Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
Speaker 1: easterne on Apple, Cocklay and Android Auto with the Bloomberg
Speaker 1: Business app. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: All right, there's been a lot of US CEO changes
Speaker 2: in the telecom space lately, Paul, but now we're getting
Speaker 2: one in the retail space. The biggest retailer, walmart announcing
Speaker 2: CEO Doug McMillan will retire in February and he will
Speaker 2: be replaced by the current head of walmart Us, Jen Bartash,
Speaker 2: has covers retail, staples and packagews for us here at
Speaker 2: Bloomberg Intelligence. Jen, was this a surprise or was this
Speaker 2: a finely planned succession plan?
Speaker 3: Good morning? So it's the surprise is really only in
Speaker 3: the timing, not in the selection of who is actually
Speaker 3: going to succeed Doug McMillan. So, well, you know, John
Speaker 3: Ferner has been in a position for the last six
Speaker 3: years as CEO of walmart Us. Everyone has presumed that
Speaker 3: he would be the heir apparent to the CEO role,
Speaker 3: So it's really just a matter of the timing of
Speaker 3: it that has caught people a little bit by surprise.
Speaker 4: Today I'm looking at this guy, the mister McMillan. He's
Speaker 4: only fifty nine years old. Now what I mean is
Speaker 4: this this isn't that's kind of young, right.
Speaker 3: It is reasonably young. He's been at the Helm since
Speaker 3: twenty fourteen, you know, and I will say to his credit,
Speaker 3: you know, he's really implemented a cultural change at Walmart.
Speaker 3: If you think back to you know, the the early knots,
Speaker 3: you know, Walmart had a bit of a reputation as
Speaker 3: maybe a bully with some of their suppliers and partners,
Speaker 3: you know, and the culture has really evolved to where
Speaker 3: it's much more of a technology led company. They're willing
Speaker 3: to experiment. They try, they fail, they move on. They've
Speaker 3: tried different strategez. They're not afraid to back away when
Speaker 3: they're not panning out and to delve into something new.
Speaker 3: And that cultural shift really is attributed to Doug McMillan.
Speaker 3: And you know, as as for the timing, you know,
Speaker 3: it just maybe he feels that it's his time to
Speaker 3: have left his mark on the company and move on.
Speaker 2: What does this mean for a company? Like Target or
Speaker 2: anyone else that competes with Walmart. Does this present an
Speaker 2: opportunity or are things just go exactly as they were
Speaker 2: at Walmart, where the strategy remains consistent and there's no
Speaker 2: real entry point for someone who has maybe been and
Speaker 2: also ran to kind of close the gap.
Speaker 3: I think that's a great question. And when it comes
Speaker 3: to tactics, we're not expecting any major pivot and strategy
Speaker 3: by John Ferner when he takes over as CEO. But
Speaker 3: to be fair, I mean, Walmart is firing on all
Speaker 3: cylinders at the moment, and they're gaining market share, they're
Speaker 3: growing their top line, growing their profits, so they're doing
Speaker 3: quite well. That said, you know, at TAR we also
Speaker 3: had a new CEO announced not long ago, you know,
Speaker 3: and for Michael Fidelke, who's who's moving into the CEO role,
Speaker 3: it's much more about the focus on targets, transformation and
Speaker 3: you know, and and a transfer a turnaround plan. Now,
Speaker 3: whether that presents an opportunity with a change at Walmart
Speaker 3: as well, that's a little hard to a little hard
Speaker 3: to say, because you know, I think first, Target's got
Speaker 3: to get their house in order before they go after
Speaker 3: other people's other people's houses as well.
Speaker 4: All Right, So stepping back here, what's the play for Walmart?
Speaker 4: If you're an investor in Walmart today? Why are you
Speaker 4: in an investor in Walmart today?
