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Is it Really Essential or Not?

He is at it again.

No, not Elon Musk, but Andy Rubin – the Godfather of the Android operating system could create another ground-breaking shift in the world of technology.

Apple’s (AAPL) iOS system was the leader of the pack until Rubin’s timely intervention.

When Apple debuted the iPhone and, shortly after, the Apple app store, there was nothing remotely comparable at the time.

The roaring success of the iPhone and its app store could have been so much more to the global smartphone audience if it consumed everybody.

You could smell broad-based world domination, but it never materialized.

Android now has 85% of the global smartphone market share, and Apple has carved out the last 15% albeit in the high-income markets.

You can thank Microsoft (MSFT) for all of this – let me explain.

Android was hands down the best purchase ever made by Google for a paltry sum of just $50 million.

It was in 2005 when Android was bought by Google and Rubin’s work commenced overseeing the construction of a platform that could avoid licensing restrictions dragging down the industry.

Android was initially commissioned by Google to build a platform to stymie another potential Microsoft monopoly, but this time, in the mobile space.

Google didn’t want to be blown away by Microsoft as the pivot to mobile was picking up steam.

Google assumed that Microsoft had the best chance to execute the shift to mobile because of the universal acceptance of the Windows operating system.

And little did they know that Steve Jobs had a game changer up his sleeve when he rolled out the iPhone.

The premise was very simple for Android - offer supreme customer value, massively scale a global platform, and catalyze explosive growth.

Easier said than done.

In the end, Rubin was able to generate a blanketed adoption of the Android operating system in smartphones.

Apple has been, by and large, the victor of hardware because even though the Android system is more popular, the manufacturer of Android-based phones cuts across a broad swath of different international companies from Google itself to Samsung, LG, and the various Chinese makers.

Around half of Americans are proud to be an iPhone owner and Apple was able to ensure they were the only manufacturer of their proprietary iOS system harvesting all the profits.

Onlookers aren’t giving Android the credit it duly deserves in the global scheme of things.

Fortunately for Google and Rubin, Microsoft CEO Steve Ballmer fudged his opportunity while Palm, Symbian, and BlackBerry never stuck around either for recorded posterity. It could of easily have gone the other way.

Android has become so entrenched in non-iPhone smartphones that Google was fined $5 billion for being too dominant in Europe or for what regulators tout as illegally cementing their position. The battle is still going on in court with a final verdict coming shortly.

What does Rubin have on the menu this time?

After establishing his own private company to battle the tech Goliaths, he built an initial smartphone that was an unmitigated flop.

The Essential PH-1 smartphone offered a stock Android experience meant to appeal to the medium-tiered smartphone market.

The phone had solid hardware, enough juice in it to be competitive, a poor camera, and it did little to stand out from the crowd. There are many other cheaper substitutes with better brand recognition selling similar enough devices.

In general, it is a passable smartphone, but the initial price point was a reach in this ultra-competitive climate.

Sales were an outsized bust barely able to penetrate the American smartphone market.

Sprint offered the phone for $699 and registered 5,000 sales in the first month.

To put it into perspective, Apple routinely sells 40 or 50 million smartphones per quarter.

The Essential phone was discounted down to $499 in an attempt to salvage revenue. That didn’t work either.

You can now buy the phone on Amazon.com (AMZN) for $378.

All told, the phone did about 150,000 in sales and Rubin needed to rethink his vision.

Even as recently as this spring, takeover rumors swirled because of Essential’s stable of engineering firepower.

The vultures never swooped and Essential is back with a vengeance building their second phone - Essential Phone PH-2

To stem the tide and make their mark in the smartphone industry, Rubin decided Essential needed a fresh strategy requiring immense chutzpah.

Smartphones have essentially become commoditized in the mid-tier range and consumers look for the best specs at the lowest price point. Samsung has made a living picking off this type of buyer.

Rubin decided to align his future product with the technology that will change the world – artificial intelligence.

Artificial intelligence will be incorporated into the design for the phone to work for the user without him using it.

Yes, that’s right, the user will not have to even have his paws on the phone. The artificial intelligence will mimic the user’s behavior and carry out its functions and tasks alone.

