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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: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 3: Let's talk us a little c suite conversation here. We

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Speaker 3: can do that with the hotel business. Mark Hopplomacian joins us.

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Speaker 3: He's a president and chief executive officer of Hyatt Hotels,

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Speaker 3: joining us via zoom. Hey, Mark, thanks so much for

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Speaker 3: joining us here. I'm looking at your stock here, fifty

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Speaker 3: two week high. For those that don't know, H is

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Speaker 3: the symbol. It's cool to get that one of those

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Speaker 3: single letter symbols there. That's always pretty cool for us

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Speaker 3: Wall Street, Folcus. I've got a market cap at fifteen

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Speaker 3: point seven billion, stocks up about three tens a one

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Speaker 3: percent today. Mark, talk to us about your recent earnings

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Speaker 3: and kind of what was the messaging you needed to

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Speaker 3: get across to your shareholders.

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Speaker 4: Of all, it's great to be back with you all,

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Speaker 4: and thanks for having me. I think that the the

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Speaker 4: clear message was really centered around the fact that the

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Speaker 4: transformation of the company to asset lighter platform has now

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Speaker 4: shown up in the numbers in a very material way.

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Speaker 4: We had the highest pre cash flow that in the

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Speaker 4: company's history. We also had the mix of our asset

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Speaker 4: light earnings to our total earnings went up to seventy

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Speaker 4: six percent five years ago.

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Speaker 5: That was in the in the mid forties.

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Speaker 3: Hey market, So, did describe for us what your asset

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Speaker 3: light strategy is? Is that relying more on franchisease.

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Speaker 4: Yeah, so it's not really I wouldn't call it an

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Speaker 4: asset light strategy. I would call it an asset light program.

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Speaker 4: Where we were selling down. We had we had two

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Speaker 4: major drivers of our of our of our earnings. One

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Speaker 4: was from real estate that we owned hotels, and the

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Speaker 4: other ones from management franchising hotels across the world. We're

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Speaker 4: primarily a management business, not a franchise businesusiness, but that

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Speaker 4: those are the two businesses. So as we sell down

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Speaker 4: real estate, the proportion that's coming from real estate sourced

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Speaker 4: earnings has been dropping. We've concurrently reinvested in buying new

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Speaker 4: platforms and new brands over the last five years, and

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Speaker 4: that has driven up our management and franchising fees. At

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Speaker 4: the same time, so the mix has shifted to much

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Speaker 4: more in the management and franchise feed driven business, which

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Speaker 4: is very low capital intensivity and high margin and high

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Speaker 4: free cash floats conversion. So that was probably the key message.

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Speaker 4: The other thing that we did is we simplified our

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Speaker 4: financial presentation because we have a business that's a subscription

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Speaker 4: model membership business called Unlimited Ucation Club, and we sold

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Speaker 4: the majority interest in that business to a third party

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Speaker 4: which helped us simplify how we report our earnings and

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Speaker 4: that was very well received by investors.

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Speaker 6: And Mark, that's you and the c suite managing all

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Speaker 6: of that. What about the demand side of the business,

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Speaker 6: What kind of pricing power do you have per room?

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Speaker 6: And what's the demand situation.

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Speaker 4: Like actually demand, So we think about three different demand drivers.

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Speaker 4: One is leisure, which has been the leader of the

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Speaker 4: recovery through post COVID period. We think about group business,

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Speaker 4: which is big meetings and conventions and things like that,

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Speaker 4: and we also have business travel individual business travel. All

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Speaker 4: three are showing signs of great momentum and positive outlooks.

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Speaker 4: So starting with leisure, in the first quarter of this year,

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Speaker 4: our pace meeting our bookings are up eleven percent for

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Speaker 4: our all inclusive resorts in the Pervian and.

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Speaker 5: Also up for our our resorts in the Americas.

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Speaker 4: But leisure travel has been really really solid in China.

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Speaker 4: We had a record year for Lunar in New Year.

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Speaker 4: The spending amongst Chinese, both inside of China and other

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Speaker 4: destinations in Asia was at them all time high. So

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Speaker 4: that's leisure in group. Our pace into this year, that

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Speaker 4: is forward bookings are up eight percent, and so we're

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Speaker 4: looking at another solid year of growth of growth in meetings,

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Speaker 4: and I think corporations are increasingly resolved to make sure

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Speaker 4: that they prioritize those meetings. And then on business transient

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Speaker 4: the US is lagging, but the overall business transient category

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Speaker 4: demand around the world is about seven percent the low

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Speaker 4: where it was pre pandemic, So we're getting closer and

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Speaker 4: closer to being a parody. Europe is fully recovered, and

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Speaker 4: then some China is fully recovered, and then some the

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Speaker 4: United States is still lagging, and we're seeing signs of

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Speaker 4: positive signs of business transient travel increasing. So I would

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Speaker 4: say across all three major category we're seeing positive trends

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Speaker 4: into twenty four mark.

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Speaker 3: Could you talked to us about m and A and

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Speaker 3: kind of growth via acquisition. How does that figure into

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Speaker 3: your growth plans? What are you guys messaging to the

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Speaker 3: street about your willingness to engage in em ande because

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Speaker 3: I know you had to buy out recently of the

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Speaker 3: Apple Leisure Group.

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Speaker 7: I want to see kind of your appetite is going forward.

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Speaker 4: Yeah, So over the past five years, we've invested about

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Speaker 4: three point eight billion dollars in acquisitions, the biggest one

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Speaker 4: being Apple Leisure Group at two point seven billion, and

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Speaker 4: it's been tremendously beneficial to us because we've been able

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Speaker 4: to expand our customer base in the most in the

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Speaker 4: highest growth and most relevant to US categories, which is leisure,

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Speaker 4: lifestyle and luxury. And so we've really done this in

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Speaker 4: a very deliberate way to move the company in that direction.

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Speaker 4: In the fourth quarter, I think we had fifty seven

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Speaker 4: percent of our total rooms revenue around the world was

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Speaker 4: leisure focused, which is up twenty points from the mid

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Speaker 4: thirties to the mid fifties pre pandemics on now, so

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Speaker 4: that the mix in the company is tremendously shifted, but

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Speaker 4: they also been very profitable and high value acquisitions. The

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Speaker 4: fees per room that we are earning today are materially

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Speaker 4: higher than they were five years ago before we made

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Speaker 4: these acquisitions and evolved the company. Even as we have

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Speaker 4: grown our select service brands, so we are expanding in

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Speaker 4: lower price points, but our overall feed growth per room

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Speaker 4: has been growing, which is really I think part of

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Speaker 4: the equation of actually driving share holder value on.

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Speaker 5: An accelerated basis.

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Speaker 4: In terms of our outbook, I think there will be

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Speaker 4: more opportunities for MNA in the future, but probably smaller scale.

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Speaker 6: Mark Paul and I talked by the story yesterday for

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Speaker 6: the Journal reported that hotel parking fees are spiking because

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Speaker 6: of the fact that you know, you guys that on

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Speaker 6: hotels have to pay more and rent interest rates have increased.

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Speaker 6: Maybe there's a demand issue in certain pockets. You got

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Speaker 6: to increase prices where you can talk to me about

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Speaker 6: how expensive it is to run your business, like where

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Speaker 6: a cost coming down?

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Speaker 8: Where cost going up?

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Speaker 4: You know, I think the primary look, first of all,

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Speaker 4: let's start with the biggest cost category, which.

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Speaker 5: Is people, yeah, at our hotels and in.

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Speaker 4: Twenty twenty one non union markets, which is primarily in

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Speaker 4: the South, the Sun Belt, the smile of the United States.

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Speaker 4: I think our wage rates went up by twenty percent

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Speaker 4: over the course of that year, and that started to

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Speaker 4: mitigate or a millliarrate in twenty twenty two and twenty

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Speaker 4: twenty three, but we experienced a massively acute situation in

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Speaker 4: terms of supply of labor.

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Speaker 5: That's really that's evened out. We were in the mid teams.

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Speaker 6: That's even out in that because we also talked about

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Speaker 6: didn't we paul about cleaning services like not staffing housekeeping

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Speaker 6: because it just can't find the workers.

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Speaker 8: So do you feel like you're at the right spot?

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Speaker 4: I would say that there are pockets where we still

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Speaker 4: have shortages, and I think part of that has to

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Speaker 4: do with the nature of the workforce at this point.

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Speaker 4: So we've got a lot of the byproduct of not

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Speaker 4: having a really advanced immigration policy in the United States

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Speaker 4: and h t B visa program, is that for at times,

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Speaker 4: especially over the summer, where you have peak demand, we

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Speaker 4: don't have the right type type of labor that's willing

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Speaker 4: to take those jobs and uh and be happy to

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Speaker 4: start their careers in those jobs. So I think this

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Speaker 4: they go together. A lot of the a lot of

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Speaker 4: the h t B people that come in on an

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Speaker 4: hub visa which is a temporary work visa they come

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Speaker 4: and they leave. Or the incidence of of immigration that

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Speaker 4: allows us to hire people who are coming in into

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Speaker 4: the workforce in the United States for the first time

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Speaker 4: has been has been under some pressure now. Having said that, overall,

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Speaker 4: our vacancy rates have gone from mid teens to mid

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Speaker 4: single digits, so down ten points, which is extraordinary, and

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Speaker 4: that's over the last eighteen months. So we are having

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Speaker 4: a better time finding labor, but there are definitely pockets

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Speaker 4: of constraints.

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Speaker 7: Yep, hear that from a lot of folks in the

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Speaker 7: service business.

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Speaker 3: Hey, Mark, thanks so much for joining us, Mark Hopplomasian,

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Speaker 3: he's a president and chief executive officer at Hyatt Hotels,

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Speaker 3: joining us from Chicago, Illinois via zoom. The company stock

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Speaker 3: h is the ticker all time high today. So how

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Speaker 3: about that they had some pretty solid numbers recovering from

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Speaker 3: the pandemic. Look like we see a lot of other

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Speaker 3: entertainment and leisure spaces.

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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 applecar.

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Speaker 2: Play and Android Otto with the Bloomberg Business.

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Speaker 1: You can also listen live on Amazon and Alexa from

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Speaker 1: our flagship New York station. Just say Alexa playing Bloomberg

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Speaker 1: eleven thirty.

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Speaker 3: All right, ma, go in the terminal. Then I click

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Speaker 3: on time series and I go, got ten years. And

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Speaker 3: I just look at the graph of M and A activity,

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Speaker 3: both in terms of dollar volume and number of deals.

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Speaker 3: And man, really, since like I don't know, mid twenty

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Speaker 3: twenty two, there's been nothing going on in the MNA world.

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Speaker 3: My M and A banker buddies, I don't know what

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Speaker 3: they're living on these days. But let's check and see

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Speaker 3: where we are on the M and A space kind

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Speaker 3: of where we can be going from here. I guess

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Speaker 3: that's what happens when rates go up five hundred basis points.

