Earnings season is drawing to a close with most of the S&P 500 having reported already, making NVIDIA NVDA easily the hottest earnings from last week. The online travel agents continued to disappoint, with both Priceline PCLN and TripAdvisor TRIP shares plummeting. These and Intel’s INTC deal with Advanced Micro Devices AMD were the top stories from last week-
NVIDIA: NVIDIA reported very strong revenue and earnings growth in its fiscal third quarter, easily beating the Zacks Consensus Estimate on both top and bottom lines. Gaming (driven by strength across geographies and form factors, Nintendo Switch and cryptocurrencies) Data Center (driven by cloud service providers and HPC) and Professional Visualization (driven by VR adoption at defense and automotive customers, stronger demand for high-end real-time rendering, simulation and more powerful mobile workstations) were all up strongly from last year. The guidance indicates that the strength will continue.
Priceline: Priceline reported a strong quarter with both top and bottom lines ahead of the respective Zacks Consensus estimates. The company’s hotel revenues did better than its rental cars and flight bookings, both of which saw weaker volumes. While bookings at the start of the current quarter were at the high end of management expectations, so can’t be considered unusually weak, the guidance was disappointing even by Priceline’s standards (it usually guides conservatively). The reason for the weakness, especially on the hotels side isn’t clear but could be because of efforts by hotels to reach customers directly rather than through a distribution channel.
TripAdvisor: TripAdvisor reported better-than-expected third-quarter earnings on revenues that disappointed. While revenues continued to grow albeit very slowly, earnings dropped over 32% from last year. The hotels side of the business was weak, with other revenues (from attractions, restaurants and vacation rentals) remaining strong. The company burnt cash and saw a reduction in its net cash position.
Intel & AMD Finally Have a Deal
Everyone expected Intel and Advanced Micro Devices to get closer together after Intel’s forced licensing deal with archrival NVIDIA expired in Jan 2017. But one of the things that stood in the way was the fact that AMD also competed with Intel, on multiple fronts.
For AMD, licensing technology to Intel would mean sacrificing profits from chip sales in exchange for royalties from a larger number of chips. It was likely a difficult decision, made easier only by the fact that their combination could help them take share in a market they were both targeting (i.e. high-end gaming laptops), one that is currently dominated by the common enemy NVIDIA.
There are also other areas of interest. The first would be the shrinking PC market and Intel’s need to maintain position while investing in emerging areas like AI, cloud, IoT, auto, etc. The second would be AMD’s unattractive financials that would improve with a steady flow of revenues from Intel.
Third, AMD’s limited presence in the PC gaming segment (the only part of the PC market that still has attractive growth rates) where its discrete GPUs are up against NVIDIA’s, but where Intel has limited presence because it only sells an integrated version. Marrying AMD graphics with Intel processing power would strengthen the integrated solution versus the discrete one.
For those with any doubts about whether the relationship is a short term one or part of a larger-scale alliance between the two, it’s worth noting that AMD VP and chief architect of the Radeon Technologies Group, Raja Koduri is now an Intel employee as its chief architect, SVP of its newly formed Core and Visual Computing Group, and GM of a new initiative to drive edge computing solutions.
The actual product details are limited at this point, but Intel has said that this will be part of its 8th Gen Intel Core family, bringing together its high-performing Intel Core H-series processor, second generation High Bandwidth Memory (HBM2) and a custom discrete graphics chip from AMD’s Radeon Technologies Group – all in a single processor package.
The integration will be facilitated with Intel’s Embedded Multi-Die Interconnect Bridge (EMIB) that will be used for the first time in a consumer device. The purpose of the integration is to fit in more power and performance with better thermal dissipation and consuming less energy into a smaller form factor.
Price Change Last Week
Price Change Last 6 Months
Apple Raising Debt Again: President Trump’s tax relief plans notwithstanding, Apple AAPL is going ahead and borrowing more cash to fund its $300 billion shareholder return program. 2-year, 3-year, 5-year, 7-year, 10-year and 30-year fixed-rate notes with maturity dates in November 2019, November 2020, January 2023, January 2025, November 2027 and November 2047.
