This weeks news includes; Snap releases finances ahead of IPO, Deutsche Bank fined £560m in money laundering scandal, Lyft surpasses Uber in download numbers for the first time and Facebook loses $500m in VR legal battle.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories.
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Opinion articles of the week:
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Sky News reports on MP’s warning that the Government ‘needs to raise its game’ on cyber security.
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Business Insider looks at whether Bitcoin is ‘a great hedge against the system’ and could be the new gold.
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City A.M considers whether Is private equity losing interest in retail mergers?
1. MP’s VOTE ON BREXIT
An overwhelming majority of almost 500 MPs have expressed their support for a Bill granting Prime Minister Theresa May the power to begin Brexit negotiations.
In the first vote in the House of Commons on the Article 50 Bill, 498 MPs backed the legislation moving to the next stage, where amendments can be tabled. By contrast 114 MPs, including 56 members of the Scottish National Party, voted against the Bill.
A large number of the remaining votes against the Bill came from the Labour party, despite Jeremy Corbyn instituting a three line whip ordering his MPs to back the legislation.
Any members of Corbyn’s frontbench who voted against it will be expected to be replaced, and Labour revealed that shadow environment secretary Rachael Maskell and shadow equalities minister Dawn Butler had resigned in the build up to the vote.
Shadow education minister Tulip Siddiq was the first to quit, resigning last week, and was followed days later by shadow secretary of state for Wales Jo Stevens.
It came after full day of debate that saw former chancellor George Osborne argue the government was prioritising immigration over the economy, and warn that Brexit negotiations with the EU should be expected to turn “bitter”.
MPs will hold a final vote on the Article 50 Bill on 8 March before debate moves to the House of Lords. (City A.M)
2. SNAP IPO
Snapchat’s parent company Snap Inc. set in motion what could be the biggest tech flotation in years by revealing that it generates over $400 million in annual sales and has 158 million people using its namesake app on a daily basis.
The Los Angeles-based company released the financial details in filing for an initial public offering on Thursday. The company filed for a $3 billion IPO, though that is a placeholder amount and certain to change as the company sets a price on the deal.
In the filing, Snap disclosed that Snapchat has 158 million average daily active users as of the fourth quarter of 2016. It had annual revenue of $404.4 million in 2016, up from $58.6 million in 2015.
The IPO filing shows Morgan Stanley, Goldman Sachs, JPMorgan, Deutsche Bank, Barclays, Credit Suisse, and Allen & Company are among the banks working on the share sale. It plans to list its shares on the New York Stock Exchange under the ticker ‘SNAP’
Now that its financial statements have been made publicly available, the must wait 15 days before holding formal meetings, or the IPO “roadshow,” with investors. Snap is planning to list shares in March, and could fetch a valuation of as much as $25 billion, people familiar with the matter have said.
Snap’s business is quickly evolving from the chat app that gave it its name. It has increased advertising and added news, and last year it began selling its Spectacles, eyeglasses that can take photos and record video.
Still, as Snap begins to meet with investors, it will need to explain what its total addressable market can be — outside of the millennial demographic it’s already popular with. It will also have to lay out a vision for how revenue can grow from less than $1 billion to many billions. The company did report meteoric growth. Annual revenue of $404 million is up from just $58.6 million in 2015, the filings show. (Business Insider)
Despite this however the Snap lost $514 million last year and warns that it ‘may never be profitable’. Business Insider explores Snap’s unprofitability issues ahead of its IPO.
3. DEUTSCHE BANK FINED £560m FOR MONEY LAUNDERING
Deutsche Bank has been fined a total of £560m by British and American authorities over alleged money laundering in Russia. New York’s Department of Financial Services (DFS) said the scheme involved so-called mirror trades which illegally moved $10bn (£9.3bn) out of Russia.
DFS superintendent Maria Vullo said: “This Russian mirror-trading scheme occurred while the bank was on clear notice of serious and widespread compliance issues dating back a decade.
