This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In a move that has become all too familiar, Facebook Inc (NASDAQ: FB) has noticed an upstart social media app that is gaining traction and wants to take a bite out of the smaller company's growth. The dominant social media network has deployed this playbook countless times over the years, oftentimes attempting to acquire a promising new start-up while simultaneously threatening it by competing through copying.

The latest target is Cameo, an app that allows users to pay celebrities to deliver personalised messages.

Coming after Cameo

Bloomberg reports that Facebook is developing a new feature called Super, which very closely resembles what Cameo does. Super will allow content creators or celebrities to host virtual events where the audience can send tips or digital gifts. Viewers will also be able to pay for the privilege of appearing directly in the event's livestream, according to the report.

Facebook's New Product Experimentation (NPE) team is said to be behind the app's development. That division was created over the summer of 2019 with the explicit task of testing out new ideas, and the team is reportedly working on apps that basically compete with everyone. The social networking tech giant has made it clear that NPE is a riskier endeavor and won't hesitate to shut down apps that fail to gain traction. Several apps have already been shuttered, most recently including Hobbi and Lasso, which were trying to replicate Pinterest and TikTok, respectively.

Founded in 2016, Cameo connects celebrities with fans, who can pay for personalised videos and messages. The celebrity sets the price, with the start-up taking a 25% cut of all transactions. Users can request that the celebrity perform specific actions or say certain things, and clips often go viral  on social media.

The company had raised $50 million last summer in a Series B funding round at a $300 valuation, according to Axios. Cameo's popularity has surged during the COVID-19 pandemic, as the platform is a way for people to connect virtually while staying at home. As a small private company, Cameo does not regularly disclose many details around its business but has said it facilitates hundreds of thousands of interactions per month.

Why Facebook won't just buy Cameo

With that type of booming demand, it's no surprise that Facebook wants to jump into the niche. Considering Facebook's history, it wouldn't even been surprising if the juggernaut was interested in acquiring Cameo. However, Facebook's strategy of acquiring upstarts that could one day grow to become viable competitors is under extreme scrutiny right now -- the FTC and state attorneys general have just sued the company, alleging that it has built an illegal monopoly by buying up the competition.

The legal complaints call for Facebook to be broken up, specifically from Instagram and WhatsApp, both of which were acquisitions. Attempting to acquire Cameo would just stoke further criticisms at exactly the worst possible time. In all likelihood, Facebook will simply try to copy Cameo and quietly shut down Super a few months after it launches when it fails to make a dent in Cameo's growth.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Facebook is preparing to copy Cameo appeared first on The Motley Fool Australia.

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Evan Niu, CFA has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook and Pinterest. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After paying a record $5 billion fine to the Federal Trade Commission last year to settle allegations that Facebook Inc (NASDAQ: FB) violated user privacy, the social media juggernaut is now in hot water with the regulatory agency yet again. But things are even more serious this time around, with a coalition of 46 attorneys general joining forces with the FTC to file two separate lawsuits against Facebook for alleged violations of antitrust laws.

These are extremely serious charges, and Facebook is now facing substantial regulatory risks as the prosecutors call to break up the company.

But his emails

Facebook has a long history of quickly scooping up small social media start-ups right as those companies start to gain popularity. The most notable of these acquisitions have been the $1 billion acquisition of Instagram and the $19 billion purchase of WhatsApp. (Those price tags are based on the initial offers but changed by the time the deals closed due to fluctuations in Facebook stock.)

The company has long maintained that those services have only been able to grow to dominance under Facebook's wing, thanks to having access to the tech giant's deep pockets and Mark Zuckerberg's ruthless business acumen. That may all be true, but it's also true that acquiring a would-be competitor for the explicit purpose of undermining competition is illegal.

Zuckerberg knows this. Over the summer, a separate congressional investigation unearthed emails from 2012 between Zuckerberg and former CFO David Ebersman where the executives contemplated acquiring Instagram and Path. Ebersman was skeptical of the rationales, and Zuckerberg said that Facebook was really trying to buy time while acknowledging that part of the reason would be to neutralize a potential competitor. Realizing that he may have gone too far, the CEO soon added, "I didn't mean to imply that we'd be buying them to prevent them from competing with us in any way."

This exchange is quoted directly in the FTC's legal complaint, along with another 2008 email where Zuckerberg asserted that "it is better to buy than compete." Facebook had initially tried to challenge Instagram directly, but failed to gain traction with users, so the company fell back on that strategy of acquiring instead of competing.

A similar episode played out with WhatsApp, which was becoming incredibly popular, perhaps unstoppably so, in emerging markets where the messaging service was displacing traditional SMS texting.

