WEBVTT - Netflix, Microsoft Team Up 0:00:02.279 --> 0:00:05.560 From the heart of where innovation, money and power colli 0:00:06.400 --> 0:00:10.920 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:10.960 --> 0:00:27.080 Emily Jay. I'm Emily changing San Francisco and this is 0:00:27.080 --> 0:00:29.639 Bloomberg Technology. Coming up in the next hour, stocks a 0:00:29.680 --> 0:00:33.800 buckle amidst another shockingly high inflation report, investors wondering if 0:00:33.880 --> 0:00:36.600 the FED will get even more aggressive. We'll talk about 0:00:36.640 --> 0:00:38.960 what it all means for tech ahead of a key 0:00:39.120 --> 0:00:44.000 earning season. Plus an exclusive conversation with IBM CEO Arvin Krishna. 0:00:44.240 --> 0:00:46.640 What's his read on the economy and his view on 0:00:46.680 --> 0:00:49.640 the supply chain? Will ask all that and more coming up, 0:00:50.720 --> 0:00:54.080 and the first ads on Netflix will be brought to 0:00:54.160 --> 0:00:56.600 you by Microsoft. We're gonna tell you about the new 0:00:56.600 --> 0:01:00.400 deal between the two tech powerhouses entering the at business. 0:01:01.480 --> 0:01:04.040 So what does another round of high inflation data mean 0:01:04.080 --> 0:01:06.959 for tech specifically? What with earning season about to get underway. 0:01:07.000 --> 0:01:08.759 I want to bring in Liz Young of so Far 0:01:09.200 --> 0:01:12.000 to discuss. So, Liz, what are you expecting this earning season? 0:01:12.080 --> 0:01:14.080 Is every day going to be like Judgment Day for 0:01:14.160 --> 0:01:17.720 the next six weeks? I think it might be. And 0:01:17.720 --> 0:01:20.840 this isn't just tech specific. These comments but I think 0:01:20.880 --> 0:01:24.440 earning season, what needs to happen is that we see 0:01:24.480 --> 0:01:28.959 revisions downward. Usually things happen in a sequence, and as 0:01:29.000 --> 0:01:31.640 we've already seen, the market has broken. The market has 0:01:31.680 --> 0:01:35.240 sent us a signal that there's rough waters ahead, whether 0:01:35.280 --> 0:01:37.760 that be in corporate America or in the economy. Now 0:01:37.800 --> 0:01:41.200 we need earnings to kind of meet that signal. And 0:01:41.440 --> 0:01:43.920 right now we still have earnings expectations through the end 0:01:43.920 --> 0:01:46.560 of the year of ten to eleven percent growth, and 0:01:46.640 --> 0:01:50.480 in three there's still pretty lofty expectations as well. I 0:01:50.520 --> 0:01:53.640 think that as profit margins get pinched and ceo s 0:01:53.720 --> 0:01:56.280 come out and talk to us about their Q two earnings, 0:01:56.480 --> 0:01:59.840 they may still have had a strong Q two, but 0:02:00.000 --> 0:02:02.720 a guidance going forward is likely going to take a 0:02:02.800 --> 0:02:06.480 hit from inflation, from the tight labor market, from the 0:02:06.520 --> 0:02:10.079 increasing costs that they've seen over the past six months. 0:02:10.639 --> 0:02:13.760 But what about tech in particular? Why is tech or 0:02:13.840 --> 0:02:18.799 has tech been underperforming the last several weeks? Well, the 0:02:18.880 --> 0:02:21.080 last several weeks I think have been characterized by a 0:02:21.080 --> 0:02:23.520 market that's trying to figure out what the biggest problem 0:02:23.680 --> 0:02:26.960 is and what what their biggest fear is. And we've 0:02:27.000 --> 0:02:30.519 had a lot of trading that has been very rate related, 0:02:30.880 --> 0:02:34.120 and tech is so sensitive to the rate environment that 0:02:34.400 --> 0:02:36.640 as we continue to get data that says, you know what, 0:02:36.800 --> 0:02:38.720 the FETE is going to have to keep going because 0:02:38.760 --> 0:02:42.520 inflation is still such a big enemy. That hurts tech shares, 0:02:42.560 --> 0:02:44.880 that hurts those high growth shares. There have been some 0:02:45.000 --> 0:02:48.240 mini rallies in between. We've seen some attempts at a 0:02:48.320 --> 0:02:50.840 rally in tech and in some of those growth names, 0:02:51.000 --> 0:02:52.800 but there's been a lot of giveback as soon as 0:02:52.800 --> 0:02:56.040 the market realizes that the FETE is still on this bandwagon. 