DealBook Briefing: Apple Is Big, but Just How Big?

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DealBook Briefing: Apple Is Big, but Just How Big?


2017-12-21 17:58:09

When adjusted for inflation, Apple’s market capitalization just recently surpassed Microsoft’s all-time high. At the heights of the dot-com bubble in 1999, Microsoft’s market capitalization peaked at $647 billion. In today’s dollars, that’s $901 billion. General Electric’s value in 2000 hits $848 billion when adjusted for inflation.

By another measure, Apple’s size is even less impressive. Apple’s share of the total stock market doesn’t even rank in the top 20 going back to 1925. Consider that in May 1932, AT&T constituted 13 percent of the entire stock market — more than five times higher than Apple’s proportion today. In fact, Apple shares represented a larger share of the total stock market in September 2012 than they do now, 3.2 percent compared with 2.5 percent today.

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Apple Is the Most Valuable Public Company Ever. But How Much of a Record Is That?

Its market capitalization is now worth more than the entire G.D.P. of Turkey, and last month, when adjusting for inflation, pushed past Microsoft’s high point set during the height of the dotcom boom.



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Is the iPhone X reversing Apple’s market share slide in China?

Morgan Stanley made the tech giant its top stock pick for 2018. The reason? What it sees as Apple’s growing share of China’s smartphone market.

That goes against the recent trend, in which cheaper smartphone rivals have taken market share away from Apple in China.

Here’s a breakdown of Morgan Stanley’s key points (note that Morgan Stanley’s data is through Nov. 19, when iPhone X had been on sale for just 16 days.):

• “iPhone X adoption in China is on a faster pace than the iPhone 8 or 8 Plus.”

• “Significant pent-up demand” for iPhone upgrades “from the base of 2+-year-old iPhone owners”

• Apple has a 57 percent retention rate among iPhone users when they upgrade. That’s 20 percentage points higher than any other brand in China.

• Apple’s net switching rate, “or percentage of non-iPhone smartphone owners that switched to an iPhone minus the percentage of iPhone owners that switched away to a different smartphone brand,” increased in China to 9.2 percent during the four-weeks prior to Nov. 19.Only one other brand in China had a positive net switching rate over that period.

In conclusion: “Ultimately, these data points show that faster iPhone X penetration, coupled with increasing switching rates to Apple, have accelerated market share gains for the iPhone in China.”

Why is China important to Apple? IPhone sales accounted for more than 55 percent of Apple’s revenue last quarter, while Greater China accounted for nearly 20 percent of company’s sales. But Apple’s share of China’s smartphone market has been sliding, down to about 7 percent from an estimated 16.5 percent in late 2014.

Swiss regulators slap JPMorgan for serious shortcomings in 1MDB case.

Swiss financial watchdog FINMA said on Thursday the Swiss subsidiary of U.S. bank JPMorgan had committed serious anti-money laundering breaches in relation to Malaysian sovereign wealth fund 1MDB, Reuters reported.

From FINMA’s statement:

• “Enforcement proceedings conducted by FINMA between May 2016 and June 2017 uncovered serious shortcomings in the anti-money laundering controls of J.P. Morgan (Switzerland) Ltd in connection with business relationships and transactions associated with the allegedly corrupt Malaysian sovereign wealth fund 1MDB.”

• “The bank failed in particular to identify the money-laundering risks relating to cash flows between business accounts and personal accounts.”

• “In one case, it credited hundreds of millions of U.S. dollars from the 1MDB sovereign wealth fund, allegedly earmarked for the purchase of a company, to the personal account of an individual with close ties to a 1MDB business partner.”

JPMorgan’s statement:

• “The resolution announced by FINMA relates to matters that took place many years ago in the Swiss private bank, and since that time we have increased training, added staff and made improvements in monitoring and surveillance.”

FINMA, which did not impose monetary penalties on the bank, has appointed a monitor “to carry out an on-site review of the appropriateness and functioning of the bank’s controls and monitor them on an ongoing basis.”

