WEBVTT - BI Weekend: Buffett Apple Stake, US Earnings 0:00:00.600 --> 0:00:12.560 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence 0:00:12.640 --> 0:00:14.400 with Alex Steinhl and Paul'sweenye. 0:00:14.480 --> 0:00:17.720 The real app performance has been the US corporate high yield. 0:00:17.880 --> 0:00:20.239 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.280 --> 0:00:24.079 The semiconductor business is a really cyclical business. 0:00:23.560 --> 0:00:27.160 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.840 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:31.040 These are two. 0:00:31.000 --> 0:00:33.120 Big time blue chip companies. 0:00:33.280 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.040 --> 0:00:41.960 Bloomberg Intelligence with Alex Steinel and Paul'sweenye on Bloomberg Radio. 0:00:43.520 --> 0:00:45.959 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:46.000 --> 0:00:48.360 business stories impacting Wall Street and the global markets. 0:00:48.440 --> 0:00:50.920 Each and every week we provide research and data on 0:00:50.960 --> 0:00:52.720 some of the two thousand companies and one hundred and 0:00:52.720 --> 0:00:55.080 thirty industries our analysts cover worldwide. 0:00:55.160 --> 0:00:57.520 Today, we'll look at why the ride sharing company Uber 0:00:57.760 --> 0:00:59.800 reported better than expected orders last quarter. 0:01:00.080 --> 0:01:01.360 L as we'll look at earnings from one of the 0:01:01.400 --> 0:01:04.039 world's biggest producers of heavy machinery, Caterpillar. 0:01:04.319 --> 0:01:07.200 First, we begin with the diversified holding company Berkshire Hathaway. 0:01:07.319 --> 0:01:09.679 The company recently slashed at steak in Apple by almost 0:01:09.680 --> 0:01:12.160 fifty percent. Now it was part of a massive second 0:01:12.200 --> 0:01:14.920 quarter sellings bree that sent billionaire Warren Buffets cash pile 0:01:15.000 --> 0:01:18.280 to a record two hundred and seventy six point nine billion. 0:01:18.000 --> 0:01:20.720 Dollars for more. Guest host Jessman and I were joined 0:01:20.720 --> 0:01:24.840 by Matthew Palozola, Bloomberg Intelligence senior analysts Property and Casualty Insurance, 0:01:25.120 --> 0:01:28.440 and Matthew began by discussing why Buffett may have decided 0:01:28.480 --> 0:01:29.600 to trim mistake in Apple. 0:01:29.760 --> 0:01:31.440 They kind of telegraphed a little bit that they were 0:01:31.440 --> 0:01:34.240 probably going to sell more at their annual meeting in May. 0:01:35.280 --> 0:01:38.840 Buffett had warned about tax rates going up potentially in 0:01:38.880 --> 0:01:41.640 the future and maybe taking some gains off the table. 0:01:42.120 --> 0:01:44.120 Tim Cook was actually sitting there and the audience was 0:01:44.200 --> 0:01:45.800 kind of funny, and that they had sold I think 0:01:45.840 --> 0:01:48.480 it was like ten to thirteen percent of their holdings 0:01:48.480 --> 0:01:51.280 at that time, and they got questions on it, and 0:01:51.280 --> 0:01:54.080 it just seemed body language wise that they would be 0:01:54.120 --> 0:01:57.400 selling a little more. So I think tax rates, he 0:01:57.720 --> 0:02:00.280 if it's been a little weary on exposure to China 0:02:00.400 --> 0:02:01.040 for some company. 0:02:01.080 --> 0:02:02.360 So I think those two played a. 0:02:02.280 --> 0:02:05.600 Big role and actually had mentioned to you before when 0:02:05.640 --> 0:02:07.559 we're off air, kind of trying to pick your brain 0:02:07.640 --> 0:02:10.680 because Apple, if just for people to remind them, it 0:02:10.760 --> 0:02:13.359 was underperformed the S and P five hundred tremendously in 0:02:13.400 --> 0:02:15.280 the first quarter. It was one of its worst quarters 0:02:15.280 --> 0:02:17.760 relative to the index, probably like the fourth or fifth 0:02:17.800 --> 0:02:19.880 worse since the dot com bubble burst. But then it 0:02:20.000 --> 0:02:23.120 bottomed in April and has been up close to thirty 0:02:23.160 --> 0:02:25.160 percent since then, and so the S and P five 0:02:25.240 --> 0:02:27.360 hundred that span has only been up about four percent. 