Category Archives: Technology

The technology sector is on fire. Potentially blazing out of control as a matter of fact. For the ride higher is being driven largely by momentum at this point. Where and when it stops, nobody knows. But we have entered territory across the sector where the risks to the downside are accumulating at a compounding rate the further the current run continues to the upside.

Blazing Hot

The run higher in technology stocks over the past year has been remarkable. After languishing in a sideways trading pattern for the better part of two years since the end of 2014, technology stocks finally broke out to the upside in early July 2016.

The catalyst for the breakout? This, of course, was the immediate aftermath of the surprise 'Brexit' vote, which raises an initial eyebrow. I am not yet clear how the departure of the United Kingdom (NYSEARCA:EWU) from the European Union (BATS:EZU) is a boon for the prospects of the technology companies found in the S&P 500 Index (NYSEARCA:SPY), but what I do know is that central banker support stood at the ready to calm financial markets in the wake of the vote announcement. And soothe tech investor fears they appeared to achieve!

Tech stocks trended sideways following the July 2016 channel break until the end of the year. Then suddenly, the sector completely caught fire and has been riding a growing wave of upside momentum ever since.

Fundamental Support, But To A Point

At first glance, it appears that the upside in technology stocks is enjoying fundamental support. And to a certain degree, this is true.

Consider the path of the Technology Select Sector SPDR (NYSEARCA:XLK) over the past six years since the summer of 2011. Why the summer of 2011? Because it was at this point during the post crisis period where U.S. stocks (NYSEARCA:DIA) and the rest of the world (NASDAQ:ACWX) including developed international (NYSEARCA:EFA) and emerging market (NYSEARCA:EEM) parted ways with U.S. stocks (NASDAQ:QQQ) continuing to rise to the moon as stocks across the rest of the world effectively have gone nowhere ever since.

Unlike some other market sectors, the rise in technology share prices has been supported by an increase in underlying earnings growth. During periods when earnings growth was accelerating, so too were technology stock prices. And during periods when earnings growth either stalled or showed signs of fading, the advance in technology stocks ground to a halt. Thus, the contention can be made that technology stocks are behaving consistently with the fundamental patterns implied by underlying earnings growth.

This is certainly constructive. But the one problem with this assessment over the past six years is the following. While technology stocks are advancing in correlation with rising earnings, the price that investors are paying for technology stocks is rising at a much faster rate than the underlying earnings. Put more simply, investors have been consistently paying increasingly more for each dollar of earnings growth that the sector is generating. This is reflected in the second chart below where the XLK and underlying sector earnings are placed on the same scale.

This can also be reflected in the following chart, which shows the daily rolling trailing 12-month price-to-earnings ratio on the XLK from July 1, 2011 to the present.

Whereas technology stocks were once priced at an attractive 13x to 15x trailing earnings back in 2011 and were still pricing in the expensive but still somewhat reasonable 17x to 20x range as recently as a year ago, they are now trading in the 25x times trailing earnings range.

Putting this in a different perspective, technology stocks are now offering an earnings yield of roughly 4%. Given the cyclical nature of the industry, this is not a lot of "yield" to receive even in today's persistently low interest rate environment.

Of course, technology stocks can overcome this premium status through an acceleration of underlying growth beyond its already robust +20% pace over the past year. Such a feat is not out of the question, but it is a tall order given the fact that technology is still a highly cyclical sector whose annual earnings growth rate has fluctuated between -10% and +20% at any given point in time over the past six years and is currently running at the very top end of this range coming out of the most recently completed quarter in 2017 Q1. In short, it's possible, but not likely.

Momentous Momentum

This is where the momentum trade comes into play for the technology sector. Over the past six years, the tech sector has evolved initially from an "intrinsic value" theme to more recently a "growth at a reasonable price" to lately a "growth at any price" pursuit.

It has been widely noted how stock market breadth has narrowed in 2017. For example, the percentage of NYSE stocks trading above their 50-day moving average has fallen from a peak of 84% at the start of the year to roughly half of stocks in recent months.

In addition, economic growth forecasts have steadily faded since the start of the year from the enthusiastic growth expectations that initially sparked the markets at the end of last year.

Yet despite this narrowing market leadership and fading economic growth prospects, the S&P 500 Index is still up strongly in 2017. The primary driver of these gains has been the strength of the technology sector. And part of the driving force behind this move has been the sentiment that excess liquidity is looking for a home and that technology is the one sector where investors can still buy growth while also gaining a degree of downside protection. Put more simply, investors have been parking money in tech lately regardless of the price driven by notion that they can continue growing regardless of the economy. Hence the still accelerating upside momentum despite the already impressive run.

This has been a great trade for those that have ridden the upside to this point. My premium service on Seeking Alpha, for one, went long technology stocks via the XLK back in mid-December 2016 as a hedge against a cyclical acceleration in economic growth. But through the end of February after an already impressive run to the upside that pushed the relative strength index to readings above 80, which was an overbought level that had been rarely reached in its two decade history, the decision was made to take profits. Thus, I have been merely a spectator to the sector's latest leg to the upside that began in late April and continues to date, which serves as another important reminder of the powerful upside momentum that remains in today's stock market.

