1
00:00:02,759 --> 00:00:10,600
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,640 --> 00:00:14,600
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

3
00:00:14,640 --> 00:00:17,920
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

4
00:00:17,960 --> 00:00:21,080
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,400 --> 00:00:23,560
Speaker 1: or watch us live on YouTube.

6
00:00:24,280 --> 00:00:28,360
Speaker 2: One of my favorite American companies is Dear John Dear Company,

7
00:00:28,400 --> 00:00:31,040
Speaker 2: because it just to me. A the products are just awesome,

8
00:00:31,560 --> 00:00:34,000
Speaker 2: the big tractors and stuff like that, and B they're

9
00:00:34,159 --> 00:00:37,360
Speaker 2: such high quality, and they're just known around the world.

10
00:00:37,440 --> 00:00:41,000
Speaker 2: Great engineering, great technology, and they're just the backbone for

11
00:00:41,040 --> 00:00:43,400
Speaker 2: the American farmer. It's the tool for the American farmer

12
00:00:44,120 --> 00:00:46,800
Speaker 2: who feeds the world. So I just always followed this

13
00:00:46,840 --> 00:00:50,120
Speaker 2: company really closely, and they came out with some numbers disappointing.

14
00:00:50,120 --> 00:00:52,320
Speaker 2: It's a little tough out there in farm country. So

15
00:00:52,360 --> 00:00:54,440
Speaker 2: we want to break it down with Chris Chiolino. He

16
00:00:54,480 --> 00:00:59,160
Speaker 2: covers all the big machinery companies for Bloomberg Intelligence, just

17
00:00:59,200 --> 00:01:02,000
Speaker 2: one of our top top analysts. He knows this story well. Chris,

18
00:01:02,000 --> 00:01:04,039
Speaker 2: tell us what you heard from Deer with their most

19
00:01:04,040 --> 00:01:07,399
Speaker 2: recent quarterly results. Yeah, thanks, Paul.

20
00:01:07,520 --> 00:01:11,840
Speaker 3: You know, we expected pretty conservative guidance coming into the print.

21
00:01:11,840 --> 00:01:14,959
Speaker 3: But this was, you know, well below our expectations, and

22
00:01:14,959 --> 00:01:17,000
Speaker 3: I'd say even you know, below some of the most

23
00:01:17,040 --> 00:01:20,199
Speaker 3: bearish estimates out there, and really just kind of points

24
00:01:20,200 --> 00:01:23,160
Speaker 3: to a lower for longer agg cycle here in North America.

25
00:01:23,840 --> 00:01:27,240
Speaker 3: Their twenty sixth net Income guide calls for another ten

26
00:01:27,280 --> 00:01:31,480
Speaker 3: percent decline in twenty twenty six. It implies roughly earnings

27
00:01:31,480 --> 00:01:34,440
Speaker 3: per share in the sixteen dollars and fifty cent range,

28
00:01:34,800 --> 00:01:38,520
Speaker 3: which is, you know, eighteen percent below consensus. So it's

29
00:01:38,720 --> 00:01:40,960
Speaker 3: not great news. I would say there are a couple

30
00:01:41,080 --> 00:01:45,360
Speaker 3: positive takeaways though. One, we do finally now have I

31
00:01:45,360 --> 00:01:49,000
Speaker 3: think visibility and line of sight on trough earnings this cycle.

32
00:01:49,520 --> 00:01:53,080
Speaker 3: In two, I think there's probably some inherent conservatism built

33
00:01:53,120 --> 00:01:56,160
Speaker 3: into this outlook, just given the lingering you know, trade

34
00:01:56,360 --> 00:01:57,480
Speaker 3: and tariff uncertainty.

35
00:01:58,440 --> 00:02:02,000
Speaker 4: Yeah. Well, Chris, I'm looking add that net income guidance,

36
00:02:02,040 --> 00:02:04,960
Speaker 4: which is down sharply from last year's levels, right, So

37
00:02:05,000 --> 00:02:06,720
Speaker 4: talk to us about that. Do you think that is

38
00:02:07,200 --> 00:02:09,720
Speaker 4: more of a cyclical thing or are we actually seeing

39
00:02:09,760 --> 00:02:13,080
Speaker 4: something more structural that's playing out in this space.

40
00:02:14,040 --> 00:02:17,040
Speaker 3: No, it's the cycle, you know. I think we always

41
00:02:17,080 --> 00:02:20,160
Speaker 3: tend to kind of undershoot on the way down and

42
00:02:20,160 --> 00:02:24,400
Speaker 3: overshoot on the way up. But this cycle is, you know,

43
00:02:25,160 --> 00:02:27,680
Speaker 3: playing out I think probably a little bit more severe

44
00:02:27,760 --> 00:02:31,840
Speaker 3: than we had initially expected. Large eg. Retail sales here

45
00:02:31,840 --> 00:02:34,840
Speaker 3: in North America are going to be down roughly thirty

46
00:02:34,840 --> 00:02:37,720
Speaker 3: percent this year. That's the second year of the decline,

47
00:02:37,760 --> 00:02:41,360
Speaker 3: and now Deer is expecting another fifteen to twenty percent

48
00:02:41,400 --> 00:02:44,920
Speaker 3: decline in twenty twenty six. That would put volumes at

49
00:02:44,960 --> 00:02:47,600
Speaker 3: the lowest level in more than four decades. I don't

50
00:02:47,600 --> 00:02:49,480
Speaker 3: think I have a model that goes back far enough

51
00:02:49,520 --> 00:02:54,239
Speaker 3: that shows that trough level of volume, So I think

52
00:02:54,280 --> 00:02:56,720
Speaker 3: it's we're pretty confident that this will be the bottom.

53
00:02:56,760 --> 00:02:58,280
Speaker 3: It's just kind of a lower floor.

54
00:02:58,800 --> 00:02:59,560
Speaker 2: On the flip side.

55
00:02:59,600 --> 00:03:01,560
Speaker 3: I mean, the earnings per share are still, you know,

56
00:03:01,800 --> 00:03:03,880
Speaker 3: we think are structurally higher just given some of the

57
00:03:04,120 --> 00:03:07,120
Speaker 3: improvements they've made in the business model. But from a

58
00:03:07,160 --> 00:03:09,959
Speaker 3: cycle and volume perspective, this is as bad as it gets.

59
00:03:10,280 --> 00:03:12,959
Speaker 2: Why do you think that is what's different around about

60
00:03:13,000 --> 00:03:15,360
Speaker 2: this cycle versus past cycles here?

61
00:03:16,200 --> 00:03:18,120
Speaker 3: Yeah, it's a combination of a couple things. I mean,

62
00:03:18,120 --> 00:03:20,280
Speaker 3: at the end of the day, farmers aren't going to

63
00:03:20,320 --> 00:03:23,360
Speaker 3: buy equipment when you have crop prices that are down.