0:02:56.400 --> 0:02:59.400 Regardless of the fact that we may have increased recession 0:02:59.480 --> 0:03:03.040 fears over the next twelve months, in the near term, 0:03:03.080 --> 0:03:05.680 the FED is still going to fight that growth narrative. 0:03:06.400 --> 0:03:09.800 So let's talk about the signals you're seeing now. Based 0:03:09.840 --> 0:03:14.840 on what you're seeing is a recession and inevitable. Well, look, 0:03:14.880 --> 0:03:18.240 I wouldn't say anything is for sure. Nothing is ever guaranteed. 0:03:18.360 --> 0:03:21.240 At some point, there will be another recession. That's just 0:03:21.280 --> 0:03:24.360 how the business cycle works. However, what I will say 0:03:24.480 --> 0:03:26.840 is that some of the signals that we look at, 0:03:27.120 --> 0:03:30.560 such as yield curban versions, now we've gotten a deeper 0:03:30.639 --> 0:03:34.080 yield curban version down twenty one basis points as of today, 0:03:34.080 --> 0:03:36.680 which is the biggest in version we've seen so far, 0:03:37.040 --> 0:03:39.760 aside from some of those minian versions earlier in the year. 0:03:40.080 --> 0:03:42.600 That's a pretty big signal, and that's the market saying 0:03:42.920 --> 0:03:45.920 that we're afraid that this hiking cycle is going to 0:03:45.960 --> 0:03:48.920 take us into recession. Here's what I would say about 0:03:49.000 --> 0:03:51.680 a recession. Now, we may find out at the end 0:03:51.720 --> 0:03:55.200 of July that we have another negative GDP print for 0:03:55.240 --> 0:03:59.520 the second quarter, which would be technically a recession, but 0:03:59.720 --> 0:04:02.120 it's an odd one, right. It's one where the labor 0:04:02.160 --> 0:04:04.840 market is so strong, We're still creating jobs, We've got 0:04:04.840 --> 0:04:09.160 a consumer that's still spending and maybe as frustrated by inflation, 0:04:09.200 --> 0:04:11.720 but hasn't stopped spending because of it. So it would 0:04:11.720 --> 0:04:15.880 be a recession that didn't hurt demand to appoint enough 0:04:16.160 --> 0:04:19.400 to bring that inflation number down. Now, what I think 0:04:19.440 --> 0:04:22.760 the market is grappling with is is there a classic 0:04:22.839 --> 0:04:28.200 recession coming at some point? Perhaps that does actually affect 0:04:28.240 --> 0:04:31.640 the labor market, does bring demand down, but it takes 0:04:31.680 --> 0:04:34.640 care of that inflation problem. So it's the path to 0:04:35.400 --> 0:04:39.159 fighting this inflation monster that we're all trying to figure out. 0:04:39.839 --> 0:04:42.320 Speaking of that monster. How much of a change is 0:04:42.360 --> 0:04:45.599 so far seeing and spending and borrowing habits right now? 0:04:45.720 --> 0:04:48.920 Do you see customers being resilient in their spending or 0:04:49.040 --> 0:04:53.920 are savings shrinking? Well, look, I mean with our bank 0:04:54.000 --> 0:04:56.479 charter earlier in the year, there's obviously a difference that 0:04:56.560 --> 0:05:00.000 we're seeing, but it's the spending patterns are pretty consider 0:05:00.080 --> 0:05:04.840 stint across consumers broadly. Right, everybody is still spending, They've 0:05:04.880 --> 0:05:08.039 just changed their habits. So what you find is, and 0:05:08.080 --> 0:05:11.200 this is a broad consumer statement, what you find is 0:05:11.360 --> 0:05:14.080 maybe consumers have pulled back on certain items, and we 0:05:14.200 --> 0:05:16.800 heard this earlier in the year from some big retailers. 0:05:17.000 --> 0:05:19.400 Maybe they've pulled back on certain items but started to 0:05:19.480 --> 0:05:22.800 spend on other items. So you're gonna see, naturally in 0:05:22.800 --> 0:05:26.800 a business cycle, a contraction and spending endurable goods, but 0:05:27.000 --> 0:05:30.560 other spending has still held up. We're still seeing in 0:05:30.600 --> 0:05:34.720 all consumers the desire to travel. We're still seeing airlines 0:05:34.760 --> 0:05:37.160 that have completely full flights, despite the fact that they 0:05:37.240 --> 0:05:40.120 keep canceling all of them, but they're still full, and 0:05:40.160 --> 0:05:42.560 there's still people out there with the appetite to travel. 