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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence

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Speaker 1: with Alex Steina and Paul'swhenie.

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Speaker 2: The real app performance has been the US corporate high yield.

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Speaker 3: Are the companies lean enough? Have they trimmed all the fats?

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Speaker 2: The semiconductor business is a really cyclical business.

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Speaker 1: Breaking market headlines and corporate news from across the globe.

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Speaker 3: Do investors like the M and A that we've seen?

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Speaker 2: These are two big time blue chip companies.

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Speaker 3: The window between the peak and cut changing super fast.

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Speaker 1: Bloomberg Intelligence with Alex Steinall and Paul's Whennie on Bloomberg Radio.

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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big

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Speaker 2: business stories impacting Wall Street and the global markets.

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Speaker 3: Each and every week we provide a DEPP research and

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Speaker 3: data on some of the two thousand companies and one

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Speaker 3: hundred and thirty industries our analysts cover worldwide.

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Speaker 2: Today, we'll break down an internal review of the IT

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Speaker 2: company super Microcomputer.

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Speaker 3: Plus we'll discuss how the automaker Stilandas is faring after

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Speaker 3: the early departure of its CEO.

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Speaker 2: But first we begin with a big deal in private credit.

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Speaker 3: This week, Blackrock agreed to buy HPS Investment Partners in

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Speaker 3: an all stock deal valued roughly twelve billion dollars.

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Speaker 2: It's a purchase that will propel the world's largest asset

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Speaker 2: manager into the highest ranks of private credit.

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Speaker 3: For more. We are joined by Neil Sipes, Boomberg Intelligence

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Speaker 3: financials analyst.

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Speaker 2: We first asked Neil where exactly this purchase leaves black.

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Speaker 4: Rock top five in private credit now and notably top

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Speaker 4: five in alternatives as a whole. And so you know,

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Speaker 4: they've long been top ten in the space, you know,

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Speaker 4: rivaling the names like a Blackstone Apollo. But when you

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Speaker 4: think about Blackrock, you're thinking about eleven and a half

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Speaker 4: trillion dollars in assets, a couple hundred billion in alternatives.

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Speaker 4: That's pretty small piece of the pie for them, So

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Speaker 4: you don't necessarily think of them as a main leader

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Speaker 4: in the alternative space, in private market space. But what

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Speaker 4: we've seen so far this year is three transactions GIP,

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Speaker 4: Prequin now HPS, and they're really pushing into this space

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Speaker 4: because that's where the growth is and that's where the

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Speaker 4: fees are.

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Speaker 2: It's just a phenomenal to you can do with all

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Speaker 2: stock as well. How cool is that if you're Blackrock,

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Speaker 2: who's HPS or the ex Goldman guys. Is that kind

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Speaker 2: of how big are they in the space.

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Speaker 4: Yeah, so they're about one hundred and fifty billion now,

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Speaker 4: and like you noted, I mean Blackrock had about eighty

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Speaker 4: billion in private credit prior to this, so it really

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Speaker 4: more than doubles that business for them. And I think

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Speaker 4: you know what you're seeing a little bit of Blackrock

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Speaker 4: is sort of this catch up game. As I just noted,

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Speaker 4: those three transactions really geared towards the private markets this year,

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Speaker 4: and they're paying, you know, heftier prices for these types

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Speaker 4: of transactions. I noted this is where the growth is,

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Speaker 4: this is where the fees are. You know, the twelve

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Speaker 4: billion dollars price tag for HPS, that's about eight percent

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Speaker 4: of assets thirty times you know, fee related earnings. So

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Speaker 4: they're sort of playing catch up in this space. And

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Speaker 4: when you think about HPS, one hundred and fifty billion

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Speaker 4: is not small, but that's about one percent of Blackrock

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Speaker 4: as a whole, right, But when you look at the

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Speaker 4: fees that HPS generating, that's almost five percent of what

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Speaker 4: BlackRock's revenue is. So you can sort of think about

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Speaker 4: the dichotomy there of aligning the organic growth opportunity more

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Speaker 4: with the revenue opportunity.

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Speaker 3: Are there more hps's out there?

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Speaker 5: There may be.

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Speaker 4: I don't think we're gonna I mean, I won't say

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Speaker 4: I don't think we're gonna see Blackrock do anymore, because

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Speaker 4: they are showing that they're taking initiative to really beef

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Speaker 4: up in a space that you could argue they were

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Speaker 4: a little bit under indexed versus some of their traditional

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Speaker 4: competitors in the space. So we'll be interested to see

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Speaker 4: what is potentially coming down the road. But again, let's

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Speaker 4: remember that they are sort of digesting a handful of

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Speaker 4: transactions that are pretty sizable in what we'll call transformational

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Speaker 4: for a business that you're typically thinking of sort of

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Speaker 4: the index and passive type products.

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Speaker 2: At the end of the day, who competes with black

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Speaker 2: Rock really aren't they just full?

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Speaker 3: Okay, what is Blackron now at this point?

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Speaker 6: Yeah?

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Speaker 2: What is Blackrock now?

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Speaker 1: With this one?

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Speaker 4: Blackrock is I guess I'll say everything sort of in

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Speaker 4: the asset many.

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Speaker 3: There are dinner thingsgiving and like someone's like, hey, what's

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Speaker 3: Blackrock and you're like, it's everything.

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Speaker 4: Yeah, it's a little bit of everything now in the

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Speaker 4: asset management space, and again I think they're really filling

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Speaker 4: out that space where they were maybe least index two

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Speaker 4: and you know, really focusing in on where the fees are.

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Speaker 4: And that's what this private credit transaction is going to do.

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Speaker 3: So are some of the big private equity guys too,

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Speaker 3: like Blackstone et cetera. Are they also just massive asset

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Speaker 3: managers now too, rather than just private equity guys.

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Speaker 4: So they are, and I mean they're sizable, and it's

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Speaker 4: it's a different realm that we're talking about than black

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Speaker 4: Rocks eleven trillion. We're talking about single digit trillions and

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Speaker 4: high hundred billions. But again, you know that size is

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Speaker 4: not necessarily representative of the fees that these that these

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Speaker 4: firms are generating. So you think about the names like

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Speaker 4: a Blackstone, Apollo, Ares, KKR, Carlisle, all of those.

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Speaker 5: As a group.

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Speaker 4: I mean, that's where that explosive growth has been in

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Speaker 4: asset management, aside from that passive, low fee type space.

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Speaker 4: That's right, You're seeing those longer duration assets, those private

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Speaker 4: markets really being where investors want to allocate their cash.

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Speaker 4: You look at the expectations for allocations to increase pretty

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Speaker 4: much broadly across the spectrum in private markets. That's where

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Speaker 4: some of those will call them smaller, more specialized alternative managers.

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Speaker 3: Are winning our Thanks to Neil Siites Bloomberg Intelligence Financials Analysts.

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Speaker 2: Each week we look at research from Bloomberg and EF

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Speaker 2: previously known as New Energy Finance.

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Speaker 3: They're the team of Bloomberg that tracks and analyzes the

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Speaker 3: energy transition from commodities to power, transport, industries, buildings, and

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Speaker 3: ag sectors.

