Technology Titans and Trailblazers - Reuters Graphicsgraphics.thomsonreuters.com/13/06/GlobalTechSummit.pdficon Valley’s ultra-competitive talent arena. “I don’t think it’s

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Global technology is going through an era of un-precedented change, at an unprecedented scale and velocity. The advent of the cloud is transform-

ing the way corporations conduct business; an explosion of mobile devices is re-shaping the way people the world over interact with media, communicate and work; and evo-lutionary devices and concepts from wearable computers to social media and crowdsourcing websites seem preg-nant with the promise of revolutionizing society and busi-ness. Against this backdrop, Facebook completed in 2012 what was then the third largest initial public offering ever to emerge from the United States, and Wall Street is bet-

ting on Twitter, Box and other Silicon Valley startups that have arrested investors’ attention in past years to soon fol-low suit. Meanwhile, China’s ascendancy as an economic superpower is driving a re-balancing in Asia and beyond that will have profound implications for the spread, use and ultimately development of technology. The Reuters Glob-al Technology Summit in San Francisco and Singapore brought together many of the industry’s leading lights – from polished corporate chieftains to scrappy Silicon Val-ley entrepreneurs behind some of today’s leading Internet trends – to share their vision on how they hope to change the world. Again.

Technology Titans and Trailblazers

GLOBAL TECHNOLOGY SUMMIT 2013

An employee of Rittal IT

poses for the media in front of

servers during preparations

at the CeBit computer fair

in Hanover, March, 4, 2013.

REUTERS/FABRIZIO BENSCH

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Facebook has never been stronger since IPO, Sandberg saysBY ALEXEI ORESKOVIC

SAN FRANCISCO, JUNE 19, 2013

A year after Facebook Inc’s fumbled IPO, Wall Street remains slow to rec-ognize what Chief Operating Officer

Sheryl Sandberg argues has been an across-the-board improvement in its business.

Facebook’s ability to deliver ads to mo-bile phones, improvements in measuring the effectiveness of its ads and increasing user engagement have all put the world’s largest social network in a better position than before the IPO, Sandberg told the Reuters Global Technology Summit.

“When I look back at the last year since we went public, I believe we are unequivo-cally a much stronger company today than we were on literally any metric I can think of,” Sandberg said at the Reuters Global Technology Summit on Wednesday.

Facebook became the first U.S. technology company to debut with a value of more than $100 billion, in May 2012. Its shares have lost almost 40 percent of their value since.

“I can’t speak to the stock price but I do feel strongly that we are a better positioned, stron-ger company than we were a year ago,” she said.

With 1.1 billion users, Facebook is one of the Web’s most popular destinations for consumers and advertisers. But growth in the company’s revenue has slowed sharply from two years ago and some investors fret that a new crop of mobile apps aimed at younger users could chip away at Face-book’s hold on consumers.

Analysts also wonder if the company’s depressed share price could dampen morale and hamper its ability to attract talent in Sil-icon Valley’s ultra-competitive talent arena.

“I don’t think it’s actually had a huge im-pact,” the ex-Google Inc executive said, add-ing that while there had been some worries in the company about it, she was less worried as she had been through it before.

The cool investor reception to Facebook and other recent consumer dotcom debu-tantes from Groupon to Zynga has helped chill the Silicon Valley IPO train.

“If you miss in the first six months of be-ing a public company, you’re in the penalty box for a very long time,” Sequoia partner Roelof Botha said at a panel about the fate of Silicon Valley public offerings.

“If you beat too much, you’re an idiot be-cause you should have forecast higher.

OLD AND NEWUnder co-founder and CEO Mark Zuck-erberg, Facebook’s new mission is to carve out a dominant position in smartphones and tablets to keep up with shifting con-sumer habits.

The company’s mobile ads, which ap-pear directly in users’ newsfeeds and now account for 30 percent of Facebook’s overall ad revenue, command higher prices than its previous PC ads and are tougher for com-petitors to replicate, Sandberg said.

It has recently introduced new features that have been popularized on rival service Twitter, such as verified user accounts and “hashtags,” which make it easier for users to follow activity on the social network.

Within the last year, Facebook made its largest acquisition ever, paying about $700

million for Instagram. Sandberg said the company was in no hurry to generate rev-enue from the mobile photo-sharing app.

Facebook will at some point monetize the popular picture-postings service, Sand-berg said. But for the near term “we all think it makes a lot of sense for Instagram to be focused on growth” in users.

Another untapped opportunity is Chi-na. Facebook remained interested in offer-ing its service in the world’s largest Internet market, where the social network is banned.

“It’s an ongoing conversation with the government. At the end of the day it’s their choice,” she said. Sitting on the sidelines too long did not mean Facebook would cede the market to local competitors, she insisted.

“We were not the first entrants in our space to any market I’m aware of. There were markets like Brazil where Orkut had huge penetration, we’re now over 80 per-cent penetrated into the Internet popula-tion,” Sandberg said.

Sandberg, 43, joined Facebook as chief operating officer in 2008, overseeing business operations and transforming the fast-growing social network into a multi-billion company, while Zuckerberg focused on product strategy.

A former Google sales executive who also served as chief of staff to former U.S. Treasury Secretary Lawrence Summers, Sandberg is credited with bringing valuable business experience and organizational dis-cipline to the company.

With her new book, Lean In, currently the No.2 bestseller in the New York Times hard-cover non-fiction list, some wonder whether Sandberg might be ready to take on a new challenge, perhaps in the world of politics.

She dismissed the notion of political aspira-tions, noting that she has already been in gov-ernment and had no plans to leave Facebook.

