Daily Tech Snippet: Wednesday, July 27

• Apple sells more iPhones than expected, shares jump after hours despite revenue drop: Apple Inc (AAPL.O) sold more iPhones than Wall Street expected in the third quarter and estimated its revenue in the current period would top many analysts' targets, soothing fears that demand for the company's most important product had hit a wall. Its shares rose 7 percent in after-hours trading. The world's most valuable publicly traded company said it sold 40.4 million iPhones in the third quarter, down 15 percent from the year-ago quarter but slightly more than the average analyst forecast of 40.02 million, according to research firm FactSet StreetAccount. IPhone sales dropped for the second straight quarter, pushing down Apple's total revenue 14.6 percent in the fiscal third quarter, ended June 25. Demand for Apple's phones has waned in China, partly because of economic uncertainty there, and has also slowed in more mature markets as people tend to hold on to their phones for longer. The sales slump has stoked concerns about whether the tech leader can continue to deliver profits at the level Wall Street has come to expect. "China was a major letdown," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "Samsung and Huawei are much more competitive now than a year ago and the Chinese economy is not doing well at all." Apple's services business, which includes the App Store, Apple Pay, iCloud and other services, generated nearly $6 billion in revenue, up 18.9 percent from the previous year. As iPhone sales level off, Apple is attempting to use such services to wring more revenue out of its existing base of users. The business emerged as Apple’s second largest after the iPhone for the first time in the second quarter, eclipsing gadgets such as the iPad and the Mac. That shift bodes well for Apple because gross margins on services are better than the average for the rest of the company, Maestri said.

• Twitter still has revenue problems, and its stock is down big: Twitter reported Q2 earnings on Tuesday and investors aren’t happy. The key issue is likely Twitter’s Q3 guidance. The company says it is targeting $590 million to $610 million in revenue next quarter. Early analyst estimates pegged that number at $678 million, according to Yahoo Finance. So that’s a big discrepancy.The stock was immediately down more than 10 percent on the news and seems to be hovering there.So here’s Twitter’s dilemma: CEO Jack Dorsey has effectively been in charge of Twitter for the past year, and it’s clear that the company’s growth problem is still a problem. On top of that, Twitter has now missed revenue estimates two quarters in a row, and significantly cut its Q3 guidance. So there’s a clear revenue problem to go along with the growth problem. Not good. To state the obvious, this kind of production (or lack thereof) doesn’t help Dorsey’s case for running two companies (remember, he also runs Square). It also puts pressure on the board to consider broader options for the company, namely selling. Twitter is in the very beginning stages of trying to transition its business to look more like TV, but it doesn’t have a lot of runway left.

• $1 Billion for Dollar Shave Club: Why Every Company Should Worry: Unilever is paying $1 billion for Dollar Shave Club, a five-year-old start-up that sells razors and other personal products for men. Every other company should be afraid, very afraid. The deal anecdotally shows that no company is safe from the creative destruction brought by technological change. The very nature of a company is fundamentally changing, becoming smaller and leaner with far fewer employees. Dollar Shave Club was a phenom in the men’s grooming industry. The online business was founded in 2011 by Mark Levine and Michael Dubin to combat the high cost of razors. The idea was rather simple. Instead of paying $10 or $20 a month at a store for disposable razors, a Dollar Shave Club subscriber could go online and set up a regular order to be shipped to his home monthly at a fraction of the retail cost. The experiment was a brave one. Until that time, Gillette dominated the razor business and was in an arms race with itself to add yet more blades and other features to its razors. Gillette was so dominant in advertising and shelf space that Procter & Gamble paid $57 billion for the company in 2005. Everything changed in 2012, when Mr. Dubin’s comedic free ad posted on YouTube. Within 24 hours, the new business had more than 12,000 orders, more than it could handle. The ad went on to get over 20 million views and rocket Dollar Shave Club to over $240 million in revenue. The wealth will be spread among a few. Dollar Shave Club has over three million subscribers but only about 190 employees. Its razors were made in South Korea by Dorco. Distribution was initially handled in-house but eventually was contracted to a third-party company in Kentucky. What remained was a terrific design, marketing and customer service shop; and a business that was easily expandable to meet demand and that had a good niche with men who do not like to shop. These super-successful companies with few employees should worry an America struggling with inequality. That is the way things roll these days. It used to be that if you wanted to sell razors, you needed a factory, a distribution center, a sales force, a research and development team and a marketing budget. Keeping all of these functions under one roof lowered transaction costs and made operations more efficient. In part this was because of communication structures — having telephone and mail together was a necessity. But the internet, mass transportation and globalization destroy everything. If you do not believe this change is about brand, experience and disruption, know that you can buy razors directly from Dorco, presumably the same brands sold by Dollar Shave Club.

• Flipkart-owned Myntra acquires Jabong for $70 mn in all-cash deal: Flipkart-owned Myntra today said it has acquired Jabong from Global Fashion Group for USD 70 million. Myntra, which itself was acquired by Flipkart in 2014 in an estimated Rs 2,000 crore deal, will have access to a combined base of 15 million monthly active users.Jabong has been in the market for a sell-off and was in discussion with companies including Future Group, Snapdeal and Aditya Birla-owned Abof among others. Jabong was founded in 2012. In September 2014, its investor, Rocket Internet merged Jabong with four other online fashion retailers in Latin America, Russia, the Middle East, South-east Asia and Australia to create Global Fashion Group (GFG). Swedish investment firm Kinnevik also owns a large stake in Jabong's parent Global Fashion Group. While Jabong has managed to reduce losses by reducing discounts, both Kinnevik and Rocket Internet seem unwilling to infuse fresh capital and are believed to be keen to exit.