1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Corplay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,080 Speaker 1: or watch us live on YouTube. 6 00:00:24,120 --> 00:00:26,200 Speaker 2: Stay on the technology theme here, we're gonna check out 7 00:00:26,200 --> 00:00:30,760 Speaker 2: the man Deep Singh, global tech research head at Bloomberg Intelligence, Mandy. 8 00:00:30,880 --> 00:00:31,840 Speaker 3: Lots of news to talk about. 9 00:00:31,880 --> 00:00:35,639 Speaker 2: I want to just start with CrowdStrike sales outlook kind 10 00:00:35,680 --> 00:00:36,920 Speaker 2: of in line with expectations. 11 00:00:36,920 --> 00:00:39,800 Speaker 3: Stock off a little bit here, just refresh our memory. 12 00:00:39,920 --> 00:00:42,600 Speaker 2: What is crowd strike and how does it fit into 13 00:00:42,600 --> 00:00:43,400 Speaker 2: the tech stack? 14 00:00:44,880 --> 00:00:47,240 Speaker 4: Yeah, I mean they are one of the pure play 15 00:00:47,360 --> 00:00:53,000 Speaker 4: cybersecurity names and clearly they have done quite well in 16 00:00:53,120 --> 00:00:56,080 Speaker 4: terms of their top line growth over the last two 17 00:00:56,120 --> 00:00:59,440 Speaker 4: three years. And you know, like with everything in the 18 00:00:59,520 --> 00:01:03,400 Speaker 4: SaaS complex, some of these names have come under pressure 19 00:01:04,160 --> 00:01:10,520 Speaker 4: because of potential competition from LLLM companies like Anthropic, and 20 00:01:11,440 --> 00:01:14,759 Speaker 4: I think that's where you see a muted reaction today. 21 00:01:14,840 --> 00:01:19,080 Speaker 4: But you know, they had their best new arr growth 22 00:01:19,920 --> 00:01:24,720 Speaker 4: yesterday and the guidance was a little conservative, but that's 23 00:01:24,760 --> 00:01:27,880 Speaker 4: what we are seeing from all the software companies that 24 00:01:27,920 --> 00:01:31,080 Speaker 4: have reported results this quarter is they want to be 25 00:01:31,160 --> 00:01:35,000 Speaker 4: then race for the next one. And I think for 26 00:01:35,080 --> 00:01:39,720 Speaker 4: a company like CrowdStrike that's growing mid twenty percent and 27 00:01:41,040 --> 00:01:45,600 Speaker 4: very high retention rate, I mean things are looking good 28 00:01:45,640 --> 00:01:50,160 Speaker 4: because all these lms should potentially drive more demand for cybersecurity. 29 00:01:50,160 --> 00:01:54,520 Speaker 4: If there's one area that certainly is poised to benefit 30 00:01:54,640 --> 00:01:58,080 Speaker 4: from LLLM usage, it should be cybersecurity. 31 00:01:59,080 --> 00:02:01,760 Speaker 5: Man Deep crowdstre has been, as you mentioned, one of 32 00:02:01,760 --> 00:02:07,040 Speaker 5: the biggest beneficiaries of cybersecurity spending boom. After this earnings report, 33 00:02:07,200 --> 00:02:10,040 Speaker 5: does it still look like there's still strong secular demand 34 00:02:10,200 --> 00:02:12,400 Speaker 5: or are we starting to see signs that those budgets 35 00:02:12,440 --> 00:02:13,880 Speaker 5: are becoming a little bit more selective? 36 00:02:16,080 --> 00:02:21,320 Speaker 4: Not in the cybersecurity complex. So if anything, you know, 37 00:02:21,440 --> 00:02:24,720 Speaker 4: if you have more data now, which is the case 38 00:02:24,800 --> 00:02:28,959 Speaker 4: with llms, now, you know you are generating a lot 39 00:02:29,040 --> 00:02:33,120 Speaker 4: more data, you are using it for training and so 40 00:02:33,360 --> 00:02:37,119 Speaker 4: all that needs to be secured and prompt injection attacks 41 00:02:37,200 --> 00:02:40,720 Speaker 4: is a new type of attack that you have to secure. Again, 42 00:02:40,880 --> 00:02:45,560 Speaker 4: So from my perspective, you know, and based on our conversations, 43 00:02:45,600 --> 00:02:49,280 Speaker 4: like this is the last thing any enterprise would want 44 00:02:49,320 --> 00:02:53,440 Speaker 4: to cut. Yes, they are shifting budgets, you know, allocating 45 00:02:53,520 --> 00:02:57,359 Speaker 4: to AI more compared to the traditional areas. But when 46 00:02:57,400 --> 00:03:00,880 Speaker 4: it comes to cybersecurity, I mean, the risks continue to 47 00:03:00,919 --> 00:03:04,080 Speaker 4: get bigger and bigger in terms of data loss or 48 00:03:04,680 --> 00:03:07,520 Speaker 4: you know, getting hacked, and so from that perspective, you're 49 00:03:08,000 --> 00:03:12,000 Speaker 4: unlikely to cut back on, you know, especially a primary 50 00:03:12,000 --> 00:03:15,640 Speaker 4: cybersecurity product, which I mean you know a lot of 51 00:03:15,680 --> 00:03:18,840 Speaker 4: cases there are point products, but CrowdStrike is more of 52 00:03:18,880 --> 00:03:22,960 Speaker 4: a platform with multiple sort of threat vectors that they 53 00:03:23,000 --> 00:03:26,320 Speaker 4: protect against. So from that perspective also they are quite insulated. 54 00:03:26,680 --> 00:03:28,720 Speaker 3: All right, folks, this is how it works at Bloomberg. 55 00:03:29,000 --> 00:03:31,240 Speaker 2: Usually Man Deep he comes into our studio when we 56 00:03:31,280 --> 00:03:33,280 Speaker 2: want to talk to him. He's not in our studio today, 57 00:03:33,280 --> 00:03:35,840 Speaker 2: which got me thinking, where is Man Deep seeing today? 