Author: The New Economy

Sharp re-enters PC market with purchase of Toshiba subsidiary

Posted on by The New Economy

On June 5, Japanese electronics company Toshiba announced it had agreed to sell a majority stake in its PC business to Sharp, which will return to the market for the first time since exiting eight years ago. The deal, worth $36.4m, will see Sharp take ownership of 80.1 percent of Toshiba Client Solutions, a subsidiary that owns the company’s PC business.

Taiwan’s Foxconn bought Sharp for $3.8bn in 2016, after the Japanese company struggled to keep up with its regional rivals. Toshiba’s PC unit, meanwhile, has been losing money over the past few years, recording a loss of $87.4m last year alone.

Toshiba’s PC business is just the latest in a string of assets sold off by the company following its failed venture with Westinghouse

With Foxconn in its corner, Sharp is better positioned to turn the struggling PC business around, especially given its parent company’s far-reaching supply chain. The purchase may also help Foxconn build upon its reputation as the world’s largest iPhone manufacturer.

For Toshiba, however, the PC unit is just the latest in a string of assets sold off following its failed venture with Westinghouse, an American nuclear engineering company that went bankrupt after problems at two major US projects.

The nuclear venture left Toshiba with heavy losses, which were not significantly offset by its eventual sale, as most of the proceeds went to creditors.

In the past two years, Toshiba has also sold its TV business to China’s Hisense, its home appliances unit to Midea and a controlling stake in its microchip business to a consortium led by the US’ Bain Capital.

De Beers set to begin selling synthetic diamonds to retail customers

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On May 29, the world’s largest diamond company, De Beers Group, announced it will begin selling lab-made diamonds to retail customers. The move will allow the group to tap into the growing market for lower-priced diamonds.

De Beers’ lab-made stones will be sold through a newly formed company called Lightbox, which will begin retail operations in September. According to De Beers, prices for the stones will range from $200 for a quarter-carat diamond to $800 for a one-carat stone – vastly cheaper than its real diamonds, which are easily priced into the thousands.

Even within the existing retail market for synthetic gems, Lightbox will be aggressively undercutting its competitors in terms of price. The stones will also have the Lightbox logo inscribed inside to differentiate them from real gems.

De Beers’ lab-made stones will be sold through a newly formed company called Lightbox, which will begin retail operations in September

“Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting,” said De Beers CEO Bruce Cleaver in a statement.

“Our extensive research tells us this is how consumers regard lab-grown diamonds – as a fun, pretty product that shouldn’t cost that much – so we see an opportunity here that’s been missed by lab-grown diamond producers. Lab-grown diamonds are a product of technology and, as we’ve seen with synthetic sapphires, rubies and emeralds, as the technology advances, products become more affordable.”

De Beers is one of the world’s most proficient makers of synthetic diamonds through its Element Six business, which sells lab-made stones for industrial use. De Beers also uses synthetic stones to compare the quality of real diamonds.

Despite this, the company’s decision to sell lab-made diamonds to retail customers comes as somewhat of a surprise, especially considering De Beers’ recent move to ensure the quality of its diamonds through blockchain. Earlier in May, De Beers confirmed it had digitally tracked its first hundred diamonds along the value chain via the technology.

China set to cut tariffs on auto imports

Posted on by The New Economy

On May 22, China’s Ministry of Finance announced the country would slash its tariffs on cars and auto parts, in a move designed to ease trade tensions with the US. The cuts are set to take effect on July 1.

The new policy will reduce tariffs on foreign cars to 15 percent, down from rates as high as 25 percent. Additionally, levies on different types of car part will be lowered to six percent.

The tariff cuts are set to benefit western car companies, particularly those selling high-end luxury vehicles, which make up almost 80 percent of Chinese car imports. Foreign firms will now be able to access the Chinese market at a cheaper rate, allowing them to better compete with domestic firms that offer products at lower prices.

China’s new policy will reduce tariffs on foreign cars to 15 percent, down from rates as high as 25 percent

Electric carmaker Tesla has said it will be able to take up to $14,000 off the price of its Model X SUV as a result of the announcement. Tesla also benefits from Chinese incentives to promote the adoption of electric vehicles.

Among the companies set to see the greatest benefit is Germany’s BMW, for which China is one of the main export markets. Of the 371,000 X-range SUVs built in the company’s South Carolina factory last year, approximately three of every four were shipped to China.

This is not the only major concession China has made to the auto industry this year: in April, China announced it would allow full foreign ownership of automakers in the country.

