TIME Earnings

Nintendo’s Financial Struggles Continue, Even With Mario Kart 8

JAPAN-COMPANY-EARNINGS-NINTENDO-GAMES
Customers play with Nintendo's videogame console Wii U at an electronics shop in Tokyo on July 30, 2014. Yoshikazu Tsuno—AFP/Getty Images

Even the smash hit Mario Kart 8 doesn’t seem to be able to save Nintendo and its Wii U. The Japanese video game giant posted a loss of 9.92 billion yen ($96.7 million) between April and June, according to its first fiscal quarter earnings report. Nintendo had a profit of 8.62 billion yen ($84 million) during the same period last year.

It’s not a great start to the fiscal year for a company that posted an annual operating loss during its last three. Sales for the company were also down, with revenue of 74.7 billion yen ($728 million) falling 8 percent from last year’s figure of 81.5 billion yen ($794 million).

The Wii U recovered at least somewhat from its disastrous 2013. It sold 510,000 units in the quarter, more than triple the 160,000 it sold during the period last year. Software sales were also way up, mostly thanks to Mario Kart 8, which sold 2.82 million copies and is already the third best-selling Wii U game of all time. But the 3DS, Nintendo’s true moneymaker, is on a precipitous decline, especially in Japan. The handheld gaming device sold just 820,000 units during the quarter, down from 1.4 million during the same quarter last year. Software sales also declined 22 percent to 8.6 million units.

Nintendo is still projecting that it will sell 3.6 million Wii Us and 20 million Wii U games over the fiscal year, while making almost $20 million in profit. That forecast will rest heavily on the performance of Super Smash Bros. Wii U, which is slated to launch in the fall, as well as titles like the Legend of Zelda spinoff Hyrule Warriors.

MONEY tech stocks

Twitter Jumps on Strong Earnings. Trouble Is, It’s Still Not Profitable.

Person using Twitter on iPhone
James Davies—Alamy

The social media company blew past expectations—using an unofficial measure of profits. Based on generally accepted accounting principles, Twitter is still in the red.

When you get used to receiving complicated messages in a short amount of space — in, say, 140 characters — you grow accustomed to overlooking key details.

That was evident late Tuesday, when investors reacted to Twitter’s earnings announcement by sending shares of the social media company soaring more than 30% in after-hours trading.

TWTR Price Chart

TWTR Price data by YCharts

Investors pounced on some better-than-expected results found high up in Twitter’s earnings release. This included the fact that revenues in the second quarter jumped 124% to $312 million, and that the company earned $0.02 a share, slightly stronger than what analysts had been expecting.

Nevermind that those profits were based on an adjusted, alternative method of measuring earnings that critics have come to criticize. Using generally accepted accounting principles (GAAP), Twitter actually lost $145 million in the quarter, or $0.24 a share.

What’s more, Wall Street analysts tallied by Zacks.com still expect Twitter — based on GAAP standards — to lose $0.98 a share in 2014 and another $0.87 a share in 2015. So it’s probably premature to regard the second-quarter results as a breakthrough for the profitless company.

User Growth Rebounds

To be fair, there were promising developments in the second quarter. Twitter reported that so-called timeline views, which are the company’s equivalent of page views, hit a record 173 billion in the quarter.

This was an important point, as timeline views in the prior quarter fell short of the company’s peak performance in 2013, despite the fact that there are more Twitter users than ever.

In the second quarter, the Twitter’s so-called average monthly active users (MAUs) rose an impressive 24%. Active users who use mobile surged even more, by 29% in the past year to 211 million.

By comparison, timeline views grew a relatively modest 15%, which means the company still needs to work on converting Twitter account holders into truly active users.

This morning, three research firms changed their rating on Twitter stock in the wake of the company’s earnings results. Bank of America upgraded its recommendation on the stock to a “buy”. UBS upgraded its rating to a “neutral”. And Pivotal Research downgraded the shares to a “sell” as Thursday evening’s surge pushed the stock above analysts’ target price.

That pretty much sums up the still-cloudy picture at Twitter.

TIME Earnings

Twitter Shocks Wall Street With Big Growth in Revenue, Users

Twitter Goes Public On The New York Stock Exchange
(L-R) Twitter CEO Dick Costolo, Twitter co-founder Jack Dorsey, Twitter co-founder Evan Williams and Twitter co-founder Biz Stone applaud as Twitter rings the opening bell at the New York Stock Exchange (NYSE) while also celebrating the company's IPO on November 7, 2013 in New York City. Andrew Burton—Getty Images

Stock shoots up 25% in after-hours trading

Updated July 29 at 6:18 p.m.

