11/05/2017 BBC Business Live


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This is Business Live from BBC News with Ben Thompson


Snap judgement - investors punish the firm behind


Snapchat as the messaging app's results disappoint,


its shares plunging in afterhours trade.


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


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


of dollars as its struggles to attract new users.


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


worldwide over the next two years in a major restructuring.


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


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


0.25%. And the company that


created Photoshop, we'll be speaking to the boss


of the software firm Today we want to know,


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


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


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


disappear after a few seconds. But it seems the confidence


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


trading on its first set of financial results since that huge


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


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


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


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


are really looking at. By the end of March


166 million people were That's up over 36%


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


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


seen in previous quarters. It also pales in comparison


when you look at this. Facebook has around 1.3


billion daily users. And almost 2 billion use it


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


Instagram Stories, has Investors were quick to pile


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


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


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


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


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


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


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


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


there has not been an increasing engagement that investors wanted.


One investor asked the chief executive if there were new products


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


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


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


be. I'm joined by Mike Weston, Founder


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


Facebook arrives with Instagram and makes Instagram stories, they have


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


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


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


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


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


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


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


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


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


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


normally advertising something. It is not sufficiently monetised


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


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


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


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


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


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


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


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


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


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


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


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


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


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


over the next two years in a major restructuring.


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


and managerial sectors as it simplifies its Global


It said technology trends meant it was less dependent on owning


physical network assets around the world.


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


due to possible issues with the engine.


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


delivery of the aircraft to a customer.


But Boeing said it was sticking with plans to begin MAX


deliveries this month, adding that production


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


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


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


compared with the same period last year.


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


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


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


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


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


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


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


operating profits. To Asia now where Japanese


telecoms and internet giant Softbank has revealed some


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


in Japan but also invests It owns US mobile company


Sprint and has recently bought UK chip firm ARM -


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


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


incredibly fascinating company, Howard has transformed itself from


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


US. Samira has the details. Retail will take centre


stage on Thursday as US department stores Macy's,


Kohl's and Nordstrom Now, all three companies


are struggling with falling sales amid growing competition and have


resorted to cutting costs by closing stores and selling


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


predicting that sales will fall this year,


while Nordstrom believes Also happening on Thursday,


Wells Fargo usually holds But it is holding one


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


shareholder confidence, following its recent accounts


scandal. The bank will provide


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


will discuss their outlook. Joining us is Lawrence Gosling,


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


getting nervous about the longer term consequences of negotiations


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


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


at one of the sector's most important firms.


Shantanu Narayen is the boss of Adobe and joins us


You're with Business Live from BBC News.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


trying to restructure its business. Its global services business which


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


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


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


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


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


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


trading after it reported disappointing growth in the first


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


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


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


interest rate decision will be at midday in the UK.


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


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


It makes products many of you will be familiar with


like Acrobat, Photoshop and the Flash video


Adobe has largely produced software for the arts,


design and film industries which have been used on blockbuster


Its products have also powered innovation in TV too.


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


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


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


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


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


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


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


right, we have been known for fundamental innovations that have


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


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


allowed people to use applications like Illustrator. But the seminal


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


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


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


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


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


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


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


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


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


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


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


mentioned technology has undergone fundamental change, as we have seen


the entrance of Facebook into the advertising world and the publishing


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


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


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


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


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


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


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


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


the confluence of technology and media and publishing is causing all


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


perceive it now? Mobile is transforming everything and emerging


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


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


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


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


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


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


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


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


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


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


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


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


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


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


normally some sort of multiple according to the sector of the


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


webpage and on World Business Report.


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


rain and it looks


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