Maintaining Momentum

The challenge for the technology sector going forward is its ability to maintain its recently remarkable upside momentum. One of the primary risks associated with the momentum trade is that it is not necessarily built on fundamentals or even technical for that matter. Instead, it is built primarily on enthusiasm and the willingness of the next buyer to pay more for the right to own shares of the company than the previous buyer. And this all works beautifully for a time until it does not. And the longer the forces of momentum take hold and the longer they run, the more painful the subsequent downside adjustment can end up being.

Such is the primary risk facing the technology sector at this stage of its recent run. The sector itself is expensive and becoming increasingly expensive with each passing trading day. And this is something that is true not only of the sector itself but many of the underlying individual stock names in the XLK.

Consider the following trailing 12-month price-to-earnings ratios for the following notable companies make up roughly 40% of the entire XLK.

Apple (NASDAQ:AAPL)

2011 P/E Ratio: 12.0x

Current P/E Ratio: 18.0x

Google (NASDAQ:GOOG)

2011 P/E Ratio: 21.8x

Current P/E Ratio: 33.7x

Facebook (NASDAQ:FB)

Current P/E Ratio: 38.9x

Microsoft (NASDAQ:MSFT)

2011 P/E Ratio: 14.7x

Current P/E Ratio: 31.9x

Intel (NASDAQ:INTC)

2011 P/E Ratio: 9.7x

Current P/E Ratio: 15.6x

Cisco Systems (NASDAQ:CSCO)

2011 P/E Ratio: 12.7x

Current P/E Ratio: 16.0x

Does value still exist in the technology sector? Perhaps among selected individual names. But at least in so far as the above list is concerned, it would require an acceleration of already robust earnings growth as of late to create this value. And in an environment where the pace of economic growth is fading and the U.S. Federal Reserve is raising interest rates, this is becoming an increasingly tall order.

The Bottom Line

The technology sector has enjoyed a tremendous run to the upside in recent months. But it no longer represents a good buying opportunity for investors with a more conservative to moderate risk tolerance, for the downside risks now outweigh the expected returns at this stage of the rally. In short, the reasonable upside opportunity set in the sector has played itself out long ago now.

Does this mean that the sector is done advancing to the upside? Not by any means, for once a momentum trade takes hold it can run indefinitely and well beyond what might be implied by fundamentals. But the sector is now running increasingly ahead on price of an already heady pace beyond its underlying earnings, thus the associated downside risks with such technology holdings are rising accordingly with each successive gain in price. Thus, selective profit taking in tech holdings may also be a prudent approach depending on your investment strategy and how your technology stock holdings fits into your broader asset allocation.

Is the technology sector then an attractive shorting opportunity? It will be at some point, but not until the upside momentum has been broken. This will be worth watching for in the days and weeks ahead. But if the current market environment has taught investors anything, any future short allocations are better implemented as part of a pair trade to hedge against a broader market that remains determined to advance to the upside no matter what is taking place in the underlying economy.

So while the tech sector that is filled with glamorous, headline grabbing stocks continues to run to the upside, equity investors with a value or "growth at a reasonable price" orientation are better served to look elsewhere at this stage of the rally.

Disclosure: This article is for information purposes only. There are risks involved with investing including loss of principal. Gerring Capital Partners makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Gerring Capital Partners will be met.

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

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

Additional disclosure: I am long selected individual stocks as part of a broadly diversified asset allocation strategy.

Continued here:

Technology: Momentous Momentum - Seeking Alpha

As the worlds second fastest-growing major economy and third largest producer of greenhouse gas emissions, India is at a crossroads.

Intent on raising its standard of living and extending reliable access to electricity to the nearly 19 percent of its citizens who lack it, India is expected to more than double its energy consumption by 2040, according to the International Energy Agency.At the same time, the nation has pledged to make reductions in greenhouse gas emissions intensity (the ratio of carbon dioxideemissions producedto gross domesting product) as specified in the 2015 Paris Agreement on climate. Achieving these seemingly conflicting goals will require energy technologies and policies that are both economically viable and efficient at cutting emissions.

That's whyArun Singh, a masters degree student in the Institute for Data, Systems and Societys Technology and Policy Program (TPP), decided to help India's decision makers weigh their options. Singh, who is also a fellow of the Tata Center for Technology and Design and a research assistant in the MIT Joint Program on the Science and Policy of Global Change, has analyzed climate policy options for India by building and applying a model of the Indian economy with detailed representation of the electricity sector.

Developed with his advisors, MIT Sloan School of Management Assistant ProfessorValerie Karplusand MIT Joint Program Principal Research ScientistNiven Winchester, the model enables researchers to gauge the cost-effectiveness and efficiency of different technology and policy choices designed to transition India to a low-carbon energy system. Singh used the model to assess the economic, energy, and emissions impacts of implementing Indias Nationally Determined Contribution (NDC) to the Paris Agreement which aims to reduce carbon dioxideemissions intensity by 33 to 35 percent from 2005 levelsand increase non-fossil based electric power to about 40 percent of installed capacity by 2030.

Singh determined that compared to a reference scenario of no policy constraints, an economy-wide emissions intensity reduction policy (simulated as a carbon price) would cost at least 43 times less per ton of carbon dioxidethan a mandated expansion of non-fossil-based electric power capacity. He also found that an economy-wide emissions-intensity reduction policy would also reduce carbon dioxideemissions in all sectors of the economy, whereas a non-fossil mandate in the electric power sector would lead to increased emissions beyond that sector.

These findings appear in Singhs masters thesis, Clean Development Pathways for India: Evaluating Feasibility and Modeling Impact of Policy Options, which was awarded the honor of being the TPP's best masters thesis for 2017.

