Ronnie05's Blog

IDC Q1, 2013: When Smartphones prevailed over Dumbphones

Posted in Industry updates by Manas Ganguly on April 27, 2013

Manufacturers shipped 216.2 million smartphones worldwide in Q1, 2013, compared with 189 million regular cellphones, according to IDC. IDC Q1, 2013 numbers compare facorably to 402.4 million units in the Q1,2012 (YoY) and down from 483.2 million units in the Q4, 2012.Smartphones thus made up 51.6 percent of the 418.6 million mobile phones shipped. The shift to a global majority of smartphones is now being driven by consumers in developing countries such as China, India and Indonesia.

Smartphones IDC

IDC Smartphones

Samsung retains the smartphone crown taking 32.7% of the market shipping out 70.7 million smartphones – thus becoming the defacto Android standard. Samsung’s up 61% over a year earlier.Apple slipped in its numbers to close Q1, 2013 at 17.3% of the smartphone market share with 37.4 mln units. Apple’s market share market share fell to 17% from 23% a year earlier. Samsung’s dominance of the smartphone markets is so superior that it ships more smartphones than its next 4 competitors put together.

Mobile Phones IDC

Total Mobile phone shipments increased 4% YoY driven solely by 41% increase in smartphones compensating 19% drop in dumbphones.

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Educomp and Education’s sub prime crisis (Part III)

Posted in Uncategorized by Manas Ganguly on April 24, 2013

This is third and concluding part of a series of posts that discuss the Rise and Fall of Educomp track the growth of the prodigal education services company and track the factors that led to its fall. Read Part I and Part II here.

A Capex intensive balance sheet and a diffused sense of direction aside, it was Educomp’s financial wizardry and creative accounting that puts the spotlight on Educomp taking what is clearly a unsustainable basis for business. Educomp formed Edusmart, an ‘unrelated’ company headed by one of Educomp’s senior executives. The new company took over all of Educomp’s newer five-year school contracts, pledged the receivables with banks in return for roughly 75 percent of the amount as a lump sum, most of which it meekly handed over to Educomp. This innovative technique even ended up making its debt disappear for a while. Educomp itself was the guarantor of the bank loans to Edusmart.

The model’s sole purpose seemed to allow Educomp to book three-fourths of a school’s five-year annuity revenue right upfront, thus inflating revenue and profits. Clearly, the move was amied at keeping the securitised debt off Educomp’s books as contingent liability, otherwise the higher leverage ratio would have meant banks wouldn’t lend money for their K-12 schools business. This is why Educomp’s total debt as of March 2012 is just Rs 337 crore, while its total liabilities were Rs 2,148 crore. When Educomp saw growth slowing down because they’d penetrated most premium ICSE and CBSE schools, a better way would have been to educate the market and make itself more sustainable instead of changing their accounting model by using a private company to book revenue upfront.

And just when, you would think the list of follies was closing, Educomp stepped into even more capital-intensive setup by deciding to buy the land on which to put up its schools instead of long-term leases like most competitors. Schools are valued on the basis of their cash flows, not land banks. Because whatever the land’s real value, on the school’s books it can only be notional because it can’t ever be de-linked and sold. Today, the 47 schools run by Educomp have nearly 50,000 seats between them, filled with only 22,000 students.

In India any educational services company should be a private and not public listed business. While listing might bring capital, it will inevitably also force businesses to take unsustainable steps to drive higher growth and valuation. In Educomp’s case it was a combination of poor execution, lack of adequate planning and oversight, and overreach as its businesses grew at a faster pace than its management capability.

Lately and Belatedly Educomp seems to have realized its mistakes. Post a $155 million infusion by International Finance Corporation, Proparco and Mount Kellett – Educomp seems to be focusing on a transformation plan that seeks to focus the company’s attention on two primary businesses: The content-based Smart Class and the asset-backed K-12 schools. Most other businesses will be sold off progressively.

Since July last year Educomp has sold off its stake in Eurokids, a pre-school chain and raised Rs 22 crore for its online learning subsidiary authorGen in a funding round led by private equity firm Kaizen. Pearson is likely to acquire its entire stake in the loss making IndiaCan venture imminently. Also up for sale are Educomp’s majority stake in coaching firm Vidyamandir Classes and test preparation company Gateforum.

