Archives for September 2017

Is Your Office Job Killing You?

When you think about health crises in America, things like obesity, heart disease, and drug abuse come to mind, but what if your 9-to-5 job is the biggest threat you face?

When you study today’s business environment where more and more people are spending large percentages of their days sitting at desks, it becomes clear that office jobs may be the silent killer of millions of Americans. The question is: Is it too late to do something about it?

Here’s How Your Job is Impacting Your Health

You go to work in order to make a living. You make a living so that you can keep your family safe, comfortable, happy, and healthy. But what if your job is actually prematurely killing you? There’s a growing body of evidence that suggests office jobs, and the habits that come with them, are having a negative impact on the health of millions of Americans across all industries and sectors.

In order to better understand this health crisis, let’s take a look at some of the biggest factors in play and how they can be corrected.

1. Sitting is the New Smoking

Perhaps you’ve heard the claims that say sitting is the new smoking, but what does that actually mean? How harmful is an excessively sedentary lifestyle? If you study the numbers and analyze research reports, the data shows that excessive sitting leads to a host of health problems.

According to Dr. James Levine, director of the May Clinic-Arizona State University Obesity Solutions Initiative, “Sitting is more dangerous than smoking, kills more people than HIV and is more treacherous than parachuting. We are sitting ourselves to death.”

That’s a bold statement, but there’s ample evidence to back it up. Credible research studies have found that sitting for long periods of time on a daily basis leads to an increased risk of colon, endometrial, and lung cancer, as well as heart disease and even breast cancer.

The easiest solution is to break up long periods of sitting. This can be done in a number of ways, with standing desks being one of the more popular solutions. More exercise, especially during lunch breaks and after work, is obviously necessary as well.

2. Stress and Anxiety

By one estimate, workplace stress contributes to $ 190 billion in annual healthcare expenses, as well as 120,000 deaths. If that’s true, employment-related anxiety kills more Americans than diabetes, Alzheimer’s, and the flu each year. In other words, it’s an epidemic.

The problem with stress and anxiety is that these issues rarely get discussed out loud. There’s a certain stigma about mental health in the workplace and employees are indirectly encouraged to stay quiet.

Unfortunately, the only way to curb the volume of stress in the workplace is to raise awareness about it. Businesses need to raise awareness about this problem and encourage people to speak up so that solutions can be initiated.

3. Poor Air Quality

Air quality is something most people don’t spend any time thinking about. If you do contemplate it, it generally has to do with outdoor air pollution or the air quality within your home. You probably aren’t considering the air quality in your office, even though it’s a major problem.

“Poisonous indoor air is almost completely ignored by the press, the public and those who bankroll scientific research–it gets about 100 times less research funding than outdoor air, even though the average American spends about 90 percent of the time inside,” explains Douglas Main of Newsweek.

For starters, businesses need to do a better job of measuring indoor air quality so that they’re aware of the presence of potentially harmful particles. Then, businesses need to make a commitment to eliminating these toxins and encouraging healthier habits.

4. Terrible Diets

Poor dietary habits are another major problem. Not only are more people working through lunch and eating meals at their desks, but there’s been a rise in the popularity of fast food and takeout over the years.

The result is a malnourished and unhealthy workforce that’s also less productive due to their low quality diets. The best piece of advice is to take advantage of your lunch break by getting out of the office and eating something fresh and healthy.

“Look at your lunch break as recess — a time to release the ants in your pants, get your blood flowing and just enjoy a change of scene,” HuffPost Food and Health Editor Kate Bratskeir suggests. “Any chance to break the pattern of a sedentary life should be taken, and doing so can keep weight from creeping on.”

Prioritizing Better Health

There’s a huge push for healthy living in virtually every area of personal life in America. You’ll find doctors and groups lobbying for healthier habits and encouraging better lifestyles, but why is it that our poor work habits get ignored?

If we really want to fix America’s health crisis and encourage healthy living, it’s time that we start focusing on these issues. There is no perfect solution, but progress must be made.

Tech

Uniti Group: I Just Bought Shares Of This 16% Yielder

I take a lot of pride in the fact that my portfolio has never experienced a dividend cut. I came close once with KMI, but I managed to sell the position before the cut was announced. I spend a lot of my time during the due diligence process focusing on dividend-related metrics with a specific focus on sustainability and dividend growth prospects. Well, I just put that perfect record at risk with a purchase of Uniti Group (UNIT) shares at $ 15.01, or a very hefty 15.98% yield.

This ~16% yield is nearly double my previously high yield, which was Omega Healthcare Inc (OHI) at just a tad bit more than 8%. Typically, when I see yields in the double digits, I get nervous. Yields that high mean the asset is distressed. When looking at stocks like UNIT investors are receiving a very high potential reward for exposing themselves to a very high perceived risk. I’m not a huge fan of making these risky bets. But, I’ve spent a lot of time reading articles and commentary about UNIT published over the last couple of weeks focused on the company’s enormous ~40% fall since the start of August. I’ve read enough bullish commentary to get me interested in the stock, especially from contributors here at Seeking Alpha that I’ve come to respect over the years.

Honestly, I think this company’s recent drama has been exhausted by the Seeking Alpha community and I don’t have anything new to add to the conversation other than the fact that I am now long the stock. I like to keep followers up to date on my recent portfolio maneuvers though, so I wanted to write this piece. However, instead of re-hash the pros and cons of UNIT ownership here, I will link you to some of my favorite articles recently published regarding UNIT.