“It is obvious, though, that the scheme could have facilitated capital flight, tax evasion or other potentially illegal objectives.”
The scheme involved wealthy clients buying stock in Moscow with rubles. Then, shortly afterwards, related parties would sell the same stocks through the bank’s London branch.
These trades, which were worth around $2m-$3m per order, were then cleared through Deutsche Bank’s New York operation with the clients paying in dollars.
The DFS legal document which details the case says: “By converting rubles into dollars through security trades that had no discernible economic purpose, the scheme was a means for bad actors within a financial institution to achieve improper ends while evading compliance with applicable laws.” The New York regulator found the bank violated state banking law by conducting its business in an unsafe and unsound manner. It fined Deutsche Bank $425m (£397m).
The UK’s Financial Conduct Authority (FCA) said it had issued a penalty of £163m – the largest of its kind in the UK – “for failing to maintain an adequate anti-money laundering (AML) control framework.”
It accused Deutsche of exposing the UK’s financial sector to the risk of financial crime. (Sky News)
Deutsche Bank’s recent financial figures don’t make for good reading either as they are expected to suffer a 1 billion euro loss for 2016. (City A.M)
4. SHELL
Shell profits
Oil giant Royal Dutch Shell’s annual profit fell almost 10%, while its fourth quarter profit missed analysts’ forecast, after the company booked $500m (£394.5m) worth of impairment costs related to a deferred tax reassessments.
In the final three months of its financial year, the FTSE 100-listed group reported a 14% year-on-year increase in profits adjusted for one-time items and inventory changes advanced to $1.8bn, falling short of the expected $2.8bn figure. Despite the lower-than-expected fourth quarter profit, however, the company maintained its total dividend for the full year unchanged at 1.88 cents per share.
Europe’s largest oil company reported current cost of supply (CSS) earnings, its preferred way of measuring profit, of $3.53bn for the whole of 2016, 8% lower year-on-year, while excluding exceptional items, CCS earnings in 2016 fell 37% from the previous year to $7.18bn.
Production in the fourth quarter, however, rose 28% year-on-year to 3.91 million barrels of oil equivalent a day (bpd). On an annual basis, oil and gas production averaged 3.7 million bpd, rising 24% year-on-year, boosted by the performance of BG Group, which the Anglo-Dutch company purchased in February last year.
Excluding the newly-acquired company, however, production declined 2% from 2015, the group said.
Shell’s upstream unit producing oil and gas reported a CCS loss of $2.70bn, compared with a $2.25bn loss last year, while the downstream unit saw earnings fall to $7.24bn from $9.74bn. Meanwhile, income attributable to shareholders more than doubled last year, jumping from $1.93bn to $4.57bn Cashflow from operations beat analyst expectations, but declined to $20.61bn from $29.81bn. (IB Times)
Shell sells North sea assets
Royal Dutch Shell has agreed to sell $3.8bn (£2.46bn) worth of North Sea assets to oil exploration firm Chrysaor as part of continuing debt reduction measures. Shell is aiming to sell $30bn of assets by 2018 as it seeks to pay off debt following its takeover of BG Group.
The deal represents about half of Shell’s 2016 North Sea output. Chrysaor will become the largest independent operator in the North Sea after the deal’s completion. (BBC News)
5. APPLE iPHONE SALES
Apple Inc. attracted a swathe of new iPhone customers over the holiday period, auguring well for a more significant upgrade to its flagship product this year — and the services revenue that these devices are increasingly generating. The shares climbed to the highest price in more than 17 months.
Existing iPhone users upgraded to the latest iPhone 7 models at about the same rate as the iPhone 6S a year earlier, Chief Executive Officer Tim Cook said in a conference call with analysts. Yet Apple still managed to sell 3.5 million more phones in the three months ended Dec. 31, indicating growth was driven by new customers.
The iPhone 7 represented a modest update to its predecessor, the 6S, adding water resistance, an improved camera, battery life and processor while retaining similar styling. Expectations are mounting for a more significant upgrade to Apple’s flagship product later this year, which is the 10th anniversary of the iPhone’s launch. That may persuade more existing iPhone users to open their wallets for the next model.
