Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight ahead on the program will
Speaker 2: get you set for more corporate earnings in the tech sector.
Speaker 2: I'm Nathan Hager in Washington.
Speaker 3: I'm Caline Hetpet in London, where we're asking how Middle
Speaker 3: Eastern and African countries are focused on business in a
Speaker 3: changing world order.
Speaker 4: I'm Doug Krissner looking at whether the le boo boo
Speaker 4: craze is due for a Beeanie Baby style bust.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Nathan Hager. We begin today's
Speaker 2: program with more corporate earnings in tech. Cybersecurity provider crowd
Speaker 2: Strike reports on Tuesday than we hear from software names
Speaker 2: Snowflake and Salesforce on Wednesday for more. We're joined by
Speaker 2: the analysts who cover these companies most closely, Bloomberg Intelligence
Speaker 2: Global head of Tech Research Mandeep Singh and On a
Speaker 2: rag Rana, tech analyst for Bloomberg Intelligence. It's great to
Speaker 2: have the both of you with us on this weekend program.
Speaker 2: Of course, we've heard from a lot of big tech
Speaker 2: names already. A lot of the hyper scalers have reported
Speaker 2: as well. Mandy, we'll start with you. Do the results
Speaker 2: that we've heard so far. Tell us anything about what
Speaker 2: we could hear from these software players this week.
Speaker 5: Yes, I think when you look at the hyperscale cloud numbers,
Speaker 5: especially Microsoft and Google, it's pretty clear that you know,
Speaker 5: we are seeing that lift from AI workloads for both
Speaker 5: Microsoft and Google, and that's why Microsoft is growing close
Speaker 5: to forty percent. Google was mid thirty percent, and they're
Speaker 5: ramping up kpex in anticipation of those numbers going even higher.
Speaker 5: So I expect that to trickle down to some of
Speaker 5: the software players like Snowflake, for example, is in the
Speaker 5: business of using enterprise data for deploying some of these
Speaker 5: agents that everyone is looking to add in terms of
Speaker 5: their enterprise functionality and snowflake data is to my mind critical,
Speaker 5: so they should see a similar lift to their top
Speaker 5: line from AI workloads and CrowdStrike. Being a cybersecurity provider,
Speaker 5: I think they are finding the tack surface when it
Speaker 5: comes to generative AI is far bigger than what anything
Speaker 5: you know, these security companies have dealts with and you
Speaker 5: could have prompt injunction attacks and some other types of
Speaker 5: new attack at that no one even conceived of before.
Speaker 5: So they should similarly benefit from enterprises looking to secure
Speaker 5: their you know, firewalls and their infrastructure. Given everyone is
Speaker 5: deploying AI, so I expect a crowd strike print should
Speaker 5: be strong as well. In terms of AI demand.
Speaker 2: Let's bring you into the conversation on a RAG as well.
Speaker 2: I know you cover salesforce pretty closely as well. What
Speaker 2: do the hyper scale numbers tell you about what we
Speaker 2: could get from salesforce?
Speaker 6: So salesforce is on the other side of the equation.
Speaker 6: They really, you know, are in a completely different business
Speaker 6: than some of the other vendors that when they've talked
Speaker 6: about In their case, the only product that hasn't overlapped
Speaker 6: is some of the data cloud that they started to
Speaker 6: sell in the last couple of years as part of
Speaker 6: their Jenny I offering. Now that product is a small
Speaker 6: portion of the overall portfolio, so even if they doubles,
Speaker 6: really it's not going to really move the needle for them.
Speaker 6: For them, they're on the receiving side of the lower
Speaker 6: end of it spending, which is as people are spending
Speaker 6: more and more money on AI related workloads and AI
Speaker 6: related infrastructure. You know, it's taking out from some of
Speaker 6: the stuff that Salesforce is selling. And in fact, one
Speaker 6: of the things that they are grappling with is the
Speaker 6: lack of seat count growth in their enterprises that they
Speaker 6: sell into. So it's I mean, you know, in our view,
Speaker 6: it's not going to be that exciting for them. They're
Speaker 6: running at at about ten percent Booking's growth rate number.
Speaker 6: That's a that's probably where it will see for them.
Speaker 6: The big question for them would be, you know, how
Speaker 6: much of the guidance they're going to go out and
Speaker 6: improve because of the closure of the Informatica deal which
Speaker 6: just happened.
Speaker 2: Let's dig into all these companies much more closely. Man, Deep,
Speaker 2: I know you cover CrowdStrike in particular, and I got
Speaker 2: to admit, whenever I think of CrowdStrike, I think of
Speaker 2: outage from last year, just because you know, full disclosure,
Speaker 2: it affected me personally, I think a lot of listeners
Speaker 2: can relate to that as well. Is that still an overhanger?
