Microsoft 3Q17: Cloud, Office, Windows strong, Surface slumps

In its third quarter of its 2017 financial year, Microsoft posted revenue of $22.1 billion, up 8 percent year-on-year, with an operating income of $5.6 billion, up 6 percent on a year ago, net income of $5.7 billion, up 28 percent, and earnings per share of $0.61, an increase of 30 percent over the same quarter a year ago.

As ever, Microsoft also offered alternative figures that book Windows 10 revenue up front instead of amortized over several years, and which hold exchange rates constant to remove the impact of rate fluctuations year-on-year (which gives some indication of year-to-year changes in actual sales transactions, if not of money in the bank). This quarter the currency differences are for the most part small, with an impact of only about 1 percent (the dollar was weaker than Microsoft expected), but Windows revenue deferral continues to be significant. Under these adjusted figures, revenue was $23.6 billion, up 7 percent, operating income was $7.1 billion, up 5 percent, net income was $5.7 billion, an increase of 16 percent, and earnings per share were $0.73, a 19 percent increase.

Microsoft currently has three reporting segments: Productivity and Business Processes (covering Office, Exchange, SharePoint, Skype, and Dynamics), Intelligent Cloud (including Azure, Windows Server, SQL Server, Visual Studio, and Enterprise Services), and More Personal Computing (covering Windows, hardware, and Xbox, as well as search and advertising).

The period January 1 through March 31 represented the first full quarter of Microsoft’s ownership of LinkedIn. LinkedIn’s numbers are accumulated within the Productivty and Business Processes group, but Microsoft is also breaking them out separately. The social networking site had revenue of $1.0 billion, with a cost of revenue of $0.4 billion and operating expenses of $1.0 billion, for an operating loss of $0.4 billion.

The Productivity group as a whole reported revenue of $7.96 billion, up 22 percent year-on-year. $1.0 billion of that revenue, or 15 of those 22 points of growth, came from LinkedIn, so even the longstanding businesses did well and were up 7 percent. Operating income was $2.8 billion, down 7 percent. Without LinkedIn’s contribution, it would have been up 6 percent. Commercial Office products and services revenue was up 7 percent overall. On the upside, Office 365 revenue was up 45 percent, and the number of commercial Office 365 seats grew by 35 percent, for the first time passing 100 million monthly active users. Commercial non-cloud Office revene was down 13 percent, however, as a result of the shift to cloud products.

On the consumer side, overall Office and Office 365 revenue was up 15 percent, with 26.2 million Office 365 subscribers. This is up 1.3 million quarter-on-quarter.

The Cloud group reported revenue of $6.8 billion, up 11 percent year on year, with operating income of $2.2 billion, unchanged year-on-year. The growth was attributed to growth in both cloud services and server products; the flat operating income due to increased operating expenses in sales, engineering, and developer engagement. Server product revenue was up 6 percent, and Azure revenue was up 93 percent. Enterprise Services revenue, however, was down 1 percent, due to a decline in support agreements for Windows Server 2003, partially offset by growth in consulting services.

Across enterprise and consumer, the cloud business remains a strong growth area, although the continued near-doubling of Azure revenue continues to be suggestive that the absolute revenue of that group is low. In aggregate, the company claims that its cloud annualized run rate is now $15.2 billion (up $1.2 billion on the previous quarter).

The Personal Computing group reported revenue of $8.9 billion, down 7 percent, with operating income of $2.1 billion, an increase of 20 percent. The Windows numbers suggest a stabilization of the PC market: Windows Pro OEM revenue was up 10 percent, and non-Pro down just 1 percent. In both cases, Microsoft says that this is outperforming (respectively) the commercial and consumer PC markets. Windows subscription revenue was up 6 percent. Overall gaming revenue was up 4 percent, on the back of 7 percent growth in Xbox software sales, and Xbox Live monthly active users were up 13 percent. Search revenue was also up 8 percent, thanks to higher search volume and higher revenue per search.

But the hardware story was unhappy. Phone revenue was down $0.7 billion; it’s now essentially wiped out, with Microsoft reporting “no material phone revenue” in the quarter, and “negligible” revenue expected for next quarter.

Surface revenue was also down, falling 26 percent due to increased competition and what Microsoft called “product end-of-lifecycle dynamics.” The 10Q document spells this out rather more clearly: fewer Surface devices were sold.

This is not altogether surprising. On the one hand, the mainstay product of the Surface line—the Surface Pro 4—is looking increasingly long in the tooth. It hasn’t been updated to use a Kaby Lake processor, nor to support USB Type-C or Thunderbolt 3. When Surface Pro was a new product, this might have been tolerable, because there were few similar systems on the market. Today, however, companies including Samsung, HP, Dell, and Lenovo all offer broadly comparable 2-in-1 machines.

Surface is looking quite ignored. Microsoft is having an event in New York City next week, and though the event has an education focus, there is some hardware element to it, but sources close to the matter tell us that neither a refreshed Surface Pro nor a refreshed Surface Book are going to be launched next week. With its hardware looking increasingly long in the tooth, and competition better than ever, further decline of the Surface business seems inevitable. Microsoft’s outlook for the next quarter concurs, though it does not expect the decline to be as steep as it was this quarter.

Overall, the quarter told a similar story to previous ones. The transition from perpetual licenses to cloud subscriptions is steady, and Microsoft’s cloud services are strong. But the numbers continue to have frustrating gaps. For example, the aggregation of Office 365 revenue—which spans not just Exchange, SharePoint, and other cloud-hosted services, but also (for many subscribers) on-premises Office 2016 ProPlus software—with Azure revenue means that two very different things are being combined. Microsoft is continuing to build large, expensive datacenters dotted around the world, but there’s no clear reporting of what the associated capital and operational expenditure is. Nor is there any good indication of cloud revenue (and expenses) are split between Azure, Office 365, Dynamics 365, Bing, and Xbox Live.

As such, it continues to be difficult to tell whether the cloud business is strong across the board, or if the revenue growth is primarily driven by a move from perpetual Office licenses to recurring subscriptions. With large scale movement from on-premises installations to the cloud, we’d expect to see some degree of cannibalization between Office 365 and on-premises Exchange and SharePoint, and Azure and on-premises Windows Server and SQL Server. Such trade-offs won’t be one-for-one—companies may well add new cloud workloads in addition to, rather than instead of, their on-premises deployments—but we’d certainly expect to see some movement. Thus far, it’s not clear that we are. Azure is a solid cloud platform with a number of compelling features; we’re just left with little idea of how big it actually is.


