11/05/2017 BBC Business Live


11/05/2017

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This is Business Live from BBC News with Ben Thompson

:00:00.:00:07.

Snap judgement - investors punish the firm behind

:00:08.:00:11.

Snapchat as the messaging app's results disappoint,

:00:12.:00:13.

its shares plunging in afterhours trade.

:00:14.:00:19.

Live from London, that's our top story on Thursday,

:00:20.:00:21.

In its first results since listing, Snap's net losses soar to billions

:00:22.:00:41.

of dollars as its struggles to attract new users.

:00:42.:00:44.

BT, the UK's biggest telecoms group, says it will cut 4,000 jobs

:00:45.:00:51.

worldwide over the next two years in a major restructuring.

:00:52.:01:02.

All eyes on the Bank of England as it unveils its quarterly economic

:01:03.:01:07.

update later. Interest rates are set to stay on hold of a record low of

:01:08.:01:11.

0.25%. And the company that

:01:12.:01:13.

created Photoshop, we'll be speaking to the boss

:01:14.:01:14.

of the software firm Today we want to know,

:01:15.:01:17.

do you use Snapchat? I know that Tanya is a user of

:01:18.:01:21.

Snapchat, I have seen the selfies! And we start with Snap, the company

:01:22.:01:47.

behind the messaging app Snapchat. It lets you send photo messages that

:01:48.:01:51.

disappear after a few seconds. But it seems the confidence

:01:52.:01:54.

of investors has gone Snap's shares plunged in after-hours

:01:55.:01:56.

trading on its first set of financial results since that huge

:01:57.:02:00.

flotation back in March. Snap lost $2.21 billion in the first

:02:01.:02:04.

three months of the year. That's way more than

:02:05.:02:09.

the same time last year. Well, mostly because of huge

:02:10.:02:11.

pay-outs to staff with stock But here's the number investors

:02:12.:02:16.

are really looking at. By the end of March

:02:17.:02:28.

166 million people were That's up over 36%

:02:29.:02:31.

on the same time last year. But it was a few million less

:02:32.:02:42.

than investors had been hoping for and a big slowdown from growth

:02:43.:02:45.

seen in previous quarters. It also pales in comparison

:02:46.:02:48.

when you look at this. Facebook has around 1.3

:02:49.:02:50.

billion daily users. And almost 2 billion use it

:02:51.:02:53.

at least once a month. Even its version of Snapchat,

:02:54.:02:56.

Instagram Stories, has Investors were quick to pile

:02:57.:02:57.

into shares when Snap went Shares rose by as much as 50%

:02:58.:03:01.

in the first days of trading, but look how that enthusiasm has

:03:02.:03:05.

waned on concerns about When it went public in March, Snap

:03:06.:03:27.

at to answer two questions, the first if it could attract a enough

:03:28.:03:34.

new users to give investors happy, and could it survive an onslaught

:03:35.:03:38.

from Facebook, copying its ideas and giving it to its users? So far, the

:03:39.:03:42.

answer to both questions seems to be no. User growth seems to have been

:03:43.:03:48.

too small, and while Snapchat is still very popular with teenagers,

:03:49.:03:51.

there has not been an increasing engagement that investors wanted.

:03:52.:03:58.

One investor asked the chief executive if there were new products

:03:59.:04:01.

coming up to give investors cause for hope. It's fair to say he did

:04:02.:04:06.

not have too many bright ideas. He also said he was not worried by

:04:07.:04:10.

Facebook, but, on the evidence of these results, he probably should

:04:11.:04:12.

be. I'm joined by Mike Weston, Founder

:04:13.:04:15.

of marketing agency Radiate B2B. that investors are quite skittish.

:04:16.:04:27.

