Tag Archives: Finance

Intel is separating its ailing foundry business from the main company

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Intel is turning its foundry business, which manufactures chips for other companies, into an independent subsidiary. The company has revealed its plan in a note to employees from its CEO Pat Gelsinger, published over a month after Intel disclosed that it's cutting 15 percent of its workforce. Intel is laying off more than 15,000 people as part of its $10 billion cost-reduction plan to regain financial stability following a second-quarter net loss of $1.6 billion. Gelsinger explained in his new memo that turning the foundry into a subsidiary "will unlock important benefits," particularly the ability to evaluate and take external funding directly. 

Gelsinger said that there will be no changes to the foundry's leadership, but the subsidiary will establish its own operating board with independent directors to govern it. According to CNBC, Intel is even considering making the foundry a separate publicly traded company. Intel is in the midst of modernizing its existing fabs and building new ones for its foundry business, which is costing the company billions of dollars, in an effort to catch up to its chipmaking rivals like TSMC and Samsung. The company has reportedly spent around $25 billion a year on its foundry business over the past two years, but that has yet to translate into profit. 

In April, the company revealed in a presentation to investors that the business posted $7 billion in operating losses for 2023, even larger than the $5.2 billion in losses that it incurred the previous year. It had a revenue of $18.9 billion, down 31 percent from its 2022 revenue of $27.49 billion. Gelsinger warned investors at the time that Intel expects its foundry business' operating loss for 2024 to be even bigger and that it doesn't expect to break even until 2027. The foundry's finances aren't the division's only problem: Its next-gen manufacturing process referred to as "18A" reportedly failed crucial tests to prove that it's ready to be used for mass production. 

In addition to announcing that the foundry business will become a subsidiary, Gelsinger also disclosed in the memo that Intel will be selling part of its stake in Altera, another chipmaker that it purchased for $16.7 billion in 2015. 

This article originally appeared on Engadget at https://www.engadget.com/general/intel-is-separating-its-ailing-foundry-business-from-the-main-company-110043046.html?src=rss

Former MoviePass CEO reportedly pleads guilty to securities fraud

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Mitch Lowe, one of two MoviePass leaders indicted by the Justice Department in 2022, has pleaded guilty to securities fraud charges. The former CEO admitted to conspiring to deceive the public and investors about the service’s sustainability. Variety reports that the details of Lowe’s plea agreement haven’t been made public.

Prosecutors claim Lowe knew from the start that the company’s $9.95 “unlimited” plan was a short-term gimmick to attract subscribers and inflate stock. He’s also accused of making false statements in press releases, interviews and SEC filings about MoviePass’ long-term viability.

Those statements included allegedly lying about the company’s ability to become profitable on subscription fees alone and having tech that could generate revenue from customer data. He also claimed MoviePass was profiting from multiple revenue streams despite not having any income beyond subscriptions.

Prosecutors also accused Lowe and Ted Farnsworth, former CEO of MoviePass’ parent company Helios and Matheson, of preventing subscribers from getting what was promised from the “unlimited” subscription. The company settled with the FTC in 2021 over allegations that it intentionally invalidated subscriber passwords to freeze their accounts, blocking their ability to get the movie tickets the service promised. MoviePass and its parent company declared bankruptcy in 2020.

Although no sentencing date has been set, Lowe is free on bond and has a status conference court date scheduled in Miami for March 2025. The 72-year-old former executive faces a maximum of five years in federal prison.

“Mitch is a good man who is looking to move forward with his life,” Lowe’s attorneys, Margot Moss and David Oscar Markus, said in a statement to Variety. “He has accepted responsibility for his actions in this case and will continue to try to make things right.”

Meanwhile, Farnsworth is still in custody. He was initially freed on a $1 million bond that was revoked in August 2023 after the feds accused him of misusing nearly $300,000 in company funds. Farnsworth's former boyfriend, who he met on an escort site, was paid $147,000, and received a Cadillac worth $144,000; after the pair split up, the feds say he falsely accused his ex of stealing the vehicle.

This article originally appeared on Engadget at https://www.engadget.com/big-tech/former-moviepass-ceo-reportedly-pleads-guilty-to-securities-fraud-201131284.html?src=rss

23andMe will pay $30 million to settle 2023 data breach lawsuit

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23andMe is close to settling a proposed class action lawsuit filed against the company over a data breach that compromised 6.9 million users' information. According to the preliminary settlement filing, the DNA testing company has agreed to pay $30 million to affected customers, as well as to conduct annual computer scans and cybersecurity audits for three years. A website will be built to notify people eligible to a portion of the settlement fund and to facilitate payments. Affected users will also be sent a link where they can delete all their information from the service, and they'll be able to enroll to a three-year Privacy & Medical Shield + Genetic Monitoring program for free. A judge still has to approve those terms. 

