Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Business Week with Carol Masser and Tim
Speaker 2: Stenovak on Bloomberg Radio.
Speaker 3: I want to get to some earnings because we're seeing
Speaker 3: some stocks move here in the aftermarket. Intel shares they
Speaker 3: are right now up about two percent. This is as
Speaker 3: we got in terms of some of the big headlines
Speaker 3: from Intel C's first quarter. Justin gross margin of thirty
Speaker 3: six percent, that's below with the Street was forecasting of
Speaker 3: about thirty nine point three percent. Go back to the
Speaker 3: fourth quarter, the last quarter revenues that was a beat
Speaker 3: fourteen point twenty six billion versus an estimate of thirteen
Speaker 3: point eighty one billion. And again talking about first quarter revenue,
Speaker 3: some forecasts here a bit of a range eleven point
Speaker 3: seven billion to twelve point seven billion, and that Tim
Speaker 3: compares with the street estimate of twelve point eighty five billion.
Speaker 3: But again right now we're seeing Intel up about two percent.
Speaker 3: I know they also talked about in terms of some
Speaker 3: spending right and I think basically saying they will not
Speaker 3: be spending speculatively. So I feel like some of that
Speaker 3: plays to maybe some of the commentary we've had about
Speaker 3: the AI spend maybe a rethink this past week.
Speaker 2: Reminder too, they're also looking for a new CEO at
Speaker 2: this point to take up for patkel Singer who left
Speaker 2: at the end of last year. For more, let's go
Speaker 2: to Jackie Doavolos. She's in our San Francisco bureau. She's
Speaker 2: been following this company and these numbers closely. Jackie, how
Speaker 2: is the turnaround going?
Speaker 4: Well, that's the question everyone wants to know. The key
Speaker 4: uncertainty here is who's taking over the company. You had
Speaker 4: some guidance from the CFO as to how the next
Speaker 4: quarter is going to look like, but not so much
Speaker 4: guidance on who's going to be taking the reins. And
Speaker 4: I think that's the big point of uncertainty. And if
Speaker 4: you look at shares, it's kind of a tepid response
Speaker 4: considering how much uncertainty is swirling around the company right now.
Speaker 4: But to your point, Carol, I think some of that
Speaker 4: optimism is coming in through the comments around spend. As
Speaker 4: you know, the former CEO, Pat gal Singer was ousted
Speaker 4: just last month, and big part of the reason for
Speaker 4: that was this ordinate amount of spending that the board
Speaker 4: perceived to be a drag on the company's performance. Now,
Speaker 4: we might not know who might be taking over, but
Speaker 4: what we do know is that next quarter they're looking
Speaker 4: at revenue of about eleven point seven to twelve point
Speaker 4: seven billion dollars. That's below estimates, but perhaps some of
Speaker 4: that optimism from the fact that they beat pretty well
Speaker 4: on their revenue figures for the fourth quarter is coming through.
Speaker 3: Yeah, it's interesting just looking through to some of the
Speaker 3: reporting from Ouroni and King of course, who follows the
Speaker 3: chips sector, and saying that you know, again, what you
Speaker 3: guys were just talking about investors in analyst waiting for
Speaker 3: the appointment of a new leader who will determine Intel's future.
Speaker 3: I mean, it's a big question. The company's outsource manufacturing
Speaker 3: push will not see meaningful revenue from silicon customers until
Speaker 3: twenty twenty seven. For now, the bulk of outside sales
Speaker 3: will come from packing works. So we're getting a little
Speaker 3: bit more in terms of the business here, Tim. But again,
Speaker 3: the stock, as Jackie mentioned, just pulling it up again
Speaker 3: here in the aftermarket, and the stock right now just
Speaker 3: up about one point two percent here. But it's not
Speaker 3: selling off, which is interesting.
Speaker 2: I mean, there's been a lot of selling off of
Speaker 2: the last few years with Intel to you know, when
Speaker 2: you zoom out, of course, Jackie, the data center business
Speaker 2: certainly facing competition from Nvidia and AMD their core business
Speaker 2: PC processors. How is demand there, how's competition there?
Speaker 4: Well, we got some comments from the CFO who said
Speaker 4: that competitive dynamics is a big reason why we're seeing
Speaker 4: a bit of a weaker forecast. He also cited the
Speaker 4: macro uncertainties and of course seasonal weakness. But when we
Speaker 4: go back to those competitive dynamics, who is the competition
Speaker 4: and tim You're absolutely right, those AI accelerators are the
Speaker 4: big question for investors. Can they get in here and compete?
Speaker 4: Obviously with the gold standard coming from Nvidia, it's going
Speaker 4: to take a lot of work and investment to really
Speaker 4: chip away there. But in the meantime they're also facing
Speaker 4: competition from their bread and butter in that processing personal
Speaker 4: computer processing unit. You have AMD really coming in, and
Speaker 4: then of course on the outsourcing manufacturing site, Taiwan Semiconductors
Speaker 4: is also a pretty big player now, so they're kind
Speaker 4: of facing this competition from all ends. Even you know,
Speaker 4: as we look at AI being this big opportunity for
Speaker 4: pretty much every tech player out there. Intel has really
Speaker 4: been struggling to make a name for themselves in the space.
