Amazon's second headquarters clears blocks in Virginia funding vote

WASHINGTON (Reuters) – Amazon.com Inc’s planned second headquarters in northern Virginia cleared a key test on Saturday when local officials approved a proposed financial package worth an estimated $51 million amid a small but vocal opposition.

People move about in front of the rostrum before a news conference about the announcement that Crystal City has been selected as home to Amazon’s new headquarters in Arlington, Virginia, U.S., November 13, 2018. REUTERS/Kevin Lamarque

Amazon in November picked National Landing, a site jointly owned by Arlington County and the city of Alexandria, just outside Washington, along with New York City for its so-called HQ2 or second headquarters. That followed a year-long search in which hundreds of municipalities, ranging from Newark, New Jersey, to Indianapolis, competed for the coveted tax-dollars and high-wage jobs the project promises.

Amazon in February abruptly scrapped plans to build part of its second headquarters in the New York borough of Queens after opposition from local leaders angered by incentives promised by state and city politicians.

The five-member Arlington County Board voted 5-0 in favor of Amazon receiving the financial package after a seven-hour meeting held in a room filled with up to about 150 citizens and representatives from local unions and minority advocacy groups.

There was strong opposition from some residents and labor groups, many of whom chanted “shame” and waved signs with slogans including “Don’t be the opposite of Robinhood,” “Amazon overworks and underpays,” and “Advocate for us and not Amazon.” One protester was escorted out of the meeting by police.

A few dozen protesters outside the county office chanted, “The people united will never be defeated.”

Danny Candejas, an organizer for the coalition “For Us, Not Amazon,” which opposes the company’s move into the area, said: “We are fighting to make sure people who live here are not priced out by wealthy people.”

Some supporters in the meeting held up signs saying ‘vote yes’ and ‘Amazon is prime for Arlington’.

One hundred and twelve people were registered to speak, an unusually high number for a local county meeting, forcing board chair Christian Dorsey to cut the talking minutes to two minutes, from three, for every regular speaker, and to four minutes, from five, for representatives of organizations.

Many speakers who were opposed to the Amazon headquarters especially opposed direct incentives, citing rising housing costs, the likely displacement of low-income families, accelerated wage theft for construction workers, and lack of investment guarantees in affordable housing funds.

“Speculators are already driving up home prices, landlords are raising rents and general contractors are raising their quotes for home improvement projects,” said one resident, Hunter Tamarro.

Unions including the AFL-CIO objected to Amazon not signing a project labor agreement with wage and benefit safeguards for workers hired to construct the new buildings.

But supporters such as resident June O’Connell said Amazon’s presence would ensure Arlington is allocated state funds for investments in transportation and higher education. “I want that money from the state,” O’Connell said. “Without Amazon, we wouldn’t get a penny of it.”

Holly Sullivan, Amazon’s worldwide head of economic development, spoke briefly and said the company will invest approximately $2.5 billion, create more than 25,000 jobs with an average wage of over $150,000, which will generate more than $3.2 billion in tax revenue.

“Regarding incentives, Amazon is only eligible for the financial incentive after we make our investments and occupy office space in the community,” she said.

Dorsey, the board chair, had said before the vote that he expected the measure to pass. He said that rejecting Amazon would not solve the community’s problems and concerns, and that this was the first deal the county has struck where new revenue growth will be used to fund it.

To be sure, the vote approved an estimated $51 million, a fraction of the $481 million promised by the county. Only 5 percent of the incentives are direct. Also, Amazon has been offered a $750 million package by the state that the Virginia General Assembly approved with little opposition.

The $51 million includes a controversial direct financial incentive or cash grant of $23 million to Amazon over 15 years, which will be collected from taxes on Arlington hotel rooms. The grant is contingent upon Amazon occupying six million square feet of office space over the first 16 years.

Arlington has also offered to invest about $28 million over 10 years of future property tax revenue in onsite infrastructure and open space at the headquarters site.

A filing on the county board’s website says the $23 million grant and the $28 million in strategic public infrastructure investments were “instrumental in Amazon choosing Arlington for its headquarters.”

