WEBVTT - Wall Street Bonuses, Baker Hughes CEO on Earnings 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.480 --> 0:00:13.280 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.360 --> 0:00:16.720 weekdays at ten am Easter on Applecarplay and the Android 0:00:16.760 --> 0:00:19.720 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:19.800 --> 0:00:23.000 you get your podcasts, or watch us live on YouTube. 0:00:24.920 --> 0:00:27.560 Happy Friday, everybody, I'm Alexe alongside Paul Sweeney. This is 0:00:27.600 --> 0:00:29.840 Bloomberg Intelligence Radio. We bring you all the top news 0:00:29.840 --> 0:00:32.360 in business, economics, and finance through our lens of our 0:00:32.360 --> 0:00:34.760 Bloomberg Intelligence folks. They cover two thousand companies in one 0:00:34.840 --> 0:00:36.959 hundred and thirty industries worldwide. 0:00:37.040 --> 0:00:37.440 Every day. 0:00:37.479 --> 0:00:39.839 We also take a look at the Bloomberg Big Take story. 0:00:39.920 --> 0:00:43.559 It's a deep dive into some of the pressing financial, political, 0:00:43.560 --> 0:00:45.640 and economic issues of our time. You can check it 0:00:45.640 --> 0:00:48.040 out on the terminal or also Bloomberg dot com slash 0:00:48.040 --> 0:00:52.360 Big Take. And today it's about banker bonuses. Wall Street 0:00:52.360 --> 0:00:55.920 bonuses often come in the form of restricted stock units, 0:00:55.920 --> 0:00:59.840 So how did that actually perform? It's dicey, it's unpredictable. 0:01:00.560 --> 0:01:02.120 Do you actually make money off of those things? 0:01:02.120 --> 0:01:02.240 Well? 0:01:02.320 --> 0:01:04.200 Joining us now is one of the authors of the story. 0:01:04.280 --> 0:01:08.440 Laura Noonan, Bloomberg News finance reporter Walkers to your story, Laura. 0:01:09.120 --> 0:01:09.480 Thank you. 0:01:10.120 --> 0:01:13.480 So the story basically looked at the restricted shares over 0:01:13.520 --> 0:01:16.440 a period from the Frantic christ Sinteszan Night, and the 0:01:16.520 --> 0:01:19.000 question we wanted to ask is how does the number 0:01:19.080 --> 0:01:21.000 on the letter you get on bonus day compare to 0:01:21.160 --> 0:01:23.760 how much you actually get by the time those shares best. 0:01:23.880 --> 0:01:26.440 So we assume certain things, and what we showed was 0:01:26.480 --> 0:01:29.840 that in the case of the US banks, you usually 0:01:29.920 --> 0:01:32.959 end up making more, in the case of the European banks, 0:01:33.080 --> 0:01:35.679 you usually end up making less. And in some cases 0:01:35.680 --> 0:01:38.119 the numbers were quite severe. So there was one case 0:01:38.120 --> 0:01:40.280 we looked at where the Bank of America people who 0:01:40.360 --> 0:01:44.160 got bonuses in twenty eleven slash twenty twelve, they ended 0:01:44.240 --> 0:01:47.000 up if they had sold them as they could over 0:01:47.080 --> 0:01:49.160 a three year period, they would have got two hundred 0:01:49.200 --> 0:01:51.760 and seventy thousand dollars for every one hundred and for 0:01:51.760 --> 0:01:53.960 every one hundred thousand dollars in the letter. So that's 0:01:53.960 --> 0:01:56.200 a big upside off the end of the spectrum of 0:01:56.200 --> 0:01:58.840 the credit Switez. Bankers who got bonuses towards the end 0:01:58.920 --> 0:02:02.040 of credit spesis life would have seen the money effectively 0:02:02.080 --> 0:02:05.120 disappear when credits fee is collapsed in twenty twenty three. 0:02:05.360 --> 0:02:08.320 Are we see investment banks pay more of the bonus 0:02:08.360 --> 0:02:12.800 in stock or RSUs less cash more. Is that a trend. 