Los Angeles Time - 08.08.2019

C2 THURSDAY, AUGUST 8, 2019 LATIMES.COM/BUSINESS

BUSINESS BEAT

OneWeb said it has se-
cured vital rights to the air-
waves it needs to launch a
global satellite broadband
network.
The startup backed by
Softbank Corp. is racing
against billionaires Elon
Musk and Jeff Bezos to in-
stall constellations of small
satellites so they can offer
4G-like broadband to places
that are too costly to reach
using terrestrial networks.
By getting six of the
washing machine-sized sat-
ellites broadcasting at the
right frequencies for 90 days,
OneWeb has met “use-it-or-
lose-it” spectrum conditions
set by the United Nations’
International Telecommu-
nication Union, the com-
pany said by email.
Musk’s Space Explo-
ration Technologies Corp.
and Bezos’ Project Kuiper
are likely to need the same
spectrum. OneWeb says
that being the first to file its
claim and have it validated
will mean signals from other
operators must not interfere
with its own, under rules
that oblige latecomers to
preserve the quality of serv-
ices offered by an incum-

bent.

“That could mean a long-

er road to the finish line for

others than it is for us,” said

Ruth Pritchard-Kelly,

OneWeb’s vice president of

regulation.

U.K. communications

watchdog Ofcom will now

ask the ITU to register

OneWeb’s priority claim on

the bandwidth. An ITU

spokeswoman said the Ge-

neva-based body had not yet

received frequency claims

for the OneWeb or SpaceX

projects.

OneWeb has raised $3.

billion from shareholders in-

cluding Softbank, Airbus,

Richard Branson’s Virgin

Corp. and Qualcomm Inc.

and plans to launch about 30

of the satellites per month

starting in December to cre-

ate an initial constellation of

648.

Because they are thou-

sands of miles closer to

Earth than traditional mod-

els, they promise much

lower transmission delays

than existing satellite

broadband services.

Musk’s SpaceX is also

moving fast, sending dozens

of satellites into orbit for its

Starlink project and prepar-

ing for more launches this

year after winning U.S. gov-

ernment approval for about

12,000 satellites. Project

Kuiper has yet to launch any

of its satellites.

Seal writes for Bloomberg.

A RENDERINGof broadband coverage that could be
provided by OneWeb’s proposed network of satellites.

OneWeb

OneWeb claims

a win in race for

space network

With six satellites in

the sky, the company

beats Musk and Bezos.

By Thomas Seal

Annapurna Pictures
founder Megan Ellison on
Wednesday fended off “rum-
blings” that her film studio is
teetering on the edge of
bankruptcy, as the company
tries to renegotiate its deals
with lenders.
The West Hollywood firm
behind movies including
“Booksmart” and “Vice” is in
talks with banks to restruc-
ture its debt after struggling
for years to produce com-
mercial hits in the challeng-
ing independent film busi-
ness.
Ellison, the daughter of
billionaire Oracle Corp.
founder Larry Ellison, has
developed a reputation for
making quality films, includ-
ing last year’s “If Beale
Street Could Talk” and
“Sorry to Bother You,” but
has recently faced specu-
lation that her company is
running out of money be-
cause of a string of box-office
disappointments.
In a memo to staff,
Ellison sought to quell con-
cerns about the company’s
financial health, in response
to a looming Deadline article
that said the company was
exploring a bankruptcy fil-
ing. If the current talks with
banks fall apart, the com-
pany may need to seek
Chapter 11 bankruptcy pro-
tection from creditors, ac-
cording to people familiar
with the matter who were
not authorized to comment.
“I got word this morning
that there are some rum-
blings around town about
our current status with the
banks,” Ellison wrote. “Re-
structuring deals with finan-
cial institutions is not un-
common, yet the process is
usually handled without a
spotlight on it. Fortunately/
unfortunately, people like to
write about me and my fam-
ily.”
Larry Ellison is one of the

world’s richest people, with a

net worth of $65 billion, ac-

cording to Forbes. His son

David Ellison runs Santa

Monica-based Skydance

Media, another film finan-

cier and production com-

pany, which focuses on

blockbuster fare such as the

“Terminator” and “Mission:

Impossible” movies.

Although Annapurna’s

more artistic films are often

up for awards consideration,

the company has weathered

internal shake-ups and fi-

nancial disappointments,

with duds including “De-

troit” and “The Sisters

Brothers.” Last year, the

studio decided to drop films

including the Jennifer

Lopez-starring “Hustlers”

and a project about the late

Fox News chief Roger Ailes

as it reconfigured its movie

strategy. Annapurna’s film

president, Chelsea Barnard,

also left the company.

