The Hard Work and Hustle Before Crazy Valuations and Exits

In February of last year, Appcues – the user activation and onboarding tool developed by Jonathan Kim – closed a seed round of $2.5 million, thanks to investors like Brian Halligan and Dharmesh Shah. That’s on top of the company’s initial seed round of $1.2 million in 2014, bringing Appcues’s total funding to $3.7 million.

That’s a huge accomplishment for any company, but for me, it’s not the whole story. I’m every bit as interested in what got Appcues to this point – in the hard work and hustle that led to the company’s eventual success.

That’s why, after an introduction from our mutual friend, Appcues cofounder Jackson Noel, I jumped on a call with Jonathan to learn how the moves he made early on helped him bring Appcues to life. 

From Journalism Major to Startup Maker 

Jonathan doesn’t come from an entrepreneurial background. In fact, he has a journalism degree from Boston University – the cost of which he describes as having led him to work in computer science.

“I had to get a job to pay for school, and the highest-paying job I could find was in the computer lab,” he says. “I started toying around with computer programming, and I started getting better and better at it. I started working at a dev shop through my junior and senior year; when I graduated, I was looking at the prospect of going into the journalism job market. I decided not to do that. I was either going to do a startup or join an early stage company, and that’s how I wound up at Performable.” 

At Performable, Jonathan was employee #8 out of what would grow to 20 total before he left for Hubspot. Both experiences gave him exposure to the growing pains startups face – lessons he still takes to heart at Appcues.

“It was cool to see how the middle-stage culture starts to solidify and how processes start to break down,” he explains. “Then, going to Hubspot, it’s a totally different set of skills and people you need. We were 200-300 people when I joined, and I stayed with the company through about 700 people. It was neat to see what comes after that really early stage, and that perspective helps shape what’s really fundamental when you’re small.”

Leaving Hubspot to Launch Appcues

For Jonathan, entrepreneurship was always the goal. He explains, “I knew when I joined Performable that I was in that bridge between joining a startup or doing one on my own. It was always my plan to do that.”

And while he learned all he could working for Performable and Hubspot, Jonathan’s exposure to the challenges involved in onboarding and activating users within new tools and systems gave him the idea for the engagement processes that would drive Appcues. But before making the leap, Jonathan hustled hard to put himself in the best possible financial position.

“I paid off all my student loans and started saving money,” he shares. “By the time I left Hubspot, I had $20,000 saved up, and I invested all that into starting the company. I moved out of my expensive apartment in Central Square and into an attic with two roommates and my girlfriend, which took our rent down to like $500 each. I bought a bike on Craigslist for $100, and I biked everywhere because I was too cheap to buy a bus pass for $75 a month. 

(As a side note, Jonathan recommends that anyone thinking of going the same cheapskate route he did not start their companies in East Coast towns during the winter, as the bike commuting he experienced was brutal.)

Jonathan cut his costs in other ways, explaining, “I was eating steel-cut oats everyday and a good amount of ramen. I spent probably $100 per month on non-rent, non-utility expenses. When you’ve got $20,000 to last indefinitely, you really have to figure out how to make it stretch. Until we actually started paying ourselves after our seed round, I had $500 left in my bank account.” 

From 23 Customers to 23 Employees

Thanks in large part to Jonathan’s frugality and forward-thinking, Appcues took off quickly. One smart decision he made was to take on consulting opportunities shortly after leaving Hubspot that showed him exactly where his target consumers’ pain points lay with regards to user onboarding. Another early win was a listing on Product Hunt in 2014, which left him with 16 customers who’d promised to pay for his solution (once he finished developing it, of course).

A speaking gig led to a connection with Appcues’s cofounder Jackson, and the pair quickly brought on their first hire in John Sherer, Director of Sales. Jonathan noted that the move was unorthodox:

“The first person we hired was John, who was a salesperson. People are always surprised that we didn’t hire a developer first. But John was literally calling people asking why they weren’t buying and trying to get them to buy. The idea was that he’d learn so much more around the objections and the real must-haves for product that he actually became more effective for product than a developer would have.”

The team’s hard work, hustle and instincts paid off. Appcues, which started with three employees and 23 customers at the start of 2015 now boasts 23 employees and 530+ paying customers – none of which would have been possible without Jonathan grinding it out in the company’s early stages.

If you’re thinking about launching your own startup, Jonathan’s example is a great one to follow. Crazy valuations and flashy exits are fun to watch, but at the end of the day, it’s the kind of hard work and hustle he’s demonstrated that leads to real success.

To catch up with Jonathan, visit the Appcues website or follow him on LinkedIn. Or, for more info on our conversation, leave me a comment below with your follow-up questions:

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Blockchain Consortium Hyperledger Loses Members, Funding

More than 15 members of blockchain consortium Hyperledger have either cut their financial support for the project or quit the group over the past few months, according to documents seen by Reuters.

Exchange operators CME Group and Deutsche Boerse have decided to downgrade their membership for the consortium starting at the end of January 2018, according to slides titled “member attrition” from a board meeting presentation held on Friday.

Led by the Linux Foundation, Hyperledger was launched in 2015 to develop blockchain technology for businesses. Blockchain, which first emerged as the system powering cryptocurrency bitcoin, is a shared record of data that is maintained by a network of computers on the internet.

CME Group and Deutsche Boerse were premier members of the group and will downgrade to a general membership.

Premier members are given board seats in the consortium and pay a fee of $250,000 a year. General memberships range from $5,000 to $50,000 based on the size of the companies, according to Hyperledger’s website.

Blockchain consortium R3 has also decided to downgrade its premier membership next year, according to the documents.

Spokespeople for CME Group and R3 confirmed the companies had downgraded their membership. Deutsche Boerse declined to comment.

Hyperledger executive director Brian Behlendorf said in a written statement that the group has seen “tremendous growth in membership” in 2017.

“We have seen some members who were part of the initial December 2015 cohort shift their spending priorities but remain members of the organization,” Behlendorf said. “We have seen others who never really engaged decide not to renew. This is normal and expected.”

Banks and other large corporations have been investing hundreds of millions of dollars in developing blockchain technology in the hopes it can help them simplify their costly record-keeping processes.

To speed up development many large companies have formed or joined industry groups including the Enterprise Ethereum Alliance and R3.

The weakening support for Hyperledger from some large members highlights how large firms have become more selective with their blockchain efforts as the technology matures. Earlier this year JP Morgan Chase left R3, following the departure of Goldman Sachs, Banco Santander and others.

It comes amid an investing frenzy in cryptocurrencies and blockchain startups. The price of bitcoin hit a record of almost $18,000 on the Bitstamp exchange on Friday.

Despite the excitement, blockchain is not yet used to run any large scale projects

Hyperledger, which counts more than 180 members, of which 18 will be premier at the end of January 2018, released its first enterprise grade blockchain this year. Membership in Hyperledger also requires a separate membership with the Linux Foundation.

Thomson Reuters, the parent group of Reuters, is a member of Hyperledger, R3 and the Enterprise Ethereum Alliance.

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Alphabet's X sells new wireless internet tech to Indian state

SAN FRANCISCO (Reuters) – Alphabet Inc’s X research division said on Thursday that India’s Andhra Pradesh state government would buy its newly developed technology that has the potential to provide high-speed wireless internet to millions of people without laying cable.

Terms of the deal were not disclosed, but the agreement, which begins next year, would see 2,000 boxes installed as far as 20 kilometers (12 miles) apart on posts and roofs to bring a fast internet connection to populated areas. The idea is to create a new backbone to supply service to cellphone towers and Wi-Fi hotspots, endpoints that users would then access.

The agreement is an outgrowth of X’s Project Loon, which on several occasions has beamed cellphone service to Earth from a network of large balloons. The balloons link directly to smartphones but are meant for rural areas with a low population density, according to X.

Alphabet, which owns Google, and other online service providers view increasing internet accessibility in developing countries as crucial to maintaining their fast-growing businesses.

Andhra Pradesh, a southeastern coastal state with 53 million people, had nearly 15 million high-speed internet subscribers as of last December, according to a report by India’s telecom regulator. The state wants to connect an additional 12 million households by 2019, Alphabet said.

X plans to deploy free space optical technology, which transmits data through light beams at up to 20 gigabits per second between the rooftop boxes. There would be enough bandwidth for thousands of people to browse the Web simultaneously through the same cellphone tower, X said.

Researchers have said such systems hold promise in areas where linking cellphone towers to a wired connection is expensive and difficult. But the technology has not taken off because poor weather or misalignment between the boxes can weaken the connection.

Baris Erkmen, who is leading the effort inside X, said his team is “piloting a new approach” to overcome the challenges, but he did not specify the software and hardware advancements.

X plans to have a small team based in Andhra Pradesh next year to help roll out the technology.

Reporting by Paresh Dave, Editing by Rosalba O’Brien

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Bots and Form Letters Make It Nearly Impossible to Find Real FCC Net Neutrality Comments

The Federal Communications Commissions’ public comment period on its plans to repeal net neutrality protections was bombarded with bots, memes, and input from people who don’t actually exist. The situation’s gotten so bad that FCC Commissioner Jessica Rosenworcel, as well as several members of Congress, including one Republican, have called for the FCC to postpone its December 14 net neutrality vote so that an investigation can take place.

The FCC seems unlikely to comply. According to an FCC spokesman, the FCC is zeroing in on legal arguments within those comments, effectively disregarding any outpouring of support for net neutrality from regular Joes. “The purpose of a rulemaking proceeding is to not to see who can dump the most form letters into a docket. Rather, it is to gather facts and legal arguments so that the Commission can reach a well-supported decision,” Brian Hart, the FCC’s head of media relations, tells WIRED. Now, the Commission is barreling ahead toward Chairman Ajit Pai’s plan to essentially allow internet service providers to speed up or slow down internet traffic however they please.

So, with the FCC declining to investigate its own comments, we decided to undertake an analysis of our own.

Yes, researchers have already sliced and diced the data. But parsing 23 million comments can quickly bend toward abstraction. How many of those commenters are real? How many are bots? How many were real, but using identical form letters drafted by advocacy groups?

For a better handle on just how broken the FCC comment system is, we went granular, analyzing all of the submissions that fell under a single name. We wanted a name that was common enough to produce a decent number of hits (so, you know, not Issie Lapowsky), but singular enough that we could actually mine them in a few days (tough luck, James Smith). We settled on Nicholas Thompson, WIRED’s editor in chief, and excluded any Nicks, or Nicholas Thompsons who also supplied a middle initial.

That left us with 39 results between May 11 and December 8 of this year. Using a combination of Facebook, public records tools like Spokeo and Nexis, and the good old fashioned telephone, we attempted to make contact with each of them. It’s far from a perfect or scientific sample, but it does help illuminate what the chaos in the FCC’s comments look like up close. Here’s what we found:

The Bots

Let’s start with the outright fakes, since they’re in some ways the easiest to sniff out. To find the bot Nicholas Thompsons in our sample, we enlisted the help of FiscalNote, a company that processes public comments on behalf of corporations to help them make sense of the policy landscape. Researchers at FiscalNote previously identified nearly one million comments as bot submissions, all of them opposing net neutrality. Each one followed the same paragraph pattern, stringing together 35 synonymous words and phrases in a particular order to form similar, but not identical, comments.

FiscalNote’s vice president of research Vlad Eidelman found six comments that fit that pattern among the 39 Nicholas Thompsons, all submitted over the course of eight days in May. They included strange grammatical formations, like in the example below:

Dear Chairman Pai, I am concerned about internet regulations. I suggest the commission to repeal Tom Wheeler’s decision to control the Internet. Internet users, rather than so-called experts, should be empowered to enjoy whichever applications we want. Tom Wheeler’s decision to control the Internet is a exploitation of the open Internet. It ended a pro-consumer policy that functioned very, very successfully for a long time with bipartisan support.

Four of the bots were attached to fake home addresses, according to public records searches. The one below was associated with an email address that’s available for purchase on

Chairman Pai: In the matter of the FCC’s so-called Open Internet order. I want to recommend you to overturn The previous administration’s decision to take over broadband. Internet users, not Washington, should be free to purchase the applications we choose. The previous administration’s decision to take over broadband is a perversion of net neutrality. It ended a market-based policy that worked very, very successfully for a long time with broad bipartisan support.

Some bot-generated comments, though, used real names and addresses. Using the email address connected to one of these bot comments, we were able to track down one real Nicholas Thompson whose name and old address in Los Angeles were being used without his knowledge.

Thompson, who now lives in Portland, says he had submitted a pro-net neutrality comment to the FCC earlier this year. When we reached him by phone, he was angry to know that his authentic comment had been effectively cancelled out by a fake comment using his information. “That’s pretty messed up. It’s pretty sneaky on whoever decided to do that,” Thompson says. “I feel, for lack of a better term, just robbed of my voice.”

Confirmed Bots: 6

The Form Letters

Form letters are comments that advocacy groups draft for their members to submit en masse. According to Pew Research, only 6 percent of the roughly 23 million comments submitted to the FCC were actually unique. The rest were a combination of form letters and bots. The most popular form, submitted 2.8 million times, was a pro-net neutrality comment drafted by the advocacy group Battle for the Net. Eight Nicholas Thompsons submitted comments associated with Battle for the Net, each one linked to an authentic street address, though we couldn’t confirm their identities directly.

Here’s one of them:

The FCC’s Open Internet Rules (net neutrality rules) are extremely important to me. I urge you to protect them.\n\nI don’t want ISPs to have the power to block websites, slow them down, give some sites an advantage over others, or split the Internet into “fast lanes” for companies that pay and “slow lanes” for the rest.

Three other Nicholas Thompsons submitted comments connected to the group Taxpayers Protection Alliance, which Pew says was responsible for spreading some of the most widely used anti-net neutrality messages. All three of those comments tracked to real addresses associated with Thompson families. Here’s one example:

Obama’s Federal Communications Commission (FCC) forced regulations on the internet that put the government, and unaccountable bureaucrats, in control. These rules have cost taxpayers, slowed down broadband infrastructure investment, and hindered competition and choice for Americans. The time to remove the regulatory stranglehold on the internet is NOW. I urge the taxpayer-funded FCC to undo the terrible regulatory burdens that ex-FCC Chairman Tom Wheeler imposed on the internet. After 20 years, and trillions of dollars in infrastructure investment, there is no reason for the government to come in and ruin what has been a thriving tool that has changed the way we all live. Chairman Pai’s proposal to repeal Title II regulations will ensure the continued growth of a dynamic, open internet for all American consumers and taxpayers.

Confirmed Form Letters: 11

The Real Nick Thompsons

In the end, we were able to directly contact three, actual sentient beings named Nicholas Thompson who either picked up their phones or answered our Facebook messages and confirmed their identities. All three supported net neutrality. One of them had submitted the Battle for the Net form letter mentioned above.

The other two submitted unique comments:

I am writing to express my strong opposition to the repeal of net neutrality. It is an assault on the right of all Americans to an open and equitable internet. The internet has not only become essential for cultural, artistic, social and educational purposes, but has largely replaced other methods of doing essential tasks such as registering with government agencies, paying bills, renewing licenses, etc. In some of these cases the older methods have even been phased out completely, leaving the internet as the ONLY option. It is therefore a public utility that all have an equal right to and it is shameful and abhorrent that there is any attempt at all to repeal net neutrality. Thank you for your consideration.


I oppose the repealing or potential loosening of net neutrality rules in all forms, and wish for the full extent of it as known to the public to be preserved. Please do not take any actions that directly lead to that.

For those keeping score at home, that’s less than 8 percent that we were able to positively confirm over the course of several days. That’s with a pool of 39 comments. Now multiply that task by more than 600,000, and you’ll see what the FCC is up against.

Confirmed Nicholas Thompsons: 3

The Unknowns

It remains unclear who, or what, was behind the remaining comments—nearly half overall. Among the comments that opposed net neutrality, several seemed likely to be fake. One comment, below, was submitted identically by three Nicholas Thompsons, including two who provided home addresses that don’t exist. According to Pew, that same comment was submitted nearly 1.3 million times overall, suggesting many of them may have been fake.

Before leaving office, the Obama Administration rammed through a massive scheme that gave the federal government broad regulatory control over the internet. That misguided policy decision is threatening innovation and hurting broadband investment in one of the largest and most important sectors of the U.S. economy. I support the Federal Communications CommissionÍs decision to roll back Title II and allow for free market principles to guide our digital economy.

Two more anti-net neutrality comments submitted by Nicholas Thompsons, used real addresses linked to Thompson families, but the text of the comment was identical to one that was also flagged by a Redditor named Shaun Seckman. Seckman says his name and old address were also used without his permission to send the same message, which read:

Obama’s Net Neutrality order was the corrupt result of a corrupt process controlled by Silicon Valley special interests. It gives some of the biggest companies in the world a free ride at the expense of consumers and should be immediately repealed!

