The Wells Fargo CEO Finally Stepped Down, Plus Amazon Is Gunning For Spotify And Apple Music

by 1 year ago

morning-brew-new
“The possibility of a severe fall in the stock market is now very high” — HSBC analyst Murray Gunn, citing increased volatility and the market’s recent sell-off. Uh oh.

Market Snapshot

  • U.S. stocks finished mixed yesterday after the Fed hinted that a rate hike could be coming relatively soon
  • Humana Insurance was the biggest loser in the S&P 500, falling 5% after a U.S. health department report showed membership declines in some of its highly rated Medicare plans

John Stumpf, Exit Stage Right

…The embattled Wells Fargo CEO stepped down yesterday. Calling this a mere downfall doesn’t do it justice: Stumpf has been one of banking’s most influential figures, and was credited with building Wells Fargo into the most valuable bank in the world by focusing on serving Main Street. His retirement comes amidst a suffocating scandal that has seen the bank come under heavy, heavy fire (hi there, Elizabeth Warren) for illegal sales practices. Translation: employees created millions of accounts in customers’ names…without their permission, all to meet ambitious internal sales goals. That’s a big, fat no-no. The bank is already paying a $185 million fine and has fired 5,300 employees.

For his part, Stumpf had been criticized for his handling of the scandal, which often saw him come off as pretty darn clueless about the whole thing. And as Stumpf exits with no severance package but a hefty $134 million in his retirement fund, he’ll be succeeded by COO Tim Sloane, who has his work cut out for him in picking up the pieces of Wells Fargo’s now-shattered reputation. Good luck, Tim.

Listen Up, Spotify and Apple Music

…Amazon’s coming for you. Yesterday, the e-commerce giant debuted its long-awaited on-demand music streaming service called—wait for it—Amazon Music Unlimited. How’s it any different from all the other music streaming services out there? How ‘bout its price: the service will cost $7.99 per month for Prime members, compared to the $9.99 price tag offered by its main competitors. To boot, the service is highly integrated with Amazon Echo—the company’s voice-controlled home system that’s been flying off the shelves. If you own an Echo, the streaming service is an eyebrow-raising $3.99 per month (but only for use on Echo). Looks like the world of on-demand music streaming just got even more competitive.

Don’t Sleep on Yellen

…She’s plenty serious about this rate hike. No one expected the Federal Reserve to raise interest rates last month (and it didn’t), but perhaps we shouldn’t have been so confident. Minutes of that September meeting were released yesterday, showing the decision to hold rates steady was a “close call.” Yes, close only counts in horseshoes and hand grenades (editorial note: the Brew doesn’t condone grenades and certainly doesn’t approve of horseshoes), but it’s a sign that the Fed is agonizingly close to believing the economy is strong enough to warrant higher interest rates. The evidence: more people returning to the workforce, rising wages and improving consumer confidence. Investors and even the Fed itself believe December could be the time to act—which would be fitting (just in time for the holidays), given the last time it raised interest rates was December 2015.

Ericsson’s Just Living the Nightmare

…And can’t seem to wake up. The world’s largest mobile network equipment maker reported brutal Q3 earnings, with operating profit dropping 94% and sales down 14%. The issue? Spending by service providers (think AT&T) has dried up demand for 4G network equipment, and 5G—which Ericsson is betting on—is still several years away. If that’s not enough, Asian companies like Huawei have been putting the pressure on and aggressively expanding into Europe. Any good news? Nope. The announcement comes after the ousting of CEO Hans Vestberg and a series of job cuts, sending the stock price tumbling 20% yesterday. Hang in there, Ericsson.

Other Stories

Economic Calendar

Making 12 Figures

That’s right, according to the IDC’s Worldwide Semiannual Security Spending Guide (quite a mouthful), revenues from IT security products are projected to pass $100 billion by 2020. That’s more than the current GDP of Puerto Rico. With companies extremely wary of being the next victim of a major cyberattack, boards of directors are increasingly insistent that security operates at peak efficiency. 100 billion bucks might be hard to fathom, so here are the numbers:

  • If revenues do in fact hit the big 12 figure mark, they’ll have shot up by a compound annual growth rate (CAGR) of 8.3%. That’s more than twice the forecasted growth of overall IT spending over the same period.
  • So who’s spending all this money on security? Banking—not a huge surprise. Banks currently invest $8.6 billion in security projects. The next three drivers are discrete manufacturing, government and process manufacturing. These top four industries will account for 37% of security revenues in 2016.
  • So what does this mean for the economy? A growing security skills gap. A recent Cisco study estimated there are over a million unfilled security jobs. The takeaway: being a hacker isn’t half as lucrative as being the person who stops them.

Interview Question of the Day

Can you find the last number in the following number sequence? 10 : 10 : 20 : 45 : 110 : 300 : ? (Answer)

Startup of the Day

WeWork is revolutionizing office life. The four-year-old startup, which divides up rented office space and sublets largely to fellow startups, aims to bring together entrepreneurs and spark connections among them. WeWork started with a single Manhattan location in 2010, and as of October 2016 operates 98 working spaces in 32 cities. Its tens of thousands of members pay a monthly fee to use its shared spaces. WeWork was most recently valued at $16.9 billion. Not bad.

Food for Thought

Michael Jackson topped the annual list of the top-earning dead celebrities on Wednesday. Yes, this list is a thing. With earnings of $825 million, it’s MJ’s fourth straight posthumous year on top, beating the likes of musical icons Prince and David Bowie.


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