64
00:03:23,520 --> 00:03:25,320
Speaker 3: You know, we've seen a little bit of improvement in

65
00:03:25,720 --> 00:03:28,720
Speaker 3: corn and soy over the last three months, but at

66
00:03:28,720 --> 00:03:30,919
Speaker 3: the end of the day, we've had too much production

67
00:03:31,160 --> 00:03:33,400
Speaker 3: over supply, so that's put a lid on where crop

68
00:03:33,440 --> 00:03:37,760
Speaker 3: prices have been going. We also have high input costs,

69
00:03:37,800 --> 00:03:40,720
Speaker 3: so while we're starting to see some of that inflation moderate,

70
00:03:41,160 --> 00:03:43,160
Speaker 3: a lot of the input costs for farmers are still

71
00:03:43,320 --> 00:03:49,240
Speaker 3: very elevated. Even on the interest rent, labor, fertilizer costs

72
00:03:49,240 --> 00:03:51,000
Speaker 3: are still too high. And then on top of that,

73
00:03:51,000 --> 00:03:52,800
Speaker 3: you have all the trade uncertainty. Who am I going

74
00:03:52,840 --> 00:03:56,840
Speaker 3: to sell my crops to? China had essentially stopped buying

75
00:03:56,840 --> 00:04:01,000
Speaker 3: our soybeans. That's our largest ad customer and a particularly

76
00:04:01,040 --> 00:04:04,280
Speaker 3: important market for deer in row crop farmers. So the

77
00:04:04,280 --> 00:04:06,720
Speaker 3: combination of those three I think has really kind of,

78
00:04:06,800 --> 00:04:09,320
Speaker 3: you know, extended the duration of this downturn.

79
00:04:09,920 --> 00:04:12,160
Speaker 4: Yeah, well, we know, of course that South American demand

80
00:04:12,280 --> 00:04:14,800
Speaker 4: expected to be flat, so I suppose a lot of

81
00:04:14,840 --> 00:04:19,200
Speaker 4: growth potentially coming from a North American farm economy. But

82
00:04:19,360 --> 00:04:21,320
Speaker 4: what are the signs that you would want to look

83
00:04:21,360 --> 00:04:24,000
Speaker 4: out for to suggest that, Look, the worst really is

84
00:04:24,040 --> 00:04:27,120
Speaker 4: behind this company. There's a turn and forthcoming in the horizon.

85
00:04:28,279 --> 00:04:30,120
Speaker 3: Yeah. I think the first you're going to look at

86
00:04:30,160 --> 00:04:32,040
Speaker 3: crop prices, and I think we're starting to see a

87
00:04:32,080 --> 00:04:35,360
Speaker 3: little bit of positive momentum there with China, you know,

88
00:04:35,560 --> 00:04:37,960
Speaker 3: getting back into the US market and making a few

89
00:04:37,960 --> 00:04:41,520
Speaker 3: soybean purchases. So some stability on the crop price front

90
00:04:41,839 --> 00:04:43,880
Speaker 3: that would be one. And then two is really having

91
00:04:43,960 --> 00:04:48,760
Speaker 3: China back in the market more consistently, right, We need stability,

92
00:04:48,800 --> 00:04:52,520
Speaker 3: we need predictability around their purchases. You know, they kind

93
00:04:52,520 --> 00:04:55,279
Speaker 3: of fell short on their Phase one trade deal agreement

94
00:04:55,320 --> 00:04:58,320
Speaker 3: during the first Trump administration, so we need to see them,

95
00:04:58,360 --> 00:05:01,160
Speaker 3: you know, consistently back the market, and I think that

96
00:05:01,200 --> 00:05:04,280
Speaker 3: will kind of give farmers confidence then maybe then to

97
00:05:04,640 --> 00:05:07,160
Speaker 3: go out and start replacing some of this aged equipment.

98
00:05:08,120 --> 00:05:11,479
Speaker 2: Is there a fact concern that again, last time, the

99
00:05:11,520 --> 00:05:13,880
Speaker 2: last Trump administration, the last time it deal was to

100
00:05:13,920 --> 00:05:16,800
Speaker 2: reach for China to buy more US agg China did

101
00:05:16,800 --> 00:05:18,560
Speaker 2: not really follow through at the end of the day.

102
00:05:18,600 --> 00:05:20,440
Speaker 2: Is there a belief that maybe this time could be different.

103
00:05:21,760 --> 00:05:24,880
Speaker 3: It's a good question, and I don't know that's the

104
00:05:24,920 --> 00:05:27,440
Speaker 3: million dollar question, right. So I think ultimately this is

105
00:05:27,480 --> 00:05:29,200
Speaker 3: why this is going to be a show me story

106
00:05:29,520 --> 00:05:32,240
Speaker 3: and until China, you know, delivers on some of their

107
00:05:32,240 --> 00:05:35,760
Speaker 3: commitments and delivers consistently. Farmers aren't going to go out

108
00:05:35,760 --> 00:05:38,400
Speaker 3: and spend. So when we see that occur, I think

109
00:05:38,400 --> 00:05:42,760
Speaker 3: that will lend more support to improvement and crop prices.

110
00:05:43,120 --> 00:05:45,080
Speaker 3: And then I do think, you know, you start to

111
00:05:45,080 --> 00:05:47,360
Speaker 3: see farmers start to go out and some replace some

112
00:05:47,440 --> 00:05:51,480
Speaker 3: of those you know, aged equipment in the on their fields.

113
00:05:51,760 --> 00:05:54,440
Speaker 3: But again it's very much I think we need to

114
00:05:54,440 --> 00:05:55,520
Speaker 3: see it to believe it first.

115
00:05:57,240 --> 00:06:00,359
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up for this.

116
00:06:03,920 --> 00:06:07,640
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

117
00:06:07,720 --> 00:06:11,119
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

118
00:06:11,200 --> 00:06:14,279
Speaker 1: with the Bloomberg Business App. Listen on demand wherever you

119
00:06:14,320 --> 00:06:17,279
Speaker 1: get your podcasts, or watch us live on YouTube.

120
00:06:18,240 --> 00:06:19,840
Speaker 2: Earnings continued to come in. We had a couple of

121
00:06:19,880 --> 00:06:22,839
Speaker 2: the tech companies Dell and HP report numbers. Let's break

122
00:06:22,880 --> 00:06:27,159
Speaker 2: it down with Woujinho, senior Technology anals Bloomberg Intelligence joining

123
00:06:27,200 --> 00:06:31,400
Speaker 2: us from our Princeton HQ Tennant Jersey. All right, would

124
00:06:31,400 --> 00:06:34,080
Speaker 2: you let's start with Dell here. It looks like they're

125
00:06:34,160 --> 00:06:37,320
Speaker 2: raising their annual projections for the AI server market. Is

126
00:06:37,360 --> 00:06:39,479
Speaker 2: that still the heart of the story.

127
00:06:40,560 --> 00:06:43,560
Speaker 5: Hey, Paul, Yeah, so it's the leading part of the

128
00:06:43,600 --> 00:06:48,839
Speaker 5: story for results. They raised their AI server guidance from

129
00:06:48,839 --> 00:06:51,000
Speaker 5: twenty billion to twenty five billion, a lot of that

130
00:06:51,040 --> 00:06:54,680
Speaker 5: coming into the fiscal fourth quarter. And look at the

131
00:06:54,760 --> 00:06:56,760
Speaker 5: end of the day, we're starting to see some of

132
00:06:56,800 --> 00:07:01,760
Speaker 5: these clustered Blackwell deals starting to come through. Think about

133
00:07:01,760 --> 00:07:03,880
Speaker 5: the open aiyes and the core weaves and so on

134
00:07:03,920 --> 00:07:08,080
Speaker 5: and so forth. That are billions of dollars for each

135
00:07:08,120 --> 00:07:10,720
Speaker 5: of these deals, and that's probably going to carry through

136
00:07:10,720 --> 00:07:12,000
Speaker 5: into fiscal twenty twenty seven.

