Companies

"My Chinese is very bad"

Not all Apple Pay winners are created equal

The fast food giant's sales are flagging, and it's about to give its menu a makeover to win over customers

After McDonald’s on Tuesday yet again posted disappointing quarterly earnings, the fast food chain is ordering up a supersize strategy that’s all about the smaller things: local ingredients, regional tastes and your own personal preferences.

McDonald’s CEO Don Thompson said Tuesday during an earnings call that the company is “changing aggressively” in the U.S., German, Australia and Japan under a new platform that emphasizes personalized meals alongside its classic options.

“Customers want to personalize their meals with locally relevant ingredients. They also want to enjoy eating in a contemporary inviting atmosphere. And they want choices: choices in how they order, choices in what they order and how they’re served,” Thompson said.

Thompson added that existing regional offerings include the chorizo burrito, which is being tested in Texas, and mozzarella sticks, which are being tested in New York, New Jersey and Connecticut. More evidence of McDonald’s plan for tailor-made options include confirming that its McRib will be available at only participating restaurants and no longer rolled out nationwide, CNBC reported last week.

But that’s not all: McDonald’s is taking a hint from DIY outlets by expanding its build-a-burger program called “Create Your Taste.” The program has been tested in four Southern California chains since September, and allows customers to use a touch screen to pick out their preferred burger toppings like tortilla chips and jalapeños, according to Businessweek.

The search giant had seen its revenue fall in four of the previous five quarters

Yahoo said Tuesday that third-quarter grew 1%. Here are the most important points from the company’s earnings report.

What you need to know: Yahoo beat Wall Street estimates with $1.15 billion in third-quarter revenue, up from $1.14 during the same quarter last year. Surprising analysts is always nice, but the Internet search giant should be especially happy about the revenue bump, even if it is just a 1% increase. Sales had declined in four of the previous five quarters, including a 3% year-over-year drop in this year’s second quarter.

Yahoo also reported earnings excluding certain costs (and a huge windfall from selling shares in the initial public offering of Chinese e-commerce giant Alibaba) of 52 cents per share, which trounced analyst predictions of 30 cents per share. The company’s profit jumped to $6.8 billion compared with the help of $6.3 billion in cash, after tax, that the company netted from selling a chunk of its Alibaba shares in September. In the year-ago quarter, Yahoo had reported a profit of $297 million.

Yahoo CEO Marissa Mayer described the quarter in a statement as solid.

“We achieved this revenue growth through strong growth in our new areas of investment – mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses,” Mayer said.

Yahoo shares soared in after-hours trading, gaining almost 2.8% after finishing Tuesday trading up by 2.3% – one of many stocks on the tech-heavy Nasdaq composite to enjoy a strong day.

The big number: Yahoo said its third-quarter mobile revenue topped $200 million, the first time the company has revealed the amount of money it makes from showing ads on mobile devices. The company said gross mobile sales for the year will exceed $1.2 billion. Mayer said that Yahoo’s mobile investments – which include a $300 million acquisition of mobile analytics startup Flurry – have paid off for the company. In the current quarter, mobile revenue made up only around 17% of overall sales, far less than rivals like Facebook and Twitter.

“Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo,” Mayer said.

Meanwhile, Yahoo’s display ad revenue – the equivalent on online billboard ads – dipped again, falling 5% year-over-year to $447 million in the third quarter. (Interestingly, Yahoo said in its earnings release that the number of ads sold in the third quarter increased about 24%, but that seems to have been offset by the fact that the price of each ad declined by an equal amount.) Search ads continue to grow for Yahoo, though, with third-quarter revenue in that sector rising 4% to $452 million.

What you might have missed: Yahoo plans to spend some of the more than $6 billion in cash it netted from the recent Alibaba IPO on one or more tech start-up acquisitions, according to The Wall Street Journal. Mayer is expected to discuss Yahoo’s plan for potential acquisitions as well as cost-cutting measures – a discussion that comes a few weeks after activist investor Starboard Value revealed it had taken a stake in Yahoo and pushed for Mayer to reduce costs and consider a combination with AOL.

This article originally appeared on Fortune.com

In the wake of hacks agains Target, Home Depot and JPMorgan, analysts say companies' boards need to be more vigilant on cybersecurity

As an increasing number of major retailers and financial institutions are falling victim to hacks like those against Target, Home Depot and JPMorgan, many experts say corporate boards aren’t doing enough to protect customers from cybersecurity breaches.While corporate boards are a step removed from companies’ day-to-day operations, the increasing risk of data breaches means that boardmembers need to be more involved in cybersecurity, observers say, whether by pushing for security oversight or reshuffling executives who don’t react properly to crises.

