Welcome to the May 9 edition of Seeking Alpha's Eye on Tech newsletter. The newsletter will be on hiatus until Tuesday, May 17.
Notable Tech News
Facebook partners with an ad agency to create a morning live video show - Facebook's (FB) aggressive live video efforts extend to creating sponsored programming. The company is partnering with ad agency DigitasLBi to create Rise and Shine, described by AdWeek as "a livestreamed morning 'feed show' on Facebook that will include local weather, exercise workouts, recipes and more." The site adds Rise and Shine will air 3-5 times a week, and be shown on Facebook's news feed, a brand sponsor's page, and on Messenger, where users will be able to subscribe to a Messenger bot alerting them to when new content from the show is available.
DigitasLBi will own the show's talent and programming, and work to find brand sponsors. Content can be "customized" according to a brand's needs. Facebook exec Keenan Pridmore: "It will appear in those morning wake-up hours where you are getting up, you could use a little [content] to get you going. Something to get you laughing, smiling, thinking." Are more sponsored shows on tap? Facebook is already paying media firms such as BuzzFeed the NYT, and Vox Media to create original content for its Live streaming service. It has also reportedly promised publishers Live videos will support ads, though not the pre-roll video ads one sees quite often on YouTube.
Nvidia launches high-end desktop GPUs based on its new Pascal architecture, prices aggressively - With 9 TFLOPs of processing power, Nvidia's (NVDA) $599 GeForce GTX 1080 surpasses the Titan X (based on the older Maxwell architecture, delivers 7 TFLOPs, and has been priced at $999) as the company's most powerful PC GPU. Nvidia has also launched a slightly less powerful card (the $379 GTX 1070) that's also promised to outperform the 1070, and is expected to launch a new flagship GPU (presumably under the Titan name) in late 2016 or early 2017.
Just as impressive as Nvidia's price/performance figures are the various other features provided to deliver a superior user experience. With the help of TSMC's 16nm manufacturing process - Maxwell GPUs rely on an older 28nm process - and a revamped power supply, the 1080 delivers a major improvement in peak-to-peak power efficiency relative to the Titan X (120mV vs. 209mV). Nvidia has also launched simultaneous multi-projection, a technology that promises to deliver better performance and a superior gaming experience when using either a VR headset or multiple PC monitors. And a solution called Ansel lets gamers take screenshots from different parts of a game scene, as well as 360° panoramic screenshots, at a whopping 4.5 gigapixels (4,500 megapixels).
Nvidia promises the $599 GeForce GTX 1080 will easily outperform the $999 Titan X, in spite of consuming much less power.
It doesn't look like AMD (AMD) will have anything that can counter Nvidia in the high-end desktop GPU market in the near term. The company's upcoming Polaris GPUs appear to be aimed at notebooks and "mainstream" desktops - AMD has talked up Polaris' power efficiency improvements relative to existing products, but it looks like Nvidia's Pascal GPUs are no slouch in that department either. For now, Nvidia looks set to continue dominating a growing, high-margin, gaming GPU market that helped the company's total GPU revenue rise 10% Y/Y in its January quarter in spite of a very weak PC market. And much as Intel (INTC) is attempting to fend off ARM server CPU rivals by creating platform-level solutions for servers relying on its Xeon CPUs, Nvidia is working to cement its high-end GPU leadership by creating selling points other than raw performance.
Apple is (apparently) looking to lease 800K square feet for self-driving car R&D - Victor Coleman, CEO of Bay Area real estate owner Hudson Pacific Properties (HPP), mentioned in his company's Q1 earnings call Apple (AAPL) is "looking to take down" 800K sq. feet of space for autonomous car R&D. He added Google (GOOG, GOOGL) is looking to add 400K sq. feet for its own self-driving car efforts.
Uber-secretive Apple probably isn't thrilled to see Coleman's disclosure. Regardless, it provides fresh evidence Apple's car efforts extend to autonomous driving. The Guardian reported last August Apple is looking for a place to test self-driving cars. The WSJ has also reported Apple is interested in autonomous driving, while adding its first car (currently rumored to have a 2019 target launch date) isn't expected to be fully autonomous.
Digitimes: TSMC begins taping out the design for Apple's A11 processor, is expected to get 2/3 of orders - Digitimes (based out of Taiwan) is generally good about reporting on local chip foundry giant TSMC's (NYSE:TSM) plans. This time, it reports TSMC has begun the design tape-out process for Apple's A11 processor (expected to go into the iPhone 7S), and could begin producing the chip by Q2 2017. It adds TSMC is likely to get about 2/3 of Apple's A11 orders - Samsung (OTCPK:SSNLF), which along with TSMC is handling production of the A9 (found in the iPhone 6S), is a likely candidate to get the rest.