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Speaker 3: Ted Smith joins us. He's co founder and president of

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Speaker 3: Union Square Advisors, joining us here in our Bloomberg Interactive

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Speaker 3: Broker studio. So Ted, M and A activity, it's been

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Speaker 3: a little fallow over the last I don't know, eighteen

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Speaker 3: months or so.

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Speaker 7: What are you guys seeing out there in terms of activity.

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Speaker 9: We're starting to finally see a little bit of a

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Speaker 9: thought out there, Paul. I want to be careful not

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Speaker 9: to suggest that it's getting overcooked. Anytime soon, but starting

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Speaker 9: to see the number of deals both and the quality

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Speaker 9: of deals start to come back. Strategical quirers are saying

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Speaker 9: they've kind of come out of their funk. They're ready

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Speaker 9: to do things again where they hadn't been to your

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Speaker 9: point for the last twelve to eighteen months. And private

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Speaker 9: equity firms, which in technology where we apply our trade

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Speaker 9: are so important, have a lot of capital to put

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Speaker 9: to work, so they're anxious to Was.

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Speaker 3: It just interest rates going up that everybody just step

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Speaker 3: back or is it global macro? What kind of caused

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Speaker 3: people to step back here? Because when I think about

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Speaker 3: M and A, I think I have to have a

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Speaker 3: board and a c suite that has confidence in their

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Speaker 3: business to go out and make.

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Speaker 9: That kind of investment right. So on the strategic side,

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Speaker 9: I think it was more macro. It was like, we

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Speaker 9: don't know enough about where our business is going right

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Speaker 9: now that we can take a risk on another business.

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Speaker 9: I think in private equity land it was definitely, at

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Speaker 9: least in part by interest rates, And it was also

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Speaker 9: the fact that because even to your point in early

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Speaker 9: twenty twenty two, there hadn't been a lot of capital

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Speaker 9: returned to their limited partners, and so for every dollar

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Speaker 9: that they're investing, they're also thinking should I be giving

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Speaker 9: that back to my limiteds And so there's been a

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Speaker 9: lot of tension in that part of the world.

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Speaker 8: So I know tech might be your space, but just.

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Speaker 6: Person so, I'm really interested in what's happening with Exon

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Speaker 6: and Seinook trying to get in the middle of the

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Speaker 6: deal between Chevron and hess And the broad question is like,

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Speaker 6: are we going to see weird territorial fights like this

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Speaker 6: in different sectors, where like one big company to stop

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Speaker 6: another big company from buying a smaller company.

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Speaker 8: Is that normal.

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Speaker 9: I'm not sure that it's normal, but it's certainly not

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Speaker 9: unheard of. And I think we think and again, in tech,

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Speaker 9: we see a lot of semi normal or even abnormal

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Speaker 9: potential buyers who see buying into the tech landscape as

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Speaker 9: being something that will help increase their growth, increase their margins,

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Speaker 9: put them into exposure of a sector that they previously

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Speaker 9: had not been. So I think we'll see some more

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Speaker 9: of that in tech, but more generally, to your question,

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Speaker 9: I'm certainly no expert on the energy sector, but I

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Speaker 9: think this is an environment where if you see that

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Speaker 9: smaller company that can really make a difference in your

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Speaker 9: business and accelerate intor granted growth. Buyers are not afraid

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Speaker 9: to mix it up at this point because they've been

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Speaker 9: on the sidelines for a while and they need to

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Speaker 9: get back in.

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Speaker 3: If I go to sand Hill Road with a really

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Speaker 3: good idea, can I find any money? Will?

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Speaker 10: They will?

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Speaker 7: They invest in my company?

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Speaker 11: They will?

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Speaker 9: Valuations are obviously down from the peak in twenty twenty one.

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Speaker 9: You're gonna ask a lot of questions about what's your

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Speaker 9: AI strategy?

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Speaker 8: You know, where where exactly they got to saw something

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Speaker 8: for it?

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Speaker 7: Right?

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Speaker 8: Exactly?

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Speaker 9: Where are you going from here? The capital is available,

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Speaker 9: but it is certainly more limited than it was two

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Speaker 9: years ago and before that. Investors are being much more

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Speaker 9: diligent about what they're willing to put capital to work in.

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Speaker 9: And again, AI is obviously hot. That's blinding glimpse of

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Speaker 9: the obvious for your audience.

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Speaker 7: But what's different?

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Speaker 9: I think, can I compare this, because I've been doing

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Speaker 9: this for a long time, I compare this to the

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Speaker 9: you know, the dot com era. Investors got to the

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Speaker 9: point really quickly where it wasn't just about it's AI,

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Speaker 9: it's what's the defensible business model, what's the real enterprise

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Speaker 9: use case and how are you going to make money

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Speaker 9: with it? That came so much faster with AI than

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Speaker 9: it did in the dot com era, and that's what

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Speaker 9: you're seeing on Santo Road.

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Speaker 7: Now, show me a full business plan that's going to

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Speaker 7: make money.

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Speaker 6: Well, how are valuations? Do you think that we're getting

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Speaker 6: overpaid things getting overpaid to be bought? Like, how hard

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Speaker 6: is it to come to price.

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Speaker 9: Better than it was in late twenty two and twenty three,

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Speaker 9: where we've had quite a bit of disparity, and that

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Speaker 9: was one of the reasons for not getting a lot

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Speaker 9: of M and A done with.

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Speaker 6: Have the buyers come down or have the seller Like, yeah,

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Speaker 6: the buyers come down, the seller's gun up or vice versa.

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Speaker 7: Some of both.

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Speaker 9: I do think that the obviously the market has improved

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Speaker 9: overall over the course of late twenty three and twenty four,

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Speaker 9: so valuations have ticked up off of their lows. But

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Speaker 9: I also think seller expectations have tempered a bit. We've

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Speaker 9: been in this valuation, this down more down valuation environment

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Speaker 9: now for almost two years, and eventually you have to

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Speaker 9: realize this is the new normal.

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Speaker 3: Yeah, I think that this I guess the question I

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Speaker 3: was asking a lot of IPO bankers is when is

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Speaker 3: that stigma of, you know, a down round.

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Speaker 7: When is that going to kind of ease up off

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Speaker 7: the marketplace?

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Speaker 3: Because I felt like I didn't want to be one

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Speaker 3: of the first people to do an IPO at a

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Speaker 3: down round or would do a down run in the

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Speaker 3: private market.

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Speaker 7: So but it maybe more deals we get done, Maybe

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Speaker 7: that that that happens.

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Speaker 3: So on the M and A space here, I mean,

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Speaker 3: how are you targeting your business, what your target sheheet

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Speaker 3: look like, what type of company are you calling on?

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Speaker 9: So we focus on late stage private companies and public companies.

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Speaker 9: We will represent either buyers or sellers. That's a little

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Speaker 9: different than other boutiques who tend to focus only on sellers.

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Speaker 9: We think it's important to be able to do both.

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Speaker 9: But opportunities in the one hundred million of enterprise value

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Speaker 9: all the way up to a billion and well beyond

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Speaker 9: is where we where we do our work. Might characterize

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Speaker 9: that as middle market, but there's a that's where you know,

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Speaker 9: under the M and A curve that's where the greatest

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Speaker 9: amount of area is. So there's a lot to do there.

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Speaker 9: We focus mostly on enterprise technologies. So again I mentioned

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Speaker 9: the enterprise use case for AI. A lot of our

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Speaker 9: companies are then are selling two big companies themselves saying here,

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Speaker 9: here's how I can make you more efficient, how I

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Speaker 9: can help you drive more revenue. That's where we spend

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Speaker 9: most of our time. And there's a there's a lot

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Speaker 9: of great software companies in there.

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Speaker 6: Well, okay, I was in say Soft, where I feel

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Speaker 6: like there are gazillion software companies like this one reports

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Speaker 6: and some reports like it could snowflake. I have no

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Speaker 6: idea the difference as like a general market person like,

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Speaker 6: are we going to have to see big consolidation within that?

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Speaker 9: I think we will see more consolidation. I'm not sure

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Speaker 9: it's going to be big to big. I think you're

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Speaker 9: going to continue to see the larger players acquire small

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Speaker 9: medium sized companies on a relative basis to their own

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Speaker 9: market caps. And that's, you know, certainly, that's what we're

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Speaker 9: counting on. We don't think because you touched up, Paul,

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Speaker 9: we don't think we're going to see a surgeon IPO activity.

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Speaker 9: It'll be busier this year than it was last year,

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Speaker 9: but that's a very low bar. Obviously, Ultimately ninety five

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Speaker 9: plus percent of venture backed companies that get to an

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Speaker 9: exit get to an exit through EM and A.

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Speaker 7: And that's that's been true for literally decades.

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Speaker 3: One of the things that's new, at least since I

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Speaker 3: was on the street, was this whole private credit market.

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Speaker 3: How does that impact your business to technology industry? Because

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Speaker 3: I would guess it's just another form of capital for

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Speaker 3: your companies, that's right.

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Speaker 9: So it's it's been a boom for our business. We

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Speaker 9: brought in a team led by Mike Meyer Partner who

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Speaker 9: owns our capital markets businesses that actually is now our

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Speaker 9: CEO has done a great job with that. That's almost

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Speaker 9: two trillion dollar asset class from private credit today and

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Speaker 9: it's also available to technology companies earlier than it ever

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Speaker 9: has been before. So to your point, we can go

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Speaker 9: to our clients and say, let's talk about your capital needs,

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Speaker 9: the cost of capital that you're looking for, the flexibility

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Speaker 9: you're looking for, and let's look across the entire debt

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Speaker 9: equity spectrum and find a solution for you. And you

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Speaker 9: can go to the private credit markets and find that

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Speaker 9: tailored solution much easier than you can in the public markets.

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Speaker 8: What other ways are we financing deals here?

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Speaker 9: Again, most of the large acquirers are going to finance

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Speaker 9: at largely off their balance sheet. Okay, so I mean,

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Speaker 9: obviously if it becomes a really large deal, you might

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Speaker 9: see the bigger companies go into the market. But to

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Speaker 9: the point that Paul made earlier, right, that's a lot

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Speaker 9: more expensive now, and so they prefer not to do

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Speaker 9: that if they don't have to. Occasionally we're seeing stock

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Speaker 9: for stock deals those used to be de Reger not

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Speaker 9: so much anymore amongst the larger buyers. But mostly this

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Speaker 9: is still a cash buyer's market, and so if you

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Speaker 9: don't have enough cash on hand, then you're going to

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Speaker 9: have to go out and find it. And I think

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Speaker 9: we'll start to see a return to equity based financing,

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Speaker 9: convertible based financing again, a lot of the use of

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Speaker 9: the private credit market with its flexibility. Will we'll back

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Speaker 9: some of the M and A.

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Speaker 7: That's going to happen this year.

