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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's move on here, because we're talking about how the

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Speaker 2: Downdustrials is outperforming the NASAK one hundred for a third

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Speaker 2: straight day, so that move to go beyond mag seven

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Speaker 2: is certainly taking place here at least recently. Although I

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Speaker 2: look within the Downdustrials, it is really am Jen and

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Speaker 2: Cisco leading the way, and the biggest drags on that

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Speaker 2: measure are Caterpillar and Disney. So let's talk a little

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Speaker 2: bit about Disney right now with our very own Githa Ranganathan.

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Speaker 2: She is our US media analyst for Bloomberg Intelligence, and Githa,

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Speaker 2: you took a look at Disney's fiscal fourth quarter results

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Speaker 2: and your verdict is good, not great.

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Speaker 3: Yeah, that's exactly right, Scarlet. It came off as a

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Speaker 3: little bit of a lackluster report. I mean everything if

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Speaker 3: you look at the fundamental drivers of the company, which

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Speaker 3: is really the parks business brings in about sixty percent

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Speaker 3: of profits. Things seem to be going pretty strong there.

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Speaker 3: We saw a thirteen percent jump in operating profit for

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Speaker 3: the fiscal fourth quarter. Again, the guidance for you know,

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Speaker 3: twenty twenty six seems pretty good as well. But really,

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Speaker 3: you know, Disney really has this very very tough balancing act.

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Speaker 3: So on the one hand, they have the parks business,

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Speaker 3: they have the streaming business, which is doing really well

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Speaker 3: from a profitability standpoint, but to drag it down, you

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Speaker 3: have the linear TV networks, and then you have the

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Speaker 3: hit and miss nature of you know, the volleybo in

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Speaker 3: the Hollywood studio business. So you know, they have to

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Speaker 3: contend with all of those different moving parts, and I

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Speaker 3: think that the drag down from the TV networks and

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Speaker 3: the studios is kind of weighing a lot on the

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Speaker 3: narrative today, Keith I.

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Speaker 4: Talk to us about some of their bundling of all

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Speaker 4: their streaming services, particularly that ESPN app, that really they

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Speaker 4: put a lot of the real valuable sports programming on

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Speaker 4: that ESPN app. How were the early results from in

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Speaker 4: terms of subscriber growth?

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Speaker 3: So they didn't give us any hard number there, Paul,

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Speaker 3: in terms of the number of subscribers that they got

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Speaker 3: on the ESPN Ultimate product, which is priced at twenty

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Speaker 3: nine to ninety nine a month. But they did talk about,

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Speaker 3: you know, in general that the traction has been pretty good.

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Speaker 3: They talked about the whole bundling strategy because that is

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Speaker 3: where Disney really wins. I mean, if we've seen some

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Speaker 3: of the numbers, you know, from Disney, we know that

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Speaker 3: forty percent of new subscribers actually take the Disney bundle,

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Speaker 3: and this is really going to be the strategy for

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Speaker 3: them going forward. Right, you get people in with the bundle,

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Speaker 3: and that's how you kind of stem churn. You you're

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Speaker 3: able to take price increases. So it's really going to

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Speaker 3: be the main driver for earnings growth for them going forward.

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Speaker 3: And that's exactly what they indicated on the call as well.

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Speaker 2: Paul, I can't remember who said this, but it's so

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Speaker 2: true that the history of media is about bundling and unbundling.

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Speaker 2: We went through this period where everyone cut the cord

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Speaker 2: and everyone unbundled, and now we're back to bundling again.

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Speaker 2: Although it's you know, in these discrete groups or Disney

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Speaker 2: might bundle Disney plus an ESPN plus together and then

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Speaker 2: if you are a T Mobile subscriber, you might get

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Speaker 2: some other options.

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Speaker 4: And here, but here's my point, that's fine. Is the

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Speaker 4: consumer better off? And my answer is absolutely not.

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Speaker 2: It's too confusing. It's way too confusing, Gita when it

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Speaker 2: comes to bundling. How much more can they do?

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Speaker 3: Though?

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Speaker 2: I mean, I see what you're saying about how it's

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Speaker 2: paying off right now, but I mean, can they continue

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Speaker 2: to innovate on their bundling or is have we reached

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Speaker 2: the limits of it?

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Speaker 3: I don't think we've reached the limits at all, Scarlett.

