AI and cost reduction will boost Big Tech
Earlier this week, Mehta's Mark Zuckerberg publicly apologized to the families of online abuse victims who survived the Capitol shooting. Just one day later, he could rejoice as his business achieved its best quarterly profit in years.
Meta's results show how the most recent earnings season has gone for Big Tech companies. It was a mostly buoyant period, when companies that could claim the benefits of artificial intelligence and cost-cutting were most welcomed on Wall Street.
Meta shot through the lights. The parent company of Facebook and Instagram, which has long faced questions about its advertising business and its ability to deal with scandals, reported that its fourth-quarter profit tripled from a year earlier. Part of this is due to AI, which is helping to streamline its core advertising business. So did cost-cutting, with tens of thousands of job cuts as part of the company's self-described “Year of Efficiency.”
Meta's profits were so strong that the company soon began paying its first stock dividend (potentially totaling $700 million a year to Zuckerberg alone) and announced a $50 billion share buyback. One analyst said this is a sign that the tech giant is entering a “maturity phase” to join the likes of Microsoft and Apple in paying regular dividends to investors.
Mr. Zuckerberg pledged further investment in AI, saying in an earnings call that “we look forward to continuing to invest aggressively in this area,” and said the company had nearly completed cost reductions. But some analysts said Meta would eventually have to show a return on its spending.
Amazon also touted its AI efforts. Much of the earnings call was spent talking about Rufus, a new smart assistant aimed at helping shoppers find what they're looking for. (It's also possible that Amazon could cut back on ad spending on Google and social media platforms.)
This is part of the e-commerce giant's aim to show that it's not just trying to catch up with Microsoft and Google in AI. Amazon reported steady growth in cloud computing, the agency that sells AI services to enterprise customers, with the sector growing 13% in the quarter. That was in line with analysts' expectations, but the growth rate was less than half the growth rate reported by competing units from Microsoft and Google.
Although Apple's performance was weighed down by China, sales rose again. Revenue for the quarter rose 2% due to sales of services such as the iPhone and Apple Music, marking the first quarterly increase in a year. However, Apple's stock price fell in after-hours trading. Investors are concerned about slowing revenue growth in China, the company's second-largest market, where it faces renewed competition from Huawei and an economic downturn.
Even though Apple's immediate product is the new Vision Reality Pro, it hinted at the rollout of new AI initiatives this year amid concerns it was lagging behind. “I won't go into details, but I think there's a huge opportunity for Apple in generative AI and AI,” CEO Tim Cook told analysts.
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Senators have accused the consulting firm of hiding information about Saudi Arabia's work. The CEOs of four advisory firms, Boston Consulting Group, McKinsey & Co., M. Klein & Company, and Teneo, have announced that the Permanent Subcommittee on Investigations has failed to comply with Congressional subpoenas. He is scheduled to testify at the Capitol next week. The subcommittee is investigating Saudi Arabia's efforts to exert influence through investments in the United States.
Commercial real estate problems are weighing on banks around the world. Shares in financial institutions New York Community Bancorp, Japan's Aozora Bank and Switzerland's Julius Baer fell on Thursday after each disclosed details of its loan loss exposures to real estate companies. It's the latest sign that lenders are considering a decline in the commercial real estate market, as office vacancy rates remain well below pre-pandemic levels.
Missing Chinese dealmaker resigns. Fan Bao, who was detained by authorities in Beijing last year, has resigned as chairman and CEO of China Renaissance, the investment bank said today. The disappearance of Mr. Bao, one of China's most important and powerful dealmakers, has shocked the country's business community and raised questions about how far Beijing will go to corner the private sector.
Volvo has cut funding for its electric vehicle joint venture. The Swedish carmaker is essentially planning to cut ties with Polestar, the start-up it co-founded with China's Geely, as business losses continue. The move raises further questions about how major car companies are dealing with weak electric vehicle sales, which are weighing on profits.
Are there any lessons for Shayne from Amer's IPO?
Amer, the Chinese parent company of sportswear brands Wilson and Arc'teryx, quietly went public on the New York Stock Exchange this week, raising less money than expected.
But the company's struggles raise questions about the prospects for larger companies with ties to China. Fast fashion giant Shein is also planning to go public in the United States.
Amer's IPO price is $13 per share. The company raised about $1.4 billion, well below its target range of $16 to $18. Although the Americas and Europe account for a large portion of sales, unidentified IPO investors told Reuters they were concerned about the company's dependence on China. China accounted for nearly 20% of Amer's sales last year, up from 8% in 2022.
Shane filed for IPO The end of last year. It was most recently valued at $60 billion by private market investors. At this level, it would be the largest company to go public in the U.S. since Uber in 2019.
Although Shein is currently headquartered in Singapore, the company was founded in China. And perhaps more importantly, it manufactures much of its clothing in China.
companies are very different. Shein operates almost like a social media app, while Amer is more like a luxury company.But Shein also faces many challenges related to China., From being accused of allowing copied designs to proliferate on their platforms to using forced labor in their supply chains.
All this bad news is weighing heavily on its backers, some of whom are reportedly trying to sell their shares at a 30 percent discount.
There are some similarities between Shane and Amellsaid Matt Kennedy, senior strategist at research firm Renaissance Capital. “Both are apparel companies with a Chinese perspective, he told DealBook.
Still, there are significant differences between the two businesses. It also includes price ranges between the products you sell. Wilson's tennis racket costs $200, while Shane's dress costs just $10. That means the fast-fashion retailer is likely to survive a squeeze by consumers.
“I don't think this decision will threaten many companies.”
— john coffeeA Columbia University Law School professor talks about why a Delaware judge's decision to invalidate Elon Musk's pay package worth more than $50 billion won't lead to an exodus of companies from the state. In response to the ruling, Musk said companies should not incorporate in Delaware.
McKinsey supports its chief
McKinsey partners reelected Bob Sternfels as the consulting giant's global managing partner, shortly after he was forced into a runoff on two ballots.
His hard-won victory Thursday shows the level of dissatisfaction within McKinsey and raises questions about how the company is governed.
Sternfels defeated Rodney Semmel; Responsible for digital operations at a rapidly growing company. Sternfels, who was first elected in 2021, replaced Kevin Sneader, who was fired after just one term amid controversy over McKinsey's approach to opioid manufacturers and other divisive clients.
McKinsey has been forced to cut jobs over the past year. It cut 1,400 back-office jobs, appointed fewer new partners, scaled back parts of its bankruptcy business amid increased scrutiny of its operations and delayed the start of new MBA hires.
Some McKinsey partners are unhappy with how Mr. Sternfels has handled these challenges, saying he mishandled restructuring and layoffs and focused on small rather than broad partnerships. He blames the company for relying too much on large teams.
For McKinsey, there may be a bigger problem than partnerships. The company currently has about 750 partners at its senior level, making it difficult to reach consensus on key issues, especially in turbulent times.
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Information of sale
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Activist Investment News: Elliott Management reportedly won a seat on Etsy's board of directors after acquiring a 13% stake. And Barrington Capital is seeking to transform Mattel, including selling its Fisher-Price and American Girl brands. (Bloomberg, WSJ)
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India's stock market rally has seen a surge in IPO filings in the country, but some investors are concerned about how those stocks will perform. (FT)
policy
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Allen Weisselberg, the former chief financial officer of a Trump family company, is in talks to plead guilty to perjury charges in the former president's recent civil fraud trial. (New York Times)
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“Inside the Israel Lobby’s new $90 million war chest” (The Lever)
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