0:02:13.880 --> 0:02:15.919 It's been a trend since the financial crisis, which is 0:02:15.919 --> 0:02:18.080 why we started the analysis there. So the idea was 0:02:18.160 --> 0:02:21.560 to align the risk taking of the people who are 0:02:21.560 --> 0:02:24.520 making bonuses with the longer term fate of the banks that. 0:02:24.440 --> 0:02:25.079 They work for. 0:02:25.480 --> 0:02:27.680 Within the EU, there are rules about this, so you 0:02:27.800 --> 0:02:30.120 have to get a certain percentage of your bonus in 0:02:30.200 --> 0:02:33.360 these kind of restricted instruments, and the percentage that you 0:02:33.400 --> 0:02:36.160 get is higher depending on how senior you are. So 0:02:36.200 --> 0:02:38.639 it's certainly something the banks have been doing for risk management. 0:02:38.760 --> 0:02:40.200 They're also doing it in terms of. 0:02:40.120 --> 0:02:42.960 Pretention, in terms of if you are a really strong 0:02:43.000 --> 0:02:45.880 bank and your share price they expected to appreciate, and 0:02:45.919 --> 0:02:48.079 we want people to stay working for you, it makes 0:02:48.120 --> 0:02:51.320 sense to give them things which kind of align their 0:02:51.360 --> 0:02:53.560 fate with the fate of the bank because it makes 0:02:53.560 --> 0:02:55.400 them stay, which is what banks are trying to do, 0:02:55.480 --> 0:02:58.560 especially as they face more competition for for staff from 0:02:58.600 --> 0:03:01.880 other industries like tes like some of the non listed 0:03:01.880 --> 0:03:05.640 banks and the and the private markets industry. 0:03:06.240 --> 0:03:08.200 Paul's here shaking his head like it. 0:03:08.240 --> 0:03:10.680 I'm just going to keep my mouth shed here because 0:03:10.680 --> 0:03:14.359 I think about the Europeans in their pay structure, and 0:03:14.400 --> 0:03:15.040 you don't like that. 0:03:15.120 --> 0:03:15.919 Ball not a fan. 0:03:16.280 --> 0:03:19.240 That's why there's no global investment bank coming out of Europe. 0:03:19.240 --> 0:03:21.280 That's why there's no technology coming out of I mean. 0:03:21.240 --> 0:03:25.280 It's a fair point, like okay, I mean is a 0:03:25.320 --> 0:03:28.240 recovering former m and a media banker. So this is 0:03:28.280 --> 0:03:28.680 near and dear. 0:03:30.000 --> 0:03:32.440 There are a lot of issues in European investment banks 0:03:32.440 --> 0:03:34.760 and we will be telling you more about that. Those 0:03:34.840 --> 0:03:38.680 in different There are some unique structural issues around bank pay. 0:03:39.080 --> 0:03:43.000 Those do limit their capacity to attract some people. It's 0:03:43.000 --> 0:03:45.080 going to be really interesting in the UK market now 0:03:45.120 --> 0:03:48.760 because the UK has just ruled off some of those 0:03:49.000 --> 0:03:51.280 crisis some of those rules introduced in the EU. The 0:03:51.280 --> 0:03:53.760 EUP obviously is outside the EU now they are liberating 0:03:53.840 --> 0:03:55.800 things here. It's going to be a really interesting market 0:03:55.840 --> 0:03:58.640 to see how people respond in terms of do people 0:03:58.680 --> 0:04:01.640 want to work for a Joyty Bank MP Paraba within 0:04:01.800 --> 0:04:04.080 the London operators now or would they be even more 0:04:04.240 --> 0:04:06.720 likely to go to a Gunman Sachs at JP Morgan 0:04:06.720 --> 0:04:09.040 where you can now get really big bonuses. 0:04:09.440 --> 0:04:13.160 Can I just ask about the whole credit Sueeze debacle there, 0:04:13.200 --> 0:04:18.080 like what happened to all of those bonuses and payouts, etc. 0:04:18.360 --> 0:04:21.360 When you take a look at Deutsche Bank and Credit Sweeze. 0:04:22.240 --> 0:04:24.400 So Deutsche Bank has just had a very troubled share 0:04:24.400 --> 0:04:26.520 price situation. I mean, if you look at the share 0:04:26.880 --> 0:04:30.200 of Deutsche since Cintomatic crisis, it has pretty much it 0:04:30.279 --> 0:04:32.599 had a very very sharp decline over that period. So 0:04:32.640 --> 0:04:34.839 you know, I knew people who had Deutsche bonuses and 0:04:34.880 --> 0:04:36.640 they were like, oh, this will be the best trade 0:04:36.640 --> 0:04:39.400 I've ever made, because you get a lot of shares 0:04:39.440 --> 0:04:41.160 when your share price is low to get you to 0:04:41.279 --> 0:04:43.960 that dollar number. And they expected the share price to recover. 