Travis Kalanick Continues to Leave a Trail of Slime

It turns out that Uber had a major data breach, with frightening levels of personal data taken about their drivers, and their response was to pay off the hackers and cover the whole affair up:

Hackers stole the personal data of 57 million customers and drivers from Uber Technologies Inc., a massive breach that the company concealed for more than a year. This week, the ride-hailing firm ousted its chief security officer and one of his deputies for their roles in keeping the hack under wraps, which included a $100,000 payment to the attackers.

Compromised data from the October 2016 attack included names, email addresses and phone numbers of 50 million Uber riders around the world, the company told Bloomberg on Tuesday. The personal information of about 7 million drivers was accessed as well, including some 600,000 U.S. driver’s license numbers. No Social Security numbers, credit card information, trip location details or other data were taken, Uber said.

I'm not inclined to believe Uber's statements as to the limited scope of the breach.

At the time of the incident, Uber was negotiating with U.S. regulators investigating separate claims of privacy violations. Uber now says it had a legal obligation to report the hack to regulators and to drivers whose license numbers were taken. Instead, the company paid hackers to delete the data and keep the breach quiet. Uber said it believes the information was never used but declined to disclose the identities of the attackers.

That is so Uber.

Hackers have successfully infiltrated numerous companies in recent years. The Uber breach, while large, is dwarfed by those at Yahoo, MySpace, Target Corp., Anthem Inc. and Equifax Inc. What’s more alarming are the extreme measures Uber took to hide the attack. The breach is the latest scandal Khosrowshahi inherits from his predecessor, Travis Kalanick. 

Like the chicken said, "You knew the job was dangerous when you took it, Fred."

BTW, Kalanick knew of the hack almost as soon as it happened.

Dara Khosrowshahi may have the worst job on the face of the earth.

Being Evil………

Guess what? Google is using Android to collect your location information even when you have turned off location services:

Many people realize that smartphones track their locations. But what if you actively turn off location services, haven’t used any apps, and haven’t even inserted a carrier SIM card?

Even if you take all of those precautions, phones running Android software gather data about your location and send it back to Google when they’re connected to the internet, a Quartz investigation has revealed.

Since the beginning of 2017, Android phones have been collecting the addresses of nearby cellular towers—even when location services are disabled—and sending that data back to Google. The result is that Google, the unit of Alphabet behind Android, has access to data about individuals’ locations and their movements that go far beyond a reasonable consumer expectation of privacy.

Quartz observed the data collection occur and contacted Google, which confirmed the practice.

………

The practice is troubling for people who’d prefer they weren’t tracked, especially for those such as law-enforcement officials or victims of domestic abuse who turn off location services thinking they’re fully concealing their whereabouts. Although the data sent to Google is encrypted, it could potentially be sent to a third party if the phone had been compromised with spyware or other methods of hacking. Each phone has a unique ID number, with which the location data can be associated.

The revelation comes as Google and other internet companies are under fire from lawmakers and regulators, including for the extent to which they vacuum up data about users. Such personal data, ranging from users’ political views to their purchase histories to their locations, are foundational to the business successes of companies like Facebook and Alphabet, built on targeted advertising and personalization and together valued at over $1.2 trillion by investors.

Clearly the solution to Google cyber-stalking us is to eliminate regulatory oversight.  That way the market will solve everything.

Tweet of the Day

Life hack: I called Walgreens to check on something and got a lengthy ad for flu shots and I shouted “fuck OFF” and it took me right to the main menu

— Casey Newton (@CaseyNewton) November 18, 2017

This is brilliant.

Please note my profanity expurgation exception for Twitter.

Oh Snap

Ron Wyden is calling for ads to be blocked from all government systems, because of their role in serving up malware:

A US Senator trying to eradicate the Internet scourge known as malvertising is proposing that all federal agencies block ads delivered to worker computers unless advertisers can ensure their networks are free of content that contains malicious code.

