TIME Companies

Apple, Facebook, Google and More: Get Ready for Earnings Season

Apple Unveils iPhone 6
Apple CEO Tim Cook shows off the new iPhone 6 and the Apple Watch during an Apple special event at the Flint Center for the Performing Arts on September 9, 2014 in Cupertino, California. Justin Sullivan—Getty Images

Intel beat expectations. What else does earnings season have in store?

So which will it be? Another banner year for tech stocks, or a period of disappointment? The next couple of weeks will provide investors plenty of clues.

Technology stocks in general enjoyed a good 2014, but the first couple of weeks of the new year have brought a sense of uncertainty. Now, as many companies in the sector gear up for the quarterly ritual of earnings announcements, investors will be scouring numbers for any signs to dispel uncertainty.

Analysts are expecting all earnings in the S&P 500 to rise a mere 1.1% in the quarter, according to Factset. For tech stocks, the growth will be slightly better: up 2.3%. Tech companies themselves aren’t feeling terribly confident: Of the 24 tech companies in the S&P 500 that have offered earnings guidance to investors, only four have given positive guidance, while 20 are taking a more cautious stance.

Factset was forecasting 4% growth in tech earnings and 8% growth for all S&P 500 sectors just a few months ago. But that was before oil prices started to plunge and the economic situation in Europe and Asia started looking as sketchy as it does now. That all adds up to uncertainty, and people tend to brace for bad news when they don’t know what to expect.

However, tech can be a safe haven in bad economic times, as it proved to be fairly resilient during the 2008-09 recession. And with investors’ expectations already lowered, strong earnings in tech could spark a more widespread rally.

The first tech giant to report was Intel. It’s an important company to watch because chipmakers’ orders rely on other tech companies’ plans for growth, making them industry bellwethers.

Intel was an under-performer for years while PC sales were in decline, but that market has finally stabilized after years in freefall. Accordingly, Intel handily beat expectations Thursday, posting Q4 2014 earnings of 74 cents per share, up 39% year-over-year, on $14.72 billion in revenue. Outside the consumer PC market, Intel has been making inroads on chips for mobile devices and sensors powering the Internet of Things, while the growth of cloud computing is creating more demand for its servers.

“The fourth quarter was a strong finish to a record year,” said Intel CEO Brian Krzanich in a statement. “We met or exceeded several important goals: reinvigorated the PC business, grew the Data Center business, established a footprint in tablets, and drove growth and innovation in new areas.”

However, Intel’s Q1 2015 guidance was lighter than expected, sending its stock down about 2% in after-hours trading. That post-earnings decline isn’t good news for other tech companies, because it suggests investors want more than just good news — they want the kind of great news that’ll spark a bigger rally.

The next notable tech names will report on Tuesday, when IBM and Netflix share their financials. This week, three analysts cut their earnings estimates and price target for IBM, following a report in the Register that said the enterprise IT giant is on the verge of its biggest restructuring ever.

Any news on a restructuring will reshape how investors assess IBM’s long-term prospects. But Big Blue’s earnings report may also offer insight on how demand and competition are faring in the enterprise tech market. If IBM’s challenges reflect an industry-wide slowdown, or if its results suffer significantly from the strength of the U.S. dollar, it could signal problems for other multinational enterprise tech stocks.

Meanwhile, Netflix’ earnings could add yet another volatile chapter in that company’s history. Netflix’s stock plummeted 25% last quarter on sluggish subscriber growth. Next week’s earnings could be just as tumultuous: One analyst said the stock could drop 15%, but urged investors to buy anyway because its international growth and original content are looking stronger than ever. To Netflix investors, such wild swings are nothing new.

Tech earnings will heat up in the final week of January when five of the most closely watched tech companies are all slated to report: Microsoft on Jan. 26, Apple on Jan. 27, Amazon and Facebook on Jan. 28, and Google on Jan. 29. Investors will scrutinize each company for different reasons, yet each will add up to a clearer picture of the health of the tech sector.

Some analysts have been increasing their estimates for Apple and Amazon. Not only is Apple valued attractively after several years as a lagging stock, iPhone sales were strong in the holiday quarter. One analyst says the company could vow to return $202 billion in dividends and buybacks in the next two years. Amazon, meanwhile, could pull back on spending, reversing its recent net losses.

For other tech giants, this quarter may show how they are maturing beyond their core markets: Google in search and Facebook in its mobile-feed ads. All are global companies, so the strong dollar could blunt any international growth. But all are consumer-focused, so they may benefit from the extra spending money consumers have left over from falling energy prices.

Public companies disdain the quarterly earnings process, with the open questionings and the swings in stock prices they can bring. But they also offer each other, their customers and shareholders insight into how the industry at large is faring. We got our first peak Thursday, but there’s plenty more to come.

TIME Social Media

For Twitter, Potential and Reality Are Increasingly at Odds

Twitter
The Twitter logo is displayed on a mobile device. Bethany Clarke—Getty Images

Here's why 2015 will be the most important year in Twitter's short history

Twitter has seen its stock rallying lately, but not for reasons the company would like. On Jan. 6, it shot up 7% on rumors activist Carl Icahn was buying a stake. Right before Christmas, it also rallied 4% on another rumor CEO Dick Costolo would step down.

Costolo has outlined a long-term vision for the company, but it’s the rumors of the plans others have for Twitter that moves its stock higher. That’s because there have been two Twitters for a while–the premier publishing platform the company could be and the one that always seems to be falling short of that potential.

There’s the influential company that breaks big stories, hosts large-scale debates and writes history in real time. And there’s the troubled company that can be found in Facebook’s shadow. There’s the stock that’s trading 40% above its offering price. And the stock that’s lost more than half its peak value.

There’s the startup that everyone doubted the first time they used it. And there’s the company that has become an addiction to many. There’s the social media site that has proven to be an indispensable platform for people in the media industry. And there is the social media site that draws naysaying predictions from people in the media industry.

