Apple Inc. is expected to unveil its latest line of iPhones and smartwatches on Sept. 7, according to a new report.
Bloomberg News reported Wednesday that the tech giant will update its flagship smartphones amid a busy fall product rollout that includes three new Apple Watch models and multiple new versions of Macs and iPads by year’s end.
But the iPhone 14 launch is by far the biggest deal for Apple. Last quarter, Apple reported $40.67 billion in revenue from iPhone sales, up from $39.57 billion a year prior, and roughly half of the company’s total revenue. That beat analysts’ expectations, defying global supply-chain problems and rising inflation.
The iPhone 14 will reportedly feature a better camera but otherwise fairly minor technological upgrades, and will add a version with a 6.7-inch screen while eliminating the 5.4-inch “mini” version.
Analysts are bullish on Apple’s outlook. Credit Suisse’s Shannon Cross on Wednesday named Apple of of her “top picks,” raising her rating on the stock to outperform from neutral, with a $201 price target, while Wedbush’s Dan Ives told CNBC that demand for Apple products will likely remain strong next year.
Apple shares
AAPL,
+0.88%
closed slightly higher Wednesday, at $174.55, and are down about 2% year to date, following a 24% rally over the past three months. In comparison, the S&P 500
SPX,
-0.72%
is down 10% in 2022, after a 9% gain over the past three months.
and is calling on the media company to buy the rest of Hulu, explore spinning off ESPN and refresh its board.
Mr. Loeb on Monday said his firm, which liquidated a large Disney stake earlier this year, has repurchased a “significant stake” in the company and sent a letter to Disney Chief Executive
Bob Chapek
urging the company to engage with Third Point on a number of issues.
Mr. Loeb praised growth in Disney’s streaming subscriber base, but also wanted Disney to more aggressively cut costs and consider a number of steps to shake up its portfolio.
The investor’s calls come at an inflection point for Disney and the streaming industry at large, which enjoyed torrential growth during Covid-19 but now face headwinds that include financial losses, domestic subscriber saturation and the introduction of new ad-supported tiers.
Mr. Loeb also now represents a fresh challenge for Mr. Chapek, who assumed the CEO job in February 2020, one month before Covid-19 shut down his company’s theme parks and the nation’s movie theaters. Earlier this year, Mr. Chapek found himself under fire from his own employees and Florida Gov.
Ron DeSantis
over his response to the state’s bill known by opponents as the “Don’t Say Gay” legislation.
Mr. Chapek was renewed to a three-year contract this summer, and recent subscriber growth in Disney’s flagship service, Disney+, has shown the company is advancing on the streaming industry’s dominant player,
Netflix Inc.
A spinoff of ESPN—itself a source of paying subscribers through its ESPN+ offering—would radically alter Disney’s presence in the streaming ecosystem.
“We welcome the views of all our investors,” Disney said in response to Third Point’s letter. The company said its board has been continuously refreshed, “with an average tenure of four years.”
Third Point is pushing Disney to “make every attempt” to buy up
Comcast Corp.’s
CMCSA 1.26%
remaining minority stake in the streaming giant Hulu before its contractual deadline in early 2024. Under a 2019 agreement, Comcast can require Disney to purchase its NBCUniversal subsidiary’s one-third stake in Hulu by that deadline for at least $9 billion, assuming the streaming service has an equity value greater than $27.5 billion.
“We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time,” Mr. Loeb’s letter says.
Disney and Comcast have been in a dispute over the value of Hulu, The Wall Street Journal previously reported. When Disney took majority control of Hulu in 2019, the service was valued at a minimum of $27.5 billion. Comcast believes the value of Hulu is now closer to $70 billion, people familiar with the matter have said.
The two companies have already started to unwind some aspects of their partnership. Comcast’s NBCUniversal earlier this year exercised an option to exit its content-sharing agreement with Disney, the Journal reported. Content from NBCUniversal that previously would have gone to Hulu after airing on NBC and NBC-owned cable channels will now go directly to Peacock, NBCU’s streaming service.
Mr. Loeb’s letter also states that there is a “strong case to be made” that Disney should spin off its ESPN business to shareholders to alleviate leverage at the parent company, despite ESPN’s centrality to the company’s streaming offerings and the significant free cash flow it generates.
Mr. Loeb suggests that synergies between Disney and ESPN could be replicated through contractual arrangements. A spinoff would drive better long-term value for Disney shareholders and result in a business “no longer haunted by the specter of cord-cutting,” the letter says.
Cord-cutting has driven Disney to make drastic changes to its business model in the past. In the summer of 2015, former Disney CEO
Robert Iger
acknowledged that the company was seeing “some subscriber losses” to ESPN. One year later, ESPN lost two million subscribers, dropping to its lowest count since 2005.
That steady decline became an albatross on Disney’s stock price, which fell as investors feared a future in which ESPN—once a top moneymaker—fell in relevance and revenue.