But would that be enough? I guess not. Educomp will find it difficult to bounce back to its former glory – the market today is more crowded and perhaps more specialized. Educomp will be one of the bigger players (perhaps the biggest), but the markets would have split into fragments – all of which Educomp will not recover.

Reproduced from Article on Forbes: The Rise and the Fall of Educomp (April 8, 2013)

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Educomp and Education’s sub prime crisis (Part II)

Posted in Business Cases by Manas Ganguly on April 23, 2013

This is Part II of a series of posts that discusses the Rise and Fall of Educomp track the growth of the prodigal education services company and track the factors that led to its fall. Read Part I here

From an asset light services to a capex laden balance sheet player – Educomp was getting its business mode wrong – Why did Shantanu Prakash (CEO, Founder) and Educomp move to this business model which would take in more capital and where the money would not come in quickly? The Answer – The lure of high valuation. In January 2008, it’s price-earnings multiple was 27.8 (today it is just a fraction of that at 6.77).

smartclass-logo

Buoyed by Educomp’s rosy growth numbers, between 2008 and 2009 investment banks and broking firms started putting out fat reports on the massive pot of gold at the end of the education rainbow. And Educomp was buoyed by its greed to ride the wave. The potential market was estimated at $30-35 billion across various education segments like multimedia-in-classrooms, privately run K-12 schools, vocational training, preschools, coaching classes and higher education.

Secondly Shantanu Prakash and Educomp diffused the effort over too many businesses in education using every conceivable strategic tool. For instance, Educomp’s joint ventures list reads-
IndiaCan with Pearson Plc (Vocational training)
Raffles Millenium colleges with Raffles Education
Topper TV with Network 18 in the TV space.

There were investments and acquisitions
PurpleLeap in vocational training
Vidya Mandir and Gateforum in test preparation
Eurokids in preschools.
And of course there were numerous new subsidiaries of which its own brand of K-12 schools was the most significant one.

Educomp’s annual report for 2009-10 listed 15 directly held subsidiaries, 28 indirectly held ones, five joint ventures and 14 associate companies spread across India, Singapore, Canada, USA and the British Virgin Islands.

Diffused sense of direction alongwith an awry business model is one of the worst cocktails and Educomp was brewing this.

Continued in Part III

Reproduced from Article on Forbes: The Rise and the Fall of Educomp (April 8, 2013)

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Educomp and Education’s sub prime crisis (Part I)

Posted in Business Cases by Manas Ganguly on April 22, 2013

This is part 1 of a series of posts that will discuss the Rise and Fall of Educomp track the growth of the prodigal education services company and track the factors that led to its fall.

For a company that almost single-handedly created the hype around money-making opportunities in school education, Educomp’s stock is down 72% YoY; 84%over two years; 91% over three years. Its market capitalisation has fallen from Rs 7,000 crore in November 2009 to just Rs 786 crore as of May 1st 2013. Of the $150 million in new funding it raised in July 2012 from three foreign investors, two-thirds would go to pay back a five-year-old foreign currency loan it couldn’t repay on its own, given the debt and liabilities on its stressed balance sheet.

Educomp

Educomp’s rise to glory is a story not too far away in history – From 2006 to 2012, revenues jumped 30X (from Rs 51 crore to Rs 1,500 crore); profits jumped 30X (from Rs 6 crore to Rs 180 crore); school customers increased 200X ( from 75 to 15,000) plus 250 preschools, 47 schools with 22,000 students and 350 vocational training centres. However, the devil they say is in numbers – and Educomp’s net profit margin has fallen 61 percent during the last four years; the net cash generated by its operations has been falling significantly for the last three years; the time taken to collect its money from customers almost doubled in the last four years; and most importantly, its overall liabilities in 2012 were over twice its revenues.

Educomp’s biggest star is the Smart Class – an interactive multimedia heavy digitally powered teaching experience which supplement the normal textbook and blackboard approach. To make things easier, Educomp does not charge for the infrastructure and works on a per student monthly fee for a contract period. The school in turn would pass the cost as a monthly fee increase of Rs.150-Rs.200 per student. Driven by the paucity of good teaching mediums, the technology enabled Smart-Class grew from 100 schools in 2006 to over 6550 schools in 2011.

