WEBVTT - Deepwater Gene Munster Talks Apple And Amazon Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Gene Monster. There seems to be a reaffirmation of free

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<v Speaker 2>cash flow and profit belief among MAG seven this morning

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<v Speaker 2>over at Looke Capital. You know them well, Genio invented it.

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<v Speaker 2>Young Kim goes out to a five point fifty price

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<v Speaker 2>target on Microsoft. Is it real now? Where there's a

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<v Speaker 2>new persistency of belief in MAG seven free cash flow.

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<v Speaker 3>That's a good way to put it, And maybe another

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<v Speaker 3>way to put it is that we knew that these

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<v Speaker 3>businesses had great free cash flow, typically generate between eighty

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<v Speaker 3>and one hundred billion per year. But what we saw

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<v Speaker 3>last night from Microsoft to Meta is that their businesses

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<v Speaker 3>are resilient. Resilience in the face of these tariffs. Is

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<v Speaker 3>that Meta raised their revenue by three percent. That was

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<v Speaker 3>in the midst of this is for the June quarter,

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<v Speaker 3>a headwind that's coming from China e commerce. They probably

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<v Speaker 3>would have raised it by three three or or four

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<v Speaker 3>or five percent if not for that headwind. And so

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<v Speaker 3>to that resiliency of cash flow, Yes, as part of

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<v Speaker 3>the story, there was this period of doubt that started

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<v Speaker 3>with deep Seek at the end of January that I

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<v Speaker 3>think there's this kind of realignment now we're seeing today

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<v Speaker 3>with investors understanding that these companies are just this incredible

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<v Speaker 3>cash machine and most likely that benefit is going to

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<v Speaker 3>continue in the future.

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<v Speaker 4>Gene, you know, before I guess the last three or

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<v Speaker 4>four months, when we've all just been focused on tariffs,

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<v Speaker 4>we actually were talking about growth stories such as the cloud,

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<v Speaker 4>such as AI. Given what you saw from Microsoft, given

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<v Speaker 4>what you saw from Meta talk to us about where

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<v Speaker 4>tech spend is today, is that still a growth story

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<v Speaker 4>that investors should be focused on.

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<v Speaker 2>Definitely.

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<v Speaker 3>There are two kind of forces in play last night.

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<v Speaker 3>One was in terms of what the tech spend is,

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<v Speaker 3>and what we heard from Microsoft was that their numbers

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<v Speaker 3>were actually down sequentially on that CAPEX number. Some of

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<v Speaker 3>that this is for the March quarter. Someone was related

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<v Speaker 3>to timing to some of these data centers, but they

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<v Speaker 3>did also say that they expect next year that apecks

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<v Speaker 3>to grow kind of in line with revenue. And then

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<v Speaker 3>of course Meta cranked it up by nine percent. That

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<v Speaker 3>was a big That was a big surprise. But there's

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<v Speaker 3>a story here kind of below the fold that I

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<v Speaker 3>think is really important, especially when it comes to Meta,

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<v Speaker 3>and last week we had our AI some we had

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<v Speaker 3>a representative from open Ai as one of the fireside

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<v Speaker 3>chats and asked the question about, like, what is the

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<v Speaker 3>substance behind AI from a return on investment perspective, and

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<v Speaker 3>his answer was that they have seen it in the

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<v Speaker 3>coding side and also customers service. And that's, from my perspective,

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<v Speaker 3>a pretty disappointing answer relative to all this anticipation. But

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<v Speaker 3>when I saw the Meta results last night, saw this

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<v Speaker 3>increase in revenue and also what's happening with their daily

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<v Speaker 3>active users. It grew six percent year every year. This

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<v Speaker 3>is three point four billion people, sixty plus percent of

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<v Speaker 3>the world's Internet population on a daily basis. Part of

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<v Speaker 3>the reason why this is happening is AI is actually

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<v Speaker 3>impacting their business. In other words, I think Meta is

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<v Speaker 3>the best example of how AI can have a real

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<v Speaker 3>impact on an investment at scale.

