Speaker 1: From the heart of where innovation, money and power colli
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Emily changing San Francisco and this is
Speaker 1: Bloomberg Technology. Coming up in the next hour, stocks a
Speaker 1: buckle amidst another shockingly high inflation report, investors wondering if
Speaker 1: the FED will get even more aggressive. We'll talk about
Speaker 1: what it all means for tech ahead of a key
Speaker 1: earning season. Plus an exclusive conversation with IBM CEO Arvin Krishna.
Speaker 1: What's his read on the economy and his view on
Speaker 1: the supply chain? Will ask all that and more coming up,
Speaker 1: and the first ads on Netflix will be brought to
Speaker 1: you by Microsoft. We're gonna tell you about the new
Speaker 1: deal between the two tech powerhouses entering the at business.
Speaker 1: So what does another round of high inflation data mean
Speaker 1: for tech specifically? What with earning season about to get underway.
Speaker 1: I want to bring in Liz Young of so Far
Speaker 1: to discuss. So, Liz, what are you expecting this earning season?
Speaker 1: Is every day going to be like Judgment Day for
Speaker 1: the next six weeks? I think it might be. And
Speaker 1: this isn't just tech specific. These comments but I think
Speaker 1: earning season, what needs to happen is that we see
Speaker 1: revisions downward. Usually things happen in a sequence, and as
Speaker 1: we've already seen, the market has broken. The market has
Speaker 1: sent us a signal that there's rough waters ahead, whether
Speaker 1: that be in corporate America or in the economy. Now
Speaker 1: we need earnings to kind of meet that signal. And
Speaker 1: right now we still have earnings expectations through the end
Speaker 1: of the year of ten to eleven percent growth, and
Speaker 1: in three there's still pretty lofty expectations as well. I
Speaker 1: think that as profit margins get pinched and ceo s
Speaker 1: come out and talk to us about their Q two earnings,
Speaker 1: they may still have had a strong Q two, but
Speaker 1: a guidance going forward is likely going to take a
Speaker 1: hit from inflation, from the tight labor market, from the
Speaker 1: increasing costs that they've seen over the past six months.
Speaker 1: But what about tech in particular? Why is tech or
Speaker 1: has tech been underperforming the last several weeks? Well, the
Speaker 1: last several weeks I think have been characterized by a
Speaker 1: market that's trying to figure out what the biggest problem
Speaker 1: is and what what their biggest fear is. And we've
Speaker 1: had a lot of trading that has been very rate related,
Speaker 1: and tech is so sensitive to the rate environment that
Speaker 1: as we continue to get data that says, you know what,
Speaker 1: the FETE is going to have to keep going because
Speaker 1: inflation is still such a big enemy. That hurts tech shares,
Speaker 1: that hurts those high growth shares. There have been some
Speaker 1: mini rallies in between. We've seen some attempts at a
Speaker 1: rally in tech and in some of those growth names,
Speaker 1: but there's been a lot of giveback as soon as
Speaker 1: the market realizes that the FETE is still on this bandwagon.
Speaker 1: Regardless of the fact that we may have increased recession
Speaker 1: fears over the next twelve months, in the near term,
Speaker 1: the FED is still going to fight that growth narrative.
Speaker 1: So let's talk about the signals you're seeing now. Based
Speaker 1: on what you're seeing is a recession and inevitable. Well, look,
Speaker 1: I wouldn't say anything is for sure. Nothing is ever guaranteed.
Speaker 1: At some point, there will be another recession. That's just
Speaker 1: how the business cycle works. However, what I will say
Speaker 1: is that some of the signals that we look at,
Speaker 1: such as yield curban versions, now we've gotten a deeper
Speaker 1: yield curban version down twenty one basis points as of today,
Speaker 1: which is the biggest in version we've seen so far,
Speaker 1: aside from some of those minian versions earlier in the year.
Speaker 1: That's a pretty big signal, and that's the market saying
Speaker 1: that we're afraid that this hiking cycle is going to
Speaker 1: take us into recession. Here's what I would say about
Speaker 1: a recession. Now, we may find out at the end
Speaker 1: of July that we have another negative GDP print for
Speaker 1: the second quarter, which would be technically a recession, but
Speaker 1: it's an odd one, right. It's one where the labor
Speaker 1: market is so strong, We're still creating jobs, We've got
Speaker 1: a consumer that's still spending and maybe as frustrated by inflation,
Speaker 1: but hasn't stopped spending because of it. So it would
Speaker 1: be a recession that didn't hurt demand to appoint enough
Speaker 1: to bring that inflation number down. Now, what I think
Speaker 1: the market is grappling with is is there a classic
Speaker 1: recession coming at some point? Perhaps that does actually affect
Speaker 1: the labor market, does bring demand down, but it takes
Speaker 1: care of that inflation problem. So it's the path to
Speaker 1: fighting this inflation monster that we're all trying to figure out.
Speaker 1: Speaking of that monster. How much of a change is
Speaker 1: so far seeing and spending and borrowing habits right now?
