Bet you weren't expecting this

MARKETS

  • U.S. markets: What's that saying? What goes down...must come up? That's what happened with stocks yesterday, as they rebounded from a miserable Wednesday with a booming Thursday. October's been a wild month.
  • GDP: Today, we'll get a reading of how well the U.S. economy performed in Q3. Small chance it'll grow as fast as it did in Q2, when it posted an annualized growth rate of 4.2%.

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TECH

Big Tech's Big Day

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If earnings season is the football playoffs, then yesterday was pretty darn close to the Super Bowl. Two of the largest and most influential companies in the world, Alphabet and Amazon, reported, and so did two much smaller (but still influential) tech firms, Snap and Twitter.

Amazon

High level: Amazon chugged along on its profit streak, snagging a fourth-straight quarter of putting more than $1 billion in the bank. The final figure? $2.88 billion in profit, up from $256 million a year ago.

Drilling down: Even with nine zeros on your bottom line, top line numbers can still hurt. Amazon stock slumped ~9% after hours, mostly because it forecasted lower-than-expected holiday season sales and reported disappointing Q3 revenue of $56.58 billion (but jeez that's a lot of money).

Bottom line: Amazon's focused on high-margin businesses (like AWS, where revenue surged 46% in Q3). Those help offset the costs that come with global expansion and pre-holiday-season logistics.

Alphabet

High level: Google's parent (-5% after hours) was under the microscope in Q3, using one hand to fight a record fine from the EU and the other to deal with scrutiny of its privacy practices from U.S. lawmakers. And wouldn't you know, revenue missed estimates for the quarter.

Drilling down: "Traffic Acquisition Costs" (or TAC) came in at 23% of ad revenue, unchanged from last quarter. That's what Google pays out to other manufacturers to use its services, and there's concern growing partner payouts could squeeze margins.

Bottom line: That news was somewhat overshadowed by a NYT report that Andy Rubin, the creator of Android, was given a $90 million exit package when he left in 2014. That exit followed allegations of sexual misconduct.

Twitter

High level: Twitter saw Q3 monthly active users fall by nine million to 326 million. That's the steepest decline ever and more than Twitter was bracing for.

Drilling down: Despite a shrinking user base, Twitter extracted more money from those it's got remaining. Revenue climbed 29% to $758.1 million—the biggest jump since Q1 of 2016.

Bottom line: Twitter stock's 15% surge yesterday shows investors just may be getting used to the idea of separating user growth from business performance.

Snap

High level: *See Twitter* But seriously, the headlines are nearly identical. Snap (-8% after hours) reported a second-straight quarter of declining user numbers, but...

Drilling down: Revenue rose 43% to $297.7 million—the most money Snap has ever made in a quarter. That's due in large part to a shift to programmatic ad sales from relationship-based ad sales.

Bottom line: That February redesign seriously didn't do Snap any favors, but don't count it out just yet (maybe). CEO Evan Spiegel has reportedly set a goal for Snap to achieve profitability as a public company for the very first time in 2019.

+ Don't worry, we didn't forget about you, Intel (+3.25% after hours). The tech giant toppled expectations on earnings and revenue, plus offered optimistic full-year guidance.

E-CIG

Altria Pulls the Plug on Some E-Cigs

After months of prodding from both antismoking groups and the FDA, Marlboro maker Altria Group will pull its e-cigarette pods off shelves and discontinue sales of most flavored e-cigs.

Some context for the move...

  • It comes amid calls of a public health crisis—officials say e-cig flavors that taste like desserts are luring in teens at alarming rates.
  • And back in September, the FDA told Altria's MarkTen e-cig brand that it had 60 days to come up with strategies to address teen use.

That's why Altria, which had a 5.6% share of the U.S. e-cig market last month, will now only sell e-cig products resembling traditional cigarettes in tobacco, menthol, and mint flavors (add "cig-a-likes" to your vocab list). It also said it'll support federal legislation pushing the minimum age to buy tobacco products to 21.

The numbers tell the story: Per Altria CEO Howard Willard, smokers between ages 18 and 20 represent 5% of the total tobacco market...but represent 15% of all e-cig users.

TELECOM

Private 5G Rollout Gets an Ally in the White House

In the arms race for the next generation of mobile networks—5G technology—the private sector just got a boost.