We see some very big numbers in terms of subscriber growth and the

:04:28.:04:32.

losses. But that is nothing new for this particular sector. What is

:04:33.:04:36.

particularly upsetting investors? Well, the first is the concern that

:04:37.:04:41.

growth has significantly slowed. A year ago, growth rate was 52%, daily

:04:42.:04:46.

average user growth. That is the key metric. Ahead of these numbers that

:04:47.:04:53.

pundits in the states were talking about, anything below about 9

:04:54.:04:56.

million growth in that number would be punished by the stock market.

:04:57.:05:00.

That is exactly what has happened. Why does it matter? It matters

:05:01.:05:06.

because it really needs to monetise the users they have got. It is quite

:05:07.:05:10.

a bloodthirsty market, particularly in North America, where most of the

:05:11.:05:16.

revenue comes from. Can we compete with TV audiences? If they are not

:05:17.:05:19.

getting to the bulk numbers that someone like Facebook has, they are

:05:20.:05:24.

going to struggle. The comparison with TV audiences is advertising?

:05:25.:05:27.

Absolutely, that is where the revenue comes from. Snap, making it

:05:28.:05:36.

popular as an app, getting is used to taking pictures with filters,

:05:37.:05:40.

Facebook arrives with Instagram and makes Instagram stories, they have

:05:41.:05:43.

the user base already and that is a big challenge, taking on a huge

:05:44.:05:47.

organisation with a massive user base? Yes, he will not afraid to

:05:48.:05:54.

copy. I loved Eric Speigel's comments, the founder of Snapchat,

:05:55.:05:59.

just because Yahoo put a search box on their page, it doesn't make them

:06:00.:06:03.

Google. Trying to draw that comparison which was quite punchy.

:06:04.:06:08.

He is quite secretive about his next creative move. In the end, as you

:06:09.:06:12.

say, it has to be monetised, it does not matter how many users you have,

:06:13.:06:15.

you have to make enough money out of them. Snapchat does that. When you

:06:16.:06:22.

take a photograph and your tongue goes... I don't do it, of course!

:06:23.:06:29.

When it goes gold, or you get horns and looked like a devil, it is

:06:30.:06:34.

normally advertising something. It is not sufficiently monetised

:06:35.:06:39.

though, to satisfy investors? They have shown massive growth,

:06:40.:06:42.

year-on-year, an advertising revenue, but it is still short of

:06:43.:06:47.

what Wall Street was expecting. That is disappointing. If the user growth

:06:48.:06:50.

is not there, you need to increase the amount of revenue per user that

:06:51.:06:55.

you are getting, and it is not happening. That is worrying for

:06:56.:07:01.

stockholders and investors. Nice to see you. Lots of you getting in

:07:02.:07:04.

touch already. We asked the question at the start of the programme, do

:07:05.:07:08.

you use it? Ian says he hardly uses it now that Instagram has Stories.

:07:09.:07:15.

Occasionally use it for face swapping, we will not even get into

:07:16.:07:20.

that! A whole other minefield. Damian says he has an account but I

:07:21.:07:24.

have not been using it lately, it does not really offer much more than

:07:25.:07:29.

Instagram. Keep comments coming in. We will talk about them later.

:07:30.:07:31.

Let's take a look at some of the other stories making the news.

:07:32.:07:34.

BT, Britain's biggest telecoms group, says it plans cut 4,000 jobs

:07:35.:07:37.

over the next two years in a major restructuring.

:07:38.:07:42.

The telecoms giant said the posts would be going in back-office

:07:43.:07:45.

and managerial sectors as it simplifies its Global

:07:46.:07:47.

It said technology trends meant it was less dependent on owning

:07:48.:07:55.

physical network assets around the world.

:07:56.:07:59.

Boeing has temporarily halted test flights of its new 737 MAX aircraft

:08:00.:08:01.

due to possible issues with the engine.

:08:02.:08:03.

The stoppage came days before the US planemaker was due to make its first

:08:04.:08:06.

delivery of the aircraft to a customer.

:08:07.:08:09.

But Boeing said it was sticking with plans to begin MAX

:08:10.:08:11.

deliveries this month, adding that production

:08:12.:08:13.

