Intel’s INTC chip flaws, Microsoft’s MSFT Avere purchase and the U.S. blocking MoneyGram’s sale to Alibaba’s BABA Ant Financial were the top stories from last week. Here are the details-
Intel Chip Flaw
Media reports from last week shed light on a number of security issues with chips that put most smartphones, laptops, PCs, servers and other computing devices at risk. The two bugs/flaws could allow programs to steal data including passwords stored in a password manager or browser, personal photos, emails, instant messages and even business-critical documents.
The first one, called Meltdown, affects only Intel processors and Intel is already providing software and firmware updates for 90% of devices that could slow down your machine somewhat, but would be mostly imperceptible for most users, according to the company. For tasks that aggregate data (like databases) or jobs that involve moving repeatedly between the storage and the processor, the patch can slow down the process by up to 30%. In addition to Intel, cloud vendors Amazon AMZN, Microsoft and Alphabet’s GOOGL Google, as well as OS provider Apple AAPL have already issued patches for this one.
The second one, called Spectre, is much harder to fix and affects Intel, Advanced Micro Devices AMD and ARM-powered devices, so practically every single machine.
There appears to be some dispute about whether AMD chips are susceptible to the vulnerabilities or not. Of the three ways a system could be attacked, AMD says its CPU microarchitecture leaves it fully immune to the first, yields "a near zero risk" to another and while being vulnerable to the third method, software/OS updates that have "negligible performance impact" should fix the issue. A Google blog post stated the vulnerabilities "affect many CPUs, including those from AMD, ARM and Intel."
Investors are, however, punishing Intel shares while boosting AMD, so they probably expect AMD to pick up some of the data center share it’s been targeting for so long. NVIDIA shares also rose possibly for similar reasons, although Intel’s CPUs don’t do exactly the same job as its GPUs.
Microsoft Buys Avere
Avere Systems, the network file systems (NFS) and server message block (SMB) file storage provider for Windows and Linux clients running in the cloud, hybrid and on-premises environments with customers like Sony Pictures Imageworks, the Library of Congress, John Hopkins University and Teradyne, has been acquired by Microsoft.
Avere’s file system and caching technologies speed access to compute and storage resources in hybrid environments, which could therefore help the number two provider of cloud services in its battle with market leader Amazon AWS and number three, Google Cloud. Microsoft has said that Avere technology will help it run "the largest, most complex high-performance workloads" in Azure.
The purchase price isn’t known yet, but the company has raised $97 million from Menlo Ventures, Norwest Venture Partners, Lightspeed Venture Partners, Tenaya Capital, Western Digital Technologies and Google over the years. In fact, one advantage that Microsoft is likely looking for is Google’s removal from the scene so it is unable to influence the company or integrate it into its cloud. Instead, Avere CEO and President Ron Bianchini has said that Avere’s technology will be tightly integrated into Azure.
Alibaba’s Ant Financial Can’t Buy Moneygram
The U.S. government’s Committee on Foreign Investment in the United States (CFIUS) has blocked money transfer company Moneygram’s sale to Alibaba’s sister company Ant Financial. The rationale for the deal is obvious: Moneygram has approximately 350,000 remittance locations in more than 200 countries that would have helped Ant’s Alipay make inroads into several international markets including the U.S.
But the U.S. government has taken a hard stand on trade relations with China and in this case, cited uncertainty about the security of private information of U.S. citizens to block the deal. Moneygram and Ant Financial have therefore agreed to work collaboratively in remittance and digital payments based on separate commercial agreements in key international markets such as China, India, the Philippines, other Asian markets, as well as the U.S.
Price Change Last Week
Price Change Last 6 Months
Jimmy Iovine Leaving Apple: Jimmy Iovine, the co-founder of Beats Music that Apple acquired for around $3 billion, is leaving Apple in August, when the Apple shares he got in the buyout, vest. Beats has been important to Apple mainly because of the music streaming infrastructure it developed that helped Apple to quickly become the number 2 music streaming service behind Spotify. As of September, the service had 30 million subscribers, up 75% from the year-ago quarter.
Apple also sells the Beats headphones, although they aren’t quite the quality or the hit Apple products usually are. While there aren’t any confirmations from Apple or Iovine himself, media reports suggest that there was also something of a culture clash between them that may have had something to do with the departure.
Alphabet’s Cityblock Raises $20 Million: Cityblock, the healthcare spinout from Alphabet’s urban development company Sidewalk Labs, has raised $20 million. CEO and co-founder Iyah Romm has the vision of helping lower-income groups like the elderly and homeless with healthcare services.
