Tech Stock Roundup: Stocks React To Trump Promises

We sure live in interesting times.

President-elect Trump’s initiative to lower the corporate tax rate will help companies that are being pressured to bring jobs back to the U.S., but it will be interesting to see how he deals with the revenue shortfall. Really big companies like Apple (NASDAQ:AAPL) will still be working out separate deals with the government.

It’s safe to say that not all sectors/companies will be affected similarly. The technology sector may be expected to take a hit, because of China retaliation to protectionist measures and significant dependence of American companies on low-cost manufacturing operations and labor (including Asian supply chains), savings from which are typically pumped into R&D. H1B Visa constraints may also affect their ability to hire talent. Outsourcing companies should feel the most heat.

With that, let’s jump to the top stories-

Apple Cuts iPhone Orders

Two research firms are seeing signs of an iPhone production cut for the current quarter, but their estimates vary widely. UBS analyst Steven Milunovich has only slightly adjusted his estimates from 75 million units to 74 million units citing Apple’s decision to prevent an inventory glut situation as was the case with the iPhone 6s family. On the other hand, JL Warren Capital estimates that the supply chain is now set to build 80 million units, having been impacted by weaker demand in China for the smaller-screened iPhone 7.

Intel’s New Automotive Unit

Intel (NASDAQ:INTC) has been telling us that although it may have missed the mobile boat, it wouldn’t let the IoT opportunity go by. In fact, Krzanich has held the view that the car is the next computer, capturing a wealth of data on car dealers and car owners that is all the more important because “data is the new oil.”

Last week, the company announced its Automated Driving Group, or ADG, that “will be solely dedicated to innovating the future of driving and designing the next generation of advanced driver assist systems and autonomous driving solutions.” The SVP and general manager of the division will be Doug Davis. Davis will relinquish his role as IoT head to Tom Lantzsch, executive vice president of strategy at rival chip player ARM.

Meanwhile, Intel continues to build on its auto market relationships. The company has now announced that it is a part of the Mobileye-Delphi team that is building a self-driving car system that will be production-ready by 2019. The system can be installed on cars of any make (Intel and Mobileye (NYSE:MBLY) have agreed in the past to create such a system for BMW). The first products will be based on Intel's high-end Core i7 line but they will be upgraded to a yet-to-be-released more powerful processor. UK-based Delphi is a leading auto parts maker while Mobileye makes sensors.

Intel has some way to go to catch up with NVIDIA (NASDAQ:NVDA) (because of its machine learning edge) and possibly Qualcomm (NASDAQ:QCOM) , which recently acquired auto-focused NXP. But the market is nascent, which means there are opportunities.

Amazon Re:Invent

At Amazon’s (NASDAQ:AMZN) Re:Invent conference on Wednesday and Thursday, the company announced a slew of tools, services and partnerships.

Some of the tools and services include-

AI-based tools: Amazon Lex, Amazon Polly, and Amazon Rekognition (make Amazon’s natural language understanding, speech recognition, text-to-speech, and image analysis technologies available at any scale, for any app, on any device, anywhere). The Amazon service thus eliminates the need for access to vast amounts of data, and specialized expertise in machine learning and neural networks making it easier to develop AI-based apps.

IoT: In partnership with a number of companies including Intel, Qualcomm, Phillips and Technicolor, Amazon is bringing AWS services to run locally on IoT devices when connectivity is difficult or expensive. The service is called Greengrass.

A Security tool called AWS Shield (free) and AWS Shield Advanced as defense against distributed denial of service (DDoS) attacks.

Amazon’s Aurora relational database now has enhancements and as always, aggressive pricing.

New high-performance cloud computing instances were launched, including ones supporting FPGAs for machine learning and video-processing.

A serverless query service called Athena that allows you to run queries saved on Amazon Simple Storage Service (Amazon S3).

Virtual private servers for developers that can be launched easily and at low cost called Lightsail.

Amazon also announced that Capital One Financial Corp (NYSE:COF) and Workday had selected AWS.

Other stories -

Corporate

Facebook Testing Express Wi-Fi in India: Failing to launch Free Basics in India on net neutrality concerns, Facebook (NASDAQ:FB) is now looking elsewhere. The company is partnering with local internet service providers and mobile operators that are using its software to extend faster, more reliable and more affordable Internet services. Mobile connectivity is extremely expensive in the country so this initiative may actually encourage people to use it a bit more. It also supports government initiatives like “Digital India,” so finally a win-win.

Microsoft, GE Invest in Tel Aviv IoT: A consortium of companies including GE Ventures, HNA EcoTech, Microsoft (NASDAQ:MSFT) Ventures, Qualcomm Ventures and Tata is investing $20 million in Tel Aviv University to fund the development of IoT technology.

Google (NASDAQ:GOOGL) Shops Inside Best Buy: Best Buy stores in the Canadian cities of Mississauga, Calgary, Edmonton and Vancouver are hosting Google’s 700 sq foot shop-within-shop locations. In October, Google launched 10 such shops in other Canadian Best Buy stores. The stores are used to showcase and sell various Google products including Pixel smart phones, Chromebook laptops, Google Home and other accessories.

