Weekly Digest
Weekly Digest Issue No. 476
30-07-2009
by Deirdre McArdle
Twitter revamp focuses on search | Japanese pair see profits slide
Microsoft and Yahoo get it on
After much to-ing and fro-ing, Yahoo and Microsoft have, finally, jumped into bed together, signing a 10-year internet search partnership that has its eyes set firmly on Google. Under the terms of the deal, Microsoft's Bing search engine will power searches on Yahoo's family of websites, with Yahoo licensing its own search technology to Microsoft to integrate if it wants to. Yahoo will then handle sales of search ads for both companies, using Microsoft's search advertising technology. The deal, which is considered quite the coup for Microsoft and follows its failed bid to buy Yahoo outright last year, gives the software giant access to Yahoo's considerable search traffic and a good shot at becoming a strong second to Google in the search market. As for Yahoo, Carol Bartz said a few months ago that the search firm would only do a deal with Microsoft if "boatloads" of money were involved; this deal could well deliver that. It will act as a revenue-sharing agreement, with Microsoft paying Yahoo 88 percent of the search revenue generated from its sites during the first five years of the agreement. Yahoo estimates that the link-up will boost its annual operating income by USD500 million and will give it capital expenditure savings of around USD200 million. As for whether the partnership can really challenge Google, general consensus is that with a 70 percent share of the market for US web searches, Google isn't going to be caught. Combined, Microsoft and Yahoo will have just under 30 percent of the search market -- quite a long way behind. Still, as Bartz said in a joint press conference on Wednesday, the deal creates a "health competitor" to Google.
Results highlight tough conditions
A number of high-profile tech sector firms released quarterly results this week. The figures, all from firms in different sectors, highlighted the ups and downs of their particular markets. Software giant Microsoft saw profit for its fiscal fourth quarter drop 29 percent year-on-year to USD3.05 billion, or USD0.34 per share, compared to USD4.3 billion, or USD0.46 per share in 2008. Revenue fell by 17 percent from the year-earlier period to USD13.1 billion. While sales declined in all areas of Microsoft's business, the unit housing its flagship Windows operating system was hit particularly hard. The quarter capped the software giant's first full year of declining sales since the firm went public over 20 years ago. Following publication of its results, Microsoft's share price fell by 8 percent on Wall Street last Friday. Another leader in its sector, EMC, posted an 11 percent fall-off in second-quarter revenue to USD3.26 billion. Net income plummeted 43 percent year-on-year to USD205.2 million, or USD0.10 per diluted share, from USD360.1 million, or USD0.17 per diluted share. Excluding employee stock compensation and one-time items though, earnings per share stood at USD0.18, higher than analysts' predictions of USD0.16 per share. EMC's results were seen in a more positive light than Microsoft's, with industry analysts pleasantly surprised by the storage goliath's full-year predictions of USD13.8 billion in sales, which exceeds Wall Street estimates of USD13.5 billion. Meanwhile, e-commerce star Amazon recorded solid second quarter revenue, which jumped 14 percent year-on-year to USD4.65 billion. Profit for the quarter dropped by 10 percent to USD42 million, or USD0.32 per diluted share; profit was hit by a USD51 million one-off legal settlement to Toys R Us. The e-tailer said it expects third-quarter sales to increase by between 11 percent and 23 percent.
Vodafone sees customer figures dip
Mobile operator Vodafone Ireland released its key quarterly figures this week, which featured a notable decline in customer numbers. The operator had 2.13 million mobile customers by the end of June, a drop-off of 46,000 from the same time last year. Vodafone's mobile customers are also spending less each month: average mobile blended monthly ARPU decreased by 7.4 percent to EUR38.60 since the same period in 2008. The figure reflects a general trend highlighted in a ComReg survey, which indicated that the average monthly mobile spend is continuing to fall. At the end of June the figure stood at EUR40.68, down from EUR45.64 in the year-ago quarter, according to ComReg. The regulator puts the decline in ARPU down to increased competition, but also a general trend of cutting back by consumers in the current economic climate. Meanwhile, Vodafone's fixed line and DSL subscriber base stood at 84,791 at the end of the quarter, bringing Vodafone's overall customer base to 2.21 million. Following its customer-transfer deal with BT Ireland last week, the operator's fixed line and DSL base is going to be vastly enhanced with 84,000 residential and 3,000 small business customers moving over to Vodafone, making it the second largest fixed-line player in the market as well as the largest mobile operator in the country.
