1 00:00:02,279 --> 00:00:05,560 Speaker 1: From the heart of where innovation, money and power colli 2 00:00:06,400 --> 00:00:10,920 Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with 3 00:00:10,960 --> 00:00:27,080 Speaker 1: Emily Jay. I'm Emily changing San Francisco and this is 4 00:00:27,080 --> 00:00:29,639 Speaker 1: Bloomberg Technology. Coming up in the next hour, stocks a 5 00:00:29,680 --> 00:00:33,800 Speaker 1: buckle amidst another shockingly high inflation report, investors wondering if 6 00:00:33,880 --> 00:00:36,600 Speaker 1: the FED will get even more aggressive. We'll talk about 7 00:00:36,640 --> 00:00:38,960 Speaker 1: what it all means for tech ahead of a key 8 00:00:39,120 --> 00:00:44,000 Speaker 1: earning season. Plus an exclusive conversation with IBM CEO Arvin Krishna. 9 00:00:44,240 --> 00:00:46,640 Speaker 1: What's his read on the economy and his view on 10 00:00:46,680 --> 00:00:49,640 Speaker 1: the supply chain? Will ask all that and more coming up, 11 00:00:50,720 --> 00:00:54,080 Speaker 1: and the first ads on Netflix will be brought to 12 00:00:54,160 --> 00:00:56,600 Speaker 1: you by Microsoft. We're gonna tell you about the new 13 00:00:56,600 --> 00:01:00,400 Speaker 1: deal between the two tech powerhouses entering the at business. 14 00:01:01,480 --> 00:01:04,040 Speaker 1: So what does another round of high inflation data mean 15 00:01:04,080 --> 00:01:06,959 Speaker 1: for tech specifically? What with earning season about to get underway. 16 00:01:07,000 --> 00:01:08,759 Speaker 1: I want to bring in Liz Young of so Far 17 00:01:09,200 --> 00:01:12,000 Speaker 1: to discuss. So, Liz, what are you expecting this earning season? 18 00:01:12,080 --> 00:01:14,080 Speaker 1: Is every day going to be like Judgment Day for 19 00:01:14,160 --> 00:01:17,720 Speaker 1: the next six weeks? I think it might be. And 20 00:01:17,720 --> 00:01:20,840 Speaker 1: this isn't just tech specific. These comments but I think 21 00:01:20,880 --> 00:01:24,440 Speaker 1: earning season, what needs to happen is that we see 22 00:01:24,480 --> 00:01:28,959 Speaker 1: revisions downward. Usually things happen in a sequence, and as 23 00:01:29,000 --> 00:01:31,640 Speaker 1: we've already seen, the market has broken. The market has 24 00:01:31,680 --> 00:01:35,240 Speaker 1: sent us a signal that there's rough waters ahead, whether 25 00:01:35,280 --> 00:01:37,760 Speaker 1: that be in corporate America or in the economy. Now 26 00:01:37,800 --> 00:01:41,200 Speaker 1: we need earnings to kind of meet that signal. And 27 00:01:41,440 --> 00:01:43,920 Speaker 1: right now we still have earnings expectations through the end 28 00:01:43,920 --> 00:01:46,560 Speaker 1: of the year of ten to eleven percent growth, and 29 00:01:46,640 --> 00:01:50,480 Speaker 1: in three there's still pretty lofty expectations as well. I 30 00:01:50,520 --> 00:01:53,640 Speaker 1: think that as profit margins get pinched and ceo s 31 00:01:53,720 --> 00:01:56,280 Speaker 1: come out and talk to us about their Q two earnings, 32 00:01:56,480 --> 00:01:59,840 Speaker 1: they may still have had a strong Q two, but 33 00:02:00,000 --> 00:02:02,720 Speaker 1: a guidance going forward is likely going to take a 34 00:02:02,800 --> 00:02:06,480 Speaker 1: hit from inflation, from the tight labor market, from the 35 00:02:06,520 --> 00:02:10,079 Speaker 1: increasing costs that they've seen over the past six months. 36 00:02:10,639 --> 00:02:13,760 Speaker 1: But what about tech in particular? Why is tech or 37 00:02:13,840 --> 00:02:18,799 Speaker 1: has tech been underperforming the last several weeks? Well, the 38 00:02:18,880 --> 00:02:21,080 Speaker 1: last several weeks I think have been characterized by a 39 00:02:21,080 --> 00:02:23,520 Speaker 1: market that's trying to figure out what the biggest problem 40 00:02:23,680 --> 00:02:26,960 Speaker 1: is and what what their biggest fear is. And we've 41 00:02:27,000 --> 00:02:30,519 Speaker 1: had a lot of trading that has been very rate related, 42 00:02:30,880 --> 00:02:34,120 Speaker 1: and tech is so sensitive to the rate environment that 43 00:02:34,400 --> 00:02:36,640 Speaker 1: as we continue to get data that says, you know what, 44 00:02:36,800 --> 00:02:38,720 Speaker 1: the FETE is going to have to keep going because 45 00:02:38,760 --> 00:02:42,520 Speaker 1: inflation is still such a big enemy. That hurts tech shares, 46 00:02:42,560 --> 00:02:44,880 Speaker 1: that hurts those high growth shares. There have been some 47 00:02:45,000 --> 00:02:48,240 Speaker 1: mini rallies in between. We've seen some attempts at a 48 00:02:48,320 --> 00:02:50,840 Speaker 1: rally in tech and in some of those growth names, 49 00:02:51,000 --> 00:02:52,800 Speaker 1: but there's been a lot of giveback as soon as 50 00:02:52,800 --> 00:02:56,040 Speaker 1: the market realizes that the FETE is still on this bandwagon. 51 00:02:56,400 --> 00:02:59,400 Speaker 1: Regardless of the fact that we may have increased recession 52 00:02:59,480 --> 00:03:03,040 Speaker 1: fears over the next twelve months, in the near term, 53 00:03:03,080 --> 00:03:05,680 Speaker 1: the FED is still going to fight that growth narrative. 54 00:03:06,400 --> 00:03:09,800 Speaker 1: So let's talk about the signals you're seeing now. Based 55 00:03:09,840 --> 00:03:14,840 Speaker 1: on what you're seeing is a recession and inevitable. Well, look, 56 00:03:14,880 --> 00:03:18,240 Speaker 1: I wouldn't say anything is for sure. Nothing is ever guaranteed. 57 00:03:18,360 --> 00:03:21,240 Speaker 1: At some point, there will be another recession. That's just 58 00:03:21,280 --> 00:03:24,360 Speaker 1: how the business cycle works. However, what I will say 59 00:03:24,480 --> 00:03:26,840 Speaker 1: is that some of the signals that we look at, 60 00:03:27,120 --> 00:03:30,560 Speaker 1: such as yield curban versions, now we've gotten a deeper 61 00:03:30,639 --> 00:03:34,080 Speaker 1: yield curban version down twenty one basis points as of today, 62 00:03:34,080 --> 00:03:36,680 Speaker 1: which is the biggest in version we've seen so far, 63 00:03:37,040 --> 00:03:39,760 Speaker 1: aside from some of those minian versions earlier in the year. 64 00:03:40,080 --> 00:03:42,600 Speaker 1: That's a pretty big signal, and that's the market saying 65 00:03:42,920 --> 00:03:45,920 Speaker 1: that we're afraid that this hiking cycle is going to 66 00:03:45,960 --> 00:03:48,920 Speaker 1: take us into recession. Here's what I would say about 67 00:03:49,000 --> 00:03:51,680 Speaker 1: a recession. Now, we may find out at the end 68 00:03:51,720 --> 00:03:55,200 Speaker 1: of July that we have another negative GDP print for 69 00:03:55,240 --> 00:03:59,520 Speaker 1: the second quarter, which would be technically a recession, but 70 00:03:59,720 --> 00:04:02,120 Speaker 1: it's an odd one, right. It's one where the labor 71 00:04:02,160 --> 00:04:04,840 Speaker 1: market is so strong, We're still creating jobs, We've got 72 00:04:04,840 --> 00:04:09,160 Speaker 1: a consumer that's still spending and maybe as frustrated by inflation, 73 00:04:09,200 --> 00:04:11,720 Speaker 1: but hasn't stopped spending because of it. So it would 74 00:04:11,720 --> 00:04:15,880 Speaker 1: be a recession that didn't hurt demand to appoint enough 75 00:04:16,160 --> 00:04:19,400 Speaker 1: to bring that inflation number down. Now, what I think 76 00:04:19,440 --> 00:04:22,760 Speaker 1: the market is grappling with is is there a classic 77 00:04:22,839 --> 00:04:28,200 Speaker 1: recession coming at some point? Perhaps that does actually affect 78 00:04:28,240 --> 00:04:31,640 Speaker 1: the labor market, does bring demand down, but it takes 79 00:04:31,680 --> 00:04:34,640 Speaker 1: care of that inflation problem. So it's the path to 80 00:04:35,400 --> 00:04:39,159 Speaker 1: fighting this inflation monster that we're all trying to figure out. 81 00:04:39,839 --> 00:04:42,320 Speaker 1: Speaking of that monster. How much of a change is 82 00:04:42,360 --> 00:04:45,599 Speaker 1: so far seeing and spending and borrowing habits right now? 83 00:04:45,720 --> 00:04:48,920 Speaker 1: Do you see customers being resilient in their spending or 84 00:04:49,040 --> 00:04:53,920 Speaker 1: are savings shrinking? Well, look, I mean with our bank 85 00:04:54,000 --> 00:04:56,479 Speaker 1: charter earlier in the year, there's obviously a difference that 86 00:04:56,560 --> 00:05:00,000 Speaker 1: we're seeing, but it's the spending patterns are pretty consider 87 00:05:00,080 --> 00:05:04,840 Speaker 1: stint across consumers broadly. Right, everybody is still spending, They've 88 00:05:04,880 --> 00:05:08,039 Speaker 1: just changed their habits. So what you find is, and 89 00:05:08,080 --> 00:05:11,200 Speaker 1: this is a broad consumer statement, what you find is 90 00:05:11,360 --> 00:05:14,080 Speaker 1: maybe consumers have pulled back on certain items, and we 91 00:05:14,200 --> 00:05:16,800 Speaker 1: heard this earlier in the year from some big retailers. 