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Apple holiday season tops projections as iPhone bounces back

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Apple holiday season

By MICHAEL LIEDTKE AP Technology Writer

SAN FRANCISCO (AP) — Apple is still reaping huge profits from the iPhone while mining more moneymaking opportunities from the growing popularity of its smartwatch, digital services and wireless earbuds.

That combination produced a banner holiday season for a company whose fortunes appeared to be sliding just a year ago amid declining sales for the iPhone, its marquee product for the past decade.

Apple’s fiscal first-quarter results, released Tuesday, provided the latest proof that the fears hanging over the consumer electronics icon might have been unfounded.

Apple’s profit and revenue for the October-December period topped analysts’ projections, providing another boost to a stock that has more than doubled in less than 13 months.

The shares surged more than 1% to $322.14 in extended trading after the numbers came out. That’s up from $142 in January 2019 after Apple warned that consumers weren’t buying as many new iPhones as they once were, especially in China, the company’s biggest market outside the U.S. and Europe. China is also where Apple makes most of its iPhones and several other products.

If the shares move similarly in Wednesday’s regular trading session, they will flirt with a new all-time high for the stock and further cement Apple’s position as the most valuable company in the U.S., with a market value of $1.4 trillion.

A deadly viral outbreak in China, which has curtailed travel and threatens the world economy, looms as a potential concern for Apple. But investors for now are focusing on what looks like an even more prosperous road ahead for a company that turned a $55 billion profit in its past fiscal year.

In a conference call Tuesday, CEO Tim Cook said the coronavirus outbreak has already caused some of Apple’s suppliers in China to delay reopening their factories closed for the Lunar New Year holiday from the end of this month until Feb. 10. And some stores in China selling Apple products already have temporarily closed or reduced their operating hours because fewer customers are shopping as virus worries escalate.

“The situation is emerging and we’re still gathering lots of data points and monitoring it very closely,” Cook said.

Apple got off to a fast start for fiscal 2020, with a first-quarter profit of $22.2 billion, or $4.99 per share, on revenue of $91.8 billion. Analysts polled by FactSet had predicted earnings of $4.54 per share on revenue of $88.5 billion.

As usual, the iPhone remained Apple’s marquee attraction. Boosted by the release of the iPhone 11 heading into the holiday season, the product generated sales of $56 billion, an 8% increase from the previous year’s disappointing showing.

Besides rolling out high-end phones with more cameras and a starting price of $1,000, Apple sold a more basic model starting at $700 — a $50 drop from a comparable version released in 2018.

Apple’s division that includes its app store, product warranties, music streaming and a new Netflix-like video service delivered revenue of $12.7 billion, up 17% from the previous year. Apple is hoping its service division will produce revenue of at least $50 billion this year, doubling its output in just four years.

The services division is feeding into all iPhones, iPads, Macs and other Apple products already being used, which the company said Tuesday now totals 1.5 billion devices, up by 100 million from the previous year.

“We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board,” Cook said.

The Apple TV Plus video streaming service, which Apple launched amid great fanfare in October, is supposed to help that cause, but it may not be a huge contributor this year. That’s because Apple is initially selling it for just $5 per month to help drum up interest. That’s less than half the price of Netflix’s most popular plan.

What’s more, Apple is giving away a free year of Apple TV Plus to anyone who buys a new iPhone or several other devices, a promotion that means tens of millions of people aren’t paying anything for the service yet. Apple hasn’t released subscription numbers for the video service.

Meanwhile, the Apple Watch, which the company began selling nearly five years ago, continued to gain new converts, and the latest version of its wireless earbuds, AirPods, emerged as a hot commodity during the holiday season.

Apple introduced the AirPods after removing the headphone jack from the iPhone in 2016, but the product picked up more momentum in October with a next-generation set designed to fit better in people’s ears. That version, called AirPods Pro, proved so popular that Apple had trouble keeping it in stock. The AirPods Pro also cost more at $250, compared with $160 to $200 for the previous models.

