I was at Apple headquarters in Cupertino yesterday, just two days before the tenth anniversary of the iPhone launch. It’s amazing how much that little device has changed our lives in a decade—how we communicate, how we consume media, how we shop, how we drive, how we literally navigate life. Yet to hear the folks at the Infinite Loop talk, we are only at the beginning of the smartphone’s transformation of the world of work.
A decade ago, Steve Jobs was contemptuous of selling to businesses. I was at The Wall Street Journal when he came by with a pre-release batch of iPhones, and passed them around for us to test. We were all Blackberry addicts at the time, and one of my colleagues, after several fat fingered attempts to type on the iPhone keyboard, told Jobs he wasn’t sure the new phone would work for enterprises. Jobs responded: “I don’t give a (expletive) about the enterprise business.”
Fast forward a decade, and Apple products now have become firmly ensconced in many companies. Tim Cook recently told Businessweek that “enterprise is like the mother of all opportunities.” The company has partnered with Cisco to link the iPhone’s data and intelligence to Cisco’s office communications networks, and is also working with SAP, IBM, and Deloitte to do more of the same. Cook is particularly excited about the power of Augmented Reality to change the way people work and shop, as well as play. So even if the iPhone’s adoption rate has slowed, its transformative potential still has, in Cook’s words, “an incredible runway.”
News below. And if you are into tech turnarounds, be sure and read Aaron Pressman’s story about CEO Lisa Su’s attempt to pull chip-maker AMD out of its death spiral, which is online today and appears in the July issue of Fortune magazine. Also worth a read is Aaron’s interview with Qualcomm chairman Paul Jacobs , which we published yesterday, and which spans subjects from the iPhone and Qualcomm’s grouse with Apple to designing robotic avatars.
• Tweaked WannaCry Virus Wreaks Global Havoc
A massive ransomware attack spread like wildfire, crippling businesses from Europe to Australia and the U.S.. The virus appeared to be a modified version of the ‘WannaCry’ bug that struck last month, based on the NSA hacking tool ‘Eternal Blue’ and mimicking WannaCry’s request of a relatively modest ransom demand payable in Bitcoin (the virtual currency rose 8% yesterday, although how much that owed to a spike in ad hoc demand for it is unclear). The attack gave the impression that WannaCry had been tweaked and ‘released back into the wild,’ according to cyber security experts. Drug giant Merck, British ad agency group WPP, Denmark’s Maersk, and Russian oil producer Rosneft were among those affected.
• Yellen’s Foray Into Equity Strategy Hit Stocks…
The stock market had its worst day in six weeks and bond yields also rose sharply after both Federal Reserve Chairwoman Janet Yellen and her deputy Stanley Fischer drew attention to “rich” stock valuations in a context of rising interest rates. Both restated the Fed’s intent on continuing to raise rates, despite indications that growth is weakening in key sectors such as housing and the auto sector. Elsewhere, the IMF also cut its growth forecast for the U.S. economy to a mere 2.1% this year and next, having earlier forecast 2.3% and 2.5%, respectively. In its annual overview of the U.S. economy, the Fund explicitly criticized President Trump’s budget proposals as appearing “counter to the budget’s goals of promoting safety and prosperity for all Americans.”
• …While Draghi Makes a Move on the Punchbowl
It was a day for central bankers everywhere to pour cold water on markets, in fact. Even before the comments from Yellen and the IMF, Mario Draghi had sent the euro soaring against the dollar and Eurozone bond markets into a funk with the clearest hint yet that the European Central Bank is preparing to wind down its monetary stimulus. With the Fed already well into tightening mode, the ECB’s quantitative easing is one of the largest remaining props to asset valuations. The QE program will run at its current rate of 60 billion euros (a month till the end of the year. The key variable now is how soon thereafter the ECB starts to reduce its bond purchases. Meanwhile, the Bank of England told U.K. lenders to raise $14 billion in extra capital to cover rising risks on mortgage loans.
• Senate Buys Time to Rejig Health Bill
One of the markets’ chief fears is, of course, that the growth spurt anticipated after Donald Trump’s election is failing to materialize because of problems pushing through the President’s agenda. There was further evidence of that Tuesday as Senators pushed back the timetable for a vote on their draft health bill until after the July 4 holiday, giving themselves another week to square the circle of cutting costs while keeping cuts to coverage within acceptable political limits.
Around the Water Cooler
• App Spending A-Plenty
There’s still plenty of money to be made in apps. According to a report from research firm App Annie, the app economy will be worth $6.3 trillion by 2021, a 380% jump in just five years. The simple explanation is more people in the world owning smartphones and doing more things with them. It goes without saying that the bulk of the gains will be in Asia, where penetration rates and more favorable consumer preferences combine to create the strongest macro backdrop. Another interesting tidbit from the report is that Google Play and other third-party Android stores will overtake Apple’s App Store in sales this year (a combined $41 billion, compared to $40 billion for the App Store).
• Nestle Responds Cautiously to Loeb
Nestle announced its response to Dan Loeb’s activism—a $20.8 billion share buyback over three years and a promise to concentrate investment in faster-growing geographies and in higher-margin businesses such as “coffee, petcare, infant nutrition and bottled water.” The buyback and other capital and portfolio measures (such as the sale of its U.S. candy business) will leave its net debt at around 1.5 times its basic operating earnings (EBITDA) by 2020. Nestle shares outperformed the broader market to return to where they were after Loeb made his play at the weekend. It conspicuously avoided answering Loeb’s challenge to sell its stake in L’Oreal.
• Toshiba Misses Chip Sale Deadline, Sues WD
Toshiba pushed back the deadline for selling its prized flash memory chip unit, saying the $18 billion deal was being held up by differences of opinion within the Japanese government-backed consortium that it has chosen as preferred bidder. It also said it would sue its chip business partner Western Digital for interfering in the sale, a day after the U.S. firm resubmitted a bid for the unit. The lawsuit pushes acrimony between the two to new heights and further complicates prospects for a deal. Toshiba, the world’s number two producer of NAND chips, is scrambling to cover billions of dollars in cost overruns at its bankrupt Westinghouse nuclear unit. It had pledged to have a signed agreement for the sale of the unit by Wednesday, the day of its annual shareholder meeting.
• Reinforced Armour
Under Armour tapped Aldo CEO Patrik Frist to take over as its president and chief operating officer, and made two other C-suite appointments as it tries to turn its flagging share price around. Paul Fipps and Colin Browne, two company insiders, will take over as chief technology officer and chief supply chain officer, respectively. The former market darling’s momentum has faltered badly under pressure from a revived Adidas and a mass exodus of customers from the Main Street stores on which UA depends. Investors’ first reaction was unimpressed. The shares, which are down over 60% from their 2015 peak, lost 0.1%.
Summaries by Geoffrey Smith Geoffrey.email@example.com;