A May 4, 2011, file photo shows the entrance to the Sears Holdings Corp. in Hoffman Estates, Ill. Sears Holdings Corp. (SHLD) reports earnings on Thursday, Feb. 25, 2016.
MANDATORY CREDIT; MAGS OUT, TV OUTNEW YORK (AP) — Sears' fourth-quarter loss widened despite deep cost cuts and, after the struggling retailer limped through the crucial holiday shopping season, it promised to tighten spending even more this year.
Chairman and CEO Edward Lampert pointed to a warm winter that drove down sales for seasonal goods and brutal competition with other retailers, almost all of whom were forced into clear inventory by marking down prices drastically.
Shares rose 4 percent before the opening bell Thursday after the company announced that a major shareholder in the company would take a seat on the board, which will be increased to 10 seats.
One of those seats will be occupied by Bruce Berkowitz, chief investment officer at Fairholme Capital Management LLC.
Fairholme owns a 26.3 percent stake in the Hoffman Estates, Illinois, company, according to the data firm FactSet.
For the period ended Jan. 30, Sears, which also owns Kmart, lost $580 million, or $5.44 per share, compared with a loss of $159 million, or $1.50 per share, a year earlier.
If a one-time $180 million charge related to the impairment of the Sears trade name is removed, the per-share loss would have been $1.70 per share.
Revenue declined to $7.3 billion from $8.1 billion.
Sales at Kmart stores open at least a year dropped 7.2 percent, while sales at Sears stores fell 6.9 percent. Both were hit with weak consumer electronics sales, though the company said that that was actually an improvement from the first three quarters of the year.
Sears said earlier this month that it would accelerate the shuttering of some stores following the challenging holiday season.
The company for years has been searching for ways to compete with the Home Depots and Wal-Marts down the street, and with Amazon.com online.
Sears stores in many locations appear run down and it has tried to revitalize its image, but it's doing so in an environment in which it must reduce costs to mitigate its losses.
The company lowered expenses by about $150 million in the fourth quarter and estimates that it will further cut costs by $550 million to $650 million this year.
At the same time, it is promising to shake up sourcing, pricing and inventory to reinvigorate clothing sales.
Sears Holdings Corp. reported a full-year loss of $10.59 per share on revenue of $25.15 billion.
Oilfield services giant Halliburton will reduce its workforce by 8%, or 5000 positions, amid the falling oil prices.
The recent cuts add to the approximate 26,000 jobs that have been reduced at the company since 2014, representing about 25% of its workforce.
Last week, the European Union (EU) suspended the deadline for its review of Halliburton’s US$34.6 billion pending acquisition of Baker Hughes, about a month after the EU opened an in-depth investigation to find out if the merger would impede effective competition.
In January, the Houston-based company posted a 42% loss in its total revenue for 2015, compared to 2014, citing the impact of reduced commodity prices creating widespread pricing pressure and activity reductions on a global basis.
“2016 is expected to be another challenging year for the industry. We believe our customers will remain focused on cost per barrel optimization and gaining higher levels of efficiency, both of which bode very well for Halliburton. Ultimately, when this market recovers we believe North America will respond the quickest and offer the greatest upside, and that Halliburton will be positioned to outperform,” Dave Lesar, Halliburton chairman and CEO said last month in the company’s Q4 report.
In the last year, Pfizer, Medtronic and Coca-Cola's largest bottling company all moved to Britain.
Global pharma giant Pfizer will be able to permanently avoid paying $US35 billion ($48 billion) in US taxes by merging with Botox-maker Allergan to become the world's biggest drugmaker, according to a report released Thursday by a group that advocates for tax fairness -- though a tax and accounting consultant called the number "a little misleading."
Four Democratic members of Congress joined Americans for Tax Fairness, which is affiliated with labour unions, in a news conference urging President Barack Obama's administration to use executive authority to deny US corporations tax benefits if they move their tax addresses overseas.
The call comes after Obama's administration has announced some action to limit the benefits of corporate inversions, in which US companies merge with offshore firms to establish a tax address in lower-tax countries. But those new rules would not affect the Pfizer-Allergan transaction, which would move the new company's tax address to Dublin but doesn't meet the technical definition of an inversion.
Pfizer spokeswoman Joan Campion issued a statement that said the merger is "not structured to move jobs out of the United States, where we conduct the majority of our research." The move will create a "global, R&D-focused company," she said.
The ATF analysis found that Pfizer could "permanently avoid" as much as $US35 billion in US taxes on offshore profit. The number is based on two of Pfizer's disclosures: first, that as of 2014, it had a deferred tax liability of $US21.1 billion; and second, that it has about $US74 billion in overseas earnings that it plans to hold there indefinitely.
The analysis credited Pfizer with foreign taxes paid on those earnings, based on a 10-year average of the company's foreign tax rate, and arrived at an estimated tax rate of 18.7 per cent for repatriating the $US74 billion -- resulting in roughly $US13.8 billion in tax. That, added to the $US21.1 billion deferred tax liability, yields the $US35 billion figure.
'A little misleading'
Robert Willens, a tax and accounting consultant in New York, said the figure was "probably a little misleading," largely because there's no reason to believe that Pfizer would have been returning the $US74 billion in offshore earnings to the US. "They haven't given up the ghost there," he said. But the company would probably be able to continue avoiding payment of the $US21.1 billion deferred tax liability, he said.
Willens said Pfizer "would probably still owe some US taxes" but did not elaborate. He added that the main benefit of the $US160 billion merger would be Pfizer's new ability to access some $US140 billion in foreign earnings, tax-free, for loans among its affiliated companies. "That's 100 per cent the reason behind this deal," he said.
Pfizer can access the stockpile because it narrowly escapes Treasury restrictions put in place last fall that were intended to curb the financial benefits of inversions, particularly the tax-free use of offshore earnings through so-called hopscotch loans. The restrictions ban such loans for inverted companies whose existing shareholders wind up owning at least 60 per cent of the new entity. Pfizer's shareholders will own 56 per cent of the new company.
Jennifer Blouin, an accounting and tax professor at the Wharton School of Business at the University of Pennsylvania, told Bloomberg that the question of how much US tax Pfizer would avoid by moving to Ireland was probably tied to whether US policymakers allow companies to repatriate their offshore earnings at a reduced tax rate in the future -- as lawmakers from both political parties have discussed. She said the total potential loss to Treasury would amount to whatever tax would be owed at that reduced rate, not at the standard 35 per cent rate used in the report.
Repatriation holiday
Pfizer brought home $US35.5 billion in foreign earnings in 2004 under a one-time repatriation holiday that Congress approved at a rate of 5.25 per cent.
For now, Blouin said, "it's quite misleading to imply there's a $US35 billion revenue loss." One reason for that, she said, is that Pfizer's deferred-tax liability is not imminently owed.
"ATF thinks that in the absence of the Allergen transaction that $US35 billion will be coming to the Treasury," she said. "Nope, not going to happen."
