Hey Snackers,
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Stocks dipped yesterday, led by the techy Nasdaq, as cooling banking fears made investors less hopeful that the Fed could cut rates this year. Rising bond yields also put a damper on stocks.
Alibaba plans to split into six companies to position itself for a Chinese tech comeback
Jack’s back… but Baba’s breakin’ up. A day after cofounder Jack Ma was finally spotted in China again, Alibaba (aka the Amazon of China) said it was splitting its biz into six independent companies. Refresher: Alibaba.com connects 1B+ buyers/sellers, but Alibaba the company is much more than e-comm — offering services like cloud computing, logistics, and entertainment. Now Baba’s gearing up for a breakup:
New focus: Each Alibaba-held company will have its own C-suite and be able to IPO independently. Units include cloud, e-comm, logistics, and media.
Less trouble? Alibaba shares jumped 14% yesterday on hopes that the breakup would ease China's regulatory concerns over its power. Smaller companies = less of a threat.
Beijing’s “tech rectification”… means tech’s gotten #rekt. Over the past two years China has cracked down on dozens of tech companies, levying big fines and imposing strict anti-monopoly laws to reel in their influence. In 2021, Baba was fined a record $2.6B after the gov’t said it failed to comply with anti-monopoly laws. Fintech giant Ant Group (1.3B+ users) was forced to halt its $35B mega-IPO. The country’s crackdown plunged the value of Chinese tech stocks and contributed to its slowest GDP growth in decades.
- The regulatory tide may be turning: DiDi (the Uber of China) got the gov’t green light to relaunch its biz after an 18-month ban.
Getting smaller can make you stronger… By breaking into smaller businesses, Baba could avoid being seen as too dominant, which could mean less scrutiny (and fewer penalties) from Chinese regulators. Keeping biz units separate could also help execs focus on industry-specific growth, rather than juggling several balls at once. If Baba’s split goes well, others could follow.
Disney and others backtrack on the metaverse as “the future of entertainment” gets old
No more meta Mouse House… Entertainment all-star Disney reportedly laid off the 50-person team leading its dive into the metaverse. Formed last year, the group was partly responsible for what then-CEO Bob Chapek called the "next great storytelling frontier" (picture: immersive fantasy sports, digital theme-park rides, meta-movies). The cuts are only a sliver of 7K planned layoffs as Disney slashes costs and tries to make its streaming biz profitable.
Meta-messy… Disney is just the latest company to see its lofty metaverse goals get squeezed under the IRL weight of rising interest rates and a corresponding shift from #growth-mode to #profit-first. Microsoft is said to have dissolved its 100-person, manufacturing-focused metaverse team after four months in operation. And last month Tencent reportedly dropped its metaverse-adjacent hardware and software VR effort. And then there's Meta:
Reality bites: Reality Labs, the business unit responsible for Meta's metaverse ambitions, lost nearly $14B last year.
Faceplant: After quarterly profit plunged, CEO Mark Zuckerberg introduced the company's "year of efficiency" — which could translate to a meta-vestment pullback.
New buzzword: This month Zuck wrote that AI, not the metaverse, is now Meta’s "single largest investment." Last month Meta released its large language model (LLaMa).
Big bets don't have to be all or nothing… as Disney's mouse-sized metaverse move makes clear. Shifting macro conditions have sent media and tech titans scrambling away from their metaverse bets. Companies like Disney were smart not to overhaul their entire biz. But the trend doesn't mean the metaverse is dead on arrival. Roblox's no-headset-required take on the metaverse is booming, but remains a far cry from the "next chapter of the internet" hyped by Zuck. Still, it could eventually be enough to turn a profit.
What else we’re Snackin’
BNPL: Apple intro'd its buy now, pay later service, Apple Pay Later (missed opp: iPay Later). It'll let users split purchases into four payments over six weeks. Rival Affirm shares dropped 10% on the news.
Green: Walgreens shares popped after better-than-expected quarterly sales growth, but profit fell on fewer Covid tests and reduced pharmacy hours at hundreds of stores where staffing shortages linger.
Cleanup: The Labor Department called Dollar General a “severe violator” of workplace-safety standards. Since 2017, OSHA said it found 111 violations (obstructed fire exits, aisle clutter) and has imposed $15.5M in fines.
Build: Epic Games announced “Creator Economy 2.0” to share a sizable 40% of “Fortnite'' revenue with users who build in-game islands (based on how much engagement they get). It’s hoping to attract more players/creators.
Update: The DOJ alleged FTX cofounder Sam Bankman-Fried bribed a Chinese official with a $40M crypto payout to unfreeze Alameda Research accounts. SBF remains under house arrest and is facing 13 counts.
Wednesday
- Earnings expected from Cintas, Paychex, and Planet Labs
Authors of this Snacks own shares of Apple, Disney, Amazon, Uber, Microsoft, and Planet Labs
ID: 2818185