0:02:27.720 --> 0:02:30.320 So you were saying you didn't think even just the 0:02:30.400 --> 0:02:32.280 rally that we've seen was as much of a factor 0:02:32.400 --> 0:02:34.040 either as far as why they turn their stick. 0:02:34.200 --> 0:02:35.760 Yeah, I don't think so. I mean, more buff it's 0:02:35.760 --> 0:02:38.240 not out there trying to time the market one way 0:02:38.360 --> 0:02:41.799 or another. And you know, he looks at these stock 0:02:41.880 --> 0:02:45.520 investments as if he's, you know, buying the company. So 0:02:45.919 --> 0:02:48.080 he also said at the annual meeting he expected Apple 0:02:48.120 --> 0:02:51.040 to be their biggest holding at the end of this year. 0:02:51.320 --> 0:02:52.040 It still is. 0:02:52.200 --> 0:02:55.440 So, I mean, it was that stock was about forty 0:02:55.480 --> 0:02:58.720 percent of their portfolio before this move. So I'm not 0:02:58.760 --> 0:03:01.000 surprised to see him take some cost of. 0:03:00.720 --> 0:03:02.880 How much cash did they have at Berkshire Hathaway today 0:03:02.880 --> 0:03:05.560 and so any any ideas what they might do. 0:03:05.560 --> 0:03:09.200 With it always a tough one, Paul. It's I think 0:03:09.240 --> 0:03:12.200 at a two hundred and seventy eight billion dollars, which 0:03:12.200 --> 0:03:13.840 I thought was a mistake when I first saw it, 0:03:13.880 --> 0:03:17.400 because they were at like less than two hundred before 0:03:17.840 --> 0:03:20.120 the sale of the apples, like brought in a lot 0:03:20.160 --> 0:03:23.560 of cash. Higher interest rates have taken a lot of 0:03:23.560 --> 0:03:27.360 pressure off them holding cash. I was calculating that just 0:03:27.400 --> 0:03:31.000 a simple after tax return on the cash would help 0:03:31.040 --> 0:03:33.720 their earnings by at least five percent next year, right, 0:03:33.760 --> 0:03:34.960 so just holding it. 0:03:34.880 --> 0:03:35.560 Will be okay. 0:03:35.920 --> 0:03:37.600 They bought a big steak and chob that would be 0:03:37.880 --> 0:03:41.280 an interesting megadal and not really predicting that would happen, 0:03:41.400 --> 0:03:44.560 but just seeing that, I mean, I think the next 0:03:44.600 --> 0:03:48.320 deal Buffett does probably something we don't even really understand 0:03:48.320 --> 0:03:51.480 what it is, like, you know, makes unique parts for 0:03:51.560 --> 0:03:53.720 some materials or something like that. 0:03:54.040 --> 0:03:56.880 It's interesting too because at a certain point they're holding 0:03:56.920 --> 0:03:59.280 an apple was so big that it took up basically 0:03:59.280 --> 0:04:02.400 half of its portfolio. So for in your kind of view, 0:04:02.440 --> 0:04:04.160 does it make sense to make a move like. 0:04:04.120 --> 0:04:06.280 That, Yeah, I mean you know, I don't know if 0:04:06.280 --> 0:04:09.120 anyone wants to have one stock makeup, you know, half 0:04:09.120 --> 0:04:12.280 of their portfolio. He had said he would love to 0:04:12.320 --> 0:04:14.839 have owned the whole company at one point or something. Also, 0:04:14.920 --> 0:04:16.920 keep in mind Bank of America was also their second 0:04:16.920 --> 0:04:18.719 biggest holding them and selling a lot of that in 0:04:18.720 --> 0:04:21.200 the third quarter, So I do think he's really looking 0:04:21.240 --> 0:04:21.960 at concentration. 0:04:22.760 --> 0:04:25.200 So some reporting, I think it was in the Times 0:04:25.320 --> 0:04:28.479 about Bill Gates and Warren Buffett relationship maybe not as 0:04:28.560 --> 0:04:30.440 tight as before, any thoughts there. 