The Best One Yet - Zynga is our “Accidental Billionaire of the Day,” Huawei’s 4 spy stories, and tobacco’s terrible day (because of regular unleaded)

Episode Date: May 29, 2019

Farmville-creator Zynga just sold its San Francisco headquarters building for $600M — And it may be better at real estate than video games. We’re jumping into the spy-worthy “corporate theft” stories of how China’s Huawei stole secret intellectual property from US tech. And cigarette companies suffered their worst day in 5 months, but not because of ecigs and Millennials.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 Chad. This is Snacks Daily. It's Wednesday. May 29. And Jack, this is my favorite one yet. This is the best one yet. We really worked out on this one. The Dow slipped by one percent. It's a little not the best one. But Snacks Daily did. We found three wonderful stories here. Jack, can you serve up the awkward number one? Accidental billionaire of the day. You got to throw one of these in every now and then. We want to keep you on your toes. Nice problem to have for Zinga. The company behind Words with Friends just made like $400 million by accident. Here's the secret. Have a back. a business plan and make sure it's completely different than your real one. Our second story, roll this one up. It's tobacco. Tobacco stocks had their worst day in five months.

The reason? It's not millennials. Nope. It's not vaping. Not exactly. Not E.6. No. Let's blame gasoline.

Sure. The third and final story, everyone is talking right now about China stealing U.S. intellectual property. It's the main thing. You can't get out of a single dinner without talking about us. IP theft for short. IP here, there. What does that actually mean?

Let's get into this thing, Jim. We're going to make this crime real. We're going to make it grizzly. We're going to look at Huawei's three biggest corporate thefts of USIP. The Wall Street Journal just put out the entire rap sheet. That's exhilarating. In the meantime, is anyone out there feeling exhausted? Yep.

Mentally distant? Sometimes. Irritable when assigned something annoying. Right now, this podcast about you. This is the perfect description by the World Health Organization of what they're calling, quote, unquote, workplace burnout. workplace burnout. We've all been there. It's globally a thing, according to the world.

Jack's, he's pumping out his story on Wahway over here. I've got to pour lecois on this guy just to get him awake. It is not officially a disease. Technically not. No, but they sound legit. It is a state of vital exhaustion in the workplace. Jack's doing air quotes over there. Now, it's not a medical condition.

You can't get a note from your doctor. Not technically. But this is a wake-up call. Yes. We work hard. Really hard. For this money. You may not get summer Fridays off.

Just go to your boss of whatever and tell them you've got workplace burnout. And it is summertime. So make sure you use up all your vacation days. While you're diagnosing yourself. They've been given to you. And writing yourself a note. You got to use them. Listen to these keywords and then wind our stories.

You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the robberhood family. It's all informational just so. You know, we're not recommending. 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 FINRA slash SIPC. Boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, nice. For our first story, we got to go true crimes edition of snacks daily. We're talking about why. Huawei. Trade war enemy numero uno. You're hearing about the trade war all the time. You may even be hearing about Huawei. Huawei has been banned in the United States. It's made in China. It's actually the second largest smartphone maker in the world. Let that sink in. This is a company very few Americans use, and they're making the second largest amount of smartphones out there. They make more smartphones

than Apple, a little bit less than Samsung. Now, what we're going to talk about here is a fascinating Wall Street Journal. The Wall Street Journal went deep. They did a lot more work than we did. They checked out 10 federal court cases, interviewed a whole bunch of people, and digged up dirt on the biggest corporate thief, Huawei. Sounds like a lot of workplace burnout. Yeah. Now, Wall Street Journal did all the work on this, but here's what we thought was fascinating about it, is that there were basically two different kinds of intellectual theft going on here. The first is when companies want to enter China, they tend to have to give up their corporate secrets to a Chinese partner. And that's just the cost you have to pay to get into China.

Corporate secrets, also known as intellectual property, or if you want to show off to your lawyer friends, call it IP. It's not good. China's the only country that requires. Now, that's the not-so-secret corporate theft. The secret corporate theft is what the Wall Street Journal looked at. We're talking CIA, James Bond, Tom Clancy-level stuff. Like black clothes with like a microchip in your ear kind of a thing. Let's give you the rap sheet starting way back in 2003.

This is like a military offensive style. Jack, kick this off in 2003. Okay, Huawei made a knockoff of Cisco's phone equipment. And, okay, we've heard of that before. Yeah, it's a knockoff. But then it printed user manuals, and they were verbatim 100% word for word plagiarized copies of Cisco's user manuals. How verbatim were they? They even included the same typos as Cisco's user manual.

That one's great. So that one's a great one. Jack and I jumped in that one. The second fascinating one we found was in 2004, a year later, a spy for Huawei goes to a U.S. tech conference. In Chicago, bus open some equipment. just starts taking photos and then like runs out of the place. Races to get back to the plane and like gets intercepted. Probably not flying business class but didn't even make it.

Okay, 2010, a relative of the founder of Huawei happened to work at Motorola. Not sure who did the background check on. He gave Huawei documents on Motorola's perfect cell tower. Thousands and thousands of page of documents. And guess what? Huawei made those phone towers. The perfect cell tower. And then I know he said we're going to cover three.

