Data Sheet—Tuesday, November 4, 2014

Good morning, Data Sheet readers! Let’s get to work—but if you’re in the U.S., don’t forget to vote!

(Reminder: Heather Clancy is on vacation this week. Tips, feedback, or just hello? @editorialiste.)

WHAT YOU NEED TO KNOW TODAY

Alibaba releases its first earnings report as a public company with revenue of $2.74 billion. CNBC

It's a swing and a miss for Sprint's latest quarterly earnings: $8.5 billion in revenue and a loss of 272,000 post-paid customers. The telecom company will cut 2,000 jobs. Barron's

A newly formed European Commission is preparing plans that would loosen the region’s strict rules on telecom mergers. NYT

Xiaomi is in talks for a funding round that values the smartphone maker between $40 billion and $50 billion. Bloomberg

A vulnerability in Apple's OS X Yosemite called "Rootpipe" allows attackers to escalate user account privileges from "admin" to "root access." ZDNet

Poynt, the startup run by a former Google and PayPal executive, signed deals with a division of JPMorgan Chase and Vantiv to distribute its new payments terminal to small retailers, restaurants, and other businesses. WSJ

Samsung is talking with SAP and Microsoft about health care partnerships. Korea Times

Disney does a deal with Google to stream Disney, Pixar, and Marvel content on Android devices. Previously, Disney's content was only available on Apple devices. CNET

IBM names Martin Jetter as head of global technology services, effective immediately. Reuters

Rahul Sood, the VoodooPC founder, resigns from Microsoft Ventures to work on a gaming startup. Re/code

"In the software-defined economy, production is about producing value for the business, users and customers." The term to know? OpenStack. eWeek

PEOPLE ARE TALKING ABOUT

Internet companies "have become the command-and-control networks of choice for terrorists and criminals, who find their services as transformational as the rest of us," according to the U.K. spy chief. Fortune, Financial Times

In several U.S. towns, smaller data center operators have moved equipment—servers, routers, cables, and the like—into vacant shopping mall retail spaces. WSJ

Russia is taking its own approach to building its version of a Silicon Valley. Fortune

Microsoft's new fitness band: "Pretty good." NYT

The HR software battle continues to heat up as another competitor, Namely, enters the fray. Fortune

STATS

Sixty-seven percent of small businesses are already experiencing steady or improved sales as this year’s holiday shopping season approaches. eWeek

Ninety-two percent of Oracle customers say the company fails to adequately explain licensing changes. InformationWeek

$3.6 million: The damages each founder of the file-sharing website The Pirate Bay must pay according to a Swedish court's sentence five years ago. One of its founders was detained yesterday. BBC

DROP IT LIKE IT'S HOT

Dropbox is making a serious bid for business customers. The company's chief operating officer, Dennis Woodside, dropped by Fortune headquarters recently to outline the company's strategy. Below is an excerpt from that conversation, lightly edited and condensed for clarity.

Fortune: The progression is: build a set of enterprise services, sales staff, and go after business customers. Is that what you're doing now?

Woodside: Absolutely. We're starting to do that, yes, although we will take a different approach than some of our competitors. We don't have a brand awareness problem. In most cases, people have heard of Dropbox. Especially when you get outside of the U.S., the usage is already there. What we have to do is convince them of the value of Dropbox in a business setting and convince them that the enterprise features that we've built satisfy their security requirements and their needs.

F: So it's trust?

W: It's trust; it's control. Those are the things that most larger companies are concerned about.

F: Do you find that conversation easier to have now that more things start on the consumer side before working their way into business?

W: A little bit, but you're dealing with information, so that's always going to be a bit tricky. The company's done a really good job in the last year of building up and investing a lot in the security of Dropbox itself. Just to give you a couple examples: When you save a Powerpoint presentation to Dropbox, we actually split it up into four-bit files—fairly small files—and then each file is encoded with a different key. The keys are stored on our servers, and the core data is stored on a different set of servers. So even if you had access to, hacked a specific server and pulled some of the bits, you'd need a key to decrypt each bit and then another to put it all back together. Once the information is on our service, it's very hard to get access to. The issues that IT administrators are typically concerned about are: What if one of my employees accidentally sends something to someone that they shouldn't? But you have that issue with e-mail as well.

F: Is there a noticeable difference in security concerns among your customers today versus a year ago?

W: On the business customer side, there's been heightened interest in security for a long time. Clearly the Edward Snowden revelations have caused people to invest a lot in security and think a lot harder about it at the CEO level. The numerous data breaches at Target and others have caused quite a bit of interest. I think it's just more that what may have been a CIO issue is now a CEO issue in many companies. Everybody has to be cognizant of the security environment and what are we doing to protect our customers' information.

F: What's your big challenge this year?

W: We're a growth company; there are always challenges. The team is close to doubling, so that creates a lot of pressure on recruiting. We'll end the year at about 1,100 people.

F: What is Dropbox going to be in however many years?

W: If you believe that 3 billion people in the planet, for most of them their local hard drive is not the best place to store information. That's the addressable market, potentially. And okay, let's say you don't believe it's that big—then let's just look at knowledge workers. There are 600 million of them in the world. Those are big numbers that potentially could use a service like Dropbox.

F: How do compete with Apple and Google and other companies that are wired into my life because I have existing accounts with them or hardware that by default uses their services? How do you compete without that entrenchment? I see Dropbox as a tool, not a place I spend time.

W: That's incumbent upon us to create the kind of workflow, or integrate with your workflow, to make it the kind of place where you do spend time. You're not everyone. Lots of people are running a good part of their lives or businesses off a Dropbox account. I think that, for the incumbent players, the advantage any specialist has is that focus.

F: Who's your biggest competitor?

W: There's tons of competition. In most cases, what we're really competing with is old technology: shared drives that were installed 10 years ago that are locally administered by an over-worked IT department and may or may not work or fall down on the weekend. A major reason that companies are considering our service is that they want to get out of their shared drives. We're competing against services like SharePoint, which I understand to be a multibillion-dollar business for Microsoft but is not particularly user-friendly and requires users to go through a lot of hoops to collaborate. We're competing against certainly other cloud services: Google, Apple to some degree, Microsoft to some degree. Then smaller players as well. The reason it's competitive is that everybody understands that this market is huge. Over time, if you build up a market of half a billion people, there are a lot of things you can do at that point.

F: If this is a nine-inning transition, which inning are we in?

W: It's probably the first, if you look at our size and scale relative to the opportunity. It's early.