Friday, July 29, 2016

The Battle for Smart Phones: Apple achieved one billion Iphone sales...

timcook.jpg
Apple CEO Tim Cook.

A few days ago, Apple sold its one-billionth iPhone. Apple CEO Tim Cook announced the milestone on Wednesday.
"We never set out to make the most, but we've always set out to make the best products that make a difference," Apple CEO Tim Cook said in a statement. "Thank you to everyone at Apple for helping change the world every day."
One billion phones is, no doubt, an impressive number, but does it really mean anything? The iPhone helped define the modern smartphone market, but some have questioned its ability to compete with new, high-quality Android flagship models.
When it first arrived in the market, the iPhone met a mixed reception. Some lauded the touch screen design, while others scoffed at its high price tag. In fact, then-Microsoft CEO Steve Ballmer actually laughed at the iPhone back in 2007.
However, little did Ballmer know that Apple's revenue from the iPhone alone would eventually eclipse Microsoft's entire revenue, and that trend would continue. In 2015, Cook said that, during a certain quarter, Apple was selling 34,000 iPhones an hour, 24 hours a day. At one point, Apple's total revenue was more than double that of Microsoft's and more than Google's as well.
Still, that's the past. In early 2016, Apple announced its first decline in iPhone sales. In Apple's recently announced Q3 earnings, Apple reported its second straight quarter of declining iPhone sales, selling only 40.39 million iPhones, a 21% drop from the same quarter a year prior. At that time, the iPhone generated $24 billion by itself. Microsoft's total revenue, as reported by its 2016 Q3 earnings, was $20.5 billion.
Those numbers are still pretty high, but they represent a massive decline in Apple's major sales driver. In that sense, the billionth iPhone doesn't mean much.
"It's always great PR for vendors to hit milestones," said Forrester vice president and principal analyst J. P. Gownder. "Unfortunately for Apple, the company hit the billionth iPhone mark in an environment of year-over-year declines. Why? Because the iPhone has saturated a number of markets, leaving Apple with a big gap: The company needs to find the "next big thing" to drive growth, since many of its major products (including iPhone and iPad) are seeing declining sales."
The first few years of the iPhone were marked by excitement. Long lines wrapped around Apple's retail spaces in malls around the country, and certain models routinely selling out within the first week. However, an upgrade cycle marked by simple iterations and waning innovation has made new iPhone models feel stale.
The iPhone laid the foundation for the current smartphone market, but Apple's innovation hasn't kept pace with its biggest rivals. While Apple did make an AI pivot at the latest WWDC, only time will tell if its efforts were enough.
With that being said, the iPhone is still one of the most popular smartphones on the planet, and a status symbol for many users. Apple has finally begin targeting emerging markets with the iPhone SE, and one billion iPhones sold means that there will be demand for iOS apps for quite some time.
"A billion iPhones ensures the vitality of the developer ecosystem for a long time to come," Gownder said. "iOS is a de facto go-to for most developers, alongside the even larger Android ecosystem, and iOS enjoys many high-income users."
Additionally, the iPhone is still massively popular with businesses, and likely gained some more fans with Apple's renewed stance on security. So, the question then becomes when the lack of innovation around things like AI will matter to the enterprise, and if that will force a further drop in iPhone sales.

Thursday, July 28, 2016

Twitter still has revenue problems, and its stock is down big

Twitter missed Wall Street’s revenue estimates. Again.

Twitter reported Q2 earnings on Tuesday and investors aren’t happy.

The key issue is likely Twitter’s Q3 guidance. The company says it is targeting $590 million to $610 million in revenue next quarter. Early analyst estimates pegged that number at $678 million, according to Yahoo Finance. So that’s a big discrepancy.

The Q2 numbers weren’t fantastic either. Twitter added three million new monthly active users last quarter — what analysts expected — bringing the company’s new total to 313 million. But Twitter also reported profits of 13 cents per share on revenue of $602 million for the quarter, which is lower than expected.

The stock was immediately down more than 10 percent on the news and seems to be hovering there.

Wall Street was looking for profits of 10 cents per share on $607 million in revenue. (Interesting note: These are basically the same expectations Wall Street set last quarter, and Twitter missed on revenue then, too.)

