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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: He's done on Apple, Cocklay and Android Auto with the

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Speaker 1: Bloomberg 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: Getting back to earnings, Intel, our good friends out there

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Speaker 2: in southern California and out in the valley. They reported

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Speaker 2: some pretty darn good numbers in the stocks rallying, and

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Speaker 2: I was just looking at Intel as a stock, and

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Speaker 2: I guess when the government invests in you and Nvidia

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Speaker 2: invests in you, that's a pretty good sign of support.

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Speaker 2: And stock is up about seven tens to one percent today,

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Speaker 2: but it's up ninety two percent year to date. Punjohn Sobani,

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Speaker 2: he follows Intel. He's a senior analys he covers the

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Speaker 2: Semis for Bloomberg Intelligence.

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Speaker 3: He's based out there in our San Francisco office. Have

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Speaker 3: you been to our San Francisco office?

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Speaker 4: I have.

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Speaker 3: It is awesome. P You're six, I think or Peer three.

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Speaker 2: I can't remember which one it is, but it's awesome

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Speaker 2: out there right out into the bay.

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Speaker 3: It's very cool. Kunjan talk to us about Intel here,

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Speaker 3: what's happening with their business?

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Speaker 4: Yeah, I mean the results yesterday sort of seemed start

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Speaker 4: of a turnaround for US. Fundamentally, the stock rally you

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Speaker 4: mentioned over the last few months has not been driven

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Speaker 4: by any fundamental improvements. It was all purely driven by

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Speaker 4: the deals that the three deals, the US government in

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Speaker 4: media and the soft bank deal, which all together brought

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Speaker 4: in somewhere between sixteen to eighteen billion dollars to them.

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Speaker 4: That brings in long term secular tail winds or not

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Speaker 4: secular but strategic tail winds, but doesn't do anything to

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Speaker 4: improve the near term fundamental businesses and address the challenges. However,

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Speaker 4: the results yesterday showed a step in the right direction

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Speaker 4: where improving their demand for their AIPC and the server

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Speaker 4: CPU products improved, which we have been wanting to see

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Speaker 4: for a while. There were some structural changes that they're

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Speaker 4: doing which will help with gross profit improvement gross profit

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Speaker 4: dollars improvement going forward, even though the gross margin will

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Speaker 4: still have headwinds next year. But we like the structural

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Speaker 4: changes they are doing, bringing more wafers into Intel, you know,

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Speaker 4: ramping up the Arizona foundry with their newest Intel eighteen

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Speaker 4: A node, which is which just has better cost structure

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Speaker 4: than any other sites that they have. So they're doing

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Speaker 4: many steps in the right direction, improving op X discipline

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Speaker 4: as well. So all of that seems to be start

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Speaker 4: of a good turnaround. And you know, there's still a

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Speaker 4: long way to go. Yeahcution still needs to be done

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Speaker 4: for many quarters, but this is a good news.

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Speaker 5: I'm so glad you brought up the investments from the

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Speaker 5: US government. Nvidian softwarek is something that helps certainly short

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Speaker 5: the balance sheet, But how does it translate into operational gains?

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Speaker 5: I mean, do customers decide to buy Intel's chips in

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Speaker 5: meaningful volumes as a result.

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Speaker 4: I mean not directly, not implicitly, the deals don't come

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Speaker 4: with that, but you know there is some indirect influence, right,

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Speaker 4: or you might want to call it a validity that

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Speaker 4: now you know the risk of liquidity risk with Intel,

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Speaker 4: which was there until a few quarters ago, the risk

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Speaker 4: of sort of failing the foundry business failing or not

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Speaker 4: investing goes away. So customers, big customers would gain some trust,

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Speaker 4: right that when you have backing of such such key

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Speaker 4: players in the industry, they must believe in you.

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Speaker 3: So Kunjun about competitive environment here.

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Speaker 2: So Intel's made you know, some nice inroads here, but

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Speaker 2: there's a lot of competition out there in their inner

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Speaker 2: chip fab business.

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Speaker 3: Talk to us about the competitive landscape, Yeah.

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Speaker 4: I mean the competition for them, both on the foundry

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Speaker 4: side and the product side is intense. Frankly speaking, they've

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Speaker 4: really missed out on the AI accelerator and the really

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Speaker 4: AI in the data center ramp, which which all of

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Speaker 4: their peers, like in Media AMD are enjoying. So they're

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Speaker 4: playing catch up when it comes to most areas. The

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Speaker 4: second issue in competition has been that they've been losing

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Speaker 4: share significantly in the data center side. Again, this is

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Speaker 4: the most profitable, highest spend side. This is where you

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Speaker 4: really don't want to lose share. But you know, slowly

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Speaker 4: we have seen the share loss pace reduce almost coming

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Speaker 4: sort of staying share lost heady quarter over quarter. So

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Speaker 4: now they need to work on improving which the changes

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Speaker 4: that they're doing going forward, which is moving the capacity

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Speaker 4: to serve the data center customers at the expense of

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Speaker 4: low end PC customers, we think is the right step

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Speaker 4: to you know, not you don't want to lose share

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Speaker 4: in that market anymore.