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Speaker 2: This week we took a look at BNF's outlook for

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Speaker 2: US natural guests from what we were joined by Enrique

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Speaker 2: Gonzales b n EF, head of US Gas Research.

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Speaker 3: First we asked n Rique where we stand now with

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Speaker 3: gas and where the US will stand under Donald Trump administration.

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Speaker 7: The US is the largest exporter of lergy in the world,

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Speaker 7: and in the short term we have a considerable amount

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Speaker 7: of new capacity coming online and that was bound to

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Speaker 7: happen regardless of whether we had Trump or Camela in office.

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Speaker 7: But yeah, we have Plaque Mindes and the Corpus Christie

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Speaker 7: Stage three expansions coming in this December or early next year,

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Speaker 7: and then the Golden Pass LNG terminal as well, so

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Speaker 7: giving us more than seven BC of the seven billion

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Speaker 7: cubic feet per day of new export capacity out of

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Speaker 7: the US, so further consolidating that role. And then where

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Speaker 7: the change could be more significant is in the medium

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Speaker 7: term with the terminals coming later this decade for it,

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Speaker 7: and especially with the discussions of Trump lifting the DOE

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Speaker 7: Non Free Trade Agreement Permit post because this is a

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Speaker 7: key permit that the terminal terminals need to be able

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Speaker 7: to reach their final investment decision. And there's a few

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Speaker 7: high profile projects there such as the the CPTW expansion

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Speaker 7: from ben through Global and then we also have a

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Speaker 7: subine Pass Corpus Christie expansion alongside other projects that are

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Speaker 7: targeted for them.

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Speaker 3: So basically, if you're not exporting energy to a free

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Speaker 3: trade agreement country, then you're no longer allowed to exit

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Speaker 3: to do it. But many said that was like an

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Speaker 3: export thing that they were doing that really wasn't going

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Speaker 3: to hole. It was just an election thing. So that's

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Speaker 3: what we're referring to. So that would really help get

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Speaker 3: a lot more investment in.

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Speaker 2: There is the expectation in your world of natural gas

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Speaker 2: that a Trump administration combined with republic controlled Congress, this

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Speaker 2: is going to be the time to get stuff done.

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Speaker 2: Whether it's a pipeline or refinery or anything.

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Speaker 4: You know.

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Speaker 7: Going back to the idea of the LNG terminals, it's

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Speaker 7: definitely yeah, you have more support to get this project. Still,

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Speaker 7: I think moving to the idea of pipelines new like

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Speaker 7: interstate pipelines, that's a bit there needs to be more change.

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Speaker 7: It's a bigger conversation, but there's definitely more momentum than

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Speaker 7: we would have otherwise had.

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Speaker 3: So to that point, and it's a good one that

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Speaker 3: you make because a lot of the gas that we

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Speaker 3: have is in Appalaysia and it's really hard to get

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Speaker 3: that gas out. It's in the northeast, you don't have

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Speaker 3: a lot of takeaway capacity, and you do get a

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Speaker 3: ton of gas from also shale productions, so within New

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Speaker 3: Mexico as well as Texas. So there is that What

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Speaker 3: do you think we're going to be able to do

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Speaker 3: in terms of getting pipelines in to get gas out

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Speaker 3: of Appalachia.

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Speaker 7: Yeah, so I would say that's not my subject matter

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Speaker 7: expertise the policy behind the pipelines, but I think there

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Speaker 7: is space to have more discussions about what can be

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Speaker 7: done to get some more gas from But if.

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Speaker 3: We don't, we wind up getting a glut at some

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Speaker 3: point of gas because there's just too much, we can't

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Speaker 3: get it out. Therefore, gas prices here in the US

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Speaker 3: kind of really sink.

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Speaker 7: Yeah, and when we've already seen this happen, especially this

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Speaker 7: early November when the weather was pretty warm, I've seen, Yeah,

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Speaker 7: Appalachia can't really send more gas out, there's no internal

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Speaker 7: demand in the basin. And then we've seen producers actually

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Speaker 7: curtel production because the prices have dropped below the level

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Speaker 7: they need to continue producing even from existing wells, and

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Speaker 7: they're well below the break events in some cases for

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Speaker 7: new wells. So we've already seen that have an impact

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Speaker 7: in production in Appalaysia and as well in other parts

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Speaker 7: of the country. You have the Haynes Bill as well,

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Speaker 7: that's closer to the Gulf and where a lot of

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Speaker 7: the rhetoric is that we the production to meet the

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Speaker 7: demand from these new allerg terminals is going to come

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Speaker 7: from there due to the location. But they do have

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Speaker 7: higher break events and higher costs than in the Northeast.

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Speaker 5: Coal.

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Speaker 2: What's going on with coal and what do you expect

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Speaker 2: under Trump administration? Happened to the coal industri in this country.

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Speaker 7: Yes, so there's been a a lot of discussion now

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Speaker 7: about potentially rolling back some rules from the EPA or

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Speaker 7: just having or being easier on pollution from coal. I've

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Speaker 7: seen I think it was Duke Energy as well discuss

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Speaker 7: the possibility of keeping some of their coal plants operating

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Speaker 7: for longer. So that is a possibility and what it

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Speaker 7: could mean for gas and for power sector gas consumption

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Speaker 7: could be pretty interesting because over the last ten years,

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Speaker 7: one of the main roles of gas in the power

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Speaker 7: sector has also been replacing, right this retiring cult coal plants,

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Speaker 7: which has been a benefit in the sense that we've

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Speaker 7: seen lower emissions as well, but this could be more difficult.

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Speaker 7: If the coal plants stay operating longer, you might not

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Speaker 7: see gas taking over in the same way it had been.

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Speaker 3: That's interesting. That would remove like this very cannibal market

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Speaker 3: function basically for gas and coal is the coal is

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Speaker 3: it green coal, is it like nice coal that we

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Speaker 3: can all get behind, or is it still dirty coal

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Speaker 3: that eventually is just going to have to be phased out.

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Speaker 7: Yeah, and there's a lot of discussion as well about

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Speaker 7: integrating carbon capture for coal, try to make make it cleaner,

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Speaker 7: but yeah, the economics are difficult, and especially in the

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Speaker 7: short term, we probably won't see a lot of that happen,

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Speaker 7: so it could result in emissions even increasing.

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Speaker 2: Is there the expectation on our Trump administration is that

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Speaker 2: just a whole move to renewables will slow down and

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Speaker 2: maybe slow down materially or is it just too much momentum.

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Speaker 7: Yeah, No, definitely parts for example of the Inflation Reduction

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Speaker 7: Act or are repealed or there's some changes in that sense,

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Speaker 7: we could see slower deployment of renewables. All leagues in

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Speaker 7: vnf IN or clean energy teams look in a lot

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Speaker 7: of detail into this, but yeah, this could lead to

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Speaker 7: an interesting dynamic where you have less coal retirements, but

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Speaker 7: maybe you have a slower deployment of renewables, where gas

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Speaker 7: maybe doesn't grow because there's less coal, but takes over

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Speaker 7: some of this generation that would be needed that would

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Speaker 7: otherwise come from renewables. So I think there's a very interesting,

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Speaker 7: very interesting analysis and a conversation to have about how

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Speaker 7: this gap is going to look.