Trump unveils biggest tax reform in over 30 years

WASHINGTON (AP) — President Donald Trump proposed dramatic cuts in the taxes paid by corporations big and small Wednesday in an overhaul his administration says will spur economic growth and bring jobs and prosperity to America’s middle class. But his ambitious plan alarmed lawmakers who worry about ballooning federal deficits.

The plan would also reduce investment and estate taxes aimed at the wealthy. But administration officials said that action on other key tax code elements would ensure the plan would largely help the middle class instead of the affluent.

The White House has yet to spell out how much of a hole the tax cuts could create in the federal budget, maintaining that the resulting economic growth would reduce — if not eliminate — the risk of a soaring deficit.

The outlined changes to the tax code are the most concrete guidance so far on Trump’s vision for spurring job growth.

“The president owns this plan; don’t be mistaken,” said Gary Cohn, director of the White House National Economic Council.

Treasury Secretary Steven Mnuchin, joined by National Economic Director Gary Cohn, speaks in the briefing room of the White House in Washington, Wednesday, April 26, 2017. (AP Photo/Carolyn Kaster)

Cohn said Trump and his administration recognize they have to be “good stewards” of the federal budget. But the plan as it currently stands could cause the federal deficit to climb, unless it sparks a massive and lasting wave of growth that most economists say is unlikely.

The threat of a rising budget deficit could erode support for the plan among lawmakers in Trump’s own Republican Party. Administration officials intend to hash out additional details with members of the House and Senate in the coming weeks for what would be the first massive rewrite of the US tax code since 1986.

“We know this is difficult,” Cohn said. “We know what we’re asking for is a big bite.”

As Cohn and Treasury Secretary Steven Mnuchin explained it in an interview, the plan would reduce the number of personal income tax brackets to three from seven: rates of 10 percent, 25% and 35%. It would double the standard deduction for married couples to $24,000, while keeping deductions for charitable giving and mortgage interest payments. The administration plans to provide tax relief for families with child care expenses, too, although the specifics have yet to be included.

On the other hand, the proposal would also trim other deductions utilized by wealthier Americans. This would include deductions for state and local tax payments, a change that could alienate support from lawmakers in states such as California and New York with higher state taxes.

“It’s not the federal government’s job to be subsidizing the states,” Mnuchin said.

The administration has emphasized that the plan was focused on simplifying the tax code and helping middle class Americans. The median US household income is slightly above $50,000 (NIS 182,000) annually.

Still, the proposal could reduce the tax burden for the wealthy as well.

It would also repeal the estate tax, the catch-all alternative minimum tax and the 3.8% tax on investment income from President Barack Obama’s health care law. The proposal has yet to be vetted for its precise impact on top earners, as several details are still being determined.

On the corporate side, the top marginal tax rate would fall from 35% to 15%. Small businesses that account for their owners’ personal incomes would see their top tax rate go from 39.6% to the proposed corporate tax rate of 15%. Mnuchin stressed that the change for small business owners — a group that under the current definition could include doctors, lawyers and even major real estate companies — would be done to ensure that wealthier Americans could not exploit the change to pay less in taxes.

Trump to propose large increase in deductions Americans can claim on their taxes

President Trump on Wednesday plans to call for a significant increase in the standard deduction people can claim on their tax returns, potentially putting thousands of dollars each year into the pockets of tens of millions of Americans, according to two people briefed on the plan.

The change is one of several major revisions to the federal tax code that the White House will propose when it provides an outline of the tax-overhaul pitch Trump will make to Congress and the American people as he nears his 100th day in office.

Trump will call for a sharp reduction in the corporate tax rate, from 35 percent to 15 percent. He will also propose lowering the tax rate for millions of small businesses that now file their tax returns under the individual tax code, two people familiar with the plan said.

These companies, often referred to as “pass throughs” or S corporations, would be subject to the 15 percent rate proposed for corporations. Many pass throughs are small, family-owned businesses. But they can also be large — such as parts of Trump’s own real estate empire or law firms with partners who earn more than a million dollars annually. The White House is expected to pursue safeguards to ensure that companies like law firms can’t take advantage of this new tax rate and allow their highly paid partners to pay much lower tax bills.

Trump’s proposed tax changes will not all be rolled out Wednesday. White House officials are also working to develop an expanded Child and Dependent Care Credit, which they hope would benefit low- and middle-income families facing substantial burdens in paying for child care. Trump had touted a tax measure for child care during the campaign, but it was criticized as not significantly benefiting families of modest means.

White House officials think these changes will give Americans and companies more money to spend, expand the economy and create more jobs.

The existing standard deduction Americans can claim is $6,300 for individuals and $12,600 for married couples filing jointly. The precise level of Trump’s new proposal could not be ascertained, but it was significantly higher, the two people said, who spoke on the condition of anonymity because the plan has not yet been made public.

During the campaign, Trump proposed raising the standard deduction to $15,000 for individuals and $30,000 for families.

Like other parts of Trump’s tax proposal, an increase in the standard deduction would lead to a large loss of government revenue.

A standard deduction works like this: If a couple filing jointly earns $70,000, they deduct $12,600 from their income, adjusting their income to $57,400. They then would pay taxes on the $57,400 in income, not the $70,000 they earned. Increasing the standard deduction would reduce their taxable income, ensuring that they can keep more of their money. A taxpayer who claims the standard deduction cannot also itemize deductions for items such as mortgage interest or charitable giving. But if the standard deduction is large enough, many would be likely to bypass the itemized deduction.

The nonpartisan Tax Policy Center estimated last year that if Trump raised the standard deduction as much as he proposed during the campaign, about 27 million of the 45 million tax filers who itemized their tax breaks in 2017 would instead opt to take the standardized deduction, creating a much simpler process.

This would also match one of the goals outlined by Treasury Secretary Steven Mnuchin. He has said that filing taxes has become too complicated for many Americans and that his goal would be for many Americans to be able to file their taxes on a “large postcard.”

White House officials including Vice President Pence also met late Tuesday with congressional leaders and said they wanted to pass a tax-code overhaul through a process known as “reconciliation,” a person familiar with the meeting said, which means they could achieve the changes with only Republican votes.

