Top news last week included Apple’s (
AAPL Quick Quote AAPL - Free Report) augmented reality glasses, Amazon’s ( AMZN Quick Quote AMZN - Free Report) credit card, Waymo’s self driving system and Yahoo’s name change. Apple AR
Tech journalist Robert Scoble has unleashed a rumor that Apple is in partnership with German luxury brand Karl Zeiss AG to make augmented reality smart glasses. He also says that the glasses may be launched this year or the next although Apple’s supply chain orders indicate that it is not ready to get into mass production just yet.
Tim Cook has made frequent comments about the AR opportunity saying that he considered it a much bigger market than VR and also that Apple continued to invest in it. Augmented reality is different from virtual reality in that it doesn’t totally immerse you in another world but allows you to mix real word situations with digital objects.
It might be just the thing to watch TV and other shows handsfree, without the need to flip a switch or surf channels. You could simply tap the Airpods and say, “Hey Siri…”, sit back and relax. Not that Apple’s said anything to that effect, but it is going after original programming, so…
Amazon Credit Card
Amazon has partnered with Chase to launch the Amazon Prime Rewards Visa Signature Card that credits Prime members an amount equal to 5% of their purchases on Amazon. They will also get 2% back on purchases at restaurants, gas stations and drugstores and 1% back on other purchases. The credit can be used to make further purchases on Amazon.
Holders of the existing Amazon card, if they are also Prime members, will be automatically upgraded to the new card. If a Prime member doesn’t renew the subscription, they will be changed back to the old card that offers a 3% credit on Amazon purchases only.
Alphabet Makes Changes At Waymo
GOOGL Quick Quote GOOGL - Free Report) regained some spotlight for driverless car technology at the North American International Auto Show in Detroit. Its recently-spun-out Waymo has developed a Lidar-based sensor system that it will be selling auto makers. The main challenge in using the technology has been the cost, which at around $75K, significantly adds to the cost of the vehicle.
Waymo CEO John Krafcik thinks that since the company’s technology reduces this cost to $7.5K or less, there are chances that adoption will pick up. Waymo has been testing its self-driving car technology the longest and says it has made notable improvements in the last few years. In 2015 for instance, its test drivers had to take over control once every 1,250 miles while today it’s only required once every 5,000 miles.
Yahoo Post-Verizon Sale
If Yahoo manages to sell off its core assets to Verizon, the remaining assets comprising a 15% stake in Alibaba (
BABA Quick Quote BABA - Free Report) and a larger chunk of Yahoo Japan will become an investment company called Altaba (appears to be a way of saying "alternative to Alibaba"). Altaba will have half the number of directors. Marissa Mayer and co-founder David Filo won’t be part of the team.
Verizon hasn’t confirmed that it will buy Yahoo after the hacking news came out and it could negotiate a lower price. It also hasn’t said whether Mayer will continue to lead the Yahoo division after its takeover.
Last 6 Months
What happened in the last week -
Corporate Apple Director Moves to Tesla: Chris Lattner, the 11-year old Apple veteran behind its Swift programming language is leaving the company. Lattner is joining Tesla as head of its Autopilot software unit. This follows Tesla’s decision to double down on autonomous technology after one of its testing drivers were killed in a tragic accident. In Apple’s case, things are also changing because the company laid off a large number of workers at Project Titan last year and invested a billion dollars in China’s Didi Chuxing. Fitbit to Launch Wearables App Store: Fitbit CEO James Park said at CES that the company will launch an app store this year. Not surprising given its intention of entering the smartwatch segment, where devices are priced higher but expected to have greater functionality. Its 2016 acquisition of struggling smartwatch maker Pebble will no doubt help since Pebble already had around 14K apps on its app store and had therefore already figured out some aspects of setting up a store.
Unlike Pebble, Fitbit continues to sign up corporate customers and also has a way for users to connect with each other. But an app store will build its ecosystem by bringing third party development effort. At any rate, the jury’s still out on when the market will actually take off but it could be anywhere between three and five years.
