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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence

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Speaker 1: with Alex Steele and Paul Sweeney.

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Speaker 2: The real app performance has been in US corporate high yield.

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Speaker 3: Are the companies lean enough? Have they trimmed all the facts?

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Speaker 2: The semiconductor business is a really cyclical.

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Speaker 1: Business, breaking market headlines and corporate news from across the globe.

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Speaker 4: Do investors like the M and A that we've seen?

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Speaker 2: These are two big time blue chip companies.

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Speaker 4: Window between the peak and cunt changing super fast.

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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.

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Speaker 3: Oh, Paul Sweeney and I'm Normalinda filling in for Alex Steel.

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Speaker 2: On today's Bloomberg Intelligence Show. We dig inside that big

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Speaker 2: business story is impacting Wall Street and the global markets.

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Speaker 3: Each and every week we provide in depth research and

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Speaker 3: data on some of the two thousand companies and one

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Speaker 3: hundred and thirty industries are analysts cover worldwide.

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Speaker 2: Today, we'll look at why Lovemaker LVMH posted weaker than

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Speaker 2: expected sales last quarter.

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Speaker 3: Plus we'll discuss how the tech company Intel is now

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Speaker 3: making good on plans to start spinning off non core assets.

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Speaker 2: But first we begin with the drug in pharmaceutical space.

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Speaker 2: This week, Pfizer terminated development of its obesity bill after

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Speaker 2: a patient in a clinical trial developed signs of liver injury.

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Speaker 3: This raises the odds that the drug maker will spend

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Speaker 3: billions on an acquisition to break in the blockbuster weight

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Speaker 3: loss market dominated by Novo, Nordisk and Eli Lilly.

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Speaker 2: For more, guest host Emily Grafail and I were joined

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Speaker 2: by Mikey Shap Bloomberg Intelligence senior pharma biotech analysts. We

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Speaker 2: first asked Mikey how big of an issue this recent

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Speaker 2: news is for Pfizer.

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Speaker 5: Yeah, I mean, I think it's a sentiment issue. I mean, clearly,

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Speaker 5: you know, you go to massive BC market out the

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Speaker 5: one hundred billion dollar plus in terms of sides, and

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Speaker 5: it's a market where you know, Phiz's already kind of

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Speaker 5: trailing large farm appears like Lily Rosch Novo in terms

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Speaker 5: of you know, the ABC pill itself. So this was

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Speaker 5: Danny glitpron So what what it they actually did was

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Speaker 5: it used to be a twice daily pill. They kind

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Speaker 5: of can that and repurposed it into a once daily

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Speaker 5: Following the failure of another one of their OBCs pills,

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Speaker 5: Lot of Glippron, So I'd say, you know, confidence into

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Speaker 5: this readout, you know, was pretty low. We had ready

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Speaker 5: kind of removed it from our models, you know, back

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Speaker 5: in twenty three. But what it does, you know, create is,

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Speaker 5: you know to two concerns. One is you know, the

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Speaker 5: trailing timeline in the BCC space. And two it kind

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Speaker 5: of adds to the mid to long term growth worries

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Speaker 5: of the company. So they've got you know, about fifteen

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Speaker 5: billion dollars and lost revenue to looees that they'll need

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Speaker 5: to kind of offset over twenty five to twenty nine.

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Speaker 5: And at the moment, you know, it's quite hard to

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Speaker 5: see you know where that where that offset and where

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Speaker 5: that additional growth is going to come come from. Long

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Speaker 5: term obesity would be kind of one pillar. But you know,

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Speaker 5: following the danaglip from read out today or the news today,

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Speaker 5: you know that's obviously mean terminated. So you know, we

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Speaker 5: think that they're going to have to go to you know,

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Speaker 5: look to external assets in the obcit space if they're

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Speaker 5: going to remain a relevant player in the in that market.

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Speaker 4: Is anyone else doing obesity pills in this market right now?

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Speaker 5: Yeah? So, I mean there's a few biotechs out there

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Speaker 5: that are that are doing pills. In terms of the

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Speaker 5: large farmer competitors, you know, Lily's got one, we'll see

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Speaker 5: the data for that this year. Phase three that could

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Speaker 5: potentially launch in twenty six. Novo's got one they're expected

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Speaker 5: to file, and then you know Rush also has one

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Speaker 5: kind of in early to mid stage development too. On

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Speaker 5: the biotech front, you know, we're seeing moves for you know,

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Speaker 5: Viking structure turns and they all hold or or JP

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Speaker 5: ones in their pipeline two.

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Speaker 2: Hey, Mikey, can you put into just perspective the size

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Speaker 2: of this obesity market relative to other big verticals that

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Speaker 2: drive these former companies.

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Speaker 5: I mean, I think the excitement around robust is you

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Speaker 5: know one, it's you know, prevalence is rising. You're forty

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Speaker 5: percent of US adults at the moment that are obese,

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Speaker 5: and it's a relatively underpenetrated market. So I mean, you know,

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Speaker 5: penetration rates are you know, low single digits, you know

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Speaker 5: in the US at the moment, you know, probably even

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Speaker 5: lower elsewhere, you know, globally, and you know, we think

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Speaker 5: that this market could grow, you know, well in excess

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Speaker 5: of one hundred billion dollars so yeah, I mean it's

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Speaker 5: a massive opportunity. I think in terms of you know,

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Speaker 5: drug classes, I think PD you know, immuno oncology PD

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Speaker 5: are one PD one drugs, you know, with a kind

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Speaker 5: of biggest class to date in terms of sales. So

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Speaker 5: that's like your contruder Bristol or Duvo, but you know

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Speaker 5: gr ones could potentially surpass that.

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Speaker 4: So Michael, where does Fizer go from here after this setback?

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Speaker 4: Do they double down on obesc pills? Do they do

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Speaker 4: they try something new? What's the plan here for Pfizer?

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Speaker 5: So, I mean they've got another oral jylp one in

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Speaker 5: their pipeline, so it's in phase one. It's being developed

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Speaker 5: for diabetes, notatural you know, whether or not they can

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Speaker 5: also look at that in obesity two. But clearly the

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Speaker 5: timeline here is the issue. You know, You've got oral

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Speaker 5: jilp ones coming to market in twenty six onwards. You'll

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Speaker 5: probably have a wave of new treatments coming in, you know,

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Speaker 5: towards the end of the end of the decade. So

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Speaker 5: you know, we really think that Fiser is going to

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Speaker 5: have to go out, you know, either in license at

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Speaker 5: jilp one or do some sort of m and a

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Speaker 5: they're well positioned to do that. You know, they've got

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Speaker 5: ten to fifteen billion of M and a firepower you

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Speaker 5: know to four acquisitions. So that's really you know, how

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Speaker 5: we think that they're going to do, you know, play

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Speaker 5: catch up in this space in terms of you know,

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Speaker 5: I mentioned some biotechs out there that have you know,

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Speaker 5: quite appealing assets. You know, you've also got China to say,

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Speaker 5: you know, we've seen some very competitive data in Chinese

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Speaker 5: patients for some of those domestic players, and you know

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Speaker 5: we've seen the lights of Novo Astro mark kind of

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Speaker 5: all kind of you know, delve into China's R and

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Speaker 5: D locker to essentially bolster their OBC pipelines.

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Speaker 3: Our thanks to Mikey Shaw, Bloomberg Intelligence Senior Pharma biotech analysts.

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Speaker 2: The trade war between the US and China has been

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Speaker 2: heating up. This week, China ordered its airlines to stop

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Speaker 2: taking deliveries of Boeing jets and to halt purchases of

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Speaker 2: aircraft related equipment and parts from US companies.

