For four of the biggest US technology companies – Amazon, Apple, Facebook and Google parent Alphabet – 2020 was one for the books. During a year when the global pandemic put many companies out of business, these market leaders thrived, raking in profits that sent their stock prices soaring and left them more powerful and valuable than ever. The outlook for next year is a different story.
These formidable giants face risks on several fronts – from mounting antitrust and regulatory issues to high valuations and a volatile economy – all of which threaten to spoil the prospects for a repeat performance in 2021. And not just next year: Governments’ growing concern over the companies’ market power may force changes to their businesses that have much longer-lasting consequences.
First, the numbers. As the foursome greet 2021, they will have a much higher bar to meet to impress investors after their big stock rallies this year. Amazon shares are trading at a forward sales multiple about 30 per cent higher than the five-year average, which could quickly lead to disappointment if its e-commerce or cloud-computing businesses slow.
Apple’s latest line-up of iPhones needs to materially exceed sales expectations to justify a price-to-earnings ratio valuation roughly double its past history. As for Facebook and Alphabet, their valuations are now baking in a robust digital-advertising recovery for next year that is by no means assured.
And if TikTok is able to get beyond the government's threats to ban its app, the social media company – with its vast user base of 100 million Americans – can be a more formidable competitor for corporate ad budgets in 2021.
A large part of the industry’s rally this year came from the so-called safety premium trade, in which portfolio managers shifted funds into technology stocks to avoid the solvency risks found in other traditional sectors such as travel, energy and retail.
Any gains from this allocation shift may quickly dissipate should the economy, once stabilised, start to improve rapidly – a scenario many fund managers expect for the second half of 2021 as vaccines become widely available. Inflows may become outflows if investors decide to buy back into beaten-down economically sensitive stocks with their cheaper valuations.
The biggest threat, though, is more existential. After years of successfully skirting the type of regulatory scrutiny that market rivals, watchdogs and politicians have long said they deserved, the foursome are now the target of governments around the world that say their market dominance hampers competition and harms consumers.
In Europe, government officials are considering passing new rules that prohibit companies from using the power of their platforms to favour their own products. If the legislation, which seems to have broad political support, becomes law, it would hurt profitable business lines, including Amazon’s private-label products, Apple’s Music service and Google’s practice of ranking its offerings higher in search results.
The US Congress may not be far behind. There is bipartisan consensus for several antitrust recommendations contained in a House antitrust report such as lowering the legal standard for regulators to prove mergers are anticompetitive and increasing funding to antitrust agencies. Both reforms would add to oversight and significantly curb the industry’s ability to stifle competition by buying emerging start-ups.
For Google and Facebook, there is also the overhang of serious antitrust lawsuits brought by the Department of Justice, state attorneys general and, in Facebook’s case, the Federal Trade Commission, too.
In the case against Google, government prosecutors want to halt the internet giant’s use of paid exclusionary distribution agreements to make its search engine the default option on mobile devices. They also want Google to provide search results based purely on relevance – not internal business objectives. In suing Facebook, state AGs say the company is so dominant in social media it may need to be broken up. While the court battles may take years to fully resolve, any sudden developments could hurt investor sentiment.
In some ways, the fact that Amazon, Apple, Facebook and Google had such a remarkably successful year may prove to be a liability. Governments can clearly see the extent of each company’s market dominance after such impressive financial showings and investors, too, now have embedded much higher expectations. That’s a recipe for a let-down.
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
500 People from Gaza enter France
115 Special programme for artists
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The team
Photographer: Mateusz Stefanowski at Art Factory
Videographer: Jear Valasquez
Fashion director: Sarah Maisey
Make-up: Gulum Erzincan at Art Factory
Model: Randa at Art Factory Videographer’s assistant: Zanong Magat
Photographer’s assistant: Sophia Shlykova
With thanks to Jubail Mangrove Park, Jubail Island, Abu Dhabi
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Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
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MATCH INFO
League Cup, last 16
Manchester City v Southampton, Tuesday, 11.45pm (UAE)
BMW M5 specs
Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
Power: 727hp
Torque: 1,000Nm
Transmission: 8-speed auto
Fuel consumption: 10.6L/100km
On sale: Now
Price: From Dh650,000