Technically Incorrect offers a slightly twisted take on the tech that's taken over our lives.
It seems that people superlike physical therapists.
It was only when I moved to America that I learned the appropriate first question when you meet someone: What do you do for a living?
We're quite into money over here and we need to get an immediate gauge on where you stand on the lucre spectrum.
Does this apply even to matters of love? Please be the judge as we discuss the helpful statistics just released by Tinder.
You'll be familiar with this app. You swipe right if you like the look of someone. You swipe left if you don't. If only we could vote for politicians that way.
Tinder decided to see which jobs were the most right-swiped. The company introduced the ability to add your job to your profile only three months ago.
Could it be that those desperate for (at least one night of) love choose to swipe certain professions?
You will choke on your cherry yogurt when I tell that the most swiped profession among males was "pilot." It's as if the 1950s never ended. Which some political types would prefer it hadn't.
It gets worse. In the slipstream of our captains came "founder/entrepreneur." It seems that those who wish to sleep with men, wish to sleep with men who have a lot of options.
It's painful to contemplate that "founder/entrepreneur" has crept up to defeat "firefighter" and "doctor."
As if to show how the pecking order is structured in the tech world, "engineer" staggered in at seventh -- which, to my mind, is a wonderful result, given the potential for abject and permanent boredom.
What, though, might be the desired female professions that enjoy right-swipes?
At the top is physical therapist.
I hesitate to even offer a potential explanation. I feel sure that you can insert your own -- something that includes the words "fit" or "massage," I suppose.
Next comes "interior designer." Third place, however, offers a heartening result: "founder/entrepreneur."
Could it be that more and more people feel the need to be with women who might make a buck or two -- or two million?
On the female side, "PR/communications" comes in fourth. On the male side, it's nowhere to be seen. This reflects my own experience with PR/communications professionals.
Here's one final uplifting thought.
In 8th place among the most right-swiped men was "model." It came only 10th among women.
In a case of the old economy colliding with the new, Sears' CEO Thursday cited the advantages that upstarts like Uber, Tesla Motors and Amazon hold over old-line companies like his own in announcing a deeper fourth-quarter loss than a year ago.
CEO Edward Lampert invoked the newcomers' names to raise a shopping list of complaints about perceived disadvantages confronting what was once one of the nation's iconic retailers, from sales tax collection to a higher minimum wage, which he says makes it difficult to compete against successful online businesses.
Sears, which has both the Sears and Kmart chains, reported a loss of $580 million, or $5.44 per share, in the quarter ended Jan. 30, compared with a loss of $159 million, or $1.50 a share, in the year-ago quarter. The adjusted loss of $1.70 a share was better than analysts had forecast, a loss of $2.62 a share, according to S&P Global Market Intelligence. Revenue came in at $7.3 billion, down from $8.1 billion in the year-ago quarter, marginally better than expectations. Most of the revenue decline was due to same-store sales falling, though some of it was attributed to having fewer Sears and Kmart stores.
As a result, Sears shares closed 55 cents higher at $17.52 a share, up 3.2%.
But aside from the numbers, what captured attention was Lampert's lengthy lament about the state of the traditional retail industry — and Sears' place on it.
He cited Tesla as being among the newer companies that "rely heavily on continued financing." By contrast, "companies viewed through a more traditional lens, like Sears Holdings, are met with skepticism even though we have an enormous asset base and a proven history of monetizing these assets and raising additional capital to fund our obligations and transformation."
Uber, the ride-sharing service, has raised billions even as it takes losses in key markets like China, Lampert wrote. Yet companies like his own "are held to a very different standard when it comes to profitability and regulation."
Online merchants often don't have to collect sales taxes, unlike Sears. And "large companies like Sears Holdings have also been met with additional burdens like higher minimum wage costs," he said. "With stores that are marginally profitable or unprofitable, such additional cost burdens can be the straw that breaks the camel’s back, causing stores to close and eliminate jobs," he added.
Despite Lampert's outcry, analysts haven't been as sympathetic to Sears' woes. "Much of this decline is still the result of things that Sears is getting wrong," says Neil Saunders, CEO of retail research firm Conlumino. The long slide in sales and profit shows that the company hasn't come "to grips with getting the business back on track. They're almost just managing the decline the best they can."
Sears has undergone a long slide as it has shrunk its store network. While many retailers experienced a soft quarter, Sears' sales declines were worse than most and follow roughly a decade of poor performance. Five years ago, Sears' shares were trading above $60.
Sears warned earlier this month that it didn't expect to fare well in the quarter and said it would accelerate 50 planned store closures this year as well as look for other ways to cut costs. The company ended the year with 1,672 Sears and Kmart stores.
Some of Sears' problems in the critical fourth quarter — when holiday shopping hits its peak — was due to unseasonably warm weather that dampened enthusiasm for cold-weather apparel and other merchandise. Lampert also said that the heightened competition during the busy holiday season led to "higher than expected markdowns."
Sales at Sears and Kmart stores open at least a year fell 6.9% and 7.2% respectively. Still, those declines were the best sales performance of the year, the company said.
Consumer electronics sales were a sore point for both brands, impacting the sales declines by several percentage points. Apparel, grocery and home items also saw sales declines at Kmart, while Sears saw declines in apparel, footwear, home, tools and sporting goods.
Lampert reiterated that the company plans to accelerate the timeline of its transformation into a retailer better integrated with digital services and focused on a member loyalty program to drive sales. Sears plans to reduce costs by up to $650 million this year, after cutting approximately $150 million in expenses in the fourth quarter.
Sears reported it had $238 million in cash as of Jan. 30, down from $250 million the previous year. Fitch Ratings says Sears had had significant cash burn, with a liquidity position that is about $1.4 billion less than expected. Sears is among 218 companies listed by Standard & Poor's Ratings Services earlier this month as being among the "weakest links," having the lowest credit ratings with a negative outlook.
The problem with Sears' financial maneuvers is they don't do anything to lure customers, which is ultimately the issue the company faces, Saunders says.
More on Sears' part than Kmart's, product assortment between fashion and appliances is confusing for customers, Saunders says, and management's focus on improving liquidity for the business as a whole is taking focus away from vital improvements that need to be made to update stores.
Another retailer, J.C. Penney, reports Friday, again opening a door into older chains are faring in a rapidly changing economy.
Consumer electronics retailer Best Buy (BBY) jumped more than 2% in Thursday trading off news of its fourth-quarter earnings. The company also announced plans to hike its dividend 22%, while scooping up about $1 billion of its own stock over the next two years.
Earnings per share of $1.53 on the quarter ticked up 3% year over year, but sales were weighed down by a nearly $400 million decline in its international segment, which totaled $1.1 billion. Meanwhile, domestic sales fell 1.5% to $12.5 billion.
