Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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You no doubt are in final preparations for next week. I certainly am.
News
Private Equity in Action: Media Division
Private equity relentlessly demonstrates, despite all their claims to the contrary, they are not very good operators of the businesses they buy. I’m sure their financial modeling is impeccable, but their business and product strategy intuitions are laughable (“hey, we can lay off even more employees and just use ChatGPT for our media business”).
We’ve said it before, and will no doubt say it many times again, but when private equity comes amalgamating, it is time to start migrating. You don’t want to rely on anything private equity is running into the ground.
This Week in Securities Fraud
As we prepare for the single biggest week of the year (Cloud CAPEX Week, coming next week)!, lets cleanse our palates by checking in on one of our favorite CAPEX clowns (i.e. non-spenders of CAPEX).
IBM beat (their own) earnings guidance and posted barn-burner revenue growth of 2.2% for 2023 (inflation was 3.4%). The market went wild and IBM stock is at a ten year high (though still short of my generational call to sell IBM at $209 because they were missing the cloud transition. They have underperformed every benchmark since).
IBM is running their cloud computing playbook again for AI. They talk up AI without making any real investment, and hope investors can’t distinguish them from real companies that are actually investing. It worked for them in the last 24 hours, but as with cloud computing, it is hard to see their slippery words competing in the long term against hundreds of billions of dollars of real CAPEX.
(Boy does the Twitter clown emoji suck).
IBM’s total CAPEX and CAPEX as a percentage of revenue are at record lows. Where are IBM’s GPUs? Selling busloads of offshore consultants who implement other companies’ AI technology is probably not what investors think they’re getting with “IBM the AI company”.
Useful Idiots, Fellow Travelers and Unregistered Foreign Agents: Wall Street
The Chinese Communist Party has decreed henceforth improved investor confidence in the Chinese economy, a revival of animal spirits, and a bullish outlook for the Chinese stock market. (Communist cadres, admittedly, may lack a nuanced appreciation of how authoritarian edicts affect a market already suffering from too much authoritarianism).
The CCP’s bestest allies in the whole wide world, Wall Street, are of course rallying in support of the party proclamation.
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Useful Idiots, Fellow Travelers and Unregistered Foreign Agents: Apple, Xi Jinping Thought on Wall Street Running Dogs, The Perils of Working for a Cult of Personality, Press Releases We’d Like to See, Best Nickname for Emmanuel Macron, Winnie-the-Pooh: Lover of Honey, Champion of Freedom, Missing the (Bamboo) Forest for the (Apple) Trees
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