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It's one of the perks of Tesla's cutting-edge driverless technology... using your phone to summon your car from a parking spot. But who's on the hook if there's a crash, if no one is behind the wheel? Your car. Your crash. You're liable. At least that's what lawyers are saying after a number of videos have popped up showing cars running Smart Summon, Tesla's new software, in a number of near misses. But if the accidents pile up - insurance industry experts expect Tesla to be dragged into legal fights. Right now repairs for any dings or scratches should go through a driver's traditional insurance policy, according to one lawyer who represents automotive suppliers in disputes about safety and autonomous car technology. But an argument could be made that if it was Tesla's software at fault, not the car owner.. then this lawyer sees the day when drivers could potentially ban together for a class action lawsuit seeking damages from Tesla. The videos highlight the shifting landscape in the world of auto insurance and accident blame as more automakers look to automate functions like parallel parking, steering, and accident avoidance - which used to be solely the responsibility of the driver. Now legal experts say the insurance industry and the law have to catch up. As for those videos of Tesla near-misses that people may find comical, the National Highway Traffic Safety Administration isn't laughing. It has started looking into the incidents.
Two very different verdicts Friday on the future of mobility. In Japan, Toyota is doubling down on vehicles powered by hydrogen fuel cells. It unveiled a new version of its Mirai car on Friday. The automaker has been working on fuel cells for two decades. Such cars emit nothing more than water vapour. And Toyota says they beat electric vehicles on range. The new Mirai can drive about 560 miles on a full tank. But the cars are costly to make and buy - over 46,000 dollars in Japan, after subsidies. And hydrogen filling stations are few and far between. As a result, Toyota has sold fewer than 10,000 Mirais over five years. By contrast, Tesla aims to deliver up to 400,000 electric vehicles this year alone. Meanwhile, James Dyson is calling it quits. The British entrepreneur is scrapping plans to develop an electric car. Dyson says he has a great design, but can't see a way to make it commercially viable. Attempts to find a buyer for the project have been abandoned. As Tesla's persistent losses demonstrate, building a profitable car company from scratch is no easy task.
The Dollar found strong support early, as the markets considered the implications on existing tariffs on the economic outlook. Brexit chatter also weighed.
(Bloomberg Opinion) -- However frothy valuations currently seem to be, optimists can always argue they’re justified by strong earnings. In the past four years, S&P 500 operating earnings per share have grown by nearly 40%.Those numbers, however, may be as airy as the asset prices they support. The U.S. government’s national income and product accounts -- which cover a broader number of businesses than the S&P, use tax returns and adjust for certain accounting practices -- suggest that corporate profits actually peaked in 2014 and have been stagnant since. The national accounts also show significant downward revisions to corporate profit margins over the previous five years. While one would expect some discrepancies between that data and S&P numbers, which are based on Generally Accepted Accounting Principles (GAAP), the gulf is too wide to be ignored.What’s going on? In many cases, accounting choices appear to be distorting results. In early 2019, General Electric Co. reported GAAP losses of $2.43 per share; under adjusted figures it earned $0.65 per share. Tesla Inc. reported full-year GAAP losses of $5.72 per share but “non-GAAP” losses were only $1.33 per share. Over 95% of S&P 500 companies regularly use at least one non-GAAP measure, up about 50% over the last 20 years.One question is how companies choose to recognize income. In the case of long-term, multi-year contracts, such as construction projects, reported revenue can be based on a formula: a portion of the total contract amount, calculated as costs incurred in the relevant period as a percentage of total forecast costs. Understating estimated final costs allows margins to be increased and greater revenue to be recognized up front. Following the collapse of Carillion PLC, the firm was found to be aggressive in recording income which was sensitive to small changes in assumptions. Given the trend to converting sales of products (such as software) into long-term service contracts, these risks are only going to grow. Companies can understate expenses. Many tech companies use non-GAAP accounting to strip out the cost of employee stock options, for instance, thereby showing higher earnings. WeWork sought to redefine