WEBVTT -  IBM CEO Arvind Krishna Talks Infrastructure Deals

0:00:02.520 --> 0:00:06.519
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio.

0:00:06.720 --> 0:00:10.920
<v Speaker 2>News chez VIBM trading near the lowest level since November

0:00:10.960 --> 0:00:14.440
<v Speaker 2>twenty four. September twenty twenty four, the company dialed back

0:00:14.480 --> 0:00:17.200
<v Speaker 2>its full year sales forecast after a pretty steep drop

0:00:17.520 --> 0:00:21.080
<v Speaker 2>in mainframe sales, which weighed on results. Joining us from

0:00:21.120 --> 0:00:23.560
<v Speaker 2>New York is the co host of Bloomberg's The Clothes

0:00:23.640 --> 0:00:28.160
<v Speaker 2>Remain Bustic alongside IBM CEO Avin Krishna remain Arvan.

0:00:28.240 --> 0:00:31.200
<v Speaker 1>You've seen the reaction amongst investors. Here are some concerns

0:00:31.240 --> 0:00:34.239
<v Speaker 1>here about that lowered sales forecast overall, as well as

0:00:34.280 --> 0:00:39.160
<v Speaker 1>softness in software. You've characterized this as basically a shortfall

0:00:39.520 --> 0:00:43.280
<v Speaker 1>for one quarter that is limited to CAPEX sensitive areas

0:00:43.320 --> 0:00:45.720
<v Speaker 1>of the portfolio, but that's still a meaningful area of

0:00:45.760 --> 0:00:49.360
<v Speaker 1>your portfolio. Were sales coming into that quarter? Was that

0:00:49.400 --> 0:00:50.440
<v Speaker 1>pipeline overstated?

0:00:52.000 --> 0:00:55.080
<v Speaker 3>I don't believe so, because when we look at all

0:00:55.120 --> 0:00:58.120
<v Speaker 3>the deals that didn't close, I think we have done

0:00:58.280 --> 0:01:02.520
<v Speaker 3>enough verification include with the clients to know that they

0:01:02.520 --> 0:01:05.840
<v Speaker 3>were very real and it was a reprioritization of the

0:01:05.880 --> 0:01:09.120
<v Speaker 3>CAPEC spend. At the end of the quarter. This was

0:01:09.160 --> 0:01:12.520
<v Speaker 3>pretty confined to I'll call it the fortune one hundred

0:01:12.560 --> 0:01:16.120
<v Speaker 3>the deals that were within a subset of those, now

0:01:16.440 --> 0:01:19.959
<v Speaker 3>one third of what didn't happen has already come back,

0:01:20.200 --> 0:01:22.920
<v Speaker 3>So that tells us that this was a reprioritization and

0:01:22.959 --> 0:01:25.600
<v Speaker 3>those deals are very real as opposed to us being

0:01:25.600 --> 0:01:30.279
<v Speaker 3>optimistic in our projections and Romain I would also add,

0:01:30.680 --> 0:01:34.120
<v Speaker 3>I think that maintaining a free cash flow tells us

0:01:34.200 --> 0:01:37.840
<v Speaker 3>that we have levels around productivity and conviction and confidence

0:01:37.880 --> 0:01:40.320
<v Speaker 3>in the business, and that is also I think going

0:01:40.360 --> 0:01:41.720
<v Speaker 3>to serve our investor as well.

0:01:42.000 --> 0:01:43.720
<v Speaker 4>But the next few months will tell us that.

0:01:43.760 --> 0:01:46.319
<v Speaker 1>Well on that cash flow figure, yes, and that certainly

0:01:46.360 --> 0:01:48.560
<v Speaker 1>pleased a lot of analysts and investors out there, that

0:01:48.640 --> 0:01:52.000
<v Speaker 1>billion dollar number of protective free cash flow growth. You

0:01:52.120 --> 0:01:55.080
<v Speaker 1>maintaining the dividend as well, but you're largely done that

0:01:55.200 --> 0:01:57.680
<v Speaker 1>so far by cutting costs. So that raises the question

0:01:58.040 --> 0:02:02.560
<v Speaker 1>that if we are anticipating slower growth on the revenue side,

0:02:02.680 --> 0:02:04.639
<v Speaker 1>does that mean more cost cuts are in store.

