IBM: Financial Report Keep Up with Its Predecessors

October 25, 2016

IBM’s financial results for 2015-2015 third quarter kept up with their predecessors.

The Wall Street Journal, October 18, 2016, said “IBM Profit, Sales Slip But New Units Grow.” (See page B1 in the Harrod’s Creek edition of the venerable business newspaper.) I noted this passage:

The Armonk, NY Company said Monday that third quarter revenue was $19.23 billion, down 0.3%…Big Blue said its profit fell 4% to $2.9 billion during the quarter ended in September amid weakness in its systems segment, which includes mainframe computer hardware and operating system software.

According to “Barclays Says IBM’s Q3 Not Much to Get Excited About”:

Going by the weakness in third quarter margins, Barclays said it’s led into believing that the company’s cloud business doesn’t have the scale to achieve margin at or above the corporate average. The firm termed it as not good, as the company’s strategic imperatives, including cloud, are starting to reaccelerate.

Here in Harrod’s Creek, the fans of blue chip stocks are wondering when IBM will reverse its 18th consecutive quarters of revenue decline.

I suggested to the folks hanging out at the local car repair shop that they should ask Watson. Their response:

What’s Watson. Ain’t he the guy who lives in the next town over?

I was going to explain but decided to put oil in my old car. It is getting old. I don’t think it can hang on much longer. I call it “Big Blue 2 too.” That sounds like blue tutu, doesn’t it?

Stephen E Arnold, October 25, 2016

Yahoo Discount: Maybe a Billion or More?

October 7, 2016

Yahoot—err, sorry—Yahoo may become a Kmart virtual blue light special. That’s the gist of the message in “Verizon Reportedly Wants $1 Billion Discount on Yahoo.”

I learned from the source article:

amid a growing case of bad news at the search engine company, the telecommunications giant is reportedly pushing to reduce the acquisition price by $1 billion.

It seems the discount bulled from the purple stew as a consequence of the  loss of only 500 million, give or take a few hundred million, customers’ credentials for email. Then there was the purple blood from Yahoo’s handling of what I presume was supposed to be a secret process performed for the US government.

From the hollow in Harrod’s Creek, three observations surfaced when I spoke to my colleagues in rural Kentucky:

First, a management bonus to the Xoogler in charge of Yahoot—err, sorry—Yahoo seems appropriate in today’s Sillycon Valley world. A reward for devaluation of the purchase price is a high water mark for Google-trained professionals. Perhaps that should be low water mark?

Second, perhaps Yahoo has other surprises for its customers, stakeholders, and possible future owner? I know that big money people absolutely love surprises. What fun? A chance to explain how due diligence “missed” the minor security breach and the relationship of a company to law enforcement adds spice to the lives of those who combed through Yahoo’s data.

Third, one of the goslings noted that Yahoo was nagging some users to add a layer of security to their Yahoo mail accounts. That action is indeed timely and illustrates the superb administrative grasp the company has on the purple coal tender’s processes.

I look forward to more Yahoot—err, sorry—Yahoo news.

Stephen E Arnold, October 7, 2016

Technology Opens Cryptomarkets: An Opportunity and a Challenge

October 3, 2016

Cryptomarket’s rise is fueled by two things – anonymity and technological advancements. How these markets develop in future however will largely depend on technological breakthrough, particularly in the domain of cryptocurrencies.

In a blog published on Business Insider titled Here’s Everything You Need to Know About Drug Cryptomarkets Like the Silk Road, the author says that –

The hidden web, also known as the dark web, can only be accessed using anonymizing software that masks the internet user’s identity. Cryptocurrencies, the most famous of which is Bitcoin, are digital, non-identity-carrying forms of cash.

As trade and compensation for goods and services takes place with aid of defense grade technologies, the Dark Web was largely successful in masquerading itself from law enforcement agencies. That changed in 2013 when the FBI dismantled the well known cryptomarket Silk Road.