In October 2023, the company admitted that the DNA Relatives profile information of roughly 5.5 million customers and the Family Tree profile information of 1.4 million DNA Relative participants had been leaked. It later revealed in a legal filing that the bad actors started breaking into customer accounts in late April 2023 and that they had access to its systems until September that year. It said that the hackers used a technique called credential stuffing, which uses previously compromised login credentials to access customer accounts. 

The breach led to several class action lawsuits filed against the company, including one that accused 23andMe of failing to notify the plaintiffs that they were specifically targeted for having Chinese and Ashkenazi Jewish heritage. In the settlement agreement [PDF] for the consolidated lawsuit, 23andMe noted that it "denies the claims and allegations set forth in the Complaint" and that it "denies that it failed to properly protect the Personal Information of its consumers and users." 

According to Reuters, 23andMe describes its financial condition as "extremely uncertain." In its financial report for the 2024 fiscal year, it revealed that it earned a total revenue of $220 million, down 27 percent from a $299 million revenue the year before. A huge chunk of the settlement money will come from cyber insurance, though, which the company expects to cover $25 million out of the $30 million total. 

This article originally appeared on Engadget at https://www.engadget.com/cybersecurity/23andme-will-pay-30-million-to-settle-2023-data-breach-lawsuit-150058702.html?src=rss

OpenAI is reportedly moving away from its complicated non-profit structure next year

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Sam Altman has told OpenAI staff members during their weekly meeting that the company is changing its rather convoluted non-profit corporate structure next year, according to Fortune. The CEO said OpenAI will move away from being controlled by a non-profit entity and will transition into a more traditional for-profit organization. He didn't delve into the specifics of how the company will achieve that goal and what OpenAI's corporate structure will look like exactly. A spokesperson only told Fortune that it remains "focused on building AI that benefits everyone" and that non-profit is "core to [its] mission and will continue to exist."

OpenAI started as a non-profit organization in 2015 that relied on money from donors. In a page explaining its structure, it said that it only raised $130.5 million in total donations over the years, which it says made it clear that "donations alone would not scale with the cost of computational power and talent required to push [its] core research forward." The then-purely non-profit organization created a for-profit subsidiary in order to solve that problem. As Fortune explains, OpenAI's non-profit entity currently controls its for-profit arm, which in turn controls a holding company that takes investments from companies like Microsoft. 

Under this structure, the profit that can be allocated to investors, including Microsoft, has a cap. Anything OpenAI makes beyond the cap will go to its non-profit division. And the company's revenue is booming, according to a report by The Information published in June. OpenAI reportedly doubled its annualized revenue in the first half of the year, thanks to the subscription version of ChatGPT.

The company's complex structure also allowed OpenAI's non-profit board of directors to oust Altman in 2023, because they "no longer [have] confidence in his ability to continue leading OpenAI." Five days later, however, the board was disbanded and replaced, while Altman was reinstated as CEO. 

This article originally appeared on Engadget at https://www.engadget.com/ai/openai-is-reportedly-moving-away-from-its-complicated-non-profit-structure-next-year-130014948.html?src=rss

Verizon will buy Frontier for $20 billion to expand its fiber network

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Verizon is acquiring Frontier for $20 billion, the provider announced one day after reports emerged that the two companies were in talks. The deal will expand Verizon's fiber network across the United States, allowing it to better compete with its rival, AT&T. Frontier will add 2.2 million fiber subscribers in 25 states, extending Verizon's reach to about 10 million customers in 31 states and Washington, DC. Verizon has experienced slowing revenue, and acquiring Frontier could give it the boost it needed in less time than it would take to expand its own network. 

"The acquisition of Frontier is a strategic fit," said Verizon Chairman and CEO Hans Vestberg in a statement. "It will build on Verizon's two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network."

Frontier has experienced a rocky few years. The company declared Chapter 11 bankruptcy in 2020 and pivoted to a "leaner business" but faced concerns about emptying its bank account before finishing ongoing upgrades. Furthermore, the FTC sued Frontier in 2021, claiming it misrepresented its actual speeds. The company had to pay over $8.5 million and remove all false information. 