“This post was absolutely not made by me,” Seckman wrote. “I am in favor of Net Neutrality and would not have made such comments.” Given that the message matches the ones supposedly sent by two Nicholas Thompsons, it seems they may be fake, as well.

The rest are a mystery. Some appear to be form letters whose origins are unclear, because the text doesn’t appear elsewhere online. Others used real home addresses, but people finder sites like Spokeo and Nexis didn’t turn up any Thompsons living there. Those sites, of course, are riddled with inaccuracies of their own. Several other comments were likely fake, because they were submitted using home addresses that don’t exist. At least one was likely real, given it was a unique comment, attached to an authentic address belonging to a Nicholas Thompson, whose voicemail recording includes his name. But without talking to each of these remaining Nicholas Thompsons, it’s impossible to know for sure.

The utter messiness of this tiny sample alone demonstrates just how much is unknown about the comments the FCC received, and which it is required by law to consider.

As a workaround, the FCC has decided to ignore the majority of comments submitted by the public in favor of lengthy legal arguments submitted by interest groups and corporations. In doing so, it undermines the only real tool the public has to express their opinions about the rules that govern them. It’s silencing their voices more than a million bots ever could.

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The 3 Biggest Challenges That Every Entrepreneur Faces–and How to Solve Them

Pete Ghiorse, Peter Tight, and James Ghiorse have a vision of transforming the way people give back.

Their iOS app, GiveTide, seeks to make charitable giving effortless by letting users link their credit cards, round purchases up to the nearest dollar, and donate the spare change (similar to apps like Givelify and Uback). It may not be a household name yet, but the three co-founders have already done a few things that should serve as be a model for other entrepreneurs.

That’s the sense I got, anyway, after meeting them last January on a Facebook group for East Coast entrepreneurs and hearing their story. Specifically, they did three things that I think every entrepreneur can — and should — do:

1. Solve a personal problem.

“We’re sorry, the minimum monthly gift amount is $25.”

That’s the message Pete Ghiorse received when he tried to set up a $5 monthly donation to his favorite nonprofit.

It shocked him that a nonprofit would actually refuse money, even if it came in small bills. But on further investigation, it turned out to be a problem with the platform, not the nonprofit.

“The fundraising tools and methods nonprofits have at their disposal haven’t changed in decades,” he explains.

This experience was the impetus for GiveTide. He knew he couldn’t be the only one wanting to donate a few dollars at a time, which meant nonprofits were missing out on a significant revenue source.

Often, the “light bulb” moment for an entrepreneur comes from a personal experience. That’s how it’s worked for me: It was only after nearly going bankrupt on a bad deal that my own agency came up with Roadmapping, a product offering that completely turned our business around.

But the light bulb moment isn’t enough. It’s important to solve a problem you understand — and the specifics of that solution shouldn’t come from the founder. Which brings us to…

2. Get answers from customers.

The inspiration for GiveTide came from personal experience, but Ghiorse and his co-founders understood that one light bulb experience does not a company make.

“We did countless hours of research and had hundreds of conversations,” Ghiorse says. “Through it all, we identified three key barriers to giving: financial, procedural, and social.”

Accordingly, the founders designed GiveTide to remove these barriers.

I’ve also found this to be helpful — it’s a foundational part of my agency business. One of our foundational priorities is to minimize founder-driven design: The only “true” answers come from users.

We spend countless hours testing our apps and design decisions with users, as that’s the only way to know what’s working and what needs to change. And whether it’s a mobile app or a physical product, that’s something every entrepreneur should do.

3. Push through barriers.

Ghiorse says GiveTide’s road to launching was initially clear. “We realized there were barely any charitable giving apps on the App Store, and none whatsoever that did what we were trying to build. We thought that was a good thing,” he explained.

Unfortunately, they missed something.

“Months into development, we discovered that Apple has a big, bold, double underlined section in their development guidelines stating that charitable giving apps are absolutely not allowed,” Ghiorse said.

This might have left them dead in the water. But instead of taking the rules at face value, they changed them. One 20-page appeal and several months later, Apple approved an exception to the rule and GiveTide was go for launch.

The GiveTide story is an instructive lesson in entrepreneurship: It demonstrates that when looking for business ideas, nothing beats a problem you’ve personally experienced. Identifying problems and pain points that you deal with personally is one of the best ways to make sure you’re creating something that people actually want.

However, no matter where the problem comes from, the solution should always be based on customer preference. As a founder, you start out with assumptions. Your job is to test them with customers and revise based on that data. 

And finally, perhaps the most important lesson here is that no problem is insurmountable. If you’re driven, dedicated, and creative enough, you can find a workaround for almost anything. 

When faced with an opportunity, sometimes the best thing is to jump on it and figure out the specifics later. In my own experience with Rootstrap, I’ve found that having a plan is important — but if you allow building the plan to get in the way of building the product, you’re lost.

Sometimes the best course of action is to jump on an opportunity even if you aren’t sure how you’ll execute.

Because the truth is, you can’t find a golden opportunity.

You can only make one.

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Uber appeal case against London license loss planned for April or June next year

LONDON (Reuters) – Uber’s [UBER.UL] appeal against the loss of its London license should begin on Apr. 30 for five days but might be delayed until June, a British judge said on Monday at a preliminary hearing.

FILE PHOTO: A photo illustration shows the Uber app on a mobile telephone, as it is held up for a posed photograph, in London, Britain November 10, 2017. REUTERS/Simon Dawson/File Photo

There will be two further preliminary hearings on Tuesday and Wednesday next week to decide whether a trade union and the London Taxi Drivers’ Association can join Uber and transport regulator Transport for London (TfL) in the case.

TfL ruled in September that the ride-hailing service’s approach and conduct was not fit and proper to hold a private vehicle hire license.

Reporting by Costas Pitas; editing by Michael Holden

Our Standards:The Thomson Reuters Trust Principles.
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Altria Vs. Brown-Forman: Battle Of Dividend Paying Sin Stocks

By Bob Ciura

Altria (MO) and Brown-Forman (BF.B) are both manufacturers of vice products, and both have impressive dividend growth histories.

Brown-Forman has increased its dividend for 34 years in a row. It is a Dividend Aristocrat, an exclusive group of 51 high-quality stocks with 25+ consecutive years of dividend growth. You can see all 51 Dividend Aristocrats here.

Meanwhile, Altria is a Dividend Achiever, a group of stocks with 10+ consecutive years of dividend increases. You can see the entire list of all 264 Dividend Achievers here.

Altria is not officially a Dividend Aristocrat, because its various spin-offs over the years technically reduced its dividend payout at times. But the company has increased its dividend 51 times in the past 48 years, which is a highly impressive track record.

If an investor were attempting to pick between them, which dividend-paying vice stock is the better buy today?

Business Overview

Winner: Toss-Up

Both Altria and Brown-Forman have very strong business models. They are both part of a group of companies, commonly referred to as ‘sin’ stocks. These are companies in the alcohol and tobacco industries. They sell vice products, that are generally viewed as detrimental to one’s health. At the same time, these are some of the shareholder-friendly businesses in existence.

Altria is a tobacco giant. It sells the Marlboro cigarette brand in the U.S., and it has a number of other businesses, such as smokeless tobacco, cigars, and wine. Its other brands include Skoal, Copenhagen, Black & Mild, and Ste. Michelle. Altria also has a 10% ownership stake in global beer giant Anheuser Busch Inbev (BUD).

Marlboro is the flagship of Altria’s fleet. Marlboro captures nearly half of all U.S. retail cigarette market share.

Source: 2017 CAGNY Presentation, page 42

Brown-Forman manufactures alcoholic beverages. It has a large product portfolio, which is focused on whiskey, vodka, and tequila. Its most famous brand is its flagship Jack Daniel’s. Other popular brands include Herradura, Woodford Reserve, El Jimador, and Finlandia.

Brown-Forman is highly profitable. It generates high returns on capital, and has significantly expanded operating margins over the past 10 years.

Source: Annual Stockholder Meeting, page 11

Altria and Brown-Forman are both cash cows. They generate high levels of free cash flow, thanks to their economies of scale, and strong brands. They sell products with steady demand, even during recessions, and can raise prices each year. This results in sustained earnings growth, which in turn gives them the ability to increase dividends each year.

Growth Prospects

Winner: Brown-Forman

When it comes to future growth, Brown-Forman could have two significant advantages over Altria. First, the growth outlook for alcoholic beverages is far more favorable than it is for tobacco products in the U.S. The major challenge for Altria is declining smoking rates.

Altria’s domestic cigarette shipment volume declined by 4% over the first half of 2017. This caused adjusted earnings growth to slow, to just 3.3% in that period. To reignite growth, Altria is working on “reduced-risk” products, which include e-vapor and e-cigarettes. These products heat tobacco, rather than burn it. According to Altria, this produces fewer harmful health effects.

Source: Investor Day Presentation, page 114

Altria is making significant progress in these areas. Last quarter, e-vapor shipment volumes grew over 50%. And, the company has submitted product applications for its next-generation IQOS line to the FDA, and is preparing to launch IQOS at some point over the next year.

Still, Brown-Forman is seeing much stronger growth in the U.S, particularly from bourbon and tequila. For example, the company generated double-digit sales growth from Woodford Reserve and Old Forester over the first half of 2017. Its tequila brands Herradura and el Jimador tequila also grew sales by double-digits, in the U.S.

Brown-Forman could continue generating higher growth, because it has a heavy presence in the emerging markets, while Altria generates 100% of its revenue from the U.S. Brown-Forman’s emerging-market sales increased 15% over the first half of the year.

Source: Q2 Earnings Presentation, page 7

For fiscal 2018, Brown-Forman expects sales growth of 6% to 7%. Earnings-per-share are expected to increase 11% to 16%, to a range of $1.90 to $1.98. Meanwhile, Altria expects full-year earnings growth of 7.5% to 9.5%, to a range of $3.26 to $3.32.

Valuation & Dividends

Winner: Altria

Brown-Forman has an advantage when it comes to future growth potential, but investors have to pay a much higher price for that growth. Brown-Forman trades for a price-to-earnings ratio above 36.Its valuation has expanded considerably over the past few years.

BF.B PE Ratio (NYSE:TTM) data by YCharts

For its part, Altria stock trades for a price-to-earnings ratio of 21.7. Meanwhile, the S&P 500 Index has an average price-to-earnings ratio of 25.5.

Both stocks are trading above their average valuations, but Brown-Forman’s overvaluation is more severe. According to ValueLine, in the past 10 years, Brown-Forman held an average price-to-earnings ratio of 22.7. In the past 10 years, Altria held an average price-to-earnings ratio of 15.7. While it is far from cheap, Altria still has a much lower valuation than Brown-Forman.

Brown-Forman appears to be significantly overvalued, both in relation to the broader market, as well as when compared to its own historical average. If Brown-Forman’s price-to-earnings multiple contracted from its lofty levels, it would significantly impact future returns.

Plus, Altria is much more attractive as a dividend stock.

MO Dividend Yield (TTM) data by YCharts

Altria’s dividend yield is more than three times Brown-Forman’s. They are both strong dividend growth companies, but Altria’s superior dividend yield gives it a huge advantage for income investors.

Final Thoughts

Altria and Brown-Forman are both highly profitable consumer goods companies, with strong brands and reliable dividends. Both companies are on our list of 350 dividend-paying stocks in the consumer staples sector. You can see the full list of all 350 consumer staples dividend stocks here.

Brown-Forman is the better growth pick. The environment is more favorable for alcohol than tobacco, in the U.S. This should result in stronger earnings growth for Brown-Forman going forward. However, Altria has a significantly higher dividend yield, and a lower valuation. That makes Altria the better pick for value and income investors.

Brown-Forman is a Dividend Aristocrat, but it isn’t undervalued right now. There are cheaper Dividend Aristocrats out there. Find them with our service Undervalued Aristocrats, which provides actionable buy and sell recommendations on some of the most undervalued dividend growth stocks around. Click here to learn more.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Uber to Settle Lawsuit Filed By India Rape Victim

Uber has agreed to settle a civil lawsuit filed by a woman who accused top executives of improperly obtaining her medical records after a company driver raped her in India, according to a court filing on Friday.

In a criminal case in India, the Uber driver was convicted of the rape, which occurred in Delhi in 2014, and sentenced in 2015 to life in prison.

The Indian woman also settled a civil U.S. lawsuit against Uber in 2015, but sued the company again in June in San Francisco federal court saying that shortly after the incident, a U.S. Uber executive “met with Delhi police and intentionally obtained plaintiff’s confidential medical records.” Uber retained a copy of those records, the lawsuit said.

The woman was living in the United States when she filed the lawsuit.

Terms of the settlement were not disclosed in the court document on Friday. Representatives for Uber and an attorney for the woman could not immediately be reached for comment.

The lawsuit cited several media reports which said former Uber CEO Travis Kalanick and others doubted the victim’s account of her ordeal.

“Uber executives duplicitously and publicly decried the rape, expressing sympathy for plaintiff, and shock and regret at the violent attack, while privately speculating, as outlandish as it is, that she had colluded with a rival company to harm Uber’s business,” the lawsuit said.

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In a prior statement, Uber said: “No one should have to go through a horrific experience like this, and we’re truly sorry that she’s had to relive it.”

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Walt Disney Makes Two Big Additions to Its Board

Media company Walt Disney on Thursday named Oracle’s chief executive, Safra Catz, and her counterpart at Illumina, Francis A. deSouza, to its board.

Disney said their election would be effective Feb. 1 but it was yet to decide on which committees they would serve on.

The company currently has 12 members on its board, including Facebook’s Sheryl Sandberg and Twitter’s Jack Dorsey.

The election of the two new members comes at a time when Disney is said to be in the lead to acquire much of Twenty-First Century Fox’s media empire.

Disney CEO and chairman Bob Iger contemplates on extending his tenure past 2019 to facilitate the integration of Fox’s assets if a deal is completed, the Wall Street Journal reported on Wednesday.

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Alibaba redraws retail fault lines with bricks-and-mortar push

HANGZHOU, China (Reuters) – In a small village shop near the eastern Chinese city of Hangzhou, store owner Lu Qiwei uses his smartphone to place orders to refill stocks of instant noodles, rice and drinks.

FILE PHOTO: A sign of Alibaba Group is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 3, 2017. REUTERS/Aly Song/File Photo

Lu, 61, says he didn’t own a phone two years ago, but he’s now one of 600,000 people using a supply chain app made by e-commerce giant Alibaba Group Holding Ltd (BABA.N), aimed at drawing millions of Chinese mom-and-pop stores into its orbit.

The app is one part of a multi-billion dollar drive by Alibaba to extend its dominance of online shopping into physical stores, and build a data fingerprint for every consumer in China, where 85 percent of retail sales are still made offline.

“We’re working to make the net in the sky and the net on the ground,” CEO Daniel Zhang said last month after Alibaba took a $2.9 billion stake in top grocery chain Sun Art Retail Group Ltd (6808.HK). “We will cover all consumers seamlessly.”

Alibaba’s strategy echoes Amazon Inc’s (AMZN.O) $13.7 billion deal this year for organic offline grocer Whole Foods Market Inc – but with a twist.

China’s fragmented market means Alibaba is spreading itself wider and thinner, hooking an array of mall operators and stores to its mobile payment, logistics and inventory management tools.

Alibaba said it had no immediate comment on how the two companies’ strategies compare.

Over the past two years, Alibaba has acquired major stakes in big box retailer Suning Commerce Group Co Ltd (002024.SZ), Lianhua Supermarket Holdings Co Ltd (0980.HK) and Intime Retail Group Co Ltd (INTIF.PK).

It all adds up to a vital – but expensive – gamble as Alibaba looks to maintain rapid growth and meet huge investor expectations even as the broader online retail market slows. Alibaba shares have more than doubled this year.

“It definitely needs to be a priority for Alibaba,” said Jason Ding, partner at Bain & Company’s Beijing office, adding it would help the firm tap an older demographic that prefers to shop offline, and cut reliance on internet sales.


Alibaba’s offline push gives it reach and influence over China’s broader retail market. Its Tmall and Taobao stores have upended e-commerce in the market, and ties to many of the top bricks-and-mortar chains extend that influence offline.

The push would add at least thousands of supermarkets and malls, and potentially millions of small local stores. Amazon’s Whole Foods Market has about 500 outlets in the United States and UK.

Despite overseeing a mass of offline sale points, analysts say Alibaba still has to piece them together – integrating data, managing personnel and protecting consumers’ privacy.

“These are areas Alibaba doesn’t necessarily have amazing expertise in, they just happen to have really good access to data and really good connections with brands,” said Ben Cavender, Shanghai-based principal at China Market Research.

