Other than some of the biggest earnings reports, last week was particularly eventful in terms of deals and product launched involving Cisco CSCO, Amazon AMZN, Alphabet GOOGL and Facebook FB.
Cisco Is Buying BroadSoft
Cisco is buying telecom software company BroadSoft for $1.9 billion. The company focuses on cloud-based private branch exchange (PBX), unified communications, team collaboration (called Team One) and contact center services, things that may be expected to improve Cisco’s collaboration business (which includes its own WebEx and Spark platforms), immediately adding to its revenue and profits.
In the words of Rob Salvagno, Cisco’s VP of corporate business development, “Collaboration is the first step to business digitization and BroadSoft has partnerships with over 450 telecom carriers in 80 countries — including 25 of the top 30 globally — to 19+ million BroadSoft business subscribers. BroadSoft’s portfolio is complementary to our existing on premises and enterprise-centric Hosted Collaboration Solutions (HCS), as well as Cisco’s overall cloud investment strategy.”
It’s no secret that this business hasn’t been too well, nor is it a secret that the market is getting increasingly crowded with Microsoft, Google, Facebook, Amazon, Slack and other startups fighting for share. Cisco needs to beef up its capabilities if it is to compete, particularly against a company like Microsoft, which offers end-to-end solutions. So this acquisition is definitely a step in the right direction.
Amazon Launches Business Prime
Amazon Business just launched Prime shipping for its customers in the U.S. and Germany with the goal of delivering a broad selection, competitive prices and fast shipping, things that most business users need. Prospective customers can sign on for a 30-day free trial, after which they need to pay annual subscription charges of $499 for companies with up to 10 users, $1,299 for businesses with up to 100 users and $10,099 for those with over 100 users. Adding new users to existing business accounts automatically includes them in the group subscription.
And that isn’t all: Amazon seeks to offer better insight and management of the entire procurement process with its purchase analytics, something that is likely to be just as important to business customers as the exclusive pricing and other Prime benefits that go with the program.
It does look as if Grainger, Staples, Office Depot and the like are in for some increased competition, although it won’t be much of a surprise since Amazon Business has been around for a while (first launched in 2015 in the U.S. as a replacement for Amazon’s existing B2B brand, Amazon Supply, which launched in 2012). It currently also exists in the UK, India and Japan.
Amazon Pharmacy License Sends Ripples Across Market
A report from St. Louis Post-Dispatch citing public reports said that Amazon obtained wholesale drug distribution licenses in 12 states (Alabama, Arizona, Connecticut, Idaho, Louisiana, Michigan, New Jersey, New Hampshire, North Dakota, Tennessee, Nevada and Oregon). As a result, drug wholesalers, pharmacy chains and pharmacy-benefit managers (PBMs) like Rite Aid, CVS, Express Scripts Holding Company, McKesson, AmerisourceBergen, Walgreens Boots Alliance and Cardinal Health shares dropped.
But Stephen Buck of CNBC says that Amazon’s current license is for medical equipment, a market in which it is already a player. Moreover, in order to get into the drug distribution business, Amazon will need a "Verified Accredited Wholesale Distributor" (VAWD) license by the National Association of Boards of Pharmacy (NABP).
And that’s something the leading online retailer doesn’t have today. But he agrees that it’s something that it can easily acquire in a few months for as little as a few hundred million. An Amazon statement said that the company didn’t comment on rumors and speculation.
Google and Cisco Have a Deal
Cisco needs virtualization tools to battle VMware’s software defined offerings and Google needs enterprise customers as it fights for share in an infrastructure-as-a-service market (IaaS) dominated by Amazon Web Services and Microsoft Azure. Microsoft MSFT has from the start been offering hybrid cloud tools (spanning both private and public cloud environments) for customers moving to the cloud but reluctant to move everything there (for regulatory, security or other reasons).
Amazon, which on its own has only public cloud tools, recently tied with VMware to fill the gap in its product line. This makes Google and Cisco obvious partners.
So Cisco will now be adding Google tools including Apigee, Istio microservices manger and Kubernetes container orchestrator to its HyperFlex hyperconvergence platform and have its considerable salesforce go to market with them. For Cisco, it might stem customer losses to the competition as it moves away from its core business of selling sophisticated high-end hardware. For Google, it’s immediate exposure to Cisco’s huge enterprise and government customer base.
As a result, “Developers will be able to create new applications in the cloud or on-premises consistently using the same tools, runtime and production environment.”
The jointly marketed products will be available for some customers in the first half of 2018 before a broader rollout in the second. The revenue share details of the partnership haven’t been made public.
Google also has a similar deal with Nutanix and since the agreement isn’t exclusive, Cisco could also have other partners.
Facebook Auto Marketplace
Facebook Marketplace is partnering with auto dealers like Edmunds, Cars.com, Auction123, CDK Global and Socialdealer to facilitate the sale of used cars in the U.S. so you can buy used cars through not just individuals but also dealerships, thus greatly increasing available inventory. New search filters like year, make, model, mileage, transmission and vehicle type will also help you make a selection.
Messenger and determine value based on Kelley’s Blue Book estimates. Chatting with the dealer’s employes through Messenger also enables wants a seamless experience.
