Daily Tech Snippet: Wednesday, October 28

• Apple Profit Is Up 31%, Revenue Up 22% as iPhones Sell Briskly, but Its Forecast Is Muted: Apple on Tuesday turned in another quarter of enviable revenue and profit growth, fueled by sales of the iPhone. But the results raised a perennial question for the world’s most valuable company: How can it keep its growth streak alive? The issue was stoked by Apple’s muted forecast for its all-important holiday quarter, as well as the unwillingness of Timothy D. Cook, the company’s chief executive, to go into detail in an earnings conference call about how Apple plans to rev up sales next year. Over all, Apple posted a profit of $11.1 billion for its fiscal fourth quarter, up 31 percent from a year ago. Revenue was $51.5 billion, up 22 percent from last year. The results exceeded Wall Street estimates. Yet while the performance was bolstered by sales of the iPhone — Apple said that it sold 48 million iPhones in the quarter, up from 39 million in the same period last year — the company was more cautious about sales for the key holiday sales period. Apple projected revenue of $75.5 billion to $77.5 billion for the end-of-year quarter. While the sheer numbers are huge, the low end of the forecast fell below Wall Street estimates and would amount to anemic growth of less than 4 percent from a year ago. The last time Apple’s quarterly sales fell below 4 percent was in mid-2013. New Products: Apple is going into 2016 with a full slate of refreshed products. In late September, the company introduced its newest iPhone models, the 6s and 6s Plus. It also announced a larger iPad, the iPad Pro, and will begin shipping a new Apple TV this week. IPad Struggles: While the iPhone continues to grow, the iPad has been facing declines. For the fiscal fourth quarter, Apple said iPad sales dropped 20 percent from a year ago, making it the seventh consecutive quarter that sales of the tablet have slipped. The company is increasingly positioning the iPad as a business device. Apple Watch: The company did not break out sales of the Apple Watch, which debuted in April. But the category called “other products” — which includes the watch — posted $3 billion in revenue in the quarter, up from $2.6 billion in the previous quarter, which was the first quarter that included sales of the device. Ben Bajarin, an analyst at Creative Strategies, said that the numbers for the “other” category were in line with his expectations, and implied somewhere between 3.5 million and four million watches were sold over the quarter. China: One of Apple’s fastest-growing markets — China — continued to grow. Sales in the region that Apple calls Greater China jumped 99 percent in the quarter to $12.5 billion. The region remained the company’s second-largest market after the Americas, accounting for 24 percent of sales in the quarter, compared with 13.7 percent a year ago. Investors have been scrutinizing the China business given that the country has been cutting interest rates to shore up a slowing economy. Apple Pay: Apple said it has partnered with American Express to bring its Apple Pay mobile payments service to global markets. Chief Executive Tim Cook said the credit card company will bring the service to customers in Australia and Canada, then expand to Spain, Hong Kong and Singapore in 2016.

• Dismal Twitter Forecast and Flat User Growth Send Its Stock Lower: On Tuesday, Twitter gave a dismal forecast for its fourth-quarter revenue and profits. Shares in Twitter, a social media company, plunged as much as 13 percent in after-hours trading as Mr. Dorsey and his lieutenants offered little explanation for the gloom in a conference call with investors. In a similar call three months ago, Mr. Dorsey’s pointed critique of Twitter’s product failings sent the stock down 11 percent. Twitter also reported revenue of $569 million for the quarter, up 58 percent from $361 million a year ago. Its net loss was $132 million, or 20 cents a share, compared to a loss of $175 million, or 29 cents a share, in the same quarter last year. For the fourth quarter, usually the strongest thanks to holiday advertising, Twitter warned that revenue would be $695 million to $710 million, well below the $740 million that Wall Street had been expecting. The new projections, delivered as the company exceeded analysts’ expectations for its third-quarter results, provided fresh evidence that Twitter is failing to win over advertisers, the source of most of its revenue, as it confronts stiffening competition from Facebook, Instagram and Google. “The company is finding real challenges gaining traction with advertisers,” said Mark Mahaney, an Internet analyst with RBC Capital Markets, citing the new forecasts and an advertiser survey his firm conducts twice a year. Mr. Mahaney, who has a neutral rating on Twitter’s stock, said he was struck by the contrast between the upbeat tone of Twitter’s executives on the call and the company’s deteriorating outlook. “Everything sounds so good, yet you reduced your forecast pretty materially. Why?” Mr. Dorsey didn’t answer that question, although Adam Bain, the company’s former ad chief and new chief operating officer, offered a clue: Ad prices plunged 39 percent in the third quarter, which he said was partly because of improved efficiency of video ads.