0:04:30.960 --> 0:04:34.440 So what has been happening is Buffett's part of the 0:04:34.480 --> 0:04:36.440 Giving pledge where he gives away a bunch of his 0:04:36.839 --> 0:04:37.839 wealth over time. 0:04:38.040 --> 0:04:40.159 And I am not I'm going to spend every least dollar. 0:04:40.600 --> 0:04:42.880 I'm not either, I don't have enough wealth to give away. So, 0:04:43.560 --> 0:04:46.440 but he was giving a lot of his money annually 0:04:46.480 --> 0:04:50.000 to the Bill Gates Foundation. What happened, I don't remember 0:04:50.040 --> 0:04:51.240 when it was. I think it was probably the end 0:04:51.279 --> 0:04:54.960 of last year. He had announced that he would when 0:04:54.960 --> 0:04:58.440 he passes away, that his children are going to inherit 0:04:59.400 --> 0:05:02.160 the share in a foundation to be used for charity. 0:05:02.240 --> 0:05:05.560 I think I think before that the Gates Foundation was 0:05:06.640 --> 0:05:08.440 I don't know if it was official, but was at 0:05:08.480 --> 0:05:10.240 least thought was going to get some of that. I 0:05:10.279 --> 0:05:12.440 don't know about the relationship between the two of them. 0:05:12.480 --> 0:05:13.040 I just know. 0:05:13.120 --> 0:05:16.839 That that was the case, and I think, you know 0:05:16.880 --> 0:05:20.279 he's given tens of billions to the Gates Foundation over time. 0:05:20.320 --> 0:05:24.080 Anyway, our thanks to Matthew Palisola, Bloomberg Intelligence Senior Analyst 0:05:24.200 --> 0:05:25.680 for Property and Casualty Insurance. 0:05:26.160 --> 0:05:28.920 We moved next to the media and entertainment company Walt Disney. 0:05:29.200 --> 0:05:32.440 This week, Disney reported mixed third quarter results and weakness 0:05:32.520 --> 0:05:34.800 had its fame theme parks all set its first ever 0:05:34.839 --> 0:05:36.400 profit in streaming for more. 0:05:36.400 --> 0:05:39.120 We were joined by gither On Ganatan, Bloomberg Intelligence analyst 0:05:39.200 --> 0:05:39.960 on US media. 0:05:40.279 --> 0:05:43.160 We first asked for Geitha's reaction to Disney's numbers. 0:05:43.480 --> 0:05:46.800 As expected, there was weakness in the parts segment. But 0:05:46.839 --> 0:05:49.880 I think what kind of spooking investors is not just 0:05:49.960 --> 0:05:53.600 the magnitude. So they had expected kind of flatish profits 0:05:53.680 --> 0:05:56.599 for the quarter that they just reported. They actually reported 0:05:56.920 --> 0:06:00.240 a three percent profit decline. But I think I think 0:06:00.279 --> 0:06:03.679 what is more disconcerting is that they expect to see 0:06:03.760 --> 0:06:07.120 kind of this lingering weakness in the park segment, so 0:06:07.160 --> 0:06:11.159 they're saying a mid single digit operating income decline again 0:06:11.240 --> 0:06:13.880 in the next quarter, and they expect the softness to 0:06:14.000 --> 0:06:17.839 last out a few more quarters. So obviously the consumer 0:06:17.960 --> 0:06:20.200 is not going to come back in a big way 0:06:20.440 --> 0:06:22.480 for at least another three four quarters. And I think 0:06:22.520 --> 0:06:24.680 that is definitely creating some nervousness. 0:06:24.720 --> 0:06:26.440 Did I tell you I canceled my Disney trip? 0:06:26.680 --> 0:06:26.960 Whoa? 0:06:27.720 --> 0:06:29.360 I was like, you know what, I don't want to 0:06:29.400 --> 0:06:31.919 spend six grand on this. And I wasn't even like 0:06:31.960 --> 0:06:34.560 going anywhere fancy. I was just like, this is ridiculous 0:06:34.560 --> 0:06:35.960 for four days, no kidding. 0:06:36.040 --> 0:06:38.440 Yeah, did you know? Did you tell your daughter this? 0:06:38.800 --> 0:06:40.440 I didn't tell we were going to be good, So 0:06:40.520 --> 0:06:44.080 I really saved myself on that one. Yeah. But we 0:06:44.200 --> 0:06:46.320 know that the consumer is slowing, right, We got that 0:06:46.360 --> 0:06:49.720 from Comcast, for example, in their parks. But they made 0:06:49.760 --> 0:06:51.960 a profit in streaming. I mean, come on, isn't that 0:06:52.000 --> 0:06:53.000 what we really care about? 