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Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
Speaker 1: YouTube and Bloomberg Originals.
Speaker 5: I'm Scarlettfoo and I'm Alexandra Semenova fill in for Paul Sweeney.
Speaker 2: On today's Bloomberg Intelligence Show. We dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 5: Each and every week, we provide in depth research and
Speaker 5: data on some of the two thousand companies and one
Speaker 5: hundred and thirty industries are analysts cover worldwide.
Speaker 2: Today, we'll look why the athletic apparel company Lulu Lemon
Speaker 2: sees signs of a rebound in the fourth quarter.
Speaker 5: Plus a look at why the tech giant Meta is
Speaker 5: beginning to cut more jobs at its reality Labs division.
Speaker 2: But first we begin with the aerospace industry.
Speaker 5: This week, Delta Airlines reported fourth quarter earnings that missed
Speaker 5: Wall Street's expectations. The company also said it will be
Speaker 5: taking a more cautious view for twenty twenty six.
Speaker 2: For more, Alex and I were joined by George ferguson
Speaker 2: Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst.
Speaker 5: We first asked George for his take on Delta's recent earnings.
Speaker 6: Really, what we saw here from Delta was a continuation
Speaker 6: of the you know, the premium and the loyalty revenue
Speaker 6: are rolling in strongly, rolling in I think sort of
Speaker 6: five to seven percent if I recall correctly, you know
Speaker 6: above sort of GDP growth rates.
Speaker 4: But the back of the airplane, you know.
Speaker 6: They call it the main cabin or bas the economy
Speaker 6: that's there was that revenue was down seven percent and
Speaker 6: a quarter where Delta was growing a couple percent. And
Speaker 6: so I think we still see this premium trend, and
Speaker 6: I think we're going to see a lot of growth in.
Speaker 4: Premium seats this year.
Speaker 6: We've got Southwest converting to some you know, to more
Speaker 6: of a full service carriers premium. Delta plans to go premium,
Speaker 6: United plans to go premium. Alaska Jet Blue, everyone wants
Speaker 6: to go premium. So I think there's probably some concern
Speaker 6: in the marketplace that maybe premium gets crowded and pushes
Speaker 6: closer to that main cabin kind of kind of fair
Speaker 6: rather than main cabin coming up.
Speaker 5: Delta said they're bracing for risk to their forecast, noting
Speaker 5: the geopolitical environment, whether it's international or domestic POLICI ge
Speaker 5: or is this unusual for them to issue this kind
Speaker 5: of morning Well, I mean.
Speaker 6: Again, I think we're at the beginning of the year,
Speaker 6: and management teams like the caveat things right, and so
Speaker 6: I guess what I would say is we had plenty
Speaker 6: of geopolitical challenges in twenty twenty five. You know, we
Speaker 6: were watching transit demand closely because you've got a war
Speaker 6: raging in Ukraine's been doing that for a bunch of
Speaker 6: years now. Didn't seem to slow down that demand. That
Speaker 6: demand seemed to do okay some days. I wonder if
Speaker 6: there maybe there's more risk domestically, right. One of the
Speaker 6: other things we're watching is the President wants to cap
Speaker 6: interest rates for the credit card companies at ten percent.
Speaker 6: Loyalty through the MX program brings a lot of money
Speaker 6: in for Delta, definitely a source of their competitive advantage.
Speaker 6: And I think if you're capping interest rates, I think
Speaker 6: some of those credit card programs have to change and
Speaker 6: that would hurt some of those loyalty programs. So there's
Speaker 6: I mean, there's risk all over the place all the time. Again,
Speaker 6: the geopolitical didn't seem to hurt demand as much as
Speaker 6: we would expect it in twenty twenty five.
Speaker 2: Right, It kind of always threatens to hurt demand, but
Speaker 2: in the end, people still prioritize traveling and paying for traveling.
Speaker 2: One of the comments from Delta was that the airline
Speaker 2: industry could see consolidation in twenty twenty six. Which players
Speaker 2: would that most likely involved.
Speaker 6: Yeah, so we're already starting to see some of that, right.
Speaker 6: We had an announcement the other day that Allegiance and
Speaker 6: Sun Country are going to put themselves together. They're two
Speaker 6: smaller low cost airlines, some of them pretty quickly growing there,
Speaker 6: quickly growing, so they'll consolidate. Uh, you know, we've heard
Speaker 6: discussion about Frontier potentially buying Spirit Airlines. We still have
Speaker 6: to see, you know, the ultimate outcome for Spirit yuring
Speaker 6: Chapter eleven. We're trying to figure out what their structuring
Speaker 6: looks like the second time they've been there.
Speaker 4: So you can see on the edges.
Speaker 6: Especially where in that low cost marketplace, you can see
Speaker 6: consolidation beginning.
Speaker 4: It takes a long.
Speaker 6: Time and that's the challenge, but you can see some
Speaker 6: of that consolidation already begin. We don't see the big
Speaker 6: players getting consolidated, but you're not You're not going to
Speaker 6: put together. I think you're not going to see sort
Speaker 6: of a united to Delta and America and the Southwest.
Speaker 6: They're not going to We're not gonna put an any
Speaker 6: of those together. I think that's too much, but I
Speaker 6: think a lot of other stuff is potentially in play.
Speaker 4: George.
Speaker 5: We also got news that Delta is ordering thirty Boeing
Speaker 5: seven eighty seven Dreamliner jets, aiming to boost the company.
Speaker 5: How much do you expect this purchase to impact its
Speaker 5: bottom line?
Speaker 6: Yeah, so they're not going to see these airplanes until
Speaker 6: twenty thirty, so it's a bit of a ways away.