Speaker 3: Just to rehash, Intel shares folks in the aftermarket up
Speaker 3: about one point three percent. Going to the first quarter
Speaker 3: forecast seeing revenue of eleven point seven billion to twelve
Speaker 3: point seven billion. The estimate on the street is twelve
Speaker 3: point eighty five billion, so above that. Also in terms
Speaker 3: of forecasts, he's an adjusted EPs of just flat. Estimate
Speaker 3: is for eight cents. He's a justin gross margin of
Speaker 3: thirty six percent. That's a miss too. Estimate is thirty
Speaker 3: nine point three percent. Go back to the fourth quarter
Speaker 3: and their current quarter sales and profit forcat asked falling
Speaker 3: short of analyst projections. But if we go back to
Speaker 3: the fourth quarter fourteen point two six billion, that's the
Speaker 3: revenue that's down seven point four percent year over year.
Speaker 3: The estimate on the street was thirteen point eight billion.
Speaker 3: But again the key thing as we're talking about, you know,
Speaker 3: not yet having any update on a permanent CEO. The
Speaker 3: interim co CEO David Sisner saying our first quarter one
Speaker 3: or quarter one outlook, I should say, reflects seasonal weakness
Speaker 3: magnified by macro uncertainties. Further inventory digestion, and competitive dynamics.
Speaker 3: Jackie sounds like a super full plate. We know it's
Speaker 3: been a full plate for Intel, but it still is.
Speaker 3: It's a reminder at least that it still is.
Speaker 4: One hundred percent. And as we look to the conference
Speaker 4: call with analysts, the big question is going to be
Speaker 4: not just an update for leadership, but also in this interim,
Speaker 4: what's the game plan here, because now that you're seeing
Speaker 4: kind of spend really being scrutinized after the deep Seek
Speaker 4: drama earlier this week, it's sort of effect those who
Speaker 4: might have been perhaps exempt from that kind of scrutiny
Speaker 4: before these open you know, AI, other AI developer kind
Speaker 4: of players out there, and so obviously this is nothing
Speaker 4: new for Intel, but of course I think that might
Speaker 4: be you know, some of the guidance that they want
Speaker 4: this this conservative spend, What does that mean, How does
Speaker 4: it look like in practice at a time when it
Speaker 4: is going to take investment to really kind of break
Speaker 4: into this AI space. Another thing that we'll be looking
Speaker 4: out for in the conference call, it's just any more
Speaker 4: guidance around what the company plans to do to perhaps
Speaker 4: offset some of the weaknesses in its bread and butter
Speaker 4: business in these personal computers. You know, what, what does
Speaker 4: it plan to do about this kind of new competition
Speaker 4: coming from Taiwan Semiconductors. I think That's what I'm going
Speaker 4: to be looking out for in the upcoming call.
Speaker 2: I think what still surprises me, Jackie is this is
Speaker 2: a company that has no full time CEO, and you
Speaker 2: had Pat Gelslinger out earlier this week. We talked about
Speaker 2: this with Ian King tweeting that he was buying shares
Speaker 2: of Nvidia during the down during the decline of Nvidia
Speaker 2: on Monday, he wrote about that on LinkedIn, and it
Speaker 2: was surprising to see that I'm not, you know, here
Speaker 2: to talk about Gelsinger. What I am wondering from you
Speaker 2: about is what are analysts saying about the type of
Speaker 2: leader who could come in and turn this company around? Like,
Speaker 2: who are the names? Do we have names that are
Speaker 2: being thrown around at this point? Do we have a timeline,
Speaker 2: what do we know?
Speaker 4: I don't think there's too much that we do know
Speaker 4: other than you know, the big point of scrutiny has
Speaker 4: been spend and if you're going to bring in a
Speaker 4: leader that can kind of articulate a new vision for
Speaker 4: the company still kind of, you know, bring it something
Speaker 4: that's forward looking, that is not going to be predicated
Speaker 4: on a plan that is going to take, you know,
Speaker 4: five to ten years to pan out, because I think
Speaker 4: what investors want to see is what can we do
Speaker 4: with what we have now? And you know, obviously a
Speaker 4: pet Elsinger didn't get to live out his full five
Speaker 4: year plan, but you know, he did put in in
Speaker 4: place a solid foundation that I think a new CEO
Speaker 4: can can work with. So some of the notes that
Speaker 4: we've been seeing from the street include, you know, what
Speaker 4: can be done with what foundation currently exists?
Speaker 3: Because it's not nothing.
Speaker 4: You know, some solid investments have been made, some good
Speaker 4: inroads have been made, but I think it's just a
Speaker 4: matter of kind of that conservative spend how far can
Speaker 4: that take them?
Speaker 3: Hey, all right, Jackie, thank you so much. Jackie Devallas,
Speaker 3: Bloomberg News Tech reporter joining us with the latest on Intel.
Speaker 3: Keeping a watch on it as it moves up just
Speaker 3: a little bit in the aftermarket. Do you want to
Speaker 3: mention KLA Corp. Semiconductor manufacturing equipment company up about four
Speaker 3: and a half percent in the aftermarket following its earnings,
Speaker 3: looking at what the company has to say, second quarter
Speaker 3: adjusted gross margins sixty one point seven percent, slightly better
Speaker 3: than the street expected third quarter adjusted gross margin, so
Speaker 3: looking towards the current quarter sixty one to sixty three percent.
Speaker 3: Also talking about third quarter revenue, they're looking for two
Speaker 3: point eighty five to three point fifteen million billion, excuse me,
Speaker 3: and that is better than the street expected. So that
Speaker 3: explains where you're seeing this stock up. Do not go anywhere.