0:05:42.760 --> 0:05:45.480 Despite higher gas prices. People are still on the road. 0:05:45.640 --> 0:05:49.039 So Consumers have not necessarily been hit by this yet, 0:05:49.200 --> 0:05:52.360 But this is much like the profit margin story. Consumers 0:05:52.400 --> 0:05:55.600 came into this period with a lot built up in savings. 0:05:55.600 --> 0:05:58.880 They could absorb some of those price increases. Plus they 0:05:58.920 --> 0:06:01.480 had such a desire to just get back out there again, 0:06:01.680 --> 0:06:04.640 which is why we're seeing an inflation and services. Much 0:06:04.720 --> 0:06:07.960 like companies came into this with record high profit margins. 0:06:08.000 --> 0:06:10.279 They can absorb some of this into earnings, but they 0:06:10.360 --> 0:06:14.560 can't absorb all of it. Now. I'm curious whether how 0:06:14.600 --> 0:06:17.080 you're watching this Tesla Twitter story. Tesla is just such 0:06:17.120 --> 0:06:19.839 a massive stock now and we're seeing it get caught 0:06:19.920 --> 0:06:21.920 up in the ups and downs of the Elon Musk 0:06:22.520 --> 0:06:24.760 Twitter saga. We're just getting some new headlines from the 0:06:24.760 --> 0:06:27.200 CEO of Twitter and a memo to employee saying they're 0:06:27.200 --> 0:06:29.880 going to hold the Musk accountable for this forty four 0:06:30.040 --> 0:06:33.800 billion dollar deal. Every time any news breaks, um, you know, 0:06:33.880 --> 0:06:36.960 it impacts not just Twitter stock but Tesla stock. Do 0:06:37.040 --> 0:06:39.919 you see an impact on the broader markets here or 0:06:40.000 --> 0:06:43.320 is this just a separate narrative in itself. Well, I 0:06:43.360 --> 0:06:46.320 think some of this is very company specific, because this 0:06:46.360 --> 0:06:49.880 isn't something that's going on across the entire industry. So 0:06:49.960 --> 0:06:52.359 at this point I don't think there's an impact on 0:06:52.360 --> 0:06:55.680 the broader markets. But as we get through the remainder 0:06:55.720 --> 0:06:58.239 of the year, if we start to hear things about 0:06:58.279 --> 0:07:01.000 other companies, I think the the M and A activity 0:07:01.160 --> 0:07:04.159 may pick up later in the year and into which 0:07:04.200 --> 0:07:07.040 is not the Twitter and Tesla story, but the M 0:07:07.080 --> 0:07:09.640 and A narrative could pick up. And what you might 0:07:09.760 --> 0:07:14.200 find as the economy slows further is that those transactions, 0:07:14.200 --> 0:07:18.520 those mergers and acquisitions are now happening because of financial reasons, 0:07:18.560 --> 0:07:21.840 not because of strategic reasons. So that's something that if 0:07:21.880 --> 0:07:24.760 we start to hear a theme across companies in certain 0:07:24.760 --> 0:07:27.320 sectors that have been hit really hard by this, that's 0:07:27.320 --> 0:07:30.520 something that would affect the broader market. Interesting all right, 0:07:30.600 --> 0:07:33.160 Liz Young of so Far Always great to have you here. Liz, 0:07:33.320 --> 0:07:36.160 thank you for giving your view on the situation and 0:07:36.200 --> 0:07:47.200 stay to play today. Well, it's long been a bell 0:07:47.280 --> 0:07:49.600 weather for corporate spending in these days. The view from 0:07:49.600 --> 0:07:52.600 IBM could be a good indicator for which way the 0:07:52.680 --> 0:07:55.440 macro headwinds are blowing. Joining us now here in the studio, 0:07:55.520 --> 0:07:58.280 the CEO of Big Blue himself, Arvin Krishna, are been 0:07:58.320 --> 0:08:01.160 great to have you here in person, Emily, always great 0:08:01.200 --> 0:08:03.200 to be here with you, and this time in person. 0:08:03.400 --> 0:08:05.880 In person, indeed, thank you for taking the time out 0:08:05.880 --> 0:08:08.080 of your trip to the West Coast. Look, we've got 0:08:08.080 --> 0:08:09.320 a lot to talk about, but I have to get 0:08:09.400 --> 0:08:12.760 your view on the macro economy. What scenarios are you 0:08:12.800 --> 0:08:16.760 planning for? Do you think of recession is inevitable. I'm 0:08:16.760 --> 0:08:20.560 actually more optimistic, so I'll caution it with that. We 0:08:20.600 --> 0:08:22.200 are a B two B company, so we tend to 0:08:22.200 --> 0:08:25.160 see corporate spending our customers. In turn, maybe B two 0:08:25.160 --> 0:08:28.400 see but we don't directly go to consumer. So in 0:08:28.480 --> 0:08:31.800 the B two B we see the spending environment quite robust. 