Lands of opportunity: Foreign markets fueling growth of US tech trendsetters, other companies

Published: July 28, 2014

In this Jan. 17, 2014 file photo, Apple’s CEO Tim Cook, left, gestures as China Mobile Chairman Xi Guohua smiles during a promotional event that marks the opening day of sales of China Mobile’s 4G iPhone 5s and iPhone 5c in Beijing, China. AP Photo/Alexander F. Yuan, File

MICHAEL LIEDTKE
THE ASSOCIATED PRESS

SAN FRANCISCO — Major U.S. companies are starting to reap their most rapid growth in fertile lands of opportunity far from home.

Technology trendsetters Apple Inc., Google Inc., Facebook Inc. and Netflix Inc. all mined foreign countries to produce earnings or revenue that exceeded analysts’ projections in their latest quarters. Prodded by the steadily rising demand for Internet access and online services in developing countries, these technology companies will likely be wading even deeper into overseas markets for years to come.

“The philosophy is to start your growth in the states and then take your fight overseas,” says BGC Financial analyst Colin Gillis. “That’s what the big guys are doing.”

The intensifying international focus extends beyond technology. Century-old companies such as Coca-Cola Co. and Ford Motor Co. also are hoping to make more money in countries including China and India.

Few U.S. industries are tying their fortunes to overseas markets as aggressively as the technology sector, where new sources of revenue are often just a matter of equipping people with a computing device and an Internet connection.

Soaring sales of iPhones in China, Russia, India and Brazil during the April-June period helped Apple overcome softening demand for the device in the U.S. and Europe, where consumers seem to be more interested in waiting for the autumn release of a new iPhone that’s expected to feature a larger screen.

Google generated 58 per cent of its revenue outside the U.S. in its second quarter, the highest level yet for the Internet’s most powerful company.

Facebook already gets 55 per cent of its revenue overseas, and the growth in those markets is outpacing by what’s happening in the U.S. The social networking service has attracted 1.1 billion users in foreign markets versus 200 million in the U.S. and Canada.

Netflix’s Internet video service added 1.1 million international subscribers, nearly doubling the number it gained in the U.S during the April-June quarter. The company expects the trend to continue as Netflix enters six more European markets, including France and Germany, in September.

Corporate profits will probably need to keep rising to sustain the U.S. stock market’s record-breaking run. The Standard & Poor’s 500 index has already climbed nearly 8 per cent this year, well ahead of its average pace historically, while analysts expect earnings to increase 8 per cent this year. Low interest rates and an improving economy have helped to create a climate of optimism, said Brad McMillan, chief investment officer at Commonwealth Financial.

“Everything is going well right now,” McMillan said. “That’s what’s driving the market up.”

Like many other money managers, McMillan isn’t convinced companies will be able to live up to investors’ high hopes.

Overall sales have been slow, and profit margins are at record levels after years of cost-cutting. Those factors will make it tougher for companies to find ways to ratchet their earnings even higher.

The natural response for many companies? Look abroad because that’s where most of the potential customers are. The U.S. population accounts for less than 5 per cent of the world’s roughly 7.2 billion people.

The U.S., though, still boasts the world’s largest economy with a mass market of consumers who can afford more products and services than most other parts of the world. That means growth in other countries, especially in markets outside of Europe, Japan and South Korea, often isn’t as lucrative as it is in the U.S.

Apple, which has always demanded premium prices, is discovering this as it sells more devices overseas. For instance, the iPhone’s average selling price fell to $561 in Apple’s most recent quarter, a 3 per cent drop from a year ago and a 13 per cent decline from $647 two years ago.

Google’s growth in foreign markets outside Europe is one of the reasons that the company’s average advertising prices have been falling for nearly three years.

Advertisers so far haven’t been willing to pay as much to peddle their wares to consumers who don’t have as much disposable income as people in the U.S.

Facebook is experiencing a similar phenomenon. The company reaped an average of $6.44 per user in the U.S. and Canada during the second quarter, compared with just $2.84 per user in Europe, $1.08 per user in Asia and 86 cents per user in the rest of the world.

Although the company remains profitable overall, Netflix still isn’t making money on an international expansion that began nearly four years ago. The company’s international losses have exceeded $800 million so far, with more likely to come with the move into France and Germany looming.

Most publicly held companies are willing to endure short-term financial pain in return for what they expect will be a long-term gain in growth. That’s one of the reasons Ford Motor is building four plants in China and two in India. By 2020, the automaker hopes Asia Pacific and the Middle East will account for one-third of its sales. The regions accounted for 22 per cent of Ford’s sales in the latest quarter.

In this June 26, 2012 file photo, a man walks past a truck that distributes Coca Cola in Mumbai, India. AP Photo/Rajanish Kakade, File

Coca-Cola is looking abroad for growth largely because it’s becoming tougher for beverage makers to increase revenue in a U.S. market already awash in soda and other refreshments. Things look much different in some large overseas markets where billions of people only recently have begun to develop a taste for the company’s products. In 2012, for instance, the per capita consumption of Coca Cola’s beverages was 403 servings of 8-ounce drinks annually in the U.S., compared with 39 annual servings in China and just 14 in India.

