Samsung warns of lower profits amid falling demand for memory chips

Samsung has warned of plummeting profits and plans to cut back on memory chip production in response to falling demand, The Korea Herald has reported. It expects to earn just 600 billion won ($455 million) for the first quarter of 2023, a drop of 96 percent from the same period last year. It blamed falling demand for memory chips, a situation that could be a bad sign for the tech industry as a whole. 

"We’re adjusting to lower memory production to a meaningful level... in addition to optimizing line operations that are already underway,” Samsung said in a statement. It added that it would continue to invest in clean room infrastructure and expand R&D spending, as it sees improved memory chip demand in the mid- to long-term. 

Although it trails Taiwan's TSMC in other areas, Samsung is the global leader in DRAM and NAND flash memory chip production with 40.7 and 31.4 percent shares respectively. Such chips are used in consumer devices of all kinds, ranging from smartwatches to mobile phones and laptops. The oversupply of memory chips is therefore a sign that demand for such products has fallen significantly due to an ongoing global economic slowdown. 

The slowdown comes just a short time after one of the biggest tech industry booms of all time, powered by the COVID-19 pandemic. Since late in 2021, however, memory prices have dropped through the floor, with DRAM and NAND prices down by 20 and 15 percent in just the last quarter alone. One bright spot for Samsung has been sales of its new Galaxy S23 smartphone, which helped bolster profits, the company said. It will reveal more details in its earnings report set to drop at the end of April. 

Samsung logo displayed on a phone screen with a binary code reflected on it, a laptop keyboard, a memory card, an adaper and cables are seen in this illustration photo taken in Krakow, Poland on January 30, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

US regulators will protect all deposits at Silicon Valley Bank

US regulators have announced that they're taking action to "fully" protect all deposits at Silicon Valley Bank (SVB), CNBC has reported. The institution is home to a large number of startups and established companies like Roku and Etsy, which will have full access to their funds as of today. At the same time, officials said there will be "no bailouts" and that shareholders and unsecured creditors won't be protected. 

"Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system," the FDIC, Treasury Department and Federal Reserve said in a joint statement. "Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."

In addition, HSBC UK agreed to purchase Silicon Valley Bank's UK division for a symbolic £1 to prevent the company's collapse in that region, the UK government announced. As in the US, both deposits and public funds are protected. "Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK," the press release states. "This ensures customer deposits are protected and can bank as normal, with no taxpayer support."

The FDIC took over SVB on Friday following the largest US bank collapse in nearly 15 years. There were concerns that numerous tech startups and companies wouldn't be able to make their payrolls, and Etsy said yesterday that payments to merchants may be delayed. On Friday, Roku announced that it could lose as much as 26 percent of its cash reserves, or more than $487 million, due to the collapse.

On top of SVB, Signature Banks was closed by regulators on the weekend. It's one of the largest banks used by cryptocurrency companies, as the Coinbase exchange, for one, had $240 million in deposits at the bank. In the same joint statement, federal regulators said that "all depositors of this institution will [also] be made whole."

Silvergate, another institution popular with crypto exchanges (and known for purchasing Diem, the ambitious crypto project funded by Facebook), collapsed on March 8th. That marks a run of three key banks with ties to technology firms closing in the space of a week. 

To reassure depositors no doubt nervous over these events, the government said that it will make additional funding available to other eligible institutions. The new program will allow banks to put up treasuries and other safe government securities as collateral in return for central bank loans of up to one year. It's designed to fix a key issue that led to SVB’s failure: unrealized losses on government securities caused by rapidly rising interest rates.

"The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry," the joint statement reads. "Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe."

Update March 13, 2023 at 4:18 AM ET: The post has been updated to include news that HSBC UK has purchased Silicon Valley Bank UK and that UK deposits and taxpayers will be fully protected.

A man puts a sign on the door of the Silicon Valley Bank as an onlooker watches at the bank’s headquarters in Santa Clara, California, U.S. March 10, 2023. REUTERS/Nathan Frandino

USDC stablecoin breaks dollar peg following Silicon Valley Bank collapse

The abrupt collapse of Silicon Valley Bank has affected the value of the world’s fifth-largest cryptocurrency, increasing fears of a possible ripple effect among Web3 companies. On Saturday morning, USD Coin fell to a record low of $0.87 after Circle, the company that manages the stablecoin, disclosed that $3.3 billion of the approximately $10 billion cash reserves backing USDC was held by SVB.

