Lenovo teases a slick, all-screen smartphone that doesn’t have a notch

Lenovo has teased a new arrival that might top Apple’s iPhone X in a bid to deliver a true all-screen smartphone.

Apple’s iPhone X goes very close but for a tiny bezel and its distinctive notch, but Lenovo’s Z5 seems like it might go a step further, according to a teaser sketch (above) shared by Lenovo VP Chang Cheng on Weibo that was first noted by CNET.

The device is due in June and Cheng claimed it is the result of “four technological breakthroughs” and “18 patented technologies,” but he didn’t provide further details.

The executive previously shared a slice of the design — see right — on Weibo, with a claim that it boasts a 95 percent screen-to-body ratio.

Indeed, the image appears to show a device without a top screen notch à la the iPhone X. Where Lenovo will put the front-facing camera, mic, sensors and other components isn’t clear right now.

A number of Android phone-makers have copied Apple’s design fairly shamelessly. That’s ironic given that Apple was widely-derided when it first unveiled the phone.

Nonetheless, the device has sold well and that’s captured the attention of Huawei, Andy Rubin’s Essential, Asus and others who have embraced the notch. The design is so common now that Google even moved the clock in Android P to make space for the notch.

Time will tell what Lenovo adds to the conversation. The company is in dire need of a hit phone — it trails the likes of Xiaomi, Oppo, Vivo and Huawei on home soil in China — and the hype on the Z5 is certainly enough to raise hope.

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Nike debuts its most ambitious SNKRS stash drop for the Championship Tour featuring Kendrick Lamar and SZA

On a mild Thursday night at the Los Angeles Forum, Nike’s public relations team and a group of journalists from some of the country’s leading lifestyle, tech, and general interest websites gathered to see the debut of Nike’s most ambitious SNKRS stash drop.

Launched in conjunction with Kendrick Lamar’s Top Dawg Entertainment, the collaboration between Nike and Lamar marks a series of firsts for the world’s largest sports and lifestyle brand.

The combined effort is the first capsule collection that Nike has done with a musician. It’s also the first time that anyone currently working at the company can remember the apparel company signing on with a musician for select tour merchandise, and the debut of the stash drop through the SNKRS app was the largest the company’s tech had tried to tackle.

For concertgoers, rolling up to the concert in Supreme sweats, Yeezys, Adidas, Pumas… and, of course, Nikes, the SNKRS stash drop would be a surprise. For folks who had downloaded Nike’s SNKRS app, they’d be able to buy and reserve a pair of Kendrick Lamar’s limited edition Cortez Kenny IIIs at the concert.

At least on the first night, things didn’t go as planned.

Working with live events like concerts, where timing is less regimented than at a typical sporting event (which are marked by tip offs and halftimes that adhere to a pretty regimented schedule), proved too much for the initial rollout of the company’s stash drop.

Select NikePlus members received an initial push notification of the Stash drop and a card in the SNKRS feed also advertised the special stash drop, in addition to a notification that flashed onscreen between the (amazing)  SchoolboyQ set and SZA’s (equally amazing) performance.

There will be other chances to get the timing down, but for the first concert in Los Angeles, concertgoers were prompted to launch the SNKRS app and try and snag a pair of the limited edition shoes well before the activation actually went live.

Once the shoes did go on sale, the user interface for finding and reserving the shoes didn’t work for everyone there — in fact, only one reporter from the group was able to reserve a pair of the shoes (since that reporter hadn’t saved payment information onto the SNKRS app, those shoes were released).

“I can’t get the app to do what I need,” said one concertgoer trying to snag a pair of shoes.

The team at Nike said the concert’s late start caused the miscue. Roughly 30 minutes after the sneakers were supposed to onsale, the activation went live — something journalists were only made aware of when notified by Nike’s public relations team.

Once the sale did go live, the shoes sold out within the first five minutes, although it’s unclear how many were made available through the stash drop (Nike declined to provide a number).

The SNKRS app is only one example of Nike’s innovative approach to integrating technology and fashion. In April, Nike launched the first sneaker that’s integrated with its NikeConnect technology.

Unveiled earlier this year through a collaboration with the NBA, the NikeConnect app allows users to access information on players and stats through a label enabled with near field communications chips.

Nike’s Air Force Ones enabled with the NikeConnect tech will open a special limited release sneaker sale opportunity called “The Choice”, but Nike has higher hopes for the technology.

“We would love to be able to award sweat equity with access to exclusive products or a partnership,” said a spokesperson for the company in an interview last year.

“NikeConnect [is] a great way for us to get interesting data about our members and deliver unlocks that are relevant to those members,” the spokesperson said.

Beyond the unlocks for exclusive sneaker offers, Nike is thinking about ways to include all of its technology partners in ways that benefit NikeConnect, NikePlus, and SNKRS users.

