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Scott Ertz Snap is in Even More Trouble than Twitter
(2017-08-13)
Snap is in Even More Trouble than Twitter Snap Inc., the company that produces Snapchat, has not been public very long, but it has had a difficult journey thus far. Their second quarterly report was released this week, and the results did not make anyone happy. The company has fallen victim to some of the same issues as other struggling social platforms, and has overcome others.

One issue that Twitter has faced is user growth, or lack thereof. While Twitter gained a total of zero active users in the last quarter, Snap experienced a 4% growth over last quarter. Snap now has 173 million active users, while Twitter is stalled at 328 million. The user growth is particularly impressive, considering that Snapchat has no unique features at this point. The product's primary feature has been duplicated wholesale by Instagram, leaving little reason for new users to join Snapchat.

Active users isn't the only thing that Snap has managed to grow in the last quarter. The company has seen a 153% increase in revenue, landing at $181 million for the quarter. Unfortunately for the company, revenue is not profit, and profit is not something the company has figured out. In fact, expenses have grown exorbitantly, taking corporate losses almost four times over last quarter, to $443 million. Losses of that amount are a great way to burn free cash flow, but not a great way to keep the lights on in the long-term. If you need a litmus test, ask SoundCloud how it's worked.

Investors showed a lack of confidence in the company, with stock prices dropping 11 percent following the report. That drop was on top of consistently falling stock prices, which have the stock well below IPO range, which is quickly approaching 1/3 of the initial offering.
Snap Inc.: Snap Inc. Reports Second Quarter 2017 Results
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Scott Ertz Lawsuit Against Nintendo Over Joy-Con Controller Design Basics
(2017-08-13)
Lawsuit Against Nintendo Over Joy-Con Controller Design Basics Patent law in the US is a mess, and it hasn't gotten better over the years. In fact, a few years ago, a patent reform bill made it worse, rather than better. A few months ago, the Supreme Court adjusted how suits are filed, but that was just a minor alteration. The real problem comes from the idea that, if an idea is truly unique, a company should be able to compete in the marketplace without the government's interference. As it works today, patent law is a system for government sanctioned monopoly.

This week's example of patent law being in trouble comes to us care of a company called Gamevice. The company registered a patent for a tablet with a removable controller ring, which was launched as the Wikipad. This Android-powered tablet was unsurprisingly not a commercial success, but the company retained the patent and has used it to file a suit against Nintendo, whose implementation of the concept has been wildly successful.

The suit alleges that, because the Nintendo Switch has removable controllers, that it violates Gamevice's patent. Of course, there are several problems with this theory. First, the Wikipad and Switch are not the only tablets to have removable controllers. In fact, we have an old mechanic's tablet, running Windows 95, with removable controls. Second, there are dozens of products that add removable controllers to existing devices. An April Fool's prank turned real turns a phone into a GameBoy - essentially making for removable controllers on a phone.

Not having a case does not preclude success in patent disputes, however. We all remember the case between Apple and Samsung, where Apple alleged that rounded corners on a smartphone was patented by Apple, even though they were not the first to do it and it is not a patentable feature. Other companies have sued for things that only marginally touch upon the wording of a patent in hopes of settling. On the other hand, the so-called "podcast patent" was recently defeated, despite very precise wording that described podcasting, all because the wording could also describe YouTube, Facebook, Netflix and almost every other video-delivery system.

There is no way to accurately predict how this case will go, but you can assume, even if they win the case, Gamevice will not get everything they want. It is incredibly unlikely that a court would prevent Nintendo from selling the Switch in the US, but instead would likely force a licensing deal - assuming the patent is not nullified altogether.
PacerMonitor: Gamevice, Inc. v. Nintendo Co., Ltd. et al
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Scott Ertz Consumer Reports Downgrades Official Surface Models Based on Other Devices
(2017-08-13)
Consumer Reports Downgrades Official Surface Models Based on Other Devices It is no secret that Consumer Reports' integrity has been in question for years. In my personal experience working in electronics retail, the publication gave high marks to some of our most returned or defective merchandise, and often gave low marks to many consumer favorites. It often appeared as if the reviews were based more on a relationship with the manufacturer than actual product successes. In fact, Consumer Affairs has the publication listed with a 1/5 star rating, for various issues, including value of reviews.

This week, Consumer Reports added fuel to that fire when they downgraded their recommendations for Microsoft's Surface line of devices. This includes all devices in the family, including the Surface Book with Performance Dock and Surface Laptop, both being fairly new. The problem is that the downgrade in recommendation comes from surveys of subscribers about their feelings about the brand as a whole. It does not require particular issues, nor does it specify any specific models. So, because some people "feel bad" about the Surface line, based on their own internal metrics, CR has decided to stop recommending Surface entirely.