Twitter revamp focuses on search
Last week we saw Yahoo unveil its redesigned homepage. This week the hugely popular micro-blogging site Twitter has released its revamped homepage, which sharpens the site's focus on real-time search. The key feature of the new homepage is a large search box under the suggestion: "See what people are saying about…" Users can type a word or phrase into the box and see the latest relevant tweets. Underneath, there is a list of the most popular topics being discussed by the minute, by the day and by the week. The new homepage shows just how far Twitter has come from its launch as a social site styled at helping people keep in touch with family and friends, to a powerful tool that lets users see what topics are important to people around the world. Certainly the site's own descriptions of its service differ greatly. The old homepage called Twitter "a service for friends, family and co-workers to communicate", while the new homepage's tagline "share and discover what's happening right now, anywhere in the world" positions the site as a powerful real-time "discovery engine", according to co-founder Biz Stone. In other news of Twitter, one user discovered the might of Twitter when her landlord (Horizon Management Group) filed a lawsuit against her for allegedly defaming the company with a tweet. The accused, Amanda Bonnen, wrote a tweet that said "Who said sleeping in a mouldy apartment was bad for you? Horizon really thinks it's okay." Horizon has claimed the tweet was "published throughout the world" and has "severely damaged" its good name. The company's lawsuit is looking for damages of USD50,000. Reaction to the lawsuit has been by and large negative with some commentators suggesting that the lawsuit itself lost Horizon more than USD50,000 through negative publicity. Bonnen's Twitter profile has since been deleted; she reportedly had 20 followers at the time of her post.
Japanese pair see profits slide
Nintendo and Sony posted their quarterly results on Wednesday, with both Japanese giants recording steep drops in profit. Nintendo saw its first fiscal quarter profit plummet 60 percent year-on-year to JPY42.3 billion (USD445.4 million) from JPY107.3 billion. The figure was short of analysts' expectations of JPY47.5 billion. The drop in profit came as sales of the firm's flagship gaming console, the Wii, declined for the first time since the console launched in 2006. Nintendo said it sold 2.23 million Wii consoles in the period, less than half the 5.17 million it sold in the same period a year earlier. Sales of the Wii have been hit by the continuing downturn in consumer demand, while the firm has also come under increasing pressure to release new products following Microsoft and Sony's announcements earlier in the year that they were developing motion sensor features to rival the Wii. Nintendo's revenue also declined during the period to JPY253.5 billion, a 40 percent drop on the year-ago quarter and significantly less than the JPY320 billion expected by analysts. Despite the poor quarterly figures Nintendo stuck to its estimate that net profit for the full fiscal year will be JPY300 billion, up 7.5 percent from JPY279.1 billion the year earlier. Meanwhile, Sony recorded a net loss of JPY37.1 billion (USD390.6 million) for its fiscal quarter, compared with a net profit of JPY35 billion in the year-ago period. The firm cited falling consumer spending, as well as a strong yen for its continuing losses. Revenue for the period was down 19 percent from a year earlier to JPY1.6 trillion. Looking ahead, Sony said it expects a net loss of JPY120 billion for the fiscal year through March 2010, compared with a net loss of JPY98.9 billion in the previous year. The firm is continuing with a cost-cutting scheme that will see it shedding 16,000 jobs, or 10 percent of its workforce, globally.
Caped Koala Studios has built a virtual world for kids, combining education and social networking 