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Microsoft earnings Q3 2018

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The company’s biggest business segment, More Personal Computing — which includes Windows, devices, gaming and search ads — produced $9.92 billion in revenue, up 13 percent year over year. The segment came in above the FactSet consensus estimate of $9.25 billion, according to StreetAccount.

The Productivity and Business Processes segment, which includes Office, LinkedIn and Dynamics, came up with $9.01 billion in revenue, which was up 16.8 percent and above the FactSet consensus estimate of $8.73 billion, according to StreetAccount.

Microsoft’s Intelligent Cloud segment, containing server products and cloud services, grew 17.3 percent with $7.90 billion in revenue. The results exceeded the $7.68 billion FactSet estimate.

In the fiscal third quarter Microsoft acquired data storage company Avere and gaming start-up PlayFab, and it announced a major reorganization that included the departure of Windows and Devices chief Terry Myerson from the company. The Windows and Devices Group was effectively split up and put inside the Experiences and Devices group (which includes Microsoft’s Office 365 and other productivity applications) and the Cloud and Artificial Intelligence Platform group (which includes infrastructure products like Windows Server and the Azure cloud platform).

“We think folding Windows into the new Experiences and Devices division, which is led by a former Office executive, sends a strong signal of the supporting, and not leading, role Windows will likely take in coming years, and we like the continued emphasis on hybrid cloud and [artificial intelligence],” Stifel analysts led by Brad Reback wrote in a Sunday note.

But Windows remains the main revenue contributor for Microsoft’s More Personal Computing business segment. One indicator for Windows sales, IDC’s PC shipments, was flat year over year in the first quarter of 2018 but better than expected, the Stifel analysts wrote.

Intelligent Cloud contains the Azure public cloud, which competes with Amazon Web Services and represents Microsoft’s biggest growth driver overall. Microsoft as usual didn’t provide an exact revenue figure for Azure but did say revenue rose 93 percent year over year, which is down sequentially from 90 percent revenue growth. The Stifel analysts said they were expecting growth just over 90 percent, while analysts led by Kirk Materne at Evercore ISI said in a Sunday note they were looking for 82 percent Azure growth.

Microsoft said its “commercial cloud,” which entails Azure, Office 365, Dynamics 365 and other cloud services, had $6 billion in revenue in the fiscal third quarter, up 58 percent year over year and up 13 percent sequentially.

There were 30.6 million Office 365 consumer subscribers in the quarter, up sequentially from 29.2 million. On the Office 365 commercial side, revenue grew 42 percent.

Microsoft stock is up 10 percent since the beginning of 2018.

This is breaking news. Please check back for updates.

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SoftBank-backed GetYourGuide secures $133 million from investors

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GetYourGuide CEO Johannes Reck.

GetYourGuide

LONDON — SoftBank-backed activity booking app GetYourGuide has raised 114 million euros ($133 million) as it tries to look beyond the pandemic. Total investment in the company now stands at over $780 million, while its valuation of over $1 billion remains the same.

The Berlin start-up’s latest funding round, led by U.S. private equity firm Searchlight Capital, has been raised as a convertible note, which is a short-term debt that will turn into equity in a future financing round.

GetYourGuide CEO Johannes Reck told CNBC on Thursday that raising money through standard means would have been “impossible” for a travel company in the current climate.

“This form of financing reflects the fact that our investor base shares the belief that our long-term mission matters, and that leisure travel is a fundamental human need,” he said via email. “People will travel again, and when they do, experiences will be what they crave the most.”

Existing venture capital investors including SoftBank Vision Fund, Lakestar, Battery Ventures, and Highland Europe also participated in the funding round.

Reck said the money will give GetYourGuide, which competes with Airbnb and Viator, the flexibility to invest in marketing and getting its products ready for future travelers’ “preferences and standards.”

On the digital side, GetYourGuide said that means ensuring the platform suits travelers that are more spontaneous and are more likely to cancel. On the physical side, it means ensuring guides have had mandatory training, as well as providing free masks and sanitizers to customers.

Decimated travel industry

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U.S. GDP booms at 33.1% rate in Q3 report, beating expectations

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Coming off the worst quarter in history, the U.S. economy grew at its fastest pace ever in the third quarter as a nation battered by an unprecedented pandemic started to put itself back together, the Commerce Department reported Thursday.

Third-quarter gross domestic product, a measure of the total goods and services produced in the July-to-September period, expanded at a 33.1% annualized pace, according to the department’s initial estimate for the period.

The gain came after a 31.4% plunge in the second quarter and was better than the 32% estimate from economists surveyed by Dow Jones. The previous post-World War II record was the 16.7% burst in the first quarter of 1950.

Markets reacted positively to the news, with Wall Street opening flat to slightly positive.

