|From: Glenn Petersen||7/30/2020 6:52:54 PM|
|Alphabet reports first revenue decline in company history|
PUBLISHED THU, JUL 30 20203:31 PM EDT
UPDATED 2 MIN AGO
Jennifer Elias @JENN_ELIAS
-- Google parent-company Alphabet reported its first revenue decline in history. The company beat most expectations with the exception of its Cloud division.
-- Investors were non-plussed, and the stock barely moved after the report.
Google parent-company Alphabet beat expectations for its second quarter earnings Thursday, but marked its first revenue decline in company history as the coronavirus pandemic slowed economic growth and advertisers pulled back spending during the quarter. The company’s stock barely moved after hours.
Here’s how it did against Refinitiv consensus estimates:
EPS: $10.13 (non-GAAP), vs. $8.21 estimated.
Revenue: $38.30 billion vs. $37.37 billion estimated.
YouTube advertising revenue: $3.81 billion vs. $3.78 billion, according to StreetAccount estimates
Google Cloud revenue: $3.01 billion vs. $3.06 billion, as per StreetAccount
Traffic acquisition costs (TAC): $6.69 billion vs. $6.67 billion, as per StreetAccount
The company’s board also authorized the company to repurchase up to $28 billion of its Class C shares.
CFO Ruth Porat said on an earnings call that consumers returned to more “commercial” search queries toward the end of the quarter, and advertisers began increasing their search spending, so search revenue ended the quarter about even from last year.
However, she cautioned that it’s hard to gauge whether those trends will continue. “We believe it is premature to gauge the durability of recent trends, given the obvious uncertainty of the global macro environment,” she said.
As a result of the customer pullbacks amid the Covid-19 pandemic and the general maturing ad market, Alphabet itself cut marketing spending by half and instituted hiring freezes for the second half of the year in anticipation of a slowdown, CNBC reported. Around that time, Alphabet CEO Sundar Pichai said Google would be pulling back on some of its investments for the rest of the year amid the Covid-19 crisis, starting with hiring.
Analysts also peppered execs with question about future growth opportunities, given the slowdown in advertising growth. Pichai briefly pointed to newer businesses he sees longterm growth in such as cloud computing and artificial intelligence, as well as YouTube and shopping.
Google’s “other revenue,” which includes hardware like its Pixel phones, came in at $5.12 billion, compared to $4.08 billion in the same quarter a year ago.
Revenue from “Other Bets,” which includes Alphabet’s self-driving car business Waymo as well as life sciences company Verily, fell to $148 million compared to $162 million in the same quarter the year prior. The Other Bets showed an operating loss of $1.11 billion during the quarter.
Alphabet added approximately 4,000 new employees, making the full-time workforce consist of 127,498 during the second quarter. That doesn’t include contractors. Porat said that the company will continue to decelerate year-over-year headcount growth.
Google is also facing antitrust probes along the same lines by the Department of Justice and 50 attorneys general investigating Google company’s search and Android businesses. That is expected to result in legal action that could span issues ranging from its search product to digital advertising marketplace, according to a recent report from The Wall Street Journal.
When analysts asked about this on the call, CEO Sundar Pichai said “I think the scrutiny is going to be here for a while.” He added that the company will “adapt.”
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|From: Glenn Petersen||8/4/2020 8:32:55 AM|
|Google owner Alphabet issues record $10 billion bond at lowest-ever price|
PUBLISHED TUE, AUG 4 20205:51 AM EDT
Reuters via CNBC.com
-- Alphabet borrowed $10 billion in the investment-grade corporate debt market on Monday, the Google parent’s largest-ever bond issue, which it secured at its lowest-ever cost of financing.
-- Investor appetite was fierce for the tech giant’s six-part bond, as low interest rates and corporate bond buying from the Federal Reserve continues to support issuance.
-- The deal garnered more than $31 billion in demand, according to Refinitiv IFR.
Alphabet borrowed $10 billion in the investment-grade corporate debt market on Monday, the Google parent’s largest-ever bond issue, which it secured at its lowest-ever cost of financing.
Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen at that maturity since Apple Inc issued a $1.5 billion five-year note at 0.45% in 2013.
