Tech Firms Hint at More Restraint

Daily Herald (Arlington Heights, IL), February 3, 2015 | Go to article overview

Tech Firms Hint at More Restraint


Byline: MICHAEL LIEDTKE AP Technology Writer

SAN FRANCISCO -- Technology's big-spending trio of Google, Facebook, and Amazon.com appear to be tightening their belts -- at least a notch -- in a concession to cost-conscious investors and a strong dollar that's taking a big bite out of their revenue.

Hints of restraint were sprinkled throughout the companies' latest quarterly reports released last week. Expenses at all three are still expected to rise faster than revenue this year, but Google Inc., Facebook Inc. and Amazon.com Inc. signaled that spending increases might not be as dramatic as expected. The message boosted all of their stocks, which had been in Wall Street's penalty box for the companies' free-spending ways.

The shift can be traced to economic turmoil in Europe and Asia that has caused the dollar's value to rise against many other currencies, said BGC Financial analyst Colin Gillis. Revenue coming in from overseas will translate into fewer dollars -- potentially chopping about 4 percent off of 2015 revenue compared with 2014, Gillis estimates.

"That's a significant hit," said Gillis. "They all have massive opportunities ahead that they want to pursue, but they are also going out of their way to sound more prudent."

Amazon's moderation was the most obvious: the e-commerce company's fourth-quarter operating expenses rose at a slower pace than analysts had anticipated. That delighted investors who have become increasingly frustrated with recurring losses driven by CEO Jeff Bezos' prolific spending on data centers, distribution centers, gadgets and drones. Amazon shares, which had hit a 52-week low after the company's prior earnings report in October, spiked nearly 14 percent on the fourth-quarter results.

"It looks like Amazon does actually care about its stock and profits," Macquarie Securities analyst Ben Schachter wrote in a research note. Amazon earned $214 million in the fourth quarter.

The change was more about tone than the actual numbers released by Facebook and Google, since spending at both companies still accelerated in the fourth quarter. Investors initially seemed spooked but settled down after reassuring remarks from Facebook and Google executives. Since their last quarterly earnings reports in October, Google's shares had fallen 4 percent and Facebook's shares slipped 6 percent. But the day after announcing earnings last week, Google shares rose nearly 5 percent and Facebook climbed 2 percent.

Google Chief Financial Officer Patrick Pichette stressed that the search giant's expenses included $300 million in one-time accounting items and emphasized the company's commitment to finding "a healthy balance between growth and discipline. …

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