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Zuckerberg loses more than $15 billion in record Facebook fall

(Reuters) – Facebook Inc (FB.O) Chief Executive Mark Zuckerberg’s fortune took a more than $15 billion hit on Thursday, as the social media company suffered the biggest one-day wipeout in U.S. stock market history a day after executives forecast years of lower profit margins.

At least 16 brokerages cut their price targets on Facebook after Chief Financial Officer David Wehner startled an otherwise routine call with analysts by saying the company faced a multi-year squeeze on its business margins.

That “bombshell,” as one analyst termed it, played into concerns on Wall Street that Facebook’s model could be under threat after a year dominated by efforts to head off concerns over privacy and its role in global news flow.

(Graphic: Facebook’s slowing revenue growth – tmsnrt.rs/2JV9APu)

Shares closed down almost 19 percent at $176.26, wiping more than $120 billion off the company’s value or nearly four times the entire market capitalization of Twitter Inc (TWTR.N).

Slowing revenue growth initially pulled the stock down nearly 9 in after-hours trading on Wednesday before losses picked up on the margin outlook.

“Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis,” Wehner said on a conference call with analysts.

Facebook’s margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy.

The company also said revenue growth from emerging markets and the company’s Instagram app, which has been less affected by privacy concerns, would not be enough to repair the damage.

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The impact on the rest of the FAANG group of high-flying tech stocks was marginal.

Shares in Alphabet (GOOGL.O) closed up 0.7 percent, while those in Apple Inc (AAPL.O) fell 0.3 percent and Netflix Inc (NFLX.O) closed barely higher. Amazon.com Inc (AMZN.O) was up 2.3 percent following its own results after the bell on Thursday.

Tracking Facebook’s fortunes in six charts

Of 47 analysts covering Facebook, 43 still rate the stock as “buy”, two rate it “hold” and only two rate it “sell”. Their median target price is $219.30.

MoffettNathanson analysts called the company’s forecast “either the new economic reality of their business model or a very public act of self-immolation to stave off further regulatory pressure”.

Rahul Shah, chief executive officer at Ideal Asset Management in New York, a Facebook shareholder, said executives were trying to reset expectations about growth but the outlook caught Wall Street by surprise.

“A lot of value investors might jump in and support the stock at these levels … it’s probably a good buying opportunity for a long-term investor, but I wouldn’t be jumping in with both feet today,” he said.

The more than $15 billion in net worth that Zuckerberg lost on Thursday is roughly equal to the wealth of the world’s 81st-richest person, currently Japanese businessman Takemitsu Takizaki, according to Forbes real-time data.

Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, in recent years has trimmed, but not eliminated, the amount of Facebook shares in his clients’ accounts, and he said he sees the company as a three-year investment.

“We own it for its leadership in the tech industry,” he said. “It’s the F in FAANG, but what’s to say that, 10 years from now, Facebook isn’t the next Myspace and something else has taken its place?”

Reporting by Vibhuti Sharma, Munsif Vengattil and Devbrat Saha in Bengaluru, Noel Randewich in San Francisco and Trevor Hunnicutt in New York; Editing by Robin Paxton and Patrick Graham

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/XOi9BFOL3IE/zuckerberg-loses-more-than-15-billion-in-record-facebook-fall-idUSKBN1KG1TN

Intel data center results, margin outlook disappoint, shares drop

(Reuters) – Intel Corp’s (INTC.O) fast-growing data center business missed Wall Street targets on Thursday as the world’s second-largest chipmaker faced stiff rivalry from Advanced Micro Devices Inc (AMD.O), and it again delayed the release of its next-generation chips until the end of 2019.

The company’s shares fell almost 5 percent in extended trading.

Sales to data centers that power mobile and web apps, which bring more profit than chips for personal computers, rose 26.9 percent to $5.55 billion in the second quarter ended June 30. Analysts had expected revenue of $5.63 billion, according to financial and data analytics firm FactSet.

