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Trump talks to U.S. automakers, pushes for new American plants

by geralt from Pixabay

 

Trump talks to U.S. automakers, pushes for new American plants

 

By David Shepardson and Roberta Rampton
| WASHINGTON

U.S. President Donald Trump urged the chief executives of the Big Three U.S. automakers on Tuesday to build more cars in the country, pressing his pledge to bring jobs to America and discourage the car industry from investing in Mexico.

Trump, who has threatened to impose 35 percent tariffs on imported vehicles, opened a White House meeting with General Motors Co CEO Mary Barra, Ford Motor Co’s Mark Fields and Fiat Chrysler Automobiles NV’s Sergio Marchionne by saying he wanted to see more auto plants in the United States.

In return, the new Republican president has vowed to cut regulations and taxes to make it more attractive for businesses to operate in the United States. He promised during his campaign to be a job-creating president and stressed that message in his inaugural address last Friday.

“We have a very big push on to have auto plants and other plants – many other plants,” he told reporters at the start of the meeting. “It’s happening. It’s happening big league.”

Matt Blunt, who heads a U.S. automaker trade association and attended the meeting, told Reuters that Trump asked what his administration could do “on domestic and trade policy that would help make the United States more competitive and strengthen the ability of automakers to add production here.”

The hour-long meeting was the latest sign of Trump’s uncommon degree of intervention for a U.S. president into corporate affairs as he has repeatedly pressured automakers and other manufacturers to “buy American and hire American.”

It was the first time the heads of the big three automakers met jointly with a U.S. president since a 2011 session with Barack Obama to tout a deal to nearly double fuel efficiency standards by 2025. Automakers have urged the Trump administration to rethink those aggressive mandates.

The auto executives on Tuesday raised the issue of the fuel efficiency rules, trade policy and other regulatory matters, another person briefed on the meeting said. Marchionne told reporters afterward that Trump did not give them specifics on what regulations he would cut.

The companies also discussed autonomous and electric vehicles and Trump asked about advanced vehicles, the person said.

 

EXCESS CAPACITY

With flattening U.S. auto sales and excess capacity in the United States, U.S. automakers have been reluctant to open new U.S. auto plants in recent years. GM and Ford last built new U.S. assembly plants in 2004, while Fiat Chrysler opened a new transmission plant in Indiana in 2014.

Kristin Dziczek, an analyst at the Michigan-based Center for Automotive Research, said automakers still had excess capacity in North America after suffering in the 1990s and 2000s from overcapacity and shifts in market share.

Building a new plant would take three or more years and cost at least $1 billion, industry experts said.

Automakers have expanded operations at existing U.S. plants to meet rising demand for trucks and SUVs. GM, Ford, Fiat Chrysler and foreign automakers have announced new U.S. jobs and investments in recent weeks.

Coinciding with Tuesday’s meeting, Toyota Motor Corp said it would add 400 jobs and invest $600 million in an Indiana plant, aiming to boost production of a popular SUV by 10 percent.

 

Ford’s Fields said automakers wanted to work with Trump to create a “renaissance in American manufacturing” and that Trump’s economic priorities were encouraging, including his move on Monday to formally bow out of the 12-nation Trans-Pacific Partnership trade pact championed by Obama.

“The mother of all trade barriers is currency manipulation. And TPP failed in meaningfully dealing with that, and we appreciate the president’s courage to walk away from a bad trade deal,” Fields told reporters after the meeting.

Barra said there was a “huge opportunity” to work together with the government to “improve the environment, improve safety and improve the jobs creation.”

U.S. automakers have collectively added more than 78,000 jobs since 2009, the year when GM and Chrysler, now a unit of Italian-American Fiat Chrysler, filed for bankruptcy as part of government bailouts during the U.S. recession. They have invested more than $40 billion in U.S. facilities during that period.

 

BUSINESS CASE

Despite the vocal pressure from Trump, the companies are unlikely to truly change their existing business plans for now, said Sam Fiorani, vice president of global vehicle forecasting with AutoForecast Solutions.

“We need to have more concrete policies from the president,” he said. “Automakers will make decisions on whether there is a solid business case. Does it make more sense to build outside the U.S. or to build in the U.S.?”

GM said in 2014 it would invest $5 billion in Mexico through 2018, a move that would allow it to double its production capacity, and Barra has said the automaker is not reconsidering the plan.

While automakers are adding U.S. jobs, they are also cutting U.S. production of small cars. On Monday, GM ended two shifts of production of small cars in Ohio and Michigan, cutting about 2,000 jobs.

Barclays auto analyst Brian Johnson said in a note on Tuesday that “automakers will be willing to make a deal that would bring back jobs to the U.S. in return for a slower ramp of (fuel efficiency) targets and related state-level mandates.”Auto stocks rose on Tuesday. U.S.-listed shares of Fiat Chrysler gained 5.84 percent to $10.88, while Ford was up 2.44 percent to $12.61 and GM rose 0.96 percent to $37.

(Additional reporting by Susan Heavey and Bernie Woodall; Editing by Frances Kerry and Peter Cooney)
Published at Tue, 24 Jan 2017 23:24:16 +0000

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BlackRock to ask if companies spend cash from tax holiday on growth

PhotoThe BlackRock sign is pictured in the Manhattan borough of New York, in this October 11, 2015 file photo. REUTERS/Eduardo Munoz/FilesThe BlackRock sign is pictured in the Manhattan borough of New York, in this October 11, 2015 file photo. REUTERS/Eduardo Munoz/Files

BlackRock Inc will scrutinize how companies plan to use the cash they bring back to the United States as part of a tax holiday backed by U.S. President Donald Trump, CEO Larry Fink said in a letter distributed on Tuesday.

During his election campaign, Trump backed a policy of cutting taxes on cash that countries repatriate as a way to entice them to invest their overseas money in the United States.

Companies such as Apple Inc, Pfizer Inc, Microsoft Corp hold nearly $1.8 trillion overseas, Moody’s Investors Service Inc estimated last month. By doing so, they avoid a 35 percent U.S. corporate tax rate.

But Fink said the tax cuts may do little to boost economic growth as investors pile the cash into buying their shares back or paying a dividend, boosting their stock prices, but not hiring new employees or growing their businesses.

 

BlackRock oversees $5.1 trillion in assets, ranking as a top shareholder of many of the world’s largest companies. It votes on the composition of those companies’ boards as well as on governance proposals from management and shareholders.

“If tax reform also includes some form of reduced taxation for repatriation of cash trapped overseas, BlackRock will be looking to companies’ strategic frameworks for an explanation of whether they will bring cash back to the U.S. and if so, how they plan to use it,” Fink wrote in an annual letter to the CEOs of the S&P 500.

Fink also said U.S. lawmakers should raise the threshold at which capital gains on investments are taxed at a reduced rate, from one year to three years, to reward long-term investment.

 

Fink, who had donated to Democratic presidential candidate Hillary Clinton, recently joined an advisory council to Trump that includes several other CEOs.

In his letter Fink wrote how developments such as Brexit and new policies of U.S. President Donald Trump reflect “a growing backlash against the impact globalization and technological change are having on many workers and communities.” He also called on companies to do more to train employees.

 

Charles Elson, a University of Delaware finance professor who follows corporate governance issues, said the language shows how Trump’s rise has caused business leaders like Fink to pay attention to matters such as inequality.

“CEOs are responsive to the public,” Elson said. “His customers are the public and a healthy portion of the public has concerns about globalization.”

