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May 19, 2020
Good morning! This Tuesday, a startup that wants to reskill Americans, the repercussions of the new Huawei restrictions, and a sobering set of tech jobs. Want Index in your inbox each morning? Subscribe here.
What Matters Today
- Just now: Weibo reported earnings, with revenue down 19% year-on-year. It missed profit estimates. The results were significantly worse than Baidu's, which reported just a 7% year-on-year revenue drop yesterday. Both companies think things will improve in the current quarter.
- 7 a.m. PDT: The quarterly U.S. ecommerce report should show a huge surge in online spending last quarter. Walmart reported a 74% jump in first-quarter ecommerce sales this morning, but said it would close Jet.com.
- 10 a.m. PDT: The White House American Workforce Policy Advisory Board, chaired by Ivanka Trump and Wilbur Ross, and counting Tim Cook as a member, will reportedly call for "an unprecedented investment in digital infrastructure." Reuters reports that reskilling workers will be a priority.
- Uber is laying off another 3,000 people, bringing total cuts to around a quarter of its workforce. The company is closing its Uber Incubator and AI Labs divisions, and considering "strategic alternatives" for Uber Works. The Wall Street Journal reports that its freight and self-driving units are being re-evaluated, too. In an SEC filing, Uber said the layoffs would cost it $175 to $220 million.
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- Kevin Mayer, who ran Disney's streaming unit, is TikTok's new CEO. He'll also be COO of ByteDance, TikTok's parent company.
- 54% of Americans said if they could only have one streaming service, they'd keep Netflix. 17% said the same for Amazon Prime, while just 4% said Disney+.
- Square said employees can permanently work from home, if they want to.
- Sony's new image sensor will have embedded Microsoft Azure AI tech.
- FedEx and Microsoft launched new delivery-management software, featuring AI delay prediction.
- The U.K. government confirmed terms of its startup investment scheme, with £250 million (around $307 million) on offer to invest in convertible loans, with up to £5 million per company. The cash has to be matched by private investors.
- Tech services firms such as Accenture and Infosys are reportedly offering 20% discounts to big banks, in an effort to keep business.
- Electric car sales are expected to fall 18% this year, according to BloombergNEF, though that's less than the 23% drop forecast for combustion engine cars.
- Sharp reported a 37% year-on-year decline in operating profit for the last fiscal year.
- Nasdaq will reportedly let companies from some countries, including China, IPO only if they raise at least $25 million or 25% of their market cap.
- Sony said it will spend around $3.7 billion to buy the 35% of Sony Financial Holdings that it doesn't already own. CEO Kenichiro Yoshida said Sony Financial would help the broader company "hedge growing geopolitical risks."
- SoftBank plans to sell around $20 billion worth of its T-Mobile shares, according to The Wall Street Journal. Bloomberg reports the deal could happen this week.
- Uber sold a further $100 million of bonds, at the same 7.5% yield as its $900 million offering last week.
Skills to survive the end of the world
We've talked before about automation, and what it means for the millions of newly unemployed Americans. The consensus seems to be that some of those jobs probably aren't coming back, with this crisis accelerating already inevitable trends. So what should those workers do?
- Guild Education's Rachel Carlson thinks reskilling provides a solution. Guild, a unicorn that helps employers provide education benefits to their staff, announced today that it acquired venture studio Entangled Ventures, with reskilling a key focus for the new team.
- "I believe the displacement we're seeing today is just the first bottom tip of a W," Carlson told me yesterday, with automation-linked layoffs just on the horizon. That means the "work ahead is unfortunately tremendous, to help reskill and up-skill the frontline workforce in America," she said.
Guild and Entangled recently launched "Next Chapter," which helps laid-off workers find career paths that suit them and employers that are hiring. It then helps them get those jobs, using Guild's existing training marketplace to teach them new skills.
- It's a modern take on outplacement benefits, Carlson said — a market worth around $5 billion a year, according to Entangled CEO Paul Freedman (who now runs Guild's Learning Marketplace).
- And it's working so far. Carlson told me that companies are hiring at "higher volumes than I think we anticipated," with jobs ranging from allied health to entry-level software roles.
Guild has an advantage in all this: Its programs have always had remote options. "For over a decade most working adult learners have preferenced online learning over a face-to-face experience," Carlson said, because of how hard it is for adult learning to fit into people's lives.
- Remote educators have learned that practice makes perfect. Freedman thinks that "for institutions that are just adopting their model now and porting an offline environment to an online environment, there's a lot of catch up to do."
Mostly, both want people to realize this market exists. "There's an enormous amount of energy spent talking about the 3 million young people who might go to college this year," Carlson said, with most of that "spent on the 30,000 of them who will go to an Ivy League."
- "In reality I wish the media coverage was proportional to the 35 million who need to now go back to school desperately in order to have a secure economic future for their families," she added — stressing that there were "no fancy ivy-covered dorms in [Guild's] future."
- "We are seeing a rapid increase in customers using digital channels to engage with us, and in our experience, once customers start to engage differently they do not go back." — Stephen Fitzpatrick, CEO of Ovo Energy, said the company was laying off 2,600 people because of accelerated digitization.
- "A number of companies have seen a faster average time to close a new customer." — Work Life Ventures' Brianne Kimmel says skipping business travel is speeding things up.
- "I think it's 75% likely Tesla generates a GAAP profit of at least $1 in 2Q, and if that happens, it's 100% likely S&P would add Tesla to the S&P 500." — Investor Gary Black thinks Elon Musk was so keen to reopen the Fremont plant so that Tesla could mark four consecutive profitable quarters, which is a requirement for S&P 500 inclusion.
- "Companies in China being able to put robotaxis into operation now is a breakthrough, even if we cannot say for sure when this technology can be widely available." — Iyiou.com analyst Zhang Nan said that self-driving taxis are having a moment — with startups seemingly outperforming the incumbents.
The Huawei domino effect
On Friday, the U.S. announced that manufacturers using U.S. technology would need a license to keep supplying Huawei. It was obviously big news at the time, and now that the dust has settled a bit, we've got a clearer idea of what exactly it means for the chip industry.
- The obvious losers are U.S. equipment makers. Deutsche Bank estimates that 15% of KLA Corp's revenue and 12% of Advanced Materials and Lam Research's revenue is linked to Huawei.
- Foundries might then turn to non-U.S. suppliers: Wedbush analyst Matt Bryson speculates that ASML, Hitachi, Cannon and Tokyo Electron could all see some increased demand. But foreign suppliers aren't a perfect replacement, leading Deutsche to speculate that this "could lead to a slowdown across the entire industry."
For Huawei, the impact is mixed. TrendForce thinks that Huawei has "significantly raised its inventory of components" in anticipation of this, which will keep it producing devices for the next few months — bad news for component suppliers, which will likely see an immediate drop in demand.
- Huawei's 5G business, though, might be in trouble. As the Financial Times' Kathrin Hille notes, "there is no alternative supplier in sight" for the chips needed to power those base stations.
- That's great news for other 5G suppliers: Ericsson, ZTE, Nokia and Samsung could all win from this, Wedbush's Bryson writes. Xilinx and Marvel, which supply chips to those infrastructure-makers, could benefit too.
The repercussions get weirder still. Bryson says that a lack of production capacity at TSMC has stopped Nvidia from producing as many datacenter GPUs as it would like. If TSMC suddenly stops producing for Huawei, Nvidia could use that extra capacity — "allowing for improved sales momentum" later this year.
- In short — the chip industry is so complex, and Huawei so intrinsic to it, that these new rules change an awful lot.
Hiring for a crisis
The pandemic seems to have affected recruiters' priorities: Protocol's Lauren Hepler took a look at the jobs on offer these days, and found that they "skew dark." Facebook is hiring a "Well-being Quantitative Researcher," who will ideally have experience in examining "loneliness." Twitter, meanwhile, is looking for a "Crisis Management Analyst," while YouTube needs a "Policy Enforcement Manager" focused on "Suicide and Self-Harm." We're a long way from "Overnight Happiness Ambassadors."