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Tesla to layoff 9 percent of workforce 3 Hours Ago | 01:29
Tesla told employees Tuesday it will cut about 9 percent of its workforce, trimming mostly salaried positions.
Since the start of the year, Tesla has added roughly 8,000 jobs and currently employs approximately 46,000 workers. Through this reorganization, it will shed about 4,100 jobs.
In mid-May, Tesla CEO Elon Musk had warned the company was undertaking a "thorough reorganization" and that it would flatten its management structure.
"To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel," Musk said in a letter to employees on Tuesday. "I also want to emphasize that we are making this hard decision now so that we never have to do this again."
Musk echoed this sentiment in a tweet he sent Tuesday, saying the cuts were "difficult, but necessary."
[View image on Twitter] [View image on Twitter] [View image on Twitter]
Difficult, but necessary Tesla reorg underway. My email to the company has already leaked to media. Here it is unfiltered:
2:02 PM - Jun 12, 2018
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CFRA analyst Efraim Levy took the news as a sign Tesla is maturing and prioritizing profitability.
"There is a normal ebb and flow of hiring and firing in a business," he said. "Nine percent is a big chunk to do at once, but there comes a time when a company grows up and they have to cut out the fat to become more efficient."
In the email to employees, Musk said "profit is obviously not what motivates us," given the company's nearly complete historical lack of it. But, he said, now Tesla needs to reduce costs and make money.
Ahead of the layoff announcement, Tesla shares had been trading up 5 percent and the stock was on pace to show its best month since February 2014. After the news, the stock gave up some of its gains, but was still on pace for its third-straight day of gains.
While sentiment has been warming, at least as far as the stock is concerned, Tesla has recently shown signs of being a company in turmoil. It has been burning through billions of dollars as it tries to scale up production of its Model 3 sedan, Tesla's lowest-priced vehicle and its first attempt at making a car for the mass market.
It has been criticized for missing production targets, even after these goals were revised. Tesla currently is trying to reach a production rate of 5,000 Model 3 cars in a single week by the end of this month.
Separately, Musk has said he expects Tesla to be profitable and cash flow positive in the third quarter. But some analysts think the company will need to raise more capital by the end of the first quarter of 2019.
The company has also seen quite a bit of turnover in its ranks, and several senior executives have left over the last several months.
Meanwhile, Tesla has defended itself in court on Monday against complaints from the National Labor Relations Board that Tesla was intimidating employees involved in union activities.
Tesla's advanced driver assistance system, Autopilot, has also drawn federal scrutiny, following its involvement in some high-profile crashes.
Also disconcerting, has been Musk's combative attitude toward Wall Street and the press, which rose to a head during its first-quarter earnings conference call.
But in recent days, there has been a growing conviction that Tesla is making progress on Model 3 production. On Monday, KeyBanc Capital Markets analyst Brad Erickson raised his second-quarter Model 3 delivery estimate to 30,000 from 20,000, based on conversations with staff at Tesla stores.
And some analysts think Tesla can achieve gross margins of 25 percent on the Model 3, which Tesla is still targeting. Others have been skeptical the company can pull in profits that high on a vehicle that starts at just $35,000, compared with Tesla's far more expensive Model S and X sedans. Indeed, Tesla has been prioritizing the production of more expensive Model 3 versions.
Tesla has grown rapidly in recent years. Even with the work force reductions announced Tuesday, Tesla will still employ more people now than it did at the end of 2017.
In its email to employees, Tesla noted that there had been some duplication of roles and job functions as it scaled quickly. Those are the areas that will be targeted with cuts.
Tesla said no production associates were impacted by the restructuring.
The company also has decided not to renew its residential sales agreement with Home Depot as it focuses its efforts on selling solar power in Tesla stores and online.
A copy of Musk's email to Tesla employees follows:
As described previously, we are conducting a comprehensive organizational restructuring across our whole company. Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today.
As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9% of our colleagues across the company. These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months.
Given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us. What drives us is our mission to accelerate the world's transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla's history to date.
This week, we are informing those whose roles are impacted by this action. We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and by assessing the specific skills and abilities of each individual in the company. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster.
In addition to this company-wide restructuring, we've decided not to renew our residential sales agreement with Home Depot in order to focus our efforts on selling solar power in Tesla stores and online. The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations.