Rubin said, “You can be off enjoying your life, having that dinner without touching your phone and you can trust your phone to do things on your behalf.”

This audacious strategy is a risky bet that consumers will be comfortable enough with artificial intelligence to allow them to venture out alone into this complicated world with no checks and balances from the user themselves.

Imagine some catastrophic scenario if the artificial intelligence taps into a user’s bank account and begins deploying hard-earned capital to exotic locations all over the world.

Smartphone competition has effectively made smartphones widely available for most of the world, but cultivating a smartphone company from scratch requires a dose of creative intuition.

Betting on the development of artificial intelligence is one of the few weapons in Rubin’s toolkit.

This could be Rubin’s last attempt at a smartphone and moving further out onto the risk curve means this could be a whale of a failure or a spectacular success. I can’t imagine his investors allowing him to produce another failed smartphone.

My bet is that consumers aren’t ready to absorb the type of levels of artificial intelligence that Rubin hopes to infuse into his new phone.

Even if he lays an egg, he will be back on another project in no time. That is the sort of slack you get by being the godfather of the Android operating system. Funding is as lush as a tropical forest.

Secretly, I want him to succeed because the world needs positive disruption to the Silicon Valley cohort of megacompanies from independent sources.

My bet is that a smartphone will not be the revolutionary new product the world is clamoring for. It’ll be something we have never seen before.

Please click here to visit Essential’s website.

A GOOD PHONE BUT TOO SIMILAR TO THE REST

October 11, 2018

Diary, Newsletter, Summary

Global Market Comments
October 11, 2018
Fiat Lux

Featured Trade:

(REACHING PEAK TECHNOLOGY STOCKS),
(GOOGL), (MSFT), (NFLX), (FB), (AAPL),
(LOCKHEED MARTIN’S SECRET FUSION BREAKTHROUGH),
(LMT), (NOC), (BA)

Reaching Peak Technology Stocks

Diary, Newsletter, Research

I drove into San Francisco for a client dinner last night and had to wait an hour at the Bay Bridge toll gate. When I finally got into town, the parking attendant demanded $50. Dinner for two at Morton’s steakhouse? How about $400.

Which all underlines the fact that we have reached “Peak” San Francisco. San Francisco just isn’t fun anymore.

The problem for you is that if the City by the Bay has peaked, have its much-loved big cap technology stocks, like Facebook (FB), Alphabet (GOOGL), and Netflix (NFLX) peaked as well?

To quote the late manager of the New York Yankees baseball team, Yogi Berra, “Nobody goes there anymore because it’s too crowded.”

What city was the number one creator of technology jobs in 2017?

If you picked San Francisco, you would have missed by a mile. Anyone would be nuts to start up a new business here as rents and labor are through the roof.

Competition against the tech giants for senior staff is fierce. What, no fussball table, free cafeteria, or on-call masseuses? You must be joking!

You would be much better off launching your new startup in Detroit, Michigan. Better yet, hyper-connected low-waged Estonia where the entire government has gone digital.

In fact, Toronto, Canada is the top job creator in tech now, creating an impressive 50,000 jobs last year. Miami, FL and Austin, TX followed. Silicon Valley was at the bottom of the heap.

It’s been a long time since peach orchards dominated the Valley.

Signs that the Bay Area economy is peaking are everywhere. Residential real estate is rolling over now that the harsh reality of no more local tax deductions on federal tax returns is sinking in.

To qualify for a home loan to buy the $1.2 million median home in San Francisco, you have to be a member of the 1%, earning $360,000 a year or better.

Two-bedroom one bath ramshackle turn of the century fixer uppers are going for $1 million in the rapidly gentrifying nearby city of Oakland, only one BART stop from Frisco.

Most school districts have frozen inter-district transfers because they are all chock-a-block with students. And good luck getting your kid into a private school like University or Branson. There are five applicants for every place at $40,000 a year each.

The freeways have become so crowded that no one goes out anymore. It’s rush hour from 6:00 AM to 8:00 PM every day.

