WEBVTT - Tesla Price Cuts, Verizon Earnings 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.040 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Apple car Playing and broud Otto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business app. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.480 or watch us live on YouTube. 0:00:25.120 --> 0:00:25.680 More news. 0:00:25.720 --> 0:00:28.200 Manus out of our good friends at Tesla. Tesla cuts 0:00:28.320 --> 0:00:33.720 roughly forty person growth content advertising team, so they're elimiting 0:00:33.800 --> 0:00:36.920 the marketing team is part of those layoffs. That's according 0:00:36.960 --> 0:00:40.760 people familiar with the matter. Here, stock off four percent today, 0:00:40.800 --> 0:00:43.600 fifty two week low down forty three percent a year 0:00:43.640 --> 0:00:45.320 to date. Let's check in with Steve Man. He's a 0:00:45.360 --> 0:00:48.199 global autos analyst for Bloomberg Intelligence. He joins us from 0:00:48.200 --> 0:00:51.519 the Princeton campus and I mean campus down there. It 0:00:51.600 --> 0:00:53.239 is beautiful down there in Princeton. That's kind of where 0:00:53.240 --> 0:00:55.960 we got a lot of the Bloomberg Intelligence folks housed 0:00:56.080 --> 0:00:59.160 down there. Steve, this is brutal here. Let's start with 0:00:59.200 --> 0:01:02.760 something basic, which is really the fundamental issue here, which 0:01:02.800 --> 0:01:07.800 is pricing. I believed mister Musk cut prices. Again, if 0:01:07.840 --> 0:01:09.119 he wakes up on the wrong side of the bed, 0:01:09.160 --> 0:01:11.639 does he cut prices? What's going on with the pricing 0:01:11.640 --> 0:01:12.520 and Testa these days. 0:01:13.440 --> 0:01:15.920 There's a lot of things going on at Tesla right now. 0:01:15.959 --> 0:01:21.360 Bruto is probably not it's that's mildly calling it. You know, 0:01:21.520 --> 0:01:24.200 we always thought that they will have to reverse prices. 0:01:25.120 --> 0:01:27.520 We're not sure why. You know, early in the year 0:01:27.600 --> 0:01:31.920 they increase prices. But you know, price prices have been 0:01:31.959 --> 0:01:35.080 dropped in the US, prices over the weekend, it's been 0:01:35.160 --> 0:01:39.240 dropped in China. China is a different quite different market. 0:01:39.440 --> 0:01:45.480 It's hyper competitive. Everybody's cutting prices, especially by d early 0:01:45.520 --> 0:01:48.240 in the year and late last year. So we're not 0:01:48.320 --> 0:01:51.040 surprised going to cut prices. The question is, you know, 0:01:51.080 --> 0:01:53.440 where are the earnings going to be? And there's gonna 0:01:53.440 --> 0:01:55.560 be a lot of questions that Elon must has to 0:01:55.600 --> 0:01:58.400 answer tomorrow at their earnings call. 0:02:02.080 --> 0:02:04.080 Yep uh. Web Bush Securities were with me a couple 0:02:04.120 --> 0:02:05.640 of weeks ago and they said, it's a hurricane five 0:02:05.640 --> 0:02:08.799 storm coming towards him. That's gone from a Cinderella story 0:02:08.840 --> 0:02:12.200 to that. But who if you look at BYD, if 0:02:12.200 --> 0:02:16.079 you look at Lee, and you look at Tesla, they're 0:02:16.120 --> 0:02:19.560 all cutting prices. So is is is this the bottom 0:02:19.639 --> 0:02:22.680 of that cycle? Has Tesla got the capacity to weather 0:02:22.960 --> 0:02:25.040 a price cutting storm in China. 0:02:26.080 --> 0:02:28.560 That's a good question. I don't think it's the end 0:02:28.600 --> 0:02:34.000 of it. We're actually seeing second quarter sales to be uh, 0:02:34.040 --> 0:02:36.160 you know, uh probably the same as what we saw 0:02:36.160 --> 0:02:40.000 in the first quarter. And remember our first quarter Tesla 0:02:40.080 --> 0:02:43.959 actually in the industry itself actually show uh slower growth 0:02:44.000 --> 0:02:48.200 and even some declinentes uh for certain automakers like Tesla. 