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Speaker 1: This is Bloomberg Surveillance. I think the death of Abanamic

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Speaker 1: says greatly overstated. It's still the same guys in charge

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Speaker 1: and with the same motivation to get themselves out of

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Speaker 1: the situation they've been in the four of US of

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Speaker 1: a very strong end and ant inflation. The reason why

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Speaker 1: investors are not that concerned about negative rates in the

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Speaker 1: US is because the economic data that we've been getting

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Speaker 1: in the US has been relatively positive. We always think

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Speaker 1: about credit in terms of demand, but maybe we need

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Speaker 1: to think about supply. You know who wants to lend

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Speaker 1: for no return? Bloomberg Surveillance your link to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning everyone,

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Speaker 1: Michael mckaon time came Bloomberg Surveillance. In this hour, did

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Speaker 1: you have the courage to buy Yahoo? At teven Valentine's Day? Seven?

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Speaker 1: On Valentine's Day? In this hour, Robert Peck will give clarity.

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Speaker 1: He's exceptionally optimistic on some of the parts for Yahoo

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Speaker 1: and sees for their modest upside from here. We will

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Speaker 1: do that in a moment. The Daily Mail in London

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Speaker 1: interested over the weekend. There's a rumor that Michael McKee

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Speaker 1: will take a bid on Yahoo as well. Somewhere somewhere

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Speaker 1: out there, somewhere in someplace, sometime, Bloomberg Surveillance is smarting

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Speaker 1: as always. An eight o'clock hour brought you by Cone

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Speaker 1: Resnick Accounting Tax Advisory. It can be hard to navigate,

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Speaker 1: to weaken on a concertainty. Your business needs industry insight

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Speaker 1: transformative advice to drive it forward. Find out why at

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Speaker 1: cone Resnick dot com. C O h N R e

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Speaker 1: z N I c K cone resn dot com. It's

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Speaker 1: text week. Everybody at Cone Resnuck working ninety work week

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Speaker 1: this week, this weekend as all of them are go

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Speaker 1: get everybody's taxes in Hey, you know my accountants. I'm sorry,

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Speaker 1: Tom LLC. We we we protect the copyright obviously of

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Speaker 1: the people who send us. They're graciously send us their

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Speaker 1: notes every day. But I gotta pass along a line

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Speaker 1: from Jim Vogel and FTN Financial talking about the bond

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Speaker 1: market and how the stock market, you know, keeps going up.

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Speaker 1: In the bond market is be calmed, and he said,

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Speaker 1: um uh. What started in the first quarter as a

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Speaker 1: haven trade to high grade bonds has become a long

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Speaker 1: slog in the Fed's waiting room with no interesting magazines

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Speaker 1: that described the bond market trading well. And we will

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Speaker 1: give you bank coverage here this week and into the

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Speaker 1: earning season. I know the ft and the cover and

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Speaker 1: Bloomberg doing lots of Michael Moore in London leading in

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Speaker 1: charge on challenging time. Although although the bank's up this morning,

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Speaker 1: I noticed un credit getting a lift this morning as well.

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Speaker 1: We have waited days to speak to him. He's been

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Speaker 1: very busy with some trust Robertson Humphrey clients. We love

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Speaker 1: having Robert peck on with I think a more measured

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Speaker 1: and acute analysis of technology emotion. He joins right now

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Speaker 1: Robert peck on Yahoo first to get the gossip out

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Speaker 1: of the way. Is ms Meyer involved in these transaction

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Speaker 1: discussions or she been pushed aside? Well, first of all,

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Speaker 1: thank you for having me. I love being on the show. Um.

