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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch US Live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch US live on YouTube.

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Speaker 2: Let's go over to another interesting story today in the

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Speaker 2: tech space. That's TikTok. It needs to be divested the

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Speaker 2: US operations. Looks like there are some buyers out there now.

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Speaker 2: The question is what are they going to pay for it?

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Speaker 2: Man Deep Sing joins us US, a senior tech analyst

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Speaker 2: a Bloomberg Intelligence Man Deep I saw the reporting this

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Speaker 2: morning from Bloomberg about a fourteen billion dollar valuation and

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Speaker 2: I was saying.

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Speaker 3: What isn't it worth multiples of that?

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Speaker 2: But then I see that there might be an arrangement

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Speaker 2: where ByteDance is going to receive a lot of the

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Speaker 2: profitability of the US operation. What's the latest that you know?

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Speaker 4: So that profitability option is tied to the fact that

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Speaker 4: you know, Bitedance still has to run the operations. So

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Speaker 4: what they have done is created two separate entities. One

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Speaker 4: entity will house the data, it will control the content

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Speaker 4: and the algorithm. So they are going to recreate the algorithm,

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Speaker 4: and that other entity that Buyedance is responsible for will

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Speaker 4: actually run the day to day operations and you know,

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Speaker 4: it will be responsible for showing the ads any e

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Speaker 4: commerce that flows through TikTok And so from that perspective,

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Speaker 4: it makes sense that they will keep half of the

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Speaker 4: profits because guess what a company like Oracle, Yes, it

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Speaker 4: can run the infrastructure the app but it doesn't have

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Speaker 4: the expertise to you know, run the ad operations or

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Speaker 4: do e commerce. At the end of the day, it's

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Speaker 4: more infrastructure than applications. And so from that perspective, it

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Speaker 4: makes sense that you know, by Dance is involved in

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Speaker 4: running the operations.

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Speaker 5: And we've also learned today that Byedance is expected to

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Speaker 5: get about fifty percent of TikTok us is profit under

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Speaker 5: this potential Trump deal.

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Speaker 3: What do you make of that? This again according to

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Speaker 3: Bloomberg reporting.

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Speaker 5: It has not been confirmed and we all are waiting

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Speaker 5: for things to be made official.

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Speaker 3: Does that sound like a reasonable split?

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Speaker 4: I mean, think of it this way. Oracle was getting paid.

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Speaker 4: Let's say, you know, TikTok Us was generating about ten

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Speaker 4: billion dollars in revenue Oracle was getting paid two billion

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Speaker 4: dollars just for hosting the app and you know, storing

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Speaker 4: the data, so it was a revenue generator or the

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Speaker 4: Oracle contrat the TikTok contract for Oracle. Now that Oracle

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Speaker 4: owns TikTok Us, that revenue gets converted into a cost,

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Speaker 4: so and it could be at least a billion dollar

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Speaker 4: in cost. So from that perspective, you know the fact

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Speaker 4: that Oracle went from two billion in revenue from TikTok

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Speaker 4: to you know, having one billion dollar extra in costs,

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Speaker 4: it makes sense that they should get some sort of

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Speaker 4: a deal when it comes to buying that asset. And

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Speaker 4: so that's why that low price tag of fourteen billion

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Speaker 4: that everyone is surprised about, there's a reason for that

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Speaker 4: because you know, I mean, if Oracle has to own

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Speaker 4: this thing, they need to have some sort of incentive

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Speaker 4: because it's a three billion dollar delta to their gross profit.

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Speaker 2: All right, So just to be clear here, what is

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Speaker 2: your what will these new investors, what will they be buying?

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Speaker 2: And is what they're buying? Is that fourteen billion dollars

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Speaker 2: seem reasonable to you?

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Speaker 6: Yes?

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Speaker 4: So the other minority investors, whether it's silver Lake and

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Speaker 4: We still don't know all the minority investors who are

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Speaker 4: involved here, but clearly you know, I imagine they're not

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Speaker 4: responsible for the day to day operations. And if TikTok

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Speaker 4: Us was generating about ten billion dollars plus in add

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Speaker 4: an e commerce revenue, that's why they want buy Dance

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Speaker 4: to continue owning those operations, running those operations, because they

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Speaker 4: don't want that ten billion to go to five billion

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Speaker 4: over the next six months. And so that's why they

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Speaker 4: are getting that forty five or fifty percent of profitability

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Speaker 4: for TikTok Us, even though they will become a twenty

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Speaker 4: percent owner of the TikTok Us asset. After this, stay

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Speaker 4: with us.

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Speaker 3: More from Bloomberg Intelligence coming up after this.

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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 easterne on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: The President has planned to impose a one hundred percent

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Speaker 5: tariff on branded drug imports. You talked about this most

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Speaker 5: Favored Nation status for US consumers. Drug companies, of course,

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Speaker 5: are up in arms and they've been trying to find

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Speaker 5: ways to get around it to get an exemption. So

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Speaker 5: let's bring in Sam Fizzelli. He is director of Research

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Speaker 5: for Global Industries and senior pharmaceuticals analysts for Bloomberg Intelligence.

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Speaker 5: And Sam, the reporting that are colleagues over at Bloomberg

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Speaker 5: News have done indicate that the drugmakers are not all

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Speaker 5: that concerned about this tariff plan for pharmaceutical companies because

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Speaker 5: they have all made plans to invest big time in

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Speaker 5: the US.

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Speaker 7: They have, indeed, and you know, scot it. This has

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Speaker 7: been something that's been going on for since the announcement

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Speaker 7: of We're going to punish you somehow tariff's most Favored

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Speaker 7: Nation or whatever other mechanism that's been put forward unless

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Speaker 7: you bring your manufacturing here. So it's the same rhetoric,

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Speaker 7: it's the same story. And some of the companies of

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Speaker 7: pleasure were just adding up. We just published the list

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Speaker 7: of things that farmer companies have said. Fifty billion here,

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Speaker 7: forty five billion, there's sixty billion there, numbers at least,

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Speaker 7: and they look good on a piece of paper. And

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Speaker 7: a lot of them already have manufacturing there. Some of

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Speaker 7: them have started making new sites. Maybe they would have

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Speaker 7: done it anyway, because you need manufacturing for the new

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Speaker 7: products that you have because they're slightly different, et cetera. So,

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Speaker 7: but but I think the reason you see pretty much

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Speaker 7: everything's green on my screen for in the large farmerland

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Speaker 7: except for Nova Nordays. You know, the top performer is

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Speaker 7: glackso which is the UK market is still open. Actually,

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Speaker 7: so I think it's because of that.

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Speaker 4: It's because people know.

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Speaker 7: Well, actually, this isn't going to happen on tariff is

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Speaker 7: not going to happen because they've done what the president

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Speaker 7: is looking for.

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Speaker 2: Sam, what is all this just generic? I mean, just

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Speaker 2: all this talk about terrorists, as on pharmaceuticals, the restricted

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Speaker 2: funding to American universities in your circles where people are

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Speaker 2: working day in, day out, trying to develop new drugs,

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Speaker 2: new therapies, what's the feeling in that community.

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Speaker 7: The feeling is thorough confusion because on the one hand,

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Speaker 7: you want skilled workers in these skilled jobs in the US.

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Speaker 7: On the other hand, you know, allowing them to come

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Speaker 7: from overseas on I don't have any hands I need here.

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Speaker 7: On the other hand, I'm going to borrow your handfull.

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Speaker 7: We've got the situation where we have science that's being

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Speaker 7: defunded to a degree. Now we have to be careful

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Speaker 7: there because there's particular pressure on certain certain types of research,

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Speaker 7: certain types of science. But the Natural Science Foundation, the NIH,

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Speaker 7: those are all the sources of these PhDs and biomedical

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Speaker 7: engineering that are required to run these manufacturing facilities. They're

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Speaker 7: being impacted. So what happens over the long run, ron

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Speaker 7: if you can't bring the workers from overseas because of

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Speaker 7: the H one bibs are issue, if you can't generate

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Speaker 7: them internally, what happens in five or ten years, who's

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Speaker 7: going to run these places? Therefore, confusion, So this I'm

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Speaker 7: trying to get my head around. Is the US still

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Speaker 7: for innovation or against innovation? I don't know what the

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Speaker 7: answer to that is.

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Speaker 5: It seems like we're for innovation, but everyone here doing

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Speaker 5: it has to be American.

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Speaker 3: I don't know. That's one interpretation of it.

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Speaker 7: Scot I buy that, and it has been the case.

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Speaker 7: And you have some of the most imniveritives, some of

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Speaker 7: the best people there, no question about it. But you

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Speaker 7: still need the basic science and the funding to give

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Speaker 7: them to that bachelor's degree, master's degree, PhD degree to

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Speaker 7: become the experts to continue to run these things. That's

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Speaker 7: where I'm getting a bit confused that it's just me.

