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Qualcomm deals blow to Broadcom's bid with sweetened NXP deal

(Reuters) – U.S. semiconductor company Qualcomm Inc (QCOM.O) on Tuesday unveiled a sweetened $44 billion agreement to acquire NXP Semiconductors NV (NXPI.O), its most defiant move in its defense against a hostile $121 billion bid from Broadcom Ltd (AVGO.O).

The new deal puts pressure on Broadcom to decide if it will stick with a stipulation in its bid that Qualcomm does not raise its offer for NXP. It could strengthen Qualcomm’s defenses because it allows its shareholders to better assess the standalone value of Qualcomm as an alternative to a deal with Broadcom.

Qualcomm shares dropped 2.4 percent to $63.23, significantly below Broadcom’s latest $82 per share cash-and-stock offer unveiled on Feb. 5, as investors saw the new NXP deal as increasing the chances of Qualcomm repelling Broadcom.

Broadcom said on Tuesday it was evaluating its options in response to Qualcomm’s move and noted that the revised price for NXP was well beyond what Qualcomm has repeatedly characterized as “full and fair.” It called the new deal a transfer of value from Qualcomm shareholders to NXP shareholders.

In an interview with Reuters, Qualcomm’s presiding board director Tom Horton argued that the revised deal with NXP represented value of Qualcomm shareholders irrespective of the outcome of the takeover battle with Broadcom.

“It makes Qualcomm stronger and more profitable and diversified if there is no deal with Broadcom, and if we do decide to pursue a sale the same is true, more value would accrue to the Qualcomm shareholders,” Horton said.

Qualcomm raised its offer for NXP from $110 to $127.50 per share in cash. In exchange, it received binding agreements from nine NXP stockholders that collectively own more than 28 percent of NXP’s outstanding shares to support the deal. These include hedge funds Elliott Advisors (UK) Ltd and Soroban Capital Partners LP, which had spearheaded opposition to the NXP deal.

NXP’s shares rose 6.1 percent to $125.73. The stock had traded above the original offer price for nearly seven months, reflecting expectations among investors that Qualcomm’s offer would be raised.

NXP shareholders have to tender their shares in an offer that is currently set to expire on March 5, though Qualcomm has repeatedly pushed back this deadline as it awaits clearance from China’s MOFCOM, the only regulator globally needed to approved the deal that has yet to do so. The Chinese New Year holiday this month has delayed this review.

Under the new terms agreed with NXP’s board, the deal with Qualcomm is contingent on 70 percent of NXP’s shares being tendered, instead of the 80 percent threshold required in the earlier agreement signed in October 2016. Once this threshold is reached, Qualcomm can take over the entire company through a “second-step” transaction mechanism.

The new NXP deal came less than a week after Broadcom and Qualcomm executives met face-to-face for the first time to discuss the differences between the two sides. Qualcomm called the meeting constructive but reiterated it had several concerns over price and regulatory risk.

BOARD CHALLENGE

The acquisition of NXP will help Qualcomm to expand in the fast-growing market for chips used in automobiles and reduce its dependence on the competitive smartphone market.

The takeover battle between Qualcomm and Broadcom is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc (AAPL.O) and Samsung Electronics Co Ltd (005930.KS) use their market dominance to negotiate lower chip prices.

Singapore-based Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. San Diego-based Qualcomm primarily outsources the manufacturing of its chips which are used for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology.

To put pressure on Qualcomm, Broadcom has put forward six nominees up for election at Qualcomm’s March 6 shareholder meeting to replace the majority of the company’s eleven-member board of directors.

Proxy advisory firm Glass Lewis on Tuesday recommended Qualcomm shareholders vote for all six director nominees Broadcom has put forward.

Last week, Institutional Shareholder Services Inc (ISS) had recommended for the election of four Broadcom nominees. While this recommendation would fall short of Broadcom’s nominees winning a majority on Qualcomm’s board, ISS said such a vote by Qualcomm shareholders would offer a reasonable path to a negotiated deal that would deliver value.

“ISS and Glass Lewis only influence a minority of our shareholders. They belie the fact that the Qualcomm board is doing everything it can in the furtherance of the interests of its shareholders. The ISS and Glass Lewis reports are also dated because they came out before certainty was secured on the NXP deal,” Horton said.

Additional reporting by Sonam Rai and Supantha Mukherjee in Bangalore; Editing by Patrick Graham and Meredith Mazzilli

Beware of Pranksters Crashing Apple iPhones Using Twitter

If you’re an Apple iPhone user who also enjoys Twitter, listen up.