traditional earnings before interest, tax, depreciation and amortization as something called “community-based EBITDA.” The new measure conveniently excluded normal operating expenses such as marketing, general and administrative expenses, development and design costs.Spending may be treated as an asset, to be written off in the future rather than when expended. A recent JPMorgan Chase and Co. research report found software intangible assets (the amount spent but not yet expensed) averaged up to 15% of adjusted costs for a sample of European banks. The idea is to better match expenses to the period over which they are expected to benefit the business. But the practice may overstate current earnings.Related-party transactions can distort a company’s true financial position. Saudi Arabia slashed the tax rate on large oil companies to 50% from 85%, even though the government depends on the profits of Saudi Arabian Oil Co. for 80% of its revenues. Aramco will still pay most of its profits to the state, but as dividends rather than tax. That means reported profits will be higher, potentially increasing the company’s valuation ahead of a highly anticipated initial public offering. Complex structures can mask liabilities. Tesla, for instance, faces potential payments related to its SolarCity business. Before being bought by Tesla in 2016, SolarCity regularly sold future cash flows to outside investors in exchange for upfront cash. Tesla assumed these obligations and has continued the practice. The obligations now reportedly total over $1.3 billion.To reduce unfunded pension liabilities, some companies have borrowed at low available interest rates to inject money into the funds. That’s fine as long as fund returns -- generally assumed to be around 6% to 8% -- are higher than the cost of borrowing. If returns come in lower, however, the companies in question will have to raise their contributions, affecting future earnings.New business models often disregard potential costs. If Lyft Inc. and Uber Technologies Inc. drivers are reclassified as employees as proposed in California, then hidden employment costs would need to be recognized, perhaps retrospectively. Newly listed fitness company Peloton Interactive Inc. faces a $300 million lawsuit from music publishers who claim the company used their songs in workouts without paying licensing fees.Finally, stated asset values can be misleading. Goodwill, the difference between acquisition price and the fair value of actual assets acquired, now averages above 50% of acquisition price. Goodwill values are notoriously uncertain. In 2018, GE unexpectedly wrote off $23.2 billion of goodwill arising from its acquisition of Alstom SA.The problem is compounded by private markets, where funding rounds can establish questionable valuations. Recent investments into WeWork valued the company at over $40 billion, more than three times the projected pricing of its abandoned IPO. A recent proposal to get Saudi businesses to make anchor investments in Aramco ahead of its IPO could also inflate its valuation.“Fake” financials, as some would call them, undermine markets. With a correction looking increasingly likely, investors need to start working with regulators and standard setters now to close accounting loopholes, while scrutinizing underlying data more closely. Otherwise, the more creatively companies are allowed to manage their financial position for short-term gain, the bigger the bill is going to be.(Corrects definition of goodwill in twelfth paragraph.)To contact the author of this story: Satyajit Das at firstname.lastname@example.orgTo contact the editor responsible for this story: Nisid Hajari at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
In Berlin, companies like Uber don't have a dominant hold on transportation. Instead, many companies compete for a slice of the market.
(Bloomberg) -- U.S. antitrust enforcers have started an in-depth review of Google’s $2.6 billion planned acquisition of a data analytics company, a further sign of greater scrutiny on big technology companies, according to people familiar with the situation.The antitrust division of the Justice Department is seeking more information from Google and Looker Data Sciences Inc. related to the deal to determine whether the tie-up harms competition, said one of the people, who asked not to be named discussing private matters.Alphabet Inc.’s Google announced June 6 it planned to buy Looker for its cloud unit, which lags far behind Amazon.com Inc. and Microsoft Corp. with just 4% of the cloud-computing infrastructure market as of 2018, according to the most-recent figures from analyst Gartner Inc.The deal was expected to receive added regulatory scrutiny. The in-depth Justice Department review, known as a “second request,” comes as antitrust authorities start historic probes of Google and other large tech companies. One issue for enforcers is whether tech giants have used