WEBVTT - Stocks, CVS, Tech Deals, and Cybersecurity (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.599 at Bloomberg dot com slash podcast. We have a in 0:00:22.640 --> 0:00:27.000 our studio today, met a Bloomberg alumn coming back. Kelly 0:00:27.040 --> 0:00:30.400 Cox joins this year US investment analysts at E Touro 0:00:30.600 --> 0:00:32.959 and a proud graduate of the University of North Carolina 0:00:33.040 --> 0:00:35.640 at Chapel Hill. That's okay, we'll allow her in the 0:00:35.680 --> 0:00:39.279 studio here. Callis have you back? Oh yeah, We're back 0:00:39.320 --> 0:00:41.159 and forth and all about it before. But it's so 0:00:41.240 --> 0:00:43.199 great to be here. And I'll put that aside with 0:00:43.400 --> 0:00:47.040 good stuff. I tell you, last year was so bad. Uh. 0:00:47.080 --> 0:00:48.960 And I know I follow you on Twitter closely. I 0:00:49.000 --> 0:00:52.640 know you make all the historical analogies and analyzes. What 0:00:52.720 --> 0:00:54.120 are you kind of telling? What are you what are 0:00:54.120 --> 0:00:57.000 you telling your clients for about? Can we kind of 0:00:57.040 --> 0:01:00.680 regroup here? Well? Hopefully for our own c entity? Um? 0:01:00.720 --> 0:01:03.720 WELLO was painful. I mean no doubt about that anyway 0:01:03.720 --> 0:01:07.920 you slice it. We're still in a challenging environment. Rates 0:01:07.920 --> 0:01:10.320 are still high, quite high. The FED doesn't seem to 0:01:10.400 --> 0:01:12.920 be backing off too much, and chances are they won't 0:01:12.920 --> 0:01:15.640 back off unless we hit a recession, and obviously nobody 0:01:15.640 --> 0:01:18.479 wants that. That's the worst case scenario. So we're hoping 0:01:18.520 --> 0:01:21.560 we can avoid a recession right now. So far, so good. 0:01:22.319 --> 0:01:24.600 But if we do avoid a recession, we're just cautioning 0:01:24.600 --> 0:01:27.080 people against the fact that we are in a high 0:01:27.160 --> 0:01:31.520 rate environment and that's still a challenging operating environment for companies. 0:01:31.560 --> 0:01:34.360 So I don't think we're there yet, but we're getting closer. So, 0:01:34.760 --> 0:01:38.119 I mean, it's a relatively high rate environment. But we've 0:01:38.160 --> 0:01:40.600 heard a couple of people say we're getting back to 0:01:40.640 --> 0:01:43.800 basics in terms of investing UM. People like bonds again 0:01:43.840 --> 0:01:49.160 after the horrible year of UM. Jeremy Siegel thinks it's 0:01:49.200 --> 0:01:52.840 the decade for dividends, which is kind of cool. I mean, 0:01:53.000 --> 0:01:55.520 you're no longer going to get meme stocks, these crazy 0:01:55.560 --> 0:01:58.280 home runs, get rich off of nothing with your stimmies. 0:01:58.360 --> 0:02:03.320 But maybe you know, with dedicated a savings plan and investments, 0:02:03.360 --> 0:02:06.480 you can you know, grow UM your wealth with income 0:02:06.520 --> 0:02:09.480 and reinvestments. What do you think, Well, I think you're right, Matt. 0:02:09.520 --> 0:02:12.360 I think investors have been forced to shift their mindsets 0:02:12.400 --> 0:02:15.160 towards what's working now and how they can make money 0:02:15.160 --> 0:02:19.240 now because yields are just so healthy and stocks and 0:02:19.280 --> 0:02:21.720 other risk assets just aren't working. And I think it's 0:02:21.720 --> 0:02:23.560 a healthy balance, right, Like you have to have a 0:02:23.560 --> 0:02:26.320 little bit of growth, a little bit of both, excuse me. 0:02:27.040 --> 0:02:28.799 But at the same time, you know, we kind of 0:02:28.960 --> 0:02:30.920 got too far on the growth side of the equation 0:02:30.919 --> 0:02:33.520 and we're coming back, you know. I think it's really important. 