Fortune

A peek into the black box that is the tech giant's top strength

If there’s one thing we’ve learned from the bankruptcy of GT Advanced Technologies it’s that Apple under Tim Cook bargains just as hard as it did when Steve Jobs was alive.

“Put on your big boy pants and accept the agreement,” an Apple executive reportedly told GT when the New Hamphire-based sapphire supplier resisted what COO Daniel Squiller describes as Cupertino’s “massively one-sided” terms.

If those terms were one-sided — and when Squiller spells them out they certainly look that way — it’s not just because Apple is big and GT small.

Apple’s strength at the bargaining table — its leverage — comes from a deeper place. It was evident in 2003, when a smaller and much weaker Apple talked the five major record labels into selling music a la carte on iTunes for $0.99 a song. As Stratechery‘s Ben Thompson explained last week:

It turned out Apple had [an] ace in the hole: a customer base that, while small, had an outsized willingness and ability to spend. After all, they had already dropped at least $1,500 on a Mac and iPod (and likely a lot more), what was an extra $0.99? At a more basic level, said customers were loyal to Apple not because it made sense from a feature or price perspective, but simply because they loved and valued the experience of using Apple products. That, ultimately, was the key to Apple’s favorable position: they had the best customers because they had the best user experience; if the labels wanted access to them, they had to agree to Apple’s terms.”

Thompson’s article is a brilliant companion piece to Squiller’s bitter declaration. Both open up a black box that Apple works hard to keep locked.

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Forget wine and cheese pairings, To’ak Chocolate’s bar is best with Pappy Van Winkle

How does one enjoy a nearly $300 bar of chocolate? In the case of To’ak Chocolate, one pairs it with a really good glass of whiskey, cognac or rum, says co-founder Jerry Toth, who recommends a Pappy Van Winkle, Frapin XO or El Dorado 21 year as options.

The former Wall Street investment banker turned environmental conservationist-chocolatier had an unlikely career trajectory, but Toth says he’s putting his economics degree from Cornell to good use.

While working at rainforest conservation organization Toth found himself in the valley of Piedra de Plata in the Ecuadorian province of Manabí. He left Wall Street after realizing pretty quickly that wasn’t the lifestyle for him. He relocated to South America where he met a woman from Ecuador who would become his girlfriend and soon help him launch a rainforest conservation organization in her home country. “We developed a 1,000 acre forest preserve in coastal Ecuador and started working with nearby farmers to reforest their cattle pastures with shade-grown cacao trees,” says Toth.

Toth and his girlfriend also started growing cacao trees on their own experimental agroforestry plot, where they found groves of old cacao trees growing wild. “We started to harvest the fruit and ferment, dry and roast the beans and make our own chocolate, and immediately we recognized that this chocolate was in a different universe from anything else we had ever tasted that bore the name ‘chocolate,’” Toth says. “Only later did we find out that the cacao beans in this province of Ecuador have historically been considered the most prized variety in the world. It was like a wine maker one day waking up and someone telling him that he’s been living in the Côte d’Or, Burgundy his whole life.”

When Toth and his friend Carl Schweizer set out to find the best cacao beans to create their chocolate bar, they paid particular attention to the soil and climate in which the beans were grown. The flavor characteristics of cacao vary by location—think of it as similar to the characteristics of the different grape varieties used to produce wine.

For the rest of the story, please go to Fortune.com.

Deal comes after the consumer-products giant said it would shed the asset

Warren Buffett’s Berkshire Hathaway has agreed to buy the Duracell battery business from Procter & Gamble, a deal that comes less than a month after the consumer-products giant said it would shed the asset.

Berkshire Hathaway, a conglomerate that owns insurance, railroad, retailers and other businesses, said it expects the deal to close by the end of the second half of next year. The deal terms are a bit complex: P&G has agreed to pump about $1.7 billion in cash into the Duracell company at closing, and in exchange, will receive about $4.7 billion in P&G stock currently held by Berkshire Hathaway.

Berkshire Hathaway is one of P&G’s top investors, owning 52.8 million in shares, or just under 2% of the total P&G stock outstanding according to Morningstar data.

“I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette,” Warren Buffett said in a prepared statement.

P&G late last month had indicated it would shed its Duracell brand, part of the company’s plan to slim down its product slate. P&G’s exit from Duracell began with an agreement to sell its interest in a China-battery joint venture, a deal that occurred in late August. Terms of that transaction weren’t disclosed, though P&G said it booked a charge of $932 million, which was related to that deal.

At the time, the second step hadn’t been finalized. P&G said it hoped to split off Duracell into a stand-alone business, but also said it would consider a sale or other alternatives if they “generated equal or better value.”