acquisitions of smaller firms to thwart rivals and cement their dominance. The U.S. Federal Trade Commission, which also enforces antitrust laws, is investigating whether Facebook Inc.’s purchases of Instagram and WhatsApp were anti-competitive.Representatives from Google, Looker and the Justice Department declined to comment.The Justice Department and a coalition of attorneys general made up of most U.S. states in the country have opened antitrust cases against Google. Those probes are mostly focused on the company’s dominant search and advertising businesses.Looker, closely held and based in Santa Cruz, California, provides tools that lets companies analyze their data stored in the cloud, a service that competes with offerings from Amazon and Microsoft. When Google announced the deal, its cloud chief, Thomas Kurian, said the company would continue to let Looker customers use other cloud providers. Google doesn’t share cloud sales.Google once spent lavishly on companies, dropping billions on device makers Motorola and Nest, as well as experimental tech like satellites and robots. More recently, the company’s acquisitions have mostly been relatively small deals in the cloud sector.It’s common for antitrust authorities to open in-depth investigations for sizable mergers, but more recently have faced criticism for allowing large tech companies to buy startups as a way to gain footholds in new markets. That charge has been aimed at Google after its takeovers of Waze, DoubleClick and YouTube. The Justice Department in July announced a broad antitrust review of the big internet platforms in search, social media and online retail.To contact the reporters on this story: Mark Bergen in San Francisco at firstname.lastname@example.org;Sarah McBride in San Francisco at email@example.com;David McLaughlin in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jillian Ward at email@example.com, ;Sara Forden at firstname.lastname@example.org, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Millions of Californians may have just suffered an unprecedented, induced blackout by the state's largest (and bankrupt) utility, and on top of that gasoline prices are soaring too
Popular US electric vehicle maker Tesla has scheduled its third-quarter earnings release for October 23. It reported record deliveries in the quarter.
(Bloomberg) -- The young woman in Monica Mazzei’s San Francisco law office was adamant: She wanted a prenuptial agreement.Never mind that the client had barely anything to her name. What she had was a bunch of startup ideas. She and her fiancé, who already had his own small tech company, signed a prenup with clear terms, Mazzei said: “The spouse who has an idea [and] starts a business ‘owns’ that business. It’s their baby.”A few years later, Mazzei, a partner at Sideman Bancroft, was traveling through the San Francisco airport when she saw her former client on a magazine cover. Her startup had struck gold. Her husband’s business had fizzled.In Silicon Valley, where penniless programmers fervently believe their ideas are worth billions, getting rich can take priority over getting married. California law assumes that any wealth created during a marriage is community property, which should be split equally in a divorce. That’s alarming not just for young entrepreneurs but also their investors.Divorce HavocFortunately, a well-written prenup is a safeguard against post-divorce havoc, which is why more and more young couples are insisting on the agreements, according to more than half-a-dozen lawyers in the Bay Area and elsewhere. Long popular with older wealthy couples who re-marry, prenups are also being demanded by entrepreneurs who want to keep future windfalls to themselves.“I am seeing more and more young people want to enter into prenuptial agreements who do not currently have a lot of money now but plan to have a lot of money someday,” said Manhattan-based divorce attorney Jacqueline Newman.In a 2016 survey by the American Academy of Matrimonial Lawyers, 3 in 5 divorce attorneys said more clients were seeking prenups in the past three years. About half said they’d seen a spike in the number of millennials requesting the agreements.“People’s concepts and notions of fairness when it comes to privately held businesses are changing,” said Mazzei, adding she’s seen “a tremendous increase” in prenups in the past eight years. “They feel that even if they’re married, this is their passion. The agreement should be reflective of that.”‘It’s Complicated’Today’s startup founders have plenty of prenup-writing forebears to emulate. Google co-founder Sergey Brin and Anne Wojcicki, who helped found personal genomics company 23andMe, had a prenup when they married in 2007. After they divorced with little fanfare in 2015, his stake in Google remained unchanged.