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Speaker 2: Thanks to Enrique Gonzalez b n EF, head of US

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Speaker 2: Gas Research.

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Speaker 3: Coming up, we're going to break down potential scenarios related

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Speaker 3: to President like Donald Trump's proposed tear ups.

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Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

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Speaker 2: depth research and data on two thousand companies in one

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Speaker 2: hundred and thirty industries. You can access Boomberg Intelligence to

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Speaker 2: be a big on the terminal Paul Sweeney and a

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Speaker 2: Malex Steel and.

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Speaker 3: This is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Afocarplay and Android Auto

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Speaker 3: We begin in the tech space with the it company

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Speaker 3: super Micro Computer.

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Speaker 2: This week's shares a super Micro jump after the company

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Speaker 2: sat an independent review of its business found no evidence

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Speaker 2: of misconduct.

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Speaker 3: However, the re you did recommend the appointment of new

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Speaker 3: top financial and legal leadership, including a new CFO, chief

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Speaker 3: compliance Officer, and general counsel.

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Speaker 2: For more. We were joined by Wouchin Hope, Bloomberg Intelligence

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Speaker 2: Senior Technology aannelists.

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Speaker 3: You first asked Wujin to remind us what the problem

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Speaker 3: is that super Micro has been trying to correct a.

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Speaker 5: Couple of things.

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Speaker 8: There was a short sell of report back in August,

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Speaker 8: citing that there was some fraud you know, with internally,

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Speaker 8: and essentially because of that, there was an internal investigation

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Speaker 8: and they delighted their ten K and ten Q filings.

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Speaker 8: What super Micro is essentially saying their internal investigation has

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Speaker 8: found nothing or no evidence of fraud, but the ten

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Speaker 8: K and ten Q filings still have yet to be filed.

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Speaker 2: But it's not every day that a big four accounting

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Speaker 2: firm does what happened here basically says, you know, they

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Speaker 2: really can't rely upon the management team and they and

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Speaker 2: they just walk away from an account that doesn't happen.

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Speaker 8: Yeah, no, Paul, I think between your lifetime and my

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Speaker 8: lifetime in the financial industry, probably four or five.

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Speaker 5: Times, right, So, yeah, it doesn't happen. It doesn't happen.

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Speaker 8: They did find an alternative bdo USA, and you know,

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Speaker 8: quite quite frankly, with the special investigation you know, being

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Speaker 8: completed without evidence of fraud, it actually almost gives them

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Speaker 8: a BDEO a safety net to actually expedite the ten

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Speaker 8: Q and ten K filing sign off in my opinion.

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Speaker 3: So does this put all the questions to bed at

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Speaker 3: this point?

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Speaker 8: No, not necessarily, quite frankly, I mean let's see what

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Speaker 8: Bdo says. I do think they're going to try to

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Speaker 8: push along the filings as quickly as possible, possibly by

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Speaker 8: year end. You know, the deadline is sometime in late February,

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Speaker 8: but you know, I do think they'll try to push

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Speaker 8: it along. Now, I will tell you. The other question

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Speaker 8: is that was there so much reputation damaged because of this?

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Speaker 5: Did they lose business?

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Speaker 2: So, assuming they can put this issue behind them, what

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Speaker 2: is the story for this company here, super Micro News?

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Speaker 2: How do you position it within your tech stocks?

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Speaker 5: Yeah?

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Speaker 8: Look, super Micro has been one of the hottest companies

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Speaker 8: within the hardware industry. They were on the forefront or

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Speaker 8: the poster child of AI servers. And you've seen a

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Speaker 8: rapid rise in sales, going from a billion dollars or

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Speaker 8: three billion dollars in annual sales and they were on

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Speaker 8: track to about twenty six to thirty billion dollars in

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Speaker 8: annual sales and fiscal twenty twenty five, right, and this

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Speaker 8: is over a span of four years.

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Speaker 5: Now, they didn't.

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Speaker 8: Retract a guidance, but they didn't affirm guidance either. So

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Speaker 8: the question is is that, look, what is the real

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Speaker 8: sales going into fiscal twenty five. We do have a

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Speaker 8: scenarios scenario analysis that in the draconian way, it's going

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Speaker 8: to be sixteen billion dollars in sales. Right, that's far

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Speaker 8: off of the twenty six on the low end, but

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Speaker 8: you know, it's still sixteen billion dollars in sales as

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Speaker 8: super Micro could deliver on the AI story alone.

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Speaker 3: And this is AI netlike hardware right versus AI chips

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Speaker 3: for example from in Video right, So a competitor would

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Speaker 3: be like Dell right, like an AI server play exactly.

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Speaker 3: So if I was a customer and I was like,

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Speaker 3: you know what, super Micro, I need to go somewhere else.

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Speaker 3: Is the only other option Dell? Or are there other

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Speaker 3: players out there?

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Speaker 5: Oh yeah?

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Speaker 8: Look, if we go back to last May at Video's conference,

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Speaker 8: there were a host of AI server companies that will

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Speaker 8: only to partner with Nvidia.

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Speaker 5: So Supermarker is not the only game in town. Now.

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Speaker 5: There is Dell nor Hpe.

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Speaker 8: There are some Taiwanese ODMs that are more than happy

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Speaker 8: to assemble AI servers out there. So we've seen the

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Speaker 8: because of the growing competitive pressure, we've seen margins compress

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Speaker 8: as a result for the industry.

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Speaker 2: So they sacrifice it feels like the CFO here. How

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Speaker 2: does the street feel about the rest of the management team,

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Speaker 2: the leadership as well as the board.

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Speaker 8: Well, look, the main issue in my mind was not

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Speaker 8: only the CFO but also the board. When you have

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Speaker 8: the wife of the CEO as a member of the

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Speaker 8: board and a seventeen year old a person on the

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Speaker 8: board who's been on for about seventeen years, there's very

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Speaker 8: limited independence. Quite frankly, I do think there needs to

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Speaker 8: be some sort of overhaul of the board. And I've

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Speaker 8: said in the past on this show and I have

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Speaker 8: written that I think the CEO may need to be

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Speaker 8: promoted to a chairman role and I may need CEO.

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Speaker 3: Now is this what part of all of this has

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Speaker 3: to do with just going from a company in the

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Speaker 3: Russell to the company in the S and P and

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Speaker 3: is growing super fast and having different kind of analysts

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Speaker 3: coverage And how much of this was gonna come kind

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Speaker 3: of no matter what.

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Speaker 8: Yeah, you know, that's a good question, Alex. You know, look,

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Speaker 8: this used to be a Russell company or a mid

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Speaker 8: cap company, and it was under the radar for a

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Speaker 8: lot of analysts, and now we're talking about being in

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Speaker 8: the S and P. Five hundred index and you're gonna

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Speaker 8: have a lot of magnifying glasses on the financials. And

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Speaker 8: keep in mind, you know, it's only been about five

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Speaker 8: to six years back where they were delicted from the

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Speaker 8: NASDAC and for them to do this again, it's quite

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Speaker 8: frankly shameful in my mind.

