WEBVTT - Shell Says It Has No Intention of Making an Offer for BP 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:18.560 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.920 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:23.080 us live on YouTube. 0:00:23.480 --> 0:00:25.599 Norma Linda Paul Shoeny were live here in our Bloomberg 0:00:25.640 --> 0:00:27.920 Interactive Brokers studio, streaming live on YouTube as well. I 0:00:27.920 --> 0:00:30.080 want to follow up on that story that Lisa was 0:00:30.160 --> 0:00:32.360 just reporting. Do we have a deal in the energy 0:00:32.360 --> 0:00:33.280 space or not? 0:00:34.080 --> 0:00:34.280 Again? 0:00:34.360 --> 0:00:38.040 Wall Street Journal was reporting that Shell early stages and 0:00:38.159 --> 0:00:43.320 talks to acquire British Petroleum BP. Then Schell say no, 0:00:43.440 --> 0:00:45.400 not so much. So I don't know where we are here. 0:00:45.479 --> 0:00:47.519 Let's check in with Will Harris. It's his job to 0:00:47.520 --> 0:00:50.280 know what's going on. He's a senior Global Energy analyst 0:00:50.320 --> 0:00:53.320 for Bloomberg Intelligence. He's based in London. Hey, well, what 0:00:53.320 --> 0:00:55.360 do you think's going on there with Shell and BP? 0:00:55.600 --> 0:00:56.200 If anything? 0:00:57.360 --> 0:00:59.880 Yeah, So, I think it's pretty important to point out here. 0:01:00.120 --> 0:01:02.640 Shell was very quick to refute these reports from the 0:01:02.640 --> 0:01:06.119 Wall Street Journal. It's pretty consistent with what we think. 0:01:06.440 --> 0:01:10.199 This would be a very opportunistic and potentially quite risky 0:01:10.280 --> 0:01:14.080 strategic departure for Shell. They have shown a very strict 0:01:14.160 --> 0:01:17.000 capital discipline for the last several years, and so this 0:01:17.040 --> 0:01:19.320 would be a big, big ticket item for them to 0:01:20.000 --> 0:01:23.520 try and absorb. Any deal would likely near one hundred 0:01:23.560 --> 0:01:27.160 billion dollars assuming something like a twenty percent premium, and 0:01:27.200 --> 0:01:32.480 you would almost certainly see major antitrust hurdles, integration risks, 0:01:32.800 --> 0:01:37.039 synergy challenges over many many years which would follow. So 0:01:37.800 --> 0:01:40.640 in short, we think it's quite unlikely that the Shell 0:01:40.800 --> 0:01:44.559 would make a run at the full full takeover of BP. 0:01:45.080 --> 0:01:47.320 What we do think is probably more likely is they 0:01:47.360 --> 0:01:52.400 could be interested in select businesses of BP that they 0:01:52.400 --> 0:01:54.640 could add as sort of bolt on acquisitions. 0:01:55.760 --> 0:01:57.280 Have this played out, of course, it would have been 0:01:57.280 --> 0:01:59.840 a really major deal here. But what is M and 0:01:59.880 --> 0:02:02.720 A activity look like More broadly in the sector. 0:02:03.800 --> 0:02:05.840 So EMINE activity has sort of take a bit of 0:02:05.840 --> 0:02:09.000 a back seat over the last little while. We've had 0:02:09.040 --> 0:02:13.600 a pretty bearish commodity outlook, and notwithstanding the last couple 0:02:13.680 --> 0:02:17.560 of weeks with a surge and geopolitical risk, we're mostly 0:02:17.600 --> 0:02:24.280 seeing smaller, lower risk near field acquisitions from these companies. 0:02:24.480 --> 0:02:27.880 They're not taking the kind of big risks that we 0:02:27.960 --> 0:02:31.880 are that we have seen maybe in the last couple 0:02:31.880 --> 0:02:34.880 of decades, and that's for many reasons. I mean, these 0:02:34.960 --> 0:02:38.120 these portfolios are much more global and much more diverse 0:02:38.160 --> 0:02:41.120 than they have been in the past. And there's this 0:02:41.280 --> 0:02:45.560 tension at the moment within this peer group of how 0:02:45.600 --> 0:02:48.639 how much to focus on their core oil and gas 0:02:48.760 --> 0:02:54.639 hydrocarbon portfolios and how quickly to advance their energy transition ambitions. 