In the past, car companies have avoided steep tariffs by setting up production operations in China, but laws dictated they had to do so in a 50-50 joint venture with Chinese car companies, putting their intellectual property at risk.

Sony buys controlling stake in music publisher EMI

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On May 22, Japanese technology giant Sony announced it had signed a legally-binding memorandum of understanding to acquire a controlling stake in music publisher EMI.

The deal, worth roughly $2.3bn, cements Sony’s position as one of the world’s leading music publishers, giving the company access to a vast catalogue of more than two million songs from artists such as Queen, Kanye West, Sam Smith and Pharrell Williams.

Ownership of DH Publishing, which holds the majority stake in EMI, will be transferred to Sony from private equity firm Mubadala Investment Company. The purchase will increase Sony’s stake in the music publisher from 30 percent to around 90 percent, consolidating EMI as a subsidiary.

The $2.3bn deal will increase Sony’s stake in the music publisher from 30 percent to around 90 percent, consolidating EMI as a subsidiary

“We are thrilled to bring EMI Music Publishing into the Sony family and maintain our number one position in the music publishing industry,” said Sony CEO Kenichiro Yoshida in a statement.

“The music business has enjoyed a resurgence over the past couple of years, driven largely by the rise of paid, subscription-based streaming services. In the entertainment space, we are focusing on building a strong [intellectual property] portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth.”

Yoshida was appointed to the top job in February, replacing Kazuo Hirai after a four-year stint as Sony’s CFO. The EMI deal reflects the new CEO’s intent to shift the company’s strategy towards more content and intellectual property. It is also a continuation of Sony’s dramatic turnaround, which has seen the company recover after years of disappointing performance.

As part of the deal, Sony will take on EMI’s existing debt, which amounts to approximately $1.36bn. The acquisition is still subject to regulatory approval but, should it be given the green light, would prove lucrative for Sony, as EMI generated $663m in revenue last year.

Top 5 data issues haunting your CIO

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Companies have never been required to keep their data as secure as they are right now. Businesses today have a greater responsibility to protect confidential information and, with GDPR on the horizon, these expectations are set to reach new levels. To add to this, the number of skilled cybercriminals capable of accessing sensitive databases has grown substantially.

Naturally, in the face of so many potential dangers, CIOs are searching for a partner that can keep their data properly protected and easily accessible. So, what are the greatest data centre threats that haunt a CIO and what do businesses need from an able data centre partner?

Here, we analyse the top five data issues CIOs should consider when identifying a data centre provider:

Physical data protection
It may appear to be very simple, but CIOs must realise that a high level of physical security is essential when protecting their sacred corporate data. Amid an increasing number of threats, CIOs must quickly establish the best way to nullify physical attacks.

CIOs must realise that a high level of physical security is essential when protecting their sacred corporate data

The presence of a highly professional security guard, an integrated alarm system and around-the-clock video surveillance is vital to the establishment of an adequately robust security foundation. Equally vital is the latest in ID and video recognition technology, which will help guarantee that access to the centre is limited to accredited personnel.

Cyber-warfare
But countering physical security threats isn’t the only challenge for CIOs: with businesses now carrying more delicate and classified information than ever before, they are being confronted by cybercriminals who are prepared to use any means necessary to gain access to potentially lucrative data.

Some of the more advanced data centres are able to restrict access to customer data through a range of controls, such as multifactor authentication, role-based access control and limiting the number of employees with constant access. Standing data encryption can also be used to safeguard against potential hacks and breaches.

Access control 
In a highly dynamic business world, CIOs need quick access to their data. As such, they will become increasingly frustrated if they experience continuous delays when accessing their stored information – and won’t hesitate to part ways with a data centre that fails to grant them access in a swift and seamless manner.

Companies must, therefore, choose a data centre partner that not only keeps hackers and cyber-terrorists out, but also provides swift and convenient access to CIOs when required.

Environmental sustainability
More CIOs are now focused on showcasing their company’s commitment to protecting the environment. With that in mind, businesses should look for a data centre partner with similar eco-sustainability goals, whether that be reducing emissions, ensuring sustainability or using renewable energy where possible.

If a CIO decides to align with a data centre that ignores these goals, it may well leave a business exposed to accusations of contradictory environmental policies.

Blackouts
Lastly, CIOs must make sure the data centre they choose has clear and well-defined plans in place to counteract realistic issues such as power outages, cooling failures – the heat generated by IT equipment means an interruption to cooling is almost as detrimental as a loss of power – and any technical communications issues.

