With 5 Short Words, Mark Cuban Made An Admission That Nobody Else Would Touch. Now He's In Big Trouble For It

Even billionaires have bad days.  In the last 24 hours, here’s what’s happened to Mark Cuban:

His Dallas Mavericks were rocked by a harassment schedule. (More on that in a second.)

Then, news broke–because he let it slip–that he’d told his Mavericks players that “losing is our best option,” so the team would wind up with a worse record and increase their odds of landing the first pick in the 2018 NBA draft. 

Now, he’s been fined $600,000 by Commissioner Adam Silver, as a result of that admission.

First, the harassment allegations, which are the most serious–but also the least settled.

Sports Illustrated investigation painted a really ugly picture of misogyny and sexual harassment by some front office staff within the Mavericks–including the team’s former president. 

There are no allegations against Cuban himself, but he admitted to ESPN that keeping employees over the years, after several allegations had arisen, had been a “horrible mistake in hindsight.”

In the #MeToo era, it’s untenable. (I mean, it should’ve been untenable forever, but this is the world we live in.)

Now, the Mavericks have hired a firm to investigate their own workplace culture. If Cuban is found to have known more about what was happening, the NBA could reportedly suspend him or fine him up to $2.5 million.

Which brings us to the current NBA fine. Because for now, Cuban is being punished for  admitting something everybody already knows about, or at least strongly suspects.

Toward the end of the season, especially in the NBA, teams with bad records have a strong incentive to play even more badly, all in the quest for that coveted number-1 draft pick.

If it weren’t such common knowledge, then the league wouldn’t be moving to make the change that will come about next year–when the bottom three teams will all have the exact same chance at the top pick (to remove the incentive to lose).

They call it “tanking,” and the Shark Tank star is simply the first to admit it so forthrightly. And it’s going to cost him–$120,000 per word in that five-word statement.

Cuban’s consolation? He’s worth about $3.4 billion, and $600,000 is only about .0176 percent of that. If you have a $500,000 house and make $100,000 a year, it might be the equivalent of about a $100 fine.

In other words, he’ll be fine with the fine. His Mavericks are still losing (they’re 3-12 in their last 15 games). And they’ll have a great shot at the first pick.

 

'Black Panther' Discussion: This One's Gonna Be Fun

In case you haven’t been near a theater, TV, mall, or interstate overpass, and haven’t seen the news, Black Panther opened this weekend. And it opened big. Like, history-making box office numbers big. With good reason—T’Challa (aka Black Panther) is a hero fans have been anticipating for a long time. As WIRED’s Jason Parham noted last week before Marvel’s latest movie “black superheroes were never afforded the same deification” as their white counterparts, but now Panther director Ryan Coogler has made a movie that shows what a superhero movie can truly be. A lot of us here at WIRED saw the movie over the weekend, and now that the worries of spoilers have receded (yes, this post will have them, continue at your own risk), it’s time we finally talk about it at length. Here we go—Wakanda forever!

Angela Watercutter: OK, I’m not going to say too much right off the bat because I want to know what my colleagues thought, but I will just say that Black Panther lived up to the hype. Like, the anticipation for this movie had been building for months and I was starting to worry that nothing could live up to what fans were hoping for with this movie, no matter how talented everyone working on this film is, but judging from the reaction at the screening I saw, people are thrilled. Did you guys have the same experience? How did you feel walking out of the theater? Did you sense that your fellow theater-goers were satisfied?

Peter Rubin: Angela, we were both in Hall H for Marvel’s panel at Comic-Con last July, and after Ryan Coogler surprised the crowd with some BP footage, we both know what was possible. The mood in that room—among attendees, Comic-Con staffers, and the crew itself—was not your usual “ah, this looks cool!” anticipation. Something cathartic happened in there. And even though I had the opportunity to go to a press screening earlier last week, I skipped it, because I wanted to see it for the first time in a theater full of people who were invested in it.

I wasn’t disappointed. Not by the movie, and not by the feeling of joy and lightness (and yes, Oakland pride) that was occupying every chair at in that theater. Two seats over from me was a young kid, seven or eight years old, in a full-on T’Challa suit; in the 24 hours since I saw the movie, I haven’t been able to stop thinking about the T’Challas (and Okoyes and Shuris) all over the country, stepping out into recess feeling like heroes. Justice, you’ve already seen it twice, right? What kind of differences did you notice in the two screenings—either in the crowd’s reception or in your own enjoyment?

Justice Namaste: The first screening I went to (second one is today!) was in Oakland on opening night. The only screening I’ve been in that nearly matched the energy in the theater during Black Panther was during the opening weekend of Get Out, when one of my friends actually fell out of their chair during the pivotal scene.

Visually, no other Marvel movie has ever come close to Black Panther—the lush Wakandan landscapes, the vibrantly colored costumes, even the wearable tech was beautiful. And that moment where the Royal Talon Fighter dips below the veil and we get an aerial look over the Golden City? Jawdropping.

But even with all this to mull over, when I left the theater, what was left ringing in my ears was Erik Killmonger’s last words: “Bury me in the ocean with my ancestors who jumped from ships, ‘cause they knew death was better than bondage.” In my opinion, the driving relationship in the film was that between T’Challa and Killmonger. (Or, thought of another way, the one between T’Chaka and N’Jobu, but realized through their sons.) T’Challa and Killmonger didn’t spend much time together on screen when they weren’t trying to murder each other—their lack of real dialogue was one of the movie’s more disappointing choices—so the tension between them was largely ideological, but it still drove the story. The “son reckoning with his father’s legacy” trope is a staple of the MCU, but it’s a limited one. Using a villain like Killmonger to complicate the idea of what heroism actually looks like, though? That’s a much more fascinating story.

Phuc Pham: As much as I enjoyed watching T’Challa grapple with both his opponents and his emotional demons, I couldn’t shake the sense that his heroic arc was a copy-paste of the superhero’s journey that Marvel has come to rely on. I mean, this is the fourth guy that has had a plot twist regarding his father upend his world.

Killmonger, on the other hand, was much more interesting to me. While T’Challa does his whole superhero thing, his archenemy points to actual systemic oppression, grounding Marvel’s universe in the real world in a way that feels new and bold. His motivation, essentially, is black liberation the world over—which to me qualified as the biggest heroic endeavor in the film. (At least until you realize that the means to achieve that end are vibranium weapons and a high body count.) Like you, Justice, I wish T’Challa and Killmonger had spent more screen time hashing out their ideological differences. The scenes when they engage in ritual combat are visceral—no Black Panther powers allowed!—but also seemed like wasted opportunities for some fight chatter about how best to rule Wakanda as well as improve the lives of the African diaspora.

Watercutter: Totally. I also wanted Killmonger and T’Challa to have more time to actually talk about their differences. Because, unlike almost every other Marvel villain before, Killmonger didn’t just want to rule to be a ruler. He wanted liberation, and in that he and T’Challa weren’t too far apart—they just had different ideas of how to achieve it. In that final scene that Justice mentioned, I truly didn’t want Killmonger to go. I wanted him to join T’Challa and stay in Wakanda. That, to Jason’s point, doesn’t happen often in these films. Maybe it happened a bit with Loki, but he’s always been a character with many allegiances. (And yes, Peter, I remember that Comic-Con Hall H panel—I’ve never felt anything like that a SDCC, and doubt I ever will again.)

Jason, in your great review last week you talked about how Black Panther showed what a superhero movie could do. What do you think it demonstrated in how it portrayed both its heroes and villains?

Parham: I didn’t think Michael B. Jordan’s acting was particularly strong, but I do agree that Killmonger as a character was perhaps the film’s most compelling—because he really wasn’t your typical antihero. I think Jelani Cobb at The New Yorker was correct in that the real villain was history itself. Killmonger’s rage was merely a product of the times, and all the despair he’d seen firsthand around the world. That’s a heavy burden to reckon with, but not an untrue one. In doing this, Coogler positioned the film in a really smart way, giving it historical currency but also contemporary heft, and all without feeling like he was trying to make some obvious political statement.

One of the more brilliant aspects of the movie—a credit to Coogler and Joe Robert Cole’s fine script—was its insistence on complicating character arcs, especially with people like W’Kabi and M’Baku, who expertly straddled the line between good and bad. Then there’s someone like Okoye, who is fiercely loyal to Wakanda in every regard. Her inner confliction felt so palpable—being forced to serve an unfit king and wage war against her lover (Danai Gurira’s Okoye was maybe my favorite character, along with Shuri and M’Baku). Everyone felt like they were doing what was best for Wakanda, which you can’t really fault them for. It felt like a truer reflection of what it means to be alive in the world today. Black Panther succeeds on so many levels. I’m curious: what did everybody think were some of the stronger aspects of the film?

Namaste: This is the obvious answer, but I just have to say it—the women. The strongest part of the film was undoubtedly all of the women characters. And that extends to the women behind the scenes as well. Lupita Nyong’o’s Nakia, Angela Bassett’s Ramonda, Letitia Wright’s Shuri (and of course Okoye and the rest of the Dora Milaje) were complex characters whose identities and motivations did not revolve solely around men. The audience saw Okoye as both a warrior and a lover, Nakia as an undercover spy who’s more concerned with protecting human rights than gathering intelligence, and Shuri as a younger (and better?) Tony Stark.

Not to mention the fact that their actions and beliefs are key to driving the story forward. Nakia is the first character who really pushes T’Challa to consider what Wakanda’s responsibility is to oppressed people across the rest of the world. And T’Challa would likely be dead 10 times over without Shuri’s engineering brilliance. Speaking of which, I’ve seen Letitia Wright being called the breakout star of the film, a title she most certainly deserves. As Shuri, she delivers some of the funniest lines, while also masterfully navigating a series of tense and heart-wrenching moments. Sure, T’Challa might be the Black Panther, but these women are far from secondary characters.

Pham: I’m so glad the writers decided to adapt Nakia and the Dora Milaje away from the ways they’re set up in some of the older comic book runs, where Nakia has an unrequited crush on T’Challa and the Dora Milaje—in addition to their role as royal guards—are a pool of potential queens. So extra kudos to film-Nakia for asserting she doesn’t want to be a Dora.

There hasn’t been an MCU film that’s as focused on technology since the Iron Man trilogy, and I was struck by how hopeful Black Panther, both the movie and the character, are how a future shaped by it doesn’t have to be dark and bleak. Production designer Hannah Beachler has said how Blade Runner inspired her vision of Wakanda’s capital Birnin Zana, and it shows. The dense urban landscape, replete with pristine skyscrapers and dusty merchant stalls, certainly hearken to traditional cyberpunk environments. Here, though, Afrofuturism shines figuratively and literally. Wakanda forgoes the dim and damp settings of futuristic cities (why are the streets always slicked with rain?) for a warm glow that almost makes you root for Killmonger’s vision of an empire upon which the sun never sets.

Thematically, the film also bucks the trend of Marvel movies in which new technology always begets catastrophe. Tony Stark’s bleeding-edge armaments always seem to end up in the hands of terrorists while Chitauri tech enables a middle-aged megalomaniac to hunt high schoolers in his spare time. Meanwhile, T’Challa not only prevents vibranium from being weaponized but also closes the film with plans to open a Wakandan outpost in Oakland—a city adjacent to Silicon Valley wealth yet wracked by a 20 percent poverty rate—to share and exchange knowledge. In an age when technology is often abused for nefarious and disruptive ends, the Black Panther’s techno-optimism seems to be a call for fewer divisions, not more.

Rubin: The rest of you have already ticked off just about everything that made this movie so appealing, so in hopes of adding something new to the mix, I’ll close with the idea that Black Panther created an entirely new lane for the MCU. After all 4,000 characters band together to (presumably) defeat Thanos in the two Avengers: Infinity War movies, Marvel is going to need a way to move forward, and Wakanda’s entry onto the global geopolitical stage is one of those ways. The MCU has its cosmic arm, its street-level arm, its mystical arm—and now Wakanda links the political intrigue of the Captain America movies with the deeply personal stories of a fully-fleshed world.

Does that mean we’ll see a Dora Milaje prequel movie in 2021? An M’Baku standalone? Only time will tell, but with a roster of new characters, ready-made internal conflict, and a rising cadre of filmmakers who are ready and able to tell these stories, the MCU’s prospects as a long-range paracosm have never been better.

Israeli visual aid company OrCam valued at $1 billion

JERUSALEM (Reuters) – Israel’s OrCam, which has developed a visual aid for the blind, has completed a funding round that values the company at $1 billion, putting it on track for a planned initial public offering (IPO), its chief executive said on Tuesday.

The company raised $30.4 million by selling an approximate 3 percent stake to investors including Israel’s Clal Insurance (CLIS.TA) and Meitav Dash (MTDS.TA). That brought the total amount OrCam has raised from investors so far to $130.4 million.

“We have sufficient reserves of money to finish our development, but part of our investment rounds is also preparing the company for the next phase, which is IPO,” Ziv Aviram said.

In about a year, he said, the company would look to raise an additional $100 million from larger, global funds before going public on a U.S. exchange. He is hoping the company will be valued at $1.5-$2 billion when it lists.

Ziv Aviram, CEO and co-founder of OrCam, poses for a portrait wearing the OrCam MyEye 2.0 device attached to a pair of glasses in his office in Jerusalem, February 15, 2018. REUTERS/Nir Elias

The latest fundraising coincided with the launch of a new version of OrCam’s product – a wireless smartcamera that attaches to the side of spectacle frames. The device reads texts, supermarket barcodes and recognizes faces while speaking the information into the user’s ear.

Aviram said he saw OrCam’s growth surpassing that of the previous company he co-founded – autonomous vehicle technology provider Mobileye, which was bought last year by Intel (INTC.O) for $15 billion.

“I think the potential for OrCam is even bigger than Mobileye,” he said from his office in a high-tech neighborhood of Jerusalem, down the street from where Mobileye’s expanded complex is being built. “This technology is endless. We just started to understand the tip of the iceberg of what can be done.”

That means expanding the customer base beyond the blind or partially-sighted to those suffering from dyslexia or who get fatigued while reading. Aviram even sees the device evolving into a sort of artificial intelligence personal assistant.

Next year’s forecast is a bit more modest.

After revenue of $10 million in 2017, Aviram expect sales to jump to $20-$30 million in the coming year and for the company to become profitable in 2019.

Editing by Mark Potter

Airport Controllers Trade the Tower for a Screen-Filled Room

The next time you fly into Florida’s Fort Lauderdale airport, look out the window and see if you can spot what’s missing. The answer? A 160 feet high tower.

That’s what airport officials at the airport say would have been necessary for them to be able to safely control the movement of planes on the ground, taxiing to and from gates and runways at the recently expanded airport. That would be doing things the old fashioned way, by line-of-sight—aka looking at the planes. Instead of an elevated perch, ground controllers at FLL have an even better view from inside a nearby squat, building.

“They have no windows in their building,” says Mike Nonnemacher, the chief operating officer for Broward Country Aviation Department, which controls FLL airport. “It’s all done by radar, and augmented by a system of CCTV and infrared cameras.” A new computer system takes the data from those cameras, and other sensors, and stitches it together into one giant virtual vista.

