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SoftBank Considers Launching a Third Vision Fund

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Global tech investor

SoftBank Group Corp.

is considering the launch of a new giant startup fund after ill-timed bets and massive losses weighed down two earlier attempts to dominate startup investing, according to people familiar with discussions at the company.

The Tokyo-based tech conglomerate, by far the world’s largest startup investor in recent years, would likely use its own cash for what would be the third SoftBank Vision Fund if it moves ahead with the plan, some of the people said.

The company is also considering putting additional money into Vision Fund 2, its main investment fund for the past few years, instead of starting a new fund, one of the people said. Vision Fund 2 is currently worth less than the investment that went into it. Those losses significantly reduce the pay for SoftBank staff working on the fund—a factor in its decision making. The company expects to make a decision in the coming months, the people said. 

SoftBank, led by Chief Executive Officer

Masayoshi Son,

has been hit particularly hard by the rout in tech valuations that began last fall, posting a record $23 billion loss in the three months ended in June. 

Much of that red ink is a product of its first two Vision Funds, the startup investment unit that Mr. Son formed in 2017 in a bid to dominate the venture sector. The $100 billion initial Vision Fund, which raised $60 billion from Saudi and Emirati wealth funds, was beset by giant soured bets on companies including WeWork Inc. and

Didi Global Inc.,

leading to meager gains over five years. 

The successor Vision Fund 2, funded by SoftBank and intended to be more cautious, is now worth 19% less than the $49 billion it invested, after accelerating its spending just as valuations peaked on companies including fintech Klarna Holdings AB. 

Chief Executive Officer Masayoshi Son has been hit particularly hard by the rout in tech valuations.



Photo:

Neil Hall/REUTERS

Mr. Son told investors in August he was “quite embarrassed and remorseful” after having gotten caught up in the frenzy, and he has substantially cut back spending on startups. Still, he has said he is committed to the startup and tech sector long term and eventually plans to increase spending again.

Mr. Son and SoftBank have tried to chart a new path forward after the market turned against unprofitable tech investments. He has also faced a string of departures of top staff. In July, the company said

Rajeev Misra,

who led the Vision Fund since it was created in 2017, would step back from his role overseeing new investments as he starts his own fund. 

Despite the misses, SoftBank expects to have more cash coming in over the next year, from a public listing of its chip maker Arm. Its Japanese telecom holdings also generate cash. 

Still, analysts and investors say the company’s options are more limited than in the past. Mr. Son has been selling down SoftBank’s stake in Alibaba Group Holding Ltd. and its telecom holdings, and funding a large stock-buyback program. The result has been an increasingly concentrated bet on startups, where results have been disappointing. 

Among those pushing for a new fund are some employees of the Vision Fund. A new fund would be a way to reset their compensation, which is partly based on profits at the fund and its investments, one of the people familiar with discussions said. The current fund would require making back large losses before employees could get those bonuses. A new fund would put profits closer in reach. The company is also considering restructuring staff incentives for Vision Fund 2. 

The size of the new fund couldn’t be determined. 

Mr. Son personally takes a hit with Vision Fund 2 in the red because of a $2.6 billion personal commitment he made. Based on the terms of the investment, Mr. Son didn’t put up the money himself but owes SoftBank if the fund ends up performing poorly.

The unusual investment has been criticized by some investors and analysts who say it could skew Mr. Son’s motivations given a structure that could make him more focused on Vision Fund 2 than on other investments. Mr. Son, who owns over one-fourth of SoftBank, has said the structure better aligns him with the investment fund.

SoftBank structured its arrangement in a way that allows the company to get repaid on most of its investment before Mr. Son. About $33 billion of its commitment to Vision Fund 2 is in preferred equity.

While that structure would have led to outsize profits for Mr. Son if Vision Fund 2 did well, today it means particularly large losses because the fund is underwater. Mr. Son currently owes $2.1 billion on the investment, SoftBank disclosures show. He is charged a 3% annual interest rate on his unpaid balance to SoftBank.

From the Archives: SoftBank’s longtime strategy of dumping mountains of cash on promising young companies to create big winners failed dramatically at WeWork and is inviting scrutiny into the fund’s other investments. Here’s a look at Vision Fund’s structure, and how its fast-paced investment strategy could make it risky.

Write to Eliot Brown at Eliot.Brown@wsj.com and Julie Steinberg at julie.steinberg@wsj.com

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Technology

Apple plans to unveil iPhone 14 at Sept. 7 event: report

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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.

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Technology

Samsung’s New $1,800 Foldable Galaxy Phone Tests High-End Budgets

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NEW YORK—The entire smartphone industry is slumping except for the priciest devices.

Samsung

Electronics Co. is testing the limits of that high-end demand.

On Wednesday, Samsung unveiled its latest models of two of the world’s most-expensive phones. The Galaxy Z Fold 4, which becomes the size of a small tablet when opened, will cost about $1,800. The more compact Galaxy Z Flip 4 will go for around $1,000. The phones have prices similar to last year’s versions and become available in the U.S. later this month.

Total smartphone shipments slid 8% in the first half of this year versus the same period in 2021, largely because consumers have cut back spending on nonessential goods amid inflation and a shakier economic outlook, according to Counterpoint Research, a research firm. The declines were steepest for the lowest-priced devices, it said.

