fortune--2020-01-07--Aston Martin May Need a Lifeline From Investors as It Runs Precariously Low on Cash

Sport utility vehicles made all the difference for the performance of UK luxury brands last year as customers rewarded Rolls-Royce for launching its first ever crossover SUV while punishing Aston Martin for lack of one.
On Tuesday, the preferred sports car model of fictitious secret agent James Bond 007, lowered its forecast for 2019 profits for a second time, warning it may need investors to plug fresh holes in its balance sheet after an unexpectedly weak fourth quarter.
With cash dwindling to just £107 million by the end of 2019, Aston confirmed it will draw upon the remaining $100 million loan tranche issued in September to keep the company afloat until its make-or-break DBX crossover starts production at an expensive new factory in Wales in the second quarter.
“Aston has had to resort to sales practices more common in the mass-market car industry to keep the lights on,” wrote Bernstein auto analyst Max Warburton in a note to clients. “Cars, most notably Vantage, are being sold with huge discounts.”
This contrasted sharply with Rolls-Royce, where vehicle sales jumped 25 percent on the back of its Cullinan SUV, which carries a base price of $330,000. Officials told Fortune the fully owned subsidiary made a “meaningful contribution” to profitability at BMW Group. As recently as November, the German parent said the Cullinan enjoyed an order backlog lasting “far into the first quarter” of this year.
Admitting on Tuesday that results were “very disappointing,” Aston Martin Chief Executive Andy Palmer pledged to take fresh cost-cutting measures and slash bloated inventories to levels “more normally associated with a luxury company” in order to minimize margin-eroding incentives.
“Winning back our strong price positioning is a key focus,” he said in a statement.
Volumes shipped to dealers dipped 7 percent to 5,809 cars in 2019, its maiden year as a listed company, with Aston blaming its missed sales target on the ongoing reduction in stock and weakness in mainland Europe rather than Brexit Britain.
Best known for its iconic DB5 that featured in the 1965 classic Goldfinger, the luxury sports car maker confirmed media reports that it was now in negotiations with strategic investors to sell a stake in the company, diluting existing shareholders.
Tumbling 15 percent on the news to £4.38, the stock has now lost three-quarters of its original IPO valuation of £4.3 billion since its IPO in October 2018.
Fortunately for Aston, Daniel Craig’s secret agent returns to the screen in April in time to generate valuable buzz for the troubled brand, potentially boosting orders for the DBX that stood at 1,800 units by year-end.
Crossovers may be major profit contributors, but rival premium and luxury brands lacking the SUV pedigree of a Land Rover were loath to embrace the shift away from saloons due to the stigma attached.
More must-read stories from Fortune:
—That great 2019 S&P rally? It has big warning signs for 2020
—The relationship between geopolitical crises and market outcomes isn’t simple
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-07--My Predictions For Artificial Intelligence in 2020

The FDA Kept Up Its Drug Approval Streak In 2019

This is the web version of Eye on A.I., Fortune’s weekly newsletter covering artificial intelligence and business. To get it delivered weekly to your in-box, sign up here.
Happy New Year to all of you Eye on A.I. readers!
If 2019 was any barometer, this year will be a busy one in the artificial intelligence world. The challenge will be to turn the advancements into something that businesses can use.
Most companies are still struggling to harness A.I. technologies like neural networks, or software that learns from data, according to surveys that Fortune covered last year. I believe this dilemma will continue in 2020, due in part to the lack of available A.I. talent that can build and maintain these complicated systems.
Despite the potential A.I. setbacks, businesses will continue spending big money on A.I. in the hope that their investments will eventually pay off. There’s just too much at stake (and too much hype) to ignore it.
Here’s my predictions for what to expect in A.I. in 2020:
1. The regulators are coming
For several years, lawmakers have been talking about regulating A.I.—but it will finally happen in 2020. For instance, on Tuesday, the White House introduced guidelines that federal agencies like the Federal Drug Administration and Department of Transportation must adhere to when crafting A.I. regulations, like whether their rules ensure that A.I. is “fair” to everyone. The principles, while vague, are a precursor to separate and more formal regulations that could impact how businesses use specific A.I. technologies like facial recognition.
Even if federal A.I. rules fail to be enacted in 2020, local and state governments will continue to fill in the regulatory gaps, as cities like San Francisco have done for the use of facial recognition by law enforcement.
2. A.I. chips go mainstream
After years of internal development and trials, you can expect startups to debut specialized computer chips for A.I. tasks like data training. Companies are increasingly seeking A.I. chips that consume less energy and that can crunch data more quickly. Also, startups may begin to challenge Nvidia, the leading maker of computer chips used to train A.I. systems.
3. Cashierless stores will debut worldwide
Fearing an increasing number of Amazon Go cashierless stores, retailers will debut their own versions. But they’ll likely lose money on these in the short term because the technology required to operate them is expensive.
4. China steps up in A.I.
China will play a bigger role in A.I. research in 2020. As Stanford University’s AI Index for 2019 shows, A.I. research papers from China are increasingly cited in other academic papers, underscoring their quality and importance. Jack Clark, an AI Index author and policy director of A.I. research group OpenAI, said Monday during an online presentation about the Stanford report that lawmakers believe that “the Chinese can’t invent things, they just steal things.”
“I sit there as someone who reads these research papers, and no, that’s very wrong,” Clark said.
Jonathan Vanian
@JonathanVanian
jonathan.vanian@fortune.com
A.I. IN THE NEWS
Are A.I. regulations coming? Over the next 18 months, the U.S. and Europe may introduce regulations impacting how businesses use A.I., the Wall Street Journal reported. The article included a statement by European Commission President Ursula von der Leyen, who said, “In my first 100 days in office, I will put forward legislation for a coordinated European approach on the human and ethical implications of artificial intelligence.”
Don’t send this A.I. software overseas. The U.S. government introduced a new rule intended to prevent U.S. companies from exporting certain kinds of A.I. software that could benefit “adversaries like China,” Reuters reported. The report said that companies must apply for a license to export certain geospatial imagery software from the United States to other countries except Canada.
A.I. hype hits healthcare. Kaiser Health News examined the burgeoning use of A.I. in healthcare and found that “many health industry experts fear AI-based products won’t be able to match the hype.” Among some of the problems the articles explores includes the fact that many health-tech startups do not publish their research in peer-reviewed journals, which means outside experts are unable to validate company claims.
A sad pizza party. Zume, a startup specializing in robots that make pizza, could lay off 400 employees as it aims to raise more money, Business Insider reported, citing unnamed sources. The startup has faced a number of setbacks and has attempted to move into new areas like "compostable packaging and food-truck services," the report said.
EYE ON A.I. TALENT
Groupon hired John Higginson to become CTO of the online deals and coupons company. Higginson was previously the CTO of the financial technology company Enova.
The Iowa Department of Transportation picked Matthew Rensch to be the state’s first chief data officer. Rensch previously worked at companies like Athene USA and Berkley Technology Services, according to the trade publication Government Technology.
EYE ON A.I. RESEARCH
A.I. that screens for breast cancer. Researchers from various Google units like DeepMind published a paper in Nature detailing an A.I. system that can help doctors more easily identify breast cancer by reading mammograms. In a New York Times article about the Nature paper, an outside expert developing similar A.I. technology said Google’s paper was strong, but cautioned that “the patients studied might not be a true reflection of the general population.”
FORTUNE ON A.I.
Holiday Superstar Wyze Suffers Data Leak, and Amazon Makes Returns Easy—By Don Reisinger
Rwanda Is Bringing Tech Buzz to Africa—By Richard Morgan
Why Workplace A.I. Needs a Human Touch—By Gwen Moran
BRAIN FOOD
Where’s the U.S.? Wired examines why the United States is not participating in an international consortium called the Global Partnership on AI, whose representatives from counties like Canada and France intend to “study and steer the effects of artificial intelligence on the world’s people and economies.” All of the so-called G7 countries have pledged support to the international group except for the U.S. “The White House says the body is unnecessary bureaucracy that threatens to dampen AI development by being overly cautious,” the article said.


fortune--2020-01-07--PlayStation 4 Becomes Second Best Selling Home Video Game Console of All Time

