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Exclusive: EpiPen price hikes add millions to Pentagon costs

NEW YORK/WASHINGTON Mylan NV’s price hikes on EpiPens have added millions to U.S. Department of Defense spending since 2008 as the agency covered more prescriptions for the lifesaving allergy shot at near retail prices, government data provided to Reuters shows.

Pentagon spending rose to $57 million over the past year from $9 million in 2008 – an increase driven both by volume and by price hikes that had a bigger bite on prescriptions filled at retail pharmacies, according to the previously unreported data.

The Pentagon gets a government discount on EpiPens dispensed at military treatment facilities and by mail order. But nearly half of its spending was at retail pharmacies where it most recently paid an average of $509 for EpiPen and $528 for EpiPen Jr two-packs – three times higher than its discounted rate, the data shows.

That may change. Both the Pentagon and Mylan told Reuters that discussions are underway that could extend the military discount to EpiPens filled at retail pharmacies through the use of rebates.

Mylan spokeswoman Nina Devlin declined to comment on the specific Department of Defense spending. She said in an emailed statement that talks were underway to address “any questions or concerns from the agency.”

She declined to say if any repayment was on the table.

A Reuters analysis of the data estimated a difference of about $54 million between what the agency paid for EpiPens at retail pharmacies from 2009 through 2016 and what it would have paid at military clinics.

Mylan Chief Executive Officer Heather Bresch has drawn public scrutiny for raising the U.S. list price on a pack of two injectors nearly six-fold to $600 since 2008.

Affordability has become a bigger issue with the increased diagnosis and awareness of food allergies. Families who rely on EpiPens to safeguard their children against possibly fatal allergic reactions often purchase several to carry with them, keep at school and with caregivers.

In response to the criticism, Mylan is providing more families with coupons to pay for EpiPens and plans to market a half-price version. The drugmaker also agreed to pay $465 million to settle questions over whether the Medicaid program for the poor overpaid because EpiPens were classified as a generic treatment, a category that allows manufacturers to give smaller rebates to government agencies.

While Medicaid providers don’t take issue with the increased use of EpiPens, they have bristled over the price hikes.

“The rate of increases in their cost is not justifiable,” said Dr. J. Mario Molina, chief executive of Molina Healthcare, which runs Medicaid plans in California and 11 other states.


The impact of Mylan’s price hikes on government health programs, such as Medicaid, has been obscured by highly complex pharmaceutical pricing and opaque negotiations.

The Centers for Medicare and Medicaid Services, as well as several large state Medicaid programs, have released partial details on their spending, saying full information on rebates is confidential under U.S. law. Without such details, it is impossible to discern what price an agency is paying for EpiPen.

At Reuters’ request, the Defense Department provided the most comprehensive picture of EpiPen spending by a government agency, including fiscal year expenditures since 2008, average price per pack and the number of prescriptions filled by type of dispensing location for all EpiPens obtained by military service members, their families and retirees.

The department’s spending on EpiPens has increased fivefold since 2008, far outpacing the 130 percent growth in prescriptions, the data shows.

Defense spending on the injectors at retail pharmacies – which accounted for 53,500 of 226,000 EpiPen prescriptions for the last fiscal year that ended Sept. 30 – has grown more than tenfold, to $28 million from $2.4 million in 2008.

While EpiPen spending represents a fraction of a percent of the Defense Department’s $49 billion annual healthcare budget, the data illustrates the premium it was paying for EpiPens at retail outlets.

“Lawmakers would not be terribly happy to hear that DoD is paying more at retail,” said Brian Bruen, a drug economics researcher at George Washington University’s Milken Institute School of Public Health.


The Defense Department and Department of Veterans Affairs, typically pay among the lowest drug prices in the country because of discounts mandated by law, as well as rebates negotiated with drugmakers, Bruen said.

Indeed, the Pentagon has paid $173 for an EpiPen two-pack filled through mail order and $169 at military facilities in fiscal year 2016.

A key factor for government discounts is whether a drug is patent protected and has market exclusivity, or it is a generic, made cheaper by competition.

The EpiPen, which packages a generic allergy antidote in a patented, easy-to-use injector, is somewhat of a hybrid.