Editing by Edwin Chan, Ed Tobin and Edwina Gibbs

Sheryl Sandberg, chief operating officer of

Facebook, speaks during Reuters Global

Technology Summit in San Francisco, June 19,

2013. REUTERS/STEPHEN LAM

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Nvidia to license graphics technology: CEOBY NOEL RANDEWICH


Nvidia Chief Executive Jen-Hsun Huang said he will license graph-ics technology to other companies,

a new model for the chipmaker that could lead to new business with Apple, Samsung and other mobile device makers.

Huang told the Reuters Global Tech-nology Summit in San Francisco on Tues-day that licensing graphics cores and visual patents would help Nvidia take greater ad-vantage of the booming market for smart-phones and tablets and tap markets it could not reach through selling its own chips.

“The bottom line is the world has changed and we’re expanding our business model to serve markets that we historically could not serve by selling chips alone,” Huang said.

With its core PC market struggling, Nvidia in recent years has established itself in the fast-growing mobile market, creating processors for tablets that take advantage of its graphics expertise.

But Nvidia has faced tough competition from the much larger Qualcomm, limiting its success. Apple designs its own processors for the iPhone and iPad, and top Android smart-phone maker Samsung Electronics increas-ingly uses its own processors in its devices.

Licensing its graphics technology to those or other companies could help Nvidia, with a market capitalization of about $8 bil-lion, reach further into the mobile industry than it has done on its own.

The move will put Nvidia into direct competition with UK-based Imagination Technologies, whose graphics technology is used in Apple’s iPhone, Samsung’s Galaxy S4 smartphone and other devices. Apple and top chipmaker Intel own stakes in Imagination.

Asked whether Nvidia hopes to license graphics technology to Apple and Sam-

sung, Huang said he is beginning to en-gage with the marketplace.

“We will target customers where their capacity and desire to build their own appli-cation processors is great,” said Huang, who co-founded Nvidia two decades ago.

“This is a way for us to engage custom-ers who don’t like to buy chips because they like to create their own, because they have the capacity, creativity and now the scale to build their own,” he said.

Nvidia will also be competing against UK-based ARM Holdings, which licenses processor technology to chipmakers includ-ing Nvidia and is increasingly targeting graphics as well.

Qualcomm uses its own graphics tech-nology on its mobile processors.

Nvidia is also open to licensing its soon-to-launch Long Term Evolution (LTE) modem technology, Huang said.

Nvidia is integrating LTE features on up-coming versions of its Tegra chips, making them compatible with high-end carrier networks. Lack of LTE technology has kept Nvidia, Intel and other chipmakers out of the top-tier smart-phone market, dominated by Qualcomm.

WIDE APERTURE“This is a maturation in their mobility play,” Pat Moorhead, an analyst at Moor Insights and Strategy, said of Nvidia’s licensing plans.

“It widens the aperture for them because now they can look at Samsung and Apple, and HTC, and basically everyone who doesn’t use Qualcomm.”

Top chipmaker Intel has been slow to modify its powerful PC chips for low-power smartphones and tablets, but its newest crop of mobile chips is expected by many ana-lysts to show major improvements and lead to even more competition in the already crowded mobile chip market.

Nvidia plans to start by licensing its Ke-

pler architecture that it uses to make high-end graphics chips for PCs.

Global PC sales plunged 14 percent in the first three months of the year, the big-gest decline in two decades of record-keep-ing, as tablets continue to gain in popularity and buyers appear to be avoiding Microsoft Corp’s new Windows 8 operating system, according to IDC.

Asked whether Nvidia could eventually depend on royalties for most of its business, Huang said, “I think the shape of companies in the future will look increasingly hybrid. Mi-crosoft licenses software, they sell devices, they have services. All of the above. I think you’ll see more and more companies that are like that.”

He said Nvidia’s revenue from licensing would trail revenue from chip sales for a long time, and that gross margins would improve as the company wins more royalties.

Nvidia previously licensed graphics tech-nology to Sony for the Playstation 3. In 2011, Intel agreed to pay Nvidia $1.5 billion over six years as part of a cross-licensing agreement.

“The opportunity went from a few mil-lion game consoles a year to now, billions of devices per year. The opportunity is now much bigger,” Huang said.

In a major break from its traditional busi-ness of designing chips, Nvidia later this month plans to begin shipping a hand-held game device using its Tegra 4 processors, a bid to use its appeal with PC game enthu-siasts to challenge console makers like Sony Corp and Microsoft.

Also underscoring its pursuit of new markets, Nvidia this year has shown off new graphics-intense server products for games and offices, also made with its processors.

Reporting by Noel Randewich; Editing by Phil Berlowitz and Bob Burgdorfer

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Yahoo’s Mayer shines spotlight on videoBY ALEXEI ORESKOVIC

SAN FRANCISCO , JUNE 21, 2013 11:07AM EDT

A s Marissa Mayer approaches her one-year anniversary as chief ex-ecutive of Yahoo, she’s hewing

closely to the struggling Web portal’s tradi-tional advertising model--and eyeing more video programming of every stripe as cen-tral to the strategy.

“We’re working on various methods in terms of how we can increase our video views, and watching,” Mayer said at the Reuters Global Technology Summit on Thursday. “It’s clear to me that our video business is something that’s growing a lot. It’s something that we’d like to accelerate.”

Yahoo is currently bidding to acquire Hulu, the online hub for TV programming owned by Walt Disney Co and News Corp, sources with knowledge of the situation have told Reuters.

Mayer would not comment on the bid for Hulu.

The Web pioneer was looking at buying French video site DailyMotion but had to abandon the effort after objections from the French government.

Yahoo also has a growing menu of origi-nal video programming, such as the criti-cally-acclaimed Burning Love TV reality show spoof, and it recently acquired the rights to the archive of Saturday Night Live television programs.