The company was formed on the idea that preventive measures are cheaper and more effective to keep these people healthy than hospital visits. So it has the goal of allotting a personalized care team of doctors, coaches, technology tools, follow-up nudges and a health plan to each member (for free if they have insurance).
Cityblock is in the process of signing up insurance companies for the purpose. The service isn’t operational yet and the money it raised will be used to develop a technology it’s calling Commons and also to build or partner with community health centers in Brooklyn, and other urban centers.
New Tax Law and Netflix Pay Raises: In response to the new tax bill that made executive compensation fully taxable, even if they were performance based bonuses, Netflix made changes in its compensation plan. The law earlier allowed companies a tax deduction on employee salaries if they constituted performance based payments.
The law was framed to curtail exponential rise in executive salaries compared to the average worker. However, this didn’t have the desired effect and in fact made the situation worse as the bulk of top executive pay was then recorded as performance based payments.
With the new law, there is no need to package compensation for maximum tax benefit, so Netflix (and some others) are rolling all payments into salary, which therefore looks like a massive hike in pay. The company’s new policy covers Chairman and CEO Reed Hastings, CFO David Wells, Chief Content Officer Ted Sarandos, Chief Product Officer Greg Peters and General Counsel David Hyman.
Cowen Downgrades Snap: Wall Street firm Cowen has downgraded Snap shares to underperform from market perform after its survey of 50 senior U.S. ad buyers found that they ranked it lowest among social media networks in terms of return on investment; targeting; and data, analytics and measurement.
Moreover, 96% of advertisers preferred Instagram Stories to Snap with all those who spent money on Instagram Stories last year intending to repeat the spending in 2018. The positives for Snap were the continued increase in DAUs (expected 16% growth in the fourth quarter) and the increase in engagement (18-24 year-olds are using it for 53 minutes a day).
Snap has 70% penetration among 13-34 year-olds in the U.S., UK, France and Australia and this is the age group contributing to its success, so analyst John Blackledge also felt that the “challenge for SNAP is whether the user base can age up."
Gender Disparity Caches Up with Google: Google now faces a class action lawsuit after it was modified to narrow down the class of people suing Google. The class was earlier defined as all women employed by Google in California, which San Francisco Superior Court Judge Mary E. Wiss considered too broad a definition. The class was subsequently modified with more than 2 dozen specific job titles including software engineer, project manager and sales representative and the case refiled after the passage of a California law that prohibits an employer from asking an employee her former pay or using it as a basis for subsequent employment.
The law was passed to prevent gender discrimination, which was perpetuated by these practices. The lawsuit alleges however that Google pays women less for equal or similar work and puts women on career paths with lower pay ceilings. The lead plaintiffs include Kelly Ellis, who worked for Google from 2010 to 2014; Holly Pease, who performed a variety of managerial roles at two Google offices from 2005 to 2016; and Kelli Wisuri, worked as a sales communications specialist and “brand evangelist” from 2012 to 2015, to which was added Heidi Lamar, a preschool teacher.
Tech Companies May See UK Taxes Rise: The Theresa May government in UK is sore about technology companies collecting individual data to sell advertisers when they won’t share that same information with the government. In a recent interview with the Sunday Times newspaper, security minister Ben Wallace directly accused companies like Facebook and Google of irresponsible behavior. "We should stop pretending that because they sit on beanbags in T-shirts they are not ruthless profiteers. They will ruthlessly sell our details to loans and soft-porn companies but not give it to our democratically elected government," he said.
The government believes that hate speech and terrorist communications on social networks are leading to the spike in terror incidents. "Because content is not taken down as quickly as they could do, we’re having to de-radicalize people who have been radicalized. That’s costing millions. They can’t get away with that and we should look at all options, including tax."
Technology companies have however been ramping up efforts to curb terrorism. Last year, Facebook, Google and Twitter joined together to limit Internet service access to terrorists. Facebook said on the UK issue: “Mr Wallace is wrong to say that we put profit before safety, especially in the fight against terrorism. We’ve invested millions of pounds in people and technology to identify and remove terrorist content. The Home Secretary and her counterparts across Europe have welcomed our coordinated efforts which are having a significant impact. But this is an ongoing battle and we must continue to fight it together, indeed our CEO recently told our investors that in 2018 we will continue to put the safety of our community before profits.”