As The Guardian notes, the drop is unprecedented. As a stablecoin, the value of USDC is supposed to remain stable thanks to its peg to the US dollar. According to data from CoinGecko, USDC’s previous all-time low was about $0.97 in 2018. More recently, the currency fell to $0.99 following the collapse of Three Arrows Capital. As of the writing of this article, USDC is valued at approximately $0.95 cents.

Web3 is Going Just Great creator Molly White suggests the effect from a sustained USDC drop would be “enormous.” A handful of other stablecoins, including FRAX and DAI, use USDC as collateral. On Friday, Circle said it would “continue to operate normally” while it waits for more information on what will happen to SVB’s clients. "As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds," Circle said on Saturday, adding $5.4 billion of its cash assets are held by BNY Mellon, "one of the largest and most stable financial institutions in the world."

A view of the Park Avenue location of Silicon Valley Bank (SVB), in New York City, U.S., March 10, 2023. REUTERS/David 'Dee' Delgado

Roku says it could lose 25 percent of its cash after Silicon Valley Bank fails

The sudden collapse of Silicon Valley Bank has put more than a quarter of Roku’s cash at risk. The streaming company had $487 million, representing 26 percent of its cash, in Silicon Valley Bank, the company disclosed in an SEC filing Friday.

The future of those funds is now uncertain as federal regulators have taken over the financial institution amid the second-largest bank collapse in United States history. “The Company’s deposits with SVB are largely uninsured,” Roku wrote in its filing. “At this time, the Company does not know to what extent the Company will be able to recover its cash on deposit at SVB.”

In a statement on Friday, the Federal Deposit Insurance Corporation (FDIC) said that it will pay “uninsured depositors an advance dividend within the next week” and that “uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds.” But there’s still a lot of uncertainty about how long that process will take to play out, and how much of their uninsured funds companies will ultimately be able to recover.

However, Roku’s situation is, at least for now, a lot less dire than many of the smaller startups that relied on Silicon Valley Bank, some of which are now unable to pay their bills or their employees. 

In its SEC filing, the company noted that it has more than a billion dollars in cash at multiple other banks. “As stated in our 8-K, we expect that Roku’s ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions,” a Roku spokesperson said in a statement to Engadget.

While Silicon Valley Bank was previously a little-known institution, it was known for its close relationships with startup founders, who made up much of its clientele. But, as Bloomberg’s Matt Levine explains, the bank’s reliance on fixed-rate assets, also made it uniquely exposed to the conditions that ultimately led to a run on the bank Thursday after prominent venture capitalists urged founders to move their money out of the institution.

Roku is not the only major public tech company now facing losses as a result of the bank’s collapse. Roblox had about 5 percent of its $3 billion in cash, at Silicon Valley Bank, the company told the SEC. “Regardless of the ultimate outcome and the timing, this situation will have no impact on the day to day operations of the Company,” it wrote in a filing. Video service Vimeo also disclosed that it had “less than $250,000” with the bank.

Updated to clarify that Roblox had 5 percent of its $3 billion in cash balances at SVB.

SANTA CLARA, CALIFORNIA - MARCH 10: Employees stand outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corporation. Prior to being shut down by regulators, shares of SVB were halted Friday morning after falling more than 60% in premarket trading following a 60% declined on Thursday when the bank sold off a portfolio of US Treasuries and $1.75 billion in shares to cover  declining customer deposits. (Photo by Justin Sullivan/Getty Images)

Sonic the Hedgehog co-creator Yuji Naka pleads guilty to insider trading

Yuji Naka has pleaded guilty to insider trading charges filed last fall. The Sonic the Hedgehog co-creator has admitted to violating Japanese financial law by buying shares in the game studio Aiming before its team-up with Square Enix on Dragon Quest Tact became public. Naka admitted to making a profit over 20 million yen (about $150,000) after selling his investment. He hasn't yet received a penalty for the illegal trade.

The veteran developer signed on with Square Enix in 2018, but abruptly left soon after his one project at the company (the mobile platformer Balan Wonderland) shipped to customers. He sued the company for removing him as director of Balan six months before launch. He was still with Square Enix when he heard about the Dragon Quest Tact work.

Two other former employees, Taisuke Sasaki and Fumiaki Suzuki, were also arrested for buying Aiming shares using insider knowledge. Square Enix says it's cooperating with investigators and has established a system that prevents insider trading. It's not clear how well that protection will work in practice, but the guilty plea theoretically discourages developers from using industry secrets to manipulate the stock market.