ESPN’s troubles—and Wall Street’s response to them—were one reason Mr. Iger would decide to launch his own streaming service. Disney+ premiered in the fall of 2019, and its rocketing growth in its first 18 months caused Disney shares to rise even as Covid-19 wrecked other parts of the business.
Hollywood has been rampant with rumors about the future of ESPN since those first indications of subscriber losses, with rivals speculating that a spinoff or sale was in its future. Today, the sports network is one of three core components of Disney’s streaming bundle, along with Disney+ and Hulu.
Disney+ has 152.1 million subscribers as of the most recent quarter, ESPN+ has 22.8 million and Hulu has 46.2 million.
Mr. Loeb’s letter also urges the company to rethink the makeup of its board and consider a list of potential new members that Third Point has compiled. It also advocates for a wide-ranging cost-cutting program and the continuation of Disney’s pandemic-era suspension of cash dividend payments.
Mr. Loeb has been a thorn in the side of studio chiefs before. In 2013, he bought a stake in
Sony Group Corp.
and publicly criticized the company’s movie arm, Sony Pictures Entertainment. He called on the company to make cuts to the division and introduce “discipline and accountability.”
Soon after Mr. Loeb’s disclosure of a 7% stake, Sony Pictures’ then-CEO pledged to find at least $350 million in annual savings. Mr. Loeb sold his stake about a year later, but has called on Sony to make changes to its entertainment division in the years since.
Last week, Disney reported better-than-expected earnings and added 14.4 million new subscribers to its Disney+ streaming service, many of which came to the service amid its expansion internationally.
The company’s new customer additions brought its total at all of its streaming services, including Disney+, Hulu and ESPN+, to 221.1 million subscribers, which puts Disney’s streaming total narrowly ahead of rival Netflix Inc., which last month reported it had 220.67 million subscribers.
Disney’s share price is up more than 12% in the past week, but remains down about 20% since the start of the year, amid a broad pullback in technology and media stocks.
Last week, Disney also announced price increases to its streaming services, including for its planned ad-supported tier of Disney+, a move that industry executives and analysts said is intended to help drive profitability at its streamers.
Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.
“We have plenty of room on price value,” Mr. Chapek said last week.
Third Point previously held 4.1 million shares of Disney and successfully pushed the company to suspend its $3 billion annual dividend and plow the funds instead into the streaming business.
But by the first quarter of this year, the hedge fund had completely exited its position. Mr. Loeb had become worried that it would take years for Disney’s streaming business to reap the profits needed to boost the company’s share price, a person familiar with his thinking told The Wall Street Journal in May.
Since 1967, the Florida land housing Disney’s theme parks has been governed by the company, allowing it to manage Walt Disney World with little red tape. WSJ’s Robbie Whelan explains the special tax district that a Florida bill would eliminate. Photo: AP
Write to Dean Seal at dean.seal@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com
according to people familiar with the matter, as the drugstore and insurance giant looks to expand in home-health services.
Signify Health is exploring strategic alternatives including a sale, The Wall Street Journal reported this past week. Initial bids are due this coming week and CVS is planning to enter one, some of the people said. Others also are in the mix, they said, and CVS could face competition from other managed-care providers and private-equity firms.
There is no guarantee any of them will reach a deal for Signify, which has a market value of around $4.7 billion after its shares rose on the news of a potential sale.
For Woonsocket, R.I.-based CVS, which has a market value of $134 billion, a deal would help fulfill its stated ambition to become an even bigger provider of medical services. The company has indicated it hopes to have a deal in place to help it do so by year-end. Wall Street has largely focused on CVS’s efforts to add primary-care practices and doctors to its payroll, though executives have also discussed their ambitions to expand its in-home health presence.
CVS, parent of the eponymous drugstores and the Aetna health-insurance operation, had eyed a deal for the parent of One Medical, people familiar with the matter said, before
Amazon.com Inc.
agreed to buy the primary-care clinic operator for about $3.9 billion last month.
Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care. It also offers in-home health evaluations for Medicare Advantage and other government-run managed-care plans. At the close of its deal this year to buy Caravan Health Inc., Signify said it supported roughly $10 billion in total medical spending.
Signify went public in February 2021. Even after rallying recently, the shares, which closed Friday at $19.87, are below their $24 IPO price. In July, the company said it planned to wind down one of its units after changes to a government-payment model and focus on more-profitable businesses.
New York-based private-equity firm New Mountain Capital is an investor in Signify after first backing it in 2017. The firm is well-versed in the sector, having sold healthcare payments firm Equian LLC to
UnitedHealth Group Inc.
for about $3.2 billion in 2019.
Write to Cara Lombardo at cara.lombardo@wsj.com, Laura Cooper at laura.cooper@wsj.com and Sharon Terlep at sharon.terlep@wsj.com
is cutting hundreds of corporate roles in a restructuring effort, according to people familiar with the matter, a week after the retail giant warned of falling profits.