In a letter sent today, Oregon Senator Ron Wyden asked White House Cybersecurity Coordinator Rob Joyce to begin discussions with advertising industry officials to ensure ads displayed on websites can't be used to infect US government computers. If, after 180 days, Joyce isn't "completely confident" the industry has curbed the problem, Wyden asked that Joyce direct the US Department of Homeland Security to issue a directive "requiring federal agencies to block the delivery to employees' computers of all Internet ads containing executable code."

"Malware is increasingly delivered through code embedded in seemingly innocuous advertisements online," Wyden wrote. "Individuals do not even need to click on ads to get infected: this malicious software, including ransomware, is delivered without any interaction by the user."

You have to figure that there is a LOT of people who surf the web during their lunch hour, and if ads are blocked, internet firms will take a major hit.

Read Harold Feld

He is a lawyer for the Public Knowledge, which advocates for, "Policies that serve the public interest."

He lives and breaths this stuff, and he has looked at the merger between AT&T and Time Warner, and the rumored remedies that the US Department of Justice is demanding, and concludes that the remedies demanded by the government, including requiring a divestiture of CNN, have extensive precedent and are reasonable in the context of the industry:

I want to start by applauding Randal Stephenson for coming out quickly and denying the rumors that DoJ asked them to sell CNN as the price of getting the merger done. At the same time, however, he acknowledged that negotiations were “complicated,” and that he and recently confirmed Asst A.G. for Antitrust Makan Delrahim were still “getting to know each other” and “figure out the ask on the other side of the table.” He also made it clear that, if DoJ does challenge, AT&T is prepared to go to court and are confident they will win.

AT&T is generally pretty good at persuading everyone that DoJ doesn’t really have a case against them. As folks may recall, despite the fact that the proposed AT&T/T-Mo transaction violated just about every basic tenant of existing antitrust law, AT&T managed to convince everyone for the longest time that DoJ was just playing hardball with them and didn’t really mean it because DoJ didn’t really have a case. While Stephenson refused to discuss what was negotiated, the rumors suggest it was a demand to divest either DIRECTV or the Turner Broadcasting cable channels (which include CNN, as well as TNT, HBO and a bunch of other real popular programming.) Once again, you have antitrust experts who do not have any particular experience with cable mergers shaking their heads and predicting that DoJ has no case.

In fact, demanding divestiture of either the must have content or the DIRECTV distribution platform is precisely the remedy you would expect if you believe the deal presents significant harm because of the vertical integration issues. That’s been the position of my employer, Public Knowledge, which has opposed the transaction since AT&T announced the deal. (That predates Trump’s election, for those of you wondering.) If you want a more detailed understanding of the theory of the harms, you can find it in my boss Gene Kimmelman’s testimony to Congress here. While generally true that vertical deals are hard to challenge, the cable industry has long been something of an exception, and the remedy here is similar to what the FTC imposed on the AT&T/Turner deal in 1996, where the FTC imposed stock divestitures and restructuring to eliminate the voting interest of John Malone and Liberty Media because of Malone/Liberty’s ownership TCI, which was then the largest cable operator in the United States (25% national market share). Given the massive criticism of “behavioral” remedies and a call to return to “structural” remedies from the right and the left, it’s unsurprising that DoJ would want actual divestiture rather than go the Comcast/NBCU consent decree route.

I would add that consent decrees tend to have limited effect over the long run, and that Public Knowledge has opposed this merger since before Trump's election.

While a lot of people have tried to cast opposition to the deal as political interference by Trump and his Evil Minions^™, it is clear that opposition could be easily justified.

This might be another case of a stopped clock being right twice a day, or it might be a vendetta by Donald Trump. 

Just don't jump to conclusions yet.

Read the rest.

But of Course

Remember the company Whitefish?

It had only two employees, and then it got a $300 million contract to repair Puerto Rico's electrical grid following the damage from hurricane Maria.

They had ties to the Trump campaign and Interior Secretary Zinke.

Well, one of their first jobs, a high power transmission line, just failed, cutting power coverage from 40% to 18%.

So not a surprise.