Investor appetite was fierce for the tech giant’s six-part bond, as low interest rates and corporate bond buying from the Federal Reserve continues to support issuance. The deal garnered more than $31 billion in demand, according to Refinitiv IFR. Previously, Alphabet’s lowest coupon was 1.25% on a $1 billion May 2014 note.
“We’re at a stage where these extremely high-quality issuers - of which Alphabet is one — are going to price very very tight. That’s because there are a lot of buyers who need short-term, don’t-need-to-think-about-it money. You’re getting two times the yield on the five-year Treasury,” said Tom Graff, head of fixed income at Brown Advisory.
Last week Alphabet reported its first quarterly sales drop in its 16 years as a public company. Its share price was largely unmoved however, as the loss in sales was offset by a recovery in Google’s ads business.
“There is a very narrow set of companies that were already super high quality, that are not impacted by this recession we’re going through right now. And Google is one of them,” said Graff.
Alphabet’s five-year tranche priced just higher than Amazon.com’s 0.40% three-year note issued in June, among the lowest corporate coupons ever recorded. Alphabet’s 0.45% five-year tranche was however cheaper than Amazon’s June 2020 offering at the same maturity, which priced at 0.80%.
Of the $10 billion offered, $4.5 billion from the seven-, 20- and 40-year tranches will be used for general corporate purposes, including acquisitions. The remaining $5.5 billion will be used for green initiatives, the company said, the largest-ever issue of corporate debt for environment, social and governance endeavors.
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|From: Glenn Petersen||8/14/2020 5:03:05 PM|
|Applicable to both AAPL and GOOGL:|
APPLE HAS FINALLY MET ITS FORTNITE MATCH
Apple’s walled garden gets an epic test
By Tom Warren @tomwarren
Aug 14, 2020, 10:12am EDT
Epic Games executed its most ambitious Fortnite live event yesterday, leading both Apple and Google to remove one of the world’s most popular games from their app stores. It was a well choreographed sequence of events designed to highlight the power Apple and Google hold over app stores, especially Apple’s walled garden. Epic Games has now filed lawsuits against both Apple and Google in a battle that’s likely to last months. Epic Games is uniquely positioned to pull off a stunt like this, and now poses a serious threat to how Apple, in particular, operates its App Store and iOS operating system.
Apple originally launched the App Store as a way to add value to the iPhone and sell more of its handsets. “It costs money to run it,” explained Steve Jobs in a Wall Street Journal interview at the launch of the App Store in 2008. “Those free apps cost money to store and to deliver wirelessly. The paid apps cost money, too. They have to pay for some of the free apps. We don’t expect this to be a big profit generator. We expect it to add value to the iPhone. We’ll sell more iPhones because of it.” Apple’s App Store is now a massive $519 billion developer ecosystem. It’s also a key part of Apple’s growing services business, which is the second biggest revenue driver for the company, behind the iPhone.
Yet Apple has maintained a lucrative 30 percent cut of in-app purchases for digital goods for more than a decade now. It’s a policy that continues to annoy developers and the basis for a fresh and very visible challenge from Epic Games.
The latest controversy kicked off when Epic implemented a “permanent discount” yesterday on the V-Bucks digital currency used within Fortnite to purchase skins and other virtual goods. The roughly 20 percent discount was made possible this week because Epic Games now offers its own in-app payment scheme within Fortnite on iOS and Android, blatantly bypassing Google and Apple app store guidelines. Both Apple and Google have, for years, forced developers to use their own in-app payment schemes that require developers to hand over a 30 percent cut of in-app purchases on digital goods, which is only lowered to 15 percent for long-term subscriptions after someone subscribes for at least a year.
Apple and Google both argue this huge 30 percent fee is necessary for them to maintain their app stores and the security and simplicity they provide, but developers don’t agree. Others have tried to fight Apple’s 30 percent tax in the past by encouraging customers to sign up to services or purchase digital goods outside of Apple’s App Store. Some have compromised by jacking up their iOS prices to help recoup the lost 30 percent.