0:02:05.960 --> 0:02:09.480
<v Speaker 3>So the bulk of our cash flow growth over the

0:02:09.560 --> 0:02:13.440
<v Speaker 3>last four years has actually been on a just adbita,

0:02:13.800 --> 0:02:16.840
<v Speaker 3>so that tells you that this is mostly through revenue growth.

0:02:17.120 --> 0:02:19.800
<v Speaker 3>And our model has always been that we are the

0:02:19.880 --> 0:02:23.320
<v Speaker 3>last dollar is more productive and more profitable than the

0:02:23.360 --> 0:02:26.720
<v Speaker 3>first dollar. So we've been growing revenue four five percent

0:02:27.080 --> 0:02:29.640
<v Speaker 3>and we've been growing cash flow up in the seven

0:02:29.680 --> 0:02:32.160
<v Speaker 3>eight nine percent. So that's kind of our model and

0:02:32.200 --> 0:02:36.320
<v Speaker 3>we intend to keep maintaining that now. Right now, if

0:02:36.320 --> 0:02:38.600
<v Speaker 3>we drop revenue by one point because we said four

0:02:38.639 --> 0:02:42.799
<v Speaker 3>to five instead of five plus, we can absolutely make

0:02:42.840 --> 0:02:46.919
<v Speaker 3>it through productivity. Cost cuts is an interesting question. Costcuts

0:02:46.919 --> 0:02:51.560
<v Speaker 3>doesn't always come down to people reduction in headcount. Our

0:02:51.560 --> 0:02:54.080
<v Speaker 3>headcount has been more or less flat over the last

0:02:54.120 --> 0:02:56.600
<v Speaker 3>many years. I think there's a lot of third party

0:02:56.639 --> 0:02:58.960
<v Speaker 3>spend where we are going to get a lot more

0:02:59.040 --> 0:03:03.079
<v Speaker 3>efficient that third party spend than we have been always.

0:03:04.480 --> 0:03:07.600
<v Speaker 2>Bloomberg Tech is live on Bloomberg Television and Bloomberg Radio

0:03:07.600 --> 0:03:10.160
<v Speaker 2>and we're speaking with the IBM CEO of in Krishna

0:03:10.160 --> 0:03:14.239
<v Speaker 2>IV in good morning. You want to focus on accelerating

0:03:14.280 --> 0:03:18.280
<v Speaker 2>revenue growth and accelerating profitability and just really simply, I'd

0:03:18.320 --> 0:03:20.480
<v Speaker 2>love to hear what you're asking the team to do

0:03:20.600 --> 0:03:23.720
<v Speaker 2>differently now in response to all of the factors that

0:03:23.760 --> 0:03:24.399
<v Speaker 2>you outlined.

0:03:25.360 --> 0:03:28.960
<v Speaker 3>So ed really, so if I look at our software business,

0:03:29.680 --> 0:03:34.000
<v Speaker 3>eighty percent of it is already an annuity consumption opics

0:03:34.000 --> 0:03:37.240
<v Speaker 3>BUSS business. Twenty percent of it is a CAPEX business.

0:03:37.800 --> 0:03:41.240
<v Speaker 3>If we think that the CAPEX headwinds are going to continue,

0:03:41.560 --> 0:03:44.880
<v Speaker 3>but eighty percent is already growing at about eight percent,

0:03:45.560 --> 0:03:47.560
<v Speaker 3>we want to put a lot more focus. So we

0:03:47.600 --> 0:03:49.360
<v Speaker 3>are going to direct a lot of the team with

0:03:49.520 --> 0:03:53.200
<v Speaker 3>forward deployment engineers, with people who are focused on deploying

0:03:53.240 --> 0:03:56.600
<v Speaker 3>the software at clients, much more technical help and make