Twitter shares leapt more than 25 percent in after-hours trading Tuesday following stellar results in the company’s latest quarterly earnings report.

The social network posted greater-than-expected growth in both revenue and monthly active users during the second quarter. Twitter added 16 million monthly active users to bring its total to 271 million, the biggest period of user growth since the first quarter of 2013. Revenue for the quarter was $312 million, blowing past analysts’ estimates of $283 million. Adjusted earnings for the company were 2 cents per share, beating expectations of a 1 cent per share loss. Overall, the company posted a net loss of $145 million for the quarter when including stock-based compensation expenses and other line items.

Pundits have been writing Twitter’s eulogy for months as its user growth slowed in the last year and the company has regularly posted losses. But the latest report shows that Twitter’s plan to make its platform more user-friendly may be paying off. Features such as a more Facebook-like profile pages and a mute button that lets users remove certain users’ tweets from their timelines are aimed at making Twitter novices feel less overwhelmed by the deluge of messages.

The World Cup, which became the most tweeted-about sporting event in Twitter history, was also likely a big boost for the social network during the quarter. Twitter organized conversations around individual matches, featured real-time score updates and attached countries’ flags to hashtags representing each team. “We made progress on multiple fronts across the business and our financial performance was truly exceptional,” CEO Dick Costolo said in a conference call with investors.

A negative point for the quarter were timeline views. At 640 per monthly active user, they were down 7% year-over-year. In the U.S., views are also down from the first quarter. Twitter regularly attributes these drops to changes in its interface that make it easier for users to see interesting tweets without scrolling through a deluge of messages. Also, some of the content on Twitter’s specially curated World Cup pages didn’t count toward the metric.

As Twitter works to differentiate itself from Facebook in the eyes of investors, Costolo spent a lot of time discussing the audiences Twitter serves outside of its monthly users. He said the total number of people who visit Twitter each month is two to three times its official user base when including those who don’t log in. He also touted what we called syndicated viewers, people who see tweets while reading news sites or watching television broadcasts.

Eventually, the company hopes to monetize these less dedicated users somehow, though Costolo said for now the company is just focused on improving the user experience of Twitter’s many casual visitors. He also wouldn’t rule out the idea of a version of the timeline that selected tweets based on an algorithm, like Facebook’s News Feed, rather than showing them in chronological order. “We’re not ruling any any kinds of changes that we might deliver in the product in service to bridging that gap to signing up for Twitter and receiving that value,” he said.

Challenges still remain for Twitter, which won’t have another World Cup to goose its metrics for another four years. But the company reversed some ominous trends this quarter and proved it can take advantage of global events tailor-made for the Web’s water cooler.

TIME Money

Study: 35% of Americans Facing Debt Collectors

The word "Bankruptcy" is painted on the side of a building in Detroit on Oct. 25, 2013.
The word "Bankruptcy" is painted on the side of a building in Detroit on Oct. 25, 2013. Joshua Lott—Reuters

The delinquent debt is overwhelmingly concentrated in Southern and western states

(WASHINGTON) — More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study released Tuesday by the Urban Institute.

These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid. Even past-due gym membership fees or cellphone contracts can end up with a collection agency, potentially hurting credit scores and job prospects, said Caroline Ratcliffe, a senior fellow at the Washington-based think tank.

“Roughly, every third person you pass on the street is going to have debt in collections,” Ratcliffe said. “It can tip employers’ hiring decisions, or whether or not you get that apartment.”

The study found that 35.1 percent of people with credit records had been reported to collections for debt that averaged $5,178, based on September 2013 records. The study points to a disturbing trend: The share of Americans in collections has remained relatively constant, even as the country as a whole has whittled down the size of its credit card debt since the official end of the Great Recession in the middle of 2009.

As a share of people’s income, credit card debt has reached its lowest level in more than a decade, according to the American Bankers Association. People increasingly pay off balances each month. Just 2.44 percent of card accounts are overdue by 30 days or more, versus the 15-year average of 3.82 percent.

