Today: Twitter's first earnings report as a public company leads to a serious dive in its stock price, while Pandora and Yelp join in the earnings report barrage. Also: Google gains after antitrust compromise, Apple increases amid more patent fights.
The Lead: Twitter, Pandora and Yelp announce fourth-quarter earnings
Twitter's highly anticipated post-IPO earnings report led to big after-hours losses on Wall Street, as investors and analysts showed disappointment in the company's subscriber growth despite stronger revenue gains than expected. The San Francisco company was not alone in late trading losses, as Pandora and Shutterfly declined after their earnings reports, leaving only Yelp enjoying post-earnings gains.
Twitter reported a net loss of $511.47 million, or $1.41 per share, on revenues of $242.68 million, representing revenue gain of 116 percent from the same quarter a year ago; after adjusting for one-time charges, Twitter reported profits of $9.77 million, or 2 cents a share. Those result easily defeated analyst expectations of a loss of 2 cents a share after adjustments on revenues of $218 million, according to Thomson Reuters.
"Twitter finished a great year with our strongest financial quarter to date," CEO Dick Costolo said in Wednesday's announcement.
Twitter's soaring stock price hit a wall after the earnings were released, however: After dropping 0.5 percent to $65.97 in regular trading, shares dropped more than 13 percent to less than $57 in after-hours action, which could presage Twitter's worst day of trading since the company's November 2013 debut at $27 a share.
Analysts pointed to Twitter's inability to attract more users to its social network and keep them on the service when they visit. Twitter reported 241 million monthly average users, a 5 percent gain from the third quarter, the smallest sequential subscriber gain yet for the company; and users viewed their timeline fewer times in the fourth quarter than the previous quarter, with 148 billion Timeline views representing a 7 percent sequential decline. Analysts expected 249 million monthly users viewing their timelines 174 billion times.
"What this report will do is it will question how mainstream is Twitter as a platform," Sterne, Agee & Leach analyst Arvind Bhatia told Reuters. "Both in the U.S. and internationally, the monthly active user base did not grow as fast as people thought, and that has an impact on the number of timeline views."
Costolo said in Wednesday's conference call that Twitter would fight its growth issues by seeking "to make the product easier for new users to use." by introducing new features that emphasize visual elements, direct conversations and the ability to search for conversations based on topics.
Oakland-based Pandora also suffered at the hands of investors in late trading Wednesday, after the streaming-radio company reported profits of $8.98 million, or 4 cents a share, on revenues of $200.36 million. Only November and December results were unknown for Pandora, which is switching its fiscal year to mirror the calendar year in 2014.
The results reflected Pandora's most profitable quarter in its history, but the company told investors and analysts not to expect those profits to continue: Pandora's forecast for the current quarter calls for a loss amid continuing investment in the company's future. For the full year of 2014, Pandora predicted revenues of $870 million to $890 million, solid growth after 2013's total of $637.89 million but still lower than analysts' forecast of nearly $900 million.
In Wednesday's announcement, Pandora CEO Brian McAndrews confirmed that Pandora's focus is on investing its cash rather than generating profits.
"We remain intensely focused on advancing Pandora's mission to reinvent radio," McAndrews said. "To fully capture the substantial market opportunity ahead of us, we will continue to aggressively invest in 2014 in sustained audience and engagement growth as well as activities that further accelerate monetization. As such, our bias will continue to be toward revenue growth and capturing additional market share."
Investors hoping for more of a profit-minded focus dumped the stock in late trading, leading to steep declines of about 10 percent. After ending regular trading with a 0.1 percent gain at $35.83, Pandora fell to slightly more than $32 by 3 p.m. Pacific time.
Breaking the trend of post-earnings declines was a different San Francisco social-networking company, Yelp. The user-reviews website lost $2.1 million, or 3 cents a share, on revenues of $70.7 million, though adjusted earnings were much kinder, showing a profit of $10.4 million. Yelp reported full-year revenues of $233 million, a 69 percent gain from 2012, and investors were likely jazzed by Yelp's forecast that revenue growth would continue to top 50 percent in 2014, with projections of $353 million to $358 million in 2014 revenues.
"Looking to 2014, we will continue our geographic expansion, add new products and programs for our community of writers and find even more ways to drive value to business owners," Yelp cofounder and CEO Jeremy Stoppleman said in Wednesday's statement.
After dropping 3.3 percent to $75.23 in regular trading, Yelp jumped to more than $81 in late trading.
SV150 market report: Google settles EU antitrust charges, stock gains
Wall Street's volatility continued Wednesday, as stocks dropped after reverting to gains on Tuesday. Tech stocks were some of the hardest hit, as the Nasdaq performed the worst of the three major U.S. stock indexes, and the SV150 dropped despite gains from Apple and Google.
Google increased 0.4 percent to $1,143.20 after reaching a preliminary agreement to avoid formal antitrust charges in the European Union. After three years of back-and-forth in the case, the Mountain View Web giant agreed to a variety of changes to the way it presents search results to users in Europe, where the company owns and extremely dominant position in the search market. "The concessions are far-reaching and have the clear potential of restoring a level playing field with competitors," EU Antitrust Commissioner Joaquin Almunia said Wednesday, adding that "No antitrust authority in the world has obtained such concessions." FairSearch, a group of competitors that includes Microsoft and Oracle, was not impressed, saying in a blog post that the changes are "worse than doing nothing." Google also confirmed that it has promoted Susan Wojcicki to head of its YouTube unit, which the company is auditing to root out bogus video views.
Apple gained 0.8 percent to $512.59 while being hit with two new patent fights: The Cupertino tech giant is being sued for $2 billion in Germany while the University of Wisconsin is seeking to prove Apple's new mobile chip violates one of its patents. Apple joined Google, its rival in the mobile sphere, in asking the U.S. Supreme Court to curb abuses of the patent system to help avoid such legal fights. Gilead dropped 4.7 percent to $78.15 after announcing its fourth-quarter earnings Tuesday, while Adobe gained 2.1 percent to $61 while preparing to assist NBC in streaming the Winter Olympics. Hewlett-Packard fell 1.1 percent to $28.01 after Reuters reported that the Palo Alto tech giant is about to lose two important executives, Todd Bradley and Dave Donatelli, who are just waiting for stock options to vest before exiting. Netflix dropped 0.4 percent to $404.42 after reports that Verizon was cutting customers' bandwidth when using the video-on-demand company's streaming service, a tactic many expected after a recent court ruling on net neutrality; Verizon denied the allegations.
Up: Adobe, VMware, Splunk, eBay, SunPower, Salesforce, LinkedIn, Cisco, SanDisk, Apple, Applied Materials, Symantec, Google
Down: Gilead, SolarCity, Yelp, Zynga, Tesla, AMD, NetApp, HP, Nvidia, Facebook, Twitter, Yahoo, Netflix, Intel
The SV150 index of Silicon Valley's largest tech companies: Down 2.02, or 0.14 percent, to 1,476.51
The tech-heavy Nasdaq composite index: Down 19.97, or 0.5 percent, to 4,011.55
The blue chip Dow Jones industrial average: Down 5.01, or 0.03 percent, to 15,440.23
And the widely watched Standard & Poor's 500 index: Down 3.56, or 0.2 percent, to 1,751.64
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.