Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg P and L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We
Speaker 1: are broadcasting live from Carbonites Investor Day at their international
Speaker 1: headquarters in downtown Boston. And well we're joined really by
Speaker 1: our host right now, Muhammad Ali. He is the president
Speaker 1: and the chief executive of Carbonite. Thank you very much
Speaker 1: for hosting us. Thank you for being here. Um, let's
Speaker 1: begin by just maybe outlining for people a bit of
Speaker 1: a strategy change on the part of Carbonite, because I
Speaker 1: can remember when it was focused almost exclusively on the consumer.
Speaker 1: Back up your data and don't worry about it, but
Speaker 1: there's been a shift. You bought some assets from s Gay,
Speaker 1: you purchased a company, I believe earlier in the year
Speaker 1: of double Take software in order to kind of shift
Speaker 1: your strategy to move more into the enterprise. Can you
Speaker 1: tell us about that? Yeah, no, thank you for asking.
Speaker 1: Today is actually a big day here at Carponite. We're
Speaker 1: using our investor day as an opportunity to really showcase
Speaker 1: the strategy that we've implemented over the last three years,
Speaker 1: which is a huge transformation for the company. As you
Speaker 1: pointed out, we used to be and we still are,
Speaker 1: that reliable company of backs up your laptop, but today
Speaker 1: we now actually have a portfolio that we have built
Speaker 1: both organically and inorganically that does what we call complete
Speaker 1: data protection. As you know, data is everywhere now, it's
Speaker 1: the most important asset. It's in the cloud, it's in
Speaker 1: a lot of different clouds, it's on prem it's on
Speaker 1: a whole bunch of operating systems. We're one of the
Speaker 1: very very few companies now that can protect all that data,
Speaker 1: your whole I T system, regardless of where it is. Mohammed,
Speaker 1: you previously were chief strategy officer at Heltt Packard, You've
Speaker 1: been at IBM. This is a smaller company, and I'm wondering,
Speaker 1: can you speak to the unique challenges UH being in
Speaker 1: a scrappy organization and say one of these uh legacy
Speaker 1: behemoth tech companies. Sure, Um, you know, I actually start
Speaker 1: up my career at a small company was called Adobe
Speaker 1: before became a big company, and then I did and
Speaker 1: artificial intelligence startup. Today we call that a big data startup.
Speaker 1: So I love the small company. I love the scrappiness. Um. Now,
Speaker 1: you know, when I got to IBM and tow hb UM,
Speaker 1: one of the one of the things that that that
Speaker 1: scrappiness was able to allow me to do is to
Speaker 1: help those companies transform because it was very difficult to
Speaker 1: those companies transform from within. And so I, you know,
Speaker 1: I helped IBM transform into a software services company again
Speaker 1: through a large number of divestitures and acquisitions to build
Speaker 1: a portfolio. Uh. And then at HP, I you know,
Speaker 1: I led the project to split the company into various parts.
Speaker 1: Again sort of that scrappy thinking, Uh, if the company
Speaker 1: is too big to really be successful, can you make
Speaker 1: the smaller parts successful? So this, you know, the scrappy thinking,
Speaker 1: as regardless of whether it's big company or small company,
Speaker 1: is really important. We have that scrappy thinking here at Carbonite,
Speaker 1: and that's why I think we've been able to you know,
Speaker 1: more than double the company in the last two and
Speaker 1: a half years. Does that scrappy attitude apply also to
Speaker 1: spending money on marketing? Because this has a competitive business,
Speaker 1: and as Lisa said, you you are smaller than some
Speaker 1: of your competitors. I'm just gonna preview maybe one of
Speaker 1: the questions you're gonna get at your investor day, which is,
Speaker 1: you know, how much you're gonna spend a lot of
Speaker 1: money on this? How are you going to afford all this? Yeah?
Speaker 1: I mean, you know, we've been around for twelve years.
Speaker 1: We started out as one of the very first companies
Speaker 1: that advertise in radio software companies, uh, the advertising radio.
Speaker 1: And we have learned through tremendous amount of data and analytics,
Speaker 1: how to best deploy that money. And so twelve years later,
Speaker 1: we can you know, we have an extremely advanced business
Speaker 1: intelligence team that uses some of those artificial intelligence techniques
Speaker 1: that I've talked about, you know, just just a little
Speaker 1: while ago, to determine how to best place that money
Speaker 1: and make it return in the most efficient way. You know,
Speaker 1: one thing that we hear again and again from a
Speaker 1: variety of chief executive officers is how difficult it is
Speaker 1: to hire talent right now. Uh, and that you know
Speaker 1: that the job market is incredibly tight, particularly in certain areas,
Speaker 1: and I'm wondering, uh, you know, clearly based on the
Speaker 1: clear love of Star Wars in our offices. Um, you know,
Speaker 1: there is a certain culture here. But I'm wondering on
Speaker 1: a broader level, how concerned you are about um sort
Speaker 1: of bigger U S policies like the H one B
Speaker 1: visa policy. Uh, and whether you view that potentially affecting
Speaker 1: your business. Oh, very concerned, and it certainly affects our business.
