Your mileage may vary

Depending on who you talk to in tech right now, the party is either over or it’s midnight, all the strangers are gone and the real fun can begin.

What seemed entirely predictable two years ago – when startups were fundraising at absurd valuations and cash was, quite literally, free – has happened, as layoffs and spending freezes dominate the headlines. Or, depending on where you sit, maybe that’s not the case.

Either way, there are several causes for concern in the near-term enterprise tech forecast.

• The combination of worsening economic conditions, rising inflation and the Ukraine crisis, which took roughly 5% of the global software market off the table for most vendors that halted work in Russia, is driving those concerns.
• Now, as the Federal Reserve plans to again raise interest rates to combat skyrocketing prices for air travel and other services, stocks are tanking and everyone is battening down the hatches to prepare for the unknown.

Giants like Microsoft and Salesforce have issued semi-disappointing outlooks, forecasting that earnings will come in slightly below prior projections. But despite a rising number of hiring freezes, layoffs and other trimmings, it seems unlikely there is any major slowdown in tech spend coming.

• It’s too soon to breathe easy; the broader tech economy typically lags behind the stock market, which has had a rough few weeks.

• For example, if consumer spending were to drop considerably – as some experts predict could happen in the next year – retailers and manufacturers would likely go into cost-cutting mode, which has typically meant trimming investments in tools like sales, marketing and supply-chain software, which have flourished during the pandemic.
• But so far, spending has been steady despite dramatic increases in prices.
• Still, some CEOs see storm clouds looming. And a look at marketing software giant Adobe’s stock, which has fallen nearly 34% since the start of the year, indicates that investors agree.

No one has a crystal ball, and with the way the last two years have gone, it would be smart to question the credentials of anyone who makes a bold claim about what the world will look like in January 2023. In fact, at a dinner last month with tech executives hosted by Battery Ventures, one partner remarked on good intelligence that China could soon invade Taiwan.

But there are some events unfolding that seem long overdue. Most noteworthy: Profitability is finally a matter of concern.

• That’s creating new challenges for companies like Twilio, which went public in 2016 and still hasn’t posted a profit, as well as the legions of startups that put the “disposable” in disposable capital.
• That “growth-first, profit-second” mindset has almost been completely turned on its head. Now investors want to see stability. Stability in spend, in revenue and in return on investment. In other words: a focus on margins.
• Amid that paradigm shift, and despite forecasting profitability ahead, Twilio’s stock price has plunged 69% since the start of the year.

As Warren Buffett likes to say, “It’s only when the tide goes out do you find out who’s been swimming naked.” It’s finally time for the best companies to rise to the top and assert their rightful status over a littered field of rivals that all offer seemingly the same product but maybe just poached the wrong sales leads from Oracle or Salesforce.

But that could pave the way for a new worry. A pared-down enterprise software landscape dominated by a handful of giant companies could finally force antitrust regulators to give the enterprise markets a close look.

— Joe Williams (email | twitter)

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A ‘pattern of behavior’ for Microsoft?

Software vulnerabilities in Microsoft products are nothing new: In the world of cybersecurity, Microsoft vulnerabilities are the very definition of the status quo. What's newer is that some cybersecurity firms are taking issue with Microsoft's response to the discovery of vulnerabilities — and saying something about it.

In a blog post last month, Orca Security co-founder and CEO Avi Shua said that Microsoft was slow to respond with a fix to a critical vulnerability in the Azure Synapse Analytics service that was first reported in early January. In a post today, Orca said the issue has only now been sufficiently addressed.

Then there was Follina, a severe vulnerability in Office that could enable execution of code by a remote user. Fortinet has documented how Microsoft initially "determined that it was not a security-related issue" after being notified of the issue in mid-April. Microsoft eventually reversed course, publicly acknowledging the issue on May 30 and ultimately releasing a patch today.

The most outspoken comments on the subject so far, however, have come from Amit Yoran, CEO at cybersecurity firm Tenable. After researchers at Tenable discovered a pair of vulnerabilities in Azure in March, "Microsoft decided to silently patch one of the problems, downplaying the risk," Yoran said in a LinkedIn post Monday. "It was only after being told that we were going to go public, that their story changed,” he said, leading Microsoft to privately acknowledge the severity of the problem.

“This is a repeated pattern of behavior,” Yoran said. "To date, Microsoft customers have not been notified."

In a statement provided to Protocol today, Microsoft said that it is “deeply committed to protecting our customers and [believes] security is a team sport. We appreciate our partnerships with the security community, which enables our work to protect customers. The release of a security update is a balance between quality and timeliness, and we consider the need to minimize customer disruptions while improving protection.”

— Kyle Alspach (email | twitter)

Intel’s advanced manufacturing is really, finally, actually … ready?

After years of delays, Intel appears ready to roll out its latest advanced manufacturing process, according to a paper the company published over the weekend that contained many of the important technical details about the chips it produces.

Called Intel 4, the new manufacturing process is the first that Intel has developed that uses the $180 million extreme ultraviolet lithography machines that reduce the number of steps in the manufacturing process — which helps reduce the error rate — and allows its engineers to squeeze more features onto each piece of silicon. And the new chips, as Intel tells it, will be faster and use less power. The company says it plans to produce them at high volume in time to make a desktop version available next year.

This is a big deal. Intel is the last of the large three chip manufacturers to adopt EUV tech, which is necessary to continue to achieve the performance gains that are demanded by modern software.

TSMC has had EUV manufacturing up and running long enough to convince Apple that it is reliable enough for its iPhone chips — a new iteration of which appears nearly every year at the scale of tens of millions. Samsung says it can make chips with EUV tech, but industry analysts have told Protocol that some of its largest customers have switched to TSMC because it can’t produce them reliably enough.

Around the enterprise

Microsoft bought Miburo, a security company that specializes in finding and responding to foreign disinformation patterns across different languages, for an undisclosed amount.

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