WEBVTT - BGC's Gillis Downgrades Apple to SELL on Product Pipeline (Aud)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleven, Washington, d C.

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<v Speaker 1>Bloomberg to Boston, Bloomberg Twell hundred to San Francisco, Bloomberg

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<v Speaker 1>nine to the country, Julie's ex General one nine and

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<v Speaker 1>around the globe the Bloomberg Radio plus Appen Bloomberg dot com.

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<v Speaker 1>This is taking stock. I'm Kathleen Hayes along with pim Fox. Yes,

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<v Speaker 1>the cat was out of the bag over the weekend,

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<v Speaker 1>but it's confirmed today that Horizon is buying Yahoo's web

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<v Speaker 1>assets for four point eight billion dollars. Oh, this means

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<v Speaker 1>for the by rating the Colin Gillis of Beach e

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<v Speaker 1>Z Partners has had on Yahoo and Oh, by the way,

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<v Speaker 1>ahead of Apple's earnings tomorrow, PIM, he's downgraded Apple to

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<v Speaker 1>a cell. Yeah, the sheriffs of Apple are down about

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<v Speaker 1>one and a half percent right now. And right now,

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<v Speaker 1>let's go to Charlie Pellett in the Bloomberg News from

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<v Speaker 1>for Bloomberg Business Flag and I thank you very much, PIM,

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<v Speaker 1>thank you, Kathleen, and worse Verizon and Yahoo the day's

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<v Speaker 1>top business story. We are brought to you by se

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<v Speaker 1>I have evolving investor and regulatory demands affected your investment

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<v Speaker 1>firms operational redness. Imagine transforming your business with SEIS Global

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<v Speaker 1>Platform at se i C dot com slash. Imagine Verizon

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<v Speaker 1>buying Yahoo's web assets, sending the company's to decade run

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<v Speaker 1>as an independent business. Verizon will pay cash in the

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<v Speaker 1>deal that includes Yahoo real estate, but excludes some intellectual property,

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<v Speaker 1>which will be sold separately. Yeah who shares They are

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<v Speaker 1>lower now by two point five percent. As for Verizon,

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<v Speaker 1>they are also lower down six tenths of one percent.

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<v Speaker 1>Tim arns Strong is the CEO of Verizon's A O

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<v Speaker 1>L business, and on Bloomberg Television and Radio this morning,

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<v Speaker 1>he talked about integrating Yahoo. By the way, we we

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<v Speaker 1>work in Silicon Valley all the time. We have a

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<v Speaker 1>big office is a multiple officers there, and the Yahoo

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<v Speaker 1>team we've spent time with um. I think we both

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<v Speaker 1>have a similar strategy and similar outcomes, and there may

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<v Speaker 1>be synergies in the deal, but this deal is about

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<v Speaker 1>growth and we're going to focus on the growth areas.

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<v Speaker 1>Synergies will come, but it's got to start with strategy

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<v Speaker 1>structure and then cost structure as the third item, and

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<v Speaker 1>also a name changed too, because Yahoo will wind up

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<v Speaker 1>changing its name. It will be left with stakes in

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<v Speaker 1>Alabama Group Holding and Yahoo Japan, with the combined market

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<v Speaker 1>value of about forty billion dollars. Federal Reserve policymakers begin

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<v Speaker 1>meeting tomorrow, and when the Monetary Policy Panel meets Tuesday

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<v Speaker 1>and Wednesday, a majority of investors expect them to do

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<v Speaker 1>what they've done at every meeting this year. That is nothing.

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<v Speaker 1>Tenure down to thirty seconds, ye old one point five

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<v Speaker 1>seven Gold down five tenths of one percent. And now

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<v Speaker 1>let's take a look at the other stories making news.

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<v Speaker 1>Thank you, Charlie from the Blueberg newsroom. I'm Matt Miller.

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<v Speaker 1>As the Democratic National Convention kicks off in Philadelphia, there

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<v Speaker 1>are reports that Hillary Clinton's campaign has asked her former

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<v Speaker 1>rival to encourage his supporters not to boo bloombergs. Bob

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<v Speaker 1>Moon reports lead emails suggesting Democratic officials look for ways

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<v Speaker 1>to undermine Bernie Sanders of outrage his supporters, bringing an

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<v Speaker 1>awkward start for party leader and convention host Debbie Wasserman.

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<v Speaker 1>Her resignation won't take effect until after she opens and

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<v Speaker 1>closes the gathering, and her interim success for Donald Brazil

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<v Speaker 1>is already working to keep the Party United We need

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<v Speaker 1>to come together tonight. We're going to have a big night,

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<v Speaker 1>a lot of good voices. Bernie Sanders, Elizabeth Warren, and

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<v Speaker 1>of course the first leader of the United States. This

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<v Speaker 1>is gonna be an exciting convention. We're going to break

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<v Speaker 1>out in a joyful noise. Who he's disappointed in? Party leader.

