An Open Letter from Steve Jobs to Tim Cook

Time passes quickly and the WiFi is spotty here in Trāyastriṃśaso I apologize for taking so long to check out how you’ve been doing with our company.

Of course, truth be known, Apple was already on that trajectory when I handed you the company, but props anyway.

Beyond that, though, I feel I must ask: Is that ALL you could manage with that money and talent? Seriously?

OK… Let me calm down… Deep breath… Nam Myoho Renge Kyo… Nam Myoho Renge Kyo.. That’s better.

Look, Tim, I don’t want to go all heavy on your case, but here’s what you need to do to make Apple great again:

1. Invest in new technology.

You let our cash on hand get all the way up to $245 billion??? Earning maybe 3% interest? Are you out of your mind?!?!  With those deep pockets, we should be making huge investments and acquisitions in every technology that will comprise the world of the future. You’ve let that upstart Musk make us look like IBM. That’s just plain wrong. 

2. Attack and cripple Google.

Google is our new nemesis, remember? They attacked our core business model with that Android PoC. But, Tim, c’mon… Google is weak. They can’t innovate worth beans and most of their revenue still comes from online ads, which are only valuable because they constantly violate user privacy. You could cut their revenues in half if you added a defaul 100% secure Internet search app to iOS and Mac OS. Spend a few billion and make it faster and better than Google’s ad-laden wide-open nightmare. This isn’t brain surgery.

3. Make the iPad into a PC killer.

WTF? The iPad was supposed to be our big revenge on Microsoft for almost putting us out of business. All it needed was a mouse and could have killed–killed!–laptop sales. Sure, it would have cut into MacBook sales, but that’s the way our industry works. I let the Macintosh kill the Lisa, remember? And the Lisa was my personal pet project. The iPad could have been the next PC… and it still might not be too late.  

4. Give our engineers private offices.

I get it, Tim. You’re not a programmer. You built your career in high tech but it was always in sales and marketing, which are the parts of the business where a lot of talking and socializing make sense. But if you’d ever designed a product, or actually written code, you’d know engineering requires concentration without distractions. Programmers and designers don’t belong in an open plan office. Give them back their private offices before it’s too late.

5. Don’t announce trivial dreck.

A credit card? Seriously? Airbuds with ear-clips? A me-too news service? Is that best you can do? And what was with Oprah And Spielberg at the event? Hey, the year 2007 called and wants its celebrities back. Look, when you gin up the press and the public up for a huge announcement and it’s just meh tweaks to existing products or me-too stuff, it makes us look lame and out of touch. If we don’t have anything world-shaking, don’t have an announcement!

6. Stop pretending we’re cutting edge.

There was a time–I remember it well–when people would line up for hours just to be the first to get our innovative new products. Heck, we even had “evangelists” who promoted our products to our true-believers. But that’s history. Until we come out insanely great new products that inspire that kind of loyalty, dial down the fake enthusiasm. 

7. Make Macs faster, better, cheaper–more quickly.

I’m honestly embarrassed what you’ve done with the Mac. You’ve not released a new design in years. Sure, MacBooks were cool back in the day, but now they’re just average. And where’s our answer to the Surface? Tim, you actually let Microsoft–Microsoft again!–pace us with a mobile product. That’s freakin’ pitiful.

8. Diversify our supply chain out of Asia.

Tim, Tim, Tim…  I love Asia, but you’ve bet our entire company on the belief that there will never be another war (shooting or trade) there. Meanwhile, China has become more aggressive and there’s a madman with nuclear weapons perched a few miles from our main supplier for iPhone parts. Wake up! We need to sourcing our parts in geographical areas where war is less likely.

9. Fix our software, already.

This was the one that surprised me the most. I knew that iTunes, iBooks, Music, and AppStore was a crazyquilt but I figured we could fix that in a future release. But here we are, ten years later, and we’re still asking people to suffer through this counter-intuitive bullsh*t? And what’s with the recent instability with our operating systems? And that wack Facetime security hole? 

10. Make some key management changes.

Delete your account.

Beatifically,

Netflix looms large as theater owners assess industry future

LAS VEGAS (Reuters) – As movie theater owners converge on Las Vegas for their annual convention, one topic that keeps coming up is how they contend with a company that has resisted their traditional business model: Netflix Inc.

FILE PHOTO: The Netflix logo is seen on their office in Hollywood, Los Angeles, California, U.S. July 16, 2018. REUTERS/Lucy Nicholson/File Photo

The world’s most successful streaming service sends some movies to theaters but has insisted on making them available on Netflix at the same time, or just a few weeks later. That has upset big movie chains, which refuse to show Netflix films and want a longer “window” of time to play films exclusively.

The issue of how Netflix fits into, or threatens, the theater business dominated a press conference on Tuesday at CinemaCon, the theater industry trade show.

“All of your questions from the first 17 minutes or whatever are about Netflix,” grumbled John Fithian, president and chief executive of the National Association of Theatre Owners.

He insisted that Netflix and theaters can happily co-exist, citing data that showed the biggest consumers of streaming video visit theaters more often. He also said Netflix had helped revive interest in documentaries, which had helped draw people to theaters to see them.

Earlier, Fithian told a crowd in a Caesars Palace theater that films reached their full potential only with a “robust theatrical release.” He spoke just after “Crazy Rich Asians” director Jon M. Chu said his film would not have had as big an impact if it had debuted on a streaming service.

Some members of the Academy of Motion Picture Arts & Sciences, the group that hands out the Oscars, have been debating whether films must play in theaters for a specific length of time to compete for the awards, which could exclude Netflix or force the company to agree to longer exclusive theatrical runs.

Hollywood publication Variety reported on Tuesday that the Department of Justice had weighed in on the issue.

Antitrust chief Makan Delrahim sent a letter to the academy warning that any changes that limited eligibility for the industry’s highest honors “may raise antitrust concerns,” according to Variety.

An academy spokesperson confirmed it had received the letter and said any rule changes would be considered at an April 23 meeting. A source close to Netflix said the company was not involved with or aware of the Justice Department’s letter.

Netflix is a member of the Motion Picture Association of America, the trade association for Walt Disney Co, AT&T Inc’s Warner Bros. and other movie studios.

“We are all stronger advocates for creativity and the entertainment business when we are working together … all of us,” MPAA CEO Charles Rivkin said on the CinemaCon stage.

Both Rivkin and Fithian noted that box office receipts hit a record $11.9 billion in the United States and Canada in 2018 even as Netflix released dozens of original movies.

Mitch Neuhauser, managing director of CinemaCon, also was asked to address the issue when he wandered into a work room for reporters.

“Streaming is not a problem!” he exclaimed, noting that there are limits to how much people can stand to stay at home with all of the modern conveniences including grocery delivery.

“We’ve got to get out of the house. We are talking about becoming a society of hermits!”

Reporting by Lisa Richwine in Las Vegas; Additional reporting by Kenneth Li in New York and Jill Serjeant in Los Angeles; Editing by Sonya Hepinstall

Cranfield gets Rubrik backup plus Nutanix in drive to the cloud

Cranfield University has replaced its Veeam and Data Domain backup infrastructure for one comprising Rubrik backup appliances and Microsoft Azure cloud storage.

In doing so, it has cut its on-site hardware footprint from 24U to 4U, slashed equipment and licensing costs, and reduced data restore times from hours or days to minutes.

The move also gives Cranfield peace of mind in disaster recovery by gaining the ability to run all operations from any location using virtual servers running in Azure, should the entire site become unavailable.

The refresh comes alongside one in which the university replaced its existing Pure Storage flash storage arrays with 12 nodes of Nutanix hyper-converged infrastructure hardware.

The entire project is a drive towards simplifying Cranfield’s on-site physical infrastructure in a move that encompasses cloud as a site for storage (and compute in case of outages).

Cranfield is a leading research establishment in science, industry and technology, with 1,600 staff and 4,000 postgraduate students.

Its IT stack is based around Microsoft and Linux servers with Microsoft and Oracle-based applications. It is effectively 100% virtualised on VMware, with 400-600 virtual machines running at any one time.

Its existing backup infrastructure was based on Veeam backup software and Data Domain hardware, with replication to a third party-hosted Data Domain box.

That setup had reached end of life and was showing the signs, said head of IT infrastructure Edward Poll.

“Data Domain did what it was supposed to do, but it was time to refresh things and we wanted to reduce costs, management time and complexity, and increase performance,” he said.

“The major issue with Data Domain had become restores. It ingests well, but recovering was more problematic. It would be fine for one restore, but if we’d had to restore multiple – 50, 100 or 150 – servers, we would have struggled.”

Cranfield’s IT department had already started a journey towards cloud by using StorSimple appliances – with about 80TB on site and 0.5PB in the Azure cloud – and had discovered how cost-effective it can be.

“Azure was a good fit and we started by thinking we could use Veeam and Data Domain instances in the cloud, but it was suggested to us, ‘why not get rid of a layer of software?’, and we looked at using Rubrik appliances,” said Poll.

Rubrik is part of an emerging category of backup appliances that come as nodes that build into clusters in a similar way to hyper-converged infrastructure.

Rubrik’s software appliance can come on approved server hardware from Cisco, HPE or Dell with flash and spinning disk inside. Capacities for a minimum four-node cluster are in the 64TB-160TB range, depending on the hardware.

Customers can set policies to specify how long data should be retained as a backup and which can be accessed for production use from Rubrik hardware. Rubrik backup data is seen as an NFS file share before being sent to an in-house physical archive or the cloud.

Cranfield has deployed eight Rubrik R348S nodes with a total of about 80TB of storage on site, with flash and SAS spinning disk tiers of storage inside. Data is ingested, then copied off to the Azure cloud.

The key benefits for Poll’s team are the substantially better restore times, plus the ability to potentially restore virtual machines in the cloud, allowing staff to work from any location in the event of a disaster.

Rubrik’s CloudOn enables rapid recovery to allow for business continuity in the event of a disaster, said Poll. “If our on-prem site is down, we can quickly convert our archived VMs into cloud instances, and launch those apps on-demand in Azure,” he added.

“We don’t notice any difference in data ingest, but performance on restores is very much better.”

In cost terms, Cranfield had been spending £50,000 a year on off-site hosting. It now spends about £25,000 a year with Microsoft Azure.

Meanwhile, time spent managing backup is down from about half a day a week to five minutes a day.

In terms of physical space and equipment savings, Poll said the university had turned off 42U of storage and backup devices, of which backup servers and Data Domain comprised 24U.

“Overall, it has given us a simpler, faster and more reliable backup service,” he said. “It is more easily integrated with a department that is moving towards a DevOps model, and when it comes to data recovery, we are down to minutes rather than many hours.”

The storage and backup refresh – with the move towards hyper-converged infrastructure – forms part of a wider plan to rationalise IT by making use of contemporary devices’ formats with a smaller physical footprint, as well as the cloud.

Poll added: “The university masterplan is to knock down the IT department and to no longer have two large datacentres on site. Instead, there will be one datacentre, a ‘resiliency room’ for redundancy of network equipment, and the cloud.”

Facebook Had a Busy Weekend, From News Feed to Livestream Changes

While millions of Americans were enjoying a warm spring weekend, Facebook employees were hard at work responding to an avalanche of news about their company. After an already busy week for the social media platform—including a lawsuit from the Department of Housing and Urban Development, as well as a policy change regarding white nationalist and separationist content—five major Facebook stories broke over the last few days, including a Washington Post op-ed in which CEO Mark Zuckerberg calls for the social network to be regulated. Here’s what you need to know to get caught up.

Facebook Explores Restricting Who Can Livestream

The torrent of Facebook news began Friday, when COO Sheryl Sandberg said the company was “exploring restrictions on who can go Live depending on factors such as prior Community Standard violations.” The decision came less than three weeks after a terrorist attack in Christchurch, New Zealand, that killed 50 people was livestreamed on Facebook. The social network, as well as other companies like YouTube, struggled to stop the shooter’s video from being reuploaded and redistributed on their platforms.

In 2016, Zuckerberg said that live video would “create new opportunities for people to come together.” Around the same time, the company invested millions of dollars to encourage publishers like Buzzfeed to experiment with Facebook Live. The feature provided an unedited, real-time window into events like police shootings, but it was also repeatedly used to broadcast disturbing events. After the Christchurch attack, Facebook is now reexamining who should have the ability to share live video, which has proven difficult for the company to moderate effectively.

Sandberg also said Facebook will research building better technology to “quickly identify edited versions of violent videos and images and prevent people from re-sharing these versions.” She added that Facebook had identified over 900 different variations of the Christchurch shooter’s original livestream. Sandberg made her announcement in a blog post published not to the Facebook Newsroom but to Instagram’s Info Center, indicating Facebook wants its subsidiaries to appear more unified.

Old Zuckerberg Blog Posts Disappear

Also on Friday, Business Insider reported that years of Zuckerberg’s public writings had mysteriously disappeared, “obscuring details about core moments in Facebook’s history.” The missing trove included everything the CEO wrote in 2007 and 2008, as well as more recent announcements, like the blog post Zuckerberg penned in 2012 when Facebook acquired Instagram.

Facebook said that the posts were mistakenly deleted as the result of technical errors. “The work required to restore them would have been extensive and not guaranteed, so we didn’t do it,” a spokesperson for the company told Business Insider. They added that they didn’t know exactly how many posts were lost in total.

This isn’t the first time Zuckerberg’s content has gone missing from Facebook. Last April, TechCrunch reported that some of the CEO’s messages were erased from people’s private inboxes. (Facebook later extended an “unsend” feature to all Facebook Messenger users.) And in 2016, “around 10” Zuckerberg blog posts also disappeared from the social network. The deletion was similarly blamed on a technical error, but in that case the blogs were later restored.

Zuckerberg Calls for Regulation in Four Areas

In an interview with WIRED last month, Zuckerberg said, “There are some really nuanced questions … about how to regulate, which I think are extremely interesting intellectually.” On Saturday, the Facebook CEO expanded on that idea in an opinion piece published in The Washington Post. “I believe we need a more active role for governments and regulators,” Zuckerberg wrote, calling for new regulation in four particular areas: harmful content, election integrity, privacy, and data portability.

In the piece, Zuckerberg acknowledged that he believes his company has too much power when it comes to regulating speech on the internet. He also mentioned Facebook’s new independent oversight board, which will decide on cases where users have appealed the content decisions made by Facebook’s moderators. (On Monday, Facebook announced it was soliciting public feedback about the new process.)

Zuckerberg also said the rest of the world should adopt comprehensive privacy legislation similar to the European Union’s General Data Protection Regulation that went into effect last year. There’s currently no modern privacy law in the United States, though California passed a strong privacy bill last summer, which Facebook originally opposed. Now a number of lawmakers, and lobbyists, are jockeying to get a federal privacy law in place before the state-level rules take effect next year.

The op-ed arrives as Facebook faces a looming Federal Trade Commission investigation over alleged privacy violations. Lawmakers on both sides of the aisle have also recently expressed an interest in regulating or even breaking up the social media giant. Zuckerberg’s op-ed provides a sketch of the kind of regulation that his company would be comfortable adopting. Some critics have also argued that legislation like GDPR can strengthen the dominant position of companies like Facebook and Google.

Facebook Opens Up About How News Feed Works

How Facebook chooses what content to feature in the News Feed has consistently remained mostly a mystery. As Will Oremus wrote last week in Slate, “For all of Facebook’s efforts to improve its news feed over the years, the social network remains as capricious and opaque an information source as ever.”

But on Sunday evening, Facebook quietly announced that it will begin revealing more about why users see one post over another when they scroll through their feeds. The company will soon launch a “Why am I seeing this post?” button, similar to the one it launched in 2014 for advertisements. It will begin rolling out this week and will be available for all Facebook users by the middle of May, according to Buzzfeed.

