The UpStream (Page 186)

Wireless Kill Switch Heads to Congress

posted Saturday Feb 15, 2014 by Scott Ertz

Wireless Kill Switch Heads to Congress

Last week, a bill creating a state-wide wireless kill switch was proposed in California. The pitched reasoning for the capability is to terminate a phone that has been reported as lost or stolen. The state believes that, if a stolen phone can be made useless, many or all mobile thefts would be eliminated.

The problem with this theory is that the carriers, the CDMA carriers at least, already have this capability. Educated consumers know to call Verizon or Sprint before purchasing a used phone and verify that the ESN is clean. This has not slowed down the theft of Sprint or Verizon handsets, however.

On the other hand, GSM technology is not based on the device at all. In fact, many GSM carriers do not often have an accurate record of what device is on your account. This is because of SIM cards, which are the only technology that is important to the carrier. This technological difference is why GSM carriers often do not have the ability to block a handset: they do not know it exists.

So, with the track record of an existing "kill switch" not working for some carriers, and a massive technological hurdle to overcome preventing its implementation on others, why would California be trying to mandate it? Let's take a look at the national response to the proposed bill for a possible answer

Upon hearing about the state's bill, a similar bill began its process on the national level. This is the second time a kill switch has been proposed on the national stage, with the first attempt being defeated rather quickly, mostly because of the facts raised above, presented by the carriers.

With Congress knowing about the ineffective nature of the kill switch as well as the difficulty of implementing it in some cases, why are they, again, trying to mandate it? Many believe that it is a way for the government to get more involved in our lives. With the ability for the federal government to kill a phone remotely, they would have the ability to interfere with things like protest planning or documentation, or anything that they consider to be harmful to their narrative.

While this might sound a little conspiracy theorist, if you consider the history of governments vying for power, there are a few rights that are infringed early, privacy (NSA), healthcare (Obamacare) and free speech and the right to assemble (this bill), it does make those conspiracy theories sound a little more credible.

Do you believe that this bill, titled the Smartphone Theft Prevention Act, is truly intended to prevent thefts, or is this a power grab? Sound off in the comments.

Alternate Messaging Heats Up with $900 Million Viber Purchase

posted Saturday Feb 15, 2014 by Scott Ertz

Alternate Messaging Heats Up with $900 Million Viber Purchase

It is always interesting to watch an industry who has been stable with the same players for years get shaken up when a collection of new players decide to enter. The market that currently everyone seems to be jumping into is messaging. Now, the messaging industry has been fairly consistent with Skype, AIM and Yahoo! Messenger being the big players for ages. Near the end of their run, Myspace tried to enter the market unsuccessfully, and Facebook has certainly made a name for themselves in the market, but in the last couple of years, we have seen a plethora of new names.

With services like Kik, Snapchat and Whatsapp bringing both similar and new features to the market, it is time for the big boys to rethink their places in the market. It is also time for companies who are newly successful Internet conglomerates to snap up some of the small guys, sometimes for a lot of money. For example, Microsoft recently picked up corporate messaging startup Yammer for $1.2 billion.

This week, Japanese retailer and purchaser of all things digital Rakuten has purchased Viber, a direct Skype competitor, for $900 million. This is not Rakuten's first purchase of a successful brand, with retailer and ad platform Linkshare joining their family as well.

What can we expect from a Rakuten-owner Viber? Under Rakuten's leadership, had their largest ever Thanksgiving weekend in 2013. Linkshare has become the first and only continually sustainable affiliate network and the largest pay for performance affiliate marketing network on the Internet. That means we can almost certainly see Viber find a financially stable place in the market, probably quickly.

Their current business model is not bad: free service-to-service calls, and paid off-network calls. This business model is almost identical to the Skype model, with Skype having the added bonus of business users, who pay a premium for added video quality options.

Hiroshi Mikitani, founder of Rakuten, gave a look into some of his plans for Viber, saying, "With Viber, we're going to link up messaging with e-commerce." Considering the company has always been focused on retail and marketing, it makes sense that the plan for the acquisition would have to do with retail. He added,

In the future, e-commerce will become a more communication-based transaction. Live interaction is going to be critical for all Internet services. Rakuten is at the start of a new era.

My guess is he is speaking about more than just "Click here to talk to a live agent" buttons on the Internet. It could mean something more like Amazon's "Mayday" button on the Kindle HD products, or it could be something more than we can come up with.

How do you think Rakuten plans on using their newest acquisition? Let us know in the comments.

