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Snap to slow hiring after dismal earnings pummel stock price

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Snap said its loss more than doubled in the recently ended quarter despite rising use of Snapchat
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Snapchat’s owner plans to “substantially” slow recruitment after bleak results Thursday wiped 25 percent off the stock price of the tech firm, which is facing difficulties on several fronts.

Snap reported that its loss in the recently ended quarter nearly tripled to $422 million despite revenue increasing 13 percent under conditions “more challenging” than expected.

A hit with young internet users in its early days, ephemeral messaging app Snapchat has remained a small player in the social networking space as competition has grown ever more intense.

“We are not satisfied with the results we are delivering, regardless of the current headwinds,” California-based Snap said in a letter to investors.

The firm pointed to a punishing confluence of increased competition, slowing growth of its revenue, “upended” advertising industry standards and macroeconomic woes.

Snap share price was around $12 in after-hours trading in the wake of the earnings report.

“Competition — whether it’s with TikTok or any of the other very large, sophisticated players in the space — has only intensified,” Snap chief financial officer Derek Andersen said on an earnings call.

“So it’s hard to disentangle the numerous factors here impacting what’s clearly a headwind-driven deceleration in our business,” he added.

The number of people using Snapchat daily grew 18 percent to 347 million from the same quarter a year ago, Snap reported.

Snap last month launched a subscription version of Snapchat as it looks to generate more money from the image-centric, ephemeral messaging app.

– Trouble on multiple fronts –

Snapchat+ is priced at $4 a month and will provide access to exclusive features. It said that these would include priority tech support and early access to experimental features.

The subscription version of the service made its debut in Australia, Britain, Canada, France, Germany, New Zealand, Saudi Arabia, the United Arab Emirates, and the United States, Snap said.

Snap in February reported its first quarterly profit, but two months later warned that it saw the economic outlook as having darkened considerably.

“It’s clear that the challenging economic environment continues to put pressure on Snap’s business,” said Insider Intelligence principal analyst Jasmine Enberg.

“Snap is also still reeling from the impact of Apple’s privacy changes, which have disproportionately impacted performance advertisers, creating a one-two-punch to its entire ad business.”

Apple rocked the digital advertising landscape by tightening privacy controls in the software powering its iPhones, letting users curb the tracking data used to target ads.

Snap is a small player in the online ad market, accounting for less than one percent of the money spent worldwide, which makes it more susceptible to such changes and challenges than internet giants such as Facebook-parent Meta, Eng said.

“It can be difficult to attribute deceleration to any one factor,” Andersen said. “But in order to keep growing, we’ve got to stay focused on the inputs that we control.”

Snap a while back recast itself as a “camera company,” fielding offerings such as picture-taking glasses called Spectacles.

“Long-term the most exciting opportunity is (augmented reality) and we’re investing heavily around the future of AR,” Andersen said.

Meanwhile, the battle for people’s attention online grows increasingly fierce as established titans such as Meta and Google adapt offerings to changing trends and relative newcomers such as TikTok grab the spotlight.

Anderson added that Snap intends to effectively pause hiring and look at reining in other expenses, joining a growing number of tech firms throttling back costs.

“We intend to substantially slow our rate of hiring to effectively pause growth in our headcount, which is a significant portion of our office,” he added.

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Volkswagen to change CEO and style with departure of Diess

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Diess has led Volkswagen's pivot to electric vehicles but ruffled feathers with his divisive style
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Volkswagen unexpectedly announced Friday that its CEO Herbert Diess will step down in a few weeks after four years at the head of the German auto giant as it attempts an ambitious shift towards electric vehicles.

Diess’s will leave the helm from the top of the world’s second-largest automaker “by mutual consent” on September 1, Volkswagen said in a statement.

The outgoing CEO had been in the hot seat at Volkswagen for months amid clashes with workers’ representatives and a nagging troubles at the group’s software division.

The change at the top comes as Volkswagen is aiming to leave behind combustion engines to become the world’s biggest electric car manufacturer by 2025 — a target boosted by Diess himself.

