TIME Companies

Apple’s Growth Stays Strong in Latest Quarter

People walk past the Apple logo at the Apple Store at Grand Central Terminal in New York.
People walk past the Apple logo at the Apple Store at Grand Central Terminal in New York City Timothy A. Clary—AFP/Getty Images

Tech-giant reports beat analyst expectations with strong sales of iPhones and Mac computers. Sales of iPads fell, however

Apple on Monday reported a 12.7% bump in fourth-quarter profit, sending shares up nearly 1% in after-hours trading to just above the $100 mark. Here are the most important points from the tech giant’s latest earnings report.

What you need to know: Apple crushed analyst predictions by posting sales of $42.1 billion in the fourth quarter, which was more than a 12% increase over the same period last year. The company reported $8.5 billion in profits, or $1.43 per share, which is an improvement of $1 billion year-over-year. Fortune’s Philip Elmer-DeWitt recently polled a few dozen analysts for their Apple quarterly predictions and every last one said to expect a record quarter for the company, including average sales and earnings bumps of at least 7.1% and 11.9%, respectively.

In July, Apple’s revenues grew by 6%, but came in just below analysts’ expectations despite a 12.6% bump in Q3 iPhone sales.

The big number: Apple said it sold 39.3 million iPhones during the fourth quarter, which beat analysts’ estimates and represents an 11.6% increase over the 35.2 million sold during the same quarter last year. The fourth quarter included September’s unveiling of Apple’s new iPhone 6 and iPhone 6 Plus and the company said in a press release announcing the fourth-quarter results that strong iPhone and Mac sales helped drive a record month of September.

Mac sales jumped 25% year-over-year, to 5.5 million, while iPad sales declined for the third quarter in a row. Apple, which just revealed its new iPad Air 2 last week at a product-launch event, said Monday that its iPad sales were down more than 7%, to 12.3 million, in the fourth quarter.

What you might have missed: Apple’s strong fourth-quarter results came after the company’s mobile-payments system, Apple Pay, went live on Monday along with an update to its mobile operating system, now known as iOS 8.1. The launch came on the heels of Apple announcing it had signed up another 500 banks to support the Apple Pay platform. Apple Pay is expected to compete with PayPal and other online systems. The entire mobile-payments market had more than 11 million users last year and could grow to have more than 36 million users in 2016, according to eMarketer.

This article originally appeared on Fortune.com

MONEY stocks

3 Things to Know About IBM’s Sinking Stock

141020_INV_IBM
Niall Carson—PA Wire/Press Association Images

IBM's shares plunged 7% Monday after a disappointing earnings report. Can tech's ultimate survivor transform itself one more time?

International Business Machines INTERNATIONAL BUSINESS MACHINES CORP. IBM -7.1134% has long enjoyed a unique status on Wall Street — a tech growth powerhouse that investors also see as a reliable blue chip, with steady profit growth and a hefty dividend. But with the rise of new technologies like cloud computing, Big Blue has struggled to maintain that balancing act.

Now investor confidence has suffered a big blow.

On Monday the company announced the results of a pretty lousy quarter. IBM’s third-quarter operating profit was down by nearly one fifth, and the company failed to generate year-over-year revenue growth for the 10th consecutive quarter.

Big Blue also revealed plans to sell-off its struggling semiconductor business, a move that involves taking $4.7 pre-tax billion charge against IBM’s bottom line. Actually, it is paying another company to take this unit off its hand.

While CEO Virginia Rometty acknowledged she was “disappointed” with IBM’s recent performance, she’s also pledged to turn the company around, led in part by IBM’s own foray into the cloud.

Now, you don’t get to be a 103-year-old tech company without learning to adapt. That’s what IBM famously did in the ’90s, when the computer giant started to shift away from profitable PC hardware in favor of consulting and service contracts for businesses.

But Monday’s dismal earnings show just how hard repeating that trick could turn out to be.

Here’s what else you need to know about the stock:

1) You can’t really call IBM a growth company anymore since its sales aren’t rising.

When it comes to revenues, IBM ranks behind only Apple APPLE INC. AAPL 2.1399% and Hewlett-Packard HEWLETT-PACKARD CO. HPQ -0.9953% among U.S. tech companies. On a quarterly basis, though, sales have actually shrunk for 10 periods in a row, including a 4% slide in the third quarter. The big culprit is cloud computing, in which businesses can access computing services remotely via the Internet.

