Daily Tech Snippet: Friday, May 6th

• Alibaba's revenue soars, but new ventures hit profit: Alibaba Group Holding Ltd, China's biggest e-commerce company, said fourth-quarter sales rose 39 percent after its core online shopping business grew, but profit fell for the first time as it spent on ventures like food delivery. Net income excluding extraordinary items, Alibaba's preferred measure for earnings, shrank 1.4 percent to 7.6 billion yuan from the previous year, as the company continued to invest heavily in new but shakier businesses. Investors welcomed the higher-than-expected revenue, sending the firm's American Depository shares up 3.7 percent. But, not all of Alibaba's businesses looked rosy. Its online finance affiliate Ant Financial Services Group, one of founder Jack Ma's crown jewels in his e-commerce empire, recorded a net loss in the quarter. That business has spent heavily on its intense competition with WeChat Payment, one of the world's largest payments systems and owned by Alibaba arch-rival Tencent Holdings. Ant, which houses the massive Alipay online payment platform, is now valued at $60 billion and is gearing up for an IPO, despite the fact it is now losing money. Alibaba did not disclose how much Ant lost. Alibaba's revenues rose to 24.2 billion yuan ($3.7 billion) in the quarter ended March 31 from 17.4 billion yuan a year earlier. Gross merchandise volume (GMV), or the total value of goods transacted on its platforms on China retail marketplaces, rose 24 percent to 742 billion yuan. The previous quarter it had risen 22.5 percent - the slowest pace on record.

• Dorsey's Square posts bigger-than-expected loss as costs surge: Square Inc, the mobile payments company run by Twitter Inc Chief Executive Jack Dorsey, reported a bigger-than-expected quarterly loss on Thursday as costs surged, sending its shares sharply lower in after-hours trading. Slowing growth at formerly fast-growing Square Capital, which lends to small merchants, also aroused concerns. The company said Square Capital lent $153 million in the first quarter, up just 4 percent from the preceding quarter, largely due to "more challenging credit market conditions." The business acts as a middleman to offer funds to customers who can't otherwise borrow easily. Most funds are arranged by Square through third parties, who commit to buy the future receivables. "Lenders are no longer wanting to finance alternative lending," said Gil Luria, an analyst at Wedbush Securities. Square loses $2 for every $1 of hardware sales, Luria said. "The growth is coming from the wrong places." Square, which went public in November, facilitates payments between businesses and customers with a credit card reader that turns any mobile phone into a payment terminal. The company also makes point-of-sale registers and chip-enabled card readers. Square's shares were down 12.3 percent at $11.44 in after-hours trading despite several bright spots in the results. The company's net revenue jumped 51.4 percent and gross payment volume - the total dollar amount of all card payments processed by sellers - jumped 45 percent to $10.3 billion. Square also raised its annual adjusted revenue projection to $615 million-$635 million from $600 million-$620 million. But its net loss attributable to common stockholders widened to $96.8 million from $48 million in the same period a year ago as operating expenses jumped 72 percent to $207 million.

• SAP announces new partnership with Apple to expand iOS in the enterprise:  SAP announced a broad partnership with Apple today to bring iOS to SAP’s enterprise customer base. The announcement comes almost two years after Apple made a similar deal with IBM. Steve Lucas, president for SAP’s Digital Enterprise Platform says while it’s natural to see similarities between the two deals — two large enterprise companies making a deal with Apple — he says there are major differences. For starters, he says SAP is firmly an enterprise software company and it has built a cloud platform to access all of the software it has developed, whether its core ERP product, SuccessFactors or Concur. He says having that core certainly is a differentiating factor in his view. Still there are similarities too. As with IBM, SAP has been working closely with Apple to bring its profound design sense to this endeavor. The objective of this partnership is no less than to revolutionize work on the iPad and iPhone, Lucas says. It’s no secret that Apple wants a bigger piece of the enterprise market and these kinds of agreements help solidify their enterprise position and drive Apple hardware sales inside companies that were traditionally PC shops — and hence more often considered Microsoft territory. Finally, much like IBM it wouldn’t be a deal without an educational component to round it out, so SAP is also offering SAP Academy for iOS as a training ground for SAP programmers to learn to use the HANA iOS SDK. Lucas says the company is absolutely committed to this educational effort and it’s not something they will announce and go away in a few months, but a program that he sees lasting well into the future. While you might not see a natural fit between SAP and Apple, when the IBM partnership was launched in 2014, it certainly raised some eyebrows too, but by the end of last year the partnership had created 100 apps — and that number has surely increased since then. In fact, SAP is also planning on building 100 apps. The apps and the SDK are not yet available, but they say they should start to trickle out in Beta later this year. Many of the apps are in progress, according to Lucas, but they are not ready to ship yet. Apple also signed a partnership with Cisco last summer.

• Tesla Falls on Cash Concerns, Doubt About Manufacturing Goals: Tesla Motors Inc. fell Thursday after the company, aiming to dramatically boost production, withdrew its projection to generate more cash than it uses this year and said it will probably need to raise capital. Shares in the electric-car maker fell 4.9 percent to $211.71 at 1:28 p.m. New York time. The shares had surged late Wednesday and early Thursday after Tesla moved ahead by two years its target date for reaching annual production of 500,000 vehicles before sinking on skepticism about the ambitious assembly goals and concerns about cash. Tesla said in a letter to shareholders Wednesday that to meet the new production target, capital expenditures this year will probably be about $750 million more than the $1.5 billion originally planned. A capital raise of about $2 billion would dilute current owners by about 7 percent, UBS analyst Colin Langan wrote in a note.

• Netflix reveals what images hook viewers on new shows: Netflix has found that its viewers spend only 1.8 seconds considering whether to watch a show or movie that is presented to them. With so little time to make a successful pitch to potential viewers, the company has become obsessed with making it easy for members to make a quick decision about whether a show is interesting. For Netflix that means perfecting the promotional artwork — imagery that runs alongside an explanation of the show. Members spend 82 percent of their time focusing on artwork while browsing Netflix, according to the company. This week Netflix released new findings about the power of the images its presents to viewers while introducing them to shows, and what traits in an image can encourage a viewer to watch a show. Netflix finds that images with expressive facial emotion that convey the tone of the show do well. Artwork featuring recognizable or polarizing characters also succeed. Even if a show has an ensemble cast, when it comes to promotional purposes — someone needs to hog the spotlight. “While ensemble casts are fantastic for a huge billboard on the side of a highway, they are too complex at small sizes and ultimately not as effective at helping our members decide if the title is right for them on smaller screens,” explained Netflix’s Nick Nelson in the blog post. While the Netflix show “Orange Is the New Black” featured eight cast members in its Season 1 image, Netflix scaled back to a single character for seasons 2 and 3. Netflix reached these conclusions through what’s called A/B testing, in which audiences are split into groups and shown different images. Analysts then gauge how audiences respond to the different options.