They also said they were going to push for steep cuts in tax rates but would be willing to raise some new revenue with other changes to the tax code. The White House on Wednesday is expected to reiterate this openness to new revenue without getting into specifics of which tax changes it would seek, as that could create a fierce corporate blowback based on which exemptions could be cut.


Congressional Republicans praised President Trump’s ambitious effort to overhaul the tax code and slash corporate income tax rates to 15 percent.

But they cautioned that some parts of the plan might go too far, illustrating the challenges the president continues to face in his own party as he seeks political support for one of his top domestic priorities.

Sen. Orrin G. Hatch (R-Utah) and Rep. Kevin Brady (R-Tex.), who head Congress’s tax-writing panels, said they were open to Trump’s plan to push forward with sharp cuts in the rates that businesses pay but suggested that changes might be needed.

“I think the bolder the better in tax reform,” said Brady, who chairs the House Ways and Means Committee. “I’m excited that the president is going for a very ambitious tax plan.”

Hatch, meanwhile, said the White House appears to be “stuck on” the idea that certain small businesses, known as S corporations, should have their tax rates lowered to 15 percent, just like large businesses. S corporations pay the same tax rates that individuals and families pay, with a top rate of close to 40 percent.

“I’m open to good ideas,” Hatch said. “The question is: Is that a good idea.”

Meanwhile, Democrats denounced the 15 percent corporate tax rate and criticized Mnuchin, who said that faster economic growth would generate enough new tax revenue to compensate for the corporate rate cuts.

Asked whether the 15 percent target was workable, Sen. Sherrod Brown (D-Ohio) told reporters: “It is, if you want to blow a hole in the federal budget and cut a whole lot of things like Meals on Wheels and Lake Erie restoration and then lie about the growth rate of the economy.”

He said that the Trump administration would have to do something “huge” such as scrapping mortgage interest deductions, adopting a border adjustment tax or relying on “outrageously inaccurate projections.”

The Trump tax package has won the support of most of the business community, but divisions remain.

The biggest winners from the corporate tax cut would include companies in industries such as retailing, construction and services that have had trouble taking advantage of the loopholes in the existing tax code.


The list of losers from tax reform could include technology companies, domestic oil and gas drillers, utilities and pharmaceutical firms that have been adept at playing the current system by using loopholes to deduct interest payments, expense their equipment and research, and transfer profits to foreign jurisdictions with lower tax rates. Under the Trump plan, many of those tax breaks would be eliminated in return for lowering the rate.

“Retail companies are the ones who pay closest to the rate of 35 percent,” said Len Burman, a fellow and tax expert at the Urban Institute. “They can’t ship their profits overseas. They can’t take advantage of the research and experimentation credit.”

A study of 2016 data for all profitable publicly listed companies by Aswath Damodaran, a finance professor at New York University’s Stern School of Business, showed that U.S. firms pay vastly different income tax rates.

On average, engineering and construction firms, food wholesalers and publishers paid about 34 percent. At the other end, oil and natural gas companies paid 7 to 8 percent on average.

“The U.S. tax code is filled with all kinds of ornaments” that help the oil and gas industry, said Damodaran. A decades-old depletion allowance, for example, allows companies to deduct money as a natural resource is produced and sold. This comes on top of other deductions for various expenses.

A Treasury Department study last year based on tax returns for 2007-2011 showed that debt-laden utilities paid only 10 percent in taxes, while construction firms and retailers paid 27 percent.“Retailers pay a higher effective tax rate of any sector in the United States,” said David French, the head of government relations at the National Retail Federation. “But the devil is in the details.”

With many key pieces of the Trump tax plan still missing, French is worried that Trump might propose something to offset the lost revenue from cutting the corporate tax rate to 15 percent. A border adjustment tax, such as the one House Speaker Paul D. Ryan (R-Wis.) favors, would more than offset the benefits of a rate cut to 15 percent, French said, “while others would see their taxes go to zero.”


French said that he expects a middle-class tax cut and business tax reform, but he does not expect Trump to unveil a complete package with offsetting items. “I don’t think that’s going to be in the president’s plan,” French said. “I expect it will be big-picture, high-level, without a lot of details.”

“There are so many special interests involved,” said Ed Yardeni, an investment strategist and president of Yardeni Research. “This is going to be a real test of whether he’s going to be able to drain the swamp or whether he’s going to pump more water in.”

Among the other big losers could be companies such as utilities or cable companies that have accumulated large debts and currently can deduct interest payments. A lower tax rate would make those tax deductions less useful.

In a report to investors in December, a team of JPMorgan analysts said that “we see reform to the corporate tax code as currently envisioned . . . as an overall net negative” for big utilities. The analysts said that because the utilities had large amounts of debt, they would be hurt more than other companies.

A big corporate tax cut could also create a crisis for individual income taxes. Without a matching cut in individual income tax rates, individuals would be able to change the structure of their pay checks so that the payments went through limited liability companies that would pay no more than 15 percent under the business tax cut, a rate far lower than the top individual rate of 39.6 percent.

That’s similar to what basketball coach Bill Self did after Kansas exempted entrepreneurs from paying taxes and eliminated the business tax. Self, the coach of the University of Kansas Jayhawks, put about 90 percent of his pay package into a corporate entity to sidestep the taxes he would have paid if it were all considered simply salary, according to a report by radio station KCUR-FM.

“Whenever a lower rate is imposed on one kind of economic activity versus another, that low-rate activity all of a sudden becomes a lot more important,” Burman said. “A lot of tax sheltering was done to make ordinary income look like capital gains.”

He added, “An associate professor in the Kansas philosophy department probably pays a higher tax rate than Bill Self.”

But if Trump cuts individual income taxes to match the cut in corporate rates, that would create an enormous shortfall in tax revenue and a ballooning of the budget deficit.

Trump’s Tax Plan: Low Rate for Corporations, and for Companies Like His

President Trump plans to unveil a tax cut blueprint on Wednesday that would apply a vastly reduced, 15 percent business tax rate not only to corporations but also to companies that now pay taxes through the personal income tax code — from mom-and-pop businesses to his own real estate empire, according to several people briefed on the proposal.

The package would also increase the standard deduction for individuals, providing a modest cut for middle-income people and simplifying the process of filing tax returns, according to people briefed on its details. That proposal is opposed by home builders and real estate agents, who fear it would diminish the importance of the mortgage interest deduction. And it is likely to necessitate eliminating or curbing other popular deductions, a politically risky pursuit.