Reporting by Nandita Bose in Washington; Editing by Richard Chang and Daniel Wallis

AT&T Can't Get Out Of Its Own Way

Just about every day, AT&T (T) reminds investors of how bad the company wasted shareholder money with mega acquisitions. The latest news regarding the DirecTV Now service is again a reminder that the company needs to focus on repaying debt far beyond the stated objectives as any other management moves will hurt the stock. AT&T is stuck at $30 for the time being, at least offering shareholders at 6.7% dividend yield to offset the suffering.

DirecTV Now website

Image Source: DirecTV Now website

More DirecTV Now Weakness

A prime reason for purchasing DirecTV was the ability to offer a competitive streaming service. After the purchase, AT&T launched DirecTV Now to some initial success, but the company is now crushing a major reason for paying $48.5 billion in the mega merger.

AT&T announced plans to raise the lowest price for DirecTV Now to $50 while stripping out cable channels from Viacom (VIAB) and AMC Networks (AMCX) in order to make the service profitable. The whole problem with the OTT concept from AT&T was the service too resembled traditional media services with a large bundle of channels.

The company now offers two bundles at $50 and $70 with HBO included in basic packages that cost $10 more despite dozens of channels stripped out of the mix. According to the Verge, AT&T now has the highest base plan cost of the five major streaming services that’s now led by Sling TV (DISH) and Hulu with Live TV owned via a future majority by Disney (DIS).

The problem is that AT&T’s management again claimed to understand the business back in December to only clearly show that they had no clue when purchasing DirecTV in the first place. CEO Randall Stephenson had this to say at the UBS Global Media conference:

We’re talking $50 to $60. We’ve learned this product, we think we know this market really, really well. We built a 2 million subscriber base. But we were asking this DirecTV Now product to do too much work. So we’re thinning out the content and getting the price point right; getting it to where it’s profitable.

The end result is a service already cutting customers after just reaching the 2 million subscriber base. DirecTV Now lost 267,000 customers during Q4 when Hulu replaced the service at the 2 million customer base. In addition, AT&T lost 403,000 satellite customers, suggesting the company is quickly unraveling a lead in pay-TV services. The only good news is that the move shifts the focus to making the business profitable and profits lead to keeping the large dividend.

The wireless and entertainment company finds itself in the middle of a video streaming war where the purchase of Time Warner (NYSE:TWX) actually pits itself against DirecTV. Offering the DirecTV Now bundles at a loss just left AT&T supporting content providers to compete against Time Warner properties. The company is now quickly headed toward mostly WarnerMedia products with the following video streaming services.

Source: Verge

The planned entrance of Apple (AAPL) into the streaming wars on March 25 further adds to the upheaval in the sector. The tech giant has reportedly had a $1 billion budget for content and could give the service away for free in order to attract subscribers for other video subscription services such as HBO where Apple takes a cut.

Hulu runs a money-losing operation that can afford to wait out the competition. One should expect DirecTV Now to lose a substantial portion of their subscribers while traditional pay-TV services remain in a substantial downtrend.

Luckily, the entertainment business is the smallest profit generator of the new AT&T. The division only had $2.2 billion in Q4 EBITDA and operating income of $826 million. Cutting back on DirecTV Now should help stabilize the profit levels of the entertainment group.

Source: AT&T Q4’18 investor briefing

The biggest risk to the bullish investment thesis is the media business from the new WarnerMedia. Most of the content providers have a strong profit incentive, but a lot of the new content services from tech players like Apple are as interested in subscribers than initial profits. The media division had Q4 operating income of $2.6 billion that is now at risk from a competitive environment.

Source: AT&T Q4’18 investor briefing

Hanging Onto The Dividend

CFO John Stephens didn’t exactly provide welcoming comments at the recent Deutsche Bank Media conference. The financial executive sees headwinds during Q1 from wireless equipment revenues to the tune of $100 million and at least another $200 million from the amortization of wireless commissions.

The biggest problem is that the CFO doesn’t even address the DirecTV hit from the pricing increase. The company will lose customers, though again this may not hit EPS with the DirecTV Now service running at an apparent loss.

