|Bid||0.00 x 76700|
|Ask||0.00 x 56500|
|Day's Range||112.18 - 115.76|
|52 Week Range||83.95 - 125.00|
|Beta (3Y Monthly)||0.54|
|PE Ratio (TTM)||40.88|
|Earnings Date||Oct. 21, 2019|
|Forward Dividend & Yield||1.50 (1.43%)|
|1y Target Est||N/A|
(Bloomberg Opinion) -- With ambitious profitability goals, a business in flux and an activist investor hammering at the door, SAP SE Chief Executive Officer Bill McDermott’s time was up. His successors’ skill sets look better suited to meeting those challenges.After nine years at the helm of Europe’s largest technology company – five as sole CEO, four as co-chief – the American manager stepped down on Thursday, replaced by two new co-CEOs: Chief Operating Officer Christian Klein and cloud chief Jennifer Morgan.McDermott’s tenure was largely impressive. Through $31 billion of deals, SAP entered a string of new businesses, and generated good value for shareholders. Annual returns averaged 15% under his leadership, compared to the 12% average of European technology firms. Since he took sole control in 2014, the returns have been even higher, and the market capitalization has doubled to almost 140 billion euros ($155 billion).Even with that growth, however, many still see the stock as undervalued: SAP trades at 21 times expected earnings, while new cloud software players such as ServiceNow Inc. trade at a multiple of 65 times. That’s partly because of some of McDermott’s operational shortcomings, not least a failure to integrate many of the acquisitions effectively and to get customers to buy into SAP’s cloud products fast enough. SAP’s clients feel they’re at a disadvantage in their digital transformation efforts to competitors who use products from SAP’s rivals, according to an industry body called the DSAG that represents SAP users in the German-speaking world. One major complaint is a failure of SAP to get its new offerings in the same coding language, creating additional work for their clients to get it all working together. As a result, only third of its 3,500 members trust the Walldorf, Germany-based company to accompany them well on the journey, the group told the Frankfurter Allgemeine Zeitung newspaper in September.The road ahead looks rocky. In April Elliott Management Corp., the activist fund controlled by the billionaire Paul Singer, revealed it had built a 1% stake in the maker of enterprise software and demanded a halt to any new dealmaking. It’s targeting an increase in earnings per share that will likely require a buyback of as much as 10% of the stock. SAP simultaneously announced it intends to improve profitability by 5 percentage points through 2023, with a focus on a better gross margin at the cloud business.The new CEOs therefore seem the logical picks. Klein is probably expected to bring the improved focus on operations needed to deliver the profit goal, and Morgan the cloud experience needed to accelerate the so far torpid adoption of its products in that market. Having been later than some U.S. competitors to pivot toward a cloud-based business, SAP is now migrating its customers away from software run on their own premises, and into its cloud offerings. Oracle Corp. sees the shift as an opportunity to steal customers from its German rival.The push has come at the expense of SAP’s profitability, which lags the level of peers such as Oracle. McDermott already announced a major restructuring program that includes 4,000 job cuts. Another set of measures will be unveiled at an investor day in New York next month. The timing of the management change therefore gives shareholders a prime opportunity to meet the new team. They will need reassurance that Klein in particular, who at 39 will be the youngest chief executive officer in Germany’s benchmark DAX Index, can seamlessly manage the operational challenges such change inevitably poses. Cost-saving pushes can generate significant uncertainty.McDermott’s departure does perhaps dispel any lingering doubt about who is really in charge at SAP: co-founder and Chairman Hasso Plattner. The 75-year-old looms large in the corridors of SAP’s headquarters in Walldorf. Thursday’s leadership picks mark the culmination of a wave of board changes which also saw former cloud chief Robert Enslin and digital services head Bernd Leukert depart in the past year. When, a few years ago, the company started developing its “digital boardroom,” a web portal that lets managers dig into the finest details of the company’s operations and evaluate earnings in real time, it was because Plattner asked for it, not McDermott.As successful as McDermott was, his shortcomings also made the company more vulnerable to an activist approach. If Elliott were to push for SAP to be carved up, that would endanger Plattner’s legacy. Morgan and Klein now have to knuckle down on delivering that profitability goal. Their boss’s place in the history books is at stake.To contact the author of this story: Alex Webb at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- SAP SE is sticking to its new plan of keeping the company youthful, and top management isn’t being spared.The storied German software giant, Europe’s biggest tech company by market value, has spent the past few years attempting to reinvent itself. It’s working to adapt its corporate software, used by almost all of the world’s 100 most valuable brands, to the