0:06:53.360 --> 0:06:57.039 That is streaming profitability has been a big focus. They 0:06:57.160 --> 0:07:00.000 have turned the corner and it's obviously going to continue 0:07:00.160 --> 0:07:03.520 to be a big earnings growth driver. Remember just yesterday 0:07:03.520 --> 0:07:07.280 they actually raised prices or they're planning to raise prices 0:07:07.320 --> 0:07:10.080 across all of their streaming tiers, including as much as 0:07:10.600 --> 0:07:13.800 a twenty five percent hike on their ad supported tier. 0:07:14.160 --> 0:07:16.760 So you know, this is going to become a significant 0:07:16.760 --> 0:07:19.560 earnings growth driver going forward. And then one of the 0:07:19.600 --> 0:07:22.000 things that we've really been complaining about with Disney, and 0:07:22.200 --> 0:07:25.760 I think investors have also been a little bit worried about, 0:07:25.840 --> 0:07:27.640 has been kind of their content engine. 0:07:27.680 --> 0:07:29.280 But they're really kind of back with the bank. 0:07:29.400 --> 0:07:31.640 So you know, obviously they had the huge success of 0:07:31.680 --> 0:07:33.880 Inside Out too in the quarter that they just reported, 0:07:34.200 --> 0:07:36.840 and then now you have Marvel's Deadpool and Wolverine, which 0:07:36.880 --> 0:07:38.960 I think is your favorite Alex and that, Yeah, it 0:07:39.000 --> 0:07:41.320 is so Githa. 0:07:41.560 --> 0:07:43.800 Going back to Alex's point, I mean, if somebody like 0:07:43.800 --> 0:07:47.320 an ox steal cancels a Disney theme park trip concerned 0:07:47.360 --> 0:07:50.960 about price, is there a fundamental concern that this is 0:07:51.320 --> 0:07:53.440 just kind of outpriced themselves out of the market, that 0:07:53.480 --> 0:07:54.600 they're starting to hurt demand. 0:07:54.920 --> 0:07:58.120 Yeah, that definitely is is a huge concern right now. 0:07:58.160 --> 0:07:59.960 Poland so I think what we're going to see is 0:08:00.040 --> 0:08:02.360 they obviously are not going to be able to raise prices. 0:08:02.360 --> 0:08:05.920 We were seeing something like a forty percent increase in 0:08:05.960 --> 0:08:09.120 per capita spending, you know, across the park for many, 0:08:09.120 --> 0:08:11.240 many quarters. But I think what they kind of did 0:08:11.360 --> 0:08:14.600 was they over forecasted demand and under forecasted the reversal 0:08:14.720 --> 0:08:17.920 from from that pent up pandemic demand, And so that 0:08:18.080 --> 0:08:20.160 is what we really are going to see play out 0:08:20.200 --> 0:08:23.040 over the next few quarters. Having said that, though, I mean, 0:08:23.280 --> 0:08:26.120 you know, yes, the domestic park business is going to 0:08:26.120 --> 0:08:29.760 see some softness, but they do have the cruise business, 0:08:29.800 --> 0:08:31.560 which obviously is going to take off in a big way. 0:08:31.600 --> 0:08:33.800 They have three new ships that are coming on board 0:08:34.200 --> 0:08:37.600 over the next few quarters, So they are expecting some 0:08:37.720 --> 0:08:40.360 of that softness in the domestic parks to kind of 0:08:40.360 --> 0:08:43.040 get offset. But again it's going to be kind of 0:08:43.040 --> 0:08:43.840 a wait and see. 0:08:43.920 --> 0:08:46.400 Our thanks to keith I Mronggannath and Bloomberg Intelligence analyst 0:08:46.480 --> 0:08:48.120 on US media, we moved. 0:08:48.000 --> 0:08:51.880 To earnings from America's leading health solutions company see vs Health. 0:08:52.080 --> 0:08:54.680 This week's CBS lowered it's twenty twenty four earnings outlook 0:08:54.720 --> 0:08:55.839 for the third straight quarter. 0:08:56.080 --> 0:08:58.600 The company also announced cost cutting measures to save two 0:08:58.679 --> 0:09:01.559 billion dollars over several year. This comes to as healthcare 0:09:01.640 --> 0:09:02.680 costs continue to soar. 0:09:02.920 --> 0:09:05.520 For more, we were joined by Jonathan Palmer Bloomberg intelligence 0:09:05.520 --> 0:09:07.720 and your healthcare analysts, and we first asked him for 0:09:07.800 --> 0:09:09.880 his take on CBS's quarterly results. 