to test a new story line. Even a lucky turn in videogames won’t free the streaming giant from the need to keep playing Hollywood’s game, though.
Netflix used its second-quarter report Tuesday afternoon to confirm previously reported plans to enter the videogame business. No timing was given, though the company said the offerings would be included in its current subscription plans at no additional cost. The company isn’t backing away from its work on movies and TV shows, but said in its letter to shareholders “since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games.”
That news comes as Netflix remains mired in somewhat of a post-pandemic slump. It added 1.5 million net new paying subscribers in the second quarter, which was a bit better than it had forecast but still its lowest level of growth in nearly a decade. It also projected 3.5 million net adds for the third quarter—about 29% less than what Wall Street was hoping for. That would bring the total number of new subscribers to about nine million for the first nine months of 2021. Netflix added more than 28 million paying subscribers in the same period last year.
A foray into games might make sense for a company with an intimate knowledge of the viewing habits of a user base that now numbers over 209 million. It is also a tough business to crack—even the mobile gaming market that Netflix says it expects to target initially. There are many participants, but most of the money is still made by long-established properties. Games like “Candy Crush” and “Clash of Clans” remain in the top-five grossing charts even after nearly a decade on the market.
Netflix will need to keep battling it out for video streaming eyeballs. The company expects its pace of new releases to pick up in the second half of this year; analysts from Wedbush count 42 original shows and movies expected for the third quarter alone. But the company still has its own track record to compete with: Last fall included popular shows such as “The Queen’s Gambit,” “The Crown” and “Bridgerton.” Netflix shares are down nearly 2% this year, lagging behind many internet and entertainment peers. Streaming investors hyper-focused on subscriber growth aren’t playing games.
Global stocks are broadly lower, along with government-bond yields and commodity prices, amid renewed anxiety around the Delta variant of Covid-19 and inflation. Here’s what we’re watching ahead of Monday’s open. Full market wrap here.
is about putting yourself out there. A select few fly, most get ignored and the unlucky get canceled.
This week, Twitter crashed and burned on its own platform. On Wednesday, the social-media company said in a blog post it was canceling Fleets, its ephemeral “story”-like feature popularized by competitors like
and Instagram. Internet banter abounded, inclusive of every imaginable pun comparing Twitter’s short-lived messages to their short-lived existence. Fleets were introduced just eight months ago, but Twitter said they failed to catch on as hoped.
Twitter portrayed the failure as one of its speculative bets that won’t always work out as it tries to best serve the public conversation. But for a company that aims to be the pulse of the people, it doesn’t seem to understand them so well. Twitter’s November tweet announcing Fleets’ rollout eventually received less than 75,000 likes. This week’s tweet announcing Fleets’ imminent end racked up nearly half a million in a day.
“Has any product sunset announcement ever received such a universally positive reception as Twitter Fleets”? Tweeted Casey Newton, editor of Platformer, a newsletter about the intersection of tech and Democracy, popular among the Silicon Valley crowd.
shares are up 2.6%. Analysts at Citigroup, Deutsche Bank and Morgan Stanley have raised their target prices for the stock in recent days. T. Rowe said this week it managed $1.62 trillion in assets at the end of June.
Plc, according to people familiar with the matter, in a deal that would expand the U.S. company’s focus on consumer software.
A deal could be finalized this month, assuming talks don’t fall apart, the people said. Avast has a market value of around £5.2 billion ($7.2 billion). Assuming a typical deal premium, the deal could value the cybersecurity firm at more than $8 billion.
Major news in the world of deals and deal-makers.
Avast is based in Prague but trades in London. It primarily makes free and premium security software, offering desktop and mobile-device protection. Avast traces its roots back roughly 30 years to when founders
established the company, then known as Alwil. It says on its website that it rebuffed an acquisition offer from rival McAfee in 1997, instead licensing its antivirus product to the company. It became Avast in 2010 and went public in London in 2018. In 2014, private-equity firm CVC Capital Partners took a significant minority stake.
Avast’s founders control roughly 35% of the shares and sit on its board.
The deal would be a big one for NortonLifeLock, which is based in Tempe, Ariz. With a market value of about $16 billion, the company was known as Symantec Corp. before it closed a $10.7 billion deal to sell its enterprise-security business to
pivot to software was never going to be easy, and it has grown only more difficult since that effort began.
Such is most evident in the company’s latest tack: The Wall Street Journal reported Monday that Broadcom was in talks to buy privately held SAS Institute for as much as $20 billion. By late Tuesday, the deal was off—apparently due to a change of heart by SAS’s owners. Sources told the Journal that some employees expressed concern about how the perk-heavy culture at SAS would meld with a chip maker whose modus operandi is to squeeze out inefficiencies to maximize earnings. SAS’s owners reportedly distribute hundreds of pounds of free M&Ms across the company’s North Carolina campus every Wednesday.
