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Market Research Report

Webscale Network Operators: 4Q18 Market Review

Published by MTN Consulting, LLC Product code 753492
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Webscale Network Operators: 4Q18 Market Review
Published: April 11, 2019 Content info:
Description

MTN Consulting's 4Q18 WNO Market Review analyzes the network infrastructure spending and financial position of webscale network operators (WNOs).

WNOs are web-centric companies whose operations and services rely heavily on hyperscale data centers and supporting connectivity. They typically have tens or hundreds of millions of customers/users, and rely heavily on scale and network effects in quest for profitable growth. Most WNOs build and operate data centers, but some rely largely on rented/leased resources. Netflix, Snap and Twitter are notable examples. Each of these spends heavily on cloud resources from other providers and is a candidate to build organically in the future. Or, purchase existing assets during a market adjustment.

WNOs tracked in this report include the "Top 8" companies (Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent) and over 20 others: Altaba, Booking Holdings (formerly Priceline), ChinaCache, Cognizant, eBay, Fujitsu, HPE, IBM, JD.COM, LinkedIn, Netflix, Oracle, Qihoo 360, Salesforce.com, SAP, Sina, Snap, Sohu, Twitter, Weibo, Xunlei, Yandex, and YY.

Coverage:

  • Global coverage with company-level drilldowns of 31 companies
  • Company-level annualized and quarterly trends across 29 financial data series
  • Network-related spending estimates at market- and company-level, across quarters

Excerpt from report:

"Global technology companies continued their spending spree into 2018, building and expanding their "webscale" networks. These networks are centered around data centers and undersea cable systems that support network traffic from the tech companies' online retail, video, and social media platforms, along with cloud services.

The companies in this webscale network operator (WNO) sector spent more than $100B in capex for the first time in a single year, investing $115.4B in 2018 and up by a robust 48.4% YoY. This surge impacted free cash flow margins, and the sector's cash & short-term investments fell by 9.8% in 2018 YoY. The capex hike during the year was primarily led by the "Top 8" webscale companies that include eight of the world's largest technology firms - Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent.

Webscale operators continue to branch into new markets, including hardware, both through R&D and acquisitions. M&A activity in the sector remained vigorous in 2018, with Alphabet, Amazon, Microsoft, Oracle, and Salesforce each recording sizable related costs. The M&A climate remains strong for the sector given its high cash reserves. Total debt for the sector is manageable overall, at $448.0B, or $136.7B less than cash & stocks. Some individual companies could face debt issues in an economic downturn, however, or due to regulatory pressure."

File format: Excel

Table of Contents
Product Code: GNI-11042019-1

Table of Contents

  • Abstract
  • Analysis
  • WNO Market: Key Stats thru 4Q18
  • Top 8 WNOs
  • All WNOs: Company Drilldowns
  • Totals by Company
  • About

List of Figures & Charts

  • 1.Key Metrics: Second-half of 2018 vs. 2011-18
  • 2.WNO Revenues: Single-quarter (US$M)
  • 3.Top 8 WNOs: YoY revenue growth in 4Q18
  • 4.Annualized profitability: WNOs
  • 5.Free cash flow per employee, 4Q18 annualized (US$)
  • 6.FCF Margins vs. Net Margins, 4Q18 annualized
  • 7.Advertising revenues as % total (FY2017)
  • 8.Annualized capex and R&D spending: WNOs (% revenues)
  • 9.WNO capex by type, 2H14-2H18 (US$M)
  • 10.Network & IT capex as share of revenues, 4Q18 annualized
  • 11.R&D expenses as % revenues, Top 8 WNOs (4Q18 annualized)
  • 12.Net PP&E per employee (US$M) - 4Q18
  • 13.Ranking the Cloud's Webscale Network Operators: 2018 revenues (US$B)
  • 14.Ranking the Cloud's Webscale Network Operators: 2018 R&D expenses (US$B)
  • 15.Ranking the Cloud's Webscale Network Operators: 2018 total capex (US$B)
  • 16.Network, IT & software capex (US$B) by WNO, 2018
  • 17.2H profitability trends, WNO Market
  • 18.WNOs: R&D spending, and network/IT capex, 2H14-2H18
  • 19.Network & IT capex as % of revenues
  • 20.WNO Network, IT and software capex: YoY growth
  • 21.Total employees: Webscale network operators
  • 22.Webscale market: Revenues & FCF per employee (US$K)
  • 23.Revenues & Spending (US$M)
  • 24.Webscale Business Mix by Revenues (FY2017) - MTN Consulting estimates
  • 25.Top 10 recent acquisitions & investments
  • 26.Revenues & YoY revenue growth: by company
  • 27.Annualized profitability: by company
  • 28.Annualized capex and capital intensity: by company
  • 29.Annualized capex and R&D spending as % of revenues: by company
  • 30.Share of WNO network & IT capex, Annualized: by company
  • 31.Total employees: by company
  • 32.Annualized per-employee metrics (US$000s): by company
  • 33.Net debt (debt minus cash & stock) (US$M): by company
  • 34.Profitability and cash flow, 2011-18 (% revenues): Webscale operators
  • 35.Free cash flow and cash on hand, 2011-18: WNOs (US$M)
  • 36.Revenues & capital intensity, 2011-18: WNOs
  • 37.Capex and R&D spending, 2011-18: WNO segment (US$M)
  • 38.Cash on hand, capex and acquisition costs, 2011-18: Webscale operators
  • 39.Capex and R&D as a % of revenues, 2011-18: WNOs
  • 40.Capex and leasing expenses as a percent of revenues, 2011-18: WNOs
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