Controllers sit in front of a video wall, which shows them what’s happening in real time. The infrared images offer improved visibility at night and in the fog. Wearing headsets, they calmly issue cryptic sounding instructions to pilots, and then track the plane moving. It’s the first of its kind in the US, and could set the bar for other airports around the country.

Gregory Meyer/Broward County Aviation Department

In the US, the FAA runs air traffic control, which sees planes safely onto the tarmac. But responsibility for moving these huge machines around on the ground falls on the airport or airline. Their wingspans, which look so elegant in the air, are just a protruding hazard on the ground. Pilots don’t have great visibility out of the cockpit windows, so they rely on ground controllers to tell them which gate to taxi to, where to hold, which path to take, and to warn them of other vehicles like fueling trucks or passenger busses crossing active taxiways. It’s a complicated dance, becoming ever more so as air travel booms and airports expand, allowing takeoffs and landings with barely 30 seconds between them. Airfields usually have one or more towers, so ground controllers can see everything that happens from the runways to the gates.

The layout of the Fort Lauderdale airport makes it a great test case for something new. One row of gates is hidden from direct view of ground controllers, so they used to send someone on foot to scout the scene, report back, and help them keep track of aircraft on a dry-erase board. Tired of all the back and forth and eager to avoid the cost of building a looming tower, they went the virtual route.

The result is that windowless building, inside which ground controllers take in feeds from 66 CCTV cameras, and FAA radar data that includes each plane’s location and call sign. “We take a lot of information, from lots of sources,” says Betros Wakim, the head of Amadeus Airport Technology in the Americas, which designed the software to stitch all that together and present it to controllers in useful ways.

When a plane is ready to leave its gate, ground controllers first make sure it’s safe to move. With their virtual views, they can train cameras toward the plane, check its flight number, and then check the surrounding area. Pushback can be rather hazardous.

“You always have construction and maintenance people who need to be on the runway to do repairs,” says Patti Clark, aeronautics professor at Embry Riddle University, and a former airport manager. Wild animals might be taking a stroll through the grounds. By combining cameras with the radar data, ramp controllers should be able to spot all that, and ward off disaster. “The human factor is always involved, but the more useful and reliable tools you can provide to the human, the better the situational awareness is,” says Clark.

No surprise then, that Nonnemacher says he has already had phone calls and visits from other airports interested in recreating the system, including Tampa, Dallas, and Toronto.

One day, virtual airfield control could remove ramp control centers from airports altogether, freeing up space for terminals or cargo handling areas. It’s all just data, it can be piped anywhere. There’s precedent in Europe; London City airport has just replaced its air traffic control tower with a remote system, and controllers sitting 120 miles away. That same tech is being used in Australia, Sweden, Norway, and Ireland.

So the next time you come in to land at FLL, don’t bother looking for that non-existent tower. Instead, see if you can spot the little building, with the folks inside making your path to the gate—to freedom—quicker and safer.


At the Airport

What Trump Still Gets Wrong About How Russia Played Facebook

Special Counsel Robert Mueller released a bombshell indictment Friday, implicating 13 Russian nationals and detailing a multi-year, costly, and widespread effort to influence the 2016 presidential election. At the center of that effort were Facebook and its subsidiary Instagram, which the Russian Internet Research Agency (IRA) used to recruit American followers, plan real-life rallies, and spread propaganda about issues like religion, immigration, and eventually Hillary Clinton and Donald Trump.

Facebook and Instagram were mentioned in the indictment far more times—41—than other online platforms like Twitter, YouTube, and PayPal, which were each mentioned less than 12 times. Still, Rob Goldman, Facebook’s vice president of advertising, tweeted Friday that Russia’s ultimate goal “very definitively” was not to influence the election, but to “divide America by using our institutions, like free speech and social media.”

On one hand, Goldman is correct: Russia certainly aimed to deepen partisan divides and stir up chaos. But he is incorrect to assert that the Russians were not interested in influencing the election. That idea is at odds with both what we know about Russia’s use of social-media platforms and with Mueller’s indictment itself. For example, Goldman overlooked the massive impact Russians had with ordinary posts, as opposed to paid ads. Most important, he also appears to misunderstand what the Russians really used the ads for.

Saturday, President Trump seized on Goldman’s tweets to argue that Russia didn’t influence the election. The president implied that media organizations were falsely reporting that it had.

Goldman maintains that the Russians were not trying to influence the election, in part, because they organized protests on “both sides,” which is true. Some of the Russians’ propaganda efforts were designed simply to cause confusion, distrust, and sow division. However that doesn’t mean they weren’t also attempting to do everything in their power to ensure Clinton wasn’t elected. The IRA had dozens of full-time employees and spent over $1 million a month on its efforts, according to the indictment.

Mueller’s indictment clearly indicates Russia’s operatives were aiming to influence the 2016 election against Clinton, and in favor of Trump and Bernie Sanders, a task they began working on as early as 2014. Russian operatives were instructed to “use any opportunity to criticize Hillary and the rest (except Sanders and Trump—we support them),” according to the indictment. The operatives behind the Facebook group “Secured Borders” were even criticized for not having enough posts dedicated to disparaging Clinton.

Most troubling, the Russians encouraged minority groups like African Americans to stay away from the polls. In October 2016, an Instagram account called “Woke Blacks” published a messaging saying that voting for Hillary was “the lesser of the two devils…we’d surely be better of without voting AT ALL,” according to the indictment.

“It’s far more concerning that they were taking and targeting groups to remove them from the process of voting,” says Jonathan Albright, research director at Columbia University’s Tow Center for Digital Journalism, who has been tracking Russia’s propaganda efforts since before the election. “It underscores the fact that you don’t know whether people are inauthentic or real.”

Goldman’s tweets not only contradict the indictment, they also indicate he doesn’t understand the true purpose of the ads. “The ads were just to get the ball rolling on this and to find the right people. It was really just an efficiency thing,” says Albright. “All the ads did and all they were meant to do was to refine targeting. It initiated the process of persuasion over long periods of time, like two years.” In other words, the ads were just designed to get people to like certain Facebook pages or to follow specified Instagram accounts. They themselves weren’t always designed to be the propaganda, but instead meant to lure people in.

The propaganda was often distributed later. For example, one ad innocuously instructed people to follow a Facebook page if they were a follower of Jesus, but the page later spread a meme of Hillary Clinton with devil horns.

The Internet Research Agency’s ads on Facebook also only made up a tiny portion of its overall strategy. Facebook estimates that 10 million people saw paid ads, whereas up to 150 million people saw other content from fake accounts.

But the Russians’ influence was even broader, because of how other Facebook users reacted to their posts. Posts on just six of the IRA’s most popular Facebook pages received 340 million shares and nearly 20 million interactions, including likes, comments, page shares, and emoji reactions, according to Albright’s analysis. The Russians were similarly successful on Instagram: A single Russia-linked account received nearly 10 million interactions from January 2016 to August 2017.

Albright was careful to say the Russians may have gamed Facebook’s algorithms in order to produce such high engagement. It’s also possible that there are cracks in the way that Facebook measures user engagement, according to Albright. “There’s no question that some of these metrics and some of these total numbers of shares are inflated,” he says.

Since it was discovered that the Russians used Facebook to influence the election, the company has hired thousands more people to monitor ads and has also crafted stricter policies for buying political advertisements. “We proactively disclosed the IRA activity and have worked with investigators to give the public a fuller understanding of what occurred,” Joel Kaplan, Facebook’s vice president of Global Policy said in an emailed statement He added that Facebook is working closely with federal agencies, including the FBI, “on better ways to protect our country and the people on our platform.”

But at least one of the company’s top executives still seems unable to fully grasp with how Facebook was used to influence the election organically. Facebook did not respond to a follow-up request for comment regarding Goldman’s tweets. His statements only address Russia’s purchase of online ads, which, of course, is the focus of his job. But he fails to mention other ways Russia co-opted Facebook and makes it appear as though there are simple ways to resolve issues about foreign meddling online. In reality, Facebook, Congress, and the US public are still grappling with how Russia weaponized internet platforms to influence an election.

“There’s literally propaganda all over their platform still,” says Albright. “Some of these memes are still getting circulated, they’re very easy to find.”

Russia Revelations

  • It’s now undeniable that Russia attempted to disrupt the 2016 election, following the indictment of 13 Russians.
  • The indictment contained many revealing new details, but its description of the work of the Internet Research Agency was striking for its blandness.
  • The indictment also revealed how Russians appropriated American identities to hide in plain sight.

After Rocky Year, CEO Evan Spiegel Is Still Happy Snap Went Public

Snap CEO Evan Spiegel says he doesn’t mind having to report quarterly financial results to pesky investors, whose disappointment could send the company’s stock plummeting.

“We love it,” the young executive enthused Thursday during a Goldman Sachs technology conference in San Francisco on Thursday.

Snap’s (snap) first three quarters as a public company last year were tough. The messaging company consistently reported disappointing user growth along with sales that failed to meet Wall Street’s expectations, causing its shares to fall.

Earlier this month, however, Snap shared some good news —that it now has 187 million daily active users, which beat analyst projections of 184.2 million, while its sales jumped 72% year-over-year to $285.7 million. After the report, investors sent Snap’s shares up nearly 30%.

For six years as a private company, Snap was insulated from fickle investors and could concentrate on developing its Snapchat messaging app without much distraction. Now that the company is public, however, all eyes are on Snap to show huge growth, especially as Facebook’s (fb) competing Instagram service consistently debuts copycat features and tries to steal users.

Spiegel said that it’s “been energizing” for Snap since going public, and said the company is at an interesting intersection of still being a young company spending lots of cash for growth while being scrutinized each quarter by Wall Street.

Working at Snap is not for the faint of heart, Spiegel said. He likened the company’s tough work culture to how water appears calm right before it boils, using an obscenity in front of the audience of bankers and financial officers.

“For people that are excited about pushing themselves, I think it’s a great place to be,” Spiegel said.

To keep up growth, Spiegel said Snap is focusing on expanding the service outside of the U.S. and Europe, and partnering with wireless carriers worldwide to bundle the Snapchat app into various packages that they in turn sell to their customers. Spiegel previously discussed these carrier deals during the company’s last earnings call with analysts, saying that these partnerships with unspecified carrier companies in “over a dozen markets” would “begin reducing cellular bandwidth costs for Snapchatters around the world.”

He didn’t say how much Snap spent on these types of carrier partnership deals.

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About the big cloud computing bills Snap pays to companies like Amazon and Google to run its service, Spiegel argued that it would have to spend even more and if it had to build and operate it’s own data centers. Snap has agreed to pay Amazon $1 billion over the next five years for cloud services, and another $2 billion to Google over the same time.

Lately, some Snapchat users have been complaining about a recent redesign that splits the disappearing videos of their friends from videos shot by celebrities and media companies. Some investors and analysts fear the redesigned app could cause Snap’s users to disappear.

But Spiegel said it’s the right decision because it makes a clear distinction between the private communications of users and their friends, and those of broadcasting networks and big-time stars.

To people who feel that the new Snapchat makes them feel less connected to celebrities who may have appeared to be their friends in the app, Spiegel said “Exactly!”

“They’re not your friend!” he said.

Ripple CEO Brad Garlinghouse Talks Bitcoin, Banks, and Payments

Despite the perception that high-flying startup Ripple is either a blockchain or cryptocurrency company, CEO Brad Garlinghouse believes it’s something simpler and not merely a business trying to latch onto the latest tech buzzwords.

“We are a payments company,” Garlinghouse said on stage Tuesday at a Goldman Sachs (gs) technology conference in San Francisco.

He explained that Ripple uses blockchain technology—one of the underlying accounting technologies used for Bitcoin—to record transactions between banks. And he said that his company uses its own XRP cryptocurrency as a payment method to make it easier for banks to move money internationally.

The hope is that major banks will use Ripple’s xCurrent payment software and related XRP crytocurrency instead of the industry standard SWIFT software to transfer money across borders. Unlike some cryptocurrency advocates, Garlinghouse believes the best way to bring cryptocurrency to the mainstream is to “work within the system” as opposed to using cryptocurrency to circumvent government regulation and financial institutions.

“While contrarian and unpopular in the crypto space, in retrospect it’s very smart,” Garlinghouse said.

He compared the proliferation of crytocurrencies like XRP and Bitcoin to the advent of different kinds of databases, rather than “one database to rule them all.’ Most of these digital currencies will die out, he says, because it’s unclear what problem they solve.

He contrasted Bitcoin with XRP by saying that the typical Bitcoin transaction costs users around $13 and takes three to four hours to complete, making Bitcoin ill-suited to solve the payments problem between banks. In contrast, XRP “is about 1,000 times faster than a Bitcoin transaction” and costs “a fraction of a cent.”

For Ripple to grow, it needs large banks to buy its payment software and use its XRP cryptocurrency, a major challenge considering it must convince financial institutions to change how they’ve been doing business for years. The biggest obstacle in convincing banks to use Ripple’s services is that many banks have other IT-related projects that are a greater priority to them than Ripple, Garlinghouse said.

When asked whether the large banks will eventually accept cryptocurrencies, Garlinghouse voiced optimism but gave no specific time frame. He said he discussed the matter with senior executives at unspecified investment funds about trading cryptocurrencies and that it could take more than six months, possibly even later than 2019.

“Despite the prognostication of Jaime Dimon, this is an asset class that I don’t think is going away anytime soon,” Garlinghouse said, referring to the JPMorgan Chase CEO negative comments about Bitcoin earlier this year.

Toshiba says to appoint ex-banker as next CEO

TOKYO (Reuters) – Japan’s Toshiba Corp said on Wednesday it is appointing Nobuaki Kurumatani, a former executive of Sumitomo Mitsui Financial Group, as its chairman and chief executive.

Incumbent CEO, Satoshi Tsunakawa, will become chief operating officer and retain his role as president, the company said.

Kurumatani, currently the president of the Japanese arm of European private equity firm CVC Capital Partners, is a former deputy president of Sumitomo Mitsui Banking Corp, one of Toshiba’s main lenders, which often have a strong influence on its management decisions.

Reporting by Makiko YamazakiEditing by Muralikumar Anantharaman

Alibaba signs deal to offer Disney shows on video platforms

SINGAPORE (Reuters) – Alibaba Group Holding Ltd’s entertainment arm has signed a licensing agreement with Walt Disney Co in a deal that will provide the Chinese group’s Youku video streaming platform with the largest Disney animation collection in China.

Alibaba said in a press release on Monday that the multi-year licensing agreement signed between Alibaba Digital Media and Entertainment Group and Disney subsidiary Buena Vista International Inc will see more than 1,000 Disney episodes released on Alibaba platforms which include set-top boxes.

The deal comes as Disney has faced obstacles in getting digital television content into China. In 2016, its DisneyLife online content venture, which it launched with Alibaba, was shut down by Chinese regulators less than five months after operations began. The reason for the shutdown was not made public.

FILE PHOTO: The sign of Walt Disney Studios Park is seen at the entrance at Disneyland Paris ahead of the 25th anniversary of the park in Marne-la-Vallee, near Paris, France, March 21, 2017. REUTERS/Benoit Tessier/File Photo

“The addition of Disney content greatly enriches the library of quality international content on Alibaba’s media and entertainment ecosystem, giving us a leading edge in foreign content distribution in China,” said Yang Weidong, president of Youku at Alibaba Digital Media and Entertainment Group.

