Technology Stock Roundup: AAPL CEO, GOOGL Trouble, FB Milestone

There’s never a quiet week for the technology sector and right n the heels of all the excitement related to China came fresh developments related to Apple’s AAPL CEO, data on the company’s Watch sales, Google’s GOOGL reply to the EU competition chief, Facebook’s FB billion-user milestone, Microsoft’s MSFT beta release of Cortana for Android… and much more…

Tim Cook on the Wrong Side of the Law?

The trouble started out with Jim Cramer of CNBC reaching out to Apple CEO Tim Cook about Apple’s performance in China in the current quarter given the growth concerns related to the country. Apple stock was being hammered in successive trading sessions at the time. Cook returned with an email saying in effect that the negative sentiments notwithstanding, Apple had in fact done rather well in China in recent months.

Normally, this would have been little more than a media scoop and things could have ended there. But the problem arose because Cramer is a notable Apple investor, so this information gave him an unfair advantage with respect to other investors at a critical time, enabling him to build position. The SEC frowns upon this kind of information sharing and protects investors under Regulation Fair Disclosure (Reg FD) that forbids the revelation of sensitive business information from publicly traded companies selectively to some investors. The action is particularly surprising given that Apple traditionally doesn’t comment at all on rumors and speculation.

Google: Nothing Wrong with Google Shopping

Earlier this year, EU competition chief Margrethe Vestager issued a statement of objections against monopolistic practices allegedly inherent in Google Shopping. This was in response to complaints from a number of companies (initially small comparison shopping sites and later, other big Google competitors) about Google using its dominant position for anti-competitive purposes.

Last week, Google defended its own position, saying that its practices in fact helped both consumers and advertisers and also that the EU hadn’t said how Google could be legally bound to use its own advertising space to display offerings from competitors. Vestager can now call for a hearing based on Google’s presentation or charge a fine, both of which Google is allowed to appeal.   

This isn’t of course the end of Google’s troubles in the EU. A bigger mess awaits it with respect to Android that Google has been trying to get increasing control over.

Facebook Touches Billion User/Day Milestone

Personal Assistant Wars Heat Up with Cortana Beta

Analysts and investors alike have been speculating on the role and success of personal assistants in new-age mobile devices. Apple’s version is called Siri, Google’s version Google Now and Microsoft’s version Cortana. All of these had been sticking with their own operating systems so the role of the assistant was largely to fetch and carry information available on specific handsets and the web.

But last week, Microsoft changed all that when it announced the public beta of Cortana for Android ahead of Google Now On Tap (not expected until Marshmallow launches later this year). Cortana can now be downloaded on Android devices and can even be made the default assistant, which can potentially help Microsoft gradually take over the Android device.

Microsoft is taking a truly aggressive cross-platform approach with mobile devices given its sagging market share in phones and need to make headway in tablets. The company also has Cortana for iOS in the works. While it’s a bit early to assume it will be successful in these endeavors, the company is clearly on the right track with nothing to lose.

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Corporate

Apple-Boeing-Pentagon on Wearable Tech: The U.S. government, U.S. Airforce Research Lab and local governments will be spending up to $171 million on technology enhancements. The goal is to develop stretchable wearable tech with embedded sensors to be worn by soldiers and eventually attached to defense aircraft or ships to determine their structural integrity in real time.

Amazon Cutting Hardware Workforce: Amazon AMZN Fire phones were a disaster, so it will likely exit this product line. The company is slashing its hardware headcount of roughly 3,000, according to media reports. Amazon had altogether too much competition in phones, which are required to multi-task heavily these days.

Amazon hardware, on the other hand, is best for experiencing Amazon shopping and services, so future hardware efforts are likely to be focused on devices that support ecommerce. Amazon likely has some Fire inventory built up though, which could be the reason for its new “Underground” app.

This app comes pre-installed on Fire devices to enable shopping and give away some Android apps that have to be paid for on Google Play Store. Since Google makes it hard to download “Underground” from its store, this can be a lure for potential Fire users and help move some inventory.

Netflix Doubles Hollywood Office Space: Netflix NFLX has gotten more serious about original productions as it grows into a bigger force in entertainment. This could be the reason it recently agreed to double its office space in Hollywood. As content acquisition costs continue to escalate, international investments look imperative for growth and the company sticks with its ad-free low-cost service, profitability remains a concern for investors.

It has been speculated that once Netflix has a more robust range of original programs, the company will adopt an advertising model. This is because, content creators survive on ads and they will be less open to sharing content with Netflix if the streaming company starts competing for their ad dollars. For the time being of course, it makes perfect sense for Netflix to vehemently deny any such future intentions.

Legal/Regulatory

Germany to Facebook: Germany is seeing an influx of refugees that has some local people burning down buildings earmarked as refugee centers. Justice Minister Heiko Maas has called out racist remarks on Facebook asking that racist comments and hate speech be taken down. Facebook responded by saying that the platform is no place for these things and should not be used as such. 

Third Point, Regulators Settle Over Yahoo Stake: The Daniel Loeb-led hedge fund that managed to get Marissa Mayer installed as Yahoo YHOO CEO and a board seat that it subsequently relinquished, has been under the regulatory scanner for failing to disclose its activist intentions in Yahoo earlier. In a 3-2 decision that went against the firm, the regulators ultimately decided to waive any fine.

