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Samsung Electronics Q2 profit likely up 38% on strong chip prices


People wears masks in front of a Samsung store at a main shopping area as the country is hit by an outbreak of the new coronavirus in downtown Shanghai, China February 21, 2020. REUTERS/Aly Song/File Photo

  • Q2 operating profit estimated at 11.3 trln won
  • Surging chip prices, shipments boost profit
  • Revenue estimated up 15.4%
  • Smartphones shipments likely fell on quarter

SEOUL, July 6 (Reuters) – Samsung Electronics Co Ltd (005930.KS) likely saw a 38% surge in profit for the April-June quarter thanks to strong chip prices and demand spurred by a pandemic-led consumer appetite for electronics as well as recovering investment in data centres.

Operating profit for the world’s biggest memory chip and smartphone maker likely jumped to 11.3 trillion won ($10 billion), according to a Refinitiv SmartEstimate drawn from 20 analysts and weighted toward those who are more consistently accurate.

The South Korean tech giant’s strong performance – coming despite it shipping fewer smartphones than in January-March – underscores the stratospheric demand for chips that has depleted stockpiles and filled production capacity.

The result would be up 20% from the first quarter and mark Samsung’s highest operating income for the second quarter since 2018. Revenue likely rose 15.4%.

Samsung is scheduled to announce preliminary second-quarter results on Wednesday.

The company’s chip division likely benefited from memory chip price hikes that exceeded market estimates, analysts said, while shipments grew as well.

Prices of DRAM chips, widely used in servers, mobile phones and other computing devices, jumped 27% compared to the March quarter, while those of NAND flash chips that serve the data storage market rose 8.6%, according to research provider Trendforce.

Profit also improved at Samsung’s chip-contract manufacturing and logic chip design business, partly because operations at its storm-hit Texas factory returned to normal, analysts said.

They estimated the chip division’s operating profit in April-June rose about 22% from the year-earlier period to about 6.6 trillion won.

Still, Samsung’s smartphone shipments dropped to about 59 million in April-June from about 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales slowed for its latest flagship model, launched in mid-January.

Reduced demand from India, hard hit by the pandemic during the quarter, as well as tight supply for some mobile processor chips may also have affected shipments, analysts said, estimating the mobile business’ operating profit at about 2.9 trillion won.

($1 = 1,129.2800 won)

Reporting by Joyce Lee; Additional reporting by Heekyong Yang; Editing by Sayantani Ghosh and Christopher Cushing

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EU deploys assistance for Cyprus as huge forest fire rages


NICOSIA, July 3 (Reuters) – The European Union on Saturday deployed aerial assistance to help Cyprus contain a huge forest fire raging north of the cities of Limassol and Larnaca, a blaze one official called the worst on record.

The blaze, fanned by strong winds, affected at least six communities in the foothills of the Troodos mountain range, an area of pine forest and densely vegetated shrubland.

The EU’s executive, the European Commission, said fire-fighting planes had departed from Greece to battle the fire and Italy was also planning to deploy aerial fire-fighters.

The EU’s emergency Copernicus satellite was also activated to provide damage assessment maps of the affected areas, the Commission said in a statement.

“It is the worst forest fire in the history of Cyprus,” Forestries Department Director Charalambos Alexandrou told Cyprus’s Omega TV.

Attempts were being made to prevent the blaze from crossing the mountains and stop it before reaching Machairas, a pine forestland and one of the highest peaks in Cyprus.

Alexandrou said the perimeter of the fire was “at least 40 kilometres”.

Dozens of properties were damaged, but no injuries were reported. There were widespread power cuts in the area. Plumes of smoke were visible in the capital Nicosia, some 75 km (45 miles) away.

Officials said that in addition to Greece’s assistance with two aircraft, help was also expected from Israel.

“This is a very difficult day for Cyprus. All of the state’s mechanisms are in gear, and the priority is for no loss of life,” Cypriot President Nicos Anastasiades tweeted.

