Linux distributor Red Hat reports 20.6 percent rise in revenue

(Reuters) – Red Hat Inc (RHT.N) reported a 20.6 percent rise in quarterly revenue as the Linux operating system distributor benefited from higher demand for its products targeting hybrid cloud.

Net income rose to $ 96.9 million, or 53 cents per share, in the second quarter ended Aug. 31, from $ 58.8 million, or 32 cents per share, a year earlier.

The company’s revenue rose to $ 723.4 million from $ 599.8 million.

Reporting by Munsif Vengattil in Bengaluru; Editing by Maju Samuel

Our Standards:The Thomson Reuters Trust Principles.

Tech

Mike's Hard Lemonade: Measuring Digital That Drives Retail Sales

It’s refreshing when the head of marketing for a Consumer Packaged Goods (CPG) brand opens up and shares his insights on best practices around tracking and measuring the impact of digital marketing that drive in-store sales. For years, this has been a challenge as the ecosystem between retailers, data providers and manufacturers has been relatively immature.

This summer, I had the opportunity to speak with Sanjiv Gajiwala, VP of Marketing at Mike’s Hard Lemonade and I asked him about how he had effectively streamlined his company’s ability to directly measure the effectiveness of their digital marketing efforts. In addition to this article, you’re welcome to watch the full interview on YouTube.

Matching Facebook Ads to Credit Card Purchase Data

“We work with Oracle and their data provider, Datalogix which actually looks at our Facebook ads and the users that are exposed to those Facebook ads and connects that back to their credit card and purchase behavior,” says Gajiwala. “Datalogix has a way of matching users to their actual purchasing and what we’ve really been able to learn from that has been incredible.”

Gajiwala explains that Datalogix fits within Mike’s Hard Lemonade’s social listening ecosystem. “We’re looking at brand health and what people are saying, but it helps us complete the picture with their purchase behavior,” he says.

Key Learning From This Purchase Behavior Data Layer

“We’ve learned some really incredible things,” says Gajiwala, “People who are exposed to our [Facebook] ads that are Mike’s users are spending 5% more. And 84% of people exposed to Facebook ads on Mike’s definitely would or are very interested in purchase Mike’s after seeing the ad or our content we’re promoting. You start to see that both of these numbers start to synch up, which helps validate what we’re seeing in the soft data versus through the register data.”

Digging in a bit further, Gajiwala acknowledges that this work with Datalogix does not allow Mike’s Hard Lemonade to segment by individual retail store since the data provided is driven by credit card purchases. “Instead of looking at [individual] retailers, we are able to look at the segments of our consumers between heavy, medium and light users and understand what kind of content and what kind of behaviors we can expect from that different type of consumer.”

Breaking Down Geographical Relevance

As Mike’s Hard Lemonade is sold nationally, I asked Gajiwala about how they review the geographical relevance of the sales data driven by their digital marketing efforts. “Datalogix and Oracle are doing the mashination including geographic and penetration data,” he said, with the understanding that some of these insights are a combination of Facebook geographic data and credit card transactional data.

This gives Mike’s Hard Lemonade an additional layer of insights that help with better understanding purchase habits by consumer segmentation (i.e. heavy to light) overlaid with geographical penetration insights to help with better understanding geographical flavor profile preferences and where marketing budgets are best spent on a local geographical level.

Insights Leading to Incremental Investments in Social Strategy

“Through this work we uncovered that there were a whole group of people that, profile-wise, were like our Mike’s heavy users that we weren’t reaching,” Gajiwala said. “They were heavy [Flavored Malt Beverage] users, but they weren’t really engaging with Mike’s. That lead to an incremental investment in our social strategy.”

This allowed Mike’s Hard Lemonade to then track back to see if they are getting the same sort of lift from this new target of previously ignored heavy non-Mike’s users and determine if the incremental investment is performing in a similar fashion to their core marketing investments.

