📱 Apple, iPhone, Lawsuit.
📱 Apple, iPhone, Lawsuit.
“We’re suing Apple for selling iPhones” says the Department of Justice (not a direct quote)...Reddit’s outstanding IPO; Nike & Lululemon drop after earnings; Hyundai and Kia recall cars; and more.
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IN THIS ISSUE
📱 Apple gets sued by the DOJ
📈 Reddit’s outstanding IPO
🇺🇸 U.S. rejects Chinese land claim
On this day. On March 22, 1894, the first Stanley Cup hockey championship game was played; home team Montreal defeated Ottawa, 3-1.
FEATURED STORY
📱 “We’re suing Apple for selling iPhones”
On Thursday, the US Department of Justice (DOJ) went and slapped its biggest taxpayer with an anti-trust lawsuit claiming they’re operating under an illegal monopoly in the smartphone market. (Yes, they’re suing Apple.)
“Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.” — DOJ
The main argument is that the iPhone has too big of a market share in the smartphone market. According to the DOJ, that’s a monopoly, and that’s a crime. The lawsuit also covers other issues such as iMessage (more on that below), App Store fees, and unfair advantages given to Apple's own devices and services.
Apple’s response to this lawsuit was fairly straightforward:
This lawsuit is "wrong on the facts and the law" and "set(s) a dangerous precedent, empowering government to take a heavy hand in designing people's technology." — Apple
But the heart of the matter focuses on Apple's alleged efforts to keep users locked into its ecosystem, even at the expense of competition and consumer choice. One of the focal points of the entire lawsuit is iMessage and the ‘unfairness’ of the ‘green bubble-blue bubble’ drama. Here is an excerpt from the lawsuit filing:
"In 2022, Apple's CEO Tim Cook was asked whether Apple would fix iPhone-to-Android messaging. 'It's tough,' the questioner implored Mr. Cook, 'not to make it personal, but I can't send my mom certain videos.' Mr. Cook's response? 'Buy your mom an iPhone.'"
Apple has already pledged some changes, including support for the RCS messaging protocol (the solution to the bad picture quailty, reactions between iPhone and Android, and so on), which will be released by the end of 2024.
Some investors have used Apple’s master ecosystem, with its 2 billion active devices, as a factor in their investment thesis. If successful, the outcome could reshape the tech industry landscape and destroy this thesis. But for now, it’s time to lawyer up—and that’s pricy.
Resources and European theatre
🏦 Resources: Between itself and its subsidiaries like the FBI and CIA, the DOJ receives close to $50 billion in funding every year from Congress. In comparison, Apple makes $120 billion in annual profit and holds over $73 billion in cash. When it comes to fines, lawyer fees, and settlements, Apple won’t have a problem with resources—that’s for sure (if I don’t jinx it that is).
🇪🇺 European theatre: Even Europe likes to pick on Apple. In 2022, Apple was forced by new EU laws to switch their iPhones from lightning to USB-C, and a year later, they announced exactly that. Going back as early as March this year, the EU fined Apple over €1.8 billion ($1.95 billion) following a complaint from Spotify regarding the ‘unfair promotion of their streaming services’.
Fun fact: Following the announcement of the lawsuit, Apple lost more in market value than the annual GDP of Luxembourg. A country known as 'the richest country in the world.'
FINANCE
📈 Reddit’s IPO breaks records (not really)
On March 21 this week, Reddit's shares surged 50% on the very first day of trading on the NYSE under the ticker symbol ‘RDDT’ despite not generating a single profit since its inception. Reddit’s price opened at $47 and closed at $50.44, valuing them at $6.8 billion. An IPO success!
Reddit is the 17th most popular website in the world, and attracted investors by branding its content as AI training grounds, (per their recent $60 million annual licensing deal with Google). Nonetheless, Reddit's primary revenue source is still advertising.
🎽 Nike, Lululemon drop after earnings
Sportswear companies Lululemon and Nike reported fourth-quarter earnings that somewhat exceeded expectations, but on both, guidance fell short. Lululemon dropped 10% after hours, and Nike fell 6%. Here’s how the companies performed:
Lululemon Q4 FY2023 (LULU)
Earnings per share: $5.29 vs. $5.00 expected
Revenue: $3.21 billion vs. $3.19 billion expected
Net income was $669.5 million, or $5.29 per share, up 458% from $119.8 million, or 94 cents per share a year ago. Revenue rose 16% to $3.21 billion from $2.77 billion the previous year.
Nike Q3 FY2024 (NKE):
Earnings per share: 77 cents vs. 74 cents expected
Revenue: $12.43 billion vs. $12.28 billion expected
Net income was $1.17 billion, or 77 cents per share, down 6% from $1.24 billion, or 79 cents per share a year earlier. (Excluding 21 cents related to restructuring charges, earnings per share would have been 98 cents.) Revenue rose to $12.43 billion, up a slight 0.3% from $12.39 billion the past year.
BUSINESS
🤝 Apple and Google partner with AI
As per Bloomberg, Apple is reportedly in talks with Google to utilize Google's Gemini AI model for iPhone features with aims to integrate AI-powered features using Google's technology in iOS updates later this year. (Talks with OpenAI have also taken place.)
Apple has been developing their own GenAI to catch up in the AI space, but if they are considering asking for third-party tech, they might not be getting anywhere with their efforts. Tim Cook in February announced plans to introduce AI features "later this year" and a potential partnership will be a major help in successfully implementing those features. All information is expected to be announced at the WWDC this June.
🚘 Hyundai and Kia recall cars
As Vroomsday continues, Hyundai Motor America and Kia America are recalling a total of 147,100 U.S. electric vehicles due to a faulty charging unit, the National Highway Traffic Safety Administration (NHTSA) said on Thursday. Hyundai will recall 98,878 vehicles, while Kia will recall 48,232 vehicles.
“The Integrated Charging Control Unit (ICCU) may become damaged and stop charging the 12-volt battery, which can result in a loss of drive power increasing the risk of a crash.” said a safety regulator per Reuters.
What is Vroomsday? Vroomsday is doomsday, but for cars. The number of cars recalled mentioned since the inception of the J. Nicholas newsletter is called the Vroomsday counter. The J. Nicholas Vroomsday counter is now at 5.39 million cars.
POLITICS
🇺🇸 U.S. rejects China’s Indian land claim
The U.S. government announced its recognition of Arunachal Pradesh, a disputed land between China and India, as part of India. China criticized the United States for intervening in the dispute stating that “the boundary issue between China and India is bilateral and unrelated to the United States.”
The dispute arose in 2020 after Indian Prime Minister Narendra Modi opened a tunnel in Arunachal Pradesh, escalating tensions between the two countries. In short, China claimed that Arunachal Pradesh was a part of southern Tibet, and India said “nuh uh.”
🇷🇺 Putin wins the presidency again
President Vladimir Putin won a landslide victory in Russia's election this week, further securing his grip on power. With 87.8% of the vote, Putin is set for another six-year term, making him Russia's longest-serving leader in over 200 years if completed.
The election has faced criticism from the West due to the imprisonment of political opponents and the potential inaccuracy of polls. Despite protests inspired by Alexei Navalny, Putin dismissed their impact on the outcome. He also called U.S. democracy, a "disaster" as an added touch.
Thank you for reading today’s issue of Weekly Brief. I’ll be back in your inbox soon, so keep an open eye! In the meantime, if you would like to support me, I’d love a coffee. ☕️
Have a great week ahead! (I apologize if there were typos, as it’s 2am on a Thursday. Time is money as they say.)
— Jacob
📚 Book of the Week
Note: I don’t recommend books that I haven’t read or that I would never read. The books I recommend are books I have already read or that I will eventually read.
The Innovator’s Dilemma — Clayton M. Christensen
Book Description:
The bestselling classic on disruptive innovation, by renowned author Clayton M. Christensen.
His work is cited by the world’s best-known thought leaders, from Steve Jobs to Malcolm Gladwell. In this classic bestseller one of the most influential business books of all time inovation expert Clayton Christensen shows how even the most outstanding companies can do everything right yet still lose market leadership.
Christensen explains why most companies miss out on new waves of innovation. No matter the industry, he says, a successful company with established products will get pushed aside unless managers know how and when to abandon traditional business practices.
Offering both successes and failures from leading companies as a guide, The Innovator’s Dilemma gives you a set of rules for capitalizing on the phenomenon of disruptive innovation.
Sharp, cogent, and provocative and consistently noted as one of the most valuable business ideas of all time. The Innovator’s Dilemma is the book no manager, leader, or entrepreneur should be without.
As of Jan 31, 2024, (resulting from my Amazon.ca Associates account being terminated) I do not earn any affiliate commissons from the links below.