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Speaker 3: I'm guessing in your middle market size, you don't have

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Speaker 3: to deal with regulators.

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Speaker 7: Too much approving deals.

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Speaker 3: But boy, across the industry, if I'm a big ticket

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Speaker 3: M and a banker, I got to make sure I

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Speaker 3: got the right lawyers give me the advice because I

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Speaker 3: didn'tink the Department of Justice, the FTC, everybody's cracking down.

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Speaker 9: It's true, and we think of it in terms of

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Speaker 9: to whom are we going to be selling this company,

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Speaker 9: because if you're one of the Big seven, you're gonna

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Speaker 9: get scrutiny for almost every deal, right, and so we

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Speaker 9: watch for that as as we bring opportunities forward and

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Speaker 9: think about what that might look like.

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Speaker 7: But you're right, it's really that group.

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Speaker 9: And let's face it, they have lived for a very

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Speaker 9: long time on asking for forgiveness, not permission, and I

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Speaker 9: think they're going to continue that activity. But by the way,

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Speaker 9: it's not just the DJ here. We've seen a lot

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Speaker 9: more activity and scrutiny out of Europe and the UK

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Speaker 9: in particular, and we think that's going to continue for

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Speaker 9: a while.

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Speaker 3: Yeah, the UK, they get Brexit and then they realize, oh,

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Speaker 3: we can have a seat at the table now.

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Speaker 8: Yeah yeah, yeah, Iah ex Oktay.

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Speaker 3: Very good, All right, Ted, thanks so much for joining

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Speaker 3: us once again. Ted Smith, he is a co founder

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Speaker 3: and president of Union Square Advisors. Joining us live here

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Speaker 3: in our Bloomberg Interactive Brokers to you're talking about the

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Speaker 3: world of tech, the world of deal making again. The

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Speaker 3: past eighteen months, just looking at my MA function on

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Speaker 3: the Bloomberg terminal, been much slower than maybe like the

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Speaker 3: ten year average, And I guess that can happen when

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Speaker 3: rates go up five hundred basis points.

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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 car Playing and

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Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand

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

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Speaker 1: YouTube PCE.

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Speaker 6: I kind of felt like it was a bit of

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Speaker 6: a nothing burger, Like it wasn't bad, it wasn't terrible,

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Speaker 6: And I'm really wondering if we actually.

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Speaker 8: Learned anything today on inflation.

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Speaker 6: So good thing that Ira Jersey is here, Bloomberg Intelligence

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Speaker 6: chief you as interest rate strategist.

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Speaker 8: Iira, did I learn anything today?

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Speaker 12: We didn't learn a whole lot from the PC report

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Speaker 12: on inflation. I mean, obviously the headline numbers were as expected.

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Speaker 12: There were some details here and there that were kind

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Speaker 12: of interesting. Certainly the downward revisions for December turned a

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Speaker 12: couple of heads here and there and helped contribute to

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Speaker 12: the rally. What I found really interesting, and I think

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Speaker 12: something that people have been talking about this the personal

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Speaker 12: income number being so hot today. So that was up

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Speaker 12: one percent, which was well above expectations, and that was

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Speaker 12: driven in large part by two factors. One was massive

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Speaker 12: increase in government spending, so basically Social Security payments in

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Speaker 12: particular were increased a lot in January. Part of that

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Speaker 12: was a cost of living adjustment, so that was up

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Speaker 12: three and a half percent in one month's you know,

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Speaker 12: that's massive and the most that we've had in the year.

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Speaker 12: And the other was actually dividend payments. So dividend payments

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Speaker 12: actually contributed about seventy five billion dollars to personal income

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Speaker 12: in annually. That's an annualized rate in the in January,

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Speaker 12: and that's a pretty big move do it normally it's

442
00:21:10,119 --> 00:21:13,560
Speaker 12: significantly less than that every month. So take that with

443
00:21:13,640 --> 00:21:15,040
Speaker 12: a little bit of a grain AsSalt too, and I

444
00:21:15,040 --> 00:21:17,919
Speaker 12: think the market looked through that, and that's why treasuries

445
00:21:17,920 --> 00:21:21,560
Speaker 12: have rallied a little bit since the since those data

446
00:21:21,600 --> 00:21:22,080
Speaker 12: came out.

447
00:21:22,400 --> 00:21:25,680
Speaker 3: So, ira would it be bad form to give the

448
00:21:25,720 --> 00:21:27,600
Speaker 3: Federal Reserve a little pat on the back here in

449
00:21:27,720 --> 00:21:29,560
Speaker 3: terms of their ability to bring inflation down?

450
00:21:31,040 --> 00:21:33,360
Speaker 11: Well, maybe it might be a little bit early for that.

451
00:21:33,440 --> 00:21:35,720
Speaker 12: You know, when you still have two point eight percent

452
00:21:35,840 --> 00:21:39,280
Speaker 12: core inflation on a PC weighted basis, that's not at

453
00:21:39,320 --> 00:21:42,000
Speaker 12: their target yet. But certainly, you know, anything sub three

454
00:21:42,080 --> 00:21:44,560
Speaker 12: percent is better than five.

455
00:21:44,320 --> 00:21:45,160
Speaker 11: Percent for sure.

456
00:21:46,119 --> 00:21:48,760
Speaker 12: But when you look at some of the details there

457
00:21:49,119 --> 00:21:51,840
Speaker 12: there still are pockets of inflation that are very hot,

458
00:21:52,119 --> 00:21:55,520
Speaker 12: and they're in sectors that aren't particularly interest rates sensitive. Right,

459
00:21:55,560 --> 00:22:00,560
Speaker 12: so there are sectors like services excluding housing, and if

460
00:22:00,600 --> 00:22:04,960
Speaker 12: you consider those types of services, it's going to be

461
00:22:04,960 --> 00:22:08,560
Speaker 12: hard for inflation to keep coming down. So the Fed

462
00:22:08,640 --> 00:22:12,920
Speaker 12: obviously has tightened monetary policy quite a lot. There's certainly

463
00:22:13,680 --> 00:22:17,240
Speaker 12: certainly some room maybe for inflation to continue to fall.

464
00:22:18,080 --> 00:22:19,639
Speaker 12: So you know, we're going to continue to have this

465
00:22:19,720 --> 00:22:23,520
Speaker 12: debate as will the Federal Reserve cut interest rates before midyear?

466
00:22:24,160 --> 00:22:26,600
Speaker 12: If they don't cut by June, then are they going

467
00:22:26,680 --> 00:22:28,840
Speaker 12: to be able to cut because of the election cycle,

468
00:22:28,880 --> 00:22:30,000
Speaker 12: and you know, do they.

469
00:22:29,880 --> 00:22:30,880
Speaker 11: Want to get in front of that.

470
00:22:31,000 --> 00:22:34,760
Speaker 12: So so that debate is going to continue right up

471
00:22:34,840 --> 00:22:38,920
Speaker 12: until the May and June meetings, I think, certainly into

472
00:22:38,920 --> 00:22:41,280
Speaker 12: the June meeting if they don't cut in May. So

473
00:22:41,640 --> 00:22:44,199
Speaker 12: so you know, that's why you're going to have these gyrations.

474
00:22:44,240 --> 00:22:46,399
Speaker 12: But they're going to be probably bounded where you're going

475
00:22:46,440 --> 00:22:48,120
Speaker 12: to see two year yields go from you know, four

476
00:22:48,280 --> 00:22:51,640
Speaker 12: fifty to five percent and probably probably hover in that

477
00:22:51,800 --> 00:22:55,280
Speaker 12: area depending on what the market's expectation for the Fed's

478
00:22:55,320 --> 00:22:55,960
Speaker 12: next move is.

479
00:22:56,040 --> 00:22:58,159
Speaker 6: Well, I wondered if we learned anything about the reaction

480
00:22:58,240 --> 00:23:00,399
Speaker 6: function of the market, because it looks like what we

481
00:23:00,520 --> 00:23:02,160
Speaker 6: learned is that we're going to sell the room or

482
00:23:02,160 --> 00:23:03,639
Speaker 6: buy the news this time round.

483
00:23:03,760 --> 00:23:06,160
Speaker 8: Is that fair to say, Well.

484
00:23:06,400 --> 00:23:09,960
Speaker 12: The selling really came because European rates were selling off overnight,

485
00:23:10,080 --> 00:23:12,400
Speaker 12: and you know, so it was just a global rate

486
00:23:12,480 --> 00:23:15,040
Speaker 12: sell off a little bit. But the rally back I

487
00:23:15,080 --> 00:23:18,199
Speaker 12: think that there was it was pretty clear that some

488
00:23:18,240 --> 00:23:20,760
Speaker 12: people were short and thinking, hey, if we get a

489
00:23:20,840 --> 00:23:23,520
Speaker 12: you know, zero point four print on headline inflation, then

490
00:23:23,880 --> 00:23:27,240
Speaker 12: that could be mean that we get meaningfully higher treasury yields.

491
00:23:28,080 --> 00:23:31,280
Speaker 12: With that not happening, I think that's the reason why

492
00:23:31,280 --> 00:23:32,760
Speaker 12: you had that pullback. That was a little bit of

493
00:23:32,800 --> 00:23:37,160
Speaker 12: a relief rally there in terms of the in terms

494
00:23:37,200 --> 00:23:41,000
Speaker 12: of the market reaction. So so you know, we knew

495
00:23:41,040 --> 00:23:43,560
Speaker 12: that that inflation was going to kind of be within

496
00:23:43,600 --> 00:23:46,920
Speaker 12: the range that it was just because PC doesn't diverge

497
00:23:46,920 --> 00:23:50,560
Speaker 12: that much directionally from CPI. So so the forecasts were

498
00:23:50,600 --> 00:23:54,240
Speaker 12: obviously reasonably good going into some of these numbers.

499
00:23:55,040 --> 00:23:57,520
Speaker 7: All right, what do we look forward next? What's the

500
00:23:57,560 --> 00:23:58,760
Speaker 7: market now? Looking forward?

501
00:23:58,880 --> 00:24:00,760
Speaker 8: May we just like snooze until May or something?

502
00:24:02,200 --> 00:24:03,320
Speaker 11: Well, I don't know if it's going to be a

503
00:24:03,320 --> 00:24:03,840
Speaker 11: snows fest.

504
00:24:03,840 --> 00:24:06,000
Speaker 12: I mean we are our duration scorecard that we put

505
00:24:06,040 --> 00:24:09,480
Speaker 12: out this morning and basically saying should you position long, short,

506
00:24:09,560 --> 00:24:13,600
Speaker 12: or neutral? The Bloomberg Treasury Index says you should be

507
00:24:13,680 --> 00:24:17,360
Speaker 12: neutral because it's very things are that there's nothing particularly

508
00:24:17,440 --> 00:24:20,040
Speaker 12: rich or cheap about the market given the incoming data

509
00:24:20,080 --> 00:24:23,159
Speaker 12: that we've received. But next week's data it could be

510
00:24:23,240 --> 00:24:28,040
Speaker 12: market moving. Right ism new orders and the ism manufacturing

511
00:24:28,040 --> 00:24:31,000
Speaker 12: report that we get next week that is often market moving.

