Centene to acquire Fidelis Care for $3.75 billion

Centene, the United States’ largest Medicaid managed care provider, announced Tuesday that it has reached a “definitive agreement” to acquire Fidelis care for $3.75 billion, USA Today reports. 

The deal is scheduled to close in early 2018. It awaits the approval of various New York regulators, who will, among other things, evaluate it for compliance with the NY Not-for-Profit Corporation Law.

With the acquisition, Centene expects to generate $60 billion in annual revenue in 2018 and $100 million in savings by 2019. The firm reported $40.6 billion in annual revenue in 2016. Based in St. Louis, the company ranks among the largest publicly held companies in Missouri in terms of revenue.

Centene hopes to maintain a debt-to-capital ratio of 40 percent in the 18 months following the acquisition.

Managed care providers like Centene and Fidelis Care function as intermediaries between federal and state governments—which fund Medicaid programs—and Medicaid beneficiaries. The State pays such companies a premium in exchange for providing the services to which a beneficiary is entitled. USA Today describes managed care providers as the “private market option for Medicaid recipients.”

Fidelis works with 70,000 health care providers to provide health insurance plans to 1.6 million New York residents. The company brought in $4.8 billion in revenue in the first six months of 2017, according to Centene’s announcement.

Centene serves more than 12.2 million members in 28 states, but prior to the Fidelis acquisition has no presence in New York state. The deal will give Centene a leadership position in that state’s managed care market, the second-largest such market in the nation, according to Centene’s statement. The company is already the leading Managed Care Organization (MCO) in the other three largest MCO markets in the country: California, Florida and Texas.

Centene partners with healthcare providers at the state level to offer care tailored toward the needs of a given community.

“We believe our over 30 years of experience, our local approach to the provision of healthcare, and our expertise and capabilities in caring for underserved populations will support the next generation of leadership in government programs in New York State,” said Michael F. Neidorff, chairman, president and CEO of Centene. “We look forward to partnering with the state of New York’s healthcare professionals as we continue to deliver on our mission of transforming the health of the community, one person at a time.”

Fidelis shares Centene’s emphasis on local involvement and affordable care for as many people as possible. The former company’s website says: “From the beginning, Fidelis Care has worked to be part of the social fabric of local communities, impacting people’s lives with one of the most basic human rights – access to quality, affordable health coverage and care.”

“Centene’s and Fidelis Care’s missions are fully aligned in terms of promoting health through high quality, accessible care and services for all and advocating for health policy that accords true dignity and respect for all people, especially the underserved,” says Neidorff.

Fidelis Care CEO Patrick J. Frawley says his company’s “mission and values” are its “foundation,” and that Centene shares those values.

According to a CBSNews report, The Archdiocese of New York, a key Fidelis backer, said the “uncertain regulatory environment” in the U.S. in part motivated the sale. Washington’s sluggishness in replacing the Affordable Care Act has been widely publicized. 

CBS further notes that the Archdiocese plans to use proceeds from the sale to establish a healthcare foundation that will “operate in conformity with Catholic values.”

Founded in Milwaukee in 1984, Centene has been publicly traded since December 2001. Its market capitalization is $14.2 billion.

As of 2:34 EST Monday, the company’s shares have risen 7.2 percent on news of the Fidelis acquisition.

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Equifax stares down almost two dozen class actions after cyberattack

Credit reporting and monitoring company Equifax is facing at least 23 proposed class action lawsuits in the wake of its announcement Thursday that a cyber attack compromised the personal information of up to 143 million Equifax customers, USA Today reports.

Various law firms have filed suits in 14 different states as well as D.C., according to USA Today. More suits will likely come. Victimized customers may receive a pretrial settlement from Equifax, and/or may be entitled to some portion of any financially pejorative judgment levied against the firm.

“Equifax probably injured 143 million people, which is kind of a record…with 143 million people it doesn’t surprise me there are already 23 suits,” said John Coffee, who directs the Center on Corporate Governance at Columbia Law School.

USA Today notes that the number of people the breach potentially victimized represents 44 percent of the U.S. population.

“Assume that if you’re an American with a credit card or a mortgage, your data has been leaked,” Zach Whittaker, security editor for CBS’s ZDNet, tweeted.

Hackers carried out the attack from mid-May through July, seizing customers’ names, social security numbers, birth dates, addresses and, in some cases, driver’s license numbers. Equifax says it became aware of the breach in late July. The company alerted the public of the incident on September 7. In the interim, Equifax hired third-party consultants to investigate the crime and provide suggestions as to how the company might bolster its cyber-defenses.

Many of the lawsuits take issue with the lag time between Equifax’s discovery of the attack and the firm’s notification of the public. USA Today says one suit calls the delayed disclosure “willful, or at least negligent.” Another argues that the delay “deprived [consumers] of their opportunity to meaningfully consider and address issues related to the potential fraud, as well as to avail themselves of the remedies available under the FCRA (U.S. Fair Credit Reporting Act) to prevent further dissemination of their private information.”

The company would presumably argue that it was justified in assessing the nature and extent of the attack before alarming the public.

A third suit notes that Equifax fell victim to similar attacks earlier this year, as well as in 2013 and 2016. Therefore, said suit argues, Equifax “knew and should have known of the inadequacy of its own data security.”

Other filings take aim at TrustedID, an Equifax service that provides identity theft protection and credit monitoring. One document says the company “failed to disclose to consumers that it owned TrustedID,” and baited customers into signing up for the service.

To help customers identify whether their information was compromised by the attack, Equifax is offering free TrustedID service to all U.S. customers

New York Attorney General Eric Schneiderman, who is investigating the Equifax case, took issue with a clause in the agreement Equifax requires TrustedID members sign. The clause in question says that in signing up for TrustedID, a user waives his/her “right to bring or participate in any class action…or to share in any class action awards.”

“This language is unacceptable and unenforceable,” Schneiderman tweeted Friday. “My staff has already contacted @Equifax to demand that they remove it.”

Equifax subsequently explained that the waiver does not prohibit TouchID members from participating in class actions regarding the cyber security incident.

In addition to Schneiderman, other government entities are pursuing the Equifax case. USA Today obtained a copy of a letter Senators Omin Hatch and Ron Wyden, both of whom hold key positions on the Senate Committee on Finance, sent to Equifax requesting details about the attack and the manner in which the company is handling it.

The letter requests a timeline of the breach and asks how Equifax is identifying affected customers and what measures the company is taking to limit consumer harm. The document also asks Equifax to clarify the amount of information that was compromised.

Legal arguments must take place before the proposed suits achieve class action status. If the court grants class action status, USA Today says, a “federal panel on multi district litigation” will likely consolidate the suits into a single case, then assign that case to a judge, who would, in turn, appoint one law firm or a group of law firms as plaintiff counsel.

At the market’s close Tuesday, Equifax stock has dipped 18.7 percent since the original announcement. 4.7 percent of the drop has come since Monday morning when news of the proposed class actions broke.

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Harvey and Irma combined could prove more expensive than Katrina

Moody’s Analytics estimates that Irma will cost the U.S. economy between $64 billion and $92 billion, CNN reports. Insured losses resulting from the storm will range between $20 billion and $40 billion, the firm said.

Moody’s estimated Harvey-related costs between $86 billion and $108 billion, CNBC notes.

Harvey and Irma will likely cost a combined $150 billion to $200 billion, Moody’s chief economist Mark Zandi says, per CNN.

Hurricane Katrina cost the U.S. about $160 billion (adjusted for inflation) when that storm hit in 2005. It was the most expensive natural disaster in U.S. history. Irma’s and Harvey’s combined economic damage will likely exceed the Katrina figure.

Irma has crippled Florida’s tourism industry, turning much of the state into the kind of water park nobody wants to see. Miami and Tampa saw four feet of storm surge, and three to five feet of storm surge, along with a foot of rain, inundated Jacksonville. The extent of the damage to business operations remains largely unknown but is presumably considerable.

Meanwhile, oil refinery operations in Texas continue to reel in the wake of Harvey. About 13 percent of the United States’ refinery capacity remains offline in Texas, according to CNN.

Last Thursday, the federal government said joblessness claims rose by 62,000, to 298,000, in the days following Harvey, CNBC notes.

The two storms together could cost the U.S. between $20 billion and $30 billion in economic output, Moody’s said per CNBC. The firm has dropped its third-quarter forecast of the nation’s GDP growth by half a percentage point, to 2.5 percent.

Zandi notes that the recovery of the nation’s economy will depend on the speed with which Florida and Texas can revive their tourism and oil industries, respectively, but says he expects the rebuilding effort to provide an economic boost that will put the U.S. economy back on track by the year’s end.

“The longer-term economic impact of the storms should be nil,” said Zandi per CNN.

William Dudley, the president of the New York Federal Reserve, echoed Zandi’s analysis. While natural disasters such as Irma and Harvey disrupt industry, create scarcity and raise prices in the short-term, the rebuilding effort boosts the economy, he said per CNBC.

