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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
Speaker 3: Oh, Paul Sweeney and I'm Normalinda filling in for Alex Steel.
Speaker 2: On today's Bloomberg Intelligence Show. We dig inside that big
Speaker 2: business story is impacting Wall Street and the global markets.
Speaker 3: Each and every week we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries are analysts cover worldwide.
Speaker 2: Today, we'll look at why Lovemaker LVMH posted weaker than
Speaker 2: expected sales last quarter.
Speaker 3: Plus we'll discuss how the tech company Intel is now
Speaker 3: making good on plans to start spinning off non core assets.
Speaker 2: But first we begin with the drug in pharmaceutical space.
Speaker 2: This week, Pfizer terminated development of its obesity bill after
Speaker 2: a patient in a clinical trial developed signs of liver injury.
Speaker 3: This raises the odds that the drug maker will spend
Speaker 3: billions on an acquisition to break in the blockbuster weight
Speaker 3: loss market dominated by Novo, Nordisk and Eli Lilly.
Speaker 2: For more, guest host Emily Grafail and I were joined
Speaker 2: by Mikey Shap Bloomberg Intelligence senior pharma biotech analysts. We
Speaker 2: first asked Mikey how big of an issue this recent
Speaker 2: news is for Pfizer.
Speaker 5: Yeah, I mean, I think it's a sentiment issue. I mean, clearly,
Speaker 5: you know, you go to massive BC market out the
Speaker 5: one hundred billion dollar plus in terms of sides, and
Speaker 5: it's a market where you know, Phiz's already kind of
Speaker 5: trailing large farm appears like Lily Rosch Novo in terms
Speaker 5: of you know, the ABC pill itself. So this was
Speaker 5: Danny glitpron So what what it they actually did was
Speaker 5: it used to be a twice daily pill. They kind
Speaker 5: of can that and repurposed it into a once daily
Speaker 5: Following the failure of another one of their OBCs pills,
Speaker 5: Lot of Glippron, So I'd say, you know, confidence into
Speaker 5: this readout, you know, was pretty low. We had ready
Speaker 5: kind of removed it from our models, you know, back
Speaker 5: in twenty three. But what it does, you know, create is,
Speaker 5: you know to two concerns. One is you know, the
Speaker 5: trailing timeline in the BCC space. And two it kind
Speaker 5: of adds to the mid to long term growth worries
Speaker 5: of the company. So they've got you know, about fifteen
Speaker 5: billion dollars and lost revenue to looees that they'll need
Speaker 5: to kind of offset over twenty five to twenty nine.
Speaker 5: And at the moment, you know, it's quite hard to
Speaker 5: see you know where that where that offset and where
Speaker 5: that additional growth is going to come come from. Long
Speaker 5: term obesity would be kind of one pillar. But you know,
Speaker 5: following the danaglip from read out today or the news today,
Speaker 5: you know that's obviously mean terminated. So you know, we
Speaker 5: think that they're going to have to go to you know,
Speaker 5: look to external assets in the obcit space if they're
Speaker 5: going to remain a relevant player in the in that market.
Speaker 4: Is anyone else doing obesity pills in this market right now?
Speaker 5: Yeah? So, I mean there's a few biotechs out there
Speaker 5: that are that are doing pills. In terms of the
Speaker 5: large farmer competitors, you know, Lily's got one, we'll see
Speaker 5: the data for that this year. Phase three that could
Speaker 5: potentially launch in twenty six. Novo's got one they're expected
Speaker 5: to file, and then you know Rush also has one
Speaker 5: kind of in early to mid stage development too. On
Speaker 5: the biotech front, you know, we're seeing moves for you know,
Speaker 5: Viking structure turns and they all hold or or JP
Speaker 5: ones in their pipeline two.
Speaker 2: Hey, Mikey, can you put into just perspective the size
Speaker 2: of this obesity market relative to other big verticals that
Speaker 2: drive these former companies.
Speaker 5: I mean, I think the excitement around robust is you
Speaker 5: know one, it's you know, prevalence is rising. You're forty
Speaker 5: percent of US adults at the moment that are obese,
Speaker 5: and it's a relatively underpenetrated market. So I mean, you know,
Speaker 5: penetration rates are you know, low single digits, you know
Speaker 5: in the US at the moment, you know, probably even
Speaker 5: lower elsewhere, you know, globally, and you know, we think
Speaker 5: that this market could grow, you know, well in excess
Speaker 5: of one hundred billion dollars so yeah, I mean it's
Speaker 5: a massive opportunity. I think in terms of you know,
Speaker 5: drug classes, I think PD you know, immuno oncology PD
Speaker 5: are one PD one drugs, you know, with a kind
Speaker 5: of biggest class to date in terms of sales. So
Speaker 5: that's like your contruder Bristol or Duvo, but you know
Speaker 5: gr ones could potentially surpass that.
Speaker 4: So Michael, where does Fizer go from here after this setback?
Speaker 4: Do they double down on obesc pills? Do they do
Speaker 4: they try something new? What's the plan here for Pfizer?