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This is a Long Island iced tea, and not a way to exploit blockchain technology or other elements of digital currencies.

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Thomas Patterson for The New York Times

This is the world we live in now.

Shot:

Long Island Iced Tea Corp. (NasdaqCM: LTEA) (the “Company”), today announced that the parent company is shifting its primary corporate focus towards the exploration of and investment in opportunities that leverage the benefits of blockchain technology. In connection with the shift in strategic direction, the Company has approved changing its name from “Long Island Iced Tea Corp.” to “Long Blockchain Corp.” and has reserved the web domain www.longblockchain.com.

Chaser:

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See also: “SkyPeople Juice International” became “Future

Group” — and briefly saw its stock price soar.

— Michael J. de la Merced

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Representative Kevin Brady, Republican of Texas, speaking at a news conference yesterday.

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Michael Reynolds/European Pressphoto Agency

How the carried interest tax break survived.

When asked, Gary Cohn blamed unidentified lawmakers and a well-organized lobbying effort by the private equity industry. As it turns out, he wasn’t completely wrong, according to the WaPo.

Lobbyists for private equity, venture capital and real estate investors held weekly organization conference calls. Then they worked lawmakers.

More from Tory Newmyer of the WaPo:

Long before congressional tax writers began detailing their proposals, the industry groups helped recruit 22 House Republicans to write to House Ways and Means Committee Chairman Kevin Brady (R-Tex.). Their June 13 letter, spearheaded on the Hill by Rep. Richard Hudson (R-N.C.), urged the panel not to “arbitrarily punish investors in real estate, venture capital, private equity and other partnerships.” The tax package, they wrote, needed to bolster “long-term investment in American companies.”

Twenty-two lawmakers in the House — and the support of Representative Kevin Brady of Texas, who was a primary writer of the House legislation, was enough to potentially block that chamber’s bill.

— Michael J. de la Merced

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President Trump celebrated the passage of the tax overhaul on Wednesday with members of Congress outside the White House.

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Doug Mills/The New York Times

A merry “Taxmas,” but who’ll get the bigger present?

In a surely coincidental series of announcements, several companies — including AT&T, Comcast, Wells Fargo, Fifth Third Bancorp and Boeing — announced that they were giving their employees bonuses or higher wages, and increasing investment in light of the passage of the Republican tax bill.

An aim of the tax bill is to help American companies, in the belief that they will in turn bolster the economy as a whole. (Justin Fox of Bloomberg View writes that AT&T’s bonuses aren’t a gimmick, but a natural consequence of a corporate tax cut.)

But skeptics have asserted that those companies really just want to get on President Trump’s good side. (AT&T, for example, is seeking approval for its Time Warner deal despite a lawsuit by the Justice Department. At a news conference, Mr. Trump praised AT&T’s bonus and capital investment plans.)

Some back-of-the-envelope calculations, courtesy of Binyamin Appelbaum of the NYT:

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A bigger question: How long can any economic stimulus from the tax bill last?

From Patricia Cohen of the NYT:

“The really hard question a year from now is going to be is how much of the miniboom we see is just an acceleration of stuff that was going to happen anyway or additional investment that is really going to spur the economy,” said Mihir A. Desai, a professor of finance at Harvard Business School.

The tax flyaround

• Expect more mergers next year, as clarity on tax policy settles in and penalties for selling businesses fall away, Aaron Back writes. (Heard on the Street)

• The tax overhaul doesn’t change the fact that automation will still cause job losses, and that giants like Apple and Alphabet will still pay lower taxes than nascent rivals, Farhad Manjoo writes in his latest State of the Art. (NYT)

• Highly indebted companies like Dell are still worried about the limits on deductions tied to corporate debt. (WSJ)

• Daniel Shaviro of N.Y.U.’s School of Law says of Mr. Trump, “I’m not even aware of a single provision in the bill that disadvantages him or his family, other than the change to state and local tax deductibility.” (WaPo)

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Simon Dawson/Reuters

What will the European court loss mean for Uber’s valuation?