With continuity a must in a highly-connected business world, CIOs cannot afford to partner with a data centre provider that is ill-prepared for such common issues.

PayPal agrees to buy payments start-up iZettle for $2.2bn

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On May 17, online payments platform PayPal announced it had signed an agreement to buy Swedish point-of-sale firm iZettle for $2.2bn – the company’s largest acquisition to date.

Founded in 2010, iZettle gives small businesses access to the financial tools needed to compete with larger enterprises. The company sells card readers that connect to smartphones or tablets, helping small companies to avoid some of the prohibitive costs associated with taking card payments.

IZettle has mainly operated in Europe and Latin America but, with PayPal’s backing, the possibility of an entrance into the US market becomes more plausible

The agreement comes just before iZettle’s proposed IPO, which was scheduled for the end of May. The Stockholm-based company had been aiming to achieve a valuation of $1.1bn, but was presented with double that amount by PayPal. Prior to this deal, PayPal’s biggest acquisition was the $890m purchase of Xoom in 2015.

“The combination of PayPal and iZettle brings together iZettle’s in-store expertise, digital marketing strength and mobile point-of-sale technology with PayPal’s global scale, online and mobile payments leadership, and trusted brand reputation to support merchants and consumers in more ways,” said PayPal CEO Dan Schulman in a statement.

Until now, iZettle has mainly operated in Europe and Latin America but, with PayPal’s backing, the possibility of a stronger entrance into the US market becomes more plausible. IZettle does not currently face too much direct competition from its main rival, the NASDAQ-listed Square, as the companies’ operations only really overlap in the UK. Competition is set to intensify, however, as both companies expand their businesses.

The $2.2bn also represents a massive financial windfall for the Swedish company, which, as of last year, was still operating at a loss of approximately $27m. Jacob de Geer, iZettle’s founder, will continue to lead the company after the deal is finalised, which is expected to happen in the third quarter of 2018.

Kaspersky Lab set to leave Russia in a bid to “increase its transparency”

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On May 15, Russian cybersecurity firm Kaspersky Lab announced plans to move its data centres and other core processes to Switzerland by the end of next year. The company is hoping relocation will help win back customer trust, after reports – published last year – alleged that its services had been used to spy on users.

According to the statement, the move will see the majority of the company’s customer data storage and processing activities relocated to Zurich, with an independent third party employed to supervise the process and ensure “full transparency”. Operations concerning threat detection and software assembly will also be relocated.

Further, Kaspersky plans to open a ‘transparency centre’, in which stakeholders will be able to examine the source code of the firm’s products, as well as its software updates.

Kaspersky Lab is hoping relocation will help win back customer trust, after reports alleged that its services had been used to spy on users

“As a leading global cybersecurity solutions provider, Kaspersky Lab has always been committed to the most trustworthy industry practices, including strong protection for transmitted data, strict internal policies for data access, ongoing security testing of its infrastructure and more,” read the announcement.

“With this new set of measures, Kaspersky Lab aims to significantly improve the resilience of its IT infrastructure to any trust risk – even theoretical ones – and to increase its transparency to current and future clients, as well as to the general public.”

The decision to relocate comes almost a year after reports suggested Kaspersky’s software was being used by Russian state security services to gather data – both with and without the company’s knowledge.

Last July, Bloomberg published a report alleging the relationship between Kaspersky and the Russian Federal Security Service was closer than the firm had publicly admitted.

The cybersecurity provider’s public image was further damaged in October, when The New York Times revealed that hackers had been able to steal classified information from the home computer of a National Security Agency contractor by exploiting the Kaspersky software installed on the machine.

In December, Kaspersky filed a lawsuit against the US Department of Homeland Security, after the agency blacklisted the firm’s software from use on both civilian and military networks.

US tech fund Silver Lake to snap up Zoopla owner for £2.2bn

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US private equity firm Silver Lake has agreed to buy ZPG, the company behind property websites Zoopla and PrimeLocation, for £2.2bn ($3bn). The deal is expected to close in the third quarter of this year.

Under the terms of the deal, California-based Silver Lake will pay 490p ($6.63) per share for ZPG, a premium of 31 percent on ZPG’s closing price of 375.2p ($5.07) on May 10 and a 24 percent premium on the company’s all-time high share price, recorded in March. Shares in UK-based ZPG, which was founded in 2007 and also owns price comparison site uSwitch, rocketed as much as 30 percent on announcement of the deal.

The company’s largest shareholder, newspaper group Daily Mail and General Trust (DMGT), backed the offer with its nearly 30 percent shareholding, worth over £650m ($879.5m).

