1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:18,560 Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business app. 4 00:00:18,640 --> 00:00:21,920 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:21,960 --> 00:00:23,120 Speaker 1: us live on YouTube. 6 00:00:23,760 --> 00:00:27,480 Speaker 2: Stay in in the TMT space if you will. We're 7 00:00:27,480 --> 00:00:29,200 Speaker 2: going to talk about check in with anorog Ronnie. He's 8 00:00:29,240 --> 00:00:33,360 Speaker 2: a Bloomberg senior tech analyst for Bloomberg Intelligence ANRAG. You know, 9 00:00:34,120 --> 00:00:37,680 Speaker 2: Microsoft as well as anybody put into context for us, 10 00:00:37,960 --> 00:00:40,360 Speaker 2: this cybersecurity attack has been certainly at the top of 11 00:00:40,400 --> 00:00:42,559 Speaker 2: the news here this morning, and it just kind of, 12 00:00:43,080 --> 00:00:44,800 Speaker 2: I think, at least to me, is surprising that a 13 00:00:44,840 --> 00:00:49,120 Speaker 2: company with the resources and the technology expertise of Microsoft 14 00:00:49,120 --> 00:00:51,360 Speaker 2: that they could in fact still be subject to this 15 00:00:51,479 --> 00:00:53,400 Speaker 2: type of risk. How should we think about it? 16 00:00:54,280 --> 00:00:56,400 Speaker 3: Yeah, Paul, when it comes to almost all the major 17 00:00:56,440 --> 00:01:00,360 Speaker 3: tech companies, this is probably the most important and biggest 18 00:01:00,480 --> 00:01:03,400 Speaker 3: risk for them. And again, you know, whether it's Microsoft 19 00:01:03,480 --> 00:01:05,800 Speaker 3: or Amazon or Google, you know, this is one of 20 00:01:05,800 --> 00:01:07,840 Speaker 3: the biggest worries for all of us. Is you know, 21 00:01:07,840 --> 00:01:09,960 Speaker 3: you wake up one morning and you see a big 22 00:01:10,000 --> 00:01:12,080 Speaker 3: outage out there, I mean almost a year ago. We 23 00:01:12,200 --> 00:01:15,480 Speaker 3: remember that CrowdStrike problem and what it did to you know, 24 00:01:15,560 --> 00:01:17,959 Speaker 3: airports and all the other things. Now, but in this 25 00:01:18,000 --> 00:01:21,280 Speaker 3: particular case, I think it's a lot less problematic than 26 00:01:21,600 --> 00:01:24,800 Speaker 3: what we saw a year ago. This is primarily based 27 00:01:24,880 --> 00:01:28,800 Speaker 3: on certain on premise software. I mean, there is an 28 00:01:28,800 --> 00:01:32,280 Speaker 3: on premise version of scarepoint software that they have. This 29 00:01:32,360 --> 00:01:35,880 Speaker 3: is the it's only affecting those particular workloads, so it's 30 00:01:35,880 --> 00:01:38,080 Speaker 3: not as widespread as some of the other areas we 31 00:01:38,160 --> 00:01:38,520 Speaker 3: have seen. 32 00:01:39,000 --> 00:01:41,000 Speaker 4: Now, what does this mean for cybersecurity companies? 33 00:01:42,120 --> 00:01:43,679 Speaker 3: I mean it's a good thing for them. They are 34 00:01:43,800 --> 00:01:46,000 Speaker 3: I mean to be honest, over the last fifteen years 35 00:01:46,000 --> 00:01:48,480 Speaker 3: that I can remember, they're probably the one area it 36 00:01:48,520 --> 00:01:52,000 Speaker 3: doesn't matter what the macro environment is, they continue to grow, 37 00:01:52,120 --> 00:01:54,920 Speaker 3: you know, bigger and bigger. That's because there's so many 38 00:01:54,960 --> 00:01:58,920 Speaker 3: little nuances that I have to be protected. These networks 39 00:01:59,080 --> 00:02:02,960 Speaker 3: have multiple software from multiple vendors, and a lot of 40 00:02:02,960 --> 00:02:07,080 Speaker 3: these companies do some unique things go prevent them endpoints security, 41 00:02:07,480 --> 00:02:10,080 Speaker 3: you know, analytics, you'd name it. I mean, there is 42 00:02:10,160 --> 00:02:12,720 Speaker 3: no shortage off I would say funding for a lot 43 00:02:12,720 --> 00:02:13,560 Speaker 3: of those companies. 44 00:02:14,600 --> 00:02:18,880 Speaker 2: So how do you characters or how do investors characterize 45 00:02:18,960 --> 00:02:22,640 Speaker 2: just cyber crime risk for some of the big tech 46 00:02:22,840 --> 00:02:24,920 Speaker 2: names that you know, the MAGS seven names are just 47 00:02:24,919 --> 00:02:26,920 Speaker 2: a big tech names in general. It's something that we 48 00:02:26,960 --> 00:02:28,919 Speaker 2: don't really talk about too often, do. 49 00:02:28,919 --> 00:02:31,800 Speaker 3: We No, In fact that as I said, I mean, 50 00:02:31,840 --> 00:02:34,120 Speaker 3: I've always said that this is probably the biggest risk 51 00:02:34,160 --> 00:02:37,160 Speaker 3: that faces all of us because remember, now think about it, 52 00:02:37,240 --> 00:02:39,720 Speaker 3: like AWS takes care of a lot of startups site. 53 00:02:39,720 --> 00:02:42,600 Speaker 3: Now you see a problem with that network, the rest 54 00:02:42,600 --> 00:02:44,280 Speaker 3: that then go down. Same thing you could say with 55 00:02:44,400 --> 00:02:49,000 Speaker 3: Google Cloud platform, Microsoft's cloud platform. This particular incidence is 56 00:02:49,040 --> 00:02:52,280 Speaker 3: only for the on premise applications, so you