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Archive for September, 2016

The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process” – Gerbsman Partners

Posted in Uncategorized, tagged , , on September 8, 2016| Leave a Comment »

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San Francisco, September, 2016
The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process”
Every venture capital investor hopes that all of his investments will succeed. The reality is that a large percentage of all venture investments must be shut down. In extreme cases, such a shut down will take the form of a formal bankruptcy or an assignment for the benefit of creditors. In most cases, however, the investment falls into the category of “living dead”, i.e. companies that are not complete failures but that are not self-sustaining and whose prospects do not justify continued investment. Almost never do investors shut down such a “living dead” company quickly.

Most hope against hope that things will change. Once reality sets in, most investors hire an investment banker to sell such a company through a standard mergers and acquisition process – seldom with good results. Often, such a process requires some four to six months, burns up all the remaining cash in the company and leads to a formal bankruptcy or assignment for the benefit of creditors. In many instances, there are a complete lack of bidders, despite the existence of real value in the company being sold.

The first reason for this sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only when forced to by competitive pressure. The highest probability buyers are those who are already familiar with the company being sold, i.e. competitors, existing investors, customers and vendors. Such buyers either already know of the company’s weakness or quickly understand it as soon as they see the seller’s financials. Once the sales process starts, the seller is very much a wasting asset both financially and organizationally. Potential buyers quickly divide the company’s burn rate into its existing cash balance to see how much time it has left. Employees, customers and vendors grow nervous and begin to disengage. Unless compelled to act, potential buyers simply draw out the process and either submit a low-ball offer when the company is out of cash or try to pick up key employees and customers at no cost when the company shuts down.

The second reason for this sad result is a misunderstanding of the psychology and methods of investment bankers. Most investment bankers do best at selling “hot” companies, i.e. where the company’s value is perceived by buyers to be increasing quickly over time and where there are multiple bidders. They tend to be most motivated and work hardest in such situations because the transaction sizes (i.e. commissions) tend to be large, because the publicity brings in more assignments and because such situations are more simply more fun. They also tend to be most effective in maximizing value in such situations, as they are good at using time to their advantage, pitting multiple buyers against each other and setting very high expectations. In a situation where “time is not your friend”, the actions of a standard investment banker frequently make a bad situation far worse. First, since transaction sizes tend to be much smaller, an investment banker will assign his “B” team to the deal and will only have such team spend enough time on the deal to see if it can be closed easily. Second, playing out the process works against the seller. Third, trying to pit multiple buyers against each other and setting unrealistically high valuation expectations tends to drive away potential buyers, who often know far more about the real situation of the seller than does the investment banker.

“Date Certain M&A Process”-  The solution in a situation where “time is not your friend” is a “Date Certain Mergers and Acquisitions Process”. With a “Date Certain M&A Process”, the company’s board of directors hires a crisis management/ private investment banking firm (“advisor”) to wind down business operations in an orderly fashion and maximize value of the IP and tangible assets. The advisor works with the board and corporate management to:

  1.  Focus on the control, preservation and forecasting of CASH.
  2. Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information Ïdue diligence war-roomÓ, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis.
  3. Stabilize and provide leadership, motivation and morale to all employees,
  4. Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.
  5. The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits.
  6. Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically two to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $200,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days.

Date Certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid. The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is five to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a “Date certain M&A Process” can be concluded in 5 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the “Date Certain M&A Process” compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus 10% or an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – Once the auction is closed and the consideration is received and distributed, the advisor takes all remaining steps to effect an orderly shut-down of the remaining corporate entity. To this end the insolvency counsel then takes the lead on all orderly shutdown items.

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 94 Technology, Medical Device, Mobile, Life Science, Cyber Security, Fuel Cell, Digital Marketing and Solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, McLean, VA, San Francisco, Orange County, Europe and Israel.

 

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Steven R. Gerbsman
Principal
Gerbsman Partners
Cell: 415.505.4991
steve@gerbsmanpartners.com
http://www.gerbsmanpartners.com

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A Navy SEAL commander told students to make their beds in the best graduation speech of 2014 – worth revisiting by all — by Peter Jacobs – Business Insider

Posted in Uncategorized, tagged , , , , on September 6, 2016| Leave a Comment »

A Navy SEAL commander told students to make their beds in the best graduation speech of 2014

Peter Jacobs

UT alum Adm. William H. McRaven gives students the “hook ’em horns” at the university’s commencement last year.AP Photo/The University of Texas at Austin, Marsha Miller

The University of Texas, Austin has chosen the president of the prestigious Ford Foundation to speak at its commencement this year, but it will be hard for him to outshine last year’s graduation speaker.

