WEBVTT - BI Weekend: Alphabet, GM Earnings, Musk Empire 0:00:02.759 --> 0:00:11.800 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.960 --> 0:00:13.039 with Paul Sweeney. 0:00:13.200 --> 0:00:16.439 The real app performance has been the US corporate high yield. 0:00:16.480 --> 0:00:20.160 These are two big time blue chip companies. One person's 0:00:20.200 --> 0:00:22.960 cast is another person's animal spirits. 0:00:22.680 --> 0:00:26.360 Breaking market headlines and corporate news from across the globe. 0:00:26.440 --> 0:00:28.400 Our viewer is if the economy is slowing. 0:00:28.080 --> 0:00:30.600 Down, there is the possibility of the debt spirals. 0:00:30.680 --> 0:00:33.240 Both tutum competing and AI are going to power the future. 0:00:33.320 --> 0:00:36.720 People are just buying everything with tex Bloomberg Intelligence with 0:00:36.800 --> 0:00:41.680 Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 0:00:42.360 --> 0:00:44.600 I'm Paul Sweeney and I'm Lis Matteo filling in on 0:00:44.640 --> 0:00:45.760 Bloomberg Intelligence. 0:00:45.880 --> 0:00:48.199 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:48.240 --> 0:00:51.040 business stories impacting Wall Street and the global markets. Each 0:00:51.040 --> 0:00:53.160 and every week, we provide in depth research and data 0:00:53.200 --> 0:00:55.240 on some of the two thousand companies and one hundred 0:00:55.240 --> 0:00:58.480 and thirty industries our analysts covered worldwide. Today, we'll look 0:00:58.520 --> 0:01:01.160 at why the toymaker has broken is raising its full 0:01:01.240 --> 0:01:01.760 year outlook. 0:01:02.000 --> 0:01:04.560 Plus we'll look at how General Motors is being impacted 0:01:04.600 --> 0:01:06.880 by President Donald Trump's tariffs. 0:01:06.520 --> 0:01:08.559 But First, let's begin with the tech sector. 0:01:08.800 --> 0:01:11.680 This week, tech giant Alphabet reported second quarter earnings that 0:01:11.760 --> 0:01:16.080 beat analyst expectations. Alphabet said demand for artificial intelligence products 0:01:16.160 --> 0:01:20.000 boosted quarterly sales and now requires an extreme increase in 0:01:20.080 --> 0:01:21.399 capital spending for more. 0:01:21.560 --> 0:01:24.280 Lisa and I were joined by Mandep Singh, Bloomberg Intelligence 0:01:24.319 --> 0:01:25.600 senior tech industry analyst. 0:01:25.800 --> 0:01:27.920 We first asked man Deep for his take on Alphabet's 0:01:27.920 --> 0:01:29.119 most recent earnings. 0:01:29.480 --> 0:01:32.639 The fact that they are able to grow their search 0:01:32.800 --> 0:01:36.160 business double digit at that kind of run rate two 0:01:36.240 --> 0:01:39.920 hundred ten billion dollar plus. Like, think of how many 0:01:40.080 --> 0:01:44.800 incremental dollars they added just by virtue of that eleven 0:01:44.840 --> 0:01:48.920 percent growth in the two hundred ten billion dollar business. 0:01:49.080 --> 0:01:53.400 And that is where you know the real strength lies 0:01:53.440 --> 0:01:57.320 with a company like Alphabet. They are overlaying Gemini across 0:01:58.200 --> 0:02:03.480 their family apps. AI overviews is actually driving ten percent 0:02:03.640 --> 0:02:08.040 more queries and AI Overviews is now used by two 0:02:08.120 --> 0:02:11.440 billion monthly active users. So Google Search has five billion 0:02:11.480 --> 0:02:15.959 monthly active users. Imagine AI overviews being used by two 0:02:15.960 --> 0:02:20.040 billion monthly active users. So they got the UI part right. 