While all that business and growth is hunky dory – the reality bites in when one accounts for delayed payments from schools and sometimes no payments from schools. The risk is that this technology sales model becomes akin to the sub-prime mortgage scenario that caused the credit crisis in the US. Like in the US where loans were given to people who did not have the repayment capacity, there is some danger that ambitious schools looking for a magic bullet are buying hardware and software they ultimately can’t afford.

It is the job of a financing institution, not an educational services vendor, to finance a school. Otherwise you end up bearing business risk, execution risk and financing risk. Unfortunately the business model of Educomp was treading the risk bit a little too high. Educomp initial assent on the bourses was because it was supposed to be ‘asset-light’ education software company that would scale with lightning speed. Unfortunately the business model chosen was driving Educomp from an ‘asset-light’ education services player into being a balance-sheet player.

Continued in Part II

Reproduced from Article on Forbes: The Rise and the Fall of Educomp (April 8, 2013)

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Chronos and kairos: What drives Apple’s iWatch ambitions

Posted in Computing and Operating Systems, Device Platforms by Manas Ganguly on April 20, 2013

Apple – the formidable under Steve Jobs has fallen fast from the cutting edge technology leadership under pincer attack from the likes of Google (Car, Glass?) and Samsung (Eye Scroll, Mind Control?). The features listed here are top of mind recalls – and a careful think could provide any and many others. For the sake of the most exciting company of our times, I hope that Tim Cook has what it takes to turn it around.

Watches_4_1_610x458 The iPad Nano watch

So while Apple has been missing in action on the “Glass” kind of immersive augmented reality application – there’s some buzz and heat on the Apple iWatch. Now then, Apple already has a device which is iPod Nano watch thereby bringing Music, e-mail, iTunes, podcasts, pedometer on the wrists. So Apple’s foray into this space has a predecessor which was cool thingie on the wrist.

However, dismissing the iWatch as a watch with features is a mistake. Apple would be inclined to see this as its first foray into wearable technologies – combining the device and apps with physical activity sensors, pulse monitor, blood pressure and possibly glucose monitor. Unlike other wearable technologies like, say, headphones, these devices allow you to monitor and analyze sleep, health, and fitness levels. In short, physical states and well being.

iWatch graphic The iWatch Concept

The ancient Greeks often made a distinction between two notions of time, Chronos and Kairos. Chronos is chronological time which flows ineluctably along by seconds, hours and years, unaffected by human interests. Kairos, etymological root of “care,” is time laden with human meaning and activity. “Lunchtime,” “a good night’s sleep,” and a “long and rejuvenating walk,” all convey this sense of Kairos. A Timex is mainly chronological. What Apple could be doing is making a “kairologocial” tool that tracks and monitors the data around the experiences you care about. How much you actually slept, when and how far you walked. Basic questions rooted from everyday experience might now be by settled by data on a “watch” — a “kairometer” — rather than guesswork. Transforming the user’s experience by making impersonal things more personal and intimate has long been at the core of Apple product’s value proposition. For example, Steve Jobs positioned the iPad as a way for customers to “connect with their…content in a more intimate…way than ever before.” The Apple watch would likely build on this logic, aiming to make users’ experience of time more intimate by tying it to who they are and what they care about. That way the Apple iWatch would want too scale its effectiveness over something like the Nike Fuel Band by adding states of well being and not just fitness. Afterall, Lifestyle (iWatch posssibly!) is much bigger than just fitness (Nike Fuel Band).

Now behold the outcome of this technology

1. With iPod, Apple redefined the way people engaged with Media. With iPhone, Apple redefined the way people engaged with Internet. The iWatch experience would be key to the way people engage with their personal hygiene and habits space. Extrapolating it further – Apple disrupted Media, it disrupted Internet and now it could disrupt Lifestyle. Lifestyle is one helluva cake, pie or what ever you want to name it that Apple is after
2. And then there is the space where you connect the dots. Apps for health/lifestyle; an Interface that really goes past platforms – Phone, TV, Media and more; and a presence which is passive over long long periods of time. You wear a wrist watch for atleast 8-14 hrs of your day! And that’s a lot of data collected.
3. Apple experience has mastered the external environment – the iWatch will take it internal ( how a user reacts to a TV program, a stimulus, a news …. (that lists is endless)). Joining the dots internal and external and what a experience continuum you have created.
4. And yes, the cascading effects of a network that goes crazy about you…. Over and over again

Its really the next frontier of technology that Apple is blending with its horizons now.

