This Week In Mobile: Vivo Nex, Samsung Tops Mobile Sales, Apple Shuts iPhone Loophole, Lumen Privacy

, Vice-President and Principal Analyst at Atherton Research Opinions expressed by Forbes Contributors are their own.

This Week in Mobile is a weekly podcast produced by Atherton Research that reviews the main news of the mobile world from the past 7 days

</div> </div> <p><em><a href="https://thisweekinmobile.simplecast.fm/" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://thisweekinmobile.simplecast.fm/">This Week in Mobile</a></em> is a weekly podcast available on <a href="https://itunes.apple.com/us/podcast/this-week-in-mobile/id1370922528?mt=2" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://itunes.apple.com/us/podcast/this-week-in-mobile/id1370922528?mt=2">Apple iTunes</a> or <a href="https://play.google.com/music/listen?u=0#/ps/Igkeffprbrviwl4kygggp4veuae" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://play.google.com/music/listen?u=0#/ps/Igkeffprbrviwl4kygggp4veuae">Google Play</a> where I bring you up to speed on the top mobile news stories of the week:</p> <ol> <li>The <a href="http://www.vivo.com/en/about-vivo/news/vivo-nex" target="_blank" rel="nofollow" data-ga-track="ExternalLink:http://www.vivo.com/en/about-vivo/news/vivo-nex">Nex S</a> (~$700) by Chinese smartphone maker Vivo is the very commercially available first all-screen (6.59-inch Super AMOLED display with a full-HD+ resolution) smartphone with no notch, no front earpiece speaker – it uses&nbsp;its Screen SoundCasting technology to turn the screen into a speaker – an under-the-display fingerprint scanner and an 8-megapixel selfie camera that pops up from inside the phone. Other features include a Qualcomm Snapdragon 845 processor, dual-SIM support, 128GB or 256GB of storage, a rear dual camera (12-megapixel and 5-megapixel), and a 4,000-mAh battery. At 8 mm thick, the Vivo NEX is just 0.3 mm thicker than the iPhone X. However, the virtual fingerprint scanner is slower than a physical one and doesn’t work all the time, and we will have to see how the pop-up mechanism survives the test of time.</li> <li>For the second quarter in a row, the iPhone X remained the world’s most popular smartphone. For the first 3 months of this year, Apple sold between 12.7 and 16 million iPhone Xs according to estimates from <a href="http://news.ihsmarkit.com/press-release/technology/iphone-x-led-global-smartphone-unit-shipments-q1-2018-ihs-markit-says" target="_blank" rel="nofollow" data-ga-track="ExternalLink:http://news.ihsmarkit.com/press-release/technology/iphone-x-led-global-smartphone-unit-shipments-q1-2018-ihs-markit-says">IHS Markit</a> and <a href="https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2018/05/03/strategy-analytics-apple-iphone-x-becomes-world%27s-best-selling-smartphone-model-in-q1-2018#.Wycb2iBlDic" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2018/05/03/strategy-analytics-apple-iphone-x-becomes-world%27s-best-selling-smartphone-model-in-q1-2018#.Wycb2iBlDic">Strategy Analytics</a>, respectively. For Strategy Analytics, the iPhone X was closely followed by the iPhone 8 and iPhone 8 Plus which shipped 12.5 million and 8.3 million units, respectively, and then followed by the iPhone 7 with 5.6 million units. IHS Markit also ranked the iPhone 8 second, followed by the $116 Samsung Galaxy Grand Prime Plus and the iPhone 8 Plus. However, this will certainly change during the current quarter, when sales of the Samsung S8 will surpass iPhone X shipments and become the world’s best-selling Android smartphone globally in the second quarter of 2018.</li> <p> </p> <li>Overall, Samsung was the best selling smartphone manufacturer last quarter with 78 million units, according to <a href="https://www.counterpointresearch.com/global-smartphone-share" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://www.counterpointresearch.com/global-smartphone-share">Counterpoint Research</a>, followed by Apple (52.2 million), Huawei/Honor (39.3 million), Xiaomi (27 million), Oppo (22 million), Vivo (19.5 million) and LG (11.4 million). Interestingly, despite a 14% decline of the Chinese smartphone market last quarter, Apple’s market share in China grew 32% year-over-year while most of the other local smartphone makers saw theirs declined, forcing them to look at other growing markets like India, Southeast Asia, Middle East, Africa, Europe and Latin America.</li> <li>Shenzhen-based <a href="https://www.oneplus.com/" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://www.oneplus.com/">OnePlus</a>, a sister company of Vivo and Oppo and part of the <a href="http://www.gdbbk.com/" target="_blank" rel="nofollow" data-ga-track="ExternalLink:http://www.gdbbk.com/">BKK Electronics</a> conglomerate, announced that they sold 1 million OnePlus 6 (~$530) in less than a month (22 days to be exact). In comparison, it took 3 months to reach the same milestone for the 2 previous OnePlus phones, while Apple sold more than 3 million iPhone X in just 22 days last quarter.</li>

<li>Apple confirmed that starting with the next generation of its mobile operating system (iOS 12), expected in the fall, it will deactivate the data function of an iPhone lightning/USB port if the device has not been unlocked in the past hour. This &quot;USB Restricted Mode&quot; will prevent anyone (mostly law enforcement agencies) to crack into an iPhone using the lightning port and siphon all of its data.</li> <li>App of the week: the <a href="https://www.icsi.berkeley.edu/icsi/projects/networking/haystack" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://www.icsi.berkeley.edu/icsi/projects/networking/haystack">Lumen Privacy Monitor</a> is a VPN application for <a href="https://play.google.com/store/apps/details?id=edu.berkeley.icsi.haystack" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://play.google.com/store/apps/details?id=edu.berkeley.icsi.haystack">Android </a>that monitors applications on the device for connections to servers tracking users and collecting data.</li> </ol> <p>Joining me this week to discuss these top mobile news stories and more is tech veteran Eric Leandri, the co-founder and CEO of search-engine <a href="https://www.qwant.com/" target="_blank" rel="nofollow" data-ga-track="ExternalLink:https://www.qwant.com/">Qwant</a>.</p>” readability=”11.5027442371″>

This Week in Mobile is a weekly podcast produced by Atherton Research that reviews the main news of the mobile world from the past 7 days

This Week in Mobile is a weekly podcast available on Apple iTunes or Google Play where I bring you up to speed on the top mobile news stories of the week:

  1. The Nex S (~$700) by Chinese smartphone maker Vivo is the very commercially available first all-screen (6.59-inch Super AMOLED display with a full-HD+ resolution) smartphone with no notch, no front earpiece speaker – it uses its Screen SoundCasting technology to turn the screen into a speaker – an under-the-display fingerprint scanner and an 8-megapixel selfie camera that pops up from inside the phone. Other features include a Qualcomm Snapdragon 845 processor, dual-SIM support, 128GB or 256GB of storage, a rear dual camera (12-megapixel and 5-megapixel), and a 4,000-mAh battery. At 8 mm thick, the Vivo NEX is just 0.3 mm thicker than the iPhone X. However, the virtual fingerprint scanner is slower than a physical one and doesn’t work all the time, and we will have to see how the pop-up mechanism survives the test of time.
  2. For the second quarter in a row, the iPhone X remained the world’s most popular smartphone. For the first 3 months of this year, Apple sold between 12.7 and 16 million iPhone Xs according to estimates from IHS Markit and Strategy Analytics, respectively. For Strategy Analytics, the iPhone X was closely followed by the iPhone 8 and iPhone 8 Plus which shipped 12.5 million and 8.3 million units, respectively, and then followed by the iPhone 7 with 5.6 million units. IHS Markit also ranked the iPhone 8 second, followed by the $116 Samsung Galaxy Grand Prime Plus and the iPhone 8 Plus. However, this will certainly change during the current quarter, when sales of the Samsung S8 will surpass iPhone X shipments and become the world’s best-selling Android smartphone globally in the second quarter of 2018.
  3. Overall, Samsung was the best selling smartphone manufacturer last quarter with 78 million units, according to Counterpoint Research, followed by Apple (52.2 million), Huawei/Honor (39.3 million), Xiaomi (27 million), Oppo (22 million), Vivo (19.5 million) and LG (11.4 million). Interestingly, despite a 14% decline of the Chinese smartphone market last quarter, Apple’s market share in China grew 32% year-over-year while most of the other local smartphone makers saw theirs declined, forcing them to look at other growing markets like India, Southeast Asia, Middle East, Africa, Europe and Latin America.
  4. Shenzhen-based OnePlus, a sister company of Vivo and Oppo and part of the BKK Electronics conglomerate, announced that they sold 1 million OnePlus 6 (~$530) in less than a month (22 days to be exact). In comparison, it took 3 months to reach the same milestone for the 2 previous OnePlus phones, while Apple sold more than 3 million iPhone X in just 22 days last quarter.
  5. Apple confirmed that starting with the next generation of its mobile operating system (iOS 12), expected in the fall, it will deactivate the data function of an iPhone lightning/USB port if the device has not been unlocked in the past hour. This “USB Restricted Mode” will prevent anyone (mostly law enforcement agencies) to crack into an iPhone using the lightning port and siphon all of its data.
  6. App of the week: the Lumen Privacy Monitor is a VPN application for Android that monitors applications on the device for connections to servers tracking users and collecting data.

Joining me this week to discuss these top mobile news stories and more is tech veteran Eric Leandri, the co-founder and CEO of search-engine Qwant.

Author: Jean Baptiste is a Vice-President and Principal Analyst at Atherton Research, a global technology intelligence firm helping clients deliver successful go-to-market strategies.

Will Multi-Cloud Strategy Help Docker Inc. Win The Enterprise?

At the recently held DockerCon conference, Docker, Inc. has announced plans to make its enterprise container management platform capable of managing applications deployed across multiple environments. The company has also highlighted the integration with Windows containers bringing interoperability between Microsoft Windows Server and Linux operating system.

Source: Docker

Docker Enterprise Edition, the commercial offering from Docker, Inc. to manage containerized applications, will allow organizations to federate applications deployed on-premises, the cloud environments and managed Kubernetes. The cloud-hosted, managed Kubernetes offerings include Azure Kubernetes Service (AKS), AWS Elastic Container Service for Kubernetes (EKS) and Google Kubernetes Engine (GKE).

According to Docker Inc., Docker Enterprise Edition is the only container platform that can deliver federated application management with a secure supply chain. With Docker EE, customers get the choice of Linux distribution or Windows Server, the choice of running in a virtual machine or on bare metal, running traditional or microservices applications with either Swarm or Kubernetes orchestration along with the flexibility to choose the right cloud platform to run containerized workloads.

The federated control plane that would be available in Docker EE delivers higher availability of applications. An application deployed in one location will be automatically replicated across multiple clusters. When the primary cluster becomes unavailable, Docker EE will transparently route the traffic to a healthy cluster. There are other possible use cases where customers will be able to manage applications across development, staging seamlessly, and production environments powered by Docker EE.

Since the move to embrace Kubernetes, Docker, Inc. has been trying to find a differentiating factor. Through federated application management, Docker wants to plug a gap that exists in current Kubernetes offerings. But this capability is not an exclusive Docker EE feature.

There are on-going efforts in the Kubernetes community to federate clusters running in different environments. Vendors such as StackPointCloud and Upbound are moving towards a federated control plane for Kubernetes. It’s a matter of time before upstream Kubernetes gets a more stable and streamlined mechanism to federate clusters. Docker, Inc. will have to make a strong case to use its enterprise platform against other Kubernetes-based offerings.

Docker, Inc. is working closely with Microsoft to integrate Kubernetes with Windows containers. Microsoft has already exposed native Windows containers through familiar Docker API and CLI. Docker and Microsoft are now working together to let Windows workloads run while leveraging all the features of both Kubernetes and Docker Enterprise Edition combined. That means organizations can choose to deploy Windows and .NET applications with either Swarm or Kubernetes, running along alongside Linux applications.

The Race To $1 Trillion, But What About $2 Trillion?

Which company is going to reach the notorious $1 trillion market cap first? Apple (AAPL) will but Amazon (AMZN) will whiz by to be the first to $2 billion. Let’s take a look at the numbers…

By the Numbers

Company

Share Price

Market Cap

% Increase to $1 Trillion

Apple

$192.64

$941 billion

5.6%

Amazon

$1,711

$822 billion

20.65%

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL)

$1,151.78

$788 billion

26.06%

Microsoft (NASDAQ:MSFT)

$101.65

$781 billion

28.04%

Company

Share Price at $1 Billion

Apple

$203.42

Amazon

$2,063.18

Alphabet

$1,451.79

Microsoft

$129.47

Only the top 4 companies by market cap were included because Facebook (NASDAQ:FB) was fifth and the market cap was around $555 billion at $192 per share. So it basically needs to double before Apple has to go up 5.6%. Possible but not plausible.

So you can see by the numbers Apple looks to be the winner. Especially since the company only trades for 18x earnings, pretty much in line with the S&P 500 (SPX). Even intuitively, Apple reaching $203 before Amazon reaching $2,063 just seems way more possible.

If the question was posed, which company will reach $2 trillion first, a lot of people would have bet on Amazon. Granted, Apple was undervalued a couple of years ago, especially when it bottomed around $90/share and Buffett, or more appropriately Combs and Weschler, backed up the truck. But Amazon’s rate of innovation and the growth of AWS led me to believe Amazon would win the foot race.

Also, Apple has bought back stock aggressively, spending over $275 billion over the past 6 or so years on buybacks and dividends. So it only makes sense that Apple is here, about to cross the finish line first.

The Race To $2 Trillion

But what about $2 Trillion? Which company is going to reach that historic landmark first? Honestly, it would not be extremely surprising if a company not even public right now managed to reach $2 trillion first, but from this vantage point, the easy answer is Amazon. The other three companies here don’t stand a chance. And for one reason: fear of failure. Amazon is not afraid to fail and that has given them a huge sustainable advantage in the form of the culture.

In other words, the company’s mindset is completely different from Apple or Microsoft. The people aren’t smarter, everyone at these companies is a genius. It’s about how those geniuses function in the context of the business. In this department, Amazon will win every time. It has proven itself time and time again. Reading a quarterly press release from Amazon is pure silliness; the highlights section goes on and on and on. There seems to be so much innovation, even the press release can’t handle it.

How Amazon Will Get There

There won’t be a comprehensive model of Amazon’s revenue, split into the three operating segments: AWS, North America and International because well, Amazon is so unpredictable. Instead, just retail and AWS will be considered. This is mostly because the quarterly numbers for the past four years and the financials do not lend themselves to pattern recognition. The only real trends are that cash flow has been strong and revenue has accelerated in the past year, due in part to the Whole Foods acquisition, which is absolutely incredible at this scale.

A slight acceleration might give the company around $240 billion in net sales at the end of this year. Nearly a quarter trillion! About 10% of that will most likely be AWS revenue, which accounts for more than 100% of operating income. Yes, you read that right, more than 100%.

It would be surprised if the company reaches $2 trillion before 2021 honestly. However, in just three years, there will probably be so many innovations investors never even saw coming.

But just some quick, back-of-the-napkin math perhaps.

Year

Total Sales at 25% Growth

AWS Sales at 40% Growth

Retail Value (2x sales)

AWS Value (40x EBIT at 30% opm)

2018

$235 billion

$24 billion

2019

$294 billion

$34 billion

2020

$367 billion

$47 billion

2021

$459 billion

$66 billion

$902 billion

$800 billion

2022

$574 billion

$92 billion

$964 billion

$1,104 billion

This is very rough math but it just goes to show that even for Amazon, it will not be easy to reach $2 trillion. Let’s break down some of the math.

  • The retail value was derived from taking the net sales and subtracting AWS sales (574-92) = 482 and giving it a 2x sales multiple = 964 billion.

To break down the growth in the retail segment, Amazon’s revenue has actually been accelerating in the last couple of years. In 2015, sales grew by 20%, in 2016, growth was 27% and this past year’s numbers shot to 30%.

The pay-offs for years of innovation are just rolling in. In the past quarter, revenue re-accelerated to 43%. An impressive feat for a company of Amazon’s scale. Over the next three or so years, 25% as a revenue growth estimate might be a little aggressive but you cannot deny the technological advancements. For example, apparently almost 30 million Alexas have been sold. Some reports peg this voice-enabled technology market at $55 billion.

And the company is, of course, attacking many other industries. According to some reports, Prime Video has over 26 million watchers and in 2017, Amazon sent nearly $5 billion on original content. And some reports estimate the online streaming industry to reach $82 billion by 2023.

