Category Archives: Cloud Computing

Apple Warns Employees to Stop Leaking Information to Media

Apple Inc. warned employees to stop leaking internal information on future plans and raised the specter of potential legal action and criminal charges, one of the most-aggressive moves by the world’s largest technology company to control information about its activities.

The Cupertino, California-based company said in a lengthy memo posted to its internal blog that it “caught 29 leakers,” last year and noted that 12 of those were arrested. “These people not only lose their jobs, they can face extreme difficulty finding employment elsewhere,” Apple added. The company declined to comment on Friday.

Apple outlined situations in which information was leaked to the media, including a meeting earlier this year where Apple’s software engineering head Craig Federighi told employees that some planned iPhone software features would be delayed. Apple also cited a yet-to-be-released software package that revealed details about the unreleased iPhone X and new Apple Watch.

Leaked information about a new product can negatively impact sales of current models, give rivals more time to begin on a competitive response, and lead to fewer sales when the new product launches, according to the memo. “We want the chance to tell our customers why the product is great, and not have that done poorly by someone else,” Greg Joswiak, an Apple product marketing executive, said in the memo.

The crackdown is part of broader and long-running attempts by Silicon Valley technology companies to track and limit what information their employees share publicly. Firms like Google and Facebook Inc. are pretty open with staff about their plans, but keep close tabs on their outside communications and sometime fire people when they find leaks.

Facebook executive Sheryl Sandberg last week talked about her disappointment with leakers. In 2016, Google fired an employee after the person shared internal posts criticizing an executive. The employee filed a lawsuit claiming their speech was protected under California law.

In messages to staff, tech companies sometimes conflate conversations employees are allowed to have, such as complaining about working conditions, with sharing trade secrets, said Chris Baker, an attorney with Baker Curtis and Schwartz, PC, who represents the fired Googler. “The overall broad definition of confidential information makes it so employees don’t say anything, even about issues they’re allowed to talk about,” he said. “That’s problematic.”

Apple is notoriously secretive about its product development. In 2012, Chief Executive Officer Tim Cook pledged to double down on keeping the company’s work under wraps. Despite that, the media has continued to report news on the firm to satisfy demand for information on a company that’s become a crucial part of investment portfolios, many of which support public retirement funds for teachers and other essential workers.

In 2017, Apple held a confidential meeting with employees in another bid to stop leaks. Since then, publications, including Bloomberg News, published details about the iPhone X, a new Apple TV video-streaming box, a new Apple Watch with LTE, the company’s upcoming augmented-reality headset, new iPad models, software enhancements, and details about the upcoming iPhones and AirPods headphones.

Here’s the memo:

Last month, Apple caught and fired the employee responsible for leaking details from an internal, confidential meeting about Apple’s software roadmap. Hundreds of software engineers were in attendance, and thousands more within the organization received details of its proceedings. One person betrayed their trust.

The employee who leaked the meeting to a reporter later told Apple investigators that he did it because he thought he wouldn’t be discovered. But people who leak — whether they’re Apple employees, contractors or suppliers — do get caught and they’re getting caught faster than ever.

In many cases, leakers don’t set out to leak. Instead, people who work for Apple are often targeted by press, analysts and bloggers who befriend them on professional and social networks like LinkedIn, Twitter and Facebook and begin to pry for information. While it may seem flattering to be approached, it’s important to remember that you’re getting played. The success of these outsiders is measured by obtaining Apple’s secrets from you and making them public. A scoop about an unreleased Apple product can generate massive traffic for a publication and financially benefit the blogger or reporter who broke it. But the Apple employee who leaks has everything to lose.

The impact of a leak goes far beyond the people who work on a project.

Leaking Apple’s work undermines everyone at Apple and the years they’ve invested in creating Apple products. “Thousands of people work tirelessly for months to deliver each major software release,” says UIKit lead Josh Shaffer, whose team’s work was part of the iOS 11 leak last fall. “Seeing it leak is devastating for all of us.”

The impact of a leak goes beyond the people who work on a particular project — it’s felt throughout the company. Leaked information about a new product can negatively impact sales of the current model; give rival companies more time to begin on a competitive response; and lead to fewer sales of that new product when it arrives. “We want the chance to tell our customers why the product is great, and not have that done poorly by someone else,” says Greg Joswiak of Product Marketing.