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On retrospective- Was Windows8 dead on arrival?

Posted in Computing and Operating Systems by Manas Ganguly on April 18, 2013

As Microsoft twiddled and twaddle Windows’ future of computing – Android has chugged ahead and going by the drop in PC shipments (the post PC era) and increase in the number of Android tablets and smartphones coupled with Windows8’s less than lukewarm acceptance – Microsoft has a problem. A big one. To complicate things, besides Windows 8.1, Cannonical (Ubuntu), Mozila (Firefox), Google (Android/Chrome) are also making bets in the shrinking PC/laptop space. Microsoft hasn’t really fired it in the tablet space – and is yet to find a toehold in 150 million/ $64 billion Tablet industry with the Surface!

When Windows8 was being conceived it was seen as “more like a living organism, made partly from familiar bits that have evolved over the last two decades, with several new strands of DNA tossed in”. A better and a continuous experience on multiple devices was key to the rise and spread of Windows8. It was due to be updated for more often, and was a part of a much larger hardware-apps-services ecosystem that is also changing quickly.” However, if one were to refer to the numbers – Windows8 usage has been Windows Vista when compared month to month. At similar points in their roll-outs, Vista had a desktop market share of 4.52% compared to Windows 8’s share of 2.67%. Underlining just how poorly Windows 8’s adoption has gone, Vista didn’t even have the advantage of holiday season sales to boost its numbers.

Vista versus Windows8
Windows 8 usage can’t even keep up with Vista/s poor numbers.

• Thus, on a retrospective count, Windows8 Metro (refreshingly new as it were) failed to cut the ice – possibly because it was too abrupt a jump from the Windows7 Desktop UI to a “want to be a touch interface”.
The interface was great for a tablet – but then again, Microsoft is way behind Android in terms of economies of scale – and the higher pricing served as significant entry barriers.
• Volumes not coming through, key OEMs such as Samsung dropped the RT platform.
• The $500-$1200 price tags on Windows8 made it uncompetitive in an economy that’s still not moving forward quickly.
• Microsoft also did not marry its traditional UI with the Metro UI successfully enough and the unfamiliarity was daunting.

Windows8
Windows 8, and its relatives Windows Phone 8 and RT, make no impression at all in the smartphone and tablet markets.

All things put together, Microsoft doesnot seem to have moved any further with its Windows8. Microsoft is betting all its chips on the silly notion that Metro will be the one true interface for its entire PC and device line. But the numbers indicate that 8.0 hasnt really taken off. Alternatively it would have soured its relations with key OEMs who would see Microsoft’s ambitions in the device space as a threat to their own positions. Alternate OSs vieing for Microsoft’s 3rd spot in the OSs for the future is also seeing a lot of action and churn.Going back the Windows7 route is out of question – one only hopes that Microsoft is able to crack the business and user case with Windows 8.1.(Else it’s the doldrums.

The end of Privacy as it happens! (Dont bother – its the industry economics now)

Posted in Internet and Search, Technology impact on economy and population by Manas Ganguly on April 17, 2013

If you’re not paying for something, you’re not the customer; you’re the product being sold- Andrew Lewis

The Internet is a surveillance state. Whether we admit it to ourselves or not, and whether we like it or not, we’re being tracked all the time. Google tracks us, both on its pages and on other pages it has access to. Facebook does the same; it even tracks non-Facebook users. Apple tracks us on our iPhones and iPads.Increasingly, what we do on the Internet is being combined with other data about us. Everything we do now involves computers, and computers produce data as a natural by-product. Everything is now being saved and correlated, and many big-data companies make money by building up intimate profiles of our lives from a variety of sources.

Facebook, for example, correlates your online behavior with your purchasing habits offline. And there’s more. There’s location data from your cell phone, there’s a record of your movements from closed-circuit TVs. This is ubiquitous surveillance: All of us being watched, all the time, and that data being stored forever. This is what a surveillance state looks like, and it’s Minority Report all over again.

Sure, we can take measures to prevent this. We can limit what we search on Google from our iPhones, and instead use computer web browsers that allow us to delete cookies. We can use an alias on Facebook. We can turn our cell phones off and spend cash. But increasingly, none of it matters.

There are simply too many ways to be tracked. The Internet, e-mail, cell phones, web browsers, social networking sites, search engines: these have become necessities, and it’s fanciful to expect people to simply refuse to use them just because they don’t like the spying, especially since the full extent of such spying is deliberately hidden from us and there are few alternatives being marketed by companies that don’t spy. This isn’t something the free market can fix. We consumers have no choice in the matter. All the major companies that provide us with Internet services are interested in tracking us. Visit a website and it will almost certainly know who you are; there are lots of ways to be tracked without cookies. Cellphone companies routinely undo the web’s privacy protection.

Maintaining privacy on the Internet is nearly impossible. If you forget even once to enable your protections, or click on the wrong link, or type the wrong thing, and you’ve permanently attached your name to whatever anonymous service you’re using.

In today’s world, governments and corporations are working together to keep things that way. Governments are happy to use the data corporations collect — occasionally demanding that they collect more and save it longer — to spy on us. And corporations are happy to buy data from governments. Together the powerful spy on the powerless, and they’re not going to give up their positions of power, despite what the people want.

Fixing this requires strong government will, but they’re just as punch-drunk on data as the corporations. Welcome to a world where Google knows exactly what sort of porn you all like, and more about your interests than your spouse does. Welcome to a world where your cell phone company knows exactly where you are all the time. Welcome to the end of private conversations, because increasingly your conversations are conducted by e-mail, text, or social networking sites.

And welcome to a world where all of this, and everything else that you do or is done on a computer, is saved, correlated, studied, passed around from company to company without your knowledge or consent; and where the government accesses it at will without a warrant.

Welcome to an Internet without privacy, and we’ve ended up here with hardly a fight.

Microsoft yet to find a toehold in 150 million/ $64 billion Tablet industry with the Surface!

Posted in Industry updates by Manas Ganguly on April 15, 2013

ABi research reports that the tablet market will grow this year by 38% to 150 million units. But the Microsofts and Blackberrys will contiunue missing the boat! With 3% of the current Tablet markets globally, Microsoft, Blackberry and other unidentified OS implementations don’t show signs of significant growth.

The ABI Research report says that an estimated 150 million tablets will ship in 2013, worth an estimated $64 billion.The total number of tablets will grow by a projected 38% over 2012, and the total revenue will grow a projected 28%. Last year, according to ABI, 60% of tablet used iOS, 37% used Android, and the remaining 3% was made up of “others”.

App publisher Animoca recently calculated the top 12 Android tablets, based on app usage, and it found that five of the top six are 7-inchers- and with iPad Mini touting the 7″+ form factor – Tablet markets in the foreseeable future could look to stabilize at 7″ form factor.

Theoretically, that could bode well for Microsoft, because the company is said to be at work on a 7-inch Surface tablet. Surface tablets haven’t sold well, but perhaps a less-expensive and smaller form factor would help. A possible winner would be a 7-inch Windows tablet that takes advantage of Microsoft’s partnership with Barnes and Noble and taps into B&N’s vast book repository and growing video offerings, as well as into Microsoft’s successful Xbox-based gaming ecosystem.

Still, if ABI Research numbers are right, Microsoft so far hasn’t been able to tap into people’s growing desire for tablets, and won’t in the foreseeable future.

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How disruptive is VoLTE? (A lot of over hype really!)

Posted in Industry updates by Manas Ganguly on April 13, 2013

As the industry waits with baited breath for reliance Jio to create the landmark disruption, there has been an uproar over VoLTE i.e Voice service over LTE spectrum. Reliance Jio paid Rs 1,658-crore fee to the government for supporting 4G VoLTE on its universal services licence. VoLTE was the final piece that would complete Reliance Jio’s portfolio of services. However is that really a disruptor as it is purported to be?