0:02:55.120 --> 0:02:58.120 What percentage of their capeck should they be investing in 0:02:58.200 --> 0:03:03.040 renewable power hydrogen ev charging networks, knowing that these are 0:03:03.120 --> 0:03:07.200 much lower return businesses than their core oil and gas projects. 0:03:07.760 --> 0:03:09.640 All Right, I'm putting on my m and a banker 0:03:09.680 --> 0:03:11.519 hat will here because I want to get a deal 0:03:11.639 --> 0:03:13.640 on the tape here. I want some bankers and lawyers 0:03:13.680 --> 0:03:15.960 to get paid here. BP's got a market cap of 0:03:16.000 --> 0:03:18.720 eighty billion dollars. That's a big number. That's a lot 0:03:18.720 --> 0:03:22.000 of money. But Shells at two hundred billion and Exon 0:03:22.040 --> 0:03:25.799 Mobiles at four hundred and seventy billion, is BP are 0:03:25.800 --> 0:03:28.079 they big enough to play on the global energy stage 0:03:28.160 --> 0:03:28.600 these days? 0:03:29.919 --> 0:03:33.280 So it's a good point and the answer is not really. So. 0:03:33.440 --> 0:03:37.120 BP has suffered terribly on valuation compared to Shell, and 0:03:37.160 --> 0:03:41.360 particularly compared to their American counterparts Exon and Chevron. This 0:03:41.480 --> 0:03:44.800 is for many reasons. They've had a flip flopping strategy 0:03:44.960 --> 0:03:48.920 over the pace of their energy transition progress. Their costs 0:03:48.920 --> 0:03:51.600 have been far too high, They're spending has been far 0:03:51.680 --> 0:03:56.720 too high. They for a couple years they were planning 0:03:56.720 --> 0:04:00.680 to reduce their hydrocarbon production by a significant amount. They've 0:04:00.680 --> 0:04:03.160 turned that around, so they've sort of been all over 0:04:03.200 --> 0:04:06.240 the place. Their valuation has suffered, which makes them a 0:04:06.280 --> 0:04:11.640 potentially interesting acquisition target. We've written for a while now 0:04:11.760 --> 0:04:14.880 that the sum of their parts is much more than 0:04:14.920 --> 0:04:17.920 where they're currently valued. Their balance sheet is also quite 0:04:18.000 --> 0:04:23.200 over leveraged, so this makes them an attractive acquisition target. 0:04:23.440 --> 0:04:26.800 But as we know, there are very very limited suitors 0:04:26.839 --> 0:04:33.480 out there Exon, Chevron, Shell, potentially some Middle Eastern NOCs. 0:04:33.920 --> 0:04:37.320 But as I mentioned, there's those massive challenges for a 0:04:37.360 --> 0:04:41.920 scale of this sort of acquisition, and as a result, 0:04:41.960 --> 0:04:46.000 we continue to think that it is probably unlikely. 0:04:47.160 --> 0:04:47.799 Not much happening. 0:04:47.839 --> 0:04:49.960 When you look at this share performance here for some 0:04:50.000 --> 0:04:52.840 of these US based companies like Exon as you called out, 0:04:53.279 --> 0:04:58.200 and Chevron here. But how are these companies scaling right now? 0:04:58.240 --> 0:05:00.080 What is it looking like right now in terms of 0:05:00.080 --> 0:05:02.880 how these US based companies are performing in comparison to 0:05:02.920 --> 0:05:03.719 their competitors. 0:05:04.839 --> 0:05:08.000 So Excell and Chevron have a very differentiated strategy compared 0:05:08.000 --> 0:05:11.880 to the Europeans. There's a very wide strategic divergence across 0:05:11.960 --> 0:05:15.520 the Atlantic. Exon and Chevron have stayed the course with 0:05:15.600 --> 0:05:18.239 oil and gas for the most part. They are still 0:05:18.240 --> 0:05:22.919 investing heavily in oil and gas growth, particularly in the 0:05:22.960 --> 0:05:26.279 Permian and also down in Guyana with some major projects 0:05:26.279 --> 0:05:28.960 coming online now and in the near future. And you 0:05:29.040 --> 0:05:32.960 can compare that to the European strategies which have moved 0:05:33.000 --> 0:05:37.560 quite quickly into renewable power, off solar, offshore wind, hydrogen, 0:05:38.040 --> 0:05:40.720 and I think the proof is in the putting as 0:05:40.760 --> 0:05:44.360 far as how the markets have received these. You can 0:05:44.400 --> 0:05:47.880 see Exon and Chevron are currently trading at about thirty 0:05:47.920 --> 0:05:51.960 percent higher on a forward earning spasis than the European group. 