Telecoms giant Vodafone makes push into internet of things consumer market

Vodafone has launched a new system that it says will allow consumers to connect “millions of home and leisure electronics products” to its dedicated global internet of things network.

In an announcement Tuesday, the business said its “V by Vodafone” system was made up of, among other things, an internet of things sim card and a smartphone app.

The sim card will be sent out with internet of things-enabled products sold by Vodafone, while the app will give customers an overview of all the internet of things-enabled products registered to their account.

Launch products include a location and activity tracker for pets, which allows owners to track their dogs and cats using GPS and the mobile network. Owners will get an alert on their smartphone if their pet moves away from a designated area, and will be able to monitor their animal’s sleeping patterns and movements.

The European Commission describes the internet of things as merging “physical and virtual worlds, creating smart environments.” According to analysis from the McKinsey Global Institute, the potential economic impact of the internet of things in 2025, including consumer surplus, could be anything between $3.9 trillion and $11.1 trillion.

“The internet of things is already beginning to transform how businesses operate,” Vittorio Colao, chief executive of the Vodafone Group, said in a statement Tuesday. “Over the next decade, the expansion of internet of things into consumer markets will bring about an equally dramatic shift in how people manage their daily lives, at home and in their leisure time.”

Priceline, TripAdvisor shares crater after weak profit outlooks from competition with Airbnb

The TripAdvisor Inc. application is seen in the App Store on an Apple Inc. iPhone.

Priceline and TripAdvisor shares both plunged Tuesday after the online travel firms warned about future results because of in increase in spending in response to mounting competition.

Shares of TripAdvisor closed more than 23 percent lower, its worst day since Nov. 2016. Priceline shares fell 14 percent.

As hotels become better at incentivizing guests to book directly and companies like Airbnb compete for vacation customers, online bookings have been under pressure to define their role. Hoping to tackle the issue head-on, Priceline issued conservative fourth-quarter guidance as it embarks on new branding investments to help accelerate volume.

“Like its closest competitor, Expedia, Priceline has entered a period of increased spend, combined with a shift in customer acquisition strategy (towards more direct traffic flow),” wrote Piper Jaffray analyst Michael Olson in a note to clients. ­­”While this is likely the right long-term strategy to drive higher repeat traffic rates and an improving overall advertising return on investment, we expect some degree of ongoing negative impact into 2018.”

The company now expects fourth-quarter room-night growth to 8 to 13 percent and earnings per share 10 percent below Street consensus, according to Olson’s Tuesday note. The analyst reiterated his buy rating but lowered his 12-month price target to $2,000, representing 5 percent upside from Monday’s close.

TripAdvisor missed revenue expectations in its own third-quarter report and saw key growth metrics like revenue per hotel shopper fall 11 percent year over year. The analyst highlighted that TripAdvisor maintained guidance for 2017 of “flat to down” year over year to earnings, adding to the stock’s downturn.

Though analyst Olson reiterated his neutral rating, he also cut his price target on TripAdvisor, even after the company’s 15 percent decline year to date.

“The decline [in revenue] was attributed to advertising partners reducing spend on TripAdvisor, along with the company’s decision to ‘manage to greater efficiency on performance-based marketing channels,'” wrote Olson. “We anticipate the trajectory of TripAdvisor Click & Transaction revenue growth will continue its downward run through 2017, as the company absorbs the negative effects of weaker spend from advertising partners and a growing mix of lower monetizing mobile users.”

Olson’s new $40 price target represents 1 percent upside from Monday’s close.

Wall Street demolishes Snap in a brutal round of notes this morning

Wall Street is buzzing over Snap’s poor financial results and blasting the company for its weak performance.

The social media company reported worse-than-expected third-quarter results Tuesday. Its sales and daily active users fell short of Wall Street expectations.

“In the first two quarters as a public company, we framed SNAP’s disappointing results as ‘growing pains’ but felt the long-term debates around user growth and ad business scaling were left unsolved,” UBS analyst Eric Sheridan wrote in a note to clients Wednesday entitled “SNAP Crackle Flop.”

“It is now very likely that SNAP will continue to struggle on multiple fronts in the coming 12 months.”