Speaker 1: Do you see customers being resilient in their spending or
Speaker 1: are savings shrinking? Well, look, I mean with our bank
Speaker 1: charter earlier in the year, there's obviously a difference that
Speaker 1: we're seeing, but it's the spending patterns are pretty consider
Speaker 1: stint across consumers broadly. Right, everybody is still spending, They've
Speaker 1: just changed their habits. So what you find is, and
Speaker 1: this is a broad consumer statement, what you find is
Speaker 1: maybe consumers have pulled back on certain items, and we
Speaker 1: heard this earlier in the year from some big retailers.
Speaker 1: Maybe they've pulled back on certain items but started to
Speaker 1: spend on other items. So you're gonna see, naturally in
Speaker 1: a business cycle, a contraction and spending endurable goods, but
Speaker 1: other spending has still held up. We're still seeing in
Speaker 1: all consumers the desire to travel. We're still seeing airlines
Speaker 1: that have completely full flights, despite the fact that they
Speaker 1: keep canceling all of them, but they're still full, and
Speaker 1: there's still people out there with the appetite to travel.
Speaker 1: Despite higher gas prices. People are still on the road.
Speaker 1: So Consumers have not necessarily been hit by this yet,
Speaker 1: But this is much like the profit margin story. Consumers
Speaker 1: came into this period with a lot built up in savings.
Speaker 1: They could absorb some of those price increases. Plus they
Speaker 1: had such a desire to just get back out there again,
Speaker 1: which is why we're seeing an inflation and services. Much
Speaker 1: like companies came into this with record high profit margins.
Speaker 1: They can absorb some of this into earnings, but they
Speaker 1: can't absorb all of it. Now. I'm curious whether how
Speaker 1: you're watching this Tesla Twitter story. Tesla is just such
Speaker 1: a massive stock now and we're seeing it get caught
Speaker 1: up in the ups and downs of the Elon Musk
Speaker 1: Twitter saga. We're just getting some new headlines from the
Speaker 1: CEO of Twitter and a memo to employee saying they're
Speaker 1: going to hold the Musk accountable for this forty four
Speaker 1: billion dollar deal. Every time any news breaks, um, you know,
Speaker 1: it impacts not just Twitter stock but Tesla stock. Do
Speaker 1: you see an impact on the broader markets here or
Speaker 1: is this just a separate narrative in itself. Well, I
Speaker 1: think some of this is very company specific, because this
Speaker 1: isn't something that's going on across the entire industry. So
Speaker 1: at this point I don't think there's an impact on
Speaker 1: the broader markets. But as we get through the remainder
Speaker 1: of the year, if we start to hear things about
Speaker 1: other companies, I think the the M and A activity
Speaker 1: may pick up later in the year and into which
Speaker 1: is not the Twitter and Tesla story, but the M
Speaker 1: and A narrative could pick up. And what you might
Speaker 1: find as the economy slows further is that those transactions,
Speaker 1: those mergers and acquisitions are now happening because of financial reasons,
Speaker 1: not because of strategic reasons. So that's something that if
Speaker 1: we start to hear a theme across companies in certain
Speaker 1: sectors that have been hit really hard by this, that's
Speaker 1: something that would affect the broader market. Interesting all right,
Speaker 1: Liz Young of so Far Always great to have you here. Liz,
Speaker 1: thank you for giving your view on the situation and
Speaker 1: stay to play today. Well, it's long been a bell
Speaker 1: weather for corporate spending in these days. The view from
Speaker 1: IBM could be a good indicator for which way the
Speaker 1: macro headwinds are blowing. Joining us now here in the studio,
Speaker 1: the CEO of Big Blue himself, Arvin Krishna, are been
Speaker 1: great to have you here in person, Emily, always great
Speaker 1: to be here with you, and this time in person.
Speaker 1: In person, indeed, thank you for taking the time out
Speaker 1: of your trip to the West Coast. Look, we've got
Speaker 1: a lot to talk about, but I have to get
Speaker 1: your view on the macro economy. What scenarios are you
Speaker 1: planning for? Do you think of recession is inevitable. I'm
Speaker 1: actually more optimistic, so I'll caution it with that. We
Speaker 1: are a B two B company, so we tend to
Speaker 1: see corporate spending our customers. In turn, maybe B two
Speaker 1: see but we don't directly go to consumer. So in
Speaker 1: the B two B we see the spending environment quite robust.
Speaker 1: We see our demand signals, we see our pipelines, We
Speaker 1: look at geographies, we look at industries, and part of
Speaker 1: it may be that technology is the answer through these problems.
Speaker 1: When you look at supply chain, inflation, labor demographics, interest rates.
Speaker 1: Technology offers you a way to scale without necessarily increasing
Speaker 1: costs that are linear or worse than linear. And so
Speaker 1: I think that that is why technology is spending I
Speaker 1: believe is going to remain robust in this In al Cahol,
Speaker 1: it all moderate scenarios. Is there's something extreme that's different,
Speaker 1: But but I don't really expect that. Are you planning
Speaker 1: for extreme scenarios? I mean, do you have to plan
Speaker 1: for extreme? Plan a bunch of scenarios, but plan is different.
