News Archive


Citigroup names Lo as Asia head of private banking business

HONG KONG (Reuters) – Citigroup Inc has appointed veteran Steven Lo as Asia head of its private banking business unit, replacing Bassam Salem who is retiring from that role in February, according to an internal memo seen by Reuters.

Lo joined Citi’s private banking business more than 26 years ago as an ultra-high networth banker in Vancouver, and moved to Asia in 2001 and has worked in different roles in the region since then, the staff memo sent on Friday showed.

A Citi spokesman in Hong Kong confirmed the content of the memo.

Reporting by Sumeet Chatterjee; Editing by Himani Sarkar

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Amazon sales surge after Whole Foods acquisition, busy Prime Day

(Reuters) – Amazon.com Inc (AMZN.O) on Thursday said its sales surged over the summer and profit trounced expectations, as shoppers jumped at “Prime Day” promotions on its website and bought groceries at its newly acquired chain of Whole Foods Market stores.

Shares rose more than 7 percent in after-hours trade.

Amazon is winning business from older, big box rivals by delivering virtually any product to customers at a low cost, and at times faster than it takes to buy goods from a physical store. It acquired Whole Foods for $13.7 billion in August to help it deliver groceries to shoppers’ doorsteps.

Amazon’s results defied expectations that it would invest nearly all of its earnings into new areas as it has in the past. The world’s largest online retailer said net income rose to $256 million, or 52 cents per share in the quarter ended Sept. 30. Analysts on average were expecting 3 cents per share, according to Thomson Reuters I/B/E/S.

“This company has finally gotten itself to the point where it can sustain its spending growth and still leave some crumbs for shareholders,” said Wedbush Securities analyst Michael Pachter.

Prime Day, a summer marketing event Amazon has created to replicate the shopping frenzy that is more typical of the winter holiday season, helped boost sales.

Revenue rose 34 percent to $43.7 billion in the third quarter, including $1.3 billion in sales from Whole Foods. Analysts had expected $42.1 billion.

“There’ll be a lot of integration,” Amazon’s Chief Financial Officer Brian Olsavsky said on a call with analysts, citing how Amazon’s two-hour delivery service Prime Now could work with Whole Foods, for instance.

“We think we’ll also be developing new store formats,” he said.

In a first, Amazon broke out sales for its online retail business and for its physical bookstores and Whole Foods locations. Revenue from its online stores jumped 22 percent to $26.4 billion, the fastest growth Amazon has seen in the segment in more than a year.

Key to its success has been signing more people up for Amazon Prime, its fast-shipping and video-streaming club, whose members tend to buy more from the company. Revenue from subscription fees such as Prime grew 59 percent to $2.4 billion.

And Amazon Web Services (AWS), which handles data and computing for large enterprises, saw its profit margin expand from the previous quarter. It posted a 41.9 percent rise in sales to $4.58 billion, beating the average estimate of $4.52 billion, according to analytics firm FactSet.

“They are firing on all cylinders. The machine is churning,” Benchmark Co analyst Daniel Kurnos said.

STILL BETTING ON HOLLYWOOD

Amazon shares have a high valuation, with a price-to-earnings ratio more than eight times that of cloud-computing rival Microsoft Corp (MSFT.O), for instance.

Unlike peers, Amazon runs on razor-thin profit margins because it sinks most of its profit back into its business.

This quarter, which includes the shopping holiday Black Friday, Amazon said it expects operating profit between $300 million and $1.65 billion. Analysts were expecting $930.78 million, according to Thomson Reuters I/B/E/S.

Amazon’s profit is going toward a dizzying number of investments: warehouses for faster shipping, data centers for AWS, and a 77 percent uptick in employees last quarter, including Whole Foods workers.

The company plans to spend more on video content next year as well, Olsavsky said. Analysts estimate Amazon will have spent $4.5 billion this year.

The commitment to content comes after Amazon Studios chief Roy Price resigned last week, and other top studio hands left the company.

It is unclear what impact the shakeup may have on Amazon’s ability to secure video that competes with Netflix Inc (NFLX.O) for viewers’ attention.

