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Tag: Senior Level Management

  • Zoom to Lay Off 15% of Staff, CEO Slashes Salary

    Zoom to Lay Off 15% of Staff, CEO Slashes Salary

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    Zoom to Lay Off 15% of Staff, CEO Slashes Salary

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  • Ford logs $2 billion loss in 2022, says profit was left ‘on the table’

    Ford logs $2 billion loss in 2022, says profit was left ‘on the table’

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    Ford Motor Co. late Thursday reported a $2 billion loss for the year and mixed quarterly results, blaming “deeply entrenched” shortcomings around costs and systems that put the brakes on its hopes to become a more nimble company.

    “I’ll start by addressing the obvious. Our fourth-quarter and full-year financial performance last year fell short of our potential,” Chief Executive Jim Farley said in a post-results conference call. “To say I’m frustrated is an understatement, because the year could have been so much more for us at Ford.”

    Ford
    F,
    +3.84%

    earned $1.3 billion, or 32 cents a share, in the fourth quarter, compared with $12.3 billion, or $3.03 a share, in the year-ago period.

    Adjusted for one-time items, the company earned 51 cents a share. Revenue rose 17% to $44 billion.

    Analysts polled by FactSet expected Ford to report adjusted earnings of 62 cents a share on sales of $41.4 billion.

    Ford stock fell more than 6% in extended trading after the results, holding around those levels as the call continued. It ended the regular trading day up 3.8%.

    “We have deeply entrenched issues in our industrial system that have proven tough to root out,” Farley said.

    Ford announced a reorganization last March, carving out its EV business and setting up business lines for its legacy conventionally powered vehicles and for its vans and other commercial vehicles.

    As with “any transformation of this magnitude,” some parts moved faster than others, even though he remains optimistic about the plan, Farley told investors.

    For 2023, Ford guided for between $9 billion to $11 billion in EBIT, but cautioned that headwinds included a potential “mild” recession in the U.S. and a “moderate” recession in Europe, higher customer incentives for the industry as a whole, and a “continued” strong dollar.

    Catalysts, however, include supply-chain improvements and higher industry volumes as well as lower costs for commodities, logistics and other aspects of the business, it said.

    The auto maker declared a first-quarter regular dividend of 15 cents a share and a supplemental dividend of 65 cents a share, saying that the supplemental dividend reflected the monetization of Ford’s stake in EV startup Rivian Automotive Inc.
    RIVN,
    +5.94%
    .
    That unwinding began in May and “now is nearly complete,” Ford said.

    The company said it will hold an investor event on March 23, which it dubbed a “teach-in” about the new structure.

    Ford said Monday that it was “significantly increasing” production of its Mustang Mach-E electric SUV in 2023 and lowering prices.

    The Mach-E was the No. 3 best-selling EV model in the U.S. in 2022, “and the updated pricing is part of Ford’s plan to keep the SUV competitive in a rapidly changing market,” Ford said at the time.

    Tesla Inc.
    TSLA,
    +3.78%

    earlier this month slashed prices of several of its models, including its cheaper Model Y compact SUV and Model 3 sedan, in the U.S. and in several European countries by between 6% and 20%.

    GM
    GM,
    +5.60%
    ,
    which reported fourth-quarter earnings on Tuesday, and Chief Executive Mary Barra said the auto maker did not plan on lowering its prices, saying GM cars are priced “right where they need to be.”

    See also: Tesla and Ford are cutting auto prices, but GM says it won’t

    Ford shares have lost about 31% in the last 12 months, compared with losses of around 9% for the S&P 500 index
    SPX,
    +1.47%
    .

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  • AMD CEO promises to keep taking data-center from Intel even as cloud demand pauses following ‘strong’ 2022

    AMD CEO promises to keep taking data-center from Intel even as cloud demand pauses following ‘strong’ 2022

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    Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales gained and executives forecast sales of more than $5 billion to start 2023, even as cloud-customer demand begins the year light.

    AMD shares AMD rose 3% after hours, following a 3.7% gain in the regular session to close at $75.15.

    AMD…

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  • Intel stock drops nearly 10% after earnings miss, execs predict quarterly loss as data-center market shrinks

    Intel stock drops nearly 10% after earnings miss, execs predict quarterly loss as data-center market shrinks

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    Intel Corp. shares dropped more than 9% in the extended session Thursday after the chip maker reported a big miss for the fourth quarter, forecast a loss for the first quarter, said the data-center market was contracting and that inventory digestion will gnaw at margins.

    Intel
    INTC,
    +1.31%

    executives forecast an adjusted loss of 15 cents a share on revenue of about $10.5 billion to $11.5 billion and adjusted gross margins of about 39% for the current quarter. Analysts surveyed by FactSet had estimated adjusted first-quarter earnings of 25 cents a share on revenue of $13.93 billion.

    Chief Executive Pat Gelsinger told analysts on a conference call he would not provide a 2023 forecast. Gelsinger restricted the outlook to the current quarter, citing macro uncertainties, a digestion of PC inventory that was “difficult” to forecast and a contracting data-center market. In the fourth quarter, AI group sales dropped 33% to $4.3 billion, while the Street expected revenue of $4.08 billion.

    “We expect Q1 server consumption [total addressable market] to decline both sequentially and year-over-year at an accelerated rate, with first-half 2023 server consumption TAM down year-on-year before returning to growth in the second half,” Gelsinger said.

    Chief Financial Officer David Zinsner told analysts that the company will institute an accounting change in the first quarter, where Intel will extend the useful life of their machinery to eight years from a current five years. Gelsinger said that Intel was going to “squeeze” its effective capacity.

    While Zinsner would not give a full-year outlook, he did say that continued inventory digestion should be weighted to the first half of the year.

    Pressed on how Intel could get back to the 51% to 53% margins range he promised a year ago, Zinsner said a “significant inventory burn” on PC inventory would hit gross margins by 400 basis points in the first quarter. Gross margins for the fourth quarter dropped to 43.8% from 55.8% a year ago, and from 45.9% in the third quarter.

    Intel reported a fourth-quarter loss of $664 million, or 16 cents a share, versus net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported earnings of 10 cents a share, compared with $1.13 a share from a year ago.

    Revenue declined to $14.04 billion from $20.52 billion in the year-ago quarter, for a 10th straight quarter of year-over-year declines.

    Analysts surveyed by FactSet estimated earnings of 21 cents a share on revenue of $14.49 billion, based on Intel’s forecast of 20 cents a share on about $14 billion to $15 billion.

