A couple of promising items here.
Microsoft's $26.2 Billion acquisition of LinkedIn looks to be on track to close. When the acquisition was announced in June 2016, Microsoft announced that the deal was closing at the end of the year. So far, the deal has not been sidetracked by regulatory or other challenges.
The LinkedIn last announced their earnings In August 2016. LinkedIn's revenue of $933 million rose by 31% compared year to year. LinkedIn's membership grew by 4% over the same period.
With these reported LinkedIn results, this Microsoft's acquisition looks to be a great deal.
Also, Microsoft is continuing to divest its phone business as it focuses on business segments that are more productive to the company.
Intel has a strong quarter with each significant business unit up across the board. However, even with EPS up 8% for the quarter, the stock fell by 5.5%. The drop was in response to the lower guidance for the 4Q.
Intel projected its 4Q revenue to come in at $15.7 billion. Analysts projected the company's 4Q revenue to come in at $15.9 billion.
While Citi's revenue was down overall, the larger drop came from the much smaller Citi Holdings part of the business. Citicorp, on its own, was flat compared to the previous quarter and past year.
Citi Holdings is the division that holds house assets, a legacy of how Citi handled the 2009 financial crisis. The bank opted to hold onto these assets rather than divesting them in a fire sale.
Citi is currently winding down and/or selling off Citi Holdings. Citi has lowered its Citi Holdings assets by 48% from the prior year and 8% lower than the prior quarter. Citi already has agreements to reduce Citi Holdings by another $10 Billion.
The sooner that Citi can complete divest its Citi Holdings division, the better. This will let the bank focus its business on other more promising financial service lines.
As Peter Drucker would note, a business should look towards abandonment if something was no longer producing the right results or outlived its usefulness.
Here Microsoft has all but completed its unwinding of its mobile phone business, decreasing the phone revenue by 71%. It had acquired Nokia two years ago in order to be a player in the smart phone market. With analysts forecasting that 2016 will have slower smartphone sales and its rival Apple seeing a reduced demand for its iPhones, Microsoft sees the writing on the wall for its smartphone demand and is proceeding to exit this segment.
Netflix's primary concern is the slowdown in its global member growth, missing projections by 800,000 members. Part of the slow down can be attributed to the reported increased pricing. The increased pricing impacts retention of current members, as well as dampening the draw of new members to Netflix.
Netflix deems the need to increase pricing in order to invest into new content for its service. It remains to be seen if its new content can push Netflix's membership numbers up.
While Citigroup's revenues and net income have had losses compared to the same period last year, the bank has focused on cutting its costs and limiting its loan losses. It lowered operating losses by 5% and Cost of Credit by 15%.
If Citigroup can continue to limit or reduce its losses and expenses, it stands to have an improved financial position once it completes its restructuring.
Citigroup's EPS of $1.25 beat the analysts' estimate of $1.10.
While JPMorgan's Net Revenue was up by 3%, its net income was "flat" compared to the prior-year quarter (actually had a slight dip). The reason for the net income being flat was due to the increased credit losses - namely from Oil & Gas and Metals & Mining.
JPMorgan was able to offset its losses due to loan growth. If JPMorgan can continue to find ways to offset the losses in Oil & Gas and Metals & Mining, the banks other lines of business should be able to add to its strong financial position.
JPMorgan's EPS of $1.55 beat analysts' estimate of $1.43 EPS.
Generally, there were no surprises with Alphabet this quarter. Keep an eye on what develops with its Other Bets segment, which is essentially all non-Google. This includes the fiber business. This segment more than doubled its revenues when compared to the same period last year. Even though the Other Best operational losses grew, the losses grew by a slower rate (26%). If the trend continues, Other Bets segment will eventually generate income instead of operating losses.
Microsoft's phone segment continues to decline and the company insists the decline is part of the strategic restructuring of the business that was announced in Summer 2015. While there is no indication that Microsoft is abandoning the phone business, continued declines (49% decline reported in the previous quarter) may make Microsoft reconsider if it should continue to support this segment.
Yahoo! starts off its highlights by disclosing that its Board of Directors have formed a strategic review committee to consider strategic alternatives. What this paragraph means is that Yahoo! is exploring ways to divest parts or its whole as a target. It bears covering these developments closely to see if and what kinds of divestiture activity results.
To follow up on what Rich Smith said: things are looking up for Citi. Citi has continued to focus on cutting its expenses - in particular its legal expenses. While some other expenses have risen, the overall expenses have decreased.
Along the same lines, Citi's allowance for loan losses has decreased as well.
Citi's continued focus on limiting its expenses and loan losses will bode well with its future outlook.
As IBM is transitioning its business towards the "Strategic Imperatives", IBM is also divesting many of its legacy businesses
IBM has been divesting legacy parts of its business for the last couple of years. (e.g. The divestment of its Microelectronics business, as noted here.) The faster IBM can divest itself of under-performing legacy business segments, the better for IBM to focus on the profitable "Strategic Imperatives" parts of its business.
This is a key in Netflix's business: It's availability to get into just about every market. Right now, Netflix's lonly notable omission is the China market.
Its near global presence gives Netflix potential for sustained continued growth in its membership and its finances.
Citi has improved its business by focusing on expenses. Citi's year to year expenses have gone down by 21%. That has lead to its much improved net revenue this 4Q 2015.
Here's something to keep an eye on: the growing cash at hand. Intel's business looks promising as it has doubled its cash from the previous quarter and grew it over six times at the same period last year.
NFLX shares are up strongly on this week's news of continued strong subscriber growth. But you can't pay the electric bill with subscribers. Even as the customer base grows, we're seeing operating income slip, net income more than halved, and EPS down 70%. And free cash flow? Dream on. Netflix has burned cash for the past three straight quarters -- and burned it faster with each passing quarter.
I'm not a fan of Netflix stock. Never have been, probably never will be. But even so, can I just point out here that, amid all the doom and gloom, Netflix *grew* its streaming revenues 33%, *grew* its streaming profits 39%, and *grew* this segment's profit margin by 90 basis points? Raising prices might scare away some customers -- but those who remain, pay a lot more.
Analysts are pleased as punch with Microsoft's revenue and earnings "beat," and make no mistake -- the news was good. Profits for fiscal 2016 leapt 38% in comparison with fiscal 2015 numbers. If you ask me, though, it's the free cash flow number that impresses most. MSFT generated $25 billion in cash for the fiscal year, up only 5% year over year, but a good 49% more "cash profit" than the GAAP would suggest..
Of course, what Ms. Mayer doesn't want (or need) to point out here is that Yahoo's "2016 plan" is to sell the company's core business for the best price possible. That requires a bit of spinning to do, and it will help if she can argue that the business is growing and profitable. An accounting change helped Mayer claim the former, with revenues ticking up slightly in Q2 -- but nothing could help her to claim the company is making money. GAAP losses ballooned.