Pranksters on the social media service have been sharing a character from the Indian Telugu language that causes iPhones to crash, according to Mashable. The offending users have been putting the character into their Twitter usernames and tweets and encouraging people to share them with their friends. If the character lands in a user’s Twitter feed, it will cause the social app to crash. The app will continue to crash after users try to boot it back up, ultimately stopping victims from accessing the service on their iPhones.

Last week, reports surfaced saying that a single Telugu character was enough to wreak havoc on iPhones. When the character is sent via any messaging or social networking app, the affected user’s app will crash. While it’s an obscure bug that only affects Apple’s iOS 11, it’s one that pranksters and those trying to cause harm are exploiting across the Internet. Worst of all, there’s no fix at the moment and unsuspecting victims needn’t do anything to be affected.

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Apple acknowledged the Telugu bug last week and has promised a fix. The company hasn’t yet delivered, though, and it’s impossible to say when it’ll be released.

According to Mashable, which tested the bug on Twitter, the only way for affected users to regain access to the app is to log in via Safari and block the person that shared the character. At that point, the character won’t show up in their feeds and Twitter will be accessible.

Here's Why You Shouldn't Pay $1.10 For A Dollar Of Investment Grade Bond Assets

I’ve received questions from prospective subscribers about the types of trade alerts that we issue to the members section of the Cambridge Income Laboratory. One type of trade is CEF arbitrage, or more specifically a pairs trade, where we simultaneously identify an overvalued CEF and an undervalued CEF in the same sector. The strategy then entails selling or selling short the overvalued fund while simultaneously buying the undervalued fund.

The advantage of a CEF pairs trade is that because both the sold and bought funds are from the same sector, we aren’t making a directional bet on the performance on the underlying assets. Instead, we’re simply relying on the powerful concept of reversion of CEF premium/discount values (see Reflections On Chemist’s CEF Report Pick Performance In 2017 for how this has worked well for us in the Chemist’s monthly CEF picks).

There are two main limitations of the CEF arbitrage strategy. The first is that the magnitude of the gains are unlikely to be very large, simply because it is by nature a hedged strategy. That’s the trade-off for the strategy being relatively low risk. The second limitation is that unless you already own the overvalued CEF identified in the pairs trade, you would have to locate shares of the overvalued CEF to sell short. With some of the smaller, less liquid CEFs, this can range from expensive to downright impossible. The most optimal set-up is therefore already owning the overvalued CEF, and then locking in profits by selling the fund and then replacing it with the undervalued CEF in the same sector.

With the introductory blurb out of the way, let’s see how this has played out for one of the more recent CEF pairs trade that we identified in the members section of the Cambridge Income Laboratory.

About 4.5 months ago (see Sell This Investment Grade Income CEF Now), we noticed the premium of Western Asset Income Fund (PAI), an investment grade bond CEF, suddenly spiking up to +10.16%. The 1-year z-score was +3.6, indicating that this fund was significantly more expensive than its recent history. My comments from the initial article are reproduced below:

I was looking through the CEF database today and noticed the Western Asset Income Fund (PAI) trading at an exceptionally high z-score of +3.6.

Its current premium of +10.16% is at a 5-year high.

(Source: CEFConnect)

A 1-year z-score of +3.6 tells us that the premium/discount is trading 3.6 standard deviations above its 1-year historical value. Statistically speaking, this would be a 0.02% probability of occurrence, assuming that the distribution of values is normally distributed (which it isn’t, but the point is that such a high z-score is a rare occurrence).

The 5-year chart above showed that the fund traded at quite substantial discounts over the past 5 years, sometimes exceeding even -10%. This makes the current premium of +10.16% even more unusual than the 1-year z-score of +3.6 would indicate.

At this juncture, I wanted to look at the entire history of the CEF since inception. Perhaps the past 5 years was just an anomaly, and that the CEF has commanded a consistent premium in the past? It turns out that was not so.

Going back to inception, only during a brief period in 2009 did the fund’s premium exceed 10%. An unusually high premium for an investment grade fund might be understood during the immediate recovery period after the financial crisis…but why now? I can’t think of a fundamental reason why someone would pay $1.10 for a dollar of investment grade debt.

(Source: CEFConnect)

I then check out the premium/discount values of the peer group. Maybe investment grade bond CEFs are for some reason on a tear thus accounting for PAI’s unusual premium? Nope, that’s not it.

The premium of PAI is 3rd-highest out of the 15 CEFs in the “investment grade” category of CEFConnect. But I don’t consider PIMCO Corporate & Income Strategy Fund (PCN) and PIMCO Corporate & Income Opportunity Fund (PTY) to be traditional investment grade income CEFs, so not counting those two funds PAI has the highest premium in the peer group.

(Source: Stanford Chemist, CEFConnect)

OK, so PAI is a pretty good sell or short candidate. What did I pair my short PAI position with?

