Value Unleashed

 The Geek's Reading List

The Geek's Reading List is a weekly publication written by Valitas advisor, Brian Piccioni. Brian has been part of the technology industry for a third of a century now. He has been a sell-side research analyst for the past 20 years, where he was ranked the #1 tech analyst in Canada for six consecutive years, named one of the best tech analysts in the world, and won a number of awards for stock-picking and estimating. The Geek's Reading List looks at recent developments in the technology sector by discussing articles that Brian compiled over the week. In his own words, the discussions are usually provocative, new, and counter-consensus. The sorts of things not being written anywhere else.

1) Uber Is Doomed

2) YouTube announces cable-free TV subscription service

3) Why Hollywood as We Know It Is Already Over

4) Amazon Cloud Services Outage Takes Down Amazon Video, Websites and Internet-Connected Light Bulbs

5) If you think NASA is frustrated with SpaceX, you’re probably right

6) Oculus slashes price of Rift headset + Touch controllers to $598

7) So you want to invest in VR or AR?

8) Gene therapy ‘cures’ boy of blood disease that affects millions

9) Researchers store computer operating system and short movie on DNA

10) U.S. appeals court tosses patent verdict against Apple

1) Uber Is Doomed

The bankers handling Snap’s IPO did their job and ensured the favored clients who got an allocation of the IPO profited handsomely. The company itself is doomed, but as long as the private equity investors unload their positions on the public no hard no foul. The success of Snap’s IPO shows the investment climate is primed for an even larger pile of garbage so don’t be surprised if Uber files for an IPO in the near future. After all, money doesn’t grow on trees and a company incapable of making a profit needs to pay its customers somehow.

“After a discombobulated 2016, in which Uber burned through more than $2 billion, amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists, it’s hard to imagine Kalanick could take the company public at its stunning current valuation of nearly $70 billion. And now, in the past few weeks alone, Uber has been accused of having a workplace that fosters a culture of misogyny, accused of stealing from Google the blueprint of a successful self-driving system, and has lost 200,000 customers over ties to President Donald Trump and how it responded to a taxi driver boycott.”

http://jalopnik.com/uber-is-doomed-1792634203

2) YouTube announces cable-free TV subscription service

It was a matter of time before Google got into the Over the Top streaming business. The company has a massive infrastructure for video delivery but it takes time to negotiate rebroadcast rights, and that will have to be done one country at a time. This sets the stage for Google to offer advertisements customized to the interests of its subscribers, which should be a very lucrative business.

“YouTube is giving viewers a way to tune in live to their favorite shows, without a cable or satellite subscription. The company announced a live and on-demand streaming TV service called “YouTubeTV” on Tuesday. The subscription, which will cost $35 a month for a family plan of up to six accounts, is expected to launch in the next few months in the U.S. Currently there are no plans for international service. Subscribers will have access to up to 40 networks, as well as YouTube creator content like original content from subscription service YouTube Red. Channels include all broadcast channels and cable channels like USA, FX, Freeform, ESPN, Fox Sports and NBC Sports. Users can add Showtime and soccer programming for an additional fee.”

http://www.cnbc.com/2017/02/28/youtube-announces-skinny-tv-bundle-.html

3) Why Hollywood as We Know It Is Already Over

This article covers a lot of territory ranging from the impact of unions on the movie business to the emergence of Netflix and other streaming services and their impact on media in general. Long story short, as I predicted in an article in 1996, streaming video channels like Netflix, Amazon Prime, and YouTube TV are making for boom times for content producers. This is bad for Hollywood, which has huge production costs and a distinct lack of imagination (the ad for the video associated with the article is for yet another King Kong remake, complete with over the top and likely very boring special effects). You don’t need to spend hundreds of millions of dollars on a story if it is a good story.