Since the 1990s, IBM’s model has been premised on selling powerful, expensive computers to large businesses, then earning added profits on contracts to help firms run those machines. But the cloud lets companies rent, not buy, this computing power. “You only pay for what you use,” says Janney Montgomery Scott analyst Joseph Foresi. The result: IBM’s hardware revenues sank 15% last quarter.

2) IBM is racing to be a leader in cloud computing, but with mixed results.

The company has identified four alternative areas of growth. One is the cloud, the very technology eating into IBM’s hardware sales. Big Blue has spent more than $7 billion on cloud-related acquisitions. It’s also going after mobile, IT security, and big data, the analysis of information sets that are too large for traditional computers. An example of that is Watson. IBM’s artificial-intelligence project, which won Jeopardy! in 2011, is being marketed to businesses in finance and health care.

These initiatives have promise, but IBM’s size is a curse. For instance, the company’s cloud revenues jumped 69% to $4.4 billion last year, but with nearly $100 billion in overall sales, “it’s hard to move the needle,” says S&P Capital IQ analyst Scott Kessler.

3) The stock is now much cheaper than its tech peers, but it may deserve to be.

Investors willing to wait and see if these moves will transform IBM may take comfort in the fact that the stock looks cheap. What’s more, the shares yield 2.4%, vs. 2% for the broad market. This could make the company look like a good value.

But investors should tread carefully, says Ivan Feinseth, chief investment officer at Tigress Financial Partners. He notes IBM has spent $90 billion on stock buybacks in the past decade, which has kept the P/E low by increasing earnings per share. Yet none of that money was invested for growth, as evidenced by IBM’s sluggish annual growth rate. It is hard to imagine IBM outmuscling Amazon AMAZON.COM INC. AMZN 0.8464% , Cisco CISCO SYSTEMS INC. CSCO -1.3763% , Microsoft MICROSOFT CORP. MSFT 1.0314% , HP HEWLETT-PACKARD CO. HPQ -0.9953% , and Google GOOGLE INC. GOOG 1.8917% in the cloud — and there are better values in tech.

TIME psychology

How Can You Use Technology to Make You Happier?

Man with phone
Getty Images

Eric Barker writes Barking Up the Wrong Tree.

Many say technology is tearing us apart but studies generally show that tech and the internet make us happier. What gives?

There’s certainly a near-term and long-term difference: your brain loves things that give you more options even if too many choices end up making you miserable. (Humans aren’t always rational. Welcome to Earth.)

More relevant, technology is a tool, and it’s all about what you do with it. Research has shown time and time again that what makes you happier is relationships with people.

Problem is we all have a tendency to use technology to replace relationships.

You do it with television:

Study 1 demonstrated that people report turning to favored television programs when feeling lonely, and feel less lonely when viewing those programs.

Television competes with friends for your free time and acts as a (poor) substitute. It fills the slot of real relationships so effectively that when your favorite TV shows go off the air, it can be the equivalent of a real life break-up. And more TV only makes you more unhappy.

You do it with your phone:

“The cellphone directly evokes feelings of connectivity to others, thereby fulfilling the basic human need to belong.” This results in reducing one’s desire to connect with others or to engage in empathic and prosocial behavior.

You’re not addicted to your phone — brain scans show it’s more like you’re in love with it. (There are now more iPhones sold than babies born in the world every day.) By stripping away the emotional information in faces and intonation, text messaging might be simulating autism.

Too much computer time can degrade social skills. Research shows Facebook often promotes weak, low-commitment relationships and it’s curated presentation of only life’s best moments can make us depressed. Email can stress you out and turn you into an asshole if you’re not careful.

So should we smash the machines and live like the Amish?

No way.

Like I said, it’s all about how you use it. In fact, research shows compulsive internet users have happier marriages. Overall, Facebook users get more emotional support than average.

So how do you get the good without the bad?

Technology can increase happiness and improve relationships if you leverage it to connect with other people:

The results were unequivocal. “The greater the proportion of face-to-face interactions, the less lonely you are,” he says. “The greater the proportion of online interactions, the lonelier you are.” Surely, I suggest to Cacioppo, this means that Facebook and the like inevitably make people lonelier. He disagrees. Facebook is merely a tool, he says, and like any tool, its effectiveness will depend on its user. “If you use Facebook to increase face-to-face contact,” he says, “it increases social capital.” So if social media let you organize a game of football among your friends, that’s healthy. If you turn to social media instead of playing football, however, that’s unhealthy.

