CEO Daily: Tuesday, February 2


Can you win a race by coming in third? That’s what Marco Rubio seems to have done last night in Iowa, finishing with a better-than-expected 23% and earning top spot in what pundits now call the “establishment lane” of the Republican presidential race. That lane, however, remains very narrow. Ted Cruz led the caucuses with just under 28% of the vote, but it’s unclear how much that victory, powered by the state’s well-organized evangelicals, will carry forward into other states. Headline writers delighted in calling Donald Trump, with 24% of the vote, the “first loser” of the race, but there’s little reason to think that will slow him down or cut into his nationwide lead in the polls.


The Democratic race between Hillary Clinton and Bernie Sanders remained too close to call. The 74-year-old socialist mimicked Barrack Obama’s win eight years earlier by exciting young Iowans, but its far from clear he can assemble the diverse racial coalition that powered Obama over Clinton in subsequent states.


Yesterday’s other big winner was Alphabet, which became the world’s most valuable company, surpassing Apple after a strong earnings report. The company, which makes its billions selling search-based ads, for the first time provided some financial details on its “moonshots” – businesses ranging from self-driving cars to wired homes to human longevity. Those efforts lost $3.6 billion during the quarter, but investors didn’t seem to care, sharply distinguishing the West Coast giant from the other American corporations that are increasingly under pressure to shut down efforts that won’t pay off in three years or less. Alphabet plays by different rules, as CEO Larry Page explained in his interview with me at the Fortune Global Forum last November.


Closer to home, I interviewed AOL CEO Tim Armstrong yesterday at the American Media Magazine Conference, where he predicted the mobile revolution “will rip through the Internet and traditional media” in the coming decades. “I thought the Internet was the biggest thing to ever happen in my lifetime,” said Armstrong, whose company was bought by Verizon for $4.4 billion last year. “I think mobile will dwarf that.”


Armstrong gave hope to the magazine publishers assembled in the room, saying strong content brands like theirs are “kryptonite to commoditization” in media. But to succeed, he said, they would have to to overcome the intransigence in their own organizations. “Your biggest competition is yourself,” he told them. Amen to that.


More news below.


Top News

Alphabet's most successful moonshots

When Google's parent company, Alphabet, reported results on Monday, the media were perhaps most excited to get a first peak into which of the tech firm's riskier and greener businesses are thus far most paying off. According to CFO Ruth Porat, the $448 million in quarterly revenue from "other units" came mostly from home appliance maker Nest, high-speed broadband Internet provider Fiber, and life sciences division Verily. “We are working diligently to build additional businesses that create long-term revenue, profits and value,” she told investors on the company’s earnings call. Fortune

BP slumps to worst loss in over 20 years

The British oil and gas company, which is still grappling with the huge costs from a deadly 2010 Gulf of Mexico oil spill, reported a steep annual loss on Tuesday and said it would cut thousands more jobs. It maintained its dividend but the weak results and outlook sent shares trading lower as investors fret about the company, which is facing a steep drop in oil prices along with the broader industry. Weak results have also been reported by Chevron, and Royal Dutch Shell is also expected to post a major drop in profits. Reuters

Uber drivers protest fare cuts

Drivers in New York City protested the ride-hailing app's recent 15% fare cuts, which they say will prevent them from earning enough wages to make ends meet. The protest, organized by United Drivers Network, is similar to others staged by the group in the past – with about 10,000 drivers expected to shut off their app as part of the protest. Uber has claimed that the price cuts, similar to actions it has made in other U.S. cities, are meant to boost demand after a demand slump that occurs after the holiday season. Drivers also protested for higher wages in San Francisco. Fortune

Nintendo offers clues on mobile games

The Japan-based videogame giant, which reported a sharp drop in third-quarter profit, also gave gamers and analysts something to be excited about when it promised that the company's second smartphone game would feature one of the company's best-known characters. Nintendo – which has a portfolio of franchises that includes Super Mario Brothers and The Legend of Zelda – declined to provide any real specifics regarding timing. A lot is riding on Nintendo's mobile game strategy, as the videogame maker long avoided making its franchises available on that platform. But with the traditional console business facing sales challenges, it became clear Nintendo had to change with the times. Wall Street Journal (subscription required)

Around the Water Cooler

A messaging app with 1 billion users

Facebook's WhatsApp, which the social-media giant purchased for $19 billion, has just became the first messaging app to clear the billion-user mark – meaning its user base has more than doubled since Facebook bought it in 2014. “There are only a few services that connect more than a billion people,” Mark Zuckerberg said. He reiterated a plan to make communication with businesses easier. Facebook Messenger itself is also doing well, with 800 million monthly active users. Fortune

Macy's shakes up management team

The department-store operator has created two new jobs to spur e-commerce and innovation in a bid to end a deepening sales decline. It named Macy’s veteran Peter Sachse to the newly created position of chief growth officer. Sachse will make sure Macy's merchants in its main retail business work in concert with the retailer’s new Backstage discount chain, the Bluemercury beauty chain it recently bought and plans to integrate into its stores, and its upcoming locations overseas.. It also hired Justin MacFarlane as its Chief Strategy, Analytics and Innovation Officer, overseeing the use of research and analytics and developing new business venture ideas from the retailer’s trove of customer data. Fortune

AT&T can't break Slim's grip

AT&T executives have claimed that laws introduced in Mexico almost two years ago to give wireless customers more choices have done little to dent dominant provider American Movil SAB's market share. AT&T has only 8.5% of the market vs America Movil's 69.5%, which is controlled by billionaire Carlos Slim. AT&T sought to frame a debate about the topic just weeks before the government reviews whether the 2014 laws have met their goals to increase competition. AT&T – a distant third in market share in Mexico – has a lot at stake in the market, where it has spent $4.4 billion on acquisitions since 2014 and has pledged to invest $3 billion more in its network. Bloomberg

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