25/07/2017 BBC Business Live


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This is Business Live from BBC News with Ben Bland and Rachel Horne.


Hit by the EU - profits fall at Google's parent company,


Alphabet, after a huge fine levied by the European Union Live


from London, that's our top story on Tuesday, 25th of July.


Shares fall for the owner of Google, as revenues surge by 21%


but are hit by the EU's multi-billion dollar fine.


US retailer Michael Kors snaps up the luxury


Here is how the European markets for $1.2 billion.


Here is how the European markets look at the open. All in positive


territory. Really interesting moves on the Indian markets, not one we


talk about much, I will tell you about that later.


And mobile adverts targeting you based on where you are -


we'll be talking to a firm giving away free WiFi but with a catch.


Three years after it started in Sweden, a company becomes the first


in the US to microchip its employees. We want to know, would


you sign up for it? The micro-chipping, convenient


maybe, but lots of privacy issues. We will get into that later.


Three of the world's most valuable internet firms


release their latest numbers this week.


The biggest by far is Google's parent, Alphabet.


It has just reported a 21% jump in revenues.


That was better than expected, but there was less cheer


Net profit fell 27.7% to $3.5 billion.


Hitting the bottom line was a $2.7 billion fine


by the European Commission which ruled the firm


abused its power by promoting its own shopping comparison service


Nevertheless, Alphabet's share price fell 3% in after-hours trading.


But take a look at this - over the past nine years,


the firm's share price has rocketed as it has dominated the internet


From $140 a share, to just under $1,000 a share.


It's now worth more than two-thirds of a trillion dollars.


Amit Pau is managing director at Ariadne Capital.


Thank you very much for joining us this morning. What is your reaction


to the figures? Should Google be pleased or is more going on


underneath the surface? At a business level, the results are


stunning. Generating 21 billion, to grow 21%, it is phenomenal. They


make it look so simple, it is impressive. The key concerns are


operationally, the cost of driving traffic to Google sites has


increased far greater than the revenue. That is one. The second is,


90% of Google's revenue still comes from digital search. Where will


future revenue streams come from? Cloud has made good progress. At a


business level, encouraging signs on how Google grows beyond being a


search company but the elephant in the room is the EU fines. A


record-breaking $2.7 billion. Is that something that is now done and


dusted? Is there more to come? I suspect there will be a lot more to


come. This was one of only three anti-trust rules that you are


looking into. The others are on android, if the fine comes in, it


could be 9 billion, and another could be significantly more. That is


why there is a significant risk overhanging the share price. The


other thing we were talking about, going hand in hand with the fine,


the changes that Google has to make as a result of that ruling, looking


ahead, that could have potentially a bigger impact than the fine itself.


Firstly, Google will have to change the way it operates. Not just in the


shopping cart, but all other areas. That will be great for the consumer,


and the second thing, where will consumer ownership of data reside?


Alphabet not the only big tech company reporting this week,


Facebook and Amazon are due. Do you think they will be the same?


Absolutely. Netflix last week, they delivered sterling results. Watch


out for some very strong results from the tech giants. Thank you very


much for your time. Let's take a look at some of


the other stories making the news. Luxury shoemaker Jimmy Choo


has just been bought by design house Michael Kors


for nearly $1.2 billion. Jimmy Choo, which is famous


for its stilettos worn by celebrities, announced


it was putting itself up Michael Kors, which has been


struggling recently amid slowing sales, will buy Choo


for 230p per share. The UK's Serious Fraud Office has


opened an investigation into British-Australian mining giant


Rio Tinto Group. The SFO says the probe


is into suspected corruption in the conduct of business


in the Republic of Guinea by the Rio Tinto Group,


its employees and others It's asking anyone with relevant


information to get in touch. Rio Tinto says it will fully


co-operate with the investigation. Dutch firm AkzoNobel,


the owner of Dulux paint, Akzo has been fighting off


a takeover approach from US rival PPG Industries and promised to grow


profits as part of its The company says second-quarter


profit fell 6% to $537 million due to weak demand in some markets


and higher raw material costs. It is the school summer holidays in


the UK, lots of people heading off, weak one, heading abroad to the


continent for holidays. Eurotunnel, it may well be an option many people


are taking, quicker than the ferry sometimes! You speak from


experience! Eurotunnel are upbeat, about prospects, despite Brexit.