    Intel shares fell 9% in after-hours trading, after closing the regular session up 1.3% at $30.09. Other chip stocks also declined, including top rival Advanced Micro Devices Inc.
    AMD,
    +0.33%
    ,
    which saw shares drop more than 3% in after-hours trading, and Nvidia Corp.
    NVDA,
    +2.48%
    ,
    which declined 2%.

    Breaking down divisions: Client-computing sales fell 36% to $6.6 billion from a year ago; “network and edge” sales slipped 1% to $2.1 billion; and foundry services revenue rose 30% to $319 million.

    Analysts surveyed by FactSet expected revenue from client computing to come in at $7.36 billion; “network and edge” revenue of $2.23 billion; and foundry services revenue of $199.1 million.

    Over the past 12 months, Intel stock has fallen 43%. Over the same period, the Dow Jones Industrial Average 
    DJIA,
    +0.61%

     — which counts Intel as a component — has slipped 1%, the PHLX Semiconductor Index 
    SOX,
    +1.63%

     has dropped 13%, the S&P 500 index 
    SPX,
    +1.10%

     has declined 7%, and the tech-heavy Nasdaq Composite Index 
    COMP,
    +6.59%

     has dropped 15%.

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  • Microsoft stock dives into the red after forecast misses, CFO warns about deceleration

    Microsoft stock dives into the red after forecast misses, CFO warns about deceleration

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    Microsoft Corp.’s profit declined more than 12% in the holiday season, and executives said Tuesday that a revenue deceleration at the end of 2022 is expected to continue into the new year as the company lays off workers.

    Microsoft MSFT Chief Financial Officer Amy Hood said in a conference call Tuesday that “we are seeing customers exercise caution,” which resulted in “moderating consumption growth in Azure and lower-than-expected growth in new business” in December. Hood then said that “we expect business trends that we saw…

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  • Genius Group CEO on why his company is fighting back against naked short sellers — and it’s not alone

    Genius Group CEO on why his company is fighting back against naked short sellers — and it’s not alone

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    “It’s like being robbed in a library, but you can’t shout ‘Thief!’ because there are ‘Silence, please’ signs everywhere.”

    That’s how Roger Hamilton, chief executive of Genius Group Ltd.
    GNS,
    +55.02%
    ,
    describes the powerlessness he feels as U.S. securities rules prevent him from discussing his company’s share price, even as it comes under attack from a group of naked short sellers.

    The Singapore-based education company on Thursday announced it had appointed a former FBI director to lead a task force investigating alleged illegal trading in its stock that it first addressed in early January. 

    For context: Genius Group stock rallies more than 200% after it appoints former F.B.I. director to investigate alleged naked short selling

    The news sent the stock up a record 290% on Thursday, and it climbed another 59% on Friday. Volume of about 270 million shares traded in Thursday’s session crushed the daily average of about 634,000 — another indicator, Hamilton told MarketWatch in an interview Friday, of wrongdoing, given that the company’s float is just 10.9 million shares. “Clearly, that’s far more shares than we created,” he said.

    Genius Group has evidence from Warshaw Burstein LLP and Christian Levine Law Group, with tracking from Share Intel, that certain individuals and/or companies sold but failed to deliver a “significant” amount of its shares as part of a scheme seeking to artificially depress the stock price.

    The company is now exploring legal action and is planning an extraordinary general meeting in the coming weeks to get shareholder approval for its planned actions. These include paying a special dividend as a way to flush out bad actors and working with regulators to share information.

    Share Intel uses tracking software in real time to determine exactly where there are discrepancies in the market and where brokers are opening large positions, Hamilton said. The software can measure the number of shares that are being naked shorted and has found multiple instances where significant amounts of fake shares were being created, said Hamilton.

    Naked short selling is illegal under Securities and Exchange Commission rules, but that hasn’t stopped the practice, which Hamilton said affects far more companies than is generally known.

    In regular short trading, an investor borrows shares from someone else, then sells them and waits for the stock price to fall. When that happens the shares are bought cheaper and returned to the prior owner, with the short seller pocketing the difference as profit.

    In naked short selling, investors don’t bother borrowing the stock first and simply sell shares with a promise to deliver them at a later date. When that promise is not fulfilled, it’s known as failure to deliver.

    By repeating that process again and again, bad actors can generate massive profits and manipulate a stock’s price lower, with an ultimate goal of driving a company to bankruptcy, at which point all the equity is wiped out and the naked shorts no longer need to be covered.

    Hamilton said the evidence gathered by Genius Group shows a great deal of the illegal activity is happening on U.S. exchanges, but there’s also activity happening off-exchange and involving dark pools.

    The company is fighting back “because we want this to stop,” Hamilton told MarketWatch. “They’re taking value away from our shareholders. They’re predators. They’re doing something illegal, and we want it to stop, whether that means getting regulators to enforce existing regulations or put new ones in place.”

    Public companies have to have committees to monitor and report internal fraud to protect shareholders, he said. But there is no such team looking for external fraud and many retail investors see stocks being manipulated, he said.

    “Hopefully, regulations will change and regulators will see there are as many, if not more, threats from outside a company,” he said.

    Genius Group is not alone, said Hamilton. He cited among other examples Torchlight, an oil- and gas-exploration company that decided to merge with Metamaterial Inc. to thwart a naked-short-selling attack.

    The stock rose from 30 cents to $11 in the six months after the deal was completed, and the company was able to raise about $183 million through a combination of convertible debt and equity. An interview Hamilton conducted with Torchlight’s former CEO, John Brda, can be found below.

    Then there’s Jeremy Frommer, CEO of Creatd Inc.
    CRTD,
    +4.14%
    ,
    which aims to unlock creativity for creators, brands and consumers, who is behind Ceobloc, a website that aims to end the practice of naked short selling.

    “Illegal naked short selling is the biggest risk to the health of today’s public markets,” is how the site introduces its mission.

    On Friday, the stock of Helbiz Inc.
    HLBZ,
    +65.48%

    joined Genius Group in rocketing higher in high volume, after that company said it, too, was taking on naked short sellers.

    The New York–based maker of e-scooters and e-bicyles said that it was following Genius Group’s example and that it believes “certain individuals and/or companies may have engaged in illegal short selling practices that have artificially depressed the stock price.” The stock had plummeted 64% over the three months through Thursday’s close at 12.31 cents.

    Genius Group’s stock, which went public in April 2022 at $6 a share, has gained more than 600% this week. The S&P 500
    SPX,
    +1.89%

    has gained 1.1% over the same four trading sessions.

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  • Genius Group stock rallies more than 200% after it appoints former F.B.I. director to investigate alleged naked short selling

    Genius Group stock rallies more than 200% after it appoints former F.B.I. director to investigate alleged naked short selling

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    The stock of a Singapore-based ed-tech and education company called Genius Group Ltd. rallied more than 200% on Thursday, after it said it appointed a former F.B.I. director to lead a task force investigating alleged illegal trading in its stock that it first disclosed in early January. 

