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Tech Roundup: GOOGL Internet, FB vs. Ad-Blockers, Acquisitions

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Last week saw just a few notable earnings reports, but there was other excitement in the form of a wireless Internet service from Alphabet (GOOGL - Free Report) , Facebook taking on ad-blockers, Microsoft (MSFT - Free Report) buying game streaming company Beam and Intel (INTC - Free Report) buying Nervana.

Here are the top stories-

Alphabet Will Offer Wireless Internet Too

Alphabet’s Fiber project is now looking to offer wireless Internet service. The company has applied for permission to test the technology across 24 locations in the U.S. spanning Provo, Utah, Omaha, Nebraska, and Boulder, Colorado. If allowed, the service will be tested for 24 months, but it’s very hush-hush. Only contractors, employees, “trusted testers” selected by Google will qualify and no money will exchange hands.

Fiber initially focused on laying out networks that can transmit high-speed Internet, but constant skirmishes with competitors like AT&T and Comcast over existing poles and the resultant regulatory roadblocks have led to significant delays in its deployment.

In the meantime, Alphabet acquired a startup called Webpass, which is testing some interesting wireless antenna technology called pCell designed by Steve Perlman. The technology claims to increase Internet speeds by up to 1000X by using multiple antennas to transmit signals that combine to create a personal cell. Theoretically, this cell then follows you around and maintains your connectivity.

Facebook’s Fight with Ad-Blockers

Facebook lives on the unremarkable, irritating thing called ads but users are increasingly looking for ways to block these pesky things. So last week, Facebook found a way to make things more difficult for ad blocking companies like Adblock Plus.

Okay, so the victory was short-lived with the ad blocking community taking just a few hours to find a workaround. But Facebook isn’t backing off; it is intent on keeping up the fight and blocking the ad blockers whenever it can.

Note that Facebook derives more than 80% of its revenue from the mobile app, where it controls the ad experience and ad blocking companies are powerless. So this conversation is about the web-based desktop business, which is a fraction of its total revenue. Still, the company wants to lead to the conversation on the concept because of the principle of the thing. After all, users enjoy its social platform where they have tools to determine the kind of ads they might be interested in.

The company also keeps a control on the ad load, so the experience isn’t spoilt. After that, users shouldn’t object to paying for the service. Or so the thought goes.   

Microsoft Buys Gaming Company Beam

Microsoft is all set to take Xbox to the next level. And that means getting into the emerging live streaming segment where players stream their moves and other players watch and interact. Beam takes this interaction to a level never before achieved, not even on YouTube where the whole concept started or on Twitch that Amazon acquired for nearly a billion dollars and not even on other game streaming platforms like Hitbox.

Beam allows viewers to introduce new elements into the game: “You can give (players) new challenges and make real-time choices that affect their gameplay, from tool selection to quests to movement; all through simple visual controls,” Microsoft says. The only thing is, it’s a small startup with just 100K users, so there won’t be any immediate impact on the gaming business. But adding the experience to Xbox Live puts Microsoft in the same league as Amazon or YouTube and Microsoft’s deep pockets, the games it develops and the Live user base could do wonders to help Beam grow.

Intel Acquires Nervana

Intel has acquired a team of former Qualcomm employees called Nervana that is developing technology for deep neural networks (DNNs). DNNs are the foundation of artificial intelligence (AI), driving a range of technological products today from robots and chatbots to automated cars, natural language processing apps and even Google’s search engine. DNNs mirror the way the human mind processes the information it comes across to come to certain conclusions about certain events. So it’s a system that can teach itself to behave in certain ways depending on its pre-programming. And because it uses data to teach itself, it is basically an advanced data processing unit.

The architectural advantages of a GPU allow significant parallel processing, which makes it preferable to CPUs for data processing in these networks. So NVIDIA, with its lead in developing GPUs, is the leader in the space.

Nervana’s accelerator is slated for a 2017 launch and its biggest advantage lies in the fact that it isn’t a GPU. According to Karl Freund of Moor Insights, this means that the device doesn’t carry excess baggage in the form of graphics processing capabilities or other financial analysis, simulation  and modeling capabilities that aren’t required for deep learning but found in a typical GPU. The leaner, meaner device should therefore offer higher performance and/or lower cost making them more attractive to companies working on artificial intelligence. Nervana’s NEON software is a nice complement.