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<v Speaker 2>Gene Monster with US Leland Miller to come on China,

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<v Speaker 2>but right now gene Monster with deep Water thrilled to

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<v Speaker 2>have him on this morning. Migrate in the Cloud, Hey,

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<v Speaker 2>you U stay in the cloud? Gen Monster talk about

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<v Speaker 2>Amazon today and after seeing Microsoft, you're not counting cardboard

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<v Speaker 2>boxes at Amazon, You're looking at their cloud.

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<v Speaker 3>Business right Definitely I mean, we've seen good cloud numbers

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<v Speaker 3>from Google and as you're last night, and it better

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<v Speaker 3>be good at this point for Amazon, and it probably

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<v Speaker 3>will be good. And part of the reason why it

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<v Speaker 3>probably will be good is we're seeing this surge in

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<v Speaker 3>demand from Generator AI. It's increasing usage at a bigger rate.

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<v Speaker 3>So I think that AWS number is going to be

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<v Speaker 3>a great number tonight for Amazon.

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<v Speaker 2>Gene Munsters spending time by mister Bezos Yatchett. Yesterday, Joe

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<v Speaker 2>Matthew Balance of Power in conversation with the Senator from

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<v Speaker 2>the Commonwealth of Massachusetts. Here is Elizabeth Laurn with mister Matthew.

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<v Speaker 1>What Donald Trump is saying is if the American people

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<v Speaker 1>can see clearly what his tariffs are costing them, that

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<v Speaker 1>creates a real problem for Donald Trump and for the

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<v Speaker 1>Republicans in Congress. So his solution is not to do

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<v Speaker 1>something more sensible on tariffs. His solution is to try

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<v Speaker 1>to end access to the information and to persuade Jeff

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<v Speaker 1>Bezos that he needs to erase that information. And yes,

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<v Speaker 1>I want to hear about that conversation. In fact, I

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<v Speaker 1>want to hear about all of the conversations.

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<v Speaker 2>Senator Warren, the Commonwealth of Massachusetts. Gen Monster, I know

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<v Speaker 2>you're going up in the rocket the next time the

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<v Speaker 2>Bezos term rocket. Let me just cut to the chase,

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<v Speaker 2>Geem Monster, is Jeffrey Bezos? Is he running Amazon?

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<v Speaker 3>Still? Simple answer is yes, as as chairman and as founder.

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<v Speaker 3>I think he has an outside has influenced much more

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<v Speaker 3>than Jasse and so I think the answer is that

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<v Speaker 3>the buck does stop with him, Jamie.

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<v Speaker 2>That's short answer there. He really doesn't want to talk

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<v Speaker 2>about it, that's right.

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<v Speaker 4>Yeah, Hey, g we're going to hear from our good

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<v Speaker 4>friends in Cooper Tino and their results. What do you expect?

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<v Speaker 4>What do you need to hear from Apple and Tim Cook?

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<v Speaker 4>As a again, try to navigate what is a suddenly

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<v Speaker 4>a very you know, I guess uncertain global economic outlook.

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<v Speaker 3>So the numbers, I've been watching this company for twenty

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<v Speaker 3>plus years, and these numbers are less important tonight as

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<v Speaker 3>far as the actual reported numbers. It's more about the

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<v Speaker 3>structure that they're going to lay for how they're going

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<v Speaker 3>to navigate what's happening with tariffs and production, and how

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<v Speaker 3>they're building out their AI and so very unique setup

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<v Speaker 3>where if the iPhone number is good, that would be

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<v Speaker 3>a positive impact on the stock if it's bad, a

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<v Speaker 3>slight negative, But for the most part, investors are looking

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<v Speaker 3>much further down the road, and this is a pivotal

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<v Speaker 3>moment around the company. I would say this related to

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<v Speaker 3>what's going on on the globalization side, how that impacts Apple,

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<v Speaker 3>and separately in terms of what's going on tariffs. Those

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<v Speaker 3>are forces that are hard for Apple to control. There

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<v Speaker 3>is one piece that and they will likely sort themselves out.