Profits at 21st Century Fox dipped in the first three months

:08:14.:08:19.

of the year, weighed down by flat cable advertising and less

:08:20.:08:22.

The Rupert Murdoch controlled firm said profits fell 5% to $799m

:08:23.:08:28.

compared with the same period last year.

:08:29.:08:36.

Fox though said it remains confident that its bid to take full

:08:37.:08:39.

Loads of other stories for you, we can't fit them all on here, but they

:08:40.:08:52.

are on the website. Nissan says profits will fall. The Japanese

:08:53.:08:59.

in profit due to higher raw material in profit due to higher raw material

:09:00.:09:03.

costs. We should get used to hearing that, inflation rising in many parts

:09:04.:09:06.

of the world, we have seen a big number of manufacturers reporting

:09:07.:09:12.

that. Nissan one of the first to say it could have a huge impact on

:09:13.:09:13.

operating profits. To Asia now where Japanese

:09:14.:09:17.

telecoms and internet giant Softbank has revealed some

:09:18.:09:19.

of its best profits ever. Softbank runs a mobile phone network

:09:20.:09:24.

in Japan but also invests It owns US mobile company

:09:25.:09:27.

Sprint and has recently bought UK chip firm ARM -

:09:28.:09:35.

which designs chips for the iPhone. I said don't be fooled by the name,

:09:36.:09:48.

you might assume it is a bank? That's right, Softbank is an

:09:49.:09:53.

incredibly fascinating company, Howard has transformed itself from

:09:54.:09:57.

just a Japanese telco to one of the world's biggest technology companies

:09:58.:10:00.

is something people should look into. Today it recorded its second

:10:01.:10:07.

best profit of $26 billion. Profit tripled largely thanks to the sale

:10:08.:10:11.

of a very lucrative stake it had in the Chinese e-commerce giant Eilidh

:10:12.:10:16.

Barbour, and as well as the sale of a Finnish game maker. -- e-commerce

:10:17.:10:27.

giant Alibaba. It is enigmatic founder is setting up a $100 billion

:10:28.:10:32.

technology fund with Saudi Arabia. Last July, you mentioned already at

:10:33.:10:43.

bought ARM. It also sunk money into Sprint, as well as the Indian

:10:44.:10:51.

e-commerce site Snap Deal. These were all big investments, but the

:10:52.:10:54.

three I just mentioned are loss-making. Whether they pay off

:10:55.:11:01.

like Alibaba, that is a big question mark. Do you use a Snapchat? I am

:11:02.:11:04.

quite old school, no. Just Facebook. This is what happened in Asia,

:11:05.:11:18.

surprise that markets rose. There was concern yesterday, all of the

:11:19.:11:22.

destruction about President Trump, the sacking of the FBI chief, what

:11:23.:11:26.

it would mean in terms of policies regarding tax, is it a distraction

:11:27.:11:30.

from that about cutting tax for business? We saw some reaction to

:11:31.:11:39.

that. Let me take you to Asia. This is what is happening. Not a huge

:11:40.:11:42.

amount happening across the board, in the UK, a big day because we get

:11:43.:11:45.

a quarterly update from the Bank of a quarterly update from the Bank of

:11:46.:11:49.

England about what it expects the economy to do over the coming

:11:50.:11:57.

quarter. Interest rates set to stay up at record low. Let's head to the

:11:58.:11:58.

US. Samira has the details. Retail will take centre

:11:59.:12:03.

stage on Thursday as US department stores Macy's,

:12:04.:12:06.

Kohl's and Nordstrom Now, all three companies

:12:07.:12:07.

are struggling with falling sales amid growing competition and have

:12:08.:12:10.

resorted to cutting costs by closing stores and selling

:12:11.:12:15.

or leasing their real estate, Macy's and Kohl's are already

:12:16.:12:17.

predicting that sales will fall this year,

:12:18.:12:24.

while Nordstrom believes Also happening on Thursday,

:12:25.:12:25.

