Technology stocks didn’t gain much last week, despite some important announcements, exciting new products and important collaborations. Last week was significant because Intel (INTC - Analyst Report) got a new CFO, Cisco (CSCO - Analyst Report) and Salesforce (CRM - Analyst Report) announced a cloud collaboration and Alphabet’s (GOOGL - Analyst Report) Google went deeper into travel with its Trips app.
Here’s a quick look at the top stories:
Intel Gets New CFO
Intel’s new CFO is the clearest indicator thus far of where the company is headed strategically. Robert (Bob) Swan is the new man in and he will be making $850,000 as base salary, $1.2 million as annual bonus and $5.5 million as hiring bonus. His new hire stock grant and annual equity award could each be worth as much as $9.5 million and $6.5 million, respectively.
So the question is, why is Intel splurging this amount of money on the CFO when it has obviously been walloped by the sluggish PC market, inadequate returns to date from new areas of promise and competing fabs/foundries catching up with its manufacturing process lead? These pressures also led it to significantly downsize its workforce.
If the man was experienced in chipmaking that would still kind of make sense. But his experience has been elsewhere, most significantly as CFO of eBay where he spent nine years and earlier, his 15 years at GE where he had senior finance roles like divisional CFO for GE Transportation Systems, GE Healthcare Europe and GE Lighting. He was last a partner at private equity firm General Atlantic where he advised clients on strategic M&A matters and helped develop their finance functions with a special focus on the IT sector.
The question is perhaps best answered when we take a look at some recent actions the company has taken. According to data from CB Insights, Intel Capital has been the biggest investor in ecommerce companies (mainly Storenvy, Snapdeal, Reebonz, 1MG Technologies) between 2010 and Aug 2016. It has surpassed investors like Google Capital which was #2, Tencent, which was #3, Alibaba at #6 and eBay at #9.
Moreover, in January this year, Intel launched its retail IoT platform, which is a reference model combining a retail sensor, a gateway and the Intel Trusted Analytics Platform to deliver near-real-time intelligence for retailers in the hopes of speeding up their IoT adoption.
Bob Swan’s background, contacts and expertise indicates that Intel is seeing some results from these efforts.
Cisco, Salesforce Collaborate on Cloud, IoT
Cisco and Salesforce have announced an agreement to share collaboration, IoT and customer service technologies in the cloud for the benefit of common customers and thereby boost sales of both companies.
Cisco Spark and WebEx solutions will be integrated into the Sales Cloud and Service Cloud through the Salesforce Lightning Framework by the second half of 2017. The combination of Cisco Jasper and Salesforce’s IoT cloud will help the deployment, management and monetization of a company’s IoT devices within a similar timeframe. On the other hand, the Cisco Unified Contact Center Enterprise and Salesforce Service Cloud are integrated and available today.
Google Unveils Trips App
The world’s largest organizer of Internet information has just decided to share a piece with us. The company has launched the new Trips app for Android and iOS that pulls out your reservations from your gmail (you need to sign in with your Google account, the one that has your reservations and travel details) and maps out the entire trip. This information, along with maps and routes connecting the places you’re visiting can be downloaded for offline use in case you want to minimize data consumption because international data plans can be expensive.
If you’re travelling to one of the 200+ cities Google has collected information on, you’ll also be treated to editorial guides and personalized recommendations on points of interest, tourist attractions, restaurants, etc.
Inside the app, Reservations organizes your flights, hotel information and rental car reservations. Need to Know contains directions, local currency, emergency information, etc. Things to Do is the most interesting because it can build custom itineraries based on the length of your stay or your recorded preferences on any Google service.
Or if you want a more focused trip, you can consider one of the specific guides on shopping, museums, or other interests, in which you can add or delete any other place you’d like to visit along the way. If your data is turned on, the app will mention the hours any place of interest is open.
Google’s Trips app doesn’t help you to buy services, its focus is on organizing tour trip information so you have it at your fingertips. So in that sense it competes directly with TripAdvisor, but not so much with Priceline or Expedia, at least not yet.
Last 6 Months
Other stories you might have missed-
Facebook Hire: Former Yahoo (YHOO - Analyst Report) senior director of search and mobile products Anand Chandrasekaran has moved around a lot. He did a stint at Indian online retailer Snapdeal where worked on a new version of the company’s website and app and integrated its mobile payments feature Freecharge. At telecom Bharti Airtel, he helped launch music streaming service Wynk and wallet service Airtel Money. He has also worked at many other companies and even founded a personalized mobile app company called Aeroprise that was later sold to BMC Software. He’s also a prolific investor in startups.
Chandrasekaran is now joining Facebook (FB - Analyst Report) to help develop strategies for its Facebook Messenger app. This is a key hire as Facebook has indicated its intention to make Messenger the next big platform for private sharing.
Major Hack of Yahoo Affects 500 Million Accounts: Yahoo has said that “state sponsored” hacking had got information from 500 million accounts, the largest ever from a single provider. The company will communicate the information to each affected user but it’s recommending people change their passwords and related security questions if they haven’t done so since 2014.
It is working with the FBI and other law enforcement agencies to determine who was at fault, but the bottom line is, this could affect its negotiations with Verizon, which is expected to close the sale early next year. So users can jump ship if they like but investors had better keep their fingers crossed.