What did I pair my short PAI position with? I chose the BlackRock Credit Allocation Income Trust (BTZ). I wanted to choose a fund with a negative z-score, but rather amazingly all 15 investment grade CEFs had z-scores 0 or greater. BTZ’s z-score of +0.8 wasn’t the lowest, but its discount of -9.04% was the widest in the peer group, as you can see from the chart above.

Next, I wanted to see compare the price and NAV returns of these two investment grade bond CEFs to check if there were signs of deteriorating portfolio values in the undervalued CEF, which might cause me to consider BTZ as the long partner in this pairs trade.

The opportunity for the pairs trade comes from the fact that PAI’s price return is significantly outpacing its NAV return, whereas that is not the case with BTZ. We can see from the chart below that PAI appears to be blowing BTZ out of the paper with a +19.29% YTD return compared to only +8.94% for BTZ.

Chart

However, their YTD NAV returns are nearly identical.

Chart

No warning signs there. That leads me to the conclusion that:

In summary, if you own PAI, now would be a great time to sell!

Let’s see how the thesis played out 4.5 months later. BTZ had a total return loss of -3.88% over this time frame. That’s bad, of course, but still relatively much better than PAI’s loss of -14.1% over the same period. In other words, BTZ outperformed PAI by 10.22 percentage points in only 4.5 months, or about 27% annualized.

Did PAI’s portfolio do much worse than BTZ’s? No, and in fact the reverse was true. PAI’s net asset value [NAV] fell by -2.10% over this time period, but BTZ’s was even worse at -3.24%.

If BTZ’s portfolio did worse than PAI’s, why was its total return (much) better? My regular readers will have already guessed at the answer: premium/discount mean reversion! Over the last 4.5 months, PAI’s premium of +10.16% has sank to a discount of -4.82%, while BTZ’s discount of -9.04% has widened slightly, to -11.9%. Therefore, the majority of the outperformance of the long BTZ/short PAI pairs trade was due to the contraction of PAI’s discount.

Chart
PAI Discount or Premium to NAV data by YCharts

Summary

This article hopefully conveys our thought process in recommending a pairs trade to our members. Anyone who owned PAI and swapped to BTZ to would have profited to the tune of ~10% in only 4.5 months (~27% annualized), which is equivalent to about 2.5 years worth of distributions from PAI!

Note that I did not need to do a deep dive analysis of either PAI or BTZ to initiate this pairs trade. This was based almost entirely on premium/discount mean reversion, or as my fellow SA author Arbitrage Trader likes to say, “simple statistics”.

Taking stock of the situation today, the long BTZ/short PAI trade has to be considered to be largely completed, as PAI is now trading with a discount of -4.82% and a 1-year z-score of -1.5, indicating that is now cheaper than its historical average. Although BTZ’s z-score of -2.5 is even lower, as is its discount (-11.9%), the gap in valuation is no longer there.

Are there any current opportunities? The following table shows the 12 CEFs in the database that currently have z-scores greater or equal to +2.5. If you own ones of these funds, if might be a good idea to seek out another fund in the same category that is trading with a more attractive valuation, particularly if the fund that you own is also trading at a premium. Don’t let mean reversion catch you out!

Name Ticker Yield Discount z-score
MS Income Securities (ICB) 2.71% -1.47% 3.9
BlackRock Science and Technolo (BST) 5.32% 3.05% 3.2
Tortoise MLP Fund (NTG) 8.61% 9.26% 3.2
ClearBridge Energy MLP (CEM) 8.85% 5.53% 3.1
Gabelli Utility Trust (GUT) 8.50% 44.95% 3.1
Templeton Emerging Mkts Income (TEI) 3.79% -8.17% 3.1
Sprott Focus Trust (FUND) 4.97% -8.86% 3.0
Nuveen S&P Dynamic Overwrite (SPXX) 5.58% 9.54% 2.9
RiverNorth Opportunities Fund (RIV) 12.09% 6.83% 2.7
Deutsche High Income Oppos (DHG) 5.42% -0.60% 2.6
First Trust New Opps MLP & En (FPL) 10.52% 6.67% 2.5

Western/Claymore Infl-Lnk Opps

(WIW) 3.79% -9.71% 2.5

(Source: CEFConnect, Stanford Chemist)

We’re currently offering a limited time only free trial for the Cambridge Income Laboratory. Prices are going up on March 1, 2018, so please join us and lock in a lower rate for life by clicking on the following link: Cambridge Income Laboratory.

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 the portfolio securities.

Can Machines Save Us From the the Machines?

Is it just me or is the cyber landscape getting more scary? Even as companies and consumers get better at playing defense, a host of new cyber threats is at our doorsteps—and it’s unclear if anyone can keep them out.

