The technology sector has grown increasingly dependent on foreign talent over the years such that today it can’t function without it. On the face of things, this has been really good for innovation helping the U.S. maintain its technological lead over others. But digging down a bit deeper, what this means is that the U.S. is increasingly incapable of producing this talent itself. This is not a good situation to be in, particularly when you consider that countries like China are doing all they can to develop indigenous intellectual property.

That’s probably the reason President Trump’s draft proposal according to Bloomberg reads as follows: “Our country’s immigration policies should be designed and implemented to serve, first and foremost, the U.S. national interest… Visa programs for foreign workers... should be administered in a manner that protects the civil rights of American workers and current lawful residents, and that prioritizes the protection of American workers — our forgotten working people — and the jobs they hold.”

There are many conflicting views and opinions about H-1B visas that companies use to employ people from other countries when adequate resources in the fields of science, technology, engineering and math aren’t available locally. But since foreign labor is usually cheaper, critics say that companies tend to employ foreigners even when the skills are available thus depressing wages for the industry as a whole.

Ron Hira, an associate professor at Howard University, has done extensive research on the topic. Supporters say there isn’t room to control wage inflation since the program is highly regulated and technology companies like Amazon (AMZN Quick QuoteAMZN - Free Report) , Apple (AAPL Quick QuoteAAPL - Free Report) , Facebook , Alphabet (GOOGL Quick QuoteGOOGL - Free Report) and Microsoft (MSFT Quick QuoteMSFT - Free Report) , in fact, pay handsomely.

Whatever the opinion on the wage rate, there’s no denying that the jobs go to foreigners. If the trend continues, high tech American employees will have a harder time finding jobs, thus gradually closing down the institutions producing them. The per capita GDP attributable to such jobs will also go down as tech employees from abroad obtain American citizenship.

It’s also true that a country is in a position of absorbing others, giving them a home, a job, etc. when it is itself in a position of strength. But when it can’t find local tech workers, it’s definitely not in that position and may need some temporary measures to rejuvenate.

There’s also another side to the story. If tech companies are unsuccessful in their letters of appeal, lawsuits and other measures they’re taking against the President and the proposal is enforced, they may decide to employ the same talent in international facilities. A company’s main motivation and objective is to generate profit, and there could be initial costs of setting up such international operations.

The visa issue has been clubbed with another important one involving terrorism because the President has blocked all refugees from entering the U.S. for 120 days (the ban is indefinite for Syrian refugees possibly because of their acts of vandalism across Europe). Citizens of seven predominantly Muslim countries like Sudan, Iran, Iraq, Libya, Somalia, Syria and Yemen were also banned from entering the U.S. for 90 days. This seems like a relatively short period of time and what will be achieved in the interim remains unclear.

In the meantime, Attorney General Bob Ferguson, a Democrat, filed a complaint saying Trump’s order is "undermining the state’s sovereign interests" in violation of equal protection laws under the Fifth Amendment. Washington State also sued the President with support from Amazon and Microsoft.

But don’t imagine that the so-called refugees are helpless victims because they have plenty of powerful lobbies working for them. The American Civil Liberties Union (ACLU) and the Council on American-Islamic Relations (CAIR) are getting ready to file lawsuits. What’s more, Google has created a “crisis fund” with $2 million and its employees have contributed a like amount that they are gifting the ACLU. Other funds are also on the way.

But tech companies have plenty to say about both issues:

Apple: CEO Tim Cook told employees that the company had communicated with the White House. “I’ve heard from many of you who are deeply concerned about the executive order issued (Friday) restricting immigration from seven Muslim-majority countries. I share your concerns. It is not a policy we support…Apple would not exist without immigration, let alone thrive and innovate the way we do,” he wrote in an email.

Google: CEO Sundar Pichai wrote in a memo to employees: “It’s painful to see the personal cost of this executive order on our colleagues…We’ve always made our view on immigration issues known publicly and will continue to do so.” He also said that at least 187 Google staff were affected by the ban.

Founder Sergey Brin: "It’s a debate about fundamental values and thoughtful policymaking and many of the other things, I think, that are apparently not universally adored but I think the vast majority of our country and legislators support." Google has a problem with the orders, including "extreme vetting" of immigrants. After planning their move for some days 2K+ Google employees from at least eight Google offices walked out on Monday afternoon.

