Paul Gluckman

Intel continues dealing with challenges from surging demand and manufacturing issues amid its second CEO change in a few years, executives told investors on a Q4 call Thursday. The chipmaker made “tremendous progress” repairing “defects” in its 7-nanometer process technology, and new CEO Pat Gelsinger will have final say on 2023 CPU product introduction decisions soon after he joins Feb. 15 (see personals section, Jan. 14), said outgoing CEO Bob Swan. There's nothing nefarious in the board’s decision to replace Swan with Gelsinger, just part of its normal “succession planning process,” said Chairman Omar Ishrak. Gelsinger said he will share his “detailed perspective” on Intel after he assumes his new role: “Based on initial reviews, I am pleased with the progress made on the health and recovery of the 7-nanometer program. I am confident that the majority of our 2023 products will be manufactured internally.” PC demand in 2020 “was off the charts,” giving Intel Q4 share gains, especially in consumer entry-level and education laptops, said Swan. “Those two segments tend to be lower margin,” he said: “Real strong demand” taxed Intel’s ability to keep up with CPU supply. The stock closed 9.3% lower Friday at $56.66.

The opportunity in hybrid cloud and artificial intelligence is “enormous” due to the digital transformations due to the pandemic, said IBM CEO Arvind Krishna on a Q4 call Thursday. “We see the hybrid cloud opportunity at a trillion dollars,” with fewer than 25% of “workloads” having moved to the cloud so far, he said. The AI market opportunity also is “massive,” he said. Though AI deployment rates remain “in the single digits,” customers are “at the point where they are moving from experimenting with AI to deploying it at scale,” he said.

The Chinese Foreign Affairs Ministry was unfazed Thursday by White House criticism of China’s sanctions against 28 former Trump administration officials, including ex-Secretary of State Mike Pompeo, prohibiting them and their immediate families from visiting China, Hong Kong and Macao, and restricting companies they work for from doing business with the Chinese (see 2101200027). A National Security Council spokesperson called the sanctions “unproductive and cynical,” but a ministry spokesperson defended them as “a legitimate and necessary response.” China has warned “multiple times that these anti-China politicians will pay for their crazy acts,” she said. “We hope the new U.S. administration will view China and China-U.S. relations in an objective and rational manner” and help bring those relations “back onto the track of sound and stable development,” she said.

Co-CEO Reed Hastings denied Netflix is “underachieving” as it watched Disney+ exceed 86 million subscribers in the first year after its November 2019 launch, compared with roughly 40 million for Netflix in the same period. “It's super impressive what Disney has done,” he said on Tuesday night’s Q4 discussion. Disney’s success shows that consumers are “willing to pay more for more content because they're hungry for great stories,” said Hastings. The Disney+ track record “gets us fired up about increasing our membership, increasing our content budget,” he said. “It’s going to be great for the world that Disney and Netflix are competing show by show, movie by movie, and we're really fired up about catching them in family animation, maybe eventually passing them.” Netflix has “never had any issue with movies being in theaters,” said co-CEO and Chief Content Officer Ted Sarandos. “Our biggest issue has been that you had to commit to this very long window of exclusivity to get access to any theaters.” Sarandos would love to give consumers the choice between seeing movies in theaters or at home, “which is becoming the norm” during the pandemic. Hastings predicts that consumers will return to theaters in “significant numbers” beginning in 2021's second half. He’s carefully watching WarnerMedia’s strategy of debuting its 2021 film slate simultaneously in theaters and on HBO Max to see if it sets a “path” for future distribution trends, he said. Netflix beat its forecast on net subscriber adds (see 2101190066). “This is one of the more uniquely challenging times, not just for life,” but also for trying to forecast “the growth trajectory of the business,” said Chief Financial Officer Spencer Neumann. “There's just so much uncertainty.” COVID-19 has “accelerated that big shift from linear to streaming entertainment,” he said. The stock was up 17% to $589.60 at 2:15 p.m. EST Wednesday.

Apple committed “arbitrary and capricious restraint of trade,” in violation of the Sherman Act, when it disallowed a COVID-19 geolocation-based symptom-tracking app from being posted for sale in the App Store in the early days of the pandemic, alleged a Tuesday complaint (in Pacer) in U.S. District Court in Concord, New Hampshire. An “ad hoc group” of developers, including a Dartmouth University computer scientist and a former NASA chief medical officer, submitted the app, called Coronavirus Reporter, for approval, but Apple rejected it on grounds that the submitters were not a “recognized healthcare company,” said the complaint. “Plaintiff is and was a bioinformatics development company” that developed “other large scale data and bioinformatics applications since 2014 that had served hundreds of millions of individuals,” it said. For “many millions” of consumers, “their de facto access to the internet relies upon using an iOS device,” it said. “As such, Apple operates a de facto monopoly for access to the national internet communication backbone.” The Coronavirus Reporter app, “had it been allowed, would likely have provided useful bioinformatics data, and provided a medium for free information exchange among United States citizens and COVID patients,” it said. Apple didn’t comment Wednesday.

