Speaker 1: I'm Caroline Hide at Bloomberg's San Francisco studio and med Lovelow.
Speaker 1: This is Bloomberg Technology and it is technology earnings. Caroline,
Speaker 1: that continued to drive these markets. That's where the energy
Speaker 1: is and that's where the news flowers. And whether these
Speaker 1: after our moves are going to start away some of
Speaker 1: that enthusiasm coming up, We've got to dig into Intel,
Speaker 1: of course, tunneling after a week forecast selling more semiconductor
Speaker 1: stocks lower. Then our exclusive interview with SEC Commissioner Brendan
Speaker 1: Carr about how a nationwide TikTok ban would actually work,
Speaker 1: and we asked chat TPT to come with a market
Speaker 1: beating e t F. We're bringing the results, so let's
Speaker 1: get straight into it with Angelo Zeno, analyst at c
Speaker 1: f R A. I mean, and I brought you that
Speaker 1: top line forecast for the current period, but what were
Speaker 1: your takeaways from the Intel print you email that in
Speaker 1: terms of maybe what's driving the downside and in the
Speaker 1: shaws after hours the guide down and people were looking
Speaker 1: to fill down party percent. I think the outlook was
Speaker 1: U the consensus is looking down about center, so so
Speaker 1: um that was really the big miss on that side
Speaker 1: of things. But I think, um, you know, you kind
Speaker 1: of think about what's really driving the lower guide on
Speaker 1: the sales side of things. It's really kind of two factors, right.
Speaker 1: It's it's the kind of the weakness we're seeing on
Speaker 1: the PC side of things. But things are, you know,
Speaker 1: significantly weaker than I think most people anticipated. And when
Speaker 1: you kind of look at the Q four numbers, I
Speaker 1: think PC down sales down about percent in the fourth quarter.
Speaker 1: So I think, um, you kind of need further settle
Speaker 1: in declines versus to sell through before we kind of
Speaker 1: fully get to the bottom. And I think maybe the
Speaker 1: good sign is that's sharp decline in sales guide maybe
Speaker 1: is hopefully a good indication that maybe we kind of
Speaker 1: get past this maybe by the second quarter. And then
Speaker 1: I said, the other factor in terms of sales bag
Speaker 1: is on a day data center side of things. I mean,
Speaker 1: it'll be interesting to kind of see how weak things
Speaker 1: are there, but clearly a lot of inventory built up there.
Speaker 1: But um, I think that's kind of really what stronggy
Speaker 1: about the weakness of the guidance of things and a
Speaker 1: lot of self help needed because otherwise depending on ordering
Speaker 1: a components, that depending on people working through our inventory.
Speaker 1: Are they doing enough self help particular on the cost side,
Speaker 1: You know, yeah, when you look at the margins here, right,
Speaker 1: especially the margin guidance, the gross margin guidance here at
Speaker 1: thirty nine percent, I mean, I think the answer there is, UM,
Speaker 1: there's probably more that they need to do or UM,
Speaker 1: it'll be interesting to kind of really figure out what's
Speaker 1: going on in the margins there, because thirty by far
Speaker 1: at this point in time, UM the lowest among our
Speaker 1: coverage universe within the semiconductor industry. So UM, that in
Speaker 1: itself is saying a lot there. Now, the big problem
Speaker 1: here is UM, they're looking to do a massive kind
Speaker 1: of undertaking in terms of technology transitions. For technology transitions
Speaker 1: in five years, never been done within the semi conductor industry.
Speaker 1: They need to get this right. This management team needs
Speaker 1: to get it right first and foremost, even it means
Speaker 1: losing money here in the near term, which is what's
Speaker 1: going to happen in the first quarter. So UM, at
Speaker 1: this point in time, that is kind of the most
Speaker 1: important factor for them. They didn't provide any guidance here.
Speaker 1: For my guest is the capets guy probably has to
Speaker 1: go down relative to what we saw in two sort
Speaker 1: of going to look to do some things here, right,
Speaker 1: um they you know, they did announce some cost cuts
Speaker 1: in a third order a couple of months ago. They're
Speaker 1: going to execute on that, but at this point in time,
Speaker 1: it's hard to cut given what they've done in front
Speaker 1: of them. Got it? And you mentioned there no full
Speaker 1: year twenty three guidance in the earnings statement. I can
Speaker 1: confirm the earnings cause started in the company saying it
Speaker 1: is not going to give full year guidance for full
Speaker 1: year twenty three. They're also talking about the macro difficulties
Speaker 1: they're seeing lasting through the first half of this year.
Speaker 1: Guide into long term PC market of three hundred million units.
Speaker 1: Break it down to very simple terms for us, What
Speaker 1: is the problem for Intel? Yeah, I mean yeah, well,
Speaker 1: first and foremost, like, I think the competitive environment. It
Speaker 1: has been by far their biggest issue in recent years, right,
Speaker 1: I mean, despite the fact that you know that they
Speaker 1: may all do it otherwise. Um A m D has
Speaker 1: definitely been kind of chipping away in terms of market
Speaker 1: share um On specifically on their certain data center server
Speaker 1: side of things, which has kind of been historically kind
Speaker 1: of a very good, kind of um profitable business for
Speaker 1: this company, and it no longer is, at least at
Speaker 1: this point in time. So I think the competitive environment
Speaker 1: clearly is a problem for them. The cycle is the
Speaker 1: the other issue for them here I mean being overly
Speaker 1: exposed to really two care areas of the market, one
Speaker 1: being um PCs, which you know was a three hundred
Speaker 1: fifty million unit market UM in one UM was down
Speaker 1: about last year. Probably looking at this point in time,
Speaker 1: given the guidance, you're looking probably down at least teen
Speaker 1: percent UM here in three. Again, so the cycles and
Speaker 1: other ratios, specifically on the PC side of things, and
Speaker 1: now also on the data center side of things, which
Speaker 1: started I can as Angelosino, great to have your instant analysis.
