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Hello everyone. We kick off today's update with Samsung buying Viv. 

Samsung Buys Viv  

Samsung just bought Siri's sibling.
The WSJ has the story:

"Samsung Electronics Co. said Thursday that it will buy U.S. artificial intelligence company Viv Labs Inc., as the South Korean smartphone giant turns to the creators of Apple Inc.'s Siri service to beef up its own mobile software and services...

After its acquisition last year of mobile payments startup LoopPay for about $160 million, Samsung adopted the Burlington, Mass.-based company's technology to launch Samsung Pay, a mobile payment service that rivals Apple Pay. 

Samsung is looking to follow a similar model with San Jose, Calif.-based Viv Labs, which was founded four years ago by a team that includes Siri co-creators Dag Kittlaus and Adam Cheyer." 

Samsung began talking with Viv Labs about an acquisition earlier this year and is planning on introducing Viv into its smartphone line in 2H17. 

TechCrunch has a deeper explanation of Viv:

"The first of two main pillars to Viv's special sauce is its interconnected nature - other agents like Siri are only starting to allow multiple silos of information across apps and services to start talking to one another and become links in a user's command chain. This allows more conversational and complex queries that more closely resemble how people actually talk. 

The second is the programmatic nature of Viv's back-end systems. Utilizing 'breakthroughs' in program synthesis, Viv says its AI is capable of writing its own code to accomplish new tasks. This 'software that builds itself' is not new in many other verticals, but Viv was one of the first big splash announcements using the technique that we had seen in AI. Viv calls this 'dynamic program generation,' and it allows Viv to understand the intent of the user and to create programs to handle tasks on the fly, even if it's never heard that particular one in the past."

I recall watching Viv's demo earlier this year at TechCrunch's conference. I had the same reaction when watching Google demo Google Assistant earlier this week. Kittlaus was using his smartphone in ways that I hoped would never become the norm. As I mentioned yesterday, there will be a much better way to use the power of AI besides having a long-winded, two-way conversation with my smartphone. 

Almost instantly after this Samsung/Viv news broke last evening, my Twitter timeline was filled with reactions along the lines of "Apple blew it by not buying Viv" or "I can't believe Apple let Siri's founders leave." That kind of reaction is to be expected.

Whenever Apple doesn't buy a company, people are quick to call it a mistake. Recall how consensus thought Apple made a big mistake by not buying Nest, even though Apple had no need for Nest, not to mention the bad blood that exists between Tony Fadell, former Apple SVP, and Apple's executive team. 

Turning to the idea that Apple in some way "messed up" by not keeping Siri's co-founders around, there were three Siri co-founders:
  • Dag Kittlaus left Apple days after Siri made its debut on the iPhone 4s. 
  • Adam Cheyer left a year later in 2012. 
  • Tom Gruber is still at Apple and is currently Siri's head of advanced development. 
I think many people would be surprised to learn that one of Siri's co-founders is actually still leading Siri. 

Circling back to the claim that Apple is making a mistake by not buying Viv, the startup was actually very public about its technology. It was clear that Viv would eventually be bought since they had a feature and not a product. Viv needed a home. Samsung ended up being the one to bite. I found Kittlaus' explantation to the WSJ for why he went with Samsung interesting: 

"There isn't another company in the world...with the scale and scope of what Samsung does."

My first reaction to that comment: No one else, other than Samsung, was interested in buying Viv. 

Earlier this year, Kittlaus was talking up how Viv made sense for a platform where users have lots of different devices like smartphones, tablets, watches, and cars. That sounds more like Apple (or Google) than Samsung. I suspect Apple and Google didn't see a need to buy Viv, while Samsung was desperate to jump into the intelligent assistant game in a big way. 

As we discussed yesterday, Google is jeopardizing OEM relationships by pursing its new hardware strategy. Having Samsung, the largest Android vendor, launch its own intelligent assistant gives a pretty big clue as to why Google is getting into hardware. Google has no other choice as it loses control over Android and is finding it increasingly difficult to get unfiltered access to the most valuable smartphone users. 

As for the elephant in the room (Siri), Apple is clearly taking a different approach to intelligent assistants compared to other companies. There are three reasons why Siri has been held back over the years:
  • Privacy concerns (related to third-party app integration).
  • Quality concerns (Apple bought Siri for its natural language processing. Adding a sudden amount of data into the mix may be detrimental to maintaining quality).  
  • Customer experience concerns (run too quickly with voice assistants and Apple could face unintended consequences).
The end result is that while Siri may not be as capable as other intelligent assistants, the service has better functionality. This is another way of saying, given the way the average person uses Siri, it's useful. Taking into account Apple's different approach to intelligent assistants, it's not a shock that Apple passed on Viv. In addition, Apple has been active on the M&A front in this area, recently acquiring Turi and Tuplejump. These startups will likely play a role in allowing Siri to better handle massive amounts of data as we rely more on intelligent assistants. 

Apple Is Not Bidding for Twitter

There is an increasing probability that Twitter will be acquired in the coming weeks, and it won't be by Apple.

Twitter M&A was recently thrown in the spotlight as the company indicated it had received interest from a potential buyer. This set off a chain reaction in posts and articles indicating there were a number of companies thinking about placing their own bids for Twitter. 

