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WEDNESDAY, SEPTEMBER 21, 2011
Years
TECHNOLOGY
Are Netflix’s best days behind it? NEW YORK: Netflix is trying to boost business by chopping its services into two separate parts. Unfortunately for investors, the company’s stock price is what’s really been cleaved. The company that once seemed like it could do no wrong has seen its stock lose half its value in the last two months. Netflix tumbled another 7.4 percent to $143.75 on Monday, on the same day that chief executive Reed Hastings sent an email to Netflix customers, announcing that the DVD-by-mail business that defined the company for much of its history will become a separate, renamed service called Qwikster. Customers who subscribe to both streaming and DVDs will soon see two separate charges on their credit card statements and have to log on to two different websites. It’s a hard landing for a company that made many investors rich while remaking the way that households watch movies. It was only ten months ago that Netflix’s success prompted Standard and Poor’s to add the company to its S&P 500 index, a broad measure of the stock market that is the basis for most US mutual funds. Since then, Netflix shares have dropped 26 percent. Some analysts now think the stock’s best days are behind it, beset by increased competition and its recent corporate blunders. “Clearly the company is not going to grow at the rate that it has in the past few years,” said Michael Corty, an analyst at Morningstar who covers Netflix.
Two years ago, the company traded at around $45 a share. Its subscriber base was swelling at a rate of 25 percent a year as customers were drawn by the value of rental plans that included no late fees for DVDs and unlimited streaming of movies and television shows. The company was so successful at adding new customers that some analysts predicted it wouldn’t be long until consumers cut their cable cords and relied on Netflix alone for content. Rising profits and a booming subscriber base helped lift Netflix’s stock price 219 percent last year to $175.70. As recently as February, investors were willing to pay $93 for $1 in the company’s profits. The broad S&P 500 index, meanwhile, traded at a price to earnings ratio of 16. But the last two months have upended those rosy growth scenarios. Since announcing higher prices on July 12, the company’s stock has plunged 51 percent from a high of $298.73. Netflix announced on September 15 that its subscribers will fall to 24 million US households at the end of the month - only the second time in the company’s history that its subscriber base has dropped from one quarter to the next. And the company faces increased competition from Amazon, Apple and a host of others, which will likely drive its costs higher. “Netflix was basically a monopoly in the streaming business until about six months ago, and the
effect was that content providers were underpricing their products,” said Charlie Wolf, an analyst who covers the company at Needham. On Feb 22, Amazon announced that it would stream 5,000 movies and television shows at no additional charge to customers who signed up for a Prime membership, which costs $79 a year. Wolf said that increased competition among streaming companies meant that the balance of power was tipping back to the movie studios and networks that produce entertainment. These companies can now play Netflix and its competitors off of one another, creating higher profits for themselves and forcing streaming companies to raise their prices or cut into their margins. Netflix recently lost its license to stream popular movies from Starz Entertainment over a dispute over fees. Streaming isn’t the only aspect of Netflix’s business that is coming under fire. Its traditional DVD business is also being challenged by Redbox, a division of Coinstar Inc that rents DVDs at 33,330 kiosks in supermarkets and other retailers. Coinstar’s stock is up 6 percent over the last six months, compared with a 32 percent drop for Netflix. Wolf thinks Netflix shares should trade at a fair value of $130 -a 10 percent drop from Monday’s closing price. Other analysts believe Netflix is bungling Qwikster’s rollout. “Netflix has built such a strong
brand name, so to switch the name of the website now doesn’t make a lot of sense to me,” said Corty, the analyst at Morningstar. He said any marketing or executive missteps could come back to hurt the company as its business faces more competition and potentially higher costs. Corty said, the new emphasis on streaming means Netflix will have to constantly renegotiate its licenses to stream movies, giving the companies that produce entertainment more leverage. Corty says that he wouldn’t recommend buying Netflix until its shares fall to $90 -a 37 percent drop from its current price. But even amid the gloom about Netflix’s future direction, there are some investors sitting on gains and holding onto the stock because they assume more are to come. Jeanie Wyatt, the chief investment officer for South Texas Money Management, a firm with $1.9 billion in assets under management, began buying Netflix when it was trading at $120. Her investment was once up 150 percent. Now it’s up just 25 percent. Even so, she attributed the company’s recent tumbles to growing pains. She believes the company will continue to perform better than the overall stock market over the next several years, in part because Qwikster will also rent video games by mail - a first for the company. “I don’t think that this is a growth story that’s broken,” she said. — AP
