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Amazon Surprising 2Q Earnings

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“A very good cost quarter,” is the way Amazon.com Inc CFO Brian Olsavsky conservatively described Amazon’s Q2 2015 results. Operating cash flow increased 69% to $8.98 billion for the preceding twelve months, compared with $5.33 billion for the same period last year.

Investors reacted less conservatively with shares surging more than 17% to $566 within hours of the announced result. In the past Amazon’s been known for sacrificing short-term profit, preferring to spend its money on long-term investment. Wall Street was bracing for a loss of 14 cents per share with only $22.39 billion in revenue — so results that put the company narrowly in the black understandably surprised the market.

Net sales also increased 20% to $23.18 billion in the second quarter, compared with $19.34 billion in Q2 2014. Net sales increased 27% compared to Q2 2014.

Some factors which impacted the results were Amazon’s increased deployment of automation in its warehouses to reduce costs, the Prime Day online sale (where customers purchased 34.4 million items reportedly at a rate of 398 products per second), and a sales increase of 81% to 1.82 billion of Amazon Web Services (AWS) which supplies cloud computing.

Contrast this to other companies’ recent Q2 reports and the results are even more staggering. Apple posted Q2 revenue of $58 billion and quarterly net profit of $13.6 billion reflecting 27% revenue growth. Microsoft’s Q2 revenue was $26.5 billion and shares dropped 4% mostly due to Windows OEM revenue — the amount of income Microsoft gets from selling software on new retail PCs — being down 13% from last year.

Amazon CEO Jeff Bezos has now taken Amazon to a company that’s bigger (by capitalization) than Walmart. Impressive for a business that only a year ago reported a loss of $126 million and ever-shrinking margins. Bezos is well known for taking a long-term view of the market and his attention to business detail, and Amazon has certainly been working on those details. Olsavsky commented that there is “certainly” a connection between Amazon’s past investment, faster delivery times, same-day delivery services (Prime Now), and revenue today.

The impact of growth in AWS cannot be overlooked. Bezos has referred to AWS as a “$5 billion business.” The 2015 Q2 results put AWS with a run rate greater than $7 billion — well ahead of its target. In comparison, Microsoft’s run rate for their longer-established cloud business reported was $8 billion for the same period.

A good result for Amazon also means a good year for Bezo personally with his net worth increasing by $8 billion as the 2Q result came out. By way of contrast, Google owner Sergy Brin and Larry Page’s net worth surged by $4 billion each last week when their 2Q result came out and market capital increased by $60 billion.

Amazon’s now seen as a growth company. Even the workforce is predicted to increase (Amazon has over 4,600 open positions just in its Seattle headquarters). There are new services on the horizon such as the production of the original film, video content for its subscription streaming service Prime. Investors will be eagerly awaiting Q3 results to see if the growth in revenue continues.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Starlink Pulls Plug on Ghana, South Africa, and Others

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Starlink, the satellite internet service operated by SpaceX, has announced the cessation of services in countries including Ghana and South Africa.

This decision comes as a significant blow to users who have come to rely on Starlink for their internet connectivity needs.

The decision, set to take effect by the end of April 2024, will disconnect all individuals and businesses in unauthorized locations across Africa, including Ghana, South Africa, Botswana, and Zimbabwe.

While subscribers in authorized countries such as Nigeria, Mozambique, Mauritius, and others can continue to use their kits without interruption, those in affected regions face imminent loss of access.

One of the reasons cited by Starlink for the discontinuation is the violation of its terms and conditions.

The company explained that its regional and global roaming plans were intended for temporary use by travelers and those in transit, not for permanent use in unauthorized areas. Users found in breach of these conditions face the termination of their service.

Furthermore, Starlink’s recent email to subscribers outlined stringent measures to enforce compliance.

Subscribers who use the roaming plan for more than two months outside authorized locations must either return home or update their account country to the current one. Failure to do so will result in limited service access.