For the Defense Department, pharmaceutical companies pay rebates on brand name drugs dispensed by retail pharmacies, reducing the final cost to the agency’s discounted rate.

EpiPen’s classification as a generic drug prevents it from receiving mandated rebates. Mylan provided documentation it said showed the military had accepted the generic classification for EpiPen in 2008.

Under Mylan’s settlement with the federal government, Medicaid will classify EpiPen as a branded drug, Devlin said. That will qualify Medicaid for a 23 percent rebate, up from the 13 percent it gets on generics. Any price hikes will be capped at the inflation rate, a protection not afforded generic drug purchases.

“It was always our intention that the reclassification would benefit all government agencies impacted by the classification, including the VA and Tricare (Defense) programs,” Devlin said.

(Additional reporting by Deena Beasley in Los Angeles; Editing by Michele Gershberg and Lisa Girion)

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Facebook executives feel the heat of content controversies

SAN FRANCISCO/WASHINGTON After Facebook’s removal of an iconic Vietnam war photo stirred an international uproar last month, the social network’s executives quickly backtracked and cleared its publication.

But the image – showing a naked Vietnamese girl burned by napalm – had previously been used in training sessions as an example of a post that should be removed, two former Facebook employees told Reuters.

Trainers told content-monitoring staffers that the photo violated Facebook policy, despite its historical significance, because it depicted a naked child, in distress, photographed without her consent, the employees told Reuters.

The social network has taken great pains to craft rules that can be applied uniformly with minimal discretion. The reversal on the war photo, however, shows how Facebook’s top executives sometimes overrule company policy and its legions of low- and mid-level content monitors.

Facebook has often insisted that it is a technology company – not a media company – but an elite group of at least five senior executives regularly directs content policy and makes editorial judgment calls, particularly in high-profile controversies, eight current and former Facebook executives told Reuters.

One of those key decision-makers – Justin Osofsky, who runs the community operations division – wrote a Facebook post acknowledging that the removal of the war photo was a “mistake.”

“Sometimes,” he wrote, “the global and historical significance of a photo like ‘Terror of War’ outweighs the importance of keeping nudity off Facebook.”

Facebook spokeswoman Christine Chen declined to comment on the company’s use of the photo in training sessions.

Facebook has long resisted calls to publicly detail its policies and practices on censoring postings. That approach has drawn criticism from users who have had content removed and free-speech advocates, who cite a lack of transparency and a lack of an appeals process for many content decisions.

At the same time, some governments and anti-terror groups are pressuring the company to remove more posts they consider offensive or dangerous.


The current and former Facebook executives, most of them speaking on condition of anonymity, told Reuters in detail how complaints move through the company’s content-policing apparatus. The toughest calls, they said, rise to an elite group of executives.

Another of the key decision-makers is Global Policy Chief Monika Bickert, who helped rule on the fracas over the war photo.

“That was one we took a hard look at, and we decided it definitely belonged on the site,” said Bickert, a former federal prosecutor.

She declined to elaborate on the decision-making process.

Facebook chief operating officer Sheryl Sandberg followed up with an apology to Norwegian Prime Minister Erna Solberg, who had posted the photo on her own account after Facebook removed it from others in her country.

In addition to Sandberg, Osofsky and Bickert, executives involved in sensitive content issues include Joel Kaplan, Facebook’s Washington-based government relations chief; and Elliot Schrage, the vice president for public policy and communications.

All five studied at Harvard, and four of them have both undergraduate and graduate degrees from the elite institution. All but Sandberg hold law degrees. Three of the executives have longstanding personal ties to Sandberg.

Chief Executive Mark Zuckerberg, a Harvard drop-out, occasionally gets involved with content controversies, Bickert said.

These executives also weigh in on content policy changes meant to reflect shifting social context and political sensitivities around the world, current and former executives said.

Facebook officials said the five people identified by Reuters were not the only ones involved in high-level content decisions.

“Facebook has a broad, diverse and global network involved in content policy and enforcement, with different managers and senior executives being pulled in depending on the region and the issue at hand,” Chen said.

Chen declined to name any other executives who were involved in content policy.