The company’s shares were down more than 15 percent midmorning Wednesday. The stock whipsawed higher and lower in premarket trading after it was revealed that Chinese internet giant Tencent has taken a 10 percent stake in the company, according to a regulatory filing.

Sheridan lowered his rating to sell from neutral and reduced his price target for Snap shares to $7 from $12.

RBC Capital Markets doesn’t see any turnaround in Snap’s business, either.

“We initiated with an outperform when the stock was at $24. We have had the wrong call,” analyst Mark Mahaney wrote Tuesday. “The revenue shortfall against expectations and (management) commentary implies that (management) likely has much less visibility into the business than we thought. … We believe visibility from here is poor.”

Mahaney lowered his rating to sector perform from outperform and reduced his price target to $15 from $20.

Piper Jaffray also pointedly criticized the company’s management and execution.

“Snap’s (management) team is showing considerable fluidity in how it is managing its business and we believe this reflects poor leadership under a corporate governance structure that lacks accountability for senior executives,” analyst Sam Kemp wrote Wednesday. “Longer-term we believe Snap is structurally challenged.”

Kemp maintained his neutral rating and $12.50 price target for Snap shares.

Stifel’s Scott Devitt also downgraded his rating on the company to hold from buy, saying “we find significant upside to current valuation difficult to justify given the trajectory of the business.”

Disney’s Hulu play could turn out to be like Facebook buying Instagram

Bob Iger (R), CEO of Walt Disney Co. and Rupert Murdoch, Chairman and CEO of News Corp.

Monday’s jolting news broken by CNBC’s David Faber that Disney had held discussions with 21st Century Fox about buying up many of Fox’s most interesting cable and movie assets is still reverberating around the media world.

Laura Martin of Needham said on CNBC after the news broke that the deal is a “dream come true” for Disney. And she’s right. If it happens, Disney would getthe valuable TV and film production business and IP (including Avatar, X Men and Ice Age), the FX and Nat Geo cable channels, very interesting international assets, and likely Fox’s stake in Vice Media. All of these assets — as well as FX executive John Landgraf — would be extremely helpful to Disney in filling out content for its over-the-top digital entertainment offering planned for 2019.

The report also says Disney is seeking to get Fox’s stake in Hulu. To me, this is perhaps the most intriguing aspect of the possible deal from a Disney perspective. It also hasn’t gotten much attention yet.

The forgotten player in over-the-top video

Disney is already a 30% owner of Hulu. If it got Fox’s 30% stake, it would move to a 60% control owner, along with Comcast at 30% and Time Warner at 10%.

Such a move would allow Disney to consolidate Hulu’s financial results.

Hulu hasn’t gotten nearly as much attention as Netflix over the past few years. The critical acclaim and Emmys for The Handmaid’s Tale put it in the spotlight in recent months, but it’s still not discussed on the same level as Amazon’s Prime Video, Netflix, Apple and other potential over-the-top (OTT) video entrants.

Why not?

Hulu is expected to reach 32 million viewers later this year. That’s less than Netflix’s 128 million and Amazon’s 85 million, but it is still formidable and ahead of everyone else who wants to launch an OTT network.

Consider this: Ben Swinburne of Morgan Stanley recently predicted that Disney’s planned entertainment OTT service, set to launch in 2019, could achieve 30 million subs by 2028.

Hulu’s at that level today.

Hulu was founded in March 2007. Achieving scale takes time. Everyone who thinks it’s a great idea to launch an OTT channel today might have a tough 10 years ahead of them.

How many “must have” OTT channels will each of us subscribe to in the future? Netflix, Apple (whenever they launch something), Amazon, Hulu and Disney all seem like likely choices. How many others?

Look at the app economy for comparison. On the top of the App Store charts today, it’s basically Facebook (with Messenger, Instagram and WhatsApp), Google and Snapchat. It seems like there also be a finite choice of OTT channels as well.

Becoming a majority owner of Hulu today might end up like being the majority owner of Instagram in 2014.

A simpler corporate structure

There’s another attractive reason for Disney to want to gain majority control of Hulu. As I argued in June here, Hulu would likely grow faster with a simpler corporate structure and a majority owner. For example, the clear leadership could help them push Hulu much more aggressively internationally, as well as streamline content decisions.

