WEBVTT - Zuckerberg Directs Pivot Away From Open Source AI At Meta 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>I'm gonna start with the Meta news because it looks

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<v Speaker 2>like mister Zuckerberg really is putting himself personally on the

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<v Speaker 2>line here for some of their AI businesses. Ed Lodo

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<v Speaker 2>joins us Bloomberg b Tech co host. He's out there

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<v Speaker 2>in San Francisco where I think they have some technology people.

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<v Speaker 2>And what's the news coming out of Meta today? Can

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<v Speaker 2>you tell us what that is and kind of if

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<v Speaker 2>it's important or not.

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<v Speaker 3>Yeah, our reporting is very detailed. Which site sources that

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<v Speaker 3>Mark Zuckerberg is getting much more hands on on the

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<v Speaker 3>minut sha of generations generation model releases, AI model releases.

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<v Speaker 3>But the bigger picture is that Meta, which has kind

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<v Speaker 3>of been the stulwork of open source AI models, is

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<v Speaker 3>realizing that it may not be the viable path. So

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<v Speaker 3>there is a specific model that they're due to release

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<v Speaker 3>called Avocado, and at one time that had been due

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<v Speaker 3>to be an open source model. What we're reporting citing sources,

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<v Speaker 3>it's now likely to be a closed source model. Alexander Wang,

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<v Speaker 3>who leads this kind of AI lab team that marks

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<v Speaker 3>Zakovolk's put together, is a great advocate for closed source.

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<v Speaker 3>And what you need to know is that in the

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<v Speaker 3>earlier days, when models were much smaller and Meta kind

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<v Speaker 3>of wanted workshopping among industry and academics.

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<v Speaker 4>Worldwide, it worked.

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<v Speaker 3>But the problem now is that these models are so

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<v Speaker 3>big the resources required to utilize them are so severe

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<v Speaker 3>that it's just not realistic to have an open source

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<v Speaker 3>policy universally. Because you need money and private industry has money.

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<v Speaker 3>You have to make it a kind of for profit

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<v Speaker 3>exercise in order for the economics of training and then

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<v Speaker 3>running the models to work. And that's what our story details.

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<v Speaker 3>It's really is a must read. What I would say

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<v Speaker 3>is that Meta in its earning school in July did

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<v Speaker 3>kind of tell us this was coming. They're committed to

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<v Speaker 3>open source, but they're going to have to start looking

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<v Speaker 3>at the reality of what it takes to build and

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<v Speaker 3>train a model and then put it out into the

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<v Speaker 3>real world in terms of who can use it all.

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<v Speaker 5>Right, ed, you've been very busy.

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<v Speaker 6>I know you've been writing about SpaceX as well, so

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<v Speaker 6>I'm going to ask you about that.

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<v Speaker 5>Tell us about this IPO.

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<v Speaker 6>I mean, it seems like it's going to be trying

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<v Speaker 6>to rival the Aramco IPO that we saw a few

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<v Speaker 6>years ago one point five trill and evaluation. What's the

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<v Speaker 6>single biggest justification for that?

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<v Speaker 4>Yeah, I mean, we're reporting that it's happening.

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<v Speaker 7>You know.

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<v Speaker 3>My understanding from sources is the work as well underway.

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<v Speaker 3>They're speaking to the bankers, they've told the investors, they're

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<v Speaker 3>hiring for the internal roles that you need when you

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<v Speaker 3>do a big IPO, and the targets the middle of

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<v Speaker 3>next year.

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<v Speaker 4>You know.

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<v Speaker 3>The valuation is what everyone's talking about. One point five

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<v Speaker 3>trillion dollars. We confirmed that the company's latest valuation in

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<v Speaker 3>the private markets through a tender settled at more than

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<v Speaker 3>eight hundred billion, So that is kind of like a

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<v Speaker 3>stepping stone to an IPO. But what I understand is

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<v Speaker 3>they need some cash for a specific project. We can

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<v Speaker 3>get into it if you want. That cash is probably

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<v Speaker 3>well north of thirty billion dollars, maybe forty billion dollars,

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<v Speaker 3>and that would exceed what Aramco raised in twenty nineteen,

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<v Speaker 3>So from a dollar raised perspective, it would make it

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<v Speaker 3>the biggest IPO of all time, which is exciting.

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<v Speaker 2>It surely is. I mean, particularly for the bankers on that.