“Our prospecting and our farming strategies are both different on social but just as measurable,” Gajiwala said. That is to say, with a relatively small team, everyone at Mike’s Hard Lemonade is accountable to the data.

What Gets Measured, Gets Managed

The bottom line here is that with the addition of the Datalogix reporting, Mike’s Hard Lemonade is finding new opportunities that it had previously ignored while, at the same time, seeing the direct impact on retail sales from its digital marketing efforts. This is the growing trend at retail. With a growing number of options to track and measure marketing impact, your ability to interpret data gives you a competitive edge. The most effective content and social media ads will receive increased and even incremental budget to ensure brand health and continued sales growth at retail.

For more on this topic, see these two related articles: What It Takes to Exceed Shopper Expectations and Empower Retail Employees and Not All Retailers are Contracting. Here’s the Secret From One That’s expanding.

Tech

Retirement Strategy: Why Is Bank Of America In TARP II?

I’ve been getting some feedback as to why I would place Bank of America (NYSE:BAC) in the heart of the new model portfolio. Let me remind you that I have been a BAC bull for a few months now and have been pounding the table about its growth potential. Read this piece for a little background.

As most of you know, I personally own a bunch of shares, model portfolio TARP has plenty of shares, and now it is tucked away with a starting position in TARP II. I am considering adding more shares for myself as well as for TARP II.

Many dividend growth investors will turn their collective noses up at the 2.00% yield as it just would not throw off enough income immediately. Well, the two reasons NOT to have purchased BAC when I started yakking about it were as follows:

  • BAC does not increase its dividend by 60%.
  • Buffett changes his mind and dumps 700 million shares of BAC stock.

Well, both of these risks were eliminated when BAC announced its intention to increase its dividend and Buffett quickly decided to exchange his warrants for 700 million shares. Risk off, right? Now shareholders were going to get a nice pop in the dividend, even with its small yield, and also have Warren Buffett as the largest single shareholder! Nice company to be with I would say and the information was given to all of us well before everything happened! So IF you bought the shares when I first started talking about it, this is where you would be in both growth and income: about 10% capital appreciation and a dividend increase of roughly 60%. Not bad for a few months of waiting right?

Now There Are Even More Reasons To Consider BAC

First, review this article, then let’s take a quick look at the new model TARP II chart as it stands now:

The new model TARP II consists of the following stocks as of today: Altria (MO), PepsiCo (PEP) Hormel (HRL), Lowe’s (LOW), Lockheed Martin (LMT), Williams-Sonoma (WSM), Realty Income (O), Omega Healthcare (OHI), LTC Properties (LTC), Community Healthcare (CHCT), Apple (AAPL), Gilead (GILD), Walgreens Boots Alliance (WBA), Visa (V), Microsoft (MSFT), Novartis (NVS), Bank of America (BAC), AT&T (T), Facebook (FB), NextEra Energy (NEE), Consolidated Edison (ED) Qualcomm (QCOM), and Bed Bath & Beyond (NASDAQ:BBBY)

Since the price of BAC was $ 24.38/share when added to the model, the price as of right now is $ 25.16, so an increase of about 4-5% in value has been added and that 2.10% yield is now down to 1.96%. Not to worry, though; there is more good news to come, AND we have 20+ years to let this stock “bake”. If we avoid another banking crisis, who knows, BAC might become a dividend champ, but in the very least, we can dump it and move the dollars into a dividend aristocrat eventually!

The reasons I am even more optimistic about the share price appreciation are quite simple.

1. A probable Moody’s credit rating upgrade:

The bank’s A1 rating has been put on review for upgrade at Moody’s, with the agency noting improvements to profitability and management’s commitment to a conservative risk profile.

Moody’s also likes Bank of America’s more conservative than peers capital return policy (shareholders may feel differently).

2. The Fed becoming more hawkish than everyone expected, so another rate hike is likely this year, and the Fed’s balance sheet will be trimmed:

Taking a closer look at the economic projections, core PCE inflation is seen at just 1.5% this year, down 20 basis points from the June guess. Inflation is seen at 1.9% next year, down from 2% previously.