This article originally appeared on Engadget at https://www.engadget.com/verizon-will-buy-frontier-for-20-billion-to-expand-its-fiber-network-114532971.html?src=rss

Verizon is reportedly near a deal to buy broadband provider Frontier Communications

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Verizon is reportedly near a deal to buy fiber provider Frontier Communications. On Wednesday, The Wall Street Journal said that an announcement could come as early as this week, provided discussions don’t “hit any last-minute snags.”

Frontier has a market value of over $7 billion and provides broadband to around three million locations in 25 states. The company would help Verizon boost its Fios fiber network and better compete with AT&T. The carrier has seen slowing wireless revenue and views fiber investment as a growth area. Acquiring companies with existing infrastructure, like Frontier, is potentially less expensive and time-consuming than rolling out its own network.

Based in Dallas, Frontier is currently upgrading its copper landline system to fiber — enabling it to offer a 5Gbps symmetrical plan. The company filed for Chapter 11 bankruptcy in 2020. It pivoted to a “leaner business,” as the WSJ describes, before running into concerns that it would run out of money before it finishes its current upgrades.

The FTC sued the company in 2021 for misrepresenting its speeds. Under a 2022 settlement, Frontier was required to stop lying about its internet performance, dole out over $8.5 million and install fiber service in 60,000 California homes over four years.

This article originally appeared on Engadget at https://www.engadget.com/big-tech/verizon-is-reportedly-near-a-deal-to-buy-broadband-provider-frontier-communications-210317747.html?src=rss

Snap is testing a less confusing version of its app

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One of the most common criticisms against Snapchat is that it's not very intuitive and is quite hard navigate as a new user. Personally, I never quite got the hang of it and find TikTok much, much easier to use. Apparently, Snap is aware of the issue, because it's currently testing a "simplified version of Snapchat." Snap CEO Evan Spiegel has revealed the existence of an experimental Snapchat app in a lengthy blog post discussing the company's highs and lows over the past 13 years, as well as its most recent earnings and future plans. 

The simplified app "aims to improve accessibility and usability," he wrote, adding that it's been positively received in early tests. In addition, the app could lead to better app performance and faster load times overall. Even so, Spiegel said that the company "will be thoughtful and deliberate about making a change of this magnitude" despite the app's reception. That most likely means that Snap is still testing the app more thoroughly and that we won't be seeing it anytime soon. 

In addition to revealing the existence of a simpler Snapchat, Spiegel has also revealed that the company is testing new advertisement formats. One of those formats called Sponsored Snaps will show up as new Snaps in your chat inbox, alongside your friends' messages. The good news is that you won't get a notification for those Snap ads, and opening the messages is optional. As The Verge notes, though, the ads could sit above your actual friends' messages if you never open them. 

The company most likely cooked up the new and potentially more intrusive ad placement as a response to its lagging share performance in the ad market. Spiegel said that the company has managed to reverse two years of declining year-over-year revenue growth, but its advertising business is growing slower than its competitors'. He also said that expanding the company's digital advertising business is key to its long-term revenue potential and that Snap's investors are getting concerned that it's not growing faster. 

This article originally appeared on Engadget at https://www.engadget.com/apps/snap-is-testing-a-less-confusing-version-of-its-app-113007479.html?src=rss

ChatGPT has doubled its weekly active users to 200 million

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ChatGPT now has 200 million weekly active users, according to OpenAI. That represents a doubling of the weekly audience of 100 million the company announced last November. A representative from the company told Engadget that API usage has also doubled since the July release of GPT-4o mini.

User numbers aren't the only big growth OpenAI has seen over the past year. CEO Sam Altman reportedly told employees this summer that the company's annualized revenue — which takes a monthly revenue figure and stretches it out over a whole year — had reached $3.4 billion, up from $1.6 billion at the end of 2023.

Separately from today's usercount announcement, The Wall Street Journal reported that Apple, Nvidia and Microsoft are in talks to invest in a new fundraising round for OpenAI. The only detail the report had about the scale of this funding round was that it would push OpenAI's valuation above $100 billion.

Microsoft has invested $13 billion into the AI business since 2019, while Apple revealed that ChatGPT will form a large part of its upcoming Apple Intelligence push. Both Microsoft and Apple gave up their seats on OpenAI's board of directors this summer after the European Commission raised antitrust concerns about the businesses' close relationships.