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<v Speaker 1>Sanders says he'll be there tonight on a mission to

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<v Speaker 1>defeat Donald Trump. Bob Moon Bloomberg Radio. Meanwhile, Baltimore Mayor

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<v Speaker 1>Stephanie Rawlings Blake has been chosen to gabble in the

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<v Speaker 1>full Democratic National Convention in place of outgoing Democratic Party

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<v Speaker 1>Chair Debbie Wasserman Schultz. Donna Brazil will replace Wasserman Schultz

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<v Speaker 1>at the end of this week's convention. Here's Brazil on

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<v Speaker 1>what to expect this week from Hillary Clinton's campaign. Her

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<v Speaker 1>campaign and her message this week is that we're stronger together,

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<v Speaker 1>we can solve our problems. We can begin in to

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<v Speaker 1>project a better country. And the m t A plans

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<v Speaker 1>to shut down the L Train subway tunnel for eighteen months.

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<v Speaker 1>The closure will happen in two thousand nineteen and will

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<v Speaker 1>disrupt commutes for more than three hundred thousand new Yorkers

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<v Speaker 1>who traveled between Brooklyn and Manhattan. The move was forced

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<v Speaker 1>by damage due to the salt water that flooded the

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<v Speaker 1>tunnel in two thousand twelve during Hurricane Sandy. Global News

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<v Speaker 1>twenty four hours a day, powered by over undred journalists

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<v Speaker 1>and analysts in more than one or twenty countries. I'm

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<v Speaker 1>Matt Miller. This is Bloomberg, and we thank you, and

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<v Speaker 1>again recapping, we do have the SMP five hundred index

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<v Speaker 1>trading lower, down eight points to sixty six. That is

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<v Speaker 1>a drop of four tenths of one percent. I'm Charlie

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<v Speaker 1>Pellett and that's a Bloomberg business flash. You're listening to

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<v Speaker 1>Taking Stock with Kathleen Hayes and Pimpbox on Bloomberg Radio.

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<v Speaker 1>So it's the end of an era, or at least

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<v Speaker 1>the end of a big chapter for Yahoo in the

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<v Speaker 1>beginning of its new existence is part of Horizon Communication

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<v Speaker 1>safter Verison agreed to buy Yeah whose web assets for

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<v Speaker 1>four point eight billion dollars, ending the company's two decade

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<v Speaker 1>run as an independent business that took it from a

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<v Speaker 1>Stanford University startup at the dawn of the Internet Age two. Unfortunately,

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<v Speaker 1>for Yahoo also ran behind nimbler online rivals such as

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<v Speaker 1>Google and Facebook. So what does it mean for investors?

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<v Speaker 1>What does it mean for the company moving ahead? Colin

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<v Speaker 1>Gillis is here to answer all of these questions. He's

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<v Speaker 1>Director of Research and senior Technology Analysts at b g

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<v Speaker 1>C Partners. Colin, Welcome, Hello, Kathleen. So we knew Verizon. Yeah,

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<v Speaker 1>who was going to get bought by somebody? Verizon's name

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<v Speaker 1>had been bandied about. Let's start by what this means

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<v Speaker 1>for Yahoo? What is it now? Well, you know, it's

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<v Speaker 1>out with a whimper, uh, and it will become folded

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<v Speaker 1>into Verizon. They suggested that the transaction will close in

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<v Speaker 1>the beginning of next year and we'll see what happens

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<v Speaker 1>to the brand name itself. But Verizon is interested in

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<v Speaker 1>the piping, the ad technology that powers Yahoo as they

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<v Speaker 1>seek to get more into advertising expand some of their

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<v Speaker 1>video offerings become more than just a carrier that competes

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<v Speaker 1>on data and pricing. Con I can't resist it. Tell

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<v Speaker 1>me how much did Microsoft offer for Yahoo at one point?

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<v Speaker 1>About ten times more pim Can you hear me? Now?

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<v Speaker 1>There was a lot of value that's been destroyed by

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<v Speaker 1>various management teams trying to turn this company around, so

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<v Speaker 1>the spring, but they didn't do too badly. Write all

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<v Speaker 1>those management teams they managed to take home quite a

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<v Speaker 1>nice little packet. Yeah, of course, that's right. Uh, And

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<v Speaker 1>that is quite tough if you think about how much

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<v Speaker 1>the current management team has been paid to. Really, just

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<v Speaker 1>how much is uh Marissa Mey are going to take home? Well,

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<v Speaker 1>we'll have to see what the final figures, but you know,

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<v Speaker 1>something north of a hundred million UH is expected. Well,

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<v Speaker 1>so the very least, I guess we could say that

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<v Speaker 1>Verizon did a good job just sitting and waiting right

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<v Speaker 1>as a disc got more affordable. There is that there

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<v Speaker 1>is that, that's right, um, and you know it's also

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<v Speaker 1>hopefully they'll preserve employee jobs. Right, But it's not done.