Israel accepted Nicosia’s plea for help, a statement from Prime Minister Naftali Bennett said, and will send firefighting aircraft to Cyprus on Sunday.

The cause of the fire, which started around midday, was unclear. Cyprus has experienced a heatwave this week, with temperatures exceeding 40 Celsius (104 Fahrenheit). Police said they were questioning a 67 year old person in connection with the blaze.

“It passed through like a whirlwind, it destroyed everything,” said Vassos Vassiliou, the community leader of Arakapas, one of the communities affected.

Reporting by Michele Kambas, additional reporting by Maayan Lubell in Jerusalem and by John Chalmers in Brussels
Editing by Ros Russell, David Gregorio and Diane Craft

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Google loosens its search engine grip on Android devices in Europe


Google (GOOGL.O) has bowed to pressure from rivals and will let them compete for free to be the default search engines on Android devices in Europe, widening a pledge to EU antitrust regulators two years ago.

The move by the world’s most popular internet search engine comes as the 27-country bloc considers rules that could be introduced next year to force Google, Amazon (AMZN.O), Apple (AAPL.O) and Facebook (FB.O) to ensure a level playing field for competitors.

Google’s Android mobile operating system runs on about four-fifths of the world’s smartphones. The U.S. tech giant said in 2019 that rivals would have to pay via an auction for appearing on a choice screen on new Android devices in Europe from which users select their preferred search engine.

Google’s change of heart followed a 4.24 billion euro ($5.16 billion) fine handed out by the European Commission, the EU antitrust authority, in 2018 for unfairly using Android to cement the dominance of its search engine.

“We are now making some final changes to the Choice Screen including making participation free for eligible search providers. We will also be increasing the number of search providers shown on the screen,” Google director Oliver Bethell wrote in a blog post on Tuesday.

The changes will come into effect in September, the blog added.

The Commission said it had discussed possible changes with Google following concerns raised by a number of its rivals, adding that those announced were positive developments.

Google said the five most popular eligible search engines in each EU country according to StatCounter, including Google, would be displayed in random order at the top of the screen while up to seven will be shown at the bottom.

The logo of Google is seen on a building at La Defense business and financial district in Courbevoie near Paris, France, September 1, 2020. REUTERS/Charles Platiau

It had previously only allowed four competitors, chosen in separate auctions for each EU country, to be displayed on Android screens.

However DuckDuckGo, a rival search engine that has long complained about the auction process, said Google should go further.

“Google is now doing what it should have done three years ago: a free search preference menu on Android in the EU,” CEO Gabriel Weinberg tweeted.

“However, it should be on all platforms, eg also desktop Chrome, accessible at all times, ie not just on factory reset, and in all countries.”

Search engine Ecosia, which together with four other rivals complained about Google’s initial proposal to the Commission last year, welcomed the changes.

“With this, we have something that resembles a level playing field in the market,” its CEO Christian Kroll said in a statement.

“Search providers now have a chance to compete more fairly in the Android market, based on the appeal of their product, rather than being shut out by monopolistic behaviour.”

($1 = 0.8211 euros)

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U.S. judge rejects Bayer’s $2 bln deal to resolve future Roundup lawsuits


Monsanto Co’s Roundup is shown for sale in Encinitas, California, U.S., June 26, 2017. REUTERS/Mike Blake

A U.S. judge rejected Bayer’s $2 billion class action proposal to resolve future lawsuits alleging its Roundup weedkiller causes cancer, saying in a Wednesday order that parts of the plan were “clearly unreasonable.”

Bayer (BAYGn.DE) has committed up to $9.6 billion to resolve some 125,000 existing claims linking Roundup to non-Hodgkin lymphoma, a type of blood cancer. The proposed class action settlement was aimed at claims by people who have been exposed to the weedkiller and who become sick in the future.

Bayer has said that decades of studies have shown that Roundup and its main active ingredient glyphosate are safe for human use. Bayer did not immediately respond to a request for comment.