    The stock was last up 264% to mark its biggest-ever one-day percentage gain. Volume of 197.76 million shares traded crushed the 65-day average of just 634,17. Genius Group
    GNS,
    +290.29%

    also said it would issue a special dividend to shareholders to help expose the wrongdoing and is considering a dual listing that would make illegal naked short selling more difficult.

     The task force will be led by Timothy Murphy, a former deputy director of the F.B.I. who is also on the board. It will include Richard Berman, also a Genius Group Director and chair of the company’s Audit Committee, and Roger Hamilton, the chief executive officer of Genius Group.

    “The company has been in communication with government regulatory authorities and is sharing information with these authorities to assist them,” the company said in a statement.

    Genius Group said it has proof from Warshaw Burstein LLP and Christian Levine Law Group, with tracking from Share Intel, that certain individual and/or companies sold but failed to deliver a “significant” amount of its shares as part of a scheme seeking to artificially depress the stock price.

    It will now explore legal action and will hold an extraordinary general meeting in the coming weeks to get shareholder approval for its planned actions.

    On the Genius website, Hamilton explains what the company, which went public in 2022, thinks happened.

    Genius’ IPO priced at $6 a share in April of 2022, he wrote in a blog. The company, which aims to develop an entrepreneur education system, then completed five acquisitions of education companies to build out its portfolio and reported more than 60% growth in its last earnings report.

    Analysts at Diamond Equity assigned it an $11.28 stock price target, while Zacks assigned it a $19.20 stock price target.

    “By all measures, we believed we were doing all the right things to justify a rising share price,” said Hamilton.

    The company then announced two funding rounds totaling $40 million to grow its balance sheet to more than $60 million, yet its stock fell to under 40 cents, or less than 25% of the cash raised and less than 20% of its net assets.

    “This didn’t happen gradually,” the executive wrote. “It happened in two month intervals from our IPO, in June, August, October and December. Each time, over a period of a few days, massive selling volume that was a multiple of our float (As most of our shares are on lock up, only around 4 million are tradeable) was sold into the market, making our share price drop by 50% or more.”

    The company has since drawn on Wes Christian, a short-selling litigator from Christian Levine Law Group, who has helped it understand how naked short selling works, and then Share Intel helped find the proof that that’s what has happened.

    Individuals or groups get together and sell shares in a target company that they don’t own, with the aim of getting the share price to fall 50% in a short period. They use small-cap firms that have low buying volume, allowing them to scare off buyers.

    “The broker doesn’t bother to find shares to borrow,” said Hamilton. “They simply sell shares they don’t have and after a few days book them as FTDs (failure to deliver) or hide them as long sales instead of short sales. The people who bought the shares have no idea they bought a fake share, and suddenly there’s plenty more shares in the market than there should be.”

    If these groups sell 6 million shares from $12 to $6 each, and then buy back over two months at under $6, they double their money. That allows them to make up to $30 million out of thin air. They can then repeat the whole process a few months later.

     “If they don’t buy back all the shares, they simply leave them as FTDs or hide them in offshore accounts,” he wrote. “At no point do they need to put up any cash to make this happen, as they’re making money from the moment they start selling fake shares.”

    The ultimate goal is to push a company into bankruptcy, where the equity will be wiped out, meaning they never have to cover the short position on the fake shares.

    By issuing a special dividend, Genius is hoping to find who is responsible, as all brokers are forced to disclose to the Depository Trust & Clearing Corp. (DTCC) how many shares their clients hold and how many dividends will be paid. Theoretically, that should expose the oversold shares and dishonest brokers will be forced to cover their position, said Hamilton.

    In practice, dishonest brokers will not declare the fake shares and just pay the dividend out of their own pockets.

    “If you issue a dividend that isn’t straight cash—such as a spinoff of a company so you are issuing shares, or a blockchain based asset, then the brokers can’t do that are a forced to either cover or be exposed,” he wrote.

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  • Netflix Surprises With a Subscriber Beat and Hastings Steps Back

    Netflix Surprises With a Subscriber Beat and Hastings Steps Back

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    Netflix


    posted better-than-expected subscriber growth in the fourth quarter, adding 7.66 million net new subscribers, well ahead of the 4.5 million the company had projected.

    The company also announced that founder and co-CEO Reed Hastings was moving to the executive chairman role to “complete our succession process.” Netflix said that Chief operating officer Greg Peters will join Ted Sarandos as co-CEO of the company.

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  • Netflix stock leaps after subscriber success in final quarter with Reed Hastings as CEO

    Netflix stock leaps after subscriber success in final quarter with Reed Hastings as CEO

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    Netflix Inc. added more subscribers than expected in the final quarter of 2022, sending shares higher in after-hours trading Thursday even as founder Reed Hastings prepared to step down from the chief executive role he has held since the company’s inception.

    Netflix
    NFLX,
    -3.23%

    announced that Hastings has moved to an executive chairman role, while Chief Operating Officer Greg Peters moves up to co-CEO, joining Ted Sarandos.

    “Since Reed started to delegate management to us, Greg and I have built a strong operating model based on our shared values and like-minded approach to growth,” Sarandos said in a letter to shareholders. “I am so excited to start this new chapter with Greg as co-CEO.”

    In a separate letter, Hastings said “in the last 2½ years, I’ve increasingly delegated the management of Netflix” to Sarandos and Peters.

    “It was a baptism by fire, given COVID and recent challenges within our business. But they’ve both managed incredibly well, ensuring Netflix continues to improve and developing a clear path to reaccelerate our revenue and earnings growth,” Hastings wrote. “So the board and I believe it’s the right time to complete my succession.”

    “More and more, they’ve been running the company,” Hastings said in a video call late Thursday. He called the move 10 days in the making.

    The company revealed on Thursday fourth-quarter revenue of $7.85 billion, compared with $7.71 billion a year ago. Earnings were $55 million, or 12 cents a share, down from $607 million, or $1.33 a share, last year; the decline was due to a $463 million noncash charge related to debt held in Europe, executives said.

    Wall Street analysts tracked by FactSet had estimated revenue of $7.86 billion on earnings of 55 cents a share. Shares increased more than 6% in after-hours trading immediately following the release of the results, after closing with a 3.2% decrease at $315.78.

    The streaming-video company reported that it added 7.7 million subscribers in the final three months of the year; analysts had expected 4.58 million, according to FactSet. Netflix will no longer offer guidance on that statistic, which has typically moved Netflix shares more than any other metric.