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Speaker 3: The move is seen as a retaliatory measure in the

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Speaker 3: ongoing trade war between the US and China, which is

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Speaker 3: imposed here is to one hundred and forty five percent

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Speaker 3: on American goods.

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Speaker 2: For more on Boeing, Nora and I were joined by

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Speaker 2: George ferguson Bloomberg Intelligence senior Aerospace, Defense and airlines analysts.

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Speaker 3: We first asked George, how big of a deal this

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Speaker 3: news is for Boeing.

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Speaker 6: I don't see the being a big issue, right, So

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Speaker 6: this is one of those things that the relationship has

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Speaker 6: deteriorated over a period of time. We took another look

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Speaker 6: at when we saw orders from the Chinese airlines for Boeing,

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Speaker 6: and there's been like fifteen or sixteen this decade. I

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Speaker 6: think fifteen came in I think last year of two

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Speaker 6: hundred and forty two orders from China that are on

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Speaker 6: the books right now, the last real material size and

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Speaker 6: orders from the big Chinese airlines we saw back in

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Speaker 6: twenty eighteen. So this is a relationship that's been broken

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Speaker 6: for a while. Frankly, the Chinese haven't really been, like

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Speaker 6: I said, ordering from Boeing.

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Speaker 7: So the bigger issue.

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Speaker 6: Here, I think is Boeing delivering some of the airplanes

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Speaker 6: they've already built for the Chinese. Like I said, there's

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Speaker 6: some two forty of them sitting in the order books.

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Speaker 6: I suspect a bunch of them are already made and

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Speaker 6: Boeing would like to get rid of them. Part of

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Speaker 6: the shadow factory elimination they're trying to do to streamline operations.

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Speaker 6: Is the pain in the neck to have an airplane

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Speaker 6: on the tarmac that's sold that you've got to maintain,

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Speaker 6: but the customer isn't taking delivery of.

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Speaker 7: It'll slow that down.

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Speaker 6: I think it might hasten some of Boeing's push to

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Speaker 6: sell some of those airplanes. The Indians have bought a.

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Speaker 7: Bunch of them.

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Speaker 6: Maybe they're they're game for more, but I just don't

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Speaker 6: This is China admitting what they've already been doing.

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Speaker 3: Frankly, So, George, what exactly is the goal here? I mean,

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Speaker 3: to your point and also Jeffrey's analysts, they're noting that

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Speaker 3: Boeing has largely de risked from China, they said of

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Speaker 3: the country contributing roughly about five percent of the skyline

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Speaker 3: over the next couple of years. But also a source

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Speaker 3: of upside. What do you think the goal is here

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Speaker 3: if there seems to be marginal impact here to Boeing.

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Speaker 7: Yeah, look, I think.

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Speaker 6: It's splashy right for the Chinese to make this kind

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Speaker 6: of commentary, And look, I do think there's potentially some upside. So, look,

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Speaker 6: there's a couple of things that's been going on right China.

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Speaker 6: One is growing a lot slower since the pandemic. Prior

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Speaker 6: to the pandemic, China would take in three three hundred

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Speaker 6: and narrow bodies a year, more than half of them

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Speaker 6: would be Boeing. And so you know since the pandemic,

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Speaker 6: last year we saw about one hundred and fifty deliveries

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Speaker 6: of narrow bodies in a China. They were airbus airplanes.

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Speaker 6: So and look, you know in a global trade battle,

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Speaker 6: China could see a diminishing GDP. Right, this is a

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Speaker 6: country grown eight percent last decade, fourish percent this decade.

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Speaker 6: But if they get that, you know, if they decide

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Speaker 6: they're going to negotiate with the US, they get some

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Speaker 6: of that growth back on the rails. I think inside

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Speaker 6: some of that negotiation you could see a requirement to

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Speaker 6: order Boeing airplanes. Donald Trump cut a similar deal in

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Speaker 6: his last administration. So there is some silver lining. And

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Speaker 6: like I said, I think the Chinese sort of they

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Speaker 6: know that the Boeing's at one of our biggest exporters.

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Speaker 6: They know they'll get some good headlines out of saying

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Speaker 6: we're not going to take any more bowing airplanes. But again,

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Speaker 6: I think this is already this is a microcosm of

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Speaker 6: the US kind of begetting uncoupled from China right now.

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Speaker 3: So this isn't a major headwind here for Boeing. But

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Speaker 3: what do you think are some headwinds that they could

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Speaker 3: be facing. What are some near term hurdles, you know.

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Speaker 6: I think Boeing has been down for so long that

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Speaker 6: I think most of the hurdles are clearing and you're

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Speaker 6: going to see a pretty good year. I think the

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Speaker 6: big issue this year is they've really got to get

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Speaker 6: Spirit Aerosystems bought and integrated into Boeing.

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Speaker 7: I think that's well underway.

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Speaker 6: I'm hearing good news from people I know in the

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Speaker 6: industry about quality coming out of Spirit. They've got to

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Speaker 6: get rid of that shadow factory. These airplanes already built

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Speaker 6: sitting on the tarmac that they're maintaining.

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Speaker 7: You know, that's just a huge dragon expenses.

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Speaker 6: They got to get them delivered out to customers, sold

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Speaker 6: off to new customers, and it's all about in the

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Speaker 6: back half of the year building more airplanes in the factory.

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Speaker 6: We've been watching it in the first quarter of the year.

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Speaker 6: I think they're getting about twenty twenty five through the

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Speaker 6: factory every month to keep building on that cadence. That's

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Speaker 6: going to generate the cash and the profitability they need.

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Speaker 7: And oh, by the way, they added.

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Speaker 6: Twenty six billion dollars to inventory since I think twenty

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Speaker 6: eighteen we have it and support at some five hundred

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Speaker 6: equivalent to five hundred and seven thirty sevens. As they

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Speaker 6: start building from the inventory on hand, their cash generation

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Speaker 6: is going to be supercharged. They could have a really

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Speaker 6: nice back half of twenty twenty five.

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Speaker 2: Our thanks to George ferguson Bloomberg Intelligence, senior Aerospace, Defense

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Speaker 2: and Airlines analysts.

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Speaker 3: Coming up, we'll break down why Elliott Investment Management is

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Speaker 3: said to be building a stake in Hewlett Packard Enterprise.

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Speaker 2: Bigo on the terminal.

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Speaker 3: I'm Paul Sweeney and I'm normal Linda. This is Bloomberg.

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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, Coarclay and

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Speaker 3: I'm Paul Sweeney and I'm Normal Linda filling it for

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Speaker 3: Alex Biel. We moved next to the luxury sector this week.

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Speaker 2: LVMA shares dropped after the luxury group published weaker than

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Speaker 2: expected quarterly sales.

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Speaker 3: The company was weighed down by sluggish demand for high

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Speaker 3: end goods in China and the US and an escalating

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Speaker 3: trade war.

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Speaker 2: For more, Nora and I were joined by Debora Aik

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Speaker 2: and Bloomberg Intelligence luxury goods analyst.

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Speaker 3: We first asked deb what she took away from LVMH's

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Speaker 3: most recent results.

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Speaker 8: Fashion and Leather goods is fifty percent of their sales,

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Speaker 8: so actually this is a key one organic sales growth

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Speaker 8: figure only, not yearnings. And we saw with Fashion and

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Speaker 8: Leather it was down five the marketed expected down half.

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Speaker 8: And what we saw behind that the US is holding

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Speaker 8: o poque social Europe, but where they did a big

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Speaker 8: chunk of their business last year from tourism shifting across

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Speaker 8: from China to Japan. That's now dried up against two

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Speaker 8: years of big numbers, and the big thing is that

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Speaker 8: it hasn't repatriated back to the mainland. So that was

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Speaker 8: one side. Another side for them would be if we

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Speaker 8: think about the wines and Spirits division, which houses their cognacs,

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Speaker 8: that's still very tough in the US and also in China,

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Speaker 8: and then Sephara was a big growth driver last year

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Speaker 8: for them in the US that's kind of fallen away

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Speaker 8: a little bit on the big comps.