Speaker 2: Is it fair to still think about the outage when
Speaker 2: it comes to crowd strength?
Speaker 5: Well, so when I look at the new customers that
Speaker 5: CrowdStrike has at it since, then, clearly their pace of
Speaker 5: new customer ads have slowed because of what happened, and
Speaker 5: I feel they've come out of it relatively okay, even
Speaker 5: though there was a slowdown, but they managed to hold
Speaker 5: on to their existing customer base. And now we are
Speaker 5: at a point where because of generative AI deployments. I mean,
Speaker 5: there are three or four companies that probably our best
Speaker 5: position to benefit from, you know, the GENAI deployment. So
Speaker 5: I would put CrowdStrike amongst one of them. And clearly
Speaker 5: there is M and A going on with pallel to
Speaker 5: buying you know a Chronosphere and cyber Arc and Google
Speaker 5: buy with so there are other dynamics at play. But
Speaker 5: on an organic basis, I think crowd strike has done
Speaker 5: well and they have themselves made some tuck in, so
Speaker 5: I feel they have been able to at least stabilize
Speaker 5: the impact and second half for them would be faster
Speaker 5: growth compared to the first half of twenty twenty five.
Speaker 5: And so from that perspective, I mean, given there around
Speaker 5: twenty percent growth, I expect growth to improve going forward.
Speaker 2: It's interesting to think about the opportunities presented by artificial
Speaker 2: intelligence for the cybersecurity space. When it comes to CrowdStrike,
Speaker 2: are there challenges?
Speaker 5: So crowd Strike to me, you know, is still a
Speaker 5: company that is a category leader in the endpoint security space,
Speaker 5: and so the challenge is if everyone starts deploying security
Speaker 5: in a different way. So imagine, you know, we have
Speaker 5: a lot more agent take functionality out there, you don't
Speaker 5: need to secure as many human users, and so that
Speaker 5: could have an impact on crowd Strike going forward, and
Speaker 5: they clearly have to adapt to their business model in
Speaker 5: terms of the agentic functionality. But as I said, you know,
Speaker 5: I don't see any pure play AI security provider really
Speaker 5: challenging their position right now.
Speaker 2: And when it comes to artificial intelligence opportunities on a
Speaker 2: rog looking at sales forces upcoming earnings, we just heard
Speaker 2: from the CEO ahead of the report saying he's not
Speaker 2: going back to chat GPT after seeing what Google's Gemini offers.
Speaker 2: Now there's been a lot of attention on this new
Speaker 2: large language model coming from the alphabet unit. Where does
Speaker 2: that position salesforce hetting into earnings?
Speaker 6: Yeah, I think the Google THEO must thank him for
Speaker 6: a few billion in market capital over there, because that
Speaker 6: was a very big statement. Google works very closely with Salesforce.
Speaker 6: They provide cloud services to Salesforce, so it is a
Speaker 6: very good relationship between the two firms. And also remember
Speaker 6: that open ai is starting to get into the wheelhouse
Speaker 6: of a lot of these software providers by saying that
Speaker 6: you can run some of the software like functionalities through CHATGPT,
Speaker 6: so they could be a little bit of that. But
Speaker 6: frankly speaking, when it comes to Salesforce, the fundamentals are
Speaker 6: that non AI related it spending is weak, and it
Speaker 6: has been weak for some time in the last couple
Speaker 6: of years. As corporations are spending more on expanding their
Speaker 6: AI footprint or either an infrastructure or models, they are
Speaker 6: pulling back in areas such as traditional software spending where
Speaker 6: salesforce lies, or in consulting, which is impacting some of
Speaker 6: the consulting names. So that's the theme that we are
Speaker 6: seeing right now. Let's see if that reverses in twenty
Speaker 6: twenty six. But as of now, things you know, I
Speaker 6: would say from a macro point of view are not
Speaker 6: that rosy for Salesforce.
Speaker 2: Interesting Why is that? Is it just because there's too
Speaker 2: much of a reliance on artificial intelligence right now?
Speaker 7: No, that's not that.
Speaker 6: You know, if you are a JP Morgan or a
Speaker 6: City Bank, I mean, you have to make sure that
Speaker 6: you invest aggressively in AI related aspects of it now.