Bitcoin, a popular cryptocurrency also has been unable to gain complete confidence of its users. Frequent problems with exchanges, hacks exposes the digital currency to heavy fluctuations and raises security concerns for its holders.

The author of the article firmly believes that –

While trends indicate increased usage rates of drug cryptomarkets over time, there may be limits to their growth. One challenge could occur through compromises to the technologies on which cryptomarkets rely (such as Tor and Bitcoin).

In future, apart from drugs and illicit services, it is possible that even legal trades could be executed through cryptomarkets simply because they offer anonymity and would be efficient. The source does not address how widespread the use of cryptocurrency is among bad actors. That is understandable to some degree. Hopefully the forthcoming report from Interpol and Europol will provide hard data, not high level observations.

Kenny Toth, October 1, 2016

US Government: Computer Infrastructure

September 26, 2016

Curious about the cost of maintaining a computer infrastructures. Companies may know how much is spent to maintain the plumbing, but those numbers are usually buried in accounting-speak within the company. Details rarely emerge.

Here’s a useful chart about how much spending for information technology goes to maintain the old stuff and the status quo versus how much goes to the nifty new technology:


The important line is the solid blue one. Notice that the US Federal government spent $0.68 cents of every IT dollar on operations and maintenance in 2010. Jump to the 2017 estimate. Notice that the status quo is likely to consume $0.77 cents of every IT dollar.

Progress? If you want to dig into the information behind this chart, you can find the report GAO 677454 by running queries on the Alphabet Google system m. The title of the report is “Information Technology. Federal Agencies Need to Address Aging Legacy Systems.” Don’t bother trying the search box on the Web site. The document is not in the index.

If you are not too keen on running old school mobile queries or talking to your nifty voice enabled search system, you can find the document at this link.

I want to point out that Palantir Technologies may see these types of data as proof that the US government needs to approach information technology in a different manner.

Stephen E Arnold, September 26, 2016

Yahoo Security Breach: The Pee-Wee Purple Solecism

September 23, 2016

Remember ShrinkyDinks. Kids decorate pieces of plastic. The plastic then gets smaller when heated. I believe the ShrinkyDink management process has been disclosed. The innovator? Marissa Mayer, the former Google search guru turned business management maven.

Image result for shrinkydinks

What’s the ShrinkyDink approach to running a business? Take a revenue stream, decorate it with slick talk, and then reduce revenues and reputation. The result is a nifty entity with less value. Bad news? No. The upside is that Vanity Fair puts a positive spin on how bad news just get worse. A purple paradox!

ShrinkyDink Management. Pop business thinking into a slightly warmed market and watch those products and revenues become tinier as you watch in real time. Small is beautiful, right? I can envision a new study from Harvard University’s business school on the topic. Then comes an HBR podcast interview with Marissa Mayer, the Xoogler behind the ShrinkyDink method. A collaboration with Clayton Christensen is on deck. A book. Maybe a movie deal with Oliver Stone? As a follow up to “Snowden,” Stone writes, produces, and directs “Marissa: Making Big Little.” The film stars Ms. Mayer herself as the true Yahoo.

I read “Yahoo Verizon Deal May Be Complicated by Historic Hack.” Yahoo was “hacked,” according to the write up. Okay, but I read “hack” as a synonym for “We did not have adequate security in place.”

The write up points out:

The biggest question is when Yahoo found out about the breach and how long it waited to disclose it publicly, said Keatron Evans, a partner at consulting firm Blink Digital Security. (Kara Swisher at Recode reported that Verizon isn’t happy about Yahoo’s disclosures about the hack.)

CNBC points out that fixing the “problem” will be expensive. The write up includes this statement from the Xoogler run Yahoo:

“Such events could result in large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, including changes to security measures, to deploy additional personnel, to defend litigation or to protect against similar future events, and may cause damage to our reputation or loss of revenue,” Yahoo warned.