"In the fourth quarter, we delivered enterprise revenue of $13.62 billion, improved our non-GAAP operating income rate by 10 basis points to 5.9% and delivered a better-than-expected non-GAAP EPS of $1.53 versus $1.48 last year," CEO Hubert Joly said in a statement. "In our domestic business, we exceeded our bottom-line expectations due to a well-executed holiday plan, a disciplined promotional strategy, better recovery on returned and clearance product and strong expense management."
And it appears the Richfield, Minn.-based company is lately coming through on Joly's plans to scale down expenses: Shares are up 13% in February, but down 16% over the last 12 months.
Joly reiterated the company's "Renew Blue" strategy on Thursday, citing the importance to rebuilding Best Buy's image as a cutting-edge tech hub.
"Turning to fiscal 2017, we are entering the next phase of our Renew Blue strategy. Our purpose is to build a company that does a unique job of helping customers learn about and enjoy the latest technology," he said. "As we begin this phase, we will execute against the following priorities: One, build on our strong industry position and multichannel capabilities to drive the existing business; two, drive cost reduction and efficiencies; and three, advance key initiatives to drive future growth and differentiation."
Best Buy's revenue outlook also outpaced forecasts by Goldman Sachs (GS), which maintains a $33 12-month price target for Best Buy.
"The firm guided to a 2.4%-3.6% sales decline, better than our -4.0%, but below the Street's -1.1%," Goldman Sachs analysts Matthew Fassler and Katie Price said in a Thursday report.
"Downside risks relate to profit recovery in Canada and product cycle volatility," they said. "Upside risks relate to valuation, capital allocation, sales strength in TV/appliances."
China’s entrepreneurs continued to mint money in 2015, despite a stock market crash and an ongoing economic slowdown. China added 104 new US dollar billionaires last year, while the US lost two, on the back of IPOs of companies.
China, which includes Hong Kong and Macau, now has 534 billionaires versus the US’s 535, according to a study published Wednesday (Feb. 24) by Shanghai-based research institute Hurun. India is a distant third with 111 billionaires. The China figure is a 24% leap from a year ago.
Mainland China’s billionaire population surpassed the US’s for the first time in August of 2015, with 596 billionaires, an earlier Hurun report said. But that mainland figure plummeted to 470 by year end, on the back of falling stocks.
Together, China and the US account for nearly half of the billionaires on the planet. Beijing, for the first time, has taken over New York to become the world capital of billionaires with 100 live there.
“Despite its own slowdown and falling stock markets, China minted more new billionaires than any other country in the world last year, mainly on the back of new listings,” Rupert Hoogewerf, head of Hurun, said in the report. A global slowdown, the strengthening US dollar, and an oil price drop hurt the rest of the world’s billionaire production, he added.
The latest wealth calculations were made using share prices as of Jan. 15, Hoogewerf told AP, which means they took into account the 40% plummet in China’s stock market over the past half year, but not the latest drop on Feb. 25.
As turbulent as Chinese stocks have been, China has had more billionaires with companies listed on its stock exchanges than the US for four years in a row, the report said.
China’s richest man is property tycoon Wang Jianlin with $26 billion. Wang, 61, founder of Wanda, won back his top post from Alibaba’s Jack Ma and stayed there since August, when his wealth increased 52%, mainly driven by a ten-fold surge in the share price of his cinema chain after its IPO launch.
In 2015, 220 companies raised $152 billion through IPOs in China’s A-share market, up 136 % from the year before. The stock crash over the summer was may have, in fact, been sparked in part by the boom in IPO orders.
Because nearly every new listing in China is priced at a discount to its price to earnings ratio, IPOs are almost always guaranteed to attract investors and “pop” when they first list. China’s IPOs were oversubscribed by 130 times on average before regulators halted new offers in July of 2015, after the market crashed.
Investors need to put cash upfront to participate in a lottery to get IPO shares. These upfront deposits drew trillions of dollars out of the rest of the stock market, which may have contributed to its drop.
The biggest winners, though, were the founding shareholders, who are now among the ranks of China’s new billionaires.
Futures now appear to be in the 5th wave up inside a C up that started at the 1920 low on 02/25. The A wave up start at the 1886 low on 02/24 and ended the same day at the 1936 high. The quick short B wave down to 1920 had a smaller ABC pattern in it while the C up that followed has 5 waves in it, and we seem to be in the last wave and most likely ended it before the open.
The rising trendline has been climbed on the entire part of the C wave up.
This mornings high of 1968.75 hit two old rising trendlines of resistance right at the Apex (the ending of a triangle, or it's "point") where they are now double resistance.
This 60 minute chart shows the MACD walking out off a cliff into thin air as it clear wants to drop. The 2 hour chart looks pretty much the same and the 4 and 6 charts are also ready to rollover anytime today.
Considering how over the futures are now, and how they went up almost 30 points over the 1940 horizontal resistance (1950 area on the SPX) I'd have too think at this point that all the bears who were short from 1940 have been taken out now. Their stops were hit and there's not much fuel left for SkyNet to take out (should call it "Ms Pacman" as it gobbles up bears). So now we only have the cash open with the SPX to gobble up the new bears that short the open. It's now getting very overbought and I don't see much upside left before a nice move down.
With the SPX cash being the last straw to fall I get the feeling it will happen today. The risk of another 10 points up on it today (to squeeze out bears shorting the open and to close the weekly candle out strong) pales in comparison to the reward of a drop down to 1860-1880 with in then next week or two. Therefore I again think today is a day to start getting into short positions and layering them if the market goes higher after the close today.
Yesterday I was ready to inch into some shorts but I was wanting the horizontal resistance to be broken first to take out the bears' stops. I didn't think it was possible at the open because the charts were all aligned so bearish. The market did fall as I expected but it wasn't allowed to drop very far as the bulls "held the line" and force the bears to chop sideways until midday when the selling pressure dried up and the market was able to grind higher.
I told everyone in the chatroom that it was becoming less and less bearish as time went on and that the market was making a bull flag. This allowed everyone to exit shorts and go to cash (or chase the long up for you day traders) and wait for a better entry. I think we'll see that "better entry" today. Whether we rollover at the open or grind up a little higher throughout the day the risk/reward of looking for 1860-1880 in the next two weeks is really low for the bears and high for bulls looking for 2000 or more. I'll be looking again to inch into some shorts and ride out the next weeks.
Futures banging on overhead resistance from falling trendline.
Rising trendline providing early support but forms a triangle that will force a break before noon today in one direction or the other.
MACD's on this 60 minute chart are trying to turn up but the 2 hour, 4 hour and 6 hour all look ready to rollover near the open.
Just looking at the ES Futures I'd say we breakdown near the open but the SPX is lagging behind a little and might help hold the futures up early today. While I'd love to see the SPX pierce through the 1950 area horizontal resistance and make a run up for 10+ points to clear out all the bears' stops before rolling back over and dropping hard it just doesn't look likely to happen today from the looks of the charts.