The finding by the European Court of Justice that the ride-hailing giant is a transportation service instead of an online platform throws a hurdle into Uber’s expansion plan. The company won’t be kicked out of any countries, but the ruling does prevent the rollout of any services involving nonprofessional drivers — like UberPop (or UberX in the United States).

The decision comes as a group led by SoftBank is trying to buy out existing investors through a tender offer. Expect some negotiating between the two sides up until the last minute of the offer period, but SoftBank has gotten a bit more negotiating leverage thanks to the E.C.J.

Coming up fast in the rearview mirror: Didi Chuxing, Uber’s frenemy in China, has just raised $4 billion from SoftBank and the Abu Dhabi state fund Mubadala. Uber is technically an investor in Didi now, thanks to a truce the two struck last year — but Didi is reportedly weighing an expansion into North America.

It’s time for some math

• Technically, Uber has retained its $68.5 billion valuation because SoftBank’s group has bought $1 billion of new shares at that level.

• But the SoftBank consortium is trying to buy out shareholders at a $48 billion valuation.

• Didi’s new fund-raising round values that company at $56 billion.

Extra credit: Uber has hired Barney Harford, the former C.E.O. of Orbitz, as its chief operating officer.

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Toru Hanai/Reuters

How SoftBank is changing Silicon Valley, continued.

Sequoia, the hugely successful venture capital firm, is raising at least $5 billion for its next growth fund. That target is more than double the size of the V.C. firm’s last fund.

It appears to be a reflection of an increasingly clear fact: When SoftBank has almost $100 billion in its Vision Fund to invest — and can write a $250 million check in one go — more traditional players will be forced to react. One way is to try to go bigger.

As one unidentified V.C. investor told Kara Swisher of Recode:

“It’s made everyone else realize they need more capital, so that SoftBank is not the lead in every deal.”

A different approach: Remember when we reported earlier this week TPG Growth raised only slightly more money for its own new fund? Why not go whole hog? The fund’s managing partner, Bill McGlashan, told Michael: “It’d change the kind of companies we’d invest in.” (Translation: Trying to play in the Vision Fund’s kind of megadeals means taking bigger risks to make the kind of returns that the fund earns now.)

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Tony Dejak/Associated Press

Rolling Stone is the latest trophy for Penske Media.

Penske — which already owns Variety, Deadline and WWD — has paid about $51 million for a majority stake in the onetime music industry touchstone. Rolling Stone was valued at about $100 million.

More from Sydney Ember of the NYT:

Jann S. Wenner, the co-founder of Rolling Stone, will stay on at Wenner Media as its editorial director. His son, Gus Wenner, will remain president and chief operating officer and will also join the advisory board of Penske Media, whose properties include Variety, Deadline and WWD. The companies said Wenner Media would retain “majority control and editorial oversight” of Rolling Stone.

Whom Penske reportedly beat out: James Dolan of Madison Square Garden and the investment firm Rizvi Traverse, according to Variety.

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Bill O’Reilly has said that he “never mistreated anyone.”

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Brent N. Clarke/FilmMagic

The latest in sexual misconduct news.

• Two women who had settled sexual harassment claims with the former Fox News host Bill O’Reilly have joined a defamation lawsuit against him and the network, asserting that they had been wrongfully depicted as liars and extortionists. (NYT)

• The NYT said that it would remove the reporter Glenn Thrush from the White House beat, but would not fire him, after investigating accusations that he had sexually harassed women at previous jobs. (NYT)

• The artist Chuck Close apologized for making insensitive remarks to women after he faced accusations of sexually harassing them when they came to his studio. (NYT)

• Damian Green, one of Prime Minister Theresa May’s top deputies, stepped down from her cabinet after an investigation found that he had made misleading claims about pornography on his work computer. (BBC)

• The presenter Catt Sadler resigned from E! Entertainment because, she said, she was being paid half of what her co-host of “E! News” was making. (Chicago Tribune)

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Dan Kitwood/Getty Images

Even big investors want in on Bitcoin.