My doom-and-gloom stems from the dire predictions of Aviv Ovadya, the technologist who predicted the fake news epidemic, and now fears an “information apocalypse” as the trolls turbo-charge their efforts with AI. He points to the impending arrival of “laser phishing” in which bots will perfectly impersonate people we know by scraping publicly available images and social media data. The result could be the complete demolition of an already-crumbling distinction between fact and fiction.

Meanwhile, the phenomenon of crypto-jacking—in which hackers hijack your computer to mine digital currency—has quickly morphed from a novelty to a big league threat. Last week, for instance, hackers used browser plug-ins to install malignant mining tools on a wide range of court and government websites, which in turn caused site visitors to become part of the mining effort.

The use of browser plug-ins to launch such attacks is part of a familiar strategy by hackers—treating third parties (in this case the plug-ins) as the weakest link in the security chain, and exploiting them. Recall, for instance, how hackers didn’t attack Target’s computer systems directly, but instead wormed their way in through a third party payment provider. The browser-based attacks feel more troubling, though, because they take place right on our home computers.

All of this raises the question of how we’re supposed to defend ourselves against this next generation of threats. One option is to cross our fingers that new technologies—perhaps Microsoft’s blockchain-based ID systems—will help defeat phishing and secure our browsers. But it’s also hard, in an age when our machines have run amok, to believe more machines are the answer.

For a different approach, I suggest putting down your screen for a day and picking up How to Fix the Future. It’s a new book by Andrew Keen, a deep thinker on Silicon Valley culture, that proposes reconstructing our whole approach to the Internet by putting humans back at the center of our technology. Featuring a lot of smart observations by Betaworks founder John Borthwick, the book could help us fight off Ovadya’s information apocalypse.

Have a great weekend.

Jeff John Roberts

@jeffjohnroberts

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

'Black Panther' Review: All That a Superhero Movie Can Be, and More

What should a superhero movie be? What can it be? With Black Panther, we finally have an answer worthy of our time.

In the last decade alone—where the promise of progress in Hollywood read first as fantasy, then as farce—America’s cathedral of heroes offered little access to depictions that fell outside the mechanisms of the industry. Batman and Iron Man, billionaires. Thor, a Norse god. Spider-Man, a youthful prodigy. Captain America, a World War II recruit, became the literal manifestation of national courage and hope.

Black superheroes were never afforded the same deification. During the tail end of black cinema’s golden age, Wesley Snipes’ early-aughts Blade trilogy flirted with pop immortality, but even that character’s legend faded across the years. I sometimes wondered if black superheroes were ever meant to endure in the mainstream, the truth of America being what it is, or if the recurring image of black valor was too much of an irritant to the illusion Hollywood needed to project, to protect.

As you can imagine, what emerges in the opening tints of Black Panther sets the stage for no ordinary undertaking. Here, the past and present are linked by a shared future. Writer-director Ryan Coogler, raised as he was in Northern California, stays close to home, dropping us in the murk of 1992 Oakland. The occasion—death.

We are first introduced to Prince N’Jobu (played pristinely by Sterling K. Brown), a Wakandan spy who is secretly selling vibranium—the meteoric ore native to Wakanda that is the life source to the nation’s technological prosperity—to Ulysses Klaue, a rogue black market dealer. When N’Jobu’s misdeeds are unearthed, King T’Chaka, his brother, is forced to confront him. Their meeting ends fatally, and the king must bear the weight of his secret: that it was he who murdered his brother to save the life of Zuri (Forest Whitaker), his trusted advisor. And though we don’t know it yet, this is the film’s heart, the moment every subsequent action will flow through.

The ensuing story splits along dueling ideologies. It picks up where Captain America: Civil War drew to a close, with T’Challa (Chadwick Boseman) assuming control of his country’s fate in the wake of his father’s death. For decades, Wakanda’s utopian spirit has thrived under the cloak of East Africa’s ethereal beauty, believing that if world powers discovered its technological and scientific ingenuity, the country would risk constant threat. Old-guard preservationists—among them, T’Challa’s mother Ramonda (Angela Bassett) and Okoye (Danai Gurira), head of the king’s women-only security unit, Dora Milaje—believe the country must continue as it has for centuries, solely nurturing its own people. Others, like W’Kabi (Daniel Kaluuya) and Nakia (Lupita Nyong’o), confidants to T’Challa, subscribe to a more pan-Africanist worldview, believing that Wakandans have a great duty to aid the less fortunate—be they refugees, poor kids in the US, or activists caught in the tempest of protest against unjust state influence. The time comes when Wakanda can remain immune no longer, realizing that it too must yield to the cry of a changing world.

