Google vs. Facebook – AI dividend.

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Google’s AI already paying dividends

  • Both Google and Facebook have a fake news problem but Google’s leadership in AI means that it is likely to have a better solution and will not have to materially impact the financial performance of the company to fix it.
  • Over the last 2 years, Google, Facebook, Twitter and so on have become far more important when it comes to delivering current events to users.
  • This is particularly relevant when certain events occur that result in regular citizens present at these events uploading videos and commentary long before the more established media outlets can arrive on the scene.
  • As a result, important information often appears on Google, Facebook and Twitter first, meaning that the accuracy and veracity of this information is of paramount importance.
  • Unfortunately, during these sorts of events, there is often a scarcity of information available making it the easiest time to successfully propagate fake news.
  • This is the problem with which both Facebook and Google are wrestling, but from looking at how both are dealing with it I think there is a huge gap between these two players.
    • Facebook: To combat this problem, Facebook has announced that the total number of employees working on safety and security will be doubled from 10,000 to 20,000.
    • Given that the total number of employees at the end of June 2017 was 20,658, this implies that 50% – 60% of all Facebook employees will be working in non-revenue producing positions.
    • This will mean that costs will meaningfully outstrip revenues leading to a “significant” decline in profitability.
    • These humans are being shipped in to deal with the problem because Facebook’s AI is not even close to being good enough to deal with it
    • Furthermore, I think that this is a problem that humans cannot really solve given the velocity that is required.
    • Google: to be fair to Facebook, Google’s data tends to be somewhat more structured than Facebook’s making it easier to analyse but this does not come close to explaining the difference in AI ability.
    • Although Google remains reluctant to discuss the methods it is using to combat this problem, this is something that it has been dealing with for many years and there has been no sudden increase in current for forecasted headcount.
    • There has also been no sudden decline in gross margins (current or forecasted) which would indicate that Google had taken on contractors to help fix the problem.
    • While Google does use fact checking services to ascertain the veracity of some of the content that appears in its searches, I think that almost all of its efforts are going into closing the loopholes in its algorithms that allow fake news to surface.
    • This is why there is no financial impact on Google from this problem compared to Facebook.
  • Furthermore, I think that using humans to combat fake news will end in failure.
  • This is because it takes the human system around 2-3 days to reliably label an article or item as fake by which time is has trended and already been seen by millions of users.
  • Consequently, I do not think that having tens of thousands of humans scouring Facebook for fake news will actually solve the problem.
  • Hence, I think that this will result in $1bn+ of shareholders money being wasted in every year that humans are being used.
  • This highlights the gravity of the AI problem that Facebook is trying to deal with and think it is one that Google is much closer to solving.
  • Hence, I see Google being able to far more effectively manage this problem and at a fraction of the cost.
  • From a shareholder value perspective, perhaps it is time to consider switching from Facebook to Google.

Tencent Q3 17 – Time purchase

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Mighty core business buys time.

  • Tencent reported strong results driven mostly by its content offerings which gives the company time to work out how to fully monetise the vast the community it has created.
  • Q3 17 revenues / net income RMB65.2bn ($9.8bn) / RMB18.0bn ($2.7bn) nicely ahead of estimates of RMB61.0bn / RMB15.8bn.
  • Tencent called out smartphone games (especially Honour of Kings) and its online video platform (which it now believes has overtaken Alibaba and Baidu to become China’s No. 1 place for video streaming) as top performers during the quarter.
  • Most revenue streams grew between 45% and 50% YoY but it was the contribution from other businesses such as first-time monetisation of WeChat Pay and cloud services that really drove the numbers above expectations.
  • Overall, these revenues grew by 143% to RMB12.0bn which pushed the corporate average revenue growth rate to a 7 year high of 61% YoY.
  • While the core businesses continue to defy the slowdown I have been expecting, the laggard in the company remains the monetisation of the ecosystem that it has created.
  • This is what Baidu and Google are really good at and what Alibaba has been showing increasing signs of getting to grips with.
  • The vast majority of Tencent’s revenues come from selling content like games, in app purchases or streaming subscriptions making it more like Netflix and Amazon rather than Google or Facebook.
  • Tencent has created a community of 980m users at least half of whom regularly interact with Tencent in multiple Digital Life segments.
  • This creates a substantial revenue opportunity for Tencent but one I think that it has struggled to really get to grips with.
  • Online advertising is still just 18% of revenues which I calculate is between one third to one half of what it should be for an ecosystem with 980m active users.
  • It is here that I still see the real upside for Tencent as it has done little in the last 15 months to address this opportunity.
  • To be fair to the company, management time has been very successfully invested in growing the existing businesses but the time will come when it will need to monetise this opportunity to keep growth going.
  • Here, I think that Tencent has a lot of work to do as its score on RFM’s 8 Laws of Robotics is pretty low, particularly against Laws 5 and 6 which focus on the integration of services and user data.
  • To monetise the ecosystem effectively, I think a good score against these measures is required and Tencent has so far shown little sign of grasping the importance of integration.
  • However, while the core business continues to defy expectations, this is not a problem from a share price perspective and buys management time to get to grips with integrating its assets into a single place where users can live their Digital Lives.
  • This is how I can continue to like Tencent as an investment despite its apparent slowness to move onto the next stage of its development.
  • While the core business continues to deliver, the valuation remains underpinned with the potential further upside coming from monetisation of the ecosystem.
  • This is why Tencent remains my preferred pick globally.