Facebook: Founder Mark Zuckerberg wrote on his Facebook page: "Expanding the focus of law enforcement beyond people who are real threats would make all Americans less safe by diverting resources, while millions of undocumented folks who don't pose a threat will live in fear of deportation." In an official statement on Saturday, Facebook said: "We are assessing the impact on our workforce and determining how best to protect our people and their families from any adverse effects."

Intel (INTC Quick QuoteINTC - Free Report) : Brian Krzanich: "I have heard from many of you, and share your concern over the recent executive order and want you to know this is not a policy we can support," and "First, as the grandson of immigrants and the CEO of a company that was co-founded by an immigrant, we believe that lawful immigration is critical to the future of our company and this nation."

One of Intel’s first hires was Andy Grove, who survived the Nazi occupation of Hungary and ran Intel for 11 years establishing it as the leader in microprocessor technology. He also said: "At Intel we believe that immigration is an important part of our diversity and inclusion efforts" and "Inclusion is about making everyone feel welcome and part of our community."

Its official statement says, “We are providing support to potentially impacted employees, all of whom are in this country lawfully. As a company co-founded by an immigrant, we continue to support lawful immigration. We will continue to provide any impacted employees with Intel’s full support.”

A statement on the company website says that it supports "legislative or administrative action to improve the immigration system for highly skilled employees." Half its 106K employees work in other countries and its U.S. workers include roughly 3K foreigners on work visas for those with specialized skills. But the number of employees from the seven banned nations is not known. Intel explained its contribution to Trump's inaugural committee by saying that it gave Intel a seat at the table on issues important to the company.

Microsoft: Microsoft’s president and chief legal officer Brad Smith wrote in a letter to the Secretary of State Rex Tillerson that there are currently 76 U.S. visa holders within the tech firm and 41 dependents who are citizens of the seven countries mentioned in the order. “These are not situations that law-abiding individuals should be forced to confront when there is no evidence that they pose a security or safety threat to the United States,” he said.

Satya Nadella, Microsoft’s CEO, said, “As an immigrant and as a CEO, I’ve both experienced and seen the positive impact that immigration has on our company, for the country, and for the world” while posting Smith’s email to employees on LinkedIn. Microsoft is trying everything to keep its options open. On the one hand it is joining Washington state to sue Trump while on the other, it is requesting the government to make an exception for “responsible known travelers with pressing needs” so people with passports from one of the countries listed in the order can return to the U.S. as long as they have a valid work or student visa and have not committed a crime in the U.S. 

Micorsoft is also asking that employees and students affected by the ban be allowed to travel outside of the U.S. for business reasons, except to the seven countries on the list. It is also asking that people with passports from one of the countries be allowed to go home for family reasons on a case-by-case basis.

Tesla: CEO Elon Musk, one of only a few tech executives on Trump’s business advisory team and manufacturing jobs initiative: “The blanket entry ban on citizens from certain primarily Muslim countries is not the best way to address the country’s challenges,” he tweeted on Saturday. “Many people negatively affected by this policy are strong supporters of the US. They’ve done right, not wrong & don’t deserve to be rejected.”

Twitter CEO Jack Dorsey called the impact of the order “real and upsetting.”

Netflix: CEO Reed Hastings said, "Trump's actions are hurting Netflix employees around the world, and are so un-American it pains us all… It is time to link arms together to protect American values of freedom and opportunity."

Uber CEO Travis Kalanick told employees he would talk to Trump about it in President Trump's first business advisory group meeting. "While every government has their own immigration controls, allowing people from all around the world to come here and make America their home has largely been the U.S.’s policy since its founding. That means this ban will impact many innocent people," Kalanick said.

Box CEO Aaron Levie who is Iranian-American said "At the corporate level, we are trying to take inventory on who could be impacted and ensuring that they stay within the country for now... We are really just getting a handle on the legal side of the situation, what we can fight and ultimately how we protect employees in the process." More broadly, the order sends "the wrong moral message to the world and within our own country," Levie said. "It's very unfortunate and very disappointing."

Slack CEO Stewart Butterfield said "Immigration is unambiguously an economic benefit, but that doesn't matter: do the right thing because it's right," he wrote in a series of posts on Twitter. "My grandfather came from Poland between the wars, at 17, sponsored by an elder sister. Two more siblings made it. Everyone else died."