Online video commands higher ad rates than other types of Web content and has become a fiercely competitive arena as it is increasingly viewed as a bulwark against the steady decline in prices for online display ads.

On Thursday, Instagram, the mobile photo-sharing app owned by Facebook Inc, introduced a new feature that allows users to create 15-second videos. Facebook itself

is reported to be readying an online video ad format. Google Inc’s YouTube, the world’s No.1 online video destination, is expected to generate $5 billion in revenue this year, according to RBC Capital Markets.

Mayer took the top job at Yahoo after a tumultuous period in which the company had churned through several CEOs and many of its top executives and engineers jumped ship.

She has revamped key products such as mail and the Yahoo home page, imple-mented morale-boosting measures like free food, and jumpstarted acquisitions. On Thursday, Yahoo closed its $1.1 billion ac-quisition of Tumblr, a blogging service that is one of the Web’s most popular hubs of user-generated content.

Yahoo’s stock has surged roughly 70 per-cent since Mayer became CEO. But Wall Street analysts say much of the gain has come from stock buybacks and from Ya-hoo’s Asian assets, including a 24 percent stake in Chinese e-commerce giant and potential IPO debutante Alibaba Group.

PEANUT BUTTER AND JELLYYahoo’s biggest near-term goal and most important yardstick by which to measure its progress will be the rate of increase in the amount of time users spend on its web-sites, Mayer said.

“Yahoo’s ability to generate revenue for a thousand pages is reasonably good,” Mayer said. “The challenge for Yahoo at the mo-ment is traffic. How do we grow traffic? How do we gain usage? Because that ulti-mately will drive up revenue.”

While rivals such as Google have ex-perimented with new revenue streams, including subscription music services and online retailing, Mayer said Yahoo remains squarely focused on advertising.

“I believe in ads, I like ads. We may try some

other things but Yahoo is an ad company,” May-er said, but added that it does not mean Yahoo will cut on its own original programming.

The company’s headcount has decreased by about 1,000 employees during her first year, through a combination of attrition and ramped-up performance management, with staffers now getting reviewed on a quarterly basis instead of every year, she said.

But Mayer said the company was ag-gressively pursuing new talent: job appli-cations recently peaked at 10,000 a week, more than twice the level of a year ago.

At the same time, Mayer has moved to cut back the thickets of bureaucracy that she said had sprouted across the company over its 18-year history.

Mayer installed a system called PB&J, short for Process, Bureaucracy and Jams. That has eliminated roughly 700 irksome or unnecessary procedures within the com-pany, such as forcing employees to undergo a special orientation for the company gym.

“I understand that we are geeks and we may not be that coordinated but I think we can all figure out how to use a treadmill without an orientation,” Mayer said.

Some industry-watchers assumed the PB&J moniker was an homage to the so-called “peanut butter manifesto,” in which former Yahoo executives warned of prob-lems plaguing the company.

Mayer said the real story was much simpler.“Most days for lunch I have a peanut

butter and jelly sandwich,” she explained. “So sitting there I was like ‘Can we call it something simple and fun like PB&J?’ And we kind of backed into process, bureaucracy and jams. But it works.”

Additional reporting by Poornima Gupta and Edwin Chan. Editing by Jonathan Weber and Edwina Gibbs

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Box’s sales model evolves as “inevitable” IPO nears -CEOBY GERRY SHIH


Box, the closely watched data stor-age company, is shifting its growth strategy ahead of an initial public

offering that could come in 2014, Chief Executive Aaron Levie told the Reuters Global Technology Summit.

In its early years as a scrappy startup, Levie advocated a sales strategy that sought to convince individual employees or small units within larger companies to use his ser-vice for free, before charging them for ad-ditional features.

The 8-year-old Mountain View, Califor-nia-based company has swapped that “free-mium” business model and is now investing heavily in selling directly to chief informa-

tion officers at the top of the corporate hier-archy, Levie said.

He acknowledged the expense associated with such a strategy but said it was necessary.

“You get to a certain scale where that business model hits a limit. There’s no way to sell to Procter & Gamble, Coke, Disney, Walmart” without a direct sales effort, Levie said at the summit in San Francisco on Wednesday. “We have to go to talk to that CIO and have a consultative process with that buyer. They might be living with that decision for the next decade.”

Levie’s comments are part of an ongoing de-bate in Silicon Valley about growth strategies for software companies that cater to businesses.

Shaken by a series of disappointing IPOs in the consumer tech sector such as Zynga Inc and Groupon Inc, investors have fun-neled money into enterprise-focused start-ups. But there has been little consensus over how exactly the industry should win cus-tomers and grow their business.

Levie, who has talked up his company’s

IPO prospects, said its sales have risen 100 percent over the past year, without disclosing specifics. Half of Box’s employees are now in sales, he added.

The 28-year old acknowledged the threat from larger companies like Microsoft Corp and Google Inc that could use economies of scale to offer lower prices for pure storage space. But he hoped to differentiate Box by of-fering more industry-specific functions such as features for healthcare providers to securely share documents on the cloud, Levie said.

Levie ruled out another round of pre-IPO fundraising for Box, which had last received a $125 million capital infusion last July that valued the company at $1.2 billion.

But he called an IPO “inevitable.”“It’s something that’s absolutely on our

mind,” Levie said. “Over time we intend to probably do more acquisitions and having that public currency is helpful for that.”

“But don’t hold your breath about this year,” he added. “Don’t call your stockbroker yet.”

Aaron Levie, co-founder and chief executive of Box, speaks during Reuters Global Technology Summit in San Francisco, June 19, 2013.