It would also help to clear up the identity of Hulu versus a yet-to-launch Disney Entertainment OTT channel. Hulu could skew more adult with Handmaid’s Tale, Family Guy, Simpsons, Fox films and FX-type content (under John Landgraf perhaps). Disney could keep Lucasfilm, Pixar, Marvel, and other Disney Channel type content.

Also, as Hulu would still be partly owned by Comcast and Time Warner, it could continue to shine a spotlight on other interesting content beyond Disney.

Hulu doesn’t have to catch Netflix to be a success. If it stays in the Top 5 of OTT channels in the future, the way Instagram has stayed in the Top 5 on the App Store since Facebook bought it, it would be a home run for Disney.

Airbnb feels ‘unencumbered’ and is growing strongly in China, its co-founder says

China growing middle class and a young, travel-loving population present a massive growth opportunity for Airbnb, one of the company’s co-founders told CNBC on Thursday.

Speaking at the sidelines of an Asia-Pacific Economic Cooperation summit in Vietnam, Nathan Blecharczyk said the start-up is doing very well in the world’s second-largest economy.

“China has been the fastest growing country for Airbnb domestically, out of all [of the] countries in which we operate, and second-fastest growing from an outbound travel perspective,” he said, suggesting that there are more opportunities to grow in that market. Blecharczyk is also chairman of Airbnb’s China operations and frequently spends his time in the country.

Broadly, the Asia Pacific region is very important to the the California-based company, according to Blecharczyk, and it is taking steps to solidify its presence there.

On Thursday, Airbnb announced it will invest $2 million through 2020 to support what the company called “innovative tourism projects” throughout the region.

Millennials and the middle class

The Chinese spend far more on international tourism than Americans, Blecharczyk said, adding that the trend is being “powered by a rising middle class, and especially a young demographic.”

He pointed out there are about 400 million millennials in China today.

Airbnb faces local competition from Tujia, a start-up that reports say was valued at $1.5 billion in October, and Xiaozhu, which recently raised funds from Jack Ma-backed Yunfeng Capital. For its part, Airbnb’s post-money valuation was $31 billion in March 2017, according to Crunchbase.

Blecharczyk said Airbnb’s competitive advantage was that it could provide outbound Chinese travelers with a broad range of accommodation options in most countries to which they choose to travel.

Nathan Blecharczyk, co-founder and chief technology officer of Airbnb.

Sam Kang Li | Bloomberg | Getty Images
Nathan Blecharczyk, co-founder and chief technology officer of Airbnb.

Unlike many U.S. companies that team up with local players to tackle the large China market, it is still very early for Airbnb to follow that route, according to the co-founder. “There’s so much potential — our company is growing at a record rate … right now we’re feeling unencumbered and growing strongly,” he said.

When asked if dominating the China market was important before the company considered going public, Blecharczyk said Airbnb is “eager to demonstrate” its success there. But he said the key to being a successful public company is to “set the right expectations and be able to deliver.”

“We’ve been around for 10 years, and we’ve demonstrated consistent solid growth and ubiquity across all the countries of the world,” he said.

Blecharczyk declined to give any guidance when asked about when the company might be planning for an initial public offering.

Morgan Stanley: Amazon could be a $1 trillion company within a year

Jeff Bezos

Amazon may reach the $1 trillion market value milestone in the next year, according to a top Wall Street firm.

Morgan Stanley reiterated its overweight rating for Amazon shares, presenting a “bull case” 12-month price target of $2,000 per share or roughly a $1 trillion market cap.

“Amazon’s high margin [revenue] disclosure speaks to the $1trln ($2,000/sh) sum of parts bull case,” analyst Brian Nowak wrote in a note to clients Sunday entitled “The Math Behind the Trillion Dollar Bull Case.”

“Our sum of the parts methodology looks out to 2022 for the 5 various segments (1P, 3P, AWS, Subscription, and Advertising/Other) and applies multiples based on what we view are appropriate peer groups, factoring in relative growth rates and margin profiles. We discount each segment back to year-end 2018 to arrive at a $2,000/share value or ~$1 trillion bull case.”

Nowak shared his valuation methodology and key forecasts for each of Amazon’s businesses to reach the $2,000 share price target.