Not addressing this issue further strengthens my resolve that the AT&T executive management team isn’t leading the market, but rather following directions made by other industry players, whether in wireless, entertainment or media. The mega-mergers of DirecTV and Time Warner are both proving to be examples of management skating to where the entertainment and media sector was at and not heading toward where the market is going. The company isn’t leading the market which is a traditional weakness of a conglomerate that’s far too slow to act.

For this reason and until AT&T gets new executive leadership, the company needs to be on a strict debt repayment diet. No more transformational acquisitions where past industry leaders are bought at a premium.

My previous thoughts on the stock rallying to $40 are starting to fade. The wireless giant isn’t generating the EPS growth envisioned with the acquisition of Time Warner or even approaching the hopes of reaching a $4 EPS target. Analysts see the company earning a max of $3.65 per share in 2020.

Chart

Data by YCharts

For this reason, AT&T is likely headed to minimal capital gains due to a lack of confidence in the management team surrounding the risks to these estimates due to the competitive entertainment and media sectors. The best hope is collecting the 6.7% annual dividend with a forecasted mid-50% payout ratio. The company hit a payout ratio of 60% last year.

Source: AT&T Q4’18 investor briefing

Takeaway

The key investor takeaway is that the market already has lost complete faith in the wireless giant. Despite buying both DirecTV and Time Warner, AT&T already is a major laggard in the video streaming space. The only hope while this executive team is in charge is cutting costs, reducing debt and paying the large dividend yield.

Disclosure: I am/we are long T, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

New Apple TV Ad on Privacy Hits Facebook and Google Where It Hurts—Without Mentioning Them

Apple is taking another swipe at its fellow tech giants for their privacy policies, this time in a new commercial that touts Apple’s stated focus on protecting user privacy. Without naming the likes of Google, Amazon, and Facebook, the TV ad invokes what many consider to be their lax privacy stances.

“If privacy matters in your life, it should matter to the phone your life is on,” the ad says, jumping among a few dozen images of people wanting privacy, including slamming doors, hushed diner conversations, windows locking, padlocks clicking shut, and one visitor to the men’s restroom nervously seeking out the most private urinal.

[embedded content]

Under CEO Tim Cook, Apple has promoted its efforts to protect user privacy on its devices. Unlike Facebook, Google and, increasingly, Amazon, Apple doesn’t rely much on advertising revenue, making money instead from sales of devices and service subscriptions.

At times, Apple has gone to great lengths to protect user privacy. The company, for example, has built most of its A.I. technology on Apple devices themselves, rather than storing personal data in the cloud, as most tech giants do. That decision has led some to argue that Apple is lagging Google and Facebook in the race to develop A.I. products.

But Apple has had its own privacy lapses, including a security flaw in its FaceTime app (which the company fixed last month) that potentially allowed people to listen in on users’ conversations. So far, though, the company has escaped the brunt of criticism that Facebook in particular has received for how it has managed and secured the personal data of its users. Facebook has been attempting to retool its products to focus more on privacy.

Cook has publicly slammed his tech rivals’ privacy policies several times. Last June, he chided them for not using humans to filter out fake news. A few months later, Cook called out the “data-industrial complex” that has “weaponized” personal data. And in January, he wrote a piece in Time calling for a federal privacy law. “It’s time to stand up for the right to privacy—yours, mine, all of ours,” Cook wrote.

The 45-second commercial began airing on U.S. television on Thursday, including during broadcasts of the highly rated National Collegiate Athletic Association’s March basketball tournament.

PagerDuty Joins A Flurry Of Silicon Valley Companies Planning To Go Public This Year

POWERFUL WOMEN

Jennifer Tejada, chief executive officer of PagerDuty Inc., speaks during the Fortune’s Most Powerful Women conference in Dana Point, California, U.S., on Wednesday, Oct. 3, 2018. The conference brings together leading women in business, government,© 2017 Bloomberg Finance LP

PagerDuty took the next step forward to a planned IPO, joining a windfall of startups expected to go public this year. But the cloud-based software company’s debut will be an exception among the tech IPO wave—it’s one of the few enterprise companies run by a woman, CEO Jennifer Tejada.

Founded in 2009, San Francisco-based PagerDuty acts as a watchdog for technical issues. The operations management software identifies problems in real time and directs engineers to the root of the problem, an alert system that’s attracted 10,800 customers in 90 countries.

In 2018, PagerDuty scored unicorn status after a $90 million round led by T. Rowe Price Associates and Wellington Management. Its first nine months of revenue last year rose 48% from the period to $84 million. However, the company took a $34.5 million loss during that time,up $4.7 million from 2017. It didn’t reveal data on the full year.

The company’s institutional investors own more than half of its shares, including early investor, Andreessen Horowitz, which owns the largest share of the company at 18.4%, followed by Accel and Bessemer Venture Partners. PagerDuty’s cofounders, Baskar Puvanathasan, Andrew Miklas and Alex Solomon, each hold 7.1%.

PagerDuty landed a spot in the top 50 on the Forbes Cloud 100 list in 2017, just a year after Tejada took over as CEO. “It was a neat brand, even though it’s a small company,” Tejada told Forbes back in July 2016. Tejada owns over four million shares of the company.

Instagram back up after several hours; Facebook still down for some

(Reuters) – Instagram is back up after suffering a partial outage for over several hours, the photo-sharing social network platform said in a tweet, but its parent Facebook Inc’s app still seemed to be down for some users across the globe.

FILE PHOTO: Silhouettes of mobile users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/File Photo

Certain users around the world were facing trouble in accessing widely used Instagram, Whatsapp and Facebook apps earlier on Wednesday, in one of the longest outages faced by the company in the recent past.

“Anddddd… we’re back,” Instagram tweeted here along with GIF image of Oprah Winfrey screaming in excitement. Facebook did not provide an update.

Social media users in parts of United States, Japan and some parts Europe were affected by the outage, according to DownDetector’s live outage map here

Facebook users, including brand marketers, expressed their outrage on Twitter with the #facebookdown hashtag.

“Ya’ll, I haven’t gotten my daily dosage of dank memes and I think that’s why I’m cranky. #FacebookDown,” a user Mayra Mesina tweeted. bit.ly/2TDCYDK

The Menlo Park, California-based company, which gets a vast majority of its revenue from advertising, told Bloomberg that it was still investigating the overall impact “including the possibility of refunds for advertisers.”

A Facebook spokesman confirmed the partial outage, but did not provide an update. The social networking site is having issues since over 12 hours, according to its developer’s page.

Facebook took to Twitter to inform users that it was working to resolve the issue as soon as possible and confirmed that the matter was not related to a distributed denial of service (DDoS)

attack.

In a DDoS attack, hackers use computer networks they control to send such a large number of requests for information from websites that servers that host them can no longer handle the traffic and the sites become unreachable.

Reporting by Mekhla Raina in Bengaluru; Editing by Gopakumar Warrier and Rashmi Aich

Mozilla’s Firefox Send Solves One of Email’s Biggest Problems: Sending Large Files

Moving top secret files around the Internet just got a little easier.

Mozilla launched a new tool on Tuesday called Firefox Send. The service, which will serve as a direct competitor to the publicly traded Dropbox, lets anyone quickly, and easily, share important files, before it gives them the disappearing Snapchat treatment, making them disappear forever into the dark void of the Internet.

The new service allows anyone to drag, drop, and share files as big as 1GB, without needing to log in or register for an account. People who register for an account will be able to transfer up to 2.5 GB.

Firefox Send is incredibly easy to use. After going to the site, users can drag and drop a link, choose an expiration date, or limit the number of downloads. They can also add a password for an extra layer of security, if they choose. After that, users are then given a link, which can be shared with their trusted contacts.

The new service is also a workaround for sending large files over email, which take up storage space, and can jam the recipient’s inbox. Mozilla said it expects to release an Android app in beta later this week.

Mozilla, which is a nonprofit, is perhaps best known for its Firefox browser. The group has also positioned itself as a champion of privacy. It pulled its Facebook ads in the wake of the Cambridge Analytica scandal, has offered tracking protection in its browser, and even released an extension last year called Facebook Container, which isolates their browsing activity on Facebook.