Speaker 3: Well, you know, Walmart is is has done an admirable
Speaker 3: job of you know, increasing the breadth of their business
Speaker 3: while simultaneously becoming more focused. If you think over the
Speaker 3: last several years, they've they've shed they've exited some of
Speaker 3: their international markets where they weren't performing well. They've really
Speaker 3: focused on technology, the implementation of things like AI to
Speaker 3: support their business. Their digital sales growth is growing, the
Speaker 3: marketplace for for for online sales is growing. So you know,
Speaker 3: when you look at it from an investor perspective, there
Speaker 3: are a lot of things that are happening at Walmart
Speaker 3: that should lead to consistent future growth. And you know
Speaker 3: that also includes, you know, a lot of the It
Speaker 3: includes the efforts that they're making to bring higher income
Speaker 3: households into their into their into their group and and
Speaker 3: if they're able to successfully retain those households going forward,
Speaker 3: that just sets up a whole new wave of potential
Speaker 3: growth for for for Walmart in the long run. With
Speaker 3: a much more robust or customer. And so those those
Speaker 3: are the kinds of things where you look at them
Speaker 3: and you look at them relative to competitors, and how
Speaker 3: those those peers are valued. And although you know, from
Speaker 3: a evaluation perspective, you know Walmart is, you know, more
Speaker 3: expensive than it had been, there's still a lot of
Speaker 3: opportunity to grow.
Speaker 1: Stay with us.
Speaker 4: More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: Let's move now to the pharmaceutical sector with a big
Speaker 2: purchase here by Murk, a nine point two billion dollar
Speaker 2: purchase of Sidara Therapeutics for twenty one excuse me, two
Speaker 2: hundred and twenty one fifty a share in cash. Madison
Speaker 2: Muller is our Bloomberg News healthcare reporter and she joins
Speaker 2: us now and Madison this is all about filling the
Speaker 2: pipeline because Murk is losing patent protection on one of
Speaker 2: its blockbuster drugs.
Speaker 5: Exactly, and this is sort of the perpetual problem for
Speaker 5: pharmaceutical companies is that they face these patents for huge
Speaker 5: blockbusters that end up accounting for a large majority of
Speaker 5: their sales. I mean, in Merk's case, almost half the
Speaker 5: company's revenue last year came from Katruda, which is facing
Speaker 5: a patent expiration in twenty twenty eight. This is a
Speaker 5: cancer drug, one of the best selling pharmaceutical products of
Speaker 5: all time, and so Merk has been looking for other
Speaker 5: products to replenish its pipeline. Like you said, this is
Speaker 5: one of them. They did another deal earlier this year,
Speaker 5: and so looking to flu treatments, which flu even though
Speaker 5: we have vaccines, anti virals for the vaccines are effective,
Speaker 5: but for a long time, scientists, researchers, drug makers have
Speaker 5: been hunting for more effective and different products to help
Speaker 5: prevent the flu, which lots of Americans die from still
Speaker 5: each year.
Speaker 4: So where would keep Where would Mark like to be
Speaker 4: in terms of I mean, I guess when you're thinking back,
Speaker 4: having half your sales tied to one drug, well, it's
Speaker 4: a great drug and it's all good. That's probably not
Speaker 4: what you want from a diversification standpoint. What does Merk
Speaker 4: say about what they'd like to be?
Speaker 5: Yeah, I mean It's interesting because a lot of pharma
Speaker 5: companies end up facing this problem. I mean, we look
Speaker 5: at Nova Nordisk, and they have they're facing a similar issue.
Speaker 5: I mean, they're not necessarily looking at patent expirations, but
Speaker 5: they're looking at government price negotiations and cuts for their
Speaker 5: best selling drugs, Ozebic and Wagovi. The majority of their
Speaker 5: sales come from those products, and so a lot of
Speaker 5: times pharmaceutical companies end up in this situation where they
Speaker 5: have one product accounting for the majority of sales. And so,
Speaker 5: you know, Merk is not taking this approach to like
Speaker 5: looking to just one company, you know, big deal one
Speaker 5: company to get another blockbuster to replace ki Truda. They're
Speaker 5: looking to have sort of one analyst, which we have
Speaker 5: in the story called it a string of pearls M
Speaker 5: and a approach you know, looking to more like bite
Speaker 5: sized deals to sort of diversify that it's pipeline and
Speaker 5: look to a couple different products to hopefully, you know,
Speaker 5: replenish that. Abvi was in a similar situation with its
Speaker 5: best selling drug human Era, and they now have and
Speaker 5: that was an arthritis drug. They now have two arthritis
Speaker 5: treatments that are sort of accounting for like half and
Speaker 5: half of what Humaira was bringing in. So it's interesting
Speaker 5: and all the pharmaceutical companies are sort of taking different
Speaker 5: approaches to how they're doing but how they're doing it,
Speaker 5: But it seems like sort of doing this string of
Speaker 5: pearls approach, having a couple of different products is the
Speaker 5: way that they're thinking about it right now.
