ApprovedBusinessBusiness and finance

Qualcomm is again under attack for living large off its patent portfolio

“SHOULD five per cent appear too small, be thankful I don’t take it all.” The Beatles wrote “Taxman” in 1966 to protest at Harold Wilson’s exorbitant “supertax” rates. Critics of Qualcomm, the world’s biggest chip-design firm, would say the lyric is a clue to the company’s business practices. Its methods have attracted a barrage of legal complaints. The latest came on January 25th, when Apple, a smartphone maker, sued it in China for abusing its clout in mobile processors and demanded 1bn yuan ($145m) in damages. Just days earlier Apple had filed a similar lawsuit in California asking for $1bn.

America’s Federal Trade Commission (FTC) issued a separate complaint against the firm this month. In late December, the equivalent body in South Korea fined it a whopping $853m, which hurt its quarterly results, announced this week. These cases follow two similar ones in 2015: Chinese regulators imposed an even higher fine, of $975m; and the European Commission found Qualcomm guilty of having sold chips below cost to hurt rivals.

Qualcomm is no household name, but most people with mobile phones use its technology….Continue reading

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Political dating sites are hot

Looking for a bit of Trumpy pumpy

AFTER Donald Trump was elected president, Maple Match, an online dating app which connects Canadians and Americans, was inundated with people signing up. The app promised to make it easy for Americans to find a Canadian partner to save them from the “unfathomable horror” of a Trump presidency. Joe Goldman, the app’s Texas-based founder, says it has taken on the perceived ethos of Canada: welcoming, open and tolerant. “We’re building bridges when people are talking about building walls and our users like that.”

TrumpSingles.com is forging connections, too. Its founder, David Goss, wants to make it easier for Trump supporters to find each other. The site’s earliest users were in Los Angeles, New York and Philadelphia, which are Democratic strongholds. Now its users are in every state. They are also signing up from abroad, including in Britain and in Russia. Mr Goss and his team personally approve each of the site’s 26,000 users to weed out trolls. The site was able to increase its monthly fee from $4.95 to $19.95 in December following Mr Trump’s election victory. It enjoyed a…Continue reading

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Bridge International Academies gets high marks for ambition but its business model is still unproven

AT THE Gatina branch of Bridge International Academies, on the outskirts of Nairobi, Nicholas Oluoch Ochieng has one eye on his class of five-year-olds and the other on his tablet. On the device is a lesson script. Every line is written 7,000 miles away, in Cambridge, Massachusetts. There an American team analyses 250,000 test scores every ten days from Bridge’s 405 Kenyan schools, and then uses the data to tweak those parts of a lesson where pupils find themselves stumped. Teachers, if they are instructing the same grade level, give identical lessons, and timetables are standardised, too. So when Mr Ochieng’s pupils read from their books, the same words should be reverberating off the walls of each Bridge nursery. 

That chorus should soon grow louder. Founded in 2008, Bridge has grown into one of the world’s largest groups of for-profit schools—and the largest targeting poor pupils. It has 100,000 pupils spread across Kenya, Liberia, Nigeria, Uganda and India. Bridge says it aims to teach 10m children—the size of Britain’s pupil population—within the next decade.

Bridge’s ambitious target sets it apart from the low-cost…Continue reading

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Warren Buffett extends his dominance of retroactive reinsurance

IT IS a niche market, but a big one, and it is increasingly dominated by Warren Buffett’s Berkshire Hathaway. On January 20th its reinsurance subsidiary, National Indemnity Company (NICO), agreed with American International Group (AIG), a big insurer, to acquire excess losses on old insurance policies. In one of the largest such “retroactive reinsurance” deals ever announced, NICO will be on the hook for four-fifths of all losses above $25bn, up to $20bn, in exchange for a payment of $9.8bn now. The deal comes just a few weeks after a similar deal giving up to $1.5bn of coverage to Hartford, another American insurance giant.

For much of the 15 years since the term retroactive reinsurance came into use, Berkshire, through NICO, has been at the forefront. The structure allows insurers to rid themselves of so-called “long-tail” exposures, ie, claims that may come in years or decades after policies were written. Often, they cover long-term environmental risks like pollution, or asbestos-related disease, where workers may fall ill many years after exposure. In the largest previous deal in 2006 NICO provided reinsurance coverage worth $7bn for…Continue reading

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How to build a nuclear-power plant

THE Barakah nuclear-power plant under construction in Abu Dhabi will never attract the attention that the Burj Khalifa skyscraper in neighbouring Dubai does, but it is an engineering feat nonetheless. It is using three times as much concrete as the world’s tallest building, and six times the amount of steel. Remarkably, its first reactor may start producing energy in the first half of this year—on schedule and (its South Korean developers insist) on budget. That would be a towering achievement.

In much of the world, building a nuclear-power plant looks like a terrible business prospect. Two recent additions to the world’s nuclear fleet, in Argentina and America, took 33 and 44 years to erect. Of 55 plants under construction, the Global Nuclear Power database reckons almost two-thirds are behind schedule (see chart). The delays lift costs, and make nuclear less competitive with other sources of electricity, such as gas, coal and renewables.

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A big Chinese province admits faking its economic data

AT THE start of 2014 a senior official in the statistics bureau of Liaoning, an industrial province in north-eastern China, told his army of boffins to cultivate a spirit of innovation in their work. “Liberate your minds,” he exhorted an annual planning meeting. They took him at his word. In one of the biggest scandals to rock the murky world of Chinese economic data, the government admitted this month that Liaoning had faked its fiscal data from 2011 to 2014, inflating revenues by about 20%.

