Burning bridges

MARKETS

• The Fed announcement: As expected, no rate hikes right now...but it seems like all-systems-go for one in June. Inflation is close to the sweet spot.
• Earnings recap: It was a busy day. In its first earnings report, Spotify (-8% after hours) didn't quite hit the mark. Square (-6% after hours) also missed estimates. But Kraft Heinz (+4% after hours) finally posted some good news, beating on profit.
• Earnings today: DowDuPont, Activision Blizzard.

TECH

Cambridge Analytica Shuts Down

You haven't forgotten about Cambridge Analytica, have you? You know, the firm that collected data on 50 million Facebook users to assist the Trump campaign.

Well on Wednesday, employees were told to hand in their badges and head straight home after Cambridge Analytica and its parent company, SCL, announced they were shutting down.

But what did you expect? Cambridge Analytica was losing customers and facing insurmountable legal fees following the Facebook fallout. Even the employees...well, ex-employees...saw it coming, sharing songs like "Help!" by the Beatles and a picture of the Titanic sinking on Slack before the announcement.

So where did it all go wrong?

Cambridge Analytica—a company with loose ties to military intelligence and psychological warfare operatives—began using social media to collect data on voter profiles nearly five years ago. And while that led to the recent controversy with Facebook...want to know what really got it in trouble?

Meet CEO Alexander Nix...well, ex-CEO. Leaked video footage showed him and his colleagues (on multiple occasions) seemingly expressing disregard for the democratic process:

• "Deep digging is interesting, but equally effective can be just to go and speak to the incumbents and to offer them a deal that's too good to be true and make sure that's video recorded...[for] evidence of corruption."
• "Send some girls around to the candidate's house...they are very beautiful, I find that works very well."
• "So the candidate's the puppet?" "Always."

Bottom line: Cambridge Analytica still claims these clips were edited and stripped of context. Either way, the damage has been done. As the company admitted yesterday, "The siege of media coverage has driven away virtually all of the Company's customers and suppliers."

+ The report that started it all.

AUTO

Tesla’s Q1: If There’s a Musk, There’s a Way

The last time we caught up with Elon Musk, he was joking about bankruptcy on Twitter, skirmishing with safety regulators over a fatal accident, and couch surfing in his factory to oversee Model 3 production.

And yesterday? He got to share some better news: All things considered, Tesla (-5% after hours) had a decent quarter.

• Tesla lost less money than expected. It also beat revenue expectations with $3.4 billion in sales.
• Model 3 production is on track (we've heard this before...). Tesla produced 2,270 the last week of April and says it'll hit 5,000/week by late June. As we've previously written, the mass-market car is key to the company's future success.
• Tesla is still bleeding cash. It burned through another $1.05 billion, though Musk says he's expecting Tesla to be profitable by Q3.

We'll give Elon the last word: "The path to an electrified revolution is not easy, but what we're trying to achieve is worth fighting for."

+ Musk acted even weirder than normal on the earnings call, cutting off an analyst's question because it was "boring."

M&A

Now Apollo Might Want to Buy Xerox

Because this deal between Xerox (-9.01%) and Fujifilm wasn't messy enough, PE giant Apollo Global reportedly approached Xerox and asked, 'Hey, what about we buy you?'

And...it's official: things haven't been this exciting in the world of documents since the signing of the Magna Carta.

Reliving the chaos:

• Earlier this year, Xerox agreed to sell a controlling stake to Fujifilm. Activist investors Carl Icahn and Darwin Deason (who together own 15% of Xerox) sued to block the deal, saying it undervalued the company.
• Late Tuesday night, a settlement was reached. Xerox CEO Jeff Jacobson and six board members stepped down while Icahn and Deason took a victory lap.
• Yesterday, Reuters reported Apollo complicated things even more by approaching Xerox about an acquisition. Maybe it's because Apollo has ties to Xerox's new boss, John Visentin.

What's next: With an Icahn-friendly board and Apollo knocking at the door, it's hard to see this Fujifilm deal going through in its current form.

MEDIA

Hulu’s Not Letting Netflix Out of Its Sights

While Netflix blazes a trail through digital streaming, Hulu is doing its best to keep up. It just passed 20 million U.S. subscribers only three months after reaching 17 million (Netflix has 55 million).

It'll also offer downloadable content to stream offline and on-the-go. That's similar to what Netflix and Amazon offer, but there's a catch: if you have Hulu's basic offering (the one with commercials), ads will download with the show.

CEO Randy Freer broke it down: Viewers won't be able to skip or speed through ads, and since they're offline, their attention will be focused on the commercial in front of them. It's a "viewing experience never before available to advertisers."

What's next for Hulu? Maybe more Emmy-winning original content (h/t Handmaid's Tale). There's also Disney's pending acquisition of Fox assets, which would give Disney controlling ownership of the streaming service.

And if all else fails, it could pivot to clothing and call itself Hululemon.

WHAT ELSE IS BREWING

• A U.S. delegation is in China for a high-stakes discussion on trade and advanced technology.
• Snap (-21.94%) is still licking its wounds after a brutal earnings report. Wall St. proceeded to pig-pile on the company.
• The Milken Institute Global Conference brought together CEOs, fund managers, celebrities, and non-profit leaders.
• Amazon (-0.80%) will pass along discounts to retailers if they use Amazon Pay.
• Zynga, (+3.41%) the developer of "Farmville," is reducing the voting power of its co-founder via a new share structure.

WATER COOLER

BIGGER PICTURE

They say a picture is worth 1,000 words. Which is great...because we definitely don't have room.

Are we witnessing the slow death of the sedan in the U.S.? Could be, as Americans increasingly snub the classic five-seater in favor of the roomier SUV. Remember, Ford is killing off most of its sedans here, like the Fusion and Taurus.

The shift is especially painful for Japanese automakers like Honda and Toyota, whose respective Accord and Camry sedans have been their ticket-to-ride in the American market. They sure didn't have a good April...

But it was another Japanese firm, Nissan, whose innovation did not excite...anyone. U.S. sales dropped 28% and deliveries of the Altima sedan plunged almost 50%. An analyst told Bloomberg, "Our eyes are bugging out."

Hit the brakes: The sky isn't falling. Companies like Ford have pounced on the shift towards trucks, investing in growth segments like pickups and SUVs. And because of a weird calendar setup, April actually had one less selling weekend, which hurt monthly sales.

BREAKROOM

Looks like Mavericks point guard Dennis Smith Jr. definitely isn’t getting that summer internship.

Looks like Mavericks point guard Dennis Smith Jr. definitely isn’t getting that summer internship.

TALK LIKE THE CREW
Internet of Things (IoT) vs. Internet of Everything (IoE)—People often use these two interchangeably. Spoiler: people are often wrong. IoT is the way physical objects communicate through the internet. Like when your toaster DMs your thermostat. IoE is IoT on steroids, streamlining connectivity between people, data, processes, and things.

If someone asks you about it, hit them with this analogy: "The Internet of Things is the equivalent of a railroad line, including the tracks and the connections, whereas the Internet of Everything is all of that and the trains, ticket machines, staff, customers, weather conditions, etc."

BRAIN TEASER
Find a number whose double exceeds its half by exactly 99.

(Answer located at bottom of newsletter)

Breakroom Answers