Speaker 6: They're replacing seven six sevens, which are old airplanes. We
Speaker 6: have an average age of them about twenty seven years
Speaker 6: right now, you know the seven eight is going to
Speaker 6: be a lot more efficient. Delta gave some numbers they
Speaker 6: fifteen ish plus percent more efficient, so I think that
Speaker 6: really helps the bottom line. Also very interesting to us
Speaker 6: is that Delta is traditionally more of an air bus shop.
Speaker 6: They buy a lot of Airbus product. The recent wide
Speaker 6: bodies they've bought. Our airbus is a three fifty and
Speaker 6: air buses a three thirty. Again, the Boeing wide bodies
Speaker 6: told you twenty eight ish years old. Interesting to see
Speaker 6: them come in for the seven eighty seven. That's really,
Speaker 6: I think, been a category leader in that small narrow
Speaker 6: body world. Boeing has over one thousand orders for that airplane.
Speaker 6: We see rates continued to rise, which to improve profitability at.
Speaker 4: Boeing as they put more through put in that seven eight.
Speaker 6: I thought it was a bit of an endorsement for
Speaker 6: seven eight, even though Delta is not going to say that.
Speaker 2: Probably our thanks to George Ferguson, our senior Aerospace, Defense
Speaker 2: and Airlines analyst.
Speaker 5: This week we focused on a Bloomberg Big Take story
Speaker 5: titled the CEO Playbook to Navigating Trump. You can find
Speaker 5: it on Bloomberg dot Com and the Terminal.
Speaker 2: So the story looks at how public feuds and protectionist
Speaker 2: threats have turned CEO's dealings with the White House into
Speaker 2: a high stakes game of loyalty and leverage.
Speaker 5: And for the story, Bloomberg News recently spoke to experts
Speaker 5: and business leaders on how CEOs should navigate Trump's second term.
Speaker 2: For more on all of this, we were joined by
Speaker 2: one of the Big Takes authors, Matthew Boyle, Bloomberg Senior
Speaker 2: Management reporter.
Speaker 5: We first asked Matt to break down some of the
Speaker 5: challenges faced while interviewing CEOs for the story.
Speaker 7: I mean the usual sort of voices of Corporate America,
Speaker 7: the Chamber of Commerce, the Business Roundtable. We're just like,
Speaker 7: you know, we're going to take a pass on this one,
Speaker 7: and just about every CEO under the sun, you know,
Speaker 7: just they just don't want to go there. It's like
Speaker 7: the third rail. So it was challenging to report, but
Speaker 7: we had a lot of great conversations, let's say, on background,
Speaker 7: with those who are advising CEOs, and that led to
Speaker 7: our playbook. Here the five rules for dealing with the
Speaker 7: Trump Madness.
Speaker 5: Matt We've seen a growing number of business leaders recently
Speaker 5: kind of push back more than usual on some of
Speaker 5: President Trump's policy proposals. We had City CFO this morning
Speaker 5: pushing back on the credit card cap. X On Mobile
Speaker 5: CEO calling Venezuela an investable. Is this unusual in what
Speaker 5: might be the consequences for them?
Speaker 7: Yeah, it takes a certain CEO to push back. It
Speaker 7: takes a Jamie Diamond or the CEO of ex On Mobile,
Speaker 7: who have the clout and the authority and the industry
Speaker 7: backing to say no, you know, this is actually not
Speaker 7: perhaps a good idea. But most of the time, as
Speaker 7: we saw with tariffs, it was happening behind the scenes.
Speaker 7: You remember, this is going back aways. But when Trump
Speaker 7: told the Walmart CEO, Doug McMillan to eat the tariffs,
Speaker 7: Walmart said nothing, and that was probably pretty wise. There
Speaker 7: was no reason to get into a public spat on
Speaker 7: true social with Trump. So but now maybe it's because
Speaker 7: Trump is in a different position twelve months later, or
Speaker 7: it's the issues involved. You know, banking CEOs are very
Speaker 7: happy to go out against interest ratecaps, but we are
Speaker 7: seeing in certain cases some CEOs pushed back.
Speaker 2: Yes, and direct engagement does seem to pay off if
Speaker 2: you can find your way to the President's mobile phone,
Speaker 2: which apparently he pans out the number pretty willingly to
Speaker 2: certain top CEOs. You talk about in videos Jensen Huang
Speaker 2: having a direct line to the president. Also Lipboon tam
Speaker 2: of Intel being able to do that as well.
Speaker 4: Exactly.
Speaker 7: I mean Jensen in video ceo one on Joe in
Speaker 7: December and said, you know, Trump is extraordinarily accessible. The
Speaker 7: United Airline ceo said the same thing to us. I mean,
Speaker 7: you can call this man up. He does answer his
Speaker 7: cell phone, as we've seen sometimes at four thirty in
Speaker 7: the morning he will pick up his cell phone. But
Speaker 7: not everybody has Trump on speed dials. So a point
Speaker 7: of our story was that you have to find a
Speaker 7: way in, whether that's Susie Wiles, a chief of staff,
Speaker 7: whether it's Scott Besson, Treasury or Commerce, Howard Lutnick, or
Speaker 7: one of the sort of lower level aids. Also, I
Speaker 7: mean we found that, you know, the director of the
Speaker 7: White House Office of Public Liaison is somebody you can
Speaker 7: you can go to also, So the point is to
Speaker 7: find a way in, no matter how you do it.
Speaker 5: Matt, what are some of the differences in how President
Speaker 5: and Trump deals with business leaders in his second term
Speaker 5: from his first term.
Speaker 7: Well, the second term, he's a little bit more unshackled.
Speaker 7: Let's say, in the first term, you had a few
Speaker 7: more traditional Republican voices. You know, you had Rex Tillerson
Speaker 7: in there and other folks who you know, were able
Speaker 7: to maybe play a little defense. They were able to
Speaker 7: slow walk some of Trump's more outrageous policy proposals. Now
Speaker 7: it's just all true believers. So he's sort of unfettered.
