Apple Now Seems Interested in Creating its Own 5G Modems
One year after the next, Apple (AAPL) has grown the scope of its chip engineering work. The company now not only designs the system-on-chips (SoCs) that power much of its hardware lineup, but also the CPU cores, GPU cores, image processors and AI co-processors that go inside of them. Its design work also now encompasses fingerprint sensors, power management chips, LCD timing controller chips, Bluetooth chips for headphones and Mac co-processors (and reportedly, SoCs that will power future Macs).
Now it looks as if Apple also wants to design the cellular modems that go into its hardware. In recent months -- as Apple has announced it plans to set up new offices in Qualcomm's (QCOM) hometown of San Diego -- the company has posted new San Diego job listings for wireless engineers.
In addition, Reuters reported on Thursday that Apple has moved its modem engineering team from its supply chain unit to its core hardware technologies unit. Johny Srouji, Apple's SVP of hardware technologies, is said to have begun overseeing the company's modem design work in January.
Apple has historically relied on Qualcomm (by far the world's biggest 4G modem supplier) and Intel (INTC) for its 3G/4G modem needs. Qualcomm was the company's exclusive supplier for several years, but -- not long before a bitter dispute over royalty rates exploded between the companies -- Apple chose to partly rely on Intel's modems for its 2016 iPhone launches, and did so again in 2017. And in 2018, Apple solely relied on Intel for the modems going inside of the iPhone XR, XS and XS Max.
Intel has also been expected to be Apple's sole modem supplier for its 2019 and 2020 iPhones, with the 2020 models expected to contain Intel's XMM 8160 5G modem. Apple's recent moves don't necessarily change this: Designing a new cellular modem from the ground up is a difficult, costly and time-consuming process. However, provided Apple's engineering work goes as planned, it wouldn't be surprising if iPhones and iPads launched in future years contain internally-designed modems.
As others have pointed out, if Apple started relying on its modems, it would likely try to build them into its A-series SoCs, in much the same way that Qualcomm, Samsung and others have built 4G modems into SoCs that also feature app processors. Taiwan Semiconductor (TSM) , which has been responsible for manufacturing Apple's A-series SoCs in recent years, is the most likely candidate for producing such a chip.
Slack Looks Poised to Get a Steep Post-IPO Valuation
Feb 5, 2019 | 6:41 PM EST
2018 was a very strong year for enterprise software IPOs, and (after getting hit during the market's late-2018 selloff) many high-growth software names are once more trading near their 52-week highs. Thus it's not too surprising that the cloud messaging and collaboration software upstart said this week that it has confidentially filed for an IPO.
Slack was valued at $7.1 billion in a 2018 funding round, and was reported in December to be seeking an IPO valuation of "well over $10 billion." Even if one assumes that Slack's revenue has doubled or more from the $221 million it reportedly had for the year ending in Jan. 2018, those are pretty lofty multiples.
The fact that public markets are willing to support high multiples for fast-growing enterprise software names should help Slack obtain a valuation premium. So should the fact that (though we won't know all of the details until the company publicly shares its S-1 filing) it's still growing at a brisk pace. Slack, whose product has both free and paid subscription tiers, recently disclosed that its daily active user (DAU) count has grown by 2 million since last May to over 10 million, and that the number of organizations paying for its offerings has grown by over 50% during the last 12 months to more than 85,000.
There are also a couple of unique factors to Slack's story that could help it obtain steep multiples. One is that Slack, whose messaging tools have achieved a cult following at many of the media companies, startups and larger tech companies where it has been adopted, has supplanted e-mail as the primary method for internal communications at many of the firms where it's deployed. A communications platform that has this kind of pull, and which is backed by a healthy ecosystem of third-party apps, will likely get a valuation premium on account of its long-term potential.
The other factor is that -- at a time when there's plenty of M&A activity happening in the enterprise software space -- Slack remains the subject of considerable buyout speculation due to that aforementioned long-term potential. Amazon.com (AMZN) was reported to have buyout interest in 2017, and Microsoft (MSFT) was reported in 2016 to have mulled an $8 billion offer for Slack. Of course, the reported Microsoft offer came before the company launched a popular Slack rival known as Teams that's now bundled with many corporate Office 365 plans.
Slack's meteoric rise over the last few years has been impressive, and it will likely see plenty of additional growth in the coming years. However, given the high multiples that the company will likely receive, and the fact that Microsoft has become a formidable rival when battling for enterprise accounts, investors should probably tread carefully with its offering, at least unless one is lucky enough to get IPO shares.
GrubHub's Recent Plunge Might Contain a Lesson for Investors
Feb 5, 2019 | 12:40 PM ESTFive months ago, GrubHub Inc. (GRUB) could do no wrong in the eyes of investors. Today, as competition from Uber and others starts to leave an imprint on GrubHub's top-line trends, the story is very different.
Though off their morning lows, GrubHub shares are down around 7% in Thursday trading after the online delivery/takeout platform missed Q4 estimates and issued in-line Q1 and 2019 revenue guidance. Shares are now down 48% from a September peak of $149.35, achieved after GrubHub rose about 700% from its early-2016 lows.
With the qualifier that it's boosted a bit by the recent acquisitions of campus food-ordering service Tapingo and restaurant loyalty program/payments service provider LevelUp, GrubHub's top-line growth is still pretty healthy. Revenue (though missing estimates) rose 40% annually in Q4, and the midpoints of the company's Q1 and 2019 revenue guidance ranges imply 37% and 35% growth, respectively.
However, growth rates for key user metrics are a lot lower. With GrubHub no longer getting a boost from its October 2017 acquisition of Yelp's (YELP) Eat24 service, which was recently shuttered, gross food sales only rose 21% in Q4 to $1.4 billion, and daily average grubs (DAGs) only 19% to 467,500. Active diners were up 22% to 17.7 million.
Meanwhile, Uber's rival UberEATS platform has been growing like wildfire. Last June, Uber CEO Dara Khosrowshahi said UberEats was on a $6 billion annualized bookings run rate, and growing over 200%. More recently, Uber disclosed it had Q3 UberEats bookings of $2.1 billion (that implies an annual run rate of $8.4 billion).
GrubHub is also contending with a handful of other rivals. Amazon.com (AMZN) continues heavily promoting its Prime Now platform's food-delivery services to its U.S. Prime base. Square (SQ) , for its part, remains committed to its Caviar food-ordering service.
One possible lesson for investors from GrubHub's recent pressures: One shouldn't lose sight of how well a company's rivals are performing simply because (for the time being) the company is still seeing healthy growth. Just to give one example, while PayPal's ( PYPL) user metrics still look pretty strong, PayPal investors should definitely keep an eye on the momentum that Apple ( AAPL) is seeing for Apple Pay, which can handle payments on iOS devices for many mobile apps and websites in addition to bricks-and-mortar stores, as well as the indirect competition provided by Amazon's e-commerce operations, which don't support PayPal as a payment method.To see Tech Check coverage from the previous trading day, click here.
