Why the US government is so suspicious of Huawei

A man walking past a Huawei P20 smartphone advertisement is reflected in a glass door in front of a Huawei logo, at a shopping mall in Shanghai, China December 6, 2018. 

Aly Song | Reuters
A man walking past a Huawei P20 smartphone advertisement is reflected in a glass door in front of a Huawei logo, at a shopping mall in Shanghai, China December 6, 2018.

The arrest of Huawei CFO Meng Wanzhou in Canada for possible Iran sanctions violations yesterday has deeper roots in a difficult legal history between the hardware giant and U.S. regulators and intelligence agencies.

The U.S. government has spent the better part of the last decade taking issue with the company over topics including the firm’s alleged espionage ties to the Chinese government and allegations of a long history of intellectual property theft. Huawei is one of China’s largest companies, with a reported $100 billion in revenue in 2018 and 180,000 employees across 170 global offices.

Starting around 2010, U.S. intelligence officials began warning agencies, and then private companies, of what it said were clear-cut cases of the company serving as a proxy for espionage conducted by the Chinese government, a claim frequently made publicly by former National Security Agency director Michael Hayden.

In 2012, the U.S. House Intelligence Committee released a report which followed an investigation into the company and its competitor ZTE.

“The Committee received almost no information on the role of Chinese Communist Party Committee within Huawei or specifics about how Huawei interacts in formal channels with the Chinese government,” the report said. “Huawei refused to provide details about its business operations in the United States, failed to disclose details of its dealings with the Chinese military or intelligence services and would not provide clear answers on the firm’s decision-making processes.”

At that time, the Intelligence Committee also called into question the company’s dealings in Iran, which Huawei had pledged to scale back in accordance with international sanctions.

“Huawei refused to provide any internal documents relating to its decision to scale-back operations in Iran or otherwise ensure compliance with U.S. laws,” the report said.

Huawei has also had trouble breaking into the U.S. market because of the U.S. intelligence reports. In 2011, the company tried to acquire 3Leaf, a deal that was nixed after government pressure.

The company’s equipment has been banned by several different agencies because of the espionage and security fears, and those bans ramped up in 2018, when President Trump disallowed U.S. government use of Huawei products and those made by ZTE, following a CIA and NSA warning in February. In January, AT&T abandoned its plans to launch a new flagship phone from Hauwei.

Huawei was also heavily rumored to be behind Trump’s decision to stop the Broadcom/Qualcomm merger. Also this year, a start-up backed by Microsoft and Dell, sued Huawei for alleged widespread IP theft. Most recently, the FCC also banned Huawei equipment from small and regional carriers earlier this year.

Huawei has strongly denied the claims made against it. Donald Purdy, both a Huawei executive and the former top cybersecurity official at the Department of Homeland Security, said in an op-ed in Fortune in June that the moves would hurt development expansion of 5G service in the U.S.

“Policymakers should bear in mind that overreaching or poorly targeted regulations usually have unintended consequences, such as those that will surely result from the FCC’s proposal to force rural carriers to remove China-sourced equipment from their networks,” he said. “In many cases, Huawei’s is the only equipment that America’s small, independent carriers can afford.”

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Lululemon earnings beat, but shares drop 3% on weak fourth-quarter outlook

A customer looks at sports bras inside a Lululemon Athletica store.

Xaume Olleros | Bloomberg | Getty Images
A customer looks at sports bras inside a Lululemon Athletica store.

Lululemon on Thursday reported quarterly earnings and revenue that beat analysts’ estimates, but its outlook for the fourth quarter was slightly weaker than expected.

Shares of the company dropped 3 percent in after-hours trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 75 cents, adjusted, vs. 70 cents expected
  • Revenue: $748 million vs. $737.5 million expected
  • Same-store sales: 18 percent increase vs. 13.8 percent expected

For its fourth and current quarter, the retailer expects to see revenue of as much as $1.13 billion and to earn $1.64 cents per share, numbers that disappointed investors who were expecting a busier holiday season.

The company said it experienced its biggest day ever for e-commerce on Thanksgiving, which was then surpassed on Black Friday. Less successful for web sales was Cyber Monday.

“Our guests shopped earlier and wanted to get a jump-start on the holiday season,” Lululemon’s COO Stuart Haselden told analysts on a conference call.

Lululemon fiscal third-quarter net income rose to $94.4 million, or 71 cents per share, from $58.9 million, or 43 cents per share, a year earlier.

Excluding items, the company earned 75 cents per share, higher than the 70 cents per share expected by analysts surveyed by Refinitiv.