“I’m confident this new ownership structure will provide strong support for Duracell’s future growth plans,” said P&G Chief Executive A.G. Lafley.

This article originally appeared on Fortune.com

Cable giant chief addresses concerns about net neutrality and customer service.

Comcast CEO Brian Roberts didn’t mince words on Wednesday about two hot button topics: shoddy customer service and net neutrality.

Customer complaints have plagued Comcast for years, but the issue came to a head in July when a customer recorded a call with a service representative who refused to let him disconnect his Comcast service. The recording not only went viral but also motivated other frustrated Comcast customers to do the same.

At an event in San Francisco, Roberts said that he was “embarrassed” and “disappointed” when he heard the recording. “It was a teachable moment for employees and it was a teachable moment for all of us,” he said.

After the incident became public, Roberts appointed Charlie Herrin senior vice president of customer experience. Herrin, who previously oversaw the design of Comcast’s Xfinity products, faces the daunting task of improving Comcast’s overall customer experience.

Still, the Comcast CEO maintained that such customer service nightmares are not the norm. “We get 250 million phone calls a year,” he said. “The nature of our business is that we’re going to have these things.”

Roberts also tackled net neutrality, the concept that Internet service providers treat all web content equally in terms of speed. It’s a heated issue pitting consumer activists, who argue against companies paying for preferential treatment online, against telecom companies.

On Monday, President Barack Obama made waves when he introduced a 1,000-word plan to ensure a free and open Internet. Specifically, President Obama called for the Federal Communications Commission, or FCC, to act on a set of rules from the 1996 Telecommunications Act that would prevent Internet providers from blocking or slowing lawful web content. Earlier this year, the Supreme Court struck down the FCC’s rules, which upheld net neutrality.

Just a day after President Obama’s introduced his net neutrality plan, Comcast leapt into the fray by releasing a statement claiming it “agrees with the President’s principles on net neutrality” and that Internet content should not be blocked or slowed. However, Comcast disagreed with President Obama’s calls for Internet providers to be regulated like utilities.

“There’s a better way to do that,” said Roberts said, who argued that Internet providers should keep their current largely unregulated status.

The battle over net neutrality is far from over. The FCC has yet to respond to President Obama’s proposal, although FCC Chairman Tom Wheeler has said he is open to the plan. And net neutrality supporters have public rallies planned.

Meanwhile, Robert emphasized that Comcast will cooperate with the government to find a common ground. “No blocking, and no discrimination — consumers need the certainty that this platform [the Internet] stands for those kinds of principles,” he said.

This article originally appeared on Fortune.com

A cost-cutting plan won’t be enough unless the company can get people back into its parks

SeaWorld is having what can only be considered a massively disappointing year. The theme park operator released its third-quarter earnings report today, and things aren’t looking any better than they did earlier this year.

The company reported decreases in revenue, net income, and earnings per share. Those declines can’t be blamed on increased expenses — the simple fact is that fewer people are going to SeaWorld parks, and when they are there, they are spending less money.

A big reason for this ongoing decline is continued bad publicity. The anti-SeaWorld documentary “Blackfish” seems to be a perennial favorite on lists of suggested documentaries to watch on Netflix. An announcement of larger habitats for the park’s trademark Orca whales last summer largely backfired, with much of the coverage still focusing on the underlying issues, namely that no tank can recreate the ocean habitats where Orcas live naturally.

Tuna Amobi, an analyst at S&P Capital, said the backlash generated by Blackfish has lasted longer than he thought it would, and that it seems to be continuing. Jared Goodman, the director of animal law at the People for the Ethical Treatment of Animals, said his group was going to continue to press SeaWorld on its treatment of Orcas. He said that the continual tanking of the SeaWorld business was a sign that investors and visitors are “deciding not to support marine animal abuse with their hard-earned money.”

Attendance at SeaWorld fell to 8.4 million visitors last quarter, down from 8.9 million in the quarter before. But its not just allegations of animal abuse that are keeping people out of the parks; competition is another factor. In Orlando, Fla., home of one of SeaWorld’s three parks, there’s always tough competition from the likes of Disney, but this year the opening of a second Harry Potter-themed park (operated by Universal) compounded it. During Wednesday’s earnings call, CEO Jim Atchison partially attributed the falling attendance at SeaWorld to “competitive pressures in Florida.” When asked directly about the new Harry Potter park, Atchison said that while he admits the opening may have hurt SeaWorld this year, he doesn’t know if that’s a long-term problem, noting that the initial launch of a major attraction tends to see an attendance spurt, and then “things tend to norm out a little bit.”