Yet roughly the same percentage of people are still getting reported for unpaid bills, according to the Urban Institute study performed in conjunction with researchers from the Consumer Credit Research Institute. Their figures nearly match the 36.5 percent of people in collections reported by a 2004 Federal Reserve analysis.

All of this has reshaped the economy. The collections industry employs 140,000 workers who recover $50 billion each year, according to a separate study published this year by the Federal Reserve’s Philadelphia bank branch.

The delinquent debt is overwhelmingly concentrated in Southern and Western states. Texas cities have a large share of their populations being reported to collection agencies: Dallas (44.3 percent); El Paso (44.4 percent), Houston (43.7 percent), McAllen (51.7 percent) and San Antonio (44.5 percent).

Almost half of Las Vegas residents— many of whom bore the brunt of the housing bust that sparked the recession— have debt in collections. Other Southern cities have a disproportionate number of their people facing debt collectors, including Orlando and Jacksonville, Florida; Memphis, Tennessee; Columbia, South Carolina; and Jackson, Mississippi.

Other cities have populations that have largely managed to repay their bills on time. Just 20.1 percent of Minneapolis residents have debts in collection. Boston, Honolulu and San Jose, California, are similarly low.

Only about 20 percent of Americans with credit records have any debt at all. Yet high debt levels don’t always lead to more delinquencies, since the debt largely comes from mortgages.

An average San Jose resident has $97,150 in total debt, with 84 percent of it tied to a mortgage. But because incomes and real estate values are higher in the technology hub, those residents are less likely to be delinquent.

By contrast, the average person in the Texas city of McAllen has only $23,546 in debt, yet more than half of the population has debt in collections, more than anywhere else in the United States.

The Urban Institute’s Ratcliffe said that stagnant incomes are key to why some parts of the country are struggling to repay their debt.

Wages have barely kept up with inflation during the five-year recovery, according to Labor Department figures. And a separate measure by Wells Fargo found that after-tax income fell for the bottom 20 percent of earners during the same period.

MONEY stocks

The Market’s New Message: Show Me the Money Now!

Investors lost patience last week, punishing companies like Amazon that aren't generating profits while rewarding those such as Facebook that are delivering on their promise.

The stock market has a reputation for looking ahead.

That’s why equity prices tend to predict shifts in the economy six to nine months before they happen. It’s also why investors recently punished shares of the credit card giant Visa after the company posted solid earnings but hinted that revenues later in the year would fall short of expectations.

Still, there are times when Wall Street adjusts its perspective and focuses on the here and now. And Friday was one of those occasions.

In what turned out to be a rather brutal end of the week, investors gave companies—including some of the market’s darlings of the past few years—an extremely short leash. Those that lived up to their promise came out relatively unscathed, but those that fell short got hammered.

Just ask Jeff Bezos and Mark Zuckerberg.

For years, Bezos’ Amazon.com soared as it posted robust sales growth while promising strong earnings were just around the corner. The e-commerce giant delivered the exact same message (and results) when it announced its quarterly earnings last week. This time, though, investors responded by erasing $16 billion of market value from the company in half the time it takes the company to deliver packages to its Prime membership customers.

Other examples of companies that couldn’t deliver on growth and earnings now were the streaming music service Pandora Media and Dunkin’ Brands , the parent company of the Dunkin’ Donuts chain, which is struggling to fight off Starbucks and McDonald’s in the coffee wars.

DNKN Price Chart

DNKN Price data by YCharts

On the flip side, Zuckerberg’s Facebook not only blew past Wall Street’s revenue and earnings expectations in the recent quarter, it proved that it was making big strides in mobile advertising, the area the social network giant’s investors were most worried about in recent years.

Not surprisingly, shares of Facebook—and other companies firing on all cylinders, such as Starbucks —defied the market’s end-of-the-week sell-off and are at or near their all-time record highs.

Here’s a closer look at the week’s winners and losers:

Amazon and Pandora Slammed by Wall Street for Weak Earnings

Dunkin, Mickey D’s, or Starbucks? The Surprising Winner of the Coffee War

Facebook’s Next Battle is Wrestling Your Credit Card Number from Amazon

MONEY tech stocks

Amazon and Pandora Shares Tumble After Reporting More Losses

Sad Danbo
Luke Baldacchino—Flickr

Amazon.com and Pandora Media learn the hard way that potential profits just won't cut it anymore in this market. Take note, Twitter.