Annapurna is just the lat-

est mini-studio to face hard

times in the indie film space.

Last year, Weinstein Co. and

Global Road Films sought

bankruptcy protection in or-

der to sell their assets. Bur-

bank-based STX Entertain-

ment, which focuses on mid-

budget films, has also strug-

gled financially as the movie

business has become in-

creasingly dominated by

studio franchises.

Nonetheless, Megan

Ellison told staff she remains

optimistic about the compa-

ny’s prospects. Its next re-

lease is Richard Linklater’s

“Where’d You Go, Berna-

dette,” a book adaptation

starring Cate Blanchett that

hits theaters next week.

“I believe in what we

make and have no intention

of stopping any time soon,”

she wrote. “We have a lot of

exciting things on the hori-

zon and I have no doubt all of

our hard work will continue

to show Annapurna’s unique

and powerful place in this in-

dustry.”

Annapurna denies

bankruptcy rumors

By Ryan Faughnder

Lyft Inc. reported a sec-

ond-quarter loss and sales

that were better than ana-

lysts expected as the com-

pany boosted its forecast for

the year, sending the stock

soaring in after-hours trad-

ing.

The ride-hailing com-

pany now projects at least

$3.47 billion in sales for the

year, compared with an aver-

age analyst estimate of $3.

billion, according to data

compiled by Bloomberg.

While sales growth is

slowing, it’s doing so less

rapidly than previously an-

ticipated. Revenue in the

second quarter reached

$867.3 million, up 72% from

the year before. Analysts

had expected 60% growth.

The rate in the last two quar-

ters was about 95%.

Lyft also improved its

forecast for adjusted losses,

which excludes debt, inter-

est and other costs. Lyft said

the loss for the year will be as

much as $875 million, a $300-

million decrease from an

earlier projection. It would

mean Lyft will lose less this

year than in 2018.

Investors are measuring

the San Francisco-based

company against a period of

massive growth over recent

years, when it gained on

Uber Technologies Inc.

Lyft’s larger rival reports its

own financial results Thurs-

day. Both stocks trade below

the price at which they went

public this year. Lyft shot up

as much as 13% in extended

trading after the financial

report, boosting the stock to

heights it hasn’t seen since

the initial weeks of trading.

Wall Street remains opti-

mistic about the companies’

prospects despite persistent

losses. Most analysts have

buy ratings for the stocks.

Lyft and Uber investors are

betting they can upend the

transportation industry and

eventually find a path to

profitability.

Both companies recently

began to raise fares around

the U.S., a battleground ac-

counting for almost all of

Lyft’s sales. The price in-

creases should help narrow

losses. Lyft’s second-quar-

ter loss increased 12% to $

million. For the third quar-

ter, it projects a reduction of

as much as 29%, at $190 mil-

lion to $210 million. “The

price adjustments that have

been reported went into ef-

fect at the very end of June,

so there was limited impact

in Q2,” Brian Roberts, Lyft’s

chief financial officer, said in

a phone interview.

Investors will watch

closely whether Lyft can

continue to cut costs while

maintaining revenue

growth. “We’re trying to get a

sense that the unit econo-

mics in ride-sharing are

good and that we’re not go-

ing to have to wait forever for

some realization of profit-

ability,” said Tom White, an

analyst at D.A. Davidson.

The financial report fol-

lows news last week that

Lyft’s chief operating officer,

Jon McNeill, was leaving af-

ter less than two years. The

company provided few de-

tails about the reason for his

departure. Lyft is currently

facing public scrutiny over

the safety of its service after

the Washington Post and

NBC’s “Today” show re-

ported on allegations of har-

assment from female cus-

tomers. Recent news raises

questions about Lyft’s abil-

ity to differentiate from

Uber, which has long strug-

gled to retain high-profile

executives and fend off criti-

cism that it doesn’t do

enough to ensure rides are

safe.

For Lyft’s critics, there

are still warning signs. When

accounting for stock-based

compensation, insurance

costs and other expenses,

Lyft’s net loss in the second

quarter worsened to $644.

million, from $178.9 million a

year earlier. Lyft reported a

$1.14-billion net loss in the

first quarter, which was

largely due to costs associ-

ated with the initial public

offering in March.