Speaker 2: I feel like I remember that once upon a time,
Speaker 2: a lot of these companies that were losing patent protection
Speaker 2: on their drugs would come out with like a tweak
Speaker 2: to the drug. You know, maybe it's in gel capsule
Speaker 2: form as opposed to tablet form, and that would you know,
Speaker 2: extend the patent for a little bit longer. Is that
Speaker 2: something that they still do?
Speaker 5: Yeah, I mean it is. It's definitely something that they
Speaker 5: still do. There are lots of ways to extend a patent,
Speaker 5: you know, getting a new indication for pediatrics or different
Speaker 5: formulations or combinations, but again, it sort of only gives
Speaker 5: you a couple more years. It doesn't extend the product's
Speaker 5: lifeline by like another ten years, which that's what we're
Speaker 5: looking at, where these companies have to think decades, you know,
Speaker 5: maybe a decade or more in advance about what's happening
Speaker 5: in terms of their pipeline. So while that's somewhat of
Speaker 5: a temporary solution or something that can be done earlier
Speaker 5: in a product's lifeline, it's like, once you get to
Speaker 5: this point where it's sort of crunch time, they need
Speaker 5: to be thinking about what more can we bring in
Speaker 5: to make up for this is.
Speaker 4: The Trump administration and the regulators. Are they okay with
Speaker 4: these deals? I mean, do they ever challenge any of
Speaker 4: these deals or are they kind of under the radar.
Speaker 5: So far it's sort of under the radar. I mean,
Speaker 5: this one's interesting. Actually, there was another analyst note this
Speaker 5: morning about how they don't think that the FTC per se,
Speaker 5: we'll have a problem with this deal. But it's interesting
Speaker 5: to do a deal in the infectious disease space given
Speaker 5: the Department of Health and Human Services stands on vaccines
Speaker 5: infectious disease right now, and while this isn't a vaccine,
Speaker 5: it's just an interesting time in that space in general.
Speaker 5: So while there might not be additional FTC scrutiny, it
Speaker 5: might be something. And you know, again this is sort
Speaker 5: of hypothetical, but just like given the climate right now,
Speaker 5: is something that HHS could potentially keep an eye on
Speaker 5: or look at.
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and
Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
Speaker 4: A lot of news into telecomspaceically, we had a lot
Speaker 4: of change in the CEO suite. We've got a lot
Speaker 4: of stuff happening here. Verizon's out with a big story
Speaker 4: I want to get to about cutting costs there. John
Speaker 4: Butler joins us. He covers all the telecom stuff for
Speaker 4: Bloomberg Intelligence. Let's start with Verizon here planning to cut
Speaker 4: about fifteen thousand jobs. It's about fifteen percent of the workforce.
Speaker 4: I mean, this is big. What's going on?
Speaker 6: That is a lot. So they have a new CEO,
Speaker 6: Dan Shalman. He's been on the board for a long time,
Speaker 6: so he's had a front row seat to what Hans
Speaker 6: Vesperg was doing. And his feeling was that Vesperg who
Speaker 6: was leaning into a network first strategy. So he was
Speaker 6: out there telling everyone Verizon has the best network. It's
Speaker 6: the only reason to be with us. It's the best
Speaker 6: reason to be with us, and it just wasn't resonating.
Speaker 6: I think Shulman saw it and said, we need to
Speaker 6: be consumer first, not network first. So he took over.
Speaker 6: I think it was October third, at the beginning of October.
Speaker 6: He's new at the company, but again, I'm sorry he's
Speaker 6: new in the role, but he's not new at the company,
Speaker 6: and so I think my hope is at least that
Speaker 6: these cuts are carefully considered, because just as you say,
Speaker 6: with cutting fifteen to twenty percent of the workforce at
Speaker 6: a telecom risk cutting into bone, not just not just fat.
Speaker 4: And he was at at and T before. He's this
Speaker 4: is a telecom guy, right.
Speaker 6: He was at Virgin Mobile too. He has telecom experience,
Speaker 6: and he also helped to sort of pull PayPal out
Speaker 6: of the dredges. I think they headed back there during
Speaker 6: his tenure as well. So it was a little bit
Speaker 6: of a controversial ride for him there, But I think
Speaker 6: he has the kind of telecom experience and board experience
Speaker 6: at Verizon to bring some changes to the organization. When
Speaker 6: I talked to the company about his naming as CEO.