Speaker 5: So, I mean they've got another oral jylp one in
Speaker 5: their pipeline, so it's in phase one. It's being developed
Speaker 5: for diabetes, notatural you know, whether or not they can
Speaker 5: also look at that in obesity two. But clearly the
Speaker 5: timeline here is the issue. You know, You've got oral
Speaker 5: jilp ones coming to market in twenty six onwards. You'll
Speaker 5: probably have a wave of new treatments coming in, you know,
Speaker 5: towards the end of the end of the decade. So
Speaker 5: you know, we really think that Fiser is going to
Speaker 5: have to go out, you know, either in license at
Speaker 5: jilp one or do some sort of m and a
Speaker 5: they're well positioned to do that. You know, they've got
Speaker 5: ten to fifteen billion of M and a firepower you
Speaker 5: know to four acquisitions. So that's really you know, how
Speaker 5: we think that they're going to do, you know, play
Speaker 5: catch up in this space in terms of you know,
Speaker 5: I mentioned some biotechs out there that have you know,
Speaker 5: quite appealing assets. You know, you've also got China to say,
Speaker 5: you know, we've seen some very competitive data in Chinese
Speaker 5: patients for some of those domestic players, and you know
Speaker 5: we've seen the lights of Novo Astro mark kind of
Speaker 5: all kind of you know, delve into China's R and
Speaker 5: D locker to essentially bolster their OBC pipelines.
Speaker 3: Our thanks to Mikey Shaw, Bloomberg Intelligence Senior Pharma biotech analysts.
Speaker 2: The trade war between the US and China has been
Speaker 2: heating up. This week, China ordered its airlines to stop
Speaker 2: taking deliveries of Boeing jets and to halt purchases of
Speaker 2: aircraft related equipment and parts from US companies.
Speaker 3: The move is seen as a retaliatory measure in the
Speaker 3: ongoing trade war between the US and China, which is
Speaker 3: imposed here is to one hundred and forty five percent
Speaker 3: on American goods.
Speaker 2: For more on Boeing, Nora and I were joined by
Speaker 2: George ferguson Bloomberg Intelligence senior Aerospace, Defense and airlines analysts.
Speaker 3: We first asked George, how big of a deal this
Speaker 3: news is for Boeing.
Speaker 6: I don't see the being a big issue, right, So
Speaker 6: this is one of those things that the relationship has
Speaker 6: deteriorated over a period of time. We took another look
Speaker 6: at when we saw orders from the Chinese airlines for Boeing,
Speaker 6: and there's been like fifteen or sixteen this decade. I
Speaker 6: think fifteen came in I think last year of two
Speaker 6: hundred and forty two orders from China that are on
Speaker 6: the books right now, the last real material size and
Speaker 6: orders from the big Chinese airlines we saw back in
Speaker 6: twenty eighteen. So this is a relationship that's been broken
Speaker 6: for a while. Frankly, the Chinese haven't really been, like
Speaker 6: I said, ordering from Boeing.
Speaker 7: So the bigger issue.
Speaker 6: Here, I think is Boeing delivering some of the airplanes
Speaker 6: they've already built for the Chinese. Like I said, there's
Speaker 6: some two forty of them sitting in the order books.
Speaker 6: I suspect a bunch of them are already made and
Speaker 6: Boeing would like to get rid of them. Part of
Speaker 6: the shadow factory elimination they're trying to do to streamline operations.
Speaker 6: Is the pain in the neck to have an airplane
Speaker 6: on the tarmac that's sold that you've got to maintain,
Speaker 6: but the customer isn't taking delivery of.
Speaker 7: It'll slow that down.
Speaker 6: I think it might hasten some of Boeing's push to
Speaker 6: sell some of those airplanes. The Indians have bought a.
Speaker 7: Bunch of them.
Speaker 6: Maybe they're they're game for more, but I just don't
Speaker 6: This is China admitting what they've already been doing.
Speaker 3: Frankly, So, George, what exactly is the goal here? I mean,
Speaker 3: to your point and also Jeffrey's analysts, they're noting that
Speaker 3: Boeing has largely de risked from China, they said of
Speaker 3: the country contributing roughly about five percent of the skyline
Speaker 3: over the next couple of years. But also a source
Speaker 3: of upside. What do you think the goal is here
Speaker 3: if there seems to be marginal impact here to Boeing.
Speaker 7: Yeah, look, I think.
Speaker 6: It's splashy right for the Chinese to make this kind
Speaker 6: of commentary, And look, I do think there's potentially some upside. So, look,
Speaker 6: there's a couple of things that's been going on right China.
Speaker 6: One is growing a lot slower since the pandemic. Prior
Speaker 6: to the pandemic, China would take in three three hundred
Speaker 6: and narrow bodies a year, more than half of them
Speaker 6: would be Boeing. And so you know since the pandemic,
Speaker 6: last year we saw about one hundred and fifty deliveries
Speaker 6: of narrow bodies in a China. They were airbus airplanes.
Speaker 6: So and look, you know in a global trade battle,
Speaker 6: China could see a diminishing GDP. Right, this is a
Speaker 6: country grown eight percent last decade, fourish percent this decade.
Speaker 6: But if they get that, you know, if they decide
Speaker 6: they're going to negotiate with the US, they get some
Speaker 6: of that growth back on the rails. I think inside
Speaker 6: some of that negotiation you could see a requirement to
Speaker 6: order Boeing airplanes. Donald Trump cut a similar deal in
Speaker 6: his last administration. So there is some silver lining. And
Speaker 6: like I said, I think the Chinese sort of they
Speaker 6: know that the Boeing's at one of our biggest exporters.