My absolute favorite REIT contributor here at Seeking Alpha is Brad Thomas. Mr. Thomas has led me to highly profitable investment decisions on several occasions. I respect his opinion in the REIT space above all others. In late August/early September, he published two bullish pieces on UNIT (when shares were trading at levels much higher than they are today). One of them remains behind SA’s Marketplace paywall, but another is free to the public. Here’s a link to Mr. Thomas’s most recent UNIT piece which includes an informative interview with UNIT’s CEO Kenny Gunderson and a reiteration of Mr. Thomas’ “BUY” rating on shares post Q2 results.

Another UNIT piece that really caught my eye was Dividend Sensei’s recent article explaining why he’s adding to his UNIT stake, making it his largest individual position. I really like Dividend Sensei’s work here at SA. He puts together a very in-depth analysis that is also easy to understand. I admit that I am much more risk-averse than he seems to be. He trades with margin and oftentimes seeks much higher yields than I do. I would never allow a company like UNIT to become my largest holding. Actually, I don’t imagine a future where UNIT ever makes up more than 1% of my overall portfolio (right now, it’s weighting is ~0.375%). Even so, I oftentimes find is opinions to be more than reasonable and while our portfolio management strategies aren’t the same (which is to be expected because no two people are in the same situation when it comes to personal finance and long-term financial goals), I still respect his opinion immensely.

I’ll talk more about this piece in a bit, but Ian Bezek’s recent article on the matter was valuable to me as well, especially in terms of trying to put this company’s potential risks into perspective against what seems to be an overly bullish consensus amongst SA contributors and readers, mainly, I think, because of UNIT’s incredibly high yield. Ian is long UNIT, although as of his latest piece, he hadn’t added to his position on more recent weakness. I think Ian has a keen eye for value and the fact that he too was long, played a role in my decision-making.

Alpha Gen Capital wrote a particularly bullish piece, hinting at the fact that UNIT could be one of the year’s best opportunities due to recent overreactions in the share price movement. This piece really breaks down the issues that UNIT is facing with WIN, some of the potential fallouts of legal/bankruptcy scenarios. All of this is very confusing and remains highly speculative, though my main takeaway is that it appears likely that, regardless of a WIN bankruptcy, UNIT will still be in a position of strength due to the Master Lease arrangement it has with WIN. Lease re-negotiation still appears to be a possible scenario here, which would change the landscape that UNIT operates in the present, but for the time being, I’m willing to trust in the payments from the Master Lease deal and rely on the strength of UNIT’s infrastructure, which should remain in demand moving forward.

And most recently, Beyond Saving and Dane Bowler have written pieces regarding the breaking news that broke this week surrounding more legal/head fund issues regarding WIN bonds defaulting. The comment streams following all of these pieces have been enlightening. There are bulls and bears on either side of the aisle, but I was pleasantly surprised to see that another one of my favorite SA REIT contributors, Bill Stoller, recently went long UNIT as well. As far as I know, Mr. Stroller hasn’t published an article focused on UNIT, but I’ve seen him make enough solid calls in the past to give weight to his recent purchase in my own decision-making process.

So, there you have it. This is a unique situation for me, investing in a speculative income play like this. I may not like to take big risks like this, but I have always said that I like to buy things when they’re cheap. At this point, I admit that UNIT could just as easily turn out to be a value trap as it could a tremendous value. Looking at the value of the company’s assets and its cash flow potential, I see validity in calls that have price targets in the $ 35-40 range. That would imply massive upside at today’s prices. Due to issues that UNIT faces with its over-reliance on distressed Windstream (WIN), I don’t foresee UNIT selling anywhere near the fair value of its parts anytime soon though, so their estimates really amount to a hill of beans.

There are so many rumors and potentially headwinds swirling around this stock that I think it’s nearly impossible to predict its future share price movements. I wouldn’t be surprised to see a short squeeze that sends the stock rocketing up to $ 20 or more tomorrow. I also wouldn’t be surprised to continued pressure on shares, sending them down into the single digits. I won’t attempt to signal any sort of direction of these shares; simply put, I acknowledge that I am speculating here.

This is why I bought a relatively small, ¼ position. I bought these shares because of the combined upside potential of the shares in a turnaround as well as the very high ~16% dividend yield. Right now, it appears that UNIT’s dividend is covered by AFFO, which management expects to come in somewhere in the $ 2.50 range in 2017. This is a good thing. However, as discussed at length in this article by Ian Bezek, a dividend cut may still be in the cards because without one, it will be very difficult for UNIT to raise cash.

UNIT needs to raise cash over time to continue to diversify itself away from WIN. Right now, WIN makes up ~70% of the company’s business. Management has stated plans to get this ratio down to ~50% in the short-term; however, this transformation will require additional acquisitions and I think it’s ludicrous to think that UNIT management will be able to find investments with cap rates that exceed its current dividend yield.

Because of this scenario, one could argue that a dividend cut for UNIT would actually be a good thing for the long-term. It might enable it to continue to diversify away from WIN exposure and grow its asset base. Michael Boyd wrote an article focused on this possibility today. This general point was that a distribution cut for UNIT is the right move for management to make. Once again, in the comment section, there are members on both sides of the fence of this issue. There are many question marks when it comes to UNIT in the present, but the one thing that is clear is that the company’s 16% has surely caught the eye on SA’s dividend and income community.

