Yahoo YHOO is mulling a sale of the business, Apple AAPL doubling down on enterprise penetration while Facebook FB CEO Mark Zuckerberg is dreaming about giving away a cool $45 billion.
Here are the top stories:
Yahoo to Sell Core Business
Yahoo shareholders are cheering a possible sale of its business, and ongoing board meetings have sent the shares up after a long weak spell. But the board has a tough decision to make because it has to sell a core business that isn’t growing and that Yahoo investors aren’t willing to pay anything to hold. It’s no secret that Yahoo trades on the value of its Asian assets despite the huge user base that trails only Alphabet’s GOOGL Google and Facebook in size.
The traditional search and display businesses are going downhill. So the only part that looks somewhat promising is CEO Marissa Mayer’s baby Mavens and the only hope of making a sale is convincing unknown outsiders that it will continue to grow. So the board is required to try and sell a business that she built from scratch in an expression of its lack of confidence in her. Alternatively, it could decide to go ahead with the spin-off that doesn’t make any sense in the event Yahoo is required to pay the related taxes.
If it decides to go for the core sale, the only people likely to be interested are Japan’s Softbank, Alibaba BABA, or maybe a Chinese Internet company could pick up some parts given China’s focus in building its own technology sector. But Alibaba will most likely be interested in buying back its own shares to boost its own EPS. And that doesn’t help Yahoo investors any.
Google won’t be able to buy for competitive reasons and Microsoft’s interest could be small given that it has a very crystallized strategy with respect to Bing and has been doing away with its own advertising business. But Yahoo’s technology and user base are likely to be attractive to telecom players like AT&T or maybe Verizon. Or it might just be private equity firms. Let’s see.
Apple Ups the Enterprise Ante
After conquering the consumer business, Apple started off slow and steady on the enterprise front. Its first move in tying with IBM IBM was brilliant because IBM was struggling on multiple fronts and looking for a toehold in devices. So Apple could enter the relationship from a position of strength. This helped iOS adoption across IBM and IBM also agreed to help sell iOS devices to its enterprise clients.
In exchange, it got to build iOS exclusive apps for specific domains, bringing in a high level of specialization. IBM is now scaling its cloud infrastructure platform SoftLayer, which is pitted against AWS, Azure and Google Cloud. So things look pretty good for the combination except that they need to speed up development. That’s because high switching costs make a first-mover advantage a big positive in the cloud infrastructure business.
So now, Apple has made its Swift programming language open source so developers (whether corporate or individual) can use it to write programs for not just devices, but also servers and the cloud. Apple says that Swift is the "fastest growing programming language in history and combines the performance and efficiency of compiled languages with the simplicity and interactivity of popular scripting languages.” If that is true, it will be easy to bring ideas to fruition and spearhead Apple’s proliferation in the enterprise segment.
Facebook’s Zuckerberg In Charitable Mood
Zuckerberg made a lot of headlines last week as he promised to give away 99% of his wealth (currently valued at $45 billion) to the limited liability company he founded along with his wife Priscilla. The company is expected to be involved in charitable activities like investment in startups and technologies for human upliftment, equality and such things.
Of course, being a limited company rather than a non-profit, he has significantly more flexibility in deciding how the funds will be used and the company can also make profits. This isn’t exactly a sin because charitable organizations also have to waste resources in raising funds and when your philanthropic activities are profitable you just don’t waste those resources. There seems to be a fine line here since business also contributes something to society, only it’s not called charity.