Speaker 1: Thank you, cfr A there. Meanwhile, let's get onto another
Speaker 1: key story is again about Salesforce sources saying that they
Speaker 1: may appoint new board members amid pressure from activist investors.
Speaker 1: Now the list of possible appointments includes Carnivals former CEO,
Speaker 1: Maskcards current CFO, and an investor value APTS chief. In fact,
Speaker 1: Salesforce had in fact been working on refreshing its board
Speaker 1: for several months. We understand as pressure of course continues
Speaker 1: to mount to boost profits and shareholder returns. Let's get
Speaker 1: straight to Ed Hammonds. You broke the news. What would
Speaker 1: these individuals bring to the board, Like Caroline, I think,
Speaker 1: first and foremost probably a proper lactic against the other
Speaker 1: activists who are circling this company. I mean Starboarder there,
Speaker 1: Elliott there, we think Jeff Ubburn with his inclusive capital
Speaker 1: funder there. And you see this fairly often in these
Speaker 1: bigger companies that might have several dissident shareholders that they
Speaker 1: will strike a deal with one group um and bring
Speaker 1: some of those onto the board. And as I say,
Speaker 1: it's often a way of really defending against some of
Speaker 1: the other activists and what they might see as some
Speaker 1: of the less savory claims against the company. Why is
Speaker 1: Salesforce under attack from so many different activists right now?
Speaker 1: I think a couple of reasons. That the first is
Speaker 1: is less exciting if you like, which is that it's
Speaker 1: it's just a safe, better minutes down I think from
Speaker 1: its highs. But unlike some of the smaller companies that
Speaker 1: they might normally target, it's unlikely to get wiped out,
Speaker 1: so you have quite a safe place to park your
Speaker 1: money one way or another. The other reason, and I
Speaker 1: think This applies to a lot of big tech companies.
Speaker 1: Is it just doesn't have great corporate governance historically, and
Speaker 1: and that that has been okay when the market was
Speaker 1: rising and everything was looking great, but as soon as
Speaker 1: things start looking bad, these tend to be the first
Speaker 1: companies they get raked over by the activists, and you're
Speaker 1: seeing that in some other big tech companies as well. Um.
Speaker 1: I also think there has been a sort of series
Speaker 1: of acquisitions that have been quite large and not necessarily
Speaker 1: that successful. And despite Benny Off saying that he was
Speaker 1: going to slow down on that, he obviously has continued
Speaker 1: to do it. And I think stuff like that really
Speaker 1: is is kind of a red rag to an activist
Speaker 1: because they know that there will be some long only investors,
Speaker 1: potentially even some retail investors who have similar discontent about that.
Speaker 1: So when it comes to Tableau, when it comes to Slack,
Speaker 1: are we going to see such names as this push
Speaker 1: for disposals? Is it further cost cutting? What sort of
Speaker 1: discipline do they want? Yeah, it's a great question and
Speaker 1: at this point we don't know is the answer. I mean, look,
Speaker 1: Elliott have been most public in terms of their recent statements,
Speaker 1: have said they like many off, they like the company,
Speaker 1: they want to work constructively. That usually is sort of
Speaker 1: activist code for let us into the boardroom. We will
Speaker 1: give you cover to make some job cuts to perhaps
Speaker 1: would be harder to make on your on your own
Speaker 1: or of your involution. UM. In terms of spinning off
Speaker 1: and separating assets, yeah, I think there is a case
Speaker 1: to be made for some investitures here. But again, some
Speaker 1: of these deals that were struck at a fairly high
Speaker 1: point in the market, it's difficult to see sales force
Speaker 1: just exiting and getting anything other than a discount doing those.
Speaker 1: Hammond terrific reporting that scoop moving the stock to his
Speaker 1: biggest game since November. Thank you. National security concerns are
Speaker 1: concerns that we take extremely seriously. UM. As we have
Speaker 1: this closed in the past, we have had discussions with
Speaker 1: the U. S. Government, but I'm very confident that to
Speaker 1: the detailed discussions that we are going to have, we
Speaker 1: will come up with a solution that will reasonably address
Speaker 1: the national security concerns that the policy makers have. TikTok
Speaker 1: CEO there show too. That was at the Bloomberg New
Speaker 1: Economy Forum in Singapore back in November. Addressing at the
Speaker 1: time national security concerns from the United States, and since
Speaker 1: then those concerns they've been building up. No action still
Speaker 1: from the administration, and some states have actually started to
Speaker 1: take it upon themselves to implement some curbs on the
Speaker 1: popular app, like ll Texas for instance. Of course, some
Speaker 1: universities there and now banned the app on their campus networks.
Speaker 1: Will help. What more should be done? Let's bring in
Speaker 1: someone has been vocal on all of this, SEC Commissioner,
Speaker 1: Brendan Carr, Commissioner, it is great to have some time
Speaker 1: with you, and you have been outspoken about the concerns
Speaker 1: you see around TikTok. What from your perspective can you,
Speaker 1: as an FCC commissioner do Is it about speaking out
Speaker 1: to or out or action can you take? Then? We
Speaker 1: have some expertise and experience in this area at the FEC.
