Lyft says ride-hailing service continued to recover in August


Lyft on Tuesday released updated ride-hailing numbers that show an uptick in demand for rides.


Robyn Beck/AFP via Getty Images

Lyft Inc. said Tuesday that the ride-hailing recovery is progressing after a steep drop in demand because of the COVID-19 pandemic.

Lyft
LYFT,
+3.90%

said in a filing with the Securities and Exchange Commission that rides rose 7.3% in August from July (although August rides were down 53% year over year), and that in the week ended Sept. 6, it saw the highest number of rides since April. That brings its decline in rides to less than 50% year over year, the company said. In addition, Lyft said its Canadian business — its only operations outside the nation — was rebounding more quickly than its U.S. business, with weekly rides in Vancouver reaching a record high in the week ended Sept. 6.

The company also said it spent less on driver incentives in August as more drivers returned to its ride-hailing app.

Those numbers prompted the San Francisco-based company to say it now expects that its year-over-year change in revenue will outperform the change in rides in the third quarter that ends Sept. 30. Lyft also said its adjusted Ebitda loss for the third quarter will be less than $265 million, compared with an adjusted loss of $128.1 million in the same period a year ago.

See: Lyft revenue and riders fall by more than half, and California could soon be cut off

In its filing, Lyft also said it put an additional $17.5 million into the Proposition 22 campaign, the California ballot measure that aims to avoid complying with a new law that would mean classifying its drivers as employees. Instead, Lyft and larger rival Uber Technologies Inc.
UBER,
+3.24%
,
as well as other companies that rely on independent contractors, are proposing to exempt gig workers from the law.

See: The different routes Uber and Lyft could take as they fight California law

Amid another broad decline for tech stocks Tuesday, with the Nasdaq Composite Index
COMP,
-4.11%

falling 4.1%, Lyft shares rose 3.9% to $30.10, while Uber shares rose 3.3% to $34.32. Both stocks fell roughly 2% in after-hours trading following the filing.



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U.S. Defense Department reaffirms $10 billion cloud deal to Microsoft


The Force appears to be finally with Microsoft Corp. in its epic duel with Amazon.com Inc. for JEDI.

The Department of Defense on Friday said it has completed its re-evaluation of the hotly-contested $10 billion cloud-computing deal and reaffirmed its award to Microsoft. “Microsoft’s proposal continues to represent the best value to the government,” the DoD said in a statement.

“The JEDI Cloud contract is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract that will make a full range of cloud computing services available to the DoD,” the statement continued. “While contract performance will not begin immediately due to the Preliminary Injunction Order issued by the Court of Federal Claims on February 13, 2020, DoD is eager to begin delivering this capability to our men and women in uniform.”

The announcement came shortly before the markets closed. In another brutal day for tech stocks Friday, shares of Microsoft
MSFT,
-1.40%

dropped 1.4% in trading; Amazon
AMZN,
-2.17%

shares declined 2.2%.

“We appreciate that after careful review, the DoD confirmed that we offered the right technology and the best value. We’re ready to get to work and make sure that those who serve our country have access to this much needed technology,” a Microsoft spokesperson told MarketWatch.

Amazon vowed to “protest this politically corrupted contract award” in a strongly worded blog post.

“[Amazon Web Services] remains deeply concerned that the JEDI contract award creates a dangerous precedent that threatens the integrity of the federal procurement system and the ability of our nation’s warfighters and civil servants to access the best possible technologies,” Amazon said. “Others have raised similar concerns around a growing trend where defense officials act based on a desire to please the President, rather than do what’s right.”

“This was illustrated by the refusal to cooperate with the DoD Inspector General, which sought to investigate allegations that the President interfered in the JEDI procurement in order to steer the award away from AWS,” Amazon continued. “Instead of cooperating, the White House exerted a ‘presidential communications privilege’ that resulted in senior DoD officials not answering questions about JEDI communications between the White House and DoD. This begs the question, what do they have to hide?”

The Defense Department’s Joint Enterprise Defense Infrastructure (JEDI) cloud-computing deal over 10 years is considered a plum government contract. The Pentagon initially awarded JEDI to Microsoft in October over the objections of co-finalist Amazon, which filed suit in protest in November. In April, a federal judge gave the Pentagon permission to reevaluate bids from Microsoft and Amazon.