Bitcoin is arguably in a bear market — because it has fallen 20 percent off its high point, which was set on Monday. But that hasn’t deterred some of Wall Street’s most sophisticated investors from wanting to dive into the world of digital currencies. (Why? Bitcoin is still up some 1,600 percent for the year.)

From Greg Zuckerman of the WSJ:

Some sizable firms and big-name investors already are involved in bitcoin. Fortress Investment Group owns over $100 million of bitcoin. Horizon Kinetics LLC, a firm that manages more than $6 billion in hedge funds, mutual funds and other products and calls itself “value-oriented and “risk-averse,” has been vocal about its recent purchases of bitcoin and other cryptocurrencies.

The ongoing tale of Bitcoin Cash: Coinbase is investigating claims of insider trading in the Bitcoin offshoot. After the exchange reopened trading in Bitcoin Cash, the digital currency fell, and as of this morning was trading at about $3,632.

The digital currency flyaround

• North Korea is suspected of carrying out a heist at a South Korean Bitcoin exchange, Youbit, that led to the company filing for bankruptcy protection. (WSJ)

• An unidentified trader has made a nearly $1 million bet that Bitcoin will reach $50,000 next year, using options. (WSJ)

• The founder of Litecoin, another digital currency, has sold his holdings. (Reddit)

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Rachelle Ann Go and Jamael Westman, who play Eliza and Alexander Hamilton in the London production of “Hamilton.”

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Matthew Murphy

It’s not Bitcoin, but …

Backers of the Broadway production of “Hamilton,” including the billionaire Len Blavatnik, have made a return of about 600 percent on their investment, according to the FT. Investors in the London production, which officially opens today, expect to collect a similar kind of return.

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Ariel Schalit/Associated Press

Quote of the Day

“The first pill you take is the ‘anti-friendship’ pill. You can be my friend for 30 years, but I’m gonna stab your eyeball out with an ice pick if it gets me more power.”

— Anthony Scaramucci, speaking at a Hanukkah party hosted by Rabbi Shmuley Boteach this week about what it was like to work in the White House, according to Page Six. (It was hard choosing just one quote.)

The Speed Read

• Royal Dutch Shell and Eni will go on trial in March on charges of corruption in a $1.3 billion oil deal in Nigeria. (NYT)

• The zero bonus, or doughnut, could be looming for bond traders as bank revenue from fixed-income sales and trading units has been falling. (FT)

• Facebook job ads, targeted to particular age groups, have raised concerns about age discrimination. (NYT, ProPublica)

• Millions of Americans have been caught up in the debate on repeal of net neutrality rules, but the most vocal and committed activity may have come from digitally savvy teenagers who grew up with an open internet. (NYT)

• Litigation for past misconduct that contributed to the financial crisis could cost European banks more than $100 billion, with several lenders still facing cases that could require billions of dollars to settle. (Bloomberg)

• The special-purpose acquisition vehicle Nomad Foods is in talks to buy Britain’s Goodfella’s Pizza for about 200 million pounds, or about $267 million. (FT)

• A New Zealand regulator blocked the HNA’s planned acquisition of UDC, a finance company, saying that it couldn’t determine which foreign person owned and controlled HNA’s local subsidiary. (WSJ)

• Guggenheim Partners has joined Carl Icahn in opposing a deal for the oil company SandRidge Energy to buy Bonanza Creek. (FT)

• CEFC, a Chinese oil conglomerate, and Penta Investments, a Czech-Slovak financial group, have submitted a joint bid for Time Warner’s Central European Media Enterprises, which could be worth about $2 billion. (Reuters)

• Spotify is expected to receive approval from the Securities and Exchange Commission for the direct listing of its shares on the New York Stock Exchange. (WSJ)

We’d love your feedback as we experiment with the writing, format and design of this briefing. Please email thoughts and suggestions to bizday@nytimes.com.

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