Speaker 1: We've dealt with Huawei's E t E China Mobile, a
Speaker 1: lot of companies with ties back to communist China that
Speaker 1: are involved with the various data flows. That's why I'm
Speaker 1: speaking out. In the main though, the action here is
Speaker 1: going to come from the Biden administration, the Treasury Department, SIPPIUS,
Speaker 1: the Committee on Foreign Investment, has been reviewing this for
Speaker 1: almost two years now. I think the reality is is
Speaker 1: the tide really has been moving out on TikTok. I
Speaker 1: think it's had a very bad two months, and I
Speaker 1: think it's shifted now from a question of whether there's
Speaker 1: going to be some sort of band or decoupling of
Speaker 1: TikTok from Beijing to a question of when that takes place. Now,
Speaker 1: TikTok is still spending a lot of money, millions of
Speaker 1: dollars to avoid that. But I definitely think things are
Speaker 1: moving in the wrong direction for TikTok. What about the
Speaker 1: direction from the administration? Do you think it will ultimately
Speaker 1: be then? And Siphius the focus there or is actually
Speaker 1: gonna be Congress because we actually see across the aisle
Speaker 1: some agreement here. It could be both. As you mentioned,
Speaker 1: there's bipartisan legislation now in Congress by Cameral actually in
Speaker 1: the House last Congress, Republican Gallagher Democrat Christiana Morphy representatives
Speaker 1: have a bill that would band TikTok nationwide. Obviously bipartisan
Speaker 1: agreement to band TikTok nationwide on federal devices, and we
Speaker 1: have almost thirty states now that have done it. It
Speaker 1: could be the Biden administration. Ultimately that takes the final
Speaker 1: action here. I think it should be there precedent for this.
Speaker 1: We've used scipious before to unwind the purchase of Grinder
Speaker 1: based on having connections back to a Beijing based entity.
Speaker 1: India has band TikTok across their entire country, so I
Speaker 1: think that's the right direction to go here. Commission Nico,
Speaker 1: good evening to you with with massive respect to your office.
Speaker 1: The FCC does not have a power or a remit
Speaker 1: to take action on this, So who are you backing
Speaker 1: to take action? Who do you think at a federal
Speaker 1: state level actually see some material change when it comes
Speaker 1: to regulating TikTok. I think SEC officials we do have
Speaker 1: some expertise here, again when it deals with companies that
Speaker 1: have ties to the CCP and the various data blows.
Speaker 1: But right in the main, I believe this is an
Speaker 1: issue that the Treasury Department should take a look at. Really,
Speaker 1: I think the biggest leader on this has been Democrats
Speaker 1: Chairman of Sending an Intel Committee, Mark Warner. He has
Speaker 1: said that quote TikTok scares the dickens out of him,
Speaker 1: and he's been working with Senator Rubio and others on this,
Speaker 1: So it could be Treasury, could be Federal Trade Commission
Speaker 1: for as we talked about earlier, there's a lot of
Speaker 1: interest in the House, bipartisan interest in taking action there.
Speaker 1: So I think it's gonna come from action on several fronts,
Speaker 1: states included. I don't anticipate this will be a poor
Speaker 1: FCC issue itself, though, Yes, Commissioning you mentioned India. We
Speaker 1: went to our audience and as then if they felt
Speaker 1: that what they saw the action taken in India could
Speaker 1: be replicated here in the United States. Seventy respondents said yes, uh,
Speaker 1: it sets an important precedent. Does the action taken in
Speaker 1: India set an important precedent? I think so it's a
Speaker 1: strong precedent. You know, India's obviously the world's largest democracy,
Speaker 1: so I think taking action in that context is very instructive.
Speaker 1: And again, there's two main issues here. There's national security
Speaker 1: but also mental health. You know, on the national security side,
Speaker 1: TikTok came clean just last month and said yes, in fact,
Speaker 1: they had been surveilling the locations of specific U S
Speaker 1: reporters who are writing negative stories about TikTok. That's sort
Speaker 1: of a nightmare scenario. Remember, we're at a point in
Speaker 1: time where TikTok has been engaged in negotiations with Sippius,
Speaker 1: where they have every reason to be on their best behavior,
Speaker 1: and yet they were engaged in that type of ne
Speaker 1: various conduct. Trust is the most important thing right now
Speaker 1: when you're trying to negotiate with the government. And if
Speaker 1: I was in the Bide administration at Sippius, I'd be
Speaker 1: really disappointed if I had this draft agreement with TikTok
Speaker 1: that was in place over the over the summer and
Speaker 1: you see this subsequent conduct, I think it's it just
Speaker 1: shows that Um, I just don't see a path forward
Speaker 1: where you could cut a deal that will put air
Speaker 1: tight protections in place. So ultimately you feel aban is
Speaker 1: the only way. It's interesting to EU before was sort
Speaker 1: of not talking as tough enough. Now in their lexicon,
Speaker 1: the word band has become on the tip of that tongue.
Speaker 1: We've also been here seeing it from India. As we mentioned,
Speaker 1: is there no way that a deal could be done
Speaker 1: with Oracle, no way that TikTok could convince there is
Speaker 1: a safe way of still continuing to operate in the US. Yeah,
Speaker 1: I just don't see that you mentioned Europe is starting
Speaker 1: to sort of ramp up their activity just this week.
Speaker 1: I think government officials in the Netherlands band TikTok from
Speaker 1: federal devices. There Again, it fundamentally comes down to trust.