Android – Downward slope.

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Fragmentation getting worse not better.

  • Despite Google’s best efforts, the situation with fragmentation in Android devices appears to be materially worsening, further reinforcing the need for Google to take Android completely proprietary.
  • Fragmentation in Android comes in two forms:
    • First, vertical fragmentation: this refers to the number of older versions of software that are still active and is exacerbated by a failure to update existing devices to the latest version.
    • Second, horizontal fragmentation: this refers to changes made to Android by different device makers to bring their products to market.
    • This results in a differing and inconsistent levels of performance from one device to another despite running exactly the same version of software.
  • Both vertical and horizontal fragmentation have a substantial and deleterious impact on the user experience and in my opinion are the main reason why the user experience on Android continues to meaningfully lag that on iOS.
  • Analysis by programmer Dan Luu (see here) is the clearest indication yet that instead of getting better, it appears to be getting worse.
  • I had already partially noticed this when I calculated that at the rate at which Android 8.0 is being adopted, it will take 5 years to fully penetrate Google’s own user base (see here) compared to 4 years for other versions.
  • Dann Luu’s analysis is much more granular and his chart clearly shows that for the latest version (far right-hand side), the update trajectory is meaningfully slower than for all of the previous versions.
  • Previous versions have seen a much more rapid update pattern leaving me to conclude that either the number of devices being updated has suddenly declined or that manufacturers have started making new devices using old software.
  • Either way, the effect will be the same which is more devices running older software meaning that Google innovations that require a change in the OS to function, will take at least 5 years to make it into the hands of all its users.
  • This will allow iOS to continue comfortably outperforming Google Android on the RFM Laws of Robotics that test the user experience leaving this as major point of differentiation for Apple.
  • Furthermore, it will also ensure that Google continues to underperform its revenue generation potential on Android devices leading to lower revenues and profits.
  • The more time goes by and the worse this problem becomes, the more I think that the only solution is for Google to take Android fully proprietary and put to bed the fragmentation issue once and for all.
  • This is how Google could begin to see significant revenue upside from its own Google Android devices as well as close the gap to Apple.
  • Its own efforts in hardware are unlikely to have nearly the same impact simply because its volumes are so small.
  • I continue think that Google’s shares remain pretty fairly valued and prefer instead Tencent, Microsoft and Baidu.

Apple – Tick in the box.

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Hacking of Face ID proves its security.

