1. #retail Mall owner Simon Property Group to buy rival Taubman Centers in $3.6 billion deal (CNBC)

What’s going on?

The news sent Taubman’s stock soaring up 52% and Simon shares were up less than 1% in premarket trading, after going down 24% over the past 12 months.

Why should I know?

• US mall operators are under increasing pressure to lure customers, who are more and more favor buying products online or at strip malls where it’s easy to dart in and out for purchases.
• Simon’s targets from the deal: enhancing the ability of Taubman to invest in innovative retail environments to create (1) exciting shopping and entertainment experiences for consumers, (2) immersive opportunities for retailers, and (3) substantial new job prospects for local communities.

2. #tech SoftBank’s Vision Fund 2 Fails To Meet Funding Goal (Pymnts)

What’s going on?

Yeh, the sequel of the successful Vision Fund 1 did not go through the financing round, and it is even expected to halve the targeted amounts $108B.

Why should I know?

• Investors are spooked by the failures of investments in WeWork, Uber, the latest closed Brandless, …then they are not willing to pony up new capital.
• There has been tension between SoftBank CEO Masayoshi Son, who wants completed fundraise and Vision Fund head Rajeev Misra, who favors one-off deals.
• Softbank are tackling this challenge by (1) Allowing investors have more influence on where money goes, (2) Create a hedge fund, (3) Relocate key executive from base office London to Abu Dhabi to gain more interest from key investor: Emirates.

3. #telecom T-Mobile and Sprint win lawsuit and will be allowed to merge (TheVerge)

What’s going on?

In January, the merger was disapproved with the concern of decreasing competition and higher price for customers. However, the challenge ended this Tuesday.

Zooming out

• For T-Mobile and Sprint: more capital and capacity, to finalize 5G network and compete as one player in the market with AT&T and Verizon
• For consumers: (1) Move from Sprint to T-Mobile (the buy side), (2) Receive a new phone plan with no higher price, as T-Mobile promised and (3) Get access to a larger 5G network with no latency.

Let’s discuss on Uber today

1. Uber is going profitable this year, which means one year sooner than expected (Finimize)

What’s going on?

Uber reported better-than-expected quarterly results last week, then also revealed that it will become profitable at the end of this year.

Zooming out

Early profitable prediction comes from two reasons”

• Revenue is rising: booking revenue grows 70% in UberEats and 30% overall
• Cost is reducing. The new CEO is doing what he promised: cut off marketing expenses, laid off workers and abandon unprofitable business (selling UberEats in India)

2. Looking deep in Uber’s earning report, and how Uber makes money what happened? (Investopedia)

First we need to know that, Rides is the bread-and-butter of Uber (76% revenue) and it is profitable (yeh, but still with generous accounting method). The peripheral two are Eats (16%) and Freights (7%) are growing precipitously but making losses, especially “Eats”. At the end of last year, Uber focused on minimizing loss from this branch.

Second, Uber free cash flow is improving, from the loss of -$1,070B (Q2,2019) and -$1,007B (Q3,2019) to -$270,2B (Q4,2019). With further cost cutting measures that the new CEO Dara Khosrowshahi pledged, the company is reaching the crucial milestone of positive FCF. 

3. The growing threats that could delay Uber’s profitability pathways

• California, a new gig work law is limiting Uber’s ability to classify its drivers as independent contractors. (Cnet)
• Uber loses its London license as regulator cites a ‘pattern of failures’ (TheVerge)
• Car-booking app Ola (from India) aims to overtake Uber in London. What I do not understand is that both of these companies are Softback-backed… (YahooFinance)

Even the self-driving car Waymo is a big threat (Investopedia)

1. (economics) China implementing its trade deal agreements (Finimize)

What’s up?

China has just announced it will halve tariffs on $75B worth of American goods. 

What does this mean?

China is trying to curry favor with the US, as it looks to avoid even more hardship from a trade war that’s dragged on for almost two years. Also, to curb the economic damage from the recent epidemic, the central bank injected ~$200B into the economy & slash interest rates to make borrowing cheaper, encourage spending and promote growth. This news came as welcome relief to investors, then not only the country’s stock rises, but also European and US stocks hit a record. 

2. (pharmaceutical) How does Merck splitting off part of its business save the company $1.5B in the long run? (follow-up the news in Feb 6)

Let me flashback

Merck’s planning to split its women’s health, biosimilars, and legacy drugs segments into a new standalone company 

Why should I care?

While Merck’s share will plunge in the first place, it reckons that loss will be offset by future saving costs in the remaining business (more towards R&D)

• The business of R&D is pretty standardized, then Merck can cut duplicate costs
• Merck can reduce manufacturing and distribution costs, since it will not have to make and sell as many drugs.