Safe as houses
Alex Chesterman, the founder and CEO of ZPG, said the company will benefit from Silver Lake’s “technology expertise” and global network, which will help drive the firm’s growth. He added that the “attractive premium” offered by Silver Lake reflected the quality of ZPG’s businesses and the strength of its future prospects.

Under the terms of the deal, California-based Silver Lake will pay 490p per share for ZPG, a premium of 31 percent on ZPG’s closing price on May 10

“Since its IPO [initial public offering] in 2014, ZPG has evolved and diversified as we have made significant progress in becoming the platform of choice for consumers and partners engaged in property and household decisions,” Chesterman said.

Simon Patterson, a managing director of Silver Lake, called ZPG a great growth technology company and referred to Chesterman as “one of Europe’s leading and most accomplished technology entrepreneurs”.

Silver Lake has around $40bn of assets under management and, in March, announced a deal to buy real estate software company EDR from DMGT for $205m.

More to come
The bid for ZPG comes just six months after Zoopla failed to acquire insurance comparison site GoCompare. GoCompare rejected ZPG’s £460m ($622.4m) takeover offer, saying it fundamentally undervalued the company and its prospects.

According to Bloomberg, analysts at Barclays said the ZPG deal was a “clear positive” for DMGT, as the hundreds of millions in proceeds could clear the company’s debt for the year.

While industry observers have predicted a rise in mergers and acquisitions (M&As) in traditional UK estate agents – due to a stagnant housing market and the rise in online firms – analysts at Investec were surprised the deal involved fast-growing property tech firm Zoopla.

“We had expected ZPG to continue to execute its M&A strategy, but had not expected a bid for ZPG itself,” Investec analysts told Reuters.

The classifieds sector was also boosted by the deal, with shares in Zoopla rival Rightmove and automotive firm Auto Trader both rising over the prospect of more M&As.

Walmart buys majority stake in Flipkart

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On May 9, American retail giant Walmart announced it had acquired a majority stake in India’s Flipkart, bringing an end to a bidding war with Amazon. Walmart has revealed it will pay $16bn for a 77 percent stake in the Indian e-retailer.

Flipkart has been an attractive takeover target for some time due to its pioneering role in the growth of Indian e-commerce and its innovative practices, such as cash payments on delivery.

The company has grown remarkably since it was founded 11 years ago and now makes approximately half a million deliveries across more than 800 cities every day. In the last fiscal year, Flipkart recorded $4.6bn in sales – an increase of over 50 percent from the previous year.

Flipkart has been an attractive takeover target for some time due to its pioneering role in the growth of Indian e-commerce and its innovative practices

“India is one of the most attractive retail markets in the world – given its size and growth rate – and our investment is an opportunity to partner with the company that is leading [the] transformation of e-commerce in the market,” said Walmart President and CEO Doug McMillon in a statement.

“We are confident this group will provide Flipkart with [an] enhanced strategic and competitive advantage. Our investment will benefit India [by] providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”

India’s young and rapidly growing population makes it an important market for global retailers, and prospects for growth are multiplied by increasing internet access.

Flipkart and Amazon have been in fierce competition ever since Amazon entered the Indian market in 2013, and Walmart’s expertise is likely to give Flipkart a leg up in the battle. Other major investors, such as Tiger Global, Tencent and SoftBank, will all retain their shares in the company.

This is the second major international deal for Walmart in as many weeks, with the firm having sold its UK subsidiary, Asda, to Sainsbury’s on April 30.

Takeda and Shire finally agree takeover terms after months of negotiations

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On May 8, Japanese pharmaceutical giant Takeda announced it had finally come to an agreement to acquire Dublin-based drug maker Shire. The acquisition follows four previously unsuccessful offers from Takeda, dating back to March.

The deal, which values Shire at £46bn ($62bn), will see Takeda become one of the 10 largest pharmaceutical companies in the world by sales, as well as putting the company in a leading position in the treatment of rare diseases. Takeda’s main areas of focus moving forward will be neuroscience, oncology, gastroenterology and vaccines.

The Japanese company’s global footprint will be significantly bolstered by the addition of Shire’s assets, particularly those in the lucrative US market. Takeda has revealed it expects pre-tax cost synergies to reach $1.4bn after three years, mostly stemming from the integration of redundant infrastructure within the two companies.

Takeda’s global footprint will be significantly bolstered by the addition of Shire’s assets, particularly those in the lucrative US market

“Shire’s highly complementary product portfolio and pipeline, as well as experienced employees, will accelerate our transformation for a stronger Takeda,” said Takeda President and CEO Christophe Weber in a statement.

