WeWork’s chairman says it expects to have positive cash flow in 2021

After aggressive cost-cutting measures, including mass layoffs and selling several of its businesses, WeWork’s chairman expects the company to have positive cash flow in 2021. Marcelo Claure, who became WeWork’s chairman after co-founder Adam Neumann resigned as chief executive officer last fall, told the Financial Times that the co-working space startup is on target to meet its goal, set in February, of reaching operating profitability by the end of next year.

Claure is also chief operating officer of SoftBank Group, which invested $18.5 billion in the co-working space, according to leaked comments made by Claure during an October all-hands meeting.

SoftBank said in April that it would lose $24 billion on investments, with one of the main reasons being WeWork’s implosion last year. The company’s financial and management issues brought its valuation down from as much as $47 billion at the beginning of 2019 to $2.9 billion in March, according to a May report by CNBC.

In addition to the layoffs, WeWork sold off businesses including Flatiron School, Teem and its share of The Wing. Claure told the Financial times that WeWork also cut its workforce from a high of 14,000 last year to 5,600.

Neumann resigned as CEO in September, reportedly at the behest of SoftBank, over concerns about the company’s financial health and his behavior. Then the company postponed its IPO filing. The next month, SoftBank took ownership of WeWork as part of a financing package.

Claure is credited with orchestrating a turnaround at Sprint, cutting losses and increasing its stock price in 2015, three years after it was acquired by SoftBank. He has served as SoftBank Group’s COO since 2018.

Despite the impact of the COVID-19 pandemic, which forced many people to work from home, Claure said that companies have been leasing spaces from WeWork to serve as satellite offices close to where employees live. But he also said that revenues were flat during the second-quarter because many tenants terminated their leases or stopped paying rent.

China Roundup: Tech giants take stance on Beijing’s data control in Hong Kong

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

This week, the unprecedented national security law descended on Hong Kong, changing the day-to-day life of the people there, as well as businesses across the board. The law has important implications for the tech sector, providing a litmus test of business sentiment towards China’s regulation over information. Google, Facebook, Twitter, Telegram, Zoom, Reddit among a roster of companies have come to voice their stance.

Resist, comply, avoid

The Hong Kong national security law that went into effect on July 1 is set to tighten Beijing’s grip over the city. A few provisions of the law directly request service providers to remove information or provide assistance to the police, as I wrote earlier. Here are what the tech giants are saying in response:

Facebook confirmed it has paused the processing of data demands from Hong Kong authorities until it can better understand the law, “including formal human rights due diligence and consultations with human rights experts.” Its spokesperson said: “We believe freedom of expression is a fundamental human right and support the right of people to express themselves without fear for their safety or other repercussions.”

Its suspension will also apply to WhatsApp, which it owns.

Twitter said it suspended transfers of user data subject to Hong Kong demands immediately after the law went into effect, and its teams are “reviewing the law to assess its implications, particularly as some of the terms of the law are vague and without clear definition.” It also said it has “grave concerns regarding both the developing process and the full intention of this law.”

Google said it suspended its reviews of data requests from the authorities. It added that it would continue reviewing government requests for removals of user-generated content from its services.

Zoom said it suspended its compliance with data requests from the Hong Kong authorities. “Zoom supports the free and open exchange of thoughts and ideas… We’re actively monitoring the developments in Hong Kong SAR, including any potential guidance from the U.S. government. We have paused processing any data requests from, and related to, Hong Kong SAR.”

LinkedIn, which is owned by Microsoft and runs a separate mainland beholden to Chinese regulations, said it is pausing responses to local law enforcement requests as it conducts its review of the law.

Telegram said it does not intend to process any data requests related to its Hong Kong users until an international consensus is reached in relation to the ongoing political changes in the city. Its spokesperson claimed it has not disclosed any data to the Hong Kong authorities in the past.

Signal, a competitor to Telegram in the realm of data encryption, tweeted a snarky comment: “We’d announce that we’re stopping too, but we never started turning over user data to HK police. Also, we don’t have user data to turn over.”

TikTok is in a dilemma. As a Chinese-owned company, it can’t choose to defy the Chinese government. On the other hand, it can’t afford more narrative about it being a tool of Chinese censorship. Instead of temporarily refusing data requests from the police like many foreign firms, which is regarded as a gesture of opposition to Beijing’s grip, the short video app decided to quit Hong Kong. It’s an easy business decision, as the city constituted only a tiny share of TikTok’s user base. Time will tell whether ByteDance will roll out a censored version of TikTok — Douyin — or leave the city of seven million people out.

Apple has long been criticized for its closeness to the government of China, where it has significant business. Last year, it pulled a map that pinpointed pro-democracy demonstrations in Hong Kong.

Following the enactment of the security law, Apple announced it is assessing the rules, adding that it does not receive requests for user content directly from the Hong Kong government and requires authorities to submit requests under a U.S.-Hong Kong legal assistance treaty.

