March 20, 2023

Although Revenue Rises, Subscribers Drop DirecTV and Time Warner Cable

The results reflected a continued strategy on the part of both companies, also mirrored by some rivals, to appeal to what DirecTV in its earnings report called “higher-quality subscribers” — that is, customers who will stick around longer and pay more for monthly services. In the United States, DirecTV’s average revenue per household — a closely watched measure called ARPU within the industry — rose 4.6 percent, to $98.73. Time Warner Cable reported a 1.2 percent uptick in average revenue per household, to $105.21.

However, Time Warner Cable lost 191,000 television subscribers in the second quarter, somewhat more than analysts were predicting. The cable company, and others like it, have been losing TV market share to satellite providers including DirecTV and other rivals like Verizon FiOS for years. But for only the second time in its history, DirecTV lost television subscribers in the second quarter, a total of 84,000.

The second quarter of the year is typically the weakest for the whole industry. Nonetheless, the subscriber decline at DirecTV prompted new chatter about whether the much-hyped phenomenon of “cord cutting,” when households give up a bundle of products including television in favor of online streaming services like Netflix, was visible in the data.

DirecTV, for its part, attributed the decline to its effort to retain more profitable households, even at the risk of losing some that are less profitable. It also cited “a more challenging competitive environment and mature industry.” Roughly 100 million American households subscribe to some form of television; that number has remained remarkably stable for years, despite newfound competition on the Internet.

But an analysis by the Leichtman Research Group in May found that the country’s biggest television providers collectively lost about 80,000 subscribers in the 12-month period that ended in March, the first time that the researchers had ever counted an industrywide subscriber loss (rather than typical share-shifting between companies). The earnings reports this quarter are being scrutinized for further evidence of declines.

Time Warner Cable showed some weakness on the broadband Internet side of its business, too. Like other cable companies, it has relied on broadband growth to offset television subscriber slippage. In the second quarter it added a mere 8,000 home broadband subscribers. The company pledged to improve its performance.

Over all, DirecTV posted a profit of $660 million, or $1.18 a share, for the quarter, down from $711 million, or $1.09 a share, a year ago. Profits were up at Time Warner Cable, totaling $481 million, for the quarter, up from $452 million, or to $1.64 a share from $1.43 a share, a year ago. When one-time costs were excluded, earnings reached $1.69 a share, exceeding analysts’ expectations.

Time Warner Cable stock closed at $117.68 on Thursday, up more than 3 percent in part thanks to continued discussion of consolidation in the cable industry. John Malone, who holds a stake in a much smaller cable company, Charter, proposed a merger with Time Warner Cable this year.

On a conference call on Thursday, Glenn Britt, the departing Time Warner Cable chief executive, said the Wall Street speculation about any such deal “is really an endorsement of the value of our assets.” The DirecTV chief executive, Michael White, also addressed consolidation — in his case, between DirecTV and its smaller satellite rival Dish Network — on a conference call on Thursday. He suggested that the differences in DirecTV’s and Dish’s operating strategies made an immediate mash-up unlikely.

“But you never say never, and we’ll be opportunistic when the right moment arrives,” Mr. White added.

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G.M.’s Quarterly Profit Falls 14%

G.M., the nation’s largest automaker, said global revenue dropped 2 percent during the quarter to $36.9 billion, despite a concerted effort to introduce new models in the United States and Europe.

The automaker’s core North American operations achieved a pretax profit of $1.4 billion during the quarter, a 14 percent decline from the same period a year ago. By comparison, the Ford Motor Company, G.M.’s smaller hometown rival, had pretax earnings of $2.4 billion in the region during the quarter. The earnings show that G.M. still trails Ford significantly on profits earned per vehicle sold in the thriving United States market.

G.M. has struggled to rebuild its business since the recession, when it needed a $49.5 billion government bailout and bankruptcy to survive. The automaker has since cut brands, models and thousands of jobs to bring costs more in line with production and sales.

The company’s chief executive, Daniel F. Akerson, said the decline in earnings and revenue did not reflect the progress G.M. is making with new models in the marketplace.

“The year is off to a strong start as we increased our global share with strong new products that are attracting customers around the world,” Mr. Akerson said in a statement.

G.M. lost market share in the United States last year to competitors like Chrysler and Toyota. Mr. Akerson has vowed to reverse that trend this year with vehicles like the new Cadillac ATS sedan and restyled versions of its big pickup trucks.

