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skibimamex

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  • Why Apple's Profits Are At Risk [View article]
    your argument doesn't make entire sense by discounting mix when discussing competitive pressures. you admit that the causality of drop in average unit economics is the much faster growth of iPad (and now iPad Mini) than the growth of iPhone (where Apple enjoys the highest marign and one of the higher average unit gross profits). so how does that translate into a decrease in competitiveness. If Apple sells more iPods or Apple TV's which have both lower average ASP and average margin %, does that say one iota about the unit economics of iPhone, but the average of the company as a whole reflecting mix.

    ASP for iPhone has actually hardly budged in the past year (so where's the competitive pressure) but it's relative portion of the overall mix of Apple's aggregate sales is less because it is now growing at lesser rates than other products in the portfolio such as iPads and even tine slice of Apple TV's. The point is that unit economics driven by product mix tells you nothing other than that the average has shifted to reflect a different mix. The average is the average.

    At least you can say with the iPad that iPad Mini may have risked cannibalization/substi... with a lower ASP, lower GM%, and a loer Gross Profit unit economics than the original iPad. Is this a different product segment, i.e. a different leg of growth, or can it canibalize existing iPad sales -- but Apple is not dropping prices on iPads due to competition; it is participating in another segment that may overlap teh existing iPad.

    So if you had said that "hey the incremental $ of Apple's revenue growth is likely to be lower margin due to relative mix shift with respect to where the growth is coming from, and therefor that growth has less earnings power than before," I would be clapping and supporting your position. But when you say disregard the mix shift and impact of apples, oranges, and bananas on "Average Unit economics" and instead this indicates declining margins due to competitive pressures -- than I say that is a pretty foolish analysis.

    By the way, I dont discount the POV that Apple has more viable competitors today in terms of competing products at increasing functional parity than it has before and therefor Apple may be more challenged in maintaining its differentiation for its products, and more importantly, for its brand image, but pointing to average unit economics across a broad swath of products (i.e. including ranges from a $99 Apple TV box to a $2000 iMac) as indicative of the health of Apple's iPhone competitiveness is as analytically sound as reading Mayan calendars to predict whether the world will end tomorrow.
    Jan 29, 2013. 05:39 PM | 1 Like Like |Link to Comment
  • Clearwire's Options Are Arranged Or Forced Marriage [View article]
    DISH's dream proposal is not a real "offer" if it's contingent on events that will not happen (i.e. Sprint agreeing to give up its governance rights and let DISH strip the assets first and then suck the economics out of CLWR afterwards) or where it only needs follow through conditioned upon that the world is flat.

    DISH's proposal is only the illusion of an offer (which is really a non-offer) in order to asset strip CLWR for its best spectrum (presumably the contiguous EBS channels) and leave CLWR shareholders with an obligation to spend money (i.e. to build to DIsh's specifications) leaving a pile of debt and burdensome lease obligations (both spectrum and towers) for CLWR shareholders.

    DISH's "offer" is "Let me take the better, smarter, and more attractive kids, along with the fancy cars, and all the jewelry" and leave the frumpy wife with the mortgage and credit card debts and the sick smelly dog" with the promise that "I'll be sure to come back to take you from this mess, but only if you convince the bank to give up their claim and you convince the neighbor to give up his rights,...and oh by the way, please keep on sending me checks to educate the kids and to pay for the chauffer to my fancy car". Oh and if you can't get every one of these unachievable conditions satisfied, DISH has long absconded with the best assets and says as the Japanese say "sayonara"..

    And why would the CLWR board agree to this Frumpy Wife Trade?

    Answer: they wouldn't but they will do the best they can to use it as a stalking horse to convince Sprint to bid against itself. Sprint may just be dumb enough to do so, but it's really Softbank's money and maybe Son doesn't feel like being a chump.
    Jan 29, 2013. 02:23 PM | 3 Likes Like |Link to Comment
  • How Apple Gave Wall Street The Middle Finger [View article]
    The Company did NOT increase share repurchase authorization which requires both board approval AND the filing of 8-K. The company purchased $2B of its $10B authorization so has $8B to go within existing plan. Nothing prevents them from increasing or amending authorization, just that they have to announce it. They would probably have to "true-up" their disclosure by providing an interim update of any subsequent purchase since last report at the time they increase share repurchase authorization.