Investments by Apple have had an enormous impact on the company’s ability to identify and catch leakers. Just before last September’s special event, an employee leaked a link to the gold master of iOS 11 to the press, again believing he wouldn’t be caught. The unreleased OS detailed soon-to-be-announced software and hardware including iPhone X. Within days, the leaker was identified through an internal investigation and fired. Global Security’s digital forensics also helped catch several employees who were feeding confidential details about new products including iPhone X, iPad Pro and AirPods to a blogger at 9to5Mac.

Leakers in the supply chain are getting caught, too. Global Security has worked hand-in-hand with suppliers to prevent theft of Apple’s intellectual property as well as to identify individuals who try to exceed their access. They’ve also partnered with suppliers to identify vulnerabilities — both physical and technological — and ensure their security levels meet or exceed Apple’s expectations. These programs have nearly eliminated the theft of prototypes and products from factories, caught leakers and prevented many others from leaking in the first place.

Leakers do not simply lose their jobs at Apple. In some cases, they face jail time and massive fines for network intrusion and theft of trade secrets both classified as federal crimes. In 2017, Apple caught 29 leakers. 12 of those were arrested. Among those were Apple employees, contractors and some partners in Apple’s supply chain. These people not only lose their jobs, they can face extreme difficulty finding employment elsewhere. “The potential criminal consequences of leaking are real,” says Tom Moyer of Global Security, “and that can become part of your personal and professional identity forever.”

While they carry serious consequences, leaks are completely avoidable. They are the result of a decision by someone who may not have considered the impact of their actions. “Everyone comes to Apple to do the best work of their lives — work that matters and contributes to what all 135,000 people in this company are doing together,” says Joswiak. “The best way to honor those contributions is by not leaking.”

A Russian Court Just Ordered the Immediate Blocking of the Telegram Encrypted Messaging App

The encrypted messaging app Telegram must immediately be blocked in Russia, a Moscow court ruled Friday due to Telegram’s refusal to hand over the keys to its users’ conversations.

The Russian communications regulator, Roskomnadzor, told Telegram in mid-2017 that it had to hand over the keys to users’ encrypted conversations. Telegram, which was founded by Russian tech luminary Pavel Durov but operates from outside the country, refused to do so.

As with other modern encryption apps such as WhatsApp, the keys to Telegram users’ private conversations are held on their own devices, so the company running the service does not hold anything it can turn over.

The matter came to a head on Friday morning when, according to Russian news agency TASS, Telegram asked Moscow’s Tagansky court to delay hearings. Durov reportedly told his lawyers not to show up, so as “not to legitimize an outspoken farce by their presence.”

The court turned down the request, and swiftly ordered Telegram’s blocking. “The court ruled to satisfy the demand of Rosomnadzor,” judge Yulia Smolina said.

According to Vedomosti, Telegram now has a month to appeal the block. Telegram’s lawyer told the newspaper that the messaging service plans to do so.

Fortune has asked Telegram for comment, but had received none at the time of writing.

The case has echoes of WhatsApp’s repeated blockage in Brazil, where prosecutors were frustrated by their inability to access the private messages of a suspect in a major drug case.

Telegram has also frequently hit the headlines over its use by terrorists, although that is more to do with its unencrypted “channels” feature, through which people can broadcast their opinions to followers.

Luminar's New Lidar Could Dominate the Self-Driving Car Market

Self-driving cars are nearly ready for primetime, and so are the laser sensors that help them see the world. Lidar, which builds a 3-D map of a car’s surroundings by firing millions of laser points a second and measuring how long they take to bounce back, has been in development since 2005, when a guy named Dave Hall made one for the Darpa Grand Challenge, an autonomous vehicle contest. In the decade-plus since then, if you wanted a lidar for your self-driving car, Velodyne was your only choice.

Yet Velodyne’s one-time monopoly has eroded in recent years, as dozens of lidar startups came to life, and robocar makers found their own way. Google’s sister company Waymo put years and millions of dollars into developing a proprietary system. General Motors bought a lidar startup called Strobe. Argo AI, which is making a robo-driving system for Ford, acquired one called Princeton Lightwave.