So don’t just hit the LIKE button. Comment, interact and most importantly, plan face-to-face get togethers.

Your phone can make you happier too. (In fact, there’s an app for that.) Use your phone to make plans to meet with friends in person or to connect with those you can’t see face to face.

And when you’re with friends, put it away. Seeing friends and family regularly is worth an extra $97,265 a year. Whatever you want to check on that phone ain’t worth a hundred grand.

Summing up:

We frequently use technology to replace relationships. This is bad. Technology can increase happiness and improve relationships if you leverage it to connect with other people.

This piece originally appeared on Barking Up the Wrong Tree.

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TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME technology

Why Apple Pay May Be the Company’s Most Challenging Move Yet

For Apple Pay to work, Apple needs to get customers, retailers and banks all in lockstep

Our smartphones have already become our de facto camera, music player, navigational device and personal assistant. Now Silicon Valley wants to make them our wallet, too.

Several tech firms have spent the last few years trying to convince consumers their phone is a more convenient payment method than cash or plastic. Most shoppers have balked. But on Monday, Apple is entering the fray, and experts say that could be a turning point for the long-hyped mobile payments industry.

Apple’s service, dubbed Apple Pay, allows customers to buy goods in physical stores with a simple tap of their iPhone 6, iPhone 6 Plus or Apple Watch smartwatch, when that device hits shelves in early 2015. Apple Pay users load their credit card information onto the phone, then press their device’s Touch ID fingerprint scanner in the checkout line to authenticate the purchase. The process is faster than using a debit card — and more secure. Apple generates a unique ID number for each transaction, meaning users’ credit card data numbers are not shared with merchants.

Apple Pay is launching just as the smartphone is becoming a central point of commerce for the average shopper. Consumers spent $110 billion via their mobile devices last year, according to research firm Euromonitor, and they used their phones plenty more to research products before buying them in stores. Meanwhile, person-to-person payment apps like Venmo have made people comfortable loading their phones with dollars to make simple transactions.

“All of that is really conditioning consumers to trust their phones when it comes to payments,” says Michelle Evans, a senior consumer finance analyst at Euromonitor.

But consumers are still reluctant to give up their credit cards. Mobile payments generated $4.9 billion in sales in 2014, a paltry figure compared to the year’s $4.8 trillion in card transactions, according to Euromonitor. Google’s own mobile payments service, Google Wallet, offers much of Apple Pay’s functionality but hasn’t seen widespread adoption. Startup Square abandoned its much-hyped mobile wallet platform earlier this year, instead pivoting to an order-ahead service like Seamless. PayPal, which is spinning off from eBay in 2015, has also struggled find a mobile formula that works in stores.

“It’s definitely starting to catch on, but I don’t think anybody has quite nailed the overarching reason to pull out your phone to pay,” says Anuj Nayar, PayPal’s senior director of global initiatives.

The transition to mobile payments is a challenging one because it requires buy-in from so many different players. Consumers have to be convinced it’s worth their time to learn a new buying behavior. Retailers have to pay for new equipment so their point-of-sale systems can accept payment from phones and smartwatches. Banks and credit card issuers also have to buy in. “It’s a lot of people to get in lockstep,” says Evans.

Apple does have a few key advantages over its competitors. The company has a knack for convincing people to change their digital lifestyles, whether by downloading MP3s, surfing the web on a phone or using a large tablet to watch videos. And thanks to the iTunes Store, Apple has more than 500 million credit cards already on file. Those customers will be able to seamlessly start using the same accounts they use to buy apps and music to buy goods in the real world when they first boot up Apple Pay. “We’ve never had this large of a base in a starting country” for a mobile payment system, says Matt Dill, Visa’s senior vice president for Innovation & Strategic Partnerships, Commerce and Network Payments.

However, analysts say convincing shoppers to give up credit cards, which are already fairly painless to use, will take more than just offering convenience. The most successful mobile payments platform to date is the Starbucks app, which rewards customers who pay via their phones with free drinks and other perks. Today, Starbucks processes about 15% of all its transactions on the app, or about 6 million per week.

“The customers really feel It’s not just about payments,” says Ben Straley, Starbucks’ vice president for digital products. “It’s also about being rewarded for their loyalty.”

But even if Apple can convince consumers to take their money mobile, some merchants aren’t playing ball. Wal-Mart, America’s largest retailer, won’t support Apple Pay at launch. Instead, it and other big-box stores like Best Buy are developing a competing mobile payments platform called CurrentC, set to launch sometime next year. Such merchants would have to be the driving force behind any effective loyalty rewards program that convinced shoppers to abandon their credit cards.