web and is taking on younger rivals in cloud-based computing.There’s also been an exodus of company veterans, which as of 12:44 a.m. Friday in Walldorf, included CEO Bill McDermott.Analysts have called the late-night news a surprise; McDermott’s contract doesn’t run out until 2021. He also unveiled a major restructuring plan in April and was expected to brief investors on the company’s strategy next month.But, as he said on a conference call after the announcement, “Ten years is a long time to be CEO.”McDermott, 58, had been with the company since 2002 when he joined as head of its North American business. At the time, he was that unit’s fourth head in three years as SAP struggled to compete with rivals like Oracle Corp., and grappled with a drop in sales of software licenses. Problems with its products were blamed for delayed shipments of Whirlpool Corp.’s appliances and even Hershey’s Halloween chocolates.In the role, he recruited a new management team, changed the way the sales department targeted customers, and ultimately boosted sales growth. When CEO Leo Apotheker unexpectedly resigned in 2010, McDermott and product-development head Jim Snabe were picked to replace him as co-CEOs. Snabe -- currently chairman of Siemens AG -- stepped down and took a spot on the board in 2014, and McDermott became sole head of the company.With nearly 100,000 employees and a sprawling business that generated about $27 billion in revenue last year, driving change has sometimes been controversial. Since 2011, McDermott spent $26 billion on six major cloud acquisitions, and was the main advocate for the $8 billion acquisition of Qualtrics International Inc., the company’s largest-ever deal.Analysts criticized the purchase as too expensive. In November, Qualtrics said it expected revenue for 2018 to exceed $400 million, a figure that wouldn’t move the needle much for SAP. McDermott defended the deal, believing that combining SAP’s sales force and a trove of operational data with Qualtrics’s customer experience feedback would accelerate growth.More recently, the company attracted the interest of activists at Elliott Management Corp., which revealed its 1.2 billion-euro ($1.3 billion) stake when SAP announced a change in strategy in April. SAP had been vague at the time, saying it planned “new initiatives to accelerate operational excellence and value creation” with a focus on “tuck-in” acquisitions.SAP underwent a management shakeup in the weeks preceding the April announcement. The president of its cloud business, 27-year SAP veteran Robert Enslin, had announced his departure earlier that month. It was later revealed he’d left for Google. A day earlier, Chief Technology Officer Bjoern Goerke, another cloud expert based in the U.S., penned a blog post saying he was leaving the company he joined as a student in 1988. Board member Bernd Leukert, a seasoned IT executive, left SAP in February.Personally, McDermott also had to weather a near-fatal accident in 2015 that cost him an eye when he fell down some stairs while carrying a water glass and nearly bled to death.His replacements are a mix of old and new guard at SAP. Christian Klein, 39, spent the past 20 years at SAP, after joining as a student in 1999. Jennifer Morgan, 48, arrived in 2004 and was the first American woman on the company’s executive board. Morgan has been seen as McDermott’s protege, rising relatively quickly through the ranks, and most recently served as the president of the all-important cloud group.Together, Klein and Morgan will have to find a way to compete with younger companies like Salesforce.com Inc. and Workday Inc. while encumbered by a traditional enterprise software business.Cloud is the company’s clear growth engine, with revenue increasing about 32% last year to about 5 billion euros. Sales from its largest business, which helps clients set up and implement SAP’s software, grew less than 1% in 2019.McDermott’s resignation was announced alongside better-than-expected preliminary third-quarter earnings results. New bookings for the company’s cloud products, a key metric that indicates future sales, grew 33% on a constant-currency business. That was more than double the pace set in the second quarter, when disappointed investors sent shares down as much as 10%.“While it is a shock to see Mr. McDermott stepping down, he is clearly handing over the reins of the business from a position of strength and we are encouraged to see that his replacements are long-term members of the SAP executive team,” said Thomas Fitzgerald, fund manager at SAP shareholder Edentree Investment Management, in a note on Friday.\--With assistance from Stefan Nicola.To contact the reporters on this story: Amy Thomson in London at firstname.lastname@example.org;Kit Rees in London at email@example.comTo contact the editors responsible for this story: Giles Turner at firstname.lastname@example.org, Nate LanxonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
European shares were boosted on Friday by advancing shares of SAP after its long term CEO stepped down, while upbeat rhetoric surrounding U.S.-China trade talks and Brexit also brightened the mood. The pan-European STOXX 600 climbed 0.5% at 0705 GMT, with shares in Frankfurt rising 0.8% - the most among its peers. SAP shares pushed the technology sector 2.5% higher, touching a two-month peak.
