The Week Ending Feb. 14
Topping this week’s roundup of those having a rough week is Huawei, which faces fresh charges of racketeering and stealing trade secrets.
Also making this week’s list is everyone connected to the Mobile World Congress event in Barcelona, which was canceled this week over growing worries about the coronavirus epidemic. Apple is on the list because it might face iPhone manufacturing problems in China – also due to the coronavirus. And once high-flying smartphone startup Essential Products shut its doors.
Some of the biggest companies in the industry, including Amazon, Alphabet and Microsoft, face the possibility that they might have to undo some acquisitions from the last decade, with the news that the Federal Trade Commission is scrutinizing past acquisitions.
Not everyone in the IT industry was having a rough go of it this week. For a rundown of companies that made smart decisions, executed savvy strategic moves – or just had good luck – check out this week’s Five Companies That Came To Win roundup.
Huawei Charged With Racketeering, Conspiracy To Steal Trade Secrets
The U.S. Department of Justice this week unveiled a superseding indictment against Huawei Technologies, charging the Chinese communications equipment giant and a number of its U.S. subsidiaries with violating the RICO (Racketeer Influenced and Corrupt Organization) Act and with conspiracy to steal trade secrets.
The new 16-count superseding indictment includes charges in an indictment handed down in January 2019. A superseding indictment replaces an earlier indictment, typically when new evidence in a case comes to light that necessitates the filing of new charges.
Huawei has called the new charges “unfounded.”
The earlier indictment, which included attempted theft of trade secrets and wire fraud, stemmed from the alleged theft of technology related to a T-Mobile-designed robotic device for testing smartphone durability.
The latest indictment charges that Huawei and several U.S. and China-based subsidiaries misappropriated intellectual property from six U.S.-based technology companies. The intellectual property included trade secret information and copyrighted works including source code and user manuals for Internet routers, antenna technology and robot testing technology, the DOJ alleges.
Alphabet, Amazon, Apple, Facebook And Microsoft Face FTC Probes On Past Acquisitions
Industry giants Alphabet (Google’s parent company), Amazon, Apple, Facebook and Microsoft have made many acquisitions in recent years – some of them worth billions of dollars. Now some of those acquisitions could prove problematic.
The Federal Trade Commission is requesting information from the five companies about “hundreds” of their past acquisitions that didn’t undergo regulatory scrutiny at the time, but now could face possible “unwinding” by the FTC.
The FTC issued so-called 6(b) special orders requiring that the technology companies hand over information and documents on the terms, scope and purpose of the relevant acquisitions between Jan. 1, 2010 and Dec. 31, 2019. Section 6(b) of the FTC Act authorizes the commission to conduct wide-ranging studies that don’t have a specific law enforcement purpose.
It’s possible that some acquisitions made during that 10-year time period could face unwinding, FTC chairman Joe Simons said. “If, during this study, we see that there are transactions that were problematic, all of our options are on the table,” he said. “It’s conceivable we could go back and initiate enforcement actions to deal with those transactions.”
Mobile World Congress 2020 Called Off Due To Coronavirus
It was a tough week for anyone associated with Mobile World Conference 2020, which was canceled this week after some of the largest communications companies pulled out of the event over mounting fears of the coronavirus epidemic.
Earlier in the week a number of major technology companies said they were backing out or scaling back their attendance at the show in Barcelona, the world’s largest telecommunications show, because of the coronavirus. They included Cisco Systems, F5 Networks, Facebook, Ericsson, Intel, LG and Sprint. Amazon Web Services canceled its plans to exhibit or participate in MWC citing the need to protect “the wellbeing and safety” of its employees, customers and partners.
Initially the GSM Association, the organization that runs MWC Barcelona, said it was implementing screening measures to help mitigate risks and asking attendees to self-certify that they had not come into contact with anyone potentially infected by the virus.
But by mid-week, with so many of the biggest companies bowing out, the show organizers threw in the towel and opted to cancel the event altogether.
Apple Facing Further iPhone Production Constraints Due To The Coronovirus
And in more news about the havoc the coronavirus is having on the IT industry, Apple is facing the prospect of limited production of its iPhones in China because of the epidemic.
Production of the iPhone 11 and other models in China is not resuming to the extent that Apple had hoped as the coronavirus epidemic continues in that country. While contract manufacturer Foxconn has received permission to re-open two key factories in Zhengzhou and Shenzhen, only 10 percent of employees have returned to work.
That has led industry watchers to slash iPhone production forecasts, including for the flagship iPhone 11 series. The production constraints could also impact Apple’s expected launch of an affordably priced, small screen iPhone model – possibly known as the iPhone SE 2.
Smartphone Startup Essential Products Shuts Down
Essential Products, the widely hyped smartphone startup launched in 2015 by Andy Rubin, the former Google executive generally seen as the father of the Android mobile OS, has closed its doors.
This week, in a blog post, the company said it had “made the difficult decision to cease operations and shut down.” The company said it had “no clear path to deliver” to market the GEM smartphone handset the company has been developing for several years.
The high-visibility company raised $330 million in financing and once had a market value of $1.2 billion. But the premium smartphone and accessories the company launched in 2017 sold poorly, according to a New York Times story, and the company has struggled to field new products, despite several announcements.