Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Emily Tech in San Francisco, and this
Speaker 1: is Bloomberg Technology coming up in the next hour. Amazon
Speaker 1: gets absolutely pummeled after predicting a rough holiday shopping season ahead,
Speaker 1: shares falling more than at one point, adding pain to
Speaker 1: an already hurting tech sector. Plus Apple revenue beats estimates,
Speaker 1: but shares drop, the strong dollar and supply issues weighing
Speaker 1: on results. We're gonna have all the details and we're
Speaker 1: getting a glipse into Elon Musk's vision for Twitter, including
Speaker 1: his hope to avoid a quote free for all healthcape
Speaker 1: and I have more on how this could change your feet.
Speaker 1: All that in a moment, but first of vo little
Speaker 1: day on the back of matters, disappointing results in leading
Speaker 1: up to Amazon and Apple out after the bell are
Speaker 1: at Ludlow here to break it all down, add lots
Speaker 1: of action today. Yeah, I mean, and you said it right.
Speaker 1: Amazon getting absolutely punished for the weakness in its fourth
Speaker 1: quarter forecast the holiday quarter. Of course, it's forecast for
Speaker 1: revenue significantly below what the street was looking for a
Speaker 1: hundred and forty to a hundred forty eight billion to
Speaker 1: come in the fourth quarter of the street was looking
Speaker 1: at one five five point five two billion. But also
Speaker 1: the outlook for operating income is weak, and that's putting
Speaker 1: it mildly. We've been saying all day on Bloomberg Television
Speaker 1: that companies in this earning season either live or die
Speaker 1: by their outlook for what's to come in the final
Speaker 1: three months of this year. In comparison to other megact
Speaker 1: text dogs, this is very weak. A mixed bag for
Speaker 1: Apple down one point three and after hours pairing some
Speaker 1: of its earlier losses. But what I would say is
Speaker 1: that it was the iPhone sales that came in weaker
Speaker 1: than expected, along with services. Overall, a beat on revenue
Speaker 1: and a beat on EPs in the quarter. But as
Speaker 1: you talked about this currency headwinds and look at that
Speaker 1: power shares kki K, it's the Investo e t F
Speaker 1: which tracks than has that one hundred. You're gonna have
Speaker 1: to take my word for it, m but being down
Speaker 1: one point four percent in after hours, that is a
Speaker 1: big move for this e t F that tracks and
Speaker 1: has that one hundred so closely so we look ahead
Speaker 1: to Friday's session, where we expect those ripples in the
Speaker 1: market more broadly to be felt by what we're seeing
Speaker 1: in earning season. Meta the story of the day this Thursday,
Speaker 1: biggest drop since February of this year, but the stock
Speaker 1: clothing and closing at its lowest level since January. The
Speaker 1: real concern the growing expenses year on year into three,
Speaker 1: which Meta outlined as being between nine to a hundred
Speaker 1: and one billion dollars, the exact opposite of what investors
Speaker 1: have been calling on Mark Zuckenberg to do. And Twitter,
Speaker 1: let's kind of end on a slightly more bright note,
Speaker 1: m Twitter, we are inching closer and closer to the
Speaker 1: close of this deal. Kurtwagon and I have reported in
Speaker 1: the last ten minutes that Tesla engineering talent have been
Speaker 1: inside Twitter San Francisco headquarters this Thursday, evaluating and assessing
Speaker 1: the underlying code each powers the Twitter platform to help
Speaker 1: you long musk understand it. They've been meetings what they
Speaker 1: called code pairing, where you sit down and work on
Speaker 1: it together. But all the signs from both sides, the
Speaker 1: debt side and the equity financing side, and what I'm
Speaker 1: hearing from sources will get a close of this deal
Speaker 1: Friday is expected. All right, Ed Ludlow, thank you great reporting.
Speaker 1: I want to dig in further to those Amazon results.
Speaker 1: Shares tumbling and late trading due to a holiday quarter
Speaker 1: forecast that came in well below expectations. Rachel Typograph is
Speaker 1: the CEO and founder of mick MC and e commerce
Speaker 1: platform that helps big brands grow, joining us now to
Speaker 1: unpack these results. So not warm and fuzzy outlook for
Speaker 1: Amazon this holiday shopping season. Rachel, what's your take on
Speaker 1: these results? Is this inflation? Is this a broader downturn?
Speaker 1: Looming macro economic factors are impacting everyone at play. At
Speaker 1: the end of the day, net sales for Amazon did
Speaker 1: increase by which was arranged with what Amazon executives were affecting,
Speaker 1: but not what the street wanted. I think a big
Speaker 1: focus was focusing on what would happen During the first
Speaker 1: ever Prime Early Access event that happened in October. Over
Speaker 1: a hundred million items were sold, so all of a sudden,
Speaker 1: Amazon was able to move excess inventory. It also showed
Speaker 1: that despite inflation, consumers were ready to shop as long
Speaker 1: as it was about value and convenience. What we saw
Speaker 1: at Mintmac is that the categories that performed strongest during
Speaker 1: the sale event were health, personal care, and grocery, not
Speaker 1: necessarily consumer electronics toys. So what this continues to show
Speaker 1: is that consumers are willing to spend, but spend on necessities.
Speaker 1: M So it sounds like you're a little more optimistic
Speaker 1: than the typical dooming loom forecast that we've been hearing.
Speaker 1: That said, on the back of not so great results
Speaker 1: from Microsoft, Alphabet Meta could at all get worse than
Speaker 1: we think. So I actually think that Amazon is in
Speaker 1: a very unique position to eat those other companies lunch.
Speaker 1: And the reason why is if you look at Amazon's
Speaker 1: advertising business in this past quarter, it actually grew over
Speaker 1: It's now the third largest player in advertising in the US.