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Speaker 1: As far as that question, Uh, No, she has been involved,

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Speaker 1: and in fact she has recorded an hour long video

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Speaker 1: that she sends to uh some of the participants who

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Speaker 1: are looking to bid, and then has met actually in

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Speaker 1: person with some of the top bidders as well. So

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Speaker 1: she is a part of the process here. What is

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Speaker 1: the process right now? Is there some of the parts

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Speaker 1: breaking apart or is there going to be an all

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Speaker 1: in bid for Yahoo? Yeah? I think the most likely

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Speaker 1: here is going to be some of the parts breaking apart,

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Speaker 1: particularly the core business as we know it's say the

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Speaker 1: portal versus the Asian assets that they own Yahoo Japan

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Speaker 1: and Ali Baba. So it's more of a bidding for

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Speaker 1: that core. Although you could have a bid for the

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Speaker 1: entire company come in here, I just think that's less likely.

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Speaker 1: Within the Robert Peck mathematics and folks, we protect the copyright.

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Speaker 1: We will not send out the sun Trust Roberts and

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Speaker 1: the Humphrey research. You have a stunning five times multiple

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Speaker 1: across most of their businesses revenue to Ebada, however you

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Speaker 1: want to put it, Boy, that seems awfully low. Yeah,

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Speaker 1: and you could argue maybe six, maybe seven. The point

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Speaker 1: we were trying to make there was that when you

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Speaker 1: look at the corey the doll they talk about this

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Speaker 1: seven fifty million number, when you really pull out the

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Speaker 1: non core stuff, some I P licensing, some royalty fees,

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Speaker 1: they get it's really about three million or so. So

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Speaker 1: whether you're talking a six times multiple that would just

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Speaker 1: add another three or million to the top of the

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Speaker 1: one point five billion we think it's worth. But the

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Speaker 1: bigger picture number there is at six billion dollars. We

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Speaker 1: think the core is worth around six billion dollars. For

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Speaker 1: an investor were about you know who Japan? Yes, the yeah, Japan.

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Speaker 1: You just do straight math on that's worth about seven

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Speaker 1: dollars a share with so and all you do is

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Speaker 1: just take their ownership and it and hit it was

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Speaker 1: some sort of tax We put about tax rate on it,

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Speaker 1: and that comes out to about set and dollars a

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Speaker 1: share overall. I guess you got to try to figure

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Speaker 1: the Ali Baba shares um And are you presuming that

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Speaker 1: ends up as the third piece here? Correct? That sort

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Speaker 1: of three big pieces, right, the core they're steak in

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Speaker 1: Yaho Japan as well as then they're steak in Ali Baba. Well, overall,

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Speaker 1: what do shareholders of Yahoo end up with when this

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Speaker 1: is done? Well, if they sell the core as we

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Speaker 1: think they will, your left was really just your steaks

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Speaker 1: in Yahoo Japan and Ali Baba, and then it would

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Speaker 1: make sense that those two steaks probably gets sold in

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Speaker 1: the second half of oh sixteen. The likely buyers would

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Speaker 1: be someone like soft Bank in Ali Baba, you have

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Speaker 1: you have a stunning paragraph which on a ven diagram

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Speaker 1: or a Valentine Beer diagram. Is the overlay of Verizon

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Speaker 1: in Yahoo labor and your numbers, Robert, To be honest,

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Speaker 1: I've never seen before where tons of employees exit creating

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Speaker 1: about two billion dollars in vailue. Does that assume then

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Speaker 1: regulatory scrutiny because there's such an overlay of someone like

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Speaker 1: Verizon with Yahoo. Yeah. So the reason why we've said

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Speaker 1: Verizon is the leading candidate to win here is because

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Speaker 1: they have these synergies. Number one, there's there's revenue synergies

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Speaker 1: as far as scale. Putting a O L and Yahoo,

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Speaker 1: you know, they get that third platform, but they obviously

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Speaker 1: wouldn't need y'all salesforce, that wouldn't need their GNA, their CFO,

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Speaker 1: there hr all that. So you do have this great overlap,

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Speaker 1: which means Verizon can afford there for to pay the most.