I talked yesterday about a right shoulder forming and I think that's exactly what we now have today. From an Elliottwave count the move down from the high on Monday to Wednesday's low was some kind of A wave and the squeeze up yesterday into the close was a B wave. Next we should have a C wave down (starting today) that takes us into Friday with a lower low then yesterday. The most likely target is the gap window at 1890 on the ES Futures from 02/16 or gap fill at 1860 from 02/16
I'd like to present a bullish case here but I just don't see one. Unless they put out some news event to spike the market higher I can't find any reason to be long today and would only look for shorts. So if this move down does happen and we make a lower low by Friday then we'll analyze the charts again to see if we are likely to break on down further to the prior lows in the 1810 area or if it's just pullback before another move up into early March to finally breakthrough the 1950 resistance and make a run for 2000+
Needless to say, as I'm sure it's obvious, but a breakout through the falling trendline is a gift for the bears as if they can take out the 1945 prior high on Monday they should squeeze up another 10 points or so as they hit all the bears' stops. Do that and we are probably looking a move down to retest the 1810 low in the coming weeks, which should break on this third hit. So, will the futures breakdown early or will the SPX Cash give them enough early support to push on up?
New York police officers stood guard during a demonstration outside the Apple store on Fifth Avenue on Tuesday.
WASHINGTON — Apple engineers have already begun developing new security measures that would make it impossible for the government to break into a locked iPhone using methods similar to those now at the center of a court fight in California, according to people close to the company and security experts.
If Apple succeeds in upgrading its security — and experts say it almost surely will — the company would create a significant technical challenge for law enforcement agencies, even if the Obama administration wins its fight over access to data stored on an iPhone used by one of the killers in last year’s San Bernardino, Calif., rampage. The F.B.I. would then have to find another way to defeat Apple security, setting up a new cycle of court fights and, yet again, more technical fixes by Apple.
The only way out of this back-and-forth, experts say, is for Congress to get involved. Federal wiretapping laws require traditional phone carriers to make their data accessible to law enforcement agencies. But tech companies like Apple and Google are not covered, and they have strongly resisted legislation that would place similar requirements on them.
“We are in for an arms race unless and until Congress decides to clarify who has what obligations in situations like this,” said Benjamin Wittes, a senior fellow at the Brookings Institution.
Companies have always searched for software bugs and patched holes to keep their code secure from hackers. But since the revelations of government surveillance made by Edward J. Snowden, companies have been retooling their products to protect against government intrusion.
Apple built its recent operating systems to protect customer information. As its chief executive, Timothy D. Cook, wrote in a recent letter to customers, “We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.”
But there is a catch. Each iPhone has a built-in troubleshooting system that lets the company update the system software without the need for a user to enter a password. Apple designed that feature to make it easier to repair malfunctioning phones.
In the San Bernardino case, the F.B.I. wants to exploit that troubleshooting system by forcing Apple to write and install new software that strips away several security features, making it much easier for the government to hack into the phone. The phone in that case is an old model, but experts and former Apple employees say that a similar approach could also be used to alter software on newer phones. That is the vulnerability Apple is working to fix.
Apple officials alluded to this in a conference call last week when a journalist asked why the company would allow firmware — the software at the heart of the iPhone — to be modified without requiring a user password. One executive replied that it was safe to bet that security would continue to improve, and someone close to the company confirmed this week that Apple engineers had begun work on a solution even before the San Bernardino attack. A company spokeswoman declined to comment on what she called rumors and speculation.
Independent experts have offered possible solutions in both public forums and private, informal conversations with the company over the last few weeks. “There are probably 50 different ideas we have all sent to Apple,” said Jonathan Zdziarski, a security researcher.
Apple regularly publishes security updates and gives credit to researchers who hunt for bugs in the company’s software. “Usually, bug reports come in an email saying, ‘Dear Apple Security, we’ve discovered a flaw in your product,’ ” said Chris Soghoian, a technology analyst with the American Civil Liberties Union. “This bug report has come in the form of a court order.”
The court order to which Mr. Soghoian referred was issued last week by a federal judge magistrate, and tells Apple to write and install the code sought by the F.B.I. Apple has promised to challenge that order. Its lawyers have until Friday to file its opposition in court.
In many ways, Apple’s response continues a trend that has persisted in Silicon Valley since Mr. Snowden’s revelations. Yahoo, for instance, left its email service unencrypted for years. After Mr. Snowden revealed how the National Security Agency exploited the company, the company quickly announced plans to encrypt email. Google similarly moved to fix a vulnerability that the government was using to hack into company data centers.
James B. Comey Jr., director of the F.B.I., said the government is not seeking a skeleton key to iPhones.
Apple’s showdown with the Justice Department is different in one important way. Now that the government has tried to force Apple to hack its own code, security officials say, the company must view itself as the vulnerability. That means engineers will have to design a lock they absolutely cannot break.
“This is the first time that Apple has been included in their own threat model,” Mr. Zdziarski said. “I don’t think Apple ever considered becoming a compelled arm of the government.”
The F.B.I. director, James B. Comey Jr., signaled this week that he expected Apple to change its security, saying that the phone-cracking tool the government sought in the San Bernardino case was “increasingly obsolete.” He said that supported the government’s argument that it was not seeking a skeleton key to hack all iPhones.
Apple, though, says the case could set a precedent for forcing company engineers to write code to help the government break any iPhone. “The U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create,” Mr. Cook said in his letter.
The heated back-and-forth between the government and technology companies is, at least in part, a function of the Obama administration’s strategy. The White House has said it will not ask Congress to pass a law requiring tech companies to give the F.B.I. a way to access customer data. That has left the Justice Department to fight for access one phone at a time, in court cases that often go unnoticed.
While it is generally accepted that Silicon Valley’s tech giants can outgun the government in a technical fight, the companies do face one important limitation. Security features often come at the expense of making products slower or clunkier.
Apple’s brand is built around creating products that are sleek and intuitive. A security solution that defeats the F.B.I. is unworkable if it frustrates consumers. One of the impediments to encrypting all the data in Apple’s iCloud servers, for instance, has been finding a way to ensure that customers can easily access and recover photos and other information stored there.
“Telling a member of the public that they’re going to lose all the family photos they’ve ever taken because they forgot their password is a really tough sell,” Mr. Soghoian said. “A company wants to sell products to the public.”
Under pressure from shareholders including Mario Gabelli's Gamco Investors and Eric Jackson's SpringOwl Asset Management, Viacom(VIA - Get Report)(VIAB - Get Report) Exeuctive Chairman and CEO Philippe Dauman said Monday the company would consider selling minority stakes in its Paramount Pictures unit.
"We have been approached by several potential strategic investors in Paramount," Dauman said at a Jefferies conference in New York. The New York media group retained PJT Partners to weigh options for the movie studio behind The Big Short, Zoolander 2, Mission Impossible: Rogue Nation and others.
Dauman said an agreement, which could be announced around the end of the third fiscal quarter, would bring financial gain but would also include strategic benefits from new forms of digitial content distribution in global markets.
