Tag: Business

Tencent vs. Toutiao and Tencent’s Core Asset

Just two days ago, one of the most popular growing app China “Douyin/Tiktok” (owned by ByteDance, formerly known as Toutiao) was founded to be blocked to login with WeChat (owned by Tencent) for new users.

The two old king in social apps is fighting the rising new star.

In March 2018, WeChat global MAUs surpassed 1 billion.

Douyin said its global MAUs is over 500 million in July 2018.

Source: Inkstone, July 2018

Tencent’s WeChat has been on the market way earlier (since 2011). Douyin was launched in Sep 2016 but its growth has been so terrifying that Tencent has adopted several defensive actions, including blocking sharing Douyin links in WeChat.

Tencent has also backed Qutoutiao to combat with Jinri Toutiao (Toutiao’s flagship and first product) and Weishi for Douyin.

Now the war has escalated. Toutiao launched a new social app “Duoshan” to challenge the King and Tencent blocked WeChat login for Douyin.

Duoshan App | Source: TechCrunch

Things are just getting started. But it reminded me of the 3Q war in 2010 between Tencent and Qihu360. Tencent didn’t have WeChat yet and relied on its QQ platform (the previous King).

Tencent vs. Qihu360 | Source: tech.sina.com.cn

During the war, one particular action by Qihu was seen by Pony Ma (Tencent founder and CEO) as the most threatening and he forced users to log off QQ if they don’t uninstall Qihu.

The key in that situation and in Ma’s mind is the copy of social map. The full connections between almost every relevent Chinese internet user.

This is probably what Ma values most and is one of Tencent’s core secrets.

That is what Toutiao is trying to obtain with Duoshan and Douyin today ina different way than Qihu) – the social map of almost every relevant Chinese (young) mobile users. And those would be the future Chinese internet revenue sources/assets/reserves.

The war will continue to unfold and Toutiao is much more powerful than Qihu. Toutiao is one of the most valued private companies in the world, but it is also taking on Baidu for news feeds and ads – multi-battleground just like Uber.

Airline Operation Results 2017 & 2018

Wrote a little python… to extract the monthly operation results from airlines, and calculated load factor change, RPM change and ASM change.

  • RPM = Revenue passenger miles, and its percentage change year-over-year
  • ASM = Available seat miles, its percentage change year-over-year
  • Load factor = RPM / ASM, its change year-over-year
  • RPM_g = RPM(t) / RPM (t-12) – 1
  • ASM_g = ASM(t) / ASM (t-12) – 1

I did Alaska and Southwest tonight and will add more…

Data Download:

Alaska Air Group operation results

Southwest Airlines operation results

US Government Shutdown – an Incomplete List of Direct Effects in Business

On Jan 10, Fed Chair Jerome Powell commented at the Economic Club about government shutdown…

In the short term, if government shutdowns don’t last very long, they have typically not left much of a mark on the economy… A longer shutdown is something we haven’t had. If we have an extended shutdown, and I do think that that would show up in the data pretty clearly,… we would have a less clear picture into the economy if it were to go on much longer.

Here is an incomplete list of effects in business…

Lowered iPhone Sales Forecast and More

Since Apple announced that it would stop reporting the iPhone unit sales number during Q3 earnings call, things have not become easier.

iPhone Ban in China

The fight between Qualcomm and Apple has led to a sales ban on older iPhone models in China, ordered from a Chinese court (福州市中级人民法院). The case was filed against Apple in China in late 2017, saying the iPhone maker infringed patents on features related to resizing photographs and managing apps on a touch screen.

Apple said it planned a software update that would solve the issue; also, the ban would likely take time to enforce, according to Reuters.

iPhone Ban in German

In German, Apple will be pulling iPhone 7 and iPhone 8 models from its stores there following a win for Qualcomm in the District Court of Munich, which ruled that Apple’s devices were infringing on Qualcomm’s intellectual property related to power savings in smartphones. (The Verge)

Qualcomm said on Thursday (Jan.3) that it posted security bonds of 1.34 billion euros ($1.52 billion) to enforce the German court order.

Apple Outlook Cut Citing Weaker iPhone Demands in China

On Jan 2, a letter from Apple CEO Tim Cook to investors said sales will be about $84 billion in the quarter ended Dec. 29, down from earlier estimates of $89 billion to $93 billion. Apple posted sales of $88.3 billion in the fiscal first quarter a year earlier, so the new forecast would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011. (Bloomberg)

Apple shares fell 10% to $142.19, the biggest drop in almost six years, the next day.

In the letter, Cook said Apple’s gross margin will be approximately 38%. (also discussed in a previous post about Apple’s pricing strategy)

Chinese Phone Makers Gaining In Zero-growth Market

Although 2018 Q4 numbers are not yet available, Q3 numbers tell the same story. According to IDC Quarterly Mobile Phone Tracker on Nov 1.