Alibaba did not disclose the value of the deal.

Youku reaches 580 million devices and gets about 1.2 billion views each day, according to Alibaba’s news website Alizila. It said the platform already has similar licensing deals with Warner Bros., Paramount, Fox, NBCUniversal and Sony Pictures Television, among others.

Reporting by Brenda Goh

Alibaba kicks off sponsor deal in Pyeongchang

PYEONGCHANG (Reuters) – Alibaba Group Holding Ltd (BABA.N) is launching a project that will create a “smarter” and more connected athletes’ village and stadia and make all Olympics stakeholders “more money”, its executives said on Saturday.

Many of Alibaba’s plans are still concepts since it has not had enough time to implement its technology after signing a deal last year worth hundreds of millions of dollars as a cloud and e-commerce partner with the International Olympic Committee.

But IOC president Thomas Bach said some of Alibaba’s plans “can become operational pretty soon” while Alibaba founder Jack Ma said they expected to be realized at the next Winter Games in Beijing in 2022.

“We want to make the Olympic Games so everyone can make more money,” Ma said, adding that “everyone” meant groups such as host cities’ organizing committees, athletes and sponsors.

Alibaba is one of the few top Olympics sponsors signed with the IOC until 2028.

It has said it wants to upgrade the technology that keeps the Games running.

It also unveiled its “sports brain,” on Saturday, a suite of software products designed to improve the back office of how sports events are run.

Ma, who appeared onstage with Bach, said he was moved by North Korea and South Korea marching together in the opening ceremony on Friday since it reflected “peace and prosperity”.

Former NBA player Yao Ming was in the audience at the media conference, which featured an interpretive dancer and a magician pulling a bird out of a hat.

Alibaba has about 200 to 300 employees on the ground in Pyeongchang to study how the games run and help find ways to save future host countries money.

Alibaba’s Tmall and Taobao shopping platforms dominate online retail in China. But it is not well known in many parts of the world, including in the United States where Amazon.com Inc is the e-commerce leader.

It is using an international branding campaign focused on the Olympics to help introduce it to markets such as the United States and Great Britain.

Editing by Greg Stutchbury

6 Kitchen Gadgets for the Elderly Could Change Your Life

According to the USDA, Americans spend 37 minutes a day preparing and serving food. Home meal kits like Blue Apron and Plated attempt to reduce that time with pre-cut and measured ingredients (as a result they are now a $2.2 billion business). But, for people who want to have more control over what they eat, new timesaving kitchen gadgets may be a better solution.

This is especially true for older individuals and those with disabilities or physical limitations. According to the World Bank, 15% of the world’s population has some form of disability and a 2015 study by the US Census Bureau projected that by 2050 nearly 17% of the world will be over the age of 65. For those with limited mobility, simple meal prep tasks can be daunting. As the population in the United States ages, the market for redesigned elder-friendly products grows too.

Here are some of the coolest additions to the market this year that everyone can benefit from.

1. An Ice Cream Scoop You Push

We can thank Michael Chou, an aerospace engineer, for the wild looking Midnight Scoop device. This scoop arrives in a Apple-like packaging, which opens to reveal something akin to a space-aged weapon. The Midnight Scoop features a heavily weighted curved handle and a scoop with sharp edges on either side for carving. The design changes the way you interact with ice cream, where instead of pulling and turning, you push and shovel  – thus protecting your wrist as you use your body strength instead of your arm. The curved edges force the ice cream into balls as you push forward so you end up with the same perfect scoops you get traditionally. While not a space-saver in your drawer, the Midnight Scoop is worth its weigh – making it a must-have gadget for weak-handed ice cream lovers everywhere.

2. One-Handed Bottle Opener

Imagine if opening a bottle of beer was as easy as pulling a trigger – in a good way. That is the what the design of GrabOpener is like. Instead of pushing down or pulling up on a stiff

board with a hole or hook on the end – both of which often send the sharp cap flying – the GrabOpener lets you use your second and third fingers in a trigger-grip to lift the cap up and away from you. The magnetized metal it is made from keeps the caps from getting away. The result is a quick, one-handed solution that makes opening bottles a party trick – literally (at least according to one enthusiastic Amazon reviewer). An added bonus is that the design keeps caps unbent for those who collect or make jewelry out of them.

3. Herbs on Demand

Using fresh herbs can make your cooking extra delicious, but for many people with limited space outside or physical limitations that make bending over to garden impossible, outdoor gardening is not a viable option.  Smart Garden has invented a counter top Click & Grow kitchen herb garden that is similar to a Keurig but with seed pods instead of coffee.

Just plug in what you want to grow, add water, and turn it on, and the garden system takes care of the rest. The Smart Garden delivers herbs in 20 days (or less if you just use a few and trim as it grows). When you are ready for new herbs, just plug in replacement pods.

4. Effortless egg peeler

Anyone who makes deviled eggs regularly knows that peeling hardboiled eggs can be a time consuming mess. When Connecticut resident Bonnie Tyler got fed up with peeling

(and was forced to arrive at a potluck empty handed), she had had enough. Her invention, the NEGG®, is a brilliantly simple and effective solution. To use it, you place your hard boiled egg into the plastic container (lined with raised bumps), add water, and shake. That’s it. You really have to see it to believe it, but the shell when you remove the egg from this contraption literally slips away. No more delicate finger work required and lots of time saved!

5. The Watermelon slicer/server

Seedless watermelon was the first great timesaving invention for this favorite summer fruit, but now there is a much faster (and easier) way to slice and serve rind-free pieces without fancy knife skills. The Angurello watermelon sliver and server looks like a double-bladed

handheld scythe. To slice, you push down and pull towards yourself in one swoop. To remove the slice, you squeeze the blades together and lift. Suddenly, you can slice up a melon in less than a minute. No more juice all over the counter, either. No more hacking away in chunks or balling. This simple solution is great for those with limited hand mobility, but also every day melon lovers (a.k.a. the rest of us).

6. Push and twist jar opener

My husband makes fun of me every time I open a jar because I now yell, “I’m unstoppable!” as I turn and pop the lids. As a petite woman with small hands, opening pasta sauce and jelly jars ranged from humiliating (when my husband was home and I needed his help) to infuriating (when he was not home and I was left to smack tops, run hot water and scream in frustration).

That all changed when I got my hands on the OXO Good Grips Jar Opener with Base Pad. You place the jar on the silicone pad, move the opener into position and push down and away from you. Like with the Midnight Scoop, this allows you to use you whole body to do the work. It is a brilliantly simple and game changing design.

While these kitchen “upgrades” may seem frivolous to some, they represent real independence for others. In an era where we are trying to empower people of all ages, small changes can have a bigger impact than one might think. 

The Big Question in *Waymo v. Uber*: What on Earth Is a Trade Secret, Anyway?

On the stand in San Francisco today, former Uber CEO Travis Kalanick appeared calm, cool, and well-hydrated, sipping from a series of tiny water bottles while serenely fielding questions from the legal team at Waymo, the Alphabet self-driving car effort that is suing Uber for trade secret theft. It was his first public speaking appearance since his resignation from the ridehailing company this summer, so his mere presence felt like big news.

But as the second day of the Waymo-Uber trial drew to a close, a quieter moment, one that dealt with the tricky nature of trade secrets, might become more consequential. If the lawyers do their job right, the jury will decide this case based not on salacious emails or meeting notes (though Waymo has presented plenty of internal Uber communications that are, well, juvenile at best). It will decide based on whether the laser technology Uber used in its self-driving cars qualify as Waymo trade secrets.

The moment: A long-time engineer for Waymo’s self-driving projects named Dimitri Dolgov testified that his company has long had a patent bonus program. If someone successfully files for a patent with the United States Patent and Trademark Office, they get a monetary prize. For a company in the business of breaking new technological ground, this makes sense: Invent a thing, win an award!

During his cross examination, Uber’s counsel Arturo Gonzalez asked Dolgov whether Waymo had a similar program for trade secrets. After all, Waymo is suing Uber for misappropriating eight of its trade secrets, after an engineer named Anthony Levandowski left Waymo to form his own autonomous truck company in January 2016. Uber acquired Levandowski’s startup just eight months later, which is how Waymo says their intellectual property ended up in Uber self-driving car lasers.

“There are eight trade secrets in this case, just eight,” Gonzalez said. “Tell the jury, who are the people who got bonuses for these eight things that are supposedly great ideas?”

There isn’t a program like that, Dolgov responded, because a bunch of people helped develop the trade secrets. Trade secret rewards, Dolgov said, “are not as clearly mapped.” He testified that he had only seen all eight trade secrets outlined after Waymo filed its lawsuit last year.

That sounds weird, but it lines up with how trade secrets work in the real world. “Often, companies won’t know what trade secrets are until they’re stolen,” says John Marsh, a lawyer with the law firm Bailey Cavalieri. You can accidentally infringe on a patent; you can also look them up, to make sure you’re not infringing on them. But two separate companies can develop the same concept, independently, and have it qualify as a trade secret—for each of them.

This is confusing. As one appellate judge wrote in 1978, “The term ‘trade secret’ is one of the most elusive and difficult concepts in the law to define.” Fortunately for both teams of lawyers in this self-driving smackdown, Judge William Alsup, who is overseeing the case, has already neatly outlined how he will ask to jury to think about trade secrets. (In a standard move, he’s released a preliminary jury instructions, to guide the lawyers when forming their cases.)

Alsup says a trade secret is anything—a formula, a design, a procedure, a code—that is securely contained and retained inside a company. Maybe it’s easier to define it by what it is not: “ skills, talents, or abilities developed by employees in their employment.”

For Waymo to win its case, Alsup explains, it must first prove the particular elements of lidar technology in question are secrets the company has gone out of its way to protect. Waymo has to show that Uber “improperly acquired”—stole—the trade secrets, and then used or disclosed them. And it has to prove that Uber enriched itself off the trade secrets. A tricky thing, when self-driving cars have yet to make money at all.

Which is to say, it’s no small feat for Waymo to establish that it had trade secrets in the first place. Despite lots of creepy looking evidence about Uber-related shenanigans—like forensic evidence shown in court today, linking Levandowski to downloads of Waymo files just a month before he left the company—jurors will be asked to keep their eyes on the prize: hard evidence that Uber stole trade secrets.

On the stand today, Uber lawyers tried to use Waymo’s own witnesses to prove the self-driving car company was careless with its information—which would indicate that the information was not, in fact, a trade secret. They asked a Google forensic analyst why Levandowski’s alleged download of those files didn’t set off “alarm bells.” The analyst said that monitoring the server in question wasn’t a specific person’s job. Uber also continued to weave the narrative it began to spin day one of the trial: that Waymo was out to get Levandowski and Uber out of fear of competition.

Waymo’s strategy, to show it was up against some bad guys at Uber, does ultimately help make its trade secrets case. “One of the key underpinnings of trade secret law is business ethics,” says Marsh, the lawyer. “There’s largely some requirement of misconduct or misbehavior by a party.”

To that end, lawyers from Waymo today used internal Uber communications to suggest Uber was panicked about its lack of progress in self-driving car sensors—and OK with cheating to get there. “Rush to laser – team really strained on trying to figure out best sensor set while also keeping up progress on so many fronts,” former Uber self-driving head John Bares wrote in notes dating to September 2015, while Levandowski was still at Waymo. “Laser is the sauce,” Travis Kalanick wrote on a whiteboard during a January 2016 meeting, a few weeks before Levandowski’s departure.

And during a skirmish before the judge with Uber lawyers, the Waymo legal team previewed plans to show the famous “greed is good” speech from Wall Street to the jury—because Levandowski sent Kalanick a YouTube clip of the scene in a text message. (Alsup will decide on whether to allow the clip later, though he did note the scene was “one the best moments in all of Hollywood.”)

Still, a calm Kalanick resisted Waymo’s insinuations he had implicitly encouraged Levandowski to cheat. The former Waymo engineer and his team did have to hit ambitious and specifically lidar-related milestones to get a full $590 million check for the acquisition of their self-driving truck startup. But he said they could also get the money if the overall initiative was successful—if they eventually cracked self-driving cars.

Kalanick will again take the stand tomorrow morning at 7:30 San Francisco time, and you can expect Waymo lawyers to attempt to show, once more, that the former CEO created an atmosphere that egged on extralegal shortcuts and winning at all costs. But while it’s tempting to boil this case down to Gordon Gekko, remember that this trial is really about trade secrets. Yeah, the boring stuff.

Trial of the Self-Driving Century

Snapchat overhaul convinces investors it can fight Instagram

(Reuters) – Snapchat owner Snap Inc on Tuesday reported surging growth in users and revenue in its latest quarter, reviving hopes that it can survive competition with Facebook Inc’s Instagram and sending its shares up more than 20 percent.

Investor enthusiasm for the instant messaging application company faded after its initial public offering last year.

But the Venice, California-based firm said that customers were now staying longer on the Android version of its app, after software bugs were fixed, and advertisers were taking to an auction-based advertising system that made it cheaper and easier to buy ads.

Snapchat’s daily active users rose to 187 million in the quarter that ended Dec. 31 from 178 million in the third quarter, beating analysts’ average expectation of 184.2 million users, according to financial data and analytics firm FactSet.

Daily active users rose 18 percent from a year earlier, reversing a trend of slowing growth. The figure is closely watched by investors who hope user growth can be translated into advertising revenue.

Revenue rose 72 percent to $285.7 million, beating analysts’ expectations of $253.2 million as companies advertised more in the key holiday quarter.

Instagram, with more than twice the daily users of Snapchat and backed by Facebook’s large bank account, has threatened to stamp out its rival by copying features such as photo filters and disappearing slide shows.

Confidence that the two could coexist in the social media sector was shaken when Snapchat’s user growth stalled last year. Analysts, though, said that Snapchat appeared willing to look inward and try to fix problems rather than be distracted by Instagram.

“They are going to continue to be competitors, and Snap is doing a creditable job of competing for revenue,” analyst Michael Pachter of Wedbush Securities said.

Snapchat is courting advertisers in an internet ad market dominated by Facebook and Alphabet Inc’s Google, which together control half the market share, according to research firm eMarketer.

While Snapchat ads once were primarily bought by large brands with household names, revenue from smaller businesses more than doubled from the third quarter to the fourth, Chief Strategy Officer Imran Khan said on a conference call.

FILE PHOTO: A woman stands in front of the logo of Snap Inc. on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to post their IPO, in New York City, New York, U.S. on March 2, 2017. REUTERS/Lucas Jackson/File Photo

“We know that in order to truly scale our business, advertising on Snapchat has to be really easy,” Khan said.

Ad prices have fallen as Snapchat lets advertisers use self-serve software to buy, but the number of ad impressions was up more than 575 percent from a year earlier in the fourth quarter, Chief Financial Officer Drew Vollero said.

Vollero said more than 90 percent of ads were sold on Snapchat’s auction, which is capable of handling larger volume than a human sales staff, and the company tripled the number of advertisers buying there.

Shares traded at $17.09 after the bell, up 22 percent, and had traded even higher.

Amid concerns Snapchat would not be able to keep growing rapidly in the face of Instagram’s competition, Snap’s stock price had fallen by half from its $29.44 high after its initial public offering last year and not traded above the IPO price of $17 since July 10. Snap had not reported upbeat results since going public.