“This is the first time that we’ve built information on how ranking works directly into the app,” Ramya Sethuraman, a product manager at Facebook, wrote in a blog post. The new feature might tell users, for example, that they’re seeing a post because they are friends with someone on Facebook or because they joined a specific group. But the button will also provide more granular information, such as telling users they’re seeing a specific photo because they’ve “commented on posts with photos more than other media types.”

Facebook is also making updates to its preexisting “Why am I seeing this ad?” button. It will now tell users when an advertiser has uploaded their contact information to Facebook. In addition, it will show users when advertisers work with third-party marketing firms. For example, an ad for a shoe company might reveal the name of the marketing agency it hired to sell its new sandals.

Pivot to Paying Publishers?

On Monday morning, Zuckerberg suggested he might create a new section of Facebook dedicated to “high-quality news.” Details are scarce, but it may feature content Facebook pays publishers directly to share. The remarks were made during an interview Zuckerberg did with European media executive Mathias Döpfner, which the CEO posted to his personal Facebook page. The announcement comes a year after Facebook said it would begin deprioritizing news stories in its News Feed in favor of content from friends and family.

Last week, Apple announced it was launching a $10 per month paid news aggregation service called News+ (it features content from WIRED). But unlike Apple, Facebook doesn’t appear to be getting into the subscription business. “We’re coming to this from a very different perspective than I think some of the other players in the space who view news as a way that they want to maximize their revenue. That’s not necessarily the way that we’re thinking about this,” Zuckerberg said in the interview.

Facebook’s earlier attempts to partner with media organizations have been a mixed bag. The social network also previously explored creating a dedicated feed for publishers but abandoned the project. Without knowing more, it remains to be seen what, if anything, is going be different this time.


More Great WIRED Stories

Stanphyl Capital Letter – March 2019

March 29, 2019

Friends and Fellow Investors:

For March 2019, the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the Russell 2000 is up approximately 14.6%. Since inception on June 1, 2011, the fund is up approximately 85.4% net while the S&P 500 is up approximately 148.5% and the Russell 2000 is up approximately 102.4%. Since inception the fund has compounded at approximately 8.2% net annually vs. 12.3% for the S&P 500 and 9.4% for the Russell 2000. (The S&P and Russell performances are based on their “Total Returns” indices which include reinvested dividends.) As always, investors will receive the fund’s exact performance figures from its outside administrator within a week or two. (If you’re an investor in the fund, you should have your 2018 K-1 next week.)

I continue to believe that what we’ve seen since the market’s late December low is a bear market rally, albeit a fierce one. The U.S. economic slowdown is in its early stages and we’re a long way from QE4; in fact, the Fed is still removing approximately $50 billion a month from its balance sheet and – despite the taper announced in March – will continue removing tens of billions of dollars a month through September, while real short-term U.S. interest rates are positive for the first time in over a decade. We thus remain short the Russell 2000 (NYSEARCA:IWM), an index which-despite incorporating almost a full year of drastically lower corporate tax rates-has a trailing twelve-month GAAP PE ratio of around 43 (and I strongly suspect the “E” will go down this year) and a record-high percentage of its constituent companies losing money…

http://si.wsj.net/public/resources/images/B3-DO131_Dshot_NS_20190328041637.png?mod=djemDailyShot

…along with a median EV-to-EBIT that’s (almost literally!) off the charts:

http://si.wsj.net/public/resources/images/B3-DM812_Dshot_NS_20190322044352.png?mod=djemDailyShot

Elsewhere in the fund’s short positions…

We remain short stock and call options in Tesla, Inc. (NASDAQ:TSLA), which I consider to be the biggest single stock bubble in this whole bubble market. The core points of our Tesla short position are:

  1. Tesla has no electric vehicle “moat” of any kind; i.e., nothing meaningfully proprietary in terms of design or technology, while existing automakers-unlike Tesla-have a decades-long “experience moat” of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably.
  2. Tesla is now a “busted growth story”; demand for its existing models has peaked and it will have to raise billions of dollars to produce new ones.
  3. Tesla is again losing a lot of money with a terrible balance sheet while suddenly confronting massive competition in every aspect of its business
  4. Elon Musk is extremely untrustworthy.

In mid-March, seemingly in response to its sliding stock price (which may have been approaching Elon Musk’s margin call territory), Tesla rushed out an ill-prepared Model Y unveiling on extremely short notice, inspiring its chief engineer to immediately quit. Supposed to be a small electric SUV/crossover, the event showed only a fake clay model and a bodywork-disguised Model 3, and was a complete embarrassment beautifully summarized here by Zero Hedge. By the time the Model Y is available in late 2020/early 2021 (if Tesla is still in business then), it will face superior competition from the much nicer Audi Q4 e-tron, BMW iX3, and Mercedes EQC.

Tesla’s backlog is now gone and new orders severely lag, and in response this month it finally introduced a $35,000 version of the Model 3. Despite the fact that this car has just 220 miles of range and comes only in black with a cheap cloth interior, I estimate it will have an EBIT loss of at least $3000 before options, which is undoubtedly why Tesla is delaying its arrival despite taking deposits for it. Tesla also introduced a 240-mile version for $37,500; that one may “only” lose around $1500 but is less likely to be “optioned up,” as it has power seats and a nicer interior (although the only standard color remains black).

Also keep in mind that since January Tesla has slashed thousands of dollars from the prices of all its other cars – longer-range Model 3s as well as the S and X, so throughout 2019 (vs. the peak quarters of Q3 & Q4 2018) Tesla will experience a deadly combination of declining volume and declining ASPs. In January, the company reported a Q4 2018 GAAP profit of $139 million that was considerably smaller than Q3’s never-to-be-topped and highly misleading (as explained in previous letters) figure of $312 million, and now as ASPs and volume decline while under-reserved warranty expenses soar, Tesla shall slide back into losses that I estimate on a GAAP basis will be well over $1 billion for 2019. That said…

In yet another example of typical Tesla “wise-guy scamminess,” the Q1 2019 GAAP loss may not be anywhere near as bad as it should be, as there’s a real chance that Tesla may use its sudden redefinition of “Full Self-Driving” (which, according to Tesla but NOT the customers who paid for that feature, now means nothing of the sort) in order to recognize hundreds of millions of dollars of deferred revenue to which it’s nowhere *near* entitled. See this excellent Twitter thread.

What else did this alleged “growth company” do in March? Well, after initially announcing (in a spur-of-the-moment cost-saving measure) that it was closing 90% of its retail stores, Tesla soon backtracked and decided to close “only” around half of them, most likely when someone informed Musk – who is truly a business moron – that the company was on the hook for all those leases anyway.

In late February, the SEC finally lost patience with Elon Musk’s continual violation of last year’s settlement stemming from his fraudulent “$420 buyout” tweet and asked the presiding judge to hold him in contempt, to which Musk (of course) swiftly responded by further mocking the SEC. Written arguments were presented by both sides in March and the presiding judge will hold a hearing on April 4th. Despite the terrible precedent Musk’s behavior sets for the CEOs of any other public company, I don’t have much faith that justice will be served here by either the court or Tesla’s fully complicit board; of course the latter’s source of complicity is clear: this is the most grotesquely overpaid group of corporate whores I’ve ever seen on the board of any public company…

…and here’s what Musk gets for his shareholders’ money from his new figurehead of an “independent” Chairwoman:

Musk’s public persona of impetuous stupidity as exemplified by his Twitter account undoubtedly provides an illuminating window into his private persona. Tesla has the most executive departures I’ve ever seen from any company (here’s the astounding full list), a dubious achievement that continued in March when in addition to the aforementioned departure of its chief engineer, still more folks departed from its already gutted finance department, as well as multiple other departments. This followed February’s departure of its general counsel after fewer than two months on the job, which followed January’s departure of its CFO, which followed the departures of a massive number of financial, manufacturing and engineering execs in 2018 and 2017. These people aren’t leaving because things are going great (or even passably) at Tesla; rather, they’re likely leaving because Musk is either an outright crook or the world’s biggest jerk to work for (or both). Could the business (if not the stock price) be saved in its present form if he left? Nope, it’s too late. Even if Musk steps down in favor of someone who knows what he’s doing, emerging competitive factors (outlined in great detail below) and Tesla’s balance sheet make the company too late to “fix” without major financial and operational restructuring.

Also in March, Navigant Consulting came out with its annual ranking of autonomous driving capabilities, and just as last year Tesla ranked dead last among active automakers and suppliers. Meanwhile, the number of lawsuits of all types against Tesla continues to escalate – there are now over 500!

How poorly is Tesla run? The quality of its products is one indication, and in February Consumer Reports published its annual auto reliability survey and guess who finished second-to-last? As one wag said on Twitter: you can now officially call Tesla “the Cadillac of electric cars”:

Consumer Reports’ awful Tesla reliability data jibes with the latest survey from True Delta, which ranks Tesla last among all available vehicles, while in September, British magazine What Car? ranked Tesla reliability so low that it’s in “a league” of its own.

But what about all those Tesla owners who tell you how much they love their cars despite the service and reliability problems?

I’ve always argued that Tesla owners (and TSLA bulls) confuse “luxury electric car love” for “Tesla love,” and now that superior European alternatives are beginning to roll out, Tesla drivers will flock to them. For instance, among those relatively near-term alternatives (out in late 2019) is the Porsche Taycan (OTCPK:POAHY) (here’s a great new video of it), and according to Porsche’s surveys, it’s Tesla drivers who are most interested in buying it. After its U.S. tax credit price advantage over Tesla (whose credits will be gone at the end of 2019), the stunning, Autobahn and Nürburgring-tested Taycan will cost roughly the same as the least expensive Tesla Model S and, among innumerable other advantages, will charge 2 ½ times as quickly and in the U.S. include three years of that charging as part of the purchase price. Hmm, Tesla or Porsche… Not a tough choice! Porsche has the capacity to build 40,000 Taycans a year, roughly the expected number of 2019 Model S sales before the Taycan steps in to steal pretty much all of them, and in March, Porsche announced that it already has over 20,000 orders. So Model S sales are about to be *so* dead. And if that’s not enough, a crossover version of the Taycan will follow soon thereafter, as will an all-electric version of the next Maycan. So Model X sales are *also* about to be *so* dead, especially in light of the other electric crossovers and SUVs discussed below…

Porsche’s offerings are just part of an onslaught of luxury EV competition that’s about to rip the face off sales of Tesla’s most profitable models, the S&X. The Audi (OTCPK:AUDVF) e-tron and Jaguar I-Pace (see below) are already crushing S&X sales in the European countries where they’re available, and the Audi arrives here in the U.S. in April. The e-tron is an all-electric SUV with a much nicer interior (and better build quality!) than any Tesla and a price that’s around $15,000 lower than the Model X before the Audi’s (initial) $3,750 to (eventual) $7,500 U.S. tax credit advantage. (Although the Audi’s range is expected to come in at around 225 miles vs. 295 miles for the Model X, the Audi will charge faster.) The e-tron received solid reviews (here, here, here and here), and three more electric Audis will follow it: the Sportback in late-2019 and, in 2020, the spectacular e-tron GT that recently debuted at the L.A. Auto show, as well as (in late 2020) the Q4 e-tron small electric crossover.

Also currently in showrooms is the Jaguar I-Pace (which received fabulous reviews, handily beating Tesla in comparison test after comparison test) and costing $20,000 less than the Model X and $15,000 less than the Model S, price gaps that widen by an additional $3,750 with Jaguar’s current U.S. tax credit advantage and escalate to $7,500 in January 2020. I’ve driven the Jaguar and can assure you that no objective person will say it isn’t much nicer than any Tesla.

The Mercedes EQC (OTCPK:DDAIF) (OTCPK:DMLRY) all-electric SUV will be widely available in Europe in the summer of 2019 and in the U.S. in early 2020, with an EPA range of around 225 miles and a price that will be nearly $30,000 (!) less than the Model X before the Mercedes’ (by then) $7500 U.S. tax credit advantage. And by 2022 Mercedes will have ten fully electric models, covering nearly all its model lines.

And let’s not count out BMW (OTCPK:BMWYY); here’s a fascinating interview with its head EV powertrain engineer and a preview of its upcoming 2021 i4 and iX3.

Less expensive and available now are the excellent new all-electric Hyundai Kona (OTCPK:HYMLF) (OTCPK:HYMTF) and Kia Nero, extremely well reviewed small crossovers with an EPA range of 258 miles for the Hyundai and 238 miles for the Kia, at prices of under $30,000 inclusive of the $7,500 U.S. tax credit. I expect these cars to have an immediate and negative impact on sales of Tesla’s Model 3 and a future negative impact on Tesla’s Model Y (assuming, of course, the latter makes it to market before Tesla declares bankruptcy).

So here is Tesla’s competition in cars (note: these links are continually updated)…

THE NEW ALL-ELECTRIC JAGUAR I-PACE

2019 Jaguar XJ to be reborn as high-tech electric flagship

VW Group to launch 70 pure electric cars over the next decade

Audi e-tron electric SUV is available now

Audi e-tron Sportback comes late 2019

AUDI E-TRON GT FIRST DRIVE: LOOK OUT, TESLA (available 2020)

Audi’s Q4 e-tron previews entry-level EV for 2021

Porsche Electric Taycan Launches Late 2019

Porsche Taycan Cross Turismo to launch in 2020 after Taycan Sedan

The next generation of the Porsche Macan will be electric

New VW ID. hatch: order books for VW electric car open on May 2019

Mercedes EQC Electric SUV Available Mid-to-Late 2019

Mercedes to launch more than 10 all-electric models by 2022

258-Mile Hyundai Kona electric is available now for under $40,000

239-Mile Kia Niro EV is Available Now For Under $40,000

Kia Soul (available mid-2019) EV’s Range Jumps to 243 Miles

Kia Europe to have six pure electric models by 2022

Chevrolet Bolt Offers 238 Miles On A Single Charge
GM is transforming Cadillac into an electric brand

Nissan LEAF e+ with 226-mile range is available now

Nissan Leaf-based SUV coming in 2020

The 2020 Volvo Polestar 2 Is Priced to Beat Tesla’s Best-Selling Model 3

BMW iX3 electric crossover goes on sale in 2020

New BMW i4: Tesla-rivalling coupe seen winter testing

BMW to have 25 electrified models by 2025

Ford CEO says 16 electric models are in design & development

Peugeot 208 to electrify Europe’s small-car market

Toyota, Mazda, Denso create company to roll out electric cars beginning 2019

Toyota to market over 10 battery EV models in early 2020s

New Renault Zoe to feature 400km range

Renault aims to remain EV leader in Europe

Infiniti will go mostly electric by 2021

DS 3 Crossback will give PSA’s upscale brand an electric boost

ALL-ELECTRIC MINI COOPER COMING IN 2019

Smart Will Electrify Its Entire Line-up By 2020

SEAT will launch 6 electric and hybrid models and develop a new platform for electric vehicles

Opel/Vauxhall will launch electric SUV and van in 2020

2019 Skoda e-Citigo confirmed as brand’s first all-electric model

Skoda planning range of hot all-electric eRS models

New Citroen C4 Cactus to be first electrified Citroen in 2020

MG E-Motion confirms new EV sports car on the way by 2020

Fiat Chrysler bets on electrification for Alfa, Jeep and Maserati

Maserati offering three fully electric cars between 2020 and 2022

Rolls-Royce is preparing electric Phantom for 2022

Honda will offer full-EV or hybrid tech on every European model by 2025

Bentley mulls electric car to help reduce carbon footprint

Subaru to introduce all-electric vehicles by 2021

Korando will lead SsangYong’s push into electrification

Dyson Moves Ahead on $2.6 Billion Electric Car Plan

Lucid Motors closes $1 billion deal with Saudi Arabia to fund electric car production

Rivian (electric pick-up truck maker) Announces $700M Investment Round Led By Amazon

Borgward BXi7 Electric SUV Flies Under The Radar

Detroit Electric promises 3 cars in 3 years

SF Motors reveals two electric SUVs for 2019 with 300 miles of range

Two new electric cars from Mahindra in India by 2019; Global Tesla rival e-car soon