137
00:07:12,600 --> 00:07:15,440
Speaker 4: Now ougent a lot of folks. Of course, in that

138
00:07:15,600 --> 00:07:19,400
Speaker 4: positive story, I suppose the less positive spin here is

139
00:07:19,400 --> 00:07:21,200
Speaker 4: the fact that this is going to cost Dell a

140
00:07:21,200 --> 00:07:24,760
Speaker 4: lot of money to deliver these orders, right, And I

141
00:07:24,760 --> 00:07:27,480
Speaker 4: think some analys are taking a look at the margins

142
00:07:27,480 --> 00:07:31,080
Speaker 4: that they reporter, which came slightly under estimates depending on

143
00:07:31,200 --> 00:07:33,520
Speaker 4: the measured are you're looking at. But you know, what

144
00:07:34,040 --> 00:07:36,600
Speaker 4: is it. Where does kind of the layer of the

145
00:07:36,640 --> 00:07:38,880
Speaker 4: land go when it comes to kind of cost versus

146
00:07:38,920 --> 00:07:43,760
Speaker 4: return for Dell's ability to deliver these AI service and

147
00:07:44,320 --> 00:07:45,440
Speaker 4: get some profit off of that.

148
00:07:46,200 --> 00:07:49,000
Speaker 5: Yeah, Hey, hey Christina, so sore, there's actually a tale

149
00:07:49,000 --> 00:07:53,239
Speaker 5: of there are two stories behind the margins. The gross

150
00:07:53,240 --> 00:07:57,000
Speaker 5: margin expectations. You know, I was back into about twenty

151
00:07:57,040 --> 00:08:00,600
Speaker 5: point three percent, twenty point four percent on growth margins

152
00:08:00,640 --> 00:08:05,080
Speaker 5: for the company. Contestants that twenty two percent. Uh, and

153
00:08:05,120 --> 00:08:08,880
Speaker 5: you're right, AI server margins are lower, but that's always

154
00:08:08,960 --> 00:08:12,200
Speaker 5: consistently been the case. Now, the one thing I will

155
00:08:12,240 --> 00:08:16,760
Speaker 5: say the AI several margins have improved this quarter relative

156
00:08:16,800 --> 00:08:20,640
Speaker 5: to the fiscal two quarter results, as as their supply

157
00:08:20,760 --> 00:08:25,400
Speaker 5: chain has gotten better. Now, the bigger story is, and

158
00:08:25,880 --> 00:08:29,760
Speaker 5: it actually applies to HP is that the DRAM pricing

159
00:08:29,800 --> 00:08:32,760
Speaker 5: has gone up and these higher commodity costs is bringing

160
00:08:32,760 --> 00:08:36,000
Speaker 5: a drag to potentially bringing a drag to not only

161
00:08:36,000 --> 00:08:38,680
Speaker 5: their PC business, but their server business as well. So

162
00:08:38,760 --> 00:08:42,280
Speaker 5: I think there's something else underlying that's driving the margins lower.

163
00:08:42,559 --> 00:08:45,840
Speaker 2: All right, so let's talk about HP HPE. Is the

164
00:08:45,920 --> 00:08:52,920
Speaker 2: tickery HPQ, HPQ exactly? Okay, talk to us about the

165
00:08:52,960 --> 00:08:55,040
Speaker 2: current I guess it gave an estimate that fell short

166
00:08:55,280 --> 00:08:57,319
Speaker 2: on the profits they're going to and I also saw

167
00:08:57,440 --> 00:08:59,720
Speaker 2: like they're going to cut four to six thousand employees

168
00:09:00,040 --> 00:09:03,320
Speaker 2: through fiscal twenty eight by using more AI tools. See

169
00:09:03,320 --> 00:09:05,640
Speaker 2: that goes to my thing. I think my thesis has

170
00:09:05,640 --> 00:09:07,040
Speaker 2: been from the beginning that AI is going to be

171
00:09:07,080 --> 00:09:10,160
Speaker 2: a net job destroyer. Here talk to us about HP.

172
00:09:10,280 --> 00:09:11,640
Speaker 2: What did they tell us this quarter?

173
00:09:12,440 --> 00:09:16,600
Speaker 5: Yeah, so, just as I was saying, Paul, the higher

174
00:09:16,600 --> 00:09:20,400
Speaker 5: commodity costs is actually going to be pinching gross margins

175
00:09:21,200 --> 00:09:24,640
Speaker 5: the way I'm looking at it right now, they cut

176
00:09:24,679 --> 00:09:27,760
Speaker 5: their EPs guidance. Well, they're saying that the higher commodity

177
00:09:27,760 --> 00:09:30,199
Speaker 5: cost is going to pinch about thirty cents an EPs

178
00:09:30,200 --> 00:09:33,960
Speaker 5: and fysical twenty six, and that's roughly about eight to

179
00:09:34,000 --> 00:09:37,760
Speaker 5: ten percent of earnings that's being pulled away because of

180
00:09:37,760 --> 00:09:40,719
Speaker 5: the higher commodity costs. There's going to be more back

181
00:09:40,800 --> 00:09:42,719
Speaker 5: end loaded. So what that tells me is that the

182
00:09:42,840 --> 00:09:47,160
Speaker 5: stockpiled inventory at least into the first half of the year.

183
00:09:48,360 --> 00:09:51,319
Speaker 5: But I think there's a bigger part of the story too.

184
00:09:52,080 --> 00:09:55,480
Speaker 5: You don't cut back on a headcount. It looks like

185
00:09:55,520 --> 00:09:59,280
Speaker 5: about an eight percent riff or reduction in force because

186
00:09:59,320 --> 00:10:02,480
Speaker 5: of AI if you're in a position of strength. So

187
00:10:04,000 --> 00:10:06,360
Speaker 5: they've been in cost cutting mode for the past five

188
00:10:06,480 --> 00:10:08,400
Speaker 5: six years now, and they've continued to be in cost

189
00:10:08,440 --> 00:10:12,080
Speaker 5: cutting mode. So you know, profits are going to be terrible,

190
00:10:12,200 --> 00:10:14,319
Speaker 5: and they're going to try to preserve their cash flow

191
00:10:14,360 --> 00:10:17,120
Speaker 5: to pay back their shareholders by cutting headcount.

192
00:10:17,640 --> 00:10:19,880
Speaker 4: Yeah, well interesting region. As you mentioned, they've been in

193
00:10:19,880 --> 00:10:22,400
Speaker 4: cost cutting mode for years now, this is their second

194
00:10:22,480 --> 00:10:26,800
Speaker 4: round of major workforce reductions in three years. The shares

195
00:10:26,800 --> 00:10:30,960
Speaker 4: though not really liking what they saw from HP yesterday.

