Last week, the big technology companies saw limited movement in share prices amidst news that Twitter (TWTR - Free Report) sued the government, Microsoft’s (MSFT - Free Report) Surface beat Apple’s (AAPL - Free Report) iPad in customer satisfaction, the Xbox Project Scorpio reveal and Intel’s (INTC - Free Report) McAfee spinoff (announced last year).
Here are the details-
Twitter Sues Then Withdraws Suit Against U.S. Government
The government sent an order to Twitter to reveal the IP addresses and phone numbers of an account called @ALT_uscis that had been trolling President Donald Trump about his immigration policies mostly with respect to Mexico. The account was created in January with its 9,000 tweets garnering it 120,000 followers.
Twitter sued the Department of Homeland Security and US Customs and Border Protection to block the order, claiming that it was "unlawfully abusing a limited-purpose investigatory tool" (related to import of counterfeit goods), especially since the person behind the account was merely criticizing Trump and there was no evidence to suggest that it was engaged in criminal activity.
The following day, Twitter lawyer Mark Flanagan said that the summons had been withdrawn and that the demand "no longer has any force or effect." Further details weren’t available.
Surface Beats iPad
Microsoft may finally have achieved what it set out to do when it introduced the first Surface several years ago. Despite its less-than-satisfactory features, Microsoft continued to pitch the product against Apple’s popular iPad while quickly learning from its mistakes to make better and better iterations. Microsoft needed in on the BYOD market, which was rapidly eating into its share of PCs.
Fast forward to today and J.D. Power’s 2017 U.S. Tablet Satisfaction Study reveals that Microsoft’s Surface brings greater satisfaction to customers than Apple’s iPad and tablets from Samsung, LG, Amazon, Acer and Asus, beating all the devices on three counts: Internet connectivity, availability of official accessories and the variety of pre-installed applications.
Its attractiveness, materials quality and size were also considered better than the iPad. Moreover, according to the study, people who want the latest technology, or want something as capable as a laptop are opting for the Surface more often than the iPad.
Apple still sells more tablets than anyone else.
Microsoft Project Scorpio Reveal
Microsoft has developed a brand new gaming console in an initiative it calls Project Scorpio. The primary goal appears to be to handle 4K video at 60 frames per second, but according to Eurogamer’s Digital Foundry, which did an independent check, there will be power to spare for additional visual improvements.
There were probably a couple of reasons why Microsoft’s XB One wasn’t very successful, the first being its aspiration to capture every kind of gamer from the casual to the most serious and the second being its uncompetitive price. With this console Microsoft has made its choice: it’s going full throttle for the hard core gamer.
This looks like a better strategy since casual gamers will be slower to adopt a console anyway because they might satisfy their needs with a mobile device or make do with cheaper alternatives. But a hard core gamer needs a console because nothing else will do. So this is a better segment to target your console at.
The pricing issue is trickier although the current market guesstimate is between $400 and $600. Some say it could go higher because the BOM cost is higher for this device and because hard-core gamers don’t mind spending. Others say that it will lose out to Sony’s PS4 Pro despite being more powerful if the pricing isn’t right.
Intel Spins Off McAfee
Intel has completed the deal to spin off Intel Security as it refocuses its efforts on the cloud.
McAfee for its part gets increased agility to better address security concerns that are changing rapidly given the advent of the Internet of Things (IoT) as well as the increased connectivity of emerging markets, both of which are creating new opportunities. Tech Crunch says that currently, McAfee secures two-thirds of the world’s 2,000 largest companies and grew its revenue 11% in the first half of 2016.
Intel spent $7.8 billion to buy McAfee seven years ago and TPG is now getting a 51% stake in a deal worth $4.2 billion. Intel initially killed the brand and regrouped the business under Intel Security, but with the spin-off, McAfee is back in the game.