“We live in the post-Target era,” said John Kindervag, security analyst at Forrester. “There’s a moral obligation to consider firing an executive team because of a data breach. It’s a huge business failure.”

Corporate boards rarely review cybersecurity plans or involve themselves in the particulars of data protection, traditionally viewing security as an information technology problem. According to a PriceWaterhouseCoopers report released last month, just 42% of 9,700 executives in over 150 countries said their boards are involved in security strategy; just 25% said their boards are involved in reviewing security and privacy threats.

“They’ll say to the CEO, what are we doing about security, and then don’t get involved at all until they get breached,” says Avivah Litan, security analyst at Gartner. “Most companies don’t communicate at that level with the board. They’re out of touch and they’re totally clueless about information security.”

Securities and Exchange Commissioner Luis Aguilar put it more gingerly to board directors earlier this month at a New York Stock Exchange cybersecurity conference. “There may be a gap that exists between the magnitude of the exposure presented by cyber-risks and the steps, or lack thereof, that many corporate boards have taken to address these risks,” Aguilar said. There’s a discrepancy, too, between what shareholders demand of boards and what they’re actually doing — a survey published by Institutional Shareholder Services (ISS) last month shows that nearly 70% of shareholders view board oversight actions prior to hacking incidents as “very important.”

Negligent boards may find themselves facing questions from angry shareholders and customers after a cyber breach. In June, ISS made the unusual recommendation that Target shareholders oust seven out of 10 members of its board after credit card information belonging to 40 million customers was compromised, laying blame on two board committees in particular.

“The data breach revealed that the company was inadequately prepared for the significant risks of doing business in today’s electronic commerce environment,” ISS advised. “The responsibility for oversight of these risks lies squarely with the Audit Committee and the Corporate Responsibility Committee.” Shareholders re-elected the board, but ISS’ condemnation was a wake-up call for retailers. Target is now facing an investigation from the Federal Trade Commission into the details of the breach.

Home Depot, meanwhile, was a founding member of a threat-sharing group of major retailers earlier this year, and its board received regular updates on cybersecurity, according to a spokesman. “IT and IT security have regularly been items on our board meeting agendas for several years now, and the board has received regular updates on the breach since it occurred,” said that spokesman. But the hardware retailer was caught flat-footed by a data breach this year that jeopardized 56 million customers’ credit cards, and managers ignored weaknesses in cyber defense before the attack, the New York Times reported last month.

Analysts say a strong board of directors should know how to ask management the right questions about cybersecurity. “The board is not responsible for identifying risk, but it sure as hell needs to know that management understands that responsibility and knows how to respond to it,” said Rick Steinberg, former governance practice leader at PricewaterhouseCoopers.

Ultimately, it might be a financial motivation that gets corporate boards to take a closer look at their firms’ cybersecurity standards. Target’s net income dropped more than $400 million in the quarter the breach was announced compared to the year before; the company said direct costs from the data breach would reach $148 million in the second quarter of 2014 alone. The total expense of any breach, including lost profits from nervous consumers, are often incalculable. “A data breach is the equivalent of an oil spill,” said Kindervag. “It’s a fundamental business issue.”

The North America market remains a problem for the beverage giant and its top rival PepsiCo

Beverages giant Coca-Cola reported a 14% decline in third-quarter net income on Tuesday on a muted volume performance. Here’s what you need to know.

What you need to know: The North America market remains a problem for Coke and top rival PepsiCo, with both of the consumer-products behemoths reporting muted results for that market in the latest quarter, even as data shows Americans are spending more at grocery stores. Coke’s North America unit case volume was down 1% in the latest period, while Pepsi earlier this month reported flat revenue for the Americas beverages business.

Consumers are spending more on fresh produce, fresh grocery products and in the beverages aisle, favoring juices, flavored waters and other items that have fewer calories and less sugar than what Coke and Pepsi use in their products. Demand for carbonated soft drinks, the biggest category in the beverages business, has suffered a nearly decade-long slide. Coke on Tuesday said the “Share a Coke” campaign helped the company gain share in the sparkling beverage segment in North America, but volume still declined. Demand was also weaker for juices and sports drinks, though demand grew for tea, energy drinks and water.