0:05:52.080 --> 0:05:57.679 So the market has certainly told them what they think. 0:05:57.920 --> 0:06:00.960 The issue with the Europeans that they've been pulled in 0:06:01.279 --> 0:06:04.920 two different directions. They have their traditional energy investors and 0:06:04.960 --> 0:06:11.760 they also have a growing cadure of sustainability minded investors 0:06:11.760 --> 0:06:16.160 that are demanding a quicker reduction in carbon intensity and 0:06:16.520 --> 0:06:20.520 a quicker pacing of their energy transition investments. 0:06:21.440 --> 0:06:24.080 Well, I watched the first season A Landman. I now 0:06:24.120 --> 0:06:27.600 consider myself an expert on all things oil and gas, 0:06:29.160 --> 0:06:31.000 but I have to put myself in the shoes of 0:06:31.040 --> 0:06:34.160 some of these European investors. I mean they're willing to 0:06:34.200 --> 0:06:40.120 take lower valuations, lower returns for I guess a sociological 0:06:40.960 --> 0:06:44.560 kind of bent there a little bit. Or they are 0:06:44.640 --> 0:06:46.600 European investors? Are they saying scrolled, I'm just going to 0:06:46.640 --> 0:06:48.240 go where i can get the best returns in this space. 0:06:48.240 --> 0:06:50.839 I'm going to go to Exonmobile and Chevron and things 0:06:50.839 --> 0:06:52.520 like that. How are the clients that you talked to, 0:06:52.600 --> 0:06:53.560 how are they thinking about it? 0:06:54.600 --> 0:06:54.800 Yeah? 0:06:54.880 --> 0:06:59.880 So to be clear, I think that this ideology is 0:07:00.080 --> 0:07:04.640 somewhat fading into the background or for the time being. 0:07:04.800 --> 0:07:09.840 And I think it was initially viewed as the enegy 0:07:09.840 --> 0:07:13.240 transition was unfolding a lot more quickly than in reality, 0:07:13.800 --> 0:07:17.040 and so it was sort of seen as a heavy 0:07:17.080 --> 0:07:19.840 carbon profile was seen as a major major risk to 0:07:20.760 --> 0:07:25.360 these companies. But in reality, oil and gas investors want 0:07:25.360 --> 0:07:29.440 oil and gas exposure and So the European oil and 0:07:29.480 --> 0:07:31.960 gas companies have been sort of sitting on the fence 0:07:32.360 --> 0:07:35.840 as a result, and they've been unable to placate either side, 0:07:35.920 --> 0:07:39.040 either the energy investors or the sustainability minded ones. 0:07:40.120 --> 0:07:41.960 I was looking through some headlines that came through earlier 0:07:41.960 --> 0:07:44.480 on the Bloomberg terminal. So the US is also targeting 0:07:44.520 --> 0:07:48.320 EU methane regulations in trade talks. Also the US target's 0:07:48.360 --> 0:07:51.760 corporate sustainability due diligence directive that's coming from the Wall 0:07:51.800 --> 0:07:54.800 Street Journal. What's the latest right now in terms of 0:07:54.840 --> 0:07:57.240 the atmosphere and environment? What are people discussing right now 0:07:57.280 --> 0:07:59.440 as we think about drilling really here. 0:08:01.320 --> 0:08:05.400 So drilling is is taking a sort of very cautious 0:08:05.400 --> 0:08:08.800 approach at the moment. The investment plans for these companies 0:08:08.840 --> 0:08:12.280 are relatively flat year over year, and I think this 0:08:12.360 --> 0:08:16.120 is shadowing really the commodity price environment that we're seeing. 0:08:17.240 --> 0:08:23.640 So the growth is somewhat subdued. But what we what 0:08:23.680 --> 0:08:25.880 we are seeing from this group is is a big 0:08:25.960 --> 0:08:30.720 focus on shareholder return, so buybacks, continued dividend policy growth, 0:08:31.720 --> 0:08:34.880 and a focus on trading for the for the larger 0:08:35.200 --> 0:08:35.720 of the group. 