US Navy admiral and UT, Austin, alumnus William H. McRaven returned to his alma mater to give seniors 10 lessons from basic SEAL training when he spoke at the school’s 2014 commencement. It was widely considered to be the best graduation speech of the year.

McRaven — a former commander of the US Special Operations Command, who organized the raid that killed Osama bin Laden — stressed the importance of making your bed every morning, taking on obstacles headfirst, and realizing that it’s OK to be a “sugar cookie.”

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As McRaven describes in his speech, a “sugar cookie” was a someone who failed uniform inspection during SEAL training, and was ordered to run fully clothed into the ocean and then roll around on the beach until every part of their body was covered with sand.

“Sometimes no matter how well you prepare or how well you perform you still end up as a sugar cookie,” McRaven said. “It’s just the way life is sometimes.”

In another lesson from his speech, McRaven stressed how everyone will likely fail at some point, and how to learn from those failures.

The former Navy admiral described how SEALs would sometimes be ordered to do “circuses” — “two hours of additional calisthenics—designed to wear you down, to break your spirit, to force you to quit.” However, McRaven said, “The pain of the circuses built inner strength-built physical resiliency.”

McRaven’s personal stories from his many years as a Navy SEAL supported all of these lessons.

“While these lessons were learned during my time in the military, I can assure you that it matters not whether you ever served a day in uniform,” McRaven told students. “It matters not your gender, your ethnic or religious background, your orientation, or your social status.”

In January, McRaven took over as chancellor of the University of Texas System.

We first saw this speech at the Military Times. Here’s the video of the full speech with the transcript below:

Here are McRaven’s 10 lessons from his years of experience as a Navy SEAL, via University of Texas, Austin:

I have been a Navy SEAL for 36 years. But it all began when I left UT for Basic SEAL training in Coronado, California.

Basic SEAL training is six months of long torturous runs in the soft sand, midnight swims in the cold water off San Diego, obstacles courses, unending calisthenics, days without sleep and always being cold, wet and miserable.

It is six months of being constantly harassed by professionally trained warriors who seek to find the weak of mind and body and eliminate them from ever becoming a Navy SEAL.

But, the training also seeks to find those students who can lead in an environment of constant stress, chaos, failure and hardships.

To me basic SEAL training was a life time of challenges crammed into six months.

So, here are the ten lesson’s I learned from basic SEAL training that hopefully will be of value to you as you move forward in life.

Every morning in basic SEAL training, my instructors, who at the time were all Viet Nam veterans, would show up in my barracks room and the first thing they would inspect was your bed.

If you did it right, the corners would be square, the covers pulled tight, the pillow centered just under the headboard and the extra blanket folded neatly at the foot of the rack—rack—that’s Navy talk for bed.

It was a simple task—mundane at best. But every morning we were required to make our bed to perfection. It seemed a little ridiculous at the time, particularly in light of the fact that were aspiring to be real warriors, tough battle hardened SEALs—but the wisdom of this simple act has been proven to me many times over.

If you make your bed every morning you will have accomplished the first task of the day. It will give you a small sense of pride and it will encourage you to do another task and another and another.

By the end of the day, that one task completed will have turned into many tasks completed. Making your bed will also reinforce the fact that little things in life matter.

If you can’t do the little things right, you will never do the big things right.

And, if by chance you have a miserable day, you will come home to a bed that is made—that you made—and a made bed gives you encouragement that tomorrow will be better.

If you want to change the world, start off by making your bed.

During SEAL training the students are broken down into boat crews. Each crew is seven students—three on each side of a small rubber boat and one coxswain to help guide the dingy.

Every day your boat crew forms up on the beach and is instructed to get through the surfzone and paddle several miles down the coast.

In the winter, the surf off San Diego can get to be 8 to 10 feet high and it is exceedingly difficult to paddle through the plunging surf unless everyone digs in.

Every paddle must be synchronized to the stroke count of the coxswain. Everyone must exert equal effort or the boat will turn against the wave and be unceremoniously tossed back on the beach.