A specter of change arrives in the form of Erik “Killmonger” Stevens (a villainous, power-drunk Michael B. Jordan); he’s a former Black Ops mercenary fueled by blood and vengeance for the death of this father, Prince N’Jobu. His price is T’Challa’s throne and sovereignty over the nation. Killmonger, who finds an ally in W’Kabi, believes Wakanda must position itself as a global wellspring by equipping marginalized factions with its cutting-edge weaponry—a move he’s sure will liberate the country from the shadows and into an international superpower. Coogler and Joe Robert Cole, who co-wrote the script, turn an age-old narrative on its head via Killmonger’s revisionist fury: The colonized as the colonizers.

Lines are drawn, and what transpires is a film of beauty, backbone, and startling discipline. Technically lush, Black Panther infuses itself with diasporic hybridity: Wakandan dress, architecture, and dialect pull from Mali, Nigeria, Kenya, Ethiopia, and Tanzania. Rachel Morrison, the Academy Award-nominated cinematographer attached to the film, delivers shots full of color and pure awe. When T’Challa travels to the ancestral plain to seek advice from his father, its gaping purple skies extend into the theater, as if we are on this dreamlike quest too. As Marvel films go, Black Panther is rife with franchise touchstones: thrilling action scenes—the most daring of which begins in an underground South Korean casino and rockets into a car chase through the frenzied streets of Busan—are undercut with moments of human spirit and levity (Letitia Wright’s Shuri and Winton Duke’s M’Baku offer up well-timed blushes of humor).

Coogler and T’Challa chart a parallel path here, seeking answers to the same question: who are you ultimately responsible to, your people or the people of the world? For his part, Coogler does due diligence by injecting the film with nods to black culture beyond the backdrop of Wakanda and the traditions of its people. I especially loved the moment when Jordan’s Killmonger, revealed to be of royal blood, calls Bassett’s Ramonda “auntie” with a razor-thin smirk. Or when Shuri jokes with T’Challa about the time-honored footwear he wore to impress tribal leaders, laying into him with, “What are thooose?!?!”

Even free of such context, Black Panther is an unmistakable triumph. Delivered through Coogler’s judicious eye, its existence alone generates a counter-history in film and mass media—first by scraping whiteness from its narrative core, then by making black people and black self-determination the default.

The 31-year-old writer-director has redefined the possibility of a superhero epic, a credit to his singular vision and belief that black stories matter, and that they imbue relevance on the big screen no matter what narrative shape they take. He proved that with Fruitvale Station, his breakout 2013 film about the killing of Oscar Grant, and again with Creed, the 2015 boxing flick that mined the importance of legacy and family.

Black Panther will manifest as a movement bigger than this moment. It’s more than historic pre-sale records, or box-office predictions. The collective hype that’s followed the film since inception has been absolutely volcanic, like nothing I’ve witnessed before.

It’s not that our need for black superheroes has shifted. Films like The Meteor Man and Steel may not have been commercially vibrant, but their stories and their images remain vital to black communities as what one friend described as “arbiters of hope and virtue in ways that transcend the limitations of our everyday, colonized lives.” Another friend who I spoke to this week shared a comparable sentiment: “we need black superheroes to remind ourselves that inventing yourself is not only possible, but necessary for survival.” I cite them because Black Panther, Coogler’s pièce de résistance, has been a reflection of shared hopes in creative industries where black identity is either undervalued or co-opted for empty laughs. These worlds, these august narratives, have always been viable to us.

So, what can a superhero movie be? It can be truth and fire and love. If we’re lucky, it is all of those things, perhaps more. It’s no mistake that Black Panther overflows with them.

All Hail King T’Challa

Number of crypto hedge funds doubles in four months: Autonomous NEXT data

LONDON (Reuters) – Hedge funds focused on trading cryptocurrencies more than doubled in the four months to Feb. 15, hitting a record high of 226, showed new data from fintech research house Autonomous NEXT on Thursday.

The firm had recorded just 110 global hedge funds with a similar strategy as of Oct. 18, up from 55 funds at Aug. 29 and just 37 at the start of 2017.

Assets under management hit between $3.5 and $5 billion, according to the firm.

Reporting by Maiya Keidan and Jemima Kelly

Walmart goes to the cloud to close gap with Amazon

SAN BRUNO/SUNNYVALE, Calif. (Reuters) – One of Walmart Inc’s best chances at taking on Amazon.com Inc in e-commerce lies with six giant server farms, each larger than ten football fields.

These facilities, which cost Walmart millions of dollars and took nearly five years to build, are starting to pay off. The retailer’s online sales have been on a tear for the last three consecutive quarters, far outpacing wider industry growth levels.

Powering that rise are thousands of proprietary servers that enable the company to crunch almost limitless swathes of customer data in-house.

