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Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
Speaker 1: YouTube and Bloomberg Originals.
Speaker 2: On today's Bloomberg Intelligence Show, we dig inside the 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 Advanced micro Devices suffered its
Speaker 2: worst stock decline in nearly nine years.
Speaker 3: Plus to look at why PayPal shares ex He's the
Speaker 3: biggest interdate drop in more than four years.
Speaker 2: At first, we begin with some news at the media
Speaker 2: and entertainment giant Walt.
Speaker 3: Disney, and that's because Disney announced Josh Tomorrow will succeed
Speaker 3: Bob Iger as CEO.
Speaker 2: Tomorrow, a twenty eight year vetteran of Disney, was chosen
Speaker 2: from among several internal candidates to lead the company at
Speaker 2: a critical time as it transitions from traditional TV viewing
Speaker 2: to the streaming era.
Speaker 3: Iiger will stay on the board and serve as a
Speaker 3: senior advisor until he retires on December thirty. First, we
Speaker 3: were joined by Geithrong and Aten Bloomberg, intelligence analyst on
Speaker 3: US Media.
Speaker 2: Well first asked Githa about this succession plan and how
Speaker 2: it might differ from previous plans.
Speaker 4: Yeah, I think it was a very different time. March
Speaker 4: twenty twenty, everything closes down, including you know, Disney parks
Speaker 4: because of the pandemic. So it was kind of unfortunate.
Speaker 4: The timing was all wrong, I would say for Bob Japek.
Speaker 4: And what happened then is, of course movies were shut down,
Speaker 4: a big part of Disney's business, movies as well as
Speaker 4: the parks again. But then what really kind of shot
Speaker 4: into prominence at that point was the streaming business. A
Speaker 4: business that Bob Chapik was not really very familiar with,
Speaker 4: and while he did have some experience in content, obviously
Speaker 4: it was not enough, and we had a whole bunch
Speaker 4: of different missteps with the content part of the business,
Speaker 4: which kind of led to the whole you know mess
Speaker 4: that we saw, you know follow I think this time
Speaker 4: we're in a very very different position. I think at
Speaker 4: that point Disney was still kind of trying to figure
Speaker 4: out what it really was. Was it a TV company,
Speaker 4: was it a studio, was it a theme park company?
Speaker 4: Or was it really a streaming player? And I think
Speaker 4: now the pieces have kind of fallen in place. We
Speaker 4: are on much more steady ground. I would say, you know,
Speaker 4: they have their clear mandates, whether it isn't streaming, whether
Speaker 4: it's in studio, you know, the clear What has really
Speaker 4: emerged clearly right now, Scarlett, is that parks is the
Speaker 4: main core growth engine of the company, and I think
Speaker 4: that is reflected in this choice with Josh Tomorrow.
Speaker 1: So Keithan.
Speaker 2: Josh is a twenty eight year veteran of Disney running
Speaker 2: the parks, But of course the other big part of
Speaker 2: the company is it's you know, entertainment business. Dana Walden,
Speaker 2: who runs the big part of that business, great reputation
Speaker 2: in Hollywood. It's important to keep her at the Walt
Speaker 2: Disney Company. Are they going to be able to do that?
Speaker 4: I absolutely think so. So, you know, they obviously this
Speaker 4: was a very clever move by the board to kind
Speaker 4: of create this new role for Dana Walden, make her
Speaker 4: the president and the chief creative officer. They've never had
Speaker 4: this post before, but they specifically created this one for
Speaker 4: Dana Walden, so that I think really kind of I
Speaker 4: think dispels a lot of fears about what would happen
Speaker 4: from a creative perspective. You know, last time, this was
Speaker 4: the same problem that you know, many investors raised when
Speaker 4: Bob Chapek became CEO. So having her there in the
Speaker 4: creative role, I think definitely plays very well with Hollywood,
Speaker 4: with the creative community, and ensures that, you know, Disney
Speaker 4: will still have a top tier content coming to its
Speaker 4: streaming platforms for the foreseeable future.
Speaker 3: So Josh Tomorrow takes the job on March eighteenth, that's
Speaker 3: when the succession is effective. And we talked about how
Speaker 3: yesterday Disney came out with a forecast that was fairly tepid,
Speaker 3: And one way of looking at that is it kind
Speaker 3: of you know, clears the deck. Lets him start off
Speaker 3: with the clean say and set expectations and kind of
Speaker 3: manage it for investors a way that he sees fit.
Speaker 3: At what point does he own everything that happens to Disney.
Speaker 4: So actually a lot of the things that we're seeing
Speaker 4: right now with the parks has been under Josh Tomorrow's watch. Remember,
Speaker 4: once Bob Chapek was promoted to the CEO position, Josh
Speaker 4: Tomorrow assumed the role of chief of the Parks, and
Speaker 4: so all of the different initiatives that we've seen, you know,
Speaker 4: whether it's Lightning Lan and whether it's Genie, whether it's
Speaker 4: the sixty billion dollar expansion, a lot of that has
Speaker 4: been you know, Josh Tomorrow's doing. So yeah, I mean,
Speaker 4: of course we're you know, I think the street is
Speaker 4: definitely going to give him a few quarters to kind
Speaker 4: of settle in. But he has pretty much been the architect,
Speaker 4: along with Bob Ayeger I'm sure, and the rest of
Speaker 4: you know, the management team in kind of instituting the
Speaker 4: strategy and making the parks a prominent part of the
Speaker 4: portfolio going forward. So very soon you know the shot
Speaker 4: answer Scarlett is very soon. I think he owns pretty
Speaker 4: much all of this right away.
