JD.com: Ridiculous Sell-Off Creates A Strong Buying Opportunity

JD.com (JD) and Google, the search engine unit of Alphabet (GOOG)(GOOGL) announced a comprehensive partnership following an equity injection exercise with cash from the latter. The news was well received by the market and the share prices of both companies rose on the day of the announcement (June 18).

JD Price data by YCharts

Unfortunately, President Trump reignited the trade kerfuffle with China and the resultant stock market swoon dragged JD down to below its closing price last Friday. That meant the gains from the positive deal with Google had all but disappeared and amazingly it lost even more. President Trump’s warning that a further eye-popping $200 billion worth of imports could be included in the trade war made sentiment worse. Yet, Alphabet managed to stay above the closing price of last Friday.

JD and Google Join Hands

Let’s forget about the share price movement for the time being and look at the implications of the partnership between China’s largest retailer and the highly pervasive internet company with a dominant search engine. First, the deal involves an investment ($550 million) by Google in JD.com. Consequently, this is not a simple collaborative project and Google has a deeper interest to see the partnership bear fruits for long-term benefits.

Interestingly, this appears to tie in well with the Google-Tencent deal which I discussed in a January article to be superbly complementary since Tencent has an equity stake in JD as well (18.1 percent). Given shared interests, I would expect the trio to be working out synergistic initiatives for the benefit of all since the results would be better than if each of the two Chinese players has collaborated in isolation with Google. Citi analyst Alicia Yap suggested that JD could leverage Google’s Shopping Action platform to increase its visibility outside China such as Thailand and Indonesia where JD is currently strengthening its operations in. In the January agreement, Google and Tencent were to collaborate on "future technology developments", a very broad statement.

Secondly, this also meant that JD.com is now owned by two major US corporations - Walmart (WMT) and Alphabet, a strong backing through which JD can leverage on to expand overseas. Walmart came into the picture after JD.com acquired the Chinese online grocery business of Walmart, Yihaodian, in June 2016. In return, Walmart received a 5 percent stake in JD.com. Walmart"s ownership has since doubled to 10.1 percent. Examples of collaboration include a Sam’s Club Flagship Store on JD.com, the Walmart Global Flagship Store on JD Worldwide, and a two-hour delivery service from some Walmart Stores in China through the JD Daojia app.

In this case, again, Walmart has also previously announced a partnership with Google to enter the voice-shopping market as they team up to fight Amazon (AMZN) in its turf. As such, Google has demonstrated its intention to establish broader alliances to achieve greater impact and better synergies.

JD Delivers On 618 Shopping Festival

In my article last month on JD and Alibaba (BABA), I mentioned that the share prices of the two e-commerce giants could benefit from the positive media coverage regarding the sales momentum during the “618” shopping festival. In the 18-day long mid-year shopping extravaganza that concluded on June 18, JD.com did not disappoint. It managed to achieve a 37 percent increase in sales over the prior year’s event. Total sales amounted to RMB 159.2 billion (US$24.6 billion). In contrast, JD made RMB 362.3 billion in revenue in the whole of 2017 and just RMB 100.1 billion in Q1 2018.

Nevertheless, while the share prices of both Alibaba and JD indeed rose in the past weeks, it is practically impossible to quantify how much of the gain was attributable to the hype surrounding the shopping festival, not that the distinction matters for the shareholders though. Periodic affirmation of the duo’s ability to grow sales helps to reassure investors that their stellar growth momentum remains on track and keep short-sellers at bay.

Investor Takeaway

Despite the strong endorsement from Google in the tangible form of an equity injection, the share price of JD only managed to eke out a small gain. Even that little appreciation quickly dissipated after President Trump reignited the trade kerfuffle with China. In fact, JD is now trading below the price before the announcement of the Google deal.

For those concerned on Chinese name over possible accounting shenanigans, you would be pleased to know that JD has recently appointed a respected figure in accounting, Dingbo Xu, to its board. Professor Xu is currently Essilor Chair Professor in Accounting and an associate dean at China Europe International Business School ("CEIBS") in Shanghai and has served on several large public companies" boards, including People"s Insurance of China Limited and China Cinda Asset Management. Professor Xu received his Ph.D. in accounting from the University of Minnesota.

Based on the price chart, JD has broken out of a multi-month descending triangle formation in early June. It has also clearly bounced off the two-year support line which has been well-tested in four prior occasions.

For those waiting to get vested in this top retailer in China or add to an existing position, the sell-down today on the fuzzy impact of a trade war on JD has certainly opened up an opportunity. It is a better time to do so now than last week, with the gains following the complementary tie-up with Google returned to the market. On Monday, JD’s share price hiked more than 10 percent in the pre-opening session. Many investors waiting on the sidelines were likely to have the feeling that the train had left the station. The JD train has returned to the station merely a day later. Would you be on board this time?

What"s your take? Do you think the sell-down is justified? Please freely share your thoughts, let me know if you found this article useful or provide your feedback in the comments section.

Author"s Note: Thank you for reading. If you would like a refreshing take on stocks that you own or are interested in, try looking here. Besides US companies, I cover a number of Asian stocks as well. If you wish to be informed of my new ideas on Seeking Alpha via email so that you have time to read them before the articles get locked behind a paywall 10 days from publication, please select "Receive email alerts" when accessing on a desktop computer.

Disclosure: I am/we are long BABA, JD, TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Three Consequences Of The Transition Taking Place In The Electric Sector

Shutterstock

Our increasingly digital world has raised expectations for speed:

Speed of communication = smartphone (iPhone, Android).

Speed of travel = car sharing (Uber, Lyft).

Speed of information = internet search (Google...well, just Google).

Speed of financial transactions = real-time payment (Venmo, Stripe).

There appear to be few barriers to accelerating the speed of anything to its utmost physical potential using the miracle of 21st-century information technology. For the flow of digital information, if it is not in real time, it might as well arrive by horse and buggy.

This phenomenon took the telecommunications industry by storm during the early part of my career, and the world has never been the same. Real-time, secure communications worldwide is a reality that has fueled the burgeoning digital economy.

A transformation not unlike what I witnessed then is now taking place in the electric power grid. Lest we forget, without the ever-present availability of electricity, the world as we know it does not run. This makes it all the more egregious that it is running on obsolete, 20th-century technology.

An Electric Sector In Transition

The holy convergence of economic competitiveness and consumer demand is driving the exponential growth of renewable energy, with energy storage soon to follow. In 2016, new capacity added to the grid from renewables exceeded that from traditional coal and gas sources for the first time. What is taking place is much more fundamental than just technological substitution. The entire character of the electric grid is changing, from centralized, large-scale generation to a proliferation of smaller-scale, distributed energy resources that are cheaper, more efficient and much faster to deploy. In concert, the energy regulatory environment is shifting to accommodate the addition of new distributed generation while simultaneously injecting competitive market forces. Similar to the breakup of Ma Bell, dismantling arguably the largest remaining monopoly in the country is stimulating more innovation -- and creating challenges -- in a “network” business known as the electric power grid.  

