FTI Consulting News Bytes – 28 March 2024

FTI Consulting News Bytes

This week, we start by looking at Microsoft’s ongoing effort to set itself up for success as the company reunites its Windows OS and Surface devices teams. Next, we discuss the state of the UK technology sector as software leaders call on the UK Government to support the industry. This coincides with the publication of a new report showing that more than a quarter of UK-listed technology companies would consider the sale of their business to foreign investors. We then analyse the UK’s most recent stance on its relations with China following two cyberattacks. Outside the UK, we look at Truth Social’s strong Wall Street debut, and finally touch on Florida’s latest decision to ban minors under the age of 14 from using social media platforms amid mental health concerns.

This week’s news

Further shake-up at Microsoft 

Coming just a week after Microsoft said it was hiring former DeepMind co-founder Mustafa Suleyman to head up its new Microsoft AI unit, the Big Tech giant announced further personnel changes on Monday. Company veteran, Pavan Davuluri, has been selected to lead its Windows operating system and Surface devices teams, which had been previously broken up. An internal memo seen by The Verge from head of experiences and devices Rajesh Jha said the reuniting of the two teams would enable “a holistic approach to building silicon, systems, experiences, and devices that span Windows client and cloud for this AI era.” Market sentiment towards the reversal has been positive with analysts welcoming the expected increase in synergy between Microsoft’s hardware and software efforts.

Software leaders call for government support

European software leaders this week called on the UK Government to ramp up support for the industry with measures including tax incentives and talent visas, as reported by Reuters. Following the release of a report shared with Britain’s technology Minister Michelle Donelan last week, which detailed the continent’s “dreadful” track record of scaling mid-sized software companies, more than 120 industry leaders voiced their desire for greater government intervention to improve conditions. This comes as Barclays released a report finding that more than a quarter of UK technology businesses favour a sale of their company to overseas investors or selling shares abroad due to concerns about domestic infrastructure and skills shortages, according to Bloomberg. A separate recent study showed just one software-focused firm, Sage, counted among Britain’s top 100 publicly traded businesses, compared to dozens in the US. The UK Government dismissed claims of under investment, stating: “Our tech sector is booming and outpacing European competitors at every turn. We consistently lead the continent, ahead of both France and Germany combined.”

UK accuses China of cyberespionage 

The UK government has formally accused China of being behind what it called “malicious” cyber campaigns against MPs and the Electoral Commission. The disclosure marks a new low point in Beijing-London relations. The Financial Times reports that Primer Minister Rishi Sunak is preparing a new crackdown on Chinese entities operating in Britain. Industry executives have reportedly complained about a lack of clarity over the government’s approach to China, amid internal uncertainty. Conservative MPs have reportedly urged the government to take tougher action against Beijing, whilst the Foreign Office and the Department for Business and Trade have advocated a more cautious approach. Similar revelations were shared by the US. The BBC cited China’s Foreign Ministry spokesperson Lin Jian who rejected all the allegations, urging the US and UK to “stop politicising cyber security issues.”

The price of Truth 

Not everyone may like the truth, but everyone certainly likes Truth Social. Shares in Donald Trump’s social media business soared more than 50% in the first hours following its New York market debut on Tuesday, implying a diluted equity valuation of $14bn and valuing the former US president’s stake in excess of $5.5bn. The Wall Street Journal notes that the quick move resulted in a trading halt. It adds that many investors argue the stock is “disconnected from the reality of Truth Social’s business”, which posted tens of millions in losses from its launch in 2021 to September 2023. For context, Reddit was valued at $6.4bn at its IPO last week — even though it generated 160 times more revenue than Trump’s social media business. The company’s financial footing is not the only concern. The stock is likely going to be closely watched because its fortunes could have a major impact on Trump’s strained finances, particularly in light of recent legal proceedings and his electoral campaign.

Florida bans under-14s from social media 

Florida Governor Ron DeSantis signed a bill on Monday that will prohibit children under the age of 14 from joining social media in the state from January 2025. As reported by Sky News, the bill, known as HB3, also mandates social media companies running popular platforms like Instagram and Snapchat to delete the existing accounts of those who are under 14. The move comes amid growing scrutiny in recent years of social media platforms around online safety and content that can negatively impact children’s mental health. In December more than 200 organisations signed a letter urging Senate Majority Leader Chuck Schumer, D-N.Y., to schedule a vote on the Kids Online Safety Act, or KOSA, previously tabled in 2022. Analysts anticipate Florida’s decision will be met with legal challenges over claims it violates the First Amendment.

Top Tweets of the Week

• Bloomberg Technology: European Union officials have seen deepfakes surfacing in several member nations’ elections, prompting warnings about the dangers of artificial intelligence and potential interference, according to a senior official.
• FT Press Office: The FT has released its first generative AI feature for subscribers. The tool, available in beta, allows users to ask any question and receive a curated response using FT content. The experimental feature is part of the FT Professional offering: http://on.ft.com/3TPXtus
• Zoe Kleinman, Technology Editor, BBC News shared her take on the EU/Digital Markets Act first cases. 

Number of the Week

8 mn – The number of UK workers at risk of losing their jobs to AI, according to the Institute for Public Policy Research, according to Bloomberg.