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Speaker 3: So of course we know weakness in sales in China

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Speaker 3: has really been an overhang for LVMH and just the

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Speaker 3: broader luxury industry. But the EU expects US tariffs to

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Speaker 3: remain as talks make little progress. So that being said,

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Speaker 3: how are a lot of these luxury companies really thinking

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Speaker 3: about this tear iff environment and the uncertainty there as

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Speaker 3: it thinks about the US consumer.

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Speaker 8: We've done certainly a lot of our own work on

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Speaker 8: Excel dug deep gone through all of the different factors,

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Speaker 8: and we can see when we look at these companies

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Speaker 8: a range of maybe two to eight percent or in

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Speaker 8: terms of needing price rise. So the highest end companies

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Speaker 8: have the biggest margin, so therefore costs are lower and

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Speaker 8: generally they're operating out of Europe, and so that means

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Speaker 8: that they would need to price probably low to mid

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Speaker 8: single digit to cover that, given that currently across Europe

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Speaker 8: we have a ten percent power of risk hike.

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Speaker 9: Of course that.

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Speaker 8: Could change, but you know it's going to be difficult

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Speaker 8: because the last three years we've seen price hikes of

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Speaker 8: twenty five percent, so since we've had a pandemic recovery,

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Speaker 8: so there really are running off a very high base

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Speaker 8: on the price in they're going to have to really

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Speaker 8: determine what they do in terms of more manufacturing over

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Speaker 8: there where they can so for mid range for some

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Speaker 8: of elv Matre's fashion and leather goods, we think around

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Speaker 8: a third of their US is covered in terms of

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Speaker 8: US sales versus production. But there's a long way to go,

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Speaker 8: and it can't be done quickly because you need really

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Speaker 8: good artisans and to be training in labor, and that's

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Speaker 8: one of the biggest issues for these companies.

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Speaker 2: I'm looking at the PGeo function on the Bloomberg terminine.

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Speaker 2: I see that Asia excluding Japan picks up about twenty

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Speaker 2: seven percent of LVMH's business. So it's material. What are

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Speaker 2: they saying about China. Is this a market that they

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Speaker 2: can depend upon being a growth driver going forward or not?

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Speaker 2: Because it's I know just from reading your work and

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Speaker 2: talking to you in the past, China's really a lynchpin

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Speaker 2: for global luxury.

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Speaker 7: Yeah.

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Speaker 8: I mean the big thing and the big hit over

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Speaker 8: the last quarter really in these share prices has been

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Speaker 8: that second half of last year we saw the US

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Speaker 8: really start to improve, and that was offering a bit

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Speaker 8: of a lifeline until we could start to see China,

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Speaker 8: hopefully by the second half this year improve that or

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Speaker 8: that changes, the mindset changes, the consumer sentiment changes, and

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Speaker 8: so yes, for the long term, there's still a lot

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Speaker 8: to do for all these companies in each of then

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Speaker 8: we'll say they still pin their hopes on China for

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Speaker 8: the long term, more infrastructure into the marketplace, owning the

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Speaker 8: consumer more over there. But certainly in the short term

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Speaker 8: and in the year ahead, the Cummuch uncertainty, and I

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Speaker 8: really think that that hits hard on consumer sentiment, not

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Speaker 8: only in the US, but also and particularly in China.

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Speaker 8: Another one we saw was biased off with Nivre in

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Speaker 8: the very high end LA Prairie came out, and I'm

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Speaker 8: just trying to get a feel of how beauty is

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Speaker 8: doing over there, and the view there is that they've

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Speaker 8: had to clean up China even more on their Laprairie brand,

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Speaker 8: which is very high end skin care, and they're having

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Speaker 8: to actually also think about Nivia and rebrand and to

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Speaker 8: at least the premium level. So there's more price volatility

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Speaker 8: in the market and that's already starting to creep up

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Speaker 8: in China.

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Speaker 2: Thanks to Debek and Bloomberg Intelligence luxury goods analysts.

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Speaker 3: This week, we focus on a Bloomberg Big Take story

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Speaker 3: titled GM and It's eight year, thirty five billion dollar

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Speaker 3: EV bet brace for tariff head. You can find that

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Speaker 3: on Bloomberg dot com. And the terminal.

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Speaker 2: Story looks at how General Motors has to figure out

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Speaker 2: how to sell cars in Donald Trump's America after spending

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Speaker 2: about thirty five billion dollars on its EV transition.

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Speaker 3: For more, Paul and I will join by David Welch,

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Speaker 3: Bloomberg Detroit BUREA Chief.

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Speaker 2: We first asked David to break down why times are

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Speaker 2: tough right now at GM.

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Speaker 10: If you look at Trump's policies, they're pretty tough on

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Speaker 10: all the car companies, right, I mean, you've got this

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Speaker 10: tariff regime out there that still hasn't been sorted out.

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Speaker 10: Trump has indicated that he might have some leniency in

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Speaker 10: the offering for car companies. But they've built up the

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Speaker 10: supply chain and assembly in the US, Canada, Mexico and

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Speaker 10: other places for decades now. They have made more investments

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Speaker 10: based on USMCA, which was a Trump trade deal, and

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Speaker 10: now that could be upended. GM makes two of its

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Speaker 10: evs in Mexico. It's two of its cheapest ones, the

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Speaker 10: Chevy Equinox and Chevy Blazer, and so it makes it

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Speaker 10: tough from that standpoint for those two vehicles and some

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Speaker 10: of the parts that can in for those vehicles, and

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Speaker 10: then generally for GM's business, tariffs are just not a

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Speaker 10: good thing. They import vehicles, they import components, all of

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Speaker 10: that that makes it tough. Trump has also said he

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Speaker 10: hasn't done it yet, but he said that he wants

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Speaker 10: to get rid of the Biden era Inflation Reduction Act.

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Speaker 10: Those are up to seventy five hundred dollars in tax

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Speaker 10: credits for people who buy evs. That makes GM's life difficult.

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Speaker 10: With this big investment they have out there. There could

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Speaker 10: be relief on this. There are ways to get around it.

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Speaker 10: But if you're General Motors and you've got a dozen

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Speaker 10: of v's out there and the program on the whole

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Speaker 10: loses money. They're improving the profitability, but it does lose money.

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Speaker 10: The pressure's really on, as it always has been, but

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Speaker 10: even more so with Trump policies to get those vehicles

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Speaker 10: to a break even or a profitable level and then

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Speaker 10: sell them in big enough numbers where you continue to

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Speaker 10: get economies of scale and you can drive the cost down.

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Speaker 10: So it's not impossible. They're working hard at it, as

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Speaker 10: we have a lot of detail on in the story

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Speaker 10: in terms of reducing battery cost, improving efficiency at the

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Speaker 10: assembly plan level, that sort of thing. It's hard work

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Speaker 10: and EV's this kind of transition was always going to

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Speaker 10: be difficult. It is for everybody. But you know, in

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Speaker 10: GM's case, they've done some reining in of investment, but

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Speaker 10: they've really continued their push and some of their rivals

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Speaker 10: have reined it in, pulled back in the face of

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Speaker 10: all of this. So GM's sticking with it and they're

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Speaker 10: really working hard to make it profitable.

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Speaker 3: David, As you said, the pressure is on does CEO

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Speaker 3: Mary Barrow really have a dog in this fight to

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Speaker 3: electrify GM in the EV space. I mean, of course

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Speaker 3: she's trying to get a little bit of a peek

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Speaker 3: into Tesla's playbook by hiring some of their veterans from Tesla,

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Speaker 3: But do they really have the brand recognition that they

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Speaker 3: need to push through on this charge.