“When we’re able to innovate with new generations of products, clearly that plays a role in the upgrade rate,” Chief Financial Officer Luca Maestri said.
Apple’s research and development budget is growing apace, hinting at new innovations or products in the works. R&D spending jumped 19 percent to $2.9 billion in the first quarter.
Apple reported total revenue rose 3.3 percent to $78.4 billion, with earnings of $3.36 a share, in the holiday quarter, exceeding analyst forecasts. The shares gained 6.7 percent to $129.50 at 2:10 p.m. in New York, the highest value since July 2015.
Samsung Electronics Co. recalled its flagship Galaxy Note 7 smartphone in September after a fault that caused some batteries to burst into flames. That reduced competition in the market for large, high-end smartphones and likely helped attract new customers, according to New York-based BTIG analyst Walt Piecyk. (Bloomberg)
6. LYFT SURPASSES UBER IN DAILY DOWNLOADS FOR THE FIRST TIME EVER
The recent backlash against Uber has had a positive outcome for one company: its main competitor, Lyft.
According to analyst firm App Annie, the ride-hailing app had its best day ever on Sunday. For the first time, Lyft was downloaded more times than Uber by US users on iOS, and Lyft’s daily downloads more than doubled its average from the past two weeks, a representative for the firm told Business Insider.
Lyft has also been trending in Apple’s App Store throughout Monday and has climbed the top free apps chart to No. 4, surpassing Uber, which is in 13th place. According to TechCrunch, this is a huge jump over just the past three days. Lyft ranked No. 39 on the free-apps chart, and by Sunday was up to No. 7. It has continued to climb throughout the day Monday.
Analyst firm Sensor Tower estimates that Lyft downloads for January 28-29 totaled 98,000 on iPhone in the US. That’s compared to 55,000 downloads for the previous weekend, a difference of 78%.
Lyft’s sudden rise in popularity comes as Uber’s reputation has taken a hit. On Sunday, thousands of Uber customers angrily deleted the app after Uber drivers tried to do business at New York’s JFK airport during a taxi strike.
The New York Taxi Workers Alliance called for all drivers to avoid John F. Kennedy International Airport on Saturday to facilitate protests against President Donald Trump’s executive order barring travelers from seven majority-Muslim countries from entering the US.
But many users said that Uber still appeared to be servicing riders during the strike. The company also tweeted after the strike saying it had halted the higher fares that normally kick in during periods of increased demand.
Many people began posting on social media that they were deleting the app, along with the hashtag “#deleteUber.” Actress Susan Sarandon tweeted “Goodbye @uber. Hello @lyft. #DeleteUber,” an example that many others seemed to follow, given Lyft’s newfound popularity.
On Sunday, Lyft cofounders John Zimmer and Logan Green sent an email to users pledging a $1 million donation to the ACLU, the nonprofit organization that was able to successfully force a temporary stay on the immigration ban.
It’s worth noting, however, that Lyft’s spike in downloads is not indicative of customers using the service more than, or instead of, Uber. And while the recent surge in Lyft’s popularity is a good sign for the company, it’s not clear if this is a permanent trend or a temporary response to anti-Uber sentiment. Uber remains the most popular ride-hailing app in the US, claiming up to 87% of the market share in some US cities with Lyft making slower gains nationwide. (Business Insider)
7. N-POWER PRICE HIKE
The energy regulator is demanding an explanation and the Government says it is “concerned” after Npower announced 1.4 million customers would be hit with a 9.8% rise in their energy bills. The move affects households on the supplier’s standard variable tariff from 16 March.
Npower, one of the so-called “big six” household suppliers, blamed a sharp rise in wholesale costs and the cost of delivering Government policies for the move. The increase will add £109 to average annual dual fuel bills and is made up of a 4.8% hike in gas and 15% for electricity.