Saab asset owner NEVS plans electric car production

EV startup Canoo will only sell cars on a subscription basis

And in China…

VW, China spearhead $300 billion global drive to electrify cars

Audi Q2L e-tron debuts at Auto Shanghai

Audi China to roll out 12 locally-produced models in total by 2022

BYD launches EV535, all-electric SUV

BYD Song MAX BEV version with 500km range to hit market in 2019

2019 BYD Yuan EV360 goes on sale with prices starting RMB89,900 after subsidy

Daimler & BYD launch new DENZA electric vehicle for the Chinese market

BAIC and Daimler to Build $1.9 Billion China Plant

BAIC brings EX5 Electric SUV to market

BAIC BJEV, Magna ready to pour RMB2 bln in all-electric PV manufacturing JV

Daimler to Start EQC Electric SUV Production in China in 2019

GM China raises new-energy vehicle target to 20 models through 2023

Nissan & Dongfeng to invest $9.5 billion in China to boost electric vehicles

Toyota to Introduce 10 New Electrified Vehicles in China by 2020

Infiniti bringing EVs to China’s luxury car market

NIOS ES8 Electric Crossover debuts with half the Tesla Model X’s price tag

536 HP Nio ES6 Midsize Electric SUV Launches With 317-Mile Range at 1/2 the price of Tesla X

NIO’s third model said to be a sedan dubbed EP7

BMW will develop and produce electric Mini in China

Ford ramps up electric vehicle push in China

Jaguar Land Rover’s Chinese arm invests £800m in EV production

SAIC building factory in China for EVs from Roewe and MG

Renault and Brilliance Automotive to build 3 new electric light commercial vehicles for China

Honda launches new all-electric Everus VE-1 for ~$25,000 in China

Honda to roll out over 20 electric models in China by 2025

Geely all-new BEV sedan Jihe A starts at RMB150,000

Geely unveils GE11 compact BEV

New Geely Emgrand GSe crossover has EV range up to 400km

Changan building large scale NEV factory

Mazda and Changan Auto join hands on electric vehicles

XPENG Motors kicks-off sales of Tesla-infused EV for €30,000

XPENG Motors to unveil second model at Auto Shanghai 2019

WM Motors/Weltmeister EX5 Electric SUV Launched On The Chinese Car Market

Chery Breaks Ground on $240M EV Factory in China

Chery’s second EV plant open in Dezhou

BYTON to launch mass-produced M-Byte into market at the end of 2019

DearCC Launches ENOVATE Electric SUV

GAC NE to roll out 12 new models for Aion series, including solar-powered models

Guangzhou Auto To Launch Four New Electric Cars By 2020

Great Wall Launches New EV Brand (NYSE:ORA) In China

Singulato iS6 Electric SUV Debuts With 249-Mile Range

Singulato, BAIC partner to promote smart new energy vehicles

Hongqi launches E-HS3 BEV SUV with AWD option, 390km range and 0-100kh/h in 5.9 seconds

FAW (Hongqi) to roll out 15 electric models by 2025

JAC’s Electric Car Has A Range Of 500 Kilometers

ICONIQ to build electric cars in Zhaoqing with total investment of RMB 16 billion

Quianu Motor aims to grab share of US electric vehicle market

Hozon Kicks Off Mass Production With All-Electric Neta N01

Aiways U5 long-range electric SUV

All-electric NEVS 9-3 sedans (nee Saab) being built in China

Youxia Motors raises $1.25 billion to start 2019 EV production

CHJ Automotive buys Lifan for shortcut to EV production

Wanxiang Gets China Electric Vehicle Permit to Make Karma Cars

Qoros Auto’s new owner plans to be an EV power

JMC (Jianling Motor Corp.) Starts New EV Brand In China

Thunder Power Chinese EV manufacturer clinches deal with Belgian investment fund

Leapmotor raises RMB2.5 billion for Series A round to build electric cars

Continental, Didi sign deal on developing EVs for China

Here’s Tesla’s competition in autonomous driving…

Navigant Ranks Tesla Last Among Automakers & Suppliers for Automated Driving

What Smart Tesla fans Get Wrong about Full Self-Driving

Tesla has a self-driving strategy other companies abandoned years ago

Waymo Starts First Driverless Car Service

Jaguar and Waymo announce an electric, fully autonomous car

Waymo Expands Chrysler Self-Driving Fleet 100-Fold to 62,000

Nissan-Renault alliance to tie up with Waymo on self-driving cars

Uber, Waymo in talks about self-driving partnership

Lyft and Waymo Reach Deal to Collaborate on Self-Driving Cars

Cadillac Super Cruise Sets the Standard for Hands-Free Highway Driving

GM ride-hailing fleet would ditch steering wheel, pedals in 2019

Honda Joins with Cruise and General Motors to Build New Autonomous Vehicle

SoftBank Vision Fund to Invest $2.25 Billion in GM Cruise

Ford and VW Discuss Autonomous Car Team-Up at a $4 Billion Valuation

Volkswagen Group and Aurora Innovation Announce Strategic Collaboration On Self-Driving Cars

VW taps Baidu’s Apollo platform to develop self-driving cars in China

An Overview of Audi Piloted Driving

Daimler, BMW deepen cooperation with self-driving venture

Mercedes plans advanced self-driving tech for next S class

Bosch and Daimler join forces to market fully automated, driverless taxis by 2020

Daimler’s heavy trucks start self-driving some of the way

Volvo, Nvidia expand autonomous driving collaboration

Continental & NVIDIA Partner to Enable Production of Artificial Intelligence Self-Driving Cars

Intel’s Mobileye has 2 million cars (VW, BMW & Nissan) on roads building HD maps

Toyota’s moonshot: Self-driving car for sale – in 2020

Nissan and Mobileye to generate, share, and utilize vision data for crowdsourced mapping

Magna joins the BMW Group, Intel and Mobileye platform as an Integrator for AVs

Intel collaborates with Waymo on self-driving compute design

Fiat Chrysler to Join BMW, Intel and Mobileye in Developing Autonomous Driving Platform

Baidu, WM Motor announce strategic partnership for L3, L4 autonomous driving solutions

Baidu plans to mass produce Level 4 self-driving cars with BAIC by 2021

Volvo, Baidu to co-develop EVs with Level 4 autonomy for China

BYD partners with Huawei for autonomous driving

Lyft, Aptiv (formerly Delphi) partner on driverless ride-hailing at 2018 CES in Vegas

Lyft, Magna in Deal to Develop Hardware, Software for Self-Driving Cars

Hyundai, Aurora to release autonomous cars by 2021

Deutsche Post to Deploy Test Fleet Of Fully Autonomous Delivery Trucks This Year

Byton cooperating with Aurora on autonomous vehicles

ZF autonomous EV venture to start output this year, names first customer

Magna’s new MAX4 self-driving platform offers autonomy up to Level 4

Groupe PSA’s safe and intuitive autonomous car tested by the general public

Tencent, Changan Auto Announce Autonomous-Vehicle Joint Venture

Self-driving startup Momenta ready to launch fully automated driving solution in Q3 2019

JD.com Delivers on Self-Driving Electric Trucks

NAVYA Unveils First Fully Autonomous Taxi

Fujitsu and HERE to partner on advanced mobility services and autonomous driving

Lucid Chooses Mobileye as Partner for Autonomous Vehicle Technology

First Look Inside Zoox’s Autonomous Taxi

Nuro’s Robot Delivery Vans Are Arriving Before Self-Driving Cars

Here’s Tesla’s competition in car batteries…

LG Chem targets electric car battery sales of $6.3 billion in 2020

LG Chem to build $1.8 bln EV battery plant in China

Samsung SDI Unveils Innovative Battery Products at 2018 Detroit Motor Show

SK Innovation to boost EV battery production capacity more than tenfold by 2022

New Toshiba EV Battery Allows 320km Charge in 6 Minutes

Daimler starts building electric car batteries in Tuscaloosa – one of 8 battery factories

Panasonic Opens New Automotive Lithium-Ion Battery Factory in Dalian, China

Panasonic forms battery partnership with Toyota

CATL’s Chinese battery factory will be bigger than Tesla’s Gigafactory

CATL to set up battery cell manufacturing in Germany

BYD to quadruple car battery output with lithium site plants

GM inaugurates battery assembly plant in Shanghai

Volkswagen plans entry into battery cell production

VW Wants to One-Up Tesla With a Next-Generation Battery

Honda Partners on General Motors’ Next Gen Battery Development

Energy Absolute Plots Asian Project Rivaling Musk’s Gigafactory

France’s Saft plans production of next-gen lithium ion batteries from 2020

Northvolt making ground on Gigafactory in Sweden

ABB teams up with Northvolt on Europe’s biggest battery plant

Chinese Battery Maker to Open Factory Next to Swedish EV Plant

Sokon aims to be global provider of battery, electric motor, electric control systems

BMW Group invests 200 million euros in Battery Cell Competence Centre

BMW Brilliance Automotive opens battery factory in Shenyang

BMW announces partnership with solid-state battery company

Toyota promises auto battery ‘game-changer’

VW increase stake in solid-state batteries with $100M investment

Hyundai Motor developing solid-state EV batteries

Wanxiang is playing to win, even if it takes generations

UK provides millions to help build more electric vehicle batteries

Rimac is going to mass produce batteries and electric motors for OEMs

Elon Musk Has A New Battery Rival (Romeo Power) Packed With His Ex-Employees

Evergrande acquires Cenat battery production

Bracing for EV shift, NGK Spark Plug ignites all solid-state battery quest

ProLogium Technology Will Produce First Next Generation Lithium Ceramic Battery For EVs

Here’s Tesla’s competition in storage batteries…

Panasonic

Samsung

LG

BYD

AES + Siemens (Fluence)

GE

Bosch

Mitsubishi Hitachi

NEC

Toshiba

ABB

Saft

Johnson Contols

EnerSys

SOLARWATT

Schneider Electric

sonnenBatterie (acquired by Shell)

Kokam

Sharp

Eaton

Nissan

Tesvolt

Kreisel

Leclanche

Lockheed Martin

EOS Energy Storage

ESS

UET

electrIQ Power

Belectric

Stem

ENGIE

Exergonix

Redflow

Renault

Fluidic Energy

Primus Power

Simpliphi Power

redT Energy Storage

Murata

Bluestorage

Adara

Blue Planet

Clean Energy Storage Inc.

Tabuchi Electric

Younicos

Orison

Moixa

Powin Energy

Nidec

Powervault

Schmid

24M

Ecoult

Innolith

LithiumWerks

Natron Energy

And here’s Tesla’s competition in charging networks…

Electrify America: Our Plan

EVgo Installing First 350 kW Ultra Fast Public Charging Station In The US

Tritium’s First 350-kW DC Fast Chargers Coming To U.S.

Porsche plans network of 500 fast chargers for U.S.

ChargePoint To Equip Mercedes Dealerships With 150kw Charging Stations For EQC

Recargo Ultrafast West Coast Charging

BMW, Daimler, Ford, VW, Audi & Porsche form IONITY European 350kw Charging Network

E.ON to have 10,000 150KW TO 350KW EV charging points across Europe by 2020

Enel kicks off the E-VIA FLEX-E project for the installation of European ultra-fast charging stations

Europe’s Allego “Ultra E” ultra-fast charging network now operational

Allego & Fortum Launch MEGA-E High Power Charging network for Europe’s Metropolitan areas

ChargePoint Secures $240 Million in Additional Funding; $500 million raised in total

UK’s Podpoint installing 150kW EV rapid chargers this year; 350kW by 2020

UK National Grid plans 350kW EV charge point network

Fastned building 150kw-350kw chargers in Europe

Deutsche Telekom to build electric car charging network in Germany

ABB powers e-mobility with launch of first 150-350 kW high power charger

Shell buys European electric vehicle charging pioneer NewMotion

BP buys UK’s largest car charging firm Chargemaster

Total planning EV charging points at its French stations

VW Is Setting Up Electric Car Charging Stations in China

Yet, despite all that deep-pocketed competition, perhaps you want to buy shares of Tesla because you believe in its management team. Really???

Elon Musk Settles SEC Fraud Charges

Elon Musk, June 2009: “Tesla will cross over into profitability next month”

Tesla SEC Correspondence Shows A Pattern Of Inaccurate, Incomplete & Misleading Disclosures

Tesla: Check Your Full Self-Driving Snake Oil Expiration Date

As Musk Hyped and Happy-Talked Investors, Tesla Kept Quiet About a Year-Long SEC Probe

The Truth Is Catching Up With Tesla

With Misleading Messages And Customer NDAs, Tesla Performs Stealth Recall

Who You Gonna Believe? Elon Musk’s Words Or Your Own Lying Eyes?

How Tesla and Elon Musk Exaggerated Safety Claims About Autopilot and Cars

When Is Enough Enough With Elon Musk?

Musk Talked Merger With SolarCity CEO Before Tesla Stock Sale

Debunking The Tesla Mythology

Tesla Continues To Mislead Consumers

Tesla Misses The Point With Fortune Autopilot Story

Tesla Timeline Shows Musk’s Morality Is Highly Convenient

Tesla Scares Customers With Worthless NDAs, The Daily Kanban Talks To Lawyers

Tesla: Contrary To The Official Story, Elon Musk Is Selling To Keep Cash

Tesla: O, What A Tangled Web We Weave When First We Practice To Deceive

I Put 20 Refundable Deposits On The Tesla Model 3

Tesla’s Financial Shenanigans

Tesla: A Failure To Communicate

Can You Really Trust Tesla?

Elon Musk Appears To Have Misled Investors On Tesla’s Most Recent Conference Call

Understanding Tesla’s Potemkin Swap Station

Tesla’s Amazing Powerwall Reservations

So in summary, Tesla is losing a massive amount of money even before it faces a huge onslaught of competition (and things will only get worse once it does), while its market cap tops that of Ford (NYSE:F) and nearly matches General Motors’ (NYSE:GM) despite selling approximately 300,000 cars a year while Ford and GM make billions of dollars selling 6 million and 8.4 million vehicles, respectively. Thus, this cash-burning Musk vanity project is worth vastly less than its roughly $60 billion enterprise value and-thanks to roughly $34 billion in debt, purchase and lease obligations – may eventually be worth “zero.”

Elsewhere among our short positions…

We continue (since late 2012) to hold a short position in the Japanese yen via the Proshares UltraShort Yen ETF (NYSEARCA:YCS) as Japan continues to print nearly 5% of its monetary base per year after nearly quadrupling that base since early 2013. In fact, of the world’s three largest central banks (the Fed, ECB and BOJ), the BOJ is now the only one still conducting QE, and in February, it reiterated its intent to continue doing so. One result of this insane policy (in 2018, the BOJ bought approximately 67% of JGB issuance and in 2019 anticipates buying 70%!) is there are days when no 10-year JGBs trade in the cash market! The BOJ’s balance sheet is now larger than the entire Japanese economy – it owns approximately 43% of all government debt…

http://si.wsj.net/public/resources/images/B3-DI987_Dshot_NS_20190307033740.png?mod=djemDailyShot

…and over 75% (!) of the country’s ETFs by market value.

Just the interest on Japan’s debt consumes 8.9% of its 2019 budget despite the fact that it pays a blended rate of less than 1%. What happens when Japan gets the 2% inflation it’s looking for and those rates average, say, 3%? Interest on the debt alone would consume nearly 27% of the budget and Japan would have to default! But on the way to that 3% rate the BOJ will try to cap those rates by printing increasingly larger amounts of money to buy more of that debt, thereby sending the yen into its death spiral.

When we first entered this position, USD/JPY was around 79; it’s currently in the 110s, and long term, I think it’s headed a lot higher – ultimately back to the 250s of the 1980s or perhaps even the 300s of the ’70s before a default and reset occur.

