Boringman McUnremarkable

MARKETS

• U.S. markets: Things took a turn yesterday after another Huawei dust-up weighed on chipmaker stocks, which in turn weighed on...everything.
• Trade: If falling chip stocks and low soybean prices weren’t enough to convince you the U.S.-China conflict is unsparing, consider that Game of Thrones fans in China couldn’t watch the finale because of the trade war. We know some of you are jealous.

TECH

Bringing Down the Digital Iron Curtain

For those of us young enough to have no recollection of the Cold War, big news. There could be another one around the corner. Just replace the Soviet Union with China and nuclear submarines with 5G networks.

Rumblings of a cold war

As this week began, U.S. companies hit Chinese tech giant Huawei with a double whammy that may widen the gulf between the American and Chinese tech worlds. A digital iron curtain, if you will.

• The who’s who of chipmakers (Qualcomm, Intel, Broadcom, etc.) have stopped supplying Huawei, according to Bloomberg.
• Google is limiting Huawei’s access to its Android operating system. That could be devastating for Huawei, the world’s No. 2 smartphone supplier, because without Google Play, YouTube, or Gmail, your smartphone is just a phone...and that’s boring.

Why now? The moves are intended to comply with the Trump administration’s actions last week to cut off Huawei from buying American components.

What a tech cold war might look like

Under a censorship regime, China has blocked access to many U.S. internet companies for years (good luck trying to get a Snapstreak going there). But there was still a cross-border flow of components, business, and ideas. Maybe not any longer.

• Here’s Tim Culpan of Bloomberg Opinion: “We can now expect China to redouble efforts to roll out a homegrown smartphone operating system, design its own chips, develop its own semiconductor technology...and implement its own technology standards.”
• Deep thoughts from the NYT: “Those closed doors could have profound effects not only on the business of technology, but also on how the world will use and understand the devices and services of the future.”

Bottom line: The U.S.’ choking off of Huawei could be a negotiating ploy in the broader trade conflict. But to some three-eyed tech ravens, escalations of the past few days are the Lexington and Concord equivalents of the tech cold war.

TELECOM

The FCC Can Get Behind the T-Mobile/Sprint Merger

Yesterday, FCC Chairman Ajit Pai recommended approving the $26 billion all-stock merger Sprint and T-Mobile have been pursuing since what feels like the Late Cretaceous. Sprint shares jumped 18.77%, and T-Mobile rose 3.87%.

Some people think they’re better off apart. The deal’s opponents have said that going from four major wireless carriers to three would increase prices for consumers and violate antitrust law. President Obama’s FCC signaled it would reject the deal back in 2014 in between ice bucket challenge videos.

So Pai tried to get in front of those concerns, making the companies pinky-swear they’d a) divest Boost Mobile, Sprint's prepaid wireless brand and b) launch a 5G network covering 97% of the U.S. within three years of closing the deal. Crucially, that network would also cover 85% of rural Americans in three years and 90% in six.

Looking ahead: The deal doesn’t have the blue check yet. This isn’t an official FCC approval, and the companies will have to get the DOJ’s go-ahead as well. And that part isn’t looking great.

AUTO

Ford Wants to Get Flatter

After two years of fielding questions on his plans for a turnaround, Ford (-0.10%) CEO Jim Hackett is finally turning around. He said Ford plans to cut about 7,000 salaried jobs, or roughly 10% of its white collar workforce, before summer’s over.

What’s worse than sending a pink slip to 7,000 employees? Bureaucracy. Hackett said the cuts, which will trim Ford’s management structure by almost 20%, will result in a “flatter and more agile team.”

And agility has been a problem at Ford, which has watched profits and market share dip in both North America and China in recent years. Too many cooks in the corner office kitchen have bloated Ford’s cost structure and dragged down its vehicle development process—while the competition has been busy innovating in the lab.

Bottom line: Tech is advancing at a rapid clip and Detroit’s tea leaves suggest global car demand is peaking. These job cuts, which should save Ford about $600 million annually, will help it keep up with the industry’s structural changes.

BIO

Meet and Greet: Robert F. Smith

Being named “Robert Smith” is kinda like being named “Boringman McUnremarkable.” But the billionaire investor who single-handedly erased the Morehouse College Class of 2019’s student loan debt this Sunday is someone you should know about. Let’s just say he looks forward to high school reunions.

Smith has roots in pre-iPod Silicon Valley. He was the first person in Goldman Sachs’s San Francisco office to focus solely on tech M&A. It’s cool, we all get stuck in dead end jobs at some point.

• In 2000, Smith left Goldman to found Vista Equity Partners, a private equity firm that focuses on enterprise software. Now it has a portfolio of over 50 software companies and manages over $46 billion in assets.
• With annualized returns of 22% since its founding, it’s one of the most successful PE firms, according to Forbes.
• In 2018, Forbes declared Smith the richest African American in the U.S.

He’s also a noted philanthropist and, as the first African American chairman of the Carnegie Hall board, a big music lover. Can you guess who his two sons, Hendrix and Legend, are named after?

WEARABLES

Let’s Try This Google Glass Thing Again

A few years after its first Google Glass became one of the Valley’s favorite flops, Google is launching the business-focused Glass Enterprise Edition 2, an augmented reality (AR) headset aimed at making factory workers more productive and sophisticated-looking.

• Edition 2 will cost $999, still expensive but more wallet-friendly than its predecessor’s $1,500 price tag.
  Unlike the OG Enterprise, this iteration will be part of Google’s main family of products and not its “moonshot factory.”
• Though everyday consumers weren’t ready to become “glassholes” (unfortunately we didn’t coin that one), Google’s betting that factory workers are. It claims Edition 2 gives workers “superpowers” like “faster production times, improved quality, and reduced costs.” Bet you project managers blushed just reading that.

Zoom out: Google’s part of a larger crowd (including Microsoft, Epson, etc.) banking on business-focused AR applications. They think turning factory workers into glassholes is step one in getting the broader public comfortable with wearable computers

WHAT ELSE IS BREWING

• Lyft (+1.56%) is facing a class action lawsuit suggesting it misled investors about market share and business prospects in its wait-did-that-just-happen IPO.
• Mary Meeker, internet sage and VC, has landed on an Australian online design platform called Canva for her Bond Capital’s first investment.
• Senators Mitch McConnell and Tim Kaine introduced a bill to raise the federal minimum age to buy tobacco to 21 in a bid to curb teen e-cigarette usage.
• Game of Thrones set a new record for single-night viewership in the series finale Sunday with 19.3 million tuning in. See what happens when you just write in Jon petting Ghost?

BREAKROOM

Guess the Stock Chart

Sector: Auto

Breakroom Answers