Speaker 1: This is significant, and the reason why is that changes
Speaker 1: in iOS fourteen cook be less Internet that negatively impacted
Speaker 1: Alphabet and Meta are actually benefiting Amazon. Amazon has so
Speaker 1: much first party data, and they own their DSP and
Speaker 1: they've built out self serve capabilities that cater to the
Speaker 1: small medium businesses. They're in a position right now to
Speaker 1: significantly grow their advertising business, which has incredible margins which
Speaker 1: can offset losses in other parts of the business while
Speaker 1: platforms like Alphabet and Eta are struggling. How is this
Speaker 1: impacting the brands that you work with, and obviously you
Speaker 1: help them grow their businesses in part with the you know,
Speaker 1: the help of Amazon and other big e commerce companies. Yeah,
Speaker 1: I mean, we work with huge consumer package good companies,
Speaker 1: and these companies understand that during trying economic times, you
Speaker 1: cannot stop spending. You can look at Procter and Gamble,
Speaker 1: you can look at Coca Cola over their hundred year history,
Speaker 1: they always spend during trying times and they always come
Speaker 1: out ahead. That being said, CFOs that those organizations want
Speaker 1: every single dollar to be able to work really hard,
Speaker 1: and that's why Amazon is in a unique position with
Speaker 1: its advertising business during this time because it has really
Speaker 1: really strong return on investment. And so right now, what
Speaker 1: we're seeing across Fortune one thousand consumer package good companies
Speaker 1: is that they have a dollar to spend their often
Speaker 1: moving it into environments like retail media where there's guaranteed
Speaker 1: r O. I. You have some interesting thoughts about buy now,
Speaker 1: Pay later and how that might have made the current
Speaker 1: consumer uh situation worse. Can you share that? Yeah? Absolutely,
Speaker 1: I mean, if you look at which honestly within commerce
Speaker 1: are anomaly years. We always guide our customers to look
Speaker 1: at two thousand nineteen. That's a much more realistic comp
Speaker 1: But in many consumers were trained to essentially spend money
Speaker 1: that they don't have. As interest rates have risen, all
Speaker 1: of a sudden, consumers are recognizing that that by now
Speaker 1: pay later value proposition will put them in major debt
Speaker 1: and cost them so much. And so I share this
Speaker 1: because there was a lot of fake money that was
Speaker 1: being spent in the ecosystem, and if you remove that
Speaker 1: all of a sudden, very quickly, you'll start to see
Speaker 1: trends that look more like two thin. And so in
Speaker 1: the long run, I actually think this is going to
Speaker 1: be benefit consumers because hopefully you'll prevent them from going
Speaker 1: into deeper debt or debt at all together. All right,
Speaker 1: Rachel Typograph, founder and CEO of Micmac, really interesting insights
Speaker 1: from you. Thank you for sharing all of that with us.
Speaker 1: Sticking with Amazon, The National Labor Relations Board says CEO
Speaker 1: Andy Jasse violated federal labor laws when he told me
Speaker 1: this about workers earlier this year. We happen to think
Speaker 1: they're better off without a union. For a number of reasons,
Speaker 1: including the fact that you know it's it's much harder
Speaker 1: when you have a union to have a direct relationship
Speaker 1: with your manager and to get things done quickly. The
Speaker 1: complaint against Jasse follows a number of big tech union
Speaker 1: votes from workers across the country. In a statement, Amazon says,
Speaker 1: the comments lawfully explain Amazon's views on unism and unization
Speaker 1: and the way it could affect the ability of our
Speaker 1: employees to deal directly with their managers. And they began
Speaker 1: with a clear recognition of our employees right to organize
Speaker 1: and in no way contain threats of reprisal. Meantime, got
Speaker 1: to dig into Apple results now, the tech giant posting
Speaker 1: weaker than expected iPhone and services sales in its latest quarter. Juliasc,
Speaker 1: principal analyst at forest Or Research, with us now, So, Julie,
Speaker 1: why our investors so uh seemingly unhappy with this report?
Speaker 1: I think it's it's hard for me to say why
Speaker 1: investors are seemingly so unhappy with this report? Um, but
Speaker 1: I think one of the things, you know, that I
Speaker 1: look at more broadly is you know it's it's there.
Speaker 1: You know it's not the big quarter. Um. You know
Speaker 1: they got product out. Even though consumers could order products,
Speaker 1: there were still a lot of delays and shipping products.
Speaker 1: They just announced a new tablet line up last week,
Speaker 1: So I think, you know, the third whatever, you know,
Speaker 1: that quarter is going to what it's going to be.
Speaker 1: But I think, you know, it's really important for every
Speaker 1: consumer electronics manufacturers, you know, the holiday season, and that's
Speaker 1: what we've got to look forward to, and that's you know,
Speaker 1: what's most important for them the rest of the year.
Speaker 1: So let's talk about that. Some words from Tim Cook here.
Speaker 1: He says, as we head into the holiday season with
Speaker 1: our most powerful lineup ever, we're leading with our values
Speaker 1: and every action we take and every decision we make,
Speaker 1: we're deeply committed to protecting the environment, securing user privacy,
Speaker 1: strengthening accessibility, and creating products and services that can unlock
Speaker 1: humanity's full creative potential. When you look at the product lineup,
Speaker 1: what's available this holiday season, the way that they're keeping
Speaker 1: you know, many of the prices the same. How optimistic
Speaker 1: are you that they're gonna be able to move a
Speaker 1: lot of products? So, you know, I do have some optimism.
Speaker 1: We just put out a force to just put out
Speaker 1: their holiday forecast and we're predicting we're forecasting an increased
Speaker 1: online spent of about fourteen point six percent. When we've
Speaker 1: surveyed consumers, we have eighteen percent of consumers seeing gonna
Speaker 1: do more this year than last year. On the flip side,
Speaker 1: we still have about forty percent saying that they're going
Speaker 1: to spend less. When we talk to consumers about how
Speaker 1: they're feeling about the economic headwinds, we do have you know,
Speaker 1: depending on the question that you asked, between like thirty
Speaker 1: nine and forty one of US online consumers saying, UM,
Speaker 1: delaying making purchases, UM, I am worried about the economy.