Speaker 3: Apple to come in just a moment. The earnings continuing
Speaker 3: to come out. We are awaiting Apple, which is set
Speaker 3: to report in just about seven minutes at the bottom
Speaker 3: of the hour four to thirty pm Wall Street time,
Speaker 3: So as soon as they cross, we will bring them
Speaker 3: to you. A reminder of the company. We'll report for
Speaker 3: the quarter despite some head wind stepping from China, the
Speaker 3: slow rollout of in house AI future features. So there's
Speaker 3: a lot coming at us when it comes to Apple
Speaker 3: in particular, a lot coming at us when it comes
Speaker 3: to the whole tech sector. This week, Angela Zino is
Speaker 3: senior equeritly alyist over at CFRAA. He joins us from
Speaker 3: New York City. Angelo, I do want to start with
Speaker 3: Intel because they just came out certainly a big part
Speaker 3: of the semi second, but they're also going through, of course,
Speaker 3: some changes, waiting for a new CEO, new leader, a
Speaker 3: new way forward. Initial thoughts on Intel.
Speaker 5: Yeah, now, thanks for having me.
Speaker 6: So, you know, you kind of look at the results overall,
Speaker 6: and I would say they were okay. I mean, as
Speaker 6: far as the results were concerned, I think earnings about
Speaker 6: thirteen cents, sales were down seven percent, roughly kind of
Speaker 6: in line where we were expecting. I think as far
Speaker 6: as the guidance is concerned, it was definitely on the
Speaker 6: lighter side of things, but you know, nothing abysmal, nothing
Speaker 6: like we've seen in past quarters where they've kind of
Speaker 6: missed by a much wider margin. So as far as
Speaker 6: kind of the results are concerned, I think it was
Speaker 6: perfectly fine, you know, within kind of you know, segments wise.
Speaker 6: I think the client computing group, which is kind of
Speaker 6: more their their PC business was down about nine percent,
Speaker 6: and when you kind of look at their data center
Speaker 6: business down about three percent. Again, I mean, it was
Speaker 6: kind of where we had expected largely. So yeah, I
Speaker 6: mean I think it's one of those situations where this
Speaker 6: company is kind of just kind of going through the motions,
Speaker 6: and we're just kind of waiting to see kind of
Speaker 6: who that next CEO is going to be and what
Speaker 6: they have to say on the call as far as
Speaker 6: kind of cost cutting this concern here in the intermediate term, I.
Speaker 2: Could have asked you the same question I'm going to
Speaker 2: ask you Angelo anytime over the last three years, where
Speaker 2: is Intel in its turnaround?
Speaker 6: You know, it's it's a it's a tough one because, yeah,
Speaker 6: there they continue to have to kind of restart in
Speaker 6: terms of you know, where they're at, I mean you
Speaker 6: and and it's typically because of the fact that they
Speaker 6: haven't really kind of given you know, the existing leadership team,
Speaker 6: you know, enough time to kind of you know, watch
Speaker 6: their vision to really come to fruition.
Speaker 5: I think right now where we're looking at is you know,
Speaker 5: you need you need a new CEO.
Speaker 6: I think when you kind of look at their core business,
Speaker 6: it's really kind of under attack. Right on the PC
Speaker 6: side of things. You hear things like you know, ARM
Speaker 6: looking to take half the half the market. On that
Speaker 6: side of things, you got got the kind of greater
Speaker 6: competitive pressure.
Speaker 5: Going on there.
Speaker 6: You kind of look on the data center side of things,
Speaker 6: they don't have the right offerings there. I mean, CPUs
Speaker 6: are kind of a thing of the past at this
Speaker 6: point in time, and you've got you know these you know,
Speaker 6: these hyperscalers out there kind of rolling out their own
Speaker 6: CPU offerings. So it is it is a very difficult
Speaker 6: time for Intel at this point in time. There's really
Speaker 6: kind of no direction. You need that direction. So the
Speaker 6: faster you get a CEO.
Speaker 5: The better.
Speaker 6: Again, this is kind of almost a race to the bottom,
Speaker 6: it seems like right now in terms of kind of
Speaker 6: continue to continuing to course as their revenue trajectory continues
Speaker 6: to go down. I think really kind of if I'm
Speaker 6: looking at this company, it's all about how they can
Speaker 6: execute on the foundry side of things right now. If
Speaker 6: you're thinking about a turnaround going into the second half
Speaker 6: of the year, I mean, you've got eighteen A that's
Speaker 6: that's kind of been long awaited and hyped up panther Laics,
Speaker 6: it's supposed to ramp here in the second half of
Speaker 6: the year. We want to see kind of what kind
Speaker 6: of customers like, you know, start ramping on that side
Speaker 6: of things. You're not going to have a major hyperscaler
Speaker 6: out there all of a sudden just give business to Intel,
Speaker 6: they need to kind of execute on that side of things.
Speaker 6: So that's where we're at right now. I think they
Speaker 6: need to start show some sort of promise on the
Speaker 6: foundry side of things, and hopefully they can kind of
Speaker 6: gain some momentum from there.
Speaker 2: I got to tell you, I get these emails on
Speaker 2: the terminal when stories are read at like a high rate,
Speaker 2: those read spikes. People want to know about Apple. It
Speaker 2: says that to Apple that our live blog on Apple
Speaker 2: Carol is already hitting a red spike before those numbers
Speaker 2: come out. We're expecting those numbers in just about two minutes. Angelo, China,
Speaker 2: is that the biggest concern? We saw some downgrades the
Speaker 2: early part of this year.
Speaker 6: Yeah, I mean it seems like, you know, when you
Speaker 6: kind of look here over the last couple of years,
Speaker 6: January just hasn't been a good month for Apple, and
Speaker 6: you know, you can kind of say maybe a part
Speaker 6: of that is seasonality and what have you. I think
Speaker 6: obviously the other issue is you kind of look over
Speaker 6: the last two three years, the competitive pressures have.
