Wednesday 22/01/20

  1. In TECH-RELATED NEWS, the UK and France take different stances on digital tax, Facebook creates UK jobs but loses Vodafone as a Libra backer
  2. In RETAIL NEWS, Sainsbury’s says it’ll axe managers, Aldi is to become the #1 payer, Dixons doubles back and Joules has a tricky time
  3. In INDIVIDUAL COMPANY NEWS, Uber sells its Indian food delivery business, IBM sees signs of a turnaround, Boeing has more problems and EasyJet benefits from Thomas Cook’s collapse
  4. In OTHER NEWS, I bring you an unusual cocker spaniel…



So the UK and France seem to go in opposite directions regarding digital tax, Facebook creates 1,000 new tech jobs but Vodafone abandons Libra…

UK to push on with digital tax in face of US anger (Financial Times, Chris Giles and Jim Pickard) shows that the UK is apparently playing a dangerous game with the US as it appeared to dig its heels in on the imposition of a digital tax that will hit big (predominantly US) companies. Washington has threatened retaliatory tariffs if the British government doesn’t pull back on its stance. In contrast, France poised to drop plan to tax tech giants amid signs of US deal (The Guardian, Larry Elliott) shows that France is about to back down on its own plans to impose a digital tax, as long as the US engages with the OECD to find a multilateral solution. * SO WHAT? * The OECD has been pretty useless thus far in getting the Americans to engage in discussions about setting rules on how to tax global tech companies and corralling a unified opinion of what to do from its members. It seems to me that the companies themselves (and the American government) have been understandably dragging their feet on this because it will affect them the most, but maybe – just maybe – we’ve reached a point where something actually might get done about it. Having individual countries impose their own taxes just won’t work because all this will do is make tech companies (who provide a lot of jobs) uproot operations and go somewhere where the regimes aren’t so strict – Ireland, for instance, has benefited from this for years. FWIW, I think that the British government will use this digital tax “threat” as a bargaining chip in trade negotiations scheduled with the US for next month. I think that the countries that will lose out the most from a

general OECD agreement will be tax-friendly countries that rely on their “light touch” to attract some of the world’s biggest companies. The tech giants will obviously bleat and scream injustice, but surely even they will realise that they’ve had a tremendous run of getting-away-with-it and will have to pay their way.

Facebook backs British tech sector with 1,000 new jobs (The Times, Simon Duke) highlights a major boost for the British tech sector going into Brexit as Facebook aims to swell its UK employee ranks to over 4,000, with half of the 1,000 new positions being in tech areas such as software engineering, product design and development and data science. Insiders say that the company is looking to expand further in the UK – its new offices at King’s Cross has capacity for over 6,000. Fun fact: the UK is now Facebook’s biggest engineering hub outside the US.

However, in Vodafone latest Libra backer to call time on Facebook’s currency (Daily Telegraph, James Titcomb) we see that Vodafone is the latest early backer of Libra to abandon ship as it decides to focus on its own mobile payment system M-Pesa. Visa, Mastercard, Stripe, PayPal, eBay, Booking Holdings and Mercado Pago all pulled out of the cryptocurrency project last year. * SO WHAT? * It will definitely be harder for Facebook to “sell” Libra as an independently overseen project with fewer members, but it will no doubt continue in its efforts to get Libra to work in some shape or form (see what I say about this in Watson’s Yearly if you are a paying subscriber). Interestingly, though, the Bank of England has formed a group of central banks comprising of The Bank of Canada, Bank of Japan, the ECB, the Swiss National Bank and Sweden’s Riksbank “to assess the potential cases for central bank digital currency”. The Bank for International Settlements (BIS), which is a body that represents central banks, is also set to join the group. If THEY could come up with a proper Libra-beater, things could get quite exciting.



Sainsbury’s announces job losses, Aldi looks set to be the biggest payer, Dixons has a wobble and Joules joins the gloom…

Sainsbury’s to cut hundreds of managers’ jobs to reduce costs (Daily Telegraph, Laura Onita) heralds some bad news for the supermarket’s employees as it continues to try to cut costs. * SO WHAT? * Sainsbury’s is clearly suffering since its bid to buy Asda collapsed last year. I think that the problems were always there and that, had the bid actually been successful, there would have been a ton of job cuts anyway that would have been blamed on “overlap”. The failure of the bid just meant that the underlying problems have less of a buffer, hence the job losses being announced now – but it will be painful for those involved. It is rumoured that chief exec Mike Coupe will be stepping down this summer. What an idiot – did you see this? Priceless 😂

Still, maybe those affected can go down the road and get another job with a rival – and maybe even come out on top. Aldi to become UK’s ‘best-paying supermarket’ with wage rise (The Guardian, Joanna Partridge) highlights Aldi’s next move where it will award UK staff a payrise of 3%, making it the best payer among supermarkets and nudging previous top dog Lidl into second place. Long service will also be rewarded. Both Aldi and Lidl are continuing to expand aggressively in the UK this year. * SO WHAT? * This really is amazing, don’t you think? I do wonder what could

possibly stop the German discounters’ continued expansion – nothing at the moment!

If you ever feel bad when you’ve made a mistake, About-turn for Dixons Carphone as it restates festive period sales (Daily Telegraph, Laura Onita) should make you feel a bit better! The company announced results yesterday which initially said that overall sales grew by 2% in the latest quarter – but then corrected this comment a few hours later when it said that sales actually fell by 2%, blaming it on a typo! On the plus side, it saw strong sales of items including big TVs, Apple Airpods and expensive hairdryers but weak sales of mobile phones as users hang onto their phones for longer or go for SIM-only deals). * SO WHAT? * Dixons is trying to fashion a turnaround by introducing new ideas (like “gaming arenas” where customers compete against each other on in-store consoles), focusing on boosting its finance arm that offers credit, merging its electrical and mobile divisions to cut costs and shutting down 92 of its 1,000 UK shops. It sounds like a bit of a mess to me, but let’s hope that these efforts bear fruit.

Then in Black Friday leaves Joules feeling blue (The Times, Robert Miller) we see that fallen-darling-of-the-high-street Joules reported a whopping 82% fall in half-year pre-tax profits. The company blamed a late Black Friday, costs incurred in shutting down underperforming stores and the relocation of its HQ. * SO WHAT? * Interestingly, the share price jumped by 10.4% on the news. Joules very recently shocked investors with a profit warning, saying that it had made an accounting error. I guess that investors are giving it the benefit of the doubt and see these costs as a one-off blip on an otherwise upward trajectory.



Uber sells a food delivery business, IBM shows a potential turnaround, Boeing has more troubles and EasyJet profits from Thomas Cook’s downfall…

Uber sells Indian food delivery business to local rival Zomato (Financial Times, Patrick McGee, Mercedes Ruehl, Stephanie Findlay and Dave Lee) heralds a scaling back of Uber’s global ambitions as it has agreed to sell its Indian food delivery service to Alibaba-backed Zomato in exchange for a 9.99% stake in the business (which is estimated to be worth around $350m on the company’s most recent valuation) and a $35m cash payment for tax and services reimbursed. * SO WHAT? * The Indian business was just haemorrhaging cash at a ridiculous rate. It only contributed 3% of Uber Eats’ worldwide revenues but accounted for 25% of the losses in the first nine months of 2019, so this latest move sounds like a reasonable exit in that it will still be able to benefit in any upside. Zomato, on the other hand, will get a boost from this deal against arch rival Swiggy, which is backed by South African investment group Naspers. This comes only days after Zomato got another $150m in funding from Ant Financial, a Chinese payments giant affiliated with Alibaba. Zomato remains unprofitable for the moment, but the company claims that its cash burn is slowing and that it is targeting profitability by the end of this year. I think it’s good to see that Uber cuts its losses – something that will benefit the company as it matures and reaches profitability.

IBM earnings hint at signs of turnaround (Wall Street Journal, Asa Fitch) highlights the tech giant’s slight increase in quarterly revenues, ending a losing streak and potentially showing signs of recovery following the company’s $33bn acquisition of open-source software giant Red Hat. IBM has been slow to the party regarding cloud computing, but the Red Hat acquisition is helping it to catch up to rivals. It also announced an upbeat outlook for the current year, which helped to lift the share price by 3.5% in after market trading.

Boeing suspends trading in its shares after Max delays (Daily Telegraph, LaToya Harding) shows that Boeing had to suspend trading in its shares yesterday after it warned that there would be further delays for the reinstatement of its currently-grounded 737 Max fleet. The expectation of the reinstatement from the Federal Aviation Administration (FAA) has now been pushed out by a number of months to at least mid-2020 as Bpeing continues to wrestle with technical issues since the grounding of its 737 Max planes. The company is scheduled to announced fourth quarter figures next week.

Meanwhile, EasyJet reports strong first quarter boosted by Thomas Cook collapse (The Guardian, Gwyn Topham) highlights a strong performance from the discount airline as its revenues shot up in the final quarter of 2019 due to Thomas Cook’s collapse. Revenue per seat was also up and it says that losses will show an improvement on last year despite higher fuel costs. It’ll be interesting to see whether the package holiday business it launched shortly after Thomas Cook’s collapse, EasyJet Holidays, will prove to be a winner!



And finally, in other news…

I thought I’d leave you today with Adorable ‘Disney’ dog has people questioning if she’s real – because of her eyes (The Mirror, Courtney Pochin, OK, so I’m biased because I’ve got a cocker spaniel and she’s lovely – but this dog really is quite something!

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Some of today’s market, commodity & currency moves (as at 0856hrs 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 **
7,610 (-0.51%)29,187 (-0.56%)3,321 (-0.26%)9,37113,550 (+0.01%)6,045 (-0.56%)24,031 (+0.70%)3,061 (+0.28%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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