92 00:05:17,000 --> 00:05:19,400 Speaker 1: Maybe they've pulled back on certain items but started to 93 00:05:19,480 --> 00:05:22,800 Speaker 1: spend on other items. So you're gonna see, naturally in 94 00:05:22,800 --> 00:05:26,800 Speaker 1: a business cycle, a contraction and spending endurable goods, but 95 00:05:27,000 --> 00:05:30,560 Speaker 1: other spending has still held up. We're still seeing in 96 00:05:30,600 --> 00:05:34,720 Speaker 1: all consumers the desire to travel. We're still seeing airlines 97 00:05:34,760 --> 00:05:37,160 Speaker 1: that have completely full flights, despite the fact that they 98 00:05:37,240 --> 00:05:40,120 Speaker 1: keep canceling all of them, but they're still full, and 99 00:05:40,160 --> 00:05:42,560 Speaker 1: there's still people out there with the appetite to travel. 100 00:05:42,760 --> 00:05:45,480 Speaker 1: Despite higher gas prices. People are still on the road. 101 00:05:45,640 --> 00:05:49,039 Speaker 1: So Consumers have not necessarily been hit by this yet, 102 00:05:49,200 --> 00:05:52,360 Speaker 1: But this is much like the profit margin story. Consumers 103 00:05:52,400 --> 00:05:55,600 Speaker 1: came into this period with a lot built up in savings. 104 00:05:55,600 --> 00:05:58,880 Speaker 1: They could absorb some of those price increases. Plus they 105 00:05:58,920 --> 00:06:01,480 Speaker 1: had such a desire to just get back out there again, 106 00:06:01,680 --> 00:06:04,640 Speaker 1: which is why we're seeing an inflation and services. Much 107 00:06:04,720 --> 00:06:07,960 Speaker 1: like companies came into this with record high profit margins. 108 00:06:08,000 --> 00:06:10,279 Speaker 1: They can absorb some of this into earnings, but they 109 00:06:10,360 --> 00:06:14,560 Speaker 1: can't absorb all of it. Now. I'm curious whether how 110 00:06:14,600 --> 00:06:17,080 Speaker 1: you're watching this Tesla Twitter story. Tesla is just such 111 00:06:17,120 --> 00:06:19,839 Speaker 1: a massive stock now and we're seeing it get caught 112 00:06:19,920 --> 00:06:21,920 Speaker 1: up in the ups and downs of the Elon Musk 113 00:06:22,520 --> 00:06:24,760 Speaker 1: Twitter saga. We're just getting some new headlines from the 114 00:06:24,760 --> 00:06:27,200 Speaker 1: CEO of Twitter and a memo to employee saying they're 115 00:06:27,200 --> 00:06:29,880 Speaker 1: going to hold the Musk accountable for this forty four 116 00:06:30,040 --> 00:06:33,800 Speaker 1: billion dollar deal. Every time any news breaks, um, you know, 117 00:06:33,880 --> 00:06:36,960 Speaker 1: it impacts not just Twitter stock but Tesla stock. Do 118 00:06:37,040 --> 00:06:39,919 Speaker 1: you see an impact on the broader markets here or 119 00:06:40,000 --> 00:06:43,320 Speaker 1: is this just a separate narrative in itself. Well, I 120 00:06:43,360 --> 00:06:46,320 Speaker 1: think some of this is very company specific, because this 121 00:06:46,360 --> 00:06:49,880 Speaker 1: isn't something that's going on across the entire industry. So 122 00:06:49,960 --> 00:06:52,359 Speaker 1: at this point I don't think there's an impact on 123 00:06:52,360 --> 00:06:55,680 Speaker 1: the broader markets. But as we get through the remainder 124 00:06:55,720 --> 00:06:58,239 Speaker 1: of the year, if we start to hear things about 125 00:06:58,279 --> 00:07:01,000 Speaker 1: other companies, I think the the M and A activity 126 00:07:01,160 --> 00:07:04,159 Speaker 1: may pick up later in the year and into which 127 00:07:04,200 --> 00:07:07,040 Speaker 1: is not the Twitter and Tesla story, but the M 128 00:07:07,080 --> 00:07:09,640 Speaker 1: and A narrative could pick up. And what you might 129 00:07:09,760 --> 00:07:14,200 Speaker 1: find as the economy slows further is that those transactions, 130 00:07:14,200 --> 00:07:18,520 Speaker 1: those mergers and acquisitions are now happening because of financial reasons, 131 00:07:18,560 --> 00:07:21,840 Speaker 1: not because of strategic reasons. So that's something that if 132 00:07:21,880 --> 00:07:24,760 Speaker 1: we start to hear a theme across companies in certain 133 00:07:24,760 --> 00:07:27,320 Speaker 1: sectors that have been hit really hard by this, that's 134 00:07:27,320 --> 00:07:30,520 Speaker 1: something that would affect the broader market. Interesting all right, 135 00:07:30,600 --> 00:07:33,160 Speaker 1: Liz Young of so Far Always great to have you here. Liz, 136 00:07:33,320 --> 00:07:36,160 Speaker 1: thank you for giving your view on the situation and 137 00:07:36,200 --> 00:07:47,200 Speaker 1: stay to play today. Well, it's long been a bell 138 00:07:47,280 --> 00:07:49,600 Speaker 1: weather for corporate spending in these days. The view from 139 00:07:49,600 --> 00:07:52,600 Speaker 1: IBM could be a good indicator for which way the 140 00:07:52,680 --> 00:07:55,440 Speaker 1: macro headwinds are blowing. Joining us now here in the studio, 141 00:07:55,520 --> 00:07:58,280 Speaker 1: the CEO of Big Blue himself, Arvin Krishna, are been 142 00:07:58,320 --> 00:08:01,160 Speaker 1: great to have you here in person, Emily, always great 143 00:08:01,200 --> 00:08:03,200 Speaker 1: to be here with you, and this time in person. 144 00:08:03,400 --> 00:08:05,880 Speaker 1: In person, indeed, thank you for taking the time out 145 00:08:05,880 --> 00:08:08,080 Speaker 1: of your trip to the West Coast. Look, we've got 146 00:08:08,080 --> 00:08:09,320 Speaker 1: a lot to talk about, but I have to get 147 00:08:09,400 --> 00:08:12,760 Speaker 1: your view on the macro economy. What scenarios are you 148 00:08:12,800 --> 00:08:16,760 Speaker 1: planning for? Do you think of recession is inevitable. I'm 149 00:08:16,760 --> 00:08:20,560 Speaker 1: actually more optimistic, so I'll caution it with that. We 150 00:08:20,600 --> 00:08:22,200 Speaker 1: are a B two B company, so we tend to 151 00:08:22,200 --> 00:08:25,160 Speaker 1: see corporate spending our customers. In turn, maybe B two 152 00:08:25,160 --> 00:08:28,400 Speaker 1: see but we don't directly go to consumer. So in 153 00:08:28,480 --> 00:08:31,800 Speaker 1: the B two B we see the spending environment quite robust. 154 00:08:33,000 --> 00:08:35,920 Speaker 1: We see our demand signals, we see our pipelines, We 155 00:08:36,000 --> 00:08:39,160 Speaker 1: look at geographies, we look at industries, and part of 156 00:08:39,200 --> 00:08:43,400 Speaker 1: it may be that technology is the answer through these problems. 157 00:08:44,120 --> 00:08:48,319 Speaker 1: When you look at supply chain, inflation, labor demographics, interest rates. 158 00:08:48,600 --> 00:08:52,640 Speaker 1: Technology offers you a way to scale without necessarily increasing 159 00:08:52,679 --> 00:08:56,920 Speaker 1: costs that are linear or worse than linear. And so 160 00:08:56,960 --> 00:08:59,400 Speaker 1: I think that that is why technology is spending I 161 00:08:59,480 --> 00:09:03,040 Speaker 1: believe is going to remain robust in this In al Cahol, 162 00:09:03,080 --> 00:09:07,320 Speaker 1: it all moderate scenarios. Is there's something extreme that's different, 163 00:09:07,400 --> 00:09:10,440 Speaker 1: But but I don't really expect that. Are you planning 164 00:09:10,520 --> 00:09:12,680 Speaker 1: for extreme scenarios? I mean, do you have to plan 165 00:09:12,760 --> 00:09:16,640 Speaker 1: for extreme? Plan a bunch of scenarios, but plan is different. 166 00:09:16,679 --> 00:09:19,079 Speaker 1: That's a plan on paper. Which ones do you expect 167 00:09:19,080 --> 00:09:20,920 Speaker 1: to play out? You would say there's a middle, there 168 00:09:21,000 --> 00:09:23,960 Speaker 1: is a more pessimistic, there's a more optimistic. None of 169 00:09:23,960 --> 00:09:26,360 Speaker 1: those are the extreme ones. Well, it's interesting because we're hearing, 170 00:09:26,400 --> 00:09:28,520 Speaker 1: for example, of the CEO of Service. Now just give 171 00:09:28,559 --> 00:09:31,160 Speaker 1: a very pessimistic forecast, and you have Snowflake with a 172 00:09:31,240 --> 00:09:35,800 Speaker 1: very optimistic forecast. Who's right, I mean, you're optimistic. I'm optimistic. 173 00:09:35,960 --> 00:09:38,800 Speaker 1: So I'd say that I see technology spending as remaining 174 00:09:38,840 --> 00:09:42,520 Speaker 1: above GDP growth, whether it's three or four or five 175 00:09:42,559 --> 00:09:44,800 Speaker 1: points about GDP growth. Somewhere in there is going to 176 00:09:44,840 --> 00:09:49,040 Speaker 1: remain technology, including in Europe, is our view. So we 177 00:09:49,120 --> 00:09:55,400 Speaker 1: are more optimistic than pessimistic for sure. And uh, that's 178 00:09:55,400 --> 00:09:58,280 Speaker 1: why in April, when we could see some of these 179 00:09:58,280 --> 00:10:00,680 Speaker 1: headwinds that we're talking about were there. In Apri, we 180 00:10:00,760 --> 00:10:02,800 Speaker 1: did forecasts that we would see at the high end 181 00:10:02,800 --> 00:10:05,920 Speaker 1: of mid single digit revenue growth for ourselves at constant currency. 182 00:10:05,960 --> 00:10:08,319 Speaker 1: So I'll put that to the side. So how is 183 00:10:08,360 --> 00:10:12,080 Speaker 1: this all impacting your strategy or cloud strategy or growth 184 00:10:12,600 --> 00:10:16,880 Speaker 1: strategy looking ahead? It's actually, I think reinforcing the play 185 00:10:17,000 --> 00:10:19,280 Speaker 1: we called so two years ago we called a player 186 00:10:19,280 --> 00:10:22,800 Speaker 1: on hybrid cloud and artificial intelligence. We see hybrid cloud 187 00:10:22,840 --> 00:10:28,040 Speaker 1: as helping our our clients through these issues. We see 188 00:10:28,080 --> 00:10:31,760 Speaker 1: AI is really helping on the productivity issue. When you 189 00:10:31,800 --> 00:10:35,440 Speaker 1: look at AI sixteen trillion dollars of productivity unlock over 190 00:10:35,520 --> 00:10:39,359 Speaker 1: this decade, and you look at hybrid cloud, trillion dollar opportunity. 191 00:10:39,480 --> 00:10:43,160 Speaker 1: All our clients want a few public clouds, still have 192 00:10:43,840 --> 00:10:47,000 Speaker 1: um their own on premise and private cloud. So when 193 00:10:47,000 --> 00:10:49,000 Speaker 1: you look at how do you help your clients navigate 194 00:10:49,040 --> 00:10:51,840 Speaker 1: through all that really give them a technology roadmap that 195 00:10:51,920 --> 00:10:54,760 Speaker 1: lets them succeed in the face of sovereignty, in the 196 00:10:54,800 --> 00:10:58,000 Speaker 1: face of resilience, in the face of supply chain issues. 197 00:10:58,440 --> 00:11:01,920 Speaker 1: Both these technologies are turning our to be great, great opportunities. 198 00:11:02,280 --> 00:11:04,840 Speaker 1: Right now, let's talk about the supply chain. Are you 199 00:11:04,920 --> 00:11:09,640 Speaker 1: seeing relief? How much longer does the supply chain pain last? 200 00:11:10,600 --> 00:11:14,280 Speaker 1: I actually maybe a bit more pessimistic on that than optimistic. 201 00:11:14,840 --> 00:11:18,880 Speaker 1: I think supply chain resilience is a real fundamental issue 202 00:11:19,200 --> 00:11:21,720 Speaker 1: that's going to go on for a couple more years, 203 00:11:22,320 --> 00:11:24,600 Speaker 1: and what are the impacts of that. So I think 204 00:11:24,640 --> 00:11:26,800 Speaker 1: the impact on the consumer side is obvious. It's going 205 00:11:26,800 --> 00:11:29,360 Speaker 1: to be higher prices and you can see that. On 206 00:11:29,400 --> 00:11:31,960 Speaker 1: the enterprise side, I think that the supply chain is 207 00:11:31,960 --> 00:11:37,080 Speaker 1: going to cause more delays, more people sort of wondering 208 00:11:37,120 --> 00:11:39,880 Speaker 1: about where is my alternate on supply chain. But it's 209 00:11:39,920 --> 00:11:43,559 Speaker 1: not a simple issue. That is what I think nations 210 00:11:43,840 --> 00:11:46,120 Speaker 1: and leaders have to wake up to. It's going to 211 00:11:46,240 --> 00:11:49,040 Speaker 1: take two three years two for us to go resolve this, 212 00:11:49,160 --> 00:11:51,280 Speaker 1: and that is why I sort of say this is 213 00:11:51,280 --> 00:11:54,120 Speaker 1: not a simple issue to get resolved. So you're saying 214 00:11:54,160 --> 00:11:56,160 Speaker 1: it's gonna get worse before it gets better. No, I 215 00:11:56,160 --> 00:11:59,360 Speaker 1: think may maybe at the worst of it right now, 216 00:11:59,600 --> 00:12:02,200 Speaker 1: but and you the walls, it doesn't get better right away. 217 00:12:02,559 --> 00:12:04,400 Speaker 1: That's going to still take a couple of years. So 218 00:12:04,440 --> 00:12:09,079 Speaker 1: obviously chips are in short supply, including you know, I mean, 219 00:12:09,120 --> 00:12:12,400 Speaker 1: we've been following the Chips Act. UH looked like there 220 00:12:12,440 --> 00:12:15,559 Speaker 1: was bipartisan agreement that this would get passed, still hasn't 221 00:12:15,559 --> 00:12:19,040 Speaker 1: been passed. We spoke to UH Commerce Secretary Gena Raimondo 222 00:12:19,400 --> 00:12:22,080 Speaker 1: on Bloomberg Television. Take a listen to what she had 223 00:12:22,160 --> 00:12:25,920 Speaker 1: to say. Yes, it will get done. This is at 224 00:12:25,920 --> 00:12:31,120 Speaker 1: this point in the negotiation. Unfortunately, politicians look for leverage, 225 00:12:31,480 --> 00:12:35,480 Speaker 1: and while it isn't right to play politics with national security, 226 00:12:35,760 --> 00:12:39,200 Speaker 1: that's what I think is happening. In the past two weeks, 227 00:12:39,240 --> 00:12:43,160 Speaker 1: we we made huge progress, we were closing out issues, 228 00:12:43,280 --> 00:12:46,319 Speaker 1: finding compromise. So I think everyone just needs to come 229 00:12:46,360 --> 00:12:51,079 Speaker 1: back today, get back to work, and commit themselves to 230 00:12:51,160 --> 00:12:54,400 Speaker 1: getting it done in the next few weeks. So she 231 00:12:54,600 --> 00:12:57,440 Speaker 1: sounds like she's trying to be optimistic, but she's also 232 00:12:57,520 --> 00:13:00,559 Speaker 1: clearly frustrated. I mean, you've got companies T S, M, 233 00:13:00,600 --> 00:13:04,079 Speaker 1: spe C spending a hundred billion dollars abroad to increase 234 00:13:04,160 --> 00:13:06,600 Speaker 1: capacity and we can't even get a fifty billion dollar 235 00:13:06,679 --> 00:13:09,160 Speaker 1: bill passed. What's it gonna take. Have you been talking 236 00:13:09,160 --> 00:13:12,599 Speaker 1: to lawmakers? What's your sense of the sentiment here? We have, 237 00:13:12,840 --> 00:13:15,439 Speaker 1: so we've been talking to lawmakers on this issue, on 238 00:13:15,559 --> 00:13:18,280 Speaker 1: both the Chips Act and USEKA for the last year. 239 00:13:18,679 --> 00:13:21,199 Speaker 1: We are very strong believers that these are good bills 240 00:13:21,920 --> 00:13:25,000 Speaker 1: for United States competitiveness. We believe in the sake of 241 00:13:25,040 --> 00:13:28,160 Speaker 1: both national security, but also business in general. These are 242 00:13:28,160 --> 00:13:30,400 Speaker 1: good things to get done. I think the Chips Act 243 00:13:30,600 --> 00:13:34,480 Speaker 1: is essential. Will it happened? I believe the Chips Act 244 00:13:34,520 --> 00:13:37,400 Speaker 1: will happen. I can't predict exactly when it will happen 245 00:13:37,960 --> 00:13:40,520 Speaker 1: and which way heckle, will it be part of USKA 246 00:13:40,559 --> 00:13:43,760 Speaker 1: are part of its own? We are not experts on that. 247 00:13:44,080 --> 00:13:46,439 Speaker 1: What we can say is there to be happy to 248 00:13:46,480 --> 00:13:48,800 Speaker 1: put our voice behind the Chips Act. We are happy 249 00:13:48,840 --> 00:13:53,480 Speaker 1: to call UH senators on both sides. We believe there 250 00:13:53,559 --> 00:13:57,080 Speaker 1: is bipartisan support actually for these acts, and that is 251 00:13:57,120 --> 00:14:02,080 Speaker 1: what we are willing to go ask for the support. Um. Now, 252 00:14:02,120 --> 00:14:04,960 Speaker 1: you just wrapped your fifth acquisition of the year with 253 00:14:05,120 --> 00:14:08,280 Speaker 1: these depressed valuations. Is that making you more open to 254 00:14:08,480 --> 00:14:11,960 Speaker 1: more M and A? A short answer is yes. But 255 00:14:12,040 --> 00:14:14,040 Speaker 1: it's not a question of depressed valuations. So M and 256 00:14:14,080 --> 00:14:17,320 Speaker 1: A has been part of our strategy. About a year ago, 257 00:14:17,400 --> 00:14:20,120 Speaker 1: when we set out on our investor day, we said 258 00:14:20,120 --> 00:14:22,200 Speaker 1: you should expect us to do three to four billion 259 00:14:22,560 --> 00:14:25,280 Speaker 1: a year and acquisitions in a normal year. Now you 260 00:14:25,320 --> 00:14:28,120 Speaker 1: can always when valuations are right and you can get 261 00:14:28,160 --> 00:14:31,080 Speaker 1: the most attractive target, and it is going to be 262 00:14:31,120 --> 00:14:33,880 Speaker 1: aggreative to us then we'd be willing to also lean 263 00:14:34,000 --> 00:14:37,600 Speaker 1: in and borrow ahead from our what we can do. 264 00:14:37,920 --> 00:14:39,680 Speaker 1: He saw a great example of that with Red Hat 265 00:14:39,720 --> 00:14:42,760 Speaker 1: four years ago, and you just the new CEO there, 266 00:14:43,040 --> 00:14:45,320 Speaker 1: and it has played out for us and we have 267 00:14:45,360 --> 00:14:47,960 Speaker 1: paid down the debt we took on to acquire Red Hat. 268 00:14:48,320 --> 00:14:50,240 Speaker 1: So but things like that you can do once in 269 00:14:50,280 --> 00:14:53,240 Speaker 1: a while. But you would absolutely expect us to be 270 00:14:53,520 --> 00:14:56,160 Speaker 1: continue to be acquisitive as we have been. So are 271 00:14:56,160 --> 00:14:58,520 Speaker 1: you saying we could see a bigger acquisition like that 272 00:14:58,600 --> 00:15:00,920 Speaker 1: again or are we going to be seeing you know, smaller. 273 00:15:01,240 --> 00:15:03,440 Speaker 1: The smaller ones are a short thing. The big one 274 00:15:03,440 --> 00:15:06,280 Speaker 1: will depend upon both the attractive opportunity. It has to 275 00:15:06,280 --> 00:15:09,000 Speaker 1: be something that is a creative to us, that aligns 276 00:15:09,000 --> 00:15:13,000 Speaker 1: with our strategy, and that creates significant synergy. So if 277 00:15:13,000 --> 00:15:16,000 Speaker 1: you get all those things in play, maybe where could 278 00:15:16,200 --> 00:15:20,000 Speaker 1: maybe some synergies Like what areas are you The areas 279 00:15:20,000 --> 00:15:22,360 Speaker 1: we are in are going to be straightforward, doesn't matter smaller. Big. 280 00:15:22,680 --> 00:15:25,960 Speaker 1: The areas were on is in software and in consulting, 281 00:15:26,440 --> 00:15:28,960 Speaker 1: and in both the areas within that in terms of 282 00:15:28,960 --> 00:15:33,480 Speaker 1: technology is around hybrid cloud, around security, around data and 283 00:15:33,560 --> 00:15:36,560 Speaker 1: AI and automation, all of which played to the current 284 00:15:36,600 --> 00:15:39,640 Speaker 1: economic themes of what's going on around the globe. So, 285 00:15:39,760 --> 00:15:43,960 Speaker 1: speaking of Red Hat, new CEO just named what changes 286 00:15:44,000 --> 00:15:46,320 Speaker 1: will the spring. This doesn't really bring any change. This 287 00:15:46,320 --> 00:15:50,320 Speaker 1: has been planned for a while. Um. Look, Paul Cormere 288 00:15:50,720 --> 00:15:53,560 Speaker 1: gave us four years since we announced the acquisition. He's 289 00:15:53,600 --> 00:15:55,560 Speaker 1: not gone, by the way, He's still here as Shairman, 290 00:15:56,320 --> 00:15:58,840 Speaker 1: and Matt has been in his wings for a long time. 291 00:15:59,680 --> 00:16:02,560 Speaker 1: Matt has worked for Pole for almost sixteen years, so 292 00:16:02,600 --> 00:16:06,360 Speaker 1: we shouldn't expect any significant change. And Matt was the 293 00:16:06,440 --> 00:16:10,320 Speaker 1: leader behind our open shift strategy behind containers for the 294 00:16:10,400 --> 00:16:13,640 Speaker 1: last three years. He's been leading products inside Red Hat, 295 00:16:13,840 --> 00:16:16,640 Speaker 1: so you should expect more of the same, more intensity, 296 00:16:16,800 --> 00:16:19,280 Speaker 1: more of a doubling down on the winners, but not 297 00:16:19,400 --> 00:16:22,360 Speaker 1: a significant change. So last good question. Obviously you've been 298 00:16:22,360 --> 00:16:24,440 Speaker 1: at IBM for so many years, but in the CEO 299 00:16:24,520 --> 00:16:26,280 Speaker 1: seat now for our for a couple of years and 300 00:16:26,640 --> 00:16:31,400 Speaker 1: through a pandemic, you know, what are your goals for 301 00:16:31,480 --> 00:16:35,040 Speaker 1: let's say the next five years. Number one is relevance 302 00:16:35,080 --> 00:16:37,040 Speaker 1: to our clients and that comes to the areas we 303 00:16:37,080 --> 00:16:38,680 Speaker 1: have picked. So we have picked our areas and we're 304 00:16:38,720 --> 00:16:41,680 Speaker 1: going to keep doubling down on them. Um, that results 305 00:16:41,680 --> 00:16:43,800 Speaker 1: in revenue growth for the company and results in cash 306 00:16:43,800 --> 00:16:46,840 Speaker 1: flow growth for the company, that's it returned to our investors. 307 00:16:47,400 --> 00:16:50,720 Speaker 1: Then apart from that, my goal is clear. We want 308 00:16:50,720 --> 00:16:52,880 Speaker 1: to build a platform that is going to stand the 309 00:16:52,880 --> 00:16:55,440 Speaker 1: test of time. The main Frame was a great platform. 310 00:16:55,760 --> 00:16:58,920 Speaker 1: Webster which was Java was a great platform. It's time 311 00:16:58,960 --> 00:17:00,800 Speaker 1: to build the next PLAT which is going to be 312 00:17:00,840 --> 00:17:04,199 Speaker 1: based on the hybrid cloud technologies from red At, but 313 00:17:04,320 --> 00:17:06,800 Speaker 1: also a lot of what IBM is innovating around that 314 00:17:06,800 --> 00:17:12,040 Speaker 1: that will provide a scream of revenue and relevance for two, three, 315 00:17:12,280 --> 00:17:16,120 Speaker 1: four decades. Maybe all right, all right, big promises will 316 00:17:16,160 --> 00:17:18,879 Speaker 1: We'll be watching. Arvin Christnas CEO of IBM, is so 317 00:17:18,920 --> 00:17:22,600 Speaker 1: great to see you here in person again, um, thank 318 00:17:22,640 --> 00:17:33,920 Speaker 1: you for stopping by. Whether it's named the Apple Watch 319 00:17:33,960 --> 00:17:37,120 Speaker 1: Pro or the Apple Watch Explorer Edition, Apple is set 320 00:17:37,160 --> 00:17:39,199 Speaker 1: to give the Apple Watch a Pro tier for the 321 00:17:39,240 --> 00:17:42,800 Speaker 1: first time this fall. This follows a strategy that has 322 00:17:42,800 --> 00:17:46,080 Speaker 1: brought the iPhone Pro, iPad Pro, map Book Pro, and 323 00:17:46,160 --> 00:17:49,600 Speaker 1: AirPods proto market over the last several years. The Pro 324 00:17:49,720 --> 00:17:51,800 Speaker 1: Apple Watch will come in the form of a new 325 00:17:51,880 --> 00:17:55,160 Speaker 1: model that's gaimed at extreme sports, athletes, and just about 326 00:17:55,200 --> 00:17:58,840 Speaker 1: anyone else simply seeking the most advanced Apple smart watch available. 