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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
Speaker 2: Today's Bloomberg Intelligence Show, we dig inside the big business
Speaker 2: stories impacting Wall Street and the global markets.
Speaker 3: Each and every week we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, well look at why home improvement has been resilient
Speaker 2: at the retailer.
Speaker 3: Home depot, and we'll discuss why the tech giant Apple
Speaker 3: still hasn't managed to crack AI.
Speaker 2: But first we begin with earnings from the retailer Targets.
Speaker 3: This week, Target reported sales that dropped in the first quarter,
Speaker 3: and the company also cut at sales forecast for the year.
Speaker 2: Target sited inclining consumer spending along with the impact of
Speaker 2: tariffs and boycotts.
Speaker 3: Target shares fell after the report and raise some questions
Speaker 3: over the company's ability to recapture growth after two years
Speaker 3: of choppy results.
Speaker 2: For more, we were joined by Jennifer Bartashi's Bloomberg Intelligence
Speaker 2: senior analyst Retail, Stables and packaged Food.
Speaker 3: We first asked Jennifer if she was surprised by the results.
Speaker 4: None of this really was a surprise. It's really about
Speaker 4: the degree to which it was a surprise. So sales
Speaker 4: came in softer than expected, profit was a little softer
Speaker 4: than expected, And it's just I think people are waiting
Speaker 4: for Target to say how they're going to fix it.
Speaker 4: And you know, they came out talking about a new office,
Speaker 4: you know, to accelerate their plans. But I think people
Speaker 4: are just waiting for something tangible that they can really
Speaker 4: hold the company accountable for to reignite growth in the
Speaker 4: in what they're trying to do.
Speaker 2: What does Target need to do specifically, because it seems
Speaker 2: like I don't know it just every time I've walk
Speaker 2: into a Target, it's lots of people doing stuff. The
Speaker 2: shelves are in good shape. What do they need to
Speaker 2: do well?
Speaker 4: A lot of it is continuing what they've started, which
Speaker 4: is improving their merchandise mix. You know, Target does best
Speaker 4: when their assortment is new, it's fresh, it's relevant to people,
Speaker 4: and they've made good strides in that area. But those
Speaker 4: types of changes take time for consumers to see and
Speaker 4: to start to embrace, and it's just a hard environment
Speaker 4: where people are still being a little bit conservative for
Speaker 4: those changes to really create some momentum in the business.
Speaker 3: So where are they with the pricing stuff in terms
Speaker 3: of their inventory, in terms of tariffs, in terms of
Speaker 3: where they source their material.
Speaker 4: Yeah, so from a pricing perspective, you know, when people
Speaker 4: look at value, price is one of the first things
Speaker 4: they look at. They're fairly priced competitive, and we've seen
Speaker 4: an uptick in the number of promotions that they're doing,
Speaker 4: so you know, buy forty dollars of these kinds of
Speaker 4: essentials and get a five dollars gift card. They're doing
Speaker 4: a lot more of that kind of promotion to pull
Speaker 4: people in. But one of the issues is that they
Speaker 4: talk today about inventory and having to you know, adjust
Speaker 4: and right size their inventory. And that's a little bit
Speaker 4: concerning because that's been a topic that has It's not
Speaker 4: new for Target, It's come up a couple of times
Speaker 4: in the past few years. And so the fact that
Speaker 4: they are expecting, you know, some inventory adjustments and markdowns
Speaker 4: to weigh on margins and profit you know, for the
Speaker 4: next quarter, is a little bit concerning that they still
Speaker 4: haven't quite figured out how they're going to navigate that, Jen.
Speaker 2: I know Walmart said on there recently that they would
Speaker 2: pass along probably some of their terror related cost increases
Speaker 2: to consumers, and then President Trump came out pretty publicly
Speaker 2: against that. What is Target saying about their ability to
Speaker 2: take whatever price increases cost increases may come about through tariffs,
Speaker 2: either in their margin or passing it along to consumers.
Speaker 4: Yeah, it's a definitely a good topic, Paul, And you
Speaker 4: know what they said was that price increases would be
Speaker 4: the last resort, but they didn't count them out. Instead,
Speaker 4: they focused on the tactics that he needs to try
Speaker 4: to mitigate some of the some of the pressure from tariffs.
Speaker 4: They're the same levers that every company is pulling. It's
Speaker 4: using your scale, it's working with your suppliers, it's trying
Speaker 4: to negotiate better you know, you know, better sourcing and
Speaker 4: better prices on the on the purchasing side. So you know,
Speaker 4: Target is certainly able to offset some of the some
Speaker 4: of the cost of tariffs, but it would be surprising
Speaker 4: if they can offset all of it. And and ultimately
Speaker 4: they're most likely going to have to be some selective
Speaker 4: price increases that get pushed through.
Speaker 3: Oh what are there? What's their inventory like in terms
Speaker 3: of that part and how that filters into their pricing.
Speaker 4: Yeah, so inventory has actually been getting a little bit
Speaker 4: better in terms of on shelf availability and tracking through
Speaker 4: the supply chain. It's just I think because they skew
Speaker 4: so much more to discretionary. If there's like, for example,
Speaker 4: in first quarter, we had some very unseasonably cold weather
Speaker 4: that impact apparel sales, That impacts a lot of those things.