Speaker 5: Definitely escalated out in China.
Speaker 6: I mean, Huawei has become you know, a real threat
Speaker 6: again at the high end of the market, and you know,
Speaker 6: we kind of want to know what's going on with China.
Speaker 6: It's somewhat of a black box at this point in time,
Speaker 6: and you kind of look at some of the sell
Speaker 6: through numbers that have been posted, you know, specifically by
Speaker 6: the Chinese government here late in the year.
Speaker 5: The numbers don't look good.
Speaker 6: And I think most people realize that most investors are
Speaker 6: kind of going into these numbers knowing that China or
Speaker 6: expecting that China is not going to be good. The
Speaker 6: question is how bad is it? You know, we are
Speaker 6: we kind of going to have to deal with some
Speaker 6: sort of excess inventoryous situation where they're going to start
Speaker 6: discounting more than we expect and it's going to, you know,
Speaker 6: look like an ugly March Quarter in terms of the guidance,
Speaker 6: I think that's at this point what we're looking at.
Speaker 6: But in terms of the biggest risk kind of going
Speaker 6: into the print here and as far as the March
Speaker 6: Quarter is concerned, it's absolutely China. And we also know
Speaker 6: as far as the March Quarter guidance is concerned, it's
Speaker 6: going to be someone on the weaker side of things
Speaker 6: because of the four X uncertainties, you.
Speaker 3: Know, Angela. We're just about forty seconds away from those
Speaker 3: Apple earnings. Stocks down about five percent. We know it's
Speaker 3: been lagging some of it's tech brethren. If you will,
Speaker 3: question is kind of what's next for Apple? What could
Speaker 3: they say today that might give some indication of what's next.
Speaker 3: They've started to give some clues. Just got about twenty
Speaker 3: seconds here.
Speaker 6: I think the hope is that you get a better
Speaker 6: than fear type number really on China. I think that's
Speaker 6: kind of the big thing. And then of course on
Speaker 6: the services side of things, you want to make sure
Speaker 6: that that's running on all cylinders. We're going to hopefully
Speaker 6: continue to get double digit growth. And I think if
Speaker 6: you can kind of get you know, those two kind
Speaker 6: of things running, I think that should be enough as
Speaker 6: far as kind of where the stock is at and
Speaker 6: the pullback that we've seen.
Speaker 3: All right, folks, we're talking with Angelo's, you know, senior
Speaker 3: equity analyst over at CFR Research. He's going to stay
Speaker 3: with us as we get ready for those Apple earnings
Speaker 3: and they are crossing. So let's go through some of
Speaker 3: the numbers. First quarter revenue one hundred and twenty four
Speaker 3: point three billion. That is just a hair better than
Speaker 3: what the street was expecting. One hundred and twenty four
Speaker 3: point one billion is what the street was looking for.
Speaker 3: Products revenue ninety seven point ninety six billion, that's up
Speaker 3: about one point six percent year over year. Ten that's
Speaker 3: a little bit light. Ninety eight point zero two billion.
Speaker 3: You break it down. iPhone, the all important iPhone number,
Speaker 3: sixty nine point fourteen billion, that is down year over year.
Speaker 3: Estimate was for seventy one point zero four billion.
Speaker 2: And then you keep going down at China revenue, big
Speaker 2: miss there, estimates for twenty one point six billion dollars
Speaker 2: that came in at eighteen point five to one billion dollars. Wearables,
Speaker 2: home and accessories coming in just shy of estimates. MAC
Speaker 2: revenue coming in above estimates, iPad revenue coming in above estimates.
Speaker 2: First quarter products revenue coming in shi of estimates. But Carol,
Speaker 2: what we're talking about right now, iPhone revenue coming in
Speaker 2: light sixty nine point one four billion versus estimates of
Speaker 2: seventy one billion, and that China number significantly lower than
Speaker 2: analysts one to see coming in at eighteen point five
Speaker 2: to one billion.
Speaker 3: Apple also maintaining its cash dividend of twenty five cents
Speaker 3: a share. I should say the stock has been bouncing
Speaker 3: around in the aftermarket. We've seen it up about one percent.
Speaker 3: Right now, it's just up about six tenths of a
Speaker 3: percent of half a percent. Angelo Zeno come on in
Speaker 3: initial thoughts on the first headlines off of this earnings release.
Speaker 6: Yeah, I mean, I think this is kind of a
Speaker 6: situation where, you know, execution was I think as good
Speaker 6: as you could have asked for. I mean, as far
Speaker 6: as the top line is concerned, roughly in line. I
Speaker 6: think the expectation again was about you know, one hundred
Speaker 6: and twenty four billion, so you're looking at what was
Speaker 6: it maybe three point eight percent or close to four
Speaker 6: percent growth, let's call it, as far as kind of
Speaker 6: on a year of a year growth rate. And I mean,
Speaker 6: I think Tim kind of highlighted the iPhone numbers were
Speaker 6: definitely a disappointment and the China numbers, so it's definitely
Speaker 6: a China iPhone problem as far as the quarter is concerned,
Speaker 6: and why we missed. And again, the expectations going into
Speaker 6: the quarter was it was going to be a challenge,
Speaker 6: and the fact that they had been able to kind
Speaker 6: of navigate and still meet the numbers despite those issues,
Speaker 6: I think kind of helps maybe do you risk the
Speaker 6: stock at least when you kind of look at the
Speaker 6: numbers this quarter. I mean, we'll see what the March
Speaker 6: quarter guidance is going to look like. But my guess
Speaker 6: is you're going to continue to see the further weakness
Speaker 6: on the China iPhone side of things.
