Sunday, October 23, 2016

Elon Musk Details His Vision Of Life On Mars

Space X founder answers questions on Reddit.


By Mike Murphy
MarketWatch
October 24, 2016

Space X founder and CEO Elon Musk gave more details about plans to colonize Mars on Sunday during an AMA session on Reddit.

Musk’s ambitious plans, laid out last month at an international space conference in Mexico, include using reusable rockets to launch a fleet of spaceships to establish a base on the Red Plant, creating a colony with 1 million people over the course of 100 years. Musk hopes to launch an unmanned mission as soon as 2018, and a manned mission in 2024.

On Sunday, Musk said the first manned mission, with about a dozen people, would create a base and set up a propellant plant for refueling. His envisions Mars settlers living in glass-and-carbon-fiber geodesic domes, with robots to assist with mining and tunnelling. Musk said he hopes to give more details in “a year or two,” after “actual live lock-ups” have been built.

Musk also answered a number of technical questions about the so-called Interplanetary Transport System, such as the maximum g’s for the spacecraft (5 g’s normally, but able to withstand two to three times that); comparisons of the massive planned rocket to the current Falcon 9 (“it won’t come in quite as hot and fast as Falcon”); and the project’s next biggest task (creating “a new metal alloy that is extremely resistant to oxidation for the hot oxygen-rich turbopump”).

Musk also said he doesn’t like the ITS moniker: “I think we need a new name. ITS just isn’t working. I’m using BFR and BFS for the rocket and spaceship, which is fine internally, but...”


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Wall Street’s $40 Billion AT&T Pledge Offers Fees And Risks

While ‘lucrative’ for banks, regulatory uncertainty exists; Markets can swing while regulators dwell on deal approval.


By Sally Bakewell and Laura J Keller
Bloomberg
October 24, 2016

Wall Street banks are writing some of their biggest checks ever to fund AT&T Inc.’s takeover of Time Warner Inc. as they seek a bonanza of fees. But there’s a dose of concern that the $40 billion loan pledge may get caught up in a regulatory impasse.

JPMorgan Chase & Co. has pledged $25 billion of the financing, with Bank of America Corp. providing the rest, according to a person with knowledge of the matter who asked not to be identified without authorization to speak publicly. That’s believed to be the most JPMorgan has ever promised for a deal, the person said.

The lending commitment gives the banks an advantage on bond offerings that would find willing buyers among yield-starved investors, analysts say. At the same time the banks face the risk that the deal, along with a chunk of their balance sheets, would be tied up if regulators delay approving it.

“This could be an especially lucrative deal for the banking industry; they’re going to make a lot of money if the deal gets done” said Bert Ely, a banking consultant at Ely & Co. “The numbers on the credit piece look big, but I’m sure the credit risk will be spread widely. The big uncertainty hanging over this will be the battle for regulatory approval and what lender protections are included if the deal fails.”

T-Mobile Failure

A failed megadeal wouldn’t be the first for AT&T. In 2011, the company abandoned its takeover of T-Mobile USA because of regulatory hurdles. JPMorgan had lined up $20 billion to finance that deal.

Taking on commitments to underwrite large deals helps JPMorgan maintain its top position in leading corporate debt deals in the U.S.

JPMorgan has occupied the top spot for managing dollar bond sales from highly rated companies since 2010, according to data compiled by Bloomberg. The bank has been the top provider of similarly rated loans for each year since 2005, Bloomberg data show.

To help finance this proposed deal, AT&T brought in Bank of America as its partner on Thursday, keeping the number of participants to a minimum until the announcement, the person said. JPMorgan intends in the coming weeks to syndicate most of the $40 billion loan to other banks that already lend to AT&T.

Bridge Loan


The loan is structured as an 18-month bridge deal, a type of financing that a borrower repays by issuing debt in capital markets. In the case of AT&T, most of the deal will be replaced by high-grade bonds, with a potential portion in the form of term loans, the person said.