0:02:48.440 --> 0:02:51.320 So uh, you know, second quarter is not gonna be 0:02:51.560 --> 0:02:55.960 pretty as well. And I think Tesla, you know, fortunately 0:02:56.040 --> 0:02:58.360 for them, they are pr They are still the only 0:02:58.440 --> 0:03:02.840 profitable EV maker in the industry right now. You know, 0:03:02.960 --> 0:03:06.679 they have about seventeen percent gross margin compared to four 0:03:06.800 --> 0:03:09.840 in GM. They're at you know, single high single digit, 0:03:10.440 --> 0:03:12.680 so you know, they do have some room to give. 0:03:13.040 --> 0:03:15.480 And you know, I think part of it is really 0:03:15.960 --> 0:03:19.000 they're they're really hoping, Tesla is really hoping to drive 0:03:19.080 --> 0:03:22.400 more volume, generate more cash. And you know, one of 0:03:22.480 --> 0:03:24.799 the things that they want to get to sooner than 0:03:24.880 --> 0:03:28.640 rather than later is really to you know, monetize that 0:03:28.800 --> 0:03:32.520 robo taxi. All the investment they've made in AI and 0:03:32.680 --> 0:03:33.880 autonomous vehicles. 0:03:34.480 --> 0:03:37.640 Gross margin is seventy percent, is that just on the 0:03:37.800 --> 0:03:42.080 manufact on the manufacturing side, or is that with the 0:03:42.120 --> 0:03:44.440 credits and so on and so forth, Because my question is, 0:03:44.520 --> 0:03:46.400 you know, if they start cutting prices, are they going 0:03:46.440 --> 0:03:48.080 to sacrifice unit profitability? 0:03:49.200 --> 0:03:53.360 Yeah, the seventeen percent thinking autumn, Yeah, seventeen is on 0:03:53.400 --> 0:03:58.560 the automotive side. Look, they you know, we're hoping they 0:03:58.600 --> 0:04:02.400 don't cut more prices because seventeen percent is not as 0:04:02.440 --> 0:04:06.560 good as the mid twenty percent they were getting last 0:04:06.600 --> 0:04:10.040 year and the year before. And cutting prices is not 0:04:10.280 --> 0:04:13.960 the not the solution. You know, the industry does not 0:04:14.200 --> 0:04:17.080 need to be in that spiral of cutting tit for 0:04:17.160 --> 0:04:20.919 tat price cuts. It's gonna hurt everyone, and at the 0:04:20.920 --> 0:04:24.760 same time, it's gonna hurt you know, the GMS and 0:04:24.839 --> 0:04:29.040 four because it doesn't really make it, you know, feasible 0:04:29.160 --> 0:04:31.440 even for them to roll out a cheaper model down 0:04:31.480 --> 0:04:34.120 the road. So, you know, what we're trying to do 0:04:34.320 --> 0:04:37.560 is create greater adoption in the EV market, in the 0:04:37.600 --> 0:04:41.880 EV industry for every consumer, and cutting prices is gonna 0:04:42.080 --> 0:04:44.400 you know, weed out a lot of the competition that 0:04:44.440 --> 0:04:49.039 are actually trying to introduce a more affordable model for 0:04:49.080 --> 0:04:51.960 the for the market, for the greater market Steve, I mean. 0:04:51.839 --> 0:04:56.719 We can debate adaptability in China in the United States 0:04:56.720 --> 0:05:00.400 of America forever. I mean the infrastructure is one could 0:05:00.400 --> 0:05:03.240 coin phrase probably not there again, going back to a 0:05:03.279 --> 0:05:05.480 web Bush note delivered in my inbox this morning by 0:05:05.600 --> 0:05:08.320 Dan Ives, which is it comes down to delivering a 0:05:08.360 --> 0:05:11.320 model TO in the next twelve to eighteen months to 0:05:11.400 --> 0:05:14.599 deliver a second wave of growth. If they don't deliver 0:05:14.720 --> 0:05:17.359 a new model TO, that growth will not come and 0:05:17.480 --> 0:05:21.280 robotaxis would be a tragic gamble in our opinion, as 0:05:21.320 --> 0:05:24.359 full autonomy we do not see until twenty thirty. This 0:05:24.440 --> 0:05:27.080 comes down to innovation in model two at the base, 0:05:27.160 --> 0:05:27.560 doesn't it. 0:05:28.440 --> 0:05:32.839 Yeah, Model two is important. I think what the industry 0:05:32.880 --> 0:05:35.440 