Aruns thesis stands out because it goes beyond modeling policy options for meeting Indias climate goals to evaluating their feasibility in practice, based on an on-the-ground understanding of Indias institutions, stakeholders and technology, Karplus says. This combination has produced results that are likely to be both relevant and actionable for policymakers in India.

Singhs paper may also have broader application.

The thesis extends a single-country modeling framework that can be used to analyze the impacts of policies consistent with the Paris Agreement in other countries, Winchester says.

Singhs model projects that achieving Indias NDC emissions intensity target with a so-called purecarbon pricing policy (in which no additional targets are set to expand non-fossil electric power capacity) would require a price of $17.40 per metric ton of carbon dioxide. Becausethis is a higher carbon price than whats been implemented in most developed countries, Singh acknowledges the political intractability of such a policy. If a carbon pricing policy were combined with enforcement of non-fossil electric power capacity targets, the carbon price would go down to $2.06, but consumers would face higher commodity prices resulting from more expensive utilities. However, declining wind and solar costs in the future could lead to lower utility prices, making a hybrid carbon pricing/electric power capacity expansion policy a viable option to meet Indias electric power demand and climate goals.

Singh shared preliminary findings from his research on clean energy development pathways for India last November as a panelist for a side event of COP22, the 2016 United Nations Climate Change Conference in Marrakech, Morocco. He was the only graduate student among nine speakers on the panel, which explored strategies to implement the Paris Agreement.

With this modeling endeavor, we aim to provide policymakers in India with a tool that they can use to assess the impacts of proposed climate policies, says Singh, who will receive a master of science degree in technology and policy at Commencement this week.

Upon graduation, Singh plans to continue working with Karplus and Winchester on expanding the models capabilities and developing collaborations with policymaking bodies in India.

Original post:

MIT Technology and Policy Program's Best Thesis for 2017 maps out a clean energy future for India - MIT News

Financial Times

Smile to enter: China embraces facial-recognition technology Financial Times China's technology giants are rushing to embrace the commercial use of facial-recognition technology, attempting to leapfrog western rivals that have taken a more cautious approach for fear of alarming privacy-conscious consumers. While privacy ...

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Smile to enter: China embraces facial-recognition technology - Financial Times

The United States has already fallen behind its rivals in developing new, clean energy technology, posing a major risk to long-term security, a group of retired military officers warned on Tuesday.

Energy demand is expected to soar by at least 30 percent over the next three decades as Chinas middle class grows and countries across Africa and South Asia emerge from poverty. And, thanks to aggressive investments in nuclear, hydro and renewable energy, China and the European Union are far better-positioned to dominate those new markets, according to a new 66-page report from the CNA Military Advisory Board.

American resolve at this point has not been sufficient to put us into the lead, Lee Gunn, a retired U.S. Navy vice admiral, told HuffPost by phone. We fear the instability around the world in everything from trade to political influence that will result from the reduction in American views, values and economic and political power.

Losing control over emerging energy industries could damage national security, said retired Lt. Gen. Richard Zilmer of the U.S. Marine Corps.

Carlos Barria / Reuters

Leader of the free world post-World War II is something we very comfortably fell into, Zilmer told HuffPost by phone on Tuesday. If you agree that energy drives an economy and the economy drives the ability of a nation to have a strong diplomatic arm and a strong military arm and a strong national security posture, with this change in energy, sourcing and distribution, we run the risk of becoming junior partners in the relationship.

In January, China set aside $360 billion to spend on green energy by 2020. In May, Chinese President Xi Jinping pledged in a sweeping foreign policy speech to spend $900 billion on infrastructure and clean energy abroad. The European Union is investing aggressively in zero-emissions energy, particularly offshore wind turbines, and has established a consortium in Africa to develop renewables in countries there. Russia, whose geopolitical power is largely tethered to its oil and gas reserves, has ramped up its plans to build up nuclear power stations in energy-thirsty India.

We are behind even Russia in deploying advanced energy to India, Leo Goff, the research lead and chief author of the study, told HuffPost.

The research team and 15 former military officials began putting together the report last year, well before President Donald Trump announced the United States withdrawal from the Paris climate agreement. But the researchers said the report is making projections for the next 30 years, and warned against reading too much into its near-term political implications.

Whats happening in China right now with their development of alternative energy and, more importantly, their move to put alternative energy in Africa and India, that has little to do with Paris, Goff said. That has to do with China cleaning up its own air, and we believe their moves in Africa and India and other parts of the globe are about influence and securing future energy needs.

We think this really transcends Paris, he added. Its for the long haul.

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The US Is Already Falling Behind On Future Energy Technology, Generals Warn - HuffPost

The government of California said on Tuesday it will work with China's science ministry to develop clean energy technologies, cooperate on emissions trading and explore other "climate-positive" trade and investment opportunities.

The two sides agreed to establish the California-China Clean Technology Partnership designed to drive innovation and commercialization in areas such as carbon capture and storage, as well as advanced information technology that could help cut greenhouse gas emissions.

President Donald Trump announced last week that he would pull the United States out of the 2015 Paris agreement on climate change, a move branded as "insane" by California governor Jerry Brown, who is visiting China this week.

Joint pledges by China and the United States ahead of the Paris talks helped create the momentum required to secure a global agreement, and included a promise by China to establish a nationwide emissions trading exchange by this year.