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Speaker 3: So I think what they're ultimately, what they're ultimately aiming

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Speaker 3: for with their ESPN product, and you know, they just

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Speaker 3: introduced the streaming product a couple of months ago. I

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Speaker 3: think ultimately they wanted to kind of become the premier

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Speaker 3: sports destinations. So you know, ultimately, I wouldn't be surprised

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Speaker 3: if you see a Fox or an NBC or you know,

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Speaker 3: even maybe an Amazon kind of feeding in all of

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Speaker 3: their apps so that you go to this one stop

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Speaker 3: shop for you know, ESPN and you're able to see

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Speaker 3: all different kinds of sports content. Because you're absolutely right,

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Speaker 3: there's way too much of fragmentation becoming a great source

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Speaker 3: of friction for you know, the average consumer, and so

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Speaker 3: I think they're going to seek out a lot more

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Speaker 3: different bundling opportunities. We're already seeing them kind of do

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Speaker 3: something with ESPN Ultimate and Fox One, which is Fox's

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Speaker 3: streaming product that they also just introduced a few months ago.

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Speaker 3: So they're going to look to partner with different media

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Speaker 3: platforms across the ecosystem, and I think that is going

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Speaker 3: to be a source of, you know, a great upside

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Speaker 3: opportunity for them. Eventually.

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Speaker 2: Is everyone willing to play ball on something like that, Kita,

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Speaker 2: or is there someone who's going to say, you know what,

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Speaker 2: you can't get me in here and I own or

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Speaker 2: I have the rights over X number of NFL games.

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Speaker 3: Actually, that's what we're seeing right now. There is the

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Speaker 3: standoff going going on between Disney and YouTube TV, and

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Speaker 3: it's really all again, it's just a you know, game

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Speaker 3: of chicken here. So you know, when it comes to

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Speaker 3: sports content, I have to say Disney has the upper

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Speaker 3: hand a little bit. So if you just kind of

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Speaker 3: look at sports viewing in the United States, Disney has

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Speaker 3: about forty percent of sports viewing just with you know,

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Speaker 3: marquee rights tied to all major leagues, you know, college football, NFL, NBA, MLB,

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Speaker 3: they have it all, so I think it becomes a

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Speaker 3: little harder to say no to them. But again, never say.

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Speaker 4: Never, all Right, Keith, I'm reluctant to ask this question,

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Speaker 4: but I feel like I have to. What's the latest

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Speaker 4: on Bob Iger's succession plan.

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Speaker 3: Yeah, this is the big thing that we're all looking

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Speaker 3: at in fiscal twenty twenty six. So James Gorman, who's

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Speaker 3: kind of heading up this whole succession planning committee Paul

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Speaker 3: has said that, you know, the board will be out

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Speaker 3: with the decision by the end of March. So Bob

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Speaker 3: Eiger's contract comes to an end by the end of

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Speaker 3: twenty twenty six, so hopefully we do have some kind

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Speaker 3: of clarity on that. Right now, it's really looking like

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Speaker 3: it's going to be internal candidates. I mean, there was

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Speaker 3: some you know, rumors and buzz about whether they were

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Speaker 3: looking externally, but I think they're going to kind of

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Speaker 3: keep it internal.

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Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live

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Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Let's talk about some of the big movers in the

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Speaker 2: market today, and one is an old school name that

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Speaker 2: we've been talking a lot about, and that's Cisco coming

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Speaker 2: out with results that show that it's definitely a part

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Speaker 2: of this AI conversation. Wujin Hoe is the Bloomberg Intelligence

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Speaker 2: Senior Technology analyst. He covers Cisco and wojin. You are

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Speaker 2: looking at this beat and raise quarter for Cisco and

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Speaker 2: thinking that the outlook is maybe even a little conservative,

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Speaker 2: and Cisco can do better than what it's promised.

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Speaker 5: Yeah, hey, Scarlett, thanks for having me on. I'll tell

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Speaker 5: you they did raise their outlook off of the first

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Speaker 5: quarter beat and the second quarter guide. But when I

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Speaker 5: look at the second half of the year, you know

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Speaker 5: there were one hundred million dollars below consensus expectations. So

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Speaker 5: give them the strong momentum that they've already had in

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Speaker 5: the first half of the year. I don't see why

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Speaker 5: it can't go any better.

