July 6, 2022

Strong Quarter for Netflix, but Investors Hit Pause

Netflix’s subscriber gains — an improvement over last year’s performance during what is traditionally its weakest quarter of the year — and overall profits were well within projections, but some investors, hoping for more, sent the stock down about 8 percent in after-hours trading before rebounding somewhat. That result alludes to one of the challenges Netflix faces: maintaining the enthusiasm of both investors and subscribers to its video-streaming services.

Looking ahead, Netflix projected that it would add 690,000 to 1.49 million subscribers in the United States in the third quarter, continuing a growth trajectory that has made it one of the most closely tracked companies in the media and technology industries. Analysts say that Reed Hastings, Netflix’s chief executive, and his colleagues are under pressure to prove that they can keep adding members to what feels more and more like a Netflix club, with insiders who can watch the service’s original shows and outsiders who cannot.

On a first-of-its-kind video conference call between Netflix executives and two interviewers on Monday evening, the executives said that the original shows — including “House of Cards,” which was nominated for nine Emmy Awards last week — are only slightly affecting the bottom line now, but will ultimately add significantly to the company’s subscriber totals and revenues.

“If we do it right, these will turn into real franchises,” Mr. Hastings said.

Ted A. Sarandos, the company’s chief content officer, reminded investors that traditional networks like HBO and Showtime worked for many years to gain widespread recognition. In Netflix’s case, he said, “the brand is starting to mean something to viewers, already.”

In the second quarter, Netflix revenue topped $1 billion for only the second time ever, totaling $1.07 billion, in line with analysts’ expectations. Netflix reported earnings of 49 cents a share, beating the consensus expectations for 40 cents a share. It returned to positive cash flow for the first time in a year, because of a one-time decline in payments to content providers and overall profit growth.

Outside the United States, Netflix added 610,000 streaming subscribers in markets like Britain and Brazil. The international business continued to operate at a loss, but it was lower than expected.

“We’re feeling quite good about the business,” Mr. Hastings said during the Google-powered video conference call, which was set up as an alternative to the phone calls that many companies set up on a quarterly basis.

In their quarterly letter to investors, Mr. Hastings and Netflix’s chief financial officer, David Wells, attributed some of the second-quarter subscriber gains to “Arrested,” writing, “This show already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it.” But they cautioned investors not to expect a similar bump from other new shows, like “Orange Is the New Black,” which came onto the service this month. “Other great shows don’t have that noticeable effect in their first season because they are less established,” they wrote.

In a hint of the company’s plans for more original programming, Mr. Hastings and Mr. Wells said Netflix would be expanding to “include broadly appealing feature documentaries and stand-up comedy specials.”

Over all, original shows like “House of Cards” remain just a sliver of subscribers’ viewing; Netflix’s menu of TV shows and films that have already had their premieres elsewhere “accounts for the bulk of viewing and leads to a lot of member enjoyment,” Mr. Hastings and Mr. Wells wrote. They cited a revealing statistic on Monday: three-fourths of the hours streamed on Netflix are spurred by the algorithms that recommend specific shows and movies based on a subscriber’s past viewing.

Sensing industrywide trends that are making hit shows and films cost more to license, Netflix increasingly wants to be known not as a service that has everything people want to watch, but instead has a selection of exclusive shows that cannot be seen anywhere else. In the second quarter, a deal with Viacom’s MTV Networks expired, resulting in the loss of shows like “SpongeBob SquarePants.” Netflix subsequently announced a deal for original programming from DreamWorks Animation.

Michael Pachter, a managing director at Wedbush Securities, who has been a Netflix skeptic, said on Monday that “I think that they probably gained a lot of new subscribers from ‘Arrested Development,’ and probably lost a lot because of the loss of Starz, SpongeBob, James Bond and MTV content.”

He added, “I think that their guidance suggests this will persist, and I’m pessimistic that they will hit the high end of their domestic streaming subscriber growth.”

Article source: http://www.nytimes.com/2013/07/23/business/media/netflix-revenue-tops-1-billion-for-the-quarter.html?partner=rss&emc=rss

Intel Names Brian Krzanich as Chief Executive

Mr. Krzanich, who is 52 and currently serves as chief operating officer, will take over on May 16. He will be Intel’s sixth chief executive, succeeding Paul S. Otellini, who unexpectedly announced his resignation in November.

Of the four insiders who were considered likely candidates for the job, Mr. Krzanich is the longest-serving and has a strong background in the production of chips. He joined Intel in 1982, the year the first “luggable computer” — weighing more than 15 pounds — was introduced.