know, in 57 00:02:52,600 --> 00:02:55,079 Speaker 3: a roundabout way, maybe this helps Microsoft in the long 58 00:02:55,120 --> 00:02:57,480 Speaker 3: run that those customers say, you know what, I need 59 00:02:57,520 --> 00:02:59,560 Speaker 3: to move online. I need to move more worklows to 60 00:02:59,560 --> 00:03:02,280 Speaker 3: the cloud. But in totality, I mean you look at 61 00:03:02,320 --> 00:03:05,320 Speaker 3: it from a cyber insurance point of view, insurance companies 62 00:03:05,360 --> 00:03:07,200 Speaker 3: don't even want to go down that route. I mean, 63 00:03:07,200 --> 00:03:09,600 Speaker 3: this is a I mean one of the biggest hidden 64 00:03:09,720 --> 00:03:12,680 Speaker 3: risks for all of us, especially as most of our 65 00:03:12,800 --> 00:03:15,519 Speaker 3: savings are you know, digital and you know placed in 66 00:03:16,120 --> 00:03:20,160 Speaker 3: not in you know, safe boxes, but in investments somewhere. 67 00:03:19,760 --> 00:03:22,360 Speaker 4: Digitally and honor again the text banks. We also had 68 00:03:22,400 --> 00:03:24,680 Speaker 4: some IPO news. You had fig Mal looking to raise 69 00:03:24,720 --> 00:03:26,440 Speaker 4: about a billion dollars us ipo. 70 00:03:27,240 --> 00:03:28,240 Speaker 5: What is Figma? 71 00:03:28,320 --> 00:03:28,760 Speaker 6: What do they do? 72 00:03:28,840 --> 00:03:30,520 Speaker 4: What's their market value? 73 00:03:30,840 --> 00:03:32,799 Speaker 3: Yeah? I was, you know, this is probably one of 74 00:03:32,840 --> 00:03:34,920 Speaker 3: the more interesting companies that I have come across in 75 00:03:34,960 --> 00:03:38,040 Speaker 3: a long while. A few years ago, Adobe made around 76 00:03:38,120 --> 00:03:40,680 Speaker 3: for them, you know, paid twenty billion dollars to buy them, 77 00:03:40,960 --> 00:03:44,160 Speaker 3: that didn't deal didn't go through. They you know, Adobe 78 00:03:44,280 --> 00:03:47,160 Speaker 3: ended up paying pigma billion dollars as sort of breakup fee. 79 00:03:48,000 --> 00:03:51,000 Speaker 3: But now they're going public, so very unique software in 80 00:03:51,080 --> 00:03:53,720 Speaker 3: their market. What they do nobody else does it so well. 81 00:03:54,120 --> 00:03:57,600 Speaker 3: They help you design application all the way from ideation 82 00:03:58,520 --> 00:04:02,040 Speaker 3: to you know, publish applications or you could say, issuing 83 00:04:02,080 --> 00:04:04,800 Speaker 3: applications out there for people. So, you know, we own 84 00:04:04,800 --> 00:04:06,760 Speaker 3: a white boat. You want to discuss this idea with 85 00:04:06,800 --> 00:04:10,840 Speaker 3: a team. Phenomenal software. It has very high market share 86 00:04:11,200 --> 00:04:12,800 Speaker 3: and at this point, to be honest, I do we 87 00:04:12,880 --> 00:04:15,520 Speaker 3: had one product that had some overlap with them, but 88 00:04:15,600 --> 00:04:18,320 Speaker 3: frankly speaking, there isn't a large company out there that's 89 00:04:18,360 --> 00:04:20,640 Speaker 3: a credible competitor for them. So we think this is 90 00:04:20,680 --> 00:04:24,320 Speaker 3: going to be an area where see strong interest. We 91 00:04:24,360 --> 00:04:27,400 Speaker 3: anticipate sales growth north of forty percent both for this 92 00:04:27,520 --> 00:04:30,280 Speaker 3: year and next year. We think revenue could be one 93 00:04:30,320 --> 00:04:33,200 Speaker 3: point six billion by the end of next year. And 94 00:04:33,320 --> 00:04:37,360 Speaker 3: you know, our analysis indicates post evaluation somewhere between you know, 95 00:04:37,480 --> 00:04:40,359 Speaker 3: nineteen and twenty three billion dollars or twenty one billion 96 00:04:40,360 --> 00:04:41,240 Speaker 3: at the midpoint. 97 00:04:41,360 --> 00:04:47,040 Speaker 2: And propose stock symbol for this pending IPOs FIG Bankers 98 00:04:47,080 --> 00:04:49,040 Speaker 2: and Morgan Stanley Goldman Sachs all in a company and 99 00:04:49,080 --> 00:04:51,400 Speaker 2: JP Morgan, so the blue chippers there for that deal 100 00:04:51,680 --> 00:04:54,040 Speaker 2: and anag in your software space. We've had a couple 101 00:04:54,120 --> 00:04:57,479 Speaker 2: of pretty good deals this year. Circle Internet Group wore 102 00:04:57,480 --> 00:04:59,200 Speaker 2: we've I mean, do you expect more? 103 00:05:00,360 --> 00:05:02,880 Speaker 3: I think that. I mean, if you have the capacity 104 00:05:02,880 --> 00:05:05,200 Speaker 3: to go out in this market and raise capital, this 105 00:05:05,320 --> 00:05:08,040 Speaker 3: is really good valuations. I'm very nice right now. I mean, 106 00:05:08,040 --> 00:05:10,960 Speaker 3: I would strongly encourage if there is somebody who's looking 107 00:05:11,000 --> 00:05:13,279 Speaker 3: at it. But at the same time, you know there 108 00:05:13,360 --> 00:05:15,720 Speaker 3: is an issue about do you want to go and 109 00:05:15,800 --> 00:05:19,920 Speaker 3: see your work being scrutinized. Public funding is also very good. 110 00:05:20,080 --> 00:05:22,359 Speaker 3: There is so much private capital out there, so it 111 00:05:22,480 --> 00:05:25,159 Speaker 3: really