The retailer began notifying employees in its Bentonville, Ark., headquarters and other corporate offices of the restructuring, which affects various departments including merchandising, global technology and real-estate teams, the people said. Around 200 jobs in total are being cut, said one of these people.
A Walmart spokeswoman confirmed that there were roles being eliminated as the company updated its structure, but said that the company was also investing in other areas and creating some new roles.
Last week, Walmart warned that its profit would decline in the current quarter and fiscal year because it was having to mark down apparel and other merchandise that has piled up in its stores. The retailer said higher prices for food and fuel were causing U.S. shoppers to pull back on other categories that are more profitable for it.
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Walmart was one of several retailers that was caught off guard this spring as shoppers shifted their spending away from products that have been in high demand throughout much of the pandemic. In addition, some products arrived late due to supply-chain snarls, causing oversupply as shopper interest waned.
Target Corp.
in June issued a profit warning after it reported quarterly results that, like Walmart, showed a surge in inventory levels. Last week,
Best Buy Co.
cut its sales and profit goals, saying consumers had pulled back on electronics.
Walmart is the largest private employer in the U.S. and while much of its workers are hourly staff, it has thousands of people in corporate roles. Walmart employed 2.3 million worldwide, including 1.7 million in the U.S., as of Jan. 31.
While the overall U.S. job market has been strong, a handful of other major employers are pulling back on hiring or cutting some jobs.
Ford Motor Co.
is preparing to cut thousands of white-collar workers, while technology giants such as
Microsoft Corp.
and Facebook parent
Meta Platforms Inc.
have pulled back.
Investors will get another update on the health of the U.S. job market on Friday when the government releases data for July. Economists surveyed by The Wall Street Journal think Friday’s jobs report will show that they added more than 250,000 in July, compared with 372,000 in June.
is slashing about 23% of its full-time staff as the flashy online brokerage continues to reel from a sharp slowdown in customer trading activity.
The job cuts mark the second round of layoffs this year at Robinhood, which in April reduced its staff by about 9%. Together, the two rounds have cut more than 1,000 jobs from the company.
The layoffs come alongside a broader company reorganization,
Vlad Tenev,
Robinhood’s chief executive, said in a message posted to the company’s blog. In the statement, Mr. Tenev said the previous round of layoffs in April “did not go far enough” in helping the company cut costs.
“Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the Covid era would persist into 2022,” Mr. Tenev said in the message. “In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory—this is on me.”
Robinhood also moved up the release of its second-quarter results a day earlier than scheduled, reporting its monthly active users tumbled to 14 million, down 34% from a year earlier. Revenue fell 44% to $318 million.
Launched less than a decade ago, Robinhood ushered in a free-stock trading phenomenon during the Covid-19 pandemic, thanks to its easy-to-use, mobile-first online brokerage platform.
By the second quarter of last year—Robinhood’s best, according to public filings—the company boasted more than 21 million active users, who flocked to the app to trade flashy meme stocks, options and cryptocurrencies.
But the pandemic-darling has seen its fortunes unwind this year as markets have tumbled and customers are no longer stuck at home like they were during the Covid-19 pandemic. Revenue tied to customers’ trading activity dropped 55% in the latest quarter to $202 million.
Robinhood’s stock price plunged this year and finished Tuesday at $9.23, down 76% from its initial public offering price last year of $38 a share. Its stock fell 1.6% in recent after-hours trading.
Robinhood scaled up staffing quickly during the Covid-19 pandemic to meet the surge in demand for its services. On the company’s earnings call in April, Mr. Tenev said the company grew its head count to nearly 3,900 in the first quarter of this year from roughly 700 at the end of 2019. Tuesday’s reduction will bring the head count to about 2,600.
In his blog post, Mr. Tenev said all employees would receive an email and a Slack message with their employment status immediately following Tuesday’s companywide meeting where the layoffs were announced. Employees who were laid off will be able to remain employed through October, Mr. Tenev said.
“The reality is that we over-hired, in particular in some of our support functions,” Mr. Tenev said later on the call with reporters. He noted that employees in support, operations, marketing and program management would be most acutely affected.
A number of technology companies have laid off employees in recent months as they grapple with a slowdown in growth and the threat of a looming recession.
Twitter Inc.,
Netflix Inc.
and
Tesla Inc.
are among those that have made staff cuts.
Within the brokerage landscape, Robinhood has found itself more deeply affected by the current market environment. Compared with larger, entrenched players in the industry, Robinhood’s users tend to be younger and have less money in their brokerage accounts. Jason Warnick, Robinhood’s chief financial officer, said Robinhood customers tend to invest in growth stocks and cryptocurrencies. Both categories were hammered by a downturn in markets this year.
In addition to slowing growth, Robinhood has found itself under the watchful eye of regulators. The New York State Department of Financial Services said Tuesday that it imposed a $30 million fine on Robinhood’s cryptocurrency trading unit for alleged violations of anti-money-laundering and cybersecurity regulations.
