Apple finds quality problems in some iPhone X and MacBook models

The new Apple iPhone X are seen on display at the Apple Store in Manhattan, New York, U.S., September 21, 2018. REUTERS/Shannon Stapleton

(Reuters) – Apple Inc said on Friday it had found some issues affecting some of its iPhone X and 13-inch MacBook pro products and said the company would fix them free of charge.

The repair offers are the latest in a string of product quality problems over the past year even as Apple has raised prices for most of its laptops, tablets and phones to new heights. Its top-end iPhones now sell for as much as $1,449 and its best iPad goes for as much as $1,899.

Apple said displays on iPhone X, which came out in 2017 with a starting price of $999, may experience touch issues due to a component failure, adding it would replace those parts for free. The company said it only affects the original iPhone X, which has been superseded by the iPhone XS and XR released this autumn.

The screens on affected phones may not respond correctly to touch or it could react even without being touched, the Cupertino, California-based company said.

For the 13-inch MacBook Pro computers, it said an issue may result in data loss and failure of the storage drive. Apple said it would service those affected drives.

Only a limited number of 128GB and 256GB solid-state drives in 13-inch MacBook Pro units sold between June 2017 and June 2018 were affected, Apple said apple.co/2AXkeEw on its website.

Last year, Apple began a massive battery replacement program after it conceded that a software update intended to help some iPhone models deal with aging batteries slowed down the performance of the phones. The battery imbroglio resulted in inquires from U.S. lawmakers.

In June, Apple said it would offer free replacements for the keyboards in some MacBook and MacBook Pro models. The keyboards, which Apple introduced in laptops starting in 2015, had generated complaints on social media for how much noise they made while typing and for malfunctioning unexpectedly. Apple changed the design of the keyboard this year, adding a layer of silicone underneath the keys.

Reporting by Ismail Shakil in Bengaluru and Stephen Nellis in San Francisco

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Roku: Time To Buy Again

After the bell on Wednesday, streaming media company Roku (ROKU) announced its third quarter results. The company beat on the top and bottom lines and again raised its yearly guidance, yet the stock sold off on the news. As this business continues to grow and repeatedly impress, the pullback makes the name quite attractive again.

The company reported revenues of $173.4 million, up nearly 40% over the prior year period and beating estimates by more than $4 million. On the bottom line, a 9 cent per share loss beat by three cents. While player revenues handily beat estimates, platform revenues fell about $3 million short of expectations, and this is the more important part of the business moving forward. This also lead to ARPU (average revenue per user) coming up shy. While Roku has beaten top and bottom line estimates every time it has reported since going public, this was the smallest beat as seen below.

(Source: Seeking Alpha Roku Earnings page, seen here)

Overall, Roku continues to make progress. The chart below shows how active accounts have soared, up 7.1 million in the past 12 months. At the Q3 2017 report, the year over year gain was 5.4 million. This was the first quarter where platform revenues topped $100 million, and this is the higher margin side of the business. As platform revenues become more of the company’s total, overall gross margins rise even though platform margins are down, so the total gross margin jump was 560 basis points year over year.

(In millions. Source: Q3 2018 shareholder letter and S-1 filing from 2017)

The company’s overall loss did increase a bit thanks to higher operating spending to support the growing business, but Adjusted EBITDA swung from a negative in last year’s period to a positive in Q3 2018. Roku also finished the quarter with about $180 million in cash and investments against no debt, meaning the balance sheet is quite strong. I do not see a need to raise additional funds unless the company wants to make a big acquisition or some major capital expenditure.

One of the things I like the most about Roku is that management continues to raise guidance. As you can see in the table below, every guidance item for the full year 2018 is well above where the original forecast was. Should the company’s progress continue in the near term, we could see more than $1 billion in revenues next year, and perhaps a profit too depending on spending.

(Source: Roku quarterly reports, seen here)

Thursday actually marks one year to the day when I first covered Roku, at which point shares were less than half of where they stand now. I was a big fan of the company’s growth, and results have only improved since. Shares that were in the teens skyrocketed to the high $70s, but they’ve lost a third of their value since then. My last article on the name came with shares in the low $30s, so those who bought on that pullback have done very well.

Since everyone likes to look at streaming giant Netflix (NFLX), I mentioned last year how Roku only needed to get 1/10th of Netflix’s valuation to get to an $8 billion valuation. After the recent pullback, Roku is worth about $5.5 billion, but 10% of Netflix would be over $14 billion now, despite Netflix shares nearly $100 off their all-time high. With the revenue picture and account base growing quite strongly, I now think a $10 billion valuation for Roku is eventually possible. That probably equals a price in the mid to high $80s if you assume some dilution, mostly from stock based compensation, over the next couple of years.

In the end, Roku announced another strong quarter, but the street didn’t totally like the results. The top and bottom line headline beats weren’t as large as previous quarters, and platform revenues were a little short of estimates. However, the company continues to grow its active accounts base very nicely, and Roku should only be about a year or so away from hitting a billion in annual revenues. As streaming media becomes an even larger part of our lives moving forward, the recent pullback provides another good opportunity for investors to buy.

Author’s additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Sen. Wyden Proposed a CEO-Felling Data Privacy Law. Is Big Tech Ready for It?

Consumers who have clamored for data privacy reform since Equifax’s ransacking and, more recently, Facebook’s Cambridge Analytica debacle have cause to celebrate.

On Thursday, Senator Ron Wyden (D-Ore.), a prominent privacy hawk, unveiled a draft bill that seeks to slap harsher penalties on companies—and chief executive officers—who run afoul of new rules that expand government oversight of the tech industry. The Consumer Data Privacy Act, as the bill is tentatively named, takes its cue from Europe’s General Data Privacy Regulation, or GDPR, which can fine companies up to 4% of their global, annual revenues for infractions. But Wyden’s bill goes even further; in addition to that penalty, the proposed law would jail chief execs up to 20 years with individual fines reaching as high as $5 million for CEOs who knowingly mislead regulators.

If GDPR has teeth, Wyden’s proposal has fangs—set on the jugulars of corporate heads. The proposed law would require big firms—ones with revenues exceeding $1 billion or ones that store data on more than 50 million consumers or their devices—to submit “annual data protection reports” to the government that lay out their data-securing practices. It would force companies to comply with “do not track” policies while offering alternative payment options to consumers, such as subscription fees instead of ad-supported “free” models. And it would boost the power of the Federal Trade Commission, adding a tech-focused division with a broader mandate alongside an arsenal of stronger enforcement actions.