0:08:36.679 --> 0:08:38.560 All right, So Bill, just to bring in full circle 0:08:38.640 --> 0:08:42.040 here Shell BP. Do you think something happens and if 0:08:42.080 --> 0:08:44.319 you do, with the regulators allow it. 0:08:46.120 --> 0:08:50.560 So the regulatory issue is massive for this, you know. 0:08:50.840 --> 0:08:53.400 I think it's important to note that this tie up 0:08:53.480 --> 0:08:55.920 has been rumored to happen for you know, longer than 0:08:55.960 --> 0:08:59.080 I've been alive, and it hasn't. And I think one 0:08:59.200 --> 0:09:01.000 one of the big reasons for that is the anti 0:09:01.040 --> 0:09:06.120 trust issue. And so this particularly applies for the fuel 0:09:06.160 --> 0:09:10.960 retail marketing component of these companies, where you could potentially 0:09:11.000 --> 0:09:15.240 see the majority or even all of the fuel supply 0:09:15.320 --> 0:09:19.080 of certain countries being dominated by one company. Countries will 0:09:19.200 --> 0:09:22.000 not like that, So I think this is probably the 0:09:22.080 --> 0:09:24.880 number one reason why it hasn't happened so far. I 0:09:24.920 --> 0:09:27.000 continue to think it's the reason why it won't happen. 0:09:27.360 --> 0:09:29.880 But I would not be surprised Shell to be interested 0:09:29.920 --> 0:09:35.000 in something like BPS onshore, a US shale business which 0:09:35.040 --> 0:09:38.680 is called BPX, maybe their Gulf of Mexico portfolio, which 0:09:38.679 --> 0:09:42.120 is where there would be huge operational overlap and potential 0:09:42.160 --> 0:09:47.680 cost synergies offshore Brazil in the deep water, and particularly 0:09:47.920 --> 0:09:50.920 BP's LNG business, which is about half of what Shells is, 0:09:51.280 --> 0:09:55.160 but combining those, it would be controlling roughly a quarter 0:09:55.320 --> 0:09:59.560 of the global LNG market, and we know that's a 0:09:59.600 --> 0:10:02.640 corner stone of Shell's long term strategy. So I think 0:10:02.679 --> 0:10:04.920 those could be interesting. It's just a matter of the 0:10:05.000 --> 0:10:08.719 right price and how badly BP wants to fix their 0:10:08.720 --> 0:10:09.280 balance sheet. 0:10:10.000 --> 0:10:12.400 Well, great stuff, as I always appreciate getting a few minutes 0:10:12.400 --> 0:10:15.040 of your time. Will here, Senior Global Energy Antis, Bloomberg Intelligence. 0:10:15.320 --> 0:10:18.880 He's over there in Queen Victoria Street, Bloomberg European HQ. 0:10:19.120 --> 0:10:22.440 It is a spectacular building in the City of London, 0:10:22.520 --> 0:10:24.760 right next to the Bank of England. It doesn't get 0:10:24.880 --> 0:10:28.200 any more City of London than the Bloomberg HQ. 0:10:28.320 --> 0:10:28.959 Appreciate that. 0:10:31.080 --> 0:10:34.760 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:34.840 --> 0:10:38.320 weekdays at ten am Eastern on Applecarclay and Android Auto 0:10:38.360 --> 0:10:41.400 with the Bloomberg Business App. Listen on demand wherever you 0:10:41.440 --> 0:10:44.400 get your podcasts, or watch us live on YouTube. 0:10:44.679 --> 0:10:46.320 Har we got normal, Linda Paul Swen. You live here 0:10:46.360 --> 0:10:49.080 in our Bloomberg Interactive Brooker's Studio streaming live on YouTube 0:10:49.080 --> 0:10:51.440 as well, So check us out there on that intraweb thing. 0:10:51.800 --> 0:10:56.680 Walgreens Boots Alliance report quarterly profit that beat Wallster rereet expectations. 0:10:57.400 --> 0:10:59.560 But this is the last one is a public company. 0:10:59.600 --> 0:11:01.120 They're going private. So I want to figure out what's 0:11:01.120 --> 0:11:04.760 going on out there in the world of the pharmacy business. 0:11:04.840 --> 0:11:07.680 Jonathan Palmer, Senior Healthcare Ants, So Bloomberg Intelligence joins us 0:11:07.679 --> 0:11:10.240 here in our Bloomberg in ARCTI broker studio. He doesn't 0:11:10.240 --> 0:11:13.160 mail it in from points beyond like his management team. 0:11:13.200 --> 0:11:15.320 He's here in the city John to talk to us 0:11:15.320 --> 0:11:19.200 about what is happening with Walgreens Boots. Not so much 0:11:19.240 --> 0:11:20.800 to Ernest say, but what's going on to it? They're 0:11:20.800 --> 0:11:22.680 going private? Why are they going private? 