“It’s complicated -- that’s all I can say,” Wojcicki told Bloomberg TV about the split.Oracle Corp.’s Larry Ellison has been married and divorced multiple times, but none affected his stake in the software company. Ellison is the seventh-richest person in the world with a net worth of $59.8 billion, according to the Bloomberg Billionaires Index.Still, a prenup hardly guarantees a smooth divorce. Judges can and do throw out the agreements, especially if they’re drafted poorly. “If you don’t put in the right language, a lot of prenups don’t do the job,” said Lowell Sucherman, a divorce attorney at Sucherman Insalaco in San Francisco.In 2017, One Kings Lane co-founder Alison Gelb Pincus, wife of Zynga Inc. founder Mark Pincus, challenged their premarital agreement in court while the couple was getting a divorce, according to a court filing. It’s unclear whether she prevailed as final terms of the divorce aren’t public.While venture capital firms don’t explicitly require prenups, they do demand legal language protecting their investments in the event a divorce court hands a chunk of a founder’s shares to an ex-spouse. So do other co-founders.Founders’ Control“Founders have wanted to ensure that someone else can’t suddenly come in and obtain some sort of founders’ control,” said Par-Jorgen Parson, a partner at venture capital firm Northzone, who has served on the board of Spotify Technology SA. “It’s just as often driven by the founders as by external investors. You don’t want to rock the balance of power.”Venture capital firms often demand that founders’ husbands and wives sign “spousal consent” forms. Such agreements determine who gets to vote for board members, and how and when shares can be sold. In the event of a divorce settlement (or death or disability), a founders’ spouse might end up with company shares. But, the agreements ensure that an ex can’t exercise much, if any, control over the company post-divorce.“We’re trying to make sure that people don’t become involuntary business partners with someone they don’t know, don’t like or who aren’t qualified,” said James Ficenec, a partner at Newmeyer & Dillion in Walnut Creek, California.Divorcing founders will often do anything to avoid handing over half of their shares in their startup.‘Keeping More’“Founders will try to negotiate keeping more of their shares,” said Michael Gorback, a partner at Hanson Bridgett. “You might balance it out some other way,” by paying exes in cash, a home or other investments.MacKenzie Bezos and Amazon.com Inc. founder Jeff Bezos divorced earlier this year, leaving her with a 4% stake and a net worth of $34.6 billion, according to the Bloomberg index. He kept 75% of the couple’s Amazon shares, and retains voting control of those she does hold.Amazon’s stock, of course, is publicly traded, which can make divorce negotiations easier.“One issue we come across very often is, ‘How do you value a startup?’” Mazzei said. Years before an initial public offering, a startup might have no profits or even revenue to speak of. A promising company could later go under -- or eventually be worth billions.Trust, CredibilityIn a divorce, “it can be quite difficult when you have a large asset that is illiquid,” said Lyssa Grimaldo, a wealth manager at San Francisco-based Wetherby Asset Management and a certified divorce financial analyst. Adding to the problem, she said: “One partner knows more about that asset than the other.”With enough billable hours, lawyers can usually sort out the legal ramifications of divorce. They’re less helpful in containing the chaos that a founder’s marital problems might create in the workplace or business relationships.“We have companies where the founder is the brand, and trust and credibility are core to the business,” said Ed Zimmerman, partner and chair of the tech group at Lowenstein Sandler in New York. “If you are investing in a company because you think the founder is amazing,” it can be alarming to learn that he or she is facing the distraction of an acrimonious divorce or custody battle, he said.If a divorce isn’t disclosed to key investors, they can lose trust in a founder who they thought they knew well. Then there’s sometimes other nasty fallout, of the sort that companies are increasingly sensitive to in the metoo era.“It would be great if we lived in a world where people who had marital problems didn’t manifest those problems by hitting on or dating people who worked at their company,” Zimmerman said. “Those kinds of things tend to be more problematic than who gets the shares.”(Updates with adviser’s comment in 23rd paragraph.)To contact the reporters on this story: Ben Steverman in New York at email@example.com;Anders Melin in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Pierre Paulden at email@example.com, Steven Crabill, Peter EichenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Avoiding certain industries that tend to fare worse in market down turns, will help steer you clear of a stock like Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS), which sells luxury goods.
