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Making profit from data is Europe’s next big challenge in tech

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Thierry Breton, France’s European Union commissioner for internal market and consumer protection, industry, research and energy.

JOHN THYS

The European Union has a new aim: figuring out how home-grown companies in the region can make money from data.

The EU is drawing up plans to boost the competitiveness of European companies amid the hegemony of U.S. and Chinese firms. Europe has struggled to develop, support and even host digital companies over the past few years. For example, Spotify, the Swedish music streaming service, threatened in 2016 to move to the United States.

However, the EU’s new head of data and industry policy wants these European firms to be better equipped to stand up to their American and Chinese counterparts.

“I will make sure we will not miss the new wave of industrial data,” Thierry Breton, the European commissioner for the internal market, told the Financial Times Tuesday.

“The most important thing is to evaluate how we create data … and how we will be able to use this data,” Breton also said. The plan in Brussels is to help EU companies better capitalize on the electronic information they generate, according to the newspaper. The exact scope of the data which is being targeted is yet to be defined.

The European Commission, the EU’s executive arm, has often criticized the dominance of big tech players and how they use data. In 2018, the European Union approved a sweeping data privacy law known as the General Data Protection Rule (GDPR), aimed at giving users’ a bigger say over their own data.

Margrethe Vestager, the EU’s chief for competition policy, said in September that there should be stronger rules on how companies collect and use information. In December, Vestager opened preliminary investigations into Google and Facebook’s data practices, assessing whether the two U.S. tech firms are complying with its rules in the region.

No more ‘openly available’ data for US tech giants

Any new data initiatives in the EU would likely become a hurdle for tech giants such as Google, Facebook and Microsoft.

“It means that the time of openly available and easily reusable data is over,” Andrea Renda, senior research fellow at the Brussels-based think tank CEPS, told CNBC regarding the impact of the European plans on U.S. companies.

“It may also mean new obligations to store data in Europe, and more obstacles in their European operations, including renewed competition from European cloud operators and even chipmakers,” Renda also said via email.

U.S. tech giants face a range of issues on the continent. Apart from how they use and store data, they are also under scrutiny for how much tax they pay and how they operate in the 28-country region. Two of the biggest cases in the last five years included fining Google for disrespecting competition rules and asking Ireland to collect unpaid taxes from Apple.

There are also plans in certain countries to impose a so-called digital tax. France and Italy have actually gone ahead with their own tax for digital companies, while other countries are still in discussions. Higher taxes also mean less margins for these companies in the region.



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Stanley Druckenmiller agrees with Tepper, still bullish the market because of the Fed and Trump

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Stanley Druckenmiller

Anjali Sundaram

This is breaking news. Please check back for updates.

Billionaire hedge fund manager Stanley Druckenmiller said Friday that he agrees with fellow investor David Tepper’s optimism on the market and said he’s still “riding the horse.”

“I revealed a very bullish posture intermediate term since October when Powell guaranteed he would not rescind the insurance cuts,” Druckenmiller said in an email to CNBC’s Joe Kernen. “Since then, both have worked out and the Fed is still whining about inflation being below target.”

“In addition, Trump’s election prospects have increased with two trade agreements and big win in Iran which the Democrats have responded poorly to,” he added. “So I am still ‘riding the horse’ and bullish immediate term.”



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Boeing expected to take another big, ugly charge on 737 Max crisis

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A year ago, Boeing posted record revenues topping $100 billion with hopes of delivering a chart-topping number of airplanes in 2019, including hundreds of 737 Max jetliners.

The news isn’t going to be so rosy on its fourth-quarter earnings call this year. Those bestselling planes were grounded worldwide in March after the second of two fatal crashes that claimed 346 lives. The crisis cost former CEO Dennis Muilenburg his job, prompted Boeing to suspend production of the planes, drove down orders to the lowest level in decades, hurt its supply chain, and wracked up costs that are now around $10 billion. Wall Street is expecting more bad news.

The Jan. 29 earnings call will be the first for new CEO Dave Calhoun, who took the helm on Monday, days after the company released a trove of shocking internal messages that showed employees dissing regulators and airlines and boasting about getting them to approve less time-consuming training. One showed employees complaining that Lion Air, the operator of the first 737 Max that crashed, wanted simulator training for pilots before they flew the planes.

Calhoun is tasked with cleaning up Boeing’s culture, improving employee morale and repairing damaged relationships with regulators and airlines.

“Many of our stakeholders are rightly disappointed in us, and it’s our job to repair these vital relationships,” Calhoun told Boeing employees on his first day. “We’ll do so through a recommitment to transparency and by meeting and exceeding their expectations. We will listen, seek feedback, and respond — appropriately, urgently and respectfully.”

Jeff Windau, industrials analyst at Edward Jones, said he hopes the call will shed some light on the company.

“It would be nice to get some candid comments,” he said. “I’m not expecting a date [of the return to service] but it would be nice to get some indication where they’re at.”

Several Wall Street analysts now expect Boeing, which reports full-year and fourth-quarter earnings on Jan. 29, to take additional charges related to the troubled airplane. The company took a $5.6 billion pretax charge in July to compensate airlines and other customers for the grounding, which is now in its 11th month.