While this policy is central to the battle between Epic Games and Apple and Google, the fight is ultimately about power, control, and Apple’s approach to games and the App Store. Epic Games is uniquely positioned to fight Apple and Google with a game that’s played around the world by more than 350 million people. The game maker demonstrated its own power yesterday.
While most iOS and Android apps have to be approved and updated through Apple’s App Store or the Google Play Store, both companies make exceptions for games to allow developers to regularly update them within a shell app. You download a smaller container app, and then this app downloads the larger game files. Epic used this exception to its advantage, implementing its in-app purchase system without Apple or Google having to approve or deny it.
This blatant disregard for the rules left Apple and Google no choice but to remove Fortnite from their app stores. Epic’s quick, calculated response shows that the real target of its attention (and attention seeking) is Apple.
To start with, the company immediately launched a protest video inside the game designed to mock Apple’s iconic “1984” Macintosh commercial.
Apple originally used this Super Bowl commercial to highlight IBM’s dominance back in 1984, comparing the corporation to the dystopian novel by George Orwell that focuses on totalitarian political systems. “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation,” says Epic Games. “Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear.”
Epic’s also encouraging Fortnite players affected by the ban to tweet at Apple with the #FreeFortnite hashtag. Epic is using all of its own power to execute a marketing campaign designed to highlight Apple’s control and power.
Epic made no such viral video or campaign targeting Google.
Given that Google has largely followed in the footsteps of Apple’s App Store, it makes sense that Epic’s attention seeking would mainly target Apple. You can also still play Fortnite on Android by sideloading the app, avoiding the Google Play Store. There’s also a lot more controversy surrounding Apple’s policy decisions and the inability for consumers to install iOS apps from outside the App Store.
Apple’s power and control over the App Store has come under increased scrutiny this year. Developers have typically avoided publicly calling out Apple for fear of retribution, but things are starting to change. Spotify was the first to file a formal antitrust complaint with the European Union last year, arguing that Apple harms consumer choice and stifles innovation through the rules it enforces on the App Store.
The EU is investigating Apple’s App Store policies. Illustration by Alex Castro / The Verge`
The EU opened a formal investigation into Apple’s App Store and Apple Pay practices earlier this year, and Epic Games, Match Group, and Rakuten all joined Spotify in protesting Apple’s App Store fees.
At around the same time, Apple got caught up in a bitter dispute over Hey — a new subscription email app — just days before its annual developers conference. Apple initially approved the Hey app in the App Store before rejecting a bug-fix update because it claimed Hey violated the rules by not offering in-app subscriptions. This led to a public back-and-forth that highlighted the inconsistent way Apple applies its rules, and it revealed just how much developers are terrified of Apple.
The Hey incident also led the chairman of the House antitrust subcommittee to label Apple a bully and say that Apple’s App Store fees are “highway robbery.” Separately, Apple CEO Tim Cook then appeared at a House Judiciary Committee hearing, alongside the CEOs of Google, Facebook, and Amazon a month later. The Big Tech antitrust hearing saw all four companies try to convince Congress that their business practices aren’t anti-competitive monopolies.
Cook’s testimony was particularly interesting, as he tried to argue that Apple’s rules are applied fairly and evenly to all developers. “We treat every developer the same,” said Cook. “We have open and transparent rules. Those rules apply evenly to everyone.” We know this can’t be true. Apple created a special program for “premium subscription video entertainment providers” that allows apps like Amazon Prime Video to let existing subscribers avoid Apple’s in-app purchases and 30 percent cut.
It’s a deal we still don’t really know enough about, although documents show that Apple brokered a special deal with Amazon that involved a 15 percent cut instead of the typical 30 percent for in-app purchases. Either way, it’s certainly not part of what Cook calls Apple’s “open and transparent rules.” This is just one, albeit significant, example of Apple not applying its rules consistently. Apple also tried to argue that “client apps” are allowed for business apps but not consumer ones in its justification for rejecting the Hey email app, even though this distinction never appears in Apple’s App Store guidelines.
These inconsistencies and rules have irked developers for years, but many have simply been too scared to call Apple out. The iPhone maker is the judge and jury when it comes to approving apps, and if you’re rejected, then there’s often no appeals process unless you can generate the press and attention to force Apple to change its mind. Hey eventually returned to the App Store on a wave of publicity (and a minor functionality tweak to its app). It’s a playbook that Epic is now looking to reuse.
