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Mayer Touts Yahoo’s Mobile Growth At Developers Conference

SAN FRANCISCO — Amid a generally falling stock and an uncertain future, Yahoo ( YHOO ) opened its mobile developers conference in San Francisco on Thursday with a keynote by CEO Marissa Mayer that avoided addressing the company’s troubled state of affairs . Speaking to several hundred developers of mobile apps — the balconies at the historic Masonic venue were empty — she kicked off the daylong affair with an optimistic tone, a day after the company’s latest round of layoffs. “We’re continuing to invest in tools that will help developers build great apps, reach new audiences and grow into great businesses,” Mayer said in the prepared speech. “Today we’re pleased to announce that we have passed 800,000 applications. That means we’ve had almost 500 applications added each day of the past year.” Mobile has been a Yahoo focus since Mayer came aboard as the heralded new CEO in 2012, recruited away from a top role at Google, which is now a unit of Alphabet ( GOOGL ). On Wednesday, tech news website Re/code reported  that the company had designated it as the day of the week to implement the job cuts  that the company announced would be coming early this month, when it said it was mulling its strategic options. The company has said it plans to lay off 15% of its workforce, cutting about 1,600 jobs . Mayer reportedly intends to spread the layoffs over several Wednesdays. One Yahoo employee told the New York Times that it was “kind of a blood bath” at Yahoo’s offices. “Only a handful of people are staying,” the employee, who requested anonymity, told the Times. Yahoo stock edged up a fraction Thursday, to 29.42. Shares last week touched a 31-month low of 26.15. In her speech, Mayer touted the $1 billion annual revenue being brought in by apps developed on Yahoo’s mobile ad and analytics property, called Flurry. “We want you to know that you’re in the right place,” Mayer said. Yahoo Touts ‘Long-Tail’ Mobile Apps Mayer also told developers that, though mobile growth in general is “plateauing,” developers should focus on capturing more of the time that people spend on mobile devices. “At Yahoo, we believe that the mobile industry is going to be defined by many players, not just a handful,” she said, adding that long-tail apps — designed for less common tasks such as a virtual dressing room — are growing far more quickly than those designed for common tasks such as email or instant messaging. Simon Khalaf, Yahoo vice president of publishing products, also warned that mobile is a maturing industry, which some took to mean that 2016 might see a slowdown. “Mobile is growing so fast,” Khalaf said in his prepared remarks, following Mayer’s. “There was a phenomenal growth year, but growth rates are declining.  Wall Street thinks that hardware is on the decline due to saturation, but there’s more opportunity in software. It’s the sign of a maturing industry.” Mayer spoke for just over 10 minutes, though she was scheduled to talk for 25 minutes. At last year’s conference, she took questions from reporters, but this year Yahoo declined to make her available, substituting Khalaf instead. Mobile has been a significant focus for Mayer, part of what the company calls its “MaVeNS” strategy — focusing on the growth areas of mobile, video, native ads and social. Yahoo has spent hundreds of millions of dollars to acquire firms such as Flurry and BrightRoll. The company reported 45% growth in its MaVeNS revenue in 2015 and 26% year-over-year growth in Q4, compared with 8% and 2% growth for the company overall. Mobile represented about 20% of Yahoo’s revenue last year. The embattled CEO has also made big bets on its media properties — bets that did not pay off, as Yahoo on Wednesday said it’s shutting down several of its online magazines, such as food and travel. It plans to reduce the size of its tech reporting staff and eventually fold it into Yahoo News . Yahoo’s revenue growth has now stalled for nearly a decade. Advertising dollars continue to slip away to rivals such as Facebook ( FB ), Netflix ( NFLX ), Google and others. Yahoo’s Q1 2016 guidance disappointed analysts. Nomura analyst Anthony DiClemente said that it implies that net revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) will decline by 19% and 53%, respectively. Nomura lowered its price target on Yahoo stock to 34 from 40, citing changes in the valuation of Yahoo’s stake in Chinese e-commerce giant Alibaba Group ( BABA ). Yahoo executives forecast modest revenue growth acceleration in 2017 and 2018.

Epam Jumps 9% As Q4 Beats; Can Stock Challenge India Outsourcers?

