Amazon.com Inc. (NASDAQ: AMZN): Q2 Earnings Preview 2011

Amazon.com Inc. (NASDAQ: AMZN), the largest online retailer, is scheduled to release its second-quarter earnings after the closing bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 35 cents per share on revenue of $9.37 billion. In the year ago period, the company reported earnings of 45 cents per share on revenue of $6.57 billion.

Amazon.com, Inc. operates as an online retailer in North America and internationally. It also manufactures and sells the Kindle e-reader. The Company offers programs that enable sellers to sell their products on its Websites and their own branded Websites. Amazon’s Cloud storage solution offers what would be an easy way to transfer, share and sync files between a smart phone, tablet or even PC/Mac.

In the preceding first-quarter, the Seattle, Washington-based company's net income was $201 million, or 44 cents a share, compared to a profit of $299 million, or 66 cents a share, in the year-earlier quarter. Revenue jumped 38% to $9.86 billion from  $7.13 billion in the first quarter of 2010. Analysts, on average, expected the company to report earnings of 61 cents per share on revenue of $9.52 billion..

At its last earnings call in April, Amazon said that it expects revenue in a range between $8.85 billion and $9.65 billion, compared with the $8.75 billion expected by analysts. Operating income is expected to come in between $95 million and $245 million; Wall Street was looking for $356.4 million for the period. In a conference call, Amazon Chief Financial Officer Tom Szkutak said the company expects to open nine fulfillment centers this year after adding 13 in 2010.

The company has benefited from strong consumer demand for its  Kindle e-reader, solid e-commerce growth and accelerating demand trends witnessed over the recent holiday period. As usual, investors will be alert for any concrete details on sales of Amazon's Kindle e-reader. The company has never disclosed how many it has sold, though it has said the Kindle is its best-selling product and that millions of people read Kindle books on the device itself and on free Kindle apps for smart phones and computers.  The company has already launched a new, lower-priced version of the device that displays ads on the main screen.

Amazon is one of a handful of players jockeying to capture the growing market for digital books, which was $966 million last year and is expected to triple by 2015, according to Forrester Research. The Kindle competes with devices such as Barnes & Noble Inc.'s (NYSE: BKS) Nook and Apple Inc.'s (NASDAQ: AAPL) iPad. The company is now selling more electronic books for its Kindle e-reader than physical books, the latest milestone in the reshaping of traditional media industries by digital technologies.

On the downside, there are signs that the growth trajectory at Amazon is tapering. Pronounced growth has necessitated more investments in its distribution network and underlying technology. Technology spending jumped by 58% during the March quarter, while fulfillment spending was up 57%. In April, Chief Executive Jeff Bezos that defended the company’s massive investments in technology and infrastructure.

A big part of Amazon’s growing expense line is to build out new fulfillment centers to service its growing sales base. Also, the company is investing heavily in technology that can serve its main online-retail business as well as its growing digital-media business — which sells electronic versions of books, music and movies — as well as its Web services, offering a popular array of cloud-based computing services to customers. Amazon has been building out its online music, movie and videogame stores, along with its “Cloud Drive,” which is a cloud-based digital locker service that can store media files and allow users to play them from any Internet-connected PC.

Among other developments, the company recently reached a licensing deal with CBS Corp. (NYSE: CBS) that will allow its Amazon Prime customers to stream programs from the television network's library at no additional cost. Amazon has been battling with Apple Inc., Netflix Inc. (NASDAQ: NFLX) and other companies for a share of the digital video market as consumer audiences increasingly turn to the Internet and a plethora of mobile devices to watch television shows and movies.

Full Disclosure: None.

eBay Inc. (NASDAQ: EBAY): Q4 Earnings Preview 2009

eBay Inc. (NASDAQ: EBAY) is scheduled to release financial results for fourth quarter after the market close on Wednesday, January 20, 2010. Analysts, on average, expect the company to report earnings of 40 cents a share on revenue of $2.28 billion. In the year ago quarter, the company reported earnings of 41 cents per share on revenue of $2.04 billion.

eBay Inc. and its subsidiaries provide online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and businesses in the United States and internationally. It operates in three segments: Marketplaces, Payments, and Communications.

In October, the San Jose, California based company reported that its third quarter net income declined to $350 million or $0.27 per share, compared to $492 million or $0.38 per share, in the comparable quarter last year. Non-GAAP net income for the quarter was $502 million or $0.38 per share, compared to $592 million or $0.46 per share, in year-ago period. Quarterly revenue rose to $2.2 billion from $2.1 billion in the same period last year. Analysts, on average, expected the company to report earnings of $0.37 per share on revenue of $2.14 billion.

On an FX neutral basis, fixed price gross merchandise volume or GMV excluding vehicles grew 37% or 17% excluding G-market.

For the fourth-quarter 2009, eBay expects GAAP earnings per share in the range of $0.28 to $0.30 and non-GAAP earnings per share in the range of $0.38 to $0.40. Net revenue is forecast in the range of $2.20 billion to $2.30 billion.