When you do drive it’s dangerous. The packed roads have turned drivers into hyper-aggressive predators, constantly weaving in and out of traffic, attempting to cut seconds off their commutes. And there is no drivers ed in China.

I took my kids to the city the other day for a Halloween “Ghost Tour” of posh Pacific Heights. It was lovely spending the evening strolling the neighborhood’s imposing Victorian mansions.

The ornate gingerbread and stained-glass buildings are stacked right against each other to keep from falling down in earthquakes. It works. The former abodes of gold and silver barons are now occupied by hoody-wearing tech titans driving new Teslas.

We learned of the young girl forced into a loveless marriage with an older wealthy stock broker in 1888. She bolted at the wedding and was never seen again.

However, the ghost of a young woman wearing a white wedding address has been seen ever since around the corner of Bush Street and Octavia Avenue. Doors slam, windows shut themselves, and buildings make weird creaking noises.

Then I came to a realization walking around Fisherman’s Wharf as I was nearly poked in the eye by a selfie stick-wielding visitor. The tourist areas on weekdays are just as crowded as they were on summer weekends 30 years ago, except that now the number of languages spoken has risen tenfold, as has the cost.

It started out to be a great year for technology stocks. Amazon (AMZN) alone managed to double off its February mini crash bottom, while others like Apple (AAPL) rocketed by 56%. But traders may have visited the trough once too often

The truth is that technology stocks have not performed since June, right when the Mad Hedge Fund Trader dumped its entire portfolio. Only Microsoft (MSFT) and Amazon (AMZN) have managed to eke out new all-time highs since then, and only just.

The rest of tech has been moving either sideways in the most desultory way possible, or suffered cataclysmic declines like Facebook (FB) and Micron Technology (MU).

Of course, the trade wars haven’t helped. It’s amazing that big tech hasn’t already been hit harder given their intensely global business models.

Nor has rising interest rates. Big cap tech companies have such enormous cash balances that they are all net creditors to the financial system and actually benefit from higher interest rates. But dear money does slow the US economy and that DOES hurt their earnings prospects.

No, I’m not worried about tech for the long term. There is no analog company that can compete with a digital company anywhere in the world.

Accounting for 26% of the stock market capitalization and 50% of its profits, it’s only a question of when we get a major new up leg in share prices, not if.

The only unknown now is whether this next leg will take place before or after the next recession. Given the rate at which interest rates and oil prices are rising in the face of a slowing global economy, it’s looking like the recession may win the race.

As our tour ended, who did we see having dinner in the front window of one of the city’s leading restaurants? A young woman wearing a white wedding dress.

Yikes! Maybe the recession is sooner than I thought.

October 10, 2018

Tech Letter

Mad Hedge Technology Letter
October 10, 2018
Fiat Lux

Featured Trade:

(DON’T BUY SURVEYMONKEY ON THE DIP),
(SVMK), (GOOGL), (CRM)

Don’t Buy SurveyMonkey on the Dip

Tech Letter

If a company takes almost 20 years and still isn’t profitable - it probably never will.

Granted, tech firms are given a Rapunzel-length leash to collect users, scale out the product, refine algorithms to industry standard, and build up the engineering team.

I know this takes time – it doesn’t happen in one day.

After whipping up a frenzy of momentum and venture capitalists claiming stakes, tech stocks usually go public.

This is the common process of what it takes to construct a Silicon Valley tech firm, and there are no shortcuts to this long hard slog.

And if after almost 20 years, amid a nine-year bull market, a tech firm in the most dominating sector in the world cannot figure how to be in the black, investors should stay away from this company in droves.

SurveyMonkey (SVMK), who recently achieved a blockbuster IPO, were the rock stars of the tech world for one day and one day only.

The stock peaking after the first trading day is a ghastly signal and ominous sign.

Their fifteen minutes of fame is all they will get because this practically ex-growth company has no indicators of a rosier future.

The company went public at $12 per share and even that was too generous.

The stock took off like a banshee, on the verge of overshooting the $20 level before falling back to grace.

The stock is now trolling around $13, and on the verge of heading to the purgatory of single digits.

What caused such a swan dive after such a promising start?

