Weekly Wireless Report

[Pages:7]Weekly Wireless Report

WEEK ENDING September 19, 2014

INSIDE THIS ISSUE:

THIS WEEK'S STORIES

Microsoft Buys Minecraft For $2.5 Billion

Apple's iPhone 6 And 6 Plus Greeted By Largely Positive Reviews

PRODUCTS & SERVICES Amazon Releases New Fire Tablets And E-Readers

A BlackBerry...Designed By Porsche

EMERGING TECHNOLOGY

Qualcomm Hopes To Attract Developers With Mobile TV And Digital Glasses SDKs

MERGERS & ACQUISITIONS

SAP $8.3 Billion Concur Buy Caps Pricey Cloud Push

Why Red Hat Needed To Buy FeedHenry, And What The Deal Means To Everyone Else

INDUSTRY REPORTS Home Depot: 56 Million Cards Exposed In Breach

Verizon Could Sell As Many As 12,500 Cell Towers

This Week's Stories

Microsoft Buys Minecraft For $2.5 Billion

September 19, 2014

Microsoft is expanding its video game empire, buying the wildly popular Minecraft and the tiny production studio that designed it for $2.5 billion.

With Minecraft, Microsoft will be acquiring one of the most popular games ever. Minecraft has been downloaded more than 100 million times since it launched in 2009.

Minecraft is an online video game that mixes Lego-like building blocks with the endearing low-fi of 8-bit graphics -- all while getting chased by monsters. It gives players ("miners") a world where they can explore endlessly and build just about anything from scratch. It's alchemy with a virtual pickaxe. If it seems low-end, that's because it is. The game was initially developed by a single man: Markus Persson, who launched Mojang studio.

Microsoft said it reached an agreement with Minecraft's Swedish game developer Mojang to buy the company sometime later this year. The deal had been rumored for a week prior to its announcement. The news was well-received by industry analysts, who say Microsoft is smart to adopt the massive community of loyal Minecraft fans.

Al Hilwa, a software analyst with market advisory firm IDC, compared the Minecraft deal to Apple's acquisition of Beats and Amazon buying Twitch. It's a battle for customers by expanding beyond the company's typical, core business.

Plus, Microsoft can make this giant deal tax-free by using cash it keeps overseas, noted Daniel Ives at FBR Capital Markets.

U.S.-based multinational corporations like Microsoft often keep lots of profit outside the United States, because bringing it back home would force them to pay taxes. Ives estimates that roughly 90% of Microsoft's $86 billion in cash is kept abroad.

Mojang is based in Stockholm, so Microsoft can keep the Uncle Sam out of the loop.

But buying Minecraft won't give Microsoft the brains behind the creation. On Monday, Larsson wrote a public letter saying he's leaving Mojang as soon as he signs the deal. Now that a major corporation is involved and Minecraft has gone mainstream, it's all too much for him.

"I make games because it's fun... but I don't make games with the intention of them becoming huge hits," he wrote. "I'm not an entrepreneur. I'm not a CEO. I'm a nerdy computer programmer who likes to have opinions on Twitter."

If Microsoft is buying Minecraft to pump out hit games, the odds are stacked against it. The video game world is full of one-hit wonders.

Angry Birds was a sensation that Rovio hasn't been able to replicate, and the company ended 2013 with a 50% drop in net profit. Rovio is dumping its CEO in January to try to turn things around.

King Digital Entertainment hasn't produced anything as addictive as the mobile game Candy Crush, and its shares have fallen 36% since it started trading publicly on the New York Stock Exchange in March. Still, there's value in Minecraft's fan base alone, especially because it keeps growing. Between 2011 and 2012, the number of registered users grew from 14 million to 39 million. And it's more than double that number today.

The question now on fans' minds is whether a big company like Microsoft will let this independent, humble game maker roam freely and retain its unique flavor -- or suck the soul out of the studio.

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"Geoffrey Fowler of the Wall Street Journal praised the iPhone 6's "performance, usability and camera refinements, coupled with a safe, powerful operating system that now lets the iPhone's big collection of apps do more."

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That's what happened when Microsoft acquired Bungie, the makers of the multi-billion-dollar Halo franchise. And how did that end? They eventually split in 2007.