Apple Supplier Planning India Expansion: Wistron Corp, Apple’s iPhone assembler in India is looking for 100 acres of land in Bangalore and have short-listed a few parcels of land, Bloomberg reports. Apple currently assembles only the SE in India and all the high end models are still imported, so they have an import duty stacked on the already-high prices. Nevertheless, Wistron said that the additional capacity may also be used for customers other than Apple.
Raja Koduri Joins Intel: Intel plans to make a mark in the graphics chip business, where it is a secondary player to AMD and NVDIA. So just before NVIDIA reported, the company announced that it had whisked away Raja Koduri, senior vice president and chief architect of the Radeon Technologies Group at AMD to head this effort. Koduri has more than 25 years of experience in graphics hardware, software and system architecture in visual and accelerated computing advances across a broad range of devices, including PCs, game consoles, professional workstations and consumer devices.
Davidson Sees Cisco Share Loss: Mark Kelleher of D. A. Davidson is excited about Arista Networks’ stellar results and strong revenue growth rate and thinks it will continue to take market share away from Cisco for years to come. Accordingly, the analyst raised his price target on the shares from $180 to $224 while upgrading the shares from Neutral to Buy.
The strong results were despite weaker-than-expected revenues from the top cloud vendors because of a product workaround related to Cisco patents, which therefore extended the qualification with them. Other analysts conceded that the company was growing strongly but also pointed to the rich valuation that kept some of them on the sidelines.
Microsoft Buys Chevron Data Center: Just a day after Microsoft signed a 7-year deal to provide cloud computing services (including data analytics and IoT) to the giant energy company Chevron Corp, its subsidiary Chevron USA sold its 5200 Rogers Road data center to Microsoft. While the purchase price was kept under wraps, the Bexar County Appraisal District fixes the value at $80 million. The company’s massive operational scale generates 1TB of data per day, which can be processed to generate operational efficiencies and savings for the company.
Tesla Nabs Microsoft Engineer: Microsoft just lost Scott Simms, one of the leading engineers at its video game engineering unit to Tesla as its "Director of UI Engineering." Simms’ LinkedIn profile says that he was involved in "AR & 3D reconstruction on mobile devices.” He also says that he managed computer vision, UI and app teams developing monocular SLAM and 3D reconstruction running real time on resource constrained hardware.
Amazon Pop-Ups at Whole Foods Stores: For the holidays, Amazon will be opening pop up stores within 100 Whole Foods outlets in Illinois, Michigan, Florida, California and Colorado so people can try Amazon devices and familiarize themselves with Prime and other subscriptions. Whole Foods is also offering Black Friday deals on Amazon's merchandise, including $20 off the Echo Dot, $20 off the new Amazon Echo, $30 off the new Echo Plus and $30 off the Fire HD 8 tablet.
The stores already process Amazon returns and have Amazon lockers for product pickup. The integration is going well and further plans are afoot that might see Prime members getting special deals inside Whole Foods stores.
Amazon’s Echo Group of Devices in Japan: Amazon has now introduced Alexa and its Echo group of devices to Japanese customers. Alexa for Japan has been built from the ground up especially for Japanese customers with a new Japanese voice, local knowledge and over 250 skills from Japanese developers.
Israeli Startup Claims Apple Infringed Its Tech: Tel Aviv-based Corephotonics, which has raised $50 million from several high-profile venture capital firms and other investors, has filed a patent infringement case against Apple. The company claims that Apple had used its patented dual camera technology in its Phone 7 Plus and iPhone 8 Plus without authorization. According to the filed complaint, "Apple’s lead negotiator expressed contempt for Corephotonics’ patents, telling [CEO] Dr. Mendlovic and others that even if Apple infringed, it would take years and millions of dollars in litigation before Apple might have to pay something."
Samsung Ventures, Apple supplier Foxconn and chipmaker MediaTek are investors in Corephotonics through its latest funding round in January. Other investors include Magma VC, Amiti Ventures, Hong Kong billionaire Li Ka-shing and Solina Chau’s Horizon Ventures, flash storage maker SanDisk and Chinese telephone services provider CK Telecom.