My portfolio’s rule regarding dividend cuts is cut and dry. A cut equals a sell, without exception. Well, being that an investment in UNIT breaks just about half of my stock screening rules anyway, I will be in wait and see mode if UNIT should slash its dividend. This is a small enough position for me that in the event of sudden weakness, it won’t do significant damage to my portfolio’s overall returns. On the flip side of this coin, UNIT’s yield is high enough to move the needle a bit in terms of my annual income expectations. Due to its extremely high yield, this ¼ position in UNIT is currently scheduled to generate the same amount of income as a typical full position with a “normal” yield for my portfolio would over a year in just a couple of quarters (my portfolio’s overall yield is just a tad above 2%).

Investing in distressed assets has led to riches for investors throughout the history. It has also lead to ruins. I’m not saying that I’m smart enough to pick and choose the winners, but I have seen enough bullish opinions from well-respected analysts/contributors to inspire me to make a small bet on UNIT. I don’t think these shares are for the faint of heart. There are so many rumors flying around regarding WIN that attempting to trade in and out of UNIT on a daily basis seems to be a fool’s errand as well. I plan on stashing the small position of UNIT shares that I bought at $ 15 away and accepting the income that they generate for my portfolio, whatever that may be. I bought one day before UNIT went ex-dividend, meaning that I’ve already captured one $ 0.60 payment. I don’t know how many more investors can expect at this level, but if management is able to maintain the dividend, I expect to do quite well here.

Although I realize that I may end up having to stay in this name for awhile depending on what happens moving forward, I don’t think this is a buy and forget type of stock. It’s both a speculative income play as well as a turnaround play. If it turns around, I think it will turn around quickly. I will continue to monitor the business and management’s attempt at diversifying its customer base. If management cuts the dividend I’m sure the share price will suffer and at that point I’ll be in it for the long-haul, hoping for a Kinder Morgan-like recovery post dividend cut. If the market receives better than expected news out of WIN and UNIT bounces drastically, I will be happy to sell my shares, taking my profits large short-term profits (these shares are held in a tax-advantaged account so that I don’t pay taxes on that hefty dividend).

Disclosure: I am/we are long UNIT, OHI.

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.

Tech

​Kubernetes takes a big step forward with version 1.8

If you want to manage containers in the cloud, Kubernetes is the program for you. Its latest release, Kubernetes 1.8, is better than ever.

Why is this important? Containers are moving quickly into becoming the way to run server-level applications both in data-centers and the cloud. According to a recent report from research house Redmonk, 54 percent of Fortune 100 companies are already running Kubernetes. Some of these are truly massive jobs.

For example, Ancestry.com has 20 billion historical records and 90 million family trees. This makes it the largest consumer genomics DNA network in the world. With Kubernetes, its deployment time for its Shaky Leaf icon service was cut down from 50 minutes to two or five minutes. Paul MacKay, an Ancestry software engineer and architect, wrote, “We’re very close to having everything that should be or could be in a Linux-friendly world in Kubernetes by the end of the year.”

Perhaps the most significant feature in this new release is role based access control (RBAC). This enables cluster administrators to dynamically define roles to enforce access policies through the Kubernetes application programing interface (API).

RBAC also includes beta support for filtering outbound traffic through Kubernetes network policies augments existing support for filtering inbound traffic to a pod. Pods are Kubernetes’ smallest deployable units. They are made up of one or more containers with shared storage, network, and a specification on how to run the containers. Together, RBAC and network policies are two powerful tools for enforcing Kubernetes organizational and regulatory security requirements.

This edition also brings the core Workload APIs to beta. This contains the most recent versions of Deployment, DaemonSet, ReplicaSet, and StatefulSet. The Workloads APIs is now stable. It can be used to migrate existing workloads to Kubernetes and for developing cloud native applications. The Workloads API also helps big data users by enabling native Kubernetes support for Apache Spark.

Another beta feature, Custom Resource Definitions (CRDs), provides a mechanism to extend Kubernetes with user-defined API objects. Why would you use this? One way is to use CRDs to automate complex stateful applications such as key-value stores, databases, and storage engines through the Operator Pattern. CRDs don’t currently have validation, but that’s expected in the next release.

With a nod to old-style computing, CronJobs is now in beta. This will enable administrators to run batch container workloads, such as nightly extract, transform, and (ETL) data warehousing jobs.

Diving deeper, Mike Barrett, Red Hat OpenShift project manager and Joe Brockmeier, Red Hat Linux container evangelist, wrote that their customers are looking forward to batch jobs, we believe that Resource Management Working Group “alpha code will enable the next wave in cloud computing.”

This gives developers access to hardware via Device Manager for access to hardware devices such as NICs, GPUs, FPGA, Infiniband and so on; CPU Manager: so users can request static CPU assignment via the guaranteed Quality of Service (QOS) tier, and HugePages so users can consume huge memory pages of any size supported by the underlying hardware.

A feature CoreOS, a container and Kubernetes power, is particularly excited about is Kubernetes advanced auditing going beta. This, said Eric Chiang, a CoreOS engineer “introduces formatted audit logs, policies to control what’s audited, and a webhook to send events to external services. Audit events can now be configured to include entire request payloads, aggregated in a central location. … The audit event format will only make backward compatible changes. This creates an opportunity for the community to start experimenting with ways of consuming, displaying, and acting on events from the audit log webhook. An early example of this is the audit2rbac tool, which consumes audit events and to automatically create RBAC profiles.”

Put it all together and you have a major step forward in making Kubernetes the do-it-all cloud container orchestration program.