As of late Tuesday, the plan did not include Mr. Trump’s promised $1 trillion infrastructure program, two of the people said, and it jettisoned a House Republican proposal to impose a substantial tax on imports, known as a border adjustment tax, which would have raised billions of dollars to help offset the cost of the cuts.

With that decision, Mr. Trump acceded to pressure from retailers and conservative advocacy groups, but the move could deepen the challenge of passing a broad tax overhaul in Congress, where concern about the swelling federal deficit runs high. His plan would put off the difficult part of a tax overhaul: closing loopholes and increasing other taxes to limit the impact of tax cuts on the budget deficit.

Republicans are likely to embrace the plan’s centerpiece, substantial tax reductions for businesses large and small, even as they push back against the jettisoning of their border adjustment tax. The 15 percent rate would apply both to corporations, which now pay 35 percent, and to a broad range of firms known as pass-through entities — including hedge funds, real estate concerns like Mr. Trump’s and large partnerships — that currently pay taxes at individual rates, which top off at 39.6 percent. That hews closely to the proposal Mr. Trump championed during his campaign.

But Mr. Trump’s decision to extend the corporate tax cut to real estate conglomerates like his own will give Democrats a tailor-made line of attack.

“Yesterday, we learned President Trump wants to slash the corporate tax rate, even though corporations already dodge most of their tax responsibilities while making record profits,” said Frank Clemente, executive director of the liberal Americans for Tax Fairness. “Today, we find out it’s even worse. In trying to slash taxes for ‘pass through’ business entities, Trump is seeking to dramatically reduce his own tax bill.”

The people who were briefed on the plan spoke on the condition of anonymity before a formal announcement that Mr. Trump has said will come on Wednesday, three days before he reaches the 100-day mark in office with nothing to show for his promises to cut taxes or revamp the health care system.

The border adjustment tax may be revisited later but was considered too controversial to include now.

Spokeswomen for the White House and the Treasury Department declined to comment on the details of the plan before Wednesday’s announcement, which is expected to contain only broad principles, leaving unanswered crucial questions about the financing of the package and the process for advancing it through Congress.

Emerging from a meeting at the Capitol where he briefed Republican congressional leaders on Tuesday evening, Treasury Secretary Steven Mnuchin said participants had “very, very productive discussions” and were united in their desire to accomplish a tax overhaul this year.

The broad contours of the plan seemed to please conservatives who had worried in recent weeks that Mr. Trump, who has dropped or modified many of the major proposals of his campaign, was drifting away from the plan he had laid out for voters.

“Conservatives are going to be very happy with this plan, because it achieves a lot of the objectives that we’ve wanted: lower business taxes, simplification and not a major tax increase that is unacceptable,” said Stephen Moore, an economist at the Heritage Foundation who advised Mr. Trump’s campaign and helped craft his tax proposal.

But Mr. Moore conceded that finding ways to offset the large revenue reductions envisioned in the blueprint would be a challenge.

“That’s the unknown right now, is whether there is some sort of pay-for for any of this,” he said.

Government officials crafting the tax plans are aware of the math problem, one of the people involved in the proposal said, but they see the 15 percent corporate tax rate as a compelling starting point for negotiations. Mr. Trump may yet reveal other tactics for replenishing lost tax revenue, someone who has been briefed on the plans said.

But the final plans remain very much in flux. At midafternoon on Tuesday, for instance, it was still not clear whether personal income-tax rate cuts or an increase in the standardized deduction for individuals would be part of Wednesday’s announcement.

The demise of the border adjustment tax was met with relief by Republicans in the Senate, who had been cool to it from the start.

On Tuesday, Senator John Cornyn, Republican of Texas, said it was safe to conclude that the provision was “not going anywhere” because of skepticism in the Senate.

But Mr. Cornyn described Mr. Trump’s plan to cut the corporate income tax to 15 percent as “pretty aggressive,” with unknown consequences for the deficit.

Other Republican senators appeared ready to embrace a tax proposal that adds to the deficit in the name of jump-starting the economy. Republicans appear intent on using parliamentary rules that would block Democrats from filibustering the plan in the Senate, but would also put a time limit on the tax cuts.

“I’m open to getting this country moving,” said Senator Orrin G. Hatch of Utah, chairman of the powerful Senate Finance Committee. “I’m not so sure we have to go that route, but if we do, I can live with it.”

Most analysts say the notion that Mr. Trump’s tax cuts will pay for themselves is unrealistic. A Tax Foundation analysis concluded this week that, on its own, a 15 percent corporate tax rate would reduce federal revenue by about $2 trillion over a decade. To make up for those losses without raising taxes elsewhere, the economy would have to become 5 percent larger.

Senator Roy Blunt, Republican of Missouri, said he was also open to tax cuts with an expiration date if that was the only way to get them passed without Democratic support, pointing to President George W. Bush’s cuts.

“You look at the tax cuts from 2002 and 2003 — well over 90 percent of them became permanent law,” Mr. Blunt said.

Democrats have criticized Republicans for failing to engage with them on a tax overhaul. Senator Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, said he would be open to working with Republicans on a plan that would bring home corporate profits parked overseas and use some of the funds to pay for infrastructure.

But Senator Mitch McConnell of Kentucky, the majority leader, said on Tuesday that he intended to pass tax legislation through budget rules that would block a filibuster. He accused Democrats of being more interested in “wealth transfers” than in spurring economic growth.

So far, the Senate has taken a back seat in tax discussions. The abandonment of the border adjustment tax will deal a blow to the comprehensive rewrite of the tax code championed by Speaker Paul D. Ryan and Representative Kevin Brady of Texas, the chairman of the Ways and Means Committee.

Mr. Brady said Tuesday that he would press ahead with the import tax, not merely because it would make up for lost revenue but because it would protect American jobs.

However, he acknowledged that his goal of producing legislation before summer was slipping.

“I’m less focused on the month than on the year for tax reform, which would be this year,” Mr. Brady said.

T-Mobile profit rises, but customer growth slows

T-Mobile US Inc. lured customers away from bigger phone companies at a slower rate than in previous quarters, ahead of what analysts expect to be a busy merger season.

The No. 3 carrier in the U.S. by subscribers ended its first quarter with 1.1 million more of them, bringing its customer base to 72.6 million. The net additions included 798,000 postpaid phone subscribers, the types of accounts that wireless companies find most profitable.

But those gains were smaller than the 2.1 million customers and 933,000 postpaid phone subscribers that the company added in the fourth quarter.

