Friday 18/09/20

1. In TECH-RELATED NEWS, Oracle and Walmart aim for chunky TikTok stakes, the Nvidia/Arm deal continues to have China niggles, Sony readies itself for console wars, a Tesla co-founder gets Amazon funding for batteries and Cornish lithium is looking good
2. In RETAIL NEWS, Unibail-Rodamco-Westfield has problems, John Lewis axes the bonus, Next upgrades and LVMH makes denials
3. In INDIVIDUAL COMPANY NEWS, Trainline sales suffer, Moderna slows things down and a 90-minute covid test looks good
4. AND FINALLY, I bring you some interesting curtains…

So Oracle and Walmart target decent TikTok stakes, Nvidia/Arm continues to rankle, Sony braces for the final battle, Tesla’s co-founder gets Amazon money and Cornish lithium is looking good…

Oracle, Walmart aim for big stakes in TikTok (Wall Street Journal, Sarah Nassauer, Michael C.Bender and Andrew Restuccia) shows that Oracle and Walmart are working away in the background to create an ownership structure that would give the Americans (including other investors such as Sequoia Capital, General Atlantic and Coatue Management) a majority interest in the deal – because at the moment, current owner ByteDance still retains a majority stake. Walmart is interested in getting involved in TikTok because it wants to increase its online presence and generate more new revenue streams. * SO WHAT? * Talks are very fluid at the moment and a deal would require ultimate approval from Donny T and the Chinese authorities. On a separate, yet related, note TikTok courts Instagram’s founder to lead US spin-off (Daily Telegraph, Laurence Dodds) shows that TikTok’s owner ByteDance is trying to get Instagram founder Kevin Systrom on board to lead the US company that would result if the deal was approved. There is currently speculation that the new company would be called TikTok Global and could float on a US exchange within a year. This is quite interesting in that it could potentially pit him against his own creation as he will have to compete against Instagram Reels!

Following on from what I said yesterday about the Chinese chip industry objecting to the Nvidia/Arm Holdings deal, Nvidia/China: Armed and dangerous (Financial Times, Lex) suggests that the sale of Arm to an American chipmaker could end hopes of China’s tech dominance and so it is unlikely that it will stand by and watch. The deal requires regulatory approval from the US, UK, Europe and China. If the deal goes ahead without Chinese approval, this would be bad for both Nvidia and Arm because the country accounts for 25% of sales for Nvidia and almost 30% of Arm’s total licensing revenue. They would also lose access to a valuable growth market just as the smartphone market is maturing and the data centre market is booming globally. This is going to get interesting…

In Sony gears up for ultimate round of gaming wars with Microsoft (Financial Times, Leo Lewis, Kana Inagaki and Patrick McGee) we see that Sony is getting ready to battle Microsoft once more in what could be the last of the console wars as both companies are due to launch their

latest offerings in November. Sony’s PS5 and Microsoft’s XBox Series X will cost $499, meaning that all eyes will be on the games lineup. The fight will matter more to Sony than it will to Microsoft as the gaming division is Sony’s biggest revenue driver – it expects its gaming business to account for 30% of its revenues and almost 40% of its operating profits in the fiscal year to March 2021. * SO WHAT? * This will be the fourth time that the two companies have battled it out head-to-head in consoles, but the success of these devices – especially in terms of digital downloads – matters more to Sony. Given the advent of 5G and much faster upload speeds, game streaming is likely to get much bigger in years to come and so I would have thought that the need for a console to play ever more complex games will diminish over time. This is why I think this will be the final console war.

Elsewhere, Tesla co-founder wins Amazon funding for electric battery project (Financial Times, Patrick McGee and Dave Lee) shows that JB Straubel, who was Tesla’s tech chief from 2003 to 2019 and founded Redwood Materials in 2017, has just won funding from Amazon to continue in its work to extract lithium, cobalt and nickel from old smartphones. It’s part of Amazon’s $2bn Climate Pledge Fund which aims to invest in green tech. Straubel started Redwood to try to minimise damage from mining as demand for electric vehicles increases. * SO WHAT? * What a fantastic initiative! Given that a huge number of mobile phones are just discarded after use, it really would be amazing for the recyclable materials in them to be used again for batteries, don’t you think? He said that “If we recover 98 or 99 per cent of those materials and reuse them, we don’t need very much new material to keep that whole process running”. Straubel declined to say how much Amazon was investing. Sounds great, no? He sounds like he’s a guy that knows what he is doing.