The company, meanwhile, has encountered questions about the future viability of part of its business model, after Securities and Exchange Commission Chairman
Gary Gensler
earlier this year outlined a revamp of trading rules that could threaten one of the key ways Robinhood makes money.
As its business has struggled this year, Robinhood has increasingly been considered a takeover target by some market watchers, especially in the highly competitive brokerage industry. In May, one of the biggest names in cryptocurrency,
Sam Bankman
-Fried, unveiled a roughly $648 million investment in Robinhood in exchange for 7.6% of the company’s Class A shares.
Any outside investor, including Mr. Bankman-Fried, would face an uphill battle in mounting an aggressive takeover bid for Robinhood, due to a dual-class share structure that gives the majority of voting control to Mr. Tenev and
Baiju Bhatt,
Robinhood’s other co-founder.
Mr. Warnick reiterated on Tuesday’s media call that Robinhood intends to continue as a stand-alone, independent company.
“We’ve got an incredibly strong balance sheet with $6 billion in cash and we’ve got a lot of momentum on the product side,” he said. “To the contrary of being acquired, we actually think that we should be looking more aggressively at opportunities to acquire other companies that would help speed our innovation.”
Mr. Warnick added that Robinhood plans to roll out tax-advantaged retirement accounts later this year, following its earlier launch of other products including a new debit card. Some former employees, customers and analysts, however, have criticized the brokerage for being too slow to unveil new products that could diversify its revenue stream.
HONG KONG—Billionaire Jack Ma plans to relinquish control of Ant Group Co., people familiar with the matter said, part of the fintech giant’s effort to move away from affiliate Alibaba Group Holding Ltd. after more than a year of extraordinary pressure from Chinese regulators.
The authorities halted Ant’s $34 billion-plus IPO in 2020 at the 11th hour and are forcing the technology firm to reorganize as a financial holding company regulated by China’s central bank. As the overhaul progresses, Ant is taking the opportunity to reduce the company’s reliance on Mr. Ma, who founded Alibaba.
Mr. Ma, a 57-year-old former English teacher and one of China’s most prominent entrepreneurs, has been the target of government action that appears designed to reduce his influence and the power of his companies. He has controlled Ant since he carved its precursor assets out of Alibaba more than a decade ago. Over time he built it into a company that owns the Alipay payments network with more than one billion users, an investing platform that houses what was once the world’s largest money-market fund, and a large microlending business. Ant was expected to be valued at more than $300 billion had it gone public.
Diminishing his ownership could put back a potential revival of Ant’s IPO for a year or more. Chinese securities regulations require a timeout on public listings for companies that have gone through a recent change in control.
Mr. Ma doesn’t hold an executive role at Ant or sit on its board, but is a larger-than-life figure at the company and currently controls 50.52% of its shares via an entity in which he holds the dominant position. He could relinquish his control by transferring some of his voting power to other Ant officials including Chief Executive
Eric Jing,
after which they would collectively control the company, some of the people said.
Ant told regulators of Mr. Ma’s intention to cede control as the company prepared to convert into a financial holding company, the people familiar with the matter said. Regulators didn’t demand the change but have given their blessing, the people said. Ant is required to map out its ownership structure when it applies to become a financial holding company.
The People’s Bank of China has yet to officially accept Ant’s application to become a financial holding company. Any change of control isn’t likely to materialize until Ant’s restructuring is complete.
Ant owns the Alipay payments network that has more than one billion users.
Photo:
Qilai Shen/Bloomberg News
Mr. Ma has personally contemplated ceding control of Ant for years, some of the people said. He has been concerned about the corporate-governance risks arising from being too reliant on a single dominant figure atop the company, those people said.
The charismatic founder addressed those risks at Alibaba years ago by setting up a partnership structure to ensure a sustainable succession as its first generation of leaders moved on. He gave up the CEO job at Alibaba in 2013 and stepped down as chairman in 2019 when he retired from the company. He currently holds less than 5% of Alibaba’s shares.
American depositary shares of Alibaba traded in the U.S. fell 2.2% on Thursday. They have lost nearly half their value over the past 12 months.
The need to end Mr. Ma’s control at Ant gained new urgency as the souring regulatory environment spurred Ant and Alibaba to cut their ties. On Tuesday, Alibaba revealed seven top Ant executives had stepped down from the Alibaba partnership, the top echelon of management at Alibaba and its subsidiaries. The two companies also terminated long-running commercial and data-sharing agreements that had given Alibaba an edge.
Mr. Ma previously held back from giving up control of Ant because he didn’t want to delay the company’s plans for an initial public offering, some of the people familiar with the matter said. The scuttling of those plans—after Mr. Ma laid into financial regulators in a speech—removed that obstacle and created a fresh opportunity for Mr. Ma to resolve the matter, those people said.
A change in control could mean that Ant will have to wait a while longer before it tries going public again. Chinese securities regulations state that companies can’t list domestically on the country’s A-share market if they have had a change of controlling shareholder in the past three years—or in the past two years if listing on Shanghai’s Nasdaq-like STAR Market.
