The Best One Yet - H&M’s “Moneyball” strategy — Intel’s $2B AI acquisition — Sprout Social’s social-ish IPO

Episode Date: December 17, 2019

H&M has spent 2 years trying to burn fewer clothes (literally), and an 11% sales rebound shows it’s finally working. Intel splurged $2B on a chip company because the last time it tried to build its own, it failed. And Sprout Social IPO’d to help your company’s social media manager relax.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is snacks. Daily, it is Tuesday, December 17. Deck the halls with vows of snacks. It's the best snacks we've ever done. No joke. We actually spent a lot of time preparing.

Three stories. The first one is Intel. The old school chip company just spent $2 billion on another smaller chip company. And they're going to organize your ICloud and your Google Drive files. Hopefully this chip business turns out a little bit better than their iPhone chip debacle. Second story, H&M, straight out of Sweden. They just enjoyed their best quarter in a long time. time because its new strategy is paying off.

Get better at scouting, not at coaching. The actual clothes are the player in this sports analogy. I was glad we clarified that. That was good to clarify. Third and final story, Sprout, just IPOed. What up Chicago? It's the mint.com of social media. It's the mint.com that organizes all of your social media accounts.

Except this is for business, not for you to maximize the beach picks and 1,000 followers. Everyone's trying to hit the 1,000. Or 100 on the like side, 1,000 on the following side. Or one. Snackers, before we jump into that, you may be aware it is T-Boy Tuesday. Ding, ding, ding, ding. The best one yet Tuesday. We only do it every now and then once a week, and it happens to happen on Tuesdays.

So we asked you on Friday, what should be the holiday toy of 2019? Because Hasbro missed their chance with Baby Yoda. We were talking about Baby Yoda. Adorable, incredible, cute. Everyone's talking about it. But there is no holiday toy for Baby Yoda right now. So we got some Snacker submissions. First one by Haley, who was a lot.

longtime snacker. She has a couple snack facts today. She said, you know those little mini cars that you get kids? Yeah, I was jealous. I think your legs are usually like the horsepower. Yeah, it's pretty fancy. So how about a mini car for kids but that's self-driving? It makes so much sense. That'd be an expensive toy. Now Jack and I noticed the rest of the one snacker submitted

were pretty Disney influenced. Yes, there was a consistent theme. The second one submitted by Lindsay and Chris is that we should just do toys of Anna, Elsa, or Olaf from Frozen 2. And then Doreen and Chris Cruz told us they think the toy of 2019 should just be forky from Toy Story 4. I'd rather see Sporky from Toy Story 4. And then Nishant and Kelly came out and said, hey, as long as the toy is Simba, it's going to win. Simba should just be the toy of 2019.

Okay, so we got Frozen, Toy Story 4, and the Lion King. Apparently Snackers are huge Disney movie fans. Or the Disney marketing team just has unbelievable guerrilla social media marketing and planted those into our ballot. Disney also happened to enjoy their sales. sixth billion dollar movie of the year. And three of them are finalists for T-Boy Tuesday. Snackers. We need you to vote at Robin Hood Snacks.

We got to pull up right now today. Who should win Best Toy of 2019? At Robin Hood Snacks on Twitter. Let's hear three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. It's snacks about to hear rain food. It's air candy.

They don't reflect the views of the Robin Hood family. It's all informational just so. You know, we're not. any securities. Nope. It's not a research report or investment advice. Not an offer or sale of a security. Right.

Snacks is digestible. Business news for you. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, the last time Intel built a new chip division, it failed. So it's acquiring a new chip division for $2 billion. You know, it's just $2 billion. Nick, Intel is desperate for a new era of profit. Snackers, you remember, this defined our childhood.

You ready? Bam, bum, bum, bum. Dun dun dun dun. Intel. I like mine better than you are. Intel inside. I was a little sharp. Intel was the processors that powered all of our computers for decades and decades.