(Bloomberg) -- SAP SE named executives Jennifer Morgan and Christian Klein as the successors to Chief Executive Officer Bill McDermott, who’s stepping down after leading Europe’s largest software company during a decade of major industry changes.The two SAP veterans will become co-CEOs effective immediately, the company said Thursday in a statement. McDermott, 58, will remain at the company in an advisory role through the end of the year.Shares of SAP rose as much as 8.4% in Frankfurt on Friday, the most since April, and are up 31% for the year.Morgan, 48, who joined SAP in 2004, most recently served as president of the software giant’s cloud business group. She became the first American woman appointed to SAP’s executive board in 2017 when she was named president of the Americas and Asia. Klein, 39, joined SAP as a student in 1999 and has been chief operating officer since April 2016, and on the executive board since 2018.McDermott’s departure was unexpected, but the new co-CEOs were on investors’ “short-list” to take over in future, Citigroup analysts including Walter Pritchard said in a note.“The decision was made based on my determination that 10 years is a long time to be CEO,” McDermott said on a conference call after the announcement. “You get to the point when you have done what you set out to do and then some.”McDermott joined Walldorf, Germany-based SAP in 2002 and was the first American to hold the CEO position at the firm. He embraced cloud computing, changing the way SAP sold software so customers could use it over the internet. He’s been transitioning the company through acquisitions and revamped products, challenging rivals Salesforce.com Inc. and Oracle Corp.While SAP had pledged to triple cloud revenue by 2023, the effort has shown mixed results and the company has pushed to shore up profit margins with the support of activist investor Elliott Management.Earlier, SAP reported preliminary third-quarter revenue and profit that topped analysts’ estimates. Cloud bookings, a key metric in the company’s transition, increased 33% on a constant currency basis, more than double the pace of the second quarter, the company said.SAP’s 3Q results “will likely be received positively and we’d expect will drive a relief in shares,” Citi said in its note.McDermott cited the strong results as a reason for the timing of the leadership change, saying he wanted to give his successors the reins while the company is at “maximum strength.”Morgan said she was only three hours into her tenure so didn’t know what changes she might push for, but expressed optimism in the leadership structure.“I’m a very big believer that when two people come together, you can really get a lot done,” she said on the conference call.McDermott said he was uncertain about his future plans.“I will do something at some point,” he said. “But today’s SAP’s day. There is no doubt in my mind the future of SAP is even brighter now.”(Updates with comments, context and shares throughout.)\--With assistance from Joe Easton.To contact the reporter on this story: Nico Grant in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Bill McDermott stood down on Friday after a decade building up SAP as the world's leading enterprise software company, handing the task of completing its transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. The succession, which helped to send SAP's shares up 7% in early trading, ends an era in which McDermott struck a string of multi-billion-dollar deals that built SAP into Europe's leading technology group but also created complexity that frustrated many clients. McDermott's exit follows the entry this year of activist investor Elliott, amid broader market concern that his acquisitions - including last year's $8 billion deal to buy customer relationship platform Qualtrics - had caused SAP to lose focus.
(Bloomberg Opinion) -- To understand Elliott Management Corp.’s plans for AT&T Inc., it’s worth examining how it tackled a relative telecommunications minnow in Europe. The activist investor’s 2018 fight for control of Telecom Italia SpA may have provided something of a dry run.Last year, after revealing its stake in the Italian carrier, the fund run by combative billionaire Paul Singer started with a relatively short and straightforward list of proposals: improve governance, replace the board and divest some fixed and mobile network assets to reduce debt. Over the subsequent months, perhaps as it ascertained what resonated best with other shareholders, the strategy evolved into a more extensive array of requests dressed with a more constructive air.By the end of the year, Singer had realized the goals that were supposed to right the ship. Elliott had installed a new chief executive officer, Luigi Gubitosi, who won support on expectations he would be better able to execute a turnaround program. Conveniently, Gubitosi, an Italian with a private equity background, appears more open to putting a for-sale sign on assets that Elliott wants Telecom Italia to shed.With AT&T, Elliott started off the bat with a more exhaustive set of proposals akin to those it took months to develop at Telecom Italia: operational improvements, a portfolio review, better governance, a halt to acquisitions, and an exhortation for AT&T CEO Randall Stephenson to “align management skills,” which seems to hint at personnel changes. That could mean trying to prevent the ascent of John Stankey, AT&T’s chief operating officer and heir apparent for the top role.As AT&T investors and employees dig into the details, they should ignore the noise and focus on what are probably Elliott’s ultimate goals. That doesn’t mean it will be a smooth ride for either side. Telecom Italia stock is down almost 30% from the levels at which Elliott likely bought in, and selling assets will probably take a long time. The company’s biggest shareholder, French media conglomerate Vivendi SA, has fought Elliot at every turn. At