0:11:22.840 --> 0:11:24.800 Yeah, thanks for having me on, Paul. So it's an 0:11:24.840 --> 0:11:28.120 interesting Wesson in terms of maybe how not to run 0:11:28.160 --> 0:11:30.720 a business. I mean, Walgreens was formed about a decade 0:11:30.760 --> 0:11:34.720 ago when it acquired Boots Alliance, the European businesses that 0:11:34.880 --> 0:11:40.160 it owns, and then as subsequently sold the wholesale business 0:11:40.160 --> 0:11:42.959 in Europe, and now it's just Walgreens and Boots pretty much. 0:11:43.000 --> 0:11:45.880 And then they have another little bit of healthcare services 0:11:45.880 --> 0:11:48.800 that acquired a couple of years ago. But pharmacy has 0:11:48.800 --> 0:11:51.360 been in a structural decline for the last decade. You know, 0:11:51.360 --> 0:11:54.280 the right AID tried to sell to then that got 0:11:54.320 --> 0:11:57.720 squashed from anti trust purposes. Right AD has filed for 0:11:57.760 --> 0:12:02.040 bankruptcy twice. Now there's a whole lot of pressure in 0:12:02.080 --> 0:12:04.280 this industry, and that pressure is coming from the payers, 0:12:04.280 --> 0:12:08.760 the PBMs, the insurance companies. And so it's an interesting 0:12:08.760 --> 0:12:11.280 time because I think we've probably reached the bottom where 0:12:11.320 --> 0:12:13.600 there's no more blood to be kind of squeezed from 0:12:13.600 --> 0:12:17.400 the stone from pharmacies, and we're seeing new reimbursement models 0:12:17.400 --> 0:12:19.760 come about what they call like cost plus, like Mark 0:12:19.800 --> 0:12:23.240 Cuban's model cost plus drugs, where the PBMs are actually 0:12:23.240 --> 0:12:25.720 forcing this on the pharmacies of the payment model. And 0:12:25.760 --> 0:12:28.600 so it's interesting in that Walgreens is probably selling at 0:12:28.600 --> 0:12:31.400 the bottom, but it might be you know, a little 0:12:31.440 --> 0:12:32.920 brighter in the future from here. 0:12:33.960 --> 0:12:36.679 So as we're looking at the pharmaceutical space, or its 0:12:36.679 --> 0:12:40.920 pharmacy space more broadly, here you've got Walgreens, you've got CBS, 0:12:40.960 --> 0:12:42.600 but you also have you know, right in and all 0:12:42.600 --> 0:12:43.280 these other companies. 0:12:43.280 --> 0:12:45.520 But they lean a lot into the retail space. 0:12:45.559 --> 0:12:49.319 So how much of these companies is really retail versus 0:12:49.679 --> 0:12:51.079 the pharma pharmacy side. 0:12:51.240 --> 0:12:54.199 Yeah, so the model has always been that the pharmacy 0:12:54.240 --> 0:12:56.600 in the back of the store was what drew people in, 0:12:56.640 --> 0:12:58.560 and they have to walk by all the shaving cream 0:12:58.600 --> 0:13:02.560 and shampoo and salty snacks, and those were higher margin products. 0:13:02.880 --> 0:13:05.080 The pharmacy was there to get them in this store. 0:13:05.440 --> 0:13:07.560 I mean, there's been the Amazon effect over the last 0:13:08.000 --> 0:13:11.320 fifteen years, right, everything goes online, so people aren't buying 0:13:11.400 --> 0:13:13.840 things in the same way that they used to for 0:13:13.880 --> 0:13:15.760 a convenience factor. I don't have to pick up my 0:13:15.800 --> 0:13:17.920 shampoo right here at CBS because it's going to come 0:13:17.920 --> 0:13:22.000 from Amazon tomorrow when I click the button. So that 0:13:22.559 --> 0:13:24.920 piece of it has kind of gotten smaller and less 0:13:24.960 --> 0:13:26.040 important over time. 0:13:26.880 --> 0:13:28.680 So you did mention the idea of Amazon. 0:13:28.679 --> 0:13:30.200 You've got Hymns and Hers, You've got all these other 0:13:30.240 --> 0:13:32.679 brands that are literally bringing stuff to your doorstep. How 0:13:32.679 --> 0:13:36.079 has this really impacted those brick and mortar companies. 