    So while I am cheering them on in repurchasing the rest of the initial authorization, there is n oway they can stealthily repurchse $45B because that exceeds the authorized limit AND there is not sufficient liquidity to execute that program within this quarter to do that much repurchases without driving up the market price of hte shares significantly.

    so good wish, but not exactly how it will play out, but you are correct that it would be foolish for them to signal their intent with respect to share repurchases and projecting EPS will necessariy get to the share count question.
    Jan 29, 2013. 11:01 AM | 6 Likes Like |Link to Comment
  • Can You Still Own Apple? [View article]
    Steve Jobs was right. I got one of the first IPad mini's. Too small and hard to manipulate, but I love the featherweight versus the original iPad which was a self-defense instrument. I fully expect the next iPad 5 to leverage some of the strengths of the iPad Mini but in th eoriginal 10" size.

    And Tim Cook's strongworded denial of the need for a phablet size smartphone proves to me that one is in the works.

    BTW, has everyone figured out all the analysts and what they are estimating for EPS what their assumptions they had for sharecount. It seems to me that AAPL did not give EPS estimates but only revenues, gross margin. If they were buying back shares, can't argue with now being a fortuious time to do so.

    What will really catch the world by surprise is if one day we woke up and the HBO Go got carriage on Apple TV and is billed through AppleID (like Netflix, HuluPlus, MLB, etc are currently). Then the power of Apples' entrenched installed base becomes readily evident...

    In the meantime I would love to see $400/shr as I sold out too early at $230; of course the company was 1/3 the size back then and $100B lighter in the cash department
    Jan 28, 2013. 03:16 PM | Likes Like |Link to Comment
  • Netflix: The Long Term And The Short Term Of It [View article]
    Unfortunately you simply don't understand the business model.

    The studios did not invest in Hulu Plus. The Media conglomerates who own Hulu (from Day 1) includes News Corp (Fox), NBC Universal -Comcast, and Disney.

    Of course Disney just entered 10 yr exclusive output deal for its studios with Netflix (following expiration of its output deal with Starz), and did non-exclusive catalog deal, and a non-exclusive exclusive for its Disney branded content (to supplement Disney channel) distribution.

    Oh Warner Bros studios did exclusive prior season deal on its serialized dramas such as Revolution and the Following (which both appears on competing NBC broadcast network for first run broadcast).

    Oh and NBC-Universal's Universal Studio's actually has long-term output deal with HBO for its studio product - despite the fact that it also owns equity (but now passive) equity interest in Hulu.

    News Corp's Fox Studio actually also has long-term exclusive pay cable 1 output deal with HBO that's up for renewal like 2016/2017 time frame.

    That's because Hulu is positioned as same-season (i.e. current season) "Catch-up" TV, and CEO Jason Kilar just resigned because he could not get the support that he felt was required (i.e. money) in order to grow Hulu, and the owners themselves had differing strategic visions of what Hulu is.

    HBO is most similar to Netflix in that it is both a distributor of exclusive studio output deals (Warner, Fox, and Universal and actually lost its Dreamworks Animation output deal to Netflix last year) as well as so-called "original" programming (both drama and sports verticals such as boxing), as well as some catalog product and late-night content (for its Cinemax patform mostly). But the difference is that HBO is currently reliant solely on MVPD's that suck 50% of the subscription fees as gate-keepers. That's why it is testing a direct-to-consumer strategy in Scandinavia in following Netflix in that country. BTW, "originals" simply they pay for the development and production,n ot some magic sauce -- every one of their originals has been pitched to most of the studios and actually are produced by some of those studios as well.

    So bottom line, Netflix, ;like HBO, Showtime, ESPN, Hulu, ABC, CNN, etc. is simply another programming network. All of these differentiate themselves based upon programming content, distribution strategy, and degree of "Exclusive" and non-exclusive content. The difference is that the traditional programmer broadcasts "linearly" -- one piece of content at a time for each channel slot. The only time-shifting was performed by the consumer on his dVR. This is evolving given the capabilities unleashed by broadband and the internet and cloud storage capabilities, to a consumption model that has nearly infinite channels since it is an on-demand model that let's the user pick what he/she wishes to watch when he/she wishes to do so. In that world, the actual size of the library becomes and important differentiator,...because it enables small niche programming, such as bollywood, b-movies horror genre, or military history, etc. to find its audience.