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Speaker 10: Yeah, that's a tough one. I think what they're trying

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Speaker 10: to do here is they're trying to change that right.

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Speaker 10: So one thing they'll point out is one they doubled

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Speaker 10: their market share in the EV segment EV space in

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Speaker 10: the US over the past year, and they did even

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Speaker 10: better in the first quarters. They've got some sales momentum,

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Speaker 10: and they're doing a on the coast, which is where

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Speaker 10: most TV buyers are. But it is it is a

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Speaker 10: bit tough when Chevrolet, for example, known for big pickup trucks,

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Speaker 10: known for Chevy suburbans, Cadillact known for the Escalade. These

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Speaker 10: are pretty thirsty and pretty expensive vehicles. They tend to

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Speaker 10: do well in the middle of the country and in

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Speaker 10: the South. So for GM, you can see why they

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Speaker 10: want to push this right. They've got brands that do

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Speaker 10: better in middle America. And if EV's are bought on

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Speaker 10: the coast and you can get market share there, why

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Speaker 10: wouldn't you push for that? It does bring in a

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Speaker 10: different kind of buyer. And I think there's a bit

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Speaker 10: of chicken egg and an egg here. Does the brand

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Speaker 10: hurt them from selling EV's or does does selling EV's

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Speaker 10: help them help get recognition for these brands with people

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Speaker 10: who didn't look at them before. And I think that's

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Speaker 10: the case they're making and they're having decent sales success,

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Speaker 10: so there's a bit of momentum there while they're trying

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Speaker 10: to do it.

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Speaker 2: David tell us about the Ultium Cells factory outside of Nashville, Tennessee.

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Speaker 10: It's very similar to the one in Ohio. Fascinating to

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Speaker 10: walk through. These are pretty pretty well automated operations. It's

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Speaker 10: not like when you walk into an assembly plant and

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Speaker 10: you see workers swinging a i'd say a set of

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Speaker 10: seating for the interior over on robotic arms and putting

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Speaker 10: that in or bolting engines like they're watching computers. They're

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Speaker 10: watching automated machinery that mixes chemicals or puts that chemical

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Speaker 10: slurry onto a metallic sheet to make parts of the battery.

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Speaker 10: Component's a very different type of thing. If you walk

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Speaker 10: through a battery plant, or I should say a cell plant,

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Speaker 10: it's kind of more like a like a chemical facility

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Speaker 10: than it is like a traditional assembly plant.

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Speaker 3: Our thanks to David Walch, Bloomberg Detroit Bureau Chief.

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Speaker 2: We move next to news on the IT company, Hewlett

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Speaker 2: Packard Enterprises.

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Speaker 3: This week, we heard that Elliott Investment Management has built

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Speaker 3: a position in HPE worth more than one and a

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Speaker 3: half billion dollars. OUR data shows that the investment makes

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Speaker 3: Elliott one of the company's top five shareholders.

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Speaker 2: For more on this, Nora and I were joined by

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Speaker 2: wu Jinho, Bloomberg Intelligence Senior technolo.

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Speaker 3: We first asked wujin what this investment by Elliott and

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Speaker 3: HPE is all about.

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Speaker 11: It looks like Elliott is looking for an opportunity here

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Speaker 11: to create a stake in terms of possibly extruction more

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Speaker 11: cost actions from HPE, especially when the company is going

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Speaker 11: through a down period from an execution standpoint as well

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Speaker 11: from a demand perspective as well.

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Speaker 3: So what exactly are they really wanting to do here

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Speaker 3: through this investment? As an activist investor, what do they

437
00:22:31,240 --> 00:22:31,919
Speaker 3: want to change?

438
00:22:32,200 --> 00:22:34,159
Speaker 11: That's a good question, or I mean look, one of

439
00:22:34,240 --> 00:22:36,320
Speaker 11: the things that I think they're doing is trying to

440
00:22:36,320 --> 00:22:40,879
Speaker 11: extract more cost actions. One of the things that HPE

441
00:22:40,880 --> 00:22:45,360
Speaker 11: did after the execution from the last quarter was cut costs, right,

442
00:22:45,359 --> 00:22:49,879
Speaker 11: They cut about two five hundred to three thousand people.

443
00:22:50,520 --> 00:22:53,040
Speaker 11: That's the plan over the next twelve to eighteen months.

444
00:22:53,200 --> 00:22:55,800
Speaker 11: That's supposed to lower the cost structure by about five

445
00:22:55,880 --> 00:22:58,640
Speaker 11: hundred basis points to have outex sales from twenty four

446
00:22:58,680 --> 00:23:02,119
Speaker 11: percent to about nineteen percent for the year. Now, the

447
00:23:02,200 --> 00:23:04,680
Speaker 11: closest cop would be Dell and Della is running around

448
00:23:04,680 --> 00:23:09,240
Speaker 11: fifteen percent op ex of sales. So I think, you know,

449
00:23:10,440 --> 00:23:12,320
Speaker 11: Elliott is trying to look for a little bit more

450
00:23:12,400 --> 00:23:15,479
Speaker 11: than nineteen percent op ecks of sales to drive up

451
00:23:15,800 --> 00:23:17,240
Speaker 11: the earnings going forward.

452
00:23:17,520 --> 00:23:21,760
Speaker 2: So is this just a cost story from Elliott's perspective

453
00:23:21,880 --> 00:23:25,240
Speaker 2: or is there something Hewlett should be doing they're not

454
00:23:25,440 --> 00:23:27,320
Speaker 2: doing from a revenue perspective.

455
00:23:27,560 --> 00:23:30,000
Speaker 11: Yeah, from a revenue perspective. I mean, if we look

456
00:23:30,040 --> 00:23:32,439
Speaker 11: about if we turn back to last quarter, there was

457
00:23:32,480 --> 00:23:36,479
Speaker 11: a really big execution fall Paul in terms of they

458
00:23:36,560 --> 00:23:40,119
Speaker 11: mispriced their servers. If you're an investor, I mean, how

459
00:23:40,200 --> 00:23:44,399
Speaker 11: does a company miss price servers to really screw up

460
00:23:44,440 --> 00:23:46,960
Speaker 11: the rest of the year from a pricing standpoint and

461
00:23:47,080 --> 00:23:50,160
Speaker 11: from a margin margin standpoint. So, you know, I wouldn't

462
00:23:50,200 --> 00:23:52,600
Speaker 11: be surprised if Elliott is looking for our management change

463
00:23:53,560 --> 00:23:57,040
Speaker 11: as well, because you know, HeLa Packard has lagged what

464
00:23:57,119 --> 00:24:02,040
Speaker 11: Della has done from an AI server perspectives, and they

465
00:24:02,080 --> 00:24:06,440
Speaker 11: really haven't gained material share on the networking side or

466
00:24:06,520 --> 00:24:09,320
Speaker 11: on the storage side against some of their closest comps.

467
00:24:09,880 --> 00:24:13,120
Speaker 3: Well, Elliott has a really successful track record from Salesforce

468
00:24:13,200 --> 00:24:16,879
Speaker 3: to CIS Strict Systems a few others. How are people

469
00:24:16,880 --> 00:24:19,200
Speaker 3: really receiving this right now? Are investors happy?

470
00:24:19,520 --> 00:24:21,520
Speaker 11: You know, some of the calls that I've received initially

471
00:24:21,560 --> 00:24:25,240
Speaker 11: off the print in Aura, is a Juniper deal off

472
00:24:25,240 --> 00:24:27,560
Speaker 11: the table as a result, I don't think so. The

473
00:24:27,600 --> 00:24:29,680
Speaker 11: one thing I will add was that Elliott was a

474
00:24:29,720 --> 00:24:34,040
Speaker 11: stakeholder of Juniper multiple years back, and they did extract

475
00:24:34,320 --> 00:24:37,919
Speaker 11: more dividends from Juniper as part of being a stakeholder.

476
00:24:37,960 --> 00:24:40,119
Speaker 11: They may you know, I wouldn't be surprised if Elliott

477
00:24:40,119 --> 00:24:44,000
Speaker 11: wants a board seat to guide the management going forward.

478
00:24:44,240 --> 00:24:46,399
Speaker 11: But I do think that the HPE Juniper deal is

479
00:24:46,600 --> 00:24:47,280
Speaker 11: still going to be.

480
00:24:47,280 --> 00:24:50,720
Speaker 2: On track thanks to Woo Jino Bloomberg Intelligence Senior Technology

481
00:24:50,760 --> 00:24:52,320
Speaker 2: channelst coming up on the program.

482
00:24:52,400 --> 00:24:54,640
Speaker 3: Well break down how the tech company Intel is now

483
00:24:54,680 --> 00:24:57,400
Speaker 3: making good on its plans to start spinning off non

484
00:24:57,400 --> 00:24:58,120
Speaker 3: core assets.

485
00:24:58,240 --> 00:25:01,000
Speaker 2: You're listening to Bloomberg Intelligence on bloom Berg Radio, providing

486
00:25:01,040 --> 00:25:03,159
Speaker 2: in depth research and data on two thousand companies and

487
00:25:03,200 --> 00:25:06,080
Speaker 2: one hundred and thirty industries. You can access Bloomberg Intelligence

488
00:25:06,160 --> 00:25:08,280
Speaker 2: via b I go on the terminal. I'm Paul Sweeney

489
00:25:08,320 --> 00:25:10,160
Speaker 2: and I'm normal Inda. This is Bloomberg.

490
00:25:18,000 --> 00:25:21,920
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch the program

491
00:25:22,000 --> 00:25:25,040
Speaker 1: live weekdays at ten am Eastern on Apple Cocklay and

492
00:25:25,040 --> 00:25:28,040
Speaker 1: Android Auto with the Bloomberg Business App. You can also

493
00:25:28,160 --> 00:25:31,800
Speaker 1: listen live on Amazon Alexa from our flagship New York station.

494
00:25:32,359 --> 00:25:35,040
Speaker 1: Just say Alexa, play Bloomberg eleven thirty.

495
00:25:36,080 --> 00:25:38,320
Speaker 3: I'm Paul Sweeney and I'm normal Linda filling in for

496
00:25:38,359 --> 00:25:40,639
Speaker 3: Alex Steel. We move next to the tech sector.

497
00:25:41,080 --> 00:25:43,359
Speaker 2: The tech company Intel is now making good on plans

498
00:25:43,359 --> 00:25:46,440
Speaker 2: to start spinning off non core assets. This week, Intel

499
00:25:46,480 --> 00:25:48,560
Speaker 2: agreed to sell a fifty one percent stake in its

500
00:25:48,720 --> 00:25:52,359
Speaker 2: programmable chips unit Alterra to the private equity firm silver

501
00:25:52,520 --> 00:25:53,400
Speaker 2: Lake Management.

502
00:25:53,600 --> 00:25:57,480
Speaker 3: The transaction values Alterra at eight point seventy five billion dollars,

503
00:25:57,720 --> 00:25:59,560
Speaker 3: and that's about half of what Intel paid for a

504
00:25:59,560 --> 00:26:02,000
Speaker 3: decade ago. The deal is expected to close in the

505
00:26:02,040 --> 00:26:03,640
Speaker 3: second half of twenty twenty five.

506
00:26:04,080 --> 00:26:06,320
Speaker 2: For more, guest host Emily Gerfaio and I were joined

507
00:26:06,320 --> 00:26:09,880
Speaker 2: by Mandeep Sing Bloomberg Intelligence senior tech industry analysts. Your

508
00:26:09,880 --> 00:26:12,480
Speaker 2: first asked, Man Deep, what Intel is up to these days?

509
00:26:12,800 --> 00:26:15,560
Speaker 9: Well, they got a new CEO, and I think he's

510
00:26:15,600 --> 00:26:19,560
Speaker 9: making the moves. Everyone was looking forward to what is

511
00:26:19,640 --> 00:26:22,640
Speaker 9: he going to do differently than Pat gel Singer, And

512
00:26:23,840 --> 00:26:27,400
Speaker 9: it looks like he wants to turn around the foundry business.

513
00:26:27,720 --> 00:26:30,719
Speaker 9: And there was one school of thought that thought Intel

514
00:26:30,880 --> 00:26:35,200
Speaker 9: should sell the foundry and focus on chip design like Nvidia.

515
00:26:35,680 --> 00:26:39,720
Speaker 9: But clearly he feels, you know, foundry business can be

516
00:26:39,800 --> 00:26:45,199
Speaker 9: turned around. And so the easy pickings here is raise cash,

517
00:26:45,320 --> 00:26:47,680
Speaker 9: you know, get rid of the non core assets, which

518
00:26:47,720 --> 00:26:50,960
Speaker 9: is al Terra here. So they're selling fifty one percent stake,

519
00:26:51,359 --> 00:26:54,280
Speaker 9: mobilize another business that comes to mind that they could

520
00:26:54,280 --> 00:26:58,520
Speaker 9: sell and look. With a company like Intel, everyone knows

521
00:26:58,560 --> 00:27:02,320
Speaker 9: that you know, you coun'try turn around this company to

522
00:27:02,560 --> 00:27:06,080
Speaker 9: show high growth. It's more about how do you manage

523
00:27:06,119 --> 00:27:08,520
Speaker 9: the company in a way where they're not burning a

524
00:27:08,520 --> 00:27:11,280
Speaker 9: lot of cash as well as they can have you know,

525
00:27:11,400 --> 00:27:13,760
Speaker 9: low to mid single digit growth. And I think that's

526
00:27:13,800 --> 00:27:14,960
Speaker 9: going to be the playbook here.

527
00:27:15,359 --> 00:27:17,840
Speaker 4: So, man, deep is silver Lake getting a good deal

528
00:27:17,880 --> 00:27:19,280
Speaker 4: then with this axe show?

529
00:27:19,320 --> 00:27:22,600
Speaker 9: I mean Intel paid you know, sixteen billion plus ten

530
00:27:22,680 --> 00:27:25,439
Speaker 9: years back, so they held their company for ten years

531
00:27:25,760 --> 00:27:29,000
Speaker 9: and now they're selling at half the price. And look,

532
00:27:29,040 --> 00:27:31,399
Speaker 9: this isn't a high growth asset, which is why it

533
00:27:31,520 --> 00:27:36,040
Speaker 9: was noncore to Intel. But we know Semis isn't that

534
00:27:36,080 --> 00:27:39,040
Speaker 9: sweet part of the cycle where everyone seems to be

535
00:27:39,080 --> 00:27:43,680
Speaker 9: bullish on AI and Semis. And so maybe silver Lake

536
00:27:43,760 --> 00:27:46,119
Speaker 9: can come up with a better way to you know,

537
00:27:46,280 --> 00:27:49,199
Speaker 9: leverage all Terra in that semi space because that's what

538
00:27:49,280 --> 00:27:52,040
Speaker 9: everyone seems to be excited by. How can I play

539
00:27:52,119 --> 00:27:53,879
Speaker 9: in the demand for Semis?

540
00:27:54,040 --> 00:27:55,200
Speaker 2: Why did they solve a whole thing?