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Speaker 2: It's been explained to me by someone who runs a

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Speaker 2: major university medical center that realizes that has a very

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Speaker 2: large research capability, that it's roughly two thirds of the

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Speaker 2: funds company the US government and one third comes from

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Speaker 2: the university and other private sources. And that's kind of

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Speaker 2: been in place for eighty years, that structure, and one

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Speaker 2: can argue that structure has worked pretty well for humanity.

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Speaker 4: Is where we are?

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Speaker 2: Is there a belief that that's at risk?

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Speaker 7: I think there is, You know, you might you might

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Speaker 7: want to listen to some of my podcasts recently. I

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Speaker 7: did one with Elisa Huni on the Angals of Healthcare podcasts.

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Speaker 7: I did one with the CEO of Mark Foundation. Who

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Speaker 7: are the people who have either been involved in running

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Speaker 7: the NIH, running R and D centers that's Elias or

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Speaker 7: the Mark Foundation who does finances very early stage cancer,

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Speaker 7: translational cancer research. They are all seeing it happen around them,

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Speaker 7: and of course they are the sorts of people who

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Speaker 7: can to a degree fill the gap. But you're dealing

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Speaker 7: with billions of dollars. We need the philanthropy moneies from

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Speaker 7: the top ten folks to come in to fill this

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Speaker 7: gap that the NIH budget cut is leaving, the NSF

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Speaker 7: budget cut is leaving. That's where I'm worried, and maybe unfairly,

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Speaker 7: maybe it all comes out and people are still able

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Speaker 7: to fund the research that leads to the innovations that

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Speaker 7: we're looking for my fingers across the hoop.

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Speaker 4: That's the case. Stay with us.

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Speaker 2: More from Bloomberg Intelligence coming up after this.

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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. He's done on Apple, Cocklay and

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Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 5: Boeing is one of the big gainers here, and there

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Speaker 5: is a report that the company will regain more powers

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Speaker 5: from regulators to conduct final safety checks. This is initially

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Speaker 5: reported by The Wall Street Journal. The FAA has since

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Speaker 5: come out and made it clear that this is the

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Speaker 5: plan starting September twenty ninth. So let's bring in George Ferguson.

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Speaker 5: He is our go to authority on aerospace. He's the

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Speaker 5: senior aerospace, defense and Airlines analysts for Bloomberg Intelligence.

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Speaker 3: George.

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Speaker 5: It would appear that this is big news given the

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Speaker 5: stock market reaction.

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Speaker 3: Was it unexpected? Was it expected?

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Speaker 8: You know, I think it was expected, But I think

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Speaker 8: you always breathe a sigh of relief when it actually happens. Right,

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Speaker 8: Gooing needs to have this cap lifted, the production cap lifted,

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Speaker 8: in order for it to push to higher build rates

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Speaker 8: next year.

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Speaker 6: That's a big part of the turnaround strategy. Right. That means.

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Speaker 8: Building more airplanes, you know, diffusing their high overhead costs

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Speaker 8: over more built. That means better cash generation, better profitability.

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Speaker 6: Everything hinges on them cranking up build rates.

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Speaker 8: And so I think if you're an investor in the stock,

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Speaker 8: you know, you're again breathing a side of relief because

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Speaker 8: this is one obstacle maybe had a little bit of

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Speaker 8: a difficult time sort of cuffing. And it seems like

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Speaker 8: the FA is comfortable, And I think it's a good sign.

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Speaker 8: It means the FA must see progress and quality and

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Speaker 8: stability and builds. And so I think it again, I

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Speaker 8: think it's if you're an investor, I think you breathe

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Speaker 8: a sigh of relief when you see it.

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Speaker 2: Yeah, I'm calling it that. I'm calling this thing is too.

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Speaker 6: He and George.

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Speaker 2: I think they've finally gotten all the bad stuff behind

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Speaker 2: them here. Hopefully that continues to play out when they're

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Speaker 2: making deliveries these days. How much is that of existing

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Speaker 2: inventory versus coming right right off the line.

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Speaker 8: Yeah, it bounces around month to month, but I think

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Speaker 8: in the last month we saw we saw five or

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Speaker 8: six airplanes at least that we think came out of inventory.

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Speaker 8: You know, what we typically look at as we look

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Speaker 8: at first flight date, and if there's a first flight

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Speaker 8: date on the airplane that's prior to twenty twenty five,

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Speaker 8: we're pretty sure it's coming out of inventory, you know.

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Speaker 6: So the majority are going through the factory.

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Speaker 8: But again they're getting rid of that what they call

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Speaker 8: the shadow factory, that inventory at a decent clip.

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Speaker 6: Now. I'm hoping we hear an update during three Q.

