The news at a glance
Tobacco: A planned megamerger in cigarettes
British American Tobacco proposed a $47 billion takeover of Reynolds American this week, a deal that “would create the world’s largest publicly traded tobacco business,” said Chad Bray in The New York Times. London-based British American Tobacco already owns 42 percent of North Carolina– based Reynolds American, the second-largest tobacco company in the U.S., and is offering to buy out the remaining 58 percent. A tie-up would bring together brands like Camel, Lucky Strike, Newport, and Pall Mall, giving the newly created tobacco giant a commanding presence in markets around the world.
The proposal comes as U.S. tobacco firms are struggling “with plummeting use” of their traditional products, said Christopher Ingraham in The Washington Post. A merger would allow British American and Reynolds to pool their efforts to develop new products like e-cigarettes, which have become more popular even as the market for traditional cigarettes has nosedived. Just 15 percent of U.S. adults regularly smoke cigarettes today, down from 42 percent in 1965. At the same time, the share of American high school students who used e-cigarettes tripled between 2013 and 2014, to more than 13 percent, according to the CDC.
The bottom line
■The artificial intelligence market, including hardware, software, and services, will surge from $8 billion this year to $47 billion by 2020, according to forecasts by research firm IDC. By 2020, IDC predicts, 60 percent of AI applications will run on platforms owned by four companies: Amazon, Alphabet, Microsoft, and IBM.
The New York Times
■Nearly 86 percent of promotions to CEO in 2015 went to company insiders rather than outside candidates, the highest rate in three years, according to the Conference Board. Of the 56 S&P 500 companies that hired a new CEO in 2015, only one named a woman chief executive.
The Washington Post
■Smartwatch sales are crashing, with global shipments dropping 51.6 percent year-over-year during the third quarter, to just 2.7 million devices. Apple is still the leader, with 41.3 percent of the global market, but Apple Watch shipments fell 71.6 percent during the latest quarter.
■Uber and Anheuser-Busch InBev recently made the world’s first-ever commercial delivery via self-driving truck. Uber’s autonomous 18-wheel semi, loaded with 45,000 cans of Budweiser, drove itself 120 miles on Colorado’s Interstate 25, from Fort Collins to Colorado Springs—with a human onboard in the sleeper cab just in case. Anheuser-Busch estimates it could save $50 million a year in the U.S. using autonomous trucks.
■More than half of new power capacity added worldwide last year came from renewable energy sources like wind and solar power, beating fossil fuels like coal and natural gas for the first time ever, according to the International Energy Agency. Renewables represent 23 percent of global power generation.
Autos: Judge approves $14.7B VW settlement
Volkswagen will start buying back 475,000 polluting diesel vehicles sold to U.S. customers starting in mid-November, said David Shepardson in Reuters.com. A U.S. judge this week approved the German automaker’s $14.7 billion deal with federal regulators and car owners this week over its diesel emissions cheating scandal, “one of the biggest corporate settlements on record.” Volkswagen agreed to spend roughly $10 billion on buybacks and additional compensation for owners, plus $4.7 billion on clean air programs. The company still faces lawsuits from at least 16 states, as well as Justice Department fines for violating clean air laws.
Gaming: Nintendo shows off comeback console
Nintendo unveiled its next-generation video game console last week, said Brett Molina in USA Today. The quirky-looking Nintendo Switch is a hybrid home and mobile device with detachable controllers that players can connect to their television. The company hopes the unique design “will reverse its fortunes in the console market.” Nintendo has been weighed down by sagging sales of the Wii U, which has sold some 13 million consoles, compared with 40 million for Sony’s PlayStation 4. The Switch will launch in March 2017, with pricing yet to be announced.
Media: Google recruits CBS for web TV service
CBS is the first major network to sign on for a soon-to-be-launched web TV service from Google, said Joe Flint and Shalini Ramachandran in The Wall Street Journal. The two companies reached an agreement last week to bring the broadcast network to the new service, named Unplugged, which will “likely premiere in early 2017.” Google is said to be targeting cord cutters who have shunned traditional cable packages, offering a “skinny bundle” of live TV channels that costs between $25 and $40 a month.
Tech: Apple reports first sales decline since 2001
“Apple’s 15-year streak is officially over,” said Seth Fiegerman in CNN.com. The technology giant this week reported its first annual sales decline since 2001, “the year it launched the iPod and kicked off a tremendous run of groundbreaking products.” Annual sales fell to $216 billion for the 2016 fiscal year ending Sept. 30, down from a record $234 billion in 2015. Three consecutive quarters of falling iPhone sales are largely to blame, but the company says it expects to reverse that trend with strong holiday sales of its newly released iPhone 7.
Nevada’s do-nothing pension hero
“Steve Edmundson has no co-workers, rarely takes meetings, and often eats leftovers at his desk.” His trading strategy is to “do as little as possible.” But under his watch, the Nevada Public Employees’ Retirement System is out-earning pension funds with hundreds on staff, said Timothy Martin in The Wall Street Journal. While other states have turned to complicated investment vehicles and pricey managers, Nevada’s $35 billion portfolio is entirely in index funds. The bare-bones strategy— Edmundson may make one change a year—keeps costs low. Last year, the state paid $18 million in fees, compared with $120 million for the average public pension. Edmundson traces his approach to having worked for a wine distributor. Like investing, the wine industry is treated as “complicated and difficult, with fancy terminology,” he said. People “focus on the details, instead of the big picture.”