    In October, Netflix executives predicted the company would add a net 4.5 million subscribers in the fourth quarter as it bounces back from a lull in growth. Netflix reported losses in subscribers for the first two quarters of 2022, prompting leaders to unveil an ad-based service in November for customers who want to pay less, and plans to crack down on password sharing.

    “2022 was a tough year, with a bumpy start but a brighter finish,” executives wrote in their letter to shareholders Thursday. “We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering. As always, our north stars remain pleasing our members and building even greater profitability over time.”

    Executives guided for 4% revenue growth year-over-year in the first quarter, which would suggest roughly $8.2 billion in sales, while analysts were projecting $8.15 billion on average, according to FactSet. Executives said they “expect constant currency revenue growth to accelerate over the course of the year,” but that the password-sharing crackdown they expect to roll out widely in the first quarter could cause some bumpiness early in the year.

    Don’t miss: Netflix will crack down on password sharing — here’s how it will work

    “From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near-term member growth,” they wrote. “But as borrower households begin to activate their own stand-alone accounts and extra member accounts are added, we expect to see improved overall revenue, which is our goal with all plan and pricing changes.”

    The video-streaming pioneer offered first-quarter earnings guidance of $1.28 billion, or $2.82 a share; FactSet analysts are forecasting $2.98 a share.

    Netflix’s results arrived in the wake of increasingly bullish research notes. At least two analysts this week raised their price targets on Netflix shares, citing a weaker dollar. Truist analyst Matthew Thornton jacked his target to $339 from $210 while maintaining a hold rating, and UBS’s John Hodulik lifted his price to $350 from $250.

    For more: In Netflix’s unpredictable finale, the focus is on financial estimates

    “We view Netflix as one of the most durable businesses in our coverage as subscription low-cost entertainment with little-to-no exposure to advertising (still very small/new in 2023) or other highly cyclical/macro sensitive revenues,” Truist’s Thornton wrote. “While there could be some pressure on churn and gross adds (as households tighten budgets), we think this should be at least partly offset by increased cord-cutting (going 100% streaming from more expensive linear TV bundles).”

    Optimism was not universal, however. Barclays analyst Kannan Venkateshwar expected Netflix to add roughly half the new subscribers executives had forecast, 2.7 million, based on a drop in app downloads.

    Netflix’s stock has plunged 38% over the past 12 months. The broader S&P 500 index
    SPX,
    -0.76%

    has declined 13% over the past year.

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  • SEC charges ex–McDonald’s CEO Easterbrook for making false statements relating to his 2019 ouster

    SEC charges ex–McDonald’s CEO Easterbrook for making false statements relating to his 2019 ouster

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    The Securities and Exchange Commission said Monday it has filed charges against Stephen J. Easterbrook, former chief executive of McDonald’s Corp., for making “false and misleading” statements to investors about the circumstances that led to his ouster in November 2019.

    The agency has also filed charges against McDonald’s for “shortcomings” in its public disclosures relating to Easterbrook’s severance agreement.

    McDonald’s
    MCD,
    -0.55%

    fired Easterbrook for exercising poor judgment and violating company policy by engaging in an inappropriate personal relationship with a McDonald’s employee. However, the separation agreement struck with the executive concluded that his termination was without cause, allowing him to retain substantial equity compensation that would have been forfeited in other circumstances.

    “In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in a statement.

    In July 2020, McDonald’s discovered in an internal probe that Easterbrook had engaged in other, undisclosed relationships with employees. Those findings were not disclosed prior to Easterbrook’s termination, in the knowledge that they would influence the board’s decision making, according to the SEC.

    “When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives,” said Gurbir S. Grewal, the SEC’s director of the division of enforcement. 

    The SEC is charging Easterbrook with violating anti-fraud provisions of the SEC Securities Act of 1933 and the Securities Exchange Act of 1934. Easterbrook has consented to a cease-and-desist order and five-year officer and director bar and a $400,000 civil penalty, without admitting to or denying the charges.

    McDonald’s is charged with violating section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. The fast-food giant has consented to a cease-and-desist order, without admitting to or denying SEC findings. The SEC has opted not to fine the company, as it cooperated with the agency and clawed back compensation after its probe.

    The stock was slightly lower Monday in early trades.

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  • EV Startup Rivian Missed 2022 Production Target

    EV Startup Rivian Missed 2022 Production Target

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    EV Startup Rivian Missed 2022 Production Target

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  • Southwest Airlines flight cancellations continue to snowball

    Southwest Airlines flight cancellations continue to snowball

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    DALLAS — Travelers who counted on Southwest Airlines to get them home suffered another wave of canceled flights Wednesday, and pressure grew on the federal government to help customers get reimbursed for unexpected expenses they incurred because of the airline’s meltdown.

    Exhausted Southwest
    LUV,
    -5.16%

    travelers tried finding seats on other airlines or renting cars to get to their destination, but many remained stranded. The airline’s CEO said it could be next week before the flight schedule returns to normal.

    Adontis Barber, a 34-year-old jazz pianist from Kansas City, Missouri, had camped out in the city’s airport since his Southwest flight was canceled Saturday and wondered if he would ever get to a New Year’s gig in Washington, D.C.

    “I give up,” he said. “I’m starting to feel homeless.”

    By early afternoon on the East Coast, about 90% of all canceled flights Wednesday in the U.S. were on Southwest, according to the FlightAware tracking service.

    Other airlines recovered from ferocious winter storms that hit large swaths of the country over the weekend, but not Southwest, which scrubbed 2,500 flights Wednesday and 2,300 more on Thursday.

    The Dallas airline was undone by a combination of factors including an antiquated crew-scheduling system and a network design that allows cancellations in one region to cascade throughout the country rapidly. Those weaknesses are not new — they helped cause a similar failure by Southwest in October 2021.

    The federal government is now investigating what happened at Southwest, which carries more passengers within the United States than any other airline.

    In a video that Southwest posted late Tuesday, CEO Robert Jordan said Southwest would operate a reduced schedule for several days but hoped to be “back on track before next week.”

    Jordan blamed the winter storm for snarling the airline’s “highly complex” network. He said Southwest’s tools for recovering from disruptions work “99% of the time, but clearly we need to double down” on upgrading systems to avoid a repeat of this week.

    “We have some real work to do in making this right,” said Jordan, a 34-year Southwest veteran who became CEO in February. “For now, I want you to know that we are committed to that.”

    Transportation Secretary Pete Buttigieg, who has criticized airlines for previous disruptions, said that “meltdown” was the only word he could think of to describe this week’s events at Southwest. He noted that while cancellations across the rest of the industry declined to about 4% of scheduled flights, they remained above 60% at Southwest.

