Last week saw Qualcomm QCOM filing counterclaims against Apple AAPL in their ongoing patent-related lawsuit, Alphabet GOOGL defending itself against gender inequality allegations by the Labor Department, Western Digital WDC objecting to Toshiba’s chip unit sale to Broadcom AVGO and much more.
So let’s jump to the details-
Qualcomm Replies to Apple
In counterclaims filed in a California Federal court, Qualcomm has indicated that Apple is playing needlessly dirty in an attempt to keep costs down. The point of contention, as has often been in the past, is standard essential patents (SEPs), on the basis of which much of modern day telecommunications takes place.
The companies that contributed technology to form the standard are required to license the technology to others on fair, reasonable, and non-discriminatory (FRAND) terms. But what constitutes FRAND has been debated about a lot because companies offering this technology obviously want to be paid more, especially from companies like Apple that make super normal profits. While on the other hand, the companies that license want to point to all their other innovations built on top of the standards and argue that the standards are just a very small part of the end product and so don’t deserve a good price.
Qualcomm's complaints are mainly about Apple failing to engage in good faith negotiations over its 3G and 4G patents while also seeking to use both these and its 5G technology at a fraction of the cost that other smartphone vendors are apparently willing to pay. "Now, after a decade of historic growth, Apple refuses to acknowledge the well-established and continuing value of those technologies. It has launched a global attack on Qualcomm and is attempting to use its enormous market power to coerce unfair and unreasonable license terms from Qualcomm" reads the complaint.
It also says that Apple made "false statements" to the Korean FTC and encouraged Samsung to go after it to force Qualcomm to change its licensing model. The KFTC investigation ultimately led to an $865 million fine on Qualcomm. Note that Apple doesn’t use Qualcomm technology directly but through its manufacturing partners, which have licensing deals with Qualcomm, some going back to before Apple started using its technology.
If Apple withholds payments to its partners they might hold out on payments to Qualcomm. Qualcomm may be able to get its agreements enforced in court but it leads to unnecessary and wasteful litigation on multiple levels. This is exactly what Apple is doing according to Qualcomm.
Qualcomm further says that Apple "acted to prevent Qualcomm from revealing to consumers the extent to which iPhones with Qualcomm's chipsets outperformed iPhones with Intel's chipsets" and later falsely claimed that there was "no discernible difference.”
Google’s Fight with the Labor Department
The U.S. Department of Labor (DoL) has made a sweeping statement that it had “found systemic compensation disparities against women pretty much across the entire workforce” and DOL Regional Director Janette Wipper said the agency had received "compelling evidence of very significant discrimination against women in the most common positions at Google headquarters."
In a detailed response to the allegation, Google’s VP of people operations, Eileen Naughton said that the claims had been made "without any supporting data or methodology." She also explained the salary analysis system Google currently employs:
"Each year, we suggest an amount for every employee's new compensation (consisting of base salary, bonus and equity) based on role, job level, job location as well as current and recent performance ratings…The analysts who calculate the suggested amounts do not have access to employees' gender data. An employee's manager has limited discretion to adjust the suggested amount, providing they cite a legitimate adjustment rationale."
The model then measures individual salary calculations against those received by their peers which is done to eliminate "statistically significant differences between men's and women's compensation”. Naughton also said that Google's methodology is available to other businesses if they want to test their own compensation practices for equal pay.
This has been going on since Sep 2016, after which a case was filed in January, asking for its compensation data. Things came to a head after Google failed to comply with a routine audit.
Western Digital Objects
Toshiba is under pressure to sell its memory chip business after accounting irregularities related to its Westinghouse nuclear project put it into financial trouble. But Western Digital, which recently acquired SanDisk, is in a JV with Toshiba and has also invested billions of dollars in that business.
WDC says that Toshiba didn’t have the legal right to split the chip business and it also deserves prior and confidential negotiating rights in case of its sale as a result of this agreement. It also objects to a sale to Broadcom, despite it being the highest bidder because of unsavory dealings with that company. Read more:Why Suitors Are Flocking To Toshiba’s Chip Business
PC Shipment Declines Continue to Moderate
According to research firms IDC and Gartner, PC shipments showed signs of improvement in the first quarter of 2017, with declines continuing to moderate. This was the 10th straight quarter of PC shipment declines. Business PCs did better than consumer PCs as expected. The spoilers remain largely the same: shift to mobile devices and emerging markets, and a longer replacement cycle. Read more: Strong PC Shipments Witnessed in Q1: Gartner, IDC
Price Change Last Week
Price Change Last 6 Months
Apple, Wistron Certified in India: Apple’ smanufacturing partner Wistron has received Bureau of Indian Standards (BIS) certification for manufacture/assembly of a phone (Model A1723, brand number R-62000612, certified under IS 13252) in India that according to media reports, is the iPhone SE. The BIS reportedly says that this phone will be different from international versions. Apple recently discounted the 4-inch phone to Rs. 19,999, which is expected to help it gain share in the mid-range market. Wistron-owned ICT Service Management Solutions, based in Yeshwantpur, Benguluru has been commissioned for the manufacturing.
MKM Optimistic on Alibaba Cloud Growth: MKM analysts have issued a highly optimistic report about Alibaba’s BABA cloud business. They estimate that the business could be worth $20 billion today with the potential to grow to a $65-70 billion valuation over the next 4-5 years.
The optimism is driven by data supplied by the analysts: 60K developers are working on the platform, AliCloud has 765K paying customers (up 100% year over year), it has 2.8 million total customers; after large enterprises, which use state-owned infrastructure, AliCloud is the largest private player with 70 of the largest 100 startups using its services. Also, Alibaba has been investing in the business for the past eight years, which is reportedly three years short of Amazon and four years longer than Alphabet’s Google.
