Demand for 25 Gbps Ethernet controllers and adapters drove the market to record shipments in Q3, reported the Dell'Oro Group Monday. Nvidia gained share on a “one-time sale” to Huawei before the mid-September sourcing ban from U.S. vendors, it said. More than 3.3 million 25 Gbps Ethernet controllers and adapters ports were shipped, surpassing the previous record set in Q2, it said. Shipments of 50 Gbps Ethernet controller and adapter ports declined from Q2, as some tier 1 cloud service providers entered a “digestion cycle” and reduced their server deployments, it said.
Citing the pandemic, Comcast extended its free internet service offer through June 30 for the first 60 days for new Internet Essentials customers, it said Monday. It's continuing to offer free access to more than 1.5 million public Xfinity Wi-Fi hot spots through then.
Warner’s decision to release 2021 blockbuster titles simultaneously in theaters and with a one-month window on its HBO Max streaming service is “a very costly one for everyone involved,” MoffettNathanson’s Craig Moffett wrote investors Friday. “We have a hard time believing the messaging that this is only a temporary 2021 plan,” said the analyst, “even if that might be the current plan today. Once the windows change, it will be hard to go back.” It’s “hard to find any winners here,” he said, ticking off AT&T, participants/rights holders and U.S. theater owners who will suffer “another unexpected big hit.” Despite growing consensus that coming COVID-19 vaccines should help return the U.S. to some normalcy by mid-2021, the Warner Bros. decision “puts a damper on those expectations for movie attendance,” he said. It’s unclear whether U.S. exhibitors will agree to play the upcoming Warner 2021 movie slate, “given the unattractive terms of running films that are simultaneously available for ‘free’ on HBO Max,” though given the difficult position most theater owners are in today, it will be hard for them to hold the line on an exclusive theatrical window, he said. The Warner announcement is ahead of any expected update from Disney this week “of likely plans to alter their own traditional theatrical windowing strategy,” Moffett said. While studios have been pressuring exhibitors to shrink the theatrical window for some time, WarnerMedia is the first to “blow up the model by skipping an exclusive theatrical window altogether.” The Pay 1 window -- where studios typically break even on their original investment -- is now the HBO Max release, which “no longer generates cash; instead, it merely shifts content between WarnerMedia segments,” he said. Going all in on the biggest blockbusters seems “overly aggressive vs. a simple window change.” The move will likely spur new subscriptions to HBO Max, which until now “has simply not been all that differentiated" from HBO, which has "floated at a penetration rate of 1/3 of US Pay TV homes for many, many years," he said. “But at what cost?” Warner didn’t comment Friday.
DocuSign is thriving as a cloud software services provider during the pandemic, as COVID-19 speeds the digital transformation of key business processes by two to four years or more, said CEO Dan Springer on a fiscal Q3 investor call Thursday. Revenue in the quarter ended Oct. 31 grew 53% from a year earlier, he said. When customers go from paper-based processes to digital, “they do not go back,” he said. “We believe that trend will hold when the pandemic subsides.” Though substantial “global, social and economic challenges undoubtedly remain, we believe we are still just scratching the surface of our long-term opportunity,” he said. The stock closed 5.3% higher Friday at $243.22.
Advances in artificial intelligence and machine learning will spur better-informed data gleaned from free streaming video service trials, resulting in improved user experience and content offerings, said Parks Associates analyst Steve Nason Friday. Free trials are important drivers to paid subscriptions, he said, noting 40% of U.S. broadband households trialed at least one over-the-top video service during the COVID-19 pandemic. By leveraging data on viewer activities and preferences, providers can personalize services to improve subscriber “stickiness,” he said. Some 42% of households subscribing to an OTT service during the pandemic cited a free trial as a key driver for the new subscription, Parks said. Average monthly spending on OTT video service subscriptions was $16 in Q1. Parks is holding a virtual Future of Video conference Dec. 14-16.