"Just as with Instagram, WhatsApp presented a powerful threat to Facebook's personal social networking monopoly, which Facebook targeted for acquisition rather than competition," the FTC wrote.

Facebook says that the feds want "a do-over"

The FTC and attorneys general are seeking to break up Facebook by forcing it to divest both Instagram and WhatsApp, an extraordinary move that would be a daunting task for acquisitions that have long since been integrated into the conglomerate. There are other aspects to the lawsuits, including allegations that Facebook also leveraged its core platform to hurt competition, but the proposed divestitures are a particularly big ask.

"Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day," Facebook fired back in a statement.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Facebook allegedly crossed a line in buying up the competition appeared first on The Motley Fool Australia.

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Evan Niu, CFA has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Apple (NASDAQ: AAPL) is set to report fiscal fourth-quarter earnings results on Thursday, but investors should temper their expectations. The company will face tough comparisons in several categories, most notably in the core iPhone business. The COVID-19 crisis impacted Apple's supply chain earlier this year and led to delays in final testing, which subsequently pushed back the production schedule by a few weeks.

The iPhone 12 and 12 Pro launched on Friday, slightly later than usual, and after the fiscal fourth quarter had already closed at the end of September. In contrast, last year's iPhone 11 lineup launched in late September.

A "lack of new products"

Morgan Stanley analyst Katy Huberty released a note last week warning that analysts' expectations for the iPhone remain too high. The consensus estimate currently calls for 40.4 million iPhone units, which Huberty suggests is too optimistic. The analyst is modeling for iPhone unit volumes of just 33 million and iPhone revenue of $22.9 billion, translating into an average selling price of approximately $694.

"While results ahead of a product cycle don't tend to influence investor sentiment, we see the potential for an expectations miss on the back of aggressive consensus iPhone expectations that don't fully account for the lack of new products in the quarter," Huberty wrote in a research note to investors. Instead of focusing on the iPhone, investors should look at other parts of the business, as well as guidance for the holiday shopping season.

While the Cupertino tech giant did have a virtual product event in September to unveil the Apple Watch Series 6 and iPad Air 4, the latter device didn't ship until October. The smartwatch did launch about a week before the fiscal year ended, so some Apple Watch sales will be included in the upcoming earnings report.

The good news is that Huberty believes that demand for the newest iPhone is the strongest it's been in years, pointing to lead times and shipping estimates. Separately, TF International Securities analyst Ming-Chi Kuo recently noted that pre-order volumes are up and that the product mix appears to be shifting toward higher-end Pro models, which bodes well for overall profitability.

Huberty is modeling for services revenue of $14.5 billion, which would represent both a new quarterly record and 10% sequential growth. The analyst is assigning a much higher valuation multiple to the booming services segment compared to hardware products, due to the highly profitable and recurring nature of services revenue. Apple is looking to hit 600 million paid subscriptions by year-end.

While the timing of the iPhone 12 launch will affect reported results, the more important thing will be how the new flagship smartphone sells in the coming quarters. On that front, Huberty is very bullish and tells investors to buy the stock if it dips after earnings.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Will Apple miss on earnings this week? appeared first on The Motley Fool Australia.

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Evan Niu, CFA owns shares of Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It's iPhone Day 2020, and Apple (NASDAQ: AAPL) just showed off its latest flagship iPhone and a new affordable smart speaker. There was no mention of the AirTags accessory that could help people locate lost items, or any updates around Arm-based Macs or how many Apple Music subscribers there are now.

Here's everything that Apple showed off today.

iPhone 12

As expected, the next iPhone will feature 5G cellular technology across all new models. Apple has overhauled the lineup's design, resembling the boxier iPad Pro and some older iPhones. The standard iPhone 12 will have the same 6.1-inch display as last year's iPhone 11, but the smartphone is -- you guessed it -- thinner and lighter. However, the display has a higher resolution with twice as many pixels.

Apple has collaborated with Corning to develop a new cover glass material that it's calling Ceramic Shield, which should improve durability and minimize damage from drops. There is an updated dual-camera system, and Apple is adding a magnetic system, repurposing its old MagSafe branding. Those magnets will make it easier to properly align a wireless charger and can also be used for other accessories.

iPhone 12 and 12 Mini. Image source: Apple.

The company is adding a smaller iPhone 12 Mini to the lineup with a 5.4-inch display. That model has essentially all of the same features as the standard iPhone 12 but in a smaller form factor.

The Pro models use the same design but swap out aluminum for stainless steel as the chassis material. iPhone 12 Pro is getting a larger 6.1-inch display, up from last year's 5.8-inch screen, while iPhone 12 Pro Max will get a 6.7-inch display.