We continue to hold a short position in the Vanguard Total International Bond ETF (NASDAQ:BNDX), comprised of dollar-hedged non-US investment grade debt (over 80% government) with a ridiculously low “SEC yield” of 0.81% at an average effective maturity of 9.4 years. As I’ve written since putting on this position in July 2016, I believe this ETF is a great way to short what may be the biggest asset bubble in history, as with Eurozone inflation now printing 1.5% annually, these are long-term bonds with significantly negative real yields. In mid-December, the ECB halted quantitative easing, thereby removing the biggest source of support for those bonds’ bubble prices. Currently, the net borrow cost for BNDX provides us with a positive rebate of over 1.7% a year (more than covering the yield we pay out), and as I see around 5% potential downside to this position (vs. our basis, plus the cost of carry) vs. at least 20% (unlevered) upside, I think it’s a terrific place to sit and wait for the inevitable denouement of this insanity:

And now for the fund’s long positions…

We continue to own Westell Technologies Inc. (NASDAQ:WSTL), a 43% gross margin telecom equipment maker (of primarily small-cell repeaters) in turnaround mode. In February, Westell reported a mediocre FY 2019 third quarter, with revenue down 22% year-over-year but up 6% sequentially, and although it burned around $970,000 in free cash flow, it ended the quarter with $27.1 million in cash ($1.75/share) and no debt, and on the follow-up conference call, management explicitly indicated that it expects to return to break-even or better within a year. Westell sells at an enterprise value of only around 0.10x (i.e. 10% of) revenue, but in addition to the (hopefully soon-to-reverse) cash burn, the “hair” on this company is the long-term decline in revenue (which now appears to have stabilized and should soon reverse), a cash pile that could potentially be squandered on dumb acquisitions (a risk with all cash-rich companies) and – perhaps most annoyingly – a dual share class, with voting control held by descendants of the founder. However, on the conference call, management claimed the controlling family is open to merging the two share classes, and Westell is so cheap on an EV-to-revenue basis that if management can’t start generating meaningful profits, it seems primed for a strategic buyer to acquire it. An acquisition price of 1x run-rate revenue (on an EV basis) would be around $4.50/share.

We continue to own Aviat Networks, Inc. (NASDAQ:AVNW), a designer and manufacturer of point-to-point microwave systems for telecom companies, which in February reported a decent Q2 for FY 2019, with revenue up 2% year-over-year (adjusted for a GAAP-mandated change in revenue recognition to ASC 606; unadjusted revenue was up 5.5%). For FY 2019, the company guided to $250-$255 million of revenue and non-GAAP EBITDA of $12.5-$13 million, and because of its approximately $330 million of U.S. NOLs, $10 million of U.S. tax credit carryforwards, $214 million in foreign NOLs and $2 million of foreign tax credit carryforwards, Aviat’s income will be tax-free for many years; thus, GAAP EBITDA less capex essentially equals “earnings.” So if the non-GAAP number will be $12.5 million and we take out $1.7 million in stock comp and $6 million in capex, we get $4.8 million in earnings multiplied by, say, 16 = approximately $77 million; if we then add in at least $30 million of expected year-end net cash and divide by 5.4 million shares, we get an earning-based valuation of around $20/share. However, the real play here is as a buyout candidate; Aviat’s closest pure-play competitor, Ceragon (NASDAQ:CRNT) sells at an EV of approximately 0.7x revenue, which for AVNW (based on the mid-point of 2019 guidance) would be around $207 million. If we value Aviat’s massive NOLs at a modest $10 million (due to change-in-control diminution in their value), the company would be worth $217 million divided by 5.4 million shares = $40/share.

We continue to own the Invesco DB Agriculture ETF (NYSEARCA:DBA), which I first bought in late 2017 because agricultural products were the most beaten-down sector I could find that wasn’t a “buggy whip” (something on the way to obsolescence) or cyclical from a demand standpoint. The “DBIQ Diversified Agriculture Index” on which DBA is based is at its lowest level since 2002, and I continue to anticipate a major bounce following a favorable outcome from U.S.-China trade talks. Trump is very conscious of the fact that farm states constitute a significant part of his political base and the China deal implications for U.S. ag products would be huge. Meanwhile, extensive midwestern U.S. flooding (a real tragedy for those affected) put a bit of a tailwind behind this ETF in mid-March (although it subsequently surrendered some of those gains).

Thanks and regards,

Mark Spiegel

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

4 Differences Between an ICO and a Penny Stock

The coins sold by small companies in Initial Coin Offerings are often compared to penny stocks. Like penny stocks, they’re cheap. Penny stocks cost less than five bucks; a new coin released at an ICO can literally cost a penny or less. They also have the potential for huge returns. Monster Beverage, a drinks company, was selling at around 60 cents a share at the start of 2005. It’s now worth nearly $60 a share. If you had bought $100 of those shares fourteen years ago, you’d now be sitting on nearly $10,000. That’s not as high as the returns earned by early Bitcoin investors but it’s still worth having. There are some important differences between penny stocks and cheap coins from ICOs though. Here are four of them:

  1. An ICO Doesn’t Give You a Company

Penny stocks might be cheap but they’re still stocks. They give you a share of a company, possibly with voting rights. An ICO only releases a product whose value you hope will rise. It’s like a new casino raising funds by selling its unique poker chips cheaply. If the casino is popular those chips could be worth a lot of money. But if the casino is never built, you’ll be left with a pile of useless discs.

  1. You Can Research the People Behind the ICO

One reason that a penny stock is such a high risk is that there’s often very little information about the company or the people behind it. You might not know who the managers are, what they did before they launched the company or whether they’re serious. You might know no more than the price of the stock and the name of the business. The rest is a shot in the dark.

Before launching an ICO, cryptocurrency firms release white papers. Those white papers will explain the background of the people launching the firm. You can often contact them on Telegram and ask them questions. That doesn’t mean that you can find all the information you want, or always get the answers you need. There will always be gaps and risks. But ICOs can provide details about the people behind them.

  1. You Can Research the Business Idea

The white paper should also explain what the company is doing and how it plans to do it. Again, that doesn’t mean that the company will actually do what it says. It doesn’t mean that the managers have the skill or the competence to do what they intend. But you should be able to assess their idea and decide for yourself whether or not you think it has legs. A bet on an ICO is a bet on a business idea.

  1. Coins Are Easier to Buy and Sell than Penny Stocks

Penny stocks are usually bought and sold through brokers. The markets are illiquid, the commissions are high and the process isn’t straightforward. The products of ICOs aren’t always sold on major cryptocurrency exchanges but you can usually buy them directly from the companies and if the coin is a success, you can expect it to be listed in the future.

“Easier” isn’t the same as “easy” though. Trading volumes will still be small. Not all coins will be listed on an exchange and those that are listed, often find themselves on small exchanges.

Like penny stocks, buying a small coin at an ICO is a high risk venture. But you can keep your losses low, and who knows, you might just strike it big!

Published on: Mar 31, 2019

Want to Spend Less Time on Marketing? Let Your Customers Do It For You - Here's How

As an already-busy entrepreneur, taking the time to create kick-ass marketing campaigns can sometimes seem more like a distraction than a worthwhile investment of your time. That being said, most entrepreneurs aren’t taking advantage of something that could dramatically reduce the time they spend on marketing: their customers.

If you take the time to strategize correctly and are crafty enough, your customers could be a content gold mine for your company. Here are even creative ways to do it.

1. Host a photo-sharing contest.

One way your customers can help your marketing efforts in a big-time fashion is through creating content to promote your business, and a photo-sharing contest is a great tactic to get the ball rolling. To do this, host a contest where customers must post a picture of themselves using your product or service on social media and tag your company in the photo to enter.

From there, you’ll have loads of images of happy customers to repost to your own social media channels for the next couple of weeks. Not only will this save you time, but it’ll also act as social proof that others are enjoying what your company is offering.

Important Note: Be sure to get explicit permission from whoever you plan on reposting that they’re okay with you doing so. Otherwise, you could have a lawsuit on your hands.

2. Use Instagram Polls for content ideas.

Stuck trying to settle on an idea for your next blog post, email newsletter, or video? Use the Polls feature on Instagram Stories to see what your audience is most interested in learning about. Within the app, they’ll be able to respond directly and vote on the topic they like best, saving you time trying to figure out which topics to cover. 

3. Use Twitter Advanced Search to eavesdrop.

Twitter has a too-often-overlooked feature called Advanced Search, which allows users to type in keywords to see what people are tweeting about as it relates to those keywords. You can also filter by location and more.

This makes it an awesome place to eavesdrop on what people are really saying about your company. Whether the tweets are questions customers may have about your company, complaints, compliments or something else, you can use this information as fuel for your content.

For example, if you have a question that frequently pops up, create a blog post to address it. If you have a part of your business that garners a lot of support, bring attention to it by posting about it across social media.

4. Take full advantage of user-generated content.

Using a tool like Tack or TINT, sift through the content your customers have already posted about you, then republish it across your social media. If you’re a moderately successful business, chances are high you’ll have a fair amount of user-generated content hiding online somewhere, whether it’s people eating at your restaurant or using your app.

One of the benefits of using a tool like TINT or Tack is they can automatically reach out to the creator of the post and ask them for permission to republish it, which will cover your bases from a legal perspective.

5. Turn positive comments into social posts.

Have a lot of positive comments from customers on social media or your company blog? Turn them into social posts by taking screenshots of the comment and publishing them to your profiles. You could even use a tool like Canva or Adobe Illustrator to make the pictures into captivating, branded word art.

6. Set up a referral program.

When it comes to brand awareness, few things beat word-of-mouth marketing. To drive more of it, try setting up a referral program where customers get kickbacks and perks for telling their friends about you. Additionally, if you have the resources to do so, consider setting up a member rewards program like Starbucks. This will gamify your customer experience and create a tightly knit community of people around your brand.

7. Create an incentive for video testimonials.

Give customers a reward or benefit for creating a video testimonial about what they like most about your product or service. Hearing and seeing positive feedback coming directly from a customer is much more powerful than a plain-text quote testimonial. 

To encourage users to share their video testimonials, you could give them 10 percent off your products, free company merchandise, or something else. Once you have these videos, you can share them across all your social media channels. 

It’s no secret just how time-consuming creating marketing content can become. This year, be sure to take advantage of the loads of content sitting right in front of you. It just might be the thing that dramatically brings down your time spent on creating marketing content. 

Data Sheet—Why the Satellite Market Is Getting So Overcrowded

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MIT has been holding its entrepreneur-focused New Space Age Conference for four years, and it’s notable how quickly things have changed. For one, the first iteration fit in a smaller room and lacked the giant and delicious mid-morning doughnuts supplied for the 2019 conference. But more importantly, the focus has shifted in two ways.

Way back in 2016, Boeing was the big incumbent, the company that had dominated the space economy for decades, offering its wisdom to all the startups and would-be startups in the audience. But Naveed Hussain, who headed the company’s R&D skunkworks, sounded a bit defensive as he insisted: “We are ready to compete.” Portentously, just the day before the conference, Elon Musk’s SpaceX landed one of its reusable rockets on a barge floating at sea. In hindsight, it’s obvious that a changing of the guard had occurred.

At this year’s New Space Age conference, SpaceX was the big incumbent and its rocket technology has now moved from the demonstration stage to the workman-like commercial phase.

Shattering the cost of putting satellites in orbit has allowed dozens, perhaps even hundreds, of new startups to attract funding and go into business, kicking off a new space race. Van Espahbodi, managing partner of the Starburst Aerospace Accelerator funding many of those startups, may not have realized the irony of his statement that “ten years ago there would have been executives from Lockheed and Boeing in this room.” (It was only three, Van.)

But Espahbodi also sounded another common refrain from the 2019 edition of the conference, one that marks the second shift from 2016. While back then startups were still trying to figure out how to woo Silicon Valley, now it seems they may have succeeded too well. Espahbodi worried that too much money may have flowed into too many startups all chasing the same few satellite opportunities. “There’s lots of not so smart money out there,” he quipped.

The most impressive CEO on stage may have been John Serafini from HawkEye 360, which is launching satellites to track all manner of radio frequency signals on the ground. The company’s satellites could help stop “bad actors in a maritime environment” from creating billions of dollars of “negative externalities,” he explained. What? They’re going to catch pirates!

Aside from the excess financing chasing too few ideas, Julien Cantegreil, the CEO of SpaceAble, offered a unique reason why startups in the space market may start crashing out–literally. There’s actually a limit to how many satellites can go into orbit before debris and collisions become a big problem. “We cannot continue to send more objects to space,” he warned. “At some point we need to stop and think about the low earth (orbital) environment.” Hopefully there won’t be any actual examples of that problem to discuss at next year’s conference.

***

Lyft priced its initial public offering at $72 a share giving the company a stock market value north of $24 billion. It’s expected to be the first of many mega-startups going public this year, as my colleague Danielle Abril reports. I’m not into the false precision of many Wall Street metrics but I do like to compare startups to others in their neighborhood. Software maker Atlassian is valued at about $26 billion, Internet infrastructure operator Verisign at $22 billion, and Check Point Software at $20 billion. Lyft has the most annual revenue and the highest growth rate, though both Verisign and Check Point are already profitable. You’ll have to do your own due diligence on Lyft’s business prospects, but I’m here to say that its initial valuation isn’t crazy.

Amazon’s Giving Prime Members Free Year of Nintendo Switch Online

Add another perk for Amazon Prime members.

The retailer has announced a new partnership with Nintendo that will give subscribers of its loyalty program a free year of Nintendo Switch Online access. That service typically costs Switch owners $20 per year.

At the same time, Amazon is getting wise to people who use the trial window for Prime to claim the best perks. In order to take advantage of this deal, members initially will be allowed to sign up for only three months of free Switch Online access. Then, after 60 days, users can claim the remaining nine months.

There’s a Sept. 24 deadline to sign up for the first part of the perk. The nine-month extension must be claimed by Jan. 22.

The service is tied to Twitch Prime, one of Amazon Prime’s benefits. The free months can be added on to any existing paid Switch Online subscriptions.

The partnership between Amazon and Nintendo is a notable one, as the two companies have not always been on the best of terms. In 2012, for example, Amazon suddenly halted its first party sales of Nintendo hardware. (Resellers were allowed to continue selling the systems, although at prices of their own choosing.)

In 2015 the two began to patch up their differences.

Amazon, which owns Twitch, is widely expected at some point to announce a video game streaming service along the same line of Google’s Stadia. The company has not commented on speculation about such action, including any sort of timeline.

Auto1 may consider IPO in future but no need for cash now: CEO

BERLIN (Reuters) – German used-car dealing platform Auto1 said it could seek a public offering in future but a 2018 cash infusion from Japan’s Softbank means it has no immediate need for extra funding of its European growth plans.

FILE PHOTO: A worker loads a second hand car on a car transporter truck at the Auto1.com company grounds in Zoerbig, Germany January 28, 2017.REUTERS/Fabrizio Bensch /File Photo

Last year’s Softbank’s deal valued Berlin-based Auto1 at 2.9 billion euros ($3.27 billion), making it one of Germany’s top so-called tech unicorns.

It is virtually unknown to consumers except through its used car buying arm Wir Kaufen dein Auto (We Buy Your Car) in Germany and similar names elsewhere. It operates from Finland to Romania to Portugal, 30 countries in all.

Revenues rose by 32 percent to 2.9 billion euros last year, and although it is profitable in Germany, investments in other markets have led to a loss on group level.

“Currently, an initial public offering is not a topic for us,” Auto1 co-founder Christian Bertermann told Reuters, adding this could change in future.

Auto1 buys cars using its vehicle pricing database to calculate an offer within minutes and then sells the vehicles on to one of its roughly 35,000 dealerships for a commission.

Its platforms helped 540,000 vehicles change hands in 2018.

The company will now also start a retail platform to compete with Scout24’s Autoscout unit or Ebay’s Mobile.de offering, Bertermann said.