196
00:10:31,000 --> 00:10:33,200
Speaker 4: How do you think investors are interpreting this? Are they

197
00:10:33,240 --> 00:10:36,199
Speaker 4: wanting more cost cuts? Like? What do you think they're

198
00:10:36,320 --> 00:10:37,960
Speaker 4: expecting from HP moving forward?

199
00:10:38,360 --> 00:10:44,120
Speaker 5: Yeah? So, Christina, no one likes cost cuts shareholders made

200
00:10:44,320 --> 00:10:47,640
Speaker 5: from a profits perspective, but you're not getting the profit gains, right,

201
00:10:47,760 --> 00:10:52,000
Speaker 5: So consensus was at three thirty five and EPs, and

202
00:10:53,040 --> 00:10:58,360
Speaker 5: if it's thirty cents of the EPs cuts were primarily

203
00:10:58,440 --> 00:11:01,560
Speaker 5: from the supply chain edwins, you're not getting the games

204
00:11:01,600 --> 00:11:04,280
Speaker 5: from the cost cutting cuts, at least not in fiscal

205
00:11:05,000 --> 00:11:07,400
Speaker 5: twenty six, but hopefully a little bit better in twenty

206
00:11:07,440 --> 00:11:09,760
Speaker 5: seven and twenty eight. So it's more a wait and

207
00:11:09,840 --> 00:11:12,760
Speaker 5: see and what those impacts are going to be. And again,

208
00:11:12,840 --> 00:11:15,720
Speaker 5: like I said, you're not cutting costs from a possession

209
00:11:15,760 --> 00:11:17,800
Speaker 5: of strength. It's more of a position of weakness.

210
00:11:18,280 --> 00:11:21,720
Speaker 2: Hey, for Dell, going back to Dell, silver Lake owns

211
00:11:21,760 --> 00:11:24,679
Speaker 2: a big, big chunk of the stock here. What have

212
00:11:24,800 --> 00:11:26,920
Speaker 2: they said about their intentions with the stock?

213
00:11:27,880 --> 00:11:32,720
Speaker 5: Well, look, look, I believe Michael Dell is a has

214
00:11:32,720 --> 00:11:35,480
Speaker 5: a seat with silver Lake. I think they're going to

215
00:11:35,559 --> 00:11:37,760
Speaker 5: hang on to it for quite a bit. I mean,

216
00:11:37,760 --> 00:11:40,439
Speaker 5: if you think about where where Dell was when they

217
00:11:40,440 --> 00:11:43,320
Speaker 5: came out of being a private company to a public company,

218
00:11:43,320 --> 00:11:46,319
Speaker 5: the returns on that has been fairly good. So if

219
00:11:46,360 --> 00:11:49,199
Speaker 5: the AI story continues to take hold, right and they

220
00:11:49,200 --> 00:11:51,880
Speaker 5: continue to take market share and they can drive margin expansion,

221
00:11:53,400 --> 00:11:58,320
Speaker 5: you know, I wouldn't be surprised if valuations continue to

222
00:11:58,360 --> 00:12:01,600
Speaker 5: expand from here because we're coming we're still coming off

223
00:12:01,600 --> 00:12:05,080
Speaker 5: the peak and the performance of the shares or could

224
00:12:05,120 --> 00:12:08,559
Speaker 5: continue to drive returns for civil Lake going forward.

225
00:12:09,320 --> 00:12:14,040
Speaker 4: Okay, why do you walk us through the Dell operating

226
00:12:14,400 --> 00:12:17,559
Speaker 4: leverage standpoint? Here's what's your take on that, because that's

227
00:12:17,559 --> 00:12:20,160
Speaker 4: been kind of a point of I guess focus for

228
00:12:20,280 --> 00:12:23,840
Speaker 4: markets recently. Just the fact that are these companies that

229
00:12:23,960 --> 00:12:28,880
Speaker 4: aim to deliver the servers, are the equipment related to

230
00:12:29,160 --> 00:12:31,720
Speaker 4: AI demand? Are they going to have to borrow a

231
00:12:31,760 --> 00:12:33,559
Speaker 4: ton of money to be able to deliver that? For

232
00:12:33,679 --> 00:12:36,400
Speaker 4: some companies like Oracle is not working out, But how's

233
00:12:36,400 --> 00:12:37,160
Speaker 4: it working out for Dell?

234
00:12:38,120 --> 00:12:41,520
Speaker 5: Yeah, I mean, the one great thing about Dell is

235
00:12:41,920 --> 00:12:44,720
Speaker 5: they have a very solid balance sheet. They don't have

236
00:12:44,800 --> 00:12:47,400
Speaker 5: much debt coming out, They deliver a lot of cash flow.

237
00:12:48,440 --> 00:12:50,760
Speaker 5: They're only half full of hardware companies that can do that,

238
00:12:50,840 --> 00:12:53,920
Speaker 5: So this goes another one that has a strong enough

239
00:12:53,920 --> 00:12:57,600
Speaker 5: balance sheet to support that. And also, you know, going

240
00:12:57,640 --> 00:13:01,640
Speaker 5: back to Paul's point on the Silver Laker relationship, Soblick

241
00:13:01,760 --> 00:13:04,520
Speaker 5: actually has ties to some of these customers who are

242
00:13:04,520 --> 00:13:08,000
Speaker 5: buying these larger deals, so funding really shouldn't be an

243
00:13:08,040 --> 00:13:11,560
Speaker 5: issue with them. Now to your point about margins and

244
00:13:11,600 --> 00:13:15,040
Speaker 5: the marginal leverage, having a diversified business is a very

245
00:13:15,080 --> 00:13:18,640
Speaker 5: good thing for Dell. I know that the AI server

246
00:13:18,720 --> 00:13:21,040
Speaker 5: margins are pretty weak, and the PC margins are weak

247
00:13:21,080 --> 00:13:23,959
Speaker 5: as well, but they have a fairly sizable traditional IT

248
00:13:24,320 --> 00:13:28,000
Speaker 5: service business traditional servers as well as storage, and that's

249
00:13:28,120 --> 00:13:31,920
Speaker 5: going through an upgrade of modernizations cycle and that has

250
00:13:32,000 --> 00:13:35,400
Speaker 5: higher margins that that helps cushion the lower margin profiles

251
00:13:35,400 --> 00:13:38,640
Speaker 5: of the AI servers for them. So diversity in the

252
00:13:38,760 --> 00:13:42,200
Speaker 5: business model is actually a good thing, not only for Dell,

253
00:13:42,360 --> 00:13:45,600
Speaker 5: but for Cisco and Hpe Stay with us.

254
00:13:45,760 --> 00:13:48,120
Speaker 2: More from Bloomberg Intelligence coming up after this.

255
00:13:52,000 --> 00:13:55,720
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

256
00:13:55,800 --> 00:13:59,160
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

257
00:13:59,280 --> 00:14:02,360
Speaker 1: with the Bloomberg Business Up. Listen on demand wherever you

258
00:14:02,400 --> 00:14:05,360
Speaker 1: get your podcasts, or watch us live on YouTube.

259
00:14:06,160 --> 00:14:09,240
Speaker 2: Lots of earnings out, one of them is Petco. Some

260
00:14:09,280 --> 00:14:12,560
Speaker 2: concerns out there. Deanna Ressett Openia, she's a consumer Staples

261
00:14:12,600 --> 00:14:16,400
Speaker 2: and at Bloomberg Intelligence, Dianna talk to us about Petco.