Speaker 7: He's unshackled, and there's really not many checks. So what
Speaker 7: this means for CEOs is, yeah, they really can't hide.
Speaker 7: They can't just say well, we'll let our industry association
Speaker 7: take care of this or don't worry. I mean, look
Speaker 7: at just the past week, what's been going on. CEOs
Speaker 7: really need to be on watch.
Speaker 5: Yeah, shackles is a fantastic word, a free range Trump right,
Speaker 5: here we go, There we go.
Speaker 2: The other thing that you could do, if you're trying
Speaker 2: to get his attention or curry favor, is to give
Speaker 2: him a made up award.
Speaker 7: Yes, he does respond to these types of trinkets and trophies,
Speaker 7: as we've seen with the Apple CEO, Tim Cook was
Speaker 7: able to give him this sort of glass you know,
Speaker 7: trophy with a twenty four carrot gold base or something,
Speaker 7: you know, with the Apple logo on it. And you know,
Speaker 7: guess what, you know, it was over tariffs and Cook
Speaker 7: Apple we're looking for some relief on foreign microchip tariffs.
Speaker 7: So and you know that helped. It also helped though
Speaker 7: that Cook had really put in the work though, talking
Speaker 7: to Trump for years now, going back to the first administration,
Speaker 7: so you can't just you know, sort of throw a
Speaker 7: trophy at him. But it does take some groundwork as well.
Speaker 7: But look at the Swiss business executives also giving him
Speaker 7: a you know, a gold rolex and you know, so
Speaker 7: these things do tend to have an impact. As we say,
Speaker 7: everything is a transaction with this president.
Speaker 5: Matt, you mentioned it's been difficult getting people to speak
Speaker 5: to you for this story. Did any of the business
Speaker 5: leaders you spoke to give you reasoning for why they
Speaker 5: might be afraid to talk or did they kind of
Speaker 5: just brush you off?
Speaker 7: It's I mean, many brush us off through their gatekeepers.
Speaker 7: They just the thing is, they just don't see much upside.
Speaker 7: They don't want to be the one CEO talking to
Speaker 7: any reporter on the record. But as we've seen now,
Speaker 7: maybe we might see some more come out of the
Speaker 7: woodwork now that Diamond and others are talking about, you know,
Speaker 7: the interest rates. The defense companies also might have something
Speaker 7: to say about Trump pressuring them to, you know, to
Speaker 7: up their game.
Speaker 4: So we'll see.
Speaker 7: But it's that you know, CEO is a yea, and
Speaker 7: that they might be speaking out on certain issues, but
Speaker 7: when it comes to Trump again, they just fail to
Speaker 7: see the upside. But at this point, as we say,
Speaker 7: or it was a Yale School of Management person wrote
Speaker 7: in Bloomberg Opinion, the chaos is not just no longer
Speaker 7: in the background. The chaos is baked in. It's in
Speaker 7: the system. It's coming for them. So they might want
Speaker 7: us talk.
Speaker 2: Yeah, it's front and center, and it feels in many
Speaker 2: ways like those who know how to navigate governments and
Speaker 2: emerging markets might be better positioned.
Speaker 8: Yea.
Speaker 7: So you have that experience exactly, you know, of that
Speaker 7: sort of slightly more chaotic, slightly more free wheeling environments,
Speaker 7: and many of these big multinationals, of course, do operate
Speaker 7: in those areas.
Speaker 2: Our thanks to Matthew Boyle Bloomberg senior management reporter, coming
Speaker 2: up a look at why the tech giant Nvidia and
Speaker 2: the pharmaceutical company Eli Lilly are partnering up. You're listening
Speaker 2: to Bloomberg Intelligence on Bloomberg Radio, providing in depth research
Speaker 2: and data on two thousand companies and one hundred thirty industries.
Speaker 5: You can access Bloomberg Intelligence via Big on the terminal.
Speaker 5: I'm Alexandra Semenova.
Speaker 2: And I'm Scarlett Foo is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 5: I'm Scarlettfou and I'm Alexandra Semenova filling in for Paul Sweeney.
Speaker 2: We moved to some news in big tech this week.
Speaker 5: Alphabet's Google confirmed that it has entered a multi year
Speaker 5: deal with Apple.
Speaker 2: This will allow Alphabet to power the iPhone maker's artificial
Speaker 2: intelligence technology, including the Serie voice assistant.
Speaker 5: We reported late last year that the two companies were
Speaker 5: finalizing such a deal, with Apple planning to pay about
Speaker 5: one billion dollars a year.
Speaker 2: For more on this, we're joined by Ano Agrana, Bloomberg
Speaker 2: Intelligence technology analyst.
Speaker 5: We first asked Ana rog about the specific advantages Google
Speaker 5: brings to Apple with its Gemini models.
Speaker 9: Now we go back in history. Apple doesn't have that
Speaker 9: big of their own foundational model on which it's running
Speaker 9: or it's supposed to run some of these technologies. But
Speaker 9: Apple and Google go back long way. They have a
Speaker 9: very very good agreement on search, which pays Apple billions
Speaker 9: of dollars. So you know, there was some legal issue
Speaker 9: around it. So we always knew that once that legal
Speaker 9: issue goes away, Apple may be working closely with Google
Speaker 9: to basically outsource a lot of their foundational models into
Speaker 9: the technology that they have.
Speaker 4: They have.
Speaker 9: Now it's possible that the next CD upgrade, which is
Speaker 9: most likely going to be in the March April timeframe,
Speaker 9: could be that one big moment that we are all
Speaker 9: looking for Apple to finally come out and say that, okay,
Speaker 9: you know we are not a laggard in AI, that
Speaker 9: they also have a product that's pretty good.