0:03:56.680 --> 0:04:01.280
<v Speaker 3>that eighty percent grow even faster. Product red Hat, Confluent,

0:04:01.440 --> 0:04:05.920
<v Speaker 3>Harshi all fit that model. On the capech side, we

0:04:06.040 --> 0:04:07.800
<v Speaker 3>have to make sure that while we can continue to

0:04:07.800 --> 0:04:11.600
<v Speaker 3>do it, don't depend upon outsized growth on that side

0:04:11.720 --> 0:04:14.960
<v Speaker 3>to go there. Then on the supply chain, can we

0:04:15.360 --> 0:04:18.400
<v Speaker 3>leverage all of our capability and supply chain to make

0:04:18.440 --> 0:04:23.320
<v Speaker 3>sure we have enough distributed infrastructure in storage in Unix

0:04:23.360 --> 0:04:26.360
<v Speaker 3>systems that people can fulfill all of the demand. Because

0:04:26.400 --> 0:04:28.159
<v Speaker 3>we came out of the second quarter with half a

0:04:28.160 --> 0:04:31.840
<v Speaker 3>billion dollars of backlog in that part of the portfolio.

0:04:32.120 --> 0:04:33.720
<v Speaker 3>So those give you an idea of the kind of

0:04:33.839 --> 0:04:37.680
<v Speaker 3>changes that we're making already, not just for the rest

0:04:37.720 --> 0:04:38.200
<v Speaker 3>of the half.

0:04:39.040 --> 0:04:43.239
<v Speaker 2>You summarize the state of the world beautifully you said

0:04:43.279 --> 0:04:47.560
<v Speaker 2>that customers shifted spending towards servers, storage and memory in

0:04:47.680 --> 0:04:50.840
<v Speaker 2>late June, and when I posted on social media You're

0:04:50.839 --> 0:04:52.839
<v Speaker 2>coming on the show that The question from the audience

0:04:52.880 --> 0:04:56.719
<v Speaker 2>really simple. Did that trend continue from June into July?

0:04:57.320 --> 0:04:59.320
<v Speaker 2>And for how long do you expect it to last?

0:05:00.960 --> 0:05:04.000
<v Speaker 3>We have not seen it in July, but I would

0:05:04.040 --> 0:05:07.359
<v Speaker 3>tell you, Look, the semiconductor pricing memory is up what

0:05:07.520 --> 0:05:11.720
<v Speaker 3>three to four times over the last eighteen months. Networking

0:05:11.800 --> 0:05:16.840
<v Speaker 3>infrastructure is up sixty to eighty percent, Fiber is up,

0:05:16.920 --> 0:05:19.520
<v Speaker 3>connectors are up. I do think that some of these

0:05:19.560 --> 0:05:22.560
<v Speaker 3>trends on the underlying components are going to carry on

0:05:22.640 --> 0:05:25.599
<v Speaker 3>for some more time that works its way up into

0:05:25.680 --> 0:05:29.440
<v Speaker 3>those things. So people are going to have those prices. Now,

0:05:29.480 --> 0:05:32.880
<v Speaker 3>the question is is that going to maintain a reprioritization

0:05:32.920 --> 0:05:35.599
<v Speaker 3>of the capex spent? If I take the signal that

0:05:35.640 --> 0:05:38.080
<v Speaker 3>a third of our deals closed, then that says no,

0:05:38.160 --> 0:05:40.719
<v Speaker 3>people are going to get more careful about how to

0:05:40.760 --> 0:05:44.360
<v Speaker 3>spend their capex. If that goes into September, because a

0:05:44.400 --> 0:05:46.880
<v Speaker 3>lot of capex does get committed at the end of

0:05:46.920 --> 0:05:50.400
<v Speaker 3>a quarter, not always through, then it means that that

0:05:51.000 --> 0:05:54.160
<v Speaker 3>carries on for some more time, and that is why

0:05:54.200 --> 0:05:57.080
<v Speaker 3>we gave a guide of four to five percent. Depending

0:05:57.160 --> 0:05:59.480
<v Speaker 3>upon if that carries on, we'll be at the low

0:05:59.560 --> 0:06:01.640
<v Speaker 3>end of the ring, but some of it comes back,

0:06:01.680 --> 0:06:03.200
<v Speaker 3>then we'll be at the high end of the range.

