WEBVTT - Dell Hikes Estimates for Next Four Years on Strong AI Demand 

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<v Speaker 2>Let's dig a little deeper into this guidance that the

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<v Speaker 2>company offered. I'd say it's more than guidance, is it.

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<v Speaker 3>It's kind of a I don't know, kind of a

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<v Speaker 3>long term vision, a little bit.

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<v Speaker 2>Of yes, where business is going exactly, and you know,

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<v Speaker 2>in the tech industry, to be able to kind of

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<v Speaker 2>project out that far as pretty notable. Let's bring in

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<v Speaker 2>Ed Ludlow, who is our b Tech co anchor based

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<v Speaker 2>in San Francisco, and Ed, one thing that I noticed

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<v Speaker 2>about Dell is that this is another legacy tech company

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<v Speaker 2>that's getting a big boost here from the whole AI play,

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<v Speaker 2>and Dell is doing that through its AI servers, but

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<v Speaker 2>it still has another part of its conventional business that

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<v Speaker 2>is holding up at.

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<v Speaker 3>Least Yeah exactly.

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<v Speaker 4>I mean, you guys make really good points about is

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<v Speaker 4>this guidance or more it's kind of like a reset

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<v Speaker 4>on Dell's position in the AI market. It's another example

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<v Speaker 4>of like, well, if we're all sort of very hyped

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<v Speaker 4>up about data center builds out and in videos getting

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<v Speaker 4>all of this love, and we're very focused on energy,

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<v Speaker 4>then why do we not talk more about Dell. If

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<v Speaker 4>you build a data center, whether that is hyper scale

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<v Speaker 4>or it's an on premises smaller facility that any given

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<v Speaker 4>sort of software company operates themselves, Dell is likely to

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<v Speaker 4>play a part. You know, they assemble servers that needs

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<v Speaker 4>to happen. You don't just sort of put all the

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<v Speaker 4>chips and a pile on the floor. And so it's

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<v Speaker 4>taken a while for investors to kind of give Dell

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<v Speaker 4>credit for that. A part of the reason being that

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<v Speaker 4>because this buildout of infrastructure is so fast, Dell's margins

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<v Speaker 4>on the AI server business have really suffered because you

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<v Speaker 4>have to spend money to move quickly. And a big

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<v Speaker 4>part of the guidance they gave us through the fiscal

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<v Speaker 4>thirties that that profit picture for the AI server business

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<v Speaker 4>is really going to improve, and as you say, the

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<v Speaker 4>core business, which is kind of PC as well, is

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<v Speaker 4>supporting them do that.

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<v Speaker 5>In the interim, Dell stock is up two and a

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<v Speaker 5>half percent today, it's today fifty two week high.

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<v Speaker 3>Today, it's up thirty percent year to dat.

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<v Speaker 5>It's not an all time high that was back in

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<v Speaker 5>twenty twenty four, but it's certainly gone in the right

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<v Speaker 5>direction here. So, ed, how does the company position itself

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<v Speaker 5>as an AI player? Are they playing that up or

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<v Speaker 5>are they saying, hey, we're in a good position. How

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<v Speaker 5>are they kind of positioning their company as.

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<v Speaker 3>A yeah my story.

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<v Speaker 4>So right now in New York City, all of the

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<v Speaker 4>executives are on a stage talking about bigging themselves up,

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<v Speaker 4>and the main argument that they're making is that on

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<v Speaker 4>premises part I us talking about. So in the future,

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<v Speaker 4>Dell argues eighty five percent of all enterprises are going

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<v Speaker 4>to have some form of on prem footprint themselves, and Dell,

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<v Speaker 4>which has a rich history of selling to businesses of

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<v Speaker 4>small and large and the public sector, is best position

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<v Speaker 4>to participate in that. And the idea, right is that

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<v Speaker 4>this all started with the hyperscalers, the cloud computing companies

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<v Speaker 4>and their capital expenditures. But the ripple effect is that

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<v Speaker 4>we're now seeing smaller companies in software in particular, justified

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<v Speaker 4>budgets to spend on their own technology because they see

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<v Speaker 4>a return on the other side, literally revenues driven by AI.