0:02:20.520 --> 0:02:23.640 Gemini as a standalone app has got four hundred and 0:02:23.639 --> 0:02:27.800 fifty million monthly active users. Imagine if everyone started paying 0:02:27.800 --> 0:02:31.200 a twenty dollars subscription like chatchipt, this could become one 0:02:31.240 --> 0:02:35.760 hundred billion dollar business. In addition to search and then YouTube, 0:02:35.800 --> 0:02:38.280 I'm not even talking about you know, I'll talk about 0:02:39.600 --> 0:02:42.280 all the strengthen YouTube and way more. So this is 0:02:42.320 --> 0:02:45.080 a powerhouse when it comes to four hundred billion dollar 0:02:45.120 --> 0:02:47.359 run rate they will be at the end of the year. 0:02:47.840 --> 0:02:49.679 So can you explain something to me, Because when the 0:02:49.720 --> 0:02:52.320 shares dropped because they said capex was a little bit more, 0:02:52.400 --> 0:02:55.399 well ten billion dollars more than expected a little bit, 0:02:56.240 --> 0:03:00.720 how is that different for an alphabet versus metaphor to 0:03:00.760 --> 0:03:01.040 say that? 0:03:01.200 --> 0:03:05.000 So that's great. So look, let's frame the capex eighty 0:03:05.000 --> 0:03:08.760 five billion dollars at potentially a four hundred billion dollar 0:03:08.800 --> 0:03:10.960 revenue run rate by the end of the year. That's 0:03:11.000 --> 0:03:14.960 like a twenty five percent capex intensity. Meta, on the 0:03:15.000 --> 0:03:18.400 other hand, is already at a forty percent capex intensity 0:03:18.400 --> 0:03:21.440 because their CAPEX will be seventy billion at a undred 0:03:21.440 --> 0:03:24.520 of close to two hundred billion. So that just goes 0:03:24.560 --> 0:03:27.959 to show Alphabet is still far lower than their peer 0:03:28.000 --> 0:03:30.960 group when it comes to the capex intensity. I mean, 0:03:31.040 --> 0:03:34.040 that's just the scale of the business that they are operating. 0:03:34.080 --> 0:03:37.720 And look, I do think the ROI on their capex 0:03:37.800 --> 0:03:42.360 is higher because Gemini's cost is much lower than all 0:03:42.480 --> 0:03:47.320 the other large ANGLID models, including Microsoft, including Meta. They 0:03:47.440 --> 0:03:51.120 do inferencing at a lower cost. And that's the advantage 0:03:51.120 --> 0:03:53.960 of having your own chip, having your own large ANGLID 0:03:54.040 --> 0:03:57.600 model that Microsoft or Meta don't have because they rely 0:03:57.720 --> 0:04:01.440 on in video chips, whereas Google does most of their 0:04:01.520 --> 0:04:04.840 inferencing from the TPU chip. So I think that just 0:04:05.000 --> 0:04:08.520 vertical integration they have Alphabet has gives them such a 0:04:08.520 --> 0:04:11.840 big cost advantage when it comes to running the AI infrastructure. 0:04:12.640 --> 0:04:16.320 Where's the company on the various regulatory issues outstanding? What 0:04:16.360 --> 0:04:17.840 are the one or two or three ones that we've 0:04:17.839 --> 0:04:20.960 really got to focus on in what's the market telling us? 0:04:21.040 --> 0:04:24.240 So that's the biggest risk with Alphabet. That has been 0:04:24.320 --> 0:04:27.479 the biggest rag on their multiple and it remains because 0:04:27.520 --> 0:04:31.200 we have a catalyst next month where Judge Meta is 0:04:31.240 --> 0:04:34.320 going to make a decision on the remedies. And you know, 0:04:34.480 --> 0:04:38.560 especially that Chrome split, that's still an overhang. Now the 0:04:38.600 --> 0:04:42.200 base case is there won't be any Chrome divestiture, but 0:04:42.520 --> 0:04:45.440 we still need to learn about what are the remedies 0:04:45.520 --> 0:04:48.240 that may come about in terms of you know, proposed 0:04:48.240 --> 0:04:50.839 by the judge, and that is where if they're asked 0:04:50.880 --> 0:04:54.359 to you know, share search data or some other type 0:04:54.360 --> 0:04:58.080 of remedy, that's going to hurt their position. I think 0:04:58.160 --> 0:04:59.320 that is the big Overhay. 0:04:59.360 --> 0:05:02.520 This one could be this one. If you have a 0:05:02.560 --> 0:05:05.160 firm view on that. You buy the stock here and 0:05:05.160 --> 0:05:08.039 there's there's a ton in this thing. Are people doing that? 0:05:08.080 --> 0:05:09.200 Are people making bets here? 0:05:09.320 --> 0:05:09.480 Think? 0:05:09.520 --> 0:05:10.960 I bet you they have to be. 0:05:11.360 --> 0:05:14.480 I mean, the narrative is still no netive, so negative. 