Netflix had 8.51 million global net subscriber additions in Q4, beating its Oct. 20 forecast by nearly 42%, said the company Tuesday. It finished 2020 with 36.6 million net subscriber adds, well above the previous high of 28.6 million in 2018, and 31% above the company’s 2019 performance. The result was 2.9% off the pace of the 2019 quarter, vs. projections of a 32% year-on-year decline. Netflix surpassed 200 million subscribers for the first time. “The big growth in streaming entertainment has led legacy competitors like Disney, WarnerMedia and Discovery to compete with us in new ways, which we’ve been expecting for many years,” said the quarterly shareholder letter. “This is, in part, why we have been moving so quickly to grow and further strengthen our original content library across a wide range of genres and nations.” Netflix is forecasting 6 million paid net adds for Q1, which would be 62% below the level achieved in the 2020 quarter, when COVID-19 lockdowns sent subscriber growth through the roof. The stock was trending 9.8% higher in after-hours trading to $551.35.

The Office of the U.S. Trade Representative's annual report on "notorious" world markets for counterfeit and pirated goods included for the first time a section exposing the growing role of e-commerce platforms in the import of such goods into the U.S. “The greatest risk of importation of counterfeit and pirated goods, harming both U.S. content creators and U.S. consumers, is posed not by foreign flea markets and dark web sites but by inadequate policies and inadequate action by e-commerce companies that market and sell foreign products to American consumers,” said USTR Thursday. “Combating piracy and counterfeits will require sustained effort by both the federal government and by companies that profit from the sale of such goods.” USTR removed Amazon's Canada and India affiliates from the notorious markets list this year, retained the British, German and French sites, and added Amazon's Italian and Spanish sites. The report praised Amazon for partnering with the federal government's National Intellectual Property Rights Coordination Center on a joint operation to prevent the import of counterfeit goods into the U.S. When Amazon was first identified as a notorious market, it said the listing was politically motivated. Amazon didn't respond to questions Friday. Online sellers of pirated and counterfeit goods are shifting increasingly to social media to carry out their crimes, said USTR.

The Russian government-sponsored hack of SolarWinds Orion software used for network management systems (see 2012170050) “highlights the necessity for companies to be vigilant in terms of how they think about security,” CrowdStrike Chief Financial Officer Burt Podbere told a Needham investor conference virtually Thursday. The breach puts corporate chief information security officers on the hot seat with their boards, he said: “They’d better have good answers, and they’d better have tested the solutions out there.” SolarWinds again puts security “front and center,” and highlights “the sophistication of the bad actors,” he said. Security awareness “shot through the roof” due to the hack, but “it's really too early to tell the impact on that in terms of customer spend” on new or improved cybersecurity solutions, he said.

The pandemic sent global 2020 box office receipts plunging 71% from a year earlier to $12.2 billion, reported Comscore Friday. The North American decline was 80% to $2.25 billion, it said. China had the least damage, falling 66% to $3.1 billion. The combination of a “well-managed pandemic response coupled with strong local product has led to a strong theatrical recovery in many countries,” said Comscore, typifying the positives it accentuated. “With careful planning, adherence to local health regulations and must-see content, studios and exhibitors found a path to success.”

It’s a “little-known fact” that Shark Tank adapted the “bubble” strategy the NBA used to finish its 2019-20 playoffs in Orlando to safely shoot episodes for the current season of the ABC series during the pandemic, Dallas Mavericks owner and Shark Tank cast member Mark Cuban told CTA President Gary Shapiro in a prerecorded CES 2021 Q&A. Shark Tank cast and crew “took over” the Venetian in Las Vegas with two protective "pods" in August and September lasting about 10 days each, said Cuban. “It was very strict filming,” he said. Cast members were socially distanced on the set and barred from giving winning contestants their congratulatory hugs, he said. “We went through that entire period" without any positive COVID-19 test results, he said. It helped set a “precedent for shooting shows in Hollywood,” he said. “People want their shows, whether it’s streamed or traditional television. They want to be entertained, particularly now.” Despite the “lull” in production due to the pandemic, “we were able to set a standard” for the safe return of cast and crew to production sets, “even where cases were growing,” he said. “It also helped hundreds of staff and production people keep their jobs.”