Photo by Vjeran Pavic / The Verge
Epic Games is aligning itself to lead the fight for the entire industry, and the company has prior form. A mysterious “configuration issue” saw Xbox and PS4 owners playing against each other for the first time in Fortnite back in 2017, just months after Sony had refused to enable cross-platform play for both Rocket League and Minecraft. It put the focus squarely on Sony blocking cross-play, and eventually led to a public outcry when it was revealed Sony was blocking Fortnite cross-play between PS4 and Nintendo Switch players. Sony eventually backed down, after Epic Games laid the blame squarely on the PlayStation maker. Cross-play has since become an increasingly common feature in everything from Call of Duty to No Man’s Sky.
Epic Games’ rebellion against Apple and Google also comes just weeks after both Microsoft and Facebook spoke out against Apple. Microsoft condemned Apple for blocking its new xCloud game streaming service on iPhones and iPads. “Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass,” said Microsoft. Google is allowing Microsoft to launch xCloud on the Google Play Store, although in-app purchases on Android will only be available through Samsung’s Galaxy Store. Samsung also demands 30 percent of in-app purchases, but it also makes it clear that developers can negotiate an “alternative revenue share rate” during the certification phase for apps.
Facebook’s criticism of Apple’s App Store policies went a step further than Microsoft’s, describing Apple’s move to block its mini-games inside a Facebook Gaming app as a “shared pain across the games industry, which ultimately hurts players and devs and severely hamstrings innovation on mobile for other types of formats, like cloud gaming.”
Epic Games CEO Tim Sweeney is determined to fight Apple and Google. Photo by Rachel Luna/Getty Images
It’s clear that Epic Games wants things to change for both its own benefit and the broader benefit of the gaming community. Most smaller developers can’t afford to take on Apple or Google, but Epic Games is now valued at $17.3 billion and can certainly put up a fight. Games are also a key part of any mobile app store and a big part of how Apple generates revenue through its own App Store. Developers want a fairer cut of that revenue, but Epic also wants to shift Apple’s control here.
“We’re fighting for open platforms and policy changes equally benefiting all developers,” says Epic Games CEO Tim Sweeney. “And it’ll be a hell of a fight!” It’s a fight that Epic has prepared for, and its lawsuit specifically alleges that Apple has a monopoly in the form of the iPhone, its iOS ecosystem, and the App Store that binds them all together.
Epic has enlisted the counsel of Cravath, Swaine & Moore, which includes Christine Varney, a former US assistant attorney general of the antitrust division for the Obama administration. Varney also served as the Federal Trade commissioner for the Clinton administration. Katherine Forrest, a partner at Cravath, is also part of Epic’s lawsuit. Forrest is a former judge and antitrust litigator, and the Cravath law firm was also part of Qualcomm’s lawsuit against Apple.
It’s easy to dismiss this as giant companies squabbling with each other, filing lawsuits, and ruining Fortnite on mobile devices, but the resolution will have far-reaching consequences for Epic Games and the many other developers that rely on mobile app stores. Apple has met a defiant competitor that’s been able to bypass App Store rules and put two prices side by side to demonstrate the “Apple tax” that so many developers are upset about. Epic Games might not win its lawsuit in the US, but this isn’t about a single lawsuit. Epic is weaponizing Fortnite as a means to highlight Apple’s App Store policies and rally hundreds of millions of players to demand change.
Epic Games demonstrates the “Apple tax.
”It’s a risky move that Epic might be forced to reverse, especially as mobile players could miss Fortnite’s next season. Epic has gambled that most people already have Fortnite installed on their phones and tablets, so it’s unlikely to immediately anger its community, which can now see how much cheaper V-Bucks could be. More importantly, it has put the App Store, Apple, and Google directly in the spotlight for a showdown that will involve lawsuits, regulators, and the fate of mobile app stores.
Epic doesn’t want Apple to pay its way out of a lawsuit or reach a special deal with the company. It wants regulators in Europe and the US to stand up and pay attention. Epic isn’t your typical Fortnite player that hides in a bush until they’re the last person standing, it’s trying to be the loud and colorful llama standing strong as the circle shrinks around Apple and Google.