0:13:36.360 --> 0:13:38.679 Yeah, it's a great a great question because we've seen 0:13:39.440 --> 0:13:42.440 a move to online business models. So you mentioned Hymns 0:13:42.480 --> 0:13:46.520 and Hers. There's row Amazon has their own pharmacy. I mean, 0:13:46.520 --> 0:13:50.040 they're not really big impactful companies from like a dollar perspective, 0:13:50.080 --> 0:13:53.760 like their revenues or share of prescriptions is really quite low. 0:13:54.160 --> 0:13:57.520 But I think what's happening is like we're just commoditizing 0:13:57.559 --> 0:13:59.839 all this right and making it super easy. I think 0:14:00.040 --> 0:14:03.079 ultimately in ten twenty years, all of our prescriptions will 0:14:03.080 --> 0:14:03.680 be online. 0:14:04.280 --> 0:14:08.679 Who sets prices for prescriptions? I know I'm going to 0:14:08.760 --> 0:14:11.840 regret asking this question because the economics of your business 0:14:11.840 --> 0:14:14.680 are the most complicated I've ever seen in my life. 0:14:14.679 --> 0:14:17.720 Well, that's one of the big arguments around why there's 0:14:17.720 --> 0:14:21.560 so much frustration from consumers and Washington and around drug pricing, 0:14:21.640 --> 0:14:24.720 because our drug prices are the pointing at Boomberg's, are 0:14:24.720 --> 0:14:27.520 different for people in Medicare and different from people from Medicaid. 0:14:27.600 --> 0:14:30.360 There's no one price, Like if you go and buy 0:14:30.440 --> 0:14:33.800 I don't know, a toy from Walmart, it's the same 0:14:33.880 --> 0:14:36.280 no matter where you go, and it's usually probably within 0:14:36.360 --> 0:14:39.760 spinning distance if you go to a competitor. Drug prices 0:14:39.840 --> 0:14:42.520 are just all over the place. And so one of 0:14:42.520 --> 0:14:45.760 the reasons the PBMs come under such fires, they're the 0:14:45.760 --> 0:14:48.920 ones kind of controlling that system of pricing and making 0:14:48.960 --> 0:14:52.520 it not transparent. And so I think what's happening is 0:14:52.840 --> 0:14:55.680 we're getting to a place where transparency is being valued 0:14:55.720 --> 0:14:59.400 and being pushed both in the market but also from 0:14:59.760 --> 0:15:01.600 washing as well. 0:15:01.800 --> 0:15:04.200 So we're looking at this situation right now where Walgreens 0:15:04.280 --> 0:15:07.800 is being bought by Sycamore, you have Writing that went bankrupt, 0:15:07.880 --> 0:15:11.520 you have all these companies struggling here. Where do you 0:15:11.640 --> 0:15:14.120 see this going moving forward? In terms of those other 0:15:14.200 --> 0:15:17.640 companies out there? Do you see more of these buyout situations? 0:15:17.960 --> 0:15:20.520 Yeah, it's a good question when I think about the landscape. 0:15:20.520 --> 0:15:23.200 I mean, as I mentioned a little while before, you know, 0:15:23.240 --> 0:15:24.880 I think we're going to see this move to more 0:15:24.920 --> 0:15:29.680 stuff online. Walgreens is interesting in that they've never really 0:15:29.800 --> 0:15:32.760 partnered with insurance in the same way like CBS has 0:15:33.080 --> 0:15:36.080 a PBM, they have insurance. They have this vertical model. 0:15:36.440 --> 0:15:39.400 United Healthcare has a vertical model. I think those are 0:15:39.440 --> 0:15:43.080 going to stay. I think we'll see I think we'll 0:15:43.080 --> 0:15:46.000 still see retail pharmacies because people still need to go 0:15:46.040 --> 0:15:47.680 around the corner and get something when they get I 0:15:47.680 --> 0:15:50.000 don't know, a sinus infection or something like that they 0:15:50.040 --> 0:15:52.400 needed today. But I think the value of those is 0:15:52.400 --> 0:15:53.720 going to be minimized over time. 0:15:54.640 --> 0:15:57.800 I go, after years of being a CBS guy, and 0:15:57.800 --> 0:16:00.240 I've got like a jillion doses over the years of 0:16:00.280 --> 0:16:03.240 like a Maxistilan for the four kids at CBS. I'm 0:16:03.240 --> 0:16:07.120 now main Pharmacy, Spring Lake, New Jersey. No big company. 0:16:07.440 --> 0:16:09.040 You switch, Hey, I switch, and. 0:16:09.560 --> 0:16:12.280 But even those guys will say you switch to a 0:16:12.280 --> 0:16:12.760 mom and pop. 0:16:13.000 --> 0:16:15.600 Yes, now, but they'll say, we don't have everything. So 0:16:15.680 --> 0:16:17.200 sometimes some things we just know we're not going to 0:16:17.240 --> 0:16:18.040 carry because we can't. 0:16:18.360 --> 0:16:20.240 We've done the same thing in Westfield, New Jersey. 