Intel has been increasingly catering to data centers as revenue from PCs has flattened since shipments peaked in 2011.

“We believe performance within Intel’s data center business largely dictates the performance in the shares and view the slight miss versus consensus as a negative,” said CFRA Research analyst Angelo Zino.

AMD, which has been gaining ground with its new server chips, beat estimates for quarterly profit and revenue on Wednesday, powered by its EPYC server processors.

On a conference call with investors, Intel Interim Chief Executive Bob Swan said the firm expected PCs with its next-generation 10nm chips to be in stores during the 2019 holiday season. Murthy Renduchintala, Intel’s chip architecture chief, said on the call that 10nm data center chips will be released “shortly after” the consumer PC chips.

Last quarter, the company said the 10nm chips were being pushed from 2018 to 2019 but did not specify when. Intel originally predicted the chips could be ready by 2015.

The compares to rival Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) expecting 7nm chips to contribute more than 20 percent to its revenue next year.

But costs of the 10nm chips are also expected to put pressure on margins, company executives said. Another challenge to margin growth is an expected increase in sales of Intel’s less-profitable modems that help mobile phones connect to wireless data networks.

Earlier this week, Qualcomm Inc (QCOM.O) executives said they believed Apple Inc (AAPL.O) had selected Intel to be the sole supplier of modem chips in the next generation of iPhones. Apple and Intel did not comment on Qualcomm’s claim.

Several analysts on Intel’s earnings call expressed concern that its gross margin growth might slow in the fourth quarter, when Apple ships most of its iPhones. Intel executives did not mention Apple or the iPhone but acknowledged those chips are not as profitable as some of its others.

“We expect modem profitability to improve. We don’t see it at the 60-plus percent gross margin level, but we do expect it to be a contributor to earnings performance as we go forward,” Swan said.

Intel’s net income rose to $5.01 billion, or $1.05 per share, from $2.81 billion, or 58 cents per share, in the year-ago quarter. bit.ly/2mLLApb

Excluding items, the company earned $1.04 per share, beating expectations of 96 cents per share, according to Thomson Reuters I/B/E/S.

The company benefited from a stabilizing PC market, in which worldwide shipments grew for the first time in six years, according to research firm Gartner.

Revenue in Intel’s client computing business, which caters to PC makers and is still the biggest contributor to sales, rose 6.3 percent to $8.73 billion, beating FactSet estimates of $8.48 billion.

Intel forecast current-quarter revenue of $18.1 billion, plus or minus $500 million, and adjusted earnings of $1.15 per share, plus or minus 5 cents. Analysts on average had expected revenue of $17.60 billion on a profit of $1.08 per share, according to Thomson Reuters I/B/E/S.

Net revenue rose 14.9 percent to $16.96 billion, above estimates of $16.77 billion.

The company is searching for a new chief executive after Brian Krzanich was ousted last month following an investigation that found he had a consensual relationship with an employee in breach of company policy.

Chief Financial Officer Robert Swan is acting as interim CEO.

Shares of the Santa Clara, California-based chipmaker which have gained 13 percent so far this year, fell 4.6 percent to $49.75 after the bell.

Reporting by Sonam Rai in Bengaluru and Stephen Nellis in San Francisco; Editing by Anil D’Silva and Richard Chang

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4CI6tqpsf8s/intel-data-center-results-margin-outlook-disappoint-shares-drop-idUSKBN1KG2WG

Chesapeake Energy plans to sell Utica shale stake for $2 billion

HOUSTON (Reuters) – Chesapeake Energy Corp (CHK.N) plans to sell all of its Ohio natural gas acreage to privately owned Encino Acquisition Partners for about $2 billion, the company said on Thursday.

The Oklahoma City-based oil and gas producer said it will use the proceeds to pay off debts, which totaled about $9.83 billion at the end of March. The deal is expected to close in the fourth quarter.