The company’s reticence to explain censorship decisions has drawn criticism in many countries around the globe.

Last month, Facebook disabled the accounts of editors at two of the most widely read Palestinian online publications, Shehab News Agency and Quds. In keeping with standard company practice, Facebook didn’t publicly offer a reason for the action or pinpoint any content it considered inappropriate.

The company told Reuters that the removal was simply an error.

Some Palestinian advocacy groups and media outlets condemned the shutdowns as censorship stemming from what they described as Facebook’s improper alliance with the Israeli government.

Israel’s government has pushed Facebook to block hundreds of pages it believes incite violence against Jews, said Noam Sela, spokesman for Israeli cabinet Minister Gilad Erdan.

Sela said the Israeli government “had a connection” at Facebook to handle complaints but declined to elaborate on the relationship.

“It’s not working as well as we would like,” Sela said. “We have more work to do to get Facebook to remove these pages.”

Ezz al-Din al-Akhras, a Quds supervisor, said that Facebook’s head of policy in the Middle East had gotten in touch after the uproar over the shutdowns and that three of four suspended accounts were restored.

“We hope the Facebook campaign of suspending and removing Palestinian accounts will stop,” he said. “We do not practice incitement; we are only conveying news from Palestine to the world.”

Facebook said the restoration of the accounts was not a response to complaints. It declined to comment on whether top executives were involved.

The company has cited technological glitches in other recent cases where content was removed, then restored, including the takedown of a video that showed the aftermath of a Minneapolis police shooting.

Chen declined to explain the glitch.

She said the company was reviewing its appeals process in response to public feedback. Facebook currently allows appeals of company actions involving entire profiles set up by people or institutions, or full pages on those profiles, but not for individual posts.


To manage the huge volume of content complaints – more than a million a day – the company employs a multi-layered system. It starts with automated routing of complaints to content-policing teams in Dublin, Hyderabad, Austin and Menlo Park, who make initial rulings, current and former executives said.

These low-level staffers and contractors consult a thick rulebook that interprets the comparatively spare “community standards” that Facebook customers are asked to follow. The company trains front-line monitors to follow rules and use as little discretion as possible.

When a removal sparks more complaints, regional managers function as a mid-level appeals court. Continuing controversy could then push the issue to top U.S. executives.

Senior executives also weigh in on policy updates. Osofsky and Kaplan, for instance, wrote a blog post last week, in response to “continued feedback” on content removals, explaining that the company would start weighing news value more heavily in deciding whether to block content.

In an earlier post, responding to the Napalm-girl controversy, Osofsky said Facebook’s policies usually work well, but not always.

“In many cases, there’s no clear line between an image of nudity or violence that carries global and historic significance and one that doesn’t,” Osofsky wrote.

The Vietnam war photo – depicting horrors suffered by a girl named Phan Thi Kim Phuc – was first removed from an account in Norway by a front-line monitor.

In protest, the Norwegian newspaper Aftenposten printed the image on its front page and posted it on Facebook, which removed it. That prompted the prime minister to post the photo – only to have Facebook remove it again.

Facebook then issued a statement defending the action, saying it was “difficult to create a distinction between allowing a photograph of a nude child in one instance and not others.”

The next day, executives reversed the call, with Sandberg telling the prime minister: “Even with clear standards, screening millions of posts on a case-by-case basis every week is challenging.”

(Additional reporting by Yasmeen Abutaleb and Joseph Menn in San Francisco, Nidal al-Mughrabi in Gaza and Terje Solsvik in Oslo; Editing by Jonathan Weber and Brian Thevenot)

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Amazon forecast for holiday season disappoints as investment rises Inc on Thursday said high spending on warehouses and video production would drag on profits in the holiday quarter, disappointing investors who are weary of roller coaster results from the e-commerce giant and sending its shares down 6 percent.

Amazon is racing to ship packages as quickly as possible by building out its own delivery system. It is making heavy U.S. investments as well as pouring funds into foreign markets, and it also is building out its home electronics and video businesses, aiming to make it difficult for customers to leave.

As a consequence, the Seattle-based company projects operating income in the fourth quarter would range from nothing to $1.25 billion, a wide span that is considerably below Wall Street’s $1.62 billion, according to market research firm FactSet StreetAccount.