Brown told Reuters last week that he would discuss linking China's carbon trading platforms with California's, the biggest in the United States.

Read more:

California and China Have Signed an Agreement to Develop Clean Energy Technology - Fortune

Forbes

Nasdaq 10000. Disruption. Disintermediation. Innovation. Technology Forbes Are we ready to concede the fact that the Nasdaq will hit 10,000 in the very near future? Probably within the next couple years. Disruption. Disintermediation. Innovation. Technology as the driver of change. How is this different than year 1999 when ...

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Nasdaq 10000. Disruption. Disintermediation. Innovation. Technology - Forbes

Micron Technology, Incorporated (NASDAQ:MU)

Stifel 2017 Technology, Internet and Media Conference

June 05, 2017 12:10 PM ET

Executives

Ernie Maddock - Chief Financial Officer

Analysts

Kevin Cassidy - Stifel Nicolaus

Presentation

Kevin Cassidy

Okay. Good morning, and welcome to Stifel 2017 Technology, Internet and Media Conference. My name is Kevin Cassidy Im one of the semiconductor analysts at Stifel. And it's my pleasure to introduce from Micron Technologys, Ernie Maddock. Ernie is the Chief Financial Officer. Welcome Ernie.

Ernie Maddock

Good morning. Thank you.

Kevin Cassidy

Thank you for coming. And were going to start off everyone of our key note presentation on -- our fireside chat presentation with three basic questions to talk about your Company, your competitive landscape and your growth opportunities. So Ernie, if you could, if there isnt anyone in the audience that doesnt know about Micron, Ernie will give you an overview.

Ernie Maddock

Sure. So we provide a broad array of memory solutions encompassing three or rationally four core technologies; so first of those is DRAM; second is NAND; third is NOR; and the forth 3D XPoint. I would say that DRAM and NAND are the vast majority of the Companys -- the basis of the vast majority of the Companys solutions. But in terms of and market, we play in a very broad array. We have leadership positions and automotive market share, which tends to be products that combine NAND, DRAM and NOR. We have a very strong position in the SSD market, competing in the clients all the way through the enterprise scale SSD space. Mobile solutions both had a component level, as well as in MCP level, for predominantly Asian customers. And then obviously in the client compute datacenter segments more plastic DRAM.

Memory, I think is beginning to be appreciate as a really big component of the future that all of us, I think, live each day both in terms of the capture and storage of the vast amounts of information that are being captured about us and about the world in which we live. And then the conversion of that information into meaningful business insights and memory plays a vital role in each step of the way as we go through that transformation. So the memory right now, if youre conservative, its probably outgrowing overall semi by 3 to 4 times, if you want to be on the more aggressive end of the estimate, you should say that memory in general is outgrowing the basic semiconductor TAM by as much as 5 times. And thats a statement of a 2016 to 2018 expected TAM.

So really a renaissance of usefulness of memory and I think some very, very high profile companies are beginning to publicly talk about the fact that memory performance and memory capacity and capability is as important to them as the process or performance that underlies whatever application or whatever solution theyre trying to bring to the market. So its a great place to be in.

Kevin Cassidy

I agree. And thats been our thesis for many years on Micron. But the importance of memory, if you want to get a higher speed, phone is that more DRAM and it gives you better performance, I am just putting in a new processor. And so with that, whats also interesting in the market has been the consolidation. And maybe, if you just talk a little bit about the competitive landscape of where Micron stands now, maybe where it was five-10 years ago, and what does it look like for the future?

Ernie Maddock

Sure. So there are three fundamental IP holders and competitors in the DRAM space, Samsung, Hynix and Micro. That share position has actually been relatively constant. We are all producing at the 20 nanometer and the 1x node, Micron probably little more on 20, a little less on 1x that will be changing considerably over the course of the next 12 months or so.

And then you have four fundamental IP holders that are distributed among six participants; so Micron and Intel jointly own IP, but both address the market separately; Toshiba and WD jointly have IP, they address the market separately; and Hynex and Samsung as well. So a fairly consolidated industry, certainly, compared to the way the DRAM industry in particular look even five to eight years ago where you had multiple competitors. I think at one time there were as many as 32 DRAM companies, and that we know it's way down to three and a lot of that Micron was able to leverage by scaling and taking advantage of the exit of other players from the industry.

Kevin Cassidy

Great. And weve talked a little bit about the growth outlook, things right now that were in the shortage period and the capacity increases that both Micron and the industry is putting out for DRAM. Can you say what that is and whats the limiting factor of increasing capacity?

Ernie Maddock

Sure. So we believe that from a supply point of view that you will have somewhere between 15% and 20% bp growth at the supply, and that is a combination of two things; one is advancing technology nodes, which are progressively yielding fewer and fewer bits. But probably if we were only dependent upon simply the bits provided by the incremental technology nodes, you might be at the lower end of that range or maybe even slightly below the low end of that range. And then all the competitors tend to want to do what they can to hold the way for output flat. So anytime you do a technology shrink, you essentially get more bits off of each wafer, but you have fewer wafers that you process because it takes longer to process a wafer on a smaller technology node.

