There is a diminishing return of these big Monetary Policy moves. It can be counterproductive. They havebelieve that to save even more to compensate for the fact that their savings are declining faster. You are paying to save. U. S. Futures are up. They are seeing it as stimulus. Portfolios get shifted around. You might live more foreign assets you might buy more equities. Bank of japan adopting negative Interest Rates. Coming up, amazon tanking afterhours trading as the retail beast misses on profits and sales. Plus, full steam ahead for microsoft. The Software Giant reported a strong quarter. And the biggest win of the day, facebook stocks surging after reporting a record report. First, to our lead. Amazon delivers its best earnings ever but shares getting slammed in afterhours trading. The company surprised investors who might have been hoping on more profits in the quarter. Shares coming in at 1. Shares of 35. 7 billion, Fourth Quarter sales. But those sales are 22 of the big numbers from a year ago. The question is whether amazon can readjust its investments. Joining us right now, a Senior Research analyst in minneapolis and new york. And let me start with you. It seems that at least the wall street selloff, that this has been one of the biggest gainers in the major markets, whether its the s p 500, the nasdaq, you name it. But these numbers are not the kind of profitability that investors may have hoped for at the end of the Third Quarter. Thats right. If you look at the stock, it looks more like ebay. But the fundamentals are much different. The fundamentals did not produce the same yield it had on that ninegap operating margin. In the september quarter, they blew the numbers out. They were up 60 ahead of analyst expectations. I want to emphasize the reason they didnt blow it out is they had higherthanexpected unit growth, 26 , adjusting for prime day. It was 24. So an acceleration in the growth basically dipped margins in the december quarter. Wait. So they made less because they sold in volume . Right. The incremental units that come at the very end are expensive for them to fulfill. Theyve got to put their own logistics to work. So that incremental cost of delivering that hurts them. So capturing market share actually hurts them a little bit in profitability, as they capture the customer. Shelly, what do you see . Like we were talking about earlier, you know, this is a great quarter for amazon. Its just not what analysts were expecting. So youre starting to see this sort of topsyturvy, were going to do a little bit of profit, growth. And analysts were thinking, once they showed a profit, theyre going to keep going with that profit. And amazon never really made that promise. Theyre saying that the reason that their profit was lower this time around was because they increased higher shipping costs, because theyre shipping more things for more of their marketplace sellers. So thats kind of pointing to the future growth for where amazon is going. And i think that you share those convictions about operating margins. I wonder, when i look at profit margins, web services may be not as profitable as last quarter. You know, pointerring towards pointing towards the run rate right now, which is pretty fantastic, i wonder what you take from what we learned about amazon web services. The growth slowed slightly, kind of high 70s to 68 or 69 in the december quarter. The reason is that they are coming up a little bit more difficult accounts. Thats one of things investors look like. Its 10 of the business. What we were expecting was for the growth to be kind of 60 to 65 . So actually, the growth was good. That to us is more important than the operating profit because its such a nascent business. I would say everything is spot on track, despite what the stock is saying in the aftermarket. Have you talked to any investors yet . Probably a couple called to scream at you for being bullish on the stock today. Yeah. We get that. We also just get emails typical during the conference call. I think one of the things that was a little bit again, investors generally see that amazon is doing all the right things. I think gene is right. They did not do a very good job of being transparent at all. But this is amazon. And theyre not really known for that. But, you know, they said, you know, we are going to ebb and flow. Those are the words they used. So i think thats really tough for analysts, for investors to follow, because theyre not theyre saying we dont really know what our profits or what our sales are going to be next quarter. And thats really tough for the market to digest. I just feel weve got 20 years of history from this company. We know that they dont manage towards profits so that any wall street surprise about any slight variation of profitability is schizophrenic, because amazon has shown us its a topline story, not a bottomline story. I think thats right. Where gene makes a good point is also about aws. Are we really expecting a profit from them yet or should they still be this more nascent business where were going to expect more growth, more investment, before we start seeing a profit . It took, you know, almost 20 years for them to start doing a profit from the retail side of things. So for aws, you know, it is the growth thats more important on that side of the business. Right. Last word. Gene . Its a great story. Youve got an opportunity to own it lower today. Theyre going to end up taking over the retail world over the next decade. Senior analyst, always glad to have you on. Its been so long. Well, maybe a day. Shelly, good to see you check her stuff out on bloomberg. Com and on the bloomberg terminal. The video maker is sliding more than 7 . Looks like 8 to me. Weaker than expected. Overshadowed the fact that the Third Quarter looked pretty good. Sales of the star wars game, battle front, surging past 13 million companies. That means theyre looking at the biggest calendar Fourth Quarter theyve ever had. They have really managed to revive the company and maybe compete with amazon web services. Carl icon will receive three board seats with the split. The shiers the shares were undervalued, he said. He essentially unravels the 2010 purchase. 6. 2 billion they spent a few years ago. Microsoft shares up afterhours. The Company Delivering a very strong quarter. Quarterly earnings of 78 cents a share, above the expectation. The analysts, wrong again, also on revenues. The company reporting 25. 7 billion. Its going great. Doing a great job at the top line, amy hood on the bottom line. The chief financial officer. Thats correct. Its been a pretty consistent message that the move to cloud is happening. They got in front of this. Theyre trying to catch amazon. But everyone else is trying to catch microsoft now. They really got out in front and invested, reset the margins. Now the margins are actually up on a year to year basis. Its a new thing for microsoft, margins going up. Margins going up across the board . On the overall business. Showing really good improvement in their personal computing business. So that margin structure is really improving. I want to stick with windows. Then i want to go back to cloud. Windows last quarter, unexpectedly wrong. There was a question about what inventory looked like. They got into saying were going to go back to normal inventory levels. Looks like that has happened. I think with windows, you have that surge. But i dont believe that anyone is thinking about os that they take out of their pocket. Theyre thinking about their system. So i think when adele was trying to think through this, this isnt the Windows Company anymore. This is the cloud and infrastructure company. Windows is an enabler. But my thesis and anyone on wall street, it does not hinge on windows. What can they do on productivity apps and with server and with azer . Theyre doing fantastic around the fringe there. So azer, we did not see well, amazon web services, we saw a little bit of a compression in terms of profitability. I keep wondering why microsoft also has decided, what do we want from this business . We want market share. We want to crush anyone else who wants to get into this business and start to own it. So microsoft thinks about azer very broadly, a collection of 40 different services. Theyre never really going to break the margin structure out but i think it ties into a lot of things they are doing. They will match amazon on pricing. We havent talked about google. Their coming. Obviously i think well get stronger here. So we think the market is taken in formation. Microsoft is the challenger. And google is the up and comer. If youre uber, you go to amazon, because you host your own stuff. But in compute, maybe not the most important thing. If youre proctor and gamble, youre microsoft apps. You can run them. As a developer, and i was a microsoft developer before i got into this business, you can say i want to run on cloud. So they give you that flexibility. So what does it leave for google. I think google right now has a great opportunity in small and mid. Where people want raw compute. Well see where they come with their apps. My 10yearold does his homework on goodwin on google apps. I think theres a tremendous opportunity for google. The aerial founder whose first attempt to shake up the industry was quashed in the Supreme Court. Hes taking aim at privacy and internet packages. Delivering internet. Theres no Legal Process i was going to say. Did you check with your lawyers ahead of time and say, were not going to be at the Supreme Court again with this . No, were not. Youre sure about that . Yes, pretty sure. Ha ha his new service is called starry, a new way of delivering internet. He mentioned using highfrequency waves rather than broadband networks. A fraction of the cost. He suggested targeting price of less than 80 a month. Coming up, alibaba, strong Earnings Report this morning. Why are shares of the company falling . We will discuss it, next. A big comeback in the trading session today. Julie has the news from new york. Corey, like the other two major averages, the nasdaq sort of vacillated throughout the day, although it did have a better consistent performance than the s p and dow. We have, of course, seen the nasdaq as the worst performing of the three benchmarks. Part of the effect we saw today was that big tech rebound. Of course, it was led by facebook, after that Companies Earnings estimates. And it saw growth in mobile users, among other metrics. But we also saw the rest of big tech rise. Amazon and microsoft rose ahead of earnings. We saw apple do well. All of that contributed to those gains overall. But, of course, facebook wasnt the only company reacting to earnings. We got numbers from ebay and paypal that seemed to perhaps validate their split last summer. Paypal coming out with numbers that beat estimates. The c. E. O. Said the company is really holding up well in a crowded marketplace because of its strong brand. Ebay, on the flip side, suffered from competition and marketplace revenues, down by 5 in the Fourth Quarter. I also wanted to mention earnings from qualcomm, as that company was also a lagger in the biggest single drag on the nasdaq. The chip maker said Second Quarter profit and sales may fall short of analyst estimates. There is increasing competition from hardware makers, now making their own chips as well. In addition to that, theres just a generally slowing Smartphone Market hurting qualcomm too. Julie in new york. All right. Alibaba, big quarter, 32 revenue gains. The chinese economy slowing down. Alibaba is able to offset that, expanding into more and more rural areas and setting a record from back in november. Brian is in new york. Bloomberg reporter chen. Since you got up so early, i want to thank you for that. Tell me about what is happening in terms of the regional expansion of alibaba. Well, on the whole, it was a solid quarter