  • The inevitable hacking of Face ID has been achieved but I think that the lengths that the hackers had to go to crack the system proves that, for all practical purposes, it is a worthy upgrade from fingerprint recognition.
  • Vietnamese cyber security firm and Android phone maker, Bkav Corp, has managed to reliably bypass Face ID (see here) by creating a 3D mask of the user’s face with special attention being paid to the eyes, nose and mouth.
  • However, it is pretty clear that a huge amount of work went into the creation of this mask as:
    • First: it was designed using expert cyber security knowledge and an intricate understanding of how Face ID works.
    • Bkav first demonstrated a bypass of facial recognition on laptops in 2008 and has been a player in the field ever since.
    • Second: 3D printing, 2D printing and hand-made artistry was used to create the mask indicating just how intricate the process was.
    • Third: each mask costs $150 to produce.
    • Fourth: it took 9 days to crack (even with at least 10 years’ experience) and I suspect Bkav was working on this flat out.
  • The net result is that Bkav continues to advocate for the fingerprint being the best method of authentication for an electronic device.
  • However, I think that the intricacy and cost of this hack combined with the fact that a detailed 3D scan of the user’s face is required, is actually an endorsement of Face ID as a verification system.
  • Taking this with surveys that suggest that 60% of users prefer the system over fingerprint (9to5 Mac) and the fact that there few reported issues with the reliability and speed of the system leads me to think that Apple has successfully ticked this box.
  • However, fast and reliable Face ID is clearly quite difficult and expensive to achieve (Samsung’s is awful) which leads me to think that Apple has set a standard for high end devices going forward.
  • I think that this will trickle down through the tiers with time, but it looks like fingerprint sensors may have a limited life span.
  • Furthermore, Apple now has a clear point of hardware differentiation over its competitors that is likely to last for a generation or two.
  • In the ecosystem, Apple is still miles ahead largely due to Google’s inability to deal with the endemic fragmentation, security and updating issues that continue to hamper the Android user experience.
  • Hence, I remain unconcerned for Apple’s iPhone gross margins for the next 12 to 18 months.
  • That being said, I think the shares continue to price in a larger iPhone X driven cycle of replacement than I see as likely.
  • This combined with excellent price appreciation so far this year, leaves me indifferent to the shares.

Softbank & Uber – Sellers’ paradise

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At around $70bn, there should be plenty of sellers.

  • Uber has approved a deal where SoftBank will lead a $1bn fund raising and at the same time buy around $9bn from existing shareholders which should give SoftBank a stake in Uber of around 14%.
  • Softbank is investing at a valuation of $70bn and while the purchase of existing shares will be done at a lower valuation, I think that it will have to be pretty close to the price being paid for primary shares to keep sellers happy.
  • The deal also goes hand in hand with agreements to restructure Uber’s corporate governance in a bid to draw a line under the disastrous 2017 that Uber has had.
  • This is badly needed as management turnover, bad press, unhappy drivers and a series of scandals has led to the company focusing on anything but its core business in 2017.
  • This has resulted in a meaningful deterioration of its market position and outlook in my opinion.
    • First, in its home market, lack of focus has led to Lyft being able to confidently expect to improve its market share to 33% from 20% at the beginning of the year.
    • This leaves Uber on 66% which based on my rule of thumb for network based businesses, is enough to eventually win the market, but its margin for error has been substantially reduced.
    • This rule of thumb states that a company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit.
    • Coming into 2017, Uber had a 20% cushion before Lyft could really start causing it some problems, but this cushion has now been reduced to just 6%.
    • Furthermore, with Google is now backing Lyft as the best way for it to get its self-driving technology (Waymo) to market, this gives Lyft much deeper pockets than it had previously.
    • Second, following its ignominious exit from China (see here), Uber has also lost the Russian market to Yandex (see here).
    • It is increasingly looking like Uber will end up with USA and a host of smaller markets where there has been no particularly strong local competitor.
    • India is still in play and I think could be a source of conflict as when this deal closes, SoftBank will have a meaningful position in both Indian rivals (Ola (see here) and Uber).
    • Third, RFM research concluded that of all the autonomous driving technologies being tested, Uber’s is the worst (see here) where Google’s offering is 5,000x better.
    • Autonomous driving will be critical for the ride sharing companies as when the supply side of their marketplaces disappears, they will become service companies or fleet operators.
    • At that time the quality of their autonomous driving technologies will be a major factor in determining market share and profitability.
    • With Lyft going with market leader Waymo. Uber has everything to do.
  • The net result of this series of misfortunes and own goals is that the outlook for Uber has deteriorated materially over the long-term.
  • I think Uber could easily lose every large market that it is trying for resulting in it ending up being pretty much US only ad even here Lyft is looking increasingly threatening.
  • On this basis, I think that a valuation of $70bn is a big stretch
  • Consequently, if SoftBank is offering around $70bn for secondary shares, I think that there will be plenty of supply as I think many people now have a materially lower valuation in mind.

Apple – Augmenting reality.

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Unit launch in 2019 is an augmentation of reality.

