock investor and former Twitter employee, pointed out that growth, slow or fast, is a “lagging indicator of prior work.” Gigaom founder Om Malik said the trends show that although Twitter is a business force to be reckoned with, it now seems unlikely to ever become a huge powerhouse like Facebook. Farhad Manjoo at The New York Times agreed.

There was one other interesting item from the earnings call: Twitter CEO Dick Costolo blamed a mysterious iOS 8 bug and seasonality, saying that the fourth quarter is always Twitter’s slowest in terms of user growth. When asked to elaborate on the bug, he dodged the question.

“It’s an unforeseen bug as it relates to twitter integration,” Costolo told investors. “Once we understood the issue we moved as quickly as we could to minimize the impact on multiple fronts. The problem was complex and affected different users differently.”

He said based on January’s numbers, he believes Twitter’s MAU numbers will return to their former growth rate by the next earnings call.

Twitter beats on earnings but misses on user growth

Twitter’s stock rose slightly today after the company announced its fourth quarter earnings. It beat by a significant amount, although it missed in terms of what analysts expected for user growth.

Here are the numbers:

Revenue:

Analysts expected — $453.1 million

Twitter actual — $479.08 million

Earnings per share (Non-GAAP):

Analysts expected — $0.06

Twitter actual — $0.12

MAUs:

Analysts expected — 295 million

Twitter actual — 288 million

Twitter’s growth is slowing. It only grew 1.4 percent from the third quarter to the fourth quarter, which is its slowest user growth quarter-over-quarter in the history of it being a public company.

The mixed bag of earnings results come after a month straight of Twitter developments. The company executed on some of the new products it previewed during Analyst Day in November: Instant, algorithmically curated timelines for new users, group private messaging, and “while you were away” updates. It made small forays into expanding its advertising beyond Twitter itself. Promoted tweets will start appearing on Flipboard and Yahoo Japan, the first partners.

At the same time, investors started raising complaints about the slow user growth. One told Business Insider that Dick Costolo should resign. A CNBC analyst predicted he’d be out by the end of 2015. Twitter co-founder Jack Dorsey recently tweet stormed in support of Costolo.

There’s also been a lot of leaked Twitter news recently that’s not product related. The company recently removed employees’ access to the monthly active user number, only granting it to certain people now. In an internal Twitter forum, CEO Dick Costolo admitted that Twitter wasn’t good at handling user harassment and bullying issues, and that he takes total blame for it. And word got out that Twitter is reestablishing its partnership with Google, so you’ll start seeing more tweets in your Google searches.

 

This story is developing and we’ll update with more information from the earnings call….

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Sprint is growing, but it’s still losing core phone customers

Marcelo Claure may have brought the struggling Sprint back to growth, but the new CEO probably wishes the company were growing in different ways. Sprint added 1 million new connections in the fourth quarter, but they were all prepaid, wholesale and tablet connections instead of core smartphone subscriptions.

In its Q4 earnings (the company’s fiscal Q3), Sprint revealed it lost 205,000 postpaid phone subscribers, the high-value customers who tend to be either on contract of premium service plans. While [company]Sprint[/company] total postpaid connections did grow by 30,000 last quarter, it was all tablets. Tablets are great, but a $30 tablet plan brings in half the revenue of a $60 smartphone plan. And as far as the slate race goes, [company]Verizon[/company] and [company]AT&T[/company] are clearly winning, connecting a combined 2.4 million tablets to their networks in Q4.

Unlike with tablets, there aren’t that many new phone customers out there. Carriers are basically poaching postpaid customers away from one another or upselling prepaid users on premium plans. So it’s pretty unreasonable to expect Sprint to post a quarter with a million new postpaid smartphone plans. But ever since Claure took over, Sprint has been focused on that segment, launching new promotions like its iPhone for Life leasing program and an offer to cut Verizon and AT&T phone bills in half.

Sprint said that due to those aggressive campaigns it had a record quarter of luring postpaid phone subscribers over to its network, but its competitors were also pretty successful at luring customers away from Sprint. Sprint’s churn rate, the percentage of customers that defect every quarter, for postpaid subscribers was 2.3 percent, double that of Verizon.

Sprint reported a loss of $2.38 billion last quarter, compared to a $1.04 billion loss a year earlier, but $1.9 billion was a one-time charge: Sprint wrote down the value of its brand. Sprint now has 55.9 million total customers.

