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Amazon Confirms It’s Ending Fire Tablet Encryption, Takes Heat

E-commerce leader  Amazon.com ( AMZN ) has confirmed that it has disabled encryption on its tablets running Fire OS 5. News of the change comes at an auspicious moment, as a debate in the U.S. rages about whether  Apple ( AAPL ) should create a tool that would give government access to a terrorist’s iPhone. Apple says that giving the feds such access would make all other iPhones more vulnerable. Amazon spokeswoman Robin Handaly emailed a prepared statement to IBD about the encryption change: “In the fall when we released Fire OS 5, we removed some enterprise features that we found customers weren’t using,” the statement reads. “All Fire tablets’ communication with Amazon’s cloud meet our high standards for privacy and security, including appropriate use of encryption.” Industry observers have been critical of Amazon’s decision to eliminate the security measure from its devices. “Removing device encryption due to lack of customer use is an incredibly poor excuse for weakening the security of those customers that did use the feature,” Jeremy Gillula of digital-rights nonprofit Electronic Frontier Foundation told IBD via email. “Given that the information stored on a tablet can be just as sensitive as that stored on a phone or on a computer, Amazon should instead be pushing to make device encryption the default — not removing it.” “Amazon’s decision is backward — it not only moves away from default device encryption, where other manufacturers are headed, but removes all choice by the end user to decide to encrypt it after purchase,” Nathan White, senior legislative manager at digital rights organization Access Now told Wired . “The devices themselves also become more attractive targets for thieves. Users should no longer trust these devices: If you wouldn’t post it to the Internet publicly, don’t put it on a Fire Tablet.” Amazon stock was flat in early afternoon trading on the stock market today . Typically, device encryption is used by device owners to protect their data in case the the device is lost or stolen. Amazon’s own chief technology officer just last month gave a speech strongly supporting encryption  in general. Reports of the company terminating encryption have sparked debate on Amazon Web forums. Amazon, however, has joined 14 other tech giants in filing court papers that support Apple and its fight against the FBI. The government is attempting to gain access to an iPhone used by one of the dead terrorists in the San Bernardino, Calif., shootings. Other companies involved include Alphabet ( GOOGL )-owned Google, Facebook ( FB ) and  Microsoft ( MSFT ).