Waymo-Uber Lawsuit Update: U.S. District Judge William Alsup, in an order the details of which were kept secret to allow both sides an opportunity to review his reasoning privately, has dealt a big blow to Alphabet’s Waymo in its case against Uber. The case was about the theft of intellectual property by one Anthony Levandowski, who stole files and transferred the information to his self-driving trucking company called Otto Trucking that was soon acquired by Uber.
The ruling is a blow on two counts; the first being the disqualification of Waymo’s damages expert/striking out of the report on which he is relying (it’s hard to tell which or both from media reports currently available) and the second, the removal of Otto as a joint defendant in the case. Without the expert, it could be harder for Waymo to prove why it deserves a billion dollars in damages on a case involving technology that hasn’t yet come to market. Without Otto in the picture, it will be harder for Waymo to fix responsibility on Uber, since the technology moved through Otto to Uber.
Apple AR Glasses: Bloomberg says that according to people familiar with the matter, Apple will have an AR headset powered by a new chip and with its own display and operating system ready to ship by 2019. Apple is moving aggressively, according to the people although the deadline could still get pushed back.
CEO Tim Cook who is extremely positive about the technology, has said that he already sees how AR will “transform the way you work, play, connect and learn” and the way that’s it’s going to “change the way we use technology forever.”
Housing Rentals Come to Facebook Marketplace: Facebook is partnering with companies like Apartment List and Zumper, which are in turn working with brokers, agents and property managers to greatly expand the list of housing rentals on the platform. Users looking for suitable homes will be able to filter results based on location, price, rental type, number of bedrooms and bathrooms, square footage, pet-friendliness and other criteria. Users can also put up their own listings directly to the site using 360 degree images.
Google Files Go: Google is working on a new app called Files Go to be available as a part of the stock Android version, for file management, sharing and cleaning. Sharing files on Android devices is possible, if not too comfortable today. So both users have to have the concerned app open and have to tap their phones together to make the connection via NFC. It’s awkward and not very well known among users. Files Go will likely solve this problem.
Additionally, it will also help to clean up disk space. The app has a dashboard that shows how much storage your phone has left, a button to clear cached files, and suggestions to remove large files that you’re apparently not using any more, all with the goal of freeing up space. There’s also a files manager that lets you browse through local photos, videos, music and other documents.
Amazon Fire TV Stick Across 100 Regions: Amazon has launched the basic version of its Fire TV stick in over 100 more countries, so people can simply plug the device into the HDMI port of their HDTVs to stream the latest shows, Amazon Prime content and also play games. Customers can also set their default language as Spanish, Brazilian Portuguese, French, Italian, German or English.
Collaborations and M&A
Apple Acquired InVisage: Apple has acquired an image technology company that raised $98 million from various sources including Nokia and Intel Capital. The reason these companies were interested in InVisage is a technology called QuantumFilm that appears to be a breakthrough in materials science.
This specialized device works with dedicated software to deliver highly accurate images in a very small form factor and even in low light conditions. Considering the way technology is developing, image processing is a super-important market with scope for application in not only smartphones and computing devices, but also IoT, security, automotive, AR/VR, filming and others.
This is likely to be an important piece of technology for Apple, but one that we won’t know much more about because of the size of the acquisition that makes it immaterial to Apple’s operations, which therefore doesn’t carry a statutory requirement to disclose.
Microsoft-Ola: Microsoft has signed an important alliance with Ola Cabs of India that will see the ride-hailing service transfer automotive data to Microsoft’s Azure instead of Amazon’s AWS and integrate Microsoft’s artificial intelligence and productivity tools into Ola Play (the company's existing connected car platform). This appears to be a step toward Ola’s self-driving car goals and furthers Microsoft’s objective of wresting corporate customers from AWS.
In the meantime, it also enables improved in-car productivity (users get Office 365 and Skype for Business, as well as voice-assisted controls built using Microsoft Cognitive Services and Bot framework, in-car during their rides), vehicle diagnostics, advanced navigation and predictive maintenance of vehicles. Ola recently raised around a $1 billion in a funding round that included Tencent and Japan’s Softbank.