262
00:14:16,520 --> 00:14:18,240
Speaker 2: What did they what did you learn with their earnings

263
00:14:18,240 --> 00:14:19,960
Speaker 2: and what's their strategy going forward?

264
00:14:21,000 --> 00:14:25,360
Speaker 6: Yes, so there were pretty much pretty in line with consensus.

265
00:14:25,360 --> 00:14:31,680
Speaker 6: In terms of Phase two. EBIDA was very strong. They

266
00:14:31,720 --> 00:14:35,440
Speaker 6: grew more than one hundred basis points EBIDA margin, So,

267
00:14:36,480 --> 00:14:41,000
Speaker 6: you know, phase two of their strategy of creating profitable

268
00:14:41,040 --> 00:14:44,760
Speaker 6: sales growth seems to be on track. Now the next phase,

269
00:14:44,800 --> 00:14:50,320
Speaker 6: which is actually getting consent comparable sales to grow, that's

270
00:14:50,360 --> 00:14:53,320
Speaker 6: probably going to be an inflection they will probably see

271
00:14:53,360 --> 00:14:55,200
Speaker 6: in the second half of twenty twenty six.

272
00:14:55,800 --> 00:14:59,040
Speaker 4: Yeah, so, Dana, very interesting that Petco actually managed to

273
00:14:59,160 --> 00:15:02,920
Speaker 4: expand their margins, especially in the environment where costs are

274
00:15:03,000 --> 00:15:05,680
Speaker 4: rising left and right. Talk to us about what sort

275
00:15:05,680 --> 00:15:08,120
Speaker 4: of strategy is they used to be able to achieve

276
00:15:08,120 --> 00:15:10,280
Speaker 4: that is something that they can sustain moving forward.

277
00:15:11,280 --> 00:15:15,000
Speaker 6: Yes, so basically they try to be a little bit

278
00:15:15,600 --> 00:15:22,440
Speaker 6: smarter with their inventory, their you know, displaying better margin

279
00:15:23,880 --> 00:15:29,720
Speaker 6: items on the shelves. They're relying more on services. They're

280
00:15:29,760 --> 00:15:32,680
Speaker 6: trying to do a little bit more on the on

281
00:15:32,760 --> 00:15:37,040
Speaker 6: the grooming side and on the bed side. That generates

282
00:15:37,480 --> 00:15:40,480
Speaker 6: a lot of income and a lot of profitability for them. So,

283
00:15:41,640 --> 00:15:47,000
Speaker 6: you know, obviously costs store closings also helped in the quarter.

284
00:15:47,200 --> 00:15:50,200
Speaker 6: So that is how they have managed to grow more

285
00:15:50,240 --> 00:15:54,080
Speaker 6: than one hundred basis points margins in the past three quarters.

286
00:15:54,760 --> 00:15:58,720
Speaker 2: What is the competitive landscape of the pet food business?

287
00:16:00,200 --> 00:16:06,480
Speaker 6: So they said that it has not it's stabilized. You know,

288
00:16:06,520 --> 00:16:09,080
Speaker 6: in the past few quarters we have seen the likes

289
00:16:09,080 --> 00:16:12,760
Speaker 6: of Chewy and pet Costs say that consumers remain a

290
00:16:12,800 --> 00:16:18,400
Speaker 6: little bit more conservative with their spending, particularly on discretionary items.

291
00:16:18,760 --> 00:16:22,560
Speaker 6: It seems that that has stabilized and family formation or

292
00:16:22,600 --> 00:16:27,320
Speaker 6: pet family formation has stabilized as well. We actually think

293
00:16:27,360 --> 00:16:30,080
Speaker 6: that by twenty twenty six, we're probably going to see

294
00:16:30,600 --> 00:16:34,200
Speaker 6: more pets being adopted probably at the same pace as historicals,

295
00:16:34,240 --> 00:16:37,160
Speaker 6: which is usually in the low to mid single digits.

296
00:16:37,720 --> 00:16:37,920
Speaker 2: Yeah.

297
00:16:37,960 --> 00:16:39,800
Speaker 4: Well, I'm certainly not in a market for a new

298
00:16:39,840 --> 00:16:41,480
Speaker 4: pet at the moment, and I think my cat would

299
00:16:41,480 --> 00:16:44,080
Speaker 4: allow for that. But Dana, well, how you talk to

300
00:16:44,160 --> 00:16:46,400
Speaker 4: us a little bit more about what you mentioned earlier, right,

301
00:16:46,480 --> 00:16:49,160
Speaker 4: kind of like diversifying the services they offer. They're focusing

302
00:16:49,200 --> 00:16:51,840
Speaker 4: on grooming as well. Are you seeing signs that this

303
00:16:51,920 --> 00:16:55,480
Speaker 4: is translating into sustained traffic, especially into their stores.

304
00:16:56,360 --> 00:16:57,400
Speaker 2: Yes. Absolutely.

305
00:16:57,560 --> 00:17:02,160
Speaker 6: We actually run a survey every you know, we have

306
00:17:02,240 --> 00:17:04,320
Speaker 6: been running it for the past three years, and actually

307
00:17:04,359 --> 00:17:07,000
Speaker 6: this year was the first time that we saw that

308
00:17:07,040 --> 00:17:09,400
Speaker 6: people were a little bit more willing to spend more

309
00:17:09,440 --> 00:17:12,679
Speaker 6: on discretionary items compared to previous two years. So we

310
00:17:12,800 --> 00:17:16,159
Speaker 6: actually saw that coming earlier this year then, you know,

311
00:17:17,240 --> 00:17:20,479
Speaker 6: before everybody was saying it that that was happening. So

312
00:17:20,640 --> 00:17:22,960
Speaker 6: people seem to be a little bit more. While they're

313
00:17:23,000 --> 00:17:26,560
Speaker 6: being very cautious in their spending, they're actually willing to

314
00:17:27,000 --> 00:17:30,760
Speaker 6: you know, groom and take their pets to the.

315
00:17:30,800 --> 00:17:34,840
Speaker 2: Vet for sure. All right, so we're in your retail space,

316
00:17:34,880 --> 00:17:37,200
Speaker 2: where do you see some of the best opportunities when

317
00:17:37,200 --> 00:17:38,719
Speaker 2: you're talking to clients, what do they want to talk

318
00:17:38,760 --> 00:17:40,760
Speaker 2: to you about your names of coverage because you cover

319
00:17:40,800 --> 00:17:42,959
Speaker 2: a lot of the consumer products that package goods companies

320
00:17:42,960 --> 00:17:43,640
Speaker 2: and things like that.

