Last week was an exciting one with some rumors about Apple’s (AAPL - Free Report) iPhone manufacturing in the U.S., Cisco’s (CSCO - Free Report) earnings report, Intel’s (INTC - Free Report) first AI Day plus lots more.
iPhone Manufacturing In The U.S.
In June this year, Apple requested its iPhone assemblers Pegatron and Foxconn to evaluate the feasibility of making the devices in the U.S. While Pegatron refused outright on cost considerations, Foxconn has decided to do the job. The study is likely to show that the cost increase, skill mismatch and supply chain problems (the supply chain is largely in Asia) would make this cost prohibitive.
This would raise iPhone prices for consumers/squeeze Apple’s margins. But the study will help Apple negotiate with the government, which might agree to fund skill development and/or subsidize U.S.-made phones. If not, Apple could introduce a luxury line of iPhones manufactured in the U.S. and try to set off the super normal profits on those with the increased cost of phones carrying the government import duty.
Note that Apple is not the only smartphone maker saddled with the problem. So if all smartphones get more expensive, Apple’s market share may not be affected.
Cisco Earnings Report
Cisco’s first quarter 2017 results topped the Zacks Consensus Estimate on both the top and bottom lines but the guidance disappointed. Switching remains a sore point for Cisco in a market increasingly favoring SDN networks and leveraging the cloud. So it’s not surprising that this segment declined 7%. The company had greater success in security where both advanced threat (up 100%) and web security (up 60%) were strong.
Intel A.I. Day
At its first Artificial Intelligence (AI) Day in San Francisco last week, Intel announced bold plans to target the deep learning segment that is currently dominated by NVIDIA (NVDA - Free Report) GPUs. Intel silicon is also in the mix, but it doesn’t take part in the real training work. Artificial intelligence comprises two main operations: training and inference with training being the more compute intensive. Inference can be handled by Intel CPUs, Xilinx/Altera FPGAs, NVIDIA GPUs, ASICs like Google TPU and in some cases, DSPs. Now Intel is planning to enter the training side very aggressively and hopefully it can stick with the timeline it has set.
Based on its acquisition of startup Nervana last year, Intel is building a new Xeon processor with Nervana integration. FPGAs are generally used as accelerators and we don’t know yet if Intel will be using the FPGA technology it got through Nervana or Altera, which it also picked up recently. At any rate, Intel promises to deliver 100X the training speed current GPUs offer within three years, which industry expert Patrick Moorhead says is aggressive. Intel expects the chips to start testing in mid-2017 and ship by year end.
Fake News Drama
Facebook (FB - Free Report) and Google are being pressured by mainstream media (MSM) for influencing the public in favor of Trump. As ridiculous as this sounds, there is a lot of print devoted to trying to prove them guilty.
Google recently started employing artificial intelligence to support its search results that have until now been solely algorithm-based. But as luck would have it, there was a brief period during which time 70news.wordpress.com took the top position, fielding incorrect data on the number of votes earned by Clinton and Trump and claiming to have obtained the information from Twitter.
The information was reportedly correct elsewhere on Google but this was enough to earn Google accusations for making money out of “fake news.” So Google has said in a statement, "Moving forward, we will restrict ad serving on pages that misrepresent, misstate, or conceal information about the publisher, the publisher's content, or the primary purpose of the web property." It is hoped that the inability to generate revenue from fake news will make it harder to produce it.
Facebook’s Mark Zuckerberg has repeatedly said that 99% of the news sites posting on Facebook were authentic and that it didn’t want to get into the position of arbiter of truth. "We do not integrate or display ads in apps or sites containing content that is illegal, misleading or deceptive, which includes fake news," said the Facebook statement (the company has now added the fake news part to pacify parties). Facebook also gave an assurance that it would continue to vet publishers to ensure compliance.
Last 1 Month
Other stories you might have missed-
Intel-Disney Drone Show: Intel, in collaboration with Walt Disney Imagineering, will be putting up a light show for guests at Disney Springs – the shopping, dining and entertainment district of Walt Disney World Resort. The show will feature 300 Intel Shooting Star drones for the first time in the U.S. These are tiny drones made of styrofoam and plastics, weighing 280 grams and bearing LED lights that can create over 4 billion color combinations and easily be programmed for any animation from a single computer. At the show, the drones will operate with holiday music.
Microsoft and the Wind: Microsoft (MSFT - Free Report) has agreed to buy 237 megawatts of capacity from Allianz Risk Transfer AG’s Bloom Wind Project in Kansas and Black Hills Corp.’s Happy Jack and Silver Sage wind farms in Wyoming. Microsoft expects that its data centers will get about 44% of their electricity from wind, solar and hydropower sources this year and 50% in two years. The company already has deals for 20 megawatts of solar power and 285 megawatts of wind, according to the blog post.
Goldman Sachs Upgrades Microsoft: GS analysts Heather Bellini and Heath Terry have upgraded Microsoft to Buy based on its current and prospective growth in cloud computing. The analysts believe that Microsoft with its increased focus on the cloud will benefit from the growth in public cloud spending, which they estimate will go from $32 billion this year to $137 billion in 2020.
Pixel Resellers Taken to Task: Google showed how much a technology company providing basic digital services controls our digital existence. Last week, some people that had bought Pixel phones online for resale by a New Hampshire dealer at a markup had their accounts frozen for violation of terms of service. Since no one really reads these terms of service, the measures came as such a shocker. Google, which attempts to make the devices available to everyone at the same price, has since restored the services (Gmail, online photos and other) with a warning.