Lindsey Barrett, an attorney and teaching fellow at Georgetown Law’s Communications & Technology Clinic within the school’s Institute for Public Representation, commented on Twitter that the proposed legislation “injects sorely needed accountability into our equif*cked information ecosystem.” Wyden’s own statement was a little more sanitized: “It’s time for some sunshine on this shadowy network of information sharing,” he said.

But the proposed reform isn’t all sunshine and rainbows. Jake Williams, an alumnus of the National Security Agency who has since cofounded Rendition InfoSec, a cybersecurity consulting shop, said he doubts the bill will pass. “Even if it does, it won’t mean what you might think. It won’t create a SOX style environment around cyber. Sorry,” he wrote on Twitter, referring to Sarbanes-Oxley, a 2002 financial reform enacted in the wake of the Enron scandal to prevent similar accounting blowups.

The main thrust of Williams’ criticism is that the proposed law will box in cybersecurity practitioners and will subjugate and constrain an industry that is still finding its feet. The bill effectively grants corporate governance, risk, and compliance departments the right to “rule infosec,” Williams warned. If it passes into law, it will likely lead to licensing requirements within the cybersecurity industry, akin to the hoops people must jump through to become certified public accountants, he said. “Professional licensure is not good for a profession this young,” he said.

Data privacy reform is long overdue, but this bill presents questions. Is Big Tech—and its CEOs—ready to face the formalized wrath of guillotine-thirsting regulators? Does the bill unfairly target CEOs, leaving other C-Suite executives and board members off the hook? Could companies end up shoving the blame onto scapegoat CEOs of subsidiary businesses? And finally, as Williams noted, is the cybersecurity industry really ready to grow up and professionalize, accepting all the responsibility and regulatory constrictions that entails?

Be careful what you wish for.

A version of this article first appeared in Cyber Saturday, the weekend edition of Fortune’s tech newsletter Data Sheet. Sign up here.

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The Next Billion Dollar Disruption. You Read About It Here First

If there’s anything true about high tech, it’s that the big fortunes are made when a new technology disrupts an existing industry. The money to be made is greatest when 1) the industry being disrupted is bureaucratic and inefficient, and 2) the new technology transcends, rather than merely automates, the previous processes.

Early in my career, I lived through and participated in, one of the biggest disruptions of all time: desktop publishing. Within ten years, photo-offset printing setups that cost millions of dollars each were replaced by PCs and laser printers. Entire job categories and companies disappeared. Millions lost their jobs but entrepreneurs made untold billions of dollars.

While I built my career riding that wave, I was too young and inexperienced to start my own company until the revolution was over. Now, as I see another, even more amazing technology about to massively disrupt another hidebound, inbred industry, I’m past the point where I want to start my own company. Too much damn work. (I’m a lazy S.O.B., truth be known.)

So I’m going to share with all you readers what I absolutely know is about to happen. I say “absolutely” because entirely by accident I’m uniquely positioned to see the disruption coming and uniquely qualified to explain how it’s going to happen. And, strangely perhaps, it has nothing whatsoever to do most of the stuff I write about in this column.

So let’s get started but, bear with me and be patient, because I’m going to explain this in my own way and without trying to package the concept with a nice, neat bow. Put on your thinking cap.

Rick and Morty

About two weeks ago, I attended a live interview with Bryan Newton, one of the animation directors of the hit cartoon series Rick and Morty. He’s been involved with the project since its inception and has become a bit of a legend among animators for pioneering some of the crazed look-and-feel of that style of animation.

Why was I at that interview? Well, it was presented by AniMAtic Boston, a group of student and professional animators, mostly graduates of local colleges, most of whom work in the fields of commercial and corporate animation but many of which are true artists in this field.

I belong to that group and support it because, in addition to all the business writing and experiences I’ve had over the years (and which I chronicle in this column), I’ve also been a hobbyist in the field of computer animation since the mid 1980s. I’ve animated using several programs; I also made a feature-length film that’s pretty well-known in some circles. (Let’s just say it gave me permanent nerd cred.)

From time to time, I’ve played around with the idea of changing careers and becoming a professional animator, probably in the field of cut-scene animation for computer games, which is a field I know pretty well. Anyway, I was interested in Newton’s perspectives about working in a big studio.

Well, I don’t know whether it was because he had had a long day and was tired, but he made it very clear that he was no fan of the studio system. As he ragged on all the inefficiencies and politics, I realized that I’d heard all this before. It seems like EVERY creative person in Hollywood hates the studios–especially the executives with their “notes.”

Anyway, it turns out that even shows like Rick and Morty–which involves relatively simple animation–must go through an insanely Byzantine process to move from conception to writing to animation to completion. Over a hundred people are involved and from what I can see a great deal of them aren’t adding much or any value.

And, don’t kid yourself, animated entertainment–TV, movies and Internet–is a multi-billion-dollar business. More important, it’s a business that’s weighed down by bureaucratic overhead and entrenched power-brokers who essentially drag down the creative process.

Revolution in Real-Time

At the end of the interview with Newton, he speculated about what animation technology might look like in the future. He said that writers could create characters by morphing standard characters, use libraries of animations to make them move, use motion capture to customize and add dialog. And then release it directly to the Internet.

Essentially he described an environment where creatives like himself would not require the infrastructure, investment, and meddlesome overhead of a studio to develop and release an entertainment product. As I heard him describe this, I considered pointing out that all of this was not just possible but day-to-day reality, at least in the real of 3D animation. 

The technology is called “Real-Time Animation” and it’s been flying under the radar for about a decade. So much under the radar that although I’ve brought up the subject with several people at AniMAtic Boston, I have yet to run into anyone who has even heard of the software-;even though they’re recent graduates of top animation college programs.

The reason I know about Real-Time is that I’ve been working with Real-Time animation software since 2004, probably because I have no formal training in animation. I suspect that most “real” animators have tended to ignore it because up until about two years ago real-time animations have been fairly crude.

However, as CPUs and GPUs (graphics cards) have gotten more powerful in order to handle ultra-realistic games, it’s become possible to create reasonably high-quality 3D animation using real-time tools. These tools are to traditional animation what desktop publishing was to typesetting and paste-up. You create animation on a WYSIWYG (What You See Is What You Get) environment.

