Facebook’s Video Dilemma, Plus Softbank And Saudi Arabia Have A Vision(Fund)

By 05.22.17

morning brew
Here’s your renewable, emission-free Brew for May 22nd.

QUOTE OF THE DAY

“If you’re familiar with that effect that Alfred Hitchcock perfected—where things look like they’re sort of telescoping out—I remember feeling that.” — Bob Lord, Yahoo’s head of data security, on what finding the massive security breaches felt like.

Market Snapshot

  • Stocks ended in the green Friday after a week of White House drama only increased investors’ worries.
  • Oil is back above $50 a barrel on a weaker dollar and remaining confidence in supply cuts. OPEC and partners will meet in Vienna this week.

Softbank and Saudi Have a Vision(Fund)

Softbank (+0.90%) synced up with Saudi Arabia this weekend to announce its $93 billion tech-focused investment fund—the largest private equity fund ever raised. Ever.

The Japanese telecom giant, looking to finance the “information revolution” of the future, added Saudi Arabia’s $45 billion to its already star-studded lineup of investors (looking at you Apple (+0.28%), Qualcomm (+2.76%) and Abu Dhabi), on its quest to reach $100 billion in six months.

An unlikely partnership, no?

Maybe not. Consider Saudi Arabia’s heavily oil-dependent economy. As crude oil prices hover near all-time lows, Saudi officials are looking to diversify in fast growing sectors like AI, robotics and mobile computing.

A similar $50 billion commitment to American startups should help with that.

As for Softbank’s end of the deal? After two HUGE paydays from early investments in Yahoo (+1.11%) and Alibaba (+1.61%), the fund is hooked.

Meet the growling stomach behind Softbank’s appetite

Masayoshi Son—Softbank’s multi-billionaire founder and long lost brother of Daniel Son—might possibly be the only person more ambitious than Elon Musk.

The self-proclaimed “Warren Buffet of tech”, envisions a world where humans communicate telepathically and live to be 200. Yup, all of it is outlined in his 300-year plan for Softbank. Because sometimes, fives years just isn’t enough.

And if you’re sitting there STILL not convinced, remember this is a guy that lost $70 billion in one day and still goes thrift shopping for ARM Holdings and Sprint.

Masayoshi Son has a vision for the future. And currently, the price tag on that vision is $93 billion.

Softbank Ain’t Saudi Arabia’s Only Pal

President Trump and King Salman of Saudi Arabia signed a $110 billion weapons deal in Riyadh, the country’s capital and most populous city (which translates to GardenUHH what garden?).

While oil is the Saudis’ bread and butter, a focus on defense checks off several boxes for Saudi Vision 2030: fighting terrorism, improving border security and creating jobs, to name a few.

And several U.S. powerhouses lined up at the door for the Saudi Arabian defense party…

Lockheed Martin (+2.05%) is set to sell 150 Black Hawk helicopters for $6 billion. (Guess that personal call from Kushner to CEO Marillyn Hewson worked.)

General Electric (+2.07%) also announced a mining, aviation, and energy deal worth $12 billion.

Boeing (+1.89%), fashionably late, while shouting “wait for me!” will be selling Chinook helicopters and other military support, totaling $3.51 billion.

Campbell’s Stock Melts

Shares of Campbell Soup (-2.04%) fell over 4% Friday after the company announced a 1% drop in sales last quarter.

It mostly stems from two very different, but equally as unfortunate setbacks.

First––the voluntary recall of Bolthouse Farms protein drinks—a big financial hit and just downright disgusting (“appear lumpy, taste unpleasant and have an off odor”).

Second––center store categories just aren’t sexy anymore––consumers continue to fiend for fresh foods like quinoa, kale and other buzz-wordy eats, which sit on the perimeter of food stores.

But Campbell deserves a little bit of love. The New Jersey-based soup maker saw sales of Pepperidge Farm cookies and Goldfish rise 2%, a glimmer of hope in an otherwise fierce food landscape.

Facebook’s Video Dilemma

Facebook (+0.27%) is set to stream 20 MLB games this season for free. The Friday games won’t have commercials, but Zuck & Co. were mute about other important details (like how much the social network is paying).

Live is going great (apart from repeated acts of violence for all to see), but custom video at the world’s largest social network will take a little longer. Facebook said Friday that the launch of original video content is delayed until later this summer as it searches for a video home outside of the Facebook app (like Apple TV, Roku, and so on).

What Else Is Happening…

Economic Calendar

  • Friday (May 19): Campbell Soup (-), Deere & Co (+), Foot Locker (-) Earnings
  • Monday: Booz Allen Hamilton Earnings; National Activity Index
  • Tuesday: Autozone, Toll Brothers, DSW, Container Store Earnings; New Home Sales, Manufacturing Index
  • Wednesday: Lowe’s, Tiffany & Co., Advance Auto Parts, Williams-Sonoma Earnings; FOMC Minutes
  • Thursday: Best Buy, Abercrombie & Fitch, TD Bank, Gamestop, Nutanix Earnings; Weekly Jobless Claims, Consumer Comfort, Fed Balance Sheet, Money Supply
  • Friday: Big Lots Earnings; GDP, Consumer Sentiment

Water Cooler

The Golden Passport

In a new book, Canadian journalist and business writer Duff McDonald argues that Harvard Business School, the oldest and most prestigious of MBA-granting institutions, has not only lost its edge, but is responsible for many of the problems wreaking havoc on Western culture. Here’s what you need to know about his divisive take:

  • While the school’s bottom line has grown year after year, McDonald says HBS hasn’t yet produced any new business giants like it has in the past; where’s the next Michael Bloomberg, Stephen Schwarzman or Jamie Dimon?
  • He also says the school has failed at diversifying its student body and controlling conflicts of interest. For example, HBS gives companies veto power over case studies it publishes.
  • So, HBS is left with two options: 1) focus on the quality of its academics, and spend less time on courting donors. But that’s no fun. Or, 2) acknowledge that, at its core, HBS is a business and not a temple of scholarship.
  • The latter isn’t actually a terrible option, if valued on a usual stock market price-earnings multiple, HBS would be worth about $5 billion.

The Breakroom

Interview Question of the Day

Cars have changed a lot in 70 years—size, shape, colors, design, you name it. What is one distance between two points on every car that is the exact same as it was 70 years ago?

(Answer)

Startup of the Day

It’s no secret that retail stores aren’t exactly flourishing right now. At the same time hip internet startups are realizing that a physical presence is great for PR, too. Which brings us to Bulletin.

The Y-combinator-backed company thinks pop-up stores are the future of retail, and has a New York City location devoting shelf space entirely to online-only brands. It’s like a 2017 version of the ‘as-seen-on-TV’ section.

Stat of the Day

$1 billion — that’s how much a Chinese peroxide maker Zhejiang Jinke paid for a digital talking cat. Industrial giants and western video game makers have an interesting relationship…to say the least.


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