Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: From the Heart where Innovation, money and power. Collie in Silicon.
Speaker 3: Valley, NBN.
Speaker 4: This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
Speaker 5: I'm Caroline Heid at Bloomberg's weltad quarters in New York.
Speaker 5: Ed Ludlow he is off. This is Bloomberg Technology coming up.
Speaker 1: All eyes on Nvidia as.
Speaker 5: The one point seven trillion dollar chip company. It gears
Speaker 5: up for earnings results after the bell. Full coverage ahead,
Speaker 5: plus we stick with earnings and Palo Alto Networks heading
Speaker 5: for its biggest drop ever as customers face spending fatigue
Speaker 5: in cybersecurity will bring you those numbers. And Google looks
Speaker 5: to build an overen source AI community with the launch
Speaker 5: of its new model Gemma, built on the same technology
Speaker 5: as it's Gemini LLM. We'll discuss that and so much
Speaker 5: more throughout the hour, but first let's check in on
Speaker 5: these markets, because look, we are seeing a little bit
Speaker 5: fatigue when we call it in terms of purchasing of
Speaker 5: tech stocks.
Speaker 1: Right now.
Speaker 5: We are all waiting and watching to see whether the
Speaker 5: AI hype can be borne out in the.
Speaker 1: Reality of revenue.
Speaker 5: Uptic over it in video Nazdac off by six tens percent.
Speaker 5: Interesting Chinese stocks moving a little bit higher on those
Speaker 5: US traded ones that ultimately is being seen as China
Speaker 5: is putting in place and restrictions on selling maasbely getting
Speaker 5: out of certain stocks and the open and the close
Speaker 5: of their trade.
Speaker 1: Could this support the market in the stock.
Speaker 5: Inflow and see some sort of rebound that's been reflected
Speaker 5: here in the US trade. I'm looking at bitcoin under
Speaker 5: pressure just by one point eight percent. We're still at
Speaker 5: about a fifty one thousand dollars handle, but still a
Speaker 5: little bit of risk aversion today that sinks into that
Speaker 5: particular area of risk assets.
Speaker 1: Move on and have a look at one of the
Speaker 1: individual movers are doing on a.
Speaker 5: Day like today, because look, I've got to focus on
Speaker 5: what's been happening more broadly on the world of palle
Speaker 5: Alt networks as you see twenty six percent lower, a
Speaker 5: quarter of its market capitalization erased on one day, as
Speaker 5: they look actually on their fiscal quarter that they just
Speaker 5: had lived up to expectations, but their forecast is where
Speaker 5: we're worried about bytes technology. Interesting one traded over in
Speaker 5: the UK off by more than nine percent as the
Speaker 5: CEO suddenly steps down as he said, they's been making
Speaker 5: some trades and not been telling executives or shareholders. That's
Speaker 5: a UKAI and cyber and software company to keep an
Speaker 5: eye on. And in Vidia, as we say, down some
Speaker 5: two percent ahead of their earnings. Look, we are all
Speaker 5: waiting and watching as to whether this one point seven
Speaker 5: trillion dollar company can live up to the two hundred
Speaker 5: percent growth in revenue that market is anticipating. Kunjin Sabani
Speaker 5: is here with us. I'm so policed to say, Bloomberg
Speaker 5: Intelligence More and Nvidia and just tell us a little
Speaker 5: bit ultimately where the warriors. Has the market priced in
Speaker 5: the right sort of level of growth for this earnings number?
Speaker 6: Definitely? I mean, look the market the stock is price
Speaker 6: for perfection, and we again expect a robust print and guide.
Speaker 6: The supply has come in strong. Lead times have shrunk,
Speaker 6: but so has the demand and continues to still outface supply,
Speaker 6: especially as momentum in enterprise AI spending continues to rise,
Speaker 6: so that increases the odds of another beaten rise.
Speaker 5: And they are integral to AI infrastructure. They are integral
Speaker 5: to building out of AI models. What's interesting though, is
Speaker 5: in the past China has been integral to it.
Speaker 1: Are we likely to get any guidance.
Speaker 5: On how much geopolitics still affects the business and how
Speaker 5: much they can sell ince that country.
Speaker 6: Yes, I mean recently, you know, Jensen has been sort
Speaker 6: of on a world whore meeting with heads of different
Speaker 6: governments and different geographies, including China. So we do expect
Speaker 6: some kind of commentary on that. The numbers for this
Speaker 6: quarter have been dealers that China will be significantly lower
Speaker 6: than what we have seen in the past, but in
Speaker 6: the near term we think they can offset the demand
Speaker 6: that they could have shipped to China by shipping to
Speaker 6: other regions, which again continue to see significant increase in demand.
Speaker 5: We will see how all of that lives off. I mean, really, Kunjen.
Speaker 5: What's been so interesting has been some of the take
Speaker 5: from other analysts out there today, Scott Rubner, Goldman Sachs.
Speaker 5: What he's saying in Vidio is the most important stock
Speaker 5: on planet Earth. We'll see how you analyze that stock
Speaker 5: a little bit later. Being meg Intelligence analyst Punchin Sabani,
Speaker 5: thank you so much for the breakdown ahead of those
Speaker 5: numbers after the bell.
Speaker 1: But let's make this broader.
Speaker 5: Let's see how this particular stock fits in with the
Speaker 5: rest of the industry group and indeed markets more generally
Speaker 5: so pleased to welcome Chris and Bitterly, City Group Wealth,
Speaker 5: head of Investment Solutions to the show and Kristin. When
Speaker 5: you think about the most important stock on planet Earth,
Speaker 5: I mean.
Speaker 1: Is this the bell weather?
Speaker 5: Do we sort of throw all the FED concerns and
Speaker 5: talk and print that we're going to get from FED
Speaker 5: minutes out the window.
Speaker 7: This is clearly the key catalyst, at least for today
Speaker 7: and maybe this week. But I think, look, this is
Speaker 7: earnings after the close today. It's really about whether or
Speaker 7: not this AI story has more legs in terms of
Speaker 7: the momentum that we've seen in the market. I think
Speaker 7: one of the things that we're looking at though, is
Speaker 7: we can talk about the Magnificent seven, we can talk
Speaker 7: about the concentration in market breadth, but it has been
Speaker 7: backed up by delivering superior earnings. And when you have
Speaker 7: earnings growth that's in the ballpark of twenty five percent plus,
Speaker 7: it is something that actually compels the valuations that we
Speaker 7: see and actually continued inflows into these companies.
Speaker 5: Some might say actually in Vidio remarkably cheap in comparison
Speaker 5: to where we've seen in terms of the run up
Speaker 5: of the overall share price. But the spillover effects here,
Speaker 5: the fact that people are looking out for anything that
Speaker 5: has AI in its name. Many have felt that it's
Speaker 5: kind of a rerun of crypto in some way, But
Speaker 5: are they justified from your perspective. More broadly, on a
Speaker 5: macro perspective, Walt productivity is going to be born out
Speaker 5: for these companies.