Facebook also offered details about its ecommerce activity that seem to indicate that it is as big as ecommerce sites like eBay or Craigslist, if not as successful. However, facts like global search volume on Marketplace growing 3X this year, 550 million people visiting formal "buy and sell" groups on Facebook each month, unique conversations between buyers and sellers in the first half of 2017 growing 70%+ over the prior year are encouraging. Marketplace is just a year old and it’s already available in more than 20 countries.
Facebook infuses artificial intelligence into the platform to facilitate item discovery and it must be getting more popular with retailers given that the month of May saw 18 million unique listings on the platform.
Other than auto, Marketplace also offers tickets through Ticketmaster and Eventbrite, daily deals through eBay, and retail products from the Shop sections of Pages. Home buying is next on the agenda.
Other Stories
Corporate
Apple Makes Key UK TV Hire: Former Channel 4 content chief Jay Hunt will reportedly take up the role of Apple’s AAPL creative head of European video operations in January. She will be working with recently hired Sony executives Zack Van Amburg and Jamie Erlicht. According to the Financial Times, which had an exclusive story on the news, "When she starts at Apple in January, Ms Hunt will play a key role in its international creative development team as it looks to deploy a budget of more than $1 billion for original series over the next year."
The FT also reports that Hunt will have a free hand in selecting content, both drama and unscripted programming. This makes sense given her experience in content commissioning at Channel 4, Channel 5 and the BBC. After her resignation from Channel 4, Hunt was broadly expected to join a technology company and most people expected that company to be either Netflix or Amazon, both of which have made some considerable progress with their Originals program.
Amazon Studio Head Departs: Following the departure of Amazon Studios chief Roy Price on allegations of sexual harassment, its head of comedy and drama, Joe Lewis is moving on and will be replaced by Sharon Tal Ygudo, who joined Amazon in January after a stint at Fox International. In her new role, Ygudo will be responsible for all scripted content as Amazon doubles down on the production of high-end drama series with global appeal. Amazon is on track to spend $4.5 billion on video content this year and has promised to increase that amount in 2018.
Toshiba Chip Unit Sale Update: The Bain Capital-led consortium that includes WDC customer Apple as well as WDC competitors Seagate, Hynix and Toshiba feels that WDC is either misreading or misrepresenting its rights under the JV and that its three JV agreements expire in 2021, 2025 and 2029. It also threatens that WDC’s current approach was souring the relationship such that it may not have access to the NAND chips after the expiry of the three contracts.
But that is anyway expected since the consortium includes two WDC competitors, which anyway indicates Toshiba’s attempt to push WDC out of the JV after benefiting from its technology. WDC is also heavily invested in the business having bought SanDisk for a hefty price tag and having followed that up with R&D and other costs. So as things stand now, WDC really doesn’t have a choice. It has to go to court.
Legal/Regulatory
Apple and Samsung Are Back in Court: Certain aspects of Apple’s iPhone design were copied by Samsung and the courts and jury have agreed that Samsung owes Apple damages. Initially, a jury said the amount should be $1.05 billion, and this amount was argued lower in subsequent confrontations to about $400 million. But another issue remains unresolved; i.e. should Samsung pay the damages on the value of the whole phone or the value of the components that it copied.
The Supreme Court has ruled that a penalty based on the value of the whole phone isn’t justified. And now, Judge Lucy Koh of the United States District Court for the Northern District of California has agreed that a retrial makes sense. But they may just settle out of court to get the litigation out of the way before they take on Qualcomm together.
EU Privacy Ruling Goes Against Facebook: Yves Bot, an advocate general of the EU Court of Justice, has said in a non-binding opinion in the capacity of advisor to the court that individual member states of the EU have power to take direct action against multinational operators like Facebook when they suspect illegal data processing has taken place. The thing is, these opinions are usually followed by the court, which could negatively impact Facebook, since it plants cookies in users’ hardware to track their browsing activity.
A Facebook spokesman said, "We respectfully disagree with the Advocate General and await the European Court's decision." Note that a new EU data protection law is in the offing that will make the member state of a multinational company’s main establishment (in Facebook’s case, Ireland) the sole authority to decide such issues, so this looks like a temporary hurdle for the company.
Tech Companies Lobbying In Washington: Google, Amazon, Facebook and Qualcomm QCOM spent $4.17 million, $3.41 million, $2.85 million and $2.2 million, respectively on lobbying in the third quarter. While Amazon spent on tax policy, cloud security and computing, and others, and Qualcomm spent on intellectual property and antitrust matters, Facebook and Google parent Alphabet were more concerned about protections granted by a 1996 law that treated them as platforms rather than content suppliers, thus limiting their responsibility for the things shared on their platforms.
The Senate is concerned about sex trafficking and alleged Russian meddling in U.S. elections, so it is considering a law that makes the platforms responsible for the content shared. A lobbying group representing companies including Amazon, Google, Facebook has pointed to the “AI Principles” report presented by The Information Technology Industry Council.
The ITI says that we are in the early stages of AI development and estimates that AI will add at least $7 trillion to the global economy by 2025. So governments and society should work together with technology companies rather than force them to disclose their algorithms, which can have undesirable consequences.