Speaker 6: They know they'll get some good headlines out of saying
Speaker 6: we're not going to take any more bowing airplanes. But again,
Speaker 6: I think this is already this is a microcosm of
Speaker 6: the US kind of begetting uncoupled from China right now.
Speaker 3: So this isn't a major headwind here for Boeing. But
Speaker 3: what do you think are some headwinds that they could
Speaker 3: be facing. What are some near term hurdles, you know.
Speaker 6: I think Boeing has been down for so long that
Speaker 6: I think most of the hurdles are clearing and you're
Speaker 6: going to see a pretty good year. I think the
Speaker 6: big issue this year is they've really got to get
Speaker 6: Spirit Aerosystems bought and integrated into Boeing.
Speaker 7: I think that's well underway.
Speaker 6: I'm hearing good news from people I know in the
Speaker 6: industry about quality coming out of Spirit. They've got to
Speaker 6: get rid of that shadow factory. These airplanes already built
Speaker 6: sitting on the tarmac that they're maintaining.
Speaker 7: You know, that's just a huge dragon expenses.
Speaker 6: They got to get them delivered out to customers, sold
Speaker 6: off to new customers, and it's all about in the
Speaker 6: back half of the year building more airplanes in the factory.
Speaker 6: We've been watching it in the first quarter of the year.
Speaker 6: I think they're getting about twenty twenty five through the
Speaker 6: factory every month to keep building on that cadence. That's
Speaker 6: going to generate the cash and the profitability they need.
Speaker 7: And oh, by the way, they added.
Speaker 6: Twenty six billion dollars to inventory since I think twenty
Speaker 6: eighteen we have it and support at some five hundred
Speaker 6: equivalent to five hundred and seven thirty sevens. As they
Speaker 6: start building from the inventory on hand, their cash generation
Speaker 6: is going to be supercharged. They could have a really
Speaker 6: nice back half of twenty twenty five.
Speaker 2: Our thanks to George ferguson Bloomberg Intelligence, senior Aerospace, Defense
Speaker 2: and Airlines analysts.
Speaker 3: Coming up, we'll break down why Elliott Investment Management is
Speaker 3: said to be building a stake in Hewlett Packard Enterprise.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 3: I'm Paul Sweeney and I'm normal Linda. This is Bloomberg.
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Speaker 3: I'm Paul Sweeney and I'm Normal Linda filling it for
Speaker 3: Alex Biel. We moved next to the luxury sector this week.
Speaker 2: LVMA shares dropped after the luxury group published weaker than
Speaker 2: expected quarterly sales.
Speaker 3: The company was weighed down by sluggish demand for high
Speaker 3: end goods in China and the US and an escalating
Speaker 3: trade war.
Speaker 2: For more, Nora and I were joined by Debora Aik
Speaker 2: and Bloomberg Intelligence luxury goods analyst.
Speaker 3: We first asked deb what she took away from LVMH's
Speaker 3: most recent results.
Speaker 8: Fashion and Leather goods is fifty percent of their sales,
Speaker 8: so actually this is a key one organic sales growth
Speaker 8: figure only, not yearnings. And we saw with Fashion and
Speaker 8: Leather it was down five the marketed expected down half.
Speaker 8: And what we saw behind that the US is holding
Speaker 8: o poque social Europe, but where they did a big
Speaker 8: chunk of their business last year from tourism shifting across
Speaker 8: from China to Japan. That's now dried up against two
Speaker 8: years of big numbers, and the big thing is that
Speaker 8: it hasn't repatriated back to the mainland. So that was
Speaker 8: one side. Another side for them would be if we
Speaker 8: think about the wines and Spirits division, which houses their cognacs,
Speaker 8: that's still very tough in the US and also in China,
Speaker 8: and then Sephara was a big growth driver last year
Speaker 8: for them in the US that's kind of fallen away
Speaker 8: a little bit on the big comps.
Speaker 3: So of course we know weakness in sales in China
Speaker 3: has really been an overhang for LVMH and just the
Speaker 3: broader luxury industry. But the EU expects US tariffs to
Speaker 3: remain as talks make little progress. So that being said,
Speaker 3: how are a lot of these luxury companies really thinking
Speaker 3: about this tear iff environment and the uncertainty there as
Speaker 3: it thinks about the US consumer.
Speaker 8: We've done certainly a lot of our own work on
Speaker 8: Excel dug deep gone through all of the different factors,
Speaker 8: and we can see when we look at these companies
Speaker 8: a range of maybe two to eight percent or in
Speaker 8: terms of needing price rise. So the highest end companies
Speaker 8: have the biggest margin, so therefore costs are lower and
Speaker 8: generally they're operating out of Europe, and so that means
Speaker 8: that they would need to price probably low to mid
Speaker 8: single digit to cover that, given that currently across Europe
Speaker 8: we have a ten percent power of risk hike.
Speaker 9: Of course that.
Speaker 8: Could change, but you know it's going to be difficult
Speaker 8: because the last three years we've seen price hikes of
Speaker 8: twenty five percent, so since we've had a pandemic recovery,
Speaker 8: so there really are running off a very high base
Speaker 8: on the price in they're going to have to really
Speaker 8: determine what they do in terms of more manufacturing over
Speaker 8: there where they can so for mid range for some
Speaker 8: of elv Matre's fashion and leather goods, we think around
Speaker 8: a third of their US is covered in terms of
Speaker 8: US sales versus production. But there's a long way to go,
Speaker 8: and it can't be done quickly because you need really
Speaker 8: good artisans and to be training in labor, and that's
Speaker 8: one of the biggest issues for these companies.