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|From: Glenn Petersen||9/3/2020 5:28:04 PM|
|Justice Dept. Plans to File Antitrust Charges Against Google in Coming Weeks|
New York Times
September 3, 2020
WASHINGTON — The Justice Department plans to bring an antitrust case against Google as soon as this month, after Attorney General William P. Barr overruled career lawyers who said they needed more time to build a strong case against one of the world’s wealthiest, most formidable technology companies, according to five people briefed on internal department conversations.
Justice Department officials told lawyers involved in the antitrust inquiry into Alphabet, the parent company of Google and YouTube, to wrap up their work by the end of September, according to three of the people. Most of the 40-odd lawyers who had been working on the investigation opposed the deadline. Some said they would not sign the complaint, and several of them left the case this summer.
Some argued this summer in a memo that ran hundreds of pages that they could bring a strong case but needed more time, according to people who described the document. Disagreement persisted among the team over how broad the complaint should be and what Google could do to resolve the problems the government uncovered. The lawyers viewed the deadline as arbitrary.
While there were disagreements about tactics, career lawyers also expressed concerns that Mr. Barr wanted to announce the case in September to take credit for action against a powerful tech company under the Trump administration.
But Mr. Barr felt that the department had moved too slowly and that the deadline was not unreasonable, according to a senior Justice Department official.
A former telecom industry executive who argued an antitrust matter before the Supreme Court, Mr. Barr has shown a deep interest in the Google investigation. He has requested regular briefings on the department’s case, taking thick binders of information about it on trips and vacations and returning with ideas and notes.
When Mr. Barr imposed a deadline on the investigation, some lawyers feared that the move was in keeping with his willingness to override the recommendations of career lawyers in cases that are of keen interest to President Trump, who has accused Google of bias against him.
The Google case could also give Mr. Trump and Mr. Barr an election-season achievement on an issue that both Democrats and Republicans see as a major problem: the influence of the biggest tech companies over consumers and the possibility that their business practices have stifled new competitors and hobbled legacy industries like telecom and media.
A coalition of 50 states and territories support antitrust action against Google, a reflection of the broad bipartisan support that a Justice Department case might have. But state attorneys general conducting their own investigations into the company are split on how to move forward, with Democrats perceived by Republicans as slow-walking the work so that cases can be brought under a potential Biden administration, and Democrats accusing Republicans of rushing it out under Mr. Trump. That disagreement could limit the number of states that join a Justice Department lawsuit and imperil the bipartisan nature of the investigation.
Some lawyers in the department worry that Mr. Barr’s determination to bring a complaint this month could weaken their case and ultimately strengthen Google’s hand, according to interviews with 15 lawyers who worked on the case or were briefed on the department’s strategy. They asked not to be named for fear of retribution.
A Justice Department spokeswoman declined to comment on the continuing investigation. A Google spokesman said that the company would “continue to engage with ongoing investigations” and that its business practices enabled “increased choice and competition.”
When the Justice Department opened its inquiry into Alphabet in June 2019, career lawyers in the antitrust division were eager to take part. Some within the division described it as the case of the century, on par with the breakup of Standard Oil after the Gilded Age. It also offered a chance for the United States to catch up to European regulators who had been aggressive watchdogs of the technology sector.
Alphabet was an obvious antitrust target. Through YouTube, Google search, Google Maps and a suite of online advertising products, consumers interact with the company nearly every time they search for information, watch a video, hail a ride, order delivery in an app or see an ad online. Alphabet then improves its products based on the information it gleans from every user interaction, making its technology even more dominant.
For nearly a year, dozens of Justice Department lawyers and other staff members worked in two groups, each overseeing a separate line of inquiry: Google’s dominance in search and its control over many aspects of the ecosystem for online advertising.
Google controls about 90 percent of web searches globally, and rivals have complained that the company extended its dominance by making its search and browsing tools defaults on phones with its Android operating system. Google also captures about one-third of every dollar spent on online advertising, and its ad tools are used to supply and auction ads that appear across the internet.
The Justice Department amassed powerful evidence of anticompetitive practices, three people said.
