Friday October 24, 2014

• Amazon's very weak earnings (rev $20.8B, 20% Y/Y, net loss $544M) and slowing growth outlook (Q4 at 7% to 18% Y/Y) triggered a sell-off; also the company took out a $2B line of credit to meet working capital requirements recently: Amazon reported lower than expected revenue in its third quarter, and a larger than expected loss. Analysts expected the company to lose $0.74 on revenue of $20.84 billion. Instead, Amazon lost $0.95 per share on revenue of $20.58 billion. Shares were down 10% after-hours. Investors were particularly spooked that forecasts for Q4 were weak too - “I think that the potential for a loss in the fourth quarter is what is freaking people out,” one analyst said. Last month the company revealed it had taken out a $2 billion line of credit with Bank of America for “working capital, capital expenditures, acquisitions and other corporate purposes.” Revenue growth - long Amazon's stated objective - could slow sharply next quarter.

• Microsoft's Q3 earnings (rev $23B, 25% Y/Y, net income $4.5B) were everything that Amazon's were not: Microsoft Corp (MSFT.O) reported higher-than-expected quarterly revenue, helped by stronger sales of its phones, Surface tablets and cloud-computing products for companies, while keeping its profit margins largely intact. The results on Thursday allayed fears of investors in recent days that the industry shift toward lower-margin cloud services was proving hard for established technology leaders to master. Microsoft shares, which have climbed 33 percent over the past year, rose another 3 percent in after-hours trading to $46.36. the company said its net income was $4.54 billion, or 54 cents a share, compared with $5.24 billion, or 62 cents a share, a year ago. Revenue was $23.20 billion, up from $18.53 billion

• Tencent seeks to marry messaging and eCommerce and out-flank Alibaba - invests in a mobile shopping portal that integrates with WeChat: Koudai Gouwu, a Chinese mobile shopping portal, today announced a huge US$350 million series C funding round led by Tencent and Tiger Fund, followed by H Capital, Vy Capital, Falcon Edge, and DST, according to the company’s official Weibo account (h/t TechNode). Of the total amount, Tencent pitched in US$145 million for a 10 percent stake in the company. On the surface, Koudai is a typical Chinese marketplace with a nice looking mobile website and app with an emphasis on fashion products, but it also has a few tricks up its sleeve. The biggest is that users can browse and make purchases from shops within WeChat. Small vendors can use the site to set up their own shops and market them through Koudai’s WeChat channels. That’s a huge opportunity for merchants looking to capitalize on WeChat’s 438 million monthly active users. Rumors on Chinese media suggested the three-year-old startup received even more traffic than Taobao on mobile, and Alibaba founder Jack Ma himself approached Koudai’s would-be investors to discourage them. Koudai could be a powerful ally for Tencent, which makes WeChat, in its face off against Alibaba’s Taobao and Tmall marketplaces.