Speaker 2: Angelo, how much of the iPhone miss can you attribute
Speaker 2: to China? Is is the iPhone miss just a result
Speaker 2: of China?
Speaker 6: It seems like it, to be honest with you, just
Speaker 6: kind of giving just given the high level numbers that
Speaker 6: I'm hearing from you, it just seems like the weakness is.
Speaker 5: Really kind of you know, all China.
Speaker 6: And you know, my guess is, you know, Western markets
Speaker 6: probably held up much better what held up as as to.
Speaker 5: Be expected, and and you know, we kind.
Speaker 6: Of saw, you know, some pronounced weakness on the China
Speaker 6: side of things, and again not a surprise because a
Speaker 6: lot of the sell through numbers that had you know,
Speaker 6: come out from China, you know, was looking you know,
Speaker 6: essentially it was kind of pointing towards double digit declines
Speaker 6: out of kind of the eye phone business. So that's
Speaker 6: essentially what you've got. So it's it's pretty brutal, but
Speaker 6: not necessarily a complete surprise given some of the indications
Speaker 6: we got going into the numbers.
Speaker 3: All right, the three bright spots, iPad, MAC, and services.
Speaker 3: The iPad and MAC. The year over year services is
Speaker 3: at an all time record. What's interesting too, all time
Speaker 3: revenue record too as well, one hundred and twenty four
Speaker 3: point three billion and narrowly beating Wall Street estimates. Again,
Speaker 3: a huge miss for China when it comes to Apple
Speaker 3: eighteen point five billion versus twenty one point six billion
Speaker 3: that Wall Street expected, and a big miss for the
Speaker 3: iPhone sixty nine point one billion dollars versus seventy one
Speaker 3: billion dollars expected. And you know, initial reaction Angelo in
Speaker 3: terms of the share price. Initially we saw pop and
Speaker 3: then we saw the stock move down just down to
Speaker 3: here a hare at this point, you know, a lot
Speaker 3: of when we talk about Apple is we are saying
Speaker 3: what's the next big thing? Right and certainly if the
Speaker 3: iPhone is you know, certainly shoring business a still a
Speaker 3: very big business. But maybe some questions about China growth
Speaker 3: going forward. But where do you want to see the
Speaker 3: company move into? Where are the new opportunities in your
Speaker 3: view for Apple.
Speaker 6: Yeah, I mean, listen, I think, you know, we need
Speaker 6: to continue to see good growth on the services side
Speaker 6: of things, and then to continue to innovate and come
Speaker 6: out with new offerings on the services side of things.
Speaker 6: And I think that business will naturally continue to grow
Speaker 6: due to a number of factors. But you know, as
Speaker 6: far as kind of what we're looking for here over
Speaker 6: the next couple of quarters, I don't think you should
Speaker 6: forget about Apple Intelligence. I think that's still a very
Speaker 6: important part of this story. We've kind of seen the
Speaker 6: first two trunches of Apple Intelligence really roll out. The
Speaker 6: first trunch well, you know, was really a non event.
Speaker 6: I actually think, you know, and I have the iPhone sixteen.
Speaker 6: I actually really liked let a number of the other
Speaker 6: upgrades on the second trunch out there. I mean, I
Speaker 6: use kind of visual intelligence all the time. Not crazy
Speaker 6: about gen moji's and what have you, but you know,
Speaker 6: I think there were a number of decent features out there,
Speaker 6: specifically on the visual intelligence ide thinks I think Grounds
Speaker 6: was great. I think the chat, GPT and integration is
Speaker 6: super helpful for someone that just kind of you know,
Speaker 6: looking to do stuff, you know, on the fly on
Speaker 6: their phone. So I just don't think the consumer is
Speaker 6: well aware of it obviously, and we're still at a
Speaker 6: point where you know, most of kind of the installed
Speaker 6: base doesn't have access or even knows about Apple Apple
Speaker 6: Intelligence at this point in time. We'll get kind of
Speaker 6: the the third you know, trunch here in the coming months,
Speaker 6: and I think that's really going to help in terms
Speaker 6: of the serie integration and what Apple can kind of
Speaker 6: demonstrate across kind of the app store and what have you.
Speaker 6: And then you know, clearly, you know, we kind of
Speaker 6: want to see how that reflects across the rest of
Speaker 6: the ecosystem as they kind of throw this out internationally,
Speaker 6: what kind of partnerships they can kind of announce out
Speaker 6: in China. Does that make a difference in China in
Speaker 6: terms of kind of helping the demand outlook, because I
Speaker 6: do think a big problem with with Apple right now
Speaker 6: in China is the fact that they don't have AI
Speaker 6: capabilities where you know, obviously they're they're China peers do
Speaker 6: don't have a full device out there where their peers do.
Speaker 6: And hopefully, you know, we see something on the foldable
Speaker 6: side of things here over the next kind of two years,
Speaker 6: So you know, where I'd like to see them go
Speaker 6: is kind of, you know, start evolving their ecosystem where
Speaker 6: they could find some success, at least in China, because
Speaker 6: at this point in time, you know, what they've got
Speaker 6: in terms of their offering in China is just not
Speaker 6: going to.
