Earnings Part Two

Earnings Part Two

Ok we get it, it’s Friday and Happy Hour plus the weekend beckons but one more review of recent earnings only this time not from the usual suspects. Yes, besides the diabetes companies who reported this week so too did a host of those high tech very cash rich companies located in that happy land known as Silicon Valley. Google, Facebook, Amazon and Apple all had a go at it this week and take a look at some of these numbers.

Google – revenues hit $21.5 BILLION for the quarter exceeding estimates by $750 MILLION

Facebook – added 60 MILLION new users – mobile ad sales up 84% – Facebook now has 1.71 BILLION users – let that sink in for a moment

Amazon – revenue of $30.4 BILLION – five straight profitable quarters

Apple – – revenue of $42.4 BILLION – 40.4 MILLION iPhones sold and the crazy thing both of these numbers were down and below expectations

Now the reason we bring these mind blowing numbers, honestly they are just crazy, to everyone’s attention is not just for amusement. No the reason we do this is because all four plus others in Silicon Valley have been jumping into the wacky world of diabetes.  Many have tried to fly under the radar but the fact is Silicon Valley besides being the home of tech heaven, outrageously expensive real-estate and sunshine aplenty (if you exclude the city of San Francisco) is also now the epicenter of the diabetes universe.

The simple fact is besides having the vision thing these companies have capital, gobs and gobs of capital. They also have tons and we mean tons of eyeballs, registered users and customers. None of them are burdened by legacy diabetes franchises meaning they don’t have to worry about the land of yesterday as they build the land of the future. These facts aren’t lost on the companies in diabetes who are throwing themselves at these companies faster than Usain Bolt runs the 100 meters. This basically means that these companies get to see all the latest whiz bang way cool drugs, devices and apps as these companies are hoping the cash rich techies will buy them.

Now we don’t to burst any bubbles but none of the techies are in a hurry nor do they need to be. They have the luxury of having very successful legacy businesses that continue to do very well. They don’t NEED to be in diabetes they WANT to be in diabetes. They don’t need to do anything quickly and can take their time. They are also very smart and know everyone wants to be their dance partner. They can literally pick whoever they want to dance with and know unless these companies are flat out stupid they are going to say yes.

One of Momma Kliff’s favorite sayings was “Money may not happiness but it sure as hell helps.” To which Papa Kliff, known as the wizard in the Kliff household added; “Money only solves the problems money creates.” Simple put what Ma and Pa Kliff were saying when the time comes and these techies want something they have the one thing that will make it happen in a heartbeat, money.

Seriously if for example Google wanted to buy Dexcom (NASDAQ: DXCM), Insulet (NASDAQ: PODD), Tandem (NASDAQ: TNDM) and Johnson and Johnson (NYSE: JNJ) diabetes assets to form a diabetes management system powerhouse, no problem. So too could Facebook, Amazon and Apple. What have we been saying all along, diabetes drugs and devices are just pieces of the system. Diabetes devices with the notable exception of CGM, are interchangeable pieces of hardware. Diabetes drugs are also not just becoming interchangeable but also generic.

Believe it or not there are a few snaky companies in this wacky world, legacy companies no less, who think they can walk into tech land and actually tell these guys what they are doing wrong and why they need to work with them. That they may know tech but they don’t know jack about diabetes. Talk about hubris combined with arrogance. This would be like Halley Barry walking into our offices and asking Diabetic Investor out for drinks and dinner, and our response being “Let me think about it.” Are you kidding me, the word yes would be out of our mouth before she finished asking the question. Listen Momma and Papa Kliff didn’t raise an idiot, yet we digress.

The point here is that these legacy companies shouldn’t be telling these techies what they are doing wrong and why they need them; no the truth is they should making a case for how much they NEED techies and how they can help tech grow. How crazy is it that one of the dumbest companies in diabetes Sanofi (NYSE: SNY) is partnered with Google, one of the smartest companies in tech land. Could it be that Sanofi begged and pleaded with Google? Did they sweeten the pot so to speak and say hey we’ll pay for the privilege? Were they so desperate knowing they needed to do something, anything to get back in the diabetes game that they would not just pay for the privilege but agree to almost any terms offered by Google?

We have no idea the answers to these question but we sure would like too. Frankly we have never understood why Google one of the smartest companies on the planet, partnered with Sanofi one of the dumbest, who just for good measure has a terrible reputation. Just ask the folks at Medtronic (NYSE: MDT) who at one time was partnered with Sanofi, a partnership which ended when Medtronic realized that Sanofi may know wine but beyond that….well.  Sorry we again digress.

The bottom line here is that tech land will do what they do in diabetes when they good and ready to do it. They have no need to move quickly, nor do they have to worry when the time comes whether they will have the money to buy the pieces they need. It’s the legacy companies in diabetes who must change their way of thinking for if they don’t … well let’s just say it won’t be pretty. The harsh reality is these legacy diabetes companies need techie’s way more than techies need them.