Headlines this week - Nov 13, 2022
Meta layoffs. Amazon's efficiency program. Apple's supply chain stress. TikTok suffering. Disney spending too much in streaming. Uncertainties around Twitter. The crypto market under question
IN SUMMARY - TOP 15 THEMES THIS WEEK
(1) Meta lays off 13% of its staff. This could signal the end of the age of Big Tech growth
On Wednesday, they announced layoffs of 11,000 people, equivalent to 13% of the staff, and a hiring freeze for (at least) the next six months (WSJ) (NYTimes)(FT)
Zuckerberg said he was accountable, but he reiterated his commitment to the metaverse. People did not take it too well (WSJ)(WSJ2)
All this is seen as a sign of (future) weakness for Big Tech firms, and as the end of the age of Big Tech growth (WSJ)(FT)(FT2)(FT3)(Bloomberg)
(2) Amazon has also announced efficiency as a key short-term priority
Amazon has started a cost-cutting review of all their activities, and changes are expected in some unprofitable units, like devices (including Alexa) (WSJ)(FT)
This looks so serious that some people are expecting the company to change its traditional (aggressive, growth-oriented) modus operandi (WSJ)
The company is redesigning its commercial offers and its processes, to increase cash flow returns (FT)(WSJ)
(3) Apple might have not suffered so much (yet), but their supply chain is under high stress. Their challenge is reducing dependence on China
Covid restrictions in China are disrupting Apple’s ability to deliver on its iPhone sales targets. The company has cut its 4Q outlook (WSJ)(NYTimes)(Bloomberg)
Obviously under pressure from Apple, their Chinese suppliers are trying to soften local covid policies, but this looks (very) challenging (WSJ)(FT)
The problem is becoming even worse with the impact of the US chip bans on China (NYTimes)
Apple could try to shift more production out of China, but their sales depend a lot on this market, so they need to be careful with that (FT)
(4) Amid Meta’s and Twitter’s problems, most people view TikTok as a winner. But they’re also having difficult days
The deceleration of digital advertising, linked to the economic context, is affecting them too. They’ve lowered their annual revenue targets (WSJ) (FT)
Pressure on revenue growth has also led them to reorganize their US business unit (FT)
(5) Lyft is losing the battle with Uber. Some claim this is because they have too much focus on their core business
The numbers are not good. Lyft users have not returned (so much) after the pandemic (WSJ)
In contrast with Uber, Lyft has decided not to diversify into other businesses (deliveries, ads) and this might be the reason why it is not growing (WSJ)(FT)
Meanwhile in the ride-hailing world, LatAm startups are filling the geographic gaps that Uber and DiDi have left (RoW)
(6) Disney’s results showed the pain from the video streaming wars, which are not expected to end any time soon
And analysts are starting to believe that something is wrong with the streaming business model (WSJ)
But the content expense pressure might even increase. Netflix now seems prepared to expand the battlefield into live sports events (WSJ)
(7) Uncertainties (and volatile strategies) remain for Elon Musk’s Twitter
Lots of users claim to be leaving the app, e.g. for Mastodon. But Musk says Twitter’s number of users is actually growing (NYTimes)(FT)(Bloomberg)
Monetizing this usage (growing or not) is another top priority. Some advertisers are leaving, concerned about “toxic content”. Musk is trying to calm then down (Bloomberg)
Twitter is trying to reduce the amount of “fake news” in the platform (WSJ)
But some monetization ideas, like the subscription fee to get a “blue checkmark”, are not exactly helping with this. Because (some) people are bad… (FT)
At the same time, pressure is growing on Musk to generate more cash. This week he even warned employees about a potential bankruptcy (Bloomberg)(WSJ)(FT)
These pressures explain the (rather massive) layoffs last week. But it now seems that these have also backfired, with some people being called back to work (Bloomberg)(Bloomberg2)
The jury is still out on Elon Musk’s performance in all this. We are reading comments against him, claiming he will fail because “this is not a startup”… (WSJ)
… and comments in his favor, discussing his “superpowers” and his ability to defy “management mantras” (WSJ)(Bloomberg)
(8) SoftBank, the old “maverick” of the telecom industry, is changing. They could even become a private company
The latest results were good… because of the profits from selling Alibaba shares (WSJ)
Investment losses are accumulating. Masayoshi Son is now pivoting to focus on a turnaround of Arm, the chip company that finally was not sold to Nvidia (FT)
Son also announced buybacks and made investors speculate on a potential move to take the company private (Bloomberg)
(9) This was a nightmarish week for cryptocurrencies, after the fall of FTX
A (glamorous) crypto-industry leader, who was also working to take the industry to the mainstream, has fallen (Bloomberg)
This created the crypto version of a bank run (WSJ)
But there are also some optimistic views, that see this as a “growth crisis” (FT)
(10) Microsoft’s regulatory challenges are growing in Europe: Activision and Azure under review
The EU regulators are concerned about the impact of the Activision acquisition on competition in the video games industry (WSJ)
Competitors, led by AWS, are complaining about Azure’s anticompetitive practices (through cross-sales of Office 365 and cloud infrastructure) (Bloomberg)
(11) Stories from the Second Cold War: the semiconductor front
The recent US bans on sales of chip manufacturing equipment and tools to China could have deeper implications than any previous “Tech Cold War” actions (FT)
A clear implication is that a full decoupling of semiconductor supply chains is moving ahead. For example, TSMC is building a large factory in the US (WSJ)
Nvidia, massively hurt by the restrictions, is trying to bypass them with new (less advanced) products that meet the export ban (Bloomberg)
(12) Stories from the Second Cold War: The AI front. Turning AI into a strategic technology might create ethical risks
Putting AI at the center of the new Cold War between China and the US may lead both superpowers to neglect ethical questions that could delay progress. And that’s a risk (Protocol)
Quantum Computing, with deep implications for cybersecurity, could be the next battle (Quanta)
(13) Stories from the Second Cold War: The data sovereignty front. Is TikTok under threat again?
US officials are again asking for a full ban of TikTok in the US market (Bloomberg)
And on top of this, socio-political pressures on the app, accused of lack of transparency on the way it works, keeps increasing (Bloomberg)
This could end up affecting Twitter too, given Musk’s connections with China (a key lever for Tesla’s growth) (FT)
(14) The Vertical Dis-integration of telecoms moves ahead. Vodafone sells a non-controlling stake of its TowerCo. But investors want more
Vodafone has created a JV with a consortium led by KKR and Global Infrastructure Partners. This JV will now control Vantage Towers through a 82% stake (FT)
There have already been negative comments about the deal, suggesting that investors expected Vodafone to fully sell the TowerCo (Bloomberg)
(15) Renault’s Corporate Strategy is seen as an example for other car vendors, amid the ongoing industry transformation
Renault has understood they can’t compete with Tesla in software development, so they seem to be replicating Samsung’s approach for smartphones, using Google / Android (Bloomberg)
Renault has created a JV with China’s Geely to build powertrains for traditional cars, and a specialized unit for electric cars. These are seen as examples for others (like Ford) (WSJ)