Speaker 3: Cut it all right, Going to leave it on that note,
Speaker 3: Angela's you know, he's senior equity analyst at CFR Research
Speaker 3: joining us in New York City. Do you want to
Speaker 3: mention Tim Cook? In the earnings release and the statement
Speaker 3: called it the company's best quarter ever at Apple. He
Speaker 3: also said, through the power of Apple Silicon, we're unlocking
Speaker 3: new possibilities for our users with Apple Intelligence, which makes
Speaker 3: apps and experiences even better and more personal. We're excited
Speaker 3: that Apple Intelligence will be available and even more languages
Speaker 3: this April. So Tim is certainly choosing to highlight that
Speaker 3: we should point out. Apple shares though after an initial
Speaker 3: pop right after the earnings release here in the aftermarket,
Speaker 3: are now pretty much flat.
Speaker 2: Yeah, no mention of China in that statement, which certainly
Speaker 2: will be a focus of investors on that call when
Speaker 2: it does begin in just a few minutes. It's certainly
Speaker 2: a focus for Caroline High. She's a Bloomberg Technology co host.
Speaker 2: She joins us here in the Bloomberg Interactive Brokers studio.
Speaker 2: Two big misses today Caroline highphone revenue coming in about
Speaker 2: two billion dollars shi of estimates, and then greater China
Speaker 2: revenue coming in about three billion dollars shi of estimates.
Speaker 2: Does Apple need to change its strategy in China? Or
Speaker 2: do investors need to adjust their expectations about China?
Speaker 7: Do we need to get more comfortable with their selling
Speaker 7: fewer phones but in a higher average selling price. And
Speaker 7: I think that's perhaps where they're trying to educate people towards.
Speaker 2: Is that in China?
Speaker 5: Is that everywhere?
Speaker 1: Well, I mean it.
Speaker 7: Feels like everywhere, but we do still have the slightly
Speaker 7: cheaper phones that are available in the US, but we
Speaker 7: don't have the rampant sort of competition that you do
Speaker 7: have with a Huawei and with some of the local
Speaker 7: operators that are in China that are just managing to
Speaker 7: produce far more sophisticateated phones and a much lower price point.
Speaker 7: And also there's some national patriotic fervor that's going on
Speaker 7: and wanting to buy your locally made phones. So they
Speaker 7: have been educating us and I think counterpoint research. For example,
Speaker 7: front run the fact that they're going to have had
Speaker 7: a dismal general amount sold eighteen percent rejection they thought
Speaker 7: in terms of phone sold, But if the average selling
Speaker 7: price is picking up, you're not going to be hurting
Speaker 7: quite so bad. But look, ultimately we've seen it's a
Speaker 7: big miss. They're growing in every region outside of China,
Speaker 7: and even the America's Japan was pretty good, but really
Speaker 7: China has been that real weak point, and we have
Speaker 7: to perhaps see that the company is just going to
Speaker 7: try and retrain us to think about them as a
Speaker 7: services company, as an Apple Intelligence company. And look, with
Speaker 7: iPhones missing as well, maybe we have to start to
Speaker 7: think is this really always going to be the juggernaut
Speaker 7: we thought it was?
Speaker 3: What about Apple Intelligence? Right? We have certainly heard so
Speaker 3: much from the company, Tim Cook singling it out also
Speaker 3: on the release and in a statement, So how is
Speaker 3: the world thinking about Apple Intelligence and its opportunities?
Speaker 1: I mean, what what that's far?
Speaker 7: I mean, of course I want to have fun in
Speaker 7: a Gen Moji, but ultimately I'm going to be upgrading
Speaker 7: my phone for that. No, I probably have gone ungraded
Speaker 7: to an iPhone sixteen because my darn camera is broken
Speaker 7: and I want to get a better camera, and I
Speaker 7: want to get a slimmer phone. But I wouldn't have
Speaker 7: gone for it for Apple Intelligence largely because look, I
Speaker 7: can integrate Google and to upgrade there and have it
Speaker 7: magicing my emails and making life a little bit more
Speaker 7: sophisticated there, and compared to Samsung, it is not able
Speaker 7: to innovate in the way that Samsung's adapted to Alphabet's
Speaker 7: offering Open Ai. Though, I think the winning formula for
Speaker 7: Apple Intelligence going forward is that it hasn't spent billions
Speaker 7: on its own large language model. It's gone in bed
Speaker 7: with open Ai, and open Ai is probably gonna have
Speaker 7: to get a lot cheaper because of what's happening with Deeze.
Speaker 2: Caroline h Have you been watching Severance?
Speaker 4: No?
Speaker 1: I haven't.
Speaker 5: Okay, Well, I'm.
Speaker 1: Too busy on the jacket, holl the day of the Jackal.
Speaker 2: It's it's a huge investment by Apple, huge marketing, push
Speaker 2: services revenue a bright spot for the company. Yes, coming
Speaker 2: in at twenty six point three four billion dollars, it's
Speaker 2: for twenty six point one billion. I bring up Severance
Speaker 2: because that's part of the services category. This is a
Speaker 2: high margin business for Apple, the services social TVs TVs.
Speaker 2: But the services category. Yeah, does does services growth and
Speaker 2: strength ever offset weakness in China or for MyPhone? Well?
Speaker 7: I think it's interesting. Then the new COFO who has
Speaker 7: just taken on the role. He's a long time Apple executive,
Speaker 7: but he's just taken on the role in January, is
Speaker 7: really talking up about sort of the installed base, because
Speaker 7: that's where they want you to think the amount of
Speaker 7: max iPads phones that we all own. They say that
Speaker 7: we now have an installed base of active devices that
Speaker 7: reached an all time high across all products and geographic segments.
Speaker 7: Suddenly the services bigot wheel just flies. And then when
Speaker 7: you're getting into payments, when you're getting into interoperability, of course,
Speaker 7: services just becomes ever more necessary.
Speaker 2: For I mean, I probably pay Apple more each year
Speaker 2: between between the memory.
Speaker 1: Yeah, what about the app store?
Speaker 7: I do wonder with some regulatory perspective, we heard it
Speaker 7: from Microsoft yesterday, Well was it Meta yesterday talk.
Speaker 1: Singling out EU.
Speaker 7: But how much are they going to have to change
Speaker 7: the business model when it comes to the revenue They
Speaker 7: can just skim away from an app store when it
Speaker 7: think about how it's treating its own consumers and whether
Speaker 7: we're being fairly treated across the world.
Speaker 3: I mean, what do you want to know and what
Speaker 3: do you want to hear from them?
Speaker 1: On the car?
Speaker 3: Is it just China or is it other things?
Speaker 1: I think, what is your next big innovation? Is it
Speaker 1: about the home?
Speaker 7: Because look, the Vision Pro looks cute, but are we
Speaker 7: all spending thousands on it? No, it hasn't been the
Speaker 7: R and D winner for them this yet, but it
Speaker 7: might have spin offs when they can tell about how
Speaker 7: much they've iterated there to bring it to what they're
Speaker 7: going to do with the home, the video screens, the robotics.
Speaker 7: We're going to see how they can become evanmore integrale.
Speaker 7: We need another winning product. It wasn't cars, the Vision Pro,
Speaker 7: not yet, But what about twenty twenty five is some
Speaker 7: new unleashed hardware.
Speaker 3: I'm amazer not more entrenched in the home. I mean,
Speaker 3: I know in my home it's such an Apple household,
Speaker 3: but it's not.
Speaker 1: We're a Google home household.
Speaker 3: We are too. We are too, and so I'm kind
Speaker 3: of amazed that they have kind of waited so long
Speaker 3: to get into the home market.
Speaker 2: Yeah, it would be certainly that would be an interesting
Speaker 2: product category from them. What about something more akin to
Speaker 2: metas glasses that we spoke about yesterday, and if they
Speaker 2: were to come out with something that is less vision
Speaker 2: pro oculous and more sort of like low profile Rabia,
Speaker 2: because that.
Speaker 1: Was the irritation for many.
Speaker 7: Was it the fact that you've basically got a huge battery,
Speaker 7: we connected to you and it just.
Speaker 1: So harding around.
Speaker 7: The tried and tested formula of Apple is let everyone
Speaker 7: else play and then you come in and win the
Speaker 7: day with something beautiful sneak and everyone jumps on board.
Speaker 7: So maybe that is the winning formula for the home
Speaker 7: and when it will be for glasses and they'll start
Speaker 7: to dabble in.
Speaker 1: I mean, Tim Cook's got nice pair of glasses.
Speaker 7: I wonder if he wants to start making them and
Speaker 7: we suit you down to the ground, Tim, But I
Speaker 7: do think that they do. They're always going to be
Speaker 7: slightly slower off the mark. Then come and bring in
Speaker 7: what it. They haven't got a foldable phone yet. Look,
Speaker 7: Samsung has plenty on the market. Everyone's been wanting to
Speaker 7: get a smaller form factor. They're just waiting until they
Speaker 7: can perfect. So you don't get a crease in it.
Speaker 7: So I do wonder whether it's gonna take a little
Speaker 7: bit of time.
Speaker 3: You know, we have talked with Mark I guess about
Speaker 3: just how the overall market here in the United States
Speaker 3: is so overweighted to some of these big tech companies.
Speaker 3: And I am curious though they are important, right when
Speaker 3: you look at kind of the numbers that they bring in,
Speaker 3: how twenty four million, I mean, it's just extraordinary, even
Speaker 3: when we say right, maybe right, it's extraordinary. So how
Speaker 3: are you thinking about this week of some of these
Speaker 3: big tech names and the results that we've had.
Speaker 7: Thing they've done all right, considering Monday and the deep
Speaker 7: seeky whiplash that we had, and I thought the spend.
Speaker 1: Would be so much more under consideration.
Speaker 7: But I think Satia, even though Microsoft saw a big
Speaker 7: hit today, Satia managed to sort of thread the needle
Speaker 7: that look, we're already offering our one on on our foundry,
Speaker 7: IAI foundry, come to us find the best models. We'll
Speaker 7: also be able to we have our issue as supply,
Speaker 7: we've got to continue to invest. So they managed to
Speaker 7: vindicate a spending. I think Meta did a phenomenal job
Speaker 7: of just talking up with such pompous, like grandiose ideas that.
Speaker 1: Won everyone over.
Speaker 7: You know, musted the same, the fact that actually the
Speaker 7: numbers look pretty ugly. But he's so optimistic about Optimist,
Speaker 7: he's so optimistic about FSD that we managed to be
Speaker 7: blindsided by the idea that actually the plans are there,
Speaker 7: the money is being well spent, and we're still committed
Speaker 7: to these companies. So ultimately, I think they've managed to
Speaker 7: navigate a pretty rocky period Apple. The fact that it's
Speaker 7: flat Microsoft's been really the only real pain point here.
Speaker 7: St Micro had another problem ever in Europe as well.
Speaker 7: I look towards Alphabet and Amazon. Can they vindicate the
Speaker 7: amounts of money that they're going to have to save.
Speaker 2: I'm not going to put words in Mark Umman's mouth,
Speaker 2: but he spent plenty of time over the last few
Speaker 2: months on our program really criticizing Apple for.