    From the high rate of cancellations to customers’ inability to reach Southwest on the phone, the airline’s performance has been unacceptable, Buttigieg said. He vowed to hold the airline accountable and push it to reimburse travelers.

    “They need to make sure that those stranded passengers get to where they need to go and that they are provided adequate compensation,” including for missed flights, hotels and meals, he said Wednesday on ABC’s “Good Morning America.”

    On its website, Southwest told customers affected by canceled or delayed flights between Dec. 24 and Jan. 2 to submit receipts. The airline said, “We will honor reasonable requests for reimbursement for meals, hotel, and alternate transportation.”

    Navy physician Lt. Cmdr. Manoj Mathew said after spending hours on hold over two days Southwest reimbursed him for the first leg of his family’s trip from Washington to Houston — they drove through terrible weather after the Dec. 23 flight was canceled. Now he is worried whether Southwest will operate the return flight Sunday.

    “I’m trying to reach other airlines,” he said. “There are no flights, plus it’s very expensive for us.”

    Leaders of Southwest’s labor unions have warned for years that the airline’s crew-scheduling system, which dates to the 1990s, was inadequate, and the CEO acknowledged this week that the technology needs to be upgraded.

    The other large U.S. airlines use “hub and spoke” networks in which flights radiate out from a few major or hub airports. That helps limit the reach of disruptions caused by bad weather in part of the country.

    Southwest, however, has a “point to point” network in which planes crisscross the country during the day. This can increase the utilization and efficiency of each plane, but problems in one place can ripple across the country and leave crews trapped out of position.

    Those issues don’t explain all the complaints that stranded travelers made about Southwest, including no ability to reach the airline on the phone and a lack of help with hotels and meals.

    Teal Williams, a 48-year-old active-duty Army reservist from Utah, was stuck at the Denver airport with her husband and two teenage kids on Christmas Day after their flight to Des Moines, Iowa, was canceled. She said Southwest employees had no information about flights and didn’t offer food vouchers while elderly passengers sat in wheelchairs for hours and mothers ran out of formula for their infants.

    “It was just imploding, and no one could tell you anything,” Williams said. The airline employees “were desperately trying to help, but you could tell they were just as clueless as everybody else … it was scary.”

    Unable to find plane, train or bus seats, Williams and her family felt lucky to score a rental car. They drove 12 hours to Iowa.

    Barber, the musician from Kansas City, already missed a performance Sunday in Dallas but had hoped to make it to Washington in time for a New Year’s performance near the National Mall.

    “I’m missing out on money,” he lamented.

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  • Southwest Airlines cancels two-thirds of its flights, with more cancellations planned

    Southwest Airlines cancels two-thirds of its flights, with more cancellations planned

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    Southwest Airlines Co. canceled more than two-thirds of its flights Monday and plans to slash its schedules Tuesday and Wednesday, in a meltdown that stranded thousands of customers and that worsened while other airlines began to recover from the holiday winter storm.

    “We had a tough day today. In all likelihood we’ll have another tough day tomorrow as we work our way out of this,” Chief Executive Bob Jordan said in an interview Monday evening. “This is the largest scale event that I’ve ever seen.” 

    Southwest
    LUV,
    +1.78%

    plans to operate just over one-third of its typical schedule in the coming days to give itself leeway for crews to get into the right positions, he said, adding that the reduced schedule could be extended.

    Southwest’s more than 2,800 scrapped flights Monday, the highest of any major U.S. airline, came as the Dallas-based airline proved unable to stabilize its operations amid the past week’s storm. Between Thursday and Monday, the airline canceled about 8,000 flights, according to FlightAware.

    On Monday, the Department of Transportation called Southwest’s rate of cancellations “disproportionate and unacceptable” and said it would examine whether the cancellations were controllable and whether the airline is complying with its customer service plan.

    Ryan Green, Southwest’s chief commercial officer, said in an interview the airline is taking steps such as covering customers’ reasonable travel costs—including hotels, rental cars and tickets on other airlines, and will be communicating the process for customers to have expenses reimbursed. He also said customers whose flights are being canceled as the airline recovers are entitled to refunds if they opt not to travel. 

    The troubles at Southwest intensified Monday despite generally improving weather conditions and warming temperatures throughout much of the eastern half of the country, which had been pummeled by snow, wind and subfreezing temperatures in recent days.

    An expanded version of this report appears on WSJ.com.

    Trending at WSJ.com:

    SPAC boom ends in frenzy of liquidation

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  • FTX co-founder Gary Wang, ex-Alameda CEO Caroline Ellison plead guilty to federal charges

    FTX co-founder Gary Wang, ex-Alameda CEO Caroline Ellison plead guilty to federal charges

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    On the same day that that the Bahamas extradited FTX co-founder and former CEO Sam Bankman-Fried to the U.S. to face criminal charges, two former executives at FTX and Alameda Research pleaded guilty Wednesday to federal fraud charges.

    Caroline Ellison, 28, the former chief executive of Alameda Research — the crypto trading company founded by Bankman-Fried — and Zixiao (Gary) Wang, 29, co-founder of crypto platform FTX and its former chief technology officer, were charged for their roles in contributing to the crypto platform’s collapse.

    The pair each faced decades-long prison sentences if convicted, and pleaded guilty to charges that included wire fraud, securities fraud and commodities fraud in exchange for leniency. In a video Wednesday night, U.S. Attorney Damian Williams of the Southern District of New York said both were cooperating in the continuing investigation into FTX and Bankman-Fried.

    Williams added that Bankman-Fried, 30, was in FBI custody and will appear in court in “as soon as possible,” and suggested more charges in the FTX case could be forthcoming.

    “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” Williams said. “We are moving quickly and our patience is not eternal. … and we are far from done.”

    In a parallel action, the Securities and Exchange Commission on Wednesday also charged Ellison and Wang “for their roles in a multiyear scheme to defraud equity investors in FTX.”

    According to the SEC complaint, Ellison helped manipulate the price of FTX-issued crypto token FTT, which served as collateral for undisclosed loans from FTX customers’ assets to Alameda. In addition, the SEC alleges Bankman-Fried misled customers by falsely claiming FTX was a safe trading platform with strict risk-mitigation measures.

    The SEC claims Wang created software code to allow Alameda to divert FTX customers’ funds, and that Ellison used those funds for Alameda’s trading activity.

    “As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” SEC Chair Gary Gensler said in a statement. “We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag. Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance.”

    Bankman-Fried was arrested in the Bahamas last week after he was indicted by U.S. federal prosecutors, who allege he played a key role in the collapse of FTX, diverting billions of dollars of customer assets and defrauding investors, customers and lenders.

