Archives for February 14, 2018

Google hires former Samsung executive to coordinate Internet of Things projects

FILE PHOTO: Injong Rhee, Executive Vice President and Head of Samsung Pay at Samsung Electronics, speaks at the Samsung Galaxy Unpacked 2015 event in New York August 13, 2015. REUTERS/Andrew Kelly

SAN FRANCISCO (Reuters) – Alphabet Inc’s Google this month hired Injong Rhee, who recently resigned as Samsung Electronics Co’s chief technology officer, to lead its Internet of Things business, he said in a LinkedIn post Monday.

Google spokeswoman Jane Hynes confirmed to Reuters Rhee’s hiring by Google’s cloud computing unit, but declined to comment further.

Rhee said in his post that he will serve as entrepreneur-in-residence under Diane Greene, chief executive of the cloud computing group, which sells software and hardware to other businesses.

Rhee said he aims to harmonize Alphabet’s various projects related to the Internet of Things, or IoT, a term that encompasses any device that accesses data online. Self-driving cars, home appliances with virtual assistants and the latest weather sensors on farms fall under the emerging category of technology.

“One of the first things I would like to do with my Google colleagues is to get these efforts coordinated and aligned toward a concerted IoT story of Google — in the process, create distinct consumer and enterprise product lines,” Rhee wrote in his post.

Each of the leading cloud computing sellers, including Amazon.com Inc, Microsoft Corp, Google and IBM Corp, offer services aimed at helping companies analyze data from a network of Internet-connected equipment. Google’s effort is among the most nascent, though.

Rhee left Samsung in December after more than six years there, most recently serving as a chief technology officer and head of software and services’ research and development. He was involved in the launch of the company’s Knox security system, Bixby digital assistant and Samsung Pay mobile wallet.

Government develops artificial intelligence program to stop online extremism

The Government has teamed up with a start-up – REUTERS

The Home Office has joined forces with a start-up to create a machine learning programme which can spot online extremism.

The £600,000 software can automatically detect Isil propaganda and stop it from going online, and ministers claim the new tool can detect 94 per cent of Isil propaganda with 99.9 per cent accuracy.

However, the developers, London start-up ASI Data Science, told BuzzFeed it will be deployed across Facebook, Twitter or Google, and the Home Office said it is still looking for smaller tech companies which want to use the software.

The artificial intelligence device, developed in partnership with London start-up ASI Data Science, means that if one million randomly selected videos were analysed, just 50 would need to be subject to human review.

The tool can be integrated into the upload process of any online video-sharing platform and the Government believes it could stop the majority of propaganda from ever being published.

Many internet giants have already developed similar technology but the Home Office plans to share the methodology with smaller web companies which are increasingly being targeted by Isil as a way of disseminating extreme material.

Amber Rudd explained: “It’s a very convincing example of the fact that you can have the information you need to make sure this material doesn’t go online in the first place.

“The technology is there. There are tools out there that can do exactly what we’re asking for. For smaller companies, this could be ideal.”

The announcement of the development of the technology comes as Home Office analysis showed that Isil supporters used more than 400 unique online platforms to publish material in 2017.

Amber Rudd, the Home Secretary, welcomed the new technology as she visited Silicon Valley for meetings with communications firms to discuss the need to do more to tackle online terror content.

She said: “The purpose of these videos is to incite violence in our communities, recruit people to their cause, and attempt to spread fear in our society.

“We know that automatic technology like this, can heavily disrupt the terrorists’ actions, as well as prevent people from ever being exploited to these horrific images.”

The technology was developed by the Home Office and ASI Data Science and it uses advanced machine learning to analyse video to determine whether it could be Isil propaganda.

The software has effectively been “trained” using more than 1,000 Isil videos so that it can spot the telltale signs of terrorist propaganda.

Alberta’s energy industry has a bright future — but it’s going to take some work

Edmonton restaurants redefine the art and craft of dining out

Edmonton: The New Capital is a special series taking the pulse of the city. From Terwillegar to Castle Downs, CBC journalists are talking to people about how Edmonton is changing and what it means for the future.

Alberta’s oil industry has rebounded and prices have risen since the crash of 2014, but the industry’s long-term future seems uncertain with changes in regulations, transportation and technology.

2018 is expected to be a less volatile year, with fewer layoffs and a renewed focus on efficient operations.

But that doesn’t mean things are going to be easy.

Producers in Alberta are struggling to find markets for oil, to attract capital investment and to contend with the NDP government’s tax on carbon dioxide emissions.

“We’re seeing a disproportionate amount of North American investment going into the United States,” says Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers. “What we’re expecting for 2018 is a similarly challenging year.”

How will Edmonton’s oil industry respond to these challenges in 2018 and beyond?