REUTERS/STEPHEN LAM

Follow us on Twitter: @ReutersSummits

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Tesla to deploy local lawyers to challenge U.S. dealer lawsBY SARAH MCBRIDE, DEEPA SEETHARAMAN

AND RORY CARROLL


Tesla Motor Inc (TSLA.O) is mar-shalling lawyers across the country to prepare for a “multi-front war”

against local laws that risk stalling the elec-tric vehicle maker’s plan to bypass dealer-ships and sell directly to consumers.

Chief Executive Elon Musk told Reuters the company is facing strong opposition from local politicians and the powerful auto dealerships that bankroll their campaigns.

Over the next few months, Tesla will also bulk up its business development team, which has been charged with starting a dia-logue with local politicians in several states, and Musk said he will personally devote more time to this issue.

“It’s a tough battle we face,” the billion-aire told the Reuters Global Technology Summit on Tuesday. “We don’t necessarily have all the answers. I certainly believe that if we were to go through the regular fran-chise system that we would not succeed.”

The push for direct-to-consumer sales is part of Musk’s broader strategy to com-bat concerns over electric cars’ price, power and range. It’s also critical for Tesla to reach more consumers when its new, lower-

priced sedan hits the market in 3-4 years.Musk also said a new battery-replace-

ment system that will underpin a nation-wide network of fast-service swapping sta-tions, would entail an investment of $50 million to $100 million.

It takes less than five minutes to swap the battery pack, compared to at least 20 min-utes needed to do a quick charge, Musk said. Tesla will demonstrate the system.

Musk added that Tesla’s technology would allow it to avoid the outcome of Better Place, an electric vehicle charging company founded by Shai Agassi that liq-uidated last month.

“Shai was very good at marketing but not so good at technology, so he didn’t quite get it right on the pack swap thing,” Musk said. “As long as you have the right mechanical device you can do a battery pack swap.”

Tesla will first test the swap program in high-traffic corridors between Los Angeles and San Francisco as well in the Washing-ton-New York-Boston region.

Larry Dominique, president of auto con-sulting firm ALG, said the battery swap-ping strategy would allow Tesla to preserve the resale value of its Model S sedan, which sells for $70,000 before a federal tax credit.

“The challenge is going to be infrastruc-ture,” said Dominique, also a former vice president of product planning for Nissan Motor Co’s North American operations. “If I’ve got to go 20 miles out of the way, that defeats the purpose.”

So far, investors have embraced the company’s strategy and Tesla shares have

nearly tripled this year.Tesla is now beefing up its sales opera-

tions in anticipation of growing Model S sales. The company expects to have 50 stores by the end of the year, up from 34 during the first quarter.

But on the state and local level, Tesla ef-forts to sell cars directly to consumers have been stymied by auto dealers that account for a sizable portion of tax revenue in many states.

In 2010, auto dealers paid a total $458 million in corporate income taxes and li-cense fees to states, compared to $296 mil-lion for automakers and parts suppliers, ac-cording to a 2012 report from the Center for Automotive Research.

Musk said there is less incentive for sales people to push electric cars on buyers since they don’t require as much servicing, a key revenue stream for dealers.

“It’s harder to sell and then they make less money on service, so for sure we would be the last thing they would sell,” he said.

Tesla faces stiff dealer opposition in North Carolina as well as Massachusetts, New York, Colorado, Virgina and Texas.

“We need to apply more resources to this because we’re finding that it’s a multi-front war,” Musk said. “They outnumber us at least 10 to 1, maybe 20 or 30 to 1.

He added: “At the state level, very often, the car dealers are the biggest funders of lo-cal state politics. That’s been a problem for us obviously.”

Editing by Phil Berlowitz and Edwina GibbsSee the video: http://reut.rs/11FigwN

REUTERS TV

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EBay CEO confident of getting China payments licenseBY ALISTAIR BARR


EBay Inc’s PayPal division will be-come the first foreign company to secure a payments license in China,

CEO John Donahoe predicted, but the e-commerce giant is taking a cautious ap-proach to expansion in the country.

Donahoe sees “encouraging signs” from the Chinese authorities, but said it re-mained next-to-impossible to guess when its fast-growing PayPal unit would finally get the green light to operate in the world’s second largest economy, he told the Reuters Global Technology Summit on Monday.

A payments license would help to level the playing field for EBay in China, a huge market where foreign Internet companies traditionally operate at a disadvantage to locals such as Alibaba Group Holding Ltd and Baidu Inc.

“I am confident that PayPal will be the first non-domestic company to get a pay-ments license in China. That could be in three months or five years,” said Donahoe.

It is not clear whether PayPal will have to do this through a joint venture with a do-mestic company in which it owns a minority 49 percent stake, or whether it will be able to own a majority stake, Donahoe added.

“That’s the multibillion dollar question for Visa, MasterCard (MA.N) and every-one else in payments, not only PayPal,” said Gil Luria, an analyst at Wedbush Securi-ties. “I don’t think there is anybody who is not Chinese who knows the answer.”

Donahoe’s comments suggest that Pay-Pal is making progress toward obtaining a Chinese payments license, albeit slowly,

Luria added.China formally opened to international

business just over a decade ago when it joined the World Trade Organization. The financial and retail industries remain large-ly dominated by domestic companies such as Bank of China and Alibaba.

“The evidence would suggest that a non-Chinese company is at a disadvantage. We have chosen not to compete aggressively,” Donahoe said at the summit, held at the Reuters office in San Francisco.

But “over time you’ll see the Chinese domestic economy try to connect with the global one.”

EBay does around $6 billion of business in China, much of it Chinese companies selling to the rest of the world, Donahoe said. He expected growth there to continue to outpace the rest of the world.