58 00:03:36,040 --> 00:03:38,280 Speaker 2: And at Bloomberg we can tell where everybody is at 59 00:03:38,320 --> 00:03:40,120 Speaker 2: all times. You have to put where you are and 60 00:03:40,120 --> 00:03:42,800 Speaker 2: who you're meeting with. It's kind of the full disclosure 61 00:03:42,840 --> 00:03:44,560 Speaker 2: thing they do a Bloomberg, so I know where he is. 62 00:03:44,760 --> 00:03:48,520 Speaker 2: He's downtown at the Bloomberg invest conference. Anytime Bloomberg gets 63 00:03:48,680 --> 00:03:51,960 Speaker 2: its clients together, they all just want to talk to 64 00:03:52,000 --> 00:03:53,920 Speaker 2: Man Deep. They want to hear man Deep, talk about 65 00:03:53,920 --> 00:03:56,120 Speaker 2: what's going on in tech and most notably AI. So 66 00:03:56,160 --> 00:03:58,960 Speaker 2: I'm going to go right there, Mandeep, what's the conversation 67 00:03:59,200 --> 00:04:01,120 Speaker 2: today about AI? 68 00:04:01,480 --> 00:04:04,119 Speaker 3: It went from just build, build, build build, Now. 69 00:04:03,920 --> 00:04:05,720 Speaker 2: People are starting to think about what are some of 70 00:04:05,760 --> 00:04:09,160 Speaker 2: the ripple effects, third and second and third quarter effects? 71 00:04:09,200 --> 00:04:09,360 Speaker 6: Here? 72 00:04:09,400 --> 00:04:13,640 Speaker 3: What's the investor view of AI these days? Yeah? 73 00:04:13,680 --> 00:04:16,920 Speaker 4: I mean at this conference, over the last couple of days, 74 00:04:17,160 --> 00:04:20,000 Speaker 4: the focus has been on the private markets. And as 75 00:04:20,040 --> 00:04:23,160 Speaker 4: you know, you know, private equity owns a lot of 76 00:04:23,200 --> 00:04:27,719 Speaker 4: these software traditional software companies that generate very high free 77 00:04:27,720 --> 00:04:30,800 Speaker 4: cash flow. But everyone is looking at, you know, what 78 00:04:30,920 --> 00:04:33,680 Speaker 4: are these lms going to disrupt and what does that 79 00:04:33,800 --> 00:04:36,120 Speaker 4: mean you know, to the free cash flow of some 80 00:04:36,200 --> 00:04:38,880 Speaker 4: of these companies, And so the private markets have been 81 00:04:38,920 --> 00:04:42,200 Speaker 4: a big focus. I would say over the last two days. 82 00:04:43,080 --> 00:04:46,599 Speaker 5: Man Deep, there's been this trade, the halo trade, focusing 83 00:04:46,680 --> 00:04:49,680 Speaker 5: on tangible assets when it comes to deciphering you know, 84 00:04:49,720 --> 00:04:52,000 Speaker 5: who the AI winners and loss are going to be. 85 00:04:52,279 --> 00:04:55,920 Speaker 5: I spoke recently to ubs, a global wealth CIO, and 86 00:04:55,960 --> 00:04:58,880 Speaker 5: she said that she's focusing on the builders and not 87 00:04:58,960 --> 00:05:01,640 Speaker 5: the coders. How are you thinking about this dynamic between 88 00:05:02,000 --> 00:05:05,200 Speaker 5: the companies with tangible assets versus intellectual property. 89 00:05:06,920 --> 00:05:10,719 Speaker 4: Yeah, I mean, look at all the hyperscalers, right, they 90 00:05:11,040 --> 00:05:13,120 Speaker 4: used to have most of them used to have an 91 00:05:13,160 --> 00:05:16,160 Speaker 4: asset light business model. Now we are talking about, you know, 92 00:05:16,200 --> 00:05:19,479 Speaker 4: seven hundred billion dollars in aggregate capex for this year 93 00:05:19,800 --> 00:05:23,360 Speaker 4: just from the hyperscalers, and this is likely a multi 94 00:05:23,480 --> 00:05:27,359 Speaker 4: year cycle. So from that perspective, I mean, we know 95 00:05:27,640 --> 00:05:32,800 Speaker 4: AI is compute intensive and you need a lot more 96 00:05:33,240 --> 00:05:38,200 Speaker 4: you know, infrastructure to do AI, and so from that perspective, 97 00:05:38,320 --> 00:05:42,159 Speaker 4: things certainly are shifting, you know, from intellectual property to 98 00:05:42,360 --> 00:05:45,960 Speaker 4: owning infrastructure, and that's the trend that is likely to continue. 99 00:05:46,279 --> 00:05:49,440 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 100 00:05:53,279 --> 00:05:56,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 101 00:05:57,080 --> 00:06:00,000 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 102 00:06:00,560 --> 00:06:03,599 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 103 00:06:03,640 --> 00:06:06,640 Speaker 1: get your podcasts, or watch us live on YouTube. 104 00:06:07,600 --> 00:06:11,280 Speaker 2: AI story just yet another angle is how AI is 105 00:06:11,400 --> 00:06:14,120 Speaker 2: being deployed by the Department of Defense and other parts 106 00:06:14,160 --> 00:06:14,920 Speaker 2: of the US government. 107 00:06:14,960 --> 00:06:16,560 Speaker 3: Particularly about the Defense Department. 108 00:06:17,160 --> 00:06:21,719 Speaker 2: We had anthropic clashing with the Pentagon about how their 109 00:06:21,760 --> 00:06:24,120 Speaker 2: AI could be used. Then we had to open ai 110 00:06:24,760 --> 00:06:27,920 Speaker 2: chief executive officer Sam Altman says, we'll come in and we'll. 111 00:06:27,680 --> 00:06:29,480 Speaker 3: Do some of the work for you. And there's a 112 00:06:29,520 --> 00:06:29,800 Speaker 3: lot of. 113 00:06:29,760 --> 00:06:32,560 Speaker 2: Uncertainly about how AI is going to be used and 114 00:06:32,600 --> 00:06:36,200 Speaker 2: who will actually provide it for various government entities, including 115 00:06:36,240 --> 00:06:37,760 Speaker 2: most notably the Department of Defense. 