2
Dec

Is it too late for Microsoft to establish a position in the smart car market?

In February, 2014, Ford announced its decision to terminate work on the Sync automobile mobile device controller system, which was a joint effort with Microsoft. Nonetheless, Microsoft has continued to aggressively compete for a share of the smart car market.

The work on the automobile segment of the mobile computing experience looks to be the province for Windows Embedded team and can be reviewed on a web site titled Connected Car Technology: Driving Innovation. The latest version of Windows Embedded, for this application, is Windows Embedded Automotive 7, which appears to be the same version included in the Sync project.

This writer has an interest in the other end of the mobile computing experience for consumers: how smart phones perform in vehicles. We own both Android and Windows Phone 8.1 devices and have recently tested both devices in a 2012 Acura TSX with the factory installed HandsfreeLink wireless mobile telephone voice control system.

We should also note we first tested just how Windows Phone devices performed with the system with Windows Phone 8. These early tests were very unproductive, especially with Nokia’s Here Maps app. The bluetooth audio control on the smart phone end of the connection was not synchronized with the HandsfreeLink system.

The result was what can only be referred to as an unsatisfactory experience for the driver. The HandsfreeLink computer voice system would consistently cut off the directions just short of presenting the driver with a very important piece of information, namely the street name where an approaching turn would need to be made.

With Windows Phone 8.1 Microsoft has corrected the computer voice problem. The audio messaging from the Windows Phone 8.1 Lumia 925 correctly synchronizes with the HandsfreeLink system and the Here maps program is, once again, a useful feature in our Acura.

But Cortana is, sadly to say, another story entirely. We cannot use Cortana while driving. Any attempt to pose questions in the vehicle, while in transit, is handled by HandsfreeLink (actually, in this writer’s opinion, this is a very good feature if, for no other reason, than how it forces drivers to use the hands free option and dispense with holding a cellular device to the ear while driving). But, once again, the audio messaging has NOT been synchronized. The conversation is cut off before the question can be delivered to the Cortana personal assistant.

Tellingly, one of Acura’s ads for its new TLX features a male driver commanding “Siri” to play a tune on the in-dash entertainment system. Acura is likely not alone in its decision to support the most popular mobile O/S, namely iOS in its vehicles. Perhaps Microsoft would do better to pass on the in-car mobile computing market altogether, unless they plan on releasing a really big new feature (hope hope).

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

20
May

NVIDIA Provides Scant Detail About Tegra Sales for the Latest Quarter

During NVIDIA®‘s Q1 2015 Earnings Conference Call, Mr. Jen-Hsun Huang, Co-founder and CEO, fielded a question presented by Mr. Mike Burton of Brean Capital about the components of the performance of one of the company’s products. Mr. Burton’s question was on the subject of NVIDIA’s Tegra Processor. He asked about the details of the sales performance, by market segment (smart phones, tablets, and automotive) for this product for Q1 2015.

Mr. Huang did not include a lot of specific detail in his answer, which rolled smart phone and tablet customers for this product into a category named “devices”, while automotive customers were presented as a separate group, with a different profit margin.

If NVIDIA management is unwilling to breakout the specific components of the sales performance for Tegra, how does it make sense, if at all, for analysts to project levels of market penetration for it? One may argue the information can be compiled from customer comments about the product. But for every customer reporting information relative to likely purchases of Tegra processors (for example, Microsoft’s rumored decision to replace Tegra with Qualcomm’s SnapDragon processor for a new model of the Surface tablet), there are many other customers not reporting anything at all, at least not publicly.

So, in my opinion, forecasting the performance of Tegra in the tablet market, at least for the latest reported quarter, and for every quarter, going forward, where management does not provide specific sales detail, will be a very difficult task. The end result, in turn, will not be credible, at least as I see it.

Are sales of Tegra processors to mobile customers in the tablet and smart phone markets an important indicator of NVIDIA’s future performance? Perhaps, if one considers the potential market size represented by these mobile customers to be dynamic, and expansive. In contrast, the same position may consider sales of NVIDIA’s hardware GPUs to the PC gaming market less significant, and less of a reliable forward looking indicator as the result of the comparatively static, and contracting nature of the global market for PCs.

But, in my opinion, NVIDIA’s very strong performance in the latter category for the quarter, when put together with their well attended developer conference for their hardware GPUs, is more of a useful indicator of the health of the business.

Nevertheless, what management does with the revenue, and the rationale behind these actions, is, unfortunately, another subject.