0:02:33.520 --> 0:02:35.760 I mean, investors are learning a lot of lessons right now, 0:02:35.960 --> 0:02:38.680 but they're also being forced to pay attention to the 0:02:38.680 --> 0:02:41.840 financial strength of companies that they invest in, and companies 0:02:41.880 --> 0:02:44.760 that actually rise and fault with the economy. That some 0:02:44.880 --> 0:02:49.200 are even economically resistant, the more defensive stocks. So, you know, 0:02:49.280 --> 0:02:51.200 I think it's a good shift back, and I think 0:02:51.200 --> 0:02:53.480 it's going to teach, you know, retail investors in general 0:02:54.080 --> 0:02:56.480 a lot about how markets work. So what are some 0:02:56.480 --> 0:02:59.000 of the sectors you like here? Um, I mean there's 0:02:59.000 --> 0:03:02.279 something to choose. Some are to belief from a evaluation perspective, 0:03:02.520 --> 0:03:05.959 um that we're beaten down where you kind of taught 0:03:06.000 --> 0:03:09.320 tongue your client to start doing some work. So I'm 0:03:09.360 --> 0:03:11.960 generally a cup have full person, I said a few 0:03:11.960 --> 0:03:15.600 minutes ago. It's a challenging environment, but I'm also looking 0:03:15.639 --> 0:03:18.280 to the fact that you know, we know a bowl 0:03:18.280 --> 0:03:20.359 market is after this. We don't know how we get there, 0:03:21.000 --> 0:03:23.400 but we know that cycles exist in the stock market, 0:03:23.440 --> 0:03:25.480 and we will eventually get back into that bowl, even 0:03:25.520 --> 0:03:28.760 if it is painful from here until now. So we're hoping, 0:03:29.240 --> 0:03:32.320 you know, by one step or another, we get there soon. 0:03:32.440 --> 0:03:35.720 And our customers are longer term. Retail investors are longer 0:03:35.840 --> 0:03:39.240 term investors, so we're encouraging them to sew their seeds 0:03:39.240 --> 0:03:42.520 for the next bull market because eventually we see inflation slowing. 0:03:42.520 --> 0:03:45.040 The Feed is committing to get committed to get rates down, 0:03:45.560 --> 0:03:47.720 so you know, we think it's time to prepare for that. Wait, 0:03:47.720 --> 0:03:49.320 why do you mean the FED is committed to get 0:03:49.400 --> 0:03:53.000 rates down? I mean inflation, Okay, But the thing is 0:03:53.040 --> 0:03:56.160 in the FED might not need to cut if we 0:03:56.240 --> 0:03:59.400 don't have a recession, if we get this soft landing 0:03:59.440 --> 0:04:01.960 that Over the past few days more people have been 0:04:02.000 --> 0:04:06.400 optimistic about um the FED could hold at five or 0:04:06.440 --> 0:04:08.960 five and a quarter depending on where they get right. 0:04:09.000 --> 0:04:11.440 But we're in a restrictive environment right now. The FED 0:04:11.520 --> 0:04:14.560 has said that, so eventually they're hoping to get rates 0:04:14.600 --> 0:04:17.040 back down and get inflation back down. Their target is 0:04:17.080 --> 0:04:20.840 two percent so for inflation correct. So we're trying to 0:04:20.880 --> 0:04:23.360 get back to that low inflation environment, and we think 0:04:23.400 --> 0:04:26.280 that low rates would come after that. So if you're 0:04:26.279 --> 0:04:28.480 a long term investor, it's a great environment to prepare 0:04:28.560 --> 0:04:30.720 for what's coming next and maybe you know, load up 0:04:30.720 --> 0:04:32.880 on those cyclicals in the case that we don't hit 0:04:32.920 --> 0:04:35.440 that recession. Of course, be guarded here, you know, look 0:04:35.440 --> 0:04:38.440 at a barbell, look at you know, possibly hedging your positions. 0:04:38.480 --> 0:04:41.679 But we're down about from the highs, and we're seeing 0:04:41.680 --> 0:04:45.039 a lot of value in the financials, the industrials, the 0:04:45.080 --> 0:04:48.440 more cyclical stocks, So you know, why not take a 0:04:48.480 --> 0:04:51.800 look the balanced portfolio that's sixty forty portfolio that a 0:04:51.839 --> 0:04:53.719 lot of folks grew up on that did not work 0:04:53.880 --> 0:04:56.479 last year with fixed income pretty much across the board 0:04:56.480 --> 0:05:00.760 down double digits. UM. I don't im an equity person. 0:05:00.800 --> 0:05:04.040 When I see people tell me we have historic declines 0:05:04.080 --> 0:05:07.280 in fixed income in I'm just naturally calling up my 0:05:07.320 --> 0:05:09.880 advisors and let's just buy some bonds. What are you 0:05:09.960 --> 0:05:12.720 kind of thinking about the fixed income space this year? Well, Paul, 0:05:12.800 --> 0:05:15.040 that's smart. I think a lot of financial advisors are 0:05:15.040 --> 0:05:18.240 telling their clients to do that. Uh, yeah, you're right. 