U.S. District Court Judge Vince Chhabria in San Francisco said the proposal “would accomplish a lot for Monsanto,” which Bayer acquired for $63 billion in 2018, and “would accomplish far less for the Roundup users” who are currently healthy.

Chhabria had outlined his doubts about the plan in a hearing last week. read more

The plan would have grouped potentially millions of residential users and farm laborers in a class and provided them free medical exams for four years and up to $200,000 if they were diagnosed with non-Hodgkin lymphoma.

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U.S. downgrades Mexico air safety rating, offers assistance


Screens show flight information at the almost empty Benito Juarez international airport, as the spread of the coronavirus disease (COVID-19) continues in Mexico City, Mexico, June 11, 2020. REUTERS/Edgard Garrido

The United States on Tuesday downgraded Mexico’s aviation safety rating, an action that bars Mexican carriers from adding new U.S. flights and limits the ability of airlines to carry out marketing agreements with one another.

The U.S. Federal Aviation Administration, in announcing the action, said it is “fully committed to helping the Mexican aviation authority improve its safety oversight system to a level that meets” international standards. The agency also said it is “ready to provide expertise and resources” to resolve issues raised in the safety assessment process.

The FAA downgraded Mexico – the most common destination for U.S. air travelers last month – from a level called Category 1, which signifies compliance with international standards, to Category 2, the lowest level.

That rating, according to the FAA, means Mexico lacks “necessary requirements to oversee the country’s air carriers in accordance with minimum international safety standards, or the civil aviation authority is lacking in one or more areas such as technical expertise, trained personnel, record keeping, inspection procedures or resolution of safety concerns.”

The FAA action sent shares in Mexican airlines down.

A similar FAA downgrade of Mexico in 2010 over suspected shortcomings within its civil aviation authority lasted about four months. Only a few countries currently are rated Category 2 by the FAA, including Bangladesh, Pakistan, Thailand and Malaysia.

Plans for the FAA downgrade were first reported on Friday by Reuters. read more

The FAA said its reassessment of the Agencia Federal de Aviacion Civil from October 2020 through February identified several areas of non-compliance with minimum international safety standards.

The Mexican government did not immediately respond to a request for comment.

Mexican President Andres Manuel Lopez Obrador on Monday had urged U.S. authorities not to downgrade Mexico, arguing that his country was complying with all relevant norms.

The downgrade means current U.S. service by Mexican carriers is unaffected, but they cannot begin new flights. U.S. airlines also will no longer be able to market and sell tickets with their names and designator codes on Mexican-operated flights and the FAA will increase scrutiny of Mexican airline flights to the United States.

Mexico has been a top vacation spot for U.S. travelers during the COVID-19 pandemic, spurring U.S. airlines to redirect capacity they had previously flown to Europe before transatlantic travel restrictions were imposed last year.

Mexico was the by far the busiest foreign air destination in April – with nearly 2.3 million passengers on U.S.-Mexico flights – more than three times that of the Dominican Republic, the next most-popular country destination, according to industry data.

Delta Air Lines said on Tuesday an FAA downgrade was not about (DAL.N) its partner Aeromexico (AEROMEX.MX) and that the action will have little impact on customers. read more

Delta said it will need to reissue reservations for some Aeromexico operated flights that were booked through Delta.

“This is not about Aeromexico. This is about the Mexican version of the FAA not having some of the right protocols in place,” Delta president Glen Hauenstein said at a Wolfe Research conference.

Delta has a codeshare arrangement with Aeromexico enabling the two air carriers to sell seats on each other’s flights. Delta will be forced to remove its codes on Aeromexico flights following the downgrade, though Aeromexico could continue to code on Delta flights and members of Delta’s loyalty program could still receive SkyMiles on Aeromexico flights that would normally carry the code, Hauenstein added.

Pablo Casas, general director of the National Institute of Legal-Aeronautical Research think tank, said the downgrade could impact the Mexican economy and carriers trying to recover from the business effects of the pandemic.