Speaker 7: I think when we look at these very large companies
Speaker 7: that have performed quite well, we have to remember just
Speaker 7: going back to twenty twenty two, they did not perform
Speaker 7: well at all, So you were saying quite the opposite
Speaker 7: story where you saw declines of fifty sixty plus percent. Now,
Speaker 7: looking at this, like I said, it is backed up
Speaker 7: by earnings. You're looking at the Magnificent seven represent close
Speaker 7: to twenty percent of the earnings contribution of the US
Speaker 7: equity market. We're only going back to twenty seventeen it
Speaker 7: was five percent, So they have delivered in earnings growth.
Speaker 7: I do think though as an investor, it's important to
Speaker 7: have exposure here, but it's also important to have exposure
Speaker 7: as to who are the beneficiaries the play when it
Speaker 7: comes to the technology and the enablers very clear. I
Speaker 7: think the adopters is where investors are really looking for
Speaker 7: gains within twenty twenty four.
Speaker 1: Okay, so dig into that.
Speaker 5: Is it going for specific names in healthcare, specific names
Speaker 5: in industry that have managed tool cup a good game
Speaker 5: in AI or do you have to see the proof
Speaker 5: in the pudding before you stop audocating money.
Speaker 7: I think it's a little bit of a show me
Speaker 7: story in twenty twenty four. I think you know, when
Speaker 7: you just look at AI in terms of the number
Speaker 7: of times it's been mentioned in earnings calls, it's come down.
Speaker 7: I think, like last quarter it was six thousand times
Speaker 7: and now it's about two thousand. But I do think
Speaker 7: that when you look at sectors that stand to benefit
Speaker 7: from this. I know cybersecurity very much in the news
Speaker 7: based on last night's earnings, But you look at something
Speaker 7: like cybersecurity and you say, okay, comparing the run up
Speaker 7: of that sector versus the broader AI magnificent seven, there's
Speaker 7: a comparative difference there, and evaluation difference actually on a
Speaker 7: forward pe basis. You're looking at valuations that we haven't
Speaker 7: seen since twenty twenty within that sector, and when I
Speaker 7: think of the applications and the adopters of GENAI, not
Speaker 7: only in an area with cybersecurity, does that increase the
Speaker 7: total addressable market and the demand side of the equation.
Speaker 7: But there are real productivity gains when it comes to
Speaker 7: what used to take a security analyst hours to do
Speaker 7: can come down to minutes. And we're going to see
Speaker 7: those productivity gains in twenty twenty four.
Speaker 1: Maybe not macro.
Speaker 5: For US, there has been a perspective that the FED
Speaker 5: is going to stop maybe talking about the productivity gains
Speaker 5: the AI can bring more broadly to the US labor
Speaker 5: force and the fact that we do have a tight
Speaker 5: labor force, people still wanting to be hard. We do
Speaker 5: seem to see growth within it. Will we see productivity gains?
Speaker 5: Do you think more broadly in a macro perspective.
Speaker 7: I think from a macro perspective, we have to go
Speaker 7: back to even though we've seen volatility and the inflation print,
Speaker 7: we have to go back to what we know is
Speaker 7: true and where we're going to see flows from an
Speaker 7: investing standpoint, So what we to be true right now?
Speaker 7: We know that there's six trillion dollars sitting on the
Speaker 7: sidelines in money market funds that has increased by one
Speaker 7: and a half trillion dollars since the FED started its
Speaker 7: hiking cycle. We know that we're at peak FED funds rates.
Speaker 7: The question is when does the FED start cutting. I
Speaker 7: don't think there's too many arguments that the FED would
Speaker 7: resume a hiking cycle. Inflation, we knew it was going
Speaker 7: to be a bumpy ride down to the.
Speaker 1: Two percent target.
Speaker 7: We see a path maybe down to two and a
Speaker 7: half percent by the end of this year. And earnings
Speaker 7: have troughed, and I think that's an important thing when
Speaker 7: we look at this broadening, not only just because of
Speaker 7: inflation coming down, raids coming down, cash on the sidelines,
Speaker 7: Earnings troughed and Q three of last year and now
Speaker 7: we're seeing more sectors turn to profitability, So you have
Speaker 7: a profitability argument in addition to then productivity gains.
Speaker 5: And it might be an argument therefore, when you come
Speaker 5: back to your theme of cyber of buying on weakness.
Speaker 5: What we love about having you on shows across on
Speaker 5: network is the themes that you bring. Where else are
Speaker 5: you seeing sort of forces that cannot be argued with
Speaker 5: even in a Federal Reserve that potentially doesn't stop costing
Speaker 5: as soon as we anticipate.
Speaker 7: Another area that we love, and you're probably going to
Speaker 7: laugh because you've heard me talk about this for years,
Speaker 7: is longevity and investing in It's very tech.
Speaker 1: It really does it kind of does work.
Speaker 7: So we'll bring it full circle in terms of AI
Speaker 7: gains there as well. But longevity is another area that
Speaker 7: was left behind last year. So when you look at healthcare,
Speaker 7: it was really exclusively about GLP one drugs until the
Speaker 7: last two months of the year, and then biotech started
Speaker 7: to get a little bit of a bid, med tech
Speaker 7: started to get a little bit of a bid, and
Speaker 7: life sciences. And so this is the same type of
Speaker 7: argument when you think of productivity gains, when you think
Speaker 7: of enhancements, when you think of what technology can do
Speaker 7: in bringing down the cost of healthcare, there are a
Speaker 7: lot of compelling valuation opportunities, both for the short term but.
Speaker 1: Also for the long term.
Speaker 5: We love the themes, you love the perspective the macro commentary.
Speaker 5: Thanks so much, con thank you. Enjoy the healthy dose
Speaker 5: of an exalt to the bell. Christian Visilicious City Group Wealth,
Speaker 5: Head of Investment Solutions, Apple it's upgrading the security of
Speaker 5: as I message app to fend off a looming future threat,
Speaker 5: advanced quantum computing attacks. Let's bring in blue mugs Mark
Speaker 5: German for more.
Speaker 1: And we talk a lot.
Speaker 5: About quantum computing, but the reality hasn't yet arrived.
Speaker 1: Blapple wants to front run that.
Speaker 2: Yeah, thank you so much for having me. That's right,
Speaker 2: quantum computing. Some estimates indicate that these types of computers,
Speaker 2: which are super duper computers, not just supercomputers so to speak,
Speaker 2: won't arrive until the tail end of the decade or
Speaker 2: deep into the twenty thirties. But Apple's starting to prepare
Speaker 2: for that with I Message. Let me tell you why.
Speaker 2: There is something called harvest now decrypt later attacks. Right.
Speaker 2: What that means is someone could steal some data now,
Speaker 2: even though it's unbreakable now, quantum computers in the future
Speaker 2: may be able to break it open.
