12 ★ FINANCIAL TIMES Friday6 March 2020

COMPANIES

G

et ready forheadlines about the latest com-

puting “space race” between the US and

China. The next generation of supercomput-

ers is about to come on stream, bringing with

them the era of so-called exascale computing.

If China is the first to fire up one of the new machines, it

will no doubt lead to hand-wringing in the West — though

the US is close to breaking the exascale barrier as well, with

its own monster systems, each costing about $600m.

But the headlines about hardware prowess will not catch

the full extent of this computing race. The muttering you

can already hear, said Bob Sorensen,analyst at Hyperion

Research, is software developers saying: How do we pro-

gramme these things? Extracting the full potential from

this technology — and turning it to national competitive

advantage — will go far beyond just flipping a switch.

The spotlight that is about to fall on the supercomputing

race is occasioned by the imminent launch of the first com-

puting systems capable of handling a billion billion calcu-

lations a second — a feat known as an exaflop. That is about

five times as much as the current world leader in the

supercomputing stakes, an IBM system that in 2018

wrested the title of world’s most powerful computer back

to the US from China for the first time in five years.

The first of three exascale systems being built for the US

Department of Energy is set to be delivered next year,

though it is likely to be 2022 before it is fully operational. It

may well be preceded by the first of three exaflop systems

being developed in China.

This has been a long time coming. Preparations for

breaking the exaflop barrier n computing have beeni

under way since the early part of thepast decade. The US

was slow off the mark, giving China a slight edge at the

start of the race. Whether it has been able to maintain that

edge should become apparent in the coming months.

Each of the DoE systems has been designed for a highly

specific task. The biggest, due to come into operation in

2023, will be used to model nuclear explosions. Named El

Capitan after the most

imp osing cliff face at

Yosemite, it was projected

this week to hittwo exaflops.

But the DoE’s supercom-

puters are also made availa-

ble to the wider scientific

community, making them

an important resource in

fields such as genetics

research, aircraft design and climate change modelling.

Not surprisingly, it is the hardware that gets all the atten-

tion, and, given the current state of the tech cold war

between the US and China, it is the focus of attempts to

protect national supercomputing prowess.

The White House last year banned US companies from

selling to five entities involved in China’s exascale super-

computing projects. But this may have little impact. Apart

from a past tech alliance that one had with AMD, the chip

technology behind China’s supercomputers is home

grown. American engineers grumble that the only effect of

the ban has been to block a potential market for US tech-

nology and to make China redouble fforts to develop itse

own technology. Yet the obsession with hardware does not

get to the heart of the issue. While the US may be pouring

$1.8bn into building its three exascale systems, it is spend-

ing as much again on the software needed to make use of

them. This is where the real national advantage may lie. If

the US edge in chip technology is narrowing, its lead on the

software side is much greater, according to Jack Dongarra,

a computer science professor at niversity of Tennessee.U

This is where the exascale supercomputing race gets

much harder to judge. Creating the software needed to

control the systems is intellectual property that will accrue

to US companies involved, said Peter Ungaro, who runs

supercomputing at Hewlett Packard Enterprise, which is

building the US systems.

The programming frameworks used to write supercom-

puting applications, on the other hand, are less proprie-

tary. Many of these, developed in the scientific commu-

nity, are open source and available for anyone to use. The

US has not acted to try to block China’s access to such tech-

nology — but even if it tried to, it would be like closing the

stable door after the horse has bolted, said Mr Dongarra.

Moving existing supercomputing applications on to the

new machines, and writing new ones, is something else

again. This is where US experience and past investment

might pay real dividends, according to Mr Sorensen. Even

if China fires up a system capable of running at an exaflop,

it may be a long while before it can handle useful calcula-

tions at that kind of speed. But as supercomputing’s exas-

cale era dawns, maintaining a lead at the frontiers of com-

puting science is far from assured.