MS Positive on Apple: Morgan Stanley became the latest brokerage with a bullish call on Apple. The analyst Katy Huberty at MS sees the main reason for upside in the iPhone and expects the new AMOLED version to be a big driver of sales, led by China. The analyst said that Apple retains an 80% share of the high end segment and current softness in China wasn’t an indicator of declining loyalty. It is instead attributable to the lack of a form factor change in the last upgrade cycle. Earlier, Goldman Sachs forwarded a positive view on Apple based on its strength in services and growing recurring revenue. Facebook News Partnerships Head: Facebook really needs to keep the media happy because it’s an important source of content. At the same time, users are the life blood of a social platform and restricting user generated content can lead people to abandon the site and create bad publicity. So it needs to find middle ground, which is exactly why it has created a News Partnerships group. It has chosen Campbell Brown to head that group because of her previous experience as an anchor for NBC News and CNN and more recently, for her efforts around education reform. Cisco Smart City Initiative in India: Cisco, along with business process management and services provider Genpact, has announced a Global Center of Excellence in Jaipur, in Rajasthan state of India as part of its Lighthouse City project. The project is aligned with Prime Minister Modi’s Digital India program. Accordingly, the MoU signed between the companies and the Government of Rajasthan requires Genpact to use Cisco Smart+Connected™ Digital Platform (CDP), Cisco Connected Mobile Experiences, and Cisco Video Surveillance Manager Solutions to develop analytics-driven technology applications. Seagate Cuts China Jobs: Seagate is reportedly shutting down its Suzhou, China facility, where it employs 2,127 people as part of a broad restructuring plan announced back in Jul 2016. The total plan involves consolidation of existing facilities across the Americas, Asia, EMEA and the reduction of total headcount by 6.5K or 14%. It followed another plan in June to take down 1.6K employees. As HDDs make way for SSDs, the two leading suppliers have reduced the amount of resources devoted to its manufacture. But while Western Digital also fortified its position with the acquisition of SanDisk, a leader in SSDs, Seagate is sticking with cost reductions for now. Legal/Regulatory Apple Antitrust Issues: Apple’s practice of allowing iPhones to run only those apps that were purchased from its App store has the effect of limiting competition and increasing prices of those apps. And since Apple takes a cut of whatever the apps earn, it directly benefits from the higher prices. This was the subject matter of a case filed back in 2012 when a lower court agreed with Apple’s submission that it couldn’t be sued in this case because users bought the apps from developers and not from Apple. Judge William A. Fletcher has said on appeal that users do buy directly from Apple, so they do have the right to sue. Apple is yet to comment. New EU Privacy Rules: The EU is looking to adopt privacy law that would require services like Google’s Gmail, Facebook’s social network and Messenger and Apple’s iMessage to obtain explicit permission of users before tracking them with cookies or otherwise. They will also be required to keep their online activity confidential, meaning that even conversations that they are following can’t be tracked without consent. This could have an immediate negative impact on ad revenue and impact the speed at which they develop artificial intelligence in the long term. Facebook Fighting Oculus Lawsuit: Video game company ZeniMax is saying that Oculus faked its origin story while enticing a key executive John Carmack to steal valuable code from Zenimax that he passed over to Oculus when he joined the company. Zenimax alleges that Oculus founder Palmer Luckey “lacked the training, expertise, resources or know-how to create commercially viable VR technology, his computer programming skills were rudimentary and he relied on ZeniMax’s computer program code and games to demonstrate the prototype Rift.” Amazon Pulled Up in India: India’s foreign minister censured Amazon for selling doormats featuring India’s flag after a Twitter user tagged her with a picture of the said mats that Amazon Canada was selling. "Amazon must tender unconditional apology. They must withdraw all products insulting our national flag immediately," she tweeted. "If this is not done forthwith, we will not grant Indian Visa to any Amazon official," she followed up in another Tweet. "We will also rescind the Visas issued earlier." While some attempted to trivialize the matter, others lauded her. Her tweet was retweeted several thousand times. Technology/Products Apple Original Content: People familiar with the matter are saying that Apple is hunting for rights to original TV shows and has been in talks with veteran producers. The programming will reportedly be made available to 20 million plus people that have already signed up for its $10-a-month music streaming service by the end of the year. Original movies are also in the works although that will likely take more time. Apple iPad Problems Could Be Gone Soon: Apple analyst Ming Chi Quo says that the company is getting ready to launch three new iPads next quarter in 12.9-inch (with A10 processor), 10-10.5-inch (A10 processor), and 9.7-inch (A9 processor) sizes. Kuo has a great track record in breaking Apple news before the company itself does, so this may be more than a rumor.
At any rate, the analyst is more optimistic about iPad shipments this year (despite an expected decline of 10%) because last year was worse, because iPad Pro is growing stronger versus the cheaper Mini, and because chances of lower costs due to increased competition amongst display providers.
Separately, Apple has now given us a reason for the inconsistent battery life of its iPad, which is the particular testing style that turns off the Safari cache. Apple said this is not a real-world situation and Consumer Reports apparently confirmed that normal consumer testing resulted in consistent results. A second review/report from the firm is now awaited.