Speaker 5: Ana rag I saw a tweet actually from the official
Speaker 5: Google account announcing this deal, and Elon Musk replied. He
Speaker 5: said that this seems like an unreasonable concentration of power
Speaker 5: for Google obviously has a vested interest here, given you know,
Speaker 5: his participation in XAI, but does he have a point,
Speaker 5: what are the regulatory risks around this deal?
Speaker 9: Yeah, I mean he won't have a point if his
Speaker 9: model been used at that point. So I mean everybody
Speaker 9: is trying to pitch Apple to use that model. But
Speaker 9: you know, at the end of the day, Apple actually,
Speaker 9: for the first time, if you go back a year
Speaker 9: and a half ago, they used open ai. I mean
Speaker 9: you can still use open ai when you go to
Speaker 9: Syria and ask a question and it can take you
Speaker 9: out of there. But for Apple, it has to be
Speaker 9: integrated within the iOS, within the software, but they won't
Speaker 9: do it to an outside vendor where they don't control
Speaker 9: the data. So what Apple's going to do here, They're
Speaker 9: going to use the foundational models from Google, but they're
Speaker 9: going to run a lot of that either on the
Speaker 9: device or their own private, private cloud data centers, which
Speaker 9: means they will still protect the privacy of that question
Speaker 9: and not let it have you know, access to other
Speaker 9: players as well.
Speaker 2: Yeah, the privacy angle is really big for Apple. It's
Speaker 2: kind of its mark of distinction here among the big
Speaker 2: tech players.
Speaker 5: An rag.
Speaker 2: Apple has seen this exodus of talent AI talent going
Speaker 2: to other big tech companies in recent months. Does this
Speaker 2: small year deal with alphabet, with Google change any of that.
Speaker 2: Does that stanch the bleeding at all?
Speaker 4: Yeah?
Speaker 9: For me, it does only because I am now buying
Speaker 9: the model outright from somebody who's doing all the hard work.
Speaker 9: So I'm not in the business of model development. If
Speaker 9: I can use the best model that's out there into
Speaker 9: my product and I pay them some money, and the
Speaker 9: humor amount is about a billion dollars a year, which is,
Speaker 9: to be honest, nothing compared to how many billions these
Speaker 9: companies are spending to come up with their own large
Speaker 9: language model. And that's what actually Apple said in the
Speaker 9: search case and says, I'm not in the search business.
Speaker 9: If Google has the best search, I will outsource that
Speaker 9: technology into my products from them.
Speaker 2: Are thanks to Honor Agrana, bi's technology analyst.
Speaker 5: We move next to news from the athletic apparel company
Speaker 5: Lululemon Athletica.
Speaker 2: This week, Lululemon said it's fourth quarter sales would land
Speaker 2: at the higher end of its twenty twenty five guidance.
Speaker 5: It's a sign that the yoga war company is regaining
Speaker 5: some momentum following a series of disappointing results.
Speaker 2: For more, Alex and I were joined by Punam Goyel,
Speaker 2: senior US e Commerce and retail analyst.
Speaker 5: We first asked Poonam to break down how the company's
Speaker 5: turnaround is going.
Speaker 10: So, the loyalty program is not something that Lulu Lemon
Speaker 10: has had for a long long time, but it does help,
Speaker 10: just like with any other loyalty program. You know, it
Speaker 10: gives you perks. You have access to Lulu Lemon merchandise,
Speaker 10: who have access to Lulu Lemon events, etc. And it
Speaker 10: does bring the member who enjoys the lul Lemon experience
Speaker 10: to keep coming back. It's an added reward for those
Speaker 10: who have been loyal to the company. But make no mistakes,
Speaker 10: that is not what's going to drive the turnaround. Their
Speaker 10: turnaround needs a lot more than that.
Speaker 2: Yeah, I mean, loyalty programs are something that most brands
Speaker 2: have and Lula Lemon has some more structural issues when
Speaker 2: it comes to Lululemon. Separate from the loyalty program, Lulu
Speaker 2: has pre announced fourth quarter sales and it comes in
Speaker 2: at the higher end of its guidance. This is kind
Speaker 2: of surprising because Lulua Lemon has struggled to connect with
Speaker 2: choppers the last couple of quarters.
Speaker 10: Yes, you can say that it's surprising, but at the
Speaker 10: end of the day, the sales are still down. The
Speaker 10: estimate was for sales to be down negative one to
Speaker 10: three percent, so maybe you're close to minus one. That's
Speaker 10: still not where we expect Lemon to be. This doesn't
Speaker 10: tell me that the turnaround is you know, has started
Speaker 10: and is underway and things will begin to improve quarter
Speaker 10: after quarter. I think it's good, but I need a
Speaker 10: lot more to be confident that the turnaround will begin
Speaker 10: to take place.
Speaker 5: What are some of the macroeconomic trends that are driving
Speaker 5: Lululemon's customer base. Is it inflation? Is it just an
Speaker 5: overall change in discretionary spending patterns?
Speaker 2: What is it?
Speaker 10: Yeah, so the macro economy has been you know, good
Speaker 10: and bad. The luxury consumer has been doing well Lemon.
Speaker 10: You could argue SIT's in the affluent space of active wear.
Speaker 10: But that said, it's not that the customer is frushured
Speaker 10: and that's why their sales have fallen. It is that
Speaker 10: they have lacked innovation and execution has been weak. So
Speaker 10: the key here is a company specific issue that they
Speaker 10: need to resolve, and they are working towards it. We
Speaker 10: will be getting a new CEO hopefully at some point
Speaker 10: in twenty twenty six, and it'll really be then where
Speaker 10: we can see who comes in, what's the strategy, and
Speaker 10: how does lul Lemon re engage. It's for a customer
Speaker 10: that probably still loves the brand but just hasn't found
Speaker 10: enough new to keep going back and back.