Visa and Mastercard Say No to Delaying Deadline for Gas Pump Chip Card Upgrades

Over the entirety of the current video game console cycle, Sony’s PlayStation 4 has been the top selling system. Now the popular console has a new accolade to add to its list: At Sony’s 2020 CES press conference on Monday, the company announced that PS4 sales have officially topped 106 million units, making it the second best-selling home console in the history of video games.
The achievement makes the PS4 more popular than Nintendo’s groundbreaking Wii, as well as the original PlayStation. To date, only the PlayStation 2 has sold more systems, topping the charts at 157 million units.
But there is a caveat: PS4’s second all-time ranking does not factor in sales of handheld game systems, such as the Game Boy and Nintendo DS—both of which devices have outsold Sony’s console, to date.
The PS4’s popularity has also had a ripple effect for game makers. Since its retail debut on Nov. 15, 2013, players have bought 1.15 billion games for the system, Sony says.
Sony also announced another noteworthy video gaming milestones: Sony’s PlayStation VR headset has sold 5 million units since its debut in October 2016. In addition, PlayStation Network, the company’s online gaming service, now has 103 million active users, Sony says.
The PS4’s sales milestone is more than a bragging right for Sony—it’s an argument against the idea that the current generation of consoles could be the last (or near it). Six years ago, when the PS4 and Xbox One launched, some analysts and observers openly wondered about the fate of game systems. But hardware innovations (including VR and new subscription models), and an overabundance of quality games kept players actively engaged throughout the systems’ life-cycles.
“PlayStation is the embodiment of a creative entertainment property, with a solid foundation of technology,” said Jim Ryan, president & CEO of Sony Interactive Enetertainment. “And it’s our mission to embrace the entire creative community.… That commitment will carry us through as we launch our next generation of PlayStation.”
Sony will launch the PlayStation 5 later this year, telling players to expect hardware enhancements like a much faster hard drive (drastically reducing or eliminating load times), a 4K Blu-ray drive, and a more adaptive controller in the console’s next iteration. Critical details, including price, backwards compatibility and the console’s design will be announced at a later date.
The PlayStation is critically important to Sony’s earnings. Even though sales in its division were down 17% year-over-year in the most recent quarter, it was the second biggest contributor to the company’s overall revenue.
More must-read stories from Fortune:
—7 companies founded in the last 10 years that you now can’t live without
—Electronic health records are creating a ‘new era’ of health care fraud
—Apple, Amazon, and Google want to create a smart home standard
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
—Amazon is on a collision course with employee activists outraged by the climate crisis
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-07--Pharma Needs to Stop Chasing Shiny Objects and Start Embracing Practical Technology

As we enter the new decade, pharmaceutical leaders are envisioning a new era of innovation, one in which the discovery of life-saving treatments, enhanced patient experience, and improved overall health will be driven by the transformative power of digital technology.
As it stands, the pharma industry lags behind other highly regulated industries, such as banking and insurance, when it comes to successful digitization. But there are immense opportunities for our industry to leverage technology. Here are three critical steps pharma companies can take to fully embrace the digital future:
Stop the clock
It may sound counterintuitive, but if we want to leapfrog into the next era of innovation, pharma companies must first pause and develop a strategic vision for adopting new tech. This will allow us to lay the groundwork for companywide (and industrywide) digitization. For example, we must prioritize data management if we want to get the most out of our A.I. investments. This includes organizing anonymized datasets for millions of patients (with consent) into interoperable data pools from which we can pull out patterns and trends, and then share it with health providers and insurers.
Perhaps one of the most promising—and important—areas where data management can play a transformative role in the industry is regulation. Cloud-based data systems can drastically speed up the drug regulation process. Currently, companies submit data to regulators via disjointed platforms and in closed templates. Cloud-based systems can streamline regulatory submissions by using a common data storage platform, which will help get treatments to patients faster.
Raise the technology quotient
Even companies with the most detailed technology and data strategies won’t make headway on digitization efforts if their people are not equipped to succeed in the new digital era. We need to focus on raising the technology quotient (TQ) throughout the entire workforce—from the lab to the factory floor to the executive office.
We need to let go of our decades-old ways of working and build cultures that encourage experimentation and accept and learn from failure. After all, failures are essential steps on the path to breakthroughs. We must also deploy training programs that help people augment their own capabilities with the technologies they work alongside.
The payoff of these efforts will be huge. In the past, for example, R&D labs were full of people at lab benches for eight hours a day, processing samples by hand. Recently, I visited a lab where a robot operates 24 hours a day, processing 200 different proteins at once. With a machine taking over a time-intensive and repetitive manual task, the scientists are free to focus on more complicated aspects of their work. To be effective, those in the lab have to learn to work with such robots, sharing tasks and trusting the results. It means setting aside longstanding ways of handling lab processes, which requires a new mindset and capabilities.
The end result of these efforts? We’re getting to breakthrough moments more quickly.
Avoid superficial intelligence
The pharmaceutical industry is driven by innovation. We can transplant organs from one person to another, use an individual’s own cells to fight disease, and even 3D print body parts. But companies are too often rushing to appear to be ahead of the curve, pursuing bold partnerships and investing in “trending” technologies that are undeniably impressive but aren’t necessarily addressing critical medical needs.
One example of this is the excitement caused by a study of whether the Apple Watch could detect atrial fibrillation in a group of 400,000 people. Because there was no control arm, the study’s impact on health outcomes can’t be properly ascertained, pointed out health journalist Larry Husten in STAT.
It’s easy to succumb to the temptation to partner with the company that will build us the splashy tool, rather than work with the company whose outcomes align with our own objectives and whose capabilities fill in our gaps. But some businesses are making the right long-term choice.
Consider the health tech companies using analytics and A.I. to match patients to clinical trials, potentially reducing the time to find patients from many months to days or even minutes. An effort like this may not seem like a breakthrough innovation, but it is a critical contribution to accelerating the process of getting medicines to patients.
Similarly, pharma companies can bring their deep understanding of biology and access to vast amounts of appropriately protected patient data to their engineering partners, who can then perfect the right algorithms and solve real problems through these concrete insights.
Pharma companies must take the time to align our strategies for adopting technology to the needs of our business, address the cultural issues that prevent us from harnessing the full power of digital tech in our workforce and workplace, and avoid chasing the next shiny object. As an industry, we need to have the courage and preparedness to abandon our old ways and begin building a fortified foundation of strategic digitization.
From personalized trials and treatments for new treatments, to drone-delivered medications, to a more sustainable manufacturing process—the possibilities on the other side of this disruption are endless.
Paul Hudson is CEO of Sanofi.
More opinion in Fortune:
—MGM Resorts CEO: What happens in Vegas no longer stays in Vegas
—I worked at McKinsey. Here’s how the firm needs to change
—Fintech regulation needs more principles, not more rules
—How to cure the antibiotic industry’s profitability infection
—The questions companies should ask themselves to prepare for a new era of business
Listen to our audio briefing, Fortune 500 Daily


fortune--2020-01-07--Girl Scout Cookie Prices Are Going Up In Some Areas

Get ready to pay S’more for your annual fix of Girl Scout cookies.
More chapters of the Girl Scouts of America have announced an across the board price increase for its most popular fundraiser, with each box now costing $1 more. For most varieties, that works out to a 25% increase.
Thin Mints, Do-Si-Dos and the newly introduced Lemon-Ups will now run $5, while specialty cookies (S’mores and the gluten-free Toffee-tastic) will run $6. The organization says the move was necessitated by increasing bakery costs and higher expenses to provide programming for the scouts, among other things.
The roll-out of Lemon-Ups didn’t hurt either.
“After careful consideration, reviewing and planning, the council decided that the 2020 Girl Scout Cookie season was the optimal time to make the increase in conjunction with the release of a new Girl Scout Cookie,” the Girl Scouts Heart of the South, which oversees 111 regional councils and 2.7 million members, said in a statement. “Historical data shows that when a price increase is introduced with the release of a new Girl Scout Cookie, the possible decrease in sales can be offset by the excitement of the new cookie.”
Prices are also increasing in Texas.
Officials acknowledge the price increase could scare off some customers, but say it will help the organization avoid multiple price increases in the future.
Some Girl Scout troops have been charging the higher rate for a while now, some as far back as 2015. But the last large-scale price increase for Girl Scout cookies came in 2015, when boxes rose from $3.50 to $4.
Girl Scout cookies go on sale at slightly different times depending on location. To find out when you can place this year’s order, a tool on the Girl Scout Website lets you enter your zip code to get the precise date – and location of sales booths.
More must-read stories from Fortune :
—25 ideas that will shape the 2020s
—USPS could privatize as early as next year
—UPS’s $20 billion bet on e-commerce is paying off
—Airbnb copes with a bad trip on the road to a 2020 IPO
—The Trump administration is targeting anti-Trump Facebook users
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-07--How Close Is Iran to Building a Nuclear Bomb?