Speaker 1: I there are things that I'm gonna pull back on. UM,
Speaker 1: and then you know, just not making purchases they want
Speaker 1: to make. And then if you ask them to the
Speaker 1: sentiment of how they're doing, there's probably about fifty of
Speaker 1: them that are worried about the economy and worried about
Speaker 1: their money. And definitely, you know, expect to slow down
Speaker 1: purchasing this holiday season. So I think it's you know,
Speaker 1: going to be a question of you know, what is
Speaker 1: that mix? You know, is that eighteen percent the a
Speaker 1: fluid eighteen percent that apple relies on year in and
Speaker 1: year out. Um, but I think it's you know, it's
Speaker 1: it's still gonna be a good holiday season, but it
Speaker 1: may not be what everybody wanted it to be. You know,
Speaker 1: if we were to look at the forecast from earlier
Speaker 1: in the year, it's gonna be a tough season. Meantime time,
Speaker 1: China has historically been a huge market for Apple. Tim
Speaker 1: Cook was really the architect of Apple's China strategy. And
Speaker 1: we're in the middle of of a of a potentially
Speaker 1: history making decoupling of the US and China. How is
Speaker 1: Apple handling that and how much will that impact or
Speaker 1: potentially hurt Apple over the longer term. Yes, so I
Speaker 1: think that's always a hard question, Emily, because I think always,
Speaker 1: you know, the devil is in the details. I think
Speaker 1: one of the things that's been interesting about watching China
Speaker 1: from a consumer standpoint, which is closer to what I follow,
Speaker 1: is a Chinese there's still far more lockdown than we
Speaker 1: are here in the United States than we are in Europe,
Speaker 1: and so there is more consumption of um, you know,
Speaker 1: online media, virtual worlds. We're seeing far more interest in
Speaker 1: things like the metaverse. Uh, and you know in streaming
Speaker 1: media and things, they keep them entertained at home. So
Speaker 1: I think it's it's it's hard for me to say,
Speaker 1: you know, what's going to happen in China, but it's
Speaker 1: a very different environment that we have here in the
Speaker 1: US in terms of, like I said, our mobility and
Speaker 1: how much we're depending on media and electronics and so
Speaker 1: forth that keeps entertained. It can needed to work, you know,
Speaker 1: stay in touch with our friends and family and so forth.
Speaker 1: So it'll be interesting to watch. Meantime, I have to
Speaker 1: ask you about the controversy changes in Apple's ad tracking policies,
Speaker 1: Meta hitting back this week with how much it's hurting
Speaker 1: them and other social media companies. You've got the skeptics
Speaker 1: and the critics out there saying that Apple isn't doing
Speaker 1: this to protect privacy or security, but to add to
Speaker 1: Apple's own bottom line. What's your take, So, you know,
Speaker 1: there's there's a little bit of both, But I don't
Speaker 1: know that anyone's crying for um, you know, half Pool
Speaker 1: or Google's diminished ability to monetize the data of consumers. Right,
Speaker 1: those companies have grown very, very wealthy over the past
Speaker 1: couple of decades by doing so and I think as
Speaker 1: we look forward and we're looking at the values that
Speaker 1: consumers have, you know, Tim Cooke really hits on them
Speaker 1: one after day, that it is about our privacy, it
Speaker 1: is about security, it is about responsibility, it is about
Speaker 1: the environment, it is about trust. And if we look
Speaker 1: at some of the biggest themes that our clients are
Speaker 1: asking about, it's all of those. It's trust, it's the economy,
Speaker 1: it's the green you know, it's being green, it's security,
Speaker 1: it's privacy, and so forth. And I think that's really
Speaker 1: the long game. Do I think that advertising is going
Speaker 1: to contribute in a substantial way to Apple's bottom line
Speaker 1: in the next five years, I'd be surprised if they
Speaker 1: break out that revenue. I'd be surprised if it begins
Speaker 1: to be that big. Well, I was going to hear
Speaker 1: from you, Julie, vice president, principal analyst at Forest for Research,
Speaker 1: Thank you so much. Elon Musk has both tried to
Speaker 1: acquire and walk away from acquiring Twitter. Here's how we
Speaker 1: got here. April four a regulatory filing reveals that Elon
Speaker 1: Musk has rapidly become the largest Twitter shareholder. April fourteen,
Speaker 1: in an sec filing and accompanying tweet, Musk says he
Speaker 1: will buy out stockholders in a cash deal and take
Speaker 1: Twitter private. The offer, valued at forty three billion dollars,
Speaker 1: is a fifty percent premium over the price. In January.
Speaker 1: May seventeen, after Musk and Twitter CEO Para Gang Rowel
Speaker 1: have it out on Twitter, Musk tweets he won't proceed
Speaker 1: unless Twitter can prove bots are less than five percent
Speaker 1: of its users. July eight, Elon Musk backs out of
Speaker 1: the deal, saying in a filing that Twitter made misleading
Speaker 1: representations over the box issue. July twelve, Twitter sues Musk
Speaker 1: to force him to complete the deal. Musk counter suits.
Speaker 1: October four, after a trove of Musks in a circle
Speaker 1: text are revealed in court filings, Musk revives his bid
Speaker 1: at the original offer price, potentially avoiding a courtroom fight.
Speaker 1: October six, the Delaware Chancery judge pauses the court case,
Speaker 1: giving the parties more time to complete a deal. Of
Speaker 1: five pm October twenty eight, hard deadline is set. Otherwise,
Speaker 1: the trial resumes in November. M just some of the
Speaker 1: Musk Twitter saga there that we've been living through for
Speaker 1: most of the year. But finally this deal seems imminent.
Speaker 1: In a tweet addressed to advertisers, Musk said he wants
Speaker 1: to make Twitter a well meantown square with highly relevant
Speaker 1: ads and less of a quote free for all healthscape
Speaker 1: for more. I want to bring in Bloomberg, Sarah Fryer,
Speaker 1: and Sarah. Our latest reporting is that Tesla engineers have
Speaker 1: gone to Twitter headquarters to review some of Twitter's code,
Speaker 1: and also that Twitter's code has been frozen ahead of
Speaker 1: a pending deal. Sort of changes can be made at
Speaker 1: the eleventh hour. What's the latest that we know, Well,
Speaker 1: it looks to us from our sources that these Tesla
Speaker 1: engineers are meant to review the code to help Elon
Speaker 1: musk assess it and think about what needs to be done. Um.
Speaker 1: You know, companies that have been around for as many
Speaker 1: years as Twitter have their their code can always be
Speaker 1: confusing to newcomers. So he's bringing in some trusted fellow
Speaker 1: of folks from his company he also runs UM. And
Speaker 1: then just in terms of the note to advertisers this morning,
Speaker 1: I think that Elon Musk is is trying a little
Speaker 1: bit of um, a reversal of what what has been
Speaker 1: said out there about what he's going to do. I mean,
Speaker 1: we all know he has this free speech plan for Twitter.
Speaker 1: What that's going to mean is is loosening up a
Speaker 1: lot of the moderation standards and bringing on content that
Speaker 1: could make advertisers uncomfortable. So I'm not exactly sure. How
Speaker 1: are you going to do both things at once? As
Speaker 1: they wrote um today for our quality newsletter, you you
Speaker 1: can't have a commercially viable social network, one that advertisers
Speaker 1: want to to buy promotions on, one that people want
Speaker 1: to join without some level of content moderation. There has
Speaker 1: to be some line that he's he's going to draw,
Speaker 1: and he's going to have to figure out what kind
Speaker 1: of balance he is comfortable with. How are Twitter employees
Speaker 1: feeling about this? We know he was at headquarters yesterday.
Speaker 1: There's this picture that was posted if everyone gathered around him,
Speaker 1: some people were smiling, didn't look so, you know, potentially
Speaker 1: doom and gloom. Of course, you only can get a
Speaker 1: few few people in one photo. Um, but how our Twitter?
Speaker 1: How our Twitter employees feeling about this? Given that he's
Speaker 1: you know, there's reports that he might cut up to
Speaker 1: the workforce. He's bringing in engineers from another company to
Speaker 1: look at their code. Well, we we skipped last night
Speaker 1: that he actually told Twitter employees that he does not
Speaker 1: plan to cut seventy five percent of the staff. In fact,
Speaker 1: he he claims he don't know where that number came from.
Speaker 1: Of course, you know, as we previously ported, it came
Speaker 1: from his own presentations to equity investors. So I think
Speaker 1: that there's just a lot of of of putting down
Speaker 1: the hatchet and all of this tension, between months of
Speaker 1: cork fights between Twitter and Elon Musk, you know, coming
Speaker 1: to a place where they can work together, where he
Speaker 1: can work with their partners and advertisers, where he's saying basically,
Speaker 1: I come in peace. You know, I am I Am
Speaker 1: going to be the boss here and and I'm going
Speaker 1: to care about this. And he's comes he comes in
Speaker 1: with this this perspective, or at least he says in
Speaker 1: his letters to appetituers that he's doing this for humanity. Right,
Speaker 1: there's a very grandiose vision for what Twitter can be
Speaker 1: under his law. Um, and I think that that that
Speaker 1: kind of messaging actually does appeal to Twitter employees. That
Speaker 1: they tend to say that when you talk to them,
Speaker 1: they're in it for for the impact you can have
Speaker 1: on the world and our culture and our our you know, politics,
Speaker 1: like you know, they can make a difference. So I
Speaker 1: think that is historically why people have joined Twitter and
Speaker 1: not maybe some other bigger tech companies that might pay
Speaker 1: them better. So it'll be interesting to see if if
Speaker 1: Musk can can actually come in peace, even though he's
Speaker 1: certainly going to have to change quite a bit. He's
Speaker 1: going to have to cut staff and um dramatically pivot
Speaker 1: the company and his vision. So he's in there talking
Speaker 1: to employees, he's walking around with the kitchen sink. Give
Speaker 1: us the TikTok of the next twenty four hours. When
Speaker 1: does this deal get sealed? I mean, we're already reporting
Speaker 1: that arch Capital is going to replace Twitter in the
Speaker 1: SMP five. It's really a matter of time before the
Speaker 1: share stop trading on on the open market. That that
Speaker 1: will be our our first public signal perhaps that the
Speaker 1: deal is done. UM, we're also looking at filings that
Speaker 1: might happen in Delaware that they need. Whatever is being
Speaker 1: signed right now, it's not final until you know. It's
Speaker 1: like when you buy a house, is not final until
Speaker 1: you get the keys. That all these little steps have
Speaker 1: to be done before we can say the deal is closed. Um,
Speaker 1: but it looks very much on track right now. There
Speaker 1: are unlikely to be I say this with the grain
Speaker 1: of salt. Right, it has been quite a zaga, but
Speaker 1: they're unlikely to be sumbling blocks between now and I
Speaker 1: PM on Friday, UM Eastern time, which is when the
Speaker 1: judge Enchance reports that this needs to be completely complete
Speaker 1: by She wants an email in her inbox by by
Speaker 1: PM saying it's dumb, we don't need to go to court. Alright. Well,
Speaker 1: some people might not be getting some sleep tonight. I
Speaker 1: hope one of them is not you. Sarah Friar are
Speaker 1: Blue Brick Tech editor, Thank you so much. Microsoft is
Speaker 1: out with its first ever report on media and pay
Speaker 1: for its workforce. It shows that women do better than
Speaker 1: the US average, but black and Hispanic employees remain underrepresented
Speaker 1: in higher level rules, and Microsoft's employees of color overall
Speaker 1: make less. Tesla facing a criminal investigation to its self
Speaker 1: driving system. Bloombergers learned that the US Justice Department is
Speaker 1: investigating whether the company made misleading claims about tesla cars
Speaker 1: ability to drive themselves down. Jones reporting the SEC is
Speaker 1: probing Tesla as well, coming up. What does the consumer
Speaker 1: want in this inflationary environment. We're gonna be talking about
Speaker 1: more earnings with shopifies Harley Finkelstein, This is Bloomberg. Welcome
Speaker 1: back to Boomer Technology, Emily Check in San Francisco. Let's
Speaker 1: get back to the after hours action Apple and Amazon.