Foxconn Technology Group, the world’s biggest iPhone assembler, on Wednesday said demand for smartphones and other consumer electronics is slowing, prompting it to be cautious about the current quarter.

Shipments of “ultra-premium” phones—devices sold for $900 or more—grew by more than 20% during the same period, Counterpoint said. This category comprises mostly

Apple Inc.’s

iPhones and Samsung’s flagship devices.

WSJ’s Dalvin Brown checks out the newest foldable smartphones from Samsung to see if the kinks in early models have been ironed out and whether folding is a feature worth spending for, or just a gimmick. Illustration: Adele Morgan

The resilience of the phone industry’s upper class mirrors that of the luxury-goods business, as wealthier consumers show a willingness to keep spending on clothing, handbags and jewelry despite economic rockiness. Brands including

LVMH Moët Hennessy Louis Vuitton SE,

Ralph Lauren Corp.

and Gucci owner

Kering SA

have reported robust growth this year.

Apple, in its most recent quarter, reported a surprise rise in iPhone sales, defying analysts’ expectations for a decline. There has been no obvious macroeconomic impact on iPhone sales in recent months, Apple Chief Executive

Tim Cook

said on an earnings call last month.

Samsung, the world’s largest smartphone maker, recently said it expects the overall smartphone market to see shipments stay flat or experience minimal growth this year. But the South Korean company expressed optimism that its foldable-display devices, which are among its most expensive products, would sell well.

Demand for iPhones and Samsung’s flagship devices, boosted in recent years by the arrival of superfast 5G connectivity and pandemic-time splurging on gadgets, should remain high, said Tom Kang, a Seoul-based analyst for Counterpoint. “It’s clear that the affluent consumers are not affected by current economic headwinds,” Mr. Kang said.

Samsung has much riding on the Galaxy Z Fold 4, left, and the Galaxy Z Flip 4 becoming a success.



Photo:

SAMSUNG

The smaller of the two new devices, the Galaxy Z Flip 4, is an update of the model that accounted for most of Samsung’s foldable-phone sales last year. When fully open on its vertical axis, it has a display that measures 6.7 inches. When closed, it is half the size of most mainstream smartphones, and owners can view text messages and other alerts on a smaller, exterior screen. Compared with last year’s version, Samsung said the Galaxy Z Flip 4 takes better photos and has a slimmer hinge and larger battery.

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Would you buy one of Samsung’s new foldable phones? Why or why not? Join the conversation below.

The heftier Galaxy Z Fold 4 sports a tablet-sized display that is 7.6 inches diagonally when fully opened. It opens and closes like a book, and when shut, it has a 6.2-inch outer screen that performs most smartphone functions. The new version has a slightly thinner hinge and improved camera capabilities, Samsung said.

The Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by

Alphabet Inc.’s

Google specifically for tablets and foldable phones, Samsung said.

Alongside the two foldable phones, Samsung on Wednesday also introduced two new versions of its Galaxy Watch 5, as well as a new edition of its Galaxy Buds wireless earphones, the Galaxy Buds 2 Pro.

Samsung has much riding on the Galaxy Z Fold 4 and the Galaxy Z Flip 4 becoming a success. Given their high price and fatter margins, foldable devices could represent about 60% of Samsung’s mobile-division operating profits, despite accounting for roughly one-sixth of the company’s smartphone shipments, said Sanjeev Rana, a Seoul-based analyst at brokerage CLSA.

Samsung said the Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by Google specifically for tablets and foldable phones.



Photo:

SAMSUNG

Across the industry, the priciest tier of smartphones represent about 10% of annual shipments but about 70% of the industry’s profits, Counterpoint said.

Samsung was a pioneer in an industry that had gone stale when it released the first mainstream foldable smartphone more than three years ago. But the original Galaxy Fold stumbled out of the gate. Design flaws delayed its release. The pandemic closed stores, cutting off opportunities for would-be early adopters to test out the devices, Samsung executives have said. And many consumers balked at an initial price tag close to $2,000.

Last year, Samsung’s Galaxy Z Fold 3 and Galaxy Z Flip 3 saw stronger sales, helped by price cuts. The company also juiced demand through aggressive promotions and trade-in discounts that made purchases more affordable.

Worldwide foldable smartphone shipments are expected to total nearly 16 million units this year, up roughly 73% from the prior year, Counterpoint said. Samsung is projected to account for roughly 80% of the foldable market this year, according to Counterpoint.

The other foldable players—selling at prices below the ultra-premium threshold—include major Chinese brands, including Huawei Technologies Co., Xiaomi Corp., as well as BBK Electronics Co.-owned Vivo and Oppo.

Lenovo Group Ltd.

’s

Motorola,

which first launched a foldable phone in 2019, is slated to introduce a new model this month.

Write to Jiyoung Sohn at jiyoung.sohn@wsj.com

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Business

VW Board Ousts CEO Herbert Diess After Pivot to Electric Vehicles

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Key shareholders in

Volkswagen AG

VOW 0.37%

joined forces with labor leaders to oust Chief Executive Officer

Herbert Diess,

who was in the midst of a push to turn the German auto company into a top maker of electric vehicles.

Mr. Diess will be succeeded by

Oliver Blume,

CEO of VW’s sports-car maker Porsche AG and long an ally of the Porsche-Piëch family that controls a majority of VW voting rights. Mr. Blume will retain his job running Porsche, which is slated for an initial public offering this autumn.