0:05:18.279 --> 0:05:20.440 We saw a pretty unprecedented year when it came to 0:05:20.440 --> 0:05:22.400 stock and bond of clients. And I think that's why 0:05:22.400 --> 0:05:26.200 it was so painful, because it felt like nothing worked. Uh. 0:05:26.240 --> 0:05:28.960 You know, usually when stocks fall, bonds compensate for it, 0:05:29.000 --> 0:05:31.520 and that just didn't happen. Uh. And we think as 0:05:31.560 --> 0:05:34.240 we had into a recession obviously, or we don't know 0:05:34.240 --> 0:05:36.480 if a recession is coming. Excuse me, but you know, 0:05:36.720 --> 0:05:39.320 if we had into a recession, we could see people 0:05:39.400 --> 0:05:41.880 lean more on bonds for their safety. You know, we're 0:05:41.880 --> 0:05:44.000 already seeing that too with the tenure coming down from 0:05:44.040 --> 0:05:47.320 about four point five percent to three point five percent. So, 0:05:48.000 --> 0:05:50.039 you know, never say never. We don't know what happens 0:05:50.080 --> 0:05:51.839 in the future. I don't have a crystal ball, but 0:05:51.880 --> 0:05:53.440 you'd think that there there would have to be some 0:05:53.480 --> 0:05:58.000 balance coming back out there. In terms of valuations. I mean, 0:05:58.200 --> 0:06:01.280 I look at this stock market and think we're still 0:06:01.320 --> 0:06:05.240 not looking at cheap stocks, right, Um, in terms of 0:06:05.240 --> 0:06:08.560 the broader market, we're still looking at seventeen times earnings, 0:06:08.600 --> 0:06:12.279 so or or eighteen times earnings. So where do you 0:06:12.320 --> 0:06:14.440 think we need to go before you start putting your 0:06:14.440 --> 0:06:18.359 money to work in a in a hefty way. Well, 0:06:18.560 --> 0:06:21.120 if you think about it, seventeen or eighteen times earnings 0:06:21.200 --> 0:06:23.799 is about average for what we've seen over the past decade. 0:06:23.839 --> 0:06:26.240 And this past decade has not been average. I'll give you. 0:06:26.400 --> 0:06:29.039 I was going to say it's a zero inters rate decade, 0:06:29.080 --> 0:06:32.279 but yeah, correct, correct, Like there's context there. But I 0:06:32.279 --> 0:06:34.960 think it's also important to remember that there are there's 0:06:35.000 --> 0:06:39.480 a lot of dispersion insectors. UM tech does look expensive still, 0:06:39.800 --> 0:06:42.320 um some cyclicals do look a little bit cheaper. I 0:06:42.360 --> 0:06:44.240 thought it was interesting, you know that the stocks that 0:06:44.279 --> 0:06:47.520 actually did really well last year, the industrials of the world, 0:06:47.520 --> 0:06:50.520 the materials of the world, are still attractively valued when 0:06:50.520 --> 0:06:52.800 you look at their price to free cash flow. So 0:06:52.920 --> 0:06:55.159 I think that there's still a little bit of you know, 0:06:55.240 --> 0:06:57.719 rebalancing that needs to be done there. But you know, 0:06:57.839 --> 0:07:00.839 at the same time, I wouldn't be talked to see 0:07:00.880 --> 0:07:04.440 the market accept evaluation here except the current valuations here. 0:07:04.480 --> 0:07:06.960 If we don't fall into a recession. Yeah, that's one 0:07:07.000 --> 0:07:09.400 of the things we're speaking with Kylie Cox, us investment 0:07:09.560 --> 0:07:12.880 analyst at tro the question about evaluation. You kind of 0:07:12.920 --> 0:07:15.120 have to talk about earnings as we get to kick 0:07:15.160 --> 0:07:17.120 off another earning season at the end of this week 0:07:17.120 --> 0:07:20.080 with some of the big banks UM people calling out 0:07:20.120 --> 0:07:23.400 earnings risk as a material risk to this market here 0:07:23.440 --> 0:07:27.160 that estimates have not come down enough. Um, how do 0:07:27.200 --> 0:07:30.000 you think about that? So earnings for us are the 0:07:30.080 --> 0:07:33.520 determinant one of the things we're watching as we question 0:07:33.600 --> 0:07:36.400 if we're heading into a recession, because