Microsoft's Commitment to PC Gaming in Question

posted Saturday Feb 15, 2014 by Scott Ertz

Microsoft's Commitment to PC Gaming in Question

There was a lot of question about Microsoft's commitment to PC gaming 6 months ago when they shuttered their Games for Windows Live brand. Some feared that the full shutdown of the brand meant the end of PC gaming from Microsoft, though Microsoft urged gamers that their commitment had shifted to the Xbox brand on Windows 8.

As a show of good faith, the company brought in Jason Holtman, a former Valve employee, who had helped shape the service we know as Steam. When he joined the company, he said that he would be working with developers to bring new titles to the platform with the goal of "making Windows a great platform for gaming and interactive entertainment." A noble goal for a new member of the Xbox family.

That goal was short-lived, it would seem, as Holtman's LinkedIn profile shows that he has left the company. Microsoft confirmed the departure to Neowin. What could Holtman's departure from Microsoft signify?

There are a lot of possibilities. The most popular this week is that Microsoft has actually nearly abandoned PC gaming in favor of a stronger focus on their Xbox One console. It would make sense that Microsoft would be putting larger than normal resources behind the console business right now with the Xbox One just hitting the market. A console without the power of a large launch catalog isn't going to have huge success.

I have an alternate theory, however. Microsoft's Ken Lobb recently said in relation to the corporate restructuring,

Now we're one {unified} Microsoft. I don't see this as pressure. I see it as an opportunity. We have more support internally to support PC more. That's great! My only expectation would be, please let us continue to do that over a five-year period so we can have real impact. That's how it feels right now. We're getting very strong support internally. So we're really going after PC.

That can be evidenced by looking at the Xbox-branded Windows titles available. There are over 60 in the store that are considered "featured" at the time of this writing. These titles span from casual games such as Solitaire and Mahjong to large titles, such as Adera. That certainly suggests some sort of commitment to gaming on the PC, though probably not the type that a hardcore gamer might be interested in. Perhaps Microsoft is going after the casual market, because that has succeeded on iOS and Android already.

Twitter Files First Earning Statement Since Going Public, Posts $500 Million Loss

posted Sunday Feb 9, 2014 by Nicholas DiMeo

Twitter Files First Earning Statement Since Going Public, Posts $500 Million Loss

As popular as Twitter may be, if it doesn't make money, it's not going to be here forever. This week Twitter had to finally post its earnings, after going public last quarter amidst filing deceptions and SEC investigations. So how much money did Twitter make? It should be no surprise here that the company lost money in its first quarter. And a lot of it.

To start, Twitter's revenue for Q4 was up 116 percent to $243 million. You can attribute that gain to whatever reason you'd like, but one could guess that going public would cause money to come in a bit quicker than before. It apparently also causes money to fly out the door. It has to be that, or Twitter has been burning money like this since the beginning of forever, and it's now finally on record. The company posted a net loss for Q4 of $511 million and a full year net loss of $645 million. So Twitter lost half a billion dollars in one quarter. Well done.

So what does Twitter's fearless leader, Dick Costolo have to say about all of this? "Successes all around!" Of course, I'm paraphrasing.

Twitter finished a great year with our strongest financial quarter to date. We are the only platform that is public, real-time, conversational and widely distributed and I'm excited by the number of initiatives we have underway to further build upon the Twitter experience.

So his insane opening statement means one of two things. It could mean that Dick can't read or see color, because a big red "$511 million" on a piece of paper would sure cause most people to react with something more along the lines of, "well, this didn't go as expected." Or it could mean that Twitter has actually lost more than $511 million in a quarter before, so this blunder isn't too terrible in the grand scheme of things. Either way, a loss is a loss and should not be buried under touting your platform as a real-time, conversational and widely distributed money pit platform.

To be fair, in the SEC filing, Twitter does explain the loss.

GAAP net loss was $511 million for the fourth quarter of 2013 compared to a net loss of $9 million in the same period last year. The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP.

So stock expenses make up most of the loss, with an ever-growing revenue. If this doesn't sound like 1999 all over again, I don't know what does. Because of Twitter's decision to not need a business model, we've been covering the company's disasters and predicting its downfall for a while now. This is despite investors throwing piles of money at Twitter for the past five years, like we were about to bust open some more dot coms or something. And until now, anyone questioning Twitter's decline was shot down with facts highlighting growth and popularity. Now that it's on record, perhaps the tide will finally shift and investors will begin to realize that history is merely repeating itself.

As a side note, since the filing was issued, Twitter's stock has gone down over ten points, or about 15 percent.

Amazon Buys Game Studio Double Helix Admist Rumors of Console Launch

posted Sunday Feb 9, 2014 by Nicholas DiMeo

Amazon Buys Game Studio Double Helix Admist Rumors of Console Launch

Amazon, in an attempt to enter each and every media space known to man, announced this week that it was buying video game studio Double Helix Games, whose best known for the Xbox One version of Killer Instinct. If this isn't proof that Amazon is looking to go head-on with its own gaming console against the competition, I don't know what is.