In the second half of 2019, after the U.S. withdrew from a landmark nuclear agreement with Iran and set out to wreck its economy, Tehran took modest steps violating the accord. After the U.S. killed the country’s most prominent military commander in a drone strike in Baghdad Jan. 2, Iran’s government said it was no longer bound by any of the atomic limits imposed by the deal. While officials stressed its nuclear sites remain open to international inspectors and said their decision was reversible, the escalation has deepened concern in world capitals from Beijing to Berlin.
1. How close is Iran to making a bomb?
It would take a while to accumulate the necessary materials. Under the multilateral 2015 accord, Iran forfeited some 97% of its enriched uranium, which can fuel a nuclear weapon, and mothballed some three-quarters of the centrifuges needed to refine the heavy metal. When the accord was negotiated, U.S. officials estimated that if Iran abandoned its provisions, the country would need a year to restore the material needed for a bomb. Iran’s 2019 violations and pledge to bring new enrichment capacity online will shorten the period. Before the accord, Iran had material to potentially build more than a dozen bombs. And while the country always maintained its program was civilian, world powers pursued the deal because they doubted that claim.
2. So is the Iran nuclear deal now dead?
Technically not, though it’s in critical condition. The deal stipulates Iran can cease performing commitments “in whole or in part” should a dispute over the legality of sanctions arise. Hundreds of International Atomic Energy Agency inspectors continue to receive access to Iranian nuclear facilities, which are visited daily and monitored. Seals and cameras help ensure that material isn’t diverted for weapons. Iran remains subject to snap inspections occurring at a rate of three a month. The accord’s Joint Commission continues consultations at its headquarters in Vienna and could eventually refer Iran’s nuclear file back to the United Nations Security Council to face even stiffer sanctions.
3. How does Iran benefit from the accord’s survival?
Iran has good reason to maintain the nuclear deal because of the access it will eventually be afforded to conventional weapons. The agreement stipulated that a UN arms embargo would be lifted within five years of the pact. That’s now become a top concern at the U.S. State Department, which has published a live ticker counting down the days until the Iranians can buy new weapons. Russia, seeing prospects for multi-billion dollar sales, has already ruled out extending the embargo. Should the pact now survive until October, Iran will be able to buy new generations of fighter jets, tanks and air-defense systems on global markets.
4. How might Iran escalate the crisis?
Most notably by increasing the quantity and quality of fuel needed for atomic bombs, kicking out IAEA monitors or following through on threats to abandon the nuclear Non-Proliferation Treaty — the bedrock agreement that regulates the spread of material needed to induce fission. Nuclear bombs are most commonly fueled with uranium-235 or plutonium-239. Uranium-235 makes up less than 1% of the matter in uranium ore, which necessitates separating it out through the process known as enrichment, usually using thousands of centrifuges spinning at supersonic speeds. IAEA inspectors are legally bound to keep track of gram-level changes in uranium inventories worldwide to ensure material produced for nuclear power plants isn’t diverted for weapons.
5. What are the enrichment worries?
Under the nuclear accord, Iran agreed that for 15 years it would not refine uranium to more than 3.7% enrichment — the level needed to fuel nuclear power plants — and would limit its enriched-uranium stockpile to 300 kilograms. It broke those promises in July and by November had accumulated more than 372 kilograms of low-enriched uranium. That’s about half of the 630 kilograms of material that would be needed to make a single weapon if further enriched to weapons grade. Iran has begun enriching some uranium to a level of 4.5%, which still qualifies as low-level. It would be more worrisome if Iran were to produce, as it did before the accord, uranium enriched to 20%, which can be purified to weapons-grade material at short notice.
6. What’s the plutonium concern?
Even before the U.S. killed General Qassem Soleimani, commander of the expeditionary branch of the Revolutionary Guard Corps, Iran was talking about restarting construction of a heavy-water reactor that could produce plutonium. That decade-long project in Arak was disabled by the accord and would need significant work to resume. The U.K. and China took over the U.S.’s role of modernizing the reactor after Washington abandoned the nuclear pact in May 2018. As part of the deal, Iran removed the original reactor core and rendered it unusable in 2016.
More must-read stories from Fortune:
—Donald Trump and the power of incumbency
—How the UN’s climate efforts could change the business world
—The wealthiest members of Congress—and how they made their millions
—USPS could privatize as early as next year
—2020 Crystal Ball: Predictions for the economy, politics, technology, and more
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-01-07--Microsoft Access Vulnerability Could Leave 85,000 Businesses Exposed

Researchers have discovered a flaw in Microsoft’s Access database application that, if left unpatched, could impact thousands of U.S. businesses.
The flaw, discovered by the team at Mimecast, could lead to the unintended disclosure of sensitive information. Mimecast estimates some 85,000 businesses are at risk. So far, however, it does not believe any companies have been compromised.
The memory leak is very similar to one that was found in Microsoft Office last year. The application will randomly save pieces of data called memory elements into every file. Normally, this is just a fragment of useless content, but it could, on occasion be something sensitive, such as passwords or user information.
And for a patient hacker, that could be valuable information.
“If a malicious actor was able to get on a machine which contained MDB files or could get ahold of large drops of MDB files, the actor could conduct an automated ‘dumpster diving’ hunt through all of them to look for and collect sensitive information residing in these files that could be applied in any number of malicious uses,” said Mimecast.
Microsoft has issued a patch to correct the issue. Mimecast is encouraging businesses to download and install the fix – and keep and eye on network traffic to monitor for attackers hunting for potentially sensitive files.
More must-read stories from Fortune :
—7 companies founded in the last 10 years that you now can’t live without
—Electronic health records are creating a ‘new era’ of health care fraud
—Apple, Amazon, and Google want to create a smart home standard
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
—Amazon is on a collision course with employee activists outraged by the climate crisis
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-07--The Downside of a Stellar 2019? Stocks Are Now Shockingly Expensive By Nearly Every Measure

This article is part of Fortune‘s quarterly investment guide for Q1 2020.
The market strategists and portfolio managers at Wall Street’s big banks and money managers are almost universally predicting that the good times for stocks will keep rolling in 2020. The problem is that last year’s boom wasn’t driven by a surge in earnings, but by an explosion in valuations that makes today’s S&P 500 vastly more pricey than at the start of last year, when they were already pretty expensive.
Put simply, it’s momentum, the exhilaration instilled in investors as they watch the index hurtle from one record to the next, that’s driven the boom, and led to the widespread conviction that it’s unstoppable. But over time, the fundamentals always trump euphoria. And the fundamental force that governs the course for equities in the long-run is profit growth. Now, prices are soaring while earnings are flatlining. That mismatch points to tough times ahead, especially since Wall Street’s prediction that profits will jump in the new year and beyond, given that they’re already hovering at near-historic highs, remains unlikely to play out.
Indeed, America has enjoyed a profit explosion that’s lifted big cap earnings by sundry measures—from their share of national income to return on sales—to levels seldom seen in the past century. The rush that brought profits to current heights was short, sharp and closely tracked the Trump corporate tax cut. S&P 500 earnings-per-share roared back after dropping to near zero in the depths of the financial crisis, reaching a then all-time peak of $106 in the third quarter of 2014. Then the train jolted into reverse, pushing the number back 18% by Q1 of 2016, and it wasn’t until the September quarter of 2017 that profits hit a new high of $107. Overall, that four year period was an earnings bust, marked by an inflation-adjusted decline of around 4%.
Read: The 27 best stocks to buy for 2020
The corporate tax cut supplied jet fuel for profits. The 40% reduction in rates from 35% to 21% took effect at the start of 2018. In each of the first three quarters of that year, profits jumped by between 5.1% and 6.5% over the previous three month period, more than the average annual increase in EPS over the past half-century. For all of 2018, profits jumped 20.4% to $132. (All EPS numbers are based on trailing four quarters of GAAP earnings.)
But in 2019, earnings went flat. In Q3, EPS showed no gains over the previous nine months, clocking in at the same $132 as in Q4 of 2018. Will a great Q4 performance salvage the year? Not according to Factset, the research firms that polls equity analysts for their predictions on earnings trends. In the latest Factset survey, the sell-side crowd projected that a EPS in the fourth quarter would be 3% lower than the no-growth number for Q3. For all of 2019, the Factset poll forecasts a gain of just .8% in EPS, positing that profits won’t even keep pace with inflation.
By contrast, stocks celebrated one of their best years in decades, surging 29.4%. Since earnings didn’t rise at all from the end of 2017 to Q3 of 2019, and are expected tread water for Q4, U.S. big cap equities got almost 30% more expensive in the past year. The most common yardstick, the price-to-earnings ratio (PE) leapt from 18.9 to a lofty 24.4 at the market close on January 2. Investors are now getting $4.10 in earnings for every $100 they pay for stocks, versus $5.30 at the start of 2019. The dividend yield has dropped from 2.1% to 1.76%. As for the buybacks that are now management’s preferred method of returning cash to shareholders, consider a company that deploys half its profits repurchasing shares. A year ago, those buybacks would have raised EPS by 2.7%. Now, ballooning prices have lowered the buyback benefit by one-quarter, to 2.0%.
The disconnect between profits and prices puts investors in a bind. On the one hand, though they haven’t grown in a year, profits remain at such towering heights that they’re unlikely to rise much, if at all, from here. Even if EPS does edge up, it’s highly possible that prices won’t follow. That’s because the market is already fetching a premium P/E that’s more likely to fall than stay constant, let alone rise. A scenario of extremely high earnings and a market that’s paying big prices for each dollar of those elevated earnings is a bad combination for future returns. The risks are double-barreled: Earnings could fall to return to normal levels, and PEs could tumble to restore the historic average, or both could occur at once.
Of course, Wall Street’s view is that profit growth will solve the conundrum by re-accelerating in 2020. The analysts surveyed by Factset forecast that EPS will wax 9.6% this year, on lesser sales growth of 5.4%. Right now, profit margins, as reported by S&P, stand at 11.2%. That’s around 2 points higher than the average since the start of 2011. For profits to increase almost 10%, profitability would need to become even more spectacular, with margins growing to 11.6%. Today, labor costs, after years of showing little or no increase, are rising rapidly. That trend alone makes it a better bet that margins will shrink rather than expand.
Another little-mentioned barrier: economic growth that’s less stellar than advertised by either Wall Street or the Trump administration, and that’s slowing from already ho-hum levels. For 2020, the Federal Reserve predicts that national income will expand at 2%, falling to 1.9% and 1.8% in 2021 and 2022. Including inflation, GDP is forecast to increase around 4% this year. It makes sense that revenues (which encompass both consumption and investment since they include purchases of the full array of household and capital goods) should rise at about the same pace. But the Wall Street crowd is projecting revenue growth of 5.4%, or 35% more. As Milton Friedman and Warren Buffett frequently noted, profits can’t outpace national income in the long term, though they they can outperform over shorter interludes, as they have recently. It’s a stretch to believe that given their current scale, profits can even match, let alone beat, what looks like the slow crawl of GDP going forward.
Those warnings bring us to the lever that more than any other, created the profit bonanza, the historic reduction in corporate taxes. Taxes are a cost, just like salaries or interest. Keep in mind that all competitors within an industry, from airlines to banks, got roughly similar benefits from the tax cut. It’s reminiscent of when the Deltas and Southwests installed ticket machines in the airports; since they all lowered costs by saving on labor, they competed away those savings in the form of lower fares. It’s the same story with ATMs in bank branches that process checks. Those labor-savings innovations lowered expenses, but the gains went to consumers, not higher profits to the banks and airlines.
It could well be the same story with the tax cuts. The savings they generate are more likely to flow to customers in the form of lower prices than to make U.S. companies permanently more profitable. Right now, it’s all about exuberance and the momentum. But the best guide the future isn’t the Big M, but the fundamentals. You just never know when they’re going to take charge. But they always do.
More must-read stories from Fortune:
—2020 Crystal Ball: Predictions for the economy, politics, technology, and more.
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
—Apple’s stock soared 89% in 2019, highlighting the company’s resilience
Don’t miss the Term Sheet, Fortune’s newsletter on deals and dealmakers.