Net sales rose 21 percent from fiscal year 2017 to $748 million, beating expectations of $737.5 million. Improvements to the retailer’s website have increased both online traffic as well as actual digital sales, one of the contributing factors for the strong sales overall. Haselden said web traffic has increased by more than 35 percent in the quarter.

The Vancouver-based company’s expansion into men’s apparel helped revenue growth, seeing the highest category increases overall. Lululemon said it is ahead of schedule to reach $1 billion in sales in 2020.

The retailer also credited its growth into outerwear for both men and women for the increase in sales.

Despite a weaker-than-expected outlook for the fourth quarter, Lululemon increased its revenue forecast for the fiscal year to a range of $3.24 billion to $3.25 billion, compared with a previous range of $3.19 billion to $3.24 billion. Earnings, excluding a tax reform-related expense, are expected to fall between $3.65 and $3.68 per share for the fiscal year, also up from a prior range of $3.45 to $3.53 per share.

The company’s same-store sales increased 18 percent, outpacing Wall Street estimates of 13.8 percent.

The athleisure retailer moved its quarterly release date from Wednesday to Thursday because U.S. financial markets were closed to observe a day of mourning for Pr[“source=cnbc”]esident George Herbert Walker Bush.

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Alphabet’s self-driving car business, which just launched a commercial taxi service, could book $114 billion in revenue in 2030, says UBS

Source: Waymo

Waymo’s first commercial pilot may be small, but Wall Street has big projections for the company’s financial future.

Alphabet’s self-driving car unit could book $114 billion in revenue in 2030, according to a base-case estimate from investment bank UBS.

In its self-driving taxi test in the suburbs around Phoenix, Waymo will charge a small number of people fares competitive with rides Lyft and Uber. But as Waymo adds more cars and locations, it could also license its maps and an autonomous vehicle operating system to other service or car-markers, or monetize the eyeballs of riders through entertainment or advertising, UBS analyst Eric Sheridan writes in a note to clients on Thursday.

To put that $114 billion into perspective, Intel released a study in June of last year that projected that the self-driving space would generate $800 billion in cumulative revenue by 2035. UBS’s estimate only included Waymo’s revenue from robotaxi-related services, though Sheridan believes it has opportunities in logistics and commercial delivery as well.

Aside from Waymo, a host of other tech and auto companies are racing to launch their own self-driving taxi services, including GM’s Cruise and Uber. While Waymo’s technology is widely seen as the most advanced, as highlighted by its Wednesday launch, there are still a host of regulatory and safety concerns on the table. Waymo’s pilot will still include safety drivers to supervise rides, for example, at least initially.

Overall, UBS pegs Waymo’s total value between $25 and $135 billion, with a base case valuation of $75 billion. Morgan Stanley valued Waymo at $45 billion in August, with the potential to grow to $175 billion.

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Tech IPO candidates for 2019 aren’t yet deterred by market volatility, JPMorgan vice chairman says

 

JPMorgan Vice Chairman says 2019 IPO candidates have not yet been impacted by market volatility

JPMorgan Vice Chairman says 2019 IPO candidates have not yet been impacted by market volatility   8 Hours Ago | 04:44

Despite the recent market volatility that’s pushed the S&P 500 down 8 percent since mid-September, technology companies headed for the IPO markets have yet to adjust their plans, according to Noah Wintroub, vice chairman at J.P. Morgan Chase who oversees tech investment banking in San Francisco.

“At J.P. Morgan we haven’t seen anybody change their view of their timing or expectations based on the markets,” said Wintroub, in an interview with CNBC on Monday from the firm’s [r]Evolution conference, which is focused on private and public technology companies. “We’ll continue to see what happens in 2019, what happens on a macro basis, what the market is doing, and if the market is super volatile, people may change their plans.”

Wintroub said that there’s generally about a six-month lag from the time a company decides to go public and the actual IPO, and in that time conditions can certainly change. But for larger more established companies, those swings tend to be a “little less relevant” than for smaller companies with less mature businesses, he said.

Next year is gearing up to be a banner year for tech IPOs, with Uber, Lyft, Airbnb, Pinterest and Slack all indicating that they may be preparing for upcoming debuts. On Thursday, Lyft said it had filed a confidential prospectus, setting the stage for an IPO. CNBC reported in October that Lyft hired J.P. Morgan, Credit Suisse and Jefferies to manage the deal, which is expected to take place in early 2019.

WePay CEO Bill Clerico speaks with J.P. Morgan CEO Jamie Dimon.

Source: Nghi Cao
WePay CEO Bill Clerico speaks with J.P. Morgan CEO Jamie Dimon.

