best hosting information: April 2019

Thursday, April 18, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

TORONTO (Reuters) - Facebook Inc plans to open an artificial-intelligence laboratory in Montreal, which will be run by prominent AI researcher Joelle Pineau, two people familiar with the plan said on Friday.
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Facebook hires prominent artificial-intelligence expert to open Montreal lab

Wednesday, April 17, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Tuesday, April 16, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Monday, April 15, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Sunday, April 14, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Saturday, April 13, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Friday, April 12, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Thursday, April 11, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Wednesday, April 10, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Tuesday, April 9, 2019

Facebook hires prominent artificial-intelligence expert to open Montreal lab

Want to Build a Great Culture? Start By Leaving Your Ego at the Door

As a leader, you need to make dozens of decisions a day, inspire confidence in your team, and always be -- or seem -- right. Is it ever possible to put aside your ego?

The last part is incredibly important. When you"re building a startup, what matters is achieving results: Creating great products, providing great service, generating sales and revenue and results. That"s what matters.

At LogoMix, we went from $0 to $15 million in revenue and eventually sold to a Fortune 1000 company. Our egos didn"t matter. My ego definitely didn"t matter. What mattered, what we celebrated, were results.

So how do you keep the focus on the mission and on company goals? The process starts with you: the leader of the company.

An employee may disagree with you. An employee may say they would have done something differently. An employee may even talk down to you, even though you"re the CEO.

As a founder, those moments are never fun. You have a choice: You can get defensive, snap back, or rest on your laurels as the founder.

Or you can take a step back, listen, think about what you hear, and create a culture where your team can share their feelings with you. Even if their feelings hurt your feelings.

Why swallowing your pride is crucially important

Do that and you can accomplish a lot more than you might think. If you can make sure your team feels free to challenge and even criticize you -- to your face -- you"ll naturally create a culture where employees feel free to suggest new ideas and different ways of doing things.

They"ll feel comfortable raising issues, giving feedback, and proposing changes. After all, when people feel comfortable saying something negative to the person in charge, they will definitely feel comfortable saying something they think will generate a positive outcome for the company.

That"s why swallowing your pride is so important. You build better and more trusting relationships with your team, and an environment where the best ideas win. Where the best results win. Where taking the right steps, working on the right projects, and focusing on outcomes -- not egos or agendas -- wins.

Don"t stop there. Help your employees learn to check their own egos at the door. Too many organizations -- or people in organizations -- lose focus on the mission and how to best work together to achieve that mission by letting their egos get involved. When that happens, it"s your job to help them circle back to the real goal you"re trying to achieve.

How to encourage the same behavior in every leader

Too many managers and supervisors also forget to check their egos at the door. Instead of rolling over a junior employee who criticizes a decision and putting him in his place, help them understand how to talk through the issue without letting their egos get the best of them.

The best way to do that? Share a few stories of times when you"ve been criticized and handled it poorly. Explain what happened. Explain how your ego kept you from handling the situation the best way it could be handled. Show a little vulnerability. Be the cautionary tale.

The supervisor or manager will appreciate your honesty, because we typically learn best from stories, and he or she will definitely remember the takeaway. The goal is to walk the fine line between maintaining yourself as a great leader and maintaining a healthy ego without letting your ego enter into the way you interact with and lead people.

Accept criticism with grace, let the best ideas win (even if they aren"t your ideas), and set an example for how other leaders in the company should act. If you do those things, your team will stay focused on results.

Which, at any company, are what truly matter.

This Shark Tank Startup Wants to Help You Crush the GMAT and Get Into a Top B-School

I checked in with Shaan to find out how he"s expanded his company -- and what happens when your startup partners with Mark Cuban.

Adam Grant recently said, "Those who can, don"t teach." Yet clearly that"s not the case for you.

Prep Expert is a test-prep company I started in college after I raised my own SAT score from average to perfect.

My perfect SAT score changed my life. I was accepted into elite universities, won a half million dollars in scholarships, and even got the meet the President of the United States!

The goal was -- and is -- to help other students change their lives by improving their own test scores. After closing a deal with Mark Cuban on Shark Tank we have helped tens of thousands of students do exactly that: Improve their SAT and ACT scores and gain admission into the nation"s top universities... and many earn scholarships as well.

So why a GMAT course? That"s a much smaller market.

Just like I launched an SAT course after my experience raising my own SAT score, I decided to launch a GMAT course after raising my own GMAT score 100 points.

Although I didn"t get a perfect GMAT score, my 98th percentile score helped me gain admission to the Yale School of Management, with scholarships. So I want to help other graduate business school hopefuls achieve their own MBA dreams.

Let"s take a step back. Is going to business school worth it, especially for entrepreneurs?

