Micron shows how the cloud is saving chip makers


Memory-chip maker Micron Technology Inc. was saved by a boom in data centers, adding to chip makers’ growth as the pandemic forces more companies to expand their cloud computing capabilities.

On Monday, Micron
MU,
+1.35%

reported better-than-expected fiscal second-quarter earnings and had a stronger outlook for the next quarter, despite some issues with the global supply chain due to the COVID-19 pandemic. Micron’s shares jumped nearly 6% in after-hours trading. At Monday’s close, Micron was trading at $49.15, down 8.62% for the year but a huge recovery from its plunge in March, when it hit a low of $31.13 in the early days of the pandemic.

“We continue to see healthy demand trend in cloud in the second half of the year,” Micron Chief Executive Sanjay Mehrotra told analysts on a conference call. “Cloud is still actually in early innings, and long-term trends for cloud are strong.” In the second quarter, the company said that the work-from-home economy, e-commerce and videogame streaming all drove a strong surge in demand for more cloud-computing capabilities.

Micron’s comments echo those that other chip giants, such as Intel Corp.
INTC,
+1.33%

and Nvidia Corp.
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+0.49%

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+0.49%
,
made last quarter. On Monday, Xilinx Inc.
XLNX,
+1.03%

joined the crowd when it updated its guidance for its fiscal first quarter, noting that strong performance in wireless and data center were offsetting weakness in consumer segments.

In the second half of the year, Micron said that it expects demand for consumer technology products such as PCs and smartphones to improve. That’s in part due to the ongoing rollout of 5G networks, which will drive demand of new smartphones that have more dynamic random access memory (DRAM) chips, compared to 4G-network phones. The company said that average selling prices of both DRAM chips and NAND flash memory were up sequentially from the previous quarter.

One issue hovering over the company, and indeed most chip makers, is the growing rise in inventories, both by Micron and its customers, especially in the smartphone market. When asked by an analyst about the growing inventories, Mehrotra said its customers are trying to prepare for when consumer demand returns.

“Customers want to be prepared to supply the smartphone demand” when it returns, he said. “So, overall, you know, it’s a mixed picture with respect to the inventory on the customer front. Cloud inventories are in decent shape,” while mobile inventories are “somewhat in anticipation of demand.”

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+0.49%

The chip industry has been amazingly resilient during the coronavirus pandemic, and most of the demand is due to data centers and the demand for more cloud computing. If the PC and smartphone markets return to growth, there could be even more upside for chip makers such as Micron. But for now, the sure thing is centered around the data center.



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Tech conferences are going virtual, and it feels like Netflix content on demand


The changing face of major tech conferences came in the form of a live-streamed speech on my computer screen Tuesday morning.

In it, Microsoft Corp.
MSFT,
-1.20%

Chief Executive Satya Nadella laid out his vision for “empowering every developer.” His 20-minute speech was followed by a series of live and prerecorded tutorials on coding, cloud computing, and other geeky topics from TV-like studios on the Microsoft campus, buttressed by slick graphics and pretaped videos, all day and night. And all of it was free, with easy access to 509 sessions and documentation. The two-day conference had the look and feel of content-on-demand a la Netflix Inc.
NFLX,
-2.55%

A week earlier, Nvidia Corp.
NVDA,
-2.17%

Chief Executive Jensen Huang delivered a two-hour keynote at GTC Digital in nine 12-minute slices, based on topics ranging from autonomous vehicles to artificial intelligence. The presentation, taped in Huang’s kitchen, attracted 4 million views. This year, 57,000 developers signed up to attend; last year, 10,000 physically attended the conference in San Jose, Calif.

Such is the new world of tech conferences in the age of COVID-19. They’ve gone all-digital, like Build and GTC Digital, and may never be the same. Absent a vaccine, the days of thousands of people herded into hotel ballrooms and convention centers like cattle, sharing cabs and eating in cramped quarters, are gone.

Far from crippling the tech industry, however, virtual shows could lead to democratization of what had once been an exclusive, pricey privilege for tech movers and shakers. In the new climate, consumers have free access to valuable technical content whenever they wish to view it.

“This will definitely change the approach of tech conferences. Virtually, you can identify attendees online and track what they see,” Paddy Cosgrave, chief executive of the company that runs the Web Summit and Collision conferences, told MarketWatch in a phone interview Monday. The show, originally planned June 22-25 in Toronto, will go on as an all-digital event those days.

“If the show is pure content and not networking, like an F8 or Build, you can upsell to them virtually,” he said. “F8, AWS, and Build are like infomercials, selling to an existing customer base.”