Chesapeake has been shedding assets and employees since a 2013 governance crisis led to the departure of co-founder and former Chief Executive Officer Aubrey McClendon, who died in an auto accident in 2016.

The sale of Chesapeake’s entire stake in the Utica shale will strengthen the company’s balance sheet and further shift its focus from gas production to oil, Chesapeake CEO Doug Lawler said in an interview.

“We will absolutely be driving for a greater percentage of oil production in our portfolio,” Lawler said. “We hope to achieve that through organic growth, exploration and future acquisitions.”

The sale to Houston-based Encino Acquisition Partners includes 320,000 net acres in Ohio’s Utica shale and 920 wells that currently produce about 107,000 barrels of oil equivalent per day. Encino is backed by the Canadian Pension Plan Investment Board and Encino Energy.

The purchase price includes a $100 million contingent payment based on future natural gas prices.

The transaction is part of Chesapeake’s plan to pay down debts that had ballooned to as much as $16 billion in 2012 after a string of land acquisitions just before U.S. natural gas prices tumbled.

The company, which had said it expected to cut debt by between $2 billion and $3 billion this year, plans additional small asset sales and expects to use cash flow from higher output at existing fields to shave debt, Lawler said.

Chesapeake expects it will be able to replace the cash flow from its acreage in the Utica within a year by investing in other assets, particularly in the Powder River Basin in Wyoming. Those assets, which the company acquired about a decade ago, had once been on Chesapeake’s chopping block.

By drilling longer horizontal wells and using better completion technology, the Powder River Basin has proven a lucrative investment, Lawler said. Chesapeake also is considering growing output by acquiring new acreage elsewhere.

“We’ll look for opportunity,” Lawler said.

Chesapeake also said its 2019 oil production is expected to rise about 10 percent from 2018, adjusted for asset sales, with additional oil growth anticipated in 2020.

Reporting by Collin Eaton in Houston and Anirban Paul in Bengaluru; editing by Shounak Dasgupta and Tom Brown

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/kw13gsHlaOg/chesapeake-energy-plans-to-sell-utica-shale-stake-for-2-billion-idUSKBN1KG2YS

Starbucks, others must pay California workers for tasks done after clocking out: court

(Reuters) – California’s top state court said on Thursday that employers must pay their workers for small amounts of time they spend on work tasks after clocking out, in a ruling that will likely lead to the revival of a lawsuit against Starbucks Corp.

The California Supreme Court said a rule under federal wage law that excuses companies from paying workers for small amounts of time that are difficult to record did not apply under California law.

The decision could be costly for many companies, particularly restaurants and retailers that have many hourly workers, since California, America’s most populous state, is home to nearly 40 million people and about 10 percent of the U.S. workforce.

The U.S. Chamber of Commerce, the nation’s largest business group, warned the court in a brief backing Starbucks that such a ruling would encourage workers to file lawsuits seeking pay for “trifling absurdities.”

A Starbucks representative said the company was disappointed with the decision.

Shaun Setareh, who represents former Starbucks employee Douglas Troester in a 2012 lawsuit against the company, said the ruling would force many companies to change their employment practices.

Troester said that after Starbucks employees clock out of work, they are required to transmit sales data, set an alarm, and sometimes bring in patio furniture or walk coworkers to their cars.

Those tasks could take up to 10 minutes each day, Troester said, and workers should have been paid for that time. In the 17 months he worked at Starbucks, he said he performed about 13 hours of unpaid work and was owed about $100.

A federal judge in San Francisco in 2014 dismissed Troester’s case, saying it would be impractical to require Starbucks to record the brief amount of time employees spent doing work tasks before leaving a store.

Troester appealed, and the 9th U.S. Circuit Court of Appeals asked the California Supreme Court to decide whether the “de minimis rule” under federal law also applied under state law.

The court said on Thursday that under California law, workers must generally be paid for any time they are required to be on their employers’ premises.