AT&T, Elliott is pushing for what looks like a more constructive approach, but the fund’s core ambitions are surely the divestment of assets, including the shrinking DirectTV business and perhaps even parts of the phone network. QuicktakeWho Really Wins When Activist Investors Attack?U.S. carriers have so far largely avoided putting their fixed-network assets up for sale, but there’s plenty of appetite from funds such as KKR & Co. to invest in the infrastructure that supports the data economy. In Europe, similar assets have been sold for close to 20 times earnings before interest, taxes, depreciation and amortization.Elliot has also taken a page from its agenda with German business-software giant SAP SE, calling on AT&T to a halt any new acquisition plans to focus on better integrating purchases it already has in motion. That complements the Telecom Italia strategy by ruling out moves that may add to the debt pile when the goal is to reduce it.There are differences, of course. Telecom Italia was a proxy fight to secure board control. That’s not on the table at AT&T – at least, not yet. And building a meaningful enough stake in the $274 billion American firm for such a fight would be tough. But the trajectory seems the same. To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Germany will finally get another major listed tech company when software maker TeamViewer AG completes a 2.3 billion-euro ($2.5 billion) initial public offering this month -- the biggest in the industry in almost two decades.While Germany has several established tech companies, including software giant SAP SE, there have been few sizable newcomers since chipmaker Infineon Technologies AG listed in 2000. TeamViewer will provide a boost to the weakest European IPO market in years and comes as Germany’s economy teeters on the brink of a recession. The share sale, which is oversubscribed, will be the country’s largest so far this year.Founded in 2005, TeamViewer has developed from a local provider of remote computer access tools to one that offers connectivity to customers in about 180 countries. The company plans to further expand in Europe, Asia and the U.S., and will add to its offerings for large corporate customers to help them connect anything from mobile phones and tablets to machine sensors, smart farming equipment or wind turbines.With a sudden influx of new offerings in Europe, IPO investors have a lot to choose from. Apart from TeamViewer, private equity firm EQT Partners AB is also marketing its initial public offering, with a management roadshow kicking off next week. On Thursday, Helios Towers Plc -- one of sub-Saharan Africa’s largest mobile-phone tower operators -- announced plans to list on the London Stock Exchange.TeamViewer’s owner, private equity firm Permira, plans to sell as many as 84 million shares for 23.50 euros to 27.50 euros each via holding firm TigerLuxOne, the company said late Wednesday. TeamViewer stock is expected to start trading on the Frankfurt Stock Exchange on Sept. 25.The price range would give the company a market value of between 4.7 billion euros and 5.5 billion euros. Bloomberg News previously reported the valuation could be 4 billion euros to 5 billion euros. The listing will improve TeamViewer’s brand recognition and make it easier for it to grow organically and via “selected acquisitions,” spokeswoman Martina Dier said.TeamViewer may hire more people in the U.S. and opened offices in China, Japan, India and Singapore last year to expand sales in those markets. In China alone, TeamViewer has “tens of millions” of free users, more of whom the company wants to convert into paying customers, according to Chief Executive Officer Oliver Steil.“Our big growth combined with strong profitability -- even if market conditions have been difficult -- makes our financial profile attractive to investors,” Steil said in an interview last month.TeamViewer’s cash billings grew more than 35% in the first half, faster than last year’s 25% growth, to over 140 million euros, the CEO said. The company posted a cash operating profit margin of more than 50% during the period. It says its software has been installed on more than 2 billion devices.Permira bought the company for 870 million euros in 2014. It has since partnered with firms including Alibaba Group Holding Ltd. and Salesforce.com Inc. to bolster its cloud offerings.The free float, a measure of company stock available to trade, will be 30% to 42%, depending on the size of the IPO, according to the statement.Goldman Sachs Group Inc. and Morgan Stanley are arranging the IPO, with Bank of America Corp., Barclays Plc and RBC Capital Markets. Lilja & Co. is acting as an independent adviser to Permira and TeamViewer.(Updates with company comment in sixth paragraph. An earlier version of the story was corrected to remove reference to IPO proceeeds)To contact the reporter on this story: Stefan Nicola in Berlin at email@example.comTo contact the editors responsible for this story: Dale Crofts at firstname.lastname@example.org, Andrew Blackman, Chris ReiterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
TechCrunch is live from San Francisco's YBCA's Blue Shield of CaliforniaTheater, where we're hosting our first event dedicated to the enterprise
SAP NEWSBYTE — Former Australian Prime Minister Paul Keating will deliver an enlightening closing keynote session at the SAP® Ariba® Live event in Sydney, the premier global procurement and supply chain conference, SAP SE (SAP) announced today. The Sydney event is the last stop in the event’s Asia-Pacific-Japan series and is scheduled to take place September 10–11 at The Westin Sydney. SAP Ariba Live will bring together buyers, suppliers, partners and thought leaders across Australia and New Zealand to network and explore the power of intelligent spend management to help drive greater efficiencies, transparency and accountability in pursuit of purpose and good business.