The A11 is expected to use TSMC's (and perhaps Samsung's?) next-gen 10nm manufacturing process. The A9 relies on 16nm processes, and the A10 is expected to as well. TSMC is expected to be the sole supplier for the A10.
AMD re-enters SSD market with low-cost Radeon R3 SSDs - The SSDs aren't technically made by AMD, but by a company called Galt. Capacities range from 120GB-960GB, with the 120GB drive costing a mere $40.99 and the 480GB drive a fairly inexpensive $136.99. A reminder of how competitive the SSD market is - unlike hard drives, where manufacturing plants give Seagate (STX), Western Digital (WDC), and Toshiba (OTCPK:TOSBF) a barrier to entry, plenty of OEMs can put together SSDs using third-party NAND flash memory and controller chips.
Marvell (MRVL) and Seagate's SandForce unit are major controller suppliers to independent SSD vendors. SSD vendors producing their own NAND chips, such as Intel, Micron (MU), Samsung (OTCPK:SSNLF), and SanDisk (SNDK - soon to be part of Western Digital) might have the best chance to differentiate over the long run.
Bloomberg: Chinese ride-sharing leader Didi Kuaidi close to raising $2B at $25B valuation - The reported funding round features a much higher valuation than the $16.5B Didi Kuaidi (DIDI) obtained in 2015, when it raised $3B. The company is in pitched battle with Uber (UBER) for Chinese ride-sharing leadership. Uber, which not long ago raised funds at a $62.5B valuation, has said it's losing over $1B/year in China. SA contributor Andrew Mok just argued Uber is well-positioned to win in China.
New app allows Amazon's Alexa voice assistant to be accessed via iPhones - Until now, Amazon's (AMZN) Alexa voice assistant was only accessible via the company's Echo speakers/voice assistants and Fire TV devices. By leveraging Amazon's Alexa API, startup Lexi has launched a $4.99 iOS app that lets users access Alexa on the go. It supports most, but not all, of the voice assistant's features.
It might be just a matter of time before Amazon launches a free Alexa app for iOS/Android. Thanks to features added by third-party developers through the API and the popularity of the Echo line - unlike smartphone-based voice assistants, plugged-in Echo devices don't need an activation phrase to turn Alexa on - Alexa has joined Google Now, Siri, and Cortana as a formidable player in the voice assistant wars.
Earnings News
Teradata rises 15% over two days after Q1 beat, strong EPS guidance, and CEO change - Teradata (NYSE:TDC), a major player in the traditional data warehousing hardware/software space, has had a rough couple of years as sales became pressured by a mixture of stiff competition from traditional rivals Oracle (ORCL) and IBM (IBM), spending on analytics projects involving technologies used to handle unstructured data such as Hadoop and NoSQL (Teradata's projects have historically involved structured data), and the arrival of low-cost cloud alternatives such as Amazon's RedShift and Microsoft's SQL Data Warehouse. Teradata has launched its own Hadoop/NoSQL and cloud offerings, but plenty of competition exists.
Teradata's results and guidance, along with the replacement of long-time CEO Mike Koehler with director Vic Lund (once the CEO of IBM-acquired software firm DemandTec), appears to be fueling hopes a turnaround is possible - Lund says accelerating Teradata's "transformation efforts" is a priority. There might also be speculation Lund will be willing to put Teradata up for sale - many mid-sized enterprise tech firms, including data warehousing software rival Informatica, have been acquired by P-E firms in recent years. Any prospective buyer will be taking in a business that's still seeing major top-line pressures - in spite of the Q1 beat, Teradata's hardware/software revenue (drives future services revenue) fell 20% Y/Y last quarter.
Sierra Wireless soars after Q1 beat and full-year guidance reiteration - From late 2012 to late 2014, Sierra Wireless (SWIR) rose over 6x as investors came to view the company - it provides modems, gateways, software, and (with the help of multiple acquisitions) connectivity services that can be used in IoT deployments - as an alluring IoT play. Since then, shares have lost over 60% of their value thanks to earnings disappointments and concerns about the health of Sierra's traditional 3G/4G modem business (faces stiff competition). Against that backdrop, the company's Q1 numbers and guidance reiteration have been well-received. Shares still only go for 0.9x a 2016 sales consensus of $643.7M.