Speaker 6: And these companies also don't have unlimited budgets. So if
Speaker 6: your overall budget is only going to grow up by seven,
Speaker 6: eight percent or nine percent, you know, and you are
Speaker 6: allocating a large portion of that into AI, you know,
Speaker 6: you have to find money from somewhere else, and that
Speaker 6: somewhere else is usually tapering down in some of the
Speaker 6: other areas, whether it's buying new hardware or you know,
Speaker 6: cutting your consulting spends, et cetera.
Speaker 7: And that's what's you know, impacting Salesforce.
Speaker 2: And Mandeep looking at Snowflakes earnings the same day as
Speaker 2: Salesforce on Wednesday, looks like there's a lot of focus
Speaker 2: on how they're navigating artificial intelligence as well.
Speaker 5: Yeah, I mean, look, I mean I come pair Snowflake
Speaker 5: to a company like Palenteer. Palenteer has seen, you know,
Speaker 5: remarkable acceleration on the commercial side, you know, by integrating
Speaker 5: their ontology product with these llms. And to me, the
Speaker 5: closest competitor for Snowflake is Palenteer and Data Breaks. So
Speaker 5: from that perspective, you know, Snowflake hasn't seen that kind
Speaker 5: of a bump that Palenteer has seen. That's partly to
Speaker 5: do with they didn't have as many llms on their platform,
Speaker 5: you know, to integrate with for agentic functionality. They've been
Speaker 5: trying to add more llms and that for me, is
Speaker 5: a catalyst for that top line acceleration. But there is
Speaker 5: no doubt that they are behind when it comes to
Speaker 5: some of the agentic functionality compared to Data Breaks and Talenteer.
Speaker 2: So when it comes to bringing in more of those
Speaker 2: large language models, does that add to some of its
Speaker 2: costs And could that have an effect on its margins?
Speaker 5: It certainly could, And that's our view as well that
Speaker 5: Snowflake may see some pressure on margins. And look, they
Speaker 5: use all these hyperscalers, Microsoft, Google and Amazon for deploying
Speaker 5: their products. So if Microsoft or Google have to raise prices,
Speaker 5: then they're going to pass it on to a Snowflake.
Speaker 5: So from that perspective, we do think with more AI
Speaker 5: workloads Snowflake, a company like Snowflake may see pressure on
Speaker 5: the margins.
Speaker 2: Of course, all these earnings are coming at a time
Speaker 2: where investors broadly are questioning artificial intelligence valuations on a
Speaker 2: rog How does that play into what we could get
Speaker 2: this week?
Speaker 7: Yeah, I mean you look at valuations mine.
Speaker 6: You know, Salesforce, as I said, is the completely opposite
Speaker 6: realm of all the AI infrastructure play that's out. Their
Speaker 6: evaluation is a lotless which has been historically. In fact
Speaker 6: SaaS trend that have seen a decline in the last
Speaker 6: twelve for twenty four months because of the seatcout pressure
Speaker 6: that we talked about, and even for them, you know,
Speaker 6: when you look at margins, you're not going to get
Speaker 6: the same lift in margins that we have seen in
Speaker 6: the last two to three years of Salesforce under the
Speaker 6: attack of some activist investor really went out and gave
Speaker 6: margin back to the investors. But I think right now
Speaker 6: with their Agent Force product, they really are investing heavily
Speaker 6: into sales and marketing, and I think a lot of
Speaker 6: that will you know, show up in this quarter's earnings.
Speaker 2: Again, we hear from a crowd strike on Tuesday and
Speaker 2: then Snowflake and Salesforce on Wednesday. Thanks to both of
Speaker 2: you for being with us. That's man Deep Singh and
Speaker 2: on a rag rana of Bloomberg Intelligence and coming up
Speaker 2: on Bloomberg day Break weekend, we'll look at how Middle
Speaker 2: Eastern and African countries are focused on business in a
Speaker 2: changing world order. I'm Nathan Hager, and this is Bloomberg.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead at
Speaker 2: the top stories for investors in the coming week. I'm
Speaker 2: Nathan Hager in Washington. Up later in the program, we'll
Speaker 2: look ahead to the holiday shopping season, as those trendy
Speaker 2: La Boo Boo dolls are expected to be a hot
Speaker 2: item in Asia. But first in the coming days, industry leaders, investors,
Speaker 2: and government officials descend on the UAE for the seventh
Speaker 2: Milkin Institute Middle East and Africa Summit. This year's edition
Speaker 2: is taking place at a time when shifting geopolitical landscapes
Speaker 2: and technological advances are dramatically altering the world order. Attendees
Speaker 2: will seek to understand where the Middle East and Africa
Speaker 2: fit in the new hierarchy. For more, let's go to
Speaker 2: London and bring in Bloomberg Daybreak Europe anchor Caroline hepger Nathan.