Analysts hadn’t foreseen

that Lyft would post another

big net loss last quarter.

They typically focus on Lyft’s

adjusted figures, concluding

that those numbers provide

a better indication of the

business’ long-term trajec-

tory.

Newcomer writes for

Bloomberg.

WALL STREET remains optimistic about ride-hailing companies Lyft and Uber, despite persistent losses.

Mark BosterLos Angeles Times

Investors cheer as Lyft beats

estimates, raises its outlook

By Eric Newcomer

FedEx Corp. seems to

have finally realized that it’s

futile to label Amazon.com

Inc.’s delivery aspirations as

a “fantastical” threat. Now

it’s waging an outright war

on a company it appears to

increasingly view as a com-

petitor.

FedEx won’t renew Ama-

zon’s ground delivery con-

tract when the agreement

expires at the end of this

month, the company said in

a statement Wednesday.

This follows a June an-

nouncement that FedEx

would cease U.S. air delivery

services for Amazon.

What’s curious is that

FedEx was at pains at that

time to emphasize that the

“strategic decision” to curb

its air delivery relationship

with Amazon didn’t affect

other business units such as

ground or international

operations. It’s hard for me

to believe that FedEx is

simply finding its backbone

and holding a firmer line on

pricing with Amazon. The

company added disclosures

in its annual filing about the

extent to which Amazon is

developing in-house deliv-

ery capabilities that may

make it a competitor. This

could be an attempt to put

Amazon in its place.

It reminds me a lot of the

streaming wars. Just as

traditional media compa-

nies were all too happy to

pad sliding DVD sales with

licensing fees from Netflix

Inc. for years, FedEx and

rival United Parcel Service

Inc. have enjoyed the reve-

nue fruits of the booming

demand for e-commerce

shipments ushered in by

Amazon. But now, FedEx

seems to be waking up to

the fact that this relation-

ship likely was never a two-

way street.

Like the media compa-

nies that are pulling their

content from Netflix and

launching their own stream-

ing services, FedEx appears

to no longer be keen to give

Amazon a valuable base on

which to build a rival logis-

tics service. The question is

whether it’s too late to turn

the tables on Amazon.

While Amazon has been

moving aggressively to open

fulfillment centers, build up

a local delivery workforce

and rent cargo planes, its

network isn’t quite ready for

prime time. The company

last month said it ended up

spending more than the

$800 million it had planned

in the second quarter to set

up one-day delivery for

Prime members.

The push for speedier

shipping was a “shock to the

system” for its distribution

and transportation net-

work, and there had been

some inventory and produc-

tivity setbacks, Chief Finan-

cial Officer Brian Olsavsky

said on a call with analysts.

The company also has to

contend with the risk of

pilot shortages and strikes

at the third-party carriers it

relies on to support its

burgeoning air cargo opera-

tions. Without FedEx as a

backstop, the reliability of

Amazon’s homegrown

logistics operations will be

put to a greater test.

That said, I remain un-

convinced that Amazon

really wants or needs to

develop a network on the

scale of UPS or FedEx. It’s

already disrupted the way

those companies do busi-

ness, forcing them to spend

billions to retrofit their

networks to handle ever-

faster delivery times for a

surge in e-commerce pack-

ages. While Amazon’s logis-

tics operations aren’t ready

to stand alone, the company

can still lean on UPS and

the U.S. Postal Service. As

FedEx itself is so quick to

point out, Amazon accounts

for only about 1.3% of its

revenue.

FedEx can’t give up on

the e-commerce game en-

tirely, though. The company

announced in May that its

ground unit would begin

seven-day service in Janu-

ary, deliver more packages

that had been handed off to

the postal service and invest

to handle oversized pack-

ages. FedEx also signed up

more drop-off and pickup

points, and is even testing a

ground delivery robot.

I am highly skeptical

that, with Amazon as a

competitor, Walmart Inc.,

Target Corp. or anyone else

is going to be that much

easier a customer when it

comes to pushing for lower

pricing and faster delivery.

Much like in the battle for

video streaming domi-

nance, it seems unlikely

there will be any one winner

in e-commerce logistics, but

there will be plenty of losers,

especially when it comes to

profit margins.

Sutherland writes for

Bloomberg.

Delivery war as FedEx shuns Amazon

By Brooke Sutherland

FEDEXwon’t renew Amazon’s ground delivery con-

tract when the deal expires at the end of this month.

Mark Lennihan / APCNG

COMMENTARY