On the surface, everything looks like peaches and daffodils – a growing Silicon Valley cloud company even with Facebook spin doctor Sheryl Sandberg on the board.

The optics pass all the marks.

But wait a second, looking at the nuts and bolts, it’s crystal clear why this stock has been throttled back.

The first half of 2018, SurveyMonkey presided over a tepid 3% of paid user growth.

Yes, SurveyMonkey is growing, but not by much.

In this same period, the company lost $27.2 million and this was after an annual 2017 loss of $24 million.

Profitability isn’t exactly their forte.

The 14% of revenue growth the company secured was done after taking a machete and gutting margins to appear pretty for the IPO.

And it’s painfully obvious that SurveyMonkey is failing at converting the freemium users into paid converts.

The online survey doesn’t exactly have the highest barriers of entry.

Google (GOOGL) Forms is the competitor in this space offering straightforward free surveys with basic analysis.

The tool is highly functional.

The pricing structure to SurveyMonkey’s individual membership is presented as a luxury service like the US postal service.

The individual service costs $384 per year and rises all the way up to the bloated price of $1,188 per year.

Any individual paying $1,188 per year for this needs to check themselves into a mental hospital.

Google Forms could easily undercut this pricing model by offering survey tool packages for a fraction of this amount.

The “team plan” is also laughable by charging $75 per month for up to three users, and this type of plan is capped at an exorbitant $225 per month.

Let’s remember that Microsoft offers Microsoft Office 365 Personal for an annual total of $59.99 and is million times more useful.

This annual subscription comes with premium versions of Word, Excel, PowerPoint, OneDrive, OneNote, Outlook, Publisher, and Access.

The OneDrive cloud service includes 1 terabyte (TB) of cloud storage.

Just by this simple comparison, it is easy to see which service is of value and which service is building castles in the sky.

With the explosion of service-as-a-software (SaaS) apps flooding desktops, I imagine the paid version of SurveyMonkey would be first on the chopping block due to its overly ambitious pricing.

In this strategy, the company is more concerned about milking as much as they can from each existing paid user instead of juicing up the core user base.

Effectively, this is a poor management decision, and the company is harming the growth of the potential paid usership base by robbing all incentive to convert to the paid version.

As Netflix masterfully proved, draw in the eyeballs at a lower price, build up the service to an optimum quality level, and subscribers never leave.

The opposite strategy is an indirect way of management believing the product is not good enough or the niche is too small to perpetualize a solid relationship.

And since growth numbers aren’t accelerating, there is infinitesimal reason to even consider investing in this fading company.

SurveyMoney has also racked up the debt - $317 million of it to be precise putting its debt $100 million over total revenue in 2017.

They were burning cash quickly and only had $43 million left in the coffers.

Part of the rationale for going public was a way to pay down debt.

Another chunk of proceeds from the IPO will be used to pay taxes.

The company has no innovative roadmap going forward and using the cash to pay down existing obligations shows the anemic level of intent from this company.

The silver lining in this company is that the losses of $76.4 million in 2016 were pared back in 2017.

In the IPO prospectus, SurveyMonkey noted that most unpaid customers do not become paid customers.

Even though the product is useful and it’s a long-time favorite of mine, the stock is a different animal.

There was not much meat in the prospectus and most of it were dry bones.

The IPO day was buoyed by the $40 million in stock venture-capital arm of Salesforce (CRM) pocketed, but that short-term boost has faded quickly as investors have dissected this company in every which way.

Use their free survey tools but avoid paying for the paid version and don’t buy the stock.

There are many other fishes in the sea.

NO IPO FOR GOOGLE FORMS

October 9, 2018

Tech Letter

Mad Hedge Technology Letter
October 9, 2018
Fiat Lux

Featured Trade:

(LIVING ON THE EDGE),
(AMZN), (MSFT), (HPE), (GOOGL)

Living on the Edge

Tech Letter

What is Edge Computing?

Edge computing is processing data at the edge of your network.

The data being generated will not only occur in a centralized data-processing storage server anymore, but at different decentralized locations closer to the point of data generation.

This is what everyone is talking about and is an epochal development for tech companies and the businesses they run.