Speaker 3: The Middle East and Africa have the advantage of young
Speaker 3: demographics and strategic location. They could well be poised to
Speaker 3: take advantage of the next frontier in global devaslopment this year. Already,
Speaker 3: Middle Eastern states, including Kuttar have played a pivotal role
Speaker 3: in the signing of the Gaza Peace Plan, with President
Speaker 3: Donald Trump thanking Arab and Muslim nations in advance for
Speaker 3: pledging money to rebuild the devastated Palestinian territory. Questions, do
Speaker 3: you remain over the extent to which these nations in
Speaker 3: the region, including Saudi Arabia and the UAE, will help
Speaker 3: fund the reconstruction. While several deep pocketed and energy rich
Speaker 3: countries in the area worked on and enthusiastically endorsed the
Speaker 3: peace Plan, almost all have specific reservations. Meanwhile, countries in
Speaker 3: Africa are grappling with a complex relationship with the US President.
Speaker 3: Bloomberg opinion columnist Andrea's Kluth has written about how Donald
Speaker 3: Trump's claims that South Africa is facing government sponsored race
Speaker 3: based discrimination and that in Nigeria quote, they're killing Christians
Speaker 3: are evidence of the current administration's u use of African
Speaker 3: policy to promote an America First agenda. The position of
Speaker 3: African countries, therefore, in a world increasingly dominated by US rhetoric,
Speaker 3: does face challenges, and it's something that was discussed widely
Speaker 3: at the recent Bloomberg Africa Business Summit. During the event,
Speaker 3: South Africa's Minister of Finance, Ino Godongwana told Bloomberg Jennifer's
Speaker 3: Abasaja that talks between the United States and South Africa
Speaker 3: are ongoing.
Speaker 8: The and negotiations taking place between ourself and the USA.
Speaker 8: Accept that we can be through the media through what
Speaker 8: details of this agament when we're not negotiating with them
Speaker 8: in the media.
Speaker 9: What would you say the current state of relations are
Speaker 9: between South Africa and the US.
Speaker 8: Absolutely non problem. Accept that now and again we hear
Speaker 8: what the the USA says about general side and all
Speaker 8: of them.
Speaker 9: Do you think it is putting a dent on potential
Speaker 9: investment into the country.
Speaker 8: Yes, the US is powerful and to that extent it
Speaker 8: influenced the attitude of Inversta community to South Plus, I
Speaker 8: love you.
Speaker 3: That was South Africa's Enoch Godongwana speaking there to Bloomberg's
Speaker 3: Jennifer Zaba Saja on the sidelines of the Bloomberg Africa
Speaker 3: Business Summit. This ahead of the Milkan Institute Middle East
Speaker 3: and Africa Summit in the coming days. So I've been
Speaker 3: getting some information about what is to come from Bloomberg's
Speaker 3: UK and Middle East Finance editor Jenny Seraine and our
Speaker 3: Chief Africa correspondent Jennifer Zabasaja. Welcome to both of you.
Speaker 3: Thank you for speaking to me in terms of the
Speaker 3: Milkan Institute this particular event. Jenny, give us a sense
Speaker 3: of how big a deal the gathering is, who the
Speaker 3: main players are going to be attending, because there is
Speaker 3: increasingly a focus on the Middle East and it's connections
Speaker 3: around the world.
Speaker 10: What we've seen increasingly is, especially as the US, you know,
Speaker 10: maybe has pulled back in a lot of ways from
Speaker 10: some of these big global summit type things, you've seen
Speaker 10: a real big emphasis on some of these midiest players
Speaker 10: that can kind of step in and fill the void.
Speaker 10: So this is a region that just has vast amounts
Speaker 10: of capital You've got entities and specific investors that are
Speaker 10: looking to put that capital to work in new and
Speaker 10: interesting ways, and so that's why you see so many
Speaker 10: Wall Street names and sovereign names from around the world
Speaker 10: kind of flocking to these events and looking to get
Speaker 10: in touch with these investors.
Speaker 3: How do you think those Middle East and countries the
Speaker 3: GCC are balancing the bizarre for investment and also their
Speaker 3: domestic issues.
Speaker 10: Yeah, it's interesting. I do think we're starting to see
Speaker 10: more of a divergence between the different countries themselves. So
Speaker 10: over the years, Abudabi's relying on oil, it has lessened
Speaker 10: to some degree, and a large part of that is
Speaker 10: because they've been able to go and invest so heavily
Speaker 10: in these new and different areas. Saudi, on the other hand,
Speaker 10: is still heavily reliant on oil, and so you kind
Speaker 10: of see that and how their different budget dynamics play out.