3. (e commerce) Tiki and Sendo has held exploratory talk to merge with each other to be the second unicorn in Vietnam (Cafef)

What’s up?

The market is going more fiercely with these two local companies. They are raising money slower than Shopee and Lazada as these two are backed by tech colossuses SEA and Alibaba. Therefore, a merge deal is reasonable at this time.

Zooming out

Let’s take a quick look at major players in the market (2018)

• Lazada: 1,773B VND profit and 7.111B VND cumulative loss. Backed by Alibaba, who has bought more than 50% of the e-wallet e-monkey. Then Alipay is coming? After years struggling with the license of State Bank of Vietnam 
• Shopee: 1,901B VND profit and 2,708B cumulative loss. Backed by Shopee, who owns “an ecosystem”: Shopee-ecommerce, GHTK-deliver and Airpay- payment.
• Tiki: 756B VND profit and 1,395B VND cumulative loss, two major shareholders are VNG and Tencent. 
• Sendo: 701B VND profit and 1,253B VND cumulative loss. Major shareholders are FPT and SBI. This company has raise $61M USD in 2019 (series C)

Today I will spend time for pharmaceutical industry. Here are some articles that I consider most worth-reading

1. What’s next for the Pharmaceutical industry? (McKinsey)

What’s up?

Till 2027, the global economy will 2x (from 2017), the total emerging markets consumer will reach 3B, people are getting older. All of that adds to the massive unmet need of the pharmaceutical industry. So, what is shaping it?

Zooming out

• Key industry drivers: (1) Technology & Innovation and (2) M&A
• Opportunities: Data, digital and technology
• What companies need to succeed: (1) Distinctiveness, (2) Have better insights and (3) Collaboration and partnership

2. What’s behind the pharmaceutical M&A push? (McKinsey)

What’s up?

The pharmaceutical industry is getting consolidated these years. M&A will help companies to innovate, work more efficiently and bolster product portfolio

Zooming out

• M&A is a source of innovation: M&A resolves two problems in the development of new products: large investment and capacity to navigate regulatory pathways
• M&A to unlock synergies: Most of the time it’s cost saving from the complimentary product portfolio and organizational structure.
• M&A to realign portfolios in some situations such as (1)Strategies has changed, (2) To bolster commercial pipelines or (3) To jettison unnecessary past assets.

3. Leading change in the Japanese pharma market: Innovating for the future in an uncertain present (McKinsey)

What’s up?

The president of Sanofi Japan: Jacques Nathan talks about the evolving Japan pharma market, areas impacted by that movement, and what Sanofi Japan is doing to adapt itself.

Zooming out

• Japan pharma market is evolving: It is exposed to a tension between cost control (mature products need more investments) and quality of care
• 03 challenged areas: (1) The promotional model: high cost, (2) The distribution and wholesale system: limited value-added and (3) R&D investment: unpredictability
• How is Sanofi Japan adapting? (1) Moving from primary care to specialty care. (2) Integrate digital into SOP and (3) Adopt some principles of agile.

1. #pharmacy Pharma giant Merck announces it is spinning off some of its products into a new business (Finimize)

What’s going on?

The title says it all :)). The company cut off its legacy products, women healthy and biosimilar drug divisions while holding onto its oncology, vaccine and hospital/animal health business. Its shares slumped

Why do I need to know?

It’s a strategic move from Merck. The spinned-off company contains low-growth but reliable existing products, while the other one is a high growth but risky R&D business. This will make it easy for investors to invest based on their risk interest. Many consumer health businesses are doing the same.

2. #banking Goldman Sachs and Amazon are collaborating (Financial Times)

What’s going on?

Goldman Sachs is close to striking a deal with Amazon to offer small business loans to its US customers. The project could be launched this March

Why do they collaborate?

• Amazon could (1) Extend its SMEs lending platform without associated credit risk of regulatory obligations and (2) Attract more business to its platform
• Goldman Sachs could increase revenue from new sources as its CEO has stated: consumer banking and wealth management. 

3. #retail Key Takeaways from BCG x Tencent 2020 China Social Retail Playbook

What’s going on?

The vast majority of Chinese consumers’ daily lives have become intertwined with social media. This January, the BCG and Tencent jointly published a whitepaper to help brands and companies better understand the landscape of Social Retail in China.

Zooming out (4 key findings)

• Consumer touchpoints become diversified (through various platforms like WeChat, TikTok, Weibo,..) and socialized, esp in the pre-purchase stage. 
• Decentralized distribution channels trigger “social fission.” Brands need to trigger customers to  repost product-related information. 
• Generating private domain (private chat or group chat) traffic is crucial to maximize customer lifetime value.
• Brands have to be specific, fast-paced, and flexible.