typically you see 0:07:36.400 --> 0:07:39.600 earnings fall about s ANDP earnings I'm talking fall about 0:07:40.720 --> 0:07:43.320 during recession. That's the average of all recessions we've seen 0:07:43.360 --> 0:07:46.600 since nineteen fifty. Right now, it looks like earnings could 0:07:46.800 --> 0:07:51.560 drop about you know, two to five in the fourth quarter, 0:07:51.880 --> 0:07:54.360 or you know, we're talking backwards, so they could have 0:07:54.440 --> 0:07:56.720 dropped two to four percent in the fourth quarter. You know, 0:07:56.800 --> 0:08:00.520 that's nowhere nearer recession. That doesn't look like a bad 0:08:00.640 --> 0:08:03.520 hit to us yet. So we're watching earnings to judge 0:08:03.560 --> 0:08:06.320 the degree of this pullback, if you know, if it 0:08:06.320 --> 0:08:11.000 falls into recessionary territory and if it justifies stocks possibly 0:08:11.320 --> 0:08:14.560 finding the bottom again. Um, And we think earnings are 0:08:14.600 --> 0:08:16.560 the thing to watch. Obviously the job market, I mean, 0:08:16.600 --> 0:08:18.480 the job market has the leading indicators that we're not 0:08:18.520 --> 0:08:21.240 seeing a ton of weakness and yet, but earnings will 0:08:21.280 --> 0:08:23.600 ultimately tell us I think where it settled out here, 0:08:23.640 --> 0:08:26.280 and right now, we think the market has priced in 0:08:26.480 --> 0:08:28.760 a slight earnings pullback and that's what we're seeing. That's 0:08:28.880 --> 0:08:31.040 that's the kind of argument to there's there's earnings risk 0:08:31.040 --> 0:08:32.800 out there. The kind of argument is that the markets 0:08:32.800 --> 0:08:35.040 price that in already. Yeah, I just don't know. I 0:08:35.080 --> 0:08:37.320 have no idea, But I think once we get past 0:08:37.440 --> 0:08:39.480 this cycle, I'm like, all right, I'm done with the 0:08:39.520 --> 0:08:43.640 earnings risk story. But you mean once we get pastor 0:08:43.760 --> 0:08:46.400 well this this next quarter, oh, I see Q four. 0:08:46.480 --> 0:08:49.560 So once we get you know, basically Friday's big bank earnings. 0:08:49.760 --> 0:08:51.560 I mean, how much does that matter to you when 0:08:51.559 --> 0:08:53.320 when we when we see the numbers on Friday, how 0:08:53.320 --> 0:08:55.959 closely we need pay attention because they're like six or 0:08:56.040 --> 0:08:59.200 seven big banks reporting on Friday. Well, big banks are 0:08:59.240 --> 0:09:01.160 the forefront of the economy. I think you need to 0:09:01.160 --> 0:09:03.400 pay attention to them. We've heard a lot of cautious 0:09:03.440 --> 0:09:06.640 rhetoric coming out of the banks, but overall their earnings 0:09:06.679 --> 0:09:09.679 have been decent. They've been surprising to the upside. I 0:09:09.760 --> 0:09:11.920 was actually parsing through earnings data last night, and I 0:09:11.920 --> 0:09:15.280 thought it was interesting that a lot of services sectors 0:09:15.280 --> 0:09:17.600 are expected to see the bigger earnings hit in this 0:09:17.720 --> 0:09:20.520 quarter in subsequent quarters, which is interesting if you think 0:09:20.520 --> 0:09:22.719 about it, because the balance that we saw last year 0:09:22.840 --> 0:09:25.720 was a lot of services spending less good spending. So 0:09:25.880 --> 0:09:27.920 coming into this earning season, I'm going to be watching 0:09:27.920 --> 0:09:30.640 the services sectors. You know, banks fall into that, Um, 0:09:30.679 --> 0:09:34.599 they're very consumer oriented. Um. You know, the more software 0:09:34.640 --> 0:09:38.880 companies fall into that because I just travel, for example, 0:09:38.920 --> 0:09:41.719 because I just don't think that there has been enough 0:09:41.720 --> 0:09:45.840 pessimism priced in there and the commentary is gonna matter. Yep, 0:09:45.960 --> 0:09:49.360 Absolutely forward guidance, all that good stuff. Kelly Cox us 0:09:49.400 --> 0:09:51.719 investment analysts for Etorro, joining us live here in the 0:09:51.720 --> 0:09:55.760 Bloomberg Interactive Broker Studio, U n C grad former reporter 0:09:55.920 --> 0:09:59.360 at Bloomberg's Analysts at four or five shops, and now 0:09:59.400 --> 0:10:03.320 she's got her at E Touro based in Charlotte, North Carolina. 