“Investments are going to be lumpy,” Chief Financial Officer Brian Olsavsky said on an analyst call. “The second half of this year looks like a big step up compared to the first half – and it is.”

Long known for heavy spending and losses, Amazon has come to turn a profit consistently, partly thanks to selling computer storage and services in the cloud. Companies globally are turning to Amazon, the market leader, and rival Microsoft Corp to host their data. In the just-ended third quarter, Amazon’s cloud business grew sales by 55 percent from a year earlier.

But investors are focused on rising costs for the company’s retail operation.

Anticipating more shoppers this holiday season, Amazon opened 18 warehouses in the third quarter and another five in the first few weeks of October, Olsavsky said.

Amazon grew its workforce by 38 percent in the third quarter.

In addition, the company has nearly doubled its spending on the creation and marketing of movies and TV shows in the second half of 2016. Amazon’s hope is that people will sign up for its Prime service to watch these videos – and in turn buy more goods from Amazon to make the $99-per-year subscription worth it.

“Amazon tends to flex investment up and down somewhat unpredictably from time to time in order to drive growth, and that’s what’s challenging for investors,” said analyst Jan Dawson of Jackdaw Research. “Some investors thought the new era of higher margins was here to stay permanently, and this quarter has likely taught them (otherwise).”

But investment is necessary to be competitive, particularly in video if established media companies withhold their content from the likes of Amazon, Dawson added.

Amazon’s income tripled in the third quarter to $252 million, or 52 cents per share, marking the company’s sixth straight profitable quarter. But analysts on average expected 78 cents, according to Thomson Reuters I/B/E/S.

Amazon forecast net sales would rise as much as 27 percent in the current quarter to $45.5 billion.

“Even if it reaches the top end of these forecasts, this would still represent the worst performance in growth terms of this fiscal year,” Neil Saunders, head of retail research firm Conlumino, wrote in a note.

“That said, over the longer term Amazon’s investment in physical should help it get a tighter grip on fulfillment costs,” he added. “Amazon is playing the long game.”

Shares of the company were down at $772 in late trade.

(Reporting by Anya George Tharakan in Bengaluru; Writing by Peter Henderson; Editing by Ted Kerr, Bernard Orr)

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Google parent Alphabet profit surges on mobile, video ads

Google parent Alphabet Inc bested analysts’ estimates for third-quarter profit and revenue on Thursday as the search company showed it has honed its core business for the mobile era and is closing in on the next wave of computing.

Propelled by strong advertising on mobile devices and video site YouTube, Alphabet’s net income climbed 27 percent to $5.06 billion. Revenue jumped 20 percent to $22.45 billion, marking the search giant’s seventh straight quarter of double-digit revenue growth.

The company authorized a $7 billion repurchase of its Class C stock, pleasing investors who had been craving more after a $5 billion repurchase last year.

Google is competing fiercely with social network Facebook Inc for dominance in the fast-growing mobile advertising market. Google Chief Executive Sundar Pichai touted the company’s gains in the space, and was bullish about recent product launches such as the Google Assistant, the Google Home smart speaker and refinements to the enterprise cloud business.

The products are aimed at the rise of voice search, which many analysts believe will succeed keyboards and touch screens as a primary way users interact with devices.

“We feel well positioned as we transition to a new era of computing,” Pichai said in an conference call. “This new era is one in which people will experience computing more naturally and seamlessly in the context of their lives, powered by intelligent assistants and the cloud.”

Shares of Alphabet, the world’s No. 2 company by market value, were up 1.6 percent in after-hours trading.

The company posted third-quarter adjusted earnings per share of $9.06, beating expectations of $8.63 a share on revenues of $22.05 billion, according to Thomson Reuters I/B/E/S estimates.

Google has been dogged by concerns about how it would nudge its vast web advertising business toward mobile, but the company’s recent performance has reassured Wall Street that the transition is well underway, said analyst Colin Gillis of BGC Partners.

“It’s showing that even though they’ve hit lifetime highs, there’s still room to run,” he said.