The company sold 902,000 vehicles in the United States in the first four months of this year, about a 10 percent gain over the same period in 2012. Sales for the overall industry have improved by about 7 percent.

G.M. narrowed its losses in Europe during the quarter. It said it had a pretax loss of $175 million in the region, compared to $294 million in the first quarter of last year.

In Asia, the company said pretax profits were about $495 million, slightly less than a year ago. Its South American operations had a pretax loss of $38 million, compared to income of $153 million last year.

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State of the Art: Galaxy S4 Crams in More Software, Some of It Good

There’s a world of wisdom there. When Apple designed its original iPhone, it had zero market share; the company had nothing to lose by taking risks. As a result, the phone teemed with bold ideas.

But as the iPhone became more iconic and more important to Apple, the company’s courage to shake things up has dwindled. Why mess with a great thing?

That timidity gave Samsung the opening it needed. Its Galaxy S phone went after the iPhone with all guns blazing, and soon became a cellular celebrity in its own right.

When it was a distant would-be, Samsung had nothing to lose. “Let’s try making the screen really huge!” “Let’s try hand gestures!” “Let’s try eye recognition!”

But now here’s the Galaxy S4, the fourth incarnation of Samsung’s best-seller. (All four big United States carriers will offer it for prices from $150 to $250 with a two-year contract, or around $640 up front.) And here’s the funny thing: Now Samsung is starting to play it safe.

The Galaxy is still a beautiful, high-horsepower Android phone. But basically, it’s an updated Galaxy S3. If this were Apple, who adds the letter S to denote a slightly upgraded model (“iPhone 4S,” for example), Samsung might have called this phone the Galaxy S3S.

The S4 is the same size as the S3 (well, seven-tenths of a millimeter thinner). It’s still huge, more Jumbotron than index card. Good for maps and movies, bad for small hands.

And the S4 is still made of plastic — lightweight and grippy, but not as classy as the iPhone’s glass or the HTC One’s metal.

All told, nobody at the office will notice that you’ve bought the latest and greatest.

Yet Samsung has managed to cram better components into this wafer without increasing its size. The bright, supersharp screen is now 5 inches diagonal, up from 4.8; the margins have shrunk.

The battery is 20 percent bigger, too. That doesn’t necessarily mean much improvement in the one-day battery life, because the larger screen drinks up more power. Fortunately, you can still pop off the back panel and swap batteries, which you can’t do on an iPhone without a blowtorch. You can also expand the storage with a memory card; the iPhone can only watch with envy.

Most of the other changes in the S4 are software features. More than ever, Samsung’s design approach this time was, “Throw everything in and see what sticks.” There was absolutely no filter. There’s also no consistency, coordination or unified direction; it’s just a big, rattling cargo bay crammed with features.

A few examples: SMART SCROLL This is the S4’s much anticipated eye tracking. Like its predecessor, the S4 can recognize your eyes; it can, for example, dim the screen when you look away, to save battery power. In the S4’s video app, playback pauses when you look away (usually).

Better yet, the Web page or e-mail message you’re reading scrolls when you tip your head, or tip the phone a little bit. No hands! It’s unpredictable and gimmicky, but hey — it’s innovation, right?

AIR VIEW Point to the screen without actually touching the glass to get a pop-up preview of something. For example, point to a calendar square to see a pop-up preview of that day’s events, or to a Gallery thumbnail image to see the full-size photo.

Unfortunately, this feature is inconsistent. Why does it work in the Mail program, but not the Gmail program? (For that matter, why does Android require one app for Gmail, and another for other e-mail services?)

AIR GESTURES A sensor sees when you’re waving your hand — a feature that “really adds value when you’re eating with greasy fingers,” Samsung says. You can scroll a Web page or e-mail message by flapping your hand, or accept an incoming call with a wave. When the phone is locked and dark, waving makes the screen light up long enough for you to see the time, battery gauge and notification icons.


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McDonald’s Profit Rises, but Year-Over-Year Sales Fall

In announcing its results, the company said that comparable sales worldwide fell 1 percent during the period and warned that comparable sales were expected to dip again in April. It was the first quarterly decline in a decade in sales at restaurants open at least 13 months.

As Burger King and Wendy’s have stepped up their marketing, McDonald’s has responded by promoting its Dollar Menu and other value deals.

The strategy has caused concern among analysts who worry that it could affect profit margins. It has also rankled some McDonald’s franchisees.