321
00:17:44,560 --> 00:17:48,199
Speaker 6: Yes, so on the pet side, definitely, there seems to

322
00:17:48,240 --> 00:17:52,320
Speaker 6: be a little bit more appetite for you know, those

323
00:17:52,880 --> 00:17:56,480
Speaker 6: companies that seem to be on the upswing. We have

324
00:17:56,600 --> 00:18:00,760
Speaker 6: Chewy that they have expanded their you know, their their

325
00:18:00,800 --> 00:18:05,800
Speaker 6: revenue channels beyond merchandise and they're doing more ads and other, uh,

326
00:18:06,440 --> 00:18:10,600
Speaker 6: you know, revenues that are going to increase profitability. On

327
00:18:10,960 --> 00:18:13,959
Speaker 6: the long term. You have pet Co that is probably

328
00:18:13,960 --> 00:18:17,120
Speaker 6: going to start growing in the second half of next year,

329
00:18:17,280 --> 00:18:21,040
Speaker 6: so by that time it's probably going to be a

330
00:18:21,080 --> 00:18:24,000
Speaker 6: good name that is probably going to be in the

331
00:18:24,080 --> 00:18:25,200
Speaker 6: in the business for a while.

332
00:18:25,920 --> 00:18:26,120
Speaker 2: Yeah.

333
00:18:26,160 --> 00:18:28,879
Speaker 4: Well, a lot of disruptors in the space for sure,

334
00:18:28,960 --> 00:18:31,080
Speaker 4: But you know, as far as kind of Petco is concerned,

335
00:18:31,160 --> 00:18:34,439
Speaker 4: it seems like no dividends, really no by passes are

336
00:18:34,480 --> 00:18:36,640
Speaker 4: on the table at the moment. Is that something that

337
00:18:37,040 --> 00:18:40,800
Speaker 4: could turn away investors, maybe something that could push towards

338
00:18:40,840 --> 00:18:42,960
Speaker 4: some of these emerging competitors in the space.

339
00:18:43,960 --> 00:18:47,280
Speaker 6: Yes, So that is something that they mentioned last night

340
00:18:47,400 --> 00:18:51,560
Speaker 6: in the call. Obviously, they did not specify when they're

341
00:18:51,600 --> 00:18:56,399
Speaker 6: going to start returning to shareholders. They're focusing on the

342
00:18:56,440 --> 00:19:01,720
Speaker 6: strategy getting the right inventor on the shelf as well

343
00:19:01,760 --> 00:19:06,439
Speaker 6: as getting profitability up there and getting leveraged down to

344
00:19:06,640 --> 00:19:10,560
Speaker 6: like less than three times. So once that happens, they

345
00:19:10,640 --> 00:19:13,920
Speaker 6: might be a little bit more willing to see where

346
00:19:13,960 --> 00:19:19,000
Speaker 6: that goes. You know. It's it's something that the new

347
00:19:19,080 --> 00:19:23,040
Speaker 6: CEO is thinking about, but not necessarily a timeline just yet.

348
00:19:23,080 --> 00:19:26,920
Speaker 6: So yeah, shareholders might not necessarily get a return similar

349
00:19:26,960 --> 00:19:31,080
Speaker 6: to other package food or other consumer stable companies, but

350
00:19:31,400 --> 00:19:33,840
Speaker 6: it's you know, it seems that this is more of

351
00:19:33,920 --> 00:19:37,840
Speaker 6: like an investment opportunity in terms of the strategy that

352
00:19:37,840 --> 00:19:39,119
Speaker 6: they're going through.

353
00:19:40,200 --> 00:19:43,440
Speaker 2: Stay with us or from Bloomberg Intelligence coming up after.

354
00:19:43,200 --> 00:19:50,600
Speaker 1: This, you're listening to the Bloomberg Intelligence podcast. Catch us

355
00:19:50,680 --> 00:19:53,719
Speaker 1: Live weekdays at ten am Eastern on Apple, Coarclay and

356
00:19:53,720 --> 00:19:57,000
Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand

357
00:19:57,040 --> 00:20:00,439
Speaker 1: wherever you get your podcasts, or watch US Live me too.

358
00:20:01,560 --> 00:20:03,679
Speaker 2: O heay. Just in the last year or two, this

359
00:20:03,800 --> 00:20:07,880
Speaker 2: AI is crept into a vocabulary. I think before it

360
00:20:07,920 --> 00:20:09,919
Speaker 2: was just big data, and then before that it was

361
00:20:09,960 --> 00:20:12,560
Speaker 2: just data. I don't know, but it's just everywhere, and

362
00:20:12,600 --> 00:20:14,439
Speaker 2: I think it's I'm being told it's also going to

363
00:20:14,440 --> 00:20:16,600
Speaker 2: be part of our shopping experience as well as we

364
00:20:16,640 --> 00:20:18,840
Speaker 2: head into the big shopping part of the year. I

365
00:20:18,880 --> 00:20:21,320
Speaker 2: have no idea that's going to work. Matt Brittin, he does.

366
00:20:21,560 --> 00:20:25,080
Speaker 2: He's the CEO of market research firm Susie and he

367
00:20:25,200 --> 00:20:28,480
Speaker 2: is the author of a book entitled Generation AI, Why

368
00:20:28,560 --> 00:20:33,240
Speaker 2: Generation Alpha and the Age of AI will Change Everything. Okay,

369
00:20:33,280 --> 00:20:35,399
Speaker 2: that that kind of gets at you, Matt, Thanks so

370
00:20:35,440 --> 00:20:41,000
Speaker 2: much for joining us here AI Shopping Go. What's going

371
00:20:41,080 --> 00:20:41,440
Speaker 2: to happen?

372
00:20:42,720 --> 00:20:45,320
Speaker 7: Well, you know, the Internet looks like it's about to

373
00:20:45,320 --> 00:20:47,879
Speaker 7: have a new front door. For the last two decades

374
00:20:48,200 --> 00:20:50,439
Speaker 7: if we wanted to find out anything, whether it's for

375
00:20:50,520 --> 00:20:53,400
Speaker 7: research or we're booking travel or we want to buy something.

376
00:20:53,800 --> 00:20:56,239
Speaker 7: You know, the word Google has become a verb in

377
00:20:56,280 --> 00:20:59,280
Speaker 7: our culture, but that is starting to shift. In fact,

378
00:20:59,280 --> 00:21:01,960
Speaker 7: Google repoorted nine percent year of your decline in their

379
00:21:02,000 --> 00:21:05,200
Speaker 7: classic link search in Q three of twenty twenty five,

380
00:21:05,520 --> 00:21:08,440
Speaker 7: and at the same time, chat GBT saw one point

381
00:21:08,480 --> 00:21:12,359
Speaker 7: eight billion week week queries as of October twenty twenty

382
00:21:12,359 --> 00:21:14,520
Speaker 7: five and over forty percent of those quarries are searched

383
00:21:14,680 --> 00:21:18,280
Speaker 7: like in nature. So consumers are sort of acting with

384
00:21:18,359 --> 00:21:20,840
Speaker 7: their fingers, so to speak, in terms of the sites

385
00:21:20,880 --> 00:21:23,240
Speaker 7: that they're going to, and they're going to these large

386
00:21:23,280 --> 00:21:25,880
Speaker 7: language models. Now, it should be stated that Google also

387
00:21:25,960 --> 00:21:28,760
Speaker 7: has its own large wagage model called Gemini, which released

388
00:21:28,760 --> 00:21:31,800
Speaker 7: an incredible version of Gemini three just this week. So

389
00:21:32,400 --> 00:21:35,199
Speaker 7: I'm not saying that Google itself is in trouble, but

390
00:21:35,680 --> 00:21:38,320
Speaker 7: the notion of going to a traditional search engine to

391
00:21:38,400 --> 00:21:41,040
Speaker 7: find things at the beginning of your shopping journey, I

392
00:21:41,040 --> 00:21:42,679
Speaker 7: don't think we'll ever look the same way again.