“The long-run effect of these disasters unfortunately is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms,” Dudley said in a live interview with CNBC.

He added: “I would expect that by the time we get to the end of the year and early 2018, the transitory negative effects of this storm I think will be over and we actually will start to see some of the benefits of the rebuilding efforts in terms of boosting the economy.”

Recovery efforts following a natural disaster create jobs, compel the government to increase infrastructure spending, and bring other economic stimuli.

For instance, Congress and President Trump agreed last week to raise the debt limit for three months to facilitate relief efforts in the wake of the storms, and the House approved $7.85 billion aid package for Harvey relief last Tuesday, the New York Post reports.

According to Reuters, Vice President Mike Pence said Sunday that the government would use all of its resources to aid Irma victims.

While the storms’ long-term impact on the economy at large may be negligible or even positive, their financial impact on a small scale can, of course, be devastating. Irma and Harvey have destroyed homes, businesses, valuables and other crucial assets.

“Think of the wealth destruction created by these hurricanes,” said Dan North, chief economist for Euler Hermes, North America, per CNBC.

In discussing Irma relief, President Trump was quick to point out that human considerations outweigh economic ones. “Right now, we are worried about lives, not cost,” he said, per Reuters.

Irma’s death toll in the U.S. rose to 12 Monday, ABC News reports. The Associated Press reported last Thursday that Harvey has killed 70. The hardship the storms have brought is incalculable; as one small example, Irma left 2 million Floridians without power. They regained power Tuesday morning.

Featured image via Wikimedia Commons

Spanish Data Protection Agency fines Facebook $1.4 billion

The Spanish Data Protection Agency (AEPD) has fined Facebook €1.2 million (just under $1.44 million) for three violations of data protection laws, TechCrunch reports. The two less serious infractions carry fines of €300,000; the more serious one would cost the social networking giant €600,000.

The AEPD’s investigation found that Facebook’s privacy policy contains “generic and unclear terms,” and does not adequately familiarize a user possessing “an average knowledge of the new technologies” with the ways in which his/her personal data is collected, stored and used, the regulator said.

Facebook gathers data from users’ actions on its site, as well as from third parties. The company uses some of that data for advertising purposes, and some for “secret,” undisclosed purposes, according to the AEPD. Facebook also gathers data regarding people’s behavior on third-party sites that feature embedded Facebook “Like” buttons.

The AEPD says Facebook collects the personal data even of internet users who do not hold accounts with the social media service when such users visit a Facebook page. The company tracks account holders’ behavior on third-party sites, even when an account holder is not logged into Facebook. In this last case, the AEPD says, “the platform adds the information collected in [third-party] pages to the one associated with your account on the social network.”

Non-Facebook users, then, are unaware that the social media company is harvesting their personal data, and Facebook account holders are unaware of the nature and extent of the data being harvested. Other European regulators, TechCrunch notes, have made similar accusations against the company.

The AEPD also alleges that Facebook unlawfully retains the data it has collected from a given user even after that user terminates his/her Facebook account. The company “captures and treats information [concerning former users who have deleted their accounts] for more than 17 months [after an account has been terminated] through a deleted account cookie,” the regulator says, even though the information in question is “no longer useful for the purpose for which [it was allegedly] collected.”

Facebook intends to appeal the AEPD’s ruling even though, as TechCrunch notes, the $1.4 million sum of the fines represent but a minute fraction of the $27.64 billion in revenue the company reported in 2016. The motivation behind Facebook’s appeal of the penalties, then, is not financial but political. The company aims to protect its public image by proving that it does not violate users’ privacy.

“We take note of the DPA’s decision with which we respectfully disagree. Whilst we value the opportunities we’ve had to engage with the DPA to reinforce how seriously we take the privacy of people who use Facebook, we intend to appeal this decision. As we made clear to the DPA, users choose which information they want to add to their profile and share with others, such as their religion. However, we do not use this information to target adverts to people,” Facebook said in a statement.

Facebook also contends that because its headquarters of its European operations are situated in Ireland, the company is subject only to Irish data protection laws.

In May, the EU is scheduled to implement tighter General Data Protection Regulation (GDPR), which will permit fines of up to four percent of a company’s global annual turnover, according to TechCrunch. Should Facebook be convicted of an infraction under the new rules, the company could face a fine of as much as $1 billion.

The new GDPR will also expand the definition of personal data and give EU citizens the right to demand that their personal data be deleted. It will likely also allow regulators across the EU to work together to police companies like Facebook that operate across multiple jurisdictions.

Per TechCrunch, Facebook says it has assembled “the largest cross functional team in the history of the Facebook family” to “fully analyze the legislation and help us understand what this would mean from a legal, policy and product perspective.”

“Ahead of next May we are working with our product, design and engineering teams to enhance existing products and build new products in a way that simultaneously provides an intuitive, user-centric experience and permits us to meet our obligations under the GDPR,” said Stephen Deadman, Facebook’s deputy chief global privacy officer, in a statement.

The privacy policy, the AEPD contends, contains “generic and unclear terms,” and “inaccurately” describes the manner in which Facebook uses user data.

Featured image via Pixabay

Markets rise as Irma weakens, North Korea anniversary passes without nuke test

Markets around the world are rising as Florida missed the worst of Irma this weekend, and as North Korea’s founding celebration, which took place Saturday, did not include a missile test, Reuters reports.

Irma hit the Florida keys Sunday as a Category 4 hurricane, then came into Miami, damaging several buildings and creating a storm surge that caused flooding in the downtown area of the city, The Wall Street Journal reports. The full extent of the damage remains unknown, as many of the hardest-hit areas are still inaccessible. The Journal points out that the National Weather Service expects severe conditions to persist in central and western Florida.

Irma continues to lose strength, The Washington Post notes. By Tuesday, experts expect it to weaken to a tropical depression. But, the storm remains capable of producing hurricane-force gusts, and will likely create a “life-threatening” storm surge, cautions the National Hurricane Center. A storm surge warning is in effect across much of the Atlantic and Gulf coasts.

The Post cites a National Weather Service tweet that says Irma’s storm surge produced record flooding in downtown Jacksonville Monday morning.

Nonetheless, Floridians caught something of a break over the weekend. On Friday, the Journal says, some models projected that the storm would hit Miami and east coast Florida head-on—instead, the storm turned toward the gulf coast.

“For now, we’re seeing a bit of a relief rally [in the market]. It does appear that the worst-case scenario for Florida has been evaded,” said Peter Cardillo, chief market economist at First Standard Financial in New York, per Reuters.

Meanwhile, North Korea tested no missiles over the weekend, though, according to the New York Times, leaders did hold a massive gala for the country’s nuclear scientists Saturday, in conjunction with national anniversary celebrations.

Last Sunday, North Korea successfully detonated its sixth nuclear bomb.

The MSCI AC World Equity Index, MIWD00000PUS, which tracks 2,400 stocks in 47 countries, according to Reuters, surged to a new high Monday morning, and as of 1:27 Eastern Monday. DXY, an index that compares the U.S. dollar to six other currencies, has jumped 33 cents (0.36 percent) since 11:59 p.m. Sunday. DXY is recovering after having hit a two-and-a-half-year low Friday.

Meanwhile, stock markets in Tokyo had their best session since June, according to Reuters. Relief about the situation in North Korea, as well as a weakening yen, spurred the surge.

In the U.S., shares are up one percent across Wall Street, Reuters says. As of 2:30 p.m. EST Monday, the DOW Jones Industrial Average has risen 260.19 points (1.19 percent) since it closed Friday. The S&P 500 has jumped 1.06 percent since Friday’s close, and now sits at 2487.67.

Demand for gold is falling, as investors are, according to Reuters, more inclined to assume risk given the relative stability of the U.S.’s relationship with North Korea and the relatively mild damage Irma wreaked upon Florida. As of 2:47 Eastern Monday, one troy ounce of gold is worth $1330.61, a decrease of $10.64 (0.8 percent).

Oil investments are falling out of favor as well, as the market frets over Irma’s and Harvey’s impacts on the supply of oil in the U.S., which Reuters says consumes more oil than any other nation.

“Brent crude oil futures for November delivery LCOc1 were down 66 cents [1.23 percent] at $53.12 a barrel, while benchmark U.S. West Texas Intermediate crude CLc1 declined by 33 cents [0.7 percent] to $47.15,” Reuters writes.

Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis, said that a weaker dollar, along with lower interest rates, will provide more fuel to the U.S. economy in the near future.

“We are massively stimulating this economy that’s already doing pretty well,” he said. “That’s likely to accelerate an already-good economy even further the next 12 months.”

Featured image via Wikimedia Commons

Amazon is taking applications to determine the location of its second headquarters

Amazon announced Thursday that it intends to build a second headquarters facility in North America, The Washington Post reports.