512
00:24:31,000 --> 00:24:33,760
Speaker 12: Plus we have payrolls coming up, right, So in order

513
00:24:33,800 --> 00:24:36,440
Speaker 12: to get the Fed Reserve to think that they're going

514
00:24:36,480 --> 00:24:39,560
Speaker 12: to cut early and aggressively, you really need to have

515
00:24:39,640 --> 00:24:43,119
Speaker 12: the employment situation deteriorate much more than it has. So

516
00:24:43,520 --> 00:24:45,520
Speaker 12: that's one reason why that will continue to be a

517
00:24:45,600 --> 00:24:47,160
Speaker 12: key focus report for the market.

518
00:24:47,680 --> 00:24:49,960
Speaker 6: Lots of people have the steepeners on. Then there was like,

519
00:24:50,000 --> 00:24:51,960
Speaker 6: oh gosh, the steepeners didn't make me money. I got

520
00:24:51,960 --> 00:24:53,320
Speaker 6: to take that off. And then it was like, now

521
00:24:53,320 --> 00:24:55,159
Speaker 6: we're going to say with the steepeners, what do I

522
00:24:55,160 --> 00:24:55,840
Speaker 6: do with the steepener?

523
00:24:55,960 --> 00:24:58,200
Speaker 7: Can somebody define steepener for this equity person?

524
00:24:58,320 --> 00:24:58,439
Speaker 11: Oh?

525
00:24:58,480 --> 00:25:01,280
Speaker 8: Okay, so let me try as like the person. Okay.

526
00:25:01,720 --> 00:25:04,159
Speaker 6: It basically means when long end yields go higher than

527
00:25:04,160 --> 00:25:07,000
Speaker 6: short end yields, and the idea is the Fed's gonna cut,

528
00:25:07,040 --> 00:25:09,160
Speaker 6: so you're gonna buy the front end and then yields

529
00:25:09,160 --> 00:25:09,959
Speaker 6: in the back and go up.

530
00:25:10,000 --> 00:25:11,320
Speaker 8: Irah am I right? Did I pass?

531
00:25:11,880 --> 00:25:14,119
Speaker 12: So that is a that is a bear steepener. A

532
00:25:14,119 --> 00:25:17,679
Speaker 12: bull steepener would be if say, front end yields rallied

533
00:25:17,720 --> 00:25:21,240
Speaker 12: a lot and yields went down and long term yields

534
00:25:21,240 --> 00:25:23,040
Speaker 12: just went down slower or didn't move at all.

535
00:25:23,119 --> 00:25:25,600
Speaker 11: So so you can get a steepener either bull or bear.

536
00:25:25,640 --> 00:25:29,000
Speaker 12: But basically it's it's that long term yields don't move

537
00:25:29,480 --> 00:25:34,399
Speaker 12: as much as or stay higher than front end yields do.

538
00:25:34,560 --> 00:25:38,639
Speaker 12: That that's basically the.

539
00:25:37,200 --> 00:25:38,400
Speaker 11: Definition of a steepener.

540
00:25:38,840 --> 00:25:40,320
Speaker 12: You know a lot of people thought that it would

541
00:25:40,359 --> 00:25:42,520
Speaker 12: be a bull steepener because they were expecting you know,

542
00:25:42,560 --> 00:25:44,719
Speaker 12: we were just think about it a month ago, we

543
00:25:44,720 --> 00:25:46,840
Speaker 12: were thinking that the Federal reserve, the market was priced

544
00:25:46,840 --> 00:25:49,360
Speaker 12: with a federal reserve to cut interest rates by one

545
00:25:49,359 --> 00:25:52,040
Speaker 12: point five percent this year. So that's one reason why

546
00:25:52,040 --> 00:25:54,280
Speaker 12: a lot of people were in those steepeners, because they

547
00:25:54,320 --> 00:25:56,560
Speaker 12: thought the two year yields, instead of being a four

548
00:25:56,600 --> 00:25:59,200
Speaker 12: point seven percent, they'd have a three handle now and

549
00:25:59,280 --> 00:26:02,640
Speaker 12: they don't. And so that's one reason why you've continued

550
00:26:02,640 --> 00:26:05,880
Speaker 12: to see the curve kind of reinvert a little bit here.

551
00:26:06,640 --> 00:26:08,119
Speaker 12: I don't know where we are at the moment, but

552
00:26:08,240 --> 00:26:11,600
Speaker 12: probably thirty nine or forty basis points inverted between the

553
00:26:11,640 --> 00:26:14,400
Speaker 12: two year and the ten year. You know, we've been

554
00:26:14,520 --> 00:26:16,960
Speaker 12: we've had the call for quite a while that we

555
00:26:17,040 --> 00:26:19,520
Speaker 12: thought that the curve would remain inverted for most, if

556
00:26:19,560 --> 00:26:21,720
Speaker 12: not all, of this year and certainly the first half,

557
00:26:22,280 --> 00:26:24,040
Speaker 12: and that seems to be playing out pretty well.

558
00:26:24,040 --> 00:26:26,000
Speaker 11: And that was predicated.

559
00:26:25,440 --> 00:26:28,520
Speaker 12: On on our view that the Fed woulden't cut more

560
00:26:28,560 --> 00:26:31,399
Speaker 12: than three times this year. And now now we're priced

561
00:26:31,400 --> 00:26:34,800
Speaker 12: for three cuts, so you know, we have to reevaluate that.

562
00:26:34,760 --> 00:26:37,760
Speaker 11: Call right now, you know, based on the incoming data.

563
00:26:37,800 --> 00:26:39,919
Speaker 6: Obviously, thirty nine basis points is where we are. So

564
00:26:39,920 --> 00:26:41,840
Speaker 6: basically we just learned Paul. Is that IRA's right?

565
00:26:42,800 --> 00:26:42,919
Speaker 11: Right?

566
00:26:43,200 --> 00:26:44,119
Speaker 8: Ira said the stuff.

567
00:26:44,119 --> 00:26:46,560
Speaker 6: He's been saying this since I don't know, last summer

568
00:26:46,960 --> 00:26:48,520
Speaker 6: and no one's listening, and now we're listening.

569
00:26:48,800 --> 00:26:49,399
Speaker 8: The markets up.

570
00:26:50,320 --> 00:26:55,679
Speaker 7: Oh, Paul, very good, Hey, Ira? I mean what I mean?

571
00:26:55,760 --> 00:26:58,160
Speaker 3: It's interesting here? What it is it May or June?

572
00:26:58,160 --> 00:27:00,159
Speaker 3: Do we care whether it's May or June? When they

573
00:27:00,440 --> 00:27:02,879
Speaker 3: start cutting rates? I feel like they gotta do it

574
00:27:02,920 --> 00:27:05,159
Speaker 3: before we get too much into the election season.

575
00:27:05,200 --> 00:27:05,840
Speaker 7: But I don't know.

576
00:27:06,600 --> 00:27:09,399
Speaker 12: Yeah, big picture, it really doesn't matter. You know, it

577
00:27:09,440 --> 00:27:12,680
Speaker 12: matters to people who are trading June, who are trading

578
00:27:13,080 --> 00:27:15,640
Speaker 12: you know what we call, you know, very short term

579
00:27:15,640 --> 00:27:19,200
Speaker 12: interest rate contracts that people who are in money market

580
00:27:19,240 --> 00:27:22,040
Speaker 12: instruments like T bills, they care whether it's May or June, right,

581
00:27:22,080 --> 00:27:24,960
Speaker 12: because there's some incremental few basis points of pickup that

582
00:27:25,000 --> 00:27:28,080
Speaker 12: you can get depending on what they do. But you know,

583
00:27:28,160 --> 00:27:30,680
Speaker 12: big picture, you don't care. Ten year yields don't really care.

584
00:27:30,720 --> 00:27:34,760
Speaker 12: Two year yields do care. So if they go, you know,

585
00:27:34,800 --> 00:27:37,000
Speaker 12: the I think the big challenge is if they don't

586
00:27:37,000 --> 00:27:41,000
Speaker 12: go by June, what is there what is their propensity

587
00:27:41,040 --> 00:27:45,440
Speaker 12: to move in July or September? Right, around the political

588
00:27:45,480 --> 00:27:47,639
Speaker 12: party conventions and then obviously in the middle of the

589
00:27:47,680 --> 00:27:50,919
Speaker 12: election season. You know, we don't have a lot of

590
00:27:51,720 --> 00:27:54,280
Speaker 12: experience with this because there's only a presidential election every

591
00:27:54,280 --> 00:27:57,160
Speaker 12: four years. But at least to date, the Federal Reserve

592
00:27:57,160 --> 00:28:01,040
Speaker 12: has never started a new activity, whether it's hiking or cutting,

593
00:28:01,160 --> 00:28:04,960
Speaker 12: in the middle of an election season. They've continued policies

594
00:28:05,000 --> 00:28:09,200
Speaker 12: that they that they started prior to an election period,

595
00:28:09,480 --> 00:28:11,880
Speaker 12: but they've never you know, they've never started at say,

596
00:28:11,880 --> 00:28:15,360
Speaker 12: the September before an election. But you know, so that's

597
00:28:15,359 --> 00:28:18,040
Speaker 12: one reason why, like, if one reason why I think

598
00:28:18,080 --> 00:28:20,040
Speaker 12: they it would behoove them if they were thinking about

599
00:28:20,080 --> 00:28:22,960
Speaker 12: cutting at all, they should just cut one time and

600
00:28:23,000 --> 00:28:25,840
Speaker 12: then they can skip a few meetings. So an outcome

601
00:28:25,840 --> 00:28:27,439
Speaker 12: that would not surprise me at all is if the

602
00:28:27,440 --> 00:28:30,240
Speaker 12: Federal Reserve were to cut in June and then wait

603
00:28:30,280 --> 00:28:33,159
Speaker 12: to cut again until after the election, and then if

604
00:28:33,160 --> 00:28:36,440
Speaker 12: they have to because the economy deteriorates meaningfully, then they

605
00:28:36,440 --> 00:28:38,880
Speaker 12: can cut again in July or September and just say, well,

606
00:28:38,880 --> 00:28:41,520
Speaker 12: there's a continuation of the policy that we started a

607
00:28:41,520 --> 00:28:43,880
Speaker 12: couple of months ago. Because you know, the unemployment rate's

608
00:28:43,880 --> 00:28:47,360
Speaker 12: gone up and inflations come down, like whatever whatever reasons

609
00:28:47,360 --> 00:28:49,280
Speaker 12: that they espouse for their initial cut.

