Daily Tech Snippet: Friday, January 7

• Flashing Red: A day of distress in the financial markets, and of distress sales in the tech startup-world.

• U.S., world stock markets slide as panic in China spreads: A collapse in China’s ailing stock market spread like contagion across the globe again Thursday, pummeling nervous investors looking for respite from the week’s rocky trading. Chinese stocks traded for less than 30 minutes, slumping 7 percent and triggering the second emergency market closure this week. The action prompted markets in Europe to retreat and then spread to the United States, where stocks tumbled 2 percent. China’s CSI 300 had traded for only 14 minutes before the first circuit breaker kicked in, calling a 15-minute halt to trading after a 5 percent fall. But instead of calming the market, it caused only more panic. When trading reopened, prices soon fell further, triggering a halt for the rest of the day. The Dow Jones industrial average, which tracks 30 blue-chip stocks, and the Standard & Poor’s 500, a broader measure of the market, both fell about 2.3 percent. They have lost about 5 percent of their value the week so far. The tech-heavy Nasdaq suffered the deepest losses, falling 3 percent on Thursday. It is down about 6 percent this week and on pace to enter a what’s known as a correction, meaning the index will have fallen about 10 percent from its most recent high. The sell-off was widespread, even hitting tech giants Apple and Amazon, which were down 4 percent and 3.7 percent respectively. JPMorgan Chase slid 4 percent, while Nordstrom tumbled 5.5 percent.  

• Distress Sale #1: Gilt’s Unicorn Tale Comes To An End After Being Acquired For $250M: Hudson’s Bay Company, the owner of department chain stores like Saks Fifth Avenue, said today it was acquiring Gilt Groupe for $250 million. The sale still represents a tough end to the story of Gilt. The startup was one of the original darling flash-sale sites coming out of New York. But that whole market has found itself challenged by slim operating margins, its initial popularity waning, and the difficulties of building a large-scale e-commerce operation. Prior to the acquisition, the company had been widely considered to be part of the billion-dollar startup club. But the company struggled to become profitable, and in October last year the company continued cutting jobs (at that time laying off 45 people). The company previously said a few times that it would go public in 2013 and 2014, before putting that on hold indefinitely and raising additional capital. It’s also not the greatest return for its investors. Prior to the sale the company had raised more than $270 million, which makes this look like a deal that will not return the total amount of money that it had raised. 

• Distress Sale #2: One Kings Lane, Once Valued at $900 Million, Is Likely to Sell for a Fraction of That: One Kings Lane, the online seller of furniture and home decor that has struggled for the better part of the last two years, has been running a process to sell the company for several months, four sources told Re/code. The company had aimed to seal a deal by the end of 2015, one of these people said, calling it a “fire sale.” After originally seeking a higher price, One Kings Lane notified potential buyers in the last few months that it was willing to sell for less than the $230 million it had raised in venture capital, multiple sources said. It’s not clear if a deal is done or who the potential buyer would be, but sources say a deal is unlikely to fetch more than $150 million. That would mean at least some investors will lose money and any employee stock would likely become worthless. Several of One Kings Lane’s investors have a liquidation preference, according to venture data startup PitchBook, meaning they will get paid out before holders of common stock, such as employees. The company most recently cut a quarter of its staff in December, including five members of its senior management team. Sources said the layoffs were likely a condition to get a deal done.

• Distress Sale #3: Quikr closes purchase of online real estate portal Commonfloor.com, pushed by investor Tiger Global: Online classifieds firm Quikr India Pvt. Ltd, one of India’s most valuable start-ups, bought real estate portal CommonFloor in a distress sale orchestrated by Tiger Global Management Llc, the influential US-based hedge fund that is an investor in both. Quikr, valued at an estimated $1 billion, and CommonFloor (maxHeap Technologies Pvt. Ltd) didn’t disclose the terms of the transaction, but two people familiar with the matter said Quickr paid $120 million in an all-stock deal. The people spoke on condition of anonymity. CommonFloor was valued at more than $150 million when it last raised Rs.60 crore from Google Capital in December 2014. The company raised a total of Rs.321 crore from Tiger, Accel Partners and Google Capital since 2011. Quikr and CommonFloor have valuations that seem disproportionate to their revenue. Quikr reported sales of Rs.24.78 crore for the year ended 31 March 2015 while CommonFloor generated sales of Rs.45.76 crore for that year, according to documents with the Registrar of Companies. Despite having generated revenue that is much larger than Quikr’s, CommonFloor attracted a much lower valuation because of the valuation metrics used by e-commerce investors that may seem peculiar to shareholders in traditional businesses.

• Samsung's Earnings Miss Underlines Sputtering Global Demand: Samsung Electronics’s profit miss is the latest sign the global smartphone market is running out of steam, spelling trouble for the suppliers of displays, semiconductors and other components that go into mobile devices. The world’s largest maker of displays and memory chips, which sells to Apple and many other brands, posted fourth-quarter profit that fell short of analysts’ estimates as sales remained sluggish over the holiday season. Demand is waning for smartphones as markets mature and China’s economy slows, pressuring profit margins at Samsung. Concerns that the smartphone market is fizzling out has spurred analysts to trim estimated demand, which in turn has hammered device vendors as well as suppliers of components and contract assemblers. Apple, which garners most of the industry’s profits, ended Thursday below $100 for the first time in over a year after investment brokerages from UBS  to Morgan Stanley lowered forecasts on iPhone shipments. Samsung phone shipments are headed for their second straight annual decline in the wake of tougher competition from Apple in the high-end segment to China’s Xiaomi  and Huawei. for budget consumers. Yet even Xiaomi, which rose from obscurity to become the country’s biggest phone brand, may have missed its 80-million unit sales target in 2015, people with knowledge of its production plans have said.

• Amazon Is Now Selling Its Own ARM-Based Chips: An Israeli company acquired by Amazon last year has announced a new line of semiconductors, marking Amazon’s first foray into the chipmaking market. The company, Annapurna Labs, announced its Alpine line of ARM-based processors on Wednesday, nearly a year after Amazon acquired it for a reported $350 million. The company says that its chips are designed for Wi-Fi routers, media streaming devices, connected home products and data storage gear, and that they’ve already been used in commercial products from Asus, Netgear, and Synology.

• Collapse in Q4 Venture Deal-Making Could Signal End of Unicorn Era: A study released in October found that venture capital firms were raising significantly less money than in previous quarters. Around that time, a bunch of well-known investors — like Union Square Ventures’ Fred Wilson — began saying that the days of steady unicorn valuations were coming to a close. Here’s more cold water: An upcoming report from CB Insights says that VC funding levels in the fourth quarter of 2015 “fell 30 percent amid weakening mega-round activity while deal activity fell 13 percent vs. the previous quarter.” Here are the core findings from the KPMG International & CB Insights 2015 Venture Pulse Report, which will be released on January 19: In the third quarter of 2015, there were 72 $100 million equity funding rounds for VC-backed companies. In Q4, there were only 39 of those gigantic growth equity rounds. There were only nine new unicorns birthed in the fourth quarter, versus 23 in Q3. Deal-making activity in general fell to its lowest levels since the first quarter of 2013. While these numbers are by far the most concrete indicator that venture startup investing is getting less, um, frothy, there have been warning signs for the last few months. December data from Ernst & Young indicated that tech startups were avoiding IPOs, partly fearful that public markets would tank their private sector valuations. In November, a series of valuation writedowns of a number of unicorn startups shaved billions off Snapchat, Zenefits and other high-flying and fast-growing tech companies.