In less than six months, China’s tech giant Ant went from planning a blockbuster IPO to restructuring in response to pressure from the central bank. As the U.S. also takes aim at big tech, here’s how China is moving faster. Photo illustration: Sharon Shi
Hong Kong also imposes a waiting period but only for one year. Ant’s scuttled IPO plan included simultaneous listings in the former British colony as well as Shanghai.
Ant is in no rush to attempt an IPO again and intends to keep its options open, some of the people said. The company could consider other moves including spinning off units that could in turn be listed themselves, those people said.
Mr. Ma controls Ant through an entity called Hangzhou Yunbo Investment Consultancy Co., which in turn controls two vehicles that together own a little more than half of Ant’s shares.
Mr. Ma has a 34% stake in Hangzhou Yunbo. The other 66% is split evenly among Ant’s CEO, Mr. Jing, former CEO
Simon Hu
and veteran Alibaba executive and former Ant nonexecutive director Fang Jiang.
The billionaire originally owned all of the entity. He transferred two-thirds of the shares to the three executives in August 2020 before Ant filed its IPO prospectus. At the same time, Mr. Ma was given veto power over Hangzhou Yunbo’s decisions, according to the prospectus. The arrangement was designed to give the other executives more say in Ant’s affairs without triggering an effective change in control that could delay the IPO, a person familiar with the matter said.
Jack Ma doesn’t hold an executive role at Ant or sit on its board but controls 50.52% of its shares via an entity in which he holds the dominant position.
Photo:
bobby yip/Reuters
Mr. Ma could cede control of Ant by diluting his voting power in Hangzhou Yunbo via giving up his veto and transferring some of his stake to other executives, the person said.
Mr. Hu, who resigned as Ant’s CEO last year and recently retired, and Ms. Jiang, who left Ant’s board last year, will likely exit Hangzhou Yunbo and be replaced by other Ant executives. In addition to Mr. Jing, Ant’s most senior executives are now Executive Vice President Xiaofeng Shao and Chief Technology Officer Xingjun Ni. Mr. Shao is also the general secretary of Ant’s Communist Party committee, according to people familiar with the matter. Mr. Ni was instrumental in founding Alipay in 2004.
Mr. Ma’s control over Ant goes back more than a decade to the period when he was CEO of Alibaba. In 2011, it emerged that he had carved the payments business Alipay out of Alibaba without the knowledge of key shareholders including Yahoo Inc. and
SoftBank Group Corp.
9984 0.37%
Alibaba argued the transfer was needed for Alipay to secure a Chinese license that might not have been granted if the company had foreign shareholders. Following the move, China’s central bank in May 2011 gave Alipay a license to operate as a payment-services company. Yahoo and SoftBank were later compensated by an agreement that allowed them to share economic interests in Ant through their ownership in Alibaba.
In 2014, Ant Financial Services Group was created to hold Alipay and other financial businesses including consumer lending. The company in 2020 changed its name to Ant Group.
Write to Jing Yang at Jing.Yang@wsj.com and Raffaele Huang at raffaele.huang@wsj.com
said it plans to break up its business into three companies, seeking to jump-start its larger, faster-growing snacks business while helping its namesake cereal brands regain their footing on supermarket shelves.
The move, which Kellogg said would separate snacks such as Pringles, Cheez-Its and Pop-Tarts from cereal-aisle staples including Frosted Flakes and Froot Loops, aims to create more agile, focused companies and marks a shift from the food industry’s decadeslong strategy of pursuing acquisitions and building scale.
“Bigness for bigness sake doesn’t make a lot of strategic sense,” said Kellogg’s Chief Executive Steve Cahillane, who will head the $11.4 billion snacking business, which accounted for 80% of Kellogg’s net sales last year.
The Covid-19 pandemic delivered a boost in sales for Kellogg and other food makers, as families prepared more meals in their kitchens as they stayed home from work and school. The grocery industry now is working to retain that momentum, but food makers over the past year have been battered by rising costs for fuel, labor, ingredients and packaging, creating what Mr. Cahillane called an unprecedented stretch of inflation.
Kellogg said it expects to complete the split by the end of 2023, with the North America cereal business potentially separating first, followed by its plant-based foods business as the third company. Kellogg said it also is considering selling the plant-based foods unit, which is predominantly composed of the
MorningStar
Farms brand. It has yet to name the individual companies.
Kellogg’s stock price rose about 3% on Tuesday. Shares were already up 4.8% this year as of Friday, bucking the broader market slump. The S&P 500 packaged foods and meat index on Tuesday was down about 3% so far in 2022.
Kellogg’s breakup plan follows splits announced last year by General Electric Co. and Johnson & Johnson. In the food sector, Kraft Foods orchestrated a similar split about 10 years ago, spinning off its North American grocery business to focus on its faster-growing snack brands including Oreos and Triscuits, a business it named Mondelez International Inc.
