Tim's gamble 🍎
Auto 2.0, biotech M&A, and oversubscribed bids.
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Market summary: 📊
Pretty awesome week so far worldwide, with Indian markets gaining some more on Wednesday and tech stocks globally making new highs. Smart investors seem a bit worried though that the music might stop playing pretty soon.
US:
S&P 500 - up 0.18%
Nasdaq 100 - up 0.57%
India:
Nifty 50 - up 0.85%
Sensex - up 0.87%
Hot from the oven 🔥
1️⃣ Mrs. Bectors knocked it out of the park — the much awaited IPO’s bookings have blown the doors off with the raise oversubscribed by nearly 7 times. Retail drawn to the history of the brand and its extensive market clout particularly in the north-Indian region piled into the company. The company basically makes self-branded cookies, biscuits, sauces etc. in addition to supplying some of the biggest chain restaurants in India with bread, buns and other premade essentials. High quality products, higher-quality business.
2️⃣ GOI pulls out more spectrum — digital-India is hungrier than ever for mobile data, while telcos are anxiously waiting by the sidelines to acquire as much bandwidth as they can to meet demand. So the center has finally approved the auction of some more spectrum in March, mostly in the low-band and mid-band range—basically so that wireless carriers can drive coverage in deeper and deeper parts of the nation. This auction however won’t include any 5G spectrum, which is cautiously reserved for a much grander feast later in the year.
Happenings from camp Cupertino 🍎
Coming out with 5G phones this year was a tough gamble for Apple—except for South Korea, some parts of Europe, and in North America, networks for most parts still use 4G LTE. With weak buildouts, come weak speeds and the benefits of 5G-upgrade are rarely visible. But Tim Apple went with it anyway and early numbers suggest it has been a very successful move.
Sales since launch in Sep 2020 are through the roof, blowing past all expectations. The fact that it's a mild-recession further highlights how impressive the feat is. The holiday quarter sales projections look brilliant, and as a result Apple has ordered nearly 96 million more iPhones for the first 6 months of 2021 from its suppliers—a 30% increase compared to last year.
FYI, for 2018 and 2019, Apple iPhone sales had actually been declining year-over-year. Users were keeping their phones for much longer and shying away from upgrading for virtually no better “features”. Categories like Services and Wearables were driving growth, but now 2021 could see the company firing from all cylinders after all—with iPhones returning to growth, Macbooks and iPads already winning from the work-from-home junta, and services per user obviously going up because we all know that’s no longer “optional”. Tim is looking at a good year and hopefully a retirement on a high.
Now onto some negative news,
The ruckus in Karnataka has been an issue of hot debate in the company’s board room. Apple says it will investigate the allegations made by the workers on why their compensation was held back, which forced them to damage properties worth over ₹400 Cr. Auditors will be sent to KA.
Regardless of whose side you’re on here, these happenings could shed poor light on India near term forcing investors to raise questions such as 1. How do local regulators make it so easy for worker exploitation, if at all there is any? 2. If things go south, as they often do in business, will our capital investments be similarly hurt? (not every company can write off ₹400 crores as a rounding error like Apple and its suppliers can). This can 100% hurt India’s newly formed favourable image on the global stage. Sad.
Auto-races 2.0 baby 🚗
Fiat Chrysler, the famed US brand that makes Jeeps, has doubled up on its game in India by committing to a $150 million fresh investment for a global digital center buildout in Hyderabad—in what appears to be one of the largest hubs for the company outside of North America, focusing exclusively on software, innovation and technology.
Jeep recently made a pompous debut in India, with its distinctly marked SUVs standing out on Indian roads, and consumers loving the “unique” appeal they give out. For decades, foreign car vendors have struggled to crack the Indian auto consumer—a market that is driven by an odd combination of low prices, reliability and prestige. But so far Jeep somewhat seems to be successful in breaking in.
So for FCA it's no surprise that they want to double down and make the most of the wind they’ve caught behind them. In addition to making suppliers and local ecosystem partners excited with the fresh investment, Jeep also gets to make the most of the software talent our shores offer—particularly as cars are becoming a platform for software innovation.
Anyway, the current facility is estimated to add nearly 1,000 new jobs right off the bat and will add more over the next two to three years. The team forming here will form a core part of the R&D division driving broad software driven mobility efforts at FCA—which sells cars under scores of other famous brands. Big win.
Some biotech cozying up for ya 💉
British pharma AstraZeneca (the one making the COVID vaccine for India) will acquire Alexion, another biopharmaceutical company, for $39 billion in cash and stock.
Kinda odd timing for the deal, given AZ’s ongoing efforts with the COVID treatment. Markets seemed a bit stumped too, with Alexion’s stock jumping nearly 40% when the deal was announced. The company is actually very well known for focusing on combating rare diseases with top drugs including Soliris and Ultomiris, which treat blood disorders, allowing AZ to expand and strengthen its footprint into immunology (study of how to make immune systems stronger and robust)—an area of treatment that is emerging out hot, with potential to drive serious profits for corporations.
Notably, this is also Astrazeneca's biggest transaction to date, and it is also the largest pharmaceutical and biotechnology takeover this year. Investors believe as the pandemic fades and markets crawl back a bit, more and more such deals will emerge.
While we’re talking acquisitions,
Human-like bot maker Boston Dynamics will be sold off to Hyundai Motors, confirming the reports that had earlier emerged that the company is exploring a sale. The deal values Boston Dynamics at $1.1 billion, a pittance for the tech and research capabilities its creators built out—basically because nobody can come up with a valid use case right now.
Post deal, Hyundai will hold some 80% stake in the business while SoftBank will hold 20% stake through one of its affiliates. We had written about how BD got here, from one owner to another.
Bottomline: sometimes good tech in itself isn’t enough—even if it's the best in the world. Timing, credible use cases, and market dynamics play an important role too, which mostly decides the difference between a “company” and an “experiment”. Important lessons.
What else are we snackin’ 🍿
🚀 Space X gets Indian influence - US Air Force Colonel Raja Chari, an Indian American will be the chosen commander of SpaceX’s Crew-3 mission scheduled for ISS, a joint effort with NASA and European Space Agency. Raja’s father had immigrated to the US from Hyderabad, and Raja was born in Milwaukee, WI. The mission will go to space next year.
📱 FB slowly making moves - The conditional approvals from NPCI are in, and Whatsapp is slowly making moves on its payment feature. In the latest, the company has partnered with 4 major banks in India to set up the UPI offering, with instant payouts and other infrastructural integrations in place.
Hit that 💚 if you liked today’s issue.
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