The latest challenger is Luminar, the Silicon Valley-based startup that already has a deal with Toyota, plus three more manufacturers it declines to name. Today, Luminar is announcing the introduction of its newest lidar unit, with a 120-degree field of view (that’s enough to see what’s ahead of the car, but you’d need a couple to get a 360-degree view). And after a first production run of just 100 units, it’s ready to start cranking them out by the thousand—more than enough to meet today’s demand. And maybe, enough to make self-driving cars cheaper for everybody.

“By the end of this year, we’ll have enough capacity to equip pretty much every autonomous test and development vehicle on the road, globally,” says CEO Austin Russell, who dropped out of Stanford in 2012 when he was 17 years old to make Luminar his full-time gig. “This is no longer being built by optics PhDs in a handcrafted process. This is a proper automotive serial product.”

In its 136,000 square foot facility in Orlando (an optics industry hub), the company has dropped the build time for a single unit from about a day, to eight minutes. In the past year, it has doubled its staff, to about 350. It hired Motorola product guru Jason Wojack to head its hardware team. Alejandro Garcia came over from major auto industry supplier Harman to run manufacturing.

Luminar is playing catch up here. Last year, Velodyne opened a “megafactory” to ramp up production and built 10,000 laser sensors. President Marta Hall says it could build a million a year if it wanted to. But the ability to build lots of lidars isn’t enough to win here.

Lidar is a fantastic sensor—it’s more precise than radar and works in more conditions than cameras do—but it’s way too expensive. Velodyne’s top shelf unit, which sees in 360 degrees with a 300-meter range, costs about $75,000 a piece. Buying in bulk will drop that cost, but that’s still a hard price tag to bear, even on a fleet vehicle that can amortize costs over years of service.

At its Orlando production facility, Luminar can now make a lidar unit in about eight minutes—it used to take a day.

Luminar

Luminar made the cost question harder by making its lidar’s receiver (the that acts like your eye’s retina) out of indium gallium arsenide (InGaAs) instead of silicon. Why is this important? Well, to make your lidar “see” farther, you have to fire more powerful pulses of light. They have to be powerful so they have the strength to hit faraway objects and make it all the way back. Most lidars use lasers at the 905 nanometer wavelength. That’s invisible to humans. But if it hits an actual eyeball, like yours, with enough power, it can damage the retina. If you want to fire more powerful pulses (and have your lidar “see” farther) without blinding actual people, you can use the 1550 nanometer wavelength, which is further into the infrared part of the spectrum, and thus can’t penetrate a human eyeball.

Which brings us back to silicon. Receivers made of silicon, which is cheap, can’t detect light at the 1550 wavelength. InGaAs can, but it’s far more expensive. So the industry standard is to use silicon, run at 905 nanometers, and accept you just can’t send your lasers all that far.

But Russell insisted on the extra power, which meant 1550 nanometers, which meant using a receiver made of InGaAs. As a result, he can fire pulses 40 times more powerful than what his competitors shoot, so his lidar can see objects extremely dark objects—like, the kind that can absorb 95 percent of light—even from 250 meters away. He says no one’s lidar can see so well at such distance.

But seriously, InGaAs, as the French say, coute la peus des fesses*. A receiver array about the size of a big potato chip can cost tens of thousands of dollars, Russell says. So Luminar built its own. The result, now in its seventh iteration, is about the size of a strawberry seed. (The entire unit, including the laser and accompanying electronics, is about half a foot square and three inches deep.) That includes the chip that calculates, down to the second, how long the photon has been out in the world. It costs a piddling $3, obliterating Luminar’s cost concerns while allowing for that extra range and resolution. Russell wouldn’t reveal an exact price for the lidar as a whole, but says his customers are quite pleased. And when they’re finally ready to start offering you rides in their robo-taxis, maybe they won’t have to charge you as much for that trip home from the bar.

Luminar’s R&D team also managed to increase the “dynamic range” of the receiver. Just like how your pupils dilate based on light conditions, lidar receivers are tuned to pick up pulses of a certain strength (the farther a photon goes before bouncing back, the weaker it becomes). If you set it to look for faint signals and it gets hit by a much stronger pulse, you can fry the receiver. “We have countless blown-up detectors,” Russell says. The current unit can handle a much greater range of pulse strengths, without even a wisp of smoke.