Speaker 2: I'm looking at the PGeo function on the Bloomberg terminine.
Speaker 2: I see that Asia excluding Japan picks up about twenty
Speaker 2: seven percent of LVMH's business. So it's material. What are
Speaker 2: they saying about China. Is this a market that they
Speaker 2: can depend upon being a growth driver going forward or not?
Speaker 2: Because it's I know just from reading your work and
Speaker 2: talking to you in the past, China's really a lynchpin
Speaker 2: for global luxury.
Speaker 7: Yeah.
Speaker 8: I mean the big thing and the big hit over
Speaker 8: the last quarter really in these share prices has been
Speaker 8: that second half of last year we saw the US
Speaker 8: really start to improve, and that was offering a bit
Speaker 8: of a lifeline until we could start to see China,
Speaker 8: hopefully by the second half this year improve that or
Speaker 8: that changes, the mindset changes, the consumer sentiment changes, and
Speaker 8: so yes, for the long term, there's still a lot
Speaker 8: to do for all these companies in each of then
Speaker 8: we'll say they still pin their hopes on China for
Speaker 8: the long term, more infrastructure into the marketplace, owning the
Speaker 8: consumer more over there. But certainly in the short term
Speaker 8: and in the year ahead, the Cummuch uncertainty, and I
Speaker 8: really think that that hits hard on consumer sentiment, not
Speaker 8: only in the US, but also and particularly in China.
Speaker 8: Another one we saw was biased off with Nivre in
Speaker 8: the very high end LA Prairie came out, and I'm
Speaker 8: just trying to get a feel of how beauty is
Speaker 8: doing over there, and the view there is that they've
Speaker 8: had to clean up China even more on their Laprairie brand,
Speaker 8: which is very high end skin care, and they're having
Speaker 8: to actually also think about Nivia and rebrand and to
Speaker 8: at least the premium level. So there's more price volatility
Speaker 8: in the market and that's already starting to creep up
Speaker 8: in China.
Speaker 2: Thanks to Debek and Bloomberg Intelligence luxury goods analysts.
Speaker 3: This week, we focus on a Bloomberg Big Take story
Speaker 3: titled GM and It's eight year, thirty five billion dollar
Speaker 3: EV bet brace for tariff head. You can find that
Speaker 3: on Bloomberg dot com. And the terminal.
Speaker 2: Story looks at how General Motors has to figure out
Speaker 2: how to sell cars in Donald Trump's America after spending
Speaker 2: about thirty five billion dollars on its EV transition.
Speaker 3: For more, Paul and I will join by David Welch,
Speaker 3: Bloomberg Detroit BUREA Chief.
Speaker 2: We first asked David to break down why times are
Speaker 2: tough right now at GM.
Speaker 10: If you look at Trump's policies, they're pretty tough on
Speaker 10: all the car companies, right, I mean, you've got this
Speaker 10: tariff regime out there that still hasn't been sorted out.
Speaker 10: Trump has indicated that he might have some leniency in
Speaker 10: the offering for car companies. But they've built up the
Speaker 10: supply chain and assembly in the US, Canada, Mexico and
Speaker 10: other places for decades now. They have made more investments
Speaker 10: based on USMCA, which was a Trump trade deal, and
Speaker 10: now that could be upended. GM makes two of its
Speaker 10: evs in Mexico. It's two of its cheapest ones, the
Speaker 10: Chevy Equinox and Chevy Blazer, and so it makes it
Speaker 10: tough from that standpoint for those two vehicles and some
Speaker 10: of the parts that can in for those vehicles, and
Speaker 10: then generally for GM's business, tariffs are just not a
Speaker 10: good thing. They import vehicles, they import components, all of
Speaker 10: that that makes it tough. Trump has also said he
Speaker 10: hasn't done it yet, but he said that he wants
Speaker 10: to get rid of the Biden era Inflation Reduction Act.
Speaker 10: Those are up to seventy five hundred dollars in tax
Speaker 10: credits for people who buy evs. That makes GM's life difficult.
Speaker 10: With this big investment they have out there. There could
Speaker 10: be relief on this. There are ways to get around it.
Speaker 10: But if you're General Motors and you've got a dozen
Speaker 10: of v's out there and the program on the whole
Speaker 10: loses money. They're improving the profitability, but it does lose money.
Speaker 10: The pressure's really on, as it always has been, but
Speaker 10: even more so with Trump policies to get those vehicles
Speaker 10: to a break even or a profitable level and then
Speaker 10: sell them in big enough numbers where you continue to
Speaker 10: get economies of scale and you can drive the cost down.
Speaker 10: So it's not impossible. They're working hard at it, as
Speaker 10: we have a lot of detail on in the story
Speaker 10: in terms of reducing battery cost, improving efficiency at the
Speaker 10: assembly plan level, that sort of thing. It's hard work
Speaker 10: and EV's this kind of transition was always going to
Speaker 10: be difficult. It is for everybody. But you know, in
Speaker 10: GM's case, they've done some reining in of investment, but
Speaker 10: they've really continued their push and some of their rivals
Speaker 10: have reined it in, pulled back in the face of
Speaker 10: all of this. So GM's sticking with it and they're
Speaker 10: really working hard to make it profitable.