There is the social network that some argued was unmonetizable, and the one that saw revenue double to $1.3 billion in 2014. There is the company that promises a decade of revenue growth, and the one that hasn’t shown an operating profit for years. There is the company that can boast 284 million monthly users and a half billion tweets a day. And the company with a measly 284 million monthly users, less than Instagram’s and a faction of Facebook’s.

But here’s the thing: As time goes on, the world has less room for two Twitters. It may well be that when 2015 comes to a close, there will only be one. The only question is which one will it be? Twitter the success story? Or Twitter the falling star?

There’s no question which Twitter Costolo wants to see survive. Over the past several months, Costolo has been working on a plan to boost user growth and engagement, convert logged-out readers into monetizable users, and insert more ads into Twitter feeds without driving away users.

The pressure to deliver on these goals is on. After the resignation rumors, critics emerged to call for his removal, including a Harvard professor who dismissed Costolo as “a consultant.” But Twitter has seen a lot of reshuffling in its executive ranks, and further instability in its leadership won’t help.

Besides, it’s not clear who would do a better job at growing Twitter right now than Costolo, who understands the devilish balance the company needs to maintain in order to keep growing without driving away its core users–a process that requires time. Facebook had nine years as a private company before facing the pressures to grow profits (and its first post-IPO year was a bummer). Twitter had only seven.

The tension that divides the two Twitters–grow users, but also grow revenue by showing them ads–is one familiar to social networks. Push too hard on one and the other vanishes. Facebook succeeded by building an inimitable place for friends to connect in non-public conversations. But Twitter isn’t Facebook. Like the “microblog” it started out as, it’s closer in spirit to Web 1.0 publishing–that is, a one-to-many format, only on a much richer, social venue.

The problem is, many people are reading tweets without setting up or logging into accounts. Twitter reckons this passive audience is 500 million large. Still more could be drawn in if a Twitter platform made tweets a part of other mobile apps. Costolo has plans to address these issues, by making it easier for passive users to build profiles and create instant timelines, and by rolling out Fabric, a Twitter platform that developers can easily drop into their apps.

Twitter is also vowing to boost the percent of ads in a Twitter feed from 1.3% of tweets to 5%, which itself could boost annual revenue to $5 billion. In my own feed, I’ve noticed ads are as high as 7%, or one in every 15 tweets, although none have shown up yet in apps like Tweetbot.

Twitter is quick to caution that such figures aren’t formal estimates but mere projections of a potential. And there’s that potential Twitter again, the one that never seems to show up in reality. Costolo has made a credible case for more time to let his plans push Twitter closer to that potential growth. Transitioning to a new leader, or merging Twitter with Yahoo or Google, would only delay a transition that is already short on time.

Moving too quickly to push ads onto Twitter could also drive away more active users. And that would cripple the best part of Twitter–the public forum where events like Ferguson protests unfold online, where debates flourish, where strangers discuss sporting or television events, and where celebrities, politicians and–yes–investors connect with the public. If Icahn does amass a large stake in Twitter, he will probably announce it on Twitter.

So 2015 is shaping up to be for Twitter what 2013 was for Facebook: a make-or-break year. Facebook managed to win over investors by delivering on its promise for growth. Twitter is reaching a similar crossroads this year, and how well Costolo delivers on his vision will likely determine which Twitter is with us come 2016.

TIME Companies

How BlackBerry Could Survive Another Year

BlackBerry
The BlackBerry Ltd. Classic smartphone is displayed for a photograph during an event in New York, U.S., on Wednesday, Dec. 17, 2014. Bloomberg—Bloomberg via Getty Images

BlackBerry's CEO is keeping investors from giving up entirely

John Chen isn’t a CEO plagued with doubt. That’s an essential quality for anyone who has taken on the formidable task of turning around around BlackBerry — but Chen also lacks the rose-colored optimism of some turnaround CEOs who, quarter after quarter, plead with investors for just a little more time.

Chen’s leadership more than anything is keeping investors from giving up on BlackBerry. When the company reported its latest quarterly earnings Friday, its stock fell 10% for an hour or two, but by the end of the day it was unchanged on the day. The stock has risen another 8% since then.

The initial selloff was triggered by revenue numbers well short of analysts’ expectations. Revenue from devices like the recently launched BlackBerry Passport fell 24% to $361 million. Even worse, revenue from mobile service subscriptions fell 42%, to $368 million. Software, seen as the company’s best hope for growth fell 4% to $54 million.

The stock didn’t begin its slow comeback until Chen took to the phone to discuss the company’s results. Chen said BlackBerry’s revenue figures were “not satisfying,” but he explained that the average selling price of $182 per device — well below expectations — was due to the company purging its inventory of older devices. The good news: BlackBerry’s cache of older models has fallen 93% in the past year.

BlackBerry sold 1.9 million devices in the quarter, shipping only 200,000 units of its new Passport. But a backlog of orders meant many Passports won’t be recognized as sales until this quarter. Chen also said that early orders for the BlackBerry Classic – with new technology stuffed into a familiar design – are already surpassing the Passport’s early demand.

BlackBerry’s decline in services revenue, however, is a long-term drain that the company has little chance of stopping. Carriers once paid BlackBerry to manage secure email and messaging, but now they can handle that themselves. So BlackBerry is now pushing software like BES12, a mobile platform aimed not at consumers but banks, healthcare companies and governments.

Many of those companies favor the mobile security that BlackBerry has long offered, something that may grow more attractive in the wake of several recent high-profile corporate hacks. Chen has said BlackBerry will double its software revenue, which currently stands at around $250 million annually, in the coming year.

Investors have had faith in BlackBerry even as they despaired over its future because Chen has been consistent with his bold predictions, rather than kicking the can of a promised turnaround down the road — a year ago, Chen said the company would be profitable by 2016.