The new location will be “a full equal” to the company’s existing Seattle hub, CEO Jeff Bezos said in the announcement. Amazon will spend more than $5 billion on its new home, which will employ more than 50,000 people making an average salary of $100,000 per year. In addition to the 50,000 long-term jobs, Amazon’s new facility will create “tens of thousands” of ancillary, temporary gigs, the company says.

The company has yet to pick an exact location for the new campus and is allowing state and local governments to apply to host the new site. The application period will run through October 19, and Amazon will announce its decision next year.

The application process is open to any metropolis in North America. Chicago, Philadelphia, Toronto and other cities have already indicated intentions to apply, according to the Post. Amazon did not explicitly comment on how willing it would be to move to Canada or Mexico but did use the word “province” several times in the statement, Jed Kolko, the chief economist at indeed.com, notes per the Post.

In addition to offering jobs, the $474 billion tech giant intends to make investments in the surrounding community. The company says its investments in Seattle boosted the city’s economy by $38 billion from 2010 to 2016.

With the potential benefit to the local economy of housing an Amazon headquarters so high, the company will seek tax breaks and other incentives. The Post cites data collected by Good Jobs First showing that Amazon received $241 million in subsidies to support the building of new facilities in 29 U.S. cities in 2015 and 2016.

Many analysts believe that by initiating an application process, Bezos intends to spur a bidding war between governments throughout the continent.

“This was like an open letter to city leaders saying, ‘Who wants Amazon and all our jobs?’” Brad Badertscher, an accounting professor at the University of Notre Dame, told the Post. “This is Jeff Bezos doing what he does best: adding shareholder value and getting the most bang for the buck.”

Amazon said it is taking applications because it “wants to build the new headquarters in “a city that is excited to work with us and where our customers, employees, and the community can all benefit.”

Though plenty of cities appear to be “excited to work with” Amazon, the Post points out that Amazon’s presence in a given locale is not without drawbacks. Though the company has contributed tens of billions of dollars to Seattle’s economy, the giant’s rise has also precipitated gentrification in the area. The Post cites The Seattle Times as noting that the median home price in the Seattle area has jumped from $605,900 to $730,000 in the past 12 months—a 17 percent increase.

Moreover, traffic problems have surfaced and some say Amazon’s presence has compromised Seattle’s culture and “changed the city for the worse.”

Rita McGrath, a professor at the Columbia Business School in New York, points out, per the Post, that Amazon may choose to build its second home in an area where the cost of living is more moderate than it is in Seattle.

“It’s hard to attract people [i.e., potential employees] if they can’t afford the housing available locally,” she said.

Amazon has said it wants the new facility to be near a metropolitan area with a population of at least one million and a thriving tech industry from which the company can pull talent. The new digs will need to be within 45 minutes of an international airport, with direct access to mass transit.

Kolko notes that an east coast location would balance Amazon’s presence throughout the continent and put the company closer to its European operations.

Amazon also seeks at least eight million square feet (183.65 acres) worth of land—it plans to expand the new facility over the next decade. The Seattle campus spans 8.1 million square feet (185.95 acres).

The company needs the room, the Post notes. It plans to add 100,000 employees by the middle of next year and already employs 380,000 people worldwide. New Amazon packing and shipping facilities are coming to New York, Ohio and Oregon. And, the company just bought Whole Foods—and its 465 stores—for almost $14 billion (Whole Foods’ headquarters could not accommodate Amazon, the Post says.)

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Facing $5 billion worth of debt, Toys “R” Us hires restructuring consultants

Toys “R” Us has hired law firm Kirkland & Ellis as restructuring consultants to help the reeling toy giant negotiate its debt as the holiday season approaches, CBS News reports. The company may seek bankruptcy protection.

In its first quarter earnings statement, the company reported over $5 billion in long-term debt as of April 29. Per CBS, $446 million of that is due by the end of this fiscal year, and $2.2 billion is due by the end of next fiscal year. Although Toys “R” Us is privately-held, it reports earnings because its debt is publicly traded, according to CBS.

“What Toys ‘R’ Us has been doing is extending the debt as it comes due and paying higher interest rates,” Howard Davidowitz, the head of the retail consultancy and investment bank Davidowitz & Associates, told CBS.

That approach has caused the debt to pile up. “They have got enormous debt,” says Davidowitz.

In its quarter two earnings call, scheduled for September 26, the company plans to discuss new fiscal strategies, and to unveil a program intended to improve customers’ experiences over the holiday season, spokeswoman Amy Von Walter told CBS.

Davidowitz said, per CBS, that a considerable percentage of Toys’ R Us’ debt results from the $6 billion sale of the company to a group of notable private equity firms in 2015. No evidence is available to corroborate the claim, though.

Toys “R” Us’ debt has prevented it from investing in online sales, which has, in turn, hampered its ability to compete with the likes of Walmart and Amazon. Over the last four years, CBS notes, the iconic toy retailer has spent just $100 million to bolster its online presence.

In 2013, Toys “R” Us generated 18 percent as much revenue as Amazon did; last year, Toys “R” Us’ figure was 8.5 percent of Amazon’s.

After Toys “R” Us failed to deliver many online orders in time for Christmas in 1999, the company partnered with Amazon in an effort to establish a stronger eCommerce presence. But, in 2004, Toys “R” Us sued Amazon for violating an exclusivity agreement, and relations soured. In 2009, Amazon paid Toys “R” Us $51 million to settle the case.

Founded in 1948, Toys “R” Us has been a household name in American industry for decades. Though the company has lost ground to competitors in recent years and is now buried under a potentially fatal mountain of debt, it maintains a strong presence in the market.

CBS quotes a June report by Moody’s, a credit rating agency, as saying: “We believe Toys ‘R’ Us remains a compelling competitive force in the toy and baby sub-segment of retail, however it is also our view that Toys’ competitive position continues to suffer challenges as a result of many of its larger, better-capitalized competitors such as Walmart, Target and Amazon using toys as traffic-drivers to both brick-and-mortar locations and websites, especially during the key holiday season, which seems to begin earlier every year.”

Forbes ranked Toys “R” Us the 22nd largest private company in the U.S. based on full-year revenue in 2016.  That year, the toy giant brought in $11.4 billion in revenue.

But, that figure marks a 2.2 percent drop from 2015. In fact, the company’s revenue has fallen in each of the last five years, according to data collected by D&B Hoovers. Since 2013, annual revenue has plummeted more than $2 billion—almost 15 percent. From 2013 to 2014, revenue dropped $1 billion (7.4 percent).

Gross profit has fallen $843 million—17 percent—since 2013, from $4.95 billion to $4.11 billion.

Toys “R” Us has reported net losses every year since 2014. That year, the company lost more than $1 billion. The bleeding has subsided each year since, though. In 2016, Toys “R” Us lost $36 million.

If anyone needs a good holiday, it’s Toys “R” Us.

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Deere & Co. to acquire Blue River Technology for $305 million

Deere & Co. announced Wednesday that it has signed a “definitive agreement” to acquire Blue River Technology, an agriculture technology company, in a $305 million deal, TechCrunch reports. The deal will likely be finalized next month.

Blue River specializes in “precision farming,” a technique that uses technology to streamline traditional farming methods. Precision farming is crucial to Deere’s future, the company said in its statement regarding the deal.

“As a leader in precision agriculture, John Deere recognizes the importance of technology to our customers. Machine learning [read: artificial intelligence] is an important capability for Deere’s future,” said John May, President, Agricultural Solutions, and Chief Information Officer at Deere.

Technology reduces labor costs—machines now perform tasks human beings used to have to do—and maximises yield.

Blue River’s flagship product, which it dubs “See and Spray,” uses computer vision to identify and exterminate weeds, thereby reducing herbicide waste. The system references a given plant against a massive image library to determine whether that plant is a weed. If it is, the machine sprays it with herbicide but leaves surrounding soil and crops untouched.

Another Blue Ridge offering, LettuceBot, thins lettuce crops. Farmers plant more lettuce seeds than they wish to cultivate to ensure that enough seeds sprout to create a proper yield. LettuceBot uses technology to evaluate the health, uniformity of size, and spacing of each lettuce plant and determine which plants need to be eliminated. Once LettuceBot identifies unwanted plants, it kills them with a concentrated dose of fertilizer.

“LettuceBot completes a labor-intensive task quickly and easily…and does so with far greater precision than a human hand,” according to Blue River’s website. The machine evaluates 5,000 plants per minute, sprays unwanted ones with quarter-inch precision, and covers 40 acres per day.

“Blue River is advancing precision agriculture by moving farm management decisions from the field level to the plant level,” said Jorge Heraud, co-founder and CEO of Blue River Technology in the aforementioned statement. “We are using computer vision, robotics, and machine learning to help smart machines detect, identify, and make management decisions about every single plant in the field.”

Blue River flies drones over fields to assess the efficiency and effectiveness of See and Spray, LettuceBot and other machines.