Speaker 3: David, As you said, the pressure is on does CEO
Speaker 3: Mary Barrow really have a dog in this fight to
Speaker 3: electrify GM in the EV space. I mean, of course
Speaker 3: she's trying to get a little bit of a peek
Speaker 3: into Tesla's playbook by hiring some of their veterans from Tesla,
Speaker 3: But do they really have the brand recognition that they
Speaker 3: need to push through on this charge.
Speaker 10: Yeah, that's a tough one. I think what they're trying
Speaker 10: to do here is they're trying to change that right.
Speaker 10: So one thing they'll point out is one they doubled
Speaker 10: their market share in the EV segment EV space in
Speaker 10: the US over the past year, and they did even
Speaker 10: better in the first quarters. They've got some sales momentum,
Speaker 10: and they're doing a on the coast, which is where
Speaker 10: most TV buyers are. But it is it is a
Speaker 10: bit tough when Chevrolet, for example, known for big pickup trucks,
Speaker 10: known for Chevy suburbans, Cadillact known for the Escalade. These
Speaker 10: are pretty thirsty and pretty expensive vehicles. They tend to
Speaker 10: do well in the middle of the country and in
Speaker 10: the South. So for GM, you can see why they
Speaker 10: want to push this right. They've got brands that do
Speaker 10: better in middle America. And if EV's are bought on
Speaker 10: the coast and you can get market share there, why
Speaker 10: wouldn't you push for that? It does bring in a
Speaker 10: different kind of buyer. And I think there's a bit
Speaker 10: of chicken egg and an egg here. Does the brand
Speaker 10: hurt them from selling EV's or does does selling EV's
Speaker 10: help them help get recognition for these brands with people
Speaker 10: who didn't look at them before. And I think that's
Speaker 10: the case they're making and they're having decent sales success,
Speaker 10: so there's a bit of momentum there while they're trying
Speaker 10: to do it.
Speaker 2: David tell us about the Ultium Cells factory outside of Nashville, Tennessee.
Speaker 10: It's very similar to the one in Ohio. Fascinating to
Speaker 10: walk through. These are pretty pretty well automated operations. It's
Speaker 10: not like when you walk into an assembly plant and
Speaker 10: you see workers swinging a i'd say a set of
Speaker 10: seating for the interior over on robotic arms and putting
Speaker 10: that in or bolting engines like they're watching computers. They're
Speaker 10: watching automated machinery that mixes chemicals or puts that chemical
Speaker 10: slurry onto a metallic sheet to make parts of the battery.
Speaker 10: Component's a very different type of thing. If you walk
Speaker 10: through a battery plant, or I should say a cell plant,
Speaker 10: it's kind of more like a like a chemical facility
Speaker 10: than it is like a traditional assembly plant.
Speaker 3: Our thanks to David Walch, Bloomberg Detroit Bureau Chief.
Speaker 2: We move next to news on the IT company, Hewlett
Speaker 2: Packard Enterprises.
Speaker 3: This week, we heard that Elliott Investment Management has built
Speaker 3: a position in HPE worth more than one and a
Speaker 3: half billion dollars. OUR data shows that the investment makes
Speaker 3: Elliott one of the company's top five shareholders.
Speaker 2: For more on this, Nora and I were joined by
Speaker 2: wu Jinho, Bloomberg Intelligence Senior technolo.
Speaker 3: We first asked wujin what this investment by Elliott and
Speaker 3: HPE is all about.
Speaker 11: It looks like Elliott is looking for an opportunity here
Speaker 11: to create a stake in terms of possibly extruction more
Speaker 11: cost actions from HPE, especially when the company is going
Speaker 11: through a down period from an execution standpoint as well
Speaker 11: from a demand perspective as well.
Speaker 3: So what exactly are they really wanting to do here
Speaker 3: through this investment? As an activist investor, what do they
Speaker 3: want to change?
Speaker 11: That's a good question, or I mean look, one of
Speaker 11: the things that I think they're doing is trying to
Speaker 11: extract more cost actions. One of the things that HPE
Speaker 11: did after the execution from the last quarter was cut costs, right,
Speaker 11: They cut about two five hundred to three thousand people.
Speaker 11: That's the plan over the next twelve to eighteen months.
Speaker 11: That's supposed to lower the cost structure by about five
Speaker 11: hundred basis points to have outex sales from twenty four
Speaker 11: percent to about nineteen percent for the year. Now, the
Speaker 11: closest cop would be Dell and Della is running around
Speaker 11: fifteen percent op ex of sales. So I think, you know,
Speaker 11: Elliott is trying to look for a little bit more
Speaker 11: than nineteen percent op ecks of sales to drive up
Speaker 11: the earnings going forward.
Speaker 2: So is this just a cost story from Elliott's perspective
Speaker 2: or is there something Hewlett should be doing they're not
Speaker 2: doing from a revenue perspective.
Speaker 11: Yeah, from a revenue perspective. I mean, if we look
Speaker 11: about if we turn back to last quarter, there was
Speaker 11: a really big execution fall Paul in terms of they
Speaker 11: mispriced their servers. If you're an investor, I mean, how
Speaker 11: does a company miss price servers to really screw up
Speaker 11: the rest of the year from a pricing standpoint and
Speaker 11: from a margin margin standpoint. So, you know, I wouldn't
Speaker 11: be surprised if Elliott is looking for our management change
Speaker 11: as well, because you know, HeLa Packard has lagged what
Speaker 11: Della has done from an AI server perspectives, and they
Speaker 11: really haven't gained material share on the networking side or
Speaker 11: on the storage side against some of their closest comps.
