Intel Outlook: Analyst Day Highlight
Intel shares reacted strongly to management comments that the company would see mid single-digit revenue growth in 2016 on the back of its Skylake chips and Windows 10. They also expressed confidence about the non-PC business (much higher-margin) saying that the company's repositioning remains on track. Another reason for shareholder approval was the 2016 dividend hike from 96 cents to $1.04.
Gross margin is expected to be 62%, same as its 2015 projections. R&D and MG&A will fall about 50 bps as a percentage of sales, but capex will jump from the $7 billion it expects in 2015 to $10 billion in 2016.
Apple Pay Has Soft Landing In Canada
Apple Pay has partnered with AmEX to launch in Canada where both mobile and electronic payment system penetration rates are very high and customers are eagerly awaiting Apple Pay. But Apple Pay appears to be at odds with Canadian banks that are loath to part with the 0.15% interchange fee Apple charges. So Apple has chosen AmEx instead despite the fact that the network has 4 million users while Mastercard and Visa together have around 70 million.
Starboard's New Plan for Yahoo
Just a year after Starboard pressured Yahoo to spin off its Alibaba assets and give it a board seat, the activist investor wants to go the other way. It's now asking CEO Marissa Mayer to keep Alibaba and Yahoo Japan assets while spinning off its search business.
Mayer has been blamed for failing to turn around Yahoo's business since its revenue remains roughly the same as it was when she joined, and it has lost search market share to Microsoft. Starboard has doubled its stake in the company in the third quarter, after slashing it in the second.
Two big things happened this year. The first was the tax authorities refusing to sign off on the Alibaba spin-off, meaning that shareholders are now exposed to the risk of paying several billion dollars in taxes if Yahoo goes through with the deal and it is assessed taxable. The second was the Microsoft MSFT search deal coming up for renewal that Mayer adjusted to make it as favorable for Yahoo as possible.
Mayer's growth strategy involved a focus on M-V-N-S (mobile, video, native and social). Her critics have been focused on the cost of her endeavors that have yielded high double-digit growth in this segment off a small base (the segment is yet to reach quarterly revenues of half a billion dollars).
But it's easy to overlook how under-invested Yahoo was in these emerging growth areas when she joined. The search business has been dependent on Microsoft, so there were considerable limitations on what she could do there.
Her biggest failing wasn't that she didn't do enough to turn the company around, but the fact that she still couldn't add definition (maybe that was a later plan). It's interesting to note that Starboard doesn't name potential suitors (like it did last time with AOL).
Last 6 Months
Other stories you might have missed -
Microsoft CRM Chief Heads to Salesforce : Bob Stutz is leaving Microsoft for rival Salesforce and will join the company as its chief analytics officer, a $38 billion business that it entered into just recently with its launch of Wave. Customer relationship software is set to get a lot more useful. Stutz has been around: the companies he worked for earlier include Siebel Systems (since acquired by Oracle), SAP and HP.
Google Nest Is Hiring : Nest Labs, the company that Alphabet GOOGL bought for $3.2 billion last year is looking for 100 engineers in Kirkland as it looks to open an R&D center inside the Google campus there. The engineering team to be amassed over the next year or so, will focus on software development (both app and cloud).
VMware Co-founder Joins Google : Google talked up its cloud business last week, pointing out how it's coming from behind Amazon and Microsoft and growing its revenues the fastest. But it wasn't all talk either. Urz Hölzle, the company's SVP of technical infrastructure mentioned product announcements coming soon.
Most importantly, Google acquired a startup called Bebop, founded and owned by the legendary Diane Greene, who is also one of its board members and a VMware co-founder. Google for Work, Google Apps (headed by Amit Singh) and Google Cloud Platform (headed by Hölzle) will now come together under her. Google hopes to add most of Bebop's 39 employees to the team as well. Greene will continue on Google's board.
This is a mega move by Google, indicating just how serious it is about its IaaS business. Greene has clout at big enterprise customers and knows a lot about the operations side of the enterprise business, which are expected to help the company gain mind share. In fact, Hölzle also said that it was early days for the cloud and Google could still wind up making more money off it than its advertising business.
Germany Investigating Apple, Amazon : The usual enemies are this time on the same side of the complaint, as they face an investigation by Germany's Federal Cartel Office into their audiobooks agreement. Amazon AMZN , through its 2008 Audible acquisition is the exclusive provider of audiobooks to Apple's iTunes store in Germany.
This arrangement has garnered them a 90% share of the market, giving them leverage to extract unreasonable marketing terms, according to the German Publishers and Booksellers Association, which filed the complaint. The complaint has also been sent to the European Commission.
