Wednesday, September 22, 2021

Tech giants’ profits soar in pandemic boom but regulation looms

Analysts say it's likely that these latest results will lead to further calls for regulatory scrutiny to curb their dominance.

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Global tech giants have reported soaring profits as consumers upgraded their devices and sought cloud storage during lockdowns.

Major companies have done so well that analysts are warning that the figures may lead to calls for tech company curbs.

They point out that Silicon Valley giants are facing increased scrutiny as profits rise and it’s likely that these latest results will lead to further calls for regulatory scrutiny to curb their dominance.

Apple’s profits nearly doubled to US$21.7 billion in the three months to June 30 as customers bought pricier 5G iPhones. Apple’s record sales, meanwhile, were boosted by growth in digital subscriptions for its TV and music streaming services.

Microsoft saw a US$16.5 billion profit – up 47% year-on-year, due to demand for cloud services and games. The company said on Tuesday that sales in its fourth quarter had also been driven by demand for personal computers which include Windows software. The company recently launched a cloud-based version of its ubiquitous operating system.

Google’s parent company, Alphabet, also reported on Tuesday that quarterly sales and profits had surged to record highs due to an increase in spending on online advertising aimed at customers who were stuck at home shopping online due to restrictions.

Its video platform YouTube, for example, saw advertising revenue jump to US$7 billion in the three months ending June 30, in comparison with US$3.81 billion the year before.

The boss of the search engine giant, Sundar Pichai, said that there was a “rising tide of online activity in many parts of the world, and we’re proud that our services helped so many consumers and businesses”.

Chief financial officer Ruth Porat said that revenues, which hit US$61.9 billion, also reflected “elevated consumer online activity” as some economies recover from the coronavirus pandemic.

Apple’s chief executive Tim Cook singled out China as its fastest-growing market, where consumers snapped up accessories such as the Apple Watch, as well as the latest iPhone 12 model, which can connect to faster 5G wireless networks.

Wedbush analyst Dan Ives said, “Taking into account the global chip shortage affecting many companies including Apple, we would characterise this as a ‘gold medal’ performance.”

He added: “China remains a key ingredient in Apple’s recipe for success as we estimate roughly 20% of iPhone upgrades will be coming from this region over the coming year with the launch of the iPhone 13.”

As parts of the economy have started to reopen, firms such as Microsoft, Alphabet and Apple have been laying out plans on how to grow even as people spend increasing time away from home – and their devices.

In the UK, a new regulator called the Digital Markets Unit has just started work on creating new codes of conduct for tech firms and their relationship with content providers and advertisers. The regime will be “unashamedly pro-competition”, Business Secretary Kwasi Kwarteng said.

In the US, President Joe Biden recently signed an executive order in a bid to promote further competition.

The order suggests that problems have arisen because of large tech firms collecting too much personal information, buying up potential competitors and competing unfairly with small businesses.

It included several recommendations such as greater scrutiny of mergers in the tech sector and barring unfair methods of competition.

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