The company’s shares, which closed down 0.05 percent on Thursday, rose about 7.5 percent to $1,046 in after-hours trading following the earnings statement. They had gained about 30 percent this year.

Reporting by Jeffrey Dastin in San Francisco and Aishwarya Venugopal in Bengaluru; Editing by Peter Henderson and Lisa Shumaker

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Alphabet’s mobile ad revenue surges; shares jump

SAN FRANCISCO (Reuters) – Alphabet Inc on Thursday reported stronger-than-expected advertising sales and higher operating margins, boosting its shares as investors brushed off concerns about higher costs for acquiring mobile users.

The stock was up nearly 3 percent at $1,001.50 after the bell. They have gained 25 percent this year.

Third-quarter revenue for Alphabet, the parent company of Google, jumped 24 percent to $27.8 billion, above the average analysts’ estimate of $27.2 billion. Profit of $6.7 billion, or $9.57 per share, was well ahead of Wall Street estimates.

Alphabet, along with much of the tech sector, has enjoyed torrid growth in recent years as advertising moves from traditional media to the internet and consumers flock to an ever-expanding array of digital devices.

While Google faces political pressure, especially in Europe, over its growing dominance and its role in spreading propaganda online, those problems have yet to hit the bottom line.

Google Chief Executive Sundar Pichai told analysts that efforts to attract “both large and small advertisers” around the world were paying off, especially in Asia, where sales rose 29 percent to $4.2 billion.

The third quarter was the 15th in a row in which Alphabet has shown double-digit, year-over-year consolidated sales increases. The pace is not slowing down, with the growth rate reaching its highest level in nearly five years.

Ad sales at Google, Alphabet’s main operating unit, account for the vast majority of the company’s revenue. The ad business faces competition from Facebook Inc but has continued to grow as more users turn to Google’s YouTube and mobile search services.

Alphabet shares trade for almost 25.8 times expected earnings and Facebook at about 26.5 times, according to Thomson Reuters data.

Investors have been increasingly concerned about a sharp rise in costs for getting ads in front of users as Google pays Apple Inc and other companies to integrate Google search into mobile products and services.

The payments are included in traffic acquisition costs, or TAC, and they rose 54 percent in the quarter, accounting for 12 percent of ad sales.

Pichai defended the partnerships in response to several analysts’ questions on Thursday, calling the deals “a win-win construct” because Google performs “better when our partners do well.”

“We’re pretty comfortable with how we’re approaching it,” he said.

Other analysts said revenue growth and cost controls made TAC increases less of an issue.

“There is way too much focus on TAC as a cost – it’s a great investment for Google to control the publishing ecosystem,” said Richard Kramer of Arete Research.

James Cordwell, an analyst at Atlantic Equities, said: “TAC is surging, but the trade-off between growth and margin is a good one.”

The third-quarter profit margin of 24 percent marked Alphabet’s highest since 27 percent in first quarter of 2013.

Google’s other revenue, which includes hardware such as the Pixel smartphones and Home speakers as well as the cloud computing business, also enjoyed solid growth. Sales from non-ad businesses rose 40 percent from a year ago to $3.4 billion in the quarter.

Among Google’s top priorities is expanding its salesforce to catch up with Amazon Web Services in providing corporate computing via large data centers, Pichai said. Alphabet does not break out cloud revenue, but Jefferies analysts estimate it at about 15 percent of Google’s other revenue.

Google also is trying to take on Apple in the high-end smartphone business with the Pixel. The company deepened its investment in September, agreeing to acquire 2,000 engineers from smartphone maker HTC Corp for $1.1 billion. Google’s Android operating system already powers most non-Apple smartphones.

But Google’s second-generation Pixel had a rough debut last week, with users complaining of a faulty screen and clicking noises during calls. The company responded on Thursday by doubling the warranty period for the smartphones to two years and promising to issue software fixes.

Losses from Alphabet’s Other Bets segment, which includes the Google Fiber broadband service and smart thermostat maker Nest, narrowed to $812 billion from $861 billion. The change reflected both an increase in sales across the companies and scaled back expansion plans for Fiber.