Speaker 4: Yeah.
Speaker 2: Absolutely. I think about the competitors that Lulu Lemon faces
Speaker 2: in the space. It ranges from Dorry to all the
Speaker 2: other big names out there, including Nike, which offers perhaps
Speaker 2: similar at leisure wear but at a lower price point too.
Speaker 2: When it comes to this new CEO, Calvin MacDonald, the
Speaker 2: current c is set to a step down, and I
Speaker 2: know Elliott has been a big player in pushing for
Speaker 2: Jan Nielsen, the former CFO at Ralph Lauren, to replace him.
Speaker 2: What's the latest on that. Do we presume that Jane
Speaker 2: Nielsen is going to be the next CEO?
Speaker 10: I mean we don't know yet right so it's definitely
Speaker 10: one of the contenders and could be. And I think
Speaker 10: as long as they get a product led executive, which
Speaker 10: he is, Little Lemon could be in good hands to
Speaker 10: continue this turnaround.
Speaker 2: Founder Chip Wilson is also kind of involved here, that's
Speaker 2: another name that we haven't heard from in a while.
Speaker 2: He founded the company. He no longer sits on the board,
Speaker 2: but he still owns about nine percent of the stock.
Speaker 2: How much do you pay attention to what he says?
Speaker 10: We definitely look at it. Look what he said was important.
Speaker 10: He founded the company. The company was grounded on innovation,
Speaker 10: on products, and I think he makes fair points that
Speaker 10: the company needs to kind of really re engage with
Speaker 10: the customer and go back to its roots, which is,
Speaker 10: are you still ahead of the competition? Like you know
Speaker 10: you mentioned earlier, competition has increased, and it has, but
Speaker 10: competition was always there. But where is Little Lemon ahead
Speaker 10: of it? Can you get similar at leisure pants or
Speaker 10: leggings at Vory or at Aloe or at Latta? How
Speaker 10: does Little Lemons stand out today? And that's the big
Speaker 10: question that they need to answer.
Speaker 2: Our thanks to put Im Goyel, senior US e Commerce
Speaker 2: and retail analysts at Bloomberg Intelligence.
Speaker 5: We move next to the biotech space.
Speaker 2: And this week tech Giant and Nvidia announced plans to
Speaker 2: invest a billion dollars over five years in a new
Speaker 2: AI lab. And that's with the pharmaceutical company Eli Lilly
Speaker 2: for more on this.
Speaker 5: We were joined by Sam Fazzelli, Bloomberg Intelligence, Director of
Speaker 5: Research for Global Industries and senior pharmaceuticals analysts.
Speaker 2: We started off by asking Sam to break down the
Speaker 2: latest news at ELI Lilly.
Speaker 11: Well, look, I think these are the brillion dollar club
Speaker 11: getting together. A billion dollars is probably dropping the ocean
Speaker 11: for both of them. It's over five years. And what
Speaker 11: I think the aim of this, at the end of
Speaker 11: the day is to try and automate and speed up
Speaker 11: as much of the partly the drudgery of doing lab work,
Speaker 11: because lab work just like as if you were a
Speaker 11: doctor in a clinical setting, you need to take a
Speaker 11: lot of notes, a lot of detail. But at the
Speaker 11: same time, I think they're investing in what appears to
Speaker 11: be automating twenty four to seven experiments, things that human
Speaker 11: beings just can't do. And I know, having been a scientist,
Speaker 11: that sometimes your life is on hold because you have
Speaker 11: to go back and deal with your experiments, yoursells, or
Speaker 11: whatever it is that you're running. So a lot of
Speaker 11: these things I think could speed up and also make
Speaker 11: the life of the scientists a little bit easier at
Speaker 11: the end of the day, though I think the am
Speaker 11: here is to try and get scientific discoveries translated to
Speaker 11: drugs quicker and get them to market quicker.
Speaker 5: Sam, What does this mean for Eli Lilly's rivals? Do
Speaker 5: you expect that we'll see some of its competitors also
Speaker 5: ramp up their AI endeavors given its partnership with the
Speaker 5: company like Nvidia.
Speaker 11: Pretty much all pharma companies. And I just want to
Speaker 11: point you to a recent survey that EI Bloomberg Intelligence
Speaker 11: has done that looked at ten different industries, one of
Speaker 11: which being the pharmaceutical industry. Ask executives, what are you
Speaker 11: doing with this? What are you trying to get to?
Speaker 11: What is the aim? At the end? Everybody is at this.
Speaker 11: This is not something specific to Lily. And you know, Google,
Speaker 11: for example, has has through deep Mind, has created an
Speaker 11: agentic KI called Google Scientists. It's like, I think four
Speaker 11: agents or five agents who interact with each other and
Speaker 11: check each other's hypothesis. So a lot of this is
Speaker 11: going on in all companies, but of course here we
Speaker 11: have Lily, one of the richest farmer companies around in
Speaker 11: terms of the amount of cash blow that is got
Speaker 11: really being able to spend the money without really impacting it.
Speaker 11: It's balance sheet and cash flow, and I'm pretty sure
Speaker 11: everybody's at this, but clearly this is the news, doujou if.
Speaker 2: You like, absolutely, Like you said, it's a drop in
Speaker 2: the bucket for both of these companies. But when you
Speaker 2: have a number like one billion dollars and these big
Speaker 2: brand names, it gets people's attention. What also gets my attention, Sam,
Speaker 2: is Maderna. Maderna obviously one of the vaccine makers during
Speaker 2: the pandemic, but it's had a rough go at it
Speaker 2: recently because it's so dependent on these vaccines and we
Speaker 2: have an administration that is kind of anti vaccine right now.
