Supplier Report: 11/2/2018
Companies are trying to find a way to make money in a world where customers are shrinking and costs continue to rise.
IBM’s purchase of Red Hat shows the company has to focus less on their AI goals and get back to software and services.
As people hold on to their phones and computers longer, Apple is raising prices to ensure the cash flow increases. The laws of supply and demand ring true as phone prices rise, demand has dropped. Is this a chicken and egg situation? Only time will tell.
Acquisitions
- IBM to Acquire Red Hat for About $33 Billion
IBM plans to pay $190 a share for Red Hat in what IBM said would be its largest acquisition ever. IBM plans to use cash and debt to make the acquisition. At the end of the third quarter, it held $14.7 billion in cash.
IBM is paying an unusually large premium in the deal, at 63% above Red Hat’s closing stock price of $116.68 on Friday. IBM said that the deal, including debt, is worth $34 billion. Using Red Hat’s most recently disclosed number for shares outstanding, the equity value of the deal is just under that.
https://www.wsj.com/articles/ibm-in-advanced-talks-to-buy-red-hat-1540751279?ns=prod/accounts-wsj
Cloud
- Microsoft’s Cloud Strategy Pays Off
The cloud-computing business, called Azure, grew 76%–still healthy but the slowest pace of growth since Microsoft began regularly disclosing the percentage gains about three years ago. Microsoft doesn’t disclose revenue figures for the business, but Stifel Nicolaus & Co. analyst Brad Reback estimated Azure revenue totaled $2.69 billion for the quarter.
Microsoft’s Intelligent Cloud segment, which includes Azure and server products, grew 24% to $8.57 billion, about $300 million above analysts’ expectations. “This absolutely shows Microsoft’s hybrid-cloud strength,” Mr. Reback said.
Overall, revenue rose 19% to $29.08 billion.
Security
- Private messages from 81,000 hacked Facebook accounts for sale
The perpetrators told the BBC Russian Service that they had details from a total of 120 million accounts, which they were attempting to sell, although there are reasons to be skeptical about that figure.
Facebook said its security had not been compromised.
And the data had probably been obtained through malicious browser extensions.
Facebook added it had taken steps to prevent further accounts being affected.
- Sen. Ron Wyden Introduces Bill That Would Send CEOs to Jail for Violating Consumer Privacy
Wyden’s bill proposes that companies whose revenue exceeds $1 billion per year—or warehouse data on more than 50 million consumers or consumer devices—submit “annual data protection reports” to the government detailing all steps taken to protect the security and privacy of consumers’ personal information.
The proposed legislation would also levy penalties up to 20 years in prison and $5 million in fines for executives who knowingly mislead the FTC in these reports. The FTC’s authority over such matters is currently limited—one of the reasons telecom giants have been eager to move oversight of their industry from the Federal Communications Commission to the FTC.
Software/SaaS
- IBM is betting the farm on Red Hat, and it better not mess up
As Jon Shieber pointed out yesterday, it was a tacit acknowledgement that company was not going to get the results it was hoping for with emerging technologies like Watson artificial intelligence. It needed something that translated more directly into sales.
Red Hat can be that enterprise sales engine. It already is a company on a $3 billion revenue run rate, and it has a goal of hitting $5 billion. While that’s somewhat small potatoes for a company like IBM that generates $19 billion a quarter, it represents a crucial addition.
https://techcrunch.com/2018/10/29/ibm-is-betting-the-farm-on-red-hat-and-it-better-not-mess-up/
- Box takes on OpenText, Microsoft as enterprise content hub
“The next five years in content management will be completely different from the last 20,” said Jeetu Patel, chief product officer at Box. Gone are the days of self-contained repositories that simply store, produce and archive business documents. The key to success entails knowing where your content resides, how to best access it and weaving the content into high-value experiences that solve business problems. The enterprise content hub is where that all begins, and Box is positioning itself to become that focus.
- Linus Torvalds is back at Linux while GNU’s Stallman unveils a “kindness” policy
Torvalds’s apparent speedy return and Stallman’s not-explicitly-pro-diversity not-quite-a-code-of-conduct seem to show the open source and free software movements are intent on taking their own approaches to diversity and gender relations. There’s no doubt this side of computing, which has historically been male and white and somewhat insular, is feeling the impact of external critiques. But so far, the projects have made relatively bland moves toward change that may not be enough to satisfy their critics or make would-be contributors who’ve felt excluded see themselves as welcome.
Datacenter/Hardware
- Apple Raises Prices, and Profits Keep Booming
Apple said Thursday that it sold about as many iPhones in the latest quarter as it did a year earlier but that iPhone revenue rose 29 percent. That was because customers paid nearly 29 percent more for the devices. (The average selling price is now $793.)
The price increase helped propel Apple’s profits 32 percent higher, to $14.13 billion.