Sam Altman, president of Silicon Valley tech incubator Y Combinator said in a blog: "It is time for tech companies to start speaking up about some of the actions taken by President Trump’s administration... The tech community is powerful. Large tech companies in particular have enormous power and are held in high regard. We need to hear from the CEOs clearly and unequivocally. Although there is some business risk in doing so, there is strength in numbers—if everyone does it early this coming week, we will all make each other stronger."

Other stories you might have missed-

Corporate

Apple in India: Apple will be assembling some iPhones in Bengaluru, the capital city of the south Indian state of Karnataka according to the state’s IT minister Priyank Kharge. Taiwan’s Wistron is setting up the unit that is expected to commence operations in the first half of 2017 (or by April-end according to some news sites).

Apple has been trying to get concessions from the Indian government but progress on that front is not clear as of now. India is an important market for Apple, which sold 2.5 million iPhones in the country in 2016. An estimated 750 million smartphones will be sold in India by 2020, so one can understand why Apple CEO Tim Cook said that India is “the place to be.” 

Apple Manufacturing In U.S.: Terry Gou, CEO of Apple’s largest contractor Foxconn, has said that the company, along with top customer Apple, is considering the setting up of a display panel manufacturing unit in the U.S. that could create up to 50K jobs. The decision followed Softbank CEO Masayoshi Son’s announcement about a $50 billion investment fund for the U.S.

The Nikkei reported that another Pennsylvania plant was also in the works, but it would be involved in molding functions.  Foxconn-controlled Smart Technologies may also move production to the U.S. if President Trump is able to renegotiate the North American free trade agreement.

Barclays Downgrades Apple: Barclays analyst Mark Moskowitz doesn’t have high expectations of the iPhone 8 because the maturing of the smartphone market means fewer upgrades and a tendency to buy lower-priced, older models. He also believes that "long-term growth opportunities related to India, services, the enterprise, artificial intelligence, and maybe even the cloud still exist;” however, he does not “expect these potential 'what's next?' opportunities to emerge as major needle movers over the next 12 months for Apple's model."  He therefore downgraded the shares from overweight to sector weight.

Ford Snaps Up Apple Executive: Musa Tariq, Apple’s global marketing and communications director for retail, is joining Ford as its chief brand officer. Tariq’s experience includes initiatives to enhance the retail experience at Apple’s 490 stores. As Ford evolves as a company making vehicles in a self-driving world, it will be increasingly blending technology and auto, so it’s easy to see that the brand might need repositioning. Steering the company through these changes seems to be the role Tariq will play.

Ajit Pai Is FCC Chairman: Net neutrality opposer Ajit Pai has been appointed Chairman of the FCC by the Trump administration. Pai was one of two Republicans on the five-member board, so his elevation won’t require senate approval. He replaces Tom Wheeler, who resigned soon after Trump won the elections. Streaming companies like Netflix, Apple and Amazon won’t be too pleased although Netflix indicated that its fan following provided it a certain amount of leverage with carriers. The truth is, it already has arrangements with carriers that allow them to charge it differential rates, contrary to the principles of net neutrality. 

Facebook Gets New VR Chief: Facebook has made an important hire in Hugo Barra, who has spent the last three years revving up the marketing machinery at Xiaomi (the success of the Mi3 and Redmi smartphones are attributed to him) and serving as Google’s Android chief before that. Facebook’s VR plan is more on the high end, which has somewhat impacted the adoption of the Rift, so it’s easy to see how it could benefit from experience.

Barra will replace Brendan Iribe as Oculus head and will also head up all VR efforts at Facebook. Iribe will move to the PC division, to speed up PC-based VR development. As part of his recent testimony defending Oculus technology, Zuckerberg said earlier that VR will take five to ten years to go mainstream and that Facebook will probably have to spend another $3 billion before it gets where it wants to go. So it clearly has long range plans.

Microsoft to Invest $1 Billion in Cloud Security: Microsoft has said that it will continue to invest a billion dollars into cloud security over the next few years and some say this is excluding acquisitions (such as Aorato for enterprise security, Adallom for general cloud security applications, and Secure Islands, for protection of data and files) and investments through its venture capital arm.

The adoption of cloud infrastructure by enterprises to a great extent hinges on the security of offerings. This along with the far greater competition in the cloud than in desktop computing makes security very important for Microsoft. Since the company now has a synchronized operating system across platforms in windows 10, it can hope to bring increasingly secure offerings and thereby pick up market share.

