Tech Brew Ride Home - Fri. 07/26 - The T-Mobile/Sprint Merger Is Approved

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme right home for Friday, July 26th, 2019. I'm Brian McCullough today. The T-Mobile Sprint merger gets the go-ahead, a whole bunch of odds and ends Apple Stories.

Starting point is 00:00:45 SoftBank announces a new Vision fund, the biggest earnings wrap-up of the calendar quarter. It turns out that Chris Hughes was serious about breaking up Facebook and the weekend long-read suggestions. Here's what you missed today in the world of tech. This has been a weirdly jam-packed newsday for a summer-fetched. Friday, so let's get right into it. The Department of Justice has officially approved the $26 billion T-Mobile Sprint merger. You might recall, one of the things holding up the merger was the notion that the DOJ wanted to somehow get the merging companies to divest enough assets and then combine those assets with assets from other companies to essentially create a fourth major

Starting point is 00:01:30 carrier from scratch to replace the fourth carrier that would be becoming the third major carrier. Well, quoting the Verge. The Justice Department finally approved the deal after DISH reached an agreement with the carriers to acquire Boost Mobile, Virgin Mobile, Sprint's prepaid business, and certain spectrum assets. This will position DISH as the replacement fourth major U.S. carrier that will be lost once T-Mobile and Sprint merge. The two companies will be required to provide at least 20,000 cell sites and hundreds of retail locations to DISH, and the satellite TV provider will also get unfettered access to T-Mobile's network for 70. years as it works to build out a mobile network of its own using the newly acquired assets and spectrum that DISH has held onto for years. DISH has publicly remained silent on

Starting point is 00:02:18 its plans through this entire process, but that is likely to change starting today. With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high-quality 5G networks, McCann Delrahim, Assistant Attorney General of the DOJ's Antitrust Division, said, end quote. DISH is reportedly going to pay $1.4 billion for Sprint's prepaid operations and $3.6 billion for Spectrum, as well as committing to building a 5G network capable of servicing 70% of the U.S. population by June of 2023.

Starting point is 00:02:58 A whole bunch of Apple stories here. First, sources are telling Julie Verhage and Mark German at Bloomberg that, Hey, do you remember that Apple credit card that Apple announced it was partnering with Goldman Sachs to bring out sometime this summer? Well, sources are saying that the credit card will launch in the first half of August, so in a matter of weeks. Quote, that timing means the project is on schedule for the summer release date that Apple first announced in March. March. People who own an iPhone will be able to sign up for the credit card via the wallet app, which will have built-in Apple card support as part of the latest iOS 12.4 update, end quote. And next, President Trump says Apple will not be getting tariff waivers or any sort of tariff relief for MacBook Pro components that are manufactured in China. And the president called on Apple to build products in the U.S. instead. I don't think we mentioned this, but last week through official channels with the U.S. trade

Starting point is 00:04:02 representative, Apple asked the Trump administration if it could be excluded from duties of as much as 25% for Mac Pro parts made in China, things like the stainless steel and aluminum frame, power supply, and some internal cables and circuit boards. You might recall that the Mac Pros were for a time built in Texas, but not so for this latest generation that goes on sale this fall. quote, Apple will not be given tariff waivers or relief for MacPro parts that are made in China, President Trump said in a tweet, make them in the USA, no tariffs, end quote. And finally, it is finally official. Apple announced it has agreed to buy Intel's smartphone modem business for around $1 billion. Quoting the Verge, around 2,200 Intel employees will

Starting point is 00:04:50 join Apple and Apple will acquire IP and equipment from Intel as well. The transaction is expected to close towards the end of the year. Intel won't be getting out of the modem business entirely. It'll still be able to develop modems for PCs, Internet of Things devices, autonomous vehicles, and seemingly anything that's not a smartphone. Intel CEO Bob Swan said the acquisition will allow the company to focus on developing other 5G technologies. The acquisition means that Apple is now well on the way to producing its own 5G modems for its smartphones, rather than having to rely on Qualcomm for the hardware, end quote. And this is what is interesting. Because think about it, what is more strategically important for the production of modern smartphones, at least component-wise, than the cellular modem?

Starting point is 00:05:35 And basically, there's only one major player left in the cellular modem business. That's Qualcomm. So with this deal, Apple can basically secure a runway to producing its own modems in-house. There are something like 17,000 patents coming with this deal, as well as all of those employees and engineers. So Apple can control its own destiny for this crucial component going forward and maybe just maybe be freed from having to do business with and source modems from Qualcomm, which is something that Apple really, really wants to do. Kind of seems like a no-brainer, right? It is Apple's second biggest deal ever in its history as a company. But given how strategically crucial modems are to the iPhone business, it kind of makes the $1 billion price tag. seem like a bit of a steel, doesn't it? I mean, it is interesting that Intel wants to hold

Starting point is 00:06:30 on to the modem business for things like IoT devices and self-driving cars. So it's a win-win for Intel in a way. But really, this buys Apple a roadmap to component independence. How did they get away with only paying $1 billion for that? Literal pocket change, considering that they have around a quarter trillion dollars in cash just kind of sitting around in the bank. Quoting Kyle Weans on Twitter, quote, I can imagine how this negotiation went. Intel. How about $10 billion? Apple. We'll give you $2 billion.