Sector Price Index

Sector Price Index

 

Company

Last Week

Last  6 Months

AAPL

+0.65%

+15.09%

FB

-0.22%

+25.19%

YHOO

+10.13%

+58.74%

GOOGL

+0.01%

+14.60%

MSFT

-0.03%

+17.26%

INTC

-1.16%

+19.94%

CSCO

-0.55%

+34.63%

AMZN

+0.86%

+58.28%

 

Other stories you might have missed-

Corporate

Flipboard Co-founder Returns to Apple: It was reported in the media last week that Flipboard co-founder Evan Doll joined Apple (AAPL - Free Report) last month as a director of health software engineering. Sage Bionetworks founder and long-time Merck employee Stephen Friend along with former technology head of Nest Labs Yoky Matsuoka are other recent hires to boost its healthcare efforts. Doll worked on iOS earlier and is now expected to play an important role in developing apps for the Watch, which Apple would like people to view as a wellness accessory, helping it grab a slice of the $4.6 trillion industry.

India on Apple Retail Stores: Apple is likely to get a three-year waiver on sourcing 30% of components in India, a rule that governs single-brand foreign retailers in the country. India’s finance minister Arun Jaitley has approved a proposal that isn’t yet public to that effect. Apple’s proposal was rejected earlier as the Narendra Modi-led India government moves full-steam to implement its Make-in-India policy. 

Microsoft’s Nadella Sells Shares: Satya Nadella has done many things at Microsoft during his brief tenure as the CEO. When he took over, the company was viewed as a giant of yesteryear that was struggling to make it in the changing and constantly evolving world of technology. But that has changed today with the company’s new approach of building on what its good at (cloud, productivity, the Surface Tablet), disposing of known mistakes (Nokia, phone business), saving Windows (with Windows 10) and pushing ahead in gaming and VR/AR.

Most encouraging is the fact that all this is being done in a highly collaborative, style that speaks of a young, nimble operator rather than one beyond its best times. So it’s no surprise that the shares have appreciated nicely allowing him to sell 143K of them and make a neat profit of $8.3 million. Note that EVP and CFO Amy Hood also sold 120K shares recently.

Alphabet’s VC Chief Departs: Close on the heels of the departure of self-driving car CTO Chris Urmson, the founder and chief of Google Ventures (later renamed GV) Bill Maris also announced his departure. Urmson was reportedly at odds with the highly-experienced John Krafcik whom Google brought in from Hyundai as the CEO of the unit. Maris on the other hand, is being succeeded by David Krane probably to run the show in a different way. To date, GV has been funded by Google but operated independently, scouting out investments in companies (like Uber, Slack, Jet.com) that Google didn’t necessarily plan to absorb. It managed $2.4 billion. But GV will now reportedly focus on consumer products and services.  

Legal/Regulatory

Apple Price Fixing Probe in Russia: Responding to a complaint by a citizen, Russia’s Federal Anti-Monopoly Service (FAS) is looking into signs of Apple and its 16 resellers colluding to fix prices of its iPhone 6S and 6S Plus since they went on sale in October last year. Apple has denied the charges but several analysts have said that the practice is in line with what Apple has done in the past. The company doesn’t like its products to be discounted because it might affect its brand value and has reportedly in the past reduced shipments to or cut retailers off completely when they didn’t comply with the policy.

Amazon Japan Offices Searched: Amazon (AMZN - Free Report) is reportedly under antu-trust scrutiny in its biggest international market. Japan’s antitrust watchdog the Fair Trade Commission (FTC) is looking into whether Amazon forces retailers to price their goods cheaper on Amazon than on other competing ecommerce sites like Rakuten and Yahoo Japan. Accordingly, the Japanese FTC recently raided Amazon’s Japan offices in search of evidence.

New Technology/Products

Apple Watch 2 Will Have GPS: KGI Securities analyst Ming-Chi Kuo, who has been largely accurate about his predictions on Apple says Watch 2, which will launch in the second half of 2016, will have GPS connectivity. It will also come with a faster TSMC-built processor, improved waterproofing, a barometer sensor. While maintaining the same screen size and thickness, it will have longer battery life. LTE connectivity is however not expected until next year. Apple will also improve the processors and waterproofing of the older versions while shaving the price. It’s also expected that the watch will have a two-way HD camera system facilitating video conferencing, but Kuo didn’t talk about this.