Speaker 1: That's a plan on paper. Which ones do you expect
Speaker 1: to play out? You would say there's a middle, there
Speaker 1: is a more pessimistic, there's a more optimistic. None of
Speaker 1: those are the extreme ones. Well, it's interesting because we're hearing,
Speaker 1: for example, of the CEO of Service. Now just give
Speaker 1: a very pessimistic forecast, and you have Snowflake with a
Speaker 1: very optimistic forecast. Who's right, I mean, you're optimistic. I'm optimistic.
Speaker 1: So I'd say that I see technology spending as remaining
Speaker 1: above GDP growth, whether it's three or four or five
Speaker 1: points about GDP growth. Somewhere in there is going to
Speaker 1: remain technology, including in Europe, is our view. So we
Speaker 1: are more optimistic than pessimistic for sure. And uh, that's
Speaker 1: why in April, when we could see some of these
Speaker 1: headwinds that we're talking about were there. In Apri, we
Speaker 1: did forecasts that we would see at the high end
Speaker 1: of mid single digit revenue growth for ourselves at constant currency.
Speaker 1: So I'll put that to the side. So how is
Speaker 1: this all impacting your strategy or cloud strategy or growth
Speaker 1: strategy looking ahead? It's actually, I think reinforcing the play
Speaker 1: we called so two years ago we called a player
Speaker 1: on hybrid cloud and artificial intelligence. We see hybrid cloud
Speaker 1: as helping our our clients through these issues. We see
Speaker 1: AI is really helping on the productivity issue. When you
Speaker 1: look at AI sixteen trillion dollars of productivity unlock over
Speaker 1: this decade, and you look at hybrid cloud, trillion dollar opportunity.
Speaker 1: All our clients want a few public clouds, still have
Speaker 1: um their own on premise and private cloud. So when
Speaker 1: you look at how do you help your clients navigate
Speaker 1: through all that really give them a technology roadmap that
Speaker 1: lets them succeed in the face of sovereignty, in the
Speaker 1: face of resilience, in the face of supply chain issues.
Speaker 1: Both these technologies are turning our to be great, great opportunities.
Speaker 1: Right now, let's talk about the supply chain. Are you
Speaker 1: seeing relief? How much longer does the supply chain pain last?
Speaker 1: I actually maybe a bit more pessimistic on that than optimistic.
Speaker 1: I think supply chain resilience is a real fundamental issue
Speaker 1: that's going to go on for a couple more years,
Speaker 1: and what are the impacts of that. So I think
Speaker 1: the impact on the consumer side is obvious. It's going
Speaker 1: to be higher prices and you can see that. On
Speaker 1: the enterprise side, I think that the supply chain is
Speaker 1: going to cause more delays, more people sort of wondering
Speaker 1: about where is my alternate on supply chain. But it's
Speaker 1: not a simple issue. That is what I think nations
Speaker 1: and leaders have to wake up to. It's going to
Speaker 1: take two three years two for us to go resolve this,
Speaker 1: and that is why I sort of say this is
Speaker 1: not a simple issue to get resolved. So you're saying
Speaker 1: it's gonna get worse before it gets better. No, I
Speaker 1: think may maybe at the worst of it right now,
Speaker 1: but and you the walls, it doesn't get better right away.
Speaker 1: That's going to still take a couple of years. So
Speaker 1: obviously chips are in short supply, including you know, I mean,
Speaker 1: we've been following the Chips Act. UH looked like there
Speaker 1: was bipartisan agreement that this would get passed, still hasn't
Speaker 1: been passed. We spoke to UH Commerce Secretary Gena Raimondo
Speaker 1: on Bloomberg Television. Take a listen to what she had
Speaker 1: to say. Yes, it will get done. This is at
Speaker 1: this point in the negotiation. Unfortunately, politicians look for leverage,
Speaker 1: and while it isn't right to play politics with national security,
Speaker 1: that's what I think is happening. In the past two weeks,
Speaker 1: we we made huge progress, we were closing out issues,
Speaker 1: finding compromise. So I think everyone just needs to come
Speaker 1: back today, get back to work, and commit themselves to
Speaker 1: getting it done in the next few weeks. So she
Speaker 1: sounds like she's trying to be optimistic, but she's also
Speaker 1: clearly frustrated. I mean, you've got companies T S, M,
Speaker 1: spe C spending a hundred billion dollars abroad to increase
Speaker 1: capacity and we can't even get a fifty billion dollar
Speaker 1: bill passed. What's it gonna take. Have you been talking
Speaker 1: to lawmakers? What's your sense of the sentiment here? We have,
Speaker 1: so we've been talking to lawmakers on this issue, on
Speaker 1: both the Chips Act and USEKA for the last year.