Most retailers rent the computing capacity they need to store and manage such information. But Walmart’s decision to build its own internal cloud network shows its determination to grab a bigger slice of online shopping, in part by imitating Amazon’s use of cloud-powered big data to drive digital sales.

The effort is helping Walmart to stay competitive with Amazon on pricing and to tightly control key functions such as inventory. And it is allowing the company to target shoppers with more customized offers and improved services, two top executives told Reuters in interviews at Walmart’s San Bruno and Sunnyvale campuses in California.

“It has made a big difference to how fast we can grow our e-commerce business,” said Tim Kimmet, head of cloud operations for Walmart.

He said Walmart, for example, is using cloud data to stock items frequently ordered by customers via voice shopping devices such as Google Home.

The network is helping the retailer improve its in-store operations as well. Using data gleaned from millions of transactions, the company sped up the process by which customers can return online purchases to their local stores by 60 percent. And Walmart can adjust prices at its physical locations almost instantly across entire regions.

“We are now able to execute change faster,” Jeremy King, Walmart’s chief technology officer, told Reuters. He added that Walmart can now make over 170,000 monthly changes to software that supports its website, compared to less than 100 changes previously.

To be sure, Walmart, the world’s largest brick-and-mortar retailer, holds just a 3.6 percent share of the U.S. e-commerce market compared to Amazon’s 43.5 percent, according to digital research firm eMarketer.

Still, Walmart’s cloud effort is significant at a time when U.S. retail is undergoing immense disruption, and data-based decision making has become more important than ever to understand how shoppers make purchases.

Walmart employees work at the company’s network operations center in Sunnyvale, California, U.S. October 25, 2017. REUTERS/Nandita Bose

Walmart’s online revenue climbed 50 percent year-over-year during the third quarter, helping it post its strongest-ever quarterly growth since 2009.

“The battle between Walmart and Amazon has been playing out on all fronts and the cloud is the latest frontier,” said Kerry Liu, chief executive of Rubikloud Technologies, which offers artificial intelligence technology services to retailers.

EXCESS CAPACITY

The cloud initiative is but one of several steps Wal-Mart is taking to boost its e-commerce business. The company has expanded its online selection and acquired smaller e-commerce retailers. Walmart is offering free two-day shipping on orders of $35 or more, and it recently asked vendors to supply it with merchandise priced at $10 and up to help it turn a profit online.

Walmart has stored information in smaller internal data centers for years. And it uses public cloud storage for non-critical data. Most retailers rent server capacity offered by companies such as Amazon Web Services, Alphabet Inc’s Google, Microsoft Corp and IBM.

(For a graphic on big players in the cloud market, see tmsnrt.rs/2EYe9Ii)

But Walmart’s decision to build a network that is not reliant on a single third-party cloud technology provider has transformed its ability to understand shoppers, who now move between store, desktop, mobile and app to make purchases. About 80 percent of Walmart’s cloud network is now in-house.

Walmart’s Kimmet said security was another big factor behind the effort, enabling the retailer to better protect customer data. That secrecy extends to the locations of its six “mega clouds” or giant server farms, and 75 “micro clouds” whose locations the company declined to disclose publicly.

Walmart shareholders so far appear supportive of its cloud strategy. The company’s shares have risen 49 percent in the last 12 months, defying the broader retail sector downturn and outperforming the wider S&P 500 index, which has risen 14 percent over the same period.

Still, some investors have expressed concerns that Walmart’s approach will make it harder for the retailer to downsize if market conditions change significantly. A few of them told Reuters they would like to see Walmart commercialize its excess capacity, much as its rival Amazon has done.

Amazon Web Services (AWS) generated $18.34 billion in revenue in 2017 and has garnered 26 percent of the cloud market, according to estimates from Jefferies Group LLC.

“Walmart is very good at following Amazon’s innovations. Now they must find a way to monetize the cloud business they are building the way AWS did,” said Charles Sizemore, founder of Sizemore Capital Management LLC, who owns shares of Walmart.

Walmart’s Kimmet said the retailer has no immediate plans to provide cloud services for other companies. But he did not rule it out as a future revenue driver.

Reporting by Nandita Bose in San Bruno, Sunnyvale California; Editing by Greg Roumeliotis and Marla Dickerson

​The most popular Linux desktop programs are…

Video: Barcelona: Bye Microsoft, hola Linux

LinuxQuestions, one of the largest internet Linux groups with 550,000 members, has just posted the results from its latest survey of desktop Linux users. With approximately 10,000 voters in the survey, the desktop Linux distribution pick was: Ubuntu.