0:10:03.360 --> 0:10:06.000 Thanks so much for joining us in studio. So that's 0:10:06.000 --> 0:10:07.760 it for me, Met on the earning stress story. Once 0:10:07.800 --> 0:10:09.319 we get past the next three or four weeks, I 0:10:09.360 --> 0:10:13.079 got all my guidance for three that's it. I mean, 0:10:13.080 --> 0:10:15.400 I think everybody's gonna give guidance that's gonna assume a 0:10:15.480 --> 0:10:18.200 modest kind of slowdown slash recession. And then, you know, 0:10:18.240 --> 0:10:20.360 I feel like we could get a kitchen sync quarter 0:10:20.760 --> 0:10:24.959 because because of because the recession was such a huge worry, 0:10:25.080 --> 0:10:27.000 especially a couple of weeks ago. You know, people have 0:10:27.040 --> 0:10:29.800 gotten more optimistic recently, but the work has been done 0:10:29.840 --> 0:10:32.920 on the earnings reports, and I feel like a lot 0:10:32.960 --> 0:10:36.079 of CEOs will say I'm throwing everything at this quarter. 0:10:40.080 --> 0:10:44.200 We have a CEO in the studio with us. Wendy 0:10:44.240 --> 0:10:48.800 Thomas joins us. She runs Secure Works NASDAC ticker s 0:10:48.880 --> 0:10:54.720 c w X. They are security as a service company, right, 0:10:54.720 --> 0:10:57.880 Wendy tell us a brief history of Secure Works and 0:10:57.920 --> 0:11:00.960 what you're doing. Sure, So, Securic has been through an 0:11:00.960 --> 0:11:05.720 important transformation to a security sas platform to really address 0:11:05.800 --> 0:11:08.040 the challenges we've seen in security over the last twenty 0:11:08.080 --> 0:11:11.840 plus years. So we were founded as a security services 0:11:12.000 --> 0:11:16.600 organization and then looking to address security challenges largely with 0:11:16.960 --> 0:11:20.520 very expert security folks. But what we found is that 0:11:20.520 --> 0:11:24.680 that we needed a new technology, machine learning AI approach 0:11:24.760 --> 0:11:27.800 to solving securities challenges, and that's what we launched a 0:11:27.840 --> 0:11:30.600 few years ago, the TAGES platform, and so our business 0:11:30.640 --> 0:11:33.720 model has been in a pretty significant transition to addressing 0:11:33.720 --> 0:11:35.440 security through that plant. So what do you expect in 0:11:36.160 --> 0:11:38.080 three As you know, Paul and I talked to so 0:11:38.120 --> 0:11:41.679 many people who say to us that cybersecurity is one 0:11:41.679 --> 0:11:43.520 of the number one issues, one of the number one 0:11:43.520 --> 0:11:46.960 threats facing companies, And of course we report on so 0:11:47.080 --> 0:11:50.559 many hacks and thefts and data leaks over the past, 0:11:50.679 --> 0:11:52.640 not just this year, but over the past five or 0:11:52.679 --> 0:11:56.760 six or seven years. UM, how does the growth look 0:11:56.800 --> 0:12:00.959 to you from from this transition vantage point? Sure? I 0:12:00.960 --> 0:12:04.040 mean our growth has been outsized in comparison to the 0:12:04.080 --> 0:12:07.640 market in terms of our tageous XDR platform. What what 0:12:07.800 --> 0:12:10.320 I see more generally in the security space, Clearly there's 0:12:10.320 --> 0:12:13.760 a broader economic backdrop right now in terms of pressure, 0:12:14.040 --> 0:12:18.360 but security is simply something that companies cannot just dispense with. 0:12:19.040 --> 0:12:21.640 What I see right now is that companies have an 0:12:21.640 --> 0:12:26.040 opportunity with with the type of technology that TAGES brings 0:12:26.080 --> 0:12:28.720 to actually reduce their total security spend, kind of like 0:12:28.760 --> 0:12:31.040 you didn't need a you'll need a separate camera from 0:12:31.040 --> 0:12:33.000 your phone or separate GPS device from your phone. You 0:12:33.000 --> 0:12:36.440 can consolidate your security spend into a platform approach to 0:12:36.520 --> 0:12:40.520 save money and get a better security posture. Broadly, speaking 0:12:40.520 --> 0:12:43.080 with