DJI – Brains not brawn

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The spark at DJI is in its software prowess.

  • DJI has launched a new drone which I think clearly demonstrates this company’s unique ability to take on its US rivals and come up with a better product.
  • DJI has launched the Spark which is a palm sized drone that looks to be so easy to fly that the controller is an optional accessory.
  • The Spark is equipped with a 1080p 12MP camera and is controllable with a smartphone app but most importantly it sports a level of autonomy that makes it easy for anyone to fly.
  • Its chief rival in this space is the Dobby drone from Xerotech, which is pretty easy to fly using a smartphone but does not offer the level of sophistication that the Spark does.
  • Specifically, I am referring to the ability to completely control the drone using hand gestures and a series of autonomous modes that are aimed at still and video selfies.
  • This level of autonomy has been under development for quite sometime and DJI continues to demonstrate that it is ahead of all its competitors, including those based in US.
  • This is extremely rare for a Shenzhen-based hardware company which tend to turn out very cheap copy-cat devices and have no understanding of software at all.
  • The difference between Chinese designed devices and the much more expensive versions sold by US companies tends to be found in software functionality and reliability.
  • This is why the US versions still sell well in developed markets as consumers can recognise and are willing to pay up for quality products.
  • DJI completely bucks this trend as it is turning out better products than all its competitors making it a worthy leader of the still small, but growing drone market.
  • What is unusual about DJI is that its differentiation is now rapidly becoming based on its software which offers the best level of autonomy currently available.
  • This has really come to light in its two most recent products, the Mavic Pro and now the Spark.
  • The Spark is DJI’s first attempt at the consumer market as the device is priced at $499 compared to all of its other products that are above $1,000.
  • For its more expensive products it is not so important for them to have a high level of autonomy as they tend to be purchased by users who are either professionals or experienced flyers.
  • This is aimed at those that have never picked up a drone before and as long as it lives up to its billing it should be very easy and great fun to fly.
  • Most of all, the autonomy should allow selfies to be taken where the “pilot” is participating in the scene rather than flying the drone.
  • DJI is continuing to stay ahead of its competitors and is the first Chinese company to lead a segment of consumer electronics rather than be a fast copier.
  • If it was listed, I would be looking at DJI with great interest.

Microsoft – Breathing space

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Microsoft gives the PC makers room to breathe.

  • Microsoft updated its Surface Pro at an event in Shanghai but left plenty of space for its partners to innovate within the fledgling tablet-PC category.
  • Microsoft has followed Apple in dropping the version number from the name and the new product makes incremental improvements which include:
    • Battery: Microsoft claims that despite looking very similar, the new product has 50% more battery life than the Surface Pro 4, clocking in at 13.5 hours under optimal conditions.
    • This will be well received by road warriors who spend a lot of time in airports and coffee shops looking for power sockets.
    • Fan-less: The new Surface Pro is fan-less in the m3 and i5 versions which is a meaningful saving both in terms of power and noise.
    • Microsoft is very late to fan-less computing and I see it as behind the curve as there are other devices (see here) available that run the same processors but are fan-less across the whole range.
    • I am assuming that as the i7 version also runs Intel Iris Plus Graphics 640, more heat may be generated under heavy load than the i5, necessitating the presence of a physical fan.
    • Going fan-less is a good opportunity to reduce thickness and weight but again Microsoft does not appear to have taken this route as it is keeping the same chassis for all versions.
    • Instead it is leaving this to other companies like Samsung, Huawei, Eve Tech and HP which has clearly been doing some work on its form factors.
    • Hinge: A new hinge has been created to enable what Microsoft calls studio mode.
    • This is where the device is almost horizontal but is slanted at the same angle as the workspace of an architect or illustrator.
    • This is very similar to the use case provided by the popular but expensive all-in-one PC Microsoft launched last year called Surface Studio.
  • Outside of these upgrades, the new Surface Pro is an incremental upgrade which leaves plenty of room for others to address this space.
  • I don’t think that it has ever been Microsoft’s intention to take market share away from its partners but more to show them the way forward
  • Historically, PC makers have really been starved of form factor innovation, having outsourced almost all of its to the ODMs.
  • However, there are signs of this coming back.
  • A good example is HP which as seen huge improvements its form factors with the Envy line of laptops finally living up to its name.
  • Most PC makers now offer a Surface Pro-like product which if marketed properly, still has the potential to change the nature of PC market.
  • A tablet PC with a separate keyboard and mouse offers a more productive, healthier and more ergonomic computing experience which I still think renders the laptop form factor obsolete.
  • However, PC makers and the marketing departments of Intel and Microsoft have been selling laptops for 40 years which has become a very difficult habit to break (see here).
  • I still believe that this has the potential to kick the PC market back to growth as old laptops are quickly replaced, but given that this is just a product cycle, it would only last for a few years.
  • This rising tide would float all boats but I would prefer to be aboard either Microsoft or Lenovo for this ride.