Updated 7/25/14 4:15 pm

Investors sent a loud message to e-commerce and social and streaming media companies on Friday: profit-less potential just won’t cut it anymore.

Nowhere was this clearer than at Amazon.com, which seems to be able to deliver everything these days — tablets, streaming video, even food — with the exception of earnings.

After the company announced a wider-than-expected loss Thursday, the stock fell nearly 10% Friday, helping push the entire market lower at the end of the week.

AMZN Price Chart

AMZN Price data by YCharts

In what sounds like a broken record, the e-commerce giant reported another robust quarter of sales — up an impressive 23% versus the same period a year ago — yet still can’t seem to turn a profit.

As costs rose in the recently ended quarter — as the company invested in new areas such as its recently announced Fire smartphone and a new unlimited e-book rental service — Amazon reported a net loss of 27 cents per share. That was nearly twice the loss that Wall Street analysts had been bracing for.

Even worse, the e-tailer warned investors that the third quarter won’t be much better. Amazon officials forecast that net sales would likely grow between 15% and 26% in the current quarter but that the company would probably suffer an operating loss of between $410 million and $810 million.

For more than a decade, Amazon shares trounced the broad market, as company leaders managed to convince investors not to focus on short-term losses, but rather the long-term potential for this company to dominate retail and consumer electronics.

They tried to do the same on Thursday, pointing to the company’s entry into the smartphone market. “Customers all over the U.S. will begin receiving their new Fire phones — including Firefly, Dynamic Perspective, and one full year of Prime,” said CEO Jeff Bezos, in announcing his company’s results. “We can’t wait to get them in customers’ hands.”

Investors shot back: “We can’t wait until we start seeing some profits in shareholders’ hands.” By Friday afternoon, it was clear that investors have had it with Amazon’s just-you-wait attitude with earnings.

For the year, Amazon shares have lost nearly a fifth of their value.

AMZN Chart

AMZN data by YCharts

Amazon wasn’t the only tech stock that got hit on Friday. Shares of Pandora Media fell more than 10% on Friday on news of another profitless quarter.

The streaming music company reported a loss of 6 cents, which was worse than the 4-cent a share loss that investors were expecting.

The company tried to spin the news in a positive light by stressing its relative success in mobile advertising, a hot topic in tech these days.

“Our better-than-expected second-quarter results demonstrate success and continued business acceleration as a result of our investments in mobile and local advertising,” Pandora’s chairman and CEO Brian McAndrews noted in the company’s press release. “Mobile advertising reached a record 76% of total ad revenue and local grew at 144% year-over-year.”

Wall Street would have none of it.

P Price Chart

P Price data by YCharts

As second-quarter earnings season gets underway, the market’s stance should worry other profit-less tech companies that are set to report their results next week.

On deck for Tuesday is Twitter . The social media company, whose shares have already fallen 39% this year, is expected to report a loss of 29 cents a share when it announces its results next week.

TIME Earnings

Amazon’s Q2 Earnings Lower Than Expected

Amazon Q2 2014 Earnings Report
Amazon CEO Jeff Bezos presents the company's first smartphone, the Fire Phone, on June 18, 2014 in Seattle, Washington. David Ryder—Getty Images

Pressure is rising for Amazon's new services and products to help the company show profit

Amazon said Thursday that its second quarter financial performance was worse than expected, causing shares to tumble over six percent in after-hours trading.

Amazon reported losing 27 cents per share on revenue of $19.34 billion, while Wall Street had been expecting, on average, a loss of 15 cents per share. Additionally, Amazon’s net loss was $126 million, far greater than the $7 million posted during the same period in 2013.

(More on Money.com: Wall Street Takes Amazon and Pandora Out to the Woodshed)

The company’s net sales, however, rose 23% to $19.34 billion, compared with $15.70 billion in second quarter 2013. Amazon said it expects net sales in the third quarter to reach between $19.7 billion and $21.5 billion. It also expects an operating loss of $410 million to $810 million for next quarter, up significantly from $25 million in 2013, which Amazon attributes to stock-based compensation and amortization of intangible assets.

Investors have long been forgiving of Amazon posting losses or thin profit margins despite its rising revenue, which some insist will be channeled into developing new products that will eventually win back those losses. But Amazon’s shares have fallen by nearly 10 percent this year as some investors grow skeptical of Amazon’s potential long-term growth. Questions remain about how well Amazon’s new services, such as its same-day grocery delivery service, will perform in the future, as Amazon will likely have to work harder to convince stakeholders of its profitability.

