Daily News Digest- 8th Oct'14

Thought of the Day:

Today in History:

Following made the Headlines:

India:

• Flipkart Attempts to Bridge Trust Deficit: A contrite Flipkart has moved swiftly to limit damage after an outcry over the manner in which it handled what was billed as India's biggest online sale ever on Monday. The founders of Flipkart apologised profusely to customers in a widely-publicised letter and gave senior employees a private dressing down after a flood of complaints from customers disappointed that they were unable to cash in on a promised shop ping bonanza. “We know that your experience was less than pleasant. We did not live up to the promises we made and for that we are really and truly sorry,“ Sachin Bansal and Binny Bansal wrote in an email to customers. Flipkart claimed it sold products worth $100 million (. `600 crore) within 10 hours on its so-called `Big Billion Day' sale that was modelled after the Black Friday shopping bonanza in the United States. While shopping volumes rose, Flipkart realised that it was unable to keep pace with demand.Technical snafus, lack of adequate preparation and in some cases misleading price information, combined to anger customers who vented their frustration on social media. By being quick to own up its mistake, Flipkart is doing the right thing, said Rishikesha T Krishnan, director and professor of strategy at Indian Institute of Management in Indore. “This is a good first step to win back customer loyalty,“ he said. Sources told ET that Sachin and Binny summoned the senior management for a talking-to on Tuesday.The top team was in meetings all day long trying to assess the damage and the reason for the let-down on what was meant to be one of the biggest days for the seven-year-old company. Sachin, the CEO, wrote a separate letter to employees where he said “Binny and I take complete responsibility for yesterday's events.“ The focus of the company, he said, should now turn to ensuring that all customer problems from Monday are resolved and delivery of orders is “superlative.“ This, however, could be a challenge and industry experts said customers must brace themselves for likely delays.

• Samsung, Apple Jostle for Ad Space: The stakes couldn't be higher for Apple and Samsung this Diwali as they unleash their newest devices -the iPhone 6 and 6 Plus will be ranged against the Galaxy Alpha and Note 4. Both companies will hurl almost everything they have in their advertising budget into a short, sharp burst of promotions as they seek to influence buyers seen to be emerging from slump-induced austerity -car sales for instance have picked up in the last five months. Diwali falls on October 23. As much as ₹ 200 crore will be pumped into ads for the four products. According to trade partners and media planners, Samsung has lined up around ₹ 100-120 crore on a big-bang launch of the two devices. Apple is going to spend around 7080 crore along with its two telecom partners, Reliance and Airtel. Experts say this is among the highest amounts spent on new launches in India's consumer goods industry. The iPhone 6 has a 4.7-inch screen, the same as the Galaxy Alpha, while the 6 Plus has a 5.5-inch display compared with the Note 4's 5.7-inch size. The South Korean company has booked front-page jackets in all leading newspapers and primetime spots on television channels well in advance, forcing Apple to focus more on digital media and below-the-line activities such as in-store branding and product demonstrations that will be extended even to some small, neighbourhood stores. Apple's media agency and company officials are also negotiating for prime space in leading newspapers. “Samsung has progressively increased their booking of advertisement spots during Diwali and they have indeed picked up huge ad inventory,“ said a senior sales executive at a leading broadcaster with multiple television channels across genres. To be sure, Samsung needs to push products harder to gain an edge over Apple because of the US company's skill at creating a media splash and generating public interest in its products. Meanwhile, Samsung also needs to counter the slowing de mand for high-end phones, given the perception that newer devices in the high-price band only offer incremental advances. That trend has been bolstered by Chinese companies such as Xiaomi offering phones with advanced features at lower price tags. Such phones also include those made by Motorola and Micromax besides the recently launched Android One handsets.