Control4 surges after Q1 beat and full-year guidance reiteration - Another case of a company that once flew higher on enthusiasm about its exposure to a much-hyped market (in Control4's case, home automation), but have since come back to earth. Markets gave a thumbs-up to Control4's (CTRL) 24% Y/Y organic Q1 revenue growth (growth was 34% after accounting for the purchase of home automation networking hardware firm Pakedge), and Control4's comments about strong uptake for its new EA-series smart home controllers. Shares go for just 10.3x a 2017 EPS consensus of $0.77.
Control4's high-end EA-5 smart home controller
Imperva plunges on soft Q2 sales guidance - While FireEye's (FEYE) post-earnings selloff (covered on Friday) received more attention, security tech peer Imperva (IMPV) fell even more after providing a light Q2 sales outlook blamed on European execution and near-term weakness in the company's web application firewall ("WAF") business - the WAF market is fairly competitive, with other notable players including F5 (FFIV), Qualys (QLYS), Barracuda Networks (CUDA), and Fortinet (FTNT). Top-line growth was still fairly strong in Q2: Product/subscription revenue rose 45% Y/Y, and the deferred revenue balance rose 29%.
Notable Tech Commentary and Reports
UBS: iPhone 7 interest stronger than year-ago iPhone 6S interest - A survey of 6,336 smartphone users in the U.S., U.K., Germany, China, and Japan found more people saying they're "very likely" or "somewhat likely" to buy an iPhone 7 than were willing to say the same for an iPhone 6S a year ago. Interest is still lower than that seen for the iPhone 6 two years ago, when there was considerable pent-up demand for larger iPhones.
Given Apple is trading near 2-year lows after having reported iPhone unit shipments fell 19% Y/Y in calendar Q1 (while guiding for further weakness in Q2), the survey figures are relatively encouraging, and highlight how consumers have come to expect bigger upgrades in upgrade years featuring number changes. A March/April U.S. Goldman survey also pointed to strong iPhone 7 interest.
It's now, of course, up to Apple to deliver an iPhone 7 that lives up to expectations - the biggest improvement mentioned thus far by the rumor mill is the addition of a dual-camera array that enables high-quality images and perhaps the ability to adjust focus/depth-of-field after a photo is taken. OLED displays, over-the-air wireless charging, and front-and-glass back panels could be scheduled for 2017.
Tune: 69% of smartphone users would pay nothing to remove ads - Tune, a mobile analytics, firm, surveyed ~4,000 users about how much they'd pay to remove all ads from their apps (if that was possible). 69.3% said they'd pay nothing, 11.3% said $1/year, 10.4% $1/month, 4.5% $1/week, and 4.5% $1/day.
Not great figures for online publishers contending with ad-blocking and often exploring ways to get readers to pay ad-free and non-paywalled content. They might be more encouraging for Google and Facebook, who each provide publishers with a slew of tools and services for running targeted ads on their sites and apps.
Bloomberg: Zeroing in on FireEye - Makes the case that FireEye , which fell 19% on Friday after posting mixed results, issuing light sales guidance, and announcing a CEO change, could be a buyout target at current depressed levels. Cisco (CSCO), which competes with FireEye and has suggested it's up for more security M&A, is mentioned as a potential acquirer.
While issues related to competition and sales execution have grown plenty over the last year, FireEye still has malware-detection and endpoint-protection products that are often considered best-of-breed, as well as an incident-response services unit often called upon to probe major data breaches. Shares currently trade for 2.1x the midpoint of FireEye's 2016 billings guidance range.
WSJ: Square Faces Questions on Lending Strategy - On a day Square (SQ) closed down 21.7% following its Q1 results, the WSJ took a look at Square's disclosure (and related investor concerns) that it saw "more challenging credit-market conditions" for its Square Capital loan/cash-advance business for merchants. Two unnamed investors delayed providing Square Capital funding. RBC's Mark Mahaney estimates Square's total software/data products revenue, which includes Square Capital fell $2M short of consensus estimates at $24M. It was still up 197% Y/Y.
VentureBeat: An interview with Netflix CEO Reed Hastings and content chief Ted Sarandos - The interview doesn't feature any earth-shaking revelations, but does help shine a light on Netflix's (NFLX) strategic thinking. It notes Netflix's investments in AI/machine learning to improve content recommendations, its use of A/B testing to optimize how content is shown, and its interest in financing original content that has global appeal. Narcos, a Netflix original about Colombian druglord Pablo Escobar, is apparently big in Germany.
Netflix says it will release 600 hours of original programming this year, twice what it released last year. Hastings: "We'd like to be as popular in the world as in the U.S., to be in one-third of households seven years from now." For now, 47M of Netflix's 81M global subscribers are still in the U.S.
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