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Judge allows self-described anti-fraud group to review Georgia ballots


A Georgia judge on Friday ordered Atlanta’s Fulton County to unseal more than 145,000 absentee ballots cast during the November 2020 election, allowing self-described election integrity activists to evaluate the legitimacy of the ballots.

Henry County Superior Court Judge Brian Amero, who is overseeing the case, ruled that Fulton County must unseal the ballots so the petitioners could inspect and scan them, not merely look at copies, according to his order filed in the Fulton County Superior Court.

The order paves the way for a second review of ballots in the United States by private groups who claim without evidence that widespread voting fraud in populous cities helped Joe Biden, a Democrat, unfairly defeat then-President Donald Trump, a Republican.

Trump and his allies spent two months denying his election defeat. State and federal officials and multiple courts rejected the Trump campaign’s claims that the election was stolen from him. Trump followers attacked the U.S. Capitol on Jan. 6 while Congress was certifying the results, leading to five deaths.

Since then, Trump supporters have sought revisions of voting outcomes in several states. Arizona’s Republican-controlled state Senate ordered an audit of roughly 2.1 million ballots cast in Maricopa County, where nearly two thirds of the state’s population resides.

“I wouldn’t be surprised if we see something similar in Michigan, Pennsylvania and Florida, because this is a way for these actors to fundraise for elections going into 2022 and 2024,” said Aunna Dennis, Executive Director of good government group Common Cause Georgia.

The nine petitioners seeking to inspect and scan Fulton County’s absentee ballots are led by Garland Favorito, a Fulton County voter who said, in the petition last December that launched the case, that he saw an “abnormal” increase in votes for Biden while observing the ballot tabulation in his county.

Favorito is the co-founder of a self-described election watchdog group called Voters Organized for Trusted Election Results in Georgia, according to his Twitter profile.

“This conspiracy theory about counterfeit ballots has been trotted out by proponents of the ‘Big Lie’ across the country and shot down every time,” said Fulton County Chairman Robb Pitts in a statement on Friday after Amero ordered the county to unseal the absentee ballots.

Georgia’s Republican Secretary of State, Brad Raffensperger, had previously asked the court to let the petitioners only view copies of the ballots, not inspect and scan the original ballots, according to an amicus brief he filed in April.

In an apparent about-face on Friday, however, Raffensperger seemed to support Amero’s decision, writing in a Twitter post, without detailing evidence, that Fulton County had long mismanaged its elections, and that “allowing this audit provides another layer of transparency and citizen engagement.”

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Toshiba unit hacked by DarkSide, conglomerate to undergo strategic review


A Toshiba Corp (6502.T) unit said it was hacked by the DarkSide ransomware group, overshadowing an announcement of a strategic review for the Japanese conglomerate under pressure from activist shareholders to seek out suitors.

Toshiba Tec Corp (6588.T), which makes products such as bar code printers and is valued at $2.3 billion, was hacked by DarkSide – the group widely believed to be behind the recent Colonial Pipeline attack, its French subsidiary said.

It added, however, that only a minimal amount of work data had been lost.

“There are around 30 groups within DarkSide that are attempting to hack companies all the time, and they succeeded this time with Toshiba,” said Takashi Yoshikawa, a senior malware analyst at Mitsui Bussan Secure Directions.

Employees accessing company computer systems from home during pandemic lockdowns have made firms more vulnerable to cyber attacks, he added.

Screenshots of DarkSide’s post provided by the cybersecurity firm said more than 740 gigabytes of information was compromised and included passports and other personal information.

Reuters could not access DarkSide’s public-facing website on Friday. Security researchers said DarkSide’s multiple websites had stopped being accessible.

Ransomware attacks have increased in number and amount of demands, with hackers encrypting data and seeking payment in cryptocurrency to unlock it. They increasingly release stolen data as well, or threaten to unless they are paid more.