Starting point is 00:07:04 Intel. Apple settles with Qualcomm, yanks the rug out from under Intel. Apple, it's now $1 billion, take it or leave it. Intel. Deal. SoftBank has officially announced its Vision Fund 2, its second Vision Fund, the fund that has completely upended the world of VC investing the world over, SoftBank will commit $38 billion of its own money to the new fund, hoping others will kick in to eventually raise the total for the fund to $108 billion. So first of all, this would make it larger than the original Vision Fund, which was $100 billion in size, and second, by committing the largest chunk of money itself,

Starting point is 00:08:01 SoftBank is signaling that it intends to have more. control over this new fund. If you'll remember, the Saudi Arabian public investment fund was the largest investor in the first vision fund, and there were some disagreements between the Saudis and Masasan about certain investments from that fund, especially in WeWork. Not saying that the Saudis won't kick in this time as well, eventually, but notable that the Saudis were not mentioned as participants, at least in this initial announcement of the new fund. And lastly, who are those mysterious? mysterious others who might kick in to top off the fund, quoting from Bloomberg. SoftBank said the second fund is expected to collect money from Apple, Microsoft, Foxcon,

Starting point is 00:08:43 and the sovereign wealth fund of Kazakhstan. Son also won broad support from Japanese financial institutions with seven identified as signing memorandums of understanding to participate. Zon is aiming to raise a new massive fund every two or three years to take advantage of opportunities he sees in cutting-edge technologies such as artificial intelligence and autonomous driving. Softbank in June disclosed that the initial Vision Fund had earned 62% returns so far after investing $64.2 billion in 71 deals, end quote. Today's show is sponsored by Pixel Union, a world leader in e-commerce design. I'm going to try to do a rapid fire earnings roundup.

Starting point is 00:09:29 Alphabet reported Q2 revenue of $38.9 billion, which was up 19% year over year, year with net income of $9.9 billion up from $3.2 billion year over year. So soup's good, especially after those iffy recent quarters. Alphabet stock is up more than 10% at the time of this writing, and Alphabet also announced a $25 billion stock buyback. In its earnings call, the company said that its cloud business now has an $8 billion annual revenue run rate up from the $4 billion run rate, the company reported in early 2018. Investors do love seeing growth in those cloud businesses, which leads me to Amazon. Amazon reported Q2 revenue of $63.4 billion, up 20% year over year, net income of $2.6 billion, up from $2.5 billion in Q2 of 2018, and crucially,

Starting point is 00:10:25 AWS revenue of $8.4 billion. So on a quarterly basis, it's doing the same thing that Google's cloud is doing on a yearly basis. And that was up from $6.1 billion in Q2 of 2018. And that is what investors have seemed to have noticed. In Q2, AWS revenue grew only 37%, the first sub-40% growth rate quarter since Amazon started sharing AWS numbers. But guess what? That other revenue category where Amazon parks its new ad business on the balance sheet, that was up 37% year over year to $3 billion. Amazon can now claim 8.8% of the U.S. digital ad market. As comparison, Facebook has 19.6% of the U.S. digital ad market.

Starting point is 00:11:16 So in the blink of an eye, Amazon's ad business is about half as big as Facebook's, which is impressive. Amazon's shares are about break-even at the time of this writing, perhaps reflecting the mixed bag there between the ad business and the cloud business. business. And a quick word for Twitter, which reported Q2 earnings that beat estimates with revenues of $841 million, up 18% year over year, and 139 million monetizable daily active users, a new term, M-DOWs, up 14% year over year. At the time of this writing, Twitter's stock is up around 10%. And I wanted to squeeze that mention in here for this reason, quoting Seth Feigerman on Twitter,

Starting point is 00:12:03 True. Facebook and Google have tremendous market dominance in online advertising. Also true? Twitter, Snapchat, and Amazon earnings show they are growing online ad sales at a healthy rate, too, end quote. Interesting data point to take note of as the rumblings of antitrust continue across the land. And speaking of antitrust, remember when Facebook sort of co-founder Chris Hughes made headlines by publicly calling for the breakup of Facebook, saying it had become too powerful. Well, two antitrust academics said that Hughes has joined them in meetings with the FTC, with the DOJ, and with state attorneys general to lay out a potential antitrust case against Facebook, quoting from the New York Times. Mr. Hughes, who made hundreds of millions of dollars from his time at Facebook, has become an outspoken critic of the company's

Starting point is 00:13:01 market power and the need for the government to take action. In a lengthy op-ed article for the Times in May, We are a nation with a tradition of reigning in monopolies, no matter how well-intended, the leaders of these companies may be. Mr. Hughes went on to describe the power held by Facebook and its leader, Mr. Zuckerberg, his former college roommate, as, quote, unprecedented. He added, quote, it is time to break up Facebook, end quote. Time for the weekend long reads suggestions. With that news about Google Photos Light, or whatever that new app was called yesterday, I forgot to mention that Google Photos has now officially joined the billion user club. And how it did so is sort of a surprising story, as Harry McCracken outlines in Fast Company.

