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Speaker 2: Let's move on here, because we're talking about how the
Speaker 2: Downdustrials is outperforming the NASAK one hundred for a third
Speaker 2: straight day, so that move to go beyond mag seven
Speaker 2: is certainly taking place here at least recently. Although I
Speaker 2: look within the Downdustrials, it is really am Jen and
Speaker 2: Cisco leading the way, and the biggest drags on that
Speaker 2: measure are Caterpillar and Disney. So let's talk a little
Speaker 2: bit about Disney right now with our very own Githa Ranganathan.
Speaker 2: She is our US media analyst for Bloomberg Intelligence, and Githa,
Speaker 2: you took a look at Disney's fiscal fourth quarter results
Speaker 2: and your verdict is good, not great.
Speaker 3: Yeah, that's exactly right, Scarlet. It came off as a
Speaker 3: little bit of a lackluster report. I mean everything if
Speaker 3: you look at the fundamental drivers of the company, which
Speaker 3: is really the parks business brings in about sixty percent
Speaker 3: of profits. Things seem to be going pretty strong there.
Speaker 3: We saw a thirteen percent jump in operating profit for
Speaker 3: the fiscal fourth quarter. Again, the guidance for you know,
Speaker 3: twenty twenty six seems pretty good as well. But really,
Speaker 3: you know, Disney really has this very very tough balancing act.
Speaker 3: So on the one hand, they have the parks business,
Speaker 3: they have the streaming business, which is doing really well
Speaker 3: from a profitability standpoint, but to drag it down, you
Speaker 3: have the linear TV networks, and then you have the
Speaker 3: hit and miss nature of you know, the volleybo in
Speaker 3: the Hollywood studio business. So you know, they have to
Speaker 3: contend with all of those different moving parts, and I
Speaker 3: think that the drag down from the TV networks and
Speaker 3: the studios is kind of weighing a lot on the
Speaker 3: narrative today, Keith I.
Speaker 4: Talk to us about some of their bundling of all
Speaker 4: their streaming services, particularly that ESPN app, that really they
Speaker 4: put a lot of the real valuable sports programming on
Speaker 4: that ESPN app. How were the early results from in
Speaker 4: terms of subscriber growth?
Speaker 3: So they didn't give us any hard number there, Paul,
Speaker 3: in terms of the number of subscribers that they got
Speaker 3: on the ESPN Ultimate product, which is priced at twenty
Speaker 3: nine to ninety nine a month. But they did talk about,
Speaker 3: you know, in general that the traction has been pretty good.
Speaker 3: They talked about the whole bundling strategy because that is
Speaker 3: where Disney really wins. I mean, if we've seen some
Speaker 3: of the numbers, you know, from Disney, we know that
Speaker 3: forty percent of new subscribers actually take the Disney bundle,
Speaker 3: and this is really going to be the strategy for
Speaker 3: them going forward. Right, you get people in with the bundle,
Speaker 3: and that's how you kind of stem churn. You you're
Speaker 3: able to take price increases. So it's really going to
Speaker 3: be the main driver for earnings growth for them going forward.
Speaker 3: And that's exactly what they indicated on the call as well.
Speaker 2: Paul, I can't remember who said this, but it's so
Speaker 2: true that the history of media is about bundling and unbundling.
Speaker 2: We went through this period where everyone cut the cord
Speaker 2: and everyone unbundled, and now we're back to bundling again.
Speaker 2: Although it's you know, in these discrete groups or Disney
Speaker 2: might bundle Disney plus an ESPN plus together and then
Speaker 2: if you are a T Mobile subscriber, you might get
Speaker 2: some other options.
Speaker 4: And here, but here's my point, that's fine. Is the
Speaker 4: consumer better off? And my answer is absolutely not.
Speaker 2: It's too confusing. It's way too confusing, Gita when it
Speaker 2: comes to bundling. How much more can they do?
Speaker 3: Though?
Speaker 2: I mean, I see what you're saying about how it's
Speaker 2: paying off right now, but I mean, can they continue
Speaker 2: to innovate on their bundling or is have we reached
Speaker 2: the limits of it?
Speaker 3: I don't think we've reached the limits at all, Scarlett.
Speaker 3: So I think what they're ultimately, what they're ultimately aiming
Speaker 3: for with their ESPN product, and you know, they just
Speaker 3: introduced the streaming product a couple of months ago. I
Speaker 3: think ultimately they wanted to kind of become the premier
Speaker 3: sports destinations. So you know, ultimately, I wouldn't be surprised
Speaker 3: if you see a Fox or an NBC or you know,
Speaker 3: even maybe an Amazon kind of feeding in all of
Speaker 3: their apps so that you go to this one stop
Speaker 3: shop for you know, ESPN and you're able to see
Speaker 3: all different kinds of sports content. Because you're absolutely right,
Speaker 3: there's way too much of fragmentation becoming a great source
Speaker 3: of friction for you know, the average consumer, and so
Speaker 3: I think they're going to seek out a lot more
Speaker 3: different bundling opportunities. We're already seeing them kind of do
Speaker 3: something with ESPN Ultimate and Fox One, which is Fox's
Speaker 3: streaming product that they also just introduced a few months ago.
Speaker 3: So they're going to look to partner with different media
Speaker 3: platforms across the ecosystem, and I think that is going
Speaker 3: to be a source of, you know, a great upside
Speaker 3: opportunity for them. Eventually.
Speaker 2: Is everyone willing to play ball on something like that, Kita,
Speaker 2: or is there someone who's going to say, you know what,
Speaker 2: you can't get me in here and I own or
Speaker 2: I have the rights over X number of NFL games.
Speaker 3: Actually, that's what we're seeing right now. There is the
Speaker 3: standoff going going on between Disney and YouTube TV, and
Speaker 3: it's really all again, it's just a you know, game
Speaker 3: of chicken here. So you know, when it comes to
Speaker 3: sports content, I have to say Disney has the upper
Speaker 3: hand a little bit. So if you just kind of
Speaker 3: look at sports viewing in the United States, Disney has
Speaker 3: about forty percent of sports viewing just with you know,
Speaker 3: marquee rights tied to all major leagues, you know, college football, NFL, NBA, MLB,
Speaker 3: they have it all, so I think it becomes a
Speaker 3: little harder to say no to them. But again, never say.
Speaker 4: Never, all Right, Keith, I'm reluctant to ask this question,
Speaker 4: but I feel like I have to. What's the latest
Speaker 4: on Bob Iger's succession plan.
Speaker 3: Yeah, this is the big thing that we're all looking
Speaker 3: at in fiscal twenty twenty six. So James Gorman, who's
Speaker 3: kind of heading up this whole succession planning committee Paul
Speaker 3: has said that, you know, the board will be out
Speaker 3: with the decision by the end of March. So Bob
Speaker 3: Eiger's contract comes to an end by the end of
Speaker 3: twenty twenty six, so hopefully we do have some kind
Speaker 3: of clarity on that. Right now, it's really looking like
Speaker 3: it's going to be internal candidates. I mean, there was
Speaker 3: some you know, rumors and buzz about whether they were
Speaker 3: looking externally, but I think they're going to kind of
Speaker 3: keep it internal.
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android
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Speaker 2: Let's talk about some of the big movers in the
Speaker 2: market today, and one is an old school name that
Speaker 2: we've been talking a lot about, and that's Cisco coming
Speaker 2: out with results that show that it's definitely a part
Speaker 2: of this AI conversation. Wujin Hoe is the Bloomberg Intelligence
Speaker 2: Senior Technology analyst. He covers Cisco and wojin. You are
Speaker 2: looking at this beat and raise quarter for Cisco and
Speaker 2: thinking that the outlook is maybe even a little conservative,
Speaker 2: and Cisco can do better than what it's promised.
Speaker 5: Yeah, hey, Scarlett, thanks for having me on. I'll tell
Speaker 5: you they did raise their outlook off of the first
Speaker 5: quarter beat and the second quarter guide. But when I
Speaker 5: look at the second half of the year, you know
Speaker 5: there were one hundred million dollars below consensus expectations. So
Speaker 5: give them the strong momentum that they've already had in
Speaker 5: the first half of the year. I don't see why
Speaker 5: it can't go any better.
