Back to top

Image: Bigstock

Tech Roundup: AAPL Content Deal, NVDA Supercomputer, Snap User Growth

Read MoreHide Full Article

Last week, Apple (AAPL - Free Report) and Spielberg’s TV agreed to produce original shows, NVIDIA NVDA announced a supercomputer that will bring forward the launch of Level 5 self-driving cars and analysts projected strong user growth at Snap. Here are the details:

Apple’s Mega Content Deal

In what is perhaps Apple’s first attempt at serious competition with Netflix (NFLX - Free Report) , Hulu, Amazon (AMZN - Free Report) Prime Video, etc., the company has signed a deal with legendary film maker Steven Spielberg's Amblin Television and Comcast's NBCUniversal television production unit to finance the remake of his science fiction anthology series “Amazing Stories,’’ according to NBCUniversal.

WSJ, which first reported the news, expects Spielberg to have a role in production, possibly as executive producer.

 Apple’s previous attempts at TV style video productions were "Planet of the Apps" and "Carpool Karaoke," which weren’t big hits. So this will be a big test for Zack Van Amburg and Jamie Erlicht, who are making their first moves at the company after jumping ship from Sony Pictures Television.

Apple earlier set aside a billion dollars for content, which will clearly come in handy once production commences. Each episode is currently estimated to cost $5 million. The company has intends to double the size of its services business to $50 billion by 2020, and this is just the sort of deal it needs to get there.

NVIDIA Supercomputer for Self-Driving Car

At a company conference in Munich last Tuesday, NVIDIA announced a new supercomputer called Drive PX Pegasus that packs the power of a 100-server data center into a license plate sized device that can be kept in a car to facilitate Level 5 (fully autonomous) driving. The computing power is required to process all the information the car reads through its sensors that it maps to form a picture of its surroundings and then help it take decisions based on this ever-changing picture at least as fast as a human driver.

With this system, there should be fully autonomous cars, trucks and other vehicles on the road much sooner than 2021, as most autonomous driving systems are targeting. The company has said that the world’s largest mail and logistics company Deutsche Post DHL Group and a top automotive parts supplier ZF are planning on deploying a fleet of automated delivery trucks based on the system as early as in 2019.

Snap Is Growing Up

According to Piper Jaffray’s 34th semi-annual Taking Stock with Teens survey, Snapchat was the most popular social network for teens of average age of 16 years with 47% share, followed by Instagram with 24%, Facebook 9%, Pinterest 7% and Twitter 1%. There is considerable overlap, however, as 90% of Snapchat users also use Instagram. The numbers therefore suggest that the platform is still the go-to destination for teens. Credit Suisse estimates that Snap in fact added 3.2 million daily active users in North America in the third quarter, better than their previously estimated 1.5 million.

This is mainly what led Credit Suisse analyst Stephen Ju to raise his price target from $17 to $20.

Recent measures taken by management to woo advertisers, such as Snap Publisher, which is intended to quickly allow advertisers to make vertical spots out of existing horizontal footage and an auction system for purchasing ads rather than the fixed rates charged by Snap thus far also prompted the target price increase.

 

Ticker

Price Change Last Week

Price Change Last 6 Months

AAPL

+1.09%

+11.30%

FB

+0.88%

+24.64%

GOOGL

+1.42%

+19.96%

MSFT

+1.23%

+15.61%

INTC

+0.10%

+19.30%

CSCO

-0.83%

+3.24%

AMZN

+1.35%

+13.36%

 

Other stories

Corporate

Ireland Okays Apple Data Center: An Irish High Court has approved Apple’s plan to build a data center in a rural location of west Ireland to take advantage of rich green energy sources nearby. The project is expected to be one of the biggest capital investment projects in the area, creating 300 construction jobs and 150 on-site permanent jobs.

Planning permission was granted by the local council back in 2015, but regulatory procedural delays held things up. The government is now considering the labeling of data centers as strategic infrastructure to speed up the planning process for future projects.

Alphabet Balloons to Puerto Rico: The Federal Communications Commission has issued an experimental license to Alphabet (GOOGL - Free Report) , allowing it to float its Internet providing balloons in Puerto Rico after Hurricane Maria wreaked havoc on the island, cutting people out of basic necessities like food and water. A recent report said that 83% of people were still without cell phone connectivity.