116 00:06:38,040 --> 00:06:39,279 Speaker 3: Vlad Richter joins us here. 117 00:06:39,320 --> 00:06:43,520 Speaker 2: He's the CEO of the cybersecurity company Fencer vladd how 118 00:06:43,520 --> 00:06:46,960 Speaker 2: do you think this is playing out AI the Department 119 00:06:47,000 --> 00:06:50,120 Speaker 2: of Defense specifically, We've had some uncertainty here. 120 00:06:50,120 --> 00:06:50,840 Speaker 3: What do you make of it? 121 00:06:52,560 --> 00:06:54,840 Speaker 6: Yeah, Look, I think there's clearly some sort of misunderstanding 122 00:06:54,839 --> 00:07:00,960 Speaker 6: internally between between the departments, the Pentagon, and Anthropic, seemingly 123 00:07:01,000 --> 00:07:04,240 Speaker 6: because from what we're reading over the weekend, open ai 124 00:07:04,400 --> 00:07:09,160 Speaker 6: is signed an agreement according to Sam Albyn, with the Pentagon. 125 00:07:09,160 --> 00:07:11,200 Speaker 6: They kind of stated the lines that I think we 126 00:07:11,240 --> 00:07:13,520 Speaker 6: as citizens would very much care about, which is we 127 00:07:13,560 --> 00:07:16,000 Speaker 6: don't want to see MAS surveillance and we definitely don't 128 00:07:16,240 --> 00:07:18,920 Speaker 6: can't even imagine a situation where there will be autonomous 129 00:07:19,280 --> 00:07:21,320 Speaker 6: weapons going through there. But I think this also speaks 130 00:07:21,360 --> 00:07:25,200 Speaker 6: to part of the challenge within these AI companies and 131 00:07:25,280 --> 00:07:27,520 Speaker 6: specific in the models, is that you know, a lot 132 00:07:27,520 --> 00:07:31,520 Speaker 6: of the data that they're trained on is effectively the same, 133 00:07:31,560 --> 00:07:33,680 Speaker 6: and so over time, you know, the work that they're 134 00:07:33,720 --> 00:07:36,160 Speaker 6: doing becomes kind of commoditized and there's much of a mode, 135 00:07:36,320 --> 00:07:39,760 Speaker 6: and so the government will inevitably, in my opinion, turn 136 00:07:39,840 --> 00:07:41,960 Speaker 6: around and start to work with the vendors that will 137 00:07:41,960 --> 00:07:44,240 Speaker 6: play ball with them and not try to strong arm 138 00:07:44,240 --> 00:07:45,480 Speaker 6: them in any single position. 139 00:07:46,560 --> 00:07:50,800 Speaker 5: Opportunistic and sloppy was the language that Sam Altman used. 140 00:07:50,800 --> 00:07:53,400 Speaker 5: Pretty strong language there. What does that tell us about 141 00:07:53,640 --> 00:07:57,120 Speaker 5: the rushed by AI labs to secure government contracts And 142 00:07:57,120 --> 00:08:00,119 Speaker 5: how important of a customer is the Pentagon when a 143 00:08:00,200 --> 00:08:01,240 Speaker 5: to the AI industry? 144 00:08:02,600 --> 00:08:05,520 Speaker 6: Yeah, great question. So I think from a perspective of 145 00:08:05,560 --> 00:08:10,440 Speaker 6: how important the Pentagon is or the government specifically to 146 00:08:10,480 --> 00:08:13,120 Speaker 6: these AI companies as a customer, it's actually not that much. 147 00:08:13,120 --> 00:08:14,720 Speaker 6: I mean, if you look at it from the perspective 148 00:08:14,720 --> 00:08:17,200 Speaker 6: of Anthropic. You know, was reported that the deal with 149 00:08:17,240 --> 00:08:20,160 Speaker 6: the Pentagon was around two hundred million dollars a year, 150 00:08:20,280 --> 00:08:23,040 Speaker 6: and I think, as reported by Bloomberg today, Anthropic went 151 00:08:23,080 --> 00:08:26,440 Speaker 6: from fourteen billion in run rate a few weeks ago 152 00:08:26,520 --> 00:08:29,720 Speaker 6: to nearly nineteen billion dollars today. It's one percent of 153 00:08:29,760 --> 00:08:32,760 Speaker 6: their revenue right, and I think for the same probably 154 00:08:32,760 --> 00:08:34,720 Speaker 6: similar to open Ai and some of these other ones, 155 00:08:34,720 --> 00:08:37,440 Speaker 6: that it's meaningful revenue, but as a percentage of the 156 00:08:37,480 --> 00:08:41,360 Speaker 6: overall base, it's not significant. And instead what you end 157 00:08:41,440 --> 00:08:44,360 Speaker 6: up what we need as citizens is that the government 158 00:08:44,400 --> 00:08:46,839 Speaker 6: actually chooses and it's more important for them. I think 159 00:08:46,880 --> 00:08:48,880 Speaker 6: in the case of open Ai, with the contract they 160 00:08:48,920 --> 00:08:51,199 Speaker 6: just signed, it was a little bit too fast, like 161 00:08:51,760 --> 00:08:55,040 Speaker 6: Sam said, and the communication was was not great. I mean, 162 00:08:55,040 --> 00:08:58,080 Speaker 6: there was a handful of departures, including some relatively senior 163 00:08:58,120 --> 00:09:01,679 Speaker 6: people from open Ai after the weekend that decided to 164 00:09:01,679 --> 00:09:04,439 Speaker 6: go to Anthropic. And I'm not sure how much people 165 00:09:04,480 --> 00:09:08,200 Speaker 6: know about this historically, but the Anthropic founding team was 166 00:09:08,280 --> 00:09:10,600 Speaker 6: actually all X for the most part, all X open 167 00:09:10,640 --> 00:09:13,880 Speaker 6: Ai employees that disagreed back in twenty twenty one with 168 00:09:13,880 --> 00:09:17,200 Speaker 6: some direction that Open Eye was heading to and decided 169 00:09:17,200 --> 00:09:19,880 Speaker 6: to leave and start Anthropopic themselves. And I think today 170 00:09:20,160 --> 00:09:23,000 Speaker 6: there are roughly seventy to eighty employees at Anthropopic that 171 00:09:23,040 --> 00:09:25,600 Speaker 6: are ex open Ai, but at open Ai, I think 172 00:09:25,600 --> 00:09:27,240 Speaker 6: they are only about ten or twelve employees that are 173 00:09:27,360 --> 00:09:29,560 Speaker 6: ex Anthropics. You can see kind of where the movement's 174 00:09:29,559 --> 00:09:32,400 Speaker 6: been going between the sort of the intelligent folks there. 