Speaker 4: All right. The stock's hitting at fifty two weeks high today,
Speaker 4: and I put up my GP chart which grafts that
Speaker 4: I go all the way back to March of two thousand,
Speaker 4: I think they've just set a new all time high
Speaker 4: that was set back in March thirty one of two thousand.
Speaker 4: So after twenty five years, based on a long round trip,
Speaker 4: they've gotten that market cap back. So good for them
Speaker 4: and their patient shareholders. So WOCH talk to us about
Speaker 4: the competitive landscape for somebody like Cisco here, how has
Speaker 4: that changed and how are they stacked up?
Speaker 5: Yeah, so we got to look at it two or
Speaker 5: three different buckets. Right on the core networking side, there's
Speaker 5: still the eight hundred pound gorilla there and that's actually
Speaker 5: been doing a lot better than I had anticipated. And
Speaker 5: they have this tremendous upgrade cycle that they're going to
Speaker 5: have grow off of for the next couple of years.
Speaker 5: And you know, given that they have the largest networking
Speaker 5: base out there, there's a lot to upgrade. It's going
Speaker 5: to be supplemental growth. Now. The AI is actually the
Speaker 5: cherry on top of this, right, they're relatively a newer
Speaker 5: player to AI. They've they've been more known to the
Speaker 5: enterprise base and that's been growing quite nicely. One billion
Speaker 5: dollars in revenue and fiscal twenty five. They said on
Speaker 5: the call yesterday they're going to be They're on pace
Speaker 5: for three billion dollars in revenue one point three billion
Speaker 5: dollars in order in this quarter alone, and they have
Speaker 5: the products to win. So who do they come up
Speaker 5: against on the AI front? Arista on their networking side,
Speaker 5: Broadcom on the chip side, and Video on the on
Speaker 5: the switching side. So they are coming up against some
Speaker 5: heavy hitters. And Cisco has the balance sheet, importantly, the
Speaker 5: balance sheet to help support their growth.
Speaker 2: In terms of M and A, is there Are you
Speaker 2: looking for them to do anything? I was just checking in.
Speaker 2: It seems like they did buy a softwaremakers Plunk in
Speaker 2: twenty twenty four to diversify in to security product. Is
Speaker 2: now a good time for them to kind of build
Speaker 2: out their empire a little bit more?
Speaker 5: Yeah, and and this is one of the things that
Speaker 5: I'm waiting for right this splunk eear. The Splunk M
Speaker 5: and A was more of their Hey, let's let's switch
Speaker 5: over to a recurring revenue software uh uh, software based era. Right.
Speaker 5: I think the phase three of M and A is
Speaker 5: going to be more on the AI side. Now, I
Speaker 5: will tell you M and A the acquisitions that I
Speaker 5: made about a decade ago is actually started to come
Speaker 5: into fruition here to help some of their infrastructure. But
Speaker 5: you know some some of the interesting things that they've
Speaker 5: invested in over the past I would say a year
Speaker 5: two or two, they've been investing in some AI infrastructure
Speaker 5: guys uh and and such as a cohere uh and,
Speaker 5: and I believe they have a little piece of core
Speaker 5: Weave as well. So I'm curious where they go with
Speaker 5: that going forward. But it's going to be they're gonna
Speaker 5: start leaning into the AI side, is my guest, but
Speaker 5: it's going to be a small and unlikely large.
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and
Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
Speaker 2: All right, let's talk a little bit about the retail
Speaker 2: sector and f leisure, because that was a big thing
Speaker 2: a couple of years ago, but it seems like it's
Speaker 2: had its moment, and you just look at Lululemon shares
Speaker 2: and how they've done, and that kind of tells you
Speaker 2: what's happened to the leisure trend. Lulu Lemon shares down
Speaker 2: by fifty five percent in twenty twenty five. Punam Goyel
Speaker 2: is senior US e Commerce and retail analysts here at
Speaker 2: Bloomberg Intelligence, and she is here with more and Putam
Speaker 2: you recently authored a report about how Adidas may lead
Speaker 2: ath leisure in twenty twenty six. But how big is
Speaker 2: that at leisure market?
Speaker 5: Right now?
Speaker 6: The at leisure market is still big and growing. So
Speaker 6: when you think about who dominates it, it's still Nike
Speaker 6: right at over forty billion dollars in sales annually. Adidas
Speaker 6: is the second, and when you think of a Little Lemon,
Speaker 6: it's far behind. It's still you know, expected to be
Speaker 6: at twelve billion dollars in the next two a specialist
Speaker 6: it is exactly. But in terms of the market, when
Speaker 6: you think about at leisure and you think about the
Speaker 6: broader apparel market, at leisure is still growing faster than
Speaker 6: the broader apparel. What are the growth rates the growth
Speaker 6: rates on If you look at Nike, Nike is clearly
Speaker 6: under a turnaround, But if you look at the average
Speaker 6: growth rate, you're looking at the single digits. It's in
Speaker 6: the high single digits to mid single digits. And if
Speaker 6: you think about it, next year, we're looking at low
Speaker 6: single digit growth rates for the whole year. But that's
Speaker 6: because there is turmoil between the names, right. There are
Speaker 6: some names that are losing share, especially the smaller names,
Speaker 6: like when you think of All Birds, right, all Birds
Speaker 6: has gone through a whole transformation or is trying to,
Speaker 6: and it's really not with its shoppers like you planted.
Speaker 6: When you think of Little Lemon, the issue isn't the brand.
Speaker 6: The issue is the product. It's the product that isn't
Speaker 6: resonating as well as it did because there isn't just
Speaker 6: much of a difference between what we already see out
Speaker 6: there and then Nike, I think, is doing a phenomenal
Speaker 6: job right now to turn around its business, so we
Speaker 6: do expect it to gain traction in the second half
Speaker 6: of next year.
Speaker 4: Is I think I haven't seen even forever Punham. He's
Speaker 4: actually see her every day now. It's been forever. Puns
Speaker 4: actually literally one of our first annamals we hired back
Speaker 4: in the beginning of.
Speaker 2: BI pretty incredible. I love I love it coming together.
Speaker 4: Putum is at leisure a global marketplace because when I
Speaker 4: went over to Italy a few months ago, my friend
Speaker 4: who lives in Rome says, do not bring any of
Speaker 4: the ath leisure stuff. We don't do that here in Italy.
Speaker 4: We trust like adults. Is it talked about the global trends.
Speaker 6: It is a global trend and now, yes, Europe is
Speaker 6: probably more on the dressier end of it, absolutely, but
Speaker 6: I think it's a growing trend in Asia, which is
Speaker 6: a very important market for at leisure. China especially still
Speaker 6: very important while trends have been mixed there for the
Speaker 6: last few years. We do think that as people begin
Speaker 6: to explore the outdoors, begin to explore fitness and health
Speaker 6: and wellness in a more meaningful way, that market is
Speaker 6: growing in that region and it is very important to growth.
Speaker 2: Where does a company like under Armour fit in here?
Speaker 6: So under Armour is one of those companies that have
Speaker 6: kind of went back and forth with this might be.
Speaker 6: I've seen them trying to turn around their business several
Speaker 6: times in the last twenty years. So Kevin Plank is
Speaker 6: back in the seat. They're focusing on the right things.
Speaker 6: When you look at their playbook, they're focusing on product
Speaker 6: they're focusing on reducing wholesale penetration and off price where
Speaker 6: you really dilute the brand, and they're focusing on bringing
Speaker 6: marketing and endorsers as athletes back in a more meaningful way.
Speaker 6: Sounds great, but I said, we've heard it before. We've
Speaker 6: heard it before, So I think execution is really key here,
Speaker 6: and then just sticking to it right because it's very
Speaker 6: easy to fall off the product cycle and for retail,
Speaker 6: irrespective of everything that we talk about, product is still king.
Speaker 6: You have to have the right product, you have to
Speaker 6: have the right customer connection, and under Armar is trying
Speaker 6: to build that. I'd say that in the early signs
Speaker 6: of it, they're doing what they need to do. It's working,
Speaker 6: but I'm not sold yet. I need to see it
Speaker 6: play out and stay. It needs to be sustained. I
Speaker 6: think that's the key here.
Speaker 5: Che.
Speaker 4: I think that business is just so competitive. I mean,
Speaker 4: there's so many good brands there, and I mean you
Speaker 4: almost forget about a Puma, you know, who's been around.
Speaker 6: Forever and they're struggling.
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