Satya Nadella Reignites Microsoft

–Satya Nadella shows that yes, you can re-ignite growth at a giant tech company. For years this was a subject of theoretical debate, but no more. Microsoft reported earnings yesterday, and even in this very hot market, the shares rose on the news from what was already a record high. When Nadella’s predecessor, Steve Ballmer, in 2013 announced his intention to retire, the stock was trading at a price it had reached previously in 2007, 2001, and 1999. Conventional wisdom held that Microsoft’s time had passed with the waning of the PC-centric world it had ruled. But it hadn’t. Though the global PC market shrank again last year, Microsoft grew, helped especially by a surprisingly strong cloud business.

–Elon Musk continues to be the world’s most electrifying CEO. (No word-play intended, but I’m sticking with it.) The latest evidence: his somewhat mysterious but definitely intriguing tweets about digging a tunnel under Los Angeles. He claims to be serious and even says he’ll start digging “in a month or so.” Could this possibly be real? We all asked the same question about his plans to create from scratch a manufacturer of electric cars, to build the world’s largest building to house a battery factory, and to launch satellites into space. So regarding the tunnel: Is he crazy? Or are we crazy to doubt him?

-The potential of artificial intelligence is limited by our imaginations more than by technological constraints. Stanford researchers have trained a computer to identify skin cancer moles and lesions as accurately as human dermatologists. This is highly significant for at least two reasons beyond the obvious benefits for human health. First, it’s another example of “deep learning,” a world-changing IT advance that Fortune explained in depth last fall. Just a couple of years ago, many people thought computers were inherently terrible at pattern recognition; now they’re excellent and getting better. Second, the technology is as good as humans at one of dermatology’s most important tasks. Amid rising angst as tech takes over more jobs, it’s rising to threaten more highly skilled jobs.

-Trade policy is the latest issue to illustrate the Republican rift. White House press secretary Sean Spicer told reporters on Air Force One yesterday that President Trump wants to impose a 20% tax on Mexican imports to pay for the border wall; later, at the White House, Spicer backtracked, and it appears he may have been referring to a border-adjustment tax regime, which House Speaker Paul Ryan favors – but Spicer also said it was only one possibility. So what’s the plan? More broadly, Trump and congressional leaders are not united on major policy issues. Business leaders need to make decisions based on their agenda, and it isn’t getting any easier.

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What We're Reading Today

Verizon explores Charter Communications merger
Verizon CEO Lowell McAdam has approached Thomas Rutledge's Charter -- recent market cap: $100 billion -- to discuss a possible deal as the media and telecom industries consolidate, led by AT&T's proposed deal with Time Warner. The strategy diverges from that of AT&T and Comcast, which have looked to add content providers. It's unclear if Charter is interested. WSJ

German prosecutors widen VW investigation...
...saying there's evidence that former CEO Martin Winterkorn may have known about the cheating earlier than he has indicated. Subjects of the investigation have increased from 21 to 37, including Winterkorn, who has claimed he learned about the cheating in August 2015, shortly before it became public.  Reuters

Toshiba to unload its memory chip business
Still reeling from an accounting scandal last year, the Japanese conglomerate announced last month it would take a multi-billion-dollar writedown in its nuclear power division. It will sell a minority stake in its memory chip business to raise cash. CEO Satoshi Tsunakawa will take over direct control of its overseas nuclear division and plans to review whether Toshiba will continue to build nuclear plants in the U.S. Fortune

Elon Musk gains Trump's ear
The Tesla CEO shares some goals with President Trump, since he intends to add manufacturing jobs. And despite Musk's criticism of Trump during the campaign, the two have formed a connection, it seems, to the point where Musk offered the idea of a carbon tax at a White House meeting with manufacturers, and it wasn't immediately rejected. Trump is a global warming skeptic and has expressed disdain for a carbon tax.  CNBC

Building Better Leaders

Trust your gut
"Because I was new to the fashion business I sometimes let myself get swayed, but my gut, rather than the seasoned experts’ advice, was usually the right answer," says Shoshanna Gruss, founder of the fashion line Shoshanna. Huffington Post

Companies issue 14% more stock options...
...during periods when they're committing fraud. Researchers found that companies accused of misstating financial results increase stock options in order to encourage employees to remain quiet.  Fortune

U.S. union membership falls to 10.7% of workers
It's the lowest level on record and the first decline in four years. WSJ

Forging Relationships

U.K. prime minister delivers tough message to GOP
Ahead of her meeting with President Trump today, Prime Minister Theresa May said U.S. and U.K. policies of long military intervention in other countries' affairs must end. She urged Trump to keep the Iran nuclear deal and support NATO. CNN

Trump pushes GOP to pass his agenda
At a Republican retreat in Philadelphia, Trump told congressional leaders they must act swiftly on his calls to build a border wall, repeal Obamacare, and cut taxes. Trump and GOP leaders remain split on priorities and timelines. House Speaker Paul Ryan said it would be difficult to pass tax and healthcare reforms in Trump's first 100 days, but he would like to do both this year. Fortune

Mexican president cancels Trump meeting
The move by Enrique Peña Nieto came one day after Trump signed an order to begin building a border wall. Trump claims the cancelation was a mutual decision.  ABC News

Fortune Reads and Videos

Carlos Slim, Mexico's richest man, calls a rare news conference
It comes shortly after President Trump's order to start building a border wall. Fortune

Trump's proposed entry ban omits Muslim-majority countries...
...where his company has business ties, including Saudi Arabia and Egypt. Fortune 

Sheryl Sandberg disagrees...
...with Trump's executive order that cuts funding to overseas health care groups that give advice on abortion. Sandberg says the best way to limit abortions is through "more family planning services." Fortune

Boeing unveils sleek new spacesuit design
It includes touchscreen-sensitive gloves and a helmet attached by a zipper. Fortune

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