When the EU referendum happened last year, Eurotunnel lost a third of its


value in a huge shares plunge. They are saying now it has had little


impact on its financials. Lots of other business stories on the web


page as well. South Korea's SK Hynix has reached


a new earnings high. They reported this morning that


profits rose a whopping 574% That is a pretty impressive set of


results, how did they do it? Indeed. It might not be exactly a household


name outside of South Korea, but it is the second biggest chip maker in


the world after some sun and its products are used in all of our


smartphones and made by the likes of Apple and the chip-makers and what


analysts calling ash super cycle where huge demand is causing a


supply shortage and the super is expected to last at least 2018. In


the quarter the company just reported, it is seeing a huge


increase in shipments, up 20%, and the company made nearly $3 billion


in those three months. Quite an impressive figure, as you say. But


as shares were falling down 3.5% because investors were expecting


those strong results. Thank you. Let us take a look at the markets. Asian


markets, barely moved, while investors await for the next US


Federal Reserve meeting happening later this week. I want to mention


the Indian stock markets. India's stock markets hit


record highs on Tuesday with the National Stock Exchange's


much-watched Nifty index breaking the psychological 10,000 point mark


for the first time as traders take The Nifty consists of 50 of India's


top companies across more Bombay Stock Exchange's Sensex index


also hit an all-time high. The two markets have


piled on 20% this year, outperforming most other global


markets, including in Japan and the United States as confidence


is boosted by reforms Let us have a look at how the


European markets begin the trading day, all in the green, some only


just. In commodities, oil prices


extended their recovery on a pledge by leading OPEC producer


Saudi Arabia to cut exports in August to help reduce


the excess global supply Haliburton's executive


chairman also said the US shale drilling boom would


probably ease next year. Brent Crude and US Crude prices both


rose on those developments. And Samira Hussain has


the details about what's ahead The Federal Reserve, America boss


for central bank, will begin their two day meeting on Tuesday. Many


analysts and investors are not expecting another rate rise at this


meeting, but they will be looking for more guidance on when they will


start reducing the bond portfolio. American car-maker General Motors


will be reporting earnings and it comes at a time when investors are


worrying about the declining demand for cars in the US. Another company


has already said they are seeing higher than expected costs related


to the sale of Opal. Also reporting earnings, Caterpillar. Improving


demand in the construction and energy industries will likely see


the company's profits go up for the quarter. Investors are looking for


an update on full-year financial forecasts which the company raised


in April. Joining us is Alix Stewart, a fixed


income Fund Manager at Schroders. Let us start with Opec. It looks


like there is relief for the oil price. Explain what is happening.


Hopes they will extend or even increase production cuts they have


been trying to implement previously which obviously would be very


beneficial for the oil price. It is just a question of whether they can


get everybody on board and to play by the rules. Saudi Arabia have said


they will try to bring down production. Nigeria, in the original


agreement to curb production in November, Nigeria and Libya were not


held to any agreements. Nigeria now say they will. They need everybody


else to come on-board. The Saudi Arabians and the Russians are two of


the bigger ones. If everybody else ignores the rules or has exemptions,


it is quite hard to keep the cap in place. Quite often the problem with


oil is when Opec get together and bring down production and the price


the US shale production kicks in, once it gets over a certain amount.


Is that a danger? That is what we have seen. Halliburton and others


have talked about cutting back a bit in shale, with the oil price is


around 40- $50 a barrel, at the crunch point for these guys.


Changing tack slightly, big move for Jimmy Choo. Slab divans include -- a


big buyout. There is value still seen in luxury brands. Over $1


billion for shoes. Have we still got the money to pay for these items?