• Zomato Set for a Billion-Dollar Meal: Online restaurant guide Zomato is in advanced talks with global private equity and strategic investors to raise about $200 million (around ` . 1,200 crore) by December, potentially catapulting the Gurgaon-based company into an elite club of Indian digital start-ups with billion-dollar-plus valuations.Multiple sources in the start-up investor community told ET that PEs Steadview Capital and Tiger Global have been in talks with Zomato. Hong Kong-based hedge fund Tybourne Capital Management is also in discussions with the eight-year-old company as are a number of strategic investors. Existing investor Sequoia Capital, which had raised $530 million through its fourth India-focused fund, is also likely to participate in the latest funding round, they said, adding that the exercise could see Info Edge, an early backer of Zomato that still owns a 50% stake, further pare its stake in the company. Zomato declined to comment on any funding related talks. Info Edge founder and the largest investor in Zomato, Sanjiv Bikhchandani, did not respond to ET's mails or SMS messages seeking comments on the story. Tybourne Capital also did not revert to ET's emails for the story. Steadview Capital and Tiger Global were not immediately available for comment. Tybourne, Steadview and Tiger Global are already investors in Indian start-ups. Sequoia Capital, which led the $37-million round of funding in November last year, did not reply to an email from ET seeking comment. If successful, the fundraising will be the largest investment made by investors in an Indian non-retail, consumer internet venture, surpassing the $90 million raised by Mumbai-based online and mobile classifieds Quikr in March earlier this year. Zomato, which is estimated to end the year with revenues of Rs 100 crore, is aiming for a valuation of more than a billion dollars (Rs 6,000 crore) in this funding round, although sources in the investor community pegged the number at about $500 million. The last round of fund raising in November 2013 valued the company at $165 million. Online retailer Flipkart saw its valuation vault from $2.6 billion to $7 billion in a matter of two months between May and July this year, underscoring the red-hot nature of India's consumer internet space. If Zomato is successful at achieving $1 billion, it will join an elite group of digital world start-ups to reach this crucial valuation milestone. Currently, just seven Indian startups -Flipkart, JustDial, Snapdeal, MakeMyTrip, Info Edge, Mu Sigma and InMobi -are valued more than $1 billion.

• Foreign airlines seek more market access via Air India: Foreign airlines are seeking greater market access from India, in return offering a share of their onward traffic to overseas destinations served by state-owned Air India. TAP Portugal, LOT Polish Airlines, Air New Zealand, Turkish Airlines, Egypt Air, Ethiopian Airlines, Adria Airways - The Airline of Slovenia, Air Astana of Kazakhstan and Siberia Airlines, which operates as S7 Airlines, have initiated moves for code sharing arrangements with Air India. Code sharing allows an airline to book passengers on the flights of a partner airline and provide seamless transport to multiple destinations where it doesn’t fly. “We are planning several code shares over the next few months. Many are on the brink of being sealed. Some airlines are seeking additional rights which will require change in air service agreements,” said an Air India official, who declined to be named. Air services agreements, which are signed between governments, would need to be tweaked to allow more services or seats on airlines that ply between destinations in any two countries.

• M&M to Buy 51% in Peugeot Motorcycles: Mahindra Two Wheelers, a part of $16.5-billion Mahindra Group, has entered into a binding bid to acquire 51% stake for ₹ 216 crore, or 28 million, in Peugeot Motorcycles, an affiliate of the 54-billion PSA group. The move is seen as an attempt by the Indian company to grow its fledgling two-wheeler business. The announcement on Tuesday came after several months of negotiation with French carmaker Peugeot. The funds will be infused subject to “Works Council consultation,“ as part of the employee dialogue process and after obtaining a green signal from the anti-trust law. According to senior M&M officials, out of the 28 million, 13 million will be spent on secondary sale of shares from Peugeot of PSA, and 15 million through a fresh issue of shares to M&M. Pawan Goenka, ED, automotive business at M&M said the legal process will be completed in three months. Once the formalities are completed, the new board will have 3 nominees from Mahindra Two Wheelers and 2 from PSA Group. Interestingly, the CEO of the Scooter business at Peugeot is Fredric Fabre, who was leading Peugeot's re-entry into India, two years back. Fabre will continue as the CEO of the company. Goenka says Peugeot is a good fit to Mahindra Two Wheelers. “It is a strong brand, which can sit above Mahindra Scooters. The four areas M&M-Peugeot will work on are building the brand, expedite global expansion, investing in product portfolio and bring together synergies in sourcing and selling,“ he said.