is looking for and what investors are looking for is 0:05:35.560 --> 0:05:40.440 looking They're looking for more affordable models for consumers so 0:05:40.480 --> 0:05:44.440 that the penetration rates, so the addressable market for EV. Actually, 0:05:45.120 --> 0:05:48.279 it's going to be greater than what it is today now. 0:05:48.680 --> 0:05:53.239 Like I said earlier, Tesla it has been aggressive, probably 0:05:53.240 --> 0:05:57.960 the most aggressive and cunning EV prices, and they've redesigned 0:05:57.960 --> 0:06:00.960 a vehicle that they can manufacturing at a lower cost 0:06:01.000 --> 0:06:03.120 than you know, than it is today. 0:06:03.640 --> 0:06:04.920 So you know, they. 0:06:04.800 --> 0:06:08.080 Could launch a model to the other option. You know, 0:06:08.120 --> 0:06:10.360 I don't think the market has really talked about is 0:06:10.920 --> 0:06:14.880 you know, the price cutting will allow them potential, the 0:06:14.920 --> 0:06:18.320 cost cutting will probably allow him the cut prices even further. 0:06:18.680 --> 0:06:21.279 You know, it wouldn't be a surprise down the road 0:06:21.320 --> 0:06:25.080 that they're going to offer the model three below thirty thousand, 0:06:25.360 --> 0:06:28.080 you know, if they can manage that costs wisely. 0:06:28.640 --> 0:06:32.360 Hey, Steve, After the close tomorrow, Tesla will report numbers. 0:06:32.360 --> 0:06:34.720 They have a conference called five thirty pm Wall Street Time. 0:06:34.920 --> 0:06:38.800 What does Elon Musk need? What message does he need 0:06:38.839 --> 0:06:41.200 to get across to kind of you know, shore up 0:06:41.200 --> 0:06:42.000 this stock price. 0:06:41.839 --> 0:06:45.520 Here well as you know, the stock price is you know, 0:06:45.920 --> 0:06:51.480 mostly driven by the anticipation of robotaxi, of autonomous vehicle 0:06:51.520 --> 0:06:54.680 of AI. I think what he needs really needs to 0:06:54.720 --> 0:06:58.120 come out and tell people, give certain milestones for the 0:06:58.160 --> 0:07:02.200 investors to follow. Understand, you know, how he's taking that 0:07:02.320 --> 0:07:07.760 company forward into you know, into the next decade, how 0:07:07.800 --> 0:07:10.320 his robotaxi is going to generate the revenue and the 0:07:10.320 --> 0:07:15.480 profit that he's so much been advocating for. So, you know, 0:07:15.800 --> 0:07:18.920 automotive business. We all know it's it's it's a small 0:07:18.960 --> 0:07:22.840 part it's in terms of valuation, but they you know, 0:07:22.880 --> 0:07:24.960 I think Elon Musk and the company really needs to 0:07:25.000 --> 0:07:28.320 come out to make the investor feel comfortable that he 0:07:28.400 --> 0:07:31.000 is still on track and there is a light at 0:07:31.040 --> 0:07:33.280 the end of the tunnel sooner rather than later. 0:07:34.240 --> 0:07:38.920 Is there a sense that he's focused enough on this 0:07:39.000 --> 0:07:41.560 company here? Is there still that concern that he spread 0:07:41.680 --> 0:07:42.040 too thin? 0:07:42.120 --> 0:07:42.560 Do you think? 0:07:44.680 --> 0:07:47.480 I don't think so. I think, you know, he's He's 0:07:47.520 --> 0:07:51.080 one person. I mean, he's done a lot with SpaceX uh, 0:07:51.280 --> 0:07:54.400 he's done a lot with Tesla obviously, and I think 0:07:54.440 --> 0:07:57.840 he's even though there's been some departure, I think still 0:07:57.880 --> 0:08:01.120 I think he still has a very very strong behind him. 0:08:01.360 --> 0:08:03.760 He's still hiring a lot for the AI for the 0:08:03.920 --> 0:08:08.120 town of his vehicle business. So I'm not too concern 0:08:08.200 --> 0:08:11.760 at the moment. I think communication is key for the 0:08:11.840 --> 0:08:15.680 company in the next you know, tomorrow, in the next 0:08:15.720 --> 0:08:19.160 few weeks yep, and through August eighth, when he actually 0:08:19.200 --> 0:08:22.400 reveals his ROBOTAXI. 