Issue link: http://cp.revolio.com/i/611691
10 | THE DATA CENTER JOURNAL www.datacenterjournal.com ogy company, the natural response to that fact is to juice your stock price by repurchasing shares to reduce the supply. But this financial gimmick has become almost a religion for some companies that would seemingly do better by investing in their actual business. Apple, whose spare change exceeded $200 billion in 2015 ac- cording to a company earnings report, can perhaps be excused for reducing its debt to investors. IBM, on the other hand, not so much. Toward the end of the year, Big Blue had seen 14 straight quarters of year-over- year revenue declines, yet it has spent tens of billions of dollars since 2012 on its own stock, peaking in 1Q14 with a roughly $8 billion outlay to investors. Other struggling companies have also engaged in this practice, including HP, which recently went through a corporate restructuring that divided the company in two. Ignoring the effect on stock price, share repurchases are like paying down a mortgage: they relieve the debtor of financial obligations to the lender. But such efforts can spell trouble when they aren't backed by a solid revenue-producing business infrastructure. at is, companies whose futures are in doubt might be better off focusing on improving their product and service offerings rather than pumping up their stock prices. e phenomenon of stock buybacks is coming under increas- ing scrutiny, however, and some indica- tions suggest their ability to increase stock prices is diminishing. If the volatility in stock markets during the fall becomes a more pronounced downturn, companies' dedication to their stock-repurchase plans will be put to the test. soCial-MeDia earnings Facebook remained the undisputed king of social networks, garnering the most eyeballs and a strong profit to show for its efforts. Many competing social- media companies, however, have struggled to make a buck. Twitter, for instance, continues to wallow in hundred-million- dollar-plus net losses, and LinkedIn has had its own share of bright-red ink for 2015. ese companies face the challenge of differentiating from Facebook to offer users something other than just connec- tions to other people they know—a task Facebook already accomplishes quite well owing to its huge, general audience. One of the mantras of social media has been viewer growth: presumably, more eyeballs will eventually draw enough rev- enue from advertising and data brokering to enable these companies to turn a steady profit. But so far, the effort has been un- convincing (again, apart from Facebook). e model of free services in exchange for data has failed to inspire any privacy- related backlash, but advertisers have yet to invest enough to make it seem workable broadly in the long term. e next year may see some major changes as companies like Twitter try to appease investors either by finally figuring out how to make it into the black or by finding a suitor in need of a social-media presence. Data Center tax Breaks More states jumped on the data center tax-break bandwagon in 2015, with others extending or easing their own incentives in a competition to win infrastructure spending and a few jobs from technology companies. e state of Oregon, however, created a minor contro- versy among data center operators thanks to its odd method of assessing property. is method reduced the incentives that some companies expected from the ex- emptions. But since many states these days are offering incentives, major technology players like Apple and Facebook were con- tent to begin shopping elsewhere. (Oregon remedied this issue, however, by amending the law.) Whether these tax breaks will actual- ly pay off for states, however, is uncertain. Data centers bring relatively few jobs, and they don't necessarily increase commerce in a particular region. Because many states are struggling fiscally, companies may eventually discover that what states give, states also take away. Sooner or later, the debt party must end; someone will be le standing when the music stops and the limited number of tax dollars must be allo- cated among numerous grabby parties. the feDeral reserve Last but certainly not least among factors influencing IT economics in 2015 is the Federal Reserve. is pseudo-gov- ernmental organization may not come to mind with regard to the technical or even financial aspects of the technology indus- try, but its policies permeate markets. In particular, its imposition of a zero-inter- est-rate policy has meant that big investors have access to extremely cheap money. By Facebook remained the undisputed king of social networks, garnering the most eyeballs and a strong profit to show for its efforts. Many competing social-media companies, however, have struggled to make a buck. Twitter, for instance, continues to wallow in hundred-million-dollar-plus net losses, and LinkedIn has had its own share of bright-red ink for 2015.