Starting Thursday, telecommunications companies will be allowed to resume merger discussions, following a quiet period in which such talks were banned because of the Federal Communications Commission’s airwaves auction.

In a conference call with analysts, T-Mobile Chief Executive John Legere said he expects consolidation in the U.S. market, though he didn’t detail his own company’s plans.

“There’s this huge pent-up energy because it’s been over a year since they could have conversations,” he said, adding there are some combinations “we would be interested in taking a look at” under the right circumstances.

T-Mobile was the top bidder in the FCC auction, pledging $8 billion toward airwaves it said it would use to improve its network as soon as this year.

T-Mobile on Monday posted a first-quarter profit of $698 million, up from $479 million a year earlier.

Its revenue rose 11% to $9.6 billion.

T-Mobile’s earnings have generally climbed in recent years thanks to its discounts and marketing campaigns that have drawn customers away from larger rivals AT&T Inc. and Verizon Communications Inc.

Verizon last week blamed heavy competition for its first-ever quarterly loss of lucrative postpaid subscribers — those who pay at the end of each monthly billing cycle — partly because of pressure from unlimited data plans. Verizon said the customer losses eased after it followed T-Mobile and others with its own unlimited plan.

T-Mobile slightly raised its 2017 estimate for branded postpaid net customer additions to between 2.8 million and 3.5 million, up from its earlier target range of 2.4 million to 3.4 million.

Write to Drew FitzGerald at

Trump to sign actions on taxes, Wall Street regulation

President Trump on Friday is slated sign three executive actions meant to spark reviews of tax and financial regulations, the latest in the White House’s effort to rethink and potentially roll back federal oversight.

The precise impact of the new actions is unclear, but they could lead to a loosening of restrictions on the way companies are structured and scale back regulations on large financial companies.

Trump will sign all three documents at the Treasury Department, the agency said.

The documents will include an executive order that directs Treasury Secretary Steven Mnuchin to “review significant tax regulations issued in 2016” to see if they “impose an undue financial burden on American taxpayers, add undue complexity, or exceed statutory authority.”

One of the most sweeping tax regulations imposed in 2016 was written by the Obama administration’s Treasury Department and it made it much harder for companies to use a process known as “inversion” to incorporate overseas in places like Ireland so that they could avoid paying U.S. taxes.

A spike in the number of companies using this tax loophole – particularly pharmaceutical firms – outraged U.S. lawmakers from both parties and prompted the Treasury Department to act. But many firms complained that the Obama administration was overstepping its authority. It’s unclear if the inversion rule will be part of the new Treasury review.

Trump will also sign two new memorandums on Friday at Treasury, though they both seem to overlap with reviews that are already underway.

One will direct Mnuchin to review something called “orderly liquidation authority,” Treasury said, which is a regulatory process that requires a process for winding down large, failing financial companies. This review would look at whether an “enhanced bankruptcy authority” would be better than the process established by the Dodd-Frank financial overhaul law. The review also asks Treasury to consider whether the liquidation rules “could lead to excessive risk-taking” by financial companies.

The Treasury Department is already conducting a review of existing financial regulations, however, and it’s unclear how this new memorandum would direct the agency to do anything differently from what it is already considering.

The other presidential memorandum would call for a review of the way the Financial Stability Oversight Council designates certain companies for enhanced financial regulation, a threshold set up by the Dodd-Frank law. Many financial companies and Wall Street executives have complained about this process, but it is another part of the financial regulatory system that was supposed to already be under review.

US stock indexes edge lower in early trading

U.S. stock indexes edged lower in early trading Wednesday, weighed down by a slide in materials and industrial companies. Consumer goods stocks were up the most. Energy stocks also rose as crude oil prices headed higher. Trading was subdued as investors monitored brewing geopolitical tensions head of the long Easter holiday weekend.

KEEPING SCORE: The Standard & Poor’s 500 index slid 3 points, or 0.1 percent, to 2,350 as of 10:09 a.m. Eastern Time. The Dow Jones industrial average fell 29 points, or 0.1 percent, to 20,621. The Nasdaq composite index lost 4 points, or 0.1 percent, to 5,862.

GLOBAL TENSIONS: Investors are cautious as world events this week complicate the investment outlook. Tensions are rising over North Korea, which threatened the U.S. against making any military moves after Washington ordered an aircraft carrier to head toward the divided Korean Peninsula. U.S. Secretary of State Rex Tillerson was in Moscow with the aim of getting Russia to ditch its ally Syria following last week’s chemical attack. France’s election later in the month is also giving investors a reason to hunker down and avoid taking any big risks.

IN A BIND: Fastenal slid 5.6 percent after the maker of industrial coatings and construction fasteners said its business was hurt by higher freight expenses and inventory costs. The stock lost $2.81 to $47.54.

OUT OF SEASON: Tractor Supply fell 5.8 percent after the farm equipment retailer said sales of seasonal goods fell during the first quarter. The stock shed $4.09 to $66.38.

ROYALLY REWARDED: BlackBerry shares vaulted 18.7 percent after arbitrators awarded the smartphone maker $814.9 million to resolve a dispute with Qualcomm over royalty overpayments. The stock gained $1.92 to $12.19.

CRUSING ALTITUDE: Delta Air Lines rose 2.1 percent after the company reported earnings that beat analysts’ estimates. The stock added 96 cents to $46.25.

MARKETS OVERSEAS: In Europe, Germany’s DAX added 0.2 percent, while France’s CAC 40 was 0.2 percent higher. Britain’s FTSE 100 was flat. Earlier in Asia, Japan’s benchmark Nikkei 225 stock index slid 1 percent after the dollar fell under 110 yen for the first time in five months, pressuring the country’s exporters. Hong Kong’s Hang Seng reversed its losses in the final hour of trading, rising 0.9 percent. South Korea’s Kospi climbed 0.2 percent.

OIL & GAS: Benchmark U.S. crude extended its rally. Oil was up 12 cents to $53.52 a barrel on the New York Mercantile Exchange. The contract added 32 cents on Thursday, its sixth gain in a row. Brent crude, the standard for international oil prices, was up 16 cents to $56.39 a barrel.

TREASURY YIELDS: The yield on the benchmark U.S. 10-year note fell to 2.29 percent from 2.32 percent late Tuesday. As bond prices rise, yields drop.