    Most pundits who talk about competitive threats seem to think there is only a winner-take-all world and dont understand that networks are distributors of content and often-tiemes includes counterprogramming (i.e. program something that's different or which others dont have). In their world of competition, there is no Starz, Epix, Showtime, Encore, Movie Channel, because there is already a HBO. OMG, how can a Fox ever establish a network when there is already ABC, CBS, and NBC,...let alone a CW with programming targeted to teenage girls like Gossip Girl and Vampire Diaries. or ABC Family channel with ti s set of programs which are totally different than its Disney or DisneyJr products.

    A programming network is a distributor -- it curates and selects and underwrites/funds programming that it believes can find an audience, either to sell eye-balls (ad-supported) or via subscription/retran fees (or ideally both). Netflix is no different but what is different now is that its US distribution just surpassed what HBO took 30 years to build, and what Netflix added in one quarter is what took HBO over the past two years to grow (while being dependent on MVPD's and charging 2.5x at $18/mo "rack rate). HBO is desperately trying to figure out alternative direct to consumer distribution without getting into fight with its existing cable operators. It looks at the value of its content and the brand positioning where it sits, and it sees the huge amounts of monies that is leaking to the cable operators, and it wonders how it can go direct-to-consumer before Netflix laps it again.

    Disney was not dumb. It chose to align with Netflix because it knows the maximum monetization of the value of its content is to leverage the strength of those with the greatest distribution and that would be Netflix, because that distributor would be in the best position to pay the most.

    Netflix is going a 10 bagger over the next 10 years. because there is no competition that is anywhere close, and content deals are either very long-term such as studio output deals or medium term for television syndication (and even those upon renewal, the guy with the largest subscriber base can CHOSE to pay the most if he wants -- but as oppose dot broadcast networks who must rely on ratings, an internet distributor SVOD operator knows an infinite amount of information and the value of every piece of content).

    That is why you are only seeing the beginning of the Netflix story - it's like HBO in 1980, the next 2 decades is going to be the opportunity of a life-time. Sony Columbia is up next, and Time-Warner has to really think twice whether to allow Warner Bro studios shop its content to auction (where Netflix is already the preferred partner for Warner Television Studios) or let it "sell" it at 1/3 the price internally to HBO. That's an interesting debate to be had.

    Streaming is not a "business" but rather an enabling technology for a programmer to distribute content without gatekeepers. Those who confuse different "streaming options" as competitors are blissful in their ignorance of what the new media paradigm that is simply a variation of the old. After-all, except in North Korea maybe, does any one really believe we live in a world where there is only one channel on TV?
    Jan 27, 2013. 06:09 PM | 3 Likes Like |Link to Comment
  • The buzz hasn't worn off quite yet for Netflix (NFLX) with shares up 36.2% premarket to sail over $140 after the company's U.S. subscriber growth smashed forecasts. On Icahn's holdings: In his letter to shareholders, CEO Reed Hastings said Netflix has had "constructive" conversations with Carl Icahn about creating value without going into great detail. Icahn said in an interview yesterday he still holds his entire position along with the hundreds of millions of dollars in profits that have piled up rather quickly. [View news story]
    Resource allocation issue. I'd rather that they compete aggressively to get the Sony-Columbia Pictures output deal (the last two of the Big 6 up for renewal this decade are Sony and WB, and I doubt that WB will be allowed to seek bidders away from HBO).

    It's not the end of the world IMO to wait until back-end of 2013 or early 2014 for the next launch (it's supposed to be France I think - somehow I thought that had launched already or rumored to launch imminentley. that works as NFLX already has familiarity with French titles and lanugage in UI from Canada).

    By year-end US streaming will be 30%-50% higher contribution than domestic DVD, and remaining international burn would be 1/2 of current (i.e. under 60/mm a quarter), then they can pop out a new country launch once every 6 months (assume $60MM loss in initial quarter of launch for the big ones such as France and Germany) and expand out to the core of Europe.