610
00:28:49,520 --> 00:28:51,440
Speaker 6: You know what we had Bruce Richards on a marathon

611
00:28:51,480 --> 00:28:54,000
Speaker 6: asset management yesterday on television. He called that the two

612
00:28:54,080 --> 00:28:56,360
Speaker 6: step yeah, which I was like, okay, I kind of

613
00:28:56,400 --> 00:28:57,920
Speaker 6: get that right, Like you move a little and then

614
00:28:57,920 --> 00:28:59,360
Speaker 6: you pause, and you move little and.

615
00:28:59,280 --> 00:29:01,360
Speaker 8: Then you pause. Hey, Ira, thanks a lot, Ira Jersey.

616
00:29:01,800 --> 00:29:05,080
Speaker 8: He is a chief US rate strategist at Bloomberg Intelligence.

617
00:29:05,120 --> 00:29:06,800
Speaker 6: He lost me after that, like two steps. I don't

618
00:29:06,800 --> 00:29:08,480
Speaker 6: know where you go after the two step, but you know,

619
00:29:08,680 --> 00:29:10,520
Speaker 6: but that idea you move a little and then you hold.

620
00:29:10,360 --> 00:29:12,200
Speaker 7: Okay, I mean yeah, I mean may or June.

621
00:29:12,240 --> 00:29:13,960
Speaker 3: I don't think again, as Iris said, I don't think

622
00:29:13,960 --> 00:29:16,240
Speaker 3: the market, generally speaking, cares that much. I'm you know,

623
00:29:16,280 --> 00:29:19,560
Speaker 3: as an equity investor, having the anticipation of RAID cuts

624
00:29:19,720 --> 00:29:22,280
Speaker 3: is as good as having them, in my opinion, just

625
00:29:22,440 --> 00:29:23,000
Speaker 3: turn right now.

626
00:29:23,040 --> 00:29:23,240
Speaker 8: Yeah.

627
00:29:23,280 --> 00:29:24,880
Speaker 6: And they actually talk about that in terms of the

628
00:29:24,960 --> 00:29:27,680
Speaker 6: lag of monetary policy, that if it's just the expectation

629
00:29:27,800 --> 00:29:30,680
Speaker 6: of stuff, that changes what the lag of monetary policy

630
00:29:30,720 --> 00:29:33,280
Speaker 6: actually is because by the time you feel it, you're

631
00:29:33,280 --> 00:29:35,200
Speaker 6: already anticipating those cuts.

632
00:29:35,400 --> 00:29:37,800
Speaker 7: That's being said, I like to refinance the mortgage.

633
00:29:38,000 --> 00:29:40,120
Speaker 8: Yeah, I know, I know, not yet, not yet.

634
00:29:42,200 --> 00:29:46,080
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

635
00:29:46,160 --> 00:29:48,000
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636
00:29:48,040 --> 00:29:51,160
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637
00:29:51,560 --> 00:29:54,440
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638
00:29:54,440 --> 00:29:58,840
Speaker 1: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

639
00:30:00,280 --> 00:30:02,160
Speaker 6: It was interesting to get their earnings out yesterday from

640
00:30:02,160 --> 00:30:05,080
Speaker 6: Paramount because there was a little bit of good and

641
00:30:05,120 --> 00:30:07,080
Speaker 6: a little bit of bad. Right, you know, fifteen percent

642
00:30:07,120 --> 00:30:10,640
Speaker 6: decline in TV advertising, so that feels like that's not great,

643
00:30:10,680 --> 00:30:13,320
Speaker 6: but then streaming subscribers went up. I was one of

644
00:30:13,320 --> 00:30:17,000
Speaker 6: those people, so real well comparing it's my weird addiction.

645
00:30:17,120 --> 00:30:19,920
Speaker 8: I have to Survivor. I know, which is because I

646
00:30:19,960 --> 00:30:20,920
Speaker 8: was paid for years.

647
00:30:20,960 --> 00:30:23,440
Speaker 6: I know, too late, but I know I'm paying my

648
00:30:23,520 --> 00:30:25,880
Speaker 6: twenty money to Survivor.

649
00:30:25,960 --> 00:30:26,600
Speaker 8: It's still a million.

650
00:30:26,600 --> 00:30:28,720
Speaker 6: They didn't adjust aipulation, but one time it was two

651
00:30:28,720 --> 00:30:30,360
Speaker 6: million and they did Survivor All Stars.

652
00:30:31,040 --> 00:30:33,719
Speaker 8: But that was back twenty nineteen.

653
00:30:33,920 --> 00:30:35,800
Speaker 6: But point is I was paying twenty five bucks a season,

654
00:30:35,840 --> 00:30:37,480
Speaker 6: so I just did the Paramount plus thing. But I

655
00:30:37,480 --> 00:30:39,720
Speaker 6: think I'm gonna add more because the ads are.

656
00:30:39,680 --> 00:30:42,360
Speaker 8: Just so annoying. Really, Yeah, and I'm gonna be one

657
00:30:42,360 --> 00:30:43,320
Speaker 8: of those people that they love.

658
00:30:43,680 --> 00:30:46,640
Speaker 6: Yes, anyway, let's go to geta because she knows much

659
00:30:46,680 --> 00:30:48,200
Speaker 6: more than I do on this. It wrong enough then

660
00:30:48,160 --> 00:30:52,080
Speaker 6: and she covers US Media Bloomberg Intelligence senior industry analyst,

661
00:30:52,200 --> 00:30:53,760
Speaker 6: hey Geet Debt. So there was like a little bit

662
00:30:53,760 --> 00:30:56,400
Speaker 6: of good, a little bit of bad. What's my broader

663
00:30:56,400 --> 00:30:57,040
Speaker 6: takeaway from that?

664
00:30:58,560 --> 00:31:02,360
Speaker 13: Yes, you're absolutely right at like streaming was definitely a

665
00:31:02,440 --> 00:31:05,000
Speaker 13: key positive, and you're absolutely right in terms of the

666
00:31:05,080 --> 00:31:08,560
Speaker 13: subscriber numbers, those came in slightly ahead of estimates. The

667
00:31:08,600 --> 00:31:12,400
Speaker 13: bigger positive was the r poo trends. So remember Wall

668
00:31:12,440 --> 00:31:14,720
Speaker 13: Street has now kind of shifted its focus away from

669
00:31:14,760 --> 00:31:19,120
Speaker 13: subscribe just subscriber growth to revenue growth as well as profitability,

670
00:31:19,360 --> 00:31:21,240
Speaker 13: and they kind of scored pretty well on the revenue

671
00:31:21,600 --> 00:31:24,719
Speaker 13: growth metrics as well. So urpoo increased about thirty percent

672
00:31:24,840 --> 00:31:26,920
Speaker 13: through the year, and that's on the back of a

673
00:31:26,960 --> 00:31:29,960
Speaker 13: price increase. And then the next thing, of course you

674
00:31:30,080 --> 00:31:32,960
Speaker 13: look at was profitability and their losses narrowed, so they're

675
00:31:32,960 --> 00:31:35,160
Speaker 13: obviously taking a step in the right direction. I think

676
00:31:35,160 --> 00:31:37,440
Speaker 13: what investors are kind of really cheering though, is that

677
00:31:37,480 --> 00:31:41,320
Speaker 13: they did articulate some kind of strategy to kind of

678
00:31:41,320 --> 00:31:45,040
Speaker 13: get to profitability, and they outlined a timeframe as well.

679
00:31:45,080 --> 00:31:48,640
Speaker 13: So twenty twenty five is when they're expecting paramount plus profitability,

680
00:31:48,680 --> 00:31:51,000
Speaker 13: which is definitely I think good news. The question is,

681
00:31:51,600 --> 00:31:53,440
Speaker 13: I'm not sure whether it's enough.

682
00:31:54,200 --> 00:31:54,440
Speaker 11: Yep.

683
00:31:54,600 --> 00:31:56,760
Speaker 3: I mean the stock is a four point three percent today,

684
00:31:56,760 --> 00:31:58,840
Speaker 3: that's a good news. Of bad news is looks down

685
00:31:58,840 --> 00:32:00,440
Speaker 3: twenty two percent year to day eight, and it's down

686
00:32:00,480 --> 00:32:02,760
Speaker 3: for about forty five percent over the last year. And Keith,

687
00:32:02,840 --> 00:32:04,760
Speaker 3: before we move forward here, we have a big discussion

688
00:32:04,760 --> 00:32:07,760
Speaker 3: internally here in the studio. Do you prefer the pronunciation

689
00:32:07,840 --> 00:32:10,400
Speaker 3: of your first name githa thh or Geeta with a

690
00:32:10,480 --> 00:32:12,760
Speaker 3: T It's it's th.

691
00:32:14,160 --> 00:32:17,240
Speaker 8: Boom told you John Tucker, thank you for schooling than

692
00:32:17,480 --> 00:32:18,680
Speaker 8: she told me years ago.

693
00:32:18,920 --> 00:32:20,960
Speaker 3: I was forget See, I've known Keith and I have

694
00:32:21,040 --> 00:32:23,520
Speaker 3: worked together for fifteen years, you know, and she just

695
00:32:23,520 --> 00:32:25,200
Speaker 3: doesn't bother to correct me anymore.

696
00:32:25,280 --> 00:32:27,480
Speaker 7: So I figured, you know, if it's I'm.

697
00:32:27,320 --> 00:32:28,760
Speaker 8: Going to stick validating us.

698
00:32:28,840 --> 00:32:30,120
Speaker 7: What was the interview with Paul?

699
00:32:30,360 --> 00:32:30,440
Speaker 10: Like?

700
00:32:30,560 --> 00:32:32,920
Speaker 11: Was it intimidating when he interviewed you for your job?

701
00:32:33,880 --> 00:32:36,720
Speaker 7: I begged keith to join me. I begged Keitha to

702
00:32:36,800 --> 00:32:38,719
Speaker 7: join me. She did and it was the best thing

703
00:32:38,760 --> 00:32:40,360
Speaker 7: we ever did, So Keitha.

704
00:32:40,520 --> 00:32:43,600
Speaker 3: I guess the bigger picture here with Paramount is what

705
00:32:43,680 --> 00:32:46,160
Speaker 3: does the ownership here want to do with the company.

706
00:32:46,240 --> 00:32:49,360
Speaker 3: It appears by all accounts that they're just not big

707
00:32:49,440 --> 00:32:52,040
Speaker 3: enough to compete against some of these big technology companies,

708
00:32:52,080 --> 00:32:54,040
Speaker 3: some of these big media companies like a Netflix, like

709
00:32:54,080 --> 00:32:57,080
Speaker 3: a Disney and boy, there's a lot of speculation around Paramount.

710
00:32:57,120 --> 00:32:58,240
Speaker 7: Did they address that at all?