But in a conference call with analysts on Friday, McDonald’s executives insisted that offering cheaper prices was necessary because the restaurant industry was barely growing. The executives said McDonald’s needed to steal customers from its rivals.

“That battle for market share has become so critical for the long-term health of business, we’re willing to sacrifice that margin,” said Peter J. Bensen, the company’s chief financial officer.

Although profit margins declined in the first quarter, McDonald’s noted that it picked up market share in many parts of the world, including the United States. But there are signs that such deals are upsetting the independent franchisees.

Janney Capital Markets reported this week that 25 United States franchisees who collectively operate 180 McDonald’s restaurants on average rated their relations with the company below historical levels. Janney said some complained about excessive coupons and discounts.

For the quarter, global sales dropped 1.2 percent in the United States and 1.1 percent in Europe, the company’s biggest region by sales. Sales fell 3.3 percent in the region encompassing Asia, the Middle East and Africa, reflecting weakness in Japan and in China.

For the quarter, McDonald’s earned $1.27 billion, or $1.26 a share, compared with $1.267 billion, or $1.23, a year ago. Revenue edged up 1 percent, to $6.6 billion.

Analysts had expected a profit of $1.26 a share on revenue of $6.59 billion, according to FactSet.

Shares of McDonald’s fell 2 percent, to $99.92.

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Chrysler’s Earnings Soar in 2012

DETROIT — Chrysler, the smallest of the American automakers, on Wednesday reported a big increase in 2012 earnings that helped its Italian parent company, Fiat, become profitable for the year as well.

Chrysler said that its net income soared to $1.67 billion last year — about nine times as much as the $183 million it earned in 2011.

The exponential increase underscored the company’s comeback from its government bailout and bankruptcy in 2009, when it was taken over by Fiat.

In the fourth quarter alone, Chrysler said it earned $378 million, a 68 percent increase from $225 million in the same period in 2011. Revenue in the quarter was $17.2 billion, a 13 percent gain from $15.1 billion a year earlier.

“Chrysler concluded a very successful 2012 with a robust fourth-quarter performance,” said Jesse Toprak, an analyst with the auto research site “The company was the only domestic automaker to gain market share last year.”

Chrysler also benefited from having little exposure to the deepening economic crisis in Europe, where vehicle sales have fallen to the lowest levels in nearly 20 years.

The European problems, however, took a heavy toll on results at Fiat, which also reported earnings on Wednesday.

Without Chrysler, Fiat said it would have lost 1.04 billion euros ($1.4 billion) in 2012. But instead, Chrysler’s results helped Fiat earn a profit of 1.41 billion euros for the year, about a 15 percent decrease from the 1.65 billion euros the Italian automaker earned in 2011, which included Chrysler after the middle of the year.

In the fourth quarter, Fiat reported a profit of 388 million euros. Without Chrysler’s contributions, it would have lost 241 million euros.

Analysts said Chrysler’s strong performance in the surging United States market should compensate for Fiat’s troubles for some time to come.

“With Europe in the mess it is in, it’s going to be a tough slog for Fiat,” said Mike Wall, an analyst with the market-research firm IHS Automotive. “They need all the help Chrysler can give them.”

Fiat currently owns a 58.5 percent stake in Chrysler, and has been consolidating the American company’s performance into its own results since June 2011.

Chrysler has been growing steadily as it introduced new vehicles and revamped older models. Its revenue for 2012 was $65.8 billion, a 19.6 percent improvement from $55 billion the previous year.

For the year, its global vehicle sales increased to 2.2 million, an 18 percent increase from 1.9 million the previous year, and its market share in the United States improved to 11.2 percent, up from 10.5 percent a year earlier.

Sergio Marchionne, who serves as chief executive of both Chrysler and Fiat, said the turnaround at Chrysler was gaining momentum thanks to solid sales of core products like the Ram pickup and the Jeep Grand Cherokee S.U.V.

“We pause for a moment to enjoy our accomplishments,” Mr. Marchionne said, “but we will not stop.”

Mr. Marchionne forecast continued improvement for Chrysler this year. He said the company expected to earn net income of $2.2 billion in 2013, on revenue of $72 billion or higher.

He also outlined plans on Wednesday to bring more Fiat and Alfa Romeo models to the United States, even as Chrysler delays the introduction of some of its own new products.

The Alfa Romeo brand, which left the American market almost 20 years ago, will return with a sports car later this year. It is the first of several new Alfas destined for the United States over the next three years.