A few (very few) traditional, high-end animation shops are getting wise to the incredible power and productivity of developing animation in Real-Time. One of these is UK-based Axis Animation, which created the computer graphics world for the excellent Netflix series Kiss Me First, and which does specialty work for several big name organizations.

I recently had a long conversation with Michael Zaman, who is the supervisor of Real-Time Computer Graphics at Axis. He noted that while in the past they used Real-Time primarily for prototyping, they’re now using it for actual project because the technology can now create quality that rivals the more laborious CG processes of the past.

Zaman had the same “knowing grin” that I’ve come to associate with the handful of people who “get” what’s coming; I have a feeling that he and Axis will end up being major players in the disruption that’s just around the corner. I’m going to save the best part of our conversation for the end of this post, so you’ll want to read the entire thing.

The Underlying Tech

There are four reasons that Real-Time animation has vastly increased in quality. (I’ll be giving some examples soon; bear with me.) 

  1. The first trend is the need to develop video games quickly; real-time animation more naturally emulates the environment in which computer games will be played.
  2. The second trend is the desire among consumers for video games that are more realistic and cinematic; to satisfy his desire, companies like NVidia have developed specialized hardware to process complex 3D graphics.
  3. The third trend is the commoditiziation of high-end technologies, like motion capture (mocap). Ten years ago, a full-body/facial mocap system cost a million dollars; a functionally identical system can be had today for $6,000.
  4. The fourth and final trend is a lively market in pre-created 3D models, including sets, props, and characters, along with the ability to very easily modify those models to suit individual projects.

The result is very much like the “next generation” environment that Bryan Newton described on stage–not just for simple 2D animation like Rick and Morty–but full-on 3D animation similar to major Disney releases.

More important, Real-Time technology makes it possible to do all of this without the overhead of the studio system; in fact, developing a short animated film is considerably less effort than writing a novel.

How do I know this? Because I’ve actually written a novel and have also been using the best (IMHO) Real-Time animation tool–iClone from Reallusion–to do exactly that over the past two years. Here are excerpts from my last three major projects, showing the incredibly rapid development of this technology (very short video):

[embedded content]

I’m not saying any of the above is great art, although The Blood Pope did get selected for several film festivals and won two awards and I have hopes that Salvage may be included in a fairly major Sci-Fi film festival. What’s important for the purposes of this post is that all three projects were created by a single person (me) who has NO formal training in animation and with a very limited budget.

The total cost for this kind of Real-Time animation comes out to less than $500 per minute, maximum. For perspective, a typical Disney feature, done with traditional animation tools in a studio setting, costs upwards of $50,000 per second which calculates out to $3,000,000 per minute. 

I’d say that a cost reduction from $3,000,000 to $500 definitely qualifies as disruptive technology, eh? And that’s just for creating animated cartoons which, although a multi-billion dollar business, is only the tiniest tip of the proverbial iceberg.

What’s Next Is Insane

Real-time animation technology is developing so quickly that even people inside the industry are struggling to catch their breath.  However, what all the insiders see very clearly is that the studio technology that Disney uses to insert deceased actors (like Carrie Fisher) into the Star Wars movies will rapidly become available to individuals.

We’re already seeing this kind of thing with the so-called “deep fake” technology where AI pastes a celebrity’s head onto a video with another actor’s body on it. But the real power happens when you combine mocap with ultra-realistic real-time rendering.

And that’s happening already. Real-Time is currently experiencing is a quantum leap in quality from a technology called iRay, which is being built into the newest graphics cards. Here’s a very short video showing how iRay radically increases realism inside Reallusion’s Character Creator tool:

[embedded content]

To understand where this is all going, here’s a demonstration of a high-end system (it uses the Unreal gaming engine) being used to create ultra-realistic animation in Real-Time–so realistic that it’s hard to tell that it’s not a real person:

[embedded content]

While the setup used above is more expensive than most independent film-makers are likely to be able to afford, it’s still geometrically less expensive–and insanely faster–than the systems used inside the studios.

The point here is that the technology shown in the video above will soon drop in price so that it will be widely available to anybody who can spend, say, $5,000 or $10,000. And that’s what’s going to completely change not just animation but the entire filmmaking industry.

Here’s what’s going to happen, based on my conversations with insiders like Michael Zaman from Axis Animation. Within five to ten years, it will be possible for a single person or a small group of people to make entire movies in virtual worlds, without ANY of the overhead of a traditional studio.

And I’m not just talking about animated cartoons. I’m talking about actual feature films with massive special effects. People like you and me will be able to create, with very little investment, content that resembles high-end cinematic work that today costs hundreds of millions of dollars.

So here’s what we’ve got: rapidly developing technology that will upend a massively inefficient and bureaucracy bloated studio system. This revolution will be more disruptive than Amazon was to the book business, or than Netflix was to the TV business. We are about to experience the kind of massive market disruption that happens only once or twice in anybody’s lifetime.

And almost nobody sees it coming. But now YOU do, because you read about it here first. The question is: are you going to start a business that surfs the tsunami? Or are you going to sit back and watch it happen?

Your move.

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Don’t Be Duped by Voting Misinformation Before the Midterms

The midterm elections are just a few days away. Though historically the president’s party takes a beating in the House and Senate, that’s far from assured this year. Will the midterms be a rebuke or an endorsement of the Trump administration? On November 6, you will decide.

As 2016 emphatically demonstrated, elections are also a major battleground for information warfare. Coordinated misinformation campaigns focus not just on individual candidates but also the electoral system itself. And though political operatives have used misleading tactics for years, the amplification and network efforts of social media have been like gasoline to a fire. Misinformation now spreads farther, faster, and ensnares unwitting accomplices who share bad information without realizing it.

Tech companies and governments are slowly beginning to realize that the information war is on and they need to respond. But you still need to be aware, and be informed.

The Facts

The balance of the House and the Senate will be decided on Tuesday, along with 36 governorships, 30 state attorneys general, many state legislative seats, and crucial local ballot initiatives on everything from a new tax to fight homelessness in San Francisco to recreational marijuana to climate change to drug sentencing reform.

To find out accurate information about where you can vote, whether you can still register, and who and what is on the ballot in your area, you can consult your local election officials. The US Election Assistance Commission lists the phone numbers and websites for every state and US territory on its website. There are also third-party tools supported by nonpartisan organizations like Ballotopedia, Democracy Works, and Vote411.org, which allow you to input your address and receive individualized voter information for your area.