Wells Fargo usually holds But it is holding one

:12:26.:12:30.

for the second year in a row. It's trying to restore

:12:31.:12:36.

shareholder confidence, following its recent accounts

:12:37.:12:37.

scandal. The bank will provide

:12:38.:12:41.

new cost-cutting targets and leaders of the lender's major business units

:12:42.:12:45.

will discuss their outlook. Joining us is Lawrence Gosling,

:12:46.:12:51.

editor-in-chief of Investment Week. Quite a UK focus we have got going

:12:52.:13:04.

today. Let's start with the Bank of England. We are getting a regular

:13:05.:13:08.

inflation reports, a lot of reports on whether there is any hint of an

:13:09.:13:12.

interest rate rise. As Ben was saying earlier, virtually no

:13:13.:13:15.

expectation we will get an interest rate rise. It is almost a question

:13:16.:13:18.

of if we will get one before the end of the year. I would say almost

:13:19.:13:23.

certainly not. Or the end of next year? Even before the Brexit

:13:24.:13:31.

negotiations? We will still be here discussing it! We could make a case

:13:32.:13:37.

for not seeing an interest rate rise until the UK has got through the

:13:38.:13:41.

Brexit negotiations, it is the one piece of ammunition that the Bank of

:13:42.:13:44.

England has in the reserves to kick-start the economy. I think we

:13:45.:13:48.

will see some signs of slowing inflation, numbers should take up a

:13:49.:13:52.

little bit. We're getting used to higher energy prices, commodity

:13:53.:13:56.

prices, that kind of stuff, and the effect of weaker sterling for goods

:13:57.:14:00.

being imported into the UK. A quick look on the outlook, away from the

:14:01.:14:02.

interest rate decision, we will give you the update on what the economy

:14:03.:14:08.

is doing, and it is going to be the same issue, Brexit? They think it is

:14:09.:14:13.

often in, that is the view from most people running businesses, that the

:14:14.:14:16.

economy is starting to flat line a little bit, largely because we are

:14:17.:14:19.

getting nervous about the longer term consequences of negotiations

:14:20.:14:26.

might be. We will talk about the paper stories later. Thank you.

:14:27.:14:28.

Still to come, he's one of the most prominent names in tech

:14:29.:14:31.

at one of the sector's most important firms.

:14:32.:14:34.

Shantanu Narayen is the boss of Adobe and joins us

:14:35.:14:36.

You're with Business Live from BBC News.

:14:37.:15:39.

It ignores the elephant in the room which is the big accounting scandal

:15:40.:15:45.

in Italy that erupted earlier this year. The company said it cost more

:15:46.:15:53.

than ?500 million. Lots of people lost their jobs, the investigation

:15:54.:15:57.

was opened and the company's share price fell by more than 20%. The

:15:58.:16:01.

company is feeling the effects of that. There has been a problem in

:16:02.:16:07.

the UK with the scandal over open Reach, the broadband delivery part

:16:08.:16:13.

of BT. It was fined a record ?42 million by Ofcom for failing to pay

:16:14.:16:17.

compensation to customers who had to wait, business customers, who had to

:16:18.:16:23.

wait too long to have high-speed lines installed, for manipulating

:16:24.:16:27.

the rules. It has been a pretty rough year and that is why the chief

:16:28.:16:32.

executive is giving up his bonus. Quickly, it is a really tough market

:16:33.:16:37.

out there. All the telecoms firms have been warning on profits. They

:16:38.:16:41.

are trying to get new users and amidst all of this there is a lot of

:16:42.:16:47.

scandal for BT to content with. Yes, it is a tough market and BT is

:16:48.:16:52.

trying to restructure its business. Its global services business which

:16:53.:16:57.

provides IT solutions to business network solutions, not just in the

:16:58.:17:02.

UK, it is slimming back down. It says it does not need so much

:17:03.:17:05.

old-fashioned infrastructure and it is getting rid of 4000 back-office

:17:06.:17:11.

cuts to cut costs. A lot to content with there.