And so the result is that you would simply add wafers such that your aggregate output from that fab or that facility would remain flat. So that you at least get the full benefit of the bp growth across however many wafers you were producing prior to the technology transition. And that would move you into the, probably to the middle, to the upper end of that range of 15% to 20%. I think beyond that, you have to think about adding fairly significant amounts of wafer capacity. And certainly as we see the supply growth that is governed by an influence by what we think is happening on the demand side and the demand side right now feels as if this between 20% and 25%. And so there really isnt a very strong reason to add significant capacity based upon the view of the demand as we go out over the next few years.

Kevin Cassidy

And maybe if you could just touch on that, what were the Greenfield fab costs to put new wafers on?

Ernie Maddock

Well depending on the size and scale, youre probably conservatively looking at $5 billion to $10 billion. And again it depends upon the specific scale, but it's quite an investment. And dont forget that even if you were to make that decision today that a two year to 2.5 year decision, so youre -- and the economic return horizon on something like that is probably 15 years, because certainly in the first four or five years, youre not going to have positive NPV coming from that investment. Youre going to count on that investment providing NPV for you out in the terminal value calculation in a traditional financial analysis. So it's a very interesting set of economics.

Kevin Cassidy

And key to that calculation would be the gross marginally that you get for the product. One of -- when Microns talked about at the Analyst Day about, what things you can control with the market the end average selling price, you cant have control over. But you can control your costs. Can you talk about some of the improvements youve made to costs of DRAM, in particular?

Ernie Maddock

Sure. Well, you get a benefit with every successes of technology shrink and we have talked about over the course of fiscal 16 through 17, we have provided an aggregate cost reduction on CAGR basis of 15% to 25% for DRAM. We said the same CAGR would likely apply if you wanted to measure from say 2016 through 2018 its actually -- a little higher than that for NAND because the bp growth is higher. We talked about this out over the prior two year period, ending with fiscal 17, that was somewhere in the 25% to 30% range; so averaging right at or slightly above market as a result of fully implementing the 20 nanometer technology node, which the Company get at a later time than its competitors. And then as we go forward, we said that we expected to grow at about the same rate as the industry. So we are pursuing our technology roadmap. Were comfortable with the technology position we have and were deploying capital to roll that out.

Kevin Cassidy

And maybe as we talk about that, it seems average selling price, at least in our read through, are continuing to be at least flat, if not up, so gross margins are improving. But can you talk about -- you said 20% to 25% demand. Can you say whats different in the market? What are those end market demand drivers, what market segments growing the fastest for you and which was, do you think, youre adding the most value?

Ernie Maddock

Sure. So if I think about, what I would consider to be the core of that market demand today, certainly, that is roughly evenly split between the mobile business and between the datacenter server hyper scale, there is a few things that people call it. But its basically that datacenter environment no matter where it's realized or implemented, and then the mobile business. And then on the fringes of that is obviously the classic PC space, which I would put to the less of that continuum. And then on the right of that continuum is a really important market for the Company, which is the embedded in automotive space, which from a size perspective is not the largest of the Companys markets but which has some very solid growth potential and probably will outgrow some of these other markets over the course for the next three to five years.

But both, depending on how you want to slice it, Id say, that the mobile business and the datacenter business today are roughly equivalent in terms of the amount of contribution they provide to the bits, and the bp growth that the Company is going to experience from a sales perspective. And they actually both provide some interesting opportunities for the Company to further differentiate and provide a solution based approach as opposed to simply commodity or a component based approach. And the server segment, in particular, also has a small sub-segment related to graphics and very, very high performance memory that is particular strength of the Company given our position in video and the well recognized leadership position that we have in graphics and high performance related memory.

Kevin Cassidy

And maybe if we even add on to that, I think, we mentioned Nvidia as part of the excitement around is the deep learning or machine learning. And all of that requires high speed memory?

Ernie Maddock

Yes.

Kevin Cassidy

So, thats -- Nvidia is getting a great valuation multiple, and if Micron could get that, what people appreciate that the DRAM involves in every one of those designs. And maybe if we turn a little bit to the flash market

Ernie Maddock

Sure.

Kevin Cassidy

NAND flash, and again were short of product this has been an industry transformation over to 3D NAND. And I think out of all the flash companies Micron is one that benefit the most for this transition to 3D. Can you talk about where Micron was with planar NAND and where you are with 3D NAND?

Ernie Maddock

Sure. So I think Micron benefited tremendously from 3D transition. We unlike many of our competitors, we did not do what would be considered a quote-on-quote final generation of planar shrink. And so we had a very significant cost decline from our last generation of planar to our first generation of 3D, many competitors companies actually had to go to a second generation of 3D before they saw that same cost benefit. So 3D has been absolutely essentially in terms of changing Microns competitive position relative to addressing the most important parts of the flash market, which I would consider to be mobile and the SSD space.

Kevin Cassidy

And where are you right now as far as your bp output planar versus 3D NAND?

Ernie Maddock

So, we talked on our last earnings call that by the end of year wed be somewhere in the 75% range. And then as we role forward through 2018, closer to 85%. The reason that number isnt a 100% is that really important automotive business that we support is supported with planar NAND right now. We are now just in the qualification process of 3D NAND. For those of you who may not be familiar with automotive design cycles, those youre calling now for cars that will be produced in 2019-2020 and then once youre called, you have to keep production at that same level of technology for decade or so. So the automotive systems providers are much more interested in stability of supply, quality of supply than they are on any cost reduction benefit they may get by a subsequent generation.