Speaker 1: Back to Ed Ludlow and Ed. Apple investors seem to
Speaker 1: like what they're hearing from Tim this call. They were
Speaker 1: liking what they were hearing from Tim Cook, but then
Speaker 1: Luca Mastreet started speaking and they did not like that.
Speaker 1: The stock at one point up two now through ours
Speaker 1: then dropping suddenly. It seems to be the headlines crossing
Speaker 1: that they're not giving revenue guidance because of the uncertainty
Speaker 1: in the world and the macro picture. Total company revenue
Speaker 1: growth will decelerate compared to the fourth quarter, the fiscal
Speaker 1: fourth quarter, and the forecast here is that mac revenue
Speaker 1: will decline substantially in the holiday quarter. Those are not
Speaker 1: things of the market like you see Apple now down
Speaker 1: by two point six percent. There was a pocket of
Speaker 1: strength in this earning season for Apple, which was the
Speaker 1: mac book executive saying that a lot of buyers of
Speaker 1: the MacBook were first time bias. Perhaps that's because of
Speaker 1: the cutting edge technology. This is what Tim Cook had
Speaker 1: said about that. Our Mac customers have already been raving
Speaker 1: about the power of M two since the arrival of
Speaker 1: our newest MacBook Air and MacBook Pro the summer. They're incredible,
Speaker 1: long battery life, stunning lee rich display, and lightning fast
Speaker 1: speeds are a signature part of the Mac experience and
Speaker 1: helped drive an all time record revenue for Mac during
Speaker 1: the September quarter. So that's the story of Apples so far.
Speaker 1: We'll continue to bring the latest as it crosses the Bloomberg.
Speaker 1: Really the story of Amazon. We know that the investor
Speaker 1: base is not impressed with this outlook for the fourth quarter.
Speaker 1: How often am have you ever heard Amazon say that
Speaker 1: macro economic conditions are tough? That seems like a car
Speaker 1: do you play when earnings are not very good? Hat
Speaker 1: tips editor Nick Turner for that one. An interesting bright
Speaker 1: spoting after hours though Intel, it's actually a little kind
Speaker 1: of bastion of hope in the It's up three. Revenue
Speaker 1: was not good, numbers not great, but there's basically a
Speaker 1: pledge from the company to cut costs, be financially discipline
Speaker 1: to get this company back on track and investors seem
Speaker 1: to be buying the story with that stock high almost
Speaker 1: four percent and after rise, we're keeping on that one too.
Speaker 1: All right, Ad Ludlow, thank you. I want to dig
Speaker 1: in now to shopifys results kind of bucking the trend
Speaker 1: which shares rising over the last couple of days after
Speaker 1: uh their numbers came out. Shopify president Harley Finkelstein with
Speaker 1: us Now, So, Harley, how did you manage to buck
Speaker 1: the trend here? You know, what is it that Shopifies
Speaker 1: doing that? Everyone else sing? Thanks trapping Emily. You know,
Speaker 1: we're we're happy with how things came out. I think
Speaker 1: the big thing that the big takeaway is that the
Speaker 1: role that Schopfli is playing in the lives of the
Speaker 1: millions of merchants is just not of a typical software company.
Speaker 1: One of the things that I mentioned on the call
Speaker 1: quite a bit was this merchant merchant services attach rate,
Speaker 1: and that is really the amount of services and that
Speaker 1: we create for for merchants. And I think the big
Speaker 1: difference here is we're not just the commerce provider anymore.
Speaker 1: Where the retail partner for physical retail where their capital
Speaker 1: partment we've given out now more than four billion dollars
Speaker 1: of cash events and loan store merchants where the logistics partner,
Speaker 1: and with audiences and shop by audiences where now their
Speaker 1: advertising partner in some cases too. And so we saw
Speaker 1: a two point one four percent merchant solutions attachment in
Speaker 1: Q three. That's up from one point nine eight in
Speaker 1: Q two. So that was really good. On the revenue side,
Speaker 1: you know, revenue came in one point four billion, that's
Speaker 1: up twenty two percent year on year and on a
Speaker 1: three year cagreats with fifty two. But I also think
Speaker 1: with the street and investors wanted to see was was
Speaker 1: operating discipline, and we saw adjusted gross profit of six
Speaker 1: over six hundred eighty million dollars that's up eleven percent
Speaker 1: and a three year cagor So when they see that
Speaker 1: plus year on year declining operating expense growth and five
Speaker 1: billion dollars of cash in the balance sheet, I think
Speaker 1: they see the Shopify is a long term, durable company.