[email protected]

INSIDE BUSINESS

TECHNOLOGY

Richard

Waters

China every bit as

agile as US in exascale

supercomputing race

The hardware is

the focus of

national efforts

given the state of

the tech cold war

E R I C P L AT T A N D O RT E N C A A L I A J
N E W O R L E A N S

Hewlett-Packard hief executivec
Enrique Lores aid the $31bn printers
and computer maker was evaluating
other combinations as the company
rejected an unsolicited offer from
Xeroxyesterday.

“Consolidation is going to happen in this
space,” hesaid. “There are other poten-
tial M&A [transactions] that we are con-
stantly analysing. HP has a very global
portfolio and M&A is a way to create
value for our shareholders.”
The Palo Alto, California-based
company has been locked in a hostile

takeover fight withsmaller rival

Xerox. Xerox, which is backed by

activistCarl Icahn, this week offered

to buy stock from HP shareholders

in its bid to force a combination of the

two companies.

HP, which recommended that its

shareholders not tender their stock,

saidits board had received opinions

from itsadvisers atGoldman Sachs nda

Guggenheim Securities hat the currentt

Xerox offerwas “inadequate”.

Xerox declined to comment.

Mr Lores and HP have remained ada-

mant that the $35bn stock-and-cash

offer from Xerox undervalues the com-

pany and that the debt needed by Xerox

to finance a takeover of its larger rival

would be “irresponsible”.

While Mr Lores saidhe remained

“open to a transaction” with Xerox, he

ruled out theproposed structuregiven

his focus on keeping debt levels to

roughly a third ofthat envisaged.

The HPboss held talks with his Xerox

counterpart,John Visentin, on Tuesday.

They discussed scheduling an in-person

meeting for next week, according to fil-

ings with US securities regulators.

People close to thegroups believe the

$35bn bid from Xerox is an attempt to

coax HP to present its own takeover

offer for Xerox, after deal talks fell apart

last year.

Technology

HP open to other deals as it rebuffs Xerox

B E N JA M I N PA R K I N A N D H E N N Y S E N D E R

M U M B A I

The State Bank of India’s credit card

company is going public in one of the

country’s few billion-dollar flotations

in years, defying a bearish mood as the

Indian economy slows and the corona-

virusknocksequitymarkets.

SBI Cards, which is seeking to raise

Rs103.5bn ($1.4bn), closed its books

yesterday after a four-day share sale

that was 20 times subscribed.

The strong demand came as investors

bet that India’s second-largest card

issuer would shrug off the downturn

and ride a wave of newly financially lit-

erate Indians taking out cards for the

first time.

India had only two credit cards per

100 people in 2017, according to broker-

age Axis, compared with 42 in China

and 320 in the US.

The company will issue Rs5bn of new

shares andSBI, India’s largest bank, will

sell 4 per cent of its 74 per cent stake.

Carlyle, the private equity firm that

holds the remainder of shares, will sell

10 per cent of its stake.

Shares in SBI Cards, the first Indian

credit card company to list, are

expected to start trading around March

16, according to brokers.

It is a boon for Carlyle, which is set to

pocket about $1bn at a time when many

foreign investors are souring on India.

Its remaining holding will be worth

more than $2bn at the IPO valuation,

eight times its initial $300m investment

three years ago. Carlyle bought a 26 per

cent stake in SBI Cards fromGeneral

Electric n a transaction that closed ini

December 2017.

“It is a mega, mega-deal,” said the

India head of one of Carlyle’s competi-

tors that bid unsuccessfully for SBI

Cards. “While it is painful for me to even

think about it, it is great for the industry

to show that there is still opportunity

here. Nobody thought that you can

make this kind of money in India.”

Financials

SBI Cards flotation attracts strong demand

ST E P H E N M O R R I S— LO N D O N

Credit Suisse hairmanc Urs Rohnerhas
privately sounded out investors about
extending his term beyond 2021 multi-
ple times in the past four months,
despite repeatedly pledging to step
down next year after ousting chief exec-
utiveTidjane Thiam.
Mr Rohner, who was paid SFr4.7m
($4.9m) in 2019 nd has been in the rolea
since 2011, has quietly broached the
topic with representatives of top share-
holders in informal meetings since
November, according to several people
familiar with the talks.
The most recent discussion took

place last month, just weeks afterMr

Thiam was forced outin a boardroom

battle over a spying affair that scandal-

ised Zurich and tarnished the bank’s

reputation.