Advertising revenue, the company’s lifeblood, rose 18.1 percent to $19.82 billion in the third quarter. Paid clicks, or ads for which advertisers pay only when users click on them, rose 33 percent, compared with a rise of 29 percent in the second quarter.

Cost-per-click, or the average amount advertisers pay Google, fell 11 percent in the latest period, but investors are willing to forgive the slump, for now, as it suggests strong mobile growth, said analyst Kerry Rice of Needham Co.

YouTube continued to post robust gains, Pichai said. Over the past year, Google, Facebook and Twitter Inc have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users’ undivided attention.

Advertising accounted for 89.1 percent of Google’s total revenue in the quarter, and analysts are eager for the company to tap new sources of growth.

One of the leading contenders is Google’s cloud business, which drove a 38.8 percent rise in the company’s “other revenue.”

“As we head into 2017, I expect cloud to be one of our largest areas of investment,” Pichai said.

A relatively late entrant to the cloud business, Google is trying to steal market share from industry leaders Inc and Microsoft Corp. Amazon on Thursday reported a 55 percent revenue increase in its cloud business.

“I would hesitate to say they are competing head-to-head, but they are making up for lost ground,” Rice said.

Alphabet’s “Other Bets” unit generated revenue of $197 million, primarily from Nest, Google Fiber and Verily units, Chief Financial Officer Ruth Porat said during the call.

Alphabet said this week it was pausing the rollout of Fiber, a high-speed internet service, in some U.S. cities and that its leader, Craig Barratt, would leave.

Porat played down analysts’ concerns of instability at Other Bets, which has suffered a wave of executive departures, including Nest founder Tony Fadell, self-driving car technology chief Chris Urmson and, most recently, Barratt.

“As we reach for moonshots that will have a big impact in the longer term, it’s inevitable that there will be course corrections along the way, and that some efforts will be more successful than others,” Porat said.

Other Bets, which also includes research unit X, reported an operating loss of $865 million, down from a year-ago loss of $980 million. The narrowing loss suggests Porat is instilling the financial discipline investors have long hoped to see from the company, said Gillis.

“Everybody loves Ruth,” he said.

(Reporting by Narottam Medhora in Bengaluru and Julia Love; Editing by Savio D’Souza and Andrew Hay)

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Meet George Jetson: Uber sees flying commuters in 10 years

SAN FRANCISCO Flying commuters like George Jetson could be whizzing to work through the sky less than 10 years from now, according to ride-services provider Uber, which believes the future of transportation is literally looking up.

Uber Technologies Inc [UBER.UL] released a white paper on Thursday envisioning a future in which commuters hop onto a small aircraft, take off vertically and within minutes arrive at their destinations. The flyers would eventually be unmanned, according to the company.

It sounds like the opening sequence to “The Jetsons”, the 1962 U.S. cartoon about a future filled with moving sidewalks, robot housekeepers and spaceflight, but Uber sees flying rides as feasible and eventually affordable.

Uber already offers helicopter rides to commuters in Brazil. The company plans to convene a global summit early next year to explore on-demand aviation, in which small electric aircraft could take off and land vertically to reduce congestion and save time for long-distance commuters, and eventually city dwellers.

Others have also envisioned such aircraft, akin to a helicopter but without the noise and emissions. Vertical take off and landing aircraft (VTOL) have been studied and developed for decades, including by aircraft makers, the military, NASA and the Federal Aviation Administration.

Uber is already exploring self-driving technology, hoping to slash costs by eliminating the need for drivers in its core business of on-demand rides. On-demand air transport marks a new frontier, set squarely in the future.

Uber’s vision, detailed in a 97-page document, argues that on-demand aviation will be affordable and achievable in the next decade assuming effective collaboration between regulators, communities and manufacturers.

Ultimately, using VTOLs for transport could be less expensive than owning a car, Uber predicted.

Such on-demand VTOL aircraft would be “optionally piloted,” Uber said, where autonomous technology takes over the main workload and the pilot is relied on for situational awareness. Eventually, the aircraft will likely be fully automated, Uber said.

Hurdles include battery technology. Batteries must come down in cost and charge faster, become more powerful and have longer lifecycles.

Regulatory hurdles must also be solved such as certification by aviation regulators as well as infrastructure needs, such as more takeoff and landing cites.

