WEBVTT - Disney Says Film Studio’s Expenses Weigh on Current Quarter 

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

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

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<v Speaker 2>Downdustrials is outperforming the NASAK one hundred for a third

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<v Speaker 2>straight day, so that move to go beyond mag seven

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<v Speaker 2>is certainly taking place here at least recently. Although I

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<v Speaker 2>look within the Downdustrials, it is really am Jen and

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<v Speaker 2>Cisco leading the way, and the biggest drags on that

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<v Speaker 2>measure are Caterpillar and Disney. So let's talk a little

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<v Speaker 2>bit about Disney right now with our very own Githa Ranganathan.

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<v Speaker 2>She is our US media analyst for Bloomberg Intelligence, and Githa,

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<v Speaker 2>you took a look at Disney's fiscal fourth quarter results

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<v Speaker 2>and your verdict is good, not great.

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

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<v Speaker 3>little bit of a lackluster report. I mean everything if

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<v Speaker 3>you look at the fundamental drivers of the company, which

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<v Speaker 3>is really the parks business brings in about sixty percent

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<v Speaker 3>of profits. Things seem to be going pretty strong there.

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<v Speaker 3>We saw a thirteen percent jump in operating profit for

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<v Speaker 3>the fiscal fourth quarter. Again, the guidance for you know,

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<v Speaker 3>twenty twenty six seems pretty good as well. But really,

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<v Speaker 3>you know, Disney really has this very very tough balancing act.

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<v Speaker 3>So on the one hand, they have the parks business,

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<v Speaker 3>they have the streaming business, which is doing really well

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<v Speaker 3>from a profitability standpoint, but to drag it down, you

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<v Speaker 3>have the linear TV networks, and then you have the

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<v Speaker 3>hit and miss nature of you know, the volleybo in

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<v Speaker 3>the Hollywood studio business. So you know, they have to

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<v Speaker 3>contend with all of those different moving parts, and I

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<v Speaker 3>think that the drag down from the TV networks and

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<v Speaker 3>the studios is kind of weighing a lot on the

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<v Speaker 3>narrative today, Keith I.

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<v Speaker 4>Talk to us about some of their bundling of all

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<v Speaker 4>their streaming services, particularly that ESPN app, that really they

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<v Speaker 4>put a lot of the real valuable sports programming on

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<v Speaker 4>that ESPN app. How were the early results from in

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<v Speaker 4>terms of subscriber growth?

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<v Speaker 3>So they didn't give us any hard number there, Paul,

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<v Speaker 3>in terms of the number of subscribers that they got

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<v Speaker 3>on the ESPN Ultimate product, which is priced at twenty

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<v Speaker 3>nine to ninety nine a month. But they did talk about,

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<v Speaker 3>you know, in general that the traction has been pretty good.

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<v Speaker 3>They talked about the whole bundling strategy because that is

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

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<v Speaker 3>of the numbers, you know, from Disney, we know that

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<v Speaker 3>forty percent of new subscribers actually take the Disney bundle,

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<v Speaker 3>and this is really going to be the strategy for

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<v Speaker 3>them going forward. Right, you get people in with the bundle,

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<v Speaker 3>and that's how you kind of stem churn. You you're

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<v Speaker 3>able to take price increases. So it's really going to

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<v Speaker 3>be the main driver for earnings growth for them going forward.

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

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

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<v Speaker 2>true that the history of media is about bundling and unbundling.

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<v Speaker 2>We went through this period where everyone cut the cord

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<v Speaker 2>and everyone unbundled, and now we're back to bundling again.

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<v Speaker 2>Although it's you know, in these discrete groups or Disney

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<v Speaker 2>might bundle Disney plus an ESPN plus together and then

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<v Speaker 2>if you are a T Mobile subscriber, you might get

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<v Speaker 2>some other options.

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<v Speaker 4>And here, but here's my point, that's fine. Is the

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<v Speaker 4>consumer better off? And my answer is absolutely not.

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<v Speaker 2>It's too confusing. It's way too confusing, Gita when it

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<v Speaker 2>comes to bundling. How much more can they do?

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<v Speaker 3>Though?

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<v Speaker 2>I mean, I see what you're saying about how it's

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<v Speaker 2>paying off right now, but I mean, can they continue

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<v Speaker 2>to innovate on their bundling or is have we reached

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<v Speaker 2>the limits of it?

