Daily Brief: Regulators Are Closer Than Microsoft And Alphabet Would Like Them To Be

Daily Brief: Regulators Are Closer Than Microsoft And Alphabet Would Like Them To Be

almost 2 years ago3 mins

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Microsoft and Google-parent Alphabet reported diverging quarterly updates late on Tuesday, but they both have one thing in common: they’re never far from regulation…

What does this mean?

Microsoft kicked things off with a clean sweep of expectation-beating results: revenue from its cloud computing business was 26% higher than the same time last year, its productivity business – think Office 365 and LinkedIn – 17% higher, and its PC business 11% higher. No such luck for Alphabet, whose overall revenue missed expectations. That, even though its advertising revenue – from platforms like Google and YouTube – was up 22% on the same time last year, and its cloud revenue up 44%. Its profit disappointed too, given how much it spent driving visitors to its sites and keeping them there. And while Alphabet tried to appease investors with a $70 billion buyback of its own shares, it didn’t work: the company’s stock initially fell 5%.

Alphabet stock
Source: Google Finance

Why should I care?

The bigger picture: Sneaky tactics.

Microsoft and Alphabet are still numbers two and three behind Amazon in the cloud space, but Microsoft is gaining ground: it’s increased its market share by nearly 10% over the past five years, putting it at around 21% to Amazon’s 33%. Not without some allegedly underhanded tactics, mind you: there’s talk that Microsoft’s been luring customers away from rivals by charging more to run its Office applications on their cloud services. And with regulators always sniffing around the tech giants these days, analysts think this could be next on their agenda.

Cloud market share

Zooming out: Why choose?

Boeing won’t settle for just one cloud giant, not when it can have all three: the plane manufacturer announced earlier this month that it’s hiring Microsoft, Alphabet, and Amazon to help revamp its tech and give its designers and developers better software to work with. It’s hoping that’ll improve quality control, as well as eliminate some of the production issues that drive up the costs of developing new aircraft.

Keep reading for our next story...

Twitter Agreed To Be Bought By Elon Musk

Twitter image

Twitter accepted Elon Musk’s offer to buy the social media giant earlier this week, whether you like it or not.

What does this mean?

We’ve all been where Elon’s been: bought a stake in one of the world’s biggest social media platforms, rejected an offer of a board seat, then offered to buy the company outright. So you must’ve felt for the guy when Twitter tried to scupper the move with a poison pill tactic, hoping to put him off by diluting his ownership and driving up the price of the deal.

Breathe easy: some of Twitter’s largest shareholders bombarded the company with calls urging it to accept, forcing the company to come to the negotiating table. So while your bids on major companies might’ve fallen through, Elon’s didn’t: Twitter agreed to sell to the world’s richest man for around $44 billion – 38% more than it was worth at the start of the month.

Twitter trading

Why should I care?

For markets: Rob Tesla, pay Paul.

Banks are prepared to lend Elon almost $26 billion to pay for the deal, but he’ll need to cover the rest himself. That leaves two options: find investors to buy the company with him, or – more likely – sell some of his stake in, say, Tesla. That might be why the EV maker’s stock has fallen 9% since he announced his takeover ambitions earlier this month.

Tesla stock

The bigger picture: Leave Elon alone.

Elon’s been explicit about his intent: he wants Twitter to be a bastion of free speech, where everyone – disgruntled men, disgruntled presidents, and disgruntled billionaires alike – can finally tell the world what they really think after having been silent – on podcasts, on network television, and on the world stage – for far too long. But analysts have pointed out that Elon has used the platform to influence his personal business interests before, and they cynically argue that he could use his new position to do it again. Okay, snowflakes…

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