The dissenters said that investor advocacy would suffer if the case was used as a precedent when there was clearly no anti-trust concern. Generally, acquisition of up to a 10% stake in a company doesn’t require specific disclosure if it is only for investment purposes with no intention of a say in business decision-making.

Microsoft-InterDigital Patent Fight Update: InterDigital has a few standard essential patents that are required by law to be licensed at reasonable rates. Some Microsoft 3G devices (Lumia phones) use this technology and InterDigital was seeking a ban on these devices for infringement. In April, a court found Microsoft guilty and said that a ban would not be against public interest.

Microsoft subsequently filed a lawsuit on Aug 20 saying that InterDigital was asking for unreasonable rates. On Aug 28, the judge overruled the April judgment saying that there was in fact no infringement. There was no mention of the reasonableness of licensing rates, so that case will likely continue as it has been since 2007, when InterDigital first filed against Nokia, which Microsoft subsequently acquired.  

New Technology/Products

Facebook Offers New Approach to AI with M:  Facebook is trying out a new personal assistant called “M” attached to its Messenger service that will make use of human intelligence on the back end. This is a new way of tackling the problem of artificial intelligence where a query sends the assistant to handle tasks that are verified by human assistants.

When there is an error, the human assistants make the necessary changes and “M” literally “learns” what they do and files away the information. So the greater the number of queries it handles, the smarter it becomes. As may be expected, the service is nowhere near finalization, but it does allow you to do simple things like order food or make dinner reservations.     

First-Party Microsoft Devices: Media reports indicate that Microsoft will be launching a couple of Lumia phones, a new wearable and a new Surface Pro come October, all running on its all-new Windows 10 OS. The devices should be able to showcase continuum (seamless experience across devices) and help the company woo developers. Separate reports out of Taiwan indicate that there will be two Surface devices, one at the current 12-inch size, and one slightly larger (maybe 13 or 14 inches) that could possibly be pitched against Apple’s soon-to-be released 13-inch iPad.

Microsoft’s New $37 Nokia Phone: Microsoft’s new phone strategy focuses on three customer sets: business, value and fans. This phone is definitely in the value category, where the focus is primarily on communication. With single and dual SIM variants, the very basic model comes with a 2 megapixel camera, 2.4 inch QVGA display, video recording at QVGA resolution, an FM radio, support for MicroSD cards up to 32GBand 1100mAH battery for up to 20 hours of talk time. Preinstalled apps include Opera Mini browser, Facebook, Twitter, Messenger and GroupMe by Skype.

Google Launches YouTube Gaming

Google Testing Video Ads In Search Results

Amazon Video Streaming Service in Japan: Amazon will be taking on Netflix in Japan as the ecommerce giant readies itself to launch its own video streaming service in the country. Amazon promises TV shows, cartoons and films (both American and Japanese). The company’s Prime service is already operational there, so Amazon has something of an advantage.

Prime is available for 3,900 yen or $32.50 (as quoted in media reports) for unlimited viewing and free deliveries, which means that Prime subscribers will now be getting an additional service without paying anything extra. On the other hand, they will have to pay something for Netflix, which is expected to be much cheaper. So the fight will likely be for new subscribers, as Amazon customers will likely stick with the company.

M&A and Collaborations

Intel Gets Into Drone Biz With Yuneec Investment

Intel-Microchip to Further IoT:  Microchip has agreed to use Intel’s Enhanced Privacy ID technology in its products meaning that everyday IoT devices like smart thermostats, smoke alarms, baby monitors and other connected items can be more secure going forward. As the IoT wave catches on, one of the factors impacting adoption is the lack of security and privacy for such devices. This collaboration is likely to help.

Intel-BlueData's Big Data Plans:  BlueData, which simplifies the deployment of big data applications and infrastructure has agreed to optimize its solutions for Intel’s Xeon processor architecture. In return, Intel will bring engineering and marketing resources that will build the go-to-market strategy and also invest in the company. The reason is simple: big data deployments on infrastructure optimized for Intel architecture will allow the company to pick up early market share.

Intel Also Teams Up With Mirantis:

Some Numbers

Apple Watch Data Update: According to a recently-published report from IDC, Apple has sold 3.6 million Watches in the second quarter (it started selling on Apr 24). This was second only to Fitbit, which sold 4.4 million units in the quarter. Both the iPad and iPhone had a slower start, so the numbers are encouraging.

Windows 10 On 75 Million PCs

Office 365 Going Great Guns: Cloud data provider Bitglass, on the basis of a cloud adoption survey of 120K global organizations says that Microsoft has overtaken Google as the top vendor of office productivity software. The research firm says that Microsoft now has a 28.2% share of the market (up from around 8% last year) with Google trailing at 22.8% (up from 16.3% last year). Companies with more than 500 employees are opting for Office 365 more often than Google Apps.

Google Leads in Video Audience: According to recently-released comScore data on U.S. online desktop video audiences, Google still leads with 169.2 million unique viewers. Facebook ranked second with 89.4 million and Yahoo third with 47.2 million. It was also the leading video ad platform with audience reach of 31.7%, followed by LiveRail, AOL and Brightroll with 27.1%, 25.9% and 25.0%, respectively.

Smartphone Shipments Report From IDC

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