fortune--2020-02-18--A frustrating 2020 consideration: Which candidate has treated women less bad?

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Mary Barra’s GM peels out of three more markets, we get a woman’s take on George Washington, and Michael Bloomberg comes under fire. Make the most of your Tuesday.
– Not that bad? Ever since Michael Bloomberg announced his presidential bid, allegations of his mistreatment of women have trickled out. That stream turned into a tidal wave in recent days, as the billionaire appeared to rise in polls and as his campaign continues to torch money in its pursuit of voters. (He qualified for Wednesday’s debate this morning.)
Last week, GQ asked the question, “Why Is Bloomberg’s Long History of Egregious Sexism Getting a Pass?” citing his boasts of womanizing, his demeaning workplace comments, and his more recent skepticism of #MeToo accusers.
Then on Saturday, the Washington Post put a finer point on the matter, with an exposé based on thousands of pages of court documents from discrimination lawsuits filed against Bloomberg and his eponymous financial information, along with company and interviews with witnesses in some of the cases.
In the highest-profile discrimination case, a former company saleswoman claimed that when Bloomberg learned of her pregnancy, he told her to “kill it.” (That allegation had previously been reported; the Washington Post found another employee who says he witnessed the conversation.) Bloomberg denied that allegation under oath and ultimately reached a confidential settlement with the employee.
Bloomberg’s demeanor toward women is also said to be captured in a booklet of his quotes, which he received as a sort of gag birthday gift in 1990 and which the Washington Post published in full. In one passage, Bloomberg allegedly said his company’s terminals could do everything, include perform oral sex. “I guess that puts a lot of you girls out of business,” he allegedly said.
A spokesperson for the Bloomberg campaign told the Post that Bloomberg “simply did not say the things somebody wrote in this gag gift.” The spokesperson also said Bloomberg “openly admits that his words have not always aligned with his values and the way he has led his life and some of what he has said is disrespectful and wrong.”
Nevertheless, Bloomberg has had to answer to the reports on the campaign trail, as his Democratic opponents have pounced on the claims. “I would not be where I am today without the talented women around me,” he tweeted on Saturday. And he’s now facing pressure—including from Sen. Elizabeth Warren—to release ex-employees from their non-disclosure agreements. He’s so far refused.
It’s not just Bloomberg’s Democratic rivals who’ve feasted on the renewed criticism. Kellyanne Conway, advisor to President Donald Trump, said on Sunday that Bloomberg’s alleged remarks are “far worse” than what Trump said in the Access Hollywood tape. Others argue that because Bloomberg has not been accused of sexual misconduct, he’s not quite in Trump territory.
When evaluating how much progress women have made in seeking elected office in recent years, it’s hard to ignore a moment like this, when, in a cycle that once featured a historically diverse field, we’re engaged in a debate about which legitimate candidate for president has treated women less bad.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
ALSO IN THE HEADLINES
- Saving San Francisco. San Francisco Mayor London Breed features in Fortune's new deep dive into the future of the city, which has seen problems like homelessness and inequality soar alongside a skyrocketing economy. "The suffering on our streets, it offends our civic soul," she has said. Dig into Adam Lashinsky's longread on San Francisco here: Fortune
- Hard questions. Ever since her third-place finish in the New Hampshire primary, Minnesota Sen. Amy Klobuchar has been grilled—on her record of prosecuting killings by police when she was a county prosecutor, on her immigration policy, and on her stance toward criminal justice reform. The questions, while harsh, seem to indicate Klobuchar's arrival as a serious contender. Politico
- The incredible, shrinking GM. CEO Mary Barra is pulling GM out of three more markets: Australia, New Zealand, and Thailand. It's part of her plan to downsize the company's global presence in favor of investing in electric vehicles to compete with Tesla. She previously yanked Chevrolet out of Europe in 2015, exited Russia that same year, and sold two brands—Germany's Opel unit and the U.K.'s Vauxhaul—to France’s Peugeot SA in 2017. Fortune
- Decision time. The five women and seven men who make the up the jury in the trial of Harvey Weinstein will begin deliberations in Manhattan today. If they find the disgraced movie mogul guilty of predatory sexual assault, Weinstein will face a sentence of life in prison. The Guardian
IN CASE YOU MISSED IT
- RBG vs. ERA. Last week, Supreme Court Justice Ruth Bader Ginsburg took a bit of air out of the Equal Rights Amendment movement by saying the recently-revived effort to amend the U.S. Constitution should "start over." It's put advocates in the awkward position of rebutting the feminist icon, including Linda Coberly, who heads the ERA Coalition’s legal task force and says it's still worth seeing the current process through. The Atlantic
- A woman takes on Washington. Alexis Coe is just the third woman to write a complete biography of George Washington; she's the first woman to do it in 40 years. Her new book, You Never Forget Your First: A Biography of George Washington, looks to challenge the portrait of Washington that—Coe argues—has been distorted by male authors' tendency to romanticize the first U.S. president. Washington Post
- Museum mess. Caroline Baumann was forced to resign as director of the Cooper Hewitt, Smithsonian Design Museum earlier this month after an investigation into how she procured her wedding dress and wedding venue. The probe reportedly turned up an appearance of a conflict of interest; six of the museum's 27 board members have resigned over the decision to remove her. New York Times
- Credit card controversy. OneUnited, the U.S.'s largest black-owned bank, was ridiculed last week when it announced its debit card would feature Harriet Tubman's image. Teri Williams, the bank’s president and chief operating officer, defended the move as symbolic. Tubman was against the dehumanizing capitalism that was practiced in America, but “she recognized the value of economic empowerment for security,” Williams argues. New York Times
ON MY RADAR
5 things Madewell’s CEO always packs when traveling Fortune
Kate Middleton opens up about 'mommy guilt' on podcast CNN
A nun's journey in the Amazon New Yorker
$1 million grant goes to record black women’s histories Associated Press
PARTING WORDS
"[S]tanding up against injustice was right. Refusing to give in to fear was right. Telling the truth was right. I knew I had to speak up. And I’m so glad I did."
-Susan Fowler, a former Uber engineer, in an essay adapted from her new book, Whistleblower: My Journey to Silicon Valley and Fight for Justice at Uber.


fortune--2020-02-18--Franklin agrees to buy Legg Mason and create $1.5 trillion investing colossus

SARS treatments could help with the new coronavirus .
Why were they shelved ?

Franklin Resources Inc. agreed to acquire asset manager Legg Mason Inc. for almost $4.5 billion in a deal that would create an active-management investing giant.
Franklin will pay all cash for Legg Mason, the companies said in a statement Tuesday. The transaction values Legg Mason at $50 per share, a 23% premium to the Baltimore-based company’s share price Friday.
The transaction is another case of consolidation in the industry, as firms grapple with falling fees and the rising challenge from managers of index-tracking funds. In November, Charles Schwab Corp. agreed to buy TD Ameritrade Holding Corp. for about $26 billion; Janus Henderson Group Plc and Standard Life Aberdeen Plc were both formed in mergers in 2017.
Tuesday’s announcement comes less than a year after activist investor Trian Fund Management took a 4.5% stake in Legg Mason, enough to secure its founder Nelson Peltz a position on the board.
Just days later, the fund manager said it would cut about 12% of its staff and reduce its executive committee to four from eight members. Peltz said at the time his three top priorities were “significantly reducing costs, driving revenue growth organically and through acquisition, and increasing profitability.”
The combined companies will have $1.5 trillion in assets under management. Franklin will also assume about $2 billion in Legg Mason debt.
Name of company Target Proposed deal size Status Jupiter Fund Management Plc Merian Global Investors U.K. Ltd. 370 million pounds Pending Amundi SA Sabadell Asset Management 430 million euros Pending Wealth Management Partners Julius Baer Netherlands BV Unknown Completed Standard Life Plc Aberdeen Asset Management Plc 3.67 billion pounds Completed Henderson Group Plc Janus Capital Group Inc. $2.64 billion Completed Based on Bloomberg data/announced deals
“This is a landmark acquisition for our organization that unlocks substantial value and growth opportunities driven by greater scale, diversity and balance across investment strategies, distribution channels and geographies,” Greg Johnson, executive chairman of the board of Franklin Resources, said in a statement.
Legg Mason closed down less than 1% to $40.72 on Friday, giving the company a market value of about $3.5 billion.
Asset and wealth managers are facing unprecedented pressures on their bottom lines as investors increasingly pull money from actively managed funds and move them to cheaper passive ones that track benchmarks. The flood of money out of active and into passive funds has sent fees grinding lower, led to thousands of job cuts and forced large-scale consolidation.
Among other changes, Banco de Sabadell SA agreed in January to sell its asset-management business to Amundi SA for 430 million euros ($466 million), while GAM Holding AG considered a sale of the company last year. On Monday, Jupiter Fund Management Plc agreed to acquire rival U.K. asset manager Merian Global Investors.
Tuesday’s announced deal is complementary because Legg Mason primarily focuses on retail investors, while Franklin Resources caters to institutional investors.
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fortune--2020-02-18--Elon Musk calls Bill Gates ‘underwhelming’ after Microsoft founder says he bought an electric…Porsch

Elon Musk calls Bill Gates ‘underwhelming’ after Microsoft founder says he bought an electric…Porsche