"I've gotten a glimpse of what some of that can be based on discussions that I've had and we'd like to be able to pursue some of those discussions to brig not just fin benefit but strategic benefit to help drive the growth of Paramount," Dauman said.
Investors sought this kind of strategic open-mindedness two weeks ago, when Viacom announced results for the first fiscal quarter of 2016. Gabelli and Jackson had pushed Viacom to consider steps such as selling a minority stake in Paramount to Alibaba(BABA - Get Report) or Amazon(AMZN - Get Report) .
Longtime Chairman Sumner Redstone stepped down recently, succeeded by Dauman. The markets apparently had anticipated bolder strategic from the new chairman during the Feb. 9 earnings presentation. When Viacom did not announce a review, the stock dropped nearly 18%.
Viacom class B shares spiked as high as $39.45, a gain of 7%, before closing at $37.01. The class A shares closed at $41.
"The positive reaction in share price illustrates the support we have among shareholders,"SpringOwl's Jackson, a columnist for TheStreet'sReal Money site, said in an emailed statement. "Good things happens when this team and board put the shareholders first in their thinking."
It's likely that a report issued privately last week to institutional investors from Institutional Shareholder Services factored into Viacom's decision to launch a strategic review for Paramount.
The proxy advisory firm on issued a report Friday, obtained by The Deal, that recommended shareholders to "withhold" their vote -- essentially vote against -- for six incumbent directors over "ongoing pay-for-performance concerns" in an upcoming uncontested director election scheduled for March 14.
In addition, ISS recommended voters back a recapitalization proposal up for a vote at the meeting to establish a capital structure in which voting power equates with economic interests. Currently, Sumner Redstone controls the majority of the voting power through a holding company so a dissident investor would never technically succeed at electing directors.
Should the computer code for an iPhone be considered free speech?
Apple will apparently turn to the First Amendment in its fight against a court order demanding that it write code to skirt an iPhone's security features.
On February 16, a federal judge ordered that Apple cooperate with the FBI in unlocking an iPhone 5C used by one of the terrorists in the San Bernardino shootings. The order would require Apple to build a custom version of its iOS mobile software so that investigators can access data protected by encryption. Apple has said that the breach, however well-intended, could in essence create a backdoor to countless iPhones.
The case strikes at the heart of the clash between privacy and national security. Apple and other technology companies have argued that encryption -- the scrambling of data so that it can be read only by someone with authorized access -- is necessary to protect private, personal information and communications. But law enforcement agencies say that technology hinders their ability to disrupt criminal and terrorist activity.
To force the issue of gaining access to the iPhone 5C tied to the San Bernardino massacre in December, in which 14 people died and 22 were injured, the government has called on the All Writs Act, which was first passed by Congress in 1789 and amended over the years. The Act gives the government the power to issue orders under extraordinary circumstances when no other law or statue can be applied.
Theodore Boutrous, one of the attorneys on Apple's team, told the Los Angeles Times in a story published Tuesday that one of the strategies will be to argue that using the All Writs Act violates Apple's right to free speech. That's because, the argument goes, computer code like that underlying the iOS software is protected under the First Amendment.
"The government here is trying to use this statute from 1789 in a way that it has never been used before. They are seeking a court order to compel Apple to write new software, to compel speech," Boutrous told The Times.
Boutrous said that the courts have deemed the writing of computer code a form of speech protected by the First Amendment.
In a 1999 case known as Bernstein v. US Department of Justice, a graduate student intended to publish an algorithm for an encryption equation he created. The government wanted to review Bernstein's information and force him to obtain a license to publish it. Bernstein sued the government, arguing that such a demand infringed on his First Amendment rights. The Ninth Circuit Court of Appeals found in favor of Bernstein.
However, the matter isn't so cut and dried. Other judges have found that free speech doesn't apply to computer code, according to Bloomberg. The law "is murky in this area," Michael Froomkin, a law professor at the University of Miami, told the news agency.
The American public is divided on the question of Apple's stance. The Pew Research Center said that about 51 percent of those it surveyed believe the company should comply with the court order, while 38 percent said it should not unlock the iPhone. A Reuters poll came back with a nearly opposite finding: 46 percent of respondents agreed with Apple's position and 35 percent disagreed.
Apple has until Friday to formally respond to the court order, and a hearing on the matter is set for March 22. CEO Tim Cook has said the Cupertino, California-based company is willing to take the case all the way to the US Supreme Court, if necessary.
Meanwhile, Cook wants Congress to form a commission to look into the larger clash over technology and security to "discuss the implications for law enforcement, national security, privacy and personal freedoms." A congressional committee on Wednesday will consider a proposal to create such a commission.
Apple did not immediately respond to CNET's request for comment, nor did Boutros.
McDonald's is rolling out a low-cal menu for SoCal, featuring Tex-Mex-style breakfast bowls and Chobani parfaits.
Starting this week, McDonald's (MCD) is testing two different low-carb breakfast bowls in 800 restaurants in Los Angeles and San Diego.
The egg white and turkey sausage bowl with spinach and kale has 250 calories and 27 grams of protein. The scrambled egg and chorizo bowl with a hash brown, salsa and Pico de Gallo has 460 calories and 26 grams of protein. They each cost $4.39.
McDonald's is also incorporating Chobani Greek Yogurt into its Fruit N' Yogurt Parfaits. The Chobani parfaits are 110 calories, compared to the non-Chobani parfaits, which are 150.
McDonald's is also using Chobani in its McCafe smoothies, which are flavored with mango pineapple and strawberry banana.
Related: McDonald's sued for mock mozzarella in cheese sticks
McDonald's spokeswoman Lisa McComb said the regional roll-out is customized to California tastes, where both Mexican food and kale are popular.
McDonald's also recently launched another local breakfast item in Ohio, a chicken-pancake sandwich combo called the Chicken McGriddle.
Betting on breakfast has paid off for McDonald's. The company started offering all-day breakfast last year, and CEO Steve Easterbrook said that's the main reason that same-store sales jumped 5.7% in the fourth quarter in the U.S.
The more traditional nationwide breakfast menu features the good-old fashioned Egg McMuffin (300 calories,) the Hash Brown (150 calories,) and the Big Breakfast with Hotcakes, which tips the scales at a formidable 1,050 calories.
U.S.-based Underwriters Laboratories has revealed how it tests the safety of the hoverboards. Popular self-balancing scooter maker Swagway, which had previously asked people to refrain from using its boards, has retracted and says its products meet the safety standards.
Amid concerns over the safety of hoverboards, ]independent product testing company Underwriters Laboratories (UL) has shown off how its conducts the new hoverboard safety standard.
At its Northbrook, Illinois headquarters, UL showed off the comprehensive tests the hoverboards or the self-balancing scooters are put through before being given the new UL 2272 certification.
The UL standards focus on the "safety of the electrical drive train system and battery and charger combination and does not evaluate the performance or reliability of these devices. In addition, it does not evaluate the overall safety of the self-balancing scooters."