Speaker 6: Right.
Speaker 2: So Apple wants to stop that from happening. They don't
Speaker 2: want someone to collect or steal someone's IM message data
Speaker 2: in the year twenty twenty five and then crack it
Speaker 2: open in twenty thirty two. And so that's what this
Speaker 2: new I Message PQ three technology is going to do.
Speaker 2: It's much improved encryption for the platform. It's rolling out
Speaker 2: next month when Apple releases its next software updates, iOS
Speaker 2: seventeen point four being the big one, and then it's
Speaker 2: going to become the default for all I message conversations
Speaker 2: by the end of this year.
Speaker 5: And saying it's more efficient of effective at least than
Speaker 5: the signal, of course than other competitors out there.
Speaker 1: What's happen?
Speaker 5: They're like, Mark, I'm interested, and also that you're reporting
Speaker 5: that you've done overnight on Really some executive changes going
Speaker 5: on at Apple.
Speaker 1: This seems to be a never ending story.
Speaker 2: Yeah, it's interesting. More executive changes at Apple, this one
Speaker 2: in its audio division. Gary Jeeves, who's their vice president
Speaker 2: of Acoustics, one of their top executives related to audio,
Speaker 2: really has been the leader and at the forefront of
Speaker 2: the development of air pods over the last decade or so,
Speaker 2: which obviously now is a fifteen to twenty billion dollars
Speaker 2: a year business for Apple. He has stepped down as
Speaker 2: of this week from his role. He's given that role
Speaker 2: to his top deputy. He's going to remain for the
Speaker 2: next several months at Apple as an advisor, right, so
Speaker 2: no longer running the team, but an advisor to Apple's
Speaker 2: executive in charge of Beats, AirPods, now the home Pod
Speaker 2: and other audio products, so more executive changes. This comes
Speaker 2: after Dj Navotni, who was a key vice president of
Speaker 2: hardware engineering there, left to be a senior vice president
Speaker 2: of program management at Rivian earlier this year. Tang Tan,
Speaker 2: the vice president of design for the iPhone, the Apple Watch,
Speaker 2: and AirPods. He's going to join former Apple design chief
Speaker 2: Johnny I've in his company love from working on new
Speaker 2: AI products with Sam Altman, and you've seen a large
Speaker 2: chunk of Apple's industrial design team leave as well. So
Speaker 2: this is not a departure yet, but key executive stepping
Speaker 2: down from their role.
Speaker 5: Changing of the God Matt Gammon always ahead of it
Speaker 5: with thank you so much for the insights. Now let's
Speaker 5: turn our attention to talking tech and we're going to
Speaker 5: stick with the theme of executive reshuffling. SpaceX seeing a
Speaker 5: rare high level departure in its corporate ranks. According to
Speaker 5: reporting from CNBC, the company senior vice president of its
Speaker 5: commercial business is leaving after spending more than a decade
Speaker 5: working there and was personally responsible for bringing in over
Speaker 5: a billion dollars of annual revenue. Meanwhile, Samsung has sold
Speaker 5: its entire remaining stake in ASML. That's as it pushes
Speaker 5: into new areas of chip making. Now the world's largest
Speaker 5: memory maker sold its remaining shares in the Dutch company
Speaker 5: as it really tries to work to catch up with
Speaker 5: rival s k Heinex in high bend bandwidth memory chips,
Speaker 5: which are used to help in videos, accelerators, train artificial
Speaker 5: intelligence plus sam mam and Freed is heading back to
Speaker 5: court today for the first time since his November conviction.
Speaker 5: That's over a multi billion dollar fraud in cryptocurrency customers.
Speaker 1: Of course, Patwan.
Speaker 5: Freed is slated to answer questions from a federal judge
Speaker 5: as to whether he is aware of potential conflicts of
Speaker 5: interest for the lawyers he hired last month to represent
Speaker 5: him at sentencing in March. His new attorneys also represent
Speaker 5: another cryptomogul facing criminal charges coming up. Vice president and
Speaker 5: general manager of Google Workspace going to be joining us
Speaker 5: a partner, Pabu joining us to talk about how duet
Speaker 5: ai is turning into Google Workspace and it became Gemini.
Speaker 1: That's next watching shows of Amazon.
Speaker 5: Meanwhile, let's have a quick look at what's happening in
Speaker 5: terms of well up eight nine tenths of the percent why.
Speaker 1: Centering the Dow Jones Industrial average. What falls out Walgreens?
Speaker 8: This is Blueberg Technology.
Speaker 5: Just to talk about Google for a moment, because it's
Speaker 5: got a lot of announcements. First up, it's introducing new
Speaker 5: open large language models that's calling GEMMA. This is reversing
Speaker 5: the company's kind of general strategy and keeping the company's
Speaker 5: proprietary artificial intelligence technology out of public view. But the
Speaker 5: models will handle text only have been built from the
Speaker 5: same research and technology used to create the company's flagship
Speaker 5: AI model, Gemini and Gemma will be released in two sizes,
Speaker 5: one targeted at customers who plan to develop AI software
Speaker 5: using high capacity AI chips and data centers, and then
Speaker 5: a smaller model for more cost efficient app building. And
Speaker 5: many would say, actually given them transformers being given to
Speaker 5: the community in many ways Google has been open sourcing. Meanwhile,
Speaker 5: let's stick with Google in another way in which you're
Speaker 5: using it, perhaps at the enterprise. Some more news coming
Speaker 5: out that's starting today Duet AI for Google Workspace. It's
Speaker 5: going to have a brand new name, and you guess
Speaker 5: that it's Gemini Workspace customers will be able to chat
Speaker 5: with Gemini in a new way, and the chat experience
Speaker 5: will have enterprise grade data protections as well as copyright
Speaker 5: in demnification. Here to join a Vice president and General
Speaker 5: Manager of Google Workspace a pantner PAPU. It is great
Speaker 5: to have you with us a partner, and number of
Speaker 5: ways it feels to be using Gemini Now when I'm
Speaker 5: sat at my work desk, how do you envisage people
Speaker 5: working with it to improve their productivity?
Speaker 3: Well, first of all, we're super excited have Workspace center
Speaker 3: the Gemini era. As you said, workspace comprisers of apps
Speaker 3: that people use every day in their life, from Gmail,
Speaker 3: Dark Drive, sheets, Meet, you name it, and so to
Speaker 3: have Gemini infuse there to make all of your work
Speaker 3: journeys more productive is fantastic. So we're already seeing people
Speaker 3: do lots of interesting things like helping them write better,
Speaker 3: making them sound more professional, perhaps making them sound more playful.
Speaker 3: And so today's announcement is really exciting because Gemini in
Speaker 3: Workspace just up levels all of the things that AI
Speaker 3: can help you do in your work.