Microsoft Wins One: Microsoft has dropped a lawsuit against the Justice department, which has been demanding information on its users while imposing gag orders so they can’t be informed. The lawsuit alleged that this violated the Fourth Amendment, which grants people and businesses the right to know if the government searches or seizes their property, and Microsoft’s own First Amendment right to free speech.
In return, the Justice department will formulate new policy that will limit the use of secrecy orders and call for such orders to be issued for defined periods and ensure that the secrecy order requests are carefully and specifically tailored to the facts in the case.
New Products/Technology
Facebook Workplace Expands: Facebook has doubled its Workplace user base to 30K, and it includes illustrious companies like Walmart, Heineken, Spotify, Lyft and Starbucks. Facebook says that the platform is popular with companies of all sizes and is used in more than 70 languages. The company also announced a Workplace chat app for PC, Mac, Android or iOS that will support text-based messaging and group video chat.
Workplace is free for nonprofits and the staff of educational organizations, but costs $3 per month per user for the first 1,000 users, $2 per month per user for the next 9,000 users and $1 per month per user after that for everyone else.
Facebook Tries Splitting Its Newsfeed: Facebook is testing the effect of splitting its news feed: one focused on friends and family and the other dedicated to the pages that the user has liked. The idea is to force businesses that run pages to pay for inclusion in the friends/family feed. It’s just a test, but could have big implications since small businesses, artists, etc aren’t in the habit of paying for the service.
On the other hand, some might have gathered a material number of followers that they’re dependent on, so they might be enticed to pay. But it may not be a good experience for users if they have to check two feeds for stuff that they’re interested in, at least if they don’t have a choice. Facebook is testing the thing in Sri Lanka, Bolivia, Slovakia, Serbia, Guatemala, and Cambodia and hasn’t said that there will be a broader rollout, but of course the prospects of higher revenue and more personal sharing by users is attractive. So if the tests show desired results, there will definitely be expansion to bigger markets like the U.S., Indonesia and India.
Intel Optane for Gamers: Intel’s Optane SSD 900P Series are its latest PCIe NVMe 3.0 SSD family for hyper fast storage (read speed of 2.5GBps and sequential write speed of 2GBps) normally required for jobs like 3D rendering and 4K games, but also effective for increasing workstation speeds by up to 4X.
Built on the 3D XPoint architecture Intel jointly developed with Micron, the storage devices offer very low latency (less than 10 microseconds) while significantly lowering wear and tear. The two products included in this announcement were a x4 Gen 3 PCIe version in 280GB and 480GB capacities at $389 and $699, respectively and a 2.5-inch U.2 drive in a 280GB capacity at $389.
Amazon Key for Prime Members: Amazon has launched a new service for Prime members, if they’re willing to fork out $250 for an Amazon Key In-Home Kit that will include Amazon Cloud Cam and one of several compatible smart locks by lock manufacturers Yale and Kwikset. The installation can be done by the customer or free of cost by Amazon installation services. Thereafter, if the customer clicks on in-home delivery, Amazon will match the location with the driver and unlock the door for delivery while Amazon Cloud Cam records the process.
The customer can see the delivery live or later on. It’s an interesting proposition, first because it eliminates chances of theft when goods are left on the porch or foyers and second because it literally opens the door for delivery of other services like maids and handymen. So people don’t have to stay home when receiving these goods or services. Amazon recently also inked deals with apartment houses that allow it to build lockers where customers might securely receive their goods rather than have them dumped in the foyers.
Collaborations And M&A
Delta Airlines Chooses Apple: Delta Airlines is standardizing its hardware and it has chosen Apple devices. So its 23,000 flight attendants will now put away their Nokia Lumia 1520 tablets in favor of iPad Pros even as its 14,000 pilots retire their Surface devices to do the same.
For Delta, this aligns its devices with other airline partners like Aeromexico, Air France, KLM and Virgin Atlantic thus demonstrating Apple’s strategy of capturing enterprise customers. Both Microsoft and Delta have said that their relationship continues, which is true enough today since it still uses Microsoft productivity solutions.
Apple Acquisition in New Zealand: Apple is buying PowerbyProxi, a New Zealand-based technology company as it goes all out to bring wireless charging to its product line. PowerbyProxi reportedly has 300+ patents and 55 employees and it’s one of the tiny tuck-in deals that we will never have too many details on. But Samsung was an early investor in the company through Samsung Ventures, which invested $4 million in it back in 2013. The acquisition may prompt Apple to make charging pads/mats/bowls/etc to charge multiple devices at one shot.
LG Joins Amazon Prime Exclusive Phones Lineup: LG is bringing its phone lineup including the flagship LG G6 and LG G6+ devices, as well as the LG Q6 and LG X charge to Amazon Prime members at exclusive prices starting at $149.99. The unlocked phones have Android Nougat, powerful processors, high-end specs and other attractive features. Prime Exclusive Phones are offered at discounted pricing for Prime members and include personalized offers. But they also have ads, including personalized deals and product recommendations, displayed on the phone’s lock screen.
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