Hoverboards have come under scrutiny as they have been catching fire suddenly. The concerns surrounding the safety of hoverboards are not only related to circuitry or battery, but also how the gadget has been assembled.
Due to escalating concerns, the Consumer Product Safety Commission (CPSC) has stepped in and issued a letter to manufacturers, importers and retailers, asking them to adhere to the voluntary standard outlined by UL.
The evaluations are done at UL's Fluid Lab, where the employees conduct a series of tests such as dropping the hoverboards from a height of 1 meter (3.28 feet), puncturing the batteries with nails, jamming the wheels of the self-balancing scooter and making the device run for 7 hours to check if it catches fire, etc.
Jamming the wheel can result in the scooter overheating as it tries to free itself during the 7-hour period. Should it fail this test, the hoverboard does not get the UL certification.
The lithium ion cell burst during the "torture tests" it was subjected to, such as the nail being pushed into the middle of the battery. The indirect heat applied near the battery remotely also led to the cell bursting into flames.
On Friday, one of the popular hoverboard brands - Swagway - declared that in a bid to comply with the CPSC's standards, the customers who had bought a self-balancing scooter should desist from "using their boards in the interim."
While this was viewed by many as a near recall, the company did a complete U-turn on Monday, saying that it never intended that the customers stop using the Swagway.
"The original Swagway from the very beginning already meets the newly required standard and we are currently evaluating if our product complies with the new voluntary standard as recommended by the CPSC. We stand by our products and are confident that Swagway still remains the safest on the market," a company representative wrote to Mashable.
While Swagway's X1 and Swagtron hoverboards meet the new UN38.3 certification, which is imperative according to the United Nations and the U.S. Department of Transportation, it is not clear if the products meet the UL 2272 voluntary certification for safety.
In this Tuesday, Feb. 16, 2016, photo, "For Sale" signs are stacked up outside a new complex of townhouses in Houston. On Tuesday, Feb. 23, 2016, the Standard & Poor's/Case-Shiller 20-city home price index is released.
U.S. home sales are climbing. Prices are rising, too. So the outlook for the housing market is golden, right?
Not entirely.
A series of reports released Tuesday pointed to potential cracks in the foundations of America's residential real estate market.
On the one hand, job growth and low mortgage rates have fueled demand and boosted sales to levels that were last glimpsed in the waning months of the housing bubble nine years ago. Those gains could spur more construction and additional spending on furniture and renovations that could help lift the economy.
Yet the number of homes for sale has fallen. With demand for homes up and supply down, prices have risen faster than incomes. Because many homes have become unaffordable for would-be buyers, further gains may be unsustainable.
"The real takeaway from the numbers is that despite demand being high, the future is looking somewhat muted for homebuyers," said Ralph McLaughlin, chief economist at the real estate firm Trulia.
This mismatch between supply and demand arrives at a delicate moment. Global pressures have roiled the stock market and hurt exports. That's meant that the economy must lean more heavily on consumers — including home buying — to extend its 6½-year-old recovery from the Great Recession.
A snapshot of the housing market points to some concerns:
— Sales of existing homes rose 0.4 percent last month to a seasonally adjusted annual rate of 5.47 million, the National Association of Realtors said Tuesday. Those gains build on a strong 2015. Sales last year reached a nine-year peak, evidence of healthy demand that has led some economists to predict that the real estate sector will keep improving.
But the report also shows a shortage of available homes. The number of home listings in January fell 2.2 percent from a year ago. The result is that those shopping for homes have fewer options and must pay elevated prices. The median home sales price was $213,800 in January, an 8.2 percent annual increase from a year ago.
— Price increases are concentrated in some of the hottest job markets, according to Standard & Poor's/Case-Shiller 20-city home price index. Home values are up 11.4 percent in Portland, 10.3 percent in San Francisco and 10.2 percent in Denver. Yet even Detroit, which has been emerging from municipal bankruptcy, notched a year-over-year gain of 7.1 percent in December.
— Strong demand showed some hints of weakening ahead of the spring sales season. The share of Americans looking to buy a home within six months reached a six-month low, according to the Conference Board's consumer confidence index. That percentage sank to 5.3 percent for February from 7.4 percent in January.
Solid demand for housing has failed to coax more homeowners to list their properties. Many are reluctant to sell. They're enjoying savings from low mortgage rates, and many lack enough equity to comfortably upgrade to another house. The consequence is that would-be buyers now face both rising prices and more competition from others looking to buy.
"So far, sales have been bulletproof to price increases, but this is unsustainable in a slowly growing economy unless inventory improves," said Nela Richardson, chief economist at the real estate brokerage Redfin.
Sales have been buttressed so far by a stable job market. Employers have added a healthy 2.67 million jobs over the past year, and the unemployment rate has fallen to a low 4.9 percent. Pay growth has been less robust, though it has accelerated somewhat, with a 2.5 percent increase from a year ago.
But it remains unclear whether the pace of job gains will endure amid signs that U.S. economic growth has dwindled. China's slowdown and troubles in such other emerging economies as Brazil and Russia have triggered a sharp decline in commodity prices such as oil. Those price drops, in turn, have driven a downturn in U.S. stock prices and a rise in the dollar's value to levels that have hurt exports.
Still, for now, the global chaos may have helped boost home sales. As many investors have shifted money into the safety of 10-year U.S. Treasury notes, the cost of borrowing has dropped for both the government and homebuyers. Mortgage rates tend to track the yields on long-term Treasurys.
Mortgage buyer Freddie Mac said the average rate on a 30-year fixed-rate mortgage remained near record lows last week — 3.65 percent, significantly less than the historic average of roughly 6 percent.
Oil prices fell further in Asia today after OPEC kingpin Saudi Arabia shut the door on an output cut to ease the global crude supply glut, touting only a freeze in production.
Oil prices fell further in Asia today after OPEC kingpin Saudi Arabia shut the door on an output cut to ease the global crude supply glut, touting only a freeze in production.
Traders were cautious ahead of the release later today of data on US commercial crude stockpiles which have been rising for weeks, indicating softer demand in the world’s top energy consumer.
US benchmark West Texas Intermediate (WTI) for delivery in April was down 56 cents, or 1.76 per cent, at USD 31.31 and Brent crude for April fell 33 cents, or 0.99 per cent, at USD 32.94 a barrel.
WTI tumbled 4.6 per cent and Brent tanked 4.1 per cent yesterday.
“We think that it’s inevitable that oil prices move back below the USD 30 market soon as supply continues to outstrip demand and inventory levels are very high,” Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd said in an e-mail to clients, according to Bloomberg.
Bernard Aw, market strategist at IG Markets in Singapore said there was a “litany of oil-negative comments”.
He added: “Saudi oil minister said the country will not reduce output, while Iran said the Saudi-Russia pact is ‘ridiculous’ amid plans to raise Iranian oil output”.