We put that question to three energy experts in a panel discussion on Edmonton AM. Their takeaway? Oil has long played a starring role in Alberta’s economy and even if the global demand for it slows, there are reasons to be optimistic about the industry’s future.

Automation and innovation

The recent recession and carbon regulations have driven companies to do more with less, and to work harder to reduce their impact on the environment.

That’s led to job losses.

And there are more job cuts coming.

Suncor Energy has been testing driverless trucks at its mines in northern Alberta and is expecting to eliminate about 400 jobs when the trucks are introduced into production over the next six years.

There are other advances in technology as well that will result in fewer people needed to operate oil rigs.

But Mark Salkeld, president and CEO of the Petroleum Services Association of Canada, says advances in technology aren’t only taking away old job — new ones are being created as well. The difference is that the new opportunities require trained technologists who know how to work with data.

“When I started 37 years ago, all you needed was a hard hat and a heartbeat,” Salkeld says.

“But the people we need now have a Grade 12 education and a couple years at SAIT or NAIT.”

What else can we do with bitumen?

As more countries work to replace fossil fuels with energy from renewable sources, some experts say oil companies in Alberta need to take more steps to diversify their products.

More than 90 per cent of all bitumen from the Alberta oilsands goes to create transportation fuels like gasoline, says Axel Meisen, a chemical engineer and advisor to Alberta Innovates,

The remainder — a very small percentage — is being used to make non-combustion products, like asphalt, lubricants, fertilizers and petrochemicals,

“What we have to do is figure out how to make that larger,” says Richard Dixon, who teaches energy, ethics and economics at the University of Alberta and Athabasca University.

Suncor’s Edmonton East refinery can produce specialized types of oil and hydrocarbon products, like waxes, lubricants, plastics and even lipstick.

But Dixon — who served as the Alberta Energy Regulator’s first chief of strategic foresight from 2014 to 2016 — believes the industry isn’t moving fast enough in this direction.

“We have to drive more and more that way,” he says. “We have to be much more innovative.”

Meisen is also looking ahead to a future in which the global demand for oil declines — something experts predict could happen after 2030.

He works on the Bitumen Beyond Combustion (BBC) project, which is looking at how oil from Alberta could be used to create new products.

“One of the most promising products is asphalt because demand for this is expected to increase, especially in Asia and Africa,” Meisen says.

Distribution is a problem, however, since asphalt needs to be shipped in molten form at a very high temperature. It’s very expensive to move it long distance.

But Meisen wonders if Alberta companies could develop new ways to ship it in a solid form. That could be a game-changer.

Another potential use for Alberta bitumen could be the creation of carbon fibres. Though the local market for these is small, producers could sell carbon fibres to foreign manufactures who use them in high-end sports equipment, airplanes or construction materials.

“Companies are thinking about this very seriously,” Meisen says.

Electric cars: Are they a threat?

The adoption of electric cars has been slow in Canada, where they account for less than one per cent of car sales.

But their market share is growing. In Canada, Quebec is leading the way, accounting for nearly half of the electric vehicles in Canada, according to a 2016 report title EV Sales in Canada.

Overseas, the British oil company BP predicts the number of electric cars on the road will rise from 1.2 million in 2015 to more than 100 million by 2035.

It’s expected that improvements in the technology will make the batteries better in cold weather, faster to charge and cheaper to buy.

“There’s going to be a huge incentive for people to shift to electric,” says David Gray, founder of Gray Energy Economics, an Edmonton consulting company specializing in the economics of electricity.

Tim McMillan of CAPP says no one should view electric cars as a threat.

Though they will continue to play a role in the energy system, he expects demand for gasoline to increase substantially in developing parts of Asia, where new roads are being built and incomes are rising.

‘Prospects for the oil industry are still very good’

Many drilling companies in the Edmonton area are focused on the oil and gas sector, but there are growing opportunities for Alberta-based drilling technology to be applied to other sectors.

One of them is geothermal energy production. The town of Hinton, just east of Jasper National Park, has proposed a pilot project to use energy from the bottom of an abandoned gas well to heat municipal buildings.

This is a small scale project, says Brian Wagg, the director of business development and planning at C-FER Technologies, an applied research lab based in Edmonton.

But the larger opportunity for Alberta comes from developing the technology, then selling it to countries that have more conventional geothermal reserves.

“People are coming here to learn what’s available,” says Wagg.

Learning about what’s available — in terms of new products, new jobs, new technologies, new growth — could be a slogan for the current state of Alberta’s energy industry.

But realizing these opportunities, says Meisen, will require companies, governments and universities to work together to make it happen.

Even if the demand for gasoline stabilizes or even falls, he adds, “I think in the longer term, prospects for the oil industry are still very good.”