I would like to thank everyone who is departing Tesla for their hard work over the years. I'm deeply grateful for your many contributions to our mission. It is very difficult to say goodbye. In order to minimize the impact, Tesla is providing significant salary and stock vesting (proportionate to length of service) to those we are letting go.
To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel. I also want to emphasize that we are making this hard decision now so that we never have to do this again.
To those who are departing, thank you for everything you've done for Tesla and we wish you well in your future opportunities. To those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are a small company in one of the toughest and most competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who haven't gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world.
JUNE NEWSLETER 7
Five years ago a licensed taxi medallion to operate a cab in New York City sold for $1.3 million. Later this month 139 of the medallions will be auctioned, likely for a fraction of the price their owners paid for them.
At a similar auction last year, 46 medallions were reportedly sold for an average price of $186,000. This month’s sale will include a minimum of 20 medallions.
The decline in value is attributed to the popularity of ride-sharing services like Uber and Lyft. The ride-hailing services made more trips in February 2017 than yellow and green cabs combined, according to Taxi & Limousine Commission data reviewed by Todd Schneider. And not just a little more–65% more, a larger monthly total than taxis have posted in any month since 2009, when the data were first collected.
Ride-sharing trips overtook taxi trips in the outer boroughs of New York City in early 2016 and today account for 10 times more trips than taxis. Schneider also believes “there’s a very good chance” that ride-hailers have already surpassed taxis in Manhattan and that may also be true of trips to LaGuardia and John F. Kennedy airports.
According to the New York Post, city taxi medallions are selling today for between $160,000 and $250,000. The number of authorized medallions totals just 13,587 and the number of for-hire vehicles in New York totals about 130,000 today.
That has cut a taxi driver’s average annual earnings from around $45,000 to as little as $29,000. Estimated annual earnings for the roughly 60,000 Uber drivers in New York fall between $30,000 and $40,000. The Post notes that many for-hire drivers earn less than an hourly worker at McDonald’s.
COMPANIES THAT CONTROL TECHNOLOGY
DRIVERLESS CAR HOPES
The next version of Tesla Inc.’s (NASDAQ: TSLA) Autopilot software scheduled to be released in August includes “full self-driving features,” according to company CEO Elon Musk. Version 9 is the first full update of the software since version 8 was released in 2016.
The features will be “enabled” on Tesla vehicles equipped with Autopilot 2.0. That does not mean, however, that they will be able to drive themselves. The version 9 update will be pushed out over-the-air to Tesla owners.
Tesla offers a $5,000 option called Enhanced Autopilot for vehicles equipped with Autopilot 2.0 hardware. Musk has already promised a summer release of a new on-ramp/off-ramp feature for Enhanced Autopilot. Tesla owners also need to add an additional $3,000 package called Full Self-Driving Capability.While Tesla is selling a full self-driving package, that does not mean that consumers will be able to use it immediately. The company clearly states the facts of life: “Self-Driving functionality is dependent upon extensive software validation and regulatory approval, which may vary widely by jurisdiction.”Musk announced (more or less) the Autopilot update in response to a tweet on the Tesla feed:Speaking of merging and autopilot the biggest issue i have noticed is when two lanes merge and it is rush hour traffic. The autopilot is not able to decide to let the car slightly ahead on the neighboring lane go ahead and I invariably find myself cornered !
In the auto industry's war for tech talent, Ford Motor Co made an unusal $1 billion bet last year to fund an artifical intelligence company in Pittsburg with fewer than a dozen employees . The aim was to build expertise in automated driving by offering job recruits a potential lucurative perk that Dearborn Mich car maker could not other wise, an equity stake for new hires in a fast growing start up. The company Argo Al has since frown to about 330 employees, in part by luring away sofgware engineers and robotics researchers from Apple Inc, Uber Technologies Inc and other tech companies Ford, which holds a majority stake in the company, is banking on Argo to help it catch up ion teh race to build driverless cars.
Ford aims to start selling a fully autonomous car for commercial cars in 2021. Argo is also working on an autonomous driving system that they can eventually sell to other car companies.
Exxon Mobil (NYSE: XOM) will start to trade energy futures. According to Reuters:
Exxon Mobil Corp is pushing deeper into energy trading, building a global cadre of experienced traders and beefing up risk-management systems to lift profit, according to executive recruiters and people familiar with the business.