In November 2015, Deere & Co. reached an agreement with Monsanto Co. to purchase the latter firm’s Ag-Tech subsidiary, Precision Planting, LLC. But, the companies abandoned the deal in May after the U.S. Department of Justice filed a lawsuit to block it. The DOJ said the acquisition would have given Deere & Co. an 86 percent share of the “high-speed precision planting market,” TechCrunch’s words reports.

When it announced the Monsanto deal in 2015, Deere used the same language it is now using to describe the Blue River acquisition, saying the companies had reached a “definitive agreement.”

The Monsanto deal would have cost Deere $190 million, the DOJ estimated. The Blue River acquisition will be almost twice as expensive.

Founded in Sunnyvale, CA in 2011, Blue River remains privately held. TechCrunch cites CrunchBase as saying the company has raised a total of $30.5 million in funding. The firm employs 60 people, all of whom will remain in Sunnyvale even though Deere is based in Moline, Illinois.

Forbes reported in March that Deere has already developed a number of high-tech farming solutions. SeedStar Mobile, for instance, provides data on the performance of equipment in real time, allowing farmers to make immediate adjustments to maximize their machines’ efficiency.

Deere is also developing self-driving farm vehicles that can navigate themselves through the rows of a corn field without damaging crops, Forbes says.

The farming industry as a whole is increasingly embracing technological advancements. “The idea that agriculture is now a tech industry is firmly established,” Roger Royse, a Silicon Valley attorney who works with ag-tech startups, told Forbes. “The farming community knows they have to embrace this.”

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IBM to spend $240 million on an AI research lab at MIT

IBM will spend $240 million to fund a Watson-branded AI research lab at MIT, CNBC reports. At the facility, MIT and IBM researchers will collaborate to create AI algorithms, optimize AI hardware, study the societal implications of AI, and apply AI to the business world.

Researchers will work at the MIT campus as well as at IBM’s nearby Watson Health and Securities Center.

Tech companies are increasingly partnering with institutions of higher learning to develop and explore AI technology. DeepMind, an Alphabet subsidiary dedicated to AI research, has announced plans to open a research facility in Edmonton, Canada, at which the company will collaborate with researchers from the University of Alberta.

Alphabet says “more than a dozen [University of Alberta] graduates have joined…DeepMind.” DeepMind has sponsored the University’s machine learning lab.

The University of Alberta program marks DeepMind’s first expansion outside of the United Kingdom.

According to CNBC, Alphabet and Microsoft have both announced intentions to fund research at McGill University and the University of Montreal, both of which are located in Montreal. The combined total of the two tech giants’ contributions is less than $10 million.

As artificial intelligence technology becomes more viable in a widening array of business sectors, tech companies are increasing their focus on the field, notes Dario Gil, vice president of AI and Q (for quantum) at IBM, per CNBC.

“AI as a field has been going on for many decades, but it is quite obvious right now it has raised to a level of centrality for every major technology company, including us and frankly every other business and area,” Gill told CNBC.

Research at the new IBM-MIT facility will center around the cyber security and healthcare fields. In the healthcare sector, IBM says it has already developed technology by which Watson can analyze “genetic testing results” to improve the precision of cancer medication. Watson also has the potential to discover new drugs that might aid patients who are resistant to established treatments, according to IBM.

But, some say Watson has thus far failed to deliver on the promises its creators made on its behalf.

Since IBM began marketing and selling Watson as a cancer treatment resource in 2014, less than 50 hospitals have adopted the system, which IBM envisioned as a new industry standard.

Watson has the capacity to gather and sift through unfathomable amounts of data with inhuman speed, but the human beings must tell the computer how to interpret the data it collects. In other words, Watson struggles to synthesize data. Therefore, some have cast doubt on IBM’s claims that the computer can identify novel medications and treatment methods.

Given IBM’s commitment to study the healthcare applications of AI at the MIT facility, researchers at the new lab will likely work to hone Watson’s cancer treatment abilities.

In February, IBM made Watson available as a cyber security “cop.” The company said it had “trained [the robot] on the language of cyber security.” IBM found that human cyber security teams analyze more than 200,000 “security events” every day, and waste 20,000 hours per year “chasing false positives.” Were these processes automated, cyber security could become more efficient and effective.

And with hackers developing new threats at an accelerating rate, the workload of cyber security teams is ever-increasing.

Of course, there will be kinks to iron out in Watson’s cyber security functionality as well.

As yet, the practical experience of AI powerhouses like Watson is limited. “The field of artificial intelligence, despite its progress, is in its infancy,” Gil said.

Still, artificial intelligence is increasingly hard to ignore. As more and more minds collaborate to refine robots like Watson, and as such robots gain more and more “hands-on” experience, AI is poised to become an integral part of the business world.

Featured Image via Wikimedia Commons

Starting school later could boost the U.S. economy by $83 million over 10 years

A recent study conducted by the RAND Corporation suggests that delaying the start of the school day until 8:30 a.m. could boost the U.S. economy by $83 billion over the course of a decade, madison.com reports.

Pediatric health experts have long argued that a later start to the school day would better accommodate teenagers’ sleep needs, and would improve students’ concentration, as well as their mental and physical health.

According to madison.com, up to 60 percent of teens do not sleep for the recommended eight to 10 hours per night. Researchers have correlated lack of sleep with suicidal thoughts and other adverse mental and physical health conditions.

Policymakers have been reluctant to delay the start of the school day, citing costs associated with rerouting bus schedules and making other necessary changes. However, RAND’s study finds that over the course of a few years, the economic benefits derived from a later beginning to the school day would outweigh the costs of implementing the change.

“A small change could result in big economic benefits over a short period of time for the U.S. In fact, the level of benefit and period of time it would take to recoup the costs from the policy change is unprecedented in economic terms,” said Marco Hafner, a senior analyst at RAND Europe who co-wrote the report.

The study identifies two primary factors that would precipitate economic growth if school started later. First, traffic fatalities would decrease. Therefore, more children would grow to adulthood and contribute to the country’s workforce.

The RAND study cites CDC and AAA data indicating that one in five fatal traffic accidents involves a tired driver. RAND also cites a study conducted in 2008 that found that starting school later would reduce the rate of traffic accidents by 16.5 percent.

Second, academic performance would improve, boosting high school graduation and college attendance rates. Another study indicated that giving students an additional hour of sleep would increase their likelihood of graduating high school by 8.6 percent, on average, and their likelihood attending college by 13.4 percent, on average.

Students who graduate high school stand to earn a higher income than those who do not. Those who attend and/or graduate college generally make higher wages than those who do not. Higher income means more spending and, therefore, increased economic contribution.

The economic benefits of the policy shift would increase at an accelerating rate over the first 15 years following the implementation of the policy. There would be no change in economic output one year after the shift, for the students graduating that year would have benefited from just one year of enhanced academic performance. After two years, though, the economy would grow by $9 billion; after five, by $37 billion; and after 15, by $140 billion.

RAND claims to have been conservative in many aspects of the study,

“Throughout the cost-benefit projections, we have taken a conservative approach when establishing the economic gains,” Hafner said. “We have not included other effects from insufficient sleep — such as higher suicide rates, increased obesity and mental health issues — which are all difficult to quantify precisely. Therefore, it is likely that the reported economic and health benefits from delaying school start times could be even higher across many U.S. states.”

Still, RAND says, the study supports the conclusion that a later school start time would benefit the nation’s economy as well as the health of students.

“From a policy perspective, the potential implications of the study are hugely important. The significant economic benefits from simply delaying school start times to 8.30 a.m. would be felt in a matter of years, making this a win-win, both in terms of benefiting the public health of adolescents and doing so in a cost-effective manner,” says said Wendy Troxel, a senior behavioral and social scientist at RAND who co-wrote the report.

Featured Image via Wikimedia Commons

Lego’s revenue drops for the first time in 13 years

Tuesday, Lego reported a decline in revenue for the first time in 13 years, The LA Times reports. Net profit also fell.

The company’s revenue over the first half of 2017 came in at $2.4 billion, a five percent drop year-over-year. Net profit dipped three percent year-over-year, to $544 million.

The revenue decrease was especially pronounced in established markets like the U.S. and Europe, but revenue in nascent markets like China grew by double digits, the company said. The press release hints that Lego intends to double down on its presence in China and other budding markets.

Sales of new lines, such as the Lego Chima have been underwhelming, according to the Times, while classic models like Lego City, Lego Friends, Lego DUPLO and Lego Technic continue to fly off the shelves.

“We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this,” said Lego Group Chairman and former CEO Jørgen Vig Knudstorp.

Lego says it has built “an increasingly complex organization” over the past five years to facilitate growth. The strategy worked for a time: from 2011 to 2016, the company’s revenue doubled, the Times notes. Now, though, the bureaucratic web has become too convoluted to sustain further growth, the company says.

“…We have added complexity into the organization which now in turn makes it harder for us to grow further. As a result, we have now pressed the reset-button for the entire Group,” Knudstorp said.

In pressing the reset button, Lego plans to trim its global workforce of 18,200 by 18 percent, eliminating 1,400 jobs. “Unfortunately, it is essential for us to make these tough decisions,” Knudstorp said.

The company hopes the streamlining process will “simplify our business model to reach more children.”

The toy industry is changing as video games and smartphones continue to capture children’s attention. However, Lego has succeeded in adapting. It has developed high-tech toys like Lego Boost, a programmable robot, and has licensed its characters out for video games, movies, and theme parks.

The licensing endeavors have generated significant revenue. Warner Bros.’ The Lego Movie, which hit theaters in 2014, grossed $469 million at the box office and garnered critical acclaim. Warner Bros’ has scheduled a sequel for release in 2019.

“The Lego Batman Movie,” which came out in February, brought in $312 million in box-office ticket sales and, like its predecessor, received positive reviews from critics.

On September 22, Warner will release The Lego Ninjago Movie. Analysts expect that film to generate between $35 million and $40 million in sales in its first weekend, the Times says.

Despite their success in theaters, though, the movies have failed to increase sales of related toys as much as Lego anticipated, said industry analyst Keith Snyder, per the Times.

Warner Bros. also handles Lego video games. 2015’s Lego Dimensions rose to the second spot on sales charts in the U.K. and Ireland in its first week, Forbes reported. According to VGChartz.com, Lego Dimensions has sold 3.7 million copies worldwide. Rival toys-to-life games Skylanders: SuperChargers and Disney Infinity 3.0 have sold 2.6 million and 2.8 million, respectively.

Warner is developing video-game spinoffs of The Lego Batman Movie and Ninjago.

Lego has also licensed its brand to Merlin Entertainments, a British-based company which owns and operates nine Lego-themed theme parks throughout the world, per the Times. Those parks brought in $1.9 billion in revenue in 2016—an 11.7 percent jump versus the previous year. Attendance rose 4.2 percent year-over-year in 2016, to 63.8 million.

Lego’s disappointing performance in quarter two surprised the toy industry. “This drop really was surprising and caught the industry off guard,” said Snyder per the Times. “Lego has been the golden child of the toy industry the last four years.”

“Everything hits a peak,” added Jim Silver, editor in chief of TTPM, a toy review and research firm, in reference to Lego’s surge. “At some point within a category, you can only grow so much.”

Lego has rebuilt itself before. The company was on the brink of financial collapse in 2004, but Knudstorp assumed CEO duties and steered Lego back to fiscal responsibility and sustainable success.

Knudstorp stepped down as CEO in December and became chairman. Since, two men have filled the role. Last month, Lego announced that Niels Christiansen would take the reigns from Bali Padda, who originally replaced Knudstorp.

Christiansen may have to engineer a comeback reminiscent of the one Knudstorp led if Lego is to retain its dominant position in the toy industry.

Featured Image via Wikimedia Commons

Carpooling service Via closes investment round, plans U.S. and oversea expansion

Carpooling service Via just completed a funding round, the proceeds of which the company intends to use to expand its service in the U.S. and to establish a presence in Europe, TechCrunch reports. Via will begin London operations in the near future, and Paris service soon after.

The amount of the funding round remains undisclosed, but a source told TechCrunch the number was $250 million.

Prior to the investment round, Zirra estimated the company’s value between $450 million and $500 million, TechCrunch notes. Following the round, then, Via could be worth as much as $750 million.

Via provides carpool service to riders seeking a cheaper alternative to operations like Uber and Lyft. A single Via vehicle carries up to five passengers at a time, so customers can book rides for as little as $5 plus tax. An algorithm determines routes in real-time as customers request rides, so unlike conventional public transit systems, Via is not constrained by a preset schedule. The company’s website says the average wait time is five minutes.

Today, Via runs 24-hour service in its hometown of New York City and also operates in Washington, D.C. and Chicago. TechCrunch says the service gives about one million rides per month.

In addition to running its own operation, Via licenses its platform to other transportation companies, including Arriva—a subsidiary of German-based railway company Deutsche Bahn AG—which operates buses, trains, and other mass transit options across 14 countries in Europe, and Keolis, a subsidiary of France-based SNCF, which offers similar service worldwide.

Daimler AG, which owns Mercedes-Benz, led Via’s most recent funding round, and the two companies plan to intensify their partnership. In addition to its contribution to the funding round, Daimler will provide $50 million towards a joint venture project with Via.

The two companies have been collaborating for years, TechCrunch notes. In late 2015, Via joined forces with Mercedes-Benz Research and Development North America, Inc. to launch a pilot program in Orange County, CA, a suburb of Los Angeles. Mercedes provided Via with Metris passenger vans for that trial program.

Daimler and Mercedes will likely provide vehicles for Via’s European expansion as well. The partnership with Via will give Daimler a ready-made sales connection and will provide a platform through which Daimler can develop and test vehicles optimized for carpooling.

As tech-based transportation start-ups change the way consumers approach moving around, automakers are seeking the most efficient ways to adapt to the changes in the industry.

“One big question is, ‘what is the right vehicle?’” Via CTO and co-founder Oren Shoval told TechCrunch “There are the seating arrangements, how you connect the sensors, what kind of door it should have. This is a big piece of mobility.”

Shoval adds that the Via-Mercedes partnership will streamline and solidify Via’s service. “We also believe that the vehicles in the network, at the end of the day, it’s not just an app but a whole service that you are getting. It makes sense to have these things converge,” said Shoval.

Volker Mornhinweg, head of Mercedes-Benz Vans, echoed Shoval’s sentiment that the partnership would improve Via’s service, and added that the collaboration was important to Daimler’s long-term strategy in the changing transportation sector.

“Via is one of the most successful providers in the growing ride-sharing sector while Mercedes-Benz Vans has the perfect vehicles that are being continuously optimized for this job,” he said. “By deepening our cooperation with Via, we are thus taking the next logical step in the context of our strategy for the future and are expanding our range of new mobility services.”

Daimler launched Car2Go, which allows users to rent cars parked in various places around a city and then return those cars to one of many drop zones around town, in 2008. Now, Car2Go operates in 26 cities across North America, Europe and Asia, and serves 2.5 million registered members.

Daimler, in tandem with Audi and BMW, bought GPS mapping service Here in late 2015 and has independently acquired a number of ride-sharing companies, including Germany’s MyTaxi, the U.K.’s Hailo, and Taxibeat in Greece. All three of those services have merged under the MyTaxi umbrella since Daimler acquired them.

Featured Image via Wikimedia Commons

Chinese authorities crackdown on cryptocurrency ICOs

Monday, the Chinese government banned the practice of creating and selling new cryptocurrencies, Reuters reports

With the rise of Blockchain technology, initial coin offerings (ICOs)—which give investors the opportunity to buy newly-created cryptocurrencies—have gained popularity. In total, Reuters says, ICOs have raised $2.32 billion since the inception of the cryptocurrency market; $2.16 billion of that amount has come in 2017.

In China this year, 65 ICOs have raised a combined 2.62 billion yuan ($394.6-million) and attracted 105,000 investors, according to Reuters.

The value of Ethereum, the cryptocurrency in which most ICOs are transacted, has plummeted on the news. On Sunday, one Ethereum token was worth $349.93. Late Monday, that figure had fallen 14.3 percent to $299.72. As of 1:33 p.m. Eastern Tuesday, Ethereum has recovered slightly; the USD-Ethereum exchange rate sits at 307.56 to one.

The Bitcoin-USD exchange rate has dropped 5.9 percent since midnight Monday morning on China’s news. Late Sunday night, one bitcoin was worth $4,632.46. As of 1:39 Eastern Tuesday, the value of a single bitcoin token is $4,359.07.

The market capitalization of the cryptocurrency industry as a whole dropped 11.66 percent Monday, from $165.095 billion to $145.833 billion. Since midnight Tuesday morning, though, the industry’s market cap has gained 1.7 percent. As of 1:55 p.m. Eastern, the industry is worth $148.358 billion.

“The large price falls can be attributed to panic amongst traders and profit-taking,” said Cryptocompare founder Charles Hayter, per Reuters.

Indeed, China’s announcement had many investors across the internet predicting doom and gloom. A participant in one chatroom set up for an upcoming ICO said “the music has stopped” for the cryptocurrency boom, Reuters reports.

“Sell all your bitcoins now,” another advised, again per Reuters.

The organizer of the ICO to which the chatroom was dedicated, which was meant to launch a new cryptocurrency called SelfSell, has suspended the project.

Regulators around the world are struggling to understand cryptocurrency investment and the risks associated with it, said Zennon Kapron, director of the Shanghai-based financial technology consultancy Kapronasia, per Reuters.

Prior to China’s announcement, the U.S. Securities and Exchange Commission, as well as similar agencies in Singapore and Canada, warned that regulations would likely be needed to control the cryptocurrency market.

The lack of regulation governing cryptocurrency and investment in it is unprecedented. Blockchain, the backbone of cryptocurrency transactions, functions without a centralized overseer.

The nature of investment in cryptocurrency is also unconventional. When one contributes to a fundraiser for a traditional company, one generally receives a share in the company and/or a security. ICO investors, Reuters notes, receive neither.

Therefore, Reuters points out, an investment in a cryptocurrency is little more than a bet that demand for that currency will exceed supply, driving up value. It is a risky bet, considering the volatility of cryptocurrencies.

With risks to investors so high, government regulators are purportedly taking strides to protect their citizens. Cryptocurrency expert and Blockchain proponent Oliver Bussman said, per Reuters, that the lack of private financial advice firms in China obligates the government to be especially vigilant in protecting the finances of its constituents.

Of course, many would argue that it is an investor’s own responsibility to protect him/herself.

Despite some predictions that China’s move spells the beginning of the end of the cryptocurrency boom, many experts believe the regulatory shutdown is but a temporary measure designed to give the country’s government time to develop a strategy by which to handle cryptocurrencies.

“China, in many ways, is no different than the U.S. or Singapore in saying, ok, we need to push back on these for now until we figure out how to deal with them,” Kapron said, per Reuters, adding that he expected regulators in China to eventually ease the ICO ban.

Bussman says, per Reuters, that cryptocurrency technology is too revolutionary, too integral to the future of global economics, to be shutdown. Cryptocurrency, he says, has already worked itself into the fabric of modern investment.

“The initial coin offering is a new business model leveraging blockchain technology and it will remain. This is not the end of the ICO – absolutely not,” he said.

Featured Image via Flickr/BTC Keychain

U.S. Labor Department releases August 2017 employment data

Friday, the U.S. Labor Department released hiring and unemployment data for August, The New York Times reports. Employers created 156,000 jobs last month—less than analysts expected.

Employers added more than 200,000 in June and July (the Department revised each of those figures downward by 41,000 in this most recent report). August’s figure marks a sequential decrease of 22%. Analysts anticipated a dip, but not one so pronounced. August job-creation figures have come in below analyst expectations in four of the last five years.

Still, job creation rose 50 percent year-over-year last month.

The unemployment rate saw a marginal sequential increase, up to 4.4 percent in August from 4.3 percent in July. Joblessness continues to hover around a 16-year low. The so-called participation rate, which reflects the percentage of able workers who are either working or looking for work, came in at 62.9 percent. It has remained more or less static over the past 12 months.

Average hourly wages rose just 0.1 percent, coming in below analyst expectations. Wages generally rise with hiring rates, but the data has gone against that trend in recent years.

As wages rise, theTimes notes, the Federal Reserve raises the federal funds rate—that is, the interest rate at which banks lend money to one another—so as to guard against inflation. But the flatness of hourly wages means inflation is minimal.

“There’s no sign of inflation, which keeps the Federal Reserve on hold in terms of interest-rate hikes, and it suggests stocks should keep doing well,” Torsten Slok, chief international economist at Deutsche Bank, said, per the Times.

Stocks are up slightly today. The DOW Jones Industrial Average is up 0.18 percent, and the Nasdaq Composite is up 0.10 percent.

There is a 30 percent chance the Federal Reserve will raise the federal funds rate when it meets in December. The Fed will also meet later this month, but will not modify the interest rate.

The Federal Reserve is watching whether workers who exited the workforce during the latest recession (which took place from January 2008 through May 2009) are re-entering now. In 2010, ten percent of Americans were unemployed. That figure has dropped by more than 50 percent as of today.

The hiring and unemployment report comes on the heels of the Department of Commerce’s publication Wednesday of national economic data for the second quarter of the year. The Department reported 3.0 percent GDP growth, up from 1.2 percent in quarter one.

Last recession hit the manufacturing sphere particularly hard. Two million jobs (just under 15 percent of the industry’s workforce) vanished. Since January 2010, though, have of those jobs have come back.

The growth is accelerating. Over the first seven months of 2017, the Times notes, factories hired 101,000 workers. In August, 36,000 more employees came on board.

Mack Truck is hiring in at its assembly plant in Pennsylvania’s Lehigh Valley, the Times notes. in illustration of the rebound of the manufacturing sector. Since 1905, Mack has built every truck it sells in North America at the Lehigh Valley plant.

In 2016, Mack lost nearly a third of its workers at the plant: the facility employed 1,875 workers at the end of 2015 and 1,287 after 2016.

Today, 1,800 people take a paycheck home from the plant, which is currently offering 26 jobs.

Because the failure of the housing market largely spurred the recession, the construction industry took arguably the biggest hit. At the beginning of 2008, 7.49 million people held construction jobs in America. The recession slashed that figure by almost 25 percent, and the industry continued to decline in the recession’s wake. At the end of January 2011, employment across the sector hit a ten-year low. 5.45 million people held construction jobs—37 percent less than of at the end of 2007.

Today, the industry employs 6.9 million people—just under 27 percent more than on March 1, 2011. It has added 101,000 jobs in 2017, including 28,000 in August.

Featured Image via Pixabay

Harvey will rank among most expensive storms ever to hit U.S.

A number of organizations have released estimates of the costs of Harvey’s destruction, The Washington Post reports. If the figures are accurate, Harvey will rank among the costliest storms ever to have hit the U.S.

A report released Wednesday by risk modeling agency RMS puts the total cost of Harvey’s devastation between $70 billion and $90 billion. The organization notes that these figures are not official estimates and that the costs will continue to rise as flooding persists.

“…with the rain still falling heavily and the waters rising, the situation is too fast-moving to be stating with certainty what the losses in Texas could be,” said Michael Young of RMS.

Flooding accounts for the lion’s share of Harvey’s damage. RMS estimates that just 10 percent of Harvey-induced economic losses are attributable to wind and storm surge damage. The remaining 90 percent is due to flooding.

Other reports support RMS’s findings. CoreLogic, another firm that gathers data on natural disasters, estimates that between $1 billion and $2 billion worth of Harvey’s damage to residential and commercial properties results from wind and storm surge damage. A third firm, S&P Global, estimated wind- and storm surge- related losses at $6 billion.

Most of the rest of the costs are, again, the result of flooding.

A standard home insurance policy, the Post notes, does not cover flood damages. Most people who elect to purchase flood coverage do so through the federal government’s National Flood Insurance Program (NFIP). But, per the Post, Federal Emergency Management Agency (FEMA) data indicates that just 17 percent of those who own property in the areas where Harvey struck hardest carry flood insurance through NFIP.

Reuters says CoreLogic’s report indicated that 70 percent of the flood damage Harvey wreaked and continues to wreak will be uninsured.

“The majority of [the financial] losses [Harvey causes] will be uninsured,” Young, of RMS, said.

Still, NFIP reports that 500,000 people who own property in Harvey’s path do carry flood insurance policies, and expects the storm to cost as much as or more than any similar disaster to date. CoreLogic estimates that between $6.5 billion and $9.5 billion worth of the flood damage Harvey wreaked on residential properties is insured.

Harvey has caused 51 inches worth of “observed cumulative” rainfall, according to RMS. No other U.S. storm has induced so much rain. Tropical Storm Allison, which hit the Gulf Coast in 2001, produced upwards of 30 inches of rain, according to AccuWeather. Hurricane Katrina produced between five and ten inches.

Like Harvey, though, Katrina caused catastrophic flooding. But, the latter storm wreaked most of its damage by virtue of a 28-foot storm surge, which smashed levees.

Katrina left $108 billion worth of damage in its wake after it ravaged Louisiana in 2009, according to a report by theBalance.com. Half of the costs were attributable to flooding in and around New Orleans.

In addition to wreaking financial devastation on property owners in its path, Harvey will likely take a toll on the larger U.S. economy. The storm has forced a shutdown of almost a third of the country’s oil and gas refinery capacity, according to CBS News, and has crippled pipelines that carry oil from the Gulf to the rest of the nation.

The Colonial Pipeline, which runs from Houston to the Northeast and provides 40 percent of the gasoline across the American South, is currently non-operational.

Gas prices are soaring in Houston and around the country. Since Harvey made landfall Friday. the average per-gallon price of gas jumped more than $0.20 in Texas and just under $0.17 across the nation, per AAA.

Former Shell Oil president John Hofmeister said oil production in the Gulf Coast is crucial to the industry.

“Without it we’d be in gas lines all the time. We need that Gulf Coast,” Hofmeister said.

He added that the refineries will not be operational until mid-September at the earliest, Thanksgiving at the latest.

Hurricanes Katrina and Rita demonstrated how damage to oil and gas production can hurt the US economy. They damaged 19 percent of U.S. oil production, shutting down 113 “offshore oil and gas platforms” and damaging 457 pipelines.

In the quarter following Katrina, U.S. economic growth fell 65 percent. But, in the subsequent quarter, the growth rate increased 270 percent and came in 26 percent higher than it had been in the quarter prior to the storms.

Granted, the deceleration of economic growth after was due only in part to oil industry slowdowns.

Featured Image via Wikimedia Commons

Consumers accuse Best Buy, other Texas retailers of price-gouging in Harvey’s wake

A photo taken at a Best Buy in Houston after Hurricane Harvey shows 12-packs of Smart Water listed for $29.98 and 24-packs of Dasani water advertised at $42.96. The photo went viral on social media, causing many to accuse the company of price-gouging in the wake of the storm.

A Best Buy spokeswoman told CNBC the exorbitant pricing resulted from a “big mistake” made by a few employees at one store.

The company issued a statement Wednesday explaining that because it does not sell water by the case, its computer systems contain no pricing information for cases of water. When employees at the store in question failed to find prices for cases, they multiplied the price of individual bottles by the number of bottles in a case and arrived at the numbers listed above.

The statement says the explanation is not an excuse and expresses remorse for the occurrence.

“We feel terrible about this because, as a company we are focused on helping, not hurting people affected by this terrible event,” the statement says. “We are all deeply sorry that we gave anyone even the momentary impression that we were trying to take advantage of the situation.”

Best Buy is just one of a number of Houston-area retailers consumers have accused of using the storm to pad the bottom line, The Washington Post reports. The state attorney general’s office has received 684 complaints from consumers, most of which allege price-gouging.

“Anytime catastrophic storms hit Texas, we witness the courage of our first responders and the generosity of neighbors coming together to help their fellow Texas,” Attorney General Ken Paxton said in a statement, per the Post. “Unfortunately, in the wake of the damage from storms and flooding, we also see bad actors taking advantage of victims and their circumstances.”

Some businesses have charged as much as $8.50 for a single bottle of water, and up to $99 for a case, the Post says.

An investigation by KXAN, an NBC affiliate based in Austin, revealed that a Best Western hotel in Robstown was charging almost triple its ordinary nightly rate. A crew working undercover for the station paid $289.99 ($321.89 with tax) for a room that typically costs $119 per night.

Best Western spokeswoman Kelly Dalton said in a statement that the nationwide hotel chain had reimbursed the overcharged customers and intends to cut ties with the Robstown location.

One woman says she paid more than $60 for two cases of beer at a RaceWay gas station in Corpus Christi. RaceWay says the overcharge resulted from a clerical error, and that the owner, who is an “independent Raceway contract operator,” according to a statement by RaceWay, gave the customer a full refund when the mistake came to light.

Still, the company says: “We take these allegations seriously and are investigating them with the operator.”

Texas law enforcement takes price-gouging seriously as well. The offense carries a fine of $20,000 per incident. If victims are over the age of 65, the penalty is $250,000 per incident.

Price-gouging, Paxton says, is something “you can’t do in Texas.”

A few gas stations have reportedly been charging upwards of $3.50 per gallon for gas, Kayleigh Lovvorn, a spokeswoman for the attorney general’s office, told the Post. One store, she said, charged $20/gallon. The average gas price in Houston is $2.21, according to gaspricewatch.com.

Sunday, the Post reported that Harvey had forced the shutdown of a quarter of the oil and gas production in the Gulf of Mexico, and disabled ten percent (two million barrels per day worth) of the country’s refining capacity. The shutdowns will drive up the gas prices in and around Houston.

Paxton’s office is investigating whether the $20/gallon price was an act of price-gouging or a necessary response to the refinery shutdowns.

Featured Image via Flickr/brownpau

Lyft nearly triples its coverage across the U.S. 

As Uber takes steps to recover from a string of allegations that called its corporate ethics into question, competing ride-share service Lyft is anxious to establish itself as a viable Uber rival, CNBC reports.

Thursday, Lyft nearly tripled its coverage across the U.S., adding 160 cities—for a total of 350—and 32 states for a total of 40. 94 percent of Americans, the company says, can now hail a Lyft ride in minutes.

The company claims to cover more of the US than any other ride-share service, including Uber.

Uber offers service in about 150 US cities. There are holes in Uber’s coverage across the Southeast—the company offers no service in Arkansas, Mississippi, or West Virginia—and the Northeast—Uber rides are not available in Delaware, Maine, Vermont, New Hampshire, New Jersey, or Washington, D.C. Uber does not operate in Alaska.

Lyft, by comparison, now serves nine cities in New Jersey, four in New Hampshire, one in Delaware (the state’s capital of Dover), five in Maine, six in West Virginia, and six in Alaska.

Unlike Uber, Lyft lacks service in South Dakota. Neither company serves Arkansas or Mississippi.

Lyft remains well behind Uber in terms of capital, ridership, and breadth of service, CNBC notes. Uber gives 10 million rides per day across more than 80 countries around the globe. Lyft, which operates in the US exclusively, reached one million rides per day in early July.

Since it began in 2009, Uber has raised $14 billion in capital. Lyft, which launched in 2012, has accrued $2.6 billion worth of capital.

But, the gulf between the two companies is narrowing, CNBC notes. Lyft gave more rides in the first half of 2017 than in all of 2016. The company’s share of the US ride-hailing market has jumped from 12 percent to 30 percent over the past two years.

CNBC says Uber continues to grow its ridership, but Business Insider reported in June that Uber’s growth—in revenue as well as in ridership—slowed in the first quarter of this year. Uber, privately held, rarely publishes ridership statistics or financial data.

“We’ve always been the underdog in the race against Uber. We’ve taken a lot of ground. We still are,” Green told CNBC.

Amidst Uber’s many scandals, Lyft is making an effort to double down on its friendly, wholesome public image.

“As we get service levels to parity and pickup times are equal, people prefer using Lyft,” said Green, per CNBC. ”They like that we treat our drivers better. They like that we treat our customers better. And they like that we have a brand that sort of stands for taking care of people, where Uber has done a lot to build the opposite type of brand.”

CNBC spoke to two drivers who each work for both Uber and Lyft in New York City: Syed Manzar and Karim Guernah. Both noticed a change in customers’ attitudes after news broke of Uber’s various scandals.

Nick Raif, who uses Uber and Lyft to hail rides in the Chicago area, told CNBC the unflattering news concerning Uber sometimes prompted him to use Lyft instead. The two companies provide comparable coverage around Chicago, he said.

Raef said he found himself willing to pay an extra dollar or two for Lyft on days when the news surrounding Uber particularly disturbed him.

But, Jan Dawson of Jackdaw Research contends per CNBC that moral considerations are of secondary importance to most customers.

“It is so tempting to think Lyft is gaining because people are taking a stand against Uber, but convenience usually trumps morality,” he said.

Uber is making an effort to repair its public image, as well as its relationship with its drivers. In July, the company launched an initiative dubbed “180 days of change.” As part of the effort, Uber aims to increase driver compensation, to offer drivers more flexibility, and to offer better support for drivers in the event of emergencies like accidents or passenger violence

The company, according to CNBC, has hired thousands of drivers to help ease each individual’s work load and has for the first time allowed customers to tip drivers using the app. (Lyft’s app has long afforded customers that ability).

Uber is also regaining stability in its corporate leadership. Tuesday, the company announced that it had at last hired a permanent CEO: Dara Khosrowshahi, who had served as Expedia’s CEO since 2005.

Featured Image via Flickr/Alfredo Mendez

 

Fox News will no longer broadcast in the UK

21st Century Fox announced Tuesday that it will pull Fox News from UK airwaves, The Guardian reports. The network’s final broadcast across the pond took place at 4:00 p.m. local time Tuesday.

A spokeswoman told The Guardian: “[Fox] has decided to cease providing a feed of Fox News Channel in the UK. Fox News is focused on the US market and designed for a US audience and, accordingly, it averages only a few thousand viewers across the day in the UK. We have concluded that it is not in our commercial interest to continue providing Fox News in the UK.”

21st Century Fox awaits British authorities’ approval of its bid to acquire Sky TV, the UK’s top pay television network. The US media giant already owns 39% of Sky and is seeking to acquire the remaining 61% in the £11.7 billion ($15.2 billion) deal.

Sources told The Guardian the decision to pull Fox News out of the UK was strictly economical and in no way related to the pending acquisition.

But, UK media regulators and lawmakers have raised concerns about the “corporate culture” of the network. According to CNN, the British Office of Communications (Ofcom), which was tasked with reviewing the proposed takeover, said following its review that the sexual harassment allegations against former Fox News chairman Roger Ailes and former anchor Bill O’Reilly, were “deeply disturbing,” and evinced “significant failings of the corporate culture.”

O’Reilly and Ailes both denied the allegations, CNN notes.

Ofcom found no evidence that senior management at Fox had been aware of the alleged misconduct prior to July 2016. CNN reports that 21st Century Fox management (namely, Rupert Murdoch and his sons Lachlan and James)  “pressured Ailes to resign,” which he did in July 2016.

In April, Fox and O’Reilly parted ways. “After a thorough and careful review of the allegations,” 21st Century Fox said in a statement per foxnews.com, “the company and Bill O’Reilly have agreed that Bill O’Reilly will not be returning to the Fox News Channel.”

Despite its concerns regarding the sexual harassment allegations, Ofcom concluded that 21st Century Fox qualified as a “fit and proper” holder of Sky. The regulatory agency did not deem further investigation of the network’s broadcasting practices necessary.

Still, British lawmakers and lobbyist groups are urging Karen Bradley, the UK’s Secretary of State for Digital, Culture, Media and Sport, to refer the Fox-Sky deal for additional review. In response to those petitions, Bradley’s office asked Ofcom to conduct further research. Friday, the office confirmed that it has received “additional advice” from Ofcom concerning the deal, Deadline reports.

“The Secretary of State will now carefully consider that advice before making her decision on referral on the basis of all the evidence before her, and will do so as soon as is reasonably practicable,” the office says, per Deadline.

Bradley said late last month that while she saw no reason to further review 21 Century Fox’s adequateness as a broadcaster, she was likely to refer the deal for review by the UK’s Competition and Markets Authority (CMA).

“Unless new evidence…changes my mind in coming weeks, the bid will therefore be referred for a Phase 2 review on at least one ground: media plurality,” Bradley told Parliament in mid-July, per Variety.

Deadline notes that CMA reviews can take up to six months. If the deal is not finalized by the end of this year, 21st Century Fox will pay Sky shareholders £170 million ($219 million).

Twenty-two million viewers across five European countries—the UK, Ireland, Italy, Germany and Austria—pay for Sky service,

The European Union has already approved the acquisition. UK authorities represent the final regulative hurdle before finalization.

If the deal dissolves, Fox will pay Sky an additional £200 million ($258 million).

Featured Image via Flickr/Johnny Silvercloud

Best Buy shares plummet despite strong earnings report

Best Buy’s quarter two earnings report, released Tuesday, shattered analyst expectations, Bloomberg reports. But, the company’s stock has plummeted on CEO Hubert Joly’s warning that the sales growth may not be sustainable.

Joly cautioned on the earnings call, per Bloomberg, that investors should not expect comparable sales growth to continue at its second-quarter rate.

As of 12 pm ET Tuesday, Best Buy shares are down 11 percent since the market closed Monday.

For quarter two, the company reported comparable sales growth of 5.4 percent, more than twice analysts’ expectations of 2.1 percent. Quarter two marks the chain’s best comparable sales growth since quarter four of fiscal 2010, Bloomberg reports.

Non-GAAP diluted earnings per share jumped from $0.57 to $0.69 year over year, an increase of more than 21 percent. Sales revenue rose almost five percent year-over-year, from $8.53 billion to $8.94 billion, and came in 3.2 percent above analysts’ expectations of $8.66 billion.

Despite Joly’s warning, Best Buy has revised its full-year comparable sales growth target from 4.5 percent to 5.5 pecent and raised Non-GAAP diluted EPS targets to $0.80/share from $0.75/share (an increase of more than 6.5 percent).

CFO Corie Barry expects “continued positive industry and consumer momentum,” she said in a statement, per Bloomberg, adding that product launches throughout the fall and the holiday season should have a positive impact on Best Buy’s performance.

Still, Barry offers a word of caution regarding the future—particularly the holiday boom, during which discounts and other promotions, Bloomberg points out, cut into the bottom line.

“You can’t always carry trends forward into the fourth quarter,” she said on the call, per Bloomberg. “…there are still a lot of unknowns.”

Best Buy’s success this summer comes as a number of hot new tech products hit the shelves. Nintendo’s new gaming platform, the Switch, and Samsung’s new phone, the Note 8, presumably played a role in boosting Best Buy’s sales numbers, Bloomberg notes.

Sales of smart home devices like the Google Home and Amazon’s Alexa increased as well, as Best Buy made an effort to showcase such devices. Sales of “wearables” like the Apple Watch also climbed.

According to the earnings report, though, pricing pressure in the mobile phone market drove down margins on products like the Note 8, and wearables are inherently low-margin products. A decline in sales of tablets, which are high-margin items, further limited profits.

Still, gross profit increased 4.4 percent, from $2.06 billion to $2.15 billion, while gross profit percentage (i.e. the percentage of revenue that becomes profit) remained flat.

Best Buy’s online revenue increased 31.2 percent “on a comparable basis,” according to the earnings release, while online sales accounted for 13.2 percent of total domestic revenue, an increase from 10.6 percent a year ago.

The company’s online revenue was higher than it has ever been, except during a holiday quarter, Bloomberg reports.

Still, experts doubt whether Best Buy can continue to compete with Amazon, which, according to a consumer survey by Gordon Haskett analyst Chuck Grom (cited by Bloomberg), now controls more than half of online sales across 11 key categories, including electronics and small appliances.

“They are going to get perfect quarters like this every now and again,” Brandon Fletcher, an analyst at Sanford C. Bernstein & Co., said of Best Buy, per Bloomberg.

The company “will continue to face waves of growth and decline,” Fletcher added, “but its base products — printer ink, headphones, etc. — are not related to product launches and those sales are inexorably moving to Amazon and Wal-Mart online.”

Best Buy has succeeded in the stock market despite increasing pressure on the eCommerce front. At Monday’s close, shares had increased more than 60 percent in the past year.

But the company’s own management has asked investors to temper their enthusiasm, and investors are obliging.

Featured Image via Wikimedia Commons

Harley-Davidson rolls out new models as sales decline

Harley-Davidson, Inc. is set to revamp its Softail lineup with a slew of new 2018 models, Charles Fleming of The LA Times reports. The company told Fleming the new models are “already on their way to dealerships.”

The new bikes will weigh less than their predecessors and will feature new engines with more torque. Many will have improved lean angles so that they steer and corner better.

The company has announced eight new Softails, according to Fleming: the Fat Boy, the Heritage Classic (formerly the Heritable Softail Classic), the Low Rider, the Softail Slim, the Deluxe, the Breakout, the Fat Bob and the Street Bob.

The Softail line has absorbed the Dyna line, leading to the discontinuation of the Sportster 1200T, the Del VROD Muscle and Night Rod Special, and the Wide Glide.

Milwaukee-Eight 107 V-twin engines will come standard on each of the new models. Those engines measure 107 cubic inches and boast 147 Nm of torque.

The larger Milwaukee-Eight 114 will be available as an upgrade on the Heritage Classic, the Breakout and the Fat Boy. That engine will pack 161 Nm of torque.

Harley has taken steps to reduce the vibration in both engines, Fleming says, thereby reducing RPMs during idling and limiting engine noise when the bikes are at rest.

Harley told Fleming the two engines are “the most powerful…ever offered” in its Big Twin cruiser category.

Each of the new models will also be equipped with a new chassis and new suspension.

Harley has seen sales drop as the core of its customer base continues to age, and the company is struggling to attract a younger generation of bikers. Many among the new generation prefer other bikes over Harleys, and the company’s dominance in the market is waning.

So, prior to rolling out its new offerings, Harley launched what it calls, per the Times, “the most extensive research and development program” in its history, which dates back to 1903. The company asked current as well as prospective riders to suggest improvements, and many of those surveyed asked for lighter bikes with better handling.

Harley delivered, but doubt remains as to whether the new bikes will precipitate a rise in sales.

“This model year lineup may not be enough to reverse Harley’s US retail sales declines, now in their third consecutive year,” said USB analyst Robin Farley, per the Times.

Harley sold 54,786 units domestically in quarter two of last year, and 49,668 in this most recent quarter. That’s a decline of 5,118 units (9.3%) year-over-year.

The company has made other changes in an effort to drag its hogs into the modern age. LED headlights and a USB port will come standard on all new models. Cruise control will come standard on the Heritage Classic and will be available as an add-on on all other models. Anti-lock breaks will come pre-installed on the Fat Boy, the Deluxe, the Heritage Classic and the Breakout, and will be optional on the other models.

Some die-hard Harley riders, Fleming says, have resisted such changes as electric starters and anti-lock breaking systems.

Perhaps in an effort to appease such customers, Harley has given the Heritage Classic, along with some of the other new models, a vintage look, featuring, per Fleming, “spoked wheels, blacked-out rims and period-correct headlight bezels,” among other “details.”

Like all Harleys, the new models will benefit from the company’s parts and accessories catalog. Riders will be able to modify seat and handlebar configurations and make other changes.

Fleming, who test-rode the Heritage Classic and the Fat Boy, says both of those bikes sit low, making them suitable for smaller riders.

The Low Rider and the Street Bob, each of which costs $14,999, are the most budget-friendly of the new models. The Heritage Classic and the Fat Boy are the most expensive of the new bikes; with the 114 engine, each of those bikes will cost $20,299.

Featured Image via Wikimedia Commons