Speaker 10: But you see, I think across the board a desire
Speaker 10: to move beyond oil. That's why you see them rushing
Speaker 10: to invest in all these new economy up and coming area.
Speaker 3: Jennifer, You've just come through a very busy time in
Speaker 3: the past few days in Africa, talking to a lot
Speaker 3: of African leaders. We heard a little snippet of one
Speaker 3: finance minister who you spoke to, just tell us first
Speaker 3: some of the complexities that are facing African nations, of
Speaker 3: which there are so many right now as this sort
Speaker 3: of new world order is establishing itself.
Speaker 9: You know, it was the first Group of twenty summer,
Speaker 9: and of course that was on the African continent, that
Speaker 9: was held on the African continent, which was significant for
Speaker 9: many countries outside of just South Africa, which is really
Speaker 9: the only sovereign nation that's a part of the G twenty,
Speaker 9: but also the African Union was also a part of
Speaker 9: the Group of twenty, and so we saw a number
Speaker 9: of leaders that use this opportunity, and even South African
Speaker 9: President Zero Ramaposa, who has held the G twenty presidency
Speaker 9: for the past year, used this, you know, opportunity to
Speaker 9: amplify a lot of the challenges that these countries are
Speaker 9: facing that even pre date a lot of the shifting alliances,
Speaker 9: if it were, that we've seen in the past few months.
Speaker 9: And so of course one of the major you know,
Speaker 9: and probably one of the top concerns that many of
Speaker 9: them have told us is this issue of debt sustainability.
Speaker 9: This is of course, you know, really came to light
Speaker 9: even more so after the pandemic when we saw a
Speaker 9: number of African countries actually you know, fall into to
Speaker 9: debt and they were not able to pay back some
Speaker 9: of the debt that they had borrowed. We saw that
Speaker 9: from from Zambia. We've also seen that from Ethiopia, and
Speaker 9: so the concern really was how do these African countries
Speaker 9: develop and industrialize when most of the revenues and the
Speaker 9: payments and you know, their their cash flow that they
Speaker 9: have domestically is going to servicing debt more so than
Speaker 9: you know, many of our reports indicate more so than
Speaker 9: sectors like education and health. And so we heard from
Speaker 9: a number of ministers wanting to at least find some
Speaker 9: ways in which they are able to maybe look at
Speaker 9: various ways of financing. And so it's not just you know,
Speaker 9: getting services from the IMF or the World Bank, but
Speaker 9: it's also from from new investors.
Speaker 3: Jen, where do you think the focuses then, what do
Speaker 3: you think that as African nations are thinking about in
Speaker 3: terms of their ties to the Middle East. As you say,
Speaker 3: you know, there's a lot of focus on the Trump
Speaker 3: administration and the US relationship with these countries. What are
Speaker 3: those ties between African countries and the Middle East.
Speaker 9: What's been interesting is that, you know, the Trump administration
Speaker 9: and the US sort of scaling back in their aid,
Speaker 9: you know, going from aid to trade or transactions to
Speaker 9: a certain extent, has sort of come at the same
Speaker 9: time in which a number of African countries have been
Speaker 9: able to stabilize many of their economies, so much so
Speaker 9: that there's some of the fastest growing economies in the world.
Speaker 9: And so while of course the shock of usaid was
Speaker 9: very relevant and focused for a number of countries, it's
Speaker 9: also come when there's a lot of new investors that
Speaker 9: are looking for capital to deploy. And you know, we
Speaker 9: were actually speaking to the Barclays head of South Africa,
Speaker 9: and he's also head of the private banking across the continent,
Speaker 9: and he was just saying just how much capital there
Speaker 9: is in some of these Gulf nations and how you know,
Speaker 9: the extent of the money and where it's coming from,
Speaker 9: and the opportunities are or more so than he's seen
Speaker 9: in the past few years.
Speaker 3: Okay, So that's an interesting point, Jenny. I'm also thinking,
Speaker 3: i mean, maybe some of this turns on the military,
Speaker 3: but also a lot of it turns on soft power
Speaker 3: as well. How does soft power, not just hard power,
Speaker 3: play into the mindset of the Middle East?
Speaker 11: Now?
Speaker 3: Huge investment in lots of other things to project, you know,
Speaker 3: whatever image it is that those leaders want to, maybe
Speaker 3: in sports or in other ventures. How do you think
Speaker 3: about soft power now in the Middle East?