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<v Speaker 2>What's the total valuation? Do we know the total valuation

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<v Speaker 2>of SpaceX these days, because I've heard some just monster numbers.

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<v Speaker 3>So Elon Musk has been pushing back on X recently

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<v Speaker 3>about reports of SpaceX's valuation. What we have reported, and

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<v Speaker 3>this is we stand by that reporting, of course, is

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<v Speaker 3>SpaceX has gone through a tender, a secondary offering. That

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<v Speaker 3>is a mechanism where the company allows existing employees and

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<v Speaker 3>some insiders early investors to sell the shares they already have.

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<v Speaker 3>As part of that, SpaceX actually buys back some stock,

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<v Speaker 3>but they don't raise any new equity, They don't raise

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<v Speaker 3>any funds for.

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<v Speaker 4>The company's treasury.

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<v Speaker 3>But you still need a price for those shares, and

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<v Speaker 3>that determines the valuation. That price was settled at four

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<v Speaker 3>hundred and twenty one dollars a share, and that gives

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<v Speaker 3>evaluation north of eight hundred billion dollars.

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<v Speaker 4>And that's settled.

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<v Speaker 3>But again SpaceX does this twice a year typically, you know, tenders, buybacks,

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<v Speaker 3>et cetera. But in this case, this would be the

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<v Speaker 3>big one to kind of get fair market value ahead

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<v Speaker 3>of an IPO.

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<v Speaker 7>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

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<v Speaker 7>We had a client earlier.

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<v Speaker 2>Christine was referencing some funuciary trust is referenced on I'm

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<v Speaker 2>waiting for the BI survey on AI and like what

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<v Speaker 2>b I SERVI on AI? Matt Blocksham Joints is he's

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<v Speaker 2>a tech analyst for Bloomberg Intelligence. Hey, Matt, talk to

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<v Speaker 2>us about this BI survey on AI. What is it

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<v Speaker 2>and what's what's it telling you?

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<v Speaker 8>Yeah?

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<v Speaker 6>Sure.

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<v Speaker 8>So this was a big survey we did, polling the

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<v Speaker 8>views of six hundred and four C suite executives across

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<v Speaker 8>the range of industries across the world, really kind of

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<v Speaker 8>get trying to get a sense on how corporates are

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<v Speaker 8>assessing the current AI situation and what they think is

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<v Speaker 8>going to do to their businesses over the next kind

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<v Speaker 8>of two to three years. So we kind of looked

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<v Speaker 8>at the motivations for AI investment, what it could do

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<v Speaker 8>to headcount, what they're expecting in terms of revenue and

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<v Speaker 8>profit uptick, and you we had some kind of interesting

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<v Speaker 8>results out the survey. You know, not surprisingly, perhaps AI

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<v Speaker 8>is very much at the top of the c suite agenda.

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<v Speaker 8>Something like thirty six percent of those polls said it

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<v Speaker 8>was their top strategic priority. In another forty seven percent

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<v Speaker 8>said it was within the top three strategic objectives for them.

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<v Speaker 8>When we looked and asked about the main objectives behind

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<v Speaker 8>their AI strategies, what came out top was improving operational efficiency,

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<v Speaker 8>which was number one with forty seven percent of the respondents,

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<v Speaker 8>and in second place was boosting a revenue at twenty

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<v Speaker 8>one percent. Interestingly, headcount cuts were quite low down the

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<v Speaker 8>packing order. Only thirteen percent of respondents put that as

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<v Speaker 8>their top priority, and actually it was the highest ranked

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<v Speaker 8>in terms of the least priority. So I think it's

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<v Speaker 8>interesting that companies are looking to boost productivity, but they're

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<v Speaker 8>not afraid to make investments both in technology and headcount

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<v Speaker 8>in the near term to kind of release those opportunities.

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<v Speaker 8>And actually on a three year view, sixty two percent

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<v Speaker 8>of respondents they expect AI to lead to an increase

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<v Speaker 8>in headcount over the next three years, an increase, not

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<v Speaker 8>a decrease, and the average increase they're looking at is

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<v Speaker 8>about four percent. So that kind of flies in the

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<v Speaker 8>face of a little bit of you know, a lot of

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<v Speaker 8>the kind of headlines we see about job cuts. I

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<v Speaker 8>think overall, corporate see the need to invest more in staff,

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<v Speaker 8>you know, to roll out their AI strategies in the

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<v Speaker 8>coming years. Yeah.