Disclaimer: I recently completely closed a long position in NVIDIA

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

3
Mar

Observations from NVIDIA Q4, 2014 WebCast

At numerous points during NVIDIA’s Q4 2014 Webcast, recorded on February 12, 2014, Jen-Hsun Huan, President and CEO emphasized the significance, for the company, of the automotive markets for graphics displays and High Performance Computing (HPC) solutions. He also spoke about the importance of the Android operating system for the near term future growth of the business.

But neither the broader automotive market, nor Audi as one automotive brand, is a new one for NVIDIA. Back on January 7, 2010, in a press release titled “NVIDIA and Audi Marry Silicon Valley Technology with German Engineering” NVIDIA informed markets about its relationship with Audi. The release also mentioned the company’s relationships with several other automobile manufacturers under the Volkswagen AG brand.

So what’s really new and promising about the automotive market for NVIDIA, besides an even bigger business for the company with the Tesla automobile manufacturer? What’s new, as I see it, is the higher valuation consumers are placing on NVIDIA graphic displays. Because consumers identify PC comparable graphics displays in cars as a set of features worth a higher price, automobile manufacturers like Audi and Tesla can differentiate their more costly products from the lower end of their lines based purely cabin navigation and entertainment systems features. I think this heightened consumer appetite for methods of replicating the PC computing online experience while they are in motion in vehicles will provide important momentum (once missing) to push even more intelligence into cars, which is where NVIDIA’s advanced core GPU technology and HPC expertise will likely be in demand. So when analysts speak of the “next consumer frontier” for computing, their argument becomes more convincing, at least if NVIDIA’s success can be taken as a true market indicator of things to come.

Huan also made a very big claim about the Android operating system, noting its strategic importance as the computing OS with the widest international reach, and, what he characterized (though I disagree with this one) as a truly open system where an ISV/IFV like NVIDIA can really add value.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

27
Feb

A Good Week for Blackberry in the Media

Blackberry’s QNX OS scored a big win at Ford this week. If readers have yet to catch up with this news, they can read about it in an article written by Craig Trudell and Jeff Green, which was published on the Bloomberg web site on Monday, February 24, 2014: BlackBerry Gains as Ford Said to Pick QNX Over Microsoft. At the same time, the volume of articles written about facebook’s controversial $19Bil acquisition of WhatsApp, engulfed Blackberry’s Messenger (BBM) service. All this news amounts to a positive sign CEO John Chen is succeeding in his attempt to resuscitate this mature ISV.

What’s different about Blackberry’s BBM service, as compared to WhatsASpp, is not at all the feature set, but the installed base of users. BBM users are predominantly people employed by large organizations in the public, private, and not-for-profit sectors. So the monetary value represented by the BBM user community may actually be greater than the same value metric for WhatsApp users, despite the annual subscription opportunity and the enormous numbers of WhatsApp users. Bottom line: teenagers lack the buying power of enterprise business users.

As far as the win at Ford for the QNX OS, put this one on top of the role the QNX OS played for Audi’s Infotainment system and I get the feel of momentum building for further sales of this feature-rich smart car OS. QNX has been at the smart car business for quite a while and presents the market with a particularly rich set of features.

Speaking of Audi’s Infotainment system, another company of recent strong interest to me, NVIDIA, is also playing a part in the architecture of Audi’s Smart Car feature set. In a press release dated January 7, 2013, and titled Audi and NVIDIA Expand Visual Computing in the Car, NVIDIA announces a big win at Audi. Curiously, the win for NVIDIA promises to displace the QNX driven Infotainment system.

Disclaimer: I’m long NVIDIA and Blackberry

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

25
Feb

Microsoft Faces Some New, Near Term Hurdles

February 24, 2014 was not a good day for news about Microsoft. Ford announced its intention to stop using the Windows Embedded Automotive 7 technology. On the same day, Dave Their published an article on the Forbes website, Xbox One Gets Its First Price Cut. Just 5 days earlier, February 19, 2014, Farjad Manjoo wrote a critical review of the new high end Nokia Lumia Icon Windows Phone in an article titled This Phone Is Great, Till It’s Time to Add Apps.

On the loss of Ford as a customer for Windows Embedded Automotive 7 Technology
I think this loss is a very big deal. While I’ve held onto a skeptical position on the safety of the consumer demand for internet-connected automobiles, I don’t doubt the very high level of consumer interest in these features. One way or another the consumer will drive manufacturers to maintain Internet connectivity features already in place in automobiles (mostly luxury brands, though the features are sure to trickle down to economy models, sooner or later), and demand the set be expanded. NVIDIA is doing well in this market. Google wants its share, too, and recently announced a joint marketing effort with NVIDIA for smart car technology development. Finally, Microsoft’s platform was displaced, by QNX from Blackberry. With this win, Blackberry looks to be making good on comments by its new CEO, John Chen, to get business back on track around its “enterprise” software products.