LeEco – Le-trenchment

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LeEco looks to return to its roots at home.

  • LeEco’s foray into the United States looks like it is coming to an end which combined with a major restructuring at home, probably brings to an end any realistic hope of becoming a digital ecosystem.
  • I understand that LeEco is about to lay off all of its employees in the US that are involved in developing, building and selling the devices and ecosystem that LeEco is offering.
  • Those that remain are thought to be staying to look after existing customers but I suspect that most that remain will be the ones that are working on the automotive ambitions of Faraday Future.
  • On top of this, Jia Yueting, the mercurial founder of LeEco, is also stepping back from his position as CEO of Leshi Internet Information & Technology Corp. (LeEco’s parent) although he will remain chairman.
  • He will be replaced by Liang Jun who has been running the content business since joining from Lenovo in 2012.
  • LeEco’s CFO has also been replaced with the CFO of the China business.
  • Furthermore, it looks like all of the content related businesses will be merged into Leshi while the automotive business is spun out as a separate unit.
  • All of this points towards a big retrenchment where LeEco will once again become a Chinese digital content company with a shareholding in an electric car company.
  • I think that this means that all LeEco’s activities in the US will be focused on Faraday Future which is trying to build an electric vehicle at a yet-to-be-completed factory in Nevada.
  • At the end of the day, I think LeEco tried to do things much too quickly and did not pay enough attention to the fundamentals of creating an ecosystem.
  • If I take LeEco’s ecosystem as it is today it has weak coverage of the RFM Digital Life Pie as it really only covers Media Consumption.
  • It also gets a poor score against RFM’s 8 Laws of Robotics mostly due to the fact that it has not paid enough attention to detail when it comes to the user experience.
  • I get the impression that the software was simply ported over from the Chinese version and not enough time has been taken to adapt the user experience for the US consumer.
  • The devices themselves offer great value compared to competitors with an 85 inch 4K TV for $5,499 being the best deal available by quite some margin.
  • However, it all falls to pieces when it comes to software and this is where LeEco was hoping to make its money.
  • I have long held the opinion that LeEco did not have the resources to create both a digital ecosystem and an electric vehicle and that it should close its automotive operation and focus on its core business (see here).
  • However, it appears to have gone one step further in closing its ecosystem ambitions and spinning out automotive where I suspect it will be seeking participation from other investors.
  • I suspect that Leshi will now return to competing in the Chinese market which is heating up with increasing levels of investment in content coming from the BATmen.
  • Consequently, the outlook is pretty bleak as Leshi’s ability to out invest the BATmen is highly questionable especially given the troubles that it has had with expanding into the US.
  • I would pick Tencent as my favourite Chinese ecosystem for investment.

 

SoftBank Vision Fund – UB40

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Pressure to employ capital is the biggest risk.