Getting shop owners on board takes resources and time.

Behind Alibaba’s Ling Shou Tong supply chain app is an army of some 2,000 foot soldiers, who work purely on commission to convince store owners to use the app, the firm says.

The workers, called ‘chengshi paidang’ – or city partners – train at Alibaba and pay a 3,000 yuan ($454.47) deposit and a 3,000 yuan annual platform fee to act as salespeople in small cities, earning a commission on products sold via Alibaba apps.

And there are logistical hurdles, said Yu Wenze, 21, who worked as a city partner in a rural area of Shandong province.

“First, awareness of the technology is too low and the replacement cycle for goods is too long. Also, the logistics aren’t good enough yet. We have to commit to next-day delivery if the shop ordered before 4.00 p.m., but in most cases we can’t do it.”

Alibaba’s efforts are further complicated by questions over ownership of individuals’ data, as it extends its offline network into highly varied offline environments.

“They need that personal information in order to create more targeted offline stores, and all of that will require additional data to be shared across different locations,” said Bain’s Ding.

“There are a lot of new rules that need to be defined if they want to strike the right balance.”


Store owners were mixed about the impact on their business.

“They give us storefront decorations and come out to give in-store training and other help,” said one store owner in eastern Hangzhou, who converted his shop to an official “Tmall Store”. He didn’t want his name used as he’s not authorized by Alibaba to speak to the media.

The store is part of a drive launched in August to transform 10,000 convenience stores outside China’s major cities into Tmall-branded stores within four months.

Near the shop’s till, goods have digital price tags that change to match online prices. Outside, Alibaba’s Tmall mascot – a black cat – looms over the shop front.

On the top floor of an Intime department store in downtown Hangzhou, Alibaba’s IKEA-like “Tmall Home Selection” uses electronic tags that allow shoppers to browse sofa cushions and vases before paying online and getting goods delivered.

On a recent Friday afternoon, the store was quiet.

“People still buy in the store… but the concept is still very new,” said a saleswoman who declined to be named. “It’s empty because people are working right now, but they can always buy online.”

Back in his store, Lu is quietly happy with his new system, which he says has cut his costs by knocking local re-sellers out of his supply chain. Customers can now also pay more easily on their smartphones with Alibaba-linked Alipay.

“Now we all work for Alibaba,” he said.

Reporting by Cate Cadell in BEIJING, with additional reporting by Sijia Jiang in HONG KONG; Editing by Adam Jourdan and Ian Geoghegan

Our Standards:The Thomson Reuters Trust Principles.
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What’s Driving Walmart’s Digital Focus? Paranoia, Top Exec Says

The biggest company in the world has a chip on its shoulder right now—and that’s probably a good thing. Why? The ever-growing challenge from online retailers is pushing Walmart to be a much better operator in the digital world.

“For us, a big part of it is being paranoid,” said Walmart chairman Greg Penner on Thursday at the Fortune Global Forum in Guangzhou, China. “We’re at our best when we’ve got a competitor that’s really challenging us.”

If so, the mega-retailer is doubly blessed: It now has two mammoth online retailers targeting its core business.

For quite some time, Walmart, No. 1 on Fortune’s Global 500 list of the world’s largest companies with $486 billion in sales last year, has been working to adjust its strategy to reckon with the threat posed by

The so-called Everything Store had more than 50% of all online retail sales in the U.S. last year and continues to expand at a blistering pace. With its acquisition earlier this year of Whole Foods, Amazon served notice that it is bringing the fight for consumers to Walmart on its own turf—physical stores. Amazon’s market value has risen above $550 billion, significantly above Walmart’s stock market value of around $290 billion despite strong returns for Walmart’s shares this year.

In China, Walmart now has another potent competitor getting into the stores business: Chinese online retail titan Alibaba.

Alibaba announced in November that it was investing $2.9 billion to acquire a 36% stake in Chinese hypermarket operator Sun Art, which has some 400 stores in China similar in scale to Walmart’s superstores. As with Amazon and Whole Foods, Alibaba plans to create a connected retail experience for shoppers between their smartphones and their neighborhood stores.

It’s the same strategy Walmart is pursuing, but in reverse: Amazon and Alibaba want to bring their huge customer bases into stores; Walmart wants to persuade the shoppers who frequent its nearly 12,000 stores globally to do more of their digital shopping with Walmart as well.

The retail business is no longer bifurcated between physical and digital, said Penner. The best way to win customers in the future is going to be by offering a sophisticated mix of both options.

“Customers aren’t going to care where products came from,” said Penner. “They just want a seamless experience. So that’s what we’re trying to solve for.”

Walmart has made significant digital inroads since its acquisition of last year. In its most recent quarter, the company grew its online sales by 50%. now sells some 70 million items—triple its number of offerings a year ago.

On Wednesday, the company made a historic announcement signaling that it is committed to being more than the world’s biggest operator of physical retail outlets: As of Feb. 1, 2018, it is officially changing its legal name from Wal-Mart Stores to Walmart.

“We’re still in the stores business, but a lot of our business is creating this new experience for customers,” said Penner, explaining the decision to drop the word “stores.”

Walmart has made major changes in its digital strategy over the past 18 months. Last year it sold Chinese online marketplace Yihaodian to, the country’s No. 2 e-commerce player behind Alibaba.

Penner told the audience at the Fortune Global Forum that the deal allowed the company to scale up faster. It can now reach 90% of consumers in China, he said. And shoppers can order items on the platform, have them picked from shelves in Walmart’s stores, and delivered within an hour.

“We went all in with that strategy,” said Penner. “We just felt we had to be part of a bigger ecosystem.”

Alibaba’s latest move presents a big, new challenge to Walmart’s business in the Chinese market—and more of the adversity that Penner says the company thrives on.

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Alleged Cyber Crime Kingpin Arrested in Belarus

One of Eastern Europe’s most prolific cyber criminals has been arrested in a joint operation involving Belarus, Germany and the United States that aimed to dismantle a vast computer network used to carry out financial scams, officials said on Tuesday.

National police in Belarus, working with the U.S. Federal Bureau of Investigation, said they had arrested a citizen of Belarus on suspicion of selling malicious software who they described as administrator of the Andromeda network.

Andromeda is made up of a collection of “botnets”, or groups of computers that have been infected with viruses to allow hackers to control them remotely without the knowledge of their owners, These networks were in turn leased to other criminals to mount malware or phishing attacks and other online scams.

Swedish-American cyber security firm Recorded Future said they have “a high degree of certainty” that the arrested Belarussian is “Ar3s”, a prominent hacker in the Russian speaking cybercrime underground since 2004, who the firm has identified as the creator of the Andromeda botnet, among other hacking tools.

“Andromeda was one of the oldest malwares on the market,” said Jan Op Gen Oorths a spokesman for Europol, the European Union’s law enforcement agency. It estimated the malicious software infected more than 1 million computers worldwide every month, on average, dating back to at least 2011.

Although authorities in Belarus declined to name the suspected hacker and Europol and the FBI declined to comment, the firm Recorded Future identified Ar3s as Sergei Yarets, a 33-year-old man living in Rechitsa, near Gomel, the second largest city in Belarus.

Reuters could not reach Yarets via phone or social media.

Yarets is identified on LinkedIn as technical director of OJSC “Televid”, a television broadcaster in southeastern Belarus.

A colleague at the company contacted by Reuters said Yarets had been arrested but declined to comment further.

A source at a government agency involved in the investigation said that the arrested hacker behind Andromeda was Yarets.

The Belarus Ministry of Internal Affairs in Minsk said officers had seized equipment from the hacker’s offices and he was cooperating with the investigation.

Information about the operation has been gradually released by Europol, the FBI and Belarus’s Investigative Committee over the past two days. No further arrests have been reported.

Cyber crime wholesaler

The shutdown of the Andromeda botnet, announced on Monday, was engineered by a taskforce coordinated by Europol which included several European law enforcement agencies, the FBI, the German Federal Office for Information Security and agencies from Australia, Belarus, Canada, Montenegro, Singapore and Taiwan.

The police operation, which involved help from Microsoft and ESET, a Slovakian cyber security firm, was significant both for the number of computers infected worldwidew and because Andromeda had been used over a number of years to distribute scores of new viruses.

Belarus authorities said the man they arrested charged other criminals $500 for each copy of Andromeda he sold to mount online attacks, and $10 for subsequent software updates.

Microsoft said Andromeda charged $150 for a keylogger to copy keystrokes to steal user names and passwords. And for $250, it offered modules to steal data from forms submitted by web browsers, or the capacity to spy on victims using remote control software from German firm Teamviewer.

German authorities, working with Microsoft, had taken control of the bulk of the network, so that information sent from infected computers was rerouted to safe police servers instead, a process known as “sinkholing.”

Information was sent to the sinkhole from more than 2 million unique internet addresses in the first 48 hours after the operation began on Nov. 29, Europol said.

Owners of infected computers are unlikely to even know or take action. More than 55 percent of computers found to be infected in a previous operation a year ago are still infected, Europol said.

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Why China’s ‘Copycat’ Image Is Beginning to Fade

Neil Shen knows a thing or two about what makes a successful entrepreneur.

Shen, who started his career as an investment banker, co-founded Chinese travel services provider and went on to become the founding partner of Sequoia Capital China. He was also an early investor in one of the hottest companies in China at the moment called Meituan, a local services platform often referred to as the Groupon of China.

“When Meituan first launched, they did try to learn from the Groupon model in the U.S,” he said at Fortune’s Brainstorm Tech International conference in Guangzhou, China on Wednesday. “In the last few years, Meituan’s business model shifted in a way that makes it unique. It doesn’t have a U.S. comparable.”

Many U.S. companies tend to focus on the home market because it’s “a big, rich market,” so why look elsewhere? “The historical experience is that if you conquer America, you can conquer the world,” he said. “But that’s starting to change.”

Over the years, Chinese entrepreneurs have gained a reputation of simply being copycats of American technology. That image is beginning to fade. In fact, Shen says the opposite is happening.

“Yes, a lot of U.S. companies still think China is about copycats, which is a totally, totally wrong perception,” he said. “I would suggest that U.S. companies should actually try to learn from China.”

Shen used Meituan as an example. Although it was inspired by Groupon, it evolved beyond Groupon’s ambitions. Meituan started out as a group-buying site, but it has quickly become the world’s largest online and on-demand delivery platform. It recently announced that it would launch a ride-hailing service of its own in China to compete against local giant Didi Chuxing.

“In the last few years. the mobile Internet has given the Chinese entrepreneur the chance to prove they are the original creator of those models,” Shen said.

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Millennials Are Old News: What Do Gen Z Workers Want?

Leaders have spent so much time focusing on how to engage Millennials that most of them forget about Generation Z — the next wave of people (those born between 1995 and the mid- 2000’s) just beginning to enter the workforce.

Gen Z is already separating itself from Millennials when it comes to workplace demands. According to Accenture, the number of college graduates in the U.S. wanting to work for large companies rose 37 percent last year. They see the underemployment struggles of their Millennial predecessors and want to avoid that fate.

To appeal to a new wave of workers, employers must offer training and skills development opportunities to stand out from other recruiters and continue to attract top talent.

How to Appeal to the Next Generation

Gen Z is not entirely different from the Millennial generation. This younger class shares the entrepreneurial drive of their older siblings, with around 72 percent of current high-school students hoping to start their own companies.

Many, however, will not end up as founders of new startups, and they are fine with that fate — if their new workplaces facilitate their success. According to Adecco Staffing USA, 32 percent of Gen Z workers expect to be working in their dream job within 10 years. New college graduates name career growth as their top desire from their first jobs, with fulfilling work and stability tied for a distant second. These young workers are hungry for success, and they expect their employers to let them capitalize on that drive.

Leaders can connect to this workforce by delivering on that expectation, providing Gen Z workers the resources they need to reach their career goals. Follow these tips to position your company as a top destination for the next wave of rising talent:

1. Ask them about values and provide relevant experiences.

Discover what young workers want to do and bring them in to experience a day in the life. Steve Robertson, CEO of Julian Krinsky Camps and Programs and a Gen Z expert, advises company leaders to “Get in touch with Gen Z today. Invite employees’ children or local students to explore the workplace. Make the event meaningful for everyone by showing them career offerings. Let them react and ask them what they value.”

Sponsoring pre-professional programs can be a great way to not only train the workforce of tomorrow, but also keep your company top of mind when program graduates enter the workforce. “These events are great opportunities for Gen Z to collaborate, communicate, and create connections,” says Robertson. “They will come away feeling like their opinions matter and, in turn, you’ll be better prepared for their arrival.”

2. Establish CSR programs and charitable partnerships.

Corporate social responsibility and charitable impact appeal to Gen Z, just as they do to their Millennial predecessors. According to Marketo, 60 percent of Gen Z workers want their work to have a positive impact on the world. Look at brands like TOMS and Apple — both popular Gen Z buys — to see the types of outreach this generation admires.

3. Evaluate company culture.

Gen Z is made up of a diverse group of people, all of whom — despite their commonalities — have different motivations and desires. Create a company culture that rewards curiosity and ambition by providing the social rewards, mentorship, and feedback Gen Z craves, along with the transparency and flexibility they and Millennials both cherish.

Successful organizations today are not only building this rewarding culture, but upholding it as a key identifier for their brands. For example, the media intelligence company Meltwater designed its culture around building and reinforcing an entrepreneurial spirit in its people. This culture, represented by MER — which stands for Moro, Enere, and Respekt — is the Norwegian word for “more,” and it helps the company celebrate achievements without losing the passion to succeed.

4. Add technology to the workplace.

This new generation started using advanced technology in elementary school. Smartphones and iPads are second nature to them, and they become frustrated quickly when companies fail to address simple problems with obvious technical solutions. You won’t need to spend much time training them on technology use, but in exchange, they demand that you keep your company up to date.

5. But prioritize face-to-face communication.

In the office, where most companies now use email and apps like Slack to enable communication between co-workers, Gen Z kicks it old school by favoring more face-to-face communication. Although Gen Z workers were raised on social media, they prefer in-person conversations with their leaders. Treat them with respect by listening to their goals and ideas, then provide consistent feedback so they know their voices are heard.

Just as not all Millennials are the same, not all Gen Z workers want the same things. However, these trends indicate a shift in the demands of the next wave of workers, and companies must adapt to the new environment to attract the best Gen Z talent. Follow these strategies to address the needs of the new generation and create an environment that tomorrow’s workforce would happily call home.

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Want to Raise Successful Kids? Start With Today's Google Doodle (and Then Keep Going)

As part of Computer Science Education Week, Google today announced its very first kids coding Doodle: a short interactive game designed to teach kids computer programming. A joint project by three teams — Google Doodle, Google Blockly, and MIT — the Doodle game teaches kids computational thinking as they guide a cute rabbit through a series of challenges in a quest for carrots.

The Google Doodle celebrates the 50th anniversary of Logo, a groundbreaking kids programming language developed in 1967 by MIT’s Wally Feurzeig, Seymour Papert, and Cynthia Solomon. Logo was invented well before the introduction of the personal computer, making it ahead of its time — preparing for a future in which computer programming would be fundamental to a well-rounded education.  

The Doodle also helps kick off Hour of Code, a greater nationwide push to promote kids computer programming in schools. Throughout this week, students around the world will be using their computer lab time to engage in interactive tutorials and games that teach the basic building blocks of coding.

One hour of code is a great starter, and every kid should participate. It should also be just the beginning.

Other countries like the U.K. and Estonia have already added computer science to their mandated curricula for K-12 students. Here in the United States, back in September, President Trump promised a landmark $200 million to the Department of Education for computer science and STEM education in schools. This is a tremendous step in the right direction, and will strengthen the efforts to bring computer science education to every student in the country.

But until we can get computer science into mandated K-12 curricula, here are some things you can do next (and why it’s important):

  • Bring Hour of Code to your home. If your child is participating in Hour of Code this week, ask them about what they learned and encourage them to explore this interest further. If your child’s school is not participating, you can still access the tutorials and games offered on the CS Education Week website. Consider making hour of code a family activity, maybe setting aside one night a week to turn off the tv and play a coding game together.

  • Form an after-school coding club. Consider joining with other parents and your school to set up an after-school coding club so that children can learn to code together. Organizations like offer several generous grants and provide trainers to help schools put together their own after-school coding clubs. You can also connect with a local coding academy to set up programs at your school, or use online academies with self-guided curricula.

  • Make it fun. Turn your child’s screen time at home into a productive activity by introducing them to the wealth of free kids coding resources online. Sign them up for camps or allow them to self-guide through online tutorials and games to make learning to code interactive and fun.

Our kids are growing up in a fast-paced world of rapid technological change. The way we approach education has to change with the times in order to prepare students for tomorrow’s problems and changes.