2 Things to Watch When Marathon Oil Corporation Reports Fourth-Quarter Results

Marathon Oil (NYSE: MRO) was on a roll last year, with production outpacing expectations each quarter even as spending came in under budget. Furthermore, it achieved that outstanding performance despite battling several headwinds. As a result, the oil producer is on pace to end the year on a high note. We’ll find out whether that was the case when it announces fourth-quarter results after the market closes on Wednesday. Here are two key things to watch in that report.

1. Did it deliver high-end results?

Marathon Oil produced a gusher of oil and gas in the third quarter, which helped it overcome the impact of Hurricane Harvey. Overall, output averaged 371,000 barrels of oil equivalent per day (BOE/D), which was 6% higher than the year-ago quarter and above the top end of its guidance range. Fueling this strong performance were its U.S. resource plays, with production from the Bakken shale up 20% from the second quarter while its output from the STACK shale play rose 18% versus the previous quarter.

Marathon expected its rapid growth in the U.S. to continue in the fourth quarter, with estimates that output from shale would average 255,000 to 265,000 BOE/D during the quarter, up 12.5% from the third quarter. That would push full-year production from its U.S resource plays up 25% to 30% from the beginning of the year. The company also believed it could achieve that production rate while keeping capital spending to less than $2.1 billion.

Given that forecast, investors should look to see whether Marathon hit both marks or if it ran into drilling problems or inflationary cost pressures, which plagued some of its peers during the quarter. If it missed either number, that fumble could send shares lower.

2. Is acceleration planned for 2018?

One of the most impressive achievements from Marathon last year was that it delivered more production from fewer capital dollars. In fact, it pushed costs down to such a point where it now anticipates to generate 10% to 12% compound annual growth in companywide output through 2021 as long as oil averages around $50 a barrel. That’s an improvement from earlier in the year when it needed crude closer to $55 a barrel to achieve that growth rate.

With oil now in the $60s, Marathon Oil is on course to produce more cash flow this year, which gives it options: It could use that money to pay down more debt, return it to investors via a share buyback or dividend increase, or boost spending to grow faster.

A black barrel on a gray floor with paper money flying out of it and a happy man in a black suit celebrating with outstretched arms next to it.

If Marathon chooses the latter option and accelerates its growth rate, it would be going against the grain since most rivals are using the extra money they’ll make at current oil prices to boost cash returns to investors and further strengthen their balance sheets. For example, Pioneer Natural Resources (NYSE: PXD) only modestly increased its budget this year in order to stick to its strategy of expanding output at a 15% compound annual growth rate through 2026. Instead of using its excess cash to hit the accelerator, Pioneer Natural Resources announced a fourfold increase in its dividend, a modest share repurchase program, and plans to repay an upcoming debt maturity with cash. Meanwhile, ConocoPhillips (NYSE: COP) also held firm to its budget forecast, keeping it on track to boost output at a 5% annual rate through 2020. Instead, ConocoPhillips added $500 million to its share repurchase plan, while also modestly increasing its dividend and repaying more debt.

Given what peers like Pioneer and ConocoPhillips are doing with their excess cash, Marathon is under some pressure to follow their lead. If it doesn’t, shares could sell off after earnings.

Give and take

Marathon Oil needs to deliver on its promise to achieve high-end production growth in 2017 for its fourth-quarter report to be a success. That said, the company also faces some pressure not to push the envelope much more in 2018 since the industry has started tapping the brakes on expanding production and is starting to get more serious about increasing returns to investors. Marathon therefore needs to prove it’s not growing merely for the sake of growth, by delicately balancing its objectives with investors’ wishes that oil companies increase their wealth and not merely oil output. Otherwise, they could jump ship for rivals like ConocoPhillips that are putting investors first.

However, that might still be a good opportunity to buy since Marathon is one of the lowest-cost producers around, which positions it to grow shareholder value over the long term even if it remains stingy on cash returns in 2018.

Will Cineplex Inc. Become a Casualty in the War Between Video Streamers?

As Netflix Inc. (NASDAQ:NFLX) doubles down on original content, movie fanatics will have even less of a reason to head out to Cineplex Inc. (TSX:CGX) to watch a movie in theatres. Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL) are also placing a huge bet on the development of original content, and with Walt Disney Co. (NYSE:DIS) starting its own streaming platform over the next few years, it’s clear that streaming competition is going to heat up, and movies may end up going straight to stream, skipping the theatrical release altogether.

In this scenario, Cineplex will be the one left out in the cold, and if it hasn’t diversified away from its box office and concession segments by then, the stock could suffer a much larger correction and could stand to shed another +50% of its value from current levels. As the industry landscape continues to shift, it’ll be original content that will remain king.

