Paul Gluckman

Tech and creative industries universally hailed Senate confirmation Wednesday of China and trade expert Katherine Tai as U.S. trade representative by a 98-0 vote. Tai inherits the USTR post as three rounds of tariffs on Chinese goods remain at 25%, over the concerns of tech and telecom stakeholders. Overhauling the tariff exclusions to give the process more “transparency and predictability” would be “very high on my radar,” Tai told her Senate Finance Committee confirmation hearing Feb. 25. The levies “disrupted a lot of people’s lives and livelihoods,” she said. BSA|The Software Alliance urges Tai to “promote digital trade policies that facilitate the responsible transfer of data across borders,” said CEO Victoria Espinel. During Tai’s time as lead trade counsel for House Ways and Means, she played “an instrumental role” in the United States-Mexico-Canada Agreement, said TechNet: USMCA “included strong intellectual property protections and a landmark digital chapter that eliminated digital trade barriers and enhanced trade.” MPA CEO Charles Rivkin said Tai “fully appreciates that securing robust copyright protections overseas is fundamental to developing a worker-centric trade policy.” CTA (here), the Information Technology Industry Council (here), the Telecommunications Industry Association (here) and others also commented.

“Macro events” of the past year helped “shine a light on the many benefits of the secular shift to the cloud and digital transformation,” said Smartsheet CEO Mark Mader on a quarterly call Tuesday. The company bills itself as a leading cloud-based “dynamic work" platform. When lockdowns began last March, customers went through “an initial adjustment period,” focused mainly on “business continuity and employee safety,” said Mader. They soon seemed "to recognize that this new normal compelled them to think differently about how they operate and which tools they would need to navigate a new reality,” he said. The COVID-19 enterprise response “proved that organizations have the capacity to adapt rapidly to changing conditions, even using change as an opportunity to more deeply connect individuals to their work and their company's missions,” said Mader.

Consumer demand for chips and faster mobile communications won't ebb soon, said executives at a major manufacturer of consumer electronics for other companies. "Things will be back to more normal conditions” in January-March 2022, said Jabil CEO Mark Mondello of semiconductor supply-demand balance. “We think this thing will start to show levels of relief” in fiscal Q1, ending late November, “and for sure as we get into calendar '22,” he said. Demand for semiconductors “has never been higher, with the accelerated convergence of technologies and the associated data generation and storage needs,” Chief Financial Officer Mike Dastoor told a call Tuesday for fiscal Q2, ended Feb. 28. “Nearly every part of the economy runs on silicon.” Jabil is seeing what “finally looks to be reasonable plans in terms of the 5G wireless rollout,” said Mondello. “That’s here to stay, not a number of months, but a number of years,” he said. “That’s going to have all kinds of tangents tied to it as well, once the 5G rollout gets underway, in terms of derivatives to other parts of our business.” The technology is speeding the “secular expansion of cloud adoption and infrastructure growth,” he said.

Technicolor CEO Richard Moat doubts other studios will replicate AT&T’s “interesting move” to funnel WarnerMedia’s 2021 slate of feature film releases direct to streaming (see 2012030053), he said Thursday on a Q4 call. “I don't see that as being a fundamental shift in the industry paradigm.” AT&T’s motive “was obviously to try to drive up subscriptions on HBO Max,” said Moat. “They were taking a big bet there in terms of the number of incremental customers” they would gain. “It remains to be seen whether that was a sensible financial bet,” he said. “Under normal circumstances, the studios are going to make a lot more money from pushing the product out into cinemas than they are through going exclusively to a streaming platform.” AT&T declined comment Friday. Connected home “delivered a strong year” for Technicolor in 2020, “exceeding the original targets” set before the pandemic, said Moat. “Increased demand from cable customers in North America drove revenues, but we were hit by a slowdown and supply constraints in Eurasia. Latin America was negatively impacted by the difficult macroeconomic situation in the region.” The strong consumer demand for upscale set-top boxes is driving “very high sales amongst our major cable and telco customers,” said Moat. Comcast picked Technicolor as the supplier for its latest-generation XB8 box, he said. Comcast referred our request for comment about the XB8 to Technicolor, whose spokesperson told us Moat "made a misstatement," and he meant to refer to Comcast orders for the XB7. She said the XB7 is a "gateway" device, not a set-top box, as Moat mistakenly called it. “Traditional video” will continue “to be on the decline” the next few years, “despite a transitional rebound” expected in 2021, said Moat. “Multi-gig broadband access markets and streaming Android TV are on the rise with solid growth. In 2021, the market will continue to be driven by the expansion of fiber and the adoption of Wi-Fi 6.” The electronics supply chain will continue “to be stretched by excess demand” for semiconductors, he said.

