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Speaker 1: I'm Charlie Pallett. Stocks have rebounded from a morning sell off.
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Speaker 1: of point one percent. I'm Charlie Pellett, and that's a
Speaker 1: Bloomberg Business Flash. Is taking stock with Kathleen Hayes and
Speaker 1: Prim Fox on Bloomberg Radio. Two days. Two significant deals
Speaker 1: in the enterprise software space. Yesterday it was salesforce and
Speaker 1: demand wear. Today it's click technologies and Toma Bravo. A
Speaker 1: lot of money being thrown around, and it seems like
Speaker 1: the paces quickening. Let's find out why and why investors
Speaker 1: should be focused on this. I'm joined now here in
Speaker 1: our New York studio by man Deep Singh, software analysts
Speaker 1: for Bloomberg Intelligence. Bloomberg Intelligence, of course, gives you unique
Speaker 1: real time research and context on all kinds of industries
Speaker 1: and all the market and government factors that impact business.
Speaker 1: And if you're a terminal customer access Bloomberg Intelligence it
Speaker 1: b ico. So, Mandy, let's start here. Software industry continues
Speaker 1: to go through all kinds of disruption and now cloud.
Speaker 1: We've been hearing this more and more and more, a
Speaker 1: big technological shift that's changed in the way company use software.
Speaker 1: Why is that so significant and and what why is
Speaker 1: it now leading to a bunch of deals? Sure, so,
Speaker 1: like you said, Kathleen, this is a big technological shift
Speaker 1: that takes place once in ten years. And what happens
Speaker 1: typically in cycles like this is companies do change the
Speaker 1: way they use software, but it happens over a period
Speaker 1: of time. So that's why the disruption happens early on
Speaker 1: the small companies. They tend to disrupt the market kind
Speaker 1: of take market share from the small from the larger players,
Speaker 1: but do it in a way where they will grow
Speaker 1: very quickly in the first couple of years, and after
Speaker 1: a while their growth starts to taper. So once that happens,
Speaker 1: investors focus on the profitability given we see the profitability
Speaker 1: aspect showing up more now, I think it's timing is
Speaker 1: right for companies who sell themselves or do something. Okay,
Speaker 1: So the cloud, we know that Microsoft is pushed into
Speaker 1: the cloud. Amazon has pushed in the cloud, and in
Speaker 1: a company could never really actually technically say it was
Speaker 1: making money. That's helping them move in that direction. So Click,
Speaker 1: for example, tell me about Click what they do and
Speaker 1: what they do in the cloud that so many people
Speaker 1: are clamoring for. Great question. So Click is an analytics company.
Speaker 1: If you look at their functionality, all they do is
Speaker 1: help visualize your data. Now that makes a lot of
Speaker 1: excuse me, visualize my data? In other words, that got
Speaker 1: my all my cluster data. By visualize it, do you
Speaker 1: mean sort of map it out, ands organized it just
Speaker 1: kind of it's it's a better way to picture your
Speaker 1: data draw than just looking at an Excel chart. And
Speaker 1: it can use that data from any type of source,
Speaker 1: so it doesn't have to be a spreadsheet. It could
Speaker 1: be uh like an unstructured data source. So you calve
Speaker 1: an example of a kind of company or what kind
Speaker 1: of data click would be so visualizing. A good example
Speaker 1: is you have all these cloud applications now Salesforce, dot
Speaker 1: Com Demand, where these are standalone applications. Obviously the is
Speaker 1: our transactional systems, so they capture a lot of data
Speaker 1: over a period of time. But if you're a company
Speaker 1: using these applications, you have to find a way to
Speaker 1: analyze this data because this is critical. That's how you're
Speaker 1: going to be making your decisions, and and to build
Speaker 1: a tool which can basically pull in data from different
Speaker 1: transactional systems and aggregated. So what a retailer uses with
Speaker 1: a hospital absolutely absolutely, all different verticals, retailers, hospitals, manufacturing, companies, logistics,
Speaker 1: any system that captures data or a period of time,
Speaker 1: they need to aggregate it and you need to visualize
Speaker 1: that data so that your management can make decisions. And
Speaker 1: I think this is a good tool to really combine
Speaker 1: all your data from different systems and help visualize it,
Speaker 1: and that includes cloud systems. Now, the problem here is
Speaker 1: they grew very rapidly. Now it's off of like six
Speaker 1: million will run rate, They're still not profitable. They spend
Speaker 1: more their fifty of their revenue on sales and marketing,
Speaker 1: and once your growth slow So they were growing in
Speaker 1: excess of every quarter. Now it's slowing to like teens
Speaker 1: eighteen seventeen eighteen percent, and expectations are it's going to
Speaker 1: slow down further because competition is rising, because the numbers
Speaker 1: are getting bigger. At scale, you just can't keep growing
Speaker 1: twenty plus. You can do that when you're a two
Speaker 1: hundred million dollar company, but it gets tougher when you're
Speaker 1: a six hundred million dollar company. And investors they give
Speaker 1: you all the benefits of growth as long as you
Speaker 1: keep delivering on the numbers. Once the growth slows, they
Speaker 1: start questioning your profitability. And I think that's what is
Speaker 1: happening with Are there investment opportunities in this space? Yes, absolutely.
Speaker 1: I think as a large company you would want to
Speaker 1: wait for a time like this when valuations have come down.
Speaker 1: So they were at their peak last year, now they
Speaker 1: have come down this year. After the February decline we had.
Speaker 1: And if I'm a Microsoft or and IBM, I'm always
Speaker 1: looking to kind of fill the gaps in my portfolio.
Speaker 1: And there are a lot of smaller companies that are
Speaker 1: out there that are trading cheaper than where they were
Speaker 1: last year, and it's a good time to buy. Of course,
Speaker 1: tom a Bravo, Uh privactly snapped up Click. But then
Speaker 1: who knows, maybe they'll be ready to sell it to
Speaker 1: somebody for more money. But what about this story about
Speaker 1: the Microsoft board pushing Saty Develo for a faster move
Speaker 1: into the cloud. They're not going fast enough. I mean Microsoft,
Speaker 1: It's really a tale of three different segments. One of
Speaker 1: them has accelerated, it's moved to the cloud doing very well.
Speaker 1: The other couple the Windows piece, the operating system piece
Speaker 1: which we are used to on our desktop. Once that
Speaker 1: moves to the cloud, that will really hurt them big time.
Speaker 1: And I think what the board is drawing its attention
Speaker 1: is what is the game plan to move the Windows
Speaker 1: piece to the PLoud? How do we make offset the
Speaker 1: revenue that Windows is generating now when pinks all moved
Speaker 1: to the cloud. And I don't think, uh, the board
Speaker 1: is satisfied with the way company has outlined its strategy.
Speaker 1: It has, like I said, it's done very well in
Speaker 1: the other two segments, the office suite and the infrastructure side.
Speaker 1: It's really the Windows that is the concern, and I
Speaker 1: think rightfully so well active, a lot of activity in
Speaker 1: this space. And Youth Thank you so much. She's software
Speaker 1: almost for Bloomberg Intelligence, kind of bringing us noncloud people
Speaker 1: into the cloud business with him. Thank you so much.
Speaker 1: As Click a very important company is purchased by Toma
Speaker 1: Bravo today. I'm Kathleen Hayes. This is taking Stock on
Speaker 1: Bloomberg Radio. Coming up next oil Opec. They met, but
Speaker 1: they couldn't agree on a production quota. So it's the
Speaker 1: bottom of oil prices really in we'll find out now
Speaker 1: on Bloomberg Radio.