1. #oil Oil drops get dramatic (Finimize)

What’s going on?

Coronavirus is weighing heavily on international and Chinese economics growth, which in turn drag oil demand down. Therefore, OPEC+, who owns 50% world oil supply and 90% oil reserves, met on Tuesday to discuss making an emergency cut.

Why dramatic? 

British energy giant BP will suffer seriously due to 2 reasons

• BP’s reported earnings drop in Q4, 2019. This cut, along with a prediction of 40% global decrease in total, will put the company into troubles.
• The UK’s announced ban for sale of gasoline, diesel and hybrid cars by 2035, while road transportation accounts for 50% of oil demand in developed countries.

2. #politics Iowa caucus did not go smoothly (Morning Brew)

What’s going on?

Iowa Caucus is expected to take place on Feb 3, but technical problems left Iowa Democratic Party (IDO) officials and volunteers scrambling to transmit and validate vote totals.

Zooming out

Read this if you don’t know what Iowa Caucus is. This year, instead of following the traditional method, IDP rolled out a mobile app for precinct workers to share total votes with party officials. IDP did not test it with precinct organizers and rushed its development, then the app could not handle the volume of the nationwide election. It is becoming even worse when the security and validity of data is brought into the table

3. #pharmaceutical Pharmacity (backed by Mekong Capital) raised $31.8M in Series C round

What’s going on?

Mekong Capital-backed Pharmacity Pharmacy JSC, which owns the largest pharmacy network in Vietnam, has raised VND735 billion ($31.8 million) in a Series C funding round. The company said that this fresh funding will help its expansion plan.

Why do I need to know?

1. The pharmacy sector in Vietnam is active, with a number of players are jumping in to capture the market share
2. Pharmacity has a bright future ahead as this industry is very promising with (1) The shift from prescriptions to OTC drugs; (2) Low-regulated Vietnam market and (3) The rising of middle class with increasing expense for drugs. Read more here

1. #tech Alphabet is in trouble (Finimize)

Alphabet reported its fourth quarter earnings, which fell short of investors’ expectation. The bread-and-butter is still Google advertising, but the operating margin continued to fall (from 2017). However, analysts expect this number will increase in the next year due to the high-margin cloud business. That’s the trouble, as Google intends to ..cut off this arm if it is not the second-biggest till 2023. To make it happen, the “search monopoly” needs to overcome the breakneck-growing Microsoft Azure.

2. #analysis Economic Moats. What is it? (cxl)

What are moats?

They are one type of competitive advantage, but more durable than other ones.

Five types of moats

1. Low cost production – mainly by optimizing manufacturing and supply chain management. Ex: Walmart achieves the lowest inventory control and management cost/store among retailers because it has more stores in an area.
2. High switching cost – customer data. Ex: If an American wants to change phone providers, they will lose their current numbers, same for Gmail customers.
3. Network effects. Amazon and Uber are representatives for this type with a two-sided network effect. Read more about network effects here
4. Intangible assets – patents and brand. Ex: Hubspot, who defines & owns inbound marketing, is the first name people think about when looking for IM solutions
5. Efficient scale – limited demand and geographic dominance. Ex: In the US, freight roads own all the tracks, then an aspiring new entrants need to build its own railway to compete, which is costly.

Moats building in 21st industry

• Inbound marketing: above example
• Software adoption: Salesforce has a strong brand and exclusive integrations with Google Analytics 360. Sales reps are also likely to be familiar with Salesforce because it’s the most widely used CRM, reducing onboarding costs for companies that use it
• Customer data.

3. #analysis Why western digital firms have failed in China (HBR)

Western digital firms should learn from the main 3 lessons when entering the world’s most dynamically evolving country and follow these to capture a slide of that market.

The report from HBS converged foreign digital firms into three clusters. The first one is the lack understanding of the business environment -low barrier and highly competitive. Secondly, these firms had ineffective strategy making and communication, especially with the local government. Finally, it’s their underperformance operation and execution, including ill-fated attempt to impose global business model to unsuited Chinese market.

While the problem is insurmountable, the size and dynamism of Chinese digital market suggest firms should follow all these recommendations. Firstly, they should penetrate the market with a holistic view: work with the government, recruit Chinese for SVP position and partnership widely. Also, they need to accumulate incremental advantages across different areas overtime. Moreover, multinational companies must bring experimental approach to their strategy and innovation, when new ideas can become obsolete before being produced. This can be done only by setting up local team, local product and technical teams or even a tailor-made business model.