'Telecommunications' Archive
Not me, buddy. I’m no gadget geek. My wireless phone is an aging Samsung A660. I’ve never owned an iPod, although I bought one for my daughter and I’m a power user of iTunes at home and at work.
Then again, Apple sold more than 1 million iPhones by Sunday, so lots of people obviously care about the new iPhone.
The iPhone 3G went on sale last Friday, and people in New York City were lining up a week in advance. Some of those folks, however, apparently were hippie farmers trying to make a point about organic food and technology.
A lot more people lined up just for the iPhones, including Steve Wozniak, the co-founder of Apple, who spent hours at a mall in San Jose, California — not waiting in line, like most civilians, but lounging on the comfy furniture in the mall and then taking his place at the head of the line when the Apple store opened on Friday morning. Violence did not ensue, as Apple fanatics will countenance anything from the two creators of the Apple II personal computer. (To be fair, Woz later reported that he had permission in advance from the staff of the Apple store in question to sit on the chairs near the store entrance and then to be first in line, along with several friends, as the store opened.)
The big news about iPhone 3G launch day was all the trouble activating the newly purchased phones (not a surprising development, given that hundreds of thousands of iPhones were bought that day in Apple and AT&T stores) and the temporary “bricking” of existing iPhones as their owners installed the newest version of iTunes and downloaded the cool new iPhone applications from the App Store. Through the weekend, there were more than 10 million iPhone and iPod touch apps downloaded.
The iPhone 3G is a certified hit, and it may help boost sales for chip makers supplying semiconductors for the new smart phone. They include Broadcom, Infineon Technologies, Marvell Technology Group, Skyworks Solutions, and TriQuint Semiconductor.
Time Warner’s long experiment of trying to create a vertically integrated media content and distribution giant finally came to a merciful end yesterday with the news that it would get rid of its entire stake in the nation’s #2 cable company, Time Warner Cable (TWC), by the end of 2008. It’s a move that’s been expected for some time now, as shareholders have been screaming for the company to find a way to boost its lagging share price. By ridding itself of the debt-laden cable firm, Time Warner will once again become a pure content company focused on movies, television, and publishing — both online and of the magazine variety. All I can say is, it’s about freaking time.
Oh, what a difference a decade makes. It was roughly 10 years ago when AOL bought Time Warner with the grand delusion that the massive new AOL Time Warner would be a competition-killing monster that could devour rivals by leveraging powerful content and distribution brands that all work together in mass media bliss. I won’t get into the specifics about why it failed so miserably — it’s been covered ad nauseum by me and everyone else — but Time Warner to this day is still paying for the mistake in the form of not only the aforementioned poor share price and debt, but also the downright shame of having what it hoped would be a winning strategy instead become an embarrassing, if not arrogant, debacle.
While I understand what Time Warner gains from the divestiture, I really don’t see what sort of upside there is for TWC, aside from the independence to go its own way in an increasingly competitive market. The details of the divorce contain a couple eyebrow raising elements. TWC will have to pay a one-time dividend to Time Warner totalling $10.9 billion, all of it borrowed. And that’s on top of the $13 billion in debt the company already has on the books. That’s a heck of a lot red ink for any firm, much less one that’s just gained independence. TWC CEO Glenn Britt rationalized the dividend by calling it, “a statement of our confidence in our business.” I call it evidence that someone needs to introduce a pair of scissors to his credit card.
How will this split help Time Warner? It’ll allow the company to cut two-thirds of its $34 billion debt load, and free it up to focus on content and even consider getting back into the acquisitions game. But that’s just speculation. Time Warner’s next order of business should be finding someone stupid enough to buy AOL, an ISP that’s been dying a slow death and a major albatross around the media giant’s neck. Seriously, do you know anyone that uses dial-up anymore? When was the last time you heard that fingernails-on-the-chalkboard equivalent that is the sound of a phone modem firing up? I don’t think it’ll be too much longer before Time Warner is forced to just shut AOL down and take its lumps with a loss.
It’s no secret that the cable television industry is going through a period of radical change. With consumers increasingly choosing different ways to get their entertainment, from video on demand services to online streaming to DVD purchases, media companies are throwing all kinds of innovative new distribution strategies at the wall and seeing what sticks. For studios Paramount, MGM, and Lionsgate, this means launching their own pay TV network to compete with the likes of HBO and Showtime.
This industry greeted this announcement with a noticeable lack of enthusiasm, if not outright skepticism that Paramount, MGM, and Lionsgate have any intention of launching the venture at all. It came on the heels of failed negotiations with Showtime to strike a new movie supply deal with the premium network. It has become extremely expensive for pay TV networks to get the exclusive rights to run movies, and they’ve been increasingly losing money on the deals because of the growing number of competing distribution avenues. As a result, Showtime demanded the studios lower their price (last year it paid $320 million to Paramount, MGM, and Lionsgate), the studios balked, and they bargained themselves into a stalemate.