0:06:03.320 --> 0:06:05.400
<v Speaker 1>So Aravin, I know there's a big focus right now

0:06:05.440 --> 0:06:08.839
<v Speaker 1>on sort of the clients that sort of did not

0:06:08.960 --> 0:06:11.760
<v Speaker 1>necessarily materialize in the quarter. With regards to the existing

0:06:11.760 --> 0:06:14.120
<v Speaker 1>clients that you have, and I'm primarily referring to your

0:06:14.120 --> 0:06:17.000
<v Speaker 1>mainframe business, I mean, can you share, like sort of

0:06:17.000 --> 0:06:20.400
<v Speaker 1>what percentage of those clients are actually increasing their spending?

0:06:20.640 --> 0:06:22.080
<v Speaker 1>Is that going up still?

0:06:22.200 --> 0:06:25.960
<v Speaker 3>Absolutely so. The current machine is called the Z seventeen.

0:06:26.600 --> 0:06:30.200
<v Speaker 3>The Z seventeen has been from the beginning, which was

0:06:30.600 --> 0:06:33.840
<v Speaker 3>May of twenty twenty five to today at one hundred and

0:06:33.880 --> 0:06:37.440
<v Speaker 3>thirty percent in terms of the capacity growth compared to

0:06:37.480 --> 0:06:40.640
<v Speaker 3>the prior machine. That's one very strong signal, and that's

0:06:40.640 --> 0:06:43.760
<v Speaker 3>an aggregate. Then you can say, hey, is everybody in

0:06:43.800 --> 0:06:46.479
<v Speaker 3>there or only a few eighty five percent of the

0:06:46.520 --> 0:06:50.560
<v Speaker 3>clients are increasing their capacity as opposed to the fifteen

0:06:50.600 --> 0:06:53.440
<v Speaker 3>who are not. That optimization goes on all the time,

0:06:53.680 --> 0:06:55.719
<v Speaker 3>and I would tell you this is probably the best

0:06:55.880 --> 0:06:58.320
<v Speaker 3>that we have seen in a long time of what

0:06:58.480 --> 0:07:01.679
<v Speaker 3>is going on there. Software to lag?

0:07:02.440 --> 0:07:04.000
<v Speaker 1>Yeah, software is going to I mean, look, we know

0:07:04.040 --> 0:07:06.120
<v Speaker 1>the hardware capacity is there. Software is lag and I

0:07:06.200 --> 0:07:09.240
<v Speaker 1>understand why it's lagging in the moment. And I'm gonna

0:07:09.240 --> 0:07:11.040
<v Speaker 1>ask you a question, and I forgive me if it's

0:07:11.040 --> 0:07:13.600
<v Speaker 1>a bit unfair, but I look back to the nineteen

0:07:13.680 --> 0:07:15.800
<v Speaker 1>nineties and whether there are some parallels to some of

0:07:15.840 --> 0:07:19.119
<v Speaker 1>the mainframe issues that IBM went through back then under

0:07:19.480 --> 0:07:22.240
<v Speaker 1>a predecessor two or three times removed from you, John Acres,

0:07:22.560 --> 0:07:25.600
<v Speaker 1>and this idea that at that time we were going

0:07:25.600 --> 0:07:29.320
<v Speaker 1>through this paradigm shift in computing and how companies spent

0:07:29.400 --> 0:07:31.520
<v Speaker 1>and allocated their money. And there was a lot of

0:07:31.560 --> 0:07:34.440
<v Speaker 1>talk by the CEO then that the issues were temporary,

0:07:34.520 --> 0:07:36.720
<v Speaker 1>that they were economic, and that they were right them sales.

0:07:36.760 --> 0:07:39.440
<v Speaker 1>We know in hindsight that it was much more structural.