541
00:27:56,680 --> 00:28:00,399
Speaker 9: Well, I mean it's a private equity player, so you know,

542
00:28:00,560 --> 00:28:03,159
Speaker 9: they're not going to put a lot of money in

543
00:28:03,240 --> 00:28:06,320
Speaker 9: one asset, and they just wanted fifty one percent so

544
00:28:06,359 --> 00:28:09,119
Speaker 9: that they can run the company. At the same time,

545
00:28:09,359 --> 00:28:12,440
Speaker 9: Intel can benefit if they are able to successfully turn

546
00:28:12,480 --> 00:28:17,760
Speaker 9: it around. And yeah, I think Alterra still needs Intel

547
00:28:17,880 --> 00:28:20,800
Speaker 9: technology to be successful, so it's not as if there's

548
00:28:20,840 --> 00:28:24,320
Speaker 9: a complete decoupling. It just allows Intel to focus more

549
00:28:24,359 --> 00:28:27,679
Speaker 9: on the core business, the foundry and their CPU business,

550
00:28:27,720 --> 00:28:30,359
Speaker 9: as opposed to focusing on Alterra and Mobile IE. I

551
00:28:30,400 --> 00:28:31,280
Speaker 9: think down the.

552
00:28:31,240 --> 00:28:34,320
Speaker 4: Line, should we expect with this new Intel CEO to

553
00:28:34,440 --> 00:28:38,240
Speaker 4: see more news like this Intel selling other parts of

554
00:28:38,240 --> 00:28:38,840
Speaker 4: its business.

555
00:28:39,400 --> 00:28:42,280
Speaker 9: I think so Mobile IE is definitely another one which

556
00:28:42,320 --> 00:28:46,040
Speaker 9: is noncore to Intel, even if they want to double

557
00:28:46,080 --> 00:28:49,600
Speaker 9: down on AI and chip design. Within AI, I mean

558
00:28:49,640 --> 00:28:53,320
Speaker 9: Mobile I is more autonomous driving. And yeah, that also

559
00:28:53,400 --> 00:28:56,880
Speaker 9: came from another acquisition that Intel did back in the day,

560
00:28:57,440 --> 00:28:59,960
Speaker 9: so I hope they don't end up taking a lot

561
00:29:00,200 --> 00:29:04,720
Speaker 9: on that one. But I do think the playbook here

562
00:29:04,800 --> 00:29:07,920
Speaker 9: seems to be that they want to focus on foundry

563
00:29:07,960 --> 00:29:10,480
Speaker 9: and core CPU chip design.

564
00:29:10,920 --> 00:29:13,760
Speaker 2: Foundry that's making chips right.

565
00:29:13,720 --> 00:29:15,680
Speaker 9: Yes, the manufacturing side.

566
00:29:15,800 --> 00:29:16,680
Speaker 2: Now, who else does that?

567
00:29:17,480 --> 00:29:19,920
Speaker 9: Well, we've heard the news around in Vidia, you know,

568
00:29:20,560 --> 00:29:25,400
Speaker 9: using TSMC to make their AI supercomputers here in the US,

569
00:29:25,880 --> 00:29:28,200
Speaker 9: So that's that was quite a bit of news because

570
00:29:28,360 --> 00:29:31,840
Speaker 9: I would have thought TSMC would partner with Intel, and

571
00:29:31,880 --> 00:29:35,400
Speaker 9: there was some rumblings about you know, TSMC doing something

572
00:29:35,440 --> 00:29:38,280
Speaker 9: with Intel, at least here in the US. But it

573
00:29:38,320 --> 00:29:42,320
Speaker 9: looks like Nvidia is thinking about making their next CI

574
00:29:42,480 --> 00:29:46,800
Speaker 9: supercomputer with TSMC. No talk about Intel, and that will

575
00:29:46,840 --> 00:29:47,680
Speaker 9: be here in the US.

576
00:29:47,680 --> 00:29:50,080
Speaker 2: So then I thought there's some deal that there were

577
00:29:50,160 --> 00:29:52,360
Speaker 2: Intel's gonna do a bunch of that stuff.

578
00:29:52,440 --> 00:29:55,280
Speaker 9: Yeah, so that's where there was talk about Intel and

579
00:29:55,360 --> 00:29:58,479
Speaker 9: TSMC partnering. So that was the foundry side of Intel.

580
00:29:58,560 --> 00:30:01,040
Speaker 9: But I don't think that's happening now.

581
00:30:01,120 --> 00:30:04,200
Speaker 2: So the Biden plan with Intel, which was to do

582
00:30:04,280 --> 00:30:07,680
Speaker 2: a big, big deal, big investment, is that's still on

583
00:30:07,760 --> 00:30:07,960
Speaker 2: or No.

584
00:30:08,480 --> 00:30:11,680
Speaker 9: So the chips Act money was given to Intel. It

585
00:30:11,760 --> 00:30:14,880
Speaker 9: was also given to TSMC for the Phoenix fab where

586
00:30:14,920 --> 00:30:19,880
Speaker 9: they will be making this AI supercomputer with Nvidia. But look,

587
00:30:20,200 --> 00:30:22,600
Speaker 9: I think in the case of Intel, the challenge has

588
00:30:22,640 --> 00:30:27,160
Speaker 9: always been why have they not participated in this AI wave?

589
00:30:27,440 --> 00:30:29,840
Speaker 9: And the Chipsack money didn't help over there.

590
00:30:30,280 --> 00:30:34,320
Speaker 3: Our thanks to Mandy seeing Bloomberg Intelligence senior tech industry analysts.

591
00:30:34,400 --> 00:30:36,840
Speaker 2: Staying with the tech sector, we recently learned that tech

592
00:30:36,880 --> 00:30:39,400
Speaker 2: giant Apple has been exempted from one hundred and twenty

593
00:30:39,440 --> 00:30:44,360
Speaker 2: five percent tariffs on goods produced in China. This includes iPhones, iPads, max,

594
00:30:44,480 --> 00:30:46,160
Speaker 2: Apple watches, and air tags.

595
00:30:46,440 --> 00:30:49,000
Speaker 3: Separately, we learned that Apple will begin analyzing data on

596
00:30:49,040 --> 00:30:52,400
Speaker 3: customer's devices in a bid to improve its AI platform.

597
00:30:52,720 --> 00:30:54,800
Speaker 2: For more on this and all things Apple, Nord and

598
00:30:54,840 --> 00:30:57,800
Speaker 2: I were joined by Mark German, Bloomberg News Managing editor

599
00:30:57,840 --> 00:31:00,560
Speaker 2: for Global Consumer Tech. We first asked more how he

600
00:31:00,600 --> 00:31:03,600
Speaker 2: thinks Apple will just the Washington policy moving forward.

601
00:31:03,920 --> 00:31:04,680
Speaker 12: That's a big question.

602
00:31:04,720 --> 00:31:06,480
Speaker 13: We're on a bit of a roller coaster here where

603
00:31:06,480 --> 00:31:10,360
Speaker 13: Apple's constantly needing to think about adjusting, and then how

604
00:31:10,360 --> 00:31:11,959
Speaker 13: are they gonna adjust? And then what happens if they

605
00:31:12,000 --> 00:31:15,280
Speaker 13: adjust and then they have to adjust them a different direction.

606
00:31:16,240 --> 00:31:18,400
Speaker 13: You can really think of Apple as just like the

607
00:31:18,440 --> 00:31:20,719
Speaker 13: biggest ship in the water. Ye, it's gonna take a

608
00:31:20,760 --> 00:31:25,000
Speaker 13: while to move anything. So these adjustments they have to

609
00:31:25,000 --> 00:31:29,000
Speaker 13: be made with precision, right, And so it's really it's

610
00:31:29,040 --> 00:31:31,480
Speaker 13: a sporadic situation. You really don't know what's going to happen.