All those factors helped Apple’s “wearables, home and accessories” category garner sales totaling $10 billion in the past quarter, a 37% increase from the previous year. That prompted Cook to hail it as a “blowout” quarter for the wearables and accessories division, which is now Apple’s fastest growing category.

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Facebook, YouTube: Firm must stop scraping faces from sites

Inside Telecom Staff

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Facebook and YouTube

By MATT O’BRIEN AP Technology Writer

Facebook joined YouTube, Twitter and payment service Venmo on Wednesday in demanding that a facial recognition company stop harvesting user images to identify the people in them, which the startup does as part of its work with police.

Facebook said it has demanded New York-based Clearview AI stop accessing or using information from its flagship site and Instagram.

“Scraping people’s information violates our policies,” a company spokesman said.

Clearview has drawn scrutiny following investigative reports in January by the New York Times and Buzzfeed detailing its work with law enforcement agencies and its practice of scraping social media and other internet platforms for images.

Venmo on Wednesday said it is sending Clearview a cease-and-desist letter.

“Scraping Venmo is a violation of our terms of service and we actively work to limit and block activity that violates these policies,” said Venmo spokesman Justin Higgs, who said the Paypal-owned mobile payment service is in the process of sending the letter.

Google-owned video service YouTube sent a similar letter to Clearview on Tuesday.

“YouTube’s Terms of Service explicitly forbid collecting data that can be used to identify a person,” YouTube spokesman Alex Joseph said in a statement Wednesday. “Clearview has publicly admitted to doing exactly that, and in response we sent them a cease and desist letter.”

Clearview CEO Hoan Ton-That told CBS in an interview that it has a First Amendment right to the roughly 3 billion images it has collected.

“The way we have built our system is to only take publicly available information and index it that way,” he told CBS.

He also said the technology is only used by law enforcement to identify potential criminals.

CBS was first to report the YouTube letter Wednesday. Twitter sent a similar letter in January and ordered Clearview to delete all the data it has collected from Twitter, including anything already shared with third parties. Microsoft-owned LinkedIn said Wednesday it is also looking into it and will take “appropriate action” if Clearview violated its terms.

Clearview attorney Tor Ekeland said in a statement Wednesday that the company’s technology “operates much in the same way as Google’s search engine.”

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Twitter to label altered media, remove if it may cause harm

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By BARBARA ORTUTAY AP Technology Writer

SAN FRANCISCO (AP) — Twitter will begin to label and in some cases remove doctored or manipulated photos, audio and videos that are designed to mislead people.

The company said Tuesday that the new rules prohibit sharing synthetic or manipulated material that’s likely to cause harm. Material that is manipulated but isn’t necessarily harmful may get a warning label.

Under the new guidelines, the slowed-down video of House Speaker Nancy Pelosi in which she appeared to slur her words could get the label if someone tweets it out after the rules go into effect March 5. If it was proven that it also causes harm, Twitter could also remove it.

But deciding what might cause harm could be difficult to define, and some material will likely fall into a gray area.

“This will be a challenge and we will make errors along the way — we appreciate the patience,” Twitter said in a blog post. “However, we’re committed to doing this right.”

Twitter said it considers threats to the safety of a person or a group serious harm, along with risk of mass violence or widespread civil unrest. But harm could also mean threats to people’s privacy or ability to freely express themselves, Twitter said. This could include stalking, voter suppression and intimidation epithets and “material that aims to silence someone.”

Google, Facebook, Twitter and other technology services are under intense pressure to prevent interference in the 2020 U.S. elections after they were manipulated four years ago by Russia-connected actors. On Monday, Google’s YouTube clarified its policy around political manipulation, reiterating that it bans election-related “deepfake” videos. Facebook has also been ramping up its election security efforts.

As with many of Twitter’s policies, including those banning hate speech or abuse, success will be measured by how well the company can enforce it. Even with rules in place, enforcement can be uneven and slow. This is likely to be especially true for misinformation, which can spread quickly on social media even with safeguards in place.

