Tech Brew Ride Home - Mon. 04/25 – Wherein I Race Elon On Breaking News

Episode Date: April 25, 2022

By the time you hear these words, Elon Musk might already own Twitter. A big Java vulnerability. All of Mark Gurman’s expectations for the iPhone 14. Where and by how much, tech worker salaries are rising. And why the struggles at Netflix might lead to worse television across the board. Sponsors: HubSpot.com discover.upland.me/techmeme Links: Twitter Eyes Deal With Musk as Soon as Monday (Bloomberg) Analysis: Musk tears up buyout playbook with $46.5 billion Twitter financing (Reuters) Major cryptography blunder in Java enables “psychic paper” forgeries (ArsTechnica) The iPhone 14 Is Less Than Six Months Away. Here’s What to Expect (Bloomberg) Tech Wage Inflation Puts Pressure on Companies (WSJ) Netflix and Facebook have given up most of the last few years’ gains since tech’s November peak (CNBC) The Netflix Nightmare: What Happens When an Industry Becomes a Squid Game (Vanity Fair) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, April 25th, 2022. I'm Brian McCullough today. By the time you hear these words, Elon Musk might already own Twitter. A big Java vulnerability has been patched. All of Mark German's expectations for the iPhone 14, where and by how much tech workers salaries are rising and why the struggles at Netflix might lead to worse television across the board. Here's what you miss today in the world of tech. Well, I wrote and recorded this segment last because I was trying to hold out for news to maybe happen before I published. Sources are saying that Twitter could reach a deal with Elon Musk for a takeover as soon as today.

Twitter's board apparently met Sunday to discuss Musk's bid, which is being considered more seriously after Musk's filing actually detailed where all the financing was coming from, quoting Bloomberg. Twitter started warming up to a potential deal. after Musk revealed a financing plan for the unsolicited bid that included backing from Morgan Stanley and other institutions. The situation is fluid and talks could drag on longer or fall apart, the people said. Still, the social media company is working to hammer out terms of a transaction and could reach an agreement as soon as Monday if negotiations go smoothly, according to the people who asked not to be identified because the information is private. Musk is lining up partners for the acquisition and continues to speak to potential co-investors, one of the people said, end quote.

So at the time of this recording, it hasn't happened yet, but I'm just going to get this out and hope Elon doesn't scoop me between now and then. Reuters is reporting that the bid deal includes a risky $12.5 billion margin loan secured against Tesla stock and potentially costing around $1 billion a year alongside the $21 billion from Musk himself. Quote, more than two-thirds of the $46.5 billion in financing that Musk unveiled on Thursday in support. of his bid for Twitter would come from his assets with the remainder coming from bank loans secured against the social media platform's assets. This is the reverse of how most investors structure buyouts with debt secured against the assets of the target company, typically comprising the majority of the financing. The bank's backing Musk's bid balked at providing more debt secured against Twitter, arguing that the San Francisco-based company did not produce enough

cash flow to justify it, people familiar with the matter said. Some banks were also worried that financial regulators could reprimand them if they took on more risk, the sources added. This will have an impact on Musk's returns, since debt secured against an acquired company can greatly amplify profits. To double the $33.5 billion, Musk is contributing out of his own fortune to the buyout, Twitter's value would have to go up by 1.4 times. Had he put in only a third of the deal consideration as equity, Twitter's value would have to go up by only 0.7 times for that money to double. What is more, Musk has agreed to take out a risky $12.5 billion margin loan secured against his stock of Tesla, the electric carmaker that he leads, to pay for some of the $33.5 billion equity check.

Were Tesla stock to drop by 40%, he would have to repay that loan a regulatory filing shows. He had already borrowed against $88 billion worth of Tesla stock, and the proposed acquisition financing for Twitter would push that figure to more than $150 billion regulatory filing. show. This would leave him little runway to get more cash out of Tesla shares in the short term, since Tesla executives may borrow no more than 25% of the value of their pledged stock. Musk's loan against his Tesla stock to finance his Twitter bid is also expensive, potentially costing him about $1 billion annually in interest and amortization expenses, a regulatory filing shows. That gives him an incentive to refinance the proposed debt package

at the earliest opportunity. It is not clear how much of the $21 billion in cash that Musk has committed to the deal is immediately available to him and whether he would have to cash out on some of his assets, end quote. Oracle has patched a critical bug in Java 15 and above, which let attackers forge TLS certificates and signatures, two-factor authentication messages, and more, quoting Ars Technica. The vulnerability which Oracle patched on Tuesday affects the company's implementation of the elliptic curve digital signature algorithm in Java versions 15 and above. ECDSA is an algorithm that uses the principles of elliptic curve cryptography to authenticate messages

digitally. A key advantage of ECDSA is the smaller size of the keys it generates compared to RSA or other crypto algorithms, making it ideal for use in standards including phytobase two-factor authentication, the security assertion markup language, open ID, and JSON. Neil Madden, the researcher at security firm Forge Rock, who discovered the vulnerability, likened it to the blank identity cards that make regular appearances in the sci-fi show Doctor Who. The psychic paper the cards are made of causes the person looking at it to see whatever the protagonist wants them to see. It turns out that some recent releases of Java were vulnerable to a similar kind of trick in the implementation of widely used ECDSA signatures, Madden wrote.