Finding right manpower can be a challenge: HCL Company building base of consultants in Kuwait By Lisa Conrad
BERLIN: Autonomos Labs assistant Paul Czerwionka touches a 360 degree laser scanner on top of a car on Sept. 16, 2011. — AP
Driverless vehicle navigates streets BERLIN: It can talk, see, drive and no longer needs a human being to control it by remote. The car of the future - completely computer-controlled - is on the streets of Berlin. All summer, researchers from the city’s Free University have been testing the automobile around the German capital. The vehicle maneuvers through traffic on its own using a sophisticated combination of devices, including a computer, electronics and a precision satellite navigation system in the trunk, a camera in the front, and laser scanners on the roof and around the front and rear bumpers. “The vehicle can recognize other cars on the road, pedestrians, buildings and trees up to 70 meters (yards) around it and even see if the traffic lights ahead are red or green and react accordingly,” Raul Rojas, the head of the university’s research group for artificial intelligence, told reporters at a presentation Friday. “In fact, the car’s recognition and reaction to its environment is much faster than a human being’s reaction.” The scientists have worked on their research car, a Volkswagen Passat worth €400,000 ($551,800) with lots of built-in special technology, for four years. Several other groups have also been working on such technology recently, notably Google, which has been testing a robotic Toyota Prius in Nevada. “There’s a big trend for completely computer-controlled cars many companies and research centers in several countries are working on it and it is hard to say, who’s got the most-developed vehicle at the moment,” Ferdinand Dudenhoeffer, a professor for automotive economics at the University of DuisburgEssen, told AP yesterday. Dudenhoeffer estimated that with the technology advances, it could only take another decade for the fully automatic cars to start becoming available for consumers. “Even today’s cars are often partially computer-controlled, for example when it comes to parking or emergency brakes”. However, he said, that besides the technological issues, the legal challenges would be another issue that needed to be regulat-
ed: “Who will be responsible when there’s an accident - the owner or the passenger of the computer-controlled car or the company that produced it?” “However, all in all, one can definitely say that computer-controlled cares will be much safer than human drivers,” Dudenhoeffer said. “Especially if you keep in mind that most of today’s accidents are caused by human error.” In Berlin, the university researchers received a special permit from the city’s security and safety controllers in June to use it in regular traffic - under the condition that a safety driver sits behind the steering wheel, even if he doesn’t touch anything - not the steering wheel, gas pedals nor brakes. On a special testing ground, the team has also been allowed to let the car run without anyone on board. “This kind of technology is the future of mobility,” Rojas said, who had a more conservative estimate than Dudenhoeffer, saying that it may be 30 to 40 years before they become available to the average consumer. The key to the automobile’s intelligence is in the way the computer program runs. “In the beginning with had trouble with the robotic driving style of the car,” said Rojas. “But we’ve worked on the programming and now its driving style is as smooth as a human being.” Rojas estimates that once the technology - specifically the sensors - gets less expensive, such cars will eventually conquer the roads. It is similar to the beginnings of the computers: 40 years ago, only research labs could afford computers, now everybody is walking around with a computer in his pocket.” Ideally, the car will respond to orders by remote control, for example on an iPad or an iPhone. With a click or a touch, the passenger can call the car to his personal location and then order the car to drop him off at his desired destination. “This kind of car is actually perfect for car sharing,” said Rojas. “There will be no more need for owning a car - once the automobile has dropped off its passenger it will drive on to the next passenger.” — AP
KUWAIT: The world is advancing technologically each year, but keeping up with the pace can pose a challenge, “Technologies have to be upgraded often, but this is difficult for many companies. In the Middle East especially, manpower with enough experience to handle such tasks are becoming increasingly expensive,” says Virender Aggarwal, Regional Head for HCL Technologies for Asia Pacific, Middle East, Africa and Turkey. Aggarwal adds that his company has capitalized on this by building up a base of consultants in Kuwait who work to assist companies in managing services within their businesses, “We provide whatever is needed to fulfill the tasks, because sometimes the main problem is finding the right people to tackle specific issues,” he adds, “there are various ways to improve on this situation in Kuwait. Firstly, outsourcing can be a way to remedy the situation quickly. Making the countr y more appealing to potential expatriates is another way, but Kuwait is looking to cut down on expatriate population levels. We have 50 high calibre consultants who are laying the foundation of our work in the country. However, going forward, we have plans of investing in Kuwaitis in terms of skill enhancement, so that we can be less reliant on expats.
