WEBVTT - Bloomberg Markets: May 24

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleven frio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg twelve hundred to San Francisco,

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<v Speaker 1>Bloomberg nine six to the country, Sirius XM Cho one

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<v Speaker 1>nineteen and around the globe the Bloomberg Radio Plus app

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<v Speaker 1>and Bloomberg dot Com. This is Bloomberg Markets. Do you

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<v Speaker 1>see across the Bloomberg Welcome h P results. Yes, we're

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<v Speaker 1>gonna talk about it. We ought to. It's an amazing

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<v Speaker 1>story of the company, and you know the heart of

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<v Speaker 1>the five after ours, big move, big changes. Ah, people

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<v Speaker 1>taking those numbers. But first let's get the latest in

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<v Speaker 1>business news headlines from Charlie Pellow. All right, I thank

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<v Speaker 1>you very much. Corey Johnson got to begin with HP.

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<v Speaker 1>As Carol mentioned, up by roughly five percent after ours.

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<v Speaker 1>HP Inc. Showed accelerating sales momentum in the second quarter,

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<v Speaker 1>delivering growth in both PCs and printers for the first

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<v Speaker 1>time in more than a half decade, revenue up six

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<v Speaker 1>point nine percent to twelve point four billion in the

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<v Speaker 1>period ending in April, topping analy assessment. It's for the

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<v Speaker 1>fourth consecutive quarter, and again we've got more on the

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<v Speaker 1>HP story coming up in just a moment right here

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<v Speaker 1>on Bloomberg Markets. China's state owned company is already grappling

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<v Speaker 1>with a leverage crackdown, now face the risk of higher

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<v Speaker 1>financing costs overseas after Moody's Investors Service cut the nation's

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<v Speaker 1>debt rating for the first time since nine But big picture,

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<v Speaker 1>what about sustaining growth in China's economy. Mike Schumacher has

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<v Speaker 1>head a great strategy at Wells Fargo Securities doesn't work well.

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<v Speaker 1>You think about an eleven trillion economy growing at seven

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<v Speaker 1>percent per year, what's at seven seventy billion. Think about

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<v Speaker 1>the US nineteen trillion two percent three eighty billion per year.

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<v Speaker 1>China's growing at twice our clip in dollar terms. You

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<v Speaker 1>can't continue to grow at seven plus with that kind

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<v Speaker 1>of size. So I agree it's a political problem, but

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<v Speaker 1>at some point the math doesn't work out well. So

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<v Speaker 1>you've got to be able to condition the population to

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<v Speaker 1>accept five six percent growth. I do think the point, though,

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<v Speaker 1>is that Germany's a Linda and Praxe Air have agreed

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<v Speaker 1>on a blueprint for their combination, and leaving the fate

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<v Speaker 1>of the proposed deal in the hands of a Linda

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<v Speaker 1>supervisory board that remains divided on the transaction and has

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<v Speaker 1>already derailed the plan once before. Practs Air shares up

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<v Speaker 1>today by one percent. SMP five hundred index at a

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<v Speaker 1>record up five to twenty four oh four, up three

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<v Speaker 1>tenths of one percent down. Industrial is up seventy four,

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<v Speaker 1>up four tenths of one percent, and has stack up

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<v Speaker 1>twenty four again. There are four tenths of one percent

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<v Speaker 1>on this headline to pass along from the Bloomberg Professional

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<v Speaker 1>Service CBO releasing the score of the House passed healthcare bill.

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<v Speaker 1>I'm Charlie Pellett. That's a Bloomberg business flash. All right,

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<v Speaker 1>Charlie Pellet, thank you so much. You're listening to Bloomberg

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<v Speaker 1>Markets on Bloomberg Radio. It's the ink appropriately name because

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<v Speaker 1>it's the ink printing part of the HP business that

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<v Speaker 1>was supposed to be a boring, not sexually part. Reboarding earnings. Uh,

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<v Speaker 1>and they does look pretty good. To help us figure

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<v Speaker 1>out what exactly that a non stornt of Austin joins

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<v Speaker 1>us right now from Bloomberg intelligencis are senior or something

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<v Speaker 1>left and hardware analysts and now these numbers are strong,

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<v Speaker 1>and we've got you know, actual growth seven percent sales

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<v Speaker 1>growth in the year of year business, clean quarter across