Facebook Explains to Belgium : Belgian regulators had previously censured Facebook FB for its practice of tracking users that were not logged in and non-users by placing a cookie (computer code, in this case called Datr) in the person's web browser. In a closed meeting between Facebook and Belgian authorities last week, nothing appears to have been resolved. Facebook still says that this is to prevent hackers taking over user accounts and the Belgian authorities are still looking for a fine of around $269K per day. Facebook was given 48 hours to comply or pay up (even if it appeals).
NY Probe Into Yahoo Fantasy Sports : The State of New York, which reportedly has more than its share of fantasy sports outfits, is taking exception to the business. Attorney General Eric T. Schneiderman filed legal documents saying that the activity was not a game of skill but a game of chance, making them clearly illegal.
Yahoo didn't comment on the filing, saying it was monitoring trends. The company gets a 10% cut of users' contest entry fees (which can be up to $600 daily). Yahoo is third favorite behind market leaders DraftKings and FanDuel, which are likely to find things tougher.
Google Will Contest Russian Ruling : Google has said that it will contest the Russian court's Sep 2015 finding that it had abused the dominant position of Android to have its apps pre-installed. The problem appears to be not so much that Google apps are getting pre-installed but that Google is preventing device makers from also pre-installing rival apps like Yandex search.
Users are, however, not prevented from using any app they wish to download. Since most users just stick with the apps that come with the phone, Yandex has seen its market share shrink (from 62% in Jan 2014 to 57% in Sep 2015). Google, which saw its share increase from 27% to 32%, has said that "device makers are free to use Android with or without Google applications and consumers have complete freedom to use rival applications". Encouraged with the ruling in Russia, Yandex has taken the matter to the EU, which has said that the Russian decision was instructive.
Facebook Has New Networking Switch : The social networking company is becoming better and better at networking products, if its head of engineering, Jay Parikh, is to be believed. Parikh is now saying that the company has a second networking switch under development. The second switch (100GB speeds) is a big improvement over the first, which was a 40GB device.
The problem for networking hardware makers like Cisco is that the switches are available to anyone who wants them through contract manufacturers under the SDN model. SDN transfers the differentiating elements of a switch to the software that runs them (in this case Facebook's FBOSS), which makes higher-end gear pointless.
Facebook is also donating the designs to the Open Compute Project (a consortium of hardware customers and vendors) to hasten development of its technology. Facebook also announced that Nokia, The Department of Energy and Yahoo Japan have now joined the OCP. Mellanox has received approval for two of its OCP switch designs.
Microsoft One Note Enhancements : OneNote 2016 is getting better for Android, iOS, Windows and web users, which means just about everybody. For Android users, the improvement is the ability write notes or copy-paste text even if another app is open. For iOS users, pressing the app icon now reveals a menu from which earlier notes can be viewed or new ones made. iPad Pro's larger screen will also see a size-optimized version.
Both iOS and the web have an insert option that also allows you to directly record audio or attach files. Windows users can also embed YouTube, Vimeo or Office Mix right into OneNote. There will be a phased rollout.
Microsoft Focuses on Security : Gone are the days when Microsoft software came full of bugs that served as a constant headache for IT managers because Microsoft couldn't be bothered to fix them within a reasonable time. In the increasingly competitive landscape that Microsoft now finds itself in, the company is spending a billion dollars on security R&D to facilitate protection of data in the cloud and on devices, so says Microsoft CEO Satya Nadella.
The company is now announcing the setting up of a Cyber Defense Operations Center, which is a network of security professionals at its Redmond headquarters trained to detect and protect against ongoing cyber threats in real time. There's also something called the Enterprise Cyber Security (ECS) Group, which sounds kind of similar except that ECS seeks to tap into security experts across the world. If you hadn't guessed already, Microsoft highly recommends that you update to Windows 10 and use Azure so all this is facilitated.
Google Mobile Search Gets Frills : It must have been forthcoming, but not easy to guess. Google started by deep-linking apps so its search engine could display information inside them. Now it has moved on to the next stage: making available the information in those apps or streaming content from those apps directly from the search results page (of course you'll need a good data connection).
What this means is that important information or content inside apps that don't have corresponding web pages will be available to people whether they are using desktop or mobile devices (only Android 5.0 and 6.0 devices for now). Also, you don't need to download an app to access the information inside them. Of course, if you intend to keep using them it might be a good idea, and that's just a click away. Starting Jan 2016,
Google is also going to display whether an app is ad-supported or not. The question is: will app developers agree to play ball? It seems like they already are because Google says that it has already deep-linked a billion apps and that 40% of searches by Android users surface app content.