0:05:14.560 --> 0:05:17.360 Everyone is fixated on oh chat ChiPT my work. 0:05:18.120 --> 0:05:21.760 Bobby Action Rod on billions would somehow figure out where 0:05:21.760 --> 0:05:24.320 this judge is going to rule, make a bet one 0:05:24.320 --> 0:05:26.200 way or the other. You know, there's the Bobby Action 0:05:26.320 --> 0:05:27.040 Rods of the world out. 0:05:27.400 --> 0:05:30.240 I agree. I think if you can figure out decisively 0:05:30.760 --> 0:05:34.160 what the judges verdict is going to be, the multiple wise, 0:05:34.200 --> 0:05:37.200 you could see easily a twenty five to thirty percent 0:05:37.360 --> 0:05:41.000 multiple expansion and numbers will go up for sure after 0:05:41.200 --> 0:05:44.360 print last night. But multiple expansion is like twenty five 0:05:44.400 --> 0:05:47.400 to thirty percent. Just and when is that ruling that's 0:05:47.600 --> 0:05:51.280 coming up in August September time frame to keep up with. 0:05:51.240 --> 0:05:52.320 These things to do. 0:05:52.360 --> 0:05:57.960 It's got like a huge team, global team behind him. 0:05:57.960 --> 0:05:59.599 I mean all he does is come on radio, TV 0:06:00.000 --> 0:06:02.839 and they give all the work. He's got everything everything. 0:06:03.320 --> 0:06:06.960 So you mentioned YouTube before Google Video site, how is 0:06:07.000 --> 0:06:09.200 its advertising still going? Still going strong? 0:06:09.800 --> 0:06:14.080 So look, YouTube subscriptions is what it's really doing well 0:06:14.200 --> 0:06:18.680 right now. So YouTube subscription growth is north of twenty percent. Imagine, 0:06:18.720 --> 0:06:23.600 you know, Netflix growing sixteen seventeen percent, YouTube subscriptions actually 0:06:23.720 --> 0:06:27.280 surpassing Netflix's growth. And then you layer ads on top 0:06:27.320 --> 0:06:29.720 of that, which grew at a very healthy thirteen percent. 0:06:30.040 --> 0:06:33.720 So ads is a forty billion dollar business. Subscriptions is 0:06:33.839 --> 0:06:37.640 now close to you know, twenty billion dollars, and that 0:06:37.880 --> 0:06:41.920 is where you're seeing, you know, combined cloud plus YouTube 0:06:43.040 --> 0:06:46.000 arr is close to one hundred and fifteen billion. So 0:06:46.120 --> 0:06:49.599 imagine when just these two segments growing at north of 0:06:49.720 --> 0:06:53.440 twenty percent. I mean, it's it's just a phenomenal business 0:06:53.480 --> 0:06:56.960 these to both cloud and YouTube and on a standalone basis, 0:06:56.960 --> 0:07:01.159 there is so much runway for growing the to segment. 0:07:01.560 --> 0:07:04.200 Our thanks to Man Deep Seeing Bloomberg Intelligence senior tech 0:07:04.240 --> 0:07:05.400 industry analyst. 0:07:05.440 --> 0:07:08.240 We moved next to consumer earnings. Earlier this week, Philip 0:07:08.240 --> 0:07:11.680 Morris posted second quarter earnings that missed analysts expectations. 0:07:11.840 --> 0:07:14.720 The results were due to the company's Zen nicotine pouch 0:07:14.720 --> 0:07:18.760 shipments accelerating less than expected. Separately, Coca Cola reported second 0:07:18.800 --> 0:07:21.640 quarter earnings that beat analse expectations. 0:07:21.080 --> 0:07:23.120 And this came as a company announced it was launching 0:07:23.120 --> 0:07:25.720 a new version of its coke product made with US 0:07:25.800 --> 0:07:28.920 sugarcane this fall. President Donald Trump had urged a company 0:07:28.920 --> 0:07:29.360 to do so. 0:07:29.720 --> 0:07:31.600 For more Lisa and I were joined by Ken Shay, 0:07:31.640 --> 0:07:34.200 Bloomberg Intelligence Senior consumer products analyst. 0:07:34.360 --> 0:07:36.880 We first asked Ken to explain why Coca Cola is 0:07:36.960 --> 0:07:39.520 making a switch to cane sugar and if pressure from 0:07:39.520 --> 0:07:41.320 President Trump had an impact. 