Google was an obvious choice after its balloons very successfully supported Peruvians when that country was affected by floods. Google is now looking for a telecoms partner because the balloons have to be integrated with a carrier network for the system to work, as they did in Peru, where Google has a partnership with Telefonica.

In the words of a company spokesperson, “We’re grateful for the support of the FCC and the Puerto Rican authorities as we work hard to see if it’s possible to use Loon balloons to bring emergency connectivity to the island during this time of need. To deliver signal to people’s devices, Loon needs be integrated with a telco partner’s network — the balloons can’t do it alone. We’ve been making solid progress on this next step and would like to thank everyone who’s been lending a hand.” Puerto Rico Governor Ricardo Rossello has also been in talks with Tesla’s Elon Musk for the supply of solar batteries.

Alibaba’s $15 Billion R&D: Headed by Alibaba (BABA - Free Report) Chief Technology Officer, Jeff Zhang, Alibaba is setting up a global research organization with an initial funding of $15 billion to recruit talented scientists and researchers, collaborate with luminaries in the technology space and top educational institutions to explore technology breakthroughs. The initiative is intended to focus on developing the global technological capabilities and infrastructure that will enable Alibaba to meet its internal target of 2 billion customers and 100 million job opportunities in 20 years.

Netflix Expands to the Middle East: An original Netflix Arabic TV series is coming to users globally in 2018. The company has mostly focused on documentaries so far in the Middle Eastern market and even won an Oscar for the last one. But it is now investing in feature films and TV series (an area of particular local interest), according to CEO Reed Hastings. This series will feature Lebanese comedian Adel Karam along with other popular comedy stars such as Gad Elmaleh, Jack Whitehall and Beppe Grillo. Netflix will also be shooting other movies in the region.

Toshiba-WDC Far from Truce: Last week, Bain Capital indicated that it would try to settle with Western Digital for its lack of consent to the sale, but would go ahead and close the deal by Mar 31, even without it. The investment firm also applied for regulatory approval in a number of countries.

Now, based on additional information provided by Western Digital, it appears that there is considerable intellectual property owned by Western Digital’s SanDisk that can’t simply be set aside by Toshiba. Their agreement specifically prohibits Toshiba from working with other companies to manufacture BiCS or other NAND flash memory being developed or manufactured in the SanDisk-Toshiba JV.

Moreover, SanDisk designs approximately half of all the NAND chips that are manufactured in the JVs. SanDisk has been responsible for breakthrough design and system innovations that have resulted in advancements such as Multi-level cell (MLC), Three-level cell (TLC) and Quad-level cell (QLC) technologies, among others.

It also says that Toshiba doesn’t have the right to make the unilateral investments in Yokkaichi’s Fab 6 equipment that it announced in August, which is why it is seeking an injunction to stay the transfer at the international arbitration court.

Commenting on the Bain transaction it said, “Toshiba implies that our arbitration only seeks to prevent the transfer of its equity, in which case they still intend to close even if Toshiba loses. Toshiba ignores that the arbitration seeks to prohibit the transfer of any JV interests without SanDisk’s consent. Because Toshiba transferred other JV interests, such as its managerial and control rights in the JVs, Toshiba cannot close its transaction if SanDisk prevails.”

Yasuo Naruke, the head of Toshiba’s flash memory chip unit said that considering the competition with Samsung, it was best to maintain good relations with SanDisk. The company had earlier announced an intention to invest an additional 110 billion yen (probably not okay per WDC comments) over and above the initial investment of 195 billion yen (this is okay per WDC). 

Micron Share Issue: Micron (MU - Free Report) has announced that it is going to sell 29.3 million shares at $41 a share to raise $1.2 billion and pay off around $400 million of high-interest debt. The potential increase in dilution didn’t have a huge impact on share prices however, as business conditions for the company remain solid.

Despite the past year being more or less supportive of strong DRAM prices (as a result of relatively limited supply), the increased DRAM demand, particularly for data centers is expected to see this trend continue through 2018 (Gartner estimates that DRAM shortage will continue through the end of 2018). So the decision appears to be well timed.