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Speaker 4: All right. The stock's hitting at fifty two weeks high today,

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Speaker 4: and I put up my GP chart which grafts that

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Speaker 4: I go all the way back to March of two thousand,

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Speaker 4: I think they've just set a new all time high

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Speaker 4: that was set back in March thirty one of two thousand.

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Speaker 4: So after twenty five years, based on a long round trip,

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Speaker 4: they've gotten that market cap back. So good for them

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Speaker 4: and their patient shareholders. So WOCH talk to us about

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Speaker 4: the competitive landscape for somebody like Cisco here, how has

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Speaker 4: that changed and how are they stacked up?

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Speaker 5: Yeah, so we got to look at it two or

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Speaker 5: three different buckets. Right on the core networking side, there's

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Speaker 5: still the eight hundred pound gorilla there and that's actually

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Speaker 5: been doing a lot better than I had anticipated. And

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Speaker 5: they have this tremendous upgrade cycle that they're going to

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Speaker 5: have grow off of for the next couple of years.

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Speaker 5: And you know, given that they have the largest networking

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Speaker 5: base out there, there's a lot to upgrade. It's going

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Speaker 5: to be supplemental growth. Now. The AI is actually the

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Speaker 5: cherry on top of this, right, they're relatively a newer

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Speaker 5: player to AI. They've they've been more known to the

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Speaker 5: enterprise base and that's been growing quite nicely. One billion

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Speaker 5: dollars in revenue and fiscal twenty five. They said on

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Speaker 5: the call yesterday they're going to be They're on pace

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Speaker 5: for three billion dollars in revenue one point three billion

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Speaker 5: dollars in order in this quarter alone, and they have

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Speaker 5: the products to win. So who do they come up

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Speaker 5: against on the AI front? Arista on their networking side,

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Speaker 5: Broadcom on the chip side, and Video on the on

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Speaker 5: the switching side. So they are coming up against some

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Speaker 5: heavy hitters. And Cisco has the balance sheet, importantly, the

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Speaker 5: balance sheet to help support their growth.

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Speaker 2: In terms of M and A, is there Are you

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Speaker 2: looking for them to do anything? I was just checking in.

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Speaker 2: It seems like they did buy a softwaremakers Plunk in

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Speaker 2: twenty twenty four to diversify in to security product. Is

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Speaker 2: now a good time for them to kind of build

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Speaker 2: out their empire a little bit more?

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Speaker 5: Yeah, and and this is one of the things that

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Speaker 5: I'm waiting for right this splunk eear. The Splunk M

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Speaker 5: and A was more of their Hey, let's let's switch

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Speaker 5: over to a recurring revenue software uh uh, software based era. Right.

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Speaker 5: I think the phase three of M and A is

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Speaker 5: going to be more on the AI side. Now, I

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Speaker 5: will tell you M and A the acquisitions that I

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Speaker 5: made about a decade ago is actually started to come

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Speaker 5: into fruition here to help some of their infrastructure. But

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Speaker 5: you know some some of the interesting things that they've

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Speaker 5: invested in over the past I would say a year

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Speaker 5: two or two, they've been investing in some AI infrastructure

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Speaker 5: guys uh and and such as a cohere uh and,

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Speaker 5: and I believe they have a little piece of core

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Speaker 5: Weave as well. So I'm curious where they go with

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Speaker 5: that going forward. But it's going to be they're gonna

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Speaker 5: start leaning into the AI side, is my guest, but

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Speaker 5: it's going to be a small and unlikely large.

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Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and

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Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: All right, let's talk a little bit about the retail

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Speaker 2: sector and f leisure, because that was a big thing

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Speaker 2: a couple of years ago, but it seems like it's

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Speaker 2: had its moment, and you just look at Lululemon shares

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Speaker 2: and how they've done, and that kind of tells you

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Speaker 2: what's happened to the leisure trend. Lulu Lemon shares down

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Speaker 2: by fifty five percent in twenty twenty five. Punam Goyel

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Speaker 2: is senior US e Commerce and retail analysts here at

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Speaker 2: Bloomberg Intelligence, and she is here with more and Putam

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Speaker 2: you recently authored a report about how Adidas may lead

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Speaker 2: ath leisure in twenty twenty six. But how big is

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Speaker 2: that at leisure market?

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Speaker 5: Right now?