Xbox One Price Cut
I’m afraid Microsoft has not done a good job of promoting the Xbox One to the consumer Home Entertainment Center market. The device looks, to me, to be all about gaming. Home entertainment market consumers respond to a different type of market promotion, which, in the case of the Xbox One, appears to be largely non-existent. The Xbox One may be a great home entertainment center, but the marketing communications team for the product needs to do a better job communicating this message to the market.

Hobbled Launch for Yet Another Nokia Lumia Windows Phone — This Time the Icon
The key handicap plaguing the Nokia Lumia Icon, noted by Farjad Manoo, is nothing new. The “lack of Apps” story has been going on for far too long. Perhaps Paul Allen was right, back in November, 2013, when the Chief Investment Officer of Mr. Allen’s Vulcan Capital was quoted, by Dara Kerr in an article titled Microsoft co-founder Paul Allen likes idea of company breakup, as recommending Microsoft spin off the its “consumer businesses”: Xbox One business, Bing, and can we say, as well, its Windows Phone effort? If financial incentives are required to get the App developer community going building Apps for Windows Phone, then shouldn’t Microsoft either provide them, or retreat from the market?

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Each of the above points may foretell declines in sales, as well as profit margins, for Microsoft’s consumer market offers over the next few quarters.

Disclaimer: I’m long Microsoft and NVIDIA.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

13
Feb

Strong Quarterly Reports from NVidia and Control4 Point to Growing Consumer Appetite for New Smart Devices

The most recent quarterly earnings reports from NVIDIA and Control4 point to an increasing retail consumer appetite for home automation and “web connected” mobile transportation systems (cars). The expansion of automated features for automobile drivers is new, but the resurgence of interest in “smart home” features likely represents more of an important turning point for home automation, than something brand new.

A few words on home automation: ISVs began working on smart features for private residences back in the early 1980s. Back then, as is the case now for a company like Control4, the essential lynchpin for any promising attempt to capture the market for HVAC systems, lighting system, or security systems amounted to channel partners. So companies like Modicon Corporation developed the ladder logic programming language. Professional trades (principally electricians) could use this language to setup Programmable Logic Controllers (PLCs) to run the residential HVAC/Lighting/Security Systems in use back then.

But these early attempts at building smart homes never produced big numbers, meaning the kind of substantial consumer interest, required to drive matching profits for comparatively early stage ISVs like Control4.

Today is very much a different story. Home Depot is distributing the Nest programmable thermostat, and, as I mentioned above, Control4 had a great quarter.

Automobile drivers have an appetite for hands free controls. So manufacturers like Acura, Audi, BMW, etc. are building more powerful Human Machine Interfaces (HMIs) into their vehicles via very smart video display technology.

If NVIDIA’s most recent quarterly earnings report can be taken as a reliable indicator of market share and market impact, then the NVIDIA Tegra chips, and the video displays built with them, appear to be leaders in this high growth market segment.

What is particularly exciting, for me, about NVIDIA’s success in this market, is the market opening they now have, and can exploit, to become the major conduit for systems built either on Google’s Android O/S, or Microsoft’s Windows 8 O/S into the smart car market. After all, the Surface tablet line from Microsoft is built on the same NVIDIA Tegra chip/display technology.

Disclaimer: I’m long NVIDIA but have no investment in Control4.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

13
Jan

Does It Make Sense to Compare NVIDIA to Broadcom?

A prominent analyst, Bobby Burleson of Canaccord Genuity, recently wrote an opinion on Broadcom and NVIDIA. Summing up Mr. Burleson’s opinion: Broadcom is the better investment of the two, at least right now. But I don’t think the comparison of the two businesses makes much sense.

Disclaimer: I am long NVIDIA, but do not have a current investment in Broadcom.

On January 9, 2014, Mr. Burleson was quoted by Tiernan Ray, in Barrons as stating “We expect BRCM’s recently-announced LTE win with Samsung, and mid-year sampling of their new LTE thin modem to drive multiple expansion as investors become more constructive on BRCM’s LTE and 802.11ac prospects, and as semis as a group come back into favor.” If we understand Mr. Burleson’s point, then the strong near term driver for increased sales for Broadcom is its new LTE modem.

But what will the demand be, going forward, for new handsets for the LTE 4G network protocol? If the recent price wars between the major smart phone manufacturers, here in the US, can be taken as any meaningful predictor of future demand for smart phone handsets capable of handling ultra fast 4G LTE networks — I don’t think it’s the great driver readers of Mr. Burleson’s opinion might take it to be.

