Daily Tech Snippet: Thursday, April 14

• Regulators plan to revoke Theranos’ federal license and ban founder Elizabeth Holmes: Theranos might find itself homeless soon. A federal agency plans to force founder Elizabeth Holmes out of her blood analysis startup for two years and take away the California lab’s federal license. First reported in the Wall Street Journal, the Centers for Medicare and Medicaid Services sent a letter dated March 18 proposing sanctions barring Holmes and company president Sunny Balwani from owning or running operations in labs for at least two years – including in  both California and Arizona – and taking away federal licensing for Theranos’ California facilities in Newark and Palo Alto after Theranos’ continued failure to correct major problems with accuracy and competence. These actions would be a major financial blow to the startup valued at $9 billion. Theranos has the runway to keep working with approximately $700 million in the bank but the two labs make a good portion of the money for Theranos’ operations and a loss of the founder and president would strangle any hope of recovery.


• Artificial Intelligence for Everyday Use: How four programmers with almost no knowledge of Japanese designed software to read handwriting. Real-world artificial-intelligence applications are popping up in unexpected places—and much sooner than you might think. While winning a game of Go might be impressive, machine intelligence is also evolving to the point where it can be used by more people to do more things. That's how four engineers with almost zero knowledge of Japanese were able to create software, in just a few months, that can decipher handwriting in the language. The programmers at Reactive Inc. came up with an application that recognizes scrawled-out Japanese with 98.66 percent accuracy. The 18-month-old startup in Tokyo is part of a growing global community of coders and investors who are harnessing the power of neural networks to put AI to far more practical purposes than answering trivia or winning board games. "Just a few years ago, you had to be a genius to do this," said David Malkin, who has a Ph.D. in machine learning but can barely string two Japanese sentences together. "Now you can be a reasonably smart guy and make useful stuff. Going forward, it will be more about using imagination to apply this to real business situations." While handwriting recognition might be considered deep-learning 101, Japanese is a whole other ballgame. That's because the language includes symbolic characters such as kanji, which is composed of elements that can be read independently, making it difficult to know where one ends and another begins. There are also more than 2,000 common pictograms made up of dozens of strokes. The trick is to tackle one squiggle at a time. Reactive’s algorithm queries the neural network for a match, adds another stroke and repeats, all the while refining the probability of an accurate hit. The startup trained its model on about 1.8 million characters. Unlike a typical program built around rigid rules, deep-learning AI is modeled on how humans process information. Given enough data as inputs and a set of desired outputs, neural networks figure out what goes in the middle. This allows them to find solutions that have bedeviled traditional approaches, like interpreting speech or tagging images. And once built, a neural network doesn’t have to be limited to language applications. In their spare time, the four Reactive engineers showed the program 5,000 dresses downloaded from Google Images, then gave it a picture of a woman in a revealing outfit. "Sexy clothes," the software responded.

• Some Online Bargains May Only Look Like One: Amazon has some unbelievable bargains on its virtual shelves. A cat litter pan with a list price of $2,159 can be yours for a mere $28. A bag of doggy treats, normally $822, is only $8. A windshield wiper blade, which the unwary pay $1,504 for, has been knocked down 99 percent. You say you don’t believe that a plastic cat pan could ever have been sold to anyone for a couple of thousand bucks? Or that a six-ounce bag of Zuke’s Lil’ Links pork and apple sausage bits ever cost more than dinner at a five-star restaurant? It’s all part of the bizarre world of Internet “discounts,” which let retailers and brands assert that you are getting a stupendous deal because someone somewhere else — exactly where is never explained — is being charged much more. Boomerang Commerce, a retail analytics firm, compared the list prices of dozens of pet items on Amazon and the specialist pet site Chewy.com. In only a handful of cases did the retailers even agree on what the list price was. So a 22-pound bag of Blue Buffalo Basics Limited Ingredient Grain-Free Duck and Potato dog food had a list price of $131 on Amazon and $84 on Chewy. Yet the retail price at both sites was the same: $49.49. “A perceived deeper discount creates a higher conversion event — in other words, more buyers,” said Boomerang’s chief executive, Guru Hariharan, who previously worked at Amazon. Another consultant, Ripen eCommerce, analyzed 746,000 product searches on Amazon. Ripen’s goal was to help third-party clients who sell on the giant retailer jockey for a better position — say, on the first page of results rather than further back. A little over 44 percent of the products — some sold directly by Amazon, others by third parties — were billed as discounted, Ripen said. “It’s less than I expected, actually,” said Dave Rekuc, Ripen’s director of marketing. “Considering you can basically name your own list price.”

• Verizon bets on Armstrong, M&A savvy in Yahoo bid:  Verizon is the clear favorite in the upcoming bidding for Yahoo's core Internet business, according to Wall Street analysts, in large part because the telecommunications company's efforts to become a force in Internet content have gone relatively well under the leadership of AOL Inc Chief Executive Tim Armstrong. Verizon acquired AOL last June for $4.4 billion - its first big foray into the advertising-supported Internet business - and it is not yet clear how well the unit is performing financially. Subsequent moves, including the takeover of much of Microsoft Corp's advertising technology business, a deal to buy Millennial Media for about $250 million and the recent launch of the mobile video service go90, are also too recent to assess. Yet analysts have given the big phone company high marks for allowing AOL to operate independently and folding in other recent acquisitions without much drama. And they said Armstrong seems to be driving Verizon's recent moves in go90 and recent acquisitions. Verizon showed interest in Yahoo's core business as early as December, when Chief Financial Officer Fran Shammo said the company would "see if there is a strategic fit" for Yahoo's holdings, which include mail, news, sports and advertising technology. Yahoo, under pressure from activist investors, launched an auction of its core business in February after it shelved plans to spin off its stake in Chinese e-commerce giant Alibaba. The first round of bidding is slated for next week, and Verizon plans to make a bid, sources familiar with the matter have told Reuters. Verizon is already working on increasing revenue through its ad-supported mobile video service go90, targeted at millennials and built on video streaming technology acquired from Intel in 2014. The app, which launched in October, offers videos from Comedy Central and Vice, among others, as well as basketball and football games. However, analysts cautioned that even a combined Yahoo-AOL would lack the unique data, such as user interests and tastes, that powers its rivals in online ads, chiefly Google and Facebook. Armstrong, who made his name leading sales at Google, is highly regarded in the advertising community - in contrast to Yahoo CEO Marissa Mayer, another former Google high-flyer, who has been struggling to revive Yahoo. Mayer would likely leave after a Verizon-Yahoo deal, analysts sa

• More Startups Are Getting Lower Valuations Than Joining the Billion-Dollar Club: According to a new report from KPMG International and CB Insights, 2016 has seen a larger number of startups taking new lower valuations than those earning the billion-dollar badge. “The first quarter of 2016 has borne witness to high-profile unicorn company issues, layoffs, down rounds and mutual fund valuation markdowns,” according to the report. Only five venture capital–backed companies entered the $1 billion club in the same period, less than half the number from any quarter since the first quarter of 2015. Meanwhile, CB Insights’ Downround Tracker shows there were 19 "down events"—or companies raising new money or being acquired at a lower valuation—during that same time frame, including big names such as Foursquare Labs Inc., Gilt Groupe Inc., and Jawbone Inc. Those downgrades may also cause other startups to wait to raise new money if they anticipate having to take cuts themselves.