Speaker 10: I think it's definitely still top of mind for these governments,
Speaker 10: and so that's why you see a lot of the
Speaker 10: different entities, whether it's sovereign wealth funds or other alternative
Speaker 10: asset managers that they've set up, going after these kind
Speaker 10: of more unique assets that are on the market. I mean,
Speaker 10: I think you saw it with the piffs decision to
Speaker 10: you know, go and take electronic arts private and kind
Speaker 10: of the big take private deal of the year. That
Speaker 10: was a huge display of the kind of wealth and
Speaker 10: then the kind of ambitions that they have, and that
Speaker 10: was all tied to, you know, their desire to be
Speaker 10: the leader of the gaming industry and have this huge,
Speaker 10: you know, footprint in a space that's obviously fast growing
Speaker 10: but also kind of captures the minds and imaginations of
Speaker 10: a lot of consumers around the world and so I think, yeah,
Speaker 10: we'll definitely continue to see these players, you know, look
Speaker 10: for ways that they can make that kind of mark
Speaker 10: and kind of these key industries, and I think sports
Speaker 10: is a great one. As you mentioned, you see them
Speaker 10: doing it in arts and culture increasingly, so it'll be
Speaker 10: really interesting to watch as they kind of pick their
Speaker 10: spots and pick their moments to deploy this trillions and
Speaker 10: trillions of dollars of sovereign wealth that they have.
Speaker 3: My thanks to Bloomberg's UK and Middle East Finance editor
Speaker 3: Jenny Soarraine and to our chief Africa correspondent Jennifer Zaba Saja.
Speaker 3: I'm Caline Hebgar here in London, and you can catch
Speaker 3: us every weekday morning for Bloomberg Daybreak Europe, beginning at
Speaker 3: six am in London. That's one am on Wall Street.
Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend,
Speaker 2: we'll look at whether the La Boo Boo craze is
Speaker 2: due for a Beanie Baby style bust. I'm Nathan Hagar
Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 2: our global look ahead, the top stories for investors in
Speaker 2: the coming week. I'm Nathan Hager in Washington. As the
Speaker 2: holiday shopping season gets underway, those trendy La Booboo dolls
Speaker 2: are expected to be a hot item. The toys are
Speaker 2: produced and sold exclusive by the China based retailer PopMart,
Speaker 2: But some are wondering if these toys have reached their
Speaker 2: peak and whether La Boo Boo is due for a
Speaker 2: Beanie Baby style bust. For more, let's go to Daybreak
Speaker 2: Asia podcast hosts Doug.
Speaker 4: Krisner Nathan These dolls have become a global phenomenon. They're
Speaker 4: fictional characters, and they appear to be an interesting mix
Speaker 4: of cute and creepy. If you haven't seen a Laboobu doll,
Speaker 4: it might be helpful to think of it as a
Speaker 4: fuzzy elf like figure with a row of jagged teeth.
Speaker 4: Images of these dolls reminded me of the characters from
Speaker 4: Where the Wild Things Are created by Maurice Sendek, Lu
Speaker 4: Boobo isn't a standalone character. I was surprised to make
Speaker 4: that discovery. She is part of a larger group called
Speaker 4: the Monsters, created by Hong Kong artist and author Ki
Speaker 4: Sing Loom. For a closer look at the popularity of
Speaker 4: La Booboo and what it means for the company that
Speaker 4: controls this property. I'm joined by Bloomberg Shirley Jao. Shirley
Speaker 4: covers consumer companies in Asia and she joins us from
Speaker 4: Hong Kong. Thank you for making time to chat with me.
Speaker 4: So we know now La booboo is gone global. Can
Speaker 4: you help me understand the beginning of this craze? How
Speaker 4: did things start?
Speaker 11: So the things really started around late last year when
Speaker 11: it started to you know, caught a lot of people's
Speaker 11: attention and the global craze really started to rise after
Speaker 11: a series of K pop stars and Hollywood stars started
Speaker 11: to feature La Booboo in their photos. And the most known,
Speaker 11: perhaps is Black Pink's Lisa, and she is known as
Speaker 11: a huge fan of La Booboo and she is seen
Speaker 11: in many photos, you know, showing her personalized La Boo
Speaker 11: Boo with really trendy clothing and really fancy handbags. And
Speaker 11: you know a lot of well people started to show
Speaker 11: a Boo boo in in their you know, social media.
Speaker 11: That really triggered this global frenzy starting from earlier this year.
Speaker 4: Can we say that it began in China on the mainland.
Speaker 4: Is that accurate.
Speaker 11: Yes, it is accurate. I think a lot of this
Speaker 11: trend is to do with the economic slowdown in China.