People have raised questions about his intentions saying that the company seemed like a good front to avoid taxes. Zuckerberg has responded saying that in this structure he would be liable to pay capital gains tax when the company sold the shares. But of course, being a limited liability company, he won’t have disclosure requirements that are particularly stringent for non-profits.
|
Company |
Last 4 Days |
Last 6 Months |
YTD |
|
AAPL |
+1.22% |
-7.48% |
+7.83% |
|
FB |
+0.69% |
+29.26% |
+36.09% |
|
YHOO |
+5.98% |
-18.44% |
-30.87% |
|
GOOGL |
+0.94% |
+41.79% |
+46.84% |
|
MSFT |
+3.67% |
+21.17% |
+20.37% |
|
INTC |
+1.37% |
+9.72% |
-3.73% |
|
CSCO |
+0.59% |
-3.85% |
-1.19% |
Other stories you might have missed–
Corporate
Google Shutters Songza: Now that Google has absorbed the features that Songza offered, it has decided to shutter the service by January-end. The special Songza features included in Google Play Music through its Concierge technology are human-curated stations, free radio and custom playlists based on a user's mood, activity or time of day.
Concierge also enabled users to search for music based on artist, genre or song, holidays, themes, interests or eras. Google now has two music subscription services in Play Music and YouTube Red. The services have the same fee and signing on to any one will offers access to the other service as well.
Google’s Renewable Energy Drive: Google is aiming to run all its data centers on clean energy by 2025 (estimated requirement at the time is 3.6 gigawatts). That’s no mean task given that its search advertising business is as big as ever and it is also planning to scale its cloud infrastructure business.
Google has been investing in clean energy for a while now and last week, it announced a major step in the direction with commitments covering 842 megawatts of power from wind and solar power projects in the U.S., Chile and Sweden. With the latest investments, Google has now reached 2 gigawatts or more than half of its 2025 target.
Alphabet Hires Tesla Executive: It’s Alphabet’s plan to get suitable heads for each one of its “Other Bets” (under the new plan, each endeavor other than the core Google/YouTube business will get a new leader/CEO who will either get the project to profitability or can it). So when Robert Rose who headed the auto pilot team at Tesla came over to Alphabet, it was something of a surprise that he joined its Robotics unit. Surprise maybe, but this unit has faced something of a leadership crisis since it acquired eight companies in 2013 and saw its head Andy Rubin depart last year.
Alibaba Hires in France and Germany: Alibaba has hired country heads in France and Germany as it remains focused on delivering popular brands from these countries to customers back in China. While management’s longer-term plan is to generate an equal amount of sales in foreign countries, it continues to fight for local market share with its closest rival JD.com. International expansion plans are likely going to be the next step. In the meantime, buyers and sellers are both satisfied while investors are looking for more.
Pandora Shares Dumped: Pandora P has bitten off more than it can chew. The company started off being an ad-supported radio service and went on to offer a subscription service as well: so far so good. Then competition started increasing with Spotify, Amazon and others. Apple Music hurt the most because many of Pandora’s customers had been iOS users.
So Pandora did some rethinking and found that attracting fresh talent, rapid international expansion and making good with record companies were the answers. So it made suitable acquisitions (Rdio, Ticketfly) and settled with record companies promising negative impacts to results in the near term and while it integrated the acquisitions. Investors had just about had as much as they could take. Then the company decided it needed to raise some debt. Naturally, shared tanked.
Legal/Regulatory
Facebook Toes the Line in Belgium: Facebook’s practice of inserting a Datr cookie to track unregistered users and those that aren’t logged on has aroused the ire of Belgian authorities. The company was accordingly asked to stop the practice or pay a daily fine of $269K. Facebook has complied while promising to appeal and defending its position by saying that the move was for security purposes to confirm the true identity of users.
Google May Be Collecting Children’s Data: Google is walking the tightrope again, this time with respect to the data collection incidental to its Chrome Synchronization services. Non-profit company The Electronic Frontier Foundation (EFF) says that Google has collected student data for non-educational purposes in violation of the Student Privacy Pledge that it signed last year. But both co-authors to the pledge (the Future of Privacy Forum and The Software and Information Industry Association) say the complaint is without merit.
The pledge covers Google Apps for Education (GAFE) Core Services, which includes Gmail, Calendar, Classroom, Drive, Docs, Sheets, Slides, Contacts, Groups, Vault and Hangouts and not the Chrome browser. So search history (whether educational or not), bookmarks and passwords are not covered in the pledge. This seems to be the bone of contention that EFF is asking the FTC to look into.