Speaking of Overrated Silicon Valley Brogrammers

On appeal, the decision of the UK Employment Tribunal to classify drivers to be employees of Uber has been upheld on appeal:

Uber suffered another setback in its biggest market outside the United States after a British employment tribunal rejected the ride-hailing company’s argument that its drivers are self-employed.

The decision on Friday, which affirmed a ruling issued last year, means that Uber will have to ensure that its drivers in Britain receive a minimum wage and paid time off. That creates problems for a common hiring model in the so-called gig economy that relies on workers who do not have formal contracts.

Companies argue that such labor practices increase flexibility on both sides of the hiring equation. But critics counter that the system is exploitative and deprives employees of important safeguards like unemployment insurance.

The ruling was the second blow to Uber’s business here in recent months. In September, London’s transport authority barred the company from operating in the British capital.

In the case before the employment tribunal, two men, James Farrar and Yaseen Aslam, had challenged Uber on behalf of a group of 19 drivers, saying that the service had denied them basic protections by classifying them as self-employed. Uber countered with an argument it has used around the world: Its drivers were independent contractors.

“You can hide behind technology, but the laws are there, and they need to be obeyed and respected,” Mr. Aslam, 36, said in an interview after the tribunal issued its decision. “The impact of this ruling could affect thousands of drivers, and not just drivers but millions of workers across the U.K.”

The core of Uber's business model is that they can make other people cover the bulk of their costs, because ………Internet.

That they are finally getting push-back on this is heartening.

About F%$#ing Time

It appears that the hagiography of brogrammers and Silicon Valley "Unicorns" has hit its expiration date:

When Danny Greg first moved to San Francisco to work at Github in 2012, he used to get high-fives in the street from strangers when he wore his company hoodie.

These days, unless he’s at an investor event, he’s cautious about wearing branded clothing that might indicate he’s a techie. He’s worried about the message it sends.

Greg is one of many people working in tech who are increasingly self-conscious about how the industry – represented by consumer-facing tech titans like Google, Facebook, Amazon, Apple, Twitter and Uber – is perceived: as underregulated, overly powerful companies filled with wealthy tech bros and “brilliant assholes” with little regard for the local communities they occupy. Silicon Valley has taken over from Wall Street as the political bogeyman of choice, turning tech workers – like it or not – into public ambassadors for the 1%.

“I would never say I worked at Facebook,” said one 30-year-old software engineer who left the company last year to pursue an alternative career. Instead, at dinner parties he would give purposefully vague responses and change the subject. “There’s this song and dance you learn to play because people are quick to judge.”

Like Wall Street before, the tech industry is a justifiable punchbag. “MBA jerks used to go and work for Wall Street, now wealthy white geeks go to Stanford and then waltz into a VC or tech firm.”

Gee, my heart bleeds for these guys.

Mark Zuckerberg Wants Me to Send Him What?!?!?!?!?

Facebook is testing a new feature in Australia.

Here is how it workssend Facebook your nude picture, and they promise to try to prevent revenge porn posts on their platform.

Seriously? Send a nude picture of myself to Mark Zuckerberg and his Evil Minions^™?

Facebook is asking users to send the company their nude photos in an effort to tackle revenge porn, in an attempt to give some control back to victims of this type of abuse.

Individuals who have shared intimate, nude or sexual images with partners and are worried that the partner (or ex-partner) might distribute them without their consent can use Messenger to send the images to be “hashed”. This means that the company converts the image into a unique digital fingerprint that can be used to identify and block any attempts to re-upload that same image.

Facebook is piloting the technology in Australia in partnership with a government agency headed up by the e-safety commissioner, Julia Inman Grant, who told ABC it would allow victims of “image-based abuse” to take action before pictures were posted to Facebook, Instagram or Messenger.

“We see many scenarios where maybe photos or videos were taken consensually at one point, but there was not any sort of consent to send the images or videos more broadly,” she told the Australian broadcaster.

It makes me want to go all. "Jules in Pulp Fiction."

I gotta figure that if you send Facebook your nude pix, you will shortly be seeing a lot of ads for penis enlargement, boob jobs, body hair removal, or anal bleaching.