There is definitely a cost to going to business school. Not only is graduate business school tuition at at an all-time high, the opportunity cost of going to business school should also be calculated before any potential applicant considers going for an MBA.

I get that. But what about for entrepreneurs?

I know: Every internet marketer says you don"t have to go to business school in order to become a successful entrepreneur.

While that is true, business school does help. As an entrepreneur who went to business school, I found business school offered three main advantages. First, the formal business education of operations, finance, economics, marketing, accounting and management helped me transform Prep Expert from an unorganized small business into one of the top test prep providers in the country -- and into a company a guy like Mark Cuban wanted to invest in. Two, the network of like-minded entrepreneurs and mentors that business school offers is unmatched.

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And three, graduate business school can serve as a great launchpad to work on any business, with excellent advisors and feedback to help take your business to the next level.

So let"s talk about the GMAT, a test I plan to never take. How similar is the GMAT to the SAT?

The SAT and GMAT are so similar that I used many of the SAT strategies I developed for Prep Expert to crush the GMAT. Unlike content-based exams like the ACT or MCAT, the SAT and GMAT are problem-solving based exams, and that allows students to use critical thinking to arrive at the correct answer.

What does that look like in practice?

Let"s start with the GMAT Quantitative section. It essentially tests math questions.

One GMAT Quant strategy we teach at Prep Expert is "Substitute Abstracts with Tangibles" or "SAT". Using this strategy, we can avoid doing any algebra at all on many GMAT algebra problems. You simply plug in a tangible number (such as 2) for an abstract variable (such as x). Then, you determine which answer choice matches your tangible answer.

Here"s an example. Imagine you"re given this question:

The expression (3x+2)/(x-4) is equivalent to which of the following?

A. (3+2)/(-4)

B. (3) - (2/4)

C. (3) + (2)/(x-4)

D. (3) + (14)/(x-4)

How can we solve this problem without using any algebra?

Start by picking a tangible number for x. You can pick any number you want because the whole point of algebra is to create expressions that are valid for all numbers. I like to start by making x equal 2 because it"s an easy number to work with.

So what happens to the original expression when x = 2?

(3x+2)/(x-4)

(3(2)+2)/((2)-4)

(6+2)/(-2)

Okay, so now we know that the original expression is equal to -4 when x is equal to 2. The next step is simply to find the answer choice that also equals -4 when x is equal to 2.

A. (3+2)/(-4), (5)/(-4), -1.25

B. (3) - (2/4), (3) - (½), 2.5

C. (3) + (2)/(x-4), (3) + (2)/(2-4), 2

D. (3) + (14)/(x-4), (3) + (14)/(2-4), -4

There you go! D is equal to -4 when x is equal to 2. So D is the answer.

What looks like a really complex problem becomes simple once you plug in x = 2.

Substitute Abstracts with Tangibles can be used on all kinds of problems beyond just algebra. And it works extremely well on the GMAT because with all the stress on test day, it"s great to have a simple strategy you can use when your brain can"t do the complex algebra, even if you normally know how to do the algebra.

We train students in our Prep Expert GMAT Courses to think in terms of tangible numbers rather than abstract algebra, and their GMAT Quant scores skyrocket.

Even though math is not my friend, I get that. What about the Verbal section?

The GMAT Verbal section essentially tests reading. One GMAT Verbal strategy that will unlock this section for you is called "Build (Your) Own Simple Solution" or "BOSS". BOSS will not only help you answer questions more accurately, but it will also save you a tremendous amount of time on the GMAT Verbal section, which is the section that many students struggle to finish on time.

When I took the GMAT, I always scored lowest on Verbal. I got a lot of questions wrong and failed to finish on time. Once I started using BOSS, I got a near-perfect GMAT Verbal score.

Build (Your) Own Simple Solution means writing down your answer to a verbal question before you look at the answer choices given to you by the GMAT. It"s a powerful technique because it ensures you won"t get distracted by the enticing -- and incorrect -- answer choices the GMAT test question writers use to try to trick you.

Think about it this way: There are five answer choices for every multiple-choice GMAT problem, and four out of those five answer choices are incorrect. That means every answer choice on the GMAT has an 80% chance of being wrong. If you believe a GMAT answer choice is correct then you are probably wrong, just based on statistics.

The problem is worse on the GMAT Verbal section because most of the answer choices sound right. The only way you can eliminate the wrong ones is to have an idea of what the correct answer should be. You can do this by creating your own answer before looking at the distracting answer choices. By using BOSS you essentially create a picture of the right answer so you can select the answer choice that is most similar to your solution.

Always write your BOSS solution in the scratch booklet. And keep in mind it doesn"t need to be long or complex. Your BOSS solution can be as simple as "good" or "bad." The point is to write down a BOSS solution before you look at the distracting answer choices.