0:16:20.320 --> 0:16:22.920 Yeah, so there you go. So CBS is good for me? 0:16:22.920 --> 0:16:24.840 All right, Jonathan? Are we gonna have any M and 0:16:24.880 --> 0:16:26.440 A in the space there's nobody left? 0:16:26.720 --> 0:16:28.880 Well, we've had a bunch of IPOs and kind of 0:16:28.880 --> 0:16:31.720 this like tech golf care bubble. I don't know if 0:16:31.720 --> 0:16:33.560 bubble is the right term, but we've seen Hinge Health 0:16:33.560 --> 0:16:36.880 come to the market recently Omada. There's a lot more 0:16:36.920 --> 0:16:37.640 waiting in the wings. 0:16:37.680 --> 0:16:40.280 See all right, Jonathan Palmer, Senior Healthcare ANTLS. Bloomberg Intelligence 0:16:40.320 --> 0:16:41.960 is one of our best Joining us live here in 0:16:41.960 --> 0:16:43.480 our Bloomberg Interactive Broker Studio. 0:16:45.320 --> 0:16:49.040 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:49.120 --> 0:16:52.200 weekdays at ten am Eastern on Apple Corplay and Android 0:16:52.200 --> 0:16:55.520 Auto with the Bloomberg Business app. Listen on demand wherever 0:16:55.560 --> 0:16:58.680 you get your podcasts, or watch us live on YouTube. 0:16:58.960 --> 0:17:00.800 We got normal Melinda, you have Paul Sweeney. You were 0:17:00.800 --> 0:17:03.080 live here in our Bloomerg Interactive broker studio, streaming live 0:17:03.200 --> 0:17:06.160 on YouTube as well. We're doing all that kind of stuff. 0:17:06.160 --> 0:17:08.600 Were out there on your smart TV, you know, like 0:17:08.640 --> 0:17:12.119 Samsung TV. Maybe it's little Roku when you just search 0:17:12.160 --> 0:17:14.600 Bloomberg Pursuits and we just popped right up there. 0:17:14.640 --> 0:17:14.919 All right. 0:17:14.960 --> 0:17:20.040 Micron Technologies reported earnings here today, a semiconductor company. I 0:17:20.040 --> 0:17:22.200 don't know a lot about this company, so I said, 0:17:22.240 --> 0:17:23.720 let's get somebody smart in here to talk to us 0:17:23.720 --> 0:17:26.400 about it. Jake Sullivan Silverman, he's the one. We got 0:17:26.400 --> 0:17:29.119 semi conductor anolds fro Bloomberg Intelligence. He joined us here 0:17:29.119 --> 0:17:31.800 in our Bloomerg directed broker studio talk to us about 0:17:31.840 --> 0:17:36.800 Micron Technology. What did they report and what's to tell 0:17:36.840 --> 0:17:37.800 you about the semi space. 0:17:38.400 --> 0:17:42.840 Yeah, so they were had pretty strong results last night. 0:17:42.840 --> 0:17:47.199 It was a beaten rays very strong on earnings based 0:17:47.240 --> 0:17:53.639 on you know, strong gross margins and the big growth 0:17:53.720 --> 0:17:57.000 was really what drove the strength in the quarter. And 0:17:57.280 --> 0:18:02.000 pricing was relatively we based on mix but generally in 0:18:02.040 --> 0:18:08.080 the right upward trajectory, and really, you know, the way 0:18:08.119 --> 0:18:12.240 to think about memory is it's pretty ubiquitous across electronics. 0:18:12.320 --> 0:18:16.160 You can think about smartphones, PCs, servers, both traditional and AI. 0:18:16.640 --> 0:18:19.360 You know, everything that you have that's a in your pocket, 0:18:19.440 --> 0:18:21.959 on your desk, sitting somewhere in your house, it's going 0:18:22.000 --> 0:18:25.160 to have memory or storage some combination of the two 0:18:25.520 --> 0:18:26.480 potentially as well. 0:18:27.320 --> 0:18:29.840 So we all know that demand for AI computing is 0:18:29.920 --> 0:18:31.480 really high right now. We're seeing a lot of those 0:18:31.480 --> 0:18:34.560 companies capitalizing on it, and Wall Street really keeping a 0:18:34.600 --> 0:18:35.800 high bar for these companies. 0:18:35.840 --> 0:18:40.199 But how is Micron matching up with all the other companies? 