(Bloomberg Opinion) -- This week, the Nobel Prize in chemistry was awarded to John Goodenough, Stanley Whittingham and Akira Yoshino for their work developing the lithium-ion battery. The Royal Swedish Academy of Sciences, in announcing the award, said the three men “created a rechargeable world.” The ubiquitous battery is now found in items as varied as hearing aids and power grids. It is a testament not just to technological revolutions, but also to the power of advancements in performance and decreases in cost. Whittingham began working on the lithium-ion battery in an Exxon Mobil Corp. laboratory in the 1970s, when it was being considered for automotive applications. The lithium-ion battery wasn’t a fit for cars then, but research and development continued and the technology improved, to the point that it became a viable power source in search of an application. But it was Sony Corp., not Exxon Mobil, that would introduce the first lithium-ion battery for consumers. That new device in need of a suitable power source? The handheld 8 mm camcorder. In 1995, camcorders created the biggest source of demand for lithium-ion batteries. By 2000, laptops had become the biggest driver of demand; by 2005, it was feature phones. By 2010, the smartphone was the biggest source of demand for lithium-ion batteries. As this rather dramatic chart shows, passenger electric vehicles have vaulted past consumer electronics to become the single biggest source of demand for lithium-ion batteries, less than 15 years after Martin Eberhard built the first Tesla Roadster battery pack from 6,831 of the lithium-ion cells used in laptop computers.The lithium-ion battery has come a very long way in other ways, too. Battery costs have come down by more than 80% in nine years.And battery manufacturing capacity has increased more than 200-fold in 15 years. There is far more expansion planned. Next year will see more new capacity added than the global manufacturing capacity’s total in 2016. By 2023, total capacity will have more than doubled.The combination of cost, capacity and capability has in itself created a new market for the lithium-ion battery: energy storage within power grids. We need look no further than northern Indiana, where power utility Nipsco plans to replace coal-fired power with wind, solar and solar-plus-storage projects. The Royal Swedish Academy of Sciences concluded its announcement of this year’s chemistry prize rather poetically: “Lithium-ion batteries have revolutionized our lives since they first entered the market in 1991,” the academy said. “They have laid the foundation of a wireless, fossil fuel-free society, and are of the greatest benefit to humankind.” Sometimes being good enough is revolutionary, too.Weekend readingSome of 2019’s wackiest investment predictions are coming true. “Firms that align their business models to a net zero world will be rewarded handsomely,” Bank of England Governor Mark Carney said in a speech in Tokyo this week. “Those that fail to adapt will cease to exist.” Carbon Tracker estimates that Japan’s coal-fired power generation fleet could end up as $71 billion of stranded assets. Singapore’s Temasek Holdings Pte has decided against investing in Saudi Aramco’s initial public offering, in part over environmental concerns. Unilever says that it will reduce its use of virgin plastic by 50% by 2025, and reduce its absolute use of plastic packaging by 100,000 metric tons. A new Organization for Economic Cooperation and Development study finds that obesity-related diseases will claim more than 90 million lives in the next 30 years, lower life expectancy by three years, and reduce gross domestic product by 3.3% in OECD countries. Three out of 10 low-income Americans do not have access to broadband of any kind. In the latest “Stephanomics” podcast, Bloomberg Economics’ Stephanie Flanders explores why birthrates are so low, and what those low birthrates mean for the global economy. Arkansas’s Ouachita Electric Cooperative Corp. is seeking a 4.5% decrease in its electricity rates, thanks to its solar power assets. Northrop Grumman Corp. has launched the Mission Extension Vehicle-1, the first satellite designed to service and extend the life of other satellites. Dyson Group Plc has pulled the plug on its electric vehicle plans, saying “we simply cannot make it commercially viable.” The most detailed map of U.S. automobile emissions. Get Sparklines delivered to your inbox. Sign up here. And subscribe to Bloomberg All Access and get much, much more. You’ll receive our unmatched global news coverage and two in-depth daily newsletters, the Bloomberg Open and the Bloomberg Close.To contact the author of this story: Nathaniel Bullard at firstname.lastname@example.orgTo contact the editor responsible for this story: Brooke Sample at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nathaniel Bullard is a BloombergNEF energy analyst, covering technology and business model innovation and system-wide resource transitions.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Alphabet’s (GOOGL) Waymo will start testing its self-driving vehicles in Los Angeles this week. Self-driving vehicles have a lot of promise.
Tesla is dominating the electronic vehicle market for long but the trade war and frequent controversies have distracted it from its sky-high goals.
