Transcript: Arm wrestles with bad first quarter as a public company

This is an audio transcript of the FT News Briefing podcast episode: ‘Arm wrestles with bad first quarter as a public company’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, November 9th, and this is your FT News Briefing.

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Arm’s first quarter on the public market was not pretty. Portugal’s prime minister abruptly stepped down. And the US wants the Palestinian Authority to run the West Bank and Gaza. Plus, this has been a confusing week for US politics.

James Politi
I think it’s been a rollercoaster really for Democrats, but they come out of it feeling like they still have very strong issues to campaign on in 2024.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day. 

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The UK chip designer Arm reported its first-ever quarterly earnings yesterday, and, boy, things have not been going well. The company said it had a $110mn loss in its first quarter since going public. In other bad news, Arm said its revenue forecast for the current quarter fell short of analysts’ expectations. And as you might expect, investors did not take any of this well. Arm’s share price dropped as much as 8 per cent in after-hours trading. The company launched its initial public offering in September. Investors greeted it with open arms, resulting in a massive share price pop, but Arm stock has been down pretty much ever since.

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Portugal’s prime minister António Costa abruptly stepped down this week after eight years in office. He’s being implicated in a corruption scandal related to lithium mines. I’m joined now by the FT’s Barney Jopson. He covers Portugal. Hi, Barney.

Barney Jopson
Hi there. Good to be here.

Marc Filippino
So, Barney, what exactly are the allegations here?

Barney Jopson
So Portuguese prosecutors are investigating possible crimes of corruption, malfeasance and influence peddling by public officials. They’ve issued a series of arrest warrants on senior officials in the government. Costa, meanwhile, has been accused by some of those suspects of being involved in these alleged misdeeds. He himself has denied any wrongdoing. And all this relates to a few big economic projects which are important to the country. There are a couple of lithium mines, a hydrogen production facility and a big data centre that Portugal wanted to set up.

Marc Filippino
Barney, what are these allegations and Costa’s resignation mean for lithium in Portugal and the industries that rely on it. I’m thinking electric vehicles, EV batteries, things like that.

Barney Jopson
Well, both Portugal and, indeed, car producers in the European Union had great expectations for Portugal’s lithium mines. At the moment, the European Union produces almost no lithium. A lot of this lithium has to come from China. So there was a huge amount of happiness and optimism over the fact that Portugal had these lithium reserves and that the government was eager to develop them. The sudden appearance of these corruption allegations raised doubts about the long-term future of these crucial lithium mining projects.

Marc Filippino
So those are the long-term consequences. Are there any short-term consequences now that the government is in disarray?

Barney Jopson
So Portugal is in an interesting place economically. It’s actually done very well in terms of fiscal discipline. But at the same time, it’s been hit very hard by the cost of living crisis. One of the things that António Costa wanted to do was pass a budget that would help people cope with some of those costs. Now that he’s resigned, that budget is frozen. It’s not being approved by parliament. So Portugal has ended up in a sort of economic freeze, just when the government and lawmakers need to do things to help people get through the cost of living crisis.

Marc Filippino
So what then happens with the politics? Who takes over for Costa, and where do they go from there?

Barney Jopson
So today is a crucial day because the prime minister’s resigned, but Portugal also has a president in its system, and the president is the person who must accept the prime minister’s resignation and has the power to dissolve parliament and call new elections. So we’ll find out today what the president — a gentleman called Marcelo Rebelo de Sousa — will do. He could choose to appoint a new prime minister from Costa’s own Socialist party. So the other option is that he goes ahead and dissolves parliament and calls new elections for early next year, January or February, probably. But nobody knows what’s going to happen. The president has a habit of sort of pulling rabbits out of the hat and surprising people with his decisions. So we’re all waiting on tenterhooks to see what happens.

Marc Filippino
Barney Jopson is the FT’s Spain and Portugal correspondent. Thanks, Barney.

Barney Jopson
Thank you.

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Marc Filippino
The US is calling for Gaza to be politically unified with the West Bank after the Israel-Hamas war ends. US secretary of state Antony Blinken said yesterday that Israel should not reoccupy Gaza after the war. But he left open the possibility that Israel could play a role in the strip’s, quote, transition period.

Antony Blinken
And it must include a sustained mechanism for reconstruction in Gaza and a pathway to Israelis and Palestinians living side by side in states of their own, with equal measures of security, freedom, opportunity and dignity.