0:04:44.400 --> 0:04:47.000 The share price did not recover. It fell further and 0:04:47.040 --> 0:04:49.640 further and further. So they just had a very tough 0:04:49.680 --> 0:04:52.599 time share price wise. Creditsweez was interesting because if you 0:04:52.600 --> 0:04:55.480 look back over the analysis, there were some years when 0:04:55.480 --> 0:04:57.640 actually Credit sweez stock did really well, and that was 0:04:57.680 --> 0:05:01.560 because in the immediate after math of the crisis kind 0:05:01.600 --> 0:05:04.560 of ten eleven twelve is actually very strong. Where came 0:05:04.600 --> 0:05:06.880 crashing down to earth was in the more recent past 0:05:06.920 --> 0:05:10.799 when those shares effectively got zeroed by the collapsash takeover 0:05:10.839 --> 0:05:12.640 from Yes, there's a lot of nuance there. What I 0:05:12.640 --> 0:05:15.000 should also say is, for this analysis, we looked at 0:05:15.040 --> 0:05:19.120 twelve banks, the twelve banks who most commonly give bonuses. However, 0:05:19.560 --> 0:05:21.680 we have a tool for the terminal users. You can 0:05:21.720 --> 0:05:23.200 go on that you can click on it. You can 0:05:23.320 --> 0:05:26.160 enter any listed company in the world. You can enter 0:05:26.240 --> 0:05:29.360 any kind of vesting structure. You might have any dates, 0:05:29.520 --> 0:05:31.720 and you can see how your life would have been 0:05:31.760 --> 0:05:34.159 different if you got your bonus at a different bank, 0:05:34.200 --> 0:05:36.040 or if you made different career choices when you were 0:05:36.080 --> 0:05:39.240 like twenty five, or you know how your colleagues down 0:05:39.279 --> 0:05:40.520 the road have done. So there is a lot of 0:05:40.560 --> 0:05:42.200 fun that you can have. If you're into playing with 0:05:42.240 --> 0:05:43.200 Excel sheets, you're. 0:05:43.080 --> 0:05:43.919 In for a fun weekend. 0:05:44.720 --> 0:05:46.440 And I guess, I mean, you have some great stuff 0:05:46.480 --> 0:05:48.800 in here about how the best year for bank bonuses 0:05:48.920 --> 0:05:51.719 was twenty twenty twelve because I guess, you know, depressed 0:05:51.800 --> 0:05:53.880 values and after. 0:05:53.680 --> 0:05:56.839 That prices were not good. Yeah, so it's something some 0:05:56.880 --> 0:05:59.520 parts of better, kind of counter intuitive. But thinking about 0:05:59.560 --> 0:06:02.200 depressed values is they and this kind of goes without saying, 0:06:02.520 --> 0:06:05.360 but they have to recover. So I've seen people make 0:06:05.440 --> 0:06:08.920 some pretty bad decisions thinking that that, thinking that things 0:06:08.960 --> 0:06:11.040 will always rebound to some kind of normal. The one 0:06:11.040 --> 0:06:13.279 thing we've learned in European bank since the financial crisis 0:06:13.360 --> 0:06:15.920 is like me and reversion hasn't really been a thing 0:06:16.160 --> 0:06:17.800 in the way people think it was going to be. 0:06:18.320 --> 0:06:21.160 Some business models turned out to be, you know, structurally flowed, 0:06:21.200 --> 0:06:23.600 structurally fatally flowed in the case of credit sweet So 0:06:24.000 --> 0:06:26.880 you can't always assume that it's going to bounce back, 0:06:27.040 --> 0:06:29.040 because I mean, if you talk to the credit feece Banger, 0:06:29.120 --> 0:06:31.440 they talk to the Liman bankers who live a different era. 0:06:31.560 --> 0:06:33.239 But they also and then I know a few people 0:06:33.240 --> 0:06:35.320 who work for both Lehman and Credits Feet and you 0:06:35.320 --> 0:06:38.200 know the Times Violin. They're silk white rich guys. However, 0:06:38.440 --> 0:06:41.040 they will be much in picture guys in other places. 0:06:41.200 --> 0:06:42.800 All Right, Laura, thanks a lot. We're gonna leave it there. 0:06:42.839 --> 0:06:45.119 Thank you very much. Lauren and a Bloomberg News finance 0:06:45.200 --> 0:06:47.880 reporter joining us on Banker Bonuses. 