He confirmed a Reuters report about Auto1’s talks with Scout24 about an acquisition of Autoscout, adding that these would not lead to a takeover.

Scout24 in February agreed to be acquired by buyout groups Hellman & Friedman and Blackstone.

Auto1 was set up in Berlin by entrepreneur Christian Bertermann after having trouble selling two old cars owned by his grandmother, along with Koc, who previously worked at Rocket Internet-backed firms Zalando and Home24.

Reporting by Nadine Schimroszik,; Writing by Arno Schuetze; Editing by Alexandra Hudson

An Astonishing 773 Million Records Exposed in Monster Breach

There are breaches, and there are megabreaches, and there’s Equifax. But a newly revealed trove of leaked data tops them all for sheer volume: 772,904,991 unique email addresses, over 21 million unique passwords, all recently posted to a hacking forum.

The data set was first reported by security researcher Troy Hunt, who maintains Have I Been Pwned, a way to search whether your own email or password has been compromised by a breach at any point. (Trick question: It has.) The so-called Collection #1 is the largest breach in Hunt’s menagerie, and it’s not particularly close.

The Hack

If anything, the above numbers belie the real volume of the breach, as they reflect Hunt’s effort to clean up the data set to account for duplicates and to strip out unusable bits. In raw form, it comprises 2.7 billion rows of email addresses and passwords, including over a billion unique combinations of email addresses and passwords.

The trove appeared briefly on MEGA, the cloud service, and persisted on what Hunt refers to as “a popular hacking forum.” It sat in a folder called Collection #1, which contained over 12,000 files that weigh in at over 87 gigabytes. While it’s difficult to confirm exactly where all that info came from, it appears to be something of a breach of breaches; that is to say, it claims to aggregate over 2,000 leaked databases that contain passwords whose protective hashing has been cracked.

“It just looks like a completely random collection of sites purely to maximize the number of credentials available to hackers,” Hunt tells WIRED. “There’s no obvious patterns, just maximum exposure.”

That sort of Voltron breach has happened before, but never on this scale. In fact, not only is this the largest breach to become public, it’s second only to Yahoo’s pair of incidents—which affected 1 billion and 3 billion users, respectively—in size. Fortunately, the stolen Yahoo data hasn’t surfaced. Yet.

Who’s Affected?

The accumulated lists seem designed for use in so-called credential-stuffing attacks, in which hackers throw email and password combinations at a given site or service. These are typically automated processes that prey especially on people who reuse passwords across the whole wide internet.

The silver lining in Collection #1 going public is that you can definitively find out if your email and password were among the impacted accounts. Hunt has already loaded them into Have I Been Pwned; just type in your email address and keep those fingers crossed. While you’re there you can also find out how many previous breaches you’ve been a victim of. Whatever password you’re using on those accounts, change it.

Have I Been Pwned also introduced a password-search feature a year and a half ago; you can just type in whatever passwords go with your most sensitive accounts to see if they’re out in the open. If they are, change them.

And while you’re at it, get a password manager. It’s well past time.

How Serious Is This?

Pretty darn serious! While it doesn’t appear to include more sensitive information, like credit card or Social Security numbers, Collection #1 is historic for scale alone. A few elements also make it especially unnerving. First, around 140 million email accounts and over 10 million unique passwords in Collection #1 are new to Hunt’s database, meaning they’re not just duplicates from prior megabreaches.

Then there’s the way in which those passwords are saved in Collection #1. “These are all plain text passwords. If we take a breach like Dropbox, there may have been 68 million unique email addresses in there, but the passwords were cryptographically hashes making them very difficult to use,” says Hunt. Instead, the only technical prowess someone with access to the folders needs to break into your accounts is the ability to scroll and click.

And lastly, Hunt also notes that all of these records were sitting not in some dark web backwater, but on one of the most popular cloud storage sites—until it got taken down—and then on a public hacking site. They weren’t even for sale; they were just available for anyone to take.

The usual advice for protecting yourself applies. Never reuse passwords across multiple sites; it increases your exposure by orders of magnitude. Get a password manager. Have I Been Pwned integrates directly into 1Password—automatically checking all of your passwords against its database—but you’ve got no shortage of good options. Enable app-based two-factor authentication on as many accounts as you can, so that a password isn’t your only line of defense. And if you do find your email address or one of your passwords in Have I Been Pwned, at least know that you’re in good company.


More Great WIRED Stories

Apple, Amazon called out for 'incorrect' Taiwan, Hong Kong references

TAIPEI/SHANGHAI (Reuters) – One of China’s top government-linked think tanks has called out Apple Inc, Amazon.com Inc and other foreign companies for not referring to Hong Kong and Taiwan as part of China in a report that provoked a stern reaction from Taipei.

FILE PHOTO: An electronic screen displays the Apple Inc. logo on the exterior of the Nasdaq Market Site following the close of the day’s trading session in New York City, New York, U.S., August 2, 2018. REUTERS/Mike Segar/File Photo

The Chinese Academy of Social Sciences (CASS) said in a report this month that 66 of the world’s 500 largest companies had used “incorrect labels” for Taiwan and 53 had errors in the way they referred to Hong Kong, according to China’s Legal Daily newspaper. It said 45 had referred to both territories incorrectly.

Beijing considers self-ruled Taiwan a wayward province of China and the former British colony of Hong Kong returned to Chinese rule in 1997 and operates as a semi-autonomous territory.

China last year ramped up pressure on foreign companies including Marriott International and Qantas for referring to Taiwan and Hong Kong as separate from China in drop down menus or other material.

The report was co-written by CASS and the Internet Development Research Institution of Peking University. An official at the Internet Development Research Institution told Reuters that it had not yet been published to the public and declined to provide a copy.

A spokesman for Taiwan President Tsai Ing-wen said Taiwan would not bow to Chinese pressure.

“As for China’s related out-of-control actions, we need to remind the international community to face this squarely and to unite efforts to reduce and contain these actions,” Alex Huang told reporters in Taipei.

Beijing has stepped up pressure on Taiwan since Tsai, from the pro-independence ruling party, took office in 2016.

That has included rising Chinese scrutiny over how companies from airlines, such as Air Canada, to retailers, such as Gap, refer to the democratic island in recent months.

Nike Inc, Siemens AG, ABB, Subaru and others were also on the list. Apple, Amazon, ABB, Siemens, Subaru and Nike did not immediately respond to Reuters’ requests for comment.

Reporting By Yimou Lee, Jess Macy Yu, Josh Horwitz; Additional Reporting by Shanghai Newsroom, Gao Liangping, Cate Cadell, Pei Li, Brenda Goh and Naomi Tajitsu in TOKYO; Editing by Paul Tait and Nick Macfie

On the autofarm: China turns to driverless tractors, combines to overhaul agriculture

Xinghua, China (Reuters) – A brand new combine harvester buzzes up and down a field in eastern China without a driver on board, chopping golden rice stalks and offering a glimpse of what authorities say is the automated future of the nation’s mammoth agricultural sector.

Staff members taking part in the experiment on automated farming machinery load fertilizer onto an automated tractor near a field in Xinghua, Jiangsu province, China October 30, 2018. Picture taken October 30, 2018. REUTERS/Hallie Gu

The bright green prototype was operating last autumn during a trial of driverless farm equipment as the government pushes firms to develop within 7 years fully-automated machinery capable of planting, fertilizing and harvesting each of China’s staple crops – rice, wheat and corn.

That shift to automation is key to the farming sector in the world’s No.2 economy as it grapples with an ageing rural workforce and a dearth of young people willing to endure the hardships many associate with toiling on the land.

Other countries like Australia and the United States are taking similar steps in the face of such demographic pressures, but the sheer scale of China’s farming industry means the stakes are particularly high in its drive to automate agriculture.

“Automated farming is the way ahead and demand for it here is huge,” said Cheng Yue, general manager of tractor maker Changzhou Dongfeng CVT Co Ltd, which provided an autonomous vehicle that was also used at the trial in the rice field in Xinghua, a county in the eastern province of Jiangsu.

However, the road to automation is long and littered with obstacles such as high costs, the nation’s varied terrain and the small size of many of its farms.

“I have heard of driverless tractors. But I don’t think they are practical, especially the really large ones,” said Li Guoyong, a wheat farmer in China’s northern Hebei province.

Most farms in his area are only a few hectares in size, he said by phone.

GOING LOCAL

To try to achieve its ambitious 7-year goal, Beijing is supporting trials of local technology across the country organised by industry group Telematics Industry Application Alliance (TIAA).

Members include state-owned tractor maker YTO Group, navigation systems producer Hwa Create and Zoomlion Heavy Industry Science & Technology Co Ltd, which helped develop the combine harvester used in the Xinghua trial along with Jiangsu University.

The next trials are slated for the northeastern province of Heilongjiang and for the hills around the southwestern city of Chongqing in the first half of this year.

Those come after a string of automated developments in the sector.

YTO developed its first driverless tractor in 2017 and is aiming to start mass production soon, depending on market demand, said Lei Jun, an executive at the firm’s technology center, without giving a more detailed timeline.

Lovol Heavy Industry Co Ltd signed a deal with Baidu in April to apply the tech giant’s Apollo automated driving system to its agricultural machinery.

“China is expected to climb the autonomous technology ladder very quickly, mainly because Chinese companies can access the local navigation satellite system, which gives them an advantage over their international peers,” said Alexious Lee, Head of China Industrial Research at Hong Kong brokerage CLSA.

He was referring to China’s ‘Beidou’ homegrown satellite navigation system, a rival to the U.S. Global Positioning System (GPS).

Beijing has included agricultural machinery in its ‘Made in China 2025’ campaign, meaning the vast majority of its farm equipment should be produced at home by that time.

Semi-automated technology is already fairly common on farms in places such as the United States, but fully-automated tractors and combines have yet to be mass-produced anywhere.

TOO SMALL

But with many Chinese farms still too small for a regular tractor, driverless ones that could be as high as four times more expensive at around $90,000 will be a long way out of reach for many in the short-term.

More than 90 percent of farms in China are less than 1 hectare, while in the United States nearly 90 percent are larger than 5 hectares.

“It is not about whether you have the product. It is about the entire system. It is about commercializing agriculture,” said Lee.

Although analysts and industry officials said that the underlying trend would be for farms to get larger as ongoing reforms to land rights should allow farmers to lease more space.

Sensors in equipment that help monitor crop conditions also need to be improved so that machines can adjust more quickly to different situations, said Wei Xinhua, deputy director of the school of agriculture equipment engineering at Jiangsu University.

China’s $60 billion farm machinery industry has been burdened by overcapacity and low profit-margins after a years-long subsidy scheme to promote mechanization in farming led to mass production of low-quality tractors. Analysts said it was too early to say how much the automated farming machinery sector could eventually be worth.

Slideshow (5 Images)

Automated farming machines are also useful in recording data on details such as volumes of fertilisers or other materials used in churning out crops, potentially helping farmers target consumers demanding higher-quality produce as some of that information could be included on food labels.

“Take a bowl of rice. I want to know exactly how it was planted, and how much fertilizer or pesticide was applied to it,” said Cheng at Changzhou Dongfeng.

($1 = 6.8450 Chinese yuan renminbi)

Reporting by Hallie Gu and Dominique Patton; Editing by Joseph Radford

HSBC settles forex deals worth $250 billion on blockchain in last year

FILE PHOTO: HSBC’s building in Canary Wharf is seen behind a City of London sign outside Billingsgate Market in London, Britain, August 8, 2018. REUTERS/Hannah McKay

LONDON (Reuters) – HSBC (HSBA.L) has settled $250 billion worth of forex trades using blockchain in the last year, it said on Monday, suggesting the heavily hyped technology is gaining traction in a sector until now hesitant to embrace it.

The bank has settled over three million forex trades and made over 150,000 payments since February using blockchain, it said in a statement. HSBC would not give data on forex trades settled by traditional processes, saying only that those settled by blockchain represented a “small” proportion.

Still, the data marks a significant milestone in the use of blockchain by mainstream finance, which has until now been reluctant to start using the technology at any scale.

Blockchain is a shared database that can process and settle transactions in minutes. Originally conceived to underpin the cryptocurrency bitcoin, the technology does not require third-parties for checks and its entries cannot be changed, making it highly secure.

Banks and other financial firms have invested hundreds of millions of dollars in the technology, hoping it will simplify and slash costs in processes from settlements to payments.

But few banks moved from testing to implementation of blockchain in large-scale projects. Many are worried about high costs, uncertainty over regulation and the risk of disruption to existing systems.

HSBC said its blockchain technology has automated manual processes and reduced its reliance on external technology.

Blockchain has also lowered the risks of errors and delays, cut costs, and helped the bank to better optimize its balance sheet, it said.

Richard Bibbey, the bank’s acting head of forex and commodities, said in a statement the bank was looking at how the technology could help multinational clients better manage forex flows.

Reporting by Tom Wilson, Editing by William Maclean

The Final Season of 'Game of Thrones' Has a Launch Date

Happy Monday, and welcome to another installment of The Monitor, WIRED’s roundup of the latest in the world of culture. In today’s news, HBO has finally coughed up a release date for the final season of Game of Thrones, Netflix is facing a lawsuit, and it looks like the Super Bowl won’t be marooned without a halftime show act.

Finally, a Date to Watch the Thrones

Always one to keep fans waiting in anticipation, HBO waited until three months out before to announce the launch date for Season 8 of Game of Thrones. Sunday night, just before the season premiere of True Detective, the network aired a teaser revealing that the epic fantasy’s final run will begin on April 14. What will the show look like when it does return? Snowy, as the Stark children—Arya, Sansa, Jon Snow—are about to confront some family demons at Winterfell. Or, at least, that’s what it seems like if the show’s new vague-as-hell-trailer is to be believed. Don’t worry, we’re sure plenty of third cousins you don’t remember will show up as well. And maybe Ed Sheeran.

[embedded content]

If You Want to Sue Netflix, Turn to Page Petty-Seven

In “Huh, didn’t see that coming!” news—there’s a lot of that these days, admittedly—Chooseco, the publisher behind the Choose Your Own Adventure books, is suing Netflix over its interactive Black Mirror episode, Bandersnatch. In the interactive episode, a young videogame programmer designs a game based on a “choose your own adventure” book, and the episode itself lets viewers make choices about what the characters will do in the story. Chooseco’s suit claims it has the trademark to the phrase “choose your own adventure” and that Netflix doesn’t have a license to use it. The company is seeking at least $25 million in damages, though it’s also possible that if the judge doesn’t like the way the arguments proceed, she’ll just bang her gavel and restart things from an earlier point.

Hold Up, Is That Adam Levine?!

After Rihanna, Adele, Jay-Z, and others reportedly passed on the gig, the NFL announced Sunday that Maroon 5 will be playing the halftime show at this year’s Super Bowl. The band—along with Big Boi and Travis Scott, who are joining them in hopes of stemming a mass Puppy Bowl exodus—will bring their Jagger-like moves to Atlanta’s Mercedes-Benz Stadium in Atlanta on February 3. And while he’s not part of the proceedings, we can only hope A$AP Ferg is nearby, his long quest at an end.


More Great WIRED Stories

Huawei Canada executive leaves post as scrutiny of company grows

NEW YORK/OTTAWA (Reuters) – One of Huawei Canada’s top executives on Friday disclosed he was leaving his post after more than seven years with the Chinese telecommunications equipment maker, which is facing heightened scrutiny over security issues from Canada and its allies.

FILE PHOTO: Huawei Canada Vice President of Corporate Affairs Scott Bradley stands outside after the B.C. Supreme Court bail hearing of Huawei CFO Meng Wanzhou, who was released on a $10 million bail in Vancouver, British Columbia, Canada December 11, 2018. REUTERS/Lindsey Wasson

Scott Bradley disclosed his departure as the company’s senior vice president for corporate affairs in a post on LinkedIn that did not give a reason for the move. He could not immediately be reached for comment.