And don"t think it will slow you down. It will actually speed you up. Most of the time students spent on the GMAT Verbal section is not spent reading passages or writing notes. Instead, most of the time spent is wasted debating between answer choices. Does the following describe what goes on in your mind when you read answer choices?

A. "This sounds like the right answer..."

B. "Definitely not"

C. "This sounds good too..."

D. "Probably not."

E. "Hmm. Maybe..."

So you spend a lot of time debating between answer choices A and C. Ultimately, you decide to go with answer choice C because it provides an insight that you had not thought of. Then when you get your test back you find out that the answer was A. You should have stuck to your gut in the first place and not wasted so much time debating between answer choices only to get the question wrong.

BOSS solves that problem. You don"t have to debate between A or C. Instead, if A is most similar to the solution you created, then A is the answer you choose. No time wasted.

That"s a useful tip when you"re preparing for a meeting, for a negotiation, etc. Knowing the "answer" ahead of time is really helpful.

So let"s talk about the Analytical Writing Assessment, which tends to be everyone"s least favorite section.

The GMAT Analytical Writing Assessment essentially tests your ability to write a well-reasoned essay.

Let"s say you don"t think you"re a good writer. No problem. We give students a GMAT AWA template that is basically a fill-in-the-blank skeleton for each paragraph you need to write for GMAT AWA Essay.

How can a one-size-fits-all template work for every GMAT AWA section when the passage you have to analyze is different on every administration of the GMAT exam? The passage you have to analyze will always be argumentative. And there are only so many argumentative techniques an author can use in order to support their argument. So we"ve identified the most common problems with those arguments and incorporated them into the template.

For example, here"s our Introduction template for the GMAT AWA Essay:

The article"s conclusion that [conclusion] may or may not be accurate; what is certain, however, is that the argument offered in support of this conclusion is ill-considered and unpersuasive. One of the primary pieces of evidence offered in support of the article"s conclusion that [conclusion] is the fact that [first major piece of evidence]. This evidence, however, does little to support the article"s conclusion; it relies on several unjustified assumptions and ignores plausible alternative causes for the [evidence] cited.

Say you"re asked to analyze a passage about gyms, and whether people care about physical strength. Here"s what the Introduction paragraph of your GMAT AWA Essay would like if you used our template:

The article"s conclusion that people care less about their physical strength than they have in the past may or may not be accurate; what is certain, however, is that the argument offered in support of this conclusion is ill-considered and unpersuasive. One of the primary pieces of evidence offered in support of the article"s conclusion that people are less concerned with developing physical strength is the fact that free weight sales are stagnant while profits on other types of exercise equipment - bicycles, treadmills, and rock climbing equipment, for instance - are increasing. This evidence, however, does little to support the article"s conclusion; it relies on several unjustified assumptions and ignores plausible alternative causes for the sales figures cited.

With enough practice even people who think they are terrible writers can write essays like the one above. After all, thousands of students have used our essay templates to get perfect scores on their SAT Essays. Our approach works. And it will work just as well on the GMAT.

One thing I"m sure Shark Tank fans want to know: What"s it been like to partner with Mark Cuban?

Not only do I email with Mark weekly, I also have access to the whole Mark Cuban Companies team. They have helped us revamp our website, create business development partnerships with companies like Amazon, and clean up some essential parts of the business, like accounting and finance.

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In addition, Mark has personally set up some big PR hits for the company. And he helped us double our licensing fees by negotiating on our behalf.

17 Ways to Be More Productive This Fall

Okay, it"s time for reality to set in: You"ve got less than four months to accomplish everything you set out to do this year. (Less than four because September doesn"t really start until the 4^th, and I know you"ve scheduled a few days off to see the leaves turn, then there"s Thanksgiving and, of course, almost nobody works the whole month of December.)

So . . . it"s a key time to revisit those New Year"s Resolutions. And pull out your performance management goals. And think about what"s really important (and necessary) for you to achieve before the ball drops on December 31^st.

Now that you"ve got your list, one thing is clear: You"re going to have to be a whole lot more productive to get it all done. No more early departure Fridays for you. Long lunches? In the rearview mirror. Social media? De-friend everybody.

Instead, use these 17 ways to be as productive as possible:

Figure out when you"re most productive and block time to tackle difficult problems.For me, that"s early morning. So I allocate time--avoiding meetings before 10 a.m.--and get to work during those periods. (But if you"re a night person, adjust your schedule to channel your inner owl.)

Speaking of meetings, set an objective to decline at least 10 percent of the meetings you"re invited to. Ask yourself: "Is this meeting really necessary? And if it is, do the people running it really need me?"

And if you"re organizing a meeting, resolve to make it worth everyone"s time. Start by setting clear objectives for what the meeting will accomplish.

Never leave any meeting without agreeing on next steps and roles.