Speaker 11: So previously consumers in China were seen posting photos on
Speaker 11: social media flaunting you know, air Mess handbags or you know,
Speaker 11: Louiston handbags and other really pricey luxury goods. But now
Speaker 11: with consumers confidence starting to weaken, but still people want
Speaker 11: a taste of this luxury lifestyle of you know, the
Speaker 11: lifestyle of really well off people. But they don't. They're
Speaker 11: being more cautious in buying luxury goods now, so what
Speaker 11: else can they do? And they see people like Lisa
Speaker 11: and people like a lot of rich people all, you know,
Speaker 11: showing their La Booboo dolls, and then they want to
Speaker 11: buy the doll because that gives them a taste, like
Speaker 11: what they call a small luxury, a taste of the
Speaker 11: upper class lifestyle in the background of an economic slow down.
Speaker 4: Are these expensive? How are they priced?
Speaker 11: They are relatively pricey in terms of you know, just
Speaker 11: the little fluffy doll. For small dolls like this, it's
Speaker 11: quite easy to fake it. So you can find a
Speaker 11: lot of different versions of fake La Boo boos on
Speaker 11: China's e commerce platforms going for much cheaper than the
Speaker 11: real ones, and sometimes you can't tell whether it's real
Speaker 11: or it's fake. The fake ones are known as La fufus.
Speaker 11: So a lot of people are joking that even though
Speaker 11: they spend a lot of money and effort to buy
Speaker 11: a La Boo Boo doll that they want, they don't
Speaker 11: know whether it's real La Boo Boo or La fufou. So.
Speaker 4: The doll is made by a company called PopMart. What
Speaker 4: do we know about PopMart?
Speaker 11: So? PopMart is known as McKain. The so called blind
Speaker 11: box dolls they actually have started quite a few years ago,
Speaker 11: before the global popularity of La Boo Boo. A lot
Speaker 11: of other popmarked products are also relatively well known, although
Speaker 11: none of them is as viral as La Boo Boo. So.
Speaker 11: Other pop marked toys include Skulp Panda, Molly Twin called
Speaker 11: Twin Cole, and even La Boo Boo's boyfriend Tay Cocoa.
Speaker 4: Suirley, can you help me understand the history of blind
Speaker 4: box gift giving? How did it start?
Speaker 11: I think it really starts guarded in recent years, and
Speaker 11: it's actually no different from other forms of blind box
Speaker 11: toys like Gatcha machines that has been going on in
Speaker 11: Japan for many, many years. I think it's the sense of,
Speaker 11: you know, excitement that you don't know what you'll get,
Speaker 11: and especially if you have a line of products. For example,
Speaker 11: there is a series of La Boo booths, and every
Speaker 11: La Boo Boo features a different outfit or a different theme,
Speaker 11: and you want to collect every one of them, and
Speaker 11: you have to spend a lot of money because sometimes
Speaker 11: you know, you may end up getting the same one
Speaker 11: over and over and over. And that's what get people
Speaker 11: get consumers into spending to get what they want, to
Speaker 11: get the toy that they want, or to collect the
Speaker 11: whole series of the toys.
Speaker 4: So in terms of PopMart, it's a publicly traded company
Speaker 4: right the trades in Hong Kong? Is that correct? How
Speaker 4: well has the stock been performing well?
Speaker 11: The stock actually surged more than one five hundred percent
Speaker 11: from the start of last year to August, so the
Speaker 11: price is peaked in August and a lot of that
Speaker 11: was writing on the global popularity of La Boo Boo,
Speaker 11: but then it dropped more than thirty percent since August,
Speaker 11: and that highlights a lot of questions and concerns in
Speaker 11: the market about whether this la booboo frenzy can last.
Speaker 4: I would imagine that. Yeah, calling into question the sustainability
Speaker 4: of a fad like this makes good sense. But I
Speaker 4: think we would be remiss if we didn't acknowledge the
Speaker 4: fact that the holiday shopping season is coming up in
Speaker 4: the West. Obviously, we have the Christmas holiday, and then
Speaker 4: New Year will be here before you know it for
Speaker 4: parts of Asia that celebrate the New Year holiday, not
Speaker 4: the Chinese New Year necessarily, but just the beginning of
Speaker 4: the calendar year. Is the expectation here that we see
Speaker 4: a lot of sales moving into the holiday season.
Speaker 11: We are definitely expecting a surge into the holiday season,
Speaker 11: but as I mentioned just now, there is also a
Speaker 11: rise of fake la boo boos. So a lot of
Speaker 11: people have already been complaining about these fakes, and actually
Speaker 11: different countries, especially China, has been tightening their scrutiny against
Speaker 11: the fakes of la boo boos. So it remains to
Speaker 11: be seen whether the holiday season can really trigger a surge.
Speaker 4: Would you consider giving it as a gift still?
Speaker 11: I would still because I know, you know, a lot
Speaker 11: of my friends are still quite into la Boo boo.
Speaker 11: And I think it's this sense of scarcity and the
Speaker 11: secondary market price that's still there, So that's still making
Speaker 11: people think, you know, oh they want this doll because
Speaker 11: it's often out of stock in stores. For consumers like me,
Speaker 11: if I see, you know, even if I'm willing to pay,
Speaker 11: but then you know, after a long time of waiting
Speaker 11: or after a lot of effort, and I finally get
Speaker 11: a lat Boo boo, but still, you know, I see
Speaker 11: a lot of fake La boo boos that's much cheaper
Speaker 11: and much easier to get. For me, it's you know,
Speaker 11: I tend to think that it may be a waste
Speaker 11: of effort and time, but for a lot of other consumers,
Speaker 11: they still think the sense of scarcity makes it such
Speaker 11: a rare thing that they still want.
Speaker 4: When you look at the market, surely, is there a
Speaker 4: specific demographic that we should address here? Are they primarily
Speaker 4: younger people? Are they teenagers? Are they a little older? Certainly?
Speaker 4: And I'm wondering about whether there is an adult audience
Speaker 4: for this product.
Speaker 11: I think there is definitely an adult audience. You know,
Speaker 11: a lot of them are in their mid thirties. But
Speaker 11: I think it's worth noticing that a lot of them
Speaker 11: are parents, so that means it's their children who got
Speaker 11: into it first. But then they started to get into
Speaker 11: it as well. I remember last year I was chatting
Speaker 11: with somebody who started looking at PopMart and La Bubu,
Speaker 11: and I asked them, you know, why do you think
Speaker 11: that this toy or the company will will be successful?
Speaker 11: And they said that they went to China and they
Speaker 11: went to a shopping mall and the majority of the
Speaker 11: shopping mall was very empty because you know, in China,
Speaker 11: the e commerce platforms are ubidiquous and that's really affected
Speaker 11: the performance of a lot of shopping malls in the country.
Speaker 11: But the only place where there were a lot of
Speaker 11: people gathering, especially you know, young people like primary school students,
Speaker 11: is Popmark stores and that's where you know, people are
Speaker 11: gathering and they are spending money to try to get
Speaker 11: their blind box toys. And that was when this person
Speaker 11: started to think that, oh, this may become a trend.
Speaker 11: But again, how long this trend may last it remains
Speaker 11: to be seen.
Speaker 4: So the Hollywood Reporter recently reported that Sony Pictures has
Speaker 4: a deal now to the rights from PopMart International. This
Speaker 4: is the company that has the rights to the doll
Speaker 4: about creating a motion picture. And to the point that
Speaker 4: you were raising earlier about the analyst community being a
Speaker 4: little suspicious or at least questioning whether this mania can continue.
Speaker 4: That seems to say to me that the idea of
Speaker 4: putting a film together based on this phenomenon, it may
Speaker 4: not last, and that is inherent in that is maybe
Speaker 4: a little bit of risk.
Speaker 11: There are indeed questions about whether this film is going
Speaker 11: to be a hit or not. We don't know a
Speaker 11: lot of details about the film, like we don't even
Speaker 11: know whether this film will be animated or if it
Speaker 11: will be live action. The observation is that it appears
Speaker 11: that this deal came first and then you know, Sony
Speaker 11: will probably figure out all those details later. But we
Speaker 11: have seen in the past examples of similar films developed
Speaker 11: from popular toy lines that turn out to be failures.
Speaker 11: For example, there are Brats, the Movie, Masters of the Universe,
Speaker 11: pand Puppies, and The Legend of Big Paul, and they're
Speaker 11: all based on really popular toy lines, but they weren't
Speaker 11: developed until several years down the line, and some of
Speaker 11: them barely recover their budget, while others didn't really sell
Speaker 11: tickets to cover the cost.
Speaker 4: Shirley, We'll leave it there, Thank you so very much.
Speaker 4: That is Bloomberg Shirley Choo. Shirley covers consumer companies for
Speaker 4: US in Asia from Hong Kong. I'm Doug Krisner. You
Speaker 4: can catch us weekdays for the Daybreak Asia podcast. It's
Speaker 4: available wherever you get your podcast, Nathan.
Speaker 2: Thanks Doug. And that does it for this edition of
Speaker 2: Bloomberg Daybreak Weekend. Join us again Monday morning at five
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