611
00:31:31,480 --> 00:31:33,320
Speaker 13: But at least for now they're in good shape. But

612
00:31:33,480 --> 00:31:36,000
Speaker 13: who knows a long that's gonna last. But no matter

613
00:31:36,040 --> 00:31:40,880
Speaker 13: what Trump does moving forward, I'd be very surprised if

614
00:31:40,920 --> 00:31:45,000
Speaker 13: this he talks about this sectoral tariff on these types

615
00:31:45,040 --> 00:31:48,160
Speaker 13: of devices, maybe I'm wrong. I just don't think there's

616
00:31:48,160 --> 00:31:49,960
Speaker 13: any way it's gonna be one hundred and forty five percent.

617
00:31:50,160 --> 00:31:52,720
Speaker 13: So either way, you're still at a big improvement.

618
00:31:53,520 --> 00:31:55,760
Speaker 3: Of course, with the tariffs as an added layer of

619
00:31:55,800 --> 00:31:59,440
Speaker 3: a headwind for the company, they're not stockpiling, and so

620
00:31:59,520 --> 00:32:02,360
Speaker 3: we're seeing them increasing shipments and everything. But it seems

621
00:32:02,360 --> 00:32:05,800
Speaker 3: as though this isn't necessarily due to more demand, but

622
00:32:05,800 --> 00:32:07,240
Speaker 3: more or less the fact that they're just trying to

623
00:32:07,240 --> 00:32:09,840
Speaker 3: prepare for the worst. Is that the case, Yeah.

624
00:32:09,640 --> 00:32:11,840
Speaker 13: That's right, trying to get as many phones as no

625
00:32:11,960 --> 00:32:14,600
Speaker 13: tariffs or at low tariffs as possible, whether it's from

626
00:32:14,680 --> 00:32:17,240
Speaker 13: China during this period right now with no tariff, whether

627
00:32:17,280 --> 00:32:20,080
Speaker 13: it's from India at this period with the lower tariff,

628
00:32:20,160 --> 00:32:22,280
Speaker 13: get as many as you can into the US channel

629
00:32:22,520 --> 00:32:25,040
Speaker 13: to fulfill demand. The problem is that we're about to

630
00:32:25,080 --> 00:32:27,240
Speaker 13: go through a product transition, right They're about to move

631
00:32:27,240 --> 00:32:28,280
Speaker 13: to the iPhone seventeen.

632
00:32:28,320 --> 00:32:29,720
Speaker 7: So the question just got the sixteen.

633
00:32:29,920 --> 00:32:31,400
Speaker 3: I'm behind, That's fine.

634
00:32:31,800 --> 00:32:34,040
Speaker 13: The point we're trying to make here, yes, yes you

635
00:32:34,080 --> 00:32:37,640
Speaker 13: are behind. You're also behind, right, But the point you're

636
00:32:37,680 --> 00:32:40,880
Speaker 13: trying I'm trying to make here is that these iPhone

637
00:32:40,920 --> 00:32:42,920
Speaker 13: seventeens are not ready to be pumped out. So the

638
00:32:43,000 --> 00:32:46,080
Speaker 13: question is what is the terariff situation going to be

639
00:32:46,480 --> 00:32:49,080
Speaker 13: in September October when these things are flying off the

640
00:32:49,120 --> 00:32:51,680
Speaker 13: manufacturing lines. Where are these going to come from? So

641
00:32:51,760 --> 00:32:54,440
Speaker 13: at this point it's so difficult to figure out what's

642
00:32:54,480 --> 00:32:55,200
Speaker 13: going to happen.

643
00:32:55,440 --> 00:32:56,440
Speaker 12: What do they need to do?

644
00:32:57,560 --> 00:33:02,520
Speaker 2: In reality? I can't imagine and China not being an

645
00:33:02,560 --> 00:33:05,720
Speaker 2: integral part of Apple in the next five years. I

646
00:33:05,760 --> 00:33:07,680
Speaker 2: mean it has to, right, you can't switch.

647
00:33:07,840 --> 00:33:12,480
Speaker 13: Nothing's changing. Well that's not true. Things are changing, but

648
00:33:12,560 --> 00:33:15,680
Speaker 13: China's not going away. Yeah, right, don't forget that the

649
00:33:15,840 --> 00:33:19,280
Speaker 13: US makes up about what a third of Apple's overall sales.

650
00:33:19,320 --> 00:33:21,800
Speaker 13: You've still got two thirds of the world that's going

651
00:33:21,840 --> 00:33:24,320
Speaker 13: to rely on this China supply chain. China's critical for

652
00:33:24,400 --> 00:33:25,080
Speaker 13: rest of the world.

653
00:33:26,160 --> 00:33:29,240
Speaker 3: So how's Apple doing in the AI game right now?

654
00:33:29,360 --> 00:33:32,360
Speaker 3: I mean, so, I know we have iOS what's going

655
00:33:32,400 --> 00:33:34,200
Speaker 3: on there? I know we have iOS eighteen point five

656
00:33:34,320 --> 00:33:35,920
Speaker 3: or something coming soon that's coming.

657
00:33:35,960 --> 00:33:38,680
Speaker 13: But Apple AI is not doing so hot. They've just

658
00:33:38,760 --> 00:33:42,880
Speaker 13: replaced the person in charge of Siri, right, They're pulling

659
00:33:42,920 --> 00:33:45,560
Speaker 13: any lever they can. One of the issues with Apple

660
00:33:45,600 --> 00:33:49,520
Speaker 13: Intelligence is that their privacy stance has prevented them from

661
00:33:49,520 --> 00:33:52,560
Speaker 13: gathering as much data possible in order to train their

662
00:33:52,560 --> 00:33:54,880
Speaker 13: AI models. To get AI models working, probably you have

663
00:33:54,920 --> 00:33:57,160
Speaker 13: to train them with data, right, and the best data

664
00:33:57,200 --> 00:33:59,200
Speaker 13: you can get is the data that your customers are

665
00:33:59,240 --> 00:34:02,280
Speaker 13: in putting into their iPhones. They don't do that. Open

666
00:34:02,320 --> 00:34:04,760
Speaker 13: AI does it. Google does it. That's why their tools

667
00:34:04,760 --> 00:34:07,320
Speaker 13: are so great. What Apple is doing now is they're

668
00:34:07,400 --> 00:34:10,160
Speaker 13: putting in this new privacy centric approach where they're going

669
00:34:10,200 --> 00:34:13,080
Speaker 13: to take your data on your phone, analyze it on

670
00:34:13,200 --> 00:34:15,680
Speaker 13: the phone, compare it to the fake data.

671
00:34:16,120 --> 00:34:17,480
Speaker 12: Right. They use fake data that.

672
00:34:17,440 --> 00:34:20,120
Speaker 13: They just create out of thin air while using AI,

673
00:34:21,360 --> 00:34:23,839
Speaker 13: compare it so they know which fake data is most

674
00:34:23,880 --> 00:34:26,040
Speaker 13: similar to the real data, and then they'll use that

675
00:34:26,520 --> 00:34:28,000
Speaker 13: best of the bunch fake data.

676
00:34:27,800 --> 00:34:30,440
Speaker 12: To train their AI model. So you're seeing.

677
00:34:30,120 --> 00:34:33,759
Speaker 13: These it is it is complicated, hard to wrap your

678
00:34:33,800 --> 00:34:36,560
Speaker 13: head around, and so they're basically pulling every lever they can.

679
00:34:37,719 --> 00:34:40,360
Speaker 2: Now we've said in the past, Apple doesn't need to

680
00:34:40,400 --> 00:34:44,719
Speaker 2: be first in things because they just need to wake

681
00:34:44,760 --> 00:34:46,799
Speaker 2: to the technologies kind of out there and then they're

682
00:34:46,840 --> 00:34:49,400
Speaker 2: going to come in and make it beautiful. Is that

683
00:34:49,440 --> 00:34:50,360
Speaker 2: still hold for AI.