Virender Aggarwal HCL is committed to the Gulf region and its continual development as a competitive and dynamic place to do business.” Despite this, Aggarwal adds that appealing to educated, experienced expatriates can be
VMWARE VIEW 5.0 BOOTS 500 DESKTOPS IN 5 MINUTES DUBAI: EMC Corporation, the number one choice of customers for information infrastructure in VMware virtualized and cloud environments according to a recent Wikibon survey, extended its leadership with added support of EMC VNX unified storage for VMware View 5.0 (also announced today by VMware). The VNX Family - including EMC VNX and EMC VNXe -support VMware View deployments in businesses of any size and scale - ranging from hundreds to thousands of desktops. The EMC VNX Family delivers VMware View 5.0 customers with new levels of performance, efficiency, and simplicity, enabling customer to: • Boost Performance during log-in storms. Early test results have shown the ability to boot 500 VMware View 5.0 desktops on VMware vSphere 5.0 over NFS to steady state - in 5-minutes. This is 40 percent faster than previous published VNX and FAST Suite results on VMware View 4.5, and enabled by EMC VNX and the EMC FAST (Fully Automated Storage Tiering) Suite. • Maximize Efficiency by leveraging the EMC FAST Suite to deliver the highest performance and capacity efficiency automatically for VMware View 5.0. EMC FAST Cache allows customers to significantly reduce the number of drives used in a VMware View environment while providing exceptionally fast boot time performance. Additionally, customers can further reduce their storage space requirements in VMware View deployments with EMC VNX deduplication capabilities.
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Simplify Management by deploying VMware View 5.0 with confidence whether in NFS or Fibre Channel environments. “The EMC VNX Family is designed from the ground-up to optimize virtual environments. We’ve seen great results in early testing with VMware View 5.0, and look forward to helping customers to deploy View 5.0 in environments ranging from hundreds to thousands of desktops,” said Eric Herzog, Vice President, Unified Storage Division at EMC. “Applying EMC’s unique FAST technology to a virtual desktop infrastructure (VDI) enables customers to maximize the full potential of their VMware View deployment. With EMC VNX, SMBs to enterprises can benefit from the solution’s simplicity, efficiency, performance and affordability.” In addition to new support of VMware View 5.0 with the VNX Family, EMC’s professional services experts are delivering Desktop Virtualization Services to help customers plan, design, and implement desktop computing environments that are secure, compliant and flexible enough to meet the needs of their businesses. Experienced and VMware-certified experts have all the virtualization skills required to ensure a successful implementation, including desktop deployment, security, systems management, and storage.
Google adds Visa, Amex, Discover cards to Wallet NEW YORK: Google’s Wallet is getting thicker. The company is adding Visa, American Express and Discover to its payment system, which aims to make cellphones the credit cards of tomorrow. Google Inc on Monday said it has licensed the right to add virtual “cards” from the three payment networks to its Wallet application. MasterCard Inc, the other major payment processor, is already part of the project. The Wallet application Google released on Monday, so far, only works on one Sprint smartphone. The Wallet can be loaded with a Citibank MasterCard or a prepaid debit card from Google. With a card in the Wallet, owners can pay in stores by tapping their phones on wireless-capable payment terminals, instead of swiping credit cards. There are more than 135,000 such terminals in stores and other retail loca-
tions, but that’s a small fraction of the total number of terminals. Google’s vice president of payments, Osama Bedier, couldn’t say when cards from Visa Inc, American Express Co and Discover Financial Services would work with the wallet. In the case of Visa, not only does Google need to work out the technical details of making its wallet compatible, it also needs to get the banks that issue the cards to sign on to the project, like Citigroup Inc. did for its MasterCard. Google also needs more phones that work with the wallet. Bedier said Google is working with all major manufacturers of smartphones that run on Google’s Android software to incorporate chips that communicate with payment terminals. Samsung Electronics Co makes the Nexus S phone that works with the wallet today.
