Here are my thoughts on each.
Could Netflix Actually Buy Roku? Maybe
As many readers probably know, Roku's (ROKU) stock popped on an Insider report that claims Roku employees have been internally discussing the possibility of an acquisition by long-time partner Netflix (NFLX) , and that Roku "abruptly closed the trading window" for its employees' vested stock.
A few thoughts:
- While I can't predict whether a deal will happen, the idea of one sounds a little less crazy than it would have before April, when Netflix's stock tanked due to disappointing subscriber figures and the company said it's exploring the launch of an ad-supported service tier. Roku's ad-tech stack and user data could be valuable to Netflix as it tries to sell and serve targeted video ads at scale. And The Roku Channel -- Roku's free/ad-supported streaming service, which the company is now investing heavily in -- might also have some appeal.
- The most common argument against a Netflix/Roku deal is that it's in Roku's interests to remain a neutral partner to major streaming services. The counterargument here is that the biggest rivals to Roku's platform -- Alphabet's (GOOGL) Google TV and Amazon.com's (AMZN) Fire TV -- are owned by companies that possess major streaming services and tightly integrate them with their platforms. Also, the launch of The Roku Channel has made Roku a little less neutral than it was before. Theoretically, a Netflix-owned Roku OS could remain more neutral than its biggest rivals, while still giving Netflix a slew of ways to leverage the platform.
- Prior to Wednesday's pop, Roku stock was down more than 80% from its July 2021 high and more than 40% from its pre-Covid high (set in September 2019). As a result, it's easy to see Roku's management wanting a significant premium relative to Tuesday's close to agree to any M&A deal, at least unless near-term business trends really have them worried (admittedly, given current headwinds for both streaming activity and brand ad sales, this can't be entirely ruled out completely).
- While Roku's gains got more attention, it's worth noting that Netflix's also-battered stock rose 2.1% on Wednesday, amid a 0.7% Nasdaq drop. At least the initial reaction among Netflix shareholders to a potential deal doesn't look bad.
- Shortly before the Roku/Netflix report arrived, Insider reported that Netflix (along with ESPN and NBCUniversal) is bidding for U.S. Formula 1 streaming rights. Netflix seems to be kicking the tires (pardon the pun) on a lot of ideas that it previously wasn't crazy about. And certainly, a major live-sports package would give Netflix more video ad inventory that it could potentially sell with Roku's help.
Apple's WWDC Announcements: The Little Things Add Up
As usual, Apple (AAPL) unveiled operating system and app refreshes during its WWDC conference keynote. It also unveiled a new Mac/iPad Pro SoC (the M2), along with MacBook Air and Pro models that are powered by the chip.
A few thoughts:
- Among the big-5 U.S. tech giants, Apple and Amazon.com (AMZN) are probably the ones that -- while not getting everything right -- pay the closest attention to what customers are asking for. And it's easy to see how invested Apple is in addressing customer pain points when one goes through the dozens of new features respectively baked into iOS 16, iPadOS 16, macOS Ventura and watchOS 9. Individually, features such as the ability to view widgets and track live activities from the lock screen, support for editing/undoing sent messages, passkey sign-on support, more intelligent search tools, more photo/video-sharing options and better iPad and Mac multitasking aren't game-changers. But together, they and other OS/app improvements show the kind of attention to detail that has much to do with Apple's historical pricing power and sky-high customer loyalty.
- The revamped version of Apple's CarPlay platform that was previewed at WWDC -- it extends CarPlay's reach beyond a car's main infotainment screen to other screens, including digital instrument clusters -- is pretty noteworthy. With iPhone sales skewing towards relatively affluent consumers, and with Apple stating a dozen-plus major automakers plan to support the new version of CarPlay, quite a few iPhone users likely own a car that will support a multi-screen CarPlay implementation, or will own one soon. With an Apple car still likely a few years away -- and perhaps initially aimed at robotaxi services rather than individual car-buyers -- CarPlay has a lot of strategic importance at a time when both the number of in-car screens in use and the amount of time consumers spend engaging with said screens is rising at a brisk pace.
- Apple's M2 SoC, which is declared by the company to feature "an 18 percent faster CPU, a 35 percent more powerful GPU, and a 40 percent faster Neural Engine" than the M1, looks like a solid piece of silicon engineering, given that the M2 is using the same 5-nanometer TSMC (TSM) process node used by the M1 (albeit with a slightly more advanced process). The M1 line -- aided by its unmatched performance-per-watt among PC CPUs -- has helped Apple take notebook share over the last 18 months, and the M2 line, which among other things will be used by a revamped MacBook Air featuring a 13.6-inch Liquid Retina display, should do the same.
Intel's Negative Commentary: How Much Are Intel's Own Issues Holding It Back?
Many chip stocks underperformed the Nasdaq on Wednesday after Intel (INTC) CFO Dave Zinsner and Data Center and AI segment chief Sandra Rivera made cautious comments about near-term demand during a Bank of America conference talk. The following comments by Zinsner (in response to a question about current demand trends) especially got a lot of attention:
I think on the macro side, clearly, it's weaker. And we, like everyone else, will be impacted by the macro events that are unfolding here more recently. That's clearly going to impact us, as it will virtually everybody else in not only the semiconductor industry but globally in terms of corporations.
For us, the other thing was we had 3 kinds of headwinds coming into the quarter, which we talked about. One was the match-set issue where customers could not get enough components to build [products]. That was [what] we expected to impact demand. The second was inventory. We expected customers to reduce their inventory levels, which would impact their demand on us. And then there was the China, Shanghai closure and we expected that to open up in early May. And it takes time to get back to normal but get back to normal [in] a relatively quick fashion.
I think in all 3 cases, the circumstances at this point are much worse than what we had anticipated coming into the quarter. (Source: TIKR)
Separately, Rivera suggested Intel's server CPU sales will be hurt not only by the inventory-correction and match-set issues Zinsner mentioned, but also by enterprises shifting workloads to cloud infrastructures.
Like so many attempts by companies to blame demand weakness on macro and/or industry-wide pressures, the explanation given by Intel for its demand problems feels half-true.
Yes, some OEMs are paring inventories and/or dealing with match-set issues, and lockdowns have recently weighed on Chinese consumer tech demand. But it's also true that Intel has been bleeding PC and server CPU share to Advanced Micro Devices (AMD) and Arm-architecture CPUs.
In addition, compared with AMD, Intel has heavier exposure to a low-end consumer PC market that's weakened after seeing strong pandemic-driven growth, as well as to an on-premise enterprise server market that (though relatively healthy this year) still faces long-term headwinds from cloud adoption. And during the BofA talk, Rivera disclosed that the volume ramp for Intel's next-gen Xeon server CPU line (codenamed Sapphire Rapids) has been delayed again.
It's worth noting that even back in April, Intel was guiding for its sales to rise less than 2% in 2022, to $76 billion. For comparison, research firm Gartner forecast in April that global semiconductor revenue would rise 13.6% this year to $676 billion.
Meanwhile, TSMC, which counts AMD and several other Intel rivals as major clients, slightly improved its full-year sales guidance on Wednesday. The chip manufacturing giant now expects roughly 30% 2022 sales growth, after having guided for high-20% or better growth in April.
In tune with their recent risk-averse mood, markets paid far more attention to Intel's commentary than TSMC's on Wednesday. But given how many other chip companies are also still sharing upbeat commentary, it might not take a lot for the pendulum to swing in the other direction.
This article has been corrected to state TSMC slightly improved its guidance on Wednesday, rather than Monday.