the clients, do you deal with Wendy, what percentage 0:12:43.120 --> 0:12:47.160 of their tech spend every every year is cybersecurity versus 0:12:47.160 --> 0:12:50.439 maybe just hardware upgrades of software upgrades. Yeah, it's a 0:12:50.480 --> 0:12:52.679 great question because rules of thumb are really important when 0:12:52.679 --> 0:12:54.480 you're trying to look at your spend, and there's a 0:12:54.480 --> 0:12:57.199 couple of I would look at depending on your industry, 0:12:57.800 --> 0:13:00.559 somewhere between four and as much as ten percent of 0:13:00.600 --> 0:13:03.880 your total I T spend is generally on security. That's 0:13:03.920 --> 0:13:06.760 what that's what good looks like. If you want to 0:13:06.800 --> 0:13:11.679 translate that into employees on average, we see see organizations, 0:13:11.760 --> 0:13:14.040 not the largest organizations, but you know, your small medium 0:13:14.080 --> 0:13:18.080 businesses six hundred dollars per employee on average for a year, 0:13:18.400 --> 0:13:22.319 but can be as much as again depending on your 0:13:22.360 --> 0:13:26.680 business model and your I T estate. So um, we 0:13:26.720 --> 0:13:29.839 have heard kind of conflicting reports in terms of I 0:13:30.000 --> 0:13:32.520 T spending plans. For the most part, it seems that 0:13:32.559 --> 0:13:35.200 people are gonna pull back on I T spending. But 0:13:35.679 --> 0:13:38.000 we were talking with Honora Rata Rata and man Deep 0:13:38.000 --> 0:13:43.120 Sing yesterday from Business Bloomberg Intelligence, and they were saying 0:13:43.320 --> 0:13:45.840 that in some places, for instance, in cloud, you're gonna 0:13:45.880 --> 0:13:48.960 see an increase in spending three. I feel like, if 0:13:48.960 --> 0:13:50.839 you're going to increase your cloud spend, you've got to 0:13:50.840 --> 0:13:53.480 be boosting your security spend as well. Is that wrong? No? 0:13:53.640 --> 0:13:56.640 I think the mix of spend is absolutely shifting. So 0:13:56.679 --> 0:13:58.440 it may be that the total is under pressure, but 0:13:58.480 --> 0:14:01.160 the mix to get the yield in terms of automation 0:14:01.160 --> 0:14:04.600 for your business and flexibility UH is going to go 0:14:04.760 --> 0:14:07.559 up in areas like cloud and security. So we continue 0:14:07.600 --> 0:14:12.760 to see security spend um increasing year over year. I 0:14:12.800 --> 0:14:16.320 think the question is where's the opportunity to make a 0:14:16.320 --> 0:14:20.160 step function change in your security investments to again get 0:14:20.240 --> 0:14:24.240 your get your security posture much higher relative to the 0:14:24.240 --> 0:14:26.680 breaches we continue to see in the marketplace. So for 0:14:26.720 --> 0:14:31.080 secure works, what's your typical customer and what's their typical 0:14:31.280 --> 0:14:33.680 need that you're trying to kind of meet for them? 0:14:33.720 --> 0:14:38.600 Sure that the typical customer needs UH simple security, and 0:14:38.640 --> 0:14:40.960 they don't want to have to bring a large security 0:14:40.960 --> 0:14:43.480 staff in house. They want to make sure that their 0:14:43.520 --> 0:14:45.520 business is up and running and that they don't have 0:14:45.680 --> 0:14:48.800 damages from breaches, and that they can ensure themselves. From 0:14:48.800 --> 0:14:52.680 a cyber insurance perspective, we check all of those those boxes. 0:14:52.880 --> 0:14:57.040 They as cyber insurance. We do not sell cyber insurance, 0:14:57.080 --> 0:15:01.040 but by having a costure yes, absolutely late and in 0:15:01.080 --> 0:15:03.480 fact it's if you've if you've read the headlines. Because 0:15:03.480 --> 0:15:06.080 of all the breaches over the past few years, the 0:15:06.120 --> 0:15:09.040 cyber insurance market is really contracted in terms of much 0:15:09.120 --> 0:15:13.280 more rigorous underwriting and rising rates. So the ability to 0:15:13.320 --> 0:15:17.280 demonstrate controls around the part of your business that generates 0:15:17.280 --> 0:15:19.920 your revenue or your cash flow is an important part 0:15:19.960 --> 