Ireland’s health service said on Friday it had shut down its IT systems after what it described as a “significant” ransomware attack. read more

Investigators in the U.S’s Colonial case say the attack software was distributed by DarkSide, which includes Russian speakers and avoids hacking targets in the former Soviet Union. DarkSide lets “affiliates” hack into targets elsewhere, then handles the ransom negotiation and data release. read more

STRATEGIC REVIEW

Amid calls from shareholders to explicitly seek offers from potential suitors after dismissing a $20 billion take-private bid from CVC Capital this year, Toshiba said it was setting up a strategic review committee and had appointed UBS (UBSG.S) as financial adviser.

Reporters raise their hands for a question during a Toshiba news conference at the company headquarters in Tokyo, Japan, June 23, 2017. REUTERS/Issei Kato

The review will be conducted by independent directors and is designed to help the board consider a new business plan to be put forward by management by October.

The CVC offer faced strong opposition within the company. Its plan to retain management was perceived by some as aimed at shielding former CEO Nobuaki Kurumatani from activist shareholders.

At a briefing by the company on Friday, 3D Investment Partners and Farallon Capital Management, its No. 2 and No. 3 shareholders respectively, both criticised Toshiba for appearing reluctant to consider offers to go private.

Chief Executive Satoshi Tsunakawa responded that the company has “no reluctance to consider various proposals to increase corporate value, including going private.”

Sources have said other private equity investors such as KKR & Co Inc (KKR.N) and Bain Capital are interested in Toshiba. read more

However, the Asahi newspaper reported on Friday that Bain Capital is not considering buying Toshiba, citing an interview with Yuji Sugimoto, the head of Bain Capital’s Japan operations.

Battered by accounting scandals, massive writedowns for its U.S. nuclear business as well as the sale of its chip unit, Toshiba is a shadow of its former self.

But it remains one of Japan’s few manufacturers of nuclear power reactors and makes defence equipment, meaning any sale of would require government approval.

Toshiba on Friday forecast a 63% rise in annual operating profit to 170 billion yen ($1.6 billion), rebounding from pandemic-induced pain in the last year and as restructuring measures bear fruit. That follows a 20% slide in profit last year.

Toshiba also nominated four new board members after Kurumatani resigned last month. Kurumatani had been under fire due to allegations that investors were pressured before a shareholder meeting last year to support desired board nominations.

Shareholders in March successfully voted for an independent investigation into those allegations, marking a watershed victory for corporate governance in Japan. The probe is due to conclude before this year’s annual general meeting on June 25.

The board nominations announced on Friday included George Olcott, a former UBS banker who is also an independent board member at Japanese beer maker Kirin Holdings (2503.T).

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EXCLUSIVE China’s Tencent in talks with U.S. to keep gaming investments -sources


Tencent Holdings Ltd (0700.HK) is negotiating agreements with a U.S. national security panel that would allow it to keep its ownership stakes in U.S. video game developers Riot Games and Epic Games, according to people familiar with the matter.

Tencent has been in talks with the Committee on Foreign Investment in the United States (CFIUS), which has the authority to order the Chinese technology giant to divest U.S. holdings, since the second half of last year, the sources said.

CFIUS has been looking in to whether Epic Games’ and Riot Games’ handling of the personal data of their users constitutes a national security risk because of their Chinese ownership, the sources added.

Tencent owns a 40% stake in Epic Games, the maker of popular video game Fortnite. Tencent also bought a majority stake in Riot Games in 2011 and acquired the rest of the company in 2015. Riot Games is the developer of “League of Legends,” one of the world’s most popular desktop-based games.

Tencent is negotiating risk-mitigation measures with CFIUS so it can keep its investments, according to the sources. The details of the proposed measures could not be learned. They typically involve ringfencing the owner of a company from operations that have national security implications. They often call for the appointment of independent auditors to monitor the implementation of these agreements.

One of the sources said Epic Games has not been sharing any user data with Tencent.