Intel won computers. It lost smartphones and now it's desperately wanting to win artificial intelligence, AI. Now, some companies can have multiple eras of success, like the Celtics. They had Bill Russell in the 60s, Larry Bird in the 80s, and Paul Pierce in the 2000. On the other hand, you got companies like the New York Rangers, essentially, who had one nice era in 1994, won the Stanley Cup. It's been a while. Yeah, the Mark Messierra, aka the one year, 1994. So here's what, it's a source subject.

So here's what Intel is doing right now. It's acquiring Havana Labs, which is based in Israel for $2 billion. Havana Labs is a fascinating story. Starting in 2016, it raised $120 million to build a top secret chip division. So Snackers, are you like, oh, yeah, I've heard of Hibana Labs? You haven't heard of Hibana Labs. You haven't. No one's heard of Havana.

It's not Havana, Cuba. No, no, no, no. It's Havana. Exactly. Based in Israel. And what they've been doing over the last few years is they actually launched and they stayed in stealth mode. They were working on a top secret chip project.

Like, can you imagine the corporate rules about what you could tell the outside about the project? Delph mode means you're not putting this on your LinkedIn. Someone asks you what you do for a living. You go, what do you do for a living? Immediately change the subject. Deflect, deflect, deflect. So Hibana unveiled itself after a couple years working in stealth mode with Goyiard.

with Goya and Gowdy, which are two chips that are made of. Wait for it. Silicon. Exactly. That's why they call it Silicon Valley, because that's what chips are made of. Next question we know you have is, so what do these chips do? Well, the answer, obviously is deep learning inference workflows. Hello.

So deep learning influence workflow chips. Which means hardly anything to anyone. Well, it means it trains machines at a rate that is 3.8 times faster than Navidia's chips. Bear in mind, Navidia is the market leader. It's the teacher who helps those who. need to learn. Now, 3.8 times faster than Navidia, was this the Weissman score from Seasmodified Piper? Honestly, seriously, it is just a teacher here.

So, Snackers, Alphabet, Amazon, and Microsoft are running the world through the cloud. Right. You always hear about like Amazon Web Services. That is critical because it stores all of your information. That's on the business side. But you got, you know, Google Drive and ICloud and Microsoft, Office 365. Intel is the one that actually has the servers that are holding all of this data that you're putting into the cloud. So Snackers, let's say, you know, you're going through your photos on your iPhone.

You're trying to find that adorable one of Sparky. And you're like, where can I find a picture of Sparky? So you search for a dog. Yeah, I personally use Apple's Photos app. You might use Google Photos or something else. But when you search Dog into your Photos app, it's probably going to come up with like 99 pictures that are actually dogs. And the way it's able to do that is through machine learning. Machine learning requires tons and tons of processing.

They're combing through all the millions of pictures that we've taken on our cameras. and they're deciding that like, okay, adorable eyes with the tongue hanging out together and spotable ears. That is probably a dog. That's why when you search dog, like 99 out of 100 are dogs. And Havana's product is who teaches the chips how to recognize that dog. Full disclosure, this is Jack. I don't have an engineering degree.

So Jack, what's the takeaway for our buddies over at Intel? Intel is acquiring this time because the last time was a disaster. Intel had a huge opportunity back in 2016. It got a deal to make chips for iPhones. That's a pretty big deal. It's a huge deal. You tell mom about that deal. Now, that deal didn't work out so well. Three years later, Apple broke up with Intel earlier in April, actually,

because Intel just wasn't getting the job done. 5G was coming, and Intel couldn't make the chips for it. Intel splurged $16 billion to build out that smartphone division. And in the end, all it had was some leftovers to sell to Apple for $1 billion. Intel wasted seven years on that project. And failed. So this time, it's acquiring a company straight up. By the way, Snackers, this is Nick.

And full disclosure, I don't have an engineering degree either. For our second story, H&M's move to say fast fashion is apparently working. H&M is based in Sweden. And when we say fast fashion, we don't mean clothing for runners. You need, you need coroises. Here you go. You need a tank top. Here you go.

Now, H&M is also named after Hens and Moritz, which apparently are the founders of the company. Now, the business model is this. Identify with like Prada and a bunch of other fashion companies are doing on the runway. Copy the trend, place a big order from China and then sell it really, really quickly in their stores. This company gets food from like idea to shelf faster than anybody. Floral prints. We got to make floral prints happen. Make floral prints happen during the stores. I just checked out the men section of H&M.com. We got to talk about this, Jack. You can get a blue velvet tuxedo for $150. Assuming you don't have one and you need one right now, that's where you're going.