Still, there’s a long way to go. By one measure, BlackBerry posted a profit of a penny per share last quarter. But by another count, BlackBerry saw a 28 cent loss. The company has to prove it can sustain any profit just by growing its revenue. One key measure suggests it might: the company turned its cash flow positive (meaning it’s generating money rather than burning through it) last quarter, one quarter earlier than it projected.

Those metrics are meaningful in that Chen’s restructuring of BlackBerry has been a two-part plan: Cut costs and eliminate older, unwanted businesses to become profitable and cash-flow positive. After that, Chen’s plan will be to drive revenue growth with new devices and software.

The last year has seen the first phase of that plan roll out quickly: BlackBerry cut its workforce by 40%, then told workers in August it was finished with layoffs. It outsourced manufacturing and refocused on the enterprise market. And its success in clearing inventory of old models means an increased average selling price in future quarters should increase profit margins.

Increasing revenue is going to be trickier. Chen’s predecessors found it much easier to cut costs than revive growth. Still, the Classic and Passport devices are designed to appeal to fans of BlackBerry’s iconic keyboard. And the BES12 platform has drawn partners like Samsung and Boeing, along with potential customers like Air Canada.

BlackBerry says it may take a few quarters for evidence of revenue growth to occur because of the way it accounts for device sales (it records revenue not when units are shipped to distributors but when users turn them on) and for software (which includes subscriptions and support spread over several quarters).

BlackBerry’s recent report did give bears plenty of fodder for gloomy predictions – revenue was down 34%, $125 million under the Street’s consensus forecast. But the company’s stock has shown an ability to recover quickly from such grim metrics. The bad news reflected BlackBerry’s past, but a better future still seems plausible. Gone are the days in which BlackBerry can beat Apple. But 2015 may be the year when BlackBerry shows reports of its demise were greatly exaggerated — and that alone would make for a remarkable achievement.

TIME Mobile

Here’s Why You’ll Pay Less for Your Wireless Plan Next Year

T-Mobile
T-Mobile President and CEO John Legere speaks at a news conference at the 2013 International CES at The Venetian on January 8, 2013 in Las Vegas, Nevada. David Becker—Getty Images

Carriers like Verizon, ATT&T and T-Mobile are fighting a price war that could last months. The longer it endures, the more choice consumers will have

This hasn’t exactly been a banner year for wireless carriers’ stocks. While the S&P 500 Index has risen 8% this year, AT&T and Verizon, which together control about 83% of the wireless market, are down 8%.

The two companies have fared especially poorly in the last month: AT&T is down 10% and Verizon is down 12%, while the S&P is down only 2%. The reason is one that may delight consumers and concern investors: A price war, in which rivals cut prices to steal market share from one another, has broken out among carriers, and it’s only likely to get more intense next year. The longer a price war endures, the more choice consumers will have, though it means financial pain for carriers.

Verizon issued a press release last week with a headline touting “strong wireless customer growth” this quarter, but contained less sunny news further down: the “impacts of its promotional offers . . . will put short-term pressure” on Verizon’s profit margins. When companies issue statements about earnings before they’re officially reported, there’s usually worrisome news tucked inside. The following day, Verizon CFO Francis Shammo offered more spin.

“What we’re seeing is a pretty exciting period here at Verizon Wireless,” he said at an investors’ conference, “where we saw an increase in the activations but we’re also seeing some increase in the churn as well.”

Churn, which measures customer attrition, is a scourge to companies that rely on subscribers because it can signify customer dissatisfaction or the impact of rivals’ lower prices. A recent survey by Consumer Reports suggests customer satisfaction is comparable among AT&T, Verizon and T-Mobile (not so much Sprint, which is having issues in upgrading its network). In previous surveys, Verizon had a clear lead and T-Mobile had lagged. That’s a sign Verizon owes its churn problem to competitors’ lower prices.

Still, Verizon’s Shammo argued that talk of a price war was overstated and that “the revenue of the industry . . . has come down slightly but not as much as everybody is making it out to be.” The market disagreed. Verizon’s stock fell 4% as Shammo made his comments. Two securities firms downgraded Verizon’s ratings, while two others lowered their price targets for the stock.

It didn’t help that at another investment conference that same day, AT&T CFO John Stephens was saying something similar in starker terms.

“The current impact — the current environment is impacting churn,” said Stephens. “In fact, we expect postpaid churn to be higher than it was in the year ago fourth quarter. This will impact fourth-quarter adjusted wireless margins.”

That’s especially good news for T-Mobile, which, under the banner of the “uncarrier,” has run promotions that remove two-year lock-ins and data caps and offer lower-price plans to steal customers away from its bigger rivals. AT&T and Verizon have responded with their own lower-priced plans, but the advantage seems to be going T-Mobile’s way.

Last week, T-Mobile CEO John Legere boasted to the Wall Street Journal that it’s taking in more customers than it’s losing, meaning it isn’t being hit by the same churn striking Verizon or AT&T. T-Mobile upped the ante yet again Tuesday with its eighth “uncarrier” promotion, which lets users roll over unused LTE data from one month into the next for free. Mobile carriers once offered similar roll-over offers for phone calls when it became clear that data networks were displacing voice calls, but until now data plans had no such perk.

None of this means T-Mobile and Sprint’s investors are necessarily any happier than those who own AT&T and Verizon stock. In fact, they’re probably less happy. T-Mobile’s stock is performing as badly as Verizon and AT&T’s this month, and year to date it’s down 26%. T-Mobile is pursuing subscriber growth and revenue with its low prices, but that strategy pushes down profits — the “uncarrier” has posted a loss for three of the last four quarters. Sprint’s stock is doing even worse: It’s down 62% so far this year.

From the looks of things, the carriers’ fierce competition may continue into 2015. This month, Sprint began offering to halve the monthly bills of AT&T and Verizon subscribers who switch to similar plans on Sprint. Not to be outdone, T-Mobile offered an unlimited data plan with two lines for $100 a month.