175 00:09:32,280 --> 00:09:35,360 Speaker 2: Do have any idea to what extent in the Pentagon 176 00:09:35,400 --> 00:09:38,480 Speaker 2: and the Department of Defense that AI is being utilized. 177 00:09:38,520 --> 00:09:41,839 Speaker 2: Are they cutting edge because they have the resources, or 178 00:09:41,840 --> 00:09:45,479 Speaker 2: are they kind of an old government plotting institution. 179 00:09:45,800 --> 00:09:46,880 Speaker 3: How are they employing AI. 180 00:09:48,400 --> 00:09:50,120 Speaker 6: There's a great article and I think it was actually 181 00:09:50,600 --> 00:09:53,439 Speaker 6: from you guys earlier this morning that popped out that 182 00:09:53,559 --> 00:09:56,520 Speaker 6: kind of described a little bit of that was revealed 183 00:09:56,520 --> 00:09:59,000 Speaker 6: by some source of how it was being used and 184 00:09:59,240 --> 00:10:03,440 Speaker 6: in the understanding, what was reported was that the Pentagon 185 00:10:03,480 --> 00:10:05,080 Speaker 6: had decided that there were going to be roughly a 186 00:10:05,080 --> 00:10:07,199 Speaker 6: thousand places that they were going to hit initially a 187 00:10:07,200 --> 00:10:10,439 Speaker 6: thousand sites that they were going to initially inside of Iran. 188 00:10:11,840 --> 00:10:14,280 Speaker 6: Previous versions of this you can't hit all a thousand 189 00:10:14,320 --> 00:10:16,320 Speaker 6: of once, and so people would sit down. They were 190 00:10:16,360 --> 00:10:19,120 Speaker 6: prioritize them based on a handful of different factors, and 191 00:10:19,160 --> 00:10:21,160 Speaker 6: it would probably take a couple of weeks to get 192 00:10:21,160 --> 00:10:24,360 Speaker 6: this done, if not longer. Right, in this case, what 193 00:10:24,400 --> 00:10:27,559 Speaker 6: was understood was that they were using Palenteer's Maven product, 194 00:10:27,760 --> 00:10:31,280 Speaker 6: which underneath the hood was also being powered by Claude 195 00:10:31,400 --> 00:10:33,960 Speaker 6: from Anthropic and they basically fed in a bunch of 196 00:10:34,280 --> 00:10:38,240 Speaker 6: data that palunteers access from the government and said, okay, 197 00:10:38,280 --> 00:10:40,800 Speaker 6: prioritize this for us based on what we need to 198 00:10:40,800 --> 00:10:43,679 Speaker 6: do and the different sort of movements right, step one, 199 00:10:43,760 --> 00:10:45,719 Speaker 6: step two, step three, whatever it may be. I think 200 00:10:45,760 --> 00:10:47,480 Speaker 6: at that point, just like if any of us were 201 00:10:47,559 --> 00:10:50,240 Speaker 6: using AI to prioritize some other things for us, it 202 00:10:50,400 --> 00:10:52,719 Speaker 6: pulled out a spreadsheet and said, listen, this is I'm 203 00:10:52,720 --> 00:10:55,880 Speaker 6: paraphrasing here, assuming this is what you should be doing, 204 00:10:56,440 --> 00:10:59,000 Speaker 6: and I imagine the powers that be sat down took 205 00:10:59,040 --> 00:11:00,720 Speaker 6: a look at it and said, is this really what 206 00:11:00,760 --> 00:11:01,960 Speaker 6: we want to be doing? Do we want to hit 207 00:11:01,960 --> 00:11:04,160 Speaker 6: these first hunter or not? But at a minimum, you're 208 00:11:04,160 --> 00:11:06,080 Speaker 6: getting that done in forty five minutes, right, This is 209 00:11:06,120 --> 00:11:08,720 Speaker 6: not a multi week endeavor. It just kind of gets 210 00:11:08,720 --> 00:11:10,360 Speaker 6: you a little bit faster there. It might only be 211 00:11:10,440 --> 00:11:12,760 Speaker 6: ninety percent correct, but humans will decide the rest of 212 00:11:12,760 --> 00:11:13,160 Speaker 6: it from there. 213 00:11:14,000 --> 00:11:17,920 Speaker 5: Glad we've seen AI leaders call for stricter regulation while 214 00:11:17,960 --> 00:11:22,080 Speaker 5: simultaneously pursuing a defense contracts. Is there a sense that 215 00:11:22,120 --> 00:11:26,080 Speaker 5: these deals are happening faster than the industry can establish 216 00:11:26,160 --> 00:11:28,239 Speaker 5: the right ethical guardrails? 217 00:11:29,920 --> 00:11:33,920 Speaker 6: Yeah? So, I you know, depends on the day. Sometimes 218 00:11:34,120 --> 00:11:36,000 Speaker 6: can go back and forth. What I think, what I 219 00:11:36,000 --> 00:11:37,880 Speaker 6: would tell you is that it's not even sometimes so 220 00:11:38,000 --> 00:11:40,560 Speaker 6: much as the guardrails from the industry, but the guardrails 221 00:11:40,559 --> 00:11:43,760 Speaker 6: from the government. Right, there are some significant points that 222 00:11:44,559 --> 00:11:48,040 Speaker 6: I agree very much with Dario, the CEO at Dariamidad 223 00:11:48,480 --> 00:11:50,959 Speaker 6: Anthropic on this, which is the government does need to 224 00:11:50,960 --> 00:11:54,200 Speaker 6: provide some guardrails for us on what is appropriate, what 225 00:11:54,320 --> 00:11:56,520 Speaker 6: is not appropriate, How do we protect you as citizens? 