The last generation of IT saw a massive migration to the cloud as centralized servers stored the sudden hoard of data that never existed before.

Edge computing bolsters data performance, boosts reliability, and cuts the costs of operating apps by curtailing the distance data must flow which effectively reduces latency and bandwidth headaches.

Edge computing is revolutionizing IT infrastructure as we know it.

No longer will we be forced to use these monolith-like giant server farms for all our data needs.

Epitomizing the Silicon Valley culture of becoming faster and more agile to disrupt, tech infrastructure is getting the same potent cocktail of performance enhancers underlying the same characteristics.

According to research firm Gartner, around 80% of enterprises will shutter legacy data servers by 2025, compared to 10% in 2018.

Keeping the data near the points of data creation is the logical step to enhance and optimize data processes.

Cloud computing depends on superior bandwidth to handle the data load.

This can create a severe bottleneck if bombarded with a heavy dose of devises all communicating with the centralized servers.

The edge computing industry already in the initial stages of ramping up will be worth $6.72 billion by 2022, up from $1.47 billion in 2017.

Underpinning this crucial IT is the imminent inauguration of 5G networks powering IoT devices.

Simply put, the amount of raw data which will need swift processing is about to explode. Relying on a slower, centralized servers is not the solution, and the edge offers a suitable solution to accommodate the new generation of technology.

And as technology starts to permeate every corner of the globe, data will need to be instantaneously processed locally in cutting-edge technology such as self-driving cars.

Waiting on communicating with a centralized server in another continent is just not plausible.

A self-driving car only has milliseconds to react in hazardous conditions.

Other critical and data heavy operations such as wind turbines, medical robots, airplanes, oil rigs, mining vehicles, and logistics infrastructure only function if operated at peak levels and an interruption to connectivity could be fatal.

Telecom companies and IT firms will experience the biggest sea of changes from edge computing in the next five years.

These two sectors are confronting a significant ramp up in network load and will find it challenging to deliver the results to operate the apps and services they are responsible to run.

This new IT technology is the answer.

The industry adopting edge computing the fastest is retail because of the troves of data collected by IoT sensors and cameras.

Companies will be able to analyze the performance of products and edge computing is the technology that will capture the data.

The adoption of edge computing will perfectly take advantage of the boom in IoT devices and uptick of internet speeds through 5G.

Sales of PC’s, tablets, and smartphones have matured, and aren’t seeing the same pop in growth rates like before.

However, the IoT industry will expand by 30% in the next five years boding well for the broad-based integration of edge computing.

In total, the number of connected devices in the next five years will balloon from 17.5 billion in 2017 to over 31 billion in 2023.

The first iteration of 5G IoT devices will be on the market in 2020 deploying industrial process monitoring and control.

This is not a flash in the plan technology and many firms already or are about to roll-out an edge computing strategy.

In a recent report, 72.7% of tech firms already possess a solid edge computing plan or it is in the works.

If you include all the tech firms who expect to invest in edge computing in the next year, the number catapults to 93.3%.

The same survey continued to delve into the mindset of edge computing for tech management by asking about the importance of the technology.

Over 70% of firms characterized edge computing as important, bifurcated into two categories with the first being “critically important” which 22.2% of respondent agreed with.

Another 49.6% of respondent described edge computing as “very important.”

Firms cited that improved application performance is the largest benefit of edge computing followed by real time data analytics and data streaming.

It is not the death of cloud computing yet.

Even though centralized, slower, and negatively affected by long distance, cloud computing still has a place in the future of IT.

About two-thirds of tech firms plan to utilize a hybrid centralized cloud – edge computing strategy.

Even if they did not combine this strategy, companies would most likely separate the operations responsible for two distinct set of tasks filtered by the level of time sensitivity.

The overwhelming and imminent adoption of IoT devices means IT departments are crafting a substantially higher budget for edge computing to satisfy their operational needs.

Large recipients of this technology will turn out to be companies related to manufacturing, smart cities and transportation as well as energy and healthcare.

This technology really cuts across the entire spectrum of global industries.