“But the real threat isn’t China. It’s Silicon Valley. Hollywood, in its over-reliance on franchises, has ceded the vast majority of the more stimulating content to premium networks and over-the-top services such as HBO and Showtime, and, increasingly, digital-native platforms such as Netflix and Amazon. These companies also have access to analytics tools that Hollywood could never fathom, and an allergy to its inefficiency. Few have seen the change as closely as Diller himself, who went from running Paramount and Fox to building his own tech empire, IAC. “I don’t know why anyone would want a movie company today,” Diller said at Vanity Fair’s New Establishment Summit in October. “They don’t make movies; they make hats and whistles.” (Half of the people in the audience, likely representing the tech industry, laughed at this quip; the other half, from Hollywood, cringed.) When I spoke to Mike Moritz, the iconic venture capitalist, backstage at the event, he noted that a nominal investment in a somewhat successful tech company could generate more money than Hollywood’s top-grossing movies. “In my mind,” he said, “Hollywood is dying.””

http://www.vanityfair.com/news/2017/01/why-hollywood-as-we-know-it-is-already-over

4) Amazon Cloud Services Outage Takes Down Amazon Video, Websites and Internet-Connected Light Bulbs

The great thing about cloud services is that they are inexpensive and an expense rather than a capital item. The bad thing about cloud services is, when they go down, they go down big. Amazon demonstrated that with a major outage which appears to have reverberated for many hours. The company blames a mistake by an employee but the mess up probably cost their customers millions

“A number of internet services were affected by an outage of Amazon’s cloud infrastructure lasting multiple hours Tuesday. Amazon’s S3 servers, which are often used to store images and other media, suffered an outage across the East Coast region Tuesday morning, affecting services ranging from Amazon’s own media services to Medium to Slack. Amazon acknowledged the outage on its cloud services status page, writing that “customer applications depending on S3 will continue to experience high error rates as we are actively working to remediate the errors in Amazon S3.””

https://variety.com/2017/digital/news/amazon-aws-s3-down-1201998994/

5) If you think NASA is frustrated with SpaceX, you’re probably right

Musk is the consummate stock promoter. Although SpaceX is private, there is an aura which must be maintained, so news that the company was going to send a couple of paying customers around the moon (and hopefully back) was greeted with hysterical excitement by his many fans. I’d love a chance to go to space, but SpaceX’s safety record with cargo is bad enough and, as is pointed out, they haven’t even got a crew into low Earth orbit yet. I’m not saying it is suicide to go on this trip but, well, they had better pack cyanide capsules just in case.

“Roughly translated, this means: Dear SpaceX, we have stood by you. We have given you $3 billion for crew services, the majority of your revenues in recent years, and we are desperately tired of relying on Russia to get our astronauts to the space station. Could you please focus on our contract? Like, now? A more blunt assessment was offered by Mary Lynne Dittmar, who is familiar with the thinking of NASA’s human spaceflight program managers. “I find it extraordinary that these sorts of announcements are being made when SpaceX has yet to get crew from the ground to low-Earth orbit,” she told The New York Times.”

https://arstechnica.com/science/2017/02/if-you-think-nasa-is-frustrated-with-spacex-youre-probably-right/

6) Oculus slashes price of Rift headset + Touch controllers to $598

A little while ago we learned that Best Buy was pulling the plug on VR demo booths at many stores due to lack of interest. Although price drops are not unusual in the technology space it is hard to believe demand for Oculus VR is living up to expectations. We continue to believe that, although there will be a demand for VR and AR, these will mainly be niche markets.

“The $599 Rift headset and $199 Touch controllers have both had their prices cut by $100, bringing the bundled price of the two VR products to $598. Consumers can also purchase them separately, with the Rift priced at $499 and the Touch controllers, which were released just three months ago, now costing $99. These aggressive price cuts suggest Oculus is doubling down on getting the device in more consumers’ hands, especially as analysts suggest the company’s headset is being outsold by competing products from Sony and HTC. No official numbers have been shared by either Oculus or HTC, but Sony announced in an interview last week that the company had sold nearly one million PS VR headsets since releasing the device this past October.”

https://techcrunch.com/2017/03/01/oculus-slashes-price-of-rift-headset-touch-controllers-to-598/

7) So you want to invest in VR or AR?

This piece is written by my friend Duncan Stewart and it provides some context for the price drops around the Oculus VR headset and related gadgetry as mentioned above. The thing with a peripheral such as VR or AR is that utility is closely associated with software. Unfortunately, lots of media software like games and even specialty applications require a large market for it to make any sense to develop software for it.