With so many competitors offering mobile payment options, analysts expect the segment will finally take off soon. Euromonitor projects in-store purchases via phone will rise to $74 billion by 2019 — though that’s still a far cry from the trillions in card purchases we see today. Mobile devices are already becoming a common tool for buying things in the virtual world. It could very well happen in the real world, too. “It’s just shopping, whether you’re buying it in a store or buying it online,” says PayPal’s Nayar. “The lines between what that looks like have started to disappear.”

Read next: Apple Pay Starts Monday for iPhone 6 Users

TIME technology

The Comic Sans Typewriter Is Finally Here

It's only a generation late

We’ve all had this thought: Why can’t my typewriter use the Comic Sans typeface?

Well, if you like Comic Sans, you may have had that thought, anyway. And if you have a typewriter.

But designer Jesse England seems to fit the bill. After reading a typewritten document, he realized there was nothing stopping him from giving a typewriter the most annoying font ever created. So he invented the Sincerity Machine, etching Comic Sans letters with a laser engraver and gluing them onto a 1970s Brother Charger 11 typewriter.

England is sympathetic to the font. “While making it, I thought a lot about the Comic Sans typeface and how ridiculed it is. But it is also a mark of sincerity for those who do not have graphic design experience. I’m not particularly enamored with this font, but I don’t think it deserves the flak it gets.”

TIME technology

FBI Director Implies Action Against Apple and Google Over Encryption

FBI Director James Comey testifies at a Senate Judiciary Committee hearing on "Oversight of the Federal Bureau of Investigation" on Capitol Hill in Washington
FBI Director James Comey testifies at a Senate Judiciary Committee hearing on "Oversight of the Federal Bureau of Investigation" on Capitol Hill in Washington May 21, 2014. Kevin Lamarque—Reuters

The law enforcement chief made it clear, however, that he was speaking only for his own agency and not others

FBI Director James B. Comey has expressed exasperation at the advanced data encryption technologies that companies like Apple and Google say they will offer their customers, and implied that the government might attempt regulations to ensure a way around them.

“Perhaps it’s time to suggest that the post-Snowden pendulum has swung too far in one direction — in a direction of fear and mistrust,” Comey told the Brookings Institution in a speech Thursday. Comey also spoke of the need for a “regulatory or legislative fix” to hold all communications companies to the same standard, “so that those of us in law enforcement, national security and public safety can continue to do the job you have entrusted us to do, in the way you would want us to.”

But in response to questions from reporters and Brookings experts, the FBI director made it clear that he was only talking on behalf of his own organization and thus could not speak for the NSA or other intelligence agencies, reports the New York Times.

This is not the first time that Comey has spoken out against Apple and Google’s move to give users complete control over data encryption, but the implications of legislative action against these companies is a step forward in government efforts to thwart it.

While Apple and Google have not commented on Comey’s latest remarks, technology companies have previously said that the move toward personal data encryption will not slow down, and will in fact probably be stepped up.

“I’d be fundamentally surprised if anybody takes the foot of the pedal of building encryption into their products,” Facebook’s general counsel Colin Stretch told the Times. He added that encryption was a “key business objective” for technology companies.

TIME technology

iPad Predictions, Then and Now

Apple Announces Launch Of New Tablet Computer
Steve Jobs demonstrates the new iPad on Jan. 27, 2010, in San Francisco Justin Sullivan—Getty Images

Apple's first iPad was Steve Jobs' last iDevice

With Apple rumored to be unveiling a new iPad Thursday at its Cupertino, Calif., headquarters, it’s a great time to look back at the company’s very first tablet — which, notably, was also the last new Apple device presented by late CEO Steve Jobs, who passed away within 2 years of the iPad announcement.

When Apple unveiled the iPad on Jan. 27, 2010, TIME, along with other media outlets, didn’t greet it as revolutionary. Instead, we thought it was all too familiar. The iPad “looks and acts exactly the way the tech pundits predicted: like a giant iPod Touch or iPhone,” we wrote in our Jan. 28, 2010 story on the reveal. Nor was the iPad the first device of its kind seen by the public; the general concept of a “tablet computer” had been around for decades, and as that TIME article notes, “more than three dozen tablets and related devices were shown at the annual Consumer Electronics Show in Las Vegas in early January,” several days before Apple’s event.

