The Market Ticker
Commentary on The Capital Markets- Category [Technology]

It's over folks.

Samsung quite-clearly has soft sales on their new GS-5.  How do I know?  Because Verizon is giving away one with a purchase (on contract.)  That is, "buy one, get one."  That's unprecedented for a new flagship device.

Apple has seen soft demand as well against their expectations.

And now there are rumors that Amazon wants "in" that market.  Oh yeah, that'll work out well.  Facebook's venture into phones anyone?

If you have an angle -- something unique -- then you might be able to make it stick.  But in the main handsets are a commodity, and one that is now going to undergo rapid depreciation in price as everyone races toward the bottom of the margin barrel.

This same process happened with personal computers, and indeed it eventually happens with all technology.  You start with an "exclusive" on something "new", but eventually the "panache" fades with the teens, the tweenies and twenty-somethings waving around their latest bling, leaving you with a business that becomes increasingly cut-throat.

T-Mobile is in trouble in this regard too.  Many look at their recent "hidden" $200 offer to upgrade people out of BlackBerry handsets and into Samsung's 5 as yet another attack on BlackBerry.  Nope.  It's yet more evidence of soft demand; why would you otherwise double the previous offer on the newest "hot" device?  Note too that his offer is not open-ended either; it only applies to people on contracted plans who are still "upgrade eligible", which tells me quite a lot about motivation.  Someone fears being stuck with a lot of high-priced "zero day" launch inventory, and that inventory doesn't say "BlackBerry" on its face.

T-Mobile's petulant child Lagere is headed for some fun of the difficult sort.  He may think that there's something magical about the size of his manhood, matched only by the volume of his mouth, but he's wrong.  The simple fact is that he's trying to play margin games in a business where service quality has deteriorated to the point that people will accept cheap but not cheap and crappy.  Oh sure, the "underdog" and "scrappy gamester" motif looks good up front, but under the covers T-Mobile is actually raising prices and cutting feature set as their customer acquisition strategy "at all costs" hasn't done a thing for the red ink they're generating.  That's bad, by the way.

One of the bigger problems with US carriers is the lack of interoperability of hardware and the tying arrangements that result -- and that is bad for customers.  We put up with it in the US pretty much because we have to; it's been the legacy of the business in this nation.  That doesn't mean it makes sense; it simply means that monopoly behavior going back to the "A" and "B" carriers in the AMPS world has been the order of the day for so long that there literally was never a different model here in the US.

Legere is trying to claim he's "different" but that's horsecrap; all he is really doing is trying to buy share in a mature market by raiding other people.  Unfortunately he's up against the same reality as is everyone else -- hardware has transitioned to a commodity business, service expansion is expensive and trying to drive sales through various gimmicks and raids on other players (along with petulant displays of hubris) is all you have left in a market where everyone over the age of 10 already has a cellphone.

Add to this the "must make the quarter" Wall Street focus and you have a recipe for much hilarity in the upcoming months and years.  While AT&T and Verizon have sort of "responded" the key here is "sort of"; neither has mounted a clean response as of yet but you can bet they will, and when they do Lagere is going to look like the mouse that tried to roar but the sound you heard was the squeak of being crushed underfoot.  The market seems to sense this is coming too; after a clean double from the spin-off IPO last year the firm's stock is down over 10% thus far in 2014.

The problem, in the end, is that you need profits in business and I've yet to see a concise plan for how Lagere intends to achieve those aims.

View this entry with comments (registration required to post)

This is really getting annoying....

This morning the stories are coming fast-n-furious on ATMs running Windows XP -- which most of them do.  My first reaction to this is: So what?

Look folks, I don't have inside information on how these things are networked to the bank systems, but I do know how they should be.  An ATM is just a terminal, really, and it should have a dedicated line connected to exactly one place -- the bank's internal computer network.

That dedicated line should be running with end-to-end encryption.  The other end of that circuit is on an internal network with no outside access.

Unless banks have done something criminally stupid in how they configure these networks it makes utterly no difference what operating system they use since there is no way to get to the protocol or the device's storage except through physical access to the unit itself or after breaking into the bank's internal network!

If you've done either of the latter the last thing the bank is worried about is the ATM's software.  If you break into the physical ATM hardware you simply steal the cassette loaded with money and extract the cash at your leisure.  Your risk of getting caught doing that is exactly the same as your risk of getting caught tampering with the code.