This article originally appeared on Engadget at https://www.engadget.com/ai/chatgpt-has-doubled-its-weekly-active-users-to-200-million-233037951.html?src=rss

Peloton to ruin the secondhand market by charging a $95 ‘used equipment activation fee’

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Peloton is in something of a financial rut lately, and we all know what companies do when that happens. They take it out on consumers. To that end, the exercise machine maker just announced it will be charging a $95 “used equipment activation fee” to anyone who buys one of its machines on the secondhand market, according to a report by CNBC.

The company made this announcement in its Q4 2024 shareholder letter. The fairly exorbitant fee will apply to any machine bought directly from a previous owner, meaning anything purchased via Craigslist, Facebook Marketplace or, heck, even a neighbor down the street. Without tithing $95 to the church of Peloton, the machine won’t have access to any of the classes or features the company has become known for.

The company says this activation fee is just to ensure that new members “receive the same high-quality onboarding experience Peloton is known for.” In a recent earnings call, however, a company representative was more transparent, calling the fee a “source of incremental revenue and gross profit,” according to The Verge.

Users who pay this fee will be treated to a “virtual custom fitting,” in the case of the Peloton Bike and Bike Plus. They will also receive a summary of the hardware which will illustrate exactly how much the machine was used by the original owner, just in case the seller tries that whole “I only used it once” thing. Peloton also says that these second hand buyers will get discounts on accessories like shoes, mats and spare parts. So it’s not all bad.

Also, the $95 fee doesn’t apply to those who buy refurbished machines directly from the company or from any of its third-party distribution partners. It’s only those who sell or buy via traditional used equipment channels who gotta pay the troll toll.

Buying a preowned Peloton machine was one of the great joys of being a consumer. The standard Bike, for instance, sells new for nearly $1,500, but you can pick up a used one online for $300 to $500. Now, that price goes up to $400 to $600. Peloton also requires a monthly membership fee to access content, which is around $44.

This isn’t the only move that Peloton has recently made that could be seen, through a cynical lens, as nickel and diming consumers. It upped subscription prices for those who use the company’s app with third-party machines. There’s still a free tier, but it doesn’t offer access to any live classes.

However, the recent earnings call did offer a bit of good news for Pelo-heads (I just made that up). Shares have risen 15 percent this quarter and losses have been narrowed to $30 million, down from $241 million year over year.

This article originally appeared on Engadget at https://www.engadget.com/home/peloton-to-ruin-the-secondhand-market-by-charging-a-95-used-equipment-activation-fee-155230509.html?src=rss

UK opens antitrust investigation into Amazon over its ties to AI startup Anthropic

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The UK’s antitrust regulator is set to carry out an antitrust investigation into Amazon and its ties with AI startup Anthropic. This comes after Amazon completed a $4 billion investment into the company. For the uninitiated, Anthropic is the organization behind the AI chatbot Claude.

The investigation will decide whether the aforementioned $4 billion investment qualifies as a merger under current regulations set forth by the country’s Competition and Markets Authority (CMA.) If it’s officially considered a merger, the investigation will then look into whether or not it will harm competition in the country. The investigators have 40 working days to come to a decision.

Amazon has previously stated the investment does not give it a majority stake in Anthropic, according to a report by TechCrunch. The company also told Financial Times that the investment “does not raise any competition concerns or meet the CMA’s own threshold for review.” Anthropic has also dismissed the notion that the investment indicates a merger of any kind.

“We are an independent company,” a spokesperson said in a statement. “Amazon does not have a seat on Anthropic’s board, nor does it have any board observer rights. We intend to cooperate with the CMA and provide them with a comprehensive understanding of Amazon’s investment and our commercial collaboration.”

The investigation is a small piece of a larger puzzle in which UK regulators look to curb “quasi-mergers.” This is when larger companies exert outsized influence over startups via strategic investments or by scooping up talent. This would, in theory, give the older company all of the benefits of a merger but without the regulatory scrutiny that would accompany an official acquisition.

To that end, the CMA is also preparing to launch an investigation into Google and its own massive investments into Anthropic. The company reportedly made two large investments, one for $300 million and another for $2 billion. Anthropic has raised $10 billion since its inception back in 2021, so Google and Amazon account for over half of that amount.

The regulatory agency is carrying out a related inquiry into Microsoft’s close partnership with OpenAI, which could represent a quasi-merger. It’s also looking into Microsoft hiring the core team behind Inflection AI, a rival to OpenAI. Last month, the CMA said it would be extending that last one into a full probe.

This article originally appeared on Engadget at https://www.engadget.com/ai/uk-opens-antitrust-investigation-into-amazon-over-its-ties-to-ai-startup-anthropic-153026609.html?src=rss