F%$# the Mouse

The LA Times published an article describing how much corporate welfare Disney Land is extracting from the city of Anaheim.

The mouse didn't like this, so they banned LA Times movie reviewers from advance showings of their movies, including things like Marvel and Star Wars movies.

In response many critics from other papers have announced that they will not be participating in advance showings, and a number of critics groups have barred all Disney movies from consideration at their year end awards.

If this were about an Times critic violating an embargo date, I could see some justification, but this is just thuggery.

BTW, Disney just caved.

Good, but someone at the movie studio needs to be fired.

Why Not to Trust the Cloud, Again

Google docs is amazing, except when it refuses to all you your own data:

A number of Google Docs users have reported being locked out of their documents today for, according to the message that pops up when they try to access the affected document, violating Google's terms of service. Users that have tweeted about the issue have said their locked-out pieces were about a range of topics including wildfire crimes, post-socialist eastern Europe and a response to reviewers of an academic journal submission.

………

A Google spokesperson told us, "We're investigating reports of an issue with Google Docs. We will provide more information when appropriate." The range of subject matters and number of reports suggest it's probably just a glitch, but the problem is a reminder of what we give up for the convenience and ease offered by cloud-based programs like Docs. Google Docs and others like it allow users to store their work offline, making it easily accessible wherever they happen to be. They also make it easy to share documents between a number of different people. But giving up control over your work comes with risks, as today's issues make clear. And though they're fairly rare, they can cause huge problems.

For example, Twitter user @widdowquinn said that while they had been encouraging others to use Google Docs for collaborative work on grants and academic papers, today's glitch is a deal breaker.

"A dealbreaker?"

Gee, you think?  Google can shut you out from your own documents, because it violates their, "Terms of service," and because it's Google, which means that you will never, ever get even remotely close to a human being.

Seriously.

What Could Possibly Go Wrong?

It appears that tech companies are looking to running portions of towns.

Why do I NOT find this reassuring?

It sounds almost dystopian: One of North America's largest cities handing over a key neighborhood to a tech giant so it can be rebuilt from scratch. That, however, may be exactly what is about to happen. Recently, it was announced that Sidewalk Labs, a division of Google-parent Alphabet, will (pending approval) lead the creation of about a 12-acre district called Quayside in a prime area of Toronto's newly revitalized waterfront area.

But if the plan immediately sounds like the beginning of a sci-fi movie in which things are about to go very wrong, Sidewalk Labs' vision at least is distinctly utopian. Simply put, Google's urban spinoff wants to build a laboratory for how a city should be run, a smart city predicated on tech, data, and everything from self-driving shuttles to garbage sorted by robots — all while shifting its Canadian headquarters to the new district.

This has fail written all over it.

After all, these are the folks who can't write a calculator app that adds 1+2+3.

Of Course, It's P G & F%$#ing E

Well, authorities are now looking at the potential cause of the devastating fires in northern California.

At the top of the list is tree branches hitting power-lines.

The power-lines in the area are operated by Pacific Gas and Electric, and PG&E has a very long history of short changing basic maintenance to improve the bottom line for shareholders.

This resulted in it being hit with significant fines for (quick Google) the Butte Fire (2015), the Rough and Ready fire (1994), the San Bruno gas explosion (2010), and (of course) poisoning people in Hinkley with toxic waste. (the movie Erin Brokovich was based on this)

The fires started almost simultaneously with reports of power outages around the origin points.

As the first reports came in Sunday night of numerous fires that would grow into one of the most destructive wildfire disasters in California history, emergency dispatchers in Sonoma County received multiple calls of power lines falling down and electrical transformers exploding.

In all, according to a review of emergency radio traffic by the Bay Area News Group, Sonoma County dispatchers sent out fire crews to at least 10 different locations across the county over a 90-minute period starting at 9:22 pm to respond to 911 calls and other reports of sparking wires and problems with the county’s electrical system amid high winds.

State fire officials said Tuesday that they are still investigating the cause of the blazes, which as of late Tuesday had killed 17 people and destroyed more than 2,000 homes in Sonoma, Napa and other Northern California counties.