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Hyper-acquisitive Broadcom turned its sights to software in July 2018, when it announced a surprising deal to acquire CA Technologies for $18.9 billion. It has since picked up the enterprise security business of
that was blocked by the Trump administration on national security grounds. That attempted deal became a tipping point in the semiconductor cold war between the U.S. and China, which in turn has made nearly impossible the type of large-scale chip deals Broadcom had come to rely on.
Rolling up software companies may not bring the same kind of political baggage. But it does have its challenges. Broadcom’s deal strategy has long centered on finding undervalued businesses that have strong market share within their categories, then maximizing the free cash flow of those acquired businesses.
But undervalued software names are hard to come by these days. The S&P 500 Software & Services Group’s average multiple has surged 45% over the past three years to nearly 33 times forward earnings, which itself represents a 37% premium to the average forward earnings multiple of the PHLX Semiconductor Index.
Going after a private company may have helped Broadcom on that score; analysts estimate the sales multiple Broadcom was offering for SAS was roughly on par with what it paid for CA and Symantec. But the prospect of talent flight is always a risk in picking up software companies, which have few other assets.
The loss of the deal now sends Broadcom back to the drawing board. It has been nearly two years since the Symantec deal, and Wall Street is getting anxious for the company to make its next move—or return excess cash in the form of a buyback. Broadcom investors need their candy as well.
to buy SAS Institute Inc. have ended after the founders of the closely held software company changed their mind about a sale, people familiar with the matter said.
The Wall Street Journal reported Monday that the companies were discussing a deal that would value SAS in the range of $15 billion to $20 billion, including any debt. Following the report,
who co-founded SAS decades ago and still run the company, had a change of heart and decided not to sell to Broadcom, the people said. Whether another suitor for SAS could emerge isn’t clear.
Some SAS employees saw the company as a strange fit for efficiency-focused Broadcom, some of the people familiar with the matter said. SAS is known for a tightknit culture and has a sprawling North Carolina campus with amenities including a yoga studio and a disc golf course.
Cary, N.C.-based SAS sells analytics-, business-intelligence and data-management software to enterprises. The company traces its roots back to the 1960s, when universities teamed up to analyze troves of agricultural data through a program called the Statistical Analysis System.
Broadcom, a semiconductor powerhouse built largely through acquisitions, has been on the hunt for a deal to beef up its presence in the corporate-software market. Its chief executive,
said earlier this year the company would look at buybacks and possibly debt repayment, if it didn’t make an acquisition by the end of the fiscal year. That typically ends in late October or early November.
Here’s what we’re watching ahead of the opening bell on Tuesday.
U.S. stock futures wavered, suggesting indexes would hover close to their record levels as investors awaited inflation data and earnings from the nation’s biggest banks.
Futures tied to the S&P 500 were relatively flat after the broad index climbed to its 39th record closing levels of the year. Dow Jones Industrial Average futures weakened 0.1%, while Nasdaq-100 futures were up 0.3%.
What’s Coming Up
U.S. inflation data for June is scheduled for 8:30 a.m. ET. Economists are forecasting a 5% increase in the consumer-price index from a year ago.
extended its fall back to earth, with its shares shedding more than 5% in premarket trading after Monday’s 17% drop. The company said it would sell up to $500 million of stock in a new share sale, a day after founder Richard Branson returned safely from a landmark trip to the edge of space.
slid 3.8% premarket. It has lost nearly 25% of its value this month so far.
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all hit record closes on Monday—and in the S&P 500’s case, it was the 39th record close this year, beating the Dow’s 27 records and the Nasdaq’s 24. The broad index is ahead of the others in terms of gains this year too, with a nearly 17% rise.
European stocks have also been on the rise, with both the Stoxx Europe 600 and Germany’s DAX index notching record highs on Monday.
On this day in 1852, Wells, Fargo opened for business in San Francisco and Sacramento. It was founded by Henry Wells and William G. Fargo to convert gold dust into cash for miners, transport and safeguard letters, gold nuggets and other valuable byproducts of the California Gold Rush.
Chart of the Day
Global coffee prices are climbing and threatening to drive up costs at the breakfast table as the world’s biggest coffee producer, Brazil, faces one of its worst droughts in almost a century.
Futures are meandering near the flat line after Friday’s record close on Wall Street. Here’s what we’re watching ahead of Monday’s opening bell.
Futures for the S&P 500, which closed Friday at its 31st all-time high of the year, drifted between muted gains and losses. Contracts on the Dow Jones Industrial Average edged down 0.1%. Futures for the Nasdaq-100 ticked up 0.3%, pointing to modest gains for technology stocks.
Bitcoin is having a strong morning, rising more than 6%. Gold and oil were both slightly lower.
What’s Coming Up
The Texas Manufacturing Outlook Survey for June is due at 10:30 a.m. ET.
shares are down 1.6% premarket. The cruise operator last week said its loss for the second quarter narrowed, and the company’s chief executive said it is working to return its full fleet to operations by next spring.