Bill Gates paid Tesla Inc. a compliment for coaxing the car industry to go electric. If he was expecting kind words in return from Elon Musk, he apparently shouldn’t have spoken about challenges that still lie ahead — or about his new Porsche.
Gates, the billionaire co-founder of Microsoft Corp., spoke with a YouTube influencer last week about the challenges of reducing emissions to slow climate change. He called the passenger-car industry “one of the most hopeful” sectors taking action in this regard.
“And certainly Tesla, if you had to name one company that’s helped drive that, it’s them,” Gates told YouTuber Marques Brownlee.
Then Gates discussed recently buying a Porsche Taycan. While he called the electric sports car “very, very cool,” he acknowledged its premium price — the initial Turbo S models start at $185,000 — and said consumers still have to overcome anxieties about EVs offering limited range and taking longer to recharge. Gasoline-powered cars travel longer between quick refuels at stations that outnumber charging points.
When a Tesla enthusiast posted about being disappointed in Gates’s decision to buy a Taycan instead of a Tesla and his comments about range anxiety, Musk replied: “My conversations with Gates have been underwhelming tbh.”
My conversations with Gates have been underwhelming tbh — Elon Musk (@elonmusk) February 18, 2020
Musk, 48, is of course no stranger to tweeting dismissively about fellow billionaires. The Tesla chief executive officer questioned Facebook Inc. CEO Mark Zuckerberg’s understanding of the risks of artificial intelligence in 2017. Last year, he called Jeff Bezos a copycat after the Amazon.com Inc. CEO embarked on an internet-satellite project that could rival one that Musk’s closely held company SpaceX is pursuing.
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—Can Tesla keep growing without critical tax incentives?
—How Renault is navigating disruption in the auto industry
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fortune--2020-02-18--HSBC plans to slash 35,000 jobs in the U.S. and Europe as it pivots to Asia

Europe’s biggest bank, HSBC, said on Tuesday it would cut up to 35,000 jobs, around 15% of its workforce, over the next three years as it sets out a sweeping plan to boost profits and growth by shrinking some of its businesses in Europe and the United States and switching resources to thriving markets in Asia and the Middle East.
The Asia-focused bank took a $7.3 billion charge against its fourth-quarter earnings, partly to cover restructuring costs. It also said its performance in 2020 may be affected by the coronavirus outbreak which was causing economic disruption in Hong Kong and mainland China, likely leading to higher provisions for bad debts.
The shakeup, which interim chief executive Noel Quinn called “one of the deepest restructuring and simplification programs in our history,” is aimed at remedying years of what the bank sees as unacceptably poor performance in parts of the group, mainly in Europe and the U.S. The new focus is to concentrate more on growth in its profitable Asian markets. But there’s risk there too. The coronavirus outbreak has turned the region from high-growth to highly unstable.
Nevertheless, the bank aims to reduce risk-weighted assets in under-performing businesses by more than $100 billion by the end of 2022 and to reinvest those assets elsewhere. That means HSBC’s businesses in Europe, excluding its U.K. retail bank, and in the United States will shrink.
While the bank had not set a target for reducing staff, Quinn told reporters on a call: “We would expect our headcount to decrease from the current level of 235,000 to be closer to 200,000 in 2022.” He pointed out though that in an average year, the bank lost 25,000 people through natural attrition.
The job cuts are expected to focus on Europe and the United States.
Negative rates, slowing economies
While U.S. banking titans have bounced back strongly from the financial crisis, with JPMorgan Chase last month reporting record 2019 net income of $36.4 billion, European-based banks continue to struggle because of weak economies, low or negative interest rates and in some cases bad loans left over from the financial crisis.
European banks, which once had global ambitions, are pulling back in areas like investment banking, leaving U.S. banks to dominate. Germany’s biggest bank Deutsche Bank said last year it would shed around 18,000 jobs, nearly a quarter of its workforce, as it pulls out of global equities trading.
For HSBC, which is based in London, Brexit, U.S.-China trade tensions, Hong Kong protests and now the coronavirus outbreak in China are the biggest concerns.
Chief Financial Officer Ewen Stevenson said the bank expected to take additional loan loss provisions in the current quarter as a result of the virus outbreak and the weakened outlook for the Hong Kong economy. “It’s really a call on how long does it take to contain the virus,” he said.
The bank took a goodwill impairment of $7.3 billion, reflecting lower long-term economic growth rate assumptions and the planned restructuring of its investment banking arm, pushing the bank to a fourth-quarter pre-tax loss of $3.9 billion.
The bank said it had expected restructuring costs of around $6 billion and asset disposal costs of around $1.2 billion between now and 2022, with the majority of restructuring costs incurred in 2020 and 2021.
Reported pre-tax profit for the full year fell by 33% from a year ago to $13.3 billion, well below the $20.03 billion consensus of analysts’ estimates compiled by the bank.
Excluding the impairment, revenue for the year rose nearly 6% to $55.4 billion and pre-tax profit rose 5% to $22.2 billion, both better than analysts expected.
HSBC shares slumped by as much as 5% as investors digested the torrent of bad news. Nonetheless, analysts at Jefferies, which has a ‘buy’ rating on the stock, said in a note shared with Fortune that HSBC’s plan “looks ambitious and very credible.” While the $6 billion restructuring charge was higher than they expected, they said the plan could put HSBC on track for a 10% upgrade to 2022 earnings.
CEO in limbo, buy-backs on hold
Unusually, the restructuring is being led by a CEO who is only filling the job on an interim basis, and that has raised concerns among some investors over whether Quinn has the authority to push through the changes, the Financial Times reported earlier this month. Quinn took over as the fill-in chief executive last August when predecessor John Flint was ousted after just 18 months in the job. If the board opts for an external candidate rather than confirming Quinn in the post, it could be difficult for the new boss to take over the plan half-way through, market observers note.
Chairman Mark Tucker stressed on the call that the board stood squarely behind the restructuring and said the plan, announced last August, to appoint a new CEO within 6-12 months, remained on track.
HSBC said it would suspend share buybacks for 2020 and 2021, but said it intended to keep its dividend stable and to keep its Tier 1 capital ratio, a key measure of financial strength, in the 14-15% range.
The bank said it planned to reduce risk-weighted assets by around 35% by the end of 2022 in its loss-making European operations. It would do this partly by exiting capital-intensive product lines—including long-term derivative market-making linked to G10 currencies in the U.K.
Reducing risk-weighted assets means a bank has to hold less capital, which can be deployed elsewhere.
The bank said it planned to focus its U.K. investment banking activities on supporting U.K. mid-market clients and international corporate clients through its London hub. It said it would reduce its sales and trading and equity research in Europe and move its structured products capabilities from the U.K. to Asia.
The bank is carrying out a strategic review of its French retail business.
The restructuring involves big changes for HSBC’s U.S. bank.
HSBC aims to reduce its U.S. branch network by around 30% from the current 224 branches and consolidate back-office functions to simplify the business and reduce operating expenses by 10% to 15%.
The U.S. branch cuts will be more heavily weighted towards the East Coast, with a reduction in the network there of around 50%, partly offset by an expansion of HSBC’s branch network on the West Coast “where we see a strong Asian, international community that will value the proposition,” Quinn said.
U.S. fixed-income activities would be consolidated in London and risk-weighted assets associated with its U.S. Global Markets business would be cut by around 45%.
In its investment banking arm, HSBC said it planned to accelerate investments in Asia and the Middle East and shift more resources to those regions, while maintaining a global investment banking hub in London.
The group’s structure will be simplified, with the Retail Banking and Wealth Management and Global Private Banking divisions merged into a single division and a reduction from seven to four in the number of regions reporting at Group Executive level .
HSBC is ranked ninth-biggest bank in the world by trade publication The Banker and has a market capitalization of around $150 billion.
HSBC opened for business in Hong Kong in 1865, helping to finance trade between Europe and Asia. HSBC, short for Hongkong and Shanghai Banking Corporation, moved to London in 1993 when it bought Midland Bank.
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fortune--2020-02-18--This studio is behind the murals at some of the world’s top hotels