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<v Speaker 6>Yeah, Well, Matt, you mentioned thirty six percent of c

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<v Speaker 6>suites now rank AA as their top priority. That number

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<v Speaker 6>actually strikes me as a little low. I would have

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<v Speaker 6>thought it would be at least half of the people's survey.

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<v Speaker 6>But what do you think, is that something that's just

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<v Speaker 6>set to grow in future surveys as really kind of

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<v Speaker 6>AI becomes central to a lot of companies workflows these days.

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<v Speaker 8>Yeah, I think so. I mean, like, you know, obviously,

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<v Speaker 8>if you add the forty seven percent that said it's

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<v Speaker 8>in the top three, I mean, you know, an overall

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<v Speaker 8>top three priority gives you the kind of vast majority

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<v Speaker 8>of the respondents. So obviously companies do have to wrestle

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<v Speaker 8>with lots of other issues too. You know that there

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<v Speaker 8>is going on in the world beyond AI, and obviously

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<v Speaker 8>trade policy is another big thing that's probably on the

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<v Speaker 8>radar for a lot of these companies too. So yeah,

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<v Speaker 8>you know, maybe it will kind of inch up, but

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<v Speaker 8>I think you've given that aggregate, you know, age percent

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<v Speaker 8>plus in the top three probably what you'd expect to see.

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<v Speaker 2>Matthew, how about return on investment here? That's kind of

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<v Speaker 2>what the streets starting to ask for now. We know

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<v Speaker 2>these companies can spend big money on AI, but what's

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<v Speaker 2>the return for shareholders?

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<v Speaker 8>Yeah, I think that's still very opaque. And actually, when

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<v Speaker 8>we asked the respondents to flag the biggest roadblocks they

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<v Speaker 8>could see to AI deployment, the investment needed in AI,

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<v Speaker 8>and the question marks around the return on investment, we're

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<v Speaker 8>definitely up there amongst some of the most important concerns

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<v Speaker 8>that respondents have, along side data security and clean data.

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<v Speaker 8>We didn't ask much of the most specific ROI expectations.

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<v Speaker 8>We just kind of get the sensor. It's a bit

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<v Speaker 8>too early to get an accurate read on that. I

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<v Speaker 8>think most companies are still kind of at a relatively

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<v Speaker 8>early stage of their AI trials, you know, lots of

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<v Speaker 8>them have moved out of the kind of testing lms.

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<v Speaker 8>They're into pilot phases, some of them are even moving

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<v Speaker 8>into scale deployment. I think it's fair to say a

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<v Speaker 8>lot of them are not really quite sure yet what

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<v Speaker 8>the return is going to be and how quick it's

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<v Speaker 8>going to come. And obviously it's kind of a bigger

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<v Speaker 8>issue for the wider tech sector. And you mentioned Oracle

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<v Speaker 8>as a kind of barometer for the kind of broader

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<v Speaker 8>pulse on AI, and I think the twenty twenty six

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<v Speaker 8>is going to be a really crucial year for kind

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<v Speaker 8>of what corporates make of the midterm ROI. And you know,

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<v Speaker 8>if they don't see a big ROI, then that's probably

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<v Speaker 8>going to slow the pace of revenue growth and that's

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<v Speaker 8>going to have a knock on effect to the levels

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<v Speaker 8>of investment we're seeing. But I likes of Oracle and

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<v Speaker 8>open eye on the revenues that bringing in.

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<v Speaker 7>Stay with us more from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Applecarplay and Android Auto

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<v Speaker 1>with the Bloomberg Business app. Listen on demand wherever you

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<v Speaker 1>get your podcasts or watch us live on YouTube.

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<v Speaker 7>Let's switch gears.

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<v Speaker 2>Going back to earnings here, earnings continue to kind of

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<v Speaker 2>trickle out a little bit, particularly from the retail oriented

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<v Speaker 2>companies that packet foods companies. One of them is Chewy.

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<v Speaker 2>Let's break that down with Diana sat Open. Yes, she

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<v Speaker 2>is an analyst covering the retail space consumer product space

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<v Speaker 2>for Bloomberg Intelligence.

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<v Speaker 7>What are good friends at Chewy dot com doing?

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<v Speaker 5>They're doing fairly well.

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<v Speaker 9>You know, they actually reported sales and profitability that beat

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<v Speaker 9>analysts expectations, you know, for their outlook, it seems that

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<v Speaker 9>they're a little bit conservative that actually, you know, level

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<v Speaker 9>up some of the gains earlier this morning for the stock.

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<v Speaker 9>But again it seems that there's a lot of tailwinds

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<v Speaker 9>going forward.

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<v Speaker 6>Yeah, what's reaving that more conservative outlook that you mentioned, Diana,

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<v Speaker 6>Is it something related to you concerns about consumer demand

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<v Speaker 6>moving forward?

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<v Speaker 5>That is absolutely the case.

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<v Speaker 9>They're seeing household formation, which is adoption versus surrendering a

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<v Speaker 9>little bit subdued compared to historical averages, and they think

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<v Speaker 9>that that's going to overflow into twenty twenty six.

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<v Speaker 5>We're not necessarily agreeing with that.

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<v Speaker 9>We think at we're a little bit more optimistic in

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<v Speaker 9>terms of, you know, the pace of adoptions going forward.

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<v Speaker 9>So this is going to make the industry a little

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<v Speaker 9>bit more interesting.

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<v Speaker 2>This is it people recall definitely one of the pandemic

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<v Speaker 2>stocks that just surged to a high of at one

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<v Speaker 2>hundred and eighteen hundred nineteen dollars a share back in

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<v Speaker 2>early twenty twenty one and then came down to a

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<v Speaker 2>more normal level here. So going forward, what's the growth

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<v Speaker 2>drivers for Chewy? Is it taking share from the mom

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<v Speaker 2>and pop pet stores, is it we're just macro.

0:12:09.920 --> 0:12:12.240
<v Speaker 7>Stuff, household formation and things like that.

0:12:12.440 --> 0:12:15.439
<v Speaker 9>Well, there's gonna be a couple of things. They're focusing

0:12:15.559 --> 0:12:20.080
<v Speaker 9>on verticals besides merchandise, which is you know, they're doing

0:12:20.120 --> 0:12:23.760
<v Speaker 9>a lot of bad care. They're expanding into that. They

0:12:23.800 --> 0:12:28.960
<v Speaker 9>are currently have fourteen buildings on that they're expanding into

0:12:29.040 --> 0:12:32.440
<v Speaker 9>eighteen by the end of the year. So you know,

0:12:32.559 --> 0:12:37.360
<v Speaker 9>you have healthcare, you have sponsor ads in the website,

0:12:37.520 --> 0:12:41.280
<v Speaker 9>you have you know, the membership program, you have a

0:12:41.440 --> 0:12:45.120
<v Speaker 9>Chewy Plus. So all of those things were probably going

0:12:45.160 --> 0:12:50.240
<v Speaker 9>to be teilwinds for the company going forward. They're focusing

0:12:50.320 --> 0:12:54.840
<v Speaker 9>on like gaining mid to high single digit sales growth

0:12:54.920 --> 0:12:57.960
<v Speaker 9>over the next few years, which is I think it's

0:12:58.040 --> 0:13:01.960
<v Speaker 9>a normal forecast, but right now they're you know, growing

0:13:02.000 --> 0:13:03.920
<v Speaker 9>two times the size of the industry.

0:13:04.000 --> 0:13:06.040
<v Speaker 5>So yeah, it's interesting.

0:13:06.280 --> 0:13:08.520
<v Speaker 6>Is this a trend that you're seeing moving forward for

0:13:08.720 --> 0:13:11.840
<v Speaker 6>a lot of these kind of consumer based companies shifting

0:13:12.120 --> 0:13:14.880
<v Speaker 6>back a little bit to that in store sort of

0:13:14.920 --> 0:13:17.200
<v Speaker 6>experience because that seems to be a strategy that's worked

0:13:17.240 --> 0:13:19.960
<v Speaker 6>for other retailers outside of the space as well.

0:13:20.240 --> 0:13:20.480
<v Speaker 3>Yes.