Apple's iPhone 6 And 6 Plus Greeted By Largely Positive Reviews

September 17, 2014

Apple's new 4.7-inch iPhone 6 and 5.5-inch 6 Plus formally go on sale Sept. 19, but reviews of the new phones are in, and they are largely positive. Apple has already said it received 4 million preorders for the new phones within the 24 hours of presale availability, and the devices are likely to be a hit with consumers well through the holiday season. However, the reviews certainly won't hurt iPhone sales.

"I think it's a terrific phone. In my view, it's the best smartphone on the market, when you combine its hardware, all-new operating system, and the Apple ecosystem whose doors it opens," Walt Mossberg wrote of the 4.7-inch iPhone 6 on Re/code, noted Reuters.

Screen size is a major differential in the new phones as Apple seeks to catch up to competing phones on Android and Windows Phone that have larger screens and have proven popular with consumers. Yet bigger is not always better, as some reviewers noted.

Geoffrey Fowler of the Wall Street Journal praised the iPhone 6's "performance, usability and camera refinements, coupled with a safe, powerful operating system that now lets the iPhone's big collection of apps do more."

Molly Wood of the New York Times notes that both the iPhone 6 and 6 Plus "get thinner, flatter and more rounded shapes than their predecessors, losing the squared-off sides on the more recent models. The effect looks sleek, but feels slippery. Dropping seems imminent as you stretch your thumb across the larger screens." She noted that Apple has a feature called Reachability that lets users touch the home button twice to shift the screen down to the bottom half of the display in an effort to mitigate the larger screen sizes.

"The feature works nicely for one-handed scrolling and finding app icons, but it doesn't do much else," she noted. "If you're in an email, for example, you can't get access to any actions like Reply or Archive."



Products & Services

Amazon Releases New Fire Tablets And E-Readers

September 18, 2014

Amazon has released a new set of tablets and e-readers.

A $79 Kindle and the Kindle Voyage are the company's new e-reader offerings.

"This is our thinnest, highest resolution, highest contrast e-reader we've ever done," Amazon VP Peter Larsen said of the Kindle Voyage, which starts at $199.

"We have a long term-vision to replace paper," Senior Vice President of Devices David Limp said at the launch event in New York Wednesday.

That translates to e-readers with higher resolution and contrast display. By releasing a cheaper ereader, Amazon hopes to tap into markets like India and China.

The company also unveiled new Fire tablets, including one aimed at children. Their Fire HD Kids Edition comes with a two-year "worry-free" warranty.

The tablet is equipped with Amazon FreeTime, a feature that lets parents manage what their children can access.

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Other new tablets include the 6-inch Fire HD, a tablet the company is touting as "the most powerful tablet under $100" and a $140 7-inch Fire HD tablet.

To prove the durability of Amazon's Fire HD tablets, Larsen said the company puts the tablets through the ringer, blasting everything from salt water to sunscreen on them and placing them inside a tumbler, which simulates the inside of a purse or backpack.

Executives also introduced the Fire HDX, showing off new audio features. As part of the demo, executives said the tablet was 20% lighter than the Apple's iPad Air, and had a million more pixels.

All devices are available online for pre-order and will begin shopping in October.



"On Thursday, Qualcomm also announced the Vuforia SDK for Digital Eyewear. Vuforia is Qualcomm's augmented reality platform, which has in the past been used on smartphone apps to superimpose computergenerated content over a live camera view."

A BlackBerry...Designed By Porsche

September 17, 2014

Can a collaboration with Porsche rev up BlackBerry sales?

The beleaguered handset maker announced a collaboration Wednesday with Porsche Design on a new phone featuring the classic QWERTY keyboard and the company's BlackBerry 10 operating system. This is the third collaboration between BlackBerry and Porsche Design. The new phone, set to hit stores next month, features "glass-like keys" and a "luxurious high-gloss finish."

In other words, it is shiny and expensive -- potentially very expensive. The last phone that Porsche and BlackBerry collaborated on costs $1,990.

BlackBerry hasn't yet set a price for the new phone, but the company said it would hit stores in October. Porsche Design was founded by Porsche 911 creator Ferdinand Alexander Porsche in 1972 after he left the automaker. The company designs a variety of luxury goods, from clothing to luggage to watches.