Sara Lee Corp. in 2012 split its business into two companies, one a meat-focused operation renamed Hillshire Brands Co., and an international coffee and tea business called D.E. Master Blenders NV.
Hillshire, D.E. Master Blenders and Kraft all later merged with other big food companies.
The largest of Kellogg’s three planned companies would be the global snacks business, which would include brands such as Pringles and Cheez-Its, and breakfast items including Eggo waffles and Pop-Tarts. It also would include Kellogg’s international operations—fast-growing noodle business in Africa and cereal sales overseas.
“The snacking business will have all household names with just the right level of scale,” Mr. Cahillane said. “And when you don’t have the ‘conglomerate effect,’ you can get a lot more done.”
Kellogg said it would use its international cereal supply chain and retailer connections to expand Cheez-Its and other snacks globally. In recent years, Kellogg’s Pringles brand has gained momentum in Europe and Latin America, which executives said paves the way for others in its portfolio.
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Snacks have been a driver of Kellogg’s growth and an area of particular interest to Mr. Cahillane since he joined the company almost five years ago. In 2019, he sold off Kellogg’s nearly $1 billion Keebler cookies and fruit snacks business to better focus on Kellogg’s other snack brands, which were already getting more of the company’s marketing and innovation resources. Since then, Mr. Cahillane said, he has been calculating a bigger corporate split.
“The pandemic pressed pause on a lot of things,” Mr. Cahillane said. “The time is right, now.”
Mondelez, the biggest global snack company, for years has added brands through small acquisitions, and on Monday it said it would acquire Clif Bar & Co. for $2.9 billion plus the potential for more tied to earnings targets. That deal could increase competition against Mars Inc.’s KIND bar brand, which Mars bought in 2020, and Kellogg’s smaller RX Bar business, which it acquired in 2017.
Mr. Cahillane said Kellogg would continue to pursue snacking acquisitions following the split.
Other food companies have reshaped their own operations.
General Mills Inc.
took on a substantial pet-food business via acquisitions, and divested less-profitable brands such as Green Giant vegetables and Hamburger Helper.
Campbell Soup Co.
has faced investor questions about whether it would be better off splitting its snack business and soup operation in two, though executives have maintained that they are better off together.
Kellogg’s decision to spin off its North America cereal business, with about $2.4 billion in sales last year, comes as it seeks to reverse sales declines and boost profit margins.
Consumers for years have been moving away from breakfast cereals, and Kellogg’s operations more recently were disrupted by a strike among factory workers and a fire at one plant that knocked out production and cost the company market share.
Corporate titans General Electric and Johnson & Johnson both announced in late 2021 that they were splitting, two of the latest in a long string of conglomerate break ups. Here’s why big businesses divide and what it could mean for investors. Photo illustration: Tammy Lian/WSJ
Kellogg, the second biggest U.S. cereal supplier after General Mills, has regained 4 percentage points of market share this year, Mr. Cahillane said. Still, Kellogg’s North America cereal sales fell 10% in the three months ended April 2 from the prior year, largely because of to supply-chain problems, the company said.
“Frosted Flakes doesn’t have to compete with Pringles for resources,” Mr. Cahillane said. “Economists might say we can do that without splitting. But we don’t live in a textbook, we live in the real world.”
Kellogg’s plant-based foods business, with estimated 2021 net sales of $340 million, as a stand-alone company will first aim to expand in North America and eventually globally, Kellogg said.
Meat alternatives have found traction in grocery stores’ freezer aisles and meat cases, though competition has grown. Kellogg in early 2020 brought out a line of plant-based burgers and tenders called Incogmeato, part of an effort to compete against
Beyond Meat Inc.
and Impossible Foods Inc.
Mr. Cahillane said MorningStar’s Incogmeato can be more aggressive with investments in technology and its supply chain once it no longer is contributing to Kellogg’s bottom line.
Some Wall Street analysts said divvying up Kellogg could hurt each business’s ability to secure competitive prices using the larger conglomerate’s purchasing power.
Piper Sandler’s
Michael Lavery
said that it could cost some 2% of Kellogg’s current total sales for each business to take on their own sales force, distribution system and other previously-shared expenses. Analysts with investment research firm Morningstar Inc. said that Kellogg’s snacks business could thrive on its own, though the benefits for the cereal and plant-based operations were less clear.
Kellogg said the North American cereal and plant-based foods businesses would both remain based in Battle Creek, Mich. The global snacking business would be based in Chicago, Ill., with dual corporate campuses in Battle Creek and Chicago.
Moving the snack company’s headquarters to Chicago will locate it in a city that is home to other food companies as Kellogg looks to hire and expand the business.
Boeing Co.
and
Caterpillar Inc.
said in recent weeks they planned to relocate their Chicago-area headquarters to Arlington, Virginia and Irving, Texas, respectively.
is exchanging its top finance executive about four months after it named a new chief executive, a move that comes as the fitness-equipment maker navigates persistent losses.