Price Change Last Week
Price Change Last 6 Months
Apple Moving Beyond Imagination: Apple GPU supplier Imagination Technologies has issued a press release saying that Apple will stop using its technology in new products within the next 15-24 months. There’s a lot of speculation about why Apple is doing this, despite the fact that the press release says that Apple will be sing independently developed GPU designs.
Imagination says that Apple is unlikely to be able to do it without infringing on its patents, so it expects that licensing revenue will be down but not out. But it’s also true that the iPhone maker has been recruiting a large number of GPU engineers and history says that it can do it (as in the case of its CPU design).
GPU technology is very important not only for its flagship line of iPhones, but also for emerging new markets like AR/VR and auto, so it’s very unlikely that Apple is bluffing about its technology. Unless it’s working to pressure Imagination prices and then buy out the company, something that it could do very easily given its cash hoard.
Apple India News: The Indian daily Economic Times has reported that given the institution of goods and services tax (GST), it will become hard for Apple to obtain specific customs duty exemptions and freight subsidies for the products it is getting ready to assemble at the Bangalore plant. Meanwhile, the App Accelerator center in Bangalore kicked off last week with minimum fanfare.
Apple’s goal here is to collaborate with local developers to make suitable apps for the Apple ecosystem. Which may be just what Apple needs as Counterpoint Research estimates that there will be a billion netizens in India by 2020. A Google and BCG study says that Indian smartphone users in 2020 will be 520 million. That is huge potential and Apple is getting in at the right time.
Facebook News Literacy Project: Facebook (FB - Free Report) , along with organizations like Craig Newmark Philanthropic Fund, Ford Foundation, Democracy Fund, John S. and James L. Knight Foundation, Tow Foundation, AppNexus, Mozilla and Betaworks is forming a group to which they will contribute $14 million to tailor how consumers read news. The initiative is being called The News Integrity Initiative and is Facebook’s way of making mends with the “fake news” attack on its platform. Urban Dictionary describes “fake news” really well: A term formerly useful for describing websites consisting entirely of intentionally fabricated news stories, but now used to describe virtually anything that does not mesh with one's own views.
YouTube Go in India: Alphabet’s (GOOGL - Free Report) YouTube Go, supporting English and the Indian languages Hindi, Bengali, Tamil, Marathi, Telugu, Kannada, Gujarati and Malayalam, launched its beta version last week. This is basically a data-light app offering recommendations and trending videos from your area when you open the app, with an option to watch the preview of any video before you decide to play it or download for offline viewing.
As may be expected, the video won’t be too great because 640p resolution is the best that it can do. But it does allow you to decide how much data you want to use on each video and also lets you share video with friends near you without using any data (through Wi-Fi direct and Bluetooth).
Amazon Creating Jobs: Amazon (AMZN - Free Report) is creating 5,000 new part time Virtual Customer Service positions as part of its initiative to add 30,000 part-time positions in the U.S. over the next year. This is in addition to the 100,000 full-time full-benefit jobs it has promised to create over the next 18 months. Part timers spending more than 20 hours a week will be considered for other benefits including Amazon’s Career Choice program that pre-pays 95% of tuition for courses related to in-demand fields.
ACCC Takes Apple to Court: The Australian Competition and Consumer Commission (ACCC) has sued Apple for alleged false, misleading, or deceptive representations about consumers' rights under the Australian Consumer Law. The ACCC has found upon investigation that Apple generally avoided looking at or servicing a customer’s device if he had earlier taken it to a third party, even if the third party’s fix wasn’t related to the defect before Apple. ACCC Chairman Rod Sims said, “Consumer guarantee rights under the Australian Consumer Law exist independently of any manufacturer's warranty and are not extinguished simply because a consumer has goods repaired by a third party.”
Germany Law on Fake News: Germany has created legislation that says that social networks will be fined as much as 50 million euros ($53 million) if they fail to give users the option to complain about hate speech and fake news or refuse to remove illegal content. Two categories were added to another bill that makes corporate officials responsible for noncompliance with fines up to $5 million. The first requires the compulsory removal of content that has been flagged as child porn. The second is really ridiculous but mentions content inciting terrorism. While Merkel’s party backed these two inclusions, this bill hasn’t been passed yet.