But after those figures were reported, Luca Maestri, Apple’s chief financial officer, said in a conference call that the company would no longer disclose how many iPhones, iPads or Mac computers it sold. As a result, journalists and analysts will no longer be able to track how Apple’s swelling prices are improving its profits.
https://www.nytimes.com/2018/11/01/technology/apple-quarterly-results.html
Other
- Google Walkout: Employees Stage Protest Over Handling of Sexual Harassment
But employees’ discontent continued to simmer. Many said Google had treated female workers inequitably over time. Others were outraged that Google had paid Andy Rubin, the creator of the Android mobile software, a $90 million exit package even after the company concluded that a harassment claim against him was credible.
That led some Google employees to call for a walkout. The organizers also produced a list of demands for changing how Google handles sexual harassment, including ending its use of private arbitration in such cases. They also asked for the publication of a transparency report on instances of sexual harassment, further disclosures of salaries and compensation, an employee representative on the company board, and a chief diversity officer who could speak directly to the board.
https://www.nytimes.com/2018/11/01/technology/google-walkout-sexual-harassment.html
Photo by Taylor Grote on Unsplash
Supplier Report: 10/26/2018
Amazon’s stock took a hit this week due to analysts’ lowered expectations about Q4 spending despite record profits. Will that retail downturn leak into corporate spending?
Oracle is having a moment thanks to their annual “Oracle World” conference. The company announced the acquisition of an AI company and maintained their tradition of s**t talking about their competitors in the press.
Acquisitions
- Oracle acquires DataFox, a developer of ‘predictive intelligence as a service’ across millions of company records
Oracle today announced that it has made another acquisition, this time to enhance both the kind of data that it can provide to its business customers, and its artificial intelligence capabilities: it is buying DataFox, a startup that has amassed a huge company database — currently covering 2.8 million public and private businesses, adding 1.2 million each year — and uses AI to analyse that to make larger business predictions.
Terms of the deal do not appear to have been disclosed but we are trying to find out. DataFox — which launched in 2014 as a contender in the TC Battlefield at Disrupt — had raised just under $19 million and was last valued at $33 million back in January 2017, according to PitchBook. Investors in the company included Slack, GV, Howard Linzon, and strategic investor Goldman Sachs among others.
- Facebook on Hunt for Big Cybersecurity Acquisition
In its current acquisition efforts, the company is most likely to look at software that it could wrap into its own systems, including things like analytics or tools to flag unauthorized access, people familiar with its thinking said. Companies in these categories include Demisto, JASK and Swimlane, each of which are privately held and would likely cost somewhere in the hundreds of millions of dollars. It could also look for technology that could help users keep their accounts more secure or add privacy features, the people said. Some companies in this category include ZeroFOX and SafeGuard Cyber, both of which help assess accounts for risk of attack or prevent attacks. ZeroFOX has raised more than $80 million to date and SafeGuard Cyber $14.9 million.
https://www.theinformation.com/articles/facebook-on-hunt-for-big-cybersecurity-acquisition
Artificial Intelligence
- China’s Baidu challenges Google with A.I. that translates languages in real-time
Baidu is China’s largest search engine and for that reason has often been compared to Google. Its latest product comes over a year after Google unveiled the Pixel Buds, a set of wireless headphones that it claims can do live translation.
Huang said Baidu is looking to integrate the AI interpreter into its Wi-Fi translator, a product it unveiled earlier this year which is both a portable internet hub and translator. The company will also use this technology to translate speeches at its annual Baidu World Conference on November 1 in Beijing, China.
Cloud
- Oracle’s Larry Ellison keeps poking AWS because he has no choice
This was about showmanship. It was about chest beating and it’s about going after the market leader because frankly, the man has little choice. By now, it’s well documented that Oracle was late to the cloud. Larry Ellison was never a fan and he made it clear over the years, but today as the world shifts to a cloud model, his company has had to move with it.
To make matters worse, Oracle’s late start puts it well behind market leader AWS. Hence, Ellison shouting from the rooftops how much better his company’s solutions are and how insecure the competitors are. Synergy Research, which follows the cloud market closely, has pegged Amazon’s cloud market share at around 35 percent. It has Oracle in the single digits in the most recent data from last summer (and the market hasn’t shifted dramatically since it came out with this data).
https://techcrunch.com/2018/10/24/oracles-larry-ellison-keeps-poking-aws-because-he-has-no-choice/
- Microsoft crushes quarterly earnings as cloud revenues rise
Azure revenue grew 93 percent during the company’s fiscal third quarter and 89 percent during its fourth quarter ended in June. Microsoft does not break out specific revenue dollar figures for Azure.
Microsoft’s commercial cloud business — which combines Azure with subscription cloud-software services Microsoft 365 and Dynamics 365 — also grew at a slightly slower rate than during the previous quarter, but still increased 47 percent to $8.5 billion.