Speaker 5: Life, and not many people might not realize as over
Speaker 5: three billion people do use Google Workspace, and I'm therefore
Speaker 5: you can garner so much data as to how it's
Speaker 5: being effectively deployed, who, what types of people wear geographically,
Speaker 5: but what are the guardrails that a lot of your
Speaker 5: clients are going to be asking you for, because that
Speaker 5: has been almost the nervousness, the reticent about the new
Speaker 5: world of generative AI.
Speaker 3: So one of the things that we hold very dear
Speaker 3: is our promise to users about privacy, security and compliance.
Speaker 3: And with Workspace, we offer enterprise grade security for all
Speaker 3: of our Gemini features, which means you're in control of
Speaker 3: your data. Your data never leaks into the models you get,
Speaker 3: your data's never used for advertising, and so that level
Speaker 3: of security and compliance being made available now to all
Speaker 3: of our Gemini users is something that we're very proud of.
Speaker 5: What's interesting is, of course, when I think about Workspace,
Speaker 5: I think of enormous corporations in which I currently sit.
Speaker 5: But small and medium size enterprises have got to have
Speaker 5: been wanting to use generative AI in their heart too, right.
Speaker 3: Absolutely, we just did a survey wag eighty seven percent
Speaker 3: of small businesses and all medium sized businesses are all
Speaker 3: ready to use generait of AI and so given our
Speaker 3: user customer base of over ten million customers, we're excited
Speaker 3: to bring Gemini today with a brand new launch at
Speaker 3: a lower price point to businesses of all sizes all
Speaker 3: over the world. And so with that launch, we now
Speaker 3: enable small businesses to get more done every single day.
Speaker 3: As well.
Speaker 1: Taught to us about ultimately the pricing of this.
Speaker 5: How does one come up with what real value is
Speaker 5: worth in this and not be sort of blown around
Speaker 5: by ultimately well other competitors of pricing that points at.
Speaker 3: So we feel very strong about our pricing strategy. It's robust,
Speaker 3: It's based on a number of factors, not just what
Speaker 3: the market can bear, but also the perceived value of
Speaker 3: our customers, because ultimately it comes down to customers and
Speaker 3: what they're willing to pay for. And this is where
Speaker 3: we started with a thirty dollars version for our enterprise
Speaker 3: customers and a twenty dollar version for smaller businesses or
Speaker 3: enterprises who want to get started. But I'm not quite
Speaker 3: sure where to begin, and I said.
Speaker 5: At the beginning, So with the breadth of three billion users,
Speaker 5: how are you seeing it being used differently in different places?
Speaker 3: Oh, it's so wonderful. It's so creative and clever. People
Speaker 3: tell us stories all the time of things that they're
Speaker 3: doing with it. We have small business people who are
Speaker 3: actually just wanting to focus on their businesses. So, for example,
Speaker 3: a music teacher really just wants to teach music, but
Speaker 3: often has to respond to inbound inquiries all the time,
Speaker 3: and so getting help replying to emails while sounding you know,
Speaker 3: factual and professional is actually really fantastic.
Speaker 1: We love the stories where people for.
Speaker 3: Whom English is the second language, have been you know,
Speaker 3: their work has been transformed by how it makes them
Speaker 3: sound at work and gives them more confidence. Creativity unlocked
Speaker 3: with things like im generation with slides. If you're trying
Speaker 3: to brainstorm how you might think about a new product,
Speaker 3: and so on, just coming up with visual aids of
Speaker 3: like visualize what this idea might look like really helps
Speaker 3: unlock some of the brainstorming. Banks using it for executive management,
Speaker 3: event planners using it to get events done.
Speaker 1: I mean, I could go on and on.
Speaker 3: It's actually just truly tremendous what our customers are doing
Speaker 3: with it already.
Speaker 5: And look, you're a long time Google executive decades under
Speaker 5: the belt and tell us a little bit about how
Speaker 5: it's felt when, as we said at the beginning of
Speaker 5: this conversation, you with of course deep Mind, have been
Speaker 5: really R and D focused all things artificial intelligence, injecting
Speaker 5: things like Transformer R and D into the broader ecosystem.
Speaker 5: But then came this idea that you were behind the
Speaker 5: curve that you were following on from Microsoft and open
Speaker 5: Ai teaming together.
Speaker 1: Have you been able to diffuse that? Have you been
Speaker 1: able to think that that's not true?
Speaker 3: I think ultimately customers decide in when customers use our products,
Speaker 3: and the tell us that they're more helpful, more intuitive,
Speaker 3: easy to use, and.
Speaker 1: Actually deliver the value.
Speaker 3: And it's not just about the hype. I think that's
Speaker 3: where we need to focus is what are the real
Speaker 3: users saying as opposed to all of the hype around this.
Speaker 3: And so we love our partnership with deep Mind because
Speaker 3: ultimately Google's focus on the user and making sure that
Speaker 3: we're actually helpful to the user is what differentiates us
Speaker 3: from everybody else.
Speaker 5: Okay, so there is a lot of feeling that there's hype.
Speaker 5: How are you in reality as just someone that uses
Speaker 5: Gmail and docs and not just someone who's in charge
Speaker 5: of workspace, is using generative AI on a daily basis.
Speaker 3: So many people, so many ways. So first of all,
Speaker 3: both at my work life and my personal life, I
Speaker 3: often feel overwhelmed with email. Actually in my personal life
Speaker 3: more so these days because schools and businesses and package
Speaker 3: tracking and all of these things. So having Gmail be
Speaker 3: a really helpful assistant to me by showing me the
Speaker 3: summaries of the endless long emails I get has saved
Speaker 3: me a lot of time at work at home, which
Speaker 3: has been helpful. Same thing applies at work as well.
Speaker 3: And you know, for example, I was prepping for an interview,
Speaker 3: how does one your broadcast interview got some really great
Speaker 3: clips from Gemini. Actually is like be confident but yourself.
Speaker 3: There's just all sorts of ways in which it just
Speaker 3: makes you a little bit more confident about what you're doing.
Speaker 3: Freeing up your time to do other things helps you
Speaker 3: be yourself in the best possible way.
Speaker 9: You can.
Speaker 5: Go back and say it to Gemini, you're a pretty
Speaker 5: darn good Thanks very much, your vice president and general
Speaker 5: manager at Google Workspace A Panna papu there on all
Speaker 5: things of its injection into Gemini into the workplace.
Speaker 1: Welcome back to Blue Meg Technology. I'm Karen Hide in
Speaker 1: New York. Let's check in on these markets.
Speaker 5: Because a little bit of a pull back, a little
Speaker 5: bit of caution ahead of course the all important earnings
Speaker 5: after the bell today, have a check in on what's
Speaker 5: happening with the nast that one hundred. More broadly, software
Speaker 5: one of the worst performing benchmarks if you compare it
Speaker 5: to the S and p 'or of by six tenser percent.
Speaker 5: I'm looking what's happening in bond markets right now, calmness.
