The Sunday Brief

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Value Creation – Long-term charts, Fab Five vs. Telco Top Five (April 12)

by | Apr 13, 2024 | TSB

This was a mixed week for the Fab Five (+$118 billion) with Apple’s gains (driven by an article concerning the new AI-infused Mac lineup) overshadowing losses in Meta and Microsoft. Fab Five shareholders are happy, however, with year-to-date gains now eclipsing $1 trillion.

Amazon’s Andy Jassey released his annual letter to shareholders which we will cover in depth next week. He also did an interview with Andrew Ross Sorkin of CNBC which is embedded below. Of greatest interest are Jassey’s comments about regulation. Here is their dialogue pertaining to regulation:

SORKIN:  Do you think you could buy a firm like Anthropic in this environment from a regulatory perspective?

JASSY:  I don’t know. I mean, it’s — I think we got to be careful right now in Western countries in the way that we’re handling regulation. I think a really good example of that is what happened with iRobot, if you follow that, you know?

SORKIN:  Yeah.

JASSY:  So I think it’s — it’s a really kind of a sad story. It’s a great entrepreneurship story where you had this — you know, this American company that invented this product, invented — invented the category and built a business that was almost a billion dollars in revenue. And whenever you build a good business, you end up with company and competition. They attracted these two very large Chinese companies as competitors, and they needed scale because scale lets you buy components at the right price and invest in R&D. So they merge with Amazon. And the European Commission blocks it because they worry that we’re going to feature our vacuum cleaner, you know, their Roomba versus others, which, of course, is not our model because we make actually at least as much money selling third party items as our own. But they block it and then immediately after they block it, the FTC comes out and says, oh, we would have blocked it if they hadn’t. And so, what happens we abdicate the acquisition, iRobot lays off a third of its staff, the stock price completely tanks. And now, there’s a real question whether they going to be a going concern. Turns out with these in-house vacuum cleaners, they have to map the inside of your house. That’s way they, way they don’t run into a table or a chair. So, really what Western regulators were saying was that they trust these two large Chinese companies with maps of the inside of U.S. consumers’ homes more than they do Amazon, even though we’ve been an amazing steward of customer data in our retail business, and for AWS, where customers of both those businesses will tell you that. That’s — that can’t be what we were going for. And so I think people don’t know what they can do right now, and I just think we got to try and find a way to be reasonable in what we’re doing.

That Amazon is just coming to grips with the fact that they are clearly in the regulatory crosshairs is dumbfounding. But their open criticism of the FTC and the DOJ should not go unnoticed.

Meanwhile, we did have two positive moves with respect to mobile pricing. First, Spectrum announced some enhancements to their Unlimited Plus plans with device protection starting at $5/ mo. per line and unlimited anytime upgrades (the “anytime” only applies after the customer has been on Spectrum Unlimited for 30 days), and the device they trade in must be “operable.” But this is a big move for Spectrum, and further distinguishes their high-end offer from their cable peers. A very good move, in our opinion.

Not to be outdone, T-Mobile announced changes to their Smartphone Equality plans (here) that further extend premium smartphone offers to lower credit risks. As Roger Entner, a good friend of the Sunday Brief for many years, tweeted, this “makes the difference between prepaid & postpaid even smaller.”

That’s it for this week. Even though we are a couple of weeks out from earnings, it’s looking like a very full Sunday Brief next week. Also, I will be reviewing Q1 earnings on the 5G Guys Podcast which should be posted around April 27th. File (which has been updated for Microsoft’s earnings time) is below.

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