Net Neutrality Friday

So, we have Title II. Not much more I can say on that from a factual standpoint until we see details of the forbearance. The question is: “So, what happens now?” To me the answer is real simple.

Nothing.

As far as I can tell, the large ISPs have been acting along Net Neutral lines anyway. So, there will be no change
in there in any case. The one big blowup around Netflix was shown to be a Cogent issue that they
acknowledged.

So, what are the upsides and downsides of Nothing? Well, the big complaint is that we want more choice and
more investment. I don’t see how this ruling makes investment improve. I don’t see anyone cutting their
performance so badly that it is noticeable. So essentially status quo.

The one downside that is talked about is new services. The ability to create different service levels might have
allowed new services that now will not work. I frankly don’t believe it. People have talked about these magical
new services for a long time. Until now, they have not appeared. If one does appear, we will come up with a
way of delivering it. The exception might be Over The Top Video at 4K HD quality. I think it will be hard to get
this done over the Internet the way it is. It may be that “Long Tail Content” is moved to OTT exclusively to make
room for it. It turns out that most people watch the top 20 channels. In fact about 99% of us do. The vast
majority of programming takes up spectrum, but the value is limited. So maybe 4K HD stuff stays on our
existing “Fast Lane”. The current video networks bypass this regulation and may be the only way to do 4K in
volume. TBD at best.

What happens now I am sure is some number of lawsuits once the details are revealed. There will be court
fights for a couple of years. It is even possible that Title II will not be out of the courts before 2017 and the next
batch of FCC people are in place. That means that it could even be overturned before it gets in place, but I
don’t think that is likely.

My best advice is: Don’t Panic. No matter where you were philosophically on this, I think the impact over the
next 5 years is going to be minimal. In the long term, we can’t know. It may be that this is not the biggest thing
that happens to impact the way Internet Services are built and marketed. But in our long and winding road, this
is just one more step.

Have a great weekend!
Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

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Sonoma County: News and Notes

This week I review the results of Cyan Optics for Q4 of 2014. The quarter was significantly better than those of the recent past with Revenue coming in at $30.5M and a Net Loss of $9.5M. Given recent quarters, it looks like Cyan make have taken a jump in performance.

Additionally, Cyan projected Revenue for 2015 of around $135M. This would lead to a loss for the year of what might be a good estimate of $32M. Given the cash raise in Q4, it would seem that Cyan should survive 2015 on its way to its projected break even in Q2 of 2016. These numbers make the assumption that Gross Margin expands to 45% in 2015 and that 2015 OPEX is flat with Q4 OPEX. These numbers are all approximate because they make assumptions based on linear extrapolation of Q4.

Anyway, the stock had already taken this news into account given Cyan’s pre-announcement of its Revenue Growth. So, the price has remained relatively flat. The question is where does this leave Cyan and what should you be listening for as an investor.

First and most important is one other very important piece of news that came out of the conference call. That is that Cyan has won 2 RFPs for Blue Planet. This software helps carriers manage its network assets with some modern technologies called SDN and NFV. On the call, the value of these wins were listed as 7 digits. This means somewhere between $1M and $9M. Without any more detail, it is hard to provide any more color. The one thing is that this should help Gross Margins as it is a software product.

Second, is the introduction of a new class of products in the Data Center Interconnect (DCI) space. The thing I found most encouraging about this was the note about the way the products were managed. They are designed to be operated as an IT environment is not the way a telco product is. This is a relatively new space and real revenue is not expected in any quantity till late 2015 at the earliest. Investors should be listening for win announcements for this product.

Third, is the customer concentration. Windstream was over 50% of revenue in Q4. Now, if you want to look at Windstream you will find a company that itself is in transition. I think this raises some concern about Windstream’s long term ability to buy product at its current rate (which would be $15M+ in Q4). There was an announcement of a $28M order that will last through 2015.

Where does this leave everything. As an investor, you need to watch Cyan’s plan unfold and make sure that they are sticking to the idea of a 2Q16 Break Even. There is risk involved here and the upside is muted by the money raise. But we can watch another Sonoma County Technology Company find its path!
Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

Leadership in a New Situation: The Boss

I have been in New Situations where my Boss was a person that I have never worked for before and others where I knew them well. In the end, the best way to deal with the Boss is the same in either case. You have to understand your role in their mind and find out the success factors in it.

What this is going to boil down to is Communication and Zero Based Thinking. By Communications, I mean you need to treat your Boss as your Customer and understand his/her needs just like you would any Customer. That means digging underneath the requests to the value represented by the requests. You need to understand this because your Boss may be giving you some ideas that become impractical to implement and you need to provide him/her with alternatives. If you don’t clearly understand the desired outcome, then you can’t build alternate plans. By Zero Based Thinking, I mean you need to eliminate your preconceptions. If you have not gone into a new company but have a new role within your existing employer, this is extremely important. If you don’t examine data without preconceptions, you are likely to end up with wrong answers.