What People Are Saying

There’s a ton of misinformation out there, and it’s always evolving, but there are a few general themes that come up every election cycle.

Voter Fraud

Voter fraud is a constant boogeyman. In the months leading up to the 2016 election, for instance, President Trump warned that millions of undocumented immigrants would vote. After he won the presidency but lost the popular vote to Hillary Clinton, he said that voter fraud was the reason. None of this, said the state authorities whose job it is to maintain the integrity of elections in the US, was true. In fact, when all the votes had been tallied—137.7 million of them—states investigating claims of voter fraud found “next to none,” according to Tthe New York Times.

Still, months into his first term, President Trump created a commission explicitly to study voter fraud. After intense criticism from experts who called it unnecessary, as well as legal challenges, it was dissolved in January, having released no evidence to substantiate the president’s allegations that millions of people voted illegally in the 2016 election. That hasn’t stopped people from claiming it’s a major issue, or from imposing restrictions like voter ID.

To support claims for widespread voter fraud, many point to states and counties where there are more registered voters than eligible adults. In California, for example, the claim that 11 counties have more people registered than are eligible to vote has spread from a conservative activist group called Judicial Watch to Alex Jones to Breitbart all the way to secretary of state candidate Mark Meuser, who regularly records and tweets out videos alleging widespread registration fraud in the state. This argument is misleading, as The Sacramento Bee, the Los Angeles Times, and The San Diego Union Tribune have all reported, because they combine “inactive” and “active” voters lists. In California, inactive voters—who, for example, may have moved but not returned an address confirmation notice—are still eligible to vote, according to state law; they just need to show proof of residency when they arrive at the polls. A January report from the California secretary of state noted that only 75 percent of eligible voters in the state are registered.

Fraudulent claims of voter fraud don’t always come in the form of misleading numbers; they can be photos, too. Doctored or out-of-context photos and videos that purport to show voter fraud taking place were shared during the 2016 election—such as one Photoshopped image that combined two separate photos to make it look like ICE was arresting people in line to vote—and as recently as last week during the presidential election in Brazil. As with other misinformation campaigns, real images taken out of context are often used as fake “proof.”

What makes this kind of misinformation so intractable is how it has the trappings of verisimilitude—a lawsuit from a Washington, DC-based group, the buy-in of political candidates and mainstream-adjacent news organizations. It also feels right to many people, who have been primed for years to suspect that fraudulent votes are a huge problem.

It’s not that voter fraud never happens; it does. But very rarely, and nowhere near the levels suggested by right-wing conspiracy theories or the president. Here’s where you can find these numbers yourself: The nonpartisan Brennan Center for Justice, run by the New York University School of Law, has put together lots of research on the persistent myth of voter fraud.

Voter Suppression

Under the National Voter Registration Act of 1993, states are required to accurately maintain their voter rolls. The rules by which states purge voters vary by jurisdiction, and they are incredibly confusing. Errors in the process and inaccurate data have led to the disenfranchisement of thousands of eligible voters. And some states have become far more aggressive in purging voter rolls since the Supreme Court struck down aspects of the Voting Rights Act in Shelby County v. Holder.

Georgia, in particular, is facing ongoing lawsuits for voter suppression over its practices. Other states have drawn national scrutiny for moving polling places miles out of town or implementing voter ID laws that disproportionately affect certain communities.

But the issue of voter rolls can be complicated and varies by state, making it a perfect topic to sow confusion along party lines. For instance, one viral stat going around says that 700,000 voters have been removed from the voter rolls in Colorado; some have suggested this is part of the nationwide effort to purge legitimate voters. The Colorado government has pushed back, pointing out that these voters were purged over the course of a decade, according to the Republican secretary of state, Wayne Williams, for legitimate reasons.

Voting Machines

There’s also misinformation swirling around the actual hardware we use to vote. Again, this is nothing new. In the 2016 election, a video that purported to show a “rigged” machine not allowing a vote for Trump in Pennsylvania went viral, at least in part after being promoted by Russian operatives. The malfunction turned out to be user error, but it was shared as proof of voting fraud by thousands of people.

During early voting for this year’s midterms, reports emerged of machines in parts of Texas switching US senate race votes if people vote the straight party ticket. This is actually happening; according to the Texas secretary of state’s office, only 20 or so people have reported such a problem, and the government and the voting machine company blame the issues on user error. But voting experts say the problem lies with the machines themselves, which have been known to be unreliable when voting a straight party ticket for years. And while experts have also said that the machines are insecure, there does not appear to have been hacking in this case. Nevertheless, claims that this is the work of hackers or a coordinated conspiracy by Republicans have flourished.

Stories about voting machines are ripe for misinformation. After 2016, the US is on high alert for election interference: More than half of Americans say they are not too confident or not at all confident that the US election system is secure from hacking or other technological threats, according to a recent Pew survey. In both of the above cases, though, quirks of the voting machines themselves turned out to provide the more likely explanation—something to remember before drawing quick conclusions. And while progress has been uneven, it’s worth noting that election officials have taken steps to shore up the electoral system in the past few years.

Bad-Faith Campaign Messaging

Spreading misinformation and uncertainty about elections is another unfortunate electoral tradition, whether it’s by candidates, parties, or more anonymous actors. Historically, these tactics often target specific communities, such as robocall campaigns intended to suppress the black vote or fake flyers distributed on college campuses or in communities of color. This week, North Dakota’s state Democratic Party affiliate posted on its website and Facebook a warning to hunters that they may lose their licenses in other states if they vote in the election.

Politicians and their campaigns are engaged in direct disinformation targeting people likely to vote for their opponents, as The New York Times notes. This includes everything from the wrong date for election day being sent out to voters, to text messages that seem to come directly from the president. These texts are made to look like the presidential alert that went out a few weeks ago, though in this case they are telling voters that their early vote has not been recorded. The purpose seems to be merely to confuse, as the Daily Beast reported, noting that state governments aren’t sure the messages are illegal but are looking into it. Fake text messages have also popped up this campaign season, too.

Why It Matters

Voting in America is hard. It happens on a work day. People aren’t automatically registered when they hit voting age or even when they get a driver’s license in most states. The early voting process is different in every state. All of this contributes to low voter turnout, particularly in non-presidential elections.