Clearly some people do! Not me. Alex, have you got any? I have,


actually. Thank you very much. Mobile adverts that


target you because of where you are. We'll be talking to the firm behind


"proximity marketing". You're with Business


Live from BBC News. "Unfair charges" levied on buyers


of new-build houses could be banned in England under


a proposed crackdown. Leaseholds on new-build


houses would be outlawed, while ground rents could be


dramatically reduced, under government plans subject


to public consultation. Andrew Walker is the BBC's


economics correspondent. Why do we need this crackdown? This


is something the communities and Local Government Secretary, Sajid


Javid, calls a great scandal of the housing market, whereby people


buying new homes may buy them on a leasehold basis and have the


playground rent which can in some cases escalate dramatically. -- pay


ground rent. He has written in colourful terms in the day's Times.


He says if you go to the butcher and buy sausages, you do not get an


invoice for the following 100 years. If you buy a bucket and spade, you


do not get change of ownership fees when you pass it on. He talks about


some examples and one case of 3000% increases in the ground rent to a


total of something approaching ?10,000. He thinks there is


certainly, although there are cases where leasehold arrangements are


justified, they are commonly used in flats, he is concerned that in some


cases they are being used in an unfair and financially abusive way.


Aside from making comparisons with sausages and buckets and spades,


what is the Government proposing to do? We have a consultation paper and


one of the things Sajid Javid says is that if house-builders are not


prepared to step off the gravy train, he is prepared to derail it.


He wants to look at banning unfair and unjustifiable use of leasehold


arrangements and also to ensure that where there is a case, that the


ground rent should be paid at the permanent peppercorn rent, is the


phrase he uses. It is consultation at this stage, but I am sure he will


get some very vigorous responses to his request for views. Andrew, thank


you. We have got some interesting stories


on the Business Live. A rise in personal loans, dangerous Bank of


England officials say. We have got interesting figures. Credit card


balance transfers and personal loans and outstanding car loans have


increased by 10% over the past yearment however, household incomes


have increased by 1.5%. So that's quite a chunk of money to find to


bridge the gap. We'll keep an eye on that story. Check it out on our live


page. You're watching Business Live.


Our top story: The parent company


of Google says it saw strong growth in the three months to the end


of June with revenues up 21%, but profits have been hit


by a record fine imposed by the European


Commission last month. A quick look at how


markets are faring. This is how they look at the start


of the traying day. All of them in positive territory. The FTSE 100 in


London just about outperforming Frankfurt and Paris.


Now let's get the Inside Track on a software which helps you stay


Despite the falling cost of mobile data plans,


many people rely on the 300 million public wi-fi hotspots


Devicescape is a piece of software which enables smartphone users


to connect to multiple wifi networks without going through the login


This means that users can stay connected to public wi-fi


In return, Devicescape allows brands to send smartphone


Devicescape is embedded in other popular apps -


this enables companies to send promotions to consumers


Wrer joined by the vice president of Devicescape. Thank you very much for


coming in. I think we've explained how it works and what proxity


marketing is. The idea is you target somebody based on where they are. A


company can come to you and say, "We want to target people as they walk


into a supermarket or enter a bus or underground and you can do that."