 

(Reporting by Trevor Hunnicutt; Editing by Bill Trott)
Published at Tue, 24 Jan 2017 17:40:41 +0000

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Kors, Coach Reportedly Interested in Kate Spade

by Sabine_Bends from Pixabay

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Kors, Coach Reportedly Interested in Kate Spade

It doesn’t seem as if high-end fashion retailer Kate Spade (NYSE: KATE) is lacking potential suitors. According to Bloomberg, citing “people familiar with the matter,” both Coach (NYSE: COH) and Michael Kors Holdings (NYSE: KORS) are interested in bidding for the company — as are four other parties.

None of the three companies has yet commented on the Bloomberg story. The article did not identify the other potential bidders.

Late last month, several media outlets reported that Kate Spade had begun to pursue a sale. This was apparently due to pressure from an activist investor in the company, Caerus Investors. According to a Bloomberg source at that time, Kate Spade was expected to launch a formal auction process at some point in January.

The company’s stock has jumped 30% since then on speculation that a bid will be made. Prior to that, shares had generally been on a downward slide since May. At the moment, Kate Spade’s market capitalization is just under $2.4 billion. Of the two potential bidders named, Coach had the larger cash stockpile at the end of its most recently reported quarter — over $1.5 billion, compared to Michael Kors’ $187 million.

Both companies have stated that they are looking to acquire an established fashion brand.

Although Kate Spade has landed in the black in each of its past three fiscal years, its margins have been very thin; last year’s figure stood at 0.02%.

“Deliberations are ongoing and no final decisions have been made,” the Bloomberg article said.

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Published at Tue, 24 Jan 2017 15:27:12 +0000

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New Shyamalan Thriller Tops Weekend Box Office

by FF16 from Pixabay

 

New Shyamalan Thriller Tops Weekend Box Office

Famous for his twist endings, director M. Night Shyamalan was the somewhat surprising winner of this past weekend’s box office crown with his new effort, Split. The film, which centers on a villain with dissociative identity (i.e., multiple personality) disorder, raked in an estimated $40.2 million in its opening weekend. That was good enough to notch the fourth-highest January opening for a movie in history, behind the 2008 sci-fi thriller Cloverfield. It’s also much better than Shyamalan’s previous effort, 2015’s The Visit, which earned $25 million in its debut weekend. Split is a Universal release.

Second place this weekend belonged to another debuting film, the action-adventure sequel xXx: The Return of Xander Cage. Its ticket sales totaled around $20 million domestically, but it made a stronger impression overseas — the estimate for international take over the weekend was nearly $51 million. In fact, of the 53 markets it opened in, xXx was the top movie in 32 of them. This makes it a hit for its distributor, Viacom‘s (NASDAQ: VIA) (NASDAQ: VIAB) Paramount, which has not had many well-performing releases lately. The Viacom unit did not have a single movie among the top 10 highest-grossing films last year.

Last week, Viacom revealed that a deal had been reached under which the Paramount studio will receive a $1 billion cash infusion from a pair of Chinese investment firms, which should help it company produce and release more movies.

The third-most-popular film of the weekend was Hidden Figures. Quite possibly the most successful film ever about a group of mathematicians, its ticket sales topped $16 million for the period. The movie was released by Twenty-First Century Fox unit 20th Century Fox, and has grossed around $85 million domestically since it opened on Dec. 25.

 

*Stock Advisor returns as of December 12, 2016
The author(s) may have a position in any stocks mentioned.

Eric Volkman has no position in any stocks mentioned.

 
Published at Mon, 23 Jan 2017 19:05:02 +0000

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Yahoo beats Wall Street view, sees Verizon deal closing in second quarter

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By Anya George Tharakan

Yahoo Inc on Monday reported better-than-expected quarterly profit and revenue, and said the sale of its core internet business to Verizon Communications Inc should be completed in the second quarter, allaying some investor concerns that the deal might collapse.

The $4.8 billion Verizon transaction had originally been expected to close in the first quarter but was delayed by the disclosure of two major cyber breaches that exposed information from more than a billion Yahoo accounts.

The Securities and Exchange Commission has opened a probe into whether Yahoo’s data breaches should have been disclosed sooner to investors, the Wall Street Journal reported on Monday. (on.wsj.com/2kjNMFd).

Yahoo said Monday that it has spent approximately $10 million related to a 2014 security breach announced in September and a 2013 breach announced in December.

Operating results for the fourth quarter, featuring a 15 percent gain in revenue from a year ago, appeared to provide some belated vindication of embattled Yahoo CEO Marissa Mayer’s strategy. The company’s shares rose 1.2 percent to $42.90 in heavy after-market trading.

Revenue from Mavens – the mobile, video, native and social advertising units that Mayer has long touted as key emerging businesses – rose 25 percent to $590 million.

Gross search revenue fell 6 percent to $821 million as Yahoo struggled to win back market share from bigger rivals such as Alphabet Inc’s Google.

Cantor Fitzgerald Analyst Youssef Squali said the report shows Yahoo is capable of increasing efficiency but cautioned that search was on the decline and display would be in decline if the numbers were crunched differently.

“You have to remember, this business is still a melting ice cube,” said Squali.

Emarketer analyst Martin Utreras said Verizon would likely be reassured by positive user engagement trends revealed in the report.

“The concern was really with the user engagement, whether those data breaches would have a material impact,” he said. “But basically, from what they released today, it looks like the engagement hasn’t changed that much from what they said the previous year.”

The Verizon deal would transform Yahoo into a holding company called Altaba, whose primary assets would include its 15 percent stake in Chinese e-commerce company Alibaba Group Holding Ltd and a 35.5 percent interest in Yahoo Japan Corp.

 

Net income attributable to Yahoo was $162 million, or 17 cents per share in the fourth quarter ended Dec. 31, compared with a loss of $4.43 billion, or $4.70 per share, a year earlier.

The year-ago quarter included a $4.46 billion write-down to account for the lower value of some units.

Yahoo’s revenue rose 15.4 percent to $1.47 billion, above analysts’ average estimate of $1.38 billion, according to Thomson Reuters I/B/E/S.

Excluding items, the company earned 25 cents per share, beating the average estimate of 21 cents.

 

The company has said it would not hold a conference call or webcast after the release of the results, citing the pending deal. This is the second straight quarter that Yahoo is not holding a post-earnings call.

Verizon is reporting fourth-quarter results on Tuesday before markets open.

 

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Yahoo earnings (tmsnrt.rs/23WWgPV)

 

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(Reporting by Anya George Tharakan in Bengaluru; Additional reporting by Deborah M. Todd; Editing by Sriraj Kalluvila, Bernard Orr)
Published at Tue, 24 Jan 2017 00:28:47 +0000

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Why Is Target Making a Big Push into Soccer?

Transferred from Flickr by User:AlbertHerring

Target (NYSE: TGT) is making what it calls its biggest-ever push into a team sport with a set of investments in soccer that range from the local youth level to the U.S. professional league.

“There are so many things that drew us to soccer — it’s multicultural, watched and played by families and is growing immensely in popularity,” said Senior Marketing Vice President Rick Gomez in a press release. “We’ve partnered with several incredible organizations and vendors to invite soccer fans everywhere to engage with the Target brand in new ways.”

What is Target doing?

The company has partnered with Major League Soccer (MLS), the growing U.S. top-tier league. The partnership will include sponsoring Spanish-language broadcasts on Univision and English airings on FOX Sports and ESPN. There will also be opportunities for in-stadium experiences, player appearances and ownership of certain major MLS platforms, “which will be unveiled at a later date,” according to the press release.

The retailer will also become the jersey sponsor for Minnesota United FC, which plays in the Twin Cities area where the company is headquartered. That deal also includes on-field branding and events.

Target will also make a major commitment to youth-sports organizations. The chain will become the official retailer of U.S. Youth Soccer, an official partner and the presenting sponsor of the Target United Cup – “the largest recreational soccer tournament in the country that will visit 30 to 40 cities,” according to the company. In addition, the chain’s brand will also be featured “prominently within several other U.S. Youth Soccer programs, including digital media integrations and event activations.”

Is this a good idea?

Target is going against the grain by sponsoring a sports both on the local/youth and professional level. It’s not as bold as advertising with the major sports — football, baseball, basketball, hockey, or even golf — but it puts the brand in front of parents and kids.

These deals give Target wide exposure to customers across multiple platforms. And while the partnership ties the company to a sport that fewer American consumers watch, it’s one than many of their kids participate in. These are not flashy deals, but one the whole, the strategy is a smart, subtle move that can help build the chain’s relationship with family shoppers.

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Daniel Kline has no position in any stocks mentioned.

Published at Mon, 23 Jan 2017 19:41:03 +0000

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U.S. blocks health insurer Aetna’s $34 billion Humana acquisition

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U.S. blocks health insurer Aetna’s $34 billion Humana acquisition

A U.S. judge blocked on Monday health insurer Aetna Inc’s proposed $34 billion acquisition of smaller peer Humana Inc, raising the stakes for rival Anthem Inc as it battles to clear a $54 billion deal to buy Cigna Corp.

The ruling is the latest sign of antitrust authorities having grown more assertive under U.S. President Barack Obama, whose term ended last week. His successor, Donald Trump, and a Republican party-controlled legislature are seeking to undo much of the Affordable Care Act, better known as Obamacare, that reshaped the U.S. healthcare industry, including insurance practices.

The U.S. Justice Department had filed a lawsuit last July to block Aetna’s acquisition of Humana and Anthem’s acquisition of Cigna, arguing that the two deals would lead to higher prices. Anthem and Cigna are now also waiting for a judge to rule on whether their merger can proceed.

Judge John Bates of the U.S. District Court for the District of Columbia said the proposed deal would “substantially lessen competition” in the sale of Medicare Advantage plans in 364 counties in 21 states that the Justice Department identified in their complaint, and in individual insurance markets on the Obamacare exchange in three Florida counties. Aetna said it was considering an appeal.

Bates dismissed Aetna’s argument that there was plenty of choice for consumers because Medicare Advantage, which is managed by insurance companies, competes with traditional Medicare for the elderly and disabled, which is managed by the government.

“In that (Medicare Advantage) market, which is the primary focus of this case, the merger is presumptively unlawful – a conclusion that is strongly supported by direct evidence of head-to-head competition as well. The companies’ rebuttal arguments are not persuasive,” Bates wrote in a 158-page decision.

Aetna’s share price was down 2.3 percent, falling to $119. Humana’s shares were flat at midday, trading about $200.

“We’re reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case,” Aetna spokesman T.J. Crawford said.

Humana is the second-largest Medicare Advantage insurer while Aetna is the fourth, and the two compete in more than 600 counties, the government said in its complaint.

Obama’s healthcare reform created online exchanges where consumers can shop for individual health insurance and get subsidies.

Doctors and hospitals had urged the Justice Department to try to block the deal, and some large employers also opposed the combination.

(Reporting by Diane Bartz in Washington, D.C.; Additional reporting by Caroline Humer and Carl O’Donnell in New York; Editing by Chizu Nomiyama and Andrew Hay)

 
Published at Mon, 23 Jan 2017 18:51:36 +0000

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Wall Street Week Ahead: Optimism among S&P 500 CEOs as Trump takes power

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By Noel Randewich
| SAN FRANCISCO

U.S. President Donald Trump’s administration is only hours old, but already a small parade of S&P 500 companies’ chiefs have voiced optimism that his promised tax cuts, stimulus spending and deregulation will boost corporate profits.

In the days ahead of Friday’s inauguration, senior executives from Morgan Stanley (MS.N), Delta Air Lines (DAL.N) and other major U.S. corporations said the Trump White House has already sparked a brighter outlook for business.

“There is certainly more reason to be optimistic as we enter 2017 than there was at the beginning of 2016,” Morgan Stanley CEO James Gorman said on Tuesday after his bank said profit doubled in the fourth quarter. He pointed to factors including a surge in consumer confidence after the Nov. 8 election and lower taxes promised by Trump.

Just under way, fourth-quarter earnings reporting season is providing a glimpse of what major large companies expect under Trump, and their take is largely positive so far.

Over a dozen S&P 500 companies reporting results in the last week have signaled optimism about potential tax cuts, infrastructure spending, employee benefit costs and reduced regulation.

With corporate earnings already on the mend after a slump in oil prices and a strong dollar last year, S&P 500 companies are expected on average to grow their earnings by 6.3 percent in the December quarter and 13.6 percent in the March quarter, according to Thomson Reuters I/B/E/S.

Since the November election, the S&P 500 has rallied 6 percent to record highs, in part due to expectations Trump will pass policies that stimulate the economy. Banks have led gains, with investors betting Trump will roll back regulations passed by President Barack Obama following the 2008 financial crisis, which many investors say went too far.

After United Continental Holdings (UAL.N) on Tuesday posted lower December-quarter profits, airline President Scott Kirby told analysts on a call, “It feels like we are on a really good path. It felt to me like there was an inflection point after the election for business demand.”

An also upbeat Delta Air Lines Chief Executive Ed Bastian told analysts this month that he was excited about potential infrastructure spending promised by Trump, as well as a chance to make his case about unfair competition from Middle Eastern airlines heavily subsidized by governments.

Vince Delie, Chief Executive of F.N.B. (FNB.N), which own First National Bank, said on a quarterly conference call on Thursday that he was saw more confidence among commercial customers and a potential pickup in lending.

“There are at least conversations occurring about larger capex opportunities within our customer base, which didn’t happen before,” Delie said.

Not everyone is over the moon, however. Kansas City Southern’s CEO (KSU.N) bemoaned an uncertain environment on Friday after the cross-border railroad reported lower quarterly profits, hurt by a slump in Mexico’s peso since Trump’s election.

“Obviously the political and economic uncertainty is probably first and foremost on most of our minds, and the irony of us reporting earnings on the Inauguration Day of the 45th President is not entirely lost on us,” Chief Executive Patrick Ottensmeyer told analysts.

Indeed, some business leaders and lobbyists in Washington who were initially enthusiastic about Trump’s victory have begun to exhibit some hesitance over his agenda amid confusing messages on healthcare, taxes and trade.

 

 

SURGING CONFIDENCE

Still, while Trump’s views on immigration and a range of other issues are at odd with many Americans, most small businesses and consumers do see a brighter future as he launches his presidency.

An index of small business confidence in December hit a 12-year high, according to the National Federation of Independent Business.

The U.S. consumer confidence index in December hit its highest level since August 2001, a month before the Sept. 11 attacks.

Following strong stock gains in November and December, many on Wall Street are concerned that Trump may fail to deliver on all of his promises. A Republican-controlled Congress might balk at infrastructure spending or tax reductions that significantly widen the federal budget deficit.

Other investors worry that Trump could follow through on campaign-trail threats to tear up global trade deals and crack down on illegal immigrants from Mexico who provide low-wage labor in agriculture, restaurants and other industries.