0:08:21.800 --> 0:08:23.400 Oh, okay, all right, Well I'm going to listen to 0:08:23.400 --> 0:08:26.320 this call tomorrow, so that'll be interesting. I think I 0:08:26.320 --> 0:08:27.640 think a lot of people are going to pay attention 0:08:27.640 --> 0:08:29.320 to that call. Steve, thanks so much for joining us. 0:08:29.440 --> 0:08:32.360 Steve Man Global Global Autos and Industrials research Channels for 0:08:32.360 --> 0:08:36.800 Bloomberg Intelligence, joining USROM Princeton, New Jersey via zoom. 0:08:36.559 --> 0:08:38.440 And here it's you know, it's Dan Iives of. 0:08:38.440 --> 0:08:42.040 Webbush said, this is a critical, critical, maybe the most 0:08:42.040 --> 0:08:45.760 important conference call for Elon Musk here because there. 0:08:45.720 --> 0:08:47.920 Is a whole host of headwinds for this company. 0:08:47.960 --> 0:08:49.280 It's about reinstilling confidence. 0:08:49.320 --> 0:08:52.120 Yeah, it's confidence in genius. I never said the genius 0:08:52.120 --> 0:08:54.880 had left right. No, exactly right. So we'll see that 0:08:54.920 --> 0:08:55.559 Tesla again. 0:08:55.880 --> 0:09:00.640 Fifty two week low here today off about forty five percent, 0:09:00.880 --> 0:09:04.400 just a year to date, significant loss of value. 0:09:04.440 --> 0:09:09.720 There. You're listening to the Bloomberg Intelligence Podcast. Catch us 0:09:09.760 --> 0:09:13.160 live weekdays at ten am Eastern on applecar Play and 0:09:13.160 --> 0:09:16.080 Android Otto with the Bloomberg Business Act. You can also 0:09:16.160 --> 0:09:19.319 listen live on Amazon Alexa from our flagship New York 0:09:19.400 --> 0:09:24.560 station Just Say Alexa playing Bloomberg eleven thirty. 0:09:24.360 --> 0:09:28.360 The Right Smack in the Middle Earning season Menace Verizon Communications. 0:09:28.679 --> 0:09:30.439 I'm a customer of Horizon Wireless. 0:09:30.720 --> 0:09:32.080 You know I think I am as well. Yes, I 0:09:32.080 --> 0:09:33.040 am the riison. 0:09:33.280 --> 0:09:36.480 I've gotten, I've cut my kids off just about everywhere. Financially, 0:09:36.520 --> 0:09:39.600 they're pretty much on their own. With one glaring exception 0:09:40.800 --> 0:09:43.320 the Celluar telephone bill. They're all still on this whole 0:09:43.320 --> 0:09:46.560 family plan. I'm carrying all of them, so I haven't 0:09:46.559 --> 0:09:47.680 figured out how to get rid of them. 0:09:47.760 --> 0:09:49.199 Maybe that helped with the Verizon's earnings. 0:09:49.240 --> 0:09:49.360 Here. 0:09:49.400 --> 0:09:51.760 John Butler joins us. He covers all things telecom for 0:09:51.840 --> 0:09:55.120 Bloomberg Intelligence. He's here in the Bloomberg Interactive Broker studio. 0:09:55.600 --> 0:09:57.840 He doesn't mail it in like some of his managers do. 0:09:57.920 --> 0:09:59.960 He comes into the New York office, which we appreciate. 0:10:00.720 --> 0:10:03.080 John. What'd you see from Verizon this quarter? 0:10:03.440 --> 0:10:08.559 So, Paul, I thought, overall, a very solid quarter from Verizon. 0:10:08.720 --> 0:10:12.200 I mean, one thing that I always look at is pricing, 0:10:12.440 --> 0:10:15.360 right because when they raise prices, which they did on 0:10:15.440 --> 0:10:18.760 me and you, by the way, it extends across the 0:10:18.800 --> 0:10:22.640 whole base, their base of one hundred million plus subscribers. 0:10:23.280 --> 0:10:28.280 So pricing was up strongly in the quarter, and I thought, overall, 0:10:28.320 --> 0:10:32.040 a solid quarter. I mean, it's interesting because the telecoms 0:10:32.080 --> 0:10:34.840 throw all these metrics at you, and you can always 0:10:34.840 --> 0:10:37.559 point to one or two and say they were weak. 0:10:37.600 --> 0:10:40.520 Here they were strong there, you know, and it all 0:10:40.559 --> 0:10:42.800 comes out in the wash. In my opinion, I sort 0:10:42.840 --> 0:10:46.520 of look, I take that ten thousand foot view and 0:10:46.600 --> 0:10:50.640 I say, how is pricing and how were subscriber net ads? 0:10:50.679 --> 0:10:54.680 How many netnews subscribers did they add? And there's still 0:10:54.720 --> 0:10:57.760 a shared donor. They're still losing a bit of subscribers 0:10:57.840 --> 0:10:58.440 on the margin. 