Investors such asHarris Associates

andBlackRock —Credit Suisse’s largest

and fifth-largest shareholders, respec-

tively — have rebuffed Mr Rohner pub-

licly and privately, saying they would

oppose his re-election beyond the end of

his current mandate in April 2021.

The February conversation followed a

series of similar approaches to key

investors by Mr Rohner and his allies on

the board last November and again in

January — before he ousted Mr Thiam —

seeking to gauge investor appetite for an

extension, the people said.

BlackRock’s rebuff f the suggestion iso

significant because thelargest asset

manager was a key supporter of Mr

Rohner in his clash with Mr Thiam,

believing that in agovernance battle the

chairman must typically prevail over

the CEO, the people said.

BlackRock’s support for Mr Rohner

was conditional onhis stepping down

next year and formally starting a proc-

ess to find his replacement at the bank’s

annual meeting next month in Zurich.

Senior figures at BlackRock were dis-

appointed by the conduct of both sides

duringthe power struggle, which dam-

aged the bank’s reputation with clients

and hurt staff morale, the sources said.

The chairman “has never asked for an

extension nor has he ever held prelimi-

nary discussions with investors on that

subject”,Credit Suissesaid.

The boardhad “been very clear that

Urs Rohner’s tenure ends in 2021 and

there is an orderly succession plan in

place for a new chairman.. .Corre-

sponding speculations are wrong and

without basis.”

A spokesman for BlackRock said

there had been no official conversations

w i t h t h e f i r m o n M r R o h n e r ’s

possibleextensionand declined to

comment further.

Thescandal erupted at Credit Suisse

last year after one of Mr Thiam’s closest

confidants hired a corporate espionage

group to followIqbal Khan, its former

wealth management head, who had quit

and joined crosstown rival UBS. A sec-

ond spying incidentemerged a few

months later, leading Mr Rohner and

the board to conclude that the scandal

had started to “damage thecompany’s

reputation” and Mr Thiam had to go.

After removing the CEO on February

7, Mr Rohnersaid that, contrary to some

reports, he had no intention of extend-

ing his term.

Banks

Credit Suisse head explores staying on

Rohner has raised issue

with investors several

times over four months

M A R K VA N D E V E L D E— N E W YO R K

An activistis urgingColony Capital ot
haltany related-party deals that could
benefitbossTom Barrack, and is call-
ing for an independent probe intodeci-
sions that haveled to theshares falling
nearly70percentinthreeyears.

The demand marks an escalation in Mr
Barrack’s battle withboutiqueBlack-
wells Capital.
It comes after Colony invested $185m
in a data centre business associated with
investorMarc Ganzi, whom Mr Barrack
last year designated as his successor.
Blackwells owns about 2 per cent of
Colony, and has waged a year-long cam-
paign against tsi team, winning the
appointment of three new directors and
a reviewthat has led toasset disposals.
Investigations into Mr Barrack’s role
as chairman ofDonald Trump’s inaugu-
ration committee, and his alleged
efforts to influence US foreign policy,
have not resulted in any accusation of
wrongdoing.
Blackwells’ latest salvo focuses on the
role of Mr Ganzi,proprietor of a polo
club that Mr Barrack sometimes fre-
quents. He joined Colony as managing
director last year, after sellingDigital
Bridge, an investment management
company he co-founded, to Mr Bar-
rack’s company for $325m.
In one of his firstdeals at the firm, he
announced that Colony would pay
$185m for a 20 per cent stake inData-
bank, a data centre operator in which
Digital Bridge founders had previously
invested.
NowJason Aintabi, founder of Black-
wells, is urgingColony o “impose at
moratorium” on related-party deals,
and demanding “a comprehensive and
independent investigation into [Col-
ony’s] inexplicable loss of value”.
He wants the probe overseen by a new
board, untainted by economic interests
that he views as being potentially in con-
flict with those of shareholders.
Colony defended the Databank eal,d
saying it would create value by “pivot-
ing to become the leading global player
in the digital real estate industry”.
It said it hadbought its stake in an
arms-lengthdeal with two institutional
shareholders, without Mr Ganzi selling
any shares.
To mitigate potential conflicts of
interest, itsaid, Mr Ganzi exchanged
“incentive units” he received in the deal
for financial interests in Colony that are
subject to a lock-up.
T h e d e a l w a s “u n a n i m o u s ly
approved” by Colony’s board, including
three directors nominated by Blackwells.