‘s booster rockets are kicking in. Its shares are up more than 7% premarket, building on Friday’s 39% gain that came after the company got the go-ahead from U.S. authorities to start carrying paying passengers to the edge of space.
shares lost some altitude, shedding 1.3% premarket. The Seattle Times reported over the weekend that the FAA told the plane maker an updated version of its 777 long-haul airliner is not ready for certification, and likely won’t be until late 2023.
A Silicon Valley stock exchange that encourages long-term thinking over short-term gains has landed two marquee tech companies to be among its first listings, reflecting the growing popularity of sustainable investing.
are the first two companies to agree to dual list their shares on the Long-Term Stock Exchange. The CEOs of both companies, which also are listed on the New York Stock Exchange, were early investors in LTSE with financial stakes of less than 1.5%.
To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
The companies and the exchange hope the listings will be a signal that their stocks should appeal to long-term investors, potentially reeling in some of the hundreds of billions of dollars stashed in funds dedicated to environmental, social and governance investing. It also would lend credence to LTSE, which has long been embraced by venture capitalists and tech founders but has yet to list a single company.
Stock exchanges often serve as gate keepers for corporate governance and provide a platform for a company’s shares to be traded. There are more than a dozen exchanges in the U.S., and most only operate as trading platforms.
The two largest in the U.S., New York Stock Exchange and Nasdaq, are dominant players in both aspects. Those exchanges also have recently been bolstering their advisory services around ESG to their listed companies.
Long-Term Stock Exchange started trading stocks in September, and only a fraction of shares are traded on its platform. Its primary focus is on ensuring stakeholder-focused corporate governance, according to its founder and Chief Executive
told The Wall Street Journal that investors are demanding companies pay more attention to their progress toward social and environmental goals.
“We’re starting to enter a realm where there is a higher expectation of companies,” he said. “LTSE takes what various pledges have been and codifies it. It’s companies putting their money where their mouth is.”
Twilio and Asana are still working out what their exact commitments will be, but Messrs. Lawson and Moskovitz said they would likely be in line with what the companies already are doing.
For example, Twilio already is focused on its social impact. Mr. Lawson highlighted Twilio.org, which supports nonprofits and social enterprises and is funded by 1% of Twilio’s equity. The company pledged $10 million to Covax, a global initiative to vaccinate lower-income countries against Covid-19. Mr. Lawson said he hopes listing on LTSE can attract more long-term investors.
Asana’s Mr. Moskovitz pointed to the company’s commitment to building an inclusive and diverse employee base. (Asana’s website shows 30% of its U.S. employees identify as Asian, while 46% identify as Caucasian; 49% identify as male and 43% as female.)
In 2011, Mr. Ries proposed the idea for a long-term exchange in his book “The Lean Startup.” He won support from Silicon Valley entrepreneurs, including venture capitalist
and LinkedIn co-founder
The decision to let companies write their own long-term themed commitments wasn’t the original plan for the exchange. On its journey to Securities and Exchange Commission approval, LTSE ended up scrapping more ambitious requirement plans for listing companies, including barring quarterly guidance and banning executive bonuses tied to short-term financial targets.
Finding its first listings also proved challenging. To sweeten the deal, LTSE cut its listing fee by 50% in 2021. To assuage executives concerned about low trading volumes on the new exchange, LTSE pitched companies the idea of dual listing, meaning their stock is primarily listed on either the Nasdaq or NYSE.
Other exchanges have tried to pick away at NYSE’s and Nasdaq’s dominance in corporate listings. None have made much progress. IEX Group Inc. spent years wooing companies to list on its upstart exchange, but closed its listing business in 2019 after winning only one.
Mr. Moskovitz, a longtime LTSE supporter, said he considered dual listing with LTSE last fall when Asana went public but the timing didn’t feel right. Asana already was doing something different by going public in a direct listing on the NYSE. Adding another twist to its stock-market debut felt like too much for investors, he said, though he said he made LTSE-inspired commitments in his founder letter and in Asana’s regulatory filing at the time of its initial public offering.
“We wanted to establish ourselves as a public company,” Mr. Moskovitz said. “We now feel we’re on stronger footing to take this new step.”
‘The material benefit of being seen as an ESG leader has become bigger as so much money has flowed in.’ ”
— Long-Term Stock Exchange CEO Eric Ries
In addition to Twilio and Asana, expense-reporting software company Expensify Inc. also is looking at dual listing with LTSE as it goes public, people familiar with the matter said. Last year,
not only called itself mission-driven in a filing ahead of its IPO, but it also dedicated an entire section to ESG.
Mr. Lawson said LTSE can help give a stamp of approval to companies who make ESG pledges. “If LTSE helps connect companies with investors who also value those things like ESG and long-term focus, that’s a good thing,” he said.