Speaker 1: And there was leaked internal communications um that Forbes got
Speaker 1: over the summer UH and they showed that a TikTok
Speaker 1: officials said that even if all these protections are in
Speaker 1: put in place, this project Texas that they talk about
Speaker 1: a lot that involves oracle that according to them, it
Speaker 1: remains to be seen whether product and engineering, meaning Beijing
Speaker 1: could still get access to this data. So if officials
Speaker 1: inside TikTok aren't certain that these protections are gonna be
Speaker 1: air tight, I don't think that we should think that
Speaker 1: they would be either. And again, if you look an analysts,
Speaker 1: one analyst in particular had odds of a TikTok band
Speaker 1: at around ten percent this summer and towards the end
Speaker 1: of last fall. They had up to now was before
Speaker 1: the bipartisan bill was introduced, else before you saw some
Speaker 1: of these recent revelations. So I think things are moving
Speaker 1: in the wrong way. But again we'll see they're spending
Speaker 1: an awful lot of money to try to stop a
Speaker 1: band or a decoupling commission. It is one part of
Speaker 1: this equation we've not discussed, which is the TikTok user
Speaker 1: here in the United States. Lots of people love using
Speaker 1: that app. Uh. Many have told us they don't understand
Speaker 1: the risks. They're not well explained. Why should TikTok be banned?
Speaker 1: How would you justify it to them? Those million plus
Speaker 1: users that are saying we want this again, it's too fold.
Speaker 1: It's national security and mental health. On the NAS security
Speaker 1: side again, it's it's pulling all sorts of sensitive data,
Speaker 1: everything from search and browsing history, keystroke patterns, potentially according
Speaker 1: to terms of service biometrics, which includes base prints and voiceprints.
Speaker 1: And for years they misrepresented where this was going. Uh.
Speaker 1: Internal communications again show that everything is viewed inside China.
Speaker 1: That's why FBI Director Chris Ray and others are raising
Speaker 1: the alarm. But the mental health side is interesting as well.
Speaker 1: There was a recent report side by New York Times
Speaker 1: that had account set up for a thirteen year old
Speaker 1: girls that within a matter of thirty minutes, was showing
Speaker 1: eating disorder self harm content. And flash forward to the
Speaker 1: version of tiktok' is available in China doy On, and
Speaker 1: it's not showing that it's showing education materials. Museum exhibits
Speaker 1: science experiments. So it's very troubling both from a national
Speaker 1: security data security side, but also the mental health side. Okay,
Speaker 1: but the mental health issues have been leveled not just
Speaker 1: at TikTok, but at homegrown social media platforms Instagram. I'm
Speaker 1: often having to respond to such concerns. How if we
Speaker 1: banned TikTok and uses move perhaps to YouTube, shorts and Instagram,
Speaker 1: how do we prevent that sort of element happening here. Yeah,
Speaker 1: there's a baseline level of of privacy protection, so we
Speaker 1: need to put in place. I'm actually open to taking
Speaker 1: a look at increased age restrictions for social media. Generally,
Speaker 1: a lot of this, to your point, goes to social
Speaker 1: media apps beyond TikTok. Again, I think there's something very
Speaker 1: unique about TikTok that's exposed by the fact that you
Speaker 1: can compare what it shows to kids in the US
Speaker 1: versus kids in China. But I do think there's a
Speaker 1: broader issue we have to deal with here. It's sort
Speaker 1: of like how do you eat an elephant? Though? It's
Speaker 1: it's one bite at a time. I think there's broader
Speaker 1: data flow concerns to go back to China with all
Speaker 1: sorts of applications and data brokers. But we've been looking
Speaker 1: at TikTok for two years. We have a big case
Speaker 1: developed on that we should take that action, and then
Speaker 1: I think it makes it easier to then deal with
Speaker 1: knock on case and say, well, this is like TikTok,
Speaker 1: We've dealt with it. That's what we've done in other
Speaker 1: context again, we went with whah wait first at the FCC,
Speaker 1: then z t E, then Shina Mobile. I think that's
Speaker 1: how we sort of approach this broader issue, Commissioner. I
Speaker 1: think what we keep hearing is we've we've been looking
Speaker 1: at this for two years. These things do not work well.
Speaker 1: I don't think Caroline and I hearing from people in
Speaker 1: your position from the company's is an actual solution. Are
Speaker 1: you going to suggest that Apple or Alphabet through Google
Speaker 1: just don't make the app available through their stores? How
Speaker 1: are you going to actually make this happen? And that's
Speaker 1: one one appetite that that I've thrown out there is
Speaker 1: this idea that you can look at Apple and Google
Speaker 1: have them remove it from the app store, obviously India
Speaker 1: as an example, grinder as a precedent here in the US,
Speaker 1: where we've banned an app through with the Sipius review,
Speaker 1: at least in that case required the sale. I think
Speaker 1: all of those our potential actions that can be taken here,
Speaker 1: and I think TikTok actually is uniquely replaceable. Again, a
Speaker 1: lot of parents look at TikTok and I think it's
Speaker 1: like Facebook or Instagram or another social media where you're
Speaker 1: following a network of people you know. But in the
Speaker 1: main with TikTok, you go on there immediately you're being
Speaker 1: fed content from Beijing. So I do think it could
Speaker 1: be replaced in with with either another owner or another
Speaker 1: short form video application relatively quickly. At c C Commissioner
Speaker 1: Brendon car with thank you for your time and the
Speaker 1: robust conversation. Frankly, and I know TikTok is a story
Speaker 1: will continue to discuss now coming up, why Morgan Stanley
Speaker 1: fired some of its own bankers find I should say
Speaker 1: some of its own bankers, and how WhatsApp is at
Speaker 1: the heart of it. This is Bloomberg. Morgan Stanley has
Speaker 1: fine some of its own anchors for some more than
Speaker 1: one million dollars each for conducting business on WhatsApp and
Speaker 1: other messaging platforms. And clearly a painful reminder, particularly if
Speaker 1: you're senior, and this is perhaps when you're facing a
Speaker 1: million of a fine rather than perhaps a couple of thousand,
Speaker 1: is how seen you are, how often you are already
Speaker 1: reprimanded and sort of a points system here. But it's
Speaker 1: interesting that these banks are paying the fines themselves and
Speaker 1: then asking for their own employer and literally clawing back
Speaker 1: bonus is already paid out because they're under that much
Speaker 1: pressure from the regulators to make sure communications for business
Speaker 1: are done properly. It's astonishing pressure from the SEC, the
Speaker 1: s CTC. Can you imagine being asked to give back
Speaker 1: a bonus that I made? I can't. I have to say.