Jack, can we throw in this fourth one? In 2013, this is like a bonus spy situation. T-Mobile developed a little robot called Tappy that actually taps a smartphone screen super fast. It's hilarious. Like way fast than when you're double tapping with two hands. And basically the purpose is to like test the durability of a smartphone. Exactly. This is like out of all the robots, like kind of the robot that got the short end of the stick. Huawei took all that stuff and created Tappy Numerau too.

These are just four of the many super secretive James Bond style spying that Huawei's been doing. that the Wall Street Journal uncovered. Now, today, Huawei is actually the third biggest spender on research and development. So they're like developing stuff on their own. They're pretty legit. But a few years ago. But they got here on the back of piggybacking. So, Jack, what's the takeaway for our buddies over at Huawei?

These were not victimless crimes. No. Remember, Huawei has become the number two smartphone maker in the world. It is the number one telecom company on planet Earth. It's the leader in 5G. There's like little question about that. And this is how Huawei has become the leader. It can set its prices 20 to 30% cheaper than everybody else.

Because everybody else has to invest in research and development. And Huawei didn't for the first few years. And so it can set prices lower. That's why Cisco, Motorola, T-Mobile, they've all had customers stolen by Cheapers, Huawei. And that's why they're so much smaller than Huawei. For our second story, tobacco stocks just had their worst day in like five months, and it's not for the reason you think it is.

Send tobacco stocks, get well soon. We got to talk about this. Now, by way, our generation, we get blamed for like, ruining. Ruining everything. Runing a lot of things. We ruined cereal. We ruined marriage.

We ruined attention spans. I can't even believe everyone's still listening to us. Can we get a little bit of credit? Please. We're also kind of ruining cigarettes. I'm pretty sure we have the healthiest lungs of any generation on planet Earth. We're ruining lung cancer. Yeah, you're welcome.

You can send a note to us directly for that. So British American Tobacco, Altria, and Philip Morris, those are all publicly traded tobacco stocks. They all fell yesterday. Now, here is the reason why. Expectations are set by the companies in this case. They said that, you know what? Our cigarette sales, they're going to dip.

FYI investors don't expect much from us next quarter. They said that over the last month, cigarette sales would have fall like 4%. But then we got new data yesterday. A report by Nielsen. Another company, not a cigarette company. No relation. Nielsen is known for TV ratings, but they do surveys of people. Apparently they just like talking to people and writing stuff down.

They predicted that the number of cigarette packs sold last month actually dropped by 11%. Not 4%. 11%. We expected something bad, but not this bad. And cigarette prices, those are like at almost all-time highs because the companies have to compensate for this. That sounds like a terrible business model. People are smoking less.

Let's increase the prices that's going to cause people to smoke even less. We look this up, snacks out. The average price of Apakazeerax is like seven bucks. But that's not the driver of less cigarette purchases. Two avocados at Chipotle, but who's count? Blame gasoline prices. Exactly. Nationwide gasoline prices have hit 285.

per gallon. I wish that were the case in California. I would kill for that in California. But relatively, you know, historically, that is very high. Now, people like to buy their 10-pack cartons of Marlboros at their shell station, at their local gas station. And if you're buying at a gas station, you may be on a fixed income. So you're going in, you're pumping your gas, and you maybe getting your cigarettes. You might have like 60 bucks. And that 60 bucks is for gas and cigarettes. But if both gas and cigarettes are really, really expensive right now, which one are you going to go with. You're probably going to go with what's going to get you home. Exactly. It's kind of like a, I don't know, some kind of a loop situation. It's a tradeoff and people are going for gas and

buying less cigarettes. Now, in case you're wondering, yes, there is a cycle here because in 2015, we saw the opposite happen when gasoline prices dropped. Lower prices actually led to increase cigarette sales in 2015. So, Jack, what's the takeaway for our buddies over in the tobacco industry? You got to think what can you control as a company and what can you not control. You cannot control gas prices if you're a cigarette companies. Not even the president can control gas prices. You can control product innovation and how you're investing your money. Fascinating page two of this Nielsen report.

We turned that thing. The finger flip the page. These cigarette sales have increased by 111% last month. Over that same period of time. And it turns out Altria just happened to have invested last year $13 billion to own 35% of Jewel, which is... Jewell Labs is like the Apple-like design, beautiful tech company that makes vaping products. And Jewell happens to own about half of the e-cigret market. Let's see how these companies react if the smoking age increases to 21.

Good call. For our third and final story, Zinga is our accidental billionaire of the day. First time we've done this? First time we've done the accidental billionaire segment. It's about time. This sounds like a repeating. It's got stay power. I see of a touch try.

I see T-shirts. So. So let's back this up. Zinga's core business is video games. Procrastinating like you're in the bathroom. Best played on smartphones. You're bored of the conversation. You're on the subway. Dates not going well.

You don't want to go to your desk. Dates going really badly. You whip out Zinga. We're talking, by the way, in the past, what were there key games here? Farmville and Words with Friends. Everyone's got like an aunt who just discovered words with friends, by the way. It was huge when I was a senior college. Senior somewhere.