Decisions about which Disney feature films will play in which theaters are “a function of the exhibitors that own those theaters and whether or not they agreed to the terms of the Walt Disney Company,” said CEO Bob Chapek during the company’s virtual annual meeting Tuesday. A Peoria, Arizona, shareholder had asked why she and her Girl Scouts troop were denied seeing Raya and the Last Dragon on the big screen when a local theater chain told her it couldn’t make a deal with Disney. Raya debuted theatrically last week with simultaneous release on Disney+ as a $29.99 "premier access" streaming option. “We hope to be able in the future to have all theaters playing all Disney films,” said Chapek. Disney has “a small army of people that spends every waking hour” protecting the “very valuable data that’s entrusted to us” for Disney+ and its other direct-to-consumer streaming services “so it doesn’t get into the hands of bad actors,” he told another questioner. Guarding Disney+ against hacks is “something that we spend a lot of time on,” he said. “We realize the trust” that subscribers “put in our hands when they decide to sign up,” he said. “We continue to try to improve and get better and better to protect that data for everybody’s best interests.” Disney constantly studies “a lot of different options” for managing its various businesses to increase shareholder value, “including potential spinoffs,” said Chapek. “We have nothing to announce today, but that is a regular part of what we do as we examine ways to operate more efficiently and more effectively.” He announced that Disney+ surpassed 100 million global paid subscribers in its first 16 months.

Marvell Technology CEO Matt Murphy is optimistic on 5G even as his company is working to avert the worst effects of chip shortages. The global semiconductor supply chain clearly “was not completely prepared for the surge” in COVID-19-induced demand across most “end markets,” he said on a fiscal Q4 call Wednesday. The supply chain “needs time to increase capacity,” and the “supply gap” seems likely to persist “at least” through Marvell’s fiscal year ending January 2022, he said. The chipmaker downplayed its revenue growth outlook for fiscal Q1 ending late April. It's forecasting $800 million, plus or minus 5%, which would mean flat sequential growth at the midrange. The stock closed 12% lower Thursday at $40.10. Marvell’s “growth initiatives” in 5G and cloud helped drive a 24% revenue increase in its networking business for Q4 ended Jan. 30, said Murphy. “We delivered our sixth straight quarter of sequential revenue growth” in 5G, “driven by standard and semi-custom product shipments to Samsung and Nokia,” partially offset by a decline in application-specific 5G ICs “as deployments in China take a pause,” he said. Factoring out the “typical lumpy nature of individual regional rollouts,” said Murphy, 5G infrastructure deployments “are expected to continue to strengthen worldwide.” That the recently concluded first phase of the FCC C-band spectrum auction was the “highest grossing” in the U.S. was “a clear indicator of the potential revenue opportunities carriers expect from 5G technology,” he said. “Other regions around the world are also opening up spectrum for 5G services.” Marvell’s open radio access networks platform, launched in December, has Facebook and Fujitsu as customers, he said.