0:06:49.720 --> 0:06:53.279 You were listening to the Bloomberg Intelligence Podcast. Catch the 0:06:53.320 --> 0:06:56.720 program live weekdays at ten am Eastern on Apple car 0:06:56.760 --> 0:06:59.640 Play and Android Auto with the Bloomberg business app you 0:06:59.680 --> 0:07:02.400 can all so listen live on Amazon Alexa from our 0:07:02.440 --> 0:07:06.200 flagship New York station, Just Say Alexa played Bloomberg eleven 0:07:06.320 --> 0:07:07.839 thirty one. 0:07:07.680 --> 0:07:09.880 Stock on the move to the upside is Baker Hughes. 0:07:10.280 --> 0:07:12.680 It is the best performing stock in the energy sector 0:07:13.040 --> 0:07:16.679 within the SMP. Baker Hughes is an oil services company. 0:07:16.720 --> 0:07:19.920 It has two main lines. One is literally oil services, 0:07:19.960 --> 0:07:21.840 so if you're an oil driller, you call Baker to 0:07:21.880 --> 0:07:24.560 help you drill the oil. The other is industrial and 0:07:24.680 --> 0:07:28.040 energy technology that's much more related to sort of the 0:07:28.080 --> 0:07:32.720 future of what the business will be. Encapsulates LNG export facilities, 0:07:32.760 --> 0:07:35.560 which they are a huge provider of. And this stock 0:07:35.680 --> 0:07:38.720 has car rushed its competition. You look at a comp 0:07:38.840 --> 0:07:42.200 chart Baker Hughes versus A, Halliburton and SLB. They've crushed 0:07:42.200 --> 0:07:44.760 it over the last year. They reported earnings last night 0:07:44.840 --> 0:07:47.560 the beat very high estimates and yet the stock is 0:07:47.600 --> 0:07:50.000 still up by about six percent. Were pleased to have 0:07:50.040 --> 0:07:54.160 the CEO, President and Chairman, Lorenzo Seminelli joining us. Now, Lorenzo, 0:07:54.280 --> 0:07:56.480 good to chat with you. I gave you a nice 0:07:56.480 --> 0:07:58.760 set up there. What do you think that you have 0:07:58.960 --> 0:08:00.200 if Pears don't. 0:08:03.120 --> 0:08:05.080 Say that again, Alex, what do. 0:08:05.080 --> 0:08:08.840 You have that your other peers don't in your best estimation? 0:08:10.840 --> 0:08:13.120 Well, Alex, firstval it's great to be with you and 0:08:13.360 --> 0:08:15.880 very pleased with the results of twenty twenty four. 0:08:15.920 --> 0:08:18.200 And I think it. 0:08:17.400 --> 0:08:21.520 Really talks to the portfolio and the capabilities of baking US. 0:08:21.880 --> 0:08:25.320 And as you mentioned, we have these two segments, one 0:08:25.360 --> 0:08:28.320 being oil field services and equipment and then the other 0:08:28.440 --> 0:08:33.440 being industrial and energy technology, and that capability of really 0:08:33.480 --> 0:08:37.840 being focused on where there's less cyclicality, less volatility. As 0:08:37.840 --> 0:08:40.720 you look at oil field services and equipment, we're much 0:08:40.760 --> 0:08:44.160 more on the production side, weighted and looking at the 0:08:44.280 --> 0:08:47.880 mature asset solutions. And when you look at the industrial 0:08:47.960 --> 0:08:52.720 energy technology, really on the liquefaction side, the gas infrastructure 0:08:53.040 --> 0:08:58.040 and also new energy and again we exceeded the guidance 0:08:58.160 --> 0:09:02.040 for new energy orders take in twenty twenty four, looking 0:09:02.040 --> 0:09:05.439 for another robust twenty twenty five. And it really comes 0:09:05.480 --> 0:09:09.839 down to the differentiation in the portfolio. And we're really 0:09:09.880 --> 0:09:13.280 not just an all field services company. We're an industrial 0:09:13.440 --> 0:09:19.559 energy technology company, and you know, we've created a portfolio 0:09:19.640 --> 0:09:21.240 that's unique within the space. 