“They’re going to have to pay more,” said Ron Epstein, aerospace analyst at Bank of America Merrill Lynch. He estimates the total cost of the grounding could reach $20 billion — excluding any settlements from lawsuits from crash victims’ families — if the planes return by June or July. Epstein estimates that about 40% of Boeing’s profits last year came from the Max.

Moody’s Investors Service said it was putting Boeing’s debt on a review for a possible downgrade, less than a month after cutting its credit rating by one-notch, as the crisis wears on longer than expected. The lower the credit rating, the more expensive it is for Boeing to borrow. Boeing, which declined to comment on a potential charge, has previously said it would tap the debt markets if it needs more cash to cover the costs of the crisis.

Sheila Kahyaoglu, aerospace and defense analyst at Jefferies, estimated this week that the charges for aircraft customers’ compensation is likely to rise to $11 billion, and that some of that will be reported later this month. That’s assuming the planes return to service in April, she said.

The Wall Street estimates for its earnings vary widely — from a loss of 23 cents a share to a profit of as much as $2.52 a share, according to analysts polled by Refinitiv. On average, analysts expect the Chicago-based company to report a profit of $1.53 a share — a 72% decline from a year earlier. They estimated a more than 26% drop in revenue to $20.8 billion.

Earlier this month, Boeing threw airline customers another curve ball: It’s recommending additional simulator training for pilots on the Max, a reverse of its previous stance and a step that promises to further delay the planes return to service and drive up costs.

As of Thursday, all U.S. airlines with Maxes in their fleets — American, Southwest and United — have pulled the planes from their schedules until early June, a delay that’s threatening to last until the peak travel season of late spring and the summer.

Analysts are also looking for news on how Boeing will manage its supply chain. Spirit Aerosystems, which makes fuselages and other parts for the planes, announced initial job cuts of 2,800 people last week. Moody’s downgraded its debt to junk territory.

Even the planned pause in production won’t stop the cash drain and will cost Boeing $1 billion a month, estimates J.P. Morgan.

“It doesn’t give you the warm and fuzzies when Spirit lays off 2,800 people,” said BofA’s Epstein. Suppliers are walking a tightrope with the 737 Max, because they don’t want to lack workers when Boeing can resume production. “It’s a tight job market and I’m sure there are a lot to companies that would like to hire them,” Epstein added.

Investors are also closely watching Calhoun for cues about Boeing’s bigger picture. The company has faced problems with its KC-46 refueling tanker. Because it’s hobbled by the 737 Max issues, Boeing hasn’t been able to move forward with a new middle-market airplane, giving a bigger lead to rival Airbus, which recently won orders for its forthcoming long-range, single-aisle plane from airlines including American and United. And the scrutiny of the Max could become more time consuming when regulators review its wide-body Boeing 777X.



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Former GOP Rep. Chris Collins set to be sentenced in insider trading case

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Former U.S. Rep. Chris Collins (R-NY) exits federal court on October 1, 2019 in New York City.

Drew Angerer | Getty Images

Disgraced former Rep. Chris Collins is set to be sentenced Friday in the insider-trading case that led him to give up his seat in Congress.

U.S. Judge Vernon Broderick is scheduled to deliver Collins’ sentence at 2:30 p.m. ET in federal court in lower Manhattan.

Federal prosecutors want Broderick to sentence Collins to nearly five years in prison — the top end of the federal guidelines range — to make an example of Collins that will “promote respect for the law, in light of the lack of respect that Collins has shown for it.”

But Collins’ lawyers have asked the judge to deliver a sentence of probation to the fallen congressman.

“He has paid a heavy price for his crimes,” one of his attorneys wrote in a court filing last week, claiming Collins is “now too ashamed to spend significant time in the community he loves.”

Probation officers had recommended a sentence of a year and a day in prison, along with a $200,000 fine and a term of supervised release.

Collins, 69, was the first member of Congress to support then-candidate Donald Trump’s 2016 White House bid. And despite pleading guilty to charges of conspiracy to commit securities fraud and making false statements, Collins has retained some support in his upstate New York district — and from high-profile Republicans like former House Speaker John Boehner — who have vouched for Collins’ character in letters to the judge.

Collins in October pleaded guilty to tipping off his son Cameron in a phone call from the White House lawn about the results of an Australian biotech company’s failed drug trial before the test results became public.

After the test was revealed, the stock price of the firm — in which Collins was a leading investor and board member — tanked by more than 90%.

A day before Collins switched his plea to guilty, he submitted his resignation from Congress.

Cameron Collins saved nearly $600,000 by dumping his stock in the company, Innate Immunotherapeutics, before it disclosed the bad news in a press release. Chris Collins himself did not trade Innate stock after learning about the test results.

The younger Collins is due to be sentenced Jan. 23, and Stephen Zarsky, the father of Cameron’s fiancee, will be sentenced Jan. 24 in connection with his selling Innate stock after being tipped by Cameron to the bad test results.

On Wednesday, Broderick sent both parties in the case a 26-question questionnaire, which the judge may use to help make his sentencing decision.

One of those questions asks: “In connection with his campaign for reelection did Collins make any statements professing his innocence in advertisements, press conferences or elsewhere?”



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