Friday Jul.19, 2019

Microsoft's love triangle

_Microsoft's perfect triangle of (record) profits_
_Microsoft's perfect triangle of (record) profits_

Hey Snackers,

Mid-summer move: Rent the Oscar Mayer Wienermobile on Airbnb. Now a thing.

Stocks barely budged up Thursday as investors digested the final big bank earnings report from Morgan Stanley.

PR

Microsoft sets a profit record ($13B), so we'll update you on what it actually does

Amazon <> Microsoft... They're cross-lake tech rivals in Seattle. Amazon set sales records earlier with Prime Day — Now it's Bill Gates' baby's turn: Microsoft profits spiked 49% to a record high last quarter. And it remains the world's only $1T (trillion with a "T") publicly-traded company as the stock rose 3% after the report.

It's thanks to the "profit triangle"... You probably notice Microsoft products at work. But it's so much more than that. Here's how its $33.7B of revenue last quarter was almost perfectly divided 33/33/33:

  • 👔 Productivity & business processing: This includes Office (Word, Excel, PowerPoint), messaging (Outlook and Teams), and LinkedIn (acquired in 2016).
  • ☁️ Intelligent Cloud: Companies that have apps or websites (that's most of 'em) need processing power. These days they rent it via servers from tech companies like Microsoft, Amazon, or Google.
  • 🎮 Personal computing: Regular folk don't rent processing power as much as companies do. We buy computers, tablets, and an Xbox or two.

Microsoft owned chapter 1 and chapter 3 of computers... but completely missed chapter 2.

  1. Personal Computers. Paul Allen and Bill Gates founded Microsoft and quickly dominated computers (with Windows) and TPS reports (with Word/Excel/PowerPoint).
  2. Mobile. Bill Gates confessed his biggest business mistake: letting Google become the default operating system for smartphones with Android.
  3. Cloud. Under new CEO Satya Nadella, Microsoft is #1 again thanks to growth in cloud services and subscription products, like Office 365.
Sounds

iHeartMedia falls on 1st day of trading (and rebound from bankruptcy)

It's the comeback tour... For nearly a decade, America's biggest radio broadcaster was drowning in corporate debt. Then bankruptcy. Now iHeartMedia re-debuted on the Nasdaq stock exchange yesterday (the stock slipped 3.5% on day 1). The return was kindly made possible by a bankruptcy judge who expunged (great word) $10B of those debts. Prior to that, it was paying almost $2B per year (1/3 of revenue) in interest payments alone.

iHeartMedia is Jackson Maine (from A Star Is Born) — and podcasts are Ally... iHeart's radio reaches 275M users monthly in the US — that's almost all Americans over the age of 6, which iHeart boldly claims is a vaster reach than Google. But a driver of its comeback is podcasts:

  • Users who pod spend more time listening overall than just-music listeners do.
  • And iHeartMedia is the #2 pod publisher behind only NPR, with shows like "Stuff You Should Know" and "The Ron Burgundy Show".

"Companionship" is now the real star... Talk radio shows and podcasts (which the CEO calls "radio on demand") foster relationships with listeners. IHeartMedia even dropped the term "companionship" 21 times in its S-1, the critical filing document for companies that want to trade on stock exchanges like Nasdaq or the NYSE. Engaged listeners are more valuable for the company that's already reaching nearly the entire country.

Looks

Skechers ignored fashion trends, and its stock still popped 12%

Dress for the earnings report you want... not the one you have. Skechers is channeling it. Your go-to middle school shoe option's overall sales jumped 11% last quarter. But it's basically become a foreign company — nearly 60% of those sales were overseas, where sales surged about 20%.

Influencers not wanted... Skechers' US growth strategy may be less extensive as it expands abroad, but it's got one theme: C-list celebs who can side hustle as shoe ambassadors.

  • Ex-QB Tony Romo is the new face of Skechers' feet (his wife is in on the deal too), headlining the brand's 2-year turnaround.
  • He's flanked by retired childhood sports icons like Joe Montana and David Ortiz who still try to feel active.
  • Golfers are playing too — Brooke Henderson and Russell Knox are repping Skechers golf spikes.

Avoiding trends is Skechers' trend... With more than 3,000 style options, the company is focused on giving a little something to everyone — not the next "it" thing that one friend of yours always has first. That mass-market strategy is captured by this single quote from the CFO: “Our core demographic isn’t the teenage fashionista.” You do you.

What else we’re Snackin’

  • Fetch: Chewy's first earnings report since last month's IPO — sales jumped 45%
  • Retry: Slack is resetting thousands of passwords because of a 2015 hack
  • Re-run: Toys 'R' Us is coming back with 2 smaller stores after all 700 had closed (ETA is just before the holidays)
  • Fined: Qualcomm falls 2% on word it'll be fined $270M by the EU for 'predatory pricing'
  • Out: WeWork's co-founder has apparently cashed out $700M of his WeWork stock
  • Rise: Morgan Stanley finishes off bank earnings strong with profits that beat expectations

Friday

Disclosure: An author of this Snacks owns shares of Amazon.