First, some background: As mobile carriers (aka AT&T, Verizon, and T-Mobile) prep to roll out 5G service, Capitol Hill's faced pressure to free up some of the airwaves, or spectrum, to make room for those ultra-fast 5G connections.

That's where the White House's new "National Spectrum Strategy" comes into play. The Commerce Dept. will "assess [R&D] priorities to create new technologies and improve U.S. competitiveness," per the Trump administration.

  • Translation? The White House will help speed up private sector 5G deployment to stay ahead of China in reaping the economic benefits of the technology.

Zoom out: A previously floated (and largely criticized) nationalization strategy to have the federal government take over part of the spectrum got the boot. Now, private sector players and federal agencies (like the FCC and Commerce Dept.) will work hand-in-hand to try to stay ahead in 5G.

ART

Notice Anything Different About This Portrait?

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Does it have too much byte? Is its mainframe a little off-center? Are you having trouble processing it?

If you haven't guessed it by now...the painting, called Edmond de Belamy, was created by an algorithm developed by a French art collective known as Obvious. Christie's says it's the first computer-generated work of art to be put up for auction.

And though it may be the first...based on its sale price, it definitely won't be the last. Including fees, this AI-generated masterpiece (we suppose you could call it that) was sold yesterday for $432,500. That's over 40x the initial estimate.

QUIZ

The Brew’s Weekly News Quiz

More closely-watched than the World Series. More dramatic finishes than the Olympics. More hats than the Kentucky Derby. It's the most exciting two minutes in business newsletters: our weekly news quiz.

1. Who said this? "Platforms and algorithms that promised to improve our lives can actually magnify our worst human tendencies."

2. Which company was "horrified by the possibility, however remote" that its internal report could have been misused by the Saudis?

3. China just opened a $20 billion bridge connecting the mainland to Hong Kong and Macau.
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Which of the following is not true about this bridge?

At 34 miles, it's the longest sea crossing in the world.
If a bus driver yawns too many times, the authorities will be alerted.
You can rent a front-seat passenger for companionship when you drive across.
Drivers have to switch sides of the road at the Hong Kong entrance.
4. What company am I? I'm an IT services firm. I've made a plan to spin off MoviePass. I've lost nearly all my value this year (thanks, MoviePass).

5. Which shoe brand became the fastest-rising brand in the history of Piper Jaffray's biannual teen trends report?

6. Fill in the blank: "On peak days in between Thanksgiving and New Year's, UPS will deliver _____ packages a day."

7. Speed round: Bezos's tour de office space (aka finding Amazon's HQ2) is driving real estate speculation in the 20 finalist cities. How many of those finalists can you name?

Answers: 1) Apple CEO Tim Cook 2) McKinsey 3) You cannot rent a front-seat passenger 4) Helios and Matheson Analytics 5) Vans 6) 30 million 7) Here's the list

WHAT ELSE IS BREWING

  • AB InBev (-9.34%) slashed its dividend in half after reporting a decline in both overall beer sales and market share.
  • Cathay Pacific Airways (-1.05%) said a hacker snagged personal info from 9.4 million customers, making it the largest airline data breach ever.
  • Chipotle (+2.15% after hours) beat earnings expectations, but same-store sales growth fell short of forecasts.
  • NBC reportedly canceled Megyn Kelly's show after she made comments earlier this week defending the use of blackface on Halloween.
  • Airbnb hired former Google engineer Ari Balogh as its chief technology officer.

BREAKROOM

From the Crew
Yesterday's brain teaser posed the question: "What is a word that has one syllable, but when you add just one letter to the end...it becomes three syllables?" We gave the answer of "are + a = area," but readers were quick to email in plenty more. Here are a couple...

  • Ore + o = oreo
  • Rode + o = rodeo
  • This one's clever: News + letter = newsletter (get it? Adding one "letter" to the end)

Friday Headlines: Spot the Fake
A lot of bizarre news about transportation came out this week...but not all of it was real. Can you guess the Onion article from the following transportation headlines?

  1. "Pilot casually nails emergency landing on San Diego area freeway"
  2. "Uber hires marketing firm to help decrease brand awareness"
  3. "Motorists stunned as metal balls roll down Seattle street"
  4. "Company ordered to stop transporting Florida school kids in driverless bus"

(Answer located at bottom of newsletter...or you can just click the links)

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Breakroom Answers


Friday Headlines
Uber hires marketing firm to help decrease brand awareness

 

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