But the reports of the power equipment failures began to turn the spotlight on PG&E, the giant San Francisco-based utility, raising questions about how well it maintained its equipment in the area and whether it adequately cut back trees from power lines to reduce fire risk — as required by state law.

………

PG&E and other large utilities in California have a long history of being found responsible for major wildfires because of inadequate maintenance of their power lines.

In April, the state Public Utilities Commission fined PG&E $8.3 million for failing to maintain a power line that sparked the Butte Fire in Amador County in September 2015. That fire burned for 22 days, killing two people, destroying 549 homes and charring 70,868 acres.

CalFire announced last year that it will seek to force PG&E to pay $90 million in firefighting costs. More than 1,000 lawsuits and claims are still pending against the utility.

“It was more than just a lack of maintenance. It was a complete disregard for their requirements of vegetation management in rural areas,” said Burlingame attorney Frank Pitre, who sued on behalf of the victims.

PG&E claims that these winds were "hurricane force", which is a lie.

Winds were in the 45 mph range (sustained) with gusts (3-5 seconds) to 75 mph, which are not at all unusual for California.

If they hadn't been bingeing on their own seed corn to overpay senior management, PG&E would have had no problems, and the current disaster would not have happened.

These sorts of disasters will get worse with the impact of anthropogenic climate change.

California privately owned utilities in general, and PGE in particular, have a long record of  neglecting maintenance, and PUC has an equally long history of being in bed with these companies.

Now might be a good time to look at making municipally owned utilities easier via the initiative petition process.

It gives cheaper rates and better run utilities.

Strike while the iron, and the forest, and a few thousand homes, are hot.

Tory Program to Destroy NHS Continues

The Conservative Party in Britain has been privatizing the National Health Service (NHS) one bit at at time, and now we are seeing the consequencesn.

Specifically, Virgin Care, a private management company running the NHS is Bath, instructed its staff to cover up health and safety at the institution:

Virgin Care asked staff in the Bath area not to report their safety concerns to the health watchdog.

Registered managers in health and social care have a legal obligation to report issues to the Care Quality Commission if they feel their service is unsafe.

But Virgin Care asked its managers in Bath and North East Somerset to “hold off” from contacting the CQC as they struggled with IT issues affecting community health and social care services.

Patients had appointments cancelled, letters and reports were not sent out, and nurses had problems updating patient records during Virgin Care’s first three months in charge of community care in B&NES.

......

Virgin Care said it had "shared comprehensive details with the CQC and they have not raised any concerns".

The private company said it had IT issues under control in its first report to the council in July.

But two weeks earlier, a senior manager had emailed service managers asking them to help “manage the situation” by not reporting their concerns to the CQC.

For the Tories, this is not a bug, it is a feature.

Their goal is slowly make the NHS worse and worse until it loses its overwhelming public support, and can then be terminated.

It's Naomi Klein's Shock Doctrine writ slow, and Britain's conservatives have created a constituency for this policy by allowing the malefactors of great wealth, including Richard Branson (Virgin Care), to profit from this.

Well, They Would Say That, Wouldn't They*

It appears that Oracle Corporation has gone to war against the "evils" of open source software.

Seeing as how it cost them money, and open source software had to be used fix disastrous issues with some of their recent projects, (**cough** failed healthecare exchanges **cough**) it should surprise no one that they have chosen to go full jihad against this:

Even though Oracle is based in the heart of Silicon Valley (I can see its offices from my own office window as I type this), the company has become sort of anti-Silicon Valley. It tends to represent the opposite of nearly everything that is accepted wisdom around here. And its latest crusade is against open source technology being used by the federal government -- and against the government hiring people out of Silicon Valley to help create more modern systems. Instead, Oracle would apparently prefer the government just give it lots of money.

