The Washington Post - 05.11.2019

A18 EZ RE THE WASHINGTON POST.TUESDAY, NOVEMBER 5 , 2019

for smartwatches that preceded even the Apple Watch. Most observers were not con- vinced that Google is in the deal entirely to sell devices. “This is not a hardware play,” said Ramon Llamas, an IDC analyst. “This will feed into both companies’ health- care strategy and fill in data gaps.” He noted that Fitbit collects data like hours of sleep, heart rate and steps taken — information that is

otherwise difficult to amass. He said Google and others have long envied the success of Apple, in particular, in marketing devices that consumers are passionate about. Amazon, for instance, took a run at the smartphone business with little success, forcing a $170 million write-down in 2014. (Amazon founder and chief executive Jeff Bezos also owns The Washington Post.)

Fitbit faces its own uphill bat- tle. At the end of last year, Fitbit commanded just 12 percent of the smartwatch market, compared with 50 percent for Apple, which launched its Apple Watch in April

And Fitbit appears to be
losing favor with consumers, in-
cluding weak sales of its touted
Versa Lite device. Fitbit has been
discounting devices to drum up
business and earlier this year

BY MARIE C. BACA

san francisco — Apple said
Monday it will spend $2.5 billion
on a housing affordability and
availability campaign, the latest
in a string of pledges by tech
giants to try to ease an escalating
crisis in the Bay Area and else-
where.
Apple’s commitment includes
a $1 billion affordable housing
investment fund for California
and other entities and a $1 bil-
lion first-time homeowner mort-
gage assistance fund, among
other measures.
Apple’s pledge doubles the
$2.5 billion committed this year
by tech giants Facebook, Google
and Microsoft to help with hous-
ing.
But some housing advocates
say the billions of dollars
pledged recently by the tech
giants are too little, too late. Tech
companies have made afford-
able housing commitments in

the past only to see many projects stymied by disagreements with municipal governments. The median market rent in San Francisco proper rose nearly 38 percent between 2012 and 2017, according to online housing marketplace Trulia. In Sep- tember, that came to $4,318 in the city and $3,168 in the metro- politan area, Trulia researchers say. “I’m happy to see that they’re making strides, but it has had an impact on our communities for as long as 10 years and many have already moved,” said Mary Prem, executive director of the Housing Equality Law Project, a Bay Area-based nonprofit orga- nization. “They’re creating the problem, and nonprofits like us have to bear the cost of counsel- ing the tenants.” Where tech has exploded, so has the cost of living. That’s because big companies offer high-paying jobs to attract the

best talent. This, in turn, pushes up rents, home prices and other basic costs in the area. That means an increasing number of low- or middle-income renters, and homeowners can’t afford to stay. The San Francisco Bay area offers a stark example of this dynamic. A family of four making $117,000 annually is consid- ered low-income under the De- partment of Housing and Urban Development’s guidelines for the region. The high cost of living in the Bay Area and in other tech hubs has meant a choice for many between long daily commutes from more affordable neighbor- hoods and leaving the area entirely. As a result, tech giants have been throwing money at the problem. Facebook and Google have announced $1 billion Bay Area-focused housing cam- paigns, while Microsoft commit-

ted $500 million toward affordable housing in the Puget Sound region. Google has proposed a new mixed-use development in San Jose, which would include between 3,000 and 5,900 units of housing. Critics have said the proposal lacks detail on how many units would be devoted to affordable or low-income housing. But they’ve also decided to move elsewhere. Amazon has opened 16 hubs around the Unit- ed States and is building a second headquarters in North- ern Virginia. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.) Apple last year said it would expand in cities including Aus- tin, Pittsburgh and Boulder, Colo. Google said it was spend- ing more than $1 billion to build a campus in New York City. Meanwhile, Facebook CEO Mark Zuckerberg said at a recent

live-streamed company event that housing shortages and traf- fic concerns were two reasons the company would focus most of its hiring in locations outside the Bay Area. “The infrastruc- ture here is really tapped,” he said. In a statement Monday, Apple CEO Tim Cook said the company has a “profound civic responsi- bility” to ensure that Silicon Valley remains a place where people can afford to live and work. The company also has said the housing crunch has affected its ability to recruit and retain employees in the area, particu- larly janitors, receptionists and other lower-wage workers. It is unclear exactly how many low-income housing units will come out of Apple’s commitment, though the $1 billion housing investment fund is ear- marked for projects focused on housing for people with incomes that are very low to moderate.