Nonetheless, he is likely to lead Intel through a period of significant transition. Personal computers, for which Intel supplies some of the most profitable parts, are losing popularity to mobile devices like tablets and smartphones. In a report last month, researchers at IDC said worldwide PC sales fell 13.9 percent in the first quarter from the period a year earlier.

The choice of Mr. Krzanich may indicate that Intel is looking more closely at turning over some of its production facilities to other semiconductor makers. Intel is known for having some of the most cutting-edge chip technology, but has been reluctant to share it with others. Changing market tastes, however, give Intel extra capacity at times, and working with other chip makers could add to its profits.

Intel also named Renee J. James as its president. Ms. James, 48, who was also considered a candidate for chief executive, runs Intel’s software division, which focuses on making Intel chips run better with other commercial software, like Oracle databases. She also served as chief of staff to Andrew S. Grove, who lead Intel through its greatest period of growth.

Article source: http://www.nytimes.com/2013/05/03/technology/intel-names-brian-krzanich-as-chief-executive.html?partner=rss&emc=rss

Fair Game: Dell Shareholders Look Hard at Takeover Effort

That’s what more and more Dell shareholders appear to believe about the $13.65 per-share price proposed on Feb. 5 by Mr. Dell and Silver Lake Partners, a technology investment firm. Initial objectors to the buyout have been joined by additional shareholders concerned about getting a fair shake.

The issue of fairness is a hazard of management-led buyouts, of course. Are insiders, who have an enormous information advantage owing to their deep knowledge of a company’s operations, trying to get control of an enterprise when its shares are perhaps temporarily depressed? Over the last year, Dell’s stock has lost 19 percent of its value.

Some investors wonder if Mr. Dell, who owns 14 percent of the shares outstanding, might have a hot new product on the drawing board that has the potential to make the company a highflier again.

Neither management nor Mr. Dell is saying much of anything about the company’s prospects. Last Tuesday, when Dell announced mixed earnings for the year, the company declined to make any projections for coming quarters on the conference call with investors and analysts. Its chief financial officer cited the pending deal as the reason no outlook was given.

As is the case with all insider deals, there’s great potential for outside shareholders to be treated unfairly. Making the deal even more problematic, Dell’s shareholders have little data upon which to assess its price. Dell’s regulatory filings say that the $13.65 per-share price is the result of extensive “bids and arms-length negotiations” between Silver Lake and the special committee of Dell’s board beginning in late October 2012.

Still, there’s no mention of how the $13.65 per-share offer stacks up against the company’s long-term enterprise value, an assessment of future earnings potential that is a typical measure in a takeover. Instead, the offer by Mr. Dell and Silver Lake seems based on the company’s recent stock price. Their $24.4 billion deal represents a 37 percent premium to the stock’s average price over the previous three months, they say.

Meanwhile, Southeastern Asset Management, one of Dell’s largest outside shareholders, estimates that the company is worth $23.72 a share, almost 75 percent more than the buyers are offering. Southeastern has come to that conclusion using publicly available information, however, because that’s all it has access to.

Naturally, both of these parties have a vested interest in getting their price in the deal. Mr. Dell and his group want to pay as little as possible, while long-suffering outside owners hope for more.

Trying to remedy this unsatisfying situation, an uninvolved investor organization has made an excellent suggestion: an independent, peer-reviewed analysis of Dell’s enterprise value should be done on behalf of its outside shareholders. Based on the same information Dell’s management has, such an assessment would assure investors that they are being bought out at a fair value.

This idea comes from the Shareholder Forum, a nonpartisan, independent creator of programs devised to provide the kind of information investors need to make astute decisions. The Forum, overseen by Gary Lutin, a former investment banker at Lutin Company, suggests hiring a qualified expert to analyze the company’s operations. This would be similar to the so-called fairness opinions provided to shareholders in takeovers by outsiders. The analysis would be subject to confidentiality when necessary and would be reviewed by recognized analysts, academics and other investment professionals.

On Feb. 14, Mr. Lutin sent a letter to Mr. Dell and Alex Mandl, chairman of the special committee of Dell’s board charged with ensuring the deal’s fairness to all shareholders. In the letter, Mr. Lutin asked that the company support the independent analysis and provide assistance in its preparation.

Mr. Lutin said he had assumed that the board committee and Mr. Dell would want to support this project. “Shareholders have a very well-established right to any information relevant to their investment decisions under Delaware law,” Mr. Lutin said last week. “They also have the right to expect management to be responsible for addressing those interests.”

But last week, Mr. Lutin said that lawyers representing Mr. Mandl and his committee told him they would not be supporting the independent analysis.

