Net Neutrality Friday

As we enter 2017, there is a big change coming. We have a new FCC coming with the new Administration. There will probably be some changes coming with that new FCC. Instead of a 3 - 2 Majority for Democratic Politicians, it will be a 3 - 2 Republican majority. By the way, that should tell you something. Being an FCC Commissioner is a political position. In general, those folks are worried about being reelected or positioning themselves for their next appointment. We don't have 5 Engineers there that make the best technical decisions. We have 5 Politicians that make political decisions. They are backed up by a Bureaucracy. That is called the FCC Staff and it is mostly lawyers. Very little technology understanding goes on there either, but at least they have no formal ties to parties or next steps up the political ladder. If it is not blatantly obvious, I am highly cynical when it comes to politicians. I have visited the FCC many times and have not come back with a great deal of respect.

The one thing that we do know is that President-Elect Trump has taken a negative view on the AT&T-Time Warner Deal. People in communications services probably forget that the FCC has jurisdiction over the broadcast industry as well. I am not sure if it will go through, be modified, or blocked by the FCC or DOJ.

What I hope we don't see is a repeat of CAF and CAF-II. CAF stands for the Connect America Funds and was intended to help get us to Universal Broadband coverage. We have allocated Billions of dollars and essentially nothing happened. There were some networks built but in the grand scheme of things we have not seen the kind of gains on this.

I have recently run into the second push I have seen for Open Access, particularly funded by Municipalities. This time it comes from the MEF (Metro Ethernet Forum). One of the problems with Forums like this is that they try to keep going after they have won. They want this notion of services over Ethernet instead of over the Public Internet. For residential services, I think this is a failed approach equivalent to the old walled garden services of the feature phone era of cell phones. That ship has sailed and we now have completely viable OTT (Over The Top) video services on the public Internet including Netflix, Hulu, Sling TV and many others. That kind of approach is a step into the past and I think it is a bad idea. The MEF should probably just throw a victory celebration and declare itself defunct. The former CEO of Vinci Systems had an ATM concentrator company that he exited out of cleanly as ATM died. There was no bankruptcy and all the employees were laid off with severance. Now that is a clean death for an organization that has lived past its useful life. The MEF should do the same. It created standards, promoted them and got them adopted by the industry. It won and that means it is done.

So, we are probably up for another eventful year. I look forward to sharing it with you!


Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

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Sonoma County: News and Notes

Election Season is over but Earnings Season has just begun. This week we cover Calix and I will be showing you a bit of what gets missed on these calls because of who is on them.

We will start by capturing the raw numbers. Revenue was $121M in Q3 and this was a record number for Calix and growth of 8% year over year. Earnings were $0.12 per share non-GAAP and $0.01 per share GAAP. Now just a reminder there was some extraordinary benefit this quarter in Operational Expenses (OPEX) due to the end of the litigation over the acquisition of Occam Networks some years ago. Q4 looks strong on the Revenue side as well but lower Gross Margin and a return to more normal OPEX numbers make the company break-even at best.

The stock reacted with a shrug. To put things in perspective, from September 2011 to today the stock has hovered from about $6 to $12 with the bulk of the time above $8/share being in the 2nd half of 2013 through the first half of 2014. Meaning that if you play the stock as a long-term investment that it has really not done anything over the last 5 years. In fact during that span, Calix stock is down over 45%, the S&P 500 is up over 30%, and the NASDAQ is up over 45%. The company is solid financially and has good products and customers. But the last 5 years has not been kind to investors.

So, I read the call transcripts and want to point out some things that the analysts missed. I know most of these analysts and if they want to hire me to help them ask better questions, they know how to find me. Simon Leopold was answered about the products in the Verizon trial. The follow-up that Simon missed was to ask about the ONT. Here is why. You could have figured out what services were being tested. Verizon used MOCA to deploy data in residential and had 3 wavelengths for overlay video. I suspect (nobody has said this) that the trial is an overlay of FiOS for wireless deployment. If that is true, then the ONT would not need voice ports, MOCA or a 3rd wavelength. That would help us understand any upside from a Verizon contract.

Another miss was on Gross Margins. The analysts both Greg Mesniaeff and George Notter asked follow-ups around the guidance down on Gross Margin. The company laid this off on an increase in Service Revenue and that Revenue has lower margins. Here is the thing. Calix has now announced its 2nd Cloud "product" as part of this call. These products should have very high Gross Margins if they are doing well - not quite software margins but well above corporate average. To answer George's question, these products SHOULD be the path to the goal of 50% gross margin and SHOULD offset the lower margins of Professional Services. If they aren't then that will tell you something about the customer's use of them.