During Sprint’s earnings call, Claure also gave an update on Sprint’s ongoing network upgrade. Sprint’s LTE network basically has three parts, each in a different phase of construction. Its main network on the PCS frequency band now covers 270 million people. Sprint has also been using its old Nextel airwaves to add LTE coverage to its footprint and that network is now in 60 percent of Sprint’s markets. Finally, the Spark network Sprint is building in the 2.5 GHz airwaves to add loads of capacity to the network now covers 125 million people.

Google misses slightly on fourth quarter earnings and stock dips

Google’s fourth quarter earnings missed Wall Street expectations today, but only by a slight amount. The stock dipped down 3 percent in after hours trading.

Here are the Q4 numbers:

Revenue minus traffic acquisition costs (TAC):

Analysts expected — $14.61 billion

Google actual — $14.48 billion

Earnings per share (Non-GAAP):

Analysts expected — $7.08

Google actual — $6.88

Cost per click:

On Google.com — Decreased 8 percent in Q4

On Google’s network sites — Increased 6 percent in Q4

As The Information’s Amir Efrati pointed out on Twitter, you can see Google’s true opinion of its fourth quarter earnings by comparing its press releases from former earnings reports. This is the first quarter in a year that Google hasn’t heralded its “strong” and “great” “momentum” and “growth.”

During the earnings call, Google’s CFO Patrick Pichette confirmed that the company has halted its Google Glass project. He explained that Google will pause future projects and reset their strategy when they aren’t having the impact hoped for. This is a change in messaging from the company’s earlier line that Glass was just “graduating” to a new stage of development.

Google also discussed its Chromecast stick, saying it has seen 1 billion cast sessions since the company started selling it. Despite the bullshit metric — number of units sold would’ve been a better number — Chromecast is clearly doing better than Glass.

This story has been updated with information from the earnings call.

Samsung is making less money from phones, but chip sales are up

Samsung Electronics announced a fourth quarter earnings decline on Thursday, its first holiday season drop in three years.

The earnings report wasn’t as gloomy as the past few quarters have been: Samsung made an operating profit of 5.29 trillion won ($4.87 billion) on 52.73 trillion won ($48.6 billion) in revenue. Nearly $5 billion in profits is still a big number, but it’s down from last years 8.31 trillion won in operating profit. Revenue was down from 59.28 trillion won.

Samsung’s struggles in its cash-cow handset division (IT & mobile communications) are well documented: It’s getting beat by Apple on high-end handsets (even in South Korea) and its margins are getting pressured on the low-end from companies such as Xiaomi and Lenovo. In this past quarter, Samsung reorganized much of its mobile executive ranks, firing several VP-level employees, including head of mobile marketing D.J. Lee, while keeping mobile unit head J.K. Shin in charge. Profit from Samsung’s handset division dropped to 1.96 trillion won from 5.47 trillion won in the year-ago period.

Some are wondering whether Apple may have sold more total handsets than Samsung in the most recent quarter. Samsung says its high-end products, specifically the Galaxy Note 4, are seeing “increased sales.”

Photo by Kif Leswing/Gigaom One bright spot in the Samsung Electronics earnings report was for its semiconductor division, which posted a profit of 2.7 trillion won ($2.4 billion). Samsung makes processors as well as memory chips.

Samsung attributed its semiconductor division performance to increased demand for DRAM. But part of it could also be due to Samsung winning contracts for semiconductor fabrication for future Apple iPhones, or it could be because Samsung will likely be using its chips in its own phones instead of ones made by Qualcomm, as has been seemingly confirmed by Qualcomm itself. Samsung also plans to spend more money to boost its chip output, the company said in a statement.

Samsung has already made several major shifts in its handset and overall strategy that haven’t completely shown up in this most recent earnings report.

It has consolidated many of its mid-range devices into a new A Series sporting Samsung’s new aluminum construction, and it appears to be going forward with unique curved displays like those found on the Galaxy Note Edge in future devices. Samsung is also a major player in virtual reality, having released the Gear VR headset in the past few months. It released a phone running its own Tizen operating system, which will start showing up in TVs and other connected durable goods made by Samsung’s consumer-electronics division. In the next year, those decisions will start to have a bigger impact on Samsung’s bottom line.

 

 

Here’s why Facebook got away with a 335 percent hike in ad prices

Ads dominated the discussion during Facebook’s fourth quarter earnings call this Wednesday. COO Sheryl Sandberg told analysts that the company is charging 335 percent more for each ad on average, despite the fact that the ad impressions has decreased by 65 percent.