CURRENCIES: The dollar fell to a five-month low against the yen as investors seeking security amid global uncertainty piled into the Japanese currency. The dollar weakened to 109.60 yen from 109.69 yen late Tuesday, the first time it has broken below the 110 level since mid-November. The euro was roughly flat at $1.0602 from $1.0608.


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Trump, Xi converge on currency, Syria as US-China ties warm

WASHINGTON — The United States and China struck what appeared to be an unusual bargain Wednesday as President Donald Trump said he won’t label China a currency manipulator and voiced confidence Chinese President Xi Jinping will help him deal with North Korea’s mounting threat.

Another result of the diplomatic wrangling: a surprising Chinese abstention on a U.N. resolution condemning a Syrian chemical weapons attack.

In a newspaper interview and a White House news conference, Trump hailed the rapport he developed with Xi during last week’s Florida summit, which seems to have yielded an immediate easing of tensions related to the U.S.-Chinese trade imbalance and efforts to prevent Pyongyang from developing a nuclear missile capable of reaching the United States.

“I think he wants to help us with North Korea,” Trump said of Xi, crediting China in the news conference with taking a “big step” by turning back boats of coal that North Korea sells to its northern neighbor. North Korea conducts some 90 percent of its trade with China.

And in one of the sharpest reverses of his presidency, Trump backed off from a campaign pledge by saying he would not declare China to be a currency manipulator, an action that could have led to higher tariffs on Chinese goods. The accusation had formed a basis of Trump’s argument for lost American jobs, on the grounds that an undervalued currency was boosting Chinese exports and leading to artificially low prices, all at U.S. manufacturers’ expense.

“They’re not currency manipulators,” Trump told The Wall Street Journal earlier Wednesday, saying the country hadn’t been cheating on its currency for months. He said a U.S. declaration of Chinese manipulation could jeopardize talks with China on North Korea.

It’s rare for American leaders to link trade or currency disputes to broader international security efforts against countries such as North Korea. Trump’s predecessors had largely kept such disputes separate.

Asked specifically if his decision on currency was part of an agreement over North Korea, Trump responded: “We’re going to see. We’re going to see about that.”

He also repeated that trade concessions could be on the table for more cooperation on North Korea. He said he told Xi last week: “The way you’re going to make a good trade deal is to help us with North Korea, otherwise we’re just going to go it alone. That will be all right, too. But going it alone means going it with lots of other nations.’”

Trump’s upbeat assessment of the relations with China contrasted with blunt talk about ties with Russia, a country with which he had repeatedly vowed to start a new partnership. Trump told reporters the U.S.-Russian relationship has reached an “all-time low” amid differences over Syria.

Trump and Xi spoke by telephone Tuesday night, just days after their two-day gathering at the president’s Mar-a-Lago resort. He and Putin talked on the phone last week after a deadly subway bombing in the Russian city of St. Petersburg.

The opposing fortunes of the two key American relationships were laid bare in a U.N. Security Council showdown Wednesday. In an unexpected move, China abstained rather than joining traditional ally Russia in vetoing a resolution that would have condemned the chemical weapons attack in a northern Syrian town last week.

Trump hailed China’s abstention. Beijing had joined Moscow in vetoing several previous Western-backed resolutions under President Barack Obama. But China’s abstention ultimately wasn’t much of a concession since it knew Russia would use its veto power.

On North Korea, Trump didn’t outline any concessions China was offering apart from the coal cutoff, which was announced two months ago.

The United States has been urging Beijing to use its economic leverage with North Korea, which conducted two underground nuclear explosions and two dozen missile tests last year. It is moving closer to developing a nuclear-tipped missile that could threaten the U.S. mainland.

Trump has given heft to the U.S. demand with shows of force. First, while Xi was visiting last week, Trump ordered 59 cruise missiles fired on a Syrian air base in response to government forces’ alleged use of a sarin-like nerve agent. This week, the U.S. president diverted an aircraft carrier toward the seas off the divided Korean Peninsula to deter North Korea from conducting another nuclear or missile test.

Bonnie Glaser, a China expert at the Center for Strategic and International Studies, said the development “bodes well for cooperation between the U.S. and China.”

“It will be interesting to see what measures China takes to ramp up pressure on North Korea,” she said. “That is the real litmus test.”

Officials at Treasury, the agency that is responsible for issuing currency reports every six months, confirmed that China won’t be named a currency manipulator. The next report is supposed to come out this week.

Some Democrats had supported Trump’s earlier position on China.

“The best way to get China to cooperate with North Korea is to be tough on them with trade, which is the No. 1 thing China’s government cares about,” Senate Democratic Leader Charles Schumer of New York said. “When the president fails to label them a currency manipulator, he gives them a green light to steal our jobs and wealth time and time again.”

In his interview with the Journal, Trump also said he would prefer that the Federal Reserve keep interest rates relatively low. And he left open the possibility of re-nominating Janet Yellen for a second four-year term as Fed chair. That would mark another shift from his campaign position that he would probably replace Yellen when her term as chair ends in February next year.

“I do like a low-interest-rate policy, I must be honest with you,” Trump said.

The Real Dangers Behind The Syrian Crisis Are Economic
By Brandon Smith

Back in 2010/2011 when I was still writing under the pen-name Giordano Bruno, I warned extensively about the dangers of any destabilization in the nation of Syria, long before the real troubles began. In an article titled “Migration Of The Black Swans,” I pointed out that due to Syria’s unique set of alliances and economic relationships the country was a “keystone” for disruption in the Middle East and that a “revolution” (or civil war) was imminent. Syria, I warned, represented the first domino in a chain of dominoes that could lead to widespread regional warfare and draw in major powers like the U.S. and Russia.

That said, my position has always been that the next “world war” would not be a nuclear war, but primarily an economic war. Meaning, I believed and still believe it is far more useful for establishment elites to use the East as a foil to bring down certain parts of the West with economic weapons, such as the dumping of the U.S. dollar. The chaos this would cause in global markets and the panic that would ensue among the general public would provide perfect cover for the introduction of what the globalists call the “great financial reset.” The term “reset” is essentially code for the total centralization of all fiscal and monetary management of the world’s economies under one institution, most likely the IMF. This would culminate in the destruction of the dollar’s world reserve status, its replacement being the IMF’s Special Drawing Rights basket currency system.

Eventually, the SDR basket system would act as a stepping stone towards a single global currency system, and its final form and function would probably be entirely digital. This would give the globalists TOTAL push-button control over even the smallest aspects of normal trade. The amount of power they would gain from a single centralized digital currency system would be endless.