Microsoft Bond Sale: Soon after raising $19.75 billion in bonds in Aug 2016, Microsoft sold another $17 billion worth. The seven-part offering will be used for general corporate purposes and to help repay $26 billion in short term debt used to acquire LinkedIn.

Moody’s assigned a Aaa rating to the issue on the basis of a business model that will remain exceptionally robust as it continues to transition from on premise licensing to cloud based software subscription and service offerings. Investors haven’t taken bond issues by tech companies badly because it’s well known that they have huge cash piles parked overseas. The practice may change going forward if tax reform brings more of this cash back home.

Microsoft Creates CTO Position: Kevin Scott, former SVP of infrastructure and operations at LinkedIn, will fill the newly created position of chief technology officer at Microsoft to push adoption of Microsoft products and services at LinkedIn customers and members. He will report directly to CEO Nadella. Scott previously worked at Google and AdMob.

Nadella Joins Starbucks Board: Microsoft CEO Satya Nadella will join Sam’s Club CEO Rosalind Brewer and LEGO Brand Group executive chairman Jørgen Vig Knudstorp on Starbucks’ board of directors, if the shareholders approve the appointments at the annual general meeting in March. The appointments will expand the size of the board from 12 to 14 as long-time director Jamie Shennan will retire before the meeting.

Snap IPO Reveals Google Cloud Deal: Inside documents filed by Snap was a deal with Google to use its cloud computing platform to run the Snapchat app; not just that, there is a minimum purchase agreement of $400 million a year, although in the first four years, up to 15% may be moved to a subsequent year. Snap doesn’t make a whole lot of money just yet, (just $404.5 million in 2016) but its service is very popular and using Google’s cloud could help it scale.

Google Is Top Brand Again: Brand Finance, one of the firms providing a list of leading brands, says that Google has claimed the top position for the first time in 5 years, replacing Apple. Google’s strength is seen in its prowess in search, which is the mainstay of its advertising business and where it remains “largely unchallenged”. Apple is seen as repeatedly underperforming expectations and its inability to "demonstrate that genuinely innovative technologies desired by consumers are in the pipeline”. 

Google Hires VR Employee: Just a few months after Google launched its Daydream View VR headset (basic features and head strap packed into a stylish package that retails for just $49), the company has hired away Claude Zellweger, who headed HTC’s VR unit. Zellweger led the team responsible for the Vive VR headset, so this is probably an indication that Google has big VR hardware plans.

Alibaba Leading Funding Round in India’s Paytm: Alibaba is leading a $200 million funding round in Paytm Ecommerce, which was spun out of One97 Communications. One97 also offers the Paytm Digital Wallet, in which Alibaba and its financial arm own a high stake. Alibaba is not entering the Indian ecommerce market directly at this stage but through startups like this one and Snapdeal. Other big players include Amazon and Flipkart.  

Activision’s Consumer Products Division: Activision has created a division to make more out of its popular video games and has appointed Tim Kilpin former president and chief commercial officer of Mattel, to head the unit. Activision’s goal is to develop consumer-type products based on its video game franchises (toys and apparel for example) so Kilpin, with his experience developing the hugely popular “Monster High” dolls (Mattel’s first intellectual property in more than 30 years) will come in handy.    

Legal/Regulatory

Facebook Fined in Oculus Case: A jury has decided that ZeniMax will receive $500 million from Oculus owner Facebook as it was guilty of copyright infringement, the failure to comply with a non-disclosure agreement, and for the misuse of Oculus trademarks. The amount to be paid is split up as follows: $200 million for violating a non-disclosure agreement, $50 million for copyright infringement and $50 million for improper use of ZeniMax trademarks.

It will also pick up $150 million in damages from Brendan Iribe and $50 million in damages from Palmer Luckey, the two Oculus co-founders. However, the court ruled that the Rift maker wasn’t guilty of trade secret theft, a point that will be used by Oculus to frame its appeal. 

Google Privacy Policy Under EU Scrutiny: Google made a significant change to its privacy policy back in June. The change, while enabling users to more easily see and delete the information that Google has on them, also alters Google’s age-old policy to separate data on Gmail and YouTube from its widely used DoubleClick business. The change therefore empowers Google to build better customer profiles and thereby serve more targeted ads. Oracle, which is part of a coalition called Fairsearch that tries to make life as difficult as possible for Google, brought it to the attention of regulators last year and they are now looking into the matter.