The departing chief executive had repeatedly clashed with unions, which hold half the seats on the German equivalent of the company’s board of directors. Until now he had retained the support of the family, heirs to the VW Beetle inventor, Ferdinand Porsche.

Mr. Diess was informed around midday Thursday that the company’s core shareholders and labor representatives had decided to fire him. The broader supervisory board learned of the decision at a meeting at around 4:30 p.m. Friday local time, according to a person familiar with the proceeding.

The sudden ouster comes after renewed internal strife over the slow progress developing core software for the company’s new generation of electric vehicles. The delays have caused the launches of some models to be pushed back, raising doubts among the Porsche-Piëch family about Mr. Diess’s ability to deliver on his promises, people familiar with the situation said.

Herbert Diess is leaving VW as it struggles in developing core software for its new generation of electric vehicles.



Photo:

Ralph Orlowski/Reuters

VW’s leadership crisis has plunged the company’s electric-vehicle strategy into uncertainty and has raised questions about the company’s governance, which is dominated by a triumvirate of family shareholders, the German state of Lower Saxony and the country’s biggest trade union.

“The hope of the supervisory board must be for new group CEO Blume to have more success in guiding the software strategy of the group,” Daniel Roeska, analyst at Bernstein Research, said in a note to clients. “However, it will take months to come up with a new plan, and creating unrest as the group is heading into a challenging 2023 is the wrong time, in our view.”

Mr. Diess couldn’t be reached to comment. Mr. Diess has said that before joining VW, he had turned down a job offer from

Elon Musk,

which has fueled speculation that he could join

Tesla Inc.

if he left VW.

Auto-industry CEOs around the world are wrestling with how best to transition to new technologies—much of which isn’t core to their companies’ expertise and requires different thinking, cost structures and skill sets.

Car executives are under pressure to get ahead of new rivals, many of them in Silicon Valley, which have deeper pockets and are unencumbered by a capital-intensive legacy business focused on making gasoline-powered vehicles.

In Detroit, the leadership at

General Motors Co.

and

Ford Motor Co.

have outlined bold moves in recent years to transform their operations, including the creation of new supply chains for batteries and the hiring of new kinds of talent. Ford this year took the unusual step of splitting its gas-engine and EV operations into two separate divisions, a move that executives have said will help it be more agile in its shift to new technologies.

Meanwhile, investors are aggressively betting on the EV space, trying to figure out who will be the next Tesla.

With gas prices on a wild ride, many consumers are exploring whether buying an electric vehicle could save them money in the long run. WSJ’s George Downs breaks down four factors to consider when buying a new car. Photo composite: George Downs

Mr. Diess has defined the industry’s challenge as shifting from banging metal into cars to developing the skills, resources and vision to create software-defined cars, vehicles that in many ways have more in common with an iPhone than a conventional car. His attempt to catch up with Tesla was hampered by difficulties turning VW into a developer of software, which is the heart of modern electric vehicles and future self-driving cars.

In recent weeks, people familiar with the company said it had rebooted its plan to develop a unified operating system for its cars after trouble delivering the code led VW’s Audi and Porsche brands to postpone the launch of new premium electric models.

It couldn’t be determined whether Mr. Blume would continue to pursue Mr. Diess’s strategy of keeping core software development in-house or whether he would turn to

Alphabet Inc.’s

Google or

Apple Inc.

as some rivals have.

In March, Mr. Blume said he and his management team met senior Apple executives for a meeting at which they discussed a range of potential projects. Mr. Blume disclosed no further details, and it couldn’t be determined what was discussed.

Ferdinand Dudenhöffer,

director of Center for Automotive Research in Duisburg, Germany, said it was to be expected that Mr. Blume would present a new software strategy for the company.

“This big issue of the software-defined car is a huge challenge for conventional auto makers,” Mr. Dudenhöffer said. “Either auto makers will become tech companies like Google, Apple and Microsoft, or they will become dependent on the tech giants.”

Mr. Diess survived several challenges to his position. In December, following a clash with labor representatives, directors stripped him of some of his responsibilities and reshuffled his management team. But this week’s move to push him out came suddenly and wasn’t linked to any single incident, people familiar with the decision said.

At the supervisory-board meeting on Friday afternoon,

Hans Dieter Pötsch,

chairman of the supervisory board and a key ally of the Porsche heirs, presented a deal reached previously with top officials of the IG Metall trade union in a smaller meeting.

The families and union leaders agreed to remove Mr. Diess in the belief that Mr. Blume, 54 years old, who became CEO of Porsche in 2015, would lead with more consensus among management and VW stakeholders, people familiar with the decision said. Mr. Blume, an engineer by training, has long been a favorite of the Porsche-Piëch families and union leaders as a successor to Mr. Diess. But Mr. Blume has repeatedly said he was happy at Porsche.

Once the controlling families decided Mr. Diess had to go, they approached Mr. Blume, people familiar with the family said, and urged him to take the job. Mr. Blume agreed, they said.

“Blume is seen as someone with a more congenial personality and management style,” one of the people said. “He speaks to his colleagues on the executive board differently and has had success at Porsche.”

According to the people with knowledge of the decision, the Porsche-Piëch family concluded that Mr. Diess’s personality led to repeated conflict within the company and that he didn’t appear to have the software problems under control. While not the only issue that weighed on the family’s mind, the software troubles began to affect new models and eroded the confidence that Mr. Diess could get the issues under control.