226 00:11:56,880 --> 00:11:59,560 Speaker 6: At what point in time does the Pentagon decide to 227 00:11:59,679 --> 00:12:01,640 Speaker 6: overset step some of these boundaries and if they're allowed to. 228 00:12:02,480 --> 00:12:04,480 Speaker 6: But I think these things are moving too quickly at 229 00:12:04,520 --> 00:12:07,559 Speaker 6: this point, right. I mean, these models come out every 230 00:12:07,640 --> 00:12:09,280 Speaker 6: you know, a new version of a model comes out 231 00:12:09,280 --> 00:12:12,200 Speaker 6: every few months from one of these organizations, and it 232 00:12:12,280 --> 00:12:15,400 Speaker 6: beats the previous one by ten, fifteen, twenty thirty percent, 233 00:12:15,720 --> 00:12:17,400 Speaker 6: and all of a sudden, it unlocks things that we 234 00:12:17,440 --> 00:12:20,760 Speaker 6: didn't think was possible. And you hear these comments that 235 00:12:21,040 --> 00:12:24,559 Speaker 6: I think Darius said this earlier earlier and earlier this week, 236 00:12:24,600 --> 00:12:26,480 Speaker 6: where he said that he believes that there's going to 237 00:12:26,480 --> 00:12:30,160 Speaker 6: be exponential growth later this year. And I you know, 238 00:12:30,440 --> 00:12:32,760 Speaker 6: for a company like ours, you know, we went from 239 00:12:32,920 --> 00:12:35,080 Speaker 6: five percent of our code being written by Ai year 240 00:12:35,120 --> 00:12:38,800 Speaker 6: ago to north of sixty percent. Today, you start to 241 00:12:38,840 --> 00:12:42,040 Speaker 6: struggle to imagine what exponential looks like by the end 242 00:12:42,080 --> 00:12:44,280 Speaker 6: of the year, and so I think it's just tough 243 00:12:44,280 --> 00:12:45,240 Speaker 6: to keep up with these things. 244 00:12:46,160 --> 00:12:49,320 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 245 00:12:53,200 --> 00:12:56,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 246 00:12:57,000 --> 00:13:00,000 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay, and Android 247 00:13:00,480 --> 00:13:03,560 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 248 00:13:03,600 --> 00:13:06,920 Speaker 1: get your podcasts, or watch us live on YouTube. 249 00:13:07,280 --> 00:13:10,520 Speaker 2: Paramount's guidance acquisition of Warner Brothers Discovery, we'll trigger a 250 00:13:10,679 --> 00:13:13,560 Speaker 2: media reranking and strategic sector reset. 251 00:13:13,600 --> 00:13:15,280 Speaker 3: Our guests says, we expect. 252 00:13:14,960 --> 00:13:20,959 Speaker 2: The industry to consolidate around three dominant players Disney, Paramount, Netflix, 253 00:13:21,120 --> 00:13:24,840 Speaker 2: leaving comcasts subscale and making further m and a likely 254 00:13:24,880 --> 00:13:27,679 Speaker 2: Keitha Ranganath and she is the media als or Bloomberg Intelligence, 255 00:13:28,400 --> 00:13:31,200 Speaker 2: Brian Robertson and the gang down there in Philadelphia probably 256 00:13:31,200 --> 00:13:32,800 Speaker 2: not gonna be happy to read this, Keitha, what do 257 00:13:32,840 --> 00:13:35,600 Speaker 2: you think comcasts will do in this. 258 00:13:35,520 --> 00:13:37,120 Speaker 3: New world of Paramount and Warner Brothers. 259 00:13:38,920 --> 00:13:41,440 Speaker 7: They absolutely need to do something, Paul, I mean that 260 00:13:41,520 --> 00:13:44,080 Speaker 7: has been the whole thinking. We know that they are 261 00:13:44,120 --> 00:13:47,400 Speaker 7: ready to do something because last year when we had 262 00:13:47,440 --> 00:13:50,800 Speaker 7: this whole Warner Brothers Discovery auction kicked off, we know 263 00:13:50,880 --> 00:13:53,319 Speaker 7: that Comcast would actually kicked the tires there. They had 264 00:13:53,320 --> 00:13:56,840 Speaker 7: a proposed a merger of NBC Universal, which is their 265 00:13:56,880 --> 00:13:59,959 Speaker 7: media division, along with Warner Brothers Discovery. But of course, 266 00:14:00,160 --> 00:14:03,120 Speaker 7: because it was a major restock deal as opposed to 267 00:14:03,120 --> 00:14:05,920 Speaker 7: a cash deal, it was you know, obviously the Warner 268 00:14:05,920 --> 00:14:08,160 Speaker 7: Brothers Discovery team didn't go ahead with it, So they 269 00:14:08,240 --> 00:14:10,120 Speaker 7: know that something needs to be done. But at the 270 00:14:10,160 --> 00:14:12,920 Speaker 7: same time, I think Brian Roberts and the team have 271 00:14:13,040 --> 00:14:18,280 Speaker 7: been somewhat shy to you know, spin out NBC, But 272 00:14:18,360 --> 00:14:22,320 Speaker 7: I think it's it's some kind of strategic action is 273 00:14:22,360 --> 00:14:24,240 Speaker 7: absolutely imperative at this point. 274 00:14:24,320 --> 00:14:26,000 Speaker 8: Paul Keitha. 275 00:14:26,120 --> 00:14:28,240 Speaker 5: Paul and I were just talking about the language in 276 00:14:28,280 --> 00:14:32,320 Speaker 5: your note, a media re ranking and a strategic sector reset. 277 00:14:32,360 --> 00:14:34,600 Speaker 5: That's going to rattle a lot of folks at Comcast. 278 00:14:34,800 --> 00:14:36,520 Speaker 5: Can you talk to us a little bit more about 279 00:14:36,560 --> 00:14:37,880 Speaker 5: what exactly that means? 