5 Companies That Had A Rough Week

For the week ending Sept. 13, CRN looks at IT companies that were unfortunate, unsuccessful or just didn't make good decisions.

The Week Ending Sept. 13

Topping this week's roundup of those having a rough week is Cloudflare, which disclosed that some of its products were used by, or for the benefit of, individuals and entities in violation of federal regulations.

Oracle made the list because one of its top executives is taking a leave of absence for health reasons. Also making the list are DXC Technology and Hewlett Packard Enterprise, whose efforts to keep court documents secret hit a legal roadblock; and Google for paying $1 billion to settle a tax fraud case in France. And on the eve of the iPhone 11 launch, Apple and manufacturer Foxconn responded to reports of illegal labor practices at a Chinese assembly plant.

Not everyone in the IT industry was having a rough go of it this week. For a rundown of companies that made smart decisions, executed savvy strategic moves – or just had good luck – check out this week's Five Companies That Came To Win roundup.

Cloudflare Admits Potential Violations Of U.S. Sanction Program

Network and cybersecurity Cloudflare admitted this week that the company’s products have been used by, or for the benefit of, individuals and entities that have been blacklisted by federal regulators.

The company said a small number of blacklisted parties made payments to Cloudflare in connection with their use of the company’s platform, according to a regulatory filing with the U.S. Securities and Exchange Commission.

Parties that used Cloudflare’s products include entities designated as terrorists or narcotics traffickers by the U.S. Office of Foreign Assets Control, as well as groups affiliated with governments currently subject to comprehensive U.S. sanctions.

Cloudflare also indicated it may have submitted incorrect information to the U.S. government in connection with certain hardware exports and has submitted self-disclosures to the Commerce Department’s Bureau of Industry and Security regarding potential violations of Foreign Trade Regulations.

Cloudflare said in the filing that it has implemented additional controls and screening tools to prevent similar activity from occurring in the future.

Oracle CEO Hurd Takes Leave For Health Issues, Company Stock Tumbles

Oracle disclosed this week that Mark Hurd (pictured), one of the company’s two CEOs, was taking a leave of absence for health reasons.

CEO Safra Catz and Oracle founder and current CTO Larry Ellison – who once served as the software giant’s CEO – will assume Hurd’s responsibilities while he is out.

Investors, apparently unnerved by the uncertainty created by Hurd’s absense, dropped the value of Oracle’s stock by more than 4 percent, cutting more than $8 billion from the company’s market cap.

Judge Blocks Attempt By DXC Technology, HPE To Keep Settlement Documents Secret

DXC Technology and Hewlett Packard Enterprise hit a legal speed bump this week when a U.S. District Court judge refused a request by both companies to keep secret all their legal filings in a $666 million arbitration case.

The judge’s decision is the latest development in a dispute between the two companies that stems from the formation of DXC in 2017 from the combination of HPE Enterprise Service’s with Computer Sciences Corp. Details about the nature of the dispute have not been made public.

Last month DXC disclosed in a filing with the Securities and Exchange Commission that under an arbitration decision HPE had to pay DXC $666 million in damages and interest in the case.

As they sought to finalize the arbitration award in federal court, HPE and DXC requested that all legal filings in the case be kept secret. But this week U.S. District Court Judge Valerie E. Caproni denied that request, calling the two companies’ justifications for sealing all court filings “inadequate,” citing the First Amendment and the public’s right to know.

Caproni ordered that all documents currently filed under seal be unsealed and publicly docketed, and for the two companies to refile the previously sealed documents or file versions of the documents that meet legal guidelines the judge set out.

Google To Pay $1 Billion To Settle Tax Fraud Case In France

Google has agreed to pay a total of 965 million Euro (just over $1 billion U.S.) to settle a long-running fiscal fraud case in France.

French authorities investigated whether Google, which maintains its European headquarters in Dublin, Ireland, evaded taxes in France by failing to declare the full extent of its activities in that country, according to a CNBC story.

The payment includes back taxes of 465 million Euros and a fine of 500 million Euros.

Google pays little tax in many European countries because it reports almost all of its sales in Ireland, according to a Reuters story. That’s due to a loophole in international tax law, Reuters said, that Google has exploited by having staff at the Dublin headquarters conclude all sales contracts.

Apple, Foxconn Broke Chinese Labor Laws To Manufacture The Latest iPhones: Report

While the focus this week was on the launch of Apple’s new lineup of iPhones, there was a sour note amid the hoopla when a report charged that a factory in China run by Apple contract manufacturer Foxconn violated rules on working conditions, according to a CNN Business story.

The report from China Labor Watch said the FoxConn plant in Zhengzhou, China, which produces the iPhone 11 devices, violated China labor laws by using too many temporary workers – about 50 percent of the plant’s workforce.

The report also said the factory violated labor laws through forced overtime and unpaid bonuses.

Apple said it had conducted its own investigation and disputed allegations of forced labor, the CNN Business story said. But Apple and Foxconn both acknowledged that the number of temporary workers was problematic, according to the story.