PREVIOUS AND RELATED COVERAGE

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Enterprise container DevOps steps up its game with Kubernetes 1.6

The popular enterprise container DevOps program, Kubernetes, is now ready to handle up to 5,000 nodes in a single cluster.

Tech

3 Reasons To Buy Gilead

The Power Factors System is the backbone of my research service, The Data Driven Investor. It’s essentially a quantitative ranking system that selects stocks based on three powerful and time-proven return drivers: financial quality, valuation, and momentum.

Multiple academic studies have proven that companies exhibiting strong numbers in these three areas tend to beat the market in the long term, and my own backtesting work confirms that the Power Factors Systems can generate impressive performance over time.

The specific details behind the system are not particularly important, the main idea is using a combination of indicators and ratios to select companies with strong metrics in these main areas. Among others, the Power Factors System includes the following metrics:

  • Financial quality: the system looks for companies with superior profitability on sales, considering ratios such as gross profit margin and free cash flow margin. In addition, financial quality includes metrics based on return on capital, such as return on investment and return on assets.
  • Valuation: this covers classical valuation ratios like price to earnings, and price to free cash flow, among several other metrics based on similar concepts.
  • Momentum: the system picks companies that are outperforming expectations, and it also looks for stocks that are doing better than the broad market. In a nutshell, we want companies that are delivering performance numbers above Wall Street forecasts, and we also want the stock price to be reflecting such outperformance.

An equally-weighted portfolio comprised of the 50 best-ranking companies in the system produced an impressive annual return of 26.39% since 1999. By comparison, the S&P 500 produced a far more modest return of 3.77% per year over the same period.

In other words, a $ 100,000 position in the S&P 500 back in 1999 would currently be worth nearly $ 199,100, while the same amount of money invested in the Power Factors portfolio would be worth an exponentially larger sum of $ 7.8 million.

Data and chart are from Portfolio123, and the full list of companies in the system is available to subscribers in The Data Driven Investor.

The ranking system is based on a stock universe that excludes over-the-counter stocks in order to guarantee a minimum size and liquidity levels. Nevertheless, most stocks in the system are relatively smaller than those in the S&P 500, and in many cases far more volatile.

Interestingly, Gilead (GILD) is a noteworthy exception. The company has a market capitalization value of more than $ 109.6 billion, and it ranks remarkably well across the three dimensions in the Power Factors System. These particularities make of Gilead a particularly intriguing name among the stocks selected by the quantitative model.

Case Study: Gilead

Gilead is a leading player in the biotech space. The company is focused on life-threatening infectious diseases, with a big presence in treatments for HIV, hepatitis B, and hepatitis C. Gilead has made a series of acquisitions to expand its portfolio in cardiovascular diseases and Cancer over the past several years. More recently, the company made a big move with the acquisition of Kite Pharma (KITE) for $ 11.9 billion in cash. This deal could provide a big boost to Gilead in cell therapy and oncology treatments.

The business is under pressure due to lower sales and increasing competition in Hepatitis C (HVC) products.

On the other hand, Gilead has a promising pipeline of new developments across different areas, and this should drive increased revenue growth over the years ahead.

Importantly, the company has an impressive track record of financial performance over the long term, and profitability levels are considerably above-average. The following table compares key financial metrics for Gilead vs. other big biotech companies, such as Amgen (OTC:AMGM), Celgene (CELG), and Biogen (IBB).

5 Year Sales Growth.

Return on Assets (ROA)

Return on Investment (ROI)

Operating Margin

Net Margin

Gilead

29.4%

21.1%

31%

57.8%

42.9%

Amgem

8.1%

10.4%

13%

44.7%

35.5%

Celgene

18.3%

9.1%

11.7%

27.6%

21.3%

Biogen

17.8%

15%

21%

38.7%

28.1%

The numbers are quite clear, Gilead ranks above the competition across all of the five indicators: sales growth over the past five years, return on assets, return on investment, operating margin, and net margin.

Financial performance over the years ahead will depend on variables such as demand for Gilead’s new products, and this is always a source of uncertainty. Nevertheless, the company’s track-record and current performance are a positive reflection on its management team and its ability to deliver attractive returns for shareholders.

In terms of valuation, Gilead stock is fairly conveniently priced, if not downright undervalued. The stock trades at a price to earnings ratio around 9.15 times earnings over the past year. This is a huge discount versus the average company in the S&P 500, which trades at a price to earnings ratio around 21.5.

Looking at valuation ratios in comparison to industry peers, Gilead also looks quite cheap in terms of price to earnings, forward price to earnings, price to free cash flow, and price to sales.

P/E

Forward P/E

P/FCF

P/S

Gilead

9.1

11.2

10.1

3.85

Amgem

16.9

14.5

18.7

5.9

Celgene

44.7

16.1

26.8

9.2

Biogen

29.8

13.7

18.21

5.7

Offering a similar perspective, the following chart shows how Gilead’s valuation has evolved over the past several years, and current entry price looks quite compelling by historical standards in terms of price to earnings, price to free cash flow, and enterprise value to EBITDA.

ChartGILD PE Ratio (ttm) data by YCharts

The bottom line is that Gilead stock is substantially cheap, be it in comparison to the broad market, when compared to industry peers, or by the company’s own historical standards.

Momentum is favoring the bulls. Both revenue and earnings came in above Wall Street expectations last quarter, and analysts are adjusting their earnings forecasts to the upside. The average earnings estimate for Gilead in 2017 was $ 8.35 per share 90 days ago, and it has steadily increased towards $ 8.78 currently.