The development is a sea change for a company that has stood out from rivals by limiting its past activity out of concern it would be accused of market manipulation. Exxon now aims to trade around more of its growing energy assets to get the best prices for its products and increase earnings, according to an employee familiar with the matter.
A deal that would put Chinese telecom company ZTE back in business by lifting U.S. sanctions may fall apart. According to The Wall Street Journal:
In a rare rebuke of President Donald Trump, Republican Senate leaders set up a vote for this week that would undo the White House deal to revive Chinese telecommunications company ZTE Corp.
Commerce Secretary Wilbur Ross was on Capitol Hill late Monday to lobby against the move. But Democratic and Republican lawmakers said that an agreement had been reached to wrap into the National Defense Authorization Act an amendment that would ban ZTE from buying components from U.S. suppliers. The Commerce Department in mid-April had banned exports to the company as punishment for breaking a settlement to resolve sanctions-busting sales to North Korea and Iran.
A federal judge will rule on the AT&T (NYSE: T) deal to buy Time Warner (NYSE: TWX), a transaction that has been challenged by the Trump administration. According to The Wall Street Journal:
AT&T Inc. and Time Warner Inc. have spent nearly two years planning and defending their tie-up, a marriage of necessity designed to take on bigger digital rivals.
A federal judge will only need a short time Tuesday afternoon to make it official or—if government antitrust enforcers prevail—block the deal, sending both companies back to the drawing board.
A huge merger in the medical products field may be underway. According to The Wall Street Journal:
Stryker Corp. has made a takeover approach to rival Boston Scientific Corp , a move to create a medical-device giant and the latest effort to consolidate a corner of the health-care industry that has produced a raft of large deals lately.
Boston Scientific has a market value approaching $50 billion, so a deal would be one of the largest in a year that is shaping up to be one of the busiest ever for mergers and acquisitions.
The long saga of net neutrality regulation has reached a critical crossroad. According to The Wall Street Journal:
Democrats and internet activists marked the rollback of internet neutrality rules on Monday by pushing House lawmakers to restore the regulations, hoping to score both political and policy gains.
The Republican-run Federal Communications Commission voted in December to repeal most of the Obama-era rules, which require internet providers to treat all online traffic equally. The rollback took effect officially on Monday.
The Insurance Institute for Highway Safety has given poor reports to several SUVs. According to CNBC:
Two of the most popular midsize SUVs in the U.S. were given a “poor” rating in the latest round of crash tests that measure how well sport utility vehicles protect front-seat passengers in certain front-end collisions.
According to the Insurance Institute for Highway Safety, the 2018 Jeep Grand Cherokee and 2018 Ford Explorer struggle to prevent some injuries when the front right corner of the vehicle collides with another vehicle or object while going 40 miles per hour.
Six of the 10 largest U.S. publicly traded companies by market cap are technology companies. So far in 2018, the tech sector is the only one to have posted a double digit gain.
The four largest tech companies — Apple, Amazon, Microsoft, and Alphabet — are in a race to be the first to reach a $1 trillion valuation. Apple, with a market cap of nearly $950 billion, is well ahead of the others and is a clear favorite to be the first to reach the magic number.
The following list of the 12 companies that dominate the tech sector are just about evenly divided between hardware and software companies. If one counts Apple as a hardware company and IBM as a software company, then the list is evenly split.
Another interesting observation about the 12 companies on the list is many were the first to create and launch a product that gained and held traction in the market. Those products generated much of these companies’ wealth and later revenue growth.
Apple, for example, released the first graphical operating system on its Macintosh computers back in 1983. It took Microsoft years to catch up, but once it did the Mac became a niche computer. Apple’s iPhone, first introduced in 2007, took a couple of years to reach it’s now dominant market position. The iPhone took 86% of second-quarter profits on global iPhone sales.
Amazon may not have been the first e-commerce website, but it was almost certainly the biggest right out of the gate. Microsoft’s operating system for personal computers was not first, nor was Google’s search engine, but both simply wiped out any competitors.