The sources cautioned there is no certainty that Tencent will clinch deals to keep its investments and asked not to be identified because the matter is confidential.

A Tencent logo is seen in Beijing, China September 4, 2020. REUTERS/Tingshu Wang

Tencent, Epic Games and a CFIUS representative at the U.S. Treasury Department declined to comment.

A Riot Games spokesman said the Los Angeles-based company operates independently of Tencent and that it has implemented “industry-leading practices” to protect player data. He declined to comment on Riot Games’ discussions with CFIUS.

CFIUS has been cracking down on Chinese ownership of U.S. technology assets in the last few years, amid an escalation in tensions between Washington and Beijing over trade, human rights and the protection of intellectual property. U.S. officials have expressed concerns that the personal data of U.S. citizens could end up in the hands of China’s Communist Party government.

President Joe Biden’s administration has maintained the hawkish stance against China inherited in January from his predecessor Donald Trump, albeit with more of a focus on geopolitical issues such as the future of Taiwan and Hong Kong, as well as China’s persecution of the Uyghurs in Xinjiang.

Yet many key CFIUS roles have not yet been staffed. This has provided a reprieve to China’s ByteDance, which was ordered by Trump last year to sell its popular short video app TikTok but balked at a transaction that would have involved Oracle Corp (ORCL.N) and Walmart Inc (WMT.N). CFIUS has not sought to enforce the divestiture order under Biden.

Epic is locked in a legal fight with Apple Inc (AAPL.O) over access to the iPhone maker’s app store. It alleges that Apple forces developers to use its in-app payment systems – which charge commissions of up to 30% – and to submit to app-review guidelines that discriminate against products that compete with Apple’s own.

Apple argues that Epic Games broke their contract when it introduced its own in-app payment system in Fortnite to circumvent Apple’s commissions. It says the way it runs the app store inspires trust in consumers to open up their wallets to unknown developers. read more

Tencent’s vast businesses include video games, content streaming, social media, advertising and cloud services. China has in recent months sought to curb the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd (9988.HK), in a clampdown backed by President Xi Jinping. Reuters reported last week that Beijing was preparing a substantial antitrust fine for Tencent. read more

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China’s Huawei reports quarterly revenue drop as smartphone income hit


A Huawei logo is seen at the Mobile World Congress (MWC) in Shanghai, China February 23, 2021. REUTERS/Aly Song/File Photo

China’s Huawei Technologies (HWT.UL) saw revenue fall 16.5% in the first quarter compared to a year earlier, hurt by a dip in sales after selling its budget smartphone unit Honor in November.

Revenues were 152.2 billion yuan ($23.46 billion) in the first quarter, it said on Wednesday.

But net profit margin rose 3.8 percentage points compared to a year earlier to 11.1%, it said, as the company cut costs and received a boost from $600 million in royalty payments.

“2021 will be a challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” Huawei’s rotating chairman Eric Xu said in the statement.

Huawei was put on an export blacklist by former U.S. President Donald Trump in 2019 and barred from accessing critical technology of U.S. origin, affecting its ability to design its own chips and source components from outside vendors.

The ban put Huawei’s once lucrative handset business under immense pressure, prompting the sale of its Honor budget smartphone unit to a group of agents and dealers in November.

The loss of sales from Honor contributed to the drop in quarterly revenue, the company said.

In March, Huawei had posted a 3.2% rise in profits in 2020, largely driven by its home market.

But its business declined elsewhere in 2020, with revenues down 12.2% to 180.8 billion yuan in Europe, the Middle East and Africa, down 8.7% to 64.4 billion yuan in the rest of Asia, and down 24.5% to 39.6 billion yuan from the Americas.