So here’s Twitter’s dilemma: CEO Jack Dorsey has effectively been in charge of Twitter for the past year, and it’s clear that the company’s growth problem is still a problem. On top of that, Twitter has now missed revenue estimates two quarters in a row, and significantly cut its Q3 guidance. So there’s a clear revenue problem to go along with the growth problem. Not good.

To state the obvious, this kind of production (or lack thereof) doesn’t help Dorsey’s case for running two companies (remember, he also runs Square). It also puts pressure on the board to consider broader options for the company, namely selling. Twitter is in the very beginning stages of trying to transition its business to look more like TV, but it doesn’t have a lot of runway left.

We are still digging through all the data now and will update this story as we learn more. For those interested, Twitter will hold a call with press and investors at 5 pm ET Tuesday, and we’ll be listening in. Unfortunately, you won’t be able to watch the call on Periscope this quarter — Twitter isn’t doing that any more.

Wednesday, July 27, 2016

The Only Winners in Volkswagen's Diesel Mess Are Drivers

Photographer: Daniel Acker/Bloomberg

The Only Winners in Volkswagen's Diesel Mess Are Drivers

A half-million tainted cars head to the scrap heap, and owners walk away with up to $44,000.

Jeremy Malczyk's 2012 Volkswagen Jetta Sportwagen is no prize. It has 70,000 hard miles on it, and the interior has been finely detailed by his two young children: beige leather buffed with beige Cheerios. But the vehicle comes equipped with a two-liter diesel engine doctored to cheat on emissions tests, so it will likely fetch almost $22,000 (PDF) in Volkswagen's buyback program. A similarly used Sportwagen without the dirty diesel would fetch about $9,000 on the open market.
A U.S. District Court in California may approve the details of a massive Volkswagen repurchase program as early as Monday, and checks are expected to trickle down this fall to U.S. owners of some 482,000 Golfs, Beetles, Jettas, and Passats, as well as Audi A3 sedans sold with engines that violate emissions standards. It will mark a painful hit for Volkswagen—part of a $15.3 billion settlement with the Environmental Protection Agency—and a windfall for owners of otherwise deeply depreciated vehicles.
“I bought it just before I kind of found Jesus, financially,” Malczyk said of his four-year-old Sportwagen. “So this is going to be kind of a nice way to reset.”
The average purchase is expected to range from $12,500 to $44,000, with values pegged to the value 1 of each car just before the diesel scandal broke in September 2015. All of the afflicted vehicles will be considered in “clean condition,” even if the wheels are falling off. Tacked onto the value of each car will be a “restitution” payment equal to 20 percent of the vehicle value, plus $2,987.
All told, owners stand to make at least double what their cars were worth just before news of the scandal.
“Financially, consumers are going to do far better than if diesel-gate never happened,” said Ernie Garcia, chief executive officer of Carvana, an online used car dealer in 14 U.S. cities. “My guess is most of them will be able to make a decision on this very quickly.”
Regulators pushed Volkswagen to spread payments widely. Owners who are upside-down on car payments–owing more than their car is worth–will be offered loan forgiveness or an even larger payout, up to 130 percent of the value of the car. Even a former owner who sold one of the afflicted cars after news of the scandal will be eligible for half the restitution payment, with the other half going to the current owner of the car.
This is all in addition to the $500 cash cards that the company has already scattered to owners.
“It is certainly the most comprehensive and thorough compensation package I’ve ever seen an automaker offer owners,” said Karl Brauer, senior analyst at Kelley Blue Book.
After Volkswagen takes the tainted vehicles off the road, what will become of the nearly half-million cars unfit for use in the U.S. remains unclear. There may eventually be a fix for the diesel engines, and owners retain the right to keep their cars and wait. Those who do will still be able to collect the restitution payment and, in theory at least, the company could eventually put the repurchased cars back on the road.
A direct injection diesel engine (TDI) of a Volkswagen Passat.
A direct injection diesel engine (TDI) of a Volkswagen Passat.
 