Wintroub declined to speak about specific clients.

He said tech’s position in the spotlight this year has marked a “critical moment for our community.” Privacy and safety concerns, platform manipulation and the #MeToo movement have all hit the industry, and employees at companies including Google and Facebook have been vocal in protesting certain practices by their employers.

“When you are doing great things but have a lot of power concentrated, we have to be careful about how we build our communities, how we empower other people and how we’re conscious of the impact we have,” Wintroub said.

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Huawei arrest just made companies like Apple less valuable, Jim Cramer says

Huawei arrest made companies, including Apple, less valuable: Cramer

Huawei arrest made companies, including Apple, less valuable: Cramer   4 Hours Ago | 01:13

U.S.-based technology companies with business in China automatically lost value on news of the arrest of Huawei CFO Meng Wanzhou, who has reportedly been accused of violating U.S. sanctions, CNBC’s Jim Cramer said Thursday.

The arrest, which occurred in Canada on Saturday and was announced Wednesday, “means any tech company that does a huge amount of business in China, including Apple or Micron or Intel or Skyworks or Qualcomm or Broadcom, is worth a little less today than it was yesterday,” Cramer, host of “Mad Money,” told investors.

Tech colossus Huawei, the world’s second largest phone seller and one of China’s most important companies, has been a cornerstone both of Chinese technological pride and of spying concerns from U.S. government officials. A rival of Samsung and Apple in the smartphone arena, Huawei counts Qualcomm and Intel among its suppliers.

The arrest of its global CFO could mark a setback in U.S.-China trade relations, a notion that Wall Street took to heart. To Cramer, calling the event an “escalation” in tensions was “one of the biggest understatements of the year.”

“To say that it could wreck any further negotiations seems reasonable,” he said. “Until we know more, we have to figure there could be more downgrades ahead [and] more pain to come in these tech stocks, unless the CFO is allowed to return to China, or at least released on her own recognizance.”

“Even then, we’re in seriously uncharted waters here,” he said. “Caution is warranted, at least on the Chinese-related tech stocks, until we know more.”

Moreover, it gives the White House “hardliners” on China — namely Trade and Industrial Policy Director Peter Navarro, Vice President Mike Pence and U.S. Trade Representative Robert Lighthizer — more “ammunition” in their push to slow China’s rise to power, Cramer said.

“These guys want to maintain America’s place as the world’s sole superpower. They believe some pain needs to be taken, even if it hurts corporate profits, to prevent China from challenging the U.S. hegemony,” the “Mad Money” host explained. “This kind of thing gives the hardliners a lot of ammunition because it illustrates that trade with China is about a lot more than making money.”

Stocks fell dramatically in the first half of Thursday’s trading session, at one point bringing the Dow Jones Industrial Average’s two-day losses to over 1,500 points. The major averages mounted a recovery into the close, though the Dow and the S&P 500 index still ended the day lower.

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Money managers are realizing that Trump isn’t ‘dependable enough’ for the market: Cramer

 

Trump not 'dependable enough' for market, money managers learn: Cramer

Trump not ‘dependable enough’ for market, money managers learn: Cramer   13 Hours Ago | 01:17

Part of Tuesday’s stock market plunge may have stemmed from money managers giving up on getting clarity from President Donald Trump and his administration on their policies, CNBC’s Jim Cramer said as stocks settled.

“We have maximum uncertainty. That makes people want to sell. That’s how money managers view the situation,” the “Mad Money” host said after the Dow Jones Industrial Average ended the day nearly 800 points lower.

Over the weekend, Trump struck a cease-fire on trade with President Xi Jinping of China at the G-20 summit in Argentina. According to the White House, the two leaders agreed to postpone the Trump administration’s planned tariff hike from 10 to 25 percent for 90 days starting Dec. 1.

But while one White House camp — namely top economic advisor Larry Kudlow and Treasury Secretary Steven Mnuchin — seem optimistic about the prospect of a deal, U.S. Trade Representative and known China hawk Robert Lighthizer has emerged as a leading candidate for running the negotiations.

That sets up a battle between those who want a deal and those who would rather see China shed the title of global superpower, Cramer said.

“The president seems to actually enjoy these face-offs. They’ve become his style. The White House is the Thunderdome: two policies enter, one policy leaves,” the “Mad Money” host said. “But the markets crave certainty, which means they hate this kind of master-blaster, Mad Max confrontation.”

As a result, professional money managers — whose jobs call for predicting how certain policies will impact their investments — “feel like they’ve been had,” Cramer said.