Article source: http://www.nytimes.com/2013/02/24/business/dell-shareholders-look-hard-at-takeover-effort.html?partner=rss&emc=rss

The Media Equation: Fox News’s Election Coverage Followed Journalistic Instincts

It has been suggested, here and elsewhere, that Fox News effectively became part of the Republican propaganda apparatus during the presidential campaign by giving pundit slots to many of the Republican candidates and relentlessly advocating for Mitt Romney once he won the nomination.

Over many months, Fox lulled its conservative base with agitprop: that President Obama was a clear failure, that a majority of Americans saw Mr. Romney as a good alternative in hard times, and that polls showing otherwise were politically motivated and not to be believed.

But on Tuesday night, the people in charge of Fox News were confronted with a stark choice after it became clear that Mr. Romney had fallen short: was Fox, first and foremost, a place for advocacy or a place for news?

In this moment, at least, Fox chose news.

By now, most of you have no doubt seen or read about the election-night stare-down between the anchors at Fox News and Karl Rove, who, apart from running a “super PAC” that aimed to defeat the president, also served as an on-air commentator. While news outlets love access to insiders, Mr. Rove’s two roles seemed to be in profound conflict after Fox’s decision desk projected that the president had won Ohio, all but guaranteeing him re-election. Mr. Rove said that the call was premature and that the decision desk was ignoring important data.

While Fox News allowed him to say his piece, it didn’t cave — and, more important, it didn’t question the legitimacy of the election over all, a move that could have led to all manner of unhealthy speculation.

The best journalistic instincts of Fox’s news people kicked in and the hard reality of Mr. Obama’s triumph was allowed to land as it occurred. In doing so, the network avoided marginalizing itself and ended, at least for a night, its war on the president.

Watching a news show transparently at war with itself made for extraordinary live television. Just after 11 p.m. on Tuesday, Fox News called Ohio for Mr. Obama. But Mr. Rove, who had helped finance over $300 million in attack ads, was getting phone calls from Romney officials protesting that forecast. He went on live television to challenge it, citing data he was receiving from the Ohio secretary of state.

“That’s awkward,” said Megyn Kelly, the co-anchor, speaking for many of us.

If Fox News had backed up under pressure from the Romney campaign and Mr. Rove, it could have fomented temporary but damaging unrest among its many fervent viewers.

Instead, Ms. Kelly walked down the hall and confronted the decision desk with Mr. Rove’s protest. She asked the head of Fox News’s decision team, Arnon Mishkin, “You tell me whether you stand by your call in Ohio given the doubts Karl Rove just raised?” Ms. Kelly may as well have been asking, “Are we a news organization or an instrument of the conservative agenda?”

Smiling, Mr. Mishkin answered plainly, “We are actually quite comfortable with our call in Ohio.” He and his colleagues were convinced, along with everyone else, that there were not enough Republican votes left in Ohio for Mr. Romney to turn the tide.

Ms. Kelly seemed satisfied, Mr. Rove was vanquished, and by this time the president had been declared the winner over all. Fox News, in this instance at least, landed firmly on the side of journalism, the facts and a narrative based on reality as opposed to partisan fantasy.

As my colleague Jeremy Peters reported, it was Michael Clemente, the executive vice president for news, who decided to let Mr. Rove have his say and then send Ms. Kelly to check it out.

“I was thinking about transparency, about putting out the facts as they happened,” Mr. Clemente told me in a telephone interview.

“For a half an hour, there was a missing piece that other networks were skating around — why there had been no talk of concession — and we wanted to explore why that was happening,” he said.

He added that once Fox concluded that the numbers from the decision desk were correct, it went with them.

“I knew that a big chunk of our viewers were going to be disappointed in the outcome,” Mr. Clemente said, “but I work on the news side, and the most important thing was getting it right.”

With the game declared over, Fox’s audience clicked off in droves. In the 10 p.m. hour, more than 10 million people were tuned in to Fox News, but that audience dropped almost by half in the 11 p.m. hour, once it was clear the president had been re-elected.

Jon Stewart, Slate and others had some fun with the civil war at Fox News, but I found the whole episode somewhat reassuring.

It was going to be a rough night at Fox News no matter how they played it.

The channel had pushed all its chips into the middle and showed its hand, all but declaring that it would be a big night for Mr. Romney. And in the run-up to the election, the channel tilted the rink in favor of Mr. Romney without compunction, keeping its viewers wrapped in a gauzy bubble of conservative notions about a country that had lost regard for its president.

According to Media Matters, a liberal watchdog group, in the final days of the campaign Fox News ran more than two and a half hours of Mr. Romney’s speeches while giving just 27 minutes to Mr. Obama’s.

But the channel was hardly alone in its partisanship. According to the Pew Research Center’s Project for Excellence in Journalism,   71 percent of MSNBC’s segments about Mr. Romney were negative, while Fox News went negative on the president 46 percent of the time.