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<v Speaker 1>the board. We knew that the PC business was going

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<v Speaker 1>to be strong. What what was I was really impressed

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<v Speaker 1>by was the print supplies business, where declines have been abating,

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<v Speaker 1>but this time they actually posted growth. Remember that this

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<v Speaker 1>is that portion of the business which you know when

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<v Speaker 1>you combine printing and print supplices about four point seven

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<v Speaker 1>four point seven billion business that was two percent year

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<v Speaker 1>on year and supplies were up two percent. And this

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<v Speaker 1>is a great margin business. Not like PCs which are

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<v Speaker 1>mid single digit margin business. This is twenty plus percent

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<v Speaker 1>margin business. So the fact that they posted revenue growth

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<v Speaker 1>here the supply business, which was holding them back, that

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<v Speaker 1>did well. Um for your guidance on the bottom line

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<v Speaker 1>is good. Not much to complain about. We knew that

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<v Speaker 1>component costs were going up. They did miss gross margins

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<v Speaker 1>by a whisper, but again in the grand scheme of things,

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<v Speaker 1>this was a very very well executed quarter. You like

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<v Speaker 1>this company, right, I do? I mean the fact, look,

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<v Speaker 1>this is a PC and printer business, Okay, so you

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<v Speaker 1>have to get comfortable with the fact that this is

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<v Speaker 1>a declining unit market. And they have done and this

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<v Speaker 1>is the this is the these are the cards they

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<v Speaker 1>have been dealt. But with with those cards, they boasted

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<v Speaker 1>really good business, their executioners solid, the gaining share, the

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<v Speaker 1>principalized business. They've seems to have turned the corner. Will

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<v Speaker 1>C filled stick and component costs of going up like crazy,

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<v Speaker 1>d RAM and A nand memory which are a substantial

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<v Speaker 1>portion of PCs have gone up pretty substantially in the

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<v Speaker 1>last seven quarters. To execute in and keep it almost

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<v Speaker 1>gross pointing neutral in that kind of an environment is

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<v Speaker 1>a testament their execution. That's interesting because the other side

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<v Speaker 1>of the business is not doing so well at all,

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<v Speaker 1>the HP side of the business. Yeah. So look there.

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<v Speaker 1>When we walked out of the analyst day two years

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<v Speaker 1>ago when the UH the split was about to be consummated,

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<v Speaker 1>one of the impressions that I walked away with was

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<v Speaker 1>that hb Q was an interesting business that was in

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<v Speaker 1>the doldrums and had the potential turnaround versus HP, which

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<v Speaker 1>was executing well but had the potential to fall apart

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<v Speaker 1>given the nature of the cloud. Now fast forward UH

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<v Speaker 1>six quarters later, hb executed really well, gained incredible amount

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<v Speaker 1>of share, particularly at Microsoft and on the Azure cloud

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<v Speaker 1>versus hb Q continued to not do so well. Now

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<v Speaker 1>the PC businesses is turning around. They've cut some costs,

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<v Speaker 1>managed margins, and they've improved the print supplies business. So

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<v Speaker 1>hb Q is doing well and thus far, the PC

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<v Speaker 1>table wind still remains versus the cloud headwind for HP

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<v Speaker 1>still remains. We think that's a pretty big threat for

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<v Speaker 1>them on that side. I thought the cloud business is

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<v Speaker 1>so competitive right now, so it makes it tough for

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<v Speaker 1>everybody involved. Let me just ask you though about HP

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<v Speaker 1>the printer, the you know that business HPQ it's this year.

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<v Speaker 1>Is that indicative and on of people just initially kind

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<v Speaker 1>of underestimating that it could do actually okay and even

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<v Speaker 1>better than okay? Or is it indicative that that it

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<v Speaker 1>is a good business. I would say it's a great

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<v Speaker 1>execution story in UM in a week overall context, I mean,

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<v Speaker 1>you have to get comfortable with the PC and the

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<v Speaker 1>printer business both are secular, low single digit declined businesses.

