Adobe Scraps $20B Deal with Figma & Why Apple is Suspending the Next Apple Watch

0:00Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them, in fact. You can even target buyers by job title, industry, company, seniority, skills, and did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell.

0:33Today, we almost made it through the year without a global supply chain disruption until now. Then, the fabled U.S. Steel has a new owner, and they are not from the U.S. It's Tuesday, December 19th. Let's ride.

0:54Sometimes you're reminded that we're living on top of a configuration of tectonic plates with a mind of their own. And that happened early this morning when a volcano erupted in southwestern Iceland, sending lava fountains high into the air and lighting up the night sky with molten rock. The eruption had been expected for weeks and a nearby town had been evacuated last month in anticipation. But the sudden outburst and the size, I mean, this fissure is 2.5 miles long, took people by surprise. Iceland is prepared for volcanoes better than anyone since it has 32 active volcanoes and one pops off every four to five years.

1:29This one isn't expected to threaten life or disrupt air travel like volcanoes have in the past, but authorities still say you shouldn't go near it. The quickest way to get people to come to a volcanic eruption is to tell people not to get near it, so I'm sure there are going to be some kind of adventurous tourists taking a peek. I remember the volcanic eruption from 2010 that grounded pretty much all of Europe's air travel because the ash cloud was so big. This one is not like that at all. There's pretty much no ash in the air. it is just this really long fissure have you seen a volcano like live never live i mean i've been to hawaii but i've never seen any any active i think it's on the bucket list okay before we jump into the news quick shout out to our friends over at yahoo finance neil i like many people use yahoo for my fantasy football league but yesterday i was going to type in yahoo fantasy sports into my search bar because it is the playoffs but yahoo finance auto filled there instead wow a symbolic changing of the guard.

2:29But wait, how's your fantasy football team doing? Neil, I just lost in the playoffs because Jalen Hurts ripped my soul out, which is why I'm sticking with Yahoo Finance going forward. So if your fantasy football team has met an unceremonious end at the hands of Jalen Hurts like Toby's, check out the number one place on the internet for financial news and data instead. Head directly to finance.yahoo.com to learn more or download the Yahoo Finance mobile app to get it on your phone. eczema isn't always obvious but it's real and so is the relief from ebglyss after an initial dosing phase about four in ten people taking ebglyss achieved itch relief and clear or almost clear skin at 16 weeks and most of those people maintain skin that's still more clear at one year with monthly dosing ebglyss libri kizumab lbkz a 250 milligram per two milliliter injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

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3:55As everyone listening knows, breakups suck. But I can almost guarantee you that your latest breakup didn't cost you a billion dollars. And if it did, good for you. But that's exactly what software behemoth Adobe will have to pay design tool Figma after their$20 billion takeover bid officially fell apart due to regulatory pressure yesterday. Where did it all go wrong? This acquisition was supposed to be a shining example of a VC-backed company finally getting a big exit the industry solely needed and was slated to be one of the largest private software takeovers in history. Adobe and Figma seemed perfect for each other, but like all tragic love stories, it was doomed by European regulators.

4:38Regulators both at home and across the pond looked at the$272 billion behemoth Adobe plucking up the plucky upstart Figma and likely had flashbacks to Facebook's similar acquisition of Instagram back in the day. So it isn't so much that the deal might be anti-competitive right now, but it certainly could discourage competition down the line. Neil, still a stunning end to a much-hyped acquisition. Yeah, let's go back to 2021. Adobe announced it was going to buy Figma, which has been used by designers all over the globe. It was a surging product, really fast growing. They said they were going to pay$20 billion, which was double Figma's valuation in its last funding round.

5:20And people did not like it. Adobe stock plummeted the worst in decades. It dropped 17 % because this was considered to be too expensive. And a lot of people in the tech world did raise alarms around the antitrust considerations here because Adobe, which has Photoshop and other design softwares that rule the world, and with Figma's fast-growing web applications for collaboration, there was a lot of alarms raised about whether this could potentially be a monopoly in a world-dominating design software. Yeah, I think the price ultimately ended up hurting Adobe because it underscored just how badly they wanted a foothold in this new collaborative design space.

6:03So it's kind of like dating, Neil. You never want to show if you're too desperate or not. And paying double the last private valuation of Figma certainly showed that Adobe was desperate for this. And honestly, the companies have tried to argue that they really don't compete. Adobe says they only have one product that's in the same space as Figma, and it hasn't really gained any traction. But honestly, it was the future kind of forestalling of anti-competitive practices that this design behemoth that they've created would lead to anti-competitive practices down the line that made regulators kind of put the kibosh on it.