(Bloomberg) -- The owners of software maker TeamViewer GmbH are planning a Frankfurt listing this year that could be the biggest German initial public offering for a technology company in nearly two decades.Permira will sell shares in the listing, planned before year-end, via its holding firm, TigerLuxOne, the company said in a statement Wednesday. TeamViewer could seek a valuation of 4 billion euros ($4.4 billion) to 5 billion euros, people familiar with the matter said previously.Permira could sell 30% to 40% of the company, depending on investor demand, the people said. While Germany has a bevy of established tech companies, including software giant SAP SE, there have been few sizable newcomers since chipmaker Infineon Technologies AG listed in 2000.“It is hard to pick the right moment in time but our big growth combined with strong profitability, even if market conditions have been difficult, makes our financial profile attractive to investors,” TeamViewer Chief Executive Officer Oliver Steil said in an interview on Wednesday. “There is a lot going on in the space and it’s still a bit early, but we will see more tech players emerge in a few years.”TeamViewer and Permira declined to comment on the size of the offering.Europe is grappling with its worst market for IPOs in years. Escalating trade wars and the specter of Brexit has lead to the fewest companies choosing to go public in a decade, according to data compiled by Bloomberg.Read More: Going Public With One Hand Tied Behind Your BackStill, there are signs that the environment is improving. Besides TeamViewer, Helios Towers Plc, one of sub-Saharan Africa’s largest mobile-phone tower operators, and French glass bottle maker Verallia are gearing up to kick off their own European IPOs in the next few weeks, people familiar with the matter have said.Based in Goeppingen in southern Germany and founded in 2005, TeamViewer develops software for collaboration and remote desktop access. Permira bought the company for 870 million euros in 2014. It has since partnered with firms including Alibaba Group Holding Ltd. and Salesforce.com Inc. to bolster its cloud offerings.Financial GrowthTeamViewer’s cash billings grew more than 35% in the first half, accelerating from 25% last year, to more than 140 million euros. It says its software has been installed on more than 2 billion devices.For the full year, the company said it expects billings growth of 35% to 39% and adjusted earnings before interest, taxes, depreciation and amortization of as much as 183 million euros.“Going down the IPO route versus selling means that we can remain an independent player, and it is important for us to sustain our independence,” Steil said.Goldman Sachs Group Inc. and Morgan Stanley are arranging the IPO, with Bank of America Corp., Barclays Plc and RBC Capital Markets. Lilja & Co. is acting as an adviser to Permira and TeamViewer.(Updates with quotes from CEO interview starting in fourth paragraph.)To contact the reporters on this story: Myriam Balezou in London at email@example.com;Aaron Kirchfeld in London at firstname.lastname@example.org;Sarah Syed in London at email@example.comTo contact the editors responsible for this story: Dinesh Nair at firstname.lastname@example.org, Amy Thomson, Giles TurnerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The editors will sit down with McDermott and talk about SAP’s quick growth due, in part, to several $1 billion-plus acquisitions. On September 5, you'll enjoy three breakout sessions --two from SAP and one from Pricefx.