• Hero Cycles Calls Off Deal with German Co MIFA: Hero Cycles, the world's largest bicycle maker by volume, has called off its proposed acquisition of Germany's leading cycle maker Mitteldeutsche Fahrradwerke AG (MIFA) citing non-fulfilment of a condition of the agreement by the company. The two manufacturers had on August 22 entered into a definitive agreement, under which the Delhi-based Hero Cycles was expected to invest about 19 million euros (about Rs 160 crore), including working capital of 4 million euros, in buying a little over 60% stake. The proposed acquisition, Pankaj Munjal-owned company's first attempt to venture out of India, was aimed at acquiring cutting-edge technology and entering the premium markets in Europe and elsewhere. “Hero Cycles and MIFA entered into binding agreement in August 2014 and MIFA had to fulfil closing conditions for Hero Cycles to invest in the company maximum of 15 million euros for shareholding in MIFA. However, MIFA could not complete the closing conditions and has filed for insolvency,“ Rohit Maheshwari, chief financial officer of Hero Cycles said.

• After Americans, Russians Now Woo Indian Start-ups: Russia's largest global technology hub, Skolkovo Innovation Centre, is on a hunt in India to incubate start-ups in areas such as big data analytics, biomedical devices and Internet of Things, a technology where devices communicate with each other intelligently . It is also looking to incubate companies in areas as diverse as energy management, space and nuclear technologies. “I am not after dotcom or ecommerce. We are really trying to support the core technologies, especially in the space where venture capitalists are not interested,“ said Igor V Bogachev, vice-president and executive director IT cluster at Skolkovo Foundation, the principal agency responsible for the innovation centre.“We want Indian innovators and technology entrepreneurs to partner directly with Russians.“ Founded in 2010 and led by Russian prime minister Dmitry Medvedev, the foundation aims to develop and commercialise advanced technologies. With a $3.9-billion (about ₹ 24,000 crore) budget, three Nobel laureates, over 1,000 companies and start-ups, the Skolkovo In novation Centre is Russia's largest supporter of innovation and a new global technology hub. Bogachev said Indian companies can get grants between $50,000 and $10 million. The residents of the innovation space also get co-working space, financial and technical support. He conceded that Russians are great innovators but are poor marketers of technology , unlike the Silicon Valley . “The entrepreneurial system in India is much better.The entrepreneurial history is too weak here,“ said Kirill Kaem, vicepresident and executive director of the BioMedical Cluster at Skolkovo.“We are trying to teach scientists to make money .”

• Paytm May Raise up to $200 M from PE Firms: India's leading mobile commerce player Paytm has mandated investment banks Citi and Goldman Sachs to raise $150200 million from private equity firms for a minority stake, making it the latest online player to venture into fund raising for growth capital at a time when the e-commerce market in India is booming. Vijay Shekhar Sharma, chairman and managing director of One97 Communications that operates through the Paytm brand, said SAIF Partners, which owns 40% in the company , will do a pro-rata investment ­ put in 40% of the funds raised while the rest of the funds will come in from new investors. Sharma did not reveal names of private equity players who have been approached. He though added that the investment will close before the end of the year. Sources privy to the developments said the holdings of all existing shareholders, including Sharma, will get diluted after this round of fund raising.Other than SAIF Partners, Sil icon Valley Bank, SAP Ventures, Intel Capital and Reliance Capital are the financial investors in the company . Paytm is the largest mobile wallet company and also the largest mobile commerce, or m-commerce, company in terms of number of transactions with over 14 million a month, including mobile recharges, tickets and shopping deals. With over 20 million active users, it has an annualised transaction value of $400500 million.