Meanwhile, Luminar’s already working on the next generation sensor. That one, Russell says, will be affordable enough to put in consumer cars—making the gift of sight little more than a commodity.


Rolling Toward Ready

China's SenseTime valued at $4.5 billion after Alibaba-led funding: sources

HONG KONG (Reuters) – Chinese facial recognition technology developer SenseTime Group Ltd has tripled its worth in less than a year after a funding round, led by Alibaba Group Holding Ltd, valued it at about $4.5 billion, people with knowledge of the matter said.

FILE PHOTO: SenseTime surveillance software identifying details about people and vehicles runs as a demonstration at the company’s office in Beijing, China, October 11, 2017. REUTERS/Thomas Peter/File Photo

The fundraising comes during a government push to make China an international leader in artificial intelligence (AI) by 2025, by which time it aims to grow core AI industries’ value to 400 billion yuan ($63.33 billion).

SenseTime raised $600 million in its series-C funding round having attracted investors including Chinese e-commerce company Suning.Com Co Ltd and Singapore state fund Temasek Holdings (Private) Ltd [TEM.UL], it said in a statement on Monday.

The company did not disclose its valuation, but said it is now the world’s most valuable AI platform. It also said it set a world record for the amount raised in a single funding round by an AI firm.

SenseTime was valued at $1.5 billion in July after it raised $410 million in its series-B funding round, led by China’s CDH Investments and state-backed fund Sailing Capital.

The two people who disclosed the current valuation declined to be identified as the matter was private. A SenseTime spokeswoman declined to comment on the valuation as the firm has moved into the series-C+ round of fundraising.

Dual-based in Beijing and Hong Kong, SenseTime develops applications for facial recognition, video analysis and other areas including autonomous driving. Existing investors include U.S. chipmaker Qualcomm Inc.

It is enjoying fast growth as both the private and public sectors upgrade to advanced technologies. It is engaged in as many as 14 sectors, and lists various police departments across China as major clients.

Alibaba Executive Vice Chairman Joe Tsai said in the statement, “We are especially impressed by their R&D capabilities in deep learning and visual computing. Our business at Alibaba is already seeing tangible benefits from our investments in AI and we are committed to further investment.”

Reporting by Sijia Jiang and Julie ZhuEditing by Christopher Cushing

Rakuten gets government approval for wireless operations

TOKYO (Reuters) – Rakuten Inc said on Monday it won government approval to offer mobile services as the Japanese e-commerce company expands its business into a market dominated by three major carriers.

FILE PHOTO – The logo of Rakuten Mobile is seen at its branch in Tokyo, Japan December 14, 2017. REUTERS/Kim Kyung-Hoon

Rakuten, which has also entered new areas such as online securities trading, aims to start offering mobile services in October 2019.

The government hopes a new entrant will intensify competition in a market led by NTT DoCoMo Inc, KDDI Corp and SoftBank Group Corp.

The last serious attempt by a Japanese company to break into their ranks was by eMobile, which entered the market in 2007. It gained four million subscribers before it was bought by SoftBank in 2013.

Rakuten is aiming to secure at least 15 million subscribers. By comparison, No. 3 carrier SoftBank has about 39 million subscribers.

Reporting by Ritsuko Ando and Sam Nussey; Editing by Vyas Mohan

Buy This Oversold Blue-Chip Bank With A 5.4% Dividend

On April 4th, Bloomberg reported that HSBC (HSBC) is considering an exit or sale from smaller consumer operations such as Bermuda, Malta, and Uruguay. In addition, the bank plans to expand its asset management division and is currently looking at a potential merger with a rival.

In our view, the news confirms that the group’s management will remain committed to transforming HSBC into a more focused and more efficient banking institution. More importantly, even though HSBC’s operations in Bermuda, Malta, and Uruguay are small compared to the group’s total assets, we believe a potential sale of these units would have a positive impact on the bank’s capital position, supporting stock buybacks and special dividends.

The recent rise in LIBOR should support HSBC’s NIM

LIBOR has grown by more than 130bps since the beginning of the year. Such a notable increase is currently among the most widely discussed topics. Several analysts suggest that this is an early indicator of a bear market or even a severe financial crisis. In our view, the increase has been driven by idiosyncratic reasons, in particular, higher supply of short-term Treasuries and lower demand from corporates due to the US tax reform.