0:09:10.280 --> 0:09:13.600 Yeah, so this is the third consecutive downward revision to earnings, 0:09:13.640 --> 0:09:16.120 and it started with four Q earnings and one Q 0:09:16.320 --> 0:09:18.960 than two Q. And really it all comes back to 0:09:19.280 --> 0:09:21.760 higher medical costs. And so if you think about CVS, 0:09:21.800 --> 0:09:24.199 there's three legs at the stool. Here, there's the ETNA business, 0:09:24.200 --> 0:09:26.720 which is there big and sure, there's a PBM care mark, 0:09:26.920 --> 0:09:29.440 and the pharmacy that we all think about. The pharmacy 0:09:29.520 --> 0:09:33.280 stable there's some pressure and consumer the PBM's doing pretty well. 0:09:33.520 --> 0:09:36.760 But the medical business, the benefits business, is seeing all 0:09:36.800 --> 0:09:40.120 these revisions downward as people are visiting their doctor more. 0:09:40.280 --> 0:09:43.440 So basically this is like if I own CVS Medical, 0:09:43.559 --> 0:09:45.320 I go to my doctor, I pay my forty buck 0:09:45.360 --> 0:09:49.080 cope or whatever, and then they bill CBS for that. 0:09:49.800 --> 0:09:52.360 Well, so the insurer this is on the Medicare side, 0:09:52.400 --> 0:09:55.000 the Medicare van plan. So a lot more seniors are 0:09:55.040 --> 0:09:57.320 visiting their doctors and that trend we saw it at 0:09:57.320 --> 0:09:59.200 the end of last year and we thought it would 0:09:59.200 --> 0:10:02.000 maybe subside by the midpoint of this year, but it's 0:10:02.000 --> 0:10:04.320 still elevated. Going into the back half and it's causing 0:10:04.320 --> 0:10:05.480 a lot of trouble for CBS. 0:10:06.080 --> 0:10:07.680 Sorry, no, I was gonna say, but don't think it 0:10:07.720 --> 0:10:10.040 reimbursed by the government. Like how does that work though? 0:10:10.200 --> 0:10:12.400 Well, so, the way the plans work is they bid 0:10:12.440 --> 0:10:14.640 a certain amount and then that's how they get paid. 0:10:14.679 --> 0:10:17.640 And so if the trend trends higher, they don't make 0:10:17.679 --> 0:10:20.160 quite as much money based on what they bid initially 0:10:20.200 --> 0:10:20.880 on the plans. 0:10:21.440 --> 0:10:24.040 So what can the company do to kind of Yeah, 0:10:24.160 --> 0:10:24.840 so there's. 0:10:24.640 --> 0:10:26.760 A couple of things they can do. They can exit markets. 0:10:27.000 --> 0:10:29.720 They can ratchet down the benefits that they're providing, so 0:10:29.800 --> 0:10:32.280 Medicare advantage is a little bit different than traditional medicare, 0:10:32.280 --> 0:10:34.520 and that they can offer things like dental and vision. 0:10:34.920 --> 0:10:38.040 They can ratchet some of those extra benefits down, but 0:10:38.080 --> 0:10:40.480 it takes time because these are planned cycles, so like 0:10:40.480 --> 0:10:42.280 we won't see any benefit until next year. 0:10:43.440 --> 0:10:45.840 This is like the whole issue with people living longer, right, 0:10:46.120 --> 0:10:49.640 Like you have people living longer they're on medicare, right, 0:10:49.679 --> 0:10:51.320 and then this is kind of what happens. How do 0:10:51.360 --> 0:10:54.040 we solve for this though? Long term? How does a 0:10:54.080 --> 0:10:55.920 company solve for this longer term? 0:10:56.240 --> 0:10:58.680 Yeah, I think it's getting a better handle around the 0:10:58.760 --> 0:11:03.479 trends and how they price they're offering. Interestingly enough, CVS 0:11:03.520 --> 0:11:05.920 just let go of the executive who's in charge of 0:11:05.920 --> 0:11:08.520 this benefits and the CEO and CFO are stepping in 0:11:08.559 --> 0:11:11.200 to run the day today. So there's a lot of 0:11:11.200 --> 0:11:12.600 work to be done in a lot of wood to chop. 0:11:12.640 --> 0:11:16.319 There may be a dumb question who are CBS's competitors, 0:11:16.360 --> 0:11:18.280 considering they're in so many businesses. 