0:07:40.040 --> 0:07:42.960
<v Speaker 1>Why should we now look at this major shift going

0:07:43.000 --> 0:07:46.600
<v Speaker 1>on with AI and the computation involved in that and

0:07:46.680 --> 0:07:48.520
<v Speaker 1>think that this time is different.

0:07:49.880 --> 0:07:51.720
<v Speaker 3>Well, we have to look at what the clients are doing.

0:07:51.840 --> 0:07:55.280
<v Speaker 3>I always thought there our opinion is an opinion, what

0:07:55.320 --> 0:07:58.080
<v Speaker 3>clients do is what matters. So when I check with

0:07:58.160 --> 0:08:00.880
<v Speaker 3>my clients, those who do a credit card authorizations, are

0:08:00.920 --> 0:08:03.320
<v Speaker 3>you going to maintain the mainframe and they go to

0:08:03.760 --> 0:08:08.400
<v Speaker 3>all the resilience, the amount of capacity, the unit cost

0:08:08.600 --> 0:08:11.800
<v Speaker 3>of it being five to fifteen times cheaper is important.

0:08:12.280 --> 0:08:15.760
<v Speaker 3>The big difference from that time early nineteen nineties to

0:08:15.760 --> 0:08:20.800
<v Speaker 3>today Romain is the cost issue. You could not argue

0:08:21.040 --> 0:08:24.320
<v Speaker 3>that the mainframe was cheaper on a unit cost basis

0:08:24.320 --> 0:08:25.160
<v Speaker 3>for the workloads that.

0:08:25.120 --> 0:08:25.960
<v Speaker 4>Are moving off.

0:08:26.400 --> 0:08:29.280
<v Speaker 3>Then at that time, the mid range computers I'll call

0:08:29.320 --> 0:08:32.360
<v Speaker 3>it the whole Unix, it wasn't really client server, it

0:08:32.440 --> 0:08:36.280
<v Speaker 3>was Unix taking the workloads off in the early nineteen nineties.

0:08:37.160 --> 0:08:39.640
<v Speaker 3>That issue you have to look at if there is

0:08:39.679 --> 0:08:43.839
<v Speaker 3>a cheaper alternate for that workload. I'll sort of look

0:08:43.880 --> 0:08:45.840
<v Speaker 3>at you and say that means in five to fifteen

0:08:45.920 --> 0:08:46.960
<v Speaker 3>years it will move off.

0:08:47.400 --> 0:08:49.920
<v Speaker 4>But that's not the case right now. For the workloads

0:08:49.920 --> 0:08:50.320
<v Speaker 4>that are on.

0:08:50.640 --> 0:08:52.880
<v Speaker 3>We can show the clients that it's five to fifteen

0:08:52.920 --> 0:08:55.680
<v Speaker 3>times cheaper to keep it on the mainframe, they're not.

0:08:55.920 --> 0:08:59.240
<v Speaker 3>But that's not all workloads. That is workloads that need protection,

0:08:59.600 --> 0:09:03.800
<v Speaker 3>that need resilience, that need the bus capacity that comes.

0:09:04.000 --> 0:09:06.480
<v Speaker 3>And so for those kinds of workloads, the main frame

0:09:06.559 --> 0:09:09.839
<v Speaker 3>is the architecturally superior platform that was not the case

0:09:10.400 --> 0:09:13.400
<v Speaker 3>thirty years ago. For the workloads that did go off.

0:09:14.880 --> 0:09:18.040
<v Speaker 2>Live on Bloomberg Television and on Bloomberg Radio. This is

0:09:18.040 --> 0:09:21.520
<v Speaker 2>Bloomberg Tech speaking with IBMCO r Vin Krishna. I've been

0:09:21.520 --> 0:09:24.559
<v Speaker 2>listening to you a lot recently on long form podcasts,

0:09:25.000 --> 0:09:27.080
<v Speaker 2>some clips on the social media about your view of

0:09:27.080 --> 0:09:29.960
<v Speaker 2>the world, what it's like to be a CEO in