“Rapid recovery” in the semiconductor industry “appears to be stressing significant portions of the supply chain,” said Marvell Technology Group CEO Matt Murphy on a fiscal Q3 investor call Thursday. “These supply challenges are currently limiting our ability to fully satisfy the increase in demand for some of our networking products.” Marvell’s quarter ended Oct. 31. Marvell customarily enters every quarter with “a fairly steady level of delinquency,” defined as the volume of orders on hand that it “can't supply within the quarter,” he said. “Heading into Q4, that number is significantly larger than we've had.” That Marvell customers are adapting to the constraints by placing “longer lead times on us” is only exacerbating the delinquency, said Murphy. The stock closed 4.7% lower Friday at $43.38. When Marvell talks to its supply-chain partners, “there is an anticipation that certainly within the first quarter or two in calendar '21, that we will see some improvements there,” said Murphy. It’s forecasting $785 million in revenue for Q4 ending early February, plus or minus 5%. Marvell would end the quarter up 9% from the year earlier at the midrange of that guidance. Revenue in Marvell’s networking business in Q3 was $445 million, up 10% sequentially from fiscal Q2 and 35% from the year-earlier quarter, said Murphy. Q3 was Marvell’s fifth-straight quarter of sequential revenue growth in 5G, he said. In the fiscal first half, Marvell’s application-specific IC business drove much of the 5G growth, “benefiting from the rapid deployments in China,” he said. Though the wireless infrastructure ASIC business remained strong in Q3, “the sequential growth was driven primarily by standard and semi-custom product shipments to Samsung,” he said. 5G rollout outside China “is starting to pick up,” said Murphy. “We expect consumer demand for 5G services will continue to grow worldwide,” especially following the launch of new Apple 5G phones, he said. If Qualcomm's forecast comes to pass that 500 million 5G-enabled smartphones will ship globally next year, “I think that's going to drive a lot of demand for networks,” he said. Marvell’s 5G customer base “continues to expand,” said Murphy. A second regional 5G infrastructure customer picked Marvell's Octeon microprocessors to power its new 5G base stations, he said. The unnamed customer plans to “engage” with Marvell on a “variety” of radio access network architectures for 5G, including “emerging” open RAN initiatives. By adding ORAN and virtualized RAN capabilities to its existing 5G offerings, “Marvell will be the ideal semiconductor partner with a complete 5G platform capable of supporting all RAN architectures on a common hardware and software framework,” said Murphy. “This is a critical differentiator for Marvell,” he said. “Most 5G networks will have a complex hybrid architecture to support a diverse set of deployment scenarios.”
Respondents in Cowen's November shopping survey were “somewhat negative” about holiday spending, it emailed investors Thursday. Despite the “soft macro backdrop” from COVID-19, e-commerce spending is expected to “rise significantly,” as 59% of respondents said they would bump up their online holiday shopping; 11% planned to spend less online. Survey data aligned with 44% year-on-year e-commerce growth over the Thanksgiving-Cyber Monday shopfest, as reported by the National Retail Federation (see 2012010042). Cowen estimates U.S. Amazon Prime households rose to 73 million in November: Two-thirds of those expect their online holiday shopping to rise year on year, said analyst John Blackledge, noting that Amazon kicked off holiday shopping with its delayed Prime Day event in early October. Amazon is the most popular site, said the survey, with 84% of respondents planning to shop the leading e-commerce site over the holidays, followed by 50% at retailer sites and 21% each for brand sites and eBay. Amazon’s third-party gross merchandise value grew nearly 60% year on year after Prime Day; it topped 60% over the “Cyber 5” shopping period. Some 44% of survey respondents said they planned to start shopping earlier this year, 42% the same as last year, and 14% later. The elongated season is a positive for e-commerce, said Blackledge, noting that consumers who begin buying earlier could end up spending more overall. Sixteen percent expected to spend more, 29% less, and half about the same as last year. Delivery anxiety is a logical driver behind early buying, dating back to longer delivery times early in the pandemic, said Blackledge. About 56% of respondents said they aren’t worried about delivery times, 36% were moderately worried, and 7% “very worried.” Similar percentages played out among Prime members, with 8% very worried.