Speaker 1: We are very strong believers that these are good bills
Speaker 1: for United States competitiveness. We believe in the sake of
Speaker 1: both national security, but also business in general. These are
Speaker 1: good things to get done. I think the Chips Act
Speaker 1: is essential. Will it happened? I believe the Chips Act
Speaker 1: will happen. I can't predict exactly when it will happen
Speaker 1: and which way heckle, will it be part of USKA
Speaker 1: are part of its own? We are not experts on that.
Speaker 1: What we can say is there to be happy to
Speaker 1: put our voice behind the Chips Act. We are happy
Speaker 1: to call UH senators on both sides. We believe there
Speaker 1: is bipartisan support actually for these acts, and that is
Speaker 1: what we are willing to go ask for the support. Um. Now,
Speaker 1: you just wrapped your fifth acquisition of the year with
Speaker 1: these depressed valuations. Is that making you more open to
Speaker 1: more M and A? A short answer is yes. But
Speaker 1: it's not a question of depressed valuations. So M and
Speaker 1: A has been part of our strategy. About a year ago,
Speaker 1: when we set out on our investor day, we said
Speaker 1: you should expect us to do three to four billion
Speaker 1: a year and acquisitions in a normal year. Now you
Speaker 1: can always when valuations are right and you can get
Speaker 1: the most attractive target, and it is going to be
Speaker 1: aggreative to us then we'd be willing to also lean
Speaker 1: in and borrow ahead from our what we can do.
Speaker 1: He saw a great example of that with Red Hat
Speaker 1: four years ago, and you just the new CEO there,
Speaker 1: and it has played out for us and we have
Speaker 1: paid down the debt we took on to acquire Red Hat.
Speaker 1: So but things like that you can do once in
Speaker 1: a while. But you would absolutely expect us to be
Speaker 1: continue to be acquisitive as we have been. So are
Speaker 1: you saying we could see a bigger acquisition like that
Speaker 1: again or are we going to be seeing you know, smaller.
Speaker 1: The smaller ones are a short thing. The big one
Speaker 1: will depend upon both the attractive opportunity. It has to
Speaker 1: be something that is a creative to us, that aligns
Speaker 1: with our strategy, and that creates significant synergy. So if
Speaker 1: you get all those things in play, maybe where could
Speaker 1: maybe some synergies Like what areas are you The areas
Speaker 1: we are in are going to be straightforward, doesn't matter smaller. Big.
Speaker 1: The areas were on is in software and in consulting,
Speaker 1: and in both the areas within that in terms of
Speaker 1: technology is around hybrid cloud, around security, around data and
Speaker 1: AI and automation, all of which played to the current
Speaker 1: economic themes of what's going on around the globe. So,
Speaker 1: speaking of Red Hat, new CEO just named what changes
Speaker 1: will the spring. This doesn't really bring any change. This
Speaker 1: has been planned for a while. Um. Look, Paul Cormere
Speaker 1: gave us four years since we announced the acquisition. He's
Speaker 1: not gone, by the way, He's still here as Shairman,
Speaker 1: and Matt has been in his wings for a long time.
Speaker 1: Matt has worked for Pole for almost sixteen years, so
Speaker 1: we shouldn't expect any significant change. And Matt was the
Speaker 1: leader behind our open shift strategy behind containers for the
Speaker 1: last three years. He's been leading products inside Red Hat,
Speaker 1: so you should expect more of the same, more intensity,
Speaker 1: more of a doubling down on the winners, but not
Speaker 1: a significant change. So last good question. Obviously you've been
Speaker 1: at IBM for so many years, but in the CEO
Speaker 1: seat now for our for a couple of years and
Speaker 1: through a pandemic, you know, what are your goals for
Speaker 1: let's say the next five years. Number one is relevance
Speaker 1: to our clients and that comes to the areas we
Speaker 1: have picked. So we have picked our areas and we're
Speaker 1: going to keep doubling down on them. Um, that results
Speaker 1: in revenue growth for the company and results in cash
Speaker 1: flow growth for the company, that's it returned to our investors.
Speaker 1: Then apart from that, my goal is clear. We want
Speaker 1: to build a platform that is going to stand the
Speaker 1: test of time. The main Frame was a great platform.
Speaker 1: Webster which was Java was a great platform. It's time
Speaker 1: to build the next PLAT which is going to be
Speaker 1: based on the hybrid cloud technologies from red At, but
Speaker 1: also a lot of what IBM is innovating around that
Speaker 1: that will provide a scream of revenue and relevance for two, three,
Speaker 1: four decades. Maybe all right, all right, big promises will
Speaker 1: We'll be watching. Arvin Christnas CEO of IBM, is so
Speaker 1: great to see you here in person again, um, thank
Speaker 1: you for stopping by. Whether it's named the Apple Watch
Speaker 1: Pro or the Apple Watch Explorer Edition, Apple is set
Speaker 1: to give the Apple Watch a Pro tier for the
Speaker 1: first time this fall. This follows a strategy that has
Speaker 1: brought the iPhone Pro, iPad Pro, map Book Pro, and
Speaker 1: AirPods proto market over the last several years. The Pro
Speaker 1: Apple Watch will come in the form of a new
Speaker 1: model that's gaimed at extreme sports, athletes, and just about
Speaker 1: anyone else simply seeking the most advanced Apple smart watch available.
