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Simon Property Group buys its tenants
Sometimes last resort tactics are hailed as a “strategy,” when in reality they would better be described as “oh shit moment,” or “come to Jesus” moments. Case in point: Simon Property Group has accelerated its practice of buying stakes in their bankrupt tenants.
The purchases themselves are rather restrained: sub $100 million, with a consortium of other investors, the targets of which are relatively few. That restraint has been critical though, because it dresses up the purchases as astute investments rather than a form of panic buying.
The future of malls in the U.S.
The company, which previously bought portions of Aéropostale and Forever 21, recently bought Brooks Brothers and Lucky Brand, while also kicking the tires on J. C. Penney Co. One analyst called it out:
“They are doing this to keep the retailer alive, so that Wall Street doesn’t see the trend of declining income,” Nick Egelanian, president of retail consultancy SiteWorks told the Wall Street Journal. “The business model has been cracked for a long time.”
Aside from Wall Street, though, Simon may be engaging in the purchases in order to keep lease receivables from other tenants flowing. Co-tenancy clauses in most commercial lease agreements allow tenants to reduce their rent if anchor tenants close, or if a certain share of tenants leave a retail area. Spending money to ensure revenue is a late stage gamble, and Simon appears stuck at the betting table as their chips dwindle.
Word on the Street
Nike continues its Consumer Direct Offense by closing “nine major wholesale accounts.” Assuming big brick-and-mortar retailers like Belk and Dillard’s survive COVID, one has to wonder what’s going to be left on the shelf.
Depending on the industry, the best COVID play might be to raise prices, or lose massive amounts of money. Just depends.
GM CEO Mary Barra talks about the automaker’s electric vehicles strategy and how COVID changed the workplace.
Ferrari’s CEO Louis Camilleri talks strategy, including how he plans to fix their Formula 1 team.
How some companies are thriving during COVID. Spoiler: past investments in digital and robotics were a strong indicator of current success.
$INTC - Intel Corporation
Intel, the American chip maker that was for years touted as being inside all of our favorite hardware, has recently seen its share price dip in what many analysts are calling a strategy (or lack thereof) slide.
The trouble started a couple years ago, with doubts about the security of Intel chips, and never really stopped. The CEO departed due to a relationship with a subordinate, resulting in a lengthy search for his replacement. The company culture came under fire. Key personnel defected. Apple broke up with them. And now delays of a key project and a possible change in production direction have led to open calls for a new strategy.
(Chip makers can either employ a fabless strategy, where they design chips and work with an external foundry to produce them, or they can choose to be an Integrated-Device-Manufacturer, covering research, design, and production. Intel has historically been an IDM.)
"Intel was always ahead because it could deliver a new chip every two years and every two years shrink it down to a smaller size and get double the compute power for half the size," Paul Teich, principal analyst at market-research firm Liftr Insight told S&P Global Market Intelligence. "It designed the chip and the fabrication process together, so that made it easier. But they still think of themselves as a manufacturing company first, and that's not true anymore. This is Intel's watershed."
But what good is a company’s watershed moment if management can’t articulate the basic outlines of a plan? Credit Suisse analysts called out Intel directly in a July 2020 research note:
“Our conversations with investors underscore three major concerns: (1) No clear definitive strategy (yet), (2) a one-foot-in/one-foot-out strategy not committing fully to either an IDM or a Fabless strategy – duplicative spending, competing internal factions, and (3) the lengthy disruption/upheaval involved in becoming fabless.” [emphasis ours]
At the very least, the stock is trading at such a value compared to other high-flying tech stocks, that, assuming Intel can (eventually) develop a well-articulated strategy, it might be a stealth value buy.*
*This is not market advise, only an observation.
She Said It Best
“AMD had a long history of having good technology and great engineers. But when I took over as CEO I thought that what we needed to do was focus on the right things. When we looked at the market back then, we said high-performance computing is a great market. It’s going to become more and more important as we go into the future and it’s pretty hard. Very few companies have the IP necessary to play in this area. So we focused. My mantra to the team was focus on great products, our most important customers, and just simplifying everything that we do. And that has held with us for the past four and a half years.”
— AMD CEO Lisa Su, on the vision and strategy that led to a turnaround at the chipmaker, a major Intel competitor.
That’s all for now.
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