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Speaker 5: Right, So how different is Libputan the CEO strategy versus

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Speaker 5: Pat Goelsing or his predecessor who was let Go.

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Speaker 3: Is there a meaningful difference as a.

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Speaker 4: Huge difference, I think from a personality, communication strategy perspective,

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Speaker 4: it's the two opposite ends, you know. Lib Boo seems

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Speaker 4: to be more practical come you know, sort of under

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Speaker 4: promising and over delivering, which which usually the street likes.

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Speaker 4: You know, Pat on the other hand, was visionary, but

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Speaker 4: was you know, trying to get to the stars before

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Speaker 4: focusing on the moon. So very different styles. You know,

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Speaker 4: lib bu is focused, has done a lot of cultural changes,

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Speaker 4: significant restructure in middle management, you know, getting everyone back

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Speaker 4: to the office, which he really believes will bring significant

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Speaker 4: culture and working changes. So a lot of different opinions,

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Speaker 4: different styles. It's too soon to say which style is

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Speaker 4: going to win, but at least we're seeing some good

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Speaker 4: proof points of the new culture ship.

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Speaker 3: Stay with us 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 Eastern 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 2: Let's talk about the auto business here forward. Can They

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Speaker 2: had some good numbers, and I think the auto maker

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Speaker 2: sured kind of saying, we're focusing on the on the units,

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Speaker 2: the models that make us a lot of money.

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Speaker 3: And they're not evs, No, they're not.

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Speaker 2: They're kind of dialing back that rhetoric a little bit

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Speaker 2: in response to I guess what they're seeing in the market.

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Speaker 2: Craig Chudell, he's a Bloomberg Global Autos editor. Craig talked

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Speaker 2: to us about Ford. They had some some some good numbers,

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Speaker 2: but I'm also seeing some layoff discussion out there.

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Speaker 3: Talk to us about Detroit. What's happening.

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Speaker 6: Yeah, it's been quite a week. It's hard to parse

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Speaker 6: because you're seeing GM and Ford have these, you know,

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Speaker 6: strong earnings reports, huge moves in the stock. President Trump

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Speaker 6: is taking victory laps over this on true Social and

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Speaker 6: yet this morning our colleague David Welchin in Detroit had

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Speaker 6: the scoop that GM is laying off hundreds of workers.

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Speaker 6: So you have this this situation where as you say

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Speaker 6: the amount of sales these companies are are pulling off

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Speaker 6: with full size SUVs, you know, the the Ford expeditions,

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Speaker 6: the Chevy Tahos, those sorts of vehicles are really hot

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Speaker 6: and in some cases, you know, as as good as

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Speaker 6: these companies have seen in something on the order of

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Speaker 6: two decades. And and yet also with that, you know,

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Speaker 6: real costs issues in terms of tariffs. I think maybe

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Speaker 6: not the worst case scenario that they were concerned about

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Speaker 6: months ago, but absolutely those were still still had wins.

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Speaker 6: I think there is a concerted effort on the part

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Speaker 6: of these two companies, however, to sort of, you know,

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Speaker 6: really thank Trump for these sort of incremental bits of

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Speaker 6: relief that he's taken off from of the measures that

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Speaker 6: that were put in place earlier this year.

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Speaker 3: Is that part of it done? Is that part of

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Speaker 3: the story over.

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Speaker 5: Are they still working to kind of continue to whittle

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Speaker 5: weigh at some of the costs imposed by the President's policies.

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Speaker 6: I think it's still very much a live issue. And interestingly,

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Speaker 6: you know, some of the the attempts to sort of

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Speaker 6: curry favor with the White House seems to be around

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Speaker 6: actually sort of a plot his move to put new

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Speaker 6: tariffs in place on medium and heavy trucks. And the

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Speaker 6: reason that they are appreciating that is because their rival,

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Speaker 6: Stalantis makes RAM big RAM pickups down in Mexico. So

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Speaker 6: it's a case of actually two players in Detroit kind

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Speaker 6: of ganging up on the third and sort of you know,

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Speaker 6: praising Trump. And I think that was one of the

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Speaker 6: interesting storylines out of last night's earnings that Ford sees,

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Speaker 6: you know, sort of some incremental opportunity to take advantage

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Speaker 6: of the fact that one of their big competitors now

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Speaker 6: faces much more of a tariff bill on those larger

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Speaker 6: pickups that are made down in Mexico.