Visa plans to bring out its own, competing mobile wallet application. The competition isn’t about getting a cut of the money that flows through the credit card accounts - Google isn’t directly tapping into that stream - but about who gets to reach people when and where they shop. The applications are conduits for advertising in the form of coupons and loyalty cards. These opportunities are the real reason companies like Google and Visa are pushing to have cellphones replace credit cards. Sprint Nextel Corp is collaborating with Google, but the other three national wireless carriers - Verizon Wireless, AT&T Inc. and T-Mobile USA - have formed a joint venture to create their own digital wallet. They, too, are working with Visa, MasterCard, American Express and Discover. — AP
very beneficial for a country and may well be worth investing in, “At HCL, we concentrate on keeping our staff happy with the different locations they travel to, so we avoid long-term full-scale relocations, instead giving them a few years in each. This is beneficial because it makes things less daunting. Nevertheless, the more appealing the country is, the more people will be willing and even wanting to work there. Just look at Dubai now.” While business in the Middle East, according to Aggarwal, is looking up, further investment in technology and infrastructure are important for continued advancement and development goals, “The government in Kuwait appears to have increased spending in the public sector. It will bring about more work for the private sector. Kuwait is small, but it’s also wealthy. Investing in infrastructure would make it more competitive, allow the private sector to reach their full potential and encourage foreign investment.” HCL has been expanding their business in the Middle East and continuing to provide professional management consultation, which it feels works toward advancing business, “There’s still a lot of caution surrounding the Arab Spring, but we’re seeing good growth again within the region with 100 percent year on year growth in Kuwait and we’re looking forward to our future here,” added Aggarwal.
‘Heavenly Palace’ to pave way for China space station BEIJING: China will next week launch an experimental craft paving the way for its first space station, an official said yesterday, bringing the growing Asian power closer to matching the United States and Russia with a long-term manned outpost in space. The Tiangong 1, or “Heavenly Palace”, will blast off from a site in the Gobi Desert around Sept. 27-30, adding a hightech sheen to China’s National Day celebrations on Oct 1, the Xinhua news agency said. The small, unmanned “space lab” and the Long March rocket that will heave it skyward have been readied on a pad at Jiuquan in northwest Gansu province, Xinhua said, citing an unnamed spokesperson for the country’s space program. It will be the latest show of China’s growing prowess in space, and comes while budget restraints and shifting priorities have held back US manned space launches. The big test comes weeks after its launch, when the eight tonne craft attempts to join up with an unmanned Shenzhou 8 spacecraft that China plans to launch. “The main task of the Tiangong 1 flight is to experiment in rendezvous and docking between spacecraft”, said the Chinese spokesperson, who added that this would “accumulate experience for developing a space station.” China’s government will hope to set a successful Tiangong mission alongside other trophies of its growing technological prowess, including the launch of a trial aircraft carrier. And the launch, just before China’s National Day holiday, is sure to come accompanied by a blaze of proud publicity. “I would say there’s a lot of political pressure to make sure that it’s launched before the birthday party,” said Morris Jones, a space analyst based in Sydney. “The real test of Tiangong doesn’t come with its flight as a solo mission. The real objective of this mission will come later on when it tries to dock with another spacecraft,” said Jones. “Without rendezvous and docking, you really cannot run an advanced space program. You’re confined to launching small spacecraft that just operate by themselves,” he told Reuters. Russia, the United States and other countries jointly operate the International Space Station, to which China does not belong. But the United States will not test a new rocket to take people into space until 2017, and Russia has said manned missions are no longer a priority for its space program, which has struggled with delays and glitches. Beijing is still far from catching up with space superpowers. The Tiangong launch is a trial step in Beijing’s plans to eventually establish a space station. “Tiangong-1 is, I think, primarily a technology test-bed,” said Joan Johnson-Freese, an expert on China’s space program at the US Naval War College on Rhode Island, in emailed answers to questions. “Technically, it has been compared to where the US was during the Gemini program,” she added, referring to NASA’s manned space flights in the mid-1960s. Over the next two years, China will probably attempt a Tiangong mission piloted by astronauts only after two initial missions, Gregory Kulacki, the China Project manager for Union of Concerned Scientists, wrote. — Reuters