for them. You say their revenue grow by a third, beating estimates. Profits doubled. The mobile rates were a highlight. More than 68 of the company transactions. In terms of expanding in rural areas, the company did grow in 12,000 rural villages. Still a long way to go. But they have held to their promise, which is that they are expanding in china and also tapping into that growth for middle class Chinese Consumers moving up the valley chain. Interesting. Brian, when you looked at this quarter, we talked on Bloomberg Radio this morning, but tell me sort of your big takeaway. Youve had plenty of time to look at this now. Absolutely. It was a great quarter for alibaba. It really pushed against the prevailing sentiment and the prevailing mood around china. We saw growth across the alibaba businesses. I think the rural story is an important point. What is it theyre Getting Better at . Is that about monetizing better off of payments, suddenly more merchandise . Theyre selling more highend merchandise. Thats a piece of it. The second is theyre increasing the actual purchase rate peruser on the site. And then third, theyre growing the overall merchandise value across the entire platform. A huge part of this is mobile. Mobile growth for the quarter, 300 . Thats really monumental. Theres this prevailing sentiment that mobile is really about showrooming, about looking but not necessarily about buying. What were seeing is alibaba start to crack the code in terms of mobile commerce in a way that no other company globally, other than perhaps ten cent in their own backyard, is really starting to conquer. Just given the nature of the Chinese Consumer and their state of technology adoption, i cant imagine theres ever been much of a desktop business. Most alibaba users, are they mobile first . Well, in terms of trying in terms of what were seeing, alibaba is really trying to grow its user base, moving from pc to mobile. One of the ways theyre trying to monetize this is sending targeted advertising to the customers. So every advertisement is actiondriven, where the user can immediately take a response based on very targeted information delivered to their mobile screens. As advertisers cut their spending budget, actually it gives their money better spent and they can actually track how the users are looking at the advertisements and also what items they are purchasing. Its important to remember, corey, that many schizophrenics can be geniuses. Im kidding. But what weve seen with alibaba enough said. Thank you very much you are watching bloomberg west. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. The bank of japan introduced negative Interest Rates at its latest meeting. The current account of each bank will be divvied up into three. A different Interest Rate will be applied to each one. You have the existing balance. Required reserve banks are nothing. Excess of what they are required to set aside with the bank of japan that is where this negative rate kicks in. Banks will now have to pay to save. There is some additional form of support for the economy. Perceived as stimulus. This takes effect the 16th of february. We will have more details when the bank of japan governor has a press conference in about an hour and a half. Lets check out markets are reacting. Yvonne the stock market, in japan, shot up and then came back down. The decision is still not enough the 80 trillion Monetary Base that they are going to be expanding. Whiplash on the equity markets. For the japanese yen we are still seeing some weakness here. We are off the lows. We are counting down to the reopened in hong kong and china at the top of the hour. What we are seeing overall in digital is it big move towards video created and consumed digitally. And the numbers use on facebook were more than 100 million hours consumed each day of video content by more than five and 2 Million People around the world. Cory the results of the Business Success where resulted in the stocks today. Eight hours today look at that. More than three times twitters market value. I think i treated this stat that facebook has added more users in two years than twitter has added in its cumulative entire existence. And that isnt even counting instagram, whatsapp, messenger the other companies theyve amassed that they havent even started to monotype. Instagram mayday huge quarter. It is an experimentation year for them and that is fine because the company is in the money right now. They are using their advertising powerhouse on facebook, all of the advertiser connections and technology anything that you see powering news feed ads and applying it to instagram so it was very easy for the company to ramp up advertising. Cory so the Lesson Learned for facebook and facebook mobile, they knew this would work smoothly. We had to target the right kind of people. And they can use the target data from facebook for instagram. They might show you the second set in eight series of ads after you first seen it on facebook. It is totally streamlined. They know where you have been on mobile and desktop because when you login, that is your identity. Corey our advertisers saying that they like the results or they saying that this works better all the time. Even with they bidding process that we have seen with google . It is all in the eating style. But what advertisers are really looking at right now on facebook is the video at which really contributed over the last quarter. It is also that facebook has increased the percentage of ads in your newsfeed which they can only do so many times until it is too saturated. Cory so they have put more ads on the page. You can only do that so much. But they have been doing it gradually over the past couple of years and people have not turned away from facebook. They keep using it just as much as ever. Cory the engagement rate has gotten better. It really couldnt get any better. Right now we are watching for walgreens. They are telling the