Speaker 5: Ultimately we're seeing four point twenty nine. Let's call it
Speaker 5: on the tenure at the moment as we all anticipate
Speaker 5: its course. From the macro perspective, the Fed minutes that
Speaker 5: come a little bit later today, looking at Bitcoin just
Speaker 5: off by one point percenters, risk assets sell off. More broadly,
Speaker 5: let's have a look at what's happening on individual names
Speaker 5: and particular stocks.
Speaker 1: That are on the downside.
Speaker 5: And I'm just going to shine a light on the
Speaker 5: story of today as well as we anticipate in video
Speaker 5: has got to sae what's happening with all of these
Speaker 5: cyber stocks. The numbers after the bell are Palo Alto Networks. Yes,
Speaker 5: they managed to meet that nineteen percent growth in revenue
Speaker 5: for their previous fiscal quarter. But the forecast is going
Speaker 5: to be sixteen percent growth. I'm afraid that's nowhere near
Speaker 5: the twenty five percent we've all got rather used to
Speaker 5: Palo Alto fooling the most in its history on record,
Speaker 5: we're currently off by twenty six percent. We're also seeing
Speaker 5: CrowdStrike down and z scala or lower in sympathy today.
Speaker 5: But let's get back to the earnings that we still anticipate.
Speaker 5: Let's get back to Nvidia results coming after the bell.
Speaker 5: And of course here's what some of our guests have
Speaker 5: had to say and what they expect.
Speaker 4: Thank listen, there's seven hundred and seventy one companies announcing
Speaker 4: this week, but there's really only one that matters, isn't
Speaker 4: that and that is in video.
Speaker 3: Of course, the structural side is very exciting, obviously, with
Speaker 3: AI in the key, Driver's Saint.
Speaker 7: In Video's earnings are going to be the story that
Speaker 7: we all anticipate and wait with baited breath.
Speaker 4: Expectations are high, Caroline. I think probably they'll deliver.
Speaker 2: You look at Navida, there's no shortage of the demand.
Speaker 4: I think it's going to be more about what Jensen
Speaker 4: says about the outlook, the growth and the product lineup
Speaker 4: as opposed to what he actually delivers in the earning.
Speaker 5: There is so much hype about what this integral part
Speaker 5: of AI infrastructure can deliver. How are we deploying generative AI?
Speaker 5: How are we using it in our day to day
Speaker 5: deon Nicholas and pleas to say, is at the forefront
Speaker 5: of that is the CEO of fore Thought. It's a
Speaker 5: company that uses generative AI for customer support. You're also
Speaker 5: into the world of agents, which is another key hype
Speaker 5: area at the moment, Dion.
Speaker 1: When we are seeing the whole market.
Speaker 5: Declaring that in Vidia is the most important company on
Speaker 5: the planet or stock at least, how do you think
Speaker 5: about this AI hype cycle?
Speaker 10: No, I agree, Caroline, and thanks for having me back
Speaker 10: on the show. When you think about it, like in
Speaker 10: a gold rush, it's really the picks and shovels that
Speaker 10: make the most money. And I think Nvidia really is
Speaker 10: the picks and shovels business for AI. But at the
Speaker 10: end of the day, we're still in the early innings
Speaker 10: on the application layer, which I'm most excited about. Right
Speaker 10: I actually think about all of the money that's being
Speaker 10: spent on things like outsourcing and things like that in
Speaker 10: the customer support world. And I think AI jen AI
Speaker 10: and particularly AI agents are going to be the future
Speaker 10: of this industry. I think it's going to be one
Speaker 10: of the most massive software categories on the planet.
Speaker 1: To get there, you need access to compute.
Speaker 5: How have you managed to think around that ensure that
Speaker 5: it's not eating so much of your cost that you
Speaker 5: also have to just keep going to the market and
Speaker 5: raising more and more in the VC world.
Speaker 10: Agreed, especially over the last year and a half, call it,
Speaker 10: everything has been about efficiency, right, and so not just
Speaker 10: in terms of people and spend like that, but in
Speaker 10: terms of compute power. And so you think about the
Speaker 10: algorithms that we use every single day, getting smarter and
Speaker 10: smarter not just on the application layer, but using those
Speaker 10: algorithms to be smarter with our compute is how we
Speaker 10: do that?
Speaker 1: Okay?
Speaker 5: Who have you turned to in terms of the ecosystem
Speaker 5: to help you with that? Who have been your hyperscalers
Speaker 5: of choice, who have been your access to GPUs?
Speaker 10: Yeah, so we do a lot with open ai, for example.
Speaker 10: You do a lot with the cloud players. So folks
Speaker 10: like Microsoft, Azure, folks like Amazon AWS and things like that.
Speaker 10: We actually announced a partnership with AWS a few months ago.
Speaker 10: So what we're trying to do is be I would say,
Speaker 10: agnostic to what's going on in the underlying layer and
Speaker 10: make sure that we can have failovers, fallbacks and all
Speaker 10: of that so that we can deliver a robust system
Speaker 10: for our customers.
Speaker 5: And let's talk about what you're delivering at the moment,
Speaker 5: you're with instacll utwork, plenty of other companies turning to
Speaker 5: you to basically make my experience when using those apps
Speaker 5: more joyous. Right, Where are we in the innings of
Speaker 5: development of having general to AI making my experience better?
Speaker 1: Absolutely so.
Speaker 10: At forethought, we've been delivering AI for the past six years,
Speaker 10: and so it's exciting to see this boom so to speak,
Speaker 10: in the genai world. But at the end of the day,
Speaker 10: I think we're still very very early and there's so
Speaker 10: much more to be done in this space. At forethought,
Speaker 10: we're delivering AI agents for customer support. We're already solving
Speaker 10: more than one hundred million issues a year, every single year,
Speaker 10: and we think the technology is only going to get better.
Speaker 10: Lllms are just the beginning and then we saw retrieval
Speaker 10: augmented LLLM or RAGS, and then we saw AI Agents,
Speaker 10: which we actually announced here on Bloomberg about a year
Speaker 10: ago with our auto flows technology. And I think it's
Speaker 10: going to keep getting better and better.
Speaker 5: AI Agents, as I said, has been sort of all
Speaker 5: the talk of the town. And what's so interesting about
Speaker 5: the generative AI space is you all seem to be
Speaker 5: frenemies in some way. You're just talking about how you're
Speaker 5: leaning upon open Ai in some way, but open Ai
Speaker 5: has GPTs itself. You then got Brett Taylor, who's the
Speaker 5: chairman of open Ai, coming in and he's launching of
Speaker 5: course Sierra, which is also all about agents and customers.
Speaker 1: Where do you see the landscape being? How many players
Speaker 1: will there be?
Speaker 10: Again, as I said, I think this is going to
Speaker 10: be one of the largest software categories on Planet Earth,
Speaker 10: mark my words. And so there's going to be room
Speaker 10: for multiple players. And ultimately, I think what's happening is
Speaker 10: there's a shift from the old guard to the new guard.