Read more: Amazon files suit, challenging Pentagon’s $10 billion cloud contract to Microsoft

Anticipating a win, Microsoft has been signing similar deals with foreign governments for cloud-infrastructure services, according to a report by CNBC last month.

For years, Microsoft and co-finalist Amazon have engaged in behind-the-scenes lobbying and subterfuge over the deal as they battle for supremacy in the cloud market. And at times, the competition has taken on almost a cartoonish quality, evoking Mad magazine’s Spy vs. Spy comic strip.

Adding to the political intrigue is the future of TikTok, a video-sharing social networking service owned by ByteDance, a Beijing-based Internet company. Microsoft is the leading candidate to acquire TikTok, though Oracle Corp.
ORCL,
-2.39%

and Twitter Inc.
TWTR,
-4.22%

have also been mentioned as suitors. Alphabet Inc.’s
GOOGL,
-2.96%

GOOG,
-3.09%

Google was part of a group that explored a bid before dropping the idea, according to a Bloomberg report.

Microsoft is believed to be the favorite to acquire TikTok, published reports suggest, because it has been in close contact with the Trump administration. The software giant was initially awarded JEDI in October because of the president’s disdain for Amazon Chief Executive Jeff Bezos, who also owns the Trump-baiting Washington Post, say two people closely aligned to Amazon who are not authorized to speak publicly on the matter.

Amazon Web Services commanded 47% of the cloud infrastructure market in 2019, while Microsoft had 13%, according to estimates from market researcher IDC.

“This is a game changer for Microsoft as JEDI will have a ripple effect for the company’s cloud business for years to come, and speaks to a new chapter of Redmond winning in the cloud vs. Amazon in our opinion on the next $1 trillion of cloud spending expected to happen over the next decade,” Wedbush Securities analyst Daniel Ives said in a note late Friday.



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10 stocks positioned for an ‘abrupt’ rebound when normalcy finally returns — none of them are tech


The stock market continues to buck the steady flow of troubling headlines and gloomy metrics in a stark disconnect with the economy that’s been hotly debated on Wall Street.

Read:Jim Cramer urges investors not to be fooled by new highs in the stock market

And while it might feel rather toppy and precarious, Thomas Hayes, founder and chairman of Great Hill Capital, a new phase in the bull market could be on the way.

“It is a Dickensonian, ‘Tale of Two Markets’ when you look under the surface,” he wrote in a blog post. “While it may be true that the general indices could be due for a rest in coming weeks, such a rest may be accompanied by ‘under the surface’ rallies in laggard/unloved sectors.”

In other words, developments that might weigh on the major indexes by taking down leaders like Apple
AAPL,
+5.15%

, Amazon
AMZN,
-0.38%

, Facebook
FB,
-0.74%

and the other big-name tech players, would actually provide a tailwind for beaten down names poised for a rebound.

“So, ‘what do you think of the market?’ is less interesting of a question than, ‘what do you think about banks, commodities, emerging markets, defense stocks, tech, etc?’” Hayes said.

He used this chart to illustrate just how much relative appetite there is for tech lately:

Some names he mentioned that could come screaming back in a post-pandemic world include: Bank of America
BAC,
-0.47%

, JPMorgan Chase
JPM,
-0.05%

, Apache
APA,
-3.25%

, Murphy Oil
MUR,
-2.89%

, Boeing
BA,
-1.22%

, Lockheed Martin
LMT,
+0.43%

, MGM
MGM,
+1.58%

, Las Vegas Sands
LVS,
+2.23%

, Southwest Airlines
LUV,
+0.66%

and United Airlines
UAL,
-2.96%

, to name just a few with compelling set-ups.

“Announcement of a vaccine, or major breakthrough that pointed to near certainty and timeline on vaccine/treatment… would shift consensus FROM slower recovery/growth (lower rates) — which benefits tech — TO faster recovery/growth (slightly higher rates) — which benefits cyclicals,” he explained in his post. “When these groups turn, it will be abrupt.”

Banks, in particular, should see a big move higher, he added.

“Most people will be chasing banks after they are trading at a 50-100% premium to book versus buying now — in many cases — at a discount to book,” Hayes said. “How do we know? Because it happens coming out of every single historical recession. There is no recovery without Banks/Cyclicals leading out of the gate (early/high growth stages). No credit growth, no recovery.”

Overall, he remains bullish on what lies ahead, particularly with the aforementioned laggards.