0:07:41.600 --> 0:07:43.560 It certainly is in sync with what Coca Cola has 0:07:43.560 --> 0:07:45.920 been doing for a long time, and that is keeping 0:07:45.960 --> 0:07:48.720 its post on what the consumer wants to do. It 0:07:48.800 --> 0:07:51.920 has a lot of assets at his disposal, and a 0:07:52.000 --> 0:07:55.720 cane sugar product is not novel to Coca Cola. I mean, 0:07:55.840 --> 0:08:00.040 it's produced it in the US, largely more outside of US, 0:08:00.080 --> 0:08:02.760 but in the US on a selected basis, So it's 0:08:02.800 --> 0:08:05.880 really just going to expand that it may have been 0:08:06.880 --> 0:08:10.600 prompted to a degree by the President's tweets or whatever, 0:08:10.960 --> 0:08:13.920 but it's certainly in synct. Like I said, you know, 0:08:13.960 --> 0:08:17.080 there's a there's an audience out there that prefers sugar 0:08:17.160 --> 0:08:20.320 based as opposed to high fructose corn cruit based, full 0:08:20.360 --> 0:08:23.280 calorie sodas, and they're going to play into that. Most likely, 0:08:23.320 --> 0:08:25.640 it's going to be a brand Coke extension, and it's 0:08:26.000 --> 0:08:28.240 going to be sell at a premium price in selected 0:08:28.280 --> 0:08:31.880 markets to give it, uh an aura of exclusivity. I'm 0:08:31.880 --> 0:08:35.760 guessing to to command those prices, and so just as 0:08:35.760 --> 0:08:38.080 a little more excitement. It's it's one of many things 0:08:38.080 --> 0:08:40.440 Coke is doing now on the innovation front. 0:08:41.679 --> 0:08:45.160 So from Coca Cola's economic perspective, do they care which 0:08:45.280 --> 0:08:46.360 ingredient they use? 0:08:48.160 --> 0:08:50.880 Well, it depends, Paul, It depends if they can capture 0:08:50.920 --> 0:08:53.200 the premium price they're going to, you know, price it 0:08:53.200 --> 0:08:56.440 at kin share costs more than high fructose corns herup. 0:08:56.480 --> 0:08:59.280 You know, a corn is a heavily, heavily subsidized crop 0:08:59.320 --> 0:09:02.480 in the US. UH they built their supply chain around 0:09:03.040 --> 0:09:06.640 HFCs because of that, and most consumers early, you know, 0:09:07.000 --> 0:09:10.760 they don't really notice the difference. Some do but buy 0:09:10.840 --> 0:09:13.839 and large. You know, they've grown that franchise very well. 0:09:15.679 --> 0:09:17.720 But I guess you know some tourists that go to 0:09:17.760 --> 0:09:21.439 Mexico and they taste the sugar cane sugar coke down 0:09:21.440 --> 0:09:22.720 there and they say, you know what, this is really 0:09:22.760 --> 0:09:25.560 good and they want to capture the same experience in 0:09:25.600 --> 0:09:26.160 the US. 0:09:26.320 --> 0:09:29.240 I'm going to Chipotle and they do offer the Mexican 0:09:30.160 --> 0:09:33.080 zoda there. Let me ask, let me shift gears here. 0:09:33.679 --> 0:09:35.319 What is a zin patch? 0:09:36.440 --> 0:09:38.480 A zin patch? You want a patch? 0:09:38.520 --> 0:09:38.600 It? 0:09:38.720 --> 0:09:42.240 I think they made a pouch pouch, Zin pouch, a pouch. 0:09:42.280 --> 0:09:45.280 You know, it's a it's an oral tobacco product. Actually, 0:09:45.760 --> 0:09:48.600 zin isn't. It really doesn't even contain tobacco. It's a 0:09:48.640 --> 0:09:53.920 synthetic products. It's lads with nicotine that is a facsimile 0:09:54.000 --> 0:09:57.120 for tobacco, which a lot of people will say causes harm, 0:09:57.160 --> 0:09:59.760 and a lot of people are right. So this is 0:09:59.760 --> 0:10:02.760 a product that you know, people can get their nicotine 0:10:02.800 --> 0:10:06.200 buzz in a you know, hands off kind of way, 0:10:06.240 --> 0:10:09.440 doesn't emit smoke, doesn't offend your neighbor that you're working with. Uh, 0:10:09.600 --> 0:10:11.960 and it's done really really well. So those are really 0:10:12.080 --> 0:10:14.840 the Zin pouches that are doing really well. Yeah, yeah, I. 0:10:14.800 --> 0:10:19.080 Thought it was Zinfindel the wine. That's no kidding, no idea, 0:10:19.160 --> 0:10:22.800 that pouch. So but I mean it's it's big enough 0:10:22.800 --> 0:10:25.320 a business can that Philip mars would would call it out. 0:10:27.280 --> 0:10:30.199 Oh yeah, I know it in it's about eight percent 0:10:30.240 --> 0:10:32.720 of the sales, I believe at this point, but it's growing, 0:10:32.840 --> 0:10:36.120 you know, a twenty thirty percent rate as opposed to cigarettes, 0:10:36.160 --> 0:10:39.439 which are flat, if not down. But you know, Icoas 0:10:39.600 --> 0:10:43.160 is their smoke free device segment, which is doing very well. 0:10:43.760 --> 0:10:45.960 But if the low large numbers at some point, that's 0:10:45.960 --> 0:10:48.480 going to slow and Zen is filling the gap. They 0:10:48.720 --> 0:10:52.959 keep the overall volumes in a positive trend. They price 0:10:53.080 --> 0:10:55.199 these things very high. There's not a lot of competition 0:10:55.800 --> 0:10:57.880 in this space. So you know, one of the things 0:10:57.920 --> 0:11:00.520 investors would say about the world of tobacco, because it's 0:11:00.520 --> 0:11:03.840 so consolidated, they can pass on a very high pricing 0:11:04.000 --> 0:11:06.240 and that's what really drives a top line and you know, 0:11:06.280 --> 0:11:09.360 the cash flows and so on, and Zen plays very, 0:11:09.160 --> 0:11:11.200 very very well into that model. 0:11:11.840 --> 0:11:13.920 And how does it fair as far as we hear 0:11:13.960 --> 0:11:16.640 about e cigarettes, vaping things like that, how has Philip 0:11:16.679 --> 0:11:19.360 Marris been doing competing with this category. 0:11:20.800 --> 0:11:23.600 So they have a product called viv which is their 0:11:24.160 --> 0:11:26.720 e vapor product as opposed to what they call Heat 0:11:26.760 --> 0:11:30.360 not Burn, which has actual tobacco in it, and they 0:11:30.400 --> 0:11:35.000 would say as a more appealing alternative for smokers who 0:11:35.000 --> 0:11:38.800 are trying to quit. It's a lower margin product. It's 0:11:38.880 --> 0:11:40.679 kind of seen by Philip Morris as a kind of 0:11:40.720 --> 0:11:43.280 an entry level product for those who are trying to 0:11:43.320 --> 0:11:46.640 move away from combustible cigarettes. They can turn to e 0:11:46.760 --> 0:11:50.080 cigarettes a low cost method, and their hope is that, 0:11:50.559 --> 0:11:52.600 you know, even though it's a low margin product, their 0:11:52.600 --> 0:11:56.840 hope is that they can get that consumer maybe at 0:11:56.840 --> 0:12:00.000 some point to trade up to their heat not Burn product, 0:12:00.600 --> 0:12:03.960 which is, you know, a more profitable product for them. 0:12:04.120 --> 0:12:07.320 Our thanks to Ken Shay, Bloomberg Intelligence Senior Consumer Products analyst. 0:12:07.520 --> 0:12:09.800 Coming up, well look at why the hotel chain Hilton 0:12:09.960 --> 0:12:12.120 lowered expectations for net income this year. 0:12:12.400 --> 0:12:15.240 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:15.280 --> 0:12:17.480 depth research and data on two thousand companies and one 0:12:17.520 --> 0:12:18.600 hundred and thirty industries. 0:12:18.840 --> 0:12:22.280 You can access Bloomberg Intelligence via Big on the terminal. 0:12:22.320 --> 0:12:24.160 I'm Lis Matteo and I'm Paul Sweeney. 0:12:24.320 --> 0:12:25.400 This is Bloomberg. 0:12:29.679 --> 0:12:33.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:33.480 --> 0:12:36.559 weekdays at ten am Eastern on Apple Corplay and Android 0:12:36.559 --> 0:12:39.880 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:39.920 --> 0:12:43.520 you get your podcasts, or watch us live on YouTube. 0:12:43.800 --> 0:12:46.240 I'm Paul Sweeney and I'm Lis Mateo filling in on 0:12:46.280 --> 0:12:47.400 Bloomberg Intelligence. 0:12:47.520 --> 0:12:50.640 We move next to the telecommunication space. This week, Verizon 0:12:50.640 --> 0:12:54.160 Communications posted second quarter revenue that surpassed analyst estimates, and 0:12:54.240 --> 0:12:55.920 the company raised this profit outlook. 0:12:56.040 --> 0:12:59.360 The results were fueled by wireless price increases and favorable 0:12:59.400 --> 0:13:01.040 tax reform. 0:13:00.480 --> 0:13:02.280 For more at Least and I were joined by John Butler, 0:13:02.280 --> 0:13:04.280 Bloomberg Intelligence senior telecom analysts. 