The median forecast for the Fed Funds rate at year-end stays at 1.4%, suggesting one more rate hike is in the cards. The median for 2018 is still 2.1%, pointing to roughly three rate hikes next year. 2019 is lowered to 2.7% from 2.9%.

Yields have moved a bit higher since the news hit, with the 10-year yield up 2.75 basis points to 2.276%. TLT -0.3%, TBT +0.6%. The two-year yield has risen to 1.43, its highest since July.

Gold (NYSEARCA:GLD) has lost a few dollars per ounce, now flat on the session at $ 1,311.

The dollar (UUP +0.4%) has strengthened a bit. …

balance sheet trim starts in Oct. (Sept. 20)

The markets have been sloppy this last week, but BAC moved higher, which is normal when interest rates are set to rise, and lending becomes more profitable. As far as I am concerned, capital appreciation has just begun.

OK, So How About Dividend Growth

This is sort of easy as well. Let’s just look at the basic metrics:

It isn’t that much of a stretch to say BAC will more than likely continue growing the dividend, so getting in when the share price is reasonable will give the yield a kick every time the bank announces a dividend increase. Obviously, I have no idea what the amount of the dividend might be in 20 years, but even if it just doubles to around $ 1.00 annually, at a share price of roughly $ 25, the yield on cost would be a rather sound 4%! Of course, if we wait and the share price rises even more before we add more, then that YOC would be lower. Given the fact that the stars seem to be aligned with the Fed, and the bank is making lots of money, tell me why I shouldn’t add more shares to TARP II, as well as my own personal account!

Look at these fundamentals:

It is VERY undervalued according to S&P Capital, as well as being EXTREMELY financially healthy. I like to get in BEFORE those 2 other metrics move higher, and I like riding the coattails of Warren Buffett!

Growth is headed in the right direction as well as cash flow (great for larger dividend raises) and even book value is up. It sits at $ 27.43/share as of June 30th, so in all likelihood that metric has ticked up a bit Let me be conservative and say it’s now about $ 28/share. That translates into a growth potential of 11-12%, and it will possibly happen sooner than later because of the rising interest rates. Rising interest rates mean rising profits on loans at higher interest rates. That spells EPS, earnings per share, which keeps the upward trend going our way!

The Bottom Line

I might not be the sharpest knife in the drawer, but I think buying more shares of BAC makes sense. I would really like to know the reasons YOU have for NOT owning BAC here. Convince me I am wrong!

Not To Bore You, But…

Knowledge is power, and many folks shy away from the investing world because that very world makes it more confusing each and every day in an effort to sell you something: stock picks, technical strategies, books, videos, subscriptions with “secret ideas,” gadgets, and even snake oil.

My promise to you is that my work here will remain free to all of my followers, with the hope of giving to you some of the things that took years for me to learn myself. That being said, let me reach out to you with my usual ending:

**One final note: The only favor I ask is that you click the “Follow” button so I can grow my Seeking Alpha friendships. That is my personal blessing in doing this and how I can offer my experiences to as many regular folks as possible, who might not otherwise receive it.

Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance. The long positions held are based upon what the model portfolio holds and I personally could have held all of the stocks noted at one time or another.

Disclosure: I am/we are long BAC CHCT ED FB GILD GLD HRL LMT LOW LTC MO MSFT NEE NVS O OHI PEP QCOM T TBT TLT UUP V WBA WSM.

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.

Additional disclosure: The portfolio is for educational purposes only, and not an actual portfolio. The long positions are based on the model portfolio.

Tech

This Time It Matters: Why Apple Is Falling

Preface
Apple Inc (NASDAQ:AAPL) is dropping hard after its event to announce the new series of hardware, in particular the new iPhone 8, 8 Plus and X as well as the Apple Watch 3.

It’s Different This Time
Normally when Apple stock dives on lukewarm product reviews we stand firmly in our position that the stock market reaction is over blown. Our simple thesis for that response is to look at demand, which is hypnotically strong, every time. That is not the case this time.

A New Risk is Not Obvious But is Enormous
Apple announced a more complicated lineup of iPhones this time around. It introduced the iPhone 8 series which is an upgrade to the iPhone 7, and then it announced the highly anticipated iPhone X (pronounced iPhone Ten).

Then the company made the iPhone 8 available this month, but pushed delivery of iPhone X to early November, which pre-orders stating in late October. That has created a risk.

It turns out that Apple hyped the iPhone X so much, and poured so much new technology into it, that it has left the demand for iPhone 8 lackluster in Apple terms. Here’s what we mean.

If you go to the Apple Store, and try to purchase an iPhone 8, the wait time is essentially 1-3 days for the smaller memory version. Here is an image:

That is for the iPhone 8, in Los Angeles, on Verizon’s (NYSE:VZ) network. The other networks are essentially the same. A normal wait time for a new iPhone release is usually several weeks, let’s say 2-4 depending on where you are in the world.

There are also reports that in store lines are much smaller than before, with one report pinpointing Sydney Australia, where only 30 people were camped out for the new release. Reports from China are similar.

Here are links to two stories:

Turnout for iPhone 8 Launch in Australia “Bleak” as Customers Hold Out for Upcoming iPhone X
The iPhone 8 launch in Sydney saw “a bleak turnout,” reports Reuters, with fewer than 30 people lining up outside of the Sydney Apple Store on George Street. In past years, hundreds of people have lined up for new iPhones on release day.

Apple Falls After Analyst Report Indicates Weak iPhone 8 Demand
Consumers pre-ordered about 1.5 million handsets on Chinese retail website JD.com in the first three days, compared with about 3.5 million for the comparable period of iPhone 7 orders.

Tim Cook just said he “couldn’t be happier” with the iPhone release (and Apple Watch 3). While sales are lower than prior models, there is one reason, a big reason, that he may actually be telling the truth.

Is There a Plan?
One of the headlines that surfaced from the Apple Event was that the iPhone X was very expensive, starting at $ 999 and climbing to $ 1,200 based on the configuration.

It’s possible, maybe even likely, that Apple decided to release the iPhone 8 for less to make it appear that it was not forcing Apple loyalists to buy a far more expensive phone by offering a reduced priced new model (iPhone 8).

In fact, it does appear that even in the bearish analyst notes, each tends to comment on the fact that demand reduction for the iPhone 8 is simply a reflection of the outsized demand for the iPhone X.

If that’s true, then Apple will have an average selling price significantly higher than in prior times, and if demand is in fact to the point where Apple also sells more units, then that would bring a windfall of profits larger than any company has ever seen in one quarter. If that sound overly bullish, it’s just the choice of words — Apple already has the largest earnings ever in one quarter, so this would be a breaking of its own record — also known more simply as, “growth.”

Back to Risk
While there is a rather bullish narrative to wrap around this odd iPhone selection, there is also, in earnest this time, a reasonable bearish thesis.

Apple won’t be delivering its iPhone X until well into November, and if demand is very strong, it might not even be able to deliver before the holiday season in the United States. And while, certainly, if all of those sales simply occur later in the year (or early 2018), then that’s fine, but to consider that a foregone conclusion is a step we are not willing to take with blind faith.

Some consumers, perhaps many consumers, will not wait. And while Apple loyalists may stick around for a later date, the all-important “Android switchers” (those smartphone Android owners that switch to Apple) may not — and that is a real risk and worthy of a stock drop, until proven otherwise.

Apple’s market share in the United States is jumping as Android loses market share — an under reported but critical phenomenon. On January 11th, 2017, 9TO5Mac wrote iPhone market share grows 6.4% in USA, takes share from Android in most markets.

Apple gained 9.1% in the UK, mostly at the expense of Windows phones.

The iPhone grew its market share in Australia, France, Italy, Japan, Spain, the UK and USA, with Android seeing its own share drop in all of these countries bar Italy, where its growth was less than half that of iOS.

Those are Android switchers and Apple may have just put that group, or at least that trend, in serious jeopardy.

Now What?
We believe the iPhone X is going to be a knock-down drag-out mega hit, and the elevated price will make it yet an even larger success. But, the risk that Apple took, as of right now, is hurting the company both with iPhone 8 sales, and potentially, with Android switchers. And that is not a false narrative — it is accurate.

That risk means the stock should drop, and is dropping.

But, we’re not done yet. What we did not show you, and is easily missed unless you are really looking, is how hard Apple is focusing consumers on the iPhone X over the iPhone 8 — in our opinion.

I recorded a 45 second video arriving on the Apple Store and looking at iPhones. I have turned to video to allow you to make your own decision, as opposed to snapshots, which are too selective and an be used to weave any narrative the author likes.

When you watch this video (below), decide for yourself if you feel that Apple is purposefully pointing people to the iPhone X over the iPhone 8. Here we go:

That’s hardly headline grabbing footage, but we found it noteworthy.

Apple Watch 3
There have been some pretty poor reviews of the Apple Watch 3 surrounding its LTE connectivity and its battery life. This is one of those times where the reviews are meaningless. Demand is strong and that’s all that matters.

Here is a snapshot from the Apple Store for that product:

We see the Watch becoming a runaway success as people learn to use that wearable device as a standalone product — leaving the phone at home on runs, meetings, swims, hikes, and whatever other times such a convenience could be desired.

Conclusion
We maintain our Top Pick status on Apple, but have certainly tempered our bullishness with an undeniable new risk. It might work out very well, but, it might not, and that is a new risk to Apple stock.

The author is long shares of Apple Inc (NASDAQ:AAPL).

Thanks for reading, friends.

Please read the legal disclaimers below and as always, remember, we are not making a recommendation or soliciting a sale or purchase of any security ever. We are not licensed to do so, and we wouldn’t do it even if we were. We’re sharing my opinions, and provide you the power to be knowledgeable to make your own decisions.

Legal
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories (“The Company”) does not engage in rendering any legal or professional services by placing these general informational materials on this website.

The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if we have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

The Company makes no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Disclosure: I am/we are long AAPL.

Tech

Wal-Mart tests direct-to-fridge; Amazon ups restaurant game

(Reuters) – Wal-Mart Stores Inc is testing a service to stock groceries directly to customers’ refrigerators as it seeks to take on e-commerce giant Amazon.com.

The delivery of groceries and meal kits is emerging as the next frontier of competition among retailers.

The world’s biggest brick-and-mortar retailer said on Friday it is partnering with August Home, a provider of smart locks and home accessories, to test the service with certain customers in the Silicon Valley. (bit.ly/2ffqqvT)

The grocery business is set to be upended through Amazon’s acquisition of upmarket grocer Whole Foods last month and the online retailer is also entrenching itself more deeply in the restaurants business.

Amazon Restaurants on Friday teamed up with online food ordering company Olo whose network of restaurants includes Applebee’s and Chipotle.

A Wal-Mart Stores Inc company distribution center in Bentonville, Arkansas June 6, 2013. REUTERS/Rick Wilking

The partnership will help Olo’s restaurant customers connect with Amazon’s delivery services.

The competition in the meal-kits business is also heating up. Supermarket operator Albertsons Cos Inc said it would buy meal-kit delivery service Plated while rival Kroger-owned Ralphs started selling meal kits in stores this week.

ONE-TIME PASSCODE DELIVERY

As part of the test, Wal-Mart delivery persons gain access to a customer’s house using a pre-authorized one-time passcode and put away groceries in the fridge and other items in the foyer.

Homeowners would receive notifications when the delivery is in progress and could also watch the real-time process from their home security cameras through the August Home app.

The Bentonville, Arkansas-based retailer has been exploring new methods of delivery and in June said it was testing using its own store employees to deliver packages ordered online.

Reporting by Vibhuti Sharma and Sruthi Ramakrishnan in Bengaluru; Editing by Martina D’Couto

Our Standards:The Thomson Reuters Trust Principles.

Tech

The SEC Hack Shows That Not Even Top Government Data Is Safe

A major computer hack at America’s top stock market regulator is the latest sign that data stored in the highest reaches of the U.S. government remains vulnerable to cyber attacks, despite efforts across multiple presidencies to limit high-profile breaches that are so frequent many consider them routine.

In recent years, nation-state and criminal hackers, as well as rogue employees, have stolen data from the Internal Revenue Service, the State Department and intelligence agencies, including millions of government employee files allegedly exfiltrated by the Chinese military, U.S. officials say.

The Sec urities and Exchange Commission ( SEC ), America’s chief stock market regulator, said on Wednesday that cyber criminals may have used data stolen last year to make money in the stock market, making it the latest federal agency to grab headlines for losing control of its data.

Related

JAPAN-US-IT-FINANCE-BITCOIN -COMPUTERS-HACKING-SERVICES-BANKING

At the same time, being only the latest major breach is not special, said Dan Guido, chief executive of Trail of Bits, which does cyber sec urity consulting for the U.S. government.

“It simply reflects the status quo of our digital sec urity,” said Guido, who is a former member of the cyber sec urity team at the Federal Reserve, America’s central bank.

Central bank officials have detected dozens of cases of cyber breaches, including several in 2012 that were described internally as “espionage.”

The U.S. federal government has sharply increased funding dedicated to protecting its own digital systems over the last several years, attempting to counter what is widely viewed as a worsening national sec urity liability.

But as one of the world’s largest collectors of sensitive information, America’s federal government is a major target for hackers from both the private sec tor and foreign governments.

“When you have one central repository for all this information – man, that’s a target,” said Republican Representative Bill Huizenga, chairman of the House subcommittee on Capital Markets, Sec urities, and Investment, which oversees the SEC .

Last year, U.S. federal, state and local government agencies ranked in last place in cyber sec urity when compared against 17 major private industries, including transportation, retail and healthcare, according to benchmarking firm Sec urityScorecard.

An update of the rankings in August showed the U.S. government had improved to third worst, ahead of only telecommunications and education.

“We also must recognize – in both the public and private sec tors, including the SEC – that there will be intrusions, and that a key component of cyber risk management is resilience and recovery,” said SEC Chairman Jay Clayton.

The federal government audits cyber sec urity measures every year at top agencies, producing reports that routinely expose shortfalls and sometimes major breaches. The Federal Bureau of Investigation also looks for hacking attempts and helped spot an alleged intrusion by Chinese military-backed hackers into a major banking regulator between 2010 and 2013.

Weekly scans of government systems by the Department of Homeland Sec urity showed in January that the SEC had critical cyber sec urity weaknesses but that vulnerabilities were worse at three agencies, including the Environmental Protection Agency, the Department of Health and Human Services and the General Services Administration.

Some agencies said they had improved their cyber sec urity posture since that report.

For more about cybersecurity, see Fortune’s video:

A GSA spokeswoman said the agency has not had any critical vulnerabilities in the past six months, and that the ones identified in January were patched in under 10 days.

A Department of Labor spokesman said all identified vulnerabilities had been fixed and that its systems were not compromised by the identified flaws.

But, he added, “addressing vulnerabilities associated with legacy systems can be challenging.”

Tech

Cloudflare Pays First $15,000 in Quest to Kill Blackbird Patent ‘Troll’

The Internet security Cloudflare is charging ahead with an unusual campaign to demolish Blackbird, a patent firm run by a group of lawyers who Cloudflare accuses of engaging in unethical practices.