711
00:32:59,800 --> 00:33:02,240
Speaker 13: They didn't. I mean the one thing though, that you know,

712
00:33:02,280 --> 00:33:04,239
Speaker 13: I think Bob Beckish got out of the way was

713
00:33:04,560 --> 00:33:06,800
Speaker 13: they are going to do something that is good for

714
00:33:07,000 --> 00:33:10,080
Speaker 13: all shareholders. He kind of underlined that because there has

715
00:33:10,120 --> 00:33:13,600
Speaker 13: been this constant, you know, question about whether you know,

716
00:33:13,640 --> 00:33:15,440
Speaker 13: Sherry Redstone is kind of just going to cash out

717
00:33:15,440 --> 00:33:18,600
Speaker 13: and leave everybody else hanging, and so he wanted to,

718
00:33:18,720 --> 00:33:20,200
Speaker 13: you know, kind of get that out of the way.

719
00:33:20,800 --> 00:33:23,320
Speaker 13: But again, you know, I think the focus is going

720
00:33:23,320 --> 00:33:25,120
Speaker 13: to come, you know, the M and A options. Paul

721
00:33:25,400 --> 00:33:27,640
Speaker 13: and We've discussed this seemed to be shrinking at this point.

722
00:33:27,640 --> 00:33:30,960
Speaker 13: You know, Warner Brothers Discovery obviously said they're no longer interested.

723
00:33:31,600 --> 00:33:33,840
Speaker 13: Other firms have kind of come taken a look. Apollo

724
00:33:33,960 --> 00:33:36,880
Speaker 13: being one of them, said not interested. The only interested

725
00:33:36,920 --> 00:33:40,400
Speaker 13: party right now is sky Dance, controlled by David Ellison,

726
00:33:40,840 --> 00:33:43,840
Speaker 13: but again he's really not there's really no natural buyer

727
00:33:43,920 --> 00:33:46,800
Speaker 13: for all of the assets. He's not interested in controlling

728
00:33:46,800 --> 00:33:49,320
Speaker 13: some TV networks. He's only really looking at the studio.

729
00:33:49,360 --> 00:33:53,080
Speaker 13: So again, I'm not sure that Paramount Management necessarily wants

730
00:33:53,120 --> 00:33:57,560
Speaker 13: to do kind of a part parts sale here. So

731
00:33:57,560 --> 00:33:59,040
Speaker 13: I think they're going to kind of go back and

732
00:33:59,040 --> 00:34:02,120
Speaker 13: focus on fundamentals. I think some of that those the

733
00:34:02,480 --> 00:34:04,800
Speaker 13: unrealistic M and A expectations are kind of going to

734
00:34:04,800 --> 00:34:06,840
Speaker 13: subside a little, but we're going to go back to fundamentals,

735
00:34:06,880 --> 00:34:07,760
Speaker 13: I think for the time being.

736
00:34:07,800 --> 00:34:10,520
Speaker 6: Well to that point, then did they buy themselves some time?

737
00:34:10,600 --> 00:34:12,400
Speaker 6: Because I could make an argument that, okay, well the

738
00:34:12,440 --> 00:34:15,040
Speaker 6: slowing and ad sales and maybe that's an industry wide thing. Okay,

739
00:34:15,080 --> 00:34:18,640
Speaker 6: other players are getting hit they did as streaming subscribers,

740
00:34:18,640 --> 00:34:20,759
Speaker 6: so they have some time now that they might not

741
00:34:20,800 --> 00:34:22,799
Speaker 6: have had twenty four hours ago. Is that a real

742
00:34:22,800 --> 00:34:23,440
Speaker 6: statement or no?

743
00:34:24,360 --> 00:34:27,200
Speaker 13: I think so. I definitely think so, because with streaming,

744
00:34:27,200 --> 00:34:28,880
Speaker 13: what we're going to see is We're going to see

745
00:34:28,880 --> 00:34:33,560
Speaker 13: some sustained momentum in those ARPUH increases, so they're doing more,

746
00:34:33,920 --> 00:34:37,799
Speaker 13: you know, international price increases. They've kind of integrated Showtime

747
00:34:37,920 --> 00:34:40,279
Speaker 13: into Paramount and with that they've been able to take

748
00:34:40,280 --> 00:34:41,919
Speaker 13: some price increases. So we're going to kind of see

749
00:34:41,920 --> 00:34:45,759
Speaker 13: that play out so pretty much most of twenty twenty four.

750
00:34:45,800 --> 00:34:48,040
Speaker 13: The question is what happens after twenty twenty four, But

751
00:34:48,080 --> 00:34:49,600
Speaker 13: they definitely have bought themselves sometime.

752
00:34:50,239 --> 00:34:54,239
Speaker 7: So what is the outlook for the studio here?

753
00:34:54,320 --> 00:34:57,560
Speaker 10: Geita Studio.

754
00:34:57,640 --> 00:35:01,120
Speaker 13: Unfortunately, for twenty twenty four looks really bleak. So the

755
00:35:01,120 --> 00:35:03,480
Speaker 13: big movie, of course that everybody was kind of looking at,

756
00:35:03,600 --> 00:35:06,759
Speaker 13: was Mission Impossible. That's been pushed out to twenty twenty five.

757
00:35:07,239 --> 00:35:09,120
Speaker 13: We do have a few movies here and there. I mean,

758
00:35:09,160 --> 00:35:11,239
Speaker 13: you have Quiet Plays that's coming out in June. There's

759
00:35:11,280 --> 00:35:15,840
Speaker 13: obviously some anticipation building there. But again, in general, Paul,

760
00:35:15,920 --> 00:35:18,840
Speaker 13: the box office outlook for twenty twenty four is just

761
00:35:18,920 --> 00:35:21,839
Speaker 13: pretty weak, and that's just because of all of those

762
00:35:21,880 --> 00:35:24,759
Speaker 13: Hollywood strikes. Has pushed out a lot of movies into

763
00:35:24,760 --> 00:35:26,560
Speaker 13: twenty twenty five. It's kind of going to shave off

764
00:35:26,600 --> 00:35:28,840
Speaker 13: I think at least two billion dollars off of the

765
00:35:28,840 --> 00:35:29,799
Speaker 13: box office.

766
00:35:29,520 --> 00:35:31,440
Speaker 6: So presumably we're going to look through that, right, I mean,

767
00:35:31,480 --> 00:35:33,399
Speaker 6: presumably they're going to recoup that and they'll be pent

768
00:35:33,600 --> 00:35:34,759
Speaker 6: up in twenty twenty five.

769
00:35:36,280 --> 00:35:39,520
Speaker 13: That is the big question, right, Yes, we've seen kind

770
00:35:39,560 --> 00:35:42,000
Speaker 13: of box office demand, you know, in general, kind of

771
00:35:42,040 --> 00:35:45,600
Speaker 13: come back, but it's still about twenty percent below pre

772
00:35:45,680 --> 00:35:47,960
Speaker 13: pandemic level. So the big question is, Okay, when all

773
00:35:48,000 --> 00:35:50,440
Speaker 13: of those big titles kind of hit the screens in

774
00:35:50,480 --> 00:35:52,640
Speaker 13: twenty twenty five, are we kind of going to see

775
00:35:52,840 --> 00:35:56,040
Speaker 13: a bigger resurgence. The jury is still out. I think yes,

776
00:35:56,080 --> 00:35:58,080
Speaker 13: it's definitely going to be better than twenty twenty four. Is

777
00:35:58,080 --> 00:36:00,279
Speaker 13: it going to be as good as it was? You know,

778
00:36:00,320 --> 00:36:02,240
Speaker 13: and it's heyday? I'm not so sure.

779
00:36:02,880 --> 00:36:06,560
Speaker 3: So, Gith, how about the CBS television network and the

780
00:36:06,680 --> 00:36:09,319
Speaker 3: Viacom cable networks? You know, one point that was such

781
00:36:09,360 --> 00:36:12,680
Speaker 3: a big part of this company. Here, talk to us

782
00:36:12,719 --> 00:36:15,560
Speaker 3: about the advertising the television advertising market. What's kind of

783
00:36:15,560 --> 00:36:18,440
Speaker 3: the forecast for the next several years. Is it a

784
00:36:18,480 --> 00:36:20,640
Speaker 3: growing business? Is it a declining business?

785
00:36:22,040 --> 00:36:24,879
Speaker 13: It's a melting ice cube, Paul, just like you know,

786
00:36:25,200 --> 00:36:29,239
Speaker 13: just like the whole PayTV ecosystem, so you know, this

787
00:36:29,320 --> 00:36:30,960
Speaker 13: is this used to be back in the day about

788
00:36:30,960 --> 00:36:33,600
Speaker 13: a sixty billion market. It's shrunk. It's going to probably

789
00:36:33,719 --> 00:36:36,040
Speaker 13: hit about forty five billion by the end of next year.

790
00:36:36,480 --> 00:36:38,600
Speaker 13: And really, you know, this is just kind of a

791
00:36:38,640 --> 00:36:41,080
Speaker 13: progression of where all the eyeballs are moving. So they're

792
00:36:41,120 --> 00:36:43,680
Speaker 13: moving away from the linear TV networks to streaming, and

793
00:36:43,680 --> 00:36:46,520
Speaker 13: so we're seeing kind of those ad dollars follow those

794
00:36:46,520 --> 00:36:50,040
Speaker 13: eyeballs and going from you know, the TV medium to

795
00:36:50,560 --> 00:36:53,120
Speaker 13: what is now called connected TV, which is really all

796
00:36:53,160 --> 00:36:55,200
Speaker 13: the streaming platforms and you know, you're using all your

797
00:36:55,200 --> 00:36:58,840
Speaker 13: connected TV devices, the rokus and the Google sticks and

798
00:36:58,880 --> 00:37:01,080
Speaker 13: all of that to kind of television, and that's where

799
00:37:01,120 --> 00:37:04,640
Speaker 13: all of the advertising is moving as well. Unfortunately, Paramount

800
00:37:04,680 --> 00:37:06,400
Speaker 13: doesn't have too much of a presence there. Yes, they

801
00:37:06,440 --> 00:37:09,360
Speaker 13: do have you know, Pluto TV, which is their solution,

802
00:37:10,080 --> 00:37:12,439
Speaker 13: but it's not going to be able to kind of

803
00:37:12,440 --> 00:37:16,359
Speaker 13: offset the leakage that we're seeing in the television ecosystem

804
00:37:17,000 --> 00:37:19,000
Speaker 13: and that is really a problem for all of these

805
00:37:19,000 --> 00:37:21,080
Speaker 13: media companies, for Paramount a little bit more so.

806
00:37:21,680 --> 00:37:22,440
Speaker 8: But here's the thing.

807
00:37:22,880 --> 00:37:26,080
Speaker 6: If they wind up just doing advertising on streaming, like,

808
00:37:26,320 --> 00:37:28,680
Speaker 6: isn't it going to be eventually kind of shake out

809
00:37:28,680 --> 00:37:29,080
Speaker 6: the same.