Politicians are also proposing plans that would force tech companies to contribute more to affordable housing. Last year, the Seattle City Council consid- ered and ultimately rejected a tax on major employers such as Amazon that would have funded efforts to end homelessness. This year, Amazon said it will spend $8 million to support affordable housing projects in Seattle and Virginia, in addition to $130 million on homelessness projects over the next decade. Still, tech giants have been helpful in speaking out on the issues of housing inequality in the Bay Area and nationally, said Laura Foote, executive director of the housing advocacy group YIMBY Action. “If we’re going to yell at employers in the Bay Area, I’ve got a long list,” she said. “Tech is in the middle of the list, maybe the bottom third.” [email protected]

Apple says it will spend $2.5 billion in effort to ease Calif. housing crunch

BY HANNAH KNOWLES AND TAYLOR TELFORD

Ousted CEO Steve Easterbrook
cannot take a job with a McDon-
ald’s rival for two years, according
to a regulatory filing Monday, one
day after the company an-
nounced he had shown “poor
judgment” by engaging in a con-
sensual relationship with an em-
ployee.
Easterbrook’s separation
agreement temporarily prohibits
him from working for such com-
petitors as Burger King, Yum
Brands and Starbucks, as well as
convenience store giants such as
7-Eleven and Wawa. He will re-
ceive 26 weeks of pay, though the
value of the severance package
was not immediately clear. East-
erbrook earned nearly $16 mil-
lion in 2018, including a base
salary of $1.35 million.
The board of directors fired
Easterbrook on Friday after con-
cluding he had violated the com-
pany’s policy against manager
relationships with direct or indi-
rect reports and announced the
decision Sunday. Easterbrook
was replaced by Chris Kempczin-
ski, previously the president of
McDonald’s USA.
Meanwhile, McDonald’s an-
nounced the departure of Chief
People Officer David Fairhurst on
Monday, effective immediately.
The company declined to com-
ment further, calling it a person-
nel matter.
Easterbrook joins a growing
list of chief executives forced out
over their personal relationships
as more companies implement
rules against dating subordinates
in the #MeToo era.
“We are seeing substantially
more interest” in these policies,
Jonathan Segal, a Philadelphia-
based employment lawyer, told
The Washington Post last year,
after Intel’s chief executive
stepped down for breaking his
company’s rules with a consensu-

al relationship. “I’m seeing more companies ask about them,” Segal said. “I’m seeing more companies add them to their anti-harassment policies. I’ve seen more companies look at them in their codes of conduct.” McDonald’s has not shared further details of the relationship that led to the firing. Easter- brook, a former head of the company’s U.K. operations, is di- vorced, according to the Sunday Times of London. In an email to employees, East- erbrook called the relationship “a mistake” and said he agreed with the board that “it is time for me to move on.” Desiree Moore, a Chicago- based lawyer acting as a spokeswoman for Easterbrook, said he is “deeply grateful for his time at McDonald’s.” “He acknowledges his error in judgment and supports the Com- pany’s decision,” Moore said, add- ing that Easterbrook will not be commenting further. Easterbrook became chief executive in 2015 as McDonald’s struggled to keep its customers. After the chain announced a drop in U.S. sales as well as a 33 percent decline in global profit in the first quarter of that year, he promised to “better address today’s con- sumer needs, expectations and the competitive marketplace.” Piper Jaffray downgraded Mc- Donald’s stock after news of East- erbrook’s departure broke, noting “the potential lack of momentum and time involved in formalizing a new team.” McDonald’s, a Dow compo- nent, shed nearly 3 percent Mon- day. The stock has soared under Easterbrook’s leadership, and the company retains its spot at the top of U.S. fast-food sales, even as the industry faces challenges. Easterbrook propelled McDon- ald’s from a tough time, said Jonathan Maze, editor of Restau- rant Business. He improved sales