When walking into Jean-Georges Vongerichten’s The Fulton, the famous chef’s downtown New York City restaurant, expect to feel as if you’ve taken a dip under the sea. That is, at its simplest, the intent of En Viu, the art collective behind large-scale murals found at this and other high-end restaurants and hotels around the world: to produce art that transports the viewer deeper into a space.
Established in 2016 by now-married couple Chandler Noah and Diego Castaño, En Viu counts the Times Square Edition, the Rosewood Guangzhou, and the upcoming The Londoner as clients—a roster made possible by Noah’s previous five-year stint as an architect at Yabu Pushelberg, an interior design company. “They introduced us to, I would say, 60% to 70% of the clients that we have now,” says Noah.
Those customers reach out to the duo to create large-scale paintings that will adorn the walls of various spaces. “They generally have a mood or a vibe or a certain theme that they are trying to stick within, so we usually start there,” Noah says. After coming up with a narrative that will inspire the project, the team—which, in addition to Noah and Castaño, includes seven expert assistant painters—work on sketches, eventually moving to physical samples and full-scale mock-ups.
“It is symbiosis and dance, not only between us, but with our clients and our artists,” says Castaño, who has a background in fine art, about the work. “From conception to the installation of the pieces in their final location, our process is artistically and technically challenging.”
Views of the Brooklyn Bridge and the East River at Jean Georges Vongerichten’s The Fulton in New York City. Courtesy of En Viu Studio
Noah and Castaño met in New York City in 2014 and started collaborating on various projects shortly thereafter. Noticing a need within the commercial space for experts that could both execute and help procure art, the duo established the company to create a “powerful art package within a hotel.”
As for the name, which is pronounced “in view,” the pair sort of stumbled upon it. “It was just a word that I saw at a flamenco show with Diego, and it was projected onto a wall in a fine serif font,” Noah recalls. “I said, ‘I don’t know what that means, but it looks beautiful.’” Turns out that, in Catalan, “en viu” means “in motion,” a concept that ends up echoing the business’s workflow, one that encompasses a variety of mediums and disciplines.
Said flow will be shaken up come April, when the duo’s latest project, an art gallery in Antwerp, Belgium, called Newchild, opens to the public. The space, which Noah and Castaño own with friend and art expert Sarah Vanwelden, will be used to showcase mostly contemporary art in different forms by both established and emerging artists.
A juxtaposition of the old and the new is what seems to define all of the pair’s work. Take their project for the Rosewood Guangzhou, for example. Now the tallest hotel in the world, the owners of the building tasked En Viu to develop a piece that involved “the idea of the past and future.” Inspired by the 2000 film In the Mood for Love, the mural they settled on was painted in a European style reminiscent of days of yore but also boasts futuristic details and nods—think of an astronaut riding a golden fish or monkeys sitting on a bridge talking to one another, all occupying a landscape that clearly depicts an older, more romantic and traditional world.
For The Londoner, slated to open in Leicester Square this June, the duo opted to honor British explorer James Cook throughout the two murals they were hired to produce. “We sort of reimagine what would have happened if [Cook] went to Hampstead Heath, just north of London, and kind of sat down and dreamt of the journey he has had,” explains Noah. “You see animals and objects that he collected from all over the world sort of superimposed on this British landscape.”
The Paradise Club at the Times Square Edition. Courtesy of The Times Square EDITION
Neither one of those projects, though, took as long as their mural for the Times Square Edition Hotel, which required 10 people to paint five days a week for two full years.
What is obviously most striking about En Viu’s work is its sheer immensity, which turns out to be its strongest asset. When asked about the shifting cultural landscape in which they operate, a world dominated by the virtual, in which people tend to look down at their phones instead of appreciating all that surrounds them, Noah is relatively positive.
“Usually, our pieces occupy or envelop a space,” he says. “So that when you walk in, most of the time, you’re somewhat enveloped, you’re sort of transported in a way. That’s probably the most fun that we have: creating something that’s completely immersive and transporting.”
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fortune--2020-02-19--Coronavirus hits China’s workers as businesses say they can’t pay wages now

U.K. unveils plans to close borders to unskilled workers and those who don ’ t speak English

A growing number of China’s private companies have cut wages, delayed paychecks or stopped paying staff completely, saying that the economic toll of the coronavirus has left them unable to cover their labor costs.
To slow the spread of the virus that’s claimed more than 2,000 lives, Chinese authorities and big employers have encouraged people to stay home. Shopping malls and restaurants are empty; amusement parks and theaters are closed; non-essential travel is all but forbidden.
What’s good for containment has been lousy for business. With classes canceled at a coding-and-robotics school in Hangzhou, employees will lose 30% to 50% of their wages. The Lionsgate Entertainment World theme park in Zhuhai is closed, and workers have been told to use up their paid vacation time and get ready for unpaid leave.
“A week of unpaid leave is very painful,” said Jason Lam, 32, who was furloughed from his job as a chef in a high-end restaurant in Hong Kong’s Tsim Sha Tsui neighborhood. “I don’t have enough income to cover my spending this month.”
Across China, companies are telling workers that there’s no money for them — or that they shouldn’t have to pay full salaries to quarantined employees who don’t come to work. It’s too soon to say how many people have lost wages as a result of the outbreak, but in a survey of more than 9,500 workers by Chinese recruitment website Zhaopin, more than one-third said they were aware it was a possibility.
The salary freezes are further evidence of the economic hit to China’s volatile private sector — the fastest growing part of the world’s second-biggest economy — and among small firms especially. It also suggests the stress will extend beyond the health risks to the financial pain that comes with job cuts and salary instability. Unsurprisingly, hiring has all but ground to a halt: Zhaopin estimates the number of job resumes submitted in the first week after the January outbreak was down 83% from a year earlier.
“The coronavirus may hit Chinese consumption harder than SARS 17 years ago,” said Chang Shu, Chief Asia Economist for Bloomberg Intelligence. “And SARS walloped consumption.”
By law, companies have to comply with a full pay cycle in February before cutting wages to the minimum, said Edgar Choi, author of “Commercial Law in a Minute” and host of a legal-advice account on WeChat. For companies that aren’t making enough to cover payroll, it’s permissible to delay salaries, as long as staff get the money they’re owed eventually.
Choi said he’s heard from thousands of foreign workers who say their payments have been cut in half this month or halted althogether. That, he said, is illegal. “A lot of these employees are foreigners, they don’t know Chinese,” he said. “Whatever their boss tells them, that’s it. It’s easy for them to get bullied.”
NIO Inc., an electric car-maker based in Shanghai, recently delayed paychecks by a week. The company’s chairman William Li also encouraged employees to accept restricted stock units in lieu of a cash bonus.
At Foxconn Technology Group’s Shenzhen factory, workers returning from the Lunar New Year break are quarantined in the dorms before they can return to work. They’re getting paid, but only about one-third of what they’d earn if they were working.
Without full, regular paychecks and few places to spend them these days anyway, Chinese consumers could cut spending in some categories to zero, said Bloomberg’s Shu. And it may not bounce back: For example, she said, if you skip your daily latte for two months, you’re not likely to make up for those missed drinks later in the year.
With limited reserves and less by way of remote technologies, the smaller companies that underpin China’s vast private sector are particularly vulnerable. Among broader efforts to help firms stay afloat, policy makers have called on state-run banks to make loans at cheaper rates to small businesses in particular.
In the case of Pei Binfeng, co-founder of the Hangzhou coding and robotics academy, the outbreak forced them to suspend all in-person classes for students in kindergarten through grade 12. With the loss of revenue, the company will withhold 50% of salary for key executives and 30% for other employees until business resumes.
“What we teach isn’t a must-have for a lot of parents, so expenses like this are usually the first to go when things get tough,” said Pei.
Rick Zeng, deputy general manager at the Lionsgate theme park in Zhuhai, said they’ve been shut down on government orders since the end of January. Starting next week, some staff will need to go on unpaid leave.
In the southeastern city of Fuzhou, hotel manager Robert Zhang said all but two or three of his 100 rooms are vacant on average nights. Two-thirds of the employees are effectively on furlough, getting some salary but not as much as they’re used to.
“When there’s no business, there’s no performance-based salary,” he said. “For a month or two, the impact isn’t immediately obvious. But if the epidemic lasts and tourism doesn’t recover for three to four months, our employees will feel the crunch.”
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fortune--2020-02-19--Wall Street isn’t sure Roku can lead cord cutters to the promised land

Roku’s latest results, out last week, have reignited a debate about the company’s future. Is the streaming platform doomed to be overrun by bigger, more diversified tech players? Or can it make the leap beyond the commodification of its boxes and embedded interface to expand into more profitable businesses of online services and digital advertising? Investors seem to be turning from euphoric to cautious.
In 2019, following the popularity of pioneering online streaming services like Netflix and Amazon, a host of newcomers jumped into the market, led by Disney and Apple. Meanwhile, Roku’s stock shot skyward 337%, as the company’s valuation hit almost $20 billion, buttressed by the streaming service’s users wanting to watch all these hot new shows on their TVs.
Now two months into 2020, Roku’s stock is down 5%, mostly after Roku released its fourth quarter results, which offered ammunition for buyers and sellers alike. Roku’s revenue jumped 49% to $411 million in Q4 2019, as the number of active accounts on its platform increased 36% to almost 37 million. Annual revenue for 2019 was up 52% to $1.1 billion. The company also projects its revenue will grow more than 40% this year. Those results were pretty much as expected, but potential problems lurk deeper.
One of the secrets of Roku’s success has been its expansion beyond its roots as a set top box maker (a term the company tries to avoid). To do this, Roku CEO Anthony Wood built a loyal customer following by moving the company away from only selling its own boxes, instead now licensing its software to TV makers, so they can ship screens with the company’s streaming TV platform built-in. This is a much higher margin business than selling streaming hardware, and almost one-third of so-called smart TVs sold last year included Roku’s software.
Roku has also developed and licensed streaming programming of its own, backed by advertising. The Roku Channel, available on all its platforms, was 2019’s most popular ad-backed streaming channel, ahead of rivals Pluto TV and Crackle, according to market research firm Parks Associates. That’s another business that yields higher margins than producing set top boxes.
Together Roku’s licensing and advertising businesses brought in $741 million in 2019, up 78% from the year before. Gross profit from the segment totaled $478 million, up 61%. The set top box business, by comparison, brought in $388 million, a 19% increase, with gross profits of only $17 million, down 52%, as higher sales were offset by deep discounting.
As Roku’s non-hardware business has grown, its growth has started to slow, notes Morgan Stanley analyst Benjamin Swinburne, who expects Roku’s stock to lag this year. “The law of large numbers for Roku’s high-growth advertising business points to decelerating gross profit growth ahead, potentially faster than the market expects,” he wrote after the fourth quarter results came out.
After all expenses are included, Roku still loses money, which should be a growing concern for investors, Wedbush analyst Michael Pachter adds.
“Roku’s path to profitability is unclear, as Roku continues to expand its workforce to support its next leg of growth,” Pachter writes. “Achieving profitability in Roku’s international markets will take time, in our view, which will likely rein in Roku’s lofty valuation once this becomes clear to investors.”
But Roku’s customer base should continue to grow, as it cuts prices on its own hardware boxes and signs more deals to get its software into more smart TV worldwide, argues Oppenheimer analyst Jason Helfstein.
“We believe Roku can leverage its advantage in pricing and merchandising to remain the market leader in consumer-facing connected television solutions,” he notes.
Though an eMarketer report this week predicted that the number of cable-free households will grow 50% in the next five years, there aren’t many other ways for investors to bet so precisely on the continued growth of cord cutting. Plus all of those new streaming video services will need to rely on Roku to bring in eyeballs, explains RBC analyst Mark Mahaney.
“We see Roku benefiting directly from the Streaming Wars,” he wrote last week. “We continue to view Roku as one of the best plays on ad-supported (online TV services), with the company being one of the best positioned to take share of the very large, under-penetrated $70 billion TV ad spend opportunity.”
But then again, the stock market is littered with the collapsed shares of independent hardware makers that once had a hot niche, from GoPro to Arlo to Palm. Will Roku similarly run aground? It’s not yet clear. In the words of traditional television: Stay tuned.
More must-read stories from Fortune:
—Airbnb’s bottom line is hurting. New safety efforts could make matters worse
—How businesses lost an extra $500 million from email scams last year
—Antivirus software Avast investigated for selling user browsing histories
—Huawei poses a 5G spying risk, but other options are hard to come by
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-19--U.K. unveils plans to close borders to unskilled workers and those who don’t speak English