Speaker 1: The other story that caught my eyes the Bloomberg reporting
Speaker 1: around the NYC and what was actually responsible so for
Speaker 1: according to a source in Layman's terms, it was that
Speaker 1: they didn't basically turn on off and back on again
Speaker 1: the basically deeply technological area that you're trying to ensure
Speaker 1: that there's never any disasters and through one person and
Speaker 1: one personnel issue a disaster ensued in the markets. That's right,
Speaker 1: Welcome back to me technology. I'm car High and I'm
Speaker 1: in Ludlow this week, both of us in San Francisco. Now,
Speaker 1: after a growing chorus of layoffs across the technology industry
Speaker 1: at large, one company is going against the grain. The
Speaker 1: cloud software platform Service Now will not layoff employees in
Speaker 1: three that's according to the company's CEO, Bill McDermott. So
Speaker 1: how is he going to keep that promise? Well? Fortunately,
Speaker 1: Bill joins us now on the program that that's a pledge. Bill,
Speaker 1: So how are you going to keep it? Well? We
Speaker 1: are the platform for end to end digital transformation. Customers
Speaker 1: today have two things on their mind. On one hand,
Speaker 1: they have to automate and improve their productivity and do
Speaker 1: a lot more with less, so they're really trying to
Speaker 1: take cost out of the business. On the other hand,
Speaker 1: they recognize that digital business is something they have to
Speaker 1: have to do well at, so they are investing thing
Speaker 1: and they're investing for the long term. So if you're
Speaker 1: investing for growth or you're taking costs out of the equation,
Speaker 1: with service Now, you can do it on one platform.
Speaker 1: You can do everything on Service Now is platform and
Speaker 1: that's what makes it so compelling. Bill told just Stock
Speaker 1: Grace three percent. We're investors chairing the pledge to not
Speaker 1: do layoffs or were they chairing the financial results? Oh?
Speaker 1: I think they're cheering the financial results. You know, we
Speaker 1: are growing at the rule of fifty eight and a half,
Speaker 1: meaning if you combine our revenue growth and our free
Speaker 1: cash flow margin and we are growing in fifty eight
Speaker 1: and a half, they say you're a world class status
Speaker 1: at So we are doing something that no other enterprise
Speaker 1: software company in the world is doing. We're growing faster
Speaker 1: than all the others, but we're doing it in a
Speaker 1: profitable way. In Wall Street likes that. But more importantly,
Speaker 1: it's a reflection of what we're doing for great customers
Speaker 1: like the Schwartz Group in Germany they're going for next
Speaker 1: generation retail, or the United States Army. They're serving their
Speaker 1: one million constituents and they're doing this end to end
Speaker 1: on one platform to run all of their business operations. You,
Speaker 1: of course actually hired, I didn't net people to your
Speaker 1: business in quite a lot of them. Would you make
Speaker 1: the most of some of the talent that's becoming available
Speaker 1: and hide more in this environment? Caroline We hired five
Speaker 1: thousand last year, as you know, and it's fantastic because
Speaker 1: on the service now platform, you can literally run all
Speaker 1: your business opera rations as a company or an individual
Speaker 1: on one platform. So this argument that young people or
Speaker 1: new hires are unproductive is not the case here at
Speaker 1: service Now because they do all their work on the
Speaker 1: service now platform, which is a total sensation. So our
Speaker 1: productivity is fantastic with early in career folks or senior
Speaker 1: executives that just want to work for the best, best
Speaker 1: company in the business will continue to hire. We're especially
Speaker 1: hiring and engineering and go to market professionals to take
Speaker 1: care of our customers. And I start there saying, well,
Speaker 1: now you're saying you're hiring this thing executing well in
Speaker 1: a tough environment. You're a man who understands activist investors.
Speaker 1: You dealt with them in previous times. You understand how
Speaker 1: to some navigate that. Talk to us as other businesses
Speaker 1: face this environment right now, how are you looking to
Speaker 1: talk to your investor base, particularly when you have a
Speaker 1: stop that it's still pretty high multiples. Yeah, Caroline, you're right,
Speaker 1: I mean it is high multiples, but that's because the
Speaker 1: growth rate is so high. What I'm super proud of
Speaker 1: is that understanding. And this was also reinforced today by
Speaker 1: other media professionals that the activist investors that are working
Speaker 1: with these other technology companies start the meeting off with
Speaker 1: we need you to look at the benchmark, and the
Speaker 1: benchmark is service now. And then they say their growth
Speaker 1: rate is twenty eight percent UM. And then they look
Speaker 1: at their margin profile and it's the highest in the
Speaker 1: cloud business. And then they show them our free cash
Speaker 1: flow margin and they're like, we need you to be that,
Speaker 1: and that's how the meeting starts. So I take that
Speaker 1: with a hungry and humble attitude. Well humble because we
Speaker 1: know it's all about taking care of the customers and
Speaker 1: doing it super well with great employees, and well hungry
Speaker 1: because we want to grow even more and even faster.