Consequences Of This Transition

1. The Dilemma Of Big Data

While these technological and regulatory advances are transforming the business models of utilities and their energy retailer cousins, a challenge looms -- big data. Yes, big data equals big problems in an industry that is still running billions of dollars of transactions using Excel spreadsheets.

This energy transition has created exponential growth in data and complexity, which, if left unresolved, will stymy the growth of renewables and distributed resources and keep the electric grid stuck in the 20th century.  

Again, the reason comes back to data -- a truck-sized firehose of complex power data that is impossible to make sense of using current information and transactional systems. To put this in perspective, there are more than 12 million backup generators in the U.S. This number dwarfs the number coal-fired generation stations (over 700) operating in the U.S. Just in backup power capable of serving as a distributed asset behind the meter, this represents an exponential increase in data and complexity for the grid.

JD.com: Ridiculous Sell-Off Creates A Strong Buying Opportunity

JD.com (JD) and Google, the search engine unit of Alphabet (GOOG)(GOOGL) announced a comprehensive partnership following an equity injection exercise with cash from the latter. The news was well received by the market and the share prices of both companies rose on the day of the announcement (June 18).

JD Price data by YCharts

Unfortunately, President Trump reignited the trade kerfuffle with China and the resultant stock market swoon dragged JD down to below its closing price last Friday. That meant the gains from the positive deal with Google had all but disappeared and amazingly it lost even more. President Trump’s warning that a further eye-popping $200 billion worth of imports could be included in the trade war made sentiment worse. Yet, Alphabet managed to stay above the closing price of last Friday.

JD and Google Join Hands

Let’s forget about the share price movement for the time being and look at the implications of the partnership between China’s largest retailer and the highly pervasive internet company with a dominant search engine. First, the deal involves an investment ($550 million) by Google in JD.com. Consequently, this is not a simple collaborative project and Google has a deeper interest to see the partnership bear fruits for long-term benefits.

Interestingly, this appears to tie in well with the Google-Tencent deal which I discussed in a January article to be superbly complementary since Tencent has an equity stake in JD as well (18.1 percent). Given shared interests, I would expect the trio to be working out synergistic initiatives for the benefit of all since the results would be better than if each of the two Chinese players has collaborated in isolation with Google. Citi analyst Alicia Yap suggested that JD could leverage Google’s Shopping Action platform to increase its visibility outside China such as Thailand and Indonesia where JD is currently strengthening its operations in. In the January agreement, Google and Tencent were to collaborate on "future technology developments", a very broad statement.

Secondly, this also meant that JD.com is now owned by two major US corporations - Walmart (WMT) and Alphabet, a strong backing through which JD can leverage on to expand overseas. Walmart came into the picture after JD.com acquired the Chinese online grocery business of Walmart, Yihaodian, in June 2016. In return, Walmart received a 5 percent stake in JD.com. Walmart"s ownership has since doubled to 10.1 percent. Examples of collaboration include a Sam’s Club Flagship Store on JD.com, the Walmart Global Flagship Store on JD Worldwide, and a two-hour delivery service from some Walmart Stores in China through the JD Daojia app.

In this case, again, Walmart has also previously announced a partnership with Google to enter the voice-shopping market as they team up to fight Amazon (AMZN) in its turf. As such, Google has demonstrated its intention to establish broader alliances to achieve greater impact and better synergies.

JD Delivers On 618 Shopping Festival

In my article last month on JD and Alibaba (BABA), I mentioned that the share prices of the two e-commerce giants could benefit from the positive media coverage regarding the sales momentum during the “618” shopping festival. In the 18-day long mid-year shopping extravaganza that concluded on June 18, JD.com did not disappoint. It managed to achieve a 37 percent increase in sales over the prior year’s event. Total sales amounted to RMB 159.2 billion (US$24.6 billion). In contrast, JD made RMB 362.3 billion in revenue in the whole of 2017 and just RMB 100.1 billion in Q1 2018.

Nevertheless, while the share prices of both Alibaba and JD indeed rose in the past weeks, it is practically impossible to quantify how much of the gain was attributable to the hype surrounding the shopping festival, not that the distinction matters for the shareholders though. Periodic affirmation of the duo’s ability to grow sales helps to reassure investors that their stellar growth momentum remains on track and keep short-sellers at bay.

Investor Takeaway

Despite the strong endorsement from Google in the tangible form of an equity injection, the share price of JD only managed to eke out a small gain. Even that little appreciation quickly dissipated after President Trump reignited the trade kerfuffle with China. In fact, JD is now trading below the price before the announcement of the Google deal.

For those concerned on Chinese name over possible accounting shenanigans, you would be pleased to know that JD has recently appointed a respected figure in accounting, Dingbo Xu, to its board. Professor Xu is currently Essilor Chair Professor in Accounting and an associate dean at China Europe International Business School ("CEIBS") in Shanghai and has served on several large public companies" boards, including People"s Insurance of China Limited and China Cinda Asset Management. Professor Xu received his Ph.D. in accounting from the University of Minnesota.

Based on the price chart, JD has broken out of a multi-month descending triangle formation in early June. It has also clearly bounced off the two-year support line which has been well-tested in four prior occasions.

For those waiting to get vested in this top retailer in China or add to an existing position, the sell-down today on the fuzzy impact of a trade war on JD has certainly opened up an opportunity. It is a better time to do so now than last week, with the gains following the complementary tie-up with Google returned to the market. On Monday, JD’s share price hiked more than 10 percent in the pre-opening session. Many investors waiting on the sidelines were likely to have the feeling that the train had left the station. The JD train has returned to the station merely a day later. Would you be on board this time?

What"s your take? Do you think the sell-down is justified? Please freely share your thoughts, let me know if you found this article useful or provide your feedback in the comments section.

Author"s Note: Thank you for reading. If you would like a refreshing take on stocks that you own or are interested in, try looking here. Besides US companies, I cover a number of Asian stocks as well. If you wish to be informed of my new ideas on Seeking Alpha via email so that you have time to read them before the articles get locked behind a paywall 10 days from publication, please select "Receive email alerts" when accessing on a desktop computer.

Disclosure: I am/we are long BABA, JD, TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Three Consequences Of The Transition Taking Place In The Electric Sector

Shutterstock

Our increasingly digital world has raised expectations for speed:

Speed of communication = smartphone (iPhone, Android).

Speed of travel = car sharing (Uber, Lyft).

Speed of information = internet search (Google...well, just Google).

Speed of financial transactions = real-time payment (Venmo, Stripe).

There appear to be few barriers to accelerating the speed of anything to its utmost physical potential using the miracle of 21st-century information technology. For the flow of digital information, if it is not in real time, it might as well arrive by horse and buggy.

This phenomenon took the telecommunications industry by storm during the early part of my career, and the world has never been the same. Real-time, secure communications worldwide is a reality that has fueled the burgeoning digital economy.

A transformation not unlike what I witnessed then is now taking place in the electric power grid. Lest we forget, without the ever-present availability of electricity, the world as we know it does not run. This makes it all the more egregious that it is running on obsolete, 20th-century technology.

An Electric Sector In Transition

The holy convergence of economic competitiveness and consumer demand is driving the exponential growth of renewable energy, with energy storage soon to follow. In 2016, new capacity added to the grid from renewables exceeded that from traditional coal and gas sources for the first time. What is taking place is much more fundamental than just technological substitution. The entire character of the electric grid is changing, from centralized, large-scale generation to a proliferation of smaller-scale, distributed energy resources that are cheaper, more efficient and much faster to deploy. In concert, the energy regulatory environment is shifting to accommodate the addition of new distributed generation while simultaneously injecting competitive market forces. Similar to the breakup of Ma Bell, dismantling arguably the largest remaining monopoly in the country is stimulating more innovation -- and creating challenges -- in a “network” business known as the electric power grid.  

Consequences Of This Transition

1. The Dilemma Of Big Data

While these technological and regulatory advances are transforming the business models of utilities and their energy retailer cousins, a challenge looms -- big data. Yes, big data equals big problems in an industry that is still running billions of dollars of transactions using Excel spreadsheets.

This energy transition has created exponential growth in data and complexity, which, if left unresolved, will stymy the growth of renewables and distributed resources and keep the electric grid stuck in the 20th century.  

Again, the reason comes back to data -- a truck-sized firehose of complex power data that is impossible to make sense of using current information and transactional systems. To put this in perspective, there are more than 12 million backup generators in the U.S. This number dwarfs the number coal-fired generation stations (over 700) operating in the U.S. Just in backup power capable of serving as a distributed asset behind the meter, this represents an exponential increase in data and complexity for the grid.

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.
Tech

Survive Or Thrive? 3 Rules For Success In The Age of Overload

What do Satya Nadella, Marc Bernioff and Arianna Huffington all have in common? They know how to thrive in the age of overload. Today, business is inherently more complex than it has ever been. The moment you enter the office, you are suddenly exposed to a huge amount of bureaucracy, rules, procedures, and protocols to follow. According to a recent McKinsey study, organizational complexity (number of procedures, structures, processes, systems, vertical layers, and decision approvals) has increased by a factor of thirty-five in the last six years.

Growth Creates Complexity And Complexity Kills Growth.

Too much complexity is not only frustrating it also wastes time, erodes productivity and kills growth. As our BMI (bureaucratic mass index) continues to rise it"s time fight back with three simple rules. 

 1. Say No Fast And Mean It.

The word "urgent" is one of the most overused words in the age of overload. It forces you to react rather than think. The fact is that everyone will always want you to prioritize their needs before yours. You lose control of your day and your agenda, making it impossible to fulfil your own priorities. If being productive sometimes means being selfish, so be it. Effective entrepreneurs protect their time and know the difference between busy work and their best work.

2. Be A Chief Purpose Officer.

Look at Larry Page, Elon Musk and Reid Hoffman. They know their why, their leadership purpose and match it with focus and speed. They are Chief Purpose Officers that follow three simple principles. First, clarify your purpose and don"t just focus on career, focus on a legacy. Second, simplify everything - that means deleting, replacing and updating all your processes in order to be nimble and fast. Third, multiply your imagination by a factor of 10 whether it"s thinking big on vision or increasing your team"s success tenfold. Being a Chief Purpose Officer means turning talk into action - it"s the golden thread that links all great entrepreneurs from Jeff Bezos to Steve Jobs.

3. Avoid The Perfection Trap.

Don"t wait for the mirage of perfection to arrive before you launch a business or reinvent  your company. It will never happen and can result in extreme stress or worse. Many entrepreneurs are trapped in this self-sabotaging mindset. Imagine if Airbnb or Square had held back until all the possible fixes had been made? They probably would not be where they are today. Wait for perfection and opportunities are lost forever.

Fight Back.

We are all consumed by "the cult of accessibility", and entrepreneurs are no exception. The people who need to pay attention the most, are often the most at risk of distraction. The people who need to focus are often the most fatigued. Are you ready to survive or thrive? 

JD.com: Ridiculous Sell-Off Creates A Strong Buying Opportunity

JD.com (JD) and Google, the search engine unit of Alphabet (GOOG)(GOOGL) announced a comprehensive partnership following an equity injection exercise with cash from the latter. The news was well received by the market and the share prices of both companies rose on the day of the announcement (June 18).

JD Price data by YCharts

Unfortunately, President Trump reignited the trade kerfuffle with China and the resultant stock market swoon dragged JD down to below its closing price last Friday. That meant the gains from the positive deal with Google had all but disappeared and amazingly it lost even more. President Trump’s warning that a further eye-popping $200 billion worth of imports could be included in the trade war made sentiment worse. Yet, Alphabet managed to stay above the closing price of last Friday.

JD and Google Join Hands

Let’s forget about the share price movement for the time being and look at the implications of the partnership between China’s largest retailer and the highly pervasive internet company with a dominant search engine. First, the deal involves an investment ($550 million) by Google in JD.com. Consequently, this is not a simple collaborative project and Google has a deeper interest to see the partnership bear fruits for long-term benefits.

Interestingly, this appears to tie in well with the Google-Tencent deal which I discussed in a January article to be superbly complementary since Tencent has an equity stake in JD as well (18.1 percent). Given shared interests, I would expect the trio to be working out synergistic initiatives for the benefit of all since the results would be better than if each of the two Chinese players has collaborated in isolation with Google. Citi analyst Alicia Yap suggested that JD could leverage Google’s Shopping Action platform to increase its visibility outside China such as Thailand and Indonesia where JD is currently strengthening its operations in. In the January agreement, Google and Tencent were to collaborate on "future technology developments", a very broad statement.

Secondly, this also meant that JD.com is now owned by two major US corporations - Walmart (WMT) and Alphabet, a strong backing through which JD can leverage on to expand overseas. Walmart came into the picture after JD.com acquired the Chinese online grocery business of Walmart, Yihaodian, in June 2016. In return, Walmart received a 5 percent stake in JD.com. Walmart"s ownership has since doubled to 10.1 percent. Examples of collaboration include a Sam’s Club Flagship Store on JD.com, the Walmart Global Flagship Store on JD Worldwide, and a two-hour delivery service from some Walmart Stores in China through the JD Daojia app.

In this case, again, Walmart has also previously announced a partnership with Google to enter the voice-shopping market as they team up to fight Amazon (AMZN) in its turf. As such, Google has demonstrated its intention to establish broader alliances to achieve greater impact and better synergies.

JD Delivers On 618 Shopping Festival

In my article last month on JD and Alibaba (BABA), I mentioned that the share prices of the two e-commerce giants could benefit from the positive media coverage regarding the sales momentum during the “618” shopping festival. In the 18-day long mid-year shopping extravaganza that concluded on June 18, JD.com did not disappoint. It managed to achieve a 37 percent increase in sales over the prior year’s event. Total sales amounted to RMB 159.2 billion (US$24.6 billion). In contrast, JD made RMB 362.3 billion in revenue in the whole of 2017 and just RMB 100.1 billion in Q1 2018.

Nevertheless, while the share prices of both Alibaba and JD indeed rose in the past weeks, it is practically impossible to quantify how much of the gain was attributable to the hype surrounding the shopping festival, not that the distinction matters for the shareholders though. Periodic affirmation of the duo’s ability to grow sales helps to reassure investors that their stellar growth momentum remains on track and keep short-sellers at bay.

Investor Takeaway

Despite the strong endorsement from Google in the tangible form of an equity injection, the share price of JD only managed to eke out a small gain. Even that little appreciation quickly dissipated after President Trump reignited the trade kerfuffle with China. In fact, JD is now trading below the price before the announcement of the Google deal.

For those concerned on Chinese name over possible accounting shenanigans, you would be pleased to know that JD has recently appointed a respected figure in accounting, Dingbo Xu, to its board. Professor Xu is currently Essilor Chair Professor in Accounting and an associate dean at China Europe International Business School ("CEIBS") in Shanghai and has served on several large public companies" boards, including People"s Insurance of China Limited and China Cinda Asset Management. Professor Xu received his Ph.D. in accounting from the University of Minnesota.

Based on the price chart, JD has broken out of a multi-month descending triangle formation in early June. It has also clearly bounced off the two-year support line which has been well-tested in four prior occasions.

For those waiting to get vested in this top retailer in China or add to an existing position, the sell-down today on the fuzzy impact of a trade war on JD has certainly opened up an opportunity. It is a better time to do so now than last week, with the gains following the complementary tie-up with Google returned to the market. On Monday, JD’s share price hiked more than 10 percent in the pre-opening session. Many investors waiting on the sidelines were likely to have the feeling that the train had left the station. The JD train has returned to the station merely a day later. Would you be on board this time?

What"s your take? Do you think the sell-down is justified? Please freely share your thoughts, let me know if you found this article useful or provide your feedback in the comments section.

Author"s Note: Thank you for reading. If you would like a refreshing take on stocks that you own or are interested in, try looking here. Besides US companies, I cover a number of Asian stocks as well. If you wish to be informed of my new ideas on Seeking Alpha via email so that you have time to read them before the articles get locked behind a paywall 10 days from publication, please select "Receive email alerts" when accessing on a desktop computer.

Disclosure: I am/we are long BABA, JD, TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Three Consequences Of The Transition Taking Place In The Electric Sector

Shutterstock

Our increasingly digital world has raised expectations for speed:

Speed of communication = smartphone (iPhone, Android).

Speed of travel = car sharing (Uber, Lyft).

Speed of information = internet search (Google...well, just Google).

Speed of financial transactions = real-time payment (Venmo, Stripe).

There appear to be few barriers to accelerating the speed of anything to its utmost physical potential using the miracle of 21st-century information technology. For the flow of digital information, if it is not in real time, it might as well arrive by horse and buggy.

This phenomenon took the telecommunications industry by storm during the early part of my career, and the world has never been the same. Real-time, secure communications worldwide is a reality that has fueled the burgeoning digital economy.

A transformation not unlike what I witnessed then is now taking place in the electric power grid. Lest we forget, without the ever-present availability of electricity, the world as we know it does not run. This makes it all the more egregious that it is running on obsolete, 20th-century technology.

An Electric Sector In Transition

The holy convergence of economic competitiveness and consumer demand is driving the exponential growth of renewable energy, with energy storage soon to follow. In 2016, new capacity added to the grid from renewables exceeded that from traditional coal and gas sources for the first time. What is taking place is much more fundamental than just technological substitution. The entire character of the electric grid is changing, from centralized, large-scale generation to a proliferation of smaller-scale, distributed energy resources that are cheaper, more efficient and much faster to deploy. In concert, the energy regulatory environment is shifting to accommodate the addition of new distributed generation while simultaneously injecting competitive market forces. Similar to the breakup of Ma Bell, dismantling arguably the largest remaining monopoly in the country is stimulating more innovation -- and creating challenges -- in a “network” business known as the electric power grid.  

Consequences Of This Transition

1. The Dilemma Of Big Data

While these technological and regulatory advances are transforming the business models of utilities and their energy retailer cousins, a challenge looms -- big data. Yes, big data equals big problems in an industry that is still running billions of dollars of transactions using Excel spreadsheets.

This energy transition has created exponential growth in data and complexity, which, if left unresolved, will stymy the growth of renewables and distributed resources and keep the electric grid stuck in the 20th century.  

Again, the reason comes back to data -- a truck-sized firehose of complex power data that is impossible to make sense of using current information and transactional systems. To put this in perspective, there are more than 12 million backup generators in the U.S. This number dwarfs the number coal-fired generation stations (over 700) operating in the U.S. Just in backup power capable of serving as a distributed asset behind the meter, this represents an exponential increase in data and complexity for the grid.

JD.com: Ridiculous Sell-Off Creates A Strong Buying Opportunity

JD.com (JD) and Google, the search engine unit of Alphabet (GOOG)(GOOGL) announced a comprehensive partnership following an equity injection exercise with cash from the latter. The news was well received by the market and the share prices of both companies rose on the day of the announcement (June 18).

JD Price data by YCharts

Unfortunately, President Trump reignited the trade kerfuffle with China and the resultant stock market swoon dragged JD down to below its closing price last Friday. That meant the gains from the positive deal with Google had all but disappeared and amazingly it lost even more. President Trump’s warning that a further eye-popping $200 billion worth of imports could be included in the trade war made sentiment worse. Yet, Alphabet managed to stay above the closing price of last Friday.

JD and Google Join Hands

Let’s forget about the share price movement for the time being and look at the implications of the partnership between China’s largest retailer and the highly pervasive internet company with a dominant search engine. First, the deal involves an investment ($550 million) by Google in JD.com. Consequently, this is not a simple collaborative project and Google has a deeper interest to see the partnership bear fruits for long-term benefits.

Interestingly, this appears to tie in well with the Google-Tencent deal which I discussed in a January article to be superbly complementary since Tencent has an equity stake in JD as well (18.1 percent). Given shared interests, I would expect the trio to be working out synergistic initiatives for the benefit of all since the results would be better than if each of the two Chinese players has collaborated in isolation with Google. Citi analyst Alicia Yap suggested that JD could leverage Google’s Shopping Action platform to increase its visibility outside China such as Thailand and Indonesia where JD is currently strengthening its operations in. In the January agreement, Google and Tencent were to collaborate on "future technology developments", a very broad statement.

Secondly, this also meant that JD.com is now owned by two major US corporations - Walmart (WMT) and Alphabet, a strong backing through which JD can leverage on to expand overseas. Walmart came into the picture after JD.com acquired the Chinese online grocery business of Walmart, Yihaodian, in June 2016. In return, Walmart received a 5 percent stake in JD.com. Walmart"s ownership has since doubled to 10.1 percent. Examples of collaboration include a Sam’s Club Flagship Store on JD.com, the Walmart Global Flagship Store on JD Worldwide, and a two-hour delivery service from some Walmart Stores in China through the JD Daojia app.

In this case, again, Walmart has also previously announced a partnership with Google to enter the voice-shopping market as they team up to fight Amazon (AMZN) in its turf. As such, Google has demonstrated its intention to establish broader alliances to achieve greater impact and better synergies.

JD Delivers On 618 Shopping Festival

In my article last month on JD and Alibaba (BABA), I mentioned that the share prices of the two e-commerce giants could benefit from the positive media coverage regarding the sales momentum during the “618” shopping festival. In the 18-day long mid-year shopping extravaganza that concluded on June 18, JD.com did not disappoint. It managed to achieve a 37 percent increase in sales over the prior year’s event. Total sales amounted to RMB 159.2 billion (US$24.6 billion). In contrast, JD made RMB 362.3 billion in revenue in the whole of 2017 and just RMB 100.1 billion in Q1 2018.

Nevertheless, while the share prices of both Alibaba and JD indeed rose in the past weeks, it is practically impossible to quantify how much of the gain was attributable to the hype surrounding the shopping festival, not that the distinction matters for the shareholders though. Periodic affirmation of the duo’s ability to grow sales helps to reassure investors that their stellar growth momentum remains on track and keep short-sellers at bay.

Investor Takeaway

Despite the strong endorsement from Google in the tangible form of an equity injection, the share price of JD only managed to eke out a small gain. Even that little appreciation quickly dissipated after President Trump reignited the trade kerfuffle with China. In fact, JD is now trading below the price before the announcement of the Google deal.

For those concerned on Chinese name over possible accounting shenanigans, you would be pleased to know that JD has recently appointed a respected figure in accounting, Dingbo Xu, to its board. Professor Xu is currently Essilor Chair Professor in Accounting and an associate dean at China Europe International Business School ("CEIBS") in Shanghai and has served on several large public companies" boards, including People"s Insurance of China Limited and China Cinda Asset Management. Professor Xu received his Ph.D. in accounting from the University of Minnesota.

Based on the price chart, JD has broken out of a multi-month descending triangle formation in early June. It has also clearly bounced off the two-year support line which has been well-tested in four prior occasions.

For those waiting to get vested in this top retailer in China or add to an existing position, the sell-down today on the fuzzy impact of a trade war on JD has certainly opened up an opportunity. It is a better time to do so now than last week, with the gains following the complementary tie-up with Google returned to the market. On Monday, JD’s share price hiked more than 10 percent in the pre-opening session. Many investors waiting on the sidelines were likely to have the feeling that the train had left the station. The JD train has returned to the station merely a day later. Would you be on board this time?

What"s your take? Do you think the sell-down is justified? Please freely share your thoughts, let me know if you found this article useful or provide your feedback in the comments section.

Author"s Note: Thank you for reading. If you would like a refreshing take on stocks that you own or are interested in, try looking here. Besides US companies, I cover a number of Asian stocks as well. If you wish to be informed of my new ideas on Seeking Alpha via email so that you have time to read them before the articles get locked behind a paywall 10 days from publication, please select "Receive email alerts" when accessing on a desktop computer.

Disclosure: I am/we are long BABA, JD, TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Three Consequences Of The Transition Taking Place In The Electric Sector

Shutterstock

Our increasingly digital world has raised expectations for speed:

Speed of communication = smartphone (iPhone, Android).

Speed of travel = car sharing (Uber, Lyft).

Speed of information = internet search (Google...well, just Google).

Speed of financial transactions = real-time payment (Venmo, Stripe).

There appear to be few barriers to accelerating the speed of anything to its utmost physical potential using the miracle of 21st-century information technology. For the flow of digital information, if it is not in real time, it might as well arrive by horse and buggy.

This phenomenon took the telecommunications industry by storm during the early part of my career, and the world has never been the same. Real-time, secure communications worldwide is a reality that has fueled the burgeoning digital economy.

A transformation not unlike what I witnessed then is now taking place in the electric power grid. Lest we forget, without the ever-present availability of electricity, the world as we know it does not run. This makes it all the more egregious that it is running on obsolete, 20th-century technology.

An Electric Sector In Transition

The holy convergence of economic competitiveness and consumer demand is driving the exponential growth of renewable energy, with energy storage soon to follow. In 2016, new capacity added to the grid from renewables exceeded that from traditional coal and gas sources for the first time. What is taking place is much more fundamental than just technological substitution. The entire character of the electric grid is changing, from centralized, large-scale generation to a proliferation of smaller-scale, distributed energy resources that are cheaper, more efficient and much faster to deploy. In concert, the energy regulatory environment is shifting to accommodate the addition of new distributed generation while simultaneously injecting competitive market forces. Similar to the breakup of Ma Bell, dismantling arguably the largest remaining monopoly in the country is stimulating more innovation -- and creating challenges -- in a “network” business known as the electric power grid.  

Consequences Of This Transition

1. The Dilemma Of Big Data

While these technological and regulatory advances are transforming the business models of utilities and their energy retailer cousins, a challenge looms -- big data. Yes, big data equals big problems in an industry that is still running billions of dollars of transactions using Excel spreadsheets.

This energy transition has created exponential growth in data and complexity, which, if left unresolved, will stymy the growth of renewables and distributed resources and keep the electric grid stuck in the 20th century.  

Again, the reason comes back to data -- a truck-sized firehose of complex power data that is impossible to make sense of using current information and transactional systems. To put this in perspective, there are more than 12 million backup generators in the U.S. This number dwarfs the number coal-fired generation stations (over 700) operating in the U.S. Just in backup power capable of serving as a distributed asset behind the meter, this represents an exponential increase in data and complexity for the grid.

JD.com: Ridiculous Sell-Off Creates A Strong Buying Opportunity

JD.com (JD) and Google, the search engine unit of Alphabet (GOOG)(GOOGL) announced a comprehensive partnership following an equity injection exercise with cash from the latter. The news was well received by the market and the share prices of both companies rose on the day of the announcement (June 18).

JD Price data by YCharts

Unfortunately, President Trump reignited the trade kerfuffle with China and the resultant stock market swoon dragged JD down to below its closing price last Friday. That meant the gains from the positive deal with Google had all but disappeared and amazingly it lost even more. President Trump’s warning that a further eye-popping $200 billion worth of imports could be included in the trade war made sentiment worse. Yet, Alphabet managed to stay above the closing price of last Friday.

JD and Google Join Hands

Let’s forget about the share price movement for the time being and look at the implications of the partnership between China’s largest retailer and the highly pervasive internet company with a dominant search engine. First, the deal involves an investment ($550 million) by Google in JD.com. Consequently, this is not a simple collaborative project and Google has a deeper interest to see the partnership bear fruits for long-term benefits.

Interestingly, this appears to tie in well with the Google-Tencent deal which I discussed in a January article to be superbly complementary since Tencent has an equity stake in JD as well (18.1 percent). Given shared interests, I would expect the trio to be working out synergistic initiatives for the benefit of all since the results would be better than if each of the two Chinese players has collaborated in isolation with Google. Citi analyst Alicia Yap suggested that JD could leverage Google’s Shopping Action platform to increase its visibility outside China such as Thailand and Indonesia where JD is currently strengthening its operations in. In the January agreement, Google and Tencent were to collaborate on "future technology developments", a very broad statement.

Secondly, this also meant that JD.com is now owned by two major US corporations - Walmart (WMT) and Alphabet, a strong backing through which JD can leverage on to expand overseas. Walmart came into the picture after JD.com acquired the Chinese online grocery business of Walmart, Yihaodian, in June 2016. In return, Walmart received a 5 percent stake in JD.com. Walmart"s ownership has since doubled to 10.1 percent. Examples of collaboration include a Sam’s Club Flagship Store on JD.com, the Walmart Global Flagship Store on JD Worldwide, and a two-hour delivery service from some Walmart Stores in China through the JD Daojia app.

In this case, again, Walmart has also previously announced a partnership with Google to enter the voice-shopping market as they team up to fight Amazon (AMZN) in its turf. As such, Google has demonstrated its intention to establish broader alliances to achieve greater impact and better synergies.

JD Delivers On 618 Shopping Festival

In my article last month on JD and Alibaba (BABA), I mentioned that the share prices of the two e-commerce giants could benefit from the positive media coverage regarding the sales momentum during the “618” shopping festival. In the 18-day long mid-year shopping extravaganza that concluded on June 18, JD.com did not disappoint. It managed to achieve a 37 percent increase in sales over the prior year’s event. Total sales amounted to RMB 159.2 billion (US$24.6 billion). In contrast, JD made RMB 362.3 billion in revenue in the whole of 2017 and just RMB 100.1 billion in Q1 2018.

Nevertheless, while the share prices of both Alibaba and JD indeed rose in the past weeks, it is practically impossible to quantify how much of the gain was attributable to the hype surrounding the shopping festival, not that the distinction matters for the shareholders though. Periodic affirmation of the duo’s ability to grow sales helps to reassure investors that their stellar growth momentum remains on track and keep short-sellers at bay.

Investor Takeaway

Despite the strong endorsement from Google in the tangible form of an equity injection, the share price of JD only managed to eke out a small gain. Even that little appreciation quickly dissipated after President Trump reignited the trade kerfuffle with China. In fact, JD is now trading below the price before the announcement of the Google deal.

For those concerned on Chinese name over possible accounting shenanigans, you would be pleased to know that JD has recently appointed a respected figure in accounting, Dingbo Xu, to its board. Professor Xu is currently Essilor Chair Professor in Accounting and an associate dean at China Europe International Business School ("CEIBS") in Shanghai and has served on several large public companies" boards, including People"s Insurance of China Limited and China Cinda Asset Management. Professor Xu received his Ph.D. in accounting from the University of Minnesota.

Based on the price chart, JD has broken out of a multi-month descending triangle formation in early June. It has also clearly bounced off the two-year support line which has been well-tested in four prior occasions.

For those waiting to get vested in this top retailer in China or add to an existing position, the sell-down today on the fuzzy impact of a trade war on JD has certainly opened up an opportunity. It is a better time to do so now than last week, with the gains following the complementary tie-up with Google returned to the market. On Monday, JD’s share price hiked more than 10 percent in the pre-opening session. Many investors waiting on the sidelines were likely to have the feeling that the train had left the station. The JD train has returned to the station merely a day later. Would you be on board this time?

What"s your take? Do you think the sell-down is justified? Please freely share your thoughts, let me know if you found this article useful or provide your feedback in the comments section.

Author"s Note: Thank you for reading. If you would like a refreshing take on stocks that you own or are interested in, try looking here. Besides US companies, I cover a number of Asian stocks as well. If you wish to be informed of my new ideas on Seeking Alpha via email so that you have time to read them before the articles get locked behind a paywall 10 days from publication, please select "Receive email alerts" when accessing on a desktop computer.

Disclosure: I am/we are long BABA, JD, TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Three Consequences Of The Transition Taking Place In The Electric Sector

Shutterstock

Our increasingly digital world has raised expectations for speed:

Speed of communication = smartphone (iPhone, Android).

Speed of travel = car sharing (Uber, Lyft).

Speed of information = internet search (Google...well, just Google).

Speed of financial transactions = real-time payment (Venmo, Stripe).

There appear to be few barriers to accelerating the speed of anything to its utmost physical potential using the miracle of 21st-century information technology. For the flow of digital information, if it is not in real time, it might as well arrive by horse and buggy.

This phenomenon took the telecommunications industry by storm during the early part of my career, and the world has never been the same. Real-time, secure communications worldwide is a reality that has fueled the burgeoning digital economy.

A transformation not unlike what I witnessed then is now taking place in the electric power grid. Lest we forget, without the ever-present availability of electricity, the world as we know it does not run. This makes it all the more egregious that it is running on obsolete, 20th-century technology.

An Electric Sector In Transition

The holy convergence of economic competitiveness and consumer demand is driving the exponential growth of renewable energy, with energy storage soon to follow. In 2016, new capacity added to the grid from renewables exceeded that from traditional coal and gas sources for the first time. What is taking place is much more fundamental than just technological substitution. The entire character of the electric grid is changing, from centralized, large-scale generation to a proliferation of smaller-scale, distributed energy resources that are cheaper, more efficient and much faster to deploy. In concert, the energy regulatory environment is shifting to accommodate the addition of new distributed generation while simultaneously injecting competitive market forces. Similar to the breakup of Ma Bell, dismantling arguably the largest remaining monopoly in the country is stimulating more innovation -- and creating challenges -- in a “network” business known as the electric power grid.  

Consequences Of This Transition

1. The Dilemma Of Big Data

While these technological and regulatory advances are transforming the business models of utilities and their energy retailer cousins, a challenge looms -- big data. Yes, big data equals big problems in an industry that is still running billions of dollars of transactions using Excel spreadsheets.

This energy transition has created exponential growth in data and complexity, which, if left unresolved, will stymy the growth of renewables and distributed resources and keep the electric grid stuck in the 20th century.  

Again, the reason comes back to data -- a truck-sized firehose of complex power data that is impossible to make sense of using current information and transactional systems. To put this in perspective, there are more than 12 million backup generators in the U.S. This number dwarfs the number coal-fired generation stations (over 700) operating in the U.S. Just in backup power capable of serving as a distributed asset behind the meter, this represents an exponential increase in data and complexity for the grid.

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.
Tech

Bloomberg Eschews Vendors For Direct Kubernetes Involvement

Financial information behemoth Bloomberg is a big fan of Kubernetes, and is using it for everything from serving up Bloomberg.com to complex data processing pipelines.

Rather than use a managed Kubernetes service or employ an outsourced provider, Bloomberg has chosen to invest in deep Kubernetes expertise and keep the skills in-house. Like many enterprise organizations, Bloomberg originally went looking for an off-the-shelf approach before settling on the decision to get involved more deeply with the open source project directly.

Lori Hoffman/Bloomberg

Steven Bower, Data and Infrastructure Lead, Bloomberg photographed at Bloomberg World Headquarters in New York on June 15, 2018.

"We started looking at Kubernetes a little over two years ago," said Steven Bower, Data and Infrastructure Lead at Bloomberg. "We had built our own orchestration system that pre-dated Docker and Kubernetes, and we were using that to manage our search infrastructure in the team I originally lead."

"We were looking at the future of our orchestration framework and trying to figure out if there was a way for us not to have all this custom code," he said. Bower"s team looked at Mesos, Yarn, Rancher, and similar offerings but nothing seemed to fit.

Around the same time, other parts of Bloomberg started to adopt Kubernetes. "Things like Bloomberg.com are running it," he said, "and some other non-infrastructure engineering teams were using it for things like stateless content processing pipelines." Eighteen months ago Bower"s team started using Kubernetes, driven largely by data science workloads.

"It"s a great execution environment for data science," says Bower. "The real Aha! moment for us was when we realized that not only does it have all these great base primitives like pods and replica sets, but you can also define your own primitives and custom controllers that use them."

"I have always said that people contribute to open source in a selfish way," says Dan Kohn, Executive Director of the CNCF, "but everyone in the ecosystem benefits from the collective selfishness." This doesn"t happen automatically, and the role of the CNCF in shepherding the development of Kubernetes, and ensuring that individual selfishness doesn"t overwhelm the collective good, shouldn"t be overlooked.

"It"s been a complicated growing process," says Kohn. "Nobody is born knowing how to run a TOC [Technical Oversight Committee] meeting." The members of the Foundation and its "three ring circus" governance structure have tried to learn from history and their personal experience with other governance efforts. "We"ve gotten clearer about a set of principles," says Kohn. These principles are captured, in typical developer fashion, in a GitHub repo.

"The Cloud Native Computing Foundation (CNCF) has done a fantastic job with the Kubernetes ecosystem," Bower said. "It has a well managed roadmap, so we can plan ahead."

Bloomberg has moved away from relying on vendors to drive innovation and has become heavily involved in open-source software communities instead. "Culturally, Bloomberg is like lots of small startups attached to a central spine," Bower says. "A core value is delivering capability quickly."

Bower has advice for other organizations considering a similar approach. "You need to have your organization in a good place for managing software in this way already," he says. "If people are just randomly building stuff in a disorganized way, you"re going to have the same thing with open source software."

Organizations also need to carefully consider how involved they want to be with Kubernetes. "With a cloud-hosted service, a lot of the complexity of Kubernetes is hidden from you. On-site you have to have people who understand how it works at the core, not just interfacing with it." This isn"t a decision to be taken lightly, because it becomes a critical operational constraint.

Leaving support up to an external vendor makes you beholden to the vendor"s responsiveness if there are issues. Bloomberg decided that a typical vendor response time wasn"t going to be enough. "No one ever talks about nines of uptime here," Bower says. "This thing cannot go down."

The traders relying on Bloomberg"s data to inform their trades stand to lose big money if they can"t access the information they need due to an outage, and Bloomberg is often on the hook to make them whole if they miss out on an opportunity. These financial incentives have reinforced Bloomberg"s decision to be in tight control of its data supply-chain.

Other organizations should look carefully at their own circumstances before following Bloomberg"s lead.

Bloomberg Eschews Vendors For Direct Kubernetes Involvement

Financial information behemoth Bloomberg is a big fan of Kubernetes, and is using it for everything from serving up Bloomberg.com to complex data processing pipelines.

Rather than use a managed Kubernetes service or employ an outsourced provider, Bloomberg has chosen to invest in deep Kubernetes expertise and keep the skills in-house. Like many enterprise organizations, Bloomberg originally went looking for an off-the-shelf approach before settling on the decision to get involved more deeply with the open source project directly.

Lori Hoffman/Bloomberg

Steven Bower, Data and Infrastructure Lead, Bloomberg photographed at Bloomberg World Headquarters in New York on June 15, 2018.

"We started looking at Kubernetes a little over two years ago," said Steven Bower, Data and Infrastructure Lead at Bloomberg. "We had built our own orchestration system that pre-dated Docker and Kubernetes, and we were using that to manage our search infrastructure in the team I originally lead."

"We were looking at the future of our orchestration framework and trying to figure out if there was a way for us not to have all this custom code," he said. Bower"s team looked at Mesos, Yarn, Rancher, and similar offerings but nothing seemed to fit.

Around the same time, other parts of Bloomberg started to adopt Kubernetes. "Things like Bloomberg.com are running it," he said, "and some other non-infrastructure engineering teams were using it for things like stateless content processing pipelines." Eighteen months ago Bower"s team started using Kubernetes, driven largely by data science workloads.

"It"s a great execution environment for data science," says Bower. "The real Aha! moment for us was when we realized that not only does it have all these great base primitives like pods and replica sets, but you can also define your own primitives and custom controllers that use them."

"I have always said that people contribute to open source in a selfish way," says Dan Kohn, Executive Director of the CNCF, "but everyone in the ecosystem benefits from the collective selfishness." This doesn"t happen automatically, and the role of the CNCF in shepherding the development of Kubernetes, and ensuring that individual selfishness doesn"t overwhelm the collective good, shouldn"t be overlooked.

"It"s been a complicated growing process," says Kohn. "Nobody is born knowing how to run a TOC [Technical Oversight Committee] meeting." The members of the Foundation and its "three ring circus" governance structure have tried to learn from history and their personal experience with other governance efforts. "We"ve gotten clearer about a set of principles," says Kohn. These principles are captured, in typical developer fashion, in a GitHub repo.

"The Cloud Native Computing Foundation (CNCF) has done a fantastic job with the Kubernetes ecosystem," Bower said. "It has a well managed roadmap, so we can plan ahead."

Bloomberg has moved away from relying on vendors to drive innovation and has become heavily involved in open-source software communities instead. "Culturally, Bloomberg is like lots of small startups attached to a central spine," Bower says. "A core value is delivering capability quickly."

Bower has advice for other organizations considering a similar approach. "You need to have your organization in a good place for managing software in this way already," he says. "If people are just randomly building stuff in a disorganized way, you"re going to have the same thing with open source software."

Organizations also need to carefully consider how involved they want to be with Kubernetes. "With a cloud-hosted service, a lot of the complexity of Kubernetes is hidden from you. On-site you have to have people who understand how it works at the core, not just interfacing with it." This isn"t a decision to be taken lightly, because it becomes a critical operational constraint.

Leaving support up to an external vendor makes you beholden to the vendor"s responsiveness if there are issues. Bloomberg decided that a typical vendor response time wasn"t going to be enough. "No one ever talks about nines of uptime here," Bower says. "This thing cannot go down."

The traders relying on Bloomberg"s data to inform their trades stand to lose big money if they can"t access the information they need due to an outage, and Bloomberg is often on the hook to make them whole if they miss out on an opportunity. These financial incentives have reinforced Bloomberg"s decision to be in tight control of its data supply-chain.

Other organizations should look carefully at their own circumstances before following Bloomberg"s lead.

Bloomberg Eschews Vendors For Direct Kubernetes Involvement

Financial information behemoth Bloomberg is a big fan of Kubernetes, and is using it for everything from serving up Bloomberg.com to complex data processing pipelines.

Rather than use a managed Kubernetes service or employ an outsourced provider, Bloomberg has chosen to invest in deep Kubernetes expertise and keep the skills in-house. Like many enterprise organizations, Bloomberg originally went looking for an off-the-shelf approach before settling on the decision to get involved more deeply with the open source project directly.

Lori Hoffman/Bloomberg

Steven Bower, Data and Infrastructure Lead, Bloomberg photographed at Bloomberg World Headquarters in New York on June 15, 2018.

"We started looking at Kubernetes a little over two years ago," said Steven Bower, Data and Infrastructure Lead at Bloomberg. "We had built our own orchestration system that pre-dated Docker and Kubernetes, and we were using that to manage our search infrastructure in the team I originally lead."

"We were looking at the future of our orchestration framework and trying to figure out if there was a way for us not to have all this custom code," he said. Bower"s team looked at Mesos, Yarn, Rancher, and similar offerings but nothing seemed to fit.

Around the same time, other parts of Bloomberg started to adopt Kubernetes. "Things like Bloomberg.com are running it," he said, "and some other non-infrastructure engineering teams were using it for things like stateless content processing pipelines." Eighteen months ago Bower"s team started using Kubernetes, driven largely by data science workloads.

"It"s a great execution environment for data science," says Bower. "The real Aha! moment for us was when we realized that not only does it have all these great base primitives like pods and replica sets, but you can also define your own primitives and custom controllers that use them."

"I have always said that people contribute to open source in a selfish way," says Dan Kohn, Executive Director of the CNCF, "but everyone in the ecosystem benefits from the collective selfishness." This doesn"t happen automatically, and the role of the CNCF in shepherding the development of Kubernetes, and ensuring that individual selfishness doesn"t overwhelm the collective good, shouldn"t be overlooked.

"It"s been a complicated growing process," says Kohn. "Nobody is born knowing how to run a TOC [Technical Oversight Committee] meeting." The members of the Foundation and its "three ring circus" governance structure have tried to learn from history and their personal experience with other governance efforts. "We"ve gotten clearer about a set of principles," says Kohn. These principles are captured, in typical developer fashion, in a GitHub repo.

"The Cloud Native Computing Foundation (CNCF) has done a fantastic job with the Kubernetes ecosystem," Bower said. "It has a well managed roadmap, so we can plan ahead."

Bloomberg has moved away from relying on vendors to drive innovation and has become heavily involved in open-source software communities instead. "Culturally, Bloomberg is like lots of small startups attached to a central spine," Bower says. "A core value is delivering capability quickly."

Bower has advice for other organizations considering a similar approach. "You need to have your organization in a good place for managing software in this way already," he says. "If people are just randomly building stuff in a disorganized way, you"re going to have the same thing with open source software."

Organizations also need to carefully consider how involved they want to be with Kubernetes. "With a cloud-hosted service, a lot of the complexity of Kubernetes is hidden from you. On-site you have to have people who understand how it works at the core, not just interfacing with it." This isn"t a decision to be taken lightly, because it becomes a critical operational constraint.

Leaving support up to an external vendor makes you beholden to the vendor"s responsiveness if there are issues. Bloomberg decided that a typical vendor response time wasn"t going to be enough. "No one ever talks about nines of uptime here," Bower says. "This thing cannot go down."

The traders relying on Bloomberg"s data to inform their trades stand to lose big money if they can"t access the information they need due to an outage, and Bloomberg is often on the hook to make them whole if they miss out on an opportunity. These financial incentives have reinforced Bloomberg"s decision to be in tight control of its data supply-chain.

Other organizations should look carefully at their own circumstances before following Bloomberg"s lead.

Bloomberg Eschews Vendors For Direct Kubernetes Involvement

Financial information behemoth Bloomberg is a big fan of Kubernetes, and is using it for everything from serving up Bloomberg.com to complex data processing pipelines.

Rather than use a managed Kubernetes service or employ an outsourced provider, Bloomberg has chosen to invest in deep Kubernetes expertise and keep the skills in-house. Like many enterprise organizations, Bloomberg originally went looking for an off-the-shelf approach before settling on the decision to get involved more deeply with the open source project directly.

Lori Hoffman/Bloomberg

Steven Bower, Data and Infrastructure Lead, Bloomberg photographed at Bloomberg World Headquarters in New York on June 15, 2018.

"We started looking at Kubernetes a little over two years ago," said Steven Bower, Data and Infrastructure Lead at Bloomberg. "We had built our own orchestration system that pre-dated Docker and Kubernetes, and we were using that to manage our search infrastructure in the team I originally lead."

"We were looking at the future of our orchestration framework and trying to figure out if there was a way for us not to have all this custom code," he said. Bower"s team looked at Mesos, Yarn, Rancher, and similar offerings but nothing seemed to fit.

Around the same time, other parts of Bloomberg started to adopt Kubernetes. "Things like Bloomberg.com are running it," he said, "and some other non-infrastructure engineering teams were using it for things like stateless content processing pipelines." Eighteen months ago Bower"s team started using Kubernetes, driven largely by data science workloads.

"It"s a great execution environment for data science," says Bower. "The real Aha! moment for us was when we realized that not only does it have all these great base primitives like pods and replica sets, but you can also define your own primitives and custom controllers that use them."

"I have always said that people contribute to open source in a selfish way," says Dan Kohn, Executive Director of the CNCF, "but everyone in the ecosystem benefits from the collective selfishness." This doesn"t happen automatically, and the role of the CNCF in shepherding the development of Kubernetes, and ensuring that individual selfishness doesn"t overwhelm the collective good, shouldn"t be overlooked.

"It"s been a complicated growing process," says Kohn. "Nobody is born knowing how to run a TOC [Technical Oversight Committee] meeting." The members of the Foundation and its "three ring circus" governance structure have tried to learn from history and their personal experience with other governance efforts. "We"ve gotten clearer about a set of principles," says Kohn. These principles are captured, in typical developer fashion, in a GitHub repo.

"The Cloud Native Computing Foundation (CNCF) has done a fantastic job with the Kubernetes ecosystem," Bower said. "It has a well managed roadmap, so we can plan ahead."

Bloomberg has moved away from relying on vendors to drive innovation and has become heavily involved in open-source software communities instead. "Culturally, Bloomberg is like lots of small startups attached to a central spine," Bower says. "A core value is delivering capability quickly."

Bower has advice for other organizations considering a similar approach. "You need to have your organization in a good place for managing software in this way already," he says. "If people are just randomly building stuff in a disorganized way, you"re going to have the same thing with open source software."

Organizations also need to carefully consider how involved they want to be with Kubernetes. "With a cloud-hosted service, a lot of the complexity of Kubernetes is hidden from you. On-site you have to have people who understand how it works at the core, not just interfacing with it." This isn"t a decision to be taken lightly, because it becomes a critical operational constraint.

Leaving support up to an external vendor makes you beholden to the vendor"s responsiveness if there are issues. Bloomberg decided that a typical vendor response time wasn"t going to be enough. "No one ever talks about nines of uptime here," Bower says. "This thing cannot go down."

The traders relying on Bloomberg"s data to inform their trades stand to lose big money if they can"t access the information they need due to an outage, and Bloomberg is often on the hook to make them whole if they miss out on an opportunity. These financial incentives have reinforced Bloomberg"s decision to be in tight control of its data supply-chain.

Other organizations should look carefully at their own circumstances before following Bloomberg"s lead.