Twitter’s New Product Head: Keith Coleman, whose startup Yes Inc. was acquired by Twitter, will be joining the company as its product head. Before founding Yes, Coleman worked as Google’s product manager and worked on Gmail, Inbox and Gchat. Yes products, including Frenzy (event planning), Heyo (chatting) and YWD (sharing status updates) will be shut down.

Alibaba Data Centers: Alibaba (NYSE:BABA) is opening four new data centers in Dubai, Frankfurt, an undisclosed city in Japan and Sydney in a push to boost its infrastructure-as-a-service business. The Ali Cloud currently enjoys very strong growth rates, partly because it is growing from a small base. But analysts expect the business to continue growing strongly even as ecommerce growth rates moderate. The four new data centers take Alibaba’s total number to 14, double the capacity it had last year.

Legal/Regulatory

Tech Companies on China Cybersecurity: China’s new cyber security bill requires foreign software companies to share code with the Chinese government citing concerns about backdoors created by technology companies that the NSA can exploit. Last week, technology companies including Intel, Microsoft and IBM (NYSE:IBM) protested the decision along with several Chinese companies. The companies haven’t yet talked about moving out of China and analysts currently don’t expect them to. But this could become a necessity in order to protect their intellectual property.

New Technology/Products

Apple Could Make Ceramic Phones: Apple has applied for a patent on a fiber-reinforced ceramic material to house the iPhone. The material is said to be highly resistant to damage and breakage and is more easily formed than other materials. But it won’t be cheap: $1,250 for the smaller version and $1,300 for the larger one. The technology was earlier tested in the Apple Watch Series 2.

Facebook Messenger Games: Facebook Messenger announced Instant Games through which users can play a long list of games (including Frenzy, PAC-MAN EverWing, SPACE INVADERS, TRACK & FIELD 100M, Galaga, etc.) provided they have a relatively new iOS or Android device. The service will initially roll out in 30 countries.

M&A and Collaborations

Fitbit May Buy Pebble: It’s being rumored that Fitbit is looking to buy Pebble to jumpstart its smartwatch business. The world’s leading wearables maker hasn’t been seeing very strong growth rates and IDC thinks smartwatches are a safer bet, to grow much faster than other wearables. It’s a small and shrinking market today, but expected to benefit from innovation in the future. So Pebble is jumping in. Read more:The Pebble Crumbles: Are Smartwatches Just A Fad?

Amazon-Intel Partner in Smart Homes: According to the agreement between the two companies, Intel will make a voice controlled smart speaker reference design like the Echo that will use Alexa as the assistant. Amazon will provide the software development kit so device makers can use the reference design and the Alexa platform to make their own devices. Additionally, smart home hubs using Intel chips will be able to sync with Alexa.

Twitter Advertising Partner in Asia: Twitter has announced its first Asian advertising collaboration with Globe that will cover NBA's two new weekly live exclusive programs streamed on Twitter and for custom NBA highlights on Twitter in the Philippines.

American Airlines Chooses IBM Cloud: IBM Cloud, which consists of more than 50 data centers spanning 17 countries, won an important customer last week. American Airlines has agreed to transfer some of its operations to IBM cloud infrastructure, making use of its global scale and the application development capabilities that it provides through Bluemix.

Some Numbers

IDC Cuts Smartphone Forecast: IDC has lowered its smartphone shipment forecast for the year, with most of the weakness attributable to quarter upon quarter of iPhone shipment declines and a longer product refresh cycle for most people in the mature USA, Canada, Japan and Western European markets. The growth is currently coming from the emerging Asia/Pacific ex-Japan, Latin America, Central and Eastern Europe, and Middle East and Africa markets. IDC particularly called out new operator Reliance Jio in India, which “trying to shake up the market by handing out free 4G SIM cards and launching own-branded low-cost 4G-enabled smartphones.”

So it’s not surprising that Android will take an 85% share this year (up 5.2%) and grow at a 5-year CAGR of 4.6% for an 85.6% share by 2020. iOS on the other hand will make up 14.3% of the market in 2016 (down 11.0%), and grow at a 5-year CAGR of 1.0% for 14.2% of the market by 2020. Other vendors will see declines.

Analysts for the most part have their eyes on Apple’s next iteration in 2017 and Ming Chi Kuo, who is known for accurate forecasts on Apple, expects three new models next year including an all-new iPhone 8 and upgraded iPhone 7 and 7 Plus.

Apple Still Tops Holiday Wish Lists: According to tech analyst Gene Munster, a survey of 1,000 consumers conducted by his firm's retail team over the past month showed that 7.2% wanted the iPhone, up from 5.2% last year. He also said that Apple led brand preferences within top gifts with 10.3% customers saying they’ll buy an Apple product, of which teens preferred iPhone and MacBook products.

Amazon Grabs 31% of Spending: Amazon was again the leading online retailer by far during the Thanksgiving weekend, accounting for 30.9% of spending, according to a new report by Slice Intelligence.It was followed by Best Buy with 7.4%, Target with 4.4%, Wal-Mart (NYSE:WMT) with 4.1% and Macy’s with 3.2%. Best Buy, Target, Kohl’s and Apple picked up some share.

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