Researchers trying to understand why people don’t vote point to myriad factors, including confusion about how to vote and whether people are eligible. It’s this problem that misinformation can so easily exacerbate. In 2007, then senator Barack Obama and Senator Chuck Schumer introduced the Deceptive Practices and Voter Intimidation Prevention Act, after high-profile cases of misleading voter tactics in the 2006 midterms. It didn’t pass, and subsequent attempts haven’t been any more successful. California recently passed a law creating an Office of Elections Cybersecurity to explicitly counter online misinformation intended to discourage voting. Facebook also recently announced a new policy to try to address misinformation on its platform that is intended to suppress the vote.

To help you recognize fact from fiction, familiarize yourself with the many sites and sources devoted to identifying misinformation. There are fact-checking sites like Snopes, where you can look up specific stories. The nonprofit investigative news organization ProPublica runs a coalition of newsrooms called Electionland dedicated to accurate reporting on the midterms, which is a fantastic resource for finding real news that matters. (WIRED is a partner on ProPublica’s Political Ads Collector project.) You can also arm yourself with tools, such as the new bot-catching Chrome extension BotCheck, which will reveal bots in your social feeds, and reverse-image-search tools, which let you figure out where an image actually originates.

With voter turnout during midterms historically low, each vote can have a large impact—particularly when it comes to local elections, which can be decided by a handful of votes. If misinformation, intentional or otherwise, can dissuade one person from showing up, that matters.


More Election Coverage from WIRED

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Trump’s ‘Game of Thrones’ Tweet Is Odd, but Trademark-Infringing? Probably Not

Of all the apparatuses presidents have at their disposal for making pronouncements—press secretaries, official statements, televised addresses from the Oval Office—the one President Trump used to trumpet forthcoming sanctions on Iran is by far the strangest: a Game of Thrones meme.

On Friday morning the president posted the image below on Twitter. It’s a picture of himself emblazoned with the phrase “Sanctions Are Coming” in a typeface not that dissimilar from the one used in the Game of Thrones logo along with the date “November 5.” Subtle, it was not.

As soon as it went up, and as soon as it was clarified by the White House that the sanctions in question were indeed the ones that had been relaxed during the Obama administration and which Trump had been seeking to reimpose, Twitter went nuts. Folks began responding with memes of their own—”Indictments Are Coming” etc.—and even the show’s cast got involved. Sophie Turner, who plays Sansa Stark, replied “Ew,” and Maisie Williams (Arya Stark), in perhaps the best Twitter drag of the day, retweeted the president and just added “Not today.” (“Not today,” for those who don’t remember, is what Arya Stark’s swordfighting instructor, Syrio Forel, told her is what she should say to the god of death.)

Then HBO got in on the action, sending out a tweet reading, “How do you say trademark misuse in Dothraki?” Reached for comment the network added, “We were not aware of this messaging and would prefer our trademark not be misappropriated for political purposes.” Trump evoking the show’s logo and slogan, it seems, doesn’t sit very well with the people who actually make the show.

But could the network or creators successfully sue? Probably not. First off, it doesn’t seem likely that HBO actually wants to make a legal claim of trademark infringement. At most, the network is playing along. Trump referenced the show; they responded. Simple as that. But the response, and subsequent online chatter, did raise some questions about whether or not the president went too far.

Most likely, he didn’t.

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If HBO were to bring a claim, it would probably be for what’s known as trademark dilution, says Daniel Nazer, a staff attorney for the Electronic Frontier Foundation’s intellectual property team. Typically, these are the kinds of claims companies make when they feel their very-famous trademarks are being used in ways that deplete the uniqueness, or dilute, their intended message. A company can’t, say, put something that looks like the Nike “swoosh” logo on the side of a commercial plane or use “Just do it.” to sell condoms.

A dilution claim also generally requires that the entity claiming infringement be able to prove the public was genuinely confused. Because Trump’s tweet wasn’t being used in commerce, and because it’s unlikely anyone thought he was legit affiliated with Game of Thrones, dilution would be a hard argument to make. “I think this would be a tough, a tough case,” Nazer says. “No one is likely to be confused that HBO is endorsing this tweet or sponsoring sanctions against Iran. My view is that this shouldn’t be a viable suit.”

Instead, Nazer says, Trump’s tweet would be treated more like a parody—legally speaking. If, for example, Saturday Night Live did a sketch about waiting for a train in New York titled “The G Train Is Coming” that pokes fun at MTA tardiness and references Game of Thrones, that’s not an infringing use. (It’s also a funny idea, SNL. Please make that sketch and credit Nazer.) As for Trump’s use of the Thrones font, the files used in typefaces can be protected, as is (presumably) the actual logo, but because Trump just uses a script that looks like the GoT emblem, the image the president tweeted is likely not infringing. It’s ironic, but the bottom line is that the man who likes to take shots at the media is protected here by the First Amendment.

The parody aspect, though, is compelling, because the metaphor doesn’t quite align. In Game of Thrones, “winter is coming” is a call to remain vigilant, and a warning that White Walkers could come and threaten the living when winter arrives. Yet winter has been coming on the show since the pilot; it’s a slow march that’s taken seven years. Trump’s “November 5” warning promises something he intends to do in a matter of days. Also, one presumes, Trump thinks the sanctions are a good idea, but the coming of winter in Game of Thrones is something most sane people in Westeros fear. It’s possible Trump wants Iran to be afraid of the sanctions, but the wordplay still doesn’t quite land.

“It’s kind of riffing on it, but it’s hard to know what the satirical or parodic intent is here,” Nazer says. “Winter in the Game of Thrones universe is kind of terrible, so I’m not sure if they really thought it through. There’s probably nothing much beyond it looks cool.”

Half an idea without any sense of its viability? Sounds about right.


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China's finance ministry calls out Xiaomi over accounting errors

FILE PHOTO: Customers wait to pay at a Xiaomi store in Beijing, China June 21, 2018. REUTERS/Jason Lee/File Photo

BEIJING (Reuters) – Chinese authorities on Tuesday said smartphone maker Xioami Corp made errors in its accounting, sending the company’s Hong Kong-listed shares down amid a wider sell-off of China tech stocks.

Xiaomi was one of several internet firms named in the annual inspection by China’s Ministry of Finance. Other firms include e-commerce giant Suning.Com Co Ltd and online game developer Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co Ltd.

Xiaomi’s stock was down 4 percent on Tuesday morning.

The ministry in its report said Xiaomi had made tax errors on corporate gifts and had incorrectly recorded some corporate costs. The document noted that the firm has already rectified the errors.