— still on the upswing this year — and restructured the company, speeding up decision-making and cutting hundreds of millions in overhead costs, Maze said. He also embraced technology in the form of in-store kiosks, online-order delivery and, in March, a $300 million start-up acquisition meant to speed up drive-through services. “He’s been pretty consequen- tial,” said Maze, who says that Easterbrook’s ouster signals that companies are taking relationship policy violations “a lot more seriously” than they used to. Kempczinski became head of McDonald’s USA in 2016. Easter- brook told staff that Kempczinski was “an important partner to me over the last four years and... the ideal person to take on the role of CEO.” In his new role, Kempczinski will receive a base salary of $1.25 million. He could earn as much as $2.1 million in annual bonuses, according to Securities and Exchange Commission fil- ings. “Chris was instrumental in the development of the Company’s strategic plan, which has enabled global growth and leadership, and has overseen the most com- prehensive transformation of the U.S. business in McDonald’s his- tory,” Enrique Hernandez Jr., chairman of the chain’s board of directors, said in a statement. In an interview with the Wall Street Journal, Kempczinski said that he will continue Easter- brook’s investments in technology and that he looks forward to discussing franchisees’ concerns. “There isn’t going to be some radical, strategic shift,” he told the Journal on Sunday. “The plan is working.” [email protected] [email protected]

Rachel Siegel contributed to this report.

Fired McDonald’s CEO barred from

working for any rival for 2 years

BY GREG BENSINGER

Tech hardware is a notoriously
difficult business. Companies
that were once atop the world like
Nokia and Motorola quickly saw
favor shift in the direction of
rivals like Apple and Samsung.
Google, reliant on online ad-
vertising for about 84 percent of
revenue, has nonetheless chased
the device business for years. Less
than two years after buying the
Motorola brand, with the promise
of rolling out a robust line of
smartphones and other devices, it
sold it in early 2014 for less than a
quarter of what it paid. It also
bought phonemaker HTC’s de-
sign team for $1.1 billion early last
year.
Google’s latest plan to be a
bigger hardware player, the pur-
chase of fitness tracker Fitbit an-
nounced Friday, fits into what
analysts say is a quixotic dream to
climb the market-share ladder
with products like Pixel smart-
phones, smart speakers and Nest
thermostats.
Analysts said the $2.1 billion
acquisition will bolster Google’s
nascent health-care business,
providing it with valuable data
about people’s waking (and sleep-
ing) lives. Together with its Pixel
smartphones and Android mo-
bile phone software, Fitbit’s data
can provide a nearly complete
picture of users’ entire day.
That’s sure to help inform
Google’s core advertising busi-
ness, even though the company
said it will not sell ads as a direct

result of the Fitbit deal. “This is about devices, not data,” said Google spokeswoman Heather Dickinson. “Devices are a different business model. We are buying Fitbit to help us in our hardware efforts. Here, the business model is primarily about selling devices and services, not advertising.” Despite the billions Google has spent to get into hardware, the tech giant is still a small player in gadgets. Its Android smartphone operating software is in more than three times the number of global devices as Apple’s, but Google continues pushing its Pixel-brand phones, a laggard in market share. Advances in hardware like GPS and radar mean gadget makers are increasingly the gatekeepers for companies that make software for mobile phones. In terms of data collec- tion, having customers using both the device and the operating system is akin to owning the mall rather than just the department store in it. Pixel phones command just 5 percent of the U.S. market for smartphones, according to Strat- egy Analytics, far behind Apple and Samsung. Under Google’s stewardship, Motorola lost market share, falling to 6.6 percent in the United States in 2013 from 9.1 percent in 2012, according to ComScore data at the time. Google’s attempts to get on people’s wrists have also included buying assets from watchmaker Fossil and an operating system

lowered its financial expectations for 2019, signaling a shift to a reliance on paid health-tracking subscriptions. What’s more, Fitbit has said it has just 28 million active users, suggesting that about three-quar- ters of the 100 million devices it has sold end up in dresser draw- ers. Jen Ralls, a Fitbit spokeswoman, declined to comment. The two companies already have some agreements in place. Fitbit stores data with Google’s cloud computing unit and was using Google’s software to help connect its data to medical re- cords storehouses used by doc- tors and hospitals. Google has broad ambitions in health care. It funds three divi- sions — Calico, Verily and Deep- Mind — that aim to detect and prevent diseases through software and medical devices and to extend life spans, among other ambitions. Google promised it will not use Fitbit data to target its advertising and said users can delete their histories stored with Fitbit. That wasn’t enough for Jason Gannon, 45, of Anderson, Ind. Within hours of hearing the news of Fitbit’s sale planned sale to Google, he said he destroyed his Alta device and canceled his ac- count with the company. “I am depressed,” said Gannon, who has relied on Fitbit for sleep and step tracking for about two years. “I can’t trust Google with my data.” [email protected]

Google keeps up gadget pursuit: Fitbit will ‘help us in our hardware efforts’

FABRIZIO BENSCH/REUTERS Visitors pass an advertisement for Fitbit watches at a 2017 electronics show in Berlin. Google’s $2.1 billion acquisition of Fitbit will bolster its nascent health-care business, analysts said.