Speaker 10: You've seen incumbents companies like Zendesk and Salesforce and folks
Speaker 10: like that scrambling to bring AI into their strategy. Because
Speaker 10: being the help desk or being a CRM is not
Speaker 10: necessarily going to cut it in an AI first future, right,
Speaker 10: And so what we're seeing and being validated by folks
Speaker 10: like Brett Taylor entering the space is that Jenai and
Speaker 10: being AI first in this space is going to be
Speaker 10: the way of the future.
Speaker 5: How hard is it, though, when I can understand that
Speaker 5: it work in instacrat A already, a startup is probably
Speaker 5: more willing to go with a startup for its own
Speaker 5: customer delivery.
Speaker 1: But when you've got big, older.
Speaker 5: Institutions, they've just got salesforce within them already. How hard
Speaker 5: is it to say no, no, no, come to this
Speaker 5: different offering untwine yourself from the incumbent.
Speaker 8: I think that's a fair question.
Speaker 10: So what we're seeing is a lot of activity in
Speaker 10: the mid market SMB companies who are embracing the future
Speaker 10: and things like that. A lot of these larger incumbent companies,
Speaker 10: there's a lot of interest, there's a lot of hype,
Speaker 10: but are they actually making the changes that's soon to
Speaker 10: be seen? And that's actually another thing is we talk
Speaker 10: about things like Nvidia, A lot of the use cases
Speaker 10: seem to be experimental today, right, and so I'm curious
Speaker 10: what's going to happen, what Jensen's going to say in
Speaker 10: terms of the outlook for the future as we start
Speaker 10: to see more of these technologies become put into production,
Speaker 10: who's going to keep and truly be an AI first
Speaker 10: company and who's just experimenting.
Speaker 5: And then I'm sure Jensen might pay some lip service
Speaker 5: to the fact that it's hard to get talent as
Speaker 5: well and to scale at the spies that you want
Speaker 5: to what are some of the things that hold back
Speaker 5: forthought or what are some of the things that are
Speaker 5: helping you grow.
Speaker 10: Absolutely, I think talent is first and foremost the most
Speaker 10: important thing. We were founded on this generative aivision, leveraging
Speaker 10: both our own research as well as research from folks
Speaker 10: like Chris Manning at Stanford, the godfather of NLP. And
Speaker 10: in terms of holding us back, I mean, the sky's
Speaker 10: the limit. In terms of this market, one of the
Speaker 10: things is that it's a very noisy market. Everyone is
Speaker 10: calling themselves a GENAI player, everyone is throwing AI into
Speaker 10: their name, but in a lot of ways, again, we've
Speaker 10: been at this for many years. We've stayed at the forefront,
Speaker 10: and so it's really about showing customers what is true AI,
Speaker 10: what you can actually deliver, and what that means for
Speaker 10: their customers.
Speaker 5: Deon, it's great to have you in town passing through
Speaker 5: New York. Glad that you could stop by the show
Speaker 5: for thoughts. CEO co founder Dion Nicholas, of course, talking
Speaker 5: all things as we anticipate in video and were broadly
Speaker 5: the impact generator A. I mean while coming up, but
Speaker 5: we're going to be joined by Darren Abrahamson from Baine
Speaker 5: Capital's techn Opportunities team.
Speaker 1: To talk about where he's placing his bets.
Speaker 5: Everyone's in town today, He's coming over from Boston to
Speaker 5: be here in New York. Meanwhile, let's have quick check
Speaker 5: on what's happening in terms of one of the AI
Speaker 5: darlings of choice of late, which has been selling off
Speaker 5: pretty hard over the last three.
Speaker 1: Training days, super micro Computer.
Speaker 5: Now actually short sellers have been notching about one point
Speaker 5: two billion dollars of late as we've seen shares full
Speaker 5: we're down another seven and three quarters of percent, but
Speaker 5: remember this is a company that's up more than seven
Speaker 5: hundred percent, and then last year this is a Bloomberg technology.
Speaker 5: Let's returned to shares of Palo Altera Networks. Why because
Speaker 5: they're heading for the biggest drop ever. That's after the
Speaker 5: company cut its forecast amid a pullback in cybersecurity spending.
Speaker 5: Joining us now is man leep seeing a bloomberg intelligence
Speaker 5: and Mandat. The lie that caught me from the CEO
Speaker 5: was that there's spending fatigue.
Speaker 1: It says this is new.
Speaker 11: Yeah, well, I think when you look at security, it's
Speaker 11: one of those things that has worked really well along
Speaker 11: with generative AI for the past few quarters. So it
Speaker 11: makes you wonder what change in the last ninety days.
Speaker 11: And they gave a prior guidance of about you know,
Speaker 11: high teens growth for the full year and now they
Speaker 11: cut it to loteins. So clearly, you know they are
Speaker 11: seeing a change in environment. They tried to explain that with,
Speaker 11: you know, a new go to market strategy, but you know,
Speaker 11: pow Alta is the largest cybersecurity vendor and they have
Speaker 11: had a lot of success with bundling their products. So
Speaker 11: the fact that they are changing the go to market
Speaker 11: in an environment that should favor cybersecurity, it is a
Speaker 11: little bit of a surprise, and that's why you see
Speaker 11: that kind of stock reaction.
Speaker 5: And we've seen a run up of about one hundred
Speaker 5: and twenty percent in the last year, which maybe is
Speaker 5: why we've see the significant pullback Man Deep, But when
Speaker 5: you went on to sort of outline that people don't
Speaker 5: want to spend at the moment unless they see a
Speaker 5: significant improvement, Well, the pole point of cybersecurity is ultimately
Speaker 5: to be a defense. How do you think that they
Speaker 5: and other competitors cloud strike can convince people to keep
Speaker 5: on spending that you need to in this environment.
Speaker 11: Yeah, it's a great point. Because the hyper scale cloud
Speaker 11: providers are all giving you security. It's bundled security that
Speaker 11: they are giving you. So these companies have to convince
Speaker 11: the customers that it's something extra. They're supporting a multi
Speaker 11: cloud strategy and the defenses that the hyperscalers give are
Speaker 11: not enough. And in this case, I think Powell Alta
Speaker 11: has to make that shift from firewalls to new subscriptions
Speaker 11: cloud based revenue, which is at multi year transition. They
Speaker 11: were doing well so far, but clearly the deceleration in
Speaker 11: top line growth is definitely spooking a few investors over here.
Speaker 5: As for sure, Man, name's saying so great to have
Speaker 5: you on the show. Thank you of Bloomberg Intelligence. Now
Speaker 5: we're going to turn our attention to the NUER landscape,
Speaker 5: talk a little bit about cyber within it. I'm a
Speaker 5: peace to Welcome to the show, Darren Abramson, he's partner
Speaker 5: at Bain Capital's Tech Opportunities team on today's VC Spotlight.