Speaker 3: Well, Elliott has a really successful track record from Salesforce
Speaker 3: to CIS Strict Systems a few others. How are people
Speaker 3: really receiving this right now? Are investors happy?
Speaker 11: You know, some of the calls that I've received initially
Speaker 11: off the print in Aura, is a Juniper deal off
Speaker 11: the table as a result, I don't think so. The
Speaker 11: one thing I will add was that Elliott was a
Speaker 11: stakeholder of Juniper multiple years back, and they did extract
Speaker 11: more dividends from Juniper as part of being a stakeholder.
Speaker 11: They may you know, I wouldn't be surprised if Elliott
Speaker 11: wants a board seat to guide the management going forward.
Speaker 11: But I do think that the HPE Juniper deal is
Speaker 11: still going to be.
Speaker 2: On track thanks to Woo Jino Bloomberg Intelligence Senior Technology
Speaker 2: channelst coming up on the program.
Speaker 3: Well break down how the tech company Intel is now
Speaker 3: making good on its plans to start spinning off non
Speaker 3: core assets.
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Speaker 3: I'm Paul Sweeney and I'm normal Linda filling in for
Speaker 3: Alex Steel. We move next to the tech sector.
Speaker 2: The tech company Intel is now making good on plans
Speaker 2: to start spinning off non core assets. This week, Intel
Speaker 2: agreed to sell a fifty one percent stake in its
Speaker 2: programmable chips unit Alterra to the private equity firm silver
Speaker 2: Lake Management.
Speaker 3: The transaction values Alterra at eight point seventy five billion dollars,
Speaker 3: and that's about half of what Intel paid for a
Speaker 3: decade ago. The deal is expected to close in the
Speaker 3: second half of twenty twenty five.
Speaker 2: For more, guest host Emily Gerfaio and I were joined
Speaker 2: by Mandeep Sing Bloomberg Intelligence senior tech industry analysts. Your
Speaker 2: first asked, Man Deep, what Intel is up to these days?
Speaker 9: Well, they got a new CEO, and I think he's
Speaker 9: making the moves. Everyone was looking forward to what is
Speaker 9: he going to do differently than Pat gel Singer, And
Speaker 9: it looks like he wants to turn around the foundry business.
Speaker 9: And there was one school of thought that thought Intel
Speaker 9: should sell the foundry and focus on chip design like Nvidia.
Speaker 9: But clearly he feels, you know, foundry business can be
Speaker 9: turned around. And so the easy pickings here is raise cash,
Speaker 9: you know, get rid of the non core assets, which
Speaker 9: is al Terra here. So they're selling fifty one percent stake,
Speaker 9: mobilize another business that comes to mind that they could
Speaker 9: sell and look. With a company like Intel, everyone knows
Speaker 9: that you know, you coun'try turn around this company to
Speaker 9: show high growth. It's more about how do you manage
Speaker 9: the company in a way where they're not burning a
Speaker 9: lot of cash as well as they can have you know,
Speaker 9: low to mid single digit growth. And I think that's
Speaker 9: going to be the playbook here.
Speaker 4: So, man, deep is silver Lake getting a good deal
Speaker 4: then with this axe show?
Speaker 9: I mean Intel paid you know, sixteen billion plus ten
Speaker 9: years back, so they held their company for ten years
Speaker 9: and now they're selling at half the price. And look,
Speaker 9: this isn't a high growth asset, which is why it
Speaker 9: was noncore to Intel. But we know Semis isn't that
Speaker 9: sweet part of the cycle where everyone seems to be
Speaker 9: bullish on AI and Semis. And so maybe silver Lake
Speaker 9: can come up with a better way to you know,
Speaker 9: leverage all Terra in that semi space because that's what
Speaker 9: everyone seems to be excited by. How can I play
Speaker 9: in the demand for Semis?
Speaker 2: Why did they solve a whole thing?
Speaker 9: Well, I mean it's a private equity player, so you know,
Speaker 9: they're not going to put a lot of money in
Speaker 9: one asset, and they just wanted fifty one percent so
Speaker 9: that they can run the company. At the same time,
Speaker 9: Intel can benefit if they are able to successfully turn
Speaker 9: it around. And yeah, I think Alterra still needs Intel
Speaker 9: technology to be successful, so it's not as if there's
Speaker 9: a complete decoupling. It just allows Intel to focus more
Speaker 9: on the core business, the foundry and their CPU business,
Speaker 9: as opposed to focusing on Alterra and Mobile IE. I
Speaker 9: think down the.
Speaker 4: Line, should we expect with this new Intel CEO to
Speaker 4: see more news like this Intel selling other parts of
Speaker 4: its business.
Speaker 9: I think so Mobile IE is definitely another one which
Speaker 9: is noncore to Intel, even if they want to double
Speaker 9: down on AI and chip design. Within AI, I mean
Speaker 9: Mobile I is more autonomous driving. And yeah, that also
Speaker 9: came from another acquisition that Intel did back in the day,
Speaker 9: so I hope they don't end up taking a lot
Speaker 9: on that one. But I do think the playbook here
Speaker 9: seems to be that they want to focus on foundry
Speaker 9: and core CPU chip design.
