May 10, 2021
The Weekly Scan May 10, 2021
By Stash Team
Find out what’s happening in the world of business this week
Welcome to the Weekly Scan. Here’s what we’re following for the week of May 10, 2021.
Problems in the pipeline. Hackers from the cybercrime gang DarkSide allegedly stole 100 gigabytes of data from Colonial Pipeline in a ransomware attack over the weekend. The hack caused the pipeline company, which provides 45% of gasoline, jet fuel, and diesel to the East Coast, to shut down. After stealing the data from the Alpharetta, Georgia-based company, the hackers reportedly threatened to leak key data to the public, and also locked and encrypted critical company information.
- The takeaway: It is unclear how long it will take to resolve the hack attack, and whether it will cause fuel prices to rise on the east coast. Ransomware attacks have increased recently and the Biden administration has announced measures to address the problem. Over the winter, hackers reportedly accessed a back door to a widely-used network maintenance software produced by tech company SolarWinds, using access networks of government agencies such as the Department of Homeland Security, the U.S. Department of Commerce, the National Nuclear Security Administration as well prominent private companies including Deloitte, Cisco, Intel, and more. In the last few weeks, Washington, D.C. police, the Illinois Attorney General’s office, and Scripps Health in San Diego were victims of cyberattacks. In response to the attacks, in March, the Department of Homeland Security announced a 60-day sprint against ransomware attacks. The Department of Justice has also created a task force to investigate.
Peloton’s costly recall. Exercise equipment company Peloton recalled its Tread and Tread+ machines last week, following reports of children being injured, and in one case killed, by the treadmills. In April, the Consumer Product Safety Commission (CPSC) issued a warning about the machines and urged Peloton to recall the products, which the company initially refused to do. A video released by the CPSC shows a child who became pinned under the treadmill when lifted. While Peloton has yet to sell the machines in the U.S., roughly 125,000 treadmills are included in the recall. The Tread retails for $2,495 and the Tread+ sells for $4,295.
- The takeaway: The recall could be a significant financial hit to Peloton of about $165 million. Peloton has seen sales increase over the course of the pandemic, as the home workout trend has taken off while gyms are closed or have restricted access. In the fourth quarter of 2020, Peloton reported profitability for the first time ever, as purchases of its bikes and treadmills surged 172% and subscribers to their virtual classes reached 1 million people.
Cracks in the foundation. Microsoft co-founder Bill Gates and wife Melinda Gates announced last week that they are divorcing after 27 years of marriage. The Gates are two of the richest people in the world, with Bill Gates being worth roughly $124 million. Together, the couple founded the philanthropic organization, the Gates Foundation, which has an endowment of roughly $50 billion. The foundation gives roughly $5 billion each year to charitable causes including K-12 education, and eradicating illnesses such as polio and, most recently, Covid-19. Bill Gates stepped down from his Board of Directors roles at Microsoft and Berkshire Hathaway last year, reportedly to spend more time with his family.
- The takeaway: The divorce could have big implications for the foundation and the various organizations that benefit from it. The Gates Foundation, which employs 1,600 people around the world, has been influential in fields such as public health. During the pandemic, the foundation also invested in vaccine development and helped purchase vaccine doses for 92 countries.
Ready, willing, and “Abel.” After years of speculation, Warren Buffett, chief executive officer of conglomerate Berkshire Hathaway, recently named Greg Abel as his successor. Buffett, a multi-billionaire known as the “Oracle of Omaha” for his smart stock-picking ability, has led the company for more than 50 years. Buffett, who is 90, had previously left open to speculation who might replace him at the head of one of biggest companies in the world. Abel has acted as the vice president of non-insurance operations at Berkshire Hathaway, reportedly earning more than $19 million from the company in 2020. Buffett has reportedly said he has no immediate plans to retire. Berkshire Hathaway owns well-known companies such as Kraft Heinz, GEICO, and Dairy Queen. The company also has significant holdings in Apple, American Express, Coca Cola, and Bank of America.
- The takeaway: As CEO of the $630 billion company, Abel will take on one of the most sought-after jobs in business when he takes the reins. Buffett’s job, however, will be split into three new ones: CEO of operations and capital allocation, investment managers for the company’s portfolio, and a board chairman. Next in line behind Abel is reportedly Ajit Jain, who currently leads Geico and Berkshire Hathaway’s other insurance functions. Buffett started out small, working a paper route as a boy in Nebraska, and holding various odd jobs. He eventually bought a struggling Massachusetts cloth mill called Berkshire Hathaway in 1965. Much of Berkshire Hathaway’s success has been based on Buffett himself, a proponent of value investing, which entails a long-term buy and hold strategy. Buffett is one of the richest people in the world.
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