Wednesday, 24 September 2014

Here's what Coke and Pepsi didn't tell you when they announced their plan to cut calories

For the most part our best interests are at least loosely aligned with the corporate powers that be and marketing just fades into the background noise. For example, Apple does a great job packaging its iPhones but the truth is it’s just a cool device. If you have the means, your life is probably a tiny bit more enjoyable if you have a kick-ass smartphone.
The fact that the media slavishly picks up on the story of the people camping out to buy their iPhones helps build the frenzy, and Apple certainly encourages such coverage, but the demand is organic. There’s no need to work on convincing people Apple makes a good phone. They just do. End of conversation.
Would that our world was made up entirely of iPhones. It’s not. For the most part what we see, read, eat and drink is a bunch of garbage we lap up out of habit, as much as anything else. At some point there comes a time where science catches up to habit and we realize just how horrible a beloved product really is for us.
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An early Marlboro Man ad
An early Marlboro Man ad
The moment of grim reality happened in tobacco in 1952 when Reader’s Digest of all magazines published a piece called “Cancer by the Carton." From then on the tobacco industry banded together to make some of the most magnificent ads ever seen. The Marlboro Man was little more than a sunset-hued reminder that real men didn’t get told what they could and couldn’t inhale. Joe Camel, Virginia Slims hosting a tennis tournament. It was all genius. Doomed, of course. Cigarette consumption on a per capita basis peaked in 1963. History’s greatest works of art are borne of romantic futility and, dammit, the tobacco industry may have done a lot of horrible things but we should at least acknowledge the way the industry advanced the art of marketing in the wake of the Cancer by the Carton scandal.
Soda takes control
Yesterday the soda industry faced up to the daunting trends facing its business in a way that had their deceased cigarette marketing predecessors wheezing with delight. Speaking from the Clinton Global Initiative representatives from Pepsi (PEP), Coca-Cola (KO) and Dr. Pepper (DPS) pledged to reduce the number of calories consumed in the form of sugary sodas by 20% in the next 11 years.
“We’ll use the most critical levers we have at our disposal, and the focus really will be on transforming the beverage landscape in the U.S. over the next 10 years,” said Susan Neely, chief executive of the American Beverage Association, the industry trade group.
Ms. Neely called the commitment a “stretch goal” and said it had been hotly debated in executive suites at the three companies. Neely says the industry will push low and no calorie drinks by levering its promotional muscle and tie ins with literally every place that sells soda on earth.
Ladies and gentlemen we are in the presence of genius. Susan Neely of the American Beverage Association, we’ve never met but allow me to commend you on your spectacular, breathtaking cynicism and pro-activity. This transcends anything we’ve seen from the tobacco industry. The soda industry selling a 20% reduction in caloric intake over the next 11 years is right up there with “You can’t fire me, I quit” in the annals of professional spin and crisis framing.
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Here’s what Ms. Neely and the rest of the industry aren’t telling you: the market for sugary drinks is fading despite the industry spending more than a billion a year pushing the stuff. Per capita soda consumption in the U.S. peaked in 1998 and was at the lowest levels since 1986 last year. Calories from soda contracted 23% from 2000 to 2013. At the time the industry considered this drop off something of a crisis.
Beyond just changing marketing strategies Coke went on a buying binge, snapping up Vitamin Water for $4.2 billion in 2007 and paying more than $2 billion for a partial stake in Monster energy drinks earlier this year.
As good fortune would have it, Vitamin Water along with Gatorade, Coke Zero and whatever low-calorie fizzy product the companies can possibly conceive of will fit quite nicely in the empty cooler space created by the soda industry’s selfless reduction goals.

Apple Pulls New IOS Amid Dropped Calls. Advice on Twitter: DO NOT UPDATE

Apple Inc. (AAPL) pulled an update for the iPhone operating system after the new software caused some people to lose cellular service.
After rolling out the latest version of its iOS 8 mobile software earlier today, the Cupertino, California-based company withdrew the update when scores of customers experienced dropped cellular service so they couldn’t make calls. The fingerprint reading Touch ID feature also wasn’t working after the update, according to some customers.
“No service on my iPhone after iOS 8.0.1,” said one Twitter user. “DO NOT UPDATE,” said another.
Apple said in a statement that it had received reports of the issues with the update, which is called iOS 8.0.1. Customers can still use iOS 8, which was released last week.
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“We are actively investigating these reports and will provide information as quickly as we can,”Trudy Muller, a spokeswoman for Apple, said in the statement. “In the meantime, we have pulled back the iOS 8.0.1 update.”
The pullback adds to the snafus Apple has experienced with the iOS 8 mobile software since it was released last week. Popular applications made by Facebook Inc. (FB), Dropbox Inc. and others have been crashing more frequently. According to data from Crittercism Inc., an analytics firm, iOS 8 causes apps to crash about 3.3 percent of the time, or 67 percent more than last year’s version. Customers also have complained about having to delete photos, videos and apps to make room for the new software.
Photographer: Tomohiro Ohsumi/Bloomberg
Apple Inc.'s iPhone 6 is displayed at the company's Omotesando store in Tokyo.

Going Wrong

Apple shares fell less than 1 percent to $101.75 at the close inNew York. The stock is up 27 percent this year.
Apple released the iOS 8 update today to fix software bugs and add the health and fitness-monitoring application HealthKit, a program that had been cut from last week’s initial release because the company discovered flaws. After the new version went out today, many customers immediately lost cellular service.
“That’s the danger with all these updates: if you get it wrong, it goes wrong big, bad and fast,” said Frank Gillett, an analyst with Forrester Research. “There’s a fundamental question of how it got out in the first place.”
The iOS software is the system that powers the iPhone, iPad and iPod Touch. According to Apple, 46 percent of devices connecting to the company’s App Store are running iOS 8.

