Business

Marcelo Claure Leaves Masa Son’s Orbit

Marcelo Claure has headed for the exit.Credit…Lucas Jackson/Reuters

A top lieutenant departs

SoftBank said today that Marcelo Claure was stepping down as C.O.O. The departure of a longtime lieutenant to the investment giant’s chief, Masa Son, comes as the company faces huge challenges.

Claure entered Son’s orbit in 2014, when he was enlisted to run Sprint after the SoftBank-owned wireless carrier gave up on its effort to buy T-Mobile. (Sprint and T-Mobile ultimately merged in 2020.) He eventually joined SoftBank itself in 2017, becoming a close confidante of Son and assuming a bigger role within the tech giant. Among his biggest responsibilities was overseeing the turnaround of WeWork: SoftBank stepped in to rescue the co-working company — following billions of dollars of investments that pumped up its valuation — when it dropped plans for an I.P.O.

But his final months at SoftBank were filled with disputes over pay. The Times previously reported that Claure had demanded about $2 billion in compensation; Son and others at SoftBank pushed back. He’s still expected to walk away with several hundred million dollars.

Claure’s departure comes at a tricky time for SoftBank, for several reasons:

  • The company’s share price is sinking, amid a decline in tech stocks (more on that below) and Beijing’s crackdown on Alibaba, SoftBank’s single biggest investment.

  • Nvidia’s deal to buy the chip designer Arm from SoftBank faces stiff regulatory opposition, potentially denying SoftBank a big payday.

  • And Claure’s exit deprives the 64-year-old Son of another potential successor, after a series of high-profile executive departures in recent years.

HERE’S WHAT’S HAPPENING

Robinhood’s shares sink on a big loss. The online brokerage said it lost $423 million in the fourth quarter, more than analysts had expected. Despite a strong start last year, thanks to the meme-stock trading surge, Robinhood said trading activity on its platform fell last quarter, while operating expenses grew.

The U.S. posts record economic growth. The country’s G.D.P. grew 5.7 percent last year, the largest annual increase since 1984, as coronavirus vaccines, government pandemic aid and low interest rates bolstered the economy. But voters feel pessimistic about economic conditions, largely because of inflation.

UniCredit abandons a deal over concerns about a war in Ukraine. In withdrawing from a potential takeover of the Russian bank Otkritie, the Italian bank cited “the geopolitical environment.” Rising tensions between the West and Russia over Ukraine are affecting businesses around the world.

Two more Libor manipulation convictions are overturned. A federal appeals court ruled that there was insufficient evidence to convict two former Deutsche Bank traders on charges of fraud and conspiracy. It was the latest defeat for prosecutors trying to convict traders accused of manipulating the once-prominent interest rate benchmark.

Understand the Supply Chain Crisis

  • The Origins of the Crisis: The pandemic created worldwide economic turmoil. We broke down how it happened.
  • Explaining the Shortages: Why is this happening? When will it end? Here are some answers to your questions.
  • Lockdowns Loom: Companies are bracing for more delays, worried that China’s zero-tolerance Covid policy will shutter factories and ports.
  • A Key Factor in Inflation: In the U.S., inflation is hitting its highest level in decades. Supply chain issues play a big role.

Oaktree threatens to seize a prized Evergrande property. The American investment firm told its investors that it has a secured loan linked to a tourist resort that it could claim if Evergrande defaults. That move could face legal challenges in Chinese courts, but highlights the risks facing the embattled Chinese real estate developer as it negotiates with creditors.

Supply lines

Apple reported record quarterly revenue and profit yesterday, easing fears that the tech industry’s long stretch of strong growth was coming to an end. Those fears stem in large part from pandemic-related disruptions to supply chains, particularly for computer chips.

Tim Cook, Apple’s C.E.O., said that supply constraints were worse in the fourth quarter than the one before — but things were looking better in the current quarter, “so there’s some encouraging signs there.” Supply chains have been a prominent talking point during earnings calls this week, and not all executives are as confident that the disruptions will clear as quickly:

  • “In 2022, supply chain will continue to be the fundamental limiter of output across all factories.” — Elon Musk, the C.E.O. of Tesla

  • “Supply chain challenges are expected to continue at least through the first half of ’22, which we’re actively managing.” — Carolina Dybeck Happe, the C.F.O. of G.E.