Consumer Reports' own reviews of the hardware has shown that the hardware was good enough to recommend previously. Based on a survey, though, the Surface Laptop, which did not even exist when the survey was conducted, and the newer Surface Book, which was barely on the market, are essentially being considered to be of poor value, with absolutely no evidence.

Panos Panay, VP of Microsoft Devices, was not happy with the move. He said in a statement,

We stand behind Surface. Surface has had quite a journey over the last few years, and we've learned a lot.

Reviewing future devices based on previous models, rather than on their own merit is not only inaccurate, it's unethical. To say that the Surface Laptop is a poor choice because a tablet from 7 years ago had a manufacturing flaw is patently ridiculous. Will Consumer Reports apply this same metric style to other devices? Will they not recommend the Samsung Galaxy Note 8 because some Note 7 devices exploded? Is the Xbox One a no-go because the thermal paste in the Xbox 360 from a decade ago was defective? It seems unlikely, making this a sticky situation for the publication.

Our recommendation is to treat each product as its own device, and not lump all like-branded products into one review. Look for reviews from LAPTOP Magazine, Tom's Guide, Windows Central, and other reputable sources, in addition to Amazon reviews, rather than relying on a single source of information before making a buying decision.
Windows Blog: We stand behind Surface
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Scott Ertz Twitter Gains Zero New Users in Latest Quarter
(2017-07-29)
Twitter Gains Zero New Users in Latest Quarter Over the last year or so, Twitter's troubles have gotten worse. Leading up to quarterly losses, the company shut down services and laid people off, and even went so far as to try to find a buyer. Since then, the company has doubled down on offerings like live video, and redesigned the platform to make it faster.

All of that work has not generated what the company, and co-founder and CEO Jack Dorsey had wanted: new users. In fact, between this quarter and last, the company generated no additional active users. Both this quarter and last, the company saw 328 million active users. Last quarter, that number was up by 7 million, but this quarter is was obviously flat. That is compared to the analyst expected 4 million new users.

Needless to say, investors were not happy with the company's performance. After announcing their failure, the stock plummeted 13 percent, bringing it to $16 per share. This price represents the company's monthly low price. The stock price recovered slightly before closing.

This news comes at a time when the service has received an influx of attention worldwide. The attention comes care of President Trump, who uses the service for all manner of tasks, from challenging opposition to announcing new policy initiatives. Whenever he tweets anything, a flood of support and resistance is posted in response. With that kind of activity, investors and analysts expected an influx in new users, there to show their support or disagreement with whatever is posted. However, what seems to be happening is the exact opposite. It is possible that new users are actually being dissuaded from joining because of the consistent negativity that the service is producing.

In response to the negative perception, Twitter has produced a system prevent harassment using its service. The company hopes that in fixing the environment, they will fix some of their growth issues. It is possible, however, that this will also produce an inverse reaction. If the intention for many users is to contradict tweets posted by the President, or to communicate with those they disagree with, then preventing harassment is the opposite of what many users are looking for. In fact, many in the opposition are looking to do just the opposite.
Twitter: Q2 2017 Letter to Shareholders
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Scott Ertz Switch Sales Help Return Nintendo to Profitability
(2017-07-29)
Switch Sales Help Return Nintendo to Profitability Over the last few years, Nintendo has seen continual profit issues. The Nintendo 3DS produces mixed, but mostly positive results, but from day one, the Wii U was a sales disaster. In fact, over the 5 years the device was active, the company sold 13.5 million units. That works out to only about 225,000 units per month.

This week, the company released their quarterly earnings report, and the results have completely turned around. Since the release of the Switch in March, the company has sole 4.7 million units - 35% of the lifetime sales of the Wii U, in just 5 months. That is a good indicator for future quarters, when inventory availability is expected to raise, and with it, hopefully sales.

Hardware is not the only successful aspect of the company. Mario Kart 8 Deluxe, which came out a month after the Switch, has sold nearly as many copies as the console itself, at 3.54 million. The Legend of Zelda: Breath of the Wild continued to be a big mover, adding 1.16 million units. Overall, Nintendo sold 8.14 million software titles for the Switch alone.

The 3DS platform sold better this year than last, selling nearly 1 million devices, coming in about 1% over this time last year. Games sold far less, though, with 5.85 million copies sold, or 31% less than last year.

Nintendo remains optimistic about the future, especially in Switch sales. While Mario might be their breadwinner, the company knows that the next quarter belongs to Splatoon 2, with the final quarter belonging to Super Mario Odyssey.
Nintendo: Consolidated Results for the Three Months Ended June 30, 2016 and 2017
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