depends on what somebody is doing. Last year, we 112 00:05:25,200 --> 00:05:28,280 Speaker 3: saw an IPO came out Service Tit and just in 113 00:05:28,320 --> 00:05:30,800 Speaker 3: the first two months or first two quarters of there 114 00:05:31,040 --> 00:05:34,000 Speaker 3: coming out as an IPO, they actually thought demand go 115 00:05:34,200 --> 00:05:36,800 Speaker 3: because people recognize what this company has. I think the 116 00:05:36,839 --> 00:05:39,120 Speaker 3: same could happen to Figma when you know a lot 117 00:05:39,160 --> 00:05:41,240 Speaker 3: of people don't know what these guys do, and you 118 00:05:41,240 --> 00:05:44,000 Speaker 3: know that recognizes the value of the software or the 119 00:05:44,040 --> 00:05:45,760 Speaker 3: company just by going public. 120 00:05:46,560 --> 00:05:50,520 Speaker 2: All right, very good. Anna Agarana, Senior Technology Channels, Bloomberg Intelligence. 121 00:05:50,839 --> 00:05:52,760 Speaker 2: He's in a Chicago. You were talking about a little 122 00:05:52,760 --> 00:05:56,080 Speaker 2: bit about MICROSOFTIC at the cyber security issue that it 123 00:05:56,200 --> 00:05:59,039 Speaker 2: is dealing with. Plus we got some IPOs in the 124 00:05:59,080 --> 00:06:02,880 Speaker 2: software space picking back up. It's always a good sign here. 125 00:06:03,640 --> 00:06:07,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 126 00:06:07,440 --> 00:06:10,799 Speaker 1: weekdays at ten am Eastern on Applecarcklay and Android Auto 127 00:06:10,920 --> 00:06:14,000 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 128 00:06:14,000 --> 00:06:17,040 Speaker 1: get your podcasts, or watch us live on YouTube. 129 00:06:17,480 --> 00:06:20,760 Speaker 4: All right, we're earlier this morning of Verizon CEO Hans Vestsberg. 130 00:06:21,040 --> 00:06:23,560 Speaker 4: He talked to us, talked to Bloomberg Shinali boss Sake 131 00:06:23,600 --> 00:06:25,280 Speaker 4: about some of the things that the company is doing 132 00:06:25,360 --> 00:06:27,320 Speaker 4: right now. They just had their earnings report, but now 133 00:06:27,320 --> 00:06:29,640 Speaker 4: we want to get the analyst view on that. So 134 00:06:29,720 --> 00:06:32,200 Speaker 4: for that we'll bring in John Butler. He's Bloomberg Intelligence 135 00:06:32,279 --> 00:06:37,600 Speaker 4: senior telecom analyst on these Verizon earnings. So John, good 136 00:06:37,640 --> 00:06:40,560 Speaker 4: beat second quarter revenue, raise the profit outlook, what's making 137 00:06:40,560 --> 00:06:41,720 Speaker 4: the company so optimistic? 138 00:06:43,800 --> 00:06:47,880 Speaker 7: So I would characterize when I look at Verizon, I 139 00:06:47,960 --> 00:06:51,600 Speaker 7: think of the phrase game of the inches, right. I 140 00:06:52,520 --> 00:06:57,120 Speaker 7: think the improvements here quartering and quarter rout are incrementally better. 141 00:06:57,880 --> 00:07:02,479 Speaker 7: They're edging towards that acquisition of Frontier, which is really 142 00:07:02,520 --> 00:07:05,920 Speaker 7: going to change the game for them. But in the meantime, 143 00:07:06,000 --> 00:07:09,120 Speaker 7: they put a lot of changes in place in terms 144 00:07:09,120 --> 00:07:14,400 Speaker 7: of their go to market strategy, how they're combating promotions 145 00:07:14,440 --> 00:07:18,040 Speaker 7: coming from T Mobile and AT and T and on 146 00:07:18,080 --> 00:07:21,520 Speaker 7: the margin quarter in and quarter out, I just see 147 00:07:21,560 --> 00:07:24,920 Speaker 7: them doing a better and better job. I think all 148 00:07:24,960 --> 00:07:28,320 Speaker 7: the actions they've taken are starting to work. And so 149 00:07:28,520 --> 00:07:32,160 Speaker 7: taking the long view here, I really think Verizon is 150 00:07:34,320 --> 00:07:37,640 Speaker 7: improving just quarter and in quarter out. And this was 151 00:07:37,680 --> 00:07:41,440 Speaker 7: another quarter where you could look at it in isolation 152 00:07:41,680 --> 00:07:45,120 Speaker 7: and say, you know, it was a solid quarter, a 153 00:07:45,200 --> 00:07:48,200 Speaker 7: little bit mixed on some of the metrics, But I 154 00:07:48,240 --> 00:07:52,160 Speaker 7: think I'm balanced better than last quarter in last year. 155 00:07:52,800 --> 00:07:57,240 Speaker 2: John, what's kind of the positioning of Verizon in the marketplace? Like, 156 00:07:57,280 --> 00:07:59,440 Speaker 2: I've been a long time Verizon wireless customers since the 157 00:07:59,440 --> 00:08:03,520 Speaker 2: beginning of service, actually, and I guess I was initially 158 00:08:03,560 --> 00:08:06,280 Speaker 2: drawn to it because I thought they had the best network. 159 00:08:06,360 --> 00:08:09,200 Speaker 2: So quality, is that still the case because it seems 160 00:08:09,240 --> 00:08:11,760 Speaker 2: like T Mobile's gotten a lot better in quality and 161 00:08:11,960 --> 00:08:13,400 Speaker 2: AT and T. I don't know. 162 00:08:15,080 --> 00:08:17,240 Speaker 7: Yeah, you know, Paul, you bring up a good point. 