Speaker 1: So I don't have an issue with activist investors, and
Speaker 1: I have worked with them in the past. I actually
Speaker 1: have a great relationship with Elliott Management and with Jesse Cohne.
Speaker 1: I think they're terrific and at the time when I
Speaker 1: was with another company, they offered very good suggestions and
Speaker 1: we trust and we did a lot of cool stuff together.
Speaker 1: But here I don't think this is the first place
Speaker 1: they'll stop because it's so successful. Does your company thrive
Speaker 1: in difficult times? Because I think you were talking about
Speaker 1: customers moving away from different individual vendors and basically coming
Speaker 1: to you for a one stop shop solution. But when
Speaker 1: customers do that, it's often because they're having to look
Speaker 1: and make changes reaction. Read you see what I mean? Yes,
Speaker 1: I do it. I mean, here's the situation. If you
Speaker 1: believe the independent research companies like I d C, they
Speaker 1: will tell you that I T spend for software will
Speaker 1: grow in double digits this year. So that's a fact,
Speaker 1: an independent research fact. But let's assume that didn't happen,
Speaker 1: and let's just assume there was no increase in I
Speaker 1: T spend. What's happening now with customers When they have
Speaker 1: three or four technologies to do something similar, they're saying,
Speaker 1: let's cancel three and go with the one that's the
Speaker 1: best alter and the two. We don't want all four.
Speaker 1: And during the hype cycle of the whole pandemic where
Speaker 1: people were trying to figure things out, they just board
Speaker 1: every point solution they can get their hands on, and
Speaker 1: now they want to really go for platforms that matter.
Speaker 1: So what service now is enabling companies to do. It's
Speaker 1: really consolidate to spend, move away from platforms that don't matter,
Speaker 1: and increase your productivity quite dramatically on one that does.
Speaker 1: So take cost out, go for service now, put growth
Speaker 1: in Gopher service now, all on one platform for anten
Speaker 1: digital transformation. It's interesting. You are such a positive person.
Speaker 1: It sounds like and in many ways rightly. So I'm
Speaker 1: looking at analyst recommendations basically thirty six of that and
Speaker 1: I say, by your stock there's only one holdout one
Speaker 1: under performing things. Your stock is going to drop, and
Speaker 1: that is Stephan over at BMP Power. What one thing
Speaker 1: would you say to stuff and what's he getting wrong?
Speaker 1: And what is that one thing that does keep you
Speaker 1: up at night that you're trying to tackle that We
Speaker 1: convinces that so well, I got to go speak with him.
Speaker 1: I think he has to have a meeting with me
Speaker 1: or come talk to our people as Serre technology. We
Speaker 1: haven't spend enough time with him, um, but I guess
Speaker 1: one out of thirty six isn't too bed. I would
Speaker 1: just tell him, like, if you look at where the
Speaker 1: new economy is going, this is a platform economy. And
Speaker 1: in this economy, you have the hyper scale of clouds,
Speaker 1: which are all very relevant outstanding companies and they're gonna
Speaker 1: do very well. And then you have a couple of
Speaker 1: sas companies um and among those couple of sas companies
Speaker 1: that matter, we are one of them. What's unique about
Speaker 1: us is whether you're doing workloads in a public cloud,
Speaker 1: a private cloud, or in a multi cloud. Formation Service
Speaker 1: now serves as the control tower to end to end
Speaker 1: digital transformation. If anyone understands the implications of that and
Speaker 1: the network effect that that creates, and the fact that
Speaker 1: we have the stickiest, most loyal customers in the business,
Speaker 1: with retention rates near and we grow same account revenue
Speaker 1: growth nearly thirty per customer. Plus we're getting lots of
Speaker 1: new business. We have a new business surge in Q four.
Speaker 1: I find it hard to understand why anyone wouldn't have
Speaker 1: a by rating on that stock. The other thing, from
Speaker 1: an individual investor perspective, hey, look the whole thing, Caroline.
Speaker 1: As you know, the tightening monetary policy is what compressed
Speaker 1: the multiples, especially in high tech. But as that now
Speaker 1: gets more normalized, you want to be in the companies
Speaker 1: that have the ability to give you tremendous leverage, because
Speaker 1: once that tightening of the monetary policy lessens, loosens gets
Speaker 1: more normalized, everybody in twenty four hours of forty eight
Speaker 1: hours is going to jump on to be in where
Speaker 1: to get in high leverage growth stocks like Service Now,
Speaker 1: and you want to be there before that rush. Are
Speaker 1: you going to miss out your time in the market,
Speaker 1: Bell your time in the market. Service Now CEO from
Speaker 1: a great house in time with it. As always, we
Speaker 1: thank you. Let's talk see meanwhilet's talk about Amazon selling
Speaker 1: a vacant Bay Area office complex, in fact purchased during
Speaker 1: the pandemic. Now the company paid a hundred twenty three
Speaker 1: million dollars for the twenty nine acre property is the
Speaker 1: latest effort to unwind a pandemic era expansion that left
Speaker 1: it with a supplus of warehouses and of employees. The
Speaker 1: Bay Area's office market has been hit harder course in
Speaker 1: the past two years. This company is pivoted to remote
Speaker 1: work and gave up real estate to cut costs. Now
Speaker 1: coming up the VC industries booming with interest in artificial intelligence.