Recently I read a Facebook post from a fellow entrepreneur that stated: “Every company regardless of industry must become a technology company or die.” Considering that computing powers nearly every industry from education to farming, from law to business, and construction to medicine, I think his assessment is spot on.

Teaching our kids coding now will give them a fluency in the systems and architecture of tomorrow’s world. From increased focus and concentration to creativity to the ability to problem solve, the skills children learn from coding will aid them in their pursuit of nearly every career path on the planet.  

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Weighing The Week Ahead: A Strong Market Outlook Gets Even Stronger

The economic calendar is another big one, with an emphasis on the employment situation. Despite this, everyone will be scrambling to analyze the tax cut legislation. I expect many to be asking:

What do the tax cuts mean for financial markets?

Last Week Recap

In the last edition of WTWA I predicted that attention would turn to the tax cut debate, with little attention to the economic data. That was an accurate guess, as the story took many twists and turns. My forecast that the legislation would not pass was mistaken. This broke my long string of successful forecasts of decisions on policy matters.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. Jill Mislinski’s weekly version is first-rate, pulling together several key points in a single look. She notes the highs and lows of the week, the nearness to the record high, the overall weekly change, and the intra-day excitement on Friday.

A close up of a mapDescription generated with very high confidence

The rest of the weekly post provides charts on drawdowns, volume, volatility and other key factors. Check it out. Meanwhile, let’s treat ourselves to an additional look at a long-term perspective.

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The excellent chart design, using a vertical log scale, makes it easy to compare moves from different times.

Personal Note

I enjoyed my (LONG) week in San Diego, a beautiful place, especially as an escape from a Chicago winter. Competing with the top professionals from all over the world forces you to forget about your regular work – at least for a while. This week was a challenge, since the market news was so interesting. On an off day I went to the Midway museum. Several of the docents were former pilots, and their descriptions were great.

Here is a fact that is a bit counter-intuitive. After touching down in an area about the size of a tennis court, with speed right and the angle of attack correct for the tail hook to grab a cable, what is the first thing a pilot does? (Answer at the end).

By the way, those who believe there are no experts should try some competing in something!

The News

The economic news continues to beat (or nearly match) expectations on a wide array of measures. This is true even though the expectations are significantly higher than usual. Last week we had strong data on housing, auto sales, GDP revisions, the ISM index, and consumer confidence. Earnings expectations remain positive.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a big calendar with an emphasis on employment. The ADP report deserves attention as an independent measure with a good approach, but most will focus on Friday’s official data. has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

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Next Week’s Theme

Despite the always-important employment news, financial media will emphasize the tax cut legislation, the likely result of the House/Senate Conference, and the implications for financial markets.

Please note! There is plenty of political commentary on this topic. The heated debate continues, and it is good fodder for financial bloggers and news media of all types. That is not my mission. We should accept the reality of the new policy and think about our best investments.

I was not alone in my surprise at the Senate success in passing a tax cut bill. This will be a great case study for students of Congressional politics – a classic example of how to build a coalition. The concessions to individual Senators, leading to hand-written changes in the bill, were classic. The big surprise was getting the deficit hawks on board. The tax cut argument has always been that lower taxes will pay for themselves through economic stimulus. CBO rules do not allow “dynamic scoring,” so these possible effects are not considered. Congress’s own Joint Committee on Taxation concluded that the bill would add $1 trillion to the deficit, even allowing for growth.

The innovative compromise dodged the economic debate. Basically, the decision was to try the cuts, but increase taxes if growth did not respond enough. I was mistaken in my belief that the deficit hawks would stand firm. Only Bob Corker did so. But our focus should turn from how the coalition was assembled to what it means for financial markets. What should we expect?

The Wall Street Journal has a good analysis of the differences in the House and Senate versions, which must be resolved in a Reconciliation Committee.

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There are several different effects to analyze:

  • General stimulus – the sort expected from any kind of tax reduction. This effect varies with the marginal propensity to consume of those getting lower taxes.
  • Business stimulus – full expensing of investments and lower corporate rates. This should encourage willingness for multi-national companies to take profits in the U.S. We should also expect higher revenues for the targets of business investments. Technology names are an obvious target.
  • Higher corporate profits. Early estimates suggest that S&P 500 earnings could get an additional 10% boost.
  • Specific “sweetener” provisions. Those benefitting from more oil drilling in Alaska are one example. The search will be on for others.
  • Specific sector effects. The WSJ has a summary that provides a good starting point for re-evaluating specific sectors and industries. Financial firms are expected to be big winners. Traditional energy will benefit from increased economic activity. Renewable energy will suffer from lost tax incentives. Hospitals will have more unpaid bills from those who are no longer insured. Ed Yardeni notes that most companies already have effective tax rates below 20%, so the key is to find those that will actually get a reduction.

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As usual, I’ll have more in the Final Thought, where I always emphasize my own conclusions.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

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Recession odds remain low and many economic indicators are improving.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

Georg Vrba: Business cycle indicator and market timing tools.

Doug Short: Regular updating of an array of indicators. Great charts and analysis. Let’s take another look at the regular update (via Jill Mislinski) of the Big Four indicators most influential in recession dating. The recent strength in these indicators is clear from the chart.

Guest Source

Davidson (via Todd Sullivan) continues his record of strong market analysis. His unique valuation approach considers both interest rate spreads and the Chemical Activity Barometer as an economic proxy.

The Dallas Fed reported its inflation measure, the 12mo Trimmed Mean PCE, at 1.60%. Inflation has fallen steadily from 1.94% reported in Jan 2017. Falling inflation is the result of a slower pace of discretionary government spending as noted in my earlier commentary on the differences in Real GDP vs. Real Private GDP. The lower the inflation the more valuable earnings become. Investors bolstered market prices in 2000 on the belief that Internet companies would nearly eliminate inflation and the SP500 saw a P/E over 35 briefly. The SP500 Value Investor Index was priced less than 50% of the SP500 levels (SP500 priced more than 100% of the Value Investor Index).

Today the SP500 is only priced a modest 15% higher than the SP500 Value Investor Index and facing an acceleration of global economic activity. Decently higher corporate earnings remain ahead in my opinion based on labor demand indicators and rising Chemical Activity Barometer(CAB).

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Insight for Traders

Our discussion of trading ideas has moved to the weekly Stock Exchange post. The coverage is bigger and better than ever. We combine links to trading articles, topical themes, and ideas from our trading models. This week’s post covers the interesting and profitable approach of finding contrarian trades. Model performance updates are published, and of course, there are updated ratings lists for Felix and Oscar, this week featuring the Russell 1000. Blue Harbinger has taken the lead role on this post, using information from me and from the models. He is doing a great job.

Insight for Investors

Sorry that I cannot update links this week. I hope we’ll get some suggestions in the comments. We will all have plenty of work to do in the week ahead.

Final Thoughts

My expectation is that stocks will continue to track the improvement in earnings expectations. If the 10% earnings boost is accurate, that is how much we might expect stocks to increase. Current levels are about 18.3 times forward earnings. This multiple is normal when interest rates (ten-year note) are below 4%.

One key question is timing. If corporate rates are not cut until 2019, the economic effect will be more gradual. Last week’s trading included some “trading” moves on the Washington news. It seems to confirm the conclusion that little if any of the current market valuation is based on the new tax policy.

I realize that many are pleased and many displeased by the tax changes. The opinions are strongly held. Neither anger nor glee will help your investment returns.

What worries me:

  • Putting off a serious solution on government debt.
  • The concept of raising taxes when the economy weakens and revenues decline. (Real Time Economics).

And what doesn’t:

  • Mueller investigation. At least not yet.
  • The debt ceiling deadline. With “extraordinary measures” the Bipartisan Policy Center now has the real deadline in the March-April timeframe. This is a poor method for addressing a real problem.

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Answer to aircraft carrier problem: Unlike a commercial landing, the carrier pilot goes to full throttle right at touch down. Depending upon conditions, 8 – 15% of landings do not catch the tail hook, even when the approach is accurate. The pilot would not know that the hook missed until it was too late. The system of winches plays out cable and are strong enough to stop the plane, even at full thrust. They call it an arrested landing!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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This Scientist Wants to Bring 'Star Trek' Values to Congress

Vulcanologist Jess Phoenix never expected to be involved in politics. Until recently her life revolved around science—traveling the world to study different volcanoes and running an educational nonprofit. But the environmental record of the Trump administration has motivated her to run for Congress.

“These guys are basically gutting every environmental protection that existed,” Phoenix says in Episode 284 of the Geek’s Guide to the Galaxy podcast. “It’s a trend we have to stop now. We can’t let this continue.”

Phoenix is one of a growing number of scientists who are running for public office, spurred on by the group 314 Action, which helps teach scientists how to organize a political campaign. There’s a growing recognition among them that too many elected officials are ignorant of basic science, and that the only solution is for scientists to get in there and do a better job.

“The science candidates are going to be in favor of things that are scientifically proven to work,” Phoenix says. “That’s the one thing that unites all of us.”

She also has one advantage that sets her apart—the support of Star Trek actors like Tim Russ, Robert Picardo, and John Billingsley, all of whom have appeared in her campaign videos. “John saw the correlation between my positions about issues and the Star Trek universe,” Phoenix says, “and how the ideals of Gene Roddenberry’s future matched up with what I wanted to fight for.”

She says that as a vulcanologist, Star Trek references are a fact of life, since pretty much everyone she meets makes a joke about her studying Vulcans. Her standard response is to give the Vulcan salute and say “live long and prosper.”

“Its convenient because it’s something I actually believe in,” she says. “I do want people to live long and prosper, so I’d say it’s a pretty universally OK message.”

Listen to the complete interview with Jess Phoenix in Episode 284 of Geek’s Guide to the Galaxy (above). And check out some highlights from the discussion below.

Jess Phoenix on Yellowstone:

“When it does erupt again, it will devastate the US. It will basically go east of Wyoming, and it will basically go all the way to Washington, DC. Ashfall has been found—from previous eruptions—all the way over in Virginia. So it has the potential to just be massively devastating. In Southern California we wouldn’t get as much ashfall, but obviously having 75 percent of the country buried under [ash] would cause serious problems. We don’t have to worry about Yellowstone killing us in Southern California, but the rest of the country? Sorry. An eruption that size, a true supervolcano eruption, would devastate not just the US but the entire world. It would screw up economies all around the globe. So it’s not something we want to happen any time soon.”

Jess Phoenix on The Core:

“I was basically in agony through that whole movie. That stuff doesn’t happen. There are no giant crystal caverns under the Earth’s crust. Oh man. I mean, there are crystal caverns that we know about in Mexico, but that’s not the same. That movie made me a little crazy, because I was a friend of someone who knew the writer, and so we got to go to a day-or-two-early screening. And this was in Massachusetts, of all places—I don’t know how we had this connection. But I didn’t know the writer, and they said after the movie, ‘Do you want to go meet him?’ and I was like, ‘No. Sorry. Right now I would be too critical. I’d have to wait.’ I was not that mature at that age either, and I was just like, ‘Oh my god, the science was awful!’”

Jess Phoenix on climate change:

“My dad was very much into ‘Oh, climate change isn’t real’ a few years back. And I would say, ‘Dad, I’m the scientist. I went to school for this. There’s no conspiracy.’ But then I’m really encouraged, because on his Facebook page he shared something that I did, one of the media appearances that I had—I think maybe it was when I was on CNN International talking about why we need scientists in government, Earth scientists in particular—and somebody on his page said, ‘Oh John, it’s just a conspiracy. Follow the money.’ And my dad was like, ‘Well, my daughter’s not getting paid off for this, so I think there’s something to it. I know she stands firm in her convictions’—or something to that effect. So I think he’s starting to see that [it’s real].”

Jess Phoenix on fundraising:

“Some [scientists] have gotten fairly wealthy patenting their discoveries, but for most scientists—particularly Earth scientists—your biggest disadvantage will be that you don’t have a massive, built-in donor network. Because scientists haven’t been politically active. So if I were to call up—and I’ve done this—if I were to call up 10, or 20, or 50 of my scientific colleagues and say, ‘Hey, donate to my political campaign,’ they’re not used to doing that. Lawyers are used to donating to other lawyers running for office, and the same goes for businesspeople, because they make up 80-plus percent of Congress right now. There’s one physicist in Congress—Bill Foster in Illinois—and that’s it. So you can see we have a hard row to hoe.”

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Nutanix: Software Story Takes Center Stage

Nutanix (NASDAQ: NTNX), the leading provider of hyperconverged datacenter infrastructure, has kicked off its fiscal 2018 with a bang. Its Q1 earnings release smashed analyst expectations across all measures: revenue, billings, margins, and cash flow. The company’s record-setting $275.6 million in revenue this quarter also puts Nutanix at a $1.1 billion run rate, making it a huge player in the datacenter space relative to a few years back, when the company posted only a couple hundred million in sales.

Perhaps most importantly of all, it has cemented its strategy of pivoting to become a software-centric company. Though in its earlier years Nutanix was known primarily as a vendor of integrated hardware-software appliances, with the bulk of revenues deriving from hardware appliance sales (the same is still true today), the company has recently announced its intention to shift toward standalone software sales, with hardware only as an incidental revenue stream.

Investor excitement over Nutanix’s software shift has driven the stock into a phenomenal recovery in recent months, sending shares up to the mid-$30s from $15, levels not seen until immediately after the IPO in late 2016. For the majority of its life as a public company, Nutanix carried lower multiples of revenue due to its concentration in hardware – but as the company shifts to software-only billings, its gross margins can expand dramatically. Also think of how much more the company can scale as it looks to become the dominant OS for hyperconverged datacenters. Just as Microsoft’s (NASDAQ: MSFT) Windows gained prominence in the ’90s as a standalone OS compatible with multiple hardware form factors, so too can Nutanix achieve its next leg of growth by selling software that’s completely decoupled from hardware. Customers can still opt to buy the integrated appliances from Nutanix, but if they have a preferred hardware brand of choice, they can still buy Nutanix software – widely recognized as the “best-of-breed” in hyperconverged infrastructures.

As I wrote in a prior article, I was hoping for the company’s Q1 to boost the stock to $40, a price target that now represents a 4.85x EV/FY18 revenues multiple based on estimated FY18 revenue of $1.2 billion. As Nutanix transitions more toward software sales in FY18, this multiple has plenty of room for expansion, and given that the stock’s post-Q1 price reaction didn’t show the uplift I was looking for, I’m holding on for additional upside – especially with Nutanix’s fundamentals showing so well this quarter.

$40 is a minimum for the stock. As analysts digest this quarter’s results, Wall Street will be adjusting its price targets much higher.


NTNX data by YCharts

Phenomenal growth in Q1, accompanied by vast margin improvement

Nutanix posted record-setting revenues of $275.6 million this year, up 46% y/y. This was an $8.7 million beat over analyst consensus of $266.9 million, or +41% y/y. The chart below, taken from its Q1 earnings materials, shows the linearity in Nutanix’s growth since 2016. Note that the company had an accounting change to comply with software revenue recognition standards in ASC 606, and all figures are presented post change:

Figure 1. Nutanix revenue growth trajectory

Source: Nutanix Q1 earnings materials

Nutanix’s strong revenue growth was also supported by strong billings in the quarter. Total billings were $315 million in the quarter (+32% y/y), driving the company’s total deferred revenues to $409 million (+48% y/y). Effectively, the company is building its backlog as fast as (or faster than) it’s recognizing revenue, giving it a solid revenue base to draw from in future quarters and providing support to future earnings.

Other business metrics reported in the quarter trended strongly as well. Here are a couple of the highlights:

  • 7,813 total customers, +760 in the quarter and +75% y/y.
  • 49 deals in excess of $1 million, up +36% y/y, indicating strong traction for the company in the critical high-end enterprise market.
  • 75% of bookings came from repeat customers, indicating that even though Nutanix isn’t a subscription software company, customers behave as if their business is recurring and keep purchasing additional Nutanix nodes.

For a company like Nutanix, the hard part is becoming “mainstream.” Especially in the datacenter infrastructure space, where IT buyers are extremely inert and apt to keep buying from the vendors they already know, it’s a hard market to be a startup. With Nutanix’s run rate reaching well over $1 billion, however, the company is now hardly a startup – it has truly become as mainstream in backend infrastructure as VMware (NYSE: VMW) and Cisco (NASDAQ: CSCO). Hyperconverged infrastructures (NYSE:HCI) are now top of mind for enterprise CIOs, boasting reductions in total cost of ownership (as HCI requires less specialized human IT administration) as well as strong performance – and within HCI, the undisputed leader is Nutanix. VMware and HPE SimpliVity (NYSE: HPE) have competing offerings, but they are still a few years behind Nutanix’s traction in the market. And once Nutanix’s level of brand recognition and market acceptance has been achieved, its path to growth is more of an eventuality, a downhill ride.