On Thursday, Cloudflare announced it has paid out the first $ 15,000 to people who discovered documents that could help invalidate Blackbird’s patents. The money is part of a $ 100,000 war chest the company announced this spring, and is using in its quest to bring down Blackbird.

Cloudflare has labeled Blackbird a new breed of “patent troll”—a derogatory term for companies that don’t produce anything, but instead amass patents in order to extract money from companies that do. While patent trolling is hardly new, Cloudflare claims Blackbird is especially infamous because it is run by lawyers and may be engaging in illegal fee-splitting arrangements with patent owners.

Blackbird did not immediately respond to an email request for comment but has in the past claimed its business model is a cost efficient way for small inventors to assert their rights.

Cloudflare rejects this view, and instead likens Blackbird to a drive-by shakedown scheme. In its latest blog post, the Internet company pointed to a patent from 1998 for GPS technology that Blackbird used to sue six companies—but then quickly dismissed the lawsuits, consistent with “a pattern where Blackbird was only looking for small settlements from defendants who sought to avoid the costs and delays of litigation.”

The 1998 patent in question, titled G​P​S​-in​t​e​r​n​e​t​ ​L​i​n​k​a​g​e, is likely to raise eyebrows in the tech world since its language (an “integrated system comprising the Global Positioning System and the Internet wherein the integrated system can identify the precise geographic location of both sender and receiver communicating computer terminals”) appears to cover nearly anything related to GPS, and is supported by a simple graphic: The GPS patent is one of two for which Cloudflare paid a series of $ 500 bounties to the public in return for so-called “prior art” which can be used to challenge the validity of a patent. In the GPS patent case case, the prior art consists of research papers and other patents from 1998 and earlier that Cloudflare says will show the invention is not valid. (Under the law, the government is only supposed to a patent for inventions that are both new and not obvious.)

Get Data Sheet, Fortune’s technology newsletter.

Meanwhile, the company also paid for prior art related to another patent that Blackbird is asserting in court against Cloudflare itself. That patent, which dates from 1998, describes a way to provide an “internet third party data channel.

In the blog post, Cloudflare adds that it is “just warming up” and intends to pursue challenges against at least 10 other Blackbird-controlled patents. If the challenges are successful, this would likely put a major crimp in Blackbird’s operations or possibly force it out of business altogether.

Finally, Cloudflare is expanding a separate campaign that asks legal disciplinary bodies to punish Blackbird lawyers for violating the profession’s fee-splitting arrangements. Cloudflare has already lodged complaints with the state bars of Massachusetts and Illinois, which have yet to issue a ruling, and on Thursday said it has filed an additional objection with the United States Patent and Trademark Office’s Office of Enrollment and Discipline.

Tech

Innogy to spend 1.2 billion euro on e-mobility, solar, glass fiber

FRANKFURT (Reuters) – Innogy, Germany’s largest energy group by market value, will spend up to 1.2 billion euros ($ 1.43 billion) in e-mobility, photovoltaics and glass fiber networks by 2019, it said in a statement on Thursday.

Innogy has an existing investment plan of 6.5-7.0 billion euros over the next three years and it was not immediately clear from the statement whether the 1.2 billion would come on top of that or are part of the existing budget.

The group, which is majority-owned by RWE, also said that there would be “no taboos” with regard to its portfolio on its way to become a leader in all relevant markets by 2025, not specifying further.

Reporting by Christoph Steitz; Editing by Arno Schuetze

Our Standards:The Thomson Reuters Trust Principles.

Tech

EU ready to move alone on digital tax if no global deal

BRUSSELS (Reuters) – The European Commission said the EU should proceed with an overhaul of taxes on digital firms even if the rest of the rich world did not follow suit, a draft report said.

The document is part of an EU push to tap more revenues from online multinationals such as Amazon and Facebook, who are accused of paying too little tax in Europe by routing most of their profits to low-rate countries such as Ireland or Luxembourg.

The draft report, to be adopted on Thursday, said that on average brick-and-mortar multinationals pay in taxes in the EU more than twice what their digital competitors do.