In addition to fixing bugs, the company is redesigning Snapchat to make it easier to use. Chief Executive Evan Spiegel said the new version had rolled out to 40 million users and would launch worldwide in the first quarter.

Acknowledging a perception that Snapchat is popular mainly among millennials, Spiegel said: “We believe that the redesign has also made our application simpler and easier to use, especially for older users.”

Snap posted a net loss of $350 million, or 28 cents per share, compared to a loss of $170 million, or 20 cents per share, a year earlier.

Excluding items, Snap reported a loss of 13 cents. Analysts on average expected a loss of 16 cents per share, according to Thomson Reuters I/B/E/S.

Revenue per user rose 46 percent from a year earlier to $1.53, while cost of revenue per user rose 5 percent to $1.02.

Still, the company expects its year-over-year revenue growth rate to moderate in the current quarter compared with the fourth quarter, Vollero said.

Reporting by David Ingram in San Francisco and Pushkala Aripaka in Bengaluru; Editing by Peter Henderson, Meredith Mazzilli, Anil D’Silva and Cynthia Osterman

Singtel to spend up to $413 million to nudge up stake in India's Bharti Telecom

SINGAPORE (Reuters) – Singapore Telecommunications (Singtel) said it would spend up to $413 million on shares in India’s Bharti Telecom, lifting its stake slightly in the holding company for Bharti Airtel to just under half.

“While there are currently headwinds in India, we take a long-term view of our investment in Airtel which continues to be a strong market leader in a region with rapidly increasing smartphone penetration and mobile data adoption,” Arthur Lang, CEO International at Singtel, said in a statement.

India’s telecommunications sector has been hit hard by a price war since the entry of carrier Reliance Jio, the telecoms arm of Reliance Industries Ltd, more than a year ago.

The purchase worth as much as 26.5 billion rupees could increase Singtel’s stake in Bharti Telecom by up to 1.7 percentage points to 48.9 percent and its holding in Bharti Airtel, the country’s biggest mobile carrier, by up to 0.9 percentage points to 39.5 percent. The deal will be done via a preferential share allotment.

Singtel has assembled a portfolio of stakes in regional mobile firms outside its small home market, and overseas businesses now account for about 75 percent of its core earnings.

Reporting by Aradhana AravindanEditing by Edwina Gibbs

2 Airlines Just Made The List of America's Top 20 Most Hated Companies (Can You Guess Which?)

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.

Public distaste for companies can run a little behind actuality. 

By the time surveys are taken and opinions are expressed, the distasteful companies are already doing something about their poor image.

Still, when 24/7 Wall Street put together its list of America’s top 20 Most Hated Companies, not one airline made the list.

Two did.

The list was compiled based on a range of factors. 

These included bad news, Glassdoor reviews, customer reviews from the American Customer Satisfaction Index and even 24/7 Wall Street’s own research.

And there, at number 19, was United Airlines.

Yes, just above the Weinstein Company.

Naturally, much of the focus was on the infamous incident last year in which Dr. David Dao was dragged bloodied down the aisle of a United plane, even though he’d paid for his ticket and had been happily seated.

But United’s ACSI score is well below industry average, too.

Which suggests that the airline has much to do to regain public trust. 

It’s started doing it, by insisting that it won’t bump passengers in the Dao-esque manner and will offer far more generous compensation to encourage paying passengers to give up their seats.

Still, the airline’s Basic Economy offering has been much criticized. 

Passengers have chosen not to trade up to regular Economy Class to get away from it and instead booked with other airlines.

It seems, indeed, that the negative opinion of United is still there.

A consolation for the airline is that it still came ahead of Facebook in the Most Hated list. 

It’s also more liked — in a relative sense, you understand — than Comcast, Uber, Monsanto and the Trump Organization.

It’s also more liked than the other airline on the top 20 Most Hated list.

That would be Spirit Airlines.

24/7 Wall Street’s verdict on Spirit is painful: “Because flying can often be stressful, many airlines attempt to make the experience as comfortable as possible for their customers. Spirit Airlines follows a different philosophy, aiming to strip air travel down to its basics by ensuring no frills, inexpensive flights.”

Spirit’s result is very much influenced by its less-than-thrilling ACSI score, which is a lowly 61. 

The industry average is 75. (United scored 70.)

Worse, a Zogby survey found that 44.4 percent of those polled claimed they’d had a negative experience with Spirit.

It also gets 3.84 complaints per 100,000 passengers, while other airlines are at around the 1 per 100,000 mark.

Again, though, Spirit has tried to take off from the bottom.

In October, the airline was the third-best when it comes to on-time performance.

Again, though, what people think they see is something they really don’t like.

Neither Spirit nor United immediately responded to my requests for comment.

Both did manage, however, to be more liked that, say, the University of Phoenix, the Fox Entertainment Group or, oh, the NFL.

And which was voted the most hated American company of all? 

Why, Equifax, of course.

United and Spirit must be praying that they don’t suffer a major data breach.

That could really send their rankings into the dungeon of despair.

Women's Empowerment Should Include Equality In  Small Business Lending

In the past year, women’s empowerment has moved to the forefront of America’s cultural trends. TIME named The Silence Breakers as “Person of the Year,” for challenging the status quo with regards to sexual harassment, and the powerful movement has caused the mighty to fall — from Hollywood mogul Harvey Weinstein to former USA Gymnastics doctor Larry Nassar. Women are increasingly pushing for change. 

Change is also needed in small business finance. Women-owned businesses in the U.S. generate over $1.7 trillion in revenues and employ millions of workers. Although last year was a good year in small business financing, it could be even better. Women business owners still experience a funding gap in loan approvals. Fortunately, to overcome systemic social and financial challenges while starting a business, there are numerous organizations dedicated to helping women entrepreneurs succeed.

Women business owners have a harder time securing startup capital and loans to pay off high interest debt, expand their companies, purchase equipment, and meet seasonal challenges than their male counterparts do.

Small business loan approval rates for women-owned companies were 15-20 percent lower than they were for businesses owned by men in 2016. Additionally, revenue and credit scores are lower and operating costs are higher for women-owned firms. These realities make it more challenging for female entrepreneurs to secure capital.

Fortunately, there are numerous forms of financing for female entrepreneurs. These range from microloans from non-profit lenders for amounts under $50,000 to SBA loans of up to $5 million. Various types of financing address different needs. For instance, a line of credit can help a company, such as an ice cream store or landscaping business, overcome the challenges of seasonality. Equipment loans, which use the machinery as collateral, can help women-owned companies upgrade their facilities. 

Thirty-six percent of the small businesses in America are women-owned, and the figure has risen substantially over the past decade. According to loan applications submitted to Biz2Credit, the states with the highest numbers of women-owned firms are: California, Texas, Florida, New York, and Georgia. The following cities, in particular, are the top metropolitan areas by number of women-owned firms: New York, Los Angeles, Miami, Chicago and Atlanta.

In these places, and across the country, the top sources of funding for women-owned businesses are:

Small Business Administration (SBA) Loans 

Through its partner lenders, Small Business Administration offers government-guarantees that minimize risk for SBA-approved banks and other financial institutions. The agency does not directly make loans to small business owners. Because the government backs up to 75 percent of the amount borrowed, SBA lenders have incentive to approve women-owned businesses for funding.

The benefits for women are that they are able to secure funding at a low cost of capital and pay it off over longer periods of time.

Term Loans

Term loans, which are really just traditional small business loans from banks–but without the government guarantees–are the most common form of small business funding. It’s what most people understand: the borrower receives a large amount of cash that gets paid back with interest, over a fixed amount of time. Big banks currently are approving about one-quarter of the funding requests they receive. Regional and community banks grant roughly one-half of applications for financing.

Business Lines of Credit

Many women business who need assistance with working capital, seasonality challenges, and unexpected expenses are able to secure business lines of credit. Essentially, it’s a debit account available to the business owner. Interest is paid only on the amount of money borrowed from the account. Entrepreneurs enjoy the flexibility of this type of funding.

Microloans

Microloans are a good solution for women owners who need a small amount of capital to get up and running. Usually, the funding comes with a short repayment window and slightly higher interest rates than SBA loans, term loans or small business lines of credit. 
While a lending gap still exists, each year it gets narrower.

As women business owners gain more experience and become more successful, they will likely encounter fewer and fewer gender-based challenges to securing financing. Thus, the social/cultural trend of women’s empowerment will also begin impacting the world of business and finance, as well. 

With a robust economy and business optimism abound, women are starting and growing businesses at unprecedented levels. In order for them to succeed, they must have a fair shot at securing financing. 

The #1 Lesson Cryptocurrency Investors Can Learn from the Dot-com Bubble

Life as we once knew it drastically changed in the mid-90s. The Internet’s popularity was on the rise, and many savvy businesses and companies saw the potential of a hyper-connected, digital world. This lead to the dot-com bubble–a sharp rise, and fall, in stock prices that was fueled by investments in Internet-based companies.

With experts predicting we are now in a cryptocurrency bubble, it seems as if history is at risk of repeating itself.  

While we’ve moved far past the early stages of Internet start-ups and e-commerce companies, digital is continuing to change our everyday lives–from how we work, live, and play to the future of money itself. Interest in cryptocurrency, similar to the frenzy we saw in the early days of the dot-com bubble, is reaching a crescendo–yet many experts are already predicting its demise.

Warren Buffet has gone on the record saying that crypto will come to a bad ending. Jamie Dimon, J.P. Morgan’s CEO, called Bitcoin a fraud before later admitting that he regretted making that statement.

Meanwhile, other big-name investors and companies are going out of their way to invest in crypto–from Richard Branson to Microsoft .

But are the naysayers right? Are we headed toward a catastrophic implosion of dot-com level proportions?

Yes, the crypto market is volatile. There are too many unknowns to be certain, but if we look at the histories of companies like Amazon, eBay, Priceline, and Shutterfly, then maybe we can gain some clarity.

These e-commerce companies were born during the dot-com era, and they weathered the storm and emerged as some of the most successful and stable companies in history. The dot-com crash didn’t destroy the concept of e-commerce or the fact that consumers want to buy airline tickets, antiques, or pet food online–there was simply a gold rush in the early development stages. Once the dust settled, however, the strong survived.  

Don’t call it a comeback

In the end, the dot-com bubble was a movement. Smart investors saw the future of digital-based commerce and, as they invested, the movement snowballed into madness. Many of the companies that popped up during that time were run by people who were in over their heads, or they didn’t have the technology to keep up with the demand. When the crash happened, it thinned the herd.

Mona El Isa, the chief executive and co-founder of Melonport, summed this notion up at a recent TechCrunch conference when she said, “The dot-com bubble was messy, but if we look at some of the largest companies that exist today they are a result of the dot-com bubble and they are part of our everyday lives.”

Which leads us back to what we’re seeing with cryptocurrency today. Even if this bubble bursts, the concept of digital currency will not go away. It may wipe out 90% of today’s existing startup currencies, but the strong will survive. Companies, like Kodak, who try to create a currency without providing real customer value may see efforts go to waste. And this will pave the way for the Amazon of cryptocurrency to make its mark on the world.

To further the power of this movement, it’s important to remember that cryptocurrency isn’t a company. It doesn’t have shareholders. It isn’t VC-backed. Which means this movement extends beyond any other economic bubble we’ve seen–it’s happening in an arena that’s removed from the stock markets. So, when, and if, the bubble bursts, it won’t go quietly into that good night. The parameters may change drastically from what we are seeing today, but digital currency–in one form or another–is the future.

How to invest in a movement

So, if cryptocurrency is the future–how do you invest? From a business standpoint, it’s important to look at crypto through a risk-management lens. Business leaders and board members should be learning everything they can about this new trend so they can determine how, where, and why it might affect or fit into the business. Is there a way to offer customers value through cryptocurrency? Is the time right to execute? Is there a long-term strategy in place that will take advantage of the crypto movement when the stormy waters calm down?

These are the types of questions you need to consider. Do what’s best for your business and what’s best for your customer. As with any digital movement, you need to be aware of the trends and aware of how it could change your business. This is the only way to defend your company from possible disruption.

Final word

For anyone who is considering investing in cryptocurrency, it’s important to remember that this is a long-term movement. Our world is becoming increasingly smaller and more reliant on digital means–currency transformation is inevitable.

It’s the smart investors who understand that this isn’t a fragile economic trend. Digital currency will continue to adapt and change over the next few years–and the companies and entrepreneurs who pay close attention now will have the best chance at deftly navigating the troubled waters.

Why GE Is A Buy Here

By Bob Ciura

One of the most disappointing stocks in the entire S&P 500 Index last year, was General Electric (GE). GE shares have lost nearly half their value in the past one year. If that weren’t bad enough, the company also cut its dividend by half, due to its eroding fundamentals.

At the same time, GE remains an industrial powerhouse. It also has a long history of surviving difficult times such as this. GE has an operating history of over 100 years. At a share price of $16, the stock has a dividend yield of 3%. The combination of 100+ years in business and a 3%+ dividend yield places GE on our list of “blue-chip” stocks. There are only a few dozen stocks that qualify as blue chips. You can see the full list of all blue chip stocks here.

At a price under $16, not only does GE have a solid 3% dividend yield, but it also has an attractive valuation. This is certainly a challenging time for GE, but the company is not doomed. This article will discuss why GE is a buy under $16.

Business Overview

There is no sugarcoating it—GE performed very poorly in 2017. The fourth quarter was particularly weak; GE reported quarterly revenue of $31.4 billion, which was down 5% year over year, and missed analyst expectations by a whopping $2.66 billion. The huge miss was especially glaring, considering GE had solidly surpassed analyst expectations in each of the first three quarters of 2017.

Source: Q4 Earnings Presentation, page 5

GE also disclosed an SEC investigation into the company’s insurance accounting practices. GE’s insurance unit reported a massive $6.2 billion after-tax charge against earnings in the fourth quarter.

The good news is, the company remained profitable, with adjusted earnings-per-share of $1.05. GE is a massive conglomerate, with a leadership position across multiple industries. Still, adjusted earnings declined 30% from 2016.

A big reason for GE’s deterioration is its power segment, which continues to struggle. Segment earnings declined 88% in the fourth quarter, and the power business will be a continued headwind in 2018.

Source: Q4 Earnings Presentation, page 14

Fortunately, GE is still doing some things right. In 2018 and beyond, GE will focus on accelerating growth in aviation and healthcare, two of its businesses that are still performing well. It will also focus on turning around its power business, by cutting costs and righting the ship.

Growth Prospects

GE’s fundamental deterioration last year, combined with the SEC investigation, do not inspire a great deal of confidence. However, GE’s chances of a successful turnaround are promising. The company is aggressively cutting costs, to slim down and become more efficient. GE cut structural costs by $1.7 billion in 2017, and expects $2 billion in additional cuts in 2018. Along with growth across its core businesses, these cost cuts will greatly help GE return to earnings growth.

For fiscal 2018, GE expects adjusted earnings-per-share of $1.00-$1.07.

Source: Q4 Earnings Presentation, page 16

Returning to its operating segments, aviation and healthcare still have a long runway of growth up ahead. Both segments grew operating profit by 9% in 2017. In healthcare, GE saw mid-single digit growth in the U.S. and Europe last year, along with more than 10% growth in the emerging markets. In aviation, GE expects 7% to 10% growth in 2018. It remains on track to deliver 1,200 LEAP engines in 2018, and production of over 2,000 engines by 2020.