  • SoftBank has announced that the first round of its $100bn Vision fund has closed with $93bn in committed capital but the problem now is going to be how to quickly put this huge amount of money to work.
  • At $93bn, the SoftBank Vision Fund ranks as the third largest private equity fund globally, behind KKR with $98bn and Blackstone which has $311bn in assets under management.
  • The investment strategy will be wide with the fund looking to target long-term investments in both private and public companies right the way across the technology sector.
  • The one exception appears to be semiconductors but the fund will have some exposure there if it takes up its option to take a 25% stake in ARM.
  • The fund is clearly intending on having a significant influence on the activities of the companies in which it invests as the aim is to supply growth capital and accelerate the development of disruptive technologies.
  • I am pretty sure that this will also involve turn-around situations as most disruptive technology and requirement for growth capital is to be found in small companies.
  • With the Vision fund’s lowest investment size at $100m, start-ups and small companies are clearly off the table
  • The main investors are SoftBank ($28bn), the Public Investment Fund (PIF) of the Kingdom of Saudi Arabia ($45bn estimate) and Mubadala from United Arab Emirates ($15bn estimate).
  • I estimate that between them they make up 95% of the funds committed.
  • Apple, Qualcomm, Sharp and Foxconn Technology Group make up the other 5%.
  • The fund will shave the option to acquire a 25% stake in ARM ($8.2bn) as well as some or all of SoftBank’s investments in Guardian Health, Intelsat, NVIDIA, OneWeb and SoFi.
  • It is worthy of note that SoftBank’s investments in Alibaba or Flipkart which fit the criteria for the Vision Fund do not appear to be included as potential contributions.
  • If the fund decides to take these investments, they will be offset against SoftBank’s $28bn commitment to the fund.
  • I suspect that the biggest issue that the fund will face will be pressure to find good investments.
  • Rivals such as KKR, Blackstone etc. have grown their asset base over time but here the Vision Fund has $93bn at its disposal from day 1.
  • Consequently, its main shareholders will be wanting to see their money quickly put to work opening the door to making rapid but sub-optimal investments.
  • I hope that SoftBank’s recent (on ongoing) experience in India will be heeded as an example of what happens when too much capital chases too little paper on a wave of hype and optimism.
  • Common sense indicates that the shareholders will not be putting up all of the capital on day 1 but as the investment opportunities arise, they will contribute their share as per the commitments that they have made.
  • This is made all the more likely as I understand that PIF will be raising the money from other investments that it is holding and Mubadala did not have $15bn of spare cash on its balance sheet at the end of 2016.
  • Although the Vision Fund is the third largest private equity fund globally, it is the largest that is dedicated to technology and consequently, it should be a major player in sector going forward.

Alibaba FQ4 17 – Intuitive integration

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Signs that Alibaba is moving to make the most of its ecosystem.

  • Alibaba reported another excellent set of results which was marred by the normalisation of the tax rate following the ending of a tax break gained by investing in its distribution partner Suning.
  • Alibaba has also begun to demonstrate the kind of traits that lead me to think that it has really figured out what it needs to do to become a fully-fledged ecosystem across all aspects of its users’ digital lives.
  • FQ4 17 revenues / Adj-EPS were RMB38.6bn / RMB4.35 nicely ahead of consensus estimates of RMB35.9bn / RMB4.86.
  • The main driver of the results was Alibaba’s core e-commerce business which posted FQ4 17 revenue growth of 47% to RMB31.6bn.
  • This was underpinned by 11% growth in the number of active buyers as well as each user spending significantly more with Alibaba than they have in the past.
  • This is how Alibaba has managed to defy my expectations that growth would slow this year.
  • Cloud computing and digital media and entertainment each posted triple digit growth albeit from a much lower base.
  • The excellent results were marred by an increase in the tax rate which increased to 23% up from 14% in FQ4 16 where it will stay from here.
  • The most notable aspect of management’s commentary was the increasing focus on integration of its digital assets.
  • This has almost been completed for the digital media assets, giving Alibaba the ability to understand usage patterns across all of its media assets.
  • The same thing is going on in its e-commerce assets and it is already beginning to reap the benefits from this by offering this intelligence back to the merchants on its sites.
  • This kind of intelligence is what could also allow Alibaba have a big impact in offline retail which still makes up the vast majority of Chinese retail spending.
  • The final step should end up being the integration of all of this data into a single repository.
  • If Alibaba can to this effectively, it will be able to monetise its traffic far more effectively than it does today as well as have the insight into its services to make them richer and better than those of its competitors: Tencent and Baidu.
  • I still struggle with the valuation of Alibaba but it’s moves towards really making the most of the assets it has makes me willing to have another look.

