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Why tomorrow is poised to be a big day for these rich tech giants

July 26, 2021, 8:09 PM UTC

It will be a big day on the stock market as tech titans Apple, Google, and Microsoft report their latest quarterly earnings on Tuesday.

These tech behemoths have all benefited from the COVID-19 pandemic, with each company selling and offering products and services that have boomed with people staying indoors. Last quarter, for instance, online advertising sales in Alphabet’s YouTube video service grew 49% year-over-year to $6 billion, a sign that consumers have been watching BTS music videos and other entertainment to keep their minds occupied during the pandemic.

Apple CEO Tim Cook said in April that the company’s iPads and Mac computers have been hot sellers during the pandemic with people using the devices for work and recreation while children have been using the computers for their remote-learning setups. And Microsoft’s cloud computing and personal computing business all racked up big sales in the company’s last quarter, resulting in overall revenue jumping 19% year-over-year to $41.7 billion.

Thus far, analysts believe these tech giants will continue to witness blowout quarters, no matter if their gargantuan businesses attract more scrutiny from regulators and lawmakers worldwide.

Analysts at Mizuho Securities Equity Research said in a research note that they believe Apple may ramp up the production of its flagship iPhones (the new iPhone 13 is expected to debut this fall) in order to capitalize off some missteps by its competitors. The analysts write: “Huawei has been unable to launch its flagship model for nearly a year owing to US sanctions; and Samsung Electronics is struggling with suspended operations at its Austin plant and lower utilization rates at its India and Vietnam plants.”

The Mizuho analysts said that their projection that Apple will increase production of its iPhones takes in account current supply-chain issues hampering the global manufacturing industry. But, it’s unclear what Apple executives will say about how they are dealing with supply chain problems when analysts inevitably ask them on Tuesday.

Meanwhile, Bloomberg Intelligence analysts said in a recent note that Microsoft will likely have a strong quarter, considering that more companies appear to be spending money on IT services and related software again after a lull during the onset of the COVID-19 pandemic. The analysts noted that several companies like Accenture, Tata Consultancy, and IBM all reported growing sales during their latest quarters, suggesting that businesses are buying IT consulting services and related software. The analysts also suspect that revenue for Microsoft’s LinkedIn professional social networking unit could go up due to a better economy, and that economic growth could even spill into Microsoft’s Bing search unit, which is still a gnat compared to Alphabet’s core Google search business.

As for Alphabet, analysts believe that while the company continues to dominate the online advertising business, its future isn’t as clear as Apple and Microsoft. For instance, Bloomberg Intelligence analysts said that the company’s latest anti-trust lawsuit brought on by 36 U.S. states “could add long-term pressure to Play Store revenue, which is about $12-$13 billion.” State attorneys generals are questioning the fees that Google charges third-party developers for releasing apps on the company’s Play Store.

Needham analysts said in a research note that Google “can’t win with global regulators, in our view,” and they detailed the pickle the company is in dealing with regulators. Every time Google makes a change to accommodate regulators, “injured groups are up in arms and write their Congressmen about their displeasure.”

The Needham analysts suggest that Google should spin off all or some parts of its YouTube video service, which would make the company even more valuable because investors tend to value companies with so-called pure play assets more so than conglomerates. 

Still, the world’s biggest tech companies like Apple, Microsoft, and Google, aren’t merely good at one thing—they operate many different businesses and are worth trillions of dollars combined, underscoring how investors are pleased with tech conglomerates.

With regulators and lawmakers, however, that may not be the case.

Jonathan Vanian 
@JonathanVanian
jonathan.vanian@fortune.com

NEWSWORTHY

Jeff Bezos has the Moon on his mind. Amazon founder and now astronaut Jeff Bezos published a public letter to NASA administrator Bill Nelson saying that he would pledge $2 billion as part of an initiative to “quickly and assuredly return to the Moon.” Bezos wants Blue Origin to be a part of NASA’s Moon missions, dubbed the Artemis Program, and has pledged $2 billion “to get the program back on track right now.” From Bezos’s letter: Blue Origin will, at its own cost, contribute the development and launch of a pathfinder mission to low-Earth orbit of the lunar descent element to further retire development and schedule risks. This pathfinder mission is offered in addition to the baseline plan of performing a precursor uncrewed landing mission prior to risking any astronauts to the Moon.