Traditional large firms face a median 23.2 percent tax rate, while digital giants do not pay more than 10.1 percent – and when they sell directly to customers, rather than to firms, their effective rate goes down to 8.9 percent, data cited by the Commission showed.

An earlier report by a European lawmaker said EU states may have lost in tax revenues up to 5.4 billion euros ($ 6.5 billion) just from Facebook and Google, now part of Alphabet, between 2013 and 2015.

“A level playing field is a pre-condition for all businesses to be able to innovate, develop and grow,” the Commission said, adding that fairer taxation of the digital economy was urgently needed.

Partly because of the uneven taxation, revenues in the EU retail sector grew on average by only 1 percent a year between 2008 and 2016, while in the same period revenues of the top-five online retailers, such as Amazon, grew on average by 32 percent per year, the Commission’s report says.

NEXT STEPS

The document, seen by Reuters, will be presented at a summit of EU leaders on September 29 dedicated to digital issues. Despite divergences and scepticism among some smaller states, the 28 EU countries are expected to find common ground on digital taxation by December.

The Commission is seeking a compromise among rich countries worldwide in a bid to reduce opposition from EU states that fear losing competitiveness if the EU moves ahead on its own in this field.

But “in the absence of adequate global progress, EU solutions should be advanced within the single market”, the document said, adding that a legislative proposal may be presented in the spring regardless of global developments.

The best way to tackle distortions would be to review the notion of “permanent establishment” so that firms could be taxed also in countries where they do not have a physical presence, the Commission said.

At the moment online companies can often avoid paying taxes in countries where they generate large revenues because they do not have a physical presence there.

A proposal to change the corporate tax base is already under discussion in the EU. The Commission believes it represents “a basis to address these key challenges”, but needs the unanimous support of EU states to turn the plan into law.

To move ahead more quickly, the Commission said short-term solutions could be considered. They include an “equalization” tax on turnover, as proposed by France and backed by 10 EU countries, the report said.

Alternative short-term options would be a withholding tax on payments to digital businesses and a levy on revenues from advertisements or other services provided by digital firms.

But short-term options “have pros and cons, and further work is needed”, the Commission said, warning that they may go against double-taxation treaties, state aid rules, fundamental freedoms and EU international commitments under free trade agreements and the World Trade Organization (WTO).

Reporting by Francesco Guarascio @fraguarascio; Editing by Philip Blenkinsop and Gareth Jones

Our Standards:The Thomson Reuters Trust Principles.

Tech

Uber reviews Asia business over bribery allegations in U.S.: Bloomberg

(Reuters) – Uber Technologies Inc [UBER.UL], which is the subject of a federal probe into whether it broke bribery laws, has started a review of its Asia operations and notified U.S. officials about payments made by staff in Indonesia, Bloomberg reported, citing people with knowledge of the matter.

A source familiar with the matter told Reuters that the Bloomberg report was accurate.

Uber said in August it was cooperating with a preliminary investigation led by the U.S. Department of Justice into whether company managers violated U.S. laws against bribery of foreign officials, specifically the Foreign Corrupt Practices Act.

Uber hired law firm O‘Melveny & Myers LLP to investigate how it obtained the medical records of an Indian woman who was raped by an Uber driver in 2014, Reuters reported in June.

O’Melveny & Myers is now examining records of foreign payments and interviewing employees, raising questions about why some potentially problematic business dealings were not disclosed sooner, Bloomberg said on Tuesday. bloom.bg/2xdk6PT

Attorneys are focused on suspicious activity in at least five Asian countries: China, India, Indonesia, Malaysia and South Korea, Bloomberg said, adding that Uber’s law firm is reviewing financial arrangements tied to the Malaysian government that may have influenced lawmakers there.

Uber and the DoJ could not immediately be reached for comment.

Reporting by Ismail Shakil in Bengaluru and Peter Henderson in San Francisco; Editing by Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.

Tech