Diess had “played a key role” in the transformation of the group, steered the company through “extremely turbulent waters” and “implemented a fundamentally new strategy”, said Volkswagen supervisory board chairman, Hans Dieter Poetsch.

The reins will be taken by Oliver Blume, the current boss of the Porsche sports cars, part of the Volkswagen family of 12 brands, which also includes the likes of Skoda and Audi.

The switch was decided at a meeting of the group supervisory board on Friday.

“Team spirit, fairness and passion are essential for success,” he said in a statement on Friday.

Blume will stay on as the CEO of Porsche, which is in the midst of planning an entry onto the stock market, potentially as soon as this year.

– Software malfunction –

Diess took over Volkswagen in 2018, tasked with turning the page once and for good on the 2015 “dieselgate” scandal, where Volkswagen tampered with millions of diesel vehicles to dupe emissions tests.

Under Diess, Volkswagen has backed its electric shift with a total of 46 billion euros ($46.8 billion) in planned investments over the next five years.

Latterly, Diess took over responsibility for VW’s tech division Cariad on the board of management.

But the development of a platform to be used in the group’s vehicles has however been mired by “production delays” that have “cost money”, according to German automotive expert Ferdinand Dudenhoeffer.

The software branch had likely “created too many problems and challenges for the VW Group”, he said.

Revitalising the software division would be top of Blume’s in-tray, Dudenhoeffer said, along with the future of Volkswagen’s battery strategy. 

In one of his last acts as CEO, Diess laid the ceremonial cornerstone at the site of the group’s first in-house battery factory alongside German Chancellor Olaf Scholz.

– Divisive style –

The outgoing CEO often ruffled feathers with his divisive style that led to clashes.

An open admirer of Elon Musk, the CEO of American electric vehicles pioneer Tesla, Diess said last year the storied German carmaker would need a “revolution” to take on its US rival.

His suggestion last October that up to 30,000 jobs could be at risk at Volkswagen in Germany if it could not cut costs in its transition to battery-powered models angered powerful workers’ representatives.

In 2019, Diess was made to apologise for making a play on words with a Nazi slogan — “EBIT macht frei” — a ham-fisted attempt to underline the importance of operational profits to the group.

The Volkswagen group as a whole has been in the spotlight of late for its operations in the Chinese province of Xinjiang, where authorities are accused of leading a crackdown against the Muslim minority.

Diess said recently the automaker “should stay” in the region and gave assurances there is “no forced labour” at the factory it operates together with its Chinese partner SAIC.

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Twitter reports earnings miss, cites Musk buyout uncertainty

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Twitter cites Musk deal uncertainty in earnings miss
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Twitter reported disappointing results on Friday, a miss that the social network attributed to “headwinds” including the uncertainty related to Elon Musk’s buyout bid.

The firm is locked in a legal battle with the mercurial Tesla boss over his effort to walk away from his $44 billion deal to purchase the platform, leaving the company in limbo.

Twitter missed expectations with revenue of $1.18 billion, due to “advertising industry headwinds… as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk,” the firm reported.

The news comes days after Twitter notched a victory in its fight with Musk, when a judge agreed to a fast-track trial on whether to force the billionaire to complete the buyout.

Musk argues that the platform misled on the number of fake accounts on the platform, but the social media platform counters that he is just trying to get out of the deal.

Musk’s lawyers had pushed for a February 2023 date, but the court in the eastern US state of Delaware hewed closely to the uncertainty-wracked platform’s desire for speed and set an October start.

– Losing money –

Billions of dollars are at stake, but so is the future of Twitter, which Musk has said should allow any legal speech — an absolutist position that has sparked fears the network could be used to incite violence.

Twitter is left with anxious employees, wary advertisers and hamstrung management as it is limps along while waiting to learn how the saga will end.

In early May, at an annual marketing event where companies negotiate large advertising deals, Twitter was “not able to give advertisers any clarity or confidence” that it would continue to be safe showcase for them, said Angelo Carusone, president of watchdog group Media Matters.

