The Geek’s Reading List – Week of September 27th 2013
I am an analyst and consultant with 20 years of experience as a sell side technology analyst and 13 years of prior experience as an electronics designer and software developer.
The purpose of the Geek’s Reading List is to draw attention to interesting articles I encounter from time to time. I hope that what I find interesting you will find interesting as well. These articles are not to be construed as investment advice, even though I may opine on the wisdom of the markets from time to time. That being said, it is absolutely important that investors understand the industry in which they are investing, along with the trends and developments within that industry. Therefore, I believe these comments may actually help investors with a longer time horizon.
Please feel free to pass this newsletter on. Of course, if you find any articles you think should be included, please send them on to me!
I blog at www.thegeeksreadinglist.com.
NOTE: I will be delivering a keynote address at the 19th Annual Annual SMCouncil Executive Forum on Microsystems and CMC 2013 Symposium October 16th entitled “Broadband Backwater: Is it too late for Canadian Technology?” I believe the presentation will be posted online, however, if you wish to attend you can register at http://www.cmc.ca/en/NewsAndEvents/Events/Symposium2013
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1. RSA warns developers not to use RSA products
Always a good sign, however, RSA is the security company which had its own data hacked in 2011 (http://www.engadget.com/2011/03/18/rsa-hacked-data-exposed-that-could-reduce-the-effectiveness-o/) so you really have to wonder. The point I need to stress is that a ‘backdoor’ is visible to anybody smart enough to recognize it (and a lot of math PhDs graduate every year) and hackable by anybody with the desire and the resources. While it is true NSA have huge resources, they are also working on a huge number of difficult problems at the same time. Any effort focused on one backdoor at one business could be successful, given enough time.
“In today’s news of the weird, RSA (a division of EMC) has recommended that developers desist from using the (allegedly) ‘backdoored’ Dual_EC_DRBG random number generator — which happens to be the default in RSA’s BSafe cryptographic toolkit. Youch.”
2. Chaos Computer Club breaks Apple TouchID
Well that didn’t last long. Mind you, most phone thieves are louts without the brains nor the predisposition to undertake such a project.
“The biometrics hacking team of the Chaos Computer Club (CCC) has successfully bypassed the biometric security of Apple’s TouchID using easy everyday means. A fingerprint of the phone user, photographed from a glass surface, was enough to create a fake finger that could unlock an iPhone 5s secured with TouchID. This demonstrates – again – that fingerprint biometrics is unsuitable as access control method and should be avoided.”
3. Why Is Microsoft Setting More Money on Fire with Surface 2?
It is an interesting fact that managers tend to double down on bad strategies – after all, admitting defeat would imply they were wrong in the first case. A bit more money, a bit more time, and they’ll be proved right. In retrospect, the error seems obvious. Also see below regarding Dell.
“Pop quiz: Imagine you spend millions of dollars—and an untold number of engineering and design hours—on a new product that you hope will prove a bestseller on the open market. Instead, that product crashes and burns so badly that you’re forced to take a $900 million write-off on unsold units. Do you… A.) Discontinue a product that nobody seems to want. B.) Continue to sell the product, but resolve to never throw good money after bad by building a follow-up. C.) Pump a whole lot of money into creating a next-generation version of the product, but don’t radically alter its fundamental properties.“
4. Dell drops Windows RT, only Microsoft remains selling the OS
Windows RT is an interesting product – it is a ‘Windows like’ OS but it runs on ARM processors. When the product was announced, many commentators thought this would be a huge success due to all the applications written for ‘real’ (i.e. x86) based Windows. Obviously the fans knew nothing about software: it is a major undertaking to move software from one CPU architecture to another, and few companies would bother given the modest market potential.
“In the fall of 2012, five companies offered tablets or PCs that ran on Microsoft’s new ARM-based Windows RT. Now just one company is actively selling such a product and it happens to be Microsoft. This week, the last remaining third party Windows RT hardware provider, Dell, stopped selling its lone product that used the OS, the XPS 10.”
5. Applied, Tokyo Electron Agree to $29 Billion Merger
Most tech acquisitions make no sense whatsoever while others appear to make sense at first blush. This deal will create a combined company which will be, by far, the largest in the industry. Unfortunately, the industry is not growing, and is unlikely to grow, and it is dominated by a small number of large customers. Those customers are not keen on having a single large supplier of capital equipment, so you can bet that, over the new few years, they are likely to move business to the new #2 (ASML).
“Applied Materials Inc., the world’s largest chipmaking equipment supplier, and Tokyo Electron Ltd., ranked No. 3, have agreed to a merger that values the combined entity at about US$29 billion (about 2.8 trillion yen).”
6. Worldwide semiconductor manufacturing equipment spending to decline 8.5 percent in 2013
This ties in to the previous article, however, you should take the growth forecasts with a grain of salt. Actually, given that it is Gartner Group, I’d suggest about 20 kilos of salt: in late 2010, their forecast for 2013 was for $47.7 billion in sales, a 27% miss.
“Worldwide semiconductor manufacturing equipment spending is projected to total $34.6 billion in 2013, an 8.5 percent decline from 2012 spending of $37.8 billion, according to Gartner, Inc. Gartner said that capital spending will decrease 6.8 percent in 2013, due to diminishing 28nm investment from a softening in the mobile phone market.”
7. Data Broker Giants Hacked by ID Theft Service
More fun and games with network security also demonstrating the challenge with centralized (i.e. cloud) services: there is a big payoff for hacking the site so a lot of effort is so directed.
“An identity theft service that sells Social Security numbers, birth records, credit and background reports on millions of Americans has infiltrated computers at some of America’s largest consumer and business data aggregators, according to a seven-month investigation by KrebsOnSecurity.”
8. T-Mobile US will no longer stock BlackBerry in stores
Blackberry’s abysmal pre-announcement came out just after last week’s Geek List, so I didn’t have the opportunity to comment. The company’s sales dropped about 50%, and were about half of expectations, despite new product launches, etc.. Those few still positive on the name suggest the company’s large subscriber base will sustain it, however, that customer base will rapidly dwindle as people drop off the network and are not replaced by new Blackberry buyers.
“David Carey, executive vice president for corporate services told Reuters about the plan on Wednesday, a few days after BlackBerry said it would no longer market to consumers because of drastically weakening smartphone sales.”
9. BlackBerry’s Descent Begets Cheapest Tech Deal: Real M&A
It is hard to believe Fairfax intends to run the company as a going concern since sales are collapsing (a situation which is rarely rectified) and it will likely burn through its cash in fairly short order. Rather than sailing off into the sunset, like any once great ship, most likely Blackberry will be broken up and its pieces sold as scrap.
“The smartphone maker said yesterday it reached a tentative agreement for a $4.7 billion buyout by a group led by Fairfax Financial Holdings Ltd., its biggest shareholder. Including net cash, the proposal values the Waterloo, Ontario-based company at an 80 percent discount to its book value and just 0.17 times its sales, the cheapest revenue multiple on record among similar-sized North American telecommunications or technology acquisitions, according to data compiled by Bloomberg.”
10. Nokia Admits Giving Misleading Information About Elop’s Compensation
What a happy coincidence for all concerned – except company shareholders of course. It is a pity that the analysts following Nokia, and, presumably, providing valuable investment advice, didn’t bother reading the public filings of the company. Not to worry – all water under the bridge now.
“Nokia’s board of directors seems caught in a tragicomedy of epic proportions. The latest twist is Finland’s largest newspaper claiming that Nokia made a false statement about CEO’s bonus package last Friday. Pressed by Finnish and international media last week, chairman Siilasmaa had claimed then that the bonus structure of Stephen Elop’s contract in 2010 was “essentially the same” as the one the previous CEO had received. But the largest daily of the country, “Helsingin Sanomat”, decided to dig into SEC filings to investigate the matter. By early Tuesday morning, the newspaper had uncovered evidence that Nokia’s board had made fundamental changes in Elop’s contract compared to his predecessors.”
11. Judge orders patent troll to explain its ‘Mr. Sham’ to jury
One gets the sense that the IP licensing ship has sailed. Perhaps the Nortel patent sale was the high mark for the trade.
“…District Court Judge William Alsup – he of Oracle v. Google fame — rendered a decision that was likely less palatable to NPS than had he dismissed the suit outright: He ordered NPS to essentially teach the jury a course in Patent Trolling 101 by defending the dirty tricks that got the case tossed out of Texas.”
12. Seriously, Samsung? Sorry, roamers, but the new Galaxy Note 3 is region-locked
If true (you never know) this is the most stupifyingly idiotic moves in tech history: people buy unlocked phones so they can use whatever mobile service they wish. If Samsung has actually region-locked the phone, people simply should not buy it.
“I really thought the days of region-locking were dying with the DVD, but it seems I was wrong – Samsung has decided to revive the odious practice with its Galaxy Note 3 smartphone. Yes, if you buy an unlocked Note 3 in Europe and travel to, say, the U.S., you will not be able to use a local SIM card. The same applies the other way round. In other words, you will be forced to pay for your carrier’s outrageous roaming fees or go Wi-Fi-only.”