0:10:58.480 --> 0:11:00.720 At every quarter they're getting better and better. 0:11:00.880 --> 0:11:04.520 So on balance, I thought a decent quarter in terms 0:11:04.600 --> 0:11:05.880 of the trends, and. 0:11:06.880 --> 0:11:08.800 You know, I like where they're headed for the year. 0:11:09.000 --> 0:11:10.719 I remember when we used to try to get used 0:11:10.720 --> 0:11:13.480 to acronyms when we were covering Vodafone and different things 0:11:13.480 --> 0:11:15.680 in Europe. You know, you've got your average revenue per user, 0:11:15.720 --> 0:11:17.719 but you look at the you just switch on your 0:11:17.720 --> 0:11:21.440 television at home, and you got Apple, You've got Netflix, 0:11:21.559 --> 0:11:25.560 you've got Prime, and you've got you just consuming so 0:11:25.800 --> 0:11:29.320 much more at so much more faster speed. So where 0:11:29.320 --> 0:11:32.480 are they in terms of pricing differential for that additional 0:11:32.520 --> 0:11:34.800 bandwidth that I'm I'm going to use more of. It's 0:11:34.840 --> 0:11:38.120 just a natural evolution of gorging on data. 0:11:38.800 --> 0:11:42.040 Well, I'm glad you asked that, manus, because what Verizon 0:11:42.280 --> 0:11:44.800 is doing so well is They've come out with a 0:11:44.880 --> 0:11:49.280 new family of unlimited plans called My Plan, and it 0:11:49.320 --> 0:11:52.640 allows people to not only buy wireless service, but also 0:11:52.800 --> 0:11:55.320 so the streaming services at. 0:11:55.200 --> 0:11:56.160 A pretty good deal. 0:11:56.600 --> 0:11:59.760 Finally, there's a bundle, right, there is a bundle praise, 0:12:00.240 --> 0:12:02.959 and you get to control the bundles, so they don't 0:12:03.040 --> 0:12:06.240 set preset bundles and say you can get planned a 0:12:06.440 --> 0:12:09.280 B or C. You can sort of mix and match 0:12:09.360 --> 0:12:12.080 and say I want wireless service and I want Disney 0:12:12.120 --> 0:12:15.520 but not Hulu, so you can sort of customize the 0:12:15.559 --> 0:12:20.359 plan yourself. Ergo the name my Plan, and it's resonating 0:12:20.480 --> 0:12:24.160 really well, Like I'm really surprised after about a year 0:12:24.240 --> 0:12:26.640 they've got a quarter of the base on My Plan. 0:12:27.320 --> 0:12:30.920 It's very good for them because they're highly profitable plans, 0:12:31.000 --> 0:12:33.080 and by year end they hope to have half the 0:12:33.160 --> 0:12:36.720 base on that My Plan structure, which is big. 0:12:37.040 --> 0:12:38.920 You know, I'm looking at the stock here about two 0:12:38.960 --> 0:12:41.280 and a half percent today, but up about five percent 0:12:41.320 --> 0:12:41.840 year to date. 0:12:42.320 --> 0:12:45.240 This seems got a six and a half percent dividend yield. 0:12:45.320 --> 0:12:46.600 That's what I'm talking about. 0:12:47.120 --> 0:12:48.520 So I don't know why you can't talk to your 0:12:48.520 --> 0:12:51.360 good I saw Tim Cook that Duke recently and I said, 0:12:51.360 --> 0:12:52.880 can you raise your dividend. 