Npower said its other 1.4 million customers, who are on pre-payment and fixed tariffs, would not be affected. Rival supplier EDF had earlier announced a rise in its electricity charges to take effect from 1 March, while some other smaller suppliers have also raised tariffs.
Npower is raising standard electricity costs by 15% The decision by Npower eases pressure on others to hold down their own prices, experts warned, meaning they could follow suit. (Sky News)
8. SONY TAKES $1BN CHARGE ON MOVIE BUSINESS
Sony has taken a hefty writedown on the value of its movie business as the unit suffers from falling DVD and home entertainment sales. It has taken a 112bn yen ($1bn; £780m) charge, citing “an acceleration of market decline”.
The rise of online streaming services has hit demand for traditional media such as DVDs and blu-ray discs. Sony’s movie division has also struggled, with recent flops including an all-female Ghostbusters sequel.
Sony had warned earlier this year its movie division could post more losses. The Japanese firm, which reports its third-quarter results on Thursday, is still assessing whether the impairment charge will affect future earnings. It plans to offset the loss by selling shares in medical web service M3.
The head of Sony’s entertainment business, Michael Lynton, recently announced he would be stepping down in February after more than a decade at the firm. (BBC News)
9. FACEBOOK LOSES $500M OCULUS VIRTUAL REALITY CASE
A US court has awarded $500m (£395m) to a firm which sued Facebook and other defendants over the use of its virtual reality technology. The jury found Oculus, which Facebook bought in 2014, had breached a contract with video game developer Zenimax when launching its own VR headset. Oculus said it was “disappointed” and would appeal against the ruling.
The case threatened to overshadow Facebook’s latest results, which showed it enjoyed a strong end to the year. Facebook’s net profit more than doubled to $3.6bn in the fourth quarter.
The social network was helped by 53% growth in advertising revenues, and said it was on course to hit two billion users in the first half of 2017. Shortly before the results came out, the court awarded Zenimax damages from Facebook, Oculus and Oculus executives following a three-week trial.
Zenimax had argued that its early innovations in virtual reality were unlawfully copied when Oculus built its own headset, the Rift. An Oculus spokesperson said the jury rejected this argument, but did find that Oculus breached a contract with Zenimax and infringed some of its copyright. The firm did not comment on the $500m damages. (BBC News)
10. AMAZON FORECAST SPARKS INVESTOR CONCERN ON BIG SPENDING
Amazon.com Inc. projected earnings for the current quarter that indicate stepped up spending on warehouses, movies and gadgets will continue this year at the expense of profits.
Operating income in the first quarter will be $250 million to $900 million, which is less than a year earlier even though revenue is forecast to increase as much as 23 percent to $35.8 billion.
The forecast suggests that Amazon Chief Executive Officer Jeff Bezos will continue expanding a delivery infrastructure designed to get products to customers quickly, produce more video content that encourages people to join and renew Amazon Prime memberships, build gadgets like the voice-activated Echo personal assistant and push further internationally into markets including India.
Amazon reported operating expenses rose 23 percent to $42.5 billion in the fourth quarter ended Dec. 31. The spending included $5.7 billion to store and deliver items, particularly those ordered by Prime customers who pay $99 a year for free, fast shipping. The company also announced Monday it would build a $1.49 billion air hub near Cincinnati to accommodate its growing fleet of cargo planes. The hub and planes make Amazon less reliant on United Parcel Service Inc. and FedEx Corp. and complement its network of warehouses around the country.
Sales increased 22 percent to $43.7 billion in the fourth quarter, the Seattle-based company said Thursday in a statement. Analysts estimated $44.7 billion. Foreign currency changes reduced sales growth in the period by 2 percentage points, the company said.
In Amazon Web Services, the company’s cloud-services division, revenue was $3.5 billion, up 47 percent from a year earlier. While cloud computing is Amazon’s fastest-growing and most profitable segment, that’s down from a 55 percent rise in the third quarter. Price reductions from the unit contributed to the slowdown, said Ron Josey, an analyst at JMP Securities. (Bloomberg)