As the company continues to scale, it’s also making vast improvements in the cost structure and slimming its losses. Nutanix once concerned Wall Street for its high (even for a Silicon Valley startup) net losses; now, the company’s loss margins have slimmed, and it’s even posting positive operating cash flow. The company posted an operating loss of $59.2 million in Q1 (representing a -21% operating margin), a huge improvement over a loss of $114.5 million in the prior-year quarter (a -61% margin).

The company’s pro forma EPS of -$0.16 is 10c above analyst consensus of -$0.26, as margins came in better than expected. Increased sales leverage, in particular, contributed a lot toward Nutanix’s slimmer losses – it increased sales spending only 13% y/y and achieved 46% y/y revenue growth in return, indicating the trend previously mentioned. As Nutanix becomes mainstream, more business will come knocking at its door without the company having to exert itself too much in field sales.

It also generated $10.2 million of operating cash flow in the quarter (a 4% margin), a 2.5x increase over just $4.2 million in 1Q17. Given the rapid advances in margins, coupled with strong top line growth, Nutanix is just on the cusp of expanding its cash flow, and in the longer run can probably achieve cash flow margins in the double digits. See the company’s cash flow margin trends in the chart below:

Figure 2. Nutanix cash flow margins

Implications of the software switch

Ever since it went public (in September 2016, at $16/share), Nutanix has been received with a bit of confusion by investors: is it a hardware company or a software company? It sells datacenter appliances, after all, built on commoditized Intel (NASDAQ: INTC) x86 servers, a cheap staple and modern workhorse for enterprise DCs. But the appliances are powered by Nutanix software – the “secret sauce” that controls the servers and binds together compute, storage, and networking resources into a single, cluster-computing unit – hence the term “hyperconverged.” So which is it – software or hardware?

The market treats it as both. Its revenue multiple – at times trading in the low 3s, now in the low 4s – is both higher than that of a typical hardware company but lower than a typical software company, where a 46% grower like Nutanix might traditionally be awarded with a 7x revenue multiple. In recent months, however, Nutanix has announced its intention of pivoting more toward software, jumpstarting the recovery in shares, as software businesses find more favor with investors and carry much higher multiples.

And it has much higher margins as well – so it’s no wonder that investors value software revenue streams much more than hardware. Nutanix estimates that its software and support revenues will carry 80%-plus gross margins (representing nearly pure profit for each incremental sale), versus hardware appliances which are basically sold at cost.

Going forward, as Nutanix includes its base OS as part of its software sales, the company expects hardware sales to be less than ~10% of total billings. As shown in the chart below, taken from Nutanix’s Q1 earnings deck, its hardware mix was 26% this quarter, eventually dropping down to 9% by year end and 5% the year after that.

With software eventually moving to become the dominant part of the company’s revenue base, it’s almost guaranteed that Wall Street and large institutional investors will shift their view on Nutanix and consider it more of a software play, attaching higher multiples to its revenue streams.

60-second summary

Investors are finally paying attention to the fact that the winds are blowing in the right direction for Nutanix – across the board. Recall that even though the stock has rallied this year, it has still yet to recover past the $37 high mark it saw immediately post IPO. With enthusiasm rekindling on the back of massive growth and a fresh software narrative, Nutanix is well-positioned to outperform in 2018.

I’m still waiting on a price target of $40 (4.85x EV/FTM revenues) to consider letting go of a portion of my holdings. With the software story becoming more prevalent, however, there’s a good chance of the company entering into a sustained phase of multiple expansion as it eases into a more software-normal revenue multiple of ~6x. Either way, with a strong Q1 under its belt and with Wall Street’s newfound confidence in the company, it seems the only way for Nutanix is up.

Disclosure: I am/we are long NTNX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Does Europe have what it takes to create the next Google?

LONDON (Reuters) – Europe is making major strides to eliminate barriers that have held back the region from developing tech firms that can compete on the scale of global giants Alphabet Inc’s Google, Inc or Tencent Holdings Inc, a report published on Thursday shows.

An attendee interacts with an illuminated panel at Google stand during the Mobile World Congress in Barcelona, Spain, March 1, 2017. REUTERS/Paul Hanna

The region has thriving tech hubs in major cities, with record new funding, experienced entrepreneurs, a growing base of technical talent and an improving regulatory climate, according to a study by European venture firm Atomico.

While even the largest European tech ventures remain a fraction of the size of the biggest U.S. and Asian rivals, global music streaming leader Spotify of Sweden marks the rising ambition of European entrepreneurs. Spotify is gearing up for a stock market flotation next year that could value it at upward of $20 billion. (

“The probability that the next industry-defining company could come from Europe – and become one of the world’s most valuable companies – has never been higher,” said Tom Wehmeier, Atomico’s head of research, who authored the report.

Top venture capitalists and entrepreneurs in the region told Reuters they are increasingly confident that the next world-class companies could emerge from Europe in fields including artificial intelligence, video gaming, music and messaging.

“What we still need to develop is entrepreneurs who have the drive to take it all the way – I think we are starting to see that now,” said Bernard Liautaud, managing partner at venture fund Balderton Capital, who sold his software company Business Objects to SAP for $6.8 billion a decade ago.

The Atomico report is being published in conjunction with the annual Nordic technology start-up festival taking place in Helsinki this week and set to draw some 20,000 participants.


Capital invested in European tech companies is on track to reach a record this year, with $19.1 billion in funding projected through the end of 2017 – up 33 percent over 2016, according to investment tracking firm

The median size of European venture funds nearly tripled to around 58 million euros ($68.7 million) in 2017 compared with five years ago, according to Invest Europe’s European Data Cooperative on fundraising investment activity.

Beyond the availability of funding, Europe has a range of technical talent available to work more cheaply than in Silicon Valley, enabling start-ups to get going with far less funding.

With a pool of professional developers now numbering 5.5 million, European tech employment outpaces the comparable 4.4 million employed in the United States, according to data from Stack Overflow, a site popular with programmers.

London remains the top European city in terms of numbers of professional developers, but Germany, as a country, overtook Britain in the past year with 837,398 developers compared with 813,500, the report states, using Stack Overflow statistics.

While median salaries for software engineers are rising in top European cities Berlin, London, Paris and Barcelona, they are one-third to one-half the average cost of salaries in the San Francisco Bay Area, which is more than $129,000, based on Glassdoor recruiting data.


Big hurdles remain. A survey of 1,000 founders by authors of the report found European entrepreneurs were worried by Brexit, with concerns, especially in Britain, over hiring, investment and heightened uncertainty in the business climate.

Although Europe has deep engineering talent, many big startups focus on business model innovation in areas such as media, retail and gaming rather than on breakthrough technology developments that can usher in new industries, critics say.

Regulatory frameworks in Europe put the brakes on development on promising technologies such as cryptocurrencies, “flying taxis” and gene editing, while autonomous vehicles and drones face fewer obstacles, the report says.

A separate study by Index Ventures, also to be published on Thursday, found that employees at fast-growing tech start-ups in Europe tend to receive only half the stock option stakes that are a primary route to riches for their U.S. rivals. Yet their options are taxed twice as much.

The Index report said employees in successful, later-stage European tech start-ups receive around 10 percent of capital, compared with 20 percent ownership in Silicon Valley firms.

“There is quite a gap today between stock option practices in Europe and those in Silicon Valley,” Index Ventures partner Martin Mignot said in an interview. “There are other issues where Europe is behind, but we think stock options should be at the top of the agenda.”

Another factor holding back Europe is that regional stock markets encourage firms to go public prematurely, Liataud said.

“Europe has markets for average companies. In the U.S., going public is hard. You have to be really, really good. You have to be $100 million, minimum, in revenue,” the French entrepreneur-turned-investor said. “Nasdaq and the New York Stock Exchange have not lowered their standards.”

($1 = 0.8442 euros)

Reporting by Eric Auchard in London; Additional reporting by Jussi Rosendahl and Tuomas Forsell in Helsink; Editing by Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.
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5 Crucial Guidelines to Make Credible Financial Projections for Your Startup

As an angel investor and business advisor on new ventures, I expect to see five-year financial projections from every entrepreneur. Yet I get more push-back on this request than almost any other issue.

Founders point to the great number of financial unknowns in any new business, and are reluctant to “commit” to any numbers which may come back to haunt them later.

From my perspective, projecting financial returns is part of the homework every business person needs to do in sizing customer opportunity, product costs, pricing, competition and customer value, before expending their own resources in a highly risky venture.

You need these projections to assess viability, set internal goals and milestones, and measure your team’s progress.

For investors, it’s more of a credibility and intelligence test. Does this entrepreneur understand the basics of business costs in the selected business domain, growth dynamics, and the competitive environment?

Reasonableness and business sense are the issues, rather than accuracy, since everyone knows that key parameters will change often before success.

There is no black magic involved in predicting numbers, and I always recommend sticking with the some basic guidelines, outlined here. With these, if you can paint a positive picture for your new venture, I assure you that investors will sit up and take notice, and you will also know how to drive yourself and your team:

1. Determine your gross margin on sales.

Per-unit cost less your cost per unit sold is your gross profit margin. If you lose money on every unit, you won’t make it up in volume.

As a rule of thumb, most new businesses need a margin above 50 percent, even on wholesale prices, to cover operational expenses and survive long-term as a business.

2. Project unit-volume and price levels.

Based on your market size and penetration expectations, size how many units you will sell, at what price, in every channel.

This should ideally be a “bottoms-up” commitment from your sales team, not your own optimistic guess. Be sure to include expected volume cost and price reductions over time.

3. Quantify overhead and growth costs.

It’s amazing how fast costs escalate as you grow. You need five percent or more of revenue for marketing, more for new development, and people costs will double as you add benefits, insurance, training, IT and processes.

Check competitor numbers and industry average statistics to get you in the right range.

4. Set a target growth and market penetration rate.

If you want to be assessed as a “premium” acquisition candidate down the road, an aggressive but reasonable target might be doubling revenue each year.

For credibility, market penetration within five years should be at least five percent. Numbers far afield from these need special explanations.

5. Calculate cash-burn rate and investment timing.

Initial sales success means more cash will be needed for inventory, receivables, facilities and people. Project your cash burn rate to keep at least 18 months between venture capital or angel investments. You need to know how many units to sell, and how much time you need to break-even.

From a planning and strategy standpoint, I offer these additional recommendations to maintain your credibility with outside investors, and to balance your risk due to market uncertainty:

  • Add a buffer to your investment calculations. Investment requirements should always be based on financial projections and cash-flow calculations, not on what you think you can negotiate. If your cash flow shows a shortfall of $750,000, add a 33 percent buffer, and ask for a million. Be willing to give up 20-33 percent of your equity to support this.
  • Avoid high-medium-low projections, as well as irrational ones. Investors want entrepreneurs to be aggressive, but don’t make projections that make you look like the next Google. Entrepreneurs tend to be driven by their own targets, so pick an aggressive one, and you will likely do better than starting with a conservative one.

You don’t need complicated ratios for a startup business plan, since you don’t have a history. On the other hand, without financial projections, you don’t have a viable venture proposal.

You don’t need an MBA to be credible with investors, just some common sense business expectations, and passion based on some data. Most of us need full investor support to turn our dream into reality.

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Why New Mothers Have Superhuman Time Management Skills (And How You Can, Too)

One of my favorite movies is I Don’t Know How She Does It. It stars Sarah Jessica Parker and garnered a mere 17 percent on Rotten Tomatoes. In it, Parker tries to juggle the many roles she plays in life: mother, wife, friend, and manager at an investment firm.

I remember watching it for the first time while folding my baby’s laundry. Despite the fact that no one else seemed to enjoy the movie, I found myself nodding along with the heroine’s challenges as if she was telling the world our little secret: If you want something done, have a mother do it.

Here are three lessons I’ve learned as a mother — stay with me — that have made me a better entrepreneur:

1. Moms make every minute count.

Every day at 12 P.M. sharp I would put my little ones down for their naps, kiss each of their foreheads, quietly shut their doors, and then sprint to my home office. I would whip open my laptop and get right to work — no time for Facebook, no time for pinning new recipes. When kids are really little, nap time is the only time moms have any time to get things done. And, like little ticking time bombs, without knowing how long the kids would sleep, mothers have no choice but to make the most of every second of it.

Managing distractions is one of the single greatest skills mother’s learn. When your available hours for working are completely dependent on the whims of tiny, helpless humans, you don’t waste a single moment. With the growing body of research about the true detriment of a distracted workforce, this skill is even more valuable.

The next time you feel you don’t have enough time to meet a deadline, pretend you have a sleeping toddler in the next room who, at any moment could wake up and demand your full attention. That will motivate you to turn off your instagram notifications real quick.

2. Moms know how much a minute is worth.

I was a stay at home mom, was four months pregnant with my second child, and we were planning a remodel of our kitchen and entryway. We estimated the project would cost about ten thousand dollars.

However, right about that time I decided I wanted to start a business. I knew, in order to build that business, I would need more kid-free time. I remember sitting down with my husband and proposing that instead of spending that money on a remodel, we should spend it on childcare.

The phrase, “Time is money” is frequently associated with high-powered sales jobs. However, no one knows the price of a minute better than a mother does and not only in terms of dollars and cents.

I remember leaving the house one day after the nanny we hired arrived and my daughter sobbed, wanting me to stay. As I drove to the coffee shop to do my work that afternoon, I vowed to make every minute away (and dollar I invested to have those minutes) count.

Do you know how much a minute of your time is worth? If not, follow a mother’s advice and figure it out. And let that number motivate you to spend it — both the time and the money — better.

3. Moms can work anywhere.

No place is sacred in motherhood — the kids will always find you. On more than one occasion I’ve taken sales calls in my closet or sent an email while hiding the bathroom.

As a result, moms are extremely adaptive. The world is my office.

Sure, I prefer to sit at a desk, but sometimes my office is in my car while I wait in the elementary school pickup line. I’ve written many an article while sitting in the boarding area waiting to catch a flight. The more work I get done on the road, the more time I’ll have at home with my kids.

The next time you forgo making some progress on a big project because the working environment is not quite right, think of the mom sending emails while on a play date at the park. If she can do it, why can’t you?

Even though I Don’t Know How She Does It doesn’t make any must-watch movie lists, don’t let the message be lost on you. Whether you watch the film or pay closer attention to the working mom on your block, make no mistake: Some of the greatest time managers are so because they’re mothers.

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Amazon Takes a Trip In Virtual and Augmented Reality

Amazon wants a part of the nascent markets for virtual and augmented reality.

The retail giant debuted software tools on Monday called Amazon (amzn) Sumerian that are intended to help coders more easily build virtual reality and augmented reality apps using 3D computer graphics.

With virtual reality, people wear headsets like Facebook’s Oculus Rift to immerse themselves in digital worlds. In augmented reality, on the other hand, people use their smartphones to see digital images overlaid onto the physical world.

Amazon pitches Sumerian as a way to build 3D-powered apps and games that can run on some VR headsets like the Rift and HTC Vive, as well as on Apple products like the iPhone or iPad. Amazon plans to make its tools compatible with Google’s (goog) AR software tools for Android-powered devices soon, but it didn’t say when.

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Sumerian’s interface resembles conventional photo editing software like Adobe Photoshop. People can choose from a library of digital graphics like tables, trees, and rugs, and then insert them into their own digital environments.

Amazon Sumerian; from Amazon

Amazon Sumerian; from Amazon

The ability to drag-and-drop digital objects and create 3-D animated scenes makes Sumerian comparable to video gaming engines like Unity and Unreal. Companies including Fidelity Investments use these gaming engines to build virtual reality apps for corporate training, for example.

Although sales of VR headsets are much smaller than what analysts originally predicted, tech companies like Facebook and Microsoft believe that the technology will eventually catch on as headset prices decline along with the cost of the personal computers needed to power them.

Many companies also believe that AR will growth into a big business. Apple CEO Tim Cook recently said that the current AR market is akin to Apple’s (aapl) app store in 2008, when it debuted, but before it really took off.

Amazon announced Sumerian as part of its Amazon Web Services annual cloud computing event in Las Vegas.

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Internet businesses ask U.S. to keep net neutrality rules

WASHINGTON (Reuters) – AirBnb, Reddit, Shutterstock, Inc, Tumblr, Etsy (ETSY.O), Twitter (TWTR.N) and a long list of small internet companies urged the Federal Communications Commission on Monday to scrap a plan to roll back net neutrality rules.

FILE PHOTO: Ajit Pai, Chairman of the Federal Communications Commission, testifies before a U.S. Senate Appropriations Financial Services and General Government Subcommittee on Capitol Hill in Washington, DC, U.S. on June 20, 2017. REUTERS/Aaron P. Bernstein/File Photo

In a letter dated on Monday, the companies urged FCC Chairman Ajit Pai to reverse course and vote against changing the rules.