Google faces political uncertainty as European regulators crack down on its business practices and U.S. critics call for greater regulation of the tech industry.

The company recorded in the second quarter a $2.7 billion European Commission fine for unfair treatment of shopping websites in search results. Antitrust experts have said another fine could come by the end of year, as the EC investigates its distribution deals with smartphone vendors and wireless carriers.

Apparently alluding to political concerns about extremist propaganda and misinformation appearing on Google services, Pichai told analysts on Thursday that the company cared “deeply about the quality of information” it provides and would “constantly work to get this right.”

Reporting by Arjun Panchadar in Bengaluru; Editing by Leslie Adler and Richard Chang

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Toymaker Mattel to miss FY revenue forecast, halts dividend

(Reuters) – Toymaker Mattel Inc (MAT.O) said on Thursday it would miss its full-year revenue forecast and decided to stop dividend from the fourth quarter to beef up its faltering business that has been hurt by the bankruptcy of its largest customer Toys‘R‘Us.

Shares of the company, which reported weaker-than-expected quarterly results, fell as much as 25 percent in after-market trading.

“(For the) full year, we will clearly not achieve the top line expectation we discussed in June,” Mattel’s Chief Executive Margo Georgiadis said.

The world’s largest toymaker had forecast mid-to-high single digit revenue growth for the medium term in June.

Mattel has been struggling with lagging sales for four of the past six quarters and is facing an inventory glut amid weak demand for its core brands from retailers.

Key retail partnerships for its brands such as Thomas Friends and Monster High were 15 percent to 20 percent lower than in 2016, Georgiadis said on the call.

Under Georgiadis, who became the CEO in January, Mattel is trying to free up funds and save at least $650 million in net costs over the next two years.

The company replaced its veteran finance chief Kevin Farr last month and decided to cut its dividend payout by more than 60 percent.

The latest suspension of its quarterly dividend of 15 cents a share is expected to save $50 million per quarter, the company said on Thursday.

The company said the bankruptcy of Toys‘R‘Us resulted in half of the decline in its North America revenue and most of the 7 percent fall in gross margins.

The toy retailer, which filed for bankruptcy in September, contributed 11 percent to Mattel’s revenue in 2016. Toys‘R‘Us owes creditors $5 billion with Mattel exposed to about $135 million in unsecured claims for payment.

However, the retailer is set to receive $3.1-billion debtor-in-possession financing, which is likely to help the Toys‘R‘Us pay some of its suppliers such as Mattel and keep 1,600 stores in operation for the crucial holiday season.

Rival Hasbro (HAS.O) and Jakks Pacific (JAKK.O) too were impacted by Toys‘R‘Us going out of business.

Net sales fell 13 percent to $1.56 billion in the third quarter ended Sept. 30, while the company posted an adjusted profit of 9 cents per share.

Analysts had expected revenue of $1.81 billion and adjusted profit of 57 cents, according to Thomson Reuters I/B/E/S.

The company’s shares were down 18.7 percent at $12.49 in after-market trading on Thursday.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Arun Koyyur

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CVS makes more than $66 billion bid for Aetna: sources

(Reuters) – U.S. pharmacy operator CVS Health Corp has made an offer to acquire No. 3 U.S. health insurer Aetna Inc for more than $200 per share, or over $66 billion, people familiar with the matter said on Thursday.

A deal would merge one of the nation’s largest pharmacy benefits managers and pharmacy operators with one of its oldest health insurers, whose far-reaching business ranges from employer healthcare to government plans nationwide.

Aetna shares rose more than 11 percent, or $18.48, to $178.60, while CVS shares fell 3 percent, or $2.22, to $73.31, after the Wall Street Journal first reported on the talks earlier on Thursday.

Healthcare consolidation has been a popular route for insurers and pharmacies, under pressure from the government and large corporations to lower soaring medical costs.

Pharmacy benefit managers (PBMs) such as CVS negotiate drug benefits for health insurance plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers.

They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines in PBM formularies with low co-payments.

A tie-up with Aetna could give CVS more leverage in its price negotiations with drug makers. But it would also subject it to more antitrust scrutiny.

The deal could also help counter pressure on CVS’s stock following speculation that Amazon.com Inc is preparing to enter the drug prescription market, using its vast e-commerce platform to take market share from traditional pharmacies.

CVS made the offer earlier this month, although the two companies have been in discussions about a potential deal for several months, the sources said.

These talks were carried out primarily between CVS Chief Executive Officer Larry Merlo and Aetna CEO Mark Bertolini, and were aimed at making executives comfortable with the idea of a merger, the sources said.

CVS and Aetna started discussing terms only recently, and a deal is not expected for a few weeks, one of the sources added, cautioning that the pace of the talks could accelerate given the publication of the negotiations.

The sources did not specify how much of CVS’ bid is cash versus stock, but given CVS’s and Aetna’s market capitalizations of $77 billion and $54 billion, respectively, a substantial stock component is likely in any deal.

Aetna and CVS declined to comment.

Aetna earlier this year closed the door on a deal with rival insurer Humana Inc after antitrust regulators said that combination and a rival deal between Anthem Inc and Cigna Corp were anti-competitive.

UNCERTAIN TIMES AHEAD

The deal comes after years of major changes to the U.S. health insurance industry under former President Barack Obama, whose 2010 Affordable Care Act created new ground rules for how insurers operate and expanded insurance to 20 million more Americans.

Republican President Donald Trump has promised to turn back many of the Affordable Care Act’s facets, but Congress has not been able to agree on a repeal or a replacement. The lack of progress – as well as Trump’s executive order to bring down healthcare costs – has created uncertainty for insurers as they head into 2018.

After the deal with Humana fell apart, Bertolini has said that he did not believe large deals were possible in the insurance industry.

But analysts have speculated about a tighter partnership between Aetna and CVS since early in the year. CVS and Aetna have a long-term contract in which CVS has provided pharmacy benefits for Aetna customers.

“Aetna really makes the best sense” said Jeff Jonas, a portfolio manager at Gabelli Funds. “It’s their largest client on the PBM side. They really have similar views as to where healthcare should go, which is to the retail setting.”

Jonas, who owns both Aetna and CVS shares, noted the two companies were already talking about working together on Minute Clinic, on home infusion and other services.

“To go from that to a full merger is a big step but it’s not huge,” he said.

Last week No. 2 insurer Anthem Inc. announced plans to manage its own pharmacy benefits with the help of CVS, a move that would give it a set-up similar to UnitedHealth Group Inc. and its Optum unit. Insurers want more control over the pharmaceutical component of care as they implement pricing schemes with doctors and hospitals that are based on health outcomes, not just procedures.

They also want to work on driving down costs, and as a pharmacy benefit manager, would negotiate directly with drugmakers.

Reporting by Carl O’Donnell, Greg Roumeliotis, Caroline Humer and Bill Berkrot in New York; Editing by Dan Grebler and Diane Craft

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/djfg-xiMi5o/cvs-makes-more-than-66-billion-bid-for-aetna-sources-idUSKBN1CV3CM

Microsoft beats profit estimates on gains from cloud services

(Reuters) – Microsoft Corp (MSFT.O) reported better-than-expected quarterly profit on Thursday as demand for its cloud computing services for companies rose and its personal computer software business stabilized.

Shares of the world’s largest software company rose 3.1 percent to $81.20 in trading after the bell.

Microsoft’s focus on fast-growing cloud applications and platforms is helping it beat slowing demand for personal computers that has hurt sales of Windows – the software that powered the company to the top in the 1990s.

Under Chief Executive Satya Nadella, Microsoft’s cloud business – which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform – has emerged as a major source of growth.

Revenue from Microsoft’s intelligent cloud business rose nearly 14 percent to $6.92 billion in Microsoft’s fiscal first quarter, ended Sept. 30. Analysts on average had expected $6.70 billion, according to financial data and analytics firm FactSet.

Revenue from Azure, which competes with Amazon.com Inc’s (AMZN.O) Amazon Web Services and offerings from Alphabet Inc’s (GOOGL.O) Google, IBM (IBM.N) and Oracle Corp (ORCL.N), grew 90 percent compared to a 97 percent growth rate in the preceding quarter.