Marred Rollout

For Apple Chief Executive Officer Tim Cook, the software problems tarnish what has been a record-breaking release for the latest iPhones. The company sold more than 10 million handsets of the new iPhone 6 and 6 Plus in their first weekend on sale starting Sept. 19, with the devices becoming available in more than the original list of 10 countries beginning on Sept. 26.
Apple has also dealt with problems with previous software releases, most famously when the mapping software it debuted in 2012 gave people wrong directions and showed mislabeled landmarks. Cook later apologized for the program.
“Apple’s not the first to have this kind of problem, but when a gadget is in your pocket, it’s a completely different reaction,” said Forrester’s Gillett.
To contact the reporter on this story: Adam Satariano in San Francisco atasatariano1@bloomberg.net
To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Jillian Ward

Friday, 19 September 2014

SAP buys expenses software maker Concur for $7.3 billion

(Reuters) - Germany's SAP (SAPG.DE) has agreed to buy U.S. expenses software maker Concur (CNQR.O) for $7.3 billion in cash, strengthening its position in cloud computing but sending its shares down almost 3 percent on concern over the price.
SAP has been slow to embrace cloud computing, which allows businesses to cut costs by ditching bulky servers for network-based systems, but the Concur deal announced late on Thursday accelerates its growth in the cloud while protecting its position in travel and expenses management.
The German business software company said it would offer $129 per share for Concur, a 20 percent premium over the Sept. 17 closing price and just short of the $130.36 record high Concur shares set in January after a two-year upward run.
That is equal to the 20 percent premium SAP paid for its 2012 acquisition of cloud procurement software maker Ariba, and comparable with the 18 and 19 percent arch-rival Oracle ORCL.O paid for Taleo in 2012 and RightNow in 2011.
"It seems expensive. But we believe that Concur is the leader in its market and the potential synergies will be a valuable addition," Bernstein analysts wrote in a note.
Societe Generale analysts wrote: "The shares are likely to react negatively today given the high price paid and Oracle's lackluster results last night."
Oracle reported profit that fell below Wall Street estimates, hurt by weak hardware sales. It also said that Larry Ellison, its co-founder and leader for 37 years, is to step down as CEO.
SAP, which competes in cloud computing with global rivals including Oracle, IBM (IBM.N) and Salesforce (CRM.N), will finance the Concur acquisition through a credit facility agreement of up to 7 billion euros ($9 billion).
The company had seen the cloud phenomenon as threatening its core business model, but it began a series of acquisitions with the $3.4 billion purchase of SuccessFactors in 2011 after Oracle embarked on its own belated cloud-buying spree.
'SOMETHING BIG'
With the acquisition of Concur, SAP will increase its cloud users to 50 million from 38 million.
"We have something big here, guys," SAP Chief Executive Bill McDermott told analysts and reporters on a conference call.
Concur has 23,000 clients, including companies, governments and universities with a total of more than 25 million users of its travel and expense-management software.
About a third of Concur users run SAP software and the German company expects to add Concur customers.
Based on 57 million outstanding shares, the offer for Concur is valued at $7.3 billion. Including debt, the offer represents an enterprise value of about $8.3 billion, SAP said.
Global business spending on cloud services is expected to jump 20 percent this year to $174 billion, research firm IHS estimates, rising to more than $235 billion by 2017.
Bernstein analysts said they believe that SAP is driving to own the procurement process, in which customers pay based on the volumes of goods and services they buy, rather than by the number of users, which requires extra sales efforts.
As well as Ariba, SAP also owns Fieldglass, which allows companies to manage their temporary staff and independent contractors and services.
"The advantage of the procurement usage-based models is that the more clients procure via Ariba and Fieldgass, the more revenue is generated," the analysts wrote.
Concur's software increasingly links suppliers and travel-management companies, and is integrated with hotel chains including Intercontinental Hotels (IHG.L) and Starwood (HOT.N).
SALES BOOST
SAP expects to gain between 3 billion euros and 3.5 billion euros in sales from cloud computing by 2017, out of a total of at least 22 billion, but CEO McDermott said that SAP would raise the outlook after completion of the Concur acquisition.
SAP shares were down 2.4 percent at 58.45 euros by 0459 ET, the biggest decliners in a 0.6 percent weaker European technology index, amid a wider market buoyed by relief that Scotland voted to stay in the United Kingdom .FTEU3.
Shares in Concur, which reported a 28.6 percent rise in revenue to $178.37 million in the quarter to June 30, have fallen more than 17 percent since early this year. The drop has been partly down to a general retreat by investors from high-momentum stocks but also because of declining margins, Jeffries’ analysts wrote in late April.
Concur trades at 44 times expected earnings before interest, tax, depreciation and amortization (EBITDA), according to Starmine data, against a ratio of 30 for Salesforce.com (CRM.N).
The Concur board of directors has unanimously approved the transaction, which is expected to close before the end of the first quarter of next year, subject to shareholder and regulatory approvals.
SAP was advised by Deutsche Bank. Concur was advised by boutique bank Qatalyst.
(1 US dollar = 0.7768 euro)

(Additional reporting by Eric Auchard and Georgina Prodhan; Editing by David Gregorio,Cynthia Osterman and David Goodman)