Syria in itself is just one layer upon many in the process of deliberate global instability, but it seems to be vitally important to the elites given that they continually make new attempts to draw the American public into support for so called “regime change.”

Mainstream media publications like The New York Times overtly press the narrative that Syrian president Bashar al-Assad has a long history of war crimes including the use of chemical weapons against civilians. Yet, neither The New York Times nor anyone in government has produced a single piece of compelling concrete evidence that Assad is guilty of such acts, including the latest chemical attack which the Trump administration as used as a rational for cruise missile strikes against Syrian military targets and rhetoric calling for the ousting of Assad.

Not that I necessarily have much faith in the Assad regime, but we saw this same exact model used under the Obama administration in 2013: A chemical attack against civilians which the White House then immediately, without evidence, uses to implicate Assad and call for regime change. This tactic to seduce the American public into war fever failed, even with many acting serving military, and Obama backed away (in part) from a full-blown invasion of Syria. Now, it would appear that the establishment hopes they’ll get a better response using the same con-game under Trump.

There are far more advantages in the Trump scenario, however.

It has been my longstanding belief since the middle of last year that Trump would undoubtedly be president of the U.S., because the international banking cabal needs a scapegoat for the ongoing economic crisis they have been engineering for many years. The Syrian strategy is a win/win for the elites under Trump because, with Trump, there is no need for moderation. If they can influence him to rampage without concern for the repercussions in the region, then their scapegoat implicates all conservatives in general with little effort on their part.

George Soros‘ prediction that Trump “will fail” because he is “unpredictable and unprepared” and that he will “end up bad for the markets” will become a self-fulfilling prophecy.

I warned the liberty movement over and over again after Trump’s cabinet selection that he was surrounding himself with establishment ghouls that would either run the White House in spite of him, or, that he was gladly cooperating with them. His recent high-tension rhetoric against the Syrian government and against North Korea only seems to confirm my suspicions.

So, where is this all headed? Nowhere good…

First, consider the fact that every time it appears that the Syrian government seems to be making headway in destroying ISIS, there is suddenly another chemical attack which places Assad under suspicion. Anyone who read my article “ISIS Is Being Aimed At The West By Globalists — Here’s What We Can Do About It,” published in 2015, has seen the extensive evidence I outlined which shows U.S. government complicity and even direct aid in the creation of ISIS. I compared the rise of ISIS to Operation Gladio, a massive false flag project undertaken by U.S. and European governments in Europe from the 1950s to the 1990s.

ISIS is useful as a perpetual bogeyman, and sadly, the Muslim religion has one foot stuck in the dark ages and will remain fertile ground for generating extremist groups for decades to come. The elites have every intention of protecting certain factions of ISIS in Syria, which means that ISIS will continue to spread from the area into the EU and the U.S. and terrorist attacks will continue to multiply.

Second, we have learned that the Trump administration is perfectly willing to fast-track certain longstanding establishment projects that involve kinetic action (i.e. destruction and death). If they were happy to move so quickly to strike Syria without supplying any evidence to support the measure, then it should come as no surprise if they are willing to strike North Korea, a country with ACTUAL means to threaten American targets or our interests in the Pacific. A precedent is being set today for an ongoing program of fast-moving preemptive strikes. I believe this will go even beyond Barack Obama’s notorious penchant for trigger pulling to destabilize regions.

Third, I think many people also forget that Syria continues to maintain a mutual defense pact with Iran. Why does this matter? Syria is NOT Libya; Assad is not going to go down like Gaddafi at the hands of insurgent groups like ISIS. Regime change in Syria is going to require numerous U.S. boots on the ground. This, in turn, will invite hundreds of thousands from the Iranian Guard to intercede. If you study military preparedness around the world you know that a country like Iran or North Korea will offer far greater resistance than what we saw in Afghanistan or Iraq.

While they are still very poor nations militarily (in terms of defense spending), they are still relatively well trained, and the technology gap is less expansive. Many American men will die in such a fight. If ground invasion becomes an option in Syria, expect Iran to be next, and expect the option of a new “draft” to return to the U.S.  Also keep in mind that Americans will never accept military conscription today unless we suffer a massive attack on U.S. soil, or on U.S. forces abroad.  So, expect some shock and awe to occur in short order…

Third, there is, of course, the ongoing question as to when U.S. and Russian forces will “stumble” over each other and someone on either side gets killed? The majority of analysts in the liberty movement expect that this is inevitable. I suppose I agree, but I do not believe the elites have been entrenching billions of dollars in control grid technology in every major city in the world just to vaporize them in a chain of mushroom clouds (this control grid includes Russian cities — just look up Putin’s Yaroslavl laws, which might make the NSA envious).

It seems to me that the natural progression of these tensions will end in economic retaliation from the East against the West, not nuclear retaliation. The thing is, this is actually the worst-case scenario.

With nuclear conflagration comes immediate loss of full-spectrum awareness for the elites. They lose their surveillance grid, they lose the means to maintain a healthy standing military, they lose the means to dictate the narrative because the mainstream media will not be functioning at that point, etc. During an economic crisis, they can shift wealth easily to safe havens, they can weaken certain militaries while strengthening others. They retain their control grid apparatus and use it effectively against the citizenry as long as there is not substantial civilian resistance, and the list goes on.

With nuclear war there would be total chaos. With economic crisis there is controlled chaos. The establishment prefers the latter option.

Eastern nations and their allies still hold considerable U.S. Treasury bonds in their coffers, and they still use the dollar for the most part as the world reserve currency (though they have been preparing the ground for a dollar dump since at least 2008). On top of this, many of these nations also have the option of dumping the dollar as the petro-currency and crushing our monopoly on how oil is traded globally. If any of these measures are taken by countries like Russia, China and Saudi Arabia, the U.S. economic structure will lose the last pillar holding it above water. We will effectively move into third-world status in the course of a few years.

These are not hypothetical dangers, these are very real dangers which have already been mentioned publicly by Eastern interests in their own media. They are also dangers which SERVE the globalist agenda in the long run. As I have noted time and time again in the past with ample evidence, Eastern governments including Russia and China openly and avidly support the International Monetary Fund and continue to call for the IMF to take over global management of all monetary policy to form a single world currency system. They may be “anti-U.S.” in rhetoric, but they are NOT anti-globalist.