Huawei Technologies Co is under intense scrutiny in the West over its relationship with the Chinese government and U.S.-led allegations that its equipment could be used by Beijing for spying.

On Friday, sources told Reuters that Poland arrested a Huawei employee and former Polish security official on spying allegations, a move that could fuel Western concerns about the security of the company’s technology.

Bradley was a key public spokesman for Huawei Canada, which has been under the spotlight since Canadian authorities in December arrested the chief financial officer of its parent company at the request of the United States.

Huawei is a major supplier of telecommunications equipment in Canada, where Bradley had served as chair of the 5G Canada Council, a national trade group promoting adoption of next-generation high-speed wireless technology.

The Canadian government last year launched a new security review of Huawei’s 5G technology, which at least two major Canadian carriers have said they plan to test in small-scale pilots.

Bradley will serve as special adviser to the company, assisting the company “as required,” Huawei Canada President Eric Li said in a memo to staff that was obtained by Reuters.

“We are saddened to see him leave but grateful for the tireless work he has put in to help us grow our brand and public image, and build various relationships with government,” Li said.

Bradley confirmed on LinkedIn that he intended to advise the company.

“As we start 2019, it is time for a change,” Bradley said in the post. “I continue to believe passionately in all of the values our Canadian team represents, and I believe that our team is one of the most innovative in the world.”

Jim Finkle in New York and David Ljunggren in Ottawa; Editing by Tom Brown

Ockam provides easy to deploy identity, trust, and interoperability for IoT developers

Featured stories

Maybe you’re not going to buy a $7,000 smart toilet, but the Internet of Things (IoT) is on its way to your home and office. Silly gadgets aside, IoT device inventors face many programming challenges. It’s hard adding identity, trust, and interoperability to IoT hardware. The Ockam startup will change this for the better.

Customers want IoT devices to be trustworthy and work with other vendors gear. Programmers know that’s easier said than done. Many IoT vendors’ answer is to not bother to add sufficient security or interoperability to their gadgets. This leads to one IoT security problem after another.

Ockam’s answer is to make it easy to add identity, trust, and interoperability by providing programmers with the open-source, Apache-licensed Ockam Software Developer Kit (SDK). With it, developers can add these important features to their devices without a deep understanding of secure IoT network architecture or cryptographic key identity management.

Also: Internet of Things (IoT): Cheat sheet TechRepublic

This is provided by a Golang library and a Command Line Interface (CLI). Additional languages, features, and tools will be supported in future releases.

Once properly embedded within a device’s firmware, the Ockam SDK enables the device to become an Ockam Blockchain Network (OBN) client. OBN provides a decentralized, open platform with high throughput and low latency. It also provides the infrastructure and protocols underpinning Ockam’s SDK.

Devices are assigned a unique Decentralized ID (DID). The DID is cryptographically secure identities for an array of entities. While used primarily to identify devices, it can also represent people, organizations, or other entities. With this, developers can codify complex graph relationships between people, organizations, devices, and assets.

Once on OBN, devices can can share data as verified claims with any other registered network device. This is secured by Ockam-provided, blockchain-powered Public Key Infrastructure (PKI).  Devices can also verify data that they receive from other registered OBN IoT devices. OBN is free of charge for developers until its general availability release later this year.

This may all sound complex, but the complexities are hidden away behind its serverless architecture: A developer only needs the SDK. OBN’s complications, such as PKI, are abstracted away.

Some of Ockam’s structure may sound familiar. That’s because it’s taking a page from Twilio. Just like Twilio provides a common layer between telecommunications infrastructure and developers, to make it easy to incorporate messaging into applications, Ockam provides a “common rail” for adding secure identify to IoT devices. With a single line of code, Ockam enables developer to provision an immutable identity to a device.

Also: 7 ways to use Alexa around the office CNET

OBN is built on Microsoft Azure confidential compute. Microsoft Engineering is a dedicated technical partner, and Ockam CEO Matthew Gregory led Azure’s open-source software developer platform strategy.

Together, Ockam and OBN provides a backbone for the next generation of high performance IoT ecosystems. Ockam is interoperable and built for multi-party IoT networks. So, in theory, your devices will be able to work with other vendor’s gear.

According to Yorke Rhodes, co-founder of blockchain at Microsoft Azure: “Ockam’s team is best in class, bringing together skills and experience in enterprise, IoT, secure compute, scale-up, and Azure. We are thrilled to be collaborating with them on their innovative solution for the IoT developer community.”

I don’t know about “thrilled,” but I do know if I were building IoT devices, which I want to work and play well and securely with other devices, I’d be working with Ockam. It promises to make high-quality IoT development much easier.

Related Stories:

Get to Know Jeff Bezos’ Almost-Ex, MacKenzie Bezos, Who Could Soon Be One of the World’s Richest Women

Jeff and MacKenzie Bezos are divorcing after 25 years of marriage. While the Amazon founder’s name is well known, the news has left some people wondering, who is MacKenzie Bezos? Who is the wife of the richest man in the world, someone who has led a relatively private life as the partner of the powerful founder and executive?

MacKenzie Bezos was also instrumental in the founding of Amazon in 1994, a year after marrying Jeff in 1993. She was one of the first employees at the online bookseller, according to USA Today. MacKenzie and Jeff were married six months after they first met at Wall Street hedge fund firm D.E. Shaw, where Jeff was a vice president and interviewed MacKenzie. Together, they have four children.

But she is perhaps best known as the author of several novels, including Traps and her debut, The Testing of Luther Albright, which won an American Book Award. She studied at Princeton University and served as a research assistant to famed author Toni Morrison, who called Bezos “one of the best students I’ve ever had in my creative-writing classes” in a 2013 Vogue profile. And in 2014, she founded an anti-bullying organization, Bystander Revolution.

In 2018, the Bezoses also jointly committed $2 billion of their combined fortune to create the Day One Fund, which will fund a network of preschools in low-income communities as well as support existing nonprofits that assist homeless families.

MacKenzie may also soon be one of the world’s richest women. Jeff Bezos is worth roughly $139 billion, and under communal property laws in Washington State, that could mean each individual Bezos could walk away from the marriage with around $69.5 billion. That would make MacKenzie roughly 26 times richer than Oprah Winfrey and 100 times richer than the Queen of England, according to Marketwatch. She would also end up with some serious real estate holdings, as the Bezoses reportedly own at least five homes around the country.

Jeff Bezos announced the couple’s plan to divorce in a tweet posted Wednesday. MacKenzie Bezos has yet to release her own statement.

5 Key Steps to Convert Your Idea Into a Business

In my role as a new business advisor and occasional investor, I hear lots of people talking about their dreams of “someday” starting and running a new venture.

They can talk with passion about their innovative new idea, and ask lots of questions, but never seem to really get started. The challenge we all have as business founders is to move from the idea stage to a real business.

The solution I recommend is to move forward with a few quantifiable steps, to turn your dreams into specific goals and milestones, and then measure your progress and celebrate each small success in achieving these goals and milestones.

I found these bite-sized chunks to be far more achievable and satisfying than making that one big step from your dream to a success business:

1. Get the idea out of your head and onto paper.

Even if it’s only a few PowerPoint slides or typed paragraphs, writing something down is the first step toward making it real. 

he process will force you solidify the specifics, and mentally commit to them. Always write in the future tense, what you will do, and name yourself as the key person responsible.

Before you know it, you will have a ten-slide pitch that you can use to gauge interest from potential customers, as well as friends, family, and early investors. Suddenly you will find that writing a ten-to-twenty page business plan with details is easy rather than daunting.

2. Create a specific plan to network to get the help you need.

If you need funding, make a list of people you know who might help, and plan to attend specific business events where you can use your pitch and written plan.

Do the same for partners and co-founders that will buttress your strengths. Consult with business peers to learn what you need.

Take the initiative to join recognized new business support groups and the local chapter of relevant industry associations to meet people you can help, as well as people who can help you. Don’t forget the local Chamber of Commerce and local business executives.

3. Set target date milestones and metrics to gauge progress.

Pick a reasonable desired business rollout date, and work backward, assigning completion dates to all the interim tasks required.

Quantify expected results, and the measurements you will use. Your goal should be smaller chunks and more milestones, allowing regular celebration of progress.

For example, every business needs a company name and logo, incorporation, an Internet domain name and website, social media accounts, prototypes, intellectual property, and key executive positions filled. Set milestones for each and measure progress to success.

4. Take action on your plan, and finish something every day.

You need to build momentum, and every milestone completion builds momentum. Celebrate each step forward, and check off completions to keep the team motivated and moving forward.

Don’t get caught up in the crisis of the day, or be satisfied with just working hard.

Now is the time to build your company culture, and make it one with a can-do attitude, team collaboration, and empowered people with a constant focus on the customer. Also, your culture must be not afraid to pivot and to adapt your plan as things change.

5. Narrow your focus daily to the key things that really matter.

Dilution of focus kills too many small businesses, as they try to attract more customers and counter more competitors. The best are determined to do one thing well, rather than many things poorly, with limited resources. Time is also of the essence, so make your impact early.

I once worked in a software startup that continually delayed initial shipment to add new features, based on feedback from early adopters and competitor concerns. The result was a product that was bloated and late to market. I recommend the minimum viable product (MVP) strategy.

For aspiring entrepreneurs and business owners, ideas will not turn into businesses, no matter how long you wait, or how hard you work, until someone builds and executes a plan with specific milestones and expected results.

If your dream is to change the world in your lifetime, now is the time to stop dreaming and start executing.

Will Microsoft Break the Internet?

When the Internet became popular in early 1990s, Microsoft was late to the partly. In a desperate catch-up move, Microsoft decided to drive Netscape (the most popular browser of the time) out of business by grafting Internet Explorer onto Windows.

The U.S. government slapped Microsoft with an anti-monopoly lawsuit, which hung around in court for about a decade, by which time Netscape had become an historical footnote, rendering the issue moot.

By that time, though, Microsoft no longer dominated high tech. Industry growth was shifting to up-and-comers like Google and Facebook, as well as a resurgent Apple. And so it remains today: Microsoft is too big to ignore but, frankly, about as exciting as IBM.

All that might change in the next few years, though, according to a recent article in Business Insider. Turns out that Microsoft is quietly testing a product, code-named “Bali,” that would completely disrupt and even destroy the business models of its chief rivals.

Today, online firms gather information about us, and use that information to increase the effectiveness of the ads they display by better targeting them to prospective buyers. Under this business model, Facebook and Google get 90% of the world’s online ad revenue.

Microsoft’s Bali turns that equation around. With Bali, you own your personal online data, which you can (if you choose) sell to the companies that want to target you with ads. Facebook and Google would only know what you want them to know.

Everything about you would, by default, be private. If you wanted it to remain so, fine. But you’d also have the choice to tell Facebook, Google and other online firms that “you can track me and sell ads to me but only if I get a piece of the action.”

In short, you’d get paid to use the Internet.

Will it work? Well, in the wake of multiple privacy scandals, this seems like an idea whose time has definitely come. And there’s no question whatsoever that Microsoft has the technical chops to develop and bulletproof the environment.

On the downside, though, Microsoft’s most successful products (Windows, Xbox, Azure, etc.) are imitations of innovations from other firms. The company’s track record launching something completely new is spotty, at best.

Still, if Microsoft pulls this off and Bali catches on, Microsoft might easily find itself in the same enviable position of massive market dominance it had back before the Internet upended their erstwhile Windows monopoly.

Frankly, I’m not sure I want Microsoft to have that kind of power. I am sure of this, though: if a single company is destined to dominate the future of the Web, I’d damn sight rather it be Microsoft than Facebook.

Before You Quit Your Day Job for a Startup, Make Sure You Can Answer These 7 Questions

I’ve heard pitches from more than 20,000 entrepreneurs over the last two decades.  The top question I’m asked (other than “Will you invest in me?”) is, “Is my idea any good?”

Wantreprneuers from far and wide track me down to get my blessing before they quit their well-paying job to start a startup. Over the decades and in conjunction with other angel investors and venture capitalists, I’ve developed a seven-question list that potential founders should ask themselves before coming to ask me.

If your answer to all seven of these questions is “yes,” your idea is probably excellent. If not, you have some work to do.

1. Are you obsessed with the industry, customers, or problem?

Successful founders love what they do. They would learn about the industry, customer segment or problem even if they weren’t being paid. To be successful, you must be obsessive about your startup opportunity.

The difference between obsessive and caring is quite large. Caring is a given, and it’s not enough. Being obsessive means that you think about something dozens a time a day. If you aren’t obsessive, you won’t be able to accumulate the insights needed to garner strategic advantage–insights that only come from focusing on something for thousands of hours. 

2. Can you build the solution? 

Ideas are worthless until combined with relentless execution. You must be able to execute both your idea and your product. At the very least, you need to be able to create a prototype or minimum viable product, something you can get into the hands of early adopters and generate early proof of concept traction.

3. How elastic is demand?

Pain killer or vitamin? Cost saver or revenue generator? The best opportunities solve unmet market needs where demand is inelastic. This yields better margins in the long run and quicker traction in the short run.

Your opportunity must satisfy a need, not a want. A need is something you can’t live without. Air, water, and food are the classic examples. A want is something you can live without, like fancy shoes or expensive cars.

As the price of wants go up, demand for them peters out. Startups that satisfy needs will always have easier times attracting early adopters and generating revenue. 

4. Is the market large and growing?

Today, the market for anti-hacker security is hot. The market for thoroughbred horseshoes is not. Why focus on a small win? You’re investing your blood, sweat, and tears. Make sure the win is worth it.

By the way, the risk is actually much greater when you focus on a niche. Since you have less pool to swim in, you have less chance to learn through iteration. Always focus on bringing your solution into a market that is large and growing. It’s OK to start with a niche, but there must be lots of room to grow.

5. Are you exponentially better?

If you’re entering an extant market, you’re automatically at a disadvantage with sunk costs and less brand recognition than your competitors. To overcome that, you must be ten times faster, cheaper, stronger, and lighter than every other company in your industry to get people to switch from incumbent products.

Netflix killed Blockbuster by offering ten times the quantity of content at one-tenth the cost. Your solution must be exponentially better than any alternatives.

6. Are you ready to go all in? 

Design thinking and the Lean Startup method allow you to start most businesses as a side hustle. Your long-term goal still needs to be full time, all the time, all in. No one has ever changed the world with half measures.

7. Do you have frictionless access to early adopters?

Early adopters are customers who have the problem you solve, and are currently trying to solve that problem with a radically less efficient method. Before spell-check software, we used third party proofreaders, which were ten times more expensive and time consuming.

To be successful, you need a clear and low cost to get early adopters and turn them into your beachhead. Make sure you’re able to get your product directly to customers.

Samsung, Huawei supply majority of own modem chips, Qualcomm says

SAN JOSE, Calif. (Reuters) – The two largest smart phone makers in the world supply a majority of their own modem chips to help their devices connect to wireless data networks, according to evidence presented at an antitrust trial for chip supplier Qualcomm Inc (QCOM.O).

FILE PHOTO: The logo of Qualcomm is seen during the Mobile World Congress in Barcelona, Spain February 27, 2018. REUTERS/Yves Herman/File Photo

A trial between the U.S. Federal Trade Commission and Qualcomm kicked off in a federal courtroom in California on Friday, with the regulators arguing that Qualcomm engaged in anticompetitive patent licensing practices to preserve a monopoly on modem chips. The case is being closely watched because it may shed light on the likely eventual outcome of the global legal battle between Apple Inc (AAPL.O) and Qualcomm.

Apple has alleged that Qualcomm engaged in illegal business practices, and Qualcomm in turn has alleged Apple violated its patents, scoring victories in China and Germany last month.

Qualcomm has argued its licensing practices follow long-established industry norms and that it charges broadly the same licensing rates that it had for many years before it ever started selling chips.

