Tuesday 31/07/18

1. In TECH NEWS TODAY, Facebook faces a class action, Nintendo’s weakness continues and Tesla eyes up a major European factory
2. In INDIVIDUAL COMPANY NEWS, GE looks to sell off its digital business, Starbucks partners with Alibaba in China on delivery and Foxtons jolts as London slows
3. In OTHER NEWS, I bring you an annoying puzzle to crack. For more details, read on…

So there’s more negative news on Facebook, Nintendo gets hit by a massive short seller and Tesla considers European production…

In Facebook faces class action over targeted ads for EU referendum (Daily Telegraph, Margi Murphy) we see that a campaign group called Fair Vote UK is preparing a class-action lawsuit on behalf of Facebook members whose data was used without permission to create targeted political ads in the run-up to the EU referendum, alleging that the social networking giant breached the Data Protection Act. The group says that 1.1m people had their data harvested and that, as such, damages could be “in the billions of pounds”. * SO WHAT? * Interesting, but really? Good luck to ‘em, but I’m not sure we’ll be seeing billions in damages. This is just the latest headache in a long line of them for Facebook at the moment. This is worth monitoring, though, as it could be used as a template for elections in other countries. If THAT came to pass, it could get pretty serious.

Short sellers set sights on Nintendo amid share slump (Daily Telegraph, Matthew Field) sounds like a height-ist headline, but it’s actually referring to a New York hedge fund that has been building a $400m short bet against Nintendo (basically, this is a massive bet that Nintendo’s share price will go DOWN) ahead of its results and is the biggest such trade against the company since at least 2013, according to Bloomberg data. Nintendo’s share price has been falling since March, despite the company’s Nintendo Switch selling like hot cakes and profits rising by

73%. Serkan Toto, head of Japanese consultant Kantan Games, pointed out that “What many people don’t understand is Nintendo traditionally generates around 50% of its yearly sales in the holiday quarter, including Black Friday and Christmas, It’s way too early to ring the death bell for Nintendo”. * SO WHAT? * I think Toto is arrogant to think that “most people don’t understand” about the timing of when Nintendo generates sales – it’s public knowledge and NOT in any way some kind of dark secret. The main reason for the fall, as far as I can see, is that investors are increasingly of a mind that Nintendo will NOT be able to hit its target of console sales of 20m units in the year to March 2019. Either that or investors are looking for an excuse to crystallise the value of shares that have had a brilliant run – especially since enjoying the stellar boost it’s had following the unveiling of the Switch console that has been a major worldwide hit. There was some disappointment following E3 in June where there was a perception by some that the upcoming title lineup was lacking – giving the naysayers more ammo – but obviously the company rejected this notion. Historically, Nintendo has been quite up itself and lost out big time on its refusal to make games for any device other than its proprietary console. However, once that changed a few years ago, the company has been on the up. Nintendo is due to report first quarter earnings today.

Tesla explores building major factory in Europe (Wall Street Journal, William Boston and Tim Higgins) heralds what could be quite an interesting move by Tesla as authorities in Germany and the Netherlands are holding talks with the company to build its first major European facility, following its announcement earlier this month that it would be building its first overseas plant in China. * SO WHAT? * The talks are at an early stage but clearly people are getting quite excited about getting a Tesla Gigafactory on their doorstep! Germany is looking like a front-runner at the moment…

In individual company news, GE lines up its digital business for disposal, Starbucks teams up with Alibaba in China and Foxtons gets a kicking…

GE puts digital assets on the block (Wall Street Journal, Dana Cimilluca, Dana Mattioli and Thomas Gryta) sounds the latest of GE’s business disposals, which is part of the wider masterplan of slimming down the behemoth to focus on key areas. GE has brought in an investment bank to run an auction for the operations which accounted for around $500m in revenues last year but was actually loss-making despite having billions poured into it over the years in the former chief exec Jeff Immelt’s attempts to make GE a top 10 software company by 2020. * SO WHAT? * The disposal of this division is not going to do much to move the needle on a business that is worth over $100bn, but it is a symbolic step away from broader ambitions to more targeted ones by GE’s current CEO John Flannery. GE won’t move away from software completely as it will service its own customers and core businesses – it just won’t do it for other industries.

Starbucks ties up with Alibaba to deliver coffee in China (Wall Street Journal, Xiao Xiao and Liza Lin) highlights the deal between Starbucks and Alibaba for the latter to deliver beverages and snacks via its Ele.me food delivery unit from this autumn. * SO WHAT? * This is a decent enough move by Starbucks to enhance its offering which is 

taking a bit of a hit at the moment with a combination of Starbucks fatigue and hustling local competition from the likes of Luckin Coffee which has opened 660 outlets SINCE JANUARY!!! Starbucks has had it good since setting up shop in China back in 1999 but other operators are trying to get a piece of the action. British coffee chain Costa Coffee has 459 outlets in China at the moment but is targeting 1,200 by 2022 and Canada’s Tim Hortons very recently announced that it would open over 1,500 shops over the next ten years – and that’s in addition to the local upstart Luckin Coffee that achieved “unicorn status” earlier this month after raising $200m at its latest fundraising round. Starbucks China’s chief exec Belinda Wong talked a good game when she said that “while recent market entrants have chosen to capitalise on delivery, combined with heavily discounted offers, there are significant compromises at play in terms of quality, experience and business sustainability. They will prove to be short-lived”. Yeah right. Starbucks needs to wake up and smell the coffee cos they is going DOWN! I guess that’s the trouble with having the number one spot – everyone is gunning for you! All this competition is going to be good news for Chinese coffee drinkers, though!

Let’s all take a moment to sympathise with those much-maligned branded Mini-drivers in Foxton’s slips to £2.5m loss as London house market stalls (The Guardian, Patrick Colinson) as the company reported its latest profit warning at its first half results. This is a far cry from the heady days shortly after its flotation in 2014 where its share price soared to 399p – it’s now been “downsized” to 50p! It’s all down to weaker London sales and not-particularly-great prospects as economic uncertainty threatens to cloud the market even more in the near term. * SO WHAT? * Just another sign of the weaker property market and sluggish consumer sentiment. Foxtons will not be alone in their pain.

…And finally, in other news…

I thought I’d leave you with a “Where’s Wally/Waldo”-type puzzle to while away a few minutes in Can you spot the only identical twins on a busy beach in this fiendish puzzle? (The Mirror, Richard Jenkins https://tinyurl.com/ybgrpojp). Good luck!

As always, thank you for reading Watson’s Daily!