Source: Bloomberg

With that being said, despite the reasons of the rise in LIBOR, HSBC should benefit from higher short-term rates. As shown below, the bank discloses its NII (net interest income) sensitivity to a shift in yield curves. However, this analysis is based on a parallel shift, while yield curves in most global economies continue to flatten.

Source: Company data

What is important here is that HSBC has a variable-rate loan book. More importantly, a significant part of its credit portfolio is priced off short-term rates. This suggests to us that the rise in LIBOR should be a positive for the bank’s asset yields and its NIM.

Source: Company data

One may argue that higher short-term rates will also affect HSBC’s funding costs, especially given that wholesale sources and corporate deposits are generally tied to the short-end of the yield curve. The caveat here is that HSBC has a unique funding position. As shown below, the bank has one of the lowest LtD (loans-to-deposits) ratios among European banks. In other words, HSBC does not need expensive deposits in order to fund its loan growth. HSBC had been struggling from abundant liquidity for many years as a low interest rate environment has virtually crippled its NIM. Given that rates have started rising, the bank’s excessive liquidity is gradually turning into a positive that will protect HSBC’s NIM in a rising interest rate environment.

European banks: Loans-to-deposits ratio

Source: Bloomberg, Renaissance Research

Saudi Aramco’s IPO

Saudi Aramco (Private:ARMCO) has appointed HSBC as an adviser on its much-awaited IPO. JPMorgan (JPM) and Morgan Stanley (MS) will also act as consultants. As such, HSBC is the only non-US bank that will have a crucial role in Aramco’s IPO.

Anecdotal evidence suggests that while many US and UK investors are skeptical on Saudi Aramco’s IPO, as state-owned oil companies have been underperforming their private peers for quite a while now, Chinese investors would be interested in Aramco’s shares. Hong Kong Exchanges and Clearing (OTCPK:HKXCF) (OTCPK:HKXCY) plans to introduce the so-called Primary Connect program, which would allow mainland Chinese investors to participate in initial public offerings on the HKEX.

We believe Aramco’s IPO would strengthen HSBC’s position in the region. In our view, it would also underpin the fact that HSBC is a global banking group with unique access to Chinese investors.

Buybacks and dividends

HSBC pays a $0.51 dividend per ordinary share or $2.55 per ADR. That corresponds to a 5.4% dividend yield, based on the current ADR price. We believe that a 5.4% dividend from a global blue-chip bank with a strong presence on Asian markets looks very attractive.

Additionally, it is also worth noting that the bank has temporarily suspended its buyback program due to technical reasons related to the issuance of additional Tier 1 capital. We expect HSBC to announce a new buyback in the second half of 2018.

Final thoughts

The shares have fallen by almost 15% since January, and we believe this sell-off represents a great opportunity to buy a global bank with an attractive dividend yield. HSBC has excess capital, thanks to its US unit, and, as a result, we expect the bank to announce a new buyback program in the second half of the year.

If you would like to receive our articles as soon as they are published, consider following us by clicking the “Follow” button beside our name at the top of the page. Thank you for reading.

Disclosure: I am/we are long HSBC, JPM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Feds Seize Backpage.com, Site Linked to Sex Trafficking

Federal and state authorities Friday seized Backpage.com, an online classifieds site frequently accused of facilitating sex trafficking, and reportedly indicted seven people. A notice on Backpage’s website said the site had been seized by the FBI and other agencies.

Nicole Navas Oxman, a spokesperson for the Department of Justice, said Friday afternoon that the agency would issue a press release after charges are unsealed, but things did not go as expected. “The Court has ruled that the case remains sealed and we have nothing to report today,” she wrote in an email Friday evening.

The banner states that the enforcement action was a collaborative effort between the FBI, US Postal Inspection Service, the criminal division of the IRS, the Department of Justice’s child exploitation and obscenity division, as well as attorneys general from Arizona, California, and Texas.

CBS News reported that an indictment had been unsealed against seven people allegedly involved in running Backpage, containing 93 criminal counts including money laundering and running a website to facilitate prostitution. The indictment, which was filed in Arizona where Backpage is maintained, names 17 victims, both adults and children, who were allegedly trafficked, according to CBS News.