0:12:52.559 --> 0:12:54.640 A little bit? And he gave me the heisman. But 0:12:56.280 --> 0:12:59.280 six percent dividend, seven percent divin in yield? Yeah, is 0:12:59.280 --> 0:13:00.559 that sustainable for these guys? 0:13:01.280 --> 0:13:04.280 You know, I think most telecoms know the danger of 0:13:04.360 --> 0:13:06.920 cutting a dividends. So let's put it that way. But 0:13:07.040 --> 0:13:10.000 if you look at Verizon stock you touched on it, 0:13:10.000 --> 0:13:11.800 it's had a bit of a run here, and so 0:13:11.960 --> 0:13:16.760 is that stock price goes up? Obviously the yield goes down. 0:13:18.000 --> 0:13:21.959 But you know they're very focused on shareholder returns as 0:13:22.040 --> 0:13:24.880 they mature here AT and T is the same way, 0:13:24.960 --> 0:13:28.960 so is T Mobile, and so in terms of the divinend, 0:13:29.040 --> 0:13:30.839 I think it's very safer right now. 0:13:30.960 --> 0:13:33.079 You see, you use the web maturity and that brings 0:13:33.400 --> 0:13:35.400 that brings a lot of connotations, and one of them 0:13:35.480 --> 0:13:37.920 is M and A. You remember the most fabled disaster 0:13:38.480 --> 0:13:41.480 telecoms murder of all time at and what was it? 0:13:41.600 --> 0:13:44.800 Aol Time Warner. But when you use the word maturity. 0:13:44.440 --> 0:13:49.000 Got paid on that, thank you? Yeah, we got paid Yeah, good. 0:13:48.800 --> 0:13:52.480 For you represent everything, We represent what you know what. 0:13:52.640 --> 0:13:56.120 But there's the question is is the next iteration in 0:13:56.160 --> 0:13:57.760 this market some form of M. 0:13:57.720 --> 0:13:58.800 And A or is it innovation? 0:13:59.440 --> 0:14:02.480 So they got asked that in the call, and I 0:14:02.520 --> 0:14:04.920 thought the answer was very good, which is, we have 0:14:05.000 --> 0:14:08.080 the assets in place right now to execute on the 0:14:08.120 --> 0:14:11.199 growth plan that we see for the next few years. 0:14:12.360 --> 0:14:15.080 And I think that's right. But they also have the 0:14:15.160 --> 0:14:18.760 ability if they want to make either tuck in acquisitions. 0:14:19.440 --> 0:14:22.800 He wants disitions. 0:14:22.920 --> 0:14:26.800 I think I think they know that investors want that dividend. 0:14:26.920 --> 0:14:30.760 So in terms of any grand ambition, ambitious M and 0:14:30.840 --> 0:14:33.480 A like we saw with AT and T in Time Warner, 0:14:34.120 --> 0:14:35.800 I'm not saying it with Verizon. 0:14:36.400 --> 0:14:38.960 What's the competitive landscape these days? Is it just price, price, 0:14:39.040 --> 0:14:39.640 price price. 0:14:41.360 --> 0:14:43.600 It is very tough at the low end, it's all 0:14:43.640 --> 0:14:47.520 about price. At the higher end, which is where Verizon plays, it's. 0:14:47.280 --> 0:14:48.400 All about value. 0:14:48.960 --> 0:14:52.160 What kind of value are you offering with that package? 0:14:52.720 --> 0:14:56.760 And I think we were talking about verizons my plan, 0:14:56.840 --> 0:15:00.280 the mix and match that has high value, and I 0:15:00.480 --> 0:15:04.640 think I think it's resonating well with the subscriber base. 0:15:05.200 --> 0:15:07.640 All right, very good, John Butler. He has our go 0:15:07.720 --> 0:15:10.840 to guy and all things telecom. Verizon putting out some 0:15:11.160 --> 0:15:13.960 numbers here, decent number stock off a couple of percent. Today, 0:15:14.040 --> 0:15:16.640 John Butler covers telecom for Bloomberg Intelligence. 0:15:16.960 --> 0:15:18.880 We appreciate getting some of his time. 0:15:21.120 --> 0:15:25.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:25.080 --> 0:15:28.160 weekdays at ten am Eastern on Affle Card, playing Android 0:15:28.200 --> 0:15:31.280 outo with the Bloomberg Business app. Listen on demand wherever 0:15:31.360 --> 0:15:35.200 you get your podcasts, or watch us live on YouTube. 0:15:36.080 --> 0:15:38.160 So my tech m and A bankers are not happy 0:15:38.200 --> 0:15:43.640 because it apparently Salesforce takeover talks with Informatica are cooling off, 0:15:43.880 --> 0:15:45.640 and that might have been a nice mm A trade 0:15:45.680 --> 0:15:47.480 in the tech space. Let's break it down a little 0:15:47.480 --> 0:15:49.960 bit here on a rag ran a senior technology analyst. 