The future, though, is all about Snapchat. It's actually the main game. provider for Snapchat games. And I just learned it has a deal to do games with Game of Thrones and Star Wars. So Zingas basically got all these mobile phone games. It was one of the first gaming pioneers in the mobile phone space. And it's got the old school games and apparently it's got some stuff going on in the future. But we're not talking about any of that. Nope. We're talking about Zinga's real estate. Real estate. Zinga just sold its headquarters building for almost triple what it paid for. Bold claim here. Please. Zinga is better at real estate than it is at

making video games. I love this. In 20, 2012 Zingabot, you know, a nice headquarters building in a good part of San Francisco. That was a savvy acquisition. This was in the Soma area south of Market Street. Jack Lowe's telling people who knows that. It's close to the Cal train station. So you can get commuters. You got sweet greens.

Boom. You don't eat calories. Ice cream. So you can have more calories. Airbnb is next door. Yeah, so you can like hope some of the innovation rubs off on your employees while they walk by. So San Francisco real estate has been bonkers. True.

And it acquired that property for $228 million. million dollars, which in 2012. Jack, full disclosure, I've been there for a meeting a few years ago. It is like if Willie Wonka's son inherited all the money from the chocolate factory got really into gaming, he would build this. That sounds perfect for a gaming tech company. It was kind of freaky, a little overwhelming, and I kind of liked it. And then yesterday, it sold that same property for about 600 million. So that is a gain of $372 million off of real estate. Now, we did some interesting numbers here that I really want to talk about, Jack. We do. We do. into the earnings report, snack style.

A lot of their old earnings reports. Since they acquired that property in 2012, the company has amassed a net loss over those like seven years of $660 million. All right, so let's break this down. Zinga, the company that makes mobile games, has lost on mobile games. How much money? 660 million. Meanwhile, Zinga, the company focused on mobile games, has made how much money in real estate?

372 million profit. Not too shabby. What is coming now? What are they doing next? Like a condo in Long Island City? The next earnings report from Zinga, what did you guys do? Time share. Time share in Tampa.

Trust us. Forget games. It's actually going to use the money from the building sale to invest in new engineers and make new games. Very nice. Meanwhile, by the way, it's still going to stay in that location and pay its new landlord $10 million per year. Not too shabby. So, Jack, what's the takeaway for our buddies over at Zink? Companies can invest just like people do.

They can buy a house. They can buy a stock. They can buy a time share. Sometimes that's big and sometimes it's small. Great examples here. Yahoo. Yahoo is the best example. The first one I thought of.

Yahoo business was going nowhere. And then it bought 40% of a tiny e-commerce company called Alibaba in 2005. That $1 billion investment in Alibaba became $26 billion when Alibaba IPed a couple years ago. It became like the whole value of Yahoo. Jack, I got my favorite for you right here. eBay, it acquired PayPal in 2002, you know, just a little payment processing company. Touche, tush, Nick. That one was a good investment, too.

They spun it off years and years later. Now, eBay is worth just a quarter of PayPal. It bought it for $1.5 billion. Some investments pay off. Other ones don't. Most people don't even notice them. But this could be a value driver for a company. Jack, can you put on a shirt and whip up the takeaways of it for us?

Burnout. Take it off my shirt. The Wall Street Journal's amazing journalism illustrates how Huawei stole an advantage from Western Telecom companies. We're calling it right now. Halloween costume of 2019, the Huawei spy. Tobacco companies are losing sales because of higher gas prices. Control what you can control.

And when you can't control something, just invest billions in whatever that is. Vaping in this case. Zinga, it has a real estate business that's been pretty much better than its gaming business. Zinga's become like your one uncle who just yells at you for not investing in real estate, even though you have no idea what he's talking about. All right. Now, time for a snack fact of the day. This one was sent in by a old school snacker, a young snacker, 19 years old.

He's been snacking for a while, actually. Great guy. Sean Codwell from Charlotte, North Carolina, home with the pulled pork awesomeness. Also, home of NASCAR Hall of Fame, which I've been to. So, keep the food theme. 100 acres of pizza are served in the U.S. every day. We verified this. 100 acres.

Let that set in. No one really knows what an acre is, but when you throw 100 in front of it, it sounds big. It's like almost a football field, most of a soccer pitch. We're going to go with that. That is a deep dish. A couple other big stories we're covering in this Robin Hood Snacks newsletter today. First, Alibaba is thinking about raising $20 billion by listing shares in Hong Kong. They're already listed in New York.

And then Fiat Chrysler and Renault. Renaud. Renaud. You know it. They're talking about merging, which would create, I think, the third biggest car company on Earth. Indeed. Now, Snackers, we love having you on with us. We loved what show.

Sean sent in, and we want to get your facts of the day. So you've got to send them to us. We need an inventory of great snacks. Please, we want to build this thing. So send us yours at Robin Hood Snacks on Twitter. Send us your first name, last name if you want. And let's get that hometown shout out. Definitely a hometown. Every hometown deserves a shout out. We will be back with you tomorrow. Your mom will love that show. Podcast. Can't wait. 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,

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.