Apple, Twitter and Facebook under scrutiny

April 26th, 2016 by Mark Daly in Industry News No Comments »

Sun Microsystems was a Silicon Valley giant.

Founded in the 80s, the company sold hardware and software to thousands of companies, and during the boom it was bringing in $5bn (£3.4bn) in revenue each quarter. But then the bubble burst, and the firm went into a catastrophic downward spiral.

Its share price plummeted and, in 2010, the scraps of Sun Microsystems were bought up by Oracle — and that was that.

Six years on, I’m driving towards San Jose, past the Menlo Park headquarters of Facebook. On the side of the road, there’s a big “Like” billboard, and you’ll often find a bevvy of techy tourists waiting to have their picture taken in front of it – like some kind of social media Taj Mahal.

But most striking about the Facebook sign is what’s on the reverse side: a logo for Sun Microsystems, the previous tenants at this location.

It looks dirty and worn out, but it’s very deliberate.  Facebook boss Mark Zuckerberg apparently demanded the sign stay there so when Facebook employees leave work each day they get a glimpse of what can happen to once-mighty companies that don’t keep three steps ahead of the pack.

My point is, that image of that tatty sign is a reminder of what Silicon Valley is all about: it’s not just about what you’re doing now, but what you’re doing next.

That’s why financial results — and the analysis that comes with them — make such interesting reading.

This week, three of the most interesting firms: Apple, Twitter and Facebook, will report their quarterly results. Three of the most talked-about companies here, not least because all three are at a fascinating crossroads in their respective futures.

Apple and its declining superstar

For Apple (results due Tuesday), there’s ever-lingering doubts over the iPhone. The last time the company put out its financial results, it warned that we may see the first-ever decline in iPhone sales in 2016.

On Tuesday, we’ll see if that prediction was true and, if so, how bad the decline was.

Apple, Twitter and Facebook under scrutiny ilicomm Technology Solutions
Image copyright Getty Images
Image caption The Apple Watch hasn’t been the killer new product some were predicting

Apple chief executive Tim Cook will offer his ever-steady hand, pointing to the fact that sales will pick up with the next major iPhone due later this year, and also the crowd-pleasing iPhone SE, a smaller, budget model shown off for the first time last month.

China has been Apple’s major growth area of late, but Mr Cook did recently warn that foreign exchange issues had hurt the company’s revenues in the country. Furthermore, there are worries that Chinese regulators are coming down hard on the company.

Apple’s iBooks and iMovies services were recently shut down in the country, just six months after they were launched. China is no stranger to telling Silicon Valley giants to clear off — just ask Facebook, which is banned in the country.

Oh, and maybe, just maybe, Apple might tell us how the Apple Watch is performing.

Twitter and its (forever?) lost users

Also on Tuesday, Twitter reports results. When co-founder Jack Dorsey came back to lead the company last year, he put it through the wash — laying off employees, changing the boardroom, dropping some projects and prioritising others. Turns out Twitter shrunk in the wash – in its latest financial results, Twitter revealed it lost users for the first time in its history.

Was that a one-off? A blip? We’ll find out if that decline has moved into a second quarter.

Apple, Twitter and Facebook under scrutiny ilicomm Technology Solutions
Image copyright Getty Images
Image caption In its last quarter, Twitter lost users. Will it become a trend?

We’ll also perhaps learn more about new board members at the company. We were told last month that Britain’s own Martha Lane Fox had joined the firm —  the founder is known for pioneering efforts for wider social inclusion in technology, and her appointment at Twitter is the company’s attempt to solve its crippling issues in that regard.

Mr Dorsey said more board appointments were coming soon, designed to bring “more diversity” to his company.

If this assessment seems a little gloomy for Twitter, perhaps solace can be found in the company’s recent deal to show Sunday football (the egg-shaped kind) on the service. It’s not expected to be a big earner — the TV networks will still get the bulk of the ad money — but it’ll certainly be a much-need boost of bums-on-seats.

Still, there’s increasing worry in the tech community that Twitter’s efforts are, understandably, focused heavily on fixing the present rather than adequately preparing for the future.

Facebook’s risky shots at glory

The same can’t be said about Facebook. At its developers’ conference earlier this month, Mark Zuckerberg outlined some of the big ideas he has in store: virtual reality; live video; intelligent chat bots; massive floaty gliders in the air providing internet access.

Not all of them will come off — the chat bots, currently, are pretty naff — but as hockey great Wayne Gretzky famously said, you miss 100% of the shots you don’t take.

Apple, Twitter and Facebook under scrutiny ilicomm Technology Solutions
Image caption Just Mark Zuckerberg waving to a drone that’s broadcasting live on Facebook

Wednesday is results day for Facebook, and general consensus among analyst firms — the types that tell people with money whether or not to buy stock in a company — is that Facebook is set to report good, steady growth.

So far, so predictable. But what will be interesting is whether Facebook tells us how its virtual reality headset, the Oculus Rift, has performed so far.

Oculus’ creator, Palmer Luckey, said in January pre-orders were better than expected — but when you’re looking at $1,500 to buy a headset and a PC good enough to run it, don’t expect mainstream success for some time to come.

Mark Zuckerberg said the Rift must eventually sell 50-100 million units in order to be considered a success. We may get a glimpse of progress on Wednesday if the company isolates Rift sales from the rest of its income areas.

Elastic rope

Still, even with exciting future investments, Facebook is nothing without the advertising money generated through its core social network.

On Wednesday we can expect even higher advertising revenues than in the last quarter. But the lingering doubt for Facebook lies in recent reports that while people are sharetastically spreading viral videos and news articles into their news feeds, they’re sharing less personal information than before.

That trend needs to be addressed if Facebook wants to remain a social network, rather than a stream of ads and news. (Too little, too late, you might say.)

So, between the lot of them, three different scenarios to overcome.

At Apple, minor nerves as it looks to negotiate wobbles with the iPhone and its presence in China.

At Twitter, a team clinging to hopes of bringing in some desperately-needed new users.

And at Facebook, a “10-year plan” to remain relevant and not be the next Sun Microsystems. Facebook’s the name on the billboard now, but that new sign isn’t exactly permanent, attached as it is with elasticated rope. You could take it down in an hour!

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