Speaker 1: The high and model will have a larger and more
Speaker 1: shadow resistant display, a rugged metal casing, a body temperature sensor,
Speaker 1: improved hiking and swim tracking, as well as better battery life.
Speaker 1: Apple's new watch will likely come in a case size
Speaker 1: between forty millimeters and forty seven millimeters, up from forty
Speaker 1: five millimeters on the Apple Watch Series seven of today.
Speaker 1: The new screen will also have about seven percent more
Speaker 1: active screen area than the currently largest model. I also
Speaker 1: think that the new high end device could replace the
Speaker 1: Apple Watch Edition income in durable titanium. Given that a
Speaker 1: bigger screen in higher end construction are in play here,
Speaker 1: I'd guess that the new device will probably start at
Speaker 1: between nine and a thousand dollars, approaching the price of
Speaker 1: an iPhone Pro for those not looking to pay for
Speaker 1: an Apple Watch at that price point. There's also a
Speaker 1: new Apple Watch Series eight coming, as well as a
Speaker 1: new low end Apple Watch SC. The Series eight will
Speaker 1: have an updated display and that same body temperature reader,
Speaker 1: while the new SC will have a faster processor than
Speaker 1: it's predate sessor. I'm Mark German. This is power On.
Speaker 1: You can subscribe to Mark's weekly power On newsletter at
Speaker 1: Bloomberg dot com. Alright, meantime, gaming service provider Unity Software
Speaker 1: is spending upwards of four point for billion dollars to
Speaker 1: buy iron Source to help boot up its advertising technology.
Speaker 1: They all stock deal sent sares of iron Source, which
Speaker 1: went public vias back last year, soaring by nearly Shares
Speaker 1: of Unity, on the other hand, fell by double digits today.
Speaker 1: There you see it. But Bloomberg Intelligence sees the deal
Speaker 1: as a real opportunity for Unity to expand its reach
Speaker 1: in advertising, particularly in app mobile ads. Here to discuss
Speaker 1: it all, Unity CEO John ric Tello, John, great to
Speaker 1: have you with us. Look, John, you've been in the
Speaker 1: gaming industry for decades. What do you have to say
Speaker 1: to investors who are skeptical that this deal is actually
Speaker 1: good for you? Well, UM, a couple of things. I
Speaker 1: think we've set out a vision for precisely how um
Speaker 1: this uh, this merger of this deal will help us
Speaker 1: make sure that our customers can make better games and
Speaker 1: um and make a better business. And when we improve
Speaker 1: the business of our customers, we're going to do well.
Speaker 1: We also set out three very specific synergies where we're
Speaker 1: going to realize benefit right to the bottom line. And
Speaker 1: we framed out that we expect to see EBIT run
Speaker 1: rate in million dollars. That's a lot for company of
Speaker 1: our scale, and UM we really gave it to them precisely.
Speaker 1: That look M and A. In a day when the
Speaker 1: market trades down, you know, there's a lot of things
Speaker 1: that happened. My job is not so much to think
Speaker 1: about my stock trade do tomorrow, but to make sure
Speaker 1: that we're building a company that is going to be
Speaker 1: super valuable in the long term. And as investors, you know,
Speaker 1: get comfortable and understand our story, but also see it
Speaker 1: in the results. I have confidence that will be fun.
Speaker 1: So how maig An impacted Apple's ad tracking privacy changes
Speaker 1: have here not at all actually, so UM no, these
Speaker 1: were well understood well before, so we considered UM you know,
Speaker 1: looking at an iron source and UM as we've reported, UH,
Speaker 1: there is durability and long term viability to UM the
Speaker 1: io S side of UM gaming advertising. I mean like
Speaker 1: it's a huge market. UM. I mean about three to
Speaker 1: five percent of applications are paid for by the consumer
Speaker 1: ninety five or consumers don't add UM hence the need
Speaker 1: for advertisement. Here's a real important trick. And almost no
Speaker 1: industry do users or players or viewers think that advertising
Speaker 1: is a positive. One of the only industries I'm aware
Speaker 1: of in the gaming industry, mobile gaming in particular, they
Speaker 1: tell us time and again that they think the advertising
Speaker 1: thing is positive. And not only do they say it,
Speaker 1: we can prove it because games with advertising, um, when
Speaker 1: they're tested against those without, achieve higher levels of engagement
Speaker 1: and what means they're playing more. And so we know
Speaker 1: this is true. I think it's it ought to be
Speaker 1: the envy of everybody in the advertising world. And of
Speaker 1: course it's performance advertising. So our customers what they get
Speaker 1: from us is return on investment. Maybe they want to
Speaker 1: spend less and sometimes against the recess and etcetera, but
Speaker 1: they don't want less r A I. And that's what
Speaker 1: we're looking now. Unity did have a round of layoffs recently.