Data usually does not discriminate, and applications of new tech is fueling a rapid rise of performance optimization that no other sectors can claim.

Let’s do a quick rundown of the edge computing players.

The three cloud behemoths of Amazon Web Services (AWS), Microsoft (MSFT) Azure, and Google (GOOGL) Cloud are constructing edge gateways and edge analytics into their IoT offerings aiding workload distribution across edge and cloud services.

Microsoft has over 300 edge computing patents and launched its Azure IoT Edge service integrating container modules, an edge runtime, and a cloud-based management interface.

Amazon Web Services offers AWS CloudFront content delivery infrastructure and AWS Greengrass IoT service building on the momentum of pioneering centralized cloud technology.

Dell’s IoT division invested $1 billion in R&D to help drive Edge Gateways and VMware's Pulse IoT Center.

Hewlett Packard Enterprise (HPE) devoted $4 billion to its edge network portfolio. HPE operates edge services, mini-data centers, and smart routers.

These are just some of the initiatives from some of the main players in the field.

Expect companies to become a lot more connected while possessing the speed, high performance, and agility to optimally entertain this new-found connectivity.

October 1, 2018

Tech Letter

Mad Hedge Technology Letter
October 1, 2018
Fiat Lux

Featured Trade:
(ZINC AIR BATTERIES WILL REVOLUTIONIZE ELECTRIC CARS),
(TSLA), (NIO), (FB), (GOOGL), (NFLX)

Zinc Air Batteries Will Revolutionize Electric Cars

Tech Letter

As Panasonic ramps up its battery production at the Tesla Gigafactory 1 in Sparks, Nevada, the demand and business for renewable energy has never been more robust.

And as the world’s population balloons and man-made pollutants roil the natural ecosphere, business needs an answer to these potential apocalyptic bombshells or there will be nowhere clean enough to live.

Energy security and population growth will have a complicated relationship going forward and cannot be ignored for the sake of mankind.

This isn’t me being a tree-hugging, Birkenstock-trotting, save-the-earth, love and peace-type of guy.

This problem is real and whoever discovers the solution could reap untold profits.

The answer has been found - rechargeable zinc air batteries.

Spearheading this massive initiative is South African-born entrepreneur, sports team owner, Los Angeles Times owner, and more importantly the founder, chairman and CEO of NantEnergy Dr. Patrick Soon-Shiong.

This El Segundo, California-based company presented an utter game changer to the future of the world and the world’s economy.

NantEnergy debuted a rechargeable battery powered by oxidizing zinc with oxygen from the air for commercial use at the One Planet Summit in New York.

It also has the capability to store energy.

Not only is this technology and product cutting edge, but it has the cost basis to support broad-based scalability and adoption.

Ramkumar Krishnan, chief technology officer of NantEnergy claimed this revolutionary battery can “deliver energy for $100 per kilowatt-hour (kWh).”

Lithium-ion batteries have been the mainstay choice for clean energy or clean enough energy since 1992, and its usage varies in cost from $300 to $500 kWh.

Tesla, with its phalanx of superior engineers, has been able to suppress that cost all the way down to a level between $100 to $200 kWh level.

NantEnergy has already registered more than100 related patents in its name and envisions a $50 billion addressable market.

I believe the addressable market is substantially bigger.

For all the hoopla about lithium-ion batteries, there are severe drawbacks in its usage and application.

Let’s concisely run down the pitfalls of batteries of this ilk.

Once out the factory door, the performance starts to go downhill.

Lithium-ion batteries react poorly to high temperatures.

These batteries become inoperable if completely discharged.

There is a slight chance a battery could burst into flames and burn off your face.

Simply put, lithium-ion batteries incorporate cobalt, an extremely toxic material hazardous to human health.

If a Samsung Galaxy smartphone explodes, cover your mouth to avoid inhaling the cobalt-laced fumes.

Dr. Soon-Shiong characterized this new technology as the “holy grail” of renewable energy.

Wide-scale adoption would bring the need for cobalt to its knees.

No longer would tech companies need to scramble to secure a sufficient amount of cobalt supply from the deepest reaches of the Congo jungle.

