Data Sheet—Thursday, October 6, 2016
Sometimes companies, like people, just can’t catch a break. Samsung Electronics was just starting to get its groove back this summer when it suffered the body blow of launching a massive recall of its flagship smartphone. Adding insult to injury, Southwest Airlines evacuated a flight Wednesday when a phone its owner says was a replacement Galaxy Note 7 began smoking.
Now Samsung is under attack by the hedge fund Elliott Management. The New York firm wants Samsung to simplify its complicated ownership structure, arguing that doing so would attract more non-Korean investors and eliminate a discount that investors place on Samsung’s shares.
Elliott is an efficient activist. It went after Samsung last summer, waging a proxy battle to prevent a merger of two Samsung entities. Elliott ran a tireless campaign against Samsung out of its Hong Kong office, but it ultimately lost. Now it is back, this time purporting to be supportive of the founding Lee family, which effectively controls Samsung despite its low-single-digit ownership stake.
I happened to be in Seoul reporting a profile on Jay Y. Lee, Samsung’s third-generation leader, when Elliott launched its blitz. Among Elliott’s past conquests is the government of Argentina, whose defaulted bonds Elliott turned into an international conflict. In Samsung, however, it met its match. Samsung is kind of like a country. Indeed, to equate it with South Korea, at least from a commercial perspective, isn’t a stretch.
Things may look bleak, but Samsung has the luxury of the ultimate long-term mentality. As an example, it has invested heavily in a making “biosimilar” drugs and stands to cash in soon with an IPO that might raise as much as $2 billion.
Don’t count Samsung out. And don’t expect it to cave easily to Elliott.
The veteran Wall Street analyst Toni Sacconaghi issued a detailed report Wednesday exploring the “dream scenario” of Apple paying $50 billion to buy Netflix, either to cross-sell Apple’s devices to Netflix customers or bolster Apple’s own subscription offerings. The Bernstein analyst concurred with the theme of yesterday’s Data Sheet, that these types of mergers don’t work. “Overall, we do not see a compelling rationale for Apple to acquire Netflix, and believe Apple will more likely partner or compete with Netflix than acquire it,” he wrote. That makes sense.
Adam Lashinsky is an assistant managing editor at Fortune.
BITS AND BYTES
VMware will embrace former nemesis Amazon. The pact, scheduled to be announced next week, should make it simpler for companies to run VMware software both on their own internal data center servers and on Amazon’s public cloud infrastructure. VMware’s chief executive described Amazon Web Services as a mortal enemy three years ago. (Fortune)
All of Apple’s cloud teams will work under one roof. The company plans to consolidate the groups led by senior vice president Eddy Cue onto its existing campus starting next year to better fight Google and Amazon, reports Bloomberg. Right now, the teams developing Siri, Maps, iCloud, Apple Pay, Apple News, iTunes, and Apple Music are scattered among different locations. (Bloomberg)
Samsung buys artificial intelligence startup founded by the guys who created Siri. The South Korean tech giant is paying an undisclosed sum for Viv Labs, which will develop software for Samsung’s smartphones. (Wall Street Journal)
Lenovo may rescue Fujitsu’s personal computer business. They are said to be discussing a deal that could be structured as a joint venture, similar to an arrangement that the Chinese tech giant entered with NEC about five years ago. (Reuters)
Why merchants are pushing back against chip cards. Chip-equipped cards became standard among retailers one year ago, a change meant to reduce fraudulent transactions. Many small retailers are still rebelling. That discontent is the subject of a lawsuit against American Express, Mastercard, Visa, and other financial institutions—one that suggests the forced migration violates antitrust laws. (Fortune)
WATCH FOR IT
Apparently, Twitter wants to decide on a sale quickly. The social media company has advised potential suitors to submit their offers before the end of October, according to several reports. It looks like at least two of them—Google and Disney—have decided to pass. That leaves Salesforce as the most prominent name on the list. CEO Marc Benioff is mum about all this speculation, although he admits the cloud software company evaluates a lot of potential acquisitions. “At the end of the day, we still have to look at everything because one of the ways we innovated is not just organically, it’s also inorganically,” he told CNBC’s Jim Cramer on Wednesday. (Reuters, Fortune, New York Times, Recode)
This could be the next $1 billion cloud company. So far, three software companies selling their applications strictly as cloud services have topped $1 billion in annual revenue—Salesforce (on its way to $10 billion), ServiceNow, and Workday. Veeva Systems, a specialist in customer databases and apps for pharmaceutical firms and life sciences companies, could well be the next.
Last year, Veeva declared its goal to reach the $1 billion mark by 2020. After its annual financial briefing last week, several analysts following the stock closely issued reports suggesting that the company is tracking ahead of that goal. Here’s why.
IN CASE YOU MISSED IT
Salesforce Customers Are Ready for Artificial Intelligence,
by Barb Darrow
What Apple’s Latest Quiet Move Could Mean for the Future of Apple TV, by Don Reisinger
Cord Cutting Is Spreading to Broadband Internet Subscribers,
by Aaron Pressman
More Evidence That Fitness Trackers Don’t Work,
by Mandy Oaklander/TIME
Twitter Encourages More Businesses to Interact With Upset Customers, by Kia Kokalitcheva
ONE MORE THING
Hey Google, is that odometer reading for real? The company’s fleet of self-driving cars has logged more than 2 million miles in the past seven years, about 90% of which were on city streets. That’s 300 years of human driving experience. (Fortune)