0:09:21.840 --> 0:09:24.000 All Right, Lorenzos, I've been telling Alex, who is the 0:09:24.000 --> 0:09:27.319 true expert here in Bloomberg for energy. I have watched 0:09:27.520 --> 0:09:29.920 season one of land Man, so I now consider myself 0:09:29.920 --> 0:09:32.640 an oil and gas expert. Just putting that in front 0:09:32.679 --> 0:09:35.839 of you there. Love to get your thoughts. Lorenzo on 0:09:35.840 --> 0:09:39.360 the implications of this new administration coming up. How much 0:09:39.400 --> 0:09:43.040 of a change in policy do you and your peers 0:09:43.120 --> 0:09:44.520 expect out of a Trump administration. 0:09:47.080 --> 0:09:50.560 You know, we've seen administrations in the past and changes, 0:09:50.640 --> 0:09:56.080 and obviously we had Trump administration previously as well. As 0:09:56.080 --> 0:09:59.960 we look at the outlook again, we think that an 0:10:00.040 --> 0:10:03.200 number of our customers and EMPs are going to continue 0:10:03.200 --> 0:10:08.600 to be disciplined, and we're seeing activity levels and production 0:10:08.840 --> 0:10:12.760 at least in the US slightly increasing. As we look 0:10:12.800 --> 0:10:17.800 at international again we see flatish year over year. But 0:10:17.880 --> 0:10:22.080 again I think as we look at the macro side, 0:10:22.320 --> 0:10:25.000 it's over the course of the next few years and 0:10:25.160 --> 0:10:28.760 the next decade and increasing demand for energy, and that 0:10:28.920 --> 0:10:31.440 means it's an all of the above strategy. It's going 0:10:31.520 --> 0:10:34.920 to be oil gas, it's going to be more renewables, 0:10:34.960 --> 0:10:37.800 and we see a good outlook on the macro side 0:10:37.840 --> 0:10:38.800 for Baker Hughes. 0:10:38.800 --> 0:10:41.760 In that environment, he does talk about Landman like all 0:10:41.800 --> 0:10:44.560 the time. So to break that down a little bit, 0:10:44.600 --> 0:10:46.760 I was talking to Mike Worth's CEO of Chevron earlier, 0:10:46.760 --> 0:10:50.199 and basically his theme in the Permian is to produce more. 0:10:50.200 --> 0:10:52.280 But with less, so less capex. 0:10:52.920 --> 0:10:54.560 It feels like the read through of that for the 0:10:54.559 --> 0:10:58.600 oil services business wouldn't be great for you guys. Walk 0:10:58.640 --> 0:11:00.520 me through what you're seeing from the big oil players. 0:11:02.240 --> 0:11:05.400 Again, as I mentioned the big old players, they're going 0:11:05.440 --> 0:11:08.920 to take the opportunity of benefiting from the consolidation and 0:11:08.960 --> 0:11:11.360 the acreage that they're bringing on. 0:11:11.920 --> 0:11:13.360 And what Mike. 0:11:13.240 --> 0:11:15.960 Is mentioning is really the aspect of doing more with 0:11:16.080 --> 0:11:19.480 what you have. And that's why Baker Hughes is well 0:11:19.559 --> 0:11:21.079 suited because we're more. 0:11:20.920 --> 0:11:23.120 On the production side. And again, as you. 0:11:23.040 --> 0:11:27.439 Look at our portfolio, greater than fifty percent is associated 0:11:27.520 --> 0:11:33.960 with the production. That's the electrical submassible pumps, it's the chemicals, 0:11:34.240 --> 0:11:37.479 it's the ability to really take more. 0:11:37.240 --> 0:11:38.640 Out of the mature assets. 0:11:38.800 --> 0:11:42.200 And that's been a big focus of Baker Hughes over 0:11:42.240 --> 0:11:44.839 the course of the last few years. And so as 0:11:44.880 --> 0:11:49.000 the intensity continues to increase on doing more with less, 0:11:49.440 --> 0:11:52.760 it actually serves the aspect of our production side and 0:11:52.840 --> 0:11:55.199 focus that we have on the mature assets. 0:11:55.320 --> 0:11:56.840 Yeah, I'm glad you brought that up, because that's kind 0:11:56.840 --> 0:11:58.920 of what my word was saying too, that like the 0:11:59.000 --> 0:12:01.600 technology just gets so much better that you can actually 0:12:01.640 --> 0:12:05.120 continue to get more oil, lower the cycle costs, and 0:12:05.160 --> 0:12:09.600 lower the cycle time. Switching to your IET business, so 0:12:09.640 --> 0:12:14.560 industrials and energy, a technology business, that's where you have 0:12:14.800 --> 0:12:18.240 sort of your LNG export facilities, it is, that's where 0:12:18.240 --> 0:12:20.120 the growth is going to come from. Your numbers for 0:12:20.160 --> 0:12:22.240 the first quarter and for all of this year are 0:12:22.360 --> 0:12:26.440 just trouncing estimates. Who is your big customer for this. 0:12:27.320 --> 0:12:32.160 Well, we've got the large LNG players obviously within North America, 0:12:32.160 --> 0:12:35.600 and we're looking forward to a number of FIDS taking 0:12:35.640 --> 0:12:40.120 place in twenty twenty five. Overall globally for LNG again, 0:12:40.200 --> 0:12:45.040 we see one hundred mtpa of new projects between twenty 0:12:45.040 --> 0:12:46.960 four and twenty. 0:12:46.679 --> 0:12:48.760 Six over the course of this year. 0:12:49.040 --> 0:12:53.280 You know, there's still about eighty mtpa to go internationally 0:12:53.280 --> 0:12:54.720 as well as also in the US. 0:12:55.280 --> 0:12:56.680 But it's not just the LNG. 0:12:57.200 --> 0:13:00.360 It's you know, when you look at gas infrastructure and 0:13:00.440 --> 0:13:05.720 the associated infrastructure around pipelines being required compression to be 0:13:05.800 --> 0:13:09.800 able to move the molecule, the LNG players Venture Global 0:13:09.880 --> 0:13:13.920 which we announced yesterday as well. You've got Shineer, but 0:13:13.920 --> 0:13:18.160 you've got the majors when you think of Katar Gas 0:13:18.240 --> 0:13:21.439 as well as Exon Mobile with the projects. 0:13:21.000 --> 0:13:21.440 That they have. 0:13:21.640 --> 0:13:25.880 So we play across the portfolio with these key customers. 0:13:26.160 --> 0:13:27.360 But it's not just LNG. 0:13:27.880 --> 0:13:31.320 You know, seventy percent of the addressable market opportunity for 0:13:31.480 --> 0:13:33.800 us in IT over the course of the next few 0:13:33.880 --> 0:13:38.480 years is outside of LNG, and that's one hundred and 0:13:38.559 --> 0:13:40.280 forty billion dollar opportunity. 0:13:40.840 --> 0:13:43.120 Where is it outside of LNG And do you anticipate 0:13:43.160 --> 0:13:45.560 any acquisitions to even beat that up even more? 0:13:47.280 --> 0:13:50.719 You know, we're benefiting from the fact that our equipment 0:13:50.880 --> 0:13:54.280 can be utilized in multiple end applications. So when you 0:13:54.360 --> 0:13:59.720 go onshore offshore production, when you look at FPSOs and 0:13:59.760 --> 0:14:03.920 we consistent theme of seven to nine FPSOs on an 0:14:03.960 --> 0:14:07.360 annual basis. When you look at pipeline infrastructure, you look 0:14:07.360 --> 0:14:08.880 at downstream. 0:14:08.720 --> 0:14:10.679 You need pumps, you need valves, you. 0:14:10.640 --> 0:14:16.920 Need reciprocating compressors, you need turbines, and increasingly behind the 0:14:16.960 --> 0:14:20.760 meta solutions as well, distributed power generation and we've got 0:14:21.040 --> 0:14:24.880 a line of industrial gas turbans obviously below one hundred 0:14:24.880 --> 0:14:27.280 and fifty megawat and when you think of the data 0:14:27.360 --> 0:14:30.120 center growth that's going to be taking place, it's a 0:14:30.200 --> 0:14:32.400 large opportunity for us as we go forward. 0:14:32.520 --> 0:14:34.080 Does that mean that, Lorenzo, you're going to be able 0:14:34.160 --> 0:14:38.320 to play in the AI data center rush? 0:14:38.680 --> 0:14:42.680 We already are playing in the aspect of providing behind 0:14:42.720 --> 0:14:46.920 the meta solutions and also distributed power generation with our 0:14:47.000 --> 0:14:50.640 Nova LT line and as we're working with a number 0:14:50.800 --> 0:14:54.960 of hyperscalers and AI is definitely a theme that we 0:14:55.040 --> 0:14:58.720 see growing and the need for data centers growing, and 0:14:59.080 --> 0:15:01.600 they're going to need short solutions forgetting. 