0:15:23.880 to being able to cost effectively ensure your organization. I see. So, 0:15:24.160 --> 0:15:27.480 just like with car insurance, if I can demonstrate that 0:15:27.560 --> 0:15:31.080 I have a decent security system on my vehicle, I'll 0:15:31.080 --> 0:15:34.960 get a discount from my insure that ensure cyber insurance 0:15:35.000 --> 0:15:36.920 is the same with businesses. They'll say, all right, if 0:15:36.920 --> 0:15:39.160 you have secure works, we'll give you a better rate. 0:15:39.240 --> 0:15:41.520 Show me that. And so we work with cyber insurers 0:15:41.560 --> 0:15:45.720 around incident response as well as putting the kinds of 0:15:46.000 --> 0:15:50.120 security controls in place that help those customers reduce that 0:15:50.400 --> 0:15:52.840 that rate. Where do you think your clients are just 0:15:52.880 --> 0:15:56.760 maybe companies in general are under investing today, and as 0:15:56.800 --> 0:16:02.240 it relates to their cybersecurity platform, they tend to undervest 0:16:02.280 --> 0:16:04.560 in two two areas. One, they try to go it 0:16:04.600 --> 0:16:06.920 alone with people. That just doesn't make a lot of sense. 0:16:06.920 --> 0:16:10.360 You can actually get more for less spend by having 0:16:10.360 --> 0:16:12.680 an expert partner like secure works. So they try to 0:16:12.680 --> 0:16:15.560 do it in house. Okay, they do, and it had 0:16:15.600 --> 0:16:18.480 just given the diversity of skill sets required in security 0:16:18.520 --> 0:16:21.600 today because you let the technology do what it does 0:16:21.640 --> 0:16:24.520 in terms of the XDR platform, so the people who 0:16:24.560 --> 0:16:26.880 are then working on the things that the platform can't 0:16:26.880 --> 0:16:29.840 solved need to be much more expert. And the second 0:16:29.920 --> 0:16:33.120 is it remains true that just the basics of security 0:16:33.120 --> 0:16:37.480 prevention can prevent the majority of security attacks. And so 0:16:37.480 --> 0:16:39.960 when we see the ability to have a second way 0:16:39.960 --> 0:16:43.080 to authenticate that it is you logging into the system, 0:16:43.080 --> 0:16:45.280 that goes a long way to preventing a large number 0:16:45.320 --> 0:16:49.080 of the sort of commodity criminal cyber attacks. I look 0:16:49.120 --> 0:16:52.320 at your stock tickers, s C w X on the 0:16:52.400 --> 0:16:56.720 nasdack UM and I put it up against you know, 0:16:56.720 --> 0:17:00.640 the NASDAC or the Russell two thousand or the Technology 0:17:00.720 --> 0:17:04.840 index on the Russell, it looks like you've really outperformed 0:17:04.880 --> 0:17:09.720 in booms and underperformed in busts. Uh, why do you 0:17:09.760 --> 0:17:13.240 think that is? Why? Why are investors making more volatile, 0:17:13.320 --> 0:17:16.119 dramatic moves with your stocks? And they are. There's to 0:17:16.600 --> 0:17:19.120 two elements to that. One is our business model has 0:17:19.119 --> 0:17:22.800 been in a transition from a services led organization to 0:17:23.000 --> 0:17:26.480 a technology lead approach to security, and in the midst 0:17:26.480 --> 0:17:30.240 of exiting some of those non strategic services, the total 0:17:30.280 --> 0:17:33.280 top line has been under pressure, which is why we 0:17:33.359 --> 0:17:37.359 talk about the TAGES platform and the air are associated 0:17:37.400 --> 0:17:40.359 with that growing eighty percent year over a year, you know, 0:17:40.800 --> 0:17:43.760 two million lesson three years after launch. So it's it's 0:17:43.760 --> 0:17:46.879 a rapidly growing area of security and emerging market trend. 0:17:47.400 --> 0:17:50.280 So you do need investors to look underneath the covers 0:17:50.320 --> 0:17:53.280 to see the opportunity in the in the valuation and 0:17:53.359 --> 0:17:56.800 the business transition. We're gonna hit this at the end 0:17:56.840 --> 0:17:59.000 of this year. We've said we're gonna exit probably more 0:17:59.040 --> 0:18:01.320 than eight percent of the news on the new platform, 0:18:01.440 --> 0:18:03.960 so the end of that time is coming. Michael Dell 0:18:04.440 --> 0:18:07.320 is your largest shareholder, is your chairman of the board. 