For the boat to make it to its destination, everyone must paddle.

You can’t change the world alone—you will need some help— and to truly get from your starting point to your destination takes friends, colleagues, the good will of strangers and a strong coxswain to guide them.

If you want to change the world, find someone to help you paddle.

Over a few weeks of difficult training my SEAL class which started with 150 men was down to just 35. There were now six boat crews of seven men each.

I was in the boat with the tall guys, but the best boat crew we had was made up of the little guys—the munchkin crew we called them—no one was over about 5-foot five.

The munchkin boat crew had one American Indian, one African American, one Polish America, one Greek American, one Italian American, and two tough kids from the mid-west.

They out paddled, out-ran, and out swam all the other boat crews.

The big men in the other boat crews would always make good natured fun of the tiny little flippers the munchkins put on their tiny little feet prior to every swim.

But somehow these little guys, from every corner of the Nation and the world, always had the last laugh— swimming faster than everyone and reaching the shore long before the rest of us.

SEAL training was a great equalizer. Nothing mattered but your will to succeed. Not your color, not your ethnic background, not your education and not your social status.

If you want to change the world, measure a person by the size of their heart, not the size of their flippers.

Several times a week, the instructors would line up the class and do a uniform inspection. It was exceptionally thorough.

Your hat had to be perfectly starched, your uniform immaculately pressed and your belt buckle shiny and void of any smudges.

But it seemed that no matter how much effort you put into starching your hat, or pressing your uniform or polishing your belt buckle— it just wasn’t good enough.

The instructors would fine “something” wrong.

For failing the uniform inspection, the student had to run, fully clothed into the surfzone and then, wet from head to toe, roll around on the beach until every part of your body was covered with sand.

The effect was known as a “sugar cookie.” You stayed in that uniform the rest of the day—cold, wet and sandy.

There were many a student who just couldn’t accept the fact that all their effort was in vain. That no matter how hard they tried to get the uniform right—it was unappreciated.

Those students didn’t make it through training.

Those students didn’t understand the purpose of the drill. You were never going to succeed. You were never going to have a perfect uniform.

Sometimes no matter how well you prepare or how well you perform you still end up as a sugar cookie.

It’s just the way life is sometimes.

If you want to change the world get over being a sugar cookie and keep moving forward.

Every day during training you were challenged with multiple physical events—long runs, long swims, obstacle courses, hours of calisthenics—something designed to test your mettle.

Every event had standards—times you had to meet. If you failed to meet those standards your name was posted on a list and at the end of the day those on the list were invited to—a “circus.”

A circus was two hours of additional calisthenics—designed to wear you down, to break your spirit, to force you to quit.

No one wanted a circus.

A circus meant that for that day you didn’t measure up. A circus meant more fatigue—and more fatigue meant that the following day would be more difficult—and more circuses were likely.

But at some time during SEAL training, everyone—everyone—made the circus list.

But an interesting thing happened to those who were constantly on the list. Overtime those students—who did two hours of extra calisthenics—got stronger and stronger.

The pain of the circuses built inner strength-built physical resiliency.

Life is filled with circuses.

You will fail. You will likely fail often. It will be painful. It will be discouraging. At times it will test you to your very core.

But if you want to change the world, don’t be afraid of the circuses.

At least twice a week, the trainees were required to run the obstacle course. The obstacle course contained 25 obstacles including a 10-foot high wall, a 30-foot cargo net, and a barbed wire crawl to name a few.

But the most challenging obstacle was the slide for life. It had a three level 30 foot tower at one end and a one level tower at the other. In between was a 200-foot long rope.

You had to climb the three tiered tower and once at the top, you grabbed the rope, swung underneath the rope and pulled yourself hand over hand until you got to the other end.

The record for the obstacle course had stood for years when my class began training in 1977.

The record seemed unbeatable, until one day, a student decided to go down the slide for life—head first.

Instead of swinging his body underneath the rope and inching his way down, he bravely mounted the TOP of the rope and thrust himself forward.

It was a dangerous move—seemingly foolish, and fraught with risk. Failure could mean injury and being dropped from the training.

Without hesitation—the student slid down the rope—perilously fast, instead of several minutes, it only took him half that time and by the end of the course he had broken the record.

If you want to change the world sometimes you have to slide down the obstacle head first.