“Without question it was a better experience: free, no red-eye flight, no hotel room charges, and better access to the Microsoft team,” Laron Walker, CEO of Mantisedu Inc., an Atlanta-based education hardware partner of Microsoft, told MarketWatch in a phone interview. “Last year, I paid several thousand dollars to attend, and if I was late for a session, I couldn’t rewind it. This year, I could.”

Walker, 41, said he was able to view sessions at any time, pause them to take notes, and then pass them on to co-workers. He was also able to connect with Build speakers via LinkedIn and email because he had more information about them via their presentations. “This made me look at tech conferences in a whole new light,” he said.

Developers conferences are as much an annual ritual in the tech industry as Apple Inc.
AAPL,
-0.74%

product launches and gargantuan shows like CES and Mobile World Congress. All told, they set the narrative for developers and, eventually, consumers over the next year or two.

May is usually the epicenter of such gatherings. Before COVID-19, executives, analysts, business partners, and the press had scheduled their travel schedules to attend Microsoft’s Build (May 19-21, in Seattle), Google parent Alphabet Inc.’s
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-0.17%

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-0.27%

I/O summit (May 12-14, Mountain View, Calif.), and Facebook Inc.’s
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+0.61%

F8 (May 5-6, in San Jose).

Two of those shows were dropped while a third will be vastly restructured. For example:

Apple: “We are delivering WWDC 2020 this June in an innovative way to millions of developers around the world, bringing the entire developer community together with a new experience,” Phil Schiller, Apple’s senior vice president of Worldwide Marketing, said in a statement May 5. “We look forward to sharing more details about WWDC20 with everyone as we get closer to this exciting event” on June 22. The event is free for all developers.

Facebook: The company, which has vowed not to host events of more than 50 people until June 2021, is “still working through what F8 and more broadly what FB’s events/conference approach will be beyond June 2021,” a company spokesperson told MarketWatch.

Google: Google canceled I/O altogether and declined to comment on the show next year. The show will go on, however, for Google Cloud Next ‘20, with more than 200 sessions over nine weeks, from July 14 through Sept. 8, a Google Cloud spokesperson told MarketWatch.

Amazon: AWS Insights Online Conference is offering a free half-day “educational immersion” tutorial on media tech capabilities on May 28.

The evolution of developer conferences was inevitable in an era of lightning-fast streaming services, content on demand, and videoconferencing. A developer in say, Spain, can binge-watch cloud-computing solutions on one channel while another in Brazil views an archived keynote speech at roughly the same time. If it sounds suspiciously like a viewing experience on Netflix or Walt Disney Co.’s
DIS,
-1.74%

Disney+, that is the goal, she and others say.

Microsoft was already in the process of “re-imaging” how to connect more with developers to improve engagement, accessibility, resources, and content before COVID-19 — which accelerated its plan, Charlotte Yarkoni, corporate vice president of cloud and AI at Microsoft, told MarketWatch in a phone interview.

“People don’t like watching something that requires you to sit for four hours; they prefer content when they choose to watch regardless of time zones,” said Yarkoni, who called first-day demand and interest of Build “unprecedented.” She said interest in the weeks leading up to the two-day conference signaled that Build would experience a bump. Traffic for Microsoft Learn, a learning-platform for technical content usually used by developers, was up 272% in April, year-over-year, she said. What is more, Microsoft now has more than 72 million monthly active users across its technical documentation and learning sites.

Perhaps, another tech executive suggests, the preponderance of consumers using Zoom Video Communications Inc.
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-1.96%

has conditioned them to digest technical information online.

“Business-to-business conferences like ours are dependent on people meeting in-person,” Okta Inc.
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+0.02%

CEO Todd McKinnon told MarketWatch in a phone interview. But his perception changed after this year’s edition of Okta Live, an all-digital show in early April, drew record attendance. He’s now considering a permanent shift to a hybrid model of both in-person and digital attendees next year and beyond.

“We had tons of leads and off-the-charts engagement with an all-digital format,” McKinnon said after 20,000 attended, compared with 6,000 a year ago.

Nutanix Inc.’s
NTNX,
+2.38%

Global .NEXT Digital Experience was to take place June 30-July 2 in Chicago. Now, it’s scheduled to be online in September.

“COVID-19 has forced Nutanix to think outside the box,” Nutanix Inc. Chief Marketing Officer Ben Gibson told MarketWatch in an email. “Consumers can expect the same great content from our traditional in-person events but on a schedule that best suits them — from the comfort of their home office.”