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Speaker 2: Craig reading between the lines from the GM release and

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Speaker 2: then the Ford results, it feels like that these companies

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Speaker 2: are stepping back on the margin from EV's and EV investments,

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Speaker 2: and that seems to be one of the things that

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Speaker 2: the street is applauding here.

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Speaker 3: How do you read it?

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Speaker 6: Yeah, I think it's a little different across these these

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Speaker 6: two companies where you have GM has is much further along,

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Speaker 6: I would say, and standing up battery capacity, standing up

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Speaker 6: EV capacity as well. So they, I would say, on

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Speaker 6: the other hand, have you know, kind of on one hand,

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Speaker 6: have more more EV potential and more battery potential to

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Speaker 6: work with and haven't quite sort of cut to the

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Speaker 6: bone in terms of you know, what the they have

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Speaker 6: to offer. And yet I would say, you know, it's

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Speaker 6: also been the case that you know, it's it's fair

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Speaker 6: to look at sort of what they've managed in terms

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Speaker 6: of how many evs they're they're selling, and and fair

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Speaker 6: to say that it's been a real disappointment.

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Speaker 3: It has.

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Speaker 6: We've not seen the ramp up in demand that that

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Speaker 6: was hoped for, you know, even in the times when

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Speaker 6: we were able to take advantage of seventy five hundred

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Speaker 6: dollars federal tax credits. As we know that those days

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Speaker 6: are now gone, and so you're seeing you know, GM

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Speaker 6: cut back. I think Ford's cutting back sort of pre

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Speaker 6: dated some of these policy changes, and it's more to

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Speaker 6: do with the fact that they've just been losing so

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Speaker 6: much money on that side of the business and have

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Speaker 6: a little bit less to work with in terms of

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Speaker 6: progress in scaling up the business and bringing down costs

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Speaker 6: thanks to that scale.

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Speaker 5: Craig, did we learn anything from GM or Ford's financing

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Speaker 5: divisions about consumers and how much they're able to how

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Speaker 5: much debt they're able to take on? And I ask,

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Speaker 5: because of course we had the subprime lender Prima Lend

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Speaker 5: enter bankruptcy this week. That followed Treecolor entering bankruptcy a

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Speaker 5: few weeks ago. So there are a lot of questions

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Speaker 5: about credit quality, particularly for low end consumers or low

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Speaker 5: income consumers.

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Speaker 6: Excuse me, this absolutely came up, you know, with Ford

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Speaker 6: in particular, because Ford mortor credit is a pretty you know, big,

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Speaker 6: big part of that company's business. They did emphasize just

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Speaker 6: sort of how small sort of amount of exposure they

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Speaker 6: have from a subprime perspective. I think that's not necessarily

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Speaker 6: a shock where you have a situation where there's a

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Speaker 6: lot of subprime let lenders willing to sort of you know,

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Speaker 6: go after that business, and the captive lenders at Ford

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Speaker 6: and GM tend not to play in that necessarily. I

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Speaker 6: think there was a lot of concern years ago when GM,

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Speaker 6: around the time that they were coming back from bankruptcy,

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Speaker 6: acquired a subprime lender and everybody said, hey, wait a minute, here,

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Speaker 6: didn't isn't this kind of what you know, put GM

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Speaker 6: in the ditch back in two thousand and eight, two

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Speaker 6: thousand and nine. But really they've they've also turned a

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Speaker 6: GM Financial into you know, a captive lender that does

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Speaker 6: a lot of you know, sort of higher, higher credit

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Speaker 6: scores and not necessarily targeting that that subprime segment that

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Speaker 6: everybody rightfully is concerned about given the events of the

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Speaker 6: last couple of months.

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Speaker 3: Stay with us. 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 2: Back in the US, in the stock market, company news,

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Speaker 2: Target cutting some people here, us cutting some headcount in

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Speaker 2: the corporate levels, in the salaried levels, in corporate HQ.

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Speaker 2: Let's see what's happening with Target and with the broader

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Speaker 2: retail space in general. We can go to Jen Bartasha's

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Speaker 2: senior retail staples and package food analysts for Bloomberg Intelligence. So, Jen,

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Speaker 2: so it looks like Target is announcing some corporate job cuts.

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Speaker 3: What do you make of it here?

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Speaker 7: Yeah, Hi, Paul, So when we look at Target, these

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Speaker 7: are corporate jobs. As you said, it's about eighteen hundred

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Speaker 7: in total from one thousand existing and eight hundred postings

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Speaker 7: that haven't been filled. And really this is to us,

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Speaker 7: signals that they're finally really looking at how to streamline

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Speaker 7: the organization, tighten things up and hopefully in shape change

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Speaker 7: a little bit faster than they have to kind of

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Speaker 7: get things back on track.

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Speaker 2: So this is this an issue for the company, I e.

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Speaker 2: Maybe they are a little bloated, maybe their profit margins

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Speaker 2: aren't up to snuff.