While Ubuntu has long a been popular Linux distro, it hasn’t been flying as high as it once was. Now it seems to be gathering more fans again. For years, people never warmed up to Ubuntu’s default Unity desktop. Then, in April 2017, Ubuntu returned to GNOME for its default desktop. It appears this move has brought back some old friends and added some new ones.

An experienced Linux user who voted for it said, “I had to pick Ubuntu over my oldest favorite, Fedora. [That’s] Simply based on how quick and easy I can get Ubuntu set up after a clean install, so easy with the way they have it set up these days.”

Right behind Ubuntu was Linux Mint. Mint is a favorite for users who want an easy-to-use Linux desktop — or for users who want to switch over from Windows.

http://www.zdnet.com/article/the-most-popular-linux-desktop-programs-are/, followed closely by antiX. With either of these, you can run a high-quality Linux on PCs powered by processors as old as 1999’s Pentium III.

In the always hotly-contested Linux desktop environment survey, the winner was the KDE Plasma Desktop. It was followed by the popular lightweight Xfce, Cinnamon, and GNOME.

If you want to buy a computer with pre-installed Linux, the Linux Questions crew’s favorite vendor by far was System76. Numerous other computer companies offer Linux on their PCs. These include both big names like Dell and dedicated small Linux shops such as ZaReason, Penguin Computing, and Emperor Linux.

Many first choices weren’t too surprising. For example, Linux users have long stayed loyal to the Firefox web browser, and they’re still big fans. Firefox beat out Google Chrome by a five-to-one margin. And, as always, the VLC media player is far more popular than any other Linux media player.

For email clients, Mozilla Thunderbird remains on top. That’s a bit surprising given how Thunderbird’s development has been stuck in neutral for some time now.

When it comes to text editors, I was pleased to see vim — my personal favorite — win out over its perpetual rival, Emacs. In fact, nano and Kate both came ahead of Emacs.

There was, however, one big surprise. For the best video messaging application the winner was… Microsoft Skype. Now, Skype’s been available on Linux for almost a decade, and recently, Canonical made it easier than ever to install Skype on Linux. But, still, Skype on Linux?

Jeremy Garcia, founder of LinuxQuestions, thought the result might have come about because: “Video Messaging Application was a new category this year and participation was extremely low. Additionally, Secure Messaging Application was broken out into a separate category that had higher participation and resulted in a tie between Signal and Telegram.”

Of course, it’s also possible that even passionate Linux people can like a Microsoft product. After all, Microsoft now supports multiple Linux distributions on its Azure cloud.

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Coincheck heist sheds light on Japan's rush to create cryptocurrency rules

TOKYO (Reuters) – After the Mt. Gox cryptocurrency exchange was stung by a half-billion dollar theft in 2014, Japanese regulators swung into action.

Their goal was to craft rules that both protected traders and allowed a promising sector to flourish. By last April, thought they had arrived at a set of guidelines that did just that.

Japan’s national system to oversee cryptocurrency trading was the world’s first, rolled out even as policymakers elsewhere grappled with how to deal with the sector. Under the Japanese framework, some exchanges would be allowed to operate – even though they hadn’t yet won regulatory approval.

One of those was Coincheck Inc. Last month, hackers stole about $530 million from the Tokyo-based exchange, a theft rivaling Mt. Gox’s as one of the biggest ever for digital currency.

The Coincheck heist exposed flaws in Japan’s system. And for some experts, it raised questions over the country’s dash to regulate the industry – a sharp contrast to clampdowns by countries like South Korea and China.

Interviews with a dozen government officials, lawmakers and cryptocurrency industry leaders depict a regulator that opted for relatively loose rules to help nurture an industry largely populated by start-ups.

Japan’s Financial Services Agency declined to comment.

But proponents of its regulatory approach say the system and the hack were not connected.

“It’s too much to say that the FSA or institutional design was lax because there was one hack,” said former information technology vice-minister Mineyuki Fukuda, previously a supporter in parliament of promoting and regulating cryptocurrencies.

“IT‘S NOT MONEY”

In the wake of the Mt. Gox bankruptcy, Japan didn’t know what to make of bitcoin – or even who should be in charge.

“It’s not money,” Finance Minister Taro Aso told reporters days after the exchange collapsed. “Does the Financial Services Agency have jurisdiction? The Finance Ministry? The Consumer Affairs Agency? The Ministry of Economy, Trade and Industry?”

Amid the vacuum of oversight, the governing Liberal Democratic Party, seeing the fintech sector as a way to stimulate growth, initially called for the cryptocurrency industry to form a body to regulate itself.

That led to the formation of the Japan Authority of Digital Assets (JADA), comprising blockchain and cryptocurrency start-ups and entrepreneurs.

When the FSA was later tasked with creating regulations for cryptocurrencies, it turned to JADA for help. The group lobbied for rules friendly to start-ups, like low capital requirements.