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Speaker 5: Now.

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Speaker 8: If there is no wrongdoing here, shame on me. Right,

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Speaker 8: But you know Fuolmi wants, you know, shame on them.

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Speaker 8: Fool me twice, Shame on me. So you know you're

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Speaker 8: going to see a lot of scrutiny going forward. I

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Speaker 8: don't know if they'll come back this.

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Speaker 2: Have they lost customers to any material basis?

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Speaker 5: Nothing reported as of yet.

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Speaker 8: What they said on the last earnings call was that

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Speaker 8: there were a couple of customers who you know, they're

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Speaker 8: trying to retain.

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Speaker 3: How much more? Okay, So just pure valuation perspective, How

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Speaker 3: do we know how to value this company when they're

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Speaker 3: all these questions.

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Speaker 8: Look at the end of the day, and Paul taught me, well,

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Speaker 8: it's all about cash flow and earnings.

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Speaker 5: Nice John, And I don't know what.

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Speaker 8: I don't know what earnings is In our scenario model,

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Speaker 8: we have a buck sixty in earnings go going forward,

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Speaker 8: and hardware companies of this ilk Ai companies are ranging

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Speaker 8: anywhere between ten to fifteen times. So if my buck

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Speaker 8: sixty is right and it's going at around, let's just

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Speaker 8: say at the high end fifteen to sixteen times. No,

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Speaker 8: it seems like from a valuation standpoint, it's training at

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Speaker 8: the fundamentals all right.

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Speaker 2: Thanks to Woojin Hoo, Bloomberg intelligen Senior technology analyst.

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Speaker 3: This week, we focused on a Bloomberg Big Take story

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Speaker 3: titled A Roadmap through the Drama and Realities of Trump's

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Speaker 3: Trade War.

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Speaker 2: You can find it on Bloomberg dot Com and the Terminal.

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Speaker 2: The story looks at president like Donald Trump's proposed herfs.

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Speaker 3: Everyone from Wall Street investors to foreign governments are trying

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Speaker 3: to map out Trump's tariff plan and a fog of uncertainty,

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Speaker 3: and Bloomberg Economics has mapped out a plausible scenario for

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Speaker 3: what lies ahead.

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Speaker 2: For more on this, we were joined by Brendan Murray,

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Speaker 2: Bloomberg Global Trade Editor.

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Speaker 3: We first asked Brendan to break down that latest research.

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Speaker 9: So, if you add up all of the tariff threats

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Speaker 9: that incoming President Trump made over the past week, about

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Speaker 9: half the world's population of eight billion people would be

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Speaker 9: hit if you take the countries that he targeted. So

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Speaker 9: there's a lot to unpack here. And so what we

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Speaker 9: tried to do was separate the rhetoric, the late night

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Speaker 9: social media posts from the more procedural approach that Trump

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Speaker 9: administration is going to have to take when it comes

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Speaker 9: to rolling out tariffs. We talked to people who were

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Speaker 9: in the previous Trump administration and supervised the last design

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Speaker 9: of the tariff package, and we got a sense for

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Speaker 9: how this next wave would be rolled out. So what

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Speaker 9: we came up with Bloombery Economics. Crunch these numbers, and

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Speaker 9: you're looking at three waves of tariff starting in the

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Speaker 9: summer of twenty twenty five, and by the end of it,

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Speaker 9: at the end of twenty twenty six, the average tariff

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Speaker 9: rate in the US is going to go up by

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Speaker 9: about triple, so from three and a half percent to

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Speaker 9: about seven or eight percent. So and Shina is going

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Speaker 9: to bear the brunt to that.

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Speaker 2: Did tariffs generate revenue for the US government?

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Speaker 9: Yeah, they sure do. The customs revenue, you know, the

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Speaker 9: Treasury reports those once a month, and they would generate

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Speaker 9: revenue for the US government. Weather they'll generate enough to

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Speaker 9: close the gap that tax cuts extending task will create

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Speaker 9: is a whole other question. You have to go back

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Speaker 9: one hundred, one hundred and fifty years to see when

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Speaker 9: tariffs were actually a sizeable part of the US budget.

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Speaker 9: At the moment, they're the tiny fraction of overall US

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Speaker 9: government revenue.

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Speaker 3: What I also find interesting in the piece, you guys

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Speaker 3: talked about how the tariffs will mostly be on intermediate

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Speaker 3: and capital goods. First of all, what does that mean specifically,

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Speaker 3: and then what does that mean for say a small

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Speaker 3: business versus me.

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Speaker 9: Yeah, those are not final consumer goods. Those are parts

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Speaker 9: and machinery that go into the making of consumer goods.

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Speaker 9: So the thinking there would be number one, is that

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Speaker 9: you could source those from another country other than China

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Speaker 9: if the US put tariffs on these capital and intermediate goods.

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Speaker 9: So that would be the first consideration is could you

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Speaker 9: replace what you already get China from somewhere else? And

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Speaker 9: the idea and then the goal there would be to

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Speaker 9: soften the inflationary impact that that we pay at the

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Speaker 9: store at Target or Walmart or werver we're shopping for

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Speaker 9: consumer goods. That the goal would be to soften the

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Speaker 9: inflationary impact. But there comes a time when you can

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00:23:10,200 --> 00:23:12,000
Speaker 9: only put tariffs on so many goods and then you

444
00:23:12,119 --> 00:23:15,040
Speaker 9: start to hit those those products that we pay for

445
00:23:15,119 --> 00:23:16,000
Speaker 9: it as consumers.

446
00:23:16,600 --> 00:23:20,520
Speaker 2: What most economists think the retaliation will be on a

447
00:23:20,560 --> 00:23:22,600
Speaker 2: part of these governments, because that's also at a level

448
00:23:22,640 --> 00:23:26,000
Speaker 2: of concern. How do we expect some of these foreign

449
00:23:26,040 --> 00:23:26,879
Speaker 2: governments to respond.

450
00:23:27,359 --> 00:23:32,920
Speaker 9: Well, if you listen to President elect Trump, he would

451
00:23:33,000 --> 00:23:35,600
Speaker 9: say that, look, I threatened these tariffs against countries and

452
00:23:35,680 --> 00:23:37,720
Speaker 9: they come to the negotiating table when they give us

453
00:23:37,760 --> 00:23:40,600
Speaker 9: what we want at fairness and trade, or in the

454
00:23:40,680 --> 00:23:43,720
Speaker 9: case of Canada and Mexico over the past week, more

455
00:23:43,800 --> 00:23:48,920
Speaker 9: border security to prevent the flow of fentanyl and illegal migration.

456
00:23:49,200 --> 00:23:52,600
Speaker 9: So it's something other than just a way to collect

457
00:23:52,640 --> 00:23:57,440
Speaker 9: revenue or to fix trade imbalances. It's to President Trump,

458
00:23:57,560 --> 00:24:02,720
Speaker 9: a way to exert form policy priorities as well, right.