0:08:33.000 --> 0:08:35.920 We see our demand signals, we see our pipelines, We 0:08:36.000 --> 0:08:39.160 look at geographies, we look at industries, and part of 0:08:39.200 --> 0:08:43.400 it may be that technology is the answer through these problems. 0:08:44.120 --> 0:08:48.319 When you look at supply chain, inflation, labor demographics, interest rates. 0:08:48.600 --> 0:08:52.640 Technology offers you a way to scale without necessarily increasing 0:08:52.679 --> 0:08:56.920 costs that are linear or worse than linear. And so 0:08:56.960 --> 0:08:59.400 I think that that is why technology is spending I 0:08:59.480 --> 0:09:03.040 believe is going to remain robust in this In al Cahol, 0:09:03.080 --> 0:09:07.320 it all moderate scenarios. Is there's something extreme that's different, 0:09:07.400 --> 0:09:10.440 But but I don't really expect that. Are you planning 0:09:10.520 --> 0:09:12.680 for extreme scenarios? I mean, do you have to plan 0:09:12.760 --> 0:09:16.640 for extreme? Plan a bunch of scenarios, but plan is different. 0:09:16.679 --> 0:09:19.079 That's a plan on paper. Which ones do you expect 0:09:19.080 --> 0:09:20.920 to play out? You would say there's a middle, there 0:09:21.000 --> 0:09:23.960 is a more pessimistic, there's a more optimistic. None of 0:09:23.960 --> 0:09:26.360 those are the extreme ones. Well, it's interesting because we're hearing, 0:09:26.400 --> 0:09:28.520 for example, of the CEO of Service. Now just give 0:09:28.559 --> 0:09:31.160 a very pessimistic forecast, and you have Snowflake with a 0:09:31.240 --> 0:09:35.800 very optimistic forecast. Who's right, I mean, you're optimistic. I'm optimistic. 0:09:35.960 --> 0:09:38.800 So I'd say that I see technology spending as remaining 0:09:38.840 --> 0:09:42.520 above GDP growth, whether it's three or four or five 0:09:42.559 --> 0:09:44.800 points about GDP growth. Somewhere in there is going to 0:09:44.840 --> 0:09:49.040 remain technology, including in Europe, is our view. So we 0:09:49.120 --> 0:09:55.400 are more optimistic than pessimistic for sure. And uh, that's 0:09:55.400 --> 0:09:58.280 why in April, when we could see some of these 0:09:58.280 --> 0:10:00.680 headwinds that we're talking about were there. In Apri, we 0:10:00.760 --> 0:10:02.800 did forecasts that we would see at the high end 0:10:02.800 --> 0:10:05.920 of mid single digit revenue growth for ourselves at constant currency. 0:10:05.960 --> 0:10:08.319 So I'll put that to the side. So how is 0:10:08.360 --> 0:10:12.080 this all impacting your strategy or cloud strategy or growth 0:10:12.600 --> 0:10:16.880 strategy looking ahead? It's actually, I think reinforcing the play 0:10:17.000 --> 0:10:19.280 we called so two years ago we called a player 0:10:19.280 --> 0:10:22.800 on hybrid cloud and artificial intelligence. We see hybrid cloud 0:10:22.840 --> 0:10:28.040 as helping our our clients through these issues. We see 0:10:28.080 --> 0:10:31.760 AI is really helping on the productivity issue. When you 0:10:31.800 --> 0:10:35.440 look at AI sixteen trillion dollars of productivity unlock over 0:10:35.520 --> 0:10:39.359 this decade, and you look at hybrid cloud, trillion dollar opportunity. 0:10:39.480 --> 0:10:43.160 All our clients want a few public clouds, still have 0:10:43.840 --> 0:10:47.000 um their own on premise and private cloud. So when 0:10:47.000 --> 0:10:49.000 you look at how do you help your clients navigate 0:10:49.040 --> 0:10:51.840 through all that really give them a technology roadmap that 0:10:51.920 --> 0:10:54.760 lets them succeed in the face of sovereignty, in the 0:10:54.800 --> 0:10:58.000 face of resilience, in the face of supply chain issues. 0:10:58.440 --> 0:11:01.920 Both these technologies are turning our to be great, great opportunities. 