In the hardware sector, Intel teamed with Microsoft and IBM to make its chips the standard for personal computing. As demand grew for more powerful processors for servers, Intel had a head start. Cisco was not the first networking hardware company (remember Novell and 3Com and a host of others), but it quickly became an industry standard after its products first appeared in the mid-1980s.
Oracle was included among the first of the enterprise database companies, and like Intel and Cisco, it was able to establish itself as a standard. Nvidia, Texas Instruments, and Broadcom all make semiconductors for specialized computing functions, while IBM (mostly) has transitioned itself out of the hardware business. The 108 year-old company moved the software and services business where it competes with “upstarts” like Oracle and others.
These tech giants are also looking ahead to applications using machine learning, artificial intelligence, virtual and augmented reality, and blockchain. Such applications, from self-driving cars to games, to surgical aids, are still mostly under development and many are still years away from being ready for the mass market.
There is no guarantee that any of these companies will continue to dominate their market, but with deep pockets and astute investments, they do not have to build everything themselves — they can buy it. Some of the larger companies on this list may even take a look at buying some of the smaller ones on the list. That has been the Darwinian tale of the tech sector in the last 30 or so years, and that is not likely to change.
24/7 Wall St. ranked our list tech titans by market cap as of May 25, 2018. Included are the companies’ most recent fiscal year revenues, net income, shares outstanding, and number of employees.
MORE INTEREST IN CYBER SECURITY STOCKS
Cybersecurity has become an increasingly important issue that companies have to address as they continue to develop new platforms and mobile apps. Hackers have been able to steal credit card and personal information from major companies like Equifax, JPMorgan and Home Depot. As a result, cybersecurity has become more necessary, and instead of developing a dedicated department within a company, most opt to hire a third-party cybersecurity firm.
What is interesting here is that many investors think cybersecurity is the next area in technology that needs real consolidation.
The May 31 short interest data have been compared with the previous figures, and short interest moves in these selected cybersecurity stocks were increased.
FireEye Inc. (NASDAQ: FEYE) saw its short interest increase to 17.86 million shares from the previous reading of 12.82 million. Shares were last seen trading at $17.16, in a 52-week range of $13.40 to $19.36.
Short interest at CyberArk Software Ltd. (NASDAQ: CYBR) increased to 1.04 million shares from the previous level of 697,700. Shares were trading at $64.70, within a 52-week range of $39.34 to $65.34.
Check Point Software Technologies Ltd.’s (NASDAQ: CHKP) short interest increased to 10.59 million shares from the previous reading of 10.06 million. Shares were trading at $99.33, in a 52-week range of $93.76 to $119.20.
The number of Palo Alto Networks Inc. (NYSE: PANW) shares short was 4.37 million. The previous level was 4.45 million. Shares traded recently at $198.71, within a 52-week trading range of $126.56 to $214.69.
Fortinet Inc.’s (NASDAQ: FTNT) short interest increased to 6.12 million shares from the previous 5.96 million. Shares were trading at $63.25. The 52-week range is $35.44 to $63.72.
Volkswagen AG will pay a 1 billion-euro ($1.2 billion) fine imposed by German prosecutors for cheating to get around diesel-emissions regulations, closing one chapter in a three-year-old crisis even as new developments arise.
The world’s biggest automaker accepts the fine and takes responsibility for its actions, Wolfsburg, Germany-based Volkswagen said in a regulatory filing on Wednesday after markets closed. The settlement of the criminal case will have a positive impact on other proceedings in Europe, it said.
“We work with vigor on dealing with our past,” Chief Executive Officer Herbert Diess said in a separate statement. “Further steps are necessary to gradually restore trust again in the company and the auto industry.”
VW still faces a multitude of probes both in Germany and abroad, with legal proceedings in 55 countries pending and investigations into stock-market manipulation in its home market. Investors have accused the company of informing investors too late about the probe, a view the carmaker has contested, saying it couldn’t have known the issue would balloon as it did.
Volkswagen shares fell 0.7 percent to 158.70 euros as of 9:06 a.m. in Frankfurt. The stock is down 4.7 percent this year, valuing the auto manufacturer at 79.5 billion euros.
The new fine comes on top of the 25.8 billion euros in provisions related to rigged engine-control software that the company has already set aside. It will add 1 billion euros to the diesel-related cash outflow of about 4 billion euros that VW had anticipated for this year. VW had net cash of about 24 billion euros at the end of the first quarter, providing a substantial liquidity buffer to digest the impact.