Gold is nearing a 7-year high .
But it can ’ t keep pace with Big Tech

Boris Johnson’s government unveiled plans to end what it called the U.K.’s dependence on “cheap low-skilled labor” and deliver on its pledge to halt freedom of movement from the European Union after Brexit.
Under a points-based immigration system to come into effect on Jan. 1, 2021, workers must prove they can speak English, have a verified job offer and meet a points threshold based on their specific skills, qualifications and prospective salaries, according to a government policy paper published Wednesday.
The system will “bring overall migration numbers down” while attracting “the brightest and the best from around the globe,” Home Secretary Priti Patel told LBC radio. The aim is to “end our reliance on low-skilled workers that are obviously — more often than not — low paid,” she said.
Johnson has repeatedly said voters opted for Brexit at least in part to control immigration, but the plans triggered immediate warnings from businesses about the impact of anticipated worker shortages. A government advisory group estimated last month that 70% of EU workers already in the U.K. wouldn’t have qualified for visas under the new rules. The government says companies must “adapt” and do more to train the domestic workforce.
Business Risk
“The speed and scale of these changes will require significant adjustment by businesses,” said Adam Marshall, Director General of the British Chambers of Commerce. “Companies are already investing heavily in home-grown talent across the U.K., but critical labor shortages mean firms will still need access to overseas workers at all skill levels.”
A table published by the Home Office showed 70 points would be needed to get a visa. Examples include 10 points for speaking English, 20 points for a job offer, 20 for a salary of 25,600 pounds ($33,000) or above, and 20 points each for a post-doctoral qualification or a job in a designated shortage occupation.
Although Johnson has branded the rules a complete change, it largely involves making EU citizens apply for visas under the existing system for non-EU migrants. That will include student visas. With employers no longer able to access the entire EU to fill job vacancies, required thresholds on the existing system have been lowered, both in salaries and required qualifications.
In moves describing how the U.K. border itself will work from next year, the government said that EU citizens will be able to use electronic gates, reducing waits, and they won’t need a visa for stays of less than six months.
The existing system for high-earners and the most skilled, which allows them to come to the U.K. without a job offer, will likewise be extended to EU citizens, the government said, though it gave fewer details.
Backlash
Representatives of the social care, hospitality and food industries were among those quick to criticize the new system. Minette Batters, president of the National Farmers’ Union, told the Times newspaper plans to restrict visas for low-skilled workers could severely affect the sector.
The opposition Labour Party said the government’s plan amounted to a “salary threshold system” that will make it difficult to attract needed workers and pledged to challenge the proposal as the legislation goes through Parliament. The pro-EU Liberal Democrats said the proposal is “based on xenophobia.”
The Tory Government's immigration proposals are based on xenophobia, not the social & economic needs of our country.
Lib Dems will oppose these destructive policies & continue our fight for a fair, effective immigration system that works for our economy.https://t.co/bLnyAEzvyG — Liberal Democrats (@LibDems) February 19, 2020
But Patel argued that the government is delivering on what voters demanded in the 2016 Brexit referendum, and when they kept her Conservative Party in power in general elections in 2017 and 2019.
The public “are fed up,” she told LBC. “They want to see a British government with its own immigration policy and system, a government that would take take back control of our borders.”
Editor’s note: This story was updated on Feb. 19 at 6:05 a.m. ET.
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—This Greek island is the perfect alternative to Mykonos
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus recovery: Why it’s so hard for China’s factories to get back to work
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-19--Gold is nearing a 7-year high. But it can’t keep pace with Big Tech

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, Bull Sheeters. It’s a risk-on day. Markets are climbing on the news that Beijing will likely do whatever it takes—injecting stimulus where needed—to cushion the coronavirus blow.
So, let’s go right to the question: who’s up, who’s down today?
Markets update
Equities are leading the way, as I type. The Asian and European markets are up across the board, as are the U.S. futures. Elsewhere, crude is up, the dollar is down.
Yesterday, the markets sunk on worrying news out of Apple and HSBC. Today, so far, the company news flow looks fairly tame.
The dominant narrative remains coronavirus. The latest outbreak data suggests the situation could—knock wood—be stabilizing. Yes, the global infection tally has topped 75,000, and the death toll has surpassed 2,000. But the number of infections in the past 24 hours—an important number to watch—was under 2,000.
We’re only one month into this outbreak so expect plenty of twists and turns in the weeks to come.
Gold standard?
One of the big headlines this morning involves gold. It’s trading near a seven-year high, a rally fueled by coronavirus concerns. The shiny metal is up 5.6% so far this year, which is to be expected when you get sky-is-falling market jolt in the form of a contagion that shuts down factories in the world’s second biggest economy and threatens to disrupt the global supply chain.
But you know what’s performing even better than the yellow stuff?
Answer: Tech… as you’ll see in today’s chart.
***
Yesterday was a fine illustration of the unsinkable nature of tech stocks. The Apple sales-warning late on Monday sent the global markets lower. Nasdaq though didn’t miss a beat, eking out a gain yesterday.
Since the start of 2020, the Nasdaq is up an impressive 7.7%, That’s a run that’s nearly twice as strong as that of the dollar (as measured in Euro-dollar FX trade) and the benchmark of benchmarks, the S&P 500.
Tech stocks are by no means a safe haven, and yet investors keep pouring into these shares when the news turns bad (and more so when it looks good)—and that’s despite abundant warnings that the valuations don’t quite add up. Meanwhile, every daily gain on the Nasdaq represents a new all-time high, drawing the index ever closer to 10,000.
If there’s a theme to draw from the markets so far in 2020 it’s that investors aren’t going to give up easily on growth stocks.
The bulls continue to carry the day, and they’re long tech.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Mixed bag. Walmart, the world’s biggest company by revenue, has invested tens of billions of dollars into e-commerce in the last few years, aiming to protect its market share from Amazon, Fortune’s Phil Wahba reports. That showed on Tuesday, when the retail giant reported a 22nd straight quarter of U.S. comparable sales growth in a row, helped by e-commerce business rising 30%. Here's the bad news: That strong digital growth is coming at great cost and is not getting a boost from categories where Walmart has made big bets, namely toys and apparel.
Meet your landlord. What do the Cosmopolitan and Bellagio hotels on the Las Vegas Strip have in common with Stuyvesant Town, the largest apartment complex in Manhattan? They’re all owned by investment funds controlled by Blackstone Group, the private equity giant, writes Fortune’s Shawn Tully. Over the past decade, Blackstone has relentlessly expanded in real estate, to the extent that today it ranks, by Fortune’s estimates, as the world’s largest commercial real estate company.
Back to work. Sort of. Chinese policymakers ordered factories back to work on Feb. 10, following the prolonged Lunar New Year shutdown imposed in an attempt to contain the spread of the deadly coronavirus. But more than a week later, production lines remain eerily silent as millions of workers remain under restricted movement. Factories—including those owned by giants like Tesla, Airbus, Toyota and General Motors—are starting to reopen but are a long way from returning to full capacity, reports Fortune’s Eamon Barrett.
Market candy
Jobs with benefits. Which workplace perk do you value most? Fortune’s just-published 2020 ranking of the 100 Best Companies to Work For finds that the top-ranked firms offer benefits such as subsidized gyms (78%), subsidized child care (42%), and even fully paid health care (12%). Finance and insurance firms dominate, occupying 21 places, reports Lance Lambert. The chart-topping firms are Hilton, Ultimate Software, Wegmans Food Markets, Cisco, and Workday.


fortune--2020-02-19--Who benefits from business data technology?

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
A prominent scientist once told me that the reason the public rejected GMO food was because its first use case was to make tomatoes that were attractive and long-lasting—but were tasteless. In other words, they helped the grocery business manage its supply chain…but they created no value for the end user.
I worry the new wave of business data technologies may follow a similar path. A new report out this morning from PwC—an early copy of which was shared with CEO Daily—highlights the problem. PwC gave more than 2,000 global executives a long list of new technologies—A.I., IOT, Blockchain, Drones, VR, AR, 3D Printing, etc.—and asked two questions:
– Which of the following technologies is the most important to your strategy today?
– Which of the following technologies will be the most important to your strategy in three years?
The consensus answer to the second question was clear—43% said they believed A.I. would be most important to their business in three years. That was more than double the number who picked the second-place choice (Internet of Things).
But when asked about their strategies today, the top choice was “RPA”—Robotic Process Automation—chosen by 36% of executives, compared to the 19% who chose A.I.
Now that may seem natural—RPA is the low hanging fruit, with a potential for quick savings. But think about it: by definition, RPA doesn’t change anything. It certainly doesn’t reinvent the business, and it doesn’t create new value for customers or society. It just means doing exactly the same thing you are currently doing more efficiently—and with fewer workers.
With that as the common starting point, is anyone surprised workers are scared? In the long term, companies will be better off—and society will be better off—if they made the bold moves now to figure out how this technology can create new value.
“RPA is alluring for its immediacy and simplicity,” says Scott Likens, who heads the emerging technologies practice at PwC. “But it is a short-lived value,” and in many cases “businesses are automating processes that aren’t that good.” He urges companies to invest in A.I. now, ”in very precise spots that make sense.”
You can read the PwC study here. Or, if you are interested in a mind-bending story, try Jeffrey O’Brien’s piece on how psychedelic drugs may revolutionize mental health care, available this morning here.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Huawei defeat
Huawei tried to get the U.S. courts to rule against the 2018 law that banned it from business with federal agencies, but a federal judge threw the case out yesterday. "Contracting with the federal government is a privilege, not a constitutionally guaranteed right—at least not as far as this court is aware," said Judge Amos Mazzant of the U.S. District Court in East Texas. Wall Street Journal
Moonshot cull
Alphabet has made its first closure of a "moonshot" project since founders Sergey Brin and Larry Page took a back seat at the end of last year. The victim: Makani, the Google parent's power-generating-kite venture. Losses in Alphabet's "Other Bets" segment are mounting, so CEO Sundar Pichai is under pressure to get rid of the relative duds. Financial Times
U.K. workforce
British industry is up in arms after the Conservative government said it would close the U.K.'s borders to unskilled labor. Under the proposed new rules, anyone moving to the country will have to be skilled and speak English, and have a job offer that clears a minimum salary threshold. It's a straight "no" to the self-employed. The hospitality and care industries are particularly worried. Guardian
Coronavirus effect
Asian American businesses are suffering due to fears about the spread of Covid-19 in the U.S. Customers are staying away; events organizers are fielding xenophobic calls. With business down 40% or more, some firms are temporarily shuttering properties. Fortune
AROUND THE WATER COOLER
Merkel successors
The race is on to seize the leadership of Angela Merkel's Christian Democratic Union party—a role that almost certainly means candidacy for the post of German chancellor after Merkel's planned departure. Meet the likely candidates (the first declared yesterday), who represent very different takes on conservatism: Armin Laschet, Friedrich Merz, Jens Spahn and Norbert Röttgen. Fortune
Trump pardon
President Trump has pardoned "junk bond king" Michael Milken and commuted the sentence of the corrupt former Illinois governor Rod Blagojevich—the latter having been a contestant on Trump's Celebrity Apprentice while awaiting trial. According to Trump, Blagojevich's 14-year sentence, which he began serving in 2012, was "tremendously powerful [and] ridiculous." Reuters
Post-Bloomberg Bloomberg
If Michael Bloomberg wins the presidency, he will sell his eponymous company, campaign adviser Tim O'Brien has said. O'Brien: "There will be no confusion about any of his financial holdings blurring the line between public service and personal profiteering…We will be 180 degrees away from where Donald Trump is on these issues because Donald Trump is a walking financial conflict of interest." CNN
Virus bonds
Beijing is pushing companies, ranging from airlines to drug distributors, to issue cheap "virus bonds" in order to shore up the economy and fight the Covid-19 epidemic. The firms have to spent at least 10% of the proceeds on fighting the coronavirus outbreak; regulators are fast-tracking the sales. Financial Times
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-19--China revokes press passes for 3 WSJ reporters over ‘discriminatory’ op-ed

China revoked the press credentials of three Wall Street Journal reporters following a dispute over a controversial headline in an article for the newspaper’s opinion section.
The government made the decision after it said the Journal refused to apologize for a “racially discriminatory” op-ed, Foreign Ministry spokesman Geng Shuang told reporters in Beijing on Wednesday. Foreign journalists need press passes issued by the foreign ministry to qualify for visas to report in the country.
The Feb. 3 article described China as the “sick man of Asia,” a phrase often used by 19th century European powers to describe the weakened state of the Qing Empire, which then governed China. A representative for the Wall Street Journal in Beijing didn’t immediately reply to an email requesting comment.
The op-ed ran as China began battling the deadly coronavirus, which has now claimed the lives of more than 2,000 people and delivered a massive setback to the world’s second-biggest economy. The government has described the virus as a threat to “social stability” in China, tightening restrictions on online expression and imprisoning citizen journalists who have reported on the topic.
“The editors used such a racially discriminatory title, triggering indignation and condemnation among the Chinese people and the international community,” Geng told reporters in an online press conference. “China demands the WSJ recognize the severity of its mistake, make an official apology and hold the persons involved accountable.”
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—This Greek island is the perfect alternative to Mykonos
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus recovery: Why it’s so hard for China’s factories to get back to work
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-19--Angela Merkel is on her way out. Meet her potential replacements

After a decade and a half in power, Angela Merkel is on her way out as Germany’s chancellor. But who will follow, and when?
Merkel’s tenure has largely been defined by her calm, cautious nature—characteristics that have made Germany an oasis of stability in a Europe that is undergoing an identity crisis. Those same traits have also opened her up to accusations of indecisiveness and lack of ambition on the part of the continent’s most powerful nation.
So, it is time for both Merkel and Germany to move on. Federal elections are planned for 2021; she decided in 2018 that she would step down at that point. She resigned as leader of her conservative Christian Democratic Union (CDU) party, which narrowly chose as her successor Annegret Kramp-Karrenbauer, known popularly as AKK or, somewhat ungenerously, “Mini-Merkel.”
But now AKK won’t be the CDU’s candidate next year either. Following a year of stumbles, she was finally undone this month by a political firestorm in which the CDU in the state of Thuringia entered a tacit alliance with the increasingly prominent, far-right Alternative for Germany (AfD) party. AKK tried to get the state’s CDU party to change its mind but was rebuffed, and Merkel was forced to remotely enforce party discipline during a state visit to South Africa. Her authority in tatters, AKK quit.
Here’s a rundown of the likely candidates for Merkel’s (and now AKK’s) successor as the face of German conservatism—and quite possibly the next chancellor of Germany.
The centrist: Armin Laschet
Like all four of the top names in the frame for CDU leadership, Armin Laschet (59) hails from North Rhine-Westphalia, Germany’s most populous state. Following a spell in journalism, he served as a member of Germany’s federal parliament, the Bundestag, then went on to become a member of the European Parliament. For the last few years, he has been head of the North Rhine-Westphalia state parliament.
Like AKK, Laschet represents broad continuity from the Merkel era—if anything, he is slightly to the left of the chancellor, who is already more liberal than most in her party.
When Merkel’s government was losing patience with Athens during the Greek debt crisis, Laschet’s was a prominent voice warning against forcing Greece out of the European Union. He was also a strong supporter of Merkel when, in 2015, she made the momentous decision to open Germany’s borders to a million Syrian refugees—a morally-driven move that, though it never caused the chaos that some predicted, fueled the AfD’s march from a fringe anti-euro party to an anti-immigrant juggernaut.
Laschet is pro-immigration. In fact, he wrote a book arguing that it was necessary to counteract a growing shortage of skilled workers in Germany. He is also seen as friendly with the Greens, who are currently polling second after the CDU and could well be part of the next government. If Laschet wins, the CDU might stop losing centrist voters to the Greens.
Laschet is however conscious of the fact that people want change after the Merkel era. “I understand that this chancellorship was influenced by crises, but it would be nice if we entered a new era in which Germany sets its own impulses,” he said in late 2018. And this week he surprised some observers by criticizing Merkel for dragging her heels on the issue of EU reform. Laschet wants Germany to assume more financial responsibility in Europe than the Merkel administration has been willing to countenance.
The nemesis: Friedrich Merz
Merkel didn’t become chancellor by accident. Her ascent involved power struggles, and the most prominent casualty in those tussles was Friedrich Merz. Like Laschet, Merz (64) served in both the European Parliament and the Bundestag. But, several years after Merkel dashed his dreams of taking over the CDU, he quit politics for the life of a corporate lawyer.
Merz is the anti-Merkel: blunt where she is hard-to-read, and confrontational where she aims for consensus. She is famed for her modest lifestyle, while he—a multi-millionaire thanks to his role as chairman of BlackRock’s German asset-management unit and work for U.S. law firm Mayer Brown—owns not one, but two private jets. Germans are not generally keen on conspicuous wealth, which was one reason Merz lost out (by a small margin) to AKK in the last race for CDU leadership.
A fiscal conservative, Merz has proposed giving half of Germany’s $53 billion reserves back to its people in the form of tax cuts, and has advocated for massive simplification of Germany’s labyrinthine tax system.
On immigration, Merz is very much to the right of Merkel and Laschet. He was a vocal critic of Merkel’s refugee decision, and outraged liberals and the left by saying in 2000 that anyone coming to Germany should conform to its culture.
In a Trump-esque flourish, he this week decided to make an enemy of the German press by saying politicians do not need journalists anymore, thanks to social media. Merz is also very socially conservative. He has made what were perceived as chauvinistic jokes, and in 1997 he voted against the criminalization of marital rape. In 2001, when asked for his opinion on Berlin having a gay mayor (Klaus Wowereit), Merz replied: “As long as he doesn’t approach me, I don’t care.”
Merz has made some attempt to win over more than his party’s right wing—he recently described Merkel as “a kind of role model.” Nonetheless, a Merz victory would be seen as an attempt by the CDU to win back voters who have defected to the AfD. “Friedrich Merz is someone who speaks plainly,” said the prominent actor and director Til Schweiger this week. “If anyone can come to grips with the rise of the AfD, it’s him.”
The rising star: Jens Spahn
At 39, Jens Spahn is by far the youngest potential leader of the CDU. As such, he would represent generational change—but his direction would be unclear.
When he last took a shot at the top spot in 2018, Spahn was seen very much as a candidate of the right. Like Merz, he has deployed the loaded phrase “Leitkultur” (a reference to the “leading” German culture) and was critical of the refugee influx of 2015, saying the following year that it “cannot be allowed to be repeated.”
But recent years have seen a significant softening of Spahn’s image. As Germany’s health minister, he has become a popular figure with a reputation for competence. Conscious of the Greens appealing to the CDU’s “bourgeois flank,” Spahn has warned against the CDU shifting further to the right. And in an opinion piece for the U.K.’s left-leaning Guardian last year, he proposed what he called a “weltoffener patriotismus.”
“Weltoffen is tricky to translate into English,” he wrote. “It roughly means being open-minded towards the world, open to new ideas and cultures. Weltoffener patriotismus does not make divisions based on ethnicity, but defines clear premises based on which everybody can join.”
Given his age, Spahn might be tempted to wait until the next battle for CDU leadership before trying his luck again—like Merz and Laschet, he is yet to formally announce his candidacy in this round.
The surprise: Norbert Röttgen
In fact, at the time of writing only one person has thrown his hat in the ring, and it’s not a name that commentators were expecting before his Tuesday announcement.
Chair of the Bundestag’s foreign affairs committee, Norbert Röttgen (54) used to be Merkel’s environment minister until she abruptly fired him in 2012. It was Röttgen who, in the wake of the Fukishima disaster, announced the government’s intention to shutter all of Germany’s nuclear power plants by 2022.
Like Merz, Röttgen is a strong Atlanticist, serving on the board of the Atlantic Bridge organization that seeks to promote strong U.S.-German ties. He is also keen on beefing up Germany’s often-timid foreign policy, in particular advocating a tougher stance on Russia—Röttgen is no fan of the contentious Nord Stream 2 gas pipeline.
Röttgen has also opposed the CDU party line on the issue of Huawei’s participation in Germany’s 5G networks, siding more (to no avail) with the U.S.’s hawkish position that the Chinese company cannot be trusted.
The wildcard: Markus Söder
One more name is worth briefly mentioning: Markus Söder, the head of the CDU’s Bavarian sister party, the Christian Social Union (CSU).
Söder (53) is obviously not going to be the next CDU leader. However, there is an outside chance that he could become the next conservative candidate for chancellor. At the federal level, the two parties operate under the joint banner of The Union. There hasn’t been a CSU candidate for chancellor since Edmund Stoiber in 2002, but it could theoretically happen again.
Söder’s main contribution to the current CDU leadership contest has been to order his party to stay out of it. However, he does want the CSU to influence The Union’s selection of its next candidate for chancellor.
His suggestion that the two roles are separable is at odds with the consensus in the CDU—AKK blamed her own woes on the fact that she only had half of Merkel’s authority, being party leader but not chancellor. But in making that suggestion, Söder also may have thrown Merkel a lifeline.
Merkel is only supposed to step down in 2021, ahead of the federal elections, but AKK’s experience has amplified the voices calling for her to go sooner rather than later—a development that would mean elections this year instead of next. Either way, the CDU’s selection of a polarizing figure such as Merz would probably lead to the collapse of The Union’s coalition with the center-left Social Democrats, again triggering imminent elections.
So this is set to be either a tumultuous year for Germany, ushering in a new coalition, or a year of policy paralysis under Merkel’s lame-duck stewardship. Whatever happens, it should be a characteristically lively period in German politics.
More must-read stories from Fortune :
—Can you catch it twice? Answers to 5 pressing coronavirus questions
—These are the Democratic candidates who qualify for the next debate so far
—John Legere will be remembered as one of the greatest turnaround stories of all time
—Bernard Arnault was briefly the world’s richest man. Then coronavirus struck
—WATCH: Why CEOs are pessimistic about 2020 business outlook
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-02-19--Coronavirus misinformation is fueled by a new force in China: government mistrust

Chen Qinghua, an OB-GYN in China’s Anhui province, moonlights as a health blogger with almost 350,000 followers on popular Chinese microblogging site Weibo. Chen’s Weibo page focuses on reproductive health and pregnancy advice, but since the novel coronavirus outbreak, her posts are interspersed with factoids about the disease, including fact-checks of false health claims that swirl around social media.
“Can taking a hot bath prevent the novel coronavirus pneumonia?” reads a Feb. 17 post. “After seeing reports that the novel coronavirus is not heat-resistant, some people think they can prevent novel coronavirus pneumonia by taking a hot bath.” Taking a hot bath, Chen explained, will not kill the virus in an infected person, as baths do not significantly raise a person’s body temperature. The logic behind the bath claim stems from unproven theories that hotter weather will kill off the virus.
Misguided health advice is just one type of misinformation that bubbles up during crises like the coronavirus outbreak. The Wuhan Institute of Virology had to shoot down another.
It released a statement on Sunday denying social media rumors that one of its graduates was “patient zero” of the coronavirus outbreak, a claim that has no supporting evidence. The institute, located in the outbreak’s epicenter, said that the accusations had interfered with its scientific research but did not specify how.
The “patient zero” claims emerged from a conspiracy theory that the virus originated in one of the institute’s labs, an idea peddled in the U.S. by fringe sources like Zero Hedge, which was banned from Twitter for circulating the debunked claim.
People wearing protective masks use smartphones at night in Hong Kong on Friday, Feb. 14, 2020. Misinformation is not just plaguing mainland China—Hong Kong and Singapore have also acted to crack down. Justin Chin/Bloomberg via Getty Images
It is not unusual for conspiracies to crop up around seismic news events, especially ones that are accompanied by so many unknowns like the coronavirus crisis. The laboratory theory, for instance, has gotten some play in the U.S., with Sen. Tom Cotton (R–Ark.) publicly floating it several times. But there, independent journalism outlets have quoted experts who’ve proved him wrong. “Tom Cotton keeps repeating a coronavirus conspiracy theory that was already debunked,” reads one Washington Post headline.
The problem carries additional weight in China, where state-run media prevails and government censors monitor user content and decide what appears—or doesn’t—on the Internet. And as Beijing has bungled its response to the virus—withholding early information about the outbreak, reprimanding a whistleblower who later died of the disease, and revising virus data after-the-fact—public trust in the government as the ultimate arbiter of information is starting to erode.
The result is a truth vacuum; a sense that there’s no reliable source for news and no authoritative check on misinformation. It’s a toxic environment where falsehoods can fester. It’s alarming to those living in its midst, especially since a nation’s public health is at stake.
Treating an ‘infodemic’
The novel coronavirus disease, dubbed Covid-19 by the World Health Organization, has sickened more than 75,000 people. More than 2,000 have died, while some 14,500 have recovered, according to data from Johns Hopkins’ Center for Systems Science and Engineering.
The WHO on Jan. 30 declared the outbreak a Public Health Emergency.
“Our greatest concern is the potential for the virus to spread to countries with weaker health systems and which are ill prepared to deal with it,” WHO director general Tedros Adhanom Ghebreyesus said at the time.
The death of Dr. Li Wenliang, a coronavirus whistleblower from Wuhan, drew tributes as far away as the UCLA campus in Westwood, Cali., which is seen here. His passing is being seen as a turning point in the Chinese public’s attitudes toward Beijing. MARK RALSTON/AFP via Getty Images
But the WHO has also cited the dangers of misinformation about the outbreak; one official last week called the deluge of false information on social media an “infodemic.” One false report that circulated, for instance, claimed that drinking bleach would cure the disease; in reality, doing so could cause liver failure.
The WHO has done its part to beat back other instances of misinformation. On its “myth busters” webpage, it’s debunked the beliefs that hand dryers, ultraviolet lamps, mouthwash, garlic, and sesame oil can all separately kill the virus or prevent its spread. (They cannot.)
A WHO official flew to Silicon Valley for a Feb. 13 meeting with representatives from Facebook, Twitter, Youtube, Amazon, Google, and other tech companies, urging them to crack down on bogus health claims and promote scientifically-backed information about the virus. The tech companies agreed to regular meetings about the virus; they pledged to work with public health groups to promote better content and create a call center to give advice about the virus.
Governments too have tried to police erroneous rumors and junk science. Officials in Hong Kong have condemned people with “evil intentions” who share false claims. A security guard in Hong Kong was arrested on Feb. 4 for allegedly sharing false information on social media that several fellow staff members had fevers and called in sick.
The government in Singapore created an official Whatsapp service to send out coronavirus updates, and it says 360,000 people—Singapore’s population is 5.7 million—have signed up.
“When you have an outbreak like this, it is not just a public health challenge,” S. Iswaran, Singapore’s minister for communications and information, told CNBC. “It is also a communication and psychological challenge.”
A desperate search for answers
The challenge is especially acute in China. There, news is dominated by state-run entities like People’s Daily, seen as a mouthpiece for the Communist Party, and Xinhua News Agency, the largest media organization in China.
Independent news sources in China do exist, like Beijing-based magazine Caijing and business media outlet Caixin. They’ve been praised for their in-depth coverage of the outbreak but are starting to face pressure to publish “less critical” stories, said Fang Kecheng, an assistant professor of journalism and communication at the Chinese University of Hong Kong. It’s comparable to the aftermath of the 2008 earthquake in Sichuan, when Chinese journalists were allowed to report relatively freely until the government clamped down on negative coverage.
“There was a brief window for critical reporting, and then censorship leveled up,” Fang said.
Government censors also police user-generated online content: social media posts critical of the authorities can disappear within hours, and the accounts behind the posts are sometimes suspended or banned. Wuhan novelist Fang Fang’s Weibo account was suspended hours after she posted a tribute essay on Feb. 8 to Li Wenliang, the whistleblower doctor. And prominent citizen journalists who criticized the government response to the outbreak in Hubei have gone missing in recent weeks.
Limitations on political freedoms and a free press are seen as the public’s end of a long-standing bargain with Beijing; in exchange, they’re assured prosperity and health. But the coronavirus has led some in China to question whether Beijing is holding up its side of the contract, with the government’s handling of the outbreak sparking broad and rarely-expressed anger from Chinese citizens online.
A turning point came in the death of Li Wenliang, the Wuhan doctor who first blew the whistle on the outbreak but was silenced and reprimanded by authorities for doing so. Li later contracted the coronavirus and died on Feb. 7, prompting an outpouring of public grief, outrage, and increased calls for free speech, many of which went uncensored for hours.
“[I]t’s quite phenomenal because I think this is the first large-scale expression calling for free speech among netizens since Xi Jinping took power,” said Fang.
Fake news and misinformation flourishes when there is a lack of trust in established news sources, Carl Bergstrom, a professor of biology at the University of Washington, told NPR. In China, Fang said, mistrust in state media is growing.
Those doubts are exacerbating the sense of confusion about the coronavirus, leading a concerned public to look elsewhere for answers.
One American student in the Chinese city of Kunming told Fortune her Mandarin teacher asked her in late January to share reports of the coronavirus death toll from The New York Times or other “Western media sources” that are blocked in China. The teacher explained that she and her family have found it difficult to access “consistent information” since the SARS outbreak in 2003.
People in China are also turning to social media. Dominant players like messaging app WeChat and Twitter-like Weibo—with 1.1 billion and 500 million monthly active users, respectively—are ubiquitous, while relative newcomers like Douyin and Kuaishou continue to gain popularity. The platforms did not exist during SARS, but are now embedded in everyday life. They’re filled with an indiscriminate mix of official news, unverified content, fake news, doctored videos, and misleading information.
WeChat owner Tencent, at the government’s request, installed a health mini-app to provide verified updates about the virus and bust myths, but the scale of information makes it hard to moderate completely.
At the same time, the apps have opened an avenue for citizens in China to reach out for help. Coronavirus patients and their relatives at understaffed hospitals in Wuhan’s Hubei province are posting videos and text messages asking for food, medical supplies, and support.
“We hope everyone can understand that we are feeling as though it is the end of the world. We really need everyone’s help,” one social media user in Wuhan wrote, according to RTHK.
The content seems to elude censors, Fang said, due in part to the sheer number of uploads and because officials are wary of the potential online backlash if they scrub the web of “authentic stories” from desperate residents and patients “calling for help.”
The posts serve as credible glimpses of an outbreak steeped in so much uncertainty. Sometimes the messages do get censored, Fang said, “but people keep reposting them.”
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fortune--2020-02-19--Newly discovered vulnerability can let hackers impersonate LTE mobile device users, researchers say

German researchers have found a new vulnerability on 4G/LTE mobile devices that could allow hackers to impersonate the phone’s owner.
The bad news: Hackers can run up users’ bills, upload illegal documents under users’ identities, and even intercept unencrypted internet traffic—all due to a gap that’s built into all devices that use LTE service. The good news is that it’s highly unlikely an average user will fall victim to this kind of crime, given the complexity of the hack.
“The attacker needs to be highly-skilled and in close proximity to the victim,” says Maya Levine, security engineer at security software provider Check Point. “The average person is not going to be affected by this, but a single target of high interest could be targeted.”
Researchers at Ruhr-Universität Bochum in Germany discovered the crack in the system. The team, comprising Thorsten Holz from Horst Görtz Institute for IT Security, David Rupprecht, Katharina Kohls, and Christina Pöpper, are expected to present their findings next week at the Network Distributed System Security Symposium in San Diego.
Here’s how hackers exploit the vulnerability: When an LTE mobile phone user moves around, the nearest cell tower sends a signal to his or her device. An attacker would have to be in the same area as the intended victim to fool the cell tower and have the technical expertise to pose as the original user to send and receive the LTE signals.
The attacker could then run up a person’s bill by making international calls or using premium services offered by the victims provider, like subscribing to a TV package, said Mark Nunnikhoven, vice president of cloud research for cybersecurity firm Trend Micro. Hackers can also collect unencrypted information sent to the victim.
“This attack happens at such a low level that all the activities we’re used to doing—Facebook, email, messages are encrypted,” Nunnikhoven says. “The normal activities are very unlikely to be impacted by this.”
The most likely targets of this kind of hack would be high-net worth individuals or specific targets who may have large quantities of sensitive information, the researchers say. Even then, the chances that a hacker would get a much useful information is still slim, given that most digital activities are encrypted.
But the vulnerability could pose a problem for network providers and law enforcement agencies, both of which would have a difficult time verifying whether a specific user did the activities their device suggests they did.
“The carrier could say I received a request for this service, and I billed you,” says Darren Shou, head of technology at NortonLifeLock. “And the user would say It wasn’t me, it was an evil twin. What repudiation would exist?”
Though the new discovery doesn’t provide any reason for the average LTE user to panic, it does remind consumers, providers, and technologists of the need to continuously improve their security practices.
The LTE vulnerability is not something a user has any control over, but there are things users can control. For example, frequently making sure their passwords have been changed, being cognizant of what links they are clicking on, and freezing banking accounts when there’s suspicious activity are best practices for thwarting hackers.
“A healthy dose of paranoia when it comes to what you’re receiving is important,” Levine says.
For technologists, news of the LTE hack reinforces how important encryption is, as hackers continue to find new ways to steal valuable data.
While the LTE hack is not an immediate, massive threat today, the new findings could be more troublesome in the near future.
“What we’ve seen is the combination of vulnerabilities, that when you combine one with something else, has bigger advantages,” Nunnikhoven says. “ There could be problems down the road if another one complements this.”
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fortune--2020-02-19--Asian American businesses are struggling because of unfounded coronavirus fear