Facebook Tweaking News Feed: Based on inputs from its Feed Quality Program that some people opt in for, Facebook is now in a fairly good position to say what users find informative. Feedback collected through this system is dependent on stories users rate on a scale of 1 to 5 with one being least useful and 5 the most. Unsurprisingly, stories related to the user’s interests and relationships determine what they consider informative. And this is the information that the social network will now use to tweak its algorithm so people get to see more stuff they want to see in their news feed.

Yahoo View Is Here: Yahoo’s talks with Hulu over the last six months have yielded Yahoo View. The streaming company is shutting down its free service and granting Yahoo the non-exclusive right to distribute its free content through Yahoo View, which will in turn be integrated with Yahoo-owned blogging platform Tumblr. Yahoo will generate revenue by serving ads on the platform and sharing the proceeds in accordance with industry standards.

Amazon Kinesis Analytics: Amazon’s AWS has launched this fully managed service to facilitate analysis of high-volume streaming data in real time. The method is to write standard SQL queries on continuously streaming data, thereby eliminating the need to learn new programming skills or develop streaming data processing applications. This saves on both time and money while speeding up response to customer and business needs.

Twitter’s New Ad Formats for Retailers: Twitter has introduced a new ad format called Instant Unlock Cards to get users to interact with the campaigns brands run on the platform. Accordingly, the platform runs an ad (video or Q&A session created exclusively for Twitter) with a hashtag describing the campaign so interested users can activate the “conversation” by tweeting the hastag. This greatly increases the visibility of the ad as well as user interaction with it. Twitter says that during beta testing of the product, brands saw a 34% earned media rate, meaning that for every 100 paid impressions, an advertiser received 34 earned impressions.

Moreover, visiting the Twitter Ads dashboard displays information about the number of people tweeting the campaign hashtag, the number of impressions the campaign earned, the most influential tweets as well as the share of brand conversation in real time.

M&A and Collaborations

Alphabet Buys Orbitera: Alphabet has bought yet another cloud computing company to boost its IaaS platform. This time it’s a company that has built a cloud commerce platform facilitating the buying and selling of enterprise software as a service. The company, which is headed by Marcin Kurc (formerly employed at Amazon’s AWS) takes care of packaging and provisioning, billing and cost optimization, marketplace and catalogues, and trials and lead management for companies. This enables them to test the software before deployment thereby facilitating the purchase.

Google has said that it will maintain Orbitera’s autonomy, allowing customers the greatest flexibility in choosing the cloud, software vendors, system integrators and other professionals of their choice. Some of its more illustrious customers include Adobe, NetApp and Oracle. This is an important buy that should help Google to build its marketplace and compete with what Amazon or Microsoft has to offer. The terms of the deal weren’t disclosed.

HPE Buys Silicon Graphics: Hewlett Packard Enterprise has agreed to buy Silicon Graphics International (SGI) for $275 million or $7.75 a share. The acquisition is not expected to add to earnings until the year after the first full year in which the deal closes. The rationale for acquiring this company, which has been struggling in recent times is to boost HPE’s capabilities in high performance computing (HPC) and data analytics as well as strengthening its position in the government vertical. SGI has only recently turned focus on the HPC storage and data processing software segment.

IDC estimates that HPC, which is currently an $11 billion market, will grow 6-8% over the next few years with the data center market growing double that rate. So the acquisition brings important capabilities in high-growth segments    

Some Numbers

RBC iPhone Estimates: Amit Daryanani of RBC Capital estimates that the extra week in the December quarter (Apple’s fiscal first quarter 2017) should raise iPhone shipments by 5-6 million units and add 200-300 bps of additional growth in fiscal 2017. His fresh estimates for the quarter are as follows: iPhone units 79 million (up 6% year on year), revenue $78 billion (up 66% sequentially and 3% year on year), gross margin of 38.9% and operating margin of 30%, which will raise the quarterly EPS from $3.06 to $3.29.  

Some Companies That Reported Last Week: Alibaba, Yelp, Paylocity

Companies to Report This Week: Cisco, NVIDIA, Analog Devices, Agilent, Applied Materials, NetApp.

 

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