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

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<v Speaker 3>So I think what they're ultimately, what they're ultimately aiming

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<v Speaker 3>for with their ESPN product, and you know, they just

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<v Speaker 3>introduced the streaming product a couple of months ago. I

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<v Speaker 3>think ultimately they wanted to kind of become the premier

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

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<v Speaker 3>if you see a Fox or an NBC or you know,

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<v Speaker 3>even maybe an Amazon kind of feeding in all of

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<v Speaker 3>their apps so that you go to this one stop

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<v Speaker 3>shop for you know, ESPN and you're able to see

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

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<v Speaker 3>there's way too much of fragmentation becoming a great source

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<v Speaker 3>of friction for you know, the average consumer, and so

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<v Speaker 3>I think they're going to seek out a lot more

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<v Speaker 3>different bundling opportunities. We're already seeing them kind of do

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<v Speaker 3>something with ESPN Ultimate and Fox One, which is Fox's

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<v Speaker 3>streaming product that they also just introduced a few months ago.

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<v Speaker 3>So they're going to look to partner with different media

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<v Speaker 3>platforms across the ecosystem, and I think that is going

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<v Speaker 3>to be a source of, you know, a great upside

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<v Speaker 3>opportunity for them. Eventually.

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<v Speaker 2>Is everyone willing to play ball on something like that, Kita,

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

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<v Speaker 2>you can't get me in here and I own or

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<v Speaker 2>I have the rights over X number of NFL games.

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

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<v Speaker 3>standoff going going on between Disney and YouTube TV, and

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<v Speaker 3>it's really all again, it's just a you know, game

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<v Speaker 3>of chicken here. So you know, when it comes to

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<v Speaker 3>sports content, I have to say Disney has the upper

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<v Speaker 3>hand a little bit. So if you just kind of

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<v Speaker 3>look at sports viewing in the United States, Disney has

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<v Speaker 3>about forty percent of sports viewing just with you know,

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

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<v Speaker 3>they have it all, so I think it becomes a

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<v Speaker 3>little harder to say no to them. But again, never say.

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<v Speaker 4>Never, all Right, Keith, I'm reluctant to ask this question,

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<v Speaker 4>but I feel like I have to. What's the latest

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<v Speaker 4>on Bob Iger's succession plan.

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<v Speaker 3>Yeah, this is the big thing that we're all looking

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<v Speaker 3>at in fiscal twenty twenty six. So James Gorman, who's

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<v Speaker 3>kind of heading up this whole succession planning committee Paul

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<v Speaker 3>has said that, you know, the board will be out

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<v Speaker 3>with the decision by the end of March. So Bob

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<v Speaker 3>Eiger's contract comes to an end by the end of

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<v Speaker 3>twenty twenty six, so hopefully we do have some kind

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

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

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<v Speaker 3>some you know, rumors and buzz about whether they were

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<v Speaker 3>looking externally, but I think they're going to kind of

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<v Speaker 3>keep it internal.

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<v Speaker 4>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us Live

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<v Speaker 1>weekdays at ten am Eastern on Apple Coarclay and Android

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<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 2>Let's talk about some of the big movers in the

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<v Speaker 2>market today, and one is an old school name that

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

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<v Speaker 2>out with results that show that it's definitely a part

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<v Speaker 2>of this AI conversation. Wujin Hoe is the Bloomberg Intelligence

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<v Speaker 2>Senior Technology analyst. He covers Cisco and wojin. You are

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<v Speaker 2>looking at this beat and raise quarter for Cisco and

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<v Speaker 2>thinking that the outlook is maybe even a little conservative,

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<v Speaker 2>and Cisco can do better than what it's promised.

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

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<v Speaker 5>you they did raise their outlook off of the first

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<v Speaker 5>quarter beat and the second quarter guide. But when I

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<v Speaker 5>look at the second half of the year, you know

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<v Speaker 5>there were one hundred million dollars below consensus expectations. So

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<v Speaker 5>give them the strong momentum that they've already had in

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<v Speaker 5>the first half of the year. I don't see why

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<v Speaker 5>it can't go any better.

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

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<v Speaker 4>and I put up my GP chart which grafts that

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<v Speaker 4>I go all the way back to March of two thousand,

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<v Speaker 4>I think they've just set a new all time high

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<v Speaker 4>that was set back in March thirty one of two thousand.

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<v Speaker 4>So after twenty five years, based on a long round trip,

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<v Speaker 4>they've gotten that market cap back. So good for them

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<v Speaker 4>and their patient shareholders. So WOCH talk to us about

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<v Speaker 4>the competitive landscape for somebody like Cisco here, how has

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<v Speaker 4>that changed and how are they stacked up?

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<v Speaker 5>Yeah, so we got to look at it two or

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

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<v Speaker 5>still the eight hundred pound gorilla there and that's actually

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<v Speaker 5>been doing a lot better than I had anticipated. And

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<v Speaker 5>they have this tremendous upgrade cycle that they're going to

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<v Speaker 5>have grow off of for the next couple of years.

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<v Speaker 5>And you know, given that they have the largest networking

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<v Speaker 5>base out there, there's a lot to upgrade. It's going

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<v Speaker 5>to be supplemental growth. Now. The AI is actually the

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<v Speaker 5>cherry on top of this, right, they're relatively a newer

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<v Speaker 5>player to AI. They've they've been more known to the

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<v Speaker 5>enterprise base and that's been growing quite nicely. One billion

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<v Speaker 5>dollars in revenue and fiscal twenty five. They said on

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<v Speaker 5>the call yesterday they're going to be They're on pace

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<v Speaker 5>for three billion dollars in revenue one point three billion

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<v Speaker 5>dollars in order in this quarter alone, and they have

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<v Speaker 5>the products to win. So who do they come up

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<v Speaker 5>against on the AI front? Arista on their networking side,

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<v Speaker 5>Broadcom on the chip side, and Video on the on

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<v Speaker 5>the switching side. So they are coming up against some

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<v Speaker 5>heavy hitters. And Cisco has the balance sheet, importantly, the

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<v Speaker 5>balance sheet to help support their growth.

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<v Speaker 2>In terms of M and A, is there Are you

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<v Speaker 2>looking for them to do anything? I was just checking in.

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<v Speaker 2>It seems like they did buy a softwaremakers Plunk in

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<v Speaker 2>twenty twenty four to diversify in to security product. Is

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<v Speaker 2>now a good time for them to kind of build

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<v Speaker 2>out their empire a little bit more?

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<v Speaker 5>Yeah, and and this is one of the things that

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<v Speaker 5>I'm waiting for right this splunk eear. The Splunk M

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<v Speaker 5>and A was more of their Hey, let's let's switch

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<v Speaker 5>over to a recurring revenue software uh uh, software based era. Right.

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<v Speaker 5>I think the phase three of M and A is

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<v Speaker 5>going to be more on the AI side. Now, I

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<v Speaker 5>will tell you M and A the acquisitions that I

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<v Speaker 5>made about a decade ago is actually started to come

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<v Speaker 5>into fruition here to help some of their infrastructure. But

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<v Speaker 5>you know some some of the interesting things that they've

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<v Speaker 5>invested in over the past I would say a year

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<v Speaker 5>two or two, they've been investing in some AI infrastructure

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<v Speaker 5>guys uh and and such as a cohere uh and,

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<v Speaker 5>and I believe they have a little piece of core

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<v Speaker 5>Weave as well. So I'm curious where they go with

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<v Speaker 5>that going forward. But it's going to be they're gonna

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<v Speaker 5>start leaning into the AI side, is my guest, but

0:10:01.559 --> 0:10:05.840
<v Speaker 5>it's going to be a small and unlikely large.

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<v Speaker 4>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:10:16.800 --> 0:10:19.480
<v Speaker 1>weekdays at ten am. He's done on Apple, Cocklay and

0:10:19.480 --> 0:10:22.760
<v Speaker 1>Android Auto with the Bloomberg Business app. Listen on demand

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<v Speaker 1>wherever you get your podcasts, or watch us live on YouTube.