Speaker 2: In fact, Keith, if I were Josh Tomorrow, day one
Speaker 2: of my tenures CEO, I would go and I would say, Hey,
Speaker 2: explain to me why we are not spinning out our
Speaker 2: broadcasting cable networks. They are businesses that are in a
Speaker 2: secular decline. They're dragging down our multiple Let's cut them loose.
Speaker 2: Do you think that's even an option for the Walt
Speaker 2: Disney Company.
Speaker 4: I think it is. I think everybody is considering that
Speaker 4: right now. I mean we've just seen what you know,
Speaker 4: Warner Brothers Discovery has been able to achieve by kind
Speaker 4: of separating out its studio and streaming from the TV
Speaker 4: network's business. So I definitely would not rule that out.
Speaker 4: I'm sure Disney will consider and Josh Tomorrow will consider
Speaker 4: all options once he becomes CEO.
Speaker 3: What happens to Jimmy Pataro over at ESPN, I mean,
Speaker 3: does that become part of the spinouts as Paul was
Speaker 3: talking about it, because there's different parts of Disney's media
Speaker 3: business that are slowing down, that are no longer the
Speaker 3: crown rules the way they once were. Whether you're talking
Speaker 3: about the network television, or whether you're talking about ESPN,
Speaker 3: or whether you're talking about the movie business.
Speaker 4: Yeah, I think sports is still very core to Disney.
Speaker 4: I mean they are so if you just kind of
Speaker 4: look at the US sports landscape, ESPN actually owns majority
Speaker 4: of the marquee US sports right almost about forty percent
Speaker 4: of all sports viewing happens on ESPN platforms, So obviously
Speaker 4: it's still very core to the company. As far as
Speaker 4: Jimmy Pittaro is concerned. Scarlett, I mean, yes, he was
Speaker 4: one of the you know, candidates that they were considering
Speaker 4: to take on this job, but I think he himself
Speaker 4: had many times indicated that he was not really interested
Speaker 4: in the top spot. I think he kind of carries
Speaker 4: on business as usual with ESPN. You know, it's a
Speaker 4: little bit of a wait and watch what exactly happens
Speaker 4: with the strategy. It is really instrumental, I think, to
Speaker 4: their streaming business because you know, as they kind of
Speaker 4: mentioned on their earnings call, you know a lot of
Speaker 4: people taking the bundle the ESPN streaming plus the Disney
Speaker 4: plus the Hulu. So it is a critical portion of that.
Speaker 4: So I'm not really sure how exactly a spinout would work.
Speaker 4: But of course, again, you know, we are in a
Speaker 4: very very different time and age, and everybody is thinking
Speaker 4: about all possible options when it comes to a media.
Speaker 3: Our thanks to KEITHA. Rong Andathan, she is our US
Speaker 3: media analyst.
Speaker 2: We've moved to some news in the energy space.
Speaker 3: And this week the German energy company Siemens Energy announced
Speaker 3: it will invest a billion dollars in manufacturing capacity in
Speaker 3: the US over the next two years as power demand surges.
Speaker 2: The company said most of the funds will be spent
Speaker 2: on expanding existing sites in North Carolina, Florida, Texas, Alabama,
Speaker 2: and New York, as well as a new plant in Mississippi.
Speaker 3: We are joined by Siemens Energy CEO Christian bra.
Speaker 2: We first asked Christian what the goal of the Semens
Speaker 2: Energy investment is Trouthol.
Speaker 5: It's a goal to keep up with a fantastic growth
Speaker 5: which we see currently in the electricity market. And you know, Guest,
Speaker 5: Turbine's great making sure that the AI transformation can really
Speaker 5: be fueled with electricity as one of the hottest markets
Speaker 5: you can see globally at the moment, and we are
Speaker 5: obviously trying to keep up with our customers and we're
Speaker 5: trying to bring all this equipment what is needed guest turbine,
Speaker 5: transformers and the likes. This means we are expending a
Speaker 5: lot of our industrial footprint here. We are hiring people
Speaker 5: adding factories to keep up with that, and this is
Speaker 5: obviously one important step really to create also this energy
Speaker 5: dominance what the US is looking for.
Speaker 2: You recently met with President Trump. What was the takeaway
Speaker 2: from your meeting there? How related is that meeting to
Speaker 2: your announcement in the investments in the US.
Speaker 5: Well, there was a let's say reception and others right,
Speaker 5: which was a big group meeting. So what for me
Speaker 5: is important that the Trump administration is very approachable for
Speaker 5: us and I have to say I'm very grateful for that.
Speaker 5: At the moment, my key interactions is really with the
Speaker 5: secretaries in terms of really understanding, hey, what needs to
Speaker 5: be done, how do we need looking forward on the opportunities,
Speaker 5: and this is taken up excellently at the moment. That
Speaker 5: is my main interaction also with the Trump administration.
Speaker 2: Christian, how would you characterize the US energy grid here
Speaker 2: as you get set to increase your investment here?
Speaker 5: Yeah, I mean, first of all, what you see the
Speaker 5: US market on the grid side is influenced by two things.
Speaker 5: The one thing is that you have a massive investment
Speaker 5: with ongoing just for replacement refurbishment of existing facilities. This
Speaker 5: is very much utility driven business, which is very active,
Speaker 5: which sometimes gets overlooked seeing the data center discussion. And
Speaker 5: at the same time, you obviously have an unprecedented growth
Speaker 5: in electricity on the data center side, which does require
Speaker 5: heavy investments into the grid side as well, and we
Speaker 5: need to understand also how do we operate all the things.
Speaker 5: I mean, everybody easily talks about gigawards of additional electricity.
Speaker 5: There's not so many sites in the US which like
Speaker 5: a one gigable type of consumption. This will require grid
Speaker 5: stabilization and this is what we all try to contribute.
Speaker 5: So what we're doing here is building factories for switch gear,
Speaker 5: transformers components which supply to that industry, and obviously also
Speaker 5: bringing up people who can help to do this overarching
Speaker 5: design on the grid side. We believe that is let's say,
Speaker 5: really a long run and we will see it for
Speaker 5: a long time because electricity grate is an important backbone
Speaker 5: of the critical infrastructure, and this is why. I feel
Speaker 5: very comfortable with the investment we're doing, and I'm very
Speaker 5: happy with the market here.
Speaker 3: So I want to pick up on where you just
Speaker 3: left off, bring in more people to design some of
Speaker 3: the grid work there. Talk to us about jobs. How
Speaker 3: many jobs will your initiatives create, What kinds of jobs
Speaker 3: are they going to be, what level, what kind of
Speaker 3: education is needed, how much training will there be in
Speaker 3: order for you to find the right people.
Speaker 1: For those jobs.
Speaker 5: Yeah, I mean, we had today an organization with around
Speaker 5: twelve thousand people in the US right and we're going
Speaker 5: to add another fifteen hundred on top of that. And
Speaker 5: this will be accompanied by a lot of education and
Speaker 5: training programs. So a lot of this will be blue
Speaker 5: color working jobs, also on the factories, making sure that
Speaker 5: we can produce and also that we have people going
Speaker 5: out in the fields and fixing things. So this will
Speaker 5: go through training academies which we build up in parallel
Speaker 5: in this. You know, we have one big new facility
Speaker 5: coming up in Jackson, Mississippi, which will obviously also will
Speaker 5: be with one training center. We have a big site
Speaker 5: in Charlotte which we also will increase on that at
Speaker 5: the same time building up factories is also then coming
Speaker 5: with some engineering work on the white color side, so.
Speaker 6: It will be both.
Speaker 5: But the big thing, and this is why we went
Speaker 5: out is really hey, this is I would call it
Speaker 5: a blue color wave. Now in terms of really getting
Speaker 5: educated workers. That is my biggest constraint at the moment,
Speaker 5: also on the market, and it goes down to the
Speaker 5: construction workers, people in the factories. And we should never
Speaker 5: ever underestimate the need to finally get something done and
Speaker 5: that will require more people, more skilled labor, and we
Speaker 5: will definitely contribute to that and to help to build
Speaker 5: up that workforce.
Speaker 3: Our thanks to Semen's Energy CEO Christian Buruh, coming up
Speaker 3: a look at why obesity data from drug maker Pfizer
Speaker 3: underwhelmed investors.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal.
Speaker 3: I'm Scarlet Foo and.
Speaker 2: I'm Paul Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: We move to some news in the biotech sector.
Speaker 3: This week, shares a Pfizer fell after the drug maker
Speaker 3: revealed limited data from one of its new obesity treatments.
Speaker 2: It showed people lost up to twelve point three percent
Speaker 2: of their body weight compared to those on a placebo
Speaker 2: at twenty eight weeks.
Speaker 3: And of course this comes after Eyer battled to buy
Speaker 3: weight loss startup met Sarah late last year. With no
Speaker 3: new drug approvals expected this year, and the limited data
Speaker 3: released means the prospects for Metsara's farthest long drug do
Speaker 3: remain unclear.
Speaker 2: For more on this and the latest in the biotech sector,
Speaker 2: we heard from Sam Fazeli, Bloomer Intelligence, director of Research
Speaker 2: for Global Industries and senior pharmaceuticals analysts.
Speaker 3: We began by asking Sam about how investors were impacted
Speaker 3: by this limited obesity data.
Speaker 7: Yeah, yeah, so look, they paid ten point one billion
Speaker 7: dollars for this, and if it all to do with that,
Speaker 7: there is it people being reminded again that the next
Speaker 7: three four years there's a major headwind from generated drugs
Speaker 7: coming for there some of the products on the market
Speaker 7: eye brands, ex standy, et cetera. So that's partly the issue.
Speaker 7: And you know in order to deal with that, you
Speaker 7: need assets and drugs that are going to try and
Speaker 7: hopefully fill the gap. And maybe this is the problem
Speaker 7: with the data. The thing is, we've looked at the data.
Speaker 7: As you know, we have very deep obesity analysis. We've
Speaker 7: looked at the data and it's not terrible. But as
Speaker 7: I said the other day when Rash reported, there's some numbers,
Speaker 7: I think folks are getting over this percentage here, percentage there.
Speaker 7: You can only dis the point going for what you
Speaker 7: can't mean unless you give out somebody who are thirty
Speaker 7: forty weights, which of course nobody wants. So this is
Speaker 7: getting to a point where now it comes to the nuance,
Speaker 7: and unfortunately we don't have a lot of the nuance
Speaker 7: that we need to know about this data set tolerability.
Speaker 7: And it is good because it's a once monthly injection
Speaker 7: after the first few weeks, so it's well set up.
Speaker 7: But the market obviously doesn't like it because they're not
Speaker 7: getting enough information about how good actually it is. Sam.
Speaker 2: It seems like if you want to be an investor
Speaker 2: in big cap farmer, you really have to be a
Speaker 2: stock picker. I've got stocks like Pfizer and Bristol on
Speaker 2: a trailing twelve month basis that are down. But I've
Speaker 2: got stocks like Johnson and Johnson and Eli Lilly and
Speaker 2: abby V. They're are big. And is that just because
Speaker 2: they've got the right portfolio of drugs and the others don't.
Speaker 7: Entirely entirely about that is what you don't want is
Speaker 7: looking into the abyss of generic drugs coming for your
Speaker 7: big earners with no obvious pipeline. Versus, let's take a
Speaker 7: Johnson and Johnson in this case, and they have a
Speaker 7: phenomenal set of drugs for the multiple my looma space
Speaker 7: or a whole you know, other oncology spaces. This is
Speaker 7: a powerhouse. And of course they've also still got the
Speaker 7: other divisions medical devices growing quite nicely so and no
Speaker 7: massive I mean, there's one that's coming up, a big
Speaker 7: hole that's coming in terms of generics, but they've still
Speaker 7: got these things that are growing at phenomenal speed. And
Speaker 7: one of their drugs, Dartlects, is very close to twenty
Speaker 7: billion dollars and that's just one indication in multiple myloma.
Speaker 7: So they've done everything right in that case, and that's
Speaker 7: what the market likes.
Speaker 3: So in other words, Sam, this is something that can
Speaker 3: be managed. The fact that Pfizer hasn't managed this well
Speaker 3: raises a lot of questions here because I mean, it's
Speaker 3: not like just one day they woke up and oh,
Speaker 3: you know, there's suddenly a lot of competition for some
Speaker 3: of their best selling drugs, or people are no longer
Speaker 3: paying up for COVID treatments COVID vaccines. In terms of management,
Speaker 3: do investigate a question whether adviser has a right management
Speaker 3: in place.
Speaker 7: Yeah, I mean, look, this is a tough game, right
Speaker 7: not the game, of course, this is a very tough
Speaker 7: set of issues to deal with. Creating pipeline takes a
Speaker 7: lot of effort. Let's take Eli Lilly. For years, nobody
Speaker 7: was paying too much attention to their potential margin expansion
Speaker 7: that was coming, and they were arguing for it, et cetera.
Speaker 7: Maybe they were lucky they hit on these obesity drugs.
Speaker 7: Look at Ask for Zeneca. It took quite a lot
Speaker 7: of pain for Pascal Soio you should write that ship
Speaker 7: when he took it. So management's part of it. Then
Speaker 7: you need to be lucky. You cannot have just one
Speaker 7: or the other. And pipeline. You know, we'll see what
Speaker 7: Fizer shows us over time, they have assets early development
Speaker 7: that we need to start seeing the fruit our.
Speaker 2: Thanks to Sam Fizzelli, Bloomberg Intelligence, Director of Research for
Speaker 2: Global Industries and senior pharmaceuticals.
Speaker 3: Analyst, we moved to some news in the tech space.
Speaker 3: This week. Advanced micro Devices suffered its worst stock declined
Speaker 3: in almost nine years after its sales forecast underwhelmed investors.
Speaker 3: It's a sign that AMD is not making the AI
Speaker 3: inroads that Wall Street had anticipated.
Speaker 2: Separately, the semiconductor manufacturers Texas Instruments reach an agreement to
Speaker 2: buy the US chip firm Silicon Laboratories for about seven
Speaker 2: point five billion dollars.
Speaker 3: This deepens TIS exposure to several long standing markets for chips,
Speaker 3: including the home appliance, power, industrial, and medical device sectors.
Speaker 2: For more on all of this, guest host John Tucker
Speaker 2: and I were joined by Ku John Sobandi, Bloomberg Intelligence
Speaker 2: senior semiconductor analysts.
Speaker 3: We began by asking Konjohn of investors overreacted or if
Speaker 3: there is actually something fundamentally wrong with AMD's latest report.
Speaker 8: There was nothing fundamentally wrong in this report. There were
Speaker 8: a lot of good things to take away, but it
Speaker 8: comes down to you know when you become an ar darling.
Speaker 8: You set up really really high expectations, and when you
Speaker 8: take out the China revenue, which was not included in
Speaker 8: the guidance and the expectations, the beat came out pretty modest,
Speaker 8: which I guess people didn't like, and then was not
Speaker 8: at power against the really high expectations that you have
Speaker 8: now every quarter from these companies.
Speaker 6: Like they used to ask in the old Westerns, you know,
Speaker 6: is there room enough for the two of us in
Speaker 6: this town? Is there room enough for them? And in
Speaker 6: Nvidia there is right now.
Speaker 8: I mean, look, all the tide is lifting all boats.
Speaker 8: There's so much demand for accelerator chips that there's room
Speaker 8: for a MD as a GPU provider. There's even room
Speaker 8: for other folks like Broadcomming mar Well as an AS provider.
Speaker 8: So there's a plenty of demand right now.
Speaker 2: Do we like management least as Sue? I think is
Speaker 2: just when I just see your interviews, it seems super
Speaker 2: on top of it.
Speaker 8: Yeah, I mean, like I said, fundamentally, nothing changed their
Speaker 8: their CPU story continues to become stronger. Nobody's paying attention
Speaker 8: to do it right now because all the focus is
Speaker 8: on GPU and competing with n media. But people are
Speaker 8: forgetting inherently. I when you look at two years back,
Speaker 8: this was really a CPU company. Their GPU story line
Speaker 8: remains intact. We didn't expect any fireworks coming into this earnings.
Speaker 8: We don't expect it until really four q F twenty
Speaker 8: twenty six, so the market is aware of this. We
Speaker 8: really have to wait until the four q twenty twenty six.
Speaker 8: This is when they will be really put to tests
Speaker 8: if they can really execute their first server level solution
Speaker 8: or not. So there's nothing changed that we saw should
Speaker 8: really concern us.
Speaker 6: How important is China in all this? I thought the
Speaker 6: export restrictions were lifted. I mean, what's what's taking so long?
Speaker 8: Well, so the expert restrictions are different for each chip,
Speaker 8: so that the Mi three to eight which they were
Speaker 8: able to ship, had already licenses approved prior, so that's
Speaker 8: a different chip. The newer chips that now is in
Speaker 8: the news when it comes to in media is that
Speaker 8: H two hundreds and equivalent. It will be the MI
Speaker 8: three twenty five for those have not been granted yet.
Speaker 8: Even though the White House has said that yes, these
Speaker 8: companies can start shipping these products, yet the formal licenses
Speaker 8: have not been granted.
Speaker 2: Ku John some m and A in your space. Texas
Speaker 2: Instruments has reached an agreement to buy Silicon Laboratories for
Speaker 2: about seven point five billion dollars. Here what's going on
Speaker 2: here with ti.
Speaker 8: Yeah, so just to give some context, this is sort
Speaker 8: of this size of the deal they have not done
Speaker 8: in the past. The last time they did a deal
Speaker 8: like this was buying National for about six seven billion
Speaker 8: dollars in twenty eleven. So this is not their typical nature,
Speaker 8: so a bit of a surprise. Strategically, it fits well.
Speaker 8: Their industrial segment, which is their largest segment and that's
Speaker 8: where they want to be focused, has a missing piece
Speaker 8: when it comes to wireless connectivity in IoT, so Silicon
Speaker 8: Lab gives them that portfolio. Financially, however, it's a lot
Speaker 8: more important. They have retreated that this has not change
Speaker 8: their pre cash foot trajectory, this has not changed their
Speaker 8: dividend path, and this does not increase The most important
Speaker 8: thing is the capech so all those things we really like.
Speaker 8: If they're able to execute to that yet the cost synergies,
Speaker 8: then this will be a really good deal for them. Also,
Speaker 8: remember TIA has been on a spending spree for the
Speaker 8: last three to five years building up a lot of capacity.
Speaker 8: So this will help bring more loading to the internal factories,
Speaker 8: bring more manufacturing internal to own TI, and help with utilization.
Speaker 2: Our thanks to Kunjan Sabani, Bloomberg Intelligence Senior Semiconductor analyst.
Speaker 3: We moved out to some news from fintech company PayPal.
Speaker 2: This week, PayPal reported quarterly profit and revenue that missed
Speaker 2: analyst expectations. The company also said HP CEO Enrique Lauris
Speaker 2: will take the top job from Alex Chris, whose turnaround
Speaker 2: plan failed to meet targets.
Speaker 3: Jamie Miller, who is the payments firm's chief financial and
Speaker 3: operating officer, will serve as interim CEO until Lauris takes
Speaker 3: over on March. First. Shares a PayPal tumbled as much
Speaker 3: as nineteen percent after the news. It was the biggest
Speaker 3: drop in more than four years.
Speaker 2: More on this I was joined by Dick sha gera
Speaker 2: Bloomberg Intelligence Global Fintech and payments analyst. I first answer
Speaker 2: her to break down the latest news at PayPal.
Speaker 9: Like two big headlines hit at once missed four Q
Speaker 9: expectations and then announced a CEO change. So on the
Speaker 9: print side, adjusted EPs was about a four percent miss
Speaker 9: and the revenue came in one percent lower, and I
Speaker 9: should highlight this is like their first miss in two years.
Speaker 9: But I think the bigger issue is forward looking branded checkout,
Speaker 9: which is the main core high margin business for PayPal,
Speaker 9: that has slowed to one percent in the fourth quarter.
Speaker 9: And PayPal is also flagging in earnings decline for twenty
Speaker 9: twenty six. So those were the key forward looking problem areas,
Speaker 9: and the CEO change definitely was a surprise. I mean,
Speaker 9: the guidance division was driven by their investments in some
Speaker 9: of the merchant business that they're doing, But I think
Speaker 9: the market reaction goes beyond that. I think it goes
Speaker 9: more around some of the serious gaps that appear to
Speaker 9: have been discovered, especially with Apple pay and all the
Speaker 9: product advancements that the competition has come through. And I think, yeah,
Speaker 9: lots to unpack that today.
Speaker 2: So just give us a sense of the competitive landscape
Speaker 2: of the businesses that paypals and the financial technology and
Speaker 2: kind of where do they fit in what are they
Speaker 2: maybe not doing right here?
Speaker 9: So PayPal has two parts of the ecosystem. It works
Speaker 9: with the merchants where you see the PayPal button when
Speaker 9: you check out and it works with the consumers through
Speaker 9: its app, the PayPal app and the Venmo app. What
Speaker 9: is very interesting is that management kept highlighting execution, discipline
Speaker 9: and prioritization, but honestly, like that is the main game.
Speaker 9: PayPal's biggest value ad is the two sided network. They
Speaker 9: could not have afforded to either drop the merchant or
Speaker 9: forget about the consumer. So it's been like it's a
Speaker 9: very competitive landscape. You have Stripe, Aden, Apple pay You
Speaker 9: would have noticed recently they revised their partnership from they
Speaker 9: moved from Goldmans to JP Morgan. So everyone is charging
Speaker 9: FIRS step and PayPal needs to show up on that.
Speaker 9: And I thought they were getting there, but I think
Speaker 9: this new CEO to change definitely puts a multi year
Speaker 9: transformation back in the play now.
Speaker 2: So what do you think is the is the next
Speaker 2: step for this company here? I mean a can of
Speaker 2: kind of remain competitive in this business going forward. Does
Speaker 2: it need to think about a new structure or a
Speaker 2: new strategy. What do you think needs to happen here?
Speaker 9: Yeah, that's the million dollar question, Paul. I think so
Speaker 9: there are two things. One is I think investors need
Speaker 9: really need clarity now on how PayPal reaccelerates its core
Speaker 9: checkout business. Is it conversion, is it pricing merchant value proposition,
Speaker 9: because that's still the core engine. But I think secondly
Speaker 9: is whether the new leadership really signals a broader strategic shakeup,
Speaker 9: like do they streamline initiatives, are they going to step
Speaker 9: cost discipline or capital return or if it doesn't work out,
Speaker 9: maybe they'd consider like big assets like Venmo. You know, strategically,
Speaker 9: the performance doesn't inflect from that.
Speaker 3: Our thanks to Dick Shagaratt Bloomberg Intelligence, Global Fintech and
Speaker 3: Payments analyst, coming up a look at why the food
Speaker 3: and beverage company PepsiCo is cutting prices by up to
Speaker 3: fifteen percent for some key brands.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 3: You can access Bloomberg Intelligence through Bigo on the terminal.
Speaker 3: I'm Scarlett Foe.
Speaker 2: And I'm Paul Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: We move next to some news in the food and
Speaker 2: beverage space.
Speaker 3: This week, PepsiCo announced it is cutting prices by up
Speaker 3: to fifteen percent for key brands, including Lays anden Doritos.
Speaker 3: It's a bid to lift sales by offering more affordable products.
Speaker 2: Pepsco has struggled to grow itales of North American in
Speaker 2: recent years. The company, like many of its peers in
Speaker 2: the food space, raised prices during the pandemic and its
Speaker 2: aftermath to offset high inflation.
Speaker 3: So we brought in Ken Shape, Bloomberg Intelligence Senior consumer
Speaker 3: products analyst.
Speaker 2: We first asked Ken for his take on Pepsi's earnings.
Speaker 10: I think the broad takeaway for investors is that PepsiCo
Speaker 10: is committed to bringing better focus to this company. You know,
Speaker 10: I've covered this company a long time and it's it's
Speaker 10: primary competitors Coca Cola, here, doctor Pepper, you can say Primo,
Speaker 10: water Monster. How they different from PepsiCo is the much
Speaker 10: more focused particularly specific categories. But PepsiCo, with the urging
Speaker 10: of the activists urging them on, is bringing more focus
Speaker 10: to this company. And what I mean is they're rationalizing
Speaker 10: a lot of the SKUs that really aren't contributing much.
Speaker 10: They're consolidating plans they are bringing more rationality to the
Speaker 10: trade spending. So when I hear things that, like, you know,
Speaker 10: cutting price, that's that's tactical. That's just a way to
Speaker 10: move the need a little bit with near term sales.
Speaker 10: But I think the bigger picture is to bringing more
Speaker 10: focus to this enterprise.
Speaker 3: Right, I mean, investors are excited about it strategy as
Speaker 3: opposed to just kind of moving forward with the way
Speaker 3: it's always been. When it comes to those price cuts, though,
Speaker 3: I wonder if this is going to spark any kind
Speaker 3: of price war, will other snack makers feel the pressure
Speaker 3: to also reduce prices, even if they've gone up quite
Speaker 3: a bit since the pandemic.
Speaker 10: That's possible, Scarlett. In the case of Free Too Lay though,
Speaker 10: they have such a dominant market share, and they have
Speaker 10: like sixty percent of the market in the measure channels,
Speaker 10: and when we have that much of a share, you
Speaker 10: deserve a premium. Particularly with Pestico's direct store delivery system,
Speaker 10: what that means is that they help their retailers much
Speaker 10: more than a lot of their competitors, and that is
Speaker 10: they actually go to the store quickly, respond to out
Speaker 10: of stocks, They help you know, position the product, they
Speaker 10: create the end caps in the store, or they do
Speaker 10: a lot more for the retailer than their competitors, and
Speaker 10: so that's how they are helped to get premium pricing. So, yes,
Speaker 10: they're rolling back some prices. You know, it's no secret
Speaker 10: that price increases have been up quite a bit since
Speaker 10: the pandemic. A lot of it's cost driven, and private
Speaker 10: label has encroached a little bit on PepsiCo's share. But
Speaker 10: to answer your question directly, they are the dominant player.
Speaker 10: I would not expect them to give back too much
Speaker 10: over time. And while their competitors may cut prices as well,
Speaker 10: I think retail would be alienating consumers if they push
Speaker 10: too hard on Petsico's price increases.
Speaker 2: Down the road, Ken talk to us about Elliott management.
Speaker 2: They've been in this company, they've owned this stock here
Speaker 2: pushing for some change. How much of an impactor are
Speaker 2: they having.
Speaker 10: I think on the margin there's an impact Paull maybe
Speaker 10: to the degree that Petsico is hastening. It's moved to
Speaker 10: more focus. You know a lot of the things that
Speaker 10: it's been doing all along, and that is upgrading their
Speaker 10: portfolio with more functionality. This is some of the things
Speaker 10: we talked about in the past, they're bringing more protein
Speaker 10: to their mix and bringing more protein by restaging muscle milk,
Speaker 10: so bringing more value to the beverages. So they've always
Speaker 10: been doing that, but to your question, Elliott is pushing
Speaker 10: them to do things like, Okay, you can still do that,
Speaker 10: but also cut costs a little more aggressively. You know,
Speaker 10: maybe maybe you don't need all of these plants, Maybe
Speaker 10: you can consolidate some. Maybe there's some SKUs, you know,
Speaker 10: some products that aren't selling, well, you can roll those back.
Speaker 10: Be a little more nimble when it comes to getting
Speaker 10: rid of some products that aren't winners, because at the
Speaker 10: end of the day, you have to grab as much
Speaker 10: shelf space as the retailer as possible, and when you
Speaker 10: have products on the shelf that aren't moving, you're not
Speaker 10: helping them, you know, with their business. So be more
Speaker 10: a little more aggressive with that. So it's helping and
Speaker 10: I think that's a positive thing for shareholders.
Speaker 3: Is this a company that's going to have to separate
Speaker 3: its drinks business from its snack business.
Speaker 10: Well, that's the age old question we've been talking about
Speaker 10: for a while. And as I mentioned, if it can
Speaker 10: prove to the market that this increased focus that they
Speaker 10: have with just doing their you know, daily business or
Speaker 10: running these operations, they can improve them. I think the
Speaker 10: heat will be off for them to go to the
Speaker 10: draconian measure of breaking up food and beverages. That's always,
Speaker 10: you know, the wild card, I think down the road,
Speaker 10: and I think will be well received by the market
Speaker 10: quite frankly, but I don't think it's necessary at this point.
Speaker 2: What are you consumer products companies telling you ken about
Speaker 2: just the consumer out there?
Speaker 10: Well, all Trea just the other day. I mean, it's
Speaker 10: a different market with cigarettes, you know. They noted that
Speaker 10: consumers are still hesitant in paying up for a premium
Speaker 10: products and the cigarettes mention isn't the same category as
Speaker 10: salty snacks, but they do note that consumers are reaching
Speaker 10: for the private label, the low priced alternative, more than
Speaker 10: they've done in the past, and so the extent that
Speaker 10: carries over to snacks and beverages. I can see some
Speaker 10: parallel lines here, and as more companies release their numbers,
Speaker 10: I think that could be a common theme here that
Speaker 10: private labels encroaching and maybe there needs to be some
Speaker 10: more deceleration in the reliance on price increases to stimulate
Speaker 10: sales growth.
Speaker 3: That was ken Ja Bloomberg Intelligence senior consumer products analysts.
Speaker 2: We moved next to Research. Bloomberg Intelligence recently put out
Speaker 2: on global communications and networking equipment.
Speaker 3: According to BI, the global networking sector heads into twenty
Speaker 3: twenty six with multiple spending tailwinds led by cloud AI
Speaker 3: infrastructure buildouts, and the money spent on networking gear is
Speaker 3: expected to grow twenty percent according to the six to
Speaker 3: fifty Group.
Speaker 2: For more, I was joined by Woujenho, Bloomberg Intelligence, Senior
Speaker 2: Hardware networking analyst. I first asked which to talk about
Speaker 2: how investors are now looking at AI.
Speaker 11: It's fairly straightforward, right, It's a very fairly concentrated space.
Speaker 11: The AI networking space is expected to grow ninety one
Speaker 11: percent on the switching hardware alone to twenty one billion dollars. Right.
Speaker 11: The way to play it is fairly straightforward. It's a
Speaker 11: three c's, an A and an N.