0:09:30.000 --> 0:09:33.400
<v Speaker 2>the domains that IBM operates in. And it's interesting how

0:09:33.480 --> 0:09:36.920
<v Speaker 2>quickly it comes back to the macroeconomic backdrop. A lot

0:09:36.920 --> 0:09:38.960
<v Speaker 2>of people looked at the guidance for the balance of

0:09:38.960 --> 0:09:41.720
<v Speaker 2>this year and would say, and they do say, are

0:09:41.880 --> 0:09:45.360
<v Speaker 2>in on this show memory prices are not changing, they

0:09:45.440 --> 0:09:50.040
<v Speaker 2>continue to push higher. They look at the outlook for growth.

0:09:51.880 --> 0:09:54.280
<v Speaker 2>Could you just explain the data points you rely on

0:09:54.480 --> 0:09:57.319
<v Speaker 2>that give you the confidence on the new guidance that

0:09:57.360 --> 0:10:00.520
<v Speaker 2>you've given and whether it is actually achievable or it

0:10:00.559 --> 0:10:01.640
<v Speaker 2>will be difficult to meet.

0:10:02.400 --> 0:10:06.720
<v Speaker 3>Yeah, so, Ed, I'll come back to For ourselves, we

0:10:06.840 --> 0:10:10.120
<v Speaker 3>have to look at our demand pipelines and our yields

0:10:10.160 --> 0:10:13.160
<v Speaker 3>and how we get things going. But I think for

0:10:13.400 --> 0:10:16.280
<v Speaker 3>your audience, let's look at it this way. Number one

0:10:16.360 --> 0:10:18.800
<v Speaker 3>most important is what is GDP growth going to be.

0:10:19.600 --> 0:10:21.760
<v Speaker 3>We think that that's between two and three percent for

0:10:21.800 --> 0:10:24.679
<v Speaker 3>the year. If I look at the globe and it

0:10:24.760 --> 0:10:27.120
<v Speaker 3>is going to be consistent, even in the Middle East,

0:10:27.160 --> 0:10:29.800
<v Speaker 3>even in Asia where there is a lot more energy

0:10:29.840 --> 0:10:31.000
<v Speaker 3>and disruption.

0:10:30.960 --> 0:10:32.360
<v Speaker 4>We actually see a lot of growth.

0:10:33.000 --> 0:10:35.000
<v Speaker 3>Tech is going to be I think two to three

0:10:35.080 --> 0:10:39.000
<v Speaker 3>to four points above that. So that puts tech in

0:10:39.080 --> 0:10:41.240
<v Speaker 3>terms of what the market is somewhere in the five

0:10:41.400 --> 0:10:44.679
<v Speaker 3>six seven percent. Then that comes back to what parts

0:10:44.679 --> 0:10:47.960
<v Speaker 3>of our portfolio can play against that demand and what

0:10:48.040 --> 0:10:50.480
<v Speaker 3>parts cannot. And so I look at the parts of

0:10:50.480 --> 0:10:52.520
<v Speaker 3>the software portfolio. That's what I talked about, the eight

0:10:52.559 --> 0:10:55.400
<v Speaker 3>percent growth in the eighty percent of it that can

0:10:55.400 --> 0:10:58.400
<v Speaker 3>play right into that. Then I look at our distributed

0:10:58.440 --> 0:11:02.360
<v Speaker 3>infrastructure that can play right into that. I think consulting

0:11:02.679 --> 0:11:05.000
<v Speaker 3>will be that one two three percent. It is not

0:11:05.120 --> 0:11:08.240
<v Speaker 3>going to be in the double digit growers. But we

0:11:08.320 --> 0:11:10.840
<v Speaker 3>see the demand and we see the signings, and we

0:11:10.880 --> 0:11:13.640
<v Speaker 3>see the clients leaning in to say they want transformational

0:11:13.760 --> 0:11:17.920
<v Speaker 3>work done. That's how we kind of know beginning with

0:11:17.960 --> 0:11:21.400
<v Speaker 3>the macro and then coming down I'll make a prediction

0:11:21.520 --> 0:11:25.000
<v Speaker 3>for you. I think technology spend is going to become

0:11:25.040 --> 0:11:28.600
<v Speaker 3>a larger and larger part of every enterprise's budget.