0:15:01.200 --> 0:15:03.480 The power Before I let you go, because you know 0:15:03.480 --> 0:15:05.400 I'm going to ask it. You got those two huge 0:15:05.400 --> 0:15:08.720 business lines. Any any theories or feelings about a spin off. 0:15:10.520 --> 0:15:13.720 There is a tremendous amount of synergies between the two. 0:15:13.960 --> 0:15:17.440 And what's great about Baker Hughes is that we can 0:15:17.520 --> 0:15:22.560 navigate with less cyclicality, less volatility because it doesn't matter 0:15:22.600 --> 0:15:26.440 on the pace of the transition. We actually match with 0:15:26.560 --> 0:15:29.680 the capabilities of oil field services and equipment and the 0:15:29.720 --> 0:15:34.080 industrial energy technology, and we actually link the value chain together. 0:15:34.200 --> 0:15:37.680 And as you think of subsurface knowledge with then being 0:15:37.720 --> 0:15:40.160 able to move the molecule and do something with the 0:15:40.400 --> 0:15:45.680 molecule from a compression standpoint, liquefaction or moving it elsewhere. 0:15:46.040 --> 0:15:49.280 The two segments were hand in hand together, so we 0:15:49.400 --> 0:15:50.920 liked the portfolio of the way that is. 0:15:51.320 --> 0:15:52.920 I knew you were going to say that one, Lorenzo. 0:15:52.920 --> 0:15:53.880 It's great to chat with you. 0:15:53.920 --> 0:15:56.640 I love catching up with you. Lorenzo Saminelli, President, chairman 0:15:56.640 --> 0:15:59.320 and CEO of Baker Hughes. That' stock up over a 0:15:59.440 --> 0:16:01.240 six percent And today. 0:16:02.720 --> 0:16:06.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:06.480 --> 0:16:09.880 weekdays at ten am Eastern on Applecarplay and Android Auto 0:16:10.000 --> 0:16:13.040 with the Bloomberg Business App. Listen on demand wherever you 0:16:13.080 --> 0:16:16.080 get your podcasts, or watch us live on YouTube. 0:16:17.200 --> 0:16:21.640 News came out today that surprised me, talking about the 0:16:21.760 --> 0:16:27.160 US Justice Department blocking HPE's acquisition of Juniper Networks. What 0:16:27.240 --> 0:16:30.000 happened to the animal spirits of a Republican white House, 0:16:30.040 --> 0:16:33.560 Republican Congress pulling back on regulation. This one kind of 0:16:33.560 --> 0:16:35.200 threw me for a curve. So we went to the 0:16:35.200 --> 0:16:38.960 expert u Jinhoe Senior technolog channels from Bloomberg Intelligence. Wooje 0:16:39.120 --> 0:16:41.120 was this expected, what's going on here. 0:16:42.320 --> 0:16:45.440 Hey, Paul, it wasn't expected. I think there were some 0:16:45.520 --> 0:16:47.840 rumblings going on earlier in the week that the DJ 0:16:48.000 --> 0:16:51.960 made blocked the deal for anti competitive reasons, and then 0:16:52.360 --> 0:16:55.640 when the deal was close, close to the finish line, 0:16:56.000 --> 0:16:58.880 Woomer was next week a DJ decided to step in. 0:16:59.360 --> 0:17:03.960 What's the problem, Well, it's all about Wi Fi and 0:17:04.320 --> 0:17:07.560 it's clear that HPE can't live without its Wi Fi either. 0:17:09.160 --> 0:17:12.680 You know, the combination of HPE and Juniper would create 0:17:12.720 --> 0:17:15.880 twenty percent Wi Fi market share in the United States 0:17:15.880 --> 0:17:20.359 in the North America, and if you combine that with Cisco, 0:17:20.960 --> 0:17:23.399 it would have over seventy percent. So the DOJ is 0:17:23.480 --> 0:17:26.400 essentially saying that it would create an anti competitive environment 0:17:26.920 --> 0:17:28.240 in the wireless landspace. 0:17:28.840 --> 0:17:31.560 Both stocks are kind of flat to a little bit 0:17:31.880 --> 0:17:36.680 up here today. So what's the market telling us here, Well. 0:17:36.480 --> 0:17:40.320 The market is telling us for a Juniper standpoint, there 0:17:40.400 --> 0:17:44.080 might be a we're getting closer to evaluation floor if 0:17:44.200 --> 0:17:47.840 HPE needs to walk away. What we did right this 0:17:47.920 --> 0:17:49.880 morning was that we think that there is a nine 0:17:49.920 --> 0:17:53.520 to ten billion dollar valuation on a standalone Juniper. That 0:17:53.600 --> 0:17:56.920 gets us to about a twenty eight to thirty two 0:17:57.040 --> 0:18:00.000 dollars share price. It slight discount where it's trading right now. 0:18:00.080 --> 0:18:04.760 Now from an HPE standpoint, you know, it's something a 0:18:04.800 --> 0:18:07.480 different signal. One of the reasons why they wanted to 0:18:07.480 --> 0:18:11.600 acquire Juniper as a whole is for a margin perspective. 