Amazon CEO Jeff Bezos said in a statement Thursday that the company continues “working hard on making the Amazon customer experience better and better,” noting recent improvements such as those to its cloud computing service, and its new Fire Phone, which goes on sale in the U.S. Friday.

 

TIME Earnings

Facebook Stock Hits All-Time High After Strong Earnings Report

Facebook CEO Mark Zuckerberg speaks during an event at Facebook headquarters on April 4, 2013 in Menlo Park, California
Facebook CEO Mark Zuckerberg speaks during an event at Facebook headquarters on April 4, 2013 in Menlo Park, California Justin Sullivan—Getty Images

Mobile ads made up 62% of Facebook's $2.7 billion in ad revenue

Updated July 23 at 5:53 p.m.

Facebook stock climbed to an all-time high as it once again sailed past Wall Street’s expectations in its second quarterly earnings report of the year. The social network pulled in $2.9 billion in revenue for the quarter, beating analysts’ estimates of $2.8 billion. The company generated a profit of $791 million. Earnings minus some line items were 42 cents per share, blowing past estimates of 32 cents per share. Facebook shares were priced above $74 in after-hours trading.

Facebook now has 1.32 billion monthly active users, an increase of about 40 million from the previous quarter. Mobile usage continues to grow, with the social network now having 1.07 billion monthly active users on mobile devices, up from 1.01 billion in the previous quarter.

With increased mobile usage, mobile advertising continues to make up a bigger share of Facebook’s revenue pie. Mobile ads accounted for 62 percent of the company’s $2.7 billion in ad revenue for the quarter, up from a 59 percent share in the previous quarter and a 41 percent share during the same period last year. It’s a stark turnaround from Facebook’s early days as a public company, when the social network’s stock tanked on fears that it couldn’t convert its growing desktop business to mobile.

During a conference call with investors, Facebook touted its popularity as a public platform. Chief Operating Officer Sheryl Sandberg said 350 million Facebook users made 3 billion interactions related to the World Cup during the event, and the World Cup Final was the most-talked-about Facebook event in Facebook history. Facebook also just launched a new app specifically for celebrities with public pages last week. “Public content will continue to be a growing focus for us over the coming months,” CEO Mark Zuckerberg said.

While Facebook’s revenue has been ramping up quickly, Zuckerberg again emphasized that investors shouldn’t expect significant monetization from newer apps and acquisitions such as Messenger, WhatsApp and Instagram in the near future. He compared their current businesses development to where Facebook was in 2006, two years after it launched.

It’s not yet clear whether Facebook’s latest controversy, in which the company experimented with people’s News Feeds without their knowledge to alter their moods for a scientific study, will have a substantial effect on usage of the social network. The mood study was only widely publicized at the very end of the fiscal quarter.

 

MONEY Tech

Here’s a Look at How Apple and Microsoft Really Stack Up

On Tuesday, both Apple and Microsoft released their quarterly earnings reports, with Apple showing a 12.3% profit jump—and Microsoft showing a 7.1% decline. How do they compete on other measures? Here's a look at how the two tech giants stack up.

TIME Microsoft

Nokia Drags Down Microsoft Profits

Microsoft logo outside the Microsoft Visitor Center in Redmond, Wash.
Ted S. Warren—AP

The software firm took over of the fledgling cell-phone maker in April

Quarterly profits at Microsoft fell 7.1% even as revenues rose, due to the company’s April acquisition of cellphone maker Nokia, the software giant said in a quarterly financial report Tuesday.

Microsoft’s core software products—like Windows and Office—continue to sell well to other businesses; revenue on commercial sales rose 11% in the last quarter. That strong performance wasn’t enough to make up for operating losses at Nokia, which totaled $692 million.

The report comes on the heels of Microsoft announcing it will slash up to 18,000 jobs over the coming year. Most of those cuts, the company said, will come from Nokia. The workforce drawdown is the largest in the company’s 39-year history.

The report covers the fiscal fourth quarter, which ended June 30. Revenue for the period is up 18% year over year.

“Our solid execution and expense discipline allowed us to deliver a strong finish to the fiscal year,” said Amy Hood, executive vice president and chief financial officer at Microsoft.

 

 

 

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