Speaker 1: You cut your guidance for the full year. Are those
Speaker 1: kind of issues behind you given the macro economic headwins
Speaker 1: we see ahead for you know, every company. Well, first off,
Speaker 1: I mean, let let me just talk a little bit
Speaker 1: about the layoffs, because um, I think they were somewhat
Speaker 1: blown out of proportion, not not by by you, Emily,
Speaker 1: but some of the press. Um. We're a company of
Speaker 1: about sixty people. We eliminated about two hundred and fifty
Speaker 1: positions and we offered half of them new roles for
Speaker 1: you know that would be a better career opportunity for
Speaker 1: inside of Unity and outside of Unity or inside of
Speaker 1: university what they're doing previously. And then for each and
Speaker 1: every one of those individuals. Look, I I take it.
Speaker 1: You know it's important to make sure that everyone is
Speaker 1: treated well, and we treated him super well. Um. A
Speaker 1: loss of that number of jobs, a covery of our
Speaker 1: scale through the focus. Look, you know, we're not the
Speaker 1: in theory of government where everything lives forever. Some things
Speaker 1: are working better than others and allow we reallocate to
Speaker 1: optimize our our approach to market and the opportunity in
Speaker 1: front of us. So Um, Look, I think it's always
Speaker 1: unfortunate when even one person loses their job. What I'm
Speaker 1: proud of is we get it in a way that
Speaker 1: I think was as positive for those involved as it
Speaker 1: could be. Everyone was given an opportunity to talk to
Speaker 1: us about what they might want to do, and half
Speaker 1: of them were able to offer them something, and a
Speaker 1: lot of them are gonna end up right back at
Speaker 1: Unity because this is a great place to work. So
Speaker 1: I know you're expecting this deal to generate a billion
Speaker 1: dollars in adjusted earnings. Will that still happen if there's
Speaker 1: a recession ahead? And do you think a recession is inevitable? Well, look,
Speaker 1: I think one of the things that always happens anytime
Speaker 1: where business show start talking about the FED is the
Speaker 1: only thing that's um, truly in great supply is pundits.
Speaker 1: And so you know, I don't want to get into,
Speaker 1: you know, pictuit of trying to be a pundit. You know,
Speaker 1: there's definitely some you know, some evidence of a slowdown.
Speaker 1: Whether we'll register is a full scale recession. But here's
Speaker 1: something you know, I don't know, but I will point
Speaker 1: out a couple of things. Um. Yeah, certainly economic cycles
Speaker 1: affect businesses, But if you go back over the last
Speaker 1: twenty to thirty years, you look at each and every
Speaker 1: time we felt recession. Um, one of the interviews that
Speaker 1: fared the best is the gaming industry. You know, lots
Speaker 1: of reasons for that, but it's a relatively inexpensive way
Speaker 1: to entertain yourself and It's one thing to get into
Speaker 1: a game and see and that and end up buying
Speaker 1: a you know, a one dollar in that purchase. It's
Speaker 1: not maybe the same thing as buying an new F
Speaker 1: one pickup truck. And the other issue is this advertising
Speaker 1: media is performance based, so to agree that, you know,
Speaker 1: you know, recessionary things happen, they're always going to buffet industries.
Speaker 1: I think this is an industry. This is a sector
Speaker 1: that we buffeted far less sell. So we feel confident
Speaker 1: in what we we outlined today. We wouldn't upset it um.
Speaker 1: You know, crystal balls are never perfect, but we think
Speaker 1: we've got the right collection of assets and in this
Speaker 1: instance we're strengthening our hand with in combination with Unity,
Speaker 1: we can and iron source. If we can help our
Speaker 1: customers make better content and have a better business, we
Speaker 1: know there's long term success and not. All right, well,
Speaker 1: thank you for giving us your view into your crystal ball.
Speaker 1: H John, Always good to have you here, John wick
Speaker 1: A Tello CEO of Unity, Appreciate you stopping by all right.
Speaker 1: Bill Gates is donating twenty billion dollars to the Bill
Speaker 1: and Melinda Gates Foundation this month. The foundation has a
Speaker 1: new goal of increasing its annual giving by fIF to
Speaker 1: nine billion dollars a year. Gates's latest donation brings the
Speaker 1: foundation's total endowment to about seventy billion dollars. The rise
Speaker 1: and Fall of Three Arrows Capital is shedding light on
Speaker 1: the obscure practices of some crypto firms they bet on
Speaker 1: prices only going up. Known as one of the largest
Speaker 1: crypto hedge funds in the world, Three a C invested
Speaker 1: in some of the best known blockchain startups. But when
Speaker 1: crypto prices turned this year, Three a C unraveled and
Speaker 1: may have even accelerated the decline. That is the topic
Speaker 1: of this week's Bloomberg Big Take title titled When Hold
Speaker 1: Spelled Total Failed The Collapse of Three Arrows joinings now
Speaker 1: are Bloomer Crypto Reporter movie ou Shan, who co wrote
Speaker 1: this p so talk to us about the draw the
Speaker 1: most dramatic twist and turns in this fall. I think
Speaker 1: the most dramatic part is that how a very well
Speaker 1: known hedge fund in crypto just felt all of a sudden.
Speaker 1: I think there is such a surprise to so many
Speaker 1: um unlike a lot of our previous fail us in crypto,
Speaker 1: that people in cy crypto in general were aware of.
Speaker 1: So did the collapse of Three Arrows really or cause
Speaker 1: or lead to potentially the crypto broader crypto contagion? What
Speaker 1: are we sing so far? There's a definitely contention in
Speaker 1: crypto market right now. We're seeing um some of their
Speaker 1: biggest counterparties, for example, uh, the Canada based Voyager Digital
Speaker 1: they announced bankrupt as a result of the exposure to
Speaker 1: See Arrows who borrow tons of money from Voyager and
Speaker 1: was not able to fulfill the obligations. Talk to us
Speaker 1: about the role of transparency here, I mean, were they
Speaker 1: really only betting that crypto was going to go up?
Speaker 1: What hedge fund does that? That's that's I think that
Speaker 1: one of the most things I my personally find very
Speaker 1: surprising throughout the reporting part of this story. It's just
Speaker 1: that these two people who are formal for X traders,
Speaker 1: They're supposed to be very intelligent, sophisticated traders in crypto,
Speaker 1: but turned out literally every single person I talked to
Speaker 1: told me there's the biggest force in crypto and they
Speaker 1: believe this kind of theory of superpycho that crypto would
Speaker 1: never fall like other markets, and they put on big
Speaker 1: best on every single project that invested in. So how
Speaker 1: does the crypto market move on from this? Obviously it's
Speaker 1: not just three arrows. You know, we've seen the collapse
Speaker 1: of of terra Um and it's really scared off a
Speaker 1: lot of investors. Yeah. I think, as you said, this
Speaker 1: is the transparency issues, and there's a trust crisis in
Speaker 1: crypto right now. So I think moving forward, um, I
Speaker 1: think the market this space really needs to be more transparent.
Speaker 1: For example, all the speak lenders they need to you know,
Speaker 1: communicate with each other talking about who's borrowing money to
Speaker 1: whom to make sure all of their contemp parties are
Speaker 1: going too big to certain extend that can have more
Speaker 1: impact across the market. All right, Well, I'm sure that
Speaker 1: we will see more tumult ahead. Bloomberg's movie out Shan
Speaker 1: on this week's Bloomberg Big Take, Thank you, Welcome back
Speaker 1: to Bloomberg Technology. Netflix has chosen Microsoft as its tech
Speaker 1: and sales partner for its new AD supported streaming service
Speaker 1: in hopes of advancing its efforts to reignite subscriber and
Speaker 1: revenue growth. Joining us now Bloomberg's Lucas Shaw. So, Lucas,
Speaker 1: what are we learning about this? New tier if you will. Well,
Speaker 1: Netflix still isn't saying an awful lot about how it
Speaker 1: will work for its customers. We don't know if they'll
Speaker 1: be ads before a shows starts, in the middle of
Speaker 1: a show, both of them. We don't know how many ads.
Speaker 1: We don't know the price of the ad tier. The
Speaker 1: only thing we know at this point is that they're
Speaker 1: relying on Microsoft for a lot of the kind of
Speaker 1: the back end work, not anything that the customer will see.
Speaker 1: But it will be Microsoft sales team that sells the ads,
Speaker 1: and it will also be Microsoft technology that will handle
Speaker 1: the serving of the ads that we all see. It's
Speaker 1: a big win for Microsoft, which is not as big
Speaker 1: a player in the video ad space as say Google
Speaker 1: or Comcast. Right, it was news to me that Microsoft
Speaker 1: had a bursioning ad service. You know, how is this
Speaker 1: a step towards some broader goal here of you know,
Speaker 1: taking on some of its competitors. Yeah, I mean Microsoft,
Speaker 1: I think said that last year it's ad business was
Speaker 1: about ten billion dollars, which is as big as some
Speaker 1: of the big kind of the TV based media companies.
Speaker 1: Obviously not as big as a as a Google or Facebook.
Speaker 1: Um it acquired Xander, which is this AD business that
Speaker 1: A T and T had had built up last year
Speaker 1: in a deal that was estimated about a billion dollars.
Speaker 1: Nosanders not say the best in class, but is did
Speaker 1: try to compete with Google and Facebook obviously has LinkedIn,
Speaker 1: and so it's building a pretty robust AD business and
Speaker 1: wants to compete with players like Amazon and Google and Facebook.
Speaker 1: So here's the question. I mean we've heard over and
Speaker 1: over again. Content is king, it is all about the content.
Speaker 1: Is it really all about the content? Or is an
Speaker 1: AD supported service that is somewhat cheaper really going to
Speaker 1: make a difference when it comes to racking up subscribers.