Google Plus Isn't Dead : At a time when there's increased focus on personalizing your experiences to grab more data on you, Google Plus is seeing something of an anti-thesis. Since the original product performed below expectations (other than certain aspects), Google has decided to focus on those aspects in the current iteration.
Accordingly, the all-new network will focus on communities and interests, i.e. bringing together people with similar interests to form communities around them. It's not a bad idea and certainly better than nothing, also something that may be possible to build on later. For now, it could be disappointing for investors but the folks that have been using it thus far probably won't mind the changes.
Amazon Launches Storywriter : Amazon is offering tools to talented but inexperienced writers so they can quickly write and submit their work. The company has announced Storywriter, a program that automatically formats writers' work as they write, sync across all their devices through their Amazon accounts and automatically store in Amazon's cloud. There's also a Chrome extension for working offline. When they are done, they can submit easily to Amazon Studios. If Amazon likes a script, it will offer to buy it at industry-standard rates.
M&A and Collaborations
HPE, Intel Get Into Edge Computing : HP Enterprise (HPE) has agreed to build the gateways to collect, process and analyze data from a range of IoT devices using Intel silicon. The idea is to separate the grain from the chaff since these devices generate a ton of information, not all of which would be useful for enterprises.
The process of parsing and then sending only relevant information is called edge computing (because it happens at the edge of the network), which can cut down network loads and therefore, increase speeds. It can also reduce enterprise storage costs. Cisco is reportedly already working in the area and it has a competitive offering called Fog Computing. Intel has IoT arrangements with a range of hardware makers and HPE is the latest.
Microsoft Ties with HP Enterprise : The two companies have announced their cloud productivity and mobility solution (CPM) that focuses on consulting services and business applications development for Windows 10 to modernize enterprise workflows, drive digital transformation and accelerate innovation on the platform. The idea is to use their existing capabilities and build new ones to drive penetration within each other's customer base.
Google, Facebook Playing Nice : The details of the alliance are a bit fuzzy, but it appears that Facebook is allowing Google to crawl its app for posts and profiles shared publicly. For Google, it's a very big deal, because it appears to have gained access to the 2 trillion public posts Facebook has indexed, thus improving the quality of search results. For Facebook, the lure is that users clicking on a Facebook post might decide to sign up or sign in, thus driving traffic to the site. Sounds like a win-win.
IBM-NVIDIA to Power Watson : IBM's AI system Watson will now be powered using a combination of IBM's Power chips and NVIDIA's Tesla K80 graphics processors to increase processing speeds by up to 1.7X, according to IBM. This will enable Watson to process enquiries faster and also learn faster, thus helping the development of its intelligence. The combination makes IBM stronger as Intel gets more aggressive in the HPC segment with its Oracle tie-up.
XB1 Beats PS4 in October : Microsoft pulled off a big win this October with its XB1 sales growing 81% from last year in a market where overall units were just up 3% and despite the fact that Sony cut PS4 prices to around $350. The success is attributable to Microsoft's Halo 5: Guardians Franchise . Research firm NPD says that not only XB1 but also Halo 5 were top sellers, making October a great month for Microsoft.
Google Android Apps Get Cheaper : Google has lowered the minimum price for its Google Play apps in 17 countries after it saw a notable improvement in uptake from implementing pricing cuts in India. Indians get it cheapest at 15 cents, but others like Turks and Ukrainians aren't far behind at 21 cents.
Google's Free Storage Has Strings Attached : Google has decided to forego the monthly $9.99 it charges for a TB of storage if users start adding restaurant reviews, photos and other information as contributions to its Local Guides feature on Google Maps. This has the potential to greatly increase competition for companies like Yelp, which depend on local reviews for its bread and butter.
Amazon, Microsoft Still Lead in the Cloud : A Goldman Sachs report as quoted in the media states that the biggest cloud computing vendors gained market share in the third quarter of 2015. Amazon finished with a 36.9% share according to Goldman Sachs estimates, followed by Microsoft with 8.7%, Salesforce with 4.7%, Oracle with 3.4%, Rackspace with 3.2% and Google with 2.2%. The firm expects that Amazon and Microsoft will extend their lead over the next few years, going from a combined share of 50% this year to 62% in the next and 76% in 2017.
Yelp Positive About Local Holiday Sales : The Harris Group did a survey of 2,016 U.S. adults on behalf of Yelp. Around 64% of those surveyed said they planned to shop for gifts online with 69% of 18-34 year-olds intending to shop from independent stores. People shopping from local stores are generally looking for uniqueness or want to support the local economy. There's also a group (around 31%) that go online simply to grab deals.
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