The news media try to figure out just what Google is up to; China devalues its currency
Morning Brief: Is Google’s move designed to encourage innovation and risk, increase transparency, or merely a business move designed to add value? Confusion as to the motives seems to prevent some outlets from leading with the story
The announcement after the NYSE stopped trading yesterday that Google would no longer be Google, but yet it would still be Google under a new parent company called Alphabet, had the media a bit confused as to how to play the news. Though that did not stop the jokes on Twitter from reporters.
Would Gmail now be called Alphamail? Is Larry Page now, in fact, the new Alpha male?
The reason the news that Google had changed names to something rather odd is not the lead story on every front page – print or digital – is that no one knows quite what to make of it? Is this really an attempt to drive innovation, or simply a financial gimmick designed to reward executives and shareholders?
“Google’s move is the most significant step by a Silicon Valley giant to get a handle on the sprawl of businesses that it has entered, an issue that increasingly afflicts other technology companies like Facebook and Amazon,” wrote Conor Dougherty of the NYT. “While all of these tech companies began as entities focused on one main business, online bookselling or a social network, for example, many have diversified over the years into numerous side businesses including cloud computing, photo sharing and even satellites.”
Josh Constine of TechCrunch thinks the move is about talent retention, saying “(i)t formalizes a solution Google had already been trying to execute. When talent at the main company grew antsy with the slow-moving bureaucracy and all the cooks in the kitchen, Google would find another place in its family for them to work.”
Naturally the Wall Street Journal would see the move in terms of stocks. “Ultimately, that could allow Google to spin off one or more of the experimental businesses, said Jan Dawson, an analyst with Jackdaw Research.”
There is no reason why the move can’t be about all these things: innovation, talent retention, financial gain, and more. The company now has a new CFO, Ruth Porat, fresh from Morgan Stanley, and it would surprise no one if its new CFO didn’t just happen to mention how Larry Page, Sergey Brin and other executives might benefit from the new structure.
Bloomberg, for one, sees this initiative very much driven by Porat:
“Whatever the consequences, this is her thing,” said Brian Wieser at Pivotal Research Group, while noting it’s not clear how much of this was done before her arrival. “Any incremental transparency into a company as opaque as Google is a good thing.”
I don’t like make predictions, but here is one you can hang around my neck if I am proved wrong: Donald Trump will sink in the polls as soon as enough of the current crop of candidates begin to pull out – and that should be pretty soon.
With well more than a dozen candidates vying to become the nominee, any one candidate that can get 20 percent or more of Republicans to support him/her will be seen as leading the pack. For some that would increase over time, assuming they would could rack up some primary victories. But for Donald Trump, 20 to 25 percent will likely be his ceiling, with any support held by a minor candidate going to anyone else other than Mr. Trump. All one needs to see, then, would be what happens when a candidate drops out, and that should start to happen soon.
Rick Perry, the former governor of Texas, is said to be already running out of money, his staff in South Carolina working without pay.
The new poll from NBC News and Survey Monkey still has the Donald leading all GOP candidates, but several big names, with big bank rolls, are not to be seen on the leaderboard. But those candidates are not about to drop out, it is those others not among the leaders, with far smaller bankrolls that we should soon see bowing out before the Iowa caucuses.
File this one under small moves with big consequences: China has devalued its currency.
Following weeks of turmoil in its stock exchanges, China has lowered the value of the renminbi (also referred to as the yuan). This will make Chinese goods less expensive, and therefore more competitive.
“The central bank set the official value of the renminbi nearly 2 percent weaker against the dollar. The devaluation is the largest since China’s modern exchange-rate system was introduced at the start of 1994,” the NYT reported.
“China’s abrupt devaluation is the clearest sign yet of mounting concern in Beijing that the country could fall short of its goal of roughly 7 percent economic growth this year. Growth is faltering despite heavy pressure on state-owned banks to lend money readily to companies willing to invest in new factories and equipment, and despite a stepped-up tempo of government spending on high-speed rail lines and other infrastructure projects.”
For those companies paying Chinese suppliers, the move could improve margins. Apple, for instance, which has been exploring moving some manufacturing out of the country, still has most of its hardware assembled in China. But Apple also has been selling more products in China, as well. So unless they can pass along price increases, they will be see margins drop as overall revenue from the overseas market contracts.
Whatever the consequences, some in the financial community are worried about the move.
“The market may take away the message that the China economy is behaving as badly as some of the more pessimistic assessments,” a Citi bank analyst said.