Jul 13, 2018

Axios Login

Lots to get to. Here's hoping Friday is a bit quieter on the news front.

1 big thing: Broadcom has strayed very far from its roots

Illustration: Sarah Grillo/Axios

With analysts and investors struggling to understand Broadcom's $19 billion CA purchase, it's worth taking a look at how the company has evolved over the years.

The bottom line: Broadcom has changed a great deal since its origins as a communications chip startup. But many believe its plan to buy a software company is a bridge too far.

Shares of the company fell 14% on Thursday as the markets digested the deal, which was announced Wednesday. As Axios' Dan Primack notes, Broadcom lost almost the exact same value in market cap as it's paying for CA.

Our thought bubble: We didn't get it either. Our best guess was that perhaps there was another shoe to drop, perhaps another deal that would help bridge the wide gulf between what Broadcom and CA do.

It sounds like that may indeed be what's up, with CNBC reporting that Broadcom has its eye on rolling together multiple business software companies together in the same vein it did with chips.

Meanwhile: Ken Hao, a partner with Silver Lake and longtime adviser to Broadcom CEO Hock Tan, stepped down from Broadcom's board in connection with the deal. The basic idea is that Silver Lake could be on the board of a chipmaker, because it didn't really otherwise invest in chipmakers. But if Broadcom is going to begin gobbling up enterprise software makers, then Silver Lake could have all sorts of conflicts.

History lesson: The company today called Broadcom is in significant part the heritage of Avago, which bought Broadcom in 2015 and took its name.

Avago's roots trace back to the early 1960s when it began life as the chip business of Hewlett-Packard, later spun out as part of Agilent Technologies. Avago then proceeded to gobble up rivals big and small, notably LSI and then Broadcom.

As for Broadcom, it was a pioneering communications chipmaker that dominated the early market for cable modems and networking chips, using dozens of acquisitions to expand into Wi-Fi, cellular and other areas.

What's next: Broadcom will be under pressure to better explain itself. The deal's backers have already brought in investor communications firm Joele Frank, known as one of the top go-to firms when transactions get thorny.

2. Feds appeal AT&T-Time Warner case

Justice Department antitrust chief Makan Delrahim. Photo: Aaron P. Bernstein/Getty Images

The Justice Department plans to renew its fight against the AT&T-Time Warner deal after all. Late yesterday the agency said it would appeal a federal judge's decision allowing the deal to proceed.

The bottom line: It's unclear the government has much of a chance. But, if it were successful, unraveling the deal now would be particularly tricky since it has already closed.

I asked our Axios deal expert, Dan Primack, to explain a few of the basics:

  • So, wait, you can unwind a closed merger? Indeed. For example, two Illinois-area hospitals merged in 2000 after receiving FTC approval, only to have a court rule seven years later that the deal had violated antitrust rules. The merger was unwound, but it was super messy.
  • This seems like a ridiculous situation. Sure does, which is why a federal, pre-merger approval process was established in 1976 (i.e., Hart-Scott-Rodino). But I've heard rumor that not all government processes are perfect.
  • What happens now? A three-judge Appeals Court panel from the D.C. Circuit will hear the case, and likely rule by year-end. On the remote chance DOJ were to win, then it's expected that AT&T would appeal to the Supreme Court. One attorney I spoke with noted that a SCOTUS case likely would be heard by a court that includes recent Trump nominee Brett Kavanaugh, who has a long track record of favoring business in regulatory matters, making it highly unlikely DOJ could ever prevail in the end.

Go deeper: Dan has more in today's Pro Rata newsletter. Which, if you don't already get, you should.

3. FCC wants to relax kids' TV rules

Illustration: Sarah Grillo/Axios

The Federal Communications Commission has begun the process of loosening requirements for children's TV programming, arguing that the old rules aren't needed in the era of kids-focused apps and streaming services.

The big picture: When it comes to kids' content, tech companies like Netflix, Amazon and Google have stolen huge market share from traditional media companies. Still, children's advocates say relaxing the rules for broadcasters may make it harder for families without reliable broadband access to find age-appropriate content, Axios' Kim Hart reports.

Where it stands: Saturday morning cartoons — once a staple of young kids' weekend routines — disappeared years ago. Millennials mostly watch TV after it has aired on live TV. Generation Z is the first generation to have grown up with on-demand TV. According to a survey by Hulu and Tremor Video, 70% of Gen Z say the phrase “watching television” means streaming something online.

  • Kids between the ages of 2 and 11 — a primary target of kids programming rules — are watching less linear (or pre-scheduled) TV, per Nielsen data. That age group's time devoted to watching live and time-shifted TV per week dropped by about 22% between 2014 and 2017.
  • Kids between 12 and 17 years of age are watching even less. The number of hours they spent watching TV each week dropped by about 38% in that period.
  • Today's kids have instant access to apps like YouTube Kids, 24/7 kid-friendly cable channels like Nickelodeon and Disney Junior, on-demand shows like Sesame Street on HBO, and over-the-top kids programming on Netflix.

Go deeper: Kim has more here.

4. Facebook: no ban on conspiracy theory posts

Facebook is drawing fire for a post defending its decision not to ban InfoWars and other entities that post debunked conspiracy theories, even repeatedly.

"We just don’t think banning Pages for sharing conspiracy theories or false news is the right way to go," the social network said in a Twitter post, responding to the New York Times' Kevin Roose.

The bottom line: There's a case to be made for using its algorithms to demote, rather than ban, low-quality content. However, critics say there should be a point at which content is removed entirely, otherwise it remains accessible to those who seek it out.

What they're saying:

  • NYT's Roose: "I just don’t understand your position. In February, you called crisis actor hoaxes 'abhorrent' and said you would remove them. But now you’re saying they shouldn’t be removed, just demoted?"
  • BuzzFeed's Mat Honan: "The Facebook comments and tweets are either astoundingly naive or cynical. Either way, remarkable how out of touch they are after what happened on their watch over the past two years."
  • Plenty of people also pointed to Facebook's current ad campaign, which criticizes the scourge of Fake News, as well as to past company statements pledging to remove such posts. "Your ads literally say fake news is not your friend. Which is it?" wrote one commenter.
5. Uber to monitor drivers continuously

As part of a plan to improve safety for its riders, Uber is rolling out ongoing background checks for its drivers, the company tells Axios' Kia Kokalitcheva.

Why it matters: Over the years, Uber has been plagued with incidents of driver violence or unsafe behavior. Once a driver had a clean initial background check, the company couldn't always track later violations or problems.

What's new: Uber has partnered with its background check provider, Checkr, and Appriss, which provides safety data.

How it works: Through Appriss’s real-time collection of data, Uber will be notified if a driver is newly charged with a traffic violation or other relevant charges. From there, Uber can decide if it wants to suspend a driver from its service to prevent unsafe behavior.

Bottom line: This new tech could mean more accurate and up-to-date information about a driver's level of safety on the road, but it's still early in the testing process. It also won't help the company avoid incidents involving drivers with no prior record of violations.

Go deeper: Read Kia's full story here.

6. Take Note

On Tap

  • Sources say it will probably be hot and muggy again in D.C. I don't know how you all stand it.

Trading Places

  • Northrop Grumman said CEO Wes Bush will step down Jan. 1, to be replaced by Kathy Warden, the current president and COO.


7. After you Login

From now on, I'm taking all my ergonomics lessons from this fine feathered friend.