Google i/o 2017 – Brain game

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Superior brains being used to make its services the best.

  • Google held the first day of its annual developer conference and in its keynote, it highlighted the features and improvements that it is making to its ecosystem to keep users engaged while gathering and categorising as much data as it can.
  • Artificial Intelligence headlined the event with Google’s leading expertise now being implemented in everything that it does.
  • These included:
    • First, Google Lens. This is machine vision similar to what many others have also announced but in Google’s case I suspect it will work properly.
    • This can be used to identify items which combined with search to bring up relevant information about it.
    • This stretches from the history and background of a place to the ratings users have given to restaurants and shops.
    • Others fall short in the ability to identify items as well as in the digging up of relevant information about the item.
    • This is because the AI they are using to power the service is not nearly as advanced as Google’s.
    • This functionality is being rolled across all of Google’s properties to enhance everything Google does such as the Photos app, Maps, Daydream and so on.
    • Second, AutoML. This is a research project within the Google.ai initiative.
    • It is neural network that is capable selecting the best from a large group neural networks that are all being trained for a specific task
    • While few details were disclosed, Google said that the results achieved to date were encouraging.
    • This is a hugely important development as it marks a step forward in the quest to enable the machines to build their own AI models.
    • Building models today is still a massively time and processor intensive task which is mostly done manually and is very expensive.
    • If machines can build and train their own models, a whole new range of possibilities is opened-up in terms of speed of development as well as the scope tasks that AI can be asked to perform.
    • RFM has highlighted automated model building as one of the major challenges (see here) of AI and if Google is starting to make progress here, it represents a further distancing of Google from its competitors when it comes to AI.
  • Google also gave updates on all the current products and services including the next version of Android: Android O.
  • Most relevant updates included:
    • First, Android. There are now over 2bn active Android devices in the market but I suspect that there is meaningful multiple device ownership.
    • For example in Brazil there are more mobile phone connections than there are people, highlighting that multiple devices are owned by a large number of people.
    • This is a trend that is mirrored in many other emerging markets.
    • Every Google Android device has a Google sign-in and for the other Google services, the figures are closer to 1bn which also includes those that have iOS devices.
    • Hence, in terms of real unique users rather than devices, I think the numbers are much lower.
    • This is important because it is unique users that generate the revenue for Google and hence they are a better measure of the real penetration of Android across the globe.
    • Second, Android Go. This is the relaunch of the failed Android One project which aimed to put smartphones in the hands of more users which obviously, requires much lower cost.
    • Android Go is like a mini-mode of Android O which runs in an optimised way on devices with memory down to 512MB of RAM.
    • Google’s apps have also been optimised to run in this highly constrained environment.
    • Importantly, functionality has been added that focuses on saving data usage as well as offering complete control of data usage from the device.
    • For the lower income users, data has become almost like a currency and this gives them much better control of their “spending”.
    • This looks like a much better proposition than Android One which was highly restrictive to the handset makers.
    • However if they start tinkering with Android Go (as they always do), there is a good chance that all of these good improvement will vanish into thin air.
  • While this is not the most exciting i/o event in terms of new announcements, it is what is going on with AI that has the most implications for Google’s outlook.
  • AI is now embedded in everything and because Google is clearly the global leader it has the scope to make its services richer and more intuitive than anyone else’s.
  • This is critical because this is how Google will win over more users to its services, generate more traffic and therefore more revenue.
  • However, I think that much of this is already embedded in the share price and I continue to prefer Baidu, Tencent and Microsoft.

 

Android Project Treble – Yellow brick road

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Yellow brick road that leads to a fully proprietary Android OS.

  • The launch of Project Treble sees Google finally moving to address the Android updating problem but it also quietly paves the way for Google to take full control of the Android software.
  • It could also cost the handset makers more of the precious little differentiation they have left.
  • I have long believed that the inability to update Android OS is one of the biggest problems that Google faces with its ecosystem on Android (see here).
  • This has meant that whenever Google makes an innovation that requires any changes to be made to the OS, it takes around 4 years to arrive on the majority of Google ecosystem Android devices.
  • In contrast iOS takes a matter of weeks to update almost everybody.
  • For example, as of today, despite being available for over 6 months, less than 7% of all Google ecosystem Android devices are running the latest version (7.0 Nougat).
  • This is because Google has no control over the updating process for all of its devices (except Pixel and Nexis) and must rely on handset makers and operators to do it.
  • The problem here is that handset makers have little incentive to make their devices updatable and most of the time are quite content just to sell a new handset instead.
  • Project Treble aims to fix this by abstracting the hardware vendor’s modifications from the underlying OS such that the OS can be updated independently.
  • The way it works today is that Google passes the code to semiconductor companies who modify the code to ensure it works with their chips and release it to the handset makers in the form of a board support package (BSP).
  • The handset makers take the BSP and then modify it to meet their own requirements such as functionality or new hardware.
  • It is at this point that their modifications must pass the compatibility test suite (CTS) in order to able to deploy Google’s App store: Google Play.
  • Problems begin when Google updates Android OS as the manufacturer has to ensure that all of the modifications it has made will work before distributing the new Android code to its devices in the hands of users.
  • This process can be so arduous that many handset makers simply do not have the resources or the incentive to redo their modifications meaning that the update stays on the shelf.
  • Project Treble aims to fix this by adding in an abstraction layer between the Android OS and the vendor modifications such that the underlying Android OS can be updated without the manufacturer losing compatibility.
  • This is being referred to at the Vendor Test Suite (VTS) and while it looks like a great idea, it will have a number of problems.
    • First, differentiation: Most Android handset makers differentiate themselves through hardware innovation.
    • For example, Samsung’s iris scanner and HTC’s edge sensors on the U11.
    • This sort of differentiation may require the handset maker to put changes into the Android OS that go beyond the VTS interface that Google has defined.
    • Modifications beyond the interface obviate the whole point of the VTS and so Google updates would be back to square 1.
    • Second, control: The VTS will be like the computability test suite (CTS) which is a series of tests that the software must pass in order to ensure that apps from Google Play will run properly.
    • Modifications made beyond the interface are likely to result in a failure to pass the VTS test.
    • Hence, in effect, the VTS is another level of control as I suspect that handset makers that don’t pass the VTS will not be able to use Google Play or Google services.
  • Hence, the VTS could further limit the small amount of differentiation that the handset makers have left, further increasing their commoditisation.
  • However, for Google its all good as handset makers will no longer have any excuse not to update the Android OS, thereby ensuring that Google’s innovations in the OS come to market much more quickly.
  • However, this does nothing to address the fact that a large number of handsets are not updateable which has been discussed here.
  • This also paves the way for Google to:
    • First: take control of updating the Android OS separately from any modifications that the handset makers have made.
    • Second: move the remaining parts of Android OS out of open source and into Google Mobile Services (GMS).
  • It has long been my opinion (see here) that this is what Google must do to fix the inherent problems of fragmentation and software updating that continue to plague the platform to this day.
  • An easier to use and more consistent platform would most likely increase traffic generation and therefore Google’s revenues which on Android remain half of that generated on iOS.
  • I continue to think that Alphabet remains fair value and I would continue to steer clear of the handset makers whose differentiation looks like it may take yet another hit.

 

Google Auto – Greek gift pt. II.

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Tinkering with Android for cars is a dangerous game.

  • Ahead of its developer conference, Google i/o, Google has demonstrated another version of Android that will be able of running many more aspects of the car beyond infotainment.
  • While Android Auto is limited in terms of what it can do and the data that it can access, this version of Android for the car is much more deeply embedded.
  • As a result, I think it will have access to everything as the infotainment unit is the nerve centre of the vehicle where the 4 data networks in the car (CAN bus) meet.
  • This means that Google services such as Maps, Search and Assistant will be fully embedded in the car enabling these services to be far more contextual and relevant.
  • It also raises the possibility that Google will be able to suck all of the data out of the car, robbing the OEMs of one the most important pieces of exclusivity that they have.
  • Audi and Volvo have signed up to use this software which will be demonstrated on the Q8 and the V90 SUVs at Google i/o this week.
  • The two most important issues are:
    • First, Code control: Who is in control of this code is crucial to the outlook for the OEMs.
    • From the presentation, I get the impression that the manufacturers are nominally in control of the Android code going into their cars but I seriously doubt that they have done the implementation themselves.
    • This was most likely done by their tier 1 suppliers or even Google itself.
    • While this means that the OEMs will have control over software updates and feature releases, there are almost certainly going to be hooks in the code that Google can still use.
    • Second, Google agreements: If the OEMs have a similar relationship with Google that the handset makers do, it is important to understand what the OEMs have agreed to.
    • Google controls Android through its agreements with the handset makers and given that the OEMs are getting Google services deeply embedded in their systems, something similar is likely to be demanded by Google.
    • Parts of those agreements are likely to include aspects of user interface design as well as the sharing of data.
  • I view this software as a replacement for the OEM designed software that resides in the head unit of the vehicle.
  • Android Auto and Car Play run on top of the OEM software but have limited access to the rest of the system.
  • This is likely to be the same such that CarPlay will still run as before but Android Auto will obviously be obsolete.
  • Google has said that the new software will not be draining the vehicle of data but I suspect that Google is referring to how the software behaves as it leaves the factory.
  • Once it is in the hands of the user and he has agreed to a pop message requesting access to data to improve Google services, the reality could be very different.
  • Sharing this data will make Google services on other devices better for the user but critically, this is the data that the OEM needs to hang onto in order to differentiate itself in all things digital in the car.
  • This is the risk of deploying software that has not been written in-house as the reality is that the OEMs will have no real idea about what they are deploying on what is becoming the most strategically important part of the vehicle.
  • Tesla and BMW are the only ones that seem to understand the importance of this which is why they are the only OEMs I know of that write their own code.
  • Google has everything to gain and little to lose by helping OEMs use Android instead of their in-house software which is exactly why OEMs need to look in minute detail at this gift before letting it into their holy of holies.

 

Autonomous Autos – The back foot.

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Uber is now even more on the back foot.

  • The partnership between Waymo and Lyft puts Lyft streets ahead of Uber when it comes to developing autonomous cars but is likely to cost it heavily in the coinage of data.
  • Uber has described autonomous autos as “existential” to its long-term future and in that regard this partnership represents a huge threat.
  • This is because when it comes to autonomous driving, Uber is by far the worst.
  • It is worse even than the dull old OEMs that everyone derides as being hopelessly unprepared for the changes coming in their industry.
  • Data from the California DMV analysed by RFM (see here) showed that Waymo is 5000x better at autonomous driving than Uber is.
  • Furthermore, Uber was also comfortably beaten by BMW, Nissan, Tesla and Mercedes.
  • Uber, Lyft, Didi and the other ride hailing companies operate market places where drivers and riders are matched making their economics exactly like that of classifieds.
  • This means the to make money a player, needs to have 60% market share or be double the size of its nearest competitor.
  • This is why I am of the opinion that its time Uber started trying to make money in the US (see here) and Didi should be trying in China where it is now unopposed. (see here).
  • Against that backdrop, Lyft looks doomed except that by signing a partnership with Waymo, it is now in pole position to have by far the best autonomous solution and be there first.
  • From this partnership, Google gets a route to market and a source of data whereas Lyft gets access to technology that it is unlikely to be able to develop on its own.
  • The problem that all the ride hailing companies face is that if all cars become autonomous, then their current businesses become obsolete as, while there will be riders, there will be no drivers.
  • This is why they must be present in this space as it will give them the ability to migrate from human to robot drivers as the technology comes to market.
  • I have long been of the opinion that this is going to take much longer than expected.
  • This is not because the technology is not ready but because the market is unprepared to receive it (see here).
  • This gives Uber time to catch up but the example of Waymo indicates that developing this technology is more difficult than many think and it requires a vast amount of practice (miles driven).
  • I still think that autonomous vehicles will not become a market reality much before 2030, meaning that the field is wide open but this partnership puts Uber even more on the back foot than it already was.