(Bloomberg) -- Salesforce.com options are showing a decidedly bullish tilt ahead of its second-quarter earnings report, signaling that investors are betting the business software maker’s results will be better received than those of European counterpart SAP SE last month.There are more than twice as many calls than puts among contracts set to expire Friday in the wake of this afternoon’s release, and options prices imply a 6% earnings-day price move. That’s almost double the 3.1% average of the past eight reports, when rallies outpaced declines five-to-three. The stock has gained 8% this year, compared with a 31% rally in the the S&P 500 Software Index.It’s probably going to be a “noisy” earnings report, given Salesforce.com’s recent acquisition of Tableau Software Inc., according to SunTrust Robison Humphrey analyst Terry Tillman. He said the acquisition closed about two months sooner than targeted and he would expect stability and modest upside for the second-quarter with more catalysts ahead.San Franciso-based Salesforce.com has low exposure to China and is unlikely to reiterate the same concerns around the U.S.- China trade dispute that SAP has, Bloomberg Intelligence analysts Anurag Rana and Gili Naftalovich said in an Aug. 14 research note. Margins are likely to expand as sales growth exceeds the rate of investment in new products and geographies, but the acquisition of Salesforce.org and currency headwinds may weigh on the rate of expansion, they said.SAP, which traded at a record high on July 3, has since fallen 14%, with the decline accelerating after it reported a second-quarter slowdown in new cloud bookings and disappointing margins. Analysts also underscored weak growth in software license revenue, hit by uncertainty in Asia.About 17% of total open interest in Salesforce.com is set to expire on Friday, and implied volatility is elevated at 117% versus a three-month average of 30%.To contact the reporter on this story: Gregory Calderone in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Richard Richtmyer, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The vast enterprise tech category is Silicon Valley’s richest, and today it’spoised to change faster than ever before
(Bloomberg) -- The promise of artificial intelligence has yet to translate into big business. Now Kai-Fu Lee, a prominent venture capitalist in China and founder of Sinovation Ventures, says his firm’s new startup should be able to reach $100 million in revenue next year and go public the year after.AInnovation, established in March 2018, develops artificial intelligence products for companies in industries such as retail, manufacturing, and finance. Its customers include Mars Inc., Carlsberg A/S, Nestle SA, Foxconn Technology Group, China Everbright Bank Co. and Postal Savings Bank of China Co.Chief Executive Officer Hocking Xu, a veteran of International Business Machines Corp. and SAP SE, has hired staff that work with traditional companies to figure out how to take advantage of AI in their operations. AInnovation is on track to hit $100 million in revenue within two years of its founding, the fastest pace yet for such a startup, Lee said.“We took the approach of ‘Let’s take some of the best business people and let’s target the industries which need AI the most’,” he said.Lee figures AInnovation will be able to go public in less than two years at a valuation of $1 billion to $2 billion. The firm has raised about $70 million so far from Sinovation, CICC ALPHA and Chengwei Capital. Since the company was funded with yuan, it would most likely list domestically, either on China’s new NASDAQ-like Star market, or on the country’s ChiNext.For retail companies, AInnovation sells products including a smart vending machine that opens with facial recognition and software that monitors retail shelves with image recognition. It’s created computer vision technology that detects defects on the production line for manufacturers and underwriting software and natural language processing technology for financial firms. There’s a large market in particular for technology to catch flaws early in the manufacturing process, said Jeffrey Ding, a researcher with Oxford’s Center for the Governance of AI. That effort “aligns with the Chinese government’s priorities to upgrade smart manufacturing capabilities to compete with countries like Germany and Switzerland,” he said in an email.The former president of Google China, Kai-Fu Lee founded Sinovation Ventures in 2009. It manages more than $2 billion across seven funds in U.S. and Chinese currencies. It holds shares in more than 300 companies, most of which are in China. Its investments include autonomous driving company Momenta, consumer AI chip firm Horizon Robotics Inc. and bitcoin mining and AI chip company Bitmain Technologies Ltd.In artificial intelligence, “we’re still at a very early stage in the commercialization,” Lee said. “We’re still at the equivalent of early internet portals, back when everybody was using Yahoo and there wasn’t even a Google, Amazon, or Facebook.”Global economic ructions, however, may present short-term challenges. Venture deals in China have been plummeting as investors pull back amid escalating trade tensions and slowing economic growth. The value of investments in the country tumbled 77% to $9.4 billion in the second quarter from a year earlier.“In an economy that’s slowing down, everything slows, including venture capital. There will definitely be a shakeout,” Lee said. “The positive side is that if the economy is challenging, and valuations are down, it’s a good time for us to go shopping.”Sinovation was one of the first Chinese venture capital firms with a presence in the U.S. With the trade war and the Trump administration’s tighter scrutiny of foreign investments, the firm has scaled back investments and no longer has an office in the U.S., Lee said, adding that investments in America have always been a small fraction of its overall investments.