Have a great week!


Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

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Net Neutrality Friday

This has been an extremely busy week in the regulatory issues in for the Internet and Telecom.  I am going to start with the smaller of the two largest pieces of news and then move to the smaller.  There is enough to talk about for a few weeks here and we will have lots of ground to cover.

The small news is that Google Fiber has pulled back on its expansion plans and is laying off around 9% of its staff.  This makes a lot of sense to me, as I always thought that this was an experiment.  People call it a science experiment, but I call it a business experiment.  Google makes so much money that they look for ways to deploy their capital effectively.  This leads them to try lots of things.  When I was at Red Condor, we competed against a company named Postini.  Postini became part of Google and is the spam filter for Gmail.  After spam filtering became an extreme commodity, Google stopped selling Postini as a separate product.  You can only get Postini if you use Google Docs.  I used to use a login landing portal called iGoogle and Google sent me an email and turned it off a year later.

Why does Google do this?  They are all about advertising dollars.  They are willing to invest and play to figure out to see if a technology or method will eventually get them those dollars.  Youtube is an example of this.  At one point, Google was losing $150M per month on Youtube.  Things are now very much different and Youtube is a great money maker for Google.  But if the investment does not pan out, Google exits.  I suspect that Google will look for a buyer for Google Fiber over time.  One of the overbuilders might be interested, it is too sporadic of a network for an incumbent to purchase.  The better option, to sell to incumbents, would be to sell one property at a time.  The incumbent for that territory can choose to use that construction instead of doing its own.  More to come on this in the future.

The larger news is that AT&T is buying Time Warner for $85B.  The deal is 1/2 stock and 1/2 cash.  I think that is interesting as I am sure that came from Time Warner.  The idea would be to provide a huge benefit now, with upside that Time Warner is not sure of.  If they thought AT&T was a growth stock, it would be an all-stock deal.  More importantly for us, this is a move similar to Comcast's purchase of NBC-Universal.  There will be plenty of uproar over it, but I think the deal will go through.  All AT&T will have to do is point at Comcast and nobody (okay Trump has called for it) has asked for Comcast to be broken up.  Comcast has a lot more broadband subscribers and so it will be hard to say that the combination will impact consumers more than Comcast did.  There is a lot here as well to discuss whether this is a good idea to why it is happening to what we should expect next to how Google, Verizon, and other companies might react.

Have a great weekend!

Jim Sackman

Focal Point Business Coaching

Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business - Change Your Life!

 

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Net Neutrality Friday

Well since we are experiencing a huge Internet kerfluffle today, I wanted to take some time to explain it a bit and help you with what you can do or might do in the future.

Today a company named Dyn was suffering what is called a DDoS attack. Dyn does most of its business on the infrastructure of the Internet. In this particular case, it was having its DNS service attacked. DNS stands for Domain Name Service and it is the software that translates the URLs that you type in (for example http://jimsackman.com) into IP addresses. Yes, there is more to it than that. But for most people that are a reasonable enough understanding of what it is. So, today you were probably seeing DNS failures for some websites. This was not on your end. Dyn was unable to translate your request into something your computer could use in a reasonable time.

The reason for this is what is called a DDoS attack. DDoS stands for Distributed Denial of Service. If you are older (like me), you might remember trying to call your mother on Mother's Day and getting an "All Circuits are Busy." message. Well, that is exactly what a Denial of Service attack is. The idea is to swamp the service with so many requests that very few, if any, get serviced. Since it is relatively easy to restrict access from a single server, people changed the attack to be distributed. This means that the attack came from many places at once and was started by some form of command and control action. Think of this as many computers being infected and they all send out attacks because a 3rd party told them to. That is a DDoS.

Why attack Dyn? Well, it is one of the more well-known companies in the Internet Infrastructure business and it has a business in cyber security. Dyn has published books on how to defeat DDoS attacks. So, this could make the hacker famous or more likely infamous. There are places on the Intenet where these people gather to share war stories about triumphing over evil or companies or just for the thrill of having done it. But it does point out a couple of more challenging issues with being solely dependent on the Internet.

One last note today for your evaluation. Many of these Internet-connected systems are what are called Embedded Applications. These are devices that sit on the Internet to do what you want them to do. These are devices from Connected Cars to that Ring Camera-Doorbell item to Webcams. All of them have a special vulnerability to hacking because nobody takes a look to see if they are infected. This means that hackers might have millions of more computers to go after to run these attacks. Something to think about.

Have a great weekend!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business - Change Your Life!

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Overcoming Fear in Sales with Preparation

Two weeks ago I posted about how many Business Owners did not want to be associated with Sales. I hope I convinced you that today there is an ethical way of Selling. One of the other objections to selling is that people fear rejection. For many Small Business Owners, they take a lost sale as a rejection of them as a person. This means that they are less likely to want to sell going forward. This is not a great way to succeed, so we need to change that. Remember that customers don't buy for a myriad of reasons. A competitor might have a better solution for that prospect (or be a personal friend of the prospect). The prospect may not be ready to buy or be unable to buy. You have to remember the sale is not about you, it is about the prospect. Some will and some won't.

But to help alleviate the fear, even more, there are some proactive steps that a people can take to improve their chances at closing deals. By taking these steps, they will be in greater control of the sales process. This reduces stress and fear as a by-product of the work.

The first preparation is to create a list of objections. Now we need to put price objection to the side for the moment. Everybody gets price objections and we have ways of working on that. If you are down to negotiating price, then all we are talking about is whether the deal is good business for you or not. You want to create a list of 3 to 5 objections, that you hear on a regular basis. Then create 1 or more responses to each of these objections. You want the responses to be natural for you and be complete for the prospect. Remember, objections are a good thing. A silent prospect is unlikely to buy. If they are talking about your product, you have a chance to overcome them and close the business.

The second preparation is to research the prospect and his or her company. The starting point is the company website. There is information about what they care about on the site. On top of that, you can find even more information on the blog, presentations, and social media pages of the company. Now these latter items are sometimes created by 3rd parties, so have lesser value than the website. But don't stop there. Look into the social media presence of the prospect. You will find out things about what the person is like and what they like. All of this information should allow you to tailor your presentation to the prospect. That customization will show effort and will be rewarded with trust.

The goal here is to help you take control of your sales processes. When you do that, you will relieve your stress and your fear. In turn, you are more likely to close sales. And that is the name of the game.

Have a great day!


Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business - Change Your Life!

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Sonoma County: News and Notes

This week Santa Rosa enacted its first rent control. This covers a relatively small part of the total number of rental units - about 11,000 out of 78,000. But it does highlight the problem that I have been posting about this year. Sonoma County housing costs are out of control compared to incomes.

The problem with this rent control is that it affects so few and so it won't actually relieve the problem. On the other hand, it is like a line in the sand was crossed and the folks against rent control are already recruiting to get it repealed. That can not happen before it goes in place on September 29th, but there it is. Battle lines are drawn. Nobody will be happy and yet the actual problem will remain. Pricing will remain too high.

The problem is that the only thing that will reduce prices or at least make increases smaller is to add more housing. Given our current occupancy rates above 96%, this means that adding a few homes here or there is not going to work. We need to add literally 1,000s of units. To get to 90% occupancy, this is over 5,000 units. In Santa Rosa. More if we want to reduce the burden on all of Sonoma County.

What are the impediments? First, regulation. Construction costs and timeframes are greatly increased by the cost of the regulation. This is particularly true in Santa Rosa but is true throughout Sonoma County. On top of that, there are height issues as well (which I will add in below). This means that builders want to maximize the value of construction. And that means, higher end units are preferable.

The second impediment is land. We have significant Green Belt initiatives and work that keep the construction boundaries smaller. We all love how beautiful the county is but do realize that taking land away from construction means an increase in home prices. The most obvious answer would be to build up in Santa Rosa. However, this is not something that is going to fly anytime soon. If we can't build up and we have to build to a certain size and within specific zones, then we have real limits to what we can do in adding more housing.

The third impediment is transportation. We are a cul de sac. I like to call us the end of civilization in Northern California. (I am not sure the following is true but its close)...I think there are as many people in Santa Rosa as there are along 101 from Santa Rosa to Oregon. On top of that, we have a complete lack of Mass Transit that connects us to the larger employment markets in the East Bay, South Bay, and San Francisco. This is not something the SMART Train will fix. This means that a company in San Jose will have difficulty managing a significant office in Petaluma. That is the reason our tech economy does not grow. When the companies get purchased, most of them move away over time. Unfortunately, the businesses that do stay are those that generally offer lower wages.

And now we have reached full circle. We need more housing to support our local economy. We struggle with where and how to build this housing. We are not honest with ourselves about our situation and our decisions around it. I don't have the one answer that will fix it all. I am not sure that anybody does. But we need all of us to get to (what I think) is our common goal. We want a county that we can love to live in.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business - Change Your Life!

Visit the FocalPoint Norcal Forum - We have many tools for helping your Business!