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Tech Stock Roundup: Wannacry, GOOGL I/O FB Fine, QCOM Suit

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Tech news last week revolved around the WannaCry ransomware attack that affected Microsoft’s (MSFT - Free Report) Windows PCs, Alphabet’s I/O developers conference, the EU’s decision to fine Facebook over misstatements in its WhatsApp merger application and Qualcomm’s (QCOM - Free Report) decision to sue Apple (AAPL - Free Report) suppliers.     

Here are a few details-

Microsoft Prime Beneficiary of WannaCry/Wannacrypt Ransomware Attack

There’s been a big hue and cry over a ransomware attack called WannaCry that gains access to the user’s PC, locks off important files and asks for a payoff in bitcoins for their release. It’s estimated that a hacking group called the Shadow Brokers have already infected 200K PCs. More could be affected unless companies pay Microsoft a huge fee for an update or buy a Windows 10 license.

Interestingly, the two parties responsible for the spread of the attack are well protected by law.

The first is the National Security Agency (NSA), which exploits vulnerabilities in software and retains this information for espionage purposes. There is a moral justification for doing this because security is a sovereign function. Therefore, it makes perfect sense that although the attack started when the hackers accessed these NSA tools, the NSA can claim protection under the sovereign immunity doctrine, which says that the government cannot be sued over carrying out its official duties.

The second party is Microsoft itself because the attack was based on an exploitation of a flaw in its software. Microsoft is protected because it sells software under a licensing agreement, which states that it can’t be held responsible for security breaches.

Needless to say, Microsoft patents its software. The only justification for granting a patent, which inflates prices for consumers, is that the company holding the patent can invest the extra funds in R&D to further its technology, again for the benefit of consumers.

In this case, Microsoft did the R&D work and created a patch for the flaw that was exploited by the hackers. But it charged an exorbitant price for it (or an offer to buy Win 10) that many organizations couldn’t afford. So effectively, it used consumers’ money to do R&D and then charged them again for the flawed product it sold in the first place (in all fairness, if a patent runs for 20 years, Microsoft should indemnify users for a like period).

After the damage was done and after it generated significant publicity for the need to buy more software from Microsoft, notwithstanding big losses to companies (mostly in terms of business hours rather than actual ransom paid), Microsoft made the update free.

Technology companies spend a lot on lobbying, so it would be very hard to change patent law; plus they have also started the software-as-a-service model that requires you to pay every year for vaguely defined benefit. This is a real winner and takes care of the problem of forcing users to upgrade for little reason.

Google I/O

AR/VR: Google is working with HTC and Lenovo on a new device based on Daydream. Google also said that its project Tango integrated into your smartphone would help you with geo location indoors while in a store or other such confined area. Google is calling it the Visual Positioning Service, or VPS.

AI Hardware: Google announced specialty artificial intelligence AI hardware, called tensor processor units (TPUs) for cloud customers. Google uses the first generation of this technology in-house.

Google Assistant: There were a number of updates for Assistant, the first of which is Google Lens. This is basically a computer vision system that generates information about any real-world object, location or point of interest when you point your phone in that direction. Assistant is now available for iPhone and Google also released the Assistant SDK so device makers can integrate into their phones, speakers, IoT devices etc for voice communication and control. Assistant now comes in a few different languages and will Google will soon release product purchase tools.

Google Home: The device is getting proactive and will now light up when it wants to tell you helpful things you never asked. It will also soon support telephonic conversation between other such devices and also any phone in the U.S. and Canada. Being voice sensitive, it can determine who’s giving the command and follow instructions accordingly. Moreover, it can also guess when and where you need information, so even if you ask it something, it can send the answer to your phone.

Android: The next version of the OS will be called something beginning with O and is likely to be after some sugar treat, as were its previous iterations. It will come with new emoji, picture-in-picture video, security enhancements, more AI and include operating efficiencies that will boost battery life. Android Go will be available for devices with less than 1GB memory in 2018. Go is for developing markets such as India where the number of Android users already exceeds the U.S.

EU Fines Facebook Over WhatsApp

Facebook got a pretty good deal all things considered since the EU could have but did not withdraw its approval of the merger of WhatsApp with Facebook and instead let it go with a fine of 110 million euros ($122 million).

When Facebook applied for approval, it said that it wouldn’t be able to reliably link Facebook users’ accounts with their WhatsApp accounts. As it turns out, it is more than able and willing to just that and in fact updated its privacy policy a couple of years later to facilitate the process. So Facebook indulged in a deliberate misstatement.

The EU says that it didn’t block the merger now because the approval had been granted on factors other than the automated matching and after consideration of its consequences in the case Facebook had misstated. Facebook obviously welcomed the decision and said it wouldn’t appeal the decision; it would pay the fee (which isn’t substantial given its resources) and be done with it.

Qualcomm Sues Apple Suppliers

Qualcomm sued Foxconn, Pegatron, Wistron and Compal Electronics, Apple suppliers that the iPhone maker has asked to withhold payments to Qualcomm. The chipmaker claims that Apple has promised to indemnify them if Qualcomm took them to court for the breach of their agreements with it.

Apple has said that Qualcomm indulged in anti-competitive behavior when it forced Apple to use its technology and that it owes Apple rebates to the tune of a billion dollars (that it withheld after Apple testified against it in an Indonesian court that resulted in a hefty fine). It also says that Qualcomm refused to come to an understanding about fair and reasonable terms for licensing its standard essential patents.

Qualcomm has said that Apple has refused to pay fair and reasonable fees for using its technology. Since Apple doesn’t directly license the technology but uses it through its manufacturing partners, it has involved them to pressure Qualcomm and harm its business.

Ticker

Price Change Last Week

Price Change Last 6 Months

AAPL

-1.95%

+28.57%

FB

-1.51%%

+26.32%

GOOGL

-0.05%

+23.16%

MSFT

-1.01%

+14.98%

(INTC - Free Report)

-0.41%

+1.36%

(CSCO - Free Report)

-6.70%

-1.55%

(AMZN - Free Report)

-0.16%

+29.14%

 

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