Of interest to me is the notion that information about 500 million users was lost. The date of the problem seems to be about two years ago. My thought is that information about the breach took a long time to be discovered and disclosed.

Along the timeline was the sale of Yahoo to Verizon. Verizon issued a statement about this little surprise:

Within the last two days, we were notified of Yahoo’s security incident. We understand that Yahoo is conducting an active investigation of this matter, but we otherwise have limited information and understanding of the impact. We will evaluate as the investigation continues through the lens of overall Verizon interests, including consumers, customers, shareholders and related communities. Until then, we are not in position to further comment.

I highlighted in bold the two points which snagged my attention:

First, Verizon went through its due diligence and did not discover that Yahoo’s security had managed to lose 500 million customers’ data. What’s this say about Yahoo’s ability to figure out what’s going on in its own system? What’s this say about Yahoo management’s attention to detail? What’s this say about Verizon’s due diligence processes?

Second, Verizon seems to suggest that if its “interests” are not served, the former Baby Bell may want to rethink its deal to buy Yahoo. That’s understandable, but it raises the question, “What was Verizon’s Plan B if Yahoo presented the company with a surprise?” It seems there was no contingency, which is complementary with its approach to due diligence.


The decision making process at Yahoo has been, for me, wonky for a long time. The decision to release the breach information after the deal process and before the Verizon deal closes strikes me as an interesting management decision.

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Digital Currencies: Anonymity and Trust Not Working at Peak Efficiency

September 23, 2016

No one knows if I am an addled goose. That’s part of the magic of the mostly anonymous Internet unless a person wants to create a “real” identity. Cryptocurrencies like Bitcoin operate on fancy technology and trust.

A single Bitcoin is trading at about $600 per token, frequent hacks are trashing reputation of the cryptocurrency for some users.

In an article that appeared on, and titled Hacked User Data Goes Up for Sale on Dark Web, the author reveals that –

In May 2015, BitcoinTalk was the victim of a social engineering attack after an unknown hacker targeted an employee of NFOrce, BitcoinTalk’s ISP. In a revelation on Reddit at the time, forum operator and administrator Theymos hinted that password hashes, private messages, emails and other user details could be compromised.

The stolen data can be used to gain access to user accounts that further can be utilized for stealing Bitcoins. Earlier in August 2016, Bitcoins worth $72 million were stolen from the Bitfinex exchange in Hong Kong.

Other major issue with Bitcoin is that it is unregulated. It can lose its entire value in a single day. Moreover, its exchange rate and monetary value is still pegged against the mighty Greenback.

As a reminder of the risk associated with cryptocurrencies, the hacked data is on sale on Dark Net for 1 Bitcoin token.

Governments are trying to find a way to corral Bitcoin and other digital currencies. As Bitcoins are unregulated, and pose threat for conventional currencies, governments and financial institutions are up in arms against entities that use this digital currency. As tracking technology improves, we think the anonymity of some digital transactions will be stripped away.

Vishal Ingole, September 23, 2016

Improvements in News and Military Technology Coming

September 23, 2016

I read two stories. These stories seem unrelated. The first is “Defense Department Reaffirms Its Commitment to Venture Investing.” The second is “Facebook and Twitter Join Coalition to Improve Social Media Newsgathering.”

Let’s look at the short item about the US Department of Defense reaffirming its interest in funding new technology. In my forthcoming, Dark Web Notebook, I point to a Web page which contains a run down of more than 100 open source software components. The software does information collection and processing functions. But the main point is that the organizations creating the code is one of the more interesting lists of entities performing next generation innovation for the Department of Defense. The write up cited above states:

Not everyone is comfortable with a government entity backing what can be sensitive technologies (not to mention the privacy issues wrought by the NSA’s practices and deployment of new tech tools).