“We had constant discussions with the FSA, giving technical information and ideas,” said So Saito, a founding member of JADA and now general counsel of its successor, the Japan Blockchain Association (JBA).

The FSA’s rules required exchanges to register, operate robust computer systems and address risk management.

But they left the storage of assets to a set of non-binding guidelines. Exchanges should keep the encrypted keys needed to access digital money in “cold wallets” – for example, USB drives not connected to the internet – only if doing so didn’t overly inconvenience customers, the guidelines said.

In effect, the clause left no obstacle to Coincheck’s holding $530 million worth of NEM crypto-coins in an online “hot wallet” – essentially a digital folder stored on a server – from which the funds were stolen.

“The FSA was quite relaxed on protecting consumers on things like cold wallets and hot wallets,” said the chief financial officer of a major Japanese cryptocurrency exchange.

JAPAN VERSUS THE WORLD

Policymakers across the world have grappled with how to deal with cryptocurrencies. Most have been skeptical about trade in digital assets.

U.S. regulators may ask Congress to legislate more oversight of digital money, the head of the Securities and Exchange Commission said this month.

In Asia, South Korea is embracing strong oversight of cryptocurrency trading, at one point saying it might shut down local exchanges. China, concerned about financial stability, last year ordered some exchanges to close. India this month vowed to stamp out use of cryptocurrencies altogether.

Statistics on cryptocurrencies are patchy because their trading is unregulated in most countries. But Japan accounts for between a third and half of all global bitcoin trade, exchange operators say – a share of the market that has grown as other jurisdictions have cracked down.

As Japan’s rules came into effect last April, exchanges were given six months to register.

But even those that registered but weren’t approved could continue to operate.

Coincheck was among the exchanges that didn’t win approval. By the time it filed its application in mid-September, bitcoin was surging towards a record high of $19,458, which it hit in December.

The exchange had grown to one of Japan’s biggest amid a sharp increase in trading, moving to a new headquarters from a dingy backstreet office. Its share of domestic bitcoin trades soared to 55 percent in December from only 7 percent a year earlier, data from Jpbitcoin.com show.

In an interview with Reuters last year, Kaga Kawabata, Coincheck’s business development manager, was dismissive of the FSA’s oversight, even as the exchange prepared to register.

“They have no knowledge. Every year someone moves, and it’s a big pain to educate them,” he said.

The FSA said last week it didn’t approve Coincheck partly because of worries about weaknesses in the exchange’s systems, declining to give further details. It allowed Coincheck to continue operating, calling for improvements without a specific timeline.

The regulator was in a bind, industry insiders said: Coincheck had grown so big that the FSA couldn’t reject its application.

“Consumers would be upset. It was politically difficult to close down Coincheck,” said Masakazu Masujima, a lawyer and adviser to the Japan Cryptocurrency Business Association, an industry body. “So they kept requesting it to improve its systems.”

Reporting by Thomas Wilson and Takahiko Wada; Additional reporting by Minami Funakoshi, Ami Miyazaki and Taiga UranakaEditing by Gerry Doyle

Alibaba signs deal to offer Disney shows on video platforms

SINGAPORE (Reuters) – Alibaba Group Holding Ltd’s entertainment arm has signed a licensing agreement with Walt Disney Co in a deal that will provide the Chinese group’s Youku video streaming platform with the largest Disney animation collection in China.

Alibaba said in a press release on Monday that the multi-year licensing agreement signed between Alibaba Digital Media and Entertainment Group and Disney subsidiary Buena Vista International Inc will see more than 1,000 Disney episodes released on Alibaba platforms which include set-top boxes.

The deal comes as Disney has faced obstacles in getting digital television content into China. In 2016, its DisneyLife online content venture, which it launched with Alibaba, was shut down by Chinese regulators less than five months after operations began. The reason for the shutdown was not made public.

FILE PHOTO: The sign of Walt Disney Studios Park is seen at the entrance at Disneyland Paris ahead of the 25th anniversary of the park in Marne-la-Vallee, near Paris, France, March 21, 2017. REUTERS/Benoit Tessier/File Photo

“The addition of Disney content greatly enriches the library of quality international content on Alibaba’s media and entertainment ecosystem, giving us a leading edge in foreign content distribution in China,” said Yang Weidong, president of Youku at Alibaba Digital Media and Entertainment Group.

Alibaba did not disclose the value of the deal.

Youku reaches 580 million devices and gets about 1.2 billion views each day, according to Alibaba’s news website Alizila. It said the platform already has similar licensing deals with Warner Bros., Paramount, Fox, NBCUniversal and Sony Pictures Television, among others.

Reporting by Brenda Goh