Speaker 1: I think if your Netflix right now, you now have
Speaker 1: about two twenty million customers. They say that each one
Speaker 1: of those subscribers is really like say three and a
Speaker 1: half people, So they're already at like six seven hundred
Speaker 1: million people who are using their service. There's only so
Speaker 1: many people who are going to pay for it. This
Speaker 1: ad here helps them in a couple fronts. One is
Speaker 1: it could appeal to some people who maybe don't want
Speaker 1: to spend quite as much money. And in some of
Speaker 1: these cases, these AD supported services actually generate more money
Speaker 1: because people are paying a monthly fee and if you
Speaker 1: can make a lot of money from the advertising. You know,
Speaker 1: Netflix is associated with quality programming. They need to both
Speaker 1: keep find ways to keep increasing the customer base and
Speaker 1: make more money from those people. This could do both.
Speaker 1: It's the same reason that they're crying the kind of
Speaker 1: what they call the crackdown and password sharing, because if
Speaker 1: they can get other users to pay more who are
Speaker 1: already using Netflix, that's a win for them. All Right,
Speaker 1: Lucas Shaw, thank you for your reporting here. We'll keep
Speaker 1: watching meantime. Want to end the show with some news
Speaker 1: out of Tesla. The EV maker's AI and auto pilot
Speaker 1: chief says he's leaving the company. Ed Ludlow back here
Speaker 1: with more. Obviously there's a critical role. Yes, this is
Speaker 1: Andre car Party. He's been at Testa since two seventeen,
Speaker 1: but he went on leave in March, and you know
Speaker 1: Sour told me this was a guy who didn't miss
Speaker 1: thedair work for five years. He went on leave. He's
Speaker 1: tweeted that he's leaving Tesla. You know, his strong capable
Speaker 1: hands also pilot. The work tests done on AI to
Speaker 1: power that camera based technology has really come a long way.
Speaker 1: But he's doing something new. You just don't know. So
Speaker 1: do we know if this had anything to do with
Speaker 1: disagreements or a de prioritization of like the work that
Speaker 1: he's doing. We don't you remember last week we reported
Speaker 1: that tesselaid off around two hundred and thirty autopilot data labelers,
Speaker 1: you know, as part of the big layoffs program. They
Speaker 1: have made progress in this area. They're working on their
Speaker 1: own chips, their own supercomputer dojo to help the AI
Speaker 1: trained in your networks to improve this technology. But he's
Speaker 1: been on leave. We don't know what's going on behind
Speaker 1: the scenes. And now he's cool time on his Tesla Chris,
Speaker 1: So just another problem for Elon Musk another one. But
Speaker 1: Elon tweeted he's grateful for the time he had. You
Speaker 1: know what, what has Elon said so far about the
Speaker 1: Twitter suit? Have we heard from him? He tweeted, oh
Speaker 1: the irony law. I gotta get a loll on the
Speaker 1: this is cutting edge. Look, how are we expecting this
Speaker 1: story to progress, you know, in terms of moving through
Speaker 1: the courts? Um, when are we going to see another development?
Speaker 1: We've seen Twitter salvo. When are we going to see
Speaker 1: a salvo to school of thoughts must counter suits. It
Speaker 1: could go to trial move very very quickly, but we're
Speaker 1: going to have a very protracted legal dispute. It's already
Speaker 1: been protracted, I mean in court for a year's some
Speaker 1: are bracing for really, so what happens to Twitter in
Speaker 1: that time? I mean, well uncertain. This is a real
Speaker 1: financial headwind for them. It's a financial and public relations headwind,
Speaker 1: but headwin for employees. I mean they're trying to recruit people,
Speaker 1: get people to stay at the company, and keep the
Speaker 1: trains running right exactly so, And that was part of
Speaker 1: what Twitter CEO paragagh Worl said two employees on Wednesday.
Speaker 1: We're facing the changing economy and this court case. Brace yourself,
Speaker 1: what are we see? What are we hearing inside the
Speaker 1: company from employees? I know you're talking a lot of people.
Speaker 1: They're not that impressed, right. They feel like Twitter's management
Speaker 1: have been on the back foot this whole time, that
Speaker 1: they should have been more proactive. That Elon must All
Speaker 1: Hands a few weeks ago just was kind of the
Speaker 1: I seen on the case on the right word the
Speaker 1: final straw for a lot of employees. And they've they've
Speaker 1: frozen hiring, they've cut projects. It's not happy as happy
Speaker 1: a place to work right now, but there's fighting talk
Speaker 1: coming out for management and the board. So sometimes fighting
Speaker 1: talk gets you going fighting words. Indeed, all right about
Speaker 1: the thank you? Well that does it. For the edition
Speaker 1: of Bloomberg Technology tomorrow, we're gonna be joined by Maven
Speaker 1: Clinic CEO Kate Rider. She's going to talk about the
Speaker 1: role Tell Ahealth will play in the state by state
Speaker 1: debate since Row versus Wade was overturned. And don't forget
Speaker 1: to check out our podcast. You can find it every
Speaker 1: day wherever you get your podcast on the terminal, Apple, Spotify,
Speaker 1: I Heart, Google Play and more. I'm emily checking San Francisco.
Speaker 1: This is Bloomberg