393
00:21:43,040 --> 00:21:45,119
Speaker 4: Yeah, Matt, I know exactly what you mean, because just

394
00:21:45,240 --> 00:21:48,080
Speaker 4: yesterday I was searching in my chat GBT for more

395
00:21:48,119 --> 00:21:51,520
Speaker 4: affordable dupes of this really expensive skincare product that I'm

396
00:21:51,800 --> 00:21:55,400
Speaker 4: in the market force. So yes, exactly what you're talking about.

397
00:21:55,440 --> 00:21:57,439
Speaker 4: But you know, for mine and Paul's generations, this is

398
00:21:57,440 --> 00:21:59,960
Speaker 4: something that we're still kind of wrapping our heads around, right.

399
00:22:00,200 --> 00:22:03,680
Speaker 4: But you were talking about Generation Alpha as the generation

400
00:22:03,760 --> 00:22:08,280
Speaker 4: Dot's basically just very this is innately something that they do,

401
00:22:08,359 --> 00:22:11,080
Speaker 4: So talk to us about that sort of generational shift.

402
00:22:11,160 --> 00:22:13,359
Speaker 4: How is that going to change the landscape? Of I

403
00:22:13,359 --> 00:22:16,040
Speaker 4: guess kind of like consumer activity now that we do

404
00:22:16,160 --> 00:22:18,840
Speaker 4: have this generation that's just this is just what they do,

405
00:22:19,000 --> 00:22:20,160
Speaker 4: use AI for everything.

406
00:22:20,920 --> 00:22:23,359
Speaker 7: Absolutely, So I've spent my career, you know, I started

407
00:22:23,400 --> 00:22:25,760
Speaker 7: my career in year two thousand and Back then the

408
00:22:25,840 --> 00:22:28,480
Speaker 7: new consumer was the Millennial generation, which was the first

409
00:22:28,520 --> 00:22:30,800
Speaker 7: generation to grow up with the Internet and household and

410
00:22:30,800 --> 00:22:33,159
Speaker 7: then ten to fifteen years later the focus was on

411
00:22:33,240 --> 00:22:35,359
Speaker 7: Gen Z, which of course is now known as a

412
00:22:35,400 --> 00:22:38,640
Speaker 7: social media and iPhone generation, meaning that they never knew

413
00:22:38,680 --> 00:22:41,720
Speaker 7: a world without social media and the iPhone Jen Alpha

414
00:22:41,760 --> 00:22:44,399
Speaker 7: currently aged zero, the fifteen years old is going to

415
00:22:44,400 --> 00:22:46,719
Speaker 7: be known as a AI generation. They are never going

416
00:22:46,760 --> 00:22:49,280
Speaker 7: to know a world without AI, without a technology that

417
00:22:49,320 --> 00:22:51,240
Speaker 7: you can interact with the same way that you interact

418
00:22:51,240 --> 00:22:54,280
Speaker 7: with other people. So for them, if you think about it,

419
00:22:54,560 --> 00:22:57,200
Speaker 7: they never will live with the through a world where

420
00:22:57,240 --> 00:22:59,760
Speaker 7: you went to Google, right, And one day they may

421
00:22:59,800 --> 00:23:01,879
Speaker 7: look at traditional search engines the way you and I

422
00:23:01,880 --> 00:23:05,639
Speaker 7: look at rotary landlines, right, and for them, it's going

423
00:23:05,720 --> 00:23:08,639
Speaker 7: to be just the facto behavior to go to a

424
00:23:08,720 --> 00:23:12,000
Speaker 7: chat GIBT to do research. And what's starting to happen

425
00:23:12,119 --> 00:23:15,000
Speaker 7: is whether it's perplexity or chat GBT. They are all

426
00:23:15,040 --> 00:23:19,159
Speaker 7: now integrating commerce functionality into their platforms where now you

427
00:23:19,160 --> 00:23:23,720
Speaker 7: can actually buy on these platforms as well. So are

428
00:23:23,800 --> 00:23:26,760
Speaker 7: brands ready for this? And I think I know the

429
00:23:26,760 --> 00:23:30,040
Speaker 7: answer there, Well, they're not, and they're trying to figure

430
00:23:30,040 --> 00:23:32,560
Speaker 7: it out. And the reality is it's just moving so fast.

431
00:23:32,920 --> 00:23:35,960
Speaker 7: You know, it's really hard to understand how to behave

432
00:23:36,080 --> 00:23:38,280
Speaker 7: when you have a new large luggage mail coming out

433
00:23:38,280 --> 00:23:41,760
Speaker 7: each week. For years, these brands were focused on search

434
00:23:41,840 --> 00:23:45,040
Speaker 7: engine optimization. How does your brand come up first when

435
00:23:45,080 --> 00:23:48,520
Speaker 7: someone's searching in your category? Now the big term is GEO,

436
00:23:48,600 --> 00:23:51,800
Speaker 7: which is essentially optimization for AI. Models and brands right

437
00:23:51,840 --> 00:23:54,560
Speaker 7: now are clamoring to be the first brand that pops

438
00:23:54,640 --> 00:23:57,959
Speaker 7: up if someone searches for a luxury handbag under three

439
00:23:58,040 --> 00:24:00,960
Speaker 7: hundred dollars for a teenage girl. Right every brand wants

440
00:24:01,160 --> 00:24:04,399
Speaker 7: to be the first brand that Chatt recommends, and right now, frankly,

441
00:24:04,440 --> 00:24:05,960
Speaker 7: it's kind of a black box and a mystery of

442
00:24:06,000 --> 00:24:08,240
Speaker 7: how to get there. But it's going to be you know,

443
00:24:08,440 --> 00:24:11,600
Speaker 7: companies that figure that out are gonna suddenly find themselves

444
00:24:11,600 --> 00:24:14,000
Speaker 7: in a very fortunate situation. It's going to create new

445
00:24:14,000 --> 00:24:15,000
Speaker 7: winners and new losers.

446
00:24:15,080 --> 00:24:15,639
Speaker 2: Very quickly.

447
00:24:16,600 --> 00:24:19,520
Speaker 4: Yeah, well, Matt just kind of shifting a kron away

448
00:24:19,640 --> 00:24:22,760
Speaker 4: a little bit from the AI factor here, and just

449
00:24:22,840 --> 00:24:25,200
Speaker 4: kind of in general kind of some of the emerging

450
00:24:25,280 --> 00:24:28,720
Speaker 4: trends in shopping at the moment. You mentioned live shopping

451
00:24:28,840 --> 00:24:31,880
Speaker 4: is something that is becoming more of a thing, certainly

452
00:24:32,359 --> 00:24:34,720
Speaker 4: for younger generations. That's kind of how they show on

453
00:24:34,680 --> 00:24:38,040
Speaker 4: they shop on TikTok with creators kind of going live

454
00:24:38,160 --> 00:24:39,960
Speaker 4: and telling them buy this products.

