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Microsoft sees cloud business growth, but supply woes continue for Xbox

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October 27, 2021

By Subrat Patnaik and Stephen Nellis

(Reuters) -Microsoft Corp on Tuesday forecast a strong end to the calendar year thanks to its booming cloud business but said supply chain woes will continue to dog key units such as those producing its Surface laptops and Xbox gaming consoles.

The company beat Wall Street expectations for its fist quarter ended Sept. 30, with pandemic-induced demand for the software giant’s cloud-based services driving sales.

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Contracts for cloud services provided by Microsoft, Amazon.com Inc’s AWS and Alphabet Inc-owned Google Cloud have surged since last year when the COVID-19 pandemic shut offices and schools, pushing more activity online.

First-quarter revenue growth for Azure, the company’s flagship cloud-computing business, came in at 48% in constant currency to beat analysts’ estimates of 47.5%, according to consensus data from Visible Alpha. Amy Hood, executive vice president and chief financial officer of Microsoft, said that the company also expected “broad based growth” for the unit in the fiscal second quarter.

Azure’s growth rate is the best direct measure of competition with rivals such as AWS and Google Cloud as Microsoft does not break out revenue from the cloud-computing unit.

Microsoft appeared to hold off Google Cloud’s rising challenge. Google Cloud said on Tuesday https://www.reuters.com/technology/google-parent-alphabet-beats-revenue-expectations-2021-10-26 its revenue surged by 45% to $4.99 billion, but failed to live up to estimates of $5.2 billion.

Revenue at the firm’s other business units that house Windows software, the Teams messaging service and LinkedIn professional social networking platform also beat analyst expectations.

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The supply chain issues affecting much of the global tech industry had mixed consequences for Microsoft.

Hood said Microsoft has continued to increase its cloud computing margins despite higher data center construction costs because it keeps adding more profitable services to those data centers. Hood also said that the company was able to ship more Xbox S and X gaming consoles than it expected in the first quarter – sales of gaming consoles and accessories were up 166% as the company continued to see strong demand for new models after the pandemic forced millions to seek entertainment at home.

But Microsoft and its rivals have been unable to keep up with demand because of the global chip crunch. Hood told Reuters the company expects Xbox demand to continue to exceed supply in the company’s second quarter, which includes Christmas.

She also said that sales of the company’s Surface computers, which declined 17% in the fiscal first quarter, were likely to keep sinking in the second quarter, with supply chain shortages hitting premium items in the lineup.

Microsoft’s revenue from selling Windows to PC makers grew 10% year over year, beating the overall PC market, which only grew 3.9% over the same period because of supply constraints, according to data from IDC.

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Hood said that the company was able to outperform in the PC market because of its strength in selling licenses for Windows destined for corporate customers, where it gets more revenue per license and has better market share.

Overall, revenue rose 22% to $45.32 billion in the first quarter ended Sept. 30, beating expectations of about $43.97 billion.

Net income rose to $20.51 billion, or $2.71 per share. The company said its results included a $3.3 billion net income tax benefit.

On an adjusted basis it earned $2.27 per share, trumping analyst expectations of $2.07 per share.

For the fiscal second quarter, Microsoft predicted a midpoint of $18.23 billion in revenue for its intelligent cloud business for the fiscal second quarter, above estimates of $17.84 billion, according to Refinitiv data.

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First-quarter revenue from “Intelligent Cloud” surged 31% to $17 billion. Analysts had expected a figure of $16.58 billion, according to Refinitiv data.

Microsoft’s forecast for its software app and Windows centric segments with midpoints of $15.83 billion and $16.55 billion, respectively, were also above Refinitiv estimates of $15.40 billion and $15.51 billion.

Shares of the company, which have risen nearly 40% this year, were marginally up in extended trading.

(Reporting by Subrat Patnaik in Bengaluru and Stephen Nellis in San Francisco; Editing by Aditya Soni and Sonya Hepinstall)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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