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The smartphone business is really tough...
April 06, 2021 View Online | Sign Up

Daily Brew

Miso Robotics

Good morning. What a performance from Baylor, who long after our bedtime closed out Gonzaga to win the NCAA men's national championship. 

And to all of our readers who won your office pools, make sure you cue up a fun Zoom background today to relish your victory. 

MARKETS 1-DAY PERFORMANCE

 
NASDAQ
+1.67%
13,705.59
S&P
+1.44%
4,077.91
Dow
+1.13%
33,527.19
Bitcoin
-1.78%
$58,754.00
10-Year
-1.8 bps
1.702%
AMC
+13.35%
$10.61
 

*Stock data as of market close, cryptocurrency data as of 6:00pm ET. Here's what these numbers mean.

  • Economy: The services sector grew at the fastest pace on record in March. That data, when paired with last week's bullish reports on manufacturing and jobs, present a pretty rosy picture of this economic recovery. 
  • Markets: Thanks in part to the good news , the Dow and S&P notched more records. AMC stock shot higher, but it wasn't because of Reddit traders. An analyst upgraded the company following the monster opening of Godzilla vs. Kong.

TECH

Life's Not So Good

A gif of a smartphone with the LG logo on its screen flashing and then turning off.

Francis Scialabba

Sunday night, South Korean electronics maker LG said it's powering down its 12-year-old smartphone business to focus on more profitable areas, like smart home devices and electric vehicle parts.

Once the world's third-largest smartphone maker, last year LG shipped just 23 million phones to Samsung's 256 million. Execs once thought the unit would turn profitable this year, but 23 consecutive quarters of losses totalling $4.4 billion said otherwise.

What went wrong?

Like Golden Delicious apples, LG's biggest issues boiled down to poor marketing and the lack of a clearly defined identity. 

Its higher-end smartphones failed to compete with the iPhone or earn a similar cult following. Mid-tier options couldn't keep pace with Samsung and its massive advertising budget. And cheaper models were outstripped by Chinese competitors like Xiaomi and Oppo. 

  • LG accounts for about 10% of the US smartphone market, and its departure will create even more opportunity for its South Korean rival, Samsung, which competes more in the mid-tier market. 

Ars Technica puts it a little more succinctly..."LG's phones were never good." As consumers held onto their devices longer and looked for budget options, LG fell behind.

Don't cry because it's over; smile because it happened

LG is credited with pioneering ultra-wide angle smartphone cameras and the first full touchscreen. While attempts to build buzz with features like a curved phone, swiveling screens, or modular customization fell flat, the company thought outside the box when many smartphone enthusiasts feel innovation has otherwise stalled.

  • Tech blogger Austin Evans tweeted, "LG were never perfect but in a world of boring slabs they delivered some of the most unique phone designs, ideas, and features ever."

Zoom out: The smartphone biz is hard. LG joins the growing ranks of failed smartphone makers, from Big Tech titans (Facebook, Amazon, Microsoft) to legacy tech companies (Dell, HP, Toshiba, Ericsson) to phone manufacturers now in their second life (Blackberry, Nokia, Motorola). 

        

GOVERNMENT

Taxes With Friends

An illustration of a Monopoly board. The space for taxes shows "Corporate Tax: Pay 21% or $200" with the 21% crossed out in red pen and 28% written beside it.

Francis Scialabba

The British Virgin Islands' tourism board might soon have to tweak its pitch. Yesterday, in her first major address as Treasury secretary, Janet Yellen called for international cooperation on a new minimum corporate tax rate.

  • Reminder: The US corporate rate is currently 21%, though many firms pay less. Globally, the average is ~24% and has been declining since the 1980s. 

The Biden administration is in full sales mode for the president's $2.3 trillion infrastructure proposal, which would raise the US corporate rate to 28% and double taxes on foreign profits to 21%. If that happens, Yellen wants to make sure US companies won't up and move to a country with more favorable tax policies. 

  • Under a coordinated international tax, multinational firms would face the same minimum rate regardless of where they park their HQ.

Zoom out: The OECD, a group of wealthy countries, has been talking about a new taxation scheme for multinationals for years, and members are hoping to reach an agreement this summer. Yellen will press her case at virtual IMF and World Bank meetings this week.