• Startups Cash in on Mobile Gaming Fever: An influx of venture capital, the right mentoring and a number of success stories have generated a surge in interest in the gaming business. An ever-increasing number of smartphone users and better bandwidth capabilities have pushed a number of startups to try their hand at mobile gaming.India now has at least 250 gaming companies, a big jump from the 20-30 companies that were present a few years ago, according to game developers. Moonfrog Labs, a Bangalorebased company founded by former Zynga executives, is one such example. The company's multi-player casino game Teen Patti is nearing a million downloads, a ceiling few Indian companies have been able to break.“The markets in Japan, US, China are all saturated. There is a great growth story here,“ said Tanay Tayal, CEO of Moonfrog Labs. “We have experience in social games for international products. This is the right time to be here.“

International:

• KFC owner Yum cuts profit outlook on China food scare: Yum Brands, the US owner of fast food chains KFC and Pizza Hut, cut its full-year profit forecast after a second food scare hurt its sales in China. The firm now expects earnings per share to increase up to 10% this year, compared to its previous projection for growth of at least 20%. The revised projection comes as sales in China slumped 14% in the last quarter, after a former supplier was accused of selling expired meat. Yum shares closed 2.3% lower in the US. Yum runs more than 6,400 restaurants in China, making it the largest foreign restaurant chain operator in the country. China is also Yum's biggest market - it makes about 75% of its revenue from its operations there. Its profit more than doubled to $404m (£251m) in the last three months, which was higher than analyst estimates. However, revenue missed forecasts, falling 3.2% in the third quarter to $3.35bn. Yum said the latest food scare had "shaken consumer confidence and impacted brand usage".

• Canberra ranked 'best place to live' by OECD: The Australian Capital Territory of Canberra has been ranked the best place in the world to live, in to a report by the Organization for Economic Cooperation and Development (OECD). Canberra led the regional ranking while Australia topped the overall country rankings, followed by Norway. The OECD ranked 362 regions of its 34 member nations in its survey. It used nine measures of wellbeing, including income, education, jobs, safety, health and environment. Five Australian states including Sydney, Melbourne and Perth were also in the top 10. Other top-scoring places included the states of New Hampshire and Minnesota in the US. On the other end of the scale, Mexican states constituted all 10 of the bottom regional rankings. On a country level, Mexico, Turkey, Hungary, Poland, Slovakia were ranked as the hardest places to live.

• AltHouse Opens in Downtown L.A.: After honing her skills as a merchant at American Rag Cie and Planet Blue, Jennifer Althouse is hanging her own style shingle in downtown Los Angeles. Althouse, who was once the head buyer for American Rag and served as director of merchandising and denim buyer for Planet Blue, unveiled a 1,650-square-foot shop fusing vintage inspiration with modern execution on Oct. 1. Dubbed AltHouse, the store signals that the retail renaissance in downtown Los Angeles is adding independent boutiques that are following the path cleared by Acne Studios, Aesop and Urban Outfitters on Broadway. Soon, AltHouse will be joined by Skingraft, an edgy leather label that is relocating its shop from four blocks away. By settling on the corner of Eighth and Main Street, just around the corner from Broadway, Althouse saves on monthly rent, paying $3 a square foot, or about a third of the cost for a lease on Broadway.

• Fast Retailing Names John C. Jay as Global Creative President: John C. Jay, a former executive at advertising firm Wieden + Kennedy, has been tapped by Fast Retailing to oversee all creative aspects of the retailer’s business. The appointment was made by Tadashi Yanai, Fast Retailing’s chairman, president and chief executive officer, at a press conference at the company’s corporate headquarters on Tuesday. Yanai discussed Fast Retailing as a global brand, and said creativity and innovation are the keys to its growth. His appointment of Jay, he said, demonstrates his commitments to these two ideas. Jay originally met Yanai when he was heading up the Tokyo office of Wieden + Kennedy, a firm for which he has worked for the majority of his career. His most recent position there was as global executive creative director, partner and trustee from 2003 through 2012. He remained a partner and trustee until this year.