0:15:50.000 --> 0:15:52.640 You know him. He's out in Chicago. This guy I. 0:15:52.680 --> 0:15:56.200 Don't know Sunil rog Gopaul, senior software analyst. But the 0:15:56.200 --> 0:15:58.880 goodness is he's in our Bloomberg Interactive Broker studio. He 0:15:58.880 --> 0:16:01.720 doesn't mail it in from Chicago like an rock Ron. 0:16:01.720 --> 0:16:04.280 It does, Honor Rock. I didn't hire this guy, Roger 0:16:04.360 --> 0:16:05.280 Capal did. I. 0:16:05.280 --> 0:16:06.240 I don't know him. 0:16:07.200 --> 0:16:10.440 No, Samiel's awesome and he does all things infrastructure. You'll 0:16:10.480 --> 0:16:11.080 really like him. 0:16:11.120 --> 0:16:13.720 Good stuff. At least he's here in the office. We 0:16:13.760 --> 0:16:15.680 make note of that. All right. So, Anrak, I was 0:16:15.760 --> 0:16:17.080 kind of surprised to see. 0:16:16.880 --> 0:16:19.200 This news to begin with, Like, I didn't think Salesforce 0:16:20.360 --> 0:16:21.600 needed to really buy. 0:16:21.360 --> 0:16:23.480 Anything, So what's going on here do you think? 0:16:24.240 --> 0:16:26.400 Yeah, it was just a big head scratcher for us 0:16:26.440 --> 0:16:30.280 to almost a few days ago because last March, Bennehoff 0:16:30.320 --> 0:16:32.880 comes and says, I've disbandled the MNE committee, no more 0:16:33.120 --> 0:16:35.040 m and A. I'm going to focus on margins and 0:16:35.160 --> 0:16:38.800 organic growth. And in less than a year, you know, 0:16:38.880 --> 0:16:40.640 just around that one year mark, he's like, oh, we've 0:16:40.640 --> 0:16:42.320 got to go back and you know, buy something now. 0:16:42.400 --> 0:16:44.400 He didn't say that, the company didn't say that, but 0:16:44.480 --> 0:16:46.560 that was the rumor on the street that they're looking 0:16:46.560 --> 0:16:48.800 to buy Informatica. For us, that was a bit of 0:16:48.840 --> 0:16:52.280 a surprise because Informatica grows six to seven percent compared 0:16:52.280 --> 0:16:54.520 to Salesforce, which is growing north of ten percent. So 0:16:54.800 --> 0:16:56.440 why would anybody buy something that. 0:16:56.480 --> 0:16:57.600 Is slow growth? 0:16:57.960 --> 0:17:00.200 I get the data angle of it, but you know, 0:17:00.640 --> 0:17:02.840 it was it was not something that we really liked. 0:17:03.160 --> 0:17:05.439 Sunil, first of all, thanks so much for joining us 0:17:05.480 --> 0:17:09.080 here in studio. Sunil Rochkopal, senior software analyst for Bloomberg Intelligence, 0:17:09.960 --> 0:17:12.359 tell us about Informatica, I don't know a lot about it. 0:17:12.400 --> 0:17:14.120 I don't think a lot of investors know a lot 0:17:14.160 --> 0:17:16.600 about it. And that was one of the reasons that 0:17:16.640 --> 0:17:20.120 they're saying, what is Salesforce buying here or maybe thinking 0:17:20.119 --> 0:17:21.840 about buying? What tell us about this company? 0:17:22.119 --> 0:17:27.280 Sure, Informatica is all about data management, which is about 0:17:27.520 --> 0:17:31.360 clean cleaning all the data that comes from different sources 0:17:31.440 --> 0:17:35.600 and aligning it with the applications and getting all things 0:17:35.680 --> 0:17:38.880 sorted out. For data, so data comes in various shapes, 0:17:39.000 --> 0:17:41.560 forms and different sources, so all of that needs to 0:17:41.600 --> 0:17:44.800 be cleaned up to be used in a proper shape. 0:17:44.840 --> 0:17:49.320 So I think Informatica is that layer that acts as 0:17:49.359 --> 0:17:53.720 a cleanser of data and gets you to that right usage. 0:17:54.080 --> 0:17:56.479 So that's where it comes in as a player. 0:17:56.920 --> 0:18:02.000 So with if they're not going to tie up with Salesforce, 0:18:02.720 --> 0:18:04.760 what's the call on this company, what's the call on 0:18:04.800 --> 0:18:05.200 the stock? 0:18:05.920 --> 0:18:08.199 Either you know, bullsh or bears. 0:18:08.640 --> 0:18:12.439 Look strategically for Informatica, such an alliance would have been 0:18:12.480 --> 0:18:16.120 a great move that would have helped fuel its cloud journey, 0:18:16.280 --> 0:18:19.920 and that now accounts for roughly one third of its revenues. 