fortune--2020-01-07--Why There Are So Many Scooters in Los Angeles

Los Angeles has become a breeding ground for electric scooter companies eager to take the lead in the second most populous city in the U.S. since it launched its pilot program in March. After 10 months, the Los Angeles Department of Transportation has logged 19 million scooter rides and expects the vehicles to play a role in relieving congestion from the traffic-stricken city, its leader says.
“People need choices, and that’s really what it comes down to,” said Seleta Reynolds, general manager of the Los Angeles Department of Transportation, at a Fortune Brainstorm Tech dinner in Las Vegas on Monday night. “And Lord have mercy, people need choices in Los Angeles.”
About 65% of all trips taken in the city are shorter than 5 miles and 85% of those trips are taken by people who drive alone in their cars, Reynolds said. The dinner kicked off CES, the annual technology trade show, and the LADOT official was speaking as part of a mobility panel discussion that included Pamela Fletcher of General Motors and Franz Reiner of Daimler Mobility.
Reynolds explained why Los Angeles chose not to stifle the number of scooter companies entering the city. “I did not want to put my finger on the scale; I did not want to artificially deflate the market,” she said. “I wanted every company that wanted to come to L.A. to come and be able to compete.”
Los Angeles’ approach to scooters vastly differs from cities like San Francisco, which initially banned scooters before handing out permits to select scooter companies for a limited number of scooters, and Atlanta, which banned scooter use at night after several deaths. Cities’ biggest qualms with electric scooters are citizen safety and a supply that threatens to overwhelm sidewalks.
Without regulation, scooter companies are able to deploy an endless number of scooters that can be haphazardly piled on street corners, parked in private driveways, and thrown in bodies of water. (Yes, really.) They also present a new danger to drivers on the roads as well as scooter riders, who may not be skilled at operating the vehicle.
Reynolds—who came to LA after working for San Francisco’s transportation department—says in Los Angeles, data has shown that scooters only represent a small portion of severe injuries and have yet to result in a death. While she admits that the electric scooter market still has some work to do to eliminate some of the “chaos,” she said a lot of the frustration from residents is stems from change.
To the city’s department of transportation, scooters represent a piece of the larger ecosystem that aims to provide transit options for everyone. Unfortunately, everyone has yet to be equally served, said Reynolds.
“They’re solving a real problem,” she said. “But what they’re not doing is deploying in low income neighborhoods that don’t have other choices and where folks may not be able to afford a vehicle.”
Los Angeles’ department of transportation is exploring what role it can play to incentivize companies to equally serve low-income neighborhoods, Reynolds said. Ride-hailing and scooter companies have to be part of the bigger picture, she added.
“We invest in public transit because it returns a public good,” Reynolds said. “We need to start expanding that definition.”
For more from the CES dinner, read “Google’s Waymo Reaches 20 Million Miles of Autonomous Driving” by Aaron Pressman.
Fortune’s annual, invite-only Brainstorm Tech conference will take place from July 13 to 15, 2020 in Aspen. For more information, click here.


fortune--2020-01-07--Waymo Reaches 20 Million Miles of Autonomous Driving

Autonomous cars from Waymo, owned by Google parent Alphabet, drove 10 million miles on public roads in about the past year, doubling the company’s self-driving record of the prior 10 years, CEO John Krafcik said on Monday.
“We’re now beyond 20 million miles of fully self-driving, like, really self driving,” Krafcik said in an interview at a Fortune Brainstorm Tech dinner in Las Vegas during the annual CES conference. “You need to have a lot of real world experience. There’s no way to avoid that. You must have it.”
The company started life in 2009 as a Google research project known as Chauffeur. It was renamed in 2016 and got permission to start its driverless service in the Phoenix area a year later. Waymo doesn’t disclose its revenue or profitability.
The company’s driverless cars, mainly Chrysler Pacificas outfitted with special hardware and software, are currently offering a ride hailing service in Phoenix. The service has about 1,500 monthly active users there. The company also uses its autnonous fleet to make deliveries in the Phoenix area and runs self-driving heavy trucks, Krafcik says.
Krafcik, who took the top jon at Waymo in 2015, is the former CEO of Hyundai Motor America. He also headed online car pricing startup TrueCar.
Asked when the Waymo services might expand beyond Phoenix, the CEO offered few specifics. “We’re considering moving that to other cities,” he said. Waymo also has extensive experience in California, but doesn’t yet have permission to charge for rides in that state.
Waymo’s rivals include self-driving projects from Uber, Apple, and Tesla, among others. California’s Department of Motor Vehicles reported that Waymo drove the most miles of any autonomous car company in 2018, at 1.3 million, followed by GM’s Cruise unit and startups Zoox and Nuro.
For more from the CES dinner, read “Why There Are So Many Scooters in Los Angeles” by Danielle Abril.
Fortune’s annual, invite-only Brainstorm Tech conference will take place from July 13 to 15, 2020 in Aspen. For more information, click here.


fortune--2020-01-08--This Beauty Company Doesn’t Do Business in China

Good morning.
Roberto Marques, group CEO of Natura & Co., visited Fortune’s offices yesterday, just a few days after closing his acquisition of Avon Products. The deal, along with the 2017 acquisition of The Body Shop, has made Natura the world’s fourth largest free-standing beauty company, with 3,000 stores worldwide and 40,000 employees.
Natura has long been on Fortune’s radar for another reason: the Brazilian company was the first public company to become a B-Corp—which requires certification of high levels of social and environmental performance. Marques said B-Corp certification is a “very tough” process, but it was a natural step for Natura, which has long operated with “a triple bottom line”—monitoring social and environmental goals, as well as financial. The company earned a spot on Fortune’s Change the World list in 2018 for its focus on sustainable sourcing of tree oils and other ingredients from the Amazon. “We have over 20 years of history working with communities in the Amazon and have touched more than 5,000 families,” Marques said.
Marques, who joined Natura four years ago, says the company has always pursued social and environmental goals “because it is the right thing to do.” That has become core to the cosmetic brand’s market appeal, and will become an important part of the Avon brand as well.
Interestingly, Natura’s purchase does not include the U.S. Avon business, which was spun off in 2016 and acquired by South Korea’s LG in 2019. Natura also doesn’t do business in China because of an aversion to animal testing. That means the company is largely absent from the world’s two largest markets.
Marques says their aspiration is not to be the biggest beauty company in the world, but rather “the best beauty company for the world.” A worthy goal.
More news below. And for those of you who, like Fortune Editor-in-Chief Clifton Leaf, are obsessed with the profound transformation happening in the health care business, here’s a plug for the Fifth Annual Fortune Brainstorm Health, which is being held in Marina Del Rey, Calif., on April 21-22.
Curated by Cliff, along with cochairs Arianna Huffington and David Agus, this fascinating event explores the collision of the health and tech businesses. It will include, among others, the CEOs of Amgen, Ancestry, AT&T Business, Baxter, Beyond Meat, Box, and Cisco . . . and that only covers through the first three letters of the alphabet! You can learn more and request an invitation here. (CEO Daily readers get special consideration.)
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Iran Fires Missiles at U.S. Troops
Last night, Iran retaliated for the killing of the Iranian Maj. Gen. Qassem Soleimani, firing ballistic missiles at two Iraqi bases that are housing U.S. troops. U.S. officials confirmed both strikes, but no injuries or casualties have been reported. On Tuesday evening, U.S. President Trump tweeted "All is well!" following the strikes. Fortune
Boeing 737 Crashes in Tehran
A Boeing 737-800 bound for Kiev from Tehran crashed shortly after takeoff Wednesday morning local time, killing everyone onboard, according to Ukraine International Airlines, the operator. The crash comes at a tense time for Boeing, which is still grappling with the aftermath of two previous crashes, and amid the escalation of tensions between the U.S. and Iran. The FT reported that the crash was reportedly due to an engine failure following a fire onboard, and not due to "terrorism." Fortune / FT
Ghosn Puts on a Press Conference
Carlos Ghosn, the former executive-turned-fugitive, is expected to give a press conference in Beirut on Wednesday. After arriving in Lebanon from Japan last week—after an escape that included private planes, security operatives and reportedly, large audio equipment boxes—Ghosn promised that he would use the opportunity to "freely communicate with the media." WSJ
TikTok Security Flaws
The makers of TikTok, the smartphone app used to make short videos, had serious vulnerabilities that may have allowed hackers access to personal information and the ability to manipulate user data, according to a report from a cybersecurity company in Israel. The company said it has patched the security flaws and had no indication that a breach or an attack had occurred. New York Times
AROUND THE WATER COOLER
It's a Trap
The global economy is heading toward a "liquidity trap." That was the warning from Mark Carney, governor of the Bank of England, as he nears the end of his tenure. In an interview with the FT, Carney warned that central banks were running out of tools to combat a recession, and that they would need to look beyond conventional monetary policy options. FT
"Chip Wars"
The annual CES tech trade show in Las Vegas this week brought a slew of new chips, from giants including Intel, Nvidia, and Qualcomm, writes Fortune's Aaron Pressman. In general, those chips are faster, more efficient upgrades on existing tech, and mean that laptop devices can get still smaller, with longer charge times. Fortune
Sonos Sues Google
The wireless-speaker maker accused Google in a lawsuit on Tuesday of stealing its technology, and sought a ban on the sale of Google's speakers, smartphones and laptops in the U.S. The two companies once worked closely together, matching Google services with Sonos speakers, but the relationship soured as Google built out its own speaker business. WSJ
What Goes Into a Girl Scout Cookie?
And finally, a break from the news, but a serious question: what does it take to develop a new Girl Scout cookie? Among other things: brainstorm sessions, tracking popular flavors and dietary trends, and choosing a name that young girls can easily say—and therefore sell. (The newest in the lineup is called "Lemon-Up.") Fortune
A note from CEO Daily: The future of Fortune is coming. This month, we will be launching (deep breath) a new site and app, a new video hub, a new magazine, plus a subscription package that offers the best of business, all in one place: strategic insights, deep-dive stories, and exclusive access to what the C-suite is thinking. We'll keep you updated on the launch, and you can also tell your friends to keep tabs on developments by leaving their email addresses here.
But that's not all! Fortune is also getting ready to launch a raft of new newsletters, two of which you can sign up for in advance. Fans of the Sino Saturday edition of CEO Daily will be excited to learn that Clay Chandler and the Hong Kong team are preparing a daily newsletter on business in China, called Eastworld. And our Rome-based ace, Bernhard Warner, will write a daily newsletter on finance news, awesomely named Bull Sheet.
This edition of CEO Daily was edited by Katherine Dunn.


fortune--2020-01-08--‘Lazy Attempt to Emulate Diversity:’ Women in Tech Criticize Ivanka Trump’s CES 2020 Appearance

The nation’s largest consumer electronics show on Tuesday hosted Ivanka Trump as a keynote speaker — a choice that drew scorn from many women in technology.
The annual CES tech gathering in Las Vegas has long taken criticism over diversity issues. In recent years, the show’s organizer, the Consumer Technology Association, has invited more women to speak and sought to curb some of the show’s more sexist aspects, such as scantily clad “booth babes” hired to draw attention of the mostly male attendees.
But for critics and activists who have long pushed for broader recognition of the less-heralded women who found startups and take on difficult technical challenges, the inclusion of President Donald Trump’s daughter, who is also a White House adviser, sent exactly the wrong message.
“Ivanka is not a woman in tech,” tweeted Brianna Wu, a video game developer who is running for Congress in Massachusetts as a Democrat. “She’s not a CEO. She has no background. It’s a lazy attempt to emulate diversity, but like all emulation it’s not quite the real thing.”
Ivanka Trump spoke with CTA President Gary Shapiro for nearly 40 minutes, highlighting work the administration has done with tech companies to retrain their workers for new skills. She has worked on skills-training initiatives at the White House. Companies including Google have joined that effort.
There was no mention of the pushback about her appearance at the show. The hall was full, and she was met with applause. Organizers declined to say how many people were in the audience.
Shapiro told The Associated Press that Ivanka Trump is fighting for workers at a time when robots are filling warehouses and factories and self-driving vehicles are worrying truck drivers.
“We’ve had politicians speak before, cabinet secretaries and others who’ve come in,” Shapiro said ahead of the talk.
Ivanka Trump said the event offered a chance to talk “about the way jobs are evolving and changing.”
“People need to be thinking about investing in their workforce so that they can enable those people to do their same job using different equipment tomorrow,” she said.
Many people who tweeted the hashtag #BoycottCES on Tuesday in protest of Trump’s appearance also took issue with the administration’s border detention policies and various actions of the president himself.
The technology industry has especially important issues pending with the U.S. government, including antitrust investigations into Facebook and Google, the trade war with China, immigration, election security and misinformation on social media.
Government officials have long made regular appearances at CES. This year, for instance, the speaker roster includes both Secretary of Transportation Elaine Chao and Secretary of Energy Dan Bouillette. Other female speakers include Meg Whitman of video streaming startup Quibi and Linda Yaccarino, chairman of advertising and partnerships for NBCUniversal.
Ivanka Trump is “taking this slot at this conference where women have been saying for so long, ‘Hey, we are being overlooked,’” said Rachel Sklar, a tech commentator and founder of a professional network for women. “The whole category of women being overlooked are still being overlooked.”
“Clearly they are not putting much effort into finding women in tech who can speak,” said Carolina Milanesi, an analyst with Creative Strategies, who is at CES.
Last year, CES caused an uproar when it revoked an innovation award presented to a female-led sex device company. CES reversed its decision and has allowed sex tech into the show for a one-year trial. Conference organizers also brought in an official “equality partner,” The Female Quotient, to help ensure gender diversity.
“Was there nobody else available? Seriously?” asked Ti Chang, co-founder of the wearable vibrator company Crave. Chang said Trump’s experience running a clothing brand is a bad fit for CES and its focus on innovation and technology.
“I don’t understand,” she said. “I would love to know what their rationale was.”
More must-read stories from Fortune:
—The magic of the wedding industry’s most exclusive conference
—3 big ideas from Fortune’s next generation of powerful women
—A masterclass in negotiating your salary
—Lessons from startup founders on hiring new talent, evolving roles, and more
—5 tips for women who want a corporate board seat
Keep up with the world’s most powerful women with The Broadsheet newsletter.


fortune--2020-01-08--Boeing 737 Crashes in Iran Due to ‘Technical Issue’, Killing All 176 on Board

A Boeing Co. 737-800 jetliner bound for Ukraine that crashed after takeoff in Iran, killing everyone on board, was most likely brought down by an engine fire, according to Tehran authorities.
Ukraine International Airlines said 167 passengers and nine crew were on the plane, an older version of the 737 that predates Boeing’s grounded Max model, which crashed at 6:18 a.m. local time Wednesday in Sabashahr, near the Iranian capital.
Iran’s Disaster Mitigation and Management Organization said early assessments indicate the cause was a technical issue and the transport ministry suggested a fire was to blame, dismissing speculation that the jet was downed by a stray missile following Iranian strikes against U.S. bases in Iraq.
At the same time, another state-run outlet cited an official from the Iran Civil Aviation Organization as saying the pilots didn’t declare an emergency, while an amateur video purportedly of the stricken plane showed a bright image descending steeply before hitting the ground.
Television footage showed recovery efforts at the crash sight, with debris from the plane spread across a charred field. Ukraine’s foreign ministry said about half those on board held Iranian citizenship and that there was also a large number of Canadians, as well as Swedes, Afghans, Britons and Ukrainians.
Ukraine International Vice President Ihor Sosnovskyi said in Kyiv that the plane, delivered to the airline new in 2016, was in good condition and had its last shop visit on Jan. 6. He said the crew was also very experienced and that there were no indications of human error, while declining to comment on possible reasons for the crash, the company’s first since it was set up in 1992.
The tragedy comes at a tense time for both Iran and Boeing.
The Islamic republic has fired more than a dozen missiles at U.S.-Iraqi airbases in retaliation for the killing of Iran’s top general, Qassem Soleimani. Just prior to the crash, U.S. aviation regulators issued new restrictions barring civilian flights over Iraq and Iran.
Boeing Crisis
Boeing is still reeling from its worst-ever crisis following two deadly crashes involving the 737 Max that led to the grounding in March of the company’s best-selling model. U.S. stock futures slid and the yen rose, though those moves faded after reports that the crash was due to a technical issue. Boeing declined as much as 2.5% in premarket trading
Under established protocols, Iran would lead any investigation since the crash occurred on its soil. Ukraine Prime Minister Oleksiy Honcharuk said his government has informed Iran that its experts should take part in the investigation.
Few nations have the expertise and technical facilities to conduct a full accident probe, however, so the U.S., France, Britain or other countries have provided assistance in the past. The plane’s crash-proof recorders, for example, will have to be downloaded in a specialist lab. The so-called black boxes have been found, Agence France-Presse reported, citing aviation officials in Iran.
International rules for air-crash probes mean the countries that made the plane and its engines usually participate, providing technical expertise. But the current turmoil between Iran and the U.S. may complicate the involvement of the National Transportation Safety Board and Boeing.
The website flightradar24 showed the 737-800 jet left Tehran’s Imam Khomeini International Airport for Ukraine’s Boryspil International Airport early Wednesday morning local time.
737 CRASH: Here's the flight path of the Ukraine International Airlines plane that crashed in #Iran
The Boeing airliner took off from Tehran's Imam Khomeini International Airport pic.twitter.com/aiQlAJNVAe — QuickTake by Bloomberg (@QuickTake) January 8, 2020
“We are aware of the media reports out of Iran and we are gathering more information,” Boeing spokesman Gordon Johndroe said in an email. Safran SA confirmed that the twin-engine plane was powered by turbines from its CFM venture with General Electric Co., while declining to comment further.
We are deeply saddened by the news of the crash of the Ukraine International Airlines flight shortly after take off from Tehran International Airport.
Our thoughts and condolences go out to the families & friends of those 180 souls who have lost their lives. 😢 — IATA (@IATA) January 8, 2020
The jet lifted off and climbed to about 7,900 feet and was traveling at roughly 300 miles an hour when it stopped transmitting its position and disappeared, according to data supplied by FlightRadar24. Other aircraft operating out of Tehran were tracked normally, said FlightRadar24 spokesman Ian Petchenik.
We are aware of the media reports out of Iran and we are gathering more information. — The Boeing Company (@Boeing) January 8, 2020
A Ukraine International employee picking up the general line declined to comment. Ukrainian President Volodymyr Zelensky cut a trip to Oman short to go to Kyiv, his office said.
Website planefinder.net, which tracks flights worldwide, listed the two-engine aircraft that crashed as being three years old, saying it was delivered in July 2016.
Boeing is still struggling with the fallout from crashes in Indonesia in October 2018 and Ethiopia last March. Those disasters, which killed nearly 350 people, involved the U.S. manufacturer’s 737 Max jet, which has been grounded globally for 10 months. The 737-800 and 737 Max are both variants of Boeing’s 737 narrow-body planes but the 737-800 hasn’t been grounded.
Boeing is still developing a fix for the flaws discovered in a flight-control system new to the 737 Max model. The 737-800 that is reported to have crashed near Tehran on Wednesday didn’t have that system.
This story has been updated.
More must-read stories from Fortune:
—7 M&As that defined a decade of dealmaking and reshaped the economy
—3 charts that prove patent power is tilting in Asia’s favor
—Rwanda is bringing tech buzz to Africa
—These 10 journalists deserve justice in 2020
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-07--Iran Fires Missiles at Iraqi Air Bases Housing U.S. Troops, U.S. Officials Confirm

This article was last updated at 8:49 p.m. E.T.
Iran struck back at the United States for the killing of a top Iranian general early Wednesday, firing a series of ballistic missiles at two Iraqi bases housing U.S. troops in a major escalation that brought the two longtime foes closer to war.
Iranian state TV said it was in revenge for the U.S. killing of Revolutionary Guard Gen. Qassem Soleimani, whose death last week in an American drone strike near Baghdad prompted angry calls to avenge his slaying.
Soleimani’s killing and the strikes by Iran came as tensions have been rising steadily across the Mideast after President Donald Trump’s decision to unilaterally withdraw America from Tehran’s nuclear deal with world powers. They also marked the first time in recent years that Washington and Tehran have attacked each other directly rather than through proxies in the region. It raised the chances of open conflict erupting between the two enemies, which have been at odds since Iran’s 1979 Islamic Revolution.
Iran initially announced only one strike, but U.S. officials confirmed both. There was no immediate word on injuries. U.S. defense officials were at the White House, likely to discuss options with Trump, who launched the strike on Soleimani while facing an upcoming impeachment trial in the Senate,
Iran’s Revolutionary Guard warned the U.S. and its regional allies against retaliating over the missile attack against the Ain al-Asad air base in Iraq’s western Anbar province. The Guard issued the warning via a statement carried by Iran’s state-run IRNA news agency.
“We are warning all American allies, who gave their bases to its terrorist army, that any territory that is the starting point of aggressive acts against Iran will be targeted,” The Guard said. It also threatened Israel.
After the strikes, a former Iranian nuclear negotiator posted a picture of the Islamic Republic’s flag on Twitter, appearing to mimic Trump who posted an American flag following the killing of Soleimani and others Friday in a drone strike in Baghdad.
Ain al-Asad air base was first used by American forces after the 2003 U.S.-led invasion that toppled dictator Saddam Hussein, and later saw American troops stationed there amid the fight against the Islamic State group in Iraq and Syria. It houses about 1,500 U.S. and coalition forces.
About 70 Norwegian troops also were on the air base but no injuries were reported, Brynjar Stordal, a spokesperson for the Norwegian Armed Forces told The Associated Press.
Trump visited the sprawling Ain al-Asad air base, about 100 miles or 60 kilometers west of Baghdad, in December 2018, making his first presidential visit to troops in the region. He did not meet with any Iraqi officials at the time, and his visit inflamed sensitivities about the continued presence of U.S. forces in Iraq. Vice President Mike Pence also has visited the base.
Iranian State TV said the Guard’s aerospace division that controls Iran’s missile program launched the attack, which it said was part of an operation dubbed “Martyr Soleimani.” Iran said it would release more information later.
The U.S. also acknowledged another missile attack on a base in Irbil in Iraq’s semiautonomous Kurdish region.
“As we evaluate the situation and our response, we will take all necessary measures to protect and defend U.S. personnel, partners, and allies in the region,” said Jonathan Hoffman, an assistant to the U.S. defense secretary.
Wednesday’s revenge attack came a mere few hours after crowds in Iran mourned Soleimani and as the U.S. continued to reinforce its own positions in the region and warned of an unspecified threat to shipping from Iran in the region’s waterways, crucial routes for global energy supplies. U.S. embassies and consulates from Asia to Africa and Europe issued security alerts for Americans.
A stampede broke out Tuesday at Soleimani’s funeral for a top Iranian general slain in a U.S. airstrike, and at least 56 people were killed and more than 200 were injured as thousands thronged the procession, Iranian news reports said.
Tuesday’s deadly stampede took place in Soleimani’s hometown of Kerman as his coffin was being borne through the city in southeastern Iran, said Pirhossein Koulivand, head of Iran’s emergency medical services.
There was no information about what set off the crush in the packed streets, and online videos showed only its aftermath: people lying apparently lifeless, their faces covered by clothing, emergency crews performing CPR on the fallen, and onlookers wailing and crying out to God.
“Unfortunately as a result of the stampede, some of our compatriots have been injured and some have been killed during the funeral processions,” Koulivand said, and state TV quoted him as saying that 56 had died and 213 had been injured.
Soleimani’s burial was delayed, with no new time given, because of concerns about the huge crowd at the cemetery, the semi-official ISNA news agency said.
A procession in Tehran on Monday drew over 1 million people in the Iranian capital, crowding both main avenues and side streets in Tehran. Such mass crowds can prove dangerous. A smaller stampede at the 1989 funeral for Ayatollah Ruhollah Khomeini killed at least eight people and injured hundreds.
Hossein Salami, Soleimani’s successor as leader of the Revolutionary Guard, addressed a crowd of supporters gathered at the coffin in a central square in Kernan. He vowed to avenge Soleimani, who was killed in a U.S. drone strike Friday near Baghdad’s airport.
“We tell our enemies that we will retaliate but if they take another action we will set ablaze the places that they like and are passionate about,” Salami said.
“Death to Israel!” the crowd shouted in response, referring to one of Iran’s longtime regional foes.
Salami praised Soleimani’s work, describing him as essential to backing Palestinian groups, Yemen’s Houthi rebels and Shiite militias in Iraq and Syria. As a martyr, Soleimani represented an even greater threat to Iran’s enemies, Salami said.
Soleimani will ultimately be laid to rest between the graves of Enayatollah Talebizadeh and Mohammad Hossein Yousef Elahi, two former Guard comrades killed in Iran’s 1980s war with Iraq. They died in Operation Dawn 8, in which Soleimani also took part. It was a 1986 amphibious assault that cut Iraq off from the Persian Gulf and led to the end of the war that killed 1 million.
The funeral processions in major cities over three days have been an unprecedented honor for Soleimani, seen by Iranians as a national hero for his work leading the Guard’s expeditionary Quds Force.
The U.S. blames him for killing U.S. troops in Iraq and accused him of plotting new attacks just before he was killed. Soleimani also led forces supporting Syrian President Bashar Assad in that country’s civil war, and he also served as the point man for Iranian proxies in countries like Iraq, Lebanon and Yemen. Russian President Vladimir Putin met with Assad in Syria on Tuesday amid the tensions between Washington and Tehran.
Soleimani’s slaying already has led Tehran to abandon the remaining limits of its 2015 nuclear deal with world powers as his successor and others vow to take revenge.
In Iraq, pro-Iranian factions in parliament have pushed to oust American troops from Iraqi soil following Soleimani’s killing. Germany and Canada announced plans to move some of their soldiers in Iraq to neighboring countries.
The U.S. Maritime Administration warned ships across the Mideast, citing the rising threats. “The Iranian response to this action, if any, is unknown, but there remains the possibility of Iranian action against U.S. maritime interests in the region,” it said.
Oil tankers were targeted in mine attacks last year that the U.S. blamed on Iran. Tehran denied responsibility, although it did seize oil tankers around the crucial Strait of Hormuz, the narrow mouth of the Persian Gulf through which 20% of the world’s crude oil travels.
The U.S. Navy’s Bahrain-based 5th Fleet said it would work with shippers in the region to minimize any possible threat.
The 5th Fleet “has and will continue to provide advice to merchant shipping as appropriate regarding recommended security precautions in light of the heightened tensions and threats in the region,” 5th Fleet spokesman Cmdr. Joshua Frey told The Associated Press.
Iran’s parliament, meanwhile, has passed an urgent bill declaring the U.S. military’s command at the Pentagon and those acting on its behalf in Soleimani’s killing as “terrorists,” subject to Iranian sanctions. The measure appears to be in response to a decision by Trump in April to declare the Revolutionary Guard a “terrorist organization.”
The U.S. Defense Department used that terror designation to support the strike that killed Soleimani. The action by Iran’s parliament was done by a special procedure to speed it into law and also saw the lawmakers approve funding for the Quds Force with an additional 200 million euros, or about $224 million.
More must-read stories from Fortune:
—Donald Trump and the power of incumbency
—How close is Iran to making a nuclear bomb?
—The wealthiest members of Congress—and how they made their millions
—USPS could privatize as early as next year
—2020 Crystal Ball: Predictions for the economy, politics, technology, and more
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-01-07--The FDA Kept Up Its Drug Approval Streak In 2019

This Specialty Pencil Shop Charms Everyone From Creative Professionals to Stationery Lovers

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Good afternoon, readers.
I hope all of you had a wonderful holiday—and saw our note about the upcoming Brainstorm Health conference in 2020.
The Food and Drug Administration (FDA) has seemingly been on a mission these past few years to get as many drug approved as possible.
Don’t take it from me—look at the agency’s own records of new approvals in 2019. Through December 23 of 2019, the FDA cleared 48 new treatments for conditions ranging from cancer to muscular dystrophy to schizophrenia. There were 46 “novel” treatments (the kind that aren’t based on existing drugs) approved in 2017, which was a record at the time. In 2018, there was a high of 59 novel treatments. This is a pretty big spike compared to 2010, when just 21 new, novel drugs were approved.
We’ve written about most of these recent drug approvals—and some of the controversies surrounding them. The pace of FDA green lights presents an opportunity for the industry—and hope for patients—but also raises questions about how regulators should balance their responsibilities to the public at large and cold, hard science.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Pear Therapeutics wants to expand its digital health platform. Digital health upstart Pear Therapeutics is leaning in to the virtual reality space, according to the company, with a number of agreements with medical providers such as the Cincinnati Children’s Hospital Medical Center and Winterlight Labs. The deals include some flashy health tech—including a form of gamification for pain and anxiety.
INDICATIONS
Merck's Keytruda faces a rare miss. Pharma giant Merck's Keytruda has been a stunning success in the cancer immunotherapy field—which makes it all the more surprising when it faces clinical setbacks. Merck stock fell more than 2.6% (not exactly chump change for a $230 billion market value company) on news that its superstar treatment couldn't match up to plain old chemotherapy for a certain form of lung cancer. While Keytruda has proven itself in other types of lung cancer, investors were hoping that Merck could expand the drug's reach further in a particularly lucrative market. (FiercePharma)
REQUIRED READING
CES 2020 Kickoff Highlights the Decoupling of US and China's Tech, by Naomi Xu Elegant
These 10 Journalists Deserve Justice in 2020, by Defne Gencler
The Driverless Car Moonshot Is Over, by Clifton Leaf
Predictions for Artificial Intelligence in 2020, by Jonathan Vanian
Sign up for other Fortune newsletters.


fortune--2020-01-08--Bed Bath & Beyond Stock Plunges on What CEO Calls ‘Unsatisfactory’ Fiscal Third Quarter Results

Oscars to Go Host-less for Second Straight Year on ABC

Bed Bath & Beyond Inc. (Nasdaq: BBBY) today reported financial results for the third quarter of fiscal 2019 ended Nov. 30, 2019.
“I am delighted to have the opportunity to lead this iconic company,” stated Mark J. Tritton, Bed Bath & Beyond’s President and CEO. “Our performance in the third quarter was unsatisfactory and underscores the imperative for change and strengthens our sense of priorities and purpose. We must respond to the challenges we face as a business, including pressured sales and profitability, and reconstruct a modern, durable model for long-term profitable growth. Fortunately, the foundation of the Company’s transformation is well underway, due in large part to the direction and support of the Board. We will be finalizing the details of our strategic plan over the next few months and appreciate your patience as we embark and pursue this journey to position Bed Bath & Beyond to deliver long-term, sustainable growth.”
Fiscal 2019 Third Quarter Results
For the fiscal 2019 third quarter, the Company reported a net loss of $(0.31) per diluted share ($(38.6) million), which included a net benefit of $0.07 from the favorable impact from an adjustment to the incremental inventory reserve for future markdowns associated with its inventory initiative, that was partially offset by a non-cash charge for the impairment of certain store-level assets. This compares to net earnings of $0.18 per diluted share ($24.4 million) for the fiscal 2018 third quarter, which included the favorable impact of $0.16 per diluted share from the gain on the sale of a building. Excluding these net favorable impacts in both periods, the Company reported an adjusted net loss of $(0.38) per diluted share ($(46.9) million) for the fiscal 2019 third quarter, compared to adjusted net earnings of $0.02 per diluted share ($2.7 million) for the fiscal 2018 third quarter. Net sales for the fiscal 2019 third quarter were $2.8 billion, a decrease of 9.0% compared to the prior year period. Comparable sales in the fiscal 2019 third quarter declined 8.3%.
The Company’s fiscal 2019 third quarter was significantly impacted by the calendar shift of the Thanksgiving holiday this year resulting in one less week of holiday sales compared to the prior year period. Adjusting for this calendar shift to include Thanksgiving and Cyber Monday weeks in both periods, comparable sales for the fiscal 2019 third quarter declined 3.6%. During the key five-day shopping period from Thanksgiving to Cyber Monday for both this year and last year, comparable sales on a shifted basis increased 7.1%.
Capital Allocation
Today, the Company’s Board of Directors declared a quarterly dividend of $0.17 per share payable on April 14, 2020 to shareholders of record at the close of business on March 13, 2020.
The Company repurchased $1.2 million of its common stock, representing 87,000 shares, during the fiscal 2019 third quarter.
The Company ended the fiscal 2019 third quarter with $920 million in cash and investments, compared with $1.0 billion in cash and investments at the end of the fiscal 2018 third quarter.
Outlook
The Company expects its sales and profitability to remain pressured during the fiscal 2019 fourth quarter. Considering these headwinds reflected in the Company’s results to date, and the ongoing work by recently appointed President & CEO Mark Tritton to assess the business and finalize the details of the Company’s go-forward strategic plan as well as the extensive senior leadership changes within the past month, the Company believes it is appropriate to withdraw its fiscal 2019 full year financial guidance.
More must-read stories from Fortune:
—That great 2019 S&P rally? It has big warning signs for 2020
—The relationship between geopolitical crises and market outcomes isn’t simple
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-08--‘A Money-Spinner:’ 737 Plane Model in Deadly Iran Crash Was a Bright Spot for Boeing

What You Need to Know Before Buying CBD Oil or Treats for Your Pet

A Boeing plane operated by Ukraine International Airlines crashed on Wednesday just outside of Tehran, Iran, killing all 176 people on board. The cause of the crash remains unclear.
In a statement, Boeing called the crash a tragic event. “We are in contact with our airline customer and stand by them in this difficult time,” it said. “We are ready to assist in any way needed.”
The crash will no doubt deepen the corporate crisis that’s ensnared Boeing for some 14 months now. It’s the third deadly crash of a Boeing aircraft since late 2018. The plane in Wednesday’s incident—the Boeing 737-800—is in the same family as the now-grounded 737 Max involved in the two earlier incidents, but aviation experts draw a distinction between the models.
The 737-800 is part of the Next-Generation (or NG) 737s that were introduced in the 1990s with increased wingspans, upgraded glass cockpits, and modernized interiors. The 737 Max, meanwhile, is categorized as a ‘fourth generation’ 737, because its design includes subtle tweaks to house more energy-efficient engines. The two fatal 737 Max crashes—a Lion Air flight in October 2018 and an Ethiopian Airlines flight in March 2019—came early in the model’s lifespan; it was only introduced in 2017. The decades-old 737NGs—of which the 737-800 is a variant—are proven workhorses that’ve carried billions of passengers across the globe. And until Wednesday, the family had been an undeniable bright spot for Boeing.
“It’s the most successful plane in the history of aviation,” said aviation expert David Learmount from FlightGlobal.
A child’s shoe is pictured on January 8, 2020 at the scene of a Boeing jet that crashed shortly after take-off near Imam Khomeini airport in the Iranian capital Tehran. (Photo by Borna GHASSEMI / ISNA / AFP)
As of February 2019, more than 4,900 models of the 737-800 had been delivered to airlines ranging from legacy carriers such as American Airlines and British Airways to European budget airline RyanAir.
In the wake of the 737 Max grounding that followed the two fatal crashes, the 737-800 has also played a vital role in supplying capacity for the global travel industry for the simple reason that with no new 737 Maxes rolling into service, airlines have had to hang onto their 737-800s for much longer than anticipated.
“It’s a robust and reliable machine with great passenger appeal,” says Saj Ahmad, chief analyst at StrategicAero Research.
Leasing companies love it too. “[I]t has great residuals—which means that its value depreciates a lot slower than other competing airplanes in its class,” Ahmad says. It “commands a strong lease rate because of the demand from airlines. Many airlines renew leases, and—in some cases—buy them off leasing companies at the end of a contract if they choose not to extend,” Ahmad says
“In short, it’s been a magnificent money-spinner for Boeing,” Ahmad said.
Dennis Muilenburg, ex-CEO of Boeing, addressed the families of victims who died in Boeing 737 Max jet crashes, during the House Transportation and Infrastructure Committee hearing examining the design, development, and marketing of the aircraft in October 2019. He lost his job two months later. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)
At the same time, the 737-800 doesn’t have a spotless safety record.
According to the Aviation Safety Network, the 737-800 involved in Wednesday’s crash was delivered to UIA in July 2016. It is just one of more than 7,000 variants of the 737NG planes to have entered service across 20 years. According to Boeing data, seven of the aircraft have been involved in fatal crashes.
That total includes a January 2010 Ethiopian Airlines crash, where 90 people died shortly after take-off in Beirut, and a Kenya Airways jet that suffered a similar fate in May 2007, shortly after leaving Douala in Cameroon, killing 114 people. As with the Wednesday incident near Tehran, the planes crashed shortly after take-off, although—unlike Tehran—both took off in poor weather. Official investigations into the two crashes pinned the blame on pilot error, with the Ethiopian Airlines pilot and co-pilot believed to have worked 51 consecutive days.
More recently, a 737-800 was involved in the March 2016 crash of a FlyDubai flight to the Russian city of Rostov-on-Don, which killed all 62 people on board. In September 2018, a 737-800 was also involved in a fatal accident in the Federated States of Micronesia, when an Air Niugini flight overshot the runway and wound up in a nearby lagoon, killing one passenger.
All told, those incidents represent a small fraction of the millions of successful flights achieved by the aircraft.
“The first [737] flew in 1967, and it is still in production now in its Max variant,” says Learmount.
Ahmad says Wednesday’s crash has to be “looked at in isolation,” meaning it shouldn’t necessarily be tied Boeing’s ongoing 737 Max saga. That’s a tall order considering how the 737 Max crisis has plagued Boeing. Former CEO Dennis Muilenburg lost his job amid the scandal; in fact, his interim replacement was on the job when the UIA flight went down. His permanent replacement starts Monday.
At the same time, Wednesday’s crash near Tehran is unique in that it occurred amid escalating tension between Iran and the U.S., which is complicating the hunt for a definitive cause.
More must-read stories from Fortune:
—7 M&As that defined a decade of dealmaking and reshaped the economy
—3 charts that prove patent power is tilting in Asia’s favor
—Rwanda is bringing tech buzz to Africa
—These 10 journalists deserve justice in 2020
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-08--As Investors Shrug Off Iran Concerns, Some Analysts Find the Complacency ‘Disconcerting’