First, some background: over the past few years, one of the most positive things involving the federal government and technology has been the success of two similar (but also very different) organizations in the US government: US Digital Service (USDS) and 18F. If you're completely unfamiliar with them there are plenty of articles describing both projects, but this one is a good overview. But the really short version is that both projects were an attempt to convince internet savvy engineers to help out in the federal government, and to bring a better understanding of modern technology into government. And it's been a huge success in a variety of ways -- such as creating federal government websites that are modern, secure and actually work. And even though both programs are associated with President Obama, the Trump administration has been adamant that it supports both organizations as well, and they're important to continuing to modernize the federal government. The offices are not politicized, and they have been some of the best proof we've got that government done right involves smart, dedicated technologists.

………

A little more background: if it weren't for Oracle's failures, there might not even be a USDS. USDS really grew out of the emergency hiring of some top notch internet engineers in response to the Healthcare.gov rollout debacle. And if you don't recall, a big part of that debacle was blamed on Oracle's technology. So, perhaps it's not surprising that Oracle might hold a bit of a grudge against USDS. Similarly, while Oracle likes to claim that it's supportive of open source technologies, most recognize that open source has been eating Oracle's lunch for a while now. 



Even with all that background, the sheer contempt found in Oracle's submission on IT modernization is pretty stunning. The letter complains about three "false narratives" that "have taken the [US government] off track":

False Narrative: Government should attempt to emulate the fast-paced innovation of Silicon Valley. Silicon Valley is comprised of IT vendors most of which fail. The USG is not a technology vendor nor is it a start-up. Under no circumstance should the USG attempt to become a technology vendor. The USG can never develop, support or secure products economically or at scale. Government developed products are not subject to the extensive testing in the commercial market. Instead, the Government should attempt to emulate the best-practices of large private-sector Fortune 50 customers, which have competed, evaluated, procured and secured commercial technology successfully.

There's even more nuttiness in the filing, but you can go through it yourself and count how frequently you gasp at just how wrong it is. This is an old, legacy company trying to cling desperately to old, obsolete, legacy ways. Oracle's entire business was originally created to serve the US government as a customer, and it clearly doesn't want to give that up. But, once again, things like this just make it clear why the top engineers coming out of school today don't have much interest in going to work for a company with views like Oracle's. 

As Upton Sinclair was wont to say, "It is difficult to get a man to understand something, when his salary depends on his not understanding it."

^*It's a Mandy Rice-Davies/Profumo Affair reference.  Learn your modern British sex scandal history.

Yeah, This is Senior Investors Plotting an Exit Strategy

Uber's Board of Directors just made major changes in their structure to lock out Kalanick and to go IPO as quickly as possible:

Uber’s board of directors voted on Tuesday for governance changes that will reshape the balance of power at the ride-hailing service, paving the way for a stock sale to the Japanese conglomerate SoftBank and for the company to go public by 2019.

The 11-member board met for less than four hours to approve some of the terms from a proposal put forward last week by Dara Khosrowshahi, Uber’s new chief executive, and Goldman Sachs, the investment bank that is an investor in the privately held company.

As a result, the clout of certain Uber shareholders — including, most significantly, its former chief executive, Travis Kalanick, who is a board member — will be reduced, according to people briefed on the deliberations, who asked to remain anonymous because the conversations were confidential. Other proposed measures, including one that would have posed hurdles to Mr. Kalanick’s returning as chief executive, were dropped before the meeting.

Still, the board approved enough changes for Uber to move forward on an investment from SoftBank. SoftBank has held discussions to buy a significant chunk of Uber’s stock, but the deal was contingent on changing the company’s governance structure so that some of its early investors would have an incentive to sell. In addition, directors approved a resolution for Uber to go public by 2019, the people briefed on the meeting said, setting up what could be one of the largest technology stock offerings in years.

These are a group of people looking to find some rubes so that they can cash out.

You have been warned.

Lord of the Flies, Uber Edition

It appears that Travis Kalanick has gotten to the breaking sh%$ of grief, specifically, he just appointed two board members without consulting with the board of Uber's new President:

The phone calls began late Friday among Uber’s new chief executive, Dara Khosrowshahi, and the ride-hailing company’s executives, as well as board members and a raft of lawyers. They were facing an emergency.

