Brief Multi-Strategy: Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems and more

In this briefing:

  1. Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems
  2. Uber: A Different Species?
  3. UK: Melt-Up Continues in Feb-19
  4. Labour Shortage to Force Major Upheaval in Japanese Retail & Distribution
  5. World Aims to Use M&A to Reduce Apparel Distribution to 50% of Its Business

1. Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems

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On the very first day of the landmark jury trial between Apple and Qualcomm over long-running patent licensing issues, the two companies quietly announced that they had reached a settlement.  Significantly, the deal included a chipset supply agreement in addition to the patent licensing accord.

On the very same day, Intel, who had stepped up to supply Apple with modem chips during its protracted dispute with Qualcomm, announced that it was exiting the 5G smartphone modem business upon completion of its current contractual commitments on 4G modems. The move is an embarrassing climb-down for Intel, eerily reminiscent of similar retreats from smartphone and tablet SOC markets in recent years, proving once again that when the going gets tough, Intel… throws in the towel. 

2. Uber: A Different Species?

Uber offers a global platform play on the future of transportation and delivery. Disney+ could be more a complement than substitute for Netflix. U.S. retailers have announced more store closures ytd than all of last year.

  • Lyft & Uber: Although Lyft’s stock price has fallen by 22% from its $72 IPO price, investors might want to take a closer look at Uber, which filed its S-1 last week. In addition to offering a global platform play on the future of transportation and delivery, Uber’s operating loss has narrowed as it has been able to gain operating leverage.
  • Disney: Disney+ offers an appealing value proposition to families eager to access Disney’s rich media library but at only $6.99 per month, it could be more of a complement than a substitute to Netflix.
  • Retail REITs: Mall traffic peaked in August and U.S. retailers have announced nearly 6,000 store closures year-to-date — more than all of last year — with net closures at over 3,300.

I still remember taking my first Uber ride — I was visiting NYC with my husband and then one-year-old. I was so inspired by that experience that I wrote the LinkedIn article, “Social Capital: The Secret Behind Airbnb and Uber”, which went viral and led to the creation of my Ubernomics book two years later. It has been a long wait as my baby is now in kindergarten and Uber’s valuation has since increased 10-fold from $10B to an expected $100B. So I was totally excited to dig into Uber’s newly-filed S-1.

Although I really want to want to buy UBER, I’m cautious about drinking the Kool-Aid – especially since LYFT is now trading 22% below its $72 IPO price and 35% below its $87 opening price. After an initial review of Uber’s S-1, you might want to take a look at Uber. In addition to being one of the rare publicly traded companies to operate at the peak of all three sides of the value pyramid, it offers a global platform play on the future of transportation and delivery. Although Uber is still not profitable, it actually seems to have operating leverage as all its line expense items declined last year on a per-ride basis. I still need to do more digging into Uber’s S-1 but I’ll leave you with this question:

Could Uber be a different species of unicorn than Lyft?

3. UK: Melt-Up Continues in Feb-19

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  • The LFS unemployment rate remained at 3.9% in Feb-19 amid rapid growth in volumes despite Brexit uncertainty. The labour market’s melt-up has stretched levels to unsustainable extremes aided by overly stimulative monetary conditions.
  • A soft wage impulse in Feb-19 could slow headline wage growth slightly, but there has been a bias towards upwards revisions recently. Hawkish pressure is building.

4. Labour Shortage to Force Major Upheaval in Japanese Retail & Distribution

Labour

Japanese companies are becoming increasingly voluble about how hard it is to find staff, while others are laying off older workers to cut costs.

The labour shortage for some roles is undeniable, particularly in retail and distribution, as well as construction.

Looser immigration and more opportunities for women to work are both part of the solution but the crisis will lead to serious disruption.

5. World Aims to Use M&A to Reduce Apparel Distribution to 50% of Its Business

World

Major fashion wholesale-retail group, World Co Ltd (3612 JP), relisted last year and has now embarked on a number of M&A deals to help diversify its business away from its focus on adult apparel.

It made three deals in March alone. One is a sizing technology service which World hopes to offer to other apparel firms to compete with online services such as that of ZOZO (3092 JP), another is a bag brand and the third is an increase in its stake in Narumiya International Co Ltd (9275 JP).

While diversifying is essential to offset the decline in World’s core channel of department stores, such a dramatic shift will bring its own problems and begs the question of whether World can compete in other retail categories where there are already powerful competitors.

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