Good morning,
The FBI arrested a cyber security researcher widely credited with helping to disarm the WannaCry virus. Motherboard reported that British-born Marcus Hutchins has now been indicted for creating and distributing a different piece of malware between mid-2014 and mid-2015
It’s an intriguing counterpoint to reports of a major breakthrough by scientists in editing human genes, a development that offers the hope that parents in future will be able to avoid passing on hereditary conditions to their children. The reports were accompanied, with only a small time gap, by a fresh chorus of concerns that the same technology could also lead to the creation of ‘designer babies’.
Very different stories in their own right, they’re both reminders that technology is ethically neutral. The mastery of coding can be just as easily applied to committing crime as to stopping it. The mastery of biotechnology makes it easier both to enhance and cheapen human life at the same time. For all that we obsess over the technology itself, everything ultimately depends on the ethical quality of the humans operating it. At which point, at the risk of digressing, it’s instructive to consider the explosion of funding for science and the orphan status of humanities disciplines in today’s educational system.
Alan will return on Monday. Thank you for your patience with me, and enjoy the weekend.
Geoffrey Smith
@geoffreytsmith
geoffrey.smith@fortune.com
Top News
• Mueller Ramps up Investigation
Special Counsel Robert Mueller has asked for a grand jury to be impaneled to help his investigation into alleged links between the Trump election campaign, The Wall Street Journal reported. It cited legal experts as saying the move was evidence of a “long-term, large-scale series of prosecutions being contemplated.” The WSJ also noted that Greg Andres, formerly head of the U.S. Attorney’s office in Brooklyn, had joined Mueller’s team from blue-blood law firm Davis, Polk & Wardwell. Separately, Congress moved to protect Mueller’s independence, by introducing a bill (with bipartisan support) that would give Mueller the tight to challenge any attempt by the President to remove him. Fortune
• Trump Helps Bring Toyota and Mazda Together
Toyota and Mazda said they will spend $1.6 billion on a new assembly plant in the U.S.. Scheduled to open in 2021 and employ 4,000 people, the plant will build crossover SUVs for Mazda and Corolla sedans for Toyota. The latter part of that is interesting because Toyota had previously planned to build the new Corolla in Baja, Mexico, until the idea was publicly attacked by President Trump. The new plant is part of a broader strategic partnership that will also see the two Japanese companies cooperate in developing electric vehicles. Toyota is taking a 5% stake in Mazda in the process, while Mazda will take a 0.25% stake in Toyota. Separately, Toyota followed Honda in raising its profit forecast for the year, reflecting a decline in the yen. Reuters
• McCoy Runs out of Road at Avon
Avon said CEO Sheri McCoy will leave in March, having failed to turn round a catastrophic decline in the once-dominant direct seller of cosmetics. The company has lost nearly 90% of its value since it rejected a $10.7 billion bid from Coty five years ago, and it another 10% yesterday alone. Fortune’s Phil Wahba traces the company’s downward spiral under McCoy – a tale of missed opportunities and misguided attachment to traditional markets and business models. Fortune
• Alibaba, Kering Kiss and Make up
Alibaba chalked up a win in its campaign to escape the stigma of being a marketplace for fakes. Kering, the French-based group behind Gucci and Yves Saint-Laurent, said it would withdraw a 2015 lawsuit that alleged Alibaba had knowingly let fake goods be sold on it Taobao marketplace. Alibaba remains on the USTR’s list of ‘notorious’ markets for fakes, however. And the recent rumors of U.S. trade measures against China have cast increasing doubt on the proposed takeover of payments services MoneyGram by Alibaba affiliate Ant Financial. MoneyGram’s shares are now trading 12% below Ant Financial’s offer, reflecting fears that the U.S. will block the deal. NYT
Around the Water Cooler
• Here Comes the Jobs Report
The yield on the benchmark 10-year Treasury note hit its lowest in over a month as a weaker-than-expected ISM survey and ADP report dented hopes for a game-changing employment report from the Bureau of Labor Statistics this morning. Analysts expect non-farm employment to have risen by 180,000, broadly in line with the trend of the last 18 months. With the jobless rate at 4.3% and near what economists consider full employment, the key variables will be whether earnings growth can pick up, and how quickly formerly discouraged workers are re-entering the workforce. The share of 25-54 year-olds employed is still below where it was at any point in the decade leading up to 2008. WSJ, subscription required
• Belt-Tightening Pays off for Big Food
Kraft Heinz said net profit rose 50% in the second quarter and raised its dividend 4.2%, as the traditional cost-squeezing expertise of its management from 3G more than offset a 1.7% drop in revenue. Sales, general and administrative expenses fell 15% to $760 million in the quarter, keeping it well on track to meet a target of $1.7 billion in cost cuts this year. Big Food rival Kellogg also beat expectations, as cost-cutting allowed net profit to inch up despite a 6.6% fall in cereal sales that extended a two-year trend of falling revenues. Bloomberg
• Viacom Slumps on Bleak Outlook
Shares in Viacom fell 8% after the bell as it said that sales to pay-TV companies and streaming video services would all in the current quarter. The news was grist to the mill of those who doubt that established TV players can hold on to their customers, and their ad revenues, as viewing habits evolve. The fact that the company eked out a stronger-than-expected 4% rise in so-called affiliate sales in the last quarter was overlooked. CEO Bob Bakish said the company intends to focus on organic business after losing out to Discovery Communications in a battle for Scripps Networks. Fortune
• March of the Games Makers
Activision Blizzard joined Electronic Arts and Take Two Interactive in posting much stronger-than-expected results for the second quarter. The multi-player futuristic game Overwatch was the star performer. However, its shares weakened after the bell as it forecast a relatively modest second half. The company is due to release new iterations of Destiny in September and Call of Duty out in time for the holiday season. The irresistible rise of the games makers goes some way, one suspects, to explaining the equally irresistible decline of the likes of Viacom. Fortune