Even more, the Whole Foods acquisition has certainly accelerated the grocery delivery business, a market expected to reach $100 billion by 2025. But the Amazon juggernaut will be a serious player in logistics in the far but not too distant future. Last year, the company unveiled a $1.5 billion hub for its cargo planes. For just its planes! As it funds more the purchasing of more assets through current business operations, it continues to cement its competitive advantage.

For instance, buying more trucks for delivery gives Amazon more control over delivery times, meaning more customers will sign up for Prime, meaning it can fund more trucks. It’s really a beautiful cycle, one that JD.com (NASDAQ:JD) has taken very seriously. The size of this global market is immense. Some estimates have it in the trillions, which Amazon could take a small bite of.

It is much different than an asset-light model but it gives the company a huge structural advantage, enabling a better customer experience. This is all to say that the company’s retail segment can grow and grow and grow. It doesn’t seem to be slowing down anytime soon.

And if Amazon reached $574 billion in revenues, the company would still have less than 10% of just North America’s retail market. Plus, with forays into the pharmaceutical industry, Amazon just keeps expanding its markets. Now we have covered grocery delivery, video streaming, logistics, voice-enabled devices, and now drugs. For instance, McKesson (MCK), does over $200 billion in sales for distributing drugs every year. It is possible for Amazon to get a small piece of that.

So all in all, the company has a lot of optionality in terms of the industries it can attack and has decided to attack. The crazy part is that this doesn’t even include international expansion.

To add it all up by the year 2022 (author’s estimates based on reports):

– Voice-enabled tech: $55 billion

– Online streaming: $75 billion

– Grocery delivery: $80 billion

– Logistics: realistically $5 trillion

– Pharmaceutical distribution: $200 billion

– Retail: $5 trillion

Total TAM: $10.4 trillion

Of course, Amazon’s respective market shares of each of these markets varies widely. In logistics and pharmaceuticals, it is practically nothing right now. But it has more than two-thirds of the market in voice-enabled technology. The retail category will naturally move more towards Amazon. Estimates have the e-commerce market at $5 trillion in 2022, up from $2.8 trillion this year. It is likely that the company will capture a sizable piece of that growth.

If the incremental growth in only e-commerce is $2.3 trillion, it is likely that Amazon can add over $300 billion in revenues in the next four years, adding in all the other industries it is involved in as well. Capturing just 10% of that incremental $2.3 billion, leaves the company with revenues of $230 billion. It is likely that Amazon can capture an additional $70 billion from the combination of industries discussed above.

  • The AWS value came from a 30% operating margin on the 2021 number ~20 billion with a 40x EBIT multiple = 800 billion.

One could go on and on about AWS, but it really is a powerhouse. On the last earnings call, Bezos noted that he and his team got a seven-year head-start. In something that moves as quickly as computing, seven years is a huge gap to make up. Only now is Microsoft catching up a little bit with Azure. Even Buffett had to comment.

The fact is that AWS is a gorilla and it will continue to be. By 2022, the cloud computing market is pegged at $210 billion. Currently, the company commands 47% market share so the estimate of $92 billion in four years is not far-fetched at all. In fact, it actually factors in a bit of market share deterioration to 44%.

So all in all, we get over $2 trillion for a market cap, more than a double from today’s levels, or about 26% annual returns after 4 years. That seems like a tall order but then again, it’s Amazon.

Guessing – Why Not?

To guess, Amazon will surpass the $2 trillion mark in the third quarter of 2022. There you have it. Will that be wrong? Almost guaranteed, but based on some quick numbers and knowledge of Amazon’s intensity and innovation, that estimate is plausible.

Apple will reach $203 per share pretty soon. But Amazon will likely be the first company to reach $2 trillion, a crazy number to believe, more than 10% of the US’s current GDP.

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.

AT&T's Merger Creates A Buying Opportunity

Ma Bell is what many people think of when they hear AT&T (NYSE: T). The old AT&T of years ago was a boring utility until it was broken up. Years later, AT&T is attempting to diversify itself into a growth and income story. With the announcement that AT&T will be allowed to acquire Time Warner (NYSE: TWX), the company’s growth profile should change for the better. As I’m writing this, AT&T’s stock sits nearly 18% below its 52-week high. Combine a discounted share price with a roughly 6% yield, and this “boring” company could be an exciting addition to any portfolio.

Favorable Figures

At first glance, the new AT&T doesn’t seem that impressive. If we combine AT&T and Time Warner’s most recent results, you get the following:

  • Total revenue $46 bil. – down 2.3%
  • Core Payout Ratio 61%
  • Operating margin 17.2%

These numbers don’t look to exciting. However, if we dig a little below the surface, the company’s potential becomes clearer. The combined company would have net income growth of just over 16% year-over-year. In addition, the combined company would have reported $5.9 billion in core free cash flow (net income + depreciation – capex.), which represents growth of just over 9%.

If the company’s income and cash flow are growing, what about AT&T’s balance sheet? Though the Time Warner deal is a large transaction, Verizon’s (NYSE: VZ) acquisition of the remainder of Vodafone’s stake in Verizon Wireless gives us a look at what AT&T might expect.

AT&T buys Time Warner

Verizon acquires Vodafone’s stake

Total Value = $85 bil.

Total Value = $130 bil.

Cash value = $42.5 bil.

Cash value = $58.9 bil.

Stock value = $38.2 bil.

Stock value = $60.2 bil.

(Source: AT&T details and Verizon’s details)

Verizon’s acquisition occurred roughly five years ago, and the company took on more debt than AT&T is for the Time Warner deal. If we look at a few key numbers comparing 2014 to 2017 at Verizon, there is a clear improvement in the company’s cash flow, debt profile, and interest expense.

Item

2014

2017

Core Free Cash Flow

$11.3 bil.

$30.3 bil.

Op. Margin

15.4%

21.8%

Interest as percentage of operating income

25%

17.3%

Long-Term Debt net of Cash

42.9%

43.4%

(Source Verizon Annual Reports: 2014 and 2017)

Now obviously Verizon’s acquisition of the remainder of an existing business isn’t the same as integrating AT&T and Time Warner. In addition, Verizon has made several other acquisitions and changes during this time frame. However, Time Warner’s business has a higher operating margin than legacy AT&T. In addition, Time Warner is expected to be free cash flow accretive.

After the acquisition, AT&T’s long-term debt profile totals roughly $180 billion versus roughly $134 billion previously. Though this sounds like a big difference, the combined company’s interest cost versus operating income shows a positive outcome for the new AT&T.

Item

Legacy AT&T

New AT&T

Quarterly interest cost

$1.8 bil.

$2.3 bil.

Operating income

$6.3 bil.

$8.1 bil.

Interest as percent of operating income

28.6%

28.4%

(all numbers per quarter)

It seems clear the new debt that AT&T is taking on won’t be a significant drain on the new company’s resources.

Red or Blue who are you going to choose?

For a long time, investors have lumped Verizon and AT&T into the same group. These two companies are solid dividend choices, but they don’t exactly set the world on fire with growth. The Time Warner merger has a chance to turn some heads toward AT&T.

If investors are concerned that AT&T’s value already reflects the potential of this merger, nothing could be further from the truth. In 2016, after the merger was announced, AT&T stock was at about $38.60. Today, those shares are nearly 16% lower. In the same time, AT&T’s dividend has increased from $1.92 to $2.00 annually.

It also seems the combined company isn’t getting much respect in the growth department. Most analysts expect AT&T to grow earnings next year by a measly 1.5%. Time Warner is expected to grow earnings by less than 1%. If we compare AT&T’s prospects to Verizon (NYSE: VZ) it seems analysts think these two companies move in lockstep. Verizon is expected to grow earnings next year by just over 2%.

It is worth noting AT&T has beaten earnings estimates by an average of 6% the last four quarters. Over the last year, Time Warner has done even better than its suitor, beating estimates by an average of 17%. Given the cost savings potential, vertical integration, and potential of the Warner Bros movie lineup, AT&T will likely keep beating estimates into the future.

Let’s all go to the movies!

The old tagline “let’s all go to the movies” is the perfect comment for why AT&T wanted to acquire Time Warner. Among the movie studios, only Disney seems to have a better lineup of movies coming out in the next few years.

Warner Bros. has at least three major releases left this year. Whether the company makes money from the recently released Oceans 8, Fantastic Beasts: The Crimes of Grindelwald, or Aquaman, Warner Bros. should positively contribute for the remainder of 2018. In 2019, the studio has and enviable list of titles including: The Lego Movie 2: The Second Part, Minecraft: The Movie, Wonder Woman 2, and more.

In 2018 and 2019, Warner Bros. should add to the new AT&T’s growth profile. Between sequels we never thought we would see (Gremlins 3 anyone?), and new franchises being launched like a Joker Origin movie or Deathstroke, AT&T has the right to expect big things from it’s studio.

The bottom line

In the end, AT&T shareholders should be excited for the future. Time Warner has the potential to upgrade AT&T’s growth profile and diversify its revenue streams.

The cost synergies and new content bundles available to the combined company could be impressive. AT&T has already announced a “skinny bundle” of television programming free to its mobile customers that will be Turner content. DirecTV could have special access to movie trailers from Warner Bros. AT&T could bundle mobile, DirecTV, and HBO without having to negotiate with an outside party. Uncertainty around the stock today represents a buying opportunity. Faster growth, improved cash flow, better margins, and a 6% yield are rarely available, smart investors should take advantage.

Disclosure: I am/we are long VZ.

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.

The AT&T Time Warner Merger Provides The Single Greatest Lesson For 21st Century Business: Yes, That's Your Business

In his book, Rules of Thumb, Alan Weber provided a series of 52 rules he’d learned from life. #24 was, “If you want to change the game, change the economics of how the game is played.”

This past Tuesday Judge Richard J. Leon of the United States District Court in Washington sent a clear signal that the economics of how the game is played have changed, when he gave the go ahead for the AT&T Time Warner merger.

The short story is this. The DOJ was opposed to the AT&T Time Warner merger because it believed that it would not have been to the benefit of consumers. This is based on the simple premise that the more choices there are in a market the greater the likelihood of innovation, fair pricing, and diverse options for the consumer.

According to an article in the New York Times, Judge Leon’s opinion was that the “Justice Department had not proved that the telecom company’s acquisition of Time Warner would lead to fewer choices for consumers and higher prices for television and internet services.”

Seems simple enough, right? But there’s much more to this worth paying attention to. Because the rules that have changed aren’t the obvious ones of how AT&T and Time Warner play but a whole ‘nother set of players who are defining their own rules.

You Can’t Handle The Truth

Mark Zuckerberg’s testimony on the hill several weeks ago gave us all cause for concern  when it comes to our legislators’ knowledge of technology. I had so wished that at any of the dozen or so times he was asked, “So, exactly how does Facebook make money?” Zuck would have just said, with a straight face, “You Can’t handle the Truth!”

“But in fairness to Mr. Goldberg, at least his contraptions would normally move a pea from one side of a room to another.”

In stark contrast Judge Leon’s depth of knowledge, insight, vision, and ability to clearly articulate the massive changes at play due to technology, had me shouting hallelujah in the hallway!   

This was a massive case. The trial transcript is more than 4,300 pages long, and Judge Leon’s opinion is a whopping 172 pages. I’m convinced that it will be one of the most read cases in business school classrooms for years to come. Not because of its legal prowess, but rather its portrayal of a post-industrial era attitude towards competition.

Although it contains some of the most enlightening and entertaining commentary that you’re likely to find in any court’s opinion, including such gems as the term “Poppycock,” it also makes it clear that this case was not just a matter of legal technicalities but rather foundational differences between old and the new ways of doing business.

That was evident in my favorite of Judge Leon’s comments. He compared the antiquated and ridiculously complex financial models presented by the DOJ to a Rube Goldberg device. After which, he went on to say, “But in fairness to Mr. Goldberg, at least his contraptions would normally move a pea from one side of a room to another.”

It’s all very entertaining, however something dramatic is also at play that cuts to the very foundation of the free market. And it’s something that will undoubtedly challenge the most basic assumptions that we’ve used to define what constitutes healthy competition, how businesses operate, and what is ultimately in the best interest of the consumer. 

Going Vertical

First, it’s worth taking a moment to describe the difference between a vertical and a horizontal merger.

A horizontal merger is between competing companies that most often represent alternative options for a consumer and are therefore driven, independently, to provide the best value. Horizontal mergers are frowned upon in a free market when they significantly reduce the positive effect of competition. We all get this cornerstone of free markets. 

Vertical merges are between companies that are at different points within the same supply chain. For example, one company manufacturers products and then merges with a separate company that distributes them.

In both types of mergers, the objectives of the companies merging are to achieve higher levels of efficiency, lower costs, and greater profit. Nothing at all wrong with that. The problems set in when the merger takes the option of choice away from the consumer and/or puts the merged company in a position where they can exert monopolistic power over pricing.

The history of regulation governing mergers is fascinating. It was spurred by the industrial trusts of the late 19th Century and the later monopolies created through mergers in the early 20th Century. There were political. labor, and economic concerns over so much concentrated power. But this was mostly true for horizontal mergers. 

Vertical integration however, was eventually shunned by corporations themselves under the premise that if everyone in a supply chain could focus on their core competency overall innovation and quality would rise, and inefficiencies would be driven out.

“You here a lot about digital disruption, right? Well, this is exactly what it looks like!”

That began to makes sense when the basics of an information sharing infrastructure were put into place through telecommunications and transportation infrastructure of hte early 20th Century. And it worked exceptionally well for the first hundred years.

Interestingly, it was technology that drove and enabled the shift to vertical disintegration. In fact, a very early conversation I had with management guru Peter Drucker, I asked him what he thought was the greatest single shift in business during the 20th Century. His answer was the shift from control through ownership to control through strategy and the shift from delivering products to delivering services.  This, according to Drucker, was the result of technological advances in how we work across businesses to build common strategies. 

So, how does all this play into the AT&T Time Warner Merger? Clearly, when it comes to content Time Warner has a treasure trove of properties, including HBO, Turner, TNT, CNN, Cartoon Network, and Warner Bros. AT&T has none of that. But AT&T does have control over the fastest growing platform for content consumption, mobile networks. Combined they seem to be purely complimentary.

There’s also fair precedent for many other vertical mergers of this sort, including Comcast and NBC Universal, Oracle and Sun, Google and Double-click, and Disney and Pixar.

Why then would the DOJ oppose this particular merger? Because, they are operating under an old industrial era economic model in which companies could achieve adequate vertical integration to meet the demands of the market and to compete on a global stage.

No longer. 

You here a lot about digital disruption, right? Well, this is exactly what it looks like! Owning the network or owning the content alone isn’t enough. And the reason is fascinating.  

Today’s marketplace is wildly different and it’s creating some of the most perverse relationships between companies–what Ken Auletta calls Frenemies, in the book by the same name.

Consider that Amazon which competes with digital media companies through its in-house produced original TV content, such as The Tick, also stores the content for its competitors’ TV series on its cloud storage. That would be like buying critical product from a competitor who you are also suing because they are stealing intellectual property from you. Oh, wait, that’s what Apple and Samsung have been doing for years.

In fact, according to a New York Post article, despite handing over a half billon dollars to Apple for patent infringement, Samsung makes more off of the components it provides to Apple for iPhone X than it does from its own Galaxy S8! 

The point here is that in today’s global markets supply chains are so intertwined and inter-reliant that in many cases the formality of a merger is just that. Sort of like the difference between cohabitating with a domestic partner and being married. Set aside religion for a moment, it’s a legal construct for economic benefit and convenience.

Whoever Owns The Behavior Wins

The one aspect of the AT&T Time Warner merger that should act as wake up call (or more like a fire alarm) to virtually every industrial era company is something that I talk about a great deal in my latest book, Revealing The Invisible. Judge Leon specifically pointed out that traditional media companies are at a distinct disadvantage when it comes to the erosion of their revenue streams from advertising.

In what has to be one of the court’s most cutting observations, Leon observed that while yesterday’s advertising players were media giants, today’s are vendors of hardware, technology, email, and social networking. He went on to point out that it’s these same companies who can, through behavioral marketing, so finely target their audience that they can deliver both advertising and content that is infinitely better suited to the consumer’s preferences than any traditional media company. 

In many ways what he was saying is that the industrial era model of business, mass marketing, billboard advertising, and ultimately faceless consumerism is on life support. Whoever owns the behavioral data owns the market. It’s that simple.

But the way, I see shades of this in many other areas as well. Musk is pushing Tesla towards ever greater vertical integration. In some cases that’s overt, such as owning their car dealerships and shunning any sort of traditional marketing. In other cases its subtle, such as collocating their battery supplier manufacturing and R&D under the same roof as the rest of their manufacturing at the Tesla Giga factory. In every case Tesla is using behavioral data across a tightly vertically integrated supply chain to create what will be an incredibly personalized experience.