13. 20% of Yelp reviews are fake
Not surprising, really – most evaluation systems can be gamed and, for the most part, on line systems are easiest to game thanks to anonymity. It is worth considering, for example, how easy it would be to move an e-book to best-seller status through phantom downloads: the distribution costs (Amazon’s cut) could be simply viewed as part of the marketing budget …
“On Monday, Attorney General Eric T. Schneiderman announced that 19 companies agreed to cease their practice of writing fake online reviews and pay hefty penalties for false advertising and deceptive business practices. Dubbed “Operation Clean Turf,” his investigation found that these businesses – ranging from bus companies to teeth whitening services — systematically tried to game the system by paying freelance writers from Philippines, Bangladesh and Eastern Europe between $1 to $10 per review. Schneiderman’s office cited a 2011 study by Michael Luca, assistant professor at Harvard Business School, which said a one-star rating hike on Yelp can mean a 5% to 9% rise in restaurant revenue.”
14. Groundbreaking Results for High Performance Trading with FPGA and x86 Technologies
High speed trading disturbs me on several levels: it is quite clear the practice games information imbalance and favors large financial institutions. It is also probably destabilizing as nobody really knows how any algorithm is going to react to all circumstances. Of course, you can find economists who claim it is good for the market because it provides liquidity, but then again you can find economists who justify insider trading, which is a criminal offense.
“Working with Arista Network’s 7124FX Application Switch which includes an Altera FPGA with hardware-level access to 8 of its 24 10Gb Ethernet ports and an x86 domain based on Intel’s Xeon processors and using the test harness developed for the Finteligent Trading Technology Community program, the latency measured was reduced by a factor of 25 over pure x86 designs tested by the program. For the measured leg in the test harness, latency was reduced from a previous best of 4,600ns to 176ns for algorithmically generated trades executed to the simulated market.”
15. Google’s Gmail Keyword Scanning May Violate Wiretap Law
I don’t follow the legal theory, but I do see the point: if you email me or I email you, how can you implicitly agree to Google’s legalese licensing terms?
“Google’s Gmail automatic keyword scanning might violate laws in the United States against wiretapping, a federal judge ruled on Thursday. U.S. District Judge Lucy Koh said that by automatically scanning Gmail users’ emails to provide targeted ads and filter spam, Google may be in breach of Federal and California state wiretapping laws, which prohibit the unauthorized interception of communications.”
16. This Scoop of Mars Soil is Two Percent Water
Given all the trace evidence of water this result is not all that surprising. Despite the lack of trace methane on the planet (a possible sign of life) I tend to think it likely life once on the planet and maybe still does.
“By now, we probably all know that there was once significant quantities of water on the Martian surface and, although the red planet is bone dry by terrestrial standards, water persists as ice just below the surface to this day. Now, according to a series of new papers published in the journal Science, NASA’s Mars Science Laboratory rover Curiosity has found that the Mars topsoil is laced with surprisingly high quantities of the wet stuff.”
17. Troll-Killing Patent Reform One Step Closer
Apropos my prior item on patent ‘trolls’ there may be some action from the US Congress. I believe one item (loser pays) would clear up a lot of the mess: currently in the US, losing litigants almost never have to pay the other party’s legal fees, which sets up an asymmetrical risk/reward profile in favor of threatening a suit with no real prospect of victory.
“Patent reform is heating up in Congress. Today House Judiciary Committee Chairman Bob Goodlatte released a second discussion draft aimed at preventing abusive patent troll litigation. Chairman Goodlatte has suggested he will move quickly to hold a hearing and committee vote on this legislation.”
18. First carbon nanotube computer to help extend Moore’s Law?
Nanotech, and in particular graphene and nanotubes, have tremendous potential once they figure out how to make the stuff reliably. Yes, this is a primitive computer, yes it is based on nanotubes, but it is a long way from being a practical device.
“Stanford researchers have created a basic system that shuns silicon in favor of imperfect lines of carbon atoms that could one day deliver even more performance and efficiency than current technology.”
19. Man Controls Bionic Leg with Thoughts
If you read the article the headline is somewhat misleading, but the direction of the research is encouraging. In fact, the leg moves thanks to redirected nerves stimulating an existing muscle, and the response is enhanced through signal processing. In the future, we can imagine a nerve/computer interface will reliable control the limb without stimulating the muscle.
“A 32-year-old man who lost his leg below the knee after a motorcycle accident four years ago now has a robotic prosthesis he can control with his mind, according to a new report of his case.”
20. The Wonderfully Mundane New iPhone
Speaking of waves which may have crested (i.e. patent litigation) it is looking increasingly obvious the era of smartphone innovation is at an end. As I have mentioned several times in the past, this speaks to significant pricing and margin pressure looming in the space.
“The new iPhones look like the old iPhones. They sound like the old iPhones. They do the same things as the old iPhones. Just slightly better, more colorfully, and less expensively than the old iPhones. This might seem disappointing: even Apple’s phones are boring now. But this is an ideal state of affairs.”