And so the reason the Company doesnt expect in the near term to have a 100% of its output of 3D is not that were not capable of getting there or dont think we have great technology, it's that we have a very, very stable requirement for planar output that were going to try to provide as efficiently as possible. And that part of the business generates the appropriate returns to accounts for the fact that that cost of producing is a little bit higher.

Kevin Cassidy

Maybe if you could just do the same type of demand versus supply that you had talked about for the DRAM. Whats the industry supply output that youre expecting for this year, and where is the demand?

Ernie Maddock

So, weve centered around the 40% bits growth for this year. I know we tend to be slightly on the higher end versus what you might hear from some other competitive companies. But the range tends to be 30% to about 40%, were at the upper end of that range. We think at that level of output you are limiting demand, that demand actually in a very natural way, if you were following a more natural price curve, would be higher than that 40% level, maybe as much as 50% give or take. Its hard to tell, because youre not producing that but there are certain modeling techniques that you can use to get you to a reasonable conclusion there.

And I think that that is a result of the fact that this is a year when many competitors are going through the brunt of their 3D transitions. And if you look whats happened in the industry in the first part of the year, theres been very slow bp growth, because of course you have to take planar capacity offline to do the conversion or you maybe ramping up a new 3D fab. And we expect that bp growth in the back half of the calendar year and certainly as we go forward into 18, we expect that bp growth from a supply point of view is going to be increasing as best we can see. You still dont have a situation where bp growth increase or bp growth supply increase is going to be materially in excess of what reasonable demand looks like based upon all the modeling that we can do. And so we think that while next year will be better in terms of the balance between supply and demand we certainly do not subscribe to the idea that there will be a vast oversupply of 3D NAND here over the next four to six quarters.

Kevin Cassidy

Even within the 3D NAND and solid state drive, with the prices of 3D going up or maybe with costs of solid state drives going up. Have you seen any de-specking in the PC industry?

Ernie Maddock

I think youre seeing some slower conversion to higher density drives, which depending on your definition of de-specking. But thats really about the only place that youre seeing any impact at all and even that is actually relatively limited, because of course, we are really focusing on the mobile and the cloud SSD space and the enterprise SSD space. And in those spaces even add todays SSD pricing, you still have a 30% or so cost of ownership advantage and thats a TCO, not a unit-per-unit cost advantage. But a solid state drive based storage environment can cost about two-thirds of what an HDD based storage environment looks like. And so even at what is a relative supply demand imbalance this year, even with that result and cost and place, youre still seeing some fairly favorable economics for folks in the cloud and enterprise space to implement SSD based storage environments.

Kevin Cassidy

Okay. Maybe similar to the end market for solid state drive, so little bit about the percentages, are they markets for growth also looking out over the next two to three years?

Ernie Maddock

Yes. I mean this is one of those things where each of the markets is growing at significant rates. And its almost little bit of an academic exercise to argue which market is growing faster. Because certainly, I think the one thing you could conclude is that the client market will be more heavily dependent on ongoing technology advancement, and therefore, cost per bp reductions in order to really ubiquitously replace HDDs in all PCs, all laptops, all desktops, et cetera, et cetera. So were not there yet from a costing perspective and a result in pricing perspective. But certainly, if you look at the industry roadmap, youd think that youre going to get there easily over the course for the next couple of years.

And in the other markets youve got 40% plus growth, so whether it's 40% or 50%, its way more growth than many, many, many other markets. So the demand horizon right now looks rather unlimited in the context of that discussion and the ability to reasonably grow bits. And you see the same opportunity on the mobile side, perhaps a little less aggressive growth. But nonetheless, very, very strong opportunity; particularly, for Micro, where we had less market share presence on NAND in the mobile segment a real opportunity for the Company to grow share substantially, which translate for us into similar rates for us as we see in the SSD space.

Kevin Cassidy

And maybe, Ernie, you touched on it a little bit on the competitive landscape. Where do you see yourself right now compared to say Samsung or Hynex and Western Digital? And then whats the gap, I guess, in terms of month well say in technology?

Ernie Maddock

I dont believe that there is a significant gap of any kind. We have very competitive 32 layer TLC base 3D SSDs are out computing in the market effectively from a pricing perspective, and were comfortable with, although, not satisfied with the margin that thats providing to the Company. And we thats only going to improve, we have the world smallest eye size on our 64 layer device that will not necessarily translate into the absolute lowest cost, but certainly it is a further step up in the cost competitiveness of the Company. So I dont think there is going to be very significant differentiation of any kind Mircon vis--vis competitors relative to our cost competitiveness. I think were going to at industry leading cost and therefore be able to provide industry leading solutions based upon that cost platform. And as a result of that I think there is continued opportunity for the Company relative to positioning our output in the highest value added segments.

Kevin Cassidy

And when we speak of the competitors, I dont think theres a day that goes by that I dont get a phone call and a question about Chinese coming into the DRAM market. Whats your view is on Chinas interest in investing into memory?

Ernie Maddock

Well, I mean, you cant raise a paper and not believe that Chinese are not interested in and in deploying capital to address the market. Their real challenge is there is no source of IP other than the existing industry participants. And those industry participants I think are appropriately thoughtful about whether or not they want to license or otherwise share that IP with a potential new industry entrant. And in the absence of that IP I think, that the opportunity for China to successfully enter is significantly hampered, I would never say never, but possessing IP has been key to every other industry participant successfully entering the market. And even then they were not able in many cases to have the wear with all to continue in the market and to compete in the absence of having a viable credit source of IP that challenge becomes even more significant.