Verizon’s Shammo predicted the price war will pass in a matter of months. “I think that things will settle down in 2015,” he said at the UBS conference. “Some of this is just temporary promotion-type stuff to stimulate some growth . . . You can’t do that long term. You can do that for a quarter or two, but then you have to get realistic.”

There’s reason to think that may not happen. When price wars break out, investors often watch who is gaining market share and revenue. Right now, that’s T-Mobile, despite its struggling performance on Wall Street. Its CEO has taken on activist shareholders in the past and has the grit to do so again. As for Sprint, investors may come to see that fighting on price may be the best option as long as customer satisfaction remains low.

At the same time, niche carriers are beginning to win over some customers as well. In Consumer Reports’ recent ranking of carriers, the two clear winners were tiny ones: Consumer Cellular and Ting, both of which ranked high on value and network quality. Last quarter, according to Cowen & Co., smaller carriers like them made up 5.2% of the postpaid mobile market, up from 4.2% only a quarter before.

For subscribers weary of having only two comparably priced mobile carriers to choose from, price competition from smaller players is welcome, even if network quality has long been an issue. When industries go from being uncompetitive to more competitive, there is often a period of declining margins across the board as consumers are given a broader range of choices.

The current price wars are coming at a time when carriers need to bid on costly spectrum auctions and spend money upgrading their networks. That suggests a tough time ahead for wireless carriers and their investors in the short term. But if price competition becomes a long-term phenomenon, it could eventually bring big returns for whichever companies emerge as the victors.

TIME Electronic Arts

Why Electronic Arts Is Suddenly Roaring Back to Life

Visitors Attend The EXG Gaming Conference
A visitor passes an advertisement for the Sony Corp. Playstation version of the FIFA 15 soccer game, produced by Electronic Arts Inc. (EA), during the EGX gaming conference at Earls Court in London, U.K., on Thursday, Sept. 25, 2014. Bloomberg—Bloomberg via Getty Images

EA is in the game again

It’s been a rough six years for Electronic Arts, as the gaming giant has navigated it way through a rapidly changing world of games while facing a customer backlash, a disenchantment of developers in studios it acquired, and increasingly unhappy investors.

But if the mood of one group – EA shareholders – is any indication, the Redwood City, California company is on its way back. Electronic Arts’ stock rose as high as $46.23 Wednesday, its highest level since September 2008, before closing at $45.99. So far this year, EA has risen 100%, outpacing by a healthy margin rivals like Activision Blizzard (up 20%), Ubisoft (up 22%) and casual gaming company Zynga (down 33%).

That recovery has been a long time coming. EA lost its way nearly a decade ago as its push to wring profits from established franchises led to a stagnation in creativity and, ultimately, financial growth. In 2008, then-CEO John Riccitiello offered a mea culpa to a crowd of gaming developers, acknowledging that a strategy of buying gaming companies and forcing their developers to assimilate to EA’s culture wasn’t working. But despite pledges to change and a restructuring of the company aimed at fostering creativity, EA’s revenue stagnated while its stock price slumped.

Even worse, users began to revolt. For several years after Riccitiello vowed to improve EA’s games, complaints began to mount on the company’s forums. In 2012, Consumerist’s annual reader survey named EA the worst company in America. Complaints centered on high prices, rushed development of games, unreliable technology, and poor customer support. At the time, Electronic Arts brushed off Consumerist’s dubious title.

But when EA was voted the Worst Company in America for an unprecedented second time, its executives were put on notice. Meanwhile, stagnant sales pushed EA’s stock down below $11 a share in 2012 – what was then its lowest point – and in the spring of 2013 the company made another round of layoffs amid more restructuring.

EA seemed to have focused so strongly on running its businesses smoothly that it lost sight of what its gaming customers wanted. Like Hollywood studios, gaming companies are only as good as their most recent hits, and for years EA navigated the industry’s inherent volatility with skill. But gaming enthusiasts are different from film buffs – they are often more passionate, more vocal, and much better at making their complaints heard online.

In September 2013, EA named Andrew Wilson CEO, and quickly made clear it wanted to reform its image with customers. In interviews, Wilson has talked of instilling a “player-first” culture at EA, willing to delay a blockbuster title, for example, if it needs more work. In July, EA said it would push back the release of Battlefield Hardline until next year to ensure a stable launch.

Despite Wilson’s intentions, EA continued to suffer snafus in the new CEO’s first year. In late 2013, the company was hit by a shareholder lawsuit over the release of Battlefield 4, which disappointed in sales after a bug-ridden release (the delay in Hardline’s launch, following focus tests with gamers, is intended to avoid a similar fate) and lingering gripes over its use of in-app purchases in mobile games.

In 2014, things have changed — at least within the ranks of some EA investors, encouraged by the company’s strong performance throughout the year. In the six months leading up to Sept. 30, the company’s revenue rose 34% to $2.2 billion, while net income swung to a profit of $1.05 a share from a loss of 17 cents a share in the year earlier period. Again, video game earnings are notoriously volatile, but the numbers show that Wilson’s efforts are paying off — especially a plan to focus more of EA’s development talent on fewer of its games.

EA expects to release 10 titles for consoles and PCs this fiscal year, a third of the number it pumped out four years ago. Despite having fewer titles, EA’s revenue from Xbox and other console games more than doubled last quarter to $631 million. Mobile revenue, meanwhile, grew 69% to $123 million, or 12% of GAAP revenue. Two years ago, when Zynga was a hot stock, incumbents like EA looked vulnerable as mobile games threatened to sideline consoles. This year, EA is managing to grow console revenue while gaining a foothold in mobile games.

EA’s rally this year has left the stock expensive: It’s trading at 23 times its estimated earnings this year, above the average for S&P 500 shares. And the fickle nature of gaming consumers, along with the possibility of more delays in EA’s reduced lineup, could bring uncertainty to its future.