0:13:04.320 --> 0:13:07.120 We first asked John, what's making the company so optimistic? 0:13:07.520 --> 0:13:11.360 When I look at Verizon, I think of the phrase 0:13:11.440 --> 0:13:15.319 game of the inches, right. I think the improvements here 0:13:15.480 --> 0:13:20.920 quartering and quarter out are incrementally better. They're edging towards 0:13:21.000 --> 0:13:24.680 that acquisition of Frontier, which is really going to change 0:13:24.720 --> 0:13:27.880 the game for them. But in the meantime, they put 0:13:27.880 --> 0:13:30.920 a lot of changes in place in terms of their 0:13:31.000 --> 0:13:36.480 go to market strategy, how they're combating promotions coming from 0:13:36.559 --> 0:13:40.160 T Mobile and AT and T and on the margin 0:13:41.080 --> 0:13:43.760 quarterin and quarter out, I just see them doing a 0:13:43.920 --> 0:13:47.320 better and better job. I think all the actions they've 0:13:47.360 --> 0:13:50.920 taken are starting to work, and so taking the long 0:13:51.000 --> 0:13:57.560 view here, I really think Verizon is improving just quartering 0:13:57.640 --> 0:14:01.360 and quarter out. And this was another quarter where you 0:14:01.360 --> 0:14:04.040 could look at it in isolation and say, you know, 0:14:04.120 --> 0:14:07.880 it was a solid quarter, a little bit mixed on 0:14:07.960 --> 0:14:11.480 some of the metrics, but I think I'm balanced better 0:14:11.679 --> 0:14:13.400 than last quarter and last year. 0:14:14.280 --> 0:14:18.720 John, what's kind of the positioning of Verizon in the marketplace? Like, 0:14:18.760 --> 0:14:20.960 I've been a long time Verizon wireless customers since the 0:14:20.960 --> 0:14:24.640 beginning of cillier service actually, and I guess I was 0:14:24.640 --> 0:14:26.560 initially drawn to it because I thought they had the 0:14:26.600 --> 0:14:30.280 best network. So quality, is that still the case because 0:14:30.320 --> 0:14:32.600 it seems like T Mobile's gotten a lot better in 0:14:32.680 --> 0:14:34.920 quality and AT and T. I don't know. 0:14:36.560 --> 0:14:38.720 Yeah, you know, Paul, you bring up a good point. 0:14:38.800 --> 0:14:41.240 I think there's a question mark out there as to 0:14:41.320 --> 0:14:46.040 whether Verizon still has the best network versus T Mobile 0:14:46.080 --> 0:14:49.560 and AT and T. But I think they have a 0:14:49.600 --> 0:14:53.200 slight edge they are in terms of coverage. And it's 0:14:53.280 --> 0:14:56.120 interesting a lot of people ask me about wireless, who 0:14:56.200 --> 0:14:59.440 was the best network? Who should I choose? And the 0:14:59.680 --> 0:15:03.120 one thing that people are always ask about is how's 0:15:03.200 --> 0:15:06.480 their coverage. I think coverage is very important to people, 0:15:06.960 --> 0:15:09.480 and I think when you think on that metric. In 0:15:09.600 --> 0:15:13.480 terms of that metric, for Riizon delivers the bars on 0:15:13.520 --> 0:15:17.280 your smartphone, probably more than T Mobile and AT and 0:15:17.320 --> 0:15:21.680 T in terms of download speeds, though I suspect that 0:15:21.840 --> 0:15:24.760 T Mobile probably is gaining the edge here. 0:15:25.200 --> 0:15:29.320 Now, what about prices? Did Verizon increase their prices? If so, 0:15:29.360 --> 0:15:30.000 did that help? 0:15:30.920 --> 0:15:31.000 So? 0:15:31.120 --> 0:15:35.320 We did see in all the carriers are increasing prices 0:15:35.440 --> 0:15:38.840 right now as the market matures and new user growth 0:15:38.920 --> 0:15:41.880 is slowing considerably. The only way you're going to grow 0:15:41.920 --> 0:15:46.800 that important service revenue metric is by raising prices. They 0:15:46.840 --> 0:15:50.600 tend to do it on older plans for riizing stunted 0:15:50.720 --> 0:15:54.040 over the past six months. As if you look over 0:15:54.080 --> 0:15:57.280 the past year, so as AT and T and T Mobile, 0:15:58.480 --> 0:16:02.440 that's flowing through and it's helping to boost the service revenue. 