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Facebook, Google and Apple – Fading Influence

Imagine the Silicon Valley tech stars from 2005 to 2015, seeing explosive growth, turning so many into billionaires, and deeply changing how we communicate. Then in 2015, competition, government influence and social changes lay a new foundation, things started to change – sales faulted and distrust and fear start to take root. Think of the image of Apple, Facebook and Google in 2012 versus 2019, the world sees these firms differently.

For Facebook the warning signs came early and frequent, starting back in 2015 and 2016, there were a series of scandals,  then the Cambridge Analytica scandal with 2016 presidential election, then hearings in the US Congress in which Mr Zuckerberg looked a bit distant and detached. Something was wrong at Facebook, sometimes management seemed to be hiding from the press and the public. 

At one point, COO Sheryl Sandberg was writing books and being interviewed by the top business magazines – now she is nowhere to be found after this string of scandals were dropped in her lap. A survey of 8,000 users including techies showed that 55 percent said that scandals involving the COO had “devalued” Facebook. Some reports suggested that there were battles and distrust within some circles in the firm. 

According to an a piece by the New York Times that outlined how Sandberg allegedly directed the Facebook communication department to investigate billionaire George Soros after he criticized the firm. According to the piece, Facebook also commissioned “opposition research” on Soros through a Republican-linked company – the article says that Sandberg denied knowing this piece of information. However, it is becoming clear, like this Soros example above, that even some on the Left are attacking the once invincible titans of Silicon Valley. Clearly the Left is starting to eat each other.

Still, a recent survey internally at Facebook said that the COO was supported by staff as 72 percent said she should not be fired. And it is worth noting that Facebook reported strong earnings in the late January reporting season, beating analysts expectations for Q4 and taking the stock higher on short covering. January looks good, but the deeper and long-term issues remain. 

Now Facebook is, like many social media companies, facing challenges from a wide range of internal and external  threats. The social network firm is now grappling with lower margins, slower sales growth and regulator risks that seem to be weighing on its business performance. The 4th quarter sales growth of 20 percent was down from the strong growth in the 3rd quarter of 33 percent. And the revenue growth that the firm enjoyed, 40 to 50 percent in recent years, has slowed a bit, down to an expected rate of 36 percent for 2018 according to S&P Capital IQ. Facebook is still making money but its glory days are clearly fading. 

When we turn to Apple, things started to change in the fourth quarter of 2018 when the firm reported flat sales and in a surprise move, announced that it would not be reporting iPhone and iPad unit sales in the future. This move can only be interpreted as negative – and analysts do not like this decision because iPhones account for 59% of revenue, it is after all a iPhone company. 

Apple experienced a punishing end to 2018 and with more competition and pressure coming from rivals in 2020, the company has had several presentations that suggest it is moving beyond iPhones and into other products and services……still…..

Apple sales fell 27 percent in Greater China as an economic slowdown has started to take hold. Partially driven by the trade war between the United States and China.

The new phones from Apple are not selling as well as many analysts had forecast. Since October the firm has lost about one-third of its market value which translates to hundreds of billions of dollars. Some analysts are now saying that recent sales of wearables and other gadgets are helping the firm stabilize but smartphones and other products are not producing the sales expected of them. 

Still, when looking at the factors such as a saturated smartphone market for Apple, a trade war with China that is now being elevated to new levels, and with slower sales growth and lower margins with Facebook, the winners and loses in US tech could start to reveal themselves in 2019 and beyond.

We see more fear and possibly layoffs in the future of Silicon Valley. 

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