“In the long term, it’s a pity if we have to cause a total separation of two countries because one could argue that AI got to where it got because the whole world has been able to work together.”(Updates with analyst’s comment in the 9th paragraph)To contact the reporter on this story: Selina Wang in China at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Peter Elstrom, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Why exactly is a German metalworkers union teaming up with YouTubers to take on Google?The answer has as much to do with concerns over how to organize labor in the era of digital disintermediation as it does with teenagers uploading clips of themselves playing Minecraft.IG Metall, whose 2.3 million members make it Europe’s largest trade union, joined forces last month with an unlikely ally: the German YouTuber Joerg Sprave, whose Slingshot Channel boasts 2.2 million subscribers and who produces viral videos of himself firing off, among other things, Ikea pencils. Two years ago, he set up a Facebook group called The YouTubers Union, which now has 21,000 members, after his videos started getting “de-monetized” -- so-called because, with no ad revenue, the uploader doesn’t make any money. They complain that Google’s YouTube refuses to explain why it stops running advertisements alongside some videos. YouTube CEO Susan Wojcicki wrote in a blogpost the move was in response to complaints by brands that their ads were being shown alongside “inappropriate” content. But creators aren’t explicitly told what rules they breached when a clip becomes ineligible for ads.Some saw their income fall by 80% after a 2017 change to the rules. Even the prominent YouTuber Casey Neistat, who now has 11 million subscribers, found an apparently uncontroversial Indonesian travelogue was de-monetized. Others have puzzled over the rationale. British YouTuber Jack Massey Welsh, who posts his wacky antics on the channel JackSucksAtLife, revealed last year that clips of himself drinking milk and of someone swearing while playing Minecraft were de-monetized. He said YouTube never explained why.Regardless of whose side you’re on, the entry of a heavyweight labor union into this battle should be seen as a healthy test of its ability to rebalance the power dynamic between Google and the millions of people whose income derives from uploading videos to the site. The fight reflects how digital platforms have reconstructed the seemingly straightforward relationship between employer and employee.IG Metall wants YouTube to be more transparent with its community of creators. The German union is inviting YouTubers to become members and is running a campaign called FairTube to press for better terms. The initiative is in its early days and IG Metall won’t disclose how many YouTubers it’s signed up. Even so, it’s given Google a deadline of August 23 to come to the negotiating table. If it refuses, IG Metall plans to use its deep pockets and army of lawyers to pursue legal options.It’s a remarkable precedent. While labor unions have already represented others who aren’t salaried employees of tech firms – ridehailing drivers and other gig economy participants, for instance – IG Metall is trying to organize a disparate group which provides a less tangible service.Meet Monopsony, Creature of a Puzzling Labor MarketIt’s a far more challenging battle than for, say, factory workers. Online platforms by their very nature tend to pit diverse groups of people, sometimes thousands of miles apart, against each other to offer the best service at the lowest possible price. Collective bargaining, in this context, doesn’t really work.A strike in the traditional sense would achieve little. Even in the extreme unlikelihood that every YouTuber in Germany boycotts the platform and stops uploading videos, it would have a limited impact on the site’s profitability. While a localized strike by Uber drivers can cripple the ridehailing service for its duration, YouTube has unparalleled cross-border scale – 450 hours of video are uploaded every minute – and an almost bottomless library of existing content.So what exactly can IG Metall do? A lawsuit is the most likely next step. The union claims that decisions made to de-monetize a video with no explanation contravene the European Union’s General Data Protection Regulation. One strand of the rules, introduced last year, gives people the right to know whether their personal data is being processed, for what purpose, and to request a copy of it all. The union argues that algorithms deciding to stop ads being attached to a clip generate such data. It’s a smart play. With the deep pockets afforded by its huge membership, IG Metall is able to contest issues where an individual would struggle.Notably, the union is trying to use the same tool of its members’ atomization – the online platform – to organize them. Even before it joined forces with the YouTubers Union Facebook group, IG Metall had launched an initiative called FairCrowd, a website where gig economy workers provide feedback on the apps they work for. It’s not that far from its home turf: IG Metall already represents employees at tech companies like SAP SE.Unions are ultimately fearful that disruption from digital platforms could unravel much of the progress they’ve made in improving labor conditions over the past 150 years. The employee-employer contract is, at its core, fairly basic: the employee receives a steady income and other insurance and agrees to subordinate him- or herself to the employer (within reason) in return. Trade unions have helped establish the limits of what is reasonable.Conversely, an independent contractor enjoys greater freedom and isn’t subordinated to a single employer, but can’t bank on getting a guaranteed salary. Digital platforms often now impose strictures which can give them an employer-like power over people who are dependent on them for their livelihood, but without the associated benefits such as a steady income. Meanwhile unions, whose membership numbers are slowly declining, are trying to establish their role in that relationship. IG Metall’s FairTube is an early sally.