“The Chinese government still would like to see U.S. Internet companies explore the Chinese market, providing they are willing to abide by Chinese law. I think companies like Facebook should think about the Chinese market.” – Said Founder and CEO of Baidu Robin Li
Mad Hedge Technology Letter
September 9, 2019
Fiat Lux
Featured Trade:
(MEET YOUR NEXT-GEN HACKER)
(PANW)
Before I get into the weeds about why Palo Alto Networks, Inc. (PANW) is a robust cybersecurity company, I want to touch on the state of the cybersecurity industry and the recent developments that investors must be aware of.
Our cyber enemies have become sophisticated and nimble - the days of malicious software, the days of keyloggers have died out.
Now we're talking about AI-based bots via machine learning (ML)-based attacks and corporations must maintain an entire enterprise infrastructure blocking external forces that hope to wreak havoc on the inside once they are in.
The volume of breaches has mushroomed in the past year because of the switch from manual hacking to automated hacking resulting in countless attacks.
Many companies that get hacked still don’t know they are hacked as we speak and could go unnoticed for decades.
And more commonly, breaches are automated attacks and even from state-sponsored groups that shoulder the dirty interests of sovereign states.
The number of artificial intelligence attacks that spread like wildfire clearly offers a pathway for Palo Alto Networks, Inc. (PANW) and companies of its ilk a golden opportunity to exploit the addressable market of protecting network infrastructure.
Every year, the stakes creep higher as globalization puts the pressure on global corporations to succeed in any way possible.
It is important to understand the context in which Palo Alto Networks, Inc. (PANW) operates and how impressed I am with the past earnings results that saw revenue 22% year-over-year to approximately $806 million.
Quarterly billings crossed the $1 billion mark, a first in the company's history.
And superior performance in Prisma and Cortex platforms which refer to the collective next-gen security was substantially strong.
Palo Alto Networks, Inc. (PANW)’s next-gen security billings were approximately $192 million in the quarter. This represents a $768 million annual run rate and accelerated growth to approximately 180% year-over-year.
Over the last 12 months, the Prisma and Cortex teams will expand from 500 people to 1,500 people, and this will transpire through hiring new staff.
The company can effectively redeploy resources from what would have been part of the core business into the new business.
These revamps result in additional acceleration to the Prisma and Cortex growth rate from approximately 70-odd percent to 180%.
Here's a quick side jaunt about the intent to acquire Zingbox, an enterprise IoT security company.
This acquisition is yet another pristine instance of the firm’s ongoing strategy to consolidate new technologies into a next-generation firewall platform, allowing customers to protect their complex enterprise ecosystems.
Some inter-industry developments have favored the company in a positive way with Palo Alto Networks catapulting Symantec and Zscaler at a Fortune 50 U.S. retailer to secure their data center and network of more than 2,000 retail outlets.
Palo Alto Networks displaced Zscaler and beat Fortinet at a major European national healthcare provider in their digital transformation project.
This will result in securing servicing for hundreds of hospitals along with all of their patients and employees.
Many victories will result in Palo Alto Networks winning the war against competition.
Palo Alto Networks beat CrowdStrike and displaced Symantec with the Prisma and Cortex platforms at a global insurance company with more than 25 million policyholders.
Palo Alto Networks beat Fortinet and displaced Cisco to become the standard security platform for the government at one of the most population-heavy regions in Asia Pacific.
Companies are spending more on cybersecurity, period.
What will the new paradigm shift of cybersecurity look like?
I believe the world migrates towards a lesser number of vendors.
The world needs to go towards more comprehensive security.
Industry needs to ditch manual labor and focus on diligently automating processes by scale.
Cybersecurity finds itself at an inflection point in the industry.
Almost every customer I've met with in the last month, approximately 600 of them, is in some way, shape or form on their journey to the cloud.
Some are analyzing the cloud. Some of them could deploy some applications in the cloud.
Some of them are in a hybrid cloud environment already and are looking to add more functions.
Some of them are going to go to multiple clouds.
Honestly, there is not a real customer who's not talking about the cloud.
The security cloud market is a $1 trillion addressable market in the next 5 years offering a massive opportunity for cloud security firms to play an outsized role in allowing these customers to make that cloud journey over the next 3 to 5 years.
No need to obfuscate my words - I am bullish Palo Alto Networks, Inc.
“I'm not an alien...but I used to be one” – Said Founder and CEO of Tesla Elon Musk
Mad Hedge Technology Letter
September 6, 2019
Fiat Lux
Featured Trade:
(THE PRODUCT OF NO REGULATION)
(FB), (MATCH)
No government interaction means the duopoly of digital ads continues as is and investors cannot be short Facebook unless massively hedged on a short-term trade.
CEO of Facebook Mark Zuckerberg and his data leak-optimizing tech company is at it again with plans to roll out an online dating feature on the Facebook platform.