280 00:14:39,840 --> 00:14:41,040 Speaker 8: Yeah, Alex, absolutely so. 281 00:14:41,440 --> 00:14:45,320 Speaker 7: If in fact the Warner Brothers Netflix transaction had gone through, 282 00:14:46,040 --> 00:14:49,440 Speaker 7: that would have left Paramount without a dance partner so 283 00:14:49,520 --> 00:14:51,240 Speaker 7: to speak, right, and they were they were they were 284 00:14:51,280 --> 00:14:55,520 Speaker 7: already considered a subscale player. They would have absolutely needed another, 285 00:14:56,120 --> 00:14:58,080 Speaker 7: you know kind of deal, and and majority of the 286 00:14:58,120 --> 00:15:02,440 Speaker 7: thinking was that, yes, they might then approach Comcast and 287 00:15:02,520 --> 00:15:05,880 Speaker 7: look to kind of bolster up their whole media presence. Now, 288 00:15:05,920 --> 00:15:10,400 Speaker 7: with the Paramount and Warner Brothers deal going through, you 289 00:15:10,560 --> 00:15:13,720 Speaker 7: have you know, obviously the media re ranking. You have 290 00:15:13,800 --> 00:15:15,760 Speaker 7: the three, the big what we call the Big Three. 291 00:15:15,880 --> 00:15:18,000 Speaker 7: So you have Disney there with almost one hundred billion 292 00:15:18,000 --> 00:15:21,920 Speaker 7: in revenue, Paramount and Warner Brothers Discovery will bring in 293 00:15:22,000 --> 00:15:24,680 Speaker 7: about seventy billion, and then you have Netflix with about 294 00:15:24,720 --> 00:15:28,360 Speaker 7: fifty to fifty five billion. That really leaves now Comcast 295 00:15:28,440 --> 00:15:30,280 Speaker 7: as somewhat of a subscale player. So they, you know, 296 00:15:30,320 --> 00:15:32,560 Speaker 7: this is the whole thinking. They need to do something, 297 00:15:32,600 --> 00:15:33,760 Speaker 7: they need to do it quickly. 298 00:15:34,920 --> 00:15:37,160 Speaker 8: You know. It's somewhat of a unique. 299 00:15:36,800 --> 00:15:40,800 Speaker 7: Play Comcast because they have both distribution and content assets. 300 00:15:40,800 --> 00:15:44,200 Speaker 7: So they are the biggest broadband provider right now in 301 00:15:44,200 --> 00:15:48,240 Speaker 7: the United States with over thirty million households. The problem 302 00:15:48,280 --> 00:15:50,440 Speaker 7: for them is their broadband business has been under a 303 00:15:50,480 --> 00:15:53,400 Speaker 7: lot of pressure, so that has kind of taken the spotlight. 304 00:15:53,480 --> 00:15:57,960 Speaker 7: Now to the media assets and media assets actually for them. Unfortunately, 305 00:15:58,640 --> 00:16:00,360 Speaker 7: there's a lot of focus and it's it's a lot 306 00:16:00,360 --> 00:16:03,320 Speaker 7: of positive focus because we know that Netflix was willing 307 00:16:03,360 --> 00:16:06,320 Speaker 7: to pay a twenty five times multiple for the Warner 308 00:16:06,320 --> 00:16:08,920 Speaker 7: Brothers studio, so you just kind of applied that multiple 309 00:16:08,920 --> 00:16:11,640 Speaker 7: to the Universal studio and they have had so many hits, 310 00:16:11,640 --> 00:16:14,160 Speaker 7: you know, whether you're thinking about the Minions or Oppenheimer 311 00:16:14,240 --> 00:16:18,280 Speaker 7: or Jurassic Park, Jurassic World. I mean, that's a studio 312 00:16:18,320 --> 00:16:21,200 Speaker 7: that delawarees consistently, so you know, you just slap that 313 00:16:21,280 --> 00:16:25,360 Speaker 7: multiple onto you know, the the NBC studio that should 314 00:16:25,400 --> 00:16:27,800 Speaker 7: be worth at least thirty billion, and then they have 315 00:16:27,920 --> 00:16:30,200 Speaker 7: the theme parks, and the theme parks are really growing 316 00:16:30,240 --> 00:16:31,640 Speaker 7: at a nice space for them. 317 00:16:32,160 --> 00:16:33,680 Speaker 8: We did some analysis. 318 00:16:33,760 --> 00:16:36,240 Speaker 7: We said that the theme parks for NBC should be 319 00:16:36,240 --> 00:16:37,360 Speaker 7: worth at least forty billion. 320 00:16:37,480 --> 00:16:39,840 Speaker 8: So you have an asset here which is. 321 00:16:39,920 --> 00:16:43,400 Speaker 7: Really kind of undervalued under the Comcast umbrella. So they 322 00:16:43,400 --> 00:16:45,760 Speaker 7: need to do something and they need to do it quickly. 323 00:16:46,200 --> 00:16:46,480 Speaker 3: KEITHA. 324 00:16:46,520 --> 00:16:50,040 Speaker 2: I've always thought two of the key advantages for Comcasts 325 00:16:50,080 --> 00:16:51,760 Speaker 2: are won their management team might have been a big 326 00:16:51,760 --> 00:16:53,440 Speaker 2: fan of Brian Roberts and his management team for a 327 00:16:53,480 --> 00:16:53,800 Speaker 2: long time. 328 00:16:53,800 --> 00:16:55,400 Speaker 3: And the second thing is their balance sheet. They've got 329 00:16:55,400 --> 00:16:56,520 Speaker 3: a very strong balance. 330 00:16:56,280 --> 00:16:59,280 Speaker 2: Sheet, you know, but there's not a lot out there 331 00:16:59,320 --> 00:17:00,160 Speaker 2: for them to buy. 332 00:17:00,000 --> 00:17:02,080 Speaker 3: Why what do you think they should do? 333 00:17:03,920 --> 00:17:05,880 Speaker 7: I think the first thing that they should do, Paul, 334 00:17:06,040 --> 00:17:10,199 Speaker 7: is spin out NBC. So NBC under the whole Comcast, 335 00:17:10,440 --> 00:17:12,720 Speaker 7: you know, family thing is is just not working out. 336 00:17:15,400 --> 00:17:17,480 Speaker 7: I think the ultimate route will be for them to 337 00:17:17,480 --> 00:17:20,360 Speaker 7: spin out NBC maybe, you know, kind of become. 338 00:17:20,119 --> 00:17:21,440 Speaker 8: This this roll up vehicle. 