Welcome to Wall Street, Twitter. Everyone’s a Critic

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Twitter CEO Dick Costolo speaks during a panel discussion at CES on Wednesday, Jan. 8, 2014.
Image: Jae C. Hong/Associated Press

Dick Costolo got his start as a standup comedian, but on Wednesday afternoon he didn’t have the best material to work with.

The Twitter CEO faced a tough crowd during the company’s first earnings call since going public in November. Analysts bombarded Costolo with questions about the social network’s slowing user growth and declining engagement. At least one of the questions was particularly harsh:

“If you triple the number of domestic users you add in a quarter to 3 million, it would take you about 12 years to get to 200 million users,” Carlos Kirjner, an analyst with Sanford Bernstein, asked during the call. “Do you think Twitter will get to 200 million U.S. domestic — U.S. users with, say, five or six years?”

Costolo’s answers to this and other questions did little to appease investors. When he started talking, Twitter’s stock was down about 13%. When the earnings call ended, the stock was down 18%. It ended up dipping more than 20% overnight.

“Based on our conversations with investors, it seems like people generally walked away confused about what led to the user growth weakness and the company’s strategy to turn that around,” Shyam Patil, an analyst with Wedbush Securities.

“His tone, inflection, maybe the persona that he projected, maybe was a little bit off,” says Brian Blau, an analyst with Gartner. “There was something about it […] He seemed to have this excitement in his voice that maybe didn’t necessarily match the situation that’s going on with Twitter.”

Though Twitter beat Wall Street estimates for revenue for the December quarter, the social network added just nine million monthly active users in the quarter — only one million in the U.S. — and saw engagement decline from the previous quarter.

One investor we spoke with criticized Costolo for leaning too heavily on buzzwords to explain these trends and coming off a little too much like a “sales guy.” Others, like Blau, just felt that Costolo displayed too much “excitement” considering the mixed earnings report.

Costolo is certainly not a novice when it comes to public speaking, nor is he an unseasoned leader. He previously founded and later sold FeedBurner to Google and joined Twitter as its chief operating officer in 2009. But this is his first time serving as the CEO of a public company and dealing with a gaggle of analysts on an earnings call — at a time when Twitter had some bad news to deliver.

“I don’t think we should take anything away about his leadership skills, or ability to run this company,” says Arvind Bhatia, an analyst with Sterne Agee. “I just think that yesterday, there was a tremendous amount of pressure on him to highlight a lot of the positives of the company at a time when the user growth had stalled a bit in the U.S… What we heard was a little bit of nervousness and concern.”

He added: “If the user metrics had been strong and he had the same presentation yesterday, I don’t think people would have cared.”

Twitter and Costolo are in good company. The day after Facebook had its first earnings call as a public company, its stock hit a new low driven by concerns about its ability to make the shift to mobile.

Mark Zuckerberg, Facebook’s CEO and cofounder, was on that first earnings call, but as Blau points out, Zuckerberg had a little bit more help. Sheryl Sandberg, Facebook’s COO, and David Ebersman, the company’s CFO, were also on the call and took many of the questions.

“[Zuckerberg] had a number of other people on that call too, so he didn’t talk that much compared to Dick,” Blau says. Costolo was accompanied on the call by Mike Gupta, Twitter’s CFO, but he weighed in on every question on the call.

Costolo did manage to squeeze in one joke about calling his mom at the very end of the call, but even this received some criticism online.

Welcome to Wall Street. Everyone’s a critic.

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Read more: http://mashable.com/2014/02/06/dick-costolo-twitter-earnings/

Textbook Rental Company Turns To Late-Night Food Orders To Sell Investors

Chegg is trying to reinvent itself into a full suite of student offerings as skepticism grows over the future of textbook rentals. So far, investors aren’t buying it.

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Chegg CEO Dan Rosensweig on an advertising panel in April 2012. Jason DeCrow/Invision for Advertising Week / AP Images

What started as a print textbook rental business has evolved into a full suite of services for students that includes a platform for late-night food orders.

At least that’s the makeover Chegg CEO Dan Rosensweig is trying to sell to investors. Not unlike many old school media companies that are preaching a gospel of digital first, Rosensweig wants to do the same for Chegg, lately referring to his company as a “student-first connected learning platform.” In addition to rented textbooks, the company is now offering study materials, internships, college match programs, and, yes, even a discount food-ordering service.

Rosensweig admits it’s a “complex story.” And so far, investors aren’t buying into his vision. After a disastrous IPO late last year that sent its shares tumbling 15% in its first day on the market, Chegg’s stock has continued to slide, from an initial $12.50 a share to well below $6.

