Wednesday 29/01/20

1. In CORONAVIRUS NEWS, Xi resolves to fight, Cathay and Starbucks take action and Microsoft and Dell donate
2. In TECH NEWS, the UK lets Huawei in, Apple unveils strong results and WhatsApp reports security flaws
3. In UK RETAIL NEWS, sales are down and John Lewis moves to ease the pressure
4. In INDIVIDUAL COMPANY NEWS, 3M cuts more US manufacturing jobs, Ryanair warns of 737 Max-related job losses and Addison Lee gets rescued
5. In OTHER NEWS, I bring you the new sport of cat-curling and a dog who rides the bus to the park…

So President Xi promises to fight, Cathay and Starbucks take precautions and Microsoft and Dell donate to the cause…

China’s Xi Jinping pledges to overcome ‘devil’ coronavirus (Financial Times, Don Weinland, Yuan Yang, Tom Hancock and Alice Woodhouse) highlights the President’s feelings as he said in a meeting with the World Health Organisation yesterday that “The epidemic is a devil. We cannot let the devil hide”, adding that “We have complete confidence and ability to win this defensive battle against the epidemic”. Chinese state media said that the WHO praised China’s handling of the epidemic so far although the WHO subsequently failed to confirm or deny this. In the meantime, Hong Kong said it would suspend rail services to the mainland from tomorrow, Cathay Pacific reduces flights into mainland China (Daily Telegraph, LaToya

Harding) highlights a reduction of at least 50% of its flights there and Starbucks closes half of China stores amid coronavirus outbreak (Wall Street Journal, Heather Haddon and Micah Maidenburg) shows the coffee shop chain’s actions, which will undoubtedly hit its profits in the second quarter and full year.

Meanwhile, Microsoft and Dell make donations to fight China coronavirus outbreak (Financial Times, James Politi, Richard Waters and Gregory Meyer) shows that, alongside Cargill, big US companies are weighing in with cash and the provision of essentials after Beijing encouraged assistance from corporate America. Other companies pledging support include PepsiCo, P&G, Apple, Bayer, L’Oreal and Michelin although their contributions are dwarfed by those made by Chinese companies including Tencent and Alibaba. * SO WHAT? * It’s good to see the groundswell of support given recent trade tensions. No doubt this will continue to increase but there is no light at the end of the tunnel yet as far as this virus is concerned.

The UK allows Huawei limited access, Apple announces strong results and WhatsApp reports flaws…

In UK gives 5G OK to Huawei (Financial Times, Chris Nuttall) we see that the government came to the decision yesterday not to ban Huawei completely from Britain’s 5G networks. It has decided to limit the company’s market share to 35% in 5G infrastructure and exclude it from the network “core”. US attacks UK’s decision on Huawei (Financial Times, Helen Warrell, George Parker and Kiran Stacey) highlights the inevitable condemnation from America who was pushing for a complete ban but The Huawei episode will in time be seen as much ado about nothing (Daily Telegraph, Jeremy Warner) highlights the fact that, in reality, a complete ban would have set the UK’s 5G plans by years and cost the country billions. * SO WHAT? * Securities agencies around the world are known to use their telecoms companies to spy on other countries and it would be naive to suggest that Huawei is squeaky-clean in this regard, so to impose a total ban right now would not only be expensive – it would be pretty pointless. Yes, this will make for awkward meetings with the US in the short term, but will it be a deal-breaker in any US-UK trade deal? Probably not. Cynics would suggest that Americans are pushing for a total ban on Huawei to help their own telecom equipment makers and/or to use as a bargaining chip in US-China trade negotiations – after all, it was our own security head who said that any security risk could be contained by just making sure that Huawei is limited to being on the periphery. I think that this is a reasonable compromise between the total ban America was pushing for and giving Huawei free rein. However, I suspect that this is not the end of the matter – and it may even be used as a precedent for other countries to do something similar as

they realise that a world without Huawei will make things rather difficult for them. 

Meanwhile, Apple jumps after iPhone sales boost (The Times, James Dean) shows that the company still moves on iPhone fortunes as better-than-expected handset sales, helped by strong demand for the iPhone 11, boosted quarterly profits to record levels and continued the share price’s winning run. The company is expected to launch a “budget” iPhone model in March and, according to the Nikkei Asian Review, suppliers have been asked to make 10% more iPhones than they were last year. Sales of wearables, home devices and accessories also came in above expectations but guidance for second quarter sales was quite wide due to uncertainties related to the coronavirus. China is Apple’s third biggest market after the US and Europe and it assembles most of its products there, so there could be supply and demand issues. * SO WHAT? * As I’ve said before, I think that Apple will really reach its peak later in the year WHEN it launches 5G compatible phones. Popular though the iPhone 11 is, I would expect a bit of a sales dip in the run-in to such a launch. It’s great that revenues for wearables and services are rising, but it’s still handset sales that drive Apple’s fortunes.

Elsewhere, WhatsApp reported sharp rise in security flaws in 2019 (Financial Times, Hannah Murphy and Patrick McGee) cites the findings from the US National Vulnerability Database, a database of flaws, which showed that WhatsApp reported a major rise in the number of vulnerabilities that were found on its platform over the course of 2019. The WhatsApp thing has come to the forefront recently because of the hacking of Jeff Bezos’ phone. A subsequent investigation has failed to prove so far whether it was a fault with the iPhone or whether it was a fault with WhatsApp’s encryption technology. * SO WHAT? * This isn’t great PR for WhatsApp owners Facebook, but it’s not disastrous either at this stage. Still, this situation is worth monitoring…

UK retail sales continue to be “meh” and John Lewis tries to ease the pressure…

Third month of flat retail sales as DIY and furniture slump (The Guardian, Phillip Inman) cites the latest data from the CBI which provides even more evidence of retail sales mediocrity, with particular weakness in DIY and furniture sales. The trade body remarked that sales were poor for this time of year and most retailers expected the situation to continue into next month. It seems that higher wages, a tight unemployment market and slightly more certainty in the economic outlook has not really fed through yet…

Then in John Lewis to replace weekly sales updates with twice-yearly ones (The Guardian, Zoe Wood) we see that the struggling retailer announced it would make its trading updates less frequent from now on and only provide them once every six months. * SO WHAT? * I am sure that retail analysts around the City and beyond will be shedding a quiet tear over this latest development because these figures have proved to be a useful yardstick on overall consumer sentiment on department stores and supermarkets. However, it is unsurprising that the partnership has decided to take the pressure (and spotlight) off itself as it tries to sort itself out. After all, given all the recent senior management changes, it’s got a lot of sorting out to do…

3M cuts jobs, Ryanair threatens to cut jobs and Addison Lee gets saved…

3M to cut more jobs amid US manufacturing slump (Wall Street Journal, Austen Hufford) highlights ongoing problems in the manufacturing sector as 3M announced lower revenues in key US markets and 1,500 additional job losses as part of ongoing efforts to streamline the business. * SO WHAT? * Although the US economy as a whole is in reasonable shape, the manufacturing sector has been weakening over the last five months. Car production numbers have dropped, shale-drilling activity has fallen and 737 Max production at Boeing initially slowed and then got suspended – all against the backdrop of weakening demand from China. Tough times, but at least 3M is doing something to turn itself around.

Ryanair warns it could shut bases and cut jobs after 737 Max delays (The Guardian, Jasper Jolly) shows the company threatening to make major cuts as the delivery of

its first of 10 Boeing 737 Max aircraft has been delayed yet again. The aircraft won’t be delivered until September or October at the earliest – versus original expectations of a March/April delivery. Job cut details are being drafted now and are expected to be released in the first or second week in February. * SO WHAT? * This is an example of the repercussions of the grounding of Boeing 737 Max planes – and I am sure it will be felt around the world at other airlines. One place where this development could be welcome is rival Airbus, who will no doubt be seeing increasing demand for their “trouble-free” planes at the moment.

For all you taxi-fans out there, Lenders seize control of Addison Lee cabs (Daily Telegraph, Oliver Gill) shows that Addison Lee’s banks have agreed overnight to put £45m new cash into the debt-ridden business and to refinance its loans. * SO WHAT? * What a fall from grace. US private equity firm Carlyle bought the company for £300m in 2013 (and invested an additional £120m), but since then competition from the likes of Uber have decimated it, despite the fact that it counts about 80% of FTSE100 companies as its customers.

And finally, in other news…

I thought I’d leave you today with the cat and dog combo of And now, a spot of everyone’s favorite winter sport: Japanese cat curling (SoraNews24, Katy Kelly https://tinyurl.com/sagq86g) – which is hilarious as the cat seems to love it – and Dog rides bus to and from dog park every day to play for two hours by herself (The Mirror, Luke Matthews https://tinyurl.com/rpzrf7n) which shows brilliant independence and teamwork with the local community!