Amazon Would Rather Settle with EU: Amazon’s parity clause that forced ebook publishers to always offer it the same terms as rival platforms has been under EU scrutiny. The investigation started in Jun 2015 with the goal of determining whether the facility prevented other distributors from competing with Amazon by offering new and innovative products and services. Now that the EU has opened it up for feedback from rivals and customers, Amazon is attempting to settle the matter with publishers so it isn’t called upon to pay a fine, which could be as high as 10% of its global turnover.   

New Technology/Products

Apple Watch Patent: Apple has won a patent for a modular metal band for its Watch. The modules can be used to house batteries, haptic devices that provide a sensation to the user, displays, photovoltaic cells, cameras, GPS sensors, speakers and a range of health sensors including thermometers, hygrometers, blood pressure sensors and sweat sensors. The limited space in the wearable to serve individual customer needs was the reason for developing the band.

Apple Mac Chip Could Hurt Intel Business: Both Boomberg’s Mark Gurman and Ian King and RBC analyst Amit Daryanani have given views on how an Apple developed co-processor(codenamed T310 for Macs based on ARM technology can hurt Intel’s chip business. According to Bloomberg, the Apple chip, which went into development last year, will gradually take over the functions of the Intel processor, paving the way for Apple’s processor independence.

But chips generally take 3-4 years to get into mass production, so Daryanani’s view that it will not impact Intel’s business in 2017 and also possibly in 2018 makes sense. He says that if Intel is totally designed out, it will be a $2-3 billion hit to annual revenue, $750 million to $1 billion hit to operating income with a 12-16 cent impact on the annual EPS.

Intel Go: Intel is boosting its automotive efforts by creating a new division called Intel Go to solve hardware problems like computer vision, infotainment, 5G wireless connectivity and AI technology. It will also offer related software solutions. Intel holds the view that the car is the next computing hub and it intends to do all it can to grab a greater dollar share. As cars incorporate more electronics and move towards complete automation, Intel’s innovations, partnerships and investments may be expected to put it in front and center of the new opportunity as it unfolds.

Google Instant Apps: First announced at the 2016 Google I/O conference, Instant Apps are a workaround between full apps and the web. Single-use or infrequently-used apps sometimes have to be downloaded because the mobile web browsers of companies aren’t that great. Since unnecessary downloads are nothing but wasted memory and space, Google will stream parts of the apps from its own servers, so neither the download nor the mobile web is required. The company is now rolling out the service to select users.   

Slack’s Answer to Microsoft: The Slack Enterprise Grid designed for larger and more complex businesses offers identity management technology, data loss prevention and advanced security systems. The Slack solution is also compliant with regulatory requirements in healthcare and finance sectors, which may be partly responsible for its swelling user base.

The company said that it now has 1.5 million paying users, which is commendable since it doesn’t offer many other computing building blocks that rival Microsoft does. In Nov 2016, Microsoft announced Teams, which connected the chat feature with the Office 365 cloud suite, thereby facilitating collaboration. The two are now competing head-on.

M&A and Collaborations

Cisco Buys AppDynamics: Cisco paid $3.7 billion for AppDynamics, an application performance management company just before it was scheduled to float its IPO. The purchase price was more than double the amount the company hoped to raise at its IPO and almost double the $1.9 billion valuation at its last funding round. Cisco has been trying to build the software and services side of the business, with particular focus on the emerging Internet of Things. The acquisition will surely provide the "end to end visibility and intelligence from the network through the application" that it is looking for and could nudge up software revenue from the current 29%, but the price tag looks high.

Alibaba Affiliate Buys MoneyGram: Alibaba’s payments arm Ant Financial is buying Nasdaq-listed MoneyGram for $880 million. MoneyGram focuses on peer-to-peer transactions and includes cross-border currency transfers. It also claims to have 350K physical locations across 200 countries. Ant Financial handles nearly 90% of digital payments in China and has also made strategic investments in India-based Paytm as part of its international push. MoneyGram will go a long way in furthering this objective. 

Some Numbers

Apple Watch Market Share: According to Strategy Anlaytics, Apple sold 5.2 million Apple Watch devices in the fourth quarter of 2016, slightly higher than 5.2 million units in the year-ago quarter, grabbing a 63% share of the market. Samsung was second with a 10% share, or 800K units (it sold 1.3 million units a year ago).

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