0:11:18.520 --> 0:11:21.400 Well, on the pharmacy side, it's Walgreens, it's Walmart, it's 0:11:21.520 --> 0:11:25.880 cost Co. On the PBM side, it's Signa's express Scripts, 0:11:26.320 --> 0:11:29.000 United Health's Optum, and then it's the whole smattering of 0:11:29.040 --> 0:11:31.240 insurers from Humanity and United Health. 0:11:31.280 --> 0:11:36.200 Signa elevance political risk, Johnathan, I know your industry cares 0:11:36.200 --> 0:11:38.960 who's in the White House, who's in Congress. What's the 0:11:39.000 --> 0:11:40.560 feeling from the healthcare steg. 0:11:40.640 --> 0:11:45.000 Yeah, we generally are our regulatory analyst in Washington, Dwayne 0:11:45.040 --> 0:11:47.760 Wright doesn't see too much risk through this election cycle. 0:11:48.160 --> 0:11:50.840 You know, everybody talks about drug prices. Biden put in 0:11:50.880 --> 0:11:54.080 the IRA that's come to pass. There's a lot of 0:11:54.080 --> 0:11:57.560 saber rattling around PBMs, but usually nothing actually happens at 0:11:57.600 --> 0:11:59.560 the end of the day. It's more about the headline 0:11:59.640 --> 0:12:02.840 risk there, so we're not too worried about the regulatory 0:12:02.920 --> 0:12:04.600 landscape going into the election cycle. 0:12:04.960 --> 0:12:06.640 What's the best part of your space, what's the name 0:12:06.760 --> 0:12:08.839 or the area that people are most enthused about. 0:12:09.000 --> 0:12:11.760 Yeah, So on the healthcare technology side, there's a lot 0:12:11.800 --> 0:12:14.560 of interest there. You know, AI's kind of creeped into everything, 0:12:14.600 --> 0:12:17.000 and there was recently an IPO of a company called 0:12:17.040 --> 0:12:22.720 tempest Ai that does diagnostics and provides data to drug manufacturers, 0:12:22.720 --> 0:12:24.680 so they're kind of marrying those two data sets in 0:12:24.679 --> 0:12:25.600 a very interesting way. 0:12:25.880 --> 0:12:28.960 Our thanks to Jonathan Palmer, Bloomberg Intelligence senior healthcare analysts. 0:12:29.240 --> 0:12:31.360 Coming up, we're going to break down why Google recently 0:12:31.360 --> 0:12:33.400 lost an antitrust lawsuit in the US. 0:12:33.520 --> 0:12:36.440 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing end 0:12:36.480 --> 0:12:38.599 up with research and data on two thousand companies in 0:12:38.720 --> 0:12:41.480 one hundred and thirty industries. You can access Bloomberg Intelligence 0:12:41.559 --> 0:12:42.760 via bi go in the terminal. 0:12:42.880 --> 0:12:46.240 I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg. 0:12:50.559 --> 0:12:50.679 Now. 0:12:51.280 --> 0:12:55.160 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:12:55.240 --> 0:12:57.880 weekdays at ten am Eastern on Apple car Play, and 0:12:57.880 --> 0:13:00.520 then broun Otto with the Bloomberg Business app based on 0:13:00.600 --> 0:13:03.880 demand wherever you get your podcasts or watch us live 0:13:03.960 --> 0:13:05.319 on YouTube. 0:13:06.000 --> 0:13:08.240 We move now to earnings from the right sharing company 0:13:08.320 --> 0:13:09.319 Uber Technologies. 0:13:09.440 --> 0:13:11.880 Uber reported better than expected orders in the second quarter, 0:13:11.920 --> 0:13:14.439 with continued strength and demand for right share and delivery 0:13:14.440 --> 0:13:15.319 services for more. 0:13:15.360 --> 0:13:18.079 We were joined by Mandeep Saying, Bloomberg Intelligence, senior tech 0:13:18.120 --> 0:13:18.920 industry analyst. 0:13:19.200 --> 0:13:22.599 We first asked Mandy first, key takeaway from Uber's results. 