The e-commerce market in China will grow 43 percent a year to $401.7 billion between 2012 and 2015, according to J.P. Morgan estimates. E-commerce in the United States is growing 10 percent to 15 percent a year, according to comScore.

EBay launched in China about a decade ago, aiming to match buyers and sellers online as it successfully did in the United States and Europe. However, the company pulled out in late 2006 after spending heav-ily on the effort.

Late last year, eBay dipped its toe back into China, through a partnership with on-line fashion retailer Xiu.com.

STATE-SPONSORED CYBERATTACKSDonahoe said eBay was working closely with foreign governments to combat online fraud and crime, especially money-laun-dering. About a quarter of PayPal transac-tions are cross-border. While eBay has not experienced state-sponsored attacks itself, it has noticed a marked increase in such cy-

berattacks, generally, in the past 12-to-24 months, he added.

EBay has been a favorite target of cyber-attackers and fraudsters for years, by dint of its size and the billions of dollars that flow through its website and PayPal annually, Do-nahoe said. While the CEO said he had not noticed a significant uptick in attacks on its own network, eBay had been ratcheting up spending in proportion to its growth in past years and now employed thousands of people to manage risk and fraud across its systems.

On the recent debate about the extent to which the U.S. government conducts sur-veillance within its own borders, Donahoe said eBay had never been asked to partici-pate in a broad information-gathering exer-cise. But he said it complied with legitimate requests for data on a case-by-case basis.

Donahoe personally welcomed the de-bate that has arisen since news first broke that the National Security Agency is scooping up vast amounts of information about personal communications from a broad swath of Internet companies.

“It’s appropriate for us to have a bit of a national dialogue and debate on privacy and on cybersecurity. And just so that what some-times goes unspoken gets spoken,” he said.

“We’re trying to make sure that all of our privacy policies and how we comply stand up to the spotlight. As the digital world becomes more of our everyday lives, there will be more opportunity and need for more of a dialogue.”

Additional reporting and writing by Edwin Chan; Editing by Edward Tobin, Andre Grenon, Phil Berlowitz and Stephen Coates

Follow us on Twitter: @ReutersTech

8


Batteries hold key to wearable device revolutionBY ALEXEI ORESKOVIC AND GERRY SHIH


Longer-lasting batteries are crucial for a new crop of wearable comput-ers whose rise may upend Apple and

Google’s dominance of mobile devices, two of the field’s pioneers say.

Wearable devices - from bracelets that monitor physical activity and sleeping pat-terns to clothing with built-in sensors and Web-ready glasses - may mark the next big technology shift, just as smartphones evolved from personal computers.

That transition has put the unglamorous battery in a starring role.

“All this wearable stuff is constrained by battery technology. It’s not a computing problem,” Hosain Rahman, CEO of Jaw-bone, told the Reuters Global Technology Summit on Monday.

While battery technology has not expand-ed at the same clip as miniaturization and dis-plays for instance, some wearables pioneers are hopeful for a breakthrough in coming years.

“There are other things that will come up five years down the road like remote charg-ing that will cause a huge next leap because it breaks this dependence on the battery. But right now the biggest challenge is the battery that’s small enough and serves you,” Soulaiman Itani, chief executive of Atheer Labs, said at the summit in San Francisco.

Itani likened wearable computing’s cur-rent stage of evolution to smartphones dur-ing the mid-2000s.

“It’s at the Palm stage, and you need an iPhone to come out,” Itani said, referring to Palm Pilots that predated the 2007 iPhone that won strong reviews but was rendered defunct

after Apple’s seminal device was launched.According to Forrester Research, about

5 percent of online U.S. adults say they wear a device with a sensor that can moni-tor some form of activity, such as running or sleeping.

Asked what gadget they would be most keen on using, 29 percent of participants cited a device that clips on to clothing.

Devices that attach to the wrist were close behind with interest from 28 percent, while glasses trailed other options, garnering interest from 12 percent of the participants.

Google is testing a $1,500 version of Glass, a stamp-sized electronic screen mounted on a pair of eyeglass frames. Ap-ple and Samsung Electronics are said to be working on other forms of wearable tech-nology, such as a smartwatch.

Apple Chief Executive Tim Cook has called wearable computers an area “ripe for exploration.” But during his comments at

the AllThingsDigital conference last month, he stopped short of confirming reports the company was developing a smartwatch.

Google and Apple, which have the two most popular smartphone operating sys-tems, have the heft to boost the nascent market and potentially control it, thanks to a vast number of users and the hundreds of thousands of apps that run on their software.

Some think the market for wearable com-puters won’t take off until Apple enters the fray, providing the kind of clever design and marketing blitz that helped transform smart-phones into a must-have consumer item.

“If Apple enters the market that would be a rapid leap forward,” said Forrester ana-lyst Sarah Rotman Epps. “Apple is a mar-ket maker. Any Apple device can sell tens of millions of units.”

Editing by Ed Tobin, Edwin Chan and Ryan Woo

Sleiman Itani (L), co-founder and chief executive of Atheer, and Hosain Rahman, co-founder and

chief executive of Jawbone, speak at the wearing computing panel during Reuters Global Technology

Summit in San Francisco, June 17, 2013. REUTERS/STEPHEN LAM

Read all Summit Stories: http://www.reuters.com/summit/Tech13

9


Data mining puts cloud security back on agendaBY ALISTAIR BARR


Concerns about security in the cloud are flaring anew after recent revela-tions about government data-min-

ing, likely spurring new technology to pro-tect corporate and consumer information, according to a panel of cloud experts.

Reports that the National Security Agency (NSA) secretly gathers user data from nine big Internet companies, including Microsoft Corp and Google Inc, have dent-ed confidence in cloud computing, especially among customers outside the United States.

