TECH

CrowdStrike’s Outage Reveals the Cracks in the Centralized Internet’s Foundation — and the Consequences for Businesses Who Don’t Heed the Warning

For most devices, fixing an issue is as simple as turning it off and on again. But last Friday, for airlines, hospitals, and banks without a reset button, it turned into a tech armageddon that threatens to wipe out billions in revenue. Blue screens of death swept the globe, interrupting business, commutes, and the weekends of IT workers worldwide — offering an isolated taste of what Y2K could’ve been like.

Year 2024 problem: A Windows update led to what security consultant Troy Hunt called “the largest IT outage in history.” Cybersecurity company CrowdStrike ($CRWD) caused chaos with an overnight update, leading to widespread outages for hundreds of businesses, including banks, travel, and tech firms. Without a quick fix for the flawed update, some operations came to a standstill.

• The global travel industry was one of the most affected industries, with airlines canceling over 2K flights — and United Airlines ($UAL) and Delta ($DAL) issuing ground stops due to “schedule disruptions.”

• Health systems like Epic Systems, brokerages like Charles Schwab ($SCHW), and logistics giants like UPS ($UPS) also experienced issues as a result of the outage.

Centralization Station

While CrowdStrike’s IT hiccup is significant, it’s not the first major incident to disrupt IT departments’ Friday plans. Businesses have become extremely reliant on infrastructure dominated by a handful of companies, so when those companies have problems, everyone does.

• In 2022, a Cloudflare ($NET) outage reportedly took down 90% of the internet, highlighting the problem with centralized services.

• Hosting platforms like Amazon Web Services ($AMZN) and Fastly ($FSLY) have also experienced outages in recent years, disrupting large swaths of the internet.

Solve for x: Thankfully, most issues with infrastructure providers are quickly resolved. Despite the widespread problem with CrowdStrike, business operations were anticipated to return to normal by end of day Sunday — assuming IT staff worked through their weekend. However, the inconveniences to millions of affected customers and employees are expected to cost businesses billions of dollars.

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LARGECAP RECAP

🎦 Breakups Are Hard, but It May Be Exactly What Warner Bros Needs to Save Its Stock

The unexpected plot twist is here — but for those following, it feels like another sequel no one asked for. Warner Bros Discovery ($WBD) is reportedly considering separating its profitable streaming and studio operations from its less lucrative cable network business. This move comes weeks after flailing competitor Paramount announced a deal to merge with Skydance Entertainment.

• The split could lead to the two businesses trading under separate names — a strategy that has been used in recent years by conglomerates like 3M ($MMM), Pfizer ($PFE), and Johnson & Johnson ($JNJ) to help boost stock prices.

• Executing a spin-off would be challenging since “most of the company’s cash flow comes from the linear television business, while most of the cash is used by the streaming and studio business,” according to Barclays Capital’s Kannan Venkateshwar.

Split decision: Warner Bros Discovery has tried everything to improve its share price, which has dropped ~27% this year and is down ~65% since its 2022 merger with Discovery. Despite layoffs and debt reduction efforts, Bank of America’s Jessica Reif Ehrlich told Deadline that the “current composition as a consolidated public company is not working,” but she still sees their balance sheet as “perhaps the most underappreciated asset within the company’s portfolio.”

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Markets & Economy

Education Department pauses payments: The US Department of Education has halted student loan payments for the SAVE program while it faces legal challenges. This affects ~8M borrowers, highlighting the political battle over student debt relief. [Read]

Biden dropout speculation intensifies: Betting markets show record-high odds of President Biden withdrawing from the 2024 race, following reports of key Democratic leaders urging him to step aside. This reflects growing concerns within the party about Biden’s electability. [Read]

Teen employment hits 17-year high: Nearly 6M teens worked in Jun. 2024, the highest since 2007. Economists cite a strong labor market, rising wages, and higher education costs. However, automation could threaten teen jobs in food service and retail. [Read]

Business & Wealth

FTC criticizes Xbox Game Pass changes: The Federal Trade Commission (FTC) blasts Microsoft’s ($MSFT) new Xbox Game Pass, criticizing the price hike and “degraded product.” The FTC argues this shows Microsoft’s abuse of market power following its Activision Blizzard acquisition. [Read]

Costco offers 25-year ‘apocalypse bucket’: Costco’s ($COST) viral ReadyWise Emergency Food Bucket contains 150 freeze-dried and dehydrated meal servings, lasting 25 years. It is priced at $79.99 and provides over 25K calories. [Read]

Bud Light falls to third place in US beer sales: Following a 2023 boycott, Anheuser-Busch InBev’s ($BUD) Bud Light has slipped behind Modelo Especial and Michelob Ultra. The brand now represents 6.5% of beer dollar sales, down from its top spot, reshaping the US beer industry. [Read]

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DIGIT OF THE DAY

China’s Carbon Output Might Finally Be Declining for the First Time in Eight Years

The world might soon breathe a sigh of relief (along with clean air). China, the largest source of greenhouse gases for the past two decades, accounted for 30% of global emissions in 2022. However, emissions are expected to fall this year — marking the first decline since 2016 and indicating that emissions may have peaked. The anticipated 7.2% to 8.2% decline is mainly due to China’s reduced coal and oil consumption.

• Last year, China outpaced the entire history of solar panel installations in the US and now hosts nearly two-thirds of major global wind and solar construction projects.

• In May, coal’s contribution to China’s electricity fell to its lowest in decades at 53%. Li Show from China Climate Hub noted significant cooling in real estate and construction, which previously made up one-third of emissions.

Global phenomenon: Chatham House’s Bernice Lee believes, “Clean energy growth is larger than demand growth.” China’s $16T commitment to reach carbon neutrality by 2060 could inspire other nations to hasten their sustainability efforts. Ember’s Dave Jones noted to the NYT, “When China’s emissions stop growing, it likely follows that the world’s stop growing, too.”