Sprint Drops $200 Million To Buy 33% Of Tidal, Plus President Trump Withdraws The U.S. From The Trans-Pacific Partnership

morning-brew-new

Enjoy your January 24th hand-crafted Brew!

QUOTE OF THE DAY

“[The] claims are baseless” — Qualcomm (-12.72%), firing back after being sued by Apple over patent royalty tactics. Gear up for some good ol’ law and order.
Market Snapshot

  • U.S. markets dropped to kick off the week as the so-called “Trump honeymoon” may be winding down—hey, it couldn’t last forever. And speaking of Trump, he had a busy first Monday…

Sayonara, TPP

…President Trump officially withdraws the U.S. from the Trans-Pacific Partnership. The 12-nation trade deal, which notably excluded China, would have covered 40% of the world’s economy and aimed to strengthen economic ties, boost growth and reduce tariffs. The move is largely symbolic, as the Trump Administration hopes to show that it’s serious about scrapping deals that it feels could hurt the U.S. jobs market. And there’s more where that came from: Trump is also expected to sign an executive order that would state his intention to renegotiate NAFTA—the sweeping free trade agreement between North American powers U.S., Canada and Mexico. There are still a lot of unknowns, but one thing’s for sure as Trump gets to business—no trade deal is safe.

Cue the Antitrust Alarms

…Because down goes Aetna’s merger. The TPP isn’t alone in the “kill it with fire” category: health insurance giant Aetna (-2.72%) had been in talks to buy rival insurance company Humana (+2.24%) for a whopping $37 billion. But (and it’s a big but)…the deal was slapped down yesterday by a federal judge. The reasoning? You probably guessed it: the merger would’ve hurt competition in the health insurance industry. Since promoting competition = protecting consumers’ best interests, this is a win for customers. As for Aetna? It’s definitely taking the L—if the deal falls through as is now expected, it’ll have to cough up $1 billion in a “breakup fee” to Humana (think of it like alimony for companies). And yes, there’s probably more where this came from too: an even bigger “mega-merger” is in the pipeline between two other health insurers (Anthem and Cigna), and we’re thinking Uncle Sam’s not going to like that one either.

Sprint Drops $200 Million on the Music Industry

…And joins forces with Jay-Z’s streaming service Tidal. Yep, you heard that right folks—Sprint (+2.80%) is acquiring a 33% stake in Tidal, marking its entry into the ultra-competitive music streaming industry that includes heavyweights like Spotify and Apple Music. What’s in it for Sprint? It’ll get to offer its customers access to exclusive content and can start using Tidal’s lineup of superstars (like Kanye, Beyonce and Rihanna) for marketing. While Tidal currently only has about one million paying subscribers compared to Spotify’s 43 million, Sprint sees a seat at the table of the biggest revenue source in the music industry as a glass half full. We at the Brew love high quality music at a reasonable price, so we’re always game to see a new competitor shake up the streaming industry.

A Whole Lotta Yahoo

…The spotlight never seems to fade. Despite all the recent shade, Yahoo (+1.13% after hours) came out Monday with strong earnings. While revenue declined year-over-year, the company still smeared Wall Street estimates. Phew. But we still can’t forget about the vast uncertainty that has befallen the once-iconic tech company, which has seen its online presence squeezed by the likes of Google and Facebook. Yeah, it’s those guys again. You may recall Verizon’s $4.8 billion acquisition of Yahoo last year, the same Yahoo once valued at $100 billion. Despite well-received earnings, Yahoo is delaying the closure of the Verizon deal until Q2 2017. Wait, what? A-ha. Remember those massive Yahoo data hacks from 2013 and 2014? Well, the SEC is now investigating whether Yahoo needed to inform investors sooner of the breaches that affected over a billion accounts. Yikes.

Other Stories

Economic Calendar

  • Monday: McDonald’s (+)Yahoo (+)Halliburton (+/-) Earnings
  • Tuesday: Johnson & Johnson, Verizon, Alibaba, Alcoa Earnings; Existing Home Sales; PMI Manufacturing Index
  • Wednesday: AT&T, Qualcomm, Boeing Earnings
  • Thursday: Alphabet, Microsoft, Intel, Comcast, Starbucks, PayPal, Ford, Southwest Airlines Earnings; New Home Sales; Weekly Jobless Claims
  • Friday: Chevron, American Airlines Earnings; Durable Goods Orders; U.S. Q4 GDP (1st Estimate), Durable Goods Orders, Consumer Sentiment

Department Stores Not Feeling the Holiday Joy

The holidays are usually the most wonderful time of the year for retailers; November and December account for as much as 30% of retailers’ sales each year. But 2016 was not so merry for department stores. Due to lower shopper traffic, retailers faced, and we quote, “the worst results since the recession.” Here are the numbers:

  • Overall holiday spending rose 4% to $658.3 billion in 2016, but that growth was a result of a 12.6% rise in online sales. That’s kind of important since department stores still mostly rely on in-store sales, and therefore didn’t see similar growth.
  • Target was a great microcosm of the industry. In November and December, Target’s online sales grew 30%, but same store sales fell 3%. Put it all together, and overall comparable sales fell 1.7%.
  • So how are retailers reacting to the disappointing holiday season? By closing stores: Macy’s and Sears plan to close over 200 stores, JCPenney plans to close nearly 300 stores and The Limited will shut down all 200 of its stores. Amazon claims more and more victims.

Interview Question of the Day

Who profits when you lease a new car? (Answer)

Startup of the Day

Shopping for a car can be fun. However, hanging at a dealership for hours on end working out the financial terms? Not so much. AutoFi is trying to change the customer car-buying experience by making the financing end of the process faster, smoother and simpler. So why is this 2015 startup making headlines now? AutoFi is now working with its first major auto partner: Ford. This partnership will hopefully give us the first real glimpse at online car purchasing.

Food for Thought

Who said NFL viewership is declining? The NFC Championship Game between the Atlanta Falcons and Green Bay Packers proved otherwise after recording a 27.4 Nielsen rating and 46 million viewers, beating out last year’s ratings. Next stop: Super Bowl Sunday.

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