That has become a big market for Qualcomm, which controlled 59.6 percent of the $15.3 billion market for 4G modem chips in 2017, according to IDC’s Phil Solis, who studies mobile chips for the research firm.

But Bob Van Nest, an attorney representing Qualcomm in the case, also sought to show that Qualcomm is not dominant in the world’s two biggest handset makers.

During opening arguments, Van Nest’s presentation said that Huawei [HWT.UL] internally sources 54 percent of the modem chips it puts in its devices and gets only 22 percent of its modems from Qualcomm, with the remainder coming from other unnamed makers. Samsung (005930.KS) internally sources 52 percent of the modem chips it uses, with 38 percent from Qualcomm and the rest from other makers, according to the presentation.

Huawei and Samsung did not immediately respond to a request for comment. Also, the FTC’s case centers not on the overall modem chip market – which includes slower chips that go into cheaper handsets – but rather the market for speedy “premium” chips where Qualcomm is among the only options.

Huawei and Samsung are both large diversified technology corporations that make many other products aside from premium-priced smart phones. Huawei’s HiSilicon unit supplies the chips for its high-end phones such as its Mate and P series. Samsung’s chip division supplies processors and other components for many of its handsets and is also a dominant global supplier of memory chips beyond its own products.

The two firms are also Apple’s fiercest rivals in the market for premium smart phones costing $700 or more. Apple depends entirely on Intel Corp (INTC.O) and Qualcomm for modem chips, though the iPhones released in 2018 use Intel modems exclusively.

Technology news publication The Information last month reported here that Apple was designing its own modem chip, citing Apple job listings and a source briefed on Apple’s plans. Apple declined to comment on its plans.

For the second quarter of 2018 – the most recent figures available from IDC – Apple was the third-largest smart phone supplier by volume, with Samsung and Huawei in first and second place, respectively.

Reporting by Stephen Nellis; Editing by James Dalgleish

The Simple Engineering That Will Keep NYC's L Train Rolling

Ever since the last of the brackish water slithered out of the Canarsie Tunnel in the aftermath of 2012’s Superstorm Sandy, New Yorkers have been bracing for the pain. Public transit officials have long warned that the water damage to the 94-year-old tunnel, full of just-as-old subway equipment, would eventually require a long, painful, deeply inconvenient rehabilitation. That’s the tunnel that runs under the East River, carrying many of the L subway train’s 400,000 daily riders from popular Brooklyn neighborhoods like Williamsburg and Bushwick into Manhattan.

The surgery was scheduled for April 2019, when the stretch of L train that takes New Yorkers across Manhattan and into Brooklyn was scheduled to shut down for a 15-month repair job. Ahead of what they officially deemed the “L-pocalypse,” local officials created piles of plans to ramp up bus service, encourage biking, and run new ferry routes, and everything else they could think of to keep all those commuters from taking to cars and making already bad traffic fully catastrophic.

Those plans (as well as wilder ones proposed by concerned citizens) became a lot less necessary Thursday morning, when Governor Andrew Cuomo called a surprise press conference to proclaim that no, the L train won’t close completely, and yes, it will still be fixed for the future.

The new plan for the next few years is to keep the train open and running as normal during weekdays, whilst doing repairs on nights and weekends (the details remain fuzzy). The board of the Metropolitan Transportation Authority, which runs the subway, has yet to adopt the new plan, which was proposed by a commission of half a dozen engineers based at Columbia and Cornell Universities that Cuomo assembled last month, two years after the decision was made to close the line. But the agency put out a press release Thursday afternoon saying it “accepted the recommendations.”

Curious politics are clearly at work here, but New Yorkers are unlikely to care, as long as the subway keeps running. And if it does, it’ll be thanks to two bits of subway engineering infrastructure: benchwalls and cable racking.

Let’s start with benchwalls. If the train stopped in the tunnel and you had to get out, these are the stretches of concrete, running along each wall and resembling big benches, that you’d be walking on. Facilitating emergency exits is one of their main functions—without them, you’d have to jump out of the train, onto the ground and risk hitting the third rail. Benchwalls also hold most of the goodies that make the subway work, including the power and communications cables. When workers were building the line, which started service in 1924, putting the cables in the concrete was the best way to protect them from things like hungry rats and water damage.

Over the past century, those benchwalls have started to deteriorate, a process accelerated by the flooding from Hurricane Sandy. Explaining its full shutdown plan in 2016, the MTA said the tunnel’s bench walls “must be replaced to protect the structural integrity of the two tubes [east and west] that carry trains through the tunnel.”

Replacing these things involves jackhammering away concrete, removing the rubble, replacing the cabling inside, setting new concrete, and having it dry. It’s work you can’t do overnight or on weekends, because any one section takes several days. And you can’t run trains without leaving a walkway to lead people to safety in an emergency.

The new plan involves giving those benchwalls a bit of a demotion. They’ll still be used for emergency egress, but they won’t hold the cables anymore. Instead, the L train will use a “cable racking” system, in which new power and comms lines will be strung up and attached to the sides of the tunnel, above the benchwalls. Turns out, their protective jacketing has advanced since the Prohibition Era. “We’ve had tremendous progress in materials,” says Peter Kinget, a Cornell electrical engineer who served on the panel. , If the jacketing catches fire, it doesn’t produce noxious fumes. It’s impervious to vermin and H2O, obviating the need for the concrete armor. The workers will also shore up the sections of benchwall that are crumbling with fiber reinforced polymer, Cuomo says, leaving the old, inactive cables entombed inside.

That decoupling of the benchwall’s duties is a big deal, because it makes the work much easier to execute. You can cut back service at night and on weekends (by running trains in just one of the tunnel’s twin tubes) and have workers slip underground, setting up the racks and new cables segment by segment. During normal hours, the train operates as it usually does, pulling power from the cables already in the benchwalls. Once the work is done, the MTA will switch the trains over to the new set of cords.

Cable racking has been used for new metro lines in London, Hong Kong, and the Saudi capital of Riyadh, Cuomo says. This would be its first use in the US, and the first time it’s been used to fix up an existing line.

“It’s a clever solution,” says Matt Cunningham, a civil engineer and global director of infrastructure for Canadian engineering firm IBI. It’s cheaper and easier than replacing all the cable-filled benchwalls, and it’s a proven method. “It’s going to work.”

Which brings up the unanswered question of why this idea is just surfacing now. Why not before the MTA decided on the full shutdown, then spent two years preparing for it? It makes Cuomo the politician who averted the traffic-spewing L-pocalypse—but it also makes one wonder why he didn’t come to the rescue earlier. (He’s been governor of New York since 2011.) In his press conference, he presented this as new solution, which is true if you compare it to the techniques used to build the subway in the previous century, but not if you take a slightly narrower view. “It’s not new technology that’s only now become available,” Cunningham says.

Of course, limiting service during nights and weekends to make this fix will still inflict some suffering, and the MTA has a terrible record of mismanaging this sort of operation, so any promises about deadlines or costs should be doubted. “You’re not getting a root canal on five teeth, you’re getting a root canal on three teeth,” says Allan Rutter, of Texas A&M’s Transportation Institute. “There’s gonna be pain.”

In infrastructure as well as in dental surgery, you’ve got to accept some drilling and discomfort. But less is definitely more.


More Great WIRED Stories

How Can We Best Prepare for Job Automation?

The best way to prepare is to transition away from things that are largely routine and predictable. Try to find a role that is largely focused on tasks that are not easy to automate.

I think this generally includes 3 areas:

  1. Creative work — where you are building something new, thinking outside the box in non-predictable ways, etc.
  2. Human-centered work — where you build sophisticated relationships with people. This would include caring roles, as with a nurse or social worker, but also business roles where you need a need understanding of your clients.
  3. Skilled trade work — this includes jobs that require lots of mobility, dexterity and flexibility in unpredictable environments. Examples would be electricians or plumbers. Building a robot that can do these jobs is probably far in the future.

What you do NOT want is to be the person who’s only role is to sit in front of a computer performing some predictable task–like cranking out the same report again and again. If you have a job like this you should worry and look to transition in other roles in the 3 areas I listed above.

One very important part of adapting is to realize that future careers will nearly all require continuous learning. So whether you are concerned with yourself or your children, a focus on learning–getting good at it and truly enjoying it–will be one of the most important components of success.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

Published on: Jan 3, 2019

The 10 Most Googled People of 2018 (Who'd You Look Up?)

There’s perhaps no better log of what’s on your mind than your browser search history. (Who hasn’t deleted their search history on a shared computer?)

It stands to reason, then, that getting a window into our collective psyche is as simple as perusing Google’s list of most-searched terms of the year. Google recently released The Year In Search–a comprehensive breakdown of everything we searched for this year, organized by category.

So what was on our minds in 2018? When it comes to people, these individuals were. Don’t worry–if you don’t know one … I Googled it for you:

10. Cardi B

American rapper whose standout hits include Bodak Yellow and this year’s breakout, I Like It, which currently has 674M streams on Spotify and counting. 

9. Stormy Daniels

Her legal name is Stephanie Clifford, and she is an American stripper, porn star, and director who got into a legal battle with Trump and his lawyer Michael Cohen this year. Trump and company paid Daniels $130,000 to stay quiet about an affair she says had with Trump in 2006.

8. Hailey Baldwin

Daughter of Stephen Baldwin, she’s a model and TV personality who married Justin Bieber this year. While legally married, the couple has yet to stage a large-scale wedding with family and friends.

7. Brett Kavanaugh

A polarizing figure, Kavanaugh was appointed to the Supreme Court this year following what some described as an excruciating and exhausting battle for confirmation. Multiple allegations of sexual misconduct were levied against him. 

6. Jair Bolsonaro

Bolsonaro was elected president of Brazil in October, 2018. A very right-wing figure, many have compared him to Trump.

5. Khloé Kardashian

Younger sister of Kim Kardashian, Khloe nearly broke the internet this year when she had her baby girl, True Thompson, in April 2018.

4. Logan Paul

On December 31, 2017, controversial vlogger Paul uploaded a YouTube video showing the corpse of a suicide victim. The video gained 6.3M views within 24 hours, sparked outrage on many fronts, and almost cost Paul his YouTube channel. Paul has since been reinstated on the platform and contributed $1M to suicide prevention agencies.

3. Sylvester Stallone

Stallone did not die this past year, but a lot of people feared otherwise. In February, popular searches included “Sylvester Stallone dead 2018” and “Did sylvester stallone die.” The countries where the hoax was passed around the most? South Africa, Ghana, and Bolivia (the U.S. came in 22nd on the list of Stallone searches).

2. Demi Lovato

A Grammy-nominated musical artist, Lovato was hospitalized this year for a suspected overdose. “I have always been transparent about my journey with addiction,” Lovato said on social media. “What I’ve learned is that this illness is not something that disappears or fades with time. It is something I must continue to overcome and have not done yet. I will keep fighting.”

1. Meghan Markle

Markle married Prince Harry in a royal wedding this year, the guest list of which included Serena Williams, George Clooney, Oprah, Elton John, and the Spice Girls.

General Electric's Healthcare IPO Is Actually Just What The Doctor Ordered

2018 has been an eventful year for General Electric (GE) and its shareholders, as this storied company will finish the year with a new CEO, Mr. Larry Culp, and in the midst of major restructuring efforts (not the first time hearing this, right?). As such, it should come as no surprise that GE shares have significantly underperformed the broader market over the last 12 months.

Chart

GE data by YCharts

Yes, it has been that bad. GE is positioned to spin/sell off several major businesses, including GE Healthcare, and I believe that most of the bad news is already baked into the stock. However, as I described in GE: It Ain’t Goin’ Be Easy, it is going to be tough sledding to turn around this large conglomerate, but, in my opinion, Mr. Culp is the right guy for the job. But, it is important to also remember that Mr. Culp and team have some great assets that can be utilized to jump start the recovery process, and it all starts with the GE Healthcare spinoff, in my mind.

Therefore, while I agree with many of the points made in General Electric Healthcare IPO Is Too Risky In This Environment, I believe that the GE Healthcare spinoff is just what the doctor ordered, even in this market.

GE Healthcare, Just What The Doctor Ordered

The GE Healthcare spinoff should be viewed as a direct attempt to unlock shareholder value. Many people ask why it would make sense for GE to get rid of a promising business like GE Healthcare, and while it would be great if a large collection of “good” businesses could be managed under one umbrella, I believe that it is now time for GE to create a more focused, simpler business.

Source: GE, Investor Presentation

To the point of unlocking shareholder value, GE Healthcare does not get the respect/love that it deserves from the market so, at the end of the day, something has to be done. In my mind, this is the overarching reason to proceed with a spinoff.

Let’s consider a few important points:

1) A promising business with an impressive track record

GE Healthcare is a growing business that has been able to report strong operating results over the last five years.

Source: 2017 10-K

The segment’s revenue is up single digits (5%) over the last five years, but, more importantly, profit is up by an impressive 13%. Additionally, management has been able to improve GE Healthcare’s operating profit margin by over 100 bps.

$ – in mil 2017 2016 2015 2014 2013 (Chg ’13 to ’17)
Revenue $19,116 $18,291 $17,639 $18,299 $18,200 $916
Chg 5% 4% -4% 1% 5%
Profit $3,448 $3,161 $2,882 $3,047 $3,048 $400
Chg 9% 10% -5% 0% 13%
Operating Profit Margin 18.0% 17.3% 16.3% 16.7% 16.7% 1.3%
8%

2) The recent results for GE Healthcare tell a similar story

Over the first nine months of 2018, GE Healthcare’s operating results show that this business unit is in a great position heading into 2019.

Source: Q3 2018 10-Q

And management has continued to improve the unit’s cost structure, as shown by the fact that the profit margin is up 50 bps YoY.

Source: Q3 2018 10-Q

3) What really matters, it’s all about creating value

The takeaway from the first two points is: GE Healthcare is a collection of assets with promising business prospects, and the numbers prove it. When taking a step back, I believe that the benefits of a GE Healthcare spinoff are threefold: (1) GE Healthcare will be valued like it should be, (2) the new GE will receive some much needed capital [let’s also not forget that approximately $18B in liabilities are going with the business unit], and (3) Mr. Culp and team will be able to focus their attention on a more streamlined business, which is especially important given the current state of this conglomerate – the Power unit should be front of mind.

It was reported that GE confidentially filed for the GE Healthcare IPO, and Mr. Culp recently floated the idea of spinning off a larger portion of the unit, so the market should get ready for this soon-to-be new publicly traded entity.

There are several good examples for what type of valuation GE Healthcare may receive when it’s eventually spun off and, as a shareholder, I like what I have seen so far. For example, American Money Management LLC provided this breakdown:

Source: AMM Research Report

Observations from AMM’s results:

  • GE Healthcare could have a market cap in the range of $33B-$60B.
  • GE Healthcare represents a material amount of the current share price for GE (the stock is trading at $7.51 per share).

I could provide at least three additional research reports estimating the value that GE Healthcare may receive, but I will save you the time by saying that most, if not all, analysts believe that the business unit makes up at least 50% of GE’s total market cap as of today (approximately $65B). I previously calculated a pre-liability market cap for GE Healthcare of $75B. AMM’s report is more conservative, and probably a little more realistic given the broader market dynamics.

Risks

Downside risks: (1) The company has significant fines related to the DOJ/SEC investigations, (2) Power takes longer than 18-24 months to recover and burns through cash, (3) management has a fire sale and disposes of assets at rock bottom prices, (4) the company’s credit rating hits junk status, and (5) additional insurance reserve charges are booked.

Upside risks: (1) the spins [Transportation, Healthcare, and Baker Hughes (NYSE:BHGE)] bring in more capital than anticipated, (2) the pension deficit shrinks as a result of the positive tailwinds, and (3) well-known investors put money to work in GE which leads to a positive change in sentiment.

Bottom Line

Make no mistake about it, GE is a high risk/high reward stock at this point in time. A turnaround will not be easy, and it will likely take an extended period of time (years instead of months), but I believe that management is already heading in the right direction. In my mind, the GE Healthcare spin will be a giant step forward.