Speaker 4: So you know that that increases markdowns. Hopefully that's a
Speaker 4: transitory type of thing. But they are talking about getting
Speaker 4: their inventory right sized as they head into back to
Speaker 4: school and the holiday season.
Speaker 2: And Jen the stock seems cheap to me? Is it
Speaker 2: cheap on a historical basis? Or how are people thinking
Speaker 2: about valuation?
Speaker 4: Yeah, it's it's definitely, you know, at a discount from
Speaker 4: it from a historical, you know, valuation perspective. But I
Speaker 4: think part of the part of the reason that it
Speaker 4: is where it is is that for a long time,
Speaker 4: what has differentiated Target was their private label selection, their
Speaker 4: own brands things that the quality of those brands where
Speaker 4: people could get value and style at a really compelling price.
Speaker 4: In the last couple of years, a lot of their competitors,
Speaker 4: whether you're talking about Walmart or Cohal's or or or
Speaker 4: companies like that, have invested in their private label. They've
Speaker 4: improved the quality, They've they've become a little bit more
Speaker 4: fashion forward, and that's that erodes the differentiation that it
Speaker 4: has always enjoyed and part of what has catapulted their
Speaker 4: success in recent years. So until Target gets that newness
Speaker 4: and that assortment readjusted again to be a leader and
Speaker 4: a differentiator, you may see that kind of valuation discount
Speaker 4: persist our.
Speaker 2: Thanks to Jen Bartashi's Bloomberg Intelligence Senior Retail Analyst.
Speaker 3: Each week we look at research from Bloomberg n EF
Speaker 3: previously known as New Energy Finance. They're the team at
Speaker 3: Bloomberg the tracks and analyzes the energy transition from commodities
Speaker 3: to power, transport, industries, buildings, and agricultural sectors.
Speaker 2: This week we looked at how the cost of clean
Speaker 2: energy technologies has changed. Solar and wind have been the
Speaker 2: most competitive source of new power for a few years.
Speaker 3: Now and for more. We are joined by Amar vasdev
Speaker 3: v an EF, a lead levelized cost expert. We first
Speaker 3: asked AMR to break down his research and what his
Speaker 3: team actually does.
Speaker 5: Effectively. We collect cost data on recently finance power projects
Speaker 5: and we sum that up into a metric that we
Speaker 5: call the levetized cost of electricity. And in short, what
Speaker 5: that is is it tells us what the long term
Speaker 5: off take price is that project developer needs to hit
Speaker 5: their IRR, recoup all of their costs and of course
Speaker 5: pay back the pay the taxes.
Speaker 2: So, Amara, here's what I don't think people understand, and
Speaker 2: I did not understand it until recently, that renewables are
Speaker 2: the cheapest source to meet new demand almost everywhere. Talk
Speaker 2: to us about that.
Speaker 5: Yeah, So the cost reductions in renewable technology, so specifically
Speaker 5: wind and solar, have been quite remarkable over the last
Speaker 5: decade or so. And so when we look at those
Speaker 5: projects that were financed last year and we estimate those costs.
Speaker 5: We find that either wind or soda is out competing
Speaker 5: either coal or gas in markets that are equivalent to
Speaker 5: two thirds of global power generation, so that includes China,
Speaker 5: includes most of Europe as well.
Speaker 3: But we take into a the intermittent power issue for
Speaker 3: wind and solar and how does that change the cause
Speaker 3: profile Like it might be cheaper to build a wind
Speaker 3: a wind farm than a billion nuclear plant, but the
Speaker 3: intermittent power of it all is an issue.
Speaker 5: Yeah, that is definitely right. It is a it is
Speaker 5: a problem with renewables that is often cited. But there
Speaker 5: are supporting technologies for supporting a grid that is dominated
Speaker 5: by wind and soda, and that would be battery storage
Speaker 5: for example. And so if we look last year alone,
Speaker 5: the cost of the typical projects fell by one third
Speaker 5: and out to twenty thirty five, we estimate that the
Speaker 5: cost of battery storage projects for by fifty percent. So
Speaker 5: there are supporting technologies that pair with wind and soda,
Speaker 5: and we also model we look at these, we break
Speaker 5: them down, and we look at the view out of
Speaker 5: twenty fifty how different power markets are likely to change.
Speaker 5: And just to put that in context, when we take
Speaker 5: that system view, we see that there are really strong
Speaker 5: long term fundamentals for renewables. So today wind and soda
Speaker 5: around eight percent of generation and that increases to sixty
Speaker 5: percent in our modeling by twenty fifty. And at the
Speaker 5: same time, the flip side of that is with fossil
Speaker 5: few assets, so coal and gas plants today they're at
Speaker 5: sixty percent. By twenty to fifty they go down to
Speaker 5: twenty five percent. And what they do is they kind
Speaker 5: of operate in a space where they support wind and
Speaker 5: soda as well as battery storage.
Speaker 2: So thinking just in the near term, what do high
Speaker 2: tariffs and maybe possible cuts to tax credits, what does
Speaker 2: that mean for this transition? Does it slow it down materially? Possibly?
