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Aug 7, 2019

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Today's newsletter has 1,320 words, the most surprising of which is Claris. It's a 5-minute read.

1 big thing: How Huawei is weathering U.S. sanctions

Illustration: Rebecca Zisser/Axios

In releasing its first half results last week, Huawei touted a "robust" 23% increase in year-over-year revenue. However, the reality for the Chinese tech giant is that a number of pieces of its business are suffering thanks to U.S. pressure and sanctions.

The big picture: The U.S. has added Huawei to a list of entities with whom U.S. firms are generally banned from doing business. But the Trump administration has delayed some of the impact of its ban and also suggested it will allow U.S. companies to seek exemptions so long as national security is not threatened. It remains unclear what will and won't be allowed.

Driving the news: Huawei took the unusual step of releasing aggregate results for the first half of the year, rather than detailing second quarter performance. But since the company touted 39% growth in the first quarter, it's clear that its business took a substantial hit in the second quarter.

  • Even Huawei officials acknowledge growth won't be what it had anticipated. The company previously was targeting $130 billion in revenue this year, but now expects it to be closer to last year's $105 billion.


  • Phones and tablets: Huawei's device business is clearly being hurt by consumer concerns over whether its phones will continue to have access to the latest versions of Android and Google services. PC sales have also been affected, as those devices rely on software from Microsoft and Intel (or Intel-compatible) processors. Huawei has been developing its own operating system, but details remain scant.
  • Cellular network equipment: Huawei touts its continued business in 5G and says no customers with signed deals have cancelled, although the U.S. has been applying pressure on allies to avoid using Huawei.
  • Corporate networking: This area has been more strongly hit, Huawei acknowledges, due to limitations on server products from Intel and other suppliers.

What's next: Huawei is preparing for a tough couple of years as it figures out what, if any, U.S. components it can count on and makes alternate plans as necessary.

  • The next 2 years will "probably be the most challenging time," Huawei SVP of public affairs Joy Tan tells Axios.
  • "We just need to figure out how we can patch some of the holes in the supply chain," Tan adds.

Yes, but: Huawei is quick to point out the impact the ban is having on the U.S. companies that supply it with goods.

  • That's everyone from Microsoft and Google to chipmakers Intel, Qualcomm and Texas Instruments. They also include smaller tech suppliers like NeoPhotonics, which has recently counted on Huawei for half its revenue.
  • In all, Huawei says it purchases $11 billion worth of U.S. goods and services and is responsible for 40,000 to 50,000 jobs, citing calculations from the Economic Policy Institute.
  • And then there's the cost to carriers of keeping low-priced Huawei products off the U.S. market. Huawei maintains that adds 15% to the cost of network equipment here.

Between the lines: One thing both Huawei and its critics seem to agree on, at least publicly, is that it would be better if the U.S. focused on its national security concerns with Huawei rather than sweeping the firm up in the larger trade conflict.

  • "Huawei did not ask to be included in the trade discussion," Tan says. "Huawei does not want to be a bargaining chip."

My thought bubble: That might be Huawei's public position, but the company's best chance to avoid tight restrictions is likely to be through a broad trade settlement.

2. Apple reclaims Claris name for FileMaker unit

Claris CEO Brad Freitag. Photo: Claris

Apple is using a new acquisition as an opportunity to rebrand its FileMaker unit, reaching back to its distant software past and adopting the name Claris.

Driving the news: Apple announced it's buying Stamplay, a small Italian company that helps automate business processes.

Why it matters: Most people don't know that Apple still owns FileMaker or what that unit does these days. A new name won't change that on its own.

History lesson: For those under 40, Claris was the name of Apple's first software spinout, dating back to 1986. It later brought the bulk of its software work back in-house and renamed the subsidiary FileMaker after its database product.

  • In recent years, FileMaker's focus has been on helping small and midsize businesses (and departments in larger companies) to develop internal apps that connect disparate internal systems and processes.
  • With the acquisition and rebrand, the company hopes to expand to connect more types of services.

What's next: "We have funding to do the things we need to do," Claris CEO Brad Freitag said. "Acquisitions are a possibility."

3. "Right to repair" could become antitrust issue

Advocates who say that companies like Apple lock users into costly repair arrangements are trying to influence a growing debate in Washington over whether giant tech firms have become monopolies.

Why it matters: The issue has gotten less airtime than concerns about Apple's iOS App Store, but it's another possible point of scrutiny for regulators as they look at broader concerns over Big Tech's market power, Axios' David McCabe reports.

Flashback: For years, activists for so-called "right to repair" have raised concerns about technology companies making it impossible for customers to go to anyone other than the manufacturer if they wanted to get their gear repaired, or restricting repairs to merchants that have the manufacturer's blessing.

  • Apple has become one flashpoint for the issue, given the prevalence of its smartphones.

Driving the news: In letters and testimony submitted to the record for a House Judiciary Committee hearing, right to repair advocates pressed their case that restricting who gets to repair a device is a way of gaining a competitive edge.

  • "Repair hurts sales," of new phones, said Nathan Proctor, who leads the right to repair campaign at the U.S. Public Interest Research Group. "Apple has an incentive to restrict repair of their devices."
  • In a different filing, Gay Gordon-Byrne, executive director of the Repair Association, said that while one option would be for right to repair advocates to go to court, the association's members "will be best served through legislation" addressing the issue, since litigation is time-consuming and expensive.

What they're saying: ""We want to make sure our customers always have confidence their products will be repaired safely and correctly, and in a way that supports recycling," an Apple spokesperson said in a statement, adding the company recently added U.S. Best Buy stores as authorized service providers.

The big picture: The House Judiciary Committee antitrust subcommittee's inquiry into the market power of major tech platforms is one of many such proceedings in Washington.

  • The Federal Trade Commission launched a tech task force and last week, the Department of Justice said it was carrying out its own wide-ranging investigation.
  • Competitors and critics of the tech companies have the opportunity to shape the probes, steering regulators towards their specific concerns.
4. Ex-Twitter execs launch startup advisory firm

Dick Costolo (l) and Adam Bain. Photos: Steve Jennings/Getty Images, Romeo Gacad/AFP/Getty Images.

Former Twitter CEO Dick Costolo and former Twitter COO Adam Bain have launched a San Francisco-based startup advisory and investment firm called 01 Advisors, Axios' Kia Kokalitcheva and Dan Primack scooped yesterday.

The bottom line: Costolo and Bain have been angel investing and advising together for the past couple of years, including in companies like TripActions, but are now formalizing their efforts.

  • 01 Advisors is also raising a fund so that it can get equity beyond "advisory shares." In this way, it's a bit similar to how Tusk Ventures is operated by Bradley Tusk, former adviser to both Uber and Michael Bloomberg's campaign.
  • Former Twitter investor relations executive David Rivinus is also involved, in addition to Costolo and Bain.

Update: After Dan and Kia's story was published, 01 Advisors disclosed in an SEC filing that it has secured $135 million for a fund targeting a total of $200 million.

5. Take Note

On Tap

  • Samsung is holding an Unpacked event in New York where it's expected to debut the Galaxy Note 10. If you can't wait until this afternoon, the details have mostly all leaked out at this point.
  • There are a ton of tech earnings reports today, including Lyft, Roku, IAC and Booking Holdings, parent of OpenTable, Kayak and Booking.com.


6. After you Login

You never know what the day will bring. So you might want to stop and watch this. Then, no matter what happens, you will be able to say you saw a baby gorilla learn how to beat his chest.