Speaker 1: But you know, if you think about America, America was
Speaker 1: really built on this, uh, you know, incredible combination of
Speaker 1: domestic talent and immigrant talent. I mean not just for
Speaker 1: the last few years, but for two hundred years. Um.
Speaker 1: You know, I walked in the office this morning and
Speaker 1: I got this beautiful card with this long letter inside
Speaker 1: from one of our employees. And I'm just gonna read
Speaker 1: one paragraph. And she came. She came from China. It
Speaker 1: was four years ago that I decided to come to
Speaker 1: the United States to pursue my MBA because I believe
Speaker 1: that if I work hard towards a clear goal, anything
Speaker 1: is possible. And I found that with the right attitude
Speaker 1: and inspirational leadership, such dreams can come true. Now, we
Speaker 1: didn't hire her because she's from China. We hired her
Speaker 1: because she was globally the best candidate for the job.
Speaker 1: That's what makes American company strong. We're able to hire
Speaker 1: the best and we're able to innovate better than anyone else.
Speaker 1: If somehow, all of a sudden that is curtail or
Speaker 1: these people go elsewhere, we have we have a problem here.
Speaker 1: And if you think about the fact that over fifty
Speaker 1: percent uh fortune companies here in Massachusetts were started by
Speaker 1: an immigrant or a child of an immigrant. If we
Speaker 1: no longer have those people, it's going to affect our economy.
Speaker 1: You know. Earlier we were speaking with your chief evangelist,
Speaker 1: Norman Guardgayell and yes, and we were talking about the
Speaker 1: cyber threats and cyber tests because of course these are
Speaker 1: in the headlines in the worst Equifax. Indeed, I want
Speaker 1: to get your thoughts on that and what do you
Speaker 1: believe will happen as a result. Uh Well, so, unfortunately,
Speaker 1: I think we live in an era where more and
Speaker 1: more of these things are going to happen. And what
Speaker 1: carbonite does is it allows it allows you to bring
Speaker 1: your business back to life after you've been either attacked
Speaker 1: by one of these you know, cyber crime situation, whether
Speaker 1: it's ransomware. Whether you've been hit by Hurricane Arama, whatever
Speaker 1: the situation, carbon I will bring your company back to life. Uh.
Speaker 1: Now you still have to clean up afterwards, as Equifax
Speaker 1: will have to do. But you know, unfortunately, they're just
Speaker 1: so many of these cyber weapons out there now, developed
Speaker 1: either by industry or by cy criminals or our governments,
Speaker 1: and they're being leaked. So I think we are in
Speaker 1: actually a very complicated time here. Well, I'd love to
Speaker 1: wrap my head around what that means to bring the
Speaker 1: business back. Does it mean restoring the data? Does it
Speaker 1: mean uh, putting new encryptions in to prevent another attack?
Speaker 1: What does that mean to you? Yeah? So, um so,
Speaker 1: first and foremost, it's about resurrecting the business. So if
Speaker 1: you get hit by a tornado or a hurricane, as
Speaker 1: was the case just recently. We have a customer who
Speaker 1: called us right before this hurricane was about to hit
Speaker 1: the island the Caribbean and said, we need you to
Speaker 1: back up our system so that if we no longer
Speaker 1: have a hotel there, at least from home, we can
Speaker 1: we have everything we can resurrect this, maybe not in
Speaker 1: that computer environment, maybe in your cloud and that's something
Speaker 1: we can do. We could spin up your entire I
Speaker 1: T environment in our cloud and have you run as
Speaker 1: long as you too in our cloth to keep going. Airlines,
Speaker 1: for example, use us to ensure high availability, so if
Speaker 1: their systems go down, they fail over to our systems
Speaker 1: and they keep running. Now, in terms of preventive aspects, right, uh, like,
Speaker 1: we also provide some level of security, but at the
Speaker 1: end of the day, you're most likely going to get hit.
Speaker 1: Mohamad Ali, thank you so much. Mohamed Ali, President, chief
Speaker 1: executive officer of Carbonite, based in Boston. Part let's talk
Speaker 1: about the future when it comes to small cap stocks,
Speaker 1: and here to help us is Drew Bejia. He is
Speaker 1: the vice president portfolio manager of the g I M
Speaker 1: small Cap Focused Growth Strategy for Granaham Investment Management firm.
Speaker 1: Why they manage over a billion dollars. The small Cap
Speaker 1: Focused Growth fund has about a quarter of a billion
Speaker 1: dollars and they are based in wolf M, mass Drew,
Speaker 1: thank you very much for being with us and coming in.