Syria remains a highly useful catalyst for the globalists to achieve the crisis they need to push their great reset forward. Being that they have tried to thrust Americans into that quagmire so many times over the past few years, I think it is safe to say they plan to use Syria as trigger point whether we cooperate or not.

You can read more from Brandon Smith at his site

Toshiba Casts Doubt on Its Ability to Stay in Business

TOKYO — Toshiba, a pillar of the modern Japanese economy whose roots stretch back to the country’s industrial stirrings in the 19th century, warned on Tuesday that a disastrous foray into nuclear power may have crippled its business beyond repair.

In a stock-market filing in Japan, Toshiba said losses associated with Westinghouse Electric, its troubled American nuclear power subsidiary, had created “substantial uncertainty” over its ability to continue as a going concern. The declaration lifts the stakes as Toshiba seeks outside investors for its coveted microchip business, a portion of which it is selling off to raise cash and stave off disaster.

Toshiba’s uncertain fate represents another blow for a country that has seen its dominance in a range of technologies eclipsed by rivals in South Korea and China.

Few companies have embodied Japan’s industrial might like Toshiba, whose products run the gamut from hair dryers to giant gas-fired electricity turbines, as well as nuclear reactors. But it has faced a spate of recent stumbles in core businesses as well as a scandal over falsified profits that came to light in 2015.

Toshiba said it hoped the planned sale of shares in its chip division, its crown jewel, would alleviate the uncertainty over its future. While Toshiba has not said exactly how much of the business it will sell, even a minority stake is expected to be worth several billion dollars.

Any stability, though, would come at a price. Toshiba would be parting with parts of its most profitable asset and giving a competitor — very likely a foreign one — a foothold in the market for flash memory drives, where Japan has managed to retain some of its long-held edge.

“We will do what we can to avoid being delisted from the stock exchange,” Satoshi Tsunakawa, Toshiba’s chief executive, said at a news conference after apologizing to shareholders for Toshiba’s latest worrying turn. The company reported financial details for the quarter that ended in December after multiple delays and disputes with its auditors.

The financial problems are mounting.

The auditors have refused to certify Toshiba’s accounts — a highly unusual signal of doubt about the company’s ability to recover its financial health. Toshiba still has the support of its banks, which would be saddled with huge losses if they were to push the company into bankruptcy by calling in loans. But the auditors are, in effect, saying that Toshiba may need to undertake a more radical overhaul to ensure its survival.

Toshiba has already admitted defeat in nuclear power.

Westinghouse filed for Chapter 11 bankruptcy protection in the United States last month, and Toshiba took a loss of more than $6 billion as it wrote down the value of the subsidiary, which it acquired in 2006 to further ambitions to become a world-leading nuclear-energy provider. Spiraling costs at American reactor projects, the upheaval caused by the 2011 Fukushima meltdown in Japan and competition from shale oil and gas output have hurt the company.

The chip sale will, in some ways, be more painful.

Pioneered by Toshiba nearly 40 years ago, so-called NAND flash memory has become one of the crucial building blocks of modern electronics, essential to storing data in smartphones and other gadgets. And Toshiba has kept the business profitable while competitors outside Japan have elbowed into the market and competed for its customers.

The identities of the bidders for shares of the chip business have not been made public. But people with knowledge of the process say as many as a dozen companies from the United States, South Korea and Taiwan have approached Toshiba with proposals.

Foxconn of Taiwan, the assembler of Apple iPhones and other electronics, which has big manufacturing operations in mainland China, is among the bidders, according to a person familiar with the matter who asked not to be identified because he was not authorized to discuss it.

None of the early suitors are from Japan — a remarkable turnabout for a country that controlled the majority of the market for many kinds of microchips a generation ago. It is also noteworthy because Japanese companies have frequently banded together to rescue flailing domestic rivals rather than let them fold or be acquired by foreigners.

The Japanese government may cobble together a Team Japan offer, consisting of small financial contributions from multiple companies and a larger investment by a state-controlled bank or investment fund, according to a person familiar with deliberations. But the response from potential participants, who would have to explain the spending to shareholders, has been tepid.

“It is fundamentally unthinkable that the Industry Ministry would intervene and take some kind of action,” Hiroshige Seko, the industry minister, said at a news conference on Tuesday, further damping expectations.

Other potential investors include the American microchip makers Western Digital and Broadcom and SK Hynix of South Korea.

For Foxconn, an investment in Toshiba would be the second recent foray into the often politically fraught world of corporate Japan. Last year Foxconn acquired control of Sharp, the maker of flat-screen television displays, for $3.5 billion. In doing so, it overcame a rival bid from an investment fund backed by the Japanese government.

Toshiba’s microchip business is viewed as a more valuable asset than a business in TV screens. Japan — despite having pioneered LCD, or liquid crystal displays — has lost most of its market share in TV screens to South Korea and China.

Samsung of South Korea has overtaken Toshiba in NAND, but Toshiba remains the world’s second-biggest producer, with a global share of just under 20 percent, according to market research groups. Analysts say Toshiba’s technology, commonly used in smartphones and USB drives, remains at the cutting edge.

One analyst, Mark Newman of Sanford C. Bernstein, argued in a report that Toshiba’s memory business remained valuable enough that selling it amounted to “selling the crown jewels to pay next month’s rent.”

Toshiba sees little choice.

Its Westinghouse-related write-off left its balance sheet perilously thin. And though the business is profitable, staying competitive in microchips is notoriously expensive. Toshiba spends $3 billion to $4 billion a year on research and development and capital investments in its chip division, costs it can no longer afford on its own.

The choice of partners, though, may be a difficult process.

Japanese politicians and industry leaders have fretted over Chinese investors’ buying advanced chip production technology; semiconductors and memory are a major priority of China’s industrial policy.

It is not clear whether Foxconn’s close relationship with China will undermine its bid. Although Foxconn is based in Taiwan, it has experience in attracting subsidies from the Chinese government to build large-scale production operations in China.

It would be easy for Foxconn to take technology from Toshiba and manufacture it more cheaply in China. Such a move could drive down pricing for memory, a boon for Apple and low-cost Chinese smartphone makers. But it would also propel China forward in its long push to become internationally competitive in semiconductors.

The worry is that Foxconn “would build huge fabs in China,” said Mr. Newman, referring to semiconductor fabrication plants. “The jobs would move to China from Japan, and furthermore China would go after market share at the expense of crushing industry economics, so the U.S., Taiwan, Korea, Japan all get hurt substantially by this arrangement.”