0:11:02.280 --> 0:11:04.840 Right now, let's talk about the supply chain. Are you 0:11:04.920 --> 0:11:09.640 seeing relief? How much longer does the supply chain pain last? 0:11:10.600 --> 0:11:14.280 I actually maybe a bit more pessimistic on that than optimistic. 0:11:14.840 --> 0:11:18.880 I think supply chain resilience is a real fundamental issue 0:11:19.200 --> 0:11:21.720 that's going to go on for a couple more years, 0:11:22.320 --> 0:11:24.600 and what are the impacts of that. So I think 0:11:24.640 --> 0:11:26.800 the impact on the consumer side is obvious. It's going 0:11:26.800 --> 0:11:29.360 to be higher prices and you can see that. On 0:11:29.400 --> 0:11:31.960 the enterprise side, I think that the supply chain is 0:11:31.960 --> 0:11:37.080 going to cause more delays, more people sort of wondering 0:11:37.120 --> 0:11:39.880 about where is my alternate on supply chain. But it's 0:11:39.920 --> 0:11:43.559 not a simple issue. That is what I think nations 0:11:43.840 --> 0:11:46.120 and leaders have to wake up to. It's going to 0:11:46.240 --> 0:11:49.040 take two three years two for us to go resolve this, 0:11:49.160 --> 0:11:51.280 and that is why I sort of say this is 0:11:51.280 --> 0:11:54.120 not a simple issue to get resolved. So you're saying 0:11:54.160 --> 0:11:56.160 it's gonna get worse before it gets better. No, I 0:11:56.160 --> 0:11:59.360 think may maybe at the worst of it right now, 0:11:59.600 --> 0:12:02.200 but and you the walls, it doesn't get better right away. 0:12:02.559 --> 0:12:04.400 That's going to still take a couple of years. So 0:12:04.440 --> 0:12:09.079 obviously chips are in short supply, including you know, I mean, 0:12:09.120 --> 0:12:12.400 we've been following the Chips Act. UH looked like there 0:12:12.440 --> 0:12:15.559 was bipartisan agreement that this would get passed, still hasn't 0:12:15.559 --> 0:12:19.040 been passed. We spoke to UH Commerce Secretary Gena Raimondo 0:12:19.400 --> 0:12:22.080 on Bloomberg Television. Take a listen to what she had 0:12:22.160 --> 0:12:25.920 to say. Yes, it will get done. This is at 0:12:25.920 --> 0:12:31.120 this point in the negotiation. Unfortunately, politicians look for leverage, 0:12:31.480 --> 0:12:35.480 and while it isn't right to play politics with national security, 0:12:35.760 --> 0:12:39.200 that's what I think is happening. In the past two weeks, 0:12:39.240 --> 0:12:43.160 we we made huge progress, we were closing out issues, 0:12:43.280 --> 0:12:46.319 finding compromise. So I think everyone just needs to come 0:12:46.360 --> 0:12:51.079 back today, get back to work, and commit themselves to 0:12:51.160 --> 0:12:54.400 getting it done in the next few weeks. So she 0:12:54.600 --> 0:12:57.440 sounds like she's trying to be optimistic, but she's also 0:12:57.520 --> 0:13:00.559 clearly frustrated. I mean, you've got companies T S, M, 0:13:00.600 --> 0:13:04.079 spe C spending a hundred billion dollars abroad to increase 0:13:04.160 --> 0:13:06.600 capacity and we can't even get a fifty billion dollar 0:13:06.679 --> 0:13:09.160 bill passed. What's it gonna take. Have you been talking 0:13:09.160 --> 0:13:12.599 to lawmakers? What's your sense of the sentiment here? We have, 0:13:12.840 --> 0:13:15.439 so we've been talking to lawmakers on this issue, on 0:13:15.559 --> 0:13:18.280 both the Chips Act and USEKA for the last year. 0:13:18.679 --> 0:13:21.199 We are very strong believers that these are good bills 0:13:21.920 --> 0:13:25.000 for United States competitiveness. We believe in the sake of 0:13:25.040 --> 0:13:28.160 both national security, but also business in general. These are 0:13:28.160 --> 0:13:30.400 good things to get done. I think the Chips Act 0:13:30.600 --> 0:13:34.480 is essential. Will it happened? I believe the Chips Act 0:13:34.520 --> 0:13:37.400 will happen. I can't predict exactly when it will happen 0:13:37.960 --> 0:13:40.520 and which way heckle, will it be part of USKA 0:13:40.559 --> 0:13:43.760 are part of its own? We are not experts on that. 0:13:44.080 --> 0:13:46.439 What we can say is there to be happy to 0:13:46.480 --> 0:13:48.800 put our voice behind the Chips Act. We are happy 0:13:48.840 --> 