:17:12.:17:19.

BT is to shed 4000 jobs. It is a new overhaul.

:17:20.:17:32.

Our top story, shares in Snapchat's owner have plunged in after hours

:17:33.:17:38.

trading after it reported disappointing growth in the first

:17:39.:17:41.

Let's quickly check on what the European markets are doing and it is

:17:42.:17:52.

not a lot, as we have just discussed with Lawrence. All eyes will be on

:17:53.:17:57.

the Bank of England as far as the inflation report is concerned. The

:17:58.:18:01.

interest rate decision will be at midday in the UK.

:18:02.:18:02.

Think of tech names that are known around the world and Adobe is one

:18:03.:18:07.

in 1982, the firm has created many industry changing products that

:18:08.:18:21.

It makes products many of you will be familiar with

:18:22.:18:31.

like Acrobat, Photoshop and the Flash video

:18:32.:18:32.

Adobe has largely produced software for the arts,

:18:33.:18:36.

design and film industries which have been used on blockbuster

:18:37.:18:38.

Its products have also powered innovation in TV too.

:18:39.:18:41.

It helped build the BBC's successful iPlayer TV on demand service.

:18:42.:18:44.

So what's it like to lead a global technology firm amid so much change?

:18:45.:18:49.

Shantanu Narayen is the boss of the company and joins us now.

:18:50.:18:54.

Welcome to the programme. This is a company which in a way has tracked

:18:55.:18:59.

the development of technology and the changes in the sector, so could

:19:00.:19:04.

you highlight what those have been during its journey and during the

:19:05.:19:08.

time you have been there? Thank you for having me on your show. You are

:19:09.:19:14.

right, we have been known for fundamental innovations that have

:19:15.:19:21.

changed the world of publishing. The first was the ability to print what

:19:22.:19:26.

you see on the screen. After that we created the first applications that

:19:27.:19:32.

allowed people to use applications like Illustrator. But the seminal

:19:33.:19:38.

products have been the ones you mention, photo shop, Acrobat. More

:19:39.:19:41.

importantly we are looking at the new forms of media people are using.

:19:42.:19:46.

What is so interesting, like we have seen with Hoover and vacuum

:19:47.:19:52.

cleaners, photo shop is now a verb. It is so commonplace and mainstream

:19:53.:19:56.

people use it in everyday language. That gives you a incredible power,

:19:57.:20:02.

doesn't it? If you look at the technology industry, the whole

:20:03.:20:05.

landscape is littered with people who rests on their laurels. Photo

:20:06.:20:11.

shop has been an incredible success. We are so focused on how we make

:20:12.:20:16.

sure that the billions of pictures people are taking, that photo shop

:20:17.:20:21.

continues to evolve at an innovative pace. People are using their cell

:20:22.:20:25.

phones to deal with pictures and the magnitude of pictures is amazing. I

:20:26.:20:30.

mentioned technology has undergone fundamental change, as we have seen

:20:31.:20:34.

the entrance of Facebook into the advertising world and the publishing

:20:35.:20:39.

world. You have entered publishing as well. At one point you are

:20:40.:20:43.

interested in being a journalist. There has been a huge merging within

:20:44.:20:49.

technology and broadcasting. How do you see the changes next? What has

:20:50.:20:55.

happened is everybody has had a story to tell. The ability to tell

:20:56.:20:58.

that story used to be restricted to a few people at the top of the

:20:59.:21:04.

pyramid. And what companies like us or Facebook are doing is

:21:05.:21:08.

democratising who is able to tell the story. Distribution is now

:21:09.:21:13.

available if you have a video and a story to tell. What is happening is

:21:14.:21:18.

the confluence of technology and media and publishing is causing all

:21:19.:21:24.

these new entrants to emerge. It makes design and aesthetics and

:21:25.:21:28.

storytelling even more important. And the barriers to entry for new

:21:29.:21:33.