Speaker 1: Maybe just first of all, make the case for small
Speaker 1: cap stocks for people that may not be familiar with
Speaker 1: this particular asset class. Sure, so we're we're looking for
Speaker 1: small cap growth companies. And you know, our our clients
Speaker 1: tend to be pension plans and now months that need
Speaker 1: returns to essentially pay pay pensioners their retirement. What characterizes
Speaker 1: small cap for you? Right? So, small cap typically it's
Speaker 1: under two billion dollars put the sweet spots around a
Speaker 1: billion dollars in market cap. And the idea is that
Speaker 1: these companies, because they're small, can grow faster and accumulate
Speaker 1: um can appreciate over the long long haul. So, Drew,
Speaker 1: I'm looking at the performance of this fund and it's
Speaker 1: up more than timber cent year to day, which is
Speaker 1: ahead of the Rustle tooth hoousand. And I'm wondering, you
Speaker 1: know what, what were the main drivers? What were the
Speaker 1: sort of wagers that you got? Did you got right? Uh? So?
Speaker 1: In generally, as I mentioned, we're looking for companies that
Speaker 1: can grow and uh stocks that have good risk reward
Speaker 1: and we take fairly concentrated bets five six seven percent
Speaker 1: of the portfolio at times, and this year I think
Speaker 1: we're actually up about or so and and what's uh
Speaker 1: we've been able to do is is the bigger bets
Speaker 1: have worked out and for the most part, the smaller
Speaker 1: bets um, the ones that haven't worked out or have
Speaker 1: been smaller positions are some of the companies that have
Speaker 1: been a big winners. So we recently exited a position
Speaker 1: in Shopify, which is no longer small cap, but his
Speaker 1: uh you know, an e commerce solutions provider for small
Speaker 1: to medium size businesses that has done very well this
Speaker 1: year and risk reward and market cap uh cause us
Speaker 1: to exit the position. What what what kind of h
Speaker 1: work do you have to do in order to get
Speaker 1: the information necessary to make these kinds of investments because
Speaker 1: many small cap stocks are not covered by any analysts
Speaker 1: and it doesn't seem to be a large following. Sure,
Speaker 1: So at Grana hand we're a pretty small shop. We
Speaker 1: have about twenty people, but uh seven of us are
Speaker 1: very experienced in small caps. So we're very experienced team
Speaker 1: that is looking for these small cap growth companies. I
Speaker 1: call them desert island companies because if you sent me
Speaker 1: to a desert island and come back five, six, seven,
Speaker 1: ten years from now, they'd be uh much much more valuable,
Speaker 1: they much bigger. So part of what we do is
Speaker 1: exclusively look for those companies, and it's easier to find
Speaker 1: diamonds in the rough if if you're if you're expresing,
Speaker 1: But where do you go to? Where do you go
Speaker 1: to find these? I mean, is it someone that comes
Speaker 1: in with an idea, says, oh, my family just bought something,
Speaker 1: or you went to an investor presentation, because a lot
Speaker 1: of companies have trouble getting getting any kind of following
Speaker 1: or anybody to wat you know, watch over them. Sure. Well,
Speaker 1: as I mentioned, we have seven people looking for these
Speaker 1: desert islands, secular growers and uh UM in that we
Speaker 1: cover a pretty wide net and can quickly reject most companies.
Speaker 1: So industry UM contacts suppliers, customers of companies we already know, etcetera. So, Drew,
Speaker 1: you know, it's it's sort of this popular belief right
Speaker 1: now that there's money flowing toward anything and everything that
Speaker 1: asks for money right now, just given the current backdrop,
Speaker 1: backdrop of central bank liquidity. Uh do you think that
Speaker 1: that is an inaccurate characterization of this current market. I'd
Speaker 1: have to say that there is capitals not scarce. UM
Speaker 1: growth is scarce, and so I think you're seeing um
Speaker 1: and and rates are low. So that combination is leading
Speaker 1: toward investors to look for anything where they can have uh,
Speaker 1: prospects for growth. Well, but I guess that's what I'm
Speaker 1: getting at is, you know, how do you sort of
Speaker 1: adjust your models to understand what value is at a
Speaker 1: time when there is so much capital that's pushing up valuations,
Speaker 1: and how do you adjust your your expectations for growth
Speaker 1: going forward? Uh, you know, based on the idea that
Speaker 1: this might this might end. Yeah, so that you separate
Speaker 1: the asset from the price of the asset. So the
Speaker 1: asset has in our case, little to do with the
Speaker 1: access to capital. There's there's plenty of capital, so that
Speaker 1: asset and our growth expectations, we're only looking for these
Speaker 1: companies that are pretty rare that can sustain growth in
Speaker 1: terms of pricing of the asset. You're right, there's been
Speaker 1: a flood of capital. And what we do is a
Speaker 1: probability weighted expected return, which has good scenarios and bad scenarios,
Speaker 1: and we probably wait them so it tries to capture both.