Before we write off the concept of the classic tech conference — even with the best of intentions and a treasure trove of content, there is no better way to network than in person, Collision’s Cosgrave points out. “Bigger conferences for meant for networking — dinners, cocktails, late-night meetings,” he said. “The flurry of networking is the utility of conferences. Speakers and panels are an excuse to go.”

“At the end of the day, we hope to be back in person in Toronto next year,” he said.



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Zoom shares tumble despite solid results


Zoom Video Communications Inc. shares initially tumbled as much as 10% in after-hours trading Wednesday after it reported better-than-expected results and guidance that did not meet lofty expectations. The stock has since rebounded to a 4% dip.

Thus may end the teleconferencing company’s

ZM, -0.57%

 recent spectacular stock run as one of the few tech companies to benefit from the coronavirus fears.

Zoom reported net income of $15.3 million, or 5 cents a share, in the fourth quarter, compared with net income of $1.2 million, or 1 cent a share, in the year-ago fourth quarter.

Revenue soared 78% to $188.3 million from $105.8 million a year ago. Total revenue was $622.7 million, up 88% year-over-year.

Analysts surveyed by FactSet had expected a loss of 1 cent a share on sales of $176.5 million.

Zoom offered first-quarter revenue guidance of between $199 million and $201 million, exceeding FactSet’s projection of $185.6 million. For fiscal 2021, Zoom expects between $905 million and $915 million, topping the $869.5 million forecast by FactSet.

If there has been a tech stock immune to coronavirus, it’s been Zoom. In fact, it has thrived as more people are flock to its remote-work tools like videoconferencing as the virus continues to spread.

“In the last 30 days alone, average daily downloads are up 90% versus the prior 30-day period, with greater user engagement as evidenced by a 17% increase in user session per day and a 3% increase in average session length,” Bernstein analyst Zane Chrane wrote in a note to clients last week. Zoom has already added more new active users this year than it did in 2019, he added.

See also: Zoom Video is seeing a surge in downloads amid coronavirus panic, analyst says

Shares of Zoom, which went public on April 18, 2019, are up 89% since then. The broader S&P 500 index

SPX, +4.22%

  is up 12.9% in the past year.



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Hey, Microsoft and Facebook — it’s time to do what Google just did


Now that Alphabet Inc. has finally broken out revenue associated with some of its important businesses, other tech giants should follow suit.

As part of Alphabet’s

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GOOGL, +3.48%

 first earnings with Sundar Pichai as its new chief executive, the search and advertising giant broke out some of the revenue for its popular YouTube internet channel and enterprise-focused Google Cloud segments on Monday. It was not a complete surprise — this column noted after Pichai was promoted that the change should happen — but it is a welcome change that should have come years ago.

Full earnings coverage: Alphabet stock declines on revenue miss

The YouTube details are not complete. Alphabet said that for 2019, YouTube’s ad revenue totalled $15.1 billion, but it did not disclose how much of that went to pay content providers, beyond saying that is pays out a “majority of revenues to our creators, reflected in our content acquisition costs.” In addition, YouTube non-advertising revenue, mostly subscription fees for YouTube TV and other premium services, are still bundled into Alphabet’s “other” revenue segment, the company said.

Even with those slight quibbles, it is still beneficial to investors to finally get this information, which analysts (and MarketWatch) have been demanding for years.

“Thank you so much for the enhanced disclosure,” Goldman Sachs analyst Heather Bellini said on the company’s conference call. “I think this is the best Google call or Alphabet call I’ve been on since I’ve covered the company, so thank you again, you’ve given us a lot of stuff here.”

Now, it is time for other tech giants to find some free praise by finally offering needed financial disclosure. The two that should feel the most heat are rivals of YouTube and Google Cloud, respectively:   Facebook Inc.

FB, +1.13%

and Microsoft Corp.

MSFT, +2.44%

Microsoft does not disclose revenue from its Azure cloud-computing business, which is believed to be more popular than Google Cloud but still trailing Amazon.com Inc.’s

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 Amazon Web Services. Instead, Microsoft bundles revenue from Azure with server sales and some other offerings in a segment called “Intelligent Cloud,” which grew 27% to $11.9 billion in the last quarter. The only tidbit it typically releases about Azure is percentage growth, including noting that Azure grew by 64% in the most recent quarter.

While that growth looks impressive, it is down from much larger percentages in previous years, and still gives no information about the actual size of its business. As Amazon has learned of late with AWS, investors tend to get worried when growth percentages decline — Amazon Chief Financial Officer Brian Olsavsky has been telling analysts and investors on recent earnings calls to look at gross dollar gains instead of percentage, which AWS can offer since it actually provides revenue and operating income for its cloud business. Microsoft should do the same now that its two biggest cloud-computing rivals are reporting results.