• Alibaba Revenue Up 32%, Sends Shares up 4%; Cloud Computing Revenue Doubles Y/Y; Overseas Sales at 8%; GMV growth sinks to lowest in 3 years: China's Alibaba is squeezing more money from online shopping than expected, beating analyst forecasts for revenue growth, as mobile shopping grows. The company wrung out higher-than-expected revenue growth of 32 percent year-on-year, even as gross merchandise volume (GMV), the total value of goods transacted across its platforms, sank to its slowest annual growth rate in more than three years. Alibaba's U.S.-listed shares closed about 4 percent higher on Tuesday, after rising as much as 8.4 percent during market hours. Alibaba is trying to replace decelerating volume growth in online shopping with new kinds of online buying, mirrored in its latest investments. For instance, Alibaba invested $4.6 billion in Suning during the quarter. It also offered $3.5 billion to become sole owner of Youku Tudou, known as China's YouTube. Online video users in the country are beginning to cough up money for high-quality online streaming services. But the majority of Alibaba's revenue still comes from China's online shoppers buying from domestic businesses, a business driven by growth in GMV. For the latest quarter, growth came mostly from Tmall, an Amazon-like website allowing businesses to sell to customers, where GMV rose 56 percent. Gains at Taobao, more akin to eBay and by far the company's biggest contributor to GMV, showed signs of slowing at just 15 percent. Alibaba's revenue rose to $3.49 billion in the three months ended Sept. 30. Net income attributable to shareholders reached $3.58 billion, or $1.40 per share. International Expansion: The proportion of revenue Alibaba gets from abroad reached 8 percent, compared with 9 percent in the previous quarter. Co-founder Jack Ma has said he wants half of the company’s sales to originate outside China. The company named Michael Evans, a former Goldman Sachs  partner, as president in August to spearhead a global expansion into regions such as Russia and Brazil. The company is also looking to make forays into Italy, France, Australia and New Zealand, Evans said in October. Cloud Business: Revenue from cloud computing more than doubled from a year earlier. The e-commerce giant is betting on Internet-based computing and big data to boost growth for the next decade thanks to demand for processing and storage from governments, finance and online gaming companies. AliCloud could account for more than $1 billion of Alibaba’s revenue by 2018

• IBM says SEC investigating company's books, shares fall: The U.S. Securities and Exchange Commission is investigating how the International Business Machines Corp (IBM.N) recognized revenue for certain deals in the United States, Britain and Ireland, IBM said on Tuesday, news that sent its shares down 4 percent. Shares of IBM fell as much as 4.4 percent to a five-year low of $137.33 and closed down 4 percent. News of the SEC probe came a week after the company posted lackluster quarterly results and cut its 2015 profit forecast. "It couldn't come at a worse possible time because now the stock is at another 52-week low as a result of this," said Belpointe analyst David Nelson. He said, however, that the probe "doesn't look like a massive smoking gun." "The investigation could be into warranty reserves, they could have recognized an item at the wrong time," Nelson said.

• PayPal says makes $1 billion in small-business loans in first two years: PayPal Holdings, the online payment processor, said on Tuesday its small-business lending program has processed $1 billion in loans in the first two years of its launch and more than doubled loan growth in that span. PayPal Working Capital is extending short-term loans totaling more than $100 million per month, or $3 million per day, to a mix of sellers on eBay and standalone small- to medium-sized merchants, the company said at a payments conference in Las Vegas. PayPal separated from eBay earlier this year, and Chief Executive Officer Dan Schulman has stated he is looking to use PayPal's size to offer affordable financial services widely.