Emerging Technology

Qualcomm Hopes To Attract Developers With Mobile TV And Digital Glasses SDKs

September 19, 2014

Qualcomm has released SDKs (software development kits) for LTE broadcast and digital glasses at its Uplinq conference, hoping to give the two burgeoning areas a push.

One of the biggest challenges mobile operators face is handling the growing amount of video traffic in their networks. One potential savior is multicast technology LTE broadcast, which delivers content such as TV broadcasts to multiple people at once instead of sending a separate stream to each user. The result is less strain on the network, which is especially good in places such as sports arenas.

With the LTE Broadcast SDK, which has been optimized for Snapdragon-based devices, developers can integrate the technology into their Android apps, according to Qualcomm. Besides video and TV, it can be used to distribute software updates and stream music.

Earlier this year, Korean carrier KT launched the world's first LTE broadcast network using the Galaxy Note 3 from Samsung Electronics and Qualcomm's middleware for streaming video and file delivery. Carriers such as Vodafone, Three, China Mobile, AT&T and Verizon Wireless are testing or have tested the technology.

More large-scale commercial services are expected to be launched next year. But launching LTE broadcast isn't just about getting the technology right--coming up with a working business model and choosing what content to distribute and where are equally important.

On Thursday, Qualcomm also announced the Vuforia SDK for Digital Eyewear. Vuforia is Qualcomm's augmented reality platform, which has in the past been used on smartphone apps to superimpose

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computer-generated content over a live camera view. With the new SDK, the platform offers functionality for recognizing images and objects in the user's field of view. Apps can then use that information to decide what to show the user.

Qualcomm hopes developers will create new types of games as well as shopping, educational and industrial apps. The SDK is compatible with Epson's Moverio BT-200, the Oculus-based Gear VR from Samsung and the ODG R-7. The latter pair were announced Thursday and are powered by Qualcomm's Snapdragon 805 processor.

A limited beta of the SDK will become available this fall, Qualcomm said. Developers who are turned on by the idea of testing the kit can apply to take part on Qualcomm's website.

The LTE Broadcast SDK can be downloaded from Qualcomm's website now.

At first glance it might not make sense for Qualcomm to spend its resources on developer tools. However, anything that results in sales of more devices with its processors (in this case, more apps) is good for the company's bottom line.

At the Uplinq conference, Qualcomm gave a sneak peek at the graphics capabilities of the upcoming 64-bit Snapdragon 810 chipset, as well. Smartphones and tablets powered by the processor will go on sale during the first half of next year, the company confirmed.



Mergers and Acquisitions

SAP $8.3 Billion Concur Buy Caps Pricey Cloud Push

September 19, 2014

SAP announced Thursday that it has reached an agreement to acquire cloud-based travel-and-expense management vendor Concur Technologies for a whopping $8.3 billion.

Assuming the deal is approved as expected by early next year, Concur's 23,000 customers and more than 25 million users will join SAP's cloud customer base. Bellevue, Wash.-based Concur was founded in 1993, went public in 1998, and currently has 4,200 employees.

SAP said Concur will complement its Ariba commerce network and Fieldglass contingent-workforcemanagement apps. Ariba, Fieldglass, and Concur combined manage more than $600 billion in spending annually, but SAP's investors may be more interested in the acquired company's revenues than profits. Concur reported $546 million in revenue during its last fiscal year, and it grew quickly. The company is on track for $700 million in revenue this year, according to SAP and Concur, but it is not profitable.

SAP's annual-cloud-revenue run rate was nearing $1.6 billion as of its second-quarter report. The Concur deal will vault it ahead of Oracle, which on Thursday reported a cloud run rate nearing $2 billion annually. At $2.3 billion, SAP is still well shy of revenue, which hit $4 billion in its last fiscal year.

Concur's app overlaps with the SAP Travel OnDemand app introduced in 2011, but SAP cited a list of benefits in the deal:

Only 30% of Concur customers currently run SAP apps, presenting an opportunity to introduce SAP products and services to the Concur customer base.

Concur can use the SAP Hana platform to bring advanced analytics and performance to businessexpense analysis.