firms are much lower. There was a time when you had to buy one of your

:21:34.:21:38.

products you had to buy it on disk or a CD-ROM and now everything is in

:21:39.:21:42.

the cloud. Wherever you are in the world you can access it, but that

:21:43.:21:46.

also means your competitors can do the same. We were very early in

:21:47.:21:52.

pioneering and believing the cloud would enable us to attract even more

:21:53.:21:57.

of a set of customers. The upfront price was considered prohibitive, so

:21:58.:22:02.

we went to a monthly subscription. That caused us to get 30% more

:22:03.:22:09.

customers. For ?9 99, if you have access to all the photo shop Magic

:22:10.:22:14.

it has brought so many people into the platform. But even from a

:22:15.:22:18.

competitive point of view it allows us to compete better because we can

:22:19.:22:21.

innovate at the pace of which our product people are focus. And it is

:22:22.:22:29.

always updated in the cloud. That is right and you can benefit from

:22:30.:22:34.

making sure it is perfect. I want to briefly ask you about India which

:22:35.:22:38.

has developed enormously on the back of the technology wave. How do you

:22:39.:22:43.

perceive it now? Mobile is transforming everything and emerging

:22:44.:22:46.

markets like India get to leapfrog countries like the UK or the US and

:22:47.:22:50.

they are taking advantage of that. Thank you so much for joining us. In

:22:51.:22:57.

a minute we will look through the business pages, but here is a

:22:58.:23:01.

reminder of how to get in touch with us. We will keep you up-to-date with

:23:02.:23:14.

all the inside news with analysis from around the world. We want to

:23:15.:23:18.

hear from you as well. Get involved on the web page. We are on Twitter

:23:19.:23:28.

and you can find us on Facebook. Business live on TV and online,

:23:29.:23:34.

whenever you need to know. Lawrence is here to take us through the

:23:35.:23:39.

papers. If you pick up a copy on the way to work this morning in the UK

:23:40.:23:50.

or in New York, the chances are it is from Pret a Manger, which was

:23:51.:23:54.

founded in the UK and they are looking to float on Wall Street.

:23:55.:24:00.

Largely because the central evaluation would be a lot higher. If

:24:01.:24:14.

you explore that multiple, it could be worth ?3.5 billion sterling. This

:24:15.:24:20.

is the value of the share price at which it floats. Correct. That is

:24:21.:24:26.

normally some sort of multiple according to the sector of the

:24:27.:24:33.

earnings. 40 times would be a bit frothy. Frothy in cappuccino terms.

:24:34.:24:38.

If we were going towards the Americana, it would be 15. Yes,

:24:39.:24:43.

towards the filter coffee, a sensible price for a business like

:24:44.:24:49.

this which is growing steadily, particularly in the States. Can I

:24:50.:24:53.

pick up on that love of triangular sandwiches. We were told it was a

:24:54.:24:59.

British obsession. No one else in the world does this. Clearly this is

:25:00.:25:04.

proof that it has a future. They also sell bread to the French these

:25:05.:25:12.

days. It was very early in the casual dining sector, in fact it

:25:13.:25:17.

almost kicked it off. I remember it in the 90s. It is a 30-year-old

:25:18.:25:22.

business. And it has had an ethical stance and it gives away its fresh

:25:23.:25:25.

food at the end of the day to homeless people which has resonated

:25:26.:25:29.

with people. And an interesting hiring policy. Yes, they have got

:25:30.:25:35.

the big EU workforce. It tried to offer free sandwiches for unpaid

:25:36.:25:40.

internships but it has withdrawn that because it was pushing it a bit

:25:41.:25:45.

too far. On that note we will all go and have a copy.

:25:46.:25:50.

There will be more business news throughout the day on the BBC Live

:25:51.:25:54.

webpage and on World Business Report.

:25:55.:25:56.

After days and weeks of dry weather, many of us are desperate for some

:25:57.:26:17.

rain and it looks

:26:18.:26:18.

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