Apple Supplier Broadcom Rockets On Post-Merger Q1 Earnings Beat

Broadcom ( AVGO ) stock rocketed late Thursday after the Apple ( AAPL ) chip supplier topped Wall Street’s fiscal Q1 earnings-per-share expectations by 11 cents and issued Q2 guidance that edged analyst forecasts. Broadcom CEO Hock Tan hinted that Broadcom is already ramping for the likely September release of Apple’s iPhone 7. He acknowledged that wireless demand declined 15% sequentially in Q1 on typical seasonality haunting “our North American customer” (i.e. Apple). Tan isn’t alone. Last month, fellow Apple supplier Qorvo ( QRVO ) guided to weak Q4 sales, tugging Skyworks Solutions ( SWKS ), NXP Semiconductors ( NXPI ) and Cirrus Logic ( CRUS ) into a hole. But Tan expects Q1 to be the year’s “trough.” After-hours Thursday, Broadcom stock lifted 7% on the fiscal Q1 beat, which followed the finalized acquisition of Broadcom by the former Avago Technologies on Feb. 1. The Q1 results relate solely to the former Avago, according to the company release, as the quarter ended Jan. 31, just before the deal was finalized. Broadcom stock closed up a fraction during the regular session. Apple Seasonality Pains Ebb For fiscal Q1, Broadcom reported non-GAAP figures of $2.41 earnings per share on $1.78 billion in sales, up 15% and 8%, respectively, vs. the year-earlier quarter. Both measures topped the consensus of 30 analysts polled by Thomson Reuters for $2.30 and $1.75 billion. During Q1, wired and enterprise storage sales grew 2% and 6%, respectively, on a sequential basis. Industrial sales fell 10% sequentially, trailing the 15% decline in wireless sales, Tan told analysts on the conference call. “Last year, we had unusually high demand in Q1 from a North American customer which offset normal seasonality,” he said. “This year, however — as we all know — seasonality returned and there was a product life cycle demand decline from that specific customer.” This week IDC issued a smartphone forecast that sees iPhone shipments declining 0.1% this year as smartphones running Alphabet ‘s ( GOOGL ) Android operating system rise 7.6%. Tan said on Broadcom’s conference call that he expects weak smartphone demand to reverse in the second half of 2016. Enterprise storage comprises 38% of the former Avago’s total Q1 revenue — the largest segment and leading wireless sales which contributed 32% to the total pot. But, the wired segment is growing and during the April quarter will bring in 55% of sales, Tan said. Wired Sales To Grow The midpoint of current-quarter guidance for $3.55 billion in sales on a non-GAAP basis, plus or minus $75 million, nearly touched the consensus model for $3.57 billion. Current-quarter sales views reflect the combined Avago-Broadcom company. During Q2, wireless and enterprise storage sales will shrink as chunks of total sales to 23% and 17%, respectively, Tan said. Still, all eyes are on Broadcom’s “North American customer” which increased the chipmaker’s RF content in its upcoming flagship smartphone, he said. “We are already pre-building significant quantities of our RF chips” for the second-half of 2016 ramp, he said. “We increase our RF content by 20% year after year in this high-end smartphone market.” But Tan expects greater strength in the wired segment where Broadcom expects to add new products. The segment will also benefit from increased enterprise demand. In May 2015, the former Avago announced a $37 billion bid for fellow Apple supplier Broadcom, kicking off a record-busting year of consolidation in the semiconductor industry amid macro weakness, slowing growth and ramping costs. Post-merger, the company retained Broadcom’s name and Avago’s ticker symbol “AVGO.” Broadcom is one of two chipmakers on the IBD 50 list of top-rated growth stocks. The other is Tesla Motors ( TSLA ) partner  Nvidia ( NVDA ).

Facebook Price Target Raised As Its Ad Network Threatens Alphabet

The advertising network which  Facebook ( FB ) announced two years ago is gaining on a similar platform from Alphabet ( GOOGL ), which is one reason an analyst increased his stock price target on the social networking giant Thursday. The ad platform, called Facebook Audience Network (FAN), uses Facebook data to help advertisers place ads across multiple websites, beyond Facebook. FAN is in direct competition with AdSense and AdMob from Alphabet. Nomura analyst Anthony DiClemente raised his price target on Facebook to 135 from 125, saying Facebook’s expansion of FAN and the upcoming monetization of its Messenger platform will help it maintain strong revenue growth. Facebook stock ended down 0.3%, just below 110, in the stock market today . Facebook stock hit an all-time high of 117.59 on Feb. 2. Alphabet stock eased below 732, down about 1%. Alphabet hit an all-time high of 810.35, also on Feb. 2. DiClemente estimates FAN will add $2 billion to Facebook revenue in 2016, more than double that of 2015. While Google AdSense and AdMob will pull in about $7.6 billion in revenue in 2016, FAN’s revenue is growing at a much faster rate, DiClemente estimates. In addition to FAN, Facebook is in the early stages of monetizing Messenger, its free instant-messaging platform with more than 800 million users. Media reports indicate Facebook will enable companies to message ads to customers via Messenger starting in Q2 2016. DiClemente estimates Facebook Messenger could approach $300 million in annual revenue. The emerging growth drivers of FAN and Messenger will compliment the strong revenue growth Facebook is getting from Instagram and video ads. “Looking at the drivers of 2016 revenue, core ad growth and Instagram should be the largest drivers of absolute dollar growth,” DiClemente wrote in the report. He estimates Instagram, the photo- and video-sharing website, will contribute about $2.5 billion in 2016 revenue.