So, what’s all this pointing towards? Simply that the rate at which companies need to innovate today and coordinate across their supply chains is impossible without ownership and access to deep behavioral data about the customer. 

Of course, none of this is a prediction of success for the merger between AT&T and Time Warner. Whether two businesses that are both facing huge challenges can achieve the economies of scale needed to overcome those same challenges when combined is something I do not hold out much hope for over the long term. AT&T has the data from its mobile users if it can figure out what to do, and if it will be tied through regulation in what not to do with it,  are entirely separate and unanswered questions. 

To me the most valuable lesson in all of this is that we are at an inflection point between the industrial era models that served us so well to scale and meet the needs of a burgeoning market of consumers to the hyper-personalized behavioral models needed to meet the demands of an insatiable appetite for personalized innovation.

You can play by the old rules or try to figure out the new ones; all that’s sure is that the rules of the game have indeed changed.

3 Tricks Dads Know That They Should Be Using on the Job

Once upon a time–let’s say June 1978–there was a freshly minted college graduate hoping to work in corporate communications. Let’s call him Joe. Now this guy is adventurous and a little eccentric, so he builds a time machine in his garage. He climbs in and sets it ahead 40 years, figuring the world will be more interesting in the future, and he exits in June 2018, or right about now.

Dusting off his wide tie and poly-blend suit, our young man marches smartly off in search of the want ads. Joe is sure to be a little confused by some of the job titles that were unheard of in his day: What the heck is a scrum master? A cloud services developer? 

One category Joe is definitely going to see is storyteller, a job that didn’t exist even 20 years ago. It is an essential corporate role in today’s instant-information-saturation world. You must brand your company, whether a startup or an established business, no matter how well known you already are. By storytelling, you nourish and burnish the image by taking people deeply and broadly into your narrative. It’s what keeps them wanting to be there.

A storyteller’s job goes beyond the traditional pairing of a grip-and-grin photo with a boilerplate press release to really narrate and show the impact of a business through–you guessed it–storytelling. When done right, it’s brilliant. Joe might not know how to apply for a storyteller job online, but telling a good story hasn’t changed since the dawn of time; it is universal and eternal. 

Likewise, the home environment of 2018 with its flat-screen TVs and Alexas might look very different to Joe, but there’s one ritual he would recognize immediately: that of a mom, dad, or other special grownup reading stories to a child at bedtime. How fortunate that some of the best things never change.

The interesting part is that this essential (and usually enjoyable) bedtime task translates to better outcomes at work. Here are three things you can learn from being a storyteller at home that will make you a great storyteller in the workplace.

1. You can’t be boring.

Kids like it when you use a bunch of different voices when reading–you know, one for the Big Bad Wolf, one for Red Riding Hood, and so on. If you’re writing (or shooting video or making a podcast) about your latest business initiative, do it that way, too. First of all, have characters, because a story with people in it is more relatable than any page of data will ever be. That’s why I introduced our friend Joe into this article and then give the different characters (members of your team, people who use your product) their own “voices” and make each one unique.

2. You need a story arc.

An “arc,” as storytellers say, means the people in your story go through a challenge of some kind, overcome obstacles, and come to a clear (ideally, happy) ending. Where’s the excitement, the suspense, the things to cheer for? Your corporate communications don’t have to rise to the thrill level of A Series of Unfortunate Events (or Stephen King, for you adults), and your story has to be believable and not seem trumped up, but if there’s no drama at all, you’re not doing it right.

3. You need just enough story and not too much.

What parent hasn’t tiptoed away from a snoozing child’s bedside, gingerly closing a Little Golden Book? Your job is to provide a story that suits the time and attention your young listener has, not to keep shaking him or her awake so you can finish the book. The amount of attention and interest will change depending on the child’s personality and age (and depending on how good the story is). As a business storyteller, your goal is to tell just enough story to get the job done, not more. Leave your listeners wondering what else there is to know about your business, not shell-shocked by information overload.

With Father’s Day on the horizon, there’s no better time to give a thumbs-up to all you dads and granddads who open up that well-worn Goodnight Moon or Harry Potter book and bond with kids over a great story. It’s such a special form of intimacy–one proven to improve children’s attention spans, ability to self-regulate, and goal-setting skills.

In other words, an adult reading to a child is doing the very best kind of mentoring there is. Oh, and Joe, your dad is going to expect you on Sunday, so you might want to get back to that time machine. Happy Father’s Day to you all!

Talking To Yourself As Stress Control

, Opinions expressed by Forbes Contributors are their own.
pxhere.com

Meeting stress

</div> </div> <p>You’re sitting in a meeting and some guy pokes fun at the idea you just pitched, in a way that sounds like when your dad made you feel stupid as a kid.&nbsp; You feel your pulse quicken. At once angry and diminished, you feel yourself reverting to the 8-year old you that believed your dad. &nbsp;What do you?</p> <p>How you react in that moment, what you say to yourself in that moment, could make or break the deal you’re trying to close, your professional reputation, and maybe even your career.</p> <p>It’ll also affect your self-esteem, self-respect and self-confidence, and your mental health more broadly.</p> <p>The shocking suicides of Anthony Bourdain and Kate Spade, who had lives many of us aspire to, rightfully shined a light on the suicide epidemic, mental health issues, and how we can help people suffering from depression.&nbsp; It’s another reminder to get our heads out of our phones, talk to people face to face, and listen.</p> <p> </p> <p>Their tragedies are also a reminder to manage that voice in your head. Here are useful insights.</p> <h2><strong>“Regular People” Pressures – How You Respond is What Matters</strong></h2> <p>“[R]egular people can wind up with the same urgent need to maintain a celebrity-like front to the world,” Ana Marie Cox wrote in <span><em><a href="https://www.washingtonpost.com/news/posteverything/wp/2018/06/09/celebrities-arent-the-only-ones-who-struggle-to-appear-perfect-or-who-need-help/?utm_term=.d3a62c9ae619" target="_blank" data-ga-track="ExternalLink:https://www.washingtonpost.com/news/posteverything/wp/2018/06/09/celebrities-arent-the-only-ones-who-struggle-to-appear-perfect-or-who-need-help/?utm_term=.d3a62c9ae619">The Washington Post</a></em></span> after the Spade and Bourdain suicides. “[P]ressure to conform to whatever story we’ve created for ourselves …(is) based in the simple fear of revealing yourself to be flawed, and how the world (or just your friends and family — <em>your&nbsp;</em>world) will respond when you do.”</p>

<p>It’s this fear that can take over when we face a stressor, whether it’s the revelation of a mistake, an unhappy client, or being spoken to in a degrading manner.</p>” readability=”49.4434680726″>

pxhere.com

Meeting stress

You’re sitting in a meeting and some guy pokes fun at the idea you just pitched, in a way that sounds like when your dad made you feel stupid as a kid.  You feel your pulse quicken. At once angry and diminished, you feel yourself reverting to the 8-year old you that believed your dad.  What do you?

How you react in that moment, what you say to yourself in that moment, could make or break the deal you’re trying to close, your professional reputation, and maybe even your career.

It’ll also affect your self-esteem, self-respect and self-confidence, and your mental health more broadly.

The shocking suicides of Anthony Bourdain and Kate Spade, who had lives many of us aspire to, rightfully shined a light on the suicide epidemic, mental health issues, and how we can help people suffering from depression.  It’s another reminder to get our heads out of our phones, talk to people face to face, and listen.

Their tragedies are also a reminder to manage that voice in your head. Here are useful insights.

“Regular People” Pressures – How You Respond is What Matters

“[R]egular people can wind up with the same urgent need to maintain a celebrity-like front to the world,” Ana Marie Cox wrote in The Washington Post after the Spade and Bourdain suicides. “[P]ressure to conform to whatever story we’ve created for ourselves …(is) based in the simple fear of revealing yourself to be flawed, and how the world (or just your friends and family — your world) will respond when you do.”

It’s this fear that can take over when we face a stressor, whether it’s the revelation of a mistake, an unhappy client, or being spoken to in a degrading manner.

Page 1 / 4

Intel Optane Finally On DIMMS

Intel first publicly discussed their 3D Point technology (developed with Micron) at the 2015 IDF and more boradly at the 2016 Storage Visions Conference. They introduced an NVMe SSD using their renamed Optane technology in 2017. Intel has now announced availability of Optane technology on a DDR4 memory channel. Providing Optane on the computer/server memory channel should allow using Optane most effectively as a non-volatile extension of DRAM.

From Intel Product Introduction

Intel’s OPTANE DC DDR Memory

Intel sees DDR-based Optane as filling the gap between fast storage (SSDs) and DRAM memory. The performance of Optane is faster than flash memory but slower than DRAM, while the endurance of Optane is better than flash memory. Like flash memory, though, Optane is a non-volatile technology and doesn’t require regular electrical refreshes to maintain its stored content. This combination makes Optane useful for traditional memory applications, and the technology can include more writing than flash memory cells can support. As a consequence, Optane can serve as a non-volatile layer, behind DRAM, effectively expanding the fast memory available to a server or host computer and providing a fast non-volatile cache to support DRAM.

From Intel Product Introduction

Intel New Memory and Storage Hierarchy

Enabling the performance of Optane on the memory channel apparently involved changes in the way the microprocessors work. Intel of course makes microprocessors, and they have been very involved in developing new memory access technologies with industry groups such as the SNIA Solid State Storage Initiative, NVM Express Promotors Group and the Open Fabric Alliance. These technologies are being applied to enable Optane to provide enhanced non-volatile memory capacity (currently up to 3 TB of capacity per CPU socket) and optimal performance at a much lower cost than an all DRAM memory. Expect that new versions or upgrades of the Xeon processors will be needed to gain the greatest advantage from the Optane DDR solutions.

Intel says that this technology will have a real impact on real world data center applications, “For example, for planned restarts of a NoSQL in-memory database using Aerospike* Hybrid Memory Architecture, Intel Optane DC persistent memory provides a minutes-to-seconds restart speedup compared to DRAM-only cold restart. On memory-intensive workloads such as Redis IMDB server, Intel’s persistent memory enables higher memory capacities, delivering more server instances at the same service level agreement (SLA) performance when compared to a system configured with just DRAM.”

Intel said that Optane can be used to provide native persistence to a local processor but it can also provide persistent memory over RDMA (Remote Direct Memory Access). This remote memory access allows low latency data replications and is enabled by PMoF (Persistent Memory over Fabric) which Intel is working on with industry groups, such as the Open Fabric Alliance. Intel has built a Persistent Memory Development Kit (DMDK) with a collection of libraries, APIs and an on-line community to support developers.

From Intel Product Introduction

Intel Persistent Memory over Fabric Illustration

The Optane DDR memory are available this year but many of the new capabilities are tied to new upcoming CPUs from Intel that will be selectively available in 2018 and broadly available in 2019. Intel also said that it will be shipping QLC NAND drives in the second half of 2018 and into 2019. Technologies like Intel’s Optane have the potential to dramatically change data center memory and storage in the next few years.

The PC Version Of 'New Gundam Breaker' Will Have Its Release Delayed

, I cover gaming in Japan as well the pop-culture here. Opinions expressed by Forbes Contributors are their own.
Credit: Bandai Namco

‘New Gundam Breaker’ will have its PC release delayed.

</div> </div> <p>With the PlayStation 4 version of <a href="https://gb.ggame.jp/" target="_blank" data-ga-track="ExternalLink:https://gb.ggame.jp/" rel="nofollow"><em data-ga-track="ExternalLink:https://gb.ggame.jp/">New Gundam Breaker</em></a> released in a few weeks, Bandai Namco has announced that the PC version of the game <a href="https://twitter.com/BandaiNamcoEU/status/1004981415476453376" target="_blank" data-ga-track="ExternalLink:https://twitter.com/BandaiNamcoEU/status/1004981415476453376" rel="nofollow">will have its release delayed</a>.</p> <p>In a recent <a href="https://twitter.com/BandaiNamcoEU/status/1004981415476453376" target="_blank" data-ga-track="ExternalLink:https://twitter.com/BandaiNamcoEU/status/1004981415476453376" rel="nofollow">Tweet</a>, Bandai Namco has explained that the PC version of <em>New Gundam Breaker</em> will have its release delayed until later this Summer to improve the quality of the game for this particular platform.</p> <p>As this will be the first <em>Gundam Breaker</em> game to come to PC, I think it is wise that Bandai Namco takes some extra time to get the game right.</p> <p>After all, there are plenty of PC ports of console games that are often terrible, as they were obviously rushed to market and thus sacrificed any kind of meaningful quality assurance.</p> <p> </p> <p>In recent years, Bandai Namco has been trying to change the fortunes of <em>Gundam</em> games outside of Japan and the PC userbase is clearly something that is very different in the West in terms of its requirements.</p> <p>As such, I think the delay of the PC version of <em>New Gundam Breaker</em> is a sensible decision.</p> <p>The good news here though is that the PS4 version will still be released later this June, so we are still getting the game on console in a timely fashion</p>

<p><em>New Gundam Breaker</em> is released for PS4 on June 22. The PC version of the game is delayed until a later this Summer.</p> <p><em>Follow me on <a href="https://twitter.com/Cacophanus/" target="_blank" data-ga-track="ExternalLink:https://twitter.com/Cacophanus/" rel="nofollow">Twitter</a>, <a href="https://www.facebook.com/cacophanus" target="_blank" data-ga-track="ExternalLink:https://www.facebook.com/cacophanus" rel="nofollow">Facebook</a> and <a href="https://www.youtube.com/user/Cacophanus" target="_blank" data-ga-track="ExternalLink:https://www.youtube.com/user/Cacophanus" rel="nofollow">YouTube</a>. I also manage <a href="http://www.mechadamashii.com" target="_blank" data-ga-track="ExternalLink:http://www.mechadamashii.com" rel="nofollow">Mecha Damashii</a> and do toy reviews over at <a href="http://www.hobbylink.tv/members/ollie/" target="_blank" data-ga-track="ExternalLink:http://www.hobbylink.tv/members/ollie/" rel="nofollow">hobbylink.tv</a>.</em></p> <p><em>Read my Forbes blog <a href="http://www.forbes.com/sites/olliebarder/" target="_self">here</a>.</em></p>” readability=”40.9205921938″>

Credit: Bandai Namco

‘New Gundam Breaker’ will have its PC release delayed.

With the PlayStation 4 version of New Gundam Breaker released in a few weeks, Bandai Namco has announced that the PC version of the game will have its release delayed.

In a recent Tweet, Bandai Namco has explained that the PC version of New Gundam Breaker will have its release delayed until later this Summer to improve the quality of the game for this particular platform.

As this will be the first Gundam Breaker game to come to PC, I think it is wise that Bandai Namco takes some extra time to get the game right.

After all, there are plenty of PC ports of console games that are often terrible, as they were obviously rushed to market and thus sacrificed any kind of meaningful quality assurance.

In recent years, Bandai Namco has been trying to change the fortunes of Gundam games outside of Japan and the PC userbase is clearly something that is very different in the West in terms of its requirements.

As such, I think the delay of the PC version of New Gundam Breaker is a sensible decision.

The good news here though is that the PS4 version will still be released later this June, so we are still getting the game on console in a timely fashion

New Gundam Breaker is released for PS4 on June 22. The PC version of the game is delayed until a later this Summer.

Follow me on Twitter, Facebook and YouTube. I also manage Mecha Damashii and do toy reviews over at hobbylink.tv.

Read my Forbes blog here.

'A Certain Magical Virtual On' Has A New Crowdfunding Campaign For A TwinStick Peripheral

, I cover gaming in Japan as well the pop-culture here. Opinions expressed by Forbes Contributors are their own.
Credit: Tanita

Tanita’s plan for the new pair of TwinSticks.

</div> </div> <p>Back in February, Tanita announced it had plans to <a href="https://www.forbes.com/sites/olliebarder/2018/02/20/it-looks-like-tanita-will-be-making-some-virtual-on-twinsticks/" target="_self">make a pair of new TwinSticks</a> for <a href="http://vo-index.sega.jp/" target="_blank" data-ga-track="ExternalLink:http://vo-index.sega.jp/" rel="nofollow"><em data-ga-track="ExternalLink:http://vo-index.sega.jp/">A Certain Magical Virtual On</em></a>. Well, there’s now a <a href="https://camp-fire.jp/projects/view/64929" target="_blank" data-ga-track="ExternalLink:https://camp-fire.jp/projects/view/64929" rel="nofollow">new crowdfunding campaign underway</a> to make that happen.</p> <p>The recently released <em>A Certain Magical Virtual On</em> ties into the <a href="https://en.wikipedia.org/wiki/A_Certain_Magical_Index" target="_blank" data-ga-track="ExternalLink:https://en.wikipedia.org/wiki/A_Certain_Magical_Index" rel="nofollow"><em data-ga-track="ExternalLink:https://en.wikipedia.org/wiki/A_Certain_Magical_Index">A Certain Magical Index</em></a> series and was released in February on both PlayStation 4 and PlayStation Vita.</p> <p>However, what was absent for the PS4 release was a suitable TwinStick peripheral. This was the traditional means of control for the <a href="http://www.mechadamashii.com/features/features-virtual-ontaku/" target="_blank" data-ga-track="ExternalLink:http://www.mechadamashii.com/features/features-virtual-ontaku/" rel="nofollow"><em data-ga-track="ExternalLink:http://www.mechadamashii.com/features/features-virtual-ontaku/">Virtual On</em></a> games when they were originally released in the arcades back in the 90s.</p> <p> </p> <p>While Hori stepped in during the last console generation to make TwinStick controllers for these games, the company abstained for the new <em>A Certain Magical Virtual On</em>.</p> <p>This is where Tanita stepped in and <a href="http://www.tanita.co.jp/page/twin-stick" target="_blank" data-ga-track="ExternalLink:http://www.tanita.co.jp/page/twin-stick" rel="nofollow">offered its services</a>.</p> <p>The complication here is that <em>A Certain Magical Virtual On</em> has not been met with open arms by the <em>Virtual On</em> community and it’s clear that making a pair of TwinSticks for the game would now be risky.</p>

<p>So this new crowdfunding campaign is hoping to mitigate that risk by having fans support the project financially and to show that there is a demand for a new TwinStick peripheral.</p> <p>The campaign is now up on <a href="https://camp-fire.jp/projects/view/64929" target="_blank" data-ga-track="ExternalLink:https://camp-fire.jp/projects/view/64929" rel="nofollow">Campfire</a> and aiming for a target of 277,000,000 yen (or around $2.5 million). This is a lofty goal, but the deadline is still a good way off, as the campaign ends on July 30.</p> <p>The sticks themselves look very similar to the earlier Hori versions (shown in the schematic above) but whether Tanita will be able to make something as serviceable as those Hori sticks remain to be seen.</p> <p><em>Follow me on <a href="https://twitter.com/Cacophanus/" target="_blank" data-ga-track="ExternalLink:https://twitter.com/Cacophanus/" rel="nofollow">Twitter</a>, <a href="https://www.facebook.com/cacophanus" target="_blank" data-ga-track="ExternalLink:https://www.facebook.com/cacophanus" rel="nofollow">Facebook</a> and <a href="https://www.youtube.com/user/Cacophanus" target="_blank" data-ga-track="ExternalLink:https://www.youtube.com/user/Cacophanus" rel="nofollow">YouTube</a>. I also manage <a href="http://www.mechadamashii.com" target="_blank" data-ga-track="ExternalLink:http://www.mechadamashii.com" rel="nofollow">Mecha Damashii</a> and do toy reviews over at <a href="http://www.hobbylink.tv/members/ollie/" target="_blank" data-ga-track="ExternalLink:http://www.hobbylink.tv/members/ollie/" rel="nofollow">hobbylink.tv</a>.</em></p> <p><em>Read my Forbes blog <a href="http://www.forbes.com/sites/olliebarder/" target="_self">here</a>.</em></p>” readability=”43.421875″>

Credit: Tanita

Tanita’s plan for the new pair of TwinSticks.

Back in February, Tanita announced it had plans to make a pair of new TwinSticks for A Certain Magical Virtual On. Well, there’s now a new crowdfunding campaign underway to make that happen.

The recently released A Certain Magical Virtual On ties into the A Certain Magical Index series and was released in February on both PlayStation 4 and PlayStation Vita.

However, what was absent for the PS4 release was a suitable TwinStick peripheral. This was the traditional means of control for the Virtual On games when they were originally released in the arcades back in the 90s.

While Hori stepped in during the last console generation to make TwinStick controllers for these games, the company abstained for the new A Certain Magical Virtual On.

This is where Tanita stepped in and offered its services.

The complication here is that A Certain Magical Virtual On has not been met with open arms by the Virtual On community and it’s clear that making a pair of TwinSticks for the game would now be risky.

So this new crowdfunding campaign is hoping to mitigate that risk by having fans support the project financially and to show that there is a demand for a new TwinStick peripheral.

The campaign is now up on Campfire and aiming for a target of 277,000,000 yen (or around $2.5 million). This is a lofty goal, but the deadline is still a good way off, as the campaign ends on July 30.

The sticks themselves look very similar to the earlier Hori versions (shown in the schematic above) but whether Tanita will be able to make something as serviceable as those Hori sticks remain to be seen.

Follow me on Twitter, Facebook and YouTube. I also manage Mecha Damashii and do toy reviews over at hobbylink.tv.

Read my Forbes blog here.

This Hong Kong 'Smart Ring' Startup Raised $2.5M To Crack The Wearables Market

Origami Labs

Origami Labs co-founders Emile Chan, Marcus Leung-Shea and Johan Wong wear their Orii rings. (photo courtesy of Origami Labs)

When you think wearables, the first things that come to mind are probably smartwatches and fitness bands. Wearables surfaced as a mainstream consumer electronics trend about four years ago, but eventually the trend tapered.

One Hong Kong startup, Origami Labs, is widening the wearables wardrobe with a finger ring that answers phone calls.

The ring, called Orii, receives any kind of smartphone notification, like a text message. The wearer can use the device to take a call or activate a phone’s voice assistant, hearing by placing the ringed finger close to one’s ear. The ring communicates with a phone via Bluetooth, with the user’s finger bones conducting the sound (painlessly).

Orii functions something like a wireless earbud but never has to be taken off until the battery dies after about 48 hours of standby time.

“It’s truly a wearable in that it serves as a notification device,” co-founder Johan Wong said at the 2.5-year-old firm’s booth at the InnoVEX tech show in Taipei this week. It’s ideal, he adds, “in a private setting, or [if] you’re outdoors or you’re on the go.”

After the user presses a button, he says, “then [the ring] will either read out whatever info,” audibly like a text message, “or you can just jump on the call.”

What got it going

The four Origami Labs founders got the idea as students at the Hong Kong University of Science and Technology. Wong’s father, now in his 50s, had trouble seeing and wanted some way to use smartphones without looking at the screen.

The product that launched late last year has sold 5,000 boxes–of four to 10 rings each–with another 5,000 expected to move by the end of August. Orders are coming mainly from Singapore, Hong Kong, Japan and Taiwan as well as Europe and the United States.

Origami Labs has raised $500,000 in crowdfunding and closed a hefty total funding of $2.5 million , Wong said. One of its founders is China-based Alibaba Entrepreneurs Fund for startups.

A set of rings sells for $160 after production in Taiwan and final assembly in China.

Magic ring or just another wearable?

Whether Origami Labs will see further funding, increased orders, or even an IPO is hard to say. Wong says the point for now is to make a “kick-butt” product.

The ring’s success could come down to fashion. The boxy Orii ring looms larger on the finger than the average wedding ring, and Origami Labs demos it by encouraging people to use the index rather than ring finger.

“It’s always neat to see creative ideas like this,” says Bryan Ma, Vice President of Client Devices Research with the market analysis firm IDC. Ma points out that Bluetooth headsets have become accepted in day-to-day life, “as awkward as they might’ve looked at first.”

“As with many wearable devices though, tech and fashion don’t always mix together very well, and society might not quickly accept the idea of putting your finger next to your ear either,” Ma says.

An Orii ring is tried at the Slush start-up events in Tokyo, March 28, 2018. (Alessandro Di Ciommo/NurPhoto via Getty Images)

Vendors will sell 411 million wearable devices in 2020, worth $34 billion, up from $14 billion in 2016 , CSS Insight says as cited here. But by last year, forecasts were getting more conservative. A lot of those shipments were watches, as well. Reports such as this one point to a shakier market.

Smartrings aren’t a new concept, either; Wareable.com released a list of some top performers earlier this year. But still…they don’t answer phones through your bones.

​Mark Shuttleworth dishes on where Canonical and Ubuntu Linux are going next

Mark Shuttleworth looked good at OpenStack Summit in Vancouver. Not only were his company Canonical and operating system Ubuntu Linux doing well, but thanks to his microfasting diet, he’s lost 40 pounds. Energized and feeling good, he’s looking forward to taking Canonical to its initial public offering (IPO) in 2019 and making the company more powerful than ever.

It’s taken him longer than expected to IPO Canonical. Shuttleworth explained, “We will do the right thing at the right time. That’s not this year, though. There’s a process that you have to go through and that takes time. We know what we need to hit in terms of revenue and growth and we’re on track.”

In the meantime, besides his own wealth — according to the BBC, his personal wealth jumped by £340 million last year — he’s turned to private equity to help fuel Canonical’s growth.

And, where is that growth coming from? Well, it’s not the desktop. Found as users — and Shuttleworth himself — of the Linux desktop, Canonical’s real money comes in from the cloud.

Ubuntu remains the dominant cloud operating system. According to the May 8, 2018 Cloud Market statistics, on the Amazon Web Services (AWS) cloud, Ubuntu dominates the cloud with 209,000 instances, well ahead of its competitors Amazon Linux AMI, 88,500; Red Hat Enterprise Linux (RHEL) and CentOS‘s 31,400, and Windows Server‘s 29,200. As another data point, the executives at the OpenStack cloud company Rackspace told me that although their company had started with RHEL, today it’s 60/40 Ubuntu.

OpenStack has been very, very good for Canonical, which is more than you can say for many companies that tried to make it as OpenStack providers or distributors. “With OpenStack it’s important to deliver on the underlying promise of more cost-effective infrastructure,” Shuttleworth said. Sure, “You can love technology and you can have new projects and it can all be kumbaya and open source, but what really matters is computers, virtual machines, virtual disks, virtual networks. So we ruthlessly focus on delivering that and then also solving all the problems around that.”

So it is, Shuttleworth claims, that “Canonical can deliver an OpenStack platform to an enterprise in two weeks with everything in place.”

What’s driving Canonical growth on both the public and OpenStack-based cloud is “machine learning and container operations. The economics of automating the data center brings people to Ubuntu.”

That said, “The Internet of Things (IoT) is still an area of investment for us. We have the right set of primitives [Ubuntu Core, Ubuntu for IoT and Snap contanizeried applications] to bring IoT all over the planet.” But, it’s “not profitable yet”.

Shuttleworth thinks Ubuntu will end up leading IoT, as it has the cloud, “because a developer can transfer their programs from a workstation to the cloud to a gateway to the IoT. I want to make sure we build the right set of technologies so you can operate a billion things with Ubuntu on it.” To make this happen, Shuttleworth said Canonical currently has just short of 600 full-time developers.

As for the desktop, Shuttleworth finds it a “fascinating study of human nature that Unity [Ubuntu’s former desktop] became a complete exercise in torches and pitchforks. I’m now convinced a lot of the people who demanded its demise never used it.” That’s because, while “I think GNOME is a nicely done desktop,” many Ubuntu users are now objecting to GNOME. Shuttleworth also had kind words about the KDE Neon, MATE, and LXDE desktops. Still, “I do miss Unity, but I use GNOME.”

Shuttleworth would like to see the open-source community become “safer to put new ideas out into it.” Too often, “it’s obnoxious to someone else’s labor of love.”

That said, in business competition, Shuttleworth said, after people criticized him for calling out Red Hat and VMware by name in his OpenStack keynote speech, “I don’t think it was offsides to talk about money and competition. OpenStack has to be in the room where public clouds are discussed and Ubuntu has to be in the conversation when it comes to cloud operating systems. No one has questioned the facts.”

In a way, though, having given up on innovating on the desktop and on the smartphone market has been a blessing. “I can work with more focus on cloud and the edge and IoT. We’re moving faster. Our security and performance story can be tighter because we can put more time on both them.”

One thing that Shuttleworth believes Canonical does better than his competition is delivering the best from upstream to its customers. “Take OpenStack, we didn’t invent a bunch of pieces. We take care of stuff people need by trusting the upstream community. People find this refreshing.”

Canonical also succeeds, he thinks, because they eat their own dog food. “We learn stuff by operating it ourselves and not just developing it. We experience what it’s like to operate many OpenStack and Kubernetes stacks. We then offer these complex solutions as a managed service, and that reduces the cost for users.”

The result is a company that Shuttleworth is sure will lead the way in the cloud and container-driven world of IT.

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Elon Musk Calms Down, and More From Tesla's Shareholder Meeting

When Elon Musk was a kid, he had so much trouble managing his time, that his younger brother Kimbal would lie to him about the bus schedule. Elon would show up a few minutes after the supposed arrival—and have just enough time to hop aboard. A few decades on, the whole world knows about Elon’s habit of blowing deadlines. And he admits it can be a problem.

“This is something I’m trying to get better at,” he said from the stage of Silicon Valley’s Computer History Museum on Tuesday afternoon, at Tesla’s annual shareholders meeting. “I’m trying to recalibrate these estimates.”

A few days after a Twitter rage fest aimed at the media, a month after refusing to answer questions about Tesla’s financial state during an investors’ call, and two months after getting in a public spat with the feds investigating a deadly crash in one of his cars, Musk’s attitude when he appeared before his fellow shareholders was conciliatory. He even seemed emotional at times. “We build our cares with love,” he said, with a slight quaver in his voice. And he noted how brutal the auto industry can be, especially to newcomers. “It’s insanely hard just staying alive.”

For an hour and a half, Musk patiently fielded questions on just about every part of Tesla’s sprawling business. He said the Model 3 production rate will hit the long-promised 5,000 cars a week rate later this month, predicted an enormous increase in battery production, announced upgrades to the Autopilot semi-autonomous system, and even appeased PETA. If you missed the meeting, here are the key takeaways.

Elon Retains the Reins

The official business of the meeting included voting on the reelection of venture capitalist Antonio Gracias, Elon’s bus-catching brother Kimbal, and 21st Century Fox CEO James Murdoch to Tesla’s board of directors. (Only a third of the nine board members come up for election at a time—it’s like the US Senate that way.) Last month, activist investor the CtW Group urged Tesla shareholders to replace the trio with people who had automotive and manufacturing expertise. Another investor, Jing Zhao, filed a proposal to strip Musk of his position as Tesla’s chairman, which he has held since 2004 (he took the CEO job in 2008). But the shareholders stuck with Musk, reelecting the board members and nixing the leadership change by an overwhelming majority. (Tesla will file the exact vote count with the SEC in the next few days.)

The loss didn’t surprise CtW executive director Dieter Waizenegger, who argues control of Tesla is too concentrated in people tied to Musk. “This opinion is shared by a significant number of shareholders of Tesla,” he says. “We expect the final vote tally to reveal that.” Even if he’s right, Musk remains fully in charge.

More Model 3

Musk’s acknowledgement of his timeline trouble didn’t stop him from announcing that, by the end of the month, Tesla will be building 5,000 Model 3 sedans every week, which should be enough to start turning a profit on the car. The uptick is thanks to Tesla’s rebalancing of the workload between humans and robots in its factory in Fremont, California, where the company is adding a third Model 3 production line. It is also planning to open a factory in China, to go with its plants in Fremont and the Netherlands.

Meanwhile, Tesla is gradually expanding options for Model 3 owners, who so far have been limited to the version with an upgraded battery and premium interior, which starts at $56,000. By the end of this year, Musk hopes to start production of the version closer to the car’s $35,000 base price, with the smaller battery pack. Also coming soon: right hand drive.

New Products

Even as it struggles to build the Model 3, Tesla is planning on three new vehicles: the Semi truck, the revived Roadster, and the still mysterious Model Y. Musk told shareholders he’s hoping to start production of all three in the first half of 2020, though he has yet to specify where he’ll do that, or how. He’ll unveil the Model Y in March (it will be “something super special”), and expects the truck and the sports car to deliver better specs than the already very impressive numbers he announced last fall. Oh, and he’ll never build an electric motorcycle.

Autopilot Advances

Without getting into details, Musk said Tesla is making steady progress to improve its Autopilot feature, and is now working on adding the ability to change lanes and handle highway on- and off-ramps (Musk noted he was testing new software around 1 am this morning). For drivers who aren’t sure they want to spend $5,000 on the feature, Tesla will soon start offering free trials. Musk also reaffirmed his distaste for lidar, the laser shooting sensor most autonomous vehicle developers say is key to building a safe, capable robo-car.

SuperChargers

Tesla now runs nearly 10,000 Supercharger stations around the world, the stations where its drivers (and no one else) can plug in and charge a depleted battery to about 80 percent in 30 minutes. And Musk is working to keep improving charge times, saying a three- or four-fold improvement is possible. (That’s only true for relatively new cars, he added, disappointing the 2012 Model S owner who asked him about it.)

Going Vegan

Unlike many automakers, Tesla has been offering leather-free versions of its cars for years, appealing to its vegan and vegetarian fans. But it’s still using some leather in its steering wheels, and a People for the Ethical Treatment of Animals (PETA) rep took the mic to press Musk on it. He explained Tesla can make leather-free steering wheels, but the work has to be done it its design studio, making it something of a pain. But he promised it’ll be easier once the Model Y comes around. Now he’s just gotta hit that 2020 goal.


More Great WIRED Stories

5 Ways to Develop More Meaningful Relationships at Work

You might assume it is common knowledge that relationships in business are important and that everyone strives to create and maintain good working relationships. However, that is not always the case.

Business relationships are tricky. Sometimes they are transactional; simply interacting as a means to an end. Other times they are relational, and centered on having meaningful engagements that build and maintain the relationship. And they can even be a combination of the two.

Transactional interactions can be collaborative or competitive. When collaborative, you and your counterpart walk away feeling good about the transaction, like you were treated fairly and more likely to engage with one another in the future. On the other hand, if competitive, you might feel like you were treated unfairly, cheated or nickeled and dimed. In such cases, you probably will not want to engage with this person again.

In relational interactions, you care about the outcome, but also about your colleague. In turn, your colleague cares about you, too. This means you are paying attention to the process and quality of how you are both communicating, not just interacting as a means to an end.

Framing these engagements as a collaborative, relational process helps you build and maintain relationships. Here are five components of collaborative relationships and how you can develop yours to be more mutually beneficial.

1. Fostering open communication.

Communicating in an open and honest manner, in any relationship, is critical. You want to experience the authenticity of your counterpart and you want that person to see you for who you are.

You want to be prepared and honestly acknowledge what it is you know and do not know. Admitting you do not have an answer and saying you will look into it and get back to them establishes credibility. Being caught making things up can be considered deceptive and inauthentic.

2. Building trust.

Building trust allows you both to feel safe sharing information. Trust does not come overnight. It is time-consuming to build, but can be easily compromised.

One way of building trust is to find out what is important to your counterpart and commit to providing something for them. It can be a key data point, a book reference or an introduction to a colleague. Whatever you promise, make sure it is something you can actually deliver on and that will build your image of being reliable.

3. Managing the pace.

Relationships take time. There is a window within which you will feel comfortable about the pace to establish rapport, and build trust and confidence in each other. Signing an important contract the next day can feel rushed, while meeting for three years before closing a deal can feel like an eternity.

It is useful to determine the “what” and “when” of milestones you can use to measure the pace of building your relationship. Your short- and long-term goals will need to be taken into consideration to identify these milestones and when you would like to reach them.

4. Controlling your emotions. 

Engaging in new relationships can feel exciting, make you anxious or both. You will not know how to interpret some comments made or actions taken, nor how to communicate your own feelings because you do not know this other person well.

Identify practices you can use to feel more comfortable even in the uncomfortable moments. Try to slow down your breathing or visualize a soothing scene. This will keep you calm and buy you time to think of a suitable response to dig deeper and clarify your understanding.

5. Creating mutually-beneficial outcomes.

At the end of the day, mutual benefits are the payoff for investing time and energy into business relationships. Maybe you learn from each other. Maybe performance increases when you are around each other. Or maybe there are other tangible benefits.

Think about the aspects of the relationship you find valuable and want to retain. What are your contributions? What are theirs?

It is the mutually-beneficial relationships that prove to be most valuable in the workplace, and in life.

Digital Storage For Media And Entertainment

For 9 years, Coughlin Associates has been running a survey of media and entertainment professionals on their uses of digital storage for content creation and capture, post production, content distribution as well as archiving and preservation. This has provided insights on developments in digital storage for rich media applications. This article and a talk that Tom Coughlin will give at the 2018 Creative Storage Conference on June 7, 2018 in Culver City, CA (www.creativestorage.org) explore some of the results from the 2018 and earlier surveys. Tom Coughlin is the organizer of the Creative Storage Conference.

Digital storage for the M&E industry has demand characteristics often very different from typical IT storage because of the performance requirements of real-time video in capture, editing and post-production as well as distribution. On the other hand, the ever-growing archive of long-tail digital content and increasing digitized historical analog content is swelling the demand for cold as well as warm archives using tape, optical discs and hard drive arrays.

Professional video cameras are undergoing rapid evolution, driven by higher resolution content as well as multi-camera content capture, including stereoscopic virtual reality content capture. The figure below shows the percentage of various recording media used by the 2018 survey recipients in professional video cameras.

Coughlin Associates

Content Capture Storage Media Distribution

Note that about 59.6% said that they used external storage devices to capture content from their cameras in 2018 (this was about the same in 2017 and 2016). 82.3% of the 2018 participants said that over 80% of their content was created as digital content (this was 85.7% in 2017).

In video post-production, there was a general increase in network storage (NAS and SAN) and a decline to between 40-50% on direct attached storage (DAS) as the number of people working in a post-production facility increases. 83% of the participants used DAS in 2018 with 1-50 TB as the most popular size DAS with 12.1% of the participants having more than 50 TB of DAS storage. 12% reported that they were using flash memory in their post-production work.

58% of the participants had NAS or SAN with 68.6% having 50 TB or more of network storage in 2018 with 15% having more than 500 TB of NAS/SAN storage in 2018. 48% of the participants used cloud-based storage for editing and post-production in 2018 with 56% having 1 TB or more of storage capacity in the cloud.

Average hours on a central content delivery system was about 1,241 hours with 372 hour ingested monthly in 2018. 43% of respondents had more than 5% of their content on edge servers and 48% used flash memory on their edge servers and 39% on their central delivery servers in 2018.

32% of participants had over 2,000 hours of content in a long-term archive in 2018. 35% said that their annual archive growth rate was greater than 6% in 2017 with 24% adding 1,000 hours or more to their archive annually in 2018. About 19% had more than 2,000 hours of unconverted analog content in 2018 with 6% having over 5,000 hours of unconverted analog content. The average rate of analog to digital conversion was 4% in 2018.

Can Apple Stay Apple?

, I write about strategy, leadership and red teaming Opinions expressed by Forbes Contributors are their own.

A sad face emoticon is seen on an iPhone in this photo illustration on May 25, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)

</div> </div> <p>On June 1, the <em>Wall Street Journal&nbsp;</em><a href="https://www.wsj.com/articles/apple-looks-to-expand-advertising-business-with-new-network-for-apps-1527869990" target="_blank" data-ga-track="ExternalLink:https://www.wsj.com/articles/apple-looks-to-expand-advertising-business-with-new-network-for-apps-1527869990" rel="nofollow">reported</a>&nbsp;Apple was looking to expand its advertising business with a new network for app-makers such as Pinterest Inc. and Snap Inc.</p> <p>“The digital ad effort, if it proceeds, would push Apple into territory dominated by Alphabet Inc.’s Google, which claims 35% of the mobile ad market, and Facebook Inc., which has 25%,” the <em>Journal </em>reported.</p> <p> </p> <p>It could also take Apple farther away from its original vision, which has in many ways been the secret to the company’s success.</p> <p>Steve Jobs decided long ago that Apple would make its money selling great products and services. He believed people would be willing to pay a premium for such products and services, and if they did, then Apple would not have to make its money off their personal information the way that competitors such as Google (now Alphabet Inc.) and Facebook Inc. increasingly were.</p> <p>In recent months, Apple CEO Tim Cook seemed like he was doubling-down on that original vision, emphatically declaring that Apple’s customers are not its product.</p> <p>“If our customer was our product, we could make a ton of money. We’ve elected not to do that,” he <a href="https://www.recode.net/2018/4/6/17197754/watch-apple-ceo-tim-cook-msnbc" target="_blank" data-ga-track="ExternalLink:https://www.recode.net/2018/4/6/17197754/watch-apple-ceo-tim-cook-msnbc" rel="nofollow">told Recode</a> in March. “We’re not going to traffic in your personal life.”</p>

” readability=”44.4777031155″>

I am struggling to understand how Apple Inc.’s purported plan to dramatically expand its digital-advertising business makes sense for a company that has successfully differentiated itself by selling products and services, rather than information about its customers.

A sad face emoticon is seen on an iPhone in this photo illustration on May 25, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)

On June 1, the Wall Street Journal reported Apple was looking to expand its advertising business with a new network for app-makers such as Pinterest Inc. and Snap Inc.

“The digital ad effort, if it proceeds, would push Apple into territory dominated by Alphabet Inc.’s Google, which claims 35% of the mobile ad market, and Facebook Inc., which has 25%,” the Journal reported.

It could also take Apple farther away from its original vision, which has in many ways been the secret to the company’s success.

Steve Jobs decided long ago that Apple would make its money selling great products and services. He believed people would be willing to pay a premium for such products and services, and if they did, then Apple would not have to make its money off their personal information the way that competitors such as Google (now Alphabet Inc.) and Facebook Inc. increasingly were.

In recent months, Apple CEO Tim Cook seemed like he was doubling-down on that original vision, emphatically declaring that Apple’s customers are not its product.

“If our customer was our product, we could make a ton of money. We’ve elected not to do that,” he told Recode in March. “We’re not going to traffic in your personal life.”

Page 1 / 3

Hulu Exec Joel Stillerman Departs in Management Shakeup

A year ago, Hulu announced that it had hired Joel Stillerman away from AMC to expand the streaming platform’s slate of original programming.

On Friday, Hulu announced that the chief content officer was leaving the company.

The departure of Stillerman, who worked on The Walking Dead and Better Call Saul while at AMC, was part of a broader reorganization at the Santa Monica company. There has been some tumult in the upper ranks at Hulu, which saw its chief executive, Mike Hopkins, depart in October to become the head of Sony’s television division. Randy Freer, the former COO of Fox Networks Group, replaced Hopkins—who had hired Stillerman—and recent reports suggest that Freer and Stillerman didn’t get along.

Following Stillerman’s departure from Hulu, the company’s chief content officer role will disappear. Craig Erwich, Hulu’s senior vice president of content, will oversee original programming. Tim Connolly, Hulu’s SVP of partnerships and distribution, and Ben Smith, SVP of experience, will also depart the company. Additionally, CMO Kelly Campbell will assume more responsibility, Jaya Kolhatkar will become Chief Data Officer, and Dan Phillips will become CTO.

Hulu is co-owned by Comcast, Time Warner, Disney, and 21st Century Fox, which itself agreed to be acquired by Disney earlier this year. (If Disney prevails, it would become Hulu’s majority owner.) That complicated ownership structure, rather unlike rival Netflix, has been characterized as a drag on the company’s ability to make decisions.

Hulu now reaches more than 20 million subscribers, and its service has expanded to include live television, more original programming (e.g. The Handmaid’s Tale), and deeper reserves of popular TV shows including 30 Rock and E.R. But Hulu remains unprofitable—almost $1 billion in the red last year—as it battles Netflix, Amazon, Google, and Time Warner-owned HBO for market share.

“Hulu has an enormous opportunity to lead the media and advertising industries into the future,” Freer said in a statement.

General Electric: Strong Buy

The drop in General Electric‘s (GE) share price is yet another buying opportunity in my opinion. The industrial company has seen a considerable rebound in investor sentiment after the release of better-than-expected first quarter results, and the recent sale of General Electric’s rail business to Wabtec puts the company on the right track. GE will likely continue to shred more assets in the next several years and apply a laser-sharp focus on the restructuring of its power business. I see General Electric as an appealing contrarian rebound play with up to 40 percent upside potential over the next twelve months.

Rebounding Investor Sentiment…Until The Last Week Of May

General Electric’s shares started to rebound in April and May, after falling rather consistently throughout the first three months of 2018. Concerns over weak cash flow, a struggling power unit, and uncertainty after the dividend cut in Q4-2017 have weighed on investor sentiment at the beginning of the year.

That being said, though, investor sentiment is improving after the industrial company reported better-than-expected results for Q1-2018. Most recently, however, GE’s share price has dipped again on concerns that the power restructuring will take longer than expected.

Year-to-date, General Electric’s share price has dropped ~19 percent.

Source: StockCharts

The recovery in General Electric’s share price looked fine, until May 23, 2018 when John Flannery, Chief Executive Officer and Chairman of General Electric, said that he expects GE’s power division to continue to struggle in the near future. Further, the CEO cast some doubt on its dividend, which made investors ditch the stock yet again. GE’s stock, meanwhile, tumbled more than seven percent.

Investors were quickly rattled by the CEO’s remarks about the restructuring of its power division, but there were few things that were actually new. The power division, as all investors know, has been a drag on GE’s earnings and margins, including the first quarter of 2018.

Source: General Electric Q1-18 Earnings Release

General Electric is running a hard restructuring, laying off people and reducing overhead costs. The company has guided for $1 billion in segment cost reductions in 2018, and has put a set of measures in place aimed at boosting performance, including driving better execution, taking margin actions, and selling non-core assets.

Source: General Electric Investor Presentation

I think General Electric is doing the right things as far as the power restructuring is concerned, and investors should give the industrial company some time to turn the ship around.

Are There Risks To The Dividend?

General Electric slashed its quarterly dividend payout 50 percent from $0.24/share to $0.12/share in November 2017, which was the second time since the financial crisis that the company slashed its dividend.

Is the dividend sustainable?

Frankly, that depends to a large degree on whether General Electric can engineer a cash flow turnaround.

Here’s GE’s industrial cash flow from 2012-2017.

Source: Achilles Research

Asset sales, however, could play a major role in boosting GE’s cash flow, at least over the short haul. General Electric recently sold its 111-year old rail transportation unit to Wabtec in an $11.1 billion deal. The industrial company will receive a $2.9 billion cash payment associated with the deal.

What To Expect Over The Next 12 Months

Obviously, General Electric will be tempted to sell more assets and raise its cash levels. I don’t think that management will want to cut the dividend again unless cash flow unexpectedly and significantly deteriorates.

Further, General Electric is strongly focused on driving the power restructuring home, but it may take a couple of quarters for investors to see meaningful results. That being said, GE’s laser focus on improving margins in the power business through cost controls and asset sales will likely lead to an incremental improvement in cash flow throughout the year. GE certainly deserves the benefit of the doubt.

Valuation

General Electric’s shares are cheap, selling for less than 14x next year’s estimated profits while investor sentiment is probably still near multi-year lows.

I am still positive on General Electric’s ability to turn things around in the power business in 2018/9. Hence, I reaffirm my $20 price target on GE, implying ~40 percent upside.

Chart

GE data by YCharts

Your Takeaway

General Electric’s share price slumped after Flannery’s comments at an industry conference last month, and the drop is a promising opportunity to consider a speculative long position in my opinion. General Electric will likely sell more non-core assets in 2018 and drive a hard, cost-centered restructuring in the power business. GE’s shares are relatively cheap on a forward P/E-basis, and there is room for improvement in investor sentiment, especially if the restructuring yields cash flow gains. Strong speculative Buy.

If you like to read more of my articles, and like to be kept up to date with the companies I cover, I kindly ask you that you scroll to the top of this page and click ‘follow‘. I am largely investing in dividend paying stocks, but also venture out occasionally and cover special situations that offer appealing reward-to-risk ratios and have potential for significant capital appreciation. Above all, my immediate investment goal is to achieve financial independence.

Disclosure: I am/we are long GE.

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.

China's SenseTime raises $620 million in latest funding round

HONG KONG (Reuters) – Chinese facial recognition technology developer SenseTime Group Ltd said it has raised $620 million in a second round of funding in just two months, adding that it continued to be the world’s most valuable unicorn in artificial intelligence.

FILE PHOTO: SenseTime surveillance software identifying customers’ movement patterns at a department store runs as a demonstration at the company’s office in Beijing, China, October 11, 2017. REUTERS/Thomas Peter/File Photo

The financing, which values the company at more than $4.5 billion, was led by Fidelity International, Hopu Capital, Silver Lake and Tiger Global and follows a $600 million funding round in April led by Alibaba Group.

SenseTime, which became profitable in 2017, said in a statement it would invest further in research and development, and in securing talented researchers after the latest round of funding.

SenseTime, based in both Hong Kong and Beijing, develops technology that employs AI to quickly identify and analyze identities using cameras, and has been used by Chinese authorities to track and capture suspects in public spaces such as airports and festivals.

In the past month, it has gained Chengdu city as a client and opened an AI laboratory with Alibaba in Hong Kong. It has also jointly published what it says is the world’s first textbook on artificial intelligence for high school students, which is being introduced in some 40 high schools in China.

Qualcomm Ventures, a unit of U.S. semiconductor giant Qualcomm Inc and an existing investor, also participated in its latest funding round with other strategic investors, it said.

SenseTime has seen its valuation more than double in the past half year, driven by strong investor interest and business demand at a time when Beijing has also said it is keen for China to become an international leader in artificial intelligence by 2025.

Face++, also known as Megvii Inc, a Beijing-based rival firm, in October raised $460 million from a Chinese state fund, Ant Financial and Foxconn Technology.

Reporting by Sijia Jiang; Editing by Anne Marie Roantree and Edwina Gibbs

Google launches second app in China, woos top smartphone market

BEIJING (Reuters) – Alphabet Inc’s (GOOGL.O) Google has launched a file managing tool in several Chinese app stores as it looks for fresh inroads into the world’s biggest smartphone market, where most of the internet giant’s top products remain banned.

FILE PHOTO: The logo of Google is pictured during the Viva Tech start-up and technology summit in Paris, France, May 25, 2018. REUTERS/Charles Platiau

The U.S. firm on Thursday released a China-specific version of ‘Files Go’, a storage management tool for smartphones, the second China-specific app it has released since its flagship services were banned.

The app, which has a small number of users compared to Google’s flagship search and app store products, is also the first it has launched on third-party Chinese app stores including those hosted by Baidu Inc (BIDU.O), Xiaomi Technologies Co Ltd and Huawei Culture Co Ltd 002502.

China has represented a black hole on Google’s global map since regulators began banning the company’s products in 2010 when it refused to censor results in line with local laws.

Its search engine is banned in the Chinese market along with its app store, email and cloud storage services.

China’s cyber regulators say restrictions on foreign media and internet platforms are designed to block influences that contravene stability and socialist ideas.

Google has been trying to expand its operations in China and has launched a dedicated artificial intelligence research hub in Beijing, but its return to providing consumer products has been slow amid tightening censorship regulations.

Google has, however, ramped up its China efforts recently. CEO Sundar Pichai has made several visits to the country and has spoken at two Chinese government forums since December.

Last year, Google released its ‘Google Translate’ app in China. It is maintained by Google’s local joint venture.

The ‘Files Go’ app, which helps users free up storage space, has been developed by Google’s Next Billion program that targets developing markets, including India and Indonesia, where there are a large number of people using low-end smartphones.

While Google’s consumer services are largely blocked in China, its Android operating system is used widely by top smartphone vendors, including Xiaomi and Huawei phones.

Reporting by Cate Cadell; Editing by Himani Sarkar

Microsoft Monday: GDPR Applying Globally, Xbox 360 System Update Launches, June Xbox One Update

Microsoft logo on a building in Issy-les-Moulineaux, France.  (AP Photo/Michel Euler, File)

“Microsoft Monday” is a weekly column that focuses on all things Microsoft. This week “Microsoft Monday” features news about the GDPR compliance, the June Xbox One Update, an Xbox 360 system update being released and more!

GDPR Compliance

On May 25th, the European Union rolled out new regulations known as General Data Protection Regulation (GDPR). GDPR requires that users need to have better access to the personal data that technology companies store and better controls for erasing it.

“We’ve been advocating for national privacy legislation in the United States since 2005. We’re encouraged that some other tech companies are starting to endorse the need to address this issue as well. While debate about how to protect data privacy continues in the U.S., we’re committed to moving forward now to take concrete steps to help strengthen people’s privacy protection,” said Microsoft in a blog post. “That’s why today we are announcing that we will extend the rights that are at the heart of GDPR to all of our consumer customers worldwide. Known as Data Subject Rights, they include the right to know what data we collect about you, to correct that data, to delete it and even to take it somewhere else. Our privacy dashboard gives users the tools they need to take control of their data.”

To further adhere to the GDPR regulations, Microsoft announced the general availability of several compliance tools. The tools include “the Azure GDPR Data Subject Request (DSR) portal, Azure Policy, Compliance Manager for GDPR, Data Log Export, and the Azure Security and Compliance Blueprint for GDPR.”

The Azure Data Subject Request (DSR) enables businesses to manage personal data in the cloud. And Azure will enable customers to access system-generated logs as part of Azure services.

The Azure Policy is a tool for defining and enforcing policies that help your cloud environment become compliant with internal policies and external regulations as well. The Azure Policy is integrated into the Azure Resource Manager and applies across resources in Azure.

The Compliance Manager for Azure is a free Microsoft cloud services solution that was created to help users manage complex compliance obligations. And it helps users assess and manage GDPR compliance.

June Xbox One Update To Save Multiple Wi-Fi Passwords

In a blog post, Microsoft announced the new preview Alpha 1806 System Update, which is being rolled out to members of the Xbox One Preview Alpha Ring. Some of the features in this build will be available immediately, but others will be added over time in system update 1806 (June Update).

The new features include the ability to group your games and apps, improved search functionality and the ability to save multiple Wi-Fi passwords. Other notable features include the ability to hit Y anywhere on the dashboard to pull up search and there are five new languages for the Narrator.

Xbox 360 System Update Released

Microsoft has just released an Xbox 360 system update, which comes two years since the last update for the older generation console. The delay was largely due to Microsoft focusing more on releasing updates for newer consoles like the Xbox One and Xbox One X.

OS version 2.0.17526.0 for the Xbox 360 was released on May 22, 2018, according to OnMSFT. The previous Xbox 360 system update was on March 29, 2016. The system update included several minor bug fixes and performance improvements.

If you have an Xbox 360, you can download the system update by going to the Settings hub and tapping on the System icon. Then go to Console Settings and then System Info.

Remote Assist And Layout Mixed Reality Apps Now Available In Limited Preview

At the Build 2018 event, Microsoft unveiled mixed reality apps designed with first-line workers in mind called Remote Assist and Layout. In a blog post, Microsoft’s Lorraine Bardeen revealed that the apps are now available in a “limited-time” preview download.

With the HoloLens, the Remote Assist app can be used for “hands-free video calling, image sharing and mixed reality annotations.” And people wearing the HoloLens can share what they see with users through the mixed reality headset.

The Layout app was designed to help people use HoloLens to “bring space designs from concept to completion much more quickly by viewing their designs at real-world size and scale.” Users can use the Layout app to design physical spaces by importing 3D models and collaborating with others to manage it.

Paul Allen Donates $1 Million For Gun Control In Washington State

According to Geekwire, Microsoft co-founder Paul Allen is donating $1 million for an initiative intended to implement tougher restrictions for the sale of semiautomatic weapons in the state of Washington. Allen partnered with venture capitalist Nick Hanauer to raise nearly $3 million.

The Alliance for Gun Responsibility said that voters in Washington will be able to vote on Initiative 1639 in November. This initiative would increase the minimum age for purchasing semiautomatic rifles to 21 and set up enhanced background checks. This would be a similar process for what is involved in purchasing handguns. And Initiative 1639 would require people to go through firearm safety training and requires a waiting period of up to 10 days to purchase the weapon.

Gen Z Graduates Into A New World Of Work, Here Is Why You Should Care

, I research & write on longevity, generational trends & innovation. Opinions expressed by Forbes Contributors are their own.

LOS ANGELES, CA – MAY 11: Media producer Oprah Winfrey addresses The USC Annenberg School For Communication And Journalism Celebrates Commencement at The Shrine Auditorium on May 11, 2018 in Los Angeles, California. (Photo by Leon Bennett/Getty Images)

</div> </div> <p>Generation Z, the leading edge of young people born after 1997, are now 21 years old. Many of them are graduating from college and listening to the well wishes and advice of graduation speakers. After the microphones are silenced and the last diploma is awarded, Gen Z will enter the workforce.</p> <p>Today’s workplace is undergoing an unprecedented rate of change placing new demands on workers of all ages. A new <em>high velocity workplace</em> is emerging – a world of work characterized by the rapid development of new knowledge, an accelerating rate of industry disruption and advancing technology.</p> <p>Graduation speakers are asking students <em>to be daring</em>, <em>to hone personal resilience</em> and more. My personal favorite is a <a href="https://www.npr.org/2018/05/25/614518550/from-oprah-to-rex-tillerson-commencement-speeches-for-the-class-of-2018" target="_blank" data-ga-track="ExternalLink:https://www.npr.org/2018/05/25/614518550/from-oprah-to-rex-tillerson-commencement-speeches-for-the-class-of-2018" rel="nofollow">speech</a>, a mixture of practical and aspirational guidance, delivered by Oprah Winfrey to University of Southern California graduates. She advised the class of 2018 to “eat breakfast…make your bed…recycle…pay your bills on time…and to aim high.”</p> <p> </p> <p>But, in the <a href="https://www.azlyrics.com/lyrics/billyjoel/preludeangryyoungman.html" target="_blank" data-ga-track="ExternalLink:https://www.azlyrics.com/lyrics/billyjoel/preludeangryyoungman.html" rel="nofollow">words</a> of another Baby Boomer, Billy Joel, not from a podium, but in song, sometimes “just surviving is a noble fight.”</p> <p>Surviving <em>and thriving</em> in the emerging high velocity workplace will require Gen Z graduates to confront the new realities of work – realities that are changing the rules of work for all generations. Here are four.</p>

<p><strong>School Is Never Out</strong></p> <p>Sorry graduates. You thought final exams were…well, <em>final</em>. The half-life of education is perhaps shorter than any previous generation perhaps placing&nbsp;Gen Z at a higher risk for professional obsolescence in fewer years than&nbsp;even the Millennials.</p> <p>Buckminster Fuller coined the idea of <a href="https://www.bfi.org/search?search_api_views_fulltext=knowledge+doubling+curve" target="_blank" data-ga-track="ExternalLink:https://www.bfi.org/search?search_api_views_fulltext=knowledge+doubling+curve" rel="nofollow">knowledge doubling</a> which suggests that knowledge, in a given field or human endeavor, doubles at a predictable, but accelerating rate. Fuller argued that in 1900 human knowledge doubled about every 100 years and by 1950 knowledge doubled every 25 years. A 2006 IBM <a href="http://www-935.ibm.com/services/no/cio/leverage/levinfo_wp_gts_thetoxic.pdf" target="_blank" data-ga-track="ExternalLink:http://www-935.ibm.com/services/no/cio/leverage/levinfo_wp_gts_thetoxic.pdf" rel="nofollow">study</a> forecasted that human knowledge might be doubling every 11 hours! Today it is widely accepted that knowledge doubles, but at different rates in different fields. Medical education provides a startling example. One researcher projects that by 2020 medical knowledge might double every 73 days.</p>” readability=”50.2899262899″>

LOS ANGELES, CA – MAY 11: Media producer Oprah Winfrey addresses The USC Annenberg School For Communication And Journalism Celebrates Commencement at The Shrine Auditorium on May 11, 2018 in Los Angeles, California. (Photo by Leon Bennett/Getty Images)

Generation Z, the leading edge of young people born after 1997, are now 21 years old. Many of them are graduating from college and listening to the well wishes and advice of graduation speakers. After the microphones are silenced and the last diploma is awarded, Gen Z will enter the workforce.

Today’s workplace is undergoing an unprecedented rate of change placing new demands on workers of all ages. A new high velocity workplace is emerging – a world of work characterized by the rapid development of new knowledge, an accelerating rate of industry disruption and advancing technology.

Graduation speakers are asking students to be daring, to hone personal resilience and more. My personal favorite is a speech, a mixture of practical and aspirational guidance, delivered by Oprah Winfrey to University of Southern California graduates. She advised the class of 2018 to “eat breakfast…make your bed…recycle…pay your bills on time…and to aim high.”

But, in the words of another Baby Boomer, Billy Joel, not from a podium, but in song, sometimes “just surviving is a noble fight.”

Surviving and thriving in the emerging high velocity workplace will require Gen Z graduates to confront the new realities of work – realities that are changing the rules of work for all generations. Here are four.

School Is Never Out

Sorry graduates. You thought final exams were…well, final. The half-life of education is perhaps shorter than any previous generation perhaps placing Gen Z at a higher risk for professional obsolescence in fewer years than even the Millennials.

Buckminster Fuller coined the idea of knowledge doubling which suggests that knowledge, in a given field or human endeavor, doubles at a predictable, but accelerating rate. Fuller argued that in 1900 human knowledge doubled about every 100 years and by 1950 knowledge doubled every 25 years. A 2006 IBM study forecasted that human knowledge might be doubling every 11 hours! Today it is widely accepted that knowledge doubles, but at different rates in different fields. Medical education provides a startling example. One researcher projects that by 2020 medical knowledge might double every 73 days.

Page 1 / 3

Customers angry after National Australia Bank hit by technology outage

MELBOURNE (Reuters) – National Australia Bank on Saturday suffered what it described as a “nationwide outage” to some of its technology systems, leaving customers unable to access banking services or withdraw money.

FILE PHOTO: A National Australia Bank (NAB) logo is pictured on an automated teller machine (ATM) in central Sydney September 12, 2014. REUTERS/David Gray/File Photo

Customers took to social media to vent their frustrations, with some saying they were left unable to pay for groceries or refuel their cars.

“Loyal member for 15 years and you leave me standing at the supermarket altar with a trolley full of shopping,” said one Twitter user.

The bank tweeted just after midday (0200 GMT) on Saturday that some services were coming back online.

“We’re sorry and it’s not good enough … but we’ll get it fixed as soon as possible,” Chief Customer Officer Business and Private Banking Anthony Healy said in a video posted on Twitter.

NAB is one of Australia’s four largest retail banks with a customer base of 9 million, according to its website.

The outage follows growing customer discontent with the so-called “Big Four” banks, which have suffered numerous embarrassing disclosures at an inquiry into financial sector misconduct.

A spokesman from the bank told Reuters by telephone that it was a national outage, without elaborating on its cause.

The Bank of New Zealand [BNZL.UL], a NAB subsidiary, also experienced outages on Saturday across New Zealand, but the spokesman was unable to confirm a connection between the two incidents.

Reporting by Will Ziebell in MELBOURNE; Editing by Joseph Radford

Gadget Lab Podcast: The Very Human Element of Self-Driving Cars

One of the greatest ironies in this still-nascent era of self-driving cars is that humans are the backup safety drivers for these autonomous systems, while the systems themselves are supposed to replace human drivers and all our follies. Earlier this week, a preliminary report from the NTSB indicated that the Uber self-driving car that killed a woman in Arizona earlier this year, did in fact “see” the woman in the seconds before the crash occurred. Transportation writer Aarian Marshall and editor Alex Davies join the Gadget Lab podcast this week to discuss the issues that surround “software that’s not yet ready to replace humans, and humans that are ill-equipped to keep their would-be replacements from doing harm.” And of course, we couldn’t have a conversation about the future of transportation without talking about Elon Musk.

Show notes: Here’s Aarian’s and Alex’s story on the preliminary report about the car crash back in March involving an Uber self-driving car. Also, Alex writes about the follies of humans act as backup safety drivers, while Aarian lays out California’s heavy-handed plans to regulate autonomous vehicles.

Recommendations this week: Alex has hopped aboard the password manager train (had to get a transpo reference in there) and recommends LastPass. Aarian said she needs space–as in the Space app, which forces you to take a breather before you open that addictive social media app for the 100th time. Lauren recommends Bad Blood, the new book about Theranos, with one caveat: She hasn’t read the book yet. But based on the book excerpt we ran in WIRED this week, she thinks it’s going to be a doozy.

Send this week’s hosts feedback on their personal Twitter feeds. Lauren Goode is @laurengoode, Aarian Marshall is @AarianMarshall and Alex Davies is @adavies47. Bling the main hotline at @GadgetLab. Our theme song is by Solar Keys.

How to Listen

You can always listen to this week’s podcast through the audio player on this page, but if you want to subscribe for free to get every episode, here’s how:

If you’re on an iPhone or iPad, open the app called Podcasts, or just tap this link. You can also download an app like Overcast or Pocket Casts, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

If you use Android, you can find us in the Google Play Music app just by tapping here. You can also download an app like Pocket Casts or Radio Public, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

We’re also on Soundcloud, and every episode gets posted to wired.com as soon as it’s released. If you still can’t figure it out, or there’s another platform you use that we’re not on, let us know.

Trump fundraiser launches subpoena blitz in Qatar legal fight- sources

(Reuters) – Lawyers for Elliott Broidy, a top fundraiser for U.S. President Donald Trump, have sent out more than 40 subpoenas to internet service providers, lobbying firms and others in an escalating legal fight against Qatar for allegedly hacking into his emails, two people with knowledge of the matter said.

The subpoenas, issued in recent weeks as part of a civil suit filed by Broidy in a Los Angeles federal court in March, come as Qatar and its rivals wage a multi-million dollar battle for influence in Washington over the Trump administration’s policies toward the Gulf region.

The lawsuit accuses Qatar of orchestrating the theft and leaking of Broidy’s emails as retribution for his support of the United Arab Emirates and Saudi Arabia, which along with Egypt and Bahrain levied economic sanctions against Qatar last June.

The emails were distributed to various media outlets, leading to weeks of damaging stories about Broidy.

Nicolas Muzin and his lobbying firm Stonington Strategies LLC are also named as defendants in the case. Both Qatar and Muzin have denied involvement in any hacking.

Broidy is scheduled to file an amended complaint on Thursday to the Los Angeles federal court. His lawyers will expand the list of defendants, adding people suspected of carrying out the hack or disseminating material, a third person with knowledge of the matter said.

One subpoena seen by Reuters asked the recipient to hand over documentation of any communications related to Broidy with more than a dozen lobbying and public relation firms, some of which are registered as foreign agents for Qatar.

Another recipient of a subpoena was Avenue Strategies Global LLC, a lobbying firm founded by former Trump campaign manager Corey Lewandowski and Barry Bennett, according to two sources with knowledge of the subpoena.

Lewandowski had left Avenue Strategies by the time it was hired by the Qatari embassy as a client. Bennett, who was an adviser to the Trump campaign, did not respond to a request for comment.

It was not clear whether the subpoenas would prove effective. One source said he believed most of the lobbying firms would at least initially decline to provide information and contest the matter in court.

Reporting by Nathan Layne and Karen Freifeld in NEW YORK; Editing by Paul Tait

After Meltdown and Spectre, Another Scary Chip Flaw Emerges

At the beginning of the year, everyone was talking about processor vulnerabilities called “Meltdown” and “Spectre” that potentially exposed data in everything from servers and desktops to tablets and smartphones. The flaws, which impacted the chips in many popular devices, allowed hackers to inconspicuously manipulate a common efficiency technique used to speed data processing. As a result, chip manufacturers and software makers scrambled to issue patches and work out the performance sluggishness that came along with blocking the risky optimizations.

At the same time, though, a larger concern was also looming: Spectre and Meltdown represented a whole new class of attack, and researchers anticipated they would eventually discover other, similar flaws. Now, one has arrived.

On Monday, researchers from Microsoft and Google’s Project Zero disclosed a new, related vulnerability known as Speculative Store Bypass Variant 4 (Meltdown and Spectre collectively make up variants 1-3) that impacts Intel, AMD, and ARM processors. If exploited, an attacker could abuse the bug to access data that is meant to be stored out of reach. It particularly could expose certain components often used in web browsing that are meant to be isolated, for example, a JavaScript module that shows ads.

Microsoft says that the risk to users from this bug is “low,” and Intel notes that there is no evidence that the flaw is already being used by hackers. Some systems, particularly browsers, already have some protection against Speculative Store Bypass attacks just from the initial Meltdown and Spectre patches. But as was the case before, chip manufacturers and software developers are now working to release tailored fixes—and SSB raises the same types of performance problems that emerged before.

“We know that new categories of security exploits often follow a predictable lifecycle, which can include new derivatives of the original exploit,” Leslie Culbertson, Intel’s executive vice president and general manager of product assurance and security, wrote in a statement on Monday. She explains that once they are generally available, some SSB protections will be off by default, requiring users to opt into protection. “If enabled, we’ve observed a performance impact of approximately 2 to 8 percent based on overall scores for benchmarks.”

Modern processors use a technique called “speculative execution” to make educated guesses about what data to work with as they complete tasks instead of waiting to have perfect information about what to do. Meltdown, Spectre, and Speculative Store Bypass flaws are all part of a category of “speculative execution side channels” in which attackers can potentially take advantage of flaws in how processors protect data during this speculative processing to grab information that leaks out in various ways. Systems can rein this in through relatively simple software and firmware (lower level coordinating software) patches. But some updates need to be changes to a processor’s “microcode” that tweak the fundamental behavior of how a chip operates, and most software developers will be depending on chip manufacturers to first release microcode updates.

Once companies push all the various types of updates, though, users will decide case by case whether to install them, since bypassing processing efficiencies to neuter potential attacks can also slow systems down. Some Meltdown and Spectre updates caused real problems for businesses and consumers. For SSB—which seems like it may be a less dangerous bug—some users may consider the pros and cons of patching rather than immediately moving forward.

Microsoft says it began researching SSB in November, after Spectre and Meltdown were already being researched, but before the flaws were publicly disclosed in January. In March, Microsoft also began offering a $250,000 reward for information about new variants of “speculative execution” attacks. Google’s Project Zero, Intel, and numerous other security researchers in the industry have all also been working to understand and discover other similar attacks since last year. Given how complicated it is to distribute fixes for these types of flaws, and how much of that process hinges on what manufacturers release, analysts say that the work that went into pushing patches for Meltdown and Spectre will make things a bit more streamlined when addressing the new SSB flaw.

“We all just started digging in and saying ‘that uses speculation, that uses speculation, what could be wrong there?'” says Jon Masters, chief ARM architect at the open source enterprise IT services group Red Hat, which had early access to the SSB research findings as part of industry defense collaboration. “Unfortunately but also fortunately there was a last time this happened, so as a result of Meltdown and Spectre lots of effort was put in to make sure the update process would be easier.”

Researchers also say that more time to investigate this general type of attack means there’s more confidence now that other speculative execution flaws won’t crop up all the time. And observers are relieved that today’s SSB revelation isn’t related to a more dire attack. But the danger in this class of bugs is the sheer number of devices they impact and how persistent they will be over time. Full protection can only come from replacing vulnerable equipment with new devices that contain fundamentally more secure chips. This replacement process will take years, and in the meantime lots of devices will remain exposed to these niche, but potentially effective attacks.

Retirement: Should You Buy These Beaten-Down Stocks Now?

The markets have generally been volatile since the end of January 2018. The S&P 500 has touched its 200-day moving average a few times, however, bounced back each time. It does appear that the current turbulence may well continue for some more time. However, in spite of recent uneasiness in the market, the broad indexes are only about 5% away from their all-time high achieved during the last week of January 2018.

However, it is altogether another story with some of the sectors of S&P 500. For example, one of them is Consumer Staples and Packaged Foods (Consumer Defensive Sector). Most investors are probably aware how bad the downturn is in Consumer Staples industry. Some of the well-known dividend-paying companies in the Consumer Staple sector are Procter & Gamble (PG), Colgate-Palmolive (CL), General Mills (GIS), Unilever PLC (UL), Nestlé S.A.(OTCPK:NSRGY), Kraft Heinz Co (KHC), and some others. Most of these companies are down by double-digits. Some of the reasons that have caused this downturn are:

  1. Competition from ‘House Brands’ causing stagnant or declining revenues for the brand name products.
  2. Commodity prices have been on the rise.
  3. Rising threat and challenges from e-commerce.

Some of the above fears may truly be valid. But the bigger question is if these trends are permanent or just a passing phase. Even if they are permanent, are some of these companies well positioned to challenge the status quo and come out stronger?

Here is a table that shows the performance of the above stocks since the beginning of this year. You will notice that not all have declined; actually, the European companies are doing much better than their American counterparts.

Symbol

Current Price

(As on 05/11/2018)

Price on 01/02/2018

% Return

(since Jan 2nd, 2018)

PG

73.37

90.65

-19.06%

CL

62.71

75.14

-16.54%

GIS

42.66

59.04

-27.74%

UL

55.92

54.85

+1.95%

NSRGY

77.41

85.63

-9.60%

KHC

59.24

77.02

-23.08%

SPY (S&P 500)

272.85

268.77

+1.51%

Many of the above stocks have been the favorites of the DGI investors (Dividend Growth Investors). A few of them are dividend champions, meaning they have paid and raised the dividends for more than 25 years. Their dividend yields were already attractive before this downturn, but some of them are offering mouth-watering yields off late. Below are the current yields for the six stocks.

Symbol

Current Price

(As on 05/11/2018)

Current Dividend

Yield

Forward Dividend Yield

PG

$73.37

3.80%

3.96%

CL

$62.71

2.58%

2.64%

GIS

$42.66

4.59%

4.61%

UL

$55.92

3.15%

3.44%

NSRGY

$77.41

3.27%

3.31%

KHC

$59.24

4.18%

4.31%

Who Should Buy Now?

Certainly, almost all of these stocks are at attractive valuation right now. However, it does not mean they can’t fall even further. They certainly can and more likely will, especially if the broader market takes a hit. However, there are other factors that need to be looked into:

  • Do you own some of them already? If so, how are they weighted in your overall portfolio? As a general rule, you should not have more than 15% in one sector, after all, there are 11 sectors of the economy. Also, you should not have more than 5% in one single stock, assuming you have a minimum of 20 stocks in your portfolio,
  • If you are already over-weighted in the sector or a stock, you should not get tempted to buy the current dip. We should remember the folks who were overweight in the financial sector just before the 2008-2009 financial-crisis and the damage it must have done to their portfolios.
  • What are your income needs? If you need high income, investing at the current yields into these generally conservative stocks would make more sense compared to someone who is in the accumulation phase and does not care about the current income.
  • Do these stocks fit your risk-profile? We would generally think these should fit even the most conservative stock investors. However, the stock market is at an all-time high, in spite of the recent turbulence. If the broader markets were to take a big hit, the above stocks would take a hit as well, irrespective of how low they may already be. However, they are likely to go down less compared to the broader market. Do you have the tolerance to see another 10% or 20% dip after you have taken a position? If your investment horizon is longer than 10 years, and you are prepared to look at the income component rather than the market price, then these may be suitable investments.
  • If you were to buy now, how much should you buy? The answer to this question is same as the point # 1. You should follow your rules regarding position-weight of any one security and any one sector. Also, you should decide if you are going to buy in one lot or in more than one lot, meaning in a deferred fashion. A deferred approach will take advantage of dollar-cost-average in case they were to dip further.

If We Are Going To Buy The Dip, Which One Is the Best?

Okay, let’s say you have taken the first decision that you would want to buy one or more of these stocks and take advantage of the lower prices and significantly higher yield compared to just a few months ago.

To help with the decision as to how these stocks rank compared to each other, we will compare them to several factors. The six companies that are being compared are:

PG, CL, GIS, UL, NSRGY, KHC

We will compare them on the basis of following metrics:

  • Size and economic moat
  • Dividend Yield
  • Dividend growth
  • Dividend safety
  • Valuation
  • Long-term debt
  • Revenue growth
  • EPS growth
  • Future growth estimates

Note: On each of the above metrics, we will provide a relative “Rating” to each company (except KHC). Please note that the rating is un-scientific and subjective, in this case, based on our opinion. It should not be used for buy/sell decisions, rather only as a starting point for further research.

Size and Economic Moat:

All of our companies in the select-list are well known and large-cap companies, with leading positions in some of their product categories. Even though some of them are larger than others, but we will consider them on equal footing and award them the same rating under this category.

Dividend Yield:

The current yield of a company’s stock will depend upon the market price at the time of buy. So, when the market price declines, the yield will go up. Ideally, we should buy when the current yield is at least higher or equal to the stock’s 5-year average yield.

Currently, many of these companies are yielding higher than their 5-year average, because of the recent decline in prices.

Symbol

Current Price

(As on 05/11/2018)

Current Dividend

Yield

Forward Dividend Yield

5-yr Trailing Yield

RATING

PG

$73.37

3.80%

3.96%

3.14%

1.5

CL

$62.71

2.58%

2.64%

2.18%

1.0

GIS

$42.66

4.59%

4.61%

3.11%

1.5

UL

$55.92

3.15%

3.44%

3.14%

1.25

NSRGY

$77.41

3.27%

3.31%

3.03%

1.25

KHC

$59.24

4.18%

4.31%

NA*

NR**

**NR – Not Rated, *NA – Not Available

Dividend Growth:

For DGI investors, both the current yield and the growth of the divided are important. Obviously, as investors, we want both to be high enough. If the current yield is low, but the faster dividend growth may compensate for low current yield. Alternatively, a high current yield may compensate for low dividend growth.

In this regard, Chowder-number comes quite handy. Chowder – number is the sum-total of current yield and past 5-year dividend growth. Generally, we would want the chowder-number to be at least 8 or higher.

Below is a table that provides an idea how much time it takes for a high dividend-growth but current low yield stock to catch up (provide the same or higher dividend amount) to another stock which yields high but provides low growth.

As you can see, in terms of YOC (yield on cost), it would take company-A 14 years to surpass company-B. That too provided company-A maintains its high dividend growth rate all these years. However, if the company-A is also growing its earnings faster, it is likely that the stock price of company-A would rise faster due to higher growth.

Here is the comparison of previous 3-year and 5-year dividend growth for our selected companies:

Symbol

FWD Dividend

Yield

3-Year

Dividend Growth

5-Year

Dividend Growth

RATING

PG

3.96%

3.30%

4.90%

1.0

CL

2.64%

3.80%

5.40%

1.0

GIS

4.61%

7.40%

9.70%

1.25

UL

3.54%

11.80%

8.90%

1.5

NSRGY

3.31%

2.30%

3.30%

0.75

KHC

4.31%

NA

NA

NR

Dividend Safety:

Dividend safety is actually more important than either the current yield or the dividend growth. After all, what good is the yield or growth, if that gets cut after a year. Investors in General Electric (GE) have learned that lesson twice in the last decade, unfortunately.

At the same time, it is also more difficult to know the dividend-safety factor, than say dividend-growth. It is often said that safest dividend is the one that just got raised. The past growth of the dividend, especially the very recent growth tells a lot about safety. But there are other factors like cash-flow and payout-ratio that the investors need to look at very carefully. The income of a company can be dressed up to look good by crafty management, but cash-flow will provide a true picture of how well the dividend is covered.

Payout-ratio = Total dividend paid for the year/ Total cash-flow generated for the year.

So, for dividend safety, we should look for:

Previous three year or 5-year dividend growth Current Payout ratio versus past 5-years payout ratios.

Symbol

FWD Dividend

Yield

5-Year

Dividend Growth

Payout-Ratio

5-Year

Payout-Ratio

RATING

PG

3.96%

4.90%

72.49%

71.31%

1.0

CL

2.64%

5.40%

61.00%

66.17%

1.25

GIS

4.61%

9.70%

71.06%

64.34%

1.0

UL

3.54%

8.90%

64.79%

65.07%

1.25

NSRGY

3.31%

3.30%

76.44%

68.52%

1.0

KHC

4.31%

NA

75.78%

NA

NR

Valuation:

.

All things equal, when the stock price of a company declines, its valuation improves. For example, PG has declined roughly 20% in the recent past, if its future EPS does not decline, the company has become much cheaper. P/E (or the forward P/E) is the most common metric that is used to judge the valuation. We should also compare the current P/E with the last 5-years average P/E to judge relative valuation.

As Warren Buffett said, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” So, we should not look at the valuation alone. It is important that the fundamentals and the future prospects of the company are solid as well. That is why valuation is just one of the nine factors in our analysis.

Symbol

Current P/E

Forward P/E

5-Yr

P/E

Price/Book

Price/Sales

RATING

PG

19.51

16.16

22.99

3.46

2.96

1.5

CL

26.57

20.08

30.81

NA

3.54

1.0

GIS

11.25

13.64

21.43

4.90

1.59

1.5

UL

21.83

20.88

21.69

4.24

2.46

0.50

NSRGY

28.15

19.92

23.10

3.86

2.67

0.75

KHC

6.56

15.34

NA

1.09

2.77

NR

Long-term Debt:

The long-term debt of a company and its ability to service those debts are important to know. We should look at the interest expense versus the income to get an idea if the debt load is going to be too much for the company. We can also look at the credit rating of the company provided by various credit agencies.

Symbol

Long-Term Debt

S&P Credit Rating (L.T.)

Debt/Equity Ratio

Debt/Total Asset ratio

RATING

PG

$18.0 Billion

AA-

0.65

0.18

1.25

CL

$6.5 Billion

AA-

NA

0.50

1.00

GIS

$7.6 Billion

BBB

1.94

0.32

0.75

UL

$19.08 Billion

A+

1.75

0.27

0.75

NSRGY

$16.14 Billion

AA-

0.43

0.12

1.50

KHC

$28.3 Billion

BBB

0.49

0.25

NR

Revenue Growth:

Revenue growth will tell us if the company is growing its top line. As you can see below, the only company that has performed much better recently is Unilever, and that shows in its share price, which has not declined much in-spite of the downward pressure.

Symbol

Previous 3-yrs Growth

Previous 5-yrs Growth

Previous 10-yrs Growth

RATING

PG

-2.50%

-3.80%

-0.10%

0

CL

-0.40%

-1.10%

2.90%

0

GIS

-2.00%

0.80%

4.60%

0.50

UL

8.40%

-14.50%

3.70%

1.00

NSRGY

0.40%

0.50%

0.70%

0.50

KHC

NA

NA

NA

NR

EPS Growth:

As the earnings of a company grow, so will the share price.