It also noted that other companies had made efforts to evade taxes by shifting their profits overseas.

A Xiaomi spokeswoman declined to comment on the report.

The rebuke comes as the company is facing teething issues following its much-anticipated listing in July. Its stock is down more than 30 percent since the initial public offering (IPO) amid a wider sell off of China tech stocks that has also affected peers Alibaba Group Holding Ltd and Tencent Holdings Ltd.

It also comes as China is making revisions to its tax code and cracking down on evasion in a wide-scale cleanup that ensnared A-list movie star Fan Bingbing among others.

Despite its tumbling price, Xiaomi has reported healthy smartphone sales in 2018. Earlier this month it said it has already surpassed its full-year sales goal of 100 million handsets.

Reporting by Cate Cadell; Editing by Christopher Cushing

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IBM’s Call for Code Prize Goes to a Team With ‘Clusterducks’

You know when you try to go online at a Starbucks or on an airplane, first you get a little popup that asks you to accept some terms before you can get to the internet? That popup window exists in a sort of netherworld between actual internet connection and being offline–you pick it up via Wi-Fi, but until you click a box, you’re not actually online. A team of five developers realized in that gray area was potentially a huge opportunity to save lives.

It’s an intractable problem during natural disasters: telecommunications networks and power grids are often damaged or overwhelmed; without them, first responders struggle to help survivors, coordinate evacuations, and even count the dead. Project Owl proposes an elegant solution: an AI-powered disaster coordination platform paired with a robust communication network that can reach people even when other connections are down. The key to making it all work? Those popup windows, which the team can beam out to people in hard-to-reach areas via buoys equipped with a low-frequency Wi-Fi network.

Now Project Owl has won IBM’s first ever Call for Code contest, which challenged developers across the world to build disaster relief technology using IBM and open-source software. More than 100,000 developers from 156 countries participated in the contest. A panel of judges including former President Bill Clinton selected Project Owl from a field of five finalists whose solutions ranged from using AI to speed up the rebuilding process after an earthquake to feeding firefighters live data during wildfires via sensors.

The winners were announced at an awards ceremony in San Francisco Monday night. The grand prize includes $200,000 and IBM’s pledge to help the team make their project a reality.

“The most important thing to me will be to deploy this for real,” says Angel Diaz, IBM’s Vice President of Developer Technology, Open Source & Advocacy, who was a leading force behind Call for Code. “Usually these hacks will be one and done, but no, we are going to make this real. We are going to deploy this.” In fact, the top 10 finalists will all have their projects officially sanctioned by the Linux Foundation.

After announcing the challenge in May, IBM hosted more than 300 hackathons and events in 50 cities across the globe, and offered its technology for free to all participating teams. Developers were also encouraged to use whatever existing technology they could find; the only requirement was that their creations work. “It has to be real, it has to work, because we’re going to take this into production. We’re not running a fantasy,” Diaz says.

Project Owl hopes to have their solution ready to help in hurricanes, floods, and fires by the end of the year.

Make Way for DuckLink

When the Project Owl teammates—developers Charlie Evans, Taraqur Rahman, Nick Feuer, Bryan Krouse, and Magus Pereira—accepted their prize on Monday night, many of them were seeing one another face to face for the first time. They live spread out around America, from North Carolina to Texas to New York. Most had only met on the Slack channel IBM set up for the contest.

The idea for Project Owl’s hardware originated with Pereira, a recent graduate from East Carolina University in Greenville, North Carolina. Pereira explained an idea he’d had—one which had previously won him a competition at his university.

“Since I’m in the Carolinas, we get a ton of hurricanes. A few years ago we had a hackathon to come up with a solution to help the community,” Pereira says. “For some reason I was just thinking about communication and I had buoys in my mind.” He created the “clusterduck,” a buoy with internet-of-things-type low-frequency connectivity that could form an ad-hoc communication network in areas hit hard by natural disaster.

Together Project Owl made the clusterducks real, and created a software platform around them to allow civilians to communicate with first responders in real time. The hardware/software solution works by harnessing low-power, long-range radio frequency called LoRa, the same technology that powers most internet of things devices. By combining LoRa units with Wi-Fi routers in waterproof buoys placed throughout a disaster area, Project Owl creates a network that can link back with any rescue operation running the Owl software. If you’re in an area with no internet or cellular service and you turn on your Wi-Fi, you’ll see Project Owl in the list of available networks. Click on it, and you’ll get that familiar Starbucks-like popup. But instead of asking you to agree to terms of service, it asks for crucial information like your name, location, how you are doing, what services you need, whether you need immediate assistance or for first responders to call family and friends to update them on your condition.

Project Owl/IBM

The team built the custom Owl software in four months. So far, they have tested it with EMS and government responders in simulated environments. It has not yet been used in an actual emergency. People in a disaster area with a Project Owl network will also need to pull up their Wi-Fi settings and select the correct network themselves; the popup won’t be available if people just try to connect to cellular service.

Still, the combination of a Wi-Fi popup with LoRa connectivity is an innovative idea. It allows you to use whatever device you already own to get onto an ad-hoc emergency communication network, without even having to click on a link or download an app, both of which are often impossible without a robust internet connection. Project Owl makes the most of very low-frequency connectivity to provide a lifeline to those who would have otherwise been cut off.

The clusterducks are also not very expensive to make—about $38 each, according to the developers. To cover a metropolitan area like San Juan, Puerto Rico, which is 77 square miles, Krouse says, would require a few hundred clusterducks, for a total cost of approximately $12,000. The idea would be to roll out clusterducks in hurricane- or flood-prone areas, so that they can be easily deployed when a disaster actually strikes. Relying on solar panels and battery packs, the clusterducks network could be turned on the moment they are needed and work off the grid. They could also be sent into a hard-hit area after the fact.

Project Owl/IBM

The Owl software can be used with or without the clusterduck networks. “The software itself is an incident management system. One of the things that makes it so great and useful is that you just talk to it. It’s a conversational experience,” says Krouse, who calls it a souped-up chatbot that uses just about every single IBM Watson API, as well as a custom natural-language AI. Owl stands for “Organization, Whereabouts, and Logistics.” First responders can coordinate from the Owl application, setting up incident zones, accessing data from FEMA and the Red Cross, as well as crowdsourced user data. People can text or call the Owl management system, or type into it directly from a computer or phone.