The analyst valued Amazon’s core retail business at $600 billion, estimating 13 percent annual sales growth for its e-commerce business in 2022 and a 5.5 percent operating profit margin that year. He also estimates its third-party marketplace business will achieve a 25 percent earnings before interest, tax, depreciation and amortization (EBITDA) profit margin in five years.

Nowak gives a $270 billion valuation for Amazon Web Services, the company’s cloud computing arm, forecasting 18 percent annual sales growth and a 50 percent EBITDA margin in year 2022. He also assigns a $70 billion value to the company’s growing subscription business and $55 billion for its advertising segment.

Even as he outlined the positive optimistic scenario, the analyst reiterated his $1,250 price target for Amazon shares, representing 11 percent upside to Friday’s close.

Amazon shares have rallied 50 percent year to date through Friday, compared with the S&P 500’s 15 percent return.

AI will obliterate half of all jobs, starting with white collar, says ex-Google China president

Robots

The upcoming worldwide workforce reckoning that artificial intelligence is expected to bring will happen much sooner than many experts predict, the former president of Google China told CNBC on Monday.

Kai-Fu Lee, now chairman and CEO of Sinovation Ventures, believes that about half of all jobs will disappear over the next decade and be replaced with AI and the next generation of robots in the fastest period of disruption in history.

“AI, at the same time, will be a replacement for blue collar and white collar jobs,” said Lee, a renowned Chinese technologist and investor who held positions at Apple and Microsoft in addition to Alphabet’s Google. But white collar jobs will go first, he warned.

“The white collar jobs are easier to take because they’re pure a quantitative analytical process. Reporters, traders, telemarketing, telesales, customer service, [and] analysts, there can all be replaced by a software,” he explained on “Squawk Box.” “To do blue collar, some of work requires hand-eye coordination, things that machines are not yet good enough to do.”

“The white collar jobs are easier to take because they’re pure a quantitative analytical process” -Kai-Fu Lee, Chairman and CEO of Sinovation Ventures

Lee knocked down an argument that the jobs lost will create new ones to service and program AI and robots. “Robots are clearly replacing people jobs. They’re working 24 by 7. They are more efficient. They need some programming. But one programer can program 10,000 robots.”

Besides taking jobs beyond factory floors, robots and AI are already starting to takeover some of the mundane tasks around people’s homes. Lee pointed to the Amazon Echo as an example.

“The robots don’t have to be anthropomorphized. They can just be an appliance,” he said. “The car that has autonomous driving is not going to have a humanoid person [driving]. It’s just going to be without a steering wheel.”

Lee said that while economic growth “will go dramatically up because AI can do so many things so much more faster” than humans, it’ll force everyone to rethink the practical and social impact of fewer jobs. “If a lot of people will find happiness without working, that would be a happy outcome.”

But in a Washington Post op-ed last month, Lee argued against universal basic income, the idea of governments providing a steady stipend to help each citizen make ends meet regardless of need, employment status, or skill level. UBI is being bandied about as a possible solution to an economy that won’t have nearly enough jobs for working-age adults.

“The optimists naively assume that UBI will be a catalyst for people to reinvent themselves professionally,” he wrote. It may work among Silicon Valley and other highly motivated entrepreneurs, he added, “but this most surely will not happen for the masses of displaced workers with obsolete skills, living in regions where job loss is exacerbated by traditional economic downturn.”

Lee sees a different plan of action. “Instead of just redistributing cash and hoping for the best … we need to retrain and adapt so that everyone can find a suitable profession.”

Some of the solutions he offered in his commentary include developing more jobs that require social skills such as social workers, therapists, teachers, and life coaches as well as encouraging people to volunteer and considering paying them.

Lee wrote, “We need to redefine the idea of work ethic for the new workforce paradigm. The importance of a job should not be solely dependent on its economic value but should also be measured by what it adds to society.”

“We should also reassess our notion that longer work hours are the best way to achieve success,” he concluded.

Here are the consumer industries Amazon will crush next: Bernstein

Amazon CEO Jeff Bezos.

The retail stock carnage will only get worse as Amazon continues to mow down certain corners of the sector, according to Bernstein.

“We are currently in the midst of a generational shift in consumer behavior and how companies bring their goods to market,” the firm’s analyst Ali Dibadj wrote in a note to clients Friday.