Pai, a Republican appointed by President Donald Trump in January, unveiled plans last week to scrap landmark 2015 rules intended to ensure a free and open internet, moving to give broadband service providers sweeping power over what content consumers can access. The FCC is set to vote on Dec. 14.

The move was seen as a victory for big internet service providers such as AT&T Inc (T.N), Comcast Corp (CMCSA.O) and Verizon Communications Inc (VZ.N), which favored a repeal.

The companies, which sent the letter on Cyber Monday to coincide with the biggest online shopping day of the year, argued that slowing access to content, called “throttling,” or blocking it altogether, would hurt the U.S. economy.

“This would put small and medium-sized businesses at a disadvantage and prevent innovative new ones from even getting off the ground,” the companies said in the letter.

Pai defended the change as a way to remove heavy-handed internet regulations.

“The internet and companies like Twitter, which signed the letter, thrived under the pre-2015 light-touch regulatory framework that governed Internet access. Chairman Pai wants to return to that framework so that we can increase investment in broadband networks and connect more Americans to the services that these companies offer online,” FCC spokesman Mark Wigfield said in a statement.

Reporting by Diane Bartz; Editing by Peter Cooney

Our Standards:The Thomson Reuters Trust Principles.
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The 7 Skills You Need To Practice To Become A Successful Writer In The Digital Age

When people see what I’ve built for myself as a writer, they think it’s the result of my degree in creative writing.

It’s not.

I tell everyone that my college education was great for two reasons: it taught me how (and what) to read, and it taught me how to read my work aloud–a skill that reveals more about your writing than any amount of silent reading ever will.

But my college education did not teach me about the underlying business model of the writing world. It didn’t explain to me how blogs and major websites make money through digital advertising–and how writers can earn money by driving page views. I didn’t take a class called Personal Branding 101, and I definitely didn’t learn about email marketing funnels and lead magnets and landing pages in my class on Russian literature. Nobody walked me through the formal publishing process, explained what a typical royalty contract looked like, and certainly didn’t compare that old-world approach to the possibilities of self-publishing through Amazon. And most of all, there was no class for the fast-paced writing styles that drive, quite literally, every single viral piece of writing on the Internet. 

These were all parts of the “digital writer” path I had to teach myself–and ended up being even more valuable than the hours spent notating Crime and Punishment.

Becoming a successful writer in the digital age is not just about writing. That’s the foundation, of course, but in today’s world–just like how musicians have had to become their own marketing managers, creative directors, and even play the role of entrepreneur–writers have to do more than just write. 

Here are the 7 skills you need to practice if you want to become a successful writer in the digital age:

1. The habit of writing.

If you want to be a writer, you have to write. There is no simpler way to say it. 

If you want to be a painter, you have to paint. If you want to be a cook, you have to cook. If you want to be X, you have to practice X–far more than you “think” about how badly you want to be X.

All throughout college, I watched the majority of my peers wait to write. They were waiting to feel inspired, waiting to see what the teacher thought of their last piece, waiting for some outside nod of approval instead of just getting on with it and putting pencil to paper (or fingers to keys). 

I’m here to tell you that unless you can establish the simple practice of writing into your daily schedule, you will never succeed. Period. Stop reading here, because nothing else I tell you will matter–unless you can first firmly establish this habit into your everyday life.

If you want to become a writer, you have to write. Every single day.

2. The art of personal branding.

People don’t buy writing. They buy You.

In the digital age, the single most valuable thing you can create for yourself is a brand around who you are and whatever it is you write about.

You could be the most incredible wordsmith the world has ever seen, but unless you have an audience, nobody will read it–and even if you want to go the conventional publishing route, a publisher will see you and your work as a gamble. You don’t have a following on the Internet. You don’t have an e-mail list of people ready to read your next piece of work. 

Nobody knows who you are, and that’s a problem.

I attribute a lot of my success as a writer to my working knowledge of branding, positioning, marketing, and social storytelling. And as much as us writers would love to hide away and not have to “put ourselves out there,” we don’t have that luxury anymore. We are now competing against YouTubers, Instagram stars, and viral cat videos. People are either reading our work, or they’re watching two cats swing from a ceiling lamp. 

In order to attract (and keep) people’s attention, you have to give them something to feel loyal to–and that’s You.

3. The patience to play the long game.

There are two types of writing: the kind you share, and the kind you sell.

99% of artists–whether you’re a writer, a musician, a filmmaker, a painter–want to come out of the gate and have someone (they’re not quite sure who, but someone) pay them to create whatever it is they want to create. 

As an independent writer, I’ve learned that consumers only buy two things: things they like, and things they need. Everything else, we ignore–no matter how “brilliant” someone else says it is. Which means, as creators, it’s our job to adopt a similar mentality: here are the things I create for myself (that someone else might like), and here are the things I create to solve a consumer need (and turn a nice profit, which allows me to spend more time creating things I enjoy).

The poetry I keep in my journal? There’s probably a very small market for that.

A book that teaches aspiring writers how to become successful in the digital age? Much larger market.

Now, this doesn’t mean I should never write poetry. But this also doesn’t mean I should only write poetry and expect to make a fortune. 

4. The confidence to practice in public.

Nothing has done my writing more good than regularly sharing my work on the Internet.

When you publish something out in the open, when you “practice in public” (as I like to call it), you receive immediate feedback. You feel vulnerable. You fear judgment. You see your work and read your sentences with a heightened awareness (“I can’t believe I didn’t catch that before…”). And most of all, you practice the most important underlying habit of all: the confidence to admit, “This is what I wrote today–in all its imperfection.”

I mentor a lot of aspiring writers. Some of the most frequent emails I receive come from those who want to turn writing into their career–but are afraid to share anything they’ve written.

“I just feel like I’m not there yet. I want to make my debut when I’m ready.”

Can I give you a brutal truth?

Nobody is waiting for you. And you will never be ready.

Every artist has this fear that what they’ve made today wasn’t good enough–and if they share it, what happens five, ten years later when they look back? Won’t everyone laugh at how bad it is? Won’t it be a disgrace?

That’s certainly one way to look at it. But in all honesty, I don’t see it that way at all.

In fact, there’s nothing I enjoy more than looking back at something I wrote years ago and seeing where my writing style was at, at that time. It’s like witnessing a younger version of yourself–and I can, with infinite more clarity, see how I’ve improved since then.

5. The humility to cut what wastes the reader’s time.

I had someone reach out to me recently who described my writing style as “minimalistic.”

I’d never thought about it that way–but that’s an accurate word for it. 

Some writers love description. They want you to see every blade of grass, every leaf on the tree, every long and winding warped streak in the tree trunk turned kitchen table. Other writers love dialogue. They want you to hear their characters talk, and talk, as if their voices are sewn with gold and a pleasure to listen to indefinitely. Some writers live by the facts, and color their paragraphs with statistics and footnotes and miscellaneous information intended to add further depth to the topic at hand. And some writers just want to float on their stream of consciousness, letting their words guide the way without ever intervening and making a conscious decision to stop and move on to the next point or moment in time.

To each their own, but from my experience (and I’ve written close to 2,000 pieces online), readers in the digital world only have so much patience.

They just want you to get to the point–Netflix shows do this addictingly well.

Part of writing in the digital age means understanding your audience–and today’s readers barely have the patience to sit through a two-sentence Tweet or a 7 second Snapchat video. 

Paragraphs and paragraphs of static description is a lot to ask of today’s readers, and a good many writers fail because they refuse to adjust.

6. The mastery of multiple voices.

As an independent writer, the ability to write with a range of voices will be your most valuable (and most easy to monetize) skill.

There are dozens of different voices a writer should hone throughout his or her career–including all the writing voices that need to be deployed in order to effectively market yourself as a writer.

There is an art to writing sales copy, an art to writing e-mail sequences, an art to writing social media posts that can leave an impact on a reader in 3-4 sentences. There is an art to writing articles that subtly promote your work, an art to writing eBooks readers will want to download. And the reason why it’s so important to nurture these business-focused voices is because either you’re going to learn how to do it for yourself, or you’re going to have to hire someone (like me) to do it for you. 

Part of being a successful writer in the digital age means being more than just a writer.

You have to be the creative director, the marketer, and the social media strategist too.

7. The willingness to be both an artist and an entrepreneur.

I really do believe that every single artist in today’s day and age also has to become an entrepreneur–if they want to be successful independently.

This dual-specialization is probably the hardest skill for an artist to acquire. They are two opposing forces, both striving toward very different goals. As an artist, you want to express yourself and write what feels most truthful. As an entrepreneur, you are always searching for what’s going to perform well, resonate with readers, and ultimately sell. 

As someone who spent years facilitating imaginary conversations between both sides of myself–the artist and the entrepreneur–in search of balance, it took me a long time to fully understand that you can’t have one without the other.

You cannot become a successful writer (or artist period) in the digital age without some sense of awareness of how the business world works.

The entrepreneur in you is the part you want showing up to meetings. The entrepreneur is the one you want negotiating deals, contracts, opportunities and more. The entrepreneur is the one you want to empower to protect your inner artist, and to have the working knowledge of the business world so you don’t find yourself giving up 80% ownership over your work–or worse, writing for minimum wage.

I am a writer, through and through. It’s who I am in my heart. I couldn’t imagine going a single day without finding a quiet place to write something, anything, that I feel. 

But had I not honed my skills as an entrepreneur, I might still be scouring Craiglist for the next opportunity to write articles for $25 a pop. 

It’s not about being one or the other–an artist or an entrepreneur. 

Becoming successful, period, is about understanding the rules of the game so that you can do what it is you love, on your own terms, for the rest of your life.

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How Soros And Buffett Inform An Updated View Of Trading Apple

Introduction – looking for alpha in all the right places (I hope)

There’s a potential bullish set-up in Apple (AAPL) right now that reminds me of thoughts of two icons, Warren Buffett and George Soros.

Markets are a little strange; the evolution of patterns matters. With many tech stocks on a roll, and with frothy valuations in smaller glamour names as Nvidia (NVDA), Adobe (ADBE) and Netflix (NFLX), there may be a “pull” effect on more ponderous names, the largest of which is AAPL. But if so, AAPL would be joining a growing number of large-/mega-caps that have little or no sexiness.

First up, comments on a key Soros trading philosophy that I’m thinking about, then the Buffett views on AAPL, then the rationale for my own hopes for AAPL that go beyond the more restrained but still bullish Buffett views. Putting all together, it may be that the seasonally strong months ahead could turn out well for AAPL’s fundamentals and stock price.

Druckenmiller on Soros: Seizing the moment

A former lead investment strategist and trader for Soros, Stanley Druckenmiller, has told the story of how the Soros fund “broke the Bank of England” years ago. With Soros, he had been analyzing and investing in the proposition that a now obsolete monetary arrangement would not hold, and the right play was to short the British pound (This is discussed in detail in an article titled The Trade of the Century). Based on rapidly changing events that favored their existing position, Druckenmiller says he came to Soros with a request to add to their bet on the pound falling, and that Soros responded that he was in error.

What was the error?

That Druckenmiller was proposing too small a position! If it was a great idea and a timely one, well, great ideas with a very short time frame to pay off come along only rarely. A bigger bet was called for. As the above-linked article quotes Soros as saying at some time in his career:

“There is no point in being confident and having a small position.”

And as the article says specifically about this situation:

Druckenmiller noted that their [existing] $1.5 billion bet against the pound was about to pay off and that they should consider adding to the position.

Soros retorted with a different strategy: “Go for the jugular.

Going for the jugular with a bullish view of AAPL involves different tactics than currency trading, of course, but the question is whether AAPL will reward A) continued long positions rather than taking profits (rebalancing) and B) adding to or initiating positions/selling puts, or more aggressively buying calls.

After its big move, could AAPL really still have a good enough reward:risk ratio in the months ahead to warrant being seriously overweighted by traders?

This article explores that question, which is pertinent to me given my overweight in this stock. Note that this is an exploratory, opinion piece and in no way represents investment advice.

Starting with the technicals, I like the set-up for AAPL in part because it is both a laggard against red-hot mid- and large-cap techs, and because AAPL has begun performing so strongly against its mega-cap peers.

AAPL: Technicals in higher gear, could be accelerating

Here are some relative strength charts.

First, AAPL versus the DJIA (DIA) on a three-year view:


AAPL data by YCharts

We see the DIA up at a 10% CAGR plus dividends, and relatively steady in achieving this (note to short sellers: this is an unremarkable performance by DIA). And we see AAPL up more than that, having swung from significant underperformance as of mid-2016 to net outperformance.

That’s an encouraging bearish-to-bullish shift for AAPL.

Next, AAPL versus the NASDAQ 100 (QQQ). On a five-year chart, we see that AAPL, coming off a high point five years ago, has lagged QQQ:


AAPL data by YCharts

However, over the past year, AAPL has regained its tech mojo, strongly beating QQQ:


AAPL data by YCharts

Again, that shows a bearish-to-bullish relative performance shift for AAPL, which is a technical positive.

Finally, even better, AAPL has beaten every mega-cap tech horseman on a one-year basis:


AAPL data by YCharts

In order of performance over the past 12 months, it has been:

  • Apple
  • Facebook (NASDAQ:FB)
  • Microsoft (NASDAQ:MSFT)

That AAPL is the one-year performance leader may not be widely known.

AAPL: Buffett’s choice

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), of which Warren Buffett is CEO, has added AAPL to its small group of highly overweighted stocks. This group favors stable (usually) consumer-facing names such as Coca-Cola (NYSE:KO), Wells Fargo (NYSE:WFC) and AmEx (NYSE:AXP). When Mr. Buffett went for a business-to-business tech company, IBM (IBM), several years ago, he erred.

I do not know if in choosing AAPL, his staff was asked to focus on tech, but Buffett has said this year that it was a close decision between AAPL and GOOGL. He chose AAPL due to greater predictability of outcomes, with less technology risk (AAPL also pays a dividend, which is important to an insurance company). In speaking of predictability, he pointed to AAPL’s strong consumer franchise and downplayed its tech chops.

Mr. Buffett has long recognized the importance of market position and brand excellence in contrast to the changeability of technology. Thus, after intensive analysis, he believes that AAPL has an investable margin of safety apart from its operation in the tech field. With the IBM “miss” staring him in the face, this decision to go long a lot of AAPL could not have been taken lightly. I suspect that the Buffett decision has been reverberating in the minds of both large institutional investors and individual investors alike. As the old brokerage ad went, when Warren Buffett talks (and invests), people listen.

However, there is another simple driver of investment value that even though Buffett believes in paying up for quality, he also appreciates. Namely, AAPL is relatively cheap. How cheap? I went into this in detail several weeks ago in an article explaining that AAPL could be worth $300 right now when comparing its valuation to that of some alternatives. AAPL closed Friday at $175. Thinking to year-end 2017 numbers, I would subtract $15 from that to normalize AAPL’s net cash stash (including other liquid assets) to that of comparable DIA and S&P 500 (SPY) companies, thus giving an adjusted AAPL price of $160. Then, using ETrade (ETFC) numbers, I project $12 EPS for next calendar year (slightly above consensus). That would imply a cash-adjusted forward P/E on calendar 2018 numbers of only 13.33X.

That P/E translates to a 7.5% earnings yield (reciprocal of the P/E). Given that AAPL has evolved a business model in which the capital spending is largely performed by its ecosystem partners, that would tend to correlate with the same 7.5% cash-on-cash return.

In contrast, the forward earnings yield of the S&P 500, also using GAAP as AAPL does, is about 4.6%, and not all of that is FCF, so it is of lower quality.

Since Buffett would expect AAPL’s free cash flow yield to grow over time, it makes sense that he could commit it to Berkshire’s permanent holdings and wait for time to prove out the choice. He gets a high starting earnings yield and the security of a tight ecosystem of products with hundreds of millions of customers who “re-enlist” in the AAPL system voluntarily year after year.

So far, I have described a plain vanilla Dow 30 stock with, recently, a choppy growth record. Maybe it’s a good value in a highly-valued universe of financial assets. But why think of this stock avidly now, as Druckenmiller and Soros did with their BoE caper in 1992, especially given how much AAPL’s price has increased off the bottom?

I proffer two reasons to consider AAPL as still being on an upswing. One is enough to look forward to a much higher stock price relatively soon. The other is a reason to look forward to a much higher stock price. This is conjecture now; it needs to be read in that context.