Uber plans to reach out to stakeholders within the next six months to explore the implications of urban air transport and share ideas before hosting a summit in early 2017 to explore the issues and solutions and help accelerate urban air transportation.

(Reporting By Alexandria Sage; Editing by David Gregorio)

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Amazon forecast for holiday seasons disappoints as investment rises Inc provided a disappointing forecast for the holiday season quarter while posting earnings that missed Wall Street estimates in the third quarter, as it invested heavily on shipping, video offerings and other projects, sending its shares down nearly 5 percent.

Investors and analysts are trying to gauge how much more Amazon plans to invest in its various ventures, and it unnerved some that it offered wide ranges in its outlook.

“Amazon really doesn’t know what’s going to happen this quarter,” said analyst Jan Dawson of Jackdaw Research, noting investors disapproved of the “uncertainty” in the company’s guidance.

Amazon forecast net sales of between $42 billion and $45.5 billion for the current-quarter, which includes the all-important holiday shopping season.

The $43.75 billion midpoint of the outlook trailed expectations of $44.58 billion, according to Thomson Reuters I/B/E/S, and Amazon also forecast that operating income would range from nothing to $1.25 billion.

“At the high end of their operating profit guidance, the Street is still $250 million above them,” said Michael Pachter, analyst at Wedbush Securities.

Amazon Chief Financial Officer Brian Olsavsky told reporters that new warehouses and spending on video drove up third-quarter costs.

“There’s a lot of hiring to support the projects we’re investing in,” he said.

Total operating expenses rose 31.5 percent to $10.94 billion, including investments in Amazon Web Services and the Prime subscription program internationally.

Amazon posted net income that rose to $252 million, or 52 cents per share, from $79 million, or 17 cents per share, a year earlier. It was company’s sixth straight profitable quarter.

But earnings per share were far short of the average estimate of 78 cents, according to Thomson Reuters I/B/E/S.

Amazon said earlier this month it would hire more than 120,000 seasonal workers in the United States for the holiday season, 20 percent more than last year, highlighting the growing threat the company poses to traditional retailers.

The company reported a 29 percent rise in quarterly revenue, in line with expectations, boosted by a big jump in sales from its Prime Day annual shopping festival, strong back-to-school shopping and its market-leading cloud services business.

The world’s biggest online retailer said its net sales rose to $32.71 billion in third quarter ended Sept. 30 from $25.36 billion a year earlier.

Amazon said in July that customers placed 60 percent more orders worldwide in its second Prime Day sale. It did not provide sales figures at the time.

Revenue from Amazon Web Services, the company’s cloud services business, surged 55 percent to $3.23 billion, beating the average estimate of $3.19 billion, according to market research firm FactSet StreetAccount.

Long known for heavy spending and losses, Amazon has found consistent profit from selling computer storage and services in the cloud.

The meteoric rise in sales in the market-leading business reflects how companies globally are turning to Amazon and Microsoft Corp to host their data, leaving once critical software programs and hardware in the dust.

Amazon’s net sales in North America, its biggest market, jumped 25.8 percent to $18.87 billion in the latest quarter.

Up to Thursday’s close of $818.36, Amazon’s shares had risen 21.1 percent this year. They were down to $779 in after-hours trade.

(Reporting by Anya George Tharakan in Bengaluru; Writing by Peter Henderson; Editing by Ted Kerr, Bernard Orr)

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Apple adds touch screen keys to MacBook Pro, price jump startles some

CUPERTINO, Calif. Apple Inc unveiled a revamped MacBook Pro on Thursday, adding a fingerprint reader, replacing function keys with a small touch screen and raising prices by several hundred dollars.

The first redesign in several years is a sign Apple still sees a role for the product that launched the company, even though its iPhone has become the flagship product.

Ben Bajarin, an analyst at Creative Strategies, described the changes as “important incremental upgrades” which would convince people with old Macs to trade up to the smaller, faster model.

But he noted that Microsoft Corp’s competing Surface notebook allowed touch on its main screen.

“A lot of people spend a lot of time on these machines. The key for them is incremental innovations that make their job easier,” said Bajarin. “That’s value.”