Company 3Q18 Shipment Volumes (millions) 3Q18 Market Share 3Q17 Shipment Volumes (millions) 3Q17 Market Share 3Q18/3Q17 Change
Samsung 72.2 20.3% 83.3 22.1% -13.4%
Huawei 52.0 14.6% 39.1 10.4% 32.9%
Apple 46.9 13.2% 46.7 12.4% 0.5%
Xiaomi 34.3 9.7% 28.3 7.5% 21.2%
OPPO 29.9 8.4% 30.6 8.1% -2.1%
Others 119.9 33.8% 149.8 39.6% -19.9%
Total 355.2 100.0% 377.8 100.0% -6.0%

And in Gartner’s December report…

Vendor 3Q18 Units (thousands) 3Q18 Market Share (%) 3Q17 Units (thousands) 3Q17 Market Share (%)
Samsung 73,360.1 18.9 85,605.3 22.3
Huawei 52,218.4 13.4 36,501.8 9.5
Apple 45,746.6 11.8 45,441.9 11.8
Xiaomi 33,219.7 8.5 26,853.2 7.0
OPPO 30,563.4 7.9 29,449.2 7.7
Others 153,960.0 39.6 159,742.0 41.6
Total 389,068.2 100.0 383,593.4 100.0

What is good for Apple…

From Cook’s letter, we know Apple’s wearables sales grew by almost 50% year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers.

2019 – A Year of Alliance?

As the first week of 2019 developed with JPM Healthcare Conference in San Francisco and CES in Las Vegas, several alliances across big companies attracted attentions. This might be a year of further cooperations as free growth is not possible and some major developments need different domain knowledge & power.

Intel & Facebook – AI chips (new Nervana Neural Network Processor for Inference) in the second half of this year, according to Reuters, and following the previous collaboration.

Qualcomm & Ford – demonstrating driving situations utilizing C-V2X direct communications, following last year’s partnership announcement.

Celgene & Bristol-Myers Squibb – collaboration-like merger for a stronger presence in oncology & immunology. (news release)

GM & DoorDash – deliver food in self-driving cars. (CNN)

and last month…

Starbucks & UberEats – expanding the partnership to more than 2,000 stores in the United States next year, about a quarter of all of the company’s locations in the country. (TechCrunch)

The Race in Aerospace – Positions of Private Equity Firms

~$40bn Apollo acquisition – GE Capital Aviation Services (GECAS), GE’s aircraft leasing operations

  • Bidder: Apollo, an offer as much as $40 billion according to Bloomberg & Reuters
  • GECAS has a fleet of more than 1,900 planes, which it provides to airlines under long-term leases.
  • 1/4/2019

~$1bn KKR investment – Altavair, focusing on the acquisition of new and used commercial aircraft for leasing to passenger airlines and cargo operators

  • Investor: KKR, $1 billion capital commitment to acquire commercial aircraft in partnership with Altavair + a 50% interest in Altavair; Altavair will be KKR’s partner for aircraft leasing investments going forward
  • Since its inception in 2003, Altavair has completed over $8 billion in commercial aircraft lease transactions with over 40 airline customers in 27 countries representing over 200 individual Boeing and Airbus aircraft
  • 1/3/2019, KKR Commits to Invest $1 Billion with Altavair

~$5bn Carlyle acquisition – StandardAero, largest independent maintenance, repair and overhaul (MRO) providers

  • Bidder: Carlyle, for more than $5 billion (Reuters) from Veritas
  • Veritas acquired StandardAero from Dubai Aerospace Enterprise Ltd (DAE) for $2.1 billion, including debt, in 2015
  • Carlyle first acquired StandardAero in 2004. In 2007, DAE simultaneously purchased StandardAero and Landmark Aviation, also an aircraft maintenance services company, from Carlyle in a transaction valued at $1.8 billion, including debt.
  • 12/18/2018, The Carlyle Group to Acquire Leading Aircraft Engine MRO Provider StandardAero from Veritas Capital

~$15bn Apollo acquisition – Arconic (ARNC), aluminum products used around the world by aerospace manufacturers

  • Bidder 1: Blackstone, Carlyle, Onex and Canada Pension Plan Investment Board
  • (winning) Bidder 2: Apollo, seems winning with a potential acquisition price of $22; also considered is a spin-off of its cladding operation with potential liability from the Grenfell Tower fire of two years ago.
  • 10/8/2018, early report on bidders
Arconic in 2018 | Source: Bloomberg