Google’s YouTube said, “Over the course of 2017 we have made significant progress through investing in machine learning technology, recruiting more reviewers, building partnerships with experts and collaboration with other companies." The government’s concern stems from the fact that Islamic terrorism killed 33 people in the UK last year.
Apple Battery Fix Could Be Expensive: Apple reacted quickly to a series of class action lawsuits for deliberately slowing down older iPhones to prevent them from shutting down and encouraging users to upgrade their phones instead of going for the cheaper battery replacement. The company offered a $50 discount on battery replacement on select models, so customers could get them for a mere $29.
Now, Barclays analyst Mark Moskowitz thinks that this move could have a significant impact on new phone sales. That’s because “even a small percentage [of customers] opting for battery replacement over upgrade could have meaningful impact on iPhone sales,” he said. The analyst estimates that around 519 million users are eligible for the battery, although only about 10% are likely to take the $29 offer. If just 30% of these people decide not to buy a new iPhone this year, it could eliminate 16 million iPhone upgrades.
Instagram Testing WhatsApp Ties: Facebook is testing a feature that could allow the sharing of Instagram stories to WhatsApp status, just as is now enabled on Facebook. The feature could spur usage of WhatsApp status, allow end-to-end encrypted sharing of stories that still disappear after 24 hours and also improve Instagram versus Snap, the messaging service it copied.
Alexa-Powered Smartglasses at CES: Amazon has confirmed that Vuzix smart glasses to be showcased at CES 2018, will be the first with Alexa integration, provided you’re an Amazon customer or decide to become one. Vuzix generally caters to the business-to-business segment and has partnerships with companies like Airbus, DHL and HP, so this could bring bulk sales of Amazon powered devices.
The deal is evidence of the success of Amazon’s partner program that allows third-party hardware manufacturers to put the digital assistant into their products. We don’t know yet whether Amazon is making its own AR/VR hardware, but that definitely seems to be in the cards. The greater the number of devices with Alexa integration, the better the chances of selling more products on Amazon.com.
Alibaba Supermarkets in Beijing: Alibaba started its Hema line of supermarkets a couple of years ago to support its omnichannel strategy in China. The company currently has 25 such supermarkets. Customers typically download the Hema app and connect with Alibaba's e-commerce platform and payment system. They also shop groceries for delivery or pickup, or order fresh food to be cooked by Hema chefs and delivered. Alibaba is now adding 30 such supermarkets in Beijing, where there are currently just five.
Collaborations & M&A
Google Invests in Chushou: Google led a series D funding round in Chinese online e-sports platform Chushou joining earlier investors Qiming Venture, Shunwei Capital and Alpha X Capital. The service has roughly 8 million streamers and 250,000 live streams a day, according to a joint statement by the companies. About 90 million gamers have registered to watch streams of more than 1,000 games, making Chushou one of the most active mobile gaming online communities in China. With this round, the startup has raised $120 million since its inception in 2015.
Google May Sell Zagat: Google is reportedly looking to offload restaurant review guide, which it biught back in 2011 for $151 million. Google’s asking price isn’t known, but the deal would likely involve the Zagat brand name and website. This is most probably not a one-off decision, but part of CFO Porat’s cleaning spree, in which she has gotten rid of other non-core businesses like Boston Dynamics and Tokyo-based Schaft (sold to SoftBank Group) and Terra Bella (sold to Planet Labs).
App Sales in 2017: According to data company Sensor Tower, mobile app revenue, including both Android and iPhone apps and paid downloads and in-app purchases, but not mobile commerce purchases such as GrubHub orders or Uber rides, totaled $58.6 billion in 2017, up from $43.5 billion in 2016. Also, new installs grew 13.5%. While revenue growth was relatively even for Android and iPhone, app downloads grew 16.7% for Android compared to just 6.7% for iPhone, which the firm attributed to Android’s domination in developing markets.
Amazon Retail Sales Leader: According to data from e-commerce analytics provider One Click Retail, Amazon accounted for 44% of U.S. ecommerce sales in 2017, or 4% of total retail sales. The firm attributes the success to millennials, as more of them grow up to get their own homes and settle down.
Consumer electronics (laptops, headphones and other computer components) was the top grossing category, with Home and kitchen, publishing (which includes books) and sports and outdoors being other top categories. The fastest-growing segments were however luxury beauty (up 47% from a year ago), pantry items (up 38%), grocery (up 33%) and furniture (up 33%). Its private label ranges were also called out as great performers.
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