Every evening, create an old-fashioned list on paper of the things you need to do the next day. This not only creates focus, it also helps you sleep more soundly (since you"re not obsessing over what you need to do tomorrow).

Stop procrastinating. I used to be one of the 25 percent of people who are chronic procrastinators. But I finally discovered that putting things off not only affected my productivity--it made my team suffer. September is a great month to go cold turkey.

Lay out your clothes for the next day. This is such an old-fashioned practice, but it really works--because rather than racing around madly trying on clothing, you"re all set.

Make a good night"s rest a priority--more important than cyber-stalking your old flames on social media or binge-watching old episodes of Homeland. After all, you can"t be your best if you"re dragging-down tired.

Get up 15 minutes earlier. It"s doable and that 15 minutes just creates enough time for you to manage your morning tasks less frenetically.

Make the most of your commute. If you take the bus or train, read a book or professional journal. If you drive, try podcasts or audiobooks.

Shut down email when you"re doing work that requires concentration. Choose your most productive period at work--say, 8:30 a.m. to 11 a.m.--and actually close your email during that time.

Make a "Do Not Disturb" sign and post it at your workspace when you need to get something done. One of my colleagues has a photo of a closed door that she sticks on her cubicle to signal that she really, really doesn"t want to talk to anyone right now.

When you"re really under pressure, get lost. Book a conference room somewhere far away from your workspace where no one will find you for an hour or two. Or borrow an empty office. (You might want to ask first.)

Decide on how to manage sudden ideas. Although ideas are wonderful, they can get you off track. So record ideas in a notebook and review the list every week or so. I write ideas on Post-It Notes, then stick them in a folder for future reference.

Give yourself a proper lunch break. Several of my colleagues always leave the office for at least 20 minutes--they say that fresh air and change of scenery really refreshes the brain. I like to read useless stuff like Us Weekly because there"s nothing more energizing than seeing how celebrities are just like us.

Delegate more. Even if you"re a secret micromanager, there are things other people can actually do (maybe even better than you do them).

Once you make a decision, stick to it. Don"t spin or revisit action steps.

Finally, remember the words of wisdom from Yoda, the productivity guru (Star Wars, of course): "There is no try, there is only do or do not."

Published on: Aug 29, 2018

6 Tools Your Business Should Try This Fall

It"s time to go back to school, and that means back-to-school shopping--not just for clothes and running shoes, but for the tools to succeed. In the case of today"s students, that includes a laptop and smartphone. But the fall is also a great time to shop for tools that can propel your business forward. That"s why I"ve compiled a list of resources that"ll be helpful for any entrepreneur throughout the rest of the year.

I chose these tools subjectively based on two informal selection criteria:

ROI--comparing effort to use against potential impact on a daily basis.

Focusing only on tools that can be used by most, if not all, of us.

With that said, here are the top tools entrepreneurs should consider in 2018:

Join.me

More and more, remote workers have become the norm. Long gone are the days where all your best minds work under one roof. With this comes new challenges, including maintaining strong communication channels. That"s where Join.me comes in.

It is like Skype for Business, but easier to use. It offers an ideal presentation for both team meetings and remote sales calls. I love the intuitive interface and the ability to set up personalized URLs. Prices start at $13 a month.

Alternatives: Zoom, Skype for Business, WebEx

Trello

Trello is the online project management corkboard for the 21st century. It follows the "keep it simple" principle with drag and drop functionality, making team task management easy and project coordination seamless.

I recently used Trello for a 36-month project multimedia project involving dozens of writers, animators, and developers in three countries and three time zones. The tool was a godsend, keeping everyone literally on the same page (albeit that page was online). It has some freemium options, so you can try before you buy.

Alternatives: Asana, Wrike, Glip

Foundersuite

Managing investors, especially with the growth of ICOs and crowdsourcing, can be a huge distraction. Some of the founders I have invested in report spending upwards of a third of their time raising money, managing investments, and communicating with investors.

Foundersuite helps with all of these tasks, leveraging a customized search tool to find your next great investors. The site also gives users 80 templates for pitch decks, financial models, term sheets, and much more. It is free for ventures with fewer than 25 active investors.

Alternatives: Gust, PitchXO, Dealroom

Clarity.fm

We now have on-demand drivers (Uber), on-demand vacation properties (Airbnb), and even on-demand handymen (Jiffy), so why not on-demand mentoring? That"s the value proposition behind Clarity.fm, whose tagline is "Startup advice from world class experts."

This online community with more than 5,000 experts and mentors allows entrepreneurs to search for and connect with expertise from around the globe. Use it not just for advice, but to explore potential customer and strategic relationships with executives all over the world.

Pricing is based on a per-minute fee set up by the expert, and some experts (like me) donate all their fees to charity.

Alternatives: Ibbü, Passle, OnFrontiers

Front

I have written lots about the fact that businesses would be smarter to focus on retention and churn than on the new client sales funnel. To do that, you need really good customer service.

