Data Sheet—Friday, October 28, 2016

Oct 28, 2016

Amazon reported quarterly earnings Thursday that fell short of what investors expected. The company’s competitors ought to be terrified.

Typically, weak results are bad news for the company that suffers them and good news for others. That’s not the case when Amazon stumbles, at least not these days. The company had a rough time making money for what seemed like forever. Now it makes sizable profits—a quarter-billion dollars in the third quarter—though on still slim margins. But Amazon still doesn’t make nearly as much as it could if it weren’t constantly investing heavily in its businesses.

The list of Amazon’s investments is long: Warehouses, leased airplanes, original movies and TV shows, its Echo voice-enabled speakers, the Amazon Web Services cloud computing business. It even is spending more on marketing. Companies that compete against any aspect of Amazon’s interests should worry that Amazon is heading back into investment mode. That’s a really long list, and it includes UPS, FedEx, Walmart, Netflix, HBO, Warner Bros., Disney, Apple, Google, Microsoft, and IBM.

Investors hated Amazon’s news, knocking almost 6% off of its stock price in after-hours trading. The dip reflected an unusual type of credibility problem for Amazon, which had warned investors profit growth could slow. As Nick Wingfield cleverly wrote in The New York Times, “analysts took those warnings with a Himalayan-size heap of salt.” They expected Amazon to do great anyway.

Making heavy investments is what Amazon does best. And it only sometimes cares about pleasing investors. Jeff Bezos loves nothing more than to take business away from competitors. (A favorite saying: “Your margin is my opportunity.”)

With Amazon’s profit stumble, it looks like he’s at it again.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

BITS AND BYTES

Big banks let chatbots do the talking. Bank of America and MasterCard disclosed substantial investments this week in smart messaging technologies that will answer account questions, offer financial advice, and even handle some transactions. (New York Times)
Please do touch these new notebooks. Apple's latest MacBook model family comes with built-in fingerprint readers and a touchbar for controlling certain tasks, depending on the application being used. Microsoft doesn't want you to get your hands on them. It is offering a $650 incentive to convince MacBook owners to buy one of its latest Surface laptops or tablets instead. (Fortune, VentureBeat, The Verge)
Another multibillion-dollar telecommunications merger may be in the works. This deal would combine Louisiana-based CenturyLink, which owns Qwest and Savvis, with Colorado's Level 3 Communications. No one is commenting officially. (Reuters)
Much ado about privacy. The Federal Communications Commission voted to tighten the rules covering the information wireless and broadband service customers can collect about consumers. Meanwhile, the European Union is taking a harsh view of the lax policies of Yahoo and WhatsApp, and an Irish privacy group is protesting the new guidelines governing how consumer data is shared between Europe and the United States. (New York Times, Reuters, Reuters)
That Oracle-Google fight over Java copyrights is going back to court. The six-year-old case centers on whether Google's use of certain Java code, called application programming interfaces, in the Android mobile operating system infringes on Oracle copyrights. The latest jury verdict, rendered in May, sided with Google. (Ars Technica)
Twitter is killing the Vine video service. The once-promising app, which which Twitter bought in 2012 for about $30 million, was a casualty of the social media company's reorganization disclosed Thursday along with its latest financials. There is some good news for Vine fans: the original creators are working on a new live video broadcasting app. (Fortune)
LinkedIn's latest financials hint at slower growth. The social network reported solid third-quarter results, reaching $960 million in sales, which represents a 23% increase. Its 467 million members are spending more time on the site, one of the reasons Microsoft is willing to pay $26.2 billion to buy the service. (Wall Street Journal)

THE DOWNLOAD

Google's parent is firing on almost all cylinders. Optimism about the Pixel smartphone has been helping buoy Alphabet’s stock, and the shares got another boost on Thursday when the company turned in better-than-expected earnings, including a profit of $5.7 billion, up 20% compared with the same period last year. More analysis from Fortune's Mathew Ingram.

WATCH FOR IT

What we know about Elon Musk's new solar roof. Tesla and SolarCity haven't actually merged yet, but the two companies are teaming up Friday night to chat about their latest technologies: roofing material that acts like solar panels and next-generation energy battery technologies. Check Fortune.com this weekend for Katie Fehrenbacher's coverage.

ONE MORE THING

Apple rallies around accessibility. The tech giant has dedicated a new website to information about technologies designed for individuals who are differently abled when it comes to hearing, vision, or motor skills. (Fortune)

MARK YOUR CALENDAR

AI World: Business applications for artificial intelligence. (Nov. 7-9; San Francisco)
TBM Conference: Manage the business of IT. (Nov. 7-10; San Diego)
DevOps Enterprise Summit: Develop and deploy software faster. (Nov. 7-9; San Francisco)
Humanity.ai: A conference for designers of bots and other artificial intelligence systems. (Nov. 10; San Francisco)
Drone World Expo: Commercial apps for unmanned aircraft. (Nov. 15-16; San Jose, Calif.)
AWS re:Invent: Amazon's cloud conference. (Nov. 28-Dec. 2; Las Vegas)
Consumer Electronics Show: An annual conference and exhibition dedicate to the business of consumer technology. (Jan. 5-8, 2017; Las Vegas)
Google Cloud Next: Products and perspectives for developers and customers. (March 7-10, 2017; San Francisco)

This edition of Data Sheet was curated by Heather Clancy.
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