The New York-based at-home exercise equipment company on Monday said
Liz Coddington
will serve as its chief financial officer, effective June 13. Peloton said its current CFO,
Jill Woodworth,
decided to leave after more than four years with the company.
Peloton said Ms. Woodworth will remain with the company as a consultant on an interim basis to help prepare the fiscal year 2022 financial results.
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Ms. Coddington most recently served as vice president of finance for Amazon Web Services, an
Amazon.com Inc.
subsidiary that provides on-demand cloud computing platforms. Before that, she held CFO and leadership finance roles at companies including retailer
Walmart Inc.
and streaming business
Netflix Inc.
Ms. Coddington joins Peloton as the company is dealing with waning demand from consumers after facing issues around its ability to meet orders, which soared during the early stages of the pandemic. The surge in demand for Peloton bikes led the company to break ground on a million-square-foot factory in Wood County, Ohio, last year.
Peloton is now looking to sell the factory that it will never use. The company also slashed prices for its equipment, projected slower growth and had to borrow $750 million to fund its operations.
Peloton in May reported its largest quarterly loss since the company went public in 2019, reporting a net loss of $757.1 million for the quarter ended March 31, compared with a loss of $8.6 million in the prior-year period.
In February, Peloton replaced Chief Executive
John Foley
with
Barry McCarthy,
who previously led the finances of digital music service
Spotify Technology SA
and Netflix. The company also cut 2,800 jobs amid reduced demand for its exercise equipment. Mr. Foley was closely associated with the company’s growth phase after its public offering and the revenue surge early in the pandemic.
The change in the CFO-seat makes sense given the continuing restructuring under Mr. McCarthy, said
Rohit Kulkarni,
managing director at equity trading and research firm MKM Partners LLC.
“As the new CEO puts his mark on the organization’s structure and aligns it with where he wants the company to go, these changes are not completely surprising,” he said.
With Peloton’s fiscal year ending June 30, Ms. Coddington will very quickly be “under a bigger investor microscope,” as the expectation is that the company will release fiscal year guidance soon after she joins, Mr. Kulkarni said. “It will be a challenging task to provide that new guidance.”
Write to Jennifer Williams-Alvarez at jennifer.williams-alvarez@wsj.com and Mark Maurer at Mark.Maurer@wsj.com
AT&T Inc. detailed its plans for the spinoff of WarnerMedia on Friday, with investors eventually expected to receive a share of the new streaming-media entity for every four AT&T shares they own.
AT&T
T,
+2.19%
is in the process of spinning off its WarnerMedia business in a combination with Discovery Inc.
DISCA,
+0.85%,
which executives have said would allow AT&T to refocus attention on core telecommunications efforts. The company expects the deal to close in April, and executives declared plans for a stock dividend to its investors for April 5 at the close of business.
AT&T explained in a Friday release that those who own AT&T shares as of the end of trading April 5 will be able to receive shares of WarnerMedia SpinCo representing 100% of AT&T’s interest in the business. After the transaction closes, expected sometime in April, investors will receive an estimated 0.24 shares of the newly created WarnerBros. Discovery for each share of AT&T they own.
See also: AT&T issues new guidance as WarnerMedia spin draws nearer
The shares created represent about 71% of WarnerBros. Discovery, which will trade under the ticker symbol “WBD” after the spinoff completes. Shareholders “do not need to take any action” as the SpinCo shares will be automatically exchanged on the date the transaction closes, the company reported.
The potential period between the stock dividend and the closing of the deal could create confusion for anyone who wants to buy or sell the stock. The company noted that between April 4, the trading day before the record date for its spinoff distribution, and the closing of the combination with Discovery, there will be two markets for AT&T’s common stock on the New York Stock Exchange.
Those who choose to sell a share of AT&T’s common stock through the “regular way” market will sell both the AT&T share and the right to receive WarnerBros. Discovery shares through the transaction. Those who participate in the “ex-distribution” market will be selling AT&T’s stock while keeping the right to receive WarnerBros. Discovery shares.
Additionally, in the two-way trading window, those who wish to keep AT&T shares while selling the right to receive WarnerBros. Discovery can use a temporary when-issued option that will be available on the Nasdaq.
While AT&T shareholders will still own the same number of AT&T shares after the transaction close that they did just before the transaction close, the company’s stock price is expected to adjust after the deal is complete, reflecting the spinoff.
AT&T’s board of directors also declared a second-quarter dividend of 27.75 cents a share, the first quarterly dividend under a reduced annual payout that executives outlined last month. The dividend will be payable on May 2 for shareholders of record as of April 14.
’s new chief executive is looking to overhaul the stationary-bike maker’s pricing strategy in a bid to turn around the company.
The company on Friday will start testing a new pricing system in which customers pay a single monthly fee that covers both the namesake stationary bike and a monthly subscription to workout courses. If a customer cancels, Peloton would take back the bike with no charge.