Concur will collaborate with SAP's mobile team to build context-aware mobile applications for travel and entertainment.

In June 2012, Concur was awarded a 15-year contract to supply its services to multiple US federal agencies. SAP will migrate its own corporate travel and expense management to Concur's platform.

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Cloud deals seem to be getting increasingly expensive for SAP. It paid $3.4 billion for SuccessFactors in 2011 and $4.3 billion for Ariba in 2012. The $8.3 billion SAP will pay for Concur represents a 20% premium over the September 17 per-share closing price and will have a material impact on SAP's results. Bloomberg reported early this month that Concur was shopping itself to potential buyers including Oracle, Microsoft, and SAP.

Even before this deal, SAP announced early this year that it would defer to 2017 a long-stated goal of reaching a 35% profit margin by 2015. At the same time, CEO Bill McDermott set an ambitious new goal for SAP to reach 3 billion to 3.5 billion ($4.1 billion to $4.7 billion) in cloud subscription and support revenues by 2017.



Why Red Hat Needed To Buy FeedHenry, And What The Deal Means To Everyone Else

September 18, 2014

Red Hat, a tech vendor that sells operating-system and cloud software for big companies, made a necessary move today. It announced that it is buying FeedHenry, a startup with tools for building, running, and managing mobile applications.

That's a wise addition to Red Hat's existing platform-as-a-service (PaaS) capabilities for building and running apps, as more web traffic derives from mobile devices, and as workers start to expect that they can and should be able to do their work with such gadgets.

FeedHenry falls under the mobile-backend-as-a-service (MBaaS) label, and it's not the first time that type of startup has been snapped up. Some of the giants that haven't opted to buy cloud-based platforms for creating applications have opted to build their own tools in-house.

For Red Hat, buying FeedHenry is a quick solution to the increasingly critical need for cloud-based mobile-development tools that securely integrate well with companies' existing architectures. The deal should have serious implications, even if it's not the first prominent MBaaS acquisition. (Previously Facebook bought Parse, and PayPal bought StackMob.) Now there will be even more pressure to build or buy MBaaS and take advantage of startups already in that business, including Appcelerator, Kinvey, and Kony.

What's more, the deal could lead to a rapid drop in the commercial value of basic mobile-backend tools in the cloud, simply because Red Hat is the buyer. As Red Hat said on a question-and-answer page about the deal, "Red Hat has long shown its commitment to open-sourcing the technology it acquires. We have no reason to expect a change in this approach."

Not only will cloud infrastructure and platform providers need to bump up their mobile-backend offerings now, but they'll also need to find other ways to make money through new mobile services.

Microsoft already has Azure Mobile Services, which can work across operating systems and handle HTML5 applications. ABC News, Hearst, and Lexis Nexis pay for that product line.

Amazon in July announced mobile services that compete against Parse, which is an Amazon customer. Google has Cloud Endpoints, which became available for anyone to use in November. It's unclear how many companies pay for the service, but Google does have it at the ready.

VMware has incorporated the mobile backend from startup Kinvey to deliver the mobile offering it announced for vCloud Air public cloud last month. That's somewhat surprising given that VMware had previously invested in FeedHenry. The news today could easily have been that VMware acquired FeedHenry, but that's not what happened.

The fact that VMware ultimately chose Kinvey and not FeedHenry to provide the backbone could turn out to be a boon to Kinvey.

At the same time, the acquisition could also be a blessing for the other mobile-backend startups that remain independent.

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"I think what will change is, if anything, the competition starts to get more interesting now," Sravish Sridhar, Kinvey's founder and chief executive, told VentureBeat.

As for why Red Hat decided to make a move in mobile development in the first place, Sridhar thought the Linux distribution seller thought its core businesses were not growing as much as they used to, with new types of applications coming out.

"We need to have something for where our customers are going next," Sridhar said while trying to crystalize Red Hat's thinking.

Whatever Red Hat's reasons, the deal will be good to investors in FeedHenry, which in 2010 spun out of the Telecommunications Software and Systems Group at Ireland's Waterford Institute of Technology. Intel Capital led last year's $9 million investment in the startup, while Kernel Capital, Enterprise Ireland, and ACT Venture Capital also participated alongside VMware.



