I just want to follow up on my comments from Tuesday on consolidation and convergence in the TMT arena. There has been another slew of reports out in tech world showing that all of the big players are jumping into each other’s turf in a quest to ‘gatekeep’ the content that we view and use.
The point here is that there has been a huge paradigm shift in the TMT world due to the ubiquity of cheap and high-powered mobile bandwidth. In October I wrote a piece on the budding paradigm shift to cloud computing and what I thought it meant for incumbent technology businesses. My conclusion at that time was that it was too early to tell where this was headed but that much of this depended on how well incumbent businesses dealt with the shifting landscape. I said Apple and Google would play a dominant role but that there were multiple points at which players could gatekeep content and charge users for the ubiquitous access we expect in the new world of content anywhere on every conceivable form factor.
I would like to iterate here based on the events on the ground. It is clear that the incumbents are making a move and consolidation is taking space right across the TMT space. You have Amazon moving into original content creation. You have video content gatekeeps DISH trying to move into Internet and mobile infrastructure by buying Sprint Nextel. You have Netflix, another content gatekeep trying to move into content creation. Mix and match any of these strategies; it’s hard to know who is going to come out on top. What is clear though is that there are going to be a lot of mergers and huge amounts of consolidation.
My overarching belief here is that the Internet is a deflationary force because of price discovery. Ubiquity of data and content is going to arrive via business models that focus on economies of scale and scope because, despite the gatekeeper role access providers want to play, monopoly power in the TMT space is effectively over. Companies like Amazon, that are focused on low costs will drive profits down in every category they touch. Incumbent businesses like cable companies and Internet service providers should feel most threatened by this. Their control is going to erode as the data and content they provide us will become accessible through other access channels.
Competition based on price and product scope will increasingly dominate TMT. This is what is driving the coming wave of consolidation. The bankers are going to busy.
Exclusive: Verizon eyes $100 billion bid for Vodafone’s Wireless stake | Reuters
“Verizon Communications has hired advisers to prepare a possible $100 billion bid to take full control of Verizon Wireless from its partner Vodafone, two people familiar with the matter said.
The two sources said Verizon was considering a 50:50 cash and stock bid for the 45 percent stake it does not already own, an asset it has long coveted but that Vodafone will take some persuading to give up. It has not put a proposal to Vodafone yet but has hired both banking and legal advisers for a possible offer, the sources said.”
Amazon Developing Device to Stream Video to Homes – WSJ.com
“Amazon.com Inc. is developing a set-top box to stream video content that it may release sometime this year, according to people familiar with the company’s development plans.
The device could help build Amazon’s brand in the living room, where the e-commerce giant is dependent on other devices to stream its expanding video content available as part of its Prime membership service.”
Qualcomm’s earnings outlook points to competition in Asia | Reuters
“Low-cost handsets weigh on Qualcomm’s profitability. Manufacturers of lower-cost phones pay lower royalties for Qualcomm’s network technology and also buy cheaper components from the chipmaker, instead of its top-tier offerings.
The growing importance of developing countries also means Qualcomm will face more challenges from Mediatek, Spreadtrum Communications and other chipmakers that are improving their technology and are happy to sacrifice profits in exchange for market share in Asia.
“When you’re trying to stay on top, and you’ve got players trying to knock you off, you have to spend to stay there,” Williams Financial analyst Cody Acree said of Qualcomm.
Qualcomm said it expects full-year earnings per share between $4.40 and $4.55. Analysts expected $4.54, according to Thomson Reuters I/B/E/S.”
Apple debt issuance would dwarf that of tech rivals | Capital City | IFRe
“Apple has US$145bn of cash, but “only” US$45bn of that is on hand in the US, according to some estimates. That is not enough to pay for plans to buy back US$60bn of shares over the next three years.
That means the company will have to issue about US$15bn to US$20bn a year for the next three years, according to credit research firm CreditSights.
“Its shareholder returns will require … total debt in the order of US$55bn,” CreditSights said in a research report.