Once you have your plans, you need to have a method to show your Boss that you are making progress. The best way is to agree to metrics around the plans and goals. You can then report on the metrics and keep your Boss in the loop on updates to your plan. The most important part of these communications is that this you make this a joint plan. It is critical that you get buy-in from your Boss on your plan. This way when there are challenges, the two of you can adjust your plan. If you don’t have buy-in, then you get explain your problems and corrective actions to your Boss. If you go down the latter path, eventually something will happen that your Boss finds reason to replace you.

Preconceptions are killers. Remember you are being brought in to provide judgement and value to the organization. If you can not evaluate things from the actual information, then you are going to be wrong. That is the point of Zero Based Thinking. When you have gone in with an Open Mind and started from the data that is available, you will have modeled the behavior for your reports. Your Boss will see you as gathering actual information and applying the lessons you have learned over your career to achieve.

Finally, I want to back up to where this started. You need to meet the goals of your Boss. That is why the twin mechanisms are so important. You can obtain freedom and trust by meeting those goals. If you don’t believe in the goals that you are given, then I have to ask why you took on the role. If it was forced upon you, you have to know that you will not last long. So it important that you can align yourself with your Boss. A Boss that acts contrary to your values is not one that you will work for in the long run.

Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

Net Neutrality Friday

This week I was speaking to an Attorney who deals greatly in the Telecom Space and he thought I might want to speak a bit about the upcoming acquisition of Verizon Telephone Lines in some areas by Frontier Communications. I think this a great idea. From this, I hope you will learn some about the changing landscape and the issues from other perspective.

If you followed the link above, you would have found you were looking at a presentation by Frontier about this transaction. Frontier is going to purchase territories that have just over 6M residents. In doing so, they take over the obligations of Verizon in these properties as well as the equipment to serve these homes. On top of that Frontier will receive about 11,000 employees. All of this is a massive expansion. Frontier will grow about 40% by just about any metric.

This is a very interesting transaction because the territories being acquired came into Verizon as part of its acquisition of GTE. The lines being sold are in Florida, Texas and California. All of these states are growing in population and the areas involved are mostly urban. These properties have over 1/2 the lines capable of delivering Verizon’s FiOS FTTH. This makes the transaction very different than Verizon/Frontier transactions in the past that were mostly rural and copper based.

Now the regulatory issue primarily involved here will be what is called “Local Loop Unbundling”. Today a company like SONIC.net can rent phone lines from AT&T and sell you DSL. If a Telco has used FTTH technology, they are not required to unbundle the fiber. But if you are Frontier, you really want to get rid of the copper in the ground that you replaced. Frontier is no longer using it and maintaining it costs money. The only people that want it are their competitors and they want to pay only wholesale rates.

The reason that consumers want the copper maintained is competition. In most places, this is more theoretical than actual. But competition is one of the two reasons that people deploy more technology in the Broadband network (the other being government intervention). The reason that the copper can be important is that Frontier and Verizon work very differently. It will be interesting to see how well Frontier is able to absorb this rather large chunk of high powered users.

One other thing to think about is that after this acquisition that there will be 4 Telcos with over 10M lines (AT&T, Centurylink, Verizon, and Frontier). The Cable companies are consolidating as well (Comcast/Time-Warner Cable). Our 10+ year trend of industry consolidation continues. At this point, I don’t see this stopping for some time. Another straw to stir the competition drink.

Have a great weekend!

Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

Sonoma County: News and Notes

Welcome back to Earnings Season. I know many of you are waiting for my review of Cyan but they have yet to report.  But yesterday, Enphase reported a very good Q4 and a rosy outlook for 2015. Business is at the top line roughly 50% year over year. The company showed a non-GAAP profit for the entire year and the GAAP reconciliation does not dampen any of this. The thing is that the company is up slightly today in a slightly down market. Given the quality of earnings, the question is why?

To do this, I need to talk about what Enphase does a bit. They are (today) in the Power Converter Business for the Solar Marketplace. The bulk of their revenue is from the Residential Market in North America (primarily the US). They are moving more into International Markets and Commercial Solar applications. This is all about expanding the Total Available Market (TAM). To do this, Enphase is increasing their Operating Expenses (OPEX) to help make this growth happened. Enphase coins this “Profitable Growth”, but essentially it means that earnings are somewhat muted to fund future growth. They are consistent about this and so there the investment community has built it into their model.

On the Conference Call, Enphase received praise for a great quarter and then some rather pointed questions. Given the quality of the results, the questions might seem rather tough minded. But here is unspoken thinking, “Hey you are doing great now, but what about the future?” So, analysts are probing for any potential weakness in Enphase and its story. The reason is pretty simple. At today’s stock price, Enphase is worth right around $600M. That is a lot of money and the investors want to make sure that the future for the company is as bright as being portrayed. Any hiccup in the future means that the company might have problems acheiving its objectives.

So, where are these pressure points:
– Price Pressure: There are many competitors in the market place and pricing is under pressure (something akin to a 10% price decline per year). This means that Enphase has to cost reduce to stay ahead of the curve. If they don’t then profitability declines quickly.
– OPEX Pressure: The concern is that expansion can get ahead of the market and thus again Enphase could use profitability.
– Market Saturation: The concern is that Enphase has captured a lot of market share and may not be able to capture more.
– Regulatory Changes: Most of the major markets provide a subsidy for Solar Deployment. What if this changes?