Marc Filippino
But it’s not so clear-cut. The Palestinian Authority, which administers part of the West Bank, is weak and lacks credibility. Palestinians are particularly frustrated with the president, Mahmoud Abbas. He’s in his 18th year of what was supposed to be a four-year term.

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We’re one year out from the next US presidential election. And this week, Joe Biden got some pretty conflicting news for his campaign. First, new polling data showed that he’s trailing former President Donald Trump, who is the 2024 Republican frontrunner. But then on Tuesday, results from an off-year election seem to say, hey, Democrats, things aren’t so bad. Here to explain what’s going on is the FT’s Washington bureau chief James Politi. Hey, James.

James Politi
Hey, Marc.

Marc Filippino
All right. Let’s start with Tuesday’s election. James, what were some of the main takeaways for Democrats?

James Politi
So there were three big races. The Democratic governor in Kentucky won re-election, a very conservative state. The Republican governor in Virginia failed to win control of the entire legislature, and Democrats were able to enshrine the right to an abortion into the state constitution in Ohio. So overall, it was a positive night for the Democrats in getting their voters out to the polls.

Marc Filippino
So some hope for Democrats there. But you know, there was also some pretty negative polling for Biden’s re-election, which I had mentioned earlier, and it went beyond concerns about his age and even the economy. What are some of the new weaknesses that we’re seeing?

James Politi
I think that one of the most troubling things we saw from the recent polling is that Biden is weak geographically in some of the kind of key swing states that allowed him to win in 2020 over Trump so Michigan and Pennsylvania. And demographically, he’s losing support among some core Democratic constituencies, including Black voters, Hispanic voters. And this has coincided with a new split which has emerged just over the past month within Biden’s coalition over his handling of the war in the Middle East between Israel and Hamas.

Marc Filippino
Yeah, tell me a little bit more about that divide. Where is it most prevalent?

James Politi
Well, you’re seeing it among progressives. The progressive left is very upset with sort of their staunch, unconditional support for Israel. And it’s been mounting alongside the growing civilian death toll in Gaza. We’ve seen not just Muslim-Americans say they won’t vote for Biden anymore, but also kind of people of colour be sort of less enchanted really with Biden than they were before. And that will be a concern.

Marc Filippino
And where did you go to better understand the divide?

James Politi
So I went to Pittsburgh because that’s a, you know, vital city for 2024 in the heart of Pennsylvania. And I spoke to a variety of people in the Jewish community, some Palestinian-Americans, the Black community. And there’s clearly a divide there.

Miracle Jones
I think, first of all, the administration has been abject failure in how they’ve addressed this crisis, in the language and the words of the (inaudible) from the communities they reached out to.

James Politi
So I spoke to Miracle Jones. She’s a local progressive activist. She does a lot of work with the Muslim community in Pittsburgh as well.

Miracle Jones
In the spaces that I’m in, a lot of Muslim people are saying, never Biden, not Biden, anyone but Biden.

James Politi
She laid out all of her concerns about what had just unfolded over the last four weeks.

Miracle Jones
Biden ran as a person who could bring people together and could get results, but like, there are no results from them.

James Politi
And what I saw is a community that’s probably more divided and suddenly divided than I’ve ever seen it.

Marc Filippino
So to recap, there are concerns over the president’s response to the Israel-Hamas war. There was a good election outcome this week, but bad polling numbers. James, what’s the big takeaway for how Democrats are doing based on this week?

James Politi
I think it’s been a rollercoaster, really for Democrats, but they come out of it feeling like they still have very strong issues to campaign on in 2024. The kind of anti-extremist, anti-Maga message is going to be one of the big themes. Biden isn’t someone who changes course quickly. You know, the establishment of the Democratic party is still very much aligned with Biden’s position on Israel, and I would not expect any major course correction. They still believe that once, you know, a clear contrast is before voters between Biden and Trump, that they won’t want to go back to the Trump years.

Marc Filippino
James Politi is the FT’s Washington bureau chief. Thanks, James.

James Politi
Thank you so much.

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Marc Filippino
Before we go, we’re bringing back our 50 per cent off deal for an FT digital subscription. Just go to ft.com/briefingsale to take advantage of the offer. We’ll have that link in the show notes.

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This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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