A model of Sega character 'Sonic the Hedgehog' is pictured at its headquarters in Tokyo, Japan, February 16, 2022. Picture taken on February 16, 2022. REUTERS/Kim Kyung-Hoon

Microsoft’s Activision Blizzard purchase will reportedly be approved by the EU

Microsoft has reportedly cleared a major regulatory hurdle as it tries to move toward finalizing its Activision Blizzard purchase. The company’s licensing offers to competitors are expected to appease European Union (EU) antitrust concerns about the $69 billion acquisition, according to Reuters. The EU previously said it believed the deal could “significantly reduce competition” in PC, console and cloud gaming.

The EU isn’t expected to demand asset sales to approve the deal. However, the potential sale of Call of Duty has been a point of contention; Microsoft wants to hang onto the property while using the licensing agreements to quell regulators. The company has pledged to keep the franchise on competing platforms for at least 10 years if the purchase closes; it’s even bringing Call of Duty to Nintendo’s consoles.

Microsoft says it’s “committed to offering effective  and  easily  enforceable solutions  that address the European Commission’s concerns.” “Our commitment to grant long-term 100% equal access to  Call of Duty to Sony, Steam,  NVIDIA and others preserves the deal’s benefits to gamers and developers and increases competition in the market,” a Microsoft spokesperson told Reuters.

The company announced the deal in January 2022 to help it compete against industry leaders Tencent and Sony while developing its take on the metaverse. “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft CEO Satya Nadella said at the time.

Microsoft will still need to appease the US Federal Trade Commission and UK regulators before the deal can be finalized. The company only has until July to sort out the antitrust concerns, or it will need to renegotiate or abandon the purchase (which would mean paying a breakup fee of up to $3 billion).

ANKARA, TURKIYE - JANUARY 18: In this photo illustration, the logos of Microsoft and Activision Blizzard are displayed in Ankara, Turkiye on January 18, 2022. (Photo by Hakan Nural/Anadolu Agency via Getty Images)

PayPal is laying off 2,000 employees

PayPal is about to become the latest tech company to lay off a substantial part of its workforce. The payments firm announced Tuesday plans to cut approximately 2,000 employees, a number that equates to about seven percent of its total staff. According to PayPal president and CEO Dan Schulman, the layoffs will occur over the next few weeks, with some parts of the company affected more than others.

“We will treat our departing colleagues with the utmost respect and empathy, provide them with generous packages, engage in consultation where required and support them with their transitions,” Schulman said. “I want to express my personal appreciation for the meaningful contributions they have made to PayPal.”

The company joins a growing list of tech companies that have announced layoffs in recent months. Earlier this month, Google disclosed plans to lay off 12,000 employees, or about around six percent of its global workforce. Before that, Microsoft said it would cut 10,000 jobs. Schulman, like his counterparts at Microsoft, Google and other tech firms, blamed PayPal's layoffs on the “challenging macro-economic environment” the company finds itself in recently. “While we have made substantial progress in right-sizing our cost structure, and focused our resources on our core strategic priorities, we have more work to do,” he said.

It’s worth noting the US economy has not entered into a recession yet. At 3.5 percent, the national unemployment rate is at a 50-year low, and the gross domestic product grew over the last quarters. Turning specifically to PayPal, the company beat Wall Street expectations during its most recent earnings call, with revenue and income increasing by 11 percent and 7 percent year on year, respectively.

PayPal on App Store displayed on a phone screen and PayPal logo displayed on a screen in the background are seen in this illustration photo taken in Krakow, Poland on January 2, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

Elon Musk says his SpaceX shares would've funded his plan to take Tesla private

Elon Musk said he could've sold his SpaceX shares to take Tesla private when he took the witness stand again to defend his 2018 "funding secured" tweets in a lawsuit filed by the automaker's shareholders. According to CNBC, Musk proclaimed: "SpaceX stock alone meant 'funding secured' by itself. It's not that I want to sell SpaceX stock but I could have, and if you look at the Twitter transaction — that is what I did. I sold Tesla stock to complete the Twitter transaction. And I would have done the same here." He didn't say how many of his shares he'd have to sell, however, to be able to fund the transaction. 

The plaintiffs' lawsuit is based on Musk's infamous 2018 tweets in which he said he was "considering taking Tesla private at $420." He even said that he already had "[f]unding secured." Musk first took the stand for this particular case last week to defend himself against the plaintiffs' accusations that the tweets he made cost them significant financial losses. Tesla's shares temporarily stopped trading after those tweets and remained volatile in the weeks that followed. He said at the time that just because he tweets something "does not mean people believe it or will act accordingly."

This time, Musk reiterated his previous claim that he had an agreement with Saudi Arabia's Public Investment Fund to take Tesla private. He told the court that the country was "unequivocal" in its support of the transaction, which ultimately didn't go through. According to Bloomberg, the court discussed his communication and eventual falling out with Saudi fund governor Yasir Al-Rumayyan regarding the deal. A text exchange was reportedly presented to the jury, wherein Musk accused Al-Rumayyan of backing out of their handshake agreement. The Saudi official responded that he didn't have sufficient information to be able to commit to the buyout and called Musk's public announcement of their discussions "ill advised."

The plaintiffs' lawyer also asked Musk what many of us were probably wondering: If the $420 share price in his tweets was made as a joke in reference to marijuana. Apparently, it wasn't a joke, and he chose it "because it reflected about a 20 percent premium on Tesla's stock price." Musk is expected to testify again on Tuesday, so we'll likely hear more details about his failed bid to convert Tesla into a private entity. 

As Bloomberg notes, the judge in this case had already determined that his tweets were "objectively false and reckless." However, the plaintiffs still have to prove that Musk knew his tweets were misleading and that his tweets caused their losses to win the case. Musk and Tesla previously had to pay the Securities and Exchange Commission $20 million each to settle a separate lawsuit over the same tweets, accusing him of making "false and misleading statements" that could be constituted as fraud. The CEO said on the stand that he told the SEC about SpaceX and that the plaintiffs' lawyer "deliberately exclud[ed] that from jurors."

Tesla CEO Elon Musk is questioned by the investors' attorney Nicholas Porritt before Judge Edward Chen as a screen displays one of Musk's tweets, during a securities-fraud trial at federal court in San Francisco, California, U.S., January 23, 2023 in this courtroom sketch. REUTERS/Vicki Behringer

Netflix co-founder Reed Hastings steps down as co-CEO

One of streaming's most influential figures is stepping away from the spotlight. Netflix co-creator Reed Hastings is stepping down as the company's co-CEO. Ted Sarandos, who has been co-CEO since July 2020, will share the reins with newly promoted operations chief Greg Peters. The change takes effect today. Hastings says he'll remain involved as Executive Chairman, serving as a "bridge" between the board of directors and the new CEOs.

The departing leader characterized the move as a long-expected transition. Sarandos and Peters have "increasingly" managed the company for the past two and a half years, Hastings says. This was merely the "right time" to implement a succession that has been in development for years, he adds. Sarandos is credited with leading Netflix's move into original content, while Peters has been key to forming partnerships and helming the company's push into gaming.

Hastings' departure comes as Netflix seems to be slowly recovering from a grim 2022. It lost subscribers for the first time in over a decade, and blamed a combination of fiercer competition, limited opportunities to grow and widespread account sharing. In its just-issued fourth quarter earnings report, however, it reported adding 7.66 million new customers, reaching a total of 230.75 million subscribers. That appears to have come at the expense of profit (Netflix made just $55 million in net income), but it's a marked turnaround from the first half of 2022.

Netflix says the end-of-year performance beat its forecast, and that it's "pleased" with the early performance of its $7 ad-supported plan. The company isn't saying how many customers are subscribed to this lower-priced tier. Instead, it credits the better-than-expected results to a strong content lineup that includes the Knives Out sequel Glass Onion, Harry & Meghan and the Addams Family spinoff Wednesday.

The company is cautiously optimistic about the first quarter of 2023. It believes it will see a "modest" boost to its subscriber base, and plans to roll out paid account sharing "more broadly" later in the period. In that sense, Hastings is leaving at a good moment for the business he helped create. While Netflix isn't back to its peak form, it's in a more stable position that could provide its new leadership with a better start.

Co-founder and director of Netflix Reed Hastings delivers a speech as he inaugurates the new offices of Netflix France, in Paris on January 17, 2020. - Hastings announced some 20 French projects by Netflix on January 17, 2020. (Photo by Christophe ARCHAMBAULT / AFP) (Photo by CHRISTOPHE ARCHAMBAULT/AFP via Getty Images)