327 00:17:59,640 --> 00:18:01,680 Speaker 1: The high and model will have a larger and more 328 00:18:01,720 --> 00:18:06,320 Speaker 1: shadow resistant display, a rugged metal casing, a body temperature sensor, 329 00:18:06,800 --> 00:18:10,080 Speaker 1: improved hiking and swim tracking, as well as better battery life. 330 00:18:10,720 --> 00:18:13,000 Speaker 1: Apple's new watch will likely come in a case size 331 00:18:13,040 --> 00:18:16,920 Speaker 1: between forty millimeters and forty seven millimeters, up from forty 332 00:18:17,000 --> 00:18:19,760 Speaker 1: five millimeters on the Apple Watch Series seven of today. 333 00:18:20,119 --> 00:18:22,479 Speaker 1: The new screen will also have about seven percent more 334 00:18:22,520 --> 00:18:26,600 Speaker 1: active screen area than the currently largest model. I also 335 00:18:26,640 --> 00:18:28,960 Speaker 1: think that the new high end device could replace the 336 00:18:28,960 --> 00:18:33,200 Speaker 1: Apple Watch Edition income in durable titanium. Given that a 337 00:18:33,240 --> 00:18:35,800 Speaker 1: bigger screen in higher end construction are in play here, 338 00:18:36,240 --> 00:18:38,760 Speaker 1: I'd guess that the new device will probably start at 339 00:18:38,760 --> 00:18:42,399 Speaker 1: between nine and a thousand dollars, approaching the price of 340 00:18:42,440 --> 00:18:46,000 Speaker 1: an iPhone Pro for those not looking to pay for 341 00:18:46,040 --> 00:18:48,560 Speaker 1: an Apple Watch at that price point. There's also a 342 00:18:48,560 --> 00:18:50,639 Speaker 1: new Apple Watch Series eight coming, as well as a 343 00:18:50,680 --> 00:18:53,640 Speaker 1: new low end Apple Watch SC. The Series eight will 344 00:18:53,640 --> 00:18:56,639 Speaker 1: have an updated display and that same body temperature reader, 345 00:18:56,880 --> 00:18:59,520 Speaker 1: while the new SC will have a faster processor than 346 00:18:59,560 --> 00:19:03,159 Speaker 1: it's predate sessor. I'm Mark German. This is power On. 347 00:19:06,119 --> 00:19:09,200 Speaker 1: You can subscribe to Mark's weekly power On newsletter at 348 00:19:09,240 --> 00:19:22,119 Speaker 1: Bloomberg dot com. Alright, meantime, gaming service provider Unity Software 349 00:19:22,400 --> 00:19:25,840 Speaker 1: is spending upwards of four point for billion dollars to 350 00:19:25,880 --> 00:19:29,320 Speaker 1: buy iron Source to help boot up its advertising technology. 351 00:19:29,560 --> 00:19:32,040 Speaker 1: They all stock deal sent sares of iron Source, which 352 00:19:32,080 --> 00:19:36,080 Speaker 1: went public vias back last year, soaring by nearly Shares 353 00:19:36,119 --> 00:19:39,960 Speaker 1: of Unity, on the other hand, fell by double digits today. 354 00:19:40,000 --> 00:19:42,680 Speaker 1: There you see it. But Bloomberg Intelligence sees the deal 355 00:19:42,720 --> 00:19:45,600 Speaker 1: as a real opportunity for Unity to expand its reach 356 00:19:45,680 --> 00:19:48,879 Speaker 1: in advertising, particularly in app mobile ads. Here to discuss 357 00:19:48,920 --> 00:19:51,879 Speaker 1: it all, Unity CEO John ric Tello, John, great to 358 00:19:51,920 --> 00:19:53,879 Speaker 1: have you with us. Look, John, you've been in the 359 00:19:53,920 --> 00:19:57,040 Speaker 1: gaming industry for decades. What do you have to say 360 00:19:57,040 --> 00:19:59,639 Speaker 1: to investors who are skeptical that this deal is actually 361 00:19:59,680 --> 00:20:03,439 Speaker 1: good for you? Well, UM, a couple of things. I 362 00:20:03,440 --> 00:20:07,399 Speaker 1: think we've set out a vision for precisely how um 363 00:20:07,440 --> 00:20:10,760 Speaker 1: this uh, this merger of this deal will help us 364 00:20:10,760 --> 00:20:14,840 Speaker 1: make sure that our customers can make better games and 365 00:20:15,440 --> 00:20:18,120 Speaker 1: um and make a better business. And when we improve 366 00:20:18,200 --> 00:20:20,040 Speaker 1: the business of our customers, we're going to do well. 367 00:20:20,600 --> 00:20:25,320 Speaker 1: We also set out three very specific synergies where we're 368 00:20:25,320 --> 00:20:28,760 Speaker 1: going to realize benefit right to the bottom line. And 369 00:20:29,240 --> 00:20:33,680 Speaker 1: we framed out that we expect to see EBIT run 370 00:20:33,760 --> 00:20:37,119 Speaker 1: rate in million dollars. That's a lot for company of 371 00:20:37,119 --> 00:20:41,840 Speaker 1: our scale, and UM we really gave it to them precisely. 372 00:20:41,920 --> 00:20:44,439 Speaker 1: That look M and A. In a day when the 373 00:20:44,480 --> 00:20:46,480 Speaker 1: market trades down, you know, there's a lot of things 374 00:20:46,480 --> 00:20:48,880 Speaker 1: that happened. My job is not so much to think 375 00:20:48,920 --> 00:20:51,720 Speaker 1: about my stock trade do tomorrow, but to make sure 376 00:20:51,760 --> 00:20:54,200 Speaker 1: that we're building a company that is going to be 377 00:20:54,640 --> 00:20:57,879 Speaker 1: super valuable in the long term. And as investors, you know, 378 00:20:57,920 --> 00:21:00,760 Speaker 1: get comfortable and understand our story, but also see it 379 00:21:00,800 --> 00:21:03,960 Speaker 1: in the results. I have confidence that will be fun. 380 00:21:04,680 --> 00:21:09,480 Speaker 1: So how maig An impacted Apple's ad tracking privacy changes 381 00:21:09,680 --> 00:21:14,720 Speaker 1: have here not at all actually, so UM no, these 382 00:21:14,800 --> 00:21:19,040 Speaker 1: were well understood well before, so we considered UM you know, 383 00:21:19,160 --> 00:21:24,080 Speaker 1: looking at an iron source and UM as we've reported, UH, 384 00:21:24,160 --> 00:21:29,200 Speaker 1: there is durability and long term viability to UM the 385 00:21:29,200 --> 00:21:32,440 Speaker 1: io S side of UM gaming advertising. I mean like 386 00:21:32,560 --> 00:21:35,480 Speaker 1: it's a huge market. UM. I mean about three to 387 00:21:35,560 --> 00:21:39,160 Speaker 1: five percent of applications are paid for by the consumer 388 00:21:39,280 --> 00:21:43,840 Speaker 1: ninety five or consumers don't add UM hence the need 389 00:21:43,880 --> 00:21:47,280 Speaker 1: for advertisement. Here's a real important trick. And almost no 390 00:21:47,440 --> 00:21:51,560 Speaker 1: industry do users or players or viewers think that advertising 391 00:21:51,640 --> 00:21:54,480 Speaker 1: is a positive. One of the only industries I'm aware 392 00:21:54,520 --> 00:21:57,840 Speaker 1: of in the gaming industry, mobile gaming in particular, they 393 00:21:57,880 --> 00:22:00,000 Speaker 1: tell us time and again that they think the advertising 394 00:22:00,040 --> 00:22:02,600 Speaker 1: thing is positive. And not only do they say it, 395 00:22:02,640 --> 00:22:05,600 Speaker 1: we can prove it because games with advertising, um, when 396 00:22:05,640 --> 00:22:08,840 Speaker 1: they're tested against those without, achieve higher levels of engagement 397 00:22:09,320 --> 00:22:12,040 Speaker 1: and what means they're playing more. And so we know 398 00:22:12,160 --> 00:22:14,199 Speaker 1: this is true. I think it's it ought to be 399 00:22:14,240 --> 00:22:16,320 Speaker 1: the envy of everybody in the advertising world. And of 400 00:22:16,359 --> 00:22:19,600 Speaker 1: course it's performance advertising. So our customers what they get 401 00:22:19,640 --> 00:22:22,720 Speaker 1: from us is return on investment. Maybe they want to 402 00:22:22,760 --> 00:22:25,480 Speaker 1: spend less and sometimes against the recess and etcetera, but 403 00:22:25,520 --> 00:22:28,119 Speaker 1: they don't want less r A I. And that's what 404 00:22:28,160 --> 00:22:33,240 Speaker 1: we're looking now. Unity did have a round of layoffs recently. 405 00:22:33,320 --> 00:22:37,880 Speaker 1: You cut your guidance for the full year. Are those 406 00:22:38,200 --> 00:22:41,520 Speaker 1: kind of issues behind you given the macro economic headwins 407 00:22:41,520 --> 00:22:45,639 Speaker 1: we see ahead for you know, every company. Well, first off, 408 00:22:45,680 --> 00:22:47,600 Speaker 1: I mean, let let me just talk a little bit 409 00:22:47,640 --> 00:22:50,879 Speaker 1: about the layoffs, because um, I think they were somewhat 410 00:22:50,880 --> 00:22:53,480 Speaker 1: blown out of proportion, not not by by you, Emily, 411 00:22:53,520 --> 00:22:55,800 Speaker 1: but some of the press. Um. We're a company of 412 00:22:55,800 --> 00:22:59,399 Speaker 1: about sixty people. We eliminated about two hundred and fifty 413 00:22:59,440 --> 00:23:02,880 Speaker 1: positions and we offered half of them new roles for 414 00:23:03,040 --> 00:23:05,000 Speaker 1: you know that would be a better career opportunity for 415 00:23:05,000 --> 00:23:07,040 Speaker 1: inside of Unity and outside of Unity or inside of 416 00:23:07,119 --> 00:23:10,040 Speaker 1: university what they're doing previously. And then for each and 417 00:23:10,080 --> 00:23:13,000 Speaker 1: every one of those individuals. Look, I I take it. 418 00:23:13,240 --> 00:23:15,280 Speaker 1: You know it's important to make sure that everyone is 419 00:23:15,320 --> 00:23:18,600 Speaker 1: treated well, and we treated him super well. Um. A 420 00:23:19,080 --> 00:23:20,719 Speaker 1: loss of that number of jobs, a covery of our 421 00:23:20,760 --> 00:23:23,840 Speaker 1: scale through the focus. Look, you know, we're not the 422 00:23:23,880 --> 00:23:26,440 Speaker 1: in theory of government where everything lives forever. Some things 423 00:23:26,440 --> 00:23:29,639 Speaker 1: are working better than others and allow we reallocate to 424 00:23:29,760 --> 00:23:32,919 Speaker 1: optimize our our approach to market and the opportunity in 425 00:23:32,960 --> 00:23:36,280 Speaker 1: front of us. So Um, Look, I think it's always 426 00:23:36,320 --> 00:23:39,400 Speaker 1: unfortunate when even one person loses their job. What I'm 427 00:23:39,440 --> 00:23:40,800 Speaker 1: proud of is we get it in a way that 428 00:23:40,840 --> 00:23:43,600 Speaker 1: I think was as positive for those involved as it 429 00:23:43,640 --> 00:23:46,040 Speaker 1: could be. Everyone was given an opportunity to talk to 430 00:23:46,119 --> 00:23:47,640 Speaker 1: us about what they might want to do, and half 431 00:23:47,680 --> 00:23:49,600 Speaker 1: of them were able to offer them something, and a 432 00:23:49,600 --> 00:23:51,280 Speaker 1: lot of them are gonna end up right back at 433 00:23:51,359 --> 00:23:53,960 Speaker 1: Unity because this is a great place to work. So 434 00:23:54,800 --> 00:23:57,000 Speaker 1: I know you're expecting this deal to generate a billion 435 00:23:57,040 --> 00:24:03,120 Speaker 1: dollars in adjusted earnings. Will that still happen if there's 436 00:24:03,160 --> 00:24:08,679 Speaker 1: a recession ahead? And do you think a recession is inevitable? Well, look, 437 00:24:09,800 --> 00:24:11,560 Speaker 1: I think one of the things that always happens anytime 438 00:24:11,560 --> 00:24:15,199 Speaker 1: where business show start talking about the FED is the 439 00:24:15,200 --> 00:24:19,320 Speaker 1: only thing that's um, truly in great supply is pundits. 440 00:24:19,400 --> 00:24:21,280 Speaker 1: And so you know, I don't want to get into, 441 00:24:21,480 --> 00:24:24,000 Speaker 1: you know, pictuit of trying to be a pundit. You know, 442 00:24:24,280 --> 00:24:27,440 Speaker 1: there's definitely some you know, some evidence of a slowdown. 443 00:24:27,480 --> 00:24:31,240 Speaker 1: Whether we'll register is a full scale recession. But here's 444 00:24:31,240 --> 00:24:33,240 Speaker 1: something you know, I don't know, but I will point 445 00:24:33,240 --> 00:24:37,080 Speaker 1: out a couple of things. Um. Yeah, certainly economic cycles 446 00:24:37,119 --> 00:24:39,520 Speaker 1: affect businesses, But if you go back over the last 447 00:24:39,560 --> 00:24:42,040 Speaker 1: twenty to thirty years, you look at each and every 448 00:24:42,040 --> 00:24:45,080 Speaker 1: time we felt recession. Um, one of the interviews that 449 00:24:45,200 --> 00:24:48,120 Speaker 1: fared the best is the gaming industry. You know, lots 450 00:24:48,160 --> 00:24:50,880 Speaker 1: of reasons for that, but it's a relatively inexpensive way 451 00:24:50,880 --> 00:24:54,080 Speaker 1: to entertain yourself and It's one thing to get into 452 00:24:54,119 --> 00:24:56,080 Speaker 1: a game and see and that and end up buying 453 00:24:56,080 --> 00:24:58,560 Speaker 1: a you know, a one dollar in that purchase. It's 454 00:24:58,560 --> 00:25:00,720 Speaker 1: not maybe the same thing as buying an new F 455 00:25:00,880 --> 00:25:05,000 Speaker 1: one pickup truck. And the other issue is this advertising 456 00:25:05,040 --> 00:25:08,639 Speaker 1: media is performance based, so to agree that, you know, 457 00:25:08,840 --> 00:25:12,080 Speaker 1: you know, recessionary things happen, they're always going to buffet industries. 458 00:25:12,280 --> 00:25:14,320 Speaker 1: I think this is an industry. This is a sector 459 00:25:14,359 --> 00:25:17,720 Speaker 1: that we buffeted far less sell. So we feel confident 460 00:25:17,800 --> 00:25:20,600 Speaker 1: in what we we outlined today. We wouldn't upset it um. 461 00:25:20,640 --> 00:25:23,120 Speaker 1: You know, crystal balls are never perfect, but we think 462 00:25:23,160 --> 00:25:25,800 Speaker 1: we've got the right collection of assets and in this 463 00:25:25,960 --> 00:25:30,760 Speaker 1: instance we're strengthening our hand with in combination with Unity, 464 00:25:30,960 --> 00:25:33,600 Speaker 1: we can and iron source. If we can help our 465 00:25:33,600 --> 00:25:37,679 Speaker 1: customers make better content and have a better business, we 466 00:25:37,720 --> 00:25:40,640 Speaker 1: know there's long term success and not. All right, well, 467 00:25:40,640 --> 00:25:43,840 Speaker 1: thank you for giving us your view into your crystal ball. 468 00:25:44,440 --> 00:25:46,679 Speaker 1: H John, Always good to have you here, John wick 469 00:25:46,720 --> 00:25:51,639 Speaker 1: A Tello CEO of Unity, Appreciate you stopping by all right. 470 00:25:52,040 --> 00:25:55,520 Speaker 1: Bill Gates is donating twenty billion dollars to the Bill 471 00:25:55,560 --> 00:25:58,080 Speaker 1: and Melinda Gates Foundation this month. The foundation has a 472 00:25:58,119 --> 00:26:01,119 Speaker 1: new goal of increasing its annual giving by fIF to 473 00:26:01,280 --> 00:26:04,200 Speaker 1: nine billion dollars a year. Gates's latest donation brings the 474 00:26:04,200 --> 00:26:22,200 Speaker 1: foundation's total endowment to about seventy billion dollars. The rise 475 00:26:22,240 --> 00:26:24,760 Speaker 1: and Fall of Three Arrows Capital is shedding light on 476 00:26:24,760 --> 00:26:28,280 Speaker 1: the obscure practices of some crypto firms they bet on 477 00:26:28,400 --> 00:26:31,440 Speaker 1: prices only going up. Known as one of the largest 478 00:26:31,480 --> 00:26:34,800 Speaker 1: crypto hedge funds in the world, Three a C invested 479 00:26:35,200 --> 00:26:37,600 Speaker 1: in some of the best known blockchain startups. But when 480 00:26:37,640 --> 00:26:41,080 Speaker 1: crypto prices turned this year, Three a C unraveled and 481 00:26:41,119 --> 00:26:44,560 Speaker 1: may have even accelerated the decline. That is the topic 482 00:26:44,800 --> 00:26:48,639 Speaker 1: of this week's Bloomberg Big Take title titled When Hold 483 00:26:49,000 --> 00:26:52,719 Speaker 1: Spelled Total Failed The Collapse of Three Arrows joinings now 484 00:26:52,720 --> 00:26:55,679 Speaker 1: are Bloomer Crypto Reporter movie ou Shan, who co wrote 485 00:26:56,000 --> 00:26:59,119 Speaker 1: this p so talk to us about the draw the 486 00:26:59,200 --> 00:27:03,320 Speaker 1: most dramatic twist and turns in this fall. I think 487 00:27:03,400 --> 00:27:07,400 Speaker 1: the most dramatic part is that how a very well 488 00:27:07,480 --> 00:27:10,880 Speaker 1: known hedge fund in crypto just felt all of a sudden. 489 00:27:11,119 --> 00:27:13,800 Speaker 1: I think there is such a surprise to so many 490 00:27:14,320 --> 00:27:17,719 Speaker 1: um unlike a lot of our previous fail us in crypto, 491 00:27:17,800 --> 00:27:20,240 Speaker 1: that people in cy crypto in general were aware of. 492 00:27:21,480 --> 00:27:25,320 Speaker 1: So did the collapse of Three Arrows really or cause 493 00:27:25,760 --> 00:27:30,280 Speaker 1: or lead to potentially the crypto broader crypto contagion? What 494 00:27:30,359 --> 00:27:33,520 Speaker 1: are we sing so far? There's a definitely contention in 495 00:27:33,560 --> 00:27:36,480 Speaker 1: crypto market right now. We're seeing um some of their 496 00:27:36,600 --> 00:27:41,440 Speaker 1: biggest counterparties, for example, uh, the Canada based Voyager Digital 497 00:27:41,800 --> 00:27:44,960 Speaker 1: they announced bankrupt as a result of the exposure to 498 00:27:45,160 --> 00:27:49,520 Speaker 1: See Arrows who borrow tons of money from Voyager and 499 00:27:49,720 --> 00:27:55,119 Speaker 1: was not able to fulfill the obligations. Talk to us 500 00:27:55,119 --> 00:27:57,359 Speaker 1: about the role of transparency here, I mean, were they 501 00:27:57,400 --> 00:27:59,760 Speaker 1: really only betting that crypto was going to go up? 502 00:28:00,040 --> 00:28:04,119 Speaker 1: What hedge fund does that? That's that's I think that 503 00:28:04,320 --> 00:28:06,840 Speaker 1: one of the most things I my personally find very 504 00:28:06,840 --> 00:28:10,879 Speaker 1: surprising throughout the reporting part of this story. It's just 505 00:28:10,960 --> 00:28:14,400 Speaker 1: that these two people who are formal for X traders, 506 00:28:14,400 --> 00:28:19,399 Speaker 1: They're supposed to be very intelligent, sophisticated traders in crypto, 507 00:28:19,480 --> 00:28:24,119 Speaker 1: but turned out literally every single person I talked to 508 00:28:24,119 --> 00:28:27,200 Speaker 1: told me there's the biggest force in crypto and they 509 00:28:27,200 --> 00:28:31,240 Speaker 1: believe this kind of theory of superpycho that crypto would 510 00:28:31,320 --> 00:28:35,359 Speaker 1: never fall like other markets, and they put on big 511 00:28:35,400 --> 00:28:39,560 Speaker 1: best on every single project that invested in. So how 512 00:28:39,560 --> 00:28:41,960 Speaker 1: does the crypto market move on from this? Obviously it's 513 00:28:42,000 --> 00:28:44,440 Speaker 1: not just three arrows. You know, we've seen the collapse 514 00:28:44,520 --> 00:28:48,640 Speaker 1: of of terra Um and it's really scared off a 515 00:28:48,720 --> 00:28:52,920 Speaker 1: lot of investors. Yeah. I think, as you said, this 516 00:28:53,160 --> 00:28:56,400 Speaker 1: is the transparency issues, and there's a trust crisis in 517 00:28:56,480 --> 00:28:59,520 Speaker 1: crypto right now. So I think moving forward, um, I 518 00:28:59,560 --> 00:29:03,360 Speaker 1: think the market this space really needs to be more transparent. 519 00:29:03,640 --> 00:29:06,400 Speaker 1: For example, all the speak lenders they need to you know, 520 00:29:06,440 --> 00:29:09,760 Speaker 1: communicate with each other talking about who's borrowing money to 521 00:29:09,880 --> 00:29:12,920 Speaker 1: whom to make sure all of their contemp parties are 522 00:29:12,960 --> 00:29:16,360 Speaker 1: going too big to certain extend that can have more 523 00:29:16,600 --> 00:29:20,520 Speaker 1: impact across the market. All right, Well, I'm sure that 524 00:29:20,600 --> 00:29:23,560 Speaker 1: we will see more tumult ahead. Bloomberg's movie out Shan 525 00:29:23,880 --> 00:29:36,120 Speaker 1: on this week's Bloomberg Big Take, Thank you, Welcome back 526 00:29:36,120 --> 00:29:39,840 Speaker 1: to Bloomberg Technology. Netflix has chosen Microsoft as its tech 527 00:29:39,880 --> 00:29:42,320 Speaker 1: and sales partner for its new AD supported streaming service 528 00:29:42,360 --> 00:29:45,680 Speaker 1: in hopes of advancing its efforts to reignite subscriber and 529 00:29:45,720 --> 00:29:49,120 Speaker 1: revenue growth. Joining us now Bloomberg's Lucas Shaw. So, Lucas, 530 00:29:49,120 --> 00:29:53,200 Speaker 1: what are we learning about this? New tier if you will. Well, 531 00:29:53,320 --> 00:29:56,200 Speaker 1: Netflix still isn't saying an awful lot about how it 532 00:29:56,240 --> 00:29:58,520 Speaker 1: will work for its customers. We don't know if they'll 533 00:29:58,520 --> 00:30:00,760 Speaker 1: be ads before a shows starts, in the middle of 534 00:30:00,800 --> 00:30:02,920 Speaker 1: a show, both of them. We don't know how many ads. 535 00:30:03,280 --> 00:30:05,840 Speaker 1: We don't know the price of the ad tier. The 536 00:30:05,960 --> 00:30:07,640 Speaker 1: only thing we know at this point is that they're 537 00:30:07,680 --> 00:30:10,560 Speaker 1: relying on Microsoft for a lot of the kind of 538 00:30:10,600 --> 00:30:13,280 Speaker 1: the back end work, not anything that the customer will see. 539 00:30:13,280 --> 00:30:15,920 Speaker 1: But it will be Microsoft sales team that sells the ads, 540 00:30:15,960 --> 00:30:18,440 Speaker 1: and it will also be Microsoft technology that will handle 541 00:30:18,720 --> 00:30:21,120 Speaker 1: the serving of the ads that we all see. It's 542 00:30:21,120 --> 00:30:23,360 Speaker 1: a big win for Microsoft, which is not as big 543 00:30:23,360 --> 00:30:26,840 Speaker 1: a player in the video ad space as say Google 544 00:30:27,320 --> 00:30:31,080 Speaker 1: or Comcast. Right, it was news to me that Microsoft 545 00:30:31,240 --> 00:30:36,360 Speaker 1: had a bursioning ad service. You know, how is this 546 00:30:36,440 --> 00:30:38,959 Speaker 1: a step towards some broader goal here of you know, 547 00:30:39,000 --> 00:30:42,840 Speaker 1: taking on some of its competitors. Yeah, I mean Microsoft, 548 00:30:42,920 --> 00:30:45,080 Speaker 1: I think said that last year it's ad business was 549 00:30:45,200 --> 00:30:47,640 Speaker 1: about ten billion dollars, which is as big as some 550 00:30:47,720 --> 00:30:50,000 Speaker 1: of the big kind of the TV based media companies. 551 00:30:50,040 --> 00:30:52,440 Speaker 1: Obviously not as big as a as a Google or Facebook. 552 00:30:52,920 --> 00:30:55,760 Speaker 1: Um it acquired Xander, which is this AD business that 553 00:30:55,840 --> 00:30:58,160 Speaker 1: A T and T had had built up last year 554 00:30:58,200 --> 00:31:00,280 Speaker 1: in a deal that was estimated about a billion dollars. 555 00:31:00,520 --> 00:31:03,680 Speaker 1: Nosanders not say the best in class, but is did 556 00:31:03,760 --> 00:31:06,920 Speaker 1: try to compete with Google and Facebook obviously has LinkedIn, 557 00:31:07,080 --> 00:31:10,240 Speaker 1: and so it's building a pretty robust AD business and 558 00:31:10,600 --> 00:31:13,920 Speaker 1: wants to compete with players like Amazon and Google and Facebook. 559 00:31:14,520 --> 00:31:17,040 Speaker 1: So here's the question. I mean we've heard over and 560 00:31:17,080 --> 00:31:19,720 Speaker 1: over again. Content is king, it is all about the content. 561 00:31:20,240 --> 00:31:22,640 Speaker 1: Is it really all about the content? Or is an 562 00:31:22,680 --> 00:31:26,480 Speaker 1: AD supported service that is somewhat cheaper really going to 563 00:31:26,520 --> 00:31:29,120 Speaker 1: make a difference when it comes to racking up subscribers. 