The reports have triggered debate over how far the government can go in its quest to enhance national security, and also provoked outrage from many non-U.S. users depend-ing on large American Internet corporations for everything from email to Internet storage to social networking, industry executives told the Reuters Global Technology Summit.

“Are people concerned about doing business in the United States and what the U.S. could do with their data? The answer is yes,” RackSpace Chief Technology Officer John Engates said. “It’s something as a country we need to figure out, how to allay some of the fears about data moving through the United States.”

“That’s partly why people are gravitating toward the idea of private clouds that you can run in other countries.”

One solution is to build “private clouds” for companies, which combine on-site com-puter processing power with outside cloud resources, Engates added. This gives compa-nies more control over their data and keeps it in their own country.

Germany and China are among the countries exploring the idea of building “pri-vate” clouds within their borders - essentially versions of the public Internet cloud that they control. In the wake of the NSA scan-dal, France has openly called for a sovereign

cloud of its own.Meanwhile, businesses will gravitate to-

wards industry-based clouds in sensitive sectors from financial services to health-care. General Electric (GE.N) unveiled an “Industrial Internet” service on Tuesday to track, analyze and share data to and from products like jet engines and gas turbines.

“VERY REAL” SECURITY, PRIVACY CONCERNSThe cloud lets companies rent remote com-puting power and data storage by the hour, rather than buying their own servers and running them in expensive datacenters. This can save a lot of money and give com-panies more flexibility to quickly increase and decrease tech spending when needed.

AWS and other rivals, such as Micro-soft, Google, RackSpace Hosting Inc and Hewlett-Packard Co, are trying to win big corporations as cloud customers. However, data privacy and security have always been a barrier to adoption and the recent NSA revelations have exacerbated this.

But security and privacy are especially pertinent for consumers increasingly expand-ing their online profile and storing personal information in the cloud, the executives said.

“The security and privacy concerns are very real for consumers,” said Tien Tzuo, founder of Zuora, which sets up payments and billing for cloud software service providers.

“There’s a sense that there needs to be a new breed of technologies to give a little bit more control of their private information back to consumers. And I think we’re going to see a lot of innovation in that area over the next few years.”

Businesses on the other hand, can employ a wide range of tactics. AWS, Amazon.com Inc’s cloud computing business, provides ways for customers to encrypt data they store, said Terry Wise, director of business development.

Some also argue for a hybrid cloud ap-proach. Secure data can remain on the in-house servers while cloud computing does the “heavy lifting” in terms of raw process-ing, the executives said.

Wise said that AWS has already set up specific cloud environments for industries that have to comply with stricter regulations on things like data privacy and security. Its GovCloud service is built for government customers, while “FinQloud” is for the fi-nancial-services sector.

Despite persistent concerns about cloud security, some corporations, like Netflix Inc, are aggressively riding the trend and steadily eliminating inhouse computing power. Net-flix CTO Adrian Cockcroft told Reuters the videostreaming giant was down to one data-center from three just a few years ago, and now relied on Internet software provided by Workday and Google to handle such func-tions as human resources.

“We’re systematically disassembling the corporate IT components,” he said.

Reporting by Alistair Barr; Editing by Ryan Woo

John Engates, Chief Technology Officer of

Rackspace, speaks during the Reuters Global

Technology Summit in San Francisco, June 19,

2013. REUTERS/STEPHEN LAM

10


IPO? No thanks, say Silicon Valley CEOsBY ALISTAIR BARR AND SARAH MCBRIDE


The Silicon Valley IPO has lost its ca-chet, and big investors need to pay attention.

That’s the view of two prominent startup chief executives awash in offers of private in-vestment, who don’t think the headache of going public is worth the effort.

An IPO used to be the one mark of suc-cess for a new technology company, but as regulations have increased and more private investors have signaled interest in the sector, the prestige and financial necessity of an ini-tial public offering has waned.

High profile IPO disappointments like Facebook (FB.O) and Zynga have not helped the case for public markets.

Technology investors, particularly large public pension funds, need to adapt to that changing reality and adjust their mindset or end up missing out, Dave Goldberg, chief executive of SurveyMonkey, told the Re-uters Global Technology Summit on Tues-day. SurveyMonkey raised $800 million this year from investors including Tiger Global Management and Google Inc.

Pension funds help drive a 10-year in-vestment cycle for venture capitalists and private equity funds, which aim to cash out at the end of that period, Goldberg said.

“It’s important to choose initial inves-tors who are not twitchy and rushing for an exit,” said Roelof Botha, a partner at venture capital firm Sequoia Capital. “Wall Street’s quarter-by-quarter lens may make the CEO make sub-optimal long-term decisions.”

Silicon Valley companies including Twit-ter and Automattic, owner of WordPress, are among other more-established startups that have eschewed an IPO in favor of tapping new late-stage financing.

Kevin Hartz, CEO and co-founder of Eventbrite, has experienced both sides of

this financing conundrum. Xoom Corp, which he also co-founded, completed an IPO recently. Around the same time, Event-brite raised a new round of private financing that included a big secondary transaction with Tiger Global.

Sequoia invested in Xoom nine-and-a-half years ago and when the company com-pleted its IPO, the venture capital firm did not distribute any Xoom shares to its limited partners, Botha noted.

“It’s a headache to be out in the pub-lic markets,” Hartz said. He was CEO of Xoom from June 2001 to October 2005, but is now just a director and spends most of his time running Eventbrite.

Eventbrite had a “quasi IPO in effect” this year to raise money for the company and give employees liquidity, he explained, adding that it “went remarkably smoothly.”

PRIVATE TRANSACTIONSPrivate secondary transactions are an in-creasingly common feature of late-stage financing. The deals allow existing investors and long-time and former employees of startups to sell some of their shares to new investors, reducing pressure to do IPOs.

These transactions also let new inves-tors, such as hedge funds and even mutual funds, put money into private companies.

Tiger Global, a top technology hedge fund and private equity firm, is one of the biggest players in this area.

There is so much money chasing such deals now in Silicon Valley, though, that some fear it is creating bubbles that would be burst by an IPO.

“Because of the money available ... there’s going to be a lot of private valuations that potentially aren’t going to correlate with what the public market is thinking,” said Coatue Management’s Thomas Laffont.

Not all of Silicon Valley has soured on the time-honored IPO. For enterprise-facing start-ups, with large corporations as customers, an IPO remains a significant confidence booster.

When an enterprise software company is trying to get a corporation to sign a five-year contract, having a few years of cash in the bank helps a lot, Goldberg noted.

“They have viewed it as a branding event,” he said, “something they can show customers they have the capital to be around for a long time.”

Recent IPOs that have done well include enterprise software provider Workday Inc and professional social network LinkedIn, while consumer Internet companies like Facebook, Zynga and Groupon performed poorly.

Reporting by Alistair Barr, Sarah McBride and Edwin Chan; editing by Ed Tobin, Peter Henderson and Phil Berlowitz

(L-R) Thomas Laffont, senior managing director of Coatue Management, Roelof Botha, venture

capitalist of Sequoia Capital, Kevin Hartz, co-founder and chief executive of Eventbrite, and Dave

Goldberg, chief executive of SurveyMonkey, speak on a panel during Reuters Global Technology

Summit in San Francisco, June 18, 2013. REUTERS/ STEPHEN LAM

11


Race is on for Southeast Asia’s tech breakthroughBY JOHN O’CALLAGHAN

SINGAPORE, JUNE 19, 2013

Technology start-up companies in Southeast Asia are building mo-mentum but need more funding and

success stories to really take off, three entre-preneurs told the Reuters Global Technol-ogy Summit on Wednesday.

With 600 million people, Southeast Asia has some of the world’s fastest-growing econ-omies, a rapidly rising middle class and an enormous hunger for smartphones and other mobile devices. But it has yet to produce a huge social media or Internet company.

“You have to believe that you can find uni-corns here,” said Steven Goh, chief executive of mig33, a social entertainment platform with 70 million registered users concentrated in In-donesia, South Asia and the Middle East.

“It’s an exciting time. This feels like China in 2003 to 2005. Wouldn’t you just love to have been investing in that region at the time?”

Challenges for technology entrepreneurs in Southeast Asia include a shortage of ex-perienced people and a lack of “exits” for in-vestors to recoup their money through share offerings or stake sales.

“Large markets, lots of potential, moneti-zation, lots of sparks - pull out a calculator, this should completely make sense,” Goh said at the summit at the Reuters’ office in Singapore. “But where’s the success story? We’re all racing to build the first one.”

Funding is also an issue, with many com-panies able to raise $250,000 or so to get going but not win the backing of venture capitalists (VCs) as they grow, said Graham Lean, chief executive of Media Develop-ment Asia and Chorus Digital.

“There’s a lot of very early-stage money. The problem comes a little bit further on, where it’s too small for the VCs, it’s too big for the angels and you’ve got this gap,” Lean said.

“(Success stories) will emerge. It’s difficult, perhaps, now to spot which company it’s going to be, but over the next two, three, four years it will happen. At that stage, you will certainly get more funding directed at this sector.”

TARGET MARKETSDarius Cheung, who moved to Singapore from Hong Kong about 20 years ago, sold his mobile security company tenCube to McAfee three years ago and is now work-ing on a mobile payments start-up.

One of the inspirations for how to target consumers and position his new business is the WeChat service started by Chinese In-ternet group Tencent Holdings (0700.HK).

“WeChat got 300 million users within 18 months, and that’s because they figured out a lot of people don’t like to type,” he said. “So they use voice ... You press a button, you record and send a message.

“It’s focused enough to solve a problem but it’s also large enough to scale across Chi-na and Thailand and many Asian countries.”

In South Asia and Southeast Asia, most start-ups focus on the country they are in, said Goh, who set up mig33 in his native Australia, built it up in California’s Silicon Valley and then moved it to Singapore to be closer to his core market.

“When you look within this region, there’s a rising tide of all these little compa-nies starting up,” he said.

“The American companies are coming through Singapore to look at this region. When it comes to the Chinese, Japanese and Korean companies, in many cases they’re just ignoring Singapore and going straight to the countries themselves.”

Singapore is an attractive base because of its infrastructure, the ease of doing busi-ness and proximity to the rest of the region. Cheung, however, would like the city state to inject more seed money but spread it be-tween fewer businesses.

“We just don’t have enough talent to cre-ate a thousand start-ups,” he said, adding that policymakers across Southeast Asia could do more to make it easier to do business.

“Whether it’s immigration policies to working permits to business registration processes to banking and money flows and trade flows, if you can reduce friction within the region, it’s going to benefit everybody.”

Editing by David GoodmanBumboats cruise past bars and restaurants in Boat Quay (R), situated near skyscrapers in the central

business district of Singapore March 19, 2013. Picture taken March 19, 2013. REUTERS/EDGAR SU

12


‘Sharing economy’ companies go mainstreamBY SARAH MCBRIDE


A few years ago, renting out a spare room via the lodging website Airbnb bordered on daring. Now,

in thousands of cities around the world, it seems almost conventional.

But as the founders of the emerging cat-egory of “sharing economy” companies are learning, going mainstream brings a whole new set of legal and regulatory challenges.

Sharing companies enable people to share anything from a car to a house to an office desk, using the Internet to vet and match those who have something with those who need it.