If you're running one of the vulnerable versions, then an attacker can easily forge some types of SSL certificates and handshakes, allowing interception and modification of communications, signed JWT's SAML assertions or OIDC ID tokens and even web authentication messages, all using the digital equivalent of a blank piece of paper. He continued, it's hard to overstate the severity of this bug. If you are using ECDSA signatures for any of these security mechanisms, then an attacker can trivially and completely bypass them if your server is running any Java 15, 16, 17, or 18 version before the April 2020 Critical Patch Update.

For context, almost all web-authent slash phido devices in the real world, including Ubikis, use ECDSA signatures, and many OIDC providers use ECDS-Signed JWTs, end quote. By the way, I'm sure I pronounced something wrong in this segment, but my apologies, as you heard, it was a whole alphabet soup, and I just didn't have time to try to look up all of the various pronunciations of that alphabet soup. Mark German's newsletter this week is basically a roundup of everything he expects from this year's iPhone 14, including a larger 6.7-inch non-pro iPhone Max, while the pro models will get the A16 chip, a 48 megapixel wide angle camera, and pill-shaped and circular notch cutouts. Goat in Bloomberg. First of all, the overall design from the iPhone 12 and iPhone 13 will stick around another year, expect the same flat edges and rounded corners, but as I've reported in the past, a new notch on the pro models.

There will also be a larger camera bump to fit in new sensors. That notch will include a pill-shaped cutout for face ID and a circular cutout for the camera. That will be Apple's solution until it's able to fully embed face ID and the front-facing camera into the display itself. Speaking of displays, one of the biggest differences in the iPhone 14 lineup is that Apple is shaking up its screen sizes. The relative sales performance of both the biggest and smallest sizes pushed Apple to rethink the lineup. The Max model is extremely popular, particularly in China, whereas the mini doesn't sell well enough to even keep it around. So here's the solution Apple is planning for the iPhone 14. A 6.1-inch iPhone 14, a 6.7-inch iPhone 14 max, a 6.1 inch iPhone 14 Pro, and a 6.7-inch iPhone 14 Pro Max.

So for the first time, the non-pro iPhone will get a 6.7.7. inch screen option. I think that version of the phone will be extremely popular, given that users will now be able to get Apple's largest iPhone size for at least $200 less than before. From what I've told, the new 48 megapixel sensor for the wide-angle camera, which is essentially the main camera on the iPhone, will be exclusive to the Pro models. The regular iPhone 14 line will stick to a 12-mixel shooter. And as has been reported, the Pro models will get Apple's new A-16 chip, while the standard models are likely to stick to the A-15 from last year or a variant of it. Beyond trying to make the pro stand out, the chip shortage may have contributed to this decision. In addition to outward-facing upgrades,

Apple is still working on bringing satellite connectivity to the iPhone. The company first aimed at adding that feature in last year's model, but now the capability could be ready this time around. To be clear, the iPhone won't be getting the ability to make calls over satellite networks. Instead, the feature is designed to report emergencies or send short text to emergency contacts when out of cellular service range, end quote. Some data points on the state of the tech job market for you. According to Comp TIA, U.S. employers posted 1.1 million tech jobs in Q1 of this year of of a year, average salaries rose 25% for cloud architects and 11% for just general engineers. This is from the years 2020 through this year 2022, quoting the Wall Street Journal.

The rising cost of hiring and retaining top tech talent is creating challenges for chief information officers and other tech leaders and has even caught the attention of chief executive officers. It's stunning, said Michael Burns, co-founder and executive chairman of ideal semiconductor devices and managing director of the Murray Hill Group, venture capital, and private equity firm. Mr. Burns said wage increases in the tech sector can top 20 percent, and in hot markets such as Austin, Texas, they can hit 30 percent. Wage pressures are acute in Europe, too, according to Vinit Jane, founder and CEO of Ignite Incorporated. The enterprise file sharing company employs 250 people in Poland where the average wage increases are 50%, and some workers have doubled their pay during

the past year, according to Mr. Jane. And these were not low paid people, he said. Rising salaries aren't limited to veteran tech workers, Jay Bagat, a software engineer at HashiCorp, a San Francisco-based enterprise software company said some hiring managers in the tech industry are offering recent graduates compensation packages in the six-figure range compared with starting salaries of 70 to 85,000 a few years ago. Outsized gains in tech compensation, while increasingly common aren't universal. An AT&T spokesperson said in an email that salary increases in that company's technology services organization averaged 5% this year.