My view is that In-Q-Tel is a more visible entity than some of the Department of Defense activities. DoD, in fact, has been in the innovation far longer than In-Q-Tel. One might suggest that substantive innovation emerges from the DoD programs; for example, the DoD is the progenitor of the Internet. My view is that more disruption may be evident in what the DoD is funding than in what the In-Q-Tel organization is funding. The write up misses an important point in my opinion. DoD looks out the windshield of innovation and In-Q-Tel looks at the world via a rear view mirror. Case in point: funding open source software related to Dark Web actions. In-Q-Tel funding companies which often have been in existence for years prior to receiving an infusion of cash and some help making sales calls in the US government.

The second write up also underscores a need for change. The idea is that old fashioned approaches are not needed. New fangled approaches are the cat’s pajamas. The problem is that the new fangled methods make some interesting errors. To fix this, high profile social media companies are going to invent a fix via a coalition.

A method with practiced for news gathering exists. Traditional newspapers illustrate the method. The process works reasonably well. More accurately, the process worked when resources were available to employ individuals who conducted interviews and performed research.

The traditional method changed with software able to count who clicked on what, people with many digital friends, and systems which collect information and figure out what is important.

Now after some interesting mistakes, Internet giants are eager to improve what I call the millennial news method:

Channel 4 News, the Telegraph, the New York Times, Washington Post, BuzzFeed News, ABC News in Australia and Agence France-Presse are among more than 20 news organizations to have signed up to the partner network, which is being organized through Google-backed First Draft.

Now Facebook (big dog) and Twitter (starving dog) are in the game. The point is that the millennial methods appear to work. Unfortunately fake news and other oddities creep into the smart systems. The new methods also help foster tension between the remaining traditional news outfits and the comparative newcomers or disruptors.

The idea of teaming up to improve smart software is interesting. The goal, of course, is to obtain high value information at the lowest possible cost; that is, with the fewest number of humans as possible.

When I read these two articles, I noted three ideas which struck me as worth thinking about:

  1. Methods exist which work yet interest gravitates away from what works to a need to find a better, more innovative process
  2. The perception that traditional methods practiced by the Department of Defense and old school newspapers are less useful than “new” approach may slow down innovation or, even worse, get the focus fuzzy.
  3. The Silicon Valley fascination with the bright and shiny may produce wasteful, duplicate efforts.

Stephen E Arnold, September 23, 2016

Featurespace Raises Capital for Bank Fraud Monitoring Technology

September 21, 2016

Monitoring online fraud has become an increasingly popular application for machine learning and search technology. The Telegraph reported Cambridge AI fraud detection group raises £6.2m. The company, Featurespace, grew out of Cambridge University and its ARIC technology goes beyond rule-based fraud-detection. It scans all activity on a network and thus learns what registers as fraudulent or suspicious. The write-up tells us,

The company has now raised $9m (£6.2m), which it will use to open a US office after signing two big stateside deals. The funding is led by US fintech investor TTV Capital – the first time it has backed a UK company – and early stage investors Imperial Innovations and Nesta.

Mike Lynch, the renowned technology investor who founded software group Autonomy before its $11.7bn sale to Hewlett Packard, has previously invested in the company and sits on its board. Ms King said Featurespace had won a contract with a major US bank, as well as payments company TSYS, which processes MasterCard and Visa transactions.”

Overall, the company aims to protect consumers from credit and debit card fraud. The article reminds us that millions of consumers have been affected by stolen credit and debit card information. Betfair, William Hill and VocaLink are current customers of Featurespace and several banks are using its technology too. Will this become a big ticket application for these machine learning technologies?

Megan Feil, September 21, 2016
Sponsored by, publisher of the CyberOSINT monograph
There is a Louisville, Kentucky Hidden Web/Dark Web meet up on September 27, 2016.
Information is at this link:



SLI Search: Loss Narrows for $35 Million Business

September 14, 2016

SLI Systems offers an eCommerce search system. If you followed the history of NBC’s search efforts, you may know that SLI Systems has some DNA from Snap Search. The company is an interesting one. It competes with EasyAsk, another eCommerce search vendor.