It would be the end of cobalt as we know it.

At first, lithium would be required for a stopgap measure while engineers refine the battery on its way to a full-fledged zinc alone battery.

The lithium placeholder would only be temporary.

The clean energy movement must be grinning widely as the potential to finally do away with cobalt from renewable energy has pronounced social and economic consequences.

An estimated 1.4 billion people still live in the dark and do not have access to electricity.

This technology is being tested in villages in Africa and desolate communities in Asia as we speak.

The absence of electricity isolates these undeveloped communities in third-world Africa and Asia without access to health care, education, and technology.

It’s hard to kick-start your life as a sprouting little kid when you’re lost in the dark half the time.

Importing fossil fuel to put these communities online is unfeasible and just plain too expensive for communities that have a dire shortage of capital.

Currently, NantEnergy’s rechargeable zinc air batteries are online in 110 villages located in nine Asian and African countries.

The batteries have been combined to establish a microgrid system powering entire areas.

The company will start delivery this product next year widening its type of use to telecommunications towers.

The next step after that would be the home energy storage market targeting California and New York as the first American cities.

Engineers have pointed out that this development could transform the electric grid into a “round-the-clock carbon-free system.”

In addition, with cooperation with Duke Energy, a major utility, NantEnergy’s batteries have been powering communications towers in America for the past six years.

The design is mind-boggling utilitarian - plastic, a circuit board, and zinc oxide wrapped up in a briefcase-size shell.

One charge can offer 72 hours of battery life.

The charging process is easy - electricity from solar installations is stored by converting zinc oxide to zinc and oxygen.

The discharge process is straightforward, too - the system produces energy by oxidizing the zinc with air.

The pursuit of energy reduction is in full throttle, and this is the next leg up for energy aficionados.

Your lithium-ion-run Tesla could become a legacy company in a matter of years if this technology disrupts Elon Musk’s brainchild.

Lately, Musk has been falling behind the eight ball with fresh innovators hot on his heels.

This is the latest company to enter into its market even though still in the incubation stage.

Competitors have popped out of nowhere and are coming for his bacon.

Shanghai headquartered electric car manufacturer Nio (NIO) went public and raised more than $2 billion.

Even though it is not yet a threat to Tesla, it shows that Tesla isn’t the only game in town anymore.

In any case, NantEnergy has the magic to unlock the “holy grail” of renewable energy. And if it can promise on its cost projections, I see no reason why this won’t be furiously adopted by corporations worldwide.

As it is, America has been losing out in the Congo, as China has cornered the cobalt market there.

And, as the evolution of fracking technology quelled the Middle-East situation, it could also have the same effect in the Congo.

More excitingly, it could put online an additional 1.2 billion new customers to devour iPhones and watch Netflix (NFLX).

Companies such as Facebook (FB) and Alphabet (GOOGL) have been developing a way for these remote and poverty-prone places to use Internet from a satellite.

They would need electricity first to power their devices unless Mark Zuckerberg has found a way to use a smartphone without electricity.

NantEnergy’s renewable batteries have already cut the need of 1 million lithium-ion batteries, and warded off the need to release 50,000 metric tons of carbon dioxide since 2012.

California is the flag-bearer in renewable energy policy by forcing its populace to be at 100% carbon-free electricity by 2045.

Musk is on record by saying he expects to break the 100-kWh level, which would contribute to better power storage and expedited electric vehicle (EV) adoption.

In contrast, energy storage analyst Mitalee Gupta at GTM Research has retorted that he’s “unsure $100/kWh is achievable this year.”

Musk, being a naturally optimistic entrepreneur, sets targets then does everything he can to break them.

Either way, two South African born visionaries are doing their part to crater the cost per kWh in the renewable energy market, and Elon Musk might not be the biggest disruptor from South Africa.

Time will tell if this market will become zinc-based or lithium-based – the higher-grade technology eventually wins out spelling doom for Musk.

But it appears that Musk has other things to worry about now.

NantEnergy plans to inaugurate a battery manufacturing facility in California next year.

As for Tesla, buy the car and not the stock.

And for Nio, don’t buy the car or the stock.