On Friday morning, the FBI raided the home of Backpage cofounder Michael Lacey, and there was some activity at the home of cofounder Jim Larkin as well, according to the The Republic, a newspaper in Arizona. A year ago, the paper reported that a federal grand jury had been convened in Arizona to hear evidence against Backpage.

The move against Backpage came just days before President Trump is expected to sign a new anti-sex-trafficking bill that passed both houses of Congress with overwhelming support. The bill initially was controversial because it alters a key internet law that protects tech companies from liability for user-generated content on their platforms.

Previous criminal and civil charges against Backpage had mostly been derailed by that law, the Communications Decency Act. The bill Trump is expected to sign creates an exception for sites that “knowingly” facilitate or support online sex trafficking and explicitly grants states and victims the right to bring criminal and civil action against websites like Backpage. The bill faced opposition from tech companies, free speech advocates, and sex workers, and has already prompted online forums like Craigslist’s personal section and Reddit sections like Escorts and Sugar Daddies to shut down, rather than risk liability. Advocates for sex workers say the closures will endanger those workers, who relied on the sites to share bad date lists and verify clients.

It’s unclear why the federal agencies acted now. The Communications Decency Act did not apply to federal law enforcement agencies, said Eric Goldman, a law professor at Santa Clara University who testified against the recently passed bill. “The question is why today and why not two weeks ago before the Senate voted?” Goldman said. “The DOJ can’t turn on or off a federal prosecution on a dime, so that seems unlikely, but still the timing is so perplexing.” On Twitter, Goldman said, “It’s almost as if the government is trying to prove that all the anti-Backpage rhetoric fueling #SESTA & #FOSTA was just political theater.” (SESTA and FOSTA are acronyms for versions of the anti-sex-trafficking bill.)

Senator Richard Blumenthal (D-Conn.), who cosponsored the bill, called the DOJ’s action to shut down Backpage “long overdue.”

A January 2017 Senate report accused Backpage of facilitating online sex trafficking by stripping words like “lolita,” “little girl,” and “amber alert” from ads in order to hide illegal activity before publishing the ad, as well as coaching customers on how to post “clean” ads for illegal transactions. Judges in California and Massachusetts previously cited Section 230 in dismissing cases against Backpage.

Still, some sex workers said the seizure could endanger them. “If the people who run Backpage have knowingly harmed people, they deserve to be held accountable, but the most immediate impact of the seizure of an entire website will be felt by independent consensual sex workers,” Liara Roux, a sex worker, political organizer, and adult-media producer and director, wrote to WIRED. “Without safe online advertising, which studies seem to show reduced female homicide rates nationally by 17 percent, sex workers are unable to screen clients based on emails and decide who is safe to see.”

Backpage was invoked frequently in the debate around SESTA and FOSTA. Members of the Senate were particularly moved by testimony from Yvonne Ambrose, whose 16-year-old daughter, Desiree Robinson, was killed after she was repeatedly advertised for sex on Backpage. Last year, Ambrose sued Backpage for facilitating child sex trafficking. The documentary “I Am Jane Doe,” followed families in their quest to hold Backpage accountable.

Berin Szóka, president of TechFreedom, a nonprofit that has received funding from Google, says, the timing of the enforcement shows that the vetting process for the bill was rushed. “The argument for SESTA was a sham all along.”

Free Speech or Human Trafficking?

  • Within days of the bill’s passage, Craigslist, Reddit, and others shut personals forums, as sex workers had feared.
  • The bill could have encourage tech companies to either stop moderating or censor content, opening the door to further attacks on Section 230.
  • The backlash against big tech played a role in the passage of the bill.

Samsung Electronics tips record first-quarter profit as chip boom winds down

SEOUL (Reuters) – Samsung Electronics Co Ltd (005930.KS) tipped a surprise record first-quarter profit on Friday but market reaction was muted due to growing concerns that the semiconductor boom that has driven the South Korean tech giant’s earnings is about to end.

The new Samsung Galaxy S9 Plus mobile is shown during the Mobile World Congress in Barcelona, Spain February 27, 2018. REUTERS/Yves Herman

Samsung shares fell after the announcement as analysts forecast similar or lower profit in the second quarter, due to slower growth in DRAM chip prices and higher marketing costs for the flagship Galaxy S9 smartphone.