Speaker 1: Will speak with insight partners who've been at it for
Speaker 1: a little while now when it comes to AI, this
Speaker 1: is bloom bog. Should you be using chat GPT for
Speaker 1: investment advice? Look, this is a natural language processing technology
Speaker 1: numerously is not at strong points. So if you ask
Speaker 1: it to pick certain stocks to out performing in ETFs,
Speaker 1: probably going to sit on the fence. But it might
Speaker 1: entice you to decide to look for actual investments that
Speaker 1: use the power of AI. For example, there are a
Speaker 1: couple of ets sort out before in the market using
Speaker 1: artificial intelligence, like the AI powered Equity e t F.
Speaker 1: It's got about a hundred million dollars in assets under management.
Speaker 1: It's greats information from the Internet and regulatory filings to
Speaker 1: help its over six thousand stocks that analysis pick re
Speaker 1: orientate in our perform. We've also got the like Silver
Speaker 1: State Street Fund one week seven billion dollars in assets
Speaker 1: under management, and itself is powered by IBM Watson. It
Speaker 1: too is finding the right sort of stock to be
Speaker 1: picking and is up about ten percent on the year
Speaker 1: so far. The one thing that chat GPT might incentivize
Speaker 1: you to do, though, is stay diversified. When you ask
Speaker 1: it about trying to find a balanced portfolio, will recommend
Speaker 1: that you spread your investments across various asset types to
Speaker 1: find uncorrelated returns and that folks be diversified. It's not
Speaker 1: that strong a math said, but it is of course
Speaker 1: a focus of a company that is trying. When you
Speaker 1: ask chat Gypt what to be doing with your investments,
Speaker 1: it sits very much on the set on the fence.
Speaker 1: It's saying like, you know, you can lose money or
Speaker 1: can gain it, but it's really interesting to try and
Speaker 1: tell where you should be investing in, what the power
Speaker 1: of AI is in your investments. And what's so funny
Speaker 1: is now and know the companies that are starting to
Speaker 1: try and make out that they're using AI right in
Speaker 1: the same way that we used to see perhaps like
Speaker 1: write blockchain when it blockchain, when everyone started to put
Speaker 1: blockchain onto the end of their names, and that the
Speaker 1: stocker pop. We've just seen some other companies starts to
Speaker 1: say that they're harnessing the power of AI. I don't
Speaker 1: know how to get my head around this, because I
Speaker 1: thought the whole point of ETS in particular was to
Speaker 1: be about passive investing, and you're asking artificial intelligence to
Speaker 1: help you with it doesn't even bear going there. Bloom
Speaker 1: Bers Katie Growfeld wrote a brilliant story about it in
Speaker 1: the terminal and on blue dot com go and read it.
Speaker 1: Is it active? Is it passive? If a bot does
Speaker 1: it for I don't know. I don't know. But talking
Speaker 1: about companies trying to get on the bandwagon of harnessing AI,
Speaker 1: open Ai, of course, which is the company behind chat GPT,
Speaker 1: Well it's being all the buzz over at BuzzFeed because
Speaker 1: BuzzFeed is planning to use open ai to bolster some
Speaker 1: of its own content creation. We understand the news cent
Speaker 1: shares surging at one point more than on this Thursday,
Speaker 1: buzzfeeds market value at one point, therefore hitting four million dollars.
Speaker 1: Let's get to it, Liciadeas and Elia, I mean, what
Speaker 1: ultimately will this help BuzzFeed do? Yees? So, I think
Speaker 1: that the main point here is for BuzzFeed sent MML
Speaker 1: out to its start today is saying that this is
Speaker 1: going to help them bring a lower cost to the
Speaker 1: content that it produces. And I think we've seen AI
Speaker 1: a lad in the tax face in terms of with algorithms.
Speaker 1: I think that's where a lot of us are the
Speaker 1: most mimiliar with it um. But it is really interesting
Speaker 1: to see that they are actually wanting to implement it
Speaker 1: with the content that it's creating. UM. So yeah, it'll
Speaker 1: be UM show to see how this plays out. I think.
Speaker 1: So the pitch here is replaced journalists with art fish intelligence,
Speaker 1: which for the three of us, I imagine is an
Speaker 1: uncomfortable thing to discuss. So let's talk about what Wall
Speaker 1: Street Alicia's saying about this partnership. I mean, the stock
Speaker 1: reaction says it all, really, doesn't it mm hmm Yeah.
Speaker 1: And as you said, UM, definitely different groups of people
Speaker 1: who have different opinions on this. UM. Clearly Wall Street
Speaker 1: is um excited at the idea of ai UM. We
Speaker 1: saw share volume go absolutely bonkers today UM with over
Speaker 1: two dred a million. UM. You know, share exchange is happening. UM.
Speaker 1: So I think that analysts are um excited and have
Speaker 1: a generally positive out look about ai UM. I think
Speaker 1: that there is probably more to come, you know. I
Speaker 1: think that this is just the beginning of the discussion. UM.
Speaker 1: And as we learn more about the outline of one
Speaker 1: BuzzFeed plans to implement this, I think that that will
Speaker 1: camera down how in lass are viewing it. Mags Alicia
Speaker 1: das really looking into the applications of open AI for BuzzFeed,
Speaker 1: but of course AI, artificial intelligence and indeed generative AY
Speaker 1: are could really disrupt most parts of industry. It feels
Speaker 1: like right now, and every VC we talked to seems
Speaker 1: to be discussing that maybe this is a new tipping point.
Speaker 1: Lonie Jeffrey is one of them, managing director of Inside Partners,
Speaker 1: which has been tracking AI. You've been tracking machine learning
Speaker 1: startups and scale up since you've been taking stakes in
Speaker 1: some of them, and only you said in particular that
Speaker 1: this is perhaps feeling like the early launch of the
Speaker 1: Internet itself. Why so, what's so important and impactful about
Speaker 1: generative AI? I think you know, before the release of
Speaker 1: chat GPT, many people have been underestimating the progress that
Speaker 1: AI has been made over the last few years and
Speaker 1: will make going forward. It was kind of like the
Speaker 1: spark that lit the fire of startup innovation around general
Speaker 1: v I, and it also created a renewed fundraising dynamic.