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Speaker 1: As far as what they'll be regulatory scrutiny, we think

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Speaker 1: there will be or is there with any large deal,

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Speaker 1: But given that the Yahoo AOL combined would still be

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Speaker 1: much smaller than something like a Facebook or a Google

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Speaker 1: with a good pass. Uh, presume that among the people

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Speaker 1: that wouldn't be needed when this is all done is

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Speaker 1: Marissa Meyer. Yeah, particularly Verizon wins. They already have Tim

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Speaker 1: Armstrong there um, so they probably wouldn't need Marissa. However,

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Speaker 1: of a different place, are one, say a T and

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Speaker 1: T or Comcast, there could be a role there for

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Speaker 1: current management, but with a rise, and we think it's unlikely.

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Speaker 1: That's enough. Fun. Yeah, we're gonna give Robert peck with

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Speaker 1: us for the hour. Let's start in right now and

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Speaker 1: many of the other companies you follow, Robert, Let's start

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Speaker 1: with Amazon right now. It's an absolute juggernaut. I was

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Speaker 1: struck the other day in our analysis of how small

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Speaker 1: the relative retail pie Amazon still is. Do you agree

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Speaker 1: with that that they've got years and years and years

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Speaker 1: of ability to take retail market share across America? They do.

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Speaker 1: And the funny part is e commerce as a percent

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Speaker 1: of total commerce is still very small. You're you're talking

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Speaker 1: double digits, and there's large categories that are just getting penetrated,

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Speaker 1: such as a power which had a lot of room

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Speaker 1: to to grow, and particularly when you think about some

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Speaker 1: of the international opportunity, they're just getting presents in India

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Speaker 1: and some of the UH non European areas as well,

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Speaker 1: So it's a long run way there for them. And

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Speaker 1: then when you add together their cloud business, which is

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Speaker 1: a behemoth and a leader in the space, they they

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Speaker 1: have a long run on both those aspects. I want

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Speaker 1: to phrase the question differently from what Tom said, because

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Speaker 1: you get the same answers when you ask about their

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Speaker 1: strengths all the time. Is there a weakness in Amazon

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Speaker 1: right now that anyone should worry about? Well, I think

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Speaker 1: from an investor point of view is as we know

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Speaker 1: Jeff Bezos will continue to invest against these long term opportunities.

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Speaker 1: So what you could have here is a weakness in

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Speaker 1: the financials, meaning the margins as they continue to invest

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Speaker 1: against some of these bigger opportunities. India's are very competitive

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Speaker 1: market right now. It's a negative gross margin business over

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Speaker 1: there right now, so that could weigh on financials and

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Speaker 1: the cloud business. You have Google and Microsoft coming after

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Speaker 1: Amazon because so you could see more competitive pricing pressure

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Speaker 1: there as well. But are they I mean, I understand

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Speaker 1: they want to strategically go after Amazon. Are they succeeding?

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Speaker 1: Is there any indication that there's a crack and Forte Bezos. Yeah,

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Speaker 1: so Spotify has publicly announced that it took some of

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Speaker 1: its budget off Amazon and put it over to Google,

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Speaker 1: particularly because of Google's superior data analytics, which we thought

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Speaker 1: was interesting. Apple, as you know, has been reported to

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Speaker 1: have taken a chunk of its budget off Amazon and

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Speaker 1: put it over to Google. And then you had Netflix

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Speaker 1: keynote at the Google platform two weeks ago. So you know,

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Speaker 1: with the scale presence Google already has, it's a formidable competitor. Oh,

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Speaker 1: sixteen will be the year, though we'll start sand much

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Speaker 1: traction they can have. You wonder, um, you know if

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Speaker 1: if Jeff Bezels puts a foot wrong anytime? Well, I

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Speaker 1: just did a trend chart. I mean, let's come back

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Speaker 1: with Robert Peck here when move on from the Amazon.

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Speaker 1: But Mike, I just did a trend chart back a

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Speaker 1: good ten years plus and it's above trend Amazon. To

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Speaker 1: your point, Mike, it's above trend. One standard deviation down

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Speaker 1: on the trend. Are you getting ready for this is

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Speaker 1: four and twenty dollars per share and we're at five.

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Speaker 1: So that shows you how far down down is away.

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Speaker 1: We'll come back with Robert peckis untrust and continue this

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Speaker 1: discussion a little much more in Yahoo I I know

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Speaker 1: this week and uh into the ballet. We didn't even

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Speaker 1: really talk about the Daily Mail doing that with private

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Speaker 1: equity daily Mail. They're talking about breaking up maybe just

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Speaker 1: taking the news parts of Yeah. Yeah, well there seems

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Speaker 1: to be speculation and win. It's good day. Have Robert

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Speaker 1: pack with us, and yes we'll talk about Facebook as

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Speaker 1: well with Mr peck up seven on futures, a better

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Speaker 1: tape than what we saw three hours ago. You see that,

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Speaker 1: and the tenure yield a good two basis point with

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Speaker 1: one point seven four percent of risk on higher yield.

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Speaker 1: Uh this morning, even the two year yield points seven

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Speaker 1: four seven, all the yields doing better off are really ugly.

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Speaker 1: Friday three o'clock to four o'clock hour as well the

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Speaker 1: end one o eight. All right, let's check in with

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Speaker 1: Michael Barr and get the latest world at National Headlines. Michael, Mike, Tom,

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Speaker 1: thank you very much. Fifteen former American Bar Association presidents

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Speaker 1: are aging Republicans to consider President Obama's choice to be

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Speaker 1: on the Supreme Court. In a letter to Senate leaders,

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Speaker 1: they argue that Chief Judge Mary Garland is one of

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Speaker 1: the most outstanding judges in the country. Republicans have refused

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Speaker 1: to hold hearings on in Obama nomined Foreign ministries from

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Speaker 1: the Group of Seven Industrialized Countries, including Secretary of State

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Speaker 1: John Kerry, are pledging to redouble nuclear disarmament efforts and

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Speaker 1: complete an anti terrorism action plan in time for a

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Speaker 1: May summit. They met the day in the atomic bomb

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Speaker 1: Japanese city of Hiroshima. Kerry is the most senior US

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Speaker 1: official to visit a Broschima since the atomic bombing. Global

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Speaker 1: News twenty four hours a day, powered by our twenty

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Speaker 1: four hundred journalists more than one hundred fifty news bureaus

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Speaker 1: from around the world. I'm Michael Blar and like I

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Speaker 1: thank someone Sterling one four stronger Sterling euro SWISSI shows

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Speaker 1: stronger euro one oh eight seventy eight six to five digits.

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Speaker 1: That's the way we do it here, euro Swissy to

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Speaker 1: five decimal points with Robert peckas Untrust Bloomberg Surveillance. The

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Speaker 1: News Update brought to you by Bentley University has prepared

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Speaker 1: infographic overview global business news twenty four hours a day

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Speaker 1: at Bloomberg dot com, the Radio plus mobile app and

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Speaker 1: on your radio. This is a Bloomberg Business Flash and

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Speaker 1: I'm Karen Moscow. US dot index futures are rising this morning.

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Speaker 1: Let's go to the First Word Breaking news desk for

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Speaker 1: today's morning call. And here's Bill Maloney. Good morning Bill,

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Speaker 1: Good morning Karen. That's right. US dock futures are maintaining

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Speaker 1: their early gains. Death futures currently hired by fifty points says.

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Speaker 1: The futures gained six and NASA futures rise by seventeen.

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Speaker 1: The US ten year at one point seven four and

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Speaker 1: RPM markets are rising, led by one point seven percent

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Speaker 1: gains in Italy. In deal news, Canadian Pacific ends efforts

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Speaker 1: to merge with Real Norfolk Southern, and in other news,

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Speaker 1: National oil pliminer r Q and revenue missed estimates also

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Speaker 1: cut it David end of five cents to share, Hurts

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Speaker 1: cut its forecast revenue and earning season kicks off with

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Speaker 1: Alcoa reporting after the bell tonight. Finally, some of your

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Speaker 1: walls sheet upgrades and downgrades and Connor raised outperform at BMO,

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Speaker 1: Valero cut to neutral at created Suits, Potash cut the

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Speaker 1: whole versus by an HSBC, Cummins cut to neutral versus

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Speaker 1: outperform our Quarry, and finally Noble Corps cut the whole

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Speaker 1: versus by at sack Chen Live from the First Breaking

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Speaker 1: News Desk on Bill Maloney Karen very thanks to Bill

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Speaker 1: and to hear live breaking news over your Bloomberg type

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Speaker 1: squawk go on your terminal. Let's ask you you a

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Speaker 1: w K go and that's a Bloomberg business flash. Tom

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Speaker 1: and Mike, Karen, thanks so much. Good Monday morning, everyone.