“This is not some reality show, for heaven’s sake. It’s real life: real jobs on the line, [a] real economy at stake. While the president had a huge hit with ‘The Apprentice,’ governing the most powerful nation on earth is more serious than going to the top floor to learn who’s been fired,” he said.

“I think it’s starting to dawn on major-league money managers that … maybe they misjudged [the president]. Maybe he simply doesn’t take this stuff seriously enough to be considered dependable, even as what really matters [to his base] is the ratings, or the equivalent of [them], which means the White House version of ‘The Apprentice.'”

To make matters worse, Cramer worried that the Federal Reserve was back on autopilot, content with ignoring slowdown indicators and talking up the job market so it could push through its widely expected December interest rate hike.

But with the bond market doing what it tends to do before recessions, another rate hike could “push us over the edge,” the “Mad Money” host warned, saying that the Fed’s more optimistic members “sound like they’ve lost their minds.”

“The Fed isn’t thinking about how Toll Brothers just told us they had the lowest orders in the house business [in] four years. They aren’t thinking about stores with no cashiers like Jeff Bezos is. They aren’t debating what the cloud does to white-collar employment … [or] what Ford and GM are doing to blue-collar employment,” Cramer said. “They’re simply saying, ‘Friday’s employment number is going to be very strong and we don’t like to … look like we’re soft on wage inflation.'”

So, between the White House policy battles and the Fed’s insistence on following through on its interest rate raises, many stock-pickers and money managers feel like they’ve been left to their own devices, he explained.

“The bottom line is this: the president’s worrying people, the Fed is worrying people, and yet, somehow, they both think they’re being reassuring,” Cramer said. “They couldn’t be more wrong.”

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US is well on its way to Trump’s goal of ‘energy dominance,’ says Marathon Petroleum CEO

US on its way to Trump's goal of 'energy dominance,' says Marathon CEO

US on its way to Trump’s goal of ‘energy dominance,’ says Marathon CEO   13 Hours Ago | 01:26

President Donald Trump’s goal of making the United States a global superpower in energy is starting to come true, Marathon Petroleum Corp. Chairman and CEO Gary Heminger told CNBC on Tuesday.

“When I look at the president’s theme to begin with and the beginning of his administration, he wanted to have energy dominance in the U.S. and I believe that we are well on our way,” Heminger told Jim Cramer in an exclusive “Mad Money” interview. “We’re the largest producer in the world today.”

Recent declines in oil prices haven’t stopped U.S. producers from pumping more oil ahead of OPEC’s meetings later this week, at which the group of oil-exporting countries are expected to cut production.

That puts the United States in a league above its competitors, said the Marathon chief, whose Ohio-based company specializes in petroleum refining, marketing and transportation.

“The U.S. refining system [is] second to none of anyone in the industry, so I believe we’re well on our way now” to global energy dominance, Heminger said.

The CEO added that he expected OPEC’s meetings in Vienna, Austria this Thursday and Friday to result in “a pullback in OPEC production,” in which case “we’ll see crude prices inch up” from their current levels.

And although oil’s recent pummeling has benefited business at Marathon — where oil is part of Marathon’s cost of goods sold, so price declines translate into higher margins — Heminger said the company sees prices for the benchmark West Texas Intermediate crude rising significantly in 2019.

“We really believe the price is probably going to end up being … $65 to [$]70 in 2019, on an average,” he said. “I believe we’ve averaged almost $65 — about [$]64.50 — year to date in 2018, so we think we’re being conservative looking at that number for next year.”

WTI crude futures fell 0.64 percent on Tuesday to $52.61. Year to date, the commodity has lost 8.77 percent.

Shares of Marathon Petroleum shed 2 percent amid Tuesday’s marketwide meltdown, settling at $63.34.

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This sell-off was caused by a computer-driven ‘footrace,’ Jim Cramer says

Sell-off caused by computer-driven 'footrace,' says Jim Cramer

Sell-off caused by computer-driven ‘footrace,’ says Jim Cramer   13 Hours Ago | 01:10

As CNBC’s Jim Cramer watched stocks nosedive in Tuesday’s trading session, one thing became abundantly clear to the longtime market-watcher: it “was all about the rise of the machines.”

The major averages all fell more than 2 percent as a possible slowdown signal in the bond market and lingering trade fears rattled investors. The Dow Jones Industrial Average fell more than 800 points intraday.

Some attributed the dramatic declines to a lack of buyers, but Cramer already knew the culprits: complex algorithmic programs set up by professional money managers to sell when the odds of future market losses increase.