Stock prices don’t just reflect fundamentals, expectations about those fundamentals are tremendously important. When expectations are on the rise, this generally means that stock prices are rising too. On the back of increasing earnings forecasts, Gilead stock has substantially outperformed the S&P 500 index over the past several months.

ChartGILD data by YCharts

Past performance does not guarantee future returns. However, profitability metrics, valuation, and momentum are all positive forces for investors in Gilead on a forward-looking basis.

Disclosure: I am/we are long GILD.

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.

Tech

Ikea’s Latest Acquisition Will Help Assemble Your Ikea Furniture

One of the most popular jobs on TaskRabbit, a service that lets you hire workers for quick gigs, is assembling Ikea furniture. So perhaps it’s no surprise that the Swedish retail giant has reportedly acquired the startup for an undisclosed price.

TaskRabbit has only a few dozen full-time employees, but it is a platform for a large number of independent contractors who help customers with all sorts of errands, handymen tasks and, of course, furniture assembly.

According to tech news site Recode, Ikea will treat TaskRabbit, which is reportedly profitable, as an independent subsidiary and keep on its CEO Stacy Brown-Philpot. Recode sees the deal as a strategic acquisition at a time of rapid change in the world of retail and home delivery:

The purchase of TaskRabbit was fueled by Ikea’s need to further bolster its digital customer service capabilities to better compete with rivals likes Amazon, which has stepped up its home goods and installation offerings. The purchase is Ikea’s first step into the on-demand platform space.

TaskRabbit had already struck a pilot partnership with Ikea around furniture assembly in the United Kingdom and also had marketed its workers ability to put together Ikea items in the U.S. and elsewhere.

TaskRabbit has received investments from a number of prominent venture capital firms, including Shasta Ventures, Lightspeed Venture Partners and Founders Fund.

Currently, customers are able to hire “rabbits” in around 40 U.S. cities.

TaskRabbit is one of the most high profile of the so-called “gig economy” companies, which connect customers with workers on an independent contractor basis. Other such companies include home cleaning service Handy, and the car-hailing services Uber and Lyft.

The “gig” business model is popular with investors because it can grow quickly, and allows companies to try to avoid the costs and legal entanglements of hiring staff. In recent years, however, workers on such services have won several court challenges claiming they are not contractors, but are instead employees.

Ikea did not immediately respond to a request for comment about the acquisition.

Tech

In France, Snap's Discover news feature gets 10 million monthly users

(Reuters) – Snap Inc, searching for ways to reinvigorate a slowing growth rate and increase advertising revenue for its Snapchat messaging app, said this week it has racked up 10 million users for its Discover news and video feature in France a year after launching there.

The figure, which has not previously been reported, is equivalent to about 15 percent of the country’s population.

Internationally, the Snapchat app has 173 million daily active users, the company said in August, while rival Instagram, owned by Facebook Inc, said this week it has 500 million daily users.

Snap’s partners in France such as Le Monde and Cosmopolitan, which supply video and news for the Discover feature, were getting “significant” revenue from ads, Nick Bell, Snap’s vice president of content, told Reuters, without giving an exact figure.

Snap, which generates revenue from advertisers, shares that revenue 50-50 with its publisher partners.

The company has yet to turn a profit since its messaging app launched in 2012. Since its initial public offering in March, its shares are down almost 18 percent, to around $ 14 per share.

France was the first international launch of Discover. It has also been released in Germany, the Middle East and North Africa, but the company is taking a slow, deliberate approach to expansion as it works at developing strong partnerships with publishers, said Bell.

Reporting By Jessica Toonkel; editing by Anna Driver and Rosalba O’Brien

Our Standards:The Thomson Reuters Trust Principles.

Tech

Sell-Off In Tech – Cramer's Mad Money (9/26/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Tuesday, September 26.

Many investors are wondering what’s wrong with the high flying tech stocks. “Let me give you my take on the dramatic see-saw-like action in the leaders of this market. First, let’s tackle the real cause of the weakness that started last week: technology. Come on, you all know the epicenter here. It’s Apple (NASDAQ:AAPL).” The talk about tepid iPhone 8 sales along with iPhone X coming in November, Apple and its suppliers stocks fell on this news.

Cramer reiterated, “Buy Apple, don’t trade it.” Betting against Apple means getting odds of losing in your favor. Apple makes the best consumer products and is cheap trading at 14 times 2018 earnings compared to consumer product companies and the average stock of the S&P500. It’s worth noting that they have $ 260B in cash as well.

“So, the proximate sell-off cause, at least number one? Apple. Now, I am saying it’s been pretty neutralized. Sure, the stock can go lower, but at these levels, it’s beginning to reflect the failure of the iPhone 9, and that product doesn’t exist,” said Cramer.

The second concern of the tech stocks is the cloud. After Adobe (NASDAQ:ADBE) reported a surprise disappointing quarter, CEO Shantanu Narayen said on the conference call that cloud growth is slowing temporarily. This led to investor panic. Which led to a sell-off in everything cloud-related.

“Remember, the cloud lives in the data center. So if the cloud’s slowing, the data center should be slowing, too. Yet last night Nvidia (NASDAQ:NVDA) announced that its new line of chips won business from three of the largest Chinese data center operators out there: Alibaba, TenCent and Baidu, which are growing like mad. I’ll match those orders against a defeat at Tesla any day of the week,” added Cramer.