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<v Speaker 4>So that's what Dell's argument is here. You know, you guys,

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<v Speaker 4>the story is that through twenty thirty, they've basically almost

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<v Speaker 4>doubled their forecast for the top and bottom line five

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<v Speaker 4>to seven to nine percent top line growth and adjusted

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<v Speaker 4>EPs growth of around fifteen percent. And a big part

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<v Speaker 4>of that story is just more people doing business with them.

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<v Speaker 2>So one thing that stuck out to me Ed is

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<v Speaker 2>the comments from the CEO, Jeff Clark, saying we were

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<v Speaker 2>all wrong about how big we thought the AI market

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<v Speaker 2>was two years ago, and it's nothing but bigger. Does

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<v Speaker 2>do have a reputation as being conservative when kind of

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<v Speaker 2>guiding along its its vision or is this some a

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<v Speaker 2>company that usually nails it in terms of its forecasts?

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<v Speaker 4>You know, like, I don't know, conservative is fair? I mean,

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<v Speaker 4>like you have to assess the business that they're doing

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<v Speaker 4>in the here and now and the pipeline of business

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<v Speaker 4>that they say has to come. And so like Dina

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<v Speaker 4>Bassar College did a really good job of explaining that

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<v Speaker 4>in the quarter, there is the sales that they've had

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<v Speaker 4>committed to them. They booked five point six billion dollars

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<v Speaker 4>of new AI server business in the quarter. They shipped

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<v Speaker 4>eight point two billion dollars worth of business in the quarter,

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<v Speaker 4>so like actual sales, and then in the future they

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<v Speaker 4>have a backlog of twelve billion. It's not that new

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<v Speaker 4>an idea that there's a pipeline of business. It takes

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<v Speaker 4>time to assemble servers, you know, ship them out onto location.

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<v Speaker 4>The thing that they need to justify is like, what's

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<v Speaker 4>the value add that they do. So I told you

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<v Speaker 4>earlier in this segment they say margins will improve. The

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<v Speaker 4>thing is that all they're really doing is assembling something.

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<v Speaker 4>They're not sort of contributing some amazing technology. That's what

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<v Speaker 4>Nvidio is doing.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

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

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

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

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<v Speaker 3>App Lovin stocks up.

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<v Speaker 5>That's despite the fact that the app love and this

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<v Speaker 5>company's being probe by the SEC over its data collection practices.

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<v Speaker 3>I don't know how to play that.

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<v Speaker 2>I know the stock is the best performing NAZAC member

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<v Speaker 2>in the second half of this year, up seventy nine percent.

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<v Speaker 5>Okay, I have to start with the pro We're going

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<v Speaker 5>to go to Nathan A Do Bloomberg Intelligence tech anlogy

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<v Speaker 5>research analysts.

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<v Speaker 3>Nathan, I don't know a lot about this company.

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<v Speaker 5>Tell our viewers and our listeners about app love and

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<v Speaker 5>number one and number two?

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<v Speaker 6>What is this?

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<v Speaker 3>Let's the SEC interested in?

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<v Speaker 7>So essentially Applevin is in the business of helping advertisers

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<v Speaker 7>or helping rather owners of apps primary apps on the

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<v Speaker 7>iOS devices on Android, Helping publishers sell at space inside

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<v Speaker 7>of their apps to potential advertisers, meaning that help app

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<v Speaker 7>app owners advertise, you know, make money off of selling

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<v Speaker 7>at space to advertisers, whether that be brands or another

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<v Speaker 7>game potentially, and Applevin typically charges a fee in mediating

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<v Speaker 7>that transactions. So going on to the SEC prop or

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<v Speaker 7>potential SEC proprather because nothing is confirmed as of now.

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<v Speaker 7>SEC allegedly is looking into its data collection practices. And

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<v Speaker 7>you know, there was a couple of links made to

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<v Speaker 7>short salary reports that surfers back in February, and that

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<v Speaker 7>was also around the company business practices, particularly in its

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<v Speaker 7>inflation of app installation numbers. And actually, you know, in

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<v Speaker 7>addition to this SEC probe or potential SEC probe, rather,

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<v Speaker 7>there was a class action lawsuit file in March and

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<v Speaker 7>it's it's it could advance a trial, according to our

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<v Speaker 7>litigation analyst, Matthew based in Washington, d C. And so

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<v Speaker 7>that is another that's actually it could be the bigger

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<v Speaker 7>fish fish to fry for able in addition to, you know,

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<v Speaker 7>alongside this SEC probe. From from my point of view.

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<v Speaker 2>Okay, so there's negative catalysts for sure for this company.

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<v Speaker 2>Yet as what points out, the stock is rising today.

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<v Speaker 2>Is this because Apple love it is a meme stock.

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<v Speaker 7>Well, I don't know about Eplepin being a meme stock,

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<v Speaker 7>but I mean, the certainly haven't made up all of

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<v Speaker 7>the losses that we saw yesterday. The stock was down

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<v Speaker 7>fourteen fifteen percent in one day, and then you've made

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<v Speaker 7>up partially that in today's gains. And because the SEC

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<v Speaker 7>probe is not confirmed, and typically the biggest risk from

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<v Speaker 7>this potential SEC probe is a penalty. And if we

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<v Speaker 7>look at SEC's published report for its fiscal twenty twenty four,

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<v Speaker 7>the heaviest fine was one hundred million Meanwhile, Aplevin at

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<v Speaker 7>the moment is pumping pumping out two billion in pre

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<v Speaker 7>cash flow every year. So I think the SEC risk

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<v Speaker 7>alone is it wouldn't make much of a financial impact

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<v Speaker 7>to Aplevin per se, you know. But the bigger risk

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<v Speaker 7>that we're watching here is definitely that potential class action

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<v Speaker 7>lawsuit because our analyst Matthew estimate that that could be

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<v Speaker 7>seven hundred and fifty million in fine if that, you know,

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<v Speaker 7>if that goes to trials and Ablevin couldn't win a

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<v Speaker 7>motion to dismiss in the next couple of months.

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<v Speaker 5>So yeah, Nathan, what does has a company responded at

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<v Speaker 5>all or talked about this?

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<v Speaker 3>Is this issue?

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<v Speaker 7>So the only allegations that the company denied was the

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<v Speaker 7>allegations from the shortsellers back in February. The company has

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<v Speaker 7>not outwardly denied the allegations or the potential allegations rather

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<v Speaker 7>from the late SEC probe. So that's where we stand

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<v Speaker 7>right now.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

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

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

0:09:35.559 --> 0:09:38.880
<v Speaker 1>Auto with the Bloomberg Business app. Listen on demand wherever

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

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<v Speaker 5>All right, I'm thinking Constellation brands. You think in Corona Beer,

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<v Speaker 5>Modella beer, Pacifico beer that got some wines stocks down

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<v Speaker 5>thirty five percent here to date, and I'm thinking it

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<v Speaker 5>has to do with the crackdown on.

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<v Speaker 3>The immigration tariffs as well and those brands.

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<v Speaker 5>So I'm thinking of all that kind of kind of

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<v Speaker 5>just kind of weighing down on the stock.

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<v Speaker 3>Let's checking in with Ken Chay.

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<v Speaker 5>He's the senior consumer products analyst for Bloomberg Intelligence. Can

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<v Speaker 5>talk to us about Constellation brands. What's weighing on the stock,

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<v Speaker 5>what's the company doing about it?

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<v Speaker 8>Yeah, Hi, Paul and Scarlet. Well, you mentioned two of

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<v Speaker 8>the factors right there. It's definitely a slow beer market.

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<v Speaker 8>Tariffs are playing a role, and also some of the crackdown,

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<v Speaker 8>you know, the ice has had in inner community is

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<v Speaker 8>hurting the Hispanic community and their socialization trends. All these

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<v Speaker 8>things have been a factor for the last couple of quarters. Today,

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<v Speaker 8>the company said that their beer volumes were not quite

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<v Speaker 8>as poor as a lot of street anamals expected today,

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<v Speaker 8>but the pressures are still on and they're very real

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<v Speaker 8>for this company, and that's because they're they're suite of

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<v Speaker 8>products as you mentioned Corona Medello, these off these command

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<v Speaker 8>high price points about twice the level of a popular beer.

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<v Speaker 8>So in times where consumers are pulling back a little

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<v Speaker 8>cautious about expenditures, I remember, you know, you've had high

0:11:09.120 --> 0:11:11.960
<v Speaker 8>inflationary pricing in this category for the last few years.

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<v Speaker 8>These brands aren't doing so well right now, and then

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<v Speaker 8>compounding that with some of the factors that I mentioned

0:11:18.600 --> 0:11:22.360
<v Speaker 8>and some longer term issues like cannabis substitution things we

0:11:22.480 --> 0:11:26.280
<v Speaker 8>talked about GLP one user not drinking as much, moderation

0:11:26.600 --> 0:11:29.400
<v Speaker 8>among gen Z. All these things are weighing of a

0:11:29.440 --> 0:11:30.280
<v Speaker 8>company here right now.

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<v Speaker 2>Yeah, I'm super interested in what you said about the

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<v Speaker 2>last part, Like the structural changes in consumer tastes, especially

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<v Speaker 2>from gen Z younger people overall, beers just not where

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<v Speaker 2>people want to be spending their money necessarily.

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<v Speaker 8>That seems to be the case. You know, it's been

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<v Speaker 8>around a long time. It's one hundred and fifteen billion

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<v Speaker 8>dollar market that is growing very slowly. It's essentially flat.

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<v Speaker 8>In fact, volumes are expected to be down low single

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<v Speaker 8>digit this year, So clearly it's a very mature category.

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<v Speaker 8>And what we've seen in over the last few years

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<v Speaker 8>is consumers just want different tastes. You know, you have

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<v Speaker 8>a proliferation of the ray to drink cocktails, you know,

0:12:08.000 --> 0:12:12.760
<v Speaker 8>like truly and white clothes and more sophisticated you know,

0:12:12.880 --> 0:12:15.240
<v Speaker 8>Margarita's in a can and so on faster a lot

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<v Speaker 8>of the consumer who wants tastes experimentation are going And

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<v Speaker 8>then you have other more mundane factors like just you know,

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<v Speaker 8>calorie more conscious, conscientious, calorie counts and all these things

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<v Speaker 8>are just weighing on this very very mature industry.

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<v Speaker 5>So somebody like Constellation Brands, did they go out and

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<v Speaker 5>look to maybe buy some of these brands or verticals

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<v Speaker 5>that within the spirit's business may be growing.

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<v Speaker 8>Well, they've had a kind of a mixed history of

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<v Speaker 8>m and A over the last few years. I'll put

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<v Speaker 8>it up me kind and say that way not really.

0:12:50.320 --> 0:12:53.520
<v Speaker 8>You know, they're downsizing their wine and spirit segment and

0:12:53.600 --> 0:12:56.280
<v Speaker 8>try to shift it to more of a high end mix,

0:12:56.360 --> 0:12:59.160
<v Speaker 8>which I think they're having success with. But what that

0:12:59.240 --> 0:13:01.920
<v Speaker 8>does is it may their beer business even that much

0:13:01.960 --> 0:13:04.720
<v Speaker 8>more important. It's now about eighty five percent of their sales,

0:13:05.240 --> 0:13:08.160
<v Speaker 8>so as beer goes. I mean, the company has really

0:13:08.160 --> 0:13:12.760
<v Speaker 8>good brands and a lot of brand loyalty there, but

0:13:12.880 --> 0:13:14.800
<v Speaker 8>again there's not a lot of wiggle room there.

0:13:16.400 --> 0:13:20.640
<v Speaker 2>So, so with beer becoming less popular, and you mentioned

0:13:20.679 --> 0:13:24.959
<v Speaker 2>other big trends like ozebic, weight loss, drugs, and greater

0:13:25.480 --> 0:13:29.920
<v Speaker 2>cannabis use, what is Constellation doing about non alcoholic beverages.

0:13:31.559 --> 0:13:35.560
<v Speaker 8>So they've rolled out a non alcoholic corona brand. They've

0:13:35.600 --> 0:13:37.839
<v Speaker 8>come out a couple of years ago. They came out

0:13:37.840 --> 0:13:44.640
<v Speaker 8>with a low calorie brand called Medelo Oro, a corona

0:13:45.160 --> 0:13:48.520
<v Speaker 8>no alcohol I think I mentioned. So those two brands,

0:13:48.600 --> 0:13:51.920
<v Speaker 8>while they're relatively small, they see, you know, a lot

0:13:51.920 --> 0:13:56.040
<v Speaker 8>of opportunity that's on trend with what you said, so

0:13:56.679 --> 0:14:00.280
<v Speaker 8>you know they're doing that. They're also modifying some of

0:14:00.320 --> 0:14:03.319
<v Speaker 8>their portfolio for more taste. There's the consumers that want

0:14:03.320 --> 0:14:05.600
<v Speaker 8>a lot of taste are coming out with you know,

0:14:06.320 --> 0:14:10.920
<v Speaker 8>a fruity surveysa and so they're doing as much as

0:14:10.960 --> 0:14:13.240
<v Speaker 8>they can to stay on trend with consumers.

0:14:13.600 --> 0:14:16.560
<v Speaker 2>I love myself a great fruit beer. Yeah there's a

0:14:16.640 --> 0:14:18.200
<v Speaker 2>German great fruit beer that I really like.

0:14:18.720 --> 0:14:19.920
<v Speaker 3>Yeah, tastes good.

0:14:20.200 --> 0:14:24.800
<v Speaker 5>So this talk to U about this legal cannabis and obesity,

0:14:24.880 --> 0:14:27.320
<v Speaker 5>drugs and the impact that's having on kind of the

0:14:27.360 --> 0:14:30.040
<v Speaker 5>beer business, the spirits business overall. Can is that something

0:14:30.040 --> 0:14:32.320
<v Speaker 5>that a lot of your companies are calling out.

0:14:33.240 --> 0:14:35.280
<v Speaker 8>Yes, As a matter of fact, Paul, yesterday we came

0:14:35.280 --> 0:14:37.720
<v Speaker 8>out with our BI came out with our fourth annual

0:14:37.760 --> 0:14:43.560
<v Speaker 8>consumer survey on beverage preferences, and again we see that

0:14:43.680 --> 0:14:49.440
<v Speaker 8>consumers are substituting cannabis for alcohol. Of consumers that do

0:14:49.600 --> 0:14:54.120
<v Speaker 8>partake in cannabis, now more than half have substituted for

0:14:54.320 --> 0:14:57.520
<v Speaker 8>alcohol at least once a week, and that's up from

0:14:57.560 --> 0:14:59.720
<v Speaker 8>forty six percent last year. So that's a trend that

0:14:59.840 --> 0:15:02.840
<v Speaker 8>just keeps moving. Now you're seeing a lot of these

0:15:02.840 --> 0:15:07.600
<v Speaker 8>cannabis companies coming out with THC products beverages that are

0:15:07.720 --> 0:15:11.520
<v Speaker 8>sold in mainstream liquor stores. You know, traditional cannabis, legal

0:15:11.560 --> 0:15:14.520
<v Speaker 8>cannabis sold in dispensaries, It was not really a big hit.

0:15:15.360 --> 0:15:19.560
<v Speaker 8>But now that some of these federally legal HEMP based

0:15:19.560 --> 0:15:23.280
<v Speaker 8>THC products beverages are sold in liquor stores right next

0:15:23.320 --> 0:15:26.080
<v Speaker 8>to the beer rile in about half the states of

0:15:26.080 --> 0:15:30.280
<v Speaker 8>the country, that's really chipping away also at beer consumption.

0:15:31.080 --> 0:15:33.360
<v Speaker 2>A final question to you, Ken, what about return of

0:15:33.400 --> 0:15:35.960
<v Speaker 2>cash to shareholders. I'm looking at the dividend yield about

0:15:36.000 --> 0:15:40.520
<v Speaker 2>two point nine percent if you're being generous. Is consulation

0:15:40.600 --> 0:15:43.200
<v Speaker 2>brands still able to make good on its dividends continue

0:15:43.200 --> 0:15:44.120
<v Speaker 2>buying back its chairs.

0:15:45.080 --> 0:15:49.480
<v Speaker 8>Yeah, that's an important point, Scarlett. Yes, they can despite

0:15:49.520 --> 0:15:52.840
<v Speaker 8>the pressure on sales. Believe it or not, the operating

0:15:52.880 --> 0:15:56.280
<v Speaker 8>margins the Constellation generates are best in class. They're about

0:15:56.320 --> 0:16:00.320
<v Speaker 8>twice that of other alcoholic beverage companies in general. So

0:16:00.360 --> 0:16:02.720
<v Speaker 8>they have strong cash flows. As a matter of fact,

0:16:02.720 --> 0:16:06.320
<v Speaker 8>they're winding down construction of a brewery right now. Over

0:16:06.320 --> 0:16:08.160
<v Speaker 8>the over the next couple of years, you're going to

0:16:08.200 --> 0:16:11.120
<v Speaker 8>see free cash flow likely rising. So it's high in

0:16:11.240 --> 0:16:15.800
<v Speaker 8>rising and that's enabling them to continue to meet their

0:16:15.800 --> 0:16:18.560
<v Speaker 8>commitments to share share buybacks and dividends.

0:16:19.640 --> 0:16:22.720
<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

0:16:26.240 --> 0:16:29.960
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:16:30.040 --> 0:16:33.080
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:16:33.120 --> 0:16:36.440
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

0:16:36.480 --> 0:16:40.000
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:16:40.920 --> 0:16:43.040
<v Speaker 2>Let's switch gears and take a look at some of

0:16:43.040 --> 0:16:46.160
<v Speaker 2>the hardware companies or I should say software companies. Once

0:16:46.200 --> 0:16:48.920
<v Speaker 2>upon a time it was hardware, and I'm talking about IBM.

0:16:48.960 --> 0:16:51.400
<v Speaker 2>It's a legacy tech company and it is the latest

0:16:51.480 --> 0:16:55.440
<v Speaker 2>legacy tech company to partner up with an AI startup.

0:16:55.720 --> 0:16:58.640
<v Speaker 2>Arog Rana is tech analysts here at Bloomberg Intelligence on

0:16:58.880 --> 0:17:04.280
<v Speaker 2>an rog hear this fancy announcement about IBM inking a

0:17:04.320 --> 0:17:07.680
<v Speaker 2>partnership with Anthropic to integrate this Claud family of large

0:17:07.720 --> 0:17:11.240
<v Speaker 2>language models into certain IBM software. What I noticed is

0:17:11.280 --> 0:17:14.360
<v Speaker 2>that there's no Toller amount mentioned at all. So how

0:17:14.400 --> 0:17:17.240
<v Speaker 2>do you evaluate this partnership versus other tie ups.

0:17:18.680 --> 0:17:20.680
<v Speaker 6>See, when you come to a company like IBM, I

0:17:20.760 --> 0:17:22.760
<v Speaker 6>think they have done a very good job of being

0:17:22.800 --> 0:17:26.320
<v Speaker 6>open and partnering with other vendors. I think the acquisition

0:17:26.359 --> 0:17:28.440
<v Speaker 6>of red Hat was the first such example a few

0:17:28.520 --> 0:17:31.040
<v Speaker 6>years ago. And frankly speaking, the company has turned around

0:17:31.119 --> 0:17:33.320
<v Speaker 6>quite a bit. Now it's more of a software company

0:17:33.320 --> 0:17:35.960
<v Speaker 6>than it is a service order hardware company. So when

0:17:36.000 --> 0:17:38.879
<v Speaker 6>you look at today's announcements, IBM still has a lot

0:17:38.960 --> 0:17:43.800
<v Speaker 6>of footprint in legacy companies and their internal infrastructure, whether

0:17:43.840 --> 0:17:47.600
<v Speaker 6>that's a regulated entity, whether that's an on premise software.

0:17:48.000 --> 0:17:51.280
<v Speaker 6>What they're basically doing saying is for these companies who

0:17:51.320 --> 0:17:55.000
<v Speaker 6>want to add more AI capabilities into their infrastructure, we're

0:17:55.000 --> 0:17:57.120
<v Speaker 6>going to use one of the best models that's out there,

0:17:57.160 --> 0:18:01.440
<v Speaker 6>and that's Anthropic. They're not just so depending on IBM's

0:18:01.440 --> 0:18:04.240
<v Speaker 6>own internal models, but you know, we see more and

0:18:04.320 --> 0:18:07.160
<v Speaker 6>more of that happening that companies like IBM and other

0:18:07.200 --> 0:18:10.560
<v Speaker 6>services companies will go out and partner with you know, anthropic,

0:18:10.640 --> 0:18:13.080
<v Speaker 6>with open AI which M and I and give more

0:18:13.240 --> 0:18:16.880
<v Speaker 6>enterprise capabilities to to vendors, to companies.

0:18:16.920 --> 0:18:20.600
<v Speaker 5>Basically, how does anthropic differ from a open AI if

0:18:20.640 --> 0:18:20.920
<v Speaker 5>at all.

0:18:22.080 --> 0:18:24.600
<v Speaker 6>It's a very good question, Pauland right now what we're

0:18:24.640 --> 0:18:27.040
<v Speaker 6>seeing is entropping is pushing more and more stuff on

0:18:27.080 --> 0:18:30.760
<v Speaker 6>the corporate side or the enterprise side, on open AI side.

0:18:30.760 --> 0:18:33.600
<v Speaker 6>You know, their code business is still chat GPT, which

0:18:33.640 --> 0:18:35.760
<v Speaker 6>is the app, and that's more of a consumer app

0:18:35.840 --> 0:18:38.720
<v Speaker 6>right now. And the question is you know which one

0:18:38.800 --> 0:18:41.520
<v Speaker 6>of the models will somebody use, Whether if you are

0:18:41.640 --> 0:18:43.800
<v Speaker 6>let's say a JP Morgan or a City Corp, you

0:18:43.840 --> 0:18:45.560
<v Speaker 6>know you'll be going to be using one of their

0:18:45.600 --> 0:18:48.520
<v Speaker 6>models or an open source model. I think they're going

0:18:48.560 --> 0:18:52.200
<v Speaker 6>to be using all of the models. What entthropic relationship

0:18:52.240 --> 0:18:54.760
<v Speaker 6>with IBM, does it actually helps them to spread the

0:18:54.760 --> 0:18:57.960
<v Speaker 6>word out across their entire customer base. So if you

0:18:58.000 --> 0:19:00.600
<v Speaker 6>are trying to get more coding done, for example, in

0:19:00.600 --> 0:19:03.600
<v Speaker 6>an IT department, and you have all the legacy products

0:19:03.640 --> 0:19:06.320
<v Speaker 6>that they're now you can use you know, an AI

0:19:06.440 --> 0:19:09.600
<v Speaker 6>model from Nthropic rather than using you know, whatterver tools

0:19:09.600 --> 0:19:10.320
<v Speaker 6>you had before.

0:19:10.600 --> 0:19:13.960
<v Speaker 2>Okay, So it makes sense why Anthropic is a good

0:19:13.960 --> 0:19:17.080
<v Speaker 2>fit for IBM or how it's going to incorporate Anthropic

0:19:17.119 --> 0:19:21.199
<v Speaker 2>into IT software. But what does IBM specifically offer Anthropic?

0:19:21.280 --> 0:19:24.879
<v Speaker 2>What access does IBM have that Anthropic wants and needs.

0:19:26.160 --> 0:19:28.760
<v Speaker 6>That's another excellent question. And in this case you're looking

0:19:28.760 --> 0:19:32.359
<v Speaker 6>at IBM's entire customer base. IBM has a very large

0:19:32.400 --> 0:19:36.120
<v Speaker 6>services business or IBM consulting. These consultants will go out

0:19:36.160 --> 0:19:39.680
<v Speaker 6>and sell Anthropic software into the enterprises and say, hey, bank,

0:19:39.800 --> 0:19:42.840
<v Speaker 6>let me help you to you know, automate this particular

0:19:42.880 --> 0:19:45.760
<v Speaker 6>process and you can use it with this software. It

0:19:45.840 --> 0:19:48.640
<v Speaker 6>drives their consulting business and it also helps out their

0:19:48.640 --> 0:19:51.600
<v Speaker 6>software business, which is fairly popular right.

0:19:51.520 --> 0:19:57.160
<v Speaker 5>Now, IBM hitting all time high here today on a rug.

0:19:58.560 --> 0:20:00.399
<v Speaker 5>This stock has found a new life, has it?

0:20:01.720 --> 0:20:04.040
<v Speaker 6>Absolutely? And this is something that we've been saying it

0:20:04.280 --> 0:20:07.600
<v Speaker 6>for almost five years now that you know, the acquisition

0:20:07.720 --> 0:20:10.600
<v Speaker 6>of red Hat completely changed it. You know, if you

0:20:10.680 --> 0:20:12.680
<v Speaker 6>go back and look at some of the comments we've

0:20:12.680 --> 0:20:15.280
<v Speaker 6>made on TV about IBM. Prior to red Hat, it

0:20:15.359 --> 0:20:17.480
<v Speaker 6>was a very closed company. It only wanted to sell

0:20:17.520 --> 0:20:19.960
<v Speaker 6>their own products to people and was not very keen

0:20:20.040 --> 0:20:22.480
<v Speaker 6>on embracing you know, what I would say is open source.

0:20:23.200 --> 0:20:26.040
<v Speaker 6>With the acquisition of red Hat and the company saying,

0:20:26.040 --> 0:20:28.320
<v Speaker 6>you know what, red Hat can work with any cloud provider,

0:20:28.480 --> 0:20:30.800
<v Speaker 6>I think that was the biggest difference to me was

0:20:31.200 --> 0:20:35.200
<v Speaker 6>it allowed red Hat to work with companies but based

0:20:35.280 --> 0:20:38.960
<v Speaker 6>on Amazon Web Services or Microsoft, so they were not

0:20:39.040 --> 0:20:41.320
<v Speaker 6>just pushing their own cloud products, and I think that

0:20:41.440 --> 0:20:44.520
<v Speaker 6>really made a difference. Their software business has been doing

0:20:44.600 --> 0:20:47.879
<v Speaker 6>so well comparatively to the rest of the world, and

0:20:47.920 --> 0:20:50.359
<v Speaker 6>I think that's where you see the market validation that

0:20:50.400 --> 0:20:52.680
<v Speaker 6>this is the right strategy for them.

0:20:52.880 --> 0:20:57.560
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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0:21:01.240 --> 0:21:05.040
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0:21:05.119 --> 0:21:08.640
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0:21:09.080 --> 0:21:12.000
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