Speaker 5: Yeah, it is a really interesting question, and it's as
Speaker 5: you know, it's moving very quickly. So our team in
Speaker 5: the US are really attracting this very very closely. And
Speaker 5: what we can say is that the policy and tariff
Speaker 5: uncertainty is posing a challenge for business confidence. It kind
Speaker 5: of impacts the willingness and investor appetite. But we do
Speaker 5: see that there is resilient demand that deployment stays resilient
Speaker 5: over the next ten years or so, because we do
Speaker 5: see increased electricity demand from AI needs from manufacturing as well,
Speaker 5: and what tends to be the cheapest source of electricity
Speaker 5: is wind and soda, so there is resilient deployment. We
Speaker 5: did model a scenario where if tax if tax credits
Speaker 5: were cut, the amount of wind and soda being added
Speaker 5: over the next ten years would reduce by around seven
Speaker 5: teen percent or so. So there is there is a
Speaker 5: material impact. But if we're adding new power to the
Speaker 5: if we're adding new supply to the grid, then it
Speaker 5: would tend to come from wind and sola.
Speaker 3: What about geothermal? The administration is definitely positive on geothermal.
Speaker 3: In speaking with the Energy Secretary here, he speaks a
Speaker 3: lot about that as well as clean coal. What's the
Speaker 3: cost profile like for geothermal?
Speaker 5: Yeah, it's hard for me to comment on that. I
Speaker 5: think the configuration of geothermal changes significantly, but there have
Speaker 5: been developments recently, and I suppose with the pairing with
Speaker 5: the kind of coupling with oil and gas experience with geothermal,
Speaker 5: there's a lot of overlap there on the specific costs.
Speaker 2: I couldn't comment on our Thanks to amar a Vestev
Speaker 2: b n EF lead levelized cost Expert.
Speaker 3: Coming up, We're going to look at why cancer risks
Speaker 3: are being linked to a popular over the counter drug.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies in one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: Bidell on the terminal.
Speaker 3: From Whole Sweeting and a Malex Steel and this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 3: We move next to news from the world's largest home
Speaker 3: improvement retailer, Home Depot.
Speaker 2: This week, Home Depot maintained its guidance for their fiscal
Speaker 2: year as US sales ticked up.
Speaker 3: The company said consumers are deferring larger projects due to
Speaker 3: the raid environment, but are still taking on smaller home projects.
Speaker 2: For more. We were joined by Drew Redding, Bloomberg Intelligence
Speaker 2: US home building analysts.
Speaker 3: We first asked Drew for his take on my home
Speaker 3: improvement has been so resilient at home Depot.
Speaker 6: One of the reasons why Home Improvement and Hope Depot
Speaker 6: have been so resilient is because a large portion of
Speaker 6: the industry has to do with that maintenance and repair
Speaker 6: oriented work. So I think that's where they're seeing a
Speaker 6: lot of the lift now. It's homeowners are taking care
Speaker 6: of the things that they need to just to maintain
Speaker 6: their home. This really isn't no, it's been a couple
Speaker 6: of quarters now where we've heard from them that big
Speaker 6: ticket discretionary categories have been relatively weaker. So think about
Speaker 6: things like kitchenry models, bathroom models, flooring projects. These are
Speaker 6: things that tend to be financed by the consumer, and
Speaker 6: with rates as high as they are right now, it's
Speaker 6: just become a little bit prohibitive for them to undertake
Speaker 6: those projects. So I think in order to see more
Speaker 6: robust growth out of these categories, which is really the
Speaker 6: missing piece of the story, we need to see rates
Speaker 6: start to come back down a little bit.
Speaker 2: How about tires. Is that impacting the costs of their
Speaker 2: goods like getting lumber from Canada, for example.
Speaker 6: So we think Home Depot's pretty well positioned from a
Speaker 6: tariff perspective. They source about fifty percent of the products
Speaker 6: they sell from inside the US, and you know, like
Speaker 6: a lot of other retailers, over the last decade, they've
Speaker 6: done a great job in diversifying their supply chain. They
Speaker 6: actually said that over the next twelve months, no single
Speaker 6: country outside of the US is going to account for
Speaker 6: more than ten percent of their product purchases. So the
Speaker 6: fact that they're diversifying their supply chain should help with costs.
Speaker 6: At the same time, given their scale the largest home
Speaker 6: improvement retailer, they'll have the ability to push back on
Speaker 6: some of their suppliers in terms of cost. Now, what
Speaker 6: they said is that they're looking to generally maintain their prices,
Speaker 6: so I think people took that as a positive. You
Speaker 6: have to remember Home Depot sales about thirty thousand to
Speaker 6: forty thousand products in their store. So when they talk
Speaker 6: about pricing, they take a portfolio approach. So you may
Speaker 6: not see them raise the price on a particular item
Speaker 6: that was tariffed, but they look at the elasticities of
Speaker 6: their various products and they'll take prices they need to
Speaker 6: where they can, gotcha.
Speaker 3: So they're going to manage that margin. So they're not
Speaker 3: going to sacrifice margin then.
Speaker 6: So they actually guided to an operating margin pretty much
Speaker 6: in line with what they were looking for at the
Speaker 6: end of last quarter. There are a couple puts in takes.
Speaker 6: They're doing better on shrinks, so they're managing their re
Speaker 6: tell theft a little better, which is always a positive.
