TEAMS WITH GOOGLE
Cisco held its annual customer event this week in Orlando, Florida, and invited the industry analysts to attend. CEO Chuck Robbins highlighted the company’s commitment to security in his CiscoLive keynote, while other executives elaborated on more security product and services details.
After a few days of meetings, I believe Cisco’s cybersecurity strategy focuses on:
Product integration. Cisco wants a common cybersecurity product architecture that spans endpoints, networks, data centers, and the public cloud, that can service most of its customers cybersecurity technology needs. As a result, Cisco is busy integrating products and services such as AMP, Umbrella, Firepower, Talos, etc. Cisco demonstrated its platform and discussed its future roadmap in detail.
Openness and programmability. Beyond gluing its own products together, Cisco’s cybersecurity platform is built with connectors and APIs for third-party integration and programmability. To illustrate its technology alliance partner ecosystem, Cisco crowed about dozens of partners, including Anomali, IBM, LogRhythm, and McAfee. Cisco’s intent-based networking (IBN) programmability also extends to security for service providers, taking advantage of APIs and building value-added services on top of Cisco security tools.
A foundation of threat intelligence. CiscoLive started last Sunday with a day-long session by the Talos team on security research and threat intelligence. Beyond the data, the Cisco team focused on teaching customers how to operationalize threat intelligence for threat detection, hunting, and risk management. Clearly, Cisco believes that Talos threat intelligence can give the company a strategic advantage versus narrowband security vendors, so it is anchoring all security products with Talos threat feeds. The company is also bolstering market education to get the Talos word out more broadly.
Comprehensive cloud security. Cisco wants customers to know that it can protect workloads in the public cloud with a one-two punch of Tetration and StealthWatch cloud. Beyond IaaS and PaaS, Cisco also promoted its CloudLock CASB product for SaaS management and data protection. Finally, Cisco is offering several "security from the cloud" services, such as Umbrella and email security to safeguard mobile workers and branch offices.
Operational simplicity. When it comes to security operations, Cisco understands that many of its customers are understaffed, lack advanced skills, have too many point tools, and still rely on manual processes. To address those shortcomings, Cisco demonstrated a security operations platform called Visibility, a common SOC analyst workbench for threat detection, incident response, and risk remediation. In its current iteration, Visibility supports a handful of Cisco products, but the company previewed an aggressive roadmap for integration of additional Cisco and third-party products.
Professional and managed services. What many customers may not realize is that Cisco professional and managed cybersecurity services are growing like a weed. Cisco plans to expand its services portfolio to provide flexible consumption options and help customers benefit further from all its security products.
While Cisco realizes it must compete with best-of-breed products, its security go-to-market is now focused on campaigns, providing solutions for security threats such as ransomware defense, breach response, and data center security. These strategic solutions often encompass an integrated bundle of several Cisco products at once.
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3 ways Cisco can prove its cybersecurity strength
I’ve been following Cisco for over a dozen years and firmly believe that the company’s security business is stronger now than it has ever been. That said, many cybersecurity professionals continue to consider Cisco a networking company or retain bad memories of products such as the Cisco Security Agent (CSA) or Cisco Monitoring, Analysis and Response System (MARS). To promote its cybersecurity prowess and gain attention within the infosec diaspora, Cisco should:
Support its platform with marketing and add-on services. The platform wars are just beginning, but customers are already confused by the myriad of offerings from vendors like McAfee, Palo Alto Networks, Symantec, and Trend Micro. Cisco should use its enterprise relationships to build a security platform market education campaign for CISOs, complete with project plans, success metrics, and add-on services. The goal? Educate and influence executive security decision makers and give them the tools and support to help them through two- to three-year security platform deployment projects.
Flex more innovation and technology leadership muscle. Cisco’s scale and security resources are pretty impressive. For example, Cisco Umbrella sees 125 billion DNS queries per day, while the company employs an army of data scientists working on artificial intelligence/machine learning for cybersecurity. So, what’s the problem? Those who don’t come to CiscoLive have no idea these assets exist, so the company can be outflanked by more boastful cybersecurity startups. Beyond CiscoLive, Cisco should host more security-only events, develop training courses with organizations such as the SANS institute, and reach out to professional organizations such as ISSA to spread the word on all the security research, development, and innovation going on in San Jose.
Take an industry leadership position on cybersecurity architecture standards. Cisco should rally customers and recruit partners to support more industry cooperation around open standards like OpenC2. For starters, Cisco should turn pxGrid over to a standards body with the goal of making it an industry standard.
Cisco is in as good a position as any other vendor, and it could take its cybersecurity business to $5 billion over the next few years if it continues to execute. I’ll be watching.
GE WORST PERFORMING STOCK
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MUSK BUYS SHARES
APPLE MEDIA CONTENT
Tesla (NASDAQ: TSLA) laid off 9% of its workforce. CEO Elon Musk said the 3,500 or so jobs did not affect employees producing the company’s cars, particularly the anticipated but late Model 3. The move was seen as an action to push Tesla toward profitability. Investors worry that Tesla does not have enough money to make it through the end of the year, without raising more. In many circumstances, money losing companies which announce layoffs do them in tranches. If Tesla’s financial predicament becomes more difficult, it may have to contemplate more downsizing
Musk recently warded off an attempt to split his chairman’s role from that of the CEO. Musk argued there is nothing wrong with being both. The majority of shareholders agreed, although some of the largest ones objected. The vote of confidence does not take Musk off the hook. He says he can produce 5,000 Model 3 vehicles a week. The would may dampen the current shareholder revolt. However, he may not reach the number. After that, there will be pressure to move toward 10,000 a week
Given Tesla’s growing need for fixed assets which include factory installations, and vehicle distribution, Musk cannot cut costs in these areas, which represent a very large part of the company’s expenses. He still has nearly 35,000 workers. It is hard to say how many of those are “dispensable”. At most companies, the number is measured by desperation.
Musk tweeted his memo to employees. Among the details were that there were some “duplication of roles”, and job functions which were “difficult to justify”. Duplication can be replaced with essential jobs which are too expensive. If Tesla’s financial fortunes continue downward, layoffs are not over.
Reuters) - Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk bought 72,500 shares of the company's common stock, a regulatory filing http://bit.ly/2t4K2sYshowed on Wednesday.
Musk bought the shares at between $342.44 and $347.44 per share in multiple transactions on Tuesday and Wednesday.
He is already the electric car maker's largest shareholder and now owns 33.74 million shares worth about $11.6 billion.
Tesla, which continues to burn through cash as it spends on its assembly line and prepares for new investments on projects, is cutting several thousand jobs seeking to reduce costs and become profitable without endangering the critical production ramp-up for its Model 3 sedan.
Tesla has been trying to hit a 5,000 per week production target of its Model 3 sedans after facing initial production hiccups.
Noted short seller Jim Chanos of Kynikos Associates said in an interview on CNBC that he continues to short Tesla's shares.
"The company will pull out all the stops, it will do a lot of one-time items, we believe, to show a GAAP profit in the third quarter. But they are just that, one-time items,” Chanos said.
"The basic problem is that he is making cars at not enough of a gross margin to make money, and that's before the competition rolls out, which is late this year and early next year."
GOAL IS SMOOTH
General Electric Co. (NYSE: GE) shares lost about 1.2% last week and established the company as the worst performer among the Dow equities for the year to date.So far in 2018 the shares have lost a fraction over 20.2%.
The second-worst Dow stock so far this year is The Procter & Gamble Co. (NYSE: PG), down 16%; followed by Walmart Inc. (NYSE: WMT), down 14.6%; 3M Company (NYSE: MMM), down 12.3%; and Johnson & Johnson (NYSE: JNJ), down 11.2%. The 30 Dow stocks are evenly split with year-to-date winners and losers each numbering 15.
The Dow dropped almost 118 points over the course of the last week to close at 24,635.21, down about 0.5%. For the year to date the consumer staples sector has dropped about 13.5%, worst among the 10 market sectors.
The Dow added more than 680 points over the course of the past week to close at 25,316.53, up nearly 2.8%. For the year to date the consumer staples sector has dropped about 11.5%, worst among the 10 market sectors.
The big news from GE this week was a Friday announcement that the company would pay its $0.48 per share dividend for the second quarter. At Friday’s closing price the dividend is producing a yield of 3.48% to shareholders, enough to overcome the many issues the company faces.
Activist investor Nelson Peltz said last week than when GE CEO John Flannery says that “everything is on the table” then investors should take him seriously. The remark was widely interpreted to mean that Peltz believes a breakup of GE is possible. Peltz’s Trian Fund Management firm has a seat on GE’s board.
Finally, GE said Friday that two of its business units are jointly starting a company called AiRXOS to provide management and control services for drones. By itself the startup is unlikely to turn GE’s fortunes around, but it does indicate some signs of life.
GE stock closed at $13.93 on Friday, up nearly 1.1% for the day in a 52-week range of $12.73 to $29.47. The 12-month consensus price target on the stock is $17.50 and the forward price-earnings ratio is 13.27
Apple has 16 new shows in the works, comparable to Netflix in 2013 (its first year of original programming) when it had released 13 originals.
We expect Apple to spend $900M on video content in 2018, growing to $4.2B by 2022.
Original video content is defensible and adds to Apple’s Services segment.
We believe Apple’s investment paradigm is shifting, centered around the Services segment. In CY18, Services should account for 14% of revenue, growing to 20% by CY23. Content is an emerging part of the Services pillar, as evidenced by the success of Apple Music, now with over 50M paying subs. Original video content is a new category for Apple and represents optionality to Services revenue growth and is not yet reflected in the value of AAPL shares.
Framing up the opportunity. While off to a disappointing start, (Carpool Karaoke and Planet of the Apps), we believe Apple is making measurable progress in original video content that will begin to contribute to Services growth starting in 2019 or 2020. Content could ultimately account for $10-$15B in annual revenue (Netflix will do $16B in 2018) and 3-5% of overall Apple revenue.
Key content hires. At the helm of the company’s content efforts are Jamie Erlicht and Zack Van Amburg, who Apple hired away from Sony in 2017. Erlicht and Van Amburg ran Sony’s primetime series division since 2005. They will report directly to Eddie Cue, who runs Apple’s Services business. Apple has also hired an array of industry veterans from a range of backgrounds including streaming platforms like Hulu and Amazon Studios, and mainstay media companies like WGN America and Legendary Entertainment.
Apple’s content pipeline:
Amazing Stories – Apple plans to spend ~$5M per episode on a 10 part sci-fi/horror series originally created by Steven Spielberg in 1985. Source
Are You Sleeping – A thriller drama series based on true crime novel by Kathleen Barber. Source
Central Park – Comedy that tells the story of how a family of caretakers living in Central Park ends up saving the park & the world. Source
Dickinson – Documentary about the early life of poet Emily Dickinson starring Hailee Steinfeld. Source
Home – Will offer viewers a “never-before-seen look inside the world’s most extraordinary homes” and the minds of the people who created them. Source
See – Straight-to-series epic world-building drama set in the future. Source
Untitled Damien Chazelle Project – Details of the series’ plot are under wraps. This project will be the first time Chazelle has written and directed every episode of a series. Source
Untitled Kristen Wiig Project – Comedy series produced by Reese Witherspoon, inspired by Curtis Sittenfeld’s upcoming short story collection “You Think It, I’ll Say It.” Source
Untitled M. Night Shyamalan Project – Straight-to-series psychological thriller. Source
Untitled Morning Show – Morning show drama starring Jennifer Aniston and Reese Witherspoon. Source
Untitled Ronald D. Moore Project – Ronald D. Moore, developer of Battlestar Galactica, explores what would have happened if the global space race had never ended. Source
Swagger – Profile on the early life and career of NBA star Kevin Durant. Source
Little America – Based on a series of true stories featured in Epic Magazine that paint a portrait of America’s immigrants. Source
Foundation – Based on Isaac Asimov’s iconic science fiction novels published between 1942-1993. Source
Shantaram – Drama series based on “Shantaram,” a 2003 novel about a man who escaped an Australian prison only to hide out in the slums of Bombay. Source
Little Voices – Tells the story of finding authenticity in the crowded and diverse New York musical landscape. Source
Apple is about 5 years behind. At first glance, it appears Netflix’s lead in original content is insurmountable. Netflix will end 2018 with close to 1,000 original titles and spend an estimated $3.5 billion on new titles this year. Keep in mind that almost half of that content is outside of the U.S. That compares to Apple, which has 2 titles out today and another 16 in the works (to be released in 2019 at the earliest), expecting to spend about $900 million this year. However, history is on Apple’s side, given that just five years ago Netflix had 13 original titles including the debut season of House of Cards. In other words, with the right resources, which Apple has, Apple’s original content titles can ramp from just under two dozen to potentially over one hundred. We note that Apple has stated they are focused on quality vs. quantity.
Apple’s Advantage. It’s an understatement to say that the video streaming landscape is competitive. Apple, once again, is late to the game but has an opportunity to change the game. Specifically, Apple can change the game around content streaming customer acquisition. Just like Netflix, HBO, and Hulu, Apple’s stories and production quality are first class. What separates Apple is the company’s access to 1.3B active devices through which they can subtly encourage adoption. Apple Music’s market share gains over the past two years are a testimony to the power of coupling Services with widely adopted hardware. An unrelated advantage is Apple’s brand, which, at its core, represents quality and attention to detail, and should translate into favorable initial adoption.
Apple Music’s market share gains over the past two years are a testimony to the power of coupling Services with widely adopted hardware.
Content is an emerging area of investment. It’s no secret that original content will be an emerging area of investment for Apple in order to boost the increasingly important Services revenue line. The good news is that cord cutting is undeniable and consumers are now paying for multiple monthly streaming services. Multiple streaming services means there will be a handful of content provider winners. We think that over the next 5 years Apple will ramp its original content investment from an estimated $900m this year to an estimated $4.2B in 2022.
How will Apple’s video content be distributed? Consuming video on Apple devices is confusing. Between the iTunes Store, Music, TV, Podcasts, Books, and News apps, it is unclear where to discover and consume Apple’s video content. This presents an issue as they attempt to bolster content offerings going forward. While it is unclear how the video streaming service will be branded and delivered, we expect the iTunes Store to fade away, folding its content into the existing Music, TV, Books, and Podcasts apps.
Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.