AT&T said that it’s seeking to hang onto its investment-grade credit rating after the deal is completed. But the lenders themselves are taking on other risks by using their balance sheet resources, according to Charles Peabody, a bank analyst at Compass Point Research & Trading.

“That is dangerous because this deal could be hung up in antitrust wranglings for a long time,’’ he said. JPMorgan and Bank of America won’t be protected if credit markets swing and they can’t sell the debt for what they had anticipated, he said.

Jessica Francisco, a JPMorgan spokeswoman, and Thomas Rottcher, a Bank of America spokesman, declined to comment. AT&T, based in Dallas, didn’t immediately reply to an e-mail and calls on Sunday.

The deal caps AT&T Chief Executive Officer Randall Stephenson’s vision to expand the company into media and entertainment as its wireless business matures. Gaining premium cable channels HBO, CNN and the Warner Bros. studio means AT&T becomes a content owner rather than just a distributor of video.

Yield Hunger

For debt investors, any financing backing the takeover would offer a juicy alternative to the more than $10 trillion of debt globally that’s yielding less than zero, driven down by easy-money policies from Europe to Japan.

“The investor base is starved for yield,” said David Hendler, founder of Viola Risk Advisors and a veteran bank analyst. “This would be a good earning asset in a low yield world -- which is very much in demand at the moment in the syndicate market. Banks are deposit-rich and looking to invest in loans.”

The prospective deal has raised regulatory questions ahead of the U.S. election, as both the Democratic and Republican presidential nominees expressed suspicion of blockbuster deals. Hillary Clinton has been critical of big mergers and has called for “reinvigorating” antitrust enforcement while her opponent Donald Trump broke with Republican orthodoxy on Saturday by saying he would block the Time Warner acquisition, arguing that such deals leave too much power concentrated among too few companies.

If AT&T’s deal doesn’t gain approval, it must pay a $500 million reverse break-up fee to Time Warner, according to a person with knowledge of the matter.

Bond Trading

Beyond collecting the fees that come from underwriting large takeovers, banks also benefit from trading that debt in the secondary market. CEO Brian Moynihan pointed to Bank of America’s debt underwriting business as a reason for his beat last week in estimates for third-quarter fixed-income trading revenue.

Wall Street’s biggest investment banks have been taking a greater percentage of their overall revenue from issuing new debt and trading fixed-income products, which includes corporate debt, sovereign debt, currencies and commodities. Debt underwriting made up 11.3 percent of U.S. investment banks’ third-quarter revenue, about a percentage point more than in the same period two years ago, according to Bloomberg Intelligence.

U.S. banks relied on fixed-income underwriting and trading to propel 56 percent of their total investment banking business in the third quarter, a rise from 47 percent last year and 50 percent two years ago, Bloomberg Intelligence data show.

“These guys are fairly anxious to generate fee income. This is an area where you can make money very quickly. And very big money,’’ said Compass Point’s Peabody.


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AT&T’s Time Warner Deal Looks Like Bad News For Verizon

By Brian Fung
The Washington Post
October 24, 2016

AT&T's $85.4 billion megadeal to acquire Time Warner is an unprecedented bid to diversify the telecom giant as network operators nationwide scramble to marry their communications pipes with exclusive content. For many of these firms, it's no longer enough to be the conduit to TV shows, films and other creative media. A growing number of them want to be making money from the production and cross-promotion of content, too.

Against this backdrop is Verizon, AT&T's biggest rival in the wireless industry, which has made its own moves toward gaining access to content. But some analysts say the outlook for Verizon is beginning to look gloomier as AT&T barreled to a deal with Time Warner on Saturday.

“You've got the big-league players, and you've got the second-string players,” said Jeff Kagan, an independent telecom analyst. “Verizon — the moves they've made, they make it look more like a second-string player.”

A Verizon spokesman didn't respond to a request for comment.

Verizon has made headlines recently with its acquisitions of AOL and Yahoo, both icons of the early Internet that later fell on hard times.

The underlying logic of those deals is rooted in the same dynamic driving the rest of the industry. Verizon primarily purchased AOL for its substantial ad-targeting technology, which will allow Verizon to turn online video viewers into revenue more easily. Yahoo, whose site remains one of the Internet's top destinations after Google and Facebook according to the market research firm ComScore, is notable for the millions of viewers it attracts each month.

But what Verizon gets out of AOL and Yahoo may pale in contrast to what AT&T is now getting with Time Warner, a media titan that includes a major movie studio; a global, 24/7 cable news network; and rights to some of the most recognizable names in pop culture, such as Batman, Superman and Harry Potter.

“It’s hard to compare what Verizon has bought . . . with the quality of what Time Warner offers,” Walt Piecyk, a telecom analyst at BTIG, wrote in a research note Saturday. “In fact, Verizon bought the AOL asset that Time Warner didn’t want. There is no indication Verizon’s strategy will change and frankly few, if any, alternatives that remain.”

Yahoo's disclosure in September of a historic data breach affecting at least 500 million user accounts has cast a big cloud over Verizon's purchase. That news was further compounded when the public learned that top Yahoo executives had secretly worked with intelligence officials to scan customer emails — without the knowledge of its chief information security officer, who quit the company in protest when he discovered the arrangement.

Now, Verizon may face pressure to match AT&T's moves. But it is unclear how.


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The Fatal Mistake That Doomed Samsung’s Galaxy Note

On the verge of challenging Apple’s mobile phone dominance, the South Korean company made a rushed decision, based on incomplete evidence, that later forced it to kill the model.


By Jonathan Cheng and John D. McKinnon
The Wall Street Journal
October 24, 2016

The X-ray and CT scans showed a pronounced bulge.

After reports of Galaxy Note 7 smartphones catching fire spread in early September, Samsung Electronics Co. executives debated how to respond. Some were skeptical the incidents amounted to much, according to people familiar with the meetings, but others thought the company needed to act decisively.

A laboratory report said scans of some faulty devices showed a protrusion in Note 7 batteries supplied by Samsung SDI Co., a company affiliate, while phones with batteries from another supplier didn’t.

It wasn’t a definitive answer, and there was no explanation for the bulges. But with consumers complaining and telecom operators demanding answers, newly appointed mobile chief D.J. Koh felt the company knew enough to recall 2.5 million phones. His suggestion was backed by Samsung’s third-generation heir apparent, Lee Jae-yong, who has advocated for more openness at one of the world’s most opaque conglomerates.

That decision in early September—to push a sweeping recall based on what turned out to be incomplete evidence—is now coming back to haunt the company.

Two weeks after Samsung began handing out millions of new phones, with batteries from the other supplier, the company was forced to all but acknowledge that its initial diagnosis was incorrect, following a spate of new incidents, some involving supposedly safe replacement devices. With regulators raising fresh questions, Messrs. Lee and Koh decided to take the drastic step of killing the phone outright.

The Galaxy Note series helped make Samsung a smartphone leader, and the Note 7, its most advanced phone ever, had all the makings of a hit. For a moment, it looked like the Galaxy Note could win over users of Apple Inc.’s iPhone and cement Samsung as one of the world’s most dominant technology companies.

Instead, as a result of the flammable phones and the botched recall Samsung’s leaders are now struggling to salvage the company’s credibility. At risk is the expected February launch of its next flagship smartphone, likely to be called the Galaxy S8.

The U.S. Consumer Product Safety Commission, which oversees product recalls in Samsung’s biggest smartphone market, is expected to investigate whether Samsung notified the agency soon enough of dangers posed by the device. Samsung’s decision to launch its own recall, bypassing the CPSC’s formal process for a time, may have prevented regulators from figuring out more about the root cause, some U.S. lawmakers suspect.

Samsung still doesn’t have a conclusive answer for what’s causing some Note 7s to catch fire.

A Samsung spokeswoman said the company worked quickly with regulators and took immediate action when problems arose with the phone. “We recognized that we did not correctly identify the issue the first time and remain committed to finding the root cause,” she said. “Our top priority remains the safety of our customers and retrieving 100% of the Galaxy Note 7 devices in the market.”

Outside experts have pointed to a range of possible culprits, from the software that manages how the battery interacts with other smartphone components to the design of the entire circuit.

Engineers are also looking into the possibility that the battery case may have been too small to house a battery of that capacity, according to one Samsung mobile executive.

Big product recalls are never easy. Consumers, however, are often willing to forgive mistakes if they believe the company is looking out for them and moving swiftly to address problems.

“What Samsung should have done, very early on, was to share even its preliminary findings or thoughts” with U.S. regulators rather than pushing its own recall, said Stuart Statler, a former CPSC commissioner and independent product safety consultant in Mooresville, N.C.

Samsung executives have delayed the development of the Galaxy S8 device by two weeks as engineers work to get to the bottom of the Note 7’s overheating problem, according to a member of the Galaxy S8 development team.

Meanwhile, investors have shaved off roughly $20 billion in Samsung’s market value. The company has said the recall would cost it $5 billion or more, including lost sales.

Introduced in 2011, the Galaxy Note series has served as a point of pride for the South Korean company, which was long derided for following—and sued for allegedly copying—the iPhone.

The bigger-screen phone was in tune with consumer tastes. When iPhones were shrinking in size, the Galaxy Note anticipated the shift to bigger handsets, which earned it the nickname “phablet,” a mashup of phone and tablet.

By the time Samsung released its third iteration in September 2013, the Galaxy Note was a certified hit, selling 10 million units in two months. The next year, Apple released its first Galaxy Note-sized iPhone.

As word reached Samsung executives that only incremental changes were likely for Apple’s iPhone 7 this year, Mr. Koh and other top executives grew confident about their prospects for a head-to-head fall release of the next version. The company decided to skip the number 6 and jump straight to 7, a name change that would invite direct comparisons with Apple’s model.

Samsung’s engineers packed new features, including an iris scanner, water resistance, an improved stylus and about 16% more battery life than its previous Note device. Presales for the Note 7 started strong after Mr. Koh introduced the device at a lavish event at a theater in Midtown Manhattan on Aug. 2. Analysts boosted their projections for Samsung’s earnings, while investors pushed the stock to record highs.

As user reports of overheating began to trickle in days later, company executives were at first unruffled. Some suspected that many of the alleged incidents had been faked, and argued that even a small number of genuine cases shouldn’t overshadow the fact that millions of smartphones were working fine, according to people familiar with their thinking.

Gathering at Mr. Koh’s office at R5, the 27-story office tower overlooking Samsung’s sprawling Digital City campus south of Seoul, he and other mobile executives, including his predecessor, J.K. Shin, and longtime Samsung top lieutenant G.S. Choi, examined the X-ray and CT scan reports of the phone, which appeared to show heat damage to the internal structure of the battery, according to people familiar with the discussions.

Messrs. Lee and Koh believed they had all the evidence they needed to conclude the problem lay with Samsung SDI’s batteries, these people said. They argued it was more important for Samsung to do “the right thing” and act, in the words of one of the people familiar with the matter, rather than wait for more information. Doing so would have left customers in the dark longer and potentially allowed the crisis to get worse.

On Sept. 2, Mr. Koh entered a news conference room in downtown Seoul to address reporters. Without providing names, he said the company had identified a problem with one of its suppliers and it would shift production to another supplier it believed hadn’t caused the problems.

People familiar with the matter say that the supplier Samsung planned to rely on was Amperex Technology Ltd., a unit of Japanese electronic parts maker TDK Corp.

In Washington, Mr. Koh’s announcement came as a surprise to the Consumer Product Safety Commission. Typically, companies work jointly with the CPSC to study a problem and plan a recall together.

Samsung didn’t notify the CPSC of the problems until later that day, according to people familiar with the matter—about two weeks after the first reported Note 7 incident.

CPSC regulations require companies to report potential product hazards within 24 hours, though the commission allows companies that are “truly uncertain” about an issue to spend a “reasonable time” investigating the situation.

Samsung also took the little-noticed decision to pursue what’s known as fast-track resolution with the CPSC. The program allows a company to shorten the agency’s sometimes-lengthy investigation of a product problem, while avoiding a formal finding by the CPSC of a defect—a maneuver that can insulate manufacturers from product-liability litigation.

The CPSC warns that some companies might not want a fast-track resolution in situations where “complex technical issues…require more time to resolve.”

At first, Samsung’s recall solution seemed to work. Consumers were turning in their phones and asking for new Note 7 phones in about 90% of the cases, Samsung said. The company’s executives basked in praise, particularly from the South Korean press that Samsung executives read obsessively, who credited Samsung with acting swiftly.

The CPSC, though, appeared unhappy with some of the company’s maneuvers. A week after Mr. Koh’s recall announcement, on Sept. 9, the agency took the unusual step of warning consumers not to use the phones while it did more research, and said it would work to determine whether Samsung’s plan to issue replacement phones was “an acceptable remedy.”

A few days later, Samsung and the CPSC finally agreed to a formal joint recall.

Meanwhile, complaints about overheating replacement phones, and of isolated cases of battery failures, began emerging. A Samsung spokesman said initially there was no safety concern.

In China, where the company used only Amperex-supplied batteries in its Note 7s, the company dismissed reported smartphone fires as fabrications, arguing it was impossible for those batteries to have caused problems.

As it became clear the reported problems were multiplying, employees describe a kind of gallows humor setting in. One mobile division executive described the Galaxy Note 7 as a “radioactive” topic, with staffers afraid of even discussing it in the company canteen.

A local television news crew camped outside the offices at 6 a.m. to film a report about how many lights were on at the company, to illustrate the depth of the company’s crisis.

Then came the evacuation of a Southwest Airlines Co. flight in early October because of a smoking Samsung smartphone.

Top executives from major telecoms operators, including Verizon Communications Inc.’s Lowell McAdam, urged Mr. Lee to quickly kill the Galaxy Note 7 smartphone, according to people familiar with the matter. The executives told Mr. Lee the smartphone was becoming increasingly unsalable.

On Oct. 11, Mr. Lee called Mr. Koh and ordered him to discontinue the smartphone. Later that day, Mr. Koh wrote a letter to the company’s mobile division, a copy of which was reviewed by The Wall Street Journal, calling the crisis “one of the toughest challenges we have ever faced.”

While the decision to abort the Note 7 has halted the damage for now, analysts have raised questions about the future of the Galaxy Note series, arguing that the brand has become too tarnished by the crisis and that the company should retire it altogether.

At least two U.S. senators, Bill Nelson of Florida and Richard Blumenthal of Connecticut, have asked for more details about Samsung communication with the CPSC and its handling of the phone crisis. Mr. Blumenthal noted in a letter to Samsung released publicly that so far in the current fiasco, Samsung has reported 96 incidents of batteries overheating in the U.S., including 13 burns and 47 cases of property damage.

Last week, at the urging of CPSC Chairman Elliot Kaye, the agency approved a proposal for a wide-ranging inquiry into lithium ion and related batteries in coming months.

“There are few things in life I’m reasonably confident of predicting; one of those is….we’re going to have yet another issue of lithium ion batteries catching fire” from a range of devices, said CPSC commissioner Robert Adler. “This is just a massive problem.”


Article Link To The Wall Street Journal: