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Boeing shares rise on report 737 Max fix could be sooner than expected

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Shares of Boeing ticked higher Friday after a report that the plane manufacturer plans to roll out a software upgrade for its 737 Max aircraft in the coming weeks.

The report from Agence France-Presse, citing sources, comes after the U.S. grounded all Boeing 737 Max jets this week. The software upgrade is expected to roll out in 10 days, according to AFP.

The Federal Aviation Administration followed the lead of dozens of other countries, citing links between two fatal crashes as grounds to cancel those flights. Boeing’s stock has tanked more than 10 percent this week in the aftermath.

Shares rose as much as 1.7 percent Friday afternoon following the report. Boeing’s gains were limited as the company told CNBC the overall timeline has not changed.

A weeks-long turnaround would come much sooner than some on Wall Street had estimated. Bank of America predicted this week that it would take the aircraft manufacturer three to six months to “certify the fix.”

Ethiopian Airlines Flight 302 crashed on Sunday, less than five months after the crash of Lion Air Boeing 737 Max 8 flight from Jakarta, Indonesia, killing all 189 people on board. Both planes were new, delivered from Boeing just months before those flights.

Of the more than 350 Boeing 737 Max jets in global fleets, 74 are flown by U.S. airlines United Airlines, American Airlines and Southwest Airlines, according to the FAA.

— CNBC’s
Leslie Josephs
and Meghan Reeder contributed reporting.

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Fiat Chrysler and France’s Renault plan to team up amid changes to the auto industry

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A row of Fiat Chrysler Automobiles (FCA) 2017 Crysler Pacifica minivan vehicles are displayed for sale at a car dealership in Moline, Illinois, on Saturday, July 1, 2017.

Daniel Acker | Bloomberg | Getty Images

Fiat Chrysler and France’s Renault are in advanced talks to forge extensive ties in the face of sweeping changes to the global auto industry, according to a report in The Financial Times.

The collaboration could bring the Italian-American carmaker into the Renault-Nissan-Mitsubishi Alliance, according to The Financial Times, although the other members — like Japan’s Nissan — would have to be won over. 

The discussions could still fall apart, sources told The Financial Times. Once source told the newspaper that Nissan has had no involvement in the talks so far. 

The Financial Times reported in March that Renault planned to take up merger talks with Nissan within the year, and then potentially acquire Fiat Chrysler.

Fiat Chrysler’s chief executive, Mike Manley, previously told the FT: “If there’s a partnership, merger, relationship that makes us stronger, then I’m absolutely open to looking at it.”

If Fiat Chrysler were added to the Renault-Nissan-Mitsubishi Alliance, which dates back to 1999, it would become the largest global carmaker, with 15.6 million combined sales a year. The current leader, Volkswagen, sold 10.8 million last year.

Read the full story in the Financial Times

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Microsoft has grown more than a basket of unicorns since 2015

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A man wearing an unicorn costume plays at a computer during the Intel Extreme Masters Katowice 2019 event in Katowice on March 2, 2019.

BARTOSZ SIEDLIK/AFP/Getty Images

In November 2015, tech investor Marc Andreessen weighed in on a hot debate about whether Silicon Valley’s start-ups were frothy from all the cash propping up so-called unicorns, or venture-backed companies valued at $1 billion or more.

Andreessen noted at a Fortune conference that the whole class of billion-dollar start-ups, headlined by Uber and Airbnb, was “worth half of Microsoft, ” and he opined on the hypothetical choice of investing in Microsoft or the “basket of unicorns.”

He suggested the unicorns were a better value.

“As a basket, it’s almost certainly too low,” Andreessen, co-founder of Andreessen Horowitz, told Fortune’s Alan Murray. “Microsoft’s a fine company, but you need a couple to really take off, and it becomes very clear in retrospect that they’re under-valued.”

(Microsoft was actually worth $433 billion at the time, and the unicorns were valued at a combined $504 billion, according to the Wall Street Journal’s “Billion dollar start-up club” tracker. Andreessen, through a spokesperson, declined to comment.)

In the long run, Andreessen could still be right. But three and a half years after those comments, the straight Microsoft bet would have yielded stronger returns than the non-existent unicorn index.

Since Andreessen’s session on Nov. 3, 2015, Microsoft shares have gained 133%, closing on Friday at $126.24. The value of unicorns over that stretch, based on the Journal’s tracker, has climbed by 89%, with a good chunk of the value creation coming from companies that have since gone public or been acquired.

The start-up group has still done fine against the broader market, solidly beating the S&P 500, which is up 34%.

But Andreessen’s view reflected both the tendency for Silicon Valley investors to downplay the ability for Microsoft (and probably other mega-cap tech companies) to continue growing in the face of stiffer competition, and their willingness to pay up for companies that in many cases were years away from being able to justify their price tags.

For example, ride-hailing company Uber was valued at $55 billion at the time, and is now only at $68 billion following its IPO this month. Investors valued Snap at $16 billion in late 2015, and the company’s inability to find a profitable business model since its 2017 IPO has left it worth $15 billion on the public market. Pinterest went public in April and has a market cap of $12.9 billion, up just a bit from its $11 billion valuation in 2015. Dropbox has slipped from $10 billion then to a market value of $9.4 billion now.