The problem was that Travis Kalanick, Uber’s former chief executive and a board member, had appointed two new directors — Ursula Burns, the former chief executive of Xerox, and John Thain, the former chief of Merrill Lynch — to the privately held company without informing them. The moves, which pushed the nine-member board to 11 people, gave Mr. Kalanick new potential allies on major decisions at Uber.

Mr. Kalanick’s actions were “disappointing,” Mr. Khosrowshahi wrote on Friday in a letter to employees that was obtained by The New York Times. “Anyone would tell you that this is highly unusual.”

The trigger for Mr. Kalanick’s move — one made possible by a board vote last year giving him control of three seats — was a proposal that Mr. Khosrowshahi and the investment bank Goldman Sachs, an Uber shareholder, brought to the board on Thursday. The proposal, which is set to be discussed by directors on Tuesday, includes measures that would shift the power on Uber’s board by reducing Mr. Kalanick’s voting clout, expanding Mr. Khosrowshahi’s powers and imposing a 2019 deadline on the company to go public, according to three people with knowledge of the proposal who asked to remain anonymous because they were not authorized to speak publicly. Parts of the proposal were also read to The Times.

Let me translate this into English, the investors realize that Kalanick has become toxic, and as a result is facing increased regulatory and media scrutiny.

In particular, people are beginning to notice that, "Uber has no conceivable path to profitability," because once they rise prices to reach profitability, entrants re-enter the market, and suddenly they are not particularly special and unicornish any more.

The big investors want to go public before it is too late, and that means rearranging deck chairs on the Titanic and then getting into a lifeboat before the rush starts.

Toys R Us Implosion Driven by Private Equity

That noted communist rag the Financial Times has observed that the Toys R Us bankruptcy was driven by private equity looting:

Who brought down Toys R Us? The 69-year-old toy behemoth listed a host of reasons for its slide into bankruptcy in a Chapter 11 regulatory filing, including “expensive debt service”, “unrelenting competition from ecommerce and big box retailers” and a news report that turned its consideration of bankruptcy protection into a self-fulfilling prophecy.

But the blame is perhaps to be placed most squarely on its private equity ownership. Toys R Us has spent more than $250m a year servicing $5bn in long term debt, which was “not a sustainable situation,” one investor said, as the company faced increasingly crushing competition from Amazon and Walmart.

After years of rearranging its debt burden, like other big leveraged buyouts of the pre-financial crisis era, it is presenting a restructuring under bankruptcy protection as a bid for freedom. Toys R Us says it now has a chance to bring its “vision to fruition”, announcing plans to invest in marketing and technology and even promising to raise store employees’ wages.

………

By 2005, as competitors ate into its profitability, Toys R Us hired Credit Suisse and found a buyer: a consortium of private equity firms KKR and Bain Capital, which had experience in retail, and Vornado, the real estate investment firm. The three firms put in $1.4bn in cash, split equally, and borrowed over $5bn to finance the transaction.

………

The three buyers who leveraged it are now expected to have their equity stakes wiped out in the restructuring. KKR and Vornado have written off their investment over time, while Bain has been carrying it near zero.
The Barbie brand owes a debt of gratitude to Toys R Us, which heavily promoted it in its stores, such as this New York outlet in 2007 © Getty

However, the losses to the firms and their investors are mitigated by the fact the buyout firms have paid themselves over $200m in expenses, advisory and management fees, according to SEC filings over 12 years of ownership

The losses accrue to the investors in their funds, the money for expenses and fees, that goes to the firm, and their bonuses.

There is nothing that cannot be ruined through an application of American financial professionals.

H/t naked capitalism

About F%##ing Time

After a continuing problems with driver vetting, incident reporting, and its treatment of its employees, Uber has been stripped of its operating permit by the Transport for London.

Specifically, they have been ruled that Uber is not a, "Fit and proper," private car operator:

Uber has been stripped of its London licence in a surprise move that dealt a serious blow to one of Silicon Valley’s fastest rising companies and sparked an outcry from a coalition of customers, government ministers and drivers at the ride-hailing company.

The firm’s application for a new licence in London was rejected on the basis that the company is not a “fit and proper” private car hire operator.