That is where Front comes in. As its website claims, it is a shared inbox for customer service teams. Pricing starts at $15 a month and there is a free 14-day trial.

Front takes the complicated process of user support and simplifies it down to the inbox. If Gmail is already your most-used app, then Front is a natural tool for you.

Alternatives: Missive, HappyFox, Freshdesk

Gatsby.ai

Leveraging social influencers (individuals with a strong following online) is a fast-growing customer acquisition channel. Managing messaging, however, can continue to be a challenge. This is where Gatsby can help.

Gatsby"s raison d"être is to help business owners identify and engage customers over social media. The software, which resides on your website, helps you learn who your social customers are and then helps turn them into authentic advocates of your firm.

While it is relatively pricey compared to other tools in this list--$300 a month--Gatsby claims in can increase conversion to 34 percent of site visitors. If that is true, can you afford not to use this?

Alternatives: Socialbakers, #Paid, Meltwater

PayPal partners with Brazilian bank Itaú Unibanco

SAO PAULO (Reuters) - Digital payments firm PayPal has announced on Wednesday a partnership with Brazil’s biggest private lender Itaú Unibanco Holding SA to offer its services to the bank’s clients.

FILE PHOTO: The PayPal app logo seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration/File Photo

PayPal’s general-director in Brazil Paula Paschoal said that the company expects to add 1 million users to its current 3.8 million client-base in Brazil in two years as a result of the partnership.

Reporting by Carolina Mandl; Editing by Chizu Nomiyama

Our Standards:The Thomson Reuters Trust Principles.

How Did GE Mess Up Its Alstom Power Acquisition?

Last week we published "How Did GE Mess Up Its Baker Hughes Acquisition?" and promised to follow up with an article on GE"s (GE) acquisition of the Alstom Power (OTCPK:AOMFF) (OTCPK:ALSMY). GE"s poor track record of deal making can be best summarized in these two marque transactions. Both transactions boosted the potential to transform GE into a better version of itself and investors were convinced it was the right thing to do at the time. If the biggest mistake for GE"s investment in Baker Hughes was the short few months between closing and a potential exiting, we would argue GE has absolutely outdone itself by acquiring the Alstom assets at the worst possible time. The pain from GE Power is so deep and so plain that every single investor on the street knows about it. How did such a transformative deal ended up being the laughing stock of corporate America?

Transaction Overview

It all started when GE announced its acquisition of Alstom"s Thermal, Renewables and Grid businesses on April 30, 2014. GE closed the transaction on November 2, 2015, after a lengthy regulatory review process. The closing of the transaction was achieved after receiving regulatory approval in over 20 countries and regions including the EU, U.S., China, India, Japan, and Brazil. The transaction represents GE"s largest-ever industrial acquisition.

Purchase Price: $13.5 billion (€9.9 billion) enterprise value including $3.4 billion (€2.5 billion) of net cash.

Transaction Multiple: The announced all-cash transaction valued the Alstom assets at 7.9 times pro forma EBITDA which implies EBITDA of $1.7 billion. GE also listed 4.6x multiple with run rate synergies based on synergy target of $1.2 billion by year 5.

Assets Acquired: What GE ended up acquiring is Alstom Energy (Thermal Power, Renewable Power, and Grid) and three 50/50 JVs (Grid, Renewable, Nuclear and French Steam).

GE Signaling: As part of the final deal GE agreed to sell its Signaling business to Alstom, which eventually combined with Siemens" rail business

Strategic Rationale

Clearly, GE saw great value in this transaction that would essentially be doubling down on the Power & Water segment. GE listed four major investments highlights at the announcement of the deal. At the time of the announcement, then CEO of GE, Jeff Immelt, announced:

This is a strategic transaction that furthers GE"s portfolio strategy. Power & Water is one of our higher growth and margin industrial segments and is core to the future of GE.

1. Transaction enhances GE"s position as the most competitive Infrastructure company with a specialty financial services business

GE wanted to acquire Alstom"s Power & Grid assets because the transaction would have added significant scale that would move the needle for a conglomerate like GE. Alstom has over $20 billion in revenue and 65k employees all over the world. GE also liked the strong services revenue (one-third of total revenue) and $38 billion of backlog. The assets fit into GE"s vision of becoming a global powerhouse for thermal power equipment.

(GE presentation)

2. Alstom brings complementary technology, global capability, a large installed base and talent to GE

Besides the large installed base and scale, Alstom assets also fit into GE"s global ambition as a majority of the revenue comes from outside developed world. As GE always mentioned in all of its deals, including Baker Hughes, is the benefits of combining technology and offer GE services to Alstom customers.