Call for Code and the Focus on Real Help

Technology, Silicon Valley denizens have often insisted, can save the world. But recent years have given rise to a growing realization that technology is not good by default, that it can break things as much as it can fix them. IBM’s facial recognition technology, for example, has come under increased scrutiny, and the company is currently facing a class-action lawsuit for age discrimination.

Call for Code is not an explicit attempt at making amends for any past wrongs, at least not according to its organizers. But the contest, and the enthusiastic response from more than 100,000 developers, comes amidst a wider tech backlash, and at least some self-examination from major tech companies and the people they employ.

When Alexander Gil Fuentes, the digital scholarship librarian at Columbia University, reached out to big tech companies like Microsoft and Google for partnerships after Hurricane Maria hit Puerto Rico, none of them were interested in helping with mapathons to help people on the ground have accurate maps.

“We thought it would be an easy sell—tech workers taking two hours to work on helping the Red Cross would improve staff morale, we thought. Alas, none of the companies bought it, and only universities stepped up to the plate,” Gil says.

That was a year ago. To Gil, Call for Code and similar hackathons for good, like the Mozilla Challenge, show the winds may be changing.

On Monday, Google announced it will grant $25 million next year to projects that “use AI to help address some of the world’s greatest social, humanitarian and environmental problems.” The company has recently come under fire for its privacy practices and its plans for a censored search engine in China. Microsoft, which faced an internal revolt for its work with ICE this summer, announced a $40 million program called AI for Humanitarian Action last month. And so on.

With IBM, meanwhile, the Project Owl team is busy preparing to get their solution to market and figuring out the how to turn the project into an actual business. They envision some kind of model, where Project Owl manufactures the clusterducks and sells them to an organization like FEMA, and then FEMA can rent them out to municipalities on an as-needed basis.

“It started as a discussion between us and the United Nations and the Linux Foundation,” says IBM’s Diaz. “The hope is that at the end of the day, when we put the winning solution into market, into Africa, India, the US or wherever it’s applicable, when we save one life, ten lives, 100 lives, if we save one life then this entire effort is worth it.”


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Amazon Is What Worries Me About The Market

Source: ABS-CBNNews.com

Amazon Is What Worries Me About The Markets

Amazon (AMZN), the A in FANG got rocked Friday, as the company reported “disappointing” results. The stock traded down by nearly $200, more than 10% intraday, before closing lower by roughly 8%. The troubling fact is that Amazon is now down by 20% from its all-time high of $2,050, and the decline could get a lot worse from here.

Amazon 1-Year Chart

Source: StockCharts.com

Another concerning factor is that Amazon is not alone in reporting lower than expected revenues, or subdued growth relative to expectations. High-flyers like Facebook (FB), Netflix (NFLX), Alphabet (GOOG) (GOOGL), and others have all reported disappointing results in recent quarters. In fact, the entire FANG sector appears to be stumbling, and it could drag the entire stock market down when it falls.

Amazon’s Report: Far Less than Stellar this Time

Amazon is still very much a growth story stock. The company is trading at a nose bleeding 95 times this year’s projected earnings estimates. Ironically, the company’s EPS figures matter far less than Amazon’s revenue figures and forward guidance. But unfortunately for shareholders Amazon failed to meet expectations regarding both fronts.

  • Revenue came in at $56.6 billion, missing estimates of $57.1 billion.
  • YoY revenue increased by 29%, yet international revenue rose by just 13%.
  • AWS revenue also fell short, coming in at $6.68 billion vs $6.71 billion estimates.
  • EPS beat estimates $5.75 vs estimates of $3.14.

Now the Really Bad News

Forward guidance was atrocious. The company guided Q4 revenues and operating income substantially lower than most analysts were expecting.

  • Consensus estimates were $73.79 billion, and the company guided to a range of just $66.5-72.5 billion.
  • Also, the company guided for much lower operating income, only $2.1-3.6 billion vs estimates for $3.9 billion.

So, after quarters and quarters of smashing revenue estimates, and providing higher than expected guidance, the opposite is now beginning to happen. So, is this just a one off, or could growth at Amazon be slowing?

I think it’s the latter, growth is slowing, and Amazon is not alone. In fact, all the FANGs have reported slower than expected growth in one form or another throughout the past couple of quarters. The problem is that Amazon is so richly valued that its current valuation may not support the stock with a slower growth rate, and the share price could buckle.

The company guided for $66.5-72.5 billion in Q4, this is roughly a YoY growth rate of just 10-20% compared to $60.5 billion delivered in Q4 2017. Also, if we factor in growth in AWS revenues, revenue growth in Amazon’s core segment could be sub 10%, single digits next quarter. Does this growth trajectory really warrant a 95 P/E multiple?

Valuation: Far Too Rich to be Missing Estimates

Right now, Amazon is trading at about 95 times this year’s projected estimates. The problem is that this is an extremely rich valuation, and requires Amazon to execute almost flawlessly when it comes to revenue growth.

Unfortunately, growth is slowing. This year revenue growth should come in at about 32%, next year it’s projected to come in at 22%. However, next year’s projections could be optimistic, and judging by the company’s forward guidance growth is likely to be substantially lower next year.

In fact, lower end estimates call for growth of only about 15% next year, and based on Q4 guidance and other factors I believe Amazon’s growth will slow down to around this level. The problem for Amazon is that at 95 times earnings and with revenue growth at just 15% and slowing, the company is extremely overvalued right now.

Did You Think The Good Times Would Last Forever?

Source: iBankCoin.com

Rates are rising, growth is slowing, consumer spending will be impacted, and Amazon is not immune from a broader market slowdown. However, the stock has been a “can do no wrong” Wall St. darling for years now. Also, investors have been willing to pay just about any price to own the growth that Amazon delivered. Conversely, now that growth is slowing substantially, the stock could take a very big hit.

The remarkable thing is that Amazon’s stock price could be cut in half, but even with the stock at just $820 the company will still be trading at over 47 times 2018’s projected EPS. Still grossly overvalued by just about every traditional valuation metric.

The Challenge for The Market: Amazon is Not Alone

It would be one thing if Amazon was alone in showing cracks in its growth story, as well as in the sky-high valuation narrative. But it’s not, in fact, every member of FANG has now shown signs of a disappointing trend developing in the past couple of quarters.

F – Facebook: Reported an extremely discouraging quarter in July where user growth disappointed by 50%.