At that level, Apple’s issuance would dwarf the levels that other technology companies such as Microsoft and Google have in bonds outstanding, and could make it nearly as big an annual issuer – at least for the next three years – as Citigroup, which issues US$20bn to US$25bn annually.”
Samsung set to heap more misery on Apple – Telegraph
“Despite reassuring investors that it was “hard at work” on new products for 2013 and 2014, Apple revealed on Tuesday night that earnings had dropped 18pc to $9.5bn in the first three months of this year.
Some experts have blamed Apple’s recent troubles, including a $300 fall in its share price, on the resurgence of rivals such as Samsung.”
Apple shares fall as buyback, dividend hike fail to please | Reuters
“Canaccord Genuity said it sees much weaker overall iPhone sales and a higher proportion of sales of lower-priced Phone 4 models.
It cut its target price on Apple shares to $560 from $600 and warned of significant market share loss at the higher end of the smartphone market ahead of the release of a new model, the iPhone 5S, in autumn.
BMO Capital Markets cut its rating on Apple’s stock to “market perform” from “outperform,” voicing concern that the company would have to trade off revenue growth for margins in the longer term.
Apple’s gross margin was 37.5 percent in the second quarter, lagging market expectations for a 38.5 percent margin.
Seven analysts have “neutral” or equivalent ratings on Apple’s stock and three have “sell” ratings. The rest of the 56 analysts covering Apple have “buy” ratings on its stock, according to StarMine data.”
Galaxy S4 review: Samsung’s superphone – Independent.ie
“THE Samsung Galaxy S4 is the best phone Samsung have ever made. But can it stand up to the iPhone 5 and the HTC One? Matt Warman says yes.”
Galaxy S4 decent, but filled with gimmicks | South China Morning Post
“I’ve seen Android phones get better and more powerful over the years, as Google and phone manufacturers pack devices with more and more features. There comes a time, though, when less is more. I’m afraid we’ve reached that time.
Samsung’s new Galaxy S4 smartphone is an excellent device from a hardware standpoint. Measuring 12.5 centimeters diagonally, the screen is slightly larger than that on its predecessor, the Galaxy S III. Yet the S4 is a tad lighter and smaller overall. The S4’s display is also much sharper, at 441 pixels per inch compared with 272 on the S III. The S4 has one of the sharpest screens out there.
The Android operating system it runs is excellent, too, and in recent years the Google-made system has become a healthy competitor to Apple’s iOS system for iPhones. Like most Android phones, the S4 comes with a suite of useful Google apps, including Gmail, YouTube, Google Maps and the voice assistant Google Now. Because Google lets device makers customize Android to suit their needs, Samsung and others have been adding their own distinguishing features.
And that’s the source of the problem. Packed with bags of tricks, phones have become way too complicated for many people to use. In some cases it’s because these custom features work only some of the time. In other cases, you’re confronted with too many ways to do similar things.”
Samsung’s new Galaxy S4 hits supply snags in United States | Reuters
“Samsung attributed the disruption to unexpectedly strong demand for the Galaxy S4, the Korean company’s direct challenge to Apple Inc’s iPhone.
“Due to overwhelming global demand of Galaxy S4, the initial supply may be limited. We expect to fulfill inventory to meet demands in the coming weeks,” the Asian electronics company said in a statement.”
Qualcomm Revenue Rises 24% – WSJ.com
“Among makers of mobile devices, Qualcomm has enjoyed particularly strong sales because of a head start in delivering modem chips that can use networks based on a technology known as LTE, for long-term evolution. A chip called Snapdragon, which combines wireless communications with microprocessor capabilities, is especially popular”
This is Microsoft’s natural space anyway. As I have written before, Microsoft should be heavily invested in this space as tablets are going to replace a good deal of PC computing in the years ahead.
“Don’t write off Microsoft’s chances in mobile just yet. It may still be struggling to make itself count in the smartphone space but early signs are more promising for Windows plus tablets. Microsoft has gone from having no share of the global tablet OS market in Q1 last year to taking 7.4% one year later, with three million Windows 8 tablets shipped in Q1 2013, according to preliminary figures from Strategy Analytics‘ Global Tablet OS Market Share: Q1 2013 report.”