0:16:02.880 --> 0:16:06.320 I think over time they're adding in those little extras 0:16:06.520 --> 0:16:11.080 like you know, device insurance and perks like you know, 0:16:11.240 --> 0:16:14.600 added content that you can purchase at a discount through 0:16:15.280 --> 0:16:18.760 through Verizon, and I think all that together is going 0:16:18.840 --> 0:16:23.600 to continue to provide a lift to service revenue. It's 0:16:23.680 --> 0:16:24.520 nothing special. 0:16:24.600 --> 0:16:24.920 Again. 0:16:25.040 --> 0:16:28.560 I'm looking forward to that Frontier acquisition where they're going 0:16:28.640 --> 0:16:33.880 to buy, you know, access to two million Fiber broadband 0:16:34.000 --> 0:16:39.000 subscribers and eight million fiber homes passed, because once they 0:16:39.080 --> 0:16:42.480 get Frontier under the hood, they're going to be able 0:16:42.520 --> 0:16:46.800 to bundle that wireless service with Fiber and I think 0:16:46.920 --> 0:16:51.600 that's going to help to really drive renewed UH subscriber growth. 0:16:52.040 --> 0:16:55.120 Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analist. 0:16:55.360 --> 0:16:57.120 We move next to the toy industry. 0:16:57.480 --> 0:16:59.640 This week, the toy maker has But reported second quarter 0:16:59.640 --> 0:17:01.400 earnings that beat analyst expectations. 0:17:01.480 --> 0:17:04.119 The company also said it's raising its full year outlook. 0:17:04.200 --> 0:17:07.159 This comes after a record quarter for Hasbro's Magic the 0:17:07.200 --> 0:17:08.280 Gathering card game. 0:17:08.640 --> 0:17:10.720 For more, co host Isabelle Lee and I were joined 0:17:10.720 --> 0:17:14.840 by Lindsey Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst. You 0:17:14.920 --> 0:17:17.240 first asked Lindsay to break down what we learned from 0:17:17.240 --> 0:17:18.159 Hasbro this week. 0:17:18.560 --> 0:17:21.919 Strong quarter are really a continuation from the first quarter 0:17:22.359 --> 0:17:25.520 where all the strength is really coming from Magic the 0:17:25.560 --> 0:17:29.760 Gathering Monopoly go and Hasbro's digital gaming business. What we 0:17:29.920 --> 0:17:32.639 did not learn from the release is really about the 0:17:32.680 --> 0:17:35.720 consumer and what the outlook is for toys in the 0:17:35.760 --> 0:17:39.720 second half, and that's causing a lot of uncertainty what 0:17:39.760 --> 0:17:41.679 that back half might look like. 0:17:42.440 --> 0:17:44.800 I was going to ask how exposed is Hasbro to 0:17:44.920 --> 0:17:48.760 current consumers spending trends, Like, especially in the toys and 0:17:49.040 --> 0:17:51.879 entertainment area, do we see more middle income shoppers buying 0:17:51.920 --> 0:17:54.480 Hasbro or what kind of consumers are you seeing? 0:17:55.200 --> 0:17:59.080 Yeah, so the toy business typically grows with GDP. It 0:17:59.160 --> 0:18:01.960 has been you know, coming down a bit challenge over 0:18:01.960 --> 0:18:04.679 the past couple of years after the peak during COVID 0:18:04.720 --> 0:18:07.120 when everyone was stuck at home buying a lot of toys. 0:18:07.400 --> 0:18:09.840 This year was supposed to be a turnaround year four 0:18:09.880 --> 0:18:12.600 toys and then early this year, you know, we got 0:18:12.680 --> 0:18:15.119 hit with the tariff news, which created a lot of 0:18:15.200 --> 0:18:19.040 uncertainty in the business. One is, you know, we don't 0:18:19.080 --> 0:18:21.560 know how the consumer is going to react to broader 0:18:21.600 --> 0:18:26.800 price increases, and we do expect increases on toys very specifically, 0:18:27.320 --> 0:18:30.320 so companies like Hasbro and Mattel, you know what some 0:18:30.359 --> 0:18:33.600 of the biggest toy makers in the globe you know, 0:18:33.640 --> 0:18:37.800 are really faced with that challenge in second quarter. Normally 0:18:38.000 --> 0:18:42.440 retailers already start buying their holiday inventory. That didn't happen 0:18:42.560 --> 0:18:46.320 this year. Those retailers Walmart, Target, took a pause. So 0:18:46.400 --> 0:18:48.399 normally by now we would sort of get a sense 0:18:48.520 --> 0:18:52.080 of holiday But because of that pullback, you know, Hasbro 0:18:52.160 --> 0:18:55.280 saw their consumer products segment see a sixteen percent decline 0:18:55.320 --> 0:18:57.920 in the second quarter revenue because of that hold on 0:18:58.359 --> 0:18:59.040 those orders. 