Hours before his ousting, Mr. Diess, who will step down on Sept. 1, posted a holiday message to workers ahead of the summer breaks.

“After a really stressful first half of 2022 many of us are looking forward to a well-deserved summer break,” he wrote on LinkedIn. “Enjoy the break—we are in good shape for the second half.”

Mr. Diess joined VW in 2015 from

Bayerische Motoren Werke AG

, initially as chief of the VW brand. In that role, he began to lay the groundwork for VW’s electric-vehicle strategy, a plan that has seen VW’s brands, including Porsche, Audi, Seat, Škoda, Lamborghini and Bentley, develop core electric models with a plan to shift fully to EVs this decade.

Under Mr. Diess’s leadership, VW embarked on a plan to build battery cell manufacturing companies around the world to power its new generation of EVs. It recently announced that it would create a new company in the U.S. under the Scout brand to build rugged, off-road electric trucks and SUVs. The move is part of a focus to rebalance the company’s heavy reliance on the Chinese market, where it makes 40% of sales.

While union leaders have acknowledged Mr. Diess’s strategic vision and his achievement in transforming VW’s culture for the EV age, they have questioned his ability to execute, as highlighted by the software problems.

Daniela Cavallo,

the head of VW’s works council, has said Mr. Diess had failed to involve employees in key decisions. She criticized him on his warning to the supervisory board last year that 30,000 jobs at its flagship plant were at stake if VW failed to accelerate its EV shift.

In a statement, Ms. Cavallo said the VW group “wants to emerge strengthened from the historical change in the world of mobility in a leading position. However, it is also our aim that, despite the great challenges, job security and profitability remain equal corporate goals in the coming years.”

Mr. Blume joined Volkswagen in 1994 and has held management positions for the brands Audi, Seat, Volkswagen and Porsche.

“Oliver Blume has proven his operational and strategic skills in various positions within the group and in several brands and has managed Porsche AG from a financial, technological and cultural standpoint with great success for seven years running,” Mr. Pötsch said. VW said Mr. Blume would continue as chief executive of Porsche after a possible IPO.

—Christina Rogers contributed to this article.

Write to William Boston at william.boston@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

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Technology

Apple’s Coming iOS 16: A Wish List

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Please step into my psychic reading room. No, no, don’t touch the crystal ball! OK, here’s what I see:

Soon—very soon—Apple will announce the next version of its iPhone operating system with many new features. The Ouija board has guided me to…1…6! Yes, iOS 16! And the spirits whisper, “September.” Yes, that’s when your iPhone will get it.

Thanks for coming. That’ll be $200.

Fine, you don’t need my powers of prognostication to know the future of

Apple’s

AAPL -3.86%

software releases because you already know the past.

On Monday, the company opens its annual Worldwide Developers Conference (aka WWDC) with a keynote address. Like in previous years, Apple is expected to announce updates to its apps and core operating systems—iOS, MacOS, iPadOS, WatchOS, tvOS. Unlike previous years, or at least the last two years, I will be emerging from my basement to attend the event in Cupertino, Calif.

Monday’s keynote will still be prerecorded and streamed online, but an assortment of reporters, YouTubers and app developers are invited to watch from the company’s headquarters. 

I get why you might not tune in. It isn’t like we’re going to party like it’s iOS 99! (Forgive me, Prince fans.) After some 15 versions of iOS—with fewer and fewer whiz-bang features—it can be harder to get excited.

So why do we have to wait until June for the new software to be presented in a big, splashy, superlative-packed presentation? And why does the bulk of the features arrive in a big dump in September?

Justin Santamaria, who was a senior engineer manager at Apple until 2013 and led the development of the FaceTime and Messages apps, told me it’s because the company used to focus on the big yearly hardware upgrade. 

“We were always building the next operating system for the features that were coming out on the next iPhone,” he said. But he concedes that now that the company is more focused on software and services and people keep older iPhones longer, the one-big-annual-upgrade approach could be rethought.

And Apple’s moving away from it. In iOS 15, for instance, the company trickled out some of the bigger features over the course of the year—releasing its digital legacy feature in December and adding mask-support for Face ID in March.

SHARE YOUR THOUGHTS

What’s on your iOS wish list? Join the conversation below.

Could it go further? Possibly. iOS could just be iOS—no number!—and new features could just appear when they’re ready, without the big applause from the, well, largely virtual audience. 

Still, don’t let anyone tell you that you can’t get jazzed about minor feature updates, like some I’ve been dreaming of. Here’s my somewhat-annual somewhat-fantasy iOS wishlist of features:

Messaging Things 

Apple Messages has become my most important app, but not because it has the best tools. I’d love the ability to mark a message as unread, so I don’t forget about it and can come back to it later. Also, what about giving us more Tapback responses—you know, the icons that pop up when you hold down on a message? I’d love to see emoji options like Slack offers. And what I wouldn’t give for a typing indicator on group chats!

Given all the spam texts I’ve been getting lately, some better blocking and reporting tools are needed.

And finally, just embrace Rich Communication Services (or RCS) already, Apple. This messaging standard, already integrated into Android, brings iMessage-like features—such as read receipts, messaging over Wi-Fi and encryption—to regular text messaging. That means those texts with your green-bubble friends would be significantly better. Google has called on Apple to embrace the standard; an Apple spokeswoman declined to comment. 

