Month: February 2022

News Corp disclosed on Friday it was the target of a cyberattack that accessed data of some employees, with its internet security adviser saying the hack was likely aimed at gathering “intelligence to benefit China’s interests.”

The publisher of the Wall Street Journal said the breach, discovered in late January, accessed emails and documents of a limited number of employees, including journalists, but added that cybersecurity firm Mandiant had contained the attack.

“Mandiant assesses that those behind this activity have a China nexus, and we believe they are likely involved in espionage activities to collect intelligence to benefit China’s interests,” David Wong, vice president of consulting at Mandiant, told Reuters.

The Chinese Embassy in the United States did not immediately respond to a request for comment.

“Although we are in the early stages of our investigation, we believe the activity affected a limited number of business email accounts and documents from News Corp headquarters, News Technology Services, Dow Jones, News UK, and New York Post,” company executives wrote in a letter to employees, seen by Reuters.

“Our preliminary analysis indicates that foreign government involvement may be associated with this activity, and that some data was taken.”

The company added that its other business units, including HarperCollins Publishers, Move, News Corp Australia, Foxtel, REA, and Storyful, were not targeted in the attack.

The Wall Street Journal, which reported the news first, competes with Reuters, the news division of Thomson Reuters Corp , in supplying news to media outlets.

 
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The same technology companies that helped drag the U.S. stock market back from the depths of the pandemic recession in 2021 led the market into a sharp plunge on Thursday after Meta Platforms, the company that owns Facebook, revealed that user growth on its marquee product has hit a plateau, and revenue from advertising has fallen off sharply.

Meta was not the only U.S. tech company to suffer on Thursday. Snap Inc., the owner of Snapchat; Pinterest, Twitter, PayPal, Spotify and Amazon all suffered sharp sell-offs during trading.

U.S. tech stocks are facing a variety of major challenges right now, including a possible economic slowdown, changes to privacy rules, increased regulatory pressure and competitive challenges that have pushed users — especially young people — to new platforms such as TikTok.

Every major U.S. stock index was down significantly on Thursday, with the Dow Jones Industrial Average falling by 1.45%, the S&P 500 down 2.44%, and the tech-heavy Nasdaq down 3.74%.

Meta’s Facebook struggles

Although the pain was spread broadly across the tech sector Thursday, it was the travails of Facebook that captured much of the public’s attention. The company’s shares, which were trading at $323 when the markets closed Wednesday, opened on Thursday at $242.48 and never recovered, closing at $237.76.

The 27% decline in the company’s share value translated into a loss of more than $230 billion in market value, an utterly unprecedented one-day loss for a single firm.

The share price began its tumble after the company announced for the first time ever that its total number of monthly users had not risen in the fourth quarter of 2021. Additionally, in its key North American market, Facebook saw monthly users decline slightly.

The stagnant user figures raised concerns about the company’s ability to grow even as more bad news poured in from its advertising business, which generates the overwhelming majority of the company’s profits.

Last year, Apple changed the privacy setting on its iPhones and other devices, requiring apps, including Facebook, to get each user’s explicit permission to track their activity on the internet. Prior to that change, Facebook had made extensive use of tracking software to deliver targeted advertising to its users — something its advertising clients were willing to pay a significant premium for.

Since Apple instituted the change, the majority of users have declined to allow Facebook to track their browsing, greatly diminishing the company’s ability to target advertisements. On Thursday, Meta Chief Financial Officer David Wehner told investors the company expects the changes to cost it $10 billion in advertising revenue in 2022.

Trouble with young users

Facebook has long struggled to attract younger users to its platform, and on Thursday, company officials admitted that the firm is finding it difficult to compete with TikTok, an app created by the Chinese firm ByteDance, which allows users to share brief videos.

In a call with investors, Meta CEO Mark Zuckerberg said the company’s answer to TikTok, a service called Reels, is still being developed.

“Over time, we think that there is potential for a tremendous amount of overall engagement growth” he said. “We think it’s definitely the right thing to lean into this and push as hard to grow Reels as quickly as possible and not hold on the brakes at all, even though it may create some near-term slower growth than we would have wanted.”

Zuckerberg, who holds 55% of the voting shares of Meta, giving him de facto control of the company, saw his personal wealth fall by an estimated $24 billion as a result of Thursday’s market rout.

Economic headwinds

Over the past year, investors have consistently pushed the share prices of U.S. tech firms higher. Now, though, with the Federal Reserve preparing a series of interest rate increases meant to cool the U.S. economy and slow price inflation, investors appear to be reconsidering the prices they are willing to pay.

Investors typically judge the value of a stock based on its price-to-earnings (P/E) ratio, which is determined by dividing the share price by the fraction of the company’s earnings represented by an individual share of stock.

When a company’s shares trade at a high P/E ratio that is usually because investors expect the underlying business to continue growing. However, that growth can be hampered by a slowdown in the broader economy, something many investors expect to see in the coming m

Political challenges

In addition to concerns about economic headwinds, the tech sector is facing a distinctly unfriendly regulatory environment in the U.S. Lawmakers in both parties have expressed their concern that big technology companies enjoy too much influence over areas like popular culture and political discourse but face too little accountability.

Facebook and its subsidiary, Instagram, were subjected to hostile congressional hearings last year, after a whistleblower revealed internal documents that showed the companies understood that their products could be harmful to some users but took little action to address the issue.

During the hearings, high-profile lawmakers, including Democratic Senator Elizabeth Warren, called for Facebook to be broken up into multiple, smaller companies.

 
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