“You have to be very careful about potential enterprise use cases. As an example, what if I came up with a cool AR headset that someone could wear while taking blood? It would show exactly where the veins are, and help me select the right place. Great idea, right? The problem is that while DUNCAN needs help in knowing where to find a vein, almost all (99% or more) of blood tests are being done by nurses and technicians who do this for a living. They are extensively trained, and have likely done it tens of thousands of times…they don’t NEED an expensive AR headset; it would only get in the way! Many of the AR business plans I see are along these lines: they look impressive to the average person, but have very poor real world utility.”

https://www.linkedin.com/pulse/so-you-want-invest-vr-ar-duncan-stewart

8) Gene therapy ‘cures’ boy of blood disease that affects millions

Nobody has figured out how to safely deliver a corrected gene to an entire body though it has been done to embryos. The most viable approach is to take stem cells, fix those, and re-implant them. This should work wells for a variety of ailments with the most obvious candidates being those related to blood. In this case they used a monoclonal antibody/retrovirus to modify the stem cells so they now produce red blood cells unaffected by the sickle cell gene. This technology was developed before CRISPR Cas9 and I suspect it would be a lot easier using that technique. This is a whole new world in terms of new medical treatments.

“Now a team in France seems to have developed a treatment that would work for everyone with the disorder. First, the team took bone marrow stem cells from the boy when he was 13, and gave them extra, mutated versions of the gene that codes for beta-globin. These were designed to make beta-globin that would interfere with the boy’s faulty proteins, stopping them from clumping together. The researchers then put these stem cells back into the boy’s body. After around three months, he began producing large quantities of haemoglobin that behaves normally (New England Journal of Medicine, DOI: 10.1056/NEJMoa1609677). “The patient is now 15 years old and free of all previous medication,” says Marina Cavazzana at the Necker Children’s Hospital in Paris, who led the team. “He has been free of pain from blood vessel blockages, and has given up taking opioid painkillers.””

https://www.newscientist.com/article/mg23331154-800-gene-therapy-breakthrough/

9) Researchers store computer operating system and short movie on DNA

I though the 2 megabytes was a typo, because I don’t know of any 2 MB operating systems but that is the figure also cited in the research paper. Nevertheless it is highly unlikely DNA would be used as a storage medium for the simple reason that the larger the data storage on a media the more important random access and access times are. So if you can imagine a magnetic tape which store 1 petabyte of data (1000 terabytes) you have to go from one end to the other looking for data. 1 petabyte is a lot of data so if you read a terabyte per minute, or 133 gigabits per second, it would take you 8 hours on average to find the data you are looking for. Suffice it to say you can’t read DNA at anywhere near 133 gigabits per second so you better not be in a hurry.

“Finally, the researchers show that their coding strategy packs 215 petabytes of data on a single gram of DNA—100 times more than methods published by pioneering researchers George Church at Harvard, and Nick Goldman and Ewan Birney at the European Bioinformatics Institute. “We believe this is the highest-density data-storage device ever created,” said Erlich. … Cost still remains a barrier. The researchers spent $7,000 to synthesize the DNA they used to archive their 2 megabytes of data, and another $2,000 to read it. Though the price of DNA sequencing has fallen exponentially, there may not be the same demand for DNA synthesis, says Sri Kosuri, a biochemistry professor at UCLA who was not involved in the study. “Investors may not be willing to risk tons of money to bring costs down,” he said.”

https://phys.org/news/2017-03-short-movie-dna.html

10) U.S. appeals court tosses patent verdict against Apple

The worm continues to turn against patent licensing companies. The US Patent Office is pretty liberal when it comes to granting patents and this has been turned to the advantage of many patent licensing firms. Ideally, you’d want a patent to be very broad so it can apply to things which never occurred to the inventor. As this case shows, litigation is so expensive that lots of companies agreed to pay licenses regardless of the dubious quality of the patents. The 3 to 0 ruling shows the Federal Circuit appeals courts is getting serious about reigning in low quality cases.

“A federal appeals court has thrown out a jury verdict that had originally required Apple Inc to pay $533 million to Smartflash LLC, a technology developer and licenser that claimed Apple’s iTunes software infringed its data storage patents. The trial judge vacated the large damages award a few months after a Texas federal jury imposed it in February 2015, but the U.S. Court of Appeals for the Federal Circuit said on Wednesday the judge should have ruled Smartflash’s patents invalid and set aside the verdict entirely. A unanimous three-judge appeals panel said Smartflash’s patents were too “abstract” and did not go far enough in describing an actual invention to warrant protection.”

http://www.reuters.com/article/us-apple-lawsuit-patent-idUSKBN1685D5