Part of the reason the result came as such a shock was that followers of conservative media had been told over and over that mainstream analysis was not to be trusted, that it reflected liberal ideology and not data. But they were misled by media outlets that shared their values, Fox chief among them. David Frum, the conservative columnist, made just that point on MSNBC’s “Morning Joe” show last week when he said that Republicans had been “fleeced and exploited and lied to by a conservative entertainment complex.”

Campaigns are about partisanship, about the contest, but elections are about what actually happened. We all have our rooting interests, and Fox News’s are more manifest than most, but no news person wants to be caught out and end up looking dumb.

Fox News made the call on Ohio, and was the third network to call the election, behind NBC and MSNBC, because news people work there and knew what the data were saying. No matter how much Mr. Rove and much of the Fox News audience wanted it to end differently, Barack Obama had been duly re-elected as president of the United States. We decided. They reported.

E-mail: carr@nytimes.com;

Twitter: @carr2n

Article source: http://www.nytimes.com/2012/11/12/business/media/fox-newss-election-coverage-followed-journalistic-instincts.html?partner=rss&emc=rss

Being Careful About Whose Money You Take

But Mr. Krishna found the guidance of one of his investors, Maria Cirino, invaluable largely because, he said, she had been an entrepreneur herself. Ms. Cirino is a co-founder of .406 Ventures, a venture capital firm in Boston, but before that she spent 20 years building technology businesses.

“Maria had run a sales cycle before and knew it was complex,” Mr. Krishna said. “She had dealt with the angst of not bringing in that crucial deal, so she provided empathy and an ability to push forward. Every company goes through challenges, and the question is, How do people around the table react when that challenge comes upon us? Who’s there for you? Former entrepreneurs are the most understanding, though not necessarily the most lenient. They won’t hold you to a lower standard, but a person who has grown a company from nothing is more able to deal with it.”

Only a minority of small-business owners seek venture capital, but for those who do, it can feel like a deal with the devil. Venture-backed companies are expected to grow quickly, and their boards can impose rigorous controls, audits and metrics. A founder who takes venture capital gets the opportunity to grow but also risks losing control of the company. One way entrepreneurs mitigate the tension in the relationship with investors is to work with venture capitalists who may have more patience during the company-building process because they have been through it themselves.

Such entrepreneurs-turned-investors have become more common recently, even as the venture capital industry contracts after years of lackluster returns. Some insiders see this as the industry righting itself after a bubble, saying venture capital has gone back to its roots now that many M.B.A.’s lured by giant paychecks have left the field. They say they believe that venture capital is once again attracting the right mix of former founders and operators who are truly passionate about nurturing companies and who have hard-won insights that can help founders succeed.

“It’s back to the future,” said Kate Mitchell, a managing director at Scale Venture Partners and former chairwoman of the National Venture Capital Association. “Silicon Valley was founded by a balance of entrepreneurs and finance types. The bubble brought a huge influx of people, but the tourists have gone home and the ratio is back to normal. A lot of the new venture firms are led by former entrepreneurs.”

Some business owners say entrepreneurs-turned-VC’s are more supportive, particularly in times of trouble or when dealing with thorny issues. Mr. Krishna, a serial entrepreneur who is now president and chief executive of MineralTree, an accounts-payable security provider for small businesses that is also backed by Ms. Cirino’s .406 Ventures, recalls a time when one of his male employees was insensitive to a working mother. This human resources conundrum was not a board-level issue, but if left unchecked it could have become one.

“If I take these situations to my board members, are they going to say, ‘This person is an idiot,’ or be glad I’m opening up to them?” said Mr. Krishna, who again sought advice from Ms. Cirino. “Sometimes you need to wear your angst and emotions on your sleeve. Certain VC’s might see that as a sign of weakness, but I know Maria’s experience is so deep in these areas.”

For many venture capitalists, replacing founders with professional management, or at least providing adult supervision, is part of a well-established strategy to increase the value of companies in their portfolios. It is not always a last resort; sometimes it is just a question of when. “You don’t want someone who’s constantly thinking, ‘Should I fire this C.E.O.?’ ” Ms. Cirino said. “Unfortunately that’s the relationship the majority of entrepreneurs have with their VC’s. Some of that is the entrepreneur’s fault, if the entrepreneur never allows the VC to gain important insight into the business.”

Scott Friend, who is now a managing director at Bain Capital Ventures, said his history as an entrepreneur informed the way he navigated the more difficult aspects of the relationship between founder and investor, such as structuring employment agreements.

Article source: http://feeds.nytimes.com/click.phdo?i=c8175bb634dbdfdd400d794da448f2bc