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<v Speaker 2>All right, let's talk a little bit about the retail

0:10:30.120 --> 0:10:33.079
<v Speaker 2>sector and f leisure, because that was a big thing

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<v Speaker 2>a couple of years ago, but it seems like it's

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<v Speaker 2>had its moment, and you just look at Lululemon shares

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<v Speaker 2>and how they've done, and that kind of tells you

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<v Speaker 2>what's happened to the leisure trend. Lulu Lemon shares down

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<v Speaker 2>by fifty five percent in twenty twenty five. Punam Goyel

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<v Speaker 2>is senior US e Commerce and retail analysts here at

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<v Speaker 2>Bloomberg Intelligence, and she is here with more and Putam

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<v Speaker 2>you recently authored a report about how Adidas may lead

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<v Speaker 2>ath leisure in twenty twenty six. But how big is

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<v Speaker 2>that at leisure market?

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<v Speaker 5>Right now?

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<v Speaker 6>The at leisure market is still big and growing. So

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<v Speaker 6>when you think about who dominates it, it's still Nike

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<v Speaker 6>right at over forty billion dollars in sales annually. Adidas

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<v Speaker 6>is the second, and when you think of a Little Lemon,

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

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<v Speaker 6>at twelve billion dollars in the next two a specialist

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<v Speaker 6>it is exactly. But in terms of the market, when

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<v Speaker 6>you think about at leisure and you think about the

0:11:24.760 --> 0:11:29.040
<v Speaker 6>broader apparel market, at leisure is still growing faster than

0:11:29.040 --> 0:11:32.120
<v Speaker 6>the broader apparel. What are the growth rates the growth

0:11:32.160 --> 0:11:34.240
<v Speaker 6>rates on If you look at Nike, Nike is clearly

0:11:34.280 --> 0:11:35.920
<v Speaker 6>under a turnaround, But if you look at the average

0:11:35.960 --> 0:11:38.079
<v Speaker 6>growth rate, you're looking at the single digits. It's in

0:11:38.120 --> 0:11:40.720
<v Speaker 6>the high single digits to mid single digits. And if

0:11:40.760 --> 0:11:43.280
<v Speaker 6>you think about it, next year, we're looking at low

0:11:43.320 --> 0:11:46.120
<v Speaker 6>single digit growth rates for the whole year. But that's

0:11:46.160 --> 0:11:49.800
<v Speaker 6>because there is turmoil between the names, right. There are

0:11:49.800 --> 0:11:52.960
<v Speaker 6>some names that are losing share, especially the smaller names,

0:11:52.960 --> 0:11:55.360
<v Speaker 6>like when you think of All Birds, right, all Birds

0:11:55.360 --> 0:11:58.000
<v Speaker 6>has gone through a whole transformation or is trying to,

0:11:58.480 --> 0:12:02.200
<v Speaker 6>and it's really not with its shoppers like you planted.

0:12:02.240 --> 0:12:05.560
<v Speaker 6>When you think of Little Lemon, the issue isn't the brand.

0:12:05.800 --> 0:12:09.160
<v Speaker 6>The issue is the product. It's the product that isn't

0:12:09.200 --> 0:12:12.280
<v Speaker 6>resonating as well as it did because there isn't just

0:12:12.720 --> 0:12:15.160
<v Speaker 6>much of a difference between what we already see out

0:12:15.160 --> 0:12:17.840
<v Speaker 6>there and then Nike, I think, is doing a phenomenal

0:12:17.920 --> 0:12:20.240
<v Speaker 6>job right now to turn around its business, so we

0:12:20.360 --> 0:12:22.559
<v Speaker 6>do expect it to gain traction in the second half

0:12:22.600 --> 0:12:23.200
<v Speaker 6>of next year.

0:12:23.640 --> 0:12:26.600
<v Speaker 4>Is I think I haven't seen even forever Punham. He's

0:12:26.679 --> 0:12:30.079
<v Speaker 4>actually see her every day now. It's been forever. Puns

0:12:30.280 --> 0:12:33.080
<v Speaker 4>actually literally one of our first annamals we hired back

0:12:33.080 --> 0:12:33.760
<v Speaker 4>in the beginning of.

0:12:33.800 --> 0:12:36.920
<v Speaker 2>BI pretty incredible. I love I love it coming together.

0:12:37.280 --> 0:12:41.240
<v Speaker 4>Putum is at leisure a global marketplace because when I

0:12:41.280 --> 0:12:43.320
<v Speaker 4>went over to Italy a few months ago, my friend

0:12:43.320 --> 0:12:45.120
<v Speaker 4>who lives in Rome says, do not bring any of

0:12:45.120 --> 0:12:48.280
<v Speaker 4>the ath leisure stuff. We don't do that here in Italy.