During the land warfare phase of training, the students are flown out to San Clemente Island which lies off the coast of San Diego.

The waters off San Clemente are a breeding ground for the great white sharks. To pass SEAL training there are a series of long swims that must be completed. One—is the night swim.

Before the swim the instructors joyfully brief the trainees on all the species of sharks that inhabit the waters off San Clemente.

They assure you, however, that no student has ever been eaten by a shark—at least not recently.

But, you are also taught that if a shark begins to circle your position—stand your ground. Do not swim away. Do not act afraid.

And if the shark, hungry for a midnight snack, darts towards you—then summons up all your strength and punch him in the snout and he will turn and swim away.

There are a lot of sharks in the world. If you hope to complete the swim you will have to deal with them.

So, If you want to change the world, don’t back down from the sharks.

As Navy SEALs one of our jobs is to conduct underwater attacks against enemy shipping. We practiced this technique extensively during basic training.

The ship attack mission is where a pair of SEAL divers is dropped off outside an enemy harbor and then swims well over two miles—underwater—using nothing but a depth gauge and a compass to get to their target.

During the entire swim, even well below the surface there is some light that comes through. It is comforting to know that there is open water above you.

But as you approach the ship, which is tied to a pier, the light begins to fade. The steel structure of the ship blocks the moonlight—it blocks the surrounding street lamps—it blocks all ambient light.

To be successful in your mission, you have to swim under the ship and find the keel—the centerline and the deepest part of the ship.

This is your objective. But the keel is also the darkest part of the ship—where you cannot see your hand in front of your face, where the noise from the ship’s machinery is deafening and where it is easy to get disoriented and fail.

Every SEAL knows that under the keel, at the darkest moment of the mission—is the time when you must be calm, composed—when all your tactical skills, your physical power and all your inner strength must be brought to bear.

If you want to change the world, you must be your very best in the darkest moment.

The ninth week of training is referred to as “Hell Week.” It is six days of no sleep, constant physical and mental harassment and—one special day at the Mud Flats—the Mud Flats are area between San Diego and Tijuana where the water runs off and creates the Tijuana slue’s—a swampy patch of terrain where the mud will engulf you.

It is on Wednesday of Hell Week that you paddle down to the mud flats and spend the next 15 hours trying to survive the freezing cold mud, the howling wind and the incessant pressure to quit from the instructors.

As the sun began to set that Wednesday evening, my training class, having committed some “egregious infraction of the rules” was ordered into the mud.

The mud consumed each man till there was nothing visible but our heads. The instructors told us we could leave the mud if only five men would quit—just five men and we could get out of the oppressive cold.

Looking around the mud flat it was apparent that some students were about to give up. It was still over eight hours till the sun came up—eight more hours of bone chilling cold.

The chattering teeth and shivering moans of the trainees were so loud it was hard to hear anything and then, one voice began to echo through the night—one voice raised in song.

The song was terribly out of tune, but sung with great enthusiasm.

One voice became two and two became three and before long everyone in the class was singing.

We knew that if one man could rise above the misery then others could as well.

The instructors threatened us with more time in the mud if we kept up the singing—but the singing persisted.

And somehow—the mud seemed a little warmer, the wind a little tamer and the dawn not so far away.

If I have learned anything in my time traveling the world, it is the power of hope. The power of one person—Washington, Lincoln, King, Mandela and even a young girl from Pakistan—Malala—one person can change the world by giving people hope.

So, if you want to change the world, start singing when you’re up to your neck in mud.

Finally, in SEAL training there is a bell. A brass bell that hangs in the center of the compound for all the students to see.

All you have to do to quit—is ring the bell. Ring the bell and you no longer have to wake up at 5 o’clock. Ring the bell and you no longer have to do the freezing cold swims.

Ring the bell and you no longer have to do the runs, the obstacle course, the PT—and you no longer have to endure the hardships of training.

Just ring the bell.

If you want to change the world don’t ever, ever ring the bell.

To the graduating class of 2014, you are moments away from graduating. Moments away from beginning your journey through life. Moments away starting to change the world—for the better.

It will not be easy.

But, YOU are the class of 2014—the class that can affect the lives of 800 million people in the next century.

Start each day with a task completed.

Find someone to help you through life.

Respect everyone.