You may not have heard the collective sigh of relief that investors around the world exhaled after President Trump’s comments indicated he wouldn’t escalate a brewing crisis with Iran. But for anyone invested in the stock market, it was palpable.
After Iran fired a series of ballistic missiles at two Iraqi bases housing U.S. troops, stock index futures late Tuesday fell, indicating a bad day for stocks today amid mounting concerns about an escalating crisis that could bring Iran and the U.S. to war.
Instead, stocks staged a tentative and modest rally amid signs that leaders in both countries were seeking ways to avoid further escalation. When Trump spoke on Wednesday, he said that no Americans or Iraqis were killed in the attacks and that Iran looked to be “standing down.”
The Dow Jones Industrial Average closed the day up 0.56% at 28,745.09. The S&P 500 Index rose 0.49%, to 3,253.05. It was hardly a feel-good rally, but it was a broad acknowledgment that the escalation many were dreading isn’t happening for now.
“The Iran fever has broken,” John Kilduff, a founding partner in Again Capital, said on CNBC following Trump’s remarks. “We have a lot less fear in this market now.”
Oil prices fell back with West Texas Intermediate crude oil futures falling more than 5% late Wednesday to below $60 a barrel. A prolonged conflict in the Middle East could disrupt oil supplies and push up energy prices, but that risk seemed more distant now.
Similarly, stocks of energy companies were among the relatively few decliners, with Exxon Mobil down 1.1% at $69.23 a share, Philliips 66 down 3.7% to $104.10 a share and Schlumberger off 2.9% at $39.41 a share.
It’s not clear whether the market’s calm response to the crisis reflects a hard-won stoicism or a sense of complacency after a year of steady, regular stock gains. But some in the market worry it could be the latter, which could spell higher volatility ahead if tensions flare up again.
“We would actually expect to see the market sell off a little bit more,” says John Traynor, chief investment officer at wealth-management firm People’s United Advisors. “That suggests a level of complacency out there that’s a little disconcerting. There are escalating macro risks that we just don’t believe investors are paying appropriate attention to. And, unfortunately, we think we’ll see increased volatility as these risks bubble up.”
That volatility could be exacerbated by a growing sense of unpredictability and uncertainty on several fronts. Despite the apparent de-escalation in Iran and the U.S. today, that may still be the case in the longer term, even if investors are largely refraining from pulling money from the stock market right now.
On the other hand, the stock market’s history in recent decades suggests that a stay-the-course mentality can make sense in the long term. LPL Financial, a Boston-based investment-management firm, looked at major political events going back to the 1941 attack on Pearl Harbor. It found that the S&P 500 fell an average of 5% on the day that a geopolitical event shocked the market. But it took an average of 47 days for the index to recover.
The S&P 500’s recovery time varied widely by event, but seemed to depend more on the broader economy’s health than the severity of the event itself. After the 9/11 attacks in 2001, the market needed 31 days to recover. By contrast, it took 189 days to recover after Iraq’s invasion of Kuwait in 1990, a year when the U.S. economy was headed into a period of prolonged weakness.
“No doubt worries over Iran have investors on edge,” Ryan Detrick, senior market strategist at LPL, said in a blog post analyzing the data. “Stocks could be volatile for a while, but the impact to stocks from geopolitical events historically has tended to be short-lived.”
In other words, it’s back to business as usual for the U.S. stock market, a sentiment that may feel at odds with the high stakes that are still on the table in the world of geopolitical tensions. That could change depending on how Iran responds to new sanctions Trump vowed to impose on the country, not to mention the ongoing war of words and tweets from leaders of both countries.
For now, though, investors are breathing a bit easier, at least tonight.
More must-read stories from Fortune:
—25 ideas that will shape the 2020s
—USPS could privatize as early as next year
—UPS’s $20 billion bet on e-commerce is paying off
—Airbnb copes with a bad trip on the road to a 2020 IPO
—The Trump administration is targeting anti-Trump Facebook users
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-08--Netflix Leads GLAAD Media Awards with 15 Nominations, HBO Scores Eight

With 15 nominations, Netflix is the top contender at the 31st annual GLAAD Media Awards.
The streaming juggernaut scored nominations for outstanding drama series (The Politician), outstanding realty program (Queer Eye) and outstanding limited series (When They See Us, Tales of the City). Three Netflix shows will compete for outstanding comedy series: Dear White People, Sex Education, and One Day at a Time.
HBO followed Netflix with eight nominations, while NBC, ABC and CBS scored four nominations each. GLAAD announced 176 nominees in 30 categories on Wednesday.
Nominees for outstanding film (wide release) are Rocketman, Bombshell, Downton Abbey, Booksmart, and Judy. Outstanding drama series has 10 nominees, including Pose, Euphoria, and Killing Eve.
Ten acts will compete for outstanding music artist including rappers Lil Nas X, Young M.A and Kevin Abstract, Alabama Shakes front-woman Brittany Howard, sister duo Tegan & Sara, veteran singer-songwriter Melissa Etheridge and pop singers Adam Lambert, Kim Petras, Mika, and King Princess.
The GLAAD Media Awards will host two ceremonies, the first in New York on March 19 and another in Los Angeles on April 16.
More must-read stories from Fortune:
—What a weird, wild Golden Globes tells us about this year’s Oscars—Inside 1917: Designing a World War I battlefield
—Greta Gerwig and cast reveal how they reinvented Little Women
—How Vevo’s artistic and scientific approach to music videos is paying off
—How Netflix transformed the peak TV terrain in the 2010s
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-01-08--Oscars to Go Host-less for Second Straight Year on ABC

The Oscars are going without a host again this year.
ABC Entertainment President Karey Burke said the Feb. 9 telecast will focus on what worked last year: “huge entertainment value, big musical numbers, big comedy and star power.”
Last year’s ceremony attracted 29.6 million viewers, the second-smallest in Oscars history but 12% more than in 2018, which ended a four-year slide in viewership. Comedian Kevin Hart was originally announced as host, but he backed away when some anti-gay tweets he posted a decade ago resurfaced.
ABC and the Academy of Motion Picture Arts and Sciences agreed to go hostless for a second straight year, Burke said.
“We expect that we’re going to have a very commercial set of nominations,” Burke told a TV critics meeting Tuesday, “and a number of elements have come together that convinced us we’ll have a very entertaining show.”
Nominations will be announced on Monday.
Last year’s Emmy Awards also went without a host. ABC is televising this year’s ceremony on Sept. 20, and Burke was asked if she had any idea who might preside.
“Baby Yoda,” she joked, referring to the infant version of the “Star Wars” character that became an instant sensation on Disney Plus’ The Mandalorian.
More must-read stories from Fortune:
—What a weird, wild Golden Globes tells us about this year’s Oscars—Inside 1917: Designing a World War I battlefield
—Greta Gerwig and cast reveal how they reinvented Little Women
—How Vevo’s artistic and scientific approach to music videos is paying off
—How Netflix transformed the peak TV terrain in the 2010s
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.