0:13:22.559 --> 0:13:26.400 Good print, solid top line growth. I think the fact 0:13:26.480 --> 0:13:30.120 that we're talking about a business that's generating forty billion 0:13:30.200 --> 0:13:33.040 dollar rund rate in a year. I mean, clearly they 0:13:33.080 --> 0:13:35.680 have the scale. The question for me when it comes 0:13:35.720 --> 0:13:39.200 to Uber five years down the line, you know, long 0:13:39.280 --> 0:13:42.920 term play, how disrupted their business model is going to 0:13:42.920 --> 0:13:46.520 be from the rollout of autonomous vehicles and robo taxis 0:13:46.559 --> 0:13:50.080 and Scott's right to help you to talk about it. But 0:13:50.160 --> 0:13:53.120 when you look at Veimo and how successful they've been 0:13:53.200 --> 0:13:55.760 in the three cities that they've launched, I mean, the 0:13:56.160 --> 0:13:59.360 part of the call was about how Uber is integrating 0:13:59.480 --> 0:14:01.439 Vemo inside their app. 0:14:01.600 --> 0:14:02.240 What is Wemo? 0:14:02.679 --> 0:14:06.960 Wemo is Google's autonomous driving unit. I mean they have 0:14:07.040 --> 0:14:10.920 about three hundred cars in San Francisco, similarly in a 0:14:10.960 --> 0:14:14.160 couple of other cities Arizona, and what they have shown 0:14:14.320 --> 0:14:17.480 is their technology is ready for primetime. I mean, they 0:14:17.520 --> 0:14:20.240 have to get regulatory approvals to do it at scale, 0:14:20.520 --> 0:14:23.920 but that changes the unit economics completely. Right now, we 0:14:23.960 --> 0:14:26.920 are talking about a business model where cost per mile 0:14:27.120 --> 0:14:31.600 is like five to seven dollars. Weimo can at scale, 0:14:31.760 --> 0:14:34.160 they can do it three or four times cheaper. So 0:14:34.200 --> 0:14:37.840 suddenly the take rate model gets to disrupted. Now again 0:14:38.040 --> 0:14:41.080 it's not hit primetime, but that's what Tesla is striving for, 0:14:41.600 --> 0:14:43.760 and the risk for Uber and Lyft is they will 0:14:43.800 --> 0:14:45.000 get disintermediated. 0:14:45.560 --> 0:14:48.160 Okay, So it's not the fact that Uber would just 0:14:48.160 --> 0:14:50.680 go get a bunch of robotaxis and use them and 0:14:50.800 --> 0:14:54.000 eventually payoff over time because they're not paying drivers. It's 0:14:54.040 --> 0:14:54.880 not that scenario. 0:14:55.160 --> 0:14:58.920 It's not that scenario because both these companies want to 0:14:59.000 --> 0:15:02.320 roll out the robot axies themselves as opposed to using 0:15:02.320 --> 0:15:05.920 an Uber and even if Uber was to get involved, 0:15:06.120 --> 0:15:08.640 their take rates would be way lower than thirty percent. 0:15:08.760 --> 0:15:12.000 Right now, they are getting thirty percent of every ride. 0:15:12.120 --> 0:15:14.640 Let's say it's a fifty dollars ride, Uber makes at 0:15:14.720 --> 0:15:18.000 least thirty percent. That's a pretty healthy take rate, you know, 0:15:18.040 --> 0:15:21.880 autonomous driving equation. First, Tesla wants to go solo. They 0:15:21.880 --> 0:15:24.320 don't want to partner with any of the right sharing guys. 0:15:24.600 --> 0:15:28.840 That's one risk Vemo is on Uber. But my senses 0:15:28.960 --> 0:15:32.080 they also want to kind of broaden out their reach 0:15:32.120 --> 0:15:35.440 and they will deploy their technology themselves. And in fact, 0:15:35.440 --> 0:15:39.520 Alphabet allocated five billion dollars in capex this quarter on 0:15:39.640 --> 0:15:40.600 Vemo's rollout. 0:15:40.640 --> 0:15:42.880 So all right, I mean, all right, it's bad enough 0:15:42.920 --> 0:15:44.920 that I get in the car with somebody I've never met, 0:15:44.960 --> 0:15:47.720 a total stranger that's crazy enough to think about. 0:15:48.000 --> 0:15:48.600 Am I getting in. 0:15:48.600 --> 0:15:52.120 A car that's a robo taxi? Is that really going 0:15:52.160 --> 0:15:52.520 to be a thing? 0:15:52.520 --> 0:15:55.760 And so when I mean, these vehicles are monitored. 0:15:55.760 --> 0:15:56.600 So by the way, I have. 0:15:56.600 --> 0:15:58.240 A vest with scooter by the way, so I don't 0:15:58.320 --> 0:15:59.560 necessarily need them for the shore. 