20190719-904702-2723094

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Latest Stories

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Business

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

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Scuba Diving in the Wild Blue Yonder in French Polynesia
Crypto

Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses. 

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses. 

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

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Business

Smooth sailing? Not for superyachts

Sales of the luxury boats sank 17% last year. Meanwhile, Super-SUPER yachts (over 650 feet long) took the biggest sales dip, falling around 40%. Part of the problem: a pandemic-era backlog has led to a three- to four-year waitlist for new yacht orders. Meanwhile Russian oligarchs — former MVP customers — are largely out of the boat-buying business due to sanctions.

Dr Martens shares have been stomped

American sales of Docs have dropped

2024-04-17-ai-capabilities-site

AI is getting good at a lot of different tasks

Business

The monkey’s paw curls on endless shrimp

Red Lobster’s shrimp promotions may have contributed to jumbo problems for the company.

The seafood chain is considering a bankruptcy filing to deal with cash flow problems, Bloomberg reports.

Red Lobster has been weighed down by pricey leases and labor costs, but it’s important to remember that it also blamed an $11M operating loss last fall in part on too many people going crustacean-mode on its Ultimate Endless Shrimp deal.

“The proportion of the people selecting this promotion was much higher compared to expectation,” said Red Lobster owner (and seafood supplier) Thai Union Group last year. The chain bumped the price of infinite shrimp by 25%, but Lobsterfest and Cheddar Bay Biscuits may not be enough to save it from Chapter 11.

“The proportion of the people selecting this promotion was much higher compared to expectation,” said Red Lobster owner (and seafood supplier) Thai Union Group last year. The chain bumped the price of infinite shrimp by 25%, but Lobsterfest and Cheddar Bay Biscuits may not be enough to save it from Chapter 11.

Power
Rani Molla
4/17/24

Elon Musk’s car company pays for Elon Musk’s security company

Elon Musk is a rich man who owns a lot of companies. One way he keeps those companies and himself rich is by making his companies support his other companies. Left pocket, meet right.

TechCrunch’s Sean O’Kane dug into Tesla’s latest annual proxy statement to find out the value of these relationships.

Musk’s Tesla bought ads on Musk’s X, aka Twitter, to the tune of $200,000 just through February this year. Tesla also paid X another $200,000 this year and a million in 2023 for “commercial, consulting and support agreements.” Musk’s SpaceX has also advertised on X, presumably helping prop up some of the budget the company has lost from non-Musk advertisers Musk seems hell-bent on driving away. Musk’s Tesla paid Musk’s SpaceX $800,000 to use a private jet and paid Musk’s The Boring Company more than a million dollars for “commercial agreements.”

It also turns out that Musk owns a security company, whose job it is to protect Musk. Naturally Musk’s Tesla paid Musk’s security company nearly $3 million since entering into a service agreement in December 2023. Apparently that represents just a “portion of the total cost of security services concerning Elon Musk,” so presumably Musk’s other companies will be left to foot the rest of the bill.

Musk’s Tesla bought ads on Musk’s X, aka Twitter, to the tune of $200,000 just through February this year. Tesla also paid X another $200,000 this year and a million in 2023 for “commercial, consulting and support agreements.” Musk’s SpaceX has also advertised on X, presumably helping prop up some of the budget the company has lost from non-Musk advertisers Musk seems hell-bent on driving away. Musk’s Tesla paid Musk’s SpaceX $800,000 to use a private jet and paid Musk’s The Boring Company more than a million dollars for “commercial agreements.”

It also turns out that Musk owns a security company, whose job it is to protect Musk. Naturally Musk’s Tesla paid Musk’s security company nearly $3 million since entering into a service agreement in December 2023. Apparently that represents just a “portion of the total cost of security services concerning Elon Musk,” so presumably Musk’s other companies will be left to foot the rest of the bill.

Tech

A social app, but it’s just voice notes on 2X speed

Airchat is basically X meets Clubhouse, and Silicon Valley types are all over it. The social app consists of a feed of audio snippets that plays continuously on 2X speed until you press pause. The speed makes sense: chugging a cold brew and plowing through podcasts on 2X speed is a rite of passage for modern multitaskers.

A surge of new users joined Airchat over the weekend, joining entrepreneur Gary Vaynerchuk and Y Combinator CEO Garry Tan.

If users don’t want to inhale voice notes at hyper speed, there is a somewhat hidden way to adjust Airchat’s cadence, but it’s an intriguing feature. User-generated audio has struggled to break out of a niche, so targeting the personality that wants to listen to a podcast at twice the speed is one way to make the user experience more efficient.

A surge of new users joined Airchat over the weekend, joining entrepreneur Gary Vaynerchuk and Y Combinator CEO Garry Tan.

If users don’t want to inhale voice notes at hyper speed, there is a somewhat hidden way to adjust Airchat’s cadence, but it’s an intriguing feature. User-generated audio has struggled to break out of a niche, so targeting the personality that wants to listen to a podcast at twice the speed is one way to make the user experience more efficient.