0:18:40.200 --> 0:18:41.240 Where are they in line? 0:18:41.560 --> 0:18:45.960 Yeah, so, so generally speaking, you know, it's important to 0:18:46.000 --> 0:18:48.040 keep in mind that Micron and a lot of the 0:18:48.080 --> 0:18:52.240 memory peers really trade on a cyclical basis. There are 0:18:52.359 --> 0:18:54.920 quite a few you know, inventory build ups and then 0:18:55.200 --> 0:18:58.880 you know, companies do restocking. And in the past there 0:18:58.920 --> 0:19:02.520 wasn't really as much of an AI story for Microns specifically, 0:19:02.560 --> 0:19:05.440 but with high bandwidth memory of some of their other products. 0:19:05.440 --> 0:19:08.480 You can think about high capacity solid state drives and 0:19:08.560 --> 0:19:11.680 high capacity DRAM modules. That has all been an AI 0:19:11.840 --> 0:19:13.880 story for the most part, and we've seen a lot 0:19:13.920 --> 0:19:17.080 of tailwinds in that business. Micron continues to gain share 0:19:17.160 --> 0:19:19.480 execute very well. It was a pretty important part of 0:19:19.520 --> 0:19:22.040 their story for this past quarter and heading into the 0:19:22.119 --> 0:19:23.080 end of this fiscal year. 0:19:23.480 --> 0:19:25.120 And I started the beginning, I didn't know a lot 0:19:25.119 --> 0:19:29.680 about Micron Technologies. No surprise, the stock's up fifty percent 0:19:29.880 --> 0:19:30.600 year to date. 0:19:31.040 --> 0:19:32.000 What's the story there. 0:19:32.600 --> 0:19:35.040 Yeah, So, you know, there were definitely a lot of 0:19:35.040 --> 0:19:38.119 worries once we got into the sort of you know, 0:19:38.200 --> 0:19:42.000 tariff related potential headwinds in April, and that really was 0:19:42.040 --> 0:19:44.919 a major drag on the stock price because there was 0:19:45.000 --> 0:19:49.800 potential for higher prices across all of their product lines 0:19:49.840 --> 0:19:52.359 and that could really be a hindrance to demand for 0:19:52.400 --> 0:19:55.760 a lot of consumer related specifically products. But you know, 0:19:55.880 --> 0:20:01.400 like PC's smartphones, USB drives and so as that kind 0:20:01.480 --> 0:20:04.760 of you know, headwind kind of faded away, what's happened 0:20:04.840 --> 0:20:09.080 is Micron has gotten those tailwinds from AI and bitter pricing, 0:20:09.880 --> 0:20:13.040 and so there's just a couple of different factors that 0:20:13.080 --> 0:20:16.040 have actually been really helping them out. They've continued to 0:20:16.080 --> 0:20:18.399 generate solid free cash flow over the next over the 0:20:18.480 --> 0:20:21.600 last several quarters, and the expectation is for that to continue. 0:20:21.640 --> 0:20:24.000 That's very important in an industry that's very cyclical. 0:20:26.240 --> 0:20:28.440 So it's out the conference called the Analysts, we're really 0:20:28.480 --> 0:20:32.520 asking the CEO questions about HBM. They're trying to get 0:20:32.520 --> 0:20:34.679 a sense of how much growth is coming. 0:20:34.720 --> 0:20:37.360 Can you explain what that is for our listeners. 0:20:37.520 --> 0:20:41.000 Yeah, So, high bandwidth memory HBM it's a very important 0:20:41.040 --> 0:20:44.199 part of AI servers. It's attached pretty much directly to 0:20:44.440 --> 0:20:47.280 the GPUs that Nvidia cells that end up in these 0:20:47.320 --> 0:20:51.399 big server stacks, and so high bandwidth memory has been 0:20:51.400 --> 0:20:56.520 an area where Micron has been gaining share. Sk Heinex 0:20:56.720 --> 0:21:00.720 was the incumbent, and Micron has been executed very well 0:21:00.760 --> 0:21:03.800 on their roadmap. First on eight high as you'll hear 0:21:03.840 --> 0:21:06.120 in the call right, but also twelve high as well. 0:21:06.240 --> 0:21:09.159 So eight high is for Blackwell and twelve high is 0:21:09.240 --> 0:21:12.880 for Blackwell ulture GB three hundred that's coming out, So 0:21:12.960 --> 0:21:16.000 that procurement cycle has already kicked in and they're going 0:21:16.040 --> 0:21:18.560 to see a pretty strong demand over the next coming 0:21:18.600 --> 0:21:22.560 months and quarters for their twelve high stack products. And 0:21:22.840 --> 0:21:26.280