AMD Ryzen 5 Release: AMD started selling its Zen-based Ryzen 5 processors (four core/eight thread and six core/twelve thread) into the channel some time back and now, these products are available to consumers. The processors reportedly compare well with Intel’s Kaby Lake-based i5 chips (four core/four thread) going by the considerable number of reviews comparing the two.
As may be expected, Intel’s chip is more expensive when you consider the fact that it has fewer threads and cores, but single-core performance is better. On a net basis, while AMD still lags Intel slightly on performance, it’s packing in more compute power at lower costs that is likely to go down well with consumers. Gamers are the biggest drivers of consumer PC sales right now so both Intel and AMD have their work cut out.
Microsoft Tools for Hybrid Cloud Migration: Microsoft MSFT has come out with three new tools that in very broad terms, will help enterprises evaluate the savings generated from moving corporate workloads to Azure, the Azure Hybrid Use Benefit in the Azure Management Portal that can save them up to 40% on their Windows server licenses and Azure Site Recovery to facilitate the process of migrating virtual machines to Azure. Microsoft is en route to delivering annualized commercial cloud revenue of $20 billion by 2018 and its pace of growth indicates that the once unreal target is now within reach.
Microsoft Launching Minecraft Marketplace: The Minecraft development team apparently can’t keep up with the demand for customizations and levels and so it’s getting on board independent developers that will supply these and other customizations through the in-game store. The good thing for developers is that Minecraft maker Mojang, now owned by Microsoft is willing to pay out 50% of what the creation generates, with 30% going to Apple, Google, or Microsoft's app stores and itself retaining the rest.
Minecraft is an insanely popular title, having sold 121 million copies worldwide, with 55 million unique monthly players (figures from Microsoft). As of now, nine businesses have been approved for selling feature packs with prices ranging from $1-10 per creation. Microsoft will sell Minecraft Coins that can be used to buy items. Microsoft intends to eventually make the purchases sync across devices and platforms.
Microsoft Ends Support for Vista: Microsoft has officially withdrawn support to its unsuccessful Windows Vista launched in 2009. While some people did buy systems based on the OS, most were dissatisfied and what’s more, Vista was the reason that most XP users simply refused to move on. All that is well behind us and both Windows 7 and Windows 10 have been received well. Microsoft says, Windows Vista users "will no longer receive new security updates, non-security hotfixes, free or paid assisted support options, or online technical content updates from Microsoft." So that ends the matter.
Google Home Services, Food Delivery App for India: Google has launched an app called Aero in Bengaluru and Mumbai, India that will allow people to connect with home service providers like plumbers, electricians and the like. It will also allow users to search for nearby restaurants and schedule food delivery.
M&A and Collaborations
Microsoft, eBay, Tencent Invest in India’s Flipkart: Microsoft, eBay and China’s Tencent joined earlier investors Naspers Group, Tiger Global Management, Accel Partners and DST Global for a share in Flipkart, India’s largest ecommerce company. The three companies together invested $1.4 billion. Ebay sold its Indian operations to Flipkart and added $500 million for its share in the company. The company is now valued at $11.6 billion.
Microsoft Buys Deis: Microsoft spent an undisclosed amount of money to buy San Francisco-based software startup Deis that was reportedly acquired by Engine Yard back in 2015. The startup has developed an open source tool based on the Kubernetes container management system that Google developed and then open sourced.
Microsoft initially agreed to work with Google on Kubernetes back in 2014 but also backed competing platforms Mesos and Docker Swarm. But Kubernetes has gained ground so in February, Kubernetes became available on the Azure Container service as well. The reason this is all so significant is because containerization is extremely important for information stored in the cloud since it creates a virtual box of code that can be shared and moved between applications and across clouds as needed.
"At Microsoft, we've seen explosive growth in both interest and deployment of containerized workloads on Azure, and we're committed to ensuring Azure is the best place to run them," Scott Guthrie, EVP cloud and enterprise group at Microsoft wrote in a blog post.
Google to Invest In LG Display: South Korea's Electronic Times has reported that Google has offered to pay LG Display up to $880 million (one trillion KRW) as its contribution toward a production line for flexible OLED panels for use in second-generation Pixel phones. LG is considering the offer. Google’s Pixel, which has the appearance and features of a premium device and has been marketed as such, will fall back in the race with Samsung and Apple on features if it doesn’t get some OLED screens of its own.
So Google’s needs are clear: it also doesn’t need to get into a deal with Samsung, which uses OLED in its own phones and is also in an agreement to supply to Apple. So it’s trying to find another supplier.
Facebook Announces Monthly Advertisers: Facebook FB has announced that the number of advertisers on its platform has grown from 4 million to 5 million between September and now. Businesses with mobile pages now total 65 million while businesses with Instagram profiles are up to 8 million. Among the 5 million advertisers, the biggest industries are e-commerce, entertainment/media and retail.
Unsurprisingly, around 75% percent of advertisers are in its fastest-growing markets, which are India, Thailand, Brazil, Mexico and Argentina. Nearly 50% of advertisers create ads on mobile devices.
Facebook Messenger Users: Facebook Messenger, which the company spun out in 2014 and then enhanced with games, a chat bot platform, voice calling, video calling, as well as a revamped camera with masks, frames, stickers and effects now has 1.2 million users. That’s up from 700 million users when it was spun out and 600 million users on the hot Facebook-owned platform Instagram.
Sell These Stocks. Now
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research