But for now, Wilson has steered the company on a path of stable growth. Barclays recently initiated coverage of the stock with a price target of $48 a share, 10% above its current price. On Wednesday, Piper Jaffray followed with a $47 target, citing the promise of future growth. As for whether Wilson’s efforts have swayed disgruntled customers, the clearest proof may be how it fares in voting for worst companies next year.

TIME Companies

How HP Could Once Again Dominate Silicon Valley

HP has shown it can innovate — but can those innovations save the company?

Throughout the 48-year history of Hewlett-Packard’s skunkworks division HP Labs, it has innovated many technologies that became commonplace: pocket calculators and laser printers, for instance. But for much of the past decade, the headlines about HP have centered on the Silicon Valley pioneer’s revolving door of CEOs, boardroom controversies and – more recently – its slow, painful turnaround.

CEO Meg Whitman has slashed 55,000 jobs in an ambitious restructuring. As the company prepares to split into two, the fruits of that effort are winning over investors who have pushed HP’s stock up 190% in the last two years — or nearly five times the Dow Jones’ rise. Throughout all of this, what HP hasn’t been portrayed as is what it was early on: an engine of innovation.

In recent months, however, new initiatives at HP have emerged to suggest that’s starting to change. In particular, HP has unveiled three innovations in printing, personal computing, and data analytics that each has the potential to influence or even reshape their respective markets. Even if that doesn’t happen, each one shows a new flair at HP to take bold new approaches in established markets.

Last month, HP announced its long-awaited entry into the 3D-printing market. While younger, smaller players like Stratasys and 3D Systems have dominated the nascent 3D-printing market early on, HP held back until it could deliver a breakthrough 3D-printing technology that could become the kind of industry standard HP has set in traditional printing. With its multi-jet fusion technology, HP seems poised to achieve just that.

Based on HP’s thermal inkjet technology – an area where HP is strong in expertise and intellectual property – multi-jet fusion promises 3D printers that offer higher resolution, lower cost and printing that the company says is 10 times faster than leading 3D printers on the market. HP’s first 3D printers will use thermoplastics, while in time HP hopes to employ metal, ceramics and other materials.

HP says it plans to make the new systems available starting next year to large and small manufacturers alike. That may seem like a late entry, but multiple analysts expect annual revenue in the 3D-printing market could rise north of $10 billion by 2020. HP says it expects its printers to be revolutionary, and some analysts agree. To persuade them, HP has a video showing how a chain link printed in less than half an hour can lift up a one-ton car.

Along with its 3D printing technology, HP also unveiled Sprout, a machine combining a PC, a projector and a 3D scanner. There’s nothing quite like Sprout on the market, and it’s hard to describe – it’s simpler just to watch a video of it – but basically the Sprout blends a tablet-like touchpad, a 14.6-megapixel camera, a projector and a scanner into a product HP calls immersive and intuitive.

Sprout is a risky product in that it sells for $1,900 at retailers like Best Buy, but it doesn’t have a pre-defined market. HP developed the idea out of an interest in bridging the physical and digital world, says spokesperson Elizabeth Pietrzak. “The target is more psychographic rather than demographic,” she says. Which means, basically, people who make things: designers, hard-core scrapbookers and school teachers, for instance.

Sprout is designed for creators who don’t have the training or the patience to use design software. HP is planning on building newer, specialized applications for markets like architectural design and health care, and it’s inviting developers to create still other applications for the platform, which HP built on Windows 8. Sprout may not end up being as disruptive as multi-jet fusion. But it shows HP is willing to innovate in areas where there is more potential than predictable outcomes – an approach that defines many startups.

Perhaps the most disruptive innovation HP is working on is something called the Machine. It’s a name at once understated and potentially pretentious, but what HP wants to do with the Machine is to create wholesale an entirely new computing architecture for the era of big data. As cloud computing and the Internet of Things demand systems that manage ever larger amounts of data, the drain on the electrical grid gets bigger.

HP’s answer is to create computing technology that can handle much more data using much less power. The Machine is being built with this goal in mind, and to reach it HP had to come up with multiple innovations: a software-defined server called Moonshot that uses 89% less energy and requires 80% less space; lasers a quarter the size of a human hair that use photonics instead of copper wires; and memristors that use ions to fuse memory and storage, making them faster and cheaper than DRAM or flash drives.

The Machine is the brainchild of HP Labs, which had earlier announced pieces of the plan, like Moonshot and memristors. In June, the company announced the Machine and discussed what may prove to be the hardest piece: an entirely new, open-source operating system. HP is also working on stripped-down versions of Linux and Android that could run the Machine on devices like smartphones.

HP expects products and services using the Machine to ship in four or five years. As with any ambitious project, the Machine faces uncertainty and questions. Will HP execute on the different pieces and integrate them into a seamless system? Will third parties embrace the Machine as a standard? Will other cash-rich tech giants build their own versions of the Machine first?

Whatever the answers to those questions, HP is showing that it’s pushing to return to its innovative roots. Earlier this month, venture capitalist Ben Horowitz talked about how big companies can innovate, arguing that the key is to have a secret insight that no one else understands, one that often comes from years of experience. HP has plenty of experience, much of it hard fought, and it’s boosted its R&D budget to 3.1% of revenue from 2.3% in 2010.

“Innovation has been a large part of our ethos over the years,” says HP’s Pietrzak. “Now we’re on a path where we can invest back in R&D.”

In Silicon Valley where young pups seem to rule, HP is an old dog, and one that has been through its share of scrapes in recent years. But it’s also showing that it can still learn some pretty intriguing tricks. And with any luck, those tricks could bring it to the forefront of tech innovation again.

Read next: Watch the Robots Shipping Your Amazon Order This Holiday

TIME Executives

Dear Tech Executives: Nobody Cares if You’re ‘Thrilled’

Inside Google Inc.'s New Toronto Offices
Patrick Pichette, chief financial officer of Google. Bloomberg—Bloomberg via Getty Images

Executives have gotten too comfortable offering less than a no-comment—a comment of negative value—by telling us what they're feeling

The quarterly call that executives hold to discuss earnings is, short of face-to-face meetings, the best chance for investors to get a sense of a company’s financial health. Over and over again, the analysts on these calls focus their questions on pressing for metrics or hard numbers to gauge that health.