And don’t look now, but Elsa and Anna are coming to Orlando soon, with a “Frozen” themed ride coming to the Norway section of Epcot. Epcot has generally been seen as the Disney park with the least appeal to kids — sorry, but a world cultures pavilion isn’t ever going to compete with Cinderella’s Castle — but that may chance now that the mega-hit Frozen is making its way there.

All of this, of course, is bad for SeaWorld. With so many options, it’s hard to see parents who might already be iffy about the treatment of Orcas making the choice to schlep their kids to the park. To adjust for this decrease in revenue, SeaWorld is announced a plan today to cut $50 million in annual expenditures by the end of 2015. The plan will “focus on the centralization of certain administrative and support functions and the further optimization of our park operations,” according to CEO Jim Atchison.

Amobi, though, sees this measure a bandage on a bullet wound, and S&P downgraded the stock from a buy to a hold.

“It’s a step in the right direction,” he said, adding “it’s a bit underwhelming. I feel like they had their backs up against the wall.”

This article originally appeared on Fortune.com

Weak performance led the retailer to trim its sales and profitability targets for the current fiscal year

Macy’s reported a 23% jump in third-quarter net income as the department-store operator trimmed expenses, helping to offset a surprising drop in sales. Here’s what you need to know about the latest earnings report.

What you need to know: Macy’s reported weaker sales for the quarter ending Nov. 1, even though Wall Street analysts had anticipated growth. Comparable-store sales, a key retail metric, fell 1.4%. Analysts surveyed by Consensus Metrix had projected a 1.9% increase. Meanwhile, total sales slipped a worse-than-expected 1.3% to $6.2 billion. The weak performance for the quarter led Macy’s to trim its sales and profitability targets for the current fiscal year, though the retailer struck a positive tone about the upcoming holiday season, in part lauding its merchandise assortment.

Macy’s isn’t the only department store suffering from poor sales trends. Sales at department stores slid 2.5% in the first nine months of 2014 from the year-ago period, according to the Commerce Department.

The big number: Profitability for the period was far better than Wall Street had anticipated, with per-share earnings rising 30% to 61 cents from a year ago (analysts had anticipated a 50-cent profit). CEO Terry Lundgren said profitability was bolstered by trimming overhead costs, as well as Macy’s ability to maintain a flat gross margin.

What you might have missed: The winter hasn’t even begun, but the word “weather” has already made an appearance in Macy’s earnings statement. A ton of retailers, including Macy’s, complained about poor winter weather last year and how it hurt sales trends. But on Wednesday, Macy’s seems to think weather will be less of a factor. “We are poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year,” Lundgren said. The better weather is one of several factors Lundgren believes will help Macy’s perform well during the critical holiday season.

This article originally appeared on Fortune.com

Company facing continued fallout from the controversial documentary ‘Blackfish’

SeaWorld means different things to different people. To some, it’s a place where you had fun watching the Shamu as a kid. For others, it’s a terrible place where animals are abused.

For investors, though, its increasingly looking like a sinkhole.

The company released its third quarter earnings report today, and things are not looking good. The firm’s rotten 2014 continued, with revenues and earnings down and no light at the end of the tunnel. Here are a few important things to note in today’s report.

What you need to know: The biggest problem with SeaWorld? Fewer people are going. The parks drew 8.4 million visitors in the third quarter, down from 8.9 million in the third quarter of 2013 — a 5.6% decline. Attendance is especially important in the third quarter for theme parks — it makes up the summer months, where kids are out of school and families are most likely to take a vacation. In a year when the economy was generally doing better, for SeaWorld to see a decrease in attendance is the clearest sign that there are serious problems with the company.

Wells Fargo industry analyst Tim Conder told CNBC Wednesday that the company is facing continued fallout from the controversial documentary “Blackfish,” which raised concerns about the way SeaWorld treats its animals.

The big number: Revenue for the quarter clocked in at $495.8 million, significantly down from $538.4 million the year before. This is obviously unsustainable, and with no sign coming of a strong reversal in revenue, the company has to look to impact the bottom line in another way — through cost savings. The earnings indicated that the SeaWorld is looking to implement a plan to save $50 million in expenses annually by the end of 2015.

What you may have missed: It’s bad enough that fewer people are going to SeaWorld. The real kicker, though, is that the people who do go through the turnstiles are spending less money to do it. Due to promotions and a less favorable customer mix, the average price paid for admission was $36.47, down 5% from 2013. The total spent per capita on food and other in-park purchases was up slightly, but the total spent on a day at the park per visitor was down nearly 3% to $58.99.

This article originally appeared on Fortune.com