Photographer: Miles Willis/Bloomberg
But the timeline on any potential fix stretches to July 2019, and environmental groups are already bracing for a fight. The California Air Resources Board estimates that any modification would still allow more NOx pollution than cars that fully comply with clean-air laws.
“Honestly, I think [Volkswagen will] probably just junk them,” said Bloomberg Intelligence analyst Kevin Tynan. “They’ll have already spent all that money to buy them back. They’re not going to spend more to retrofit them.”
Brauer, at Kelley Blue Book, expects from 70 percent to 90 percent of owners to take the buyback. “I think Volkswagen’s approach is, ‘We’re going to assume scrap value on all of these,” he said.
It's a staggering number of cars to toss onto the scrap heap. Volkswagen needed the past 18 months to sell as many new vehicles in the U.S. The company is still trying to figure out how to make amends for diesel gamesmanship on its larger, three-liter engines. There are 85,000 of them on the road in the U.S.
Malczyk, meanwhile, is one of a few people who knows exactly what to do with his tainted Volkswagen while he waits to sell it back to its maker. He’s going to wreck it, or at least flog it extremely hard in the coming weeks. Oil changes? Pass. Car wash? Nah. An impromptu rally course through the hardwoods of Connecticut? Sure. None of those will affect his payout.
"I guess I could just park it for six or seven years," he mused. "It would be the last diesel wagon in America and there's always going to be some geeked out diesel fan who's into these things."


Tuesday, July 26, 2016

What Sank Yahoo?

Blame Its Nice Guy Founders...

Two Stanford University students put their studies on hold to create what was at one time an essential part of the internet. Then they stopped taking risks.
Marissa Mayer
Marissa Mayer 

The epilogue in the long, sad story of Yahoo!, the web portal with the perpetually ebullient exclamation mark, is finally being written. After emerging as the top bidder in a five-month auction, Verizon Communications has agreed to buy the historic web franchise’s core assets for $4.83 billion.

Yahoo Chief Executive Officer Marissa Mayer will assist with the transition until the sale is complete and then depart the company with a comfortable parachute worth more than $50 million in cash and stock. So let’s not weep for her. But inevitably, a passel of eulogies will be crafted about her failed four-year attempt to turn around the company. These reflections will be largely unfair, because the decline and demise of Yahoo isn’t totally her fault. It’s at least partially the fault of its founders, Jerry Yang and David Filo.

The early story of Yahoo is now Silicon Valley mythology. As graduate students at the Stanford School of Engineering in 1994, Yang, a math-oriented Taiwanese immigrant, and Filo, a quiet programmer from Louisiana, created a directory of links called Jerry and David’s Guide to the World Wide Web. It was a handy map to what was then an unnavigable digital landscape, and web surfers loved it. The following year, when Sequoia Capital invested in the newly renamed startup, it brought in a former Motorola executive named Tim Koogle to be CEO.

The move reflected the reigning conventional wisdom of the time—bring in an experienced chief executive and go public early. But while they stepped aside to become “chief Yahoos,” as their business cards said, Filo and Yang stayed intimately involved. Filo, as the technical leader, wrote the very first version of Yahoo search and made the bulk of decisions about the company’s underlying technical architecture. Yang stayed close to strategic decisions and was instrumental after the dot-com crash in replacing Koogle with Terry Semel, the longtime co-CEO of Warner Brothers.

Semel brought with him a core group of native media execs whose names are now familiar in Silicon Valley, like Jeff Weiner, the CEO of LinkedIn, and Dan Rosensweig, CEO of textbook rental service Chegg. This was the origin of what would become Yahoo’s enduring split-personality: Was it a technology company or a media company? Sitting on perhaps the most valuable piece of real estate on the web, shuttling between its offices in Santa Monica, California, and Sunnyvale, Yahoo executives tried to be a little bit of both.

We now know what it takes for technology companies to succeed: fierce, often unpleasant, founders who are able to make hard choices and place unpopular bets. During the years that Yahoo was banking on the media business, Jeff Bezos of Amazon.com, for example, expanded into unprofitable lines of online retail, brooked a painfully hollow stock price, cut workers, and finally spawned a completely different business in the cloud, called Amazon Web Services. At Google, Larry Page and Sergey Brin brought in Eric Schmidt as CEO, but they governed as a triumvirate of equals, inventing an insanely profitable text advertising business that augmented web search results, rather than distracting from them like Yahoo’s eye-ball burning banner ads.

During the 2000s, Yahoo’s biggest mistakes were failures of will. Semel, billed as a “deals guy” from Hollywood, could have bought Google in 2002, as Fred Vogelstein reported in Wired. Yahoo also came close to buying Facebook in 2006, until Semel lowered his offer from $1 billion to $850 million after a disappointing earnings report, alienating an already reluctant Mark Zuckerberg in the process, according to David Kirkpatrick’s book, The Facebook Effect.

