As always, earnings season brought with it plenty of interesting earnings call disclosures from major tech companies.
Here's a look at a few notable disclosures made on earnings calls over the last few weeks.
1 Electronic Arts Is Eager to Add More Content to its Subscription Services
At June's E3 gaming conference, Electronic Arts (EA) unveiled its Origin Access Premier service -- it costs either $15 per month or $100 per year, and (unlike the older and cheaper Origin Access service) provides PC gamers with full and immediate access to EA's newest game launches.
During EA's Oct. 30th earnings call, CEO Andrew Wilson suggested that EA -- perhaps taking a page from the likes of Amazon.com (AMZN) and Disney (DIS) -- wants to expand how much content it delivers to its subscribers, and could turn to partnerships and M&A to help do so.
"In terms of next steps, you should expect us to continue to try and aggregate more content for our player...so that players can come in and play more games and spend more time," said Wilson. "Some of that will be the creation of new content organically inside of our company. Some of it will be working with indie developers or third-party developers and publishers. And...we also expect that we would look to acquire both content IP and talent over time."
Presumably, a broader content library and higher monthly user engagement would also make price hikes easier to carry out in time. Wilson's remarks come as Microsoft (MSFT) preps a game-streaming service that will work across PCs, Xboxes and mobile devices, and see public trials in 2019.
2. Companies Are Starting to See the Impact of Early 5G Network Rollouts
While Texas Instruments' (TXN) Q3 call didn't feature a ton of good news, the company did note its analog chip sales are starting to benefit from "early 5G product ramps." IR chief Dave Pahl that the greater complexity of 5G radios translates into a larger analog opportunity for TI.
Xilinx (XLNX) , whose FPGAs are found within many mobile base stations, reported its Communications segment (revenue up 33% annually) benefited from "LTE upgrades, pre-5G and some early 5G deployment." In addition, CEO Victor Peng indicated that Korean 5G deployments might be getting accelerated
It's still early days for 5G network rollouts; many have argued 2020 will be the real inflection point for them. However, with a number of major smartphone OEMs set to launch 5G phones in 2019, carriers in the U.S. and certain other developed markets are starting to get serious about deploying the technology.
3. Microsoft Is Optimistic About its Traditional Server Software Business Continuing to Grow
Though Microsoft's Azure cloud services business gets more attention these days, its traditional "server products" business, which covers license sales of products such as Windows Server (server OS), SQL Server (database) and the System Center (systems management software), is still doing well for itself. Server products revenue rose 10% annually in the September quarter, up from 8% in the June quarter and just 2% a year earlier.
Admittedly, this growth came ahead of expected December quarter price increases for some products. However, when asked about how Microsoft sees the business trending going forward, CEO Satya Nadella sounded upbeat, arguing that hybrid cloud Azure deployments in which on-premise assets integrate with Microsoft's public cloud will remain a tailwind. He also noted that products such as Windows Server and SQL Server run on Azure's public cloud.
"[W]e don't think of hybrid [cloud] as some stopgap as a move to the cloud," said Nadella. "We think about it's the coming together of distributed computing where the cloud and the edge work together for not just the old workloads, but most importantly for new workloads....And this is a place where we are leading." 4. Booking.com's Efforts to Build Out its Payments Platform Are Driving a Revenue Mix Shift
In Q3, 78% of online travel giant Booking.com's (BKNG) gross bookings still involved an agency model, in which the company gets a commission on bookings made through its platforms, and just 22% involved a merchant model in which it pre-purchases blocks of hotel room inventory and sells the rooms at a markup. However, while agency bookings rose just 2.3%, merchant bookings rose 65.7%.
A mix shift towards merchant transactions provides some benefits for Booking. The company gets paid up-front for bookings rather than after a user has stayed at a hotel, and only has to give the hotel owner its cut at the time of stay. And Booking's take rate on merchant transactions is somewhat higher than its take rate on agency transactions.
On Booking's Q3 call, CFO Dave Goulden indicated that the recent rollout of a new payments platform is helping drive the shift towards merchant transactions.
"It gives them more opportunities to pay with the payments product of their choice. That may not necessarily be a credit card, it could be something like an Alipay, for example," he said. "For us, it lets us basically provide our customers with a more consistent service because we're in charge of exactly how the payment flow works. And then for our partners...we offer them more ability to access different payment forms from different customers in different parts of the world."
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