Renewable energy is another positive growth catalyst for GE. In 2017, renewable energy revenue increased 14%, and eclipsed $10 billion for the year. Overall, GE expects as much as 3% organic revenue growth in 2018.

GE could also be a beneficiary of the recent tax reform. GE expects a long-term benefit to earnings, as it is expecting a tax rate in the low-to-mid 20% range. In addition, the company is confident the SEC investigation will not have a material impact. On GE’s fourth-quarter earnings call, CFO Jamie Miller said the company is cooperating fully with the investigation, and is not “overly concerned”.

Valuation & Dividend Analysis

Based on the midpoint of fiscal 2018 earnings guidance, GE stock trades for a price-to-earnings ratio of 15.4. GE is valued 7% below its 10-year average price-to-earnings ratio, of 16.5.

Source: Value Line

GE is not a deep-value stock, but could be considered slightly undervalued. And, if earnings are near a bottom, the valuation multiple could expand moving forward, if the company returns to grow earnings. Even with relatively low future growth assumptions, GE could produce satisfactory returns, assuming at least a flat price-to-earnings ratio from here. A potential breakdown of total returns is as follows:

  • 2% to 3% organic revenue growth
  • 0.5% to 1% margin expansion
  • 1% share repurchases
  • 3% dividend yield

In this scenario, total returns would reach 6% to 8% per year, including dividends. Returns could be significantly higher, if earnings growth exceeds the 3.5% to 5% projected above. Expansion of the valuation multiple would only add to these annual returns, in the event GE accelerates earnings growth above projections.

GE is still a strong cash-flow generator. The company expects free cash flow of $6 billion to $7 billion in 2018. This should be more than enough to cover the dividend. With 8.68 billion diluted shares outstanding at the end of 2017, GE’s new dividend rate of $0.48 equals a dividend cost of roughly $4.2 billion. Using adjusted earnings-per-share, GE expects a dividend payout ratio less than 50% in 2018. On a free cash flow basis, GE expects to maintain a dividend payout ratio of 60% to 70%.

Reducing the dividend gave the company greater financial flexibility, which it can use to strengthen its financial position. GE is targeting a healthy net-debt-to-EBITDA ratio of 2.5 times going forward. The reset dividend appears to be secure, and at a price of $16 or below represents an attractive 3%+ dividend yield.

GE is one of 747 dividend-paying stocks in the industrial sector. You can see all 747 dividend-paying industrial stocks here.

Final Thoughts

In our last review of GE, when the stock was trading at $18, we suggested investors wait for $16. With GE now down to $16, the stock is nearing buy territory. Investors will need to be patient, as GE is a huge company, and it takes time to turn around a company of this size. GE is certainly a work-in-progress.

But at this price, GE could produce attractive returns moving forward, if the turnaround is successful. In the meantime, investors can buy the stock at a reasonable valuation, and a 3% dividend yield.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Apocalyptic Loss For Boeing?

The trade dispute between Boeing (BA) and Bombardier (OTCQX:BDRAF) has been eyeballed by investors, aerospace journalists and analysts for some months now. The Department of Commerce of the US advised a tariff to be applied on any C Series aircraft or partly assembled aircraft destined for the US market.

Boeing claimed that the program received illegal launch aid and was dumped on the US market. So, Boeing did not have one problem with the C Series, but two and that is very important to be aware of.

https://www.ainonline.com/sites/default/files/uploads/2017/05/07_20160428_bca_delta-00187_en.jpg

The DoC based on its findings advised a tariff of 300% on C Series aircraft imported for the US market. Today, the ITC having the final word on the matter for now unanimously rejected Boeing’s claim. The decision comes as a surprise to many, including aerospace analysts, not because market assessment and expertise support in any way that Boeing did suffer or would suffer damages but because the Boeing sphere of influence reaches far and there is a current political climate in the US that favors American companies any day over foreign counterparts.

In this article, I want to touch on some key points that I think have played a major role in the ITC’s decision to deny Boeing’s claim.

Investment or illegal aid

Part one of the problem was the determination whether any aid that the C Series program did receive was investment or illegal launch aid.

https://static.seekingalpha.com/uploads/2017/9/27/9932311-1506564818065659.png

In October 2015, the Quebec government invested $1B for a 49.5% ownership of the limited partnership of the Bombardier C Series. I think there is not much doubt about this being an illegal form of state aid. Tax breaks are often already subject of debate and can possibly be considered illegal, let alone such a government involvement to drop a life to a program to save it.

Given the importance of Bombardier and the C Series to the aerospace industry in Canada, I think that government involvement was to be expected and we might have seen Boeing doing exactly the same if they ever would get themselves in a situation similar to Bombardier’s. The fact, however, is that the Quebec government has not even tried to conceal this state aid and Boeing is in a position to complain about that.

The DoC determined that the C Series program was uncreditworthy and unequityworthy at the time the ‘investment’ was made. Given that in the commercial space, Bombardier would be unable to secure commercially sourced loans it was determined that most of the help it did get was indeed illegal.

I think nobody will disagree with me when I say that there has been state aid, a lot of it and probably most of it was indeed illegal.

Dumping

https://airwaysmag.com/wp-content/uploads/2016/07/cseries-fal-montreal-7.jpg

Source: airwaysmag.com

Probably the most important part of the story is the dumping part. In case no dumping activity is found, any recommended tariff would unlikely to be held up.

Dumping, in reference to international trade, is the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market or does not cover the costs of production. As dumping usually involves substantial export volumes of the product, it often has the effect of endangering the financial viability of manufacturers or producers of the product in the importing nation.

From the definition of dumping above, 2 things become clear. The sales price should be known and the damage to the domestic industry should be mapped. Although Delta Air Lines might have provided the sales price of the aircraft it bought from Bombardier, the Canadian jet maker for obvious reasons would not share any prices and supplier contracts making it very hard to dodge the DoC’s 300% tariff to level the playing field.

Pricing and sales campaigns

https://i.ytimg.com/vi/bovcOgTDqxI/maxresdefault.jpg

Source: Youtube

One of the big question marks was the pricing of the aircraft that Bombardier sold to Delta Air Lines (DAL). Boeing did supply the DoC with a figure of $19.6 million, while Bombardier and Delta Air Lines denied the figure. Since Bombardier did not supply any figure, the DoC was forced to apply the tariffs and was forced to apply the tariffs based on the figure that Boeing used, whether this figure was anywhere close to the actual prices or not.

Creating a level playing field sounds nice, but with tax breaks, investments and commercial market prices it is hard to determine what actually makes a level playing field.

The Boeing 737-700, which Boeing claims to be the main victim of the C Series alleged illegal subsidies and subsequent dumping has a list price of $85.8 million and its market value is expected to be slightly less than $36 million, which is a 60% discount. The tariff applied on the C Series would put its sales price on nearly $78.4 million. This would put the price including tariffs in line with the list price of the Bombardier CS100. Knowing that discounts of 50% or slightly higher are common in the industry, the tariff could hardly be called ‘leveling’ the playing field when using a bottom-up approach instead of a top-down approach.

What the DoC also totally ignored, probably because it has primarily assessed the subsidies, is that the price that Delta got the aircraft for is a contract price tailored to the needs of the airline in terms of range and with the airline being a key customer it has also received additional discounts. So, the pricing that Delta received does not necessarily reflect dumping and it does not reflect pricing that other airlines could expect going forward. Also for Airbus (OTCPK:EADSF) and Boeing giving discounts to key customers and early adopters is common practice and you could question how much this has to do with dumping of aircraft.

The above is amplified even more considering that Boeing has not entered the Boeing 737-700 or Boeing 737 MAX 7 going head to head with the Bombardier C Series to win an order from Delta.

In another sales campaign to sell aircraft to United Airlines (UAL), Boeing ended up on top but the airline likely has been given steep discounts with a sales price of $22 million for the Boeing 737-700. Likely that is a price tag that Embraer (ERJ) and Bombardier at that time could not meet and given that United Airlines ended up converting that order, I think it is fair to assume that Boeing dropped the pricing just to keep Bombardier out given that the Boeing 737-700 is a 128-seat aircraft and what United was looking for was a 100-seat aircraft. So, Boeing responded to a request for an aircraft with a capacity of roughly 100 seats with an aircraft that was far too big and United ultimately converted that entire order. Bombardier does have a 108-seat aircraft, Boeing doesn’t… but just wanted to keep Bombardier out with rock bottom pricing.

The important observation is that Boeing is complaining about an instance where it didn’t offer anything to Delta Air Lines. In that case you can rightfully ask how you can be harmed if you don’t offer anything, because in that case you didn’t have anything to win or lose in the first place. In the other case, the sales campaign with United Airlines, Boeing dented the pricing of the Boeing 737-700 and MAX 7 itself by offering an aircraft unfit for what United Airlines asked for.

You really cannot blame Bombardier for Boeing deciding not to put effort to win an order from Delta Air Lines and you cannot blame Bombardier for entering Boeing entering the Boeing 737-700 in the sales campaign with United Airlines with a product that was so unsuitable to fulfill the role it was required for efficiently that it had to throw the pricing of the smaller Boeing 737-700 and Boeing 737 MAX 7 off a cliff. That would be the same as holding Bombardier accountable for the decisions the sales team of Boeing is making.

Competitive analysis

Boeing asked for anti-dumping duty and countervailing duty for aircraft imports from Canada with a 100-150 seating capacity regardless of airline-specific configuration and a minimum range of 2,900 nautical miles and covered by an FAA type certificate as such. I think that much of Bombardier’s stronger point started here. In order to understand why, you either have to know the capabilities of the products that Boeing and Bombardier offer or just look at the figure below, where we can have a look at the C Series, Boeing 737 NG and Boeing 737 MAX families.

https://static.seekingalpha.com/uploads/2017/9/9932311_15067183319529_rId5_thumb.jpg

Figure 1: Seat brackets Bombardier C Series and Boeing 737 NG and MAX (Source: AeroAnalysis)

One important observation that needs to be made is that there is very little overlap between the Boeing 737 families and the Bombardier C Series aircraft. In fact, there is no overlap between the 737 MAX and C Series aircraft at all.

Boeing has asked the Department of Commerce to consider the 100-150 seat aircraft with a minimum range of 2,900 nautical miles and that is something I could not disagree more on. The C Series as we know it today is a 100-130 seat aircraft family with 2 members. By taking the minimum range of 2,900 nautical miles, coinciding with the Boeing 737-800 range, and stretching that bracket all the way up to 150 seats, Boeing tried to create the impression that the C Series as we know it today is an immediate threat to Boeing’s core business where there is significant overlap.

The figure quite clearly shows that this is not the case and there is little to no overlap. The only overlap that there could be is between the Boeing 737-700 and the Bombardier CS300. With the introduction of the Boeing 737 MAX, Boeing has stretched the Boeing 737 MAX 7 to accommodate more passengers. Important to note here is that Boeing claimed that this has been done on customer demand, which somewhat takes away any thoughts that this decision is driven by a potential fierce competition on the lower part of the seat bracket.

The CS100 is a 108-seat aircraft, a one-to-one replacement for the Boeing 737-600 which Boeing abandoned years ago. The CS300 as a 130-seat aircraft slightly exceeds the Boeing 737-700 in terms of capacity, but with the aircraft being near the end of production life, Boeing has shifted away from the 130-spot and made the Boeing 737 MAX 7 a 138-seat aircraft. This means that the C Series family can hardly be labeled as a product competing with the lower side of the Boeing 737 aircraft family, which makes it hard to support any statement of dumping leading to damages to Boeing.

Boeing said the pricing pressure on the Boeing 737-700, a result of the United deal, would leak through to the Boeing 737 MAX 7. I think Bombardier is not to blame for Boeing’s decision to offer an aircraft that doesn’t fit the airline’s RFP leading to significantly pricing pressure on the Boeing 737-700 and subsequently the Boeing 737 MAX 7. That is something Boeing inflicted on itself.

Also if we look at efficiency, it is unlikely that the Boeing 737-700 or Boeing 737 MAX 7 can be as efficient as the clean sheet design. The Boeing 737 finds the majority of its customers in the 160+ seat segment and Boeing is also focused on optimizing for that market and has stepped away from 100-130 seat segment as the ‘stumpy’ designs aren’t nearly as efficient and appealing as the stretched variants. The sales figures also show this. Bombardier simply had the aircraft optimized for the 100-130 seat segment.

A spicy detail is that Embraer, a company that Boeing wants to team up with, announced the range of the Embraer 190-E2 to be 2,900 which triggered Bombardier to ask the ITC to re-open the record for Bombardier to provide additional information and make the Embraer E2 family an integral part of the dispute.

Domestic market

http://www.pw.utc.com/Content/Photos/Feed/Stories/Ops-04/Multiple-PW1100G-JM-on-production-line-in-Middletown.jpg

Source: United Technologies

One thing that is important to understand is that you cannot equate the aerospace industry in the US to Boeing and more importantly a sale to Canadian Bombardier doesn’t mean a lost sale for Boeing. Boeing is important to the aerospace industry, that cannot be denied but I do not think that if it would have managed to virtually eliminate the C Series aircraft from the US market, it would have seen orders for its Boeing product materialize.

Bombardier supported 22,700 jobs in the US adding $2.4B to the US economy and this would increase even more after the C Series joint venture between Bombardier and Airbus announced an assembly line would be set up in Mobile, US, Alabama. If there is any company that might lose due to the C Series, it would be Embraer along with the jobs it supports in the US but the company has been left out of the scope of investigation.

My view in a few snippets

I did not expect that the ITC would deny Boeing’s claim, not because I think Boeing had a valid point but because the political system in the US now more than ever would favor a US company over any other company.

In due time we will know what moved the ITC to deny Boeing’s claims, but I do not expect them to go into detail. In my view, Boeing behaved like the big kid in class bullying the smallest kid and that somewhat backfired. It has tried something which had little to no merit if you are aware of the competitive field, the efficiency of designs and include some other factors such as pricing in two aircraft deals in which Bombardier was involved.

I have collected some important or striking snippets from my previous work and my comments to the hundreds of comments I received when addressing the Boeing-Bombardier below:

Snippet 1:

The battle between Boeing and Bombardier is a complex one, it’s is a multi-dimensional space that includes product, market, contracts, launch aid, dumping and a legislative dimension.

Snippet 2:

Boeing has filed a complaint claiming that the C Series could be disruptive to its position on the 100-150 seat market. In reality, there is little overlap in the markets and one could say Boeing’s claim has little to no merit. I view the C Series as a product superior to the Boeing 737 [in its space] and the only way for Boeing to tackle that is by filing a complaint.

Snippet 3:

All in all, I think that Boeing’s competitive position is not being threatened by the CS100 or CS300, but the bigger threat would be a CS500 and by barring or at least trying to bar the C Series, Boeing is protecting its single aisle moat with the means that it has available. At this point, there is no immediate threat to Boeing but the C Series program uses suppliers in the US and if the C Series program crumbles those jobs could be affected.

Snippet 4:

Boeing says it loves the competition, if that is the case it should just point out that CS500 has the potential to destroy its single aisle margins because they do not have an up-to-date product and see how strong their case is… because that is what really is happening and what really bothers Boeing.