459
00:24:02,720 --> 00:24:05,080
Speaker 3: Which makes even more difficult to game out right, because

460
00:24:05,080 --> 00:24:06,480
Speaker 3: you don't know how much of that is going to

461
00:24:06,520 --> 00:24:08,600
Speaker 3: be just a strong arm to get other things, and

462
00:24:08,720 --> 00:24:11,560
Speaker 3: how much of it is actually going to be implemented,

463
00:24:11,600 --> 00:24:14,760
Speaker 3: and then what the retaliatory factor are. What's the level

464
00:24:14,800 --> 00:24:17,399
Speaker 3: of conviction When you were speaking to say Anawan and

465
00:24:17,400 --> 00:24:21,080
Speaker 3: Bloomberg Economics and other peers in the area. What's everyone's

466
00:24:21,160 --> 00:24:22,679
Speaker 3: conviction on their calls right now?

467
00:24:24,000 --> 00:24:26,440
Speaker 9: No one can make a call right now with any

468
00:24:26,680 --> 00:24:30,680
Speaker 9: high level of confidence there as we lay out in

469
00:24:30,840 --> 00:24:33,959
Speaker 9: this Big Take story, there are just a lot of unknowns,

470
00:24:34,600 --> 00:24:38,000
Speaker 9: you know how, the degree to which the president elect

471
00:24:38,200 --> 00:24:41,640
Speaker 9: is threatening rather as opposed to know things that he'll

472
00:24:41,680 --> 00:24:44,720
Speaker 9: follow through on. So this is what we call a

473
00:24:44,840 --> 00:24:48,600
Speaker 9: plausible scenario. It's one that's based on the modeling that

474
00:24:48,640 --> 00:24:52,400
Speaker 9: Bloomberg Economics does, the reporting that our Bloomberg News reporters

475
00:24:52,920 --> 00:24:56,240
Speaker 9: have done, speaking to people who were there for the

476
00:24:56,320 --> 00:24:59,320
Speaker 9: first time, and gaming out how it might happen the

477
00:24:59,400 --> 00:25:03,080
Speaker 9: second time. So it's a it's an attempt to describe

478
00:25:03,240 --> 00:25:06,320
Speaker 9: the method that will come with a lot of the

479
00:25:07,240 --> 00:25:10,560
Speaker 9: perceived madness of trade wars and the second Trump administration.

480
00:25:11,040 --> 00:25:13,440
Speaker 2: Our thanks to Brendan Mary, Bloomberg Global Trade.

481
00:25:13,320 --> 00:25:15,719
Speaker 3: Editor, coming up on the program will break down earnings

482
00:25:15,720 --> 00:25:17,439
Speaker 3: from software provider Salesforce.

483
00:25:17,600 --> 00:25:21,000
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing research

484
00:25:21,040 --> 00:25:23,080
Speaker 2: and data on two thousand companies and one hundred and

485
00:25:23,119 --> 00:25:26,040
Speaker 2: thirty industries. You can access Bloomberg Intelligence via bi go

486
00:25:26,160 --> 00:25:27,920
Speaker 2: on the terminal, I'll Paul Sweetey.

487
00:25:27,560 --> 00:25:29,560
Speaker 3: And Amlex Steele, and this is Bloomberg.

488
00:25:36,040 --> 00:25:39,880
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

489
00:25:40,000 --> 00:25:43,520
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

490
00:25:43,560 --> 00:25:46,280
Speaker 1: Auto with the Bloomberg Business App. You can also listen

491
00:25:46,440 --> 00:25:49,520
Speaker 1: live on Amazon Alexa from our flagship New York station

492
00:25:49,920 --> 00:25:52,520
Speaker 1: Just say Alexa Play, Bloomberg eleven.

493
00:25:52,400 --> 00:25:55,800
Speaker 3: Thirty to move next to the auto sector and Stialantis.

494
00:25:56,000 --> 00:25:59,879
Speaker 3: Stalanta's CEO, Carlos Taveras recently resigned and this has left

495
00:26:00,080 --> 00:26:03,240
Speaker 3: automaker without clear leadership at a time of significant up

496
00:26:03,320 --> 00:26:04,280
Speaker 3: people in the industry.

497
00:26:04,680 --> 00:26:07,280
Speaker 2: For more, we were joined by Steve Man Bloomberg Intelligence,

498
00:26:07,320 --> 00:26:10,320
Speaker 2: Global Autos and Industrials and Research Channels. We first asked

499
00:26:10,320 --> 00:26:12,240
Speaker 2: Steve for his take on the most recent news.

500
00:26:12,640 --> 00:26:15,800
Speaker 10: Probably a bad timing for the CEO to make an

501
00:26:15,840 --> 00:26:19,760
Speaker 10: exit at the moment. You know, they are facing really

502
00:26:19,880 --> 00:26:24,439
Speaker 10: tough market conditions, you know, in Europe, in the US,

503
00:26:25,000 --> 00:26:27,640
Speaker 10: and you know, to a certain extents some emerging markets.

504
00:26:28,280 --> 00:26:30,959
Speaker 10: So you know, Carlo has been you know, he's been

505
00:26:31,080 --> 00:26:33,320
Speaker 10: very good at controlling costs and that's what we need

506
00:26:33,400 --> 00:26:36,440
Speaker 10: at the moment to adjust to the current market condition.

507
00:26:37,080 --> 00:26:39,440
Speaker 3: So what's your read then on why now?

508
00:26:40,119 --> 00:26:43,200
Speaker 10: Well, I think you know they've you know, Carlos and

509
00:26:43,240 --> 00:26:45,040
Speaker 10: the management team has done a lot, He's made some

510
00:26:45,160 --> 00:26:49,480
Speaker 10: management changes, uh, to really bring down the inventory in

511
00:26:49,560 --> 00:26:51,159
Speaker 10: the US. That's where the pain is.

512
00:26:51,240 --> 00:26:51,399
Speaker 5: You know.

513
00:26:51,480 --> 00:26:55,119
Speaker 10: They they typically get you know, adjusted operating income of

514
00:26:55,320 --> 00:26:58,879
Speaker 10: double digits in the teams, but that's been down to

515
00:26:59,000 --> 00:27:02,240
Speaker 10: single digit and last quarter. So there's a lot of

516
00:27:02,320 --> 00:27:05,879
Speaker 10: work to be done to actually bring down inventory in

517
00:27:05,960 --> 00:27:09,280
Speaker 10: the US so they can actually try to get some

518
00:27:09,840 --> 00:27:12,760
Speaker 10: you know, pricing on their new new models that's coming

519
00:27:12,840 --> 00:27:16,080
Speaker 10: out at the moment. So a lot of work to

520
00:27:16,160 --> 00:27:19,680
Speaker 10: be done. But it's it's really out of his control

521
00:27:19,840 --> 00:27:22,399
Speaker 10: at the moment. He's done all he's can Carlos. That is,

522
00:27:23,040 --> 00:27:26,280
Speaker 10: it's really something who can he can? He cann't control.

523
00:27:26,680 --> 00:27:30,000
Speaker 10: It's the market. Every automaker is facing a similar situation

524
00:27:30,359 --> 00:27:31,000
Speaker 10: around the world.

