CEO Daily: Friday, June 12
Two big CEO changeovers topped the news yesterday. Rupert Murdoch is said to be handing the reins of 21st Century Fox to his son James, and Dick Costolo is stepping down as CEO of Twitter. Neither is a surprise. Murdoch’s lifelong desire to keep the company in the family is well known; Costolo’s failure to grow the Twitter user base is, too. Whether James can adequately replace the able Chase Carey, who has been running the company for the senior Murdoch, is a question worth asking – as is whether Twitter founder Jack Dorsey can do a Steve Jobs comeback act and save his company from fading into oblivion. More below.
Meanwhile, the action to watch today is in the U.S. House of Representatives, where the President will attempt to twist enough Democratic arms to get his trade bill past the finish line. We think it is hard to overstate the importance of this one, as an indicator of whether the Obama presidency still has gas, whether the U.S. Congress can still function, whether the business agenda still carries any political weight in Washington, and whether the U.S. still plays a leadership role in the world. Too close to call.
Sorry to have more questions than answers this morning. Maybe it’s time for a weekend. I’ll be heading for the Eastern Shore of Maryland, if I can get off the island.
• Dorsey back in as Twitter CEO, Costolo out
Dick Costolo announced on Thursday afternoon that he'll step down as Twitter's CEO, effective July 1, and that company co-founder and chairman Jack Dorsey will serve as interim CEO. Dorsey, who will receive no direct compensation for serving in the interim role, previously served as CEO of Twitter until 2008, when Costolo's predecessor, fellow co-founder Evan Williams, took over that role. Wall Street seemed to be in favor of the move, at least initially, as Twitter's shares surged by as much as 5% in after-hours trading. Fortune
• Appeals court denies telecoms, net neutrality goes into effect
A federal appeals court denied the telecom industry's request to suspend the new net neutrality rules passed by the Federal Communications Commission in February. The FCC rules, which ban paid prioritization and the blocking of lawful content by Internet providers, will go into effect today. Fortune
• Whole Foods on "attack" with new, lower-priced stores
Whole Foods co-CEO Walter Robb said on Thursday that the upscale grocery chain is "going to go attack" with its new sister chain of smaller, lower-priced stores. Robb said the new chain, to be called "365," is Whole Foods' "aggressive response" to the pricing tactics of rivals who have increasingly squeezed the company's market share with expanded natural and organic product selections. Whole Foods' 365 chain will launch its first locations sometime next year and Robb believes the new chain could eventually grow to the size of its parent. Fortune
• Uber bets on China
Uber said it plans to spend $1 billion in China this year, as the ride-sharing service looks to expand in a country where it says it already controls roughly half of the market for non-taxi car services. In a letter to investors, Uber CEO Travis Kalanick said the company's China unit has already received $500 million in strategic funding from Chinese investors. While a number of U.S. tech firms have seen plans to expand to China stall out, Uber has found strategic partners with companies such as Chinese search engine Baidu. Financial Times (subscription required)
Around the Water Cooler
• Fox's future king?
Recent reports have Rupert Murdoch stepping down as CEO of 21st Century Fox and handing over the reins to his son, 42-year-old James Murdoch. But doubts remain about the ability of Murdoch's son to run the $67 billion media giant, particularly given that the younger Murdoch's leadership experience includes heading up News Corp.'s British holdings during a high-profile phone-hacking scandal. Of course, Rupert has spoken glowingly of his son's management abilities in the past and James will not need to look far for advice on running Fox, as his father will stay on as co-executive chairman. Fortune
• Samsung's activist battle heats up
Activist investor Paul Elliott Singer's hedge fund moved on Thursday to block a Samsung unit's sale of treasury shares to an allied shareholder, KCC Corp. The deal is meant to secure KCC's support for the planned $8 billion merger of two Samsung affiliates that Elliott Associates opposes. The activist fund also received support from pension fund manager Park Yoo-Kyung, a director at APG, who said on Thursday that Samsung "burned the bridge" with shareholders by using the treasury stock sales "as ammunition to protect controlling shareholders." Bloomberg
• Could bond selloff delay rate hike?
Investors have been closely watching improving U.S. employment numbers and other economic indicators as they gird themselves for the Federal Reserve's expected interest rate hike sometime this year. But, the recent bond market selloff is sending mortgage rates soaring while raising borrowing costs for corporations, all of which could potentially convince the Fed to delay the eventual rate hike. Reuters
• Facebook's Oculus partners with Microsoft
Facebook-owned Oculus VR revealed the final consumer version of its virtual reality headset, the Oculus Rift, on Thursday. The company also surprised the tech and gaming worlds by announcing a partnership with Microsoft that will see the Oculus Rift sold with a wireless controller for Microsoft's Xbox One gaming console. In addition to streaming several Xbox One games, the Oculus headset will also work natively with the Windows 10 operating system Microsoft is launching next month. The Oculus Rift goes on sale in early-2016. Fortune