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Speaker 1: Bloomberg Surveillance brought you buy Investco. Markets may be volatile,

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Speaker 1: but investcos value managers are finding high conviction opportunities. Find

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Speaker 1: out where at invesco dot com slash Interactive. We've been

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Speaker 1: talking Yahoo and Amazon with Robert Peck of sun Trust,

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Speaker 1: Robinson Humphrey and Michael McKee. Is aware that I had

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Speaker 1: one to Mike, I had to Netflix accounts and I

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Speaker 1: just dropped them both. Well, you may be ahead of

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Speaker 1: the crowd. Uh. Netflix is raising its prices seven ninety

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Speaker 1: nine a month now. In the next month or so,

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Speaker 1: going up to nine nine. According to u B s

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Speaker 1: ubs analysts surveyed some Netflix subscribers and found that forty

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Speaker 1: one say they will uh cancel, But will they really uh?

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Speaker 1: Robert Peck uh sun Trust covers Netflix as part of

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Speaker 1: his Internet or research and I'm wondering what your estimation

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Speaker 1: of the impact on Netflix of the pricing increase is

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Speaker 1: going to be. Is Mr Hastings taking a big gamble here? Yeah,

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Speaker 1: there are a couple of things there. We just put

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Speaker 1: a big piece out on this last week and we

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Speaker 1: think about ten per centers So of the people will

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Speaker 1: end up canceling, you have a good majority that will

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Speaker 1: just trade down to the lower tier pricing they can have,

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Speaker 1: and a lot of others that will just have it

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Speaker 1: go through the impact of it though to the companies,

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Speaker 1: while you will have an increase in churn and the

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Speaker 1: investors are very much looking at that for two q uh.

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Speaker 1: The RPO offset are the additional revenue get actually protects

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Speaker 1: the financials and as a creative so it actually works

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Speaker 1: out well for Netflix. The the the competitors to Netflix.

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Speaker 1: I mean, you've got Amazon Streaming. Now. To go back

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Speaker 1: to the company we were just talking about, you got

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Speaker 1: the Hulu people out there. Um, with various efforts by

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Speaker 1: various people to attract cord cutters, even Apple TV, you know,

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Speaker 1: wide selection of stuff. So, um, does Netflix have a

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Speaker 1: great future? Uh? How do they remain competitive as they

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Speaker 1: raise prices? Yeah. So one of the big drivers going

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Speaker 1: forward here is international. They just rolled out across the globe,

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Speaker 1: so all the Asian Pacific markets, all of your Latin America,

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Speaker 1: et cetera. So all that if you can provide a

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Speaker 1: big growth engine for the company coming from a base

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Speaker 1: of close to zero. So that's the big part of it.

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Speaker 1: But what you also see here is consumers use these

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Speaker 1: services complementary. So they will use Amazon, they will use Netflix,

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Speaker 1: they'll use hbo Go. They don't necessarily just choose one

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Speaker 1: over the other. But what you are seeing as the

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Speaker 1: impact on traditional cable bill, this cord cutting you were

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Speaker 1: referring to, as consumers end up choosing more of the

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Speaker 1: services and content they want. I look at it, and

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Speaker 1: I look at sort of the frustration. The whole industry

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Speaker 1: is a consumer moving and an investor for that matter,

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Speaker 1: moving so fast. Within the blur of April of two

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Speaker 1: thousand sixteen, Robert Peck, what's the single trend of media

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Speaker 1: you're looking at. The big shift you're seeing is consumption