The stocks of Eastern European-rooted IT outsourcing companies, including Epam Systems,  have seen more downside in recent months than the India-centric ones. But Epam just had a great day. Newton, Penn.-based Epam’s ( EPAM ) stock jumped 14% early Thursday and kept most of that gain through the day, as investors responded to a consensus-beating fourth quarter report that included a 26% revenue surge and mixed guidance. Epam closed up 9.3% in the stock market today  at 65.67, still 22% off an all-time high set Dec. 17 at 84.41. The company went public priced at 12 in January 2012. Specializing in software development and testing for tech vendors, EPAM was founded by two Belarusians, one in Princeton. N.J., and the other in Minsk. Founded in Moscow, Luxoft Holding ( LXFT ), now headquartered in Switzerland, was up 2% Thursday near 51, still 36% off its its Dec. 8 record high of 80.64. Luxoft maintained half its workforce in Ukraine  before war broke out between the government and Russian-backed rebels. It still employs thousands in Eastern Europe as it grows its presence there, in Western Europe and elsewhere. Two of the largest IT consulting and business process outsourcing (BPO) firms, U.S.-based Cognizant Technology Solutions (CTSH) and India-based Infosys ( INFY ), are trading 19% and 15% below their 52-week high marks, respectively. Cognizant fell 1.1% to 56.01 Thursday and Infosys 0.4% to 16.41. Infosys holds the highest IBD Composite Rating of the bunch, 82 out of a possible 99. Cognizant gets a 79, as does Epam. Luxoft has a 65. While all four firms support employees outside their workforce bases, they have a more important thing in common: All four look to the U.S. for a plurality, if not a majority, of their revenue. “Epam’s competitive differentiation comes from its highly educated workforce in Eastern Europe and Russia, nearly all of whom hold a master’s equivalent university degree in math, science or engineering,” said Baron Global Advantage Fund ( BGAFX ) portfolio manager Alex Umansky in a Dec. 31 newsletter. “In contrast, most India-based competitors predominantly rely upon recent college graduates with limited experience.” The difference, he said, allows Epam “to work on higher-value client projects with stronger pricing power than peers” and makes Epam “well-suited” to benefit from rising corporate spending on SMAC, or social, mobile analytics and cloud technologies. Another outsourcer, neither Eastern Europe nor India oriented, ManTech International ( MANT ), rose 1.5% to close at 27.44 Thursday after rallying as high as 29.14 in the morning. ManTech is 22% off a nearly three-year high set exactly one year ago today, Feb. 18. ManTech specializes in highly sensitive IT for U.S. defense and intelligence agencies. After Wednesday’s close, ManTech offered revenue guidance up 5% for 2016, following a 46% slide in sales from 2011 through 2015, prompting Cowen analyst Gautam Khanna to suggest in a Thursday research note that “growth finally appears plausible.” For Q4, ManTech said diluted EPS fell to 37 cents from 39 cents a year earlier, on revenue of $402 million, down from $411 million in the year before. For the full year, diluted earnings rose to $1.36 per share from $1.27, on sales of $1.55 billion, down from $1.77 billion in 2014. As for Epam Systems, it earned 78 cents per share minus items in Q4, up 26% from a year earlier, beating Wall Street analysts polled by Thomson Reuters by 5 cents, on revenue up 29% to $260 million, beating analyst views by about $9 million. Epam guided adjusted Q1 EPS to 70 cents, short of analyst expectations of 72 cents, on revenue up 29% to $258 million, beating Wall Steet’s $250 million estimate. For the year, it guided adjusted EPS to $3.20 vs. analysts’ $3.16, on revenue up at least 26% to $1.151 billion, beating Wall Street’s $1.122 billion.  

China’s Q4 Earnings Season Resumes With NetEase, Baidu, JD

The state of China’s wobbly economy will come into focus next week when a pair of big Chinese Internet companies are set to report fourth-quarter earnings. First up to bat is NetEase ( NTES ), a home-field favorite on China’s gaming scene. It ranks a close second in gaming to Tencent Holdings ( TCEHY ), which reports earnings next month. Also coming next week is China search engine leader Baidu ( BIDU ), followed by e-commerce company JD.com ( JD ) on March 1. NetEase is set to report after the close Wednesday. The company topped earnings expectations when it post Q3 earnings Nov. 11, sending its stock to a then record high of 159.34, as revenue rose 114% in local currency, year over year. The stock continued upward and hit an all-time high of 186.45 on Dec. 29. NetEase has pulled back and closed Thursday near 152. The Q4 consensus estimate on NetEase is for sales to rise 121% in local currency to $1.17 billion. Earnings per share minus items are seen rising 52% in local currency, to $2.25. Analysts will look at the state of new mobile games in the pipeline. In late December, NetEase unveiled 26 new mobile and PC games. Baidu is set to report after the close Thursday, with analysts looking for guidance on China’s ad market amid an economic slowdown. Baidu stock jumped 11% to 197.47 when it reported Q3 earnings on Oct. 30 that were in line with estimates. Revenue rose 36% in local currency. Analysts expect Q4 revenue will rise 32% in local currency, to $2.85 billion. EPS minus items is seen falling 27%, to $1.01. Last week, Baidu announced that it had received a non-binding proposal from two Baidu executives to acquire the company’s fast-growing Qiyi video wing for $2.8 billion. Baidu stock hit a seven-month high of 217.97 on Nov. 30 but closed Thursday near 161. JD.com is slated to report Q4 earnings before the market open on March 1. The focus is expected to be on JD’s push into online-to-offline (O2O) retailing and other new businesses. JD is banking on its O2O business to help it compete in China’s burgeoning e-commerce arena vs. China e-commerce leader Alibaba ( BABA ) and others. Analysts expect sales to rise 50% in local currency to $7.96 billion. They see the company swinging to a two-cent per-share loss from a penny profit in the year-earlier period. Tencent, China’s leader in messaging and gaming, is set to report earnings before the market open March 17. It’s traded in the U.S. over the counter. Tencent, Alibaba, JD and Baidu are the four largest Internet companies in China. On Jan. 28, Alibaba reported earnings for its fiscal third quarter, ended Dec. 31, that topped Wall Street expectations.