The Market Ticker
Commentary on The Capital Markets- Category [Company Specific]
2015-05-15 07:10 by Karl Denninger
in Company Specific , 1042 references

Heh heh.... it's starting....

I bought an Apple Watch. I didn't preorder it, because at first I didn't even want one. I warned people who asked me about the company's first wearable: These things (Apple things) always get much better on the second attempt. Apple's product history, perhaps even more so than other tech companies, is peppered with examples: the substantially thinner second iPad, the next iPhone that had 3G data, the MacBook Air sequel that had decent battery life and a slimmer design. Despite knowing that, something changed for me. I became an early adopter.

Sounds positive, right?  The watch changed his life and we all live happily ever-after.

Uh, no.

What the author's bottom line turns out to be is that it's not changing his life, it's not enabling things he was missing and he is out the $700, which truly stings.

Uh huh.

Unique?  Maybe, maybe not, but the beginnings of a nightmare (for Apple) may well be coming to pass.... as I expected it to.

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There seems to be some question as to what's going on here, but none of the potential explanations are very good.

If you use the Starbucks app with a linked credit card to pay for java with your phone, now would be a good time to change your account password. The Seattle-based coffee company confirmed Wednesday that some of its customers had funds withdrawn from the credit card linked to the app without their knowledge.

Starbucks is blaming the customers, claiming that the passwords being used were "poor."  The actual article doesn't have much more detail available at all, but the comments are arguably more important -- there are several people who have said they were hit, and more than a few of them state that their passwords were not weak.

Worse, apparently the problem extends to not just buying a cup of java or two, but mass-theft incidents where funds are being loaded onto a Starbucks card via their system off a linked credit card and then those funds are transferred to a new card which is then removed from the account.

Starbucks seems to be telling customers who this happens to that they "can't" trace where the money went too.

Let me ask a question: What happened to good old cash?

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I had to chuckle when Facebook announced its "instant article" initiative.

There is a basic problem with "web properties" like Facebook and ad value, which is that your "status updates" and cat pictures are hosted there, but how much is ad inventory sold against that worth?

On the other hand there are links that are intentionally designed as click bait all over the site, and they have a problem too -- some of them are simply inane "tests" (e.g. "what Star Wars character would you be?") that are designed to get you on the target site where it can sell your eyeballs to advertisers (poorly, I might add, since the so-called "test" is just more insanity) but others are links to actual original content.

Facebook's problem at a fundamental level is that there's little reason for a publisher to put that original content (like this article, for example) on their site and I can tell you from when I used to auto-publish tickers there that unless you craft the excerpts and headlines to be "click bait" the click-through back to your site, due to how they "demote" things you don't spend ad money on, is nearly zero.

I have over a year's worth of data showing that publishing Tickers on Facebook resulted in less than a 2% increase in traffic here.

Needless to say I'm not paying anything in ad spend for a 2% increase in traffic; that's lost in the noise.

But if you send the entire article there then you lose the engagement on your site, and all the ad revenue.

So what Facebook has done is give those "selected" publishers who are willing to send the entire article all of the ad revenue they source and sell, and the majority of it that Facebook sources and sells. In addition all the metrics data will go back to the publishers.

But that's not such a great deal for Facebook, is it?  See, now Facebook takes the cost of distribution (it's not zero) and gets none of the revenue.  They'll add some to their so-called "engagement" figures and time-on-site but if there's no money made from it that they get to keep it's a negative, not a positive!

But I'm not convinced it's a great deal for the publisher either, despite the infrastructure benefit to them, for the simple reason that disjointing your customer base and having some of them over on someone else's platform decreases your engagement.

There might be an argument for it if a publisher wants to use only Facebook as that distribution system.  Then you're giving up your cost and keeping the ad revenue, plus you're not fragmenting the userbase.  I could see that, maybe, provided the numbers work.

