Daily Tech Snippet: Monday, June 27

• Brexit Pounds Some Technology Companies: Online marketplace operator EBay sank as much as 8.2 percent on Friday, outpacing declines by the wider U.S. equity market as analysts singled it out for its large exposure to the U.K. and Germany. Chipmaker ARM, based in Cambridge, U.K., gained as much as 6.8 percent on calculations that a weaker British pound will make its repatriated earnings more valuable. The pound sank more than 8 percent against the U.S. currency Friday, to its lowest level in 30 years. The U.S. dollar rose 2 percent against a basket of foreign currencies tracked by Bloomberg. A strong dollar hurts mainly when proceeds from goods and services sold in foreign currencies are exchanged into dollars. That can also make it more expensive to buy U.S. tech products. EBay has the most significant exposure among U.S. internet companies to the U.K. and Europe, according a report by Needham & Co. The disruption caused by Britain’s exit from the EU and currency fluctuations could slow cross-border transactions on online marketplaces. "EBay gets 31 percent of revenue from U.K. and Germany, more than Google or Amazon," said Needham analyst Kerry Rice. "This really impacts cross-border trade more than anything. It could shift spending behavior if currency fluctuations make a purchase cost-prohibitive." ARM investors were quick to turn to its own calculations on the impact of currency moves and bet on an increase in profit. The company, which licenses chip technology and designs, gets more than a third of its sales from the U.S., 19 percent from China and another 25 percent from Taiwan and South Korea. Singapore and Switzerland supply it with more revenue than its home market at around 3 percent each, according to data compiled by Bloomberg. According to a company presentation from April, more than 95 percent of ARM’s sales are in dollars. A 10 percent move in the value of the pound against the dollar moves earnings per share by 15 percent, it said. That suggests the recent drop in the British currency could boost profit by about 10 percent for the rest of this year.

• China Tightens Internet Rules for Baidu and Other Search Engines: Chinese authorities will require Baidu Inc. and other search engines to report banned content and verify advertisers’ qualifications in its latest attempt at Internet regulation. Under rules to take effect Aug. 1, search engines operating in the country will be prohibited from providing banned information in various formats including links, summaries, cached pages, associative words, related searches and relevant recommendations, the Cyberspace Administration of China said in a statement. They will also be required to report websites and applications that contain prohibited content when spotted, the regulator said. Baidu, China’s biggest search engine, has been criticized recently for misleading users with search results. The Cyberspace Administration launched aninvestigation earlier this year after the death of Wei Zexi, a 21-year-old computer science major, who sought out a controversial treatment advertised among search results. Baidu said it would restrict the number of sponsored posts to 30 percent of a results page and establish a 1 billion yuan ($151 million) fund to fight fraud after the death of the student.

• Line, the biggest tech IPO of the year, struggles to show its growth plan can work: In delaying its IPO by two years, Japanese messaging app company Line Corp bought time to correct weak financial reporting controls, work on its business plan, bolster staffing - and left billions of dollars on the table as its valuation shriveled. Line's initial public offering in the next three weeks is set to raise about $1 billion, which given a global drought of such deals could make it the biggest tech listing this year, but skeptical fund managers point to tepid growth in Line's home market and doubts about its prospects for regional expansion. They also question whether its advertising revenue strategy will work. Fund managers who have watched Line's growth slow in a crowded global messaging app market assess the plan with caution. "I'm not interested," said Yasuo Sakuma, portfolio manager at Bayview Asset Management, which manages 270 billion yen ($2.64 billion). "Its growth outlook is very poor." "Among the four countries that it's focusing on, only Indonesia has big room for growth in use," he added. "Even there, the business outlook is not that easy." Growth in Line's monthly active users has tailed off after tripling across the world over the past three years. Last year, user numbers rose just 13 million to 218 million at the end of March, the IPO filing showed. The company isn't providing much visibility about the future either - it says in its filing that limited operating history makes it "difficult" to forecast future results. "I went to the company's meeting with investors... but nothing moved me," said a fund manager at a major Japanese asset management firm who declined to be named because of company rules against discussing individual shares. "It's not clear how it can make money out of its advertisement business." Line's likely valuation is far less than the $10 billion-$20 billion that was expected by investors when South Korean parent Naver Corp previously talked of a Line listing in 2013-2014, although Line may not have had much choice but to wait.