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Speaker 6: The at leisure market is still big and growing. So

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Speaker 6: when you think about who dominates it, it's still Nike

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Speaker 6: right at over forty billion dollars in sales annually. Adidas

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Speaker 6: is the second, and when you think of a Little Lemon,

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Speaker 6: it's far behind. It's still you know, expected to be

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Speaker 6: at twelve billion dollars in the next two a specialist

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Speaker 6: it is exactly. But in terms of the market, when

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Speaker 6: you think about at leisure and you think about the

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Speaker 6: broader apparel market, at leisure is still growing faster than

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Speaker 6: the broader apparel. What are the growth rates the growth

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Speaker 6: rates on If you look at Nike, Nike is clearly

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Speaker 6: under a turnaround, But if you look at the average

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Speaker 6: growth rate, you're looking at the single digits. It's in

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Speaker 6: the high single digits to mid single digits. And if

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Speaker 6: you think about it, next year, we're looking at low

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Speaker 6: single digit growth rates for the whole year. But that's

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Speaker 6: because there is turmoil between the names, right. There are

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Speaker 6: some names that are losing share, especially the smaller names,

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Speaker 6: like when you think of All Birds, right, all Birds

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Speaker 6: has gone through a whole transformation or is trying to,

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Speaker 6: and it's really not with its shoppers like you planted.

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Speaker 6: When you think of Little Lemon, the issue isn't the brand.

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Speaker 6: The issue is the product. It's the product that isn't

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Speaker 6: resonating as well as it did because there isn't just

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Speaker 6: much of a difference between what we already see out

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Speaker 6: there and then Nike, I think, is doing a phenomenal

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Speaker 6: job right now to turn around its business, so we

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Speaker 6: do expect it to gain traction in the second half

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Speaker 6: of next year.

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Speaker 4: Is I think I haven't seen even forever Punham. He's

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Speaker 4: actually see her every day now. It's been forever. Puns

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Speaker 4: actually literally one of our first annamals we hired back

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Speaker 4: in the beginning of.

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Speaker 2: BI pretty incredible. I love I love it coming together.

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Speaker 4: Putum is at leisure a global marketplace because when I

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Speaker 4: went over to Italy a few months ago, my friend

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Speaker 4: who lives in Rome says, do not bring any of

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Speaker 4: the ath leisure stuff. We don't do that here in Italy.

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Speaker 4: We trust like adults. Is it talked about the global trends.

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Speaker 6: It is a global trend and now, yes, Europe is

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Speaker 6: probably more on the dressier end of it, absolutely, but

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Speaker 6: I think it's a growing trend in Asia, which is

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Speaker 6: a very important market for at leisure. China especially still

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Speaker 6: very important while trends have been mixed there for the

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Speaker 6: last few years. We do think that as people begin

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Speaker 6: to explore the outdoors, begin to explore fitness and health

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Speaker 6: and wellness in a more meaningful way, that market is

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Speaker 6: growing in that region and it is very important to growth.

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Speaker 2: Where does a company like under Armour fit in here?

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Speaker 6: So under Armour is one of those companies that have

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Speaker 6: kind of went back and forth with this might be.

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Speaker 6: I've seen them trying to turn around their business several

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Speaker 6: times in the last twenty years. So Kevin Plank is

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Speaker 6: back in the seat. They're focusing on the right things.

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Speaker 6: When you look at their playbook, they're focusing on product

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Speaker 6: they're focusing on reducing wholesale penetration and off price where

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Speaker 6: you really dilute the brand, and they're focusing on bringing

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Speaker 6: marketing and endorsers as athletes back in a more meaningful way.

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Speaker 6: Sounds great, but I said, we've heard it before. We've

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Speaker 6: heard it before, So I think execution is really key here,

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Speaker 6: and then just sticking to it right because it's very

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Speaker 6: easy to fall off the product cycle and for retail,

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Speaker 6: irrespective of everything that we talk about, product is still king.

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Speaker 6: You have to have the right product, you have to

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Speaker 6: have the right customer connection, and under Armar is trying

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Speaker 6: to build that. I'd say that in the early signs

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Speaker 6: of it, they're doing what they need to do. It's working,

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Speaker 6: but I'm not sold yet. I need to see it

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Speaker 6: play out and stay. It needs to be sustained. I

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Speaker 6: think that's the key here.

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Speaker 5: Che.

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Speaker 4: I think that business is just so competitive. I mean,

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Speaker 4: there's so many good brands there, and I mean you

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Speaker 4: almost forget about a Puma, you know, who's been around.

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Speaker 6: Forever and they're struggling.

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