Speaker 1: So real quick, thirty seconds, what's your best idea right
Speaker 1: now that you're looking at our company that you've recently bought. Uh, well,
Speaker 1: not the best idea, because we have a fairly concentrate
Speaker 1: concentrated UH portfolio. But for example, there's a company here
Speaker 1: in Boston called ub spot UH. It's a platform for
Speaker 1: small to medium sized businesses. They're basically created a category
Speaker 1: called inbound marketing. We use it high value, add open
Speaker 1: ended opportunity. Very interesting Desert Island company. The stock we
Speaker 1: also think has good risk, reward and probability way to
Speaker 1: expect the return. Drew Bejia, thank you so much for
Speaker 1: joining us. Drew Bejia as vice president portfolio manager of
Speaker 1: the g i M small cap focused growth strategy for
Speaker 1: Grinahan Investment Management, which manages UH about a billion dollars
Speaker 1: and is based in Waltham, Massachusetts. Let's bring in Margaret
Speaker 1: Tollive right now. Our White House corresponded. Margaret is in Washington,
Speaker 1: and Margaret, I'm wondering if you could just sort of
Speaker 1: unpack a little bit of what the President was describing,
Speaker 1: because it seems as though he was making a very
Speaker 1: great distinction between the people of the various countries and
Speaker 1: the responsibilities of the world leaders in order to fulfill
Speaker 1: this promises he describes it of freedom, justice and peace. UH.
Speaker 1: You know, it's really interesting because when we hear the
Speaker 1: two messages of the president's speech. One was sort of UH,
Speaker 1: uniting the world around action, UH, particularly towards North Korea
Speaker 1: and also UM on Ivan. But the second was to
Speaker 1: kind of drill home on this point that's been central
Speaker 1: to his, you know, still relatively new political career, the
Speaker 1: idea of of the primacy of nation states, of sovereignty
Speaker 1: and such, and so the way he treated the needle
Speaker 1: was again to say that you can be UM looking
Speaker 1: out for number one. In effect, every country can have
Speaker 1: its own version of an America First policy, and they
Speaker 1: can still UM interact through the United Nations on issues
Speaker 1: that rise above individual national interests. At these are the
Speaker 1: two themes. Uh. They did sort of at sometimes bump
Speaker 1: into one another. But his mission again was to try
Speaker 1: to thread the needle between someone who's been himself skeptical
Speaker 1: in the past of the utility of organizations like the
Speaker 1: United Nations, but in this case saying, UH on North
Speaker 1: Korea and Iran, I really think the world needs to
Speaker 1: come together around what the US wants an act. Well, Margaret,
Speaker 1: you know, I'd love to just get your big picture
Speaker 1: sense of how this speech was likely received. He did
Speaker 1: stay on script. He did quote historical figures in American history.
Speaker 1: What was your first impression. Uh. We were very much
Speaker 1: interested in looking around the room, not just to hear
Speaker 1: what he was saying, but to watch how people were reacting.
Speaker 1: And I was interested in seeing the notes from my
Speaker 1: colleagues who were on the floor and sending color. UM,
Speaker 1: some key US allies holding onto every word. Be at
Speaker 1: Israel or be a Japan Uh, some other countries. Ministers
Speaker 1: at times go ahead checking their their phones for notes,
Speaker 1: kind of in and out of the stream of of
Speaker 1: what he was saying. Uh. And then of course, UM
Speaker 1: looking for where a couple of the countries who were
Speaker 1: targets of these discussions stood in the room earlier before
Speaker 1: he began to speak. UM. North Korea as foreign minister
Speaker 1: appeared to be in the room later on, UM not
Speaker 1: as visible. So well, I think we're going to see
Speaker 1: the reaction from the world begin to trickle in. There
Speaker 1: were a couple of lines that were important for domestic audience,
Speaker 1: such as the president's UH talk about Venezuela and how
Speaker 1: the problem was in fact the ideology of socialism that
Speaker 1: did not go over a real big and at the
Speaker 1: same time, some of the discussions about the need to
Speaker 1: act the score of Iran or the problems in North Korea.
Speaker 1: There seemed to be a lot of agreement in the room,
Speaker 1: so um different messages for different people. And this is
Speaker 1: always true for US President. He's talking at once to
Speaker 1: the world and to his own uh based not so
Speaker 1: well all of the American voters, but particularly his base.
Speaker 1: And again his base is the basi that is inherently
Speaker 1: skeptical of the value and the utility of the United Nations.
Speaker 1: Margaret Taller, thank you so much for joining us. Thanks
Speaker 1: for listening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
Speaker 1: Abramo wits one. Before the podcast, you can always catch
Speaker 1: us worldwide on Bloomberg Radio.