Google snags Fitbit, McDonald's fires its CEO mid-weekend

Monday, November 4, 2019 by Robinhood Snacks | Disclosures

"It's Fitbit, not Footbit"

Last Week’s Market Moves
Dow Jones
27,347 (+1.44%)
S&P 500
3,067 (1.46%)
Nasdaq
8,386 (+1.73%)
Bitcoin
$9,658 (-4.83%)
10-Yr US Treasury
1.716%

Hey Snackers,

Arizona and Hawaii feel one hour less-rested than the rest of us (they still ignore Daylight Saving Time).

Stocks feel even better after record highs last week on a fall harvest of econ news: 128K jobs added last month and 3rd quarter GDP growth of 1.9% both beat expectations. The Fed even cut interest rates for a 3rd time this year to make sure the economy keeps chugging.

Sweat equity
1. Google acquires Fitbit — adding another device, ad platform, and data tracker

Start company. Get acquired by Google 12 years later... Not a bad way to go out for Fitbit. It's joining the Alphabet family after Friday's announcement that Google will drop $2.1B for it. That's a fraction of the almost $10B it was worth after IPO-ing in 2015, but Google's wizardry will help Fitbit take on Apple — Apple Watch sucked away anyone else's smartwatch sales like a dementor.

What's in it for Google?... Then-Google (the parent company is called Alphabet now) paid $12.5B for Motorola in 2011, $3.2B for Nest in 2014, and $1.1B for part of HTC in 2017. It doesn't have much to show for any of this hardware since then. Here's what Fitbit can contribute:

  • Sneaky ad sales: 84% of Alphabet's 3rd quarter revenues came from ads. Fitbit could become another platform for Google to slip in paid suggestions when you ask your wrist "Hey Google..."
  • Fancy device sales: The tiny wedge of Google's biz that's not related to ads is growing faster, led by Pixel phones and Google Home.
  • Data. Lots of it.: Now Google will know your mid-jog blood pressure. Its press release promised it won't use health/wellness data for better-targeted ads (anti-BO antiperspirant?). We'll see.
THE TAKEAWAY

If you want to buy an entire company, you've got to pay extra... When one company acquires another, it typically splurges about 33% more than the stock price of the company it's buying. Alphabet paid 71% more:

  • Sept. 20th: $4.10. That was the price of Fitbit shares before word it was open to selling itself.
  • Nov. 1st: $7.35. That's how much Alphabet is paying for each and every Fitbit share that exists — aka it's paying $2.1B total.

That's why you often hear of a company's stock rising when investors believe it could get acquired — they want to ride the stock higher, like some did with Fitbit's.

Highs

Leave the iPhone in your pocket... Apple is now (almost) a Wearables company. iPhone sales have slipped for a full year, but sales in Apple's AirPods and Apple Watch division surged over 50% for the 2nd straight quarter. That biz brings in as much revenue as all of Starbucks, so CEO Tim Cook's going extra venti with new $249 noise-canceling AirPod Pros. Plus, Apple TV+ launched Friday, adding starpower to its Services division.

It took more than 280 characters... CEO Jack Dorsey needed 11 tweets to explain that Twitter has banned political ads. It still lets world leaders tweet free of fact-checking, but it won't accept cash from them to boost their reach to millions of Twitter users (Jack says it's too risky to society). Facebook still lets politicians push their messages to undecided potential voters — and it expects just 0.5% of its total revenue for 2020 to come from political ads,

Lows

Your "promiscuous" chicken curry ordering... It's a problem for GrubHub. That's how the CEO described your disloyal strategy of ordering dinner on whatever delivery app happens to be the cheapest at the moment. GrubHub is forced to whip up promo codes to entice you away from Uber Eats — and those increased marketing costs ate away at profits by 96% last quarter. News that delivery apps are becoming just a commodity dropped Grubhub stock to its lowest point in 2.5 years.

He should've learned from Leslie Knope in Parks and Rec... Don't date your co-workers. McDonald's CEO Steve Easterbrook got fired Sunday for having a consensual romantic relationship with an employee. That broke company policy — Some HR departments ban the possibility of controlling the title and salary of someone you call Boo. Since Easterbrook took over in 2015, McDonald's has been brought into shape menu-wise, technology-wise, and stock price-wise — Its stock has doubled during Easterbrook's time. Now shareholders are mourning/adjusting their outlook on McDonald's future.

What else we’re Snackin’
  • Work: The "time multiplier" — what it is and how it ups your productivity game hard
  • Life: 20 spots that Airbnb thinks are due for a visit in 2020
  • Investing: 85% of investors are interested in impact investing. Here's how to start sustainablizing your portfolio
  • Venture: Venture capitalist Ben Horowitz found the culprit — he thinks an overly "optimistic" culture was WeWork's downfall
  • Crypto: French high school students may be the first to get cryptocurrency lessons mixed into their classes
Snacks Daily Podcast
  • Insurance giant AIG holds the record for biggest quarterly loss in corporate history. A decade after its government bailout, climate change now affects its "catastrophic losses."
  • Quip helps you never run out of toothpaste again with not-free refills through the mail. It just launched floss, and it's reversing the ol' "razor/razor blade" pricing model.
This Week

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