Watson’s Weekly 19-09-2020

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• Oracle “beat” Microsoft in the race for TikTok (Monday) but ByteDance is still going to be the majority owner as things stand. Oracle is to be the TikTok’s tech partner and will have an HQ in the US, which will be disappointing for those hoping for a London HQ. The proposed deal is now with the Committee on Foreign Investment in the US (aka “Cfius”) for a recommendation. Unfortunately, on Friday 18th, the Commerce Department brought in regulations to ban US companies from providing downloads or updates for TikTok and WeChat apps from 11.59pm on Sunday, according to US bans Chinese apps TikTok and WeChat, citing security concerns (Wall Street Journal, Katy Stech Ferek and John D.McKinnon). There are two major concessions from a total ban: firstly, that US companies would be allowed to continue to provide web hosting services for TikTok until November 12th and secondly, that US companies will be allowed to continue to use WeChat outside the US. WeChat ban rattles Chinese communities in the US (Wall Street Journal, Shan Li) shows the immediate panic of Chinese WeChat users who rely on the service – it has had almost 22 million downloads from Google Play and the Apple App store in the US since January 2014, accounting for about 7% of the app’s total downloads outside China. Meanwhile, a group called the WeChat Users Alliance got together to sue the Trump administration over the executive order to shut it down and Judge to hear arguments on Trump’s WeChat restrictions (Wall Street Journal, Sebastian Herrera) shows that the hearing is ongoing. I bet Trump is loving the problems he is causing! FWIW, I think he is using this as an opportunity to show voters he is sticking it to the Chinese. Not great for the innocent people caught in the middle!
• Nvidia announced its intention to buy Arm Holdings from current owner SoftBank for $40bn (Tuesday). If this gets approved, Nvidia will broaden its horizons enormously because Arm chips are in 90% of the world’s smartphones, with customers such as Apple, Qualcomm and Broadcom. China’s chip industry is complaining that this move will give Nvidia, viewed as a competitor, far too much power in chips (Thursday) and, considering that Chinese regulators will also have to approve this acquisition for it to go ahead it is far from a done deal (Friday) because both Nvidia and Arm Holdings have reasonably sizeable business interests in China, they would be taking a sizeable risk if they ignored objections and went ahead anyway
• Apple announced new gadgetry (Wednesday), but did not unveil the next generation of iPhone due to production delays caused by Covid. It is expected that there will be a separate announcement on this in a few weeks’ time
• There were rumours of the Federal Trade Commission looking at bringing an antitrust lawsuit against Facebook (Wednesday) but whether it actually goes ahead or not is moot as it has threatened to do things like this in the past with other companies and just changed its mind
• Spotify struck a deal with Songkick (Wednesday) to promote live streaming events on its platform. Given that lockdown has effectively ended all concerts for the foreseeable future, the prospect of doing livestreams instead should be a welcome revenue stream for all concerned. It may even be an additional revenue stream when things do actually normalise in the future
• Sony announced two PS5 consoles (Thursday) at two price points, much like Microsoft’s new XBox. Both franchises are releasing a cheaper console without a disc drive and a more expensive one with a disc drive. They will both be launching at about the same time and if their tech specs are relatively similar, success is going to be all about the games line-up (where Sony possibly edges Microsoft)
• There was a great story this week about a small British company called iAbra which is working on a coronavirus testing device which gives you a result in 20 seconds (Thursday). It’s still in development, but wouldn’t it be brilliant if it worked well and made it to market!

• The FCA announced plans to investigate Klarna (Thursday), which I think is a good thing considering that the unsecured credit market (especially in the “buy now, pay later” segment) has grown exponentially in the last few years. Given that many countries are in recession there is a danger that a wave of defaults could hit companies like Klarna – so I think that an investigation is long overdue!
  
• The FCA also made the news this week because the verdict over its test case with insurers was announced (Wednesday). You will recall that many companies claimed on their business interruption insurance when lockdown hit, only to find that insurers said they weren’t covered. Rather than let individual companies try and fail against the insurers, the FCA decided to try and accelerate things by getting insurers together, collating some of the common policy wordings and then taking a test case to the High Court. The verdict was not clear cut but it favoured claimants more than the insurers. Insurers will appeal but this could be good news for many affected firms (although this will come too late for some)
• Rumours surfaced of a UBS/Credit Suisse merger (Tuesday) but I wouldn’t get too excited at this stage – rumours of a “dream team” world-beating Swiss combo have been around for donkey’s years! They even used to surface when I started working in the City in the late 90s! If there was a merger, there would be massive job losses IMO given the business overlaps

• On the negative side, it appears that UK shopper numbers are falling (Tuesday) according to the latest figures from Springboard, but then again it’s always quiet around the time when kids go back to school. The ridiculously-named Unibail-Rodamco-Westfield shopping centre specialist announced a plan to bolster its balance sheet (Friday) due to ongoing difficulties resulting from the coronavirus outbreak and is looking to sell assets as well to raise money. John Lewis also axed the staff bonus (Friday) for the first time in over 60 years as the tough times continue for the high street stalwart
• In more positive news, its seems like the Ocado-Marks & Spencer venture is going well (Wednesday), Aldi announced click-and-collect (Tuesday), New Look managed to survive a creditors’ vote (Wednesday) and Inditex (owner of Zara etc.) is back in profit and looks set to be heading back to normality (Thursday). Interestingly, Thomas Cook popped up – now as an online travel agent (Wednesday)

• The whole electric-truck maker Nikola scandal is just getting more ridiculous by the day, don’t you think?? So it turns out that the Hindenburg Research allegations were true about Nikola’s questionable tactics (Wednesday) with Nikola giving hilariously dodgy rebuttals. The US Department of Justice is now going to investigate alongside the regulators to see whether the company misled investors. We’ll just have to get some more popcorn, pull up a seat and see what happens next 😁

• Watson’s Yearly updates: watch this space!

This week, my favourite “alternative” story this week was the hilarious Woman labelled ‘genius’ for sharing ‘revolutionary’ way she eats duck pancakes (The Mirror, Courtney Pochin). Probably best not to do this in a restaurant if you want to maintain a low profile…