• Wal-Mart Moves Forward on Made in USA Push: Wal-Mart Stores Inc. has been making good on its pledge to spend $250 million over 10 years on products made in the U.S. Since the initiative was launched in January 2013, the retail giant has been forging ahead. In July, Wal-Mart held its first open call for products made in the U.S. The event attracted 500 suppliers and generated 800 meetings. Buyers had their pencils out. “Over half of the 800 meetings resulted in some form of move forward,” said Michelle Gloeckler, executive vice president of the consumables division and U.S. manufacturing lead for Wal-Mart. In August, Wal-Mart held its second manufacturing summit in Denver, with the goal of boosting American manufacturing.

• Chanel to Get Third 'C'? Stake in Coty Offered: The Wertheimers of Chanel have a new relationship with another low-profile billionaire family — the Reimanns of Germany. In a deal that surprised many observers, Coty Inc. on Tuesday said it planned to acquire the masstige makeup brand Bourjois from Chanel in an all-share deal worth about $239 million. The agreement not only focuses Chanel Inc. on what it knows best — pure luxury — but also gives the French luxury house a 4.2 percent stake in Coty. Now everyone is puzzling what Chanel plans to do with the holding. “I am not surprised that Coty [might make] an acquisition, as it’s always on the hunt for deals. I was surprised that Chanel is a seller, but with investment into Coty through stock they now can ride the upside on the whole company — [and] that may have been a key consideration,” said the industry source.

Tech:

• iPhone 6 Shines on Booking Day One: Apple began taking pre-orders for its much-awaited iPhone 6 and iPhone 6 Plus in India on Tuesday, with confusion over pricing as well as the mode of bookings and a fierce war among large format retailers looking to lure potential buyers. The MobileStore was taking preorders for a minimum ₹1,000 but for delivery between October 18 and 24, while those booking with the full amount were assured of delivery latest by October 18. Tata Group’s Croma in central Delhi was taking pre-orders at 30% of the retail price and promising delivery on October 18, while Spice’s Hot Spot was taking orders for just ₹500, even as customer inquiries for pre-bookings poured in. These retailers are offering EMI schemes as well. Executives at the stores declined to put a number to the pre-booking orders received on Day One. Two large format retail stores in south Delhi refused to take pre-orders, citing lack of clarity on the stocks that they will get from Apple. “I have advised customers to come back on October 15 evening or 16, by when I would have more clarity on what stocks I will get. If I take a specific order and the money for it today, and don’t get it from Apple, I will face an awkward situation,” the owner of one of the two stores said.

• Nokia Plant to Stop Ops from Nov 1: Nokia will suspend production of handsets at its Sriperumbudur plant from November 1, the company has said, after Microsoft decided to terminate their contract manufacturing pact from that date. The Finnish company , however, will continue paying wages to the 1,100 employees till a decision is taken to shut down the factory. Although software major Microsoft had purchased Nokia's global handsets and services business earlier this year, the Sriperumbudur factory was not part of the deal owing to an assets freeze order on the plant over a ₹ 21,000crore tax dispute with Indian authorities. Microsoft continued sourcing handsets ­ mainly the popular Asha series devices from the factory on a contract basis, but with its recent decision to cull the Asha series, has now decided to end the agreement. “Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from November 1. In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility ,“ Nokia said in a statement on Tuesday . Sriperumbudur is close to Chennai.