You can either buy that for a buck 50 or rent a bad suit for 200. Sounds wonderful. Sounds like it solves your own fashion problems. But here's the thing. H&M's got a problem itself. People weren't buying their clothes. Yeah. Inventory was building up into mountains in factories,

and they couldn't figure out what to do with the clothing. Jack, how much inventory did they have? You ready? I crunched the number. We were talking, we threw a little Swedish Krona at a U.S. dollar conversion over here. It's Krona with an A, not R. True. That's Norwegian Kroner.

Yeah, it's a silent R. Way back in 2012, H&M had $1.6 billion of inventory. Basically, clothing that they hadn't sold yet, but were planning to sell. Someone take me home. I'm a sweater. By 2018, H&M had $3.7 billion of unsold inventory that had built up on the shelves. This was unsellable clothing, ungiveawayable clothing, to the point where they were even burning some of the clothing. First, they tried to discount the clothes. Then they try to donate the clothes to charity.

But eventually, the only person willing to take their clothing was a local power. power plant near the headquarters, which burned the clothing instead of coal, which it typically burns, in order to make electricity. This is a true story reported by Bloomberg. It's cold up there in Sweden. You need to burn some things. And shares dropped by 50% over the last five years. And its American cousin, Forever 21, just went bankrupt.

Now, here's the thing, Snackers. H&M just made a major change a couple years ago that Jack and I found to be fascinating. They're following the Moneyball strategy from that Michael Lewis book. In the past, they used humans to identify. the trends. Now they're using data. So according to the Wall Street Journal, they contracted and hired like 200 data scientists over at H&M to look at what shoppers wanted and actually were buying a couple years ago. They're combing through Google searches. They're combing through social media posts.

They're looking at the sales in the trendiest cities that kind of make the biggest leap and get out of their comfort zone and try on something new. But then they took things a step further. And at the individual stores, they started looking at what's actually getting returned. What are the loyalty card people actually buying? what's actually selling. The end goal was to make less clothes that people don't want and end up in the power plant getting burned. And we just got the early sign that this whole strategy is paying off. H&M just announced that sales rose by 11% in the past year, ending a two-year sales skit.

So Jack, what's the takeaway for our buddies over H&M? H&M needed better scouting, not better coaching. It didn't need, like, to coach up its team on new marketing techniques or, like, get its shirt makers to, like, lower their prices and costs. It needed data on the trends to better inform the clothing that they actually produce. For example, they realized they needed like fewer basics. They didn't have to hold as many t-shirts and leggings in the stores. And they also localized their clothing menu across their 4,300 stores because one size doesn't fit all. H&M made the investment a couple years ago.

It's paying off today. For our third and final story, this one's fascinating. Sprout Social isn't a social media company, but it is a FOMO solver. FOMO is a major social media problem. This is seriously a life problem. And this company just IPOed so it's got a publicly traded stock. Not only that for our Chicago Snackers at Chicago and Chicago needs? Chicago-Oan.

Chicago-Wain. Is it? For people from Chicago, this is the first Chicago tech company go public in the last five years. Since Grubhub. Big deal. Not Grubhub, but Jack Loss Gruboff. All right. So in the S-1, which is the filing document that every company must make before IPOs so that investors can read up on the company.

Yeah. It says that Sprout Social. Changes the way that the world communicates. Yeah, Jack and I jumped into this one, snacks now, read through this S-1, and the first picture you see is of, like, you know, a bunch of 18-year-olds taking pictures, some selfies. It looks like a lot of fun. We're like, why aren't we there? Yolo.

Yeah, well, lo-low. But this company is not targeting you. It's targeting your boss. Right, and they want to charge your boss $100 a month for you to use this thing. The problem that Sprout Social solves is corporate social media fomo. Right. Companies feel like they got to be on every social media platform to succeed. it is exhausting.