Financials

Activist turns

up heat on

Colony with

probe demand

Continental, one of thelargest car

parts suppliers,warned of a

miserable year ahead for thecar

industry, exacerbated by the

coronavirus outbreak.

The Hanover-based company

projected a fall insales in the

passenger car marketby up to 5 per

centthis year,the third successive

annual contraction and the worst

run since thefinancial crisis.

A member of the Dax index of

German groups, the company

producescore componentsfor the

likes ofVolkswagen nda PSA.

It hassaid 20,000 jobs will be at

riskand cautionedthat it “does not

anticipate any recovery in the

economic environment”.

It expected car production to

shrink by a 10th in the first three

months of the year, and by triple

that n China as the virus takes itsi

toll on sales and supply chains.

regulations, the increasing

importance of software, and the

shift to electric vehicles.

The company’s dire forecastswere

a “stark reminder for what a tough

year we are heading into for auto”,

said Chris McNally, an analyst at

Evercore ISI.

Continental, whose business

structures are designed to benefit

from economies of scale, “remains a

very large company that is not

moving fast enough in this rapidly

declining volume environment”.

As a result of this outlook, the

company, which has already

announced plans to cease

production of combustion engine

parts atsites in Germany, Italy and

the US, said it was examining

“additional measures to enhance

competitiveness”, details of which

would be revealed in May.

Continental swung to a €1.2bn net

loss in 2019, from profits of €2.9bn

last year, largely due to acquisition

writedowns.

Due to accounting standards, the

book value of the assetswould not

improve even if the car market

picked up,chief financial officer

Wolfgang Schäfer onfirmed.c

Despite these results, Continental

proposed to only cut its dividend by

only 15 per cent, to €4 per share.

Joe Miller in Frankfurt

Sharp shock

Continental’s

confidence

punctured

An employee

adjusts a 5G

antenna in a

measuring room at

Continental’s

Regensburg plant

Lukas Barth-Tuttas/

epa-EFE/Shutterstock

Theshares fell 11 per cent to

€85.82 following the announcement,

its lowest level n seven years.i

Continental is heavily exposed to

China, where it employs 25,

people and runs more than 50

production and research sites.

The company said the full effects

of the virus’s spread “cannot be

gauged at the current time”.

Elmar Degenhart, chief executive,

said: “Everything else would be

looking into the crystal ball.”

He said that whileno one at the

companyhad been infected,

hundreds of employees in Europe,

China and the US were working on

minimisingdisruption to the

company’s operations.

“We do have certain limitations

on transport,” Mr Degenhartsaid.

“I would compare the situation to a

huge airport. If there are bad

weather conditions, everything

comes to a standstill and is then

ramped up.”

The ex-engineer noted that “goods

that are usually transported by

vessel ill have to be transported byw

air” to make up for time lost.

Continental, which transformed

itself from a tyre producer to a

technology-focused company, has

already been buffeted by the storms

that are encircling the car industry,

including strict new emissions

The most

recent

discussion

took place

just weeks

after the

departure

of Thiam

MARCH 6 2020 Section:Companies Time: 5/3/2020- 18:51 User:jon.wright Page Name:CONEWS1, Part,Page,Edition:USA, 12, 1