Alibaba-backed Logistics Firm’s U.S. IPO: Best Logistics, in which Alibaba (BABA - Free Report) owns a 22% stake, is reportedly looking for a U.S. IPO early next year. The company is valued at $3 billion based on its latest funding round, in which Alibaba, Fosun International Ltd., SoftBank China Venture Capital, Alibaba’s own logistics unit, Cainiao Network, and the World Bank’s private-sector investment arm, International Finance Corp participated.
Russians Fear Apple Call Logs: Russian provider of iPhone hacking tools, Elcomsoft says that Apple maintains a call log of users’ phone calls and other details in its iCloud for up to four months. Apple likely does this to help sync calls across devices, but the storage of private information without explicit consent is problematic.
Moreover, in its data access guide for law enforcement, Apple says that available iCloud information includes email logs and content, text messages, photos, documents, contacts, calendars, bookmarks and iOS device backups but doesn’t mention call logs. While all iCloud data is encrypted once it’s on the server and in transit, Apple keeps the keys for iCloud accounts in its U.S. data centers.
Amazon Sues Counterfeit Sellers: Following repeated complaints from different parties including Apple, Amazon is taking action against companies acting as counterfeiters. Last week, Amazon filed a couple of cases against sellers of training equipment (originally developed and patented by Fitness Anywhere and sold by third-parties) and against infringers of patented technology for forklift equipment.
These actions aren’t easy because first, the patent holder has to be established, second, new counterfeiters crop up all the time and third, Amazon, given its size has millions of sellers, so it’s hard to track any one seller. So these actions are encouraging. Amazon’s Chinese rival Alibaba also faces the same problem resulting in the alienation of some brands.
Apple Considering AR Device: Bloomberg reports that Apple may be experimenting with a Google’s Glass-like AR (augmented reality) device, for which it has spoken to suppliers and ordered a small quantity of related components. But while Google, Samsung, Facebook and others have focused more on VR (virtual reality), Apple, like Microsoft with its Hololens, seems to be more interested in AR. In any event, the device is not expected to launch until 2018 at the earliest.
WhatsApp Video Calling: Facebook has launched fully-encrypted free video calling for all WhatsApp users across the world. While this obviously sweetens personal communications, it also makes the app more attractive for business users. The recently-talked about job posting feature does the same thing. Facebook had promised to look at monetizing the app once the user base reached critical mass and the company seems to be doing just that.
Amazon Family Plan: Similar to Apple, Spotify and others, Amazon has launched a family plan that charges $14.99 a month for up to six users. Prime members aren’t getting a concession on this one, although they do have the option of choosing an annual family membership for $149, which then brings down the monthly cost to $12.42.
While other music services offer unique experiences, feature sets, personalized playlists and recommendations, etc, Amazon’s service comes with Alexa so you can just ask her to do your bidding in choosing tracks albums, genres, or whatever else you may be in the mood for.
Amazon Expands Home Services: Amazon nearly doubled its home services areas with 20 new additions last week. The company offers more than 1200 services such as lawn care, plumbing, electric work, home cleaning and more through this offering. Services are also offered when a customer buys some item from Amazon and needs someone to install it. TV wall-mounting, house cleaning and furniture assembly are reportedly the most popular services at present.
M&A and Collaborations
Intel Invests in Self-Driving Cars: At the Los Angeles Auto Show last Tuesday, Intel said that it is putting in $250 million to support the development of self driving and other technology (connectivity, communication, context awareness, deep learning, artificial intelligence, safety and security) for cars all over the world. Intel has said that it is currently involved in 30 vehicle programs, but that number would swell to 49 by 2020. Its order book is already pretty huge at a billion dollars, but this is just the beginning.
Intel and Google Get Closer: Google and Intel are deepening their relationship with the goal of pushing their respective technologies in the cloud. While Google needs to wrest share versus Amazon and Microsoft, Intel would like to make inroads into the deep learning segment that NVIDIA dominates. The two companies have now decided to go for both product integration and joint marketing to push these efforts, especially among big cloud customers. They have announced that the collaboration will include container management, machine learning, IoT and security.
Microsoft-NVIDIA Tie for A.I.: The companies have announced a collaborative effort to promote Microsoft’s A.I. solution through its Azure cloud computing platform. The Microsoft solution is based on GPUs from NVIDIA, the leading provider in the machine learning space. Indicating the considerable prospects, the companies say that A.I. has application across a broad number of industries including healthcare, life sciences, energy, financial services and automotive.
Microsoft Ties with Elon Musk A.I. Company: Tesla’s Elon Musk has agreed to use Microsoft’s Azure to develop AI technology for its self driving cars. The Musk-backed startup OpenAI will use NVIDIA-powered Azure N-Series Virtual Machines, which will be available from December. OpenAI was formed in December last year by Musk and Y-Combinator President Sam Altman and others with the goal of ascertaining that self-driving technology remains open and free for all, possibly also as a reaction to Google’s dominance in smartphones.
Amazon-Hyundai: Hyundai’s connected car Blue Link technology is now getting Alexa integration, so users can get their cars warmed up and ready before they step into them. Or they can ask Alexa to lock the doors as they carry heavy grocery bags into the house.
Google AMD: Google is one company that keeps all its options open. So on the one hand, it uses GPUs from NVIDIA, the current market leader (by far), on the other, it is now using NVIDIA rival AMD’s GPUs. And if that isn’t enough, it’s also into deepening its relationship with Intel for its Nervana-based, non GPU technology, which is yet to make it into the market. So come 2017, training deep neural networks is going to be a very interesting business indeed.
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