SLI released its financial results in a news release titled “SLI Systems Announces Financial Research for the Year to 30 June 2016.” (Some news releases have the ability to disappear or become a pay to play feature. The release was online an free as of September 6, 2016.)

The write up confirmed what most stakeholders in search and content processing systems may avoid thinking about: Generating revenue in today’s economic climate is difficult.

SLI Systems is a $35 million dollar company. The firm lost several big accounts for a range of reasons. The good news is that instead of losing $7 million in FY2015, SLI reported a before tax loss of $162,000. There are no details about what caused the hefty loss 12 months ago or what a new management team to reduce the shortfall by almost $8 million. Great management? Magic?

I circled this chunk of management explanation:

SLI Systems Chairman Greg Cross said: “The 2016 financial year has been a period of significant change for the company. Chris Brennan took over as Chief Executive Officer in October 2015 and since then we have recruited three key executives: a new Chief Revenue Officer, a new Chief Marketing Officer and a new Vice President of Customer Success. Drawing on the expertise of these new recruits and the broader management team, SLI has put in place new business processes and organizational structures to lift the performance of the business for the long term.

He added:

“The company remains in a strong financial position. Although we expect net cash outflows in the coming year as we return to a growth trajectory, we remain confident that we have sufficient cash resources to support the company’s plan. We are looking forward to the remainder of the year with cautious optimism,” Mr. Cross said.

SLI is based in New Zealand. The mot recent version of the company’s Web site does not make it easy to locate the company’s address at 78 – 106 Manchester Street. Christchurch 8011. New Zealand. New Zealand Phone: 0800 754 797. The company’s office appears to be in the Enterprise Precinct Innovation Center. The firm has an office in San Jose, California. SLI’s office locations are available at this link.

Stephen E Arnold, September 14, 2016

Alphabet Google Spells Mess for One Expert

September 10, 2016

An MBA infused article caught my attention. The title was a magnet, and I was not hunting for Google related information. Nevertheless, I read “Larry Page’s Grand Plan for Google Looks More Like a Mess than a Success.” Before I comment on the write up, I must admit I liked the euphony of “mess” and “success.” Ogden Nash would have approved I surmise.

The main point is that Google leveled up and created Alphabet. The idea was that a Ling Temco Vought style outfit would be more in tune with the Loon balloon business, the solving death business, the Google Fiber business, and the other alleged money engines the online ad firm was inventing or, at least, me-too’ing.

The write up points out that some financial discipline is in evidence. Google Fiber and the quite exciting Nest initiatives are under scrutiny. I noted this passage:

the company’s self-driving car project still hasn’t announced any business plan and a bunch of people have left. The life sciences division Verily has been accused of peddling “slideware,” and Google just killed its ambitious build-it-yourself-phone.

Right, the modular phone. Great idea. What happens when the little gem is dropped or the coefficient of friction decreases with use and the electronic bits drop into the garbage disposal?

The write up adds:

right now, the parts of the company that were once the perfect marketing for luring potential talent and showing off Google as the world’s most influential tech pioneer, look more like a mess than an advertisement.

Okay. That seems to be a bit negative.

Here in Harrod’s Creek, we love the Alphabet Google thing. The MBA-ish write up does not ask this question, “Why does Alphabet Google assume that its new initiatives will succeed?” The DNA of Google is anchored in the proteins of and This means Yahoo purple in these Alphabet Google progeny.

How is that family tree performing? After 15 years, Google has one revenue stream. Google’s success with “innovations” seems to be counter to the image the company tries to project. Do MBAs understand the mentality of “go to” members of the math team and science club? The last time I drove down 101 I noted a strong scent of musk when a Google self driving car crept past me. Interesting.

Stephen E Arnold, September 10, 2016

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