Question-and-Answer Session

Q - Kevin Cassidy

Right. Ive got to open it up to the audience for any questions, if not all. Well go on with -- we have a new CEO, we do Sanjay Mehrotra, Co-Founder of SanDisk. Can you say what strategy changes you might be expecting or what change this might bring to Micron?

Ernie Maddock

I think its premature to expect that there would be strategy changes. As the Board articulated when both Marks retirement was announcement and Sanjays appointment was announced, there are comfortable with the strategy of the Company. And I think that, listen Company strategy evolves overtime, it does not -- you dont do in about say as quickly, and I certainly wouldnt expect to anything like that here. I think that Sanjay brings a, what I would consider to be, a Silicon Valley perspective into the business at the very highest level. And by that, I mean, a level of challenge, a level of pushing to do better that weve all become very accustom to if youve lived and worked in Silicon Valley. And which isnt necessarily something that the breadth of the Company experience for a very long time. I think Micron has always been positioned effectively and push hard.

I will tell you that Sanjay pushing even harder, and I think that is net beneficial, whether its Micron or any other company. The most significant achievements are typically made when you have leadership that pushes to do thing, so you didnt think were possible or pushing you to do things that you thought in fact might be impossible, and by the way doing those impossible things a little more quickly than you might have thought. So I think its sort of that energy, that drive.

And then also anytime an enterprise, as big as Micron has to adapt to someone who is new, that in and of itself creates the opportunity for change, and a heightened level of performance. So Im personally really excited and I think that he was exactly the right choice for the Company and a great -- he is looking forward to building on the legacy that Mark left behind. So what a great way to inherent the Company to be in such fantastic shape from a technology point of view, a capital deployment point of view, as Sanjay have the luxury of coming in this Company during that time, which was a result of what market done during his tenure.

Kevin Cassidy

Okay. And maybe if we touch on that when we talked about doing the impossible. But maybe 3D XPoint, first new memory introduced to the market in 40 years or so, and you and Intel have co-developed this. Can you say how is that market evolving and whats Micron positioned in this?

Ernie Maddock

Weve set fairly modest expectations about 3D XPoint. Because we have to work through enablers to enable solutions, and there will be solutions in the datacenter and potential storage solutions. And I would say that we are still exploring. So we really dont have an update for 3D XPoint since our Analyst Day. And at the point in time where we feel its appropriate, well share more about what were planning to do with that.

Kevin Cassidy

Okay, anything from the audience? How about, you mentioned capital allocation, what are you views for capital allocation through this year and then into next year?

Ernie Maddock

Well, we pretty much set the course for this year relative to capital. We have talked about a nominal $5 billion plus or minus CapEx budget and provided the outlet for that, which is somewhere in the 40% to 60% DRAM range, 30% to 40% non-volatile memory and the balance is sort of engineering, backend, test, configuration. Weve also said and have actually reduced that by about $1 billion. So weve deployed about a billion or so of the free cash flow. We said that remains an important priority. So theres possibility that we will do more of that here as we exit our fiscal year. And then of course we typically share our fiscal, what would be our fiscal 18 capital budget towards the end of the summer and we plan to be doing that this year.

Kevin Cassidy

Okay. So youre not going to give any more details on what your future plans are, or the mix be about the same?

Ernie Maddock

Well, well give those details when we finalize our 2018 plan. And there is a massive planning effort going on now in the Company. But listen when you have these two core technologies, its a reasonable thing that youre going to make significant investments in both as you look forward through fiscal 18 budget.

Kevin Cassidy

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Micron Technology (MU) Presents At Stifel 2017 Technology, Internet And Media Conference (Transcript) - Seeking Alpha

Two years ago, the New York Giants began using drone technology to help them analyze their practices. It was the first step of many to come as they began shifting towards more progressive analyzation techniques.

As technology and technological methods continue to advance, todays coaching staffs have no choice but to get accustomed to using the tech equipment. From drones to tablets, the use of technology is at the forefront of everyday life in the NFL.

The Giants big offseason acquisition, veteran wide receiver Brandon Marshall, recently praised the team and head coach Ben McAdoo for their implementation of these new technologies.

Our league is a lot of times stuck in its ways, the tradition, Marshall said via ESPN. Theyre doing the same things from 40 or 50 years ago, running the same plays, the same terminology, same teaching message. When you have younger coaches or coaches who are innovators like Coach Mac, they are more receptive to doing things like that. . . I love it.

The fact that the Giants are the first team that Marshall has been on implementing these new methods shows how progressive the Giants have become. In particular, the GPS utility being used has excited Marshall in his short time with the team. The new-aged tactics have helped during training, on the sideline, in the film room and in the diet/nutrition category as well.

Some of todays players are too young to remember a time without coachs challenges and booth reviews, let alone the new training technology. Marshall certainly didnt have access to these methods when he made his way through college and into the NFL.

[My Father] used to take us to the hill, we used to run the hill, we used to pick up old tires, put tires together, run through tires and ropes. It was tough. Marshall said.

Although technology is changing the game, Marshall reiterated that hes still where he is today because of the work he put in prior to the advancements.

I think that is one of the reasons Im here today. My dad instilled that work ethic with me and my brother, he added.

This past weekend, Marshall came together with Sterling Shepard, Evan Engram and former Jets teammates at the Recievers Factory to help teach kids about the fundamentals of the game and the use of new technologies.