The company is investing heavily in businesses that are less reliant on U.S. chip technology such as autonomous driving technology and cloud computing, Xu said this month. read more

($1 = 6.4866 Chinese yuan renminbi)

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Review: Blockbuster’s demise had many culprits


The Blockbuster movie rental store is open for business in the Denver suburb of Broomfield, Colorado April 6, 2011. REUTERS/Rick Wilking

In early 2000 Reed Hastings and his partner traveled to Blockbuster’s headquarters in Dallas. The Netflix (NFLX.O) founder tried to pitch the video rental behemoth on a deal to buy his fledging DVD-by-mail startup for $50 million. Blockbuster declined. Two decades later Netflix, now a streaming-video giant worth $243 billion, is broadcasting a documentary about the fall of its one-time desired suitor. The schadenfreude is cinematic. Yet while Netflix played a role in killing Blockbuster, its demise has many culprits.

“The Last Blockbuster” examines how the once-mighty corporate juggernaut went belly up through the eyes of its charming hero, Sandi Harding. She is the gatekeeper of the last Blockbuster store of the film’s title in Bend, Oregon. While the documentary includes lots of crunchy financial details it never gets bogged down in them. Meanwhile a cast of oddball characters and B-list actors including “Clerks” director Kevin Smith and Ione Sky, the object of John Cusack’s boom box serenade in the 1989 rom-com “Say Anything,” round out the story with their reflections on life before on-demand television.

Harding, who started working at Blockbuster in 2004 when the chain had about 9,000 stores and 60,000 employees, is known as the “Blockbuster mom” because she has employed so many of Bend’s teenagers. She pours her energy into keeping the video rental dream alive. It’s a store frozen in time: the cheerful yellow and blue schematic, bright lights, displays of candy and popcorn, computer systems that run on floppy discs, and racks and racks of DVDs. Her devotion to the business is so fierce that she knits hats in Blockbuster colors to sell to customers who flock from all over the world in search of a bit of nostalgia.

The documentary intersperses Harding’s efforts to retain the rights to the Blockbuster name – currently owned by Charlie Ergen’s Dish Network (DISH.O) – with details of the company’s history. The video rental empire was founded in the mid-1980s by a Texas-based oil and gas software engineer who developed an ingenious database to keep track of movie titles, allowing him to offer consumers a bigger selection. The concept of a clean family-friendly video rental destination was a smash hit. At one point Blockbuster was opening a new store every 17 hours.

The company caught the attention of mogul Sumner Redstone, who was locked in an epic takeover fight with rival Barry Diller over movie studio Paramount. In a surprise move Redstone’s Viacom and Blockbuster in 1994 agreed to an $8.4 billion merger. Blockbuster become the media company’s piggy bank, as Redstone drew on its cash flows to sweeten his bid for Paramount. Though Redstone got the studio, the rationale for owning a chain of stores was a flop.

Several disastrous corporate decisions added to the cash drain. To better compete with scrappy newcomer Netflix, Blockbuster decided to spend $400 million to eliminate late fees on rentals and build an online presence. Its inventory of DVDs declined because customers no longer had an incentive to return movies. Eventually, Viacom spun off Blockbuster after loading it up with nearly $1 billion in debt. The stock fell. Activist investor Carl Icahn launched a distracting proxy fight.

When Netflix launched its streaming service in 2007, the rental chain’s revenue of $5 billion was still more than 4 times that of its upstart rival. But as former Blockbuster executive Tom Casey explains, the financial crisis marked the beginning of the end. The company’s rental business faced fierce competition from retailers like Walmart (WMT.N) and Target (TGT.N), which were selling ever-cheaper DVDs. With capital markets frozen at the beginning of 2009, Blockbuster’s $780 million of debt proved fatal. It filed for bankruptcy a year later.

Netflix’s ascendancy pushed Blockbuster towards the grave. But as “The Last Blockbuster” shows, it took corporate raiders, a series of bad decisions and a global financial panic to nail the lid on its coffin.

On Twitter https://twitter.com/jennifersaba

CONTEXT NEWS

– “The Last Blockbuster” started streaming on Netflix March 15.

– For previous columns by the author, Reuters customers can click on

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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