(Bloomberg Opinion) -- Once again it’s October, which means it’s time to debate whether the economics Nobel prize is a real Nobel or an impostor. And once that tired argument is duly rehashed, we can proceed to the more interesting topic -- who might win, and how their ideas help us understand the world. Here are five strong candidates for this year’s award:No. 1. The New KeynesiansNot since 2011 has a prize been awarded to economists who primarily study the ups and downs of the business cycle, so we might be overdue. The obvious choice would be to award the prize for the creation of New Keynesian theory. This theory holds that recessions happen because businesses have difficulty adjusting their prices in response to economic disturbances.Although it’s the dominant paradigm within modern academic macroeconomics, and is used by most central banks to help set monetary policy, New Keynesianism hasn’t yet received a gold medal from Sweden. One reason might be that the theory isn’t the brainchild of a single genius, but of a large group of influential figures who each added key elements. These include Michael Woodford, Stanley Fischer, Greg Mankiw, Nobuhiro Kiyotaki, Olivier Blanchard, Guillermo Calvo, Janet Yellen, David Romer and a number of others. Picking two or three to award the prize to will be hard, but it seems inevitable that the prize committee will eventually have to recognize this incredibly influential theory.No. 2. Claudia GoldinBefore French economist Thomas Piketty ever hit the bestseller lists, Harvard University’s Claudia Goldin was writing about the rise in economic inequality. Combining the methods of labor economics and economic history, Goldin identifies increasing education as a key driver of the fall in U.S. inequality in the early 20th century, and blames a slowdown in educational attainment for the reversal of that happy trend.Goldin has also extensively studied the changing role of women in the economy, weaving together trends like delayed childbearing, increasing education and forward-looking decision-making to create the authoritative story of how and why women entered the formal workforce. She has advocated for flexible work scheduling as a way to reduce the gender pay gap. And she has theorized that workplace gender discrimination results from men being afraid that the occupations they dominate will be devalued if women enter. In an age when society is struggling to eliminate gender inequality, Goldin’s work provides a crucial road map.No. 3. David CardGreat changes have happened in the economics profession during the past three decades. The field has gone from a largely theoretical discipline to one firmly grounded in empirics and data. Although the transition is the work of many thousands of economists, perhaps no one has pointed the way forward as clearly as the University of California-Berkeley’s David Card. His landmark studies of low-skilled immigration and minimum wages changed the debate on those crucial issues, astonishing economists with the finding -- now corroborated by decades of follow-up research -- that neither is particularly damaging to local workers. Those results changed the world, but they represent only a small portion of Card’s extensive body of work. If anyone deserves to win a Nobel for the seismic shift that has changed the very meaning of economics research, it’s probably Card.No. 4. Paul MilgromThe economics Nobel tends to favor the work of pure theorists who work on the deepest problems. And few thinkers dig deeper than Stanford University’s Paul Milgrom. He was a major figure in the creation of auction theory -- probably the most empirically successful and practically useful economic theory of all time, which is now used to power everything from Google ads to federal spectrum auctions. He has also contributed deep insights to our understanding of financial markets, modeling the way that market makers interact with informed and uninformed traders, and helping to explain why trading happens in the first place. This is only the tip of the iceberg, though. Milgrom’s contributions in game theory, contract theory, labor economics, industrial organization, the economics of information and learning, and other fields are too numerous to mention or elaborate here. If he never wins the Nobel for this virtuosic career, it will be a big surprise.No. 5. Daron AcemogluDaron Acemoglu is another virtuoso, but of a very different sort. Acemoglu tackles the big questions of why nations grow and develop or stagnate and decline -- the kinds of questions that rarely if ever get definitive answers. His most important thesis is that social institutions are crucial for development and don’t change much over time -- places that develop institutions based on exploiting labor and extracting resources tend to do badly over the centuries, while those that create more inclusive systems flourish. More recently, Acemoglu has tackled the question of whether automation will make humans obsolete. He has created new models of automation in which it’s possible for robots to reduce human wages, and theorized that different types of artificial intelligence could help human workers or compete with them. Beyond those topics, Acemoglu has a vast body of work, much of it dealing with difficult and expansive topics like politics, history, culture and technological change.To contact the author of this story: Noah Smith at firstname.lastname@example.orgTo contact the editor responsible for this story: James Greiff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The British pound continues to soar, on optimism that a withdrawal deal could be close at hand. The Mexican peso continues to rally late in the week. The Canadian dollar is steady, but we could see stronger movement in the North American session, when Canada releases key employment numbers.
(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.