So here's my prediction despite the hype: This will (and has) spike the stock due to people's perception (which may well play) that engagement numbers will rise.  However, it will increase Facebook's costs more than the net gained from advertising because most if not close to all of the revenue gained from those articles will be paid to the publishers.

In other words it's a net lose for Facebook rather than a net win, and that leads to the next question:

Zuck has to know this, so why are they doing it?

What's "under the hood" in their numbers that you haven't figured out yet, and how ugly is it?

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This review of the Leap is interesting....

To sum it up.

  • The camera is great, particularly in a phone at this price-point.  But..... the CPU is old.
  • The phone is snappy in performance and does not feel constrained.  But..... the CPU is old.
  • The screen is not an AMOLED, although it's of the dot pitch one expects in something of this size.
  • The battery life is outstanding, in fact, the phone will probably go two days without being charged.  But.... the CPU is old!
  • The build quality is excellent, it looks and feels like you could hammer nails with it, the body doesn't flex or twist, and the back and sides of the case are easy to hold and provide a decent amount of impact protection.  But.... the CPU is old!
  • The BB10 virtual keyboard is outstanding (as it is on all BB10 devices), outclassing competitors.  But... the CPU is old!
  • The hub, as with all other BB10 phones, places everything important in one place -- and nobody else does it anywhere nearly as well when it comes to integrating messaging, email and similar.  But.... the CPU is old!

You can fly around the device pretty much as fast as your fingers can take you, only having to pause for a second while your chosen app or message loads. Browser performance is as slick as you need it to be, too. Pages load rapidly and you'll only stumble across the odd desktop site where tiling is visible.


In other words, if what you care about is spec sheets on a piece of paper then pay $200 more for bragging rights instead of performance and suffer with the crap battery life that comes with that decision, as CPU power comes with a requirement to drain battery power.

But if you instead prefer to have an efficient device that runs well, has good performance and thus sips battery power, allowing you to use the device without being tethered to a wall outlet on a continual basis like so many iPhone and Android users are.....

Buy a BlackBerry LEAP!

PS: The one true criticism I found in that article relates to the screen.  I'm no fan of AMOLED myself (which is why I never bought a Z30); give me a good IPS panel as is found in either the Z10 or the Passport as I find the color fidelity to be generally superior with no concerns about burn-in or service life, which IS an issue with AMOLED.  But there IS a trade-off with ALL displays in that you need to use a LOT of power (whether in direct drive current with AMOLED or backlighting with LCD panels) to make them visible in direct sunlight.  The Z10 and Passport both have that with the Passport being above even the Z10 in that regard; my Passport is easily viewable outdoors without any attempt to shade it with my body or other objects.  It appears the Leap falls somewhat short in this regard as it appears they short-changed the backlighting a bit for power consumption reasons, but given the concern for battery life that's a trade-off you have to judge for yourself.

Disclosure: I do not have a LEAP myself but if BlackBerry was to decide to ship one this direction I'll be happy to give it a fair review and write-up on a comparative basis.  I doubt, however, it would differ much from the above, and frankly for a mid-tier device to have no notable impairments in common everyday use is, on balance, quite the endorsement whether Engadget intended to provide one or not.

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Idiocy has reached a peak and we are definitely in the first quarter of 2000 once again when it comes to tech.

The latest is a "report" that "someone" wants to buy Salesforce (CRM).  There's a problem, however, with that premise -- irrespective of the "earnings" (and they've been consistent too; ~60 cents or so a year, so that makes the P/E north of 100!) the company is selling in the market today for eight times sales.

That's at least four times a reasonable valuation, and with the premium necessary to get a deal to go how do you possibly finance that and make it look reasonable from an acquiring firm perspective?

You can't, in short, and this is a firm with a $50 billion market cap as well, so you need someone who either has or can finance that $50 billion plus another 10 or so for the premium.

No matter what you think of the firm's prospects, I have just one response to this "report":

You gotta be fooking kidding me.

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