Azure’s strong performance helped lift the gross margin at Microsoft’s cloud business to 57 percent, said Stephanie Rodriguez, director of investor relations for Microsoft.

Microsoft said its commercial cloud annualized revenue run rate reached $20.4 billion in the quarter. In 2015, Nadella set a target of $20 billion in cloud revenue by 2018.

In a call with analysts after earnings, Nadella said retailer Costco Wholesale Corp (COST.O) recently chose Azure its hybrid cloud platform.

Revenue from Microsoft’s personal computing division, its largest by revenue, fell 0.2 percent to $9.38 billion but handily beat analysts’ estimate of $8.81 billion.

The unit includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers.

After two straight quarters of declining Surface revenue, Microsoft notched a 12 percent year-over-year increase in revenue for its tablets and laptops in the latest quarter, helped by the release of a new Surface in May.

Microsoft also benefited from a 13 percent year-over-year increase in revenue from Dynamics, its enterprise and sales software business which competes with Salesforce.com Inc (CRM.N).

“Even though best in class is Salesforce, Microsoft has a good enough product to get a large amount of business,” said Kim Forrest, an equity analyst at Fort Pitt Capital Group.

“Microsoft is set for an acceleration of growth and bookings with margin concerns that were overblown heading into 2018,” said Daniel Ives at research firm GBH Insights. “A slowly improving PC environment is also a modest tailwind for Microsoft with cloud remaining the Trojan horse growth driver for Redmond over the coming years.”

The technology company, based in Redmond, Washington, reported net income of $6.58 billion, or 84 cents per share, up from $5.67 billion, or 72 cents per share, a year earlier. (bit.ly/2lkGlyz)

Revenue rose 12 percent to $24.54 billion.

Microsoft’s shares had risen nearly 27 percent this year through Thursday, eclipsing the 14.4 percent gain in the broader SP 500 .SPX.

Reporting by Salvador Rodriguez in San Francisco and Pushkala A in Bengaluru; Editing by Arun Koyyur and Bill Rigby

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/2YeXdxIQLqs/microsoft-beats-profit-estimates-on-gains-from-cloud-services-idUSKBN1CV3AZ

CSX executive shakeup rattles employees, investors; shares drop

(Reuters) – The resignation of two prominent female executives at CSX Corp (CSX.O) hours before CSX canceled a long-planned investor conference this week rattled employees and investors on Thursday, sending the No. 3 U.S. railroad’s shares down 1 percent.

The resignations prompted concerns over the health of 72-year-old Chief Executive Hunter Harrison, and fears of deeper turmoil as CSX undergoes a major overhaul.

“We think investors suspect there could be something else behind this,” said Cowan Co analyst Jason Seidl, adding that he received many calls and emails from concerned investors. “We do not think the departure of these three people, long-tenured executives at the firm, came on completely amicable terms.”

Jim Foote, who worked for Harrison at Canadian National Railway Co (CNR.TO) and is well-versed in his “precision scheduled railroading” model for driving efficiency, will replace Chief Operating Officer Cindy Sanborn and Chief Sales and Marketing Officer Fredrik Eliasson, who both plan to resign next month.

CSX said the decision to postpone the investor conference was “to allow Mr. Foote to familiarize himself with the company’s operations and the teams he is now leading, so he would be in a better position speak to CSX’s future opportunities.”

Sanborn, and corporate counsel Ellen Fitzsimmons, who will retire, were likely the two highest-ranking women in the rail industry, said independent rail analyst Anthony Hatch.

Harrison praised the departing executives in an internal e-mail seen by Reuters.

“Although we will miss the talents of these valued leaders, we are pleased to welcome another highly capable leader to our executive team,” he said.

One senior CSX manager who spoke to Reuters on condition of anonymity said Sanborn’s resignation was deeply unsettling. Sanborn joined CSX in 1987, is the daughter of a former president of Conrail, acquired by CSX and Norfolk Southern (NSC.N) in 1997, and holds $6.47 million in CSX shares.

“She is not the kind of person who would automatically resign unless she was forced to,” the manager said.