Speaker 5: Traveling in from Boston and I'm interested, Darren, and whether
Speaker 5: you're hearing or seeing this from some of the startups
Speaker 5: that you've been investing in. I know cyber has been
Speaker 5: a theme, but all of us are talking about how
Speaker 5: GENATVAI means that we need more cyber protection, not a
Speaker 5: pullback or less.
Speaker 6: Yeah.
Speaker 12: I think it's really important that you sort of put
Speaker 12: things in context. I think you pointed out on the
Speaker 12: prior segment. You know, pale Alto's had a phenomenal run
Speaker 12: up and a lot of the cyber companies really outperformed.
Speaker 8: Over the last year.
Speaker 12: As CFOs and customers look to cut back spend in
Speaker 12: other areas of technology, cyber was one of those areas
Speaker 12: that remain very resilient. But when we talked to chief
Speaker 12: information security officers, what we're hearing a lot now is
Speaker 12: particularly in the enterprise, that they don't want another solution.
Speaker 12: They don't want to buy more. They need to actually
Speaker 12: figure out how to integrate what they've got and patch
Speaker 12: the holes that pop up inevitably when you integrate and
Speaker 12: implement a lot of new technologies. That being said, to
Speaker 12: your point, underlying threats persist, and I think AI is
Speaker 12: going to accelerate that. Just the ease at which a
Speaker 12: hacker can now you know, spoo for fish or spam
Speaker 12: or do other things in a much more sophisticated way,
Speaker 12: I think makes the cyber attack surface ever more dangerous.
Speaker 12: And so we do see a lot of innovative new
Speaker 12: companies that are solving those problems as well as in
Speaker 12: other segments of the market, you know, down market. We
Speaker 12: made an investment last year in a company called Blackpoint,
Speaker 12: which has an MDR solution and they bring it sort
Speaker 12: of all in one way to solve cyber problems for
Speaker 12: smaller customers, and they're probably the highest growing company in
Speaker 12: our portfolio right now because the demand is still clearly there.
Speaker 12: So I think it very much depends on the segment
Speaker 12: of the market the types of tools you're selling into.
Speaker 5: Interesting that you point out that black Point Cyber was
Speaker 5: a check you wrote last year where else have you
Speaker 5: been deploying.
Speaker 1: Your capital there?
Speaker 5: For in this whole environment where generative AI suck the
Speaker 5: oxygen down the room, have you just been leaning into
Speaker 5: that theme or finding other ways?
Speaker 12: Yeah, So our fund is really more sort of late
Speaker 12: stage growth equity and even into some small growth her buyouts,
Speaker 12: and so we're not we have a separate venture capital fund.
Speaker 12: I think you've spoken to some of my partners from
Speaker 12: that team before. You know, we really were born to
Speaker 12: sit in between our venture effort and our large cap
Speaker 12: private equity effort and sort of fill that gap for
Speaker 12: later stage companies. And so for us, the generative I
Speaker 12: sort of theme, which is obviously pervasive across the tech ecosystem,
Speaker 12: is less of a direct investment opportunity. I think that's
Speaker 12: earlier stage, you know, more risky, more venture capital.
Speaker 9: You know.
Speaker 12: For us, what we're looking for is established businesses, often
Speaker 12: founder owned and led, who have reached some scale and
Speaker 12: are looking for not just capital but support to kind
Speaker 12: of help get to the next level. So, you know,
Speaker 12: how do they get from fifty seventy five one hundred
Speaker 12: million of revenue to two three four hundred million. And
Speaker 12: that may be things like we need some outside help
Speaker 12: in thinking about how to leverage generative AI to drive
Speaker 12: our own process efficiency and find ways to innovate in
Speaker 12: our product segment. It may be going to do their
Speaker 12: first scale acquisition, it may be entering a new market,
Speaker 12: and so we tend to be more focused right now
Speaker 12: on how we can help our portfolio companies as well
Speaker 12: as new investments leverage generatve AI as opposed to sort
Speaker 12: of trying to back the next model or sort of
Speaker 12: pure AI.
Speaker 1: Company, if you will.
Speaker 12: Now, over time that will evolve, but for now that
Speaker 12: just feels to us a little bit early and a
Speaker 12: little more sort of speculative than our focus.
Speaker 5: And in that less speculative, more mature business, there has
Speaker 5: been sort of a tough environment ultimately, people not wanting
Speaker 5: to write such bigger checks to such big up companies
Speaker 5: or indeed seed being very active other areas still slightly
Speaker 5: concerned amid the economic environment.
Speaker 1: Has that changed at all?
Speaker 5: Have you actually found that, No, there was this real
Speaker 5: sweet spot where companies are actually revenue generating, profit generating,
Speaker 5: and that's where you want to be writing the checks.
Speaker 12: Yeah, I think you've Again, I think there's different segments
Speaker 12: of the market where we play. So what we did
Speaker 12: see in the back half of last year. Is activity
Speaker 12: really start to pick out on the buy outside of
Speaker 12: our business. So growth your sort of mid market buyouts.
Speaker 12: You know, companies that are high quality businesses of scale,
Speaker 12: have some profitability, and in many cases have existing investors
Speaker 12: who are starting to think about liquidity after a period
Speaker 12: of the environment where it was tougher to do so.
Speaker 12: And so that part of our business has picked up
Speaker 12: quite significantly.
Speaker 5: He's doing the buying, who are they tending to go
Speaker 5: with other smaller companies? Are they being bought by larger companies,
Speaker 5: Because it's a combination.
Speaker 12: I'd say in many cases where where we're looking, it's
Speaker 12: new financial investors coming in with a new thesis and
Speaker 12: you know, providing some liquidity. In other cases, some of
Speaker 12: our portfolio companies, you know, bigger, better capitalized businesses are
Speaker 12: looking to take advantage and drive M and A as well.
Speaker 12: And then you're seeing some activity from larger strategic So
Speaker 12: i'd say that's still you know, less active. Obviously, the
Speaker 12: IPO markets haven't been a real path for this. So
Speaker 12: the buy outside of our business has been quite active
Speaker 12: and really picked up over the last quarter or two.
Speaker 12: The growth side I'd say is a tale of two worlds.
Speaker 12: If you were one of the companies that raised you know,
Speaker 12: at peak multiples very you know, at the top of
Speaker 12: the market in twenty twenty one, it's still difficult to.
Speaker 1: Go back to market.
Speaker 12: People are still you know, somewhat stigmatic about down rounds,
Speaker 12: and we're seeing a little bit more of that ease up,
Speaker 12: but that part of the market, I think those companies
Speaker 12: still need to grow into those valuations. For the most part. However,
Speaker 12: where we tend to focus is a lot of founder
Speaker 12: owned businesses who didn't raise money during that period of
Speaker 12: time and where we're sort of the first institutional capital
Speaker 12: coming in, and that's very different. The dynamics there are
Speaker 12: around relationship and partnership, and it's less about what's going
Speaker 12: on in the macro and more about when that specific
Speaker 12: founder identifies an opportunity to do something different with their
Speaker 12: business and wants the right partner to help them do that.