Home Screen Things 

iOS 14 rethought the home screen with helpful widgets (those little boxes of live information) and an App Library to tame the mess. In iOS 16, Apple is planning to add widget capabilities to the lock screen, so you wouldn’t need to swipe to check weather or other info, according to Bloomberg. This goes hand-in-hand with the reports that the iPhone 14, due in September, would have an “always on” display that shows important info without needing to tap the screen—similar to Samsung Galaxy and Google Pixel phones, and the Apple Watch.

And how about some fresh homescreen design options? With Apple’s Shortcuts feature, people have gotten into customizing their app icons with downloadable packs. Yet I’m exhausted just watching this TikTok on how to do it. Android’s new Material You feature lets you overhaul the colors, icons and look of your home screens without all that effort. Who doesn’t want their screen to look like a West Elm showroom? 

Miscellaneous Things

I say it every time I review the super-mega-massive iPhone (the Pro Max): Let us put two apps side by side, iPad style, or on top of each other. That way we can look at, say, a webpage and a document simultaneously.

Then there’s ducking autocorrect! As I proposed in my recent column, we should have the ability to adjust the aggressiveness of the correction so “well” doesn’t always become “we’ll.” But I’d settle for what Android has: options to suggest offensive words and people from your contacts, and a way to undo unwanted autocorrections.

On the Google Pixel 6, you can easily save a frame from a video as a photo.



Photo:

Joanna Stern / The Wall Street Journal

In the Photos app, how about the ability to pull a still from a video after it’s been recorded? I love having this feature on the Google Pixel: I don’t have to devote the mental energy to deciding “video or photo” when capturing my kids doing something adorable. 

Apple Wallet badly needs an interface overhaul. The vertical display of cards is confusing and swiping around when shopping or boarding a flight with your family should be simpler.

And, for the love of battery-saving, please just put the battery percentage back in the upper right corner. I’m done swiping down!

Some of my top new features over the years have been ones focused on protecting our privacy, security and even physical safety. As my colleague Rolfe Winkler reported, Apple is working on a car-crash detection feature that will automatically dial 911 if the phone senses there was an accident.

iPad Things

I’m throwing in some iPadOS things, too. Please give us multiple user accounts so I don’t have to fear my son sending emails when he’s supposed to be watching Pokémon. As the iPad has become increasingly like a Mac, it makes sense to have this functionality.

See how easy it is to add another user on a Mac? Now do it on iPads, Apple!



Photo:

Joanna Stern / The Wall Street Journal

And I’ll be honest, I really have no idea how to multitask efficiently on the iPad. I’ve never mastered the finger calisthenics to switch apps, place apps side by side, etc. All of this could be more intuitive.

Finally, my iPad wishlist constant: a freaking calculator. Seriously, just make it a widget at this point. 

Oh, and one AirPod thing. Look, I’m in charge, you little white doodads. I want to be able to say, “Stay connected to my iPhone and just my iPhone! Don’t connect to my MacBook or iPad!” Let’s have a setting to disable the constant switching between devices. 

We will see what wishes come true at the Monday event. I’ve just consulted my tarot cards and they confirm that we’ll in fact witness many things Apple touts as “great,” “incredible” and indeed “magical.”

—Sign up here for Tech Things With Joanna Stern, a new weekly newsletter. Everything is now a tech thing. Columnist Joanna Stern is your guide, giving analysis and answering your questions about our always-connected world.

Write to Joanna Stern at joanna.stern@wsj.com

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US

Alleged Covid-19 Fraud Schemes Totaling $150 Million Draw Criminal Charges

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Federal prosecutors have charged about 20 people in the past two weeks with allegedly engaging in various fraud schemes related to the Covid-19 pandemic that amounted to about $150 million in improper government claims, around $20 million of which have been paid, officials said.

The Justice Department has stepped up efforts to uncover theft from programs that were pumping billions of dollars into the healthcare system after the outbreak of the pandemic in 2020. The new cases are filed in districts around the country, and provide a sweeping look at how some healthcare providers allegedly sought to cheat Medicare and other programs by bundling charges for unnecessary services—or those that weren’t ever provided—with the delivery of relatively inexpensive Covid-19 tests.

A doctor who ran drive-through Covid-19 testing sites in Maryland, for example, allegedly billed Medicare for many of those tests, along with $1.5 million in other lengthy physician visits that purportedly accompanied them, but never actually happened. The doctor,

Ron Elfenbein,

allegedly told his employees to submit the tests for reimbursement as services that required 30-minute consultations, because the higher complexity services were “the ‘bread and butter’ of how we got paid,” an indictment returned on Tuesday alleged. A woman who answered the phone at Dr. Elfenbein’s company said he wasn’t in the office on Wednesday and a lawyer for him couldn’t be identified.

Attorney General Merrick Garland, glasses, and Kevin Chambers, who was tapped last month to lead the Justice Department’s Covid-19 fraud enforcement efforts.



Photo:

Kevin Lamarque/Associated Press

A nurse practitioner in Miami, Elizabeth Hernandez, allegedly billed Medicare for $134 million in fraudulent claims, using relaxed telemedicine rules to sign orders for unnecessary genetic tests and medical equipment. And people in New Jersey, California and Colorado allegedly sold hundreds of fake vaccine cards created to look like official Centers for Disease Control and Prevention records.