Know that life is not fair and that you will fail often, but if take you take some risks, step up when the times are toughest, face down the bullies, lift up the downtrodden and never, ever give up—if you do these things, then next generation and the generations that follow will live in a world far better than the one we have today and—what started here will indeed have changed the world—for the better.

Thank you very much. Hook ’em horns.

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What to expect from Apple’s iPhone 7 event by Brooke Crothers – Fox News

Posted in Uncategorized, tagged , , , , on September 5, 2016| Leave a Comment »

What to expect from Apple’s iPhone 7 event

By

iPhone rumor mill: What does Apple have up its sleeve?

With a major iPhone physical redesign expected in 2017, the iPhone 7 may feature just modest changes this year. Will that be enough to keep consumers interested? Read on.

The closer you get to an Apple event, the more accurate the rumors tend to get. We’re now a few days before the event and probably have a pretty good idea what to expect — barring a few surprises — according to reports and analysts.

Let’s go over the new stuff you’re most likely to see on the next-generation iPhone at the September 7 Apple event.

Physical design: The iPhone 7 will not be a major departure from the appearance of the 4.7-inch iPhone 6s and 5.5-inch 6s Plus. The expected similarity is one of the reasons that the iPhone 7 is being referred to as another interim release, rather than the full redesign typically seen every two years.

Elimination of traditional headphone jack: This expected change has gained steam this week with an apparent leak revealing new Beats headphones due to be announced at the event. Rumors suggest that Apple will debut both new wireless headphones and Beats headphones that use Lightning connectors, according to MacRumors.

Water resistance: The elimination of the headphone jack is also expected to allow improved water resistance and is a key reason for its removal.

New dual-camera: A better camera has become a de rigueur upgrade for any smartphone. In the last few months, dual-sensor cameras (aka, dual cameras) are just beginning to come into vogue on high-end phones. The larger iPhone 7 model could use a dual-camera system similar to Huawei’s P9 smartphone. The dual-cameras produce photos with more detail and perform better in low-light conditions. The camera sensors combine the two images to yield a single, merged photograph, according to a Bloomberg report.

New home button: Apple may replace the current buttons — which must be pressed down into the phone — with a flush, pressure-sensitive button.

Faster processors: It is almost certain that Apple will come out with a new generation of faster processors, most likely called the A10 processor, as follow-on to the current A9 chip.

So far, analysts are not overly impressed by the expected changes to Apple’s flagship device.

“As much as the updates are solid moves forward they sound fairly mundane,” Neil Saunders, managing director of research firm Conlumino, told FoxNews.com. “That said, there will likely be more interest in the new phone if only because consumers with iPhone 5 or 5s models who feel it is time to trade up. However, this isn’t a replacement for the demand created by a phone which represents a real step forward.”

Jitesh Ubrani, an analyst at market researcher IDC, agrees. “The minor changes and the major refresh expected in 2017 are partly the reason we forecast a decline for the iPhone in 2016,” Ubrani told Foxnews.com.

IDC published a forecast on Thursday that reinforced this outlook for Apple — though the report added: “IDC does expect a rebound in 2017 and beyond as iPhones reach nearly a quarter billion units in 2020.”

And what about the most-talked-about change, the elimination of the venerable headphone jack? “Apple’s rumored decision to remove the 3.5mm headphone jack will dramatically improve audio quality,” Rene Oehlerking, CMO at headphone maker Jaybird, told Foxnews.com. “Replacing the 50-year-old analog technology allows you to listen to digital music in its purest form and, along with the upcoming Bluetooth 5.0 release, paves the way for a massive leap in wireless adoption.”

Other expected announcements on September 7 include a new Apple Watch with GPS, a faster processor, and better health and fitness tracking. A new iOS 10 operating system is also expected, as is the latest operating system for Macs, called macOS Sierra.

Apple did not respond to a request for comment.

 

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Apple is facing a crisis of salesmanship by Matt Weinberger – Business Insider

Posted in Uncategorized, tagged , , , , on September 3, 2016| Leave a Comment »

Apple is facing a crisis of salesmanship

Apple haters have always made the case that the company’s massive success is as much the product of marketing and salesmanship as it is any kind of technical innovation.

Maybe they’re right. Whatever else Apple cofounder Steve Jobs was, he was the consummate salesman. Maybe the original iPhone could have sold itself back in 2007, but Jobs’ legendary introductory event definitely helped.