These acquisitions probably looked like risky, uneconomical moves that Yahoo investors might hate. That’s the whole point. Web companies need the unique power of founders to do unpopular things. Page advocated for Google to buy the money-losing video sharing site YouTube in 2006; Zuckerberg made what seemed like an outrageously overpriced bet on the photo app Instagram in 2012. This is how tech companies survive—the ability to take risks.

Yang took over as CEO from Semel in 2007 but was either too nice or too unwilling to make hard decisions. In retrospect, he should have fired more employees, and banked hard toward technology and the emerging smartphone revolution. In what now looks like his biggest blunder, he turned away one of the best exits Yahoo would ever see, Microsoft’s unsolicited $45 billion bid in 2008, an effort by then CEO Steve Ballmer to compete with Google.

In what should now be the canonical photo of Yahoo’s decline, from the Allen & Co. conference in Sun Valley, Idaho, that June, Yang was pictured sitting with Page and Brin, his head in his hands, presumably bemoaning the overture from the big, lame software blunderbuss from the north. The photo reveals Yang’s confusion at the time about Yahoo’s true enemy. It was not Ballmer and his gang of Windows fanatics. It was the Google guys, there listening supportively across the table from him.

Jerry Yang, left, and David Filo in Sunnyvale, California, in 2007.
Jerry Yang, left, and David Filo in Sunnyvale, California, in 2007.

After that, it was pretty much over for slow-footed Yahoo, trying to navigate a fast-changing internet landscape with uninspired CEOs like Carol Bartz and Scott Thompson at the helm. In periodically leaked missives, executives bemoaned that Yahoo was spreading itself too thin over too many lackluster products. Without a steadier hand from its founders, Yahoo had lost its way culturally as much as strategically. It was fat with layers of accountants, lawyers, and product managers, people whose job it was to mitigate risk, rather than take it. Yang didn’t respond to requests for comment, and Filo declined to comment through a spokeswoman.

The founders did make big contributions. In 2005, Yang helped orchestrate what would be the company’s best deal: the sale of its businesses in China to Alibaba, along with a $1 billion investment. He deserves tons of credit for that. It’s also likely that his voice was not always heard. In 2012, Yang left the company’s board of directors after its disastrous decision to hire PayPal’s Scott Thompson as CEO and then promptly fire him upon discovering he fibbed on his résumé. For his part, Filo has been the picture of corporate loyalty in an age sorely lacking it. He joined the Yahoo board when Mayer took over the company and, by all accounts, remains an inspirational figure.

But by that time, the mistakes of the past loomed too large. Perhaps there was a short window of opportunity for Mayer to bet the company on a bold acquisition or a new product, but it closed fast. She made strange moves, spending a huge chunk of her figurative and literal capital on a $1.1 billion deal for the also-ran social network Tumblr in 2013. Tumblr, like so many other Yahoo acquisitions (Flickr, et al.) went nowhere fast, perhaps because there were not enough nutrients in the Yahoo soil for any startup to thrive.

Others have chronicled more of Mayer’s mistakes. But now it’s all ancient internet history, to be parceled out and puzzled over by business school students. It’s time for us to mourn Yahoo. Sorry, I mean—Yahoo!



Monday, July 25, 2016

The Strange Politics of Peter Thiel, Trump’s Most Unlikely Supporter (BW)