Select Peloton stores in Texas, Florida, Minnesota and Denver will for a limited period offer a bike and subscription for between $60 and $100 a month, an experiment that aims to find a price proposition that will help return Peloton to profitability without crippling growth.
If adopted, the model would be a major shift for Peloton, which built a business around selling high-price, screen-equipped stationary bikes alongside $39-per-month subscriptions to its connected workout classes. The idea: sell Peloton as a fitness service that can be canceled anytime rather than as a major purchase with a subscription attached.
“There is no value in sitting around negotiating what the outcome will be,”
Barry McCarthy,
who last month replaced co-founder
John Foley
as CEO, said in an interview. “Let’s get in the market and let the customer tell us what works.”
Along with a pricing overhaul, Mr. McCarthy, the 68-year-old former finance chief of
Netflix Inc.
and
Spotify Technology SA,
said he plans to reshape his executive team, consider manufacturing simpler bikes, and upend the company’s capital spending strategy. Rather than investing primarily in bikes, treadmills and other equipment, he said, Peloton will spend most of its money improving its digital interface and content options.
He said inventors that control 70% of voting shares of Peloton, including Mr. Foley, have agreed to put off any discussions around selling the company while he executes his turnaround plan. Mr. Foley still controls around 35% of voting power even after selling about $150 million worth of his shares in the company since the start of 2021, said Ben Silverman, director of research at InsiderScore. That voting power is because of his holdings of Class B shares, which entitle holders to 20 votes a share.
Initially one the pandemic’s biggest success stories, New York-based Peloton has lowered its revenue forecasts for several quarters in a row and has said it would cut roughly 20% of its corporate positions to help cope with widening losses as demand cools.
The $39-a-month subscription price has existed essentially since Peloton’s inception. In recent years, the company has lowered the cost of its bikes and treadmills, either by cutting prices or offering cheaper options. A Peloton bike in 2020 cost $2,495; now the cheapest model is $1,495, not including a delivery charge.
CEO Barry McCarthy said a different pricing system could draw new customers and make the business more profitable.
Photo:
brendan mcdermid/Reuters
Under the test program, people get a Peloton and a membership that includes access to all its courses for a single monthly fee, with the ability to cancel anytime. The offers would be available through Peloton stores, or studios, and not online. Subscribers would pay a nonrefundable delivery fee.
Mr. McCarthy said a different pricing system could draw new customers and make the business more profitable.
His predecessor, Mr. Foley, argued that Covid was only the beginning of Americans’ shift to online, connected fitness. Based on that assumption, Mr. Foley dramatically increased the company’s capacity, which proved to be well in excess of demand as legions of people returned to gyms and Peloton’s growth sputtered
That misstep, Mr. McCarthy said, led to Peloton’s current woes.
Now, he said, Peloton has to figure out how to tap new customers and make more money on each subscription, while reducing its reliance on bikes and treadmills to deliver profits.
Given Peloton’s ability to retain subscribers, Mr. McCarthy said, higher subscription rates carry big profit potential over time. Even at $39, Peloton subscriptions are hugely profitable, he said. He said he wants to employ models that succeeded at Spotify and Netflix and that Peloton has far higher retention rates than either of those companies.
“I’m a huge proponent of them charging more for subscriptions,” said BMO Capital Markets analyst Simeon Siegel. “But they need to internalize that that will hurt their brand and lower demand,” while making the company more profitable.
He said the fact that Peloton’s growth has slowed dramatically despite cutting the price of equipment casts doubt on whether any changes to the pricing model will win converts.
A Peloton spokeswoman said the ability of customers to cancel anytime differentiates the potential new model from previous price cuts.
Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds
Profitability of Peloton’s exercise equipment is sharply lower than it was before the pandemic, as the company struggles with higher production and logistics costs and excess capacity.
Equipment sales have been vital because the physical machines, while more costly to make, generate more than twice as much revenue as subscriptions, UBS analyst Arpiné Kocharyan said.
Equipment sales have funded Peloton’s ballooning marketing spending up until now, Ms. Kocharyan said. “If you are going to get out of the product business, who is going to pay for that sales and marketing?” she said.
Mr. McCarthy said it isn’t yet clear the role Peloton machines will play in the company’s future. He said roughly 80% of capital spending goes toward equipment, with the rest spent on software. That should be reversed, he said.
Among potential offerings he thinks Peloton should look at developing: its own social-media platform, more seamless ways for members to interact and compete with each other during classes, and partnerships that could land Peloton classes on other devices, or allow outside content to stream on Peloton’s screens.
At the moment, Mr. McCarthy said, Peloton will fervently market test, a strategy more reliable than focus groups and consumer surveys. Netflix also did market tests to see what caused subscribers to ditch the service or keep it, he said.
There isn’t much middle ground between success and failure, he said.
“Either I’m going to leave here successfully,” he said, “or I’m going to leave with a greatly diminished reputation.”