Reddit, which counts Tencent as an investor, stated that its user information policy is independent of its backers:  “User privacy is a deeply embedded value at Reddit. To date, Reddit has not received requests for user information from the Hong Kong Government. As a matter of principle, Reddit does not comply with Government requests that have human rights implications and this will not change as a result of the new law. Our policies on protecting user information are in no way influenced by our investors, and any implication of such influence is incorrect.”

The list is not exhaustive and many aspects of the national security law await further explanation. We will keep tracking how other tech companies cope with the city’s new rules.

In response to tech firms pausing data compliance to the police, China’s Foreign Ministry Spokesperson Zhao Lijian tried to allay concerns in a statement:

“I recall what Deng Xiaoping noted in 1982 when he met with Margaret Thatcher, after Hong Kong’s return to the motherland, ‘Horses will still run, stocks will still sizzle, and dancers will still dance’ in Hong Kong. We have every reason to believe that as the Law is implemented, the foundation of ‘one country, two systems’ will be further strengthened, the Hong Kong residents’ fundamental interests and wellbeing will be better protected, there will be greater social stability and harmony, and ‘horses will run faster, stocks will be more sizzling, and dancers will dance more happily.’ We have full confidence in Hong Kong’s future.”

Elsewhere…

  • The U.S. threatens to ban TikTok over concerns that it could be used by the Beijing government as a surveillance and propaganda tool.
  • In a race to lead the global semiconductor industry, Chinese chip companies have fundraised more than twice as much in 2020 than in all of 2019.
  • The U.K. is poised to begin phasing out Huawei technologies in the country’s 5G network as soon as this year due to security fears. The decision reversed a previous plan to keep Huawei in the nation’s telecom infrastructure on condition of tight restrictions.
  • Weibo is becoming a closed ecosystem. The biggest microblogging platform in China announced it will only accept shortened links that it authenticates. Keeping a whitelist, it said, will help clamp down unsafe sites such as illegal gambling and porn services. Meanwhile, users worry this is a slippery slope that leads to another walled garden on the internet. The platform allows four types of short links, including a pre-select list of official websites operated by government branches, media, news portals, as well as business websites vetted and approved by Weibo.

Updated Reddit statement on July 13, 2020.

Qualcomm to invest $97 million in India’s Reliance Jio Platforms

Qualcomm has become the newest high-profile backer of four-year-old Reliance Jio Platforms, which has raised more than $15.7 billion in the past 12 weeks from as many investors.

On Sunday evening, Qualcomm Ventures said it will invest $97 million in Reliance Jio Platforms to acquire a 0.15% equity stake “on a fully diluted basis” in the top Indian telecom operator. Qualcomm said it will help Jio Platforms “roll out advanced 5G infrastructure and services for Indian customers.”

Reliance Jio Platforms, which competes with Bharti Airtel and Vodafone Idea in India, has disrupted the Indian telecommunications market by offering cut-rate voice and data plans. It has amassed nearly 400 million subscribers to become the top carrier in the world’s second largest internet market in less than four years of its existence.

Its dominance in the Indian telecom operator while maintaining an ARPU (average revenue per user) that match those of its rivals has made Reliance Jio Platforms — a subsidiary of Reliance Industries, India’s most valued firm — an attractive firm for a roster of high-profile investors. Facebook, Silver Lake, General Atlantic, Intel are some of the firms that have backed Jio Platforms at the height of a global pandemic. Jio Platforms has sold 25.24% stake in the firm during the period.

The digital unit for Reliance Industries also operates a number of digital services including streaming services for music, live TV channels, and movies and TV shows. Earlier this month, the Indian firm added a new service to its arsenal: A video conferencing service.

Steve Mollenkopf, chief executive of Qualcomm, said the firm believes that Reliance Jio Platforms “will deliver a new set of services and experiences to Indian consumers” in the future.

“With unmatched speeds and emerging use cases, 5G is expected to transform every industry in the coming years. Jio Platforms has led the digital revolution in India through its extensive digital and technological capabilities. As an enabler and investor with a longstanding presence in India, we look forward to playing a role in Jio’s vision to further revolutionize India’s digital economy,” he said in a statement.

Some investors have told TechCrunch in recent months that Reliance Jio Platforms’ owner — India’s richest man, Mukesh Ambani — and his closeness to the ruling political party in India are also crucial to why the digital unit of Reliance Industries is so attractive to many.

They believe that buying a stake in Jio Platforms would lower the regulatory burden they currently face in India. The investors requested anonymity as they did not wish to talk about the political tie ups publicly.

A person familiar with the matter at one of the 12 firms that has backed Reliance Jio Platforms said that the Indian firm is also enticing as globally companies are trying to cut down their reliance and exposure on China.

India, and the U.S., in recent months have taken actions to limit their reliance on Chinese firms. New Delhi last month banned 59 apps and services including TikTok that are developed by Chinese firms. Reliance Jio Platforms has interestingly yet to raise capital from any Chinese investor.

“Qualcomm has been a valued partner for several years and we have a shared vision of connecting everything by building a robust and secure wireless and digital network and extending the benefits of digital connectivity to everyone in India,” said Ambani in a statement Sunday.