New Technology/Products
New Yahoo Messenger: Yahoo’s new Messenger is great, with instant sharing of any number of photos, GIFs from Tumblr, the ability to “like” these things like you do on Facebook, the ability to take back what you said and easy group formations. All this is possible because Yahoo is now leveraging the cloud, which greatly speeds up photo sharing (since all the photos are in the cloud) and deletion of messages from everyone’s devices, not just your own (because again, the message is deleted in the cloud). Yahoo is also using Xobni technology to determine relationships between contacts, which facilitate group formation and adjustments.
Microsoft’s Skype for Business: Skype For Business has been around for a while, but usage hasn’t really picked up. So Microsoft is making it a little harder to ignore by including it in the Office 365 bundle and syncing to Azure. Note that Google Apps For Work includes email, online storage and video conferencing. With these software players getting eager to integrate additional services, traditional conferencing providers like Cisco may have to compete or improvise.
Microsoft promises to be cheaper than both traditional systems from carriers and conferencing service providers. So it’s charging $35 per user per month for unlimited conferencing, or an additional $24 for international calls, which could be a very good deal for heavy users.
Google Has New Cloud Vision Technology: Google released its cloud vision API, which means a technology that can look at images and recognize them, then determine their relation and possibly moods etc. This is the beginning of an all-new world where your machines check you out, determine your mood and also what needs to be done with respect to you. Your gadgets could recognize you and come on automatically or do your bidding, throw in a Siri or some other personal assistant and your own personal robot could probably tell your mood and maybe sing (or turn off the music) to make you feel better. Wow.
New Chrome Update to Cut Data Consumption: Google is updating its Chrome Data Saver mode that can lower data consumption by up to 70%. In addition to the existing data compression facility, this change will detect whether the user is on a slower connection and automatically load pages without pictures, thus speeding up load time and reducing data consumption. Users will have the option of opening any of the pictures they choose. The service will launch in India and Indonesia first and gradually roll out to other developing markets where a large chunk of users are still on 2G Internet.
Amazon’s Prime Air Drone Prototypes: Regulatory issues notwithstanding, Amazon continues to whet user appetite and perhaps look for dissenter reaction, investor anticipation while also increasing pressure on the government with new drone prototypes. In any case, it didn’t waste a moment of the holiday publicity, pushing out an ad of a rather sleek and efficient-looking drone that satisfies FCC guidelines for small unmanned vehicles in weight and size and other details.
Amazon also showed that the device could sense objects and avoid collision, and, to top it all, land nose-down with great accuracy on a welcome mat with Amazon written in big letters over it. If all goes well (with regulatory permissions), Amazon might have drones delivering goods next year. Though heaven knows how this could be worth the expense given the small loads they are capable of carrying.
M&A and Collaborations
Apple-Ford: Apple and Ford have agreed that those people using iPhones and driving Ford automobiles of a 2011 make or later will be able to access Siri Eyes-Free by updating the SYNC infotainment systems in those automobiles. An elongated press of a voice button on the steering wheel will activate Siri to help them make calls, look up phone numbers, set reminders and alarms, check on the weather, play music, send and receive text messages and get Apple Maps directions.
Qualcomm-Xiaomi: Qualcomm has seen trouble in China as the company objected to the way Chinese companies reported sales, making it hard to determine royalties. Soon after, the National Reform and Development Corporation (NRDC) accused it for violating the country’s anti-monopoly law.
Qualcomm has gone back to licensing its technologies now, signing up ZTE and TCL in the September quarter and Xiaomi last week. The Xiaomi license covers 3G and 4G devices and since Xiaomi is extremely popular in China and doing increasingly well in other developing markets, it’s no surprise that Qualcomm investors appreciated the news.
Amazon-Baidu: Amazon and Baidu have agreed that Amazon Fire and other devices will have Baidu as the default search. While Amazon management did mention that it had sold “millions” of devices in China, the number is unknown. But the deal makes sense both because Baidu is the search market leader in China and because Amazon is in too much competition with both Google and Microsoft, the other major search platform providers. So the deal could very well extend beyond China.