339 00:17:21,520 --> 00:17:24,359 Speaker 7: Maybe they combined with some other assets some of the 340 00:17:24,400 --> 00:17:26,960 Speaker 7: smaller players out there, could be an AMC Networks, could 341 00:17:26,960 --> 00:17:29,439 Speaker 7: be a lions Gate. Of course, nothing is necessarily going 342 00:17:29,520 --> 00:17:33,359 Speaker 7: to be transformative, but you know, at least, you know, 343 00:17:33,400 --> 00:17:36,360 Speaker 7: maybe once they're spun out, maybe they become an interesting 344 00:17:36,359 --> 00:17:37,280 Speaker 7: target for Netflix. 345 00:17:37,320 --> 00:17:37,920 Speaker 8: I mean, who knows. 346 00:17:37,960 --> 00:17:39,920 Speaker 7: Netflix has already kind of gone this whole m and 347 00:17:40,000 --> 00:17:42,600 Speaker 7: a route maybe Comcasts becomes interesting to them. 348 00:17:42,960 --> 00:17:45,840 Speaker 2: You know, I see Fox out there and there. I 349 00:17:45,840 --> 00:17:49,480 Speaker 2: would call them a subscale player too. But boy, they're 350 00:17:49,520 --> 00:17:51,639 Speaker 2: doing fine. It seems like they've got i mean, they're 351 00:17:51,760 --> 00:17:54,760 Speaker 2: broadcast and their whole audience. They've got that editorial thing down. 352 00:17:54,800 --> 00:17:57,159 Speaker 2: They know who their audience is. What do you think 353 00:17:57,200 --> 00:17:57,560 Speaker 2: they do? 354 00:17:59,440 --> 00:18:01,639 Speaker 7: Yeah, so the the endgame for them is also a 355 00:18:01,680 --> 00:18:04,240 Speaker 7: little bit unclear, Appaul. I mean, up until now, I 356 00:18:04,240 --> 00:18:08,399 Speaker 7: think Fox has made all of the right decisions, you know, 357 00:18:08,480 --> 00:18:11,399 Speaker 7: whether it has been to get rid of some of 358 00:18:11,440 --> 00:18:14,679 Speaker 7: the you know, challenged cable TV networks, the studio with 359 00:18:14,720 --> 00:18:17,920 Speaker 7: the whole Disney deal in twenty seventeen, and really kind 360 00:18:17,920 --> 00:18:21,679 Speaker 7: of doubled down on live sports and news. The thing is, 361 00:18:21,720 --> 00:18:23,560 Speaker 7: the one big thing that we're all kind of looking 362 00:18:23,600 --> 00:18:26,480 Speaker 7: at this year is going to be the NFL renegotiations, 363 00:18:26,480 --> 00:18:28,800 Speaker 7: and that's going to have some serious implications for all 364 00:18:28,840 --> 00:18:31,760 Speaker 7: of these companies, whether it's Comcast with you know, NBC 365 00:18:31,880 --> 00:18:34,919 Speaker 7: exposure and Fox. Fox is the most heavily exposed to 366 00:18:35,080 --> 00:18:38,119 Speaker 7: NFL programming and they're going to have to pay up 367 00:18:38,320 --> 00:18:40,119 Speaker 7: and so, you know, at that point, I think that 368 00:18:40,200 --> 00:18:41,840 Speaker 7: there is going to be some kind of reckoning for 369 00:18:41,880 --> 00:18:42,920 Speaker 7: all of these media companies. 370 00:18:45,040 --> 00:18:47,840 Speaker 3: Stay with us more from Bloomberg Intelligence coming up there 371 00:18:47,880 --> 00:18:48,119 Speaker 3: for this. 372 00:18:51,200 --> 00:18:54,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 373 00:18:55,000 --> 00:18:57,679 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay, and 374 00:18:57,680 --> 00:19:00,959 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 375 00:19:01,000 --> 00:19:04,560 Speaker 1: wherever you get your podcasts or watch us live on YouTube. 376 00:19:05,320 --> 00:19:07,199 Speaker 2: There's a time of the earning cycle, the end of 377 00:19:07,200 --> 00:19:08,560 Speaker 2: the earning cycle, where we get to hear from a 378 00:19:08,560 --> 00:19:09,560 Speaker 2: lot of these retailers. 379 00:19:09,600 --> 00:19:10,439 Speaker 3: Today's no different. 380 00:19:11,160 --> 00:19:13,480 Speaker 2: Bath and body Works reporting some numbers here, So let's 381 00:19:13,480 --> 00:19:16,399 Speaker 2: break it down. Lindsay, Dutch Consumer Hardlines, senior analysts for 382 00:19:16,440 --> 00:19:18,000 Speaker 2: Bloomberg Intelligence Joints is here. 383 00:19:18,280 --> 00:19:21,000 Speaker 3: So Bath and Bodyworks I know they're doing it. 384 00:19:21,000 --> 00:19:23,879 Speaker 2: They're in the midst of a turnaround here, lindsay, what 385 00:19:23,880 --> 00:19:25,080 Speaker 2: did you learn on the earnings release? 386 00:19:26,080 --> 00:19:29,439 Speaker 9: Hi, Paul, thanks for having me. Yes, Bath and body 387 00:19:29,480 --> 00:19:34,480 Speaker 9: Works is aggressively pursuing a turnaround strategy. The fourth quarter, 388 00:19:34,800 --> 00:19:38,160 Speaker 9: we saw sales and earnings come in better than expected, 389 00:19:38,200 --> 00:19:41,960 Speaker 9: but still down year over year, and then their outlook 390 00:19:42,000 --> 00:19:44,920 Speaker 9: for twenty six wasn't super surprising, kind of in line 391 00:19:44,920 --> 00:19:47,880 Speaker 9: with what they were expecting three months ago. 392 00:19:48,200 --> 00:19:48,399 Speaker 2: You know. 393 00:19:48,440 --> 00:19:51,200 Speaker 9: Growth is kind of off the table as they pursue 394 00:19:52,240 --> 00:19:55,760 Speaker 9: a strategy that's going to attract younger customers, a broader 395 00:19:55,800 --> 00:19:58,960 Speaker 9: customer base. They're moving a little bit into wholesale, They're 396 00:19:59,000 --> 00:20:02,840 Speaker 9: pulling on lots of different levers to really become back 397 00:20:02,880 --> 00:20:05,000 Speaker 9: to the brand that they have been historically. 