525
00:27:31,200 --> 00:27:33,000
Speaker 2: And I think what we're seeing, I guess what I'm

526
00:27:33,040 --> 00:27:36,360
Speaker 2: piecing together from reading your research and reading the Bloomberg

527
00:27:36,359 --> 00:27:38,600
Speaker 2: News reporting here is and kind as it relates to

528
00:27:38,680 --> 00:27:41,560
Speaker 2: the global auto industry. You're up in a tough place

529
00:27:41,640 --> 00:27:43,720
Speaker 2: because again, like everybody else, they're not sure about this

530
00:27:43,880 --> 00:27:47,320
Speaker 2: transition to EVS yet. At the same time, China is

531
00:27:47,359 --> 00:27:49,879
Speaker 2: flooding the market with electric vehicles, so it makes it

532
00:27:49,960 --> 00:27:53,960
Speaker 2: even tougher for the incumbent manufacturers. Where are we in

533
00:27:54,040 --> 00:27:54,600
Speaker 2: that process?

534
00:27:55,600 --> 00:27:58,159
Speaker 10: Yeah, I mean, it's it's an interesting industry right now

535
00:27:58,280 --> 00:28:01,920
Speaker 10: to follow because there's all these Dynams makes. There's new competitor.

536
00:28:02,200 --> 00:28:05,520
Speaker 10: It's it's becoming the eight hundred pound gorilla China, which

537
00:28:05,720 --> 00:28:08,480
Speaker 10: you know, it's coming into the market, not just in Europe,

538
00:28:08,520 --> 00:28:11,119
Speaker 10: they're thinking about coming into North America. We'll see how

539
00:28:11,480 --> 00:28:16,320
Speaker 10: that goes with Trump in the office. But you know,

540
00:28:16,520 --> 00:28:19,320
Speaker 10: EV is tough. You know, a lot of countries in

541
00:28:19,359 --> 00:28:24,560
Speaker 10: Europe have cut back subsidies for consumers, so you know

542
00:28:24,680 --> 00:28:29,240
Speaker 10: you hear Volkswagen cutting closing plants, two three plants in Europe.

543
00:28:29,720 --> 00:28:32,200
Speaker 10: So it's it's going to take time to work out.

544
00:28:32,280 --> 00:28:35,480
Speaker 10: I think we're going to see pain three twenty twenty five.

545
00:28:36,720 --> 00:28:38,800
Speaker 3: Well, where is the biggest pain point? Because you just

546
00:28:38,880 --> 00:28:40,160
Speaker 3: listed off a lot of stuff, And when I think

547
00:28:40,160 --> 00:28:42,920
Speaker 3: about carmakers, I think, ooh, evs right, Like, it's not

548
00:28:43,040 --> 00:28:44,880
Speaker 3: yet really profitable for these guys to make them. But

549
00:28:44,920 --> 00:28:46,400
Speaker 3: you've got to make them in order to make the

550
00:28:46,800 --> 00:28:48,920
Speaker 3: prices lower and make them competitive and kind of put

551
00:28:48,960 --> 00:28:50,880
Speaker 3: it out there and get the supply. Is that really

552
00:28:51,000 --> 00:28:54,560
Speaker 3: the issue in addition to Chinese competition or a traditional

553
00:28:54,880 --> 00:28:59,040
Speaker 3: auto landscape also struggling when it comes to I should say.

554
00:28:59,440 --> 00:29:03,240
Speaker 10: That's very good question. It's it's really not about evs.

555
00:29:04,240 --> 00:29:06,760
Speaker 10: You know, EV only makes up you know, less than

556
00:29:06,800 --> 00:29:11,479
Speaker 10: ten percent of a lot of these companies annual sales,

557
00:29:11,840 --> 00:29:14,520
Speaker 10: So it's not really EV. It's really the ice vehicles

558
00:29:14,600 --> 00:29:17,000
Speaker 10: that you know, during COVID, we had a lot of

559
00:29:17,040 --> 00:29:20,720
Speaker 10: shortages because of the supply chain constraints. But over the

560
00:29:20,840 --> 00:29:25,080
Speaker 10: past couple of years, with that supply chain constraint going away,

561
00:29:25,440 --> 00:29:28,160
Speaker 10: they've been producing a lot of vehicles and they're refilling

562
00:29:28,240 --> 00:29:31,480
Speaker 10: that inventory and with higher interest rate over the last

563
00:29:31,720 --> 00:29:35,880
Speaker 10: you know, past past few quarters, you see that inventory,

564
00:29:36,200 --> 00:29:40,560
Speaker 10: inventory piling up, and now they can't sell. They sell

565
00:29:40,640 --> 00:29:43,640
Speaker 10: the cars, but at the same time they're they're gonna

566
00:29:43,640 --> 00:29:47,160
Speaker 10: have to drop prices, and the worry is it's gonna

567
00:29:47,160 --> 00:29:51,200
Speaker 10: spiral out of control, not only for Stilentists or Nissan,

568
00:29:51,400 --> 00:29:53,560
Speaker 10: but for the rest of the auto industry. You know,

569
00:29:53,720 --> 00:29:57,000
Speaker 10: price cutting is not where the where the industry needs

570
00:29:57,040 --> 00:29:57,200
Speaker 10: to go.

571
00:29:57,360 --> 00:30:00,800
Speaker 2: Right now, So talk to us about Stillantis to their

572
00:30:00,840 --> 00:30:03,840
Speaker 2: brands in North America, how are they faring?

573
00:30:03,880 --> 00:30:04,080
Speaker 1: Then?

574
00:30:04,600 --> 00:30:08,400
Speaker 10: Yeah, that's also a very good question. I think Carlos

575
00:30:08,520 --> 00:30:12,880
Speaker 10: really had, the former CEO of Silenti's is, really had

576
00:30:12,920 --> 00:30:16,400
Speaker 10: a tough job. Not only does he need to manage uh,

577
00:30:16,560 --> 00:30:19,920
Speaker 10: the the new market conditions that he's seeing in a

578
00:30:20,000 --> 00:30:24,240
Speaker 10: lot of developed markets. But look, you know, Stillenti's is

579
00:30:24,360 --> 00:30:27,840
Speaker 10: really an amalgamation of brands that a lot of brands

580
00:30:27,880 --> 00:30:31,640
Speaker 10: that a lot of automakers didn't want, right. You know,

581
00:30:31,760 --> 00:30:34,640
Speaker 10: I think you know, in the North American market, you know,

582
00:30:34,760 --> 00:30:37,160
Speaker 10: I think GM and four are probably more of the

583
00:30:37,240 --> 00:30:40,760
Speaker 10: go to brands. You know, third is is you know

584
00:30:40,880 --> 00:30:44,800
Speaker 10: the Asians. Uh, and then you know Stillentis is you

585
00:30:44,880 --> 00:30:48,959
Speaker 10: know Jeep and Dodge in Chrysler. Uh, they're kind of uh,

586
00:30:49,120 --> 00:30:52,000
Speaker 10: they're famous brands, but it's not in at the top

587
00:30:52,080 --> 00:30:54,840
Speaker 10: of the consumers wish list. And you can say that

588
00:30:55,400 --> 00:30:58,600
Speaker 10: say the same thing over in Europe as well with Fiat.

589
00:30:58,760 --> 00:31:01,160
Speaker 3: Right, because I guess from what I hear, and this is,

590
00:31:01,240 --> 00:31:04,080
Speaker 3: let's be clear, just a Matt Miller thing like trucks, right,

591
00:31:04,200 --> 00:31:06,120
Speaker 3: Like trucks is the thing like pickup trucks is the

592
00:31:06,200 --> 00:31:10,800
Speaker 3: thing those stuff the Stlanta's. What's their market share in

593
00:31:10,840 --> 00:31:11,280
Speaker 3: that arena?

594
00:31:11,800 --> 00:31:14,000
Speaker 10: Well, they still have you know, their top three their

595
00:31:14,080 --> 00:31:20,880
Speaker 10: third behind Ford and GM Chevrolet. You know they you know,

596
00:31:20,960 --> 00:31:24,320
Speaker 10: when they came out with the new redesigned Ram truck

597
00:31:24,360 --> 00:31:27,360
Speaker 10: a few years ago, they did did reach the number

598
00:31:27,440 --> 00:31:29,960
Speaker 10: one market position in the US, but it has since

599
00:31:30,040 --> 00:31:32,560
Speaker 10: then has fallen off. And you know, their vehicles are

600
00:31:32,600 --> 00:31:36,800
Speaker 10: getting old. Their their their pickup trucks needs a new redesign.

601
00:31:36,880 --> 00:31:40,680
Speaker 10: Their SUVs are going through that process right now. They

602
00:31:40,760 --> 00:31:42,800
Speaker 10: need to come out with new products to really excite

603
00:31:42,800 --> 00:31:43,360
Speaker 10: the consumers.

604
00:31:43,800 --> 00:31:46,400
Speaker 3: Our thanks to Steve Man, Bloomberg Intelligence Global Autos and

605
00:31:46,400 --> 00:31:48,320
Speaker 3: Industrials Research analyst, this.

606
00:31:48,400 --> 00:31:50,680
Speaker 2: Week's Salesforce shares hit a record high after the company

607
00:31:50,760 --> 00:31:52,760
Speaker 2: reported better than expected their quarter revenue.

608
00:31:52,920 --> 00:31:56,880
Speaker 3: This boosts hopes for the companies much hyped artificial intelligence strategy.

609
00:31:57,200 --> 00:31:59,800
Speaker 3: For more. We were joined by anarag Rana, Bloomberg Intelligence

610
00:31:59,800 --> 00:32:00,760
Speaker 3: Technology analyst.

611
00:32:01,000 --> 00:32:03,400
Speaker 2: We first asked an Arok what the street liked about

612
00:32:03,480 --> 00:32:04,960
Speaker 2: recent Salesforce numbers.

613
00:32:05,320 --> 00:32:07,680
Speaker 6: I think when you'd really peel the numbers on sales

614
00:32:07,760 --> 00:32:10,360
Speaker 6: and backlog, they were pretty much in line. But I

615
00:32:10,440 --> 00:32:13,120
Speaker 6: think what is really happening, and something that we highlighted

616
00:32:13,760 --> 00:32:16,720
Speaker 6: during a preview w some notes that we wrote earlier

617
00:32:17,280 --> 00:32:20,200
Speaker 6: in October, they released a new product called Agent Force,

618
00:32:20,280 --> 00:32:23,320
Speaker 6: which is truly their AI product. Now that's not going

619
00:32:23,400 --> 00:32:25,640
Speaker 6: to drive revenue over the next twelve months, but it

620
00:32:25,800 --> 00:32:28,240
Speaker 6: really changes the shape of the company and with the

621
00:32:28,360 --> 00:32:31,040
Speaker 6: direction it's going in, and I think that's what investors

622
00:32:31,080 --> 00:32:34,600
Speaker 6: are buying in right now, along with their steady margin expansion.

623
00:32:34,720 --> 00:32:37,040
Speaker 6: Margins were so good that has been a big story

624
00:32:37,120 --> 00:32:39,760
Speaker 6: for them as well. So I think on all fronts

625
00:32:40,200 --> 00:32:42,840
Speaker 6: they're doing well. And as I said, the sales growth

626
00:32:42,960 --> 00:32:45,560
Speaker 6: is not going to show up time near term, but

627
00:32:45,680 --> 00:32:47,400
Speaker 6: I think they have a clear strategy how they're going

628
00:32:47,480 --> 00:32:48,120
Speaker 6: to play this game.

629
00:32:48,720 --> 00:32:51,320
Speaker 3: So to this point, if Salesforce are doing this well

630
00:32:51,440 --> 00:32:55,760
Speaker 3: without Agent Force materially contributing to its bottom line, I mean,

631
00:32:56,320 --> 00:32:58,600
Speaker 3: what kind of upside do we really have and when

632
00:32:58,680 --> 00:33:00,480
Speaker 3: do they read sort of full to that?

633
00:33:01,480 --> 00:33:03,040
Speaker 6: Yeah, I think I would agree with you on that,

634
00:33:03,200 --> 00:33:05,720
Speaker 6: because you know, people are buying into that without seeing

635
00:33:05,760 --> 00:33:08,440
Speaker 6: the results. And I think this is truly what we

636
00:33:08,560 --> 00:33:11,120
Speaker 6: have seen a lot in the software space is people

637
00:33:11,320 --> 00:33:14,600
Speaker 6: really figured out which are the companies that will benefit

638
00:33:14,720 --> 00:33:16,520
Speaker 6: in the long run, and a lot of that, you

639
00:33:16,600 --> 00:33:20,000
Speaker 6: could say, value realization happens sooner, you know, when the

640
00:33:20,120 --> 00:33:22,960
Speaker 6: revenue realization is so perhaps down the road there will

641
00:33:23,000 --> 00:33:25,600
Speaker 6: be a time when the software space may not see

642
00:33:25,640 --> 00:33:28,600
Speaker 6: evaluation uptake, but the sales growth will go up. But

643
00:33:28,880 --> 00:33:30,000
Speaker 6: you know, one of the things you have to think

644
00:33:30,000 --> 00:33:32,680
Speaker 6: about it when former salesforce point of view, they have

645
00:33:32,800 --> 00:33:36,320
Speaker 6: two really critical products. One is sales automation for salespeople

646
00:33:36,600 --> 00:33:39,800
Speaker 6: and the other is customer service products for customer service

647
00:33:39,880 --> 00:33:45,400
Speaker 6: people and in enterprises AI and is the biggest beneficiary

648
00:33:45,520 --> 00:33:49,400
Speaker 6: to those customer service people chat pots AI agents. We

649
00:33:49,560 --> 00:33:52,360
Speaker 6: recently did a conference and when we ask the question

650
00:33:52,440 --> 00:33:55,440
Speaker 6: as to how many people use chat pots, it's still

651
00:33:55,600 --> 00:33:58,320
Speaker 6: less than twenty percent at this point. So that is

652
00:33:58,400 --> 00:34:00,880
Speaker 6: the direction where the world is going in terms of

653
00:34:00,960 --> 00:34:05,120
Speaker 6: working with retailers, working with you know, airlines, and these

654
00:34:05,160 --> 00:34:06,800
Speaker 6: guys are right in the middle of it all.

655
00:34:06,880 --> 00:34:09,120
Speaker 2: Right, So what's getting the market all excited here this

656
00:34:09,520 --> 00:34:11,800
Speaker 2: AI product? What is their AI product and what is

657
00:34:11,840 --> 00:34:14,680
Speaker 2: it supposed to do? Because I actually moderated a panel

658
00:34:14,719 --> 00:34:17,600
Speaker 2: with the salesforce executive and I forgot everything.

659
00:34:17,360 --> 00:34:20,480
Speaker 6: You told me so think about it. I actually have

660
00:34:20,560 --> 00:34:23,320
Speaker 6: a very interesting demonstration if you go to YouTube and

661
00:34:23,400 --> 00:34:25,759
Speaker 6: look at their Dreamforce and demo. It was actually pretty

662
00:34:25,800 --> 00:34:28,960
Speaker 6: interesting because they did Sacks Fifth Avenue. So think about

663
00:34:29,000 --> 00:34:31,000
Speaker 6: it this way, Paul, you you buy. You know, the

664
00:34:31,360 --> 00:34:35,160
Speaker 6: presenter bought a jacket from Saxs Fifth Avenue, didn't like

665
00:34:35,239 --> 00:34:38,360
Speaker 6: the the size or something, just went to the chatpot

666
00:34:38,400 --> 00:34:41,000
Speaker 6: and say can you find me a different size? And

667
00:34:41,120 --> 00:34:44,240
Speaker 6: can you the chatbot basically took care of everything, basically

668
00:34:44,400 --> 00:34:48,160
Speaker 6: knew what size this person was, was able to return

669
00:34:48,239 --> 00:34:52,040
Speaker 6: the jacket, you know, send another one to this person's address,

670
00:34:52,719 --> 00:34:53,279
Speaker 6: or that matter.

671
00:34:53,400 --> 00:34:54,200
Speaker 9: If it wasn't.

672
00:34:54,000 --> 00:34:56,040
Speaker 6: Available, you could go to the store and pick it

673
00:34:56,160 --> 00:34:59,360
Speaker 6: up without the intervention of a human. That level of

674
00:34:59,400 --> 00:35:03,000
Speaker 6: sophistication coming into a chat pot so quick in the game,

675
00:35:03,200 --> 00:35:06,520
Speaker 6: I think it's really what people are getting excited about.

676
00:35:06,800 --> 00:35:09,239
Speaker 3: And put some numbers on that, like how much is

677
00:35:09,280 --> 00:35:11,120
Speaker 3: that going to do for them in terms of revenue?

678
00:35:11,160 --> 00:35:13,280
Speaker 3: And how much do they charge for like that chatbot?

679
00:35:13,400 --> 00:35:16,360
Speaker 3: So say like that chatbot works for me for two minutes,

680
00:35:16,600 --> 00:35:17,839
Speaker 3: what's the translation of money?

681
00:35:18,719 --> 00:35:22,440
Speaker 6: So the pricing starts at two dollars per conversation. Now

682
00:35:22,480 --> 00:35:24,840
Speaker 6: the question is what does that mean? So when you

683
00:35:25,120 --> 00:35:28,239
Speaker 6: look at you know, a person calling at and D

684
00:35:28,480 --> 00:35:31,480
Speaker 6: or Hoverizon, that call could cost as much as ten

685
00:35:31,480 --> 00:35:34,440
Speaker 6: to fifteen dollars. If it's a quasi mix of an

686
00:35:34,440 --> 00:35:38,520
Speaker 6: automated chat pot and a customer service person, you know,

687
00:35:38,640 --> 00:35:41,360
Speaker 6: that call could be seven dollars eight dollars per conversation.

688
00:35:41,960 --> 00:35:45,000
Speaker 6: Salesforce is pricing at two dollars or so, so it

689
00:35:45,200 --> 00:35:49,000
Speaker 6: will force companies to fix their customer service because think

690
00:35:49,040 --> 00:35:51,440
Speaker 6: about it, if you're an insurance company, if you are

691
00:35:51,480 --> 00:35:54,279
Speaker 6: a phone company, that's really a very large portion of

692
00:35:54,360 --> 00:35:57,120
Speaker 6: your cost. Amazon's already doing so much of that in

693
00:35:57,160 --> 00:36:00,120
Speaker 6: the chatbot. If you are used to returning things on

694
00:36:00,280 --> 00:36:03,440
Speaker 6: Amazon through their chat pot, it's actually pretty impressive right now.

695
00:36:03,760 --> 00:36:06,360
Speaker 6: But it is still rule based, which is if it

696
00:36:06,480 --> 00:36:09,240
Speaker 6: can only do so much based on the data that's available,

697
00:36:09,560 --> 00:36:11,560
Speaker 6: it doesn't take you to the next level. And this

698
00:36:11,760 --> 00:36:14,759
Speaker 6: is what Salesforce is saying is the direction of that

699
00:36:15,080 --> 00:36:17,799
Speaker 6: is that the agent or the chat pot is able

700
00:36:17,840 --> 00:36:21,839
Speaker 6: to execute a transaction for you without getting a human

701
00:36:21,880 --> 00:36:24,200
Speaker 6: involved in it, which is refund the money for you

702
00:36:24,440 --> 00:36:29,000
Speaker 6: return your things, give you an alternative of whatever you

703
00:36:29,080 --> 00:36:32,200
Speaker 6: were doing before without any person getting in and that

704
00:36:32,360 --> 00:36:33,280
Speaker 6: really saves costs.

705
00:36:33,840 --> 00:36:35,640
Speaker 2: All right, so this coman's got like thirty nine to

706
00:36:35,640 --> 00:36:38,000
Speaker 2: forty percent EBITDA margin. Pretty much all of that goes

707
00:36:38,040 --> 00:36:39,359
Speaker 2: down to the free cash flow line.

708
00:36:39,520 --> 00:36:41,600
Speaker 6: What do they do with their cash right now? They're

709
00:36:41,640 --> 00:36:44,560
Speaker 6: buying back shares. I'm sorry, Paul, but that's exactly what

710
00:36:44,800 --> 00:36:47,480
Speaker 6: most software companies do when they have it. Now, think

711
00:36:47,520 --> 00:36:49,799
Speaker 6: about it this way. Just one and a half two

712
00:36:49,880 --> 00:36:52,719
Speaker 6: years ago, this was almost ten percent reach points lower

713
00:36:53,000 --> 00:36:55,320
Speaker 6: because they were spending even more on sales and marketing.

714
00:36:55,800 --> 00:36:58,120
Speaker 6: The big story for salesforce in the last one and

715
00:36:58,160 --> 00:37:01,640
Speaker 6: a half years has been a really improvement in bulgins our.

716
00:37:01,560 --> 00:37:04,360
Speaker 3: Thanks to Anna Rograna, Bloomberg Intelligence technology analyst.

717
00:37:05,000 --> 00:37:09,520
Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify,

718
00:37:09,719 --> 00:37:12,879
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719
00:37:12,920 --> 00:37:16,120
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720
00:37:16,440 --> 00:37:19,960
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721
00:37:20,080 --> 00:37:23,200
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722
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