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  • Micron sales could dive more than 50%, and more belt-tightening is expected before outlook improves

    Micron sales could dive more than 50%, and more belt-tightening is expected before outlook improves

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    Micron Technology Inc.’s revenue declines could worsen to more than 50% before inventory-saturated customers work though that product and boost sales in the second half of 2023, but before then the memory-chip maker is implementing some austerity measures.

    Micron
    MU,
    +1.01%

    said it expects an adjusted loss of between 72 cents and 52 cents a share on revenue of $3.6 billion to $4 billion for the fiscal second quarter, with the midpoint 51% lower than last year’s second-quarter revenue total of $7.78 billion. Analysts had forecast an adjusted loss of 32 cents a share on revenue of $3.92 billion.

    In a filing with the Securities and Exchange Commission, the memory-chip specialist disclosed that management plans to cut about 10% of its staff in 2023, “through a combination of voluntary attrition and personnel reductions.” About $30 million in restructuring costs are expected, all in the fiscal second quarter.

    Along with headcount reductions, Micron said in 2023 it will also suspend share buybacks, productivity programs and company bonuses, and that executive salaries would be “cured” for the rest of the fiscal year. Sanjay Mehrotra, Micron’s chief executive, also told analysts after the release of results that he expected profitability to remain challenged through 2023.

    Micron specializes in DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are the flash memory chips used in smaller devices like smartphones and USB drives.

    Micron shares were down less than 1% after hours, following a 1% rise to close the regular session at $51.19. Micron shares are down 45% for the year compared with a 19% fall by the S&P 500 index
    SPX,
    +1.49%

    and a 32% drop by the Nasdaq Composite Index
    COMP,
    +1.54%

    and a 33% drop on the PHLX Semiconductor Index
    SOX,
    +2.36%
    .

    Mehrotra said he expects DRAM growth to rise by about 10% and NAND to rise by around 20%. “For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in the end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China,” Mehrotra said.

    “But the largest impact to the profitability and financial outlook for us is the supply-demand balance, and the rate and pace of this improvement is going to be a function of aligning supply with demand, and we’re taking decisive actions on CapEx and utilization to address it,” Mark Murphy, Micron’s chief financial officer, told analysts on the call.

    Data-center and cloud sales were considered relatively safe, but in another potentially developing crack, Mehrotra said the current environment showed some softness in cloud data-center demand, given tighter consumer spending.

    “We do absolutely expect that once we get past the current macroeconomic environment and macroeconomic weakening, longer-term trends for cloud will remain strong,” Mehrotra said. “In terms of the current environment, yes, inventory adjustments and some impact of cloud and demand weakening as well. That’s impacting our overall data-center outlook.”

    The CEO also told analysts he expects customers to be in a much better position in the burning off of their inventories by the middle of 2023.

    “By mid-calendar ’23, we are projecting, even though we don’t have perfect visibility, but based on all of our discussions with our customers, we are projecting that inventory at customers will be in relatively healthier position by that time.”

    “And that’s where we say that our second half of fiscal-year revenue will be greater than first half, and we would expect continued improvements beyond the second half as well,” the CEO said.

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  • Tesla Shares Are Weak. The Reason Why Is in the Stock Chart.

    Tesla Shares Are Weak. The Reason Why Is in the Stock Chart.

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    Tesla stock is weak again despite the likelihood CEO Elon Musk will step down as head of Twitter and earnings estimates for 2023 staying stable.

    Investors are perplexed, but traders know why. Investors can’t, or shouldn’t, ignore the stock chart.

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  • Tesla stock suffers worst week since 2020 as Elon Musk sells, large shareholder asks for new CEO

    Tesla stock suffers worst week since 2020 as Elon Musk sells, large shareholder asks for new CEO

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    Tesla Inc. shares Friday wrapped up their worst week since 2020, as Chief Executive Elon Musk sold billions in stock and faced a call from a prominent investor to step down from the helm of the electric-vehicle maker.

    Tesla
    TSLA,
    -4.72%

    stock fell 4.7% Friday for a weekly decline of 16.1%, the fourth-worst week in history for the shares after a series of three weeks in late February and early March 2020, when investors sold stocks in fear of the COVID-19 pandemic’s effects. Tesla ended the week with a market capitalization of less than $500 billion for the first time since November 2020, and the share price nearly fell lower than $150 for the first time since that month, ending the week at $150.05.

    In-depth: Tesla investors await clues on demand, board actions and weigh downside risks in 2023

    The decline occurred as Musk sold stock, which he has done repeatedly since November of 2021. Musk disclosed the sale of more than $3.5 billion in Tesla stock late Wednesday, after performing the trades over the three previous trading sessions, when the price declined a cumulative 12.4%. In total, the Tesla CEO has sold $39.3 billion worth of Tesla stock in the past 13 months, according to calculations from Dow Jones Market Data and MarketWatch.

    The recent sales have seemed tied to Musk’s acquisition of the social-media platform Twitter, which he bought for roughly $44 billion this year. It is the second time he has sold stock since closing that deal in October.

    See also: Elon Musk’s $5.7 billion mystery gift has been revealed

    Musk has reportedly been spending much of his time at Twitter, which seems to have angered some prominent Tesla investors. Leo KoGuan, Tesla’s third-largest individual shareholder, publicly called for a new CEO on Twitter this week, as a chorus of previously boosterish accounts on the service expressed dismay at the stock decline and Musk’s actions.

    Bullish analysts have also expressed concerns about Musk’s focus and stock sales. Wedbush analyst Daniel Ives, who has an outperform rating and $250 12-month price target on Tesla shares, wrote Thursday that “Musk continues to throw gasoline in the burning fire around the Tesla story by selling more stock and creating Tesla brand deterioration through his actions on Twitter.”

    “The nightmare of Musk owning Twitter has been an episode out of the Twilight Zone that never ends and keeps getting worse,” Ives wrote. “In late April Musk said he was done selling Tesla stock, instead the exact opposite has happened and put massive pressure on Tesla shares which have significantly underperformed the market since Musk took over Twitter in late October.”

    Opinion: Why Tesla investors are the biggest losers in Elon Musk’s Twitter deal

    Tesla shares have now declined 57.4% so far in 2022, as the S&P 500 index
    SPX,
    -1.11%

    has declined 18.3%. Tesla’s market cap was $474.4 billion as of Friday’s close.