Microsoft Returning Cash to Shareholders: In line with its practice of dividend hikes in September, Microsoft (MSFT - Analyst Report) announced that the quarterly dividend was being raised by 3 cents or 8% to 39 cents. It also authorized a fresh open-ended share buyback plan of $40 billion that will go into effect once the current $40 billion plan ends in December. Note that Microsoft, like most other technology companies, holds the bulk of its cash offshore, so the payments will likely come from debt issues.
Apple Smart Home Device: Similar to other companies, Apple’s people who are familiar with things have started leaking information about what the company is doing. These people have now told Bloomberg that the company’s two-year project developing a home device like Amazon’s Echo has now exited the R&D phase and entered the prototyping phase. Apple’s device, which hasn’t been finalized, will control appliances, locks, lights and curtains through voice activation but of course it will be better.
The devices will have advanced microphone and speaker technology and one or more models could have facial recognition technology. Not just that, since Apple already offers computing hardware, it may be able to get Siri to read e-mails, send text messages and Tweets, stream content from Apple Music and open maps.
IHS Says iPhone 7 BOM Higher: The yearly teardown of Apple’s iPhone (IHS Markit hasn’t looked inside the larger 7 Plus yet) shows a bill of materials cost of $224.80, which is $36.89 higher than the 6S model. The research firm has indicated that the cost is in line with flagship phones from rival Samsung. While both companies also spend on things like R&D and marketing, Apple makes more profit off its $649 device.
Facebook Working on Improving Ad Tech: The company’s recent partnerships with Nielsen Catalina Solutions, Visual IQ and Neustar are all intended to show the measurable impact of targeted advertising on its platform. Nielsen will provide data on the impact of Facebook and Instagram on in-store purchases, while the other two will help determine which ads perform better.
Earlier this year, it tied with Square and Marketo to track customer buying patterns from those services. It also uses a combination of GPS, beacons, WiFi, radio signals and cell towers that are matched with brick-and-mortar coordinates to push more relevant ads and track when they result in sales.
The data is anonymized and the tracking works only if you have the share location feature on your device turned on. But sending buyers to online sites alone is a limiting factor for advertising revenue growth and retailers generally want customers to come to their stores because it’s easier to influence them there and also because the stores involve major investment. So measurable increased footfall from online ads will get them to spend more.
LinkedIn Enhancements: LinkedIn, which agreed to sell itself to Microsoft for $26.2 billion, announced some new features. The company will now start serving a newsfeed to its users tailored to their interests and based on their job history. It will also recommend online training courses when job seekers indicate that they are looking for a certain kind of job (the capability is likely inherited from its $1.5 billion acquisition of Lynda.com in 2015).
Chatbots will also enter the picture soon, as Microsoft has been experimenting with the technology for quite some time and a number of companies are already testing their bot technology on Facebook’s Messenger as the social networking leader gears up to facilitate direct communication between brands and users.
Google Allo: In an already over-crowded market, Google has finally launched its AI-powered messaging app Allo for Android and iOS. Along with Google Assistant, which is built in, it can access movie times, news headlines, restaurant details, etc from across Google's whole suite of services. It’s more like a starting point for Google in the space, which can leverage Android for growth while also adding features along the way.
Plus the fact that the AI-powered assistant will get better with use, it’s just the kind of thing that might grow on users. The only problem is, Google has really taken very long to get to this stage with all of its competitors already boasting big user bases. Can Google manage to pull users away? It’s really an open question at this stage.
Google Smartphones Coming Soon: Google has sent out invites to an Oct 4 event in which it plans to launch some hardware. The company is widely expected to launch a couple of Pixel smartphones(5-inch and 5.5-inch models), but Google Home and Daydream VR devices may also make it to the event. The event will stream live on YouTube.
M&A and Collaborations
Apple Partners with Flipkart in India: Apple has entered into a direct relationship with leading Indian ecommerce company Flipkart. Accordingly, Flipkart will get marketing support from Apple, allowing it to sell the entire Apple range of products at full price. Another online retailer Infibeam will sell a more limited range of products.
The direct relationships probably stem from the heavy discounting of earlier models between Indian online retailers and Amazon in an attempt to gain share in the increasingly competitive market. Meanwhile, Nomura’s Jeffrey Kvaal and RBC’s Amit Daryanani raised their price targets on “stronger than expected” iPhone 7 demand.
Intel, Amazon Invest in Thalmic Labs: The Canadian startup, which earlier raised just $20 million, this time managed to get $120 million. Intel Capital, The Amazon Alexa Fund and Fidelity Investments Canada were the main investors in this round, First Round Capital, Spark Capital and iNovia also participated also contributed.
The interest in the company is because it has developed an arm-worn band called Myo that reads electrical impulses during arm movements and communicates to a computing platform so mere gestures can control apps and devices. Thalmic intends to use the funds to develop new devices and enhance existing ones. Intel would like its silicon inside these devices while Amazon would like Alexa integrated.
Google Capital Invests in Airbnb: Google Capital is leading an $850 million investment round in Airbnb at a valuation of $30 billion. Apart from the money it’s raising, the company is allowing long-time employees to encash some of their stock options ($200 million worth of employee stock was sold according to WSJ).
Airbnb is looking for strategic investors and it apparently turned down mutual funds and financial owners that valued the company as high as $34 billion. An investor like Google may be able to help it deal with regulatory issues both within the country and as it expands more broadly in international markets. This is necessary because it continues to avoid going public due to the uncertain market conditions.
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