684
00:34:52,239 --> 00:34:58,320
Speaker 13: That's the problem usual playbook. You're right, don't be first,

685
00:34:58,680 --> 00:35:03,200
Speaker 13: be the best. Well, they're certainly not first, and they're

686
00:35:03,200 --> 00:35:06,240
Speaker 13: probably the worst. Wow of all the big tech names.

687
00:35:07,040 --> 00:35:08,840
Speaker 13: They are the worst in AI of all the.

688
00:35:08,800 --> 00:35:12,520
Speaker 2: Big tech How concerned, Copertino, I mean it's extremely concerning.

689
00:35:12,760 --> 00:35:15,320
Speaker 13: They were going to have the head of AI retire.

690
00:35:15,760 --> 00:35:19,200
Speaker 13: Perhaps he's not going anywhere. They just replaced him on Siri.

691
00:35:20,120 --> 00:35:22,719
Speaker 13: There is certainly a lot of work and accountability that

692
00:35:22,800 --> 00:35:24,879
Speaker 13: needs to be done there, And the question is how

693
00:35:24,880 --> 00:35:27,120
Speaker 13: long is it going to take till you have something compelling?

694
00:35:27,160 --> 00:35:29,040
Speaker 13: And I do think it's going to be at least

695
00:35:29,040 --> 00:35:32,400
Speaker 13: a few years. But don't forget AI is not the phone.

696
00:35:32,440 --> 00:35:36,759
Speaker 13: The phone moved fast, but there was new innovation in

697
00:35:36,800 --> 00:35:39,600
Speaker 13: the phone. Maybe you know every year every couple of

698
00:35:39,640 --> 00:35:42,800
Speaker 13: years AI, you're getting a new deep Seek every three weeks.

699
00:35:43,960 --> 00:35:45,000
Speaker 12: There could be a big.

700
00:35:44,840 --> 00:35:49,000
Speaker 13: AI innovation announced tomorrow. In fact, I think Open Ai

701
00:35:49,160 --> 00:35:52,560
Speaker 13: just rolled something out Chat GPT four Dot one model

702
00:35:52,560 --> 00:35:55,719
Speaker 13: the other day or yesterday. And so the speed at

703
00:35:55,719 --> 00:35:59,239
Speaker 13: this that this moves at is what's really concerning, because

704
00:35:59,280 --> 00:36:00,760
Speaker 13: Apple just doesn't move at that speed.

705
00:36:00,760 --> 00:36:04,080
Speaker 12: They're not built to operate at the speed of the break.

706
00:36:06,239 --> 00:36:08,680
Speaker 13: I think they can, but that would also require a

707
00:36:08,680 --> 00:36:12,480
Speaker 13: big c change because Apple is historically bad at integrating

708
00:36:12,560 --> 00:36:17,000
Speaker 13: larger companies into their overall operational workforce. And so it's

709
00:36:17,040 --> 00:36:19,120
Speaker 13: like you take a step back and you ask yourself,

710
00:36:19,440 --> 00:36:22,040
Speaker 13: what is Apple really good at. They're good at the phone,

711
00:36:22,080 --> 00:36:23,880
Speaker 13: They're good at the iPad, they're good at the watch,

712
00:36:23,920 --> 00:36:27,000
Speaker 13: They're good at health stuff, They're good at core.

713
00:36:27,000 --> 00:36:28,120
Speaker 12: On device software.

714
00:36:29,160 --> 00:36:31,920
Speaker 13: Not really good at cloud though they have some excellent

715
00:36:32,440 --> 00:36:35,440
Speaker 13: cloud based services at this point, not really good at AI.

716
00:36:35,600 --> 00:36:36,360
Speaker 12: They're getting good.

717
00:36:36,200 --> 00:36:39,200
Speaker 13: At TV from you know what I hear from people

718
00:36:39,239 --> 00:36:44,719
Speaker 13: who like their shows. But they're just a company at

719
00:36:44,719 --> 00:36:50,640
Speaker 13: this point that's running based on legacy ideals and they

720
00:36:50,680 --> 00:36:54,319
Speaker 13: need a bit of modernization. And the question is is

721
00:36:54,360 --> 00:36:56,879
Speaker 13: that going to happen. Don't forget this company is run

722
00:36:56,920 --> 00:36:58,520
Speaker 13: by the same group of people.

723
00:36:58,239 --> 00:37:00,480
Speaker 2: Who's just as does Tim Cooks still have the support

724
00:37:00,520 --> 00:37:01,640
Speaker 2: of the street and of the board.

725
00:37:01,800 --> 00:37:04,600
Speaker 13: Oh yeah's you know, Tim cook wouldn't write his own ticket,

726
00:37:04,680 --> 00:37:08,439
Speaker 13: There's no question there. They're down nineteen percent this year, right,

727
00:37:08,520 --> 00:37:13,160
Speaker 13: but look how much they're up over the last fifteen years.

728
00:37:13,480 --> 00:37:17,560
Speaker 13: What he's done is amazing, you know, everyone counted him

729
00:37:17,560 --> 00:37:19,200
Speaker 13: out after Steve Jaws passed away.

730
00:37:19,560 --> 00:37:20,640
Speaker 12: Right, Steve Jaws is.

731
00:37:20,640 --> 00:37:23,560
Speaker 13: A one of one innovator in mind and this type

732
00:37:23,600 --> 00:37:26,319
Speaker 13: of thing, and it would have been very easy and

733
00:37:26,360 --> 00:37:30,080
Speaker 13: not surprising, if you know, Apple not folded up shot,

734
00:37:30,200 --> 00:37:34,200
Speaker 13: but really moved away from what they were, And in

735
00:37:34,239 --> 00:37:37,080
Speaker 13: many respects they have moved away, but at the same.

736
00:37:36,880 --> 00:37:38,799
Speaker 12: Time they've grown so much.

737
00:37:40,080 --> 00:37:41,879
Speaker 13: The way Apple's at the center of all our lives

738
00:37:41,960 --> 00:37:44,279
Speaker 13: today was not the way they were at the center

739
00:37:44,280 --> 00:37:46,319
Speaker 13: of our lives ten years ago. They were not at

740
00:37:46,360 --> 00:37:47,720
Speaker 13: the center of the universe.

741
00:37:47,320 --> 00:37:48,000
Speaker 12: A decade ago.

742
00:37:48,280 --> 00:37:51,040
Speaker 13: They're at the center of the center of the universe today.

743
00:37:50,760 --> 00:37:52,239
Speaker 12: Because Steve Jobs left them with a lot.

744
00:37:52,160 --> 00:37:55,480
Speaker 13: Of momentum and Tim Cook executed better than anyone else

745
00:37:55,520 --> 00:37:56,799
Speaker 13: would have been able to execute.

746
00:37:57,040 --> 00:37:59,640
Speaker 3: Our Thanks to Mark German Bloomberg News, a managing editor

747
00:37:59,640 --> 00:38:00,919
Speaker 3: for Gloeble Consumer Tech.

748
00:38:01,440 --> 00:38:06,160
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,

749
00:38:06,320 --> 00:38:09,799
Speaker 1: and anywhere else you get your podcasts. Listen live each

750
00:38:09,840 --> 00:38:13,600
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,

751
00:38:13,719 --> 00:38:17,240
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

752
00:38:17,680 --> 00:38:20,560
Speaker 1: You can also watch us live every weekday on YouTube

753
00:38:21,000 --> 00:38:23,240
Speaker 1: and always on the Bloomberg terminal,