Base (bull market) case: nicely higher AAPL price by 2019

The thesis is fairly simple, namely that shares of most large strong companies are now getting 20X P/Es and higher. We see that with the slow-growing Johnson & Johnson (JNJ), which recently traded at 24X TTM P/E (all P/Es are GAAP). Slow-growth Wal-Mart (WMT) is trading above 25X. Slow-growth companies in the pharma industry without all the strengths of JNJ are almost all above 20X. This includes Bristol-Myers Squibb (BMY), Novo Nordisk (NVO), Pfizer (PFE), Merck (MRK), and Lilly (LLY). In some of these cases, the P/Es are above 30X (I use GAAP for all P/Es and am mostly relying on ETrade data; apologies for any errors). The list goes on and on. McDonald’s (MCD) can only grow just so fast, yet it is at 24X. Procter & Gamble (PG), which has barely grown for years, is also at 24X. Pepsi (PEP) is also at 24X. KO is at 44X, but that’s an anomaly, and will normalize in the 24X range as well soon enough if the price stays where it is (One notes a 24X pattern here in the P/E).

This pattern applies to many good but not extraordinary smaller companies, as well. A small supplier to the recreational vehicle industry, LCI Industries (LCII), is at 22X. Texas Roadhouse (TXRH), a small cap restaurant chain, is at 28X. Yum! Brands (YUM) is at the familiar 24X. Lancaster Colony (LANC), a small cap food company, is at 31X.

Amongst cyclicals, the same pattern of once-unusual P/Es is seen. One of my faves this year, Deere (DE), is at 22X. Illinois Tool Works (ITW) is at the familiar 24X. Even plain old railroads are in the 20X act. Norfolk Southern (NSC) and Union Pacific (UNP) are both in the 20-21X range.

MSFT, with several years of growth challenges in the rearview mirror, is at 28X, which does include some excess cash. Oracle (ORCL), which has seen organic revenues and profits decline until very recently, is at 21X.

Thus, something strange is occurring in plain sight that is little remarked about. It is the opposite of what the Fed and the Street have confidently been predicting since 2009. They have been predicting rising interest rates. Finance theory would then imply lower P/Es. Instead, my vision of “lower for longer” in interest rates has continued to be in force for long-term bonds. Once more, the Fed has raised short-term interest rates, only to run into the Greenspan “conundrum” of long-term rates staying flat. Stocks, as long-lived ownership interests in businesses, compete with bonds much more than with cash. With that comparison, blue chips and lesser companies are now cheap under almost any scenario relative to their own debt. AAPL’s bonds maturing in February 2045 yield 3.66% to maturity (CUSIP #037833BA7). As stated, AAPL’s forward earnings yield per consensus is over 7%. Even if that were not to change, i.e. AAPL’s earnings never to rise, its stock would probably be more attractive than the bond. If you predict AAPL’s FCF to rise at a 7.2% CAGR until 2045, AAPL’s terminal yield would be over 50%, while the bond would still be paying out at 3.66%.

In the DoctoRx world view, this sort of reasoning is why JNJ and WMT, and MSFT and ORCL as B2B techs, can trade above 20X. Their FCF yields for the year ahead exceed the yields on their debt, and over time, the FCF yields are expected to grow, even if only slowly. The lower-for-longer bond scenario in place today benefits their P/Es.

Using the Buffett view of AAPL as a true blue chip, I think AAPL belongs there too and that it is reasonable to invest as though this is going to happen (Or, if P/Es drop, AAPL may be relatively insulated from this trend reversing, relatively being key).

Looking forward to March 2019, if AAPL reports about $12 EPS for CY 2018, a continued lower-longer interest rate scenario can easily support a P/E on SPY around 21-22X TTM GAAP EPS, and higher. If so, AAPL at 20X is no stretch at all. That would suggest an AAPL price of $240 per share in Q1 2019, implying alpha for AAPL.

That’s my first, base bull case. If it’s correct, some amount of Sorosian aggressiveness toward this stock would pay off well.

Now here’s a somewhat more aggressive bull case.

AAPL as growth stock once more, part 1: less obvious successes

Not everything at AAPL ties into the big guns. Hints of progress can be seen elsewhere.

Apple Music

Just as one example of a small part of AAPL that few think about, look at this growth path for Apple Music, from Horace Dediu on October 4:

This is impressive growth for Apple Music.

Now think back to how quickly this service was dismissed as a “meh” effort soon after launch. Yet the above growth rate, if it continues, means higher corporate profits and a stickier ecosystem: synergy (It also means that AAPL may again be succeeding in a sector where MSFT has… well…: Zune, we hardly knew ye).

Apple Watch

Here’s another potential big success in the making which may generate rapidly growing profits from sale of the product along with increasing app sales, all the while strengthening the AAPL ecosystem. From Above Avalon, this graph is taken from a lengthy blog post. The Apple Watch may have been surging before the untethered Watch was released:

Again, once the Watch sales stagnated, the Street forgot about it. But the Watch may add 2-3% to AAPL’s sales annually for the next few years if sales do what I think they may do. As Neil Cybart says in that blog post:

There is no smartwatch market. After more than two-and-a-half years of competition, it is clear that Apple Watch doesn’t have much genuine competition.

Now let’s look quickly at the growth potential for the Big 3 AAPL products.

AAPL as growth stock, part 2: iPhones poised for growth again

The smartphone is becoming more central to the lives of people globally. This makes the iPhone increasingly important.

The US-centric data coming from ChangeWave Research (which I see regularly as a panelist) continues to show that a higher percentage of Android owners are switching to iPhone than vice versa. Fluent has found the same thing. Since there are more Android than iPhone owners, this creates a gravitational pull toward AAPL; again, this is US-centric data, but the trend may scale globally.

It is also possible that iPhones, getting increasingly capable, are undervalued, as Horace Dediu (again) points out (emphasis added):

More important however is that the iPhone remains priced at about $1/day… the value users perceive is very high. The most expensive iPhone costs about 8 cents per hour of use, 1.4 cents each time you unlock it and 1 cent for every 25 interactions you have with it (touches or taps). On a per use basis the iPhone is extraordinarily cheap. I know of no consumer product that is cheaper.

Not only that, but also as augmented reality becomes a normal part of the iPhone experience over time, I expect that smartphones will become virtually indispensable to modern life for a great many people, and that the iPhone could replace Android as US market share leader (and elsewhere) – on AAPL’s terms.

That’s an intermediate term perspective. Markets also respond to headlines, and the iPhone X created quite the buzz, with the return of lines at AAPL’s stores upon its release.

When iPhones have a super reception in South Korea, home of Samsung (OTC:SSNLF), then AAPL is doing something right. This all makes the recent spewing of FUD from the mainstream look ridiculous. From Fortune on October 20:

Apple’s No Good, Very Bad iPhone X Launch: A Chronology.

As TechRadar says in its review of the iPhone X, getting it right:

Our Verdict

The iPhone X was a huge gamble from Apple, but one that really paid off… this is the closest to smartphone perfection Apple has ever got.

If sales of the X are indeed strong, the Dediu argument may be coming into play; the iPhone may be if anything underpriced (This was a similar argument OPEC used to jack up the price of crude oil from $3/barrel in 1971 to $12 in 1974, then the $30s by 1979-80). This concept also implies that average selling prices for the iPhone could rise faster than Mr. Market thinks.

So, a key part of the AAPL story could be that the return of lines for a smartphone – a phenomenon that looked to be a thing of the past – could presage long and strong AAPL stock moves as in 2010-2, when lines were also seen.

The theme that AAPL products could regain unit market share, beginning with but not limited to the iPhone, is continued in the next section, covering AAPL’s two other leading product lines.

iPads may follow iPhones; Macs attack

The iPad may be set for greater things, based on the iPhone X and recent sales momentum for the iPad. The iPad is stellar as is before upgrades that may come soon. E.g., TechRadar gives the new 2017 iPad the same 5 Star rating it gave its predecessor, the iPad Air 2.

With iPad sales growing again, we can see that much of the sales stagnation was due to their durability. Our iPad 2 lasted from March 2011 until last year, and it still works, though it’s poky. The iPad line-up is strong now; our iPad Pro is a thing of beauty. My conclusion: the iPad is a very valuable franchise. (Let’s see how much people begin using it as a laptop replacement).

The aging Mac line showed nice growth last quarter. I don’t know why, but that is welcome. AAPL has finally begun refreshing the Mac. The iMac Pro, out soon, marks an impressive reset for this flagship product. The rest of the iMac line and laptops are due for upgrades.

I have had a bullish view of the long-term potential of the Mac for at least five years, and trends may be moving to place the Mac back in the picture, especially in households. Please consider these reasons:

1. Streaming. As the world moves to streaming video, powerful desktop computers with big beautiful displays gain an important new use.

2. Storage of photos, video, music. You have taken baby photos, videos of your child in action in a sports setting, etc., with your iPhone. Now what? Move them to the Cloud, where you pay storage fees endlessly? A better, or parallel, solution is to store them on the Mac. Beyond sight, there is sound, i.e. permanent storage of music. Again, it’s there, close at hand, not needing to be downloaded from the Cloud.

The more we use iPhones to create our own media, the more the Mac comes in handy to store that media.

3. Limitations of mobility devices. Smartphones and the iPad Pro are just not able to do all that a full-size home computer can do. Information is found and displayed faster and better on a desktop computer, or at least a well-powered laptop. The more we use mobile devices, the more we recognize their limitations as well as their capabilities.

AAPL is on an even playing field against Windows in the above uses, none of which tie into the Office ecosystem. AAPL oversees the design of silicon, designs its displays and overall product configuration, and thus can and usually does provide the best products. Further, with MSFT now competing with its Windows licensees, what is the incentive for it to invest heavily to also compete with AAPL?

So I look at Macs as having some growth potential for the indefinite future, and if things break AAPL’s way, they might even gain greater traction in the enterprise. Maybe 2018 will be the year that AAPL takes Macs to a new level.

AAPL is in the odd situation for the market’s leader is that it has minority market share in all its major markets. A little market share growth in AAPL’s mature product lines along with more rapid growth in Services, Watch, etc. could go a long way toward growing profits faster than Mr. Market expects. The recent upgrades of the iPhone and the Watch, along with the advent of augmented reality in iOS 11 and the latest iPhones, may augur well for an ongoing important round of upgrades in the Mac and iPad lines.

If AAPL gets viewed as a growth stock again, I would think about traders in 2019, noting its cash stash, giving it something like a 24X P/E on, say, $12 or $12.50 CY 2018 EPS. That implies a massive $300 price target. Can it happen? Yes. MSFT’s stunning P/E ascent shows it can.

Concluding points – two winning scenarios for a Sorosian approach to AAPL

But a final thought comes from this walk down memory lane. If I remember correctly, James O’Shaughnessy’s book What Works on Wall Street reported that if you were looking for a stock that would double in the year ahead, your best bet was one that had just doubled; the same for a triple. It was back in or around 1999-2000 when I read the book; even if I am remembering correctly, matters might have changed. But with AAPL up so much from its lows, this sort of thinking may be relevant. AAPL may be rising for two reasons. First, to summarize, Warren Buffett may have anointed AAPL as just as deserving of that now-unremarkable 24X P/E as so many other stocks that also carry risk of various kinds. If so, Mr. Market may trend AAPL’s P/E upward on a cyclical manner. I’m looking out for that possibility being actualized. Second, my bigger bull case involves thinking of the flow of business at AAPL. Here, macro trends may indeed favor AAPL, which itself may be in the midst of an important, exciting new wave of products with long product lives. If so, then AAPL’s relative P/E versus its tech peers (does it really have many/any peers?) may be due for revaluation upward, providing alpha within the sector.

In either of these scenarios, thinking of the Soros quote to go big in an investing concept one believes in merges with the Buffett view that AAPL is truly special (as many of us have been saying for some time). This could lead to not what we have gotten used to with AAPL the past few years, namely almost as many steps backward as forward, but steadier upward movement of the share price. If some techs look as though it is 1999 all over again, AAPL looks more like 1997 with tailwinds blowing. No guarantees, but for what little it’s worth, I’m on board with Buffett on AAPL (and even more than he is assuming), and I’m thinking seriously about the Soros philosophy.

Thanks for reading and sharing any comments you wish to contribute.

Disclosure: I am/we are long AAPL, AMZN, BMY, DE, GOOGL, MSFT, NVO, ORCL, WFC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Not investment advice. I am not an investment adviser.

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Richard Branson Says He Has ‘No Recollection’ of Sexual Misconduct Alleged by Joss Stone’s Backup Singer

Virgin Group head Richard Branson has offered a soft-focus denial of allegations that he sexually harassed a backup singer for English singer-songwriter Joss Stone. In statements published by The Telegraph, Branson said he had “no recollection of the incident” described by singer Antonia Jenae.

The allegations are suddenly in the headlines, but were initially aired in an October 16th Facebook post by Jenae. Jenae describes Branson “trying to convince me to show him my boobs” at an island party. Then, Jenae claimed, Branson “proceeded to ‘motorboard’ my breasts with his face” as the party was breaking up.

According to the Telegraph, the island referenced by Jenae is Necker Island, a Caribbean which Branson owns. The alleged incident would have taken place in June 2010, after Stone and her band played a nearby festival.

Jenae has since told The Sun that “his behaviour was disgusting. I feel like it was sexual assault . . . Everyone was wondering why I wasn’t angry because I’m usually a firebrand. But I was just too shocked.”

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A Virgin Management spokeswoman also stated, according to the Telegraph, that “everyone appeared to enjoy their time on the island. Richard has no recollection of this matter and neither do his family and friends, who were with him on the island at the time . . . there would never have been any intention to offend or make anyone feel uncomfortable in any way and Richard apologizes if anyone felt that way during their time on the island.”

Joss Stone’s father, Richard Stoker, also contributed to the Virgin statement to the Telegraph, saying that “Joss and the group had a wonderful afternoon on Necker Island, everybody entered into the party spirit and it was wonderful getting to know Richard and his family.”

There are elements of the statements that were once standard in such situations, but which the latest round of harassment allegations seems to have rendered insufficient. Senator Al Franken was roundly lambasted earlier this month for saying “I certainly don’t remember” what broadcaster Leeann Tweeden described as a coerced kiss, and for dismissing a picture of him pretending to grab her breasts as “clearly intended to be funny.”

Franken quickly amended his statement to something more genuinely contrite, and Branson may find himself having to do the same. In addition to the weakness of the ‘I don’t remember’ defense, Stoker’s claim that “everybody entered into the party spirit” seems to subtly imply that Branson’s forgotten behavior might have been acceptable under the circumstances, a sentiment unlikely to be received well in the post-Weinstein era.

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Flat profit gives Angry Birds maker's shares the blues

HELSINKI (Reuters) – Angry Birds maker Rovio Entertainment (ROVIO.HE) fell short of market expectations for quarterly sales and profit on Thursday, sparking a near 20 percent fall in the Finnish firm’s shares.

An employee works inside an office of Rovio, the company which created the video game Angry Birds, in Shanghai June 20, 2012. REUTERS/Aly Song/Files

Increased marketing costs meant adjusted earnings before interest, tax, depreciation and amortization were flat at 8.6 million euros ($10.2 million) in the third quarter, although sales rose 41 percent from a year ago to 70.7 million euros.

“Costs were surprisingly big but also the number of paying customers lagged expectations,” Hannu Rauhala, an analyst at OP Equities, who has a “buy” rating on Rovio, said.

Rovio which was listed on the Helsinki bourse in September saw its shares drop to 9.64 euros at 0837 GMT, a fall of nearly 19 percent and well below its IPO price of 11.50 euros.

“The company has changed a lot in the past years and it is considered as a growth company. The stock is strongly driven by growth expectations,” Rauhala said.

Rovio saw rapid growth after the 2009 launch of the original “Angry Birds” game, but it plunged to an operating loss and cut a third of its staff in 2015 due to a pick up in competition and a shift among consumers to freely available games.

Rovio’s game titles now include “Angry Birds 2,” “Angry Birds Blast”, “Angry Birds Friends” and “Battle Bay.”

Reporting by Jussi Rosendahl; editing by Gwladys Fouche and Alexander Smith

Our Standards:The Thomson Reuters Trust Principles.
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Uber Hid 57-Million User Data Breach For Over a Year

By now, the name Uber has become practically synonymous with scandal. But this time the company has outdone itself, building a Jenga-style tower of scandals on top of scandals that has only now come crashing down. Not only did the ridesharing service lose control of 57 million people’s private information, it also hid that massive breach for more than a year, a cover-up that potentially defied data breach disclosure laws. Uber may have even actively deceived Federal Trade Commission investigators who were already looking into the company for distinct, earlier data breach.

On Tuesday, Uber revealed in a statement from newly installed CEO Dara Khosrowshahi that hackers stole a trover of personal data from the company’s network in October 2016, including the names and driver’s license information of 600,000 drivers, and worse, the names, email addresses, and phone numbers of 57 million Uber users.