163 00:08:17,320 --> 00:08:19,760 Speaker 7: I think there's a question mark out there as to 164 00:08:19,800 --> 00:08:24,560 Speaker 7: whether Verizon still has the best network versus T Mobile 165 00:08:24,600 --> 00:08:28,040 Speaker 7: and AT and T. But I think they have a 166 00:08:28,120 --> 00:08:31,720 Speaker 7: slight edge they are in terms of coverage. And it's 167 00:08:31,800 --> 00:08:34,640 Speaker 7: interesting a lot of people ask me about wireless, who 168 00:08:34,720 --> 00:08:38,000 Speaker 7: was the best network? Who should I choose? And the 169 00:08:38,240 --> 00:08:41,640 Speaker 7: one thing that people are always asking about is how's 170 00:08:41,720 --> 00:08:45,000 Speaker 7: their coverage? I think coverage is very important to people, 171 00:08:45,440 --> 00:08:48,000 Speaker 7: and I think when you think on that metric. In 172 00:08:48,120 --> 00:08:52,000 Speaker 7: terms of that metric, for Rizon delivers the bars on 173 00:08:52,040 --> 00:08:55,800 Speaker 7: your smartphone probably more than T Mobile and AT and 174 00:08:55,840 --> 00:09:00,240 Speaker 7: T in terms of download speeds, though I suspect that 175 00:09:00,360 --> 00:09:03,880 Speaker 7: T Mobile probably is gaining the edge here now. 176 00:09:03,880 --> 00:09:07,520 Speaker 4: What about prices. Did did did Verizon increase their prices? 177 00:09:07,559 --> 00:09:08,520 Speaker 4: If so, did that help? 178 00:09:10,440 --> 00:09:10,560 Speaker 2: So? 179 00:09:10,640 --> 00:09:14,840 Speaker 7: We did see in all the carriers are increasing prices 180 00:09:14,960 --> 00:09:18,360 Speaker 7: right now as the market matures and new user growth 181 00:09:18,440 --> 00:09:21,400 Speaker 7: is slowing considerably. The only way you're going to grow 182 00:09:21,440 --> 00:09:26,320 Speaker 7: that important service revenue metric is by raising prices. They 183 00:09:26,360 --> 00:09:30,080 Speaker 7: tend to do it on older plans. For Verizon, stunt 184 00:09:30,080 --> 00:09:33,320 Speaker 7: it over the past six months. As if you look 185 00:09:33,360 --> 00:09:36,000 Speaker 7: over the past year so as AT and T and 186 00:09:36,080 --> 00:09:40,480 Speaker 7: T Mobile, that's flowing through and it's helping to boost 187 00:09:40,520 --> 00:09:44,360 Speaker 7: the service revenue. I think over time they're adding in 188 00:09:44,440 --> 00:09:49,760 Speaker 7: those little extras like you know, device insurance and perks 189 00:09:49,880 --> 00:09:53,079 Speaker 7: like you know, added content that you can purchase at 190 00:09:53,080 --> 00:09:57,240 Speaker 7: a discount through through Verizon, and I think all that 191 00:09:57,320 --> 00:10:00,840 Speaker 7: together is going to continue to provide a lift to 192 00:10:00,960 --> 00:10:05,840 Speaker 7: service revenue. It's nothing special. Again, I'm looking forward to 193 00:10:05,880 --> 00:10:10,559 Speaker 7: that Frontier acquisition where they're going to buy you access 194 00:10:10,679 --> 00:10:16,480 Speaker 7: to two million fiber broadband subscribers and eight million fiber 195 00:10:16,559 --> 00:10:21,120 Speaker 7: homes passed, because once they get a Frontier under the hood, 196 00:10:21,120 --> 00:10:24,200 Speaker 7: they're going to be able to bundle that wireless service 197 00:10:24,400 --> 00:10:27,360 Speaker 7: with fiber and I think that's going to help to 198 00:10:27,920 --> 00:10:31,120 Speaker 7: really drive renewed subscriber growth. 199 00:10:32,000 --> 00:10:34,800 Speaker 2: So, John, use of cash heer, how do they kind 200 00:10:34,840 --> 00:10:37,319 Speaker 2: of allocate it between debt reduction. They've got a lot 201 00:10:37,320 --> 00:10:40,480 Speaker 2: of debt on their balance sheet versus funding that big 202 00:10:40,559 --> 00:10:44,680 Speaker 2: juicy six percent plus dividen yield, so. 203 00:10:44,600 --> 00:10:47,760 Speaker 7: They're doing both. Paul, I think free cash flow is 204 00:10:47,840 --> 00:10:50,480 Speaker 7: going to get a lift from HR one, the new 205 00:10:50,600 --> 00:10:55,160 Speaker 7: tax legislation. It's also a very cash flow rich business. 206 00:10:55,960 --> 00:10:59,120 Speaker 7: As we exit the year. This year, they'll have most 207 00:10:59,200 --> 00:11:03,319 Speaker 7: of their celves sites upgraded with the new C band 208 00:11:03,400 --> 00:11:10,000 Speaker 7: midband spectrum, which again is improving network speeds and enhancing 209 00:11:10,040 --> 00:11:13,440 Speaker 7: their coverage. So that whole project is going to begin 210 00:11:13,520 --> 00:11:16,040 Speaker 7: to wind down a bit as we get to your end, 211 00:11:16,600 --> 00:11:19,600 Speaker 7: so they'll be able to sort of maintain spending without 212 00:11:19,640 --> 00:11:23,560 Speaker 7: having to increase, which is constructive to free cash flow growth. 213 00:11:24,200 --> 00:11:26,280 Speaker 2: All right, John, thanks so much. We appreciate it as always. 214 00:11:26,320 --> 00:11:29,960 Speaker 2: John Butler, Senior telecom analyst for Bloomberg Intelligence. 