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  • Ex-Theranos exec ‘Sunny’ Balwani sentenced to nearly 13 years in prison

    Ex-Theranos exec ‘Sunny’ Balwani sentenced to nearly 13 years in prison

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    SAN JOSE, Calif. — A judge on Wednesday sentenced former Theranos executive Ramesh “Sunny” Balwani to nearly 13 years in prison for his role in the company’s blood-testing hoax — a sentence slightly longer than that given to the CEO, who was his lover and accomplice in one of Silicon Valley’s biggest scandals.

    Balwani was convicted in July of fraud and conspiracy connected to the company’s bogus medical technology that duped investors and endangered patients. His sentencing came less than three weeks after Elizabeth Holmes, the company’s founder and CEO, received more than 11 years in prison for her part in the scheme.

    The scandal revolved around the company’s false claims to have developed a device that could scan for hundreds of diseases and other potential problems with just a few drops of blood taken with a finger prick.

    The case threw a bright light on Silicon Valley’s dark side, exposing how its culture of hype and boundless ambition could veer into lies.

    Holmes, 38, could have gotten up to 20 years in prison — a penalty that U.S. District Judge Edward Davila could have imposed on Balwani, who spent six years as Theranos’ chief operating officer while remaining romantically involved with Holmes until a bitter split in 2016.

    While on the witness stand in her trial, Holmes accused Balwani, 57, of manipulating her through years of emotional and sexual abuse. Balwani’s attorney has denied the allegations.

    The two trials had somewhat different outcomes. Unlike Balwani, Holmes was acquitted on several charges of defrauding and conspiring against people who paid for Theranos blood tests that produced misleading results and could have pointed patients toward the wrong treatment. The jury in Holmes’ trial also deadlocked on three charges.

    Balwani was convicted on all 12 felony counts, and his lawyers sought a far more lenient sentence of just four to 10 months in prison. Prosecutors for the Justice Department asked for 15 years. A probation report recommended nine years.

    Duncan Levin, a former federal prosecutor who is now a defense attorney, described Balwani’s bid for a light sentence as “utterly unrealistic.” Levin suspects the judge may give greater weight to the Justice Department and the probation office recommendations, which mirror the sentences those agencies sought for Holmes.

    The judge ultimately gave her 11 1/4 years in prison and recommended that the sentence be served in a low-security facility in Byran, Texas.

    Federal prosecutors also want the judge to order Balwani to pay $804 million in restitution to defrauded investors — the same amount sought from Holmes. Davila deferred a decision on restitution during Holmes’ Nov. 18 sentencing until an unspecified future date.

    In court documents, Balwani’s lawyers painted him as a hardworking immigrant who moved from India to the U.S. during the 1980s to become the first member of his family to attend college. He graduated from the University of Texas in 1990 with a degree in information systems.

    He later moved to Silicon Valley, where he first worked as a computer programmer for Microsoft before founding an online startup that he sold for millions of dollars during the dot-com boom of the 1990s.

    Balwani and Holmes met around the same time she dropped out of Stanford University to start Theranos in 2003. He became enthralled with her and her quest to revolutionize health care.

    Balwani’s lawyers said he eventually invested about $5 million in a stake in Theranos that eventually became worth about $500 million on paper — a fraction of Holmes’ one-time fortune of of $4.5 billion.

    That wealth evaporated after Theranos began to unravel in 2015 amid revelations that its blood-testing technology never worked as Holmes had boasted in glowing magazine articles that likened her to Silicon Valley visionaries such as Apple co-founder Steve Jobs.

    Before Theranos’ downfall, Holmes teamed up with Balwani to raise nearly $1 billion from deep-pocketed investors that included software mogul Larry Ellison and media magnate Rupert Murdoch.

    “Mr. Balwani is not the same as Elizabeth Holmes,” his lawyers wrote in a memo to the judge. “”He actually invested millions of dollars of his own money; he never sought fame or recognition; and he has a long history of quietly giving to those less fortunate.” Balwani’s lawyers also asserted that Holmes “was dramatically more culpable” for the Theranos fraud.

    Echoing similar claims made by Holmes’s lawyers before her sentencing, Balwani’s attorneys also argued that he has been adequately punished by the intense media coverage of Theranos, which has been the subject of a book, documentary and award-winning TV series.

    Balwani “has lost his career, his reputation and his ability to meaningfully work again,” his lawyers wrote.

    Federal prosecutors cast Balwani as a ruthless, power-hungry accomplice in crimes that ripped off investors and imperiled people who received flawed results. The blood tests were to be available in a partnership with Walgreen’s that Balwani helped engineer.

    “Balwani presented a fake story about Theranos’ technology and financial stability day after day in meeting after meeting,” the prosecutors wrote in their memo to the judge. “Balwani maintained this façade of accomplishments, after making the calculated decision that honesty would destroy Theranos.”

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  • Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

    Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

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    Okta Inc. executives on Wednesday said they will report an adjusted profit in the fourth quarter and, in a surprise, predicted profitability for all of next fiscal year, trumping profit concerns stemming from recent sales-operation issues.

    For the fourth quarter, Okta
    OKTA,
    +4.04%

    guided for adjusted earnings of 9 cents to 10 cents a share on revenue of $488 million to $490 million. Analysts, on average, were expecting an adjusted loss of 12 cents a share on sales of $488.3 million, according to FactSet.

    In a surprise announcement during the conference call, Chief Financial Officer Brett Tighe revealed a full forecast for fiscal 2024 as well. Most software companies shy away from such practices amid uncertainty about macroeconomic conditions. He said Okta executives are aiming for adjusted profits for the full year on revenue of $2.13 billion to $2.15 billion. Analysts on average expected adjusted losses of 30 cents a share on sales of $2.3 billion, beating profit projections widely but also missing sales expectations by more than $100 million.

    Shares rallied as much as 18% in after-hours trading immediately following the release of the results, but those gains noticeably pared back to a steady 12% level after Tighe announced the outlook to analysts on the call. They have fallen 76% so far this year, compared with a 27% decline by the tech-heavy Nasdaq Composite Index
    COMP,
    +4.41%
    .

    In an exclusive interview with MarketWatch ahead of the company’s conference call, Okta Chief Executive and co-founder Todd McKinnon said the company is not providing any forecasts past 2024 because of uncertainty in the macro environment.

    “We’re thinking a pretty conservative assumption that the macro is going to get worse before it gets better, so that’s definitely factored into the guide,” McKinnon told MarketWatch.

    On a more positive note, McKinnon said sales-rep attrition has been the lowest it has been in the past several quarters, following a spike last quarter. Okta also announced that Susan St. Ledger, the president of worldwide field operations, is retiring and McKinnon will take over her duties on an interim basis.

