Spotify Is Making Changes That Might Affect You, Plus Disney Doubles Ownership Stake In Vice
“Tell Donald Trump: hate is not an American value.” — Hillary Clinton (via Twitter), responding to the always-controversial Donald Trump’s plan to block all Muslims from entering the U.S. if elected president.
Oil Fuels the Fire
- The familiar trend continued yesterday, as markets across the world closed lower again, and oil dropped even further (albeit not as heavily as on Monday). Not helping matters: extremely weak trading figures from China, to the tune of a 7% drop in exports, the fifth month in a row of declines.
- Energy giant Kinder Morgan fell throughout the day and then collapsed an additional 6% after hours after announcing plans to cut its once-lofty dividend by 75%. Credit rating agency Moody’s warned that Kinder’s investment grade rating was “at risk,” which is bad news for a company with over $40 billion in debt and suffering from oil’s precipitous decline.
Stuck Between a Rock and a Hard Place
Things aren’t looking so great for the world’s fifth-largest mining firm. Cornered by a slumping raw materials market, Anglo American has announced a broad restructuring plan…and “broad” is an understatement: the plan includes over 85,000 job cuts, a reduction in capital spending and the sale of core assets and mines. Management is hoping to cut down to a smaller-scale operation that can withstand a weak commodities market. It’s tough, but there weren’t many other options—many mining competitors are also scrambling to prevent losses by reducing spending and employee counts.
You might remember Taylor Swift’s well-publicized rift with Spotify last year, during which she pulled her entire music collection from the streaming service. Why? Spotify insisted on keeping Tay-Tay’s songs available to its 80 million free users. Now, the company is considering a change in course, offering some artists the option to withhold their music from non-subscribers. It’s unclear which artists would get first dibs on exclusivity, but one thing’s clear: with 20 million subscribers paying $10 a month but a whopping 80 million free users, Spotify has a lot to gain (or lose) from the new approach.
Marissa Mayer vs. Everybody
Yahoo just can’t get out of the spotlight, and yesterday was no different. But at least the company made a decision, announcing that it will no longer spin off its stake in Chinese e-commerce powerhouse Alibaba. The spin-off possibility was first announced in January (and reaffirmed in June), but was shot down by the Board this week after determining that the risks of incurring a huge tax deal just weren’t worth it. The decision goes directly against CEO Marissa Mayer’s strategy, which could signal trouble ahead for her (or the company). The silver lining? Following the announcement, Yahoo shares jumped 2.7%.
TODAY IN TECH
Qualcomm Gets What’s Coming
There’s a good ol’ fashioned monopoly brewing within chipmaking giant Qualcomm—and the EU is having none of it. After mounting charges involving predatory pricing techniques such as illegally paying large customers to avoid buying their competitors’ chips and dumping the market with below-cost chips to drive out competitors, Qualcomm got slapped with fines of up to 10% of its global revenue. That’s what you get when you mess with the free market. Rule number one of capitalism: let there be competition.
- Disney doubles ownership stake in Vice to 10%
- Morgan Stanley to take $150 million charge, cut 1,200 jobs
- Dow Chemical and DuPont in merger talks
- Norfolk Southern dismisses Canadian Pacific’s new bid
- Monday: H&R Block Earnings
- Tuesday: Job Openings and Labor Turnover Survey; Krispy Kreme Doughnuts Earnings
- Wednesday: Costco, Lululemon, Men’s Wearhouse Earnings
- Thursday: Adobe Earnings; Weekly Jobless Claims; Import Prices
- Friday: Retail Sales; Producer Price Index; Consumer Sentiment
“Rutgers is Big” is New Jersey’s new slogan, with Rutgers now well established in the Big Ten Conference since joining in 2014—but going big comes with big problems and even bigger spending:
- In case you hadn’t heard, Rutgers’ athletics situation isn’t exactly in fine form: its men’s basketball coach was fired in 2013, two athletic directors were fired in the last couple years, and last week it fired its football coach. That’s a lot of firing.
- Big Ten coaches demand more money, larger staffs and better facilities. Rutgers is expected to pay $100 million for renovations and facility improvements, but could get as pricey as $300 million.
- On the bright side, Rutgers should be able to cover these expenses soon enough, with its cut of revenues projected to be around $40 million per year.
INTERVIEW QUESTION OF THE DAY
Two companies are identical in earnings, growth prospects, leverage, returns on capital and risk. Company A is trading at a 15 P/E multiple, while the other trades at 10 P/E. Which would you prefer as an investment? (Answer #10)
BUSINESS TERM OF THE DAY
Participatory Notes — Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.
FOOD FOR THOUGHT
A Reuters/Ipsos poll showed on Tuesday that about 7 percent of U.S. adults plan to give the Apple Watch as a gift this holiday season, including current owners.