The New Tech Arms Merchants: Flex, Ansys, New Relic

Sept. 2, 2017 12:01 a.m. ET

Steve Jobs was once asked how


Apple



AAPL 0.03048780487804878%



Apple Inc.


U.S.: Nasdaq


USD164.05


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0.03048780487804878%



/Date(1504299600254-0500)/


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18.642045454545453

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847097396484.375


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Rev. per Employee
1920430









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decides which technologies to build into its products. His answer was succinct. “It’s the editing function,” he said. “The art of it is” knowing what to leave in and what to leave out.

It’s no surprise that the maestro of Apple (ticker: AAPL), so famously hands-on and particular, would view products as the result of the creative intellect. Increasingly, however, gadgets, and indeed most technology, are developed not in secret deliberation but in the wide open, trying different things to see what works.

The next step, still several years away, will be to use artificial-intelligence techniques and have software invent products, removing a lot of the human element. Some tech vendors may be arms merchants for those new trends in product development. They include software-tool makers


New Relic



NEWR 0.16701461377870563%



New Relic Inc.


U.S.: NYSE


USD47.98


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USD47.98



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Volume (Delayed 15m)
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3271




P/E Ratio
N/A

Market Cap
2611316427.63672


Dividend Yield
N/A

Rev. per Employee
261921









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(NEWR) and


Ansys



ANSS -0.5511566526936811%



Ansys Inc.


U.S.: Nasdaq


USD128.11


-0.71
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41.19292604501608

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10918912845.2344


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(ANSS), and contract electronics manufacturer


Flex



FLEX 1.659496004917025%



Flex Ltd.


U.S.: Nasdaq


USD16.54


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USD16.5


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Market Cap
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N/A

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119972









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(FLEX).

Some products still are born the way Jobs described.


Sony



6758.TO 0.22710068130204392%



Sony Corp. ADR


U.S.: NYSE


USD39.72


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559780









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(SNE), the paragon of design before Apple, still has flashes of brilliance. Its recently introduced Digital Paper is a tablet-shaped device that uses e-ink, the display technology that


Amazon.com



AMZN -0.23964919437079338%



Amazon.com Inc.


U.S.: Nasdaq


USD978.25


-2.35
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USD979.5


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P/E Ratio
248.28680203045684

Market Cap
471060621060.058


Dividend Yield
N/A

Rev. per Employee
439731









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(AMZN) uses in its Kindle reader. But Sony has stripped away all the buttons that make Kindle clumsy, and done away with some unnecessary software features. Simplifying things is Sony’s approach, and the resulting product, which is gorgeous, reflects careful thought and a certain aesthetic ideal.

SUCH DELIBERATIVE TRIUMPHS are rare. More common are public experiments that produce mixed results. An infamous example is Google Glass, from


Alphabet’s



GOOGL -0.3402286336418073%



Alphabet Inc. Cl A


U.S.: Nasdaq


USD951.99


-3.25
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USD952.79


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P/E Ratio
34.48951717791633

Market Cap
655613802396.885


Dividend Yield
N/A

Rev. per Employee
1373290









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(GOOGL) Google. Google’s “spectacles” were underpowered and awkward when they emerged in 2013. Glass was soon discontinued, though it has been recently re-introduced as a device for commercial environments, which may be more forgiving than consumers.

In Google’s defense, the company frankly admitted that Glass had employed a new approach to development, and that it was bringing the device out of the lab and seeing what worked or didn’t in the real world.

That approach has caught on, with tons of products these days entering the world in varying states of completion on crowdfunding sites, such as Kickstarter and Indiegogo. Sometimes, a product is announced and then delayed because inventors have learned things just from the initial response they got before shipping. The industry is constantly in beta-testing mode, and you might be one of its guinea pigs if you’re a customer.

Some companies that have been around for a while will get a new lease on life in this age of constant experimentation. One is Flex, formerly known as


Flextronics,



FLEX 1.659496004917025%



Flex Ltd.


U.S.: Nasdaq


USD16.54


0.27
1.659496004917025%



/Date(1504299600399-0500)/


Volume (Delayed 15m)
:
1839607



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USD16.5


-0.04
-0.2418379685610641%


Volume (Delayed 15m)
:
82585




P/E Ratio
26.447073872721457

Market Cap
8666196280.20423


Dividend Yield
N/A

Rev. per Employee
119972









More quote details and news »


which is moving beyond assembling products for a fee to helping clients think through the initial design. Among the products that Flex lays claim to helping conceive is Google’s Chromecast gadget. (For more on Flex, see Jack Hough’s July 22 feature, “Flex Shares Could Rise 25% in a Year.”)

Another company to watch, Ansys, is making its wares more affordable, so that more people in the design process can start playing with concepts at the outset of design.

Companies that really run with this new approach to design include Internet outfits, such as


Facebook



FB 0.029074838634645578%



Facebook Inc. Cl A


U.S.: Nasdaq


USD172.02


0.05
0.029074838634645578%



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USD172.19


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109003




P/E Ratio
39.184510250569474

Market Cap
499114210896.403


Dividend Yield
N/A

Rev. per Employee
1945860









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(FB). They can test their concepts against a huge audience of people, who will show them what works and what doesn’t. Facebook was able to copy, relatively quickly, the features of Snapchat, the popular messaging program from


Snap



SNAP -1.6540317022742936%



Snap Inc.


U.S.: NYSE


USD14.27


-0.24
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USD14.25


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Market Cap
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(SNAP), and add them to Facebook’s competing program, Instagram.

Initiating coverage of Snap’s stock last week, analyst Michael Pachter of Wedbush astutely pointed out that Facebook’s huge audience—more than 1.3 billion users—gives it a tremendous advantage against the smaller Snap, with just 173 million, because it affords Facebook a bigger sample set to test and refine features.

This culture of constant software innovation could be good for New Relic, helping it expand beyond its current business of supplying products that monitor and manage the health of programs running on websites.

The measure of success in this new world of design is less whether a product appears beautiful to the “editors” than how much it changes people’s behavior. Hit products are, above all, habit-forming. The iPhone comes out, and the next thing you know, we’re walking into traffic because we’re staring at a screen.

The most thrilling example of the new approach is Amazon’s purchase of Whole Foods, completed last week. Amazon doesn’t know bananas about bananas, but it now controls the fifth-largest U.S. grocer. It’s the perfect venue in which to experiment. Doubtless those who shop at Whole Foods will do so differently in years to come, as Amazon invents all sorts of pricing, promotion, and delivery tricks.

The next wave will be using smart software to test and refine products before humans are involved. A machine that can learn could conceive and test faster than a person, to get items to market faster.

The companies that make that possible could be the giants of artificial intelligence, like Google, or they may be outfits not yet born. Those that win will someday have great businesses, replacing the human product editors of yore.

SPEAKING OF EDITING, Tech Trader is losing an admirable editor this week, as Fleming Meeks departs Barron’s after 18 years for new opportunities. Fleming has been a great silent partner, refining this column, week after week, with a judicious sense of what to leave in and what to yank out. We will miss him at Barron’s, and we hope to live up to his fine approach to the craft. 

TIERNAN RAY can be reached at: tiernan.ray@barrons.com, www.blogs.barrons.com/techtraderdaily or @barronstechblog

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