In its first-quarter earnings report, released Thursday, Chegg emphasized that its digital revenue was up 66% year over year to $17.8 million. But the majority of its revenue is still generated by textbook rentals, which accounted for 76% of its $74.4 million in total revenue. The company had a net loss of $25.8 million in the quarter.

Chegg’s digital growth has been driven by its big-name acquisitions, such as study platform Cramster, food-ordering service Campus Special, and a major college-match program called Zinch.

“Everything we do is designed to solve the pain points students have,” Rosensweig said in an interview with BuzzFeed last week at the annual ASU/GSV Education Summit. He admitted, though, that investors “may not understand our business right now, and it’s my job to change that.”

Chegg went public just as the textbook rental space became increasingly crowded with big names like Barnes and Noble and Amazon, and as print textbooks themselves are increasingly being replaced by digital curriculum.

“I think investors were spooked,” Rosensweig said of the company’s IPO.

On its earnings call Thursday, Rosensweig laid out a goal for the company he is calling “50/50/50:” They hope to have 50% of revenue come from their digital business, and to reach 50% of both high school and college students.

Chegg’s move into the food-ordering business was a focus of the call. One analyst asked about the ordering platform’s revenue model, which he said he did not understand. Chegg bought Campus Special for $17 million in April, and is paying $2 million in expenses without any revenue for the quarter; the platform’s sales cycle does not begin until July.

Another analyst called the purchase of Campus Special “not core to your studying-related business” and asked Rosensweig if similar “non-core” acquisitions were planned.

“We do think it’s at the core of our business,” Rosensweig corrected. In an earlier interview with BuzzFeed, he said he hopes to use the business to disrupt the model of the college meal plan.

Read more: http://buzzfeed.com/mollyhensleyclancy/chegg-turns-to-late-night-food-orders-to-sell-investors

Pepsico Claims Food And Beverage Domination Despite Currency Troubles

The food and drink giant said on its earnings call Wednesday that it was driving more retail sales growth than any of its competitors, even as a strong U.S. dollar crimps the profitability of its global operations.

Jim Young / Reuters

Pepsico has anointed itself king of U.S. food makers, claiming on its fourth quarter 2014 earnings call Wednesday that its portfolio of products, including Quaker Oats, Frito-Lay, Tropicana, and Gatorade, was the largest contributor to retail sales growth in the U.S. among all food and beverage producers.

The nearly $1 billion in retails sales growth Pepsico produced was more than the next 27 food and drink makers combined, according to Chairman and CEO Indra Nooyi, citing IRI data. Nooyi said on the call this was due, in part, to new business deals and product innovation.

What kind of innovation exactly? According to Nooyi, the “Better Together” food pairing programs, which encourage the simultaneous consumption of two Pepsico products, like Doritos Loaded and Mountain Dew Solar Flare, helped catapult Pepsico to Street-beating profits in the fourth quarter.

New products that were popular in the U.S., like Doritos Jacked and Deep Ridged Chips, were introduced to new markets, also contributing to sales growth in Europe and Latin America.

But while Pepsico may be blessing the rest of the world with Jacked Doritos, it appears as though some nations were not so good to Pepsico in return. Profit fell 25% in the quarter, and revenue decreased by 1%, thanks in large part to a strong dollar and weak currencies and economies abroad. Collapsing currencies in Russia and Venezuela meant earnings from there translated into fewer dollars, hitting the company’s margins — although Nooyi called the company’s Russian customers “resilient”.

“In a country like Russia, because our categories are in juice and dairy, stuff that the Russian consumer really needs, the businesses have been quite resilient. Now, we have to wait and see how 2015 shapes up,” she said. “But I’d say for our categories and the nature of the products that we offer them the portfolio has remained quite resilient even going into 2015. But let’s watch and see what happens.”

Back at home for U.S. consumers, Pepsico introduced new carbonated beverage products like Mountain Dew Kickstart, Pepsi Cola Made with Real Sugar, and Mountain Dew Baja Blast, which, according to Nooyi, “generated double digit estimated annual retail sales growth in 2014 after achieving over $100 million in their launch year.”

While new products might have been hits, the wider marker for soda is still looking grim. In North America, the volume of carbonated soft drinks sold by Pepsi fell by 2%, even as non-carbonated drinks increased by 4%. It seems American consumers still haven’t absorbed the message from the big beverage lobby that soda isn’t bad for you.

Read more: http://www.buzzfeed.com/mariahsummers/pepsico-claims-food-and-beverage-domination

Burrito Bonanza

Despite raising prices for the first time in three years, consumers’s insatiable appetite for Chipotle burritos continued unabated during the second quarter. The casual dining chain easily beat Wall Street’s earning expectations, posting revenue of $1.05 billion and net income of $110.3 million.

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The Associated Press

Read more: http://buzzfeed.com/businesspluginfeed/burrito-bonanza