Snapchat Rejects $3 Billion from Facebook: Huge Mistake? | MarketFoolery Podcast - 11/14/13

TL;DR

Cisco Systems and Walmart both reported disappointing earnings, with Cisco's stock down 12% and Walmart experiencing a drop in same-store sales. Snapchat made headlines by rejecting an offer from Facebook for $3 billion.

Transcript

it's Thursday November 14th welcome to Market Foolery I'm Chris Hill joining me in studio today from fool.com David Hansen and from monney fo1 Brian White happy Thursday jents hey happy Thursday um we're going to talk uh earnings we've got Cisco Systems we've got Walmart we've got some fabulous banking news to get into that's why I'm so happy David... Read More

Key Insights

• 😀 Both Cisco Systems and Walmart experienced disappointing earnings, highlighting the challenges faced by large, diversified companies.
• 🚨 Cisco Systems' weakness was attributed to the government shutdown, pullbacks in emerging markets, and concerns about the impact of NSA leaks.
• 🏪 Walmart's decline in same-store sales was driven by weakness in the entertainment category, particularly traditional toys.
• ❓ Snapchat's rejection of a $3 billion offer from Facebook reflects their confidence in future growth and potential monetization strategies.
• ✋ The valuation of social media companies, such as Instagram and Snapchat, may seem high, but their popularity among younger demographics and potential for advertising presents opportunities for growth.
• 👤 Snapchat's app, which allows users to send disappearing photos and videos, has become a verb and has built a loyal user base, which may contribute to future revenue generation.
• 🖤 However, the challenge for Snapchat is to collect data on user preferences, as the platform is image-focused and lacks the same level of data as Facebook and Twitter.

Questions & Answers

Q: Why did Cisco Systems' stock price drop by 12%?

Cisco Systems reported lower than expected revenue for Q1, and projected lower revenue for Q2. Weakness in the government sector, emerging markets, and potential impact of NSA leaks contributed to the disappointing results.

Q: What were the reasons for Walmart's lower than expected revenue?

Walmart experienced a decline in same-store sales, with weakness in the entertainment category, particularly in traditional toys. The company stated that children are increasingly adopting electronics at a younger age, leading to a decline in sales of traditional toys.

Q: Why did Snapchat reject Facebook's $3 billion offer?

Snapchat, an app that allows users to send photos and videos that disappear after a set time, rejected Facebook's offer due to its loyal and growing user base. The founders and venture capital firms backing Snapchat believe that the company has the potential for significant growth and prefer to continue building the platform.

Q: How does Snapchat generate revenue?

Snapchat does not currently generate any revenue. However, potential revenue streams could include advertisements or a subscription fee in the future.

Summary & Key Takeaways

• Cisco Systems reported lower than expected first quarter revenue and projected lower revenue for Q2. Weakness was attributed to the government shutdown, customer pullbacks in emerging markets, and concerns about the impact of NSA leaks.

• Walmart's first quarter revenue was also below expectations, with a drop in same-store sales. Weakness in the entertainment category, driven by a decline in sales of traditional toys, was a notable factor.