“We’re excited to learn how unlocks are being received right now,” said the spokesperson. “There is a pretty comprehensive ecosystem of value that we’ve been building for our members… Members who are really active with us are getting rewards or achievements [and] that could include partners like Apple… that we’ll be bringing to the table to round out your whole holistic sport experience.”

 

 

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The UK and USA need to extend their “special relationship” to technology development

Apple hit with lawsuit over the “completely reinvented” Macbook keyboard it rolled out back in 2015

A little more than three years ago, Apple just announced a new MacBook with a “butterfly” keyboard that was 40 percent thinner and ostensibly four times more stable than the previous “scissor” mechanism that MacBooks employed.

The promise was to more evenly distribute pressure on each key. Not everyone loved this “reinvention,” however, and now, Apple is facing a class action lawsuit over it.

According to a complaint lodged in the Northern District Court of California yesterday and first spied by the folks over at AppleInsider, “thousands” of MacBook and MacBook Pro laptops produced in 2015 and 2016 experienced failure owing to dust or debris the Butterly design that rendered the machines useless. The complaint further alleges that Apple “continues to fail to disclose to consumers that the MacBook is defective, including when consumers bring their failed laptops into the ‘Genius Bar’ (the in-store support desk) at Apple stores to request technical support.”

It just not a lack of disclosures at the outset that’s problematic, the suit continues. Customers who think the issue will be covered by their warranties are sometimes in for an unpleasant surprise. As stated in the filing: “Although every MacBook comes with a one-year written warranty, Apple routinely refuses to honor its warranty obligations. Instead of fixing the keyboard problems, Apple advises MacBook owners to try self-help remedies that it knows will not result in a permanent repair. When Apple does agree to attempt a warranty repair, the repair is only temporary—a purportedly repaired MacBook fails again from the same keyboard problems. For consumers outside of the warranty period, Apple denies warranty service, and directs consumers to engage in paid repairs, which cost between $400 and $700. The keyboard defect in the MacBook is substantially certain to manifest.”

The lawsuit was filed on behalf of two users, ZIxuan Rao and Kyle Barbaro and more broadly “on behalf of all others similarly situated.” It was brought by Girard Gibbs, a San Francisco-based law firm, which has battled with Apple numerous times in the past, including filing a class-action suit centered on the iPod’s “diminishing battery capacity.” (Apple appears to have settled that one.)

Interestingly, AppleInsider appears to have provided the fodder for the lawsuit, or some of it, at least. Last month, the outlet reported findings of its own separate investigation into the problem after hearing enough anecdotes to support a deep dive. It says that after collecting service data for the first year of release for the 2014, 2015, and 2016 MacBook Pros, it concluded that —  excluding Touch Bar failures — the 2016 MacBook Pro keyboard has been failing its users twice as often in the first year of use as the 2014 or 2015 MacBook Pro models.

AppleInsider says it collected its data from “assorted Apple Genius Bars in the U.S.” that it has worked with for several years, as well as  Apple-authorized third-party repair shops.

The investigation clearly resonated with MacBook owners, because soon after, more than 17,000 people signed a Change.org petition demanding that Apple recall all MacBooks with butterfly switch keyboards.

That petition — which cites among others the highly regarded writer and UI designer John Gruber, who has called the keyboard “one of the biggest design screwups in Apple history” —  is gaining steam again today, presumably fueled by this new lawsuit. As of this writing, roughly 18,000 people have provided their signature.

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The many twists and turns of hardware

Note: This is the final article in a three-part series on valuation thoughts for common sectors of venture-capital investment. The first article, which attempts to make sense of the SaaS revenue multiple, can be found here; the second, on public marketplaces can be found here.

Over the past year, the VC-backed hardware category got a big boost — Roku was the best-performing tech IPO of 2017 and Ring was acquired by Amazon for a price rumored to exceed $1 billion. In addition to selling into large, strategic markets, both companies have excellent business models. Ring sells a high-margin subscription across a high percentage of its customer base and Roku successfully monetizes its 19 million users through ads and licensing fees.

In the context of these splashy exits, it is interesting to consider the key factors that have made for valuable hardware companies against a backdrop of an investment sector that has often been maligned through the years, as I’m sure we’ve all heard the trope that “hardware is hard.” Despite this perception, hardware investment has grown much faster than the overall VC market since 2010, as shown below.

Source: TechCrunch

A large part of this investment growth has to do with the fact that we’ve seen larger exits in hardware over the past few years than ever before. Starting with Dropcam’s* $555 million acquisition in 2014, we’ve seen a number of impressive outcomes in the category, from large acquisitions like Oculus ($2 billion), Beats ($3 billion) and Nest ($3.2 billion) to IPOs like GoPro ($1.2 billion), Fitbit ($3 billion) and Roku* ($1.3 billion)**. Unfortunately for the sector, a few of these companies have underperformed since exit; notably, GoPro and Fitbit have both cratered in the public markets. 