Saudi Arabia and Russia — the world’s top oil producing nations – had earlier proposed to freeze output if other producers followed suit.
But Iranian Oil Minister Bijan Zanganeh described the proposal as a “very funny joke” as production levels vary among oil producers.
“These developments reinforced my view that there is unlikely to be any concrete plans to ease the supply glut in the near term. Any solutions may be demand-led when the global economy picks up pace,” Aw told AFP.
While trimming production may be out of the picture for now, Saudi Oil Minister Ali Al-Naimi said he remained hopeful other producers would join a tentative freeze to January output levels it had agreed with Russia, Qatar and Venezuela last week.
He said freezing output was more realistic than cutting because “not many countries are going to deliver, even if they say they will cut production”.
Jack Griffin helped oversee Tribune Publishing’s spinoff from its parent company, now called Tribune Media.
After taking over as the chief executive of Tribune Publishing in 2014, Jack Griffin withstood a string of controversies and criticisms and a decline in the company’s share price to about $7 from nearly $25.
The one thing he could not survive was a new investor who initially seemed like a potential savior.When Michael Ferro, a Chicago entrepreneur and the majority owner of The Chicago Sun-Times, took a $44 million stake in Tribune Publishing in early February, many there thought the move might give Mr. Griffin more cash to pursue acquisitions and more leverage to stave off potential takeover bids. At the time, Mr. Griffin described the investment as one that would help Tribune Publishing execute its strategic plan. The company owns The Chicago Tribune, The Los Angeles Times and The Hartford Courant, among other newspapers.
Less than three weeks later, Mr. Griffin has been abruptly replaced. The news, first reported by Politico, was announced in a filing with the Securities and Exchange Commission early Tuesday. Mr. Griffin will be succeeded by Justin C. Dearborn, the former chief executive of Merge Healthcare, and a close associate of Mr. Ferro.
Current and former Tribune Publishing staff members, speaking on condition of anonymity, attributed the move to Mr. Ferro. The company declined to comment on Mr. Griffin’s departure.
In a subsequent statement, Mr. Griffin said he had laid the foundation for the future success of the company and that “the timing is right for a new leader to come on board and lead Tribune Publishing through its next phase of transformation.”
Mr. Griffin helped oversee Tribune Publishing’s spinoff from its own parent company, now called Tribune Media, after years of turmoil. But he has been criticized recently by, among others, current and former members of the staff, and by civic leaders in Los Angeles, for cost-cutting that they said endangered The Times and for the lack of a clear plan to turn around the company’s newspapers. They are struggling, as are many in the industry, as precipitous downturns in print advertising are not being made up by digital revenue.
In a memo to staff members on Tuesday, the company said that Mr. Dearborn believed “that Tribune Publishing has a significant opportunity to leverage technology to increase the value of our content and distribution channels.” Before his appointment, Mr. Dearborn accompanied Mr. Ferro to some Tribune Publishing meetings, according to a person briefed on the matter who spoke on the condition of anonymity.
Mr. Ferro, who also became board chairman upon making his investment, said in a statement, “The board thanks Jack Griffin for his significant contributions and wishes him the best of luck in his future endeavors.”
Robert Feder, who operates an independent website and has covered the news media in Chicago for decades, said it seemed clear that Mr. Ferro was “carrying out a strategy that he had planned from the beginning to take over the company.” Mr. Ferro, he said, was expected to make further executive changes, which could include “most of the people who were top executives around Griffin.” The plans, he said, could be unveiled early next month, around the time of the company’s earnings call.
Mr. Griffin’s departure represents the latest upheaval for Tribune Publishing’s newspapers. The Tribune Company, its corporate antecedent, was bought by the Chicago billionaire Sam Zell for $8.2 billion in 2008. Less than a year later, in the face of reports of erratic management, it tipped into bankruptcy, listing $7.6 billion in assets against a debt of $13 billion.
In 2014, after years of dealing with the bankruptcy and its fallout, the company spun its newspaper assets out into a separate company, Tribune Publishing, which it left with $350 million in debt. Mr. Griffin, who had consulted on the company’s spinoff, was appointed chief executive.
The Los Angeles Times, its flagship newspaper, responsible for the largest portion of the company’s revenue, has waged a continuing battle with its ownership through the years. Two former top editors — including Dean Baquet, now the executive editor of The New York Times — left after refusing to cut newsroom jobs. Despite their efforts, the newsroom, once staffed by 1,200 people, declined to about 500.
And late last year, Mr. Griffin fired Austin Beutner, the recently appointed publisher of the newspaper, who had injected a sense of optimism into the newsroom, after the two disagreed about strategy.
Many of those who protested Mr. Beutner’s firing have held out hope that the Los Angeles billionaire Eli Broad, who previously expressed an interest in leading a group to buy The Times as an act of civic benevolence, would do just that. It was not immediately clear on Tuesday what impact the change in Tribune leadership might have on the newspaper’s future.
In the Times newsroom on Tuesday the feeling was one of resignation from afar. The journalists, said one person who was there, had been through this before.
The Manhattan district attorney, Cyrus R. Vance Jr., foreground, and New York City’s police commissioner, William J. Bratton, behind him, say they have about 175 iPhones they have been unable to unlock.
WASHINGTON — The Justice Department is demanding Apple’s help in unlocking at least nine iPhones nationwide in addition to the phone used by one of the San Bernardino, Calif., attackers.
The disclosure appears to buttress the company’s concerns that the dispute could pose a threat to encryption safeguards that goes well beyond the single California case.
Apple is fighting the government’s demands in at least seven of the other nine cases, Marc J. Zwillinger, a lawyer for the company, said in a letter unsealed in federal court on Tuesday.
“Apple has not agreed to perform any services on the devices,” Mr. Zwillinger wrote. Starting in December, the letter says, Apple has in a number of cases objected to the Justice Department’s efforts to force its cooperation through a 1789 statute known as the All Writs Act, which says courts can require actions to comply with their orders.
In the San Bernardino case, prosecutors have cast their demands for Apple to help them unlock the iPhone used by Syed Rizwan Farook — one of the attackers in the December rampage, in which 14 people were killed — as a limited effort in response to an unusual situation.
Still, “no one should be surprised that we’re investigating other cases and looking for assistance in those other cases,” a law enforcement official said on Tuesday.
Since challenging a judge’s demand in the San Bernardino case, which called for Apple to create a special tool to help investigators more easily crack the phone’s passcode, the company has repeatedly asserted that such a move could not be done in isolation.
“Once created, the technique could be used over and over again, on any number of devices,” Apple’s chief executive, Timothy D. Cook, said in a letter to customers. And in a note on its website on Monday, Apple said law enforcement agencies nationwide “have hundreds of iPhones they want Apple to unlock if the F.B.I. wins this case.”
Apple has long maintained that it would hand over data to comply with a court order when it was technically able to do so. In a report covering the first six months of 2015, Apple said it had received nearly 11,000 requests from government agencies worldwide for information on roughly 60,000 devices, and it provided some data in roughly 7,100 instances.