“The catalyst will likely come from science at this point. Don’t bet against science,” he said. “I would not be surprised to see a bit of volatility/chop over the next few weeks. For now, keep on dancing while the music is playing, but keep your feet on the floor.”

For now, the stock market is rather quiet, with the Dow Jones Industrial Average
DJIA,
+0.68%

, tech-heavy Nasdaq Composite
COMP,
+0.41%

and S&P 500
SPX,
+0.34%

all hovering around the breakeven point in Thursday’s trading session.



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California makes bold moves to tackle Big Tech with Uber and Lyft showdown


As California becomes one of the first states to take on Big Tech in the ongoing battle over the employment status of Uber and Lyft drivers, the scofflaw ride-hailing companies are now working their political contacts to avoid complying with a law that has been on the books for almost a year.

Earlier Thursday, an appellate judge granted an emergency stay, lifting the injunctions against Uber Technologies Inc.
UBER,
+6.76%

and Lyft Inc.
LYFT,
+5.75%

LYFT,
+5.75%

that ordered them to comply with the California law, known as AB-5, that requires ride-hailing companies to classify their drivers as employees instead of independent contractors. The companies had threatened to shut operations in the state rather than comply with the ruling. They now have an expedited time frame for their appeals, which, in an unusual request from Appellate Judge P.J. Pollack, will now be consolidated. Both Uber and Lyft have until Aug. 25 to agree to the expedited procedures and then until Sept. 4 to file their opening briefs.

The two companies, but Uber even more so, have taken an act-first-and-seek-forgiveness-later approach when it comes to complying with international and local regulations. Now, both are using all the political might that they have gathered up over the past years to buy more time in this battle, in the hopes that a ballot measure in the upcoming November election, known as Proposition 22, will overturn AB-5.

The companies are spending millions of dollars fighting a law that will make their operating costs rise if they are forced to pay benefits to their drivers. Their threats to shut down their operations in the state raised enough concern to get support in some corners.

Late Wednesday, the mayors of San Jose and San Diego issued a joint statement, saying they had serious concerns that nearly 1 million gig-economy workers in California would lose their jobs if Uber and Lyft shut down their operations in the Golden State. They also played the pandemic card, saying that many of those drivers are helping homebound seniors and transporting patients seeking medical care. In their statement, they asked the appeals court to stay the injunction against the companies.

“The vast majority of drivers want to stay independent workers and are looking for solutions that protect their independence while also providing additional benefit,” said Kevin Faulconer, mayor of San Diego, and Sam Licardo, mayor of San Jose, echoing the party line of the companies.

In addition, Uber and Lyft — along with DoorDash — have spent at least $30 million each so far on Prop. 22, which would exempt them from AB-5. So while the state ushered in a new law that offers more protections to workers, the companies involved have been doing everything possible to make their part of the gig as low-cost and as high-profit as possible. Instead of preparing for a major change, and making changes in their operations to accommodate the new law, they have continued to relentlessly fight it.

The appellate judge, however, is demanding that the CEOs of both companies submit a sworn statement, also by Sept. 4, “confirming that it [the company] has developed implementation plans under which, if this court affirms the preliminary injunction and Proposition 22 on the November 2020 ballot fails to pass.”

California is leading the way in these battles against Big Tech, from this fight with Uber and Lyft to the California Consumer Protection Act (CCPA) that is Facebook Inc.’s
FB,
+2.44%

next nightmare, to a law requiring women on company boards. And just last week, a new bill that would require racial diversity on boards passed the state Senate Committee on Banking and Financial Institutions.

Whether these efforts to reign in tech giants will be successful or not is way too early to tell, but it’s clear that the rest of the U.S. is watching. The Uber and Lyft showdown is an important battle in the war against the dominance of Big Tech.



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Postal Service issues have affected Netflix and Amazon


Issues at the U.S. Postal Service have created concerns about the November elections, but they have already caused headaches for some of the 2 million Netflix customers who still receive DVDs by mail, as well as Amazon.com Inc.’s fulfillment network.

Netflix
NFLX,
+2.75%

, which still mails rental DVDs in its iconic red envelopes in addition to offering its more popular streaming service, has experienced isolated delivery delays via the U.S. Postal Service, according to a person with knowledge of the company’s operations. The Postal Service remains an important strategic partner of Netflix, and the two operations are working closely to navigate the situation, which is not expected to have any material impact on customer service nor sales because of the isolated issues, the person said.