The triple-camera system is similarly getting a revamp with improved photo and video performance. The Pro models also include a lidar sensor in the camera system, which was expected after Apple added that sensor to the iPad Pro earlier this year. The inclusion of lidar will allow the iPhones to better understand their environments, which will be useful for augmented reality (AR) applications, as well as contribute to photo quality.

Here's what the new lineup looks like.

Data source: Apple.

The iPhone 12 and 12 Pro can be pre-ordered on Friday and will ship a week later, while the Mini and Max models will ship in early November.

HomePod Mini. Image source: Apple.

HomePod Mini

Years after launching the overpriced HomePod, Apple has finally announced its oft-rumored HomePod Mini, priced at $99. The new speaker is smaller, has a spherical design, and features a backlit touch surface on the top that displays visualizations. HomePod Mini looks like an upside-down version of Amazon's new Echo Dot, except it costs twice as much.

The original HomePod, which was initially priced at $350, was never a strong seller and failed to make a dent in the booming smart-speaker market. Apple is still touting superior audio quality, pointing to an S5 chip that powers computational audio that optimizes the speaker's acoustics. HomePod Mini will include Apple's U1 Ultra Wideband chip for short-range communications with other Apple gadgets that have the chip.

One of the main criticisms of the original HomePod was that it only directly supported integration with Apple Music, limiting the appeal to consumers that might use another streaming service. Apple will add support for SiriusXM's Pandora and Amazon Music -- but not Spotify, the most popular paid music-streaming service in the world. That omission will not help dispel the ongoing antitrust scrutiny.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Apple Announces the iPhone 12: What You Need to Know appeared first on The Motley Fool Australia.

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Evan Niu, CFA owns shares of Amazon, Apple, and Spotify Technology. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The global smartphone market has had the worst year in its history, primarily on account of the COVID-19 pandemic that has decimated discretionary spending while simultaneously disrupting consumer electronics supply chains. Total shipments have seen the biggest drops in history throughout 2020, with some markets like India even getting cut in half.

Some smartphone manufacturers have already started to release handsets equipped with 5G, and Apple Inc's (NASDAQ: AAPL) highly anticipated foray into 5G this year could help save the market.

Bouncing back in 2021

Canalys released its latest estimates for the worldwide smartphone industry this week, with total unit volumes for 2020 expected to decline by 11%. Total 5G smartphone shipments this year are forecast to be approximately 280 million, driven by relatively affordable 5G handsets being sold in China, the largest smartphone market in the world. Hopefully, 5G product releases at the end of 2020 will spur momentum heading into 2021, when total volumes should bounce back by 10% to 1.3 billion.

"Gradual reopening of offline stores, improving logistics and production have provided necessary uplift for most markets to move into a more stabilized second half of 2020," Canalys senior analyst Ben Stanton said in the release. "And with the holiday season about to kick off, there is no doubt 5G is about to be thrust into spotlight."

Commoditisation of 5G phones in China, which helps bring prices down, will be crucial in boosting demand this year, according to Canalys. 5G smartphones that cost $400 or less are expected to account for nearly 60% of total smartphone volumes in China in 2021, a much higher proportion than in other mature markets like North America or Europe. Note that Apple tends to have a stronger position in developed markets and its flagship 5G iPhones this year will cost well above $400.

"Fairly aggressively-priced 5G devices are already available in Europe, such as the Motorola G 5G Plus, and the Xiaomi Mi 10 Lite 5G," Stanton added. "But with many Apple-centric markets, such as the UK, there is a large base of customers willing to wait for an iPhone with 5G."

Average selling prices (ASPs) of 5G handsets sold in Europe should steadily decline as well due to competition, with Canalys modeling that figure at $765 in 2021 and $477 in 2024.

Even though many wireless carriers around the world are still in early stages of 5G deployments and there are important nuances regarding the types of speeds that 5G can offer, carriers and smartphone manufacturers are doing a good job in creating interest and hype around the next-generation technology, which will push 5G penetration higher. Canalys analyst Shengtao Jin expects 5G penetration in China to top 80% within the next year.

Canalys estimates that total 5G shipments will soar by 95% to reach 544 million in 2021, which would represent over 40% of all units sold.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Can 5G save the smartphone market? appeared first on The Motley Fool Australia.

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Evan Niu, CFA owns shares of Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It's not every day that Warren Buffett, famously averse to tech companies that aren't named after fruit, as well as IPOs in general, agrees to buy into a hot tech IPO. Yet that's exactly what Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is preparing to do.

To be clear, it's highly likely that the Oracle of Omaha is not making the call personally and instead one of his investing lieutenants (Todd Combs or Ted Weschler) made the decision, but presumably Buffett had to give his blessing for such a risky investment. Let's see if you should consider investing in Snowflake like Berkshire Hathaway is about to.