It’s one thing for executives to be bashful about sharing too much data that could help their competitors. It’s another for them to try and replace cold hard numbers with a completely useless commodity: a confessional on how a CEO or CFO is feeling in the moment.

Yet this is an unwelcome trend in tech earnings, where over and over tech leaders who are smart enough to know better keep repeating how thrilled they are, how excited, how they couldn’t be happier about all the boring little incremental developments that apparently please them to no end. It’s unwelcome because these calls aren’t support groups. Investors tune in to decide whether they should buy, sell or hold a company’s stock.

Take Google. On a recent earnings call, Citigroup analyst Mark May asked a reasonable question about Compute Engine, Google’s cloud services platform. “What sort of impact is that having on revenue or expenses and capex for the business?” “We’re really thrilled by the momentum,” Google CFO Patrick Pichette replied.

A no comment would have sufficed here. But Pichette offered less than a no-comment, a comment of negative value, a subjective emotion as answer to a mathematical question. It’s like ordering food at a restaurant and being served a picture of someone who just had a yummy meal. It neither nourishes nor satisfies.

And yet Pichette and Chief Business Officer Omid Kordestani went on to mention how thrilled they were about this or that (we’re thrilled to be a platform!) six more times during the call. The Oxford English Dictionary defines a thrill as “an intense emotion or excitement” that causes “a subtle nervous tremor.” The word comes from the English “thirl,” meaning to pierce something with a sharp instrument–to bore it, which is what Pichette and Kordestani were doing to their audience.

Nor were they the only corporate thrillseekers. “Overall, I’m thrilled with the progress we made across all of our initiatives,” Groupon CEO Eric Lefkofsky said on Thursday. But at least Groupon’s stock rose 25% on the evidence of that progress. So even if Lefkofsky wasn’t exactly atremble with joy over the company’s progress, the surge in value Friday of his Groupon shares surely enlivened his mood.

Not so for Mark Zuckerberg. Facebook’s shares fell 10% on warnings of slower growth and heavier spending. The normally low-key Zuckerberg had no thrills to report but he does get excited pretty easily–nine times in last week’s earnings call. Most people in the Bay Area get excited when the Giants win the World Series, but for Zuckerberg it’s a new ad platform, deep linking or “partnering with credit card companies.”

This is fine, in a nerdy way. But the point is, on Wall Street nobody cares about excitement levels, even with an influential executive like Zuckerberg. The numbers Facebook delivered meant everything in the selloff. The emotional state over at Hacker Way meant nothing. So why do executives even bother?

Sometimes the hyperbole defies common sense, as when Greg Blatt, chairman of IAC’s Match Group, which owns OKCupid and Tinder, explained that Tinder isn’t being monetized right now but that he “couldn’t be happier.” But wouldn’t surging revenue and profits from the popular Tinder app make him happier? Because it would probably make investors in IAC feel better.

Perhaps the king of earnings hyperbole is Apple’s Tim Cook. Which seems strange because Cook gives off this constant Zen vibe. “It’s just absolutely stunning,” Cook said about Mac sales to a group of investors who were completely not stunned. Later, Cook added, “I could not be more excited about the road ahead in fiscal 2015.”

At one point in last week’s call, Cook said he “couldn’t be happier” about Apple’s ability to supply its new iPhone lines. Then, only a few seconds later, he said he “couldn’t be happier with the way demand looks.” Which is either a direct contradiction or a crazy business koan that, once cracked, will yield immediate enlightenment.

The effect of such relentless hyperbole is that, when companies do have good news to be excited about, investors just dismiss it as more hollow rhetoric. Instead, it’s the immediate, often knee-jerk reaction to the stock price that sets the consensus on how well or poorly a company is performing financially. The thicker the happy feelings are layered on, the more they are distrusted as more corporate spin.

Of course, such grandiose language is also to be found outside of the tech industry. Starbucks CEO Howard Schultz on Friday said he was “beyond thrilled” to be announcing—not blowout profits or guidance surpassing Wall Street’s hopes—but a new roastery Starbucks is opening in December.

Maybe Schultz is on to something. Taking his words “beyond thrilled” at face value could be good advice for overexcited executives in general: Hurry up and get past your declarations thrills/excitements/pleasures. Because the rest of the market is already well beyond caring about them.

And while you’re at it, more numbers would be helpful.

TIME technology

7 Ways Satya Nadella’s Microsoft Is Completely Transformed

Microsoft Corp Chief Executive Officer Satya NadellaSpeaks At Company Event
Satya Nadella, chief executive officer of Microsoft Bloomberg—Bloomberg via Getty Images

It’s not even nine months into the Satya Nadella era of Microsoft and the new CEO is making his mark. Notably, his Microsoft is smaller after completing this week most of the 18,000 job cuts he announced in July. Whether Nadella’s plans for Microsoft succeed, it’s clear the company is dramatically different from the Microsoft that ruled the technology industry in the 80s and 90s. The Microsoft that Nadella leads has strayed so far from its original incarnation that it seems in some ways to have become nearly its opposite. Here are seven examples of how today’s Microsoft is different from the juggernaut Bill Gates built.

1. Microsoft has a kinder, gentler CEO. Bill Gates frequently hurled verbal abuse at employees and was coldblooded about deploying predatory practices against competitors. Steve Ballmer had a reputation for hurling chairs and inspiring the rank and file in manic, sweat-soaked diatribes. Both heightened Microsoft’s image as a hard-charging software giant.

Nadella is cut from a different cloth entirely. Yes, his mansplaining about salaries revealed an ability to insert his foot in his mouth, but most accounts of his temperament describe a low-key and humble personality at odds with those of his predecessors. He communicates not in fist-pumping speeches but lengthy memos on strategy.