The new pricing is roughly line with expectations, Bajarin said, but it surprised some.

On Twitter, many potential buyers were underwhelmed by the new features and posted pictures of people crying about the new prices. Others tweeted that they hoped for more products.

Apple shares fell 1.2 percent.


Customers will be able to access the new machines with Touch ID, the fingerprint reader also used on iPhones, and use the touch screen bar of keys, called the Touch Bar, to control programs on the main screen.

The buttons, which change depending on what programs the user is running, effectively act as a second screen, showing older versions of a picture being edited, for example.

Other computer makers have chosen to use touch screens for the main display screen, including Microsoft’s first-ever desktop and a revamped Surface Book laptop, launched on Wednesday.

The MacBook Pro with Touch ID, Touch Bar and a 13-inch screen will start at $1,799, compared with $1,299 for the previous 13-inch product. Apple also will offer a 13-inch MacBook Pro without the Touch ID and Touch Bar for $1,499.

The 15-inch notebook will start at $2,399, compared with $1,999 for the previous version.

The Mac line accounted for about 11 percent of Apple sales in the just-finished fiscal year, with the number of machines sold down by 10 percent to 18.5 million.

Apple has steadily upgraded components to the MacBook Pro, but the overall form has changed little, and PC Week described the unit being replaced as a “fossil” which had not had a major design change since 2013.

Apple also announced a new TV App that would work on Apple TV, iPhone and iPad products, in an effort to make it easier to tune into programs across devices.

The company also said that it would integrate Twitter Inc feeds into live sports games on Apple TV, adding a social element to the product.

(Reporting by Deborah M. Todd and Julia Love; Writing by Peter Henderson; Editing by Lisa Shumaker and Bill Rigby)

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Alphabet posts strong revenue on mobile, video; sets buyback

Google parent Alphabet Inc (GOOGL.O) reported stronger-than-expected quarterly revenues and earnings on Thursday, helped by strong advertising sales on mobile devices and YouTube, and the search company authorized a $7 billion repurchase of its Class C stock.

Alphabet, along with Facebook Inc (FB.O), dominates the fast-growing mobile advertising market.

Shares of Alphabet, the world’s No. 2 company by market value, were up 1.6 percent in after-hours trading.

The company posted third-quarter adjusted earnings per share of $9.06 on revenue of $22.45 billion. Analysts expected earnings of $8.63 a share and revenue of $22.05 billion, according to estimates on Thomson Reuters I/B/E/S.

Google has been dogged by concerns about how it would nudge its vast web advertising business toward mobile, but the company’s recent performance has reassured Wall Street that the transition is well underway, said analyst Kerry Rice of Needham Co.

“They are just one of the best positioned companies for the future of the internet,” Rice said.

Google’s ad revenue rose 18.1 percent to $19.82 billion in the third quarter, accounting for 89.1 percent of Google’s total revenue, compared with 89.8 percent of revenue in the second quarter.

Paid clicks rose 33 percent, compared with a rise of 29 percent in the second quarter. Paid clicks are those ads on which an advertiser pays only if a user clicks on them.

Cost-per-click, or the average amount advertisers pay Google, fell 11 percent in the latest period after dropping 7 percent in the second quarter.

Analysts on average had expected a decline of 7.9 percent, according to FactSet StreetAccount.

Per-click costs have been falling as people shift to mobile devices from desktops. Because of the limited space, advertising on mobile devices is generally cheaper.

Investors are willing to forgive the falling cost-per-click for now as it suggests strong mobile growth, Rice said.

“Over the last few quarters it seems investors have worried less about that as long as paid clicks are also going up,” he said.

Research firm eMarketer has estimated that Google will capture $52.88 billion in search ad revenue in 2016, or 56.9 percent of the global market.

Google’s Other Revenue, which includes the company’s increasingly important cloud business, jumped 38.8 percent after rising 33 percent in the second quarter.

The cloud business competes with services offered by market-leader Inc (AMZN.O), Microsoft Corp (MSFT.O) and IBM Corp (IBM.N).

Alphabet’s Other Bets generated revenue of $197 million, primarily from Nest, Fiber and Verily units, Chief Financial Officer Ruth Porat said on an earnings call. Other Bets capital expenditure was driven by fast-internet service Fiber.

Alphabet said this week it was pausing roll out of Fiber in some U.S. cities.

“Our revenue growth reflects our sustained investment in innovation,” Porat said. “Within Google, this relentless focus has led to innovations across our advertising platforms that have driven continued strong growth on a very large base while, at the same time, we’re building new businesses to serve as sources of future revenue growth.”

Other Bets reported an operating loss of $865 million. In the year earlier period, revenue was $141 million and the loss was $980 million.

Other Bets includes broadband business Google Fiber, home automation products Nest, self-driving cars as well as X, the company’s research facility that works on “moon shot” ventures.

The narrowing loss suggested Chief Financial Officer Ruth Porat is instilling the kind of financial discipline investors have long hoped to see from the company, said analyst Colin Gillis of BGC Partners.

“Everybody loves Ruth,” he said.

The company’s consolidated revenue rose to $22.45 billion in the three months to Sept. 30 from $18.68 billion a year earlier.

Net income rose to $5.06 billion, or $7.25 per Class A and B share and Class C capital stock, from $3.98 billion, or $5.73 per share, a year earlier. (

Up to Thursday’s close of $817.35, Alphabet’s shares had risen 5.1 percent since the start of the year.

(Reporting by Narottam Medhora in Bengaluru and Julia Love; Editing by Savio D’Souza and Andrew Hay)

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Stocks dip as earnings pour in, consumer discretionary lags

NEW YORK U.S. stocks dipped in a choppy session after the latest round of earnings reports, as a decline in the consumer discretionary sector and interest-rate sensitive stocks outweighed gains in healthcare names.

The SP 500 healthcare index .SPXHC rose 0.53 percent to help keep the SP 500 near the unchanged mark, buoyed by strong results and forecasts from Bristol-Myers (BMY.N), up 5.4 percent and Celgene (CELG.O), up 6.4 percent. The two drugmakers were the top boosts to the SP 500.

Profits at SP 500 companies have largely exceeded analysts’ estimates for the third quarter so far, setting up the first profit growth since the second quarter of 2015. Thomson Reuters I/B/E/S data shows third-quarter earnings are now expected grow 2.6 percent, up from the 0.5 percent decline anticipated at the start of October.

Sectors linked to interest rates weighed, however, as yields on benchmark 10-year Treasury notes US10YT=RR touched a five-month high of 1.87 percent.

The SP real estate sector .SPLRCR was down 2.5 percent, its worst decline in nearly six weeks, while utilities .SPLRCU shed 0.5 percent.

“If we can continue to see actual growth in revenue and growth in EPS, we may see this four-quarter drop in earnings growth come to an end. That would be really positive but we are too early in the earnings season to say that,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.

“To the extent that the 10-year has popped, that is also providing a bit of a headwind for equities.”

Comcast (CMCSA.O) was among the top drags on the SP 500 and Nasdaq, falling 1.7 percent after Barclays and Deutsche Bank cut their price targets and cited increased competition from ATT-owned DirecTV Now. The stock is down nearly 6 percent over the past three sessions.

Comcast, along with O’Reilly Auto (ORLY.O), whose quarterly earnings missed expectations, were the primary drags on the consumer discretionary index .SPLRCD, which lost 0.9 percent. O’Reilly shares touched a five-month low and were on pace for their worst day in over four years.

The Dow Jones industrial average .DJI fell 29.65 points, or 0.16 percent, to 18,169.68, the SP 500 .SPX lost 6.39 points, or 0.3 percent, to 2,133.04 and the Nasdaq Composite .IXIC dropped 34.29 points, or 0.65 percent, to 5,215.97.

After the market close, Google parent Alphabet (GOOGL.O) rose 2.3 percent, while online retailer (AMZN.O) tumbled more than 6 percent after their quarterly results.

Declining issues outnumbered advancing ones on the NYSE by a 2.61-to-1 ratio; on Nasdaq, a 1.99-to-1 ratio favored decliners.

The SP 500 posted 16 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 65 new highs and 120 new lows.

About 7.2 billion shares changed hands in U.S. exchanges, above the 6.35 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

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