        

COVID

In a Vaccine State of Mind

Vaccine eligibility map

Ariadne Labs

As of today, all adult New Yorkers are eligible for a Covid-19 vaccine, setting up a new Subway Series between Pfizer and Moderna. 

Zoom out: More than 30 states have made shots available to all adults, including a dozen more states yesterday. New Jersey just announced it's opening up eligibility to everyone over 16 beginning on April 19.

        

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Miso Robotics

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LAW

The Country's First Fight Over an Android

Supreme Court

Pixabay

Yesterday, the Supreme Court ruled that Google did not violate copyright law when it used parts of Oracle's Java code to develop the Android operating system. The ruling handed Google a W in its decade-long copyright battle over the origins of one of the most important software programs used today. 

Here's what happened: Oracle said Google "committed an egregious act of plagiarism" by using ~11,500 lines of code from the Java platform now owned by Oracle. Google argued that because it used Java APIs, or application programming interfaces, that were essentially building blocks and lacking much creative expression, Google was covered under "fair use" protections.

Ultimately, in a 6–2 decision, the court said that Google's use of the code did fall under fair use, and that if Oracle had its way, other developers could be blocked from getting the code they needed and tech innovation might slow down. 

Expect future battles. The court didn't decide on whether any APIs could be protected under copyright law, and Justice Stephen Breyer acknowledged that tech is changing so fast it's best to "not answer more than is necessary."

        

GRAB BAG

Key Performance Indicators

Genesis drones in the air

Genesis

Stat: Genesis, the Hyundai-owned auto brand, just set the Guinness World Record for most Unmanned Aerial Vehicles (aka drones) in the air at the same time. It sent 3,281 drones into the Shanghai night sky on March 29 to promote its entrance into China. 

Quote: "On Monday, April 12, I will be going to the pub myself and cautiously but irreversibly raising a pint of beer to my lips."

An "I'm going to grab a beer" probably would have sufficed, but UK Prime Minister Boris Johnson offered his own unique way of confirming that England will proceed with reopening non-essential businesses next week, including hairdressers, gyms, and outside service for restaurants.

Read: How beauty filters took over social media and changed the way young girls see themselves. (MIT Tech Review)

        

RETAIL

A Sample Sale Won't Save You Now

Around 80,000 retail stores, or 9% of the total in the US, will close their doors by 2026 if e-commerce sales continue their upward trend, a new report from UBS projects.

  • The category that'll be hit the hardest: clothing and accessories retailers, which are projected to close 21,000 stores by 2026.
  • Plus, 45% of office supply stores are expected to close in the next five years.

But Home Depot hot dogs remain safe. Retailers in the home improvement, grocery, and auto parts sectors are expected to be relatively immune from having to shutter stores.

Some good news: For the first time in years, 2021 store openings are actually outpacing closures, per Coresight Research. And even as many retailers struggled to stay afloat during the pandemic, there were still more than 1,000 fewer closures in 2020 than there were in 2019, thanks in part to the government's historic stimulus measures.

        

WHAT ELSE IS BREWING

  • GameStop said it may sell up to $1 billion in new stock to raise capital for its shift to e-commerce. 
  • Sen. Minority Leader Mitch McConnell blasted corporations that criticized Georgia's new voting law for using "economic blackmail to spread disinformation."
  • Russia said it would slow, but not completely block, Twitter due to the platform's alleged failure to remove harmful content.
  • The market capitalization of all cryptocurrencies hit an all-time high of $2 trillion yesterday.
  • Apple CEO Tim Cook thinks we're in a privacy "crisis." 
  • Aaron Rodgers faced a tough contestant in his first episode hosting Jeopardy! 

BREW'S BETS

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America, America: From the mountains to the prairies, check out this map of US elevation.

"My cofounder": Morning Brew CEO Alex Lieberman talks about his relationship with his cofounder Austin Rief on the latest episode of the podcast Founder's Journal.

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FROM THE CREW

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Francis Scialabba

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GAMES

Nutritional Facts

Which popular beverage product has the following ingredient list?

Filtered Water; Sugar; Pear And Grape Juice Concentrates; Citric Acid; Orange, Apple And Pineapple Juice Concentrates; Natural Flavor

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ANSWER

Capri Sun Fruit Punch. What a throwback...

              

Written by Alex Hickey, Matty Merritt, and Neal Freyman

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