6:41It seems like investors aren't too phased about this either. Adobe stock rose yesterday, and it seems like it is invested in a lot of generative AI capabilities. It has this product suite called Firefly, which it's supported through all of its products, and investors are pretty hyped about that. And they said, hey, maybe we don't even need Figma. Although I will say Adobe needs to start showing that those AI tools can actually turn a profit. Adobe forecasted 10 % growth next year, which is the same thing that they forecasted for this past year. So they're kind of in this moment where investors are starting to say, all right, you're going to lose out on Figma.

7:17Where's the growth coming from? Probably AI, but we're going to need to see you monetize that more effectively going forward. Meanwhile, this is a big win for regulators. They've cracked down hard this year on M &A. And then they had Microsoft. One of the biggest defeats was allowing Microsoft to buy Activision for$69 billion. But this is a big win to hang their hat on. Yeah, recently, earlier this week, Alumnia, which is this huge gene sequencing company, said it would sell this cancer test maker that they bought for$7 billion at the behest of regulators. And then if we want to go back to a few years ago, remember Meta sold off Giphy that they bought after UK regulators blocked it.

7:59So even though there's been some widths for regulators, the most notable one being Activision or Microsoft, but they've had a couple wins recently. OK, if you had global supply chain disruption on your 2023 bingo card, congrats. You can cover up that square with just a few weeks to spare. Shipping in the Red Sea is grinding to a halt after oil companies and major cargo ship lines said they would avoid the area due to ramped up attacks by Yemen's Houthi rebels on vessels. This has the potential to redraw the map of oil shipments across the world and drive prices much higher, just like the war in Ukraine did last year.

8:34A major escalation happened yesterday when British oil giant BP said it would not transit the Red Sea, joining shipping leaders Maersk, Hapag-Lloyd, and MSC in diverting its vessels. The problem is a sliver of water known as the Bab-Almandab Strait, which ships must go through in order to get from Asia to Europe via the Suez Canal. 10 % of all global maritime trade takes this route, but shippers must now look for alternatives because it's become simply too dangerous. The Iran-backed Houthis are prowling these waters and have vowed to attack Israeli ships in solidarity with the Palestinian cause.

9:07Except shipping companies say they're attacking all kinds of commercial vessels, not just Israeli, which has made the situation untenable. Toby, when the Israel-Hamas war broke out, economists warned of the spillover effects into a regional war that disrupts supply chains and oil markets. And it looks like those concerns are playing out. European natural gas prices jumped as much as 13 percent yesterday and oil futures climbed almost 4 percent. Yeah, many of these shipping companies are being forced to make the decision between safety and speed. And a lot of them are choosing safety sailing around the southern tip of Africa instead.

9:42It's crazy how big of a detour you have to make just for this one sliver of water. And there's this ripple effect, too, because the attacks have made moving cargo pricier. And then rerouting energy shipments obviously cause an even bigger headache because now there's fewer oil tankers and they can't speed up as quickly as container ships. So basically there's all these ripple effects. Insurance now is a lot more expensive in the area. So it's just become one of these things where one little disruption in one part of the world can lead to a massive supply chain disruption across the world. I mean, we saw what happened in 2021 when the Ever Given blocked the Suez Canal for just a week.

10:19It was causing all kinds of chaos. This has the potential to be even exponentially more significant than that. It also shows the ability of one kind of paramilitary force to disrupt the global supply chain, because this isn't a government necessarily doing it. These are Houthi rebels doing it via drone attacks and kind of nipping at the heels of some of these container ships. And it's just caused the global container shipping market to change. Yeah. So if this continues, we might expect prices to rise. We were talking about Costco's earnings yesterday. Well, Costco said that they had not seen any inflation at all quarter over quarter, primarily because cargo shipping rates had come down to normal levels during the pandemic.

11:03They surged, and then finally we were seeing supply chains, all those wrinkles kind of ease out. And now this has the potential to drive prices not just in the oil market, but across a variety of commodities and goods higher. That being said, experts are forecasting that it's unlikely that it will get to the levels experienced during the pandemic. It won't quite get that bad, but still, it will drive these shipping prices up. The U.S. just announced a task force last night called Operation Prosperity Guardian. So they are on because you don't want to mess with oil prices. The U.S., if you mess with oil shipments, then the U.S.

11:37will come and try to figure it out. So we've sent three destroyers into the area to maybe take care of business here. In a shocking move, Apple will stop selling some of its hottest products in the thick of the holiday shopping season. The company said yesterday it's pulling U.S. sales of its Apple Watch Series 9 and Ultra 2 over a patent dispute with another company that's accusing it of stealing trade secrets related to the blood oxygen feature on the watch. The thorn in Apple's side, California-based Massimo, took its IP gripes to the U.S. International Trade Commission. And in October, that commission ruled that Apple did indeed infringe on some of Massimo's patents.