2. The tables have turned in the Microsoft-Apple rivalry. For decades, Apple had but a sliver of the market share for personal computers. In 2014, Apple is not onlyshipping more personal computers – counting the ones that fit in our pockets – it’s making much more money from them. Apple made $156 billion in revenue from iPhones, iPads and Macs in the last year. And Microsoft? Between Windows and Office software, Nokia phones and Surface tablets, it saw about $23 billion in revenue.

3. Microsoft isn’t a monopoly, but it competes with some. Gates never got the stranglehold he wanted on the Web, thanks to antitrust lawsuits and the Internet’s decentralized structure. And today, Microsoft is just one more company fighting for turf in a variety of markets: enterprise software, game consoles, search and, yes, personal computers.

And anyway, monopolies in the Internet era aren’t quite what they used to be. Yes, Amazon is bullying publishers but it’s pushing prices down, not up. Yes, Google dominates in search but it costs consumers nothing to find a perfectly good alternative like Bing. Neither of those companies is exactly stifling innovation but rather investing heavily in new technologies.

4. Microsoft isn’t really a Windows-driven company. And not just because PC sales have been declining for years. It’s more because Microsoft under Ballmer expanded into gaming and enterprise software markets. Under Nadella, these are becoming an even bigger part of the business. Enterprise offerings like server and storage software, cloud computing and consulting services made up 53% of revenue last quarter. Xbox made up 7%. Windows and Office were only 18%.

5. Microsoft has stopped worrying and learned to love open. Or at least it’s trying. Where Ballmer called the Linux open-source operating system a “malignant cancer,” Nadella proclaims, “Microsoft loves Linux.” All along, Nadella has said Microsoft needs to develop its own platform while playing well with others. Thefitness tracker Microsoft announced Thursday works with Windows as well as Android and iOS phones. Its Office programs work on those platforms too, even though that approach is leaving Microsoft vulnerable to upstarts.

6. It’s not exactly a growth company anymore. In the mid-90s, Microsoft’s revenue was growing by nearly 40% a year. It’s risen an average of 8.5% a year over the past two years, although that pace could increase this year under Nadella. Wall Street demands from Microsoft the kinds of hefty payouts older, slow-growth companies offer: Last year, Microsoft spent $4.9 billion on buybacks and $9.3 billion on dividends. Taken together, that’s more than Microsoft spend on R&D.

7. But it’s slowly gaining cachet among young geeks. A generation of software engineers grew up in the 80s and 90s loathing Microsoft – calling it evil, the Borg, or worse. But for those who came to know Microsoft not through Windows but the Xbox console and Halo franchise, the feelings range from indifferent to positive.

The $2.5 billion purchase of Mojang may or may not make Microsoft a cool brand. But it will wash away the hostility that the Microsoft brand inspired only a dozen years ago. Most kids who love Minecraft seem to think of Microsoft as a big corporation that won’t hurt and might even help Minecraft develop. That generational shift in sentiment may be the most dramatic evidence of how Microsoft has changed.

TIME Companies

Here’s Why Netflix Can Shrug Off its Stock Plunge

US Online Streaming Giant Netflix : Illustration
In this photo illustration the Netflix logo is seen on September 19, 2014 in Paris, France. Netflix September 15 launched service in France, the first of six European countries planned in the coming months. Pascal Le Segretain—Getty Images

Netflix is hanging on tight to its core mission

It’s not every day that a brand-name stock loses a quarter of its value in a matter of minutes, as Netflix did after reporting its financial earnings Wednesday. It’s even rarer when executives respond as if it’s no big thing.

After Wednesday’s stock market close, Netflix reported a net profit that exceeded Wall Street’s expectations. So far so good. But Netflix’s success hinges on whether it can keep signing up new subscribers, and it’s here where the company came up short: The company added 3 million net subscribers around the world after publicly predicting it would add 3.7 million.

Investors read those numbers and started running for the hills. It took about 30 minutes for Netflix’s stock price to fall by more than $120 a share. After the plunge, the company was more philosophical than apologetic. “Our internal forecast . . . will be high some of the time and low other times,” CEO Reed Hastings shrugged in a letter to shareholders. Later, on a Google Hangout with select analysts, he was just as Zen-like, saying he expected to miss subscriber estimates “frequently.”

There are a few reasons why Hastings can get away with this attitude without investors calling for his head. Wednesday’s stock market was a tumultuous one in general, seeing the Dow close down 173 points after a 458-point drop at its worst. And amid lingering concerns that tech valuations in general were too high, many investors were ready to sell any stock on bad news.

On top of that, Netflix has long been a favorite of speculators, who have made it one of the most consistently volatile issues in the tech sector for the past decade. This has long been a headache for Hastings, who’s complained before about “momentum investor-fueled euphoria.” Such euphoria usually ends in nasty hangovers, like the 80% plunge in Netflix’s stock price after it raised prices in 2011. What Netflix is seeing today is another bender coming to an end, one Hastings predicted a year ago.

The main reason Netflix is shrugging off the current decline is that the company has always hewed, come what may, to a single strategy of finding a more efficient way to distribute video content. That tactic, which has always worked out in the long run, is the classic distrupt-the-incumbent model. And in the world of video content, no one has done this better, and more consistently, than Netflix.

The creation myth of Netflix says that Hastings founded the company after racking up $40 in video rental late fees. As DVDs emerged, Hastings started delivering them by mail, precipitating the slow but sure extinction of video-store giants like Blockbuster. As bandwidth improved, Netflix switched to an even more efficient way to deliver movies: by streaming them online. Today, 87% of Netflix revenue comes from streaming movies and TV shows. Netflix has effectively disrupted its own founding business model. Netflix wasted no time disrupting its founding business model, splitting off its DVD-by-mail business into an ill-fated venture called Qwikster. Today, Quikster is an unsightly footnote in the company’s history, and 87% of Netflix revenue comes from streaming movies and TV shows.