A – Amazon: Just reported weak revenues, and much lower guidance than expected going forward.

N – Netflix: Disappointed substantially on subscriber growth (by far the company’s most important metric) in Q2 of this year.

G – Google: Just days ago Alphabet disappointed on revenues as well, delivering just $33.7 billion vs estimates of $34.04 billion.

The problem for the various high growth/high multiple stocks (not just FANGs) is that substantial growth must be sustained to justify their incredibly rich valuations. Now that growth appears to be faltering, many high-flying stocks could experience significant declines.

This is a serious issue for the broader stock market as well. FANG has been the leader that has spearheaded this bull market stampede substantially higher in recent years. However, now that all the FANGs are showing serious signs of a slowdown their stock prices could potentially go a lot lower, and the broader stock market could decline much further as well. Just like FANGs led stocks on the way up, they could very easily lead stocks on the way down also.

Charts Look Terrible

Three out of the four FANGs are already in bear market territory, excluding only Alphabet. Moreover, all the declines began well before the S&P 500 peaked, which is even more troubling. This stealth bear market in FANGs appears to have started months ago, and it is now dragging down the broader market as well.

Facebook

Amazon

Netflix

Google


There Could Be A Lot More Pain Ahead

The bottom line is that Amazon’s revenue miss and lower guidance is deeply troubling. This is the stock that has arguably been the single strongest leader in this bull market. Furthermore, this is not just a “one-off”, as the company both missed estimates and guided substantially lower. Therefore, this could be a developing trend and significantly lower growth is plausible for Amazon going forward.

Moreover, it’s not just Amazon, all the FANGs and many other high flying/high multiple names are showing signs of faltering growth. In fact, many high growth names are illustrating comprehensive signs that growth is slowing relative to expectations. The problem is that this clashes with the expanding GDP numbers, and the overall narrative that the economy is doing “great”.

I don’t believe the economy is doing so great. I believe the GDP numbers are a mirage brought on by late cycle fiscal, and tax stimuli. Once their effects wear out, the economy could stall due to significantly higher interest rates, incredibly high debt levels, and other growth inhibiting factors.

In fact, Amazon, FANGs, and many other companies are already beginning to show signs of strain, and are likely to face further growth issues in the near and intermediate term. This makes Amazon’s stock price appear substantially overvalued here. Therefore, there could be a lot more pain ahead for Amazon, as well as for other high multiple stocks in general going forward.

Thank you for taking the time to read my article. If you enjoyed reading it, feel free to press the “Like” button, and if you’d like to be notified about my future ideas, hit the “Follow” link.

Disclaimer: This article expresses solely my opinions, is produced for informational purposes only, and is not a recommendation to buy or sell any securities. Investing comes with substantial risk to loss of principal. Please conduct your own research, consult a professional, and consider your investment decisions very carefully before putting any capital at risk.

Disclosure: I am/we are long GOOG, FB, NFLX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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​Red Hat leaders praise IBM acquisition, but employees are worried

When Bloomberg broke the news that IBM was acquiring Red Hat, Red Hat‘s corporate leadership already had all its ducks in a row. The company’s worker-bees, though, were blindsided. Many of them are worried sick about Big Blue’s acquisition of the world’s largest Linux and open-source power.

Paul Cormier, Red Hat’s president of Products and Technologies, proclaimed, “Today is a banner day for open source. The largest software transaction in history and it’s an open source company. Let that sink in for a minute. We just made history.”

After reflecting on Red Hat’s history, Cormier concluded, “From IBM’s first billion dollar investment in open source, to Red Hat’s contributions in open source communities and efforts to bring open source into the enterprise, and now, with IBM making a $34 billion investment in Red Hat and the open hybrid cloud – if there was ever any doubt that open source was here to stay, I think this announcement can officially put that argument to rest. And we’re just getting started.”

Red Hat CEO Jim Whitehurst also praised the deal in an e-mail to all Red Hat employees. “We have barely scratched the surface of the opportunity that is ahead of us. Open source is the future of enterprise IT.” He continued:

Powered by IBM, we can dramatically scale and accelerate what we are doing today. Imagine Red Hat with greater resources to grow into the opportunity ahead of us. Imagine Red Hat with the ability to invest even more and faster to accelerate open source innovation in emerging areas. Imagine Red Hat reaching all corners of the world, with even deeper customer and partner relationships than we have today. Imagine us helping even more customers benefit from the choice and flexibility afforded by hybrid and multi-cloud. Joining forces with IBM offers all of that, years ahead of when we could have achieved it alone. Together we can become *the* leading hybrid cloud solutions provider.

Moving on, Whitehurst emphasised,

“Red Hat is still Red Hat. When the transaction closes, as I noted above, we will be a distinct unit within IBM and I will report directly to Ginni. Our unwavering commitment to open source innovation remains unchanged. The independence IBM has committed to will allow Red Hat to continue building the broad ecosystem that enables customer choice and has been integral to open source’s success in the enterprise. IBM is acquiring Red Hat for our amazing people and our incredibly special culture and approach to making better software. They understand and value how and why we are different and they are committed to allowing us to remain Red Hat while scaling and accelerating all that makes us great with their resources.”

It’s that last part which has Red Hat staffers worried. Can Red Hat still be Red Hat under IBM? Many Red Hat employees fear it can’t be.

In the first hours since the news broke, I’ve been told by Red Hat staffers:

“I can’t imagine a bigger culture clash.”

“I’ll be looking for a job with an open-source company.”

and

“As a Red Hat employee, almost everyone here would prefer it if we were bought out by Microsoft.”

Why all the fear?

First: The news, which had been scheduled to be released early next week, broke early. None of Red Hat’s rank and file knew this was coming. Red Hat’s leadership had no chance to let them know in a timely manner to comfort the blow.

Second: While IBM has a long, distinguished history of supporting open source, in recent years they’ve been perceived as a company falling behind the times and is hamstrung with red tape and bureaucracy. This is the opposite of the Red Hat’s open organization leadership style.

Whitehurst, aware of his crew’s nerves, promises Red Hat will continue “to focus on growing our culture as part of a new organization. Specifically, Red Hat’s “Collaboration, transparency, participation, and meritocracy–these values make us Red Hat and they are not changing. In fact, I hope we will help bring this culture across all of IBM. Together we can.”

If Whitehurst can deliver on these promises, Red Hat employees will have nothing to worry about. Indeed, they can look forward to even greater success.

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