BY CHRISTIAN DAVENPORT

Boeing on Monday morning declared successful its test of the emergency abort system for the spacecraft it’s developing to fly astronauts to the International Space Station, even though only two of the three main parachutes deployed. The test, at the White Sands Missile Range in New Mexico, was a long-anticipated milestone for a company that has been under fire for two fatal plane crashes that killed 346 people. The test of the system was intended to demonstrate that the Starliner spacecraft could carry astronauts to safety in case some- thing were to go wrong with the rocket. Sitting on a test stand, the capsule fired its abort engines at 9:15 a.m. Eastern time, sending the capsule hurtling through the air to more than 4,000 feet. The capsule was to hit 650 mph in five seconds. While one of its main parachutes appeared to malfunc- tion, two deployed and the spacecraft landed safely in the desert about a little over a minute later. Boeing officials said they have built in redundancy to the spacecraft, and having two of three parachutes deploy was good enough. “The test team and spacecraft performed flawlessly,” John Mulholland, Boeing’s Star- liner program manager said in a statement. “Emergency scenario testing is very complex, and today our team validated that the spacecraft will keep our crew safe in the unlikely event of an abort.” Boeing spokesman Todd Blech- er said the company will review the data from the test “to deter- mine how all of the systems performed, including the parachute deployment sequence.” He characterized the parachute problem as “a deployment anom- aly, not a parachute failure.” Chris Ferguson, a former NASA

astronaut who works at Boeing as its director of crew and mission systems, said the test went “pretty much the way I had envisioned.” Mike Fincke, a NASA astronaut slated to fly on the first mission with crews, said it shows Boeing is “committed to safety, and we are really looking forward to fly- ing.” The test came just days after Dennis Muilenburg, Boeing’s chief executive, was grilled by members of Congress over the problems the company has had with its 737 Max airplanes, which

resulted in two crashes, killing 346 people. The scandal has engulfed the company and tarnished its repu- tation — one member of Congress during the hearings last week accused Boeing of building “fly- ing coffins” — and so it needed the test Monday to go perfectly. While not perfect, having two parachutes working is “accept- able” to meeting the test objec- tives, Boeing spokesperson Jessi- ca Landa said during the broad- cast. Initially, Boeing did not in- tend to live-stream the event, but NASA Administrator Jim Briden- stine insisted, writing on Twitter that he wanted “transparency for the taxpayer.” Boeing and Elon Musk’s SpaceX are under contract from NASA to build spacecraft to ferry astronauts to the space station. The first flights were supposed to take place in 2017, but both com-

panies have suffered problems and delays. NASA has been unable to fly astronauts anywhere since the space shuttle was retired in 2011 and relies on Russia to launch its rockets to space. The delays have forced NASA to negotiate buying additional seats on Russian rockets at a cost of more than $80 million each. Last year, Boeing, which is being paid $4.8 billion by NASA under what is known as the commercial crew program, suffered a major setback during a test of its abort engines when four of eight valves failed to close properly, allowing propellant to leak. The investigation and efforts to fix the problem resulted in a one-year delay, according to the Government Accountability Office. But the system has since been tested successfully, the company said. The company hopes it will never have to use the abort system. But last year, a Russian Soyuz rocket carrying NASA astronaut Nick Hague and his Rus- sian counterpart Alexey Ovchin- in, suffered a failure when one of the side boosters did not separate properly and slammed into the rocket. That triggered the abort system, which gave Hague and Ovchinin a wild ride to the edge of space, but ultimately they landed safely. Boeing’s next major milestone is a test flight of the Starliner spacecraft, without anyone on board, to the space station. In that test, the spacecraft would dock autonomously to the station while traveling 17,500 mph in orbit. The flight is scheduled for Dec. 17. NASA hopes Boeing and SpaceX, which completed its test flight to the station without crews earlier this year, will be able to fly astronauts to space sometime next year. [email protected]

Boeing declares test a success despite

a parachute failure in abort system

“The test team and

spacecraft performed

flawlessly.” John Mulholland, program manager for the Starliner spacecraft that Boeing is building to fly to astronauts to the International Space Station

The Washington Post - 05.11.2019

Get our desktop app

Company

Features

Documentation

Resources