    But I think incremental dollar to secure US dominance and add the next sub where US is already at scale is far more financially rewarding and that excess return can then be invested in foot print expansion.
    Jan 24, 2013. 12:39 PM | Likes Like |Link to Comment
  • The buzz hasn't worn off quite yet for Netflix (NFLX) with shares up 36.2% premarket to sail over $140 after the company's U.S. subscriber growth smashed forecasts. On Icahn's holdings: In his letter to shareholders, CEO Reed Hastings said Netflix has had "constructive" conversations with Carl Icahn about creating value without going into great detail. Icahn said in an interview yesterday he still holds his entire position along with the hundreds of millions of dollars in profits that have piled up rather quickly. [View news story]
    I think the shorts will get squeezed as the operating momentum continues near-term, but then by summer when the seasonality comes into play, the short thesis will gain popularity again and the stock may retrace significantly. Q4 and Q1's gross adds are Q2's churn, and Q2 doesn't have the gross adds to outrun the seasonal churn echo. So you'lll get the "OMG, see Netflix can't grow because the market is totally saturated and look at all the fearful competition." IMO, not really the case of course, but that will again become the prevailing market perception, and the stock will likely retrace, by grinding down as some folks lose conviction and take profits, not a cliff drop IMO.

    Good luck. I am long but not a trader. In for the long-haul.
    Jan 24, 2013. 11:47 AM | 1 Like Like |Link to Comment
  • The Apple Blow Up [View article]
    author doesnt seem to realize gross margin is a function of mix. IPhone, which is the largest driver of outsized GM, had no declination of ASP/unit. Rather it was the success from increasing portion of revenues from iPads, which has a lower profit margin in general and more specifically during the launch phase of new Mini, that resulted in the weighted average margin. It is not a sign of competition (i.e. Apple's iPhone ASP hardly budged), but rather growth in a different product category that doesn't offer the unique carrier subsidy characteristics that the IPhone offers.

    In any case, the author has articulated the proposition from short thesis well; however, he has actually given me the impetus to get involved now (on the long side). So thanks.
    Jan 24, 2013. 11:34 AM | 2 Likes Like |Link to Comment
  • The buzz hasn't worn off quite yet for Netflix (NFLX) with shares up 36.2% premarket to sail over $140 after the company's U.S. subscriber growth smashed forecasts. On Icahn's holdings: In his letter to shareholders, CEO Reed Hastings said Netflix has had "constructive" conversations with Carl Icahn about creating value without going into great detail. Icahn said in an interview yesterday he still holds his entire position along with the hundreds of millions of dollars in profits that have piled up rather quickly. [View news story]
    JPM just upgraded NFLX this morning --- while he was neutral when stock was in $50's a few months back. We'll see other analysts jumping on the bandwagon too after the horse has already left the barn. This will get overdone relatively quickly as we get the mother of all short squeezes.
    Jan 24, 2013. 09:15 AM | Likes Like |Link to Comment
  • The buzz hasn't worn off quite yet for Netflix (NFLX) with shares up 36.2% premarket to sail over $140 after the company's U.S. subscriber growth smashed forecasts. On Icahn's holdings: In his letter to shareholders, CEO Reed Hastings said Netflix has had "constructive" conversations with Carl Icahn about creating value without going into great detail. Icahn said in an interview yesterday he still holds his entire position along with the hundreds of millions of dollars in profits that have piled up rather quickly. [View news story]
    He may "hold" his position, but that doesn't mean that he can't start hedging some of it. Great trade for Icahn.
    Jan 24, 2013. 09:09 AM | 1 Like Like |Link to Comment
  • Sprint's Battle For Clearwire Heats Up [View article]
    yes anyone else can bid, they just cant win. since Sprint isnt selling its 70% (the strategics are commited to sell to sprint irrespective of the shareholder vote -- it's called a "lock-up"). at least no one that wants to win the whole thing. Charlie doens't care about CLWR minority shareholders; he's working for DISH sharehodlers (himself really).

    His deal is let him strip the most valuable BRS spectrum (which isnt lease encumbered) and give him option for adjacent contiguous spectrum. and only if the proceeds goes back a portion of which is to pay himself (via teh bonds he holds), then he willl make an offer fot teh whole company conditioned upon at leat beign able to buy 25% of the company, which is 83% of teh minority shareholders not held by Sprint or otherwise committed to sell to Sprint. And by the way only if Sprint amends its goverance rights and CLWR becomes piggy-bank to build out Charlie's network (with what monies). He doesn't care whether he wins the back-end since he's stripped the most valuable spectrum on the front-end and has optioned a piece that he didnt pay for upfront. Worst case he does buy into a blockign position at CLWR after stripping it and he then remains a thorn in Sprint's side as payback for Sprint messing with his FCC waiver.

    What Sprint shold do is to match exactly DISH's offer on the front-end, which is to pay in cash to strip the best spectrum, do not require CLWR to repay debt but let it use it how CLWR's BOD sees fit (which may in fact to pay some debt down that's callable), and keep it's existing offer for the whole company without any of the conditions imposed by DISH but rather than a merger will do so via a cash tender -- let's shareholders vote with their tender rather that a vote. So if CLWR minority shareholders want to sell the spectrum in order to have more porceeds to pay the $500mm a year in interest expense, $550MM+ to pay for running the current network and spectrum leases, and to extend out their "option value" for someone else to pay more, they can simply "vote" by not tendering.

    DISH can simply ask for permission from CLWR to buy in the open-market to get to 25%, but they dont, because it is not worth $3.30 to DISH unless Sprint waives some of its governance rights, which means a transfer of value from Sprint to other shareholders, which Sprint aint dumb enough to do.

    In fact Sprint should do the asset-stripping trade that Charlie proposed described above, offer a back-end that I described via tender at $2.97 and agree to that if it does not get to 90% ownership (when it can do squeeze out), it will make another offer in 2 years to buy out all shareholders at a price at which if someone else will top by more than 10% on enterprise value basis, then Sprint will sell its ownership along with others at that price (it's an "honest bid" shotgun provision) -- of course what remains of CLWR after the spectrum-strip front-end is the less attractive spectrum along with the spectrum leases, opex obigations and a nice pile of debt. I wonder what that's worth at that time. Maybe Verizon will ride to the rescue then because surely Verizon will be desperate for additional spectrum by then and of course all spectrum must be equally attractive -- that investment thesis is called "hope" or "prayer".
    Jan 11, 2013. 02:23 PM | 2 Likes Like |Link to Comment
  • Android Is Dead - Part 6: Nokia Triumphs [View article]
    Cdpete1

    I agree with you. My kids have had Apple products (mac, iPod, Apple TV, and now iPhone) since they were in high school and in particular, iTunes, has locked them in, and now iCloud, due to their embedded investment in content. But that doesnt mean that the next customer is similarly locked (I have all the same products but tried the iPhone but disliked the keyboard and do not have similar entrenched iTunes library) so Apple constantly competes to entice the next purchase decision while simultaneously protecting its installed base.

    My only point is that I believe that with respect to new customers, or even new purchase decisions, we are closer to competitive parity than we were before. Hey the original iphone "pinch and zoom" was a game changer -- but now that is not a differentiator an more. I frankly cant think of anything that Android offers that I value that is not a parity with everything else and I have two state of the art top of line Android phones, and an Android tablet (because it was cheap and I wanted something non-Apple -- even though we have 6 iPads in the household).

    While we cant make our own investment decisions based upon our own preferences or cosumption decisions, actually using all these devices does give us a framework to assess the relative competitive strengths and weaknesses of each vendor's value proposition. I dont pre-suppose that everyone else is like me. I actually think that there are a lot of different needs and that new devices are clsoer to competitive parity in their offering than they were before -- that's actually why I agree with the author that there is more likelihood for fragmentation of market share in the future than the current 2 horse race.

    I think that Windows Phone will survive just becasue wealth of MSFT to back it and the more unique user interface and the fact that MSFT can leverage its desktop position to attempt to make that user interface ubiquitous. Will it take more from Android or from Apple, who knows. With respect to Blackberry, their challenge is greater because it cannot leverage multiple OEM's to get shelfspace (beign willing to license the OS is not the same as getting somebody to be a willinge licensee) so the jury is out. BUT, at least I, and I believe others too, would love to have a device that lets us leverage a good physical keyboard because more than 50% of my use of the smartphone is still basic email. So I do not rule out Blackberry regaining some market share and finding a niche of loyal crackberry-heads; now whether it is economically viable and can gain sufficient scale to earn an economic return,...especially when you realize where it makes it money is on the service toll and that is going away or otherwise going to compress dramatically, that's an entirely different question all together.
    Jan 11, 2013. 12:14 PM | Likes Like |Link to Comment
  • Android Is Dead - Part 6: Nokia Triumphs [View article]
    I dont disagree that GOOG has not have fallen into the blessed position of having a phenomenal ability to generate profits and returns from its dominant core search biz, but I question the stewardship of its leadership. He is a lousy investor of shareholders capital (and frivolous) and is at risk to piss it away to serve his own whims. that $40B is largely off-shore by the so, when you tax effect it, maybe it's $30B. So it will only take a couple more idiotic acquisitions like MMI for him to piss it away.