“Bottom line? We’re at the end of a good quarter in a good year, and we’re seeing profit-taking and forced selling of the winners while some money’s going into cheaper stocks and, when you put it that way, there’s a kernel of rationality to the entire move,” concluded Cramer. This does not mean selling is over, but the weakness should be used as a buying opportunity.

CFO interview – Red Hat (NYSE:RHT)

The stock of open source software solutions provider Red Hat went up on better than expected earnings and guidance. Cramer interviewed CFO Eric Shander to find out more about the quarter.

Shander said that the cloud world is changing. “Everybody’s talking about it being a hybrid cloud world; I can tell you, whether it’s on-premise, off-premise, they’re looking for optionality, they’re looking for multiple cloud providers, they’re looking for flexibility,” he added.

The company has been investing in application development and emerging technologies which made them $ 150M in the last quarter. The result of their investments can be seen in the strong growth. “Every single industry is transforming. And not only that – there is an IT implication related to that. They’re looking for agile development and that’s where a lot of our technologies are helping enable that,” he added.

Their sales to the Federal government have been strong and not capped as thought by many. Apart from that, Europe is a growing category for the company’s business. Bottom line is that Red Hat has all the components to enable companies to run successfully in the cloud.

Carnival Corp (NYSE:CCL)

The stock of cruise-liner Carnival went down on fears of hurricane damage. However, after the solid earnings and hurricane-adjusted guidance, the stock rallied.

“The most valuable currency in this business isn’t dollars. It’s not gold. It’s not even bitcoin. It’s the benefit of the doubt. When the market realizes that a CEO deserves it, their stock tends to catch fire. If there’s one thing we can bank on, it’s that he’s not going to be tripped up by some storms, even really bad ones,” said Cramer referring to Carnival CEO Arnold Donald.

Donald held the Costa Concordia catastrophe, which resulted in 32 deaths, really well. Apart from that, they got through the Ebola and Zika crisis as well. “Donald seems ready for any disaster and he always seems to have a back-up plan,” said Cramer.

Donald raised the lower end of the guidance despite the hurricane and said that there is only 1% cancellation rate. Cramer calls the weakness in the stock a chance to buy it.

COO interview – VMware (NYSE:VMW)

VMware is the virtualization infrastructure solutions provider which reported a good last quarter and its stock is down just $ 4 from its recent highs. Cramer interviewed COO Sanjay Poonen to hear what lies ahead.

Poonen said that more companies turn to cloud-based solutions in order to cut costs and connect with the digital world. Many companies are adopting to the hybrid approach to the cloud. “As you think about companies and their future, they have to decide how much data center capacity they want to use now. Some people feel they run a data center very well. We can help them modernize it with software, and that’s what we do very well. Some of the companies say, ‘Listen, I don’t want to expand a lot of my data centers. I want to use the new hardware economy.’ The new hardware economy is not just the traditonal players, but Amazon Web Services, Microsoft Azure, Google, IBM,” he added.

VMware is an important name in data center business and they have saved enough energy with their virtualization to power 40% of US homes for a year. They have partnered with AWS to bring scalable solutions to the public and private cloud.

“If you could get the benefit of both worlds, the same tools that you’ve known at VMware for managing and automating that, but get the data center capacity on the fly, that’s what we’ve brilliantly innovated here,” said Poonen. Their aim is to help high-profile customers on-premise and private cloud operations, pair those functions with public cloud etc.

“We think there’s going to be a good amount of spending in the private cloud on-premise and into the public cloud. And we feel we’re one of those quintessential companies that can bridge both sides of that chasm. I think there’s innovation to be had in tech,” concluded Poonen.

Viewer calls taken by Cramer

Emerge Energy Services (NYSE:EMES): Cramer thinks the entire fracking group is a sell.

Supernus Pharma (NASDAQ:SUPN): The migraine business is very competitive.

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Ford And Lyft Partner to Bring Self-Driving Cars to Public Roads

Ford Motor (f) has struck a partnership with Lyft to develop and test self-driving vehicles on the ride-hailing company’s growing network of passengers.

Ford, which announced the partnership in a blog post early Wednesday, said that the goal is to put self-driving vehicles onto Lyft’s ride-hailing network. Just don’t expect to see self-driving Ford vehicles shuttling around Lyft customers anytime soon.

The initial aim is to combine the strengths of each company. For Ford, that’s large-scale manufacturing and development of autonomous vehicles technology, which its partner Argo AI is currently working on. Lyft, meanwhile, has a vast network of customers across the United States that has given the startup greater insight in how people move within cities. Both companies have fleet management and Big Data experience, according to Ford’s blog post written by Sherif Marakby, Ford Vice President of autonomous vehicles and electrification.

Ford, which is now being led by CEO Jim Hackett, hopes to learn how to create self-driving cars that can easily connect with a platform like Lyft’s so they can be quickly dispatched to pick up customers. The automaker also wants to use Lyft’s data (and its own) to determine which cities would be worth launching a self-driving vehicle service and what kind of infrastructure would be needed to properly service and maintain a fleet of self-driving vehicles.

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Lyft is taking a more collaborative approach to self-driving cars, unlike rival Uber. Earlier this year, Lyft launched an open platform designed to give automakers and tech companies working on self-driving cars access to its ride-sharing network of nearly 1 million rides per day.