Another candidate for more disclosure is Facebook, which should by now be disclosing revenue for its slightly hipper, possibly faster-growing Instagram business, and eventually its WhatsApp business, if messaging ever starts to generate real revenue for Facebook. But Facebook seems to be moving further away from individual breakouts as it ages: It has begun bundling all of its services into one combined “family” metric for daily and monthly average users, a number that tells investors nothing about the use cases, revenue or profit at its different services.

From 2018: The YouTube and Instagram secret Alphabet and Facebook don’t want you to know.

Both Google and Facebook are seeing slowing revenue growth in internet advertising. Last week, Facebook reported that revenue grew 25%, its slowest quarter in the past two years, and many on Wall Street began to worry more about its revenue deceleration. If Facebook can show that its brilliant acquisitions, WhatsApp and Instagram, are growing faster than their older, core businesses, it should help its case with investors as they age.

There are plenty of other examples of tech segments that deserve to be reported. Just last week, this column pointed out that Advanced Micro Devices Inc.

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 needs to begin breaking out its revenue for chips sold in the data-center market, as rivals Intel Corp.

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 and Nvidia Corp.

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 both already do.

The problem is that not all have been properly pressured to do so. In Alphabet’s case, the Securities and Exchange Commission had sought comment from the company on why it did not break out some segments, and its reasoning — that co-founder and previous CEO Larry Page did not see all its segment results, but that Google CEO Pichai did — came back to haunt it when Pichai was promoted.

The full story: Why Google finally disclosed YouTube revenue

The SEC needs to apply similar pressure on other tech companies, or those companies need to face reality and begin breaking out larger businesses, even if it is difficult to give a completely clean view of a segment because of revenue-sharing elements. It’s simply not conceivable that Mark Zuckerberg, Satya Nadella, and Lisa Su — the CEOs of Facebook, Microsoft and AMD, respectively — are not seeing the numbers for their growing business segments. They should start sharing them with investors, just as Google has and as the rules state.

Indeed, in some cases, such as Instagram, it may not be possible to give an entirely clean view of one segment, because there may be revenue-sharing elements with other businesses. But the move by Alphabet was an important one, and other tech companies should follow suit.



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Amazon set to become fourth U.S. tech company worth $1 trillion


Amazon.com Inc. is set to become tech’s newest trillion-dollar company, joining the four-comma club less than three weeks after Alphabet Inc. achieved the same lofty status.

Shares of Amazon were last up 8.2% in trading Friday, giving it a market value of just over $1 trillion. If the stock closes at or above this level, it will officially be worth that much. Amazon briefly touched $1 trillion in intraday trading on Sept. 4, 2018, but closed that day shy of the figure. It also was above $1 trillion last July intraday, but also fell short by the close.

The e-commerce powerhouse

AMZN, +7.38%

 obliterated its underwhelming forecast and posted $3 billion in profit with a strong fourth-quarter report, propelling its stock 12% in extended trading Thursday to a record $2,092 a share and sending it over $1 trillion.

See also: Amazon earnings return to growth in holiday season, sending stock soaring toward $1 trillion valuation

Also read: Amazon one-day shipping is a hit with shoppers — and it cost less than the expected $1.5 billion.

Amazon has reached the financial stratosphere in large part because of its booming cloud business. It said Amazon Web Services was responsible for $2.6 billion in operating profit, 67% of Amazon’s total, on revenue of $9.95 billion. Amazon expects its current first-quarter sales to be between $69 billion and $73 billion, year-over-year growth of 16% to 22%.

“There was little to complain about in this quarter, supporting our view of AMZN as our top pick in Internet,” Jefferies analyst Brent Thill said in a note Jan. 30. He maintains a Buy rating with a price target of $2,300.

Apple Inc.

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 was the inaugural member of the exclusive $1 trillion club in August, followed by Microsoft Corp.

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 last year. Alphabet

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 hit $1 trillion last month.

See also: Google becomes third U.S. tech company worth $1 trillion

The rising fortunes of some of tech’s biggest names come as the Justice Department and Federal Trade Commission investigate the business practices and dominant market positions of Amazon, Apple, Alphabet and Facebook Inc.

FB, -3.64%

 Indeed, Wedbush Securities analyst Daniel Ives on Thursday predicted so-called FAANG companies will lead the industry’s stocks up another 25% in 2020, and longtime Apple analyst Gene Munster believes Apple can reach $2 trillion in 2020.



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