But the world has changed. As smartphone innovation seems to have plateaued, the tech giants of the world, notably Google, Microsoft, and Facebook, have doubled down on machine learning and artificial intelligence — the trendy technology that’s making for smarter, more personalized apps and devices.

It’s a big, necessary step for the industry. Thanks to smartphones, tablets, smart TVs, home voice assistants like the Amazon Echo, and all our other kinds of gadgetry, we’re generating more data than ever before. The promise of artificial intelligence is a way to sift through the noise and always find exactly what we need, when we need it, on whichever device we’re using.

This means that Tim Cook’s Apple is facing a unique and unprecedented marketing challenge as it heads into Wednesday’s much-anticipated iPhone 7 launch event, where the company is expected to announce a new phone that’s only a minor improvement to the existing iPhone 6S.

iphone 7Apple

With the hardware unexciting at best, that means that the onus will be on Apple to prove that the iPhone is differentiated from Google’s ever-improving Android elsewhere. Namely, it must prove the upcoming iOS 10 operating system has game with the new machine learning trend and it will bring intelligence to the whole iPhone.

How do you sell customers on something they don’t even know they’re using? Perhaps more importantly, how do you do it when the world is convinced that Apple is far behind the rest of the market? With Google nipping at Apple’s heels with each new Android release, these questions are only growing in urgency.

Media blitz

For Apple, the peril is twofold.

First, Wall Street is afraid that we’ve reached peak iPhone sales, and it’s all downhill from here. Second, customers and analysts alike are concerned that after years of same-same iPhone releases and the failure of new products like the Apple Watch and iPad Pro to light the market ablaze, Apple’s ability to innovate has peaked, too.

That’s why Apple’s PR machine spent much of August in overdrive, with top company execs including Tim Cook, Eddy Cue, and Phil Schiller giving interviews to Fast Company, The Washington Post, and Medium’s Backchannel.

In each interview, the content may have varied, but the message was always the same: If you think Apple’s glory days are behind it, think again.

The coded message is: Apple is not behind in new technologies like machine learning.

Tim CookApple CEO Tim CookREUTERS/Stephen Lam

Instead, Apple execs explained to Steven Levy at Backchannel that there is indeed an “Apple brain” on every iPhone and iPad that learns from user behavior. Apple sees it as part of that overall, signature Apple-just-works experience, rather than a total revolution.

“It’s a technique that will ultimately be a very Apple way of doing things as it evolves inside Apple and in the ways we make products.” Apple Senior VP Phil Schiller told Steven Levy at Backchannel.

Again, to decode that message for Apple’s investors and customers: We’re ahead of the curve on machine learning, but even if we weren’t, it would be okay, because we’re still Apple, and we still build the best stuff.

The Siri solution

In a way, Apple is right on track.

Investors and your average consumers don’t care so much about the technology that goes on behind the scenes, so much as they like new, shiny experiences. It’s as true for Apple as it is for Microsoft, Google, Facebook, Amazon, or anybody else, really.

But that just underscores the struggle of selling the stuff that machine learning makes possible.

Many of the coolest things it enables, from a technical standpoint  — better app recommendations, facial recognition in photos, speech recognition, fraud prevention and security — are nifty and useful, but also the kind of things you tend to only ever notice when it doesn’t work.

siri in ios 10 wwdc 2016Apple

Which is why you’ve heard so much from Apple about the Siri voice assistant and the new smarts that she’s getting in iOS 10. It’s something Apple can’t hammer on hard enough: This is the proof that we’re not behind in machine learning. This is the thing you can use every day to make your life better.

It remains to be seen if the souped-up Siri will be enough to reverse user behavior, given that surveys have found that 70% of iPhone users use her only sometimes or rarely.

Ultimately, though, it doesn’t matter if she wins the world over or not. Siri, with her new smarts, becomes what’s essentially a mascot for the so-called Apple Brain, more so than she already is.

She’s the most tangible example of what machine learning can do, even if she’s not necessarily the best or most useful.

amazon echoAmazon

The exact same factors are going into Microsoft’s Cortana, Amazon’s Alexa, and the forthcoming Google Assistant, too.

So don’t be surprised if Apple starts talking up Siri as better than all other smart assistants. And don’t be surprised if Microsoft, Google, and Amazon all fire back. Because really, what they’re trying to prove is who’s the most intelligent, artificial or otherwise.

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