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<v Speaker 3>My sense is this year. But there's one piece that

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<v Speaker 3>I think investors have been penalizing Apple for that will

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<v Speaker 3>come up. This will be an a topic tonight that

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<v Speaker 3>I think there is generally a misunderstanding from investors, and

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<v Speaker 3>that piece is Apple behind an AI. The answers yes,

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<v Speaker 3>and how much are they being damaged by that? And

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<v Speaker 3>I think that the answer is currently almost not at all.

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<v Speaker 3>And part of the reason is that they really have

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<v Speaker 3>three years to sort this out. When it comes to

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<v Speaker 3>Apple Intelligence, when I say sort of out, I mean

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<v Speaker 3>provide the features that give it punch and so their

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<v Speaker 3>customers aren't going anywhere. And so when I think, Paul,

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<v Speaker 3>when I think about these results tonight, I'm more cute

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<v Speaker 3>into how they're going to fix Apple intelligence over the

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<v Speaker 3>next two three years versus the next two or three quarters.

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<v Speaker 2>Okay, Gene, what I want to do here is I

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<v Speaker 2>got a seguity and the Leland Miller on the Beige

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<v Speaker 2>Book and all the brilliance of China in that. So

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<v Speaker 2>we're going to do this with Gene Monster right now.

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<v Speaker 2>Gene Monster. I don't think this is in the zeitgeist.

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<v Speaker 2>Tim Cook, based on my amateur take, is the number

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<v Speaker 2>one supply chain expert in American business out of Douke

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<v Speaker 2>All that this is the guy is more knowledgeable about

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<v Speaker 2>Pacific rim get the stuff from there to here? Is

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<v Speaker 2>there a lack of confidence in Tim Cook's ability to

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<v Speaker 2>stick to survive these supply chain disruptions.

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<v Speaker 3>There is one hundred percent confidence in Tim Cook's ability

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<v Speaker 3>to make the best out of an extremely difficult situation.

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<v Speaker 3>But even his magical ability to increase gross margins by

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<v Speaker 3>using better manufacturing over the last decade, even that power

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<v Speaker 3>is small relative to the forces of what these tariffs

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<v Speaker 3>could mean. And I'll just kind of put some briefly

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<v Speaker 3>into context. Is my sense is that these tariffs, when

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<v Speaker 3>it comes to Apple, there's still mixed messages coming out

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<v Speaker 3>of the White House in terms of how Apple's going

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<v Speaker 3>to be impacted by that, My sense is that they're

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<v Speaker 3>probably going to shake out somewhere between a ten and

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<v Speaker 3>twenty percent tariff. And if that in fact ends up

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<v Speaker 3>being the case, even with Cook's masterful use of the

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<v Speaker 3>supply chain, They're probably going to see some diminishing of

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<v Speaker 3>gross margins and it probably goes from call it forty

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<v Speaker 3>percent forty one percent. They're probably going to lose a

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<v Speaker 3>couple percent on that, call it thirty nine, and so

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<v Speaker 3>that is a step back. But I just want to

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<v Speaker 3>put some context when we hear about all this, the

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<v Speaker 3>versus the Tim Cook, the levers that he can pull,

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<v Speaker 3>there are some limitations to it, and that's why I

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<v Speaker 3>think that I just like applaud dan Ives and him

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<v Speaker 3>standing up and saying like, we got to get this

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<v Speaker 3>thing figured out. And what figured it out means is

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<v Speaker 3>just some clarity. And ultimately I think that that clarity

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<v Speaker 3>is going to be twenty percent, and it's going to

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<v Speaker 3>be a little bit of an impact. Again, doesn't change

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<v Speaker 3>the long term trajectory of the business, but it's something

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<v Speaker 3>that investors are focused

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<v Speaker 2>She monster, thank you so much, Managing partner Seatporter Asset management,