But while the data backed up on Apple’s iCloud service is readily accessible by the company, it has made the security on the iPhone itself increasingly hard to crack.
Because a number of the newly disclosed cases remain sealed, Apple’s letter did not describe the types of crimes at issue. But they appear to involve run-of-the-mill prosecutions for offenses like drug trafficking and pornography, rather than a high-profile terrorism investigation, officials said.
The newly disclosed cases are in New York, Chicago, Los Angeles, San Francisco and Boston.
The existence of the other demands came to light in a drug-trafficking case in Federal District Court in Brooklyn, where prosecutors are seeking access to the data held in an iPhone linked to a methamphetamine distribution ring.
The owner of the phone, Jun Feng, 45, has pleaded guilty to conspiracy in the case. But prosecutors have pushed ahead anyway with their efforts to force Apple to unlock his phone, in part because they maintain that it could lead them to other drug suspects.
The two sides are awaiting a ruling from Magistrate Judge James Orenstein on whether Apple should be forced to cooperate. Before issuing a ruling, Judge Orenstein wanted Apple to detail other pending requests from prosecutors.
The Brooklyn drug-trafficking case has been dwarfed by the fight in California. But national security lawyers say the Brooklyn case remains important, because Judge Orenstein’s decision is expected to be the first to offer a broad examination of the government’s authority under the All Writs Act to force Apple to unlock passcode-protected iPhones.
The judge has indicated skepticism over the government’s demands. Initially, Apple agreed to a formal order to help the Justice Department gain access to Mr. Feng’s phone, but Judge Orenstein balked, questioning whether the All Writs Act could be used that way. He invited Apple’s lawyers to raise objections.
While his ultimate decision will not be legally binding in California, it could influence the legal arguments there. And an appeal by either side has the potential to work its way through the federal court system to become significant case law.
Law enforcement officials around the country are anxiously watching the cases in both Brooklyn and California to see how their own investigations might be affected.
At a news conference last week after the debate erupted in California, the New York City police commissioner, William J. Bratton, and the Manhattan district attorney, Cyrus R. Vance Jr., said they had collected about 175 iPhones, in investigations, that they have been unable to unlock.
Mr. Vance rejected the notion that Apple should be forced to cooperate only in certain prominent crimes.
“What we discover is that investigation into one crime often leads into criminal activity in another, sometimes much more serious than what we were originally looking at,” he said.
The new Starbucks Rewards program will count the dollars that customers spend instead of the number of transactions in giving out stars that can be collected for a free food item or drink. Low spenders are not welcoming the change, which will highly benefit customers that spend more.
Starbucks is revamping its loyalty program to make it easier for big spenders to gain rewards, as the new program will now be counting the dollars spent by customers as opposed to the number of times they have visited.
In the current My Starbucks Rewards program, customers earn stars for every transaction they make in Starbucks, regardless of the amount they spent. After accumulating 12 stars, customers are entitled to a free drink or food item of their choice.
Beginning April, Starbucks will be awarding stars to customers based on how much they spend in the store. In the renamed Starbucks Rewards program, every dollar that they spend will net the customer two stars, and a free drink or food item can be cashed in after collecting 125 stars. This would mean that, under the new program, customers will have to spend $62.50 to get their reward.
Customers who are low spenders, such as those who usually only purchase the $2 regular drip coffee, are getting the short end of the stick in the new program. They will now need to make more than 30 visits to Starbucks before they get their free drink or food item, as opposed to the current program that allows them to get their reward after only spending $24 over 12 visits.
On the other hand, customers who regularly purchase drinks and food items for their families or for team meetings, for example, will be able to accumulate enough stars for rewards faster and more often.
According to Starbucks, there are 11 million members of the company's loyalty program, with each member spending three times as much on average compared to non-members. The number of members is less than one out of every six Starbucks customers though, which is a rate that is lower compared to other companies with similar programs in other industries.
Starbucks chief strategy officer Matthew Ryan said that the change in the program is the most requested one, and is being depended upon to entice more customers to join Starbucks Rewards.
With all that said, the company is still facing some backlash on social media due to the new program. Understandably, loyal Starbucks customers that are not big spenders are unhappy about the change.
With the new Starbucks rewards system, money matters.
On Monday, Starbucks announced a new rewards program that will begin in April. The program will reward customers based on dollars spent at Starbucks locations and shift away from rewarding frequent visits. The decision was based on consumer demand, according to Starbucks, but has caused a backlash from customers on Twitter.
The new rewards system has the potential to aid big spenders to more quickly earn free rewards. But for customers getting a quick drink to go? They’ll have to spend more to qualify.
“If you always buy only one beverage or pastry when you visit Starbucks, it might mean taking a little longer to get a free reward than you do today,” it states on the Starbucks website.
The current Starbucks reward system is based on visits. Each visit results in a customer being rewarded with one star. With 30 stars customers reach Gold status, after which every 12 stars results in a free reward. At a minimum, a Gold customer could earn a free reward by spending about $24 and buying a cup of regular coffee over 12 visits. For people buying more expensive drinks, it would still take 12 visits.
Under the revamped rewards system rolling out in April, every dollar spent at Starbucks will gain a customer 2 stars, according to the website. It will take customers 300 stars to reach Gold level and 125 stars to gain a free reward. At a minimum, Gold customers would need to spend $62.50 and for customers only buying a cup of coffee, it would take more than 30 visits to reach a free reward. A Gold customer buying more expensive drinks would earn a free reward faster.
In other words: spend more money and you will earn a reward even faster under the new system.
The change in rewards system comes as many fast food establishments have been shedding programs that offer cheap food and replacing them with programs to boost the dollar per order amount. In November 2015, McDonald’s ditched its dollar menu in exchange for a McPick 2 menu, where customers can pick two items for $2. Wendy’s also ended its dollar menu and became the first burger chain to test a “4 for 4” menu nationally, which Business Insider credits with helping to achieve a 4.8 percent boost in sales in the fourth quarter.
Starbucks could be leveraging its popular reward system aiming at the same goal: upping the amount, even slightly, of how much customers spend when they order.
Last month, Starbucks reached more than 11 million customers using their loyalty program, a growth of 23 percent over the last year, according to The Associated Press. Current loyalty rewards members spend about three times more than non-members.
Starbucks has stated that the new plan will also offer new ways to earn reward stars, including Double-Star Days and other as yet undisclosed methods.
“You’ll be able to collect Stars in so many places, from Starbucks and Teavana stores to the grocery aisle, even in your inbox. Soon we’ll be launching new ways for you to earn even more Stars, both in and out of our stores,” it says on the website.
A May 4, 2011, file photo shows the entrance to the Sears Holdings Corp. in Hoffman Estates, Ill. Sears Holdings Corp. (SHLD) reports earnings on Thursday, Feb. 25, 2016. 