Speaker 1: Investors are looking at. This is potentially a sign that
Speaker 1: Shopifies worse days are behind it, quote unquote, it's been
Speaker 1: a tough year. You've had job cuts, it's a very
Speaker 1: tough retail environment. Inflation is weighing on everyone. Would you
Speaker 1: agree with that is the worst over look. I think
Speaker 1: Shopify was this incredible COVID you know, story March, physical
Speaker 1: retail shuts down permanently, and all these physical retailers end
Speaker 1: up moving to needed to move online, and most of
Speaker 1: them did so Shopify. I think what most people missed
Speaker 1: was that the trust we build in the COVID period
Speaker 1: meant that now that stores are reopening, Phystom Stories reopening,
Speaker 1: they're now using us to to replace their existing quinte
Speaker 1: sale systems as well. So that's one issue. The second
Speaker 1: issue is that, you know, talking about sort of the
Speaker 1: macrotin of the consumer. This idea of omni channel we talked,
Speaker 1: I've talked to this on your show before. This is
Speaker 1: now steady state. The best brands, most modern brands, they
Speaker 1: need to sell everywhere online, offline, on social media, on marketplaces,
Speaker 1: and doing so with the retail operating system like Shopify
Speaker 1: gives them the tools to do so. So I don't
Speaker 1: know what's going to happen in terms of the larger
Speaker 1: economy in the future, but certainly, you know, September was
Speaker 1: a good month from a consumer spend. It looks like
Speaker 1: October is pretty good too. But our our our merchants
Speaker 1: and millions of merchants on shop they are getting set
Speaker 1: up for a good holiday season and we want to
Speaker 1: be there to support them on that. You know, investors
Speaker 1: were not happy with Amazon's results there. Holiday forecast was
Speaker 1: not great. You know, what's what's your read on that
Speaker 1: and what it also could bode for Shopify. I mean,
Speaker 1: we're certainly dealing with an inflationary economy right now, there's
Speaker 1: no doubt about that. What I what I what I
Speaker 1: think is certain is that the direct to consumer business model,
Speaker 1: where brands manufacture and sell direct to the consumer, where
Speaker 1: there are no intermediaries, there is more margin there, there
Speaker 1: is more room for inflation. And so I actually think
Speaker 1: that that a direct to consumer model operates better in
Speaker 1: this environment than say a third party reseller might who's
Speaker 1: already operating on on razor thin margins. But so far,
Speaker 1: I mean, you know what you look at companies, uh
Speaker 1: just this quarter, Glossier for example, or Spanks for exam
Speaker 1: Apple or Alo Yoga or Vori for example, like these
Speaker 1: these brands on Shopolate are doing really really well, and
Speaker 1: so you know, we we we think the consumers remain strong,
Speaker 1: but we'll see what the holiday season comes from. The
Speaker 1: most important thing, though, is that we're there to support
Speaker 1: them no matter what they want to do. You had
Speaker 1: me at Viori Carley love it great. Brand Great. Let's
Speaker 1: talk about your logistics and fulfillment network. Obviously you've been
Speaker 1: developing that. Where does development stand now and what are
Speaker 1: your ambitions there when it comes to investing and you know,
Speaker 1: potential acquisitions. Yeah, we've made a lot of progress there.
Speaker 1: I mean, the goal is to build an end to
Speaker 1: end logistics network, so from the second year product is
Speaker 1: made at the factory to to when your your consumer
Speaker 1: gets it, we want to basically we want to handle
Speaker 1: that for for all of our merchants. The key though,
Speaker 1: is that we want to make it so that when
Speaker 1: you use Shopify, Shopify, film and Network, when you use
Speaker 1: our logistics product, you don't have to think about logistics.
Speaker 1: But the key here is something that I mentioned the
Speaker 1: urnings call today. It's called shop Promise. This idea that
Speaker 1: when you use our fulfillment product, you can provide an
Speaker 1: anticipated delivery date with certainty to your consumer. In early
Speaker 1: testing of shop Promise, we know that consumers will spend more,
Speaker 1: they will convert higher when they know when to anticipate it.
Speaker 1: So we're not trying to build out what Amazon did
Speaker 1: this like one day free shipping thing. What we're trying
Speaker 1: to do is make it so that our merchants one
Speaker 1: don't have to think about logistics, it's not a problem
Speaker 1: for them, will take care of it. And second that
Speaker 1: they can provide and anticipate anticipation of when the product
Speaker 1: will get into the hands of consumers. And we made
Speaker 1: a lot of progress there so when that you know,
Speaker 1: we we've disclosed a partnership that we have with flex Board.
Speaker 1: On that first phase from factory to port, from port
Speaker 1: to fulfillment, we acquired a company called Deliver that does
Speaker 1: balancing better than frankly anyone on the planet. And that
Speaker 1: third phase from the fulfillment center to the end consumer,
Speaker 1: that's really where shop Life Fulfillment Network takes really ramps up.
Speaker 1: And and and we have partners you know, all over
Speaker 1: the U S right now that are using our software,
Speaker 1: our robotic technology from six River System and we are
Speaker 1: creating this this this logistics network and we've made a
Speaker 1: lot of progress. Well can you need to do so,
Speaker 1: But the key really is the shop promise to give everyone,
Speaker 1: every small business the same tools that frankly Amazon has
Speaker 1: with things like you know, Amazon Prime, and we think
Speaker 1: we can do that. That's aid in person shopping is
Speaker 1: back and I can imagine back even bigger this holiday season.
Speaker 1: How is Shopify prepared to adapt to that? And are
Speaker 1: and what are you planning for? Yeah, so you're your correct,
Speaker 1: It is back, Um, it is. I mean it went
Speaker 1: away obviously during the pandemic, but you know, we always
Speaker 1: believe the future retail is gonna be retail everywhere. It
Speaker 1: will be a consumer choice. The consumer may want to
Speaker 1: buy online or offline, or on Instagram or snap or
Speaker 1: TikTok or you know in person. So those are the
Speaker 1: tools that we've been building. What you saw in this
Speaker 1: past quarter was we saw thirty increase year on year
Speaker 1: of g m V on point of sale. At the
Speaker 1: same time, we're seeing larger merchants replace their entire point
Speaker 1: of sales systems with Shopify, whether it's Alo Yoga or
Speaker 1: it's James Purse, my favorite brand. But also this quarter alone,
Speaker 1: more than eight excuse me, eight retailers with more than
Speaker 1: twenty five locations replace their existing traditional point of sale
Speaker 1: systems with Shopify. We actually one merchant of ours who
Speaker 1: replaced us in a hundred and seventy five locations, so
Speaker 1: we really are scaling up around Shopify. We call point
Speaker 1: of cell pro to help larger retailers for lots of
Speaker 1: stores really replace and modernize their their in store experience.
Speaker 1: But the idea is this, if you are a consumer
Speaker 1: and you buy something online and then you go into
Speaker 1: a store a week later, they should have the same information.