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Speaker 8: It got a bit hard to keep track of how

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Speaker 8: much inventory they had, but it seems like they're getting

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Speaker 8: pretty depleted. They're running that inventory off pretty well, which

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Speaker 8: would be another big positive for this company.

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Speaker 5: Well, speaking in positives, the company does report earnings in

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Speaker 5: October twenty third, and these are the kinds of news

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Speaker 5: events that lead to a productive earnings conference call where

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Speaker 5: the management can point to all these sides of progress

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Speaker 5: and talk about how they're going to move forward and

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Speaker 5: build on this momentum. What are you looking for the

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Speaker 5: company to say when it does hold its earnings report

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Speaker 5: earnings call.

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Speaker 6: Yeah, so.

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Speaker 8: We would probably love to hear some targets for twenty

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Speaker 8: twenty six, for build rates, for cash generation, for reduction

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Speaker 8: to that shadow factory. I'm just not totally short management's

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Speaker 8: ready to give that out yet. Kelly or Berg seems

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Speaker 8: to play a little bit conservative whole things back a

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Speaker 8: little bit, but we'd love to hear what their expectations.

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Speaker 6: Are right now.

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Speaker 8: I think what you have in the marketplace is is

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Speaker 8: just a bunch of analyst views without company guidance to

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Speaker 8: sort of tether some of those views.

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Speaker 6: On build rates. If you look at some of.

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Speaker 8: The eb numbers on the Bloomberg terminal for Boeing, the

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Speaker 8: spread is pretty wide in that.

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Speaker 6: So we'd like to hear about that. We want to

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Speaker 6: hear as well. The defense business, you know, looks like

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Speaker 6: it's turning around too, I think, which just you know,

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Speaker 6: adds to.

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Speaker 8: It adds to some of the gains the companies should

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Speaker 8: be able to make in profitability. They won the F

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Speaker 8: forty seven program. We'd love to hear some commentary there

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Speaker 8: too on how they're rolling off some of those fixed

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Speaker 8: price contracts that have really clipped them. We think they've

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Speaker 8: turned the corner there too, and defense how to be

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Speaker 8: profitable and cash generative going into.

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Speaker 6: Twenty twenty six too, So love commentary on that, George.

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Speaker 2: One of the headwinds you called out for Boeing over

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Speaker 2: the last several years is the you know, the lack

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Speaker 2: of you know, enough skilled laborers to get these planes

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Speaker 2: off the assembly nine. As it's a lot more complicated

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Speaker 2: than than building an automobile, you pointed out. And during

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Speaker 2: the pandemic a lot of high skilled industries lost some

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Speaker 2: other high skilled people, and that certainly includes the aerospace industry.

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Speaker 2: What's the status of that as the industry looks to

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Speaker 2: continue to rebuild.

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Speaker 6: I mean, I think it's improving, right, And I think

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Speaker 6: one of the things you can look.

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Speaker 8: To is the you know, the job situation in the

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Speaker 8: country in the US is definitely switched up from the

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Speaker 8: world where there were more job opportunities than there were

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Speaker 8: job seekers. We've turned that around to now there's more

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Speaker 8: job seekers than opportunities. That's not so good for the workers,

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Speaker 8: but it is good for the companies. I think it

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Speaker 8: means more stability. You don't have people that join Boeing

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Speaker 8: or more importantly join their suppliers and then have a

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Speaker 8: bid away pretty quickly, get trained and leave because training

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Speaker 8: and aerospace takes a while. So you invest in a

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Speaker 8: person and to have them stick around for six months

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Speaker 8: and leave means you never really get the productivity and

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Speaker 8: even probably knock down some of the productivity of your

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Speaker 8: existing workers to train them. So I think that's an

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Speaker 8: indicator that they're labor force is probably going to become

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Speaker 8: more stable. And like I said, I think, you know,

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Speaker 8: Boeing WI law for a wage and a benefit package

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Speaker 8: that pulls people into that business.

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Speaker 6: There's a lot of people coming.

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Speaker 8: To these businesses, to aerospace that hadn't done this work

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Speaker 8: before because there was a lot of baby boomers that retired.

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Speaker 8: The more concerning part is the supply chain and the

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Speaker 8: backfill and the supply chain. And I think again this

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Speaker 8: indicates that we're getting more stability. You know the FAA confidence, Yeah,

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Speaker 8: indicates there's more stability in that supply chain. And given

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Speaker 8: this change in sort of the labor supply demand situation,

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Speaker 8: I think it bodes well for keeping those people and

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Speaker 8: improving productivity.

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Speaker 6: In the business.

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