That said, Apple is legendary for its ability to create demand in a market where little was found before, as it did with the iPod. The iPad quickly became the best-selling tablet device, and it would take tablets running Google’s iOS competitor, Android, until 2013 to outsell the iPad in terms of raw volume.

What we’re seeing today, however, is flatlining demand for the iPad, perhaps because people don’t feel the need to upgrade their tablet as often as they do their phone — which, by the way, are devices that people still love, contrary to TIME’s 2010 comment that “with the iPad, smartphones have already begun to feel dated,” another prediction that missed the mark. Indeed, while Apple’s new iPhone 6 models are flying off the shelves, iPad sales are stalling.

Which brings us to Apple’s Thursday event, which should show the company trying to pour some gasoline on the iPad’s simmering fire. Even so, the world’s willingness to want an iPad has been proved — these days, the predictions these days are less about whether anyone needs a tablet than about the bells and whistles that might make someone want this one in particular: one of the most hyped rumors is that the new iPad will come in gold. And contrary to broader predictions about the iPad, this one will be tested sooner rather than later: on Thursday at 10:00 Cupertino time.

TIME celebrities

Bill Murray Just Bought His First Cellphone, and It’s a BlackBerry

"The Monuments Men" - Los Angeles Photo Call
Actor Bill Murray attends a photo call for "The Monuments Men" Jason LaVeris—FilmMagic

Who you gonna BBM?

Public service announcement to Bill Murray fans: If the actor crashes your bachelor party or engagement shoot, make sure to ask for his BBM after.

After a lifetime of eschewing cellphones, Murray told Variety that he has purchased a smartphone: A BlackBerry. Because obviously.

“I got it to communicate with my sons, because they will not answer a phone call, but they will answer a text,” he said begrudgingly. “I mean I have done it, but I have no interest in it. The kids’ school stuff is all email, and they send thousands of emails. It’s complete overload.”

But don’t worry, the actor also has his very own 800 number which he sporadically checks. Who you gonna call? Bill Murray, duh.

[Variety]

TIME technology

Google’s Former CEO: Amazon Is Biggest Rival

The South Summit - Spain Start-Up Convention, Madrid
Google Executive Chairman Eric Schmidt speaks at the 'The South Summit'- Spain Start-Up convention at Las Ventas bullring in Madrid on Oct. 10, 2014. Geisler-Fotopress/DPA/Corbis

Eric Schmidt said there's competition brewing from unknown entrepreneurs, too

Google’s former CEO said Monday that the tech giant’s biggest rival is Amazon.

“Many people think our main competition is Bing or Yahoo. But, really, our biggest search competitor is Amazon,” Eric Schmidt, currently serving as Google’s executive chairman, told a crowd in Berlin. “They are obviously more focused on the commerce side of the equation, but, at their roots, they are answering users’ questions and searches, just as we are.”

Google is the most-visited site on the Internet, with 233 million unique visitors in August. According to the same ranking, 172 million visited Amazon, making it the sixth most visited.

But while Schmidt may see Amazon as Google’s biggest competitor right now, the CEO said that there’s competition brewing from unknown entrepreneurs.

“Someone, somewhere in a garage is gunning for us,” Schmidt said. “The next Google won’t do what Google does, just as Google didn’t do what AOL did. Inventions are always dynamic and the resulting upheavals should make us confident that the future won’t be static.”

TIME technology

Comedy Clubs Are Using Facial Recognition Software So They Can Charge Per Laugh

Taking all of the fun out of comedy


Spanish comedy clubs are about to become very sullen places.

The BBC reports that Barcelona’s Teatreneu Club is using facial recognition software to charge patrons by the laugh, inspiring curmudgeonliness in the name of thrift. Tablet devices are attached to the back of seats to gauge people’s amusement, charging 0.30 euros (.38¢) per laugh at a cap of 24 euros (about $30). As if performing comedy wasn’t daunting enough without have an audience that is incentivized not to laugh.

While the endeavor may seem like a publicity stunt — the theater partnered up with ad agency Cyranos McCann — the BBC reports that it has proven effective and other clubs are starting to implement it around the country. The pay-per-laugh system was adopted to fight fledgling audience numbers, but it has resulted in increased overall ticket costs by 6 euros (about $7.50). Surely, that makes up for the thousands of dollars spent in tablets.

Send in the clowns, because this all sounds pretty depressing to us.

 

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