0:19:00.080 --> 0:19:02.720 Thought they would have tried to front run the tariffs. Here, 0:19:02.720 --> 0:19:04.919 what's the company saying about when they expect some of 0:19:04.960 --> 0:19:08.840 these retailers to place their orders, so. 0:19:08.760 --> 0:19:11.560 They expect the orders to be sort of made up 0:19:11.600 --> 0:19:14.320 in the third quarter. And the challenge with that is, 0:19:14.359 --> 0:19:16.720 you know, some of those hotter toys that do sell 0:19:16.720 --> 0:19:20.120 out maybe in the early holiday shopping season, there will 0:19:20.160 --> 0:19:22.680 be very little time to sort of replenish on that end. 0:19:23.080 --> 0:19:26.679 So Hasbro did continue their production, which you know they 0:19:26.680 --> 0:19:29.800 do still make about fifty percent of their toy products 0:19:29.840 --> 0:19:32.680 in China. They continued in May. You know, they took 0:19:32.680 --> 0:19:35.200 some of that inventory on their books in the second quarter. 0:19:35.240 --> 0:19:37.679 That's why we saw the inventory come up there. You know, 0:19:37.680 --> 0:19:40.200 they're hoping that the retailers, you know, place more of 0:19:40.240 --> 0:19:43.560 their orders in the third quarter, you know, ahead of holiday. 0:19:44.119 --> 0:19:46.600 You know, the risk is they just don't really know 0:19:46.840 --> 0:19:49.399 what those pre order will be and there will be 0:19:49.520 --> 0:19:53.439 limited time for additional orders like in that fourth quarter 0:19:54.000 --> 0:19:55.560 right before holiday. 0:19:56.320 --> 0:19:58.960 To your point. In April, the company warned the tires 0:19:59.000 --> 0:20:02.360 clid impact profit by as much as sixty million two 0:20:02.400 --> 0:20:04.480 hundred and eighty million this year, and they did reduce 0:20:04.520 --> 0:20:07.199 their Chinese manufacturing output to less than forty percent, or 0:20:07.200 --> 0:20:09.719 at least plan to by twenty twenty six. If they 0:20:09.800 --> 0:20:11.920 do that, will they pass on the cost to consumers? 0:20:11.960 --> 0:20:14.199 And do you think consumers will bear the brand of 0:20:14.280 --> 0:20:14.800 that burden. 0:20:15.280 --> 0:20:20.080 Yes, so Hasbro is using multiple mitigation strategies. You know, 0:20:20.119 --> 0:20:22.359 they have been very focused on cutting costs. You know, 0:20:22.400 --> 0:20:25.520 prior to tariffs, they sort of accelerated some cost cutting 0:20:26.240 --> 0:20:30.399 at the corporate level. They will be raising prices, I 0:20:30.440 --> 0:20:34.480 think selectively on toys. They are also just going to 0:20:34.520 --> 0:20:38.200 not sell certain toys in the US if it can't 0:20:38.240 --> 0:20:40.760 it doesn't make financial sense to do so if they 0:20:40.760 --> 0:20:43.879 can't raise the price and consumers would not buy it 0:20:43.920 --> 0:20:47.080 at that price. So they're sort of using a mixed strategy. 0:20:47.119 --> 0:20:50.040 They had predicted tariffs to cost sixty million to one 0:20:50.119 --> 0:20:54.359 eighty million on an annual basis three months ago. They 0:20:54.400 --> 0:20:58.440 sort of dropped that impact closer to the sixty million side. 0:20:58.600 --> 0:21:03.000 That's because of lower rate on the Chinese imports. They 0:21:03.040 --> 0:21:05.960 are working to diversify the supply chain, but that will 0:21:05.960 --> 0:21:08.880 take time. The goal of less than forty percent that's 0:21:08.960 --> 0:21:12.240 really by twenty twenty seven, So in terms of this year, 0:21:12.480 --> 0:21:14.320 you know where their supply chain is. They're sort of 0:21:14.359 --> 0:21:17.840