810
00:37:30,719 --> 00:37:33,279
Speaker 13: So that has been kind of their hoole spiel. I mean,

811
00:37:33,360 --> 00:37:36,240
Speaker 13: of course they're saying that, you know, they can reclaim

812
00:37:36,280 --> 00:37:39,440
Speaker 13: some of those lost dollars. The problem is the digital

813
00:37:39,480 --> 00:37:42,520
Speaker 13: ad space is getting really really crowded as well, and

814
00:37:42,600 --> 00:37:45,719
Speaker 13: so you know, again it depends on who has the

815
00:37:45,760 --> 00:37:48,719
Speaker 13: most watch time. Netflix dominates. They have about two and

816
00:37:48,760 --> 00:37:51,480
Speaker 13: a half hours of viewing time every day. Disney Plus

817
00:37:51,560 --> 00:37:54,960
Speaker 13: is you know, follows very closely. And now the biggest

818
00:37:55,600 --> 00:37:58,040
Speaker 13: blow really to all of these players has been Amazon

819
00:37:58,080 --> 00:37:59,719
Speaker 13: because they just came out about a month ago and

820
00:37:59,760 --> 00:38:04,600
Speaker 13: they introduced advertising on their Prime video service and that

821
00:38:04,719 --> 00:38:07,920
Speaker 13: is really kind of shaking up the whole digital ad market.

822
00:38:08,000 --> 00:38:10,920
Speaker 13: So if you're a subscale player, chances are you're not

823
00:38:11,000 --> 00:38:13,080
Speaker 13: going to really be able to make a dent even

824
00:38:13,160 --> 00:38:14,440
Speaker 13: within the digital ad space.

825
00:38:15,360 --> 00:38:15,680
Speaker 1: Wow.

826
00:38:15,719 --> 00:38:18,000
Speaker 3: Interesting, all right, Githa, thanks so much for joining us there.

827
00:38:18,000 --> 00:38:22,359
Speaker 3: Githa Raganathan, analyst on US media for Bloomberg Intelligence. Githa

828
00:38:22,440 --> 00:38:26,960
Speaker 3: Raganathan joining us from the headquarters of Bloomberg Intelligence, done

829
00:38:27,000 --> 00:38:29,440
Speaker 3: in Princeton, New Jersey. Boy, I don't you know that

830
00:38:29,600 --> 00:38:30,960
Speaker 3: melting ice cub that's not good.

831
00:38:31,040 --> 00:38:32,640
Speaker 8: Yeah, just do. That sentence wasn't good.

832
00:38:32,719 --> 00:38:34,080
Speaker 3: Yeah, that's not good for them. And but I just

833
00:38:34,120 --> 00:38:35,480
Speaker 3: don't know what they do. I don't know what the

834
00:38:35,600 --> 00:38:36,520
Speaker 3: endgame is here.

835
00:38:37,000 --> 00:38:39,120
Speaker 6: What's funny is this is a total side note, but

836
00:38:39,360 --> 00:38:41,560
Speaker 6: my daughter grew up without commercials because.

837
00:38:41,280 --> 00:38:42,319
Speaker 8: We never had linear TV.

838
00:38:42,680 --> 00:38:45,880
Speaker 6: We had to like Netflix, right, And now she's experiencing

839
00:38:45,880 --> 00:38:48,719
Speaker 6: commercials because all these streaming players have commercials, and so

840
00:38:48,800 --> 00:38:51,359
Speaker 6: now she like quotes all these She's nine, by the way,

841
00:38:51,480 --> 00:38:54,120
Speaker 6: so she can quote all these commercials now from and

842
00:38:54,360 --> 00:38:55,960
Speaker 6: she like likes them and wants to be with them,

843
00:38:55,960 --> 00:38:57,040
Speaker 6: and she rails.

844
00:38:56,719 --> 00:38:57,880
Speaker 8: Against car commercials.

845
00:38:58,120 --> 00:39:00,160
Speaker 6: Really, I don't know what that is. She's like, who

846
00:39:00,239 --> 00:39:01,200
Speaker 6: needs all these cars?

847
00:39:01,560 --> 00:39:02,680
Speaker 7: This is ridiculous.

848
00:39:02,920 --> 00:39:03,919
Speaker 8: I don't want to see this.

849
00:39:04,360 --> 00:39:06,279
Speaker 6: So I feel like I'm gonna have to pay up

850
00:39:06,600 --> 00:39:07,759
Speaker 6: for the non commercial one.

851
00:39:07,920 --> 00:39:09,960
Speaker 7: Now, yeah, a lot of people do, a lot of

852
00:39:09,960 --> 00:39:11,239
Speaker 7: people do well.

853
00:39:11,239 --> 00:39:13,960
Speaker 6: It just shaves time too, right, And they're only and

854
00:39:14,000 --> 00:39:16,160
Speaker 6: that that block between segments is only going to get

855
00:39:16,160 --> 00:39:16,600
Speaker 6: more and more.

856
00:39:16,680 --> 00:39:17,600
Speaker 7: I'm thinking, yep.

857
00:39:17,680 --> 00:39:21,640
Speaker 3: And if you're on broadcasting cable television, what are the advertisers.

858
00:39:21,680 --> 00:39:25,400
Speaker 3: They're not the car companies, they're not Coca Cola, they're healthcare.

859
00:39:25,800 --> 00:39:27,440
Speaker 3: You need this drug for this problem.

860
00:39:27,560 --> 00:39:30,200
Speaker 8: As my husband loves, He's like, I have all these problems.

861
00:39:30,560 --> 00:39:32,800
Speaker 8: It's like I don't want to see this on TV exactly.

862
00:39:32,960 --> 00:39:34,040
Speaker 8: That such a good point.

863
00:39:35,560 --> 00:39:39,439
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

864
00:39:39,520 --> 00:39:42,080
Speaker 1: weekdays at ten am Eastern on Apple.

865
00:39:41,800 --> 00:39:44,839
Speaker 2: Car Play and Android Auto with the Bloomberg Business Act.

866
00:39:44,960 --> 00:39:47,799
Speaker 1: You can also listen live on Amazon Alexa from our

867
00:39:47,840 --> 00:39:53,160
Speaker 1: flagship New York station, just say Alexa playing Bloomberg eleven thirty.

868
00:39:53,840 --> 00:39:56,480
Speaker 8: Another sock weer're watching here is Hewlett Packard. So this

869
00:39:56,600 --> 00:39:57,360
Speaker 8: is HPQ.

870
00:39:57,760 --> 00:40:01,480
Speaker 6: This is the company that makes PCs and printers reported

871
00:40:01,560 --> 00:40:04,600
Speaker 6: or that stocks down by about one percent. It reported

872
00:40:04,600 --> 00:40:06,840
Speaker 6: earnings that quite frankly, just show that there's still a

873
00:40:06,920 --> 00:40:10,960
Speaker 6: slowdown in the PC market. They seemed relatively more constructive

874
00:40:10,960 --> 00:40:13,440
Speaker 6: in the back half, but still I got some questions.

875
00:40:13,560 --> 00:40:15,239
Speaker 6: There's no one else to bring to and talk to

876
00:40:15,280 --> 00:40:17,480
Speaker 6: about it. Then, as Woojin Ho, Bloomberg.

877
00:40:17,000 --> 00:40:20,879
Speaker 8: Intelligence Senior Technology analyst, Wujin what was your biggest takeaway here?

878
00:40:21,719 --> 00:40:25,279
Speaker 14: Yeah, Look, the first quarter results were pretty week if

879
00:40:25,280 --> 00:40:28,080
Speaker 14: you if you look at the first quoter PC numbers, Uh,

880
00:40:28,120 --> 00:40:33,080
Speaker 14: they fell below consensus expectations, and you know, the the

881
00:40:33,080 --> 00:40:35,719
Speaker 14: the fact that they were able to maintain guidance on

882
00:40:35,840 --> 00:40:39,200
Speaker 14: the revenue side for PCs as well as EPs side.

883
00:40:39,440 --> 00:40:42,200
Speaker 10: They're really hoping for that second half, as you were saying, Alex.

884
00:40:42,200 --> 00:40:46,400
Speaker 7: And give us the drivers here, wouge for that second half.

885
00:40:46,960 --> 00:40:48,000
Speaker 7: What has to happen?

886
00:40:48,960 --> 00:40:51,600
Speaker 14: Well, there's a there's a couple of things, right. You

887
00:40:51,600 --> 00:40:54,920
Speaker 14: have a macro improvement and better consumer dollars. You have

888
00:40:55,000 --> 00:40:57,360
Speaker 14: the second half seasonality that's going to drive it up

889
00:40:57,400 --> 00:40:59,200
Speaker 14: back to school for the consumer side.

890
00:40:59,520 --> 00:40:59,640
Speaker 3: Uh.

891
00:40:59,719 --> 00:41:02,879
Speaker 14: But there's also a big Windows eleven upgrade cycle that's

892
00:41:02,920 --> 00:41:05,280
Speaker 14: coming in and which is supposed to be a tailwind.

893
00:41:06,280 --> 00:41:10,040
Speaker 14: But I do have some doubts for for one big reason,

894
00:41:10,080 --> 00:41:13,919
Speaker 14: corporate I spending has been fairly weak and that really

895
00:41:13,960 --> 00:41:15,719
Speaker 14: needs to cooperate in the second half for.

896
00:41:17,400 --> 00:41:19,720
Speaker 10: The PC numbers to materialize. For hp.

897
00:41:21,160 --> 00:41:23,239
Speaker 8: Do my homework for me. We have the CEO of

898
00:41:23,360 --> 00:41:26,000
Speaker 8: HPQ tomorrow in the morning. Yeah, and we're going to

899
00:41:26,080 --> 00:41:28,120
Speaker 8: run it on the closed Show. What are the best

900
00:41:28,160 --> 00:41:29,520
Speaker 8: questions to ask?

901
00:41:29,600 --> 00:41:31,759
Speaker 6: Because I'm really interested in kind of when they see

902
00:41:31,760 --> 00:41:35,760
Speaker 6: the trough really materializing, how how long that trough actually

903
00:41:35,800 --> 00:41:36,360
Speaker 6: may last.

904
00:41:37,360 --> 00:41:40,640
Speaker 14: Yeah, So I think we are getting closer to the trough, right.

905
00:41:40,680 --> 00:41:43,800
Speaker 14: I think next quarter is going to be the trough

906
00:41:44,640 --> 00:41:48,919
Speaker 14: in terms of a PC revenue side. If we think

907
00:41:48,920 --> 00:41:52,400
Speaker 14: about it from from this perspective, you want to ask

908
00:41:52,480 --> 00:41:55,000
Speaker 14: along the lines of why are they so bullish on

909
00:41:55,000 --> 00:41:58,279
Speaker 14: the second half? If I do my if looking at

910
00:41:58,320 --> 00:42:00,799
Speaker 14: the back of the envelope math, it looks like they

911
00:42:00,840 --> 00:42:04,840
Speaker 14: need about ten percent second half growth versus first half growth.