Starting point is 00:13:48 Basically, what became Google Photos was salvaged for parts from Google Plus. Essentially, they took the only features that were really working for Google Plus and turned them into Google Photos. So I guess a rare success story for Google in the social networking space, except it's not about succeeding as a social network so much as it is pivoting to a utility. And speaking of successful social features, BuzzFeed has an interview slash profile of the man who built the retweet feature for Twitter. Forget Chris Hughes. If you want to talk about a person who built a social network or part of a social network

Starting point is 00:14:27 and came to regret it, almost entirely, quote, we might have just handed a four-year-old a loaded weapon. Chris Weatherall recalled thinking as he watched the first Twitter mob use the tool he created. That's what I think we actually did. But Weatherill has some ideas for fixing things. To rein in the excesses of the retweet, Wetherall suggested the social media companies turn their attention toward audiences. When thousands of people retweet or share the same tweet or posts, they become part of an audience.

Starting point is 00:14:57 A platform could revoke or suspend the retweet ability from audiences that regularly amplify awful posts, said Wetherall. Quote, curation of individuals is way too hard as YouTube could attest, Wetherall said. But curation of audiences is a lot easier, end quote. And I know I've mentioned this obliquely, but if you've been paying attention, then you might have noticed that Microsoft has pivoted with its Cortana personal assistant. Cortana is basically no longer an Alexa or Siri competitor, at least especially not in the consumer space. It once was a key feature of Windows 10, but now it's being decoupled from Windows 10, and Windows 10 itself is opening up to all assistants, of all stripes from all competitors, seemingly.

Starting point is 00:15:42 So what now is Microsoft's strategy for Cortana? That's the question Tom Warren dives deeply into in The Verge. and I want everyone to read the piece from the New Yorker about the hidden costs of something called automated thinking, which serves as a warning for AI development in a broad sense. It's kind of a brief piece, but it does look into the idea of something that is important. Intellectual debt. I describe intellectual debt as something like this. It's when you make a discovery like scientific or medical discovery, a discovery that works, and yet you kind of don't know why it works. So really think of any advancement that gets results, even if you don't know how or why or what the long-term consequences would be,

Starting point is 00:16:31 but you kind of don't care, you deploy it anyway because it works. Sort of like how we knew that aspirin worked to dull pain for hundreds of years before we finally figured out scientifically how it worked. But again, for 100 years, we didn't care. It just worked. It's sort of an answer's first.

Starting point is 00:16:51 Explanations later sort of situation. That, in short, is intellectual debt. And this piece makes the point that AI is working. It is generating results. But a lot of times, even the makers of the algorithms, even the algorithms themselves, don't know why they work. And then as the field moves forward and you build result after result on top of previous results, you risk creating a world where things will work, you can get answers and results, but you might not know the underlying mechanisms or infrastructure that allow these results to happen, and that creates a risk of blind spots and even malevolent manipulation, possibly. Quote, as machines make discovery faster, people may come to see theoreticians as extraneous, superfluous, and hopelessly behind the times. Knowledge

Starting point is 00:17:46 about a particular area will be less treasured than expertise in the the creation of machine learning models that produce answers on that subject. Just as financial debt shifts control from borrower to lender and from future to past, mounting intellectual debt may shift control too. A world of knowledge without understanding becomes a world without discernible cause and effect, in which we grow dependent on our digital concierges to tell us what to do and win, end quote. And finally, this isn't a long read at all. It's a very short read, in fact. It's about TikTok, which I've tried a couple of times to suggest explainers for you on what TikTok is and why you should care about it.

Starting point is 00:18:29 But frankly, no one has done it better than The Onion's Guide to TikTok, which is very funny. And as always, with the Onion satire, if you squint your eyes a bit, it's almost painfully accurate. So I just bought my plane tickets for the Fireside Conference this morning. Again, if you've not yet ordered your tickets, why not consider joining me? Check out FiresideConf.comf.com slash ride for more information and to pick up those tickets reserved exclusively for listeners to this podcast. FYI, no weekend bonus episodes this weekend. Because of my vacation last week, I didn't have time to book any interviews.

Starting point is 00:19:16 over the last three days. But I did just book one for next week, for next weekend. And hey, maybe this is a further vacation. Maybe I can go a whole weekend without thinking about work at all. Here's hoping for that, because I've got a ton of new books on my Kindle. I've just delved into the Ursula K. Le Guin, Earth Sea cycle for the first time. So, you know, I might just be spending my weekend with a bunch of wizards. Talk to you on my...

Starting point is 00:19:46 Monday.

Tech Brew Ride Home - Fri. 07/26 - The T-Mobile/Sprint Merger Is Approved

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