How the FAA Decides When to Ground a Jet Like Boeing’s 737 MAX 8

When an Ethiopian Airlines Boeing 737 MAX 8 jet crashed shortly after takeoff from Addis Ababa on Sunday morning, killing all 157 people aboard, observers quickly noted that the circumstances resembled those of another flight. In October, Lion Air Flight 610 crashed into the Java Sea, killing all 181 passengers and eight crew. Both flights plummeted a few minutes after takeoff, in good weather. And both were on 737 MAX 8 jets, the plane Boeing started delivering in 2017 to replace the outgoing 737 as the workhorse of the skies. Since 2017, Boeing has delivered 387 MAX 8s and 9s. It has taken orders for 4,400 more, from more than 100 customers.

As of Tuesday evening, various foreign aviation regulators and airlines had decided that after the two crashes, the plane shouldn’t be in the air. Officials in the European Union, China, Indonesia, Singapore, Australia, and the United Arab Emirates have all grounded the planes. Of the 59 operators that fly the new 737, at least 30 have parked it.

In the US, though, Boeing’s plane is free to fly. American Airlines, Southwest Airlines, and United Airlines are still putting their 737 MAX jets—74 in total—in the air. (So is Air Canada.) And the Federal Aviation Administration—the agency that oversees American airspace—says that’s just fine.

Which might seem strange, since the FAA is notoriously safety-conscious. Planes in search of an airworthiness certificate must meet stringent standards; the certification process usually takes years. And it gets results: Just one person has died in American airspace on a commercial airplane since 2009. But, it seems, the agency has not yet found reason to ground the new 737.

In a statement Tuesday, acting FAA administrator Daniel Elwell said the agency is looking at all the available data from 737 operators around the world, and that the review “thus far shows no systematic performance issues and provides no basis to order grounding aircraft.” Elwell said the FAA “would take immediate appropriate action” should such problems be identified. The FAA and the National Transportation Safety Board both have teams at the crash site outside Addis Ababa to investigate and collect data.

The agency did note in a directive published Monday that it would probably mandate flight control system enhancements that Boeing is already working on, come April. And after the Lion Air crash, the FAA made a Boeing safety warning mandatory for US airlines.

“We have full confidence in the safety of the 737 MAX,” Boeing said in its own statement Tuesday. “Based on the information currently available, we do not have any basis to issue new guidance to operators.”

A number of senators, including Ted Cruz of Texas, Elizabeth Warren of Massachusetts, and Dianne Feinstein of California, have called for the US to ground the aircraft. But it’s the FAA chief who has final say. (Elwell has been the acting administrator since January 2018, though Politico reports that the Trump Administration is close to nominating Delta Air Lines executive Steve Dickson as administrator.) He doesn’t make that decision alone, says Clint Balog, a flight test pilot and human factors expert with the College of Aeronautics at Embry-Riddle University. Any grounding goes through a “semi-formal” process, full of discussions with experts on the specific aircraft and crash situation, both in- and outside the federal government.

“The FAA looks at all of this information and decides, ‘OK, if it’s just likely that there’s a significant problem here, it doesn’t matter what the cost to the traveling public is—we have to put safety first and ground this aircraft,’” Balog says. “However, if they look and say, ‘Well, jeez, grounding this aircraft is going to be a monumental cost to the world and we simply don’t have enough information to know what the risk really is with this aircraft, do we really want to ground it at this point in time?’”

The FAA has grounded aircraft before. In 1979, the FAA grounded all McDonnell Douglas DC-10s (and forbid the aircraft from US airspace) after a crash in Chicago killed 273 people. An investigation found the problem was maintenance issues, not the aircraft design, the FAA lifted the prohibition just over a month later.

In early 2013, the FAA grounded Boeing’s 787 Dreamliner, after two lithium ion-battery related fires in the aircraft. “We are issuing this [directive] because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design,” the FAA wrote in its emergency airworthiness directive. It didn’t let the jet take to the sky again until Boeing found and corrected its design issues. (That happened in April.)

So far, though, we have little concrete information on whatever might be going on with the 737 MAX. The investigation into the Ethiopia crash is in its earliest stages. Indonesia’s civil aviation authority has released a preliminary report on the Lion Air crash, but has not issued any findings on what caused it.

Based on its directives, the FAA hasn’t “seen any red flags that are significant enough” to ground the aircraft, Balog says. So he’d have no problem getting on a 737 MAX-8. “More importantly, I would have no problem having my family get on a 737 MAX-8 at this point.”


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This Big Facebook Critic Fears Tech’s Business Model

Longtime Silicon Valley investor Roger McNamee met Mark Zuckerberg in 2006, when the Facebook CEO was just 22 and his two-year-old company still only catered to university students. Facebook was young, but McNamee was already convinced it was “the next big thing,” he told WIRED editor in chief Nicholas Thompson on Sunday during a keynote conversation at SXSW 2019 in Austin. “The thing that had killed every attempt at social apps before that [was] essentially that the ability to be anonymous allowed trolls to take over. I was convinced that Mark’s requirement of authenticated identity was literally the holy grail, it was the thing that was going to unlock this opportunity.”

There was no investment opportunity at the time; McNamee viewed their meeting as a way to offer advice—and a chance “to meet the young guy who had figured [social networks] out.” As McNamee admits, “I didn’t even have it in my head that a thing like Facebook could go bad. I was a technology optimist like everybody else.”

In the decade-plus since that first meeting, McNamee, who went on to invest in Facebook, has become a vocal critic of the company. In fact, he’s the recent author of Zucked: Waking Up to the Facebook Catastrophe, a book where the subtitle alone drives home just how much McNamee’s view on the company has changed.

McNamee explained the arc of his view. Early in the 2000s, the burgeoning companies of Web 2.0, like Google, Paypal, and Facebook, began “blitz-scaling.” And as they quickly grew, they operated from a different value system, McNamee said, which basically said “none of us is responsible for the disruptions that we create.” The founders of these companies collected loads of personal data to fuel their own growth and profits and thought it was OK. “I don’t think that in prior generations of Silicon Valley, people would have thought that way,” McNamee said. “These people are brilliant, and I have enormous admiration for what they created; I just wish we could have created it without some of the business model characteristics that are causing the harm.”

McNamee still owns Facebook stock (and has a Facebook account), he says, so that people don’t think he’s trashing the company because he sold his interest in it. “Look, I understand I’m not the perfect messenger,” he said. “What I ask people to do is just think about the message. And understand this isn’t really about Facebook.”

McNamee said his concerns began with Facebook because he knows it best, “but this is a problem that is endemic in a world where the business model is about tracking human beings, claiming eminent domain on their personal data, using it for behavioral prediction, and then using the tools of machine learning and AI to steer people toward outcomes that make those predictions more valuable.”

McNamee said he is especially concerned because users, and society, have not had a chance to debate whether companies should gather information and profit from people’s financial transactions, health data, or location. “That may be fine, but all of that business model developed behind a curtain,” he said. “We didn’t know that’s what was going on. And there’s a lot of history that says that’s a model that we don’t want.”

Asked about Elizabeth Warren’s recent proposal to break up the big tech companies, McNamee called it “brilliant.” In response to another question, McNamee said he is advising Warren’s team, as well as consulting with the campaigns of two other Democratic presidential candidates, Amy Klobuchar and Cory Booker.

McNamee discussed a number of other issues, including the pros and cons of Europe’s General Data Protection Regulation, the deepening divide between America and China’s tech spheres, and the problems he sees with Google, Microsoft, and Amazon.

But in the end, the conversation came back to Facebook and its business model. An audience member asked if Zuckerberg should step down. “No,” McNamee said emphatically. “I don’t think this is about the people. I believe that this is about the business model. Larry [Page] and Sergey [Brin] at Google and Sheryl [Sandberg] and Mark at Facebook have the moral authority to change the business model. If you don’t change the business model, it doesn’t matter who’s running it, and if you do change the business model, it’s OK whoever’s running it.”


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