Mr. Culp has a finite amount of capital that can allocated across the business portfolio so, at this point in time, it simply makes more sense for GE Healthcare to operate as a standalone entity. It helps that GE Healthcare is a great business that operates in a promising environment. In my opinion, GE Healthcare could turn out to be the catalyst that gets GE’s stock back into the double-digit range.

Lastly, I believe that the spins (Healthcare, Baker Hughes, & Transportation) will eventually lose the conglomerate discount that is currently being applied in the years ahead. As such, the asset disposals (including the GE Healthcare spin) will benefit the newly created entities and the “New GE” in 2019 and beyond. GE is definitely still a 3- to 5-year story, but I believe that the stock is a great long-term investment, if it meets your risk/return profile.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long GE. 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.

Elon Musk Adds Larry Ellison to Tesla's Board, Fulfilling SEC Requirement–Sort of

Tesla announced today that Oracle co-founder and Chairman Larry Ellison, and an investor in Tesla, has been added to the Tesla board. Also joining the board is Kathleen Wilson-Thompson, global head of HR at Walgreens. 

The move fulfills the letter, although not the spirit, of Tesla’s agreement with the Securities and Exchange Commission, which sued the company after Elon Musk posted an inaccurate and ill-advised tweet saying he was planning to take Tesla private and had the funding to do so. The settlement required that Tesla name a new chair to replace Musk, and add two independent directors to the board. 

The company has now met both those conditions, though maybe not the way the SEC  wished. Robyn Denholm, Tesla’s new chair, lives in Australia, where she’s CFO of that country’s largest telecom company. She won’t move to California for at least another four months and maybe never. That might make it tough for her to oversee Musk, as the SEC wanted the new chair to do. She’s also a longtime member of Tesla’s board, which is famous for failing to oversee him, at least so far.

Ellison is certainly more local and more vocal. He has a lot in common with Musk–he’s another iconic entrepreneur who built a hugely successful enterprise but sometimes gets himself in trouble by publicly saying exactly what he’s thinking, for instance when he called cloud computing “complete gibberish” at a 2008 analyst conference. Perhaps most important from Musk’s point of view, he’s a good friend and a staunch defender of both Tesla and Musk. 

Case in point, an October analyst call, where Ellison momentarily diverged from the topic at hand to defend Musk. “He’s landing rockets on robot drone rafts in the ocean,” Ellison said. “And you’re saying he doesn’t know what he’s doing. Well, who else is landing rockets? You ever land a rocket on a robot drone? Who are you?”

Ellison may not be the truly independent voice the SEC was hoping for. And yet, his arrival is probably very good news for Tesla. Ellison is one of the world’s richest people precisely because he knows how to build a profitable company. He also has a proven track record as an outside director, particularly at Apple, where he helped guide that company’s legendary turnaround after Steve Jobs returned as CEO in 1997. He has skin in the game, having bought 3 million shares of Tesla earlier this year. And, while he’s obviously a big fan of Elon Musk, he’s clearly capable of standing up to him if Ellison believes Musk is headed in the wrong direction. 

Tesla’s other new director, Kathleen Wilson-Thompson, is  more in the mold of Denholm–an un-flamboyant executive who has spent decades working her way up the corporate ladder, first at Kellogg, then at Walgreens. Having a longtime HR executive on the board is another good move for the company, in light of complaints about working conditions, especially during the Model 3 production ramp-up

The SEC has not publicly commented on the choice of new directors. But the markets seem to approve. Tesla’s share price is up by more than 5 percent on a day when most of the market headed downward. 

Disclosure: I’m a contributor to Oracle’s magazine Profit.

Got a McDonald's or Burger King Coupon? Here's the Smart, Surprising Thing to Do With It. (You Only Have 3 Days)

This is a story about a smaller restaurant chain trolling McDonald’s, Burger King, and other giants of the business. And it’s kind of brilliant. Before the details, a quick explanation.

The fast food industry is a smart and fun one to follow no matter what business you’re in, and for two big reasons.

First, there’s the pure scale. Make a menu change at McDonald’s for example, and you’re upending the routines of hundreds of thousands of hungry Americans. You can learn a lot just by watching how they develop and test new products.

But second, there’s the marketing.

Think of McDonald’s, which spends $2 billion a year on marketing and ads. That’s half the entire value of its much smaller competitor, Wendy’s. It’s an incredible chance just to unpack what they do, and figure out why they think that various ideas will work.

Which brings us to some shoot-the-moon marketing campaigns that can actually turn the big chains’ efforts on their heads.

The only catch? You had to place the order from a McDonald’s restaurant. (Technically, just being within 600 feet was close enough to trigger the offer.)

Of course, Burger King isn’t small; just smaller than McDonald’s. But it shows how if you’re creative, you can use a competitor’s strength–in that case the fact that there are roughly twice as many McDonald’s in the U.S. than there are Burger King locations–to your advantage.

But what if you don’t have 1.7 million Twitter followers and a full time social media marketing operation, like Burger King, to get word of your deal out.?

What if you don’t even have a mobile app (or a burning desire to get people to download your app, which is what the Burger King promotion and so many others these days are all about)?

Ladies and gentlemen, I give you: Smoothie King.

Again: not exactly tiny, although very small compared to McDonald’s and Burger King. Smoothie King has close to 800 stores, heavily concentrated in warmer weather parts of the country.

It’s privately held, and even if you’ve never tried it, you might recognize the name from the $40 million naming deal it has for the NBA New Orleans Pelicans home arena (“Smoothie King Center“).

Now, like its bigger competitors, Smoothie King also has a rewards app, and it’s launched a contest to try to incentivize people to download and use it. (The “Change-a-Meal Challenge.”)  

But what attracted me to this whole thing is how Smoothie King is kicking off its promotion: By letting you use any coupon from any other fast food restaurant — McDonald’s or Burger King included — at Smoothie King.

It’s good for only one day, New Year’s Eve, and regardless of the competitor’s coupon’s value, it gets you $2 off a smoothie at Smoothie King on December 31.

And in truth, I don’t know how many people would take advantage of it. But that doesn’t really matter in a way; what matters in this social media age is whether you can find a truthful, fun way to troll your competitors and turn their strengths to your advangage.

As a marketing strategy, I think it’s brilliant.

As for the Smoothies, well, I don’t know. I’m writing this from New Hampshire, and it looks like the nearest Smoothie King would be a three hour drive away. You’ll have to let me know in the comments.

General Electric: Expect A Big 2019

To call 2018 a bad year for shareholders of General Electric (GE) would be a grave understatement. Throughout the year, the company has undergone expanded investigations by the government, shuffled top management, sold off various assets, and, on multiple occasions, revise down performance expectations before ultimately eliminating them for the foreseeable future. By practically all accounts, the industrial conglomerate has been hit harder, and in almost every way possible, more than it has ever been hit before in its more than 100-year history. Now, as 2019 approaches, the big question facing shareholders is “what’s next?” While it’s possible 2019 will bring with it even more pain than 2018 has, the more likely scenario is that the firm will use the New Year to restructure its operations (out of bankruptcy) and will, if all appropriate steps are taken, prepare for a turnaround that could bring to shareholders significant value.

Expect the breakup to occur

One thing that very few people will disagree with, I think, is that a breakup of General Electric must occur. The business has become so large that it is, from a management and capital allocation perspective, inefficient. When you have so many divisions, figuring out where and how to deploy limited capital can be hard, while as separate entities, the fact of the matter is that individual management teams can focus on their core operations. By breaking up, the firm will also, for the most part, rid itself of GE Capital, which is likely where any currently undisclosed problems probably reside.

As management indicated while John Flannery was still General Electric’s top dog, I fully expect the company to divest of itself its GE Healthcare segment in some way, shape, or form. Management has indicated that this will take place through an IPO, but it’s expected that shareholders might still retain some of the business, though all of this could change over time. We already know thanks to an announcement earlier this year that the firm is likely to continue winding down its ownership in Baker Hughes, a GE Company (BHGE), by selling off its stake in the firm, but a big question here might relate to timing. Since the end of September, shares of the oilfield services firm have plummeted 34.6%, so while the company has struck a deal for a sale of some of its stock, I suspect that additional sales will only happen following a recovery in unit price.

Following the spinoff of its Transportation segment into a commanding interest in Westinghouse Air Brake Technologies Corporation (WAB), also known as Wabtec, next year, I believe management will likely begin monetizing its interests there as well. Personally, I see monetizing both Wabtec and Baker Hughes further as a sizable mistake given the future outlook I have for both energy and transportation in the US, but the cash generated from these deals will allow management to reduce debt and/or to invest further into what operations are left.

One thing I would love to see transpire is the sale or spinning off of General Electric’s Power segment. At this time, the firm intends to separate that into two different sets of operations, which may be setting the stage to sell or spin off at least one of them. I see this new decision under CEO Culp as a sign that he understands Power is General Electric’s most significant problem at the moment, and since plans to retain power occurred while Flannery was still in charge, I have modest hope that management will divest of the segment or at least part of it.

Don’t expect a distribution hike

During its third quarter earnings release earlier this year, management made a significant change to General Electric’s dividend policy. They said that, effective this month, the company would only pay out $0.01 per share each quarter as a distribution, down from $0.12 per quarter previously. This decision, though controversial, will result in the firm’s annual distribution falling from $4.175 billion per year to just $347.925 million per year. While I would have loved to see it cut all the way to zero so that management would have even more cash to put toward debt reduction and investing in core assets, the savings seen are material regardless.

Investors hoping for the distribution to recover in the near future are, I think, engaging in wishful thinking. As of the end of its latest quarter, General Electric had cash, cash equivalents, restricted cash, and marketable securities worth $61.69 billion, which is a lot to work with, but it also had $114.97 billion worth of debt (inclusive of $2.70 billion of non-recourse debt). Admittedly, debt was down from the $134.59 billion the firm had at the end of its 2016 fiscal year, but as assets come off the books, debt also must be reduced. Some of this could be taken off by spinning off various assets (for instance, the firm could probably spin in the low tens of billions of dollars off with its Healthcare segment if it so decided), but it’s likely that a lot of the work toward reducing debt will be tied to asset sales and the cash that otherwise would have been allocated toward its quarterly dividends. Until management can reduce debt, it’s unlikely we’ll see a hike, and that probably won’t occur until, at the very best, late next year.

*Taken from Moody’s

Where does debt need to be in order for management to consider raising its distribution again? The short answer is that it’s anybody’s guess, but more likely than not, it’s by whatever amount would allow the firm’s credit rating to rise back into the As. As you can see in the image above, the firm’s credit rating, as calculated by Moody’s (MCO), used to be Aaa until it fell in 2009. Since then, the rating has fallen further and, today, the firm’s long-term debt rating is Baa1. This still places it in a category known as “investment grade,” as the image below illustrates, but the drop, even though it’s not on watch for a further downgrade at this time, will weigh on financing options until the situation can be improved.

*Taken from Moody’s

A lot of cost-cutting and wheeling-and-dealing

If General Electric is going to not only survive but thrive for the long haul, there’s no doubt the firm will need to cut costs. This is especially true if the company elects to keep its Power segment, but irrespective of it, certain corporate costs will need to be slashed as the firm works to spin off its assets. Although management has, in recent times, done well to push for cost cutting, when the company actually starts to break up, we will know whether, and to what extent, this is actually true. One strategy that could work quite well could be what the firm struck with Baker Hughes. As part of its share divestiture, the two companies have entered into a series of joint agreements that will keep their operations intertwined through things like guaranteed low pricing and joint buying of key assets. I suspect this kind of wheeling-and-dealing to continue as the conglomerate sells off more of itself.

Takeaway

Based on the data provided, it’s clear that 2018 has been awful for General Electric, but investors who are expecting more pain to follow through 2019 might be on the wrong side of the bet. If 2018 was the crash for the business, 2019 will likely be the start of a true recovery for the firm, especially if management can work to restructure the entity in the way that they should. Obviously, whether the firm is successful or not, investors should expect a tremendous amount of volatility during the process, but that could present opportunities to buy and sell at attractive prices for the emotionally-detached investor.

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.

Exclusive: White House mulls new year executive order to bar Huawei, ZTE purchases

WASHINGTON (Reuters) – President Donald Trump is considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using telecommunications equipment made by China’s Huawei and ZTE, three sources familiar with the situation told Reuters.

FILE PHOTO: A man walks past a sign board of Huawei at CES (Consumer Electronics Show) Asia 2018 in Shanghai, China June 14, 2018. REUTERS/Aly Song

It would be the latest step by the Trump administration to cut Huawei Technologies Cos Ltd [HWT.UL] and ZTE Corp, two of China’s biggest network equipment companies, out of the U.S. market. The United States alleges that the two companies work at the behest of the Chinese government and that their equipment could be used to spy on Americans.

The executive order, which has been under consideration for more than eight months, could be issued as early as January and would direct the Commerce Department to block U.S. companies from buying equipment from foreign telecommunications makers that pose significant national security risks, sources from the telecoms industry and the administration said.

While the order is unlikely to name Huawei or ZTE, a source said it is expected that Commerce officials would interpret it as authorization to limit the spread of equipment made by the two companies. The sources said the text for the order has not been finalized.

The executive order would invoke the International Emergency Economic Powers Act, a law that gives the president the authority to regulate commerce in response to a national emergency that threatens the United States.

The issue has new urgency as U.S. wireless carriers look for partners as they prepare to adopt next generation 5G wireless networks.

The order follows the passage of a defense policy bill in August that barred the U.S. government itself from using Huawei and ZTE equipment.

Huawei and ZTE did not return requests for comment. Both in the past have denied allegations their products are used to spy. The White House also did not return a request for comment.

The Wall Street Journal first reported in early May that the order was under consideration, but it was never issued.

HIT TO RURAL NETWORKS

Rural operators in the United States are among the biggest customers of Huawei and ZTE, and fear the executive order would also require them to rip out existing Chinese-made equipment without compensation. Industry officials are divided on whether the administration could legally compel operators to do that.

While the big U.S. wireless companies have cut ties with Huawei in particular, small rural carriers have relied on Huawei and ZTE switches and other equipment because they tend to be less expensive.

The company is so central to small carriers that William Levy, vice president for sales of Huawei Tech USA, is on the board of directors of the Rural Wireless Association.

The RWA represents carriers with fewer than 100,000 subscribers. It estimates that 25 percent of its members had Huawei or ZTE equipment in their networks, it said in a filing to the Federal Communications Commission earlier this month.

The RWA is concerned that an executive order could force its members to remove ZTE and Huawei equipment and also bar future purchases, said Caressa Bennet, RWA general counsel.

It would cost $800 million to $1 billion for all RWA members to replace their Huawei and ZTE equipment, Bennet said.

Separately, the FCC in April granted initial approval to a regulation that bars giving federal funding to help pay for telecommunication infrastructure to companies that purchase equipment from firms deemed threats to U.S. national security, which analysts have said is aimed at Huawei and ZTE.

The FCC is also considering whether to require carriers to remove and replace equipment from firms deemed a national security risk.

FILE PHOTO – The logo of China’s ZTE Corp is seen on the building of ZTE Beijing research and development center in Beijing, China June 13, 2018. REUTERS/Jason Lee

In March, FCC Chairman Ajit Pai said “hidden ‘back doors’ to our networks in routers, switches — and virtually any other type of telecommunications equipment – can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more.”

In the December filing, Pine Belt Communications in Alabama estimated it would cost $7 million to $13 million to replace its Chinese-made equipment, while Sagebrush in Montana said replacement would cost $57 million and take two years.

Sagebrush has noted that Huawei products are significantly cheaper. When looking for bids in 2010 for its network, it found the cost of Ericsson equipment to be nearly four times the cost of Huawei.

Reporting by Diane Bartz and David Shepardson; Editing by Chris Sanders and Leslie Adler