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Speaker 1: for what you want when you want it, and particularly

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Speaker 1: in the younger demographics, they don't watch linear TV like

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Speaker 1: our generator did, so that's one of the biggest shifts,

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Speaker 1: and therefore you're seeing the advertising dollars trying to follow

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Speaker 1: those at those eyeballs. Let me take another angle on that,

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Speaker 1: which is somewhat the same but but but I'll call

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Speaker 1: it call it adjacent, which is, we only have so

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Speaker 1: much time in the day to watch this stuff. Are

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Speaker 1: we watching more or are we substituting when we go

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Speaker 1: do something new in media technology? Well, that's interesting part

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Speaker 1: about it is that you're able to watch more more

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Speaker 1: efficiently instead of having to sit there through linear TV

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Speaker 1: and watch all those commercials that we had to do

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Speaker 1: growing up. The younger demographics are watching when they can,

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Speaker 1: particularly even mobile, so whether you're standing on a line

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Speaker 1: or on a train or what have you. That's where

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Speaker 1: they're concerning a lot of the mike to the NHL

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Speaker 1: Stanley Cup. I mean this weekend, a couple of games

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Speaker 1: I had to watch on regular TV and they ended

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Speaker 1: up turning them off. There are too many commercials. I

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Speaker 1: just can't do it. And it's I don't know where

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Speaker 1: this is in three months, Michael, you cover uh eighteen

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Speaker 1: companies is by my account here Robert, and I'm just

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Speaker 1: wondering because we only have a minute left here. Um,

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Speaker 1: of all those companies, who's the most interesting right now?

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Speaker 1: We think Facebook's extremely interesting and you're gonna see a

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Speaker 1: lot of news flow out this week from their FAI conference.

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Speaker 1: But they've got another billion and a half people they

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Speaker 1: reach every single month. They haven't started monetizing with messenger,

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Speaker 1: and what's that. And when you think about the future

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Speaker 1: of advertising and social experiences oculus or virtual reality or

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Speaker 1: mental reality right in the heart of it, how do

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Speaker 1: you respond across I'll let you pick the companies to

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Speaker 1: the phrase from your institutional clients. Yeah, I want to

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Speaker 1: own it, but I need to pull back and there's

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Speaker 1: some pullbacks. Yeah, it's difficult to do. And what we

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Speaker 1: try and do is look at quality companies that are

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Speaker 1: not only executing on their core near term but are

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Speaker 1: also investing in large opportunities for the long term. And

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Speaker 1: those are proven out. So's just Amazon, Facebook, Google of

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Speaker 1: all works really well, and you just there's no I mean,

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Speaker 1: look at the chart of Facebook and folks, it's a

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Speaker 1: chart you teach in an undergraduate technical course. Since the

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Speaker 1: middle of two thousand thirteen, there hasn't been a pullback opportunity.

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Speaker 1: And it's just very simple. Yeah, and I think a

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Speaker 1: lot of people missed that, and we're waiting for that

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Speaker 1: pullback opportunity. And uh, you know, with with your core

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Speaker 1: check showing how well the core is executing for them,

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Speaker 1: it's difficult to see a pullback of any Thanks for

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Speaker 1: the clinic. Robert Peck on the Monday's sun Trust Robertson

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Speaker 1: Humphrey getting us started the course with a major focus

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Speaker 1: on the ballet as it is, the multiple party ballet. Yeahoo,

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Speaker 1: Daily Mail in the headlines Wall Street Journal had that story, Mike,

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Speaker 1: I guess in the less eighteen hours, I'll say, well,

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Speaker 1: it's nice to look at individual companies and figure out

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Speaker 1: what they're worth. You know, after talking to Sam Stove

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Speaker 1: all about sectors, a reminder that very different ways to

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Speaker 1: do it. That's what we do. We do the equity markets,

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Speaker 1: to do finance, investment, and of course economics. A big

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Speaker 1: International Economic Week with IMF springing meetings this Friday. It's

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Speaker 1: Bloomberg's surveillance economic data next coming up. With all due respect,

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