The company provided answers to all of these items. In particular, it seems to be doing well against Price Pressure. The newer products are aimed at new segments of the market to address and the market itself is expanding. An example of the UK market showed that changing subsidies may not be an issue. But expect the analysts to keep an eye on Enphase until the growth slows and profitability expands.

Just a reminder if you are interested in visiting a great BNI group come visit us at Legends at the Bennett Valley Golf Course on Fridays just before 7AM. The “Best Networkers In Town” would be happy to have you visit. Great, free way to meet around 40 Business People here in Sonoma County. If you want any other information about this let me know.

Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

Leadership in a New Situation: Dealing with New Peers

One of the bigger challenges when you enter a new situation is that you will have new peers most of the time. I have had the occasion to have a role that I used to call “Executive Without Portfolio.” Beyond my normal duties, I would be given assignments to handle or fix something in specific. Generally this included hiring my own replacement.

But other times, I have ended up with a different group of peers. Sometimes, I have known the others to a greater or lesser degree. Sometimes not at all. The challenge is that the company has a style and personality that already exists. By joining, you change the situation – hopefully for the positive. The thing is that no matter how you look at it the balance in the organization will have changed.

On top of the change in balance, you are going to be changing things. That means the way you work with other groups is probably impacted. This will cause unplanned work for other organizations. So just by stepping in the door you are likely to upset the plans of your peers.

All of this means that you have to act with care. To do so there are two things you need to do: Build Relationships and Listen to Problems. Building Relationships is just that simple. You need to spend time and energy getting to know your peer group. This is best done outside a strictly business environment, like a lunch or a dinner to start. This is just part of a trust building exercise. Because you are going to have to present the work you are intending to them at some point in a work context. If you can have a non-stressful start, if makes the more challenging dealings easier.

The Listen to Problems bit has two variants. Your peers (or at least 1 of them) are going to want you to make changes in your groups personnel or processes. Some of that may conflict with the plans that you want to go forth with. So it is important that you listen actively to the requests. You may be able to solve the request in the way offered or in a different way. But the goal is to understand that you need to balance the needs of the two groups. Find the pain points that the other person has. This may lead to improvements and changes to your own initiatives.

Your peer group will be very important in this new gig. They present to you an opportunity to learn more about the informal organization and help introduce you to other important figures within the company. So Build Relationships and Listen to Problems!

Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning

Net Neutrality Friday

Well it has been an interesting week for me on the Net Neutrality Front. The reason is that I tracked an article from Forbes through my friend Dan Grossman. This Article was published around Thanksgiving last year. I think that is why I missed it or never heard about it. The notion is that Netflix has really screwed up the Net Neutrality Debate.

For me, the most interesting technical part of the article is a pointer to an admission by Cogent. Let me walk you back in time to that all this happened. If you remember, Netflix and Comcast were having a lively spat in public based around some data that Netflix put out showing out ISPs were slowing down their traffic. If you recall at about the same time, Cogent was claiming that Comcast was creating a bottleneck at the Cogent-Comcast Peering Point. This was resolved when Netflix directly connected to Comcast. At that point, the entire affair became a more widely known general public topic. And the FCC put out the Notice of Proposed Rule Making (NPRM) that mentioned “Fast Lanes”. At that point, John Oliver jumped in and we had many uninformed children adding on.

So, let’s back up through this and take a look at the admission from Cogent. This blog post says that the cause of the Netflix slowdown was actually Cogent. That the reason that the direct connection between Comcast and Netflix improved things is that Cogent was removed from that connection. The reason stated by Cogent was that Cogent had taken to prioritizing the traffic of their retail customers over their wholesale customers (like Netflix). Now, as with all things I think it is worth skepticism to consider these sources. But I do want you to ask yourself, would the debate be as newsworthy without the Netflix issue? I would say wholeheartedly no. And that is the point of my writing.

I have told many people that the reason I write my Friday blog post is that one of the first groups to link to my blog was a Telecom Advocacy website. I look at the articles that referred to my blog and found that the website was wrong. I don’t mean that they advocated bad positions. They advocated positions based on technical information that was factually incorrect. My favorite was that VoIP was being pushed because it could be wiretapped unlike POTS lines. POTS lines in the US are tapped under Carrier Assistance of Law Enforcement Agency (aka CALEA). This happened long before data tapping which only came in as part of the Patriot Act. It occurred to me that people can not make good decisions about policy until they have facts.

I do put out positions and I try to tell you when I do. If you are not clear on when I am talking fact versus opinion let me know. I will make it clear. For example, my view of Title II is that it probably will end up badly for the consumer. I say that because I feel that the number 1 issue is incenting investment in the network. Imposing Title II does not do that in my opinion. In fact most of the problem that I have with the positions that people take is that they are self serving or theoretical. To me, investment means bandwidth and bandwidth is what we are looking for.

Next week, I start talking more about what we need to get investment. That is unless something else happens. Have a great weekend!

Jim Sackman
Focal Point Business Coaching
Change Your Business – Change Your Life!
Business Coaching, Sales Training, Marketing Consultant, Behavioral Assessments, Business Planning