In November, the online retailer announced the successful completion of the sale of its Skype communications unit in a deal valuing the business at $2.75 billion. The buyer, who will control about 70% stake, is an investor group led by Silver Lake and includes Joltid Limited and certain affiliated parties, the Canada Pension Plan Investment Board and Andreessen Horowitz. eBay received about $1.9 billion in cash and a note from the buyer in the principal amount of $125 million. The company retained an around 30% equity investment in Skype. The company also purchased senior debt securities with a face value of $50 million as part of Skype debt financing.

The 2009 online holiday shopping season was a positive one as growth rate surpassed analyst estimates. According to comScore, consumer spending online rose 4% compared to last year, with shoppers spending $29.1 billion at online retail sites in November and December. In 2008, online sales as tracked by comScore fell 3 percent. For eBay, the biggest shopping day of the year—with more than 2.3M transactions in the U.S.—was Sunday, December 13th. Similarly, Paypal, a subsidiary of the company, reported a double digit growth in online sales or total payment volume on Cyber Monday. Black Friday 2009 total payment volume jumped 20% from the year before. Similarly, on Thanksgiving Day 2009, total payment volume surged by 25% year-over-year compared to Thanksgiving Day 2008.

The company is also benefiting from a growth in mobile commerce in the United States. Mobile shopping at eBay tripled year-on-year this holiday season. According to figures released by eBay, said 1.5 million items were bought worldwide via eBay mobile applications this holiday season. During 2009, eBay buyers and sellers have generated over US$500 million of transactions using mobile devices.

Though, it appears that eBay's turnaround efforts have started to pay off, the firm still faces an uphill climb. Despite eBay's vast potential, Amazon (NASDAQ: AMZN) dominates the e-commerce space continues to grow from strength to strength. Apart from Amazon, eBay also faces heightened competition from new entrants like Google (NASDAQ: GOOG), which may leverage its operations to create compelling alternatives to eBay's current model.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 14.38 and PEG ratio (5 yr expected) of 1.20. In terms of stock performance, eBay shares have gained 25 percent over the past year.

Full Disclosure: Long AMZN.

Sprint Nextel Corp. (NYSE: S): Third Quarter Earnings Preview 2009

Sprint Nextel (NYSE: S), the third-largest US wireless carrier, will release its third quarter earnings before the market open on Thursday, October 29, 2009. Analysts, on average, currently expect the company to report a net loss of 15 cents a share on revenue of $8.09 billion. In the year ago quarter, the company reported a net loss of 11 cents per share on revenue of $8.81 billion. In the past four quarters, the company has twice missed Wall Street forecasts.

The company has been steadily losing money and customers amid stiff competition. Late in July, the company reported that its second quarter net loss widened to $384 million or 13 cents per share, from $344 million, or 12 cents per share, in the year-ago quarter. Net operating revenues for the quarter were $8.14 billion, down 10% from $9.06 billion in the same period last year and down 1% from the preceding first quarter.Analysts, on average, expected the company to report a loss of 2 cents a share on revenue of $8.12 billion for the quarter.

On a segmental basis, Sprint Nextel's wireless net operating revenues for the quarter declined 9% to $7.00 billion from $7.74 billion in the previous-year quarter. Of the total net operating revenues, wireless service revenues for the quarter declined 9% year-over-year to $6.4 billion. Operating loss for the segment widened to $314 million from $262 million in the same period last year. Wireless post-paid average monthly revenue per user, or ARPU, remained stable at $56, primarily due to growth in fixed-rate bundled plans such as Simply Everything, offset by declines in usage and roaming. Prepaid ARPU for the quarter was approximately $34, compared with $30 in the year-ago period. Post-paid churn in the quarter was 2.05%, up from 1.98% in the year-ago period, but down from 2.25% in the preceding first quarter. Postpaid churn is the measure of these monthly customers dropping service. The company has one of the industries worst churn rates.

The Overland Park, Kansas-based company is losing subscribers at a rapid pace. Even the launch of the highly anticipated Palm Inc. Pre couldn't prevent Sprint Nextel Corp.'s most lucrative customers from defecting to rivals in the second quarter. The wireless operator started selling the much-awaited Palm Pre on June 6 and has exclusive rights to the 'Pre' through at least the end of the year. Sprint Nextel served 48.8 million customers at the end of the second quarter, down 0.61% from 49.1 million at the end of the preceding first quarter. For the latest quarter, total wireless customers declined by approximately 257,000, including net losses of 991,000 post-paid customers - comprising 393,000 CDMA and 598,000 iDEN customers. The company gained a net 938,000 prepaid iDEN customers, offset by net losses of 161,000 prepaid CDMA customers. The company also experienced a net loss of 43,000 wholesale and affiliate subscribers.

The company's wireline revenues for the quarter were $1.43 billion, down 11% from $1.61 billion in the previous-year quarter, as legacy voice and data declines offset Internet revenue growth. On a sequential basis, wireline revenues declined 3% from the first quarter. Operating income for the segment increased to $208 million from $143 million a year ago. Internet revenues were up 10%, reflecting strong enterprise demand for Global MPLS services and the increasing base of cable subscribers who utilize VoIP services. Legacy voice revenues declined 18% year-over-year. Legacy data revenues dropped 32% from a year ago, in part due to customer transitions to IP services.