Intel 5G: At CES, Intel launched its first 5G modem saying that companies could now start developing 5G solutions. 5G is expected to increase network speeds, as more IoT and home network devices connect with the cloud and autonomous driving becomes a reality. Verizon is the first carrier to adopt: the company plans to start 5G deployment this year. Intel’s early start may help it gain share versus Qualcomm, which pretty much owns the 4G market. Video Ads on Facebook: Facebook will soon be serving ads in the middle of video clips from established news houses and sharing 55% of the proceeds with content creators just the way YouTube does. But unlike Facebook, YouTube shares revenue with all content creators and not just professionals. Facebook is probably just testing the product with plans of a broader rollout later on.
Facebook also requires videos to be at least 90 seconds long with the ad not kicking in until at least 20 seconds of the video is played, thus encouraging longer and more engaging video on the platform. So it looks like an important step towards growing the time spent on the platform and ultimately pulling in more TV ad dollars.
Nintendo Launches New Switch Console: Nintendo has finally launched its first game console (Switch) in four years and the company initially expected to sell 2 million of the devices by the end of March. But pricing for the more elaborate Switch, which doubles as a smart home hub, is a disappointment, because it’s 20% more expensive than the earlier unsuccessful WiiU in Japan and comes for the same price in the U.S.
The earlier device had limited choice in terms of games and was also hit by the shift to mobile gaming. This device holds more promise and Nintendo has said that more than 50 game software makers are developing 80 titles for the Switch. Of these eight will be available at launch in Japan.
M&A and Collaborations Microsoft Buys Maluuba: Microsoft has bought a Samsung-backed artificial intelligence startup called Maluuba for an undisclosed sum. Maluuba’s specialty is in what it calls general artificial intelligence, i.e. the ability for bots to think, reason and communicate like humans. Microsoft is focused on making Cortana more appropriate for enterprise use, something that other smart assistants like Alexa and Google Assistant haven’t prioritized. The ability of a smart assistant to carry out an entire operation requires greater cognitive capabilities that can set Cortana apart and help Microsoft advance in the cloud computing race. Google Shutters Titan: Google had a number of plans to take Internet to more people. It was also considering use cases for drones. The company’s Titan project brought these two ambitions together, i.e. it was a plan to beam Internet to remote areas using drones. But soon after Facebook’s similar idea crashed unceremoniously, Google also shelved its plans because of technical difficulties. Its Project Loon appears to be on track to deliver however. Google Buys Swedish Software Company: Google has bought Sweden’s Limes Audio, primarily for its patented TrueVoice noise reduction software. Google offers a number of communication services including Chromebox, Hangouts, Allo and Duo. It’s expected that the acquisition will help Google improve the audio quality of its services, even in low-bandwidth conditions and help it compete more effectively with rival services like Skype. Alibaba Buys China Retailer: Alibaba is buying traditional Chinese retailer Intime, which operates 29 department stores and 17 shopping malls across urban China for $2.6 billion. Alibaba is the leading Chinese online retailer by far. Its current growth strategy is focused on bringing international brands to urban Chinese consumers while also increasing penetration in rural areas. This acquisition gives it offline presence that can be used to showcase products when necessary that customers can buy on site or on its website (the raging omnichannel trend). Some Numbers Apple Leads Wireless Headphones Sales: A new report from Slice Intelligence says that 75% of all headphones sold in December were wireless and that 26% of total wireless headphone spending was on Apple Airpods. And if that isn’t enough, its Beats headphones are also doing extremely well, accounting for 32% of wireless headphone sales over Cyber Weekend. PC Market: PC shipment reports from IDC and Gartner are out and as usual the difference in measuring criteria means that their estimates differ slightly. So while IDC says that PC shipments declined 1.5% in the Dec 2016 quarter, Gartner says the decline was as much as 3.7%.
Also, while both agree that the top three vendors were Lenovo, HP and Dell in that order, IDC sees Apple as number four followed by ASUS, while Gartner says it’s the other way around. IDC also says that the market continues to stabilize with most geographies coming in stronger than expected.
The U.S. declined slightly as high channel inventory going into the seasonally stronger quarter was depleted. In EMEA, desktops came in about as IDC expected while notebooks outperformed. Many factors affected APAC: India’s demonetization was negative, China’s continued demand for thin and light consumer PCs was positive, commercial was weak in both India and China and impacted by macro concerns in Malaysia, Indonesia, Singapore and the Philippines with Korea growth being an exception. Overall, competition from tablets and phones has eased up.
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