Speaker 6: The answer was, we're bringing him in as a change agent.
Speaker 6: We really need shake up here.
Speaker 4: For and that's an industry that could probably use it
Speaker 4: a little bit. I mean, John Ledger T Mobile did
Speaker 4: such a great job as a change.
Speaker 6: He did, so what he recognized is that consumer wireless
Speaker 6: is a consumer retail business, right. They have brand spokespeople,
Speaker 6: they advertise on the Super Bowl, they have free Tuesday,
Speaker 6: you know, tea Mobile Tuesday giveaways, and Verizon seems off
Speaker 6: base there. I don't think they really hit the ball
Speaker 6: well when it comes to being in the consumer retail
Speaker 6: business and.
Speaker 4: They think they think my thing is they always they're
Speaker 4: a bell company, so they have some of that legacy.
Speaker 6: Yeah, it's in the culture there and hopefully Shulman can
Speaker 6: sort of instill that excitement in the consumer. That's his
Speaker 6: big challenge.
Speaker 4: But I mean that's a business, the wireless business, that's
Speaker 4: a tough business. It's very competitive. Top blank growth really
Speaker 4: not there for in a large so maybe cutting costs
Speaker 4: is a way to deliver cash it earnings.
Speaker 6: It's part of it. I think they also need to
Speaker 6: move into adjacency. So if you look in Canada at
Speaker 6: the carriers there, like Rogers owns the Toronto Blue Jays
Speaker 6: and Rogers Center Stadium. They're in media, you know, they're
Speaker 6: they're tapping a lot of different adjacencies to make up
Speaker 6: for that slow growth and wireless.
Speaker 3: All right.
Speaker 4: Another story that is really front and center for me
Speaker 4: in it for a lot of the kind of telecom
Speaker 4: equity investors and bond investors is SATs Echo Star.
Speaker 6: Yeah.
Speaker 4: And finally, Charlie Ergen is the CEO and founder of
Speaker 4: Ecostar finally selling the spectrum. Is that what's going on?
Speaker 4: Because he bought a lot of spectrum.
Speaker 6: It has been a crazy ride. So EchoStar, as you know,
Speaker 6: their roots were in satellite delivered PayTV. That market is
Speaker 6: dying with a capital d and his decision was, let
Speaker 6: me take the capital I have and get into the
Speaker 6: consumer wireless business and compete with AT and T Verizon
Speaker 6: and T Mobile. And I think every analyst, including myself, asked,
Speaker 6: what are you doing?
Speaker 3: You know?
Speaker 6: And he bought a treasure trove of spectrum and he
Speaker 6: was sitting on it. He was beginning to deploy it.
Speaker 6: He was building his own wireless network, but they weren't
Speaker 6: getting any subscribers. And I think the FCC looked at
Speaker 6: it and said, we need more spectrum in the hands
Speaker 6: of people that can really fill the air waves. And
Speaker 6: so they started to get pressured a lot by the FCC,
Speaker 6: and that prompted the sales spectrum to STARLINKH and AT
Speaker 6: and T.
Speaker 4: I guess the good news is he is selling the
Speaker 4: spectrum for a lot of money. The stocks up, It's
Speaker 4: tripled this year. That's the good news. The bad news
Speaker 4: it took him about fifteen years steam to do what
Speaker 4: we all knew almost fifteen years ago, which is either
Speaker 4: build a network or you flip the spectrum and we
Speaker 4: make money. I eat either way, but right, woll it
Speaker 4: took a long time for him.
Speaker 6: Well, not only that, I always thought with they were
Speaker 6: Dish as a PATV provider, it's a strong brand name.
Speaker 6: I need become what's called a mobile virtual network operator MVNO,
Speaker 6: where you basically have AT and T and Verizon run
Speaker 6: the network for you. You do the billing, customer care,
Speaker 6: most importantly the marketing, and so you're out there with
Speaker 6: a Dish wireless brand. You don't have to worry about
Speaker 6: spectrum or network operations. And they just decided to do
Speaker 6: the network themselves.
Speaker 1: This is The Bloomberg Intelligence Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal