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BW Businessworld

Globescan: Slowing Down

Venice, California-based Snap has said it relies on Google Cloud to host the vast majority of its computing, storage and bandwidth

Photo Credit : Shutterstock

Twitter Inc reported its slowest quarterly revenue growth since going public, as the company continues to grapple with intense competition from newer services such as Snap Inc’s Snapchat and Facebook’s Instagram. Twitter’s net loss widened to $167.1 million, or 23 cents per share, in the fourth quarter ended December 31, from $90.24 million, or 13 cents per share, a year earlier. Restructuring charges in the latest quarter ballooned to $101.2 million from $12.9 million a year earlier. Revenue rose 1 per cent to $717 million. Twitter was abuzz with takeover chatter last year involving big names such as Inc and Walt Disney Co.

Profit Game
Snap Inc, owner of the popular Snapchat app, said it expected to spend $1 billion over the next five years to use Inc’s cloud services, in addition to the $2 billion cloud contract it already has with Google. Snap may eventually invest in building its own infrastructure. The company, which filed its IPO registration statement recently, is looking to raise $3 billion. Snap could be valued at between $20 billion and $25 billion, giving the company the biggest valuation in a US technology IPO since Facebook Inc.

Venice, California-based Snap has said it relies on Google Cloud to host the vast majority of its computing, storage and bandwidth.

On The Right Track
Renault SA’s profit surged 38 per cent in 2016 after the French carmaker gained market share in Europe with an expanded lineup of sport utility vehicles and upgraded models like the Megane hatchback. Operating profit increased to 3.28 billion euros ($3.5 billion) from 2.38 billion euros a year earlier, the Boulogne-Billancourt-based company said in a statement. The figure exceeded the 3.05 billioneuro average of 16 analyst estimates. Revenue jumped 13 per cent to 51.2 billion euros. Its shares rose the most in seven months.

“It is a very good year, and we reached the targets that we set for ourselves,” said Chief Financial Officer Clotilde Delbos recently. “We reached these good results, despite struggles in once-strong markets like Russia and Brazil.”

Big Deal
Renault and alliance partner Nissan 7201 are ready to pursue a closer tie-up, Chief Executive Carlos Ghosn said recently, but not before the French state sells its stake in the French carmaker.

Ghosn, who heads both manufacturers, said a 2015 stand-off over French government voting rights had persuaded Nissan that no further consolidation was possible while France remained a shareholder.

“The Japanese will never accept to be part of an entity where the French state will be a shareholder of Japanese assets,” Ghosn told analysts as he presented Renault’s full-year results. “The day the French state decides to get out, everything is open.”

France is Renault’s biggest shareholder, with a 19.74 per cent stake and a bigger share of voting rights.

Costly Exit
When Britain leaves the European Union, and likely the bloc’s customs union, such cross-border supply chains could see substantially increased costs and time delays due to tariffs and administrative burdens. The EU’s customs union allows goods to circulate freely between member states without facing any duties, quotas or customs controls, and applies a common tariff at its external border to goods coming from outside the bloc. British Prime Minister Theresa May has said she wants to have some kind of customs agreement with the EU in order to have trade that is “as frictionless as possible”.

Buying Out
Reckitt Benckiser Group Plc agreed to buy Mead Johnson Nutrition Co. for $16.6 billion, taking the UK consumerproducts maker into the baby-formula market for the first time as it seeks to boost slowing sales growth. The maker of Lysol cleaners will pay $90 a share in cash, the same price it indicated when it announced it was holding advanced negotiations on the deal. The deal will result in 200 million pounds ($250 million) of cost savings after three years and add to earnings, the company said. Mead Johnson provides a means of stoking growth at Reckitt Benckiser, whose sales are advancing at the slowest pace in more than five years amid tough conditions in Europe and emerging markets like Brazil.

Raising The Bar

Ant Financial, the parent of China’s largest online payment service, is seeking to raise $3 billion by issuing debt to fund its acquisitions, people familiar with the matter said. Ant Financial is raising the money to partly finance its $880 million purchase of MoneyGram International Inc. and other acquisitions, the people said, requesting not to be named because the matter is private. Controlled by billionaire Jack Ma, the online behemoth has been valued at $75 billion by CLSA Ltd. and is planning an initial public offering soon, sources have said.

Flying High
Singapore Airlines (SIA) announced a $13.8 billion provisional order to buy 39 Boeing wide-body aircraft as it pursues expansion opportunities, dealing a setback for Airbus Group in the battle of big twinjets between the two manufacturers. SIA signed a letter of intent with Boeing for twenty 777-9s and nineteen 787-10s to tap additional passenger growth and to modernise its fleet over the next decade. Additional options for the two aircraft types could take the deal to as many as 51 aircraft. The agreement leaves questions over Airbus proposals to develop a larger 400-seat version of its A350 passenger jet to compete with the 406-seat Boeing 777-9.

Growing Big
PT Bumi Resources will post its first annual profit in five years as a rally in fuel prices help Asia’s biggest exporter of thermal coal push through a debt restructuring. The company, controlled by the family of Indonesian politician Aburizal Bakrie, had net income of $101.6 million last year, compared with a net loss of $2 billion in 2015, according to provisional results e-mailed by Bumi recently. The company will release audited results next month. Profit “prospects are bright” for 2017 as coal sales are seen rising between 5 per cent to 7 per cent with prices set to climb at least 30 per cent, Bumi said. Bumi’s shares have surged 58 per cent this year

Great Start
Facebook Inc. co-founder Eduardo Saverin’s B Capital Group has led a new financing round for a Singapore-based online health insurance service that values the startup at $100 million.

Singaporean government investment vehicle EDBI jointly led the $25 million round in CXA Group alongside Saverin’s outfit, the startup said recently. New investors Royal Philips NV and RGAx, a unit of Reinsurance Group of America Inc., and existing backers NSI Ventures and BioVeda Capital also joined the round.

CXA is among a growing crop of startups trying to build an online marketplace for health services, from insurance to data management. Founded by Chief Executive Officer Rosaline Koo, the daughter of an illegal Chinese immigrant who made his way from Mexico to San Francisco by sea, CXA now has annual revenue of S$10 million ($7 million) and counts 45 Fortune 500 companies among its 500 corporate clients, she said.