Cisco Systems in an email said average pay levels for its software engineers across the U.S. rose between 5% and 10% this past year, end quote. sticking with numbers, think of this piece as sort of a bridge post to allow you to keep score on the state of play after Netflix's bad earnings last week, and then the big tech earnings this week, including for meta, quoting CNBC. As of Friday's close, Netflix had a market cap of $99.2 billion down from over $300 billion in November. Facebook did briefly join the trillion dollar club last year, but it is now down to $532.2.5.5.5.5.5.5.5.5.5.5. $6 billion. The past week was particularly bad for Netflix. The stock plummeted 35% on Wednesday, its worst day since 2004, after the streaming company said it lost subscribers for the first time in more than 10 years, and that it expects to lose as many as 2 million more in the current quarter.

Facebook reports earnings this week. The stock has been under pressure since its last earnings report in February when the company missed user number expectations and warned of increased competition from video apps like TikTok. Netflix is at its lowest price since January 2018, while Facebook hasn't been this low since April 2020. And then here are the cold hard numbers for you. Investors who got into Netflix and Facebook a decade ago are still solidly in the green, but newer shareholders are suffering. Here are the returns on a 10-year, five-year, three-year, and one-year basis. If you got into Netflix 10 years ago, you're up 1,321%. Five years ago, you're still up 50%. But three years ago, if you got in, you're down 42.88%. And if you got in a year ago, you're down more than 57%.

For meta, if you invested in the stock 10 years ago, you're up 381%. Five years ago, you're up 28%. And three years ago, you're still up 1.47%. But if you invested in the last year, you're down 37.91%. And finally today, one more little bit of color for the streaming wars situation. According to this piece in Vanity Fair, streamers are starting to act like TV networks. They're pulling back on the edgy content that originally made streaming

stand out, and seeking instead, quote, elevated broadcasts, things like sitcoms. This is all under financial pressure from competition. I think Julia spoke to some of this to some degree in the Twitter space on Saturday, but quoting Vanity Fair. Since streamers came to dominate the landscape, the assumption has been that broadcast TV is seriously endangered, that it's struggling to reach new generations of viewers, partly because of its risk-averse rules and its devotion to broad, inoffensive content. That existential threat is real, but some see a worrisome irony emerging. The streamers are acting more and more like the cautious industry they revolutionized. Streamers are pursuing what they call elevated broadcast, making sitcoms, dramas,

procedures, and reality TV central to their platforms. Some also appear to be pulling back from the challenging content that attracted audiences in hopes of scooping up every viewer the networks have left. Insiders say streaming executives are becoming less adventurous or more populist, depending on your point of view, because they're spooked by the overcrowded market and uncertain about how to keep expanding and retaining their subscriber bases. Netflix's stock price plunged after an earnings report projected a loss of 2 million global subscribers by June. A top executive there also said they are exploring a lower-price subscription that would include commercials. I'm always a little bit worried that half the streamers will go away at a certain point, says Alan Yang,

co-creator of unconventional comedies like Netflix's Master of None, Amazon's Forever, and Apple TV Plus's upcoming loot. Can the market sustain all of them spending the way they are and making the number of shows that they make, end quote. Netflix now abounds in escapist fare a la Emily and Paris, and love is blind. Amazon, famously the home of transparent and flea bag, dedicates an immense amount of money to epics

like The Wheel of Time and the Lord of the Rings of the Power. Paramount Plus is building a universe around Taylor Sheridan, creator of the Western mega hit Yellowstone, and Peacock is betting on pop culture reboots to reel in both the nostalgic older audience and younger viewers who respond to tried and true templates. I hear this panic around

the idea that some of these streamers are not going to exist in three years, and people get very conservative when that happens, says a showrunner. There's a real directive to agents and writers to broaden the appeal, which is crazily disheartening, end quote. I've got some ride home fund news for you. I emailed the ride home fund LPs about this this morning, that we've got our first unicorn in the portfolio. We've invested in Angelist itself. Basically, Angelus reached out to some of the more active GPs on their platform, which included us, and they offered us allocation in line with our recent investing activity. So, on behalf of the Ride Home Fund, I took all the allocation they give me, and now we're in on the Angelist Series B on the

same terms as Tiger and accomplice and everyone else that was in on that last round. Now, normally, I don't get to announce to everyone our investments in the same quarter that we make them. I mean the LPs, all see the investments in close to real time, but for once, I can actually announce that we're investors in Angelist in the same quarter that we've made this investment, which makes for a unique opportunity. If you invest in the ride home fund right now, I believe it is all the way up until June 1st, some portion of your money will go into this angelist deal. So if you've ever wanted to invest in a unicorn company while it's still private, you can right now via the ride home fund.

More info, of course, on investing in the ridehome fund at ridehomefund.com. You do have to be an accredited investor, of course. But still, if that's been a dream of yours to own a piece of a unicorn, you can right now. Of course, we hope to have lots of unicorns eventually. But given that we're only eight months old as a fund, you know, that sort of thing takes time. So it's kind of fun to jump the line a bit in this case. Talk to you tomorrow.