0:18:11.640 --> 0:18:13.560 So the stock is down about ten percent and some 0:18:13.640 --> 0:18:16.600 of the margin decretion related Juniper might be falling off. 0:18:17.520 --> 0:18:19.240 What could they do to save this deal? 0:18:19.320 --> 0:18:20.600 Is there anything that they could offer? 0:18:22.040 --> 0:18:25.200 Yeah, so look at the end of the day, there's 0:18:25.240 --> 0:18:30.880 one particular product that Juniper has called missed and that 0:18:31.680 --> 0:18:37.520 was automated the Wi Fi functionality as well as delivered 0:18:37.520 --> 0:18:41.160 some AI functionality. You know, HP doesn't want to walk 0:18:41.200 --> 0:18:43.520 away from that, but if they walk away from that 0:18:43.560 --> 0:18:47.200 portion of the deal, that could possibly preserve the deal. 0:18:47.240 --> 0:18:51.240 But you know, with Antonio trying to do to keep 0:18:51.880 --> 0:18:55.680 to go through with the lawsuit, they really want Missed 0:18:55.680 --> 0:18:57.200 and quite frankly, I think it's one of the crown 0:18:57.280 --> 0:18:57.960 jewels of the deal. 0:18:58.520 --> 0:19:01.240 So which I know you probably speak to Jenrie at 0:19:01.240 --> 0:19:04.760 Bloomberg Intelligence. She does all this anti trust stuff. How 0:19:04.800 --> 0:19:06.240 are you guys thinking about this? What are you telling 0:19:06.240 --> 0:19:07.879 your clients? Is it still going to get done? Is 0:19:07.920 --> 0:19:09.760 it not gonna get done? Are they going to walk away? 0:19:09.760 --> 0:19:10.760 What do you think is gonna happen? 0:19:11.280 --> 0:19:14.360 Yeah, you know, I've been going back and forth with 0:19:14.359 --> 0:19:17.840 with Jen, and you know what Jen is telling us 0:19:17.880 --> 0:19:21.159 as well as Bloomberg Bloomberg clients is that the DJ 0:19:21.320 --> 0:19:25.240 actually may have a strong case. Quite quite frankly, I 0:19:25.280 --> 0:19:28.480 think it's kind of a bunk from from a DJ standpoint. 0:19:29.520 --> 0:19:32.800 You know, Hpe is getting penalized for Cisco having fifty 0:19:32.800 --> 0:19:36.600 percent market share, right and one of the arguments that 0:19:36.640 --> 0:19:40.400 the DJ is making is that there might be an 0:19:40.440 --> 0:19:43.000 increase in price. But you know, the historical trend has 0:19:43.000 --> 0:19:47.399 been Hpe actually has been a price leader in terms 0:19:47.440 --> 0:19:50.520 of having lower price for their wireless land products versus 0:19:50.600 --> 0:19:54.240 where Cisco is a price you know, is a price 0:19:54.320 --> 0:19:57.719 leader where they have the highest price. So, you know, 0:19:58.600 --> 0:20:00.840 I don't know where it'll be. But if uh, Jens 0:20:01.200 --> 0:20:05.239 generally says that DJ has a case, HPE may need 0:20:05.280 --> 0:20:06.080 to find alternatives. 0:20:06.640 --> 0:20:09.080 So let's pretend that deodee h does have a case. 0:20:09.080 --> 0:20:11.440 What's a plan B or I guess what does Juniper 0:20:11.520 --> 0:20:13.200 and HPE look without a deal? 0:20:14.160 --> 0:20:14.560 Yeah? 0:20:14.600 --> 0:20:16.679 So, uh, the way I look at it right now 0:20:17.080 --> 0:20:19.679 is that the there actually is still a lot of synergies. 0:20:20.720 --> 0:20:24.879 You know, Juniper has a data center networking UH data 0:20:24.880 --> 0:20:26.840 center uh A as well as cloud routing. 0:20:27.200 --> 0:20:27.280 UH. 0:20:27.320 --> 0:20:30.399 These are two areas that HPE does not have, and 0:20:30.440 --> 0:20:34.760 it actually would fit well UH with HPE's portfolio. From 0:20:34.760 --> 0:20:37.840 a valuation standpoint, you know, we think that UH the 0:20:37.880 --> 0:20:41.639