The world technologically “experienced more change” in 2020 than in the previous 10 years, “and there are signs that 2021 will be similar,” said Splunk CEO Doug Merritt on a fiscal Q4 call Wednesday. “We are seeing companies with a strong digital strategy outpacing their peers.” Cybersecurity attacks are growing “at unprecedented levels and scale,” said Merritt. The “magnitude” of the SolarWinds hack (see 2103040066) “hammered home the unsettling but ever-present reality of the digital era that all organizations are likely to get hacked at some point,” he said. Splunk took immediate action at the “onset” of SolarWinds to “enable customers to investigate whether they had been impacted by the attack and to confirm that Splunk itself hadn't been impacted,” he said. Splunk’s cloud revenue for the year ended Jan. 31 was $554 million, up 77%.

China “firmly opposes and combats” cyberattacks and cybertheft “in all forms,” said a Foreign Affairs Ministry spokesperson when asked Wednesday about Microsoft’s disclosures of a new “state-sponsored threat actor” based in China it named Hafnium. Microsoft said the hacking group preys on infectious disease researchers, law firms, universities, defense contractors and think tanks. China considers it “a highly sensitive political issue to pin the label of cyber attack to a certain government,” said the spokesperson. "We hope that relevant media and companies will adopt a professional and responsible attitude and underscore the importance to have enough evidence when identifying cyber-related incidents, rather than make groundless accusations.” Though Hafnium is based in China, it conducts its operations from leased virtual private servers in the U.S., blogged Tom Burt, Microsoft corporate vice president-customer security and trust. Hafnium uses “previously undiscovered vulnerabilities” to gain access to network servers by disguising itself “as someone who should have access,” said Burt Tuesday. It creates a “web shell” to control the compromised server remotely and uses that remote access “to steal data from an organization’s network,” he said. “We need more information to be shared rapidly about cyberattacks to enable all of us to better defend against them. That is why Microsoft President Brad Smith recently told the U.S. Congress that we must take steps to require reporting of cyber incidents.”

CEO Bob Chapek “would challenge the idea” that Disney is in a streaming war with its competitors, “in the sense that there's one winner” that typically emerges. “We think there's going to be multiple winners,” he told a virtual Morgan Stanley investor conference Monday. He's “highly confident that we're going to be one of them.” Disney remains a big believer in the “power of exhibition to build our franchises” theatrically, said Chapek. In 2019, “the last normal year we had,” Disney fielded 11 feature films that grossed more than $1 billion at the box office, he said. “That is a big deal to us, and that'll continue to be a big deal, but we realize that this is a very fluid situation.” The “short-term impact” of COVID-19 impeding “the number of screens that are open and consumers' willingness to actually go back into theaters” is taking “longer than we want" to abate, said Chapek. The company is “watching very carefully” to discern any “shift” in consumer behavior and preferences toward returning to theaters, he said. Consumers have had the “luxury” for a year of “getting titles at home, pretty much when they want them, and so I'm not sure there's going back” to people flocking to the theater the first day a feature film comes out, said Chapek. “But we certainly don't want to do anything like cut the legs off a theatrical exhibition run.”

Zoom revenue grew 369% to $882 million in fiscal Q4 ended Jan. 31 “due to strong sales and marketing execution in online, direct and channel businesses as well as lower-than-expected churn,” said Chief Financial Officer Kelly Steckelberg on a quarterly webinar Monday. “Demand was widespread.” The increase in customers generated about 80% of the “incremental revenue,” up from 59% in Q4 a year earlier, she said. “We continue to add customers of all sizes and across industries that we anticipate will provide future upsell opportunities.” Zoom continued to benefit from significant growth in customers with 10 or fewer employees, she said. Customers in that segment generated 37% of revenue, nearly double that of Q4 a year earlier, she said. For the full year of fiscal 2022 ending in late January, Zoom expects revenue to be $3.76 billion to $3.78 billion, which would be 42-43% year-over-year growth, she said: “Although we remain optimistic on Zoom’s outlook, please note the impact and extent of the COVID-19 pandemic and people returning to in-person contact still remains largely unknown.” The stock closed down 9% Tuesday at $372.79.