  • If Apple is working on an AR headset, I think that there is no way that the technology will be ready in 2019 and that the scale of the technical issues to be surmounted will keep ARKit firmly resident on the iPhone for the foreseeable future.
  • Bloomberg is reporting that Apple is building up a team to develop an AR headset which will be fully vertically integrated from custom silicon all the way up to the apps and the services that run on the unit.
  • I think it makes complete sense for Apple to explore this product area but whether or not this will ever materialise into a real product is very uncertain.
  • This is exactly what happened with project Titan (see here) which was disbanded once Apple realised how difficult and financially damaging it would be for it to make and sell a vehicle.
  • I think that there is an argument to be made that AR has some potential to replace smartphones for consumers, but the technical challenges that need to be overcome are still huge.
  • To make matters worse, there has not been that much progress made against these challenges since I first wrote about them in 2015 (see here).
  • These are:
    • First, size: to be adopted by consumers I think that the unit needs to be no more intrusive than a regular pair of spectacles.
    • I also think that having a light head unit with the computing being executed on a pack that the consumer lugs around with him will not work.
    • I think that everything needs to be in the glasses.
    • Second, field of view: One of the biggest technical challenges of AR is to project the virtual world on top of the real world with a full field of view.
    • This is proving to be a real challenge and almost every implementation to dated uses a huge bulky head unit that produces a letterboxed view of the virtual world.
    • This is a user experience that in my opinion will not be acceptable to the consumer.
    • This is the promise that Magic Leap has made but has yet to live up to.
    • Third, artificial intelligence: to be really useful and fun, the virtual world will need to be aware of where the user is in the real world and of what he can see.
    • This is essentially an AI problem which everyone is feverishly currently working on.
    • At the launch of the iPhone 8, Apple demonstrated image recognition through the phone camera and Facebook has made some progress in this area.
    • However, everyone including Google, is very far from where they need to be to give a computer the contextual awareness that it needs to really make augmented reality work well for the consumer.
    • Fourth, Ecosystem: This is where the smaller companies and Magic Leap are going to fall over (if they haven’t already done so).
    • Just like IoT, TVs, Wearables and Cars, AR is likely to be simply another medium by which to deliver Digital Life services to consumers.
    • Consequently, users are going to want the Digital Life services they enjoy elsewhere to be present on the AR unit necessitating a good cross device offering as well as a vibrant third-party app community.
    • Here, Apple probably has the best chance as its ecosystem on the iPhone remains the strongest currently available.
  • These criteria do not apply to AR in the enterprise (see here) as the nature and economics of the interaction of the user with the unit is completely different.
  • The net result is that while Apple is right to explore the possibilities of AR, I suspect that there is no concrete intention to launch a unit.
  • I see this activity much like the vehicle or the television which were experiments that failed to stand up to the scrutiny of market reality.
  • AR is likely to remain a prisoner on the smartphone for the foreseeable future and not even Magic Leap looks capable of effecting a prison break any time soon.

Tencent – Digital circumnavigation.

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Tencent begins to build on Supercell.

  • Following the most difficult set of results after its IPO, Snap has conveniently announced that Tencent has taken a 12% stake in the company.
  • This has awoken take-over speculation that I thought would not really emerge before the shares dropped below $10 and should provide a badly needed boost to sentiment.
  • In its 10Q Snap stated that it had been notified by Tencent that it has purchased 145.8m shares representing a holding of 12% in Snap Inc.
  • If this had been purchased purely through the exchange it would have consumed 25% of the free float which I think would have been noticed triggering a rally and speculation.
  • Consequently, I suspect that the majority of this stake was accumulated by approaching existing holders directly whom I suspect were only too happy to sell.
  • I do not think that this transaction has anything to do with Tencent’s China business but instead is more about Tencent looking at ways of spreading its wings overseas.
  • RFM research (see here) has concluded that Digital Life services in developed markets do not work well in China (mostly because they are blocked) while Chinese Digital Life services do not work well in developed markets as they do not fit culturally and also are predominantly in Chinese.
  • Consequently, the BATmen have had to seek other ways to develop overseas other than just spreading their Chinese services into developed markets.
  • Alibaba is approaching this using the Trojan horse of Alipay (see here), while Tencent is showing signs of assembling a range of assets that would give it good coverage of Digital Life in developed markets (see here).
  • This process began with the acquisition of Supercell in June 2016 (see here), continued with an attempt on Spotify that failed (see here) and now it seems to be latching onto Snapchat.
  • Tencent is the global market leader when it comes to Digital Life coverage with 77% of the Chinese pie covered and 30% of the developed market pie covered with its position in Supercell.
  • Adding Snapchat would take this coverage to 44% ahead of both Google and Apple (who have 40% each).
  • However, it is one thing to have good Digital Life coverage and quite another to create a vibrant ecosystem that one can effectively monetise.
  • The Digital Life measure is only a measure of opportunity which is why RFM uses its 8 Laws of Robotics to assess the quality of the proposition being made to users.
  • Against these tests both inside China and overseas, Tencent does not score well (see here) which explains why the vast majority of its revenue comes from selling content and games rather than from monetising its community.
  • It increasingly looks as if Tencent is embarking on a circumnavigation of the Digital Life pie in order to build an ecosystem to challenge the established Google, Apple, Amazon, Facebook dominance of consumer digital services.
  • Consequently, I expect Tencent to actively seek investments or acquisitions in Media Consumption, Search, Social Networking and so on in order to build its coverage.
  • This is likely to prove to be expensive and in my opinion the real challenge for Tencent lies ahead.
  • This will be to assemble and integrate these assets into a vibrant and consistent community which is something is has yet to do with the majority of its assets in China.
  • It is at this time that its score against RFM’s 8 Laws of Robotics will begin to improve but so far there is not that much sign of it.
  • I continue to like Tencent as it is the strongest of all the Chinese ecosystems and the share price still does not reflect all of the potential upside.
  • Hence, there is still not much very downside in Tencent if it fails to integrate its assets and improve its score on the 8 Laws.
  • However, should it do so, there is plenty of further upside from here.
  • Tencent, along with Baidu and Microsoft remain my top picks.


Snap Q3 17 – Sixes and sevens.

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Dreadful results reveal a company in disarray.

  • Snap reported weak results that bear all the hallmarks of a small, weak player being ground into the dust by a larger, much more powerful rival (see here).
  • Furthermore, Snap now finds itself being forced to redesign its user experience in a desperate attempt to drive user growth which, by its own admission, puts at risk the usage and revenues it already has.
  • Signs of disarray are everywhere from a sudden desire to redesign its user experience (see below) to a failure to update its mission statement following the failure of Snap Spectacles (see here).
  • Snap still describes itself as a camera company (see here) despite taking a $39m write-off of camera hardware after failing to sell the units.
  • Q3 17 daily active users (DaU) and revenues were 178m / $207.9m falling well short of consensus at 180.5m / $235.5m.
  • Revenues have been depressed by the shift from direct sales to programmatic advertising which has had a significantly negative impact on advertisement pricing.
  • This transition is now largely over as 80% of revenue now comes from this form of advertising meaning that growth should be better going forward.
  • However, the two most important measures of a company’s ability to monetise its users: Digital Life coverage and active users are both stagnant.
  • Snap’s Digital Life coverage remains at 14% and without major traction in another area like Media Consumption or Gaming, it is unlikely to change for the foreseeable future.
  • I think that Snap’s active users are not growing because Instagram has successfully copied all of Snap’s user experience innovations and made them easier to access.
  • The result is that users are no longer leaving Facebook to go to Snapchat but instead simply switch over to Instagram Stories for this type of service.
  • Hence, I think that the end result is that neither its Digital Life coverage nor its user count has any real scope to expand from here.
  • Putting this into the context of RFM’s monetisation analysis (see here), means that once Snap Inc. has monetised its full potential, growth will grind to a halt as it has at Twitter.
  • Furthermore, tinkering with the user experience runs the risk of putting off its existing users which could cause active users to decline which would put a major crimp on the company’s ability to monetise.
  • Snap has a core user base and revenue opportunity which, in my opinion, still values the company at around $12.40 a share.
  • This is not far from where it is now following the 17% after-hours correction on 7th November 2017.
  • However, I still think that the stock needs to dip below $10 before I would consider looking at it as it is at this point that potential acquisition interest may materialise.

Facebook vs. Snap Inc. – Own goal pt. II.

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An unaffordable outage.

  • Snap Inc’s Snapchat service suffered a 4 hour worldwide outage that enraged its users, greatly increasing the risk of defection to Facebook’s more reliable and much larger stories service.
  • Snap Inc. is already having a tough time competing against Instagram Stories and these sorts of events are simply unaffordable if Snap Inc. is to have a chance of succeeding and remaining independent.
  • Snapchat currently has around 173m DaU but despite launching just 14 months ago, Instagram Stories now has over 300m.
  • This is doubly troubling as not only is Stories now twice the size of Snapchat, it is growing much more quickly.
  • This strongly implies that users who like the type of service pioneered by Snapchat can now access a much bigger network without having to leave Facebook’s environment.
  • I think that this has proved to be very successful as evidenced by the fact that Instagram Stories is growing very quickly while Snapchat has stagnated from the day it went public.
  • I suspect that many users, who might have otherwise signed up with Snapchat, have opted to stay with Instagram thereby depriving Snap Inc. of its badly needed growth.
  • This is why an outage is something that Snap Inc can not afford as it meaningfully increases the risk that, on top of not gaining new users, it may begin to lose its those that it already has.
  • Furthermore, Data from Captiv8, the audience tracking service, indicates that influencers are leaving Snap and are finding their way to Instagram.
  • During Q2 17, Snap saw a 20% decline in influencers while Instagram saw an 11% jump.
  • Snap Inc. is already struggling with the loss of key influencers who are defecting to Instagram as Instagram is making it very easy for them to get set up and critically, make money.
  • In many ways influencers are a bit like developers which in order to get going, need lots of love and support.
  • Facebook and Instagram have understood this and acted upon it while Snap’s management does not seem to care that much.
  • Snap badly needs to address this situation as influencers are key for marketing to its key user base.
  • Take this in the context of enraging users with a service outage and the stage is set for very little progress to be made in terms of getting the user base growing again.
  • Consequently, I think that Q3 17 and Q4 17 will continue to see the user numbers and the engagement disappoint leading to more pressure on the share price.
  • I continue to think that while Twitter is also stagnating, it is in a much better strategic position as it remains unopposed in its space.
  • Snap by contrast is under colossal pressure from Facebook which I think could lead to the shares dipping well below my fair value of $12.40 a share.
  • If they were to hit $10 or below, I could see acquirors coming out of the woodwork.
  • Until then, I still see no reason whatsoever to get involved.

Razer phone– In character.

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For hardcore fans only.

  • Razer has stuck to what it knows in its in launching first smartphone, but its focus on gamers means that the device looks very dated against competition in its price tier (Galaxy s8, Mate 10 Pro, iPhone 8 etc).
  • The Razer phone sports a very average looking screen with large top and bottom bezels but these make sense in the gaming context.
  • The most annoying thing about playing games on smartphones that are all screen, is that there is nowhere to rest one’s thumbs.
  • The large bezels also provide the real estate to include high specification speakers and Razer is also pushing audio as a differentiator for this product.
  • Razer has provided for this at the expense of aesthetics but combined with a 120hx refresh rate on the display and a snapdragon 835 and a whopping 8GB of RAM, I think it is safe to say that this will provide arguably the best overall gaming experience.
  • True to its roots it also allows gamers to tweak the performance of the device to optimise battery life against performance with the Razer app that comes preinstalled.
  • The Razer phone is effectively a tweaked Nextbit Robin which was the lead product of the small phone maker that Razer acquired in January.
  • This makes sense as it would have been almost impossible to come up with a new design from scratch in such a short time period.
  • Unfortunately, in order to benefit from the 120hz refresh rate, games companies need to include support for it in their apps meaning that the majority of Android games will not be able to make use of this key feature.
  • However, it has announced partnerships with Tencent, Square Enix, Namco and several others meaning that some high-end games will be able to work optimally with the device.
  • Razer has a similar problem to the one that caused Microsoft no end of grief which is that the average consumer will not understand its product and will only see an old looking device at a high price.
  • Consequently, I think that this is an enthusiast device that will only be purchased by users that are already very familiar with Razer and most likely own its products.
  • That being said, I have estimated that the software that it offers on its PCs has between 5m and 10m active users (see here), which probably makes up a big part of its core fan base.
  • If 5-10% of these users buy the device, then this would represent shipments of 500,000 or revenues of around $280m (at my estimated wholesale price).
  • This would help support Razer’s lofty valuation of around 10x sales at IPO, but margins are likely to be very low, leaving me unchanged in my opinion that there will be a better time to consider this one.