“Even if profits start falling in the second half, Samsung will have a strong balance sheet this year,” said Song Myung-sup, analyst at HI Investment & Securities, predicting looser supply of DRAM chips to start driving down prices.

The global semiconductor leader and Apple Inc (AAPL.O) smartphone rival forecast January-March profit to leap 57.6 percent from a year earlier to 15.6 trillion won ($14.7 billion), beating an average forecast of 14.5 trillion won from a Thomson Reuters survey of 21 analysts.

Revenue for the quarter was tipped to rise 18.7 percent to 60 trillion won, Samsung said in a regulatory filing. The company did not elaborate on its performance and will disclose detailed earnings in late April.

Samsung shares fell as much as 2.7 percent on Friday before paring losses to fall 0.7 percent as of 0345 GMT (11.45 p.m. ET), compared to a 0.4 percent drop in the wider market. .KS11

The logo of Samsung Electronics is seen at its office building in Seoul, South Korea, March 23, 2018. REUTERS/Kim Hong-Ji

Analysts said Samsung’s shares were affected by a UBS report forecasting an increase in the supply of DRAM chips used in servers, which dragged down Micron Technology Inc (MU.O) shares more than 6 percent on Thursday.

The prices of NAND chips commonly used in mobile devices began falling late last year and analysts have been closely watching for signs of the peak in the DRAM price boom as well.

Even if DRAM price growth is at its peak, analysts said Samsung remained on track for record annual earnings.

“Although gains in memory chip prices have slowed from the height of the chip boom, lower prices could also increase demand for chips, and Samsung has the cost-cutting ability to keep profits up,” said Greg Roh, analyst at HMC Investment & Securities.

MOBILE BUSINESS

While the chip business underpinned Samsung’s profit growth, the mobile business – which accounted for 40 percent of 2017 revenue – appeared to have made a surprisingly solid contribution to first-quarter earnings, analysts said.

They put this down to Samsung’s early launch of its flagship Galaxy S9 device in March, healthy sales of older devices as consumers balk at the high price of new premium models, and a short-term dip in advertising costs.

“I think lower marketing costs for the mobile business helped, because the first quarter is traditionally not a boom season for rival Apple, so Samsung did not need to spend a lot on marketing,” said Claire Kim, analyst at Daishin Securities.

Worldwide smartphone shipment volumes shrank for the first time in 2017, and Samsung is coming under increasing competition from the likes of low-cost Chinese rival Xiaomi [IPO-XMGP.HK].

Concerns about the smartphone market and a subsequent fall in demand for components like OLED screens – used in Apple’s iPhone X – are behind a roughly 5.3 percent fall in Samsung Electronics’ share price so far this year, from a record high in November.

In a separate development, prosecutors searched the offices of a Samsung Electronics unit on Friday as part of a probe into allegations the conglomerate had sabotaged worker’s efforts to set up stronger unions, Yonhap News Agency said.

A Samsung spokeswoman said prosecutors had secured labor-related documents. She declined comment further.

Reporting by Joyce Lee; Additional reporting by Ju-min Park; Editing by Stephen Coates

Hong Kong fund says Toshiba chip unit worth more than $30 billion

TOKYO (Reuters) – A Hong Kong-based activist investment fund opposed to Toshiba Corp’s (6502.T) sale of its chip unit to a Bain Capital-led group said the deal should be renegotiated at a valuation of 3.3 trillion yen to 4.4 trillion yen ($30 billion-$41 billion).

FILE PHOTO – The logo of Toshiba Corp. is seen at the company’s facility in Kawasaki, Japan February 13, 2017. REUTERS/Issei Kato/File Photo

Argyle Street Management said on Friday that the current deal, which values the unit at 2 trillion yen, was agreed upon when Toshiba was desperate for cash. Toshiba is no longer insolvent, and was free to terminate the deal without incurring any penalty because the sale had not closed by a March 31 deadline, it said.

Toshiba should aim to list the unit if the Bain group will not agree to a higher price, it added.

Reporting by Makiko Yamazaki; Writing by Ritsuko Ando; Editing by Edwina Gibbs