Speaker 2: Foundry that's making chips right.
Speaker 9: Yes, the manufacturing side.
Speaker 2: Now, who else does that?
Speaker 9: Well, we've heard the news around in Vidia, you know,
Speaker 9: using TSMC to make their AI supercomputers here in the US,
Speaker 9: So that's that was quite a bit of news because
Speaker 9: I would have thought TSMC would partner with Intel, and
Speaker 9: there was some rumblings about you know, TSMC doing something
Speaker 9: with Intel, at least here in the US. But it
Speaker 9: looks like Nvidia is thinking about making their next CI
Speaker 9: supercomputer with TSMC. No talk about Intel, and that will
Speaker 9: be here in the US.
Speaker 2: So then I thought there's some deal that there were
Speaker 2: Intel's gonna do a bunch of that stuff.
Speaker 9: Yeah, so that's where there was talk about Intel and
Speaker 9: TSMC partnering. So that was the foundry side of Intel.
Speaker 9: But I don't think that's happening now.
Speaker 2: So the Biden plan with Intel, which was to do
Speaker 2: a big, big deal, big investment, is that's still on
Speaker 2: or No.
Speaker 9: So the chips Act money was given to Intel. It
Speaker 9: was also given to TSMC for the Phoenix fab where
Speaker 9: they will be making this AI supercomputer with Nvidia. But look,
Speaker 9: I think in the case of Intel, the challenge has
Speaker 9: always been why have they not participated in this AI wave?
Speaker 9: And the Chipsack money didn't help over there.
Speaker 3: Our thanks to Mandy seeing Bloomberg Intelligence senior tech industry analysts.
Speaker 2: Staying with the tech sector, we recently learned that tech
Speaker 2: giant Apple has been exempted from one hundred and twenty
Speaker 2: five percent tariffs on goods produced in China. This includes iPhones, iPads, max,
Speaker 2: Apple watches, and air tags.
Speaker 3: Separately, we learned that Apple will begin analyzing data on
Speaker 3: customer's devices in a bid to improve its AI platform.
Speaker 2: For more on this and all things Apple, Nord and
Speaker 2: I were joined by Mark German, Bloomberg News Managing editor
Speaker 2: for Global Consumer Tech. We first asked more how he
Speaker 2: thinks Apple will just the Washington policy moving forward.
Speaker 12: That's a big question.
Speaker 13: We're on a bit of a roller coaster here where
Speaker 13: Apple's constantly needing to think about adjusting, and then how
Speaker 13: are they gonna adjust? And then what happens if they
Speaker 13: adjust and then they have to adjust them a different direction.
Speaker 13: You can really think of Apple as just like the
Speaker 13: biggest ship in the water. Ye, it's gonna take a
Speaker 13: while to move anything. So these adjustments they have to
Speaker 13: be made with precision, right, And so it's really it's
Speaker 13: a sporadic situation. You really don't know what's going to happen.
Speaker 13: But at least for now they're in good shape. But
Speaker 13: who knows a long that's gonna last. But no matter
Speaker 13: what Trump does moving forward, I'd be very surprised if
Speaker 13: this he talks about this sectoral tariff on these types
Speaker 13: of devices, maybe I'm wrong. I just don't think there's
Speaker 13: any way it's gonna be one hundred and forty five percent.
Speaker 13: So either way, you're still at a big improvement.
Speaker 3: Of course, with the tariffs as an added layer of
Speaker 3: a headwind for the company, they're not stockpiling, and so
Speaker 3: we're seeing them increasing shipments and everything. But it seems
Speaker 3: as though this isn't necessarily due to more demand, but
Speaker 3: more or less the fact that they're just trying to
Speaker 3: prepare for the worst. Is that the case, Yeah.
Speaker 13: That's right, trying to get as many phones as no
Speaker 13: tariffs or at low tariffs as possible, whether it's from
Speaker 13: China during this period right now with no tariff, whether
Speaker 13: it's from India at this period with the lower tariff,
Speaker 13: get as many as you can into the US channel
Speaker 13: to fulfill demand. The problem is that we're about to
Speaker 13: go through a product transition, right They're about to move
Speaker 13: to the iPhone seventeen.
Speaker 7: So the question just got the sixteen.
Speaker 3: I'm behind, That's fine.
Speaker 13: The point we're trying to make here, yes, yes you
Speaker 13: are behind. You're also behind, right, But the point you're
Speaker 13: trying I'm trying to make here is that these iPhone
Speaker 13: seventeens are not ready to be pumped out. So the
Speaker 13: question is what is the terariff situation going to be
Speaker 13: in September October when these things are flying off the
Speaker 13: manufacturing lines. Where are these going to come from? So
Speaker 13: at this point it's so difficult to figure out what's
Speaker 13: going to happen.
Speaker 12: What do they need to do?
Speaker 2: In reality? I can't imagine and China not being an
Speaker 2: integral part of Apple in the next five years. I
Speaker 2: mean it has to, right, you can't switch.
Speaker 13: Nothing's changing. Well that's not true. Things are changing, but
Speaker 13: China's not going away. Yeah, right, don't forget that the
Speaker 13: US makes up about what a third of Apple's overall sales.
Speaker 13: You've still got two thirds of the world that's going
Speaker 13: to rely on this China supply chain. China's critical for
Speaker 13: rest of the world.