Speaker 1: It's one set of information, one set of customer data,
Speaker 1: one set of inventory. That this I like the idea
Speaker 1: of omni channel. I think it's going to become like
Speaker 1: talking about the color TV. In a few years from now,
Speaker 1: you don't say color TV, because every TV is fundamentally
Speaker 1: colored TV. That's what omni channel will be. The best
Speaker 1: retailers that are most successful will be omni channel by
Speaker 1: default in the future. All Right, Spify president probably Finkelstein
Speaker 1: and should be should will certainly be an eventful holiday
Speaker 1: season that at least we can say. Ethereum is transitioning
Speaker 1: to low energy consumption at a time of crisis, which
Speaker 1: could maybe should turn in turn bump up demand and adoption.
Speaker 1: Bloomberginney Bossi joins us now from New York to explain.
Speaker 1: Do explain, yeah, because it's interesting. It's not even just
Speaker 1: the energy used to cheer Emily. You're seeing there's a
Speaker 1: lot of questions on what the merge really did for ethereum.
Speaker 1: And the reason we have to look at it is
Speaker 1: are people trading ethereum more on the fundamentals more than
Speaker 1: they are the macro story? And the answer is, if
Speaker 1: you look at it since the merge, it's about flat
Speaker 1: to down, but in the last month period, one month period,
Speaker 1: it is up nearly fifteen per cent. It is up
Speaker 1: pretty significantly over seven day period. So you are seeing
Speaker 1: some positive impacts here on ethereum, and it comes to
Speaker 1: pricing here. One of those reasons is that people believe
Speaker 1: that there is more deflationary impact when it comes to ethereum.
Speaker 1: That means supply is somewhat more pressured here, which would
Speaker 1: have an impact on the pricing. Now, Bloomberg Intelligence also
Speaker 1: has more information about ethereum. They're really positive on the
Speaker 1: trends here in terms of usage over the longer term.
Speaker 1: Remember the reason I bring this up, Emily, is because
Speaker 1: when I talk to my sources, not just in crypto,
Speaker 1: but in the banking industry. They're watching Ethereum really closely
Speaker 1: on what it could mean in terms of, you know,
Speaker 1: the next cryptocurrency that could really help form a backbone
Speaker 1: to the financial system. So the more you see Ethereum succeed,
Speaker 1: the more you see more traditional players also be more
Speaker 1: comfortable with the network itself. Now, I think we should
Speaker 1: also kind of turn our attention to hear to kind
Speaker 1: of what this means for the broader network. I know
Speaker 1: we're gonna talk about this in a second here, but
Speaker 1: you know, the idea here that people are treating more
Speaker 1: on fundamentals and less on the macro story, I think
Speaker 1: is really important to a lot of large investors. And
Speaker 1: there's some questions about how that is starting to form
Speaker 1: in the market, especially as you're seeing some more macro
Speaker 1: hiccups come to the forefront and inflation be as sticky
Speaker 1: as it is. Bitcoin had a couple of strong sessions
Speaker 1: earlier this week, it's back above twenty, and yet you know,
Speaker 1: we've had you know, several guests on this show, uh
Speaker 1: saying it's going to go down to twelve or thirteen.
Speaker 1: You know, is it really do couple from the rest
Speaker 1: of the market. Is this just a blip. The reason
Speaker 1: that it's important to watch this at this point. To
Speaker 1: your point, it's held above twenty thousand. It's faced a
Speaker 1: little bit of pressure in the last twenty four hour period.
Speaker 1: But again that twenty tho levels the psychological level. It's
Speaker 1: an important level to hold on. When you talk to
Speaker 1: folks that were surveyed by by Bloomberg hundreds of people,
Speaker 1: they really say that it's not going to break in
Speaker 1: or out of a very large range. Twelve thousand would
Speaker 1: be lower than that range. So if you do see
Speaker 1: a drop to that point, then you do have a
Speaker 1: lot more psychological issues when it comes to treating bitcoin,
Speaker 1: especially barring any large leveraged event like you saw earlier
Speaker 1: this year with three urrows or anybody else. So to
Speaker 1: your point, if it were to fall that much, it
Speaker 1: would be concerning. But I think you also have to
Speaker 1: take note that you saw ma tech firms report earnings
Speaker 1: that were very disappointing. Yeah, Bitcoin hold up generally in
Speaker 1: the face of that. When bitcoin has been trading correlated
Speaker 1: to the NASDAC for a while. I'll refer back to
Speaker 1: Dan moorehead in a note that he put out with
Speaker 1: Pantara just a couple of days ago, and that crypto
Speaker 1: has really traded a very low correlation to SMP for
Speaker 1: most of its life, but in the last eight months
Speaker 1: it was very correlated to the NASDAC. And he says
Speaker 1: that there are risk assets struggling, but there is a
Speaker 1: world where blockchain does well. And the SMP was down,
Speaker 1: gold was down, treasuries are down, and the Galaxy Crypto
Speaker 1: Index was up seven point three pc in that same
Speaker 1: time frame. So again near term signs of decoupling. Does
Speaker 1: it hold is the main question for the market. All right,
Speaker 1: Bloomberg Shannelly bassik As always appreciate it coming up. More
Speaker 1: earnings over Stock, We're going to talk about that and
Speaker 1: more with its CEO, John's Johnson with us next, This
Speaker 1: is Bloomberg. More earnings today, including over Stock missing estimates
Speaker 1: in the midst of rising inflation. Want to dig into
Speaker 1: the numbers and e commerce trends with Jonathan Johnson, the
Speaker 1: CEO of over Stock. Jonathan, thank you so much for
Speaker 1: joining us. So earnings beat, but we saw revenue drop
Speaker 1: more than What is driving this? Is it inflation? Is it?
Speaker 1: Is it? Uh? This pending downturn? Well, I think it's
Speaker 1: a lot of things. I think it's lapping pandemic numbers
Speaker 1: where we grew really well. It's a very promotional environment. Uh,
Speaker 1: many of our competitors are at too much inventory in
Speaker 1: our working to liquidate that. That makes the environment more difficult.