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<v Speaker 1>Within that context, this is a great execution story. Right

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<v Speaker 1>Nobody wants to hear the part that hey, PCs are

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<v Speaker 1>a great place to be. How sexy is that story

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<v Speaker 1>um printers, we are secular early structurally reducing the amount

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<v Speaker 1>of stuff we print within that environment, how do we

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<v Speaker 1>improve the number of printers sold, how do we improve

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<v Speaker 1>the revenue the sp of the printers sold? And even

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<v Speaker 1>if we can't do those things, how do we make

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<v Speaker 1>sure that you buy more turner? Right? We just oxymoronic

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<v Speaker 1>and something to some way, But how do we improve

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<v Speaker 1>the profitability of that context within that? They've done really well.

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<v Speaker 1>It's it's interesting. It's also interesting the financial performance here

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<v Speaker 1>of just the income statement just works. It's got kind

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<v Speaker 1>of nice gross margins for business that shouldn't have such

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<v Speaker 1>good gross margins. And then keep pulling it off. Ye

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<v Speaker 1>clean execution story. Corey well Well told printers eventually go away.

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<v Speaker 1>I mean, we used to talk about a paperless news room.

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<v Speaker 1>That hasn't happened. I print a lot of stuff still

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<v Speaker 1>at home printers. Printers was more right. One of the

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<v Speaker 1>things that's trying to do is commercial t D printing,

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<v Speaker 1>banner printing, big image printing, and printing is reduced. They

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<v Speaker 1>don't go printing reduces doesn't go away. Not too shabby.

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<v Speaker 1>It's a mover, Yes, it's a mover. It's gonna be

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<v Speaker 1>when we're gonna be watching and shown of Austin also

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<v Speaker 1>a mover, part of our Boomberg Intelligence teams, senior semiconductor

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<v Speaker 1>and hardware analysts, and of course b I is our

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<v Speaker 1>in house group of analysts or everybody you are listening

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<v Speaker 1>to Bloomberg Market's Carol Master, Corey Johnson, we've got to

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<v Speaker 1>check in your top as his stories in just a

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<v Speaker 1>moment right here on Bloomberg Radio. It's a world of

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<v Speaker 1>national news headlines with Bloomberg News anchor Adrian Mitchell and

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<v Speaker 1>onndon and one Studios in Washington, d C, Corey and Carol.

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<v Speaker 1>Five suspects are now in custody as police confirm their

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<v Speaker 1>investigation at the Manchester suicide bombing is focused on a network.

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<v Speaker 1>The father of British born Salmon Abody says his son

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<v Speaker 1>is innocent. He spoke to the AP from Libya hours

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<v Speaker 1>before he and a brother of Abbady were arrested. The

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<v Speaker 1>Washington Post reports the brother is suspected of planning an

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<v Speaker 1>attack in Tripoli. Republicans aren't exactly falling in line to

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<v Speaker 1>and worse, the President's budget proposal, and Budget Director mc

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<v Speaker 1>mulvaney faced an onslaught of criticism from Democrats over its

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<v Speaker 1>cuts two benefits for the poor. Bloomberg's Serf Chapman reports,

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<v Speaker 1>well Vaney heard the budget plan denounced by Representative Barbara

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<v Speaker 1>Lee of California. Never before, really have I seen such

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<v Speaker 1>a brule and morally bankrupt budget. Well Vaney defended cuts

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<v Speaker 1>and food stamps, healthcare, housing, and education hasn't necessary to

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<v Speaker 1>boost economic growth. What about the standard of living for

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<v Speaker 1>my grand children who aren't here yet, who will end

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<v Speaker 1>up inheriting thirty train dollars in death, fifty hutter train dollars.

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<v Speaker 1>Who's going to pay the bill? Congressman, My unborn grandchildren

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<v Speaker 1>are paying for it, and I think that is morally bankrupt.

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<v Speaker 1>Well Vaney said he was also trying to be fair

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<v Speaker 1>to middle income taxpayers who get the bill but not

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<v Speaker 1>the benefits or if Chapman Bloomberg Radio Washington. Just ahead

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<v Speaker 1>of Memorial Day road trips, the typical fifty cent spring

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<v Speaker 1>surgeon gas prices hasn't happened. Triple A says the average

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<v Speaker 1>prices now to thirty six a gallon, within eight cent

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<v Speaker 1>of a five year low for the date. Last month,

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<v Speaker 1>the Petroleum Institute says consumption hit a record for April.

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<v Speaker 1>Global news twenty four hours a day, powered by more

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<v Speaker 1>than twenty six hundred journalists and analysts in more than

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<v Speaker 1>a hundred twenty countries. I'm Adrian Mitchell.