But the lawyers also described internal politics that at times slowed down the department’s work or drove a wedge among members of the team.
Makan Delrahim, the head of the Justice Department’s antitrust division, had pushed the department to investigate Google but was recused from the case because he represented the company in a 2007 acquisition that helped it to dominate the online advertising market.
In an unusual move, Mr. Barr placed the investigation under Jeffrey A. Rosen, the deputy attorney general, whose office would not typically oversee an antitrust case. Mr. Barr and Mr. Delrahim also disagreed on how to approach the investigation, and Mr. Barr had told aides that the antitrust division had been asleep at the switch for decades, particularly in scrutinizing the technology industry.
Mr. Rosen does have a tech background: He was the lead counsel for Netscape Communications when it filed an antitrust complaint against Microsoft in 2002.
In October, Mr. Rosen hired Ryan Shores, a veteran antitrust lawyer, to lead the review and vowed to “vigorously seek to remedy any violations of law, if any are found.”
Mr. Barr also had a counselor from his own office, Lauren Willard, join the team as his liaison. She met with staff members and requested information about the investigation. She also issued directives and made proposals about next steps.
The case seemed to have two leaders who were not always in sync about who was in charge, and one of them sat in the office of the attorney general.
As debates arose over how best to move forward against Google — primarily over whether to file a complaint that included both the search and advertising elements, or to focus on one line of attack — lawyers wondered who would have the last word. Mr. Barr stepped in this spring to clarify that Mr. Shores was in charge. Ms. Willard still had a hand in Google, but she stepped back from the case to focus on other assignments.
State attorneys general also disagreed on whether to bring a narrow case that could be filed during Mr. Trump’s presidency or to take more time to file a broader complaint. Attorney General Phil Weiser of Colorado, a Democrat who worked in the Obama Justice Department, drove the effort to bring a broad lawsuit, three people with knowledge of his plans said. But Attorney General Ken Paxton of Texas, a Republican, was in the advanced stages of a case focused on Google’s advertising technology and felt that it could be brought quickly.
A spokesman for Mr. Weiser declined to comment. A spokeswoman for Mr. Paxton did not immediately respond to a request for comment.
When the Justice Department this summer shared a potential approach to the case that was focused on advertising technology, several state attorneys general viewed it as too narrow for them to support, said one person who was familiar with the presentation.
Google’s lawyers hope to seize on Mr. Trump’s politicization of the matter should the Justice Department sue the company. Republican lawmakers like Senator Ted Cruz of Texas and Representative Jim Jordan of Ohio, the top Republican on the House Judiciary Committee, have accused platforms like YouTube and Facebook of censoring conservative voices.
Data from the companies undermine their claims, showing that Republicans are among the most visible figures on their services. And few figures have as much reach on social media as Mr. Trump himself.
But the president had made the accusations personal. In 2018, he said that when searching for “Trump News,” Google’s search engine turned up only reports from news organizations that he said were biased against him.
“Google search results for ‘Trump News’ shows only the viewing/reporting of Fake News Media,” he said on Twitter. “In other words, they have it RIGGED, for me & others.” He also said Google had potentially violated the law.
Mr. Barr recently echoed the president’s criticism and said that antitrust laws could be used to keep companies from restricting the spread of conservative views.
Many career staff members in the antitrust division, including more than a dozen who were hired during the Trump administration, considered the evidence solid that Google’s search and advertising businesses violated antitrust law. But some told associates that Mr. Barr was forcing them to come up with “half-baked” cases so he could unveil a complaint by Sept. 30, according to three people with knowledge of the discussions.
Some lawyers who felt they needed more time laid out their concerns in the memo and left the case; about 20 lawyers remain on the team. Department lawyers said that Mr. Shores planned to slim down the team this summer. Some people also left because the coronavirus pandemic had made it hard for them to dedicate time to the case. A lawyer in the department’s civil division joined the remaining members of Mr. Shores’s team.
The department approached litigators from at least three outside law firms to take on a potential case, according to two people with knowledge of the talks. But they all declined, citing conflicts of interest and other logistical obstacles created by the pandemic.
David McCabe contributed reporting.
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