Speaker 3: So how's Apple doing in the AI game right now?
Speaker 3: I mean, so, I know we have iOS what's going
Speaker 3: on there? I know we have iOS eighteen point five
Speaker 3: or something coming soon that's coming.
Speaker 13: But Apple AI is not doing so hot. They've just
Speaker 13: replaced the person in charge of Siri, right, They're pulling
Speaker 13: any lever they can. One of the issues with Apple
Speaker 13: Intelligence is that their privacy stance has prevented them from
Speaker 13: gathering as much data possible in order to train their
Speaker 13: AI models. To get AI models working, probably you have
Speaker 13: to train them with data, right, and the best data
Speaker 13: you can get is the data that your customers are
Speaker 13: in putting into their iPhones. They don't do that. Open
Speaker 13: AI does it. Google does it. That's why their tools
Speaker 13: are so great. What Apple is doing now is they're
Speaker 13: putting in this new privacy centric approach where they're going
Speaker 13: to take your data on your phone, analyze it on
Speaker 13: the phone, compare it to the fake data.
Speaker 12: Right. They use fake data that.
Speaker 13: They just create out of thin air while using AI,
Speaker 13: compare it so they know which fake data is most
Speaker 13: similar to the real data, and then they'll use that
Speaker 13: best of the bunch fake data.
Speaker 12: To train their AI model. So you're seeing.
Speaker 13: These it is it is complicated, hard to wrap your
Speaker 13: head around, and so they're basically pulling every lever they can.
Speaker 2: Now we've said in the past, Apple doesn't need to
Speaker 2: be first in things because they just need to wake
Speaker 2: to the technologies kind of out there and then they're
Speaker 2: going to come in and make it beautiful. Is that
Speaker 2: still hold for AI.
Speaker 13: That's the problem usual playbook. You're right, don't be first,
Speaker 13: be the best. Well, they're certainly not first, and they're
Speaker 13: probably the worst. Wow of all the big tech names.
Speaker 13: They are the worst in AI of all the.
Speaker 2: Big tech How concerned, Copertino, I mean it's extremely concerning.
Speaker 13: They were going to have the head of AI retire.
Speaker 13: Perhaps he's not going anywhere. They just replaced him on Siri.
Speaker 13: There is certainly a lot of work and accountability that
Speaker 13: needs to be done there, And the question is how
Speaker 13: long is it going to take till you have something compelling?
Speaker 13: And I do think it's going to be at least
Speaker 13: a few years. But don't forget AI is not the phone.
Speaker 13: The phone moved fast, but there was new innovation in
Speaker 13: the phone. Maybe you know every year every couple of
Speaker 13: years AI, you're getting a new deep Seek every three weeks.
Speaker 12: There could be a big.
Speaker 13: AI innovation announced tomorrow. In fact, I think Open Ai
Speaker 13: just rolled something out Chat GPT four Dot one model
Speaker 13: the other day or yesterday. And so the speed at
Speaker 13: this that this moves at is what's really concerning, because
Speaker 13: Apple just doesn't move at that speed.
Speaker 12: They're not built to operate at the speed of the break.
Speaker 13: I think they can, but that would also require a
Speaker 13: big c change because Apple is historically bad at integrating
Speaker 13: larger companies into their overall operational workforce. And so it's
Speaker 13: like you take a step back and you ask yourself,
Speaker 13: what is Apple really good at. They're good at the phone,
Speaker 13: They're good at the iPad, they're good at the watch,
Speaker 13: They're good at health stuff, They're good at core.
Speaker 12: On device software.
Speaker 13: Not really good at cloud though they have some excellent
Speaker 13: cloud based services at this point, not really good at AI.
Speaker 12: They're getting good.
Speaker 13: At TV from you know what I hear from people
Speaker 13: who like their shows. But they're just a company at
Speaker 13: this point that's running based on legacy ideals and they
Speaker 13: need a bit of modernization. And the question is is
Speaker 13: that going to happen. Don't forget this company is run
Speaker 13: by the same group of people.
Speaker 2: Who's just as does Tim Cooks still have the support
Speaker 2: of the street and of the board.
Speaker 13: Oh yeah's you know, Tim cook wouldn't write his own ticket,
Speaker 13: There's no question there. They're down nineteen percent this year, right,
Speaker 13: but look how much they're up over the last fifteen years.
Speaker 13: What he's done is amazing, you know, everyone counted him
Speaker 13: out after Steve Jaws passed away.
Speaker 12: Right, Steve Jaws is.
Speaker 13: A one of one innovator in mind and this type
Speaker 13: of thing, and it would have been very easy and
Speaker 13: not surprising, if you know, Apple not folded up shot,
Speaker 13: but really moved away from what they were, And in
Speaker 13: many respects they have moved away, but at the same.
Speaker 12: Time they've grown so much.
Speaker 13: The way Apple's at the center of all our lives
Speaker 13: today was not the way they were at the center
Speaker 13: of our lives ten years ago. They were not at
Speaker 13: the center of the universe.
Speaker 12: A decade ago.
Speaker 13: They're at the center of the center of the universe today.
Speaker 12: Because Steve Jobs left them with a lot.
Speaker 13: Of momentum and Tim Cook executed better than anyone else
Speaker 13: would have been able to execute.
Speaker 3: Our Thanks to Mark German Bloomberg News, a managing editor
Speaker 3: for Gloeble Consumer Tech.
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