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CEO Daily: Thursday, 10th August

Aug 10, 2017

Good morning.

Global markets are jittery, but mostly shrugging off the escalating war of words between the U.S. and North Korea. The BBC offered the case for optimism this morning, pointing out that a war on the Korean peninsula serves no-one’s interests.

But it is interesting to note the role reversal that has taken place. Kim Jong Un’s regime has long thrived on its unpredictability, making bellicose statements and sending off missiles when no one is expecting it. President Trump has turned the table, and become the unpredictable one. The world learned yesterday that, while he has surrounded himself with experienced generals, he consulted none of them before making his provocative “fire and fury” comment.

Meanwhile, the North Koreans have become more precise, providing unusual detail about plans to launch four intermediate range missiles in mid-August that would fly over Japan and land in the water 30 to 40 kilometers from Guam. While North Korea regularly promises to destroy the U.S., it seldom offers such precise details.

Guam Governor Eddie Calvo says he’s not worried, and told Reuters that North Korea’s actions are a sign of caution. “They like to be unpredictable. They’ll pop off a missile when no-one is ready. They’ve done it many times,” he said. “They’re now telegraphing their punch, which means they don’t want to have any misunderstandings. I think it is a position of fear.”

Let’s hope he’s right. More news below.


Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Charter’s French Connection

The plot around Charter Communications thickens. Altice, the company of French billionaire Patrick Drahi, is reported to be preparing a bid for the U.S.’s number 2 cable company. Charter has already turned its nose up at combining with Verizon and Softbank this year. To end up in bed with the company it beat in a competition for Time Warner Cable last year would be an ironic twist. Charter’s enterprise value of $186 billion makes it a difficult target for the much-smaller Altice. Still, if Drahi can persuade Charter’s biggest shareholder John Malone to listen, anything is possible. Fortune

Glencore Gears up for Acquisitions

Ivan Glasenberg, CEO of the world’s biggest miner Glencore, said he was ready to hit the acquisition trail again after using solid cash flows from its core businesses to pay down debt. Net debt is now only at half the company’s medium-term target level. The company conspicuously chose not to raise its dividend, despite the fact that it’s a key source of income for Glasenberg and other top managers. The company also had its best trading results in two years, as it cashed in its thank-you check from Russia’s Rosneft after helping CEO Igor Sechin out of a tricky privatization dilemma last year. Bloomberg

We Told You So, Says Office Depot

Office Depot’s shares tumbled a stomach-wrenching 25% after it admitted that Amazon’s move into office supplies was hurting it. The admission raises fresh questions about the wisdom of the Federal Trade Commission’s decision to quash Office Depot’s merger with Staples last year. Vulnerability to competition from Amazon was one of the companies’ strongest arguments for the deal. The share price reaction suggests that investors, too, thought that the companies were only bluffing. Like-for-like sales were down 6% on the year in the second quarter. Fortune

A New Front on Mobile Carriers’ Price War

AT&T and T-Mobile are introducing new, cheaper smartphones and promoting financing plans for low-cost handsets to convince low-income customers to upgrade. The phones, made by LG and Alcatel, don't have the latest chips, screens and cameras, but are being offered at what look to be pretty compelling prices of $4-$5 a month. AT&T says value phones are one of the fastest growing segments in its portfolio. They need to be: customers are upgrading ever slowly due to market saturation and the fact that existing models are good enough to meet most users’ needs (until the content providers can create new needs, of course). Fortune

Around the Water Cooler

No Sector For Old Men

The frenetic race for original content goes on. Facebook made its biggest move yet in the television market by announcing plans for programming ranging from professional women's basketball to a safari show and a parenting program. The redesigned product, called "Watch," will be available initially to a limited group in the U.S. on Facebook's mobile app, website and TV apps. Elsewhere, the streaming arms race continued as Netflix signed up the Coen brothers to make a six-part Western series that will debut next year. Netflix has already had a big hit with its serial expansion of the Coens’ movie Fargo. Fortune

Lego CEO Let Go

Lego’s CEO Bali Padda is to leave the company after less than a year in the job. Chairman Joergen Vig Knudstorp said the move was down to Badda’s age (61), “and the realization that he could only do the job for a few years at most,” according to the Financial Times. Lego’s sales slowed in 2016 after heady growth in previous years. Padda, who had previously been COO and was the first non-Dane at the helm of the company, will hand over to the impeccably Danish Niels Christiansen. FT, metered access

Toshiba and PwC Spare Each Other’s Blushes

Toshiba avoided the humiliation of being delisted from the Tokyo stock exchange after its auditors, the Japanese affiliate of PriceWaterhouseCoopers, agreed to sign off on its accounts, albeit with a “qualified opinion” on the accounts as a whole and a rare “adverse opinion” on its internal controls. The case is almost as important for PwC as for Toshiba, after a couple of high-profile embarrassments in Italy (with BT) and in Ukraine (with PrivatBank) this year, not to mention its gaffe at the Oscars. Fortune

“Own the School Year Like a Hero”

The latest instalment in our occasional series of avoidable PR disasters involves Wal-Mart, which yesterday had to explain away a display in one of its stores that showcased a collection of guns as “back-to-school” items. Above the display case hung a sign it reading “Own the school year like a hero.” At the time of writing Wal-Mart hadn’t identified the store but appeared to accept that the photo of the display was authentic and apologized for a "truly awful" error. Fortune

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