The Postal Service is in the process of removing 671 high-speed mail-sorting machines nationwide, which will eliminate 21.4 million items-per-hour’s worth of processing capability from the agency’s inventory. Relief could be on the way with Tuesday’s statement from Postmaster General Louis DeJoy that the mail service is ready to handle all mail-in ballots it receives in November, and that he is putting off drastic changes until after the election.

But with Democrats openly skeptical about that vow, as well as budget cuts to mail delivery, tech companies are taking nothing for granted.

Read more:Postmaster has no intention of restoring mail cuts, Pelosi says

“There has been a noticeable delay,” says Nitin Gupta, founder of One Hundred Feet Inc., a mapping geocode app developer that helps delivery systems get to their locations faster. He has seen a surge in use of his company’s app, which is used by the likes of FedEx Corp.
FDX,
+0.45%

, Uber Technologies Inc.
UBER,
+6.76%

and Verizon Communications Inc.
VZ,
-0.15%

, over the past few weeks.

Netflix’s DVD-by-mail service makes up a relatively small slice of the company’s overall business, but is still popular is rural areas, where access to high-speed internet and streaming services is limited. The DVD business reported revenue of $297 million in 2019 from more than 2 million subscribers, down from $366 million in 2018; as recently as 2012, Netflix reported more than $1 billion in DVD revenue. Netflix reported $20.16 billion in 2019 sales, so only 1.5% of that total comes from the DVD business.

The importance of mail delivery in rural areas has intensified the stakes for online retailers shipping products like prescription drugs, groceries, jewelry and DVDs, including Amazon
AMZN,
+1.13%
.

“It’s so critical to older people who are homebound during the pandemic, especially those reliant on medicines,” Shivaram Rajgopal, a professor at Columbia Business School, told MarketWatch.

Online pharmacy Honeybee Health Inc. says about 20% of patients who order delivery via first-class mail have experienced delays so far. “Neither mail-delivery nor brick-and-mortar is reliable for pharmacies,” says Cary Breese, CEO of NowRx Inc., a pharmacy based in Mountain View, Calif., that uses proprietary software, robotics, and artificial intelligence to provide free same-day delivery of prescription medication in the San Francisco Bay Area, Orange County (Calif.), and Phoenix.

Delivery of Amazon packages in the U.S. can be “hit or miss,” according to Helium 10, which is tracking Amazon sellers who rely on the postal service. A seller who ships 500 units via USPS weekly said that for the same area, package deliveries can take anywhere from a couple days to a week. Other businesses report some packages shipped by USPS have not been delivered in three weeks.

Any Postal Service issues could affect Amazon on a larger scale because the e-commerce giant ships billions of packages annually. However, the company has built redundancies into its delivery network — utilizing its own deliveries along with the Postal Service and private carriers — because its products are so geographically dispersed.

Amazon Logistics, the company’s in-house logistics operation, “more than doubled its share” of U.S. package volumes from about 20% in late 2018 and is now shipping at a rate of 2.5 billion per year. Morgan Stanley estimates United Parcel Service Inc.
UPS,
-0.49%

and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year, respectively, and that Amazon is already delivering about half of its own packages in the U.S.

By 2022, Amazon’s U.S. package delivery volume could more than double, to 6.5 billion, according to the Morgan Stanley report. That would easily surpass UPS’s estimated 5 billion and FedEx’s 3.4 billion package volume.

Amazon Chief Executive Jeff Bezos, who as owner of the Washington Post has been publicly targeted for vitriol by President Donald Trump, has put into place a vast network of delivery partners to avoid bottlenecks. Besides its ubiquitous vans that have become as common in neighborhoods as mail carriers, Amazon has agreements with the USPS and UPS to fulfill customer service.

“We regularly balance capacity across our extensive network of carrier partners to ensure we are able to meet our delivery promises,” an Amazon spokeswoman told MarketWatch in a phone interview. “While we don’t comment on our agreements with carrier partners, we continue to look at all of our options to ensure we’re providing the best possible service to customers.”

That hasn’t always translated into timely delivery for small businesses that partner with Amazon. Sharon Buchalter, CEO of Products on the Go, an e-commerce seller of baby products and other goods, said her company has lost sales in recent weeks because Amazon has been late in processing and delivering some orders, prompting customers to ask Amazon for refunds or cancellations.

“There’s really nothing I can do if Amazon runs late,” Buchalter told MarketWatch. “This [slower mail] and the economic slowdown caused by the pandemic have impacted sales a bit.”



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