Benner on Tech: Apple's Data-Center Deal

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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People are Talking About…

Apple’s just-announced decision to build data centers in Europe touches on two hot-button issues facing the tech industry: taxes and privacy. While the project might successfully keep money out of Uncle Sam’s tax coffers, it may not keep European customer data safe from the U.S. intelligence community.

The data-center details go something like this: The company will spend 1.7 billion euros, or nearly $2 billion, to build a data center in Ireland and another in Denmark that will be used to power Apple’s services such as iTunes and iMessage for customers across Europe.

Corporate America has to pay 35 percent in taxes on money that it brings into the U.S. from overseas operations, and big companies are fighting for a tax holiday should they repatriate that cash. (News reports peg Apple’s cash hoard at around $178 billion last quarter, of which $158 billion is kept overseas, largely to avoid tax payments.)

Apple’s press release made sure to mention the benefits it bestows on countries that have business-friendly tax policies. “We’re thrilled to be expanding our operations, creating hundreds of local jobs and introducing some of our most advanced green building designs yet,” chief executive Tim Cook said in the statement.

Apple was quieter about the security and privacy implications of its new project. (I guess it’s one thing to taunt the IRS and quite another to pick on the NSA.) But lots of U.S. tech companies are building overseas data centers in an attempt to protect customer information from the watchful eyes of the U.S. intelligence community. Whether they’ll successfully keep customer data safe is up for debate, as evidenced by Microsoft’s current legal battle with the Justice Department. Microsoft is appealing a decision that allows the U.S. to take e-mails from a data center in Ireland without going through the proper legal procedures, and there’s no guarantee that the company will win. 

Ventureland

Gilt Groupe was once one of New York City’s hottest startups. Business Insider takes a look at what went wrong.

Line, a need-to-know Japanese messaging app that combines entertainment, merchandise, taxi-hailing and payments, generated $656 million in revenue last year. Fast Company takes a deep dive into the company as it gears up for an initial public offering.

Snapchat, an app seemingly made for naked-picture sharing, is telling teens not to share naked pictures, Fusion reports.

Uber drivers for the company’s low-cost option in Paris could be fined for not having a taxi license and appropriate insurance, the New York Times reports.

Bill Gurley is again sounding the bubble alarm, saying that valuations are being driven by fear of missing out, according to the Wall Street Journal. Much higher rent and compensation costs could be among the reasons that startups have to raise so much money right now, argues Redpoint Ventures partner Tomasz Tunguz.

People and Personnel Moves

Meredith Perry, the founder of uBeam, tells USA Today that she can replace electrical outlets with transmitters that let us charge up just by walking into a room.

Companies

Apple…

The company is going head-to-head with Google for control of the car. The New York Times takes an in-depth look at what’s at stake.

Cisco…

CEO John Chambers told Bloomberg that he’s vetted all but 23 of the company’s 70,112 employees, and that he’s on the hunt for software acquisitions. I take a look at why the activist investors haven’t come knocking.

Facebook…

The company’s shuttle drivers are closing in on a union contract that gives them improved pay and benefit packages, the Wall Street Journal reports. The median income for high-skilled workers in Silicon Valley is about $119,000. It’s about $27,000 for low-skilled workers.

Google…

Italian privacy regulators can spot-check Google to make sure that it’s complying with orders to improve its privacy, advertising and data polices, the Wall Street Journal reports. The Journal also reports that the company’s service in Vietnam was disrupted by hackers.

Yahoo…

Tumblr is hiding search results for the word “torrent” in a likely bid to keep users from finding pirated or pornographic content, according to TorrentFreak.

Cybersecurity Blotter

Cyberwar between the U.S. and Iran is escalating, according to the New York Times.

It’s going to be hard for the U.S. government to work with corporations if the Sony hack is any indication of how much the two sides are inclined to help their own interests, the Wall Street Journal reports.

Media Files

Laura Poitras’s documentary "Citizenfour" won the Oscar for best documentary. Here’s my review of the important, eye-opening, less-than-perfect film. In semi-related news, Oliver Stone is making an Edward Snowden biopic that is set for a holiday 2015 release, according to the Hollywood Reporter. Finally, this mild-mannered kid can get the histrionic, ultra-slick Hollywood treatment that Poitras spared him.

News and Notes

The power of Internet shaming: The Guardian looks at both sides of the coin. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.