Facebook's Ad Sales, Google's Smartphone White Flag, and Taper's Round 2
Someone get us a Costco-sized grinder of this maple bacon coffee flavored beer after another big drop on Wall Street. The Dow Jones Industrial Average toppled 190 points Wednesday after a big, bad announcement from the Federal Reserve.
1. Fed continues its taper in Bernanke's last meeting
That's a wrap. The Fed's epic eight-times-per-year, two-day policy meeting/vacation retreat ended Wednesday. Chairman Ben Bernanke didn't hand out a rose like on The Bachelor (though it would make the central bank more fun), but he did announce more stimulus cuts that rocked Wall Street.
Throughout 2013 the Fed supported the U.S. recovery through "quantitative easing" (aka QE3) -- it bought $85 billion in long-term bonds every month, which drove down interest rates to encourage borrowing and risk-taking to help the U.S. economy.
But starting in December, the Fed decided to cut back on its stimulus protein shake. As econ data over the past year continues to show the U.S. economy improving, the Fed cut its monthly QE3 purchase to $75 billion, and on Wednesday it chopped the amount down again to $65 billion. The Fed did say that quantitative easing of some size will remain until unemployment dips closer to 6.5%, but stimulus-hooked investors weren't craving the news.
The takeaway is that Big Bernanke's last meeting almost made us tear up -- 'cause it was his last. The legend leading the Fed has been at the helm since '06 but will step away on Feb. 1 as Janet Yellen steps in. She's expected to keep stimulus flowin', but we'll miss the beard jokes, Ben.
2. Facebook shows off impressive mobile-driven earnings
Facebook's alarming user growth rate (warning: Grandma's cat video is on your news feed) has come to an end. New users grew only 3% from the prior quarter. The good news is that it's matured into a profit power. Sales climbed 63% to $2.3 billion in the fourth quarter, and earnings totaled $523 million. Both crushed Wall Street estimates.
Mobile advertising is climbing as a percentage of total revenues at 53% in the fourth quarter, up from 23% a year ago. It's important, since 77% of users are doing it on their phones. Clearly, Mark Zuckerberg is learning how to occupy smartphone users with annoying Wal-Mart ads on their walls, which is a huge plus for FB shareholders.
Facebook knows you better than your mom does, and they're cashing in on the ad dollars. Because of all-encompassing user-data, FB targets a demographic with razorlike precision, so it's charging top dollar for its ad space. Companies are paying 29% more per FB ad than last year.
It's still growing, too. Facebook's employee headcount grew 33% last year and is poised to grow more in 2014. Look out, Silicon Valley. More Adidas sandals and zip-up hoodies are coming your way. The stock is up 10% on the awesome news.
3. Google sells Motorola phone unit to Lenovo
Do you have a hardware business that stinks? Lenovo is probably willing to buy it off you. The Chinese tech company is binging on American underperforming tech segments. First Lenovo bought IBM's laptops in 2005, then its servers last week, and Wednesday it announced it was buying Google's Motorola phone division for $2.9 billion.
Google makes phones? Yes. You might not have noticed that your Motorola Droid is made by Google , and it has been ever since Big G bought the phone company for $12.5 billion in May 2012. It's selling today because it's a viciously competitive business to make smartphones. And it was ticking off Samsung, too.
Android OS is owned by Google, and it's what most Samsung smartphones run on. The fact that Larry Page's enormous company had its own pet-phone company irritated the biggest phonemaker in the world, Samsung. Maybe this sale gets Google out of Samsung's doghouse.
Motorola was a $9.6 billion loss for Google, according to my Gcalc app. It wasn't a total failure, since it got to gobble up some lawsuit-preventing patents from Motorola's intellectual-property arsenal, but this is a high-profile defeat for GOOG ... and another chapter of Lenovo's journey into American AV clubs.
U.S. GDP reading
Weekly jobless claims
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MarketSnacks Fact of the Day: America eats about as much mayonnaise as the next three most-consumed condiments combined.
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