America’s technology companies are proving to be fairly crisis-proof. It’s good for America’s economy – but keepers of the competition need to keep an eye on the growing power of Silicon Valley.
Apple is by no means unaffected by the corona crisis. iPhones are selling less well, in China the virus not only slowed down sales, but also severely affected the production capacities that were mainly based there. But the group is in phenomenal financial shape. Despite all the adversity, it has reported double-digit billions in profits and a liquidity cushion of almost $200 billion. And as if to demonstrate that the company was bursting with strength, they increased share buyback program by $50 billion.
Apple is not alone. Other American technology giants such as Microsoft, Amazon, Facebook and the Google’s parent company Alphabet are remarkably robust in these uncertain times. Microsoft reported that the bottom line was that the pandemic had “minimal impact” on sales so far, businesses like “cloud computing” had even benefited. Amazon not only achieved record numbers in its cloud division, but is already seen as a winner in its core business as an online retailer in the crisis. Facebook and Google suffer from the loss of advertisers, but remain highly profitable.
While the layoffs from the corporate world are piling up, they still see themselves able to hire staff. Google’s parent company Alphabet continues to afford a whole vault of loss-making side activities in areas such as autonomous driving and does not seem to shake this structure even in the midst of the current shocks.
Cause for mistrust
Microsoft, Apple, Amazon, Alphabet, and Facebook were in a brilliant position when the coronavirus hit the world. Their dominance and resilience can be seen on the stock exchange. They are the five American companies with the largest market capitalization and have performed significantly better than the overall market even in the midst of the crisis. They represent one fifth of the combined market value of all companies in the S&P 500 index. Compared to the last major economic crisis in 2008, the balance of power has changed dramatically. At that time, Exxon-Mobil topped the list of the most expensive companies. The oil company is not even in the top twenty today and has just reported its first quarterly loss in decades.
The tech giants not only benefit from the fact that they have a solid financial foundation. It is this crisis that is playing into their hands because it is driving digitalization into turbo gear. In the midst of forced isolation, work, shopping or maintaining contacts have shifted further into the online world. The technology industry provides the infrastructure for this. There are promoters like the video conference specialist Zoom, but it is mainly the large corporations that can take advantage of this development. They are able to continue to invest heavily, while smaller start-ups that might otherwise be threatening them struggle to survive and find hardly any investors. That can only help the established to keep the competition at a distance.
It is all the more important to keep a watchful eye on the behavior of the industry giants. There could be a temptation to put the debates about the power and data protection practices of large corporations in the background, especially since some of them are currently busy in reputation management. Facebook, for example, presents itself as a fighter against misinformation about the virus, trying to make up for the omissions in the last American presidential election. Apple and Google are working on a “tracing” technology that is intended to help slow the spread of the virus.
But there is still cause for suspicion. Google has just been criticized by German advertisers for its intransigence in collecting bills. Amazon was held up in a newspaper report to use third-party data from its marketplace to develop its own competing products.
The American Congress has therefore asked CEO Jeff Bezos to take a position at a hearing. With this he has sent a welcome signal. Precisely because the tech giants have the best chance of emerging from the crisis even more powerful, it is more urgent than ever to question their power and business methods.