A lawyer for Ms. Hernandez said that she “vehemently denies the charges and didn’t knowingly participate in any scheme to defraud the Medicare program.” The other defendants or their lawyers couldn’t immediately be reached for comment or didn’t immediately respond to requests for comment.

The cases “involve extraordinary efforts to prosecute some of the largest and most wide-ranging pandemic frauds detected to date,” said

Kevin Chambers,

who was tapped last month to lead the Justice Department’s Covid-19 fraud enforcement efforts.

SHARE YOUR THOUGHTS

Do you think funds stolen as part of Covid-19 fraud schemes can be recovered? Join the conversation below.

In the wake of the pandemic, prosecutors and regulators pored over Medicare billing data, spotting anomalies and pursuing a range of investigations. Last year, prosecutors charged another dozen healthcare providers with fraud schemes related to the pandemic totaling $143 million in allegedly false bills to government programs.

In some of the new cases, providers allegedly used Covid-19 testing to obtain personal information and saliva or blood samples from patients, and used them to submit for more expensive tests. In one California case, two owners of a clinical lab—

Imran Shams

and

Lourdes Navarro

—were charged with a healthcare fraud, kickback and money-laundering scheme that involved more than $100 million in fraudulent claims for Covid-19 and respiratory pathogen tests. They also sought to conceal their role by laundering the proceeds through shell companies Ms. Navarro controlled, prosecutors said.

Officials said the pair and other defendants preyed upon patients’ fear during the pandemic to tack on other unnecessary tests that had a more lucrative reimbursement rate but weren’t medically necessary. A lawyer for Ms. Navarro said she would plead not guilty to the charges. “She always tried to follow the law and provide appropriate and quality testing services to the laboratory’s patients. She looks forward to clearing her name in court,” said the lawyer,

Mark Werksman.

A lawyer for Mr. Shams couldn’t immediately be identified.

Prosecutors allege fake Covid-19 vaccine cards were found in a Colorado man’s trash.



Photo:

U.S. Department of Justice

“What is perhaps most disturbing about healthcare fraud is that patients may be harmed in furtherance of fraud schemes advanced by medical professionals who sadly place profit above patients’ health,”

Aaron Tapp,

section chief of the FBI’s financial crimes section said Wednesday.

In other cases, defendants allegedly worked to get around new requirements installed after the Covid-19 outbreak, including a required proof of vaccination at some businesses.

In September, Colorado businessman

Robert Van Camp

told a potential customer—who turned out to be an undercover agent—he had fake Covid-19 vaccine cards. “How are you guys doing that whole vaccine bullshit?” he asked, according to a complaint and arrest warrant filed on Monday, adding that he had sold fake cards to three Olympic athletes and hundreds of others. “Until I get caught and go to jail, f— it, I’m taking the money,” he said, “I’ve saved a thousand lives. I mean we’re talking about people who can’t go to work, can’t go to school, and they’re losing their job. It’s insane they can’t travel because of this bullshit.” He sold the agent five cards for $600.

In October, agents searched Mr. Van Camp’s trash at his home that he shared with an alleged co-conspirator who worked for a defense contractor and had a security clearance, finding handwritten documents titled “Card List” and “Card Order$” with the names of people and amounts, and several torn up vaccine cards, prosecutors alleged. Mr. Van Camp was arrested on Tuesday, according to court records. A lawyer for Mr. Van Camp didn’t immediately respond to a message seeking comment.

Since the start of the Covid-19 pandemic in 2020, the scientific understanding of its transmission and prevention has evolved. WSJ’s Daniela Hernandez explains what strategies have worked for stemming the spread of the virus and which are outdated in 2022. Illustration: Adele Morgan

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Sadie Gurman at sadie.gurman@wsj.com

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Entertainment

‘Matrix’ Co-Producer Sues Warner Bros. Over HBO Max Streaming Release

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“The Matrix Resurrections” co-producer Village Roadshow Entertainment Group filed a lawsuit against Warner Bros., alleging the studio parent’s decision to release the movie simultaneously on HBO Max and in theaters was a breach of contract.

The suit, which was filed in Los Angeles Superior Court on Monday, is the latest indication of growing tensions between factions of the entertainment industry as major media companies give priority to direct-to-consumer streaming over traditional distribution platforms.

Warner Bros. parent WarnerMedia, a unit of

AT&T Inc.,

T -0.19%

put its entire 2021 slate of movies on its sister streaming service HBO Max at the same time as their theatrical release. The studio also moved the release date of “The Matrix Resurrections” to 2021 from 2022 in an effort to help HBO Max attract more subscribers, the lawsuit alleged.

“WB’s sole purpose in moving the release date of ‘The Matrix Resurrections’ forward was to create a desperately needed wave of year-end HBO Max premium subscriptions from what it knew would be a blockbuster film, despite knowing full well that it would decimate the film’s box office revenue and deprive Village Roadshow of any economic upside that WB and its affiliates would enjoy,” the suit said.

“The Matrix Resurrections” performed disappointingly at the box office, garnering only a fraction of the revenue generated by its predecessors.

Other films released during the pandemic performed well at the box office, including “Spider-Man: No Way Home,” which unlike “The Matrix Resurrections” wasn’t released on a streaming platform when it came out in theaters, the lawsuit said.

Keanu Reeves and Carrie-Anne Moss in the latest ‘Matrix’ movie.