The up-and-coming generations certainly have a leg up with everything at their fingertips. It wasnt until college that Marshall was introduced to VHS tapes used to watch film.

When I was younger there wasnt really a YouTube or a Google. I didnt really have a computer to see what Jerry Rice was doing or Terrell Owens or Randy Moss, Marshall said.

As these new-aged tactics continue to grow, NFL teams will continue to adjust their approach. And so long as veterans like Marshall embrace the changes, the more advanced the game itself will become.

Read more here:

Brandon Marshall embracing Giants' use of progressive technology - Giants Wire

Apple's marathon WWDC 2017 opening session touched on a bevy of key themes enterprises need to ponder. Overall, artificial intelligence was a key theme and enterprises may be able to step up their augmented reality games. Developers also got a bevy of notable software developer kits.

Here are the big takeaways for technology professionals.

Apple is now playing the artificial intelligence and machine learning game too. Based on a Jackdaw Research analysis, AI has occupied a big chunk of the major developer---Microsoft, Facebook and Google---keynotes in 2017. Apple has now joined the club.

Executives frequently mentioned machine learning and noted how Siri could do more things (like Google Assistant) and use more voices. Siri will get an upgrade on watchOS as well as iOS. As I noted in a preview, Apple's main task was to outline key AI moves. The company got into the game and conversation with WWDC 2017. More: WWDC 2017: Apple gives Siri top billing on watchOS 4, Apple Watch | CNET: Apple wants Siri to read your mind and take over your home

Hardware upgrades woo pros back and set stage for developers to use augmented (AR) and virtual reality (VR). Apple upgraded its entire Mac line to handle more graphics processing. The iMac Pro could be a nice showpiece or workstation for enterprises. Apple has been behind the curve with hardware updates and has closed the gap with the PC industry.

The extra horsepower was needed given Apple needed to make a stand in augmented reality. Meanwhile, enterprises and content pros will have more faith in the Apple upgrade cycle. Content pros now have better systems. WWDC 2017: Apple reveals macOS refresh, High Sierra | Apple iMac Pro, worth the $4,999 | Apple announces new iMac range, powers up the MacBook | TechRepublic: Apple unleashes 18-core iMac Pro with 128GB RAM, bumps other Macs to Kaby Lake

Developer tools for Siri and AR support the strategic shift to be more AI and AR centric. SiriKit and ARKit were notable additions. If Siri is going to be the primary screen across devices Apple will need to use its developer base to help. On the AR front, ARKit will expose the technology to more developers and consumers. Both of those software developer kits will be strategically important going forward. Apple launches augmented reality developer tools with ARKit | Apple positions Mac updates, Mac OS High Sierra for VR developers

Apple is commerce. Yes, Apple's main theme was AI and AR, but don't forget what will pay the bills. Apple Pay will be more integrated and easier to use with iMessage integration. Meanwhile, an iOS 11 upgrade to Maps will include malls and inside spaces. You can see the connective tissue here as Apple profits from the handoff from Apple Pay to internal maps to closing sales and collecting fees. CNET: Apple Pay takes on Venmo with personal money transfers

An App Store revamp may result in more developer profits. Apple's App Store walkthrough focused on games and apps, but developers had to be thinking better economics. Apple is promising a faster review process and more customer engagement. Let's face it: You can't discover many apps on the current App Store. The upgrade will make it easier to find apps and then conduct transactions. TechRepublic: Apple macOS High Sierra kills AutoPlay in Safari, uses machine learning to improve privacy

Apple's iPad Pro update was overdue, but features like drag and drop and files were outlined like they were something groundbreaking. And those features were great--20 years ago or more. Apple is making the iPad Pro more of a productivity device with its updates, but the company over rotated on the Apple Pencil and will still struggle to convince me an iPad Pro is better than a MacBook. Apple refreshes larger iPad Pro with 10.5-inch display | Your iPad will finally show you files | iOS 11 for iPad includes customizable dock and drag and drop features

See the original post here:

Apple's WWDC 2017: The big takeaways for technology pros - ZDNet

Last time we heard from Palmer Luckey, the one-time poster boy for VR, he was quietly ousted from Facebookafter a $100,000 donation to a pro-Trump shitposting group came to light.

Now Luckey, who sold his VR company Oculus to Facebook for $2 billion in 2014, is back, and his new company is concerned with national security.

The New York Times reports that his newest business venture uses lidar technology commonly used in self-driving cars for surveillance on country borders or high-level sites such as military bases. The reported added that the technology, when completed, could be used to detect threats such as drones, but ignore more common objects such as birds or other wildlife. It is proposed as an alternative to full-scale border walls, such as the one President Trump has pledged to build between the U.S. and Mexico, due to potentially vast cost savings.

Luckey confirmed the outline of his new venture in a statement to the Times:

We are spending more than ever on defense technology, yet the pace of innovation has been slowing for decades. We need a new kind of defense company, one that will save taxpayer dollars while creating superior technology to keep our troops and citizens safer.

Peter Thiel, a tech advisor to President Trump, is planning to support Luckeys new company with investment from his fund, the Times report noted. Theres no information on other potential financial backers at this point.

Already, the company which is located in Southern California has hired a handful of staff, including former Oculus employeeChristopher Dycus.

Continue reading here:

Oculus founder Palmer Luckey is developing border surveillance technology - TechCrunch