This edition of Supplier Report is a bit more reflective than forward facing thanks to several end-of-year posts. This week we get some context on how Huawei grew and how Amazon is potentially hiding its growth. There is speculation about acquisitions and what some companies are doing with their excess cash.
And I can’t properly close out 2018 without some Larry Ellison news!
Acquisitions
- Will Microsoft Acquire Oath (Verizon Media Group)?
The business unit, Verizon Media Group, faces tough competition. Revenue for the division fell from $2.2 billion in the fourth quarter of 2017 to $1.8 billion in the third quarter of 2018.
Verizon CEO Hans Vestberg, who joined the business in August 2018, set out to restructure the company. He told investors during the third quarter investors’ call that he doesn’t expect to meet the company’s “previous target of $10 billion of [annual] revenue [for Oath] by 2020.”
Apparently, the company really just wants to build Oath’s technical capabilities such as artificial intelligence, augmented reality, and virtual reality into its other businesses across Verizon. But the company could license those patents from Microsoft, if they choose to sell the assets to the Redmond, Washington-based company.
- 3 Tech Companies That Are Spending Billions to Buy Back Their Own Stock
Earlier this year, memory specialist Micron announced a share-repurchase program good for $10 billion. While that’s not quite in the same ballpark as Microsoft’s $40 billion buyback, let alone Apple’s enormous $100 billion share-repurchase authorization, the size of a buyback needs to be considered in the context of a company’s market capitalization. Microsoft’s and Apple’s market capitalizations are each north of $700 billion, while Micron’s is currently around $35 billion.
https://www.fool.com/investing/2018/12/30/3-tech-companies-that-are-spending-billions-to-buy.aspx
Artificial Intelligence
- The Verge 2018 tech report card: AI
This reckoning has been most visible as a parade of negative headlines about algorithmic systems. This year saw the first deaths caused by self-driving cars; the Cambridge Analytica scandal; accusations that Facebook facilitated genocide in Myanmar; the revelation that Google helped the Pentagon train drone surveillance tools; and ethical questions over the tech giant’s human-sounding AI assistant. The research group AI Now described 2018 as a year of “cascading scandals” for the field, and it’s an accurate, if disheartening, summary.
Cloud
- What Amazon Isn’t Telling Investors About Its Revenue
The rule doesn’t require companies to break down their revenue in any specific way. But if they discuss particular sources of revenue in earnings announcements or conference calls, or if they provide their top decision-makers with particular details about revenue, such as how individual products are selling, then they are supposed to consider breaking out the revenue on that basis for investors too.
In Amazon’s case, the SEC noted in an August letter that the company said publicly it had topped 100 million paid Prime members globally and shipped more than five billion items with Prime world-wide in 2017. It asked Amazon to disclose its percentage of sales attributable to Prime members.
Amazon declined, telling the SEC it didn’t believe sales to Prime customers was useful information and that Prime membership is “only one element” of its business. An Amazon spokeswoman declined to comment further.
https://www.wsj.com/articles/what-amazon-isnt-telling-investors-about-its-revenue-11545480000
Software/SaaS
- How Facebook Keeps Messenger From Crashing on New Year’s Eve
In addition to shifting loads, the Messenger team has developed other levers that it can pull “if things get really bad,” says Ahdout. Every new message sent to a server goes into a queue as part of a service called Iris. There, messages are assigned a timeout—a period of time after which, that message will drop out of the queue to make room for new messages. During a high-volume event, this allows the team to quickly discard certain types of messages, such as read receipts, to focus its resources on delivering ones that users have composed.
“We set up our systems so that if it comes to that, they start shedding the lowest-priority traffic,” says Ahdout. “So if it came to it, Iris would rather deliver a message and drop the read receipt, rather than drop the message and deliver the read receipt.”
Datacenter/Hardware
- Intel to get 700 million shekel grant for Israel expansion
Israel will give Intel Corp (INTC.O) a 700 million shekel ($185 million) grant in return for a planned $5 billion expansion of its production operations in Israel.
Intel is one of the biggest employers and exporters in Israel, where many of its new technologies are developed. Earlier this year it submitted plans to upgrade its Kiryat Gat manufacturing plant in southern Israel.
https://www.reuters.com/article/us-israel-intel-idUSKCN1OO0JD
- 911 emergency services go down across the US after CenturyLink outage
CenturyLink, one of the largest telecommunications providers in the U.S., provides internet and phone backbone services to major cell carriers, including AT&T and Verizon. Data center or fiber issues can have a knock-on effect to other companies, cutting out service and causing cell site blackouts.
In this case, the outage affected only cellular calls to 911, and not landline calls.
Several states sent emergency alerts to residents’ cell phones warning of the outage.
https://techcrunch.com/2018/12/28/911-service-outage-centurylink/
Other
- How Huawei Took Over the World
In its early days, Huawei was accused of stealing technology, including by Cisco Systems Inc. in a 2003 lawsuit, which Huawei settled without admitted wrongdoing. Now it has the biggest R&D budget of any tech company in China, pouring $13 billion last year into developing its own technologies, outpacing Intel Corp. and spending almost as much as Google parent Alphabet Inc. Huawei says that 80,000 people—45% of its employees—work on R&D. They make chips, design phones and work on 5G technology.
https://www.wsj.com/articles/how-huawei-took-over-the-world-11545735603
- JD.com Tries to ‘Change the Narrative’ With Business Restructuring
Investors have become increasingly worried about Mr. Liu’s unusually tight grip over his company. He controls nearly 80% of the company’s voting rights and the board can’t meet without him unless he recuses himself. His concentration of authority became a focus of concern among some analysts after Mr. Liu’s brief arrest in August and during the subsequent months when accusations against him were pending.
JD.com’s American depositary receipts have fallen 49.1% in the past year, closing at $21.10 on Wednesday. While shares of the nation’s large tech firms have been beaten down by concerns about China’s slowing economy and government regulation, JD.com’s fall was especially dramatic. Some analysts attributed the swoon to the uncertainty surrounding a criminal prosecution.
- Tesla adds Oracle founder Larry Ellison to board of directors
Tesla is Ellison’s second-largest investment as of October, Ellison said then. Ellison owns 3 million shares in the company, according to the announcement. He also said that he and Musk are close friends. Wilson-Thompson spent 17 years as an executive at the Kellogg Company, and currently serves as the executive vice president and global chief human resources officer of the Walgreens Boots Alliance, the holding company that sits above Walgreens.
Tesla was required to add two new independent board members as part of the settlement Elon Musk and the company signed with the Securities and Exchange Commission (SEC) earlier this year. The SEC had charged Musk with securities fraud in September over the “false and misleading” statements he made on Twitter in August, when he suddenly announced plans to turn Tesla back into a privately held company. He quickly settled with the agency two days after rejecting its initial offer.
https://www.theverge.com/2018/12/28/18158832/tesla-larry-ellison-board-of-directors-oracle-founder
Photo by Thomas Lipke on Unsplash