    BTW, I've only owned Android phones (actually that's nto true since I've had Blackberries, like everyone else over 30 at some point (who had a job previously), and Palm Pre. I'm not an Apple zealot although I've bought lots of their products. But I am just as likely on my next purchase to buy an WP8 or Blackberry 10 device because frankly I'm bored with my two Samsung's. My point is that the author is correct, that there's really nothing that locks me in to Android, and if Samsung, or Nokia, or Blackberry, or Apple, has something cool for me to try, that will be my next smartphone. I have no loyalty whatsoever other than I want to be "wow'ed" by the next innovation -- although I do miss my BB keyboard.
    Jan 10, 2013. 07:53 PM | 1 Like Like |Link to Comment
  • Sprint's Battle For Clearwire Heats Up [View article]
    have you read the WTO which is a treaty that the US is a party to....that says you can't limit foreign owenership in telecommunications operators. Hmmm maybe that's why the Germans own 100% of T-Mobile USA. The FCC aint going to stop a "Japanese company to control" - that's not an available criteria for it to deny license transfer. Nor does Crest's petition to the FCC about valuation since the the Clearwire spectrum were already paid for in the BRS/EBS auctions by its and its predecessors Sprint, Worldcom, Nextel, the MMDS operators, that originally bought the spectrum from the FCC auctions. The FCC doesn't have any rules about how much licensees who own their license should resell their licneses for. Crest is grabbing at straws in hopes of a tip for delaying the deal.

    Sprint doesnt really care -- they already have locked in the other strategics who have committed to sell to Sprint at $2.97/shr irrespective of the shareholder vote. When faced with in the end the same dilemna that the independent board concluded which was "do we take the bird in hand versus running out of money" the rational CLWR shareholders will vote with their wallet. Even if they dont, Sprint buys up north of 70% and then just keep diluting the minority (because CLWR needs money) even if it allows the other minority shareholders to tag along if they also provide the capital alongside Sprint. Crest and its gang of rabblerousers aint got the dough to keep up. In the meantime CLWR's spectrum aint going anywhere else, because Sprint can block any other sale since it's not a seller.

    I'm not saying that Sprint may not eventually pay a bump at some point but there is certainly no bidding war now. No one else can bid. That's the part that Crest hasn't realized (they missed that M&A class in b-school). Sprint has CLWR locked up 20 ways to sunday AND with CLWR's cash flying out the door, Sprint ahs all the leverage.

    You gotta give Charlie credit though. The man has chutzpuh. Hey let me buy your best spectrum (the BRS), give me free seller financing for some more (the purchase option for adjacent contiguous 5mhz), and oh by the way only if you take the proceeds and pay down the CLWR debt that I own $750MM of. Now that boy sure wins every time when he's negotiating with himself in the bathroom. Hey you don't get what you you don't ask for.
    Jan 10, 2013. 07:36 PM | 1 Like Like |Link to Comment
  • Android Is Dead - Part 6: Nokia Triumphs [View article]
    But Larry Page pissed $12.5B away on Motorola because he didn't know that Standards Essential Patents are useless in a patent war by a practicing entity (rather than a troll). That's because the counter-party can sue you to kingdom come too but because all SEPs are FRAND encumbered, only the guy with non-SEP IP has ultimate leverage.

    Anyway, we'll have to wait another year for GOOG to generate another $12B of cash for them to piss away on driverless cars, geek-wear eye glasses, or asteroid mining ventures.

    "Do Only Evil" -- that's the ticket.
    Jan 10, 2013. 06:51 PM | 3 Likes Like |Link to Comment
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