Innovation on wheels
Has Apple really crashed the car? The tech giant has killed its electric vehicle project as it pivots to artificial intelligence, prompting many observers to declare the venture a major failure for the company.
Here’s a contrarian thought: That critique misses a wider point about how Apple innovates, because the company has used the project to power a whole ecosystem of products and services that have been unmitigated successes.
Apple invested billions to build a self-driving car. Reports emerged about the secret effort, code-named Project Titan, in 2014, and the company has never publicly acknowledged its existence. That said, it told staff on Tuesday that many of them would be redeployed.
There had been an wider internal debate about getting into the car business. An E.V. was seen by some as the ultimate data-collection device and as a way to diversify from the iPhone.
But others questioned what kind of margins cars would deliver, especially in a market locked in a price war. The answer: nothing like the profits packed into an iPhone or Apple Watch, which have helped Apple reach a near $3 trillion valuation.
The car project was an R.&D. lab on wheels. In the same year that speculation started about Project Titan, Apple released CarPlay. That has morphed into a software system that, as of 2022, had been installed in 98 percent of new cars in the U.S., pulling more consumers into Apple’s universe. Years of testing self-driving cars has also helped improve that platform, as well as providing data to inform Apple Maps and to push further into augmented reality.
General Motors’ decision last year to drop CarPlay hasn’t been widely copied. And former Apple executives are in charge of software at G.M. and at Ford, suggesting that Apple’s fingerprints will be all over cars even if it’s not making one.
Apple investors seem happy. The share price rose after Bloomberg first reported the decision. Investors are pushing for more transparency about what Apple is doing on A.I., so they will probably be pleased about moves to improve those efforts.
And Elon Musk, who once considered selling Tesla to Apple, published a post on X with a saluting emoji and a lighted cigarette.
HERE’S WHAT’S HAPPENING
Michigan voters send President Biden a warning. While Biden handily won the state’s Democratic primary, more than 100,000 votes for “uncommitted” were cast to protest his support for Israel regarding the war in Gaza. That could spell danger for his re-election bid: He won the state in 2020 by just 150,000 votes.
New alarms sound on the U.S. economy. The Conference Board’s consumer confidence index declined for the first time since November, with concerns about layoffs and the coming presidential election front and center. Elsewhere, Goldman Sachs’s C.E.O., David Solomon, cautioned investors that an economic “soft landing” was no certainty. (One bright spot: Congressional leaders appear increasingly optimistic that they can avert a partial government shutdown on Saturday.)
Google’s C.E.O. called recent artificial intelligence blunders “completely unacceptable.” Sundar Pichai told employees that mistakes by the tech giant’s A.I. image generation tool had offended users and that structural changes were needed. It’s a setback for Google as tech giants rush out A.I. products despite well-known problems, including serving up inaccuracies.
A possible sea change at Starbucks
Starbucks is advancing talks with leaders of a growing unionization push within its company-owned stores in the U.S., a potentially huge shift in strategy and culture for the coffee giant.
More broadly, if even Starbucks — a poster child in recent years for resisting labor organizers — is willing to work with unions, could more of corporate America follow?
It’s something of a reversal of Howard Schultz’s efforts to prevent such organizing. For the former C.E.O., who turned a Seattle coffee shop chain into a global giant, unionization efforts that began in 2021 seemed almost a personal affront, given that he had pioneered benefits such as giving part-time workers health care benefits, stock options and free college education.
“What’s happening in America is much bigger than Starbucks,” Schultz said at the DealBook Summit in 2022. “If a company is as progressive as Starbucks, that’s done so much and at the 100th percentile, can be threatened by a third party, then anyone can.”
That led to sometimes bitter clashes, particularly as organizers managed to unionize workers at hundreds of stores. The Workers United union has accused Starbucks of repeated labor law violations, including retaliating against organizers. (The National Labor Relations Board has repeatedly ruled in favor of workers.)
A group of unions is also seeking three seats on the Starbucks board, citing the anti-organization efforts as harmful to the company’s business.
Schultz’s successor, Laxman Narasimhan, is more open to unions. In December, the company said that it would restart talks with Workers United in a bid to “resume productive contract negotiations.”
Of note: Schultz remains a major shareholder in Starbucks, but he no longer holds an executive role.
There’s a long way to go. Starbucks and Workers United are working on a “foundational framework” for labor talks that could lead to new contracts. And while more and more employees are voting to organize — more than 20 locations filed petitions in one day last week — just a small fraction of stores are unionized.