Voice Telephony on LTE is made possible through apps such as Skype. However, with prohibitive CAPEX on full carpet area coverage – Data connectivity in a wide carpet area will be patchy at best. It means no voice calls when driving or outside city limits.

The 2,300 MHz spectrum, is one of the worst when it comes to creating a large area network. Compared to a GSM/HSPA 900 MHz; LTE on 2300MHz requires exponentially higher number of towers in one shot. Voice is not profitable enough, to support such high infrastructure costs.

Thirdly, Voice requires a better quality of experience. A data subscriber rarely notices fluctuations in speed, but a user in a moving vehicle will expect the same call quality throughout. Thus, for data services can afford lower initial investments and expand incrementally afterward, but for voice telephony, all investments are needed up front.

The one way VoLTE might make commercial sense is if Reliance acquires or partners with an existing mobile operator, such that its current 2G or 3G network becomes the fallback network that will carry voice calls or data when 4G airwaves aren’t around. That appears to be the only way Voice can happen for Reliance Jio. (Or alternatively, a tie up with Reliance (Anil Ambani) could provide Mukesh Ambani the where with all to su[pport voicee services).

Thus VoLTE under the current understanding is not the disruption as many earlier thought it to be.

Tablets – Why Marketers need to move out of the “Tablet – a Fad” Perspective!

Posted in e-commerce, Mobile Computing, Mobile Data & Traffic by Manas Ganguly on April 11, 2013

For many of the marketers out there – there is not a great case for Tablets and Smartphones together. Most of them view tablets as a passing fad. This equation is perhaps complicated by the announcement of Phablets as a hybrid form and use factor! However, is Tablet really a fad?

A recent report published by the Adobe Digital Index is an eye opener. For February 2013, Tablets are attributed to be driving more traffic to websites than smartphones. The report is based on 100 billion visits to more than 1,000 websites worldwide over the last year – hence this isnt a fluke that you had blow over. Adobe attributes this shift in web browsing patterns primarily to the device’s form factor, which lends itself to leisurely (and more comfortable) browsing than smaller touch devices.

adobe-report-tablets-620x343

Listing down a key points on how and why Tablets are not a fad. They are here for good-
1. Frankly, with both WiFi Tablets and Entry-level Smartphones penetrating the $50 price point – the screen size is a big enabler for tablets.
2. As WiFi hotspot roll outs gather momentum – Tablets will push more and more of data.
3. So while Smartphone gathers numbers in the low end – it is the larger screen size devices (3.5″ – 4.0″ – 5″ – 7″- 9.7″) which will posssibly drive higher data consumption.
4. The customer at the economy end of connected devices ($50-$100) tends to use his device as a media machine – again for the $50-70 price – a tablet provides greater value than a 2.8″-3.5″ smartphone given the profusion of pirated content.
5. Tablets are also driving penetration across segments such as education, insurance for the large screen internet access advantage
6. For the Phablet space – this is a sub-category branching out into becoming a category by itself – but its numbers will take some building up – and the pricing still is $200 & above.
7. With tablet growth rates still well above smartphone growth rates, expect this gap to widen
8. Traditionally because of the higher screen size the engagement time on tablets has been higher than the smartphones as well.

Interestingly enough, in mature economies, Tablets have found yet another niche. Tablets are increasingly being used shopping activities.Adobe found that 13.5% of all online sales were transacted via tablets during the recent holiday season. Furthermore, as of January 2012, researchers found that consumers using tablets spent 54 percent more time per online order than their counterparts on smartphones, and 19 percent more than desktop/laptop users.

Adobe- report-tablets-1-v3-620x339

Thus the key take away from the Adobe report is this – tablets and smartphones are two different animals. Based on consumer use cases, one does not replace the other because mobile device owners are using tablets and smartphones to accomplish different tasks. This has implications on the way e-commerce companies as well as media companies and online content distributors would play up to serve the user. So this really gets into single device – multi use cases scenarios – all of is still building.

Thus i come back to my initial point – Marketers who are apprehensive of the scale and scope of tablets and are unable to fix “proper” answers to tablets, need to understand, there is no single answer… and the answers too are evolving at a fast clip! The risk that they run in trying to perfect the business cases and create understanding is that they could be left out of the markets. Proposition here is possibly not a case of inspiration but of evolution!

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