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California Inc.: Snap Inc. needs to hurry up and make a profit

Snap Inc., the Santa Monica company behind Snapchat, needs to become cash-flow neutral in three years or it will need to raise fresh capital.

Welcome to California Inc., the weekly newsletter of the L.A. Times Business Section.

I'm Business columnist David Lazarus, and here's a rundown of upcoming stories this week and the highlights of last week.


Markets were closed for Good Friday. This week, investors will refocus on company earnings as they look for clues about the health of the U.S. economy and the prospects for better corporate profits. Analysts expect the wave of first-quarter results for S&P 500 companies will be the weakest in nearly three years.

Looking ahead

Home sales: The housing market takes center stage as the latest stats on existing-home sales come out Monday, with new-home sales spotlighted Tuesday. In February, existing-home sales rose nearly 12%, while new-home sales were up about 5%.


Busy, busy: It’s a hectic week for Elon Musk. On Monday, Tesla will host an “Autonomy Day” for investors to showcase its progress with its driver assistance feature known as Autopilot. First-quarter earnings come Wednesday. The next day, a revised fraud settlement between Musk and the Securities and Exchange Commission is due to be presented in court.

Economic activity: An important pulse-reading of the economy arrives Friday as first-quarter gross domestic product is revealed. Fourth-quarter GDP for 2018 rose by 2.2%, in line with expectations.

Consumer sentiment: The latest consumer sentiment index will be released Friday. In March, households generally felt better about the state of the economy and their earnings prospects, according to the University of Michigan.

At the movies: A small film entitled “Avengers: Endgame” opens Friday. This mise-en-scène may do a little business at the box office. Also opening that day is “Dreamland,” a period thriller starring Margot Robbie as a fugitive bank robber on the lam in the Dust Bowl.

The agenda

Monday’s Business section takes a critical look at the evolution of Snapchat and Evan Spiegel, who was crowned the new boy king of tech when he took his photo-message company Snap Inc. public for $24 billion two years ago. Since then the Santa Monica company has suffered an executive exodus and a terrible redesign that turned off users. It has steadied itself, but according to a Financial Times analysis, Snap has just over three years to become cash-flow neutral before it will need to raise fresh funds.

Story lines

Here are some of the other stories that ran in the Times Business section in recent days that we’re continuing to follow:

Job gains: California added jobs at a modest rate in March, reflecting an economy that is close to full employment after 108 months of expansion, one of the longest runs since World War II. Net payroll jobs increased by 24,500 to 17.35 million, a slight improvement over February’s revised gain of 20,900.

IP Go: Stock of Pinterest and Zoom Technologies soared in their trading debut, showing investors still have a thirst for tech. Shares of the digital-scrapbooking company leaped 28%, giving Pinterest a market value of about $12.9 billion. Videoconferencing company Zoom Video Communications, with a track record of real earnings, vaulted more than 72%.


Labor battle: The Writers Guild of America sued the four main Hollywood talent agencies — CAA, WME, ICM Partners and UTA — alleging that the widespread use of packaging fees that agencies extract from TV shows and movies for pulling together talent violate the state’s fiduciary duty and anti-kickback provisions of the federal Taft-Hartley Act. The two sides are involved in a protracted dispute over a code of conduct for agents who represent creative talent.

Dispute ended: Apple Inc. and Qualcomm Inc. agreed to end a two-year legal war over billions of dollars of technology licensing fees. A court victory for Apple would have hampered Qualcomm’s ability to collect fees on the technology that powers mobile phones around the world. But the iPhone maker needed the chips to keep from falling behind in fifth-generation, or 5G, technologies.

More Tesla: Elon Musk’s Fremont electric-car maker will reduce the size of its 11-member board to nine as Tesla ushers in a new era of corporate governance. Director terms will be cut to two years from three, allowing shareholders to vote on the board’s performance with greater frequency, according to it latest proxy. Critics have complained Tesla lacks sufficient board oversight.

What we’re reading

Some recent stories from other publications that caught our eye:

Eye of the storm: The New York Times profiles Susan Wojcicki, CEO of YouTube. It’s not an easy job. “In an industry that celebrates eccentricity, Ms. Wojcicki presents as exceedingly normal, bordering on boring, even as elements of her digital realm burst into the real world in forms that are increasingly grotesque and sometimes dangerous.”

Shot in the foot: From the New Yorker, a deep dive into the finances and operations of the National Rifle Assn. “Memos created by a senior N.R.A. employee describe a workplace distinguished by secrecy, self-dealing and greed, whose leaders have encouraged disastrous business ventures and questionable partnerships, and have marginalized those who object.”


A tight grip: Bloomberg Businessweek looks at the way hedge funds pressure companies to play fast and loose with corporate debt. “Conventional investing isn’t a zero-sum game: One investor can buy shares of Apple Inc., and another can buy Microsoft Inc., and both can make money. … That’s not true with the financial instruments known as credit-default swaps.”

Say what? From the Wall Street Journal, an examination of how communication suffers as texting becomes more prominent in the workplace. “Complaints range from oversharing colleagues to texts pinging at all hours of the day and night. While email helps silo work communications, the text inbox is a more blended affair, where notes from friends and family jostle with communiqués from bosses and co-workers.”

Open wide: Admit it, you’ve always suspected that dentists are kind of, you know, winging it. The Atlantic drills into the issue. “Many standard dental treatments — to say nothing of all the recent innovations and cosmetic extravagances — are not well substantiated by research. Many have never been tested in meticulous clinical trials. And the data that are available are not always reassuring.”

Spare change

I don’t mind admitting that, as a kid, I was really into pinball. My friends and I would meet at a diner called Watergate Dog on the Sunset Strip, and our table of choice was Bally’s Monte Carlo. I totally flashed back to those days watching this video from Wired about Michael Schiess, a pinball enthusiast who collects and repairs old machines in an effort to preserve them for future generations.

For the latest money news, go to Mad props to Laurence Darmiento for helping put this thing together.

Until next time, I'll see you in the Business section.