As bad as that data debacle sounds, Uber’s response may end up doing the most damage to the company’s relationship with users, and perhaps even exposed it to criminal charges against executives, according to those who have followed the company’s ongoing FTC woes. According to Bloomberg, which originally broke the news of the breach, Uber paid a $100,000 ransom to its hackers to keep the breach quiet and delete the data they’d stolen. It then failed to disclose the attack to the public—potentially violating breach disclosure laws in many of the states where its users reside—and also kept the data theft secret from the FTC.

“If Uber knew and covered it up and didn’t tell the FTC, that leads to all kinds of problems, including even potentially criminal liability,” says Williams McGeveran, a data-privacy focused law professor at the University of Minnesota Law School. “If that’s all true, and that’s a bunch of ifs, that could mean false statements to investigators. You cannot lie to investigators in the process of reaching a settlement with them.”

The Hack

According to Bloomberg, Uber’s 2016 breach occurred when hackers discovered that the company’s developers had published code that included their usernames and passwords on a private account of the software repository Github. Those credentials gave the hackers immediate access to the developers’ privileged accounts on Uber’s network, and with it, access to sensitive Uber servers hosted on Amazon’s servers, including the rider and driver data they stole.

While it’s not clear how the hackers accessed the private Github account, the initial mistake of sharing credentials in Github code is hardly unique, says Jeremiah Grossman, a web security researcher and chief security strategist at security firm SentinelOne. Programmers frequently add credentials to code to allow it automated access to privileged data or services, and then fail to restrict how and where they share that credential-laden software.

“This is all too common on Github. It’s not a forgiving environment,” says Grossman. He’s far more shocked by the reports of Uber’s subsequent coverup. “Everyone makes mistakes. It’s how you respond to those mistakes that gets you in trouble.”

Who’s Affected

Uber’s count of 57 million users covers a significant swath of its total user base, which reached 40 million monthly users last year. The company hasn’t notified affected users, writing in its statement that it’s “seen no evidence of fraud or misuse tied to the incident,” and that it’s flagged the affected accounts for additional protection. As for the 600,000 drivers whose information was included in the breach, Uber says it’s contacting them now, and offering free credit monitoring and identity theft protection.

How Serious Is This?

Mass spills of names, phone numbers, and email addresses represent valuable data for scammers and spammers, who can combine those data points with other data leaks for identity theft, or use them immediately for phishing. The even more sensitive driver data that leaked may offer even more useful private information for fraudsters to exploit. All of it contributes to the dreary, steady erosion of the average person’s control of their personal information.

But it’s Uber, not the average user whose data it spilled, that may face the most severe and immediate consequences. The company has already fired its chief security officer, Joe Sullivan, who previously led security at Facebook, and before that worked as a federal prosecutor. By failing to publicly disclose the breach for over a year, the company has likely violated breach disclosure laws, and should be bracing for hefty fines in many states where its users live, as well as its home state of California, says the University of Minneapolis Law School’s McGeveran. (In statements on Twitter embedded above, former FTC attorney Whitney Merrill echoed that interpretation of those breach disclosure laws.) “I would not be surprised to see states pursuing Uber on that basis,” McGeveran says.

Former FTC attorney Whitney Merrill echoed that interpretation Tuesday on Twitter:

If the cover-up included making false statements to the FTC during its investigation of the 2014 breach—even though it was a separate incident—that could have even more dire consequences. Making false statements to the commission’s investigators, McGeveran points out, is a federal criminal offense. “This is not just a casual chat over a cup of tea. it’s a formalized investigative procedure,” McGeveran says. “They’re already being asked investigative questions by a government official. They not only know about the breach, but they’re allegedly paying hackers to cover it up. They presumably omit this 57 million person breach from their disclosure to the FTC.”

“If all of that is true,” McGeveran reiterates, “that’s huge.”

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Whether They’re Calling It A Fraud, Bubble Or World Changer, A Lot of Companies Are Talking About Cryptocurrency

J.P. Morgan CEO Jamie Dimon thinks bitcoin is a “fraud.” Investor Mark Cuban called it “a bubble.” Goldman Sachs CEO Lloyd Blankfein is still undecided. But whether or not executives believe in the potential of bitcoin, ethereum or blockchain technology, they and their companies can’t avoid talking about cryptocurrencies.

Mentions of “cryptocurrency” (digital currencies not tied to any country’s legal tender) and related terms including “bitcoin” and “ethereum” (the two most popular cryptocurrencies), “blockchain” (the technology underlying these currencies), and “initial coin offering” (or ICO, which lets companies raise capital through the creation of a new cryptocurrency) have skyrocketed over the last seven years, according to data from Sentieo, a financial research firm.

In total, 1,200 publicly traded companies have generated over 12,000 mentions of digital currency during the past 14 years.

With another month left to go in 2017, references to cryptocurrency in corporate communications are already double what they were in all of 2016, according to a Fortune analysis of the Sentieo data. And they’re up more than 7,000% since 2010, when admittedly only a handful of companies had talked about “digital currency” during earnings calls or presentations.

It began with ‘digital currency’ … and getting bitcoin’s name wrong

From 2009 through 2012, most of the mentions only referenced “digital currency,” which includes cryptocurrencies, along with other money recorded electronically or stored in another device. Players in the digital currency space, like PayPal and Square, had to address cryptocurrencies earlier than most.

In a March 2014 statement to eBay shareholders about PayPal’s IPO, Carl Icahn calls bitcoin “the digital currency Mr. [Marc] Andreessen cheerleads for.”

Amusingly enough, bitcoin was actually misidentified in its first actual mention by name during Discover’s 2013 annual meeting.

“One of the questions I’ve put down, the subject is bio coin,” a shareholder began to say.

Discover CEO David Nelms course-corrected. “You mean bitcoins?”

“Yes, bitcoins. You’re a good listener,” the shareholder said. “You picked it up. ”

Fortune analyzed Sentieo data from earnings call transcripts, press releases, presentations, and SEC filings — 8Ks and 10Ks. Cryptocurrency and related terms pop up in press releases most often, followed by SEC filings and presentations. And that’s to be expected. Most companies publish press releases a lot more frequently than they submit SEC filings or hold earnings calls.

A lot of financial institutions mention it only to say it’s irrelevant, or deny its ability to disrupt their industry

Less than 20% of the S&P 500 appear among the 1,200 companies talking about cryptocurrencies, and only 65 hail from the 2017 Fortune 500 list. Information technology and finance companies, unsurprisingly, have discussed the topic more fervently than other industries.

Many times, large financial institutions have brought up cryptocurrency because they’re denying its importance or expressing disinterest in bitcoin. But some companies in the consumer-facing fintech subset have been talking about it because they’re planning to adopt parts of the new technology.

“Cryptocurrency will be almost a gimmick at first,” Benjamin Jessel, managing principal at Capco, told Fortune. “Institutional investment will come later.”

He leads a variety of digital risk, compliance and strategy projects and programs for financial services clients.

It’ll be a while before anyone can say cryptocurrencies have truly disrupted financial institutions, he said. But there’s signs it could come to pass. Companies like Square and American Express have been working on allowing consumers the option to pay with cryptocurrencies. has embraced cryptocurrencies more than any of its peers

Of the 1,200 companies that Fortune analyzed, stood out. It has talked about cryptocurrencies and blockchain technology more than any other firm.

The retailer has allowed customers to buy products with bitcoin since January 2014 and recently expanded payment options to include Ethereum and about 40 other major digital currencies.

“We think that at some point there will be … Bitcoin will hit a tipping point and like it took time for people to adopt PCs and the Internet, at some point there is a tipping point and this could become … Bitcoin could become as ubiquitous as PCs and the Internet are now,” said Jonathan Johnson, executive Vice Chairman Jonathan in January 2014.’s CEO Patrick Byrne was an early believer in the importance of cryptocurrencies, too. It doesn’t just show in earnings calls and SEC filings. One of Overstock’s subsidiaries, tZero, has made it possible to trade tokens using blockchain technology in a regulatory-free environment.

“Three years ago I stood up in front of an audience for the opening keynote speech at Bitcoin 2014, in Amsterdam, and told the world that the main event of Bitcoin is not Bitcoin, it is the Blockchain, and it would change the world,” Byrne said at the Money 20/20 conference last month.

But executives were the outliers. There’s been heated debate about whether there is a bitcoin bubble.

“We’re certainly in something that resembles a bubble,” Jessel said.

He points to the sheer amount of capital invested in a short time period — more than $2 billion in initial coin offerings (ICOs) in 2017— along with the low sophistication of investors. More and more people are buying tokens like Bitcoin and Ethereum, but very few are using them for anything other than trading.

The infrastructure for cryptocurrencies is growing very rapidly and generating lots of conversation, like what’s been captured in the Sentieo data. But the truth is very few companies are making money from using the technology.

“It’s like a whole industry building roads,” Jessel said, “and they haven’t discovered cars yet.”

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raceAhead: Three Podcasts to Help You Understand Things, Charles Manson’s Race War, Life in North Korea

If one thing has become clear during the two years of working the race beat at Fortune is this: Everything has a backstory. Our ability to understand and embrace these hidden histories can help us all become more curious, aware, empathetic and informed.

Here are three podcasts that I’ve recently enjoyed that brought a fresh perspective to something I already thought I knew a bit about. Turns out, I was missing more than just some interesting facts. Enjoy.

Good Muslim, Bad Muslim is a delightful podcast, and ordinarily a breezy conversation between two friends, Tanzila ‘Taz’ Ahmed and Zahra Noorbakhsh, about their complicated modern relationship with faith, love, social justice and American life. They took a break from their usual dish to join an annual pilgrimage to Manzanar, a Japanese American internment camp just north of Los Angeles. This year’s visit commemorated the 75th anniversary of Executive Order 9066, which ordered the incarceration of more than 110,000 Japanese Americans and was signed by President Franklin D. Roosevelt. (Executive orders matter, yo.) The trip was organized by the Vigilant Love Coalition and their Bridging Communities program, which draws parallels between the Japanese experience post-Pearl Harbor and the experience of Muslim Americans today. “Today we are retracing the humanity of a group of people who our country shamelessly mistreated,” the tour guide begins. While Taz and Zahra continually hand the mic to other pilgrims and survivors to make sure their stories are heard, the bigger message is clear. “Your citizenship will not protect you,” one woman tells them.

Every installment of Second Wave is a revelation and a thoughtful exploration of the experiences of Vietnamese Americans in the aftermath of a war that hasn’t ended for everyone. One delicious example is Pho, part savory noodle-dish, part iconic comfort food born in a faraway land and now, a dish ripe for cultural appropriation. Seemingly out of the blue, the dish has been embraced by hipster chefs in the U.S. and turned into a barely recognizable version of itself, with pho experts everywhere making fancy derivations like pho dumplings, pho salads, even rolling “phorritos.” Host Thanh Tan sits with two women who have made their own careers with the noodle dish, writer Andrea Nguyen and chef Yenvy Pham, owner of Pho Bac in Seattle, and have a fascinating conversation about what the soup meant to both the working class and elites in Vietnam, and the uncomfortable peace they’re making with its gentrification stateside. And then the talk turns to a scandal you may have missed — the recent Pho-gate, and their ultimate defense against the ultimate erasure.

I’ve fallen hard for Uncivil, a new Gimlet podcast about the Civil War that explores the stories that have been left out of history if you get my drift. Again, there are no wrong choices, but for the purposes of digging into a juicy backstory, start with their eye-opening exploration of the true origins of Dixie, the unofficial and still beloved anthem of the Confederacy. The common knowledge was this: Dixie was a Confederate anthem, written by a Southerner, during the dark days of the Civil War. As usual, the common knowledge is completely wrong. There are a couple of twists before we get to the painful truth, an erasure so profound that it’ll get you whistling Dixie yourself. Hosts Chenjerai Kumanyika and Jack Hitt are both excellent. But later in this episode, Kumanyika talks about “coon spaces,” a framing for performative blackness for the benefit of white audiences. It yields one of the richest conversations I’ve heard in ages. In this instance, it’s with a musician named Justin Robinson, who both understands the true roots of the song and has performed it with a sense of dignity and restorative justice. It didn’t quite work. “They invite you to dehumanize yourself for profit, for their pleasure, to deepen their sense of identity,” says Kumanyika of the “coon space” dynamic. “You’re sort of hitting on the head what it means to be black in America or indigenous in America,” Robinson begins.

On Point

Cult leader Charles Manson dies having failed to achieve his dream of a full-on race war
It’s an element of his cultish control over his “hippie” followers that often gets the short shrift. His murderous rampage was not just an attack on the Hollywood elite. It was a full-throated attempt to incite a race war that would – insert magical thinking here – end with him running the world. The Root has a great explainer here. I’d also point you to another podcast, currently in production called Young Charlie. It unfolds as the breathless true crime it actually was, but also gives rich context to the person Manson was and the country he was planning to overtake. Not only did he fall through every possible crack in his young life, he was monstrously smart and profoundly cynical, fully prepared to leverage a racist country for his own benefit.
How rapper Meek Mill has come to personify criminal justice reform
Rapper Meek Mill is back in prison for a parole violation stemming from various criminal charges he faced over a decade ago. And now, the Philadelphia home town hero has become a flashpoint in a long overdue conversation about reform and judicial overreach. If you haven’t been following the story, then this explainer from the Washington Post will get you up to speed. But don’t stop there. Read this op-ed from Jay-Z, whose Roc Nation reps Mill, but who has also become increasingly outspoken on justice reform issues. “On the surface, this may look like the story of yet another criminal rapper who didn’t smarten up and is back where he started,” he begins. But Mill was nineteen when he was sent to jail for drug and gun possession and served an eight month sentence. “For about a decade, he’s been stalked by a system that considers the slightest infraction a justification for locking him back inside.”
Washington Post
Lena Dunham under fire for siding with friend accused of sexual assault
The man in question is Girls writer Murray Miller, and he was accused by actor Aurora Perrineau. While the backlash was swift and followed by a penned apology, writer Zinzi Clemmons has decided enough is enough. In a statement posted to Twitter, she announced that she will no longer be contributing to Lenny Letter, Dunham’s online feminist newsletter. “She cannot have our words if she cannot respect us,” she writes. She also describes the casual racism, and worse, that she believes defines Dunham’s circle, many of whom she was acquainted with in college. “It is time for women of color — black women in particular — to divest from Lena Dunham,” she says.
What it’s like to live in North Korea
The Washington Post has interviewed 25 North Koreans who have lived, in some capacity, in the country under Kim Jong Un. Their tales are uniformly grim and disappointing. They all thought that the millennial leader would bring fresh ideas and much-needed change to a country crippled by generational dictatorship. Instead, things got worse, as the state broke down and the economy crumbled. The only way to survive is the constant hustle of dealing in bribes and the illegal/informal economy. The threat of state violence, they say, is ever-present. “I once went for six months without getting any salary at all. We lived in a shipping container at the construction site… Once I didn’t bathe for two months,” said one construction worker who escaped in 2015.
The Washington Post

The Woke Leader

Princeton University comes clean on race
Here’s just one example: Researchers have recently found evidence that Samuel Finley, the school’s fifth president, sold his slaves in front of his stately 18th century clapboard home, once a popular stop on the campus tour. That is just one of many stories being brought to light as the institution works to reconcile it’s complex past. To that end, it’s worth spending time with the Princeton and Slavery Project, an evolving work of depth and honesty that includes primary documents and articles highlighting the university’s long history of slavery-related funding and racial violence.
New York Times
The bleak and poignant history of black NASCAR drivers
After a 46 year dry spell, a black rookie driver is set to become the first full-time black driver since Wendell Scott stopped driving in 1971. Darrell “Bubba” Wallace, Jr., is set to drive car number 43 for Richard Petty Motorsports next season. “There’s only 1 driver from an African-American background at the top level of our sport … I am the one,” he said on Twitter. “You’re not gonna stop hearing about ‘the Black driver’ for years. Embrace it, accept it and enjoy the journey.” But it’s worth remembering Scott, the very first black driver, who braved Jim Crow laws and death threats to persist in the sport. He won money and acclaim, but never the traditional post-race kiss from the white beauty queen. Click through for the real deal history.
Atlanta Blackstar
Take a jazz lesson with Wynton Marsalis and Jon Batiste
Batiste, the less-well-known of the two jazz greats, is the leader of the “The Late Show with Stephen Colbert” band, and absolutely holds his own with Marsalis, during this hour-long segment on the genius of jazz from The Aspen Institute. The conversation includes plenty of music and technical talk, like how pentatonic scales originally came from Africa. It also weaves in discussions of painful elements of life under the English plantation system, which also exploited Irish people. The strange mix of race, culture, and oppression found its way into the alchemy known as blues and jazz.
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