0:11:29.080 --> 0:11:30.040
<v Speaker 4>Used to be three percent.

0:11:30.679 --> 0:11:34.440
<v Speaker 3>Since remain raised the thirty years ago, is probably up

0:11:34.480 --> 0:11:36.960
<v Speaker 3>at five six percent on average. I will not be

0:11:37.000 --> 0:11:39.679
<v Speaker 3>surprised if by twenty thirty five it's ten percent of

0:11:39.840 --> 0:11:44.040
<v Speaker 3>everyone's budget. Give you a quick micro case study. Bloomberg

0:11:44.080 --> 0:11:47.160
<v Speaker 3>reported that Starbucks is replacing some IBM tools on the

0:11:47.160 --> 0:11:48.920
<v Speaker 3>software side with in house.

0:11:50.120 --> 0:11:50.800
<v Speaker 4>Let's talk to that.

0:11:51.880 --> 0:11:55.000
<v Speaker 3>So Starbucks is about a little over two million dollars

0:11:55.000 --> 0:11:58.319
<v Speaker 3>a year client for IBM. The portion they're replacing is

0:11:58.360 --> 0:12:00.920
<v Speaker 3>a product called tri Regard that it does real estate

0:12:01.000 --> 0:12:05.760
<v Speaker 3>Lee's management. The version of it that Starbucks has is

0:12:05.880 --> 0:12:09.080
<v Speaker 3>almost ten years old. I'm not surprised at a replacing

0:12:09.120 --> 0:12:14.000
<v Speaker 3>it because I've actually been describing publicly software which is

0:12:14.080 --> 0:12:17.800
<v Speaker 3>largely interaction based and is based on ease of use

0:12:17.960 --> 0:12:21.199
<v Speaker 3>as opposed to anything else, can be easily replaced by

0:12:21.280 --> 0:12:23.839
<v Speaker 3>AI and AI agents, and that is what is going

0:12:23.920 --> 0:12:27.800
<v Speaker 3>on there. However, if I see other parts of Starbucks

0:12:28.160 --> 0:12:32.600
<v Speaker 3>and maybe the ability for our harshy portfolio or security portfolio,

0:12:33.400 --> 0:12:35.320
<v Speaker 3>I'm a loutf afraid it this way, I would not

0:12:35.360 --> 0:12:38.040
<v Speaker 3>be surprised if Starbucks is a larger client next year

0:12:38.320 --> 0:12:39.440
<v Speaker 3>than it was last year.

0:12:40.040 --> 0:12:43.120
<v Speaker 1>With regards to how this world is evolving, Arvin, I

0:12:43.120 --> 0:12:46.240
<v Speaker 1>am curious that just internally about your plans to hire,

0:12:46.480 --> 0:12:51.640
<v Speaker 1>particularly when it comes to the technological side. Have you

0:12:51.640 --> 0:12:53.720
<v Speaker 1>been able to keep pace with some of the other

0:12:53.720 --> 0:12:56.439
<v Speaker 1>companies out there also trying to do what you do

0:12:57.480 --> 0:13:00.360
<v Speaker 1>and pay some of the salaries that you have to pay.

0:13:00.880 --> 0:13:04.960
<v Speaker 3>Well, we hired three times as many college hires this

0:13:05.080 --> 0:13:08.320
<v Speaker 3>year than we did last year, and I think that

0:13:08.520 --> 0:13:11.520
<v Speaker 3>given others seem to be backing off college hiring, it

0:13:11.559 --> 0:13:14.720
<v Speaker 3>gives us an incredible ability to bring in great talent

0:13:15.240 --> 0:13:18.200
<v Speaker 3>and to then grow them inside our company and to

0:13:18.240 --> 0:13:21.480
<v Speaker 3>offer them great careers. I think if I looked at