“Folks are potentially underestimating the degree to which Trump is serious about real reform on trade an immigration,” warned Jon Adams, senior investment strategist at BMO Global Asset Management. “Investors, in general, are hopeful Trump will take a more pragmatic approach on those issues.”

Over the past two months, Trump has publicly targeted and threatened a range of multinationals, including Ford Motor (F.N), General Motors (GM.N), Boeing Co (BA.N) and Lockheed Martin (LMT.N). That may have left CEOs wary of publicly disagreeing with his policies.

“You don’t want to step on a mine. So the best course of action is to be somewhat optimistic, positive but also somewhat noncommittal so you’re not trapped one way or another,” said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

Trump’s frequent use of Twitter to single out companies for criticism or praise has created volatile spikes in trading of their shares, which is good for online brokers including Charles Schwab (SCHW.N) and TD Ameritrade (AMTD.O).

“Each time, it’s a new market event and a potential trading opportunity for our clients. Like everyone else, we’re watching it with interest,” TD Ameritrade Director of Finance Jeff Goeser said on a conference call on Wednesday after the company reported an increase in quarterly profits.

 

(Reporting by Noel Randewich, additional reporting by Caroline Valetkevitch in New York; editing by Dan Burns and Nick Zieminski)
Published at Sat, 21 Jan 2017 00:28:51 +0000

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Apple files $1 billion lawsuit against chip supplier Qualcomm

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The new iPhone 7 smartphone goes on sale inside an Apple Inc. store in Los Angeles, California, U.S., September 16, 2016. REUTERS/Lucy Nicholson/File Photo

Apple files $1 billion lawsuit against chip supplier Qualcomm

 

By Diane Bartz and Stephen Nellis

Apple Inc filed a $1 billion lawsuit against supplier Qualcomm Inc on Friday, days after the U.S. government accused the chip maker of resorting to anticompetitive tactics to maintain a monopoly over key semiconductors in mobile phones.

Qualcomm is a major supplier to both Apple and Samsung Electronics Co Ltd for “modem” chips that connect phones to wireless networks. The two companies together accounted for 40 percent of Qualcomm’s $23.5 billion in revenue in its most recent fiscal year.

In the lawsuit filed in U.S. District Court for the Southern District of California, Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates. Apple said in its complaint that Qualcomm withheld the rebates because of Apple’s discussions with South Korea’s antitrust regulator, the Korea Fair Trade Commission.

“If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm’s release of those payments to Apple. Apple refused,” Apple said in its lawsuit.

In a statement, Qualcomm General Counsel Don Rosenberg called Apple’s claims “baseless.”

“Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information,” Rosenberg said in the statement.

“We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”

Qualcomm’s stock closed 2.4 percent lower at $62.88 on the news.

Qualcomm has patents for chips which include standard essential patents, a term used to describe technology that is required to be licensed broadly and on “reasonable” terms.

In its lawsuit, Apple accused Qualcomm of refusing to license the technology to other manufacturers to prevent them from making the chips.

It also accused Qualcomm of selling chips while requiring Apple to pay a separate licensing fee for the same chips, in a “no license, no chip” policy.

In addition, Qualcomm pressured network carriers to not sell or support Apple devices made with Intel chipsets Apple said.

The KFTC fined Qualcomm $854 million in December for what it called unfair patent licensing practices.

In February 2015, Qualcomm paid a $975 million fine in China, while the European Union in December 2015 accused it of abusing its market power to thwart rivals.

 

On Tuesday, the U.S. Federal Trade Commission filed a lawsuit against Qualcomm, saying the San Diego-based company used its dominant position as a supplier of certain phone chips to impose “onerous” supply and licensing terms on cellphone manufacturers. Qualcomm said it would contest the FTC complaint.

Qualcomm was the sole supplier of modem chips for Apple’s phones until the release of the iPhone 7 in September. Intel Corp supplied about half of the modem chips for the newest models, said Stacy Rasgon, a senior analyst at Bernstein Research. Intel’s shares closed up 1 percent at $36.94 after the Qualcomm suit was announced.

Apple made the move around the same time that Samsung, which had switched to using its own internal chips for its Galaxy S6 phones, returned to Qualcomm for the Galaxy S7.

Qualcomm “has been able to manage through (the Apple contract loss) pretty well because they got back Samsung at the same time,” Rasgon said.

Apple is known for seeking multiple suppliers to keep prices down, said Jim Morrison, vice president of technical intelligence for TechInsights, which tears down devices to analyze their parts.

 

(Reporting by Diane Bartz in Washington and Stephen Nellis in San Francisco; Editing by Matthew Lewis and Cynthia Osterman)

Published at Sat, 21 Jan 2017 03:57:43 +0000

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Why Stanley May Have a Hard Time Pushing Craftsman

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Why Stanley May Have a Hard Time Pushing Craftsman

The deal Stanley Black & Decker (NYSE: SWK) made for Craftsman tools with Sears Holdings (NASDAQ: SHLD) is really a win-win for both sides, even if it does augur the end of the latter. In that it takes away yet another reason to shop at Sears — and Craftsman tools was arguably one of the strongest reasons to visit to the failing department store chain — it’s truly only a matter of time before the retailer collapses.

Yet there’s no guarantee Stanley will be successful, either. It does bring in a notably strong, respected name in tools that further bolsters a portfolio that includes not only its own name brands Stanley and Black & Decker, but also powerhouses like DeWalt, Porter-Cable, and Mac Tools. But given that Craftsman is a Sears house brand — and one that it will continue to sell — major third-party distribution outlets might not be so eager to add its name to their inventories.

For example, Home Depot (NYSE: HD) and Lowe’s, which do largely carry the various Stanley brands and others, might not be so quick to accept the Craftsman lineup as well as it will compete against their own store brands of Husky and Kobalt, respectively.

In reality, just a handful of companies make most tools that are then sold under their respective brands. For example, Snap-On used to make Lowe’s Kobalt brand, then Danaher did; but today, they’re made by Chinese tool manufacturer Chervon, which also owns Skil and Skilsaw, and is an OEM for Bosch power tools, too. Hong Kong-based Techtronic Industries makes branded power tools for Milwaukee, AEG, and Ryobi. Emerson makes wet/dry vacs for Home Depot’s Ridgid brand, but also Craftsman. And Stanley makes Home Depot’s Husky brand of hand tools.

It’s that last point, among others, that raises the question of whether Home Depot in particular would want another rival’s brands on its shelves. The deal Stanley structured to acquire the Craftsman brand certainly protects it from any financial woes Sears Holdings will encounter in the future, but if it cannot broadly introduce the brand into national retailers, this may not turn out to be the smart acquisition it seemed at first glance.

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Published at Fri, 20 Jan 2017 19:34:03 +0000

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Wall St. opens higher ahead of Trump inauguration

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U.S. stocks rose amid gains across sectors on Friday as investors counted down to Donald Trump’s inauguration as the 45th president of the United States.

Trump, a New York businessman and former reality TV star, is scheduled to be sworn in around midday by U.S. Supreme Court Chief Justice John Roberts in Washington.

Investors will focus on Trump’s inaugural speech to get more insight into his economic policies.

“All eyes will be on the content and style of Trump’s inauguration speech,” Morgan Stanley strategists led by Hans Redeker wrote in a note. “The more ‘Presidential’ this speech comes across, the better the outcome for markets.”