564 00:31:29,920 --> 00:31:32,480 Speaker 1: I think if your Netflix right now, you now have 565 00:31:33,200 --> 00:31:36,719 Speaker 1: about two twenty million customers. They say that each one 566 00:31:36,760 --> 00:31:39,160 Speaker 1: of those subscribers is really like say three and a 567 00:31:39,240 --> 00:31:42,920 Speaker 1: half people, So they're already at like six seven hundred 568 00:31:42,920 --> 00:31:45,600 Speaker 1: million people who are using their service. There's only so 569 00:31:45,640 --> 00:31:47,640 Speaker 1: many people who are going to pay for it. This 570 00:31:47,720 --> 00:31:50,000 Speaker 1: ad here helps them in a couple fronts. One is 571 00:31:50,280 --> 00:31:53,000 Speaker 1: it could appeal to some people who maybe don't want 572 00:31:53,040 --> 00:31:55,200 Speaker 1: to spend quite as much money. And in some of 573 00:31:55,240 --> 00:31:58,360 Speaker 1: these cases, these AD supported services actually generate more money 574 00:31:58,360 --> 00:32:00,600 Speaker 1: because people are paying a monthly fee and if you 575 00:32:00,640 --> 00:32:02,640 Speaker 1: can make a lot of money from the advertising. You know, 576 00:32:02,680 --> 00:32:06,120 Speaker 1: Netflix is associated with quality programming. They need to both 577 00:32:06,240 --> 00:32:09,000 Speaker 1: keep find ways to keep increasing the customer base and 578 00:32:09,080 --> 00:32:11,120 Speaker 1: make more money from those people. This could do both. 579 00:32:11,160 --> 00:32:13,400 Speaker 1: It's the same reason that they're crying the kind of 580 00:32:13,520 --> 00:32:15,800 Speaker 1: what they call the crackdown and password sharing, because if 581 00:32:15,800 --> 00:32:18,640 Speaker 1: they can get other users to pay more who are 582 00:32:18,680 --> 00:32:21,959 Speaker 1: already using Netflix, that's a win for them. All Right, 583 00:32:22,120 --> 00:32:25,480 Speaker 1: Lucas Shaw, thank you for your reporting here. We'll keep 584 00:32:25,520 --> 00:32:28,680 Speaker 1: watching meantime. Want to end the show with some news 585 00:32:28,720 --> 00:32:32,440 Speaker 1: out of Tesla. The EV maker's AI and auto pilot 586 00:32:32,560 --> 00:32:36,000 Speaker 1: chief says he's leaving the company. Ed Ludlow back here 587 00:32:36,040 --> 00:32:38,120 Speaker 1: with more. Obviously there's a critical role. Yes, this is 588 00:32:38,120 --> 00:32:41,960 Speaker 1: Andre car Party. He's been at Testa since two seventeen, 589 00:32:41,960 --> 00:32:43,840 Speaker 1: but he went on leave in March, and you know 590 00:32:43,880 --> 00:32:45,760 Speaker 1: Sour told me this was a guy who didn't miss 591 00:32:45,760 --> 00:32:48,320 Speaker 1: thedair work for five years. He went on leave. He's 592 00:32:48,320 --> 00:32:51,400 Speaker 1: tweeted that he's leaving Tesla. You know, his strong capable 593 00:32:51,480 --> 00:32:54,600 Speaker 1: hands also pilot. The work tests done on AI to 594 00:32:54,760 --> 00:32:57,480 Speaker 1: power that camera based technology has really come a long way. 595 00:32:57,920 --> 00:32:59,680 Speaker 1: But he's doing something new. You just don't know. So 596 00:33:00,760 --> 00:33:02,880 Speaker 1: do we know if this had anything to do with 597 00:33:03,360 --> 00:33:06,200 Speaker 1: disagreements or a de prioritization of like the work that 598 00:33:06,240 --> 00:33:09,320 Speaker 1: he's doing. We don't you remember last week we reported 599 00:33:09,480 --> 00:33:13,920 Speaker 1: that tesselaid off around two hundred and thirty autopilot data labelers, 600 00:33:14,000 --> 00:33:16,560 Speaker 1: you know, as part of the big layoffs program. They 601 00:33:16,560 --> 00:33:18,520 Speaker 1: have made progress in this area. They're working on their 602 00:33:18,560 --> 00:33:22,360 Speaker 1: own chips, their own supercomputer dojo to help the AI 603 00:33:22,520 --> 00:33:25,720 Speaker 1: trained in your networks to improve this technology. But he's 604 00:33:25,720 --> 00:33:27,320 Speaker 1: been on leave. We don't know what's going on behind 605 00:33:27,360 --> 00:33:29,880 Speaker 1: the scenes. And now he's cool time on his Tesla Chris, 606 00:33:29,880 --> 00:33:32,280 Speaker 1: So just another problem for Elon Musk another one. But 607 00:33:32,360 --> 00:33:36,240 Speaker 1: Elon tweeted he's grateful for the time he had. You 608 00:33:36,280 --> 00:33:39,080 Speaker 1: know what, what has Elon said so far about the 609 00:33:39,160 --> 00:33:42,800 Speaker 1: Twitter suit? Have we heard from him? He tweeted, oh 610 00:33:42,960 --> 00:33:47,560 Speaker 1: the irony law. I gotta get a loll on the 611 00:33:47,640 --> 00:33:50,520 Speaker 1: this is cutting edge. Look, how are we expecting this 612 00:33:50,760 --> 00:33:53,800 Speaker 1: story to progress, you know, in terms of moving through 613 00:33:53,800 --> 00:33:57,200 Speaker 1: the courts? Um, when are we going to see another development? 614 00:33:57,200 --> 00:33:59,080 Speaker 1: We've seen Twitter salvo. When are we going to see 615 00:33:59,080 --> 00:34:02,760 Speaker 1: a salvo to school of thoughts must counter suits. It 616 00:34:02,800 --> 00:34:05,600 Speaker 1: could go to trial move very very quickly, but we're 617 00:34:05,600 --> 00:34:08,880 Speaker 1: going to have a very protracted legal dispute. It's already 618 00:34:08,920 --> 00:34:11,400 Speaker 1: been protracted, I mean in court for a year's some 619 00:34:11,560 --> 00:34:14,480 Speaker 1: are bracing for really, so what happens to Twitter in 620 00:34:14,560 --> 00:34:16,799 Speaker 1: that time? I mean, well uncertain. This is a real 621 00:34:17,080 --> 00:34:20,400 Speaker 1: financial headwind for them. It's a financial and public relations headwind, 622 00:34:20,600 --> 00:34:24,000 Speaker 1: but headwin for employees. I mean they're trying to recruit people, 623 00:34:24,040 --> 00:34:26,279 Speaker 1: get people to stay at the company, and keep the 624 00:34:26,320 --> 00:34:28,840 Speaker 1: trains running right exactly so, And that was part of 625 00:34:28,840 --> 00:34:32,560 Speaker 1: what Twitter CEO paragagh Worl said two employees on Wednesday. 626 00:34:32,640 --> 00:34:36,480 Speaker 1: We're facing the changing economy and this court case. Brace yourself, 627 00:34:36,480 --> 00:34:38,200 Speaker 1: what are we see? What are we hearing inside the 628 00:34:38,200 --> 00:34:41,720 Speaker 1: company from employees? I know you're talking a lot of people. 629 00:34:41,800 --> 00:34:44,680 Speaker 1: They're not that impressed, right. They feel like Twitter's management 630 00:34:44,680 --> 00:34:46,320 Speaker 1: have been on the back foot this whole time, that 631 00:34:46,360 --> 00:34:49,040 Speaker 1: they should have been more proactive. That Elon must All 632 00:34:49,120 --> 00:34:51,480 Speaker 1: Hands a few weeks ago just was kind of the 633 00:34:51,960 --> 00:34:53,320 Speaker 1: I seen on the case on the right word the 634 00:34:53,360 --> 00:34:56,160 Speaker 1: final straw for a lot of employees. And they've they've 635 00:34:56,160 --> 00:34:59,920 Speaker 1: frozen hiring, they've cut projects. It's not happy as happy 636 00:35:00,000 --> 00:35:02,480 Speaker 1: a place to work right now, but there's fighting talk 637 00:35:02,520 --> 00:35:05,239 Speaker 1: coming out for management and the board. So sometimes fighting 638 00:35:05,280 --> 00:35:08,280 Speaker 1: talk gets you going fighting words. Indeed, all right about 639 00:35:08,320 --> 00:35:11,919 Speaker 1: the thank you? Well that does it. For the edition 640 00:35:11,920 --> 00:35:14,280 Speaker 1: of Bloomberg Technology tomorrow, we're gonna be joined by Maven 641 00:35:14,320 --> 00:35:16,880 Speaker 1: Clinic CEO Kate Rider. She's going to talk about the 642 00:35:16,960 --> 00:35:20,439 Speaker 1: role Tell Ahealth will play in the state by state 643 00:35:20,480 --> 00:35:23,480 Speaker 1: debate since Row versus Wade was overturned. And don't forget 644 00:35:23,520 --> 00:35:25,760 Speaker 1: to check out our podcast. You can find it every 645 00:35:25,840 --> 00:35:29,600 Speaker 1: day wherever you get your podcast on the terminal, Apple, Spotify, 646 00:35:29,719 --> 00:35:33,759 Speaker 1: I Heart, Google Play and more. I'm emily checking San Francisco. 647 00:35:33,920 --> 00:35:34,799 Speaker 1: This is Bloomberg