Last week, Microsoft MSFT scored a major coup by snatching HP HPQ from market leader Salesforce CRM, Intel INTC was discovered inside the iPhone, Alphabet GOOGL formalized its relation with Sanofi and FacebookFB, Twitter joined an alliance with select publishers.
Here’s a quick look at the top stories:
Microsoft Snatches HP from Salesforce
Microsoft has signed a six-year deal with HP for its Dynamics CRM offering. HP’s sales team previously used market leader Salesforce’s solution while its support team used number three Oracle’s solution. So in order to simply the system and add additional could-focused functionality it opted for the Microsoft solution. For further details see: Software Speak: On ORCL-N, MSFT-HPQ, RAX-Apollo Deals
Intel Inside iPhone 7
A number of years back, Intel refused to make Apple’s AAPL iPhone chip (based on ARM technology) as the strategy in those days was to stick with its x86 architecture. So the company has practically been sitting on the sidelines as the smartphone market ate into its core computing business.
But iPhone 7 changed all that with Apple using four Intel components according to a tear down of the A1778 model by chipworks. The components include two RF transceivers (SMARTI 5 RF), the baseband modem (XMM7360) and the RF power management chip (X-PMU 736). All these are part of the XMM7360 platform.
Apple is one of few companies that still use a separate modem (most others use the integrated solution that Qualcomm provides). This is also the first time that Apple is launching two models, one with a Qualcomm modem for CDMA networks (Verizon, Sprint in the U.S. and Chinese networks) and the other with an Intel modem for everyone else.
This dual sourcing strategy is typical of tech companies these days because it lowers the chances of component shortage, while also keeps the pressure on the supplier when negotiating prices.
Alphabet’s life sciences division Verily and French pharma company Sanofi formalized their year-long relationship last week by forming a joint venture they named Onduo. Sanofi is a leading diabetes drugs maker, so the JV is focused on diabetes management devices covering all aspects of the disease from exercise routine to diet and of course medication.
The companies want to develop a tool to measure outcomes of various treatments and possibly speed up drug development efforts (from the 10 years it takes currently to an estimated 2-3 years). Alphabet’s other diabetes-focused alliances with pharma companies include a deal with Novartis to make smart contact lens that take sugar readings from moisture in the eye and another with GlaxoSmithKline to develop bioelectronic solutions that will work on nerve signal pathways.
New Alliance That Could Curb Free Speech
In a rather disturbing development, technology companies like Facebook, Twitter and YouTube are getting together with select news publishers to determine what can be published and shared on social networks and also in training journalists on what to accept as valid news when they source stories from social networks. Ostensibly, the organization has been formed to filter out false news that can proliferate on social networks.
This kind of coalition is harmful for society because of the monetary relationships between the various parties. First, technology companies are dependent on publishers because it helps them generate advertising revenue. Second, (and this is not different from what has always been the case) news organizations can publish articles or suppress or color information for organizations that pay them to do it. So effectively, all the power to determine truth passes to organizations with deep pockets who may want to move public opinion to their advantage.
Social networks and YouTube have been ways for people to finally know and transmit the truth but this was possible only because of their independence. This seems to be the end of an era.
Last 6 Months
Other stories you might have missed-
Apple Makes Significant Hire: Apple made a significant hire in Zeyu Li, who according to his LinkedIn profile is "interested in deep learning, VR, AR, driverless car," with capabilities in “experimental psychology, human vision, optics for head-mounted displays, brain imaging, and mathematical methods of signal processing and analysis.”
With all the noise around VR/AR and head-mounted devices surrounding Microsoft, Facebook, Google and just about everyone else in the tech sector, Apple’s silence was kind of deafening. But this silence is actually typical of the company; not its inability to address an emerging market with a premium device.
Citi Sees FB Growth in "Bot Economy": It seems that bots, or software programs that can automate tasks will soon be the rage with technology companies. As artificial intelligence is increasingly added to these programs, they become better at handling customer relations and natural language processing, and don’t need to be limited to things like processing online transactions.
Citigroup analyst Mark May says, “Moves by players like Facebook to increasingly commercialize its Messenger platform (e.g., payments, business bots, etc.) and Apple's recent announcement that it will launch an app/bot store specifically for iMessenger with the launch of iOS 10 point to a possible momentum shift in the mobile landscape from the 'App Economy' to the 'Bot Economy.'" Facebook brought bots into Messenger earlier this year.
Cisco Prices $6.25 Billion in Debt: Cisco will issue the notes in five tranches at varying interest rates and maturities extending from 2019 to 2026. The amount raised will be used for repurchases of its common stock, repayment of debt, including the repayment of previously issued senior unsecured notes, acquisitions, investments, additions to working capital, capital expenditures, cash dividends and advances to or investments in its subsidiaries.
Moody’s has allotted an A1 rating to the offering based on the company's dominant position in the network equipment industry on the strength of its broad product portfolio, strong technology development capabilities and scale of operations. Cisco's strong debt protection measures, outstanding liquidity profile expectations for continued strong profitability and $7 billion of free cash flow over the next year also support the rating.
Coalition for Better Web Ads: Google, along with 16 other advertising organizations have formed a group called “the coalition for better ads” with the goal of dealing with the issue of ad blocking. The group will develop global ad standards using a rating technology developed by IAB's Tech Lab. Most of the criteria considered in the rating system deal with ad quality and user experience. Interestingly enough,
Adblock Plus, the company that caused most of the ad-blocking problem in the first place, announced that it is combining with Google and AppNexus to sell ads through a self-designed platform called the Acceptable Ads Platform. Google and AppNexus have explicitly denied this involvement.