And even before the open platform began, Lyft has been locking in partnerships. The company landed its first major partnership in January 2016 with GM, which like Ford also wants to eventually deploy self-driving cars with Lyft’s network.

Lyft has made at least three other partnerships in 2017, including startups Drive.ai and nuTonomy, and Waymo, the Google self-driving car project that spun out to become a business under Alphabet (googl).

Tech

FCC: There’s ‘Effective Competition’ in the Wireless Market

A divided Federal Communications Commission on Tuesday approved a report that found for the first time since 2009 there is “effective competition” in the wireless market, a finding that could help Sprint and T-Mobile to merge.

Reuters reported last week that the wireless carriers are close to agreeing on tentative terms on a deal to merge, a major breakthrough in efforts to merge the third and fourth largest U.S. wireless carriers.

The transaction would significantly consolidate the U.S. telecommunications market and represent the first transformative U.S. merger with significant antitrust risk since President Donald Trump’s inauguration.

FCC Chairman Ajit Pai said “most reasonable people see a fiercely competitive marketplace” citing intense price competition carriers. “This is strong, incontrovertible evidence,” he added.

The FCC approved the report by a 3-2 vote.

A decade ago there were seven major U.S. wireless carriers and today the largest four carriers led by Verizon Communications and AT&T control 98.8% of the U.S. market, according to the FCC.

The FCC would need to approve any merger as would the Justice Department. In 2014, the FCC and Justice Department told the carriers they would not back a merger and the companies abandoned merger talks.

FCC Commissioner Jessica Rosenworcel referenced the potential looming merger.

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“While this report celebrates the presence of four nationwide wireless providers, let’s be mindful that a transaction may soon be announced that seeks to combine two of these four,” Rosenworcel said.

“For my part, any transaction before us will require someone to explain how consumers will benefit, how prices will not rise, and how innovation will not dissipate in the face of so much more industry concentration.”

She added: “Someone will also need to explain how having fewer potential big bidders in upcoming spectrum auctions will not render our most potent distribution mechanism substantially less powerful.”

FCC Commissioner Mignon Clyburn said the competition report “takes a decidedly myopic view of the ecosystem, and instead focuses only on ‘competition in the provision of mobile wireless services.’ This is like a doctor looking at one organ and pronouncing a patient fit as a fiddle.”

FCC Republican Commissioner Mike O’Rielly praised the report and noted intense wireless competition has led to price cuts, despite carriers investing $ 200 billion in networks over the last six years.

AT&T said in a statement the report shows “with an array of providers, pricing plans and service offerings to choose from, there’s no question that consumers are reaping the benefits of a competitive industry.”

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'Star Trek: Discovery' Is Worth the Price of CBS All Access—Maybe

Last night, CBS finally took the wraps off its oft-delayed new show, Star Trek: Discovery. The two-part debut (“The Vulcan Hello” and “Battle at the Binary Stars”) gave fans the first new TV Trek since Star Trek: Enterprise ceased subspace transmission in 2005. And they were ready for it—last night’s premiere set a single-day record for new signups for CBS’ All Access streaming service. Those who ponied up for an account got both parts of the debut; those who didn’t only got the first episode, which aired on broadcast like something from the 1990s.

Is it worth the money? Was it worth the wait? WIRED writers Adam Rogers and Brendan Nystedt, two life-long Trek fans, boldly agreed to discuss the newest venture. Shields up! Red alert! Spoilers ahead!

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Adam Rogers: All right, Brendan. My mind to your mind; my thoughts to your thoughts. How are we feeling? On the one hand, I am glad to have some Star Trek to watch, and while I got all aflutter watching a Klingon armada get #disruptive on the United Federation of Planets, some part of my brain was definitely spinning on the story problems and possible solutions I wrote about last week. Like, it spent two hours on the kind of character deployment and story set-up that Deep Space Nine could’ve knocked out in a single cold open. And this definitely wasn’t explore-strange-new-worlds-seek-out-new-life Trek. This was dark Starfleet at war, with a captain who meets her Kobayashi Maru and a promising officer who ends up sentenced to life in the stockade for mutiny.

Hey, relatedly, there is no piece of culture I can embrace wholly where Michelle Yeoh dies an ignominious death. I didn’t like it in Sunshine and I don’t like it here. She was in Heroic Trio, for pete’s sake. She coulda taken that Klingon.

Brendan Nystedt: I saw it coming from a lightyear away but still, ouch. What I didn’t see coming was that they’d also kill the Klingon cult leader, T’Kuvma.

Overall, even with my quibbles over the first two episodes, I’m still holding off judging it entirely. I think the two-parter backstory was an intriguing way to open this new show but it also worries me that the CBS All Access “first taste is free” thing means we don’t have a sense of what the bulk of the story will involve because the network is putting a lot of window dressing in the episodes people can watch for free. Maybe fans who didn’t like the introduction would learn to love where it pivots to next.

Was the opening dark? Yeah, it was. I appreciated that Michael Burnham wanted to get out there and check out the OUO (object of unknown origin) and that they bring up the balance between exploration and war. I think that darkness is something this time period can exploit more since we’re firmly in the “cowboy diplomacy” days of Kirk.

Even with my Star Trek brain fully engaged (heh), I was surprised that the drama worked on me. When Burnham disables the captain with a perfectly-executed Vulcan Nerve Pinch, I was stunned. When that Klingon ship took out the USS Europa while de-cloaking, I recoiled. As much as I was scrutinizing the uniforms and the Klingon makeup, the show worked for me on a basic level.