The studio out of Irvine, CA first came to be after a 2007 merger of Collective, Inc. and Shiny Entertainment and is now home to 75 developers under the Double Helix roof. Amazon said that the team will continue to work out of the office it currently resides in.

Officially, here's all Amazon has to say about the purchase.

Amazon has acquired Double Helix as part of our ongoing commitment to build innovative games for customers.

Because of this lack of information, we have no word on financial terms of the deal. However, Amazon did say that Double Helix's current roadmap for games will be supported by the company. Also, since Double Helix will potentially be a rival to Microsoft in the future, Microsoft announced that it is finding a "new development partner" for Killer Instinct.

We have thoroughly enjoyed working with Double Helix and wish them success in their next endeavor. We want all of our loyal fans to know that the Killer Instinct team at Microsoft is not changing and that the franchise will remain with Microsoft Studios. We remain dedicated to delivering a great experience and plan to announce our new development partner soon. We're excited about the future of this popular franchise.

The question that remains for Amazon now is what will they do with the gaming studio they've just picked up? Rumors have been swirling about an Android-based gaming console out of the Amazon camp, and if they introduce a gaming service that is combined with the recent price hike of the Prime service, all of this could actually make sense in the end. It is being thrown around that the console would play host to both streaming and downloadable games.

All is not happy in Streaming Game Land, though. Recent flops like Ouya and not-so-recent disasters like OnLive have left a bad taste in gamers' mouths when it comes to streaming games to an "open" console. Amazon would have to work harder than anyone else in the space to win the trust of the gamers that would potentially play on this platform. Further, considering the possibility of the system being run on Android, it severely limits the capabilities of the machine, especially when the talk is a sub-$300 price point. Triple-A titles and blockbuster hits won't show up here, just like they aren't available on OUYA or nVidia's SHEILD.

With a non-casual studio like Double Helix under the Amazon brand, one would assume casual gaming isn't the focus of whatever Amazon is looking to do next, but the rumors about platform don't seem to match up to the actions of the purchase. It is possible that Amazon could launch something crazy and change the gaming space as we know it. But until we hear more official news from the company, anything beyond a Candy Crush remake doesn't seem feasible. What do you think Amazon will do with this studio? Sound off in the comments below.

Lenovo Acquires Motorola for $9 Billion Less than What Google Paid

posted Sunday Feb 9, 2014 by Nicholas DiMeo

Lenovo Acquires Motorola for $9 Billion Less than What Google Paid

In a deal that has been leaving many scratching their heads, Google, after two of owning the brand, has decided to sell off Motorola to Lenovo. The agreement will give Lenovo a bigger position into the North and Latin American markets and will set them up for presence in Western Europe.

Google has stated that the estimated price sits at $2.91 billion, which will include $1.41 billion being paid upon closing of the deal, with $660 million in cash and $750 million in Lenovo standard shares. The rest of the outstanding $1.5 billion will be paid off over time in a three-year note. The money being exchanged here is interesting for two reasons. First, the agreement gives Google about a 6 percent stake in Lenovo when all things are said and done. And while that's a pretty hefty share of a company as large as Lenovo is, it can't be overshadowed by how much money Google has actually lost in the deal. You see, back in 2011, Google picked up Motorola for $40 per share, which comes out to about $12.5 billion. So while saying you made $3 billion is a good thing, losing $9 billion isn't so great overall.

On the plus side, perhaps $9 billion was spent on Google acquiring an extensive portfolio of patents, which the company will maintain ownership of after the deal is finalized. Lenovo will be able to receive licenses to those patents, along with access to other intellectual property. Lenovo will pick up the entire Motorola Mobility brand and trademark portfolio, as expected, and will also receive more than 2,000 other patent assets.

Yang Yuanqing, chairman and CEO of Lenovo, said,

The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space. We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business. Lenovo has a proven track record of successfully embracing and strengthening great brands - as we did with IBM's Think brand - and smoothly and efficiently integrating companies around-the-world. I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future.

Even up until the sale date, despite improved marketing efforts and increased options for customization in its handsets, Motorola has been losing money and the new flagship phone, Moto X, did not come close to meeting sales expectations. Will putting Motorola back into the hands of a hardware manufacturer leave the brand in better shape than it has been for two years? Lenovo expects to use this as its platform to become more competitive in three markets, in the company's effort to reach 100 million new people. It's a quite ambitious goal, but with a brand like Motorola backing it all up, it might just work.

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