SAP and Qualtrics, Athenahealth, California Fires: CEO Daily for November 12, 2018
Clay Chandler, standing in for Alan today.
I write from Shanghai in the aftermath of Singles’ Day, the annual Nov. 11 shopping extravaganza orchestrated by Chinese e-commerce giant Alibaba Group. This year marks the festival’s tenth year and, true to form, Alibaba smashed its own record for inciting consumer frenzy. Between midnight Sunday and midnight Monday, Alibaba racked up $30.8 billion in online sales as measured by its own metric of “gross merchandise value,” shattering last year’s record of $25.3 billion. That’s a staggering number, exceeding the $19.6 billion American consumers spent between Thanksgiving and Cyber Monday last year, plus the $4 billion spent on Amazon’s July 16 Prime Day.
Alibaba works hard to whip up excitement for this event. Festivities commenced on Saturday night with a schmaltzy gala featuring Cirque Du Soleil, Mariah Carey, and supermodel Miranda Kerr. But one important celebrity, Alibaba founder and executive chairman Jack Ma, kept a low profile. In past years, Ma has appeared in increasingly elaborate performance routines, dressed as a punk rocker, Michael Jackson wannabe, or martial arts hero. But this year, Ma, who announced in September that he will retire next year, appeared in a pre-recorded video that showed him toiling alongside Alibaba employees wrapping packages and delivering meals.
Ma will cede the chairmanship to CEO Daniel Zhang, who dreamed up Singles’ Day ten years ago and has overseen its expansion into blockbuster success. And yet, unlike Ma, there’s not much PT Barnum in Zhang. He is buttoned down and earnest—so much so that he is sometimes mocked for his nerdiness. Last night, I found that lack of pretense something of a relief. Singles’ Day has become such a glitzy, over-the-top affair—the breathless emcees! the giant Cape Canaveral-style screens flashing the latest sales data! the stadium-sized media center!—that it is starting to feel contrived, like the company is trying just a little too hard to convince the world its sales are real.
This year, with the escalating U.S.-China trade war and slowing Chinese economy, there is new skepticism of Alibaba’s breakneck expansion. Many analysts noted that while gross merchandise value hit a new record at this year’s Singles’ Day, year-on-year growth fell to 27%, slowest in the event’s 10-year history
At a media briefing last night, executive vice chairman Joe Tsai argued the trade war can’t derail the rise of China’s middle class. “There are 300 million [in China’s] middle class. In the next 10 to 15 years, that number will double to 600 million,” he said. “That number is not going to stop, trade war or no trade war.”
Zhang argued Alibaba’s “New Retail” strategy, which combines online sales with a new focus on improving digital capabilities of bricks-and-mortar stores, offers ample room for further growth. “People always ask, ‘Daniel, what is the ceiling to this?’” he said. “But if we look at traditional online spending in China, it’s 20% of consumption.”
Meanwhile the group is highlighting its effort to use the vast trove of data it collects from its online commerce operations to diversify into new fields such as cloud services and artificial intelligence. Some of those technologies, including an A.I.-enabled car, a “smart hotel” room served by robots instead of people, and a giant robotic arm that mixed and poured coffee and cocktails, were on display. Late Sunday night, Ma himself made a brief cameo at the media center to tour the exhibit and admire its marvels.
SAP and Qualtrics
Software firm Qualtrics had been planning for an IPO this week, but it’s decided at the last minute to opt for a sale to SAP instead. The German giant is paying $8 billion in cash for the survey software firm. Qualtrics was likely to get a $5 billion valuation at its flotation. SAP CEO Bill McDermott: “Yes, we did pay a handsome price, but it’s well-deserved.” Fortune
Athenahealth is being bought by private equity firm Veritas Capital and hedge fund Elliott Management. The deal is reportedly worth $5.5 billion cash, or around $135 per share. Elliott has for a while been pressuring Athenahealth to sell itself, and bid $160 per share back in May. Reuters
The death toll from the California wildfires has now reached 31—29 in Northern California’s unprecedentedly destructive Camp fire and two in the Woolsey fire down south. A total of 228 people still remain unaccounted for. The fires are being fed by dry conditions, and Governor Jerry Brown said of climate change: “The chickens are coming home to roost, this is real here.” CNN
Diageo will sell 19 brands, including Seagram’s VO whiskey, to distiller Sazerac for $550 million. Diageo is trying to concentrate on its more high-end brands, and Southern Comfort owner Sazerac is building up its portfolio. Bloomberg
Around the Water Cooler
When Facebook got rid of Oculus Rift designer Palmer Luckey, the reason was never made clear. Mark Zuckerberg denied it had anything to do with politics. But a new Wall Street Journal piece claims it was because of Luckey’s support for Donald Trump in his race against Hillary Clinton. The article also alleges that Zuckerberg pressured Luckey to voice support for libertarian candidate Gary Johnson. WSJ
The Tokyo Stock Exchange has approved the IPO of SoftBank’s mobile unit, which at $21 billion should be Japan’s biggest ever. The flotation is set to take place on December 19. SoftBank’s mobile unit, which grew out of what was once Vodafone’s Japanese business, is SoftBank’s cash cow, and saying goodbye marks SoftBank’s shift toward being an investment powerhouse. Financial Times
Big Tech companies such as Microsoft have… called for more regulation? They have indeed, in concert with the French government and a bunch more European countries—but not Russia nor China, nor the U.S. The “Paris call for trust and security in cyberspace” is supposed to ward off cyber-attacks, online censorship, and hate speech. “Now that half of humanity is online, we need to find new ways to organize the Internet,” said an official from the office of French President Emmanuel Macron. Reuters
President Macron used a speech at the centenary of the Armistice that ended the First World War to slam nationalism—in front of self-avowed nationalist President Donald Trump. Macron: “Nationalism is a betrayal of patriotism. By saying, ‘Our interests first, who cares about the others,’ we erase what a nation holds dearest, what gives it life, what gives it grace and what is essential: its moral values.” Fortune