Facebook Loses New York Case: The New York Court of Appeals, while recognizing the privacy concerns, has upheld the decision of a lower court that Facebook didn’t have the legal right to appeal a search warrants order in a criminal case. The case involves search warrants on 381 Facebook account holders who were allegedly involved in a disability benefits fraud case against New York City police and fire retirees. Five of the six judges were in favor of the ruling while the only dissenting judge said that Facebook was denied "any meaningful recourse" against the "en masse" data seizure. Facebook may take the matter to the federal courts.
Facebook Testing Workplace: Facebook is testing a free version of Workplace, the walled-off social networking service for office workers that it’s referring to as the “Standard” edition. The paid version, called “Premium” is more secure, but offering the same basic services like chatting and collaboration, and including specialized versions of Facebook Live and News Feed. This is a crowded market including Microsoft’s Teams, Slack and Google’s Hangouts Chat (part of G Suite) although the others are yet to offer a free version.
M&A and Collaborations
Facebook Collaboration in Korea: Facebook is planning on sprucing up its AR/VR tech by tapping into the Korean market. So it is working in collaboration with Korea Innovation Center (KIC) and the Institute for Information & Communications Technology Promotion (IITP), both managed by the Ministry of Science, ICT and Future Planning. As part of the ministry’s Technology Revolution Together initiative, in which it seeks to help startups go global, it has identified 138 prospects eligible to work with Oculus, Facebook’s VR arm, of which 30 have indicated interest.
Amazon Deal with NFL: The National Football League has now given Amazon the rights to live stream 10 Thursday night football games for the 2017 season. Amazon is paying $50 million, which is 5x the 10 million Twitter paid last year. But then, Twitter is totally dependent on advertising, while for Amazon, advertising is more of an experiment (although on track to fetch a billion dollars this year). Amazon will be streaming to Prime members, so it must expect Prime member additions. This will of course help it sell much more than a football game (products, video, music, sports), which allows it to offer the higher price.
Apple Places Huge OLED Order: According to a report in the Nikkei Asian Review, which was based on a supply chain source, Samsung Electronics has received an order for OLED panels for 70 million iPhones this year. IHS Markit analyst David Hsieh forecasts the same number of phones and adds that Samsung is preparing to deliver OLEDs for 95 million phones in case demand exceeds supply, which is often the case. Apple is expected to launch three new iPhones this year.
iPhone 8 Price Cut Likely: It had been rumored that Apple’s new iPhone would cost somewhere around $1000, but it now appears that only the high-end model could reach that high. A research report from UBS analyst Steven Milunovich reportedly says that Apple usually prices its low-end model at the mid-range market. So since Samsung’s new Galaxy S8 and S8 Plus phones with their 5.8-inch and 6.2-inch displays cost $720 and $840, respectively, Apple is also likely to price in the ballpark. But since the 64GB OLED iPhone will cost $70 to $90 higher, this means Apple will make a lower profit, so its gross margins will be something to watch.
Android Is Most Popular OS: Mainly because of the smartphone becoming the primary device to access the Internet, the secular decline in traditional PC sales and the emergence of Asia as the biggest market for connected devices, Android is now the most popular OS for connecting to the Internet. StatCounter says that in March 2017, Android garnered a 37.93% share of Internet usage compared to Windows’ 37.91%.
While Microsoft still dominates the desktop, there’s evidence that Google’s Chrome is the most popular browser. Google’s Android and Chrome strategies remain hazy and with these stats there are now renewed speculations about their merger.
HPE Lowers Outlook: After the spin out and merger of its enterprise services group with Computer Sciences Corp, Hewlett Packard Enterprise lowered its second quarter EPS guidance from $0.43 to $0.35. The full-year guidance went from $1.93 to $1.51. The company also said that it expects a GAAP loss of 2 cents in the second quarter.
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