Speaker 1: And of course there's inflation and rising interest rates. When
Speaker 1: interest rates rise, housing sales go down. That of courts
Speaker 1: of course hurts our business as a home furniture retailers,
Speaker 1: so lots going into it. I think the good news
Speaker 1: is even with all that headwind, Overstock is profitable for
Speaker 1: its tenth consecutive quarter. We've got a very asset light
Speaker 1: business model that works when the jolts help us, and
Speaker 1: that works when the jolts are against us. How is
Speaker 1: Overstock responding? There's some criticism that growth and advertising is
Speaker 1: sort of overshadowing bread and butter retail on the website
Speaker 1: and that there are too many promos. Well, right, you know,
Speaker 1: I think, Uh, in a highly promotional market where competitors
Speaker 1: are holding more and more sales, we have to be there.
Speaker 1: Our Our view is we're always going to provide marked
Speaker 1: value to our customer, which means the best product they
Speaker 1: can afford for the amount of money they're spending really
Speaker 1: quality product. Uh, we promote. We are also in the
Speaker 1: middle of launching a new marketing campaign that associates our
Speaker 1: brand more with home. We are a home furniture and
Speaker 1: home furnishing company. We've got a new ad out that's
Speaker 1: entitled come On, Get Comfy. We've got social media brand
Speaker 1: ambassadors that have just signed on really pushing our mobile app.
Speaker 1: So there's a lot of marketing to try and push
Speaker 1: overstocked over stock sales that are not just promotions. Let's
Speaker 1: talk a little bit about the broader landscape. Though Amazon
Speaker 1: stock was pummeled today. Not uh not a bright forecast
Speaker 1: for the holiday quarter. I'm curious what you make of
Speaker 1: that and if you're you know, expecting to feel similar trends, well, look,
Speaker 1: I think it's a very competitive market, uh, in a
Speaker 1: tough economy, and uh, you know, our top line sales
Speaker 1: were down year over years significantly. We're not pleased with that,
Speaker 1: but I think it's incumbent up on all businesses when
Speaker 1: that happens, to manage to the bottom line and make
Speaker 1: sure you're profitable. The way I viewed today's economy, it's
Speaker 1: like we're hiking down into the Grand Canyon and we're
Speaker 1: gonna have a long hike up at some point. In
Speaker 1: order to hike up that north rim. Every hiker needs
Speaker 1: energy and fuel, and for a retailer, that need means
Speaker 1: you need lots of inventory and a strong balance sheet.
Speaker 1: Overstock has both. I think that bodes well for us
Speaker 1: in the future. Let's talk about your inventory, because you've
Speaker 1: been diversifying your products, and I'm curious how well that's
Speaker 1: working out. You know, for example, when when Amazon diversified
Speaker 1: into more products, return rates went up. There now a
Speaker 1: machine at accepting returns. Are you getting more returns? And
Speaker 1: how would you say your return operation compares. We've actually
Speaker 1: been focusing. We went from being a general merchandiser and
Speaker 1: over six quarters we got rid of everything that wasn't
Speaker 1: related to home, so we're really a furniture and home
Speaker 1: furnishings company. During the last three years, we have doubled
Speaker 1: the amount of home product we have on site. That
Speaker 1: doesn't mean tens or hundreds of thousands more, it means
Speaker 1: millions of more products. We have always been good at
Speaker 1: managing returns on home furniture and furnishing a difficult thing
Speaker 1: to do, and we think it's one of the characteristic
Speaker 1: that sets us apart. We are all about easy delivery
Speaker 1: and support for our customers. They know that if they
Speaker 1: buy something for us, they're gonna have a good experience
Speaker 1: on the back end, It's going to be delivered well
Speaker 1: and on time, and if for any reason they want
Speaker 1: to return it, we're good at facilitating that return and
Speaker 1: we're getting even better through a partnership we're piloting with
Speaker 1: ups right now. Give us a status update on supply
Speaker 1: chain issues? Is the worst behind us? How are those
Speaker 1: going to be felt through the holiday quarter? First off,
Speaker 1: I think most retailers are flushed with inventory. We're flushed
Speaker 1: with inventory too, so that that piece of the supply
Speaker 1: chain is not a concern. If customers are worried about
Speaker 1: getting product on time for the holidays, if you come
Speaker 1: to our site and you push click to order or
Speaker 1: pick packing and shipping that day or the next, so
Speaker 1: there's no worries there. I think on the supply chain front,
Speaker 1: UH stuff being manufactured overseas, that supply chain is running
Speaker 1: fairly smoothly. Container costs have gone way down, the ports
Speaker 1: aren't colg like they were before the police where they
Speaker 1: are still supply chain constraints is from the distribution center
Speaker 1: to the customer, and that's mostly in costsom were expensive
Speaker 1: because of higher fuel, more asset sorreal search arges. That
Speaker 1: means it's either being passed on to the customer or
Speaker 1: in our case often eating as part of our gross margins.
Speaker 1: So what are going to be the most popular items
Speaker 1: this holiday season? And it's going to get too folks
Speaker 1: on time. We got a lot of inventory. One place
Speaker 1: that we're particularly deep our giftable products. We've got lots
Speaker 1: of home appliances, big brand names like kitchen Aid, Mr Coffee, Queens,
Speaker 1: and art. These tend to be highly giftable items. We've
Speaker 1: got lots of them. The other products that have been
Speaker 1: selling well recently are things to do with home improvement.
Speaker 1: Is home sales are down and people realize they're staying
Speaker 1: in their home and they want to spruce it up.
Speaker 1: We've been selling lots of home improvement products, things like
Speaker 1: bathroom vanities. Alright, some gift ideas too that I hadn't
Speaker 1: thought of. Jonathan Johnson, CEO of over Stock, thank you
Speaker 1: so much, uh for joining us. And that does it
Speaker 1: for this edition of Bloomberg Technology. Coming up Friday, We've
Speaker 1: got Ross Gerber. He will be talking about Elon Musk
Speaker 1: and more. Of course, a big Tesla investor who wasn't
Speaker 1: such a fan of Twitter. And of course we'll give
Speaker 1: you an update on the deal. This is Bloomberg