You've got to be on Instagram, LinkedIn, Twitter, TikTok, and then you're putting content out there and you're like, wait, now I've got to respond to Paul, Julie, on Instagram, on Twitter, on Instagram, on Pinterest. As anyone who's looked at a job board knows, social media manager is literally a full-time job. Right. And as a business, Sprout social helps 23,000 customers, which are businesses, manage those social media accounts. It is like a mint.com for social. So you link up all your accounts and it's one place that you can see how everything's doing. Right. And this isn't just like old school companies that are using this. You've got customers like Grubhub. You've got Dartmouth College. You've got Lowe's hotels. They're all using Sprout Social to manage their social media game.

And Sprout Social Social Social Social Social Media Manager, and turns them into like a Robocop. It's like, boom. Brandon, your social media person, suddenly he has a third arm and he can do even more. So the essential thing is an online dashboard to help you manage all of your accounts and optimize social everything. Right. You look at this thing. Jack and I are looking at this thing. We're like, this is like, this is like, this is the like those scenes from Top Gun where they show them in the airplane, you're like, what is this gadget to? What is that gadget? Is there an eject button? Doing a hundred million different things right at your fingertips. It's a little overwhelming. So the first thing you do is you link up

all of your corporate social media accounts into this master feed. Right. And then let's say you want to actually send out that Instagram post. You can start crafting it in there. And then one of your other peers at the company can go in and edit it and make sure it's like, you know, on brand. So you can do that for Instagram, Twitter, TikTok, and then you can schedule them all so that you don't need to wake up super early tomorrow morning because you like that it goes out at 6.5. And it's going to suggest the hashtags you should add based on your previous post

so you can be optimizing for the right actual hit. Okay. So now you've tweeted, you've posted. Now you're getting responses. You don't need to obsessively watch every single feed. Right, because you get blocked out. You get logged out of Instagram. They're like, I've got to get back into Twitter.

What's going on over here? So you just log into Sprout Social and you can respond from one dashboard and recognize the trends. And then after you get all that information in, they're going to divvy up the analytics and let you know that that ice cream post performed better than the pasta post on Instagram. Ironically, this isn't for personal people. It's only for businesses. Very true.

I could imagine this having a great, like, personal spin-off. Yeah, your chocolate jokes work way better on TikTok. So, Jack, what's the takeaway for our buddies over at Sprout Social? Sprout Social is a social media stock, but it's less volatile and less exciting than most social media company. With Sprout, you're like one degree of separation away from actual social media apps like Facebook or Twitter. Its customers are any companies that have social media accounts, i.e. every company.

So if you believe social media is like the future of marketing and everything is going to be driven through LinkedIn ads and LinkedIn engagement, then Sprout is super aligned with that. But unlike social media companies, which can be rocket chips of growth like TikTok, Instagram, Snap, and Facebook in their days, Sprout Social is only growing 30% a year, which isn't astronomical. It touches social media companies, but it's not a social media company. Jack, can you whip up the takeaways for us over there? Intel 1 computers lost smartphones and wants to win artificial intelligence. So it just perched $2 billion on a chip company to process all your cloud data. H&M is employing the moneyball strategy of less humans, more data. The goal is to make fewer clothes that end up basically getting burned and warming Sweden.

It's actually a beautiful moment. Sprout Social brings order to your social media chaos and it just IPOed. Sprout touches social media but isn't social media itself. Now Snackers, time for our snack fact of the day. This one sent in, it may be a hat trick. I think this is its third, Justin Cramm in Fort Lauderdale, Florida. In 1957, bubble wrap was created as a new kind of wallpaper, which I think works in solitary confinement in prisons.

Doesn't work the product flopped until three years later when the makers made a pivot. It's no longer wallpaper. Now it is packing material to protect originally IBM computers, which were pretty expensive. Completely changed through their mark. marketed to completely change the product. And now you get it in every single Amazon package you've ever ordered. It's actually a little overwhelming. Now, Snackers, remember to vote on the toy of 2019 at Robin Hood Snacks on Twitter today. Thanks for snack and we'll be back with you tomorrow. Happy T-Boy Tuesday. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security.

The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.