The decision to discontinue services in certain countries raises questions about the future of internet connectivity in these regions.

Also, concerns have been raised about Starlink’s ability to enforce the new rules effectively. Reports indicate that the company has previously failed to enforce similar conditions for over a year, raising doubts about the efficacy of the current measures.

Starlink’s decision to pull the plug on Ghana, South Africa, and other nations underscores the complexities of providing satellite internet services in diverse regulatory environments.

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Nigeria’s Broadband Penetration Stalls at 42.53% Amid Connectivity Challenges

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Nigeria’s broadband penetration has stalled at 42.53% as of January, according to the latest report.

Subscriptions currently stand at 92.19 million, indicating a significant gap in connectivity, particularly in rural areas.

The Nigerian National Broadband Plan 2020-2025 aims to increase broadband penetration to 70% by 2025, with the ultimate goal of achieving 96% mobile broadband coverage by 2030.

However, this ambitious target requires substantial investment—approximately $461 million, according to a recent report by the Global System for Mobile Communications Association (GSMA).

While the country’s major telecommunications companies, such as MTN Nigeria and Airtel Africa, have invested heavily in expanding their network infrastructure, much of this development has been concentrated in urban areas. Rural and underserved regions face a significant coverage gap, exacerbating the digital divide.

Despite these challenges, Nigeria has made progress in improving its broadband infrastructure. Since 2012, the mobile broadband coverage gap across Africa has decreased from 56% to 13% in 2022, due to significant investments in network capacity and new technologies.

Nonetheless, millions of Nigerians, particularly those in rural regions, remain without access to essential telecom services.

To address this issue, Nigeria’s government established the Universal Service Provision Fund (USPF) in 2006, aimed at bridging the connectivity gap and expanding broadband access to unserved and underserved areas.

The fund provides resources for deploying telecommunications infrastructure in economically unviable regions.

The success of these initiatives, along with increased investments in broadband infrastructure and policies to incentivize internet expansion in remote areas, will be crucial in closing the connectivity gap and improving digital access for all Nigerians.

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iPhone Shipments Drop Amid Resurgence of Android Rivals

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Apple Inc. reported a significant drop in iPhone shipments during the March quarter, reflecting a downturn in sales across China amid the resurgence of competition from Android-powered rivals.

According to market tracker IDC, the tech giant shipped 50.1 million iPhones in the first three months of the year, a 9.6% year-on-year decline that fell short of the average analyst estimate of 51.7 million.

The steep decrease in iPhone sales marks Apple’s most significant quarterly dip since 2022, when Covid-19 lockdowns disrupted supply chains.

This time, the Cupertino-based company faces challenges from resurgent competitors such as Huawei Technologies Co. and Xiaomi Corp.

These firms have rebounded strongly in recent quarters, and their innovative product lines have begun to reclaim market share from Apple in China.

Samsung Electronics Co. regained its position as the top smartphone supplier globally, while Apple ranked second. Xiaomi closed the gap on Apple, shipping 40.8 million units, an impressive 33.8% increase year-on-year.

Transsion Holdings, another key player in the budget smartphone segment, nearly doubled its shipments, showcasing the competitive environment Apple faces.

Nabila Popal, research director at IDC, highlighted the broader shift in the smartphone market, which has recovered from the supply chain disruptions and challenges of recent years.

“While Apple has demonstrated resilience and growth in recent years, maintaining its pace and share in the market may prove challenging as Android manufacturers make strides,” Popal commented.

Apple has a strong brand and loyal customer base, yet its market position may be tested further by the aggressive pricing and innovative products offered by Chinese rivals.

The company’s efforts to sustain its premium pricing strategy may also be challenged as more customers consider switching to Android alternatives.

As the tech industry looks ahead to the rest of the year, Apple’s upcoming earnings report and strategic moves to address this competitive pressure will be closely watched by investors and industry observers alike.

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