Google, Salesforce Get Cozier: Google and Salesforce are integrating their software so their solutions are more complete, useful and competitive versus offerings from Microsoft Azure. Of course Salesforce also integrates with AWS, the other major Azure (and Google Cloud) competitor. In Google’s case, the partnership involves Salesforce CRM working closer together with Google G Suite productivity apps so customers can make the most of Salesforce Lightning and Quip along with Gmail, Hangouts Meet, Google Calendar, Drive, Docs and Sheets.
It also brings sales, marketing and advertising data across Salesforce Sales Cloud, Salesforce Marketing Cloud and Google Analytics 360 together for better number crunching. There are a number of benefits for Google as well: First, Google’s ability to offer better analytics to retailers competing with Amazon, which uses CRM from Salesforce.
Second, Google gets access to those of the 150K Salesforce customers that are new to G Suite, thus expanding its enterprise customer base. (These customers will get a year’s worth of the service free of cost provided they qualify). Third, Salesforce will use Google infrastructure where required as it expands internationally (it only uses AWS now), which can only be positive for Google.
Tencent Invests in Snap: Changes are coming to Snapchat, the oh-so-popular teen app from the company that doesn’t have the revenues to show for it. Most of its innovations are copied by Facebook in record time, which quickly rolls them out to its much larger customer base. The truth is, Snap can’t make it big without targeting a bigger audience. So it’s doing a number of things to grow the numbers, both users and engagement.
The first is a redesign that will place personal stories on the left and curated content on the right to facilitate discovery. The second is the exploration of new strategies or avenues of growth, possibly through partnerships.
The company also disclosed last week that China’s Tencent had bought 145.8 million non-voting shares in the company for an additional 12% stake. It’s likely that Tencent will bring gaming content to the platform. An emailed statement from the company reads thus: “The investment enables Tencent to explore cooperation opportunities with the company on mobile games publishing and newsfeed as well as to share its financial returns from the growth of its businesses and monetization in the future”.
iPhone X Teardown: According to an IHS Markit teardown, the stainless steel case, 3-D facial recognition system on the front and 5.8-inch OLED screen of the iPhone X that aren’t part of the iPhone 8 have increased bill of materials for Apple’s flagship device. The cost therefore comes to $370.25 for the 64GB model compared to $255.16 for the iPhone 8 with the same storage.
TechInsights, on the other hand, places the cost at $357.50 and given the $999 retail price, estimates the gross margin on the device of 64%. The iPhone 8 in comparison fetches a gross margin of 59%, according to the company.
But drop tests (from 6 and 3 feet heights) reveal that the phone is the most breakable and expensive to replace. The corner drop is the least disruptive, but dropping on the front or back face shatters the device, for which Apple will not sell the parts destroys but replace the entire device for $549, which is $150 more than the cost of replacing the iPhone 8 glass.
Amazon Discounting Third Party Sellers’ Wares: Moving away from its practice of discounting only those products that it ships directly, Amazon has started discounting products it sells on behalf of third party sellers. If a product is sold on an Amazon discount, the full amount including the discount is paid to the seller by Amazon.
The discount is obviously intended to move customers away from competing platforms and traditional retailers like Walmart. But third party sellers may not be thrilled for a number of reasons: discounts that they didn’t plan for might lead to inventory imbalances. Moreover, it could devalue their brands. Amazon says that while the discount is clearly labelled as coming from Amazon, sellers can still opt out at any time.
Twitter Doubles Character Count: Twitter has finally doubled the character limit from 140 to 280 so users can express themselves better. All users that is, except those in Japan, Korea and China, because those languages are denser and therefore more expressive, according to the company. Twitter has been testing the increased character limit with a number of users since September and found that most users don’t send very long tweets.
On the other hand, the option to say more in a single tweet meant that users generally could think less about the composition, so they could be more spontaneous. They could also probably (or at least more often) do without screen shots of longer messages, or tweet storms (saying what they mean in a series of tweets rather than a single one because of the character limitation). Some older Twitter users are afraid that the character of the platform will change with longer tweets. But the ability to express themselves more fully will definitely attract more users, make it more social and increase engagement on the platform.
Other Earnings Reports From Last Week: Snap, Microchip, Skyworks, GoDaddy, Take Two Interactive.
Some Companies Reporting This Week: CSCO, AMAT, NTAP, SSYS
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