Legal/Regulatory

New Tax Plan Could Benefit Apple: According to RBC Capital Markets analysts Amit Daryanani, Amitesh Bajad, Irvin Liu and Mitch Steves as reported by Barrons, Apple could be a major beneficiary of Trump’s tax reforms. There are four aspects of the new policy that will affect Apple, of which three are positive and one a slight negative. These are: a reduction in the effective corporate tax rate to below 20%, capex deductions on "depreciable assets other than structures" (what constitutes structures needs further clarification), repatriation of offshore cash at a low tax rate

Britain Looking Into Facebook & Google’s News Distribution Role:  A spokesman for British Prime Minister Theresa May said that the government was considering the role, responsibilities and legal status of Internet companies like Facebook and Google. There are a number of angles to the investigation, of which two are primary:

The first is with respect to false stories that are at times erroneously treated as news on social media, or racist, sexist, terrorist or other objectionable content that also circulates broadly because of the reach of these platforms. The second is the objections raised by news providers, because these two companies reportedly take 90% of new advertising revenue that would otherwise have gone to them but aren’t bound by the same standards that news agencies have to adhere to.

So they basically want Facebook and Google to be treated as news agencies in the UK. Also on the radar is the harm caused to children who share content and pictures freely and often, unwisely with people they meet online with no idea of the repercussions.

New Products/Technology

iPad Pro Rumor: Famed Apple analyst KGI Securities analyst Ming-Chi Kuo is out with another rumor: this time he’s saying that the next iPad Pro will include TrueDepth technology, enabling Face ID instead of the fingerprint system currently in use. The more advanced camera system will also reportedly help its AR ambitions. Of course, while in the past, Apple has tried out some new features on its iPhone, it still isn’t clear how the new technology will be taken by users. So we don’t really know if it will bring this feature as well.

Amazon Wooing Teens: In an attempt to understand/profile the next generation while easing them on to Amazon, the leading online retailer has launched a special service that will allow teens (aged 13-17) to shop freely on Amazon. For the purpose, Amazon is offering parents the option of attaching up to four accounts to theirs such that things chosen by their teenage children through these accounts can be approved by them on case-by-case basis.

Or, if they prefer not to approve each purchase, they can specify the amount their kids can spend on Amazon and then let them shop as they like. The parents choose the mode of payment.

Collaborations and M&A

Microsoft-Transparency-One: Microsoft has signed an agreement with Transparency-One, which offers companies an end-to-end supply chain solution so they can discover, analyze, and monitor all suppliers, components, and facilities in the entire supply chain. The agreement enables Transparency-One customers to include an additional layer of security to their data by storing critical supply chain information, captured in Transparency-One, in Microsoft Azure's Blockchain Services.

Microsoft-Amazon on AI: Amazon Web Services and Microsoft have announced a new deep learning library, called Gluon, with the goal of bringing developers to the Python-based application programming interface (API) that will allow them to prototype, build, train and deploy sophisticated machine learning models for the cloud, edge devices and mobile apps on MXNet, the AI framework backed by Amazon, and later, Cognitive Toolkit, the framework that Microsoft open-sourced in 2015. The idea is to put up some competition to Google’s Tensorflow, (which it open sourced back in 2015 with considerably greater success), and thereby attract developers to their own AI tools, cloud and services.

Some Numbers

HP Financial Outlook: HP estimates GAAP diluted net earnings per share from continuing operations for fiscal 2018 of $1.69 to $1.79, non-GAAP diluted net earnings per share of $1.74 to $1.84 and free cash flow of at least $3.0 billion. The company expects to return 50%-75% of fiscal 2018 free cash flow to shareholders through dividends and share repurchases.

PC Shipments: According to Gartner, PC shipments were down 3.6% to 67 million units in the third quarter of 2017 with signs of stabilization in the key regions of EMEA, Japan and Latin America, However, this was offset by the U.S., which saw a 10% year-over-year decline partly because of a very weak back-to-school sales season. HP was the top vendor globally (21.8% share), followed by Lenovo (21.4%), Dell (15.2%), Asus (7.3%), Apple (6.9%) and Acer (6.5%). HP was the only one to have grown market share.

Back in the U.S., HP (31.6%), Dell (25.6%), Apple (12.8%), Lenovo (12.2%) and Asus (4.4%) were the top vendors. All vendors saw declines, but HP’s decline was the smallest.

Gartner’s numbers exclude chromebooks and iPads.

 

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in