Sharing-economy entrepreneurs say their firms are a boon to the economy, be-cause they enable productive use of assets that would otherwise be sitting idle. And they can enable all manner of people to, in effect, start their own small business.

“We could create millions of entrepreneurs who don’t fit into the market system,” Brian Chesky, co-founder and chief executive of Airbnb, said at a Reuters Technology Sum-mit roundtable in San Francisco this week.

Airbnb itself is an entrepreneurial phe-nomenon, with venture investors valuing it at $2.5 billion. Sharing firms such as Re-layRides (rent out your car), LiquidSpace (rent out a spare workspace) and TaskRab-bit (rent your free time for errands) are just a few of the myriad new firms with “shar-ing” models.

“Certainly, this is becoming main-stream,” said Jeremiah Owyang, an analyst at research firm Altimeter Group. Peer-to-peer rental of goods such as toys and electronics is already a $26 billion indus-try, estimates Rachel Botsman, author of “What’s Mine Is Yours: The Rise of Col-laborative Consumption.”

But moving beyond small circles of like-

minded people in tech-savvy cities to be-come national or global services with mil-lions of customers is no simple matter.

Airbnb has run up against local regula-tions in many cities that restrict the way rooms can be rented. In New York, for example, the city fined Airbnb host Nigel Warren $2,400 for renting out part of his apartment in September.

A judge ruled in May that Warren vio-lated a law forbidding short-term rentals by residents; the city’s Environmental Control Board has granted an extension until July 15 for him to file an appeal. Many cities have similar laws.

But Airbnb’s Chesky said he believes educating officials on the merits of his business could result in the city softening its stance, citing examples such as Amster-dam, where the city was originally against Airbnb and is now allowing it, he said.

One tactic: convincing officials that Airbnb is contributing to the local econ-omy. Earlier this month, Airbnb released a study showing that guests and hosts in Paris contributed $240 million to the local economy; Airbnb guests stayed an average of five nights, compared with two for those who stayed in hotels.

Similarly, insurance companies are grap-pling with how to handle car-sharing busi-nesses, in some cases discouraging their customers from working with them.

RelayRides, the biggest player in the sec-tor, provides car owners with $1 million in liability insurance during the rental. In other words, the owner’s existing auto insurance would not come into play if the rental driver gets into an accident, according to Relay-Rides Chief Executive Andre Haddad.

But the insurance industry raises ques-tions such as what happens if there is a dispute over whether a ding to the car happened while it was rented out, or while the owner was driving. And in serious ac-

cidents, $1 million may not be enough, a spokeswoman for the Insurance Informa-tion Institute said.

In February 2012 in Boston, a driver of a RelayRides car hit another car with four passengers and died. Insurance companies are still negotiating over who will pay what.

Haddad said he cannot comment on that case. But he pointed out the insurance RelayRides offers is several times what the average driver carries or state minimums.

“You are better off being in an accident with a RelayRides car,” he said.

GOVERNMENTS JOIN THE GAMESome of the companies advocate drawing local governments into using their services as a way to bring them around to seeing the law the sharing-economy way.

“We have libraries and city halls and municipalities that are using our platform to make their space more accessible,” said Mark Gilbreath, chief executive of office-rental service LiquidSpace, who cites the Palo Alto City Library and the County of Santa Cruz, both in California, as examples. “Demystify it by bringing them into it.”

Like most sharing companies, TaskRab-bit has put a lot of effort into background checks and other methods of assuring that those who provide its services are trust-worthy. Founder Leah Busque said about 12,000 people now actively offer their er-rand-running services on her site.

Increasingly, the executives say, par-ticipants are turning to social networking services such as Facebook (FB.O) to build comfort over doing business with someone they may not know.

Customers appreciate that sharing-economy businesses are often less expensive than comparable services, such as hiring a temporary staffer through a traditional agency. The services sometimes give a dif-

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13


Aaron Levie

CEO and Co-Founder

Box

Adrian Cockcroft

Chief Cloud Architect

Netflix

Andre Haddad

CEO

RelayRides

Ben Horowitz

Partner

Andreessen Horowitz

Bernard Golden

Author, Consultant

EnStratius executive and author of

“AWS for Dummies”

Brian Chesky

CEO and Co-Founder

AirBnb

Darius Cheung

CEO and Co-Founder

BillPin

Dave Goldberg

CEO

SurveyMonkey

Elon Musk

CEO

Tesla, Space-X

Graham Lean

Entrepreneur Investor and CEO

Media Development

Asia and Chorus Digital

Hosain Rahman

CEO and Co-Founder

Jawbone

Jen-Hsun Huang

CEO and Co-Founder

Nvidia

Jeremy Stoppelman

CEO

Yelp

John Donahoe

CEO

eBay

John Engates

CTO

RackSpace

Kevin Hartz

CEO and Co-Founder

Eventbrite

Leah Busque

CEO

TaskRabbit

Marissa Mayer

CEO

Yahoo

Mark Gilbreath

CEO and Founder

LiquidSpace

Terry Wise

Director Business Development

AWS (Amazon Web Services)

Thomas Laffont

Senior Managing Director

Coatue Management

Summit Speakers

FOR MORE INFORMATION:Jonathan [email protected] [email protected] [email protected] [email protected]

Paul Maritz

Chief Strategy Executive

EMC

Roelof Botha

Venture Capitalist

Former PayPal CFO; Director of Square,

Evernote and Tumblr

Sheryl Sandberg

Chief Operating Officer

Facebook

Sleiman Itani

CEO and Founder

Atheer

Steven Goh

CEO and Co-Founder

mig33

Pete Flint

CEO and Co-Founder

Trulia

Simon Segars

President and CEO Designate

ARM

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