215 00:11:31,880 --> 00:11:35,560 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 216 00:11:35,640 --> 00:11:39,040 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 217 00:11:39,160 --> 00:11:42,200 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 218 00:11:42,240 --> 00:11:46,400 Speaker 1: get your podcasts. Or watch us live on YouTube. Let's 219 00:11:46,400 --> 00:11:48,920 Speaker 1: go back to the car business and we talk about 220 00:11:48,920 --> 00:11:51,280 Speaker 1: a name. We don't talk I don't think enough about 221 00:11:51,400 --> 00:11:54,360 Speaker 1: or as much as maybe we could. And that is Stillantis. 222 00:11:54,360 --> 00:11:56,760 Speaker 2: I think about the old Chrysler with Fiat and all 223 00:11:56,760 --> 00:11:58,920 Speaker 2: that kind of stuff. I'm not sure what all the 224 00:11:58,960 --> 00:12:01,760 Speaker 2: brands are there, but they at two point seven billion 225 00:12:01,840 --> 00:12:05,720 Speaker 2: dollar charge. Here Steve Manner, Global Autos and Industrials Research 226 00:12:05,760 --> 00:12:09,840 Speaker 2: Channels for Bloomberg Intelligence. He joins us. Here, Steve, what's 227 00:12:09,880 --> 00:12:11,680 Speaker 2: going on with our friends at Stalantis. 228 00:12:12,760 --> 00:12:16,760 Speaker 6: Yeah, so they reported the preliminary first half numbers today. 229 00:12:17,559 --> 00:12:20,400 Speaker 6: They booked a loss and a charge of three point 230 00:12:20,400 --> 00:12:23,840 Speaker 6: three billion. A lot of that is, you know, canceling 231 00:12:23,880 --> 00:12:29,040 Speaker 6: the fuel cell R and D business. They're canceling like 232 00:12:29,080 --> 00:12:33,760 Speaker 6: an EV from Maserati, taking some other charges on recalls 233 00:12:34,640 --> 00:12:39,160 Speaker 6: in tariffs. So overall, at the end of the day, 234 00:12:39,440 --> 00:12:42,440 Speaker 6: I think the if you listen to the call, there's 235 00:12:42,520 --> 00:12:45,800 Speaker 6: really no new bad news, which is good news for 236 00:12:45,920 --> 00:12:48,560 Speaker 6: the company. I don't think it can get any any worse. 237 00:12:49,120 --> 00:12:53,839 Speaker 6: So then that's why the stock's actually reacting positively at 238 00:12:53,840 --> 00:12:54,280 Speaker 6: the moment. 239 00:12:54,720 --> 00:12:57,080 Speaker 4: Steve, what about the president's efforts to dial back the 240 00:12:57,080 --> 00:12:59,920 Speaker 4: sport for evs is that affecting them as well. 241 00:13:00,880 --> 00:13:06,120 Speaker 6: You know, they are revisiting the EV business, not dialing back, 242 00:13:06,200 --> 00:13:09,720 Speaker 6: not so much in Europe, but revisiting it definitely in 243 00:13:09,760 --> 00:13:14,440 Speaker 6: North America. And one thing that it's it's really bad 244 00:13:14,480 --> 00:13:17,080 Speaker 6: for the quarter for them was really their North American business. 245 00:13:17,160 --> 00:13:20,800 Speaker 6: Their North American business drives most of the profit. Shipments 246 00:13:20,840 --> 00:13:24,680 Speaker 6: were down twenty five percent in the first half year 247 00:13:24,679 --> 00:13:27,800 Speaker 6: on year, and a lot of that is controllable. One 248 00:13:27,840 --> 00:13:29,520 Speaker 6: of the things, a couple of things that they are 249 00:13:29,559 --> 00:13:33,480 Speaker 6: doing to kind of arrest that decline is not only 250 00:13:33,520 --> 00:13:37,520 Speaker 6: cutting back on production, but they're relaunching a couple of 251 00:13:37,760 --> 00:13:42,040 Speaker 6: popular models that they've they discontinue. One of them is 252 00:13:42,080 --> 00:13:45,560 Speaker 6: the jeep Jaer Cherokee. It's going to come back later 253 00:13:45,600 --> 00:13:50,000 Speaker 6: this year. And more importantly to stop market share loss 254 00:13:50,080 --> 00:13:52,560 Speaker 6: on their RAM trucks is they're going to reintroduce the 255 00:13:52,640 --> 00:13:55,640 Speaker 6: V eight, so you know, they can't you know, they delayed, 256 00:13:55,720 --> 00:13:57,960 Speaker 6: they didn't really stay canceled, but the delay the EV 257 00:13:58,559 --> 00:14:02,520 Speaker 6: product for the Ram trucks. But now in reintroducing, uh, 258 00:14:02,640 --> 00:14:05,280 Speaker 6: the V eight, which is you know, the biggest engines 259 00:14:05,320 --> 00:14:07,760 Speaker 6: you can get for a gasoline engine you can get 260 00:14:07,800 --> 00:14:08,720 Speaker 6: on a on a truck. 261 00:14:08,920 --> 00:14:12,640 Speaker 2: So where is stalanthis in the world of big auto 262 00:14:13,280 --> 00:14:15,319 Speaker 2: how do you how do they position themselves? I think 263 00:14:15,360 --> 00:14:18,840 Speaker 2: the four GM, Volkswagen, the Chinese players. I'm just not 264 00:14:18,880 --> 00:14:20,640 Speaker 2: sure where to put Stalantis these days. 265 00:14:21,320 --> 00:14:25,560 Speaker 6: Yeah, I think, I mean, they do have an important 266 00:14:25,640 --> 00:14:29,400 Speaker 6: role to play in the auto market. They're really strong 267 00:14:29,480 --> 00:14:32,520 Speaker 6: in Europe's particularly in there what they call the B 268 00:14:32,600 --> 00:14:35,600 Speaker 6: and C segment, which is the hatchback the compacts up 269 00:14:35,680 --> 00:14:36,600 Speaker 6: compact segment. 