Apple's earnings are dropping and its shares are now trading below where they were in the summer of 2014.
That’s because Apple hasn’t been investing adequately in new technologies. It’s been coasting on global sales of iPhones and related products it periodically upgrades.
So what’s Apple’s strategy for turning this around? Apparently nothing. It just announced it’s spending $35 billion to buy back its shares of stock.
Over the past several years Apple has spent $117 billion buying back itself. Stock buybacks reduce the number of outstanding shares so each remaining share is worth more. But it’s a steroid with no lasting effect, because the remaining shares won’t hold their value unless Apple provides far more value to its consumers.
Meanwhile, Apple’s CEO, Tim Cook, raked in in $10.3 million in 2015, up from $9.2 million in 2014.
As soon as the news was out, the stock fell $40, or about 5 percent.
One culprit for the disappointing report: aggregate cost per click, a crucial measure of Google’s advertising business, fell 9 percent from 2015.
Nearly all of Alphabet’s revenue and all its profits come from the core Google search and advertising business. Revenue from what the company calls “Other Bets” was $166 million, more than double what it was in the first quarter of 2015. But losses for Other Bets rose to $802 million from $633 million.
Aside from the troubles in Europe — antitrust authorities there said this week that the company was unfairly using its Android mobile software to promote its products over those of rivals — the last year has been generally sweet for Google fans.
The company brought in Ruth Porat from Morgan Stanley as chief financial officer, a sign it wanted to rein in spending. The results for the second quarter of 2015 offered evidence that the core advertising business was succeeding on mobile, igniting one of the largest one-day jumps in capitalization for a Nasdaq stock ever. A reorganization in the fall that separated the core business from the ambitious “moonshots” was met with approval by investors and analysts.
Euphoria cannot last forever, though, and recently some headaches have emerged. An inability to release new products has plagued an acquisition, the thermostat company Nest. Bought for $3.2 billion in early 2014, Nest has struggled to expand its product line amid corporate infighting.
Google is far behind at No. 3, or perhaps even No. 4 after IBM, said John R. Rymer, an analyst at Forrester Research. Last fall, Google hired Diane Greene, an industry veteran, to run all of its cloud businesses.
弗雷斯特研究公司(Forrester Research)的分析师约翰·R·里默(John R. Rymer)称，谷歌远远落后，目前处在第三位，甚至是IBM之后的第四位。去年秋天，谷歌请来业内资深人士戴安·格林(Diane Greene)负责所有云业务。
“This is their third try to really become a cloud powerhouse,” Mr. Rymer said. “They certainly seem more serious this time, but we’ll have to see if they move beyond digital natives to airlines, utilities, trucking companies, governments — the enterprises where the real money is.”
SAN FRANCISCO — Google parent Alphabet is scrutinizing its "other bets," those speculative businesses that are now run separately from Google's lucrative advertising business.
"We continue to rationalize our portfolio of products to ensure we efficiently and effectively," Alphabet Chief Financial Officer Ruth Porat said during the first-quarter earnings call on Thursday, hinting that poor performers may find themselves on the chopping block.
Other products or projects are not escaping scrutiny either.
"In certain areas where we have had multiple teams developing different approaches to a similar technology, we have been evaluating how to rationalize these approaches, enabling us to increase investments around a smaller, more focused set of opportunities," she said.
The remarks came as growing losses from the tech giant’s investments in speculative new businesses overshadowed Google's booming advertising business and caused the company to miss Wall Street forecasts.
Revenue from "other bets" doubled to $166 million, primarily generated by smart gadget maker Nest, life sciences research organization Verily and speedy Internet provider Fiber. But the operating loss widened to $802 million from $633 million, spooking investors.
Recent reports suggest Alphabet is taking a hard look at certain investments such as robotics.
Porat reminded analysts that other bets are "pre-revenue."
"We continue to invest across these opportunities, doing so in a disciplined way," she said.
Apple's sales in China tumbled in the second quarter after currency headwinds hurt Hong Kong sales, the company said in Tuesday's earnings.
"The vast majority of the weakness sits in Hong Kong," Apple CEO Tim Cook told analysts in an earnings call. "The Hong Kong dollar being pegged to the U.S. dollar, and therefore it carries the burden of strength of U.S. dollar. And that has driven tourism, trade and international shopping down significantly compared to what it was in the year ago."
The company reported quarterly earnings and revenue that missed analysts' expectations, with revenue declining year-over-year in every region. But China saw the biggest share of declines: Greater China sales, once the tech giant's fastest growing market, fell to $12.49 billion in the second quarter, the company said, a 26 percent year-over-year decline.
Excluding Hong Kong and Taiwan, mainland China saw sales decline 11 percent on a reported basis, and 7 percent on a constant currency basis, Cook said. But people need to look under the numbers, Cook said, as LTE adoption increases and more Apple stores open in the region.
"When I look at the larger picture, I think China is not weak as is talked about," Cook said. "I see China as ... a lot more stable than what I think is the common view of it. We remain really optimistic about China."
Chief financial officer Luca Maestri said the business in China was "better than the numbers might suggest."
"We had significant inventory channel reductions and currency weakness which affected our reported revenue," Maestri said in an earnings call. "Keep in mind that we were up against an extremely difficult year-ago compare when our mainland China revenue grew 81 percent. We remain very optimistic about the China market over the long-term, and we are committed to investing there for the long run."
But speaking in January, Cook warned that the company had seen "some signs of economic softness" in the Greater China region.
That business segment, which includes mainland China, Taiwan and Hong Kong, is a key area of growth for the U.S. tech giant, but Cook acknowledged in January that it had been something of a "turbulent environment." China has seen its pace of economic expansion slowing in recent quarters, and its stock markets have taken investors on a roller coaster ride during that time.
"Something's wrong in China," Gene Munster, managing director and senior research analyst at Piper Jaffray, wrote in a research note after the earnings. "Guidance appear negatively impacted by a sharp deceleration in China ... Overall we see few bright spots in the March report and June guide."
Beyond macroeconomic factors, Apple's position in China is under fire by domestic firms, and it could even see the government in Beijing crack down on its success in the country.
Speaking with CNBC earlier this week, billionaire Chinese entrepreneur Jia Yueting said Apple is "outdated," and charged that it has not been innovating at a sufficient pace.
"One of the most important reasons [for slowing sales] is that Apple's innovation has become extremely slow," he said. "For example, a month ago Apple launched the iPhone SE. From an industry insider's perspective, this is a product with a very low level of technology...We think this is something they just shouldn't have done."
Cook admitted in the earnings call that the smartphone market was not growing but attributed it to a passing "overhang of the macroeconomic environment in many different places in the world."
And Cupertino, California-based Apple could face increased scrutiny from Beijing, which has sought to exercise control over many other U.S. tech companies.
"I'd be very surprised in five years' time if we see Apple having the kind of access to the Chinese consumer that they presently enjoy," Ian Bremmer, founder and president of the Eurasia Group, told CNBC's "Squawk Box" on Monday.
But Cook has continued to sound an optimistic note on China throughout that time. Tuesday's report showed what Cook called "tremendous" success of Apple Pay in China, for instance. Drexel Hamilton analyst Brian White said even after the earnings, he was looking forward to new geographic opportunities in certain Chinese cities.
"Beyond the short-term volatility, we remain very confident about the long-term potential about the China market and the large opportunities ahead of us, and we are maintaining our investment plans," Cook said in January, adding that he does not "subscribe to the doom and gloom kind of predictions."