0:12:48.320 --> 0:12:51.640
<v Speaker 4>We trust like adults. Is it talked about the global trends.

0:12:51.760 --> 0:12:54.640
<v Speaker 6>It is a global trend and now, yes, Europe is

0:12:54.720 --> 0:12:58.480
<v Speaker 6>probably more on the dressier end of it, absolutely, but

0:12:58.600 --> 0:13:01.640
<v Speaker 6>I think it's a growing trend in Asia, which is

0:13:01.679 --> 0:13:05.760
<v Speaker 6>a very important market for at leisure. China especially still

0:13:05.880 --> 0:13:08.360
<v Speaker 6>very important while trends have been mixed there for the

0:13:08.440 --> 0:13:12.160
<v Speaker 6>last few years. We do think that as people begin

0:13:12.240 --> 0:13:15.920
<v Speaker 6>to explore the outdoors, begin to explore fitness and health

0:13:15.960 --> 0:13:19.200
<v Speaker 6>and wellness in a more meaningful way, that market is

0:13:19.320 --> 0:13:22.600
<v Speaker 6>growing in that region and it is very important to growth.

0:13:23.520 --> 0:13:26.360
<v Speaker 2>Where does a company like under Armour fit in here?

0:13:26.920 --> 0:13:29.520
<v Speaker 6>So under Armour is one of those companies that have

0:13:29.720 --> 0:13:33.000
<v Speaker 6>kind of went back and forth with this might be.

0:13:34.240 --> 0:13:37.280
<v Speaker 6>I've seen them trying to turn around their business several

0:13:37.320 --> 0:13:40.199
<v Speaker 6>times in the last twenty years. So Kevin Plank is

0:13:40.240 --> 0:13:43.080
<v Speaker 6>back in the seat. They're focusing on the right things.

0:13:43.120 --> 0:13:45.240
<v Speaker 6>When you look at their playbook, they're focusing on product

0:13:45.240 --> 0:13:48.760
<v Speaker 6>they're focusing on reducing wholesale penetration and off price where

0:13:48.800 --> 0:13:51.840
<v Speaker 6>you really dilute the brand, and they're focusing on bringing

0:13:51.920 --> 0:13:55.800
<v Speaker 6>marketing and endorsers as athletes back in a more meaningful way.

0:13:56.920 --> 0:14:00.239
<v Speaker 6>Sounds great, but I said, we've heard it before. We've

0:14:00.280 --> 0:14:03.360
<v Speaker 6>heard it before, So I think execution is really key here,

0:14:03.679 --> 0:14:06.200
<v Speaker 6>and then just sticking to it right because it's very

0:14:06.240 --> 0:14:09.199
<v Speaker 6>easy to fall off the product cycle and for retail,

0:14:09.280 --> 0:14:12.400
<v Speaker 6>irrespective of everything that we talk about, product is still king.

0:14:12.800 --> 0:14:15.120
<v Speaker 6>You have to have the right product, you have to

0:14:15.120 --> 0:14:18.000
<v Speaker 6>have the right customer connection, and under Armar is trying

0:14:18.000 --> 0:14:21.320
<v Speaker 6>to build that. I'd say that in the early signs

0:14:21.360 --> 0:14:24.080
<v Speaker 6>of it, they're doing what they need to do. It's working,

0:14:25.160 --> 0:14:27.440
<v Speaker 6>but I'm not sold yet. I need to see it

0:14:27.640 --> 0:14:30.520
<v Speaker 6>play out and stay. It needs to be sustained. I

0:14:30.520 --> 0:14:31.480
<v Speaker 6>think that's the key here.

0:14:31.760 --> 0:14:31.840
<v Speaker 5>Che.

0:14:31.920 --> 0:14:34.600
<v Speaker 4>I think that business is just so competitive. I mean,

0:14:34.600 --> 0:14:37.120
<v Speaker 4>there's so many good brands there, and I mean you

0:14:37.120 --> 0:14:39.920
<v Speaker 4>almost forget about a Puma, you know, who's been around.

0:14:39.640 --> 0:14:41.200
<v Speaker 6>Forever and they're struggling.

0:14:42.560 --> 0:14:47.239
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