Half a billion from Berkshire

Cloud-based data-warehousing start-up Snowflake filed its initial S-1 Registration Statement a couple weeks ago and submitted an amended version this week that included some important updates. For starters, Snowflake expects to price the stock at $75 to $85 and raise approximately $2.7 billion in fresh capital. That would put the unicorn's market cap at $20.9 billion to $23.7 billion -- quite a jump from the $12.4 billion valuation that it fetched in February of this year in a Series G funding round.

Snowflake also disclosed that it will be conducting two concurrent private placements with Berkshire Hathaway and Salesforce Ventures, the venture capital arm of salesforce.com (NYSE: CRM), that will close immediately after the IPO. While Salesforce Ventures is a fixture in Silicon Valley private markets -- it already has a stake in Snowflake -- Berkshire Hathaway is decidedly not.

Buffett's investment holding company has agreed to purchase $250 million worth of Class A stock through a private placement. Based on the midpoint of the expected range ($80), that would be good for 3.13 million shares. On top of that, Berkshire Hathaway is buying another 4 million shares from former Snowflake CEO Robert Muglia at the IPO offer price, or another $323 million based on the midpoint. The end result will be Berkshire Hathaway spending over half a billion dollars to buy a 2.6% stake in Snowflake.

A value investor buying a high-growth tech IPO

What does Berkshire Hathaway see in Snowflake? In no uncertain terms, Snowflake's numbers are fantastic. Revenue skyrocketed 174% last fiscal year, and sales are up 133% in the first half of this fiscal year. The company now has 3,117 total customers, of which 56 have contributed over $1 million in trailing-12-month product revenue. That cohort of big spenders has more than doubled over the past year, up from 22 at the end of July 2019.

Remaining performance obligations (RPO), which represents future revenue under contract but not yet recognized, has more than tripled over the past year to $688.2 million. Existing customers continue to expand their relationships with Snowflake, as evidenced by a net revenue retention rate of 158%.

These types of figures will appeal to any growth investor, but Buffett tends to prefer value stocks instead of unprofitable start-ups, particularly those that are valued at nearly 60 times sales. Combs and Weschler are surely behind the move; let's see if they can prove Buffett wrong about tech IPOs.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Evan Niu, CFA owns shares of Salesforce.com. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short September 2020 $200 calls on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shortly after giving up on live-streaming, Microsoft (NASDAQ: MSFT) is doing likewise with retail. The company announced last week that it would be permanently closing all physical retail stores in a major strategic shift, thus ending a decade-long experiment in replicating Apple's (NASDAQ: AAPL) success in retail. The first Microsoft Store opened in October 2009, nearly 11 years ago.

Here's why the software giant is pulling the plug on its stores.

Four locations will be repurposed

Like many retailers, Microsoft stores have been crushed by the COVID-19 pandemic. Locations have been closed since March as a result of various virus-related lockdown orders, and none have reopened even as some local restrictions have eased. Employees have still been able to assist customers, including average consumers and enterprise customers, remotely with virtual training and support calls.

Only four locations in London; New York City; Redmond, Washington; and Sydney will remain open, but they will be repurposed as Microsoft Experience Centers instead of traditional retail stores. Microsoft expects to eat a pre-tax charge of approximately $450 million, or $0.05 per share, in the second quarter.

Microsoft told The Verge that it would not be laying off any employees as a result of the decision. Instead, those workers will transition to other corporate offices where they will remotely work on sales, training, and support. Accordingly, the aforementioned pre-tax charge should relate primarily to things like lease terminations and other associated costs instead of severance or termination benefits.

Meanwhile, the enterprise software tech behemoth will invest heavily in its digital storefronts -- which Microsoft says collectively have 1.2 billion monthly visitors -- to facilitate virtual interactions.

"Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has proven success serving customers beyond any physical location," Microsoft exec David Porter said in a statement. "We are grateful to our Microsoft Store customers and we look forward to continuing to serve them online and with our retail sales team at Microsoft corporate locations."

Chasing Apple

It was always clear that Microsoft was hoping to emulate Apple. The stores were designed to look almost identical to Apple stores, including the use of minimal aesthetics and overall layout. Microsoft often positioned them in close proximity to Apple stores. But Microsoft was never able to achieve the same level of success. Foot traffic was always uninspiring, and the company has never provided much financial detail around the segment.

Apple, on the other hand, often tops retail rankings for sales per square foot. Apple is trying to reopen its stores as local conditions permit, but the Mac maker has had to reclose stores in certain states where coronavirus cases are spiking.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Microsoft is giving up on retail appeared first on The Motley Fool Australia.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.