Further, let’s add to this assessment two other pieces of important information for investors to consider: 1) The FCC has recently required cellular data vendors to provision “recyclable” handsets to customers. In other words, these handsets must include some type of re-programmable interface (likely a SIM card), to permit porting from one carrier to another. So if I can bring my handset with me, then why do I need to buy a new one?

The second point for investors to consider is the recent decision by Verizon (the largest cellular data carrier here in the U.S.) to sell bandwidth. If cellular data is the cash cow investors have assumed it to be, then Verizon’s decision doesn’t make sense. The right conclusion, in my opinion, is the proliferation of hardware clients (tablets, smart phones, etc) capable of using these networks, together with an explosion of graphics rich content requiring very high speed data communications, have caught the carriers in the middle. In sum, they may even be losing money, right now, on cellular data.

NVIDIA on the other hand has a lot of absolutely blue sky ahead of it, whether in terms of Microsoft’s Surface 2 tablet platform (which is likely not to be a strong driver), which is built around the Tegra 4, or, of much more importance and packed with much more potential, the “smart car”. Unless I’m missing something, I didn’t see any competitive products to these offerings in Broadcom’s product list.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

7
Jan

NVIDIA Jumps Into the Market for Smart Car CPUs with the Tegra K1

On January 6, 2014, the first day of the Consumer Electronics Show (CES) in Las Vegas, Nevada in the U.S., NVIDIA announced the Tegra K1. This “mobile processor” ” . . . is powered by the 192-core NVIDIA Kepler GPU.”

The press release on the NVIDIA site makes no mention of automotive applications of the Tegra K1 technology beyond simply the term “mobile processor”. But a white paper, titled NVIDIA K1 A New Era in Mobile Computing clearly presents this chip as a important option for automotive designers who need to add cutting edge ” . . . navigation, infotainment, and driver assist systems . . . ” to new vehicles. The chip can also provide considerable processing power to some of the most pressing design requirements for “driverless cars”. These will likely include ” . . . gesture and object recognition, motion tracking, computational photography, and augmented reality.”

The chip is also a powerhouse capable of delivering high end “gamer quality” graphics to small mobile devices — smart phones and tablets. Elevating the quality of gaming experience for average users is likely to be an avenue tablet OEMs will want to explore as they search for new “value packed” features to drive higher prices for these devices.

Kiernan Ray of Barrons published an article on Sunday, January 5, 2014, titled Nvidia Announces ‘Tegra K1′ 192-Core Processor with 64-Bit ‘Denver’ Option. This article provides a lot of additional detail on the Tegra K1 announcement, including a lot of quotes from NVIDIA CEO JEN-Hsun Huang’s speech about the new chip at CES. Mr. Huang is quoted as highlighting the features of the Tegra K1, which he claims are capable of supporting the “‘first programmable platform for advanced driver assist'” (quoted from Tiernan Ray’s article) for smart cars.

The chip will be available in 2 different pin set configurations. Per Tiernan Ray, one of these configurations is ” . . . the world’s first demonstration of 64-bit v8 ARM on Android”. The other configuration will support NVIDIA’s own “Denver” 64-bit CPU.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

31
Dec

Is the Android Operating System Safe for Use in Automobiles?

According to an article written by Neal E. Boudette, Daisuke Wakabayashi, titled Google, Apple Forge Auto Ties, Google and Audi will announce a joint effort at the Consumer Electronics Show in Las Vegas, in early January, 2014. This effort will include installing smart devices powered by the Android O/S in automobiles.

Interested parties need to look closely into two broad areas of concern about this notion:

  1. What’s the content, and how will users handle communication? The information exchanged over person to person conversations, regardless of whether they transpire over cellular telephone calls, text messaging, emails, etc, can be a powerful threat to mobile safety. So any plans to add an extensive list of other ways for people to communicate while they are mobile will be (and, I might add, should be) closely scrutinized by regulatory bodies charged with ensuring public safety. Any announcement of new features must include some details about methods of controlling and limiting the content of these conversations, as well as how the conversations will transpire
  2. Why is the planned Android O/S different? and Why should we have confidence in its security? In its Security Threat Report 2013, Sophos, Inc. identified the Android O/S as “Today’s biggest target” for malicious software. It doesn’t take much to conceptualize the great danger represented by an automobile traveling at speed. So, if Android is to be seriously considered for an important role as an O/S for smart cars, there better be a lot of detail of new security features in the announcement. If these details are not provided, the notion is not likely to proceed much further than merely a method to build hype.

Both of these areas of concern contribute to a perception of a “smart car” as a potentially deadly device. The Journal’s article had little to say about security. This oversight should be corrected. The public should be informed of the dangers of “smart cars” if the discussion is to be fair and balanced.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved