Posts in category Business


ApprovedBusinessBusiness and finance

Samsung’s boss is arrested on bribery charges

IN ONE of the many interrogations Lee Jae-yong has undergone in connection with a presidential influence-peddling scandal, he said that he would surrender management control of Samsung, the South Korean electronics giant that he is running on behalf of his incapacitated father, Lee Kun-hee, “if there is anyone better than me”. He may now be forced to do so. On February 17th Mr Lee was arrested on suspicion of bribery, embezzlement, perjury, moving assets abroad illegally and concealing evidence of criminal profit, after a local court agreed to a request from a special prosecution team for a pre-trial detention.

Last month investigators accused Mr Lee of paying 43bn won ($36m) in bribes to organisations tied to Choi Soon-sil, a confidante of South Korea’s president, Park Geun-hye (who is herself under investigation by the constitutional court). The prosecution team’s first request for a pre-trial arrest warrant was rejected. But the court reversed its decision, it said today, after prosecutors put forward additional evidence. (The court denied, however, a request to arrest another Samsung executive, Park Sang-jin, on similar charges.) The move…Continue reading

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ApprovedBusinessBusiness and finance

Traditional media firms are enjoying a Trump bump

DONALD TRUMP calls it the “failing” New York Times in his tweets, but his presidency has breathed new life into the newspaper and other mainstream media outlets. The New York Times, the Washington Post and the Wall Street Journal have all received boosts in subscriptions and page views; cable news networks, such as CNN and the Fox News Channel, are getting huge increases in viewers at a time when most other channels are losing them; and even the long-suffering stocks of newspaper companies are rallying. Since the election shares in the New York Times Co have risen by 42%, outperforming even the mighty Goldman Sachs.

Why the boost? The unprecedented nature of political events has kept American eyeballs glued to pages and screens. The pace of change, especially since the election, compels Mr Trump’s fans and foes alike to stay abreast of developments. Many do so using Twitter (see article). But…Continue reading

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ApprovedBusinessBusiness and finance

New models for new media

Not watching Twitter

FOR months Twitter, the micro-blogging service, has received the kind of free attention of which most companies can only dream. Politicians, corporate bosses, activists and citizens turn to the platform to catch every tweet of America’s new president, who has become the service’s de facto spokesman. “The whole world is watching Twitter,” boasted Jack Dorsey (pictured), the company’s chief executive, as he presented its results on February 9th. He has little else to brag about.

But Donald Trump has not provided the kind of boost the struggling firm really needs. It reported slowing revenue growth and a loss of $167m. User growth has been sluggish, too: it added just 2m users in that period. Facebook added 72m. The day of the results, shares in Twitter dropped by 12%. Because news outlets around the world already report on Mr Trump’s most sensational tweets, many do not feel compelled to join the platform to discover them. Others are put off by mobs of trolls and reams of misinformation.

And not even Mr Trump could change the cold, hard truth about Twitter: that it can never be…Continue reading

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ApprovedBusinessBusiness and finance

Planet’s satellites offer customers a new world view every day

BUILT by the Indian Space Research Organisation, the Polar Satellite Launch Vehicle threw itself into the sky at 3.58am GMT on February 15th. It took with it a record-breaking 104 satellites—88 of which belonged to a single company, Planet, a remote sensing business based in San Francisco. Planet now has 149 satellites in orbit—enough for it to provide its customers with new moderately detailed images of all the Earth’s land surface every single day.

The satellites Planet makes—it calls them “doves”—measure 10cm by 10cm by 30cm. The first doves, launched five years ago, could send back pictures of just 3,000 square kilometres a day. But the satellites have followed a trajectory of improvement much closer to that seen in cell-phones—from which they get some of their components—than the established satellite industry. The latest doves can cover 2.5m square kilometres a day.

The expanded fleet of satellites will send over 3 terabytes of data a day to more than 30 receiver stations spread around the Earth. After processing to remove distortions and to locate each image, the data will be in the cloud and ready for the company’s…Continue reading

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ApprovedBusinessBusiness and finance

France’s PSA Group may plan to buy Opel, GM’s European operation

AFTER sweeping past a significant milestone, drivers rarely slam their vehicles into reverse. Yet General Motors (GM), which last year joined Toyota and Volkswagen in an elite group that sells over 10m vehicles a year, may be on the brink of such a manoeuvre. On February 14th the American firm and PSA Group, which makes Peugeots and Citroëns, sprang a surprise by confirming that they were in talks that could lead to the French carmaker buying GM’s European operation. GM’s decision to downsize has many merits, but the advantages of getting bigger are much less clear-cut for its European counterpart.

The two carmakers say a deal for Opel (which carries the Vauxhall brand in Britain) is only a possibility. But GM’s global might is not reflected at Opel, and it is probably keen to offload a carmaker that it has owned for nearly 90 years. Opel has done little other than disappoint in the recent past. Its 6% share of the European market puts it behind seven other brands and the business has lost money for years.

GM has considered offloading Opel before. In 2009, as it struggled in bankruptcy protection in the wake of the financial…Continue reading

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ApprovedBusinessBusiness and finance

America’s latest spectrum auction

MARKETS don’t simply emerge, but are created by the state, argued Karl Polanyi, an economist, in “The Great Transformation”. This is certainly true for radio spectrum, an intangible natural resource, which governments now regularly sell in auctions. The most intricate ever organised came to an end in America on February 10th, bringing in $19.6bn.

When America’s Federal Communications Commission (FCC) started auctioning spectrum in 1994, it did so because lotteries and “beauty pageants” to allocate the scarce resource seemed otherworldly when billions were at stake. Two decades later the FCC again tried something new, because the established auction system, in turn, was no longer adequate. With most spectrum compatible with today’s technology already allocated, the agency could only satisfy ever-growing demand from mobile carriers by convincing current holders of big slices, mostly broadcasters, to give up some of their licences.

The FCC’s solution was to organise not one but two sets of sell-offs, collectively called an “incentive auction”. The first set finds out the prices at which broadcasters are…Continue reading

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ApprovedBusinessBusiness and finance

Electric cars are set to arrive far more speedily than anticipated

THE high-pitched whirr of an electric car may not stir the soul like the bellow and growl of an internal combustion engine (ICE). But to compensate, electric motors give even the humblest cars explosive acceleration. Electric cars are similarly set for rapid forward thrust. Improving technology and tightening regulations on emissions from ICEs is about to propel electric vehicles (EVs) from a niche to the mainstream. After more than a century of reliance on fossil fuels, however, the route from petrol power to volts will be a tough one for carmakers to navigate.

The change of gear is recent. One car in a hundred sold today is powered by electricity. The proportion of EVs on the world’s roads is still well below 1%. Most forecasters had reckoned that by 2025 that would rise to around 4%. Those estimates are undergoing a big overhaul as carmakers announce huge expansions in their production of EVs. Morgan Stanley, a bank, now says that by 2025 EV sales will hit 7m a year and make up 7% of vehicles on the road. Exane BNP Paribas, another bank, reckons that it could be more like 11% (see chart). But as carmakers plan for ever more battery power, even…Continue reading

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ApprovedBusinessBusiness and finance

Sales of green vehicles are booming in Norway

TO JUDGE by the gleaming rows of Teslas, Nissan Leafs and other electric cars parked in the snow in central Oslo, Norwegians might already have given up on the internal combustion engine. Before long they probably will. Battery-powered cars and plug-in hybrids together accounted for 29% of all new car sales last year. The 100,000th battery-powered unit sold in December.

Norway first introduced tax perks to boost the electric-car market in the 1990s. But sales only sparked in the past five years or so after slicker vehicles with better batteries appeared. Now the country’s 5m citizens constitute the most developed national market for electric cars anywhere. Christina Bu, who heads the country’s association for electric cars, expects 400,000 electric-only vehicles on the roads by 2020, and predicts 70% of new sales will be of zero-emission cars. As range increases and price falls, demand will rise faster.

Though less than 5% of the total fleet of cars in Norway are electric, the country’s transport minister calls it “realistic” to expect an end to sales of new cars powered by fossil fuels by 2025. Fiscal incentives, not an outright ban, will bring this…Continue reading

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ApprovedBusinessBusiness and finance

Investors flock to buy a piece of Mexico’s leading tequila-maker

OVER the course of more than 200 years in the tequila business, Jose Cuervo will have been responsible for a fair few moments of giddy pleasure. Last week, it got one of its own thanks to a successful initial public offering (IPO). It was eight times oversubscribed and raised 18.6bn pesos ($920m) in exchange for 15% of the company.

Jose Cuervo, which is based in the western state of Jalisco, is one of the country’s best-known brands, and has been run by the same family for 11 generations. It dominates the Mexican tequila industry; sales in 2015 came to 18.5bn pesos. It also holds an assured place in the history of mixology: the original margarita cocktails were purportedly made with Jose Cuervo tequila.

Long considered a candidate for flotation, it eventually published a prospectus in September 2016. The IPO was delayed, though, seemingly to allow the company to take stock of the impact of Donald Trump’s election victory in November. Since then the peso has dropped over 10% against the dollar, and Mr Trump’s desire to rework, even to rip up, the North Atlantic Free-Trade Agreement, and perhaps impose a border tax on Mexican exports to America has sent tremors…Continue reading

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ApprovedBusinessBusiness and finance

Tata’s governance is still faulty

Chandra in, Cyrus out

PROFIT is to good corporate governance what tides are to swimming trunks: when the former is high, absence of the latter tends to go unnoticed. The ebbing of profits at Tata, India’s largest conglomerate, in recent years has prompted a power struggle that in turn has exposed the often dysfunctional relationship between several dozen businesses, holding companies, people and charities that use the Tata name. The struggle is now over: on February 6th, Cyrus Mistry, Tata’s boss until last October (pictured on next page, on the right) was finally booted out of the company. Natarajan Chandrasekaran (on the left), the boss of one of the group’s key operating firms, Tata Consultancy Services, takes over as chairman on February 21st.

Executives at the 149-year-old group hope that will close a grim chapter in its history. Mr Mistry, whose family owns an 18% stake in Tata Sons, the main holding company, which is unlisted, reacted badly to being evicted as its chairman last year. The move to oust him was set in motion by Ratan Tata, the group’s 79-year old patriarch (and Mr Mistry’s interim successor)….Continue reading

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ApprovedBusinessBusiness and finance

Ralph Lauren and Macy’s tell a similar tale of woe

NEW YORK’s fashion week, which will start on February 9th, promises the usual show of glamour, but a more fascinating industry display came a week earlier. On February 2nd Ralph Lauren, a well-known brand, said that the executive it had hired in 2015 to overhaul its business would leave. On February 3rd the Wall Street Journal reported that Macy’s, America’s biggest department store, might be bought by Hudson’s Bay, a smaller Canadian rival. Each is an institution of American retailing. Each is a reminder of how hard it is to keep pace.

Consumer habits have changed especially rapidly in their world. Frocks, bags and shoes are now disproportionately bought online compared with other goods. Last year clothes and accessories accounted for a fifth of e-commerce, estimates Cowen, a financial-services firm; far higher than their 8% share of total retail spending. Cowen expects Amazon to surpass Macy’s as America’s top clothing seller this year.

For manufacturers, such as Ralph Lauren, the picture is more mixed. For some clothing firms, particularly small ones, Amazon offers a new way to reach…Continue reading

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ApprovedBusinessBusiness and finance

Internet firms’ legal immunity is under threat

GOOGLE, Facebook and other online giants like to see their rapid rise as the product of their founders’ brilliance. Others argue that their success is more a result of lucky timing and network effects—the economic forces that tend to make bigger firms even bigger. Often forgotten is a third reason for their triumph: in America and, to some extent, in Europe, online platforms have been inhabiting a parallel legal universe. Broadly speaking, they are not legally responsible, either for what their users do or for the harm that their services can cause in the real world.

It is becoming ever clearer, however, that this era of digital exceptionalism cannot last for ever. Governments and courts are chipping away at the sovereignty of internet firms, and public opinion is pushing them to police themselves better. Given their growing heft, this shift is likely not just to continue but to accelerate.

When the internet went mainstream in the mid-1990s, online firms feared being held liable if their services were used in illegal ways—for instance, when subscribers posted copyrighted content or defamatory information. The danger was underlined in…Continue reading

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ApprovedBusinessBusiness and finance

Snow-making companies in a warming world

Better than mud

THE creamy glide of fresh powder sends skiing enthusiasts into ecstasies. Scraping over brown patches and dodging lumpen rocks inspires far less enthusiasm. Thousands of families will hit Europe’s slopes this month, hoping that snow conditions will be more favourable than at the start of the season in December. A warming world is changing precisely how, when and where snow falls. For the winter-sports industry, such shifts could hit profits harder than a springtime avalanche.

The snowfall season has become shorter in places such as the Alps, says David Robinson of Rutgers University in New Jersey, as snow arrives later and melts earlier than it once did. Resorts at lower altitudes are among the most vulnerable. Since the 1970s the duration of the snow season, averaged over the northern hemisphere, has declined by five days a decade, according to the European Environment Agency. Huge regional variation exists, however, both in Europe and elsewhere. Californian slopes that were unable to open in recent years because of snow shortages had to close at the start of 2017 because too much of the stuff had…Continue reading

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ApprovedBusinessBusiness and finance

Grab battles Uber in South-East Asia

Overtaking manoeuvres

SCOOTER-DRIVERS in bright green helmets enliven the dusk of rush hour in Ho Chi Minh City, Vietnam’s commercial centre. This conspicuous fleet is carrying round clients of Grab, a South-East Asian ride-hailing firm. Its operations, connecting travellers with taxis, private cars and motorbike taxis in six countries, straddle a region that is twice as populous as America and swiftly urbanising. Its future seems assured, if it can compete with Uber, a deep-pocketed American competitor.

Grab started life at Harvard Business School, where its 34-year-old boss, Anthony Tan, met his co-founder, Hooi Ling Tan (the pair are unrelated). Its headquarters are in Singapore. Anthony’s father runs Tan Chong Motors, a car assembler and distributor which is among Malaysia’s largest companies, but he does not have funding from the family outfit.

Mr Tan denies that he is building South-East Asia’s answer to Uber, and says he is more inspired by Chinese technology firms such as Tencent, an online-gaming and social-media firm that owns WeChat, a fantastically popular mobile-messaging service, and Alibaba…Continue reading

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ApprovedBusinessBusiness and finance

Shareholder democracy is ailing

DEMOCRACY is in decline around the world, according to Freedom House, a think-tank. Only 45% of countries are considered free today, and their number is slipping. Liberty is in retreat in the world of business, too. The idea that firms should be controlled by diverse shareholders who exercise one vote per share is increasingly viewed as redundant or even dangerous.

Consider the initial public offering (IPO) of Silicon Valley’s latest social-media star, Snap. It plans to raise $3-4bn and secure a valuation of $20bn-25bn. The securities being sold have no voting rights, so all the power will stay with Evan Spiegel and Bobby Murphy, its co-founders. Snap’s IPO has echoes of that of Alibaba, a Chinese internet giant. It listed itself in New York in 2014, in the world’s largest-ever IPO, raising $25bn. It is worth $252bn today and is controlled by an opaque partnership using legal vehicles in the Cayman Islands. Its ordinary shareholders are supine.

Optimists may dismiss the two IPOs as isolated events, but there is a deeper trend towards autocracy. Eight of the world’s 20 most valuable firms are not controlled by outside shareholders. They…Continue reading

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