Netflix To Compete With Nigerian ‘Netflix,’ Plateauing Yahoo! Revamps Their Business Strategy

morning-brew (1)

Congrats to Walter T., a retired colonel law enforcement officer from Maryland, for winning the Brew’s second-ever weekly quiz prize! Get ready: Round 3 is coming up on Friday!
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“Water…electricity, why would you do that? But as you think more about it, it actually makes a lot of sense.” — Ben Cutler, an engineer for Microsoft’s Project Natick. Microsoft has been testing an underwater data center in an effort to cool down computers.

MARKET SNAPSHOT
Big Picture

  • U.S. markets settled mixed, with the Dow and S&P closing lower thanks to declines in oil and China’s factory sector contracting for the sixth month in a row

Market Movers

  • Twitter jumped over 6% after it was reported that investor Marc Andreessen and private equity firm Silver Lake were interested in acquiring the company—but Silver Lake adamantly denied the rumor
  • Chipotle shares staged a 4% rally after the CDC declared that the chain’s E. coli outbreak has mercifully ended
  • Wood-flooring company Lumber Liquidators saw its shares sprout 10% after being fined $13.2 million by the DOJ for importing illegal wood—less than expected

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U.S. MACRO

 

Saving Money = Slowing the Economy

Some important information on consumer behavior came out yesterday, but it wasn’t exactly what we wanted to hear. Despite incomes rising in December for the ninth month in a row, it didn’t seem to make anyone want to spend more. In fact, consumers spent slightly less, while the amount of money saved increased to 5.5%, a three year high. While it might look nice to have money in the bank, it doesn’t exactly bode well for an economy that needs consumers to break out their wallets to keep growing.

 

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CORPORATE PRIMER

Is It Too Late to Say Sorry?

Actions speak louder than words, and Yahoo CEO Marissa Mayer is finally realizing the importance of this phrase. Since assuming the role in 2012, Mayer promised growth to investors, but the company has merely plateaued in response. But take heart, Brewers, a proposal is in the works that will alter Yahoo’s business strategy: it involves terminating several business units on top of cutting 15% of its workforce. It’s a bold move by Mayer; the only problem is she’s three years late.

Google > Apple

Following some very solid earnings, Alphabet stock jumped over 5% in after-hours trading—surpassing Apple to become the world’s most valuable company (pause for effect). The main takeaway: Google’s core internet business (e.g. search, YouTube, Android) had a stellar year, with revenue growth accelerating 14%. An interesting side effect of the Alphabet reorganization is the transparency to the “Other Bets” business line, which includes long-shot businesses like Nest, Fiber high-speed internet and its health care subsidiary. The bets haven’t paid off yet as the section posted an operating loss of $3.1 billion, but that didn’t ruin the fun.

Abbott + Alere

Yesterday, Abbott Laboratories agreed to purchase diagnostics-testing company Alere for nearly $5.8 billion. The historic company (fun fact: Abbott developed the first HIV blood test in 1985) had a rough fourth quarter, with profits down 15% as a strong dollar took a bite out of its expansion to emerging markets. In other words, the acquisition came just in time: the combined business will save around $500 million per year in pre-tax savings—a cure to Abbott’s fourth-quarter blues.

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OTHER STORIES

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ECONOMIC CALENDAR

  • Monday: Alphabet (+), Aflac (+) Earnings; ISM Manufacturing Index (-); Personal Income and Outlays (+/-)
  • Tuesday: Chipotle, Yahoo, Dow Chemical, Exxon, Ferrari, Gilead, Keurig Green Mountain, Match Group, Michael Kors, Pfizer Earnings; Motor Vehicle Sales
  • Wednesday: General Motors, GoPro, Yum Brands, Buffalo Wild Wings, Comcast Earnings; Private Employment Report; ISM Non-Manufacturing Index
  • Thursday: LinkedIn, Lions Gate Entertainment, Phillip Morris, Ralph Lauren, News Corp, Cigna, Clorox, ConocoPhillips, Deckers, Dunkin’ Brands Earnings; Weekly Jobless Claims
  • Friday: January Jobs Report; Tyson Foods Earnings

NIGERIAN NETFLIX

You might recall that Netflix recently announced a global expansion that will include African countries, but it turns out the streaming power already has some competition. iROKO TV, a streaming service that specializes in Nigerian “Nollywood” content, has just raised $19 million from European companies Canal+ and Kinnevik AB. Here’s a bit more on this burgeoning market:

  • iROKO TV is known as the “Netflix of Africa,” and plans to grow by producing 300 hours of fresh content this year and doubling that by 2018.
  • Africa has a growing consumer class that’s interested in such content, but the issue of unreliable internet connectivity still remains a major hurdle.
  • This clearly hasn’t stopped foreigners from watching, though—55% of iROKO’s audience comes from outside Africa.
  • But there’s a light at the end of the tunnel: smartphone usage is on the rise in Africa, and the region is trending towards expanding internet access for all.

INTERVIEW QUESTION OF THE DAY

Three envelopes are presented to you. One contains a job offer and the other two contain rejection letters. You pick one of the envelopes. The interviewer then shows you the contents of one of the other envelopes, which is a rejection letter. The interviewer now gives you the opportunity to switch envelope choices. Should you switch? (Answer)

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BUSINESS TERM OF THE DAY

Vacancy Rate — A numerical value calculated as the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time.

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FOOD FOR THOUGHT

Zero — The number of initial public offerings (when a company goes public) in January, the first IPO donut month since way back in September 2011.

 

 

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