But the court said there could be cases involving tasks “that are so irregular or brief in duration” that companies are not required to pay for them.

The 9th Circuit must now apply the court’s decision in Troester’s case, which will likely lead to the lawsuit against Starbucks being revived.

The case is Troester v. Starbucks, California Supreme Court,  No. S234969.

Reporting by Daniel Wiessner in Albany, N.Y.; Editing by Alexia Garamfalvi and Peter Cooney

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NeTKDs79bp4/starbucks-others-must-pay-california-workers-for-tasks-done-after-clocking-out-court-idUSKBN1KG349

Amgen quarterly profit beats Wall Street view on new product sales

(Reuters) – Amgen Inc (AMGN.O) on Thursday reported a better-than-expected second quarter profit and raised its full-year forecast, as growth of newer drugs like cholesterol fighter Repatha and osteoporosis drug Prolia offset weakness in older products.

The world’s largest biotechnology company also announced replacements for its head of research and development and retiring global commercial operations chief.

Amgen posted adjusted earnings of $3.83 per share. Analysts on average expected $3.54 per share, according to Thomson Reuters I/B/E/S.

The company increased its 2018 earnings forecast to $13.30 to $14 per share, up from its previous view of $12.80 to $13.70.

Net earnings in the quarter rose 7 percent to $2.3 billion, or $3.48 a share, from $2.15 billion, or $2.91 a share, a year earlier.

Overall revenue for the quarter revenue rose 4 percent to $6.06 billion, with product sales up 2 percent to $5.68 billion.

Sales of rheumatoid arthritis drug Enbrel fell 11 percent to $1.3 billion, about in line with Wall Street estimates.

Sales of the potent but expensive cholesterol drug Repatha have begun to take off, with sales up 78 percent to $148 million. They have been held back since the drug’s 2015 approval by an unwillingness of insurers and pharmacy benefit managers to authorize its use for most patients.

Prolia sales rose 21 percent to $610 million.

Amgen did not report early sales of Aimovig, the new migraine preventer that won U.S. approval in May. Amgen offered all new patients two free months of the medicine.

Amgen announced that longtime research chief Sean Harper is stepping down and will be replaced by David Reese, currently senior vice president of translational sciences and oncology at the company.

Murdo Gordon, who left his role as Bristol-Myers Squibb’s (BMY.N) chief commercial officer earlier this week, will replace Tony Hooper as executive vice president of global commercial operations in September, the company said.

Reporting By Michael Erman and Deena Beasley; editing by Deena Beasley

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/0e3dWAaH4zQ/amgen-quarterly-profit-beats-wall-street-view-on-new-product-sales-idUSKBN1KG2WO

Starbucks’ quarterly growth slips on competition, waning customer enthusiasm

NEW YORK (Reuters) – Starbucks Corp (SBUX.O) on Thursday reported quarterly same-store sales rose 1 percent globally and in its U.S. cafes, while growth in the once-robust China market slipped 2 percent amid fierce competition and stricter regulations on delivery services.

Starbucks, the world’s biggest coffee retailer, said a 3 percent increase in average tickets drove the rise in same-store sales for its fiscal third quarter.

Reporting by Alana Wise; Editing by Leslie Adler

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/m0WkJ5aWaf8/starbucks-quarterly-growth-slips-on-competition-waning-customer-enthusiasm-idUSKBN1KG2WQ

Northrop CEO grilled by U.S. lawmakers over space telescope

(Reuters) – Northrop Grumman Corp (NOC.N) CEO Wes Bush faced tough questions from U.S. lawmakers about the delays and growing price tag for NASA’s James Webb Space Telescope and rebuffed the idea that the company, rather than taxpayers, should pay an $800 million cost overrun.

Northrop is the primary contractor for the project, NASA’s long-planned successor to the orbiting Hubble Space Telescope, but the Webb telescope’s overall mission price tag has skyrocketed over the years and is now pegged at $9.66 billion.