The Republican Party’s new trade-loving, free-thinking, gay, Christian, antiwar, rich-as-hell, naturalized-citizen, Silicon Valley hero.
When Peter Thiel has the first move in a chess game, he lifts his e2 pawn, the fifth from the left and the one directly in front of his king, and advances it two spaces. It’s an aggressive tactic, putting the bishop and queen into play, which is why Thiel likes it.
The king’s pawn, as it’s known, was the preferred opening by the American chess grandmaster Bobby Fischer. And even though Thiel considers the move more perilous than another popular opening, the queen’s pawn, he’s made it his go-to. “It’s the attacking move,” he explained last year. “If you’re short of world champion level, I always enjoy increasing the risk involved and the volatility of the game.” The comments, made at an event at George Mason University, were revealing. If you’re a few rungs down from the biggest players, he seemed to be saying, it doesn’t hurt to create a bit of chaos.
Thiel boasts a World Chess Federation rating of 2,199, one point short of the group’s lowest honorific, candidate master. At 48, he’s co-founded PayPal, was Facebook’s first outside investor, and is worth almost $3 billion. He still sits on Facebook’s board, and through his firm, Founders Fund, made early bets on Spotify, Airbnb, SpaceX, Lyft, Palantir Technologies, and a half-dozen other private companies worth more than $1 billion each.
Thiel
His status as ringleader of the PayPal Mafia, the network of former employees and co-founders that includes SpaceX’s Elon Musk and LinkedIn’s Reid Hoffman, makes him one of Silicon Valley’s most influential and admired figures; his iconoclastic politics make him a subject of amusement. Not coincidentally, and disconcertingly to many of those close to him, Thiel is also one of Donald Trump’s most prominent backers.
On Thursday night, after four days of speeches by an eclectic group including the guy who played Chachi on Happy Days, at least one underwear model, and a promoter of professional cage fighting, Thiel is scheduled to address the Republican National Convention in a prime-time speaking slot shortly before Trump accepts the nomination. Thiel declined to comment for this article, but according to a person familiar with his speech, he plans to embrace Trump’s skepticism about recent U.S. wars in the Middle East and to praise the candidate’s economic qualifications—despite Trump’s advocacy of protectionist tariffs and extreme immigration restrictions, measures that would seem at odds with the radical libertarian image Thiel projects. Thiel also plans to say that, though he considers identity politics a distraction, he’s proud of his identity as a gay man.
Thiel will be the first speaker to publicly acknowledge his or her homosexuality at a Republican convention. Jim Kolbe, the former Arizona congressman, spoke briefly at the 2000 convention without acknowledging his sexuality. (During the speech, members of the Texas delegation removed their cowboy hats and prayed.) Unlike Kolbe, Thiel will speak on the final night, when ratings are highest. 
His speech also marks an historic moment for Silicon Valley. After decades of avoiding politics, technology companies have suddenly taken an interest in elections. “In the tech world there’s a feeling that politics is not something you do willingly,” says Bruce Cain, a professor of political science at Stanford. “These are not ethnic studies majors.”
But the industry has been moving into more heavily regulated areas of the economy in recent years. Uber and Airbnb are locked in battles with municipalities over the “sharing economy.” Tesla Motors faces scrutiny over its driverless car program. Google and Apple have been fighting off federal government pressure to build backdoors into their technology. Since 2005, the lobbying expenditures of internet companies have increased sevenfold, according to the Center for Responsive Politics. Political contributions by internet companies and their employees, 70 percent of which go to Democrats, are also way up. During the 2006 midterm elections, donors gave $2.4 million; in 2014 the figure was $11.6 million.
“It wouldn’t surprise me,” Levchin said, “if the underlying reality of his choice were the sheer contrariness of what he is doing”
The conventional wisdom in Silicon Valley is that Trump would be disastrous for an industry that markets itself to the world and draws from a global talent pool. According to the Silicon Valley Index, a long-running survey published by a Bay Area trade group, 74 percent of workers age 25 to 44 in computer or mathematical roles were born abroad. Many of them come to the country on H-1B visas, which Trump has derided as “a cheap labor program.” 
Moreover, Apple, Facebook, and Google explicitly promote the same countercultural values, such as racial and religious tolerance, that Trump has routinely attacked as political correctness run amok.
On July 14 a group of 140 or so tech industry figures including Slack’s Stewart Butterfield, EBay founder Pierre Omidyar, Twitter co-founder Evan Williams, and, for some reason, the Reverend Jesse Jackson, released an open letter decrying Trump’s candidacy. 