Security
- Yahoo to pay $50M, other costs for massive security breach
Yahoo has agreed to pay $50 million in damages and provide two years of free credit-monitoring services to 200 million people whose email addresses and other personal information were stolen as part of the biggest security breach in history.
The restitution hinges on federal court approval of a settlement filed late Monday in a 2-year-old lawsuit seeking to hold Yahoo accountable for digital burglaries that occurred in 2013 and 2014, but weren’t disclosed until 2016.
- Japan and China Are Getting Along Better, but Not When It Comes to Tech
Yet Japanese government and business leaders express views in line with Vice President Mike Pence’s recent depiction of China as a nation that seeks technological dominance “by any means necessary” including “forced technology transfer [and] intellectual property theft.”
China is “making unacceptable demands and seeking to exclude foreign businesses,” said a top Japanese official.
One response, the official said, would be to block Chinese tech companies from global markets.
https://www.wsj.com/articles/tech-rivalry-shadows-japan-china-summit-1540306548?ns=prod/accounts-wsj
Software/SaaS
- Linus Torvalds is Back With Linux
Almost exactly a month after Torvalds’ self-imposed exile, he is back at the helm of the project he started nearly three decades ago. In a note sent to the Linux Kernel mailing list on Monday, Greg Kroah-Hartman, a lead Linux developer, said that he is “handing the kernel tree back” to Torvalds.
“These past few months has [sic] been a tough one for our community, as it is our community that is fighting from within itself, with prodding from others outside of it,” Kroah-Hartman wrote. “So here is my plea to everyone out there. Let’s take a day or two off, rest, relax with friends by sharing a meal, recharge, and then get back to work.”
https://motherboard.vice.com/en_us/article/3km9qb/linus-torvalds-is-back-with-linux
Datacenter/Hardware
- Investigating Implausible Bloomberg Supermicro Stories
In this article, we have shown why the technical details of the Bloomberg alleged hack are inaccurate and/or implausible. These technical details were offered to Bloomberg through anonymous sources, so we have no way of doing further fact-checking. We showed why, even if a chip can be produced and placed it would not work as Bloomberg reports. CEOs such as Tim Cook of Apple and Charles Liang of Supermicro and all of the named companies have said that the reporting was untrue or inaccurate. The three security experts named in the two Bloomberg pieces have expressed reservations about what and how Bloomberg has presented the story.
Bloomberg is standing by their piece, citing 17 sources and over 100 interviews. It seems 9 sources between Apple and Supermicro have contradicting evidence offered by CEOs with a duty to make truthful statements about their companies. There are 2 cited security experts who have reservations, as does the lynchpin expert in the follow-up piece but we do not know if they are included in the tally.
https://www.servethehome.com/investigating-implausible-bloomberg-supermicro-stories/
Other
- SoftBank Chief Is Said to Have Canceled Appearance at Saudi Conference
Word of Mr. Son’s decision not to attend came on Tuesday, the first day of the conference. A representative for SoftBank, the Japanese internet, energy and financial conglomerate, did not immediately respond to a request for comment
However, Saleh Romeih, an executive with Softbank’s Vision Fund, the biggest technology fund on record, spoke on a panel at the conference on Tuesday, a spokesman for the fund said. The Saudi government is providing $45 billion of the Vision Fund’s nearly $100 billion.
https://www.nytimes.com/2018/10/23/business/saudi-investment-softbank.html
- Amazon shares fall as record profits are offset by conservative holiday forecasts
Amazon is still raking in the cash, but its slower than expected customer growth in its web services offerings and a weaker than expected sales outlook for the holiday season shook investor confidence and caused the stock to slide around 5 percent in after-hours trading.
Profits for the company continued to soar, reaching $2.9 billion, or $5.75 per share, up from $2.5 billion in the second quarter, and handily beating analysts’ estimates of $3.14 per share. Those earnings were offset by slower revenue growth at $56.6 billion versus the $57.1 billion analysts had expected.
- Silicon Valley’s dirty secret: Using a shadow workforce of contract employees to drive profits
It’s not only in Silicon Valley. The trend is on the rise as public companies look for ways to trim HR costs or hire in-demand skills in a tight labor market. The U.S. jobless rate dropped to 3.7 percent in September, the lowest since 1969, down from 3.9 percent in August, according to the Bureau of Labor Statistics.
Some 57.3 million Americans, or 36 percent of the workforce, are now freelancing, according to a 2017 report by Upwork. In San Mateo and Santa Clara counties alone, there are an estimated 39,000 workers who are contracted to tech companies, according to one estimate by University of California Santa Cruz researchers.
https://www.cnbc.com/2018/10/22/silicon-valley-using-contract-employees-to-drive-profits.html