Speaker 1: Its AI is and it's analysts.
Speaker 7: He loves to criticize the analyst.
Speaker 2: AI and you know, a question about slow rolling AI
Speaker 2: and to what extent this actually is something that's not
Speaker 2: just incremental but is actually meaningful. When do we start
Speaker 2: to see Apple intelligence really flourish.
Speaker 7: I think they're signaling it signaling in the even the
Speaker 7: press release saying that more languages are coming in April,
Speaker 7: we will be making it further integrated. It's also interesting
Speaker 7: when they bring these things without us even knowing, like
Speaker 7: the news that they brought starlink and the fact that
Speaker 7: we can now use with it, they just hide in
Speaker 7: these little operating system grades.
Speaker 2: So example, publicly acknowledge that, I know Mark Grimman reported
Speaker 2: that it was.
Speaker 5: Going to happen.
Speaker 7: I think T Mobile CEO came on and talked about it,
Speaker 7: and it's just that ultimately they do slow roll. They
Speaker 7: don't perhaps they realize that they need to speak to
Speaker 7: the investor.
Speaker 1: Base about intelligence.
Speaker 7: They're going to talk about how they're really managing to
Speaker 7: infuse it in a more seamless manner. But to you
Speaker 7: and I as a consumer, I think they just don't
Speaker 7: want to stress test it too much. They want to
Speaker 7: slowly have us naturally absorbing it and making our life
Speaker 7: simpler and simpler. But thus far, like a little summari
Speaker 7: of my email hasn't changed my life.
Speaker 5: All that much.
Speaker 3: Yeah, exactly. I just want to remind everybody that we
Speaker 3: do see Apple shares fluctuating in the aftermarket. Apple as
Speaker 3: our Mark German Reports posted sales that were slightly better
Speaker 3: than analysts estimated, even as the iPhone and sales in
Speaker 3: China were weaker than anticipated. Caroline, just talking about that
Speaker 3: revenue number, it did rise four percent to one hundred
Speaker 3: and twenty four point three billion in the fiscal first quarter.
Speaker 3: Analysts had estimated one hundred and twenty four point one, so,
Speaker 3: you know, coming in just a hair better than what
Speaker 3: the street was forecasting. But again concerns over China and
Speaker 3: Apples struggling there stacks up about four tenths of a
Speaker 3: percent here in the aftermarket. Yeah, I just think, you know,
Speaker 3: it's interesting to see after what a crazy week that
Speaker 3: we've seen. I feel like with technology that the stock
Speaker 3: is just kind of flat.
Speaker 7: Yeah, we priced it in, and remember great point, it
Speaker 7: was kind of beaten up running into this. We'd had
Speaker 7: five analyst downgrades right in the last month or so,
Speaker 7: and unlike in Nvidia that has zero cells, there have
Speaker 7: been a few creeping into Apples, So I think people
Speaker 7: had started to price in the China weakness.
Speaker 1: Interestingly made the point to.
Speaker 7: Like all the going to sell us cheaper price points
Speaker 7: they are, according to Mark Gumman, going to be focusing
Speaker 7: on the iPhone SE, which is the cheaper around five
Speaker 7: hundred dollars offering that's going to come in April March.
Speaker 7: Maybe that's going to pull more people perhaps away from
Speaker 7: the Samsung's and the Android offerings. Maybe we get the cheaper,
Speaker 7: lower end Airpod's making a dent. But all of this
Speaker 7: I think had just been guided. We knew that Apple
Speaker 7: was going to have a terrible time in China, and
Speaker 7: Apple Intelligences isn't there yet, and people have really been
Speaker 7: complaining about the latest os, like use cases, the way
Speaker 7: in which the phone just doesn't feel as slick.
Speaker 1: As it used to.
Speaker 2: Are we going to start hearing more chatter about Tim
Speaker 2: Cook and a succession plan. We've been talking a lot
Speaker 2: about Intel and what Intel does post Gal Singer, and.
Speaker 1: They've got some big issues they do.
Speaker 2: Tim Cook has been an Apple since nineteen ninety eight,
Speaker 2: he's been CEO since twenty eleven.
Speaker 5: What's the succession plan?
Speaker 7: And they've just had a CFO come into the MITS
Speaker 7: who's been trained up from within. I don't think anyone
Speaker 7: feels that Tim's going anywhere soon. He navigates the first
Speaker 7: Trump administration so swiftly and seamlessly worked well to be
Speaker 7: able to protect his business that of course is so
Speaker 7: dependent on China, not just from a selling perspective, but
Speaker 7: it's more from a production perspective. What do tarifs mean
Speaker 7: for him? So I think in this next administration can't
Speaker 7: I wouldn't ever bet that he's going to hand over
Speaker 7: the baton anytime soon. But I think that is a
Speaker 7: key question that people are gonna be asking who from
Speaker 7: within has been groomed up, because.
Speaker 1: Remember they lost a lot of talent as well.
Speaker 7: Johnny E's left, and a lot of people seem to
Speaker 7: move from the engineering the product development side of things.
Speaker 3: All right, fascinating stuff, Caroline, thank you again. Second day
Speaker 3: like making anyways sense of all the big tech earnings.
Speaker 3: As we said, Caroline Hyde is co host of Bloomberg
Speaker 3: Technology on Bloomberg TV. Catch It. They'll continue coverage of
Speaker 3: all the earnings this week. That'll be at eleven am
Speaker 3: Wall Street time tomorrow on Bloomberg TV. Right now, tim
Speaker 3: Apple shares just down about one quarter of one percent.