“Trump would be a disaster for innovation,” it read. “His vision stands against the open exchange of ideas, free movement of people, and productive engagement with the outside world that is critical to our economy— and that provide the foundation for innovation and growth.” On the same day, Thiel issued a statement confirming he’d speak in Cleveland. “Many people are uncertain in this election year but most Americans agree that our country is on the wrong track,” he said. “I don’t think we can fix our problems unless we can talk about them frankly.”
The timing, according to an investor who knows him, was classic Thiel: “He’s always thinking, ‘How can I use this to move my agenda forward?’ ” Another acquaintance, a founder of a startup in which Thiel is an investor, says with a mix of fear and admiration, “He’s diabolical.”
 “Every time I read [of Thiel’s support for Trump], I typically check the calendar because I’m not completely sure it’s not April 1,” said Max Levchin, Thiel’s friend and PayPal co-founder, at a June conference, after recovering from a giggling fit. He went on: “It wouldn’t surprise me if the underlying reality of his choice were the sheer contrariness of what he is doing.” (Levchin declined to comment further.)
Thiel’s presence in Cleveland is mystifying in part because he seems so at odds with the 2016 Republican Party, even in all its heterodox, Trumpian glory. Thiel is not only gay, he’s a pro-marijuana immigrant in a party that has long seemed hostile to all those things. In a 2014 interview with the conservative website the Daily Caller, he referred to Trump as “sort of symptomatic of everything that is wrong with New York City.”
Republicans often talk of using free-market competition to bring the cost of attending college down; Thiel is anti-college. He runs a fellowship that gives promising students $100,000 to drop out. “Education,” he said in a 2011 interview with the National Review, “is a bubble in a classic sense.” Among other generally agreed-upon concepts about which Thiel has expressed doubts: antitrust policies (he’s pro-monopoly), women’s suffrage (in a 2009 essay for the libertarian journal Cato Unbound, he noted that women have a troublesome tendency not to be libertarian), and the political system of the U.S. (in the same essay he noted, “I no longer believe that freedom and democracy are compatible”). Thiel has also funded efforts to cure death, which he considers a treatable disease, and to create an offshore colony free of governmental interference. The concept is known as “seasteading.”
Thiel’s politics may be weird, but they’ve endeared him to the press, which has presented him as a kind of TED Talk eccentric, or as Fortune put it, “America’s leading public intellectual.” He wears his contrarian thinking as a badge of honor, always asking job candidates to name one true thing that the world disagrees with them on.
Over the years he has evolved into a calculating operator, a man who nursed a decade-long grudge against a blog while secretly spending millions to destroy it. In 2007, Valleywag, the tech gossip site owned by Gawker Media, noted that Thiel, who had come out to friends but not to the public, was gay. Nine years later, in May, Thiel revealed he’d been funding numerous lawsuits against Gawker, including one involving a sex tape featuring Terry Bollea, also known as Hulk Hogan, that resulted in a $140 million judgment in Bollea’s favor. Gawker filed for bankruptcy in June; founder Nick Denton has indicated that he may file for personal bankruptcy as well. Meanwhile the episode has led to unflattering headlines for Thiel, who defended his involvement in a trial involving a sex tape and a professional wrestler as “one of my greater philanthropic things.”
Thiel’s childhood was filled with signs of quirky genius. He was born in Germany in 1967 and moved to the U.S. at age 1. He was a chess prodigy—ranking seventh in the U.S. Chess Federation’s under-13 age group—with a thing for J.R.R. Tolkien and Ayn Rand. But by the time he made it to college, he was on a very conventional path. The man who urges young people to drop out of college did the full four at Stanford, plus three to earn a law degree. At Stanford, Thiel was a rabble-rouser, but a respectable one. He founded a right-wing newspaper, the Stanford Review, and chose to chronicle the culture wars as a writer, rather than taking up arms himself. The Diversity Myth, a 1995 book he co-wrote with David O. Sacks, railed against multiculturalism, which, they wrote, “exists to destroy Western culture.”
After Stanford came an appeals court clerkship and a job at the white-shoe law firm Sullivan & Cromwell in New York. In a commencement speech at Hamilton College earlier this year, Thiel recalled quitting the firm after seven months and three days. “Looking back at my ambition to become a lawyer, it looks less like a plan for the future and more an alibi for the present,” he said. In the speech, as he usually does, he skipped over the three years he spent at Credit Suisse as a derivatives trader before moving West.
In the Cato Unbound essay, he said his vision for PayPal was “centered on the creation of a new world currency, free from all government control and dilution—the end of monetary sovereignty, as it were.” But in Zero to One, a startup how-to manual he published in 2014, he seemed to moderate this, emphasizing that the message was self-consciously strident and thus useful in recruiting talented, impressionable young programmers. (The word “libertarian” plays very well in tech.) Indeed, PayPal almost seems to have immediately abandoned any radical ambitions, striking deals with banks and credit card companies, and selling itself to EBay for $1.5 billion just four years after its founding. The company was spun off last year and is now worth almost $50 billion.