(GE presentation)

3. Enhancing the Alstom assets plays to GE"s strengths … technology, growth-market capability, services delivering customer outcomes and a lean structure

GE envisioned its new Power & Water business to be the leader in its markets through advanced technology, broad global reach, large installed base with long-term service revenue and sustained growth. As we will see later that Thermal, representing the largest revenue source, will face significant headwinds and the lucrative Water segment will be sold leaving Services becoming a larger portion of its revenue.

(GE presentation)

4. Transaction is financially attractive

Besides the scale and global reach, GE believed the deal was financial attractive with over $1.2 billion of synergies available within five years. The synergy was based on optimization of manufacturing and services footprint, combining procurement, optimizing R&D and consolidating support functions.

GE also disclosed that its initial assumptions included modest revenue growth (did not happen), conservative working capital assumptions (working capital went out of control), $1.2B cost synergies (remain to be seen but the layoffs in Power can no longer be counted as synergy) and the $4.0 billion debt financing will be paid down over 5 years.

(GE presentation)

5. Long Heritage between the Two Companies

Alstom and GE had a long history and in fact, Alstom was formed after GE"s former self, Thomson-Houston Electric Company, merged with Société Alsacienne de Constructions Mécaniques to form Alstom (originally called Alsthom). According to GE, the two firms had many ties with factories side by side, and even share a cafeteria. The long history between the two has definitely attributed to the strong preference from GE to acquire the assets.

(Elihu Thomson and GE engineer Charles Steinmetz)`

Closing Condition

As part of the closing conditions, French government set out a few conditions that GE had to meet. GE was desperate to get the deal done and made promises that are proving to be painful now:

French government will acquire 20% of Alstom

Retaining a headquarter in France

Not only maintain existing employment levels but also to add 1,000 jobs by the end of 2018, which proved to be especially painful for GE after announcing thousands of job cuts around the world

Advocated Alstom keep its train-building operations and them acquire GE"s train business; Alstom merged its rail business with Siemens later

GE made ambitious job creation promises to the French government. For each position that GE failed to create, the French government will charge 50,000 euros which translates into 50 million euros for the 1000 promised job creation. So far GE has created net 358 jobs since November 2015 so the French government has not had any objection. But the big promises made by the previous GE management team will have a double-whammy effect on the struggling Power business. As GE rivals start to slash costs and cut workforce, GE is unable to shrink its French workforce and in turn, has to increase employment levels in 2018.

What Went Wrong?

There are a few things that did not go as planned which caused the situation to go out of control in the years following the acquisition. The market has certainly turned south since the acquisition as other peers have also faced severe downturn and announced layoffs. However, we think the softness in the market was only amplified by GE"s poor execution and lack of leadership in navigating through a tough market. It is in our view that when times are good every management makes "good" decision, but it is when things get tough to do good management start to differentiate from the bad ones. Unfortunately, GE has proven times after times that it does not belong to the good side.

Opportune Timing?

GE touted in its investor deck that the acquisition was done at the opportune moment in the cycle and represents attractive long-term strategic business.

But in reality, GE most likely doubled down on an industry that is about to face some serious challenges in the years ahead. GE plunged into the natural gas power market but found itself facing increasing competition from renewable energy and cheaper oil and gas prices. The market for its natural gas turbines shrank so fast that operating income dropped more than 80% year over year in its latest quarter. The timing could not have been worse as GE paid some top dollars for assets that are likely impaired by a secular trend in the industry with no end in sight for its pain.

(Bloomberg)

Grossly Mismanaged

If the timing of the acquisition was a combination of bad luck and poor judgment, then the mismanagement at GE"s Power business was 100% attributable to human error. What made the industry slump worse for GE Power is that it had exacerbated the problem by ramping up production when demand waned which resulted in a huge backlog of inventory. Cash flow was also severely depressed due to the falling operating income and rising inventory.

The result of the misjudgment? GE announced a layoff of 12,000 people from its Power business in December 2017. Most of the layoffs will be outside the U.S. and France won"t be affected due to the deal GE agreed to with the French government. So GE acquired an asset that is impaired now but is stuck with part of its cost structure due to the prior commitment.

Management were also reshuffled as Steve Bolze was fired and Russell Stokes was promoted. GE also announced that it will fold its energy connections business into GE Power. The energy connection business provides electric power distribution and conversion equipment.

Flannery told investors that:

GE Power has "exacerbated the market situation with some really poor execution...Alstom has clearly performed below our expectations

Accounting Mystery

One of the biggest selling points for Alstom"s Power & Grid business was its large backlog of service contracts. At the time of acquisition, Alstom boosted over 350GW of installed base and $38 billion of backlog. A large service base and the large backlog has its benefits, namely the stable and recurring revenue from servicing existing clients. However, GE recently announced that SEC is currently investigating its revenue recognition and controls for long-term service agreements. The investigation was launched after GE disclosed a larger funding deficit for its long-term care businesses and pension plans. Others have long speculated that GE"s accounting for long-term service contracts is aggressive and full of subjective assumptions. We think the acquisition has added to the opaque nature of GE"s accounting and the larger backlog might have amplified any potential fallout from SEC investigation. If SEC were to require any changes in GE"s accounting for its long-term contract the Alstom would have added to the pain by bringing in tens of billions of contract assets.