Microsoft BUILD – The right choices.

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Enterprise remains the focus.

  • At Microsoft’s developer conference, it continued to emphasise its move away from being a platform for the consumption of content to one that is primarily for the creation of content.
  • At the same time it cemented its move away from mobile with the migration of its strategy from cloud first, mobile first to intelligent cloud, intelligent edge.
  • Effectively, Microsoft is signalling two main changes:
    • First, device agnostic: Microsoft no longer cares what device the user has, but instead is aiming to ensure that its services work seamlessly across everything that is available.
    • This was embedded in every presentation during the first two days of BUILD where cross device was emphasised time and again.
    • Cortana, Office 365, team collaboration and communication will be increasingly integrated across all the devices that the user has.
    • This was made very clear with the announcement of the cloud powered clipboard where text and pictures copied to the clipboard on the PC can be pasted into non-Microsoft apps on iOS or Android devices.
    • Microsoft employees no longer have to hide their iPhones and Galaxies or take off their Apple Watches when entering hallowed ground in Redmond.
    • I have long argued that cross device is a good way to differentiate an ecosystem that is vying for engagement with the two giants Apple and Google.
    • Microsoft has led in this space for a long time and, as long as this works as billed, it will take Microsoft further into the lead.
    • Second, processing at the edge: Microsoft discussed a future where all the processing does not happen in the cloud but part of it is redistributed to the edge for faster response times and greater efficiency.
    • Microsoft demonstrated how running diagnostics locally could cut an emergency shutdown time for a piece of industrial equipment from 2000 millisecond to just 100.
    • However, this is a problem that is supposed to be solved by 5G, which was not mentioned once, further cementing Microsoft’s move away from mobile as a standalone technology.
    • This goes directly against what Intel (and others) is aiming for as its most profitable and highest market share products are the processors that power the cloud meaning that it wants as much as possible to run there.
    • I see a number of schools of thought with regard to how intelligence and processing should be distributed throughout the network with each proponent obviously going for the option that benefits their business the most.
    • I think that the reality will be that different use cases require different scenarios.
    • For example simple monitoring that requires rapid response makes sense in the edge but object recognition and tracking and relating that to policies is a very intensive task that is best carried out on big servers in the cloud.
  • Microsoft also announced the fall creators update for Windows 10 to support all the cross-device capability as well as badly needed improvements to the Windows Store that is needed to give Windows 10 S a chance (see here).
  • Hololens was also upgraded with the addition of a controller to bring it into line with the other offerings but this remains very much a tool for the enterprise.
  • This was clear in the demos and examples which were focused around productivity with the idea of a virtual shoot out in the living room, thankfully not being repeated.
  • With every presentation that passes, Microsoft distances itself further and further away from content consumption and the consumer.
  • Consequently, while there is a strong rationale to keep Bing (data generation), I cannot say the same for Xbox, Minecraft and a number of other assets.
  • Hence, I would not be surprised to see them sold off should a good opportunity present itself.
  • The net result is that Microsoft is doing exactly what it should in playing to its strengths and differentiating where it has a chance rather than wasting money trying make a difference where it has no chance.
  • This sets it up for steady growth with its dominant position in the enterprise, still giving support to the valuation even though the shares have been strong.
  • I still like Microsoft alongside Baidu and Tencent.