Rogers: Yes, yes. Me too.

But be honest. If the set up for this show was that it is set 100 years after Voyager rather than a decade before TOS, would it be any different? In what sense is this a prequel? The Klingons do not look like Klingons we have seen. The instrumentation on the ships is new. The uniforms are new. The pew-pew of the phasers and photon torpedoes are new. The Federation starships don’t look anything like the ships of the era—were no Constitution-class starships deployed at that point? Why don’t the Bussard collectors have the light-up pinwheel spinny effect? Why don’t the warp nacelles have to be as far from the crewed parts of the ships? What are these Star Wars communications holograms doing here?

Flip side, I loved seeing the rethought handheld phasers and communicators; they really are elegant. And I liked the bridge noises being the TOS bridge noises. But other than knowing Sarek is Spock’s dad, what’s prequel-y about this?

This isn’t necessarily a complaint. I like the story so far. I just feel about it the same way I did about the reboot movies’ alternate timeline. As a fan, I don’t need it. I dunno; maybe it’s all a set up for the last shot of the season being a TOS-authentic Constitution-class Enterprise heading off on Captain Pike’s five-year mission.

Nystedt: The look of the show is something I’m still reconciling, but Trek has been here before. Whether it’s the retcons of Star Trek: Enterprise or especially the 1979 Motion Picture, designs and tech change a bit to suit the time. I’ve never believed that the movie Enterprise was the same Enterprise as the TV show, and yet it’s known to be a “refit.” Unless it’s the ship of Theseus, the movie Enterprise just can’t logically be the same as the one from the show!

I digress … I’m also unsure why they decided to make this a prequel, especially if it’s going to try to do its own thing. I’d understand if it were for the sake of fanservice but as of yet there have been a limited number of references to the universe. I’m hoping they’ll at least hint at conforming to a style closer to what we know from TOS, but I’d be OK if that were a reinterpretation, too.

The Klingons were another sticking point: I was cool with showing this rogue gang of Kahless-worshippers but when the rest of the house leadership Skypes in to T’Kuvma’s sarcophagus ship I was disappointed. Enterprise tried to give the makeup and characterization changes of past Klingons some kind of sense, but I felt like even that explanation couldn’t remotely cover for why all these Klingons looked different. At least they were completely subtitled—that I really dug.

Rogers: I liked hearing all that Klingon, too—and then seeing the universal translator kick in when T’Kuvma called the Shenzhou. Cool starship names all around, actually. I loved the references to a USS Yeager.

Speaking of, though, you make a good point that we don’t even really know what the story of this show will be. We haven’t yet discovered the Discovery, presumably the ship we’ll spend the bulk of the season on. And despite my gripes, I’m psyched for it. I don’t know if a lot of people will spring for this show, but I’m glad it exists, and I’m looking forward to the season. Glad there’s more Star Trek in my life.

Can I tell you a separate story? I know that the first ep did great in the ratings, 9.6 million people. And CBS is staying that it got a big pulse of new subscribers to All Access, but not giving out numbers. So OK. Last night I watched the first ep on my DVR and then went to subscribe to All Access to watch the second.

First I tried to do that via Apple TV, but apparently my Apple TV is so old that it doesn’t really know how to do two-factor authentication. You have to get a verification code from your phone and then type it in along with your password, apparently, but timed with the deftness of a longtime gamer, which I am not. I gave up.

I went to the app on my iPad, which seemed ready to let me sign up, until it decided that my zip code was invalid. Several times. (Narrator: It was not invalid.) Finally I logged all the way out and then logged in with Google, which somehow convinced the app my zip code was real. At which point I learned that payment was going via my Apple account, which makes me wonder why I’m paying CBS instead of just Apple. This all took about 45 minutes to figure out, by the way.

This is not an onboarding process anyone should be proud of, is my point.

Nystedt: That’s a huge bummer! I had signed up for my All Access account earlier in the day through the website, but that wasn’t ideal either. Like, I’m happy to give my money over to Trek, but I wish it were more streamlined. One disappointment for me is that even though Discovery is a launch title for the service, the rest of the Star Trek offerings are a mix of HD and non-HD. Voyager and DS9 haven’t been restored (and they might not ever be) but only about a half of The Next Generation and none of the original show appear in their HD incarnations.

And so, even though we get a new show, Trek continues to get dissed. It’s a treasure of global popular culture but it just doesn’t get the respect it deserves, whether it’s from CBS or Paramount. I’d go so far as to say that MGM is giving Stargate better treatment with its upcoming streaming service, offering up just that show’s back catalog (and movies!) for a flat rate plus the promise of new content to come.

And when you have to look to Stargate to find a decent single-franchise online service, you know it’s gonna be a long road… But, I got faith of the hearrrttttt!!!

Rogers: No Sto’vo’Kor for you, pal. Eesh. Anyway, no matter what these streaming services show or don’t show, they can’t take the sky from me.

Nystedt: Awww man I was looking forward to seeing my ancestors in the afterlife. One thing I enjoyed seeing yesterday was how fandom reacted to the show. Definitely check Twitter for #OnFleet—some excellent, funny commentary there, particularly from nerds of color and women fans.

So, next Sunday, we finally get to see the titular ship. Somehow, Burnham gets out of her life sentence, and I guess we’ll get more Saru, too. I’m on the Discovery train, are you feeling optimistic?

Rogers: I’m with Ambassador Spock. There are always possibilities.

Nystedt: LLAP and tune in next week.

Tech