As of April 3, 2018, both stocks traded at less than 1x trailing revenue, a far cry from the multiples of forward revenue given to other tech companies. Roku, on the other hand, continues to perform as a stock market darling, trading at approximately 6x trailing revenue and a market cap of $3.1 billion. What sets them so far apart?

The simple answer is their business model — Roku generates a significant amount of high gross margin platform revenue, while GoPro and Fitbit are reliant on continued hardware sales to drive future business, a revenue stream that has been stagnant to declining. However, Roku’s platform is one successful hardware business model; in this article I’ll explore four others — Attach, Replacement, Razor and Blades and Chunk.

Attach

“Attaching” a high gross margin annuity stream from a subscription to a hardware sale is a goal for many hardware startups. However, this is often easier said than done — as it’s critical to nail the alignment of the subscription service to the core value proposition of the hardware.

For example, Fitbit rolled out coaching, but people buy Fitbit to track activity and sleep — and this mismatch resulted in a low attach rate. On the other hand, Ring’s subscription allows users to view past doorbell activity, which aligns perfectly with customers looking to improve home security. Similarly, Dropcam sold a subscription for video storage, and at an approximate 40 percent attach rate created a strong economic model. Generally, we’ve found that the attach rate necessary to create a viable business should be at least in the 15-20 percent range.

Platform

Unlike the “Attach” business model that sells services directly related to improving the core functionality of the hardware device, “Platform” business models create ancillary revenue streams that materialize when users regularly engage with their hardware. I consider Roku or Apple to be in this category; by having us glued to our smartphones or TV screens, these companies earn the privilege of monetizing an app store or serving us targeted advertisements. Here, the revenue stream is not tied directly to the initial sale, and can conceivably scale well beyond the hardware margin that is generated.

In fact, AWS is one of the more successful recent examples of a hardware platform — by originally farming out the capacity from existing servers in use by the company, Amazon has generated an enormously profitable business, with more than $5 billion in quarterly revenue.

Replacement

Despite the amazing economics of Apple’s App Store, as of the company’s latest quarterly earnings report, less than 10 percent of their nearly $80 billion in quarterly revenue came from the “Services” category, which includes their digital content and services such as the App Store.

What really drives value to Apple is the replacement rate of their core money-maker — the iPhone. With the average consumer upgrading their iPhone every two to three years, Apple creates a massive recurring revenue stream that continues to compound with growth in the install base. Contrast this with GoPro, where part of the reason for its poor market performance has been its inability to get customers to buy a new camera — once you have a camera that works “well enough” there is little incentive to come back for more.

Razor and Blades

The best example of this is Dollar Shave Club, which quite literally sold razors and blades on its way to a $1 billion acquisition by Unilever. This business model usually involves a low or zero gross margin sale on the initial “Razor” followed by a long-term recurring subscription of “Blades,” without which the original hardware product wouldn’t work. Recent venture examples include categories like 3D printers, but this model isn’t anything new — think of your coffee machine!

Chunk

Is it still possible to build a large hardware business if you don’t have any of the recurring revenue models mentioned above? Yes — just try to make thousands of dollars in gross profit every time you sell something — like Tesla does. At 23 percent gross margin and an average selling price in the $100,000 range, you’d need more than a lifetime of iPhones to even approach one car’s worth of margin!

So, while I don’t think anyone would disagree that building a successful hardware business has quite literally many more moving parts than software, it’s interesting to consider the nuances of different hardware business models.

While it’s clear that in most cases, recurring revenue is king, it’s difficult to say that any of these models are intrinsically more superior, as large businesses have been built in each of the five categories covered above. However, if forced to choose, a “Platform” model seems to offer the most unbounded upside as it’s indicative of a higher engagement product and isn’t indexed to the original value of the product (some people certainly spend more on the App Store than on the iPhone purchase).

While it’s easy to take a narrow view of VC-hardware investing based on the outcome of a few splashy tech gadgets, broadening our aperture just a bit shows us that large hardware businesses have been built across a variety of industries and business models, and many more successes are yet to come.

*Indicates a Menlo Ventures investment

**Initial value at IPO

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Wear OS is getting a new battery saving mode

Given Google’s recent rebranding mode and a few pieces of news trickling out over the past week, it seemed safe to expect some key updates for the operating system formerly known as Android Wear. But the company only really mentioned Wear OS in passing at yesterday’s keynotes.