“Together, we will be a leader in providing targeted treatments in gastroenterology, neuroscience, oncology, rare diseases and plasma-derived therapies.

“We are looking forward to the benefits this combination will bring to patients worldwide, the opportunities it will bring for our employees and the returns it will deliver for our shareholders.”

The proposed merger was complicated in April, when Shire sold its oncology business to France’s Servier, removing one of Takeda’s key motivations for seeking the acquisition. Takeda’s cancer-treatment portfolio had already been supplemented in early 2017, however, with the purchase of oncology specialist firm ARIAD Pharmaceuticals.

Despite having a significantly lower market cap than Shire, Takeda was able to obtain $30.85bn from a number of institutions – including JPMorgan Chase, Sumitomo Mitsui and MUFG Bank – in order to finance the takeover. The deal is expected to close in the first half of 2019.

Facebook unveils new in-app dating service

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On May 1, Facebook CEO Mark Zuckerberg unveiled the company’s new dating service at its annual F8 developer conference in San Jose, California. The move challenges existing dating services like Tinder and eHarmony.

Facebook comes into the matchmaking field with the distinct advantage of already having extensive data on its existing users – much of which dates back years. Facebook hopes this knowledge of preferences can help the 200 million active users currently listed as ‘single’ on its network forge long-term relationships.

The dating service, which Zuckerberg says will be rolled out soon, will allow users to set up a dating profile and find people who are attending the same events. This is meant to replicate the way people meet in real life.

For the dating service to be successful, it will be important for Facebook to ease the public’s privacy concerns following the Cambridge Analytica scandal

“This is going to be for building real long-term relationships, not just hookups,” Zuckerberg said in his keynote address at the conference. “It’s going to be in the Facebook app but it’s totally optional – it’s opt-in.

“I know a lot of you are going to have questions about this, so I want to be clear that we have designed this with privacy and safety in mind from the beginning. Your friends aren’t going to see your profile, and you’re only going to be suggested to people who are not your friends.”

For the service to be successful, it will be important for Facebook to ease the public’s privacy concerns following the recent Cambridge Analytica scandal, for which Zuckerberg was required to testify in front of both houses of the US Congress.

The announcement seems to have already had an impact on investors, however, with shares in Match Group – Tinder’s parent company – plummeting more than 20 percent in the wake of Zuckerberg’s remarks.

The conference also comes at a good time for Facebook, as it distracts attention from the departure of WhatsApp co-founder Jan Koum, who left the Facebook-owned company one day prior to the conference over privacy disagreements.

Second WhatsApp co-founder leaves Facebook over privacy concerns

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On April 30, the co-founder of encrypted messaging service WhatsApp, Jan Koum, announced he was stepping down from Facebook, WhatsApp’s parent company. Koum’s departure adds to Facebook’s struggles, as the company attempts to navigate the privacy scandal involving political consulting firm Cambridge Analytica.

Facebook’s attempts to monetise the free messaging platform, such as developing tools to make it easier for businesses to reach their customers, have resulted in clashes between WhatsApp and Facebook executives.

Facebook’s attempts to monetise the free messaging platform have resulted in clashes between WhatsApp and Facebook executives

The use of WhatsApp for advertising purposes is something Koum and co-founder Brian Acton were adamantly against when they started the company. There are concerns that some of the tools Facebook is looking to develop would weaken the app’s end-to-end encryption system – its strongest value proposition.

“It’s been almost a decade since Brian [Acton] and I started WhatsApp, and it’s been an amazing journey with some of the best people,” Koum said in a post to his Facebook page.

“But it is time for me to move on. I’m taking some time off to do things I enjoy outside of technology, such as collecting rare air-cooled Porsches, working on my cars and playing ultimate frisbee. And I’ll still be cheering WhatsApp on – just from the outside.” Koum is also expected to step down from his seat on Facebook’s board of directors.

Brian Acton, WhatsApp’s other co-founder, left the company in September, later deleting his Facebook when it was revealed the data of more than 50 million users had been improperly accessed by third parties. Koum’s departure is likely to compound public scepticism regarding the social network’s commitment to privacy.

Koum and Acton founded WhatsApp in 2009, later selling the company to Facebook for $19bn in 2014. WhatsApp, alongside fellow messaging apps Telegram and Signal, has been the preferred tool of communication for a growing number of people concerned with privacy violation, both from private companies and governments.