What theory did you just use? News brief — week of Apr 4 2016
Here are the headlines pulled from Clay’s news brief this week.
WSJ: JetBlue, Alaska Air Bidding for Virgin America (3/28/16): Takeover offers due by end of week in what could signal next wave of airline consolidation. Low-fare startup Virgin America Inc. may soon have a new owner. Takeover offers from two other U.S. airlines — JetBlue Airways Corp. and Alaska Air Group Inc. — are due by the end of the week, according to a person familiar with the matter, in what could signal the latest wave of consolidation in the industry. A preferred buyer could emerge as early as this week, the person said, though a final deal could take longer to complete. The details of the potential offers couldn’t be determined. The possible takeover of Virgin suggests consolidation in the industry is moving to the regional carriers and ultradiscounters after mergers between 2008 and 2013 combined eight big carriers into four, which now control more than 80% of the U.S. domestic market. The four, in order of size by U.S. traffic, are American Airlines Group Inc., Delta Air Lines Inc., United Continental Holdings Inc. and Southwest Airlines Co.
o WSJ: Alaska Air Nearing Deal to Acquire Virgin America (4/2/16): JetBlue Airways would lose out, with Alaska Air expected to pay upwards of $2 billion if its bid succeeds. Alaska Air Group Inc. has emerged as the likely winner of an auction for Virgin America Inc. The company is nearing a deal to buy Virgin America after beating a rival bid by JetBlue Airways Corp., people familiar with the situation said. There is no guarantee Alaska Air ultimately will clinch the deal, but if it does, an announcement could come Monday, they added. Alaska Air is expected to pay upwards of $2 billion for Virgin America, which has a market value of about $1.5 billion, following a surge sparked by recent news that the company was in play, one of the people said.
Yahoo: Tesla, buoyed by strong Model 3 orders, may need more cash (4/1/16): An initial flurry of orders has put Tesla Motors’ new Model 3 sedan off to a fast start, but the company may need to raise more cash if it hopes to deliver the new electric vehicle to customers on time, analysts said on Friday. Tesla’s stock price bounced around $237 in afternoon trading after opening at nearly $248, the highest mark in six months. Up to Thursday’s close, Tesla stock had soared 60 percent since hitting a 12-month low in February. Chief Executive Elon Musk’s ambitious plans include launching the Model 3, Tesla’s first mass-market car, in late 2017 and boosting the company’s annual production tenfold to 500,000 by 2020.
WSJ: SunEdison Said to Be Preparing to File for Bankruptcy (4/1/16): Company would rank among largest financial collapses in recent years. Solar-energy company SunEdison Inc. plans to file for bankruptcy protection in coming weeks, a dramatic about-face for a company whose market value stood at nearly $10 billion in July. The company is preparing a chapter 11 filing and is in talks with two creditor groups to obtain a loan to fund its operations during the process, according to people familiar with the matter. Creditors are likely to take control of the company and its portfolio of power projects, the people said. SunEdison, whose stock has plunged in recent months, would rank among the largest financial collapses in recent years. The company, based about 20 miles outside St. Louis, used a combination of financial engineering and cheap debt to grow to be one of the country’s biggest developers of renewable-power plants.
WSJ: McDonald’s Plans to Add More Than 1,000 Restaurants in China (3/31/16): Chief Executive Steve Easterbrook aims to turn China into company’s No. 2 market. McDonald’s Corp. is adding more than 1,000 restaurants in China despite a rough recent history in the country, joining a number of companies that have made bullish bets on Chinese consumption. Over the next five years, the Oak Brook, Ill., company is hunting for an investment partner to help build out its franchise business in China, and plans to add 1,300 restaurants to its current 2,200, it said Thursday. The fast-food giant’s is betting that population growth and urbanization rates will continue to propel sales even as China’s economy slows, said Chief Executive Steve Easterbrook in an interview.
WSJ: Foxconn and Sharp Approve $3.5 Billion Takeover Deal 3/30/16): Taiwanese company believes deal will improve its position on the technology value chain. The boards of Sharp Corp. and Foxconn Technology Group approved a plan Wednesday for the Taiwanese electronics assembler to buy struggling Japanese consumer electronics giant for 389 billion yen (US$3.5 billion), a nearly $2.5 billion haircut from its original offer price. The deal, ending months of negotiations, marks a victory for Foxconn, which has been looking to expand in the market for next-generation displays through the acquisition of Sharp, a supplier of smartphone screens to Apple Inc. Foxconn believes acquiring Sharp would allow the company to move up the technology value chain by manufacturing smartphone screens, which are the most expensive components in mobile devices.
WSJ: Behind the Sharp Deal, Apple-Samsung Rivalry Looms (3/31/16): Neither Apple Inc. nor Samsung Electronics Co. has played a visible role in the Sharp Corp. takeover battle. But their technological rivalry — and the future of the iPhone — likely has fueled this fight. Sharp said Wednesday it has accepted Foxconn’s investment offer of around $3.5 billion and that part of this money would go toward developing organic light emitting displays, or OLED screens. This next-generation technology is dominated by Samsung, which makes more than 95% of the world’s supply of OLED displays, according to Beijing-based display research firm Sigma Intell. These displays are thinner than the mainstream liquid crystal displays inside iPhones because they don’t have a backlight layer, and they can be shaped into flexible designs. Think the curved screens in Samsung’s Galaxy S6 Edge. Apple is considering bringing OLED screens to iPhones as early as next year, as it searches for innovative features to revive iPhone sales growth despite the global economic slowdown, according to people familiar with Apple’s product roadmap. And it doesn’t want to rely on Samsung, its biggest rival in the smartphone market.
WSJ: Dell’s SecureWorks Aims to Launch IPO in April (4/1/16): Offering would mark the first tech company this year to debut in the U.S. A cybersecurity firm owned by Dell Inc. is seeking to end the technology IPO drought. SecureWorks Corp., owned by Dell’s closely held parent, Denali Holding Inc., is seeking to launch its initial public offering in April, people close to the deal say. The company could begin its “roadshow” to market the stock to investors during the week of April 11, the people said. The shares are expected to trade on Nasdaq under the symbol “SCWX”, according to a previous securities filing. Should it succeed, SecureWorks, which helps corporations lock down their systems and check for computer intruders, could be the first technology company to debut on a U.S. exchange in 2016 and send a positive signal about the health of an IPO market that has been ailing amid market volatility.
WSJ: How Millennials and Low-Income Consumers Are Propping Up the U.S. Economy (3/29/16): Consumer-spending growth allowed the U.S. economy to dodge contraction territory late last year, and the source of strength was not the wealthy, but rather low-income consumers and millennials. Younger consumers and those with lower incomes punched above their weight class in the final months of 2015 fueling a 2.35% increase in year-over-year spending in December in 15 U.S. metro areas, according to data released today by the J.P. Morgan Chase & Co. Institute. Those same groups were leading contributors to consumption gains in October and November. Separate government data showed consumer spending more than accounted for all economic output gains in the fourth quarter, counteracting drags from weak business investment and a slowdown in international trade.
WSJ: GE Files to End Fed Oversight After Shrinking GE Capital (3/31/16): Industrial giant says it would no longer pose systemic threat to banking system. General Electric Co. formally asked to be released from supervision by the Federal Reserve on Thursday, saying it has sufficiently shrunk its once-massive financial-services arm so it would no longer pose a systemic threat to the financial system. Being categorized as a “systemically important financial institution,” or SIFI, required GE to submit to financial supervision by Fed staff and rein in leverage, two factors in GE’s decision last year to exit most of its lending business, which until recently provided as much as half of the conglomerate’s profits. In a filing sent Thursday to the Financial Stability Oversight Council, GE said it had cut its total assets in the financing division by more than half, eliminated the majority of its U.S. operations, and cut the company’s ties to the rest of the financial system that had led to its receiving the SIFI designation.
WSJ: FBI Opens San Bernardino Shooter’s iPhone; U.S. Drops Demand on Apple (3/28/16): Move delays a high-stakes showdown between Washington, Silicon Valley. The government said Monday it had cracked a terrorist’s iPhone without Apple Inc. ’s help and is seeking to drop its legal case to force the tech giant to unlock the device. The move was announced in court papers filed Monday in a dispute over a phone seized in the investigation of a Dec. 2 terror attack in San Bernardino, Calif. The filing signals a temporary reprieve from a high-stakes fight between Washington and Silicon Valley over privacy and security in the digital age. For now, the Federal Bureau of Investigation is focused on reviewing the information contained on the phone, which was unlocked with help from a third party the government has refused to identify.
WSJ: California Moves Toward $15-an-Hour Minimum Wage (3/27/16): Gov. Jerry Brown has proposed to state Legislature increasing pay floor to that level by 2022. California appears poised to raise its minimum wage to $15 an hour. Gov. Jerry Brown ’s administration has told leaders in the Democratic-controlled state Legislature he supports boosting the state’s minimum wage to $15 by 2022, a person familiar with the matter said. The approach would give the governor some control over an issue that looked set to be decided directly by voters in November. Moving ahead with the plan would give the most populous U.S. state the nation’s highest minimum pay floor. The minimum wage in California is now $10 an hour, already one of the highest of any state, though some cities have set higher minimum levels.
WSJ: NTT Data to Buy Dell’s IT-Services Arm (3/28/16): Deal would mark one of the largest foreign buyouts in recent years for NTT Data. Japan’s NTT Data Corp. said Monday that it has agreed to buy Dell Inc . ’s information-technology services division for $3.05 billion, its latest effort to seek growth overseas. The deal would mark one of the largest foreign buyouts in recent years for NTT Data, operations of which span fixed-line and mobile telecommunications as well as IT services. Faced with sluggish growth at home, many Japanese companies are turning to overseas acquisitions. The move would enable Dell, which is in the process of acquiring storage vendor EMC Corp. for tens of billions of dollars, to raise cash to help finance that deal. NTT Data said the acquisition would increase its presence in North America significantly, and strengthen and expand its global delivery network.
WSJ: Mobile Banking Grows More Popular (3/30/16): Share of adults who bank on hand-held devices grew last year, Fed survey finds. The popularity of mobile banking grew last year, with 43% of adults with mobile phones and bank accounts using their phones for financial activities, according to an annual survey by the Federal Reserve. The share of adults who reported using mobile-banking features increased by 4 percentage points from the Fed’s 2014 survey, reflecting the increasing popularity of features like mobile payments and the capability to check account balances on a hand-held device. More than half of mobile-banking users had received alerts from their financial institution in the form of a push notification, text message or email.
Fortune: Meet the Secretive Startup Trying to Steal Uber’s Top Drivers (3/28/16): Juno, a 100-employee startup still in stealth mode, is launching a ride-sharing app in New York City sometime this spring. And when it does, it’s going after the 800-pound gorilla: Uber. Still, if anyone has a chance against Uber, Juno founder Talmon Marco isn’t a bad bet. The Israeli-born entrepreneur has struck gold in difficult markets before: two years ago, he sold Viber, the popular messaging app he created, for a cool $900 million. That’s one reason he feels he has a chance, though he admits it won’t be easy. “You have to make sure you have sufficient funding,” he says. “We’ve been blessed that we don’t have to start from zero, which is a definite advantage compared to your average entrepreneur.”
NYT: Less Innovation, More Inequality (2/24/16): America’s peak years of indigenous innovation ran from the 1820s to the 1960s. There were a few financial panics and two depressions, to be sure. But in this period, a frenzy of creative activity, economic competition and rapid growth in national income provided widening economic inclusion, rising wages for all and engaging careers for most. Innovations gave workers better tools to work with and better products to make, thus lifting their wages. Then this innovation began to retreat, most of it to an area of land along the West Coast. In the early 1970s the rate of indigenous innovation (as measured by its estimated contribution to the rate of growth in labor productivity) dropped by about half — to around 1 percent since then, from about 2 percent before then.
WSJ: Jet Prices Take Center Stage in Boeing Job Cuts (3/31/16): Cost will take a larger role alongside the performance of the companies dueling jetliners. Boeing Co. has opened a new chapter in its battle with Airbus Group SE , with price taking a larger role alongside the performance of their sparring jetliners. The U.S. company wants to boost productivity and efficiencies at its jet plants, with plans to cut 4,500 positions from its 161,000-strong workforce by June, as part of its strategy to offer airlines and lessors the lowest price, according to one of its most senior executives. The staff reductions would include 4,000 employees — or roughly 5% — from a commercial unit that has a $431 billion backlog of about 5,800 aircraft as of the end of 2015.
WSJ: Intel Announces New Chips for Cloud Computing (3/31/16): Chip maker to collaborate with two startups to help companies move computing jobs through multiple clouds. Intel Corp. announced new chips targeting cloud computing as well as partnerships to address concerns of companies that have stayed on the sidelines of that technology trend. The Silicon Valley giant, whose chips power the vast majority of server systems, on Thursday expanded its Xeon line with new models that boost computing performance. Intel executives, at an event in San Francisco, also pointed to built-in features that could boost the security of cloud computing jobs. Intel also announced a collaboration with two startups, CoreOS and Mirantis Inc., could make it easier for companies to move computing jobs between competing cloud services, or between their own data centers and the cloud.
Fortune: Why IBM Is Buying One of Salesforce’s Biggest Consulting Partners (4/1/16): It’s pretty simple: market domination. There’s still no end in sight to IBM’s recent acquisition spree. The tech giant’s services division disclosed its intention this week to snap up Bluewolf Group, one of the biggest independent services firms specializing in Salesforce’s cloud services with more than 9,500 projects under its belt over that past 15 years. When the deal closes in the second quarter, Bluewolf’s 500-person team will join IBM’s Interactive Experience (iX) division. The group already is one of the world’s largest digital agencies with more than 10,000 people focused on marketing services, analytics applications, and interface designs for websites and customer support forums.