Another Midwest-based employee said the departures suggested Harrison was removing executives who disagreed with his operating philosophy.

“Sanborn is a major stockholder, she has a lot of influence with big customers, a lot of influence in Washington,” the employee said.

Morningstar analyst Keith Schoonmaker wrote in a client note that changes matched Harrison’s record at Canadian railroads he turned around before taking the helm at CSX in March.

“It’s hard to argue with his results at Canadian National and Canadian Pacific (CP.TO),” Schoonmaker wrote.

CSX shares closed down just over 1 percent at $52.35 on Thursday, but are up nearly 46 percent so far this year.

Reporting by Eric M. Johnson in Seattle; Editing by Dan Grebler

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/DnrR5RnMUbM/csx-executive-shakeup-rattles-employees-investors-shares-drop-idUSKBN1CV3GH

Amazon gains wholesale pharmacy licenses in many U.S. states: report

(Reuters) – Amazon.com Inc has gained approval from a number of state pharmaceutical boards to become a wholesale distributor, St. Louis Post-Dispatch reported on Thursday, citing public records.

The news send the shares of U.S. pharmacy chains, drug wholesalers and pharmacy benefit manager Express Scripts down.

An Amazon spokesperson said it doesn’t comment on rumors or speculation.

Earlier this month, a source-based report by CNBC said Amazon would decide before Thanksgiving whether to move into selling prescription drugs online.

The ecommerce giant is reported to be in talks with mid-market pharmacy benefit managers and has been hiring talent to assess the drug retailing market for its entry, brokerage firm Leerink had said.

Reporting by Munsif Vengattil in Bengaluru; Editing by Arun Koyyur

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/PKWIxlnJ_8o/amazon-gains-wholesale-pharmacy-licenses-in-many-u-s-states-report-idUSKBN1CV388

GE explores divesting its transportation, healthcare IT businesses: sources

(Reuters) – General Electric Co (GE.N) is exploring divesting its transportation and healthcare information technology businesses, as it seeks to reshape its portfolio under new Chief Executive John Flannery, people familiar with the matter said.

Such a move would help GE to meet more than half of its stated goal of shedding more than $20 billion worth of assets, the sources said this week. There is no certainty that GE will proceed with these divestitures, the sources added.

The sources asked not to be identified because the deliberations are confidential. GE declined to comment.

The move would make GE the latest U.S. industrial conglomerate to go ahead with asset divestitures after Honeywell International Inc (HON.N) announced earlier this month it would part with some of its businesses by creating two new publicly listed companies.

Ed Garden, a founding partner at activist investor Trian Fund Management who was recently given a board seat at GE, has also acted as a catalyst for change.

GE is looking to bounce back after what Flannery earlier this month called horrible results in the third quarter. He has argued that GE’s strong businesses are being held back by others that “drain investment and management resources without the prospect for a substantial reward.”

GE’s transportation business, which generated revenue of $4.7 billion in 2016, manufactures freight and passenger trains, marine diesel engines and mining equipment, among other products.

GE’s healthcare information technology business, which would likely have to be broken up into separate chunks in the event of a sale, assists with electronic medical records, healthcare workforce management, and hospital revenue cycle management. Some of its better known brands include API Healthcare, which it acquired in 2014, and Centricity EMR.

The business is part of GE’s sprawling healthcare business, which had revenue last year of $18.3 billion and spans magnetic imaging, medical diagnostics and drug discovery.

GE has taken several actions to prune its portfolio over the years, shedding plastics, NBCUniversal and most of its GE Capital business. It also combined its oilfield services business with Baker Hughes (BHGE.N).

Last week, GE cut its profit forecast for the full year to $1.05 to $1.10 a share, from $1.60 to $1.70 previously, and said it would generate only about $7 billion in cash from operations, down from $12 billion to $14 billion it had forecast earlier. It left its dividend unchanged.

Weak performance in GE’s power and oil and gas businesses, goodwill impairment and higher-than-expected restructuring costs were the main causes of the profit decline.

Reporting by Carl O’Donnell and Greg Roumeliotis in New York; Additional reporting by Alwyn Scott in San Francisco; Editing by Phil Berlowitz

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