Amazon also announced last week that its latest generation Fire 7 tablet was now available in China for 499 Yuan.
Some Numbers
IDC on Apple Watch: IDC said Apple shipped 3.9 million Watches (18.6% market share) in the third quarter for a very strong second position. It was behind only Fitbit, which led the market with 4.7 million fitness devices, or 22.2% market share. Close on Apple’s heels however was Chinese company Xiaomi, with 3.7 million units and 17.4% market share. Garmin and Chinese company XTC were fourth and fifth, with a respective 4.1% and 3.1% market share.
It’s important to note, however, that Apple sells premium devices with greater functionality and XTC sells specialty devices for school children only in China. So the devices are not totally comparable. Fitbit is in danger of losing share to Apple, but Erin Murphy of Piper Jaffray remains positive about the stock, calling out its brand value, international growth opportunity and secular growth prospects in the healthcare vertical.
Microsoft Surface Gaining on iPad, Android: IDC estimates that the tablet market will shrink 8.1% this year to 211.3 million units mainly as a result of the availability of more capable and larger-screened smartphones. But the research firm sees the market as particularly dynamic because of an ongoing shift to convertibles.
Microsoft, which spear-headed this trend with its Surface, will close the year at 8.5% (up from 5.1% in 2014). Apple will go from 27.6% to 24.5% while Android will be relatively flat at 67.3% to 67.0%. By 2019, Android is expected to shrink to 56.5%, with Apple growing slightly to 25.7% and Microsoft jumping to 17.8%. Note that this market continues to change, with first Microsoft and then Google increasing focus on their own devices.
ChannelAdvisor Holiday Numbers: ChannelAdvisor, which is a technology firm selling ecommerce software, published ecommerce sales data from its more than 2,700 customers for what it calls the Cyber 5 (from Thanksgiving Day to Cyber Monday). Accordingly, total same store sales (SSS) for its customers increased 20.9% this year.
Google Shopping (GS) grew 24.3%, Amazon 24.1%, comparison shopping engines (SCEs) 7.4%, eBay 2.6% and other third party marketplaces (O3PM) 82.8%. CSEs were impacted by Google policy decisions on search rankings and its own shopping format. Search declined 1.6% as customers preferred Google Shopping instead. Traffic and orders from smartphones grew 104% and 125%, respectively while tablets and desktops saw double-digit declines.
Overall, Cyber Monday was the biggest sales day, followed by Black Friday and then Thanksgiving Day. GS had its strongest day on Black Friday (up 40.3%), while for Amazon and O3PM it was Thanksgiving Day (up 28.9% and 182.6%, respectively). Amazon is of course growing on the largest base (Slice Intelligence said that Amazon accounted for 35.7% of all Black Friday Sales with Best Buy second at just 8.2% and Macy’s third at 3.4%).
IBM SoftLayer Aims High: Somebody “with knowledge of the matter” told Bloomberg that IBM’s SoftLayer cloud infrastructure service has an internal revenue goal of $1 billion, up from the $700-800 million it is expected to take in this year. If true, this would be great for IBM because it has reported 14 straight quarters of revenue decline.
Most of the companies offering cloud infrastructure prefer to lump related revenue with other products and services. Amazon started breaking it out this year and its shares have been rewarded. Forrester analysts believe that Microsoft and Alphabet will do likewise next year.
Netflix Gains on YouTube: RBC Capital Markets has reportedly found that 51% of Americans have watched a video on Netflix in the twelve months ending Sep 30 compared to 50% on YouTube, an indication of how fast Netflix has grown. YouTube has been a free service for long but now also offers some subscription services.
The survey results indicate that 160 million people are watching Netflix on 43 million IDs, which could indicate growth possibilities for Netflix. Also, some of the people surveyed may not have been aware that they were watching a YouTube video because these are embedded across the web and not just on the YouTube site, so actual viewership could be higher.
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