Amazon Books: Amazon’s announcement of a bookstore in Chicago set off an alarm across independent book sellers in the region. They are now circulating a letter touting the benefits of small, specialized bookstores in customer forming customer relationships and personal interactions. Not just that: they make Amazon out to be quite a villain, cheating taxes until the law forced it to do otherwise.
The local stores are made out to be big heroes, paying all the taxes that help local development while also creating local jobs. Amazon will of course be very hard to beat because most people have already used Amazon services; moreover, the fact that its opening a local store means employment and it is already paying taxes.
But Amazon is also a much bigger player. A Bowker report surfacing last week indicates that the self-publishing industry is growing in leaps and bounds. The research firm, which publishes International Standard Book Numbers (ISBN) numbers said that self-published books grew 375% between 2010 and 2015 and that Amazon’s CreateSpace was the dominant player. When you consider that Kindle Direct Publishing is not included in the ISBN numbers, Amazon’s share is obviously even greater.
Amazon to Open 100 Pop-Up Stores: Malls in different places will see temporary Amazon stores that will most likely display Amazon gadgets as well as books. Amazon has a huge target for its Echo devices (10 million units next year from an estimated 3 million this year). But Alexa is also being integrated into a number of consumer and home intelligence devices and it would be interesting to see how the combined experience promises to be. So these stores could simply sell Amazon devices or they could be experience stores. We’ll have to wait and see.
GRUB Price Target Raised: Morgan Stanley’s Brian Nowak raised his price target on GhubHub shares from $31 to $36. The analyst cited the company’s new recommendation platform that was more effectively matching diners to meals and restaurants, thus leading to an increase in the number of orders per diner. The analyst expects this to translate to higher gross margins, which can then be invested in delivery, marketing and other growth initiatives.
NVIDIA Prices $2 Billion Debt: The notes consist of $1.0 billion of 2.20% notes due 2021 and $1.0 billion of 3.20% notes due 2026. The proceeds will be used to prefund the repayment of the principal amount of its convertible notes and for general corporate purposes such as dividend payments or share repurchases.
Indonesia Probes Google on Unpaid Taxes: The Indonesian government is getting ready to investigate Google’s tax practices in the country on suspicion that the country allots just 4% of the revenue it generates in Indonesia to the country itself and calls this too small and unfair. While Google said, “We continue to cooperate fully with local authorities and pay all applicable taxes," Muhammad Hanif, head of the specials cases branch in the tax office, said that the company’s refusal to allow the agency to examine the company's tax reports raised suspicions. Yahoo, Twitter and Facebook have reportedly allowed such inspections.
Apple News App Changes: The WSJ reports that iOS 10 users will now be able to subscribe to 14 news providers including the Washington Post, The Wall Street Journal, the Economist, National Geographic, Time, People, Cosmopolitan, Fast Company, the Los Angeles Times and the Chicago Tribune through Apple News and by paying through their iTunes accounts.
Apple will keep 30% of the proceeds in case of new subscribers and 15% of the amount generated from renewals. Apple gets to keep customer data and doesn’t say if it will share the information with advertisers that it has routinely shunned in the past.
As far as advertising revenue is concerned, Apple takes 30% if it sells the ads or nothing at all if the ad comes from the provider. The Financial Times ended its partnership with Apple, which could be either because of the loss of control over customer data or because advertising revenue from Apple News is lower than expected because usage is less than was previously estimated.
New Intel Wearable Coming Up: Intel is collaborating with Teva Pharmaceuticals to develop a wearable device that can track the progress of Huntington’s disease. This is a hereditary, degenerating brain disease resulting in deteriorating motor control, cognition and mental stability that can best be managed but for which a cure isn’t currently available.
A smartphone and sensor-laden wrist wearable can track and transmit the patient’s condition to Intel’s cloud-based platform for real time processing. The goal is to establish that medication has a positive impact on a person’s health, thereby convincing them to spend. Pharma companies are therefore very interested in this kind of technology.
Google Maps Now Suggests Lyft/Gett Options: Google Maps now integrates nine ride-hailing apps including 99Taxis in Brazil, Ola Cabs in India, Hailo in the UK and Spain, Gett in the UK and Lyft in the U.S. While these services run primarily in the aforesaid countries, they are available across 60 countries. Google has stepped up competition with Uber (which remains conspicuously absent from the list) after the two companies developed conflicting interests, mainly with respect to self driving cars.
M&A and Collaborations
Cisco-Barrick Gold: Barrick Gold Corp., the world’s biggest gold producer, will initially spend $100 million on Cisco technology to modernize its operations and bring efficiency and safety into every aspect of its business. The modernization effort will begin at its Cortez mine in Nevada. Cost efficiency in mining operations is of utmost importance because revenues are dependent on a constantly depleting material.
Barrick’s current target is to bring costs down to $700 per ounce of gold by 2019 and this partnership is expected to facilitate the process. The deal is significant in itself and also because it could get other miners to invest in technology.
Alibaba-EyeVerify: Alibaba’s finance arm Ant Financial has scooped up a Kansas-based biometric measurement company for $70 million. EyeVerify has made Eyeprint ID, an eye-scan software that can be used to unlock phones and make payments, a technology reportedly demonstrated last year through Alipay. The acquisition will help the company secure payments on its platform and help it expand internationally.
HP-Samsung: HP acquired Samsung’s printing business for $1.05 billion thus eliminating one competitor and getting better equipped to deal with others like Cannon and Epson. HP’s relationship with Canon is tricky at best because while they compete on one level they collaborate on another. HP uses some Cannon multi-function printing (MFP) technologies while Canon services the devices that use its technology.
The acquisition brings 6.5K printing patents plus a large number of research, sales and support staff, thus shoring up HP’s capabilities and possibly reducing its dependence on Cannon’s service staff that have reportedly not proved popular with HP customers.
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