The rigging of as many as 11 million diesel cars worldwide was disclosed by U.S. authorities in September 2015 and triggered the deepest crisis in the manufacturer’s history.
“The fact that the criminal risk has now been dealt with is good news,” said Arndt Ellinghorst, an analyst with Evercore ISI. “Paying out 1 billion euros is extremely painful but in the broader context it isn’t a material number.”
While the company has shaken up management and introduced internal reforms, the crisis has continued to grind on. The settlement announced on Wednesday covers the company’s role in a diesel-rigging investigation in Braunschweig, whose court district includes Wolfsburg, but it doesn’t affect criminal probes against individuals, or civil claims and the shareholder lawsuits against Volkswagen. There are also probes in Munich focused on the Audi brand, and in Stuttgart covering Porsche.
Just this week, Rupert Stadler, the head of Audi, was named a suspect in the Munich case, and his home was raided along with another member of the unit’s management board.
The scandal has undermined consumer demand for diesel cars, a key element in automakers’ plans to meet stringent new emissions targets in Europe, and other manufacturers have also fallen under suspicion. Daimler AG, maker of Mercedes-Benz luxury cars, was hit with a mass recall this week after German regulators concluded that it too used illegal systems enabling the shutoff of emissions controls. The Stuttgart-based automaker, which has repeatedly denied being complicit in the kind of cheating Volkswagen undertook, will upgrade software in 774,000 vehicles in a deal enabling it to escape fines.
TO OFFER FULL SELF DRIVING CAR
If you have a quarter of a million dollars to spare, Royal Caribbean Cruises Ltd. will soon have a vacation for you.
The Miami-based cruise operator agreed to buy a 66.7 percent stake in closely held Silversea Cruises Ltd. based on an enterprise value of about $2 billion. The purchase price of the equity being acquired is approximately $1 billion. The deal will give the company new luxury offerings, including a stay in the Owner’s Suite that starts at $240,000 per person for Silversea’s World Cruise 2020, a 140-day trip around the globe.
Royal Caribbean is targeting the ultra-rich with its purchase of a majority stake in the luxury cruise brand. Silversea’s trips range from $5,000 per person for a 10-day Mediterranean trip to the epic -- and wallet-busting -- World Cruise. The partnership is expected to have “significant” synergies, including global market access, supply chain and purchasing power, according to Royal Caribbean Chief Financial Officer Jason Liberty.
It’s “a good extension into an area that, frankly, we haven’t been active in,” Royal Caribbean Chief Executive Officer Richard Fain said in a phone interview. Silversea has an “unparalleled” reputation and a “simpatico culture,” he said.
Manfredi Lefebvre D’Ovidio, left and Richard Fain shake after signing the deal.
Source: Weber Shandwick
The deal will be financed through debt and the company’s leverage ratio will “elevate a little bit,” according to Liberty. The company expects to keep its investment grade rating and target ratio of 3 percent to 3.5 percent. Silversea Chairman Manfredi Lefebvre D’Ovidio will qualify for milestone stock awards of about 472,000 Royal Caribbean shares if the combined company reaches performance targets in 2019-2020. The transaction is expected to close later this year and isn’t expected to have a material effect on near-term adjusted earnings.
Perella Weinberg Partners LP served as financial adviser to Royal Caribbean and Barclays Plc served as financial adviser to Lefebvre.
Royal Caribbean has enjoyed a strong second quarter so far, according to Fain. Strong close-in demand for core products and better-than-expected performance “below the line,” including joint ventures, drove improved results. Onboard spending also continues to be strong, reflecting people’s desire to have experiences on their trip, Fain said.
The results will “completely offset” a strengthening dollar and higher fuel prices, which are expected to result in approximately a 25-cent per-share headwind in the second half of the year. The company reiterated its 2018 forecast for adjusted earnings of $8.70 to $8.90 per share, compared to the average analyst estimate of $8.83. The forecast doesn’t include the Silversea deal.
Royal Caribbean shares rose as much as 7 percent, their best intraday gain since April of last year. Year-to-date, Royal shares have declined 4.9 percent versus a 3.2 percent drop for peer Carnival Corp.
$1.2 BILLION FINE
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778