Apple or Uber? It's all in the valuation


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September 15, 2017

Reports emerged Thursday that Softbank wants to invest $10 billion in Uber, but with a catch: It wants a 30% discount on Uber's last valuation of about $69 billion.

As it happens, I was asked earlier in the day if I were a betting man and had the opportunity would I invest in Apple, the subject of my first book, or Uber, the subject of my second. I first set the record straight that as an acolyte of Vanguard founder Jack Bogle I don't invest in individual stocks. And I'm not a betting man. Regarding Uber, I asked, "At what valuation?"

That said, just to play along, perennial undervalued Apple trades for a little less than 15 times its expected earnings. Uber has no earnings. Uber is all execution risk—and a few other kinds of risk too. Apple has a stable, long-serving management team. Uber is about to get a new management team.

I think you get the picture.

***

An impression backed up by no reporting yet: Three groups have the long knives out for Facebook right now. One is politicians and regulators, upset over Facebook's complacency with stopping fakesters, especially of the Russian variety. A second is advertisers, miffed that Facebook delivers ads to inappropriate content and yet is a drug the advertisers can't quit. Third are publishers, who buy ink and web sites by the barrel, so to speak, who are sick of Facebook hoovering up the media industry's profits.

Nothing good can come of this for Facebook.

***

I was in Washington D.C. this week, giving a well-attended talk about my book about Uber at the gorgeous and legendary Kramerbooks and then giving a speech to a group of government technologists. I left Washington 25 years ago, glad to start my career in business reporting. It's fairly obvious that the business of our nation's capital is business. And plenty of it was going on this week. While my little talk was happening Andreessen Horowitz's policy team was hosting a dinner and there was a book party for Bridgewater's Ray Dalio, attended by numerous administration swells. As far as I can tell, there's plenty of water left in that swamp.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com
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NEWSWORTHY

Buyer beware. Mobile gaming companies have struggled-to put it mildly-as public companies, as anyone who bought shares at the IPO of Candy Crush publisher King Digital or Glu Mobile or Zynga could tell you. So we probably should not be surprised that Angry Birds creator Rovio is going for a valuation of about $1 billion, half what was initially rumored, in its upcoming IPO.

We try harder. Speaking of about $1 billion, Google parent Alphabet is considering making a $1 billion investment in ride service Lyft, Bloomberg reports. Alphabet has previously invested in Uber, but its Waymo self-driving car unit is suing Uber for allegedly stealing trade secrets. And Waymo has lately been working more closely with, you guessed it, Lyft. In other Google news, the company was sued by three female former employees over alleged sexual discrimination.

Missed it by that much. And speaking of poor portents, I have definitely seen this movie before: Reuters notes that even after the Equifax hack was revealed, most Wall Street analysts kept their "buy" ratings on the stock as it tumbled 32%. If you're feeling nostalgic, here's a 2010 version of that Reuters narrative but about BP (and written by me).

One more sad story. As you read this, the remarkable 5 billion-mile journey of the Cassini space probe has come to a fiery end. At about 6:31 a.m. EST, Cassini burned up as it plunged into Saturn's atmosphere. It took another 83 minutes for the craft's final radio signals to reach earth.

Sorry, Larry. Shares of database titan Oracle had been hitting record highs this week, but dropped 4% in premarket trading on Friday after Co-CEO Safra Catz said revenue would grow only 2-4% next quarter after adjusting for currency effects. Wall Street analysts were forecasting 5%.

Not good. In addition to the three challenges for Facebook that Adam has already mentioned today, the company is now under fire for allowing advertisers to target audiences using offensive categories like "Jew hater," according to an investigation by Pro Publica.

Double fix. Must have been distracted dreaming of new iPhones yesterday. Steven Levy's writing appears in Wired, but his title is not a writer for Wired anymore-he's now known as the founder of Backchannel. And Ford demonstrates its fealty, not "demonstrate," as yesterday's subject line went.

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IN CASE YOU MISSED IT

Exclusive: Makers of Live Streaming App YouNow Plan ICO on Ethereum by Robert Hackett

Larry Ellison: Oracle's Next Database Will Beat Amazon by Barb Darrow

Why a Popular Salad Chain Stopped Using Cash by Jeff John Roberts

Massive Android Malware Outbreak Invades Google Play Store by Robert Hackett

How the Apple iPhone X Compares to the Samsung Galaxy Note 8 by Don Reisinger

Here Come the Equifax Scammers by Jeff John Roberts

Here's When Google Will Unveil the Pixel 2 by Don Reisinger

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FOOD FOR THOUGHT

Apple's facial recognition unlocking feature on the new iPhone X, dubbed Face ID, has already come in for all kinds of criticism even though it's not on the street yet. Will it work consistently, will it be easily fooled, will it lead to a huge database of faces or even just normalize the idea that a huge database of faces is an okay thing to build?

Well, some of those questions are surely TBD, but Troy Hunt, a who works at Microsoft, has written a solid discussion of the key issues on his blog. Critically, he looks at Face ID in the context of all the other kinds of security measures available to safeguard data on a smartphone. And, as Hunt notes, there has long been a trade off between stronger security features and ease of use for most people:

Here's the problem with multi-step verification: it's a perfect example of where security is friction. No matter how easy you make it, it's something you have to do in addition to the thing you normally do, namely entering a username and password. That's precisely the same problem with getting people to put PINs on their phone and as a result, there's a huge number of devices out there left wide open.

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FOR YOUR WEEKEND READING PLEASURE

A few interesting longer reads I came across that are suitable for your weekend reading pleasure.

How Russia Created the Most Popular Texas Secession Page on Facebook
Enter the "Heart of Texas." The Facebook site, for the past two years, existed as the most prominent Texas secession social media presence online. With over 225,000 followers as of summer 2017, the page, at one point last year, boasted more Facebook fans than the official Texas Democrat and Republican pages combined.

Thoughts and Observations on the Products Announced at This Week's iPhone X Introductory Event
THE NOTCH: It offends me. It's ungainly and unnatural. Clearly, the ideal of an "all-screen" design — to use Apple's own words — has no notch at all. This is not that. But what I dislike more than the notch isn't the notch itself but that Apple is fully embracing the notch in software. I really wish their software design rendered the "ears" with black backgrounds while using apps. I'd be fine with embracing the notch on the home screen and lock screen.

Parents Who Pay to Be Watched
The idea, I learned by speaking with employees and clients of the company over several months, is that if you want to truly change the way a person parents, you need to be there as they're parenting, not occasionally but immersively and consistently. "We are a fly on the wall of a family's home," the company's clinical director, Sarah Lopano, explained. "We take a very behavioral approach to everything we do."

How Conde Nast Put the Squeeze on New Yorker Cartoonists
The market for content, especially humor, has evolved considerably in that decade, with creators of every stripe earning less than they might have in the past. But this decline, according to the accounts of current cartoonists and former longtime Cartoon Editor Bob Mankoff, appears strikingly connected to one factor in particular: Conde Nast's acquisition and slow dismantling of their primary source of licensing revenue, the Cartoon Bank.

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BEFORE YOU GO

Italy is an outstanding vacation destination but away from the famed cities like Rome, Venice, and Florence, some incredibly beautiful spots are fading away. Take a virtual visit off the beaten path in this elegiac New York Times piece.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.
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