0:15:59.640 --> 0:16:02.080 But go ahead, but just go to San Francisco right now. 0:16:02.160 --> 0:16:05.520 You can order a Veimo ride. You can, you can 0:16:05.920 --> 0:16:09.960 and just get that experience. I think every consumer who 0:16:10.000 --> 0:16:13.440 has taken a Mo ride loves that experience. Uber talked 0:16:13.440 --> 0:16:16.480 about they acknowledged the thread on their call, but they 0:16:16.520 --> 0:16:18.760 also think the rollout will be slow, and they are 0:16:18.800 --> 0:16:22.520 positioning themselves by seeking all these partnerships. They're partnering with 0:16:22.600 --> 0:16:25.480 BYD for one hundred thousand vehicles, that was big news 0:16:25.600 --> 0:16:26.160 last week. 0:16:26.440 --> 0:16:29.120 Well, then why would it be exclusionary, Like if Tesla 0:16:29.240 --> 0:16:32.160 rolls it out themselves. It just means more competition. It 0:16:32.200 --> 0:16:35.240 doesn't mean it's exclusionary like with Lyft. Like you guys 0:16:35.480 --> 0:16:37.800 price compare with Lyft, there's room for more than. 0:16:37.720 --> 0:16:40.240 Just one there is, but then it goes back to 0:16:40.320 --> 0:16:44.040 being the scale player and having that thirty percent take rates. 0:16:44.280 --> 0:16:47.800 The reason why Uber has done much better than Lyft 0:16:47.880 --> 0:16:50.400 is because it's a scale player and it can charge 0:16:50.400 --> 0:16:53.280 that thirty percent take rates because it has the liquidity 0:16:53.280 --> 0:16:56.880 in its marketplace, the supply demand matching, the best ETAs, 0:16:56.960 --> 0:16:59.920 the most options that it can offer to its riders. 0:17:00.080 --> 0:17:03.320 So like marketplaces are all about scale, the moment you 0:17:03.400 --> 0:17:06.800 have more than three or four competitors right now, it's 0:17:06.800 --> 0:17:09.240 a duopoly. And still we see how badly Lyft is 0:17:09.280 --> 0:17:12.000 doing relative to Uber. If you have more competition, that's 0:17:12.040 --> 0:17:14.000 not good news. But again this is for the route. 0:17:14.040 --> 0:17:18.280 This quarter was solid. Nothing goes wrong for Uber until 0:17:18.800 --> 0:17:22.640 this Robotaxi rollout plays out. So we're talking a few quarters. 0:17:22.280 --> 0:17:24.680 Out scenario market cap for Uber one hundred and thirty 0:17:24.680 --> 0:17:28.920 two billion, market cap for Lyft four billion. What happened well? 0:17:29.040 --> 0:17:32.520 I mean, Uber clearly has the scale and door Nash 0:17:32.560 --> 0:17:35.920 has done similarly very well on the food delivery side. 0:17:35.960 --> 0:17:38.719 So you've got two scale players when it comes to 0:17:38.800 --> 0:17:42.720 right sharing and food delivery, and they have the most supply. 0:17:43.280 --> 0:17:46.800 I mean, one challenge with this business model is gross 0:17:46.800 --> 0:17:49.920 margins can never be as attractive as your software companies, 0:17:50.200 --> 0:17:52.520 and that's what we keep finding with Uber. It's like 0:17:52.760 --> 0:17:55.199 there's still a forty percent gross margin business at an 0:17:55.240 --> 0:17:56.080 aggregate level. 0:17:56.240 --> 0:17:59.120 Our thanks to Man Deep Saying, Bloomberg Intelligence senior tech 0:17:59.119 --> 0:18:00.240 industry analyst. 0:18:00.400 --> 0:18:03.080 We moved to big tech and Google. This week, a 0:18:03.200 --> 0:18:06.560 US district court judge rule that Google illegally monopolized the 0:18:06.600 --> 0:18:08.480 search market through exclusive deals. 0:18:08.640 --> 0:18:10.800 This handed the US government a win in its first 0:18:10.840 --> 0:18:13.600 major antitrust case against a tech giant in more than 0:18:13.600 --> 0:18:14.359 two decades. 0:18:14.480 --> 0:18:16.600 For more, we were joined by Jennifer Ree, a Bloomberg 0:18:16.600 --> 0:18:18.280 Intelligence senior litigation analyst. 0:18:18.480 --> 0:18:21.400 We first asked jen to explain what exactly the accusation 0:18:21.440 --> 0:18:22.359