The future

https://s2.reutersmedia.net/resources/r/?m=02&d=20171017&t=2&i=1205829098&r=LYNXMPED9G0UB&w=940

Source: Reuters

Will we wake up in a different world after the ITC ruling? No. First of all, the ruling can be appealed by Boeing although I don’t expect another outcome there. Secondly, what Boeing tried was making it as difficult as possible for the C Series program to survive, preferably eliminating a competitor. They know it is a sound engineering product and after the most risky phases of the aircraft’s development were over, Boeing probably looked to acquire the technology and potentially even the program at no costs. What they probably also were after is preventing a third competitor from entering the highly profitable single aisle market and with Bombardier partnering with Airbus the fate of the program rests with Airbus. They can either choose to acquire the program or be forced to acquire the program, but I think it is unlikely that the CS500 will be launched to compete with the core products of Airbus or Boeing.

The market, as expected, awarded Bombardier with a 15% surge in share prices, but it doesn’t mean that Boeing came crashing down, it ended the day flat and I think that more or less reflects what the markets really thinks about the C Series that Boeing made such a deal about.

If the ITC would have ruled in Boeing’s favor, Bombardier would have seen the door to the US market being closed and that would dent the sales potential of the aircraft family, but any such thing does not hold for Boeing. The difference in scale of both companies makes it that a win for one company does not result in a loss of equal size for the opposing party.

What is the price that Boeing paid?

The more interesting question is what is the price Boeing will pay or has paid. With Boeing losing now, it might be worth more than ever to team up with Embraer. A buy out scenario seems unlikely at this point, but Boeing will have to do more to please Embraer and that might be somewhat disappointing given that Embraer counterpart of the C Series is older by design. Airbus might be stuck with the C Series aircraft in the future, while at this stage Boeing is unlikely to have big advantages when it comes up with some sort of partnership with Embraer. A full buy out would increase the premium for Embraer at this stage, but it is something that is opposed by the Brazilian Air Force and President.

Boeing lost a $5B jet deal with the Canadian government and it seems to be excluded for consideration for future defense contracts, but we will have to see for how long that will hold. I cannot imagine that the Canadian government would choose exclude any possible manufacturer for a prolonged time. It would not be in the best interest of the Canadian tax payer or Canada’s Air Force.

You could go as far as connecting the Delta Air Lines order for 100 A321neo aircraft valued $5B-$5.5B to the dispute between Boeing and Bombardier. This would bring the total price that Boeing ‘paid’ to $10B.

Was it worth it? Maybe, maybe not… the aerospace industry is complex, but I do think that ultimately Boeing has prevented a third competitor from rising in the single aisle space it shares with Airbus at a $10B price and pushed the C Series along with its technology to Airbus. Airbus will decide what will happen to the program and how it will fit in with the timeline of a A320neo successor.

The C Series now provides Airbus with a complimentary product and a head start for an Airbus A320neo replacement instead of adding another competitor for Boeing and Airbus.

Boeing will likely put effort into normalizing relations with parties such as the Canadian government and Delta Air Lines to limit the price that is being paid for this dispute.

Boeing investors have hardly noticed a thing from the dispute. Since the petition was filed by Boeing, its shares gained over 90%, Bombardier share prices were slightly more damped but are now trading 60% higher and Airbus shares are trading roughly 50% higher. So, the investor didn’t pay the price for this dispute. As an investor, I really can’t complain and as an analyst I do think the ITC ruling is fair.

Disclosure: I am/we are long BA, DAL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Ford Paves a Path From Big Automaker to Big Operating System

In its 114-year history, Ford has been many kinds of automaker. A manufacturing innovator, a hawker of Mustang muscle, a pickup powerhouse. Now the company that helped put a car (or two) in every garage wants to be something else altogether: an operating system.

“With the power of AI and the rise of autonomous and connected vehicles, for the first time in a century, we have mobility technology that won’t just incrementally improve the old system but can completely disrupt it,” CEO Jim Hackett said in a keynote address at this year’s Consumer Electronics Show, trumpeting the pivot. “A total redesign of the surface transportation system with humans and community at the center.”

As Ford executives move to execute the plan, they unveiled yesterday a reorganization of the automaker’s young mobility business, with two acquisitions to help it along. It’s all in service of a new, very 21st century goal. Ford will put less effort into convincing people to plunk down their credit cards for personal cars (though that’s still important) and more into moving them from A to B, with a little Ford badge tacked onto whatever gets them there.

It’s a turbulent time for traditional automakers, which have to keep making money today while aggressively prepping for the market changes—carshare, ridehailing, self-driving—that will happen tomorrow. Ford’s news comes eight months after the company dismissed CEO Mark Fields in favor of Hackett, a former furniture exec who oversaw the formation of Ford’s mobility subsidiary—and promised a greater vision for the future. Earlier this week, the Detroit automaker posted disappointing quarterly profits. Ford blamed rising metal prices while CFO Bob Shanks said, “We have to be far fitter than we are.”

In lean times, every expenditure merits extra scrutiny. And while Ford Mobility President Marcy Klevorn did not disclose how much it spent on its new companies, she says they’re important steps on Ford’s path to becoming more than a big ol’ automaker. “We did an assessment of our strategy and what our gaps were and the speed we wanted to go,” she says. “We looked at where we thought we needed a really fast infusion of help.”

Still, it’s all a little woolly. The thing about being a platform that connects the world is that others have to agree to come aboard. So while Ford tries to woo partners—other carmakers, mobility companies like Uber or Lyft, carsharing companies, bikesharing providers, entire cities—the carmaking continues. Make money now, prep for tomorrow.

OK, let’s look at the details of this new arrangement for tomorrow. Acquisition A is Autonomic, a Palo Alto–based company with a cloud-based platform called … wait for it … the Transportation Mobility Cloud. Autonomic seeks to build a kind of iOS for cities, managing data and transactions between city-dwellers and agencies and companies that provide payment processing, route mapping, mass transit, and city infrastructure services. That sounds vague, because it is.

“By making all these different services available we have no idea what’s going to come so we’re super excited,” Autonomic CEO Sunny Madra told Fortune Thursday. Autonomic seeks to be the go-to platform for other car manufacturers, too, and Klevorn indicated Ford hopes to monetize its cloud service quickly. Somehow.

Acquisition B is TransLoc, a 14-year-old Durham, North Carolina–based company that makes software to help cities, corporate campuses, and universities manage their transportation systems, from traditional fixed-route service to on-demand ridehailing apps like Uber and Lyft. “Ford is interested in taking the streets back in the city, and getting more people out of single occupancy cars,” says CEO Doug Kaufman. “I think one of the reasons that we ended up with Ford and not some other suitor is because our missions are so aligned.” Ford’s execs said they would lean on TransLoc’s existing sales relationships with hundreds of cities and transit agencies to accelerate its platform plan.

Meanwhile, the company is restructuring its Ford Mobility subsidiary. Autonomic is moving into a new accelerator section called Ford X. The Mobility Business Group will handle microtranist service Chariot, car services app FordPass, and digital services. Mobility Platforms and Products will cover autonomous vehicle partnerships and transportation as a service. And a new mobility marketing group will sell it all to the world. (Argo AI, the autonomous vehicle developer that Ford plunked $1 billion into last year, is still technically an independent company.)

It’s close to a throw-it-all-see-what-sticks move, but it does show Ford is charting a different path into this new world than its great rival. General Motors, which acquired startup Cruise Automation in 2016, is all about the autonomous and electric vehicle, with self-driving Chevy Bolts testing on roads in Phoenix and San Francisco. It’s even starting to think about making actual, honest-to-goodness driverless vehicles, this month showing off a design for a steering wheel– and pedal-free EV, and touting plans to get the thing on the road by 2019. The company’s Maven service, which provides car rental and sharing in 11 American cities, could be a great, data-hoovering starting point for a delivery and ridesharing service. And GM employees in San Francisco are using Cruise Anywhere, an Uber-like platform, to catch rides in self-driving testing vehicles. But GM hasn’t as overtly attempted to partner with cities yet, and its broader mobility strategy is hazy. Will GM provide transportation services and not just an excellent autonomous, electric car? Can any American automaker do that?

Ford has been pretty consistent about its admittedly hazy vision for the future of mobility. (At least, consistent with its messaging.) “The bigger risk is doing nothing,” executive chairman Bill Ford told WIRED back in 2015, as he outlined a future where a single, digital ticket could buy you a ride on a car, taxi, subway, bus, or bicycle. “I am very confident that we can compete and morph into something quite different.” Now it’s time to deliver.


Pivot! Pivot!

Did Mnuchin Signal A Policy Shift Today?

Did US Treasury Secretary Mnuchin signal a change in the US dollar policy? Probably not. As Mnuchin and President Trump have done before, a distinction was drawn between short- and longer-term perspectives. In the short-term, Mnuchin says weaker dollar is good for US trade and “other opportunities”. In the longer term, Mnuchin explicitly acknowledged, “The strength of the dollar is a reflection of the strength of the US economy.”

The market chose to focus on the first part of the comment because it was already selling dollars and this offered justification at an important inflection point. The dollar has strung together a 4-5 week slide despite macroeconomic conditions, including strong growth, tax cuts, the relative and absolute increase in interest rates, and the anticipation of additional Fed tightening, usually associated with a stronger dollar.

Mnuchin unknowingly pushed on an open door. “Unknowingly” because it did not break new ground, and Commerce Secretary Ross tried clarifying the statement relatively quickly. Mnuchin may have been the most surprised by the impact of his comments. One gets a sense that he is still learning the nuances of his position and, perhaps, the disdain with which the administration holds mainstream media, obscured by how the media and markets hang on every word of the Treasury Secretary, especially regarding the dollar.

In some ways, Mnuchin’s precise meaning is unimportant. The point is that they were said within an important context. The Trump administration just levied protective tariffs on solar panels and washing machines. It is expected to decide soon on steel and aluminum. President Trump has threatened action on China’s intellectual property rights violations as well.

The US is blocking the appointment of judges for WTO panels, which will jeopardize the conflict resolution mechanism (the teeth) of trade practices. Although President Trump has suggested that the NAFTA talks are progressing, many still fear that the talks will collapse due to US demands or withdrawal, as the president has threatened.

Through the mid-1990s, the US and other countries habitually wanted to directly influence the foreign exchange market. Countries sought competitive advantage. However, beginning with Rubin’s “strong dollar policy,” best practices evolved toward letting markets determine exchange rates. This is now the official position of the G7 and G20. In effect, the foreign exchange market was de-weaponized.

That is the real meaning of the much-maligned strong dollar policy. The US would not use the dollar’s exchange rate to secure some trade or policy concession or purposely seek to depreciate the dollar to reduce its debt burden. With the disruption potential of the US administration, investors and allies are rightfully and genuinely concern that this is another part of the modern liberal global order that may be abandoned. It may be abandoned, but it is not being abandoned today.

As we noted, the dollar has been falling persistently since the middle of December. It looked as if there may have been a window of opportunity for it to stabilize this week. The technical conditions were stretched, market positioning extreme, and the Bank of Japan and European Central Bank would likely push against speculation of a near-term change in their respective policies.

Perhaps, concerned about triggering the ire of the mercurial US administration, European and Japanese officials have been particularly circumspect in their remarks about their currencies strength. The new head of the Eurogroup (eurozone finance ministers) Centeno did not express concern about the euro’s strong appreciation. The ECB’s Constancio’s remarks were a bit more pointed but simply noted that premature tightening would jeopardize the inflation target. Japan’s Finance Minister Aso saw no problem with the dollar approaching JPY110 but sought a gradual adjustment.

There is another reason that Mnuchin most likely did not announce a weak dollar policy today. A week from now, the US Treasury will announce its quarterly refunding plans. Mnuchin has previously acknowledged that there will be a substantial increase in Treasury issuance this year. Last year’s net sales were around $550 bln. This year, net issuance is likely to be double that if not a bit more. A third or so will be T-bills when the debt ceiling is eventually lifted.

The increased supply meets unknown demand in the sense that the Federal Reserve will be buying progressively less as it does not reinvest the full amount of maturing paper. In the first half, the Fed will not replace $150 bln, and in the second half, it will not replace $270 bln.

China and Japan, the two largest holders of US Treasuries, were net sellers in November, the latest TIC data showed. As the dollar falls, other central banks in Asia appear to be inclined to buy Treasuries. Europe seems cool to Treasuries. Germany still offers negative yields out six years and France out four years, but investors seem to be more attracted to the periphery of Europe than the US bond market.

The point is that it beggar’s belief that Mnuchin was talking the dollar down, introducing new currency risk, ahead of the quarterly refunding and a significant increase in the supply of Treasuries in the months ahead. Understanding what Mnuchin really said will not stop the dollar from falling. Many momentum players have their sights set on $1.25-1.26 for the euro, $1.45 for sterling, and JPY108.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Burger King Just Made a Commercial About Net Neutrality…Using Whoppers?

Burger King premiered a new Whopper commercial that advocated for net neutrality more than its signature burger.

You may have heard about “net neutrality,” especially since the Federal Communications Commission categorized broadband as a public utility during the Obama Administration in 2015. This meant Internet service providers couldn’t create an Internet fast lane by prioritizing certain online content.

The FCC repealed net neutrality in late 2017, under FCC Commissioner Ajit Pai, who was appointed to the commission by President Obama, but was made chairman by President Trump.

The Burger King commercial, titled “Whopper Neutrality,” explains what could happen without net neutrality. But instead of the Internet, it uses burgers to spread the message.

In the commercial, frustrated Burger King customers choose between the Whopper fast lane vs. slow lane—depending on how much they’re willing to pay. In doing so, they learn that certain non-Whopper menu items are prioritized over others.

For example, people who order a chicken sandwich get their meal quicker. And even though burgers are cooked, assembled, and ready, a Burger King employee explains that policy dictates a very slow handoff.

“I didn’t think ordering a Whopper would really open my eyes to net neutrality,” one customer exclaims in the video.

“We believe the internet should be like Burger King restaurants, a place that doesn’t prioritize and welcomes everyone,” global chief marketing officer Fernando Machado, said in a statement. “That is why we created this experiment, to call attention to the potential effects of net neutrality.”

While this may be true, it’s also still an ad meant to catch the eyes of millennials. Though the video directs customers to an online petition to support in net neutrality, tech news site Recode found no evidence that the burger behemoth has gone to the additional step of supporting net neutrality through lawsuits or lobbying like some major tech companies have done.

Qualcomm fine from EU antitrust regulators expected Wednesday: source

(Reuters) – EU antitrust regulators are expected to impose a multi-million euro fine on Qualcomm Inc on Wednesday for paying Apple Inc to use only its chips, according to a person familiar with the matter.

The European Commission in 2015 accused the company of the anti-competitive behavior. The fine could in theory go as high as 10 percent of Qualcomm’s annual revenue, which was $22.2 billion for its most recent fiscal year.

Apple and Qualcomm are engaged in a wide-ranging legal battle over Qualcomm’s business practices, which started a year ago with Apple suing Qualcomm for nearly $1 billion in patent royalty rebates that the chipmaker allegedly withheld from the phone maker.

Other regulators including the U.S. Federal Trade Commission are investigating Qualcomm’s dealings with Apple, and the decision may make Qualcomm more vulnerable to chip maker Broadcom Ltd’s $103 billion hostile bid for it. Broadcom argues it will smooth rocky relations with customers such as Apple.

Europe’s antitrust regulators are pursuing two proceedings against Qualcomm, with the second expected in coming months, the person familiar with the matter said.

In 2015, European regulators lodged a statement of objections against Qualcomm that it had made payments to “a major smartphone and tablet manufacturer” in exchange for the smartphone maker exclusively using its baseband chipsets, which connect mobile devices to wireless data networks. Apple is the customer, this person said.

The Financial Times earlier on Tuesday reported the expected decision, which covers Qualcomm’s behavior from 2011 to 2016. (on.ft.com/2DAGjeY)

In filings in a U.S. federal court case against one another, Apple and Qualcomm gave dueling descriptions of a so-called “transition agreement” signed by the two companies in 2011.

Apple alleged Qualcomm gave it a discount on royalty payments in exchange for exclusively using Qualcomm’s so-called modem chips.

Qualcomm alleged that Apple demanded the discount as an “incentive” to do business with Qualcomm.

In a separate lawsuit filed in January 2017 by the U.S. Federal Trade Commission against Qualcomm, regulators alleged that Qualcomm’s agreement was a “de facto” exclusivity arrangement that violated antitrust rules. The FTC said the chipmaker could cut off Apple’s incentive payments and even require a refund of past payments if Apple tapped a different supplier.

Qualcomm has denied the FTC’s allegations.

The European Commission declined to comment. Apple declined to comment beyond its previous position on Qualcomm’s practices.

Reporting by Aishwarya Venugopal in Bengaluru, Foo Yun Chee in Brussels and Stephen Nellis in San Francisco; Editing by Sai Sachin Ravikumar and Cynthia Osterman

Google, Tencent, Sequoia China join $15 million funding for pharma startup XtalPi

BEIJING (Reuters) – Alphabet Inc’s Google, Tencent Holdings Ltd and Sequoia Capital China have joined a $15 million B series funding round for Boston- and Shenzhen-based artificial intelligence (AI) pharmaceutical firm XtalPi Inc.

Sequoia led the round, which brings the startup’s total funding amount to $20 million, XtalPi and Google said in statements on Wednesday.

XtalPi uses AI, cloud computing and quantum physics to improve drug design processes.

The deal is the first co-investment by Google and Tencent since the two companies revealed this month that they have signed a patent sharing agreement, paving the way for cooperation between the two firms.

Google has recently ramped up investment in the Chinese market where its search engine remains blocked. Last month it announced it had launched a dedicated AI lab in the country.

Reporting by Cate Cadell; Editing by Himani Sarkar

The Real Reasons Behind The Amazon Prime Monthly Price Boost

source: nyfa edu

It’s no secret that the e-commerce business of Amazon (AMZN) is driven by its Amazon Price subscribers, who spend about double the amount on products served up by Amazon than non-subscribers do.

So when it announced it has boosted its monthly subscriber price from $10.99 to $12.99 for Prime members, and from $5.49 to $6.49 for students, it definitely warrants a look as to what is probably behind the move, which goes into effect on the first payment after February 18.

The new annual costs from the monthly increase will climb from $131.88 a year to $155.88 a year.

It’s important to know that in both increases, the annual fee of $99 for regular customers, and $49 for students, remain the same. This at least partially plays into the reasoning behind the decision.

Also of note, the standalone service fee for its Prime Video membership remains the same at $8.99.

In this article we’ll look at what Amazon is trying to get out of the increase in monthly Prime subscription prices.

Prime growth

While Amazon has never released specific numbers concerning the number of customers subscribing to Prime, the general consensus is that in the U.S. there are about 90 million households subscribing. Again, those subscribers spend about twice as much as customers that don’t subscribe.

Growth for the service has continued to accelerate. In January 2018, the company said “more new paid members joined Prime worldwide this year than any previous year.”

As for the pricing, an Amazon spokeswoman said it was increased because of the “tremendous appetite” Prime subscribers have for the benefits offered in the service, adding, the company is “indifferent” to what payment option customers choose.

I’m going to challenge that assertion a little later in the article. First, let’s look at the variables associated with potential churn.

Thoughts on churn

Some concerns have been raised, and have been for some time, regarding how customers would respond once Amazon inevitably raised its Prime subscription price as the costs of delivering desired services increased.

It has to be kept in mind that Amazon’s performance is driven by Prime subscribers, so when it raised its monthly price, it had to know there was little risk to that customer base in regard to churn.

The first and probably most important thing to consider about the monthly price increase is, if customers were to cancel their subscriptions over $2 a month, or $24 a year, they aren’t the type of customer Amazon is trying to reach with the service in the first place. If they aren’t spending on average like other Prime subscribers do, they are costing the company money to retain them.

So while it’s probable there will be some churn as a result of the increase in subscription price on a monthly basis, it’ll almost certainly be customers that aren’t generating much in the way of e-commerce sales for the company. If its inner data didn’t confirm that, it never would have made the move in the first place.

What’s most interesting about the price move to me is the widening gap between the monthly costs and annual costs, which are now over 50 percent more. I think that’s the key to understanding what’s behind the decision.

I see Amazon trying to change subscribers’ behavior by making it much more desirable to choose an annual subscription against a monthly subscription. Why that’s the case is that it provides more visibility, continuity, and predictability to the performance of the company over time.

The reason why is that the company without a doubt has good customers that pay on a monthly basis. The problem is that with such a large customer base, numerous things can happen that can prompt a quality individual customer to stop their subscription. It could be a loss of a job, divorce, medical bills, or any other unplanned event that causes customers to rethink their financial priorities.

Getting them on an annual payment plan removes much of that risk. That’s because there is no reason to cancel a subscription if it isn’t due for some time. It provides a window of opportunity for the problem to be solved or adjusted to, which removes the level of churn of the types of customers Amazon wants to retain.

Finally, for those that decide to remain on a monthly pay plan, they will probably be good customers that will now provide a larger passive revenue stream with the company doing little to generate the increase in sales.

Most of the churn will come from customers that aren’t contributing much if anything to its bottom line.

Why how people subscribe matter

Now back to the assertion made by the Amazon spokeswoman. The reason I don’t think it’s an accurate statement is because it does in fact matter how people subscribe, and with the widening costs between monthly and annual costs, it is obvious to me the company is trying to push people to buy annually.

If I’m accurate in that assessment, it means the reason for the price increase isn’t to support the added services and their costs, but to get more people to grab a yearly subscription.

Why won’t Amazon come right out and say that? That’s easy. It would be a public relations nightmare for the company to declare some of its Prime subscribers aren’t carrying their weight because they don’t buy many products from the company to offset the costs of delivering premium services.

Conclusion

The costs of delivering premium services to Amazon Prime members are rising. Since Amazon chose to boost costs by targeting the monthly subscription, it suggests it is attempting to push monthly subscribers to its annual subscription plan.

Why it is doing that is in order to produce more predictable results, and in fact, lower churn. The annual service experiences little churn; the churn comes primarily from its monthly service.

So the combination of low-spend customers and an increase in annual revenue and earnings visibility are the primary catalysts behind this increase in monthly prices, in my view.

When considering Amazon will likely lose some fee revenue from this move, it’s obvious to me the company does care about how customers pay. What isn’t being said is that those that drop the plan altogether will no longer be Amazon customers.

What will be left is a better mix of monthly and annual customers, with the monthly customers being those that still spend significantly on its e-commerce platform.

From that point of view, Amazon will get an increase in monthly fees while keeping its best customers on board. That should more than offset the churn coming from the loss of lower-spending customers that are a drag on the service.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Facebook, Twitter Take New Steps to Combat Fake News and Manipulation

Facebook and Twitter both revealed on Friday more about how they plan to deal with the spread of fake news and propaganda on their services.

Facebook said that it would ask its users to tell it which news sources they read and trust to help it decide which ones should be featured more prominently. These responses will help “shift the balance of news you see towards sources that are determined to be trusted by the community,” CEO Mark Zuckerberg explained in a Facebook post.

Meanwhile, Twitter said in a blog post that it would email nearly 678,000 users that may have inadvertently interacted with now-suspended accounts believed to have been linked to a Russian propaganda outfit called the Internet Research Agency (IRA).

The announcements come amid intense scrutiny by U.S. lawmakers over both Facebook and Twitter’s role in letting Russians and others spread misinformation during the 2016 presidential election. The goal, according to U.S. intelligence agencies, was to divide Americans on politically charged issues like race, religion, and gun control.

Zuckerberg announced the Facebook news just days after his company said it would revamp its news feed to show users more family-friendly posts from friends or acquaintances that Facebook believes will spur more user interaction.

“There’s too much sensationalism, misinformation and polarization in the world today,” Zuckerberg said about the polling of users about the sites they have confidence in. “Social media enables people to spread information faster than ever before, and if we don’t specifically tackle these problems, then we end up amplifying them.”

He added: “This update will not change the amount of news you see on Facebook. It will only shift the balance of news you see towards sources that are determined to be trusted by the community.”

It’s unclear how Facebook’s shift will solve the problem of so-called filter bubbles, in which people only see information that aligns with their existing beliefs. Some raised the possibility that crowd sourcing the list of credible news outlets could be manipulated.

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For its part, Twitter minimized the impact of the Russian-linked accounts, saying that they merely represented “two one-hundredths of a percent (0.016%) of the total accounts on Twitter at the time.”

“However, any such activity represents a challenge to democratic societies everywhere, and we’re committed to continuing to work on this important issue,” Twitter said.

Twitter has said that it had discovered 3,814 IRA-connected accounts in total, including 1,062 accounts that it uncovered just recently. It said it had also identified 50,258 bot accounts linked to the Russian government that spread misinformation during the 2016 election, including 13,512 accounts found just recently.

Tesla's Model 3: Unprecedented Price Performance Means Unprecedented Sales

Tesla’s (TSLA) all-electric Model 3 sedan is receiving glowing reviews. The Drive’s Alex Roy spent 50 hours with the car over four days and had this to say: “…it’s far more than a car. It’s a work of art, a concept car come to life, more revelatory than the Model S, and historically even more important. “

Jalopnik and Doug DeMuro echoed the view that the Model 3 is a unique car — futuristic and exciting. Road & Track called it an “unexpected delight” to drive. Motor Trend called it “magic.”

But here’s the kicker: the base model of the Model 3, priced at $35,000, is estimated to have an unsubsidized five-year total cost of ownership only $4,200, or 13% more than a base model Toyota (TM) Camry. For over a decade, the Camry has been the best-selling sedan in the United States. The Camry is generally regarded as a utilitarian vehicle rather than “magic” or a “work of art.”

Photo by Carl Quinn.

The Model 3’s unprecedentedly low total cost of ownership

In my somewhat subjective estimation — backed up by several impartial car reviewers — the Model 3 offers greater quality than an ordinary entry-level luxury car like the BMW (OTCPK:BMWYY) 3 Series at a total cost of ownership not far from a utilitarian, mass market car like the Toyota Camry. This is an unprecedented level of price performance.

Total cost of ownership includes the full costs of owning a vehicle, including energy costs (i.e. electricity or gasoline), service and maintenance, and insurance. It’s a better apples-to-apples comparison of the cost of an electric car vs. a gasoline car than sticker price due to the considerably lower costs of running an electric vehicle.

The comparison to the Toyota Camry comes from Loup Ventures partner Gene Munster, known for betting on Apple (AAPL) as an analyst at Piper Jaffray. Another comparison by YouTubers Two Bit da Vinci produces similar results. They compare the Model 3 to the Honda (HMC) Civic. They find that the unsubsidized five-year total cost of ownership for the Model 3 is only $3,400 or 14% higher than for the Honda Civic, a much more utilitarian car.

They also compare the Model 3 to the BMW 330i, a car with a similar level of luxury, at best equal driving performance, and inferior technology. They estimate the 330i’s total cost of ownership at $17,450 higher than the Model 3s. That’s 62% higher for a car that is about the same or worse.

Two Bit da Vinci notes that beyond their fifth year, the maintenance cost for gasoline cars increases significantly with several parts requiring replacement. Not so for electric cars. Over a seven-year or eight-year timeframe, the cost comparison is likely even more favorable to the Model 3.

A newer gasoline car can survive for 200,000 miles before it needs to be scrapped. Data from the Tesla Model S shows that an electric car can drive 150,000 miles with minimal battery degradation. One taxi driver drove 250,000 miles in his Model S and lost only 7% of his original battery life. Based on this data, electric cars are expected to have much longer lifetimes than gasoline cars, perhaps as much as 500,000 miles.

This makes the total cost of ownership comparison extremely favorable over a 15-year timeframe. After 15 years, a Model 3 may still be running smoothly while a gasoline car is long gone. The same goes for cases of high utilization such as taxis or ride-hailing services. Looking ahead to autonomous ride-hailing, self-driving electric cars will savagely outcompete self-driving gasoline cars.

Photo by Seungho Yang.

Low cost of ownership means high sales

The Model 3 offers a BMW-like experience for a Toyota Camry-like cost. For this reason, I believe that demand for the Model 3 will be like nothing the automotive industry has seen in recent decades. Research has shown that consumers are responsive to the total cost of ownership of vehicles, not just sticker price.

Venture capitalist Chamath Palihapitiya argues that BMW 3 Series sales will be decimated by the Model 3. Gene Munster speculates that Tesla could sell 2.75 million Model 3s per year by 2025. I don’t know if these predictions are correct, but they are certainly not unreasonable given the unprecedented level of price-performance the Model 3 offers. Many consumers will wonder why they would want to buy any other car.

Some analysts are gravely underestimating the level of consumer enthusiasm specifically for this car, and not for lackluster electric compliance cars like GM’s (GM) Chevy Bolt or future me-too offerings. Tesla has advantages in software, design, and battery pack economies of scale that competitors show no signs of overcoming.

Most recently, Tesla stores in San Francisco and LA were swarmed when the first Model 3s were put on display. Some waited over an hour in line just to see the car up-close for a few minutes. This did not occur for the Chevy Bolt, or any other car in memory for that matter.

The best advertising for the Model 3 will be knowing someone who drives one, especially someone as enthusiastic as the 455,000 people who held a reservation as of August 2. I expect that demand will greatly increase over time as more people learn about the car. Another factor driving increased demand will be the development of Enhanced Autopilot and more advanced autonomy features.

Photo by Andrew Wilder.

Revenue and market cap implications

If Gene Munster is correct in his speculation that Tesla will sell 2.75 million Model 3s per year by 2025, the company will generate $105 billion in annual revenue from that one vehicle alone. Assuming an equal amount of revenue from the Model Y crossover, that would be $210 billion between the two vehicles, plus $9 billion for the Model S and X.

At an auto industry average 0.52 price/sales ratio, $219 billion in revenue would yield a market cap of $114 billion, up 42% from September’s all-time high of $65.5 billion. At an S&P 500 historical average 1.47 price/sales ratio, Tesla’s market cap would be $322 billion. That’s an increase of over 490% from the all-time high. Remember, these calculations exclude revenue from all other vehicles and lines of business, including solar and energy storage.

I think the 2025 timeframe is too long for two reasons. First, by 2025 there is a good chance that autonomous ride-hailing will affect overall vehicle demand in a way that Munster is not accounting for. Second, it doesn’t help us to think about what sales will be like in the Model 3s first few years on the market. What factors prevent sales from reaching 2.75 million per year in three years, rather than in seven?

The bottom line is that although it is difficult to predict the future in much detail, I can say with high confidence that the Model 3 will break sales records as soon as the limiting factor is demand, not production. Once production ramps to meet demand, I would be surprised if it is not the best-selling sedan in the United States.

An alternative way to model future revenue and market cap is through the autonomous ride-hailing business. Suppose Tesla produces just 5 million cars with self-driving hardware over the seven years from 2018 to 2025, an average production of 714,000 cars per year. Suppose that each self-driving vehicle replaces five conventional vehicles. Given 1-2 billion passenger vehicles on the road globally (estimates vary widely), that means there is a need for a 200 million to 400 million self-driving vehicles. 5 million cars would be only a 1.25% to 2.5% share of the eventual install base.

Source: ARK Invest.

I’m assuming that each self-driving car will replace the driving of five people, putting average annual paid miles per vehicle at 82,750. Using ARK Invest’s estimated price of 35 cents per mile, that’s about $29,000 in revenue per vehicle per year. Assuming the same net margin on this revenue as the taxi and limousine industry’s 31%, that’s about $9,000 in net profit per car per year. Across 5 million cars, that comes to about $45 billion in annual net profit. The historical price/earnings ratio of the S&P 500 is 15.7. At this ratio, $45 billion in earnings would yield a market cap of $706 billion. That’s over 10x growth from Tesla’s all-time high.

Conclusion

The main obstacle to the Model 3 achieving a high sales volume is achieving a high production volume. Product risk is low and execution risk is moderate or high. In my view, Tesla is unlikely to run out of cash due to its large cash balance ($3.5 billion as of the end of Q3), improving cash flow from Model 3 production, and its proven historical ability to raise funds in a second offering when needed.

Motor Trend calls the Model 3 “the most important vehicle of the century.” Many observers fail to see what is new about the Model 3. It’s not just another electric car like the Chevy Bolt. It’s not just another entry-level luxury car like the BMW 330i. It’s a breakthrough in price-performance that will generate unprecedented consumer interest, and that breakthrough will be hard for competitors to replicate.

Disclosure: I am/we are long TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Private cloud storage 101: Key components and hardware options

Private cloud is an infrastructure deployment methodology that looks to deliver services typically seen in public cloud to internal IT customers. These features echo public cloud’s attributes of on-demand delivery and service-based charging.

Private cloud storage evolves the process of deploying storage resources into the datacentre in a way that enables users to consume resources on demand.

In this article, we discuss what features to expect from private cloud storage and the existing products offered by suppliers.

Cloud definition

As already mentioned, private cloud storage echoes the offerings we see in the public cloud. The classic definition of cloud was set by the National Institute of Standards and Technology (NIST) many years ago, and we can use this definition as a framework for private cloud storage.

Self-service: Users (in this case, the business) should be able to request storage resources and have them provisioned with as little impact as possible. A self-service storage architecture needs automation in the form of application program interfaces (APIs) and command line interfaces (CLIs), which is integrated into the application provisioning process.

Elasticity: Users shouldn’t be concerned with scaling storage resources up or down. In effect, private cloud storage should appear infinite and be available on demand. In the public world, this requirement is pretty clear, because public cloud service providers (CSPs) continue to see continuous growth in volume of new customers (for now at least). In private cloud, budget constraints and business growth means IT has to put much more effort into being efficient with storage resources, while providing the illusion of elasticity.

Resource pooling: Rather than islands of storage, deployments should be pooling resources and getting the benefits of economies of scale. This represents a challenge to implement, because hardware isolation offers better security and performance management. As a result, features like quality of service (QoS) and multi-tenancy become important to deliver private cloud storage.

Billing: Typically this is seen within public cloud as delivering a measured service, or charging for usage. Charging for usage can be an issue for many IT organisations that have evolved to implement IT resources using project-based deployments.

Performance: Although not strictly a NIST definition, in private cloud performance is more significant than for public cloud. Applications in private deployments tend to be monolithic and latency sensitive, which makes input/output (I/O) performance all the more important.

Service-levels: For service-based deployments, we need to have service levels, if not service level agreements in place. Service levels form the basis of a service catalogue – a list of offerings and their descriptions.

Private cloud transformation

Moving to a cloud-based deployment for storage has many advantages.

Users can be abstracted away from needing specific hardware, allowing IT to optimise the products they buy. IT can choose the most efficient refresh-and-replace cycles, choosing whether to replace hardware or extend maintenance. This is done without impacting the end user financial model as charging is typically done on a consumption per-month basis.

The on-demand nature of private cloud means businesses can be more agile, because the “human factor” can be removed from deploying storage for new and existing applications. This is where API-based management becomes critical.

But, moving to a private cloud model is not without its challenges. Business process for application deployment may be based around projects and not structured to handle ongoing payment for resource usage. This may mean significant changes to the process of budgeting for IT within the business.

Building a cost model for IT also changes. Where previously the business may have been charged simply for the cost of infrastructure, now a more complex model needs to be developed that considers all the costs (capex and opex) and translates that into a recurring (opex) monthly charge. If the business doesn’t need as much storage from one month to another, how will this shortfall be made up? This is an issue for many IT organisations and one that is a significant factor in not adopting a private cloud model.

Private cloud building blocks

In putting together a strategy for private cloud storage, here are the main considerations.

Service catalogue: A service catalogue puts in place generic definitions of the requirements of the user, without being hardware-focused. The catalogue references service levels, like tiering, performance and availability, without discussing specific products.

Multi-tenancy: Storage will be shared to get economies of scale. Multi-tenancy features mitigate risks like “noisy neighbour” and to segregate applications from a security perspective.

QoS: Quality of service is important to ensure users get the resources they pay for. The ability to dynamically change QoS settings is a real benefit for private cloud and a differentiator over public cloud, where customers are generally expected to repurpose or reprovision their application to increase I/O performance.

APIs: This has already been stated, but needs to be re-emphasised to highlight the quality and specific implementation of APIs or CLIs. Some storage suppliers have added APIs as an afterthought, making it difficult to manage storage from multiple interfaces (for example, GUI, CLI and API together). APIs should be native and inherent to the platform.

Analytics and monitoring: Inevitably, performance and configuration problems can occur. Most IT organisations will have tools already in place, but these may need revisiting with a private cloud perspective. This can mean building out better reporting/billing, establishing thresholds with automated responses and a long-term capacity planning strategy.

Process: The term “process” seems very generic, but there are a lot of traditional tasks which would impact storage that are not seen in the public cloud. This includes, for example, maintenance and downtime for patching and upgrades and hardware replacement. Ensuring 100% uptime with minimal or no maintenance means implementing processes for live workload migration, including working with server and virtualisation teams to build joined-up solutions.

Private cloud products

HCI: Hyper-converged infrastructure integrates the functions of storage into the virtualisation platform, providing one scale-out deployment model for compute and storage. Typically, the HCI storage component is highly integrated, with little or no work needed by a storage administrator to manage the solution.

VMware provides HCI in the form of Virtual SAN, which can be enabled through a software licence on each vSphere host. The customer is responsible for managing the hardware itself and any associated internal server storage. Dell EMC solutions use Virtual SAN to build HCI appliances that come in a range of configurations.

HPE offers HCI in the form of SimpliVity appliances. Storage is integrated tightly into the architecture, with dedicated hardware that implements performance and storage capacity optimisation features. HPE also offers solutions build around the Synergy architecture.

Nutanix offers HCI solutions that implement a scale-out storage layer across a multi-node configuration. Storage offerings include block-based devices integrated into the hypervisor, external block-based storage and file services.

NetApp recently introduced an HCI range of products, based on the SolidFire storage technology. Solutions scale both storage and compute independently, which fits an architecture between HCI and converged offerings. The SolidFire platform offers native features like QoS and API-based management.

Converged: These are solutions that integrate storage into a hardware “stack”. Typically, converged offerings provide good automation features, but are weaker on scale-out, due to the pre-configured nature of converged infrastructure products.

Hitachi Vantara offers a range of converged solutions based UCP and Hitachi Storage. These products are strong in their software components for private cloud, including Hitachi Cloud Automation Suite and Automation Director. Hitachi also offers hyper-converged solutions based on VMware Virtual SAN.

Appliances

Storage appliances provide another way to implement private cloud storage. Examples of suppliers in this area include:

Tintri, which offers a range of appliances designed to work with virtual machines. Features such as QoS, replication and data protection are implemented at the VM level. Tintri management solutions provide automation via API and CLI, as well as federation, making it easy to balance resources across multiple appliances.

HPE 3PAR has many features that implement private cloud, including QoS, API management and storage capacity optimised features. HPE has extended the ease of management for 3PAR to the storage fabric, with simple device discovery and provisioning for Fibre Channel storage networking.

Pure Storage offers FlashArray appliances with native automation via APIs and CLI. Maintenance and management of multiple arrays can be achieved with 100% availability using ActiveCluster. Financially, Pure offers customers the ability to upgrade systems without the cost and disruption of traditional “forklift upgrades”.

Software-defined

Finally there are software-defined offerings entering the market that provide features of scale-out and automation. SDS suppliers like Portworx, Hedvig, StorMagic and Starwind offer storage that can be deployed on-demand and in an automated fashion to build scale-out solutions.

We’ve only presented a snapshot of the storage solutions on the market today. Most suppliers are adding cloud-based functionality to their platforms as they recognise the benefits of enabling customers to implement a much more service-based consumption model.

Spotify IPO: What You Need to Know About This Unusual Event

The initial public offering of Spotify, the music-streaming service, is almost here.

What is expected to be the largest tech IPO of 2018—it’s certainly the most anticipated—will likely take place in late March or April.

Spotify plans to list on the New York Stock Exchange—but there’s a catch. Instead of a traditional IPO that makes shares available to the general public, Stockholm-based Spotify will opt to directly list on the exchange, making its shares available only to institutional investors and eliminating the need for underwriters, a.k.a. the banks that set an initial price, connect sellers and buyers, and provide the cash necessary to stabilize the stock. Some people have already called it a “non-IPO.”

The move could shake up Wall Street. IPOs are usually a lucrative business for investment banks, but in the last few years revenues from equity capital market (ECM) fees have dropped.

Spotify paid just $30 million in ECM fees to three banks: Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. Those institutions will perform some of the traditional tasks expected of them, but in a less prominent way.

Why the novel strategy? Spotify can buck tradition because, though it’s not yet turning a profit, it is earning cash, and it is not planning on raising more revenue from investors. Spotify, as measured by either its subscription service or its ad-supported free version, is the most popular music streaming service, according to the New York Times.

Commentators say it’s a good time for Spotify to go public. The company has 60 million paying subscribers, just renegotiated long-term licensing deals with three major record labels, and is valued at about $15 billion. (It is, however, facing a copyright suit from Wixen Music Publishing, filed in late December 2017.)

The Wall Street Journal says that due to other companies’ need for cash, “it is far from guaranteed” that more will follow Spotify’s lead. However, according to Bloomberg, Spotify “could create a new model for growth companies in which they raise all their money in private markets and do all their trading in public ones, with some small variations.”

Whatever the case, Wall Street will be watching.

End of a chip boom? Memory chip price drop spooks investors

SEOUL (Reuters) – After a blistering year-and-a-half long surge, a sudden drop in some memory prices, followed by Samsung Electronics Co’s disappointing profit estimate, is causing jitters among investors who had bet the chip boom would last at least another year.

Amid news that the market has started losing some steam – prices of high-end flash memory chips, which are widely used in smartphones, dropped nearly 5 percent in the fourth quarter – some analysts now expect the industry’s growth rate will fall by more than half this year to 30 percent.

That led shares in Samsung to dip 7.5 percent last week, while its home rival SK Hynix fell 6.2 percent. But analysts say that there is unlikely to be a sudden crash, and that 2018 should be a relatively stable year for chipmakers.

The $122 billion memory chip industry has enjoyed an unprecedented boom since mid-2016, expanding nearly 70 percent in 2017 alone thanks to robust growth of smartphones and cloud services that require more powerful chips that can store more data.

Supply also has become more disciplined following years of consolidation that reduced the number of manufacturers to a handful from around 20 in mid-1990s.

“Memory chips will likely see a gradual price decline in 2018 if demand remains strong and appetite from servers holds,” said Lee Jae-yun, analyst at Yuanta Securities Korea.

But growth of 30 percent is a strong gain in an industry known for volatility, and the market is still on course for its longest ever boom after shrinking 6 percent in 2016.

Last year’s explosive growth gave chipmakers cash to reinvest and boost output, analysts said. The supply of NAND flash memory chips, in particular, will grow 43 percent this year, up from last year’s 34 percent, causing prices to drop by about 10 percent, brokerage Nomura estimates.

Nomura expects growth in output will be largely led by the likes of Western Digital, Toshiba Corp and Micron Technology Inc as they seek to catch up with top-ranked Samsung, which controls about 40 percent of the flash memory chip market.

NO DOOM SEEN

Smartphone vendors have been including more memory in their phones and charging more for them, allowing them to weather last year’s price surge, analysts say.

Average DRAM memory of new models launched last quarter increased by 38 percent from the second quarter of 2016, while NAND content measured by gigabyte jumped 84 percent, according to an analysis by BNP Paribas.

Such solid demand will keep the industry’s margin healthy this year, and chipmakers’ investment in more advanced technology will help them cut production costs and stay profitable even as prices ease, analysts say.

Macquarie estimates Samsung’s chip division’s operating profit margin jumped to 47 percent last year from 26.5 percent in 2016, and will rise further to 55.5 percent this year.

While the NAND flash market may soften somewhat, the DRAM memory chip market, which is about $20 billion bigger than the NAND industry, is seen as much tighter. Prices are expected to gain nearly 9 percent because of a severe supply shortage.

With DRAM manufacturers’ rushing to ramp up production – they are likely to nearly quadruple capital spending for 2017 and 2018 combined to $38 billion from 2016’s $10 billion – prices may decline as much as 18 percent next year, according to Nomura.

That gives some investors confidence in the industry’s long-term future.

”Besides some minute adjustment, I am currently holding Samsung shares almost without change,” said Kim Hyun-su, fund manager at IBK Asset Management. “I don’t think the share price is expensive as they have recently been increasing dividends a lot – and as of now, the expected profit levels are very high.”

PRESSURE FROM CLIENTS

Smartphone makers account for about one-third of global memory chip demand, and many have been pressing suppliers to lower prices.

In late December, state-run China Daily reported China’s National Development and Reform Commission (NDRC) was paying close attention to a surge in the price of mobile phone storage chips and could look into possible price fixing by Samsung and others that make them.

More than 50 percent of Samsung’s 2017 memory business revenue came from China, according to chip price tracker DRAMeXchange.

“Although supply-demand dynamics are still solid, clients’ pressure to lower prices make it hard to predict” what will happen, said MS Hwang, an analyst at Samsung Securities, which is an affiliate of Samsung Electronics.

Reporting by Joyce Lee; Editing by Miyoung Kim and Gerry Doyle