An increasing thirst for Coca-Cola products in China, India and the Middle East helped boost the company’s international sales by 3 per cent in the second quarter while volume remained flat in North America.

Even large U.S. companies that are growing faster domestically realize they need to keep pushing in countries where many consumers may not make enough money to buy their products yet. That’s one reason General Motors CEO Mary Barra told analysts on a conference call last week that her company remains bullish on China, even though car sales there have been slowing.

“As the market grows, we need to participate in that growth … in a disproportionate fashion to make sure that we are seizing the opportunity,” Barra said.

——

AP Business Writers Matthew Craft and Candice Choi in New York and AP Business Writers Dee-Ann Durbin and Tom Krisher in Detroit contributed to this story.

12:31ET 28-07-14

[+]

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,



Readers Comments (0)

Comments are closed.

Featured

Seniors-documentary-Parents

Stricken by her mom’s death, Sikh filmmaker learns ‘to keep moving forward’

LARISSA CAHUTE VANCOUVER DESI When Vancouver filmmaker Baljit Sangra’s mother suddenly died after being struck by a car, Sangra was so devastated that she wanted…
Continue Reading »

Parliament hill

Dosanjh: We must criminalize glorification, encouragement of terrorism

UJJAL DOSANJH SPECIAL TO VANCOUVER DESI Canada is no stranger to terrorism. Nonetheless what has happened in the heart of our capital on the heels…
Continue Reading »

Royal Wedding

Aga Khan’s eldest son Prince Rahim and his wife Kendra Salwa Spears expecting their first child

VANCOUVER DESI The Aga Khan’s eldest son Prince Rahim and his wife Princess Salwa (Kendra Salwa Spears) are expecting their first child, the spiritual leader…
Continue Reading »

LOCAL NEWS

Seniors-documentary-Parents

Stricken by her mom’s death, Sikh filmmaker learns ‘to keep moving forward’

LARISSA CAHUTE VANCOUVER DESI When Vancouver filmmaker Baljit Sangra’s mother suddenly died after being struck by a car, Sangra was so devastated that she wanted…
Continue Reading »

CIVIC ELECTIONS

Surrey mayoral candidates share city visions at first meeting

AMY REID VANCOUVER DESI SURREY — Surrey mayoral candidates met for the city’s first all-candidates meeting Thursday night at SFU. Six of the seven candidates…
Continue Reading »

OTTAWA

Surrey MP Nina Grewal’s account of the shootout in Ottawa

NINA GREWAL SPECIAL TO IANS  When Canadian Prime Minister Stephen Harper was speaking at about 9.30 a.m. Wednesday in a caucus room of parliament, we…
Continue Reading »

Don't Miss...

student dead

Two dead, including gunman, in school shooting north of Seattle

DOUG ESSER THE ASSOCIATED PRESS MARYSVILLE, Wash. — A student opened fire in a high school cafeteria north of Seattle on Friday, killing at least…
Continue Reading »

attack on Parliament Hill

Ottawa shooter kicked out of Burnaby mosque two years ago

Zehaf-Bibeau was asked to leave the mosque, because he had “gotten a hold of keys and stuff from the mosque, and when he got out…
Continue Reading »

labour laws violation

U.S. company penalized for mistreatment of Indian employees working 122 hours in a week

MICHAEL LIEDTKE THE ASSOCIATED PRESS SAN FRANCISCO – A Silicon Valley company is paying more than $43,000 in back wages and penalties after labour regulators…
Continue Reading »

DESI-SOCCER

Surrey soccer captain played the U-18 national club championship using only one foot

KYLE BENNING SURREY NOW SOUTH SURREY – Kyle Sohi’s perseverance and performance in the 2014 Sport Chek National Club Championships U-18 Cup Final might go…
Continue Reading »

SURREY-FIELD HOCKEY

Barinder Rasode announces plan to develop field hockey pitch in Surrey

Third field at Tamanawis Park would cost approximately $3 million KYLE BENNING SURREY NOW NEWTON – Barinder Rasode and the One Surrey team were at…
Continue Reading »


Bollywood Latest

Stan Lee-Bollywood

Stan Lee plans Bollywood film on his first Indian superhero

VANCOUVER DESI Stan Lee, the legendary ‘Spiderman’ creator, is reportedly planning his Bollywood entry with a film on his Indian superhero character ‘Chakra: the Invincible’….
Continue Reading »

KANGANA RANAUT

Even my parents think I am weird, says Bollywood ‘Queen’ Kangana Ranaut

HINDUSTAN TIMES Kangana Ranaut has always made unconventional choices, be it her movies or the way she dresses. And the actor says she’s happy the…
Continue Reading »

Happy New Year-Bollywood

Happy New Year: Mandatory ‘formula’ and all those old Bollywood references

HINDUSTAN TIMES Film: Happy New Year Cast: Shah Rukh Khan, Deepika Padukone, Abhishek Bachchan, Boman Irani, Sonu Sood, Vivaan Shah, Jackie Shroff Director: Farah Khan…
Continue Reading »