Daily Tech Snippet: Tuesday, July 21

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• Ahead of Earnings, Amazon Surges on Confidence Over Cloud, Spending Discipline: Amazon.com’s shares reached another record, three days before the company’s earnings report, as investors expected upbeat results from the fast-growing cloud-computing business, a boost in sales from last week’s Prime Day promotion and signs that the company is controlling spending. The stock set records three days last week and is up 12 percent this month. The Seattle-based online retailer reports earnings Thursday. Analysts on average project earnings of $364 million on sales of $22.4 billion, according to data compiled by Bloomberg. The shares’ advance shows renewed faith that Amazon can boost profit margins despite Chief Executive Officer Jeff Bezos’s history of sacrificing short-term earnings to invest in growth. A year ago, the company’s shares tumbled almost 10 percent the day after reporting a $126 million quarterly loss, hurt by a surge in spending on such items as its new Fire smartphone. This year, the company has invested in online entertainment and same-day delivery in big cities, increasing the allure of a $99 annual membership in Amazon Prime. Investors see such investments -- rather than on hardware -- as a sign of greater discipline. Amazon this year also began reporting results for its Amazon Web Services cloud-computing division, revealing a fast-growing and profitable enterprise to complement the core retailing business. The inaugural Prime Day promotion helped boost memberships, which will increase revenue through the year, said Michael Pachter, an analyst at Wedbush Securities. Amazon Prime members spend significantly more than nonsubscribers. He estimated that Prime Day added about $500 million in new third-quarter sales. Pachter issued a report on Sunday encouraging investors to buy Amazon shares in advance of earnings, in part citing the company’s cloud-computing operation. “Amazon Web Services has a much higher profit than anyone thought, and we know it’s growing at a ridiculously fast rate,” he wrote.


• IBM Drops After Revenue Declines for 13th Straight Quarter: IBM fell after reporting second-quarter sales declines across all of its major business units, missing analysts’ estimates and marking the 13th straight period of falling revenue. “Investors are losing patience given the revenue miss,” said Bill Kreher, an analyst at Edward Jones “It’s a show-me stock.” IBM, based in Armonk, New York, fell as much as 5.3 percent to $164.01 in late trading. The stock has lost about 10 percent in the past year. Total revenue fell 13 percent from a year earlier to $20.8 billion, or a 1 percent decline adjusting for currency impact. Analysts estimated $20.9 billion on average. The company said it cut total expenses by 7.9 percent from the year-earlier period. Last quarter, IBM said full-year earnings would greatly hinge on its software business, which saw a sales decline of 10 percent in the second quarter, or a 3 percent decrease when excluding currency impact. The hardware business’ sales fell 32 percent as reported.


• JD.com launches online store to sell U.S. brands in China: JD.com Inc, the no. 2 Chinese e-commerce company, said it would start selling U.S. products to customers in China through a new store on its website, as it looks to battle competition from bigger rival Alibaba. Both companies have recently started exclusive stores that offer products from countries including Japan, France, South Korea and Australia. JD.com also said on Monday that it would be the first authorized seller of Taylor Swift merchandise in China, which will include a line of clothes designed by the singer exclusively for JD.com customers. JD.com said the "U.S. Mall" would feature American brands such as Converse, Samsonite, and major apparel labels that are part of the Global Brands Group, including Nautica Kids and Jeep apparel. JD.com's U.S.-listed shares were little changed at $35.39 on the Nasdaq. Up to Friday's close, the stock had gained about 53 percent this year.


• EBay Reports Sale of Enterprise Unit as Earnings Beat Estimates: EBay is sailing into the split of its two businesses — PayPal payments and its online marketplace — with a reassuring show of strength as its second-quarter financial performance surpassed Wall Street forecasts. With its PayPal business to be spun off at the end of this week, eBay also did some last-minute corporate cleanup Thursday morning. The company announced that it was selling its eBay Enterprise unit, which handles warehousing and logistics for third-party sellers, for $925 million to an investors consortium led by two private equity firms, Permira and Sterling Partners. Both eBay’s profits and revenue were better than expected, after taking into account the sale of its warehouse and logistics arm. Shares in eBay, which reported its results before the stock market opened, were up about 3 percent in midday trading. The company’s revenue increased 7 percent from the year-earlier quarter to $4.38 billion. The reported revenue fell short of analysts’ average estimate of $4.49 billion. In the quarter, eBay pulled out the revenue from eBay Enterprise. If included, total revenue would have been $4.65 billion, above Wall Street forecasts. The split-up strategy is the byproduct of a drawn-out proxy fight with Carl C. Icahn, an activist investor, who advocated a PayPal spinoff. His pressure and logic prevailed, and the company declared in September that it planned to break itself up.