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As the tech world digests Amazon’s CEO transition, it’s worth toting up all the big leadership changes we will need to follow this year.
Qualcomm president Cristiano Amon is taking over for Steve Mollenkopf, who vanquished a thousand foes and put the mobile chipmaker on a solid footing for at least a few years. Intel brought back the prodigal son, 30-year veteran Pat Gelsinger, to take over from former CFO Bob Swan, who was unable to revive the struggling PC chipmaker. And back at Amazon, as we discussed on Wednesday, Andy Jassy will take over for Jeff Bezos with the company at the height of its success but facing antitrust and labor issues.
For the current issue of Fortune, I dug into one of the biggest CEO transitions of 2020. Last April at T-Mobile, Mike Sievert took over for a legend, John Legere, who started out in last place and ended up gaining the most customers and having the best performing stock in telecom over his eight year run. Legere’s strategy combined savvy dealmaking (buying MetroPCS and Sprint), disruptive product offerings (no more two-year contracts), and memorable marketing campaigns (“the Uncarrier” and “Netflix on us”). Oh, and don’t forget the endless Twitter boasts, wars, and rants.
Sievert was alongside Legere for the whole run. The two first met in a tiny windowless conference room in Seattle in 2012 after Sievert, a boy wonder in the marketing biz, had already been interviewed by the prior two T-Mobile CEOs. Legere and Sievert hit it off from the get-go. “We sat there together and plotted an awful lot of the things that ultimately became the uncarrier,” Sievert told me when I spoke with him last month. “It was about the two of us being able to imagine the art of the possible for this company, where could it go and what would be required to get there.”
Despite Legere’s incredible run, he left plenty on the to-do list for Sievert, who was the best paperboy in Canton, Ohio, the brand manager for Pepto Bismol, and the lead marketer for E*Trade, AT&T Wireless, and Microsoft Windows before joining T-Mobile.
Now the wireless industry is just at the start of the 5G era. The networks aren’t finished, the apps aren’t there, and consumers seem confused about what 5G even means. Acquiring Sprint gave T-Mobile better airwave spectrum for offering 5G than rivals AT&T and Verizon have, but that head start won’t matter if Sievert and his team don’t build out their network and convince people to sign up. “We’re going to create some real FOMO among people carrying around AT&T and Verizon phones,” Sievert tells me.
There’s also the matter of the uncompetitive home Internet market. More than 80 million people have only one choice for broadband at home. T-Mobile (and Verizon) say they want to crack that market using 5G instead of the usual wires and fiber optic cables. “These monopolist that run these companies, they’ve never faced competition,” Sievert says, channeling his old boss. “There’s a chance to solve problems in that industry in a very uncarrier way.”
T-Mobile reported its 2020 results on Thursday and it was even better than analysts expected. Revenue for the year exceeded $68 billion, up 52%, and the carrier added 5.6 million customers.
To keep the party rolling, Sievert is going to need to plot a few moves on his own this time. He’s off to a good start.
You may have heard of the SolarWinds hack. Brainstorm podcast hosts Michal Lev-Ram and Brian O’Keefe explain how the attack was carried out, who was involved, and what the fallout may be. They are assisted by Fortune writer David Z. Morris and Dmitri Alperovitch, Chair of the Silverado Policy Accelerator and founder and previous CTO of CrowdStrike, a large cybersecurity company. Listen now.
Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter
Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.
The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.
Coinbase shares fell almost 8% in premarket trading to $80.74.
Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.
JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.
Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.
The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.
The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.
JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.
The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.
Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter
Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.
“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings.
Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”
Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.
Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October.
In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance.
“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”
At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.”
Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.
Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year.
With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.
The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says
Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.
But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.
This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday.
The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June.
But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows.
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.
The great rent comeback
Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value.
Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA.
It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.
It’s no wonder—the rent really is too high.