Yes, absolutely. I guess why that's important as more and more money


flows from traditional advertising into mobile, advertisers want to


know that they are getting good return on that and the adverts are


relevant. Like wise as consumers use their mobiles more and more as a way


to consume information, thet want to know the stuff getting them is


relevant. This ensures the messages that gets to the consumers is


targeted at the right time and the right place. The adverts pop up on


the lock screen. There will be people who don't want to have the


adverts. Can people opt-out? Lock screen notifications are well


understood by consumers. It's something they use every day for


their e-mails, but if it is something they don't want to see,


they can disable that this is a transparent opt-in service that they


can remove if they don't want to. Are you targeting business users? Is


it everyone? Is it more people who are using it for leisure and sending


whatsapp messages and so on? I guess at this point we are very much


targeting consumers. We work within the entertainment industry. We tend


to target people in public locations like supermarkets or coffee shops


and cinemas for example. Your success rate is 13% for the click


through rate. So for every 100 messages that are sent, 13 people


will, well, so let me count, 87 people will delete. 13 people will


click on it and will go through. How does that compare with the success


rates of other types of advertising? It is very, very high actually. If


you look at the industry average for in app geotargeted advertising. This


is when you open up an app that's relevant to your general locality,


we are 18 times higher than the industry average which shows that


consumers like this format and this form of advertising. I suppose the


danger is that for example 4G and 5G coverage gets so good that we stop


using wi-fi hotspots as much. What's your insulation against that to


safeguard the future of what you're doing? So we have moved our service


so the consumers don't have to connect to the wi-fi. Our software


sits there and it looks for the networks and just by its presence


and by us knowing that they are in the location they can serve that


particular advert to the consumer. What about rural areas? If you


haven't got the wi-fi hotspots then you are not going to be able to


target the consumers? Well, over the last ten years, we have crowd


sourced 300 million locations. So we have got broad coverage. Pretty much


anywhere that's a public location has some form of wi-fi today and I


don't think that's going away any time soon. So we can target anywhere


that's a public location today. I suppose what do you see as the


long-term ambition for the company? What would you like to see it doing


in five or ten years? We are trying to improve the effectiveness of


mobile marketing. So trying to give advertisers much better return rates


on their money and a lot of visibility. So it is much the


antidote to programmic advertising. That is specific and very relevant


to the consumer. We would like consumers to get less stuff, but the


stuff that they get is more interesting to them. We look forward


to hearing how it goes. Owen, thank you very much. Owen Geddes there.


A Wisconsin company is to become the first in the US to implant


So far more than half its employees have volunteered to have a chip


Patrick McMullan, the director of the company, Three Square Market,


told the BBC it's an exciting development.


We're a technology company and they're excited about it


The thing to understand is this is not a job performance tracker.


What it has is different things that helps you to identify who you are,


what our business is and to use it as a form of payment and by no means


is it something that we use to track what they're doing,


This takes the level of security to a whole new level.


One of the things that we're very much ensuring that it's responsible


innovation and ensuring that it's used correctly and used


for the purpose that it is intended, not for something that nobody


Alix Stewart from Schroders is joining us again to discuss.


A really interesting development that. How do you feel Alix, would


you get microchipped? You can see how we are moving from scanning


cards to using your phones for whatever and I guess the logical


next step in some ways is to just have a chip. You don't have to


bother remembering anything. The one thing to note about the chips, they


haven't got GPS. So your boss can't tell if you're in the office. It is


for logging on to computers, paying for food. Getting in and out of


buildings. It would stop that problem when you get to the doors at


reception and someone can't find their pass and they are blocking the


way. It happens here. We have got a lot of tweets. Beth says yes, I'd do


it, but I'd microchip my children first. Another viewer says no way.


Julie says, "If your employees are not responsible to keep track of


their badge, I would question the competence of any job?" What's the


fun of bionic when your own super power is being able to open doors


and pay for stuff! We were talking a while ago about whether Brexit is


causing slink flation. Things like chocolate bars getting smaller, but


the price saying the same. The Financial Times says it is not down


to Brexit and the weak pound, but it has been going on for sometime? It


seems to have been going on for the last five years, not just the last


year. I think we have all been aware of it that some of our favourite


chocolate bars don't seem to be as big as they used to be. Brexit must


play a part. Part of it would be import costs which have gone up? As


the consumers have been more constrained we have had austerity


and so on and people want to see the prices rise, this is the way that


manufacturers have got around it by shrinking. Would you rather pay an


extra amount to get the same sized Toblerone? Some of the other things


mentioned are toilet roll. 240 sheets down to 221 and fewer


biscuits in a packet and less chocolate bars. We notice that. We


know you have Jimmy Choo shoes! The reason we are talking about, there


is a quote on US immigration officials checking out on the


importation of fake designer chairs. It is incredible. The number of


them. It is really nice to think that they are training people to


spot the difference between fakes and real chairs to clamp down on


this and they have been quite successful. Last year they seized


over $4 million of fake chairs. That's an extraordinary amount. Alix


For joining us. That's it from Business Live today. There will be


more business news throughout the day. We will be back in these


chairs, not designer ones, the Business Live chairs tomorrow. See


you then. Hi there. Good morning. Yesterday we


had quite a bit of cloud across eastern parts of the UK. Some damp


and drizzly weather. Today I'm hopeful it should be brighter the


for all of us during the afternoon we are looking at sunny spells and




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