Speaker 6: So they're also you know, getting some more leverage from productivity.
Speaker 6: So you know, I think pricing is going to be
Speaker 6: a component of it, but they also have other levers
Speaker 6: within the business that are going to help to maintain
Speaker 6: their margins, you know, where they expected them.
Speaker 2: Just what's home Depot do with the number of stores?
Speaker 2: Have they added stores? Are they fully kind of where
Speaker 2: they want to be? What's the store count story?
Speaker 6: Yeah, So interestingly, Home Depot over the last year has
Speaker 6: actually returned to store growth, which is something we haven't
Speaker 6: seen from them in a very long time. They kind
Speaker 6: of have had the established footprint in the US, but
Speaker 6: as the business has grown so much, as they've grown
Speaker 6: their pro business, they've started to add new stores in
Speaker 6: markets where you know, populations are growing or where they
Speaker 6: want to kind of take some of the pressure off
Speaker 6: the existing store base to look to drive some additional productivity.
Speaker 6: So this year they're adding about thirteen new stores. They're
Speaker 6: going to do that. I think their their plan was
Speaker 6: about eighty over a five year period, So the next
Speaker 6: couple of years they'll continue to add.
Speaker 2: To you to our thanks, did you're writing, Bloomberg Intelligence,
Speaker 2: US homebuilding analyst.
Speaker 3: We move next to earnings from the off price retailer TJX.
Speaker 2: TJX reported a gross margin shortfall for its first quarter
Speaker 2: and issued for your guidance that fell short expectations.
Speaker 3: However, the company said it's global network of vendors and
Speaker 3: flexibility on prices will help it manage future tariff pressures.
Speaker 2: For more, we were joined by Mary Ross Gilbert, Bloomberg Intelligence,
Speaker 2: senior equity analysts covering retail.
Speaker 3: We first asked Mary for her key takeaways from tjx
Speaker 3: as results.
Speaker 7: So, when I look at the results, they beat for
Speaker 7: the quarter. They beat on the top line, you know,
Speaker 7: for total sales, and they came in line on comp
Speaker 7: sales comp sales being up three percent, and that was
Speaker 7: at the high end of their guidance. The real issue,
Speaker 7: I think is the forward guidance. So when you look
Speaker 7: at the second quarter, analysts were looking for EPs of
Speaker 7: about a dollar four and the top end of their guidance,
Speaker 7: it's ninety seven cents to a dollar, and so I
Speaker 7: think there's a disappointment there. But frankly, this management team
Speaker 7: really executes. They tend to provide conservative guidance, So we
Speaker 7: really view this as whatever guidance they put out there,
Speaker 7: we see upside to it. They certainly have seen a
Speaker 7: strong start to the second quarter concerns around tariffs. They're
Speaker 7: saying that they can mostly mitigate most of the impact
Speaker 7: when it comes to directly sourced merchandise. And then with
Speaker 7: regard to indirectly sourced merchandise, this is where they're buying overstocks.
Speaker 7: They'll be able to negotiate. They see plenty of availability
Speaker 7: and so they see a lot of opportunity in terms
Speaker 7: of the buying there, and they'll make sure that they
Speaker 7: always maintain that gap, and that gap being twenty to
Speaker 7: sixty percent versus what you'd see a department in specialty store.
Speaker 3: Oh I know, yes, I was telling these guys that
Speaker 3: I feel like I'm single handedly keeping home Goods in business,
Speaker 3: having to furnish a house.
Speaker 2: Who is the TJX consumer other than Alex Deal and
Speaker 2: Lisa MATTEI, who I know? Who is that consumer? Who
Speaker 2: is that customer and what's the company saying about their
Speaker 2: their customer.
Speaker 7: So Paul gg Max's customer, you know, Marmax and Home Goods,
Speaker 7: it spans from low income all the way up to
Speaker 7: high income. So within the Marmax you know, which is
Speaker 7: where you have TJ Max and Marshall's, they carry brands
Speaker 7: as high as Gucci, Fendy, Chloe, you name it, and
Speaker 7: we see a lot of that merchandise there. They have
Speaker 7: stores where you can walk in and you'll see these
Speaker 7: high end handbags and glass cases, just like you would
Speaker 7: in a department store where it's really tethered, and so
Speaker 7: they have that as well. But then they also have
Speaker 7: you know, more moderate brands like a Tommy hillfigure and
Speaker 7: a Calvin Klein or Juicy Couture, even you know, at
Speaker 7: a lower end there.
Speaker 8: So they're able to attract.
Speaker 7: All income levels and they know how to merchandise stores
Speaker 7: appropriately all around the country and actually all around the world,
Speaker 7: because we're seeing strength in all of their markets. And
Speaker 7: you raised a good point, Alex. I think you talked
Speaker 7: about home goods, and you're absolutely right. Home goods actually
Speaker 7: led the comps. They were up four percent and so
Speaker 7: when you look at the comps that were at Marmax,
Speaker 7: they were up two percent, so they definitely saw strength
Speaker 7: and home goods our.
Speaker 2: Thanks to Mary Ross, Gilbert Bloomberg Intelligence senior equitanaals covering retail.
Speaker 3: This week, we focused on the Bloomberg Big Take story
Speaker 3: titled Possible Cancer Health risks are lurking in a popular
Speaker 3: OTC drug and you can find it on Bloomberg dot
Speaker 3: com and in the terminal.
Speaker 2: The story looks at the dangers of a widely available
Speaker 2: drug for urinary tract infections that has never been formally
Speaker 2: approved by the US government, and it's not the only one.
Speaker 3: For more. We were joined by the story's author, Anna Edney,
Speaker 3: Bloomberg National healthcare reporter, and we first asked Anna to
Speaker 3: walk us through some of the over the counter drugs
Speaker 3: discussed in the story.
Speaker 9: Probably the most popular one, I think a lot of
Speaker 9: our listeners will recognize as Azo. It's an over the
Speaker 9: counter drugs, so you can go into most any store
Speaker 9: you know, Target, Walmart, anything like that, and and purchase it.
Speaker 9: You don't need a prescription. Your a stat is another brand,
Speaker 9: but all of these stores also make their own generic version,
Speaker 9: so it's something that is supposed to treat the pain
Speaker 9: with your airy tract infections. A lot of people seem
Speaker 9: to think it goes beyond that and it's actually curing
Speaker 9: their infections. So one of the issues being that, you know,
Speaker 9: people might need antibiotics, but instead they're they're using this.
Speaker 3: Now, what's the drug in it that is causing some
Speaker 3: of the issues and how do we know?
Speaker 9: Yeah, so this is the active ingredient in all of
Speaker 9: these drugs. It's what the generics will go by. It's
Speaker 9: called naso purdine. I may still be butchering that name,
Speaker 9: but it's an unapproved drug, which was really interesting to
Speaker 9: me and something sort of new to me even though
Speaker 9: I've covered these issues for a long time that I
Speaker 9: came across. What it means is the FDA has never
Speaker 9: formally approved this drug, so, you know, while millions of
Speaker 9: women are using it for decades that there's never been
Speaker 9: a true vetting of, you know, how this drug interacts
Speaker 9: with our bodies. One of the things that a National
Speaker 9: Cancer Institute's study found, this was back in nineteen seventy eight,
Speaker 9: is that it caused tumors to form in rats and mice.
Speaker 9: That's never been looked at in humans because it's never
Speaker 9: been this drug has never gone through clinical trials or
Speaker 9: anything like that.
Speaker 3: That is just that statement is so insane, And Paul,
Speaker 3: just me, I'll explain to you a little bit here.
Speaker 3: So if you have a UTI, it comes on really fast.
Speaker 3: And if you order to get medication from your doctor aginecologists,
Speaker 3: you have to go in so they can test it.
Speaker 3: And if you're in pain and you know what it
Speaker 3: is because as you've had it before, you just go
Speaker 3: to the store, pick it up and you feel better
Speaker 3: in twenty four hours. Like that's why these drugs are
Speaker 3: so popular and easy to access.
Speaker 2: And what I learned and a story, and they're not
Speaker 2: FDA approved. They are essentially grandfathered in. So if I'm
Speaker 2: walking down the aisle looking at you know, over the
Speaker 2: counter drugs, do I have any way of knowing what's
Speaker 2: been FDA approved and maybe what hasn't been.
Speaker 9: Yeah, I think that's a really good question. And there
Speaker 9: were multiple, you know, quotes out there from congressional testimony
Speaker 9: and other places where FDA staff members were talking about
Speaker 9: there's you know, there are many such grandfathered in kind
Speaker 9: of drugs, but the agency did not give me a list,
Speaker 9: wouldn't even tell me how many might be out there,
Speaker 9: But there is potentially you know this is this takes
Speaker 9: a little sleuth thing. It's not that easy to do
Speaker 9: in the drug store aisle. But there's a website that
Speaker 9: the National Institute of Health runs called Daily Med and
Speaker 9: people can search by drug there. I wouldn't say it's
Speaker 9: like the misuser friendly looking piece, but if you look
Speaker 9: for azo or you're a stat or Finazo, Piaroty in
Speaker 9: any of those, what will come up as kind of
Speaker 9: a disclaimer saying, you know, this hasn't been vetted by
Speaker 9: the Food and Drug Administration, its safety is not known,
Speaker 9: and that kind of gives you an indication. You can
Speaker 9: dive deeper into that data and you can actually see
Speaker 9: that it's unapproved, but just for the lay person at
Speaker 9: least with that disclaimer, that would give you a good
Speaker 9: idea at the top.
Speaker 3: So what happens then.
Speaker 8: I think that's a good question.
Speaker 9: So the FDA is they have a system where they're
Speaker 9: supposed to have vetted these kind of very old drugs
Speaker 9: and given them what's called a monograph. This is the
Speaker 9: agency's instruction book. Here's how this drug should be made,
Speaker 9: Here's how the dosing, what it should be, here's how
Speaker 9: it should be manufactured. They have not done that for
Speaker 9: FINASO piaroting. So it's possible that, you know, with this
Speaker 9: increased attention, that they could decide to look into that.
Speaker 9: There's you know, they asked in two thousand and three
Speaker 9: whether this drug should actually be prescription only, just given
Speaker 9: the risks and that people don't often follow directions on
Speaker 9: OTC drugs. You know, you're only supposed to take this
Speaker 9: for two days, and you're not supposed to take it
Speaker 9: all the time. There are companies, particularly online retailers, that
Speaker 9: are really pushing this drug on women and girls, kind
Speaker 9: of just to have on hand all the time.
Speaker 2: Our thanks to an Ednie Bloomberg national healthcare reporter.
Speaker 3: Coming up on the program, we're going to look at
Speaker 3: how diversity, equity and Inclusion DEI efforts have changed at
Speaker 3: US companies.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: bi go on the terminal.
Speaker 3: I'm Paul Sweeney and a Malex Steel, and this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 3: This week, we focus on a Bloomberg Big Take story
Speaker 3: titled Apple Spending Billions and still has it managed to
Speaker 3: crack AI? You can find it on Bloomberg dot Com
Speaker 3: and the Terminal.
Speaker 2: The story looks at Apple's continued failures to get artificial
Speaker 2: intelligence right, and it discusses how this threatens everything from
Speaker 2: the iPhone's dominance to plans for robots and other products.
Speaker 3: For more, We are joined by the stories author Mark German,
Speaker 3: Bloomberg News Managing editor for Global Consumer Tech.
Speaker 2: First, ask Mark about what's going on at Coopertino as
Speaker 2: it relates to AI.
Speaker 10: Well, philosophical differences, mismanagement and the biggest thing is they
Speaker 10: were blindsided when generative AI with chat, GPT and GitHub
Speaker 10: launched back in twenty twenty two. November twenty twenty two.
Speaker 10: I'm told Apple Intelligence wasn't even an idea back then. Why, well,
Speaker 10: they missed the boat.
Speaker 3: But how I mean? I mean, I don't understand.
Speaker 10: Yeah, well, clearly there was philosophical disagreement, in philosophical disinterest
Speaker 10: in the topic of artificial intelligence. I write about how
Speaker 10: Craig freederighi, Apple's senior VP of software engineering, doesn't really
Speaker 10: believe in these multi billion dollar projects. He tends to
Speaker 10: try to shut down or steer away from projects of
Speaker 10: that sort, and AI is something of that nature. AI
Speaker 10: is quite a bit messy. They're known for the very
Speaker 10: intricate and well designed user experiences. AI sometimes with hallucinations
Speaker 10: can take away from that. But I think they didn't
Speaker 10: think it was going to be as big of a
Speaker 10: thing as it became today. A lot of it fell
Speaker 10: on deaf years years ago, I'm told. But really, this
Speaker 10: is a company that's known for updating their operating systems
Speaker 10: once a year. It's known as a company that focuses
Speaker 10: on the minutia, and they missed the big picture here
Speaker 10: with artificial intelligence, and it really is a shame. You know,
Speaker 10: the big picture here isn't the AI capabilities of its
Speaker 10: devices today. The big picture today is the AI capability
Speaker 10: of future hardware. If you don't have the core technology,
Speaker 10: the AI ready to go at a deep level, how
Speaker 10: are you going to develop products like humanoid robots, smart glasses,
Speaker 10: watches in AirPods with depth sens and cameras for AI purposes.
Speaker 10: Can't do any of that if you don't have that technology.
Speaker 10: So they need to seriously turn this thing around quickly
Speaker 10: or they're going to be in big trouble. This is
Speaker 10: as core technology as the touchscreen.
Speaker 8: Wow.
Speaker 2: I mean, first of all, how many words is this story?
Speaker 9: Dude?
Speaker 10: Six thousand?
Speaker 9: Yeah?
Speaker 2: This is a long, well that story, folks. So if
Speaker 2: you wouldn't get smart on AI and Apple, you got
Speaker 2: to read the story. It's in the Bloomberg Business Week,
Speaker 2: It's on the terminal. I'm sure it's everywhere else as well.
Speaker 6: Mark.
Speaker 2: What can they do if I'm an investor? That's the
Speaker 2: only question I have for Tim Cook. Can you guys
Speaker 2: catch up and get some of that AI pixie dusk
Speaker 2: in your stock?
Speaker 10: Yes, they need to make acquisitions and they need to
Speaker 10: up the percentage of that R and D budget tied
Speaker 10: to AI. They need to up that percentage. They need
Speaker 10: to allocate more of their hires to AI as well.
Speaker 10: So they need to go big or go home on this.
Speaker 2: And I think do they know that? Do you think?
Speaker 6: Yeah?
Speaker 10: Of course they know that.
Speaker 3: Okay, how do they go big?
Speaker 10: You got to spend more money. AI is really one
Speaker 10: of the only things that you can buy your way
Speaker 10: into when it comes to this technology, right, you can
Speaker 10: buy your way into it. You just need to throw
Speaker 10: billions and billions at AI training. They need to make
Speaker 10: probably some tweaks to their privacy policy. Right, they have
Speaker 10: so many devices, They have more devices than anyone else
Speaker 10: as a single brand of a hardware company, of any
Speaker 10: company in the entire world, in the history of the world.
Speaker 10: But they don't leverage that because of their privacy stands.
Speaker 10: So maybe make some tweaks there to be able to
Speaker 10: collect some more data, maybe figure out a way to
Speaker 10: convince people to give up some of their data for
Speaker 10: this purpose. And I think that could go a long
Speaker 10: way for them. So spending money collecting more data.