“The only thing one can be certain about is that things will change and companies will be disrupted, and when it comes to disruption there has never been a company quite like Amazon.”

The retail sector is having a rough year so far as the industry struggles under the Amazon onslaught.

The SPDR S&P Retail ETF’s declined 9 percent year to date through Friday compared to the S&P 500’s 15 percent gain and Amazon’s 50 percent surge in the same time period.

Dibadj shared his imminent Amazon disruption predictions for each consumer subsector:

1. Consumer packaged goods: “We think beverages/snacks companies will fare better than household & personal care companies, while packaged food companies are likely most at risk.”

2. Restaurants: “The benefits of a potential national delivery network through Amazon Restaurants outweighs the relatively modest risk presented by Amazon’s placing possible downward pressure on food prices (proteins appear more insulated).”

3. Transportation: “Structural volume growth in e-commerce will benefit the network carriers, and the significant hurdle posed by the costs of last mile delivery is likely to result in better pricing.”

4. Broadline retailers: “We think the scale of Walmart’s existing network of distribution centers, stores, and new pick-up points we expect … will allow them to adapt well to the higher costs, while smaller grocers will be more damaged.”

5. Specialty apparel retail: “We see the off-price retailers retaining their competitive advantage in apparel, for now.”

6. Healthcare services: “We think Amazon’s entry into pharmacy would be negative for independent pharmacies, somewhat negative for national pharmacies and distributors, and we increasingly see this as long term negative for” pharmacy benefit managers.

The analyst also explained how the internet and social media have generally hurt the power of traditional brands, further adding to the companies’ difficulties.

Online magazine OZY launches book site

NEW YORK (AP) — Daniel Handler of “Lemony Snicket” fame and medical writer Atul Guwande are among the contributors to a new book portal launched by the online magazine OZY.

OZY Books was launched in response to reader requests, OZY CEO Carlos Watson said Monday. The portal provides book recommendations, reviews and essays. It is edited by the Nigerian-British author Sarah Ladipo Manyika.

OZY (www.ozy.com ) bills itself as a daily news digest “custom built for the Change Generation.” It was co-founded in 2013 by Watson, a businessman and former MSNBC host, and Samir Rao.

Corrects that it was co-founded by Watson and Samir Rao.

Snap shares downgraded on fears app redesign will slow user growth

Snapchat

JMP Securities downgraded shares of Snap, citing sluggish user growth and potential risks from its app redesign.

The social media company reported worse-than-expected results last Tuesday. Both sales and daily active users — a key metric for Snap — fell short of consensus expectations.

“We downgrade shares of Snap Inc. to market perform from market outperform as we believe the pending app redesign could further impact daily active users growth,” wrote JMP Securities analyst Ronald Josey in a note to clients. “With slowing daily active user growth relative to our projections, its pending product redesign—which should make the product easier to use—and uncertainty around advertiser demand and pricing, we step to the sidelines until Snap’s daily active user growth stabilizes and advertiser demand ramps.”

As a key indicator of app user activity, the number of daily active users is closely watched by advertisers when making decision on whether — or how much — to spend on Snap. The company added 4.5 million new users in the third quarter, nearly 60 percent below JMP projections and disappointing many others across the Street.

Shares of Snap have fallen more than 16 percent since the discouraging earnings report last week and amid a slew of critical analystnotes. The shares were down another 1.4 percent in premarket trading Wednesday following the JMP call.

CEO Evan Spiegel said during the recent earnings call that the upcoming app update will include major social media feed that focuses on friends and trending videos. The company is tweaking its app largely to entice new users who currently find it difficult to use, including older people who find the current interface and multiple menus confusing.

“Snap plans to redesign its core app with a focus on making it easier to use, surface more of its Discover content, and importantly, appeal to a broader audience,” continued Josey, noting that users aged 35 years or more accounted for just 15 percent of daily users the fourth quarter last year. “We agree these changes are the right thing to do, but believe they are likely to further impact traffic growth, at least in the near-to-medium term.”

This all comes as Snap transitions to an auction-based advertising system, whereby the company awards ad slots to the highest bidder from interested businesses. Though the popular photo sharing app saw the number of advertisers spending in the auction multiply by a factor of five since July, the key will be in scaling the auction to create stronger demand.