  • “My sense is it’s starting to get a little bit better, but it’s still not back to where things were prepandemic.” — Kevin Ozan, the C.F.O. of McDonald’s

“It is appalling that lawyers divvying up the estate of Jeffrey Epstein are profiting more than his victims.”

— Spencer Kuvin, a Florida lawyer who has been seeking compensation for women who accused Epstein of sexual abuse, on the tens of millions of dollars in legal fees paid by the estate of the late financier and convicted sex offender.

A streaming money pit

Comcast said yesterday that its nascent streaming service needs more money — a lot more money. The cable giant, and owner of NBCUniversal, said it would spend $3 billion on content for Peacock this year, double what it spent in 2021. Content costs, it said, are likely to rise to $5 billion a year soon.

As viewing habits shift, streaming has upended Hollywood. But given these services’ soaring costs, investors are questioning their worth to media owners. “The business model is much more capital intensive than most others we have seen,” Michael Nathanson, a longtime media analyst, wrote in a recent report.

Streaming has been a money pit for media giants. Peacock generated revenue of nearly $800 million last year, but lost $1.7 billion. WarnerMedia, which is in the process of being spun out from AT&T, reported higher revenue but lower profits because of higher programming and marketing costs.

Nonetheless, media groups are bullish. “I couldn’t be more excited with the momentum we are seeing,” Comcast’s C.E.O., Brian Roberts, said of Peacock. Disney said it expects to spend an additional $8 billion on content in 2022, much of it for its streaming service. Several high-profile hires at CNN show that it is also betting big on streaming.

Given the high cost of creating new content, the answer might be acquisitions. Lionsgate, a smaller Hollywood studio, has been the subject of takeover speculation. And market watchers say that ViacomCBS could be seeking partners. In its most recent annual report, Netflix for the first time included a dedicated section on acquisitions, and how potential deals could affect its bottom line.

How the Supply Chain Crisis Unfolded

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The pandemic sparked the problem. The highly intricate and interconnected global supply chain is in upheaval. Much of the crisis can be traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:

A reduction in shipping. With fewer goods being made and fewer people with paychecks to spend at the start of the pandemic, manufacturers and shipping companies assumed that demand would drop sharply. But that proved to be a mistake, as demand for some items would surge.

Demand for protective gear spiked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo vessels began delivering gear around the globe.

Then, a shipping container shortage. Shipping containers piled up in many parts of the world after they were emptied. The result was a shortage of containers in the one country that needed them the most: China, where factories would begin pumping out goods in record volumes

Demand for durable goods increased. The pandemic shifted Americans’ spending from eating out and attending events to office furniture, electronics and kitchen appliances – mostly purchased online. The spending was also encouraged by government stimulus programs.

Strained supply chains. Factory goods swiftly overwhelmed U.S. ports. Swelling orders further outstripped the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.

Labor shortages. Businesses across the economy, meanwhile, struggled to hire workers, including the truck drivers needed to haul cargo to warehouses. Even as employers resorted to lifting wages, labor shortages persisted, worsening the scarcity of goods.

Component shortages. Shortages of one thing turned into shortages of others. A dearth of computer chips, for example, forced major automakers to slash production, while even delaying the manufacture of medical devices.

A lasting problem. Businesses and consumers reacted to shortages by ordering earlier and extra, especially ahead of the holidays, but that has placed more strain on the system. These issues are a key factor in rising inflation and are likely to last for months — if not longer.

An end to the private party?

Some start-up investors say they’re confident that a damper on the public market party — that is, a rough few weeks for tech stocks — will not disrupt the private market frenzy that arguably reached peak froth last year. But as markets continue to swing, some warn that the volatility could make start-up investors reconsider those high pre-I.P.O. valuations.