Facebook, for instance, has been using third-party fact-checkers to debunk false stories on its site for three years. While the efforts are paying off, the battle against misinformation is far from over.

Twitter said it was committed to seeking input from its users on such rules. Twitter said it posted a survey in six languages and received 6,500 responses from around the world. According to the company, the majority of respondents said misleading tweets should be labeled, though not everyone agreed on whether they should be removed or left up.

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Disney Plus hits nearly 29M subscribers in 3 months

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By TALI ARBEL AP Technology Writer

NEW YORK (AP) — Disney said its Disney Plus streaming service reached nearly 29 million paid subscribers in less than three months, an impressive start for what the company has positioned as its future as more people drop cable subscriptions.

But as expected, starting up a new service comes with huge expenses, contributing to a 23% profit decline for the company in the latest quarter.

Disney Plus launched in November to compete with online video services like Netflix. Disney had 26.5 million Disney Plus subscribers as of Dec. 28, the end of its fiscal first quarter. That grew to 28.6 million as of Monday, well on the way to Disney’s target of 60 million to 90 million worldwide by 2024.

Original series on Disney Plus include the “Star Wars” series “The Mandalorian.” One of the hit characters from the show resembles a baby version of Yoda. Disney CEO Bob Iger told analysts Tuesday that “Baby Yoda” consumer products will go on sale in the coming months. He said the “sensational response” to the character said a lot about Disney Plus.

The company also said a second season for “The Mandalorian” is coming in October and said the priority for “Star Wars” going forward is through the streaming service. After 42 years, the franchise just concluded its nine-part core series with “Star Wars: The Rise of Skywalker” in theaters. Disney has said the next “Star Wars” theatrical movie, which is to be set outside the Skywalker saga, isn’t scheduled for release until 2022.

Disney also had 30.4 million Hulu customers and 6.6 million ESPN Plus subscribers as of Dec. 28, big gains for both from a year ago. Disney offers a bundle of the three streaming services.

Disney Plus is currently available in the U.S., Canada, The Netherlands, Australia, and New Zealand. Disney expects growth in the near term to come primarily from further expansion abroad, as the service launches over the next two years in Western Europe, India and Latin America. Disney also plans to roll out Hulu outside the U.S. next year after getting Disney Plus off the ground abroad.

The company has been turning to heavy promotions to boost Disney Plus in the early months. Disney, for example, struck a deal with Verizon to give some customers a free year. Disney said about 20% of its subscribers came through Verizon. About half signed up directly through Disney, and the rest from other channels.

Disney earned $2.13 billion in the latest quarter, or $1.17 per share. Adjusted for one-time items, earnings came to $1.53 per share. Analysts polled by FactSet expected earnings of $1.46. Revenue rose 36% to $20.9 billion. Wall Street expected revenue of $20.7 billion.

Disney shares gained 27 cents, or less than 1%, to $145 in after-hours trading after the release of results.

The direct-to-consumer business that includes Disney Plus posted revenue of $4 billion, up from $918 million a year ago, while its operating loss widened to $693 million from $136 million. Disney expects the business to lose another $900 million during the current quarter.

Revenue at the movie business more than doubled to $3.8 billion thanks to “Frozen II” and the new “Star Wars” movie in theaters.

Revenue slid at Disney’s cable networks division, by 20% to $4.8 billion. It said ESPN weighed on its profit because of higher programming and production costs and lower ad revenue as viewers decline. The broadcasting arm’s revenue rose 34% to $2.6 billion, while the parks division’s sales rose 8% to $7.4 billion.

Disney said attendance and hotel stays in Hong Kong were lower because of “recent events.” The company said that there has been “a significant decrease in visitation to Hong Kong Disneyland from China and other parts of Asia” but didn’t otherwise elaborate. There have been anti-government protests in Hong Kong. That was offset by growth in Shanghai, though a virus outbreak in China could impede travel and attendance.

Both parks are currently closed because of the virus. Assuming a two-month shutdown, impact to operating income in the current quarter will be $175 million. Both parks usually see a lot of visitors at this time of year.

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