Nintendo Has A Switch Supply Problem, Plus What The Hell Is Elon Musk Up To Now?

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“As Meg has said several times before, she is fully committed to HPE.”

Hewlett Packard Enterprise in response to Uber considering Meg Whitman as a CEO candidate. With Uber on the lurk, HPE better sleep with one eye open.

Market Snapshot

  • U.S. indexes closed at record highs on another strong earnings day.
  • The dollar index hit a 13-month low after the Fed left rates unchanged.
  • Oil finished at a two-month high as U.S. crude inventories fell again.
  • The Fed announced plans to reduce its balance sheet “relatively soon.”

Time for a Switch

Consumers are storming to Nintendo Switch like it’s 1978, your dad and his buddies just smoked a joint and someone told them Space Invaders was real thing.

And it’s the best, worst problem Nintendo has ever had.

After the the Wii U 

Nintendo needed something to drag it out from those big green pipes. There’s no question that a cult of self-proclaimed Lewis and Clarks searching for that next Charizard near Time Square lent Nintendo a helping hand (that’s a Pokemon Go reference for you non-gamers).

But, today’s big switch is really all about the Switch.

Nintendo said that despite crazy demand for its newest gaming console, Nintendo Switch, sales forecasts for the device will remain at initial expectations of $13 million (below analysts’ predictions of $15 million).

This is a supply issue, folks

In fact, some buyers are paying a premium on the device, because their kid “just HAD to have it.”

The essential components needed to produce the Switch, including NAND flash-memory chips and liquid-crystal displays, are also used by tech giants like Apple for its iPhones.

Issue is, massive tech giants enjoy bulk orders (offering them juicier margins), so Nintendo gets priced out of the parts.

And even if Nintendo wanted to ramp up ordering, pricier orders might push production costs above the Switch’s retail price of $299 a console.

And as President Tatsumi Kimishima so eloquently put it, “I don’t want to sell the Switch at a loss.”

For now, having too much demand isn’t the worst problem for a company to have.

Electric Revolution

These days you might find Elon Musk on the side of Route 51 with a crazy look in his eyes, digging away at a tunnel to God-knows-where.

But, that shouldn’t worry you. His other master plans, like electric vehicles, still seem to be gaining more and more traction.

Yesterday, Britain announced it is banning all new diesel and gas cars by 2040. The push to all-electric aims to cut energy costs and combat rising air pollution, mimicking similar commitments by France, Norway, India and independent carmakers like Volvo.

For Britain, this transition won’t happen overnight. To fuel the change leading up to 2040, the government is offering $332 million for short-run solutions, like retrofitting busses with more emissions-friendly technology.

Still, even if this ban runs without a hitch, keep in mind that cars can have a lifetime of up to 15 years. Any diesel and gas cars sold in 2039 will likely be zipping around on the wrong side of the street long after the ban is in place.

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Give Me Some Sugar

Coca-Cola (+1.11%)beat earnings yesterday on the strength of its healthier drinks and low-to-no sugar sodas.

Before this not-so-sugary high wears off, Warren Buffett’s favorite beverage company is hoping to capitalize on the U.S. market’s health craze by rebranding “Coke Zero” as “Coca-Cola Zero Sugar.”

The name change may feel like a nuance only Jenny Craig would care to notice, but after successfully testing Zero Sugar in 25 world markets, Coca-Cola knows there is more to it.

A sexier bottle (can you call a bottle sexy?) and a more authentic Coca-Cola taste should mix well with the soda brand’s two-part plan.

One: emphasize “no sugar” on the bottle to improve Coke Zero’s position as the U.S.’ No. 10 selling soda brand.

Two: focus more on sugar-free beverages as countries around the world could begin to increase taxes (up to 20%) on sugary drinks.

And who knows, maybe a slightly different name and a fancy new bottle will be enough to do the trick.

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Mile High Club

Boeing stock took its largest leap since August of 2009, prompting the largest hangar banger since the Wright Brothers took flight.

The company beat forecasts for the fifth straight quarter, largely due to aggressive cost-cutting (lik 15,000 jobs) and a 5,700-item order book giving the plane maker $500 billion in cold, hard cash.