0:13:21.520 --> 0:13:25.760
<v Speaker 3>it last we had I think twenty million resumes in

0:13:25.800 --> 0:13:30.040
<v Speaker 3>our applicant database, so that gives us a huge field

0:13:30.040 --> 0:13:33.000
<v Speaker 3>to go look at. So I mean I don't worry

0:13:33.080 --> 0:13:36.480
<v Speaker 3>about bringing in talent. I actually worry much more about

0:13:36.559 --> 0:13:38.559
<v Speaker 3>can we give them a great career and a great

0:13:38.600 --> 0:13:43.040
<v Speaker 3>pathway because not everybody is cut out to do work

0:13:43.080 --> 0:13:45.360
<v Speaker 3>that is going to be demanded. Because I don't think

0:13:45.360 --> 0:13:48.280
<v Speaker 3>there's a lack of employment, but the nature of the work.

0:13:48.559 --> 0:13:51.480
<v Speaker 3>If you can't use AI tools, if you can't use

0:13:51.520 --> 0:13:54.120
<v Speaker 3>the productivity tools, then it's going to be really hard

0:13:54.160 --> 0:13:56.400
<v Speaker 3>for you to be competitive with your peers.

0:13:56.960 --> 0:13:59.840
<v Speaker 1>We always we already know sort of the potential impact

0:14:00.080 --> 0:14:02.920
<v Speaker 1>what AI means for the economy and for your business.

0:14:03.120 --> 0:14:04.800
<v Speaker 1>There are a lot of people looking around the corner,

0:14:04.840 --> 0:14:08.840
<v Speaker 1>including yourself, to quantum. Is that a viable business on

0:14:08.920 --> 0:14:11.839
<v Speaker 1>the horizon or is that just a moonshot that you're

0:14:11.880 --> 0:14:12.960
<v Speaker 1>hoping actually.

0:14:12.600 --> 0:14:16.080
<v Speaker 3>Sticks well when things are two years away. I wouldn't

0:14:16.080 --> 0:14:18.880
<v Speaker 3>call them a moonshot. I think quantum is now in

0:14:18.920 --> 0:14:22.680
<v Speaker 3>the engineering realm, as opposed to the science realm for

0:14:22.720 --> 0:14:25.680
<v Speaker 3>the next five years, and I believe that by twenty

0:14:25.680 --> 0:14:28.920
<v Speaker 3>twenty nine we will deliver a machine that does one

0:14:29.000 --> 0:14:34.480
<v Speaker 3>hundred million competitions of large scale, fault tolerant quantum computer

0:14:34.960 --> 0:14:38.320
<v Speaker 3>in the next two years. I think that's an incredible opportunity.

0:14:38.880 --> 0:14:41.360
<v Speaker 3>I'll quantify it. And this is not just our work,

0:14:41.400 --> 0:14:45.720
<v Speaker 3>a lot of third parties. By the end of twenty thirties,

0:14:46.080 --> 0:14:49.120
<v Speaker 3>we think it's about a trillion dollar total market opportunity

0:14:49.160 --> 0:14:52.520
<v Speaker 3>in terms of value that quantum will create. That is

0:14:52.520 --> 0:14:55.640
<v Speaker 3>why we also double down this morning and announced that

0:14:55.680 --> 0:15:00.320
<v Speaker 3>we bought HRL from GM and Boeing and that is

0:15:00.360 --> 0:15:02.240
<v Speaker 3>going to help us bring people with a lot of

0:15:02.280 --> 0:15:09.680
<v Speaker 3>talent around materials, spintronics, quantum sensing and other sense that

0:15:09.760 --> 0:15:12.320
<v Speaker 3>technology is to add to our own effort, so we

0:15:12.440 --> 0:15:15.520
<v Speaker 3>are even more well positioned to go win in this market.

0:15:17.200 --> 0:15:20.880
<v Speaker 2>Avin Krishna IBM CEO, of course, alongside Bloomberg's remain bustic.

0:15:20.920 --> 0:15:22.400
<v Speaker 2>Thank you both very much,