Earnings reports from NVIDIA NVDA and Cisco CSCO, a stay order on the JEDI contract in Amazon’s AMZN favor, Facebook’s FB app to compete with Pinterest and other stories are covered in this daily.
NVIDIA’s reported revenue and earnings of $3.10 billion and $1.54 were better than the Zacks Consensus Estimates of $2.96 billion and $1.34, respectively.
Results were driven by a strong data center business as hyperscalers that had curtailed spending through the year, stepped up purchases in the fourth quarter. There were also some vertical-specific GPU deployments for AI/deep learning workloads. NVIDIA expects this business to grow sequentially in the current quarter, indicating that increased data center spending is not a one-off thing.
New device builds hit gaming GPUs for consoles, but NVIDIA products gained ground in gaming PCs and notebooks. The guidance for this segment was disappointing because of a $100 million impact from the coronavirus that the company thinks is in its early phases.
But while NVIDIA, and Intel before it, saw renewed demand in the data center as a positive for their future business, Cisco continued to see softness for the second straight quarter. The company reported in-line revenue and a 3 cent beat on earnings in its fiscal second quarter, largely supported by a strong subscription service business that was offset by continued weakness on the product side.
Management called out 5G cellular networks, 400-gigabit Ethernet, WiFi 6 and the cloud as its primary growth drivers. Cisco remains greatly enthused by 5G and expects it to play a major role in 2021. But of course tech transitions are difficult, particularly given coronavirus concerns that are limiting global travel and spurring plant shutdowns.
Management said that Brexit and trade with China were negatively impacting its business, but results would improve with stabilization in the macroeconomic environment. Cisco’s China exposure is very small (like 2%), so coronavirus has a limited impact on it. But it continues to guide conservatively indicating that uncertainties persist.
Cisco also announced a $300 million restructuring charge including severance and other cost, about half of which will be recognized in the current quarter.
Stay on JEDI Contract
Judge Patricia Campbell-Smith issued a preliminary injunction temporarily barring Microsoft MSFT and the DoD from proceeding with the $10 billion contract until she has had time to look into the details. Amazon was asked to submit $42 million in case the injunction wasn’t justified. Work on the contract was supposed to start today.
Amazon claims that President Trump, because of his personal vendetta against Amazon CEO Bezos, instructed the selection committee not to award the contract to Amazon. The concerned people have all denied any such meddling by the White House. Microsoft said it is confident that the DoD’s decision was without bias.
Facebook Rival for Pinterest
The Information reports that Facebook has launched an app in Colombia, Belgium, Spain and Ukraine, according to CNBC. The app is called Hobbi and appears to compete with Pinterest. The app allows users to organize their photos into “visual collections”. The app was created by Facebook’s "New Product Experimentation" team that was formed last year to develop useful consumer-facing applications.
A Pinterest spokesman Told CNBC, "Upon first look, Hobbi appears to be a photo saving app that lacks the discoverability, search, and recommendations of Pinterest." "As described in the App Store, it's meant to help you document and remember the things you do, which is about the past, while Pinterest is about discovering ideas and inspiring action for the future."
Nonetheless, Pinterest shares dropped in reaction to the news.
Google Fights EU Fine
The EU has imposed three fines on Google, the first in 2017 involving the Google Shopping price comparison service for $2.6 billion, the second in 2018 for bundling its apps with Android for $5 billion and the third in 2019 for blocking its online advertising rivals. Hearing on the first case started yesterday, with the company defending its position using the age-old argument that regulation couldn’t stifle innovation.
"Competition law does not require Google to hold back innovation or compromise its quality to accommodate rivals. Otherwise, competition would be restricted and innovation would be stifled," its lawyer Thomas Graf told a panel of five judges on the first of a three-day hearing at the EU General Court.
It also disputed other aspects of the case: "It is wrong on the law, the facts, and the economics. Shopping ads have always helped people find the products they are looking for quickly and easily, and helped merchants to reach potential customers," said a company statement.
Google’s statement that it was only in 2017 that the EU decided to fix the penalty “at a level sufficient to ensure deterrence” further illustrates its argument. Moreover, the company contends that since it neither hid the practice nor obstructed the course of justice and instead cooperated with the investigation, the exemplary punishment was unjustified. The fine was based on Google’s 2016 revenue, on which the multiplier applied was higher than the highest possible in anti-competitive cases.
Commission lawyer Nicholas Khan echoed the plaintiffs, saying Google had clearly used its dominance to expand in an adjacent market. He also said the company was avoiding addressing the whole decision. "It is as if Google has applied a ranking algorithm to the decision and decided that parts of it just aren't relevant," Khan said.
Thomas Hoppner, who generally argues for anti-Google clients said, "Google's search service acts as a de-facto kingmaker. If you are not found, the rest cannot follow. No company should be allows to abuse such position to promote its own services at the detriment of competitors and consumers alike."
Lawyers representing British comparison shopping site Foundem whose complaint started this investigation and Tech lobbying group CCIA, which sides with Google, also weighed in.
Amazon Succeeds in India Court
Amazon challenged an investigation by the Competition Commission of India (CCI) into trade practices adopted by its India arm and Walmart-owned Flipkart, including the system of deep discounting, by saying that the CCI didn’t have adequate evidence to order the probe. The CCI action was prompted by protests from a trade body of small sellers called Delhi Vyapar Mahasangh.
After three days of hearing at a Bengaluru court, the judge put a hold on the investigation. A lawyer for the trade group said he would appeal the decision.
UK Approves Google’s Looker Acquisition
Google’s acquisition of data analytics startup Looker Data Sciences has been approved by the UK’s Competition and Markets Authority. The UK watchdog suspected that the deal would substantially reduce competition in the country’s cloud computing market. But after looking at the details, it was convinced that it wouldn’t adversely affect either the quality of service or competition in the data analytics tools and software market.
Google said its goals match those of Looker’s to continue supporting a multi-cloud environment. The acquisition is intended to help Google build its BigQuery tool that helps manage large data sets.
For the first time in Barcelona’s 33-year history, organizers of the mobile world congress (MWC) decided to call off the event. It’s a huge event, attracting 100,000+ participants from all over the world.
But after a large number of tech companies, including AT&T, Intel. , NVIDIA , Facebook, Cisco Systems, Telefon AB L.M. Ericsson , LG Electronics Inc., Sony Corp and Amazon.com pulled out of the event, the organizer GSMA said that the way the virus was spreading made it impossible to hold the event.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research