Speaker 1: One way to think about it is that we've gone
Speaker 1: from these systems of prediction like classification or recommendation systems,
Speaker 1: to these systems of creation, and so you now have
Speaker 1: these really interesting, powerful generative systems like our portfolio company
Speaker 1: Jasper which can help you write a blog post, or
Speaker 1: stable Diffusion which can generate images, or get hub copilot
Speaker 1: which can help write code and likely see co pilots
Speaker 1: emerge with the ability to create first drafts for all
Speaker 1: sorts of other functions besides programming, you know, eventually medical documentation,
Speaker 1: legal contracts, school lesson plans and things like that. The
Speaker 1: thing for me Loan is it all comes down to money.
Speaker 1: It always comes back to money, right and and the
Speaker 1: team over its coil capital writing this research report recently,
Speaker 1: the AI has the potential, particularly generative a AI, to
Speaker 1: generate trillions of dollars of economic value. How do we
Speaker 1: get there to actually, you know, implement AI in a
Speaker 1: way that that leads to value creation or products and
Speaker 1: services we can actually charge for. It will be very
Speaker 1: interesting to watch where the pools of value will accrue
Speaker 1: and where the economic boats will be the deepest with
Speaker 1: these new generative AIA and technologies, if anywhere. Some people
Speaker 1: believe that the economic power will go to the companies
Speaker 1: that are building the large foundation models because they require
Speaker 1: so much time and skill and money to create, like
Speaker 1: open AI and Google and others. And some think that
Speaker 1: the modes will be deepest with the companies that are
Speaker 1: fine tuning the models for specific use cases, because they
Speaker 1: can enjoy things like demand side economies of scale from
Speaker 1: having proprietary training data or flow of feedback data from users.
Speaker 1: But I think it's a little early. It's still the
Speaker 1: fog of war around at all. Lonnie, your CB is fascinating.
Speaker 1: We just showed some of your portfolio companies on the screen.
Speaker 1: You interned at Microsoft in your earlier years, you worked
Speaker 1: at IBM. Who is going to get there first, big
Speaker 1: tech company like Microsoft or the more nimble startops that
Speaker 1: you're investing in now. I think the rise of generative
Speaker 1: AI in particular could help to democratize access to AI
Speaker 1: technology because it can be delivered as a service. It
Speaker 1: that's such a versatile capability of these foundation models. UM
Speaker 1: it may be easier for regular companies to consume and
Speaker 1: without being quite as deep tech. But I would say
Speaker 1: it's also important to remember that, um it's not just
Speaker 1: the generative AI companies that are making transformative impact in
Speaker 1: the kind of more traditional AI like in computer vision
Speaker 1: AI and healthcare. For example, we have a portfolio company
Speaker 1: over Jet where the CEO A Warda and her team
Speaker 1: have built powerful technology that can tell you whether you're
Speaker 1: two needs a filling or a crown based on its
Speaker 1: reading of a dental X ray or itor of health
Speaker 1: which can apply computer vision to colonoscity videos in real time.
Speaker 1: It can catch cancer's poll ups missed by a gas enterrologist,
Speaker 1: which can be hugely impactful for healthcare. Um so there's
Speaker 1: gonna be a lot of progress over the next couple
Speaker 1: of years. I think it will be pretty pretty fun
Speaker 1: to watch Lonely Jeffe. We're looking forward to watching it
Speaker 1: along with the managing director of Insight Partners. Thank you
Speaker 1: so much for joining Caroline and on the show going
Speaker 1: viral today? What have you seen it already? The new
Speaker 1: teaser for the season four of HBO's Succession Now the
Speaker 1: March twenty four season premiere was trying across all of
Speaker 1: social media Basically. HBO says an average of six point
Speaker 1: one million viewers watched season three, up fifty six PEP
Speaker 1: from season two, and the season three finalie held one
Speaker 1: points of a million viewers who tuned in live. But
Speaker 1: Edward's interesting is we keep saying our succession white lotus.
Speaker 1: Some of these key talked about ones, but actually if
Speaker 1: you look at the numbers, they're not. Some of the
Speaker 1: most popular, they're not. There's a target audience. I get why,
Speaker 1: you know, the Bloomberg family would be into Succession, the
Speaker 1: money behind it, the stories that aren't reflecting reality. There
Speaker 1: are fans out there. I mean, this is going viral right.
Speaker 1: I went to Twitter hashtag Succession. The video on Twitter
Speaker 1: has you know, one point five million views when I
Speaker 1: last looked. People get excited for this and they get
Speaker 1: talking about it because they love the stories. But look
Speaker 1: at it compared to like Young Sheldon average audience seven million,
Speaker 1: so way more than Succession. Yellow Stone season five is
Speaker 1: getting twelve million in terms of their overall viewerships. So
Speaker 1: perhaps as much as the fewer it gets, perhaps that
Speaker 1: maybe just Succession is really good at marketing itself on
Speaker 1: social media. It's a case of no, your audience, yes, yeah,
Speaker 1: and maybe we're it. And that does it for this
Speaker 1: edition of Broomberg Technology to our own audience. From here
Speaker 1: at least San Francisco, I've got to get on a plane.
Speaker 1: Thank you for being here. Don't forget check out our
Speaker 1: podcast and everything we've got coming up this week. This
Speaker 1: is Bloomberg,