21st Century Fox Buys Itself A $14 Billion Christmas Present, Plus A New CEO For Coca-Cola

by 1 year ago

morning-brew-new
QUOTE OF THE DAY
“Believe” — Magic Leap CEO Rony Abovitz. Forgot about Magic Leap? It’s the super-secretive, $4.5 billion startup that’s supposedly revolutionizing virtual, mixed and augmented reality. The Information managed to get a look at the company’s actual products, and reported that they don’t live up to the hype—prompting that tweet from its CEO, along with a series of others.

Market Snapshot

  • U.S. markets finished off their best week since the elections, with each index closing at all-time highs—making this the 14th record close for the Dow Jones out of the last 20 sessions of trading. Keep riding that wave
  • Bitcoin jumped to its highest level in three years after India’s prime minister Modi made a shocking move to take the 500 and 1,000 rupee notes, worth a combined $256 billion, out of circulation to combat corruption. This sent investors to Bitcoin, which is easily convertible and provides anonymity to boot

21st Century Fox

…21st century price tags. The media giant has reportedly reached a preliminary deal to acquire Sky (+31.06%), Europe’s top pay-TV company, for a hefty $14 billion. Worth it? 21st Century Fox (-1.50%) hopes so. Interestingly, Fox already owns 39% of Sky, so what does it have to gain from straight up buying it? Total control over a massive distribution platform in Europe, that’s what—combining Fox’s content with Sky’s European subscriber base could result in some sweet revenue synergies. We saw a similar rationale for an acquisition earlier this year when AT&T bought Time Warner. The AT&T deal is still under regulatory review, and you’d better believe that if Fox officially agrees to acquire Sky, antitrust (aka monopoly) concerns will soon follow.

Coke Trades Kent for Quincey

…And sugary for “healthy.” Coca-Cola (+2.49%) CEO Muhtar Kent is stepping down to make way for President and COO James Quincey. Originally tasked with growing sales, Kent had a rocky eight-year reign over the company. Plagued by a decrease in sugary drink and diet soda consumption, quarterly sales growth was negative for the majority of his term. And it doesn’t end there: more and more cities are pushing for soda taxes. Why the misfortune? People want less soda and more juice, tea and water. That’s why Coke has decided to invest more into “healthy” options like Honest Tea. Message to Quincey: good luck getting those pesky health nuts to “taste the feeling.”

Verizon’s Not Ready To Let Go

…Of the Samsung Galaxy Note 7. Since Samsung’s (-2.19%) saga with the exploding Note 7 began, almost all of the phones have been disabled or collected—after all, who wants a phone that could catch on fire? But, for those still clinging to their precious devices, Samsung is planning to release a software update to prevent the phones from charging, rendering them useless. AT&T, Sprint and T-Mobile are all on board to push the update, but Verizon (+0.70%) won’t hit the kill switch. The carrier claimed that disabling Note 7s could leave customers without a phone to use in emergencies, and is therefore refusing to roll out the update. Flammable phones or no phones at all: pick your poison, Verizon.

Iran Needs Plans

…Boeing makes planes. A match made in commerce heaven? Not quite. Since June, Boeing (+0.71%) has been toying with the idea of selling planes to state-sponsored Iran Air. This weekend, things finally got real, and Boeing agreed to sell 80 planes for $16.6 billion. What’s the big deal? For starters, the agreement is the first between Iran and a major U.S. company since economic sanctions against Iran were formally lifted in January. And this isn’t any ordinary transaction; it’s the biggest deal between the two countries since 1979. Well, it could be—it’s not over until Washington has its say. The U.S. Treasury, State Department and Congress all get to weigh in. Good luck, Boeing.

Other Stories

Economic Calendar

  • Monday: Treasury Budget
  • Tuesday: Fed Meeting Begins
  • Wednesday: Fed Meeting Announcement; Retail Sales; Producer Price Index; Industrial Production
  • Thursday: Oracle, Adobe Earnings; Weekly Jobless Claims; Consumer Price Index
  • Friday: Housing Starts

What Snack Consumers Really Want

Coca-Cola isn’t the only company balancing its sugary origins with a health-conscious future. Rival PepsiCo is too: ever since CEO Indra Nooyi took over PepsiCo, the battle has waged between profits and nutrition. Nooyi’s stated goal is for PepsiCo to turn into a “health juggernaut.” But high-fat and high-salt products like Doritos and Cheetos keep acting as the PepsiCo earnings breadwinners. Here are the numbers:

  • In 2010, PepsiCo set the ambitious goal of tripling revenue from nutritious products by the end of the decade. That would be roughly $30 billion. That’s a lot of (low-sodium) cheese.
  • So far, PepsiCo has been slightly successful: nutritious products have risen from 20% to 25% of total revenue. But growth has been slower than the company hoped, while the so-called “fun for you” products continue to dominate sales—Lay’s, Doritos and Cheetos combined for nearly $20 billion in sales in 2015.
  • Why are the less nutritious food and beverages still doing so much better? You guessed it: taste. 66% of baby boomers and 53% of millennials say that taste is the biggest factor when making a snack purchase.
  • The balance between nutrition and delivering profits is a tricky one, but PepsiCo isn’t giving up. The company has cut its sodium per serving by 12% and saturated fat by 3% (well under its goal of 15% by 2020, but still impressive) since 2006. Keep doing you, PepsiCo. Just please don’t get rid of Doritos.

Interview Question of the Day

What is carried interest, and how is it taxed? (Answer)

Startup of the Day

Yik Yak, the popular anonymous messaging app that took over college campuses last year, has laid off 60% of its staff—it’s down to just 20 employees. The startup is struggling to find its way as harassment and threats damage its reputation. Without a clear business model, Yik Yak spells trouble.

Food for Thought

When and if the robots take over, will there be enough jobs to go around? According to James Bessen from the Boston University School of Law, “jobs and automation often grow hand in hand.” By using machines, productivity goes up. Historically, when productivity has gone up, wealth increases, goods becomes cheaper, consumers get more buying power and there are more jobs. Don’t worry, the Brew will always remain by humans, for humans (no offense to any robots reading this).


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