• Telcos Unleash Festive Offers for Data Plans: Reliance Communications, Tata Teleservices, MTS, Vodafone India and Idea Cellular are rolling out cheap data plans and freebies, hoping to add more new customers this festival season. Anil Ambani-headed RCom is offering double data limit on some 3G recharges, unlimited use of Facebook, Whatsapp and Twitter, free talk-time equivalent of a 2G data recharge, and double talk-time on some voice recharges. Sistema Shyam, which operates under the MTS brand, and Tata Teleservices are offering a discount on dongles if customers opt for a post-paid plan. Vodafone India, which is trying to make a mark in the Kar nataka circle, is offering a free dongle (data card) with a two-month subscription on a post-paid data plan with a .` 650 monthly rental. Idea Cellular is offering 16GB data and a subscription of Idea TV free for four months to customers who pick a smartphone from the over 20 hand sets the company is selling. “Conversation with consumers has been flipped over and now voice is the add-on service, not data, as was the position last year,“ said Kamlesh Bhatia, research director, Gartner. Analysts say that making data central to the plans compels consumers to use it as it is the primary service for which the plan has been purchased.

• Yahoo Lays Off Several Hundred Engineers In India: Yahoo is slashing hundreds of engineering jobs in its India Software Development Centre (SDC) but is offering jobs in the U.S. to some of the affected workers. Reports conflict as to how many employees will be laid off, but the consensus seems to be somewhere between 400 and 600. Bloomberg claims as many as 40% of the laid-off employees will be offered jobs in the U.S., but Quartz puts that number at less than 5%. We reached out to Yahoo to clarify and will update this post when we get a response. Marissa Mayer, Yahoo’s CEO, famously began her tenure at the company by eliminating telecommuting, insisting employees work from Yahoo offices. This may be an extension of that philosophy on a global scale. As Mayer said in an email to employees announcing the telecommuting decision, “We need to be one Yahoo and that starts with physically being together."

• Meru cab launches in-app payment system: Radio cab service, Meru, has introduced an all-new mobile app called, Cab Wallet, which according to the company aims at revolutionising travelling experience into radio cabs by offering cashless taxi ride. Meru has tied up with digital payment solution provider Citrus Pay to offer this feature. The radio cab service provider has decided to go all mobile with features such as one touch booking, tracking your cab and confirmed booking up to seven days in advance. Some features have been introduced considering safety for women such as customer’s location tracking and sending a safety alert in case of distress. Speaking about the app, Siddhartha Pahwa, CEO, Meru Cabs, said, “We see increased adoption of smart phones and we understand how a good Cab App makes the travel experience enjoyable. The Meru Cabs App gives control and convenience in the hand of the customer.” In order to use the service, users have to load cash into their mobile wallet using netbanking, debit or credit cards. Once this is done customers can order a Meru cab using their application. If the users’ GPS is on, the app will note down their starting point, and calculate the total distance covered. Additionally, the app will also track the live positioning of the cab, suggest routes and inform the estimated time travel. 

• Twitter sues US government over spying: Twitter has sued the US government over surveillance laws. Under current regulations, Twitter cannot reveal certain information about government requests for users' data relating to national security. Twitter argues that this violates the right to free speech, as defined by the First Amendment to the US Constitution. The firm said it brought the case in an effort to force the government to be more transparent about personal data requests. "It's our belief that we are entitled under the First Amendment to respond to our users' concerns and to the statements of US government officials by providing information about the scope of US government surveillance," Twitter's lawyer, Ben Lee, wrote in a blog post. Twitter brought the action against the US Department of Justice and the Federal Bureau of Investigation in a northern California court on Tuesday. In April, Twitter submitted a Transparency Report to the US government for publication; however, so far officials have denied the firm's request to share the full report with the public.

• Microsoft creates room-based gaming technology: Microsoft researchers have shown off a prototype gaming system that turns any room into an interactive, augmented reality display. Called RoomAlive it uses projectors and depth cameras to work out the dimensions of a room so any surface within it can be used as a display on which to show images. The ceiling-mounted cameras keep an eye on people moving round in the space to work out how they interact with projected objects. Demonstrations created by the research team show players shooting and hitting creatures appearing on walls or dodging virtual projectiles fired across the room. One demo shows a player controlling a small projected robot that shoots foes appearing from behind furniture. Another shows virtual creatures scurrying over surfaces in the room and projects video that appears to turn a carpet into a fast flowing river.