0:13:20.760 --> 0:13:25.520
<v Speaker 9>So, you know, the pet industry, it's very sticky in

0:13:25.600 --> 0:13:31.319
<v Speaker 9>terms of demand. So once these companies get the pet

0:13:31.400 --> 0:13:34.920
<v Speaker 9>parent at the start of the you know, pet ownership,

0:13:34.920 --> 0:13:36.520
<v Speaker 9>they are going to have them for the rest of

0:13:36.559 --> 0:13:39.160
<v Speaker 9>the life of the pet. So you know, that is

0:13:39.200 --> 0:13:44.840
<v Speaker 9>obviously a very interesting dynamic compared to other retailers. But

0:13:44.880 --> 0:13:47.600
<v Speaker 9>in terms of, you know, the in store experience, this

0:13:47.720 --> 0:13:50.360
<v Speaker 9>is something that pet Co is also doing. They're leveraging

0:13:50.400 --> 0:13:56.040
<v Speaker 9>their fourteen hundred stores to also increase that traffic and penetration.

0:13:56.160 --> 0:13:58.040
<v Speaker 9>So definitely interesting times.

0:13:58.160 --> 0:14:04.080
<v Speaker 2>So Walmart, Amazon, how does Chewi compete against those players

0:14:04.080 --> 0:14:07.000
<v Speaker 2>that have big, big e commerce platforms.

0:14:06.640 --> 0:14:09.800
<v Speaker 5>So based off of them, they compete on price.

0:14:10.320 --> 0:14:12.120
<v Speaker 9>We a couple of years ago, we did a price

0:14:12.120 --> 0:14:15.880
<v Speaker 9>and study with Amazon, but Walmart and Chewy and other

0:14:15.960 --> 0:14:20.520
<v Speaker 9>retailers and Chewy and Amazon, we're pretty close in terms

0:14:20.560 --> 0:14:26.000
<v Speaker 9>of pricing where Amazon. Where Chewy beats Walmart and Amazon

0:14:26.120 --> 0:14:29.080
<v Speaker 9>is that their customer service. They you know, if you

0:14:29.160 --> 0:14:32.760
<v Speaker 9>call them and you have any questions about the food

0:14:32.880 --> 0:14:35.840
<v Speaker 9>that you're going to feed your dog, they're very knowledgeable

0:14:35.880 --> 0:14:38.160
<v Speaker 9>compared to you know, Amazon customer service.

0:14:38.200 --> 0:14:39.840
<v Speaker 5>So that is like the edge that they have.

0:14:40.920 --> 0:14:41.880
<v Speaker 6>Oh, very interesting.

0:14:42.000 --> 0:14:42.160
<v Speaker 10>Now.

0:14:42.240 --> 0:14:45.320
<v Speaker 6>Another bright spot, of course is autoship, right, which is basically,

0:14:45.320 --> 0:14:47.480
<v Speaker 6>if you're a pet owner, this is the thing that

0:14:47.560 --> 0:14:51.000
<v Speaker 6>you sign up for like my cat's food each month,

0:14:51.080 --> 0:14:53.080
<v Speaker 6>and then it just keeps charging me every month and

0:14:53.120 --> 0:14:56.200
<v Speaker 6>then I get surprice delivery of cat food that I

0:14:56.240 --> 0:14:59.760
<v Speaker 6>was not maybe expecting. But so obviously that's a bright

0:14:59.800 --> 0:15:04.520
<v Speaker 6>spot for Chewy. What's the outlook for that part of

0:15:04.560 --> 0:15:06.600
<v Speaker 6>the business. Is that something that could be sustainable?

0:15:06.920 --> 0:15:08.120
<v Speaker 5>Yes, absolutely so.

0:15:08.360 --> 0:15:12.080
<v Speaker 9>Right now, eighty four percent of their revenue comes from authorship,

0:15:12.400 --> 0:15:15.680
<v Speaker 9>which allows them to have a lot of scale and

0:15:15.760 --> 0:15:19.440
<v Speaker 9>allows them to be very profitable. So that is obviously

0:15:19.520 --> 0:15:22.280
<v Speaker 9>they have been growing since I started covering this company.

0:15:22.280 --> 0:15:24.320
<v Speaker 9>It was like in the seventies and now it's eighty four,

0:15:24.400 --> 0:15:26.600
<v Speaker 9>so it's probably going to get to the nineties soon.

0:15:26.840 --> 0:15:28.600
<v Speaker 6>It's very convenient because you sign up for it and

0:15:28.600 --> 0:15:29.600
<v Speaker 6>then you forget about it.

0:15:30.360 --> 0:15:33.480
<v Speaker 7>Stay with us. More from Bloomberg Intelligence coming up after this.

0:15:37.400 --> 0:15:41.120
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:15:41.200 --> 0:15:44.280
<v Speaker 1>weekdays at ten am easterne on Apple, Corplay and Android

0:15:44.280 --> 0:15:47.600
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

0:15:47.640 --> 0:15:50.760
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0:15:51.600 --> 0:15:56.360
<v Speaker 2>Krakerbo reported some numbers today, some disappointing guidance stufs kind

0:15:56.360 --> 0:15:57.800
<v Speaker 2>of flat on the day, but the stock has been

0:15:57.840 --> 0:15:59.920
<v Speaker 2>down pretty significantly this year. They had that whole low

0:16:00.120 --> 0:16:02.040
<v Speaker 2>go change that was a real problem for them, and

0:16:02.040 --> 0:16:03.600
<v Speaker 2>they're starting to see in their traffic.

0:16:03.280 --> 0:16:06.280
<v Speaker 7>Pretty big time. Stocks down about fifty percent year to date.

0:16:06.320 --> 0:16:09.080
<v Speaker 2>Michael Halen joints his senior restaurant and food service analyst

0:16:09.080 --> 0:16:13.200
<v Speaker 2>for Bloomberg Intelligence. Michael, what did the company report today

0:16:13.240 --> 0:16:16.640
<v Speaker 2>and what's management saying about kind of the future plans here?

0:16:18.360 --> 0:16:23.360
<v Speaker 10>Yeah, so, you know, guidance was cut and this was

0:16:23.400 --> 0:16:26.840
<v Speaker 10>their fiscal first quarter, so it's it's always tough to

0:16:27.280 --> 0:16:32.920
<v Speaker 10>have a guidance, revenue and ebitdoc cut after your first report,

0:16:33.000 --> 0:16:37.120
<v Speaker 10>but they hadn't seen a bounce yet in their traffic

0:16:37.200 --> 0:16:41.480
<v Speaker 10>post logo change controversy and everything that that went along

0:16:41.520 --> 0:16:45.360
<v Speaker 10>with it, you know. On the positive side, they said,

0:16:45.440 --> 0:16:48.480
<v Speaker 10>you know, traffic has now steadied at this down ten

0:16:48.560 --> 0:16:52.120
<v Speaker 10>to eleven percent level, which is translating into a you know,

0:16:52.160 --> 0:16:53.760
<v Speaker 10>a down a mid single digit.

0:16:54.160 --> 0:16:55.360
<v Speaker 7>Same store sales.

0:16:55.920 --> 0:16:59.560
<v Speaker 10>You know, So if you're if you're a glass half

0:16:59.600 --> 0:17:03.600
<v Speaker 10>full investor, you're saying that, you know, after the stabilization

0:17:03.800 --> 0:17:08.320
<v Speaker 10>comes in improvement. You know, their new guidance has a

0:17:08.320 --> 0:17:10.560
<v Speaker 10>pretty wide range. So the low end of the range

0:17:10.640 --> 0:17:13.520
<v Speaker 10>is assuming no improvement through year end, which we think

0:17:13.560 --> 0:17:16.359
<v Speaker 10>could be sounds pretty conservative to us, you know, and

0:17:16.400 --> 0:17:19.240
<v Speaker 10>then on the higher end they would see a gradual

0:17:19.400 --> 0:17:24.199
<v Speaker 10>slow improvement in traffic going forward. So what are they

0:17:24.240 --> 0:17:26.520
<v Speaker 10>going to do? You know, it's going to be a

0:17:26.720 --> 0:17:30.720
<v Speaker 10>continue to be about improving the operations, right that's been

0:17:32.600 --> 0:17:36.160
<v Speaker 10>you know, a key tenant under under CEO Julie Messino.

0:17:36.760 --> 0:17:38.919
<v Speaker 10>It's also going to be food innovation. It's going to

0:17:38.960 --> 0:17:42.760
<v Speaker 10>be Southern favorites, it's going to be twists on old classics.