Trump’s campaign promises of tax and regulatory reforms and higher infrastructure spending had driven Wall Street to multiple highs post-election. However, the Trump trade has been unraveling in recent weeks as investors wait to see how he will carry out his ambitious plans.

“I would expect an extremely calm day,” said Brad Lamensdorf, chief executive officer of Active Alts Inc.

“Usually these type of events are highly publicized so people are very distracted during the day and I wouldn’t expect a lot of volatility.”

The CBOE Volatility index .VIX, or Wall Street “fear gauge”, was down nearly 3 percent.

The dollar index .DXY edged up for the third straight session, while a 2 percent rise in oil prices pushed up energy stocks.

At 9:36 a.m. ET (1436 GMT), the Dow Jones Industrial Average .DJI was up 109.18 points, or 0.55 percent, at 19,841.58 and the S&P 500 .SPX was up 12.86 points, or 0.57 percent, at 2,276.55.

The Nasdaq Composite .IXIC was up 33.45 points, or 0.6 percent, at 5,573.53.

Ten of the 11 major S&P indexes were higher, with technology .SPLRCT giving the biggest bump to the broader index. Industrials .SPRLCI, which have risen for the past two days, were flat.

A thrush of quarterly earnings reports from Dow components also kept investors busy. Procter & Gamble (PG.N) was the top stock on the S&P and the Dow, rising 2.7 percent after the consumer products maker reported quarterly sales and profit above expectations.

General Electric (GE.N) was off 1.4 percent after the industrial conglomerate reported a drop in quarterly revenue.

Merck (MRK.N) rose 3.3 percent to $62.35 after Bristol-Myers (BMY.N) said it would not seek accelerated U.S. approval for a combination of its two immunotherapy drugs as an initial treatment for lung cancer, giving Merck an advantage in the lucrative market. Bristol-Myers’ stock was down about 10 percent.

Advancing issues outnumbered decliners on the NYSE by 1,890 to 670. On the Nasdaq, 1,520 issues rose and 685 fell.

The S&P 500 index showed 11 new 52-week highs and one new low, while the Nasdaq recorded 20 new highs and five new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)

 
Published at Fri, 20 Jan 2017 14:32:52 +0000

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Skyworks Touts Growth Beyond Apple Sales

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Skyworks Touts Growth Beyond Apple Sales

By Shoshanna Delventhal | January 19, 2017 — 10:53 PM EST

Skyworks Solutions Inc. (SWKS) announced its fiscal 2017 first-quarter earnings report on Thursday after market close. For the quarter ending Dec. 30, the chip supplier posted top- and bottom-line numbers that exceeded the Street’s estimates, sending its shares up an approximate 8% in after-hours trading.

In the recent period, Skyworks has attempted to wean its reliance off disproportionately large smartphone customers such as Apple Inc. (AAPL), whose business comprised 40% of Skyworks’ sales in the most recent period.

CEO Speaks to Analysts

In a conference call following the most recent earnings report, Skyworks’ Chief Executive Liam Griffin and members of the firm’s management team spoke with analysts to shed light on drivers of growth and the overall direction of the tech firm.

Particularly, Griffin highlighted Skyworks’ strength in meeting the demands of mobile connectivity and the Internet of Things (IoT). Outside of Apple, Skyworks says it has inked deals with smaller vendors in the mobile space such as Huawei, Oppo, Meizu and Samsung Electronics. In the previous fiscal 2016 fourth quarter, Skyworks attributed better-than-expected earnings to upward demand in China for complex smartphones that require the firm’s chips. In the second half of 2016, Skyworks announced an expanded partnership with Chinese smartphone maker Xiaomi.

When asked by Merrill Lynch’s Vivek Arya about the state of Skyworks’ sales outside of Apple, Griffin replied, “our growth and success outside of our largest customer has been outstanding.” Arya noted that last year, Skyworks saw its sales grow about 8% outside of Apple.

Looking to Asia

Griffin reiterated the importance of China’s Huawei as taking a No. 2 account in the last quarter, expecting the telco supplier to continue to be of significance for Skyworks. Management says a Korean customer will continue to grow into 2017, as Apple will set up “very well” for Skyworks as the firm “addresses complex architectures with compelling products.”

Aside from mobile, Skyworks hopes to continue to bolster its market portfolio with emerging tech solutions from infrastructure to connected cars and the IoT. The chipmaker expects double-digit year-over-year (YOY) growth in these target markets. (See also: How Skyworks Transitioned in 2016.)
Published at Fri, 20 Jan 2017 03:53:00 +0000

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Netflix blows past international subscriber estimates

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Netflix Inc’s (NFLX.O) international and U.S. subscriber additions blew past analysts’ estimates as the video streaming service released shows including the award-winning British drama “The Crown” and a revival of “Gilmore Girls”.

Netflix, whose shares rose 7.1 percent in extended trading, has been hugely successful in attracting more subscribers through the popularity of its original shows.

Netflix, whose original shows include “Narcos” and “Stranger Things”, said on Wednesday it signed up 5.12 million subscribers outside the United States in the quarter ended Dec. 31. (nflx.it/2jyes47)

Analysts on average had estimated 3.73 million additions, according to research firm FactSet StreetAccount.

Faced with slowing growth in the United States, Netflix has launched in almost every country, but is now faced with the task of tweaking the service to suit different markets and cultures, even as competitors expand.

In the United States, Netflix added 1.93 million subscribers, compared with the average estimate of 1.44 million.

The company plans to spend $6 billion in original content in 2017, a $1 billion increase from last year.

Netflix — whose competitors include Amazon.com Inc’s (AMZN.O) streaming service and Hulu, besides cable channels such as HBO — plans to release over 1,000 hours of original programming this year, up from 600 hours last year.

The Los Gatos, California-based company said its revenue rose 35.9 percent to $2.48 billion in the December quarter. Analysts on average had expected $2.47 billion, according to Thomson Reuters I/B/E/S.

The company said it expects to add 1.50 million subscribers in the United States in the current quarter, below the FactSet estimate of 1.79 million.

In international markets, Netflix said it expects to add 3.70 million subscribers, above the average estimate of 3.05 million.

Up to Wednesday’s close of $133.26, Netflix’s stock had risen 33.5 percent since it reported third quarter results in October.

(Reporting by Anya George Tharakan in Bengaluru; Editing by Shounak Dasgupta)
Published at Wed, 18 Jan 2017 21:28:53 +0000

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Rolls-Royce to pay more than $800 mln to settle bribery charges -DoJ

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Rolls-Royce to pay more than $800 mln to settle bribery charges -DoJ

By Joel Schectman | WASHINGTON

Rolls-Royce Plc (RR.L) agreed to pay authorities more than $800 million to resolve charges of bribing officials in six countries in schemes that lasted more than a decade, the U.S. Justice Department and UK Serious Fraud Office said in statements on Tuesday.

The company admitted to paying officials at state-run energy companies in Kazakhstan, Thailand, Brazil, Azerbaijan, Angola and Iraq more than $35 million in order to win contracts, the Justice Department said.

In a statement, the company’s chief executive officer, Warren East, apologized “unreservedly” for the bribery schemes. The company had since overhauled its compliance rules and cut back on using intermediaries, the statement said.

Among the bribes, Rolls-Royce paid a Brazilian official $1.6 million through a middleman to win numerous oil equipment contracts from Petrobras (PETR4.SA), U.S. authorities said.

The case was the third resolution related to Petrobras in the United States following a nearly three-year investigation in Brazil dubbed “Operation Car Wash” into corruption at the oil company, which has led to dozens of arrests and political upheaval in the country.