Speaker 2: Is there somebody out there that they could buy, should buy,
Speaker 2: that would leapfrog them?
Speaker 3: Do you think they hate doing that though?
Speaker 2: Right?
Speaker 10: Well, the problem is this philosophical discussed. I would say
Speaker 10: to making these large acquisitions if I told you, I mean,
Speaker 10: you know this is true, so maybe you're not a
Speaker 10: good example. But if I said to someone who didn't
Speaker 10: know the company as well as you too. Would you
Speaker 10: believe me if I told you that Apple's biggest acquisition
Speaker 10: in the history of the company was three billion dollars?
Speaker 3: I actually believe that.
Speaker 2: Well, you believe that.
Speaker 10: Because you know that, But I think if you ask
Speaker 10: people who didn't know that, that would be completely unbelievable.
Speaker 6: Yep.
Speaker 10: They make these small acquisitions, and in addition to not
Speaker 10: wanting to spend big bucks on a company, they're really
Speaker 10: poor at integrating companies. The Beats integration, integrating all those
Speaker 10: engineers into the company, Disaster Intel, they bought the modem
Speaker 10: unit for a billion dollars back in nineteen Disaster. What
Speaker 10: is it going to feel as an AI person at
Speaker 10: Apple today if you're bringing if the company buys your
Speaker 10: replacement to bring them in, It's not going to be fun.
Speaker 10: There's enough turf wars as it is at Apple.
Speaker 3: So if they do then have to do it internally,
Speaker 3: they've still not done well at that.
Speaker 10: They've got to do both. They got to make the
Speaker 10: equ position, They got to just deal with that. They
Speaker 10: got to make their biggest acquisition ever, and it has
Speaker 10: to be for AI, maybe multiple acquisitions. They have to
Speaker 10: turn things up a notch internally as well. They're going
Speaker 10: to be making changes. I mean, there's so many philosophical disagreements.
Speaker 10: The biggest is about chatbots. When it comes to AI.
Speaker 10: They are allergic to AI chatbots. They don't like the technology.
Speaker 10: They don't think open ai has staying power. So you're yes,
Speaker 10: I know.
Speaker 3: I made a face when he said that. You're going to.
Speaker 10: See deeper integrations with other companies. You're going to see
Speaker 10: Google Gemini integration. I think next year you'll see Perplexity integration,
Speaker 10: maybe some Anthropic integration, maybe some Microsoft integration. But they're
Speaker 10: going to keep pushing and this is going to be
Speaker 10: a multi year thing. The biggest problems they were caught
Speaker 10: off guvernment's happened, so they had no head start on this.
Speaker 10: They're coming way from behind.
Speaker 2: Well yeah, it's amazing. It's amazing now that some people
Speaker 2: would say, hey, they're rarely first phones. Oh boy, when
Speaker 2: they decide to get into phones, they do it.
Speaker 10: That's the big difference. They were not first and they're
Speaker 10: the worst, all right.
Speaker 3: Thanks to Mark German and Bloomberg News Managing editor for
Speaker 3: Global Consumer Tech.
Speaker 2: This week we focused on a story on the Bloomberg
Speaker 2: terminal and Bloomberg dot Com entitled Despite Backlash, DEI Hasn't
Speaker 2: Disappeared at US companies.
Speaker 3: It discusses how Walmart and other large US companies have
Speaker 3: made modest changes to their diversity, equity and inclusion efforts,
Speaker 3: but most programs retained intact with minor adjustments.
Speaker 2: From where we were joined by the story's author, Simone Foxman,
Speaker 2: reporter for the Bloomberg News Equality Team. We first asked
Speaker 2: Simone to break down what she's learned recently about DEI
Speaker 2: at US companies.
Speaker 11: Well, Frankly, I've been talking to senior executives at large
Speaker 11: companies their corporate advisors ever since Trump's executive orders came
Speaker 11: out on January twenty first, and the message I've been
Speaker 11: hearing is no, Frankly, many of the programs that were
Speaker 11: part of diversity, equity and inclusion, many of which had
Speaker 11: frankly been around since long before the acronym even existed,
Speaker 11: they're still there. They've had some tweaks, maybe, and we
Speaker 11: can talk about exactly what those are, but they companies
Speaker 11: still believe that these underlying programs the ones that will
Speaker 11: help them recruit diverse talent as well as keep employees happy.
Speaker 8: These are largely there.
Speaker 11: And so even at companies that have sort of tried
Speaker 11: to send a message to their to perhapshaps the Trump administration,
Speaker 11: perhaps conservative activists, they're sending a very different message to
Speaker 11: their employees and investors.
Speaker 8: Well.
Speaker 2: I think what got a lot of people's attention, including myself,
Speaker 2: was when Walmart came out and said they were going
Speaker 2: to scale back DEA. I mean, it'sok, a monster employer
Speaker 2: all over the country. What did you find at Walmart? Oh?
Speaker 8: I mean, even when that announcement came out.
Speaker 11: Which was just before Black Friday, if you looked into
Speaker 11: the actual depth of what they were talking about, sunsetting
Speaker 11: the term DEI in favor of belonging.
Speaker 9: Ok.