0:17:42.800 --> 0:17:46.800
<v Speaker 10>It's going to be bringing back items that people love

0:17:46.880 --> 0:17:49.240
<v Speaker 10>they want to see return to the menu. But I

0:17:49.280 --> 0:17:54.679
<v Speaker 10>think what really stood out is their willingness to listen

0:17:54.800 --> 0:17:59.400
<v Speaker 10>more closely to their customers. I think that's a big

0:17:59.520 --> 0:18:03.080
<v Speaker 10>key point of focus for them moving forward after the

0:18:03.119 --> 0:18:04.560
<v Speaker 10>controversy that they suffered.

0:18:05.080 --> 0:18:07.159
<v Speaker 6>Well, Michael, So in terms of what are they going

0:18:07.200 --> 0:18:10.000
<v Speaker 6>to do right, it seems as a cutting capex is

0:18:10.160 --> 0:18:11.960
<v Speaker 6>a part of the plan. Is that something that you

0:18:12.040 --> 0:18:15.720
<v Speaker 6>think wood single discipline or does it actually risk slowing

0:18:15.720 --> 0:18:17.000
<v Speaker 6>to turn around even more?

0:18:19.119 --> 0:18:22.520
<v Speaker 10>Well, they're going to still refresh the stores. What they're

0:18:22.640 --> 0:18:27.320
<v Speaker 10>cutting back on is a more extensive remodel, which was

0:18:29.240 --> 0:18:32.680
<v Speaker 10>in tandem with the logo change, which was something that

0:18:32.800 --> 0:18:34.200
<v Speaker 10>was angering customers.

0:18:34.520 --> 0:18:34.720
<v Speaker 4>Right.

0:18:34.840 --> 0:18:40.480
<v Speaker 10>So I think the capex change is probably you know,

0:18:40.560 --> 0:18:43.960
<v Speaker 10>the lowered capex is probably smart. But they're going to

0:18:44.000 --> 0:18:46.840
<v Speaker 10>continue to refresh their stores. They're going to continue to

0:18:46.880 --> 0:18:49.160
<v Speaker 10>give them a fresh coat of pain, improve floors where

0:18:49.200 --> 0:18:51.359
<v Speaker 10>they need to clean up the bathrooms, things of that

0:18:51.480 --> 0:18:55.720
<v Speaker 10>nature that nobody's going to get up in arms over.

0:18:56.520 --> 0:18:59.160
<v Speaker 2>I'm actually surprised in hindsight that maybe this manager team

0:18:59.480 --> 0:19:02.679
<v Speaker 2>kept theirs there. I mean, this was a real self

0:19:02.680 --> 0:19:06.960
<v Speaker 2>inflicted wound there. What's the shareholder's been saying. Has it

0:19:06.960 --> 0:19:08.879
<v Speaker 2>been any pushback other than selling the shares?

0:19:09.600 --> 0:19:12.679
<v Speaker 10>Yeah, So listen, Julie Messino the you know that you

0:19:12.760 --> 0:19:16.160
<v Speaker 10>make a great point, Paul and Julie Messino. The reason

0:19:16.160 --> 0:19:18.480
<v Speaker 10>why I believe she's still there is that she was

0:19:18.480 --> 0:19:22.119
<v Speaker 10>doing a great job until until this controversy hit. You know,

0:19:22.200 --> 0:19:27.240
<v Speaker 10>this is a chain that had been bleeding traffic for years, right,

0:19:27.320 --> 0:19:30.160
<v Speaker 10>They've been really struggling for a long time to bring

0:19:30.200 --> 0:19:35.200
<v Speaker 10>in younger consumers, right, and she had shown pretty good

0:19:35.280 --> 0:19:41.000
<v Speaker 10>success over the twelve months leading into the logo change.

0:19:41.280 --> 0:19:44.200
<v Speaker 10>Same Star sales at the restaurants were up five percent

0:19:45.320 --> 0:19:48.879
<v Speaker 10>in the August quarter. So I think that's why, you know,

0:19:48.960 --> 0:19:53.600
<v Speaker 10>the proxy fight kind of failed, the attempt to remove

0:19:53.600 --> 0:19:56.120
<v Speaker 10>her from the board failed, And why she still has

0:19:56.160 --> 0:19:59.199
<v Speaker 10>her job right now is that they this chain was

0:19:59.240 --> 0:20:01.879
<v Speaker 10>a mess prior to her arrival, and she was showing

0:20:01.920 --> 0:20:04.560
<v Speaker 10>some pretty good progress up until August.

0:20:05.280 --> 0:20:09.960
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:20:10.160 --> 0:20:13.640
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