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<v Speaker 1>There's still going to be a holding company left, right,

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<v Speaker 1>that's going to be turned into a an investment advisory

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<v Speaker 1>company that's going to have the assets of Ali Baba,

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<v Speaker 1>Yahoo Japan and cash in there using for investors, then

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<v Speaker 1>what do I what do I own? What should I buy?

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<v Speaker 1>You know you had a buy rating on Yahoo before, correct,

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<v Speaker 1>that's right? And you know what you're hoping to see

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<v Speaker 1>is that there is a discount that these assets trade

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<v Speaker 1>to parity. Because Ali Baba is a publicly traded stock,

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<v Speaker 1>we know that you know it's worth you can take

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<v Speaker 1>a quote, you know, X number of dollars to share

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<v Speaker 1>saying with Yahoo Japan and the value of the assets,

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<v Speaker 1>and this holding company trades at a material discount to that.

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<v Speaker 1>And we're hoping to see that gap closed now that

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<v Speaker 1>there's no longer concerned that management be spending that money

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<v Speaker 1>and Wasteand I want to turn your attention out of

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<v Speaker 1>tomorrow and Apple, and really you downgraded the shares of Apple.

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<v Speaker 1>I don't get this at all. Explain it? Okay, Well,

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<v Speaker 1>you know we put a cell on it, and um,

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<v Speaker 1>you know we have long been uh neutral, we've been positive.

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<v Speaker 1>Right now we're out there saying we think the upcoming

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<v Speaker 1>iPhone cycle is going to disappoint people. And typically Apple

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<v Speaker 1>works on a tick talk basis, which means that you

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<v Speaker 1>get a major update with a new form factor which

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<v Speaker 1>is the tick, and then the next year you gotta

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<v Speaker 1>talk it's an s upgrade. It's more incremental this year

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<v Speaker 1>or than we expect a tick talk talk. We expect

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<v Speaker 1>another incremental update happening in two thousand and sixteen is

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<v Speaker 1>Apple gears up the big push the tenth anniversary iPhone,

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<v Speaker 1>which will be a redesign in and this could cause

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<v Speaker 1>numbers to come down in September and December as people

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<v Speaker 1>wait to hold off to up read their phone. I

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<v Speaker 1>like your Haiku. It has become clear that the muse

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<v Speaker 1>that drove Apple has gone somewhere else. I know it's

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<v Speaker 1>a bit sad, but you know, if you think about

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<v Speaker 1>the degree of just iteration that we've had happening at Apple,

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<v Speaker 1>you know, we haven't really opened up major new product categories.

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<v Speaker 1>At some point, people are not going to be caring.

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<v Speaker 1>You will not care so much about just a slightly

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<v Speaker 1>better camera or slightly faster processor, a little bit more memory, right.

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<v Speaker 1>They want to see new form factors. And quite frankly,

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<v Speaker 1>the whole market itself it's slowing down. Smartphones grew less

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<v Speaker 1>than one percent in its entirety last quarter. So you

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<v Speaker 1>don't want to pay a ten multiple for a stock

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<v Speaker 1>that's yielding two point three that is arguably at least,

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<v Speaker 1>if not the largest and best UH mobile communications manufacturer

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<v Speaker 1>in the world. Yep, you know, and in fact, because

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<v Speaker 1>I look out at the next billion dollars in value, Right,

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<v Speaker 1>is that going to be on the positive side. On

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<v Speaker 1>the negative side if iPhone unit continue to come down, Right,

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<v Speaker 1>there is ample room for air to come out of Apple.

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<v Speaker 1>It's still the largest company on a per on, on

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<v Speaker 1>a strict market account valuation. You can talk about ratio

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<v Speaker 1>is all you want, right, but it's still north of

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<v Speaker 1>five billion dollars half a trillion dollars. And so we've

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<v Speaker 1>seen nine consecutive quarters of iPad revenue declining. This is

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<v Speaker 1>the third consecutive quarter where iPhone revenue is going to decline.

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<v Speaker 1>So we have to be careful that Apple is not

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<v Speaker 1>starting a long term negative downtrend. All right, We're gonna

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<v Speaker 1>leave it there, Thanks very much. Colin gillis joining us

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<v Speaker 1>as the technology analyst and director of research at the

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<v Speaker 1>b g C Partners. Talking about Apple shares of Apple

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<v Speaker 1>today down about one and a half percent, trading at

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<v Speaker 1>ninety dollars and one cent signed fim Fox, my co

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<v Speaker 1>host Kathleen Hayes, this is bloomberg. As the Democrats get

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<v Speaker 1>their convention underway in Philadelphia, we're going to step back

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<v Speaker 1>and look not just the politics, but what do the

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<v Speaker 1>elections mean for the markets, from stocks to bonds and currencies.

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<v Speaker 1>This is coming up on Bloomberg Radio.