Recently, Amazon (NASDAQ: AMZN) dropped Sprint as the primary wireless service provider for the latest versions of the Kindle 2 e-book reader. From now on, new Kindle 2s, in the U.S. and worldwide, will be powered exclusively by AT&T’s 3G network. The move is being seen as a major blow to Sprint, as Kindle DX, is $230 more expensive than the international Kindle and, thus, is likely to enjoy lower sales.

However, there are few bright spots. The recessionary environment has actually spurred demand for Boost Mobile, its pre-paid brand which offers unlimited voice and text for $50 per month and is targeted at lower income, and younger customers. The segment added 770,000 subscribers in the second quarter, which represents the highest reported level of prepaid performance by any U.S. carrier in three years. Sprint Nextel is also working hard on nationwide expansion for its fourth-generation (4G) wireless broadband service. The company made history by becoming the first US carrier to launch 4G WiMax mobile broadband services in the U.S. with the official commercial service launch in Baltimore in early October 2008.

Early this month, Sprint unveiled Samsung's First Android-Powered Phone "Samsung Moment." The new mobile will be available beginning November 1. Earlier, Sprint and Taiwan-based mobile phone company HTC Corporation announced the proposed launch of the HTC Hero, the wireless device running on Android software in October.

Last month, shares of the company surged after a London-based newspaper reported that German telecom giant Deutsche Telekom AG is likely to submit a bid for Sprint Nextel Corp.. However, Deutsche Telekom CFO Timotheus Hoettges later suggested that his firm is not interested in acquiring the U.S.-based wireless giant.

Sprint recently announced that it has agreed to acquire its regional affiliate and wireless communications service provider iPCS, Inc. for $24 per share in cash, or about $831 million, including the assumption of $405 million of net debt. The acquisition is expected to be completed by the year end or early 2010. Sprint expects to achieve annual synergies of about $30 million through the proposed transaction and expects the transaction to be free cash flow accretive in 2010.

Meanwhile, federal antitrust authorities approved Sprint's $483 million purchase of prepaid phone services giant, Virgin USA, on Aug. 24. The companies announced the deal July 28. Virgin Mobile USA Inc. shareholders will vote Nov. 24 on the proposed deal.

In terms of stock performance, Sprint shares are up almost 67% since the beginning of the year. Shares of the company lost 13 cents or 3.85% to close at $3.25.

Disclosure: Author doesn’t own any of the stocks discussed here.

Cloud Computing: The Next Big Thing?

What Is Cloud Computing?

Cloud computing is a style of computing in which data and software is housed in remote data centers rather than on-site server, which are typically accessed through the Internet. It implies that instead of running software applications on your computer, you run the apps in the "clouds" in cyberspace, in other words through the Internet. All your programs and files are stored on an outsourced computer network.Users need not have knowledge of, expertise in, or control over the technology infrastructure "in the cloud" that supports them.

The concept incorporates infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS) as well as Web 2.0 and other recent technology trends that have the common theme of reliance on the Internet for satisfying the computing needs of the users. Examples of SaaS vendors include SAP Business ByDesign, Salesforce.com and Google Apps which provide common business applications online that are accessed from a web browser, while the software and data are stored on the servers.

Cloud computing should not be confused with grid computing ("a form of distributed computing whereby a 'super and virtual computer' is composed of a cluster of networked, loosely-coupled computers, acting in concert to perform very large tasks"), utility computing (the "packaging of computing resources, such as computation and storage, as a metered service similar to a traditional public utility such as electricity") and autonomic computing ("computer systems capable of self-management").

Advantages of Cloud Computing:

1.Cost is greatly reduced and capital expenditure is converted to operationalexpenditure. Server equipment cost is reduced due to elimination of the necessity of on site servers. Staffing cost also comes down, since there is little or no need for on-site network administration.

2. This lowers barriers to entry, as infrastructure is typically provided by a third-party and does not need to be purchased for one-time or infrequent intensive computing.

3.Device and location independence enable users to access systems using a web browserregardless of their location or what device they are using, e.g., PC, mobile. As infrastructure is off-site (typically provided by a third-party) and accessed via the Internet the users can connect from anywhere.

4.Multi-tenancy enables sharing of resources and costs among a large pool of users who can acces it through PC, netbooks, mobile phones and other handheld devices.

5.Clouds provide scalability; can easily grow as the organizaton grows.

6. Security typically improves due to centralization of data, though concerns are raised about privacy issues.

Cloud Service Providers (CSPs) include bigger names like Amazon, Microsoft , Google , Sun and Yahoo.

Worldwide cloud computing services revenue is continuing to grow at a rapid rate, and is expected to top $56.3 billion (US) in 2009, according to a report from technology research firm Gartner. Market revenue grew by 21.3 per cent from 2008's $46.4 billion, and it will continue to increase to $150.1 billion in 2013.

Nonetheless, there are still concerns about security and privacy from individual through governmental level, e.g., the USA PATRIOT Act and use of national security letters and the Electronic Communications Privacy Act's Stored Communications Act.