Half of the 2018 Top 10 Movies in US Are Made by Disney…

2018 Top 10 movies in US

Here is the list by gross sales in US, according to boxofficemojo.com

Rank Movie Title (click to view) Studio Total Gross / Theaters Opening / Theaters Open Close
1 Black Panther BV $700,059,566 4,084 $202,003,951 4,020 2/16 8/9
2 Avengers: Infinity War BV $678,815,482 4,474 $257,698,183 4,474 4/27 9/13
3 Incredibles 2 BV $608,581,744 4,410 $182,687,905 4,410 6/15 12/13
4 Jurassic World: Fallen Kingdom Uni. $416,769,345 4,485 $148,024,610 4,475 6/22 10/4
5 Deadpool 2 Fox $318,491,426 4,349 $125,507,153 4,349 5/18 10/18
6 Aquaman WB $270,596,781 4,184 $67,873,522 4,125 12/21 –
7 Dr. Seuss’ The Grinch (2018) Uni. $269,848,350 4,141 $67,572,855 4,141 11/9 –
8 Mission: Impossible – Fallout Par. $220,159,104 4,395 $61,236,534 4,386 7/27 10/18
9 Ant-Man and the Wasp BV $216,648,740 4,206 $75,812,205 4,206 7/6 11/1
10 Solo: A Star Wars Story BV $213,767,512 4,381 $84,420,489 4,381 5/25 9/20

* BV (Buena Vista) was the brand name which was historically often used for divisions and subsidiaries of The Walt Disney Company, whose primary studios, the Walt Disney Studios, are located on Buena Vista Street in Burbank, California

Top 3 are all from Disney, as are #9 & #10, making Disney occupy half of the Top 10 seats of best-selling movies in US.

And according to ComScore, 2018’s movie business hit all-time benchmarks of $11.9 billion in North America and $41.7 billion globally, with Disney taking in nearly a fifth of that figure. (Variety)

Among Disney’s domestic box office of $3.09 billion, its top 3 got ~$1.99 billion (64.32%), top 5 got ~$2.42 billion (78.25%).

Besides, Disney’s movies in Top 10 all have rating of 7.0 or above, averaging at ~7.56 on IMDb (beating the Top 10 average of 7.35)

2018 US Top 3 Movies | Source: IMDb

Overall…

Total US movie sales is barely growing. The figures below are not inflation-adjusted.

But the number of movie productions is increasing, partially due to a lack of funding after financial crisis (bottomed in 2009 with 521 movies that year).

Yearly US Box Office 2008-2018 | Source: boxofficemojo.com

As streaming is disrupting the market, increasing the number of production seemed to be a way to make up for the total revenue?

Then expenses are up and industry margin is low. It is a sure thing that movies are hard to survive alone.

Then no wonder the consolidation kicked in.

Disney bought Marvel for $4 billion in late 2009, bought Lucasfilm for $4 billion in late 2012. Before the financial crisis, Disney also got Pixar in a $7.4 billion in stock.

With the completion of $71 billion acquisition of Fox, Disney will add X-Men and Avatar to its list of movie series.

Warner Bros. will be under a new umbrella – AT&T’s, together with HBO and Turner.

Universal has been under Comcast since 2011.

Paramount is under Viacom and has teamed up with Netflix.

Movie is not a studio business anymore.

Tesla Model 3 Sales in 2018 Q4 – Not so Exciting

Model 3 has Little QoQ Growth

Tesla had very impressive numbers in Q3, when Model 3 delivery (55,840) was almost tripled from Q2 (18,440).

While no one is expecting another jump, the Q4 numbers are kinda lackluster, especially when adding Model 3 delivery and in transit numbers.

Tesla shares fall 9% on Wednesday when those numbers were reported.

$2,000 Price Cut and Phase-out of Tax Credit

Tesla also announced a price cut of $2,000 for Model S, Model X and Model 3 in the US. The move will partially offset the phase-out of the $7,500 federal tax credit for EV.

[Phase-out will start in the second calendar quarter when the manufacturer has 200,000 plug-in registered in US. The credit is reduced to $3,750 for the next 6 months, then to $1,875 for the next 6 months before expiring completely.]

Source: InsideEVs

According to InsideEVs’ estimate, Tesla hit the 200,000 first in the second half of 2018, while General Motors was second with a breakout month of sales for the Bolt and Volt in November 2018.

The next four manufacturer in EV are Nissan (126,875), Ford (111,715), Toyota (93,011), BMW (79,679).

A combination of flat delivery + in transit Model 3, and a price reduction, warned people about the actual demand for Model 3.

Good news are: 1) people may just be waiting for the basic Model 3, aka $35,000 version that Elon touted but analysts said money-losing for Tesla; 2) Tesla is still way ahead in the EV market

2018 Monthly Sales Chart