Amazon Anticipates Slow Down

For the first quarter of 2021, Amazon reported a 41% year-on-year increase in sales to 108.5 billion US dollars at constant currencies. For the current quarter, it expects to report sales of between 110 billion and 116 billion dollars - year-on-year growth of between 24% and 30%. This guidance anticipates a favourable impact of approximately 200 basis points from foreign exchange rates. 

As it benefits from the pandemic-induced demand for digital commerce, Amazon is enhancing its delivery capabilities. It is fitting delivery vehicles with camera safety technology and artificial intelligence to capture real-time data (such as following safe distance and road conditions) to identify at-risk driving events. "When this technology was piloted in 2020 on over two million miles of delivery routes, crashes decreased 48%, stop sign violations decreased 20%, driving without a seatbelt decreased 60%, and distracted driving decreased 45%," Amazon said.

It is also expanding Amazon Scout, a fully electric autonomous delivery system. "Similar in size to a small cooler on wheels, Amazon Scout rolls down the sidewalk at walking pace and delivers items right to customers," the company said. ?Since its launch, Scout has delivered tens of thousands of packages to customers in California, Georgia, Tennessee, and Washington, and the programme is continuing to expand to new communities in the U.S." 

Amazon Web Services (AWS) increased revenues by 32% year-on-year to 13.5 billion dollars in the first quarter. It said that DISH is leveraging AWS’s infrastructure to build a cloud-based, 5G open radio access network (O-RAN) "to deliver consistent, cost-effective performance from the cloud to the edge of the network". It also reported that The Walt Disney Company is working with AWS on the expansion of Disney+ to more than 100 million subscribers around the world. Source: Amazon statement

Alphabet Reports Big Rebound

For the first quarter of 2021, Alphabet reported revenues of 55.3 billion US dollars, up 32% at constant currencies, "reflecting elevated consumer activity online and broad-based increases in advertiser spending within Google Services, as well as ongoing strength in Google Cloud." 

Reporting on its "Other Bets" division, Alphabet said Waymo’s fully autonomous public ride-hailing service in Phoenix is providing hundreds of rides per week. In San Francisco, Waymo has begun limited employee testing. 

Asked about Alphabet's plans for office space in the wake of the pandemic, Ruth Porat, CFO said. "We've been very clear we do value bringing people together in the office. And we're looking at a hybrid work from home, work from office model. As we look forward at developing our real estate footprint for offices, what we factor into it is, first, we are growing our headcount. We are looking at less density per employee. So even with a hybrid work environment, we will continue to need space. And so we're continuing to build out our campuses and office facilities."

Source: Alphabet Investor Relations

Telsa Talks Up Computer Vision and Energy Storage

Tesla reported a 74% year-on-year rise in revenues for the first quarter of 2021 to 10.4 billion US dollars, as total vehicle deliveries more than doubled to almost 185,000.

CEO Elon Musk also shared some thoughts on the development of artificial intelligence to run self-driving cars:

"The neural net needs to be compressed into a fairly small computer... that's using on the order of 70 or 80 watts. So this is a much harder problem than if you were you, say, 10,000 computers in a server room.

"With the elimination of radar, we're finally getting rid of one of the last crutches. ...You actually just need vision to work. .. it's like having eight cameras, it's like having eyes in the back of your head, beside your head and has three eyes of different focal distances looking forward. ... and processing it at a speed that is superhuman. There's no question in my mind that with a pure vision solution, we can make a car that is dramatically safer than the average person.

Two million cars to collect data

"Key to solving this is also having some massive data set. Just having well over one million cars on the road that are collecting data from every sort of corner case, rare situations.....Perhaps next year, we'll have two million cars in active use, providing vast amounts of video training data that then needs to be digested by a very powerful training system. 

"So we developed a lot of training software...to do surround video labelling, which is quite tricky. This means all eight cameras simultaneously at 36 [frames] a second per camera labelling video over time. There wasn't any tool that existed for this, so we developed our own labelling tool. ... the Holy Grail is auto labelling.

"The trainers train the training system and then the system auto labels the data and then the human labellers just need to look at the labelling to confirm that it is correct and perhaps make edits. And then every time an edit is made, that further trains the system. So it's kind of like a flywheel that's just sort of spinning up. And really, the only way to do this is with vast amounts of video data.

"Dojo ...is a supercomputer optimised for neural net training. We think Dojo will be.... an order of magnitude more cost efficient in hardware and in energy usage for a frame of video compared to a GPU-based solution or compared to the next best solution that we're aware of. So then possibly that could be used by others."

Tesla also reported a 71% year-on-year rise in energy storage deployments, mainly driven by the popularity of its Powerwall product for homeowners. With demand outstripping supply, it is now only selling Powerwall to customers who also buy its solar roof products.

"Even if all lights go out in the neighbourhood, you will still have power," Musk told investors. "So that gives people energy security. And we can also, in working with the utilities, use the Powerwalls to stabilise the overall grid....with a whole bunch of Powerwalls and houses, we can actually buffer the power. And so if the grid needs more power...we can then actually release power onto the grid to take care of peak power demand.

"The Powerwalls can operate as a giant distributed utility. This is profound....and necessary because we are headed toward a world where.....people are moving toward electric vehicles. This will mean that the power needs in -- at homes and businesses will increase significantly.

Step change in electricity demand

"If you go to full renewable electricity, we need about 3x as much electricity as we currently have. So these are rough numbers, but roughly you need twice [as] much electricity if all transport goes electric, and... three times much electricity, if all heating goes electric. So basically, this is a prosperous future, I think, both for Tesla and for the utilities.

"It needs to occur both at the local level and at the utility level. If it doesn't occur at the local level, what will actually be required is a massive increase in power lines in power plants. So they have to put long distance and local power lines all over the place. They'll have to increase the size of the substations, is a nightmare."

Source: Tesla's investor relations

Weaker Returns for U.S. Telcos

 

Upheaval in the U.S. telecoms is hitting profitability. In 2020, the aggregate return on capital employed (ROCE) by the top three telcos in the U.S. nosedived to just 5% (before tax) from 7% in 2019. Industry ROCE was eroded by major write-downs by AT&T, primarily related to its ill-starred acquisition of DirecTV, as well as the pandemic and T-Mobile US's efforts to absorb Sprint. Tellingly, aggregate net cash flow also fell, as AT&T felt the competitive heat in the entertainment market (see chart below).

Temporarily, at least, the leading U.S. telcos are even less profitable than their European counterparts, with the notable exception of Verizon. Over the past six years, Verizon has outperformed its peers by some distance (see chart above). 

For more, please see a new report by Pringle Media on the financial performance of AT&T, Verizon, T-Mobile US and Sprint (now part of T-Mobile US). The iBooks edition is available here and the Kindle edition is available here.  

Top Telcos Struggle with Low ROCE

 

Over the past decade, Europe's largest telcos have struggled to cover their cost of capital. Their aggregate return on capital employed (ROCE) since 2010 is just 6% before tax, according to estimates in a new report by Pringle Media.  

Still, the aggregate ROCE of Europe's big five telcos - Deutsche Telekom, Orange, Vodafone, Telefónica and Telecom Italia - appears to have risen slightly in 2020, despite the pandemic. That is due to an improving financial performance by Vodafone, which has historically made a weak return on the vast amounts of capital it spent on acquisitions. However, Vodafone has yet to report its profitability for the final quarter of 2020, so these numbers may change.

For more, please see the iPad version of the new report here or the Kindle version here.