12:15Instead of letting regulators take its watches off the market, Apple acknowledged defeat and is pulling those products on its own timeline, which means you have less than a week to buy a Series 9 or Ultra 2 if you were thinking of getting those as holiday gifts. Apple is pulling sales of the watches on its online store on Thursday and at its physical retail locations on Christmas Eve. What happens next is anyone's guess. Apple could try to fix its watches to avoid any patent infringement. But since it's hardware and not software we're talking about, that might be more challenging. The Biden administration is also conducting a review of the International Trade Commission's order and could also rule that Apple is in the clear.

12:54But as it stands now, a significant and unprecedented blow to Apple during the critical holiday shopping season. Yeah, there was this interview back with the founder of Massimo in April of this year, kind of describing what it's like for Apple to come knocking. This is his quote, When Apple takes an interest in a company, it's the kiss of death. First of all, you get all excited. Then you realize that the long-term plan is to do it themselves and take it all. And this is kind of exactly what happened here. There are reports that Apple took a meeting with Massimo, then immediately began hiring employees from the company, sometimes doubling their salaries to offer them to come over.

13:30And then the following year, Apple launched a watch that could measure blood oxygen level. So there's this timeline that doesn't look very great for Apple saying, yes, we took a meeting with Massimo, hired a bunch of their employees, filed a bunch of patents, kind of closely monitoring those, and then launched a watch with the same feature. So there's certainly a case here, and we're seeing that because the watches have been taken out of stores. Yeah, you might not think, hey, this is Apple, and it's taking its watches off the market. it's not a big deal, right? Apple makes the iPhone. That's its biggest seller.

13:59But wearable segment has become so important to Apple. It generates$40 billion a year in revenue. It's the third largest revenue driver of the entire business. And the watches make up the vast majority of all of its wearables revenue. So this is a big deal for Apple, even if you might think that the Apple Watch is just not an important segment for the company. It really is. Yeah. Apple is definitely not going down without a fight here either. They're kind of pulling a classic Uno reverse card here where they're appealing the ruling. And they also filed their own pair of suits against Massimo in October of last year, saying that Massimo is the one who infringed on their patents and are now wrongly trying to use the ITC to kind of keep the product out of consumers' hands.

14:43But the timelines don't really match up, and they don't favor Apple in this case, because Massimo's own complaint stems all the way back to June of 2021. The ones that Apple filed were filed in October. So again, it is interesting to see kind of the plucky upstart versus the biggest company in the world. And maybe this is being used as a chance to say, hey, Apple, I know you're the most powerful company on Earth, but you still got to follow the law. All right, Neil, before Massimo gets mad at us for infringing on some of their patents, we're going to take a quick break.

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16:17A bastion of American industrialism has been reduced to a shell of its former glory after U.S. Steel agreed to sell itself to Japan's Nippon Steel for$14.1 billion. This caps off months of speculation around the fate of the once-proud American heavyweight and ends its run as an independent company stretching back to the days of Andrew Carnegie's industrial empire. What's U.S. Steel's loss is Nippon's gain, though. It's now the world's third largest steelmaker. But the timing of the steel is a little tough for U.S. Steel, especially because the government has been heavily supporting domestic steel production for the last two administrations.

16:55Trump slapped a 25 % tariff on steel imports from Japan and the EU, while the Biden administration has included provisions in an infrastructure act that requires all steel used and covered projects to be produced in the U.S. But ultimately, it's just been tough to compete with the extremely low-priced subsidized metals coming out of foreign competitors like China. Neil, it's hard not to look at the symbolism behind this. A company founded by J.P. Morgan, Charles Schwab, and Andrew Carnegie now moving under Japanese ownership. Yeah, it was interesting to read on the history of U.S. Steel. It was once the largest company on the planet.

17:30It was the first company to be valued at$1 billion. And like you said, it was created by people whose names are on$500 billion companies today, like Charles Schwab, like J.P. Morgan. It created so many of the buildings and industrial backbone of the United States during the 20th century. It was so influential in world wars and supplying the military. And, you know, things change. Things change. Things change. I know the biggest thing, it's just been very tough to compete with kind of the prices that foreign metal producers can offer. I also want to talk about just the optics of this in terms of our relationship with our allies, honestly, because this is an example of a policy kind of called friend shoring, which is a strategy backed by Treasury Secretary Janet Yellen.

18:20It basically says refocus our manufacturing supply chains with our geopolitical allies and economic allies. So much of recent policy has been devoted towards boosting American industry. So it will be interesting to see how this is kind of politically perceived, because even though Japan is an ally, it is interesting to see us sell a bastion of American industry to a foreign ally and how that is perceived like domestically. Well, it's not being perceived well. I mean, you had the senators from Pennsylvania and Ohio, John Fetterman and J.D. Vance saying they're going to do everything they can to block it.

18:57JD Vance said a critical piece of Americans defense industrial base was auctioned off to foreigners for cash. So even if it's an ally like Japan, these two guys and I'm sure some others in the Rust Belt are going to do everything they can to stop this deal from happening. Plus, you have workers who are very upset because they weren't consulted and they wanted to be sold to another another American steel company, Cleveland Cliffs. So there is a lot of opposition to this deal. And so it's not exactly clear whether it's going to go through or not. Ultimately, though, that Cleveland Cliffs deal that you mentioned, they offered$35 a share for U.S.

19:33Steel. The current deal values U.S. Steel at$55 a share. So it's very hard for shareholders to say no to that premium. And so I think ultimately, even though it made the steel union in the U.S. a little angry, there's not a ton of leverage you have when you are presented with such a good deal from a shareholder's value perspective. Okay, I can't believe I'm about to say this, but Meta's new smart glasses might be cool now. And I'm going to tell you why in this week's edition of Toby's Trends, where I, a bright-eyed Gen Zer, educate my millennial co-host Neil on a new trend that has caught the youth's eyes.

20:11From the days of Google Glass, smart glasses just have not been cool. The cameras are weird and slightly creepy, and no one was really sure how to use them. That is until this recent trend where creators are filming themselves dancing in a mirror while wearing Meta's Ray-Band smart glasses. Now, here's the thing, Neil. No one really knows if this is because Meta was paying them or if this trend sprang up organically, but it is blowing up. Jules Turpak on Twitter was the first to notice it and pointed out that one video has over 125 million views, which on today's TikTok is extremely impressive.

20:46so the trend i'm putting forth today neil is this the time that smart glasses finally go mainstream it just appears like this is a product made specifically for influencers right because you can kind of record you yourself going around in the world without having to reach to your phone and that's been the unlock that people love about this yeah it's certainly one of those things that influencers primarily are going to use them so i've actually had the chance to play around with them. And from a normal person's perspective, the only thing that it really gives you is the ability to listen to music, which is a good ability because suddenly you don't have to walk around with AirPods in.

21:23There's little speakers in the glasses themselves that work very well, actually. And there is AI built in as well. But primarily, these are geared towards creators. And so I was saying, thinking about this trend, I was saying that, oh, if it's only appealing to creators, then no, this isn't their mainstream moment. But then you remember that so many people out there want to be creators today. It's literally the number one thing that kids want to be is be a YouTuber. So if that's not mainstream, then I don't really know what it is. So I can see both sides that maybe you or me aren't going to be wearing these down the street, but someone who is a fledgling influencer certainly will be.

21:59Do you think it's a problem that you can't see the person? Because when you put on the glasses and you're recording, you're just looking at it from the person's point of view. And so all of these videos that I watched have mirrors in there. So I want to sell mirrors because you have to actually have a look into a mirror to be able to see the person. I feel like just going through someone's, just watching the world through someone's eyes is not as compelling as seeing the person themselves do it. Yeah. Well, I can't believe the takeaway from this is that mirrors are so hot right now, but I see what you're saying.

22:33I do think that, I mean, people have taken selfies for ages via mirror. But also, I do think that you are right in the sense that just seeing a POV of someone maybe isn't as compelling as seeing the actual person filming themselves, which is why this particular trend, instead of live streaming your friend, caught on and not something else. But the takeaway is that meta Ray-Bans are maybe cool. Yeah, they are cool because, again, they're Ray-Bans. They look just like Ray-Bans. That's a huge factor that Snapchat, that Google Glass especially never nailed, is that they never made the glasses look cool.

23:09So it is interesting to see Ray-Ban specifically catch on because they're still cool. And if trendsetters do this, then maybe the rest of the population will follow. So we will keep an eye on that. You know the kid who mouths off in soccer practice and then the coach makes them run wind sprints and do 100 push-ups just to make an example out of them in front of everyone? That is what the U.S. government just did with Southwest Airlines. The Department of Transportation ordered Southwest to pay$140 million for the mayhem it caused travelers last winter, a penalty that is 30 times larger than any it has handed down for consumer protections violations.

23:43The message to Southwest and other airlines, don't ever think about messing up this bad again. Just to jog your memory, winter storms almost exactly a year ago basically broke Southwest, causing it to scrub nearly 17 ,000 flights and leave about 2 million customers in the lurch as they were traveling home for the holidays. No other airline had close to as bad of a problem as Southwest, which compounded the issues by failing to provide adequate customer service, not alerting travelers of flight changes, and delaying some refunds. In all, the debacle cost it$1.2 billion, not including the bill it was handed yesterday.

24:19In the past year, Southwest execs have said they've made major operations changes, are in a much better spot this year. It's not so much that the delays happen, is that Southwest failed to adequately provide proper customer service, flight notifications, and refunds to its passengers. One thing about this deal that I love, though, is of the$140 million, they're paying$35 million to the government, but they're also earmarking aside$95 million for future delays. And so that is going to be great from a consumer perspective because the flights affected are usually ones delayed by more than three hours.