The new business is coined “Facebook Dating” which is the new façade in which Facebook will gouge your personal data in every shape and form possible so Mark Zuckerberg can add to his plethora of gaudy mansions that dot Hawaii, Palo Alto and Lake Tahoe.
It’s nuts that most people still subscribe to Facebook’s unfair terms, but this takes it up a few notches higher by gifting the company access to the most personal of personal content that a person holds dear to his heart.
Facebook, as usual, has the marketing spinners putting out the misleading reasons to join such as starting “meaningful relationships” which shows that Facebook has shrugged off any type of personal data scrutiny to double down on this new data business.
As it stands, their cryptocurrency business looks as if the momentum has been hijacked for the moment as regulatory issues could stand in the way of that, but dating online is the lower hanging fruit.
Instagram users will be able to integrate posts seamlessly into their “Facebook Dating” profile and Facebook will roll out a new feature called a “Secret Crush” list which allows users to add people to this ridiculous list.
This is Facebook’s master plan for integrating Instagram before the anti-trust regulators deem the company anti-competitive.
Some of the risk involved is the alienation of a younger Instagram audience by forcing Facebook integration down their throats.
This will unhinge a few of the Instagram diehards but on the flip side, it could cause more engagement by an older Facebook seeking their partner on a younger Instagram world, meaning more ad dollars.
On the business side of things, Facebook has every incentive to try this and even lusting to get into many other short-term engagement tricks and gimmicks by moving into marginal industries.
It is no secret that quite possibly, the best place to get opioids is on Facebook’s platforms.
Until the government does something meaningful, Facebook will run wild trying to create these types of engagement cesspool businesses out of thin air.
The imminent collateral damage is Match Group, Inc. (MTCH) cratering over 6% now that a FANG is a direct competitor.
I wouldn’t want to be in their offices today.
“Our goal is not to build a platform; it's to be across all of them.” – Said CEO of Facebook Mark Zuckerberg
Mad Hedge Technology Letter
September 4, 2019
Fiat Lux
Featured Trade:
(HERE’S YOUR NEXT GENERATION SEMICONDUCTOR)
(USHIO)
Transistor capacity has always put the kibosh on semiconductor chip performance.
Chipmakers have for decades drained investment into a revolutionary new Japanese technique to push the limits of physics and cram more transistors onto pieces of silicon.
A secretive Japanese company that mastered the skill of manipulating light for applications is about to go mainstream with cutting edge technology.
Ushio Inc. announced it had achieved the once thought impossible task of refining powerful, ultra-precise lights needed to test chip designs based on extreme ultraviolet lithography (EUV), a process through which the next generation of semiconductors will be made.
The milestone means that the Japanese company will become a prominent player in future chipmaking and technology that harnesses it.
“The infrastructure is now mostly ready,” said CEO Koji Naito in an interview.
Testing equipment was primarily holding back EUV but with that hold-up dealt with, production efficiency and yields can finally go up setting the stage for electronic manufacturers with the possibilities of producing substantially better consumer products.
The Tokyo-based company developed a light source for equipment used to test what are known as masks: glass squares slightly bigger than a CD case that act as a stencil for chip designs. These templates must be picture-perfect, even a minute of malfunction in one of them can render every chip in a large batch unfit.
That’s where Ushio seamlessly slots in.
Its technology operates lasers to vaporize liquid tin into plasma and produce light closer in wavelength to X-rays than the spectrum visible to the human eye.
That light aids chipmakers in detecting errors in the product.
This process takes a room-sized machine that looks like a sci-fi death ray and requires a phalanx of workers to operate.
After 15 years of industrious development, the EUV business will generate profits next year.
Only Intel Corp., Samsung Electronics Co., and Taiwan Semiconductor Manufacturing Co. desire to go smaller than the 7-nanometer processes that are the current status quo of CPU design.
The focus on niche areas and creating things that others can’t is set to pay off for Ushio.
Ushio is poised to seize control of the market for light sources used in testing of patterned EUV masks, there are several boutique tech companies in the Tokyo area that are incessantly focused on high-precision manufacturing.
Ushio dominates lithography lamps used to make liquid crystal displays with 80% market share and controls 95% of the supply of excimer lamps used in silicon wafer cleaning.
Their secret sauce is balancing mass production with craftsmanship.
Materials like quartz glass are arduous to work with and possess peculiar thermal expansion properties from metals like the molybdenum in which they are housed.
Ushio was established in 1964, and it was the first Japanese company to develop and produce halogen lamps.
Starting from 1973, fishermen used its lights to catch squid.
The firm has succeeded in more than tripling its sales over the past 25 years.
The company is now venturing into the use of sodium lamps to nurture plants and using ultraviolet light calibrated to such a precise wavelength to kill bacteria without damaging human skin.
“If you can't make it good, at least make it look good.” – Said Founder of Microsoft Bill Gates