0:18:07.680 --> 0:18:09.919 What's it like working from Michael Dell? He is an 0:18:09.920 --> 0:18:14.040 amazing entrepreneur. So this is an individual who understands how 0:18:14.040 --> 0:18:18.000 to grow businesses, is invigorated around going businesses and really 0:18:18.040 --> 0:18:22.560 going to speak to their their pain points. He is 0:18:22.840 --> 0:18:26.920 a big supporter of the the importance of merging security 0:18:26.960 --> 0:18:29.000 with the technology story for ce i os and not 0:18:29.119 --> 0:18:31.520 just s sos, and sees a lot of synergies in 0:18:31.640 --> 0:18:34.639 terms of those types of investments that must be fascinating 0:18:34.680 --> 0:18:37.639 and and a little scary. I would think Wendy Thomas uh, 0:18:37.720 --> 0:18:41.240 CEO and president of Secure Works public trader company s 0:18:41.240 --> 0:18:44.320 cw X there in town speaking at the need Him conference, 0:18:44.320 --> 0:18:46.080 which is a great conference. A lot of really cool 0:18:46.119 --> 0:18:49.280 small mid cap tech media names are good. Friend Lauren 0:18:49.320 --> 0:18:51.840 Martin is a big, big part of that team there 0:18:51.840 --> 0:18:54.040 and need Him so good to see Secure Works out 0:18:54.080 --> 0:18:55.960 in front of clients. Good to see everybody out and 0:18:56.000 --> 0:19:01.280 about doing stuff. I want to get to the story here. 0:19:01.400 --> 0:19:06.879 Microsoft gonna potentially invest ten billion dollars open ai and 0:19:07.040 --> 0:19:10.640 open ai, which would give it an Open AI evaluation 0:19:10.680 --> 0:19:13.160 about twenty nine billion dollars. So I'm going to start 0:19:13.200 --> 0:19:15.080 with the most basic with an a Rock Rana, he's 0:19:15.080 --> 0:19:19.840 our Bloomberg Intelligence. What is open AI? What for? For 0:19:20.280 --> 0:19:22.480 you know, I mean Mats a lot. You know, he's 0:19:22.520 --> 0:19:24.600 not as tex savvy as Iron, but so for mats 0:19:24.600 --> 0:19:26.439 sake and maybe for some of our listeners, what is 0:19:26.480 --> 0:19:31.159 open AI? So you have a number of artificial intelligence 0:19:31.160 --> 0:19:35.239 companies that are basically building algorithms to make you know, 0:19:35.320 --> 0:19:37.479 some kind of function good. So they have a they 0:19:37.480 --> 0:19:40.560 have a product called chat GPT and it works like 0:19:40.600 --> 0:19:42.280 a search function. I mean, you go and type in 0:19:42.320 --> 0:19:44.600 and says, you know, how should I invest and will 0:19:44.640 --> 0:19:47.080 give you a very complicated answer or a very simple 0:19:47.119 --> 0:19:49.560 answer to any of those things. So it is it 0:19:49.720 --> 0:19:55.560 is really products like that or anything that enhances the 0:19:55.600 --> 0:19:58.600 insights that anybody can can can get on the data. 0:19:58.680 --> 0:20:01.080 That's underline. So it it is a bit, it's it's 0:20:01.119 --> 0:20:03.840 it's not as complicated as it sounds. It's practically it's 0:20:03.880 --> 0:20:08.280 like a search box. Sounds like Watson again, but exactly, 0:20:08.520 --> 0:20:12.080 you are absolutely right. It is like Watson. But the 0:20:12.160 --> 0:20:16.359 results for chat GPT has been really good. And Microsoft 0:20:16.480 --> 0:20:18.439 is already an investor. It's not as if it's not 0:20:18.480 --> 0:20:21.919 an investor right now, UM, but it's it seems that 0:20:22.040 --> 0:20:25.120 the company has a very high valuation and somebody might 0:20:25.160 --> 0:20:27.680 want to take it. So a I'd like to see 0:20:27.760 --> 0:20:31.199 chat gpt, then take on Watson on Jeopardy, Yes, and 0:20:31.280 --> 0:20:36.080 be jing and buh what do they call it? When 0:20:36.080 --> 0:20:39.240 it kind of like turns human? Is Is it possible 0:20:39.320 --> 0:20:42.560 that it's going to develop its own Was it? No? 0:20:42.720 --> 0:20:45.760 There was? There was? There was? Wasn't there a Google 0:20:46.359 --> 0:20:50.360 UM employee who was worried that the AI they were 0:20:50.400 --> 0:20:55.960