0:13:53.480 to call UH senators on both sides. We believe there 0:13:53.559 --> 0:13:57.080 is bipartisan support actually for these acts, and that is 0:13:57.120 --> 0:14:02.080 what we are willing to go ask for the support. Um. Now, 0:14:02.120 --> 0:14:04.960 you just wrapped your fifth acquisition of the year with 0:14:05.120 --> 0:14:08.280 these depressed valuations. Is that making you more open to 0:14:08.480 --> 0:14:11.960 more M and A? A short answer is yes. But 0:14:12.040 --> 0:14:14.040 it's not a question of depressed valuations. So M and 0:14:14.080 --> 0:14:17.320 A has been part of our strategy. About a year ago, 0:14:17.400 --> 0:14:20.120 when we set out on our investor day, we said 0:14:20.120 --> 0:14:22.200 you should expect us to do three to four billion 0:14:22.560 --> 0:14:25.280 a year and acquisitions in a normal year. Now you 0:14:25.320 --> 0:14:28.120 can always when valuations are right and you can get 0:14:28.160 --> 0:14:31.080 the most attractive target, and it is going to be 0:14:31.120 --> 0:14:33.880 aggreative to us then we'd be willing to also lean 0:14:34.000 --> 0:14:37.600 in and borrow ahead from our what we can do. 0:14:37.920 --> 0:14:39.680 He saw a great example of that with Red Hat 0:14:39.720 --> 0:14:42.760 four years ago, and you just the new CEO there, 0:14:43.040 --> 0:14:45.320 and it has played out for us and we have 0:14:45.360 --> 0:14:47.960 paid down the debt we took on to acquire Red Hat. 0:14:48.320 --> 0:14:50.240 So but things like that you can do once in 0:14:50.280 --> 0:14:53.240 a while. But you would absolutely expect us to be 0:14:53.520 --> 0:14:56.160 continue to be acquisitive as we have been. So are 0:14:56.160 --> 0:14:58.520 you saying we could see a bigger acquisition like that 0:14:58.600 --> 0:15:00.920 again or are we going to be seeing you know, smaller. 0:15:01.240 --> 0:15:03.440 The smaller ones are a short thing. The big one 0:15:03.440 --> 0:15:06.280 will depend upon both the attractive opportunity. It has to 0:15:06.280 --> 0:15:09.000 be something that is a creative to us, that aligns 0:15:09.000 --> 0:15:13.000 with our strategy, and that creates significant synergy. So if 0:15:13.000 --> 0:15:16.000 you get all those things in play, maybe where could 0:15:16.200 --> 0:15:20.000 maybe some synergies Like what areas are you The areas 0:15:20.000 --> 0:15:22.360 we are in are going to be straightforward, doesn't matter smaller. Big. 0:15:22.680 --> 0:15:25.960 The areas were on is in software and in consulting, 0:15:26.440 --> 0:15:28.960 and in both the areas within that in terms of 0:15:28.960 --> 0:15:33.480 technology is around hybrid cloud, around security, around data and 0:15:33.560 --> 0:15:36.560 AI and automation, all of which played to the current 0:15:36.600 --> 0:15:39.640 economic themes of what's going on around the globe. So, 0:15:39.760 --> 0:15:43.960 speaking of Red Hat, new CEO just named what changes 0:15:44.000 --> 0:15:46.320 will the spring. This doesn't really bring any change. This 0:15:46.320 --> 0:15:50.320 has been planned for a while. Um. Look, Paul Cormere 0:15:50.720 --> 0:15:53.560 gave us four years since we announced the acquisition. He's 0:15:53.600 --> 0:15:55.560 not gone, by the way, He's still here as Shairman, 0:15:56.320 --> 0:15:58.840 and Matt has been in his wings for a long time. 0:15:59.680 --> 0:16:02.560 Matt has worked for Pole for almost sixteen years, so 0:16:02.600 --> 0:16:06.360 we shouldn't expect any significant change. And Matt was the 0:16:06.440 --> 0:16:10.320 leader behind our open shift strategy behind containers for the 0:16:10.400 --> 0:16:13.640 last three years. He's been leading products inside Red Hat, 0:16:13.840 --> 0:16:16.640 so you should expect more of the same, more intensity, 0:16:16.800 --> 0:16:19.280 more of a doubling down on the winners, but not 0:16:19.400 --> 0:16:22.360 a significant change. So last good question. Obviously you've been 0:16:22.360 --> 0:16:24.440 at IBM for so many years, but in the CEO 0:16:24.520 --> 0:16:26.280 seat now for our for a couple of years and 0:16:26.640 --> 0:16:31.400 through a pandemic, you know, what are your goals for 0:16:31.480 --> 0:16:35.040 let's say the next five years. Number one is relevance 0:16:35.080 --> 0:16:37.040 to our clients and that comes to the areas we 0:16:37.080 --> 0:16:38.680 have picked. So we have picked our areas and we're 0:16:38.720 --> 0:16:41.680 going to keep doubling down on them. Um, that results 0:16:41.680 --> 0:16:43.800 in revenue growth for the company and results in cash 0:16:43.800 --> 0:16:46.840 flow growth for the company, that's it returned to our investors. 