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Speaker 3: Is that something that's been identified?

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Speaker 7: You know, I think that the bloat is something that

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Speaker 7: has been identified by the company, and they're not alone.

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Speaker 7: If you think about as we came out of the pandemic,

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Speaker 7: you know, a lot of companies introduced a lot more

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Speaker 7: redundancy in their processes, in their things like that, just

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Speaker 7: in order to make sure that they would have enough

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Speaker 7: supply of goods for everybody. And as the overall supply

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Speaker 7: chain is stabilized, now it's time to go back and

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Speaker 7: trim that fat that they put on just after the pandemic.

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Speaker 7: And you know, again Target's not alone. Walmart, you know,

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Speaker 7: earlier this year has also announced corporate headcuts and so

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Speaker 7: I think this is a normal course of business. But

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Speaker 7: it's a good time for Target to do so.

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Speaker 2: So let's all right, assuming that's as a due course

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Speaker 2: of business, here, let's step back and take a look

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Speaker 2: at their core fundamentals of the business, whether it's Target

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Speaker 2: or Walmart. Here, as we go into this, you know,

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Speaker 2: holiday shopping season, what's the what are the key drivers

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Speaker 2: or the key levers that you're looking at to gauge

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Speaker 2: success or you know, maybe some challenges.

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Speaker 7: Yeah, I think one of the things that needs to

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Speaker 7: be kind of reiterated about Target's decision is that it

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Speaker 7: doesn't impact the client facing part of the business, and

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Speaker 7: so that won't affect their seasonal hires, it won't affect

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Speaker 7: their number of employees and stores. And when you're looking

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Speaker 7: at broader retail coming into that holiday season, success is

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Speaker 7: really going to hinge on making sure they have enough

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Speaker 7: of the inventory in stock, that they've made good calls

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Speaker 7: on what the items are that they're carrying, but also

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Speaker 7: that customer support and experience and so you know, those

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Speaker 7: those are the things that we're going to be looking

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Speaker 7: for as we get closer to the holiday season. And

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Speaker 7: we had Mattel and we had Hasbro report earlier this

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Speaker 7: week and they didn't have great results, and you know,

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Speaker 7: part of that is reading into toy demand for the

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Speaker 7: holidays and the orders that weren't at actually the dinection materialized,

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Speaker 7: So we'll be watching that very carefully when it comes

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Speaker 7: to these retailers that really specialize in those kind of

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Speaker 7: products for consumers around the holidays.

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Speaker 3: So what is Walmart, what is Target?

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Speaker 2: What are they saying about the upcoming holiday season, which

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Speaker 2: is such an.

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Speaker 3: Important part for you know, the overall retail chain.

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Speaker 7: Yeah, it is the the most important part of the

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Speaker 7: year for these companies. And both of you know, both

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Speaker 7: of these companies as well as others like Costco, they

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Speaker 7: all say that they're well positioned for the holidays. You know,

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Speaker 7: if you think about the procurement process, most of the

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Speaker 7: orders for holiday goods were placed back in January or February.

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Speaker 7: A lot of the goods started to arrive in July

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Speaker 7: and August, so they should have their goods, you know

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Speaker 7: here in the US kind of ready to go. And

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Speaker 7: so I think, but with the state of the consumer

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Speaker 7: spending patterns in the US, although people are still spending money,

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Speaker 7: they're still looking for value. So when we're looking forward

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Speaker 7: to the holiday season, we think we're going to see

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Speaker 7: much more spread out deals and people spending you know,

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Speaker 7: on a on a spread out basis. So that they

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Speaker 7: don't get hit hard by big credit card bills in January,

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Speaker 7: So watch for lots of small deals that kind of

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Speaker 7: lead up into the holidays.

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Speaker 2: And will prices that we pay at the retail at

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Speaker 2: the target level, at the Walmart level, are they going

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Speaker 2: to be influenced by tariffs?

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Speaker 3: Do we think?

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Speaker 7: I think there will be certain categories that will be

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Speaker 7: that will be influenced by tariffs. And so, you know,

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Speaker 7: all the retailers are saying they're they're they're using price

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Speaker 7: increases as the last possible resort. And I think actually

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Speaker 7: one of the interesting things is that when they talk

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Speaker 7: about pushing back on suppliers or sharing the cost of suppliers,

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Speaker 7: some of the commentary that we heard this week from

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Speaker 7: Mattel and Hasbro sort of illustrate that, you know, you know,

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Speaker 7: there were lower orders, there's you know, less expectation for

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Speaker 7: for quick refills. So it'll be interesting to see, you know,

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Speaker 7: where that you know, how effective those companies are negotiating

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Speaker 7: other ways to to to to manage tariffs before they

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Speaker 7: put price increases in. But in some areas it's going

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Speaker 7: to be impossible not to pass something through.

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