0:18:20.840 --> 0:18:24.880 With the deal not happening. Informatica now has to focus 0:18:24.920 --> 0:18:29.840 on fueling its cloud growth organically. The company is boosting 0:18:29.880 --> 0:18:34.480 its partnership and rolling out new AI powered features, but 0:18:34.600 --> 0:18:40.800 this space is highly fragmented and competitive. The company has 0:18:40.920 --> 0:18:45.199 continued to lose market share, especially with the challengers that 0:18:45.280 --> 0:18:49.719 have risen substantially over the last few years. There are 0:18:49.760 --> 0:18:53.320 other big players like SAP and IBM that also compete, 0:18:53.320 --> 0:18:56.360 So I think going forward the market will definitely look 0:18:56.480 --> 0:18:59.960 a lot more challenging because now Salesforce are not having 0:19:00.119 --> 0:19:02.960 to go through with this tale will put more resources 0:19:03.000 --> 0:19:08.040 into MuleSoft, which I think will raise the competitive intensity 0:19:08.119 --> 0:19:10.679 and I think that is a big challenge for Informatical 0:19:10.760 --> 0:19:11.280 going forward. 0:19:12.440 --> 0:19:16.040 An rag on your side from the Salesforce side, I mean, 0:19:16.359 --> 0:19:17.520 is it just steady as she goes? 0:19:17.640 --> 0:19:19.200 I mean, it's just such a great company. 0:19:19.640 --> 0:19:22.439 What's the call for the next twelve to eighteen months 0:19:22.480 --> 0:19:24.960 for Salesforce dot com? 0:19:25.359 --> 0:19:27.720 So, Paul, what we're thinking. You know, hopefully by the 0:19:27.800 --> 0:19:29.680 end of this year we get a little more clarity 0:19:29.720 --> 0:19:33.040 on technology spending and perhaps from next year onwards we 0:19:33.080 --> 0:19:35.840 can see that, you know, load double digit growth in 0:19:35.920 --> 0:19:39.480 earnings as well as I take that back load. Double 0:19:39.480 --> 0:19:43.520 digit growth in sales coupled with some margin expansion getting 0:19:43.520 --> 0:19:46.600 you to that mid to high teens earnings growth. That's 0:19:46.600 --> 0:19:51.040 what we want from salesforce, organic growth, organic earnings, not 0:19:51.160 --> 0:19:53.560 so much driven by M and A. And I'm hoping 0:19:53.600 --> 0:19:55.600 that that's what the company delivers. 0:19:56.640 --> 0:19:59.560 On the software side, what are the most exciting areas 0:19:59.760 --> 0:20:00.080 for you? 0:20:00.080 --> 0:20:01.720 You that you're looking at here. 0:20:02.080 --> 0:20:07.439 Look for me in the overall enterprise software space, I 0:20:07.640 --> 0:20:15.480 still like names in the observability sector. The Yeah, all right, 0:20:15.720 --> 0:20:19.840 So the observability is they act as a layer that 0:20:20.000 --> 0:20:25.000 monitors all of your systems applications, so be it any 0:20:25.119 --> 0:20:28.520 kind of an application that you're running your enterprise, everything 0:20:28.600 --> 0:20:31.560 needs to be monitored if there are like any bugs, 0:20:31.600 --> 0:20:35.200 if there are like system downtimes, et cetera. So observability 0:20:35.440 --> 0:20:40.639 vendors typically monitor all your applications and the infrastructure. So 0:20:40.720 --> 0:20:43.719 they play a very critical role in the overall enterprise 0:20:43.800 --> 0:20:47.000 software space. And I think players such as the data 0:20:47.040 --> 0:20:49.639 Dog diner trays are very well positioned in. 0:20:49.640 --> 0:20:51.640 Public recently, like recently as a couple of years. 0:20:51.720 --> 0:20:52.680 Yeah, yes, that's right. 0:20:53.080 --> 0:20:55.000 So so what is I mean? I love the name. 0:20:55.760 --> 0:20:57.520 I'm looking at the stock here and bringing up the 0:20:57.520 --> 0:20:58.760 stock Data Dog. 0:20:59.520 --> 0:21:04.120 The DG this is kind of forty billion dollar market cap. 0:21:04.119 --> 0:21:06.439 It's kind of flat stock price on the year, but 0:21:06.520 --> 0:21:08.720