Bush acknowledged in testimony in Washington to the House of Representatives science committee that Northrop “human errors” contributed to the telescope’s rising costs and delays. But Bush said Northrop is “fully committed” to the project’s success.

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The telescope’s development costs of $8.8 billion have exceeded an $8 billion funding cap set by Congress. NASA is asking lawmakers to approve funding to cover the $800 million difference.

Asked by the committee’s Republican chairman, Lamar Smith, whether he would agree to pay the extra $800 million instead of the taxpayers, Bush said “that would be the wrong approach” and would “significantly impede and impair the relationship between NASA and Northrop Grumman.”

Having the company pay “would be justified given the poor record and given the poor management,” Smith responded.

“I only wish that Northrop Grumman was willing to take responsibility and show a little bit more good faith, both to the taxpayer and for the cost overruns,” Smith added.

A June 27 report by an independent review board set up by NASA described “human-induced errors” and other problems that forced a postponement of the planned launch by 29 months from October 2018 to March 2021 – at a cost of an extra $1 billion. The problems included loose nuts and bolts, the wrong solvent being used to clean propulsion vales and improper test wiring that caused excess voltage to be applied to devices called transducers.

“Having been delayed 14 years, and now costing 19 times the original cost, is just probably the worst example of bad management any of us have ever seen or heard about,” Smith told Reuters in an interview.

During the hearing, Republican Representative Dana Rohrabacher noted that other deserving NASA missions may have lost out on funding because of this project’s ballooning costs.

“Your group that was handling this, and your company, failed. They failed us, and they failed the American people. … The question is, is it worth all those other projects that we’ve been unable to fund in this committee because you have failed your job?” Rohrabacher asked Bush.

Reporting by Joey Roulette in Orlando, Florida; Editing by Ben Klayman and Will Dunham

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/R8sr06sO61o/northrop-ceo-grilled-by-u-s-lawmakers-over-space-telescope-idUSKBN1KG2US

Amazon second-quarter revenue jumps 39 percent

(Reuters) – Amazon.com Inc (AMZN.O) reported a 39 percent jump in second-quarter revenue on Thursday, driven by a surge in online shopping and higher demand for its cloud services.

The company said its net sales rose to $52.89 billion from $37.96 billion a year earlier.

Net income rose to $2.53 billion, or $5.07 per share, in the second quarter ended June 30 from $197 million, or 40 cents per share, a year earlier.

Revenue from Amazon Web Services (AWS), the company’s fast-growing cloud services business, surged about 49 percent to $6.11 billion, beating the average estimate of $6 billion, according Thomson Reuters I/B/E/S.

Reporting by Arjun Panchadar in Bengaluru

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/j8saU0tYULA/amazon-second-quarter-revenue-jumps-39-percent-idUSKBN1KG2WB

Intel profit beats on higher demand for data center chips

(Reuters) – Intel Corp (INTC.O) topped Wall Street estimates for quarterly profit and revenue on Thursday, as a booming cloud computing market drove higher demand for chips used in data centers.

Net income rose to $5.01 billion, or $1.05 per share, in the second quarter ended June 30 from $2.81 billion, or 58 cents per share, a year earlier. bit.ly/2mLLApb

Net revenue rose 14.9 percent to $16.96 billion.

Excluding items, the company earned $1.04 per share.

Analysts on average were expecting adjusted earnings of 96 cents per share and revenue of 16.77 billion, according to Thomson Reuters I/B/E/S.

The company is in the midst of a CEO search following the ouster of Brian Krzanich last month after an investigation found he had a consensual relationship with an employee in breach of company policy.

Reporting by Sonam Rai in Bengaluru and Stephen Nellis in San Francisco; Editing by Anil D’Silva

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/628AeE4w47Q/intel-profit-beats-on-higher-demand-for-data-center-chips-idUSKBN1KG2WG