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Stephanie Baker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- It’s been a good year for Qualtrics International Inc.’s Ryan Smith. In January, he completed the sale of his company to SAP SE for $8 billion, then three weeks later teamed up with pro golfer Josh Teater to finish third at the AT&T Pebble Beach Pro-Am.For his efforts, the three-handicapper picked up the Jack Lemmon Award as the amateur who most helped their pro in the tournament. While his social set now includes top golfers like Tony Finau, who posted this photo from Smith’s Pebble Beach home ahead of June’s U.S. Open, Smith still dedicates the bulk of his time to ventures off the course.He and older brother Jared continue to oversee the day-to-day operations of the Provo, Utah-based software company they founded in their parent’s basement. He’s also branching out into real estate, while backing a crowdfunding charity that supports cancer research. Ryan, 41, recently spoke with Bloomberg about his investing priorities, as well as philanthropic efforts spurred by events close to home. Comments have been edited and condensed.Which sports are you most passionate about?I play basketball almost every morning I’m in town, and I am an avid golfer. I don’t play golf as often as I would like, but I love everything about the game: respect, integrity and the challenge that you can never beat it entirely. I also love that golf is a way to unplug without your phone or technology. Some of the greatest relationship and bonds I have in this life have been created on the golf course.Is there a sports team you’d love to own?I love the NBA. Qualtrics sponsors the jersey patch of the Utah Jazz and donates it to our cancer charity, 5 For The Fight, which invites everyone to give $5 to the fight against cancer. It’s crowdfunding for cancer research. It’s been incredible to work with the players, the Jazz organization and the NBA as a whole. As far as team ownership, I have a hard time not seeing myself more involved with teams in the future.What’s your approach to investing?One of our principles at Qualtrics is being “All In.” So until recently, I have been very focused on only investing in Qualtrics and putting 100% of my energy and time into that. While I’m still all in on Qualtrics, I am also looking at where and how to invest going forward. My current thoughts are threefold. One, I know tech. I’m good at tech. Tech will be a big part of all my investing. Two, I want to back the funds that backed us. Three, real estate. As for what I look for, it’s 100% founders. It’s absolutely simple. I want to back people who know how to win and who use sheer force of will to carry their ideas forward.Tell me more about real estate investing.I have always been passionate about real estate. It’s how I was able to survive while bootstrapping Qualtrics. I stayed afloat in college because I owned the apartment I lived in and rented out the other rooms. I got free rent and didn’t require much of a paycheck from Qualtrics to live on. We’ve now opened more than 20 Qualtrics offices around the world, including designing a new headquarters in Utah. I love that process. Real estate is something I understand and always want to be involved in. Plus, good real estate projects can have a really positive impact on local communities and that’s important to me. Are projects in particular?I recently founded 50 East Capital with an investment manager who relocated from New York City to Provo. We’re pursuing commercial real estate investing in two areas. The first is opportunity zones, focusing primarily on multifamily and student housing. The second is more opportunistic, with a strategy to purchase existing, positive cash-flow commercial real estate properties in primary and secondary markets. How did you celebrate the sale of Qualtrics?I don’t know that I’ve really celebrated the sale. I think “sale” is often referred to as a finish line. It’s not. I view the acquisition a lot like the various funding rounds we had at Qualtrics. People would always congratulate us as if the goal was to get funding. The goal isn’t to get funding, it’s to build a great company. I have always said that congratulating someone on getting funding was like congratulating someone on getting a mortgage. It shouldn’t be “congratulations,” it should be “good luck.” That said, I just bought a truck -- a black Ford Raptor. My kids are pretty excited about hauling stuff and put things in the back. So maybe that’s how I celebrated.What about philanthropy?When we started Qualtrics, my dad was fighting cancer. Because of some incredible research being done, he survived. We decided that if our then-little tech project ever became anything, cancer research could be the cause we supported. There are so many amazing causes out there, but we have always believed that if we focus on one area, we can have the biggest impact. For years, we donated to great cancer research hospitals like the Huntsman Cancer Institute. A few years ago, I co-founded 5 for the Fight. At Qualtrics, we know the power of researchers and the impact they can have.To contact the reporter on this story: Gillian Tan in New York at email@example.comTo contact the editors responsible for this story: Alan Goldstein at firstname.lastname@example.org, Steven Crabill, Pierre PauldenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.