Symbol

Previous 3-yrs

EPS Growth

Previous 5-yrs

EPS Growth

RATING

PG

0.50%

1.50%

0.50

CL

14.50%

1.40%

1.50

GIS

-0.70%

1.30%

0.25

UL

10.40%

7.10%

1.50

NSRGY

-19.90%

-15.60%

0

KHC

NA

NA

NR

Future Growth Estimates:

The recent past history of EPS growth can tell a lot about how the company has been growing. But it still can’t tell about the future. However, we can use the EPS growth estimates for this purpose. Below are the EPS growth estimates from Nasdaq.com and Morningstar.com.

Symbol

Next-year

Growth Est.

Next 5-yrs

Growth Est.

RATING

PG

6.60%

7.37%

1.0

CL

9.68%

8.49%

1.25

GIS

6.62%

8.18%

1.0

UL

10.41%

5.46%

1.0

NSRGY

11.5%

16.2%

1.50

KHC

8.08%

23.29%

NR

Overall Rating:

We summarize the category-wise ratings for the five stocks and calculate the overall ratings.

PG

CL

GIS

UL

NSRGY

Size and economic moat

1.00

1.0

1.0

1.0

1.0

Dividend Yield

1.5

1.0

1.5

1.25

1.25

Dividend growth

1.0

1.0

1.25

1.50

0.75

Dividend safety

1.0

1.25

1.0

1.25

1.0

Valuation

1.5

1.0

1.5

0.50

0.75

Long-term debt

1.25

1.00

0.75

0.75

1.50

Revenue growth

0

0

0.50

1.00

0.50

EPS growth

0.50

1.50

0.25

1.5

0

Future growth estimates

1.0

1.25

1.0

1.0

1.50

RATING

TOTAL

8.75

9.0

8.75

9.75

8.25

Conclusion:

All the above companies that have been analyzed are relatively safe DGI companies. As you can see from our analysis that there are only marginal differences in the net rating that we have derived. Though this rating method is un-scientific and subjective to some extent, we still find it helpful.

If we are price-conscious and rather go for the cheapest company in this sector, probably PG would be our choice. However, if we want to buy a company that has been going strong in the recent years, we could buy Unilever, which is trading at a fair price (but not cheap). In terms of future prospects and growth, it is difficult to see which company will grow faster than others. The EPS growth estimates suggest higher growth for Nestle and KHC going forward, but these are only Wall-street estimates at this point and should be taken with a grain of salt.

As we stated earlier in the article, you should pay attention to the position weight to this sector. If you are already overweight the sector, you should probably skip the temptation to buy. On the other hand, if you are underweight, it will be okay to nibble on a couple of names like PG and Nestle.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. Any stock portfolio or strategy presented here is only for demonstration purposes.

Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, MON, ADM, MO, PM, KO, DEO, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VTR, CVX, XOM, VLO, HCP, O, OHI, NNN, STAG, WPC, MAIN, NLY, PCI, PDI, PFF, RFI, RNP, UTF, EVT, FFC, KYN, NMZ, NBB, HQH, JPC, JRI, TLT, DAE , ARCC, JPS.

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.

Regretting It Already

Last Sunday, I wrote a fun little something for this platform called “Jerome Powell May Live To Regret These Statements“, in which I flagged a series of comments the newly appointed Fed chair made at an IMF/SNB event earlier this month.

Here, for anyone who missed it, is what Powell said about the likely resilience of emerging markets (EEM) as the Fed normalizes policy:

Monetary stimulus by the Fed and other advanced economies played a relatively limited role in the surge of capital flows to (emerging market economies) in recent years.

There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs. Markets should not be surprised by our actions if the economy evolves in line with expectations.

In the first piece linked above, I gently suggested that while rising U.S. rates and the ongoing rally in the dollar (UUP) needn’t necessarily lead to a broad-based unwind in EM, past a certain point it won’t be possible to contend that the only real issues here are a recalcitrant Erdogan in Turkey and a crisis of confidence with regard to the Argentine peso.

In other words, there’s only so long you can lean on the idiosyncratic, country-specific stories excuse when the pain is spilling over to other locales amid a continual rise in U.S. rates and still more dollar strength. Although it’s really only possible to know this in hindsight, often (and this doesn’t just apply to emerging markets) we discover that what we thought were “idiosyncratic” stories were in fact coal mine canaries or, to mix metaphors, the wobbliest dominoes.

As I noted last Sunday, “what you’ve seen recently in the Brazilian real and also in Indonesia is evidence of contagion.” I started talking at length about the Indonesia story weeks ago and around the same time, BofAML’s Michael Hartnett (he’s the guy who told you to sell based on his “perfect” indicator back on January 26, a week before things got dicey), said this about the Brazilian real:

EM FX never lies and a plunge in Brazilian real toward 4 versus US dollar is likely to cause deleveraging and contagion across credit portfolios.

Well, this week, Indonesia hiked rates for the first time since 2014 and Brazil’s central bank eschewed what would have been a 13th consecutive rate cut in an effort to put the brakes on the currency pressure.

Neither effort was effective. In Indonesia’s case, the rupiah plunged to its lowest since October 2015 on Friday:

(Heisenberg)

Have a look at the selloff in bonds (benchmark yields for Indonesia are up some 65 bps this quarter, that would be the largest quarterly jump since late 2016):

(Heisenberg)

In short, the rate hike is not going to be enough. Capital flight is accelerating.

As for Brazil, the “hawkish” decision to forgo another rate cut similarly failed to assuage concerns and worse, it deep-sixed Brazilian equities. The real continued to fall, hitting a two-year low on Friday and I think you’ll agree that what you see in the following chart looks like trouble:

(Heisenberg)

And look, if you’re in the camp that’s predisposed to suggesting none of this matters until it spills over into developed markets, do your friends who hold the popular iShares MSCI Brazil Capped ETF (EWZ) a favor and don’t feed them that line, ok? Have a heart. Empathize. Because they just had their worst week since the circuit breakers were tripping last May:

(Heisenberg)

When it comes to Brazil there’s probably no need to panic just yet. There’s some electoral uncertainty, but nothing that should justify what you see in the currency.

“BRL is slightly weak but not too devalued. This is not an overshooting,” Goldman’s Alberto Ramos told Bloomberg in an e-mail, adding that this is a reflection of external shocks (think: stronger dollar and rising U.S. rates) that “are common to other EM currencies.”

He did go on to note that we could see 4.00 on the BRL, but that “would require the intensification of global EM FX pressures and more concern about the October election.”

Right. Well when it comes to “the intensification of global EM FX pressures” (i.e., when it comes to the kind of 30,000 foot view), the MSCI EM FX index has fallen for six of the past seven weeks:

(Heisenberg)

It was down every day this week.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has also fallen for six of the last seven weeks:

(Heisenberg)

And how about the iShares JP Morgan EM Local Government Bond UCITS ETF? Well, it’s down handily, has seen some $550 million in outflows this month alone, and as Bloomberg notes, hasn’t seen a net inflow since March:

(Heisenberg, Bloomberg)

Look at the slide in its market cap just over the past two months:

(Bloomberg)

Now, let me take a moment to remind you that I have been persistently warning about Turkish President Recep Tayyip Erdoğan’s penchant for pushing a laughably unorthodox “theory” about how higher interest rates cause inflation and currency depreciation. If you follow Turkey, you know all about this. Here’s what I said in the post linked here at the outset:

In case you were under the impression that Erdoğan is going to be inclined to moderating his stance on interest rates (which, in his bizarre version of economics, cause inflation if they’re too high), he is going out of his way to ratchet up the rhetoric and disabuse you of that idea on a daily basis.

Well, do you know what he did this week? He went on Bloomberg TV and all but confirmed that once next month’s election is out of the way, he’s going to effectively commandeer monetary policy. You can watch that interview for yourself here and/or read my longer commentary here, but suffice to say it pushed the beleaguered lira to a fresh all-time low and confirmed everyone’s worst fears about what’s going to happen once he officially consolidates power:

(Heisenberg)

As an amusing aside, if you’re following along on Twitter, you knew that Bloomberg interview was bound to cause trouble:

All of this played out in a week that saw 10Y yields (TLT) in the U.S. hit their highest since 2011 and 30Y yields touch 3.25%.

Oh, and remember how the dollar rally stalled last week? Yeah, well it resumed this week, rising for the fourth week in five:

(Heisenberg)

What you’re seeing here is not only notable, but extremely important for what it says about how the environment is shifting as the Fed normalizes. As I’ve been keen on noting for at least a year, everything became one trade as QE drove everyone down the quality ladder in a relentless hunt for yield and as dovish forward guidance kept rates vol. anchored. That’s now reversing.

How violent that reversal will ultimately be is debatable. Some folks think it wouldn’t be the worst thing to just let emerging markets go. The following excerpts are from the latest by former trader turned Bloomberg columnist Richard Breslow:

These positions can be put to the test without necessarily having negative implications for the broader asset classes. In fact, it may represent a very positive development. A big chunk of these trades weren’t originally done because people were feeling chuffed. They were just desperately searching for yield and following the bidding of the central banks.

But if you’re fascinated by big names, then you might note that Carmen Reinhart is concerned. Here’s what she said this week about emerging markets:

The overall shape they’re in has a lot more cracks now than it did five years ago and certainly at the time of the global financial crisis. It’s both external and internal conditions. This is not gloom-and-doom, but there are a lot of internal and external vulnerabilities now that were not there during the taper tantrum.

And then there was this from El-Erian (via Twitter):

Now look, if what you want to do is pretend as though this is all immaterial for developed market investors, then by all means, but just know that this is one of those scenarios where the old adage about being “entitled to your own opinions but not your own facts” applies. As Heisenberg readers know, I generally despise old adages, but that one is apt here.

This is absolutely material for all investors and the whole point of documenting the spillover from Turkey and Argentina into other locales and charting the decline in various indices and funds is to demonstrate that rising U.S. rates and the stronger dollar are the proximate cause of the problem.

This is all a consequence of the buildup of imbalances in the QE era. It was always a matter of how smoothly the unwind of all the trades that are part and parcel of the global hunt for yield would be and the verdict from emerging markets right now is: “not smoothly”.

Trade accordingly. Or don’t. It’s up to you. But don’t say you don’t have the information you need to make an informed decision.

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.

Elon Musk brings technology charm offensive to Los Angeles tunnel plan

LOS ANGELES (Reuters) – Billionaire entrepreneur Elon Musk is bringing his technology charm offensive to an attempt at digging a tunnel beneath part of Los Angeles to test designs for a high-speed subterranean transportation network he envisions for the city.

Elon Musk arrives to speak at Boring Company community meeting in Bel Air, Los Angeles, California, U.S. May 17, 2018. REUTERS/Lucy Nicholson

Musk, the Silicon Valley high-tech tycoon best known for his Tesla Inc electric car manufacturer, planned to make a rare personal appearance at a public event in Los Angeles on Thursday night to answer questions from residents about his tunneling plans.

Efforts by Musk’s aptly named underground transit venture, the Boring Company, to win fast-track city approval of the proposed tunnel has drawn a court challenge from two neighborhood organizations.

The venue for his town hall-style meeting is the Leo Baeck Temple, a synagogue in the city’s affluent Bel-Air district, where Musk owns a residence, about 10 miles (16 km) north of the would-be tunnel site.

Elon Musk (L) speaks at Boring Company community meeting in Bel Air, Los Angeles, California, U.S. May 17, 2018. REUTERS/Lucy Nicholson

Plans call for excavating a 2.7-mile (4.4-km) passage below a stretch of the congested Sepulveda Boulevard corridor on the West Side of Los Angeles and the adjacent town of Culver City.

The Los Angeles City Council’s public works committee last month approved Boring’s request to exempt the tunnel from a lengthy environmental impact review that would otherwise be required under state law.

Slideshow (2 Images)

Boring says the tunnel would serve as an experimental proof-of-concept site to demonstrate ideas for a traffic-easing system Musk wants to build to rapidly whisk individual cars and small groups of pedestrians from place to place beneath the surface.

But two neighborhood advocacy groups have filed suit to block the excavation, arguing the project is really intended as the first segment for a much larger tunnel system planned by Musk. They say he is trying to obtain a waiver to evade environmental regulations that forbid piecemeal fast-track permitting of big-scope projects.

Musk launched his foray into public transit after complaining on Twitter in December 2016 that clogged traffic was “driving me nuts,” vowing to “build a boring machine and just start digging.”

The Boring expansion comes as Musk wrestles with production problems for the rollout of the Model 3 sedan at Tesla, his electric car and energy-storage business. He also is chief executive of rocket builder Space Exploration Technologies, or SpaceX, and the profusion of leadership roles has concerned some investors that he is spread too thin.

The West L.A. tunnel is the latest project Boring has undertaken after quietly digging a slightly shorter tunnel underneath tiny neighboring municipality of Hawthorne, where SpaceX and Boring are both headquartered.

Reporting by Steve Gorman; Editing by Peter Cooney

Amazon cuts Whole Foods prices for Prime members in new grocery showdown

(Reuters) – Amazon.com Inc and Whole Foods Market are making a surgical strike in the already brutal grocery price war.

FILE PICTURE – The logo of the web service Amazon is pictured in this June 8, 2017 illustration photo. REUTERS/Carlos Jasso/Illustration/File Photo

On Wednesday, Whole Foods debuted a much-anticipated loyalty program that offers special discounts to Prime customers, including 10 percent off hundreds of sale items and rotating weekly specials such as $10 per pound off wild-caught halibut steaks.

Those perks are available now in Florida and will roll out to all other stores starting this summer. Amazon previously announced free two-hour delivery from Whole Foods stores for members of Prime, its subscription club with fast shipping and video streaming.

The new loyalty strategy will test whether Amazon’s $13.7 billion deal for Whole Foods brings much-feared disruption and an intensified price war to the $800 billion U.S. grocery industry dominated by Walmart Inc and Kroger Co.

Whole Foods, with 463 U.S. stores and roughly 1 percent share of the fragmented U.S. grocery market, has gained momentum since the Amazon merger last summer, Whole Foods co-founder and Chief Executive John Mackey told Reuters.

Closely watched basket size – the number of items purchased per transaction – has grown since the merger, said Mackey. He declined to offer specifics.

Mackey is betting on Prime to convince shoppers wary of its “Whole Paycheck” reputation that it is an affordable option for more of their purchases.

The new perks could make Whole Foods cheaper than conventional grocers for about 8 million of its customers who already subscribe to Amazon Prime, according to Morgan Stanley analysts.

Prime members scan an app or input their phone numbers at checkout to receive the discounts.

Still, Philadelphia-area Whole Foods shopper and Prime member Heather Kincade, 46, is going to need convincing.

While Whole Foods’ prices on staples like rotisserie chicken, bananas and avocados have come down, she still thinks some every day items are prohibitively expensive. “If I start buying dish soap and other things there, I will have hit the big time,” she said.

LOWER MARGINS

In Amazon, Whole Foods has found an owner that is famously comfortable spending away profits on new businesses or on lower prices.

“Given how important it is for Amazon to provide value for their customers, and customers value lower prices, I would think they’d be comfortable operating Whole Foods at a lower margin while experimenting with the operating model,” said Tom Furphy, former vice president of consumables and AmazonFresh, and now chief executive of Consumer Equity Partners.

Mackey said more rounds of cuts are in the cards.

“Whole Foods is going to become more and more and more competitive,” said Mackey, who declined to detail how much of a haircut its suppliers will take.

Hain Celestial Group, one of Whole Foods’ biggest suppliers, says a lower profit margin may be worth it.

“I never mind giving up margin for growth,” Hain CEO Irwin Simon told Reuters.

Small grocers, who still control a hefty portion of U.S. sales, typically have razor-thin margins. They are under increasing pressure as German discounters Aldi and Lidl lower prices, too.

Walmart said it will keep offering everyday low prices to all shoppers at its more than 5,000 U.S. stores.

Kroger Co, the largest U.S. supermarket operator with roughly 2,800 stores, uses shopper data to personalize loyalty discounts.

CEO Rodney McMullen told Reuters earlier this month that the chain’s prices will “absolutely” be lower than Whole Foods on the typical shopper’s basket of about 50 items per week.

“It’s easy to beat somebody on four or five items,” said McMullen.

Kroger tested an annual grocery delivery subscription but tabled it due to insufficient demand, he added.

Reporting by Lisa Baertlein in Los Angeles and Jeffrey Dastin in San Francisco; Editing by Greg Mitchell