Data analytics provider Splunk endured “continued pressure” in fiscal Q3, ended Oct. 31, from COVID-19 “macro conditions” that resulted in some customers “hesitating to commit to long-term contracts,” said CEO Doug Merritt on a Wednesday investor call. Though cloud revenue of $145 million was 80% higher than in the year-earlier quarter, total revenue declined 11% to $559 million. As Splunk reached the end of October, “we saw a much lower than normal close rate among our largest deals, which caused us to fall short of our bookings target,” said Merritt. “Our third quarter did not meet our expectations.” Despite Q3 results, “I continue to believe that our opportunity is massive and our fundamentals remain strong,” he said. The stock plummeted 23.3% Thursday, closing at $158.03. Since exiting the quarter, Splunk “scrutinized the transaction pipeline and factors impacting our close rates,” said Chief Financial Officer Jason Child. “All indicators point to continued strong demand overall, and we are confident in the eventual closing of delayed transactions in the pipeline, but when they will actually close remains uncertain. As a result, we remain cautious on near-term market dynamics, but confident in our long-term growth trajectory.” Fiscal Q3 featured “the most unusual selling environment we’ve ever seen,” he said. “We believe this is a temporary market condition and the underlying demand remains strong, particularly for cloud.” Bookings that the Splunk sales team thought were in the bag “got stopped” by the customers' CEO, CFO or the board “in the final hours or days of routing for approval,” said Merritt. Looking back quarter over quarter, of “the top 10 deals that we went into a quarter with, we tend to close seven, eight or nine,” he said. “This quarter, we wound up closing three.” Customer personnel who previously had the authority to approve deals “had that authority pulled at the very end” of the quarter, he said. “There were some material, large-term transactions that got pushed.”
Consumers’ “omnichannel buying behavior” will drive 60% of direct-to-consumer brands to move toward “functional, rather than channel-based” organizations by 2025, reported Gartner Thursday. The COVID-19 pandemic “accelerated the blending of physical and digital commerce,” it said. Leading DTC brands in this environment “have proven the efficacy of blending digital and physical channels to support customers’ new preferred methods of shopping and fulfillment, rather than treating web and physical channels as separate entities,” it said. But the omnichannel blend “is not often reflected in marketing organizational structures,” with only 30% of DTC brands reporting they have functional organizational alignment, it said. “Brands hinging their future plans on e-commerce -- and structuring teams accordingly -- should think twice. Brands should take advantage of this time to reorient teams and objectives around a customer-first, channel-agnostic strategy.”
The COVID-19 pandemic exacerbated digital divide issues, and more focus needs to be put on items such as better pedagogy for remote education and the lack of broadband affordability for many, speakers said Thursday at an Axios broadband event. NCTA President Michael Powell said the number of Americans without broadband availability could dramatically decline over the next five to 10 years with proper government support. But economics is also a hindrance, and low-income access efforts like NCTA's K-12 Bridge to Broadband program need to be a higher societal imperative, he said. Beyond connectivity, more work is needed on adapting educational curricula to remote learning and teaching students digital skills, he said. Without such efforts, even with more universal connectivity, "you're still going to get suboptimal results," Powell said. FCC Commissioner Geoffrey Starks said lack of granular data about who has broadband is "frustrating," but it's already well established that 77 million people in the U.S. lack adequate home fixed broadband connections, large numbers of people in urban areas are unconnected, and communities of color are persistently "on the wrong side of the digital divide," with particularly high rates of adults lacking broadband connections. Starks said "help is on the way" in tackling rural access issues, but broadband affordability and digital literacy -- particularly with seniors often not realizing the must-have nature of broadband -- are also key problems. Expand the E-rate program, he said. Plinio Ayala, CEO of IT career training nonprofit Per Scholas, said artificial intelligence will disrupt industries such as hospitality, retail and transportation, and the pandemic accelerated that. He said workforce development programs like his and others need more private and public sector investment. Comcast said Thursday it was giving Per Scholas $1 million to scale its operations. Jessie Woolley-Wilson, CEO of online educational software firm DreamBox, said 15 million U.S. students are falling behind educationally because they lack "persistent, consistent" broadband access. Treat broadband like a utility, with sustained funding for access and devices in schools, she said.