Increased consumption along with sold gains in business and residential investment as well as exports fueled the third-quarter rebound. Decreases in government spending following the expiration of the CARES Act rescue funding subtracted from GDP.

The powerful growth pace came after governments across the country shut down large swaths of activity in an effort to stem the spread of Covid-19, which the World Health Organization declared a pandemic on March 11.

Since then, some 228,000 American lives have been lost to the virus, which has infected nearly 9 million. The economy has been in a technical recession since February, as first-quarter growth declined at a 5% pace.

While the news on Q3 was good for the $21.2 trillion economy, the U.S. faces a tougher road ahead as coronavirus cases increase and worries grow over the health and economic impacts. Nearly half the 22 million jobs lost in March and April remain unfilled and the unemployment rate remains at 7.9%, more than double its pre-pandemic level as 12.6 million Americans are still out of work.

The GDP release comes just five days before Election Day, which culminates a heated battle between President Donald Trump and his Democratic challenger, former Vice President Joe Biden. Trump has promised a return to the strong growth prior to the pandemic, while Biden has accused the Republican incumbent of taking a thriving economy into a ditch due to mismanagement of the virus.

“This is going to be seized upon by both ends of the political spectrum as either evidence of the strength of the post-lockdown economic rebound or a cursory warning that the gains could be short-lived,” said James McCann, senior global economist at Aberdeen Standard Investments. “The reality is that the GDP numbers demonstrate that the U.S. economy did indeed rebound strongly as lockdown measures were lifted.”

Q3 growth came amid a resurgence in consumer activity, which comprises 68% of GDP. Though most of the country remained in a cautious reopening, shoppers began returning to stores and the bar and restaurant industry entered the first tepid phase of resuming business despite restrictions on capacity.

Personal consumption increased 40.7%, while gross private domestic investment surged 83% amid a 59.3% increase on the residential side.

While the headline number “looks spectacular,” it still leaves growth 3.5% beneath its level at the end of 2019, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. Shepherdson expects the consumer and business investment rebound that led Q3 to “rise much less quickly” in the final three months of the year.

“Absent new stimulus, and with Covid infections spreading rapidly, we’re sticking to our 4% forecast for Q4 growth, though the margin of error here is large at this point,” he added.

Economic activity was strong in the real estate sector, and consumer and business executive surveys showed that confidence has remained high about the future despite the virus-related setbacks.

Personal income fell sharply for the quarter as transfer payments from coronavirus relief efforts dissipated. Personal savings also declined but remained strong at a 15.8% rate, down from the record 25.7% in Q2.

The annualized measure represents how much GDP would grow over the course of a year at the current pace from the same lever a year ago. In terms of raw percent change from a year ago, the economy contracted 9% in the second quarter and 2.9% in Q3.

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Central bank hints at stimulus in December

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President of the European Central Bank Christine Lagarde.

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The European Central Bank decided to keep its rates and wider monetary policy unchanged on Thursday, as countries across the region impose new restrictions and fresh lockdowns to tackle an upsurge in coronavirus cases.

However, the central bank hinted that there could be more monetary stimulus coming to the euro zone as soon as December.

“The Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate,” the ECB said in a statement on Thursday.

It said new economic projections in December “will allow a thorough reassessment” of the economy and risks.

“On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation,” the bank added.

In September, the ECB estimated a contraction of 8% in euro zone GDP this year, followed by a rebound of 5% in 2021. In terms of headline inflation, it forecast 0.3% for 2020, followed by an increase to 1% in 2021. But the institution, led by Christine Lagarde, will update these forecasts in December.

The latest statement from the ECB suggests that policymakers will adjust their monetary policy based on those upcoming forecasts.

No action — for now

Thursday’s decision means the interest rate on the ECB’s main refinancing operations, marginal lending facility and deposit facility remain at 0%, 0.25% and -0.5%, respectively. In addition, its Pandemic Emergency Purchase Program, created in the wake of the coronavirus outbreak, was left unchanged.

It comes as the euro zone battles a rapid increase in the number of Covid-19 infections, leading some governments to implement new restrictions.

French President Emmanuel Macron on Wednesday announced a second national lockdown, though schools and factories will remain open. While Germany announced on Wednesday a “light lockdown,” with restaurants, bars and public events closed as of next week.

The second wave of infections could deliver a fresh blow to the euro zone economy, which was expected to rebound in the second half of 2020. Preliminary data released last week showed that business activity in the euro area shrank in October amid new social restrictions. However, the picture is expected to worsen if governments go ahead with additional measures.

Another issue facing the ECB is the strength of the euro, which has appreciated almost 5% against the U.S. dollar since the start of the year. The central bank said at its September meeting that it discussed the strengthening of the euro but stressed that it doesn’t target the exchange rate with its policies. A stronger euro is often seen as an issue for Europe’s economy, given the reliance of the euro area on its exports.

This is a breaking news story and it is being updated.

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