Speaker 2: Yet madernal pre announced at the JP Morgan Healthcare conference
Speaker 2: that is the US COVID business did better than expected.
Speaker 2: Is Madernas starting to stabilize, Well.
Speaker 11: One would hope. So they've stuck with their aim of
Speaker 11: growing twenty twenty six point ten percent. But you know,
Speaker 11: if you look back at the beginning of the year,
Speaker 11: where the company in twenty twenty five started with guidance
Speaker 11: and where we ended up, we're a good five six
Speaker 11: hundred million dollars short of what the hope was at
Speaker 11: the beginning of the year. So everybody, I thinking knows
Speaker 11: that this is a very difficult market to call for
Speaker 11: exactly the reasons you just highlighted. There is a constant
Speaker 11: change in the way that the administration in the US,
Speaker 11: and not just the US elsewhere is also dealing with vaccination,
Speaker 11: particularly in the COVID side of things. Other vaccinations are
Speaker 11: still pretty much well settled and at least outside the US.
Speaker 11: Problem also that MODERNA is going to face or has
Speaker 11: been facing, is that there are lots of people. There's
Speaker 11: I think my patent colleagues say that at least twenty
Speaker 11: various directions of legal cases or trials going on different
Speaker 11: groups saying you're infringing my patents, so you've fringe my
Speaker 11: patents and you need to because there was billions and
Speaker 11: billions of dollars of revenues. So some of that is
Speaker 11: coming potentially in the March timeframe, very lightly against a
Speaker 11: trial coming up against our Bridges, another company that's listed
Speaker 11: in the US. So some of that is I think
Speaker 11: something that might keep people from getting too excited.
Speaker 5: Our Thanks to Sam Fazzelli, Bloomberg Intelligence Director of Research
Speaker 5: for Global Industries and senior pharmaceuticals analyst, coming up all
Speaker 5: look at how artificial intelligence is changing shopping.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 5: You can access Bloomberg Intelligence via big on the terminal.
Speaker 5: I'm Alexandra Semenova and I'm Scarlett Foo. This is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: I'm Scarlet Foo.
Speaker 5: And I'm Alexandra Semenova filling in for Paul Sweeney.
Speaker 2: We move now to some news in the tech space.
Speaker 5: This week, we heard that the tech giant Meta Platforms
Speaker 5: is beginning to cut more than a thousand jobs from
Speaker 5: its Reality Labs division.
Speaker 2: It's part of a plan to redirect resources from virtual
Speaker 2: reality and metaverse products towards AI, wearables and phone features.
Speaker 5: For more on this and the latest tech news, we
Speaker 5: were joined by Mandeep Saying, global tech research head at
Speaker 5: Bloomberg Intelligence.
Speaker 2: We first as Ban Deep what these job cuts mean
Speaker 2: for Meta's bottom line.
Speaker 8: I mean reality Lab segment is almost losing twenty billion
Speaker 8: dollars a year and cumulatively they've lost about seventy billion
Speaker 8: dollars over the past three years, so a lot of
Speaker 8: investors questioned, you know, how long they were expected to
Speaker 8: remain patient on those kind of losses. And I think
Speaker 8: the initial rumors were about a thirty percent cut in
Speaker 8: that unit. So this is somewhat below expectations in terms
Speaker 8: of ten percent job cut, but it just goes to
Speaker 8: show that right now, the companies obviously focus more on
Speaker 8: the AI side in terms of building the infrastructure, building
Speaker 8: their own large anguid model, and it may take a
Speaker 8: while to you know, really bring it, bring that LLLM
Speaker 8: concept in that variables or the whether it's a VR
Speaker 8: headsets or the glasses. And I mean when you compare
Speaker 8: VR headsets or the glasses that they're selling to let's
Speaker 8: say AirPods, the number of units pale in comparison. We're talking,
Speaker 8: you know, ten million, maybe if they do twenty million.
Speaker 8: Apple does more than one hundred million AirPods a year,
Speaker 8: So what's the opportunity here? And I think that's where
Speaker 8: you probably will see more cuts in that business.
Speaker 2: That is a really really important contrast to make there
Speaker 2: in terms of what Meta is trying to do, because
Speaker 2: they want to be part of the mass market here,
Speaker 2: but it's not quite there yet. Mindy. As Meta pivots
Speaker 2: away from VR and the metaverse to AI, what does
Speaker 2: that mean for spending? I mean, they obviously had to
Speaker 2: spend a lot to build out the metaverse, to build
Speaker 2: out their VR offerings, and now they're going to shift
Speaker 2: everything to building out the AI offerings of large language models,
Speaker 2: these AI glasses. What do you think that the pace
Speaker 2: of spending will just kind of continue, It won't really
Speaker 2: shift all that much.
Speaker 8: Yes, On the AI side, the opportunity is huge. What
Speaker 8: everyone is chasing right now is an AI agent that
Speaker 8: can book your travel, your Uber trip, order food, you know,
Speaker 8: do shopping for you. That's the vision Google is chasing.
Speaker 8: That's what Amazon alexaplus launch was all about. So Meta
Speaker 8: has that surface area with you know, Instagram and WhatsApp,
Speaker 8: and you could argue they could in theory develop such
Speaker 8: an agent, but the hard part is integration and getting
Speaker 8: the AI to where it's you know, reliable and predictable.
Speaker 8: And that's where I mean, it's anybody's guests who is
Speaker 8: best positioned. I think the Apple Google partnership that we
Speaker 8: saw this week is probably a negative for Meta in
Speaker 8: this sense. Like, if Apple is setting up defaults in
Speaker 8: their phone, then that makes it hard for an external
Speaker 8: kind of agent to do these kind of things. So
Speaker 8: from that perspective, distribution really matters and operating system control
Speaker 8: really matters. So Meta is somewhat at a disadvantage when
Speaker 8: it comes to, you know, their distribution on Apple and
Speaker 8: Android devices.
Speaker 5: Mandy. We also got new Airbnb hired Meta's head of
Speaker 5: General AI, which is really interesting because wasn't it not
Speaker 5: too long ago that they declined work with open AI.
Speaker 5: What does this all mean for its artificial intelligence endeavors.
Speaker 8: Yeah, I think Brian Chesky has been quite vocal about
Speaker 8: using open source llms as opposed to you know, proprietary
Speaker 8: llms like open AI and Gemini, and so his thing is,
Speaker 8: I've got a direct customer traffic coming to my website.
Speaker 8: If I give away you know, my bookings interface to
Speaker 8: these llms, then I'm losing that customer direct customer touch.
Speaker 8: And he doesn't want to do that. He instead wants
Speaker 8: to build his own LLM based on an open source
Speaker 8: model that's already out there, and that's where you know,
Speaker 8: Meta has open source their model in the past, so
Speaker 8: it makes sense to have somebody from Meta come in
Speaker 8: and do something along those lines. AB and B has
Speaker 8: been open to using Chinese open source models and building
Speaker 8: on top of that. So from that perspective, it's an
Speaker 8: interesting strategy that they are going ahead with in terms
Speaker 8: of using all kinds of open source and not just
Speaker 8: you know, the US based model.
Speaker 2: Who in the tech world is winning the talent war
Speaker 2: because it felt like for a long time open AI
Speaker 2: and traffic they were, you know, picking up a lot
Speaker 2: of talent. Is that still the case?
Speaker 8: I mean right now, the talent is going to where
Speaker 8: the compute is. If you don't have the compute, you
Speaker 8: just cannot attract the talent because these models need a
Speaker 8: lot of compute for training. And you may be the
Speaker 8: smartest person, but if you don't have the computer, you
Speaker 8: can't test your idea. So from that perspective, infrastructure build
Speaker 8: really matters, which is why in Nvidia, even though they
Speaker 8: are the chip provider, now they launch their own foundational
Speaker 8: model in autos self driving that just goes to show
Speaker 8: what compute can do, you know, and Vidia is definitely
Speaker 8: moving up the stax. It will be interesting to see
Speaker 8: how many areas where they compete in with their own
Speaker 8: foundational model man Deep.
Speaker 5: We're early into the earning season, but big tech results
Speaker 5: will be here before we know it. And obviously the
Speaker 5: bar is really high when it comes to what these
Speaker 5: companies are saying about how they're monetizing their heavy AI investments.
Speaker 5: Do you think that they'll live up to the expectations.
Speaker 8: I think right now you have to focus on where
Speaker 8: you will see positive earnings revisions, and given the kapex
Speaker 8: investments are going up for this year, it's going to
Speaker 8: be hard to show, you know, positive revisions when it
Speaker 8: comes to earnings, except for someone like Alphabet that really
Speaker 8: has seen a big shift in sentiment because one everyone
Speaker 8: realizes that their models have caught up, and they also
Speaker 8: are the most efficient when it comes to their stack,
Speaker 8: the use of TPUs and low cost inferencing. So from
Speaker 8: that perspective, I think Alphabet clearly is best position to
Speaker 8: deliver positive surprises. But for someone like Meta, I mean,
Speaker 8: if you're hearing job cuts, then you know probably it's
Speaker 8: going to be hard for them to you know, show
Speaker 8: positive revisions this year.
Speaker 5: Our thanks to man Deep sing Global Tech Research had
Speaker 5: at Bloomberg Intelligence this week.
Speaker 2: We also looked at the e commerce platform Commerce which
Speaker 2: provides a driven tools for brands and retaillers. This company
Speaker 2: trades on the NAZAC under the ticker CMRC.
Speaker 5: We were joined by the company's CEO, Travis Hess, who
Speaker 5: discussed how AI is changing shopping and this came on
Speaker 5: the heels of Google launching its Universal Commerce Protocol or UCP.
Speaker 2: Commerce is an active partner in UCP, which enables buying
Speaker 2: directly across Google's AI surfaces. We first asked Travis to
Speaker 2: break down Google's UCP and just how exactly this makes
Speaker 2: shopping easier.
Speaker 3: Given the extent of which Google plays in all of
Speaker 3: our lives and how people think of them, It's essentially
Speaker 3: setting the foundation and the standard for brands and retailers
Speaker 3: and other organizations to be able to scale agent to
Speaker 3: commerce across all of the surfaces that Google AI would hit.
Speaker 3: So think of the contextualized conversations everyone's having through answer
Speaker 3: engines today. Those conversations are then dynamically recommending not only
Speaker 3: experiences and facts, but certainly shopping and brands based on
Speaker 3: the enrichment of data against those surfaces, and Google is
Speaker 3: enabling a standard by which consumers would be able to
Speaker 3: buy in a standardized, safe secure way. As it serves
Speaker 3: up discovery, you'll be able to buy seamlessly across those surfaces.
Speaker 5: Travis, can you walk us through how AI will change
Speaker 5: the shopping experience in practical terms? Let's say I'm looking
Speaker 5: for a bag? How do I go about using your platform?
Speaker 3: The consumer behavior has changed more than anything, So the
Speaker 3: amount of eyeballs and behavior going to the answer engines
Speaker 3: is probably the fastest adopting technology we've seen. So because
Speaker 3: the consumers are going there and they're having these conversations,
Speaker 3: brands and retailers are having to respond in kind, and
Speaker 3: they tend to have a fair amount of brand ethos,
Speaker 3: so they're very concerned about where they show up, how
Speaker 3: they show up, and who they show up next to.