(GE Contract Assets, Bloomberg)

Sold the Wrong Thing? Again?

In March 2017, GE announced that it was selling its Water business to French utility Suez SA and a Canadian pension fund. The sale was a result of its combination with Baker Hughes (BHGE) which had an overlap with its water business. As we discussed at length in our recent article "How Did GE Mess Up Its Baker Hughes Acquisition?" the combination has not resulted in the expected benefits for GE shareholders. So GE pursued a largely unsuccessful deal with Baker Hughes and had to divest its profitable Water business which further weakened its Power business. GE management seems to have mastered the skill of "buy high and sell low" and unfortunately shareholders have suffered a lot of damages over the years through these deals.

More Troubles Ahead? A Write-Off?

We think the next potential bomb that GE could drop on its investors is an upcoming write-off relating to the Alstom assets. The assumptions used by GE management to come up with its goodwill calculation potentially look too optimistic. If the auditors, especially under SEC investigation, decided that the Alstom assets have been impaired then a write-off in the billions would be inevitable. We think there is definitely the possibility of GE finding themselves overly optimistic and any impairment would no doubt cause significant destruction of shareholder value.

Summary

New CEO John Flannery said that the Alstom deal "has clearly performed below our expectations." We think that was an understatement as the deal clearly has not only failed to meet its initial expectations but also, to some extent, caused the recent collapse of one of America"s largest and oldest industrial conglomerate. Despite the strong performance from Aviation and Healthcare, the weakness in Baker Hughes and Power managed to overshadow the success in other segments and GE has been trading at levels not seen since the financial crisis, in contrary to other members of the Dow.

We think the acquisition of Alstom"s Power Grid business was a perfect example where unfortunate timing plus mismanagement can result in negative impact to one of America"s longest standing conglomerate far beyond one"s imagination. The deal was done at sub-optimal timing but it was the misjudgment of management and slow response from executives that deepened the woes at GE Power and eventually led to the embarrassing loss of shareholder value. GE was aiming for 15% plus returns but has now conceded to single-digit return on the investment. We hope GE has learned its lesson from these two disastrous transactions (Baker Hughes, Alstom Power & Grid) and will make shrewd M&A decisions going forward.

We noted in our previous article Why GE Won"t Break Itself Up that GE is unlikely to break itself up which means that management will face another task of divesting assets and reorganizing the remaining assets. We await to see how management will tackle the task of simplifying GE and hopefully won"t repeat its past mistakes again and again.

Author"s Note

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Arista Networks: Buy The Fall From Grace

I"ve had my eye on Arista Networks (NYSE:ANET), the cloud-friendly networking hardware company, for a long time now. The company"s sheer execution is undeniable, with the company gaining market share over entrenched incumbent Cisco (NASDAQ:CSCO) with each passing quarter and growing north of 40%, a true feat for a hardware company in an otherwise "boring" industry. Meanwhile, the company has been expanding its margins, earnings, and cash flow by envious amounts - leading the stock to go up, up, up over the past year.

Hardware has had a bit of a resurgence over the past year, with typically "boring" stocks like semiconductors companies enjoying a bit of a renaissance with huge gains in 2017. But surpassing them all is Arista Networks, which twelve months ago was trading just north of $100. Right before Arista"s Q4 tumble, shares crossed the psychologically important $300 mark, and even after taking into account its earnings pummeling, the stock is up 156% over the past twelve months.

Naturally, it"s healthy for any stock that"s risen this far, this fast to have a bit of a breather to consolidate gains before resuming a rally - no matter how solid the fundamentals. While fundamentals are the strongest backbone for any investment decision, one can"t ignore the fact that traders will take profits on an extremely profitable trade no matter what the underlying results are.

For this reason, I believe Arista"s "fall from grace" is simply cosmetic - peeking under the hood at its results can find no immediate cause from disappointment. The stock will rise again, and though it would be foolish to hope the company can double again in 2018, it"s more than likely that Arista will continue to outperform the broader market.

Note also that Goldman Sachs" new telecom hardware analyst recently initiated Arista as a Buy with a price target of $320 (21% upside). While Wall Street"s ratings and price targets are not a perfectly reliable source of investment due diligence (due to the fact that ratings skew mostly positive, especially from the larger firms with investment banking ties to these clients - irrespective of the so-called "Chinese Wall"), the fact that Goldman added Arista to its Conviction List is certainly worth mentioning. Such accolades aren"t frivolously awarded by a top research house.