Photo:

Warner Bros./Everett Collection

Moves by major media companies to give priority to their streaming services over other platforms have potentially significant financial implications for actors, producers and financial partners who fear that the push to streaming will come at their expense.

In July, actress Scarlett Johansson filed a lawsuit against

Walt Disney Co.

, alleging her contract to star in the Marvel movie “Black Widow” was breached when the media giant released the movie on its streaming service Disney+ at the same time as its theatrical launch.

Ms. Johansson, who argued her box office-based performance bonus was hurt by the Disney+ move, was seeking as much as $80 million in damages. Disney, which denied it violated her agreement, settled with Ms. Johansson in September.

In Monday’s lawsuit, Village Roadshow also alleges that Warner Bros. is attempting to cut the company out of future movies and TV shows based on characters or intellectual property that it has ownership stakes in. Village Roadshow said it has invested $4.5 billion in its more-than-two-decade partnership and co-financed many Warner Bros. hits including “Joker,” “American Sniper” and the “Matrix” franchise.

“WB has also been devising various schemes to deprive Village Roadshow of its continuing rights to co-own and co-invest in the derivative works from the films it co-owns,” the suit alleged.

In response to the lawsuit, a spokeswoman for Warner Bros. said: “This is a frivolous attempt by Village Roadshow to avoid their contractual commitment to participate in the arbitration that we commenced against them last week. We have no doubt that this case will be resolved in our favor.”

The partnership between the two companies does contain an arbitration clause to resolve disputes, but Village Roadshow said in the suit that it doesn’t apply in this case.

“Instead, the parties’ contracts expressly allow Village Roadshow to bring any action for injunctive or non-monetary relief in this Court, as they agreed that the arbitration agreement `shall not prevent any party from seeking injunctive relief and other forms of non-monetary relief in the state or federal courts located in Los Angeles County, California,’” the suit said.

The suit comes just weeks before AT&T is expected to close on its deal to combine the WarnerMedia assets with

Discovery Inc.

and create a new company dubbed Warner Bros. Discovery.

Village Roadshow has also been exploring strategic options including taking on investments or even selling itself, The Wall Street Journal previously reported.

Bradley Cooper starred in the 2014 movie ‘American Sniper,’ which Village Roadshow co-financed.



Photo:

Warner Bros./Everett Collection

When Warner Bros. unveiled its strategy to put its 2021 movie slate on HBO Max and in theaters, it said it was doing so both to boost the new streaming service and as a counterbalance the effects the Covid-19 pandemic had on the theatrical industry.

The studio earned the wrath of Hollywood producers and stars by not alerting them to the decision in advance. Many feared they would be shortchanged by the move and were openly critical of the studio.

Warner Bros. ended up cutting new deals with much of the talent involved in its 2021 slate, which cost the studio more than $200 million, the Journal previously reported.

No deal regarding “The Matrix Resurrections” was reached, and Village Roadshow said in its suit that not only was the box office for the movie cannibalized but that it was also a victim of “rampant piracy” that Warner Bros. “knew would come by distributing this marquee picture on a streaming platform on the same day as its theatrical release.”

Piracy has been on the rise since more films have been released on streaming platforms, according to firms that track such data. Theater owners have also been vocal about their concerns of increased piracy due to the streaming first strategy.

The issue over the release of “The Matrix Resurrections,” isn’t the only significant crack in Village Roadshow’s 25-year partnership with Warner Bros. It also claimed Warner Bros. is violating Village Roadshow’s rights to participate in projects derived from movies it co-produced.

Village Roadshow co-financed the 2019 film ‘Joker,’ starring Joaquin Phoenix.



Photo:

Niko Tavernise/Warner Bros./Everett Collection

Village Roadshow said Warner Bros. tried to force it to give up its rights in a TV series based on the movie “Edge of Tomorrow,” which it co-financed and co-produced.

“When Village Roadshow refused, WB said the quiet part out loud: it will not allow Village Roadshow to benefit from any of its Derivative Rights going forward, despite the over $4.5 billion it has paid WB to make and distribute 91 films. In other words, if Village Roadshow won’t give up its rights, WB will make sure they are worth nothing,” the suit said.

“Warner Bros. has a fiduciary duty to account to Village Roadshow for all earnings from the exploitation of the films’ copyrights, not just those it can’t hide through sweetheart deals to benefit HBO Max,” said Mark Holscher, a Kirkland & Ellis litigation partner who represents Village Roadshow.

Village Roadshow also said under its agreement with Warner Bros. it should have the option to partner in “Wonka,” a prequel to “Charlie and the Chocolate Factory” that it co-produced.

Write to Joe Flint at joe.flint@wsj.com

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Technology

Microsoft’s Activision Blizzard Deal to Power Its Netflix-of-Gaming Aspirations

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Microsoft Corp.’s

MSFT 1.96%

acquisition of

Activision Blizzard Inc.

ATVI -0.27%

aims to shake up the game industry by expanding the software giant’s library of blockbuster videogames and bolstering its efforts to entice consumers to its cloud-gaming service.

The planned $75 billion deal would be Microsoft’s biggest ever and its most ambitious investment yet in its plan to turn its Game Pass subscription service into the

Netflix

of gaming. Once the acquisition closes, Microsoft said it would be the world’s third-largest game company by sales, with 30 game studios under its belt, including the developers of popular franchises Call of Duty, World of Warcraft and Candy Crush.

Around a decade ago, Microsoft shifted to bringing its corporate clients to subscription-based cloud services. The move has helped lift its market value to $2 trillion and maintain its status as one of the world’s top tech companies. The Activision acquisition positions Microsoft to use the same tactic on consumers by persuading gamers to abandon their expensive hardware and play on the cloud.

“Together with Activision Blizzard, we have an incredible opportunity to invest and innovate, to create the best content, community and cloud for gamers to build substantial new value for our shareholders,” said Microsoft Chief Executive

Satya Nadella

on an investor and media call Tuesday.

With more gamers playing on smartphones rather than pricey game consoles and computers, companies around the world are racing to develop services for streaming high-end games to all kinds of devices the same way movies and TV shows are streamed.

Amazon.com Inc.,

Alphabet Inc.’s

Google,

Sony Group Corp.

and a host of smaller players are trying, but Microsoft has taken a large early lead in the emerging cloud-game space by spending billions of dollars on acquisitions and infrastructure, analysts said.

“Microsoft has big aspirations in gaming,” said

Mark Moerdler,

a Bernstein Research analyst. “Microsoft has been buying a number of studios because of what they’re trying to build with Game Pass and subscription gaming.”

If the company can convert some of Activision’s nearly 400 million monthly active users into subscribers, it could significantly bolster its cloud-game business, Mr. Moerdler said.

Subscribers to Microsoft’s Game Pass have increased 39% in the past year to 25 million, the company said. A billboard in New York pitching Activision’s ’Call of Duty: Vanguard.’



Photo:

Richard B. Levine/Zuma Press

Cloud gaming is an emerging technology that allows people to stream games using nearly any internet-connected device with a screen, much as they stream videos on Netflix, Hulu and other platforms. Streaming games is more challenging, though, because games are interactive and require a lot more data to run smoothly. While Netflix moved into mobile games last year, it has so far offered only a handful of games that subscribers must download to an Android or iOS device—not games that can be streamed via the cloud.

Consumer spending on cloud-game services reached $3.7 billion last year, with Microsoft’s Game Pass accounting for 60%, according to research firm Omdia, which forecasts total cloud-game revenue will hit $12 billion by 2026.

Along with announcing its planned acquisition, Microsoft said Tuesday that subscribers to Game Pass—which includes cloud gaming, online multiplayer support and access to a large, rotating library of games—have increased 39% in the past year to 25 million.

Mr. Nadella said Microsoft plans to bring as many Activision games as it can to Game Pass. As it has done with games from developers it has acquired previously, Microsoft could make future games from Activision exclusive on Game Pass and Xbox consoles, analysts said.

“We do think our investment in cloud creates a unique capability for triple-A content to reach any screen on any device,” Microsoft game chief

Phil Spencer

said after the Activision deal was announced.

Growing its cloud-game business will help Microsoft diversify further into consumer-facing businesses. That could narrow the leads Sony’s PlayStation has on Microsoft in game hardware and Amazon’s in cloud services. Mr. Nadella’s broader strategy for Microsoft puts cloud computing at the center of a collection of disparate businesses, from corporate software and enterprise data storage to social media and digital advertising.

Microsoft’s commitments to gaming and the cloud have been years in the making. Since taking over in 2014, Mr. Nadella has leaned heavily on offering the company’s enterprise customers cloud-computing services to power their businesses. This strategy has been the primary driver behind Microsoft’s ascent to become the world’s second-most-valuable company behind

Apple Inc.,

with a market valuation of nearly $2.3 trillion.

Ms. Wu, a target of the GamerGate scandal, says Activision Blizzard’s CEO led a culture of non-accountability, during an interview at WSJ’s Women In: The Tech Industry event.

For years, gaming took a back seat at Microsoft, where consumer-facing businesses got less attention, former and current employees said. The Xbox team was slotted under the Windows operating system and didn’t directly report to the CEO, as Mr. Nadella focused on selling the Office 365 business-software suite and developing the cloud-computing business. The Xbox group struggled to find its place in this structure, the employees said, as the unit was always competing with Windows priorities for investments, typically without success, they said.

“Under Windows, we had to make trade-offs between investing in big gaming initiatives and features for Windows enterprise customers,” said

Richard Irving,

who spent 12 years working on Xbox before leaving Microsoft in 2016. “That was the challenge of being in the Windows division.”

A Microsoft spokesman declined to comment on the company’s previous management of its game business.

A few years ago, Microsoft decided to become more aggressive about expanding its cloud usage to gaming, its main touch point with consumers. Internally, there has been concern that Microsoft is too dependent on enterprise for growth, said people familiar with company strategy. The decision to do more in gaming came after Microsoft looked at the possibility of buying consumer-facing businesses including TikTok,

Pinterest

and Discord, the people said.

It started snapping up game makers, spending more than $10 billion to buy game studios and build a vast library. The company has added popular titles such as the Doom franchise, acquired last year.

Microsoft isn’t alone. The global videogame industry has been riding a wave of consolidation and investing in recent years. Spending on mergers and acquisitions nearly tripled to $26.2 billion in 2021 from $8.9 billion in 2020, data from PitchBook show. And venture-capital deals nearly doubled to a record $11.2 billion from $6.4 billion, according to the private-market-data firm.

Write to Aaron Tilley at aaron.tilley@wsj.com and Sarah E. Needleman at sarah.needleman@wsj.com

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