In Arizona, a burgeoning Asian American community fields xenophobic calls about a planned night market featuring Asian street foods. In New York, a dim sum restaurant owner worries he won’t make rent. In the San Francisco Bay Area, a local Asian American-owned restaurant chain is mulling temporarily shuttering one of its properties because of the downturn in trade.
In major U.S. cities, Asian American businesses are seeing a remarkable decline in customers as fear about the viral outbreak from China spreads. City and health officials are trying to stanch the financial bleeding through information campaigns and personal visits to shops and restaurants, emphasizing that, with just 15 cases diagnosed in the entire country, there is no reason to avoid them.
Business owners, some of whom have seen their customer traffic cut by more than half, are anxiously waiting for things to return to normal.
Mesa, Ariz.’s freshly crowned Asian District was deep into organizing its night market when news broke that a case of the illness known as COVID-19 was confirmed at nearby Arizona State University.
Xenophobic comments on social media and phone calls started almost immediately, according to Arizona Asian Chamber of Commerce CEO Vicente Reid.
“I probably should stop picking up my phone altogether,” Reid said. “One lady was like, ‘Well, aren’t people coming to your event that are the cause of it?'”
The Feb. 29 food festival, modeled after popular outdoor Taiwanese markets, was designed to get the public acquainted with the district.
Mesa Mayor John Giles called the xenophobia directed at the event “ridiculous.”
“We certainly take any health crisis seriously but to make those kinds of connections is just offensive,” he said.
Organizers will be handing out specially made masks with playful Asian-food theme slogans like “Bao to me” and “Insert lumpia here.”
The virus has sickened tens of thousands of people, mostly in China. Fifteen people have been diagnosed with the virus in the U.S., all but two who recently traveled from China. U.S. citizens have also been diagnosed abroad, including 14 who were on a cruise ship quarantined off Japan and have been brought to hospitals in the U.S.
Vegetarian Dim Sum House has been a fixture in Manhattan’s Chinatown for 23 years, but suddenly owner Frankie Chu said he will not be able to make his rent this month.
Chu said sales have plunged 70% over the last two weeks at his no-frills restaurant. Three couples trickled in for lunch on a recent weekday. Normally, Chu said he gets up to 30 customers for lunch. At dinnertime, his narrow restaurant is usually packed with about 70 diners. These days, he gets about four.
Chu has sent some of his staff on vacation to cut costs. Under the circumstances, he will ask his landlord to forgive a 5% late fee normally charged.
“I don’t know how long I can stay here,” Chu said. “After 9/11, it wasn’t this bad.”
The crisis has alarmed New York City officials and business leaders, who have launched a campaign to lure people back to hard-hit communities in Manhattan, Queens, and Brooklyn.
“Chinatown is bleeding,” said Wellington Chen, executive chairman of the Chinatown Partnership, a local business and community group. “This thing is thousands of miles away. This fear is really out of proportion.”
Small businesses in Manhattan’s Chinatown have reported sales drops of between 40% and 80% the past month as the viral outbreak in China spread, Chen said. In Flushing, business is down an estimated 40%, according to the Flushing Chinese Business Association.
For some businesses, it’s much higher. Derek Law, senior vice chairman of the America China Hotel Association, said business has dropped about 70% at a spa he owns in Flushing.
New York City is home to more than half a million Chinese Americans, the biggest population of any U.S. city. Some New Yorkers of Chinese descent are frustrated at being made to feel like foreigners because of a disease outbreak that feels as far away to them as any other resident.
“I’m probably more American than a lot of the people asking me about coronavirus. It’s a little annoying to be honest,” said Christina Seid, owner of the Chinatown Ice Cream Factory, a neighborhood fixture that her father founded four decades ago with flavor offerings like mango and green tea.
Seid, whose great-grandparents immigrated to New York from China, said business has been slower than usual but added that the winter months are never good for ice cream shops. She said she feels optimistic that things will soon return to normal, relying on New Yorkers’ determination to get on with life.
With no confirmed cases of the virus in New York City, officials and politicians are trying to drive home the point that there is no reason to avoid any neighborhood, with many eating at Chinese restaurants and tweeting out photos under the hashtags #supportchinatown.
ZERO cases of coronavirus in NYC #SupportChinatown Businesses – take photos at the popular Baxter Street Triangle to qualify for a Valentine’s Day themed raffle. Details coming soon on contest to support businesses @cpldcny Resources for businesses https://t.co/D8Sv6uqcNF https://t.co/hzQ3ES6pox — IrisQuinones_ (@IrisQuinones_) February 13, 2020
In Boston, Mayor Marty Walsh has launched a similar social media campaign, encouraging people to share photos of themselves supporting small businesses in the neighborhood with the hashtag #LoveBostonChinatown.
Where are you having dinner tonight? Bundle up and head to #Chinatown! By supporting local businesses in this community you are helping to maintain Boston’s Chinese culture and history. Celebrate Boston’s Chinese community with our Chinatown Bingo! #LoveBostonChinatown @HHSBOS pic.twitter.com/15AdCbbs0K — Boston Public Health (@HealthyBoston) February 15, 2020
Allison Arwady, the Chicago Department of Public Health commissioner, said she and her colleagues “continue to field rumors” about threats to public health. She said the health risk is low and urged people to not fear visiting and spending time at restaurants or stores in Chicago’s Chinatown.
“Please do not allow stigma, xenophobia or fear to control your decisions,” Arwady said.
In the San Francisco Bay Area, the situation is dire enough that Sunny Wong’s family is considering temporarily closing one of the four restaurants they own in Oakland Chinatown. Even some of his friends and patrons have told him about hearing of untrue rumors of people getting sick at one of his restaurants.
“People just are clueless. They hear stories and rumors and they just don’t really look for the facts in a situation,” said Wong, adding that he has had to cut back hours for his workers.
Carl Chan, president of the Oakland Chinatown Chamber of Commerce, said business owners have reported a drop of roughly 50% to 75% in business. The chamber is planning a Chinese New Year celebration, with Oakland Mayor Libby Schaaf encouraging residents to patronize Chinatown restaurants.
New York City Mayor Bill de Blasio recently visited Nom Wah Tea Parlor, the oldest restaurant in Manhattan’s Chinatown.
The restaurant has seen a 40% drop in business over the past three weeks, said manager Vincent Tang, whose cousin Wilson Tang took over the restaurant from his father. Normally, the restaurant fills up at lunchtime. But during a recent weekday, nearly half the tables were empty, although it was at least busier than many of its lesser-known neighbors.
“We’re lucky to have loyal customers,” said Tang, sitting near a row of green stools that he used to swing around in as a child. “Usually at this time we are packed and there is a line outside.”
Customers at Nom Wah said they were perplexed that others were staying away.
“It didn’t cross my mind at all,” said Kate Masterson, an artist digging into dumplings with her uncle at a booth beneath signed framed photographs of celebrities like Kirsten Dunst.
“It’s not happening here,” she said of the outbreak.
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fortune--2020-02-20--HTC CEO Yves Maitre on the company’s ‘new vision,’ virtual reality, and the rivalry with Facebook

Three mega-deals to have on your radar today

HTC was once one of the most prominent smartphone makers in the world, but competition from Apple and Samsung proved too tough to beat. In 2018, the Taiwan-based company ended up selling off a large chunk of its smartphone business to Google, and 2019 saw revenues decline 58%, down to roughly $333 million from $789 million a year earlier.
To right the ship, this past fall HTC brought in a former executive from telecom giant Orange, Yves Maitre. The Frenchman has promised to lead the struggling tech giant into a new era, doubling down on previous investments in virtual and extended reality with the HTC Vive product line.
Now, HTC is announcing three new VR products as part of the “Cosmos” series, a PC-based VR headset. The new products—Cosmos Elite, Cosmos XR, and Cosmos Play— are interchangeable faceplates that attach to the Cosmos headset, allowing different functionality for varying levels of users and developers.
Maitre sat down with Fortune on Jan. 31 to discuss the new products, his “continuum” approach to merging virtual reality and reality, and HTC’s “new vision” ahead of a reveal at the MWC Conference scheduled for late February in Barcelona—but the trade show was cancelled over fears of Coronavirus.
This conversation has been edited and condensed for clarity.
HTC hasn’t had a great past few years financially. At a TechCrunch event in October, you said that HTC had “stopped innovating in the hardware of the smartphone,” and that you were now focusing on virtual reality. Is it safe to say that virtual reality is the priority for the company now?
Maitre: I would like to correct myself a little bit. It’s probably been misinterpreted, or I misexpressed myself when I said we stopped investing in smartphones. We didn’t stop investing in smartphones. What we tried to do is to continue the smartphone business, and we are, but the smartphone business in terms of innovation is plateauing a little bit. If you look at manufacturers—and I will not name anybody else other than HTC obviously—but the smartphone between the version “N” and “N+1,” there’s not so many big changes.
Now, yes, the results of 2019 are what they are. And I’m on board to restart the company. I believe that we have a new vision, which is a continuum between reality and virtual reality. And in order to make this vision true—and that we will be able to measure true figures—we are promoting and putting in place a new portfolio with a new vision. This new portfolio is based on a segmented approach, based on hardware that you can upgrade.
And how will you execute this vision?
We have decided to focus on three main key pillars. The first pillar is to help developers create content, to store the content in a very safe way, and for customers to access that content. This is business-to-consumer as well as for business-to-business. This is Viveport. This is our ecosystem of developers. Our APIs. Everything which is done, including tools, we give to developers. Our job is not to do the job of developers. Our job is to listen to developers, to listen to their community, to listen to enterprise companies, and try to help them do the best content, through the best hardware, through the best software. And to be in a position to have their content somewhere in a store that customers will know and be able to access.
The second pillar is play: how to play this content. We have the smartphone. We have a portfolio of headsets aligned with our segmented approach strategy. And for this one, it’s very clear that the position we have is to be No. 1 globally. And not only in some counties—you have opportunity if you are in China to buy our headset in China, or Abu Dhabi, or the U.S. here in New York, or in Paris, or in Berlin. The second thing is we position ourselves for mid-tier and high-end. It doesn’t mean we will not have other devices. It doesn’t mean that we will not respect these people, but this is not where we want to be. We will be No. 1 where we are used to playing, which is mostly high-tech.
The third pillar is what I call distribute. It’s good to have content. It’s good to have a headset. But what are you doing with that? I want to make sure content moves from one place to the other in the right way. This is not the job of HTC; this is the job of [phone] carriers. But the 5G technology will open a lot of opportunities. We need to understand the need of the carriers— Verizon, AT&T, China Mobile, Orange—and how they want to carry this content. What can we do to optimize our device to their network? What can we do to also make sure that consumers will pay the right price?
We’ll never be a carrier; we’ll never be an Ubisoft or big content makers. But what we want to do is make sure that the entire experience isn’t only the best experience across all three pillars, but also in terms of price positioning, the right price. When we talk about price we have to really talk about the price of the entire experience, not only the price of the hardware.
When you talk about price, a lot of people right now would associate that with Facebook and Oculus, which sells the standalone Oculus Quest VR headset for just $399. Do you want to appeal to that market as well, or are you focused more in mid-tier and enterprise solutions?
The market is going to arrive. I really appreciate Facebook helping us because we have been the only one, the first one, to make the market become a reality. When you are the only one to make a market, it’s pretty heavy. Remember the car industry 120 years ago, there were several guys like Ford, Delage, Benz, Bugatti, and altogether they were making the market a reality so that the horse is now a horse, and a car is now a car. So we are at the period of time where we are building a market. And when you build a market there are several ways. Our approach from a hardware perspective is more of a segmented approach, where we try to understand what the experience should be, and what our customers want. Mostly B2B enterprise. They are very, very precise. We started with a very accurate precision type of product, and we go down in terms of the precision to a normal user.
What Oculus is doing is going mass market. What they are doing is trying to make a robust product very price-oriented and black. Kind of like a Henry Ford, T Model. Where we are more of a European way of making cars where it’s more of a segmented approach, trying, for each segment for each need, to provide something that’s more dedicated to what you want to do. They are two different types of approach.
We are very pleased to have as a partner, competitor—whatever you call it—people like Facebook, a strong company. Together, we are creating this market.
More must-read stories from Fortune:
—The fall and rise of VR: The struggle to make virtual reality get real
—How Apple defied the odds to post the biggest quarterly profit ever
—Oracle and Google are about to face off in tech’s trial of the century
—Can San Francisco be saved?
—Did the ‘techlash’ kill Alphabet’s city of the future?
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.