China steps in. China continues its crackdown on the country’s big tech companies, this time with government regulators ordering companies with online platforms like food delivery services to ensure better protections for workers, the South China Morning Post reported. Under the new mandates, Chinese tech companies must ensure that “food delivery riders earn above the country’s minimum wage, that riders be freed from unreasonable demands placed upon them by algorithms, and that these workers have access to social security and a place in a union,” the report said.

Private equity is hungry for tech. Private equity giant Thoma Bravo plans to acquire the business software firm Medallia in a deal worth $6.4 billion in cash, Reuters reported. The deal marks another major tech company purchase by Thoma Bravo, as CNBC reporter Ari Levy noted. Some of the firm’s recent tech deals include the planned acquisition of cybersecurity company Proofpoint for $12.3 billion, the $10.2 billion purchase of RealPage, and the planned purchase of Stamps.com for $6.6 billion.

Gotta catch ‘em all. Netflix is planning a new live-action series based on the popular Pokemon video game, Variety reported citing unnamed sources. The report said that the series would involve human actors as opposed to being a cartoon, as exemplified by the recent “Detective Pikachu” movie. From the article: “The move to develop an original Netflix Pokemon series comes as the streamer has made itself the home to multiple existing Pokemon shows, including “Pokemon: Indigo League” and “Pokemon Journeys” among others.”

FOOD FOR THOUGHT

All hail the Google Cloud king. Google Cloud chief Thomas Kurian is the subject of a Bloomberg News profile, which details how the former Oracle executive has adjusted to leading the search giant’s fast-growing cloud computing arm that trails Microsoft and Amazon. The profile describes some of Kurian’s moves to grow the company’s cloud business, such as landing more strategic partnerships as opposed to more transactional deals. Strategic partnerships, in which Google engineers help clients with their tech projects, can often be more financially lucrative.

And unlike his Google Cloud chief predecessor, former VMware co-founder Diane Greene, Kurian is emphasizing sales teams instead of engineers as a strategy to land more customers. The article says that at Google Cloud, “It’s not uncommon for seasoned salespeople to make $600,000 to $700,000 with salary and commission.”

From the article:

It took an outsider from India and a veteran of the nasty enterprise software wars of the 1990s to bring old-school salesmanship to the search giant; and in the process, Google’s playful, intellectual culture may have softened his style and dulled his hard edges.

Early on at Google, he was known to scream at some executives in one-on-one meetings, but did not have public tirades. When the pandemic took hold, the yelling eased. Kurian said his leadership style has changed at Google.

“You have to adapt to the style of the place that you're working in and the people you're working with,” Kurian said in an interview. “And so I worked quite differently here than I did before.”

IN CASE YOU MISSED IT

Jeff Bezos offers to pick up $2 billion in NASA costs by Chris Morris

The Trump crackdown hits the SPAC world by Lucinda Shen

Bitcoin at $40k? Crypto jumps after signs more tech companies plan to use it by Sophie Mellor

Something big is about to happen in the housing market by Lance Lambert

Russian disinformation campaigns are trying to sow distrust of COVID vaccines, study finds by Jonathan Vanian

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BEFORE YOU GO

A reminder that you will never escape work notifications.Workplace chatting app Slack, now owned by Salesforce, debuted a television commercial for the Olympics that begins with the clicking sound that notifies people that a colleague is messaging them. As numerous people said via Twitter, that notification sound can instantaneously cause people to think about work instead of the Olympic games. One Twitter commenter noted that “Just hearing the notification sound gave me a wee adrenaline spike,” while another said “Raise your hand if you’ve been personally victimized by the notification sound in the Slack ad aired during the men’s gymnastics Olympics.”

 

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