Speaker 4: Right.
Speaker 11: That's my new networking fang Cisco, Celestica, Corning and CNSO.
Speaker 11: Four c's Arista and Nvidia, right, and those are going
Speaker 11: to be the leading beneficiaries for the networking space in AI.
Speaker 2: So give us a sense of kind of how investors
Speaker 2: should think about the investment cycle for AI. I mean,
Speaker 2: I'm going to say we're two three years into it.
Speaker 2: I'm just not sure. How do you guys think about
Speaker 2: the duration here?
Speaker 11: Yeah, you know, it's it's quite odd, right, because you know,
Speaker 11: some of us say it's two three years into it.
Speaker 11: Michael Dell had this interesting quote a couple of weeks ago,
Speaker 11: saying what inning are we and his response was, we're
Speaker 11: just entering the stadium.
Speaker 10: Wow.
Speaker 8: Right.
Speaker 11: He still thinks it's early on in terms of the
Speaker 11: investment phase, and networking is going to be one of
Speaker 11: the leading beneficiars of it.
Speaker 2: So how are the networking equipment companies that you follow,
Speaker 2: how are they financing some of their capex? Because again,
Speaker 2: I think most of us grew up when technology companies
Speaker 2: had so much cash flow that they could self fund
Speaker 2: their R and D, their capex, that type of stuff.
Speaker 2: Now they many of them need to come to the
Speaker 2: capital markets.
Speaker 11: Yeah, fortunate for the networking guys. It's a low capex
Speaker 11: type of business, right, We're talking about seb ten percent
Speaker 11: of the cash flow to capex or ten percent to
Speaker 11: capex ratio to sales, So it is a fairly self
Speaker 11: funded business. And it's also high margin business as well.
Speaker 11: As long as the hyper scale cloud providers as well
Speaker 11: as the tier two cloud providers like the Neo clouds,
Speaker 11: are funded, they'll be able to buy the networking gear.
Speaker 10: So how do.
Speaker 2: You I mean, it's interesting here. You think about the
Speaker 2: tech space and it's hardware, it's software, it's the networking equipment.
Speaker 6: Here.
Speaker 2: Who's kind of driving this this AI thing?
Speaker 1: Is?
Speaker 2: Are your networking in communications companies? Are they kind of
Speaker 2: dependent upon I don't know what the hyperscalers are doing
Speaker 2: or what the chip makers are doing. Who's kind of
Speaker 2: leading this?
Speaker 11: So at the end of the day, it's how quickly
Speaker 11: and how fast and how large of the investments that
Speaker 11: the hyperscalers are making on the AI side. I will
Speaker 11: tell you, as these language models grow and the scale
Speaker 11: of these compute investments grow, you actually need a lot
Speaker 11: more networking. And networking is if you think about it
Speaker 11: as the arteries and the veins of a human body.
Speaker 11: Networking is probably at the center of that right now,
Speaker 11: and that's why you're having a lot of investment on
Speaker 11: their networking front.
Speaker 2: Who are I mean, how are they dealing with?
Speaker 4: Again?
Speaker 2: These networking companies, I think of these big global companies.
Speaker 2: Is that manufacturing dispersed around the globe? Is there a
Speaker 2: pressure to bring it.
Speaker 1: To the US.
Speaker 2: How are they dealing with some of the changes we've
Speaker 2: seen in global logistics, whether it's tariffs or just you know,
Speaker 2: most favorite nation status, those types of things.
Speaker 11: Yeah, that's a fantastic question, Paul. I will tell you
Speaker 11: that there's a couple of things. Right when we had
Speaker 11: the tiraff situation number one, and also the COVID situation
Speaker 11: a few years back, the companies have actually done a
Speaker 11: good job rearranging the supply chain. A lot of manufacturings
Speaker 11: happening out of Mexico. There's some manufacturing that's happening in
Speaker 11: Taiwan as well as in Canada. So we're bypassing some
Speaker 11: of the tiff situation. And quite frankly, tariffs have become
Speaker 11: a non story for the majority of my networking guys.
Speaker 11: And on top of that, the dram story is inconsequential
Speaker 11: for the networking games as well.
Speaker 2: How are the stocks performing here? We've seen so many
Speaker 2: parts of the tech space just rip. How have your
Speaker 2: stocks been doing?
Speaker 11: I will tell you, if you know, if you looked
Speaker 11: at the Celestica two years back, you're seeing a ten
Speaker 11: time performer to to where it is right now. You
Speaker 11: know it has slowed down because I think people are
Speaker 11: starting to catch up to the name Arista. It's a
Speaker 11: double from from two to three years back. And Cisco,
Speaker 11: I mean we've finally got back to it's two thousand
Speaker 11: and one highs because of the business has actually stabilized,
Speaker 11: so the stocks in itself have done well, the multiples
Speaker 11: have actually gotten a little bit rich.
Speaker 3: That was Ujinho, our senior hardware and networking analyst.
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: and one hundred and thirty industries.
Speaker 3: And remember you can access Bloomberg Intelligence if b I
Speaker 3: go on the terminal. I'm Scarlett Foo and.
Speaker 2: I'm Paul Sweeney. Stay with us. Today's top stories and
Speaker 2: global business headlines are coming up right now.