Daily Tech Snippet: Friday, July 24

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• Amazon Reports Unexpected Profit, and Stock Soars; Market Value Exceeds Wal-Mart's: The e-commerce company beloved by Wall Street for its fast-growing ways did something completely out of character in the second quarter: It made a profit. It was only $92 million, practically a rounding error for Google or Apple. But it confirmed all the hopes and expectations of analysts and investors, who immediately pushed Amazon shares up 17 percent in after-hours trading Thursday to $566. Amazon’s second-quarter profit amounted to 19 cents a share. A year ago, the company lost 27 cents a share. Analysts had been predicting another loss of 13 cents. Revenue was better than expected, too, up 20 percent to $23.2 billion. That was about $800 million more than forecast. One big contribution to the improved profit and revenue was Amazon Web Services, the cloud computing division whose numbers were broken out for the first time in the first quarter. A.W.S. is the undisputed leader in the sector, outdistancing both Microsoft and Google, but analysts had been wondering if price cuts would hamper growth. Apparently not. A.W.S. revenue rose 81 percent to $1.82 billion from a year ago, even better than it did last quarter. In the first quarter, A.W.S. revenue was up 49 percent. Operating income for the cloud division rose to $391 million from $77 million. No wonder analysts on a conference call with Amazon financial executives offered their congratulations. Amazon hired another 50,000 employees over the last year, increasing its head count by 38 percent. Many of those workers are in its network of more than 100 fulfillment centers. Amazon held a Prime Day sale last week that was a demonstration of Prime’s power — and also a few of its problems. Enough shoppers found fault with the selection to create a popular Twitter hashtag, #PrimeDayFail. Michael Pachter, managing director of equity research for Wedbush Securities, estimated Amazon took in $1.5 billion in revenue on Prime Day, versus $250 million for a typical day during the quarter. “That means that they can deliver $1.25 billion of upside by scheduling a flash sale,” he said. “There’s no reason that they can’t do this once per quarter,” although he noted that no such announcement had been made.

• Amazon’s Cloud Business Rose 81 Percent in Q2, Its Fastest Growing and Most Profitable Business: Amazon Web Services, the cloud computing unit of the Web retail giant, grew its revenue by 81 percent year on year in the second quarter. It grew faster and with higher profit margins than any other aspect of Amazon’s business. AWS, which offers leased computing services to businesses, posted revenue of $1.82 billion, up from $1 billion a year ago, as part of its second-quarter results. By comparison, retail sales in North America grew only 26 percent to $13.8 billion from $11 billion a year ago. The cloud computing business also posted operating income of $391 million — up an astonishing 407 percent from $77 million at this time last year — for an operating margin of 21 percent, making it Amazon’s most profitable business unit by far. The North American retail unit turned in an operating margin of only 5.1 percent. The AWS profit margin has also risen despite price competition from the likes of Google, Microsoft and IBM. Last quarter, the operating margin at AWS was closer to 17 percent. If it were broken out as a separate business — something that some investors may want but which Amazon has no intention of doing — AWS would be on track to reach about $7 billion and change in revenue this year.

• Apple's India test: how to gain volume and meet aspiration: For years, India has been a low priority for Apple as spending power is weaker than in China, where the company's iPhones swiftly became must-have devices after their 2007 launch. But Apple is now looking to build on a 93 percent increase in its iPhone sales in India in April-June, which for the first time outpaced growth in China, of 87 percent - albeit from a low base. Apple has just a 2 percent share of India's smartphone market, while South Korean rival Samsung Electronics accounts for around one third of volume sales with its range of Android phones. "Apple is consciously expanding its distribution in India and pushing its products aggressively. The marketing spend too is a part of that," said Jaideep Mehta, managing director for India and South Asia at tech research firm IDC. Executives at several electronics retail chains and Apple distributors said the Cupertino-based firm was chasing shelf space to make its gadgets more visible, and has more than doubled the number of distributors to five. Apple has also brought in a new senior executive to take charge solely of the Indian market, industry sources said, and has placed advertisements for a policy adviser to help it work with New Delhi's bureaucracy. "Apple's single-minded focus for India is on volume," said a senior executive at an electronics chain store, who declined to be named. "They have increased distributors and want to reach out to smaller cities." Taking to Indian TV screens for the first time, Apple plays up the aspirational appeal of its phones, showing a glamorous Indian bride using Facetime, Apple's video calling feature, to send coy flashes to her groom of a henna-ed hand or skirt hem before their wedding. In addition, Apple offers financing schemes where buyers of its latest iPhone 6 can pay in monthly instalments, and has launched Apple Music, a cloud-based music streaming service, for just 120 rupees ($1.88) a month in India - a fifth of the price in the United States. "The premium smartphone market will be close to 8 million units in 2015," said Neil Shah, analyst at Counterpoint. "Apple has a lot of room to grow and capture a significant share of that," he added, noting Apple sold just over a million iPhones in India in the year to April.

• Pandora Sales, Forecast Beat Estimates Amid Apple Pressure: The largest Internet radio service reported a 30 percent increase in revenue to $285.6 million, according to a statement Thursday. Pandora is trying to grab advertisers from terrestrial radio while it faces pressure from rivals Spotify Ltd. and Apple. Pandora said listener hours rose 5 percent in the period ended June 30, the day of Apple Music’s debut. This quarter, sales will be $310 million to $315 million, the company said, above analysts’ estimates of $309.1 million. Both Spotify and Apple market streaming-music services that allow users to tailor their choice of songs and create music libraries. Each also offers Web-based radio that competes with Pandora. They use the free products to attract consumers to their paid services. Pandora raised its forecast for full-year revenue to a range of $1.175 billion to $1.185 billion.

• Flipboard has confirmed that it has raised $50 million. Flipboard didn’t provide valuation for the round, though JP Morgan is participating, and the funding will be used to build out the product and team, the company said. According to the regulatory documents, the valuation of the most-recent round could range from $800 million to $1.32 billion. The raise comes at a time when rumors cropped up that Twitter might buy Flipboard — though, to be sure, it’s not exactly clear how far those talks progressed — and had held discussions with a few other companies like Google and Yahoo. The company said its user base had jumped 75% in the past six months or so to 72 million monthly active users, with the vast majority of that coming from mobile devices. The company said it sees anywhere from 150,000 to 200,000 activations every day around the world. Still, the company will face stiff competition from new entries like Apple News — and will have to grapple whether the company can continue to grow in the face of that competition.