The company says its ads have become more efficient at targeting and tracking people. Facebook is measuring the return on investment that each advertiser receives for every dollar spent. “When I sit down with clients this year compared to last year … we’re able to A/B test Facebook ads versus no Facebook ads and what the effect is on their sales,” Sandberg said on the call.

She repeated Facebook’s new advertising mantra, a tactic it’s calling “people based marketing.” The company is building new ways to measure a user across multiple devices, like phone, desktop, laptop, and tablets, instead of relying on cookies, which don’t work well on mobile.

“The ability to understand that that’s one person, to serve an ad and measure through all the way, we think is going to massively improve the efficiency of the system,” Sandberg said.

She’s not the only one who thinks that. On Google’s earnings call last quarter the company admitted it was keeping an eye on Facebook’s innovations in the mobile advertising space. At the time, analysts were concerned that Google didn’t have enough visibility in the app ecosystem, via Gmail logins, to track users across their apps and target the best ads to them.

Since many apps have integrated Facebook login technology, the company is the leader in targeted advertising for mobile. 69 percent of Facebook’s advertising revenue came from mobile in Q4, 16 percent more than in the same quarter of 2013. It’s staggering growth, given it was only two years ago it was struggling to figure out how to make money on mobile.

As for the rest of Facebook’s Q4 numbers, the company beat Wall Street estimates for the tenth quarter in a row. Its growth continues unabated and it surpassed its number of monthly active users from Q3 by 40 million.

Here are the Q4 numbers:

Revenue:

Analysts expected — $3.77 billion

Facebook actual — $3.81 billion

Earnings per share (non gaap):

Analysts expected — $0.48

Facebook actual — $0.54

Monthly active users:

3rd quarter 2014: 1.35 billion

This quarter: 1.39 billion

Other significant stats:

3 billion video views per day

890 million daily active users in December

1.19 billion monthly active mobile users

The company’s continued success comes on the heels of positive news about its social acquisitions and messaging efforts. As Kevin Fitchard reported this morning, Facebook owns the top four most downloaded apps worldwide in 2014: WhatsApp, Instagram, Facebook itself, and Facebook Messenger.

Facebook’s attempts at building new social apps haven’t succeeded quite as well — Poke was quietly shuttered, and Slingshot and Rooms have been laying low. But Zuckerberg’s lavish acquisition strategy, although occasionally jaw-dropping, appears to be working. Instagram is now believed to be worth $35 billion compared to the $1 billion Facebook bought it for.

This post has been updated with more information from Facebook’s earnings call.

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AT&T grows by 1.9 million connections, many of which were cars

AT&T posted yet another strong quarter for new connections, but unlike previous periods this fourth quarter was driven (pun intended) largely by cars. Of its 1.9 million net subscriber additions, 800,000 were vehicles giving yet another indication that AT&T is locking down the 4G car connectivity market.

Ma Bell didn’t do too shabbily in other areas either. The carrier saw its postpaid customer base grow by 854,000, which included 148,000 new smartphone connections and nearly 1 million new tablet data subscriptions. It lost 180,000 prepaid subscribers and 65,000 wholesale subscribers, but it made up for them with 1.3 million connected device links, which includes cars and other internet-of-things devices. [company]AT&T[/company] now hosts 121 million total wireless connections on its networks.

Over the last year, AT&T has been signing deal after deal with automakers to provide the LTE link to their new 3G and 4G cars. Most of those new connected Audis, Chevys, Buicks, Cadillacs and Volvos rolled out this summer and fall (it also supplies the links to Tesla cars), leading to two big quarters of vehicle-driven growth. In Q3, it added 500,000 car connections as well.

Archrival [company]Verizon[/company] welcomed 2.07 million new connections to its networks in a Q4 that was also dominated by new tablet subscriptions. [company]T-Mobile[/company] grew by 2.1 million connections and [company]Sprint[/company] saw a rare growth spurt of 1 million new subscribers.

Financially AT&T posted a net loss of $3.9 billion after seven straight quarters of profit. AT&T said that loss is attributed to actuarial losses on its employee benefit plans, network write-offs and merger and integration expenses. AT&T just bought Mexican carrier Iusacell, and it’s in the process of acquiring both DirecTV and Nextel Mexico, all of which will give AT&T a big presence in Latin America.

“Building out Mexico is going to be a full-court press for the next few years,” CEO Randall Stephenson said at AT&T’s earnings call.