Despite falling ~43% peak to trough, Cineplex is still an expensive stock at ~32 times trailing earnings, which implies there’s still a great deal of growth to be expected from the firm that has struggled to find its legs over the past few years.

I see two scenarios playing out for Cineplex. The company could keep its dividend, which currently yields 5.1%, intact, as it soars while the stock drops further, only to eventually be reduced at some point down the road. Or management could roll up its sleeves, slash the dividend before it feels immense financial pressure to finance its efforts to become a general entertainment company.

With the rise of straight-to-stream movies and the potential for AR or VR video-viewing experiences, I think the secular decline of Cineplex’s theatre business will accelerate at a quicker rate over the next five years. Sure, Cineplex may be attempting to offset pressures by selling theatre tickets to watch eSports, live plays, or hockey events, but let’s face it: these efforts will do little to nothing to offset pressures that the theatre segment will face.

What can provide medium- to long-term relief for the box office and concession segments?

Cineplex may follow its U.S. counterparts by introducing a subscription-based movie-going membership where you can pay a monthly fee and watch all the movies you like. These efforts will provide top-line relief; however, box office margins will suffer, but that’s not a bad thing since beefing up traffic to theatres will likely entice movie-goers to loosen their purse strings at the concession stands. The concession segment is a high-margin business and with extremely high-margin items like alcohol.

Cineplex has an opportunity to slow the bleeding as it heads further into secular decline.

What about diversification away from general entertainment?

While a subscription-based movie-going model may slow Cineplex’s pains, I don’t think it is enough to command a premium growth multiple. If Cineplex is worthy of such a multiple, which it currently trades at, investors are going to need to trust that management will be active when it comes to acquiring smaller entertainment firms. Playdium and Topgolf are a step in the right direction, and I suspect there are many other opportunities to pounce on, as the shopping experience becomes more of a place to be entertained rather than just a place to shop at brick-and-mortar retailers.

Bottom line

Right now, Cineplex is slated to become a casualty of a content war between many behemoths. Over the next decade, things won’t end up well for Cineplex, unless it’s able to successfully adapt to a general entertainment company which can produce its own premium content.

Unless you’re an aggressive contrarian who believes the company will make an aggressive move when it comes to generic entertainment M&A, I’d look elsewhere, especially if you’re a retiree who relies on income. For now, Cineplex remains a high-risk/high-reward play that shouldn’t comprise too large of a portion of a risk-averse portfolio.

Stay hungry. Stay Foolish.

Airbnb income can now count on refinance applications

Airbnb income can now be used on applications to refinance your mortgage.

Becoming an Airbnb host can be a lucrative endeavor.

In Dallas, the average Airbnb host earns $10,311 a year by renting out their entire home. In Austin, a full home listing can bring in $17,007, and in the state of Colorado, the average host brought in $8,100 in 2017.

Now some of that Airbnb income can have an added benefit for some homeowners. Airbnb and Fannie Mae this month announced that three major lenders would recognize income through Airbnb as part of a homeowner’s mortgage refinancing application.

Quicken Loans, Citizens Bank and Better Mortgage will take Airbnb income into consideration for homeowners who want to refinance the mortgage on their primary residence, as long as that residence is in the US. According to Intuit, 34% of the US workforce participates in the gig economy. Fannie Mae sees this new initiative as a way for lenders to connect with that group.

“People are earning part-time income in different ways through Airbnb, or other forms of part-time income never contemplated before,” said Jonathan Lawless, Vice President of Product Development and Affordable Housing at Fannie Mae. “Our aim is to work with lenders and partners who share our goal of finding innovative, safe, and sensible housing solutions by testing and learning from innovative ideas.”

What hosts need to know

There are a handful of reasons why a person may decide to refinance their mortgage. In many cases, homeowners use it as a way to snag a lower interest rate. Others may see an opportunity to shorten the terms of their mortgage. Fannie Mae hopes that providing the option to refinance will help some hosts to become more financial stable.

“Qualified Airbnb hosts will be able to tap into their equity through a refinance and use that equity for other big expense or to reduce their monthly payments,” said Jonathan Lawless of Fannie Mae.

There are a few things to know before hosts make the move to refinance.

First, you can still refinance with one of these providers, even if your existing mortgage is with someone else. Your primary residence must also be in the US, which means that “experience hosts” and non-US hosts that have listings in the US are not eligible for the new initiative.

If you meet the requirements, hosts only need to follow three steps. First, log in to your account and make sure that your contact and listing information are up to date. Next, request your Proof of Income, and finally, choose your preferred lender and sign up through their site.

Still, you could still be met with some pushback, even if you meet all of the requirements. Airbnb is quick to point out that specific eligibility requirements and approval will still need to be decided by each lender, and each lender can use its own discretion to decide how much Airbnb income it will consider in the application.