Fiat will also add several new products for the American market, building on its first offering, the tiny Fiat 500 microcar.

Mr. Marchionne said that a few Chrysler car models, mostly derived from Fiat platforms, would be delayed as a result.

“The product plan is a living document,” he said, referring to changes in Chrysler’s vehicle timetable. “And we continue to rework that document.”

Mr. Marchionne also said plans were fluid regarding an initial public offering of Chrysler stock. A health care trust for retired members of the United Automobile Workers union is seeking an I.P.O. to cash out its 41.5 percent ownership stake in Chrysler.

Chrysler’s large profits in 2012 will directly benefit its current hourly work force. About 31,000 union members will receive average profit-sharing checks of $2,250, the company said.

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It’s the Economy: Come On, China, Buy Our Stuff!

It wasn’t supposed to be this way. In 2000, the United States forged its current economic relationship with China by permanently granting it most-favored-nation trade status and, eventually, helping the country enter the World Trade Organization. The unspoken deal, though, went something like this: China could make a lot of cheap goods, which would benefit U.S. consumers, even if it cost the country countless low-end manufacturing jobs. And rather than, say, fight for an extra bit of market share in Chicago, American multinationals could offset any losses because of competition by entering a country with more than a billion people — including the fastest-growing middle class in history — just about to buy their first refrigerators, TVs and cars. It was as if the United States added a magical 51st state, one that was bigger and grew faster than all the others. We would all be better off.

More than a decade later, many are waiting for the payoff. Certainly, lots of American companies have made money, but many actual workers have paid a real price. What went wrong? In part, American businesses assumed that a wealthier China would look like, well, America, says Paul French, a longtime Shanghai-based analyst with Access Asia-Mintel. He notes that Chinese consumers have spent far less than expected, and the money they do spend is less likely to be spent on American goods.

There is a long list of missteps, French says. Home Depot, for example, overestimated the desire for D.I.Y. home projects and high-end materials in a country with an unbelievably cheap labor force and a thriving black market. Kodak learned it couldn’t forever dump its unsold film on a consumer base looking to make their first cameras digital ones. The Gap had to learn that a thriving middle class does not want to dress shabby-chic. In general, French says, European companies have done much better than American ones because they’ve had to practice selling across borders and cultures for decades.

Many U.S. executives also assumed that as China got richer, its citizens would spend more of their income. But the opposite has happened: the country’s savings rate is now climbing faster than its spending. China’s households save more than a quarter of their money, while Americans save less than 4 percent.

Some argue that this is because of millenniums-old Confucian frugality. Others say it’s more prosaic. When China joined the W.T.O. in 2001, it famously conceded that it would break “the iron rice bowl” — to get rid of the millions of decent-paying (for China) government jobs with fairly generous (for China) benefits. Partly as a result, a successful professional in Shanghai knows that she will have to bear any future health care or retirement costs for herself and, because of the one-child policy, for her parents and grandparents too.

Yet probably the greatest barrier to Chinese consumption is the policy of China’s Central Bank. Every month, the United States buys around $35 billion in goods and services from China and sells around $11 billion back. That, of course, leaves a $24 billion trade deficit. Currencies work like any other salable good in that they adjust based on supply and demand. Every month, the United States is demanding a lot of renminbi and China is demanding few U.S. dollars. The natural result should be for the dollar to get weaker as the renminbi gets stronger.

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Google, a Giant in Mobile Search, Seeks New Ways to Make It Pay

But there was a problem: searching on a phone was less than ideal. It was hard to type on small screens. And most irritating for Google, which brags about its speed on every page of search results, was that Web pages were slow to load on phones.

So Google started a project it code-named Grand Prix. In six weeks, engineers revamped mobile searching and hatched plans for new ways to search on the go, by talking or taking photos instead of typing.

The stakes were high. Mobile phones could be a huge new market for Google. Or they could provide an opening for a competitor to pounce, or obviate the need for a search engine altogether. If people on phones could go straight to apps for information, why Google anything?

Today, Google says mobile searches are growing as quickly as Web searches were at the same stage in the company’s early days, and they are up sixfold in the last two years. Google has a market share of 97 percent for mobile searches, according to StatCounter, which tracks Web use.

Now that it dominates the field, Google is throwing its burly computing power and heaps of data at new problems specific to mobile phones — like translating phone calls on the fly and recognizing photos of things like plants and items of clothing.