Google’s push to offer an open, Android-like experience for wearable devices has stagnated a bit in recent years, along with the category itself — but the company is pushing out some key updates for devs this week at I/O. Over on the Android Developer blog, the company is highlighting some key features for developer preview 2, which launches this week.

The biggest news here is the addition of an “enhanced battery saver mode.” Battery life is certainly one of the chief concerns on these devices, thanks to their relatively small size. While in the new mode, the device will sport a “power efficient watch face,” while shutting off radios, the touchscreen and tilt to wake — essentially all of those features that make your smartwatch smart. A quick press of the side button will show the time and a longer press will restore functionality.

Also new here is support for Actions on Google, which should make Wear devices more useful when it comes to working with third-party smart objects. That’s a nice addition that brings the products up to speed with the rest of the Google Assistant ecosystem.

This all comes a couple of days after an LG Wear OS watch appears to have hit the FCC. None of this is earthshaking, but at the very least, it shows that Google’s not entirely given up the wearables ghost.

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Apple pulls the plug on its €850M data center project in Ireland over planning delays

Dark clouds have gathered and broken over Apple’s plans to build a data center in Ireland. Three years ago, Apple announced that it would invest $2 billion into building a pair of new, green data centers in Ireland and Denmark. But today, the iPhone giant confirmed that it was cancelling the first of those two projects, after too many delays in the approval process, which today appeared to be extending in a way that could go on for a long time to come.

“We’ve been operating in Ireland since 1980 and we’re proud of the many contributions we make to the economy and job creation.  In the last two years we’ve spent over €550 million with local companies and, all told, our investment and innovation supports more than 25,000 jobs up and down the country.  We’re deeply committed to our employees and customers in Ireland and are expanding our operations in Cork, with a new facility for our talented team there,” the company said in a statement provided to TechCrunch. “Several years ago we applied to build a data centre at Athenry. Despite our best efforts, delays in the approval process have forced us to make other plans and we will not be able to move forward with the data centre. While disappointing, this setback will not dampen our enthusiasm for future projects in Ireland as our business continues to grow.”

Apple had planned for the data center — which would cover 166,000 square metres — to go online in 2017.

(The first phase of the Danish center announced at the same time, incidentally, is nearly completed and Apple is now working on a second center in the country. We’ve confirmed with sources that this second center is not the “other plan” that Apple refers to in its statement above, meaning another data center announcement from Apple in the region may be coming.)

As originally conceived, the facility in Ireland was planned to be built on land previously used for growing and harvesting non-native trees. As part of its CSR in building the facility on that land, Apple also pledged to “restore native trees to Derrydonnell Forest,” as well as build an outdoor education space an a walking trail.

But within months of Apple announcing the project, issues started to arise around the potential environmental impact and what effect the building of the data center would have on the national electric grid. Initially, the Galway County Council asked for more details from Apple about how the data center would work.

Then, when Apple provided it and the council granted permission to build the center six months later, individual objections started to surface, including from a local environmental engineer called Allan Daly, who has become something of the public face of the opposition to the plans.

Daly’s main argument was that Apple’s data center, particularly at its fullest-possible size, would put too much strain on Ireland’s power grid, including in the building of them. Apple has maintained that its data centers are powered on renewables, that it gives back over time, and that it wouldn’t over-build.

Last October, Apple won a case in the Irish High Court that appeared to give the company the green light it needed to proceed with its plans. But from what we understand, there was still some uncertainty that lingered, because opposition could have still taken the case to the Supreme Court to appeal once again.

That continued uncertainty was the final straw for Apple. With no guaranteed end in sight, Apple finally made the choice to “move on”, as one source close to the situation told TechCrunch.

The whole case underscores some of the ongoing issues that apparently exist in Ireland over how data centers are planned and approved by local authorities.

“There is no disputing that Apple’s decision is very disappointing, particularly for Athenry and the West of Ireland,” Ireland’s Minister for Business and Enterprise Heather Humphreys said in a statement provided to Reuters.

There is talk of reforming that whole process, but that is not something Apple will get involved with at this point.

The company has had a rather complex relationship with the country.

Like many tech companies, Apple has made a lot of investment into operations based out of Ireland, including housing its European headquarters in Cork. But the country has also been the subject of a large tax debate, which has seen Apple just weeks ago finally settle on paying some €13 billion ($15.4 billion) in back taxes to Ireland starting this month, after the EU ruled that the existing tax scheme was illegal.

Ironically, Ireland was on Apple’s side in trying to resist the payment — perhaps in part because it all too well understands its relationship to the companies that subsequently pump hundreds of millions of euros in investment and jobs into their economies.

It’s odd timing, therefore, that we’d hear about Apple pulling out of the data center in Ireland now, although from what I’ve been told the two are very distinct, unrelated issues.

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