• Even As Oracle and AWS Circle Each Other, Oracle Will Not Build a Giant Cloud System Like AWS: Counter to the expectations of many industry watchers, Oracle, the world’s largest maker of software for businesses, is not planning a global computing system to rival Amazon Web Services or Microsoft Azure, the other big global cloud companies. While it has built out a network of 20 data centers, largely filled with Oracle equipment, it now plans to go after customers by offering faster updates of its core products, new ways of customizing applications and a much younger, retooled sales force. “We’ve made our investments,” Mark Hurd, co-chief executive of Oracle, said in an interview. Compared with A.W.S., he said, “the place we like is one of higher profit margins.” Besides applications, Amazon sells raw computing and data storage, which are generally lower-margin businesses. Oracle is expected Tuesday to announce better security inside its cloud because of changes from its proprietary hardware, but won’t sell access to the machines on their own. Oracle’s better margins, Mr. Hurd said, will come from selling large-scale software that can be customized by its buyers to suit local markets and products. He hopes to lower his sales costs and bring in younger companies with salespeople recruited straight from college and given crash courses in selling Oracle cloud products. In the last four years, he said, the company has hired 1,000 graduates a year. “We train them in products, sales skills and processes,” said Mr. Hurd. “They’re selling within a year, with a much lower cost of sales.” Oracle’s sales force, some 30,000 people globally, is considered among the most aggressive and highly compensated in the tech business. Now, Mr. Hurd said, “we have to do some branding” to entice the kind of smaller companies and start-ups the new sales team is chasing. The ease of modification and the faster sales force illustrate how, while still far apart, Oracle and A.W.S. are becoming more like each other as cloud computing goes mainstream. For its part, a few weeks ago A.W.S. dropped all pretense and made a direct bid for Oracle’s customers. A.W.S. even put up a thinly disguised picture of Oracle founder and executive chairman Larry Ellison.

• Japan's Carmakers Proceed With Caution on Self-Driving Cars: At this week’s Tokyo Motor Show, Nissan Motor Co. will display a concept car with retractable steering wheel and message-flashing windshield, joining Honda Motor Co. and Toyota Motor Corp. in exhibiting vehicles with autonomous modes for changing lanes and avoiding collisions on highways. But while Tesla deployed its Autopilot system this month and Google aims to have fully self-driving cars on the road by 2020, Japan’s automakers see a wait for such vehicles, with introductions coming only after 2025. The unwillingness to take a software-testing approach -- with beta versions used for trial periods and ongoing updates -- and apply this to car-making divides traditional auto companies and tech-industry challengers, said Tatsuo Yoshida, an auto industry analyst with Barclays Plc. Whereas Tesla beamed Autopilot into Model S sedans with the promise the system would continually learn and improve itself, Japan’s automakers view such an approach as putting features on the road before they’re ready. They’re also wary of exposure to liability if they introduce safety features that fail. Each of Japan’s three biggest automakers have set targets to start deploying the technology around 2020. Tesla Chief Executive Officer Elon Musk told reporters this month the company can probably develop a completely self-driving car in about three years, while Google has forecast about a five-year time frame.

• Rackspace Launches Carina, A Hosted Environment For Running Docker Containers: Rackspace is getting deeper into the container game. The company today announced the beta launch of its Carina container service. Carina gives developers access to a fully managed container environment that offers bare-metal performance and still allows them to use the same native Docker tools they are used to from their local development environments. Right now, the service — which will remain available for free during what the team expects to be a long beta period — focuses on Docker’s tooling, but over time, the idea here is to use the flexibility of Magnum and OpenStack to give developers the ability to use other container orchestration engines like Kubernetes and Mesos, as well. The team believes that the combination of a multi-tenant environment and (near) bare-metal access will allow it to deliver the right mix of a high-performance system and low cost. Otto acknowledged a multi-tenant system may not be the right choice for workloads that are highly security sensitive, but the service also gives users the choice to also run containers on Rackspace’s private cloud service. The service provides users with a set of defaults based on the company’s experience, but users can then tweak these as necessary. Otto believes most users will opt to stay with Docker Swarm as the container orchestration engine, simply because it gives users more control (and in an imperative way) than Kubernetes, which is far more opinionated. Because of the way the company architected the service without using a traditional hypervisor (using libvirt/LXC instead), containers will start significantly faster than on a similar service that uses more traditional virtual machines. Because there are still some advantages to running containers on virtual machines — especially when it comes to security — Rackspace also plans to support virtual machines. It’s no secret that large public cloud vendors like Google, AWS and Microsoft now all offer their own container services. The Rackspace team believes that it has an advantage over them in terms of speed, but also because they don’t abstract away the containers from developers. In addition — and this is no surprise coming from Rackspace — the company believes it can offer a level of service that is significantly higher than its competitors. Rackspace already worked with a number of partners to test the service in a private beta. These include O’Reilly Media, which is using containers to power parts of its online learning tools, as well as the Drupal and WordPress hosting service Pantheon, which has long used containers at the core of its platform.