“I feel like a parent the second time around feels,” said Amit Singhal, a Google fellow who works on search. “You saw your first child grow at an amazing pace, and here we are with our second child, mobile, growing at the same pace and showing the same signs.”

Google has been slow to seize some newer Web business opportunities, most notably social networking. Investors have criticized the company for dragging its feet when it comes to figuring out how to make money in new fields.

But mobile is an exception. Last year, Eric E. Schmidt, then the company’s chief executive, said Google’s philosophy was “mobile first,” meaning it would build products for phones at the same time as versions for PCs.

“This is the place that Google is essentially betting its future on,” said Karim Temsamani, Google’s head of mobile advertising, a role created in September.

Still, Google has not consistently followed the mobile-first mantra, and some analysts, including Colin W. Gillis of BGC Partners, say it has not moved quickly enough to create new mobile products or ads.

“They’ve done a really good job of positioning themselves so they can’t get boxed out of the market,” Mr. Gillis said. “Now they just need to deliver some innovation. Let’s wring some revenue out of this platform.”

Google said in October that mobile ads were on track to generate $1 billion in revenue in the coming year. Mobile users can call a business from within a Google ad or receive coupons for nearby stores. They can take cellphone photos of movie posters to pull up a trailer. With new technologies like near-field communication, advertisers could reward customers with loyalty gifts for walking into stores, Mr. Temsamani said.

But because mobile ads generally sell for less than half the price of Web ads, Mr. Gillis said, “there’s just not a lot of profit left over.” Though Google makes Android software for phones, it does not make money from it directly because it gives it away to phone makers. Meanwhile, Apple makes money from its devices and from what appears on their screens, including its own ad network.

Still, the company’s approach to the mobile market is classic Google: take problems that computer scientists have been working on for decades, throw huge amounts of data and computing power at them and assume that if the resulting product is useful to people, it will eventually make money.

People can now snap photos of landmarks or wine labels to search for them using Google Goggles, speak to their phones using voice search and, on Android phones, translate spoken conversations between English and Spanish.

“We as an academic community would have figured this out, but we wouldn’t have been able to set it up on this kind of scale,” said Alexei A. Efros, an associate professor in computer science and robotics at Carnegie Mellon, referring to these kinds of technological feats. “That’s really the great thing about Google, the fact that it can do it on such a humongous scale and actually make it useful to the general public.”

Google trained its computers to learn spoken language based on troves of voice recordings. “Even if you’re from Brooklyn and you drop all your R’s when you park your car, it’s heard plenty of people from Brooklyn and it can do well,” said Mike Cohen, head of Google’s speech technology team.

At first, Google engineers thought people would talk to its voice search service as if they were talking to a person — “you know, it’s my anniversary, and I’d love to take my wife somewhere really romantic to eat, do you have any ideas?” — so it taught the service to filter out unnecessary words. But it turned out that Google had already trained people into thinking in keywords, so they knew to search “romantic restaurants” even when speaking instead of typing.

Goggles, the visual search tool, recognizes things that have strong visual textures, like a bar code, book cover or landmark. But it often can’t distinguish between a black cat and a black chair, for instance, or recognize food or plants, though Google is working with botanists to teach its machines the secrets of leaf-spotting. Google already has the capability to recognize faces, so people could theoretically snap a photo of a blind date and pull up an online profile, but it is not yet using that technology because it is still working out the privacy implications.

People can also snap a photo to translate a menu in a foreign country, and speak English to hear the Spanish translation. Someday Google hopes to be able to translate both sides of a phone conversation as it happens, said Franz Och, head of Google’s machine translation group.

Though the search results Google spits out might seem the same on phones as on computers, there are some behind-the-scenes differences.

For example, certain search results are ranked differently, with location factored in. Search for Wal-Mart on a computer and Google suspects you are probably looking for the e-commerce site or job openings. Search on a phone and Google assumes you are looking for the nearest store. Other search tools were built specifically for phones. Search for weather or stock prices and Google shows a scale, movable with a finger, to see results for different times.

Google says mobile search is not stealing time from computer searches. Instead, mobile searches spike during the lunch hour and evenings, when people are away from their computers. And while mobile users do search for simple things like weather and train times, engineers have been surprised at how many people also ask more complicated questions about business and politics.

“Mobile search is definitely going to surpass desktop search,” said Scott B. Huffman, who works on mobile search at Google and leads its search evaluation team. “The lines will pass, and I think they’ll pass before anyone thought they would.”

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