Thiel’s libertarianism also proved useful in promoting Palantir, a data mining company he co-founded in 2004, which received funding from the CIA. Palantir’s software has been used by police and intelligence agencies to search vast databases for suspicious clues and patterns, though it’s unclear exactly which databases and what the technology is capable of finding. The mystery has made the company controversial, especially after the Edward Snowden leaks. The company responded to concerns that it was enabling domestic spying by emphasizing Thiel’s civil libertarian bona fides, arguing that Palantir creates a paper trail that makes government abuses less likely. “It was a mission-oriented company,” Thiel told Forbes in 2013. “I defined the problem as needing to reduce terrorism while preserving civil liberties.”
Thiel’s main gig for much of the Aughts was at Clarium Capital Management, which attempted to leverage his pessimism about U.S. economic institutions into a profitable investment strategy. He made a contrarian bet against housing prices, and the fund delivered a 59 percent return for the first half of 2008. But Thiel stumbled in 2009, clinging to his bearish thesis and missing the recovery. The fund ultimately lost more than 90 percent of its value and Thiel laid off most of its staff, transforming it into a personal investment vehicle. Several people familiar with Clarium said that Thiel’s insistence that the fund ignore short-term volatility and stick to his long-term investment thesis was what doomed it.
In interviews, four of Thiel’s friends and colleagues—all of whom would speak only on the condition of anonymity—characterized his decision to back Trump as in keeping with his entrepreneurial instincts. He loves disruption, in the Silicon Valley sense of “creative destruction,” as opposed to the usual connotation of “making things worse,” and has weighed the candidate’s demagoguery against a hope that a Trump administration would clear the way for further disruption. It is, these friends and colleagues say, a perfectly sensible chess move—the political equivalent of the king’s pawn.
“I don’t think it’s completely out of character,” says Garrett Johnson, co-founder of SendHub, a Bay Area messaging startup, and Lincoln Initiative, a right-leaning nonprofit. Johnson, who supports the Libertarian candidate Gary Johnson (no relation), notes that many of Thiel’s portfolio companies might benefit from a Trump presidency. “Donald Trump is saying the system is rigged,” he says, adding that SpaceX, which counts NASA as its biggest customer and which Founders Fund has been backing since 2008, “is being blocked by Boeing and the aerospace cartels.” 
Many of Thiel’s smaller investments, such as the health-care startup Oscar and the education company AltSchool, also do business in highly regulated industries.
Perhaps the biggest Thiel-backed beneficiary of a Trump administration would be Palantir. The company, recently valued at $20 billion, still isn’t profitable and has struggled to retain employees over the past year. Today about half of Palantir’s sales—it booked deals totaling $1.7 billion in 2015—comes from companies such as BP; the other half comes from the National Security Agency, the FBI, branches of the U.S. Department of Defense, and other government entities. The U.S. Army isn’t a customer—yet—but it’s currently bidding out a software contract that could be worth up to $25 billion. Palantir, which had hoped to win some of the business, is suing the Army on the grounds that the process is biased toward longtime contractors.
In this light, it’s easy to see why Thiel’s ambitions extend beyond those of your average public intellectual. He doesn’t just want to be respected by readers of the Daily Caller and the National Review; he wants, or at least seems to want, actual power, which a Trump presidency would undoubtedly deliver. It’s not clear what Thiel gives Trump in this trade, beyond a sheen of Silicon Valley respectability. (According to the Center for Responsive Politics, Thiel hasn’t donated any money this election cycle to Trump. Last year he gave $2 million to a PAC that supported Carly Fiorina and more than $8,000 to the campaign of Mike Lee, a Utah senator who’s part of the #NeverTrump movement.)
Trump is widely seen as the underdog, a sense that was magnified by a series of missteps during the convention’s first three days—including an apparent instance of plagiarism in a speech given by his wife, Melania. But that’s the point. According to people who know him, Thiel sees his support of Trump as the ultimate hedge. Having already staked out a position as the Valley’s preeminent kooky libertarian, he’d see his standing largely undiminished by a Trump loss. Betting markets put the possibility of a Trump victory at about 30 percent. Most prone to judge Thiel probably already despise him for his other heresies. But if Trump wins, Thiel will be the U.S. president’s kooky libertarian.