“They didn’t go anywhere close to what they normally sell at that event. And it’s obviously been sluggish since then,” he told AFP previously.

The San Francisco-based social network cannot afford to lose customers. 

Unlike big fish such as Google and Facebook parent Meta, which dominate online advertising and make billions in profits, Twitter lost hundreds of millions of dollars in 2020 and 2021.

The group will capture less than one percent of global ad revenue in 2022, according to eMarketer, compared to 12.5 percent for Facebook, 9 percent for Instagram and nearly two percent for booming upstart TikTok. 

On top of that, Twitter’s user base is barely expected to grow and may even shrink in the United States, analysts have noted.

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Scholz tackles energy fears as Germany bails out gas giant

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Uniper as seen is cash and gas reserves dwindle as Russia has reduced gas supplies, prompting it to seek a bailout from the German government
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Chancellor Olaf Scholz promised to shield Germans from surging energy costs on Friday as the government agreed a rescue package for key gas company Uniper, which has been brought down by market turmoil from the war in Ukraine.

Interrupting his summer holidays to give a press conference in Berlin, Scholz reassured Germans they would “never walk alone” with the burden of spiralling gas and electricity costs.

The government is planning a housing benefit reform from next year as well as flat-rate payments to help consumers pay their bills, Scholz told reporters after the Uniper announcement.

“No one will be left alone with their challenges and problems,” he said.

Russia’s war in Ukraine has caused an energy earthquake in Europe and especially in Germany, which is heavily dependent upon Russian gas.

EU states have accused Russia of squeezing supplies in retaliation for Western sanctions over the war, with Germany accusing Moscow of using energy as a “weapon”.

Russia on Thursday restored critical gas supplies to Europe through Germany via the Nord Stream pipeline after 10 days of maintenance, but at low volumes, and suspicions linger that the Kremlin may trigger an energy crisis on the continent this winter.

– Rescue plan –

German gas giant Uniper, threatened with bankruptcy as a result of the crisis, on Friday said it had agreed a rescue plan with the government.

The plan “comprises a capital increase of approximately 267 million euros ($271 million) for an issue price of 1.70 euros per share”, which will lead to “a shareholding of the (state) in Uniper of approximately 30 percent”, Uniper said in a statement.

The group will benefit from a public loan of “up to 7.7 billion euros” in mandatory convertible bonds that will eventually become shares.

An increase is also planned in the credit line available to the firm via the public lender KfW from two to nine billion euros, Uniper said.

“Uniper is a company of vital importance for the economic development of our country and for the energy supply of our citizens,” Scholz told reporters after the announcement.

Uniper also said the German government was planning to introduce a general mechanism for all gas importers to pass through the replacement costs for missing Russian gas to consumers as of October 1.

This measure, long requested by the energy giant, could cause consumer gas bills to explode.

– Energy savings –

Scholz said this could mean that a family of four would have to pay 200 to 300 euros more per year.

The government wants to ensure that the impact of this is “spread over all of our shoulders”, he said.

Moves by Moscow to curtail supplies to Germany since mid-June have forced Uniper to turn to the more expensive spot market for gas to supply its customers, leaving the energy group saddled with the extra cost.

One of the biggest importers of Russian gas, Uniper is a key part of Germany’s energy infrastructure and its biggest gas storage operator.

While the German government has mandated stores to be filled ahead of the winter, the short supply has also forced Uniper to withdraw gas from its own booked storage capacities.

The group made a request for a bailout from the German government on July 8.

Since then, negotiations have been ongoing between Uniper, the German government and the Uniper’s Finnish parent company Fortum. 

In addition to boosting its gas reserves, Germany is implementing plans to temporarily revert to more coal power.

It is also planning to mandate energy savings in public buildings and impose new rules for efficiency in heating homes and offices. 

The European Commission this week urged EU countries to reduce their demand for natural gas by 15 percent over the coming months, and to give it special powers to force through needed demand cuts if Russia severs the gas lifeline.

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