Tuesday 21/05/19

  1. In TECH NEWS, Huawei gets an Android-shaped kick in the teeth
  2. In CAR NEWS, Ford details job cuts, JLR unveils a record loss and Tesla’s shares hit new lows
  3. In INDIVIDUAL COMPANY NEWS, Ryanair suffers Brexit blues while Goldman buys hotels and changes auditors
  4. In OTHER NEWS, I tell you the real reason why you get fingernail spots. For more details, read on…



So Huawei gets hit with Android restrictions…

So a major drama kicked off yesterday in Huawei suffers hammer blow with Android ban (Financial Times, Nic Fildes and Louise Lucas) as Google, which bought Android in 2005, said it would stop supplying Huawei with Android software as part of a US government ban. Huawei’s rise had been gaining momentum as its handset sales rose by 50% year-on-year in the first quarter while rivals Samsung and Apple’s sales fell by 10% and 23% respectively, so this latest development could stop them in their tracks as new Huawei phones won’t be able to access apps such as Google Maps and YouTube while existing phones won’t be able to update. Huawei is due to unveil its Honor phone in London today but networks such as Vodafone and EE will be wondering whether they should be partnering up with Huawei in 5G given the massive political backlash it is having. Huawei Plan B to beat Trump may break Google stranglehold (Daily Telegraph, James Cook) highlights the fact that Huawei has its own operating system that it has been developing since 2012 for just such an eventuality and that this action may be the thing that pushes a third party to break the duopoly that Google and Apple have on operating systems. The tricky thing is that it’s all very well for Huawei to have its own operating system, but customers outside China are likely to be sceptical about the swap and third party developers would also need to be

on board with another system to develop attractive apps. A spokesperson for reseller website musicMagpie said that it had already seen an uptick of Huawei smartphone trade-ins of 25%. US plans temporary exemptions to Huawei blacklist (Wall Street Journal, John D McKinnon, Dan Strumpf and Yoko Kubota) highlights a few exemptions to the export blacklist for 90 days, which gives everyone a breather in this drama – but also gives the US more time to continue its mission to slag off Huawei to pretty much any government that will listen. * SO WHAT? * Google/Huawei: androids and aliens (Financial Times, Lex) says that the impact on sales will be minimal in the US and China, but Europe is Huawei’s second biggest market, with 75% of Europeans using an Android phone and the company having a 25% market share. Europeans are unlikely to give up access to YouTube and Gmail for WeChat and Tencent Video. Silicon Valley hit by fears of tech Cold War (The Times, Simon Duke and James Dean) highlights the immediate reaction of markets as share prices in Qualcomm (which makes modems and processors used in Huawei phones), Intel (which sells server chips to it) and Dialog Semiconductor (which makes power management chips) as well as Apple and Alphabet (which owns Google) all fell between 2 and 6% on the news. As far as I’m concerned, the main result of this – if it’s not resolved quickly – will be that China tech has just been given the massive kick in the pants it needs to make its own operating system (and possibly freeze out the others while they’re at it). Google and Apple should be very afraid now!



Ford, Tesla and JLR all announce bad news…

Ford to cut 7,000 jobs in bid to catch up to rivals (Wall Street Journal, Mike Colias) isn’t the most upbeat headline you’ll see (especially if you are a Ford worker) as the troubled US automaker announced plans to cut about 10% of its workforce. The cuts will save the company about $600m per annum and the layoffs will be completed by August. * SO WHAT? * These cuts won’t come as a surprise as a major overhaul was announced pretty recently as the company tries to play to its strengths in the domestic market and sort out its overseas business. It’s also not alone in trying to slim down as GM and VW are among those shedding workers as well – but this won’t be much consolation for those affected.

Tesla stock hits lowest level since 2016 as car maker’s outlook debated (Wall Street Journal, Patrick Thomas, Sam Goldfarb and Tim Higgins) highlights the gloom hanging over Tesla at the moment as long term ambitions are being scuppered in the short term by financial and

production challenges. Its share price has fallen by about 38% so far this year and one of Tesla’s biggest investors, T Rowe Price, sold off about 81% of its holding in the first quarter of the year. Tesla announced one of its worst ever quarterly losses in April and vehicle deliveries fell by 31% in the same quarter. * SO WHAT? * The tough times continue for Tesla and I bet it won’t be long before it asks for yet more money! In the meantime, its competition is growing stronger…

The gloom continues in Jaguar Land Rover reports record £3.6bn loss (The Guardian, Rob Davies) as the Tata Motors-owned car manufacturer announced its biggest ever loss last year. It was hit by a weakened Chinese market, falling diesel sales and a one-off downward revision for the value of its business. * SO WHAT? * This, again, shouldn’t be a surprise given all the newsflow we’ve been hearing. It seems to me that the company was over-exposed at the wrong time (falling global car sales) to the wrong market (China) with the wrong technology (diesel) and it doesn’t have enough scale to weather these problems as well as some of its larger brethren. It’s also falling behind competitors on the electric car front. Surely it is going to be bought by another maker for (almost) fire-sale prices?



Ryanair announces weak profits while Goldman Sachs looks at hotels and a new auditor…

Ryanair profits slide due to lower fares and Brexit uncertainty (The Guardian, Julia Kollewe) shows the travails of Europe’s biggest budget carrier as it announced its worst profits in four years on the back of tough competition in Europe and Brexit uncertainty as well as rising fuel costs and disruption caused by staff strikes. Chief exec Michael O’Leary said that the company will have to cut fares to stimulate demand. * SO WHAT? * Ryanair has the firepower to withstand the current market turbulence, which is more than can be said for the likes of Iceland’s Wow Air, Flybmi and Flybe who stopped flying because of lack of funding, collapsed and were bought by a consortium respectively. Even EasyJet reported a £275m loss last week for the first half. I would have thought that the company (like many other travel companies) will be praying for clarity on Brexit.

There were two stories concerning Goldman Sachs that caught my eye today as Goldman Sachs in talks to acquire French hotel chain for €2bn (Daily Telegraph, Lucy Burton) heralds the Wall Street bank’s interest in French hotelier B&B Hotels. This is its second foray into the industry as it previously joined up with two US hedge funds to perform a turnaround with Travelodge in 2012, saving it from collapse.

Then in Mazars strikes gold with audit contract (The Times, Tabby Kinder) we see that Goldman announced that it will become the first major bank in Britain to be audited by mid-sized accountant Mazars in Europe (but will stick with PwC elsewhere – as it has done since 1922). * SO WHAT? * This is notable because auditing is getting a right old pasting at the moment amid (long held) accusations that the Big Four (EY, Deloitte, PwC and KPMG) have got it too easy with big companies. Mazars’ appointment may shake things up a bit and encourage other firms to follow suit and break up the cosy club.



And finally, in other news…

I thought I’d leave you today with something educational in Why you get spots on your fingernails – and it’s nothing to do with calcium (The Mirror, Zoe Forsey https://tinyurl.com/y5jff5zs). Well I never!

Some of today’s market, commodity & currency moves (as at 0837hrs 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 **
7,311 (-0.51%)25,680 (-0.33%)2,840 (-0.67%)7,70212,041 (-1.61%)5,359 (-1.46%)21,272 (-0.14%)2,906 (+1.23%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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