0:16:47.400 --> 0:16:50.720 Then apart from that, my goal is clear. We want 0:16:50.720 --> 0:16:52.880 to build a platform that is going to stand the 0:16:52.880 --> 0:16:55.440 test of time. The main Frame was a great platform. 0:16:55.760 --> 0:16:58.920 Webster which was Java was a great platform. It's time 0:16:58.960 --> 0:17:00.800 to build the next PLAT which is going to be 0:17:00.840 --> 0:17:04.199 based on the hybrid cloud technologies from red At, but 0:17:04.320 --> 0:17:06.800 also a lot of what IBM is innovating around that 0:17:06.800 --> 0:17:12.040 that will provide a scream of revenue and relevance for two, three, 0:17:12.280 --> 0:17:16.120 four decades. Maybe all right, all right, big promises will 0:17:16.160 --> 0:17:18.879 We'll be watching. Arvin Christnas CEO of IBM, is so 0:17:18.920 --> 0:17:22.600 great to see you here in person again, um, thank 0:17:22.640 --> 0:17:33.920 you for stopping by. Whether it's named the Apple Watch 0:17:33.960 --> 0:17:37.120 Pro or the Apple Watch Explorer Edition, Apple is set 0:17:37.160 --> 0:17:39.199 to give the Apple Watch a Pro tier for the 0:17:39.240 --> 0:17:42.800 first time this fall. This follows a strategy that has 0:17:42.800 --> 0:17:46.080 brought the iPhone Pro, iPad Pro, map Book Pro, and 0:17:46.160 --> 0:17:49.600 AirPods proto market over the last several years. The Pro 0:17:49.720 --> 0:17:51.800 Apple Watch will come in the form of a new 0:17:51.880 --> 0:17:55.160 model that's gaimed at extreme sports, athletes, and just about 0:17:55.200 --> 0:17:58.840 anyone else simply seeking the most advanced Apple smart watch available. 0:17:59.640 --> 0:18:01.680 The high and model will have a larger and more 0:18:01.720 --> 0:18:06.320 shadow resistant display, a rugged metal casing, a body temperature sensor, 0:18:06.800 --> 0:18:10.080 improved hiking and swim tracking, as well as better battery life. 0:18:10.720 --> 0:18:13.000 Apple's new watch will likely come in a case size 0:18:13.040 --> 0:18:16.920 between forty millimeters and forty seven millimeters, up from forty 0:18:17.000 --> 0:18:19.760 five millimeters on the Apple Watch Series seven of today. 0:18:20.119 --> 0:18:22.479 The new screen will also have about seven percent more 0:18:22.520 --> 0:18:26.600 active screen area than the currently largest model. I also 0:18:26.640 --> 0:18:28.960 think that the new high end device could replace the 0:18:28.960 --> 0:18:33.200 Apple Watch Edition income in durable titanium. Given that a 0:18:33.240 --> 0:18:35.800 bigger screen in higher end construction are in play here, 0:18:36.240 --> 0:18:38.760 I'd guess that the new device will probably start at 0:18:38.760 --> 0:18:42.399 between nine and a thousand dollars, approaching the price of 0:18:42.440 --> 0:18:46.000 an iPhone Pro for those not looking to pay for 0:18:46.040 --> 0:18:48.560 an Apple Watch at that price point. There's also a 0:18:48.560 --> 0:18:50.639 new Apple Watch Series eight coming, as well as a 0:18:50.680 --> 0:18:53.640 new low end Apple Watch SC. The Series eight will 0:18:53.640 --> 0:18:56.639 have an updated display and that same body temperature reader, 0:18:56.880 --> 0:18:59.520 while the new SC will have a faster processor than 0:18:59.560 --> 0:19:03.159 it's predate sessor. I'm Mark German. This is power On. 0:19:06.119 --> 0:19:09.200 You can subscribe to Mark's weekly power On newsletter at 0:19:09.240 --> 0:19:22.119 Bloomberg dot com. Alright, meantime, gaming service provider Unity Software 0:19:22.400 --> 0:19:25.840 is spending upwards of four point for billion dollars to 0:19:25.880 --> 0:19:29.320 buy iron Source to help boot up its advertising technology. 