The news at a glance
Apple’s quarterly profits slip; Stocks tumble after hacked AP tweet; Dreamliner plans return to the skies; Senate considers Internet sales tax bill; Subscribers stream to Netflix
Earnings: Apple’s quarterly profits slip“Apple has found a big investor that still has faith in its future: itself,” said Nick Wingfield in The New York Times. The technology giant posted its second-quarter earnings last week, revealing its first decline in profits in a decade, due largely to slowing iPhone sales. The firm says it now plans to return cash from its $145 billion war chest to shareholders by buying back stock. Apple’s share price hit a peak of $700 in September, but since then it has dropped by 42 percent. More and more frustrated investors have clamored for the company to spend or share the wealth “as warning signs began to emerge about its growth prospects.”
The plan to share cash with shareholders has dinged Apple’s credit rating, said Charles Mead, Victoria Stilwell, and Sarika Gangar in Bloomberg.com. Much of the firm’s cash is held abroad, and while U.S. law allows companies to defer income taxes indefinitely on overseas earnings, Apple would have to pay 35 percent in corporate taxes if it repatriated that money. That’s why it plans to borrow cash for its buyback program instead. “You have a company that’s in a highly volatile industry that could have up to $50 billion of debt five or six years down the line,” a Moody’s analyst said. “Just based on that, it didn’t smell like a triple-A.”
Markets: Stocks tumble after hacked AP tweet“Wall Street collided with social media” this week, said Heidi Mooreand Dan Roberts in The Guardian (U.K.). Financial markets briefly went into free fall after hackers posted a fake news alert on the Associated Press Twitter feed: “Two Explosions in the White House and Barack Obama is injured.” The market recovered within minutes, but the hoax “left traders catching their breath and speculating once more about their vulnerability to breaking news in the age of social media.” Bloomberg.com estimated that in two minutes, the fake tweet temporarily wiped $136 billion from the S&P 500.
Airlines: Dreamliner plans return to the skiesThe Federal Aviation Administration has approved Boeing’s plan to fix its beleaguered jetliner’s battery design, said W.J. Hennigan in the Los Angeles Times. The agency said that once airlines operating Boeing 787 Dreamliners install new containment and venting systems, the planes can fly again. Boeing had delivered 50 Dreamliners worldwide when several battery incidents led to a global grounding earlier this year. Boeing will provide kits to fix the planes and help with installation. “The rest is really up to the airlines,” a Boeing engineer said.
Taxes: Senate considers Internet sales tax bill“The days of tax-free online shopping could finally be numbered,” said Jia Lynn Yang in The Washington Post. The Senate plans to vote on a bill that would empower states to collect sales tax on Internet purchases, giving them access to as much as $11 billion in annual revenue that “they are legally owed—but that hasn’t been paid to them for years.” The Marketplace Fairness Act, introduced by Sen. Mike Enzi (R-Wyo.), would allow states the power to collect taxes even from out-of-state vendors, and has been hailed by brick-and-mortar retailers.
Media: Subscribers stream to NetflixShares of Netflix are soaring, said Amol Sharma and Nathalie Tadena in The Wall Street Journal. The streaming and DVD-rental service’s stock price shot up 24 percent last week, after subscriber gains beat Wall Street expectations. The company said it now has 29.2 million U.S. subscribers, surpassing Time Warner’s HBO cable channel “in terms of paying customers.” Netflix said it hopes more original content, like its political drama House of Cards, will help “lure in subscribers and further differentiate it from competitors” like Amazon and Hulu.