As previously mentioned, I"ve been eyeing Arista stock for a while, not daring to jump in because of the consistent gains. I try not to buy on the way up, but in Arista"s case, that seems to be the only way the stock can go - and in my mind, it"s just as dangerous to ride a huge rally as it is to catch a falling knife. I"ve been waiting for the pullback that never seemed to come until now, and if the stock falls to the $250-$260 range, I"m snapping up as much as I can.

Analysts are pinning an EPS target of $6.27 for the coming year (as reported by Yahoo Finance) - so shares are trading at a forward P/E of ~40x. This is roughly in line with Arista"s historical average, and before you jump to the conclusion that 40x is a ridiculous earnings multiple to pay, recall that Arista"s earnings growth of ~70% is leagues better than legacy peers. On a PEG basis, Arista carries a PEG ratio of about 0.6x, indicating that the stock is undervalued relative to its earnings potential.

Let"s dive into Arista"s quarter to see if there"s anything we have to worry about (right off the bat, let"s capstone this by saying there isn"t anything of note to be concerned about).

See the company"s earnings summary below:

Figure 1. Arista Networks Q4 results

Source: Arista investor relations

Arista grew revenues by 43% y/y to $467.9 million, a stunning growth rate for a company at its ~$2 billion run rate. One note here: Perhaps it"s the deceleration from last quarter"s 51% growth that has investors worried, but what are they to expect when the company has grown this large? Deceleration is a fact of life in growing companies, and Arista"s revenue growth towers over Cisco"s at 3% (and investors had applauded Cisco"s results). Arista also beat analysts" expectations of $458.7 million (+40% y/y) by a comfortable margin, so there"s not too much to criticize the company for.

Arista"s CEO Jayshree Ullal (herself a former top executive and protege of Cisco"s John Chambers, a drama that has been chronicled in the Wall Street Journal) called FY17 a "significant year" for the company in which it gained widespread acceptance of its products, having sold a cumulative 15 million cloud networking ports to a base of 4,900 customers. Ullal also reminded customers that its top customer is Microsoft (NASDAQ:MSFT).

What other badge of honor can be greater for an enterprise technology company than being a major vendor to the largest enterprise software company in the world? If that"s not market acceptance, nothing else is. While Cisco and its contemporaries are racing fast to innovate again in the space after being stale for such a long time, Arista is climbing to the top of the leaderboards in new deployments and customer reviews.

While it"s true that Arista isn"t the only networking hardware company that is compatible with cloud technologies - I"m sure Cisco products work just fine - it has the advantage of having the closest association with the cloud. It"s a fan-favorite brand among forward-thinking IT leaders, and as cloud transformation becomes an increasingly important agenda item for top companies, Arista will continue benefiting from more customer conversions.

All the while, Arista is taking advantage of its continuous growth to pump out more margins. As a percentage of revenues, all of Arista"s operating spend components have scaled down, indicating much higher efficiency. In particular, notice how sales and marketing spend has essentially flatlined from $38.3 million in 4Q16 to $38.8 million in 4Q17, notwithstanding the much higher (43% higher) revenue base.

This hints at the fact that Arista is pulling in demand fairly organically. It doesn"t have to continually add bodies to a massive, expensive sales force to push its products into the market - it"s doing just fine in the growth department without any incremental sales spending.

As such, GAAP operating profits in the quarter rose to $139.4 million (a 30% margin) versus $77.5 million (24% margin) in 4Q16. Note that this is now in-line with Cisco"s operating margin, despite being a fraction of Cisco"s scale (and with Cisco having much more gross margin accretive businesses in its software arm). Arista"s profitability, if market trends continue and the IT community continues to embrace its product, will eventually overtake Cisco"s - it"s only a matter of time.

Arista"s pro forma EPS of $1.71 grew 64% y/y from $1.04 in 4Q16, and beat analyst consensus of $1.41 by 30c (a 21% beat). It"s evidently obvious from the size of Arista"s beat this quarter that the earnings reaction is solely profit taking, nothing more.

Perhaps guidance was a bit tighter relative to Wall Street consensus than usual, but a beat is still a beat, and if history shows anything, it"s that Arista continually outperforms relative to its targets and frequently revises its targets upward. The company called for Q1 revenues of $450-$468 million, the midpoint of which ($459 million) still beat consensus of $457.8 million.

With profits growing ~70% y/y, revenues growing above 40% and beating analyst estimates in both the current quarter and for next quarter"s guidance, there"s no cause for concern in Arista"s quarter. Declines in best-of-breed, top-notch growth stocks like Arista tend to be short-lived, so investors are encouraged to take advantage of the current volatility to pick up shares at a slight discount.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ANET over the next 72 hours.