Speaker 8: You know these aren't why.
Speaker 11: The huge enormous things a racial equity training that they
Speaker 11: had had in conjunction with a racial equity institute. It
Speaker 11: hadn't been offered since the spring of that year, and
Speaker 11: that was something that they said, Okay, we're not.
Speaker 8: Going to have this anymore.
Speaker 11: In fact, you know, Walmart still mentioning in its job
Speaker 11: postings that they want associates who are committed to diversity,
Speaker 11: equity inclusion. Spokesman told us that they're trying to phase
Speaker 11: out that language in posts, and some people call different names, but.
Speaker 3: At what are the names? Like, what are the kind
Speaker 3: of things that people are now sort of spinning out there?
Speaker 11: I mean it depends company by company. At Walmart, supplier
Speaker 11: diversity became supplier inclusion, for example, and there were some
Speaker 11: small tweaks to their supplier diversity program not just focusing
Speaker 11: on race and gender in terms of trying to find
Speaker 11: diverse suppliers.
Speaker 8: But they're absolutely.
Speaker 11: Still highlighting brands that are owned by women, Hispanic people,
Speaker 11: black people, it's lgbt Q, i A plus people.
Speaker 8: These in fact all have landing pages. So it clearly
Speaker 8: speaks to the idea that consumers want this.
Speaker 11: They're they're looking for brands, or Walmart believes they're looking
Speaker 11: for these brands. So maybe that's not somewhere where they
Speaker 11: really pull back, you know, Does that satisfy the Trump administration,
Speaker 11: conservative activists, et cetera.
Speaker 8: Maybe maybe not. I will say one thing as well that.
Speaker 11: Was very controversial. We're sort of demographic targets. For example,
Speaker 11: we want to double the number of women in senior
Speaker 11: management roles by twenty twenty six. That target that, you know,
Speaker 11: very specific target. Lawyers are advising companies that this sounds
Speaker 11: a little bit too much like a quota, so don't
Speaker 11: have that anymore, or if I guess the lawyers are saying,
Speaker 11: don't have that, you know at best, you know companies
Speaker 11: are not having that publicly because that is a little
Speaker 11: bit on that legal gray area not sorted out by
Speaker 11: the court, but something even a voluntary target that lawyers
Speaker 11: say you might want to stay away from that.
Speaker 2: But I sort remember, you know, talking about internships, mentor
Speaker 2: programs that help marginalize groups, and maybe you know talking
Speaker 2: about hiring and historically black colleges and universities. Is that
Speaker 2: under pressure or is that going to be changing?
Speaker 11: So those are actually two different things. One, mentorships and
Speaker 11: internship programs have now been opened to everyone, and this
Speaker 11: is sort of another thing that was recommended by lawyers.
Speaker 11: Came especially after the Students for Fair Admissions at Harvard
Speaker 11: decision HBCU scholarships. However, if you know recruiting from a
Speaker 11: specific HBCU historically black college and university, these are actually
Speaker 11: still getting a lot of interest from companies because there
Speaker 11: are something that.
Speaker 8: Is extremely legally above board.
Speaker 11: Anyone can apply to go to an HBCU and a
Speaker 11: company can choose to hire or to have a scholarship
Speaker 11: or internship program specifically targeted towards an HBCU, and because
Speaker 11: anyone can go there, that that means they're definitely not,
Speaker 11: you know, discriminating on race from a legal perspective, and frankly,
Speaker 11: you know, among conservative groups, this is a little bit
Speaker 11: of a bone.
Speaker 8: It's a little bit of a.
Speaker 11: Kind of subjective controversy because these are you know, HPCU
Speaker 11: programs are the ones that feel.
Speaker 8: Like DEI at its very.
Speaker 11: Heart, and frankly, they were the way to try and
Speaker 11: increase the pipeline of black managers and black engineers and
Speaker 11: technologists and et cetera. So we'll see if there's more
Speaker 11: at tax on those specific programs going forward. At at
Speaker 11: the moment, that seems to be a legal area where
Speaker 11: you know, many companies are doing.
Speaker 3: Do you get the sense from any companies that there
Speaker 3: is a worry about going too far in the other direction,
Speaker 3: like stripping out certain things that actually need to be
Speaker 3: thought of and done.
Speaker 11: One hundred percent absolutely, And you know, when you talk
Speaker 11: to a senior executive at an accounting firm was telling
Speaker 11: me they just need accountants. They cannot get accountants unless
Speaker 11: they are going to places where people have not been
Speaker 11: exposed to accounting to try and encourage them to work
Speaker 11: for them.
Speaker 8: They don't want to make young people unhappy.
Speaker 5: You know.
Speaker 11: These are affinity groups. Employee resource groups still exist in part.
Speaker 11: Maybe they're scrutiny of their spending, but they still exist
Speaker 11: a lot because this is stuff that makes people happy
Speaker 11: to come to work, and companies are very afraid because
Speaker 11: the actual employment law has not changed substantially. They are
Speaker 11: very afraid that they are going to see your traditional
Speaker 11: discrimination suits filed by women, people of color, LGBTQ, people,
Speaker 11: people with disabilities a right.
Speaker 3: Thanks to Simone Foxman, reporter for the Bloomberg News Equality Team.
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