Coke also didn’t post especially strong growth in any of the other markets it serves to help offset the North America weakness. Volume grew just 2% in Latin America and the Asia Pacific, and it feel 5% in Europe. The Eurasia and Africa region’s volume grew 5%.

The big number: 53 cents — that’s the adjusted profit Coke reported for the third quarter, and it matched the year-ago level and also what analysts had projected. The reported bottom line was dragged lower by $270 million in charges tied to a move to refranchise some bottling partners in North America.

Revenue totaled $11.98 billion, falling slightly short of the $12.12 billion projected by analysts. Citing some currency exchange fluctuations, Coke said it now expects profit for all of 2014 to be “below its long-term EPS growth targets.”

What you might have missed: Coke is targeting annualized savings of $3 billion per year by 2019. Coke issued a second press release Tuesday morning touting an “expanded productivity program” (typically, corporate lingo for cost-cutting) and a move to streamline its operations. While Chief Executive Muhtar Kent said Coke sees a challenging macroeconomic environment in 2015, the company’s plans to restructure its global supply chain, among other moves, will help the beverages company achieve a profit before tax target of 6% to 8%.

This article originally appeared on Fortune.com

The four-year-old firm Magic Leap aspires to blend computer generated images into the physical world

Google and several other leading tech firms have pooled $542 million in venture capital funding for Magic Leap, a secretive, Florida-based startup that is rumored to be working on virtual reality eyewear.

The deal, one of the largest venture capital fundraisers to date, would value the company at nearly $2 billion, two sources close to the negotiations told the Wall Street Journal. Two senior Google executives will join Magic Leap’s board of directors.

Little is known about Magic Leap beyond an eye-popping video of what the company hopes to achieve with its technology: a projection of life-like imagery that seamlessly blends with the physical surroundings. This deal echoes Facebook’s acquisition of Oculus Rift, a virtual reality headset that immerses users in graphically rendered 3-D worlds.

Both technologies point to a gamble within the tech industry that interfaces will ultimately break free from the confines of 2-D screens and form more immersive user experiences.

[WSJ]

The solution? Focus on food quality, digital strategy

Another quarter, another terrible set of results from McDonald’s.

And the company thinks focusing on food quality and digital payments is the trick to shaking its longstanding doldrums.

The world’s largest restaurant chain by revenue reported on Monday that comparable sales last quarter fell 3.3% (worse than the 3% drop analysts expected, according to Consensus Matrix) and that profit fell 28%, with trouble in every single major market.

McDonald’s has been hit by a number of setbacks, ranging from Russia closing some of its restaurants, to a scandal engulfing one of its big meat suppliers in China last summer. At home, McDonald’s is dealing with aggressive competition, especially for breakfast offerings, lower income customers cutting down on eating out and menu additions that have annoyed guests by slowing service.

McDonald’s CEO Don Thompson said in a statement more bad news was coming: “The internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter.” He added that U.S. comparable sales growth would likely be negative for the 12th straight month.

In the U.S., comparable sales for the quarter ended Sept. 30, comparable sales decreased 3.3% as fewer customers came in to eat and competitors ramped up their efforts. More alarmingly for McDonald’s, its operating profit for the region fell 10% as efforts to fix its ongoing, growing U.S. problems fell flat.

So Thompson said the company’s new U.S. president,Mike Andres, is flattening the unit’s organizational structure to make it nimbler and to let restaurants respond more quickly to local needs. He is also updating its marketing to emphasize food quality, and simplifying the menu to reduce wait times.

Comparable sales in Europe—McDonald’s biggest market—were weak, falling 1.4%, more than expected, as the ongoing crisis in Russia and Ukraine hurt sales. Over in Asia, a big hit to business in China and Japan results led comparable sales to fall 9.9%

Thompson has a big job ahead of him, so he laid out some broad principles and initiatives he hopes will fix McDonald’s globally. Those include investing in updating its image and service, along with new technology to update McDonald’s for today, make better use of tech to facilitate ordering, payment and mobile offers (it will accept Apple Pay) and in what sounds like a hint of potential job cuts, a review of the company structure to determine how much fat there is and whether money can be redeployed to its digital strategy.

“McDonald’s third quarter results reflect a significant decline versus a year ago,” Thompson, CEO since 2012, said. “By all measures our performance fell short of our expectations.”

This article originally appeared on Fortune.com