Talking about batteries, Cornish lithium in ‘globally significant’ find (Daily Telegraph, Rachel Millard) shows that lithium explorer Cornish Lithium has discovered “globally significant” grades of the metal under Cornwall! * SO WHAT? * Lithium is currently a key ingredient in electric car batteries but China, Australia and Chile are currently the dominant suppliers. Cornish Lithium got some government funding last year to see whether it could develop a UK supply – but this latest find could mean that the project goes into commercial production in the next three to five years. This would probably coincide quite nicely with the ongoing uptick in interest in electric vehicles. On the flipside, lithium prices are at record lows at the moment, so funding may be more difficult than usual to come by at the moment. Still, it’s early days but quite an exciting development, no?

Mall-owner URW experiences tough times, John Lewis cuts the bonus, Next triumphs and LVMH denies asking for government help…

Unibail sets out €9bn plan to pay down debt (Financial Times, Leila Abboud and George Hammond) shows that Europe’s biggest mall owner – Unibail-Rodamco-Westfield – announced a big plan to bolster its balance sheet as the French company continues to battle against the headwinds of the coronavirus. It owns 89 high-end malls in 12 countries and is looking to sell assets to raise funds as well as cut capex as part of a bid to make a dent in its €24bn debt mountain, much of which was incurred when it bought Australian mall player Westfield for $24.7bn. * SO WHAT? * This latest attempt at raising funds just confirms the currently tricky conditions for retailers. URW/Hammerson: mauled (Financial Times, Lex) highlights the fact that the financials were a bit iffy before the outbreak and says that although it’s trying to raise funds now by disposing of assets, it’ll be doing so in a market where everyone else is trying to do the same thing!

Elsewhere, there are contrasting fortunes in John Lewis to axe staff bonus as it sinks to loss (Daily Telegraph, Laura Onita) where the famous bonus will be axed for the first time in over 60 years (but then again it’s hardly surprising given current circumstances) and Next raises profits forecast again as sales rise (The Guardian, Zoe Wood),

which shows that the apparel retailer has managed to raise its profit guidance for the second time this year on recovering sales. It did, however, warn that Christmas may get more difficult with the introduction of the “rule of six” which will limit gifting and family get-togethers. * SO WHAT? * I don’t think the John Lewis thing was surprising given what chairman Dame Sharon White has been doing recently (closing stores, cutting jobs etc.). The bonus had been trending down anyway. As for Next, it’s impressive to see the company’s recovery – and it seems that recent announcements by Inditex and H&M have reflected this as well. Still, an uncertain Christmas awaits and so I think it is prudent for retailers to rein in expectations at this time.

I thought I’d include LVMH sought French government help in dropping Tiffany takeover (Wall Street Journal, Noemie Bisserbe and Matthew Dalton) for a bit of entertainment value as it seems that France’s top trade negotiator with the US, French Finance Minister Bruno Le Maire, was approached by LVMH for a bit of help with trying to help it in negotiations with Tiffany! * SO WHAT? * Both Le Maire and LVMH refuted this but I think that LVMH is full of 💩. I suspect that LVMH is using the coronavirus as an excuse to force the price down of its proposed acquisition of Tiffany. At the end of the day, I think that both businesses are a good strategic fit and that Tiffany needs LVMH more than LVMH needs Tiffany. I suspect that the agreements are pretty watertight – hence the need to get the French government involved – but that ultimately the logical choice for both parties is to go ahead with the deal but at a lower price. After all, who else is going to buy Tiffany at the moment?

Trainline suffers, Moderna slows and a 90-minute covid test emerges…

In a quick scoot around other news stories today, Trainline sales hit the buffers (The Times, Tom Ball) shows that ticket sales have fallen sharply (hardly surprising though!) – down 85% in the half-year to August versus the year before – although things are starting to improve.

In Covid-related news, Moderna signals slower timeline for Covid-19 vaccine (Financial Times, Hannah Kuchler) shows that Moderna may have to wait until December to analyse data from its vaccine trial – way later than Trump had been hoping (he’d sought an emergency approval before the US election). Then in Positive results for 90-minute Covid-19 test (Financial Times, Anna Gross) we see that a test that will get you results in 90 minutes that the UK government poured £161m into has had positive results. The test is produced by medical company DnaNudge. Nice! Still early days, though…

…in other news…

Today, I thought I’d bring you something that made me laugh immediately: Argos shoppers spot huge design flaw on pair of bargain £6 curtains (The Mirror, Luke Matthews). Love this 😂!