270 00:14:37,160 --> 00:14:37,280 Speaker 7: Uh. 271 00:14:37,360 --> 00:14:41,560 Speaker 6: They also have really high market share in their commercial 272 00:14:41,640 --> 00:14:46,360 Speaker 6: vehicle business. This is like their Ram transit man that 273 00:14:46,480 --> 00:14:49,440 Speaker 6: you see. You know, a lot of contractors use. You know, 274 00:14:49,480 --> 00:14:52,480 Speaker 6: they have thirty percent market share in Europe. But and 275 00:14:52,520 --> 00:14:56,320 Speaker 6: then again Ram truck is one of the most popular 276 00:14:56,360 --> 00:15:00,960 Speaker 6: pickup trucks in the US market. Unfortunately, you know, for 277 00:15:01,280 --> 00:15:05,640 Speaker 6: and GM has taken share from them because they didn't 278 00:15:05,680 --> 00:15:09,760 Speaker 6: have the V eight when they talked about EV's and 279 00:15:10,560 --> 00:15:13,920 Speaker 6: in more few efficient trucks. But you know, the US 280 00:15:13,960 --> 00:15:17,840 Speaker 6: market is quite different. Commercial users do love the power 281 00:15:18,280 --> 00:15:22,360 Speaker 6: the torque, so they're reintesting reintroducing the V eight just 282 00:15:22,440 --> 00:15:25,400 Speaker 6: to try to bring a game more market share back. 283 00:15:25,760 --> 00:15:28,080 Speaker 4: And they have a new CEO and Tonio Foaloza. He's 284 00:15:28,160 --> 00:15:30,920 Speaker 4: in office for roughly a month, so he's just getting there. 285 00:15:30,960 --> 00:15:33,000 Speaker 4: What are some of the top items on his agenda? 286 00:15:33,040 --> 00:15:33,880 Speaker 4: Has he talked about it? 287 00:15:35,240 --> 00:15:38,080 Speaker 6: No, but we'll hear more about it on July twenty ninth. 288 00:15:38,280 --> 00:15:42,000 Speaker 6: So today's call was just a proliminary, proliminary, preliminary call 289 00:15:42,520 --> 00:15:45,000 Speaker 6: on first half. We're going to hear from the new 290 00:15:45,080 --> 00:15:47,680 Speaker 6: CEO on the twenty ninth, And I think a lot 291 00:15:47,680 --> 00:15:50,840 Speaker 6: of the questions still in the air is, you know, 292 00:15:50,880 --> 00:15:54,320 Speaker 6: what is the strategic direction for the company in terms 293 00:15:54,360 --> 00:15:57,320 Speaker 6: of evs, How are they going to manage the tariffs, 294 00:15:57,640 --> 00:16:00,880 Speaker 6: which is still a big unknown because because you know, 295 00:16:01,000 --> 00:16:05,600 Speaker 6: negotiation is still ongoing with Europe. And then you know, 296 00:16:05,680 --> 00:16:07,600 Speaker 6: what is what are they going to do do with 297 00:16:07,680 --> 00:16:11,840 Speaker 6: some of the kind of slower performing brands like Maserati, 298 00:16:11,920 --> 00:16:15,200 Speaker 6: which is really draining a lot of their cash. 299 00:16:15,320 --> 00:16:17,640 Speaker 2: All right, Steve, thanks so much. Appreciate that Global autos 300 00:16:17,880 --> 00:16:19,640 Speaker 2: Research channels for Bloomberg Intelligence. 301 00:16:21,360 --> 00:16:25,080 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 302 00:16:25,160 --> 00:16:28,520 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 303 00:16:28,640 --> 00:16:31,720 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 304 00:16:31,760 --> 00:16:34,720 Speaker 1: get your podcasts or watch us live on YouTube. 305 00:16:35,080 --> 00:16:36,720 Speaker 2: All right, at least Mitello Paul Sweeney live here on 306 00:16:36,760 --> 00:16:40,360 Speaker 2: our Bloomberg Interactive Broker Studio streaming live on YouTube as well. 307 00:16:40,400 --> 00:16:45,080 Speaker 2: I consider myself a pizza aficionado, So by definition, I'm 308 00:16:45,080 --> 00:16:48,560 Speaker 2: not really a Domino's person because I live in a 309 00:16:48,600 --> 00:16:51,360 Speaker 2: world where there's great local yes, but for a lot 310 00:16:51,400 --> 00:16:53,240 Speaker 2: of the world that's not the case. And so they 311 00:16:53,280 --> 00:16:55,400 Speaker 2: depend on the Dominoes of the world. And they came 312 00:16:55,400 --> 00:16:56,680 Speaker 2: out and you saw that in the number study, some 313 00:16:56,720 --> 00:16:58,840 Speaker 2: pretty good numbers. Let's break it down with Michael Halem, 314 00:16:58,960 --> 00:17:02,560 Speaker 2: Senior Restaurant and Foods are analyst for Bloomberg Intelligence. So 315 00:17:02,640 --> 00:17:05,600 Speaker 2: some pretty good news out of Domino's, Mike, what'd you 316 00:17:05,680 --> 00:17:06,080 Speaker 2: take away? 317 00:17:08,000 --> 00:17:11,000 Speaker 5: Yeah, listen, they've they have some nice tailwinds this year. 318 00:17:11,040 --> 00:17:11,320 Speaker 3: Stuff. 319 00:17:11,320 --> 00:17:15,280 Speaker 5: Gross Pizza has done really well. It's it's really driven 320 00:17:15,359 --> 00:17:17,720 Speaker 5: some strong same star sales here in the first half. 321 00:17:17,760 --> 00:17:20,639 Speaker 5: You know, the industries about flat in the US, and 322 00:17:21,200 --> 00:17:23,480 Speaker 5: you know, they drove are almost three and a half 323 00:17:23,480 --> 00:17:27,160 Speaker 5: percent comp here in the second quarter, so outperforming the 324 00:17:27,200 --> 00:17:32,680 Speaker 5: market by a pretty significant margin. And they also rolled 325 00:17:32,680 --> 00:17:35,840 Speaker 5: out door dash to all their stores in this second quarter. 326 00:17:35,960 --> 00:17:38,600 Speaker 5: And so they're going to start ramping up the marketing 327 00:17:38,640 --> 00:17:41,800 Speaker 5: there and that should give a nice, nice boost the 328 00:17:41,840 --> 00:17:45,600 Speaker 5: shares over the next twelve months or so and maybe beyond. 329 00:17:45,720 --> 00:17:48,119 Speaker 5: And so yeah, for those two reasons, you know, we 330 00:17:48,160 --> 00:17:51,840 Speaker 5: expect them to continue to outpace their QSR Pizza and 331 00:17:51,920 --> 00:17:54,160 Speaker 5: QSR Burger competitors throughout the year end. 332 00:17:54,560 --> 00:17:57,119 Speaker 4: What about their loyalty programs, they know, a lot of 333 00:17:57,200 --> 00:17:58,879 Speaker 4: analysts were saying, you know what, this is going to 334 00:17:58,920 --> 00:18:00,880 Speaker 4: be a big, big boost for them. Did it help 335 00:18:00,880 --> 00:18:01,840 Speaker 4: out we're doing. 336 00:18:02,400 --> 00:18:05,000 Speaker 5: Yeah, that's been they that was the other thing they cited. 337 00:18:05,080 --> 00:18:10,760 Speaker 5: And so, you know, they they rely heavily on households 338 00:18:10,760 --> 00:18:14,120 Speaker 5: making you know, fifty sixty thousand dollars a year and below. 339 00:18:14,760 --> 00:18:17,040 Speaker 5: And so you know, as everyone knows, that's been a 340 00:18:17,119 --> 00:18:20,359 Speaker 5: very weak segment of the restaurant industry for the last 341 00:18:20,680 --> 00:18:23,040 Speaker 5: few years due to all the inflation, right, and so 342 00:18:23,359 --> 00:18:26,720 Speaker 5: to bring people back in, they started lowering the redemption 343 00:18:27,760 --> 00:18:29,960 Speaker 5: the number of points needed to make redemptions on the 344 00:18:30,040 --> 00:18:36,679 Speaker 5: loyalty program, and it's been successfully bringing in more carry 345 00:18:36,680 --> 00:18:39,919 Speaker 5: out consumers, which are typically lower income, right, And so 346 00:18:40,080 --> 00:18:43,520 Speaker 5: by bringing those consumers in, you know, it's definitely given 347 00:18:43,640 --> 00:18:45,959 Speaker 5: a boost to their traffic over the last three quarters 348 00:18:46,040 --> 00:18:47,280 Speaker 5: or so. 349 00:18:47,280 --> 00:18:51,520 Speaker 2: So, what's Dominoes and some of the other restaurant chains 350 00:18:51,520 --> 00:18:54,440 Speaker 2: that you cover, Mike, what are they saying about tariffs 351 00:18:54,480 --> 00:18:57,480 Speaker 2: and how that might impact their costs and how much 352 00:18:57,480 --> 00:18:59,840 Speaker 2: of their costs will they take in margin versus pest 353 00:19:00,040 --> 00:19:02,679 Speaker 2: along to consumers? Is their consensus building? 354 00:19:04,800 --> 00:19:10,320 Speaker 5: It depends on the chain. But you know, luckily, restaurants 355 00:19:10,359 --> 00:19:13,600 Speaker 5: source a large majority of their product in the in 356 00:19:13,640 --> 00:19:16,600 Speaker 5: the country in which they're operating, right, So Dominoes operates 357 00:19:16,600 --> 00:19:19,360 Speaker 5: in over eighty markets, and and all of their products, 358 00:19:20,280 --> 00:19:23,920 Speaker 5: you know, all of their countries largely source everything domestically, right, 359 00:19:24,000 --> 00:19:26,359 Speaker 5: And so restaurants are in a good space, you know, 360 00:19:26,400 --> 00:19:31,200 Speaker 5: the restaurants companies, the stocks got hammered back in April. 361 00:19:31,320 --> 00:19:32,919 Speaker 5: You know, I think that was largely a case of 362 00:19:33,000 --> 00:19:36,360 Speaker 5: the baby being thrown out with the bathwater, because restaurants 363 00:19:36,400 --> 00:19:41,000 Speaker 5: have very low exposure to tariffs, and I think we've 364 00:19:41,080 --> 00:19:44,280 Speaker 5: seen that in the rebound since April. You know, some 365 00:19:44,320 --> 00:19:46,440 Speaker 5: of the restaurant names we cover, you know, two ones 366 00:19:46,440 --> 00:19:49,600 Speaker 5: that we like, Shakeshack and Crackerball. They've rallied one hundred 367 00:19:49,600 --> 00:19:53,160 Speaker 5: percent over the last couple months. And I think they're 368 00:19:53,200 --> 00:19:55,600 Speaker 5: in a good place because you know, if people do 369 00:19:55,760 --> 00:19:59,679 Speaker 5: recognize some price increases at retail, at the mall, stuff 370 00:19:59,720 --> 00:20:02,479 Speaker 5: like that, at whatever it is, fifteen to twenty percent, 371 00:20:02,640 --> 00:20:05,480 Speaker 5: they're not going to see those same increases in restaurants 372 00:20:05,480 --> 00:20:08,320 Speaker 5: and may you know, look at as a better value. 373 00:20:08,720 --> 00:20:11,080 Speaker 4: So people are still dining out as much as they 374 00:20:11,200 --> 00:20:13,840 Speaker 4: used to because I know, I consider myself thrifty. So 375 00:20:14,080 --> 00:20:16,920 Speaker 4: I cook the entire week and then we pick one 376 00:20:17,040 --> 00:20:18,920 Speaker 4: night where we go out to eat. It's a Friday, 377 00:20:18,960 --> 00:20:21,959 Speaker 4: you know, because Mama don't cook on Fridays. So are 378 00:20:22,080 --> 00:20:24,520 Speaker 4: more do you see that kind of a change in 379 00:20:24,600 --> 00:20:27,240 Speaker 4: the habits of the people who are going to eat out? 380 00:20:28,119 --> 00:20:30,919 Speaker 5: Well, we've seen that, there's no doubt, especially due to 381 00:20:30,920 --> 00:20:35,760 Speaker 5: all the inflation. We've seen traffic decline now for several 382 00:20:35,840 --> 00:20:39,359 Speaker 5: years in a row. But restaurants have been able to, 383 00:20:39,640 --> 00:20:41,199 Speaker 5: you know, the ones that are doing well have been 384 00:20:41,240 --> 00:20:45,240 Speaker 5: able to more than offset that with price increases. Right 385 00:20:45,240 --> 00:20:47,840 Speaker 5: and obviously the best performers of the bunch are absolutely 386 00:20:48,200 --> 00:20:51,200 Speaker 5: able to drive traffic. And it's that's really about providing 387 00:20:51,240 --> 00:20:54,200 Speaker 5: a very good experience. Right now, people are very discerning 388 00:20:54,280 --> 00:20:57,280 Speaker 5: about where they're going to spend their restaurant dollars when 389 00:20:57,280 --> 00:20:58,920 Speaker 5: they go out. They want to make sure they're not 390 00:20:59,000 --> 00:21:02,400 Speaker 5: going to have a bad experience, and so they're continuing 391 00:21:02,480 --> 00:21:08,159 Speaker 5: to go to places. You know, think Texas Roadhouse is 392 00:21:08,200 --> 00:21:10,840 Speaker 5: one that really stands out. They're going to a place 393 00:21:10,840 --> 00:21:12,879 Speaker 5: where they know they can get good value on the 394 00:21:12,920 --> 00:21:16,840 Speaker 5: plate for what they pay, a very consistent experience, right, 395 00:21:16,880 --> 00:21:20,280 Speaker 5: And because of that, you're seeing a wider divergence between 396 00:21:20,320 --> 00:21:22,280 Speaker 5: the winners and losers in the restaurant space. 397 00:21:23,680 --> 00:21:26,439 Speaker 2: Mike, how about labor? President Trump has effectively shut the 398 00:21:26,480 --> 00:21:29,879 Speaker 2: southern border. Have your companies who typically who rely to 399 00:21:29,920 --> 00:21:32,640 Speaker 2: some degree on that labor force, are they seeing it yet? 400 00:21:34,200 --> 00:21:38,400 Speaker 5: Yeah, you know, everybody's logged onto e verify and most 401 00:21:38,400 --> 00:21:41,480 Speaker 5: of our chains, you know, are making sure that their 402 00:21:41,520 --> 00:21:47,000 Speaker 5: employees are have papers and are operating legally. It's more 403 00:21:47,040 --> 00:21:51,320 Speaker 5: of an impact to I would say, the independent restaurants 404 00:21:51,320 --> 00:21:53,760 Speaker 5: in the country. But then you know what happens is 405 00:21:53,800 --> 00:21:57,919 Speaker 5: that ends up being a price competition, and so it 406 00:21:58,000 --> 00:22:01,160 Speaker 5: drives up prices for labor. And we're seeing another year 407 00:22:01,200 --> 00:22:04,119 Speaker 5: of about four to five percent wag ery inflation in 408 00:22:04,160 --> 00:22:05,480 Speaker 5: the restaurant industry this year. 409 00:22:06,400 --> 00:22:09,600 Speaker 4: And are we changing how people are changing how they eat. Right, So, 410 00:22:09,640 --> 00:22:12,199 Speaker 4: in the last thirty seconds or so, GLP ones. Our 411 00:22:12,200 --> 00:22:15,040 Speaker 4: restaurant's cutting back on those portions, making things smaller, you know, 412 00:22:15,119 --> 00:22:15,840 Speaker 4: less on your plate. 413 00:22:16,880 --> 00:22:19,680 Speaker 5: Well they are, but mainly because of inflation. 414 00:22:19,840 --> 00:22:20,359 Speaker 3: Well there you go. 415 00:22:21,160 --> 00:22:24,840 Speaker 5: You know, GLP ones, you know over time, you know, 416 00:22:24,920 --> 00:22:28,240 Speaker 5: we expect that to be the biggest way to combat 417 00:22:28,280 --> 00:22:31,800 Speaker 5: that is to decrease the portion sizes and to make 418 00:22:31,800 --> 00:22:33,960 Speaker 5: sure you have some healthy options on the menu. 419 00:22:34,640 --> 00:22:38,160 Speaker 2: Michael Helen, Thanks, We always appreciate chatting with you. Getting 420 00:22:38,200 --> 00:22:41,440 Speaker 2: the lay of the land in the restaurant business. Again Domino's, 421 00:22:41,440 --> 00:22:43,880 Speaker 2: but got some good numbers here today, so good for them. 422 00:22:44,000 --> 00:22:46,560 Speaker 2: Michael Helen a senior restaurant in food service analyst or 423 00:22:46,600 --> 00:22:50,399 Speaker 2: Bloomberg Intelligence. He's based down there in our Princeton office. 424 00:22:50,960 --> 00:22:55,639 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 425 00:22:55,840 --> 00:22:59,320 Speaker 1: and anywhere else you get your podcasts. Listen live each 426 00:22:59,320 --> 00:23:03,080 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 427 00:23:03,200 --> 00:23:06,720 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 428 00:23:07,160 --> 00:23:10,120 Speaker 1: You can also watch us live every weekday on YouTube 429 00:23:10,480 --> 00:23:12,760 Speaker 1: and always on the Bloomberg terminal