Speaker 12: And that tends to be a pretty active segment of
Speaker 12: the market where we've found, actually all of our investments
Speaker 12: last year were a flavor of that.
Speaker 5: For example, and those founders who are by them in
Speaker 5: bootstrapped or have had wealth to be able to invest
Speaker 5: in sales beforehand. I think coming from East coast of America,
Speaker 5: are they generally US? Are you looking more further afield
Speaker 5: and globally.
Speaker 12: It's a great question. You know, we're big believers that
Speaker 12: there are great companies being built all over the world.
Speaker 12: So we have investments in Japan and Brazil and Europe
Speaker 12: and Israel and all over the US. Interestingly, only one
Speaker 12: of our portfolio companies is actually from the Bay Area.
Speaker 12: We have two from Nebraska to phenomenal software companies all
Speaker 12: up and down the East Coast, and so I think
Speaker 12: it really speaks this idea of there's talent everywhere andnology
Speaker 12: is transforming industries around the world. And so our job
Speaker 12: is to go find those founders. And often they're not
Speaker 12: in places you might expect, but they're building, you know,
Speaker 12: phenomenal businesses kind of under the radar, and eventually we'll
Speaker 12: get to a size and scale where they want to
Speaker 12: partner like us to help them sort of scale and grow.
Speaker 1: And how do you find those founders? What is your
Speaker 1: pipeline look like?
Speaker 5: Is it introductions of one found and on business turning
Speaker 5: to another fun in their business, saying they've been a
Speaker 5: great partner is it people that you know have been
Speaker 5: backed to with I mean, how have you found these
Speaker 5: sorts of.
Speaker 12: So this is where I think being part of a
Speaker 12: firm and a platform like being capital is really advantageous.
Speaker 12: You know, we've been investing in the tech ecosystem for
Speaker 12: really our history.
Speaker 1: This is our forty year.
Speaker 12: Anniversary, and so there's a huge amount of relationships and
Speaker 12: networks around the world. We obviously have a venture capital business,
Speaker 12: and so they're seeing a lot of companies at the
Speaker 12: earlier stages, some of which they invest in, many they don't,
Speaker 12: but those relationships persist and ultimately may grow into things
Speaker 12: that are relevant for us. And then there's a lot
Speaker 12: of just proactive sort of outreach. You know, our team
Speaker 12: is traveling all over the world, all over the country
Speaker 12: in very targeted sectors. We like to really focus on
Speaker 12: sub segments of the market that we know well, specific
Speaker 12: pockets of cybersecurity, vertical software, healthcare, IT, fintech, and so
Speaker 12: within those we're trying to be very thematic around Okay,
Speaker 12: these are the segments, these are the companies, these are
Speaker 12: the founders, and how do we get in front of
Speaker 12: them build those relationships which in many cases take you know,
Speaker 12: four or five six years until they result in any
Speaker 12: kind of transaction opportunity, until a lot of our time
Speaker 12: and effort is really spent there.
Speaker 5: So relationship business, thanks for spending some of that time
Speaker 5: with us today, darn Abramsen, his partner at Bain Capital's
Speaker 5: tech opportunities team. Universal Music it snapped up a minority
Speaker 5: stake in coren Music Partners. That's a company that owns
Speaker 5: one than sixty thousand songs by the likes of John
Speaker 5: Legend or Lord or The Weekend and more. And the
Speaker 5: music giant is actually paying two hundred and forty million
Speaker 5: dollars for a twenty five point eight per cent steak
Speaker 5: in the business here with more on why Murkes Michelle Davis,
Speaker 5: and the reason is well, sort of exposure to music
Speaker 5: rights to them bring to the masses, How do they benefit?
Speaker 9: So? Universal Music already owns a ton of music rights.
Speaker 9: You'll remember a big deal they did a couple of
Speaker 9: years ago was buying Bob Dylan's whole catalog.
Speaker 1: But this by being a.
Speaker 9: Minority of investor, they're gonna have exposure to these music
Speaker 9: rights in this particular catalog without being a direct owner.
Speaker 9: Universal Music as well as a lot of other big
Speaker 9: media music companies. Media companies are under pressure right now
Speaker 9: to show returns to their shareholders, and this is kind
Speaker 9: of an indirect way for them to do that without
Speaker 9: spending too much, you know, dipping their toes into this
Speaker 9: particular catalog, without just putting too much of their balance
Speaker 9: sheet behind it. But I think it all speaks to
Speaker 9: a much bigger trend within the music industry where some
Speaker 9: of the traditional you know, Wall Street firms like Kkar, Apollo,
Speaker 9: Blackstone that really poured money into the industry a few
Speaker 9: years ago when music valuations were surging, they've all been
Speaker 9: looking for an exit because you know, private equity, even
Speaker 9: outside of music, outside of entertainment, Their LPs want them
Speaker 9: to show some returns, to returns some money. As it's
Speaker 9: gotten more expensive to them for them to invest in
Speaker 9: stuff with rates going up, they've been under pressure to
Speaker 9: show that that money to them. And this for Kkar,
Speaker 9: you know, exiting, this is one way for them to
Speaker 9: do that.
Speaker 5: So Dundee Partners takes the other seventy odd percent of it,
Speaker 5: and that's run by the Handel family. Ultimately, what does
Speaker 5: Universal Music benefited shareholders with right with rights ownership. Is
Speaker 5: it that they think the value will go up on
Speaker 5: the rights to the music or they can use it.
Speaker 1: In different and more interesting manners.
Speaker 9: I think that's part of the assumption is you have
Speaker 9: to expect if the value will go up, and it's
Speaker 9: also a predictable revenue stream for them.
Speaker 1: You know, you know right now a lot of the music.
Speaker 9: Industry has recovered because we've figured out streaming. Compared to
Speaker 9: twenty years ago, when you know, the music industry didn't
Speaker 9: know what to do with everyone pirating music. Streaming is
Speaker 9: a thing now, but they're still facing a lot of disruption.
Speaker 9: There's questions around what will happen with TikTok and ai,
Speaker 9: how that will affect everything. So this just gives them
Speaker 9: a predictable revenue stream to build as show investors.
Speaker 1: Well said Michelle Davis.
Speaker 5: We thank you for a time on all those transactions
Speaker 5: within the music industry. Meanwhile, how does it for this
Speaker 5: edition of bloombig Technology. You do not want to forget
Speaker 5: to check out our podcast. Got so much more to
Speaker 5: wrap up, and of course stay braced from video earnings
Speaker 5: after the bell we'll be digesting that tomorrow.
Speaker 1: This is bluebad Technology