In a surprise move, the studios said, “Well forget you, Showtime, we’re gonna launch our own channel then.” The whole thing reeks of the business equivalent of a child sticking out his tongue at someone who made him mad. Why, you ask? Because the whole plan is very sparse on details and seems hastily executed. Just look at the press release and notice the clues: It came out on a Sunday when it could fly under the media radar, the new channel has no name and is a year and a half away from launch, and it has no cable or satellite distribution partners lined up — which is unheard of when you launch this kind of endeavor; there’s always some sort of initial agreements in place before you go public.
Rightly, many analysts have wondered if the studios are merely using the announcement as leverage against Showtime. It’s somewhat of a cynical view that they would engage in such an elaborate game of chicken, but anything’s possible. I doubt it will matter though since Showtime, much like HBO, has long since expanded beyond the traditional pay TV model and become a hub of critically praised original series like Weeds, Dexter, and The L Word. In fact, given that HBO is in a bit of a creative rut now that they no longer have The Sopranos, Sex and the City, or The Wire, Showtime’s more than comfortable with their original programming and will likely respond with, “Whatever, dudes. Don’t let the door hit your you-know-what on the way out.”
Given the difficulty of launching any sort of new cable network, much less one that relies heavily on running movies from the libraries of three studios, will not be easy. Paramount, MGM, and Lionsgate tried to build enthusiasm by saying the channel will embrace video on demand capabilities and develop their own original series, but again, extreme skepticism is warranted. Show me, don’t tell me, guys.
Stock prices for semiconductor companies may be down across the board, but one thing is looking up for the industry: profits at analog chip makers.
The manufacture of analog semiconductors is an arcane sector of the industry, yet they’re absolutely necessary to many electronics products, especially in the key area of electrical power management. The chips regulate the power used by a product and help keep the battery from draining too quickly.
Analog chip designers command big salaries among electronics engineers, since what they do is often seen as a form of wizardry. Analog expertise is especially desired in the field of wireless technology, since such products require what the industry calls mixed-signal design — that is, a mixture of analog and digital signals.
The biggest analog chip makers in the industry — Texas Instruments, STMicroelectronics, Infineon Technologies, NXP, Analog Devices, National Semiconductor, et al. — are passing familiar to many people. Those companies have diverse product lines, and their bottom lines are occasionally dragged down by the boom-or-bust cycles of the industry. The analog chip market is forecast to hit $40B this year, after a slow year in 2007.
The chip companies that really make major coinage are the ones that are purely analog (or close to it) and I seriously doubt you’ve ever heard of them. Consider Linear Technology. It’s a billion-dollar company, and its profit margins average around 40%. Forty percent! Even Chevron and Exxon Mobil would love to have such hefty profit margins!
Maxim Integrated Products is another one with a fine bottom line. In its recent history, the company’s profit margins have averaged 29% a year. They’ve got catching up to do on their accounting, due to recent problems with backdating stock options, but they should have some fine numbers to show once they do file those 10-Ks, even after expensing the stock options.
Micrel has been around for nearly 30 years, and it’s made money in 28 of those years. Their low public profile may be about to explode, as a hedge fund has taken a sizeable stake in the company, and a proxy fight is possibly brewing.
Romit Shah, an analyst for Lehman Brothers, last week upgraded his ratings on four analog chip makers: Analog Devices, Fairchild Semiconductor International, Intersil, and Microsemi. Shah sees the stock prices of these companies moving up because of their higher margins, net income, and free cash flow.
No telling where the stock prices will go, but look for lots of black ink in financial reports from these and other analog chip makers.
IBM continues to be at the forefront of advanced semiconductor technology. IBM Research last week announced that it has developed the world’s smallest silicon modulator. Huh? OK, it’s real geeky stuff. What it promises is to put more and faster computing power into electronic products, which is what we all care about.
Check this brief video.
You may have heard about dual-core and quad-core processors in the latest notebook and desktop computers. Multiple cores speed up the functions of a microprocessor, since the cores help parcel out and delegate all the little processing chores the chip has to do. They also help reduce the amount of power needed by a processor. The Cell Broadband Engine, the processor at the heart of Sony’s PlayStation 3 (jointly developed with IBM and Toshiba), has nine cores on a single chip, helping you kill space aliens or hungry zombies with greater efficiency.
This silicon modulator could lead to chips with hundreds or thousands of cores on a single processor. I know what you’re thinking — as soon as they work out a neural interface between your brain and the game console, you could be blowing away flesh-eating zombies just by looking at them. Cool.
Elsewhere on the microelectronics frontier, the Naval Research Laboratory last week disclosed that its scientists isolated a pure spin current in silicon, the most commonly used semiconductor material. This is an advance in the field of spintronics, where devices operate on the spinning of electrons, rather than electrons’ charge, as electronics does.
Spintronics is a technology of the future that’s been a long time coming; practical implementations haven’t caught up with the theoretical applications of the technology, as conventional microelectronics continues to knock out amazing advances year after year. One of the few companies actually making spintronics products is NVE Corporation, which supplies sensors for a variety of applications.
It will be a few years before these advances make it to consumer electronics, naturally. So, sit back, relax, play with your PS3 or iPhone, and we’ll get back to you.