Google, Disney, Apple, Salesforce, Facebook, and Microsoft were all in one way or another attached to this story. 

We are now getting a clearer view of the situation. Not surprisingly, Apple will not be bidding for Twitter.
The WSJ has the story:

"Twitter Inc. is expected to field bids this week, and Marc Benioff has been building a case to Inc. investors and others that his company should be the buyer, according to people familiar with the matter. 

Mr. Benioff is looking to make a splashy acquisition that would secure for Salesforce a treasure trove of data as well as a prized consumer brand, according to the people.

Mr. Benioff, whose recent approach to Twitter set off the bidding process, sees the social-media pioneer as an 'unpolished jewel' with untapped potential in advertising, e-commerce and other data-rich applications he regards as important to the cloud-software juggernaut's next phase of growth, the people said."

As the WSJ alluded to, the Twitter board received interest from a potential acquirer. It looks like that acquirer was Salesforce. As a result, Twitter hired Goldman Sachs and Allen & Co. to field other bids. This is where all of the other large cap tech (and media) companies enter the equation. Ev Williams and the rest of Twitter's board is open to an acquisition while Twitter CEO, Jack Dorsey, wants Twitter to remain independent.

Salesforce's intense interest in acquiring Twitter makes sense for no other reason than Salesforce wanted to buy LinkedIn but lost out in a brutal $26 billion bidding war to Microsoft. As a sign of how bad Salesforce CEO Marc Benioff wanted LinkedIn, he is now trying to derail the Microsoft/LinkedIn deal by going to U.S. and European regulators.

It may be just a coincidence, but the $26 billion for LinkedIn is very close to the price at which Twitter's board would surely agree to sell. At the time of the Microsoft/LinkedIn acquisition announcement, I said that Twitter must be pretty upset since that was essentially their acquisition ticket being given away to LinkedIn. 

As a general rule, I've never been too optimistic about Twitter's future. The company's user growth potential was pinned by Facebook, and the "all Twitter needs to do to fix things is..." posts were off the mark. Every bull case argument for Twitter sounded the same. Twitter was all about the data, and apparently someone just needs to figure out how to utilize the data. As time went on, fewer people focused on trying to fix Twitter's user growth stagnation, likely in recognition of Facebook's growing dominance.

The suggestion that Apple should buy Twitter has appeared from time to time in the press over the years. In the beginning, the argument put forth was that Twitter would give Apple a presence in social networking. This then turned into a more general "data acquisition" framework. Only recently, the discussion has turned to Apple acquiring Twitter for video and media purposes.

The case for Apple buying Twitter has always been a weak one. Any argument for Apple combining tweets with iTunes or iMessage just doesn't contain logic. If we go a bit deeper and focus on Twitter's data and the idea of Apple tying Twitter into something like Siri, your argument may at least sound more plausible, but there would be so many holes in the logic.

I keep things very simple when it comes to Apple M&A. Apple acquires or invests in companies that are able to plug a hole in the company's asset base. Sometimes that may involve hiring a team of people. Other times, it may require buying technology or other tangible resources. The end goal is to use M&A to strengthen Apple's product line. These relatively straight-forward prerequisites go a long way in minimizing potential culture shock when it comes to Apple M&A, a key reason why tech M&A has such a poor track record of success.

Apple users will have access to Twitter, regardless of who owns the company. Simply put, too many iPhone users rely on Twitter for a new owner to try something different and risk jeopardizing all of that data collection (assuming they find a way to use all of that data). This is a benefit of having an iOS ecosystem that has reached the point of being self-sustaining. If there is no risk of losing access to Twitter, Apple's only other reason for buying the company would be related to leveraging its technology and data to improve other parts of Apple's product line. I just don't see it. 

As for Twitter's future, I would be surprised if Salesforce doesn't end up acquiring the company. If Twitter's board decides to remain independent, Twitter shares are in for a very bumpy ride (they are already down 20% on news of Google and Disney dropping out of the bidding process). I have difficult time seeing many Twitter board members wanting to go through that experience. In addition, the fact that everyone else has dropped out of the running to buy Twitter is a pretty big clue that Twitter isn't as valuable of an asset as many people have been thinking over the years. 


Thursday Q&A

Could Tim Cook have been using misdirection when downplaying AR and VR headsets?

Cook has never been big with misdirection when discussing future Apple products. Instead, Cook has actually been extremely forthcoming with where Apple is headed. Consider how Cook made it clear that Apple was going to do something with the wrist. Lately, we have Apple throwing some pretty big hints that it is indeed working on a car.

It is actually difficult to master the art of misdirection. Going out and saying one thing over and over again for months and years only to then end up doing the opposite contains quite a bit of risk. Cook (and most of Apple's management team for that matter) has never shown the desire to participate in that behavior. Instead, if a product is progressing, we likely will see Cook become a bit more vocal about said product. This is why his somewhat aggressive comments against VR (and AR) headsets stood out to me.

Do you think Google wanted Tony Fadell to have a leadership role in its hardware efforts?

Yes. I think bringing Fadell to Google was the primary reason Larry Page bought Nest. However, the culture clash between Nest and the rest of Google played a role in Fadell's departure. This actually represents one out of a handful of reasons why I am not optimistic about Google's long-term success in hardware.  


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