Uber’s cars will not disappear immediately as its current licence expires on 30 September and it plans to challenge the ruling by London’s transport authority in the courts immediately. The hailing app can continue to operate in the capital – where it has 3.5 million users – until the firm has exhausted the appeals process. Uber has 21 days to launch an appeal but can continue to operate until the process expires – which could take months.

Uber chief executive Dara Khosrowshahi wrote to staff on Friday confirming that the company would appeal the ruling. He said he disagreed with the decision but it was based on past behaviour.

“The truth is that there is a high cost to a bad reputation,” he wrote. “It really matters what people think of us, especially in a global business like ours.

………

TfL said it had rejected the company’s application to renew its licence because “Uber’s approach and conduct demonstrate a lack of corporate responsibility” in relation to reporting serious criminal offences, obtaining medical certificates and driver background checks.

The licensing body also said it was concerned by Uber’s use of Greyball, software that can be used to block regulatory bodies from gaining full access to its app and undertaking regulatory or law enforcement duties.

What Khosrowshahi is basically saying is that Travis Kalanick is simply too toxic to run Uber.

As Hannah Jane Parkinson has noted, "You name it, and if it’s sh%$#y behaviour, Uber has probably done it." (%$# mine)

Uber's primary innovation has always been a willingness to behave with complete disregard for the law and for ethics.

It's nice to see that bubble popped.

Same as it Ever Was ……… Same as it Ever Was ……… Same as it Ever Was ……… Same as it Ever Was ……… Same as it Ever Was ………

When Boeing rolled out is 777, it decided that the best way to maximize profits was to recruit potential competitors to be risk sharing partners to minimize its upfront costs.

The net result was significant delays and a loss of technical know-how, and now, both Boeing and Airbus are looking to bring these capabilities, because it turns out that they outsourced their profits as well:

The world’s largest plane makers are testing a seemingly simple formula to smooth production, cut costs and fatten profits: Make more of the parts that go into their jets themselves.

In the wake of United Technologies Corp.’s proposed $23 billion deal to buy Rockwell Collins Inc., that push is taking on more urgency. The deal is the latest in a round of consolidation among the world’s biggest suppliers of aviation parts—something Boeing Co. and European rival Airbus SE have eyed warily.

Earlier this week, Boeing said it might cancel some of its parts contracts if the deal undermines competition further in the aerospace supply chain. Airbus had previously expressed its skepticism over it.

Worried about getting squeezed by the consolidation, Boeing and Airbus have moved to protect themselves by building more of their parts in-house. This month, Boeing will start construction of a new production facility in Sheffield, England, that will make some of its own actuation equipment—motors that help move a wing’s flaps. Airbus, meanwhile, is planning to build some of its own nacelles, the metal casings that house a plane’s engines. United Technologies is one of the world’s largest nacelle suppliers.

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Boeing decided two years ago to make some of its own nacelles after years of buying them. In July, the company also said it is planning to develop and build some aircraft electronics, a market dominated by companies such as Rockwell Collins and Honeywell International Inc.

The wings for a revamped version of Boeing’s new 777 jetliner also will be built at a new plant near Seattle rather bought from a supplier. Boeing bought the wings from a supplier for its last big project, the 787 Dreamliner.


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Bringing production in-house helps level the playing field.

Those parts makers have also traditionally been able to suck out more profit for their components than plane makers like Boeing and Airbus can extract for selling whole aircraft. Profit margins for plane and engine makers have averaged 9% over the past two years, compared with 14% for so-called “tier one” suppliers such as United Technologies and Rockwell Collins, which make finished parts directly for plane makers. Margins come in at 17% for tier 2 suppliers, which provide smaller components for those parts, according to Boston Consulting Group.

This is not a surprise.

The idea that drove the outsourcing of critical technologies for the 787 was that Boeing could be more profitable and efficient by doing and knowing as little as is possible about the underlying business.

This is classic MBA/High Finance type thinking, and MBA/High Finance type thinking unmoored from the underlying business has ALWAYS been a recipe for dismal failure.