0:19:29.560 --> 0:19:32.040 They all stock deal sent sares of iron Source, which 0:19:32.080 --> 0:19:36.080 went public vias back last year, soaring by nearly Shares 0:19:36.119 --> 0:19:39.960 of Unity, on the other hand, fell by double digits today. 0:19:40.000 --> 0:19:42.680 There you see it. But Bloomberg Intelligence sees the deal 0:19:42.720 --> 0:19:45.600 as a real opportunity for Unity to expand its reach 0:19:45.680 --> 0:19:48.879 in advertising, particularly in app mobile ads. Here to discuss 0:19:48.920 --> 0:19:51.879 it all, Unity CEO John ric Tello, John, great to 0:19:51.920 --> 0:19:53.879 have you with us. Look, John, you've been in the 0:19:53.920 --> 0:19:57.040 gaming industry for decades. What do you have to say 0:19:57.040 --> 0:19:59.639 to investors who are skeptical that this deal is actually 0:19:59.680 --> 0:20:03.439 good for you? Well, UM, a couple of things. I 0:20:03.440 --> 0:20:07.399 think we've set out a vision for precisely how um 0:20:07.440 --> 0:20:10.760 this uh, this merger of this deal will help us 0:20:10.760 --> 0:20:14.840 make sure that our customers can make better games and 0:20:15.440 --> 0:20:18.120 um and make a better business. And when we improve 0:20:18.200 --> 0:20:20.040 the business of our customers, we're going to do well. 0:20:20.600 --> 0:20:25.320 We also set out three very specific synergies where we're 0:20:25.320 --> 0:20:28.760 going to realize benefit right to the bottom line. And 0:20:29.240 --> 0:20:33.680 we framed out that we expect to see EBIT run 0:20:33.760 --> 0:20:37.119 rate in million dollars. That's a lot for company of 0:20:37.119 --> 0:20:41.840 our scale, and UM we really gave it to them precisely. 0:20:41.920 --> 0:20:44.439 That look M and A. In a day when the 0:20:44.480 --> 0:20:46.480 market trades down, you know, there's a lot of things 0:20:46.480 --> 0:20:48.880 that happened. My job is not so much to think 0:20:48.920 --> 0:20:51.720 about my stock trade do tomorrow, but to make sure 0:20:51.760 --> 0:20:54.200 that we're building a company that is going to be 0:20:54.640 --> 0:20:57.879 super valuable in the long term. And as investors, you know, 0:20:57.920 --> 0:21:00.760 get comfortable and understand our story, but also see it 0:21:00.800 --> 0:21:03.960 in the results. I have confidence that will be fun. 0:21:04.680 --> 0:21:09.480 So how maig An impacted Apple's ad tracking privacy changes 0:21:09.680 --> 0:21:14.720 have here not at all actually, so UM no, these 0:21:14.800 --> 0:21:19.040 were well understood well before, so we considered UM you know, 0:21:19.160 --> 0:21:24.080 looking at an iron source and UM as we've reported, UH, 0:21:24.160 --> 0:21:29.200 there is durability and long term viability to UM the 0:21:29.200 --> 0:21:32.440 io S side of UM gaming advertising. I mean like 0:21:32.560 --> 0:21:35.480 it's a huge market. UM. I mean about three to 0:21:35.560 --> 0:21:39.160 five percent of applications are paid for by the consumer 0:21:39.280 --> 0:21:43.840 ninety five or consumers don't add UM hence the need 0:21:43.880 --> 0:21:47.280 for advertisement. Here's a real important trick. And almost no 0:21:47.440 --> 0:21:51.560 industry do users or players or viewers think that advertising 0:21:51.640 --> 0:21:54.480 is a positive. One of the only industries I'm aware 0:21:54.520 --> 0:21:57.840 of in the gaming industry, mobile gaming in particular, they 0:21:57.880 --> 0:22:00.000 tell us time and again that they think the advertising 0:22:00.040 --> 0:22:02.600 thing is positive. And not only do they say it, 0:22:02.640 --> 0:22:05.600 we can prove it because games with advertising, um, when 0:22:05.640 --> 0:22:08.840 they're tested against those without, achieve higher levels of engagement 0:22:09.320 --> 0:22:12.040 and what means they're playing more. And so we know 0:22:12.160 --> 0:22:14.199 this is true. I think it's it ought to be 0:22:14.240 --> 0:22:16.320 the envy of everybody in the advertising world. And of 0:22:16.359 --> 0:22:19.600 course it's performance advertising. So our customers what they get 0:22:19.640 --> 0:22:22.720