Petrobras did not return a request for comment.

In Iraq, Rolls-Royce middlemen bribed Iraqi officials after they had expressed concerns about turbines the company had sold. The Rolls-Royce bagman paid the bribe to “persuade the officials to accept the turbines” and prevent the officials from “blacklisting” Rolls-Royce from future business in Iraq, U.S. authorities said.

The settlement included agreements with U.S., UK and Brazilian authorities whom the company agreed to pay $170 million, 497 million British pounds ($616 million) and $25.6 million respectively, the Justice Department said.

In setting the penalty, the Justice Department said it weighed the fact that Rolls-Royce did not come forward with the misconduct until media reports of the allegations began to surface. But U.S. authorities also showed Rolls-Royce leniency for later cooperating with authorities and fixing problems at the company.

(Additional reporting by Sarah Young and Kristin Ridley in London; Editing by Lisa Shumaker and Peter Cooney)

Published at Tue, 17 Jan 2017 20:24:36 +0000

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Exploding Samsung Phones Caused by Battery

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Exploding Samsung Phones Caused by Battery

By Richard Saintvilus | January 17, 2017 — 5:10 AM EST

Consumer electronics giant Samsung (SSNLF) recently completed an investigation that determined its Galaxy Note 7 smartphones were catching fire because of a failed battery – not the hardware or software, according to Reuters.

The South Korean tech giant plans to launch its next phone iteration, presumably the Galaxy S8, some time in the first half of this year. In doing so, the conglomerate wants to put the exploding battery issue, which prompted one of the largest electronics recalls in history, behind it. To that end, Samsung, the world’s largest smartphone maker, has tons of convincing to do. Wary investors want assurances that the same thing won’t happen in the next phone. (See also: Verizon, AT&T Scramble After Samsung Recall.)

“They’ve got to make sure they come clean and they’ve got to reassure buyers as to why this won’t happen again,” said Bryan Ma, Singapore-based analyst for researcher IDC, according to Reuters. Samsung’s full findings from its investigation are expected to be released on Jan. 23, which is one day before it announces fourth quarter earnings results, noted Reuters.

Earlier this month, Samsung issued a fourth quarter forecast saying it expects operating profits to rise almost 50%, blowing past Wall Street estimates. In a regulatory filing, Samsung said it expects to earn 9.2 trillion won ($7.8 billion) in consolidated operating profit for the October through December 2016 quarter. Not only does this mark an increase of 50% year over year, up from up from the 6.14 trillion won a year earlier, it would also be Samsung’s highest profit figure in three years. (See also: Samsung Putting Galaxy Note 7 to Sleep on Dec. 19.)

Samsung said that profits from components business offset declines in its mobile unit caused by the aforementioned battery-related recall. The components business supplies memory chips and display panels to other companies, including rival Apple, Inc. (AAPL). This means that, unlike three years ago, the company’s profits are no longer being driven solely by the mobile phone division.

While Samsung’s results were drastically affected by the Note 7 fiasco, the company can’t afford to repeat the issue with the Galaxy S8. (See also: South Korean Prosecutor Could Arrest Samsung Boss.)
Published at Tue, 17 Jan 2017 10:10:00 +0000

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Ericsson, Cisco Team for Joint Customer VHA

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Ericsson, Cisco Team for Joint Customer VHA

By Shoshanna Delventhal | January 16, 2017 — 4:44 PM EST

Networking hardware vendor Cisco Systems Inc. (CSCO) has extended its partnership with Swedish global telecom gear provider Ericsson AB (ERIC) in efforts to virtualize Vodafone Hutchinson Australia’s (VHA) core and IP network.

Ericsson will lead the transformation program, with responsibility for both building the infrastructure and ensuring the delivery of an end-to-end operational system.

Virtualizing the Network

The two networking giants say the latest project, aimed at transforming and virtualizing VHA’s network, will help the Australian company better prepare for new emerging services and evolve its core network to increase the level of agility and programmability for network slicing. With cutting-edge tools and infrastructure, VHA hopes to become more innovative and pro-active in the way services are brought to market, improving customer engagement experience, while reducing opex​ and capex​ spending.

Partners’ First Cloud Infrastructure Deal

The new deal with VHA represents the first major collaboration between Ericsson and Cisco on Telecom Cloud infrastructure. Their partnership began in November 2015 and has generated over 60 new deals. It is projected to add an extra $1 billion in annual revenues to each firm by 2018. In providing customers joint offerings in areas such as routing, data center, hardware, cloud, mobility, management and control, the firms say more than 250 active customer engagements have now started to turn into won deals. In late 2016, the two firms announced a strengthened alliance to target new corporate and public sector clients outside of main telecom operators in order to diversify their top lines.

Rima Qureshi, chief of Ericsson’s North American business, has indicated the two firms are “investigating what we can do together with industry and society, IoT [Internet of Things], [and] smart cities” as well as public sector segments. Moving ahead, the firms will also continue to target traditional telecom companies, especially as Ericsson faces heightened competition from players such as Nokia and Huawei Technologies. (See also: Ericsson and Cisco Tighten Their Partnership.)

(Why?)
Published at Mon, 16 Jan 2017 21:44:00 +0000

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Q&A: Sallie Krawcheck has a new game plan for women at work

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By Chris Taylor
| NEW YORK

For decades, Wall Street was the ultimate boys club of all boys clubs.

Then came Sallie Krawcheck. As the former CEO of Smith Barney, head of Merrill Lynch’s “thundering herd” and chief financial officer for Citigroup, Krawcheck kicked down those boardroom doors – and did it with a smile.

Now head of investment platform Ellevest and chair of Ellevate Network (www.ellevatenetwork.com/), Krawcheck is releasing the book “Own It: The Power of Women at Work” this week. She spoke with Reuters about how women are ideally positioned to thrive in a next-gen business world.

Q: Sheryl Sandberg’s book “Lean In” started so many discussions about women in the workplace, so how does this book contribute to the conversation?

A: I hope this is the next chapter. I wanted this book to be about how to succeed in the business world of tomorrow, since everything is changing so rapidly. There are certain characteristics that women tend to bring to the workplace, and the business world is going our way. So the last thing I want to do is to tell women to act like men.

Q: What are those characteristics that women often bring to the table?

A: Women tend to have a more long-term perspective. We are more risk-aware, we have a love of learning, we have more of a focus on meaning and purpose. Now think about how the business world is changing: It has moved away from command-and-control leadership styles, and toward more collaboration and communication.

Q: What is your best advice for women who are trying to thrive in male-dominated fields?

A: I would say that it is not necessarily a bad thing to work with a bunch of men. In fact it can be fantastic. The bigger question is whether it is a corporate culture where you can learn, where others will help you – and whether your voice will be heard.

Q: What do you think about the typical ‘Having It All’ question?

A: It drives me nuts. What the heck does that even mean? The answer is that I don’t have perfect work-life balance, and I never had it. When I was running Merrill Lynch, I was spending much more time at the office; when my children had health issues, I spent more time with my family. So I think it is the wrong question to ask.

No one can be perfect in every way. That is just too high a bar. Around my house, the joke is that I am a mediocre mother at best.

Q: You lived through the financial crisis with a front-row seat – how did the lack of diversity on Wall Street play into that?

A: The industry is obviously homogenous. Go to any trading floor, and you will see mostly well-educated, analytical, young and middle-aged Caucasian males. You and I both know if there was more diversity on trading floors, the financial crisis would not have been as bad.

With a more diverse leadership team you get more questioning, and more carefully thought-out decisions, rather than the false comfort of agreement.

Q: Why was it important for you to talk about your own career setbacks in the book?

A: Because women tend to take failure harder than men do. They get embarrassed, or try to run away from it.

But there is a certain freedom about being fired on the front page of the Wall Street Journal, like I was. Maybe getting fired used to be fatal, but it’s not anymore. In fact, going forward, people are going to be fired even more, because of how the business world is changing. So we need to normalize it.

Q: Why is having the ‘insurance’ of a strong network so critical?

A: If you ever want a new job, or a board seat, or have a career stumble, you see the real power of a network. I have had a number of business opportunities over the years, and not a single one ever came through an executive search firm. Make sure your network extends well beyond your own company, by the way. Otherwise, on the day you quit or are fired, you’re done.

 

(The writer is a Reuters contributor. The opinions expressed are his own.)

(Editing by Beth Pinsker and Dan Grebler)
Published at Mon, 16 Jan 2017 14:22:52 +0000

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Tech stocks soar as growth trumps Trump fears

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Trump meets with tech execs

Tech stocks soar as growth trumps Trump fears

  @lamonicabuzz

So much for fears of Donald Trump’s presidency hurting tech stocks.

While the Dow continues its flirtation with 20,000 (will it EVER get there?) the Nasdaq keeps hitting new record highs. And it’s being led by four prominent tech companies that collectively are known by the acronym of FANG.

Facebook. Amazon. Netflix. Google — whose parent company is now technically Alphabet, but its ticker symbol still starts with a G.

Facebook (FB, Tech30) is the hottest of these Fab Four stocks. Shares of the social network are already up nearly 12% in just the first two weeks of the year. Amazon (AMZN, Tech30) and Netflix(NFLX, Tech30) are each up more than 8%. Google’s (GOOGL, Tech30) shares have gained 5%.

What makes Facebook’s performance even more astonishing is that it has come despite criticism about fake news proliferating on Facebook, concerns about some of its metrics being wrong and speculation that CEO Mark Zuckerberg may seek public office.

But investors are looking past that and focusing on the fact that Facebook is expected to keep posting impressive levels of growth.

Analysts are predicting that Facebook will report a year-over-year revenue increase of 45% for the fourth quarter and 65% surge in earnings per share. Facebook will report its results on February 1.

Wall Street is bullish about the earnings prospects for the other FANG stocks too. Netflix, which will kick off tech earnings season when it reports its results Wednesday, is expected to post sales and earnings increases of more than 30% from a year ago.

Analysts are forecasting a 25% jump in sales for Amazon and more than 35% increase in profits. And Google is expected to report earnings growth of 11% and a revenue increase of nearly 20%.

It seems that these strong fundamentals are trumping Trump fears. Tech investors were worried in the immediate aftermath of Trump’s win over Hillary Clinton for several reasons.

Concerns about a crackdown on immigration, most notably on H1-B visas that allow many foreign workers to come to Silicon Valley, hurt the stocks of big tech companies.

Trump’s protectionist rhetoric wasn’t helping either since most large tech companies do big business overseas.

But sentiment has shifted in the past few weeks. Investors are focusing more on some of the potential positives of a Trump administration.

The meeting that Trump held with leaders of several big tech companies in New York last month seemed to help allay some of the concerns investors had about Trump.

Investors also seem to recognize that corporate tax reform, particularly changes that could allow companies to bring back cash being held overseas at lower rates, could be good for the tech sector.

Google said in its most recent earnings report in October that it had $50 billion in cash and investments, 60% of its overall cash hoard, outside of the U.S. Apple (AAPL, Tech30) and Microsoft (MSFT, Tech30) hold an even bigger percentage of their cash overseas.

Eric Ervin, CEO of Reality Shares, an investment firm that runs several ETFs focused on dividends, said Monday that assuming Trump follows through on his tax reform promise, more tech companies may consider paying dividends.

Ervin highlighted Google, Amazon and Facebook as three that have enough cash to easily afford a dividend.

“It’s reasonable to assume most of those companies will want to put that cash to work,” he said.

Tech stocks are also rallying on the hopes of broader economic stimulus from Trump and the Republican Congress.

It stands to reason that if $1 trillion is spent on the nation’s roads, bridges and other physical infrastructure, that could boost overall economic growth. That would be good for tech companies too, especially if stimulus lifts consumer spending.

But are investors too optimistic?

Terri Spath, chief investment officer of Sierra Investment Management, wrote in a recent report to clients that she’s worried that the market rally is about to stall.

“Stimulative policy should turbocharge growth and boost corporate profits, but stocks are ahead of themselves,” she wrote.

“The anticipation of changes in tax and regulatory policy are ahead of the reality right now. We like the improved optimism in corporations and consumers,” she added. “We are just saying, proceed with caution. The sugar high is wearing off.”

CNNMoney (New York)First published January 16, 2017: 10:48 AM ET

Published at Mon, 16 Jan 2017 15:49:10 +0000

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Top U.S. bank executives optimistic heading into 2017

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A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. REUTERS/Andrew Kelly

Top U.S. bank executives optimistic heading into 2017


By David Henry and Dan Freed
| NEW YORK

Executives of big U.S. banks expressed optimism on Friday about the outlook for 2017 in their first public comments about quarterly earnings since the U.S. presidential election in November.

JPMorgan Chase & Co and Bank of America Corp, the two largest U.S. banks, kicked off the corporate reporting season on a rosy note, each with healthy increases in fourth-quarter profit. Those improvements came on the back of trading revenue gains, higher interest rates, healthy loan growth and cost controls.

On the flip side, the earnings of Wells Fargo & Co, which also reported on Friday, were hurt by the fallout of a sales scandal and a loss related to accounting, both of which are particular to the San Francisco-based lender.

Results at regional lender PNC Financial Services Group Inc were better than expected, with Chief Financial Officer Rob Reilly predicting the bank will be able to increase revenue faster than expenses this year.

Shares of all four banks climbed Friday afternoon, with JPMorgan up 0.5 percent at $86.64, Bank of America up 0.4 percent at $23.01, Wells Fargo up 1.1 percent at $55.15 and PNC up 0.4 percent at $118.39.

On conference calls with reporters and analysts, top executives were sanguine about topics ranging from interest rates and loan growth, to regulation and the incoming administration of President-Elect Donald Trump.

 

OPTIMISTIC

“We are very optimistic about the future, optimistic about new policies which could spur growth,” Bank of America Chief Executive Brian Moynihan said.

The bank’s finance chief, Paul Donofrio, predicted BofA will be able to produce an additional $600 million in the current quarter from higher interest rates, with further gains throughout the year.

He also cited customers’ “high credit quality” and positive trends in auto, home and middle-market loans, as being supportive of earnings.

In the fourth quarter, BofA benefited from an aggressive cost-cutting program Moynihan detailed last summer, as well as a pickup in trading revenue.

JPMorgan Chief Executive Jamie Dimon was slightly more circumspect, but said he was comforted by the fact that Trump was selecting people with experience to join his team.

Dimon also cited several positive economic trends that suggest the global economy is headed in the right direction, which will help buoy bank earnings.

 

“The economy is getting a little bit better,” he said. “Interest rates help and looking forward, you probably have a better political, legal and regulatory environment.”

The bank is sticking by its loan growth forecast of 10 to 15 percent for 2017, though Chief Financial Officer Marianne Lake said it might be toward the lower end of the range.

 

‘SOLID PERFORMANCE’

Despite Wells Fargo’s unique troubles, its chief financial officer, John Shrewsberry, also said the bank had a “solid underlying performance,” citing loan growth, good credit quality and higher interest rates.

The idea that banks will benefit from lighter regulation, rising interest rates and lower taxes under Trump has driven bank stocks up nearly 25 percent since the election.

Nearly all the executives commented on the enthusiasm evident in markets, but were hesitant to fully endorse it.

For instance, Dimon noted that it may take a full year for the new government in Washington to decide exactly how it will tackle complex issues like corporate tax reform.

And, he said, increased competition means lenders may just “compete away” any tax benefits they receive.

“We’ve all heard that the new administration in Washington supports tax reform, regulatory relief and other pro-growth policies,” said PNC Chief Executive Bill Demchak. “But, so far, a move in interest rates is the only thing that has actually happened.”

Other big banks, including Citigroup Inc, Morgan Stanley and Goldman Sachs Group Inc, will report results next week.

 

(Reporting by David Henry and Dan Freed in New York; Additional reporting by Sweta Singh, Sruthi Shankar and Nikhil Subba in in Bengaluru; Writing by Lauren Tara LaCapra; Editing by Bernadette Baum)

 

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US insurers get inside cars, mouths, grocery carts in profit search

by stevepb from Pixabay

US insurers get inside cars, mouths, grocery carts in profit search

By Suzanne Barlyn
| NEW YORK

Twice a day, Scott Ozawa’s Bluetooth-enabled toothbrush tells his dental insurer if he brushed for a full two minutes. In return, the 41-year-old software engineer gets free brush heads and the employer which bought his insurance gets premium discounts.

The scheme, devised by Beam Technologies Inc, is just one of the latest uses of technology by insurers hungry for more real-time information on their customers that they say lets them assess risk more accurately and set rates accordingly.

In theory, everybody wins, as policyholders adopt better habits and insurance companies save money on claims.

However, there are concerns that insurers will eventually use the data they get to cherry-pick the best and most profitable customers, while hiking rates or even denying coverage to people who choose not to participate.

“It’s not expected today, but in the near future it will be used to penalize people,” said Mitchell Wein at Novarica Inc, who advises clients on insurance technology.

Insurers are still in the data collection stage, said Wein, but he predicts that in about five years, tracking tools will have a direct impact on pricing and coverage on a range of policies.

Insurers recognize the dangers but consumers have nothing to fear, according to Michael Barry, a spokesman for the Insurance Information Institute, an industry-funded communications group.

“Insurance is such a heavily regulated industry that insurers must justify, in actuarial terms, the reason for any rate increase they’re seeking in almost any line of business,” he said.

Moreover, the insurance marketplace is competitive. “If any insurer raises rates to the point where a consumer is dissatisfied, the consumer can go elsewhere,” he added.

 

TECH LEAP

Beam’s technology follows auto insurers using devices in cars to find out how far and how safely policyholders drive – known as telematics – and life and health insurers giving customers wearable devices such as Fitbit and Apple Watch to keep track of their activity.

U.S. insurers and their customers have generally been slow to adopt new monitoring techniques, which have been common in auto insurance in South Africa, Italy, Brazil and Britain for years.

But the world’s biggest insurance market, with $1.3 trillion in premiums in 2015 – more than a quarter of the global total – is catching up.

Mayfield, Ohio-based Progressive Corp (PGR.N), an early leader in the area, said its telematics-based ‘Snapshot’ auto policy allows it to “attract, identify and reward good drivers while also retaining those customers longer.” Progressive has more than 2 million Snapshot policies in force, about a fifth of its total U.S. auto business.

About 30 percent of North American auto insurers now have telematics programs, according to a survey last year by insurance consultants Strategy Meets Action (SMA). That will rise to 70 percent by 2020, SMA said.

In health insurance, health insurer Anthem Inc (ANTM.N) has been working since 2013 with Fitbit Inc (FIT.N) and Garmin Ltd (GRMN.O) to offer premium discounts to eligible customers who wear the devices and transmit information to the insurer.

In life insurance, John Hancock Financial started offering a policy in 2015 that gives customers discounts on healthy groceries when shopping at certain retailers and rewards for hitting exercise targets as measured by a wearable device.

The program, designed in partnership with Vitality Group, includes a free Fitbit or an Apple Watch for as little as $25 if a customer hits their targets.

“We get to know you better than your doctor does,” said Brooks Tingle, head of insurance marketing for John Hancock, owned by Canada’s Manulife Financial Corp (MFC.TO).

 

COMPETITIVE ADVANTAGE

Insurers generally do not disclose data on premiums or profit on specific types of policies, so it is hard to tell what effect such approaches have had on their bottom lines, or whether riskier customers are being asked to pay more.

However, people in the industry agree that increased data from technology means insurers can target more desirable customers.

The benefit for insurers is “competitive advantage, pure and simple,” said Katie DeGraaf, a senior consultant at insurance advisory firm Willis Towers Watson, in a recent report. “Companies that have integrated granular telematics data into rating plans are better positioned to attract and retain the most profitable customers.”

Much of the pioneering work in the area has taken place in South Africa, which suffers chronic high crime and accident rates.

Johannesburg-based financial services firm Discovery Ltd (DSYJ.J), whose car insurance unit has been tracking customers’ driving and using the information in pricing since 2011, said it has seen a 10 percent drop in accident claims since then.

Discovery’s ratio of losses to premiums for drivers in the tracking scheme is more than a quarter lower than those not participating, the company said. Data has also upended a longstanding rule of thumb in the insurance industry that younger drivers are the riskiest.

“The whole beauty is that someone who might be seen to be a bad risk can turn out to be a good risk,” said Anton Ossip, CEO of Discovery Insure, the company’s auto insurer.

The new approach has “substantially improved the quality of new business and our ability to attract and select high-quality clients,” Discovery Insure said in its latest financial report.

Still, Ossip is concerned about consumers who do not want to use the telematics devices to relay data: “Generally, someone who chooses not to use it is a worse risk,” he said.

 

FUNDAMENTAL CHANGE

Insurers interviewed by Reuters said better data collection allows them to underwrite risk better, and customers tend to take better care of themselves when confronted with numbers.

They described participation in data-tracking programs as voluntary, and said they are transparent about what information they collect and confident about data security.

Some of that might be changing, however. Root Insurance Co, a Columbus, Ohio-based startup, immediately uses the information it gathers and only insures what it believes are good drivers.

Root’s smartphone app tracks car movements for two weeks before offering eligible customers a quote, according to CEO Alexander Timm. An algorithm assesses risk using factors such as tailgating, fast turns and texting.

Using data to segment risks in such a way is only set to spread.

“Pricing will change,” said Anand Rao, a principal at consultancy PwC who focuses on analytics and uses of artificial intelligence in business. “Not everyone will change their behavior, which will start translating into different pricing and different types of products.”

Some industry-watchers worry that approach will fundamentally change how the insurance business works. But for now, consumers do not seem too concerned.

“There are a lot of pieces of information that companies are tracking about you anyway,” said Ozawa, referring to Facebook Inc (FB.O) and other social media.

While Ozawa no longer works for the company that introduced him to Beam, he expects the impact will be long-lasting. The two-minute requirement has motivated his kids to do more than a simple “swish-swish” when they brush, he said.

 

(Reporting by Suzanne Barlyn; Editing by Lauren LaCapra and Bill Rigby)
Published at Sun, 15 Jan 2017 12:00:00 +0000

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