398 00:20:06,000 --> 00:20:08,840 Speaker 5: Lindsay, promotions are a big part of Bath and body 399 00:20:08,840 --> 00:20:13,680 Speaker 5: Works as strategy. Are they driving traffic successfully or are 400 00:20:13,680 --> 00:20:16,919 Speaker 5: they assigned that demand is a little bit more shaky. 401 00:20:17,520 --> 00:20:18,439 Speaker 8: Yeah, great question. 402 00:20:18,560 --> 00:20:21,320 Speaker 9: So promotions are a huge part of Bath and Body's 403 00:20:21,440 --> 00:20:25,719 Speaker 9: historical strategy. The new management team is really trying to 404 00:20:25,960 --> 00:20:29,119 Speaker 9: ultimately move away from that. I don't think twenty six 405 00:20:29,359 --> 00:20:31,880 Speaker 9: we will see a significant shift. They set on the call, 406 00:20:31,920 --> 00:20:36,120 Speaker 9: they're expecting promos to be about flat this year. They 407 00:20:36,160 --> 00:20:39,960 Speaker 9: do still see success from those promotional strategies. At Black 408 00:20:40,000 --> 00:20:45,119 Speaker 9: Friday Cyber Monday, they elevated the strategy versus historical and 409 00:20:45,160 --> 00:20:48,919 Speaker 9: that deeper discount definitely drew traffic, and I think that 410 00:20:49,000 --> 00:20:51,320 Speaker 9: was a key part of the little bit better than 411 00:20:51,359 --> 00:20:54,000 Speaker 9: results in the fourth quarter than they were expecting. 412 00:20:54,840 --> 00:20:58,320 Speaker 2: Ben, what's the Amazon dot com play here for Bath 413 00:20:58,400 --> 00:20:59,080 Speaker 2: and Bodyworks? 414 00:21:00,240 --> 00:21:02,720 Speaker 9: Yeah, so I think that they're really looking to broaden 415 00:21:02,760 --> 00:21:06,400 Speaker 9: their brand awareness with consumers that don't shop them already. 416 00:21:06,560 --> 00:21:09,520 Speaker 9: So they have, you know, forty million loyalty members. Some 417 00:21:09,560 --> 00:21:11,879 Speaker 9: of those customers have been with Bath and Bodyworks for 418 00:21:11,920 --> 00:21:14,800 Speaker 9: a very long time. They're extremely loyal to the product 419 00:21:14,800 --> 00:21:17,879 Speaker 9: the sense that they have but this company is really 420 00:21:17,960 --> 00:21:22,840 Speaker 9: looking to reach that younger shopper. They're doing pushing into 421 00:21:22,880 --> 00:21:26,280 Speaker 9: new lines they have like lip products now, and the 422 00:21:26,320 --> 00:21:30,040 Speaker 9: move on Amazon is similarly broad in brand awareness, you know, 423 00:21:30,359 --> 00:21:33,119 Speaker 9: reach other shoppers that they don't currently reach. So I 424 00:21:33,119 --> 00:21:35,919 Speaker 9: don't see a huge push into wholesale as like a 425 00:21:35,960 --> 00:21:39,479 Speaker 9: new business strategy, but it's really getting that brand in 426 00:21:39,480 --> 00:21:42,560 Speaker 9: front of customers that aren't going to the mall and 427 00:21:42,600 --> 00:21:43,520 Speaker 9: seeing their store. 428 00:21:44,320 --> 00:21:47,680 Speaker 5: This is a company, lindsay, that falls into the affordable 429 00:21:47,800 --> 00:21:50,720 Speaker 5: luxury category. What are these results tell us about the 430 00:21:50,760 --> 00:21:53,439 Speaker 5: broader consumer and trading down to companies like this. 431 00:21:55,280 --> 00:21:58,439 Speaker 9: Yes, so you know Bath and Bodyworks has historically drawn 432 00:21:58,600 --> 00:22:03,040 Speaker 9: customers for their value proposition, and they have an everyday 433 00:22:03,119 --> 00:22:06,040 Speaker 9: luxuries line that did very very well in twenty four 434 00:22:06,040 --> 00:22:08,919 Speaker 9: and twenty five. You know, they still want to maintain 435 00:22:09,240 --> 00:22:13,560 Speaker 9: their piece and in that you know, seeking for value behavior, 436 00:22:14,080 --> 00:22:16,639 Speaker 9: and I think that's very important for them going forward. 437 00:22:17,000 --> 00:22:19,560 Speaker 9: The new management team also wants to elevate the brand 438 00:22:19,680 --> 00:22:22,920 Speaker 9: and push it maybe towards that prestige level a little bit. 439 00:22:23,000 --> 00:22:26,280 Speaker 9: And in beauty broadly, we've seen prestige holding up a 440 00:22:26,280 --> 00:22:29,880 Speaker 9: little bit better than mass, so it's an interesting move 441 00:22:30,000 --> 00:22:33,280 Speaker 9: to try to sort of elevate and move up a tier, 442 00:22:33,520 --> 00:22:36,320 Speaker 9: you know, when a lot of consumers are seeking value, 443 00:22:36,920 --> 00:22:39,320 Speaker 9: but I sort of understand the logic behind that. You know, 444 00:22:39,440 --> 00:22:42,360 Speaker 9: just look taking a step back, where those prestige brands 445 00:22:42,440 --> 00:22:45,399 Speaker 9: have held up better in this economy, probably driven by 446 00:22:45,440 --> 00:22:46,560 Speaker 9: a higher end consumer. 447 00:22:47,640 --> 00:22:52,359 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 448 00:22:52,560 --> 00:22:56,000 Speaker 1: and anywhere else you get your podcasts. Listen live each 449 00:22:56,040 --> 00:22:59,720 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 450 00:23:00,000 --> 00:23:03,440 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 451 00:23:03,880 --> 00:23:06,760 Speaker 1: You can also watch us live every weekday on YouTube 452 00:23:07,200 --> 00:23:09,440 Speaker 1: and always on the Bloomberg terminal