Bottom Line: A defense cloud computing contract which could be worth as much as $10 billion over 10 years was just awarded to Microsoft (NASDAQ: MSFT). The Joint Enterprise Defense Infrastructure (JEDI) contract had long been thought to be awarded to Amazon (NASDAQ: AMZN). In fact many of the other bidders including Microsoft, Oracle (NYSE: ORCL) and IBM (NYSE: IBM) lobbied publicly that the structure of the contract favoured Amazon. According to the Washington Post, political pressure from President Trump may have been one of the reasons Amazon was passed over. It should be noted that the Washington Post is owned by Jeff Bezos, CEO of Amazon. Regardless of the fact that Amazon may be considering legal action to protest the awarding of the contract, the Microsoft win is a big boost of confidence and exposure for their Azure cloud platform, which is a distant second in market share to Amazon’s AWS.
Bottom Line: Game publisher Electronic Arts (NASDAQ: EA) announced that it will resume releasing games on Steam (the PC game distribution platform). EA hasn’t released games on Steam since 2011 due to complaints about it’s ‘business terms’. Steam is one of the biggest distribution platforms and marketplaces for PC games but takes an estimated 20-30% cut of sales from publishers. EA will also let Steam users purchase its subscription service but the game options available are still to be determined. The move back to Steam for EA is interesting as it already has its own marketplace/distribution platform called Origin, which it will continue to operate separately. The move back to Steam was to help their games ‘be where the players are’, which must mean the players aren’t on Origin.
Bottom Line: Uber (NYSE: UBER) recently announced the creation of a new division called Uber Money to provide financial services to its drivers and eventually its riders as well. Initially, the division will launch a debit account and debit card for drivers along with a digital wallet, intended to give drivers easier access to track and spend their earnings. The company will also re-launch its Uber credit card with improved perks for those who use Uber’s ride-hailing and meal delivery services. The new division seems to be targeted more so at increasing stickiness to Uber’s platform for both riders and drivers and less so a potential salve to the company’s ongoing money-losing which have been under increasing scrutiny since the much maligned IPO. Maybe drones will help them make money?!
Bottom Line: Earlier this week Reuters reported that Google parent company Alphabet (NASDAQ: GOOGL) had made an offer to buy Fitbit (NYSE: FIT) for an undisclosed amount. The real question is why? Neither Fitbit nor Google’s smartwatches perform very well compared to Apple or Samsung’s offerings since the latter two develop custom hardware for their products while the former use primarily off-the-shelf components. While in the lower-end fitness band market, Fitbit’s products have been losing market share to lower cost Chinese-based competition. With a current market cap of over $1.5 billion, Fitbit would be an expensive acquisition without a clear strategic advantage in a market where Google hopes to catch up to its main rivals.
Tech Investing Chart of the Week
Facebook (NASDAQ: FB) reported earnings this week and despite the threats of regulations, anti-trust, #deletefacebook trending topics, etc, etc, the social media giant continued to show remarkable consistency in both financial and user metrics. The user metrics stood out the most to us. Since Q1 2015, Facebook has added over 1 billion monthly active users (MAU) and the percentage of those that go on daily (DAU) has been basically constant at 65-66% over that entire period. Now that’s consistency. Note these numbers do NOT include Instagram or WhatsApp.