Microsoft, meanwhile, is cranking out earnings from its dominant Windows products and its ability to push legacy clients to emerging cloud products like Azure and Office 365. Under CEO Satya Nadella, Microsoft has recorded eight straight quarters of year-over-year double-digit sales growth. In April, it became the third public company to reach a $1 trillion market cap, though it’s fallen some since then.

There have also been plenty of solid gains within the unicorn basket, many coming from enterprise software companies. Twilio, Zscaler and Okta have been some of the best-performing tech stocks since their fairly recent IPOs, and others like MuleSoft and GitHub were acquired for huge premiums. (In a fitting bit of irony, Microsoft bought GitHub for $7.5 billion in June 2018, paying nearly four times GitHub’s last reported valuation.)

Andreessen has benefited handsomely from some of these, including Okta and GitHub. His firm was also an early investor in Lyft, which was worth $2.5 billion in November 2015, and now has a market cap of $16.9 billion.

On the downside, there are several significant companies that have lost value since late 2015 and others that are in limbo. Palantir, for example, was valued at $20 billion, and Bloomberg reported on Friday that the data analytics company has pushed out its IPO likely to next year. Meanwhile, its private market valuation is flat.

And the worst performer? No contest there. Theranos was worth $9 billion in November 2015, and today the blood-testing company no longer exists, while founder Elizabeth Holmes and former president Ramesh “Sunny” Balwani are awaiting trial and potential jail time on fraud charges.

Here are a few significant themes from the unicorn data:

  • Biggest companies have hardly budged: As mentioned earlier, the IPOs of some of the biggest companies in the group — Uber, Snap and Pinterest — have done little for investors. China’s Xiaomi, which was second on the 2015 list at $46 billion, has actually lost significant value since going public in Hong Kong last year.
  • Enterprise IPO excitement: Twilio went public in 2016 and is now worth $16.8 billion, up from $1 billion in 2015. Okta has gone from $1.2 billion to $12.4 billion, Zscaler from $1 billion to $9.1 billion and Coupa from $1 billion to $6.8 billion. Slack isn’t yet public, but secondary investors are valuing it at as much as $17 billion, up from $2.8 billion in 2015. Among consumer companies to go public, Lyft has provided the best return for 2015 investors, going from $2.5 billion to $16.9 billion, followed by Spotify, which has jumped to from $8.5 billion to $21.6 billion. Adyen, an Amsterdam-based payments company, has a stock market value of $21 billion in Europe, up from $2.3 billion.
  • M&A: MuleSoft went public before getting snapped up by Salesforce last year for $6.5 billion, up from $1.5 billion in 2015. GitHub was worth $2 billion then and was purchased by Microsoft in 2018 for $7.5 billion. Qualtrics, previously valued at $1 billion, was headed for an IPO late last year before SAP bought it for $8 billion. Online retailer Jet.com was acquired for $3.3 billion by Walmart in 2016, more than doubling its $1.4 billion valuation.
  • Private but gaining value on paper: Some companies could still be overvalued, but we don’t know yet because they remain private and continue to attract capital. China’s ride-hailing giant Didi Chuxing has jumped from $16 billion to $55 billion. Elon Musk’s SpaceX has climbed from $12 billion to $31.5 billion. WeWork is now at $44 billion, up from $10 billion.
  • Flameouts and disappointments: Theranos went from $9 billion to zero, but it’s not the only bust. Digital media company Mode Media shut down in 2016 after achieving a $1 billion valuation. Shazam was valued at $1 billion but sold to Apple last year for $400 million. Blue Apron was worth $2 billion, but has lost more than 90% of its value to $144.5 million.

WATCH: An IPO of IPOs could be about to hit the market. Is the unicorn mania a sign of the top?

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Trump digs at Japan for ‘substantial’ trade advantage and calls for more investment in US

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U.S. President Donald Trump attends a Japanese business leaders event with U.S. Ambassador to Japan William Hagerty in Tokyo, Japan May 25, 2019. REUTERS/Jonathan Ernst

Jonathan Ernst | REUTERS

President Donald Trump, on the first day of his state visit to Japan, dug at Tokyo for what he called a “substantial advantage” in trade and asked Japanese businesses to invest more in the United States.

“Japan has had a substantial advantage for many, many years, but that’s okay, maybe that’s why you like us so much,” Trump said during a meeting with Japanese business leaders in Tokyo.

The president said Tokyo and Washington were “getting close” to a deal that would address the U.S. trade deficit. The U.S. had a deficit of $56.8 billion in goods and services with Japan in 2018, according to the U.S. Trade Representative.

“With this deal we hope to address the trade imbalance, remove the barriers to United States exports and ensure fairness and reciprocity in our relationship,” Trump said.

The president’s state visit comes amid tensions with carmaker Toyota over potential auto tariffs. Trump has repeatedly threatened Japanese and European carmakers with tariffs.

Earlier this month, Trump postponed a decision on car levies for up to six months and directed U.S. Trade Representative Robert Lighthizer to seek trade agreements with Tokyo and Brussels.

But in his decision to postpone tariffs, the president made clear that he views car imports as a potential threat to U.S. national security. That provoked a strongly worded statement from Toyota.

The Japanese carmarker said Trump’s view of car imports “sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued.”

Toyota’s president was present during the meeting with Japanese business leaders on Saturday in Tokyo. During the meeting, Trump recognized Toyota for its investments in the U.S. and called for Japanese businesses to invest more.

“If you join in seizing the incredible opportunities now before us in terms of investing to the United States, I think you’re going to see tremendous return on your investments,” he said.

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