More recently, Netflix has begun to bump up against the cable companies that are so loathed by consumers by pushing more into TV programming, notably several of its own series. In a victory for cord-cutters, Time Warner said Wednesday it would offer HBO as a standalone online service starting next year. That will provide Netflix a strong competitor, but it’s likely to do more damage to the cable providers in the long run. In effect, HBO is hedging its future by adapting to the model Netflix pioneered. CBS followed suit Thursday with its own launch of an on-demand subscription service for its programs.

Now Netflix is moving into a new area by producing its own original films, reasoning that it’s often cheaper than entering into bidding wars for titles every several years. This is likely to work with “branded” films, like a sequel to Crouching Tiger Hidden Dragon and a series of Adam Sandler vehicles (Netflix says data shows Sandler’s comedy translates well in global markets like Brazil and Germany — who knew?).
This latest move is angering movie theater chain owners, mostly because their own aged business model has turned into another unpleasant experience for consumers. Moviegoing often involves paying upward of $15 a ticket to endure a gauntlet of pre-film commercials and obscenely overpriced popcorn. Another recent technological development, the rise of affordable, high-def home entertainment systems, is making it easier to bypass that experience. And Netflix is now working to speed up the time it takes for new movies to reach home theaters.

All this is costing Netflix a lot of money. Streaming content obligations rose to $8.9 billion from $7.7 billion in the last three months alone. Netflix is warning that these obligations will weigh down cash flows for years. This is risky, because the new content costs may not translate into enough new subscribers. And that’s why investors freaked out about the low subscriber figures this quarter. Netflix keeps building more content, but what if subscribers don’t come?

Right now, Netflix is shrugging in the face of all this fretting. Investors also worried two years ago, when the company’s overseas operations were losing $400 million a year. This year, Netflix’ international subscriptions are close to breaking even. Most of all, the company has learned to ignore speculators and naysayers as it pursues its core strategy of finding better ways to bring quality video content to consumers. Producing movies may sound like a new and risky area to move into, but as Netflix sees it, it’s the same old business model that’s worked so well in the past.

TIME Silicon Valley

In Silicon Valley, You Can Forget Aging Gracefully

HP CEO Meg Whitman Visits China
ChinaFotoPress—ChinaFotoPress via Getty Images

Getting old isn't easy, especially in tech

Nature abhors the old, Emerson said. In 2014, we can add: so do technology investors. Because in the tech sector, where innovation and growth are worshipped and rewarded with obscene valuations, the esteemed companies that helped establish Silicon Valley and shape the Internet are not being allowed to age gracefully.

HP is breaking into two, despite years of its CEO saying this wouldn’t happen. eBay’s spinning off PayPal, after its CEO insisted this made no sense. Both companies knuckled under shareholder pressure. Now Yahoo is facing pressure to cash out of Alibaba and merge with AOL. That follows Dell going private and IBM ditching its low-end servers. There are even investor rumblings that Microsoft would be better broken into pieces.

Spinoffs, breakups, LBOs and shotgun marriages aren’t uncommon among aging, troubled companies. But the wave of events hitting companies once considered blue-chip tech firms is unprecedented. Only a decade ago, most of these companies were at the top of their games. Even today, many are so profitable they annually pay out billions, if not tens of billions, to shareholders through dividends and buybacks. And while many of these companies have been undervalued by investors for years, they are now being treated as if they are entering a period of advanced decay.

In sectors like utilities or retail, slow growth is tolerated as long as a healthy profit margin is maintained. But in tech, profits aren’t enough without growth. And there is plenty of growth among the younger generation of tech giants like Google, Facebook, and LinkedIn. The gap between long-in-the-tooth tech giants and lithe, growing companies is getting wider by the year. While the latter are driven by innovation the former are pushed around by shareholder demands.

Tech investors have always been growth-oriented, but now it’s becoming an obsession. And why not? As the network effects long promised in the early years of the Internet finally kick in, growth at a successful startup can mushroom from seed round into large cap in a few years. Airbnb, Uber and WhatsApp were all founded about five years ago and today are valued at $10 billion, $18 billion and $22 billion, respectively.

Often, the new generation of successful startups push to stay out of public markets as long as possible to avoid the public scrutiny, quarterly earnings parades and exposure to shareholder activists that are plaguing the likes of HP, eBay and Yahoo. The world of secondary markets and venture investing have evolved to accommodate them, allowing institutional investors who can afford substantial stakes to become investors while the startups remain private.

Yet there’s a cautionary lesson here that startup founders should consider: The same forces that are accelerating tech growth curves are also accelerating the time to maturity. Grow big enough and companies will need to draw on public markets for financing. To meet quarterly targets, they need to maintain billion-dollar businesses even when they stop growing. That limits the ability to find new, financially risky areas of innovation. Soon enough, dividend and buyback programs are rolled out to placate antsy investors. That, as we are seeing this year, only placates them for so long.

No one is demanding a dividend from Google, or calling for Facebook to spin off Instagram. Both are delivering growth that often surpasses investor expectations and rewarded with rising stock prices. Others like Netflix and Amazon are getting a pass by investing profits into future growth. But as much as HP talks about, say, developing a mass-market 3D printer, investors only look with disappointment at the slow-growth business of PCs and IT services.

There are a few companies founded before the dot-com boom, notably Apple and Amazon, that have so far been able to buck the trend. But they may not be able to stay ahead of the curve for long. The campaign to pressure Apple for more dividends has halted because Tim Cook keeps promising new product categories like the Apple Watch. Amazon has lost nearly a quarter of its value in the last nine months amid concerns its spending is outpacing its promised growth.

For now, Apple and Amazon are anomalies among companies more than 20 years old that are promising more growth in coming years. That’s leaving their CEOs independent enough to pursue blue-sky innovations. But age catches up to all companies. And these days, companies in the tech sector are growing old faster than ever.

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