All this may increase pressure on other union resisters, including Amazon, Apple and the outdoor gear retailer REI. If Starbucks is willing to bend — amid growing support for unions among Americans — they might feel pressured to as well.
Bankman-Fried’s push for leniency
Sam Bankman-Fried’s legal team, his parents and some of their close allies have been arguing for months that the former poster boy of the crypto world shouldn’t have to spend the rest of his life behind bars.
In a legal filing issued late on Tuesday, they set out the heart of their case: that creditors and customers can expect to be paid back and that he should serve no more than six and a half years in prison.
Bankman-Fried was convicted last year of one of the biggest financial crimes in history. Prosecutors said his actions cost investors and customers $8 billion, and have requested up to 100 years in prison, according to the filing.
Such a sentence would be “flawed” and “grotesque,” Bankman-Fried’s lawyers argue in the filing. The legal team stresses that FTX customers will get every penny back, partly because of the sharp rebound in crypto asset prices. (DealBook asked this month what a turnaround in FTX’s finances would mean for the wider case.) They also point to the company’s healthy holdings, including:
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A $500 million investment in Anthropic, an A.I. start-up. That stake is now worth up to $1.4 billion, the filing says.
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A stake in Solana, a crypto token, that was worth $4 billion as of Monday.
It’s a long-shot strategy. Bankman-Fried’s supporters ultimately want to reverse the conviction and initiate a public reappraisal of the FTX leadership team’s role in the collapse. But criminal convictions like this are rarely overturned, and some legal experts say they believe Bankman-Fried will spend decades behind bars. (His legal team plans to file an appeal after the sentencing.)
The legal pushback is part of a broader strategy spearheaded by Bankman-Fried’s parents. Joseph Bankman and Barbara Fried, professors at Stanford Law, have lined up former FTX employees to write supportive letters on their son’s behalf. And two lawyers at Yale and Stanford who are close family friends published an essay arguing that FTX had enough assets to make its customers whole “all along.”
A media (non)merger
Warner Bros. Discovery has decided that buying Paramount Global wouldn’t make sense after all. The media giant has reportedly backed off a potential deal for Shari Redstone’s company, which reports fourth-quarter earnings on Wednesday, The Times’s Edmund Lee writes for DealBook.
It probably didn’t need to look too hard. DealBook has previously laid out the cons of such a deal. Even if a soaring debt load and a combination of two businesses that still rely on declining TV assets weren’t enough to put off investors, there was always a high probability that regulators would have stepped in.
That doesn’t mean more media deals won’t happen this year. The threat of Big Tech kicked off a dizzying array of media tie-ups after AT&T’s blockbuster purchase of Time Warner five years ago. (Reminder: The telecom behemoth bought the company, then sold it to Discovery, while Disney beat out Comcast to acquire most of Rupert Murdoch’s Fox.)
Comcast, Disney, Paramount and Warner still face a fundamental threat from Alphabet, Amazon, Apple and Netflix. Think of it this way: Amazon generated more advertising dollars in the fourth quarter than Warner and Paramount did all of last year combined.
Silicon Valley is now muscling into sports programming, the life blood of pay television. And Netflix is dipping its toes into live coverage, having aired the Screen Actors Guild Awards last Saturday.
That partly explains the motivation behind the recently proposed sports streaming alliance to combine ESPN, Fox and Warner into one consumer offering. But even that deal has reportedly piqued the interest of regulators.
Redstone will want to cut a deal before things get even more difficult. She has fielded interest from Skydance, the studio led by David Ellison, son of the Oracle billionaire Larry Ellison. But that transaction could just be for her controlling interest, which might displease Paramount shareholders unless a special dividend were included in the deal.
And then there’s Brian Roberts at Comcast. He’s probably the one executive who successfully pulled off a big media deal in recent memory when he bought NBC Universal in 2009. Losing out on Fox doesn’t mean he’s done with M.&A.
THE SPEED READ
Deals
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Klarna is reportedly pushing ahead with plans for an I.P.O. in New York this fall that would value the Swedish buy-now-pay-later company at roughly $20 billion. (Bloomberg)
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The cable network operator Cox Enterprises agreed to buy OpenGov, a maker of software for government agencies, at a $1.8 billion valuation. (WSJ)
Policy
Best of the rest
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