Though revenue did fall (from $24.76 to $22.74 billion) as Boeing transitioned away from one big ass plane to another (777s to 737s), quarterly profit hit $1.76 billion (vs. -$0.23 billion a year earlier) and cash from operations came in at $4.5 billion, almost double analyst estimates.

The cherry on top—Boeing will make $3.5 billion in additional pension contributions to reduce future costs. Can you hear the Glassdoor reviews rolling in?

— 😃 feeling thankful.

Mark Zuckerberg logs in to Facebook.

He has a friend request. It’s from Elon Musk. He mutters something under his breath and swiftly rejects.

He heads to his profile and posts a Q2 earnings update for his friends…all 93,952,234 of them.

The highlights:

  • $9.32 billion in revenue, growing 44.7% year-over-year
  • 2.01 billion users, 66% of which visit Facebook daily
  • $3.894 billion in profit, more than Google for the first time ever
  • FB stock up 44% since the beginning of the year

While impressive, it doesn’t tell the whole story.

Zuck & Co aren’t benefiting from your concerning Facebook addiction like the good ol’ days. Revenue growth has moved lower five straight quarters as your news feed busts from the seams with ads. User growth isn’t doing it any favors either, hitting its lowest point since Q3 2015.

The company has acknowledged that its main source of growth will ultimately come from video (and eventually WhatsApp and Messenger), but until then, it’s time to focus on Zuckerberg’s bread and butter. FarmVille.

What Else Is Happening…

  • Berkshire Hathaway will table its offer to Energy Future if the deal takes any longer.
  • Chipotle (-2.30%)received another subpoena after its suspected norovirus outbreak near Sterling, VA.
  • Wal-Mart (+0.47%)suggested ten policies that would boost U.S. manufacturing.
  • Foxconn (-0.98%) is building a $10 billion manufacturing facility in Wisconsin.

Economic Calendar

Water Cooler

The Back Burner

Everyday we bring you the most up-to-date stories. Some quirkier pieces of news tend to fall through the cracks. Consider the Back Burner our segment to bring those stories back to life.

Both classical music and the tech industry have produced a fair share of prodigies.

Mozart was eight years old when he wrote his first symphony.

Steve Jobs was 21 when he, Steve Wozniak and Ron Wayne founded Apple Computer. What took you so long, Steve?

This week, you can catch a rare glimpse of these two worlds colliding at the Santa Fe Opera, which premiered The (R)evolution Of Steve Jobs—an opera about the G.O.A.T. himself.

Oh, nothing beats the sheer drama of the opera! Delight in Steve’s joyful face as he drops acid for the first time. Experience his utter dejection upon being removed from Apple’s Board of Directors. Be enchanted by Woz’s wistful tune as he turns the final screw into the Apple I computer!

We’ll grant you that Steve Jobs might seem like an odd topic to cover in an opera, but this hi-tech production wasn’t assembled by, let’s say, two amateurs sitting in a garage. The lyricist Mark Campbell is a Pulitzer Prize winner.

And, if you’re going to pick a composer for a Steve Jobs opera, Mason Bates is your guy. He’s written classical pieces with titles like “Rise of Exotic Computing” and “Alternative Energy,” which uses actual recordings from the particle collider at the Fermilab. Nerd on, Mason!

Even with these musical heavyweights, it’s unclear how such a focus on technology will integrate into opera, a notoriously stuffy and traditional art form. But if we’ve learned anything from Steve, it’s the power of innovation.

The Breakroom

Question of the Day

In a room filled with 7 people, 4 people have exactly 1 sibling in the room and 3 people have exactly 2 siblings in the room. If two individuals are selected from the room at random, what is the probability that those two individuals are NOT siblings?

A. 5/21

B. 3/7

C. 4/7

D. 5/7

E. 16/21

(Give Up?)

Who Am I?

  1. I am a self-made steel tycoon and one of the 19th century’s wealthiest businesssmen.
  2. I later sold my company and dedicated my life to philanthropy.
  3. I donated more than $350 million (half a billion in today’s money) in my lifetime.
  4. I established a university in my name, now ranked 23rd in the world.

(Any guesses?)

Stat of the Day

50 million

A little over 50 million Americans suffer from some form of hearing loss. Apple is teaming up with cochlear implant company, Cochlear, to seamlessly stream sound from Apple technology to Cochlear’s Nucleus 7 Sound Processor.