    “What we’ve done over the last six months is what a lot of companies are doing, slowing hiring, re-evaluating real estate, doubling down on the things we know are high value. And some of the things that are maybe less value we’re doing less of, so that’s where we see the profitability come from,” McKinnon told MarketWatch.

    Much of that comes from addressing the company’s struggle in combining Okta’s salesforce with sales reps acquired in the May 2021 acquisition of identity-platform Auth0 (pronounced “Auth Zero”), which is more focused on direct-to-user sales than Okta’s corporate focus.

    “The problem was never that we didn’t have talented sales people,” McKinnon told MarketWatch. “The problem is that we didn’t enable them and clarify things with them.”

    In-depth: Okta CEO says ‘short-term challenges’ resulted in workers leaving at a higher rate

    “We still have work to do,” McKinnon said. “We don’t think we’ve solved it after one quarter of a positive trend but I do think it’s progress.”

    “The biggest factor: We’ve really done a much better job clarifying the products and the positioning and saying we have two clouds: We have Workforce Identity Cloud and Customer Identity Cloud and it’s very clear what to sell when,” he said.

    Okta reported a third-quarter loss of $208.9 million, or $1.32 a share, compared with a loss of $221.3 million, or $1.44 a share, in the year-ago period. After adjusting for stock-based compensation expenses and other items, the company reported break-even results on a per-share basis, compared with a loss of 7 cents a share in the year-ago period. Revenue rose to $481.4 million from $350.7 million in the year-ago quarter.

    Analysts had forecast an adjusted loss of 24 cents a share on revenue of $465.4 million, based on the company’s forecast for a loss of 24 cents to 25 cents a share on sales of $463 million to $465 million.

    For the current year, Okta forecast an adjusted loss of 27 cents to 26 cents a share on revenue of about $1.84 billion, compared with the Street’s forecast of 73 cents a share on revenue of $1.82 billion.

    So far in November, cloud software stocks have been getting trashed. While the S&P 500
    SPX,
    +3.09%

    has gained 5.4%, and the Nasdaq has advanced 4.4%, the iShares Expanded Tech-Software Sector ETF
    IGV,
    +4.39%

    has risen 1.6%, the Global X Cloud Computing ETF
    CLOU,
    +6.00%

    has ticked up 0.8%, the First Trust Cloud Computing ETF
    SKYY,
    +4.54%

    has fallen 2%, and the WisdomTree Cloud Computing Fund
    WCLD,
    +4.99%

    has dropped 6.9%.

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  • Salesforce co-CEO Bret Taylor leaving, stock falls after lower-than-expected forecast

    Salesforce co-CEO Bret Taylor leaving, stock falls after lower-than-expected forecast

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    Salesforce Inc. performed better than expected in the third quarter, but executives issued a fourth-quarter forecast that fell short of expectations on Wednesday and revealed that co-Chief Executive Bret Taylor is leaving the company.

    Salesforce
    CRM,
    +5.65%

    shares fell about 7% after hours, after rising about 5.5% in the regular session to close at $159.97, their fifth gain in the past six sessions. 

    The cloud-software company said in a news release that founder, co-CEO and Chairman Marc Benioff will resume the sole CEO role on Jan. 31. Taylor is the second executive to be elevated to co-CEO with Benioff, only to leave with Benioff still in charge. Keith Block stepped down in February 2020 after just 18 months in the position, and Taylor lasted exactly a year in the co-CEO position after being promoted Nov. 30 of last year.

    “I am grateful for six fantastic years at Salesforce,” Taylor, who was also vice chairman, said in a statement. “Marc was my mentor well before I joined Salesforce and the opportunity to partner with him to lead the most important software company in the world is career-defining. After a lot of reflection, I’ve decided to return to my entrepreneurial roots.”

    See more: Opinion: Salesforce better get used to Marc Benioff in charge, because he keeps chasing off his chosen successors

    On the company’s earnings call, Benioff said “we’re still in a little bit of shock and extremely sad” about Taylor’s exit, but did not answer an analyst’s question about whether he would fill the co-CEO position.

    At least one analyst said he didn’t see the departure coming: “Given that Mr. Taylor was assumed to be the ‘heir apparent’ at CRM, this does bring up a lot of questions in terms of the management team and frankly offsets some of the positive narrative around margins heading into [calendar year 2023],” wrote Kirk Materne, analyst for Evercore ISI, in a note Wednesday.

    Salesforce reported that third-quarter net income fell to $210 million, or 21 cents a share, compared with $468 million, or 47 cents a share, in the year-ago period. Adjusted for stock-based compensation and other costs, earnings were $1.40 a share. Revenue rose to $7.84 billion from $6.86 billion in the year-ago quarter.

    Analysts, who have been expressing concerns about a slowdown in business-software spending, had forecast adjusted earnings of $1.22 a share on revenue of $7.83 billion, according to FactSet.

    “We remain positive on the long-term outlook for Salesforce as front-office applications leader,” Michael Turits, analyst for KeyBanc Capital Markets, wrote ahead of the company’s earnings report. “That said, we remain cautious regarding the near-term outlook given ongoing recession concerns, slowing cloud spend, and weaker conversations we had with a few Salesforce channels this quarter.”

    Those concerns sprung up in the company’s forecast, as Salesforce executives’ guidance fell $900 million short of expectations. They expect fourth-quarter earnings of 23 cents to 25 cents a share on revenue in the range of $7.932 billion to $8.032 billion, and adjusted earnings of $1.35 to $1.37 a share. Analysts had forecast adjusted earnings of $1.44 a share on revenue of $8.94 billion.

    Chief Financial Officer Amy Weaver said on the earnings call that along with the “unpredictable” macroeconomic environment and some slowing in customer spending, the strong dollar had an impact on the company’s showing. “Foreign exchange continued to be a headwind for our results,” she said.

    Still, Weaver said the company remains committed to a goal of operating margins of 25% or above; in the third quarter it was at 22.7%, which she said was a record high. Among the things the company is doing, she said, is taking a measured approach to hiring. Earlier this month, the company confirmed hundreds of layoffs, though it did not address them during the call.

    See: Tech layoffs approach Great Recession levels

    In response to an analyst’s question about employees working from home and the company’s real-estate footprint, Benioff said the San Francisco-based company will have more employees in the office while maintaining the flexibility of remote work. “We’re never going back to how it was, we all know that,” he said. Meanwhile, Weaver said the company is “looking at every aspect of our real estate .”

    Shares of Salesforce have declined about 37% this year. The Dow Jones Industrial Average
    DJIA,
    +2.18%
    ,
    whose 30 components include Salesforce, has fallen about 5% year to date, while the S&P 500 index
    SPX,
    +3.09%

    is down almost 15% this year.

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