Speaker 3: So trust is at the cornerstone of this. So a
Speaker 3: lot of the foundational stuff you're hearing about now is
Speaker 3: to set up that trust. So when you're shopping for
Speaker 3: that bag, it's giving you a response that you can
Speaker 3: objectively trust. It's not serving up who paid the most
Speaker 3: to be listed or injected in that conversation. The thesis
Speaker 3: behind this is based on your own behavior within those
Speaker 3: answer engines, and of course other behavior within Google. Whether
Speaker 3: that's through Chrome or through other Google products. They have
Speaker 3: a unique advantage there because of the amount of surfaces
Speaker 3: an individual might use to synthesize that in a hyper
Speaker 3: personalized way. So think of it as not only shopping either,
Speaker 3: but think of going into your favorite store and someone
Speaker 3: as you walk in can scan a code and immediately
Speaker 3: knows what you own, what you like, where you're going,
Speaker 3: what you're looking for, so they could curate something for
Speaker 3: you immediately. Where that friction is removed through the process.
Speaker 3: Think of that virtually in this particular capacity. That's the
Speaker 3: future state.
Speaker 2: So all the information that Google has on me, they
Speaker 2: are also selling who are they selling it to?
Speaker 3: Oh that's not for me, that's that's top.
Speaker 2: I mean. The reason I ask is because it depends
Speaker 2: on me logging into Google for them to give me
Speaker 2: those personalized recommendations. If I don't choose to log in,
Speaker 2: then I end up with the equivalent of a Google
Speaker 2: search on a public computer.
Speaker 8: You do.
Speaker 3: I think the models are changing. Certainly the old model
Speaker 3: was you're searching for terms, and certainly organizations are optimizing
Speaker 3: through SEO to be listed organically at the top, or
Speaker 3: they're through paid search, but listed that still exists today
Speaker 3: certainly in this behavior that drives that, but where this
Speaker 3: is evolving to is called GEO, so generative optimization, which
Speaker 3: is really going to be a combination of structured data,
Speaker 3: which is like product catalog data, skew, color size, all
Speaker 3: those dynamics dimensions coupled with unstructured data, which are brand guidelines,
Speaker 3: call center, transcripts, blogs, articles, all the things that would
Speaker 3: contextualize that brand and that product, if you will. That's
Speaker 3: being enriched oftentimes by us on the petonomic side, which
Speaker 3: is part of our portfolio, and then syndicated across these
Speaker 3: different surfaces, be that Google or Open AI or Microsoft
Speaker 3: or whomever. And it's going to continue to expand as
Speaker 3: the channels have expanded over the last several years.
Speaker 5: What kind of AI trends and retail trends have you
Speaker 5: been monitoring.
Speaker 3: It's all about AI this year. That's what's hot exactly
Speaker 3: this right, I think there's two sides of the spectrum.
Speaker 3: There's a lot of buzz, which is exciting, but at
Speaker 3: the same time, it's confusing a lot of people. Is
Speaker 3: everyone is doing everything and it's hard to kind of reconcile,
Speaker 3: like what's meaningful to the business I think for larger
Speaker 3: organizations that we work with, brand manufacturers and retailers, trust,
Speaker 3: brand ethos, and security are top of mind. So for them,
Speaker 3: it's less about the sizzle, it's more about the stake
Speaker 3: and the foundational elements. I think the importance of the
Speaker 3: Google announcement is they are taking a very pragmatic approach
Speaker 3: to this to lay the tracks so this can scale
Speaker 3: and scale properly with trust, with security, and most importantly
Speaker 3: with a frictionless experience for customers. Because the brands don't
Speaker 3: want to lose that customer data. They still want to
Speaker 3: maintain that experience, even though they're not fully controlling the
Speaker 3: surface by which they're showing up against. It's not like
Speaker 3: they're showing up against their own websites, so they're in
Speaker 3: a surface they don't completely control. They're controlling part of
Speaker 3: it through the data enrichment in syndication, but they're not
Speaker 3: controlling all of it. So they're very, very concerned that
Speaker 3: that experience is a positive one and a frictional list one.
Speaker 3: Otherwise it has ramifications, It drives cost up and call centers,
Speaker 3: it drives maybe negative customer experience, it drives back things
Speaker 3: exactly we're in turns bad things on the back end.
Speaker 3: So that's the reconciliation people are trying to have. But yes,
Speaker 3: that EI has sucked all the oxygen out of the
Speaker 3: room at Javis.
Speaker 4: And it's a big rule.
Speaker 2: What will AI not change for shoppers?
Speaker 3: But will it not change for shoppers? I think the
Speaker 3: behavior and the surfaces by which they're going to they're
Speaker 3: still going to go to. Right. I think new ones
Speaker 3: are showing up. I think the expectation personalization has been
Speaker 3: promised for a long time. I think there's some hesitancy
Speaker 3: there around the trust, So I think overcoming the trust
Speaker 3: aspect of this and having that reinforced through continued behavior.
Speaker 3: The shopping is very new. There was a big rush
Speaker 3: to do this in holiday and the experiences weren't great,
Speaker 3: so I think there's a little bit of hesitation. I
Speaker 3: think you'll see a much more robust offering this holiday season.
Speaker 5: Our thanks to Commerce CEO Travis Hess.
Speaker 2: That is this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: and one hundred the industries.
Speaker 5: And remember you can access Bloomberg Intelligence via bi go
Speaker 5: on the terminal I'm Alexandra Samonova and.
Speaker 2: I'm Scarlet Foo. Stay with us. Today's top stories and
Speaker 2: global business headlines are coming up right now.