Data from Pitchbook shows that the recent decline in public markets has been particularly hard on venture-backed companies that recently went public:

Credit…NYT

With I.P.O.s looking shakier, some start-up investors say they’ve already noticed an impact on private markets:

  • “There appears to be more flexibility on valuation,” Ravi Viswanathan, the founder and managing partner at NewView Capital, told Pitchbook.

  • Niko Bonatsos, a managing director at General Catalyst, told The Wall Street Journal that the $1 billion-plus unicorns in his firm’s portfolio now need to show more progress in order to raise additional funding.

  • The Information reported this week that Tiger Global Management slashed its offers for shares of software companies at least twice late last year.

Chris Lehane is joining the crypto fund KRH.Credit…Allison Shelley for The New York Times

Exclusive: Chris Lehane’s new job in crypto

Chris Lehane, the former Airbnb policy chief and Clinton administration veteran, is joining Katie Haun’s crypto venture fund, KRH, DealBook is first to report. Haun was a federal prosecutor who cracked crypto cases before joining Andreessen Horowitz to help lead the firm’s crypto funds. She launched KRH this month.

Lehane will lead global strategy at the fund, applying what he learned at Airbnb to bring crypto concepts like web3 into the mainstream. He spoke with DealBook about his new job. The interview has been edited and condensed.

What’s the back story to your move?

Katie called last year around Thanksgiving. I always joke that when Katie calls you know you’re saying “yes” to something.I think she was still in the process of figuring out her next steps and it was like, “What do you think of this concept? Should we do this?” It’s been a rocket ship since.

When did you meet?

In 2015. I’d just started at Airbnb and it was one of those meetings where you have energy just ping-ponging off one another. I remember leaving thinking everyone there was going to end up being at something that Katie Haun created. No question.

Were you already into crypto?

Yes. I had two “aha” moments years back. I remember driving in the car with my 17-year-old, who was then probably 13, listening to a podcast on the history of money and how crypto is playing into this. He got it in a really interesting way and began talking about blockchain for cap and trade. And my 15-year-old was an early player on Fortnite. I was always complaining that he should go outside and play soccer, but his sword ended up becoming so valuable that people offered him multiple thousands of dollars; thatclicked the idea of creating communities and creating value within those communities.

So, do your kids think this is a cool move?

I was pretty cool when I went to Airbnb. I could speak with their friends. Being in the crypto web3 space, my 17-year-old says he’s going to have to get on the Zooms to make sure I use the right words. But I have talked to my kids about the importance of chapters in life — stepping out of your comfort zone, being intellectually challenged — and this is an opportunity to build a better internet that leads to economics being distributed in a more fair way.

THE SPEED READ

Deals

  • HP won its legal battle in London against Mike Lynch, whom it accused of overseeing fraudulent accounting at the software maker Autonomy when he sold it to the company. (Sky News)

  • Blackstone doubled its pay for top dealmakers last year, to a collective $1.6 billion. (Bloomberg)

  • Chinese stock markets have stopped processing at least 60 I.P.O. applications as regulators investigate advisers on the deals, including Deutsche Bank’s China venture. (Reuters)

Policy

  • The F.C.C. revoked China Unicom’s ability to operate in the U.S., citing national security concerns. (NYT)

  • “How the Computer Chip Shortage Could Incite a U.S. Conflict With China” (NYT)

  • Mike Bloomberg argues that a bipartisan bill to rein in Big Tech is bad for consumers, workers and the economy. (Bloomberg Opinion)

  • In billionaire donor news, Ken Langone gave money to the PAC of Senator Joe Manchin, Democrat of West Virginia, after the lawmaker opposed President Biden’s social spending plan; and Peter Thiel hosted a fund-raiser for a primary challenger to Representative Liz Cheney, Republican of Wyoming. (CNBC, Vanity Fair)

Best of the rest

  • Analysts at Goldman Sachs and JPMorgan Chase threw cold water on hopes that cryptocurrency prices are set to rebound after a recent price rout. (Bloomberg, Insider)

  • Southwest Air’s C.E.O., Gary Kelly, reversed course and endorsed the effectiveness of face masks on airplanes. (Bloomberg)

  • “Would you buy a home in the metaverse?” (FT)

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