Thursday, July 21, 2016

Google Cuts Its Giant Electricity Bill With DeepMind-Powered AI (BW)


  • Game-playing AI coordinates data center tasks like cooling
  • DeepMind efficiencies cover part of cost of 2014 acquisition


Google just paid for part of its acquisition of DeepMind in a surprising way.

The internet giant is using technology from the DeepMind artificial intelligence subsidiary for big savings on the power consumed by its data centers, according to DeepMind Co-Founder Demis Hassabis.

In recent months, the Alphabet Inc. unit put a DeepMind AI system in control of parts of its data centers to reduce power consumption by manipulating computer servers and related equipment like cooling systems. It uses a similar technique to DeepMind software that taught itself to play Atari video games, Hassabis said in an interview at a recent AI conference in New York.

The system cut power usage in the data centers by several percentage points, "which is a huge saving in terms of cost but, also, great for the environment," he said.

The savings translate into a 15 percent improvement in power usage efficiency, or PUE, Google said in a statement. PUE measures how much electricity Google uses for its computers, versus the supporting infrastructure like cooling systems.

Google said it used 4,402,836 MWh of electricity in 2014, equivalent to the average yearly consumption of about 366,903 U.S. family homes. A significant proportion of Google’s spending on electricity comes from its data centers, which support its globe-spanning web services and mobile apps.

Saving a few percentage points of electricity usage means major financial gains for Google. Typical electricity prices companies pay in the U.S. range from about $25 to $40 per MWh, according to data from the U.S. Energy Information Administration. (Prices in different regions range from a few dollars to more than $100). Either way, saving 10 percent on data center power consumption, for instance, could translate to hundreds of millions of dollars in savings for Google over multiple years. Google acquired DeepMind in 2014 for 400 million pounds, or more than $600 million at the time, according to The Guardian.

The application of DeepMind’s technology builds on previous efforts by Google to apply machine learning, a type of AI, to its data centers. Back in 2014, the company said it used neural networks, a type of pattern recognition system, to predict how its power usage would change over time, letting it arrange equipment in more efficient ways.

The DeepMind work goes a step further. Instead of making moves in an Atari game, the software changes how equipment runs inside the data centers to get the highest score -- in this case more efficient consumption of electricity.

"It controls about 120 variables in the data centers. The fans and the cooling systems and so on, and windows and other things," Hassabis said. "They were pretty astounded."

This is just the beginning of the project, Hassabis said. Now that DeepMind knows the approach works, it also knows where its AI system lacks information, so it may ask Google to put additional sensors into its data centers to let its software eke out even more efficiency.


Wednesday, July 20, 2016

Netflix stock price tanks as customers quit over higher prices

The results of its global expansion are starting to become clear
Image result for Netflix


Netflix released its earnings report for the second quarter today. The company was one of 2015's best performing stocks, but has seen its share price stumble in recent months on projections of slower growth. Today it reported $1.97 billion in revenue and net income of $41 million. Adding to worries about its growth, the company added just 1.54 million subscribers, well below its own projections of 2.5 million new customers. The stock is down around 14 percent in after-hours trading.

In its letter to investors, Netflix blamed the weak subscriber growth on churn, meaning older customers exiting. "Our global member forecast for Q2 was 2.5m and we came in at 1.7m. Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to un­grandfather longer tenured members and remained elevated through the quarter," Netflix wrote. "We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."

Netflix subscriber growth

The company stuck to its guns on the price hikes, writing that "while un­grandfathering and associated media coverage may moderate near­ term membership growth, we believe that un­grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long­term growth."

Netflix needs to increase revenues, because in recent years it has invested heavily in expansion and original content. These improvements have enticed subscribers to join the service; Netflix gained 13 million new subscribers in 2014, and another 17 million in 2015. In both years, Netflix saw new subscriptions spike in the fourth quarter, with the second quarter yielding the lowest number of new subscribers.

Today's earnings report showed that the company may have seen the end of the explosive growth it generated in the run up to its expansion into 130 new countries. The company may soon have new upside in its domestic market, as it gains access to Comcast's X1 box, and perhaps hubs for other cable providers in the near future, but so far, it's not banking on these partnerships for new growth. In its investor letter, Netflix wrote it "does not include any boost in the US from the Comcast X1 launch due to uncertainty on timing as we and Comcast will only release Netflix on the X1 when the viewer experience is great."