If you break into the bank's internal network then the bank has a lot bigger problems than malware on an ATM; the potential for the bank's entire transaction flow to be intercepted and tampered with exists.

It's very different for a machine connected to the Internet at large that happens to have the ability for random people to access it, or where random outbound connections can be made from it to arbitrary sites and destinations.  Then you have a whole litany of things to worry about, as every bit of software involved in that process has to be "clean" against the possibility of malware attacks, with the most-insidious being buffer overflows and other carefully-crafted means of causing the software to do something unintended, especially any part of it that runs with privileges and thus can overwrite the operating system or otherwise tamper with it.

Any bank that has ATMs configured with unrestricted Internet connectivity in today's world deserves to be shut down instantly with its executives and IT "professionals" taken out back and skinned alive.  The only possible reason to do such a stupid thing is an attempt to save a tiny bit of money on dedicated connectivity of some form, and given the tiny amount of traffic involved in verifying an ATM transaction this sort of mistake is just plain dumb.  Since the device itself is really nothing more than a terminal there is no reason for anything to be present on the machine other than what is required to perform that function and there is also no reason for the media on which it is stored to be writable!

It would not shock me to find that somewhere, someone has done something stupid enough where there are risks involved here, but the risk isn't in using a version of an operating system that no longer has virus and malware patches available.

The risk is that the firms involved employed so-called "professionals" that have rocks in their head.

View this entry with comments (registration required to post)

Talk about nonsense...

The Internet is improving lives everywhere – democratizing access to ideas, services and goods. To ensure the Internet remains humanity's most important platform for progress, net neutrality must be defended and strengthened. 

The essence of net neutrality is that ISPs such as AT&T and Comcast don't restrict, influence or otherwise meddle with the choices consumers make. The traditional form of net neutrality which was recently overturned by a Verizon lawsuit is important, but insufficient. 

Amusing, really.

Watching mindless Houses of Cards is now equated with the progression of humanity?  Please pass the bong Mr. Hastings, but do make sure you're in Colorado first.

ISPs sometimes point to data showing that Netflix members account for about 30% of peak residential Internet traffic, so the ISPs want us to share in their costs. But they don't also offer for Netflix or similar services to share in the ISPs revenue, so cost-sharing makes no sense. When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from. 

That's a nice argument but Hastings knows it's a lie. He knows because he's bought national-scope circuits from people before, and thus he knows what they cost.  He is thus well-aware that you can't buy a 10 or 50 Mbps national circuit (that is, one that reaches from, say his servers in California to New York) for $100 or a month or thereabouts.

He knows damn well there are some zeros missing on that number.

This, fundamentally, is the problem.  The ISP is selling a service that has a peak data performance of 10 or 50Mbps, but they in no way can possibly provision 50Mbps to your home all the time on a streaming basis, especially if you and 3/4 of the rest of the neighborhood all want to watch various videos at once -- not at the price you're paying.

There are only two ways this resolves: Everyone pays much more (including those who don't want to watch Netflix) or Netflix customers pay more -- either directly or indirectly.

Whether Netflix gets billed by the ISP to build out the capacity or the customer pays the ISP someone has to pay, and in the end it will be the customer.

What Hastings wishes to argue is that you, as a non-Netflix customer, should get ****ed so that his customers can avoid paying the full cost of providing his content to their computers.

He isn't willing to come out and say that, but that's what the argument devolves into because the simple fact of the matter is that a non-streaming-video user has a radically different load profile than a customer who is streaming video.

In fact, during peak hours the cost of those two customers is likely different by a factor of ten or more.

There are people who argue that this is like an all you can eat buffet restaurant.  They're right and they're wrong.  Where they're wrong is that if the restaurant's clientele winds up being all 400lb people who don't eat for two days and then show up and shovel down 10 plates piled a foot high with food the price is going to triple to eat at the buffet!

Now what do you, Mr. 150lb man who did eat breakfast and lunch, think about the $50 buffet?

You don't eat there.

And that, my friends, is how this resolves.

Unless, of course, Mr. Hastings manages to convince the government to shove a gun up someone's ass and force you to cover your neighbor's Netflix watching costs.

View this entry with comments (registration required to post)

Main Navigation
Full-Text Search & Archives
Archive Access
Get Adobe Flash player
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.