Industry Reports

"Cybersecurity expert Brian Krebs first discovered affected card numbers for sale on Sept. 2, the same day Home Depot says it began its investigation. The company later confirmed that hackers broke into its payment system possibly as far back as April."

Home Depot: 56 Million Cards Exposed In Breach

September 18, 2014

Home Depot confirmed Thursday that hackers exposed 56 million credit and debit cards during its months-long security breach.

The company also said it had eliminated the malware behind the attack from its payment systems. Card readers that encountered the malware, which Home Depot said was a custom strain its security team had never seen before, were removed from service. The company is also beefing up its payment data encryption capabilities and other security measures.

Cybersecurity expert Brian Krebs first discovered affected card numbers for sale on Sept. 2, the same day Home Depot says it began its investigation. The company later confirmed that hackers broke into its payment system possibly as far back as April.

"We apologize to our customers for the inconvenience and anxiety this has caused, and want to reassure them that they will not be liable for fraudulent charges," said CEO Frank Blake in a statement. The company is offering identity protection services to any customer that has used a card in its stores since April.

The Home Depot hack is far from the biggest in history -- a distinction that belongs to Adobe -- but it did outrank the 40 million cards exposed in Target's holiday season breach last year.



Verizon Could Sell As Many As 12,500 Cell Towers

September 15, 2014

Verizon Communications was opened up to the possibility of selling its wireless towers because of AT&T's agreement last year to sell and lease 9,700 of its cell towers to Crown Castle in a $4.85 billion deal, according to Verizon Communications CFO Fran Shammo. According to Cowen & Co. estimates cited by Bloomberg, Verizon has 12,000 to 15,000 towers. Macquarie Securities analyst Kevin Smithen wrote in a research note that he estimates that Verizon is looking to sell about 12,500 sites.

Shammo said at an investor conference on Wednesday that a deal for Verizon's towers always came down to price, and terms and conditions. "And some of the recent deals that have been done, the terms and conditions seem to be much more favorable," he said, according to a transcript of his remarks provided by Verizon.

"The AT&T deal was a good deal for them," Shammo added. "And it kind of opened our eyes and said, OK, well, maybe there is a way to get through this and protect all of our interests and get a deal that is

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palatable to us. So again, and that is why we said we are open to the idea and we will see what happens."

Under the terms of AT&T's October 2013 agreement with Crown Castle, Crown will have the exclusive right to lease about 9,100 AT&T towers for an average of about 28 years and will buy 600 other towers. Crown can buy the leased towers for $4.2 billion beginning in 2032. AT&T will sublease capacity on the towers from Crown Castle for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent. AT&T said it can add "additional reserve capacity," most likely new antennas, on the towers for future use.

Shammo did not specify what in the AT&T deal seemed more favorable to Verizon than previous terms or deals. The deal did give AT&T an infusion of cash to use for spectrum purchases and acquisitions, as Bloomberg notes, and also the ability to get additional space on the sites since it is leasing them to Crown.

Smithen wrote in his research note that, given the comments from Shammo that a tower deal would most likely resemble AT&T's deal with Crown Castle, Macquarie ran a model assuming annual rent increases of 2 percent and limited site-amendment activity for the first several years. "We believe that [American Tower] and [SBA Communications] are unlikely to pursue a deal under these terms," he wrote. "We do feel there could be private equity interest in the VZ towers if VZ were to carve up the portfolio into two or three parts."

AT&T is not the only carrier to sell towers in recent years. In September 2012, T-Mobile US agreed to sell the rights to 7,200 of its towers to Crown Castle for $2.4 billion.

The Verizon CFO added that Verizon wants to "to protect the ability for us to expand our network when we want on our own towers. Where we need space we want to get the space without having to go through a bunch of hoops in order to get that."

Shammo was expanding on comments Verizon Communications CEO Lowell McAdam made last week at a separate investor conference, when he said that when offers were made two years ago for Verizon's towers, "it was very easy to say no way, not interested. I think those deals are coming to us a little bit more now." According to a transcript of his remarks provided by Verizon, McAdam said that the terms are still not what Verizon would like and that there are "some very key terms that we won't compromise on, but if an opportunity presented itself to generate shareholder value around towers, I would do that."



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