For those inclined to distrust all Chinese numbers, the announcement was simple vindication. But a closer look paints a different picture: of central authorities wanting to get a better read on the economy but being impeded at the local level—and by one of the usual suspects at that.

In manipulating statistics, Liaoning has form. When Li Keqiang, now prime minister, was Communist Party chief of the province in the 2000s, he confided to America’s ambassador to China that its GDP figures were “man-made” and unreliable. Mr Li’s comments have often been cited by critics of Chinese data, though his concerns focused just on…Continue reading

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Brexit poses a threat to Ireland’s aircraft-leasing business

THE glass office blocks of Dublin’s docklands still stand proud; the banks that built them no longer do. The financial crisis of 2008 took down Ireland’s six biggest lenders. Within five years Dublin slid from being rated by Z/Yen, a London-based business think-tank, as the world’s tenth-best financial centre to its 70th. Britain’s readiness to leave Europe’s single market has since sparked hopes Dublin’s fortunes could be revived. An English-speaking base from which to keep doing business inside the EU may appeal to London’s bankers. But worries are growing that the impact will not be all good for Dublin.

To see why, look at aircraft finance, perhaps the city’s most successful industry. The topic of Brexit dominated the chatter at the world’s two biggest air-finance conferences, both held in Dublin this month. Drawing more than 4,500 airline bigwigs, lessors and bankers, such gatherings are usually preoccupied by issues such as aeroplane prices and the aviation cycle. This year geopolitics predominated. “In Ireland we’re surrounded by Trump to the west and Brexit to the east,” one industry veteran sighed in…Continue reading

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Visas as aid

Better in America

TWO years ago, Jon Hegeman, a farmer from Alabama, was struggling to expand his business. He could offer unglamorous but steady work. Potting plants and shifting them to a greenhouse paid $10.59 an hour. He couldn’t find workers; he even tried recruiting from a youth-detention programme.

Mr Hegeman stumbled on a solution when he met Sarah Williamson, of Protect the People (PTP), a charity for people affected by humanitarian disasters. With the International Organisation for Migration, PTP was trying a novel way of helping Haiti after its devastating earthquake in 2010: by taking Haitians to work temporarily in America. The idea appealed to Mr Hegeman, born to missionary parents on the same island (but in the Dominican Republic). With the agencies’ help, eight workers arrived in September 2015.

A new study by Michael Clemens and Hannah Postel of the Centre for Global Development compares those Haitians who secured visas through the project with unsuccessful applicants left behind. The benefits were mind-boggling: the temporary migrants earned a monthly income 1,400% higher than those back in…Continue reading

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America, China and the risk of a trade war

DONALD TRUMP’S quest to protect American workers from cheating foreigners has begun. But in his first flurry of policy tweets and executive orders, China, his favourite bogeyman, was conspicuously absent. On the campaign trail he deplored China’s currency manipulation, accused it of flouting global trade rules and threatened a 45% tariff on its exports, all to cheering crowds. Now, the world is waiting to see how much of this he meant. 

The promise to label China a currency manipulator has not been repeated. An optimistic interpretation is that Mr Trump has realised that the promise was based on an “alternative” fact. China is no longer squashing its currency to gain a competitive edge, but is instead propping it up. A pessimistic one is that Steven Mnuchin, his treasury secretary, who would do the labelling, is not yet confirmed by the Senate.

Mr Trump certainly has the power to wreak trade havoc. A big blanket tariff would slice through supply chains, hurt American consumers and fly in the face of the global system of trade rules overseen by the World Trade Organisation (WTO). But, rather than blow up the world’s trading system, Mr…Continue reading

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A fintech startup tries to shake up American student loans

IN AN old factory building in lower Manhattan a fintech startup is seeking answers to a question that has tormented teachers and students for decades: what is the value of a given course, teacher or institution? Climb Credit, with just two dozen employees, provides student loans. The programmes it finances bring returns far higher than can be expected from even highly rated universities.

Climb does not claim to nurture billionaires, nor to care much about any of the intangible benefits of education. Rather, it focuses on sharp, quantifiable increases in earnings. The average size of its loans is $10,000 and it normally finances programmes of less than a year. The subjects range from coding to web design, from underwater welding to programming robots for carmakers (which has the highest rate of return). Some students have scant formal education; others advanced degrees. The rate of return they get is calculated as the uplift in earnings after the course of study, minus its cost (which includes that of servicing the loan, and takes account of the absence of earnings during the course).

Climb’s results so far are hardly conclusive. It has…Continue reading

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Why American bosses have become giddy, last-minute fans of Donald Trump

IN AN effort to understand their new reality, many American bosses have been studying “The Art of the Deal”. Donald Trump’s autobiography, published in 1987, begins by describing his working week, which mainly consists of frequent calls with his stockbroker, sitting in his office as other businesspeople pay him lavish tribute, and drinking tomato juice for lunch.

If Mr Trump’s routine is anything like the same today, he must be delighted. The broker has good news: the S&P 500 index has returned 6% since his election and on January 25th the Dow Jones Industrial Average closed above 20,000 for the first time. There have been chief executives-a-plenty lavishing praise on him both in public and in private. Their devotion seems extraordinary. Before the vote, many of the same C-suiters lambasted him as a menace to capitalism and much else.

One theory is that executives are simply terrified of Mr Trump. But many are supportive of him in private, too. They offer two explanations: that they can’t help but respond to his personal charm offensive to big business, and that they are persuaded that there is some substance there. Consider the…Continue reading

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