Thursday 26/11/20

  1. In TECH NEWS, France imposes the digital tax, Facebook makes an error, TikTok gets an extension, Salesforce eyes Slack and IBM announces job cuts
  2. In M&A NEWS, Bertelsmann buys Simon & Schuster, Future buys GoCompare and AA agrees to takeover
  3. In INDIVIDUAL COMPANY NEWS, Netflix ups the budget, De La Rue is in talks about a Covid passport and AstraZeneca’s vaccine faces criticism
  4. In MACROECONOMIC NEWS, Sunak outlines the latest response to an “economic emergency”
  5. AND FINALLY, I bring you a Tom Kerridge Christmas…



So France braves it against Big Tech, Facebook’s error costs, TikTok gains more time, Salesforce cosies up to Slack and IBM announces job cuts…

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France appears to be willing to brave it alone in France demands digital tax payments from US tech groups (Financial Times, Aime Williams, Hannah Murphy and Victor Mallet) as French tax authorities have decided to push on regardless of the consequences with Washington and demand 2020 tax payments from the likes of Facebook and Amazon. * SO WHAT? * This action is likely to trigger tariffs of 25% on $1.3bn worth of French handbags and make-up as Trump’s lot say that such taxes unfairly target American companies and threatened retaliation. Governments around the world argue that tech companies pay too little tax on the profits they make but not many have the balls to stand up to the tech giants and impose taxes more forcefully. The OECD tried to get some kind of blanket tax agreement across Europe last month but couldn’t get enough countries to agree so another vote has been booted into next year. We’ll just have to see whether Biden will be able to bridge the gap when he comes to office in January but even if we see these companies paying higher taxes I think they are unlikely to suffer! They will just make advertisers pay more and pass any other costs onto customers where they can.

Talking of Big Tech and advertising, though, Facebook’s latest error shakes advertisers’ confidence (Wall Street Journal, Alexandra Bruell and Sahil Patel) shows that the social media giant is offering millions of dollars in credits to some advertisers after discovering a bug in one of its tools (the “conversion lift”) that has shown the wrong

figures on how effecting their ads are. The tool has apparently overestimated ad success in some campaigns for 12 months leading to advertisers overspending. * SO WHAT? * This is not great and it will shake the confidence of advertisers, many of whom are cash-strapped and need to keep a proper handle on budgets. For instance, in retail, marketers are spending 5-10% more on Facebook and other performance-dependent sites in a bid to get more focused bang for their buck. Given the importance to Facebook’s of ad revenues, it will be imperative for the company to show that this is a one-off and not symptomatic of other problems. Ultimately, I don’t think this in itself will be disastrous for Facebook, but if there are more blunders like this to come things could get tricky. It will also play into the hands of those wanting to put more pressure on the company, saying that it’s systems are not reliable enough to handle sensitive data.

In the latest in this ongoing saga, TikTok granted extension on divestiture order (Wall Street Journal, John D. McKinnon) shows that the Committee on Foreign Investment in the US (aka “Cfius”) has granted TikTok and its parent ByteDance a one-week extension on the original deadline to finalise a deal with a buyer to next Friday. * SO WHAT? * There was no official comment from the companies involved, but as I have said before, I think TikTok/ByteDance will do all it can to drag things out for as long as possible so that it can force itself onto Biden’s agenda and potentially get more lenient treatment that it got under the Trump administration.

Salesforce is in advanced talks to buy Slack Technologies (Wall Street Journal, Cara Lombardo, Liz Hoffman and Dana Cimilluca) shows that CRM-supremo Salesforce is in advanced talks to buy Slack Technologies in a deal that could be announced within the next few days. Slack’s market cap is currently about $17bn and if this went ahead it would be Salesforce’s biggest ever acquisition (Salesforce’s market cap is about $230bn currently). * SO WHAT? * I think this would be a really powerful combination and will edge Salesforce ever closer to its goal of becoming a broader software provider, expanding out of its traditional niche. I really think that this acquisition could make the enlarged entity more of a serious competitor to Microsoft! Interestingly, Slack’s share price went up by 30% on the rumours whereas Salesforce’s dropped by 5% so it seems that investors may need convincing of the merits of a deal!

Elsewhere in tech, UK and Germany in firing line as IBM cuts jobs (Wall Street Journal, Morgan Meaker) shows that the company is expected to cut around 2,000 jobs in the UK and Ireland as part of a programme of 10,000 job cuts across Europe in a bit to slim down costs. This is the equivalent of 20% of the European workforce but the UK and Germany will suffer the most.



Bertelsmann buys Simon & Schuster, Future eyes Gio Compario and the AA agrees to a PE takeover…

In a quick scoot around M&A news today, Penguin owner adds Simon & Schuster to its bulging bookshelf (The Times, James Dean) shows that Bertelsmann, the company that owns Penguin Random House, is about to buy Simon & Schuster for almost $2.2bn that will confirm its position as the world’s biggest publisher, putting more distance between it and second-placed Harper-Collins, which is owned by News Corp. The deal now has to get past regulators.

Investors quit Future after surprise takeover bid for GoCompare (The Times, Ben Martin and Simon Duke) highlights a massive 16.7% fall in the share price of Future, the magazine publisher, as it announced plans for a £500m cash-and-shares deal to buy GoCo Group, the parent of GoCompare. This would be a big acquisition to swallow for the publisher as it continues to pursue its online strategy and provide customers with more services in finance, including price comparison.

Then in AA agrees £219m takeover deal with private equity investors (The Guardian, Jasper Jolly) we see that the AA has agreed to be taken private in the bid flagged earlier this week with private equity firms TowerBrook and Warburg Pincus. The new owners plan to upgrade the AA’s existing infrastructure and offer new products and services – but I imagine that, being private equity firms, they will also be doing a load of cost cutting as well.



Netflix spends, De La Rue tries to drum up business and AstraZeneca’s candidate faces criticism…

Britain is a jewel in the crown for Netflix filming (The Times, Tom Ball) shows that Netflix is to boost its production spend in the UK by 50% to £750m after successes of productions including The Crown and Sex Education. This news comes hot on the heels of last month’s announcement that the company would treble its office space. * SO WHAT? * This will be great news for an industry that has suffered tremendously under the pandemic. As productions have shut down for so long, content for the hungry streamers has been running down quite considerably – so investment in making more will come as very welcome news for many.

In other news, Banknote printer De La Rue reveals Covid passport talks (Daily Telegraph, Alan Tovey) shows that De La Rue is holding talks with governments and pharmaceutical companies about producing “Covid passports” with security seals and tracking systems that guarantee the authenticity of vaccines and tests. This all sounds great, but this is just talk for now. Worth bearing in mind, though…

Then in Doubts raised over AstraZeneca-Oxford vaccine data (Financial Times, Donato Paolo Mancini, Anjana Ahuja and Clive Cookson) we see that concerns are growing about the touted efficacy of the Brit vaccine as some say that there’s been a bit of manipulation on the data that has been made public so far. * SO WHAT? * IMO, this goes to show that the euphoria that follows these announcements should be tempered given how fluid the situation is. The search for effective vaccines continues…



Sunak gets real and does what he can…

Sunak warns of ‘economic emergency’ as borrowing hits record £394bn (Financial Times, Chris Giles, George Parker and Jim Pickard) highlights the dire economic circumstances that we find ourselves in as a country as Rishi Sunak announced his new Spending Review. He cut

government spending plans, froze public sector pay increases and cut overseas aid spending but promised to invest in schools and hospitals while continuing to support businesses. He also announced a new “levelling-up fund” of £4bn that councils will be able to apply for to get grants in addition to a new national infrastructure fund. * SO WHAT? * He has one tricky job. I would say that all these spending plans are probably causing opposition parties to scratch their heads as they always tend to tout the benefits of increased spending – but the Conservatives are (uncharacteristically!) having to do that anyway. It’ll be interesting to see whether they can do much to change their own policies to be markedly different.



…in other news…

I thought I’d leave you today with an idea for Christmas dinner (if you’ve got the money!) in Tom Kerridge leaves people divided over £350 Christmas dinner you cook at home (The Mirror, Rosaleen Fenton). It sounds great if you can do/afford it!

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)