In other words, when an event that often precedes a recession occurs — in Tuesday’s case, short-term interest rates trading above long-term rates in a so-called yield curve inversion — some trading algorithms will automatically begin selling securities because the chances of an economic slowdown just got higher.

Cramer, host of “Mad Money,” drew a comparison with football. Some plays can seem very risky, but when you consider the percentage chances of them going right, there’s no choice but to implement them in the field. These programs make the same kind of calculation.

So, when the two-year and the five-year yield curves inverted on Tuesday, some hedge funds’ programs automatically sold the S&P 500, which tends to fall in times of economic weakness, and others automatically sold shares of the big banks, which suffer when long-term rates are lower, Cramer said.

“Why? Because historically, this situation has produced negative results for the bank stocks and these hedge funds are trying to get out ahead of others who fear those negative results but just don’t know they’re going to fear them. It’s a footrace,” he explained. “This curve, as they call it, overrides whatever you hear about good employment or consumer balance sheets or robust lending. It’s predictive.”

Worse, the charts are signaling more pain ahead: based on Cramer’s analysis, many hedge funds likely sold the S&P 500 when it dipped below its 200-day moving average because, in the past, that move tended to bring more downside.

“Here’s the problem: there are now so many hedge funds using the same algorithm, same programs [that] there simply aren’t enough investors willing to take the other side of the trade. If we all know that stocks go down on certain triggers, then who the heck would want to buy stocks?” Cramer said.

“That’s how you get a day like today, where the market goes into free-fall,” the “Mad Money” host continued. “When the percentages are against you and the algorithms are in charge, … nobody wants to try to be a hero and bet against them.”

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Uber’s India business has topped $1.6 billion in annualized bookings

Dara Khosrowshahi, chief executive officer of Uber Technologies.

David Paul Morris | Bloomberg | Getty Images
Dara Khosrowshahi, chief executive officer of Uber Technologies.

Uber has been selling off its local businesses in big emerging markets like China and Southeast Asia. But the company’s India unit isn’t going anywhere.

In an email obtained by CNBC, Uber’s India head Pradeep Parameswaran told company executives, including CEO Dara Khosrowshahi and CFO Nelson Chai, that Uber India reached an annualized bookings rate of $1.64 billion in the third quarter.

Parameswaran wrote that Uber will close the year in its “strongest position ever — as the ride-sharing leader in India.” He said the company doubled its engineering team as of the third quarter and plans to double again next year in its two big hubs of Bangalore and Hyderabad.

India marks Uber’s last stand in Asia. The San Francisco-based company spent billions of dollars building its business across the region, before ultimately consolidating with local players. In 2016, Uber sold off its China operations to Didi Chuxing for a 20 percent stake in its former rival, and in March of this year Uber sold its business in eight countries across Southeast Asia for a 27.5 percent stake in regional leader Grab. Uber also merged its Russian business with Yandex in 2017.

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Cramer Remix: Federal Reserve officials have to watch what they say

Cramer Remix: Federal Reserve officials have to watch what they say

Cramer Remix: Federal Reserve officials have to watch what they say   13 Hours Ago | 00:59

Part of Tuesday’s stock market plunge may have stemmed from money managers giving up on getting clarity from President Donald Trump and his administration on their policies, CNBC’s Jim Cramer said as stocks settled.

“We have maximum uncertainty. That makes people want to sell. That’s how money managers view the situation,” the “Mad Money” host said after the Dow Jones Industrial Average ended the day nearly 800 points lower.

Over the weekend, Trump struck a cease-fire on trade with President Xi Jinping of China at the G-20 summit in Argentina. But while top economic advisor Larry Kudlow and Treasury Secretary Steven Mnuchin seem optimistic about the prospect of a deal, U.S. Trade Representative and known China hawk Robert Lighthizer has emerged as a leading candidate for running the negotiations.

That sets up a battle between those who want a deal and those who would rather see China shed the title of global superpower, Cramer said.

To make matters worse, Cramer worried that the Federal Reserve was back on autopilot, content with ignoring slowdown indicators and talking up the job market so it could push through its widely expected December interest rate hike.

But with the bond market doing what it tends to do before recessions, another rate hike could “push us over the edge,” he warned, saying that the Fed’s more optimistic members “sound like they’ve lost their minds.”

“I’m concerned that the Fed just doesn’t get how important its words are. All of these Federal Reserve officials should simply hush up and let the chairman do the talking,” Cramer said. “They are sowing a lot of uncertainty, too. Talk about your region, maybe. Talk about business conditions in your states. Don’t make sweeping declarations that only confuse people.”

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