Avast and Renishaw Announcements, and BBC News

Avast (AVST) issued an announcement this morning covering a trading update and what they are doing about the Jumpshot operation. Avast is primarily an anti-virus software company with a product named AVG although they do have some other products in addition. They sell AVG using the freemium business model, i.e. most “customers” acquire the free version but some pay to upgrade to the priced version. They have 435 million users worldwide. A couple of days ago Avast was hit by an article in the Daily Mail that suggested they were selling user web browsing history to other companies via a 65% owned subsidiary called Jumpshot. The suggestion in the mail article was that the data might not be sufficiently anonymised even though no names or other identifiers were disclosed. The share price of Avast fell sharply as a result and has fallen further today. That’s after another announcement from the company that it was immediately shutting down providing information to Jumpstart and will incur a cash charge in the range of $15m-$25m in the current financial year. It will not affect the 2019 financial results.

Because AVG monitors web access to ensure safety against virus threats, the software can record web sites visited and usage information such as page clicks. That is exceedingly valuable to marketing organisations such as Omnicom (whose name the Mail article mis-spelt) so that they know what sites are being visited and in what volumes. The Avast announcements make clear that no personal information was disclosed and they were always compliant with laws such as GDPR. Perhaps there was a concern that AVG users were not being informed about the data collection although they introduced a specific opt-in in July 2019.

The CEO of Avast, Ondrej Vlcek, has issued a letter in which he apologizes to all concerned – see  https://blog.avast.com/a-message-from-ceo-ondrej-vlcek .

Is this something that should concern AVG users? As a past but not current user of that software, I am not sure I would be. A product that is free to most users (over 90% of them with AVG) often has some “monetization” associated with it. So Facebook users for example disclose personal information and then get targeted with relevant advertisements which the company relies on for its income and profits. This hardly seems to be much different. Providing anonymised information to third parties should not be an issue so long as it is properly handled and anonymised, and there is no suggestion it was not.

This story seems to be very similar to the allegations against GB Group (GBG) which I commented upon recently – see  https://roliscon.blog/2020/01/20/share-price-fall-at-gb-group-over-data-misuse-claim/ where again a Mail article exaggerated the possible problems and the writer seemed to have limited knowledge of the technology being used and the legal background, effectively trying to make a story that might grab people’s attention. That cloud soon blew away when people came to understand the real facts. GBG did not even bother to comment on the allegations.

The actions by Avast have certainly been vigorous though in countering any reputational threat and with Jumpshot only representing about 4% of Avast revenues of about $862 million, it does not seem to be of great concern. Indeed their response is a good example of how to face up to such threats as opposed to the problems faced by Boeing of late and how they handled the 737 Max safety issue (latest cost to Boeing $19 billion) where they initially discounted the seriousness of the problem. But investors who purchased the Avast shares based on “New Year Tips” from at least two publications only weeks ago won’t be too happy on the events – and that included me.

Avast expects 2019 results to be in line with expectations, but for 2020 they only expect revenue growth of “mid-single digit” after adjusting for the Jumpshot impact and with a weighting towards the second-half due to deferral of product releases. I suspect it may take some time for investors to regain confidence in the company.

Another announcement this morning was a half-year report from Renishaw (RSW) which I do not hold. It made for grim reading – revenue down by 13% on the previous half year and statutory profit down by over 80%. The interim dividend was held as before but the directors waived their rights to the dividend which has reduced its cost to the company by over 50%. But the share price has barely moved, presumably because the poor “trading conditions” were highlighted in a previous trading statement.

One aspect that investors need to consider though is that a major proportion of Renishaw’s revenue comes from the Asia-Pacific (APAC) region that includes China. The coronavirus outbreak in China is already being forecast to reduce growth in China and I suspect if the outbreak is not contained it could have a much bigger impact. This might surely affect Renshaw where APAC revenue is 41% of its overall revenue. Stockopedia still reports Renishaw as having a prospective p/e of 49 for the current year to June which does not seem to take the business risks into account.

Other news is that the BBC is cutting staff and refocusing its coverage to appeal to younger consumers. Apparently the BBC employs 6,000 staff in its news service which seems an astonishingly large number. They are proposing to cut 450 but will we notice?

Fran Unsworth, head of its news division suggested they need to do more on digital provision rather than “linear” broadcasting. But there is the suggestion that the affluent, well-educated parts of the BBC audience are “over-served” to quote today’s FT. That sounds like the BBC might move down-market to be more populist – rather like the Daily Mail perhaps with lots of click-bait stories? With BBC news already being dominated by human interest sob-stories and biased political commentary it can surely not get much worse. That is why so many of the “well-educated” perhaps object to paying the TV license fee.

The BBC certainly seems to have lost its way of late. I complained to them recently about one news story and was fobbed off with poor excuses. A complaint to their “regulator” OFCOM obtained no result at all either. The BBC does not adhere to its Charter and their regulator is a toothless poodle. The BBC surely needs substantial reform and they need a better regulator.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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