455
00:24:40,000 --> 00:24:41,680
Speaker 2: It's kind of like the home Shopping network, but for

456
00:24:42,119 --> 00:24:45,680
Speaker 2: this a QI exactly new PC exactly.

457
00:24:45,920 --> 00:24:47,919
Speaker 4: So yeah, tells more about that.

458
00:24:48,000 --> 00:24:50,760
Speaker 7: So this year, for the first time ever, the average

459
00:24:50,800 --> 00:24:53,679
Speaker 7: age of a first time mom in the US is

460
00:24:53,760 --> 00:24:56,720
Speaker 7: gen Z, which means the average age of a mom

461
00:24:56,760 --> 00:24:59,800
Speaker 7: who's head of their household and buying the Tide to

462
00:24:59,800 --> 00:25:02,920
Speaker 7: t Urgent and you know, Gillette shaving cream for the home.

463
00:25:03,359 --> 00:25:05,880
Speaker 7: Grew up looking at their phone, and when they are

464
00:25:05,960 --> 00:25:08,159
Speaker 7: looking at their phone, they are not looking at content

465
00:25:08,240 --> 00:25:12,680
Speaker 7: from traditional media networks, but instead content from creators and influencers,

466
00:25:12,840 --> 00:25:15,920
Speaker 7: people who have built large followings on these platforms through

467
00:25:15,920 --> 00:25:19,320
Speaker 7: really compelling social media content. For years, these creators were

468
00:25:19,359 --> 00:25:22,840
Speaker 7: kind of limited to earning money through awareness and impressions.

469
00:25:22,960 --> 00:25:25,399
Speaker 7: But now they are moving further down the funnel and

470
00:25:25,440 --> 00:25:28,040
Speaker 7: they are engaging in what you definitely talked about is

471
00:25:28,080 --> 00:25:30,960
Speaker 7: live shopping, whether it's on TikTok or an emerging platform

472
00:25:30,960 --> 00:25:34,080
Speaker 7: called whatnot, where they can actually use their audience, use

473
00:25:34,119 --> 00:25:37,600
Speaker 7: their credibility and authenticity in the space to actually sell products.

474
00:25:37,800 --> 00:25:39,840
Speaker 7: In some instances, it's products that they actually have an

475
00:25:39,880 --> 00:25:41,720
Speaker 7: equity stake in or they build on their own, and

476
00:25:41,800 --> 00:25:45,359
Speaker 7: other instances they're simply an agent earning commission on products

477
00:25:45,359 --> 00:25:47,199
Speaker 7: that they sell. But I would expect to see more

478
00:25:47,200 --> 00:25:48,200
Speaker 7: and more of this overtime.

479
00:25:49,000 --> 00:25:51,639
Speaker 2: Who is or what is the alpha buyer?

480
00:25:53,800 --> 00:25:56,600
Speaker 7: Well, the alpha buyer is jen Alpha, and the alpha

481
00:25:56,640 --> 00:25:59,200
Speaker 7: buyer is really skipping the funnel entirely. You know, they

482
00:25:59,200 --> 00:26:02,959
Speaker 7: are essentially going down social video. They're focusing on creators trusts,

483
00:26:03,119 --> 00:26:06,240
Speaker 7: they want instant checkout. You know, they have very low

484
00:26:06,760 --> 00:26:10,120
Speaker 7: tolerance for any friction in the buying process. So it's

485
00:26:10,119 --> 00:26:12,560
Speaker 7: a completely new set of expectations that businesses really need

486
00:26:12,640 --> 00:26:13,200
Speaker 7: to build around.

487
00:26:14,359 --> 00:26:17,119
Speaker 4: Yeah, and you know, I guess when you say that,

488
00:26:17,160 --> 00:26:19,879
Speaker 4: they're kind of skipping the funnel exactly right. So this

489
00:26:19,960 --> 00:26:22,679
Speaker 4: could potentially transform how people shop, Like we may not

490
00:26:22,800 --> 00:26:26,040
Speaker 4: need website setting where people can just go on TikTok

491
00:26:26,160 --> 00:26:29,320
Speaker 4: or whichever social media like, yeah, are you seeing companies?

492
00:26:30,040 --> 00:26:30,560
Speaker 2: Think about it?

493
00:26:30,600 --> 00:26:32,920
Speaker 7: Think about what's been in the last ten years. It's

494
00:26:32,920 --> 00:26:36,000
Speaker 7: like you hear about something on TV, or maybe you

495
00:26:36,040 --> 00:26:38,920
Speaker 7: saw an ad on Facebook or Instagram, and then maybe

496
00:26:38,960 --> 00:26:40,560
Speaker 7: you go on Google and do more research and you

497
00:26:40,640 --> 00:26:42,800
Speaker 7: go to Amazon and purchase it. Right, So you're going

498
00:26:42,800 --> 00:26:44,639
Speaker 7: to a variety of different places or a variety of

499
00:26:44,640 --> 00:26:47,880
Speaker 7: different media channels. But now you can do your research

500
00:26:48,240 --> 00:26:51,280
Speaker 7: and you can interact, and you can over time purchase

501
00:26:51,680 --> 00:26:54,560
Speaker 7: on maybe just one platform, right, And that's going to

502
00:26:54,640 --> 00:26:57,239
Speaker 7: change the entire funnel, and it's going to create you know,

503
00:26:57,359 --> 00:26:59,640
Speaker 7: the risk there is that you're going to have few

504
00:26:59,720 --> 00:27:02,200
Speaker 7: arm your companies control more and more of the market,

505
00:27:02,240 --> 00:27:05,160
Speaker 7: which we've obviously seen with the mag seven over time.

506
00:27:05,840 --> 00:27:07,879
Speaker 2: You know, obviously open Ai is a new entrant in

507
00:27:07,880 --> 00:27:08,240
Speaker 2: the space.

508
00:27:08,280 --> 00:27:12,160
Speaker 7: You have other entrants like Claude which is a large

509
00:27:12,240 --> 00:27:15,040
Speaker 7: language mouth, Bromanthropic and of course Perplexity if I mentioned

510
00:27:15,080 --> 00:27:17,320
Speaker 7: so there are some new players, but it's looking more

511
00:27:17,320 --> 00:27:18,920
Speaker 7: and more like big tech is going to play a

512
00:27:19,000 --> 00:27:20,800
Speaker 7: huge role in the shift.

513
00:27:20,840 --> 00:27:22,320
Speaker 2: What does Amazon do you know.

514
00:27:22,359 --> 00:27:24,400
Speaker 7: I think that's one of the questions I have because

515
00:27:24,520 --> 00:27:27,920
Speaker 7: if you can buy over chat, gptware has context, what's

516
00:27:27,960 --> 00:27:28,960
Speaker 7: going to happen with Amazon.

517
00:27:30,160 --> 00:27:34,840
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

518
00:27:35,040 --> 00:27:38,520
Speaker 1: and anywhere else you get your podcasts. Listen live each

519
00:27:38,520 --> 00:27:42,280
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

520
00:27:42,400 --> 00:27:45,960
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

521
00:27:46,359 --> 00:27:49,240
Speaker 1: You can also watch us live every weekday on YouTube

522
00:27:49,680 --> 00:27:52,680
Speaker 1: and always on the Bloomberg terminal