912
00:42:05,239 --> 00:42:09,600
Speaker 14: Typically it's about five percent second half growth versus first half,

913
00:42:09,680 --> 00:42:11,640
Speaker 14: So it's going to be well above seasonality.

914
00:42:12,040 --> 00:42:13,040
Speaker 10: So some of those.

915
00:42:12,880 --> 00:42:17,000
Speaker 14: Drivers maybe, as they said on the call, is higher pricing,

916
00:42:17,040 --> 00:42:20,560
Speaker 14: so PC prices are going to come up as as

917
00:42:20,600 --> 00:42:26,080
Speaker 14: as well as you know, possibly possibly some timing on

918
00:42:26,440 --> 00:42:30,400
Speaker 14: the incremental contribution to to aipcs.

919
00:42:30,520 --> 00:42:31,839
Speaker 10: And I opened a tend door box.

920
00:42:31,880 --> 00:42:35,040
Speaker 3: I believe because I'm just looking at the PGO function

921
00:42:35,160 --> 00:42:37,680
Speaker 3: which kind of breaks down kind of their revenue where

922
00:42:37,719 --> 00:42:41,240
Speaker 3: it comes from. Commercial is a big part of their business.

923
00:42:41,239 --> 00:42:43,400
Speaker 3: Talk to us about the buying cycle on on the

924
00:42:43,400 --> 00:42:44,920
Speaker 3: commercial side of the enterprise side.

925
00:42:44,800 --> 00:42:47,520
Speaker 7: Which is it every two to three years? Is it predictable?

926
00:42:47,560 --> 00:42:51,719
Speaker 14: And where are we Yeah, so, so we're actually on

927
00:42:51,880 --> 00:42:56,560
Speaker 14: the beginning and the beginning or the start of the

928
00:42:56,680 --> 00:43:02,160
Speaker 14: PC refresh cycle from the pre COVID times right, Typical

929
00:43:02,200 --> 00:43:07,239
Speaker 14: refresh cycles for PCs are about four years and then

930
00:43:07,239 --> 00:43:12,080
Speaker 14: we get new ones. Now this lies into my concern.

931
00:43:12,719 --> 00:43:16,680
Speaker 14: If the pieces are running okay and the budgetary dollars

932
00:43:16,680 --> 00:43:20,520
Speaker 14: are the corporate dollars are still fairly tight, you know,

933
00:43:21,200 --> 00:43:23,640
Speaker 14: I would like to say that they would like to

934
00:43:23,840 --> 00:43:26,640
Speaker 14: hold on to those PCs for another six months to

935
00:43:26,719 --> 00:43:29,560
Speaker 14: a year, and that would fall into fiscal twenty twenty five.

936
00:43:30,120 --> 00:43:33,359
Speaker 14: The other thing that concerns me in terms of this

937
00:43:33,600 --> 00:43:38,920
Speaker 14: particular PC cycle is the emergence of aipcs.

938
00:43:39,400 --> 00:43:41,120
Speaker 10: We don't know, Wait.

939
00:43:41,000 --> 00:43:42,440
Speaker 8: Real quick, what's an AIPC.

940
00:43:43,880 --> 00:43:49,400
Speaker 14: Well, an AIPC is a PC that has specific artificial

941
00:43:49,440 --> 00:43:53,919
Speaker 14: intelligence chips provided by Intel or a MD and can

942
00:43:54,000 --> 00:43:58,759
Speaker 14: run AI functionality. That's actually there's a lot of hype

943
00:43:59,200 --> 00:44:03,520
Speaker 14: on AIPC starting from CEES even last year, and we're

944
00:44:03,520 --> 00:44:05,040
Speaker 14: going to start seeing the ramp up at the second

945
00:44:05,080 --> 00:44:09,880
Speaker 14: half of this year and materialize even more in twenty

946
00:44:09,920 --> 00:44:15,160
Speaker 14: twenty five. So my issue with the AIPC wrap up cycle.

947
00:44:15,160 --> 00:44:17,239
Speaker 14: I do think it's going to materialize. It's just that

948
00:44:17,320 --> 00:44:19,960
Speaker 14: there's no application ecosystem to help support it right now,

949
00:44:20,320 --> 00:44:23,319
Speaker 14: and if there's going to be buying decisions coming up

950
00:44:23,360 --> 00:44:25,640
Speaker 14: at the end of this year, I may want to

951
00:44:25,640 --> 00:44:29,040
Speaker 14: delay a quarter or two to see what the AIPC

952
00:44:29,239 --> 00:44:31,839
Speaker 14: can actually do and is it right?

953
00:44:32,239 --> 00:44:36,000
Speaker 10: Doesn't fit into my corporate workflow, that's interesting.

954
00:44:36,040 --> 00:44:39,000
Speaker 3: So I'm looking at the stock absolutely unchanged on it

955
00:44:39,200 --> 00:44:40,160
Speaker 3: over the past year.

956
00:44:40,600 --> 00:44:42,040
Speaker 7: I look at the A and R functions.

957
00:44:42,040 --> 00:44:45,960
Speaker 3: I got eight buys, eight holds in three cells the street.

958
00:44:46,000 --> 00:44:49,200
Speaker 3: There's no conviction on this name here. When you talk

959
00:44:49,239 --> 00:44:51,880
Speaker 3: to clients, what are they saying about it?

960
00:44:52,560 --> 00:44:52,759
Speaker 11: Yeah?

961
00:44:52,760 --> 00:44:55,640
Speaker 14: And then it sounds about right right, So so the

962
00:44:55,680 --> 00:44:59,360
Speaker 14: bulls are looking forward to that second half PC upgrade cycle.

963
00:45:00,080 --> 00:45:02,680
Speaker 14: Have to look past twenty twenty four to get that

964
00:45:02,719 --> 00:45:05,000
Speaker 14: PC upgrade cycle to happen, And it's going to happen

965
00:45:05,000 --> 00:45:09,360
Speaker 14: in twenty five, right regardless, because Windows is going to

966
00:45:09,400 --> 00:45:12,399
Speaker 14: shut down Windows ten. Microsoft is gonna shut down Windows ten,

967
00:45:12,640 --> 00:45:15,680
Speaker 14: and it's going to really push that upgrade cycle regardless.

968
00:45:16,600 --> 00:45:19,520
Speaker 14: My main concern is twofold, and I'm going to step

969
00:45:19,560 --> 00:45:23,040
Speaker 14: away from the PC segment for our moment here. That

970
00:45:23,080 --> 00:45:26,240
Speaker 14: printer segment is a cash goal. It's a twenty percent

971
00:45:26,680 --> 00:45:32,120
Speaker 14: nineteen to twenty percent operating margin business, and they really

972
00:45:32,160 --> 00:45:35,200
Speaker 14: can't sell the hardware. And if you can't sell the hardware,

973
00:45:35,520 --> 00:45:37,560
Speaker 14: you're not going to be able to sell the higher

974
00:45:37,600 --> 00:45:42,400
Speaker 14: margin supplies. So over the long term, the concern for

975
00:45:42,520 --> 00:45:46,279
Speaker 14: me is is that diminishing hardware sales is going to

976
00:45:46,320 --> 00:45:49,440
Speaker 14: impact the demand for supplies because no one's printing anymore,

977
00:45:49,480 --> 00:45:51,920
Speaker 14: everyone's digitizing, and then it's going to affect the long

978
00:45:52,000 --> 00:45:53,680
Speaker 14: term profitability.

979
00:45:53,719 --> 00:45:54,200
Speaker 8: Interesting.

980
00:45:54,880 --> 00:45:57,040
Speaker 6: I just wonder though, for the refresh cycle, Like I

981
00:45:57,440 --> 00:45:59,399
Speaker 6: hear you on the profitability part in the printer PERP

982
00:45:59,440 --> 00:46:02,880
Speaker 6: and the refresh cycle, I mean, how dependent do you

983
00:46:02,880 --> 00:46:04,840
Speaker 6: think will actually be on that. I'm still waiting for

984
00:46:04,880 --> 00:46:05,800
Speaker 6: the iPhone.

985
00:46:05,440 --> 00:46:08,120
Speaker 8: Supercycle that I've been hearing in bouts in twenty sixteen.

986
00:46:09,280 --> 00:46:12,520
Speaker 14: Yeah, well, I want you to think about it this way, Alex.

987
00:46:13,520 --> 00:46:17,600
Speaker 14: We came off of a terrible, terrible twenty twenty three

988
00:46:17,760 --> 00:46:21,080
Speaker 14: from from a uni volume perspective, right, and we're probably

989
00:46:21,120 --> 00:46:24,480
Speaker 14: still going to be bouncing along historic lows from unit volumes.

990
00:46:25,120 --> 00:46:29,000
Speaker 14: And you know, people have not been upgrading their PCs

991
00:46:29,160 --> 00:46:32,239
Speaker 14: and laptops for the last two three years since the

992
00:46:32,280 --> 00:46:35,400
Speaker 14: beginning for COVID, so we're starting to get some tired

993
00:46:35,440 --> 00:46:39,320
Speaker 14: PCs out there, and again more importantly for the corporate side,

994
00:46:39,600 --> 00:46:44,040
Speaker 14: we have the Windows eleven forced upgrade and that is

995
00:46:44,120 --> 00:46:45,719
Speaker 14: going to force our upgrade cycle. Now.

996
00:46:45,840 --> 00:46:46,120
Speaker 2: Now, to.

997
00:46:47,600 --> 00:46:53,880
Speaker 14: Give you a data point, normalized normalized volumes on an

998
00:46:53,880 --> 00:46:56,080
Speaker 14: annual basis is roughly around two hundred and sixty to

999
00:46:56,120 --> 00:47:00,000
Speaker 14: two hundred and seventy million PCs, and we're probably going

1000
00:47:00,040 --> 00:47:02,160
Speaker 14: to be running around two hundred and sixty two million

1001
00:47:02,239 --> 00:47:06,719
Speaker 14: for this year, so we're still below average trend. And

1002
00:47:07,360 --> 00:47:09,879
Speaker 14: I think there's scope in twenty five that we are

1003
00:47:09,920 --> 00:47:13,479
Speaker 14: going to get above to sixty five million units.

1004
00:47:13,880 --> 00:47:15,800
Speaker 10: Nahpiece is going to benefit from that as well.

1005
00:47:16,239 --> 00:47:17,880
Speaker 6: All right, Rich, thanks a lot, which and hoo a

1006
00:47:17,880 --> 00:47:19,960
Speaker 6: Bloomberg Intelligence senior technology.

1007
00:47:19,520 --> 00:47:19,920
Speaker 8: And a listener.

1008
00:47:20,160 --> 00:47:24,680
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1009
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1010
00:47:25,520 --> 00:47:26,959
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1011
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1012
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1014
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