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

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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

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

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Speaker 1: or watch us live on YouTube.

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Speaker 2: I thought the story for tech companies, if you spend capex,

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Speaker 2: that's a good thing.

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Speaker 3: Once upon a time it was.

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Speaker 4: Yeah, I don't know, but I guess things have changed

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Speaker 4: a little bit.

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Speaker 2: Oracle.

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Speaker 3: Oracle Corp.

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Speaker 2: Shares declined in pre market trading after the company reported

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Speaker 2: quarterly capital expenses that were higher than estimates.

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Speaker 4: And it's boom. It's trading down down ten point nine

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Speaker 4: percent here today. I mean, this is a big company.

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Speaker 2: It's got a half a trillion dollar market cap, so

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Speaker 2: I mean we're talking some real money here. Anorak Rana,

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Speaker 2: he can explain this to us. He's a technology channels

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Speaker 2: for Bloomberg Intelligence, Honor. What's going on with Oracle today?

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Speaker 2: What did the market not like?

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Speaker 5: I think one of the things you have to think

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Speaker 5: about it is there is an unlimited capital in the world. Frankly,

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Speaker 5: I know everybody is funding data centers, but one of

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Speaker 5: the things Oracle is also doing is when it's going

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Speaker 5: to raise capital next year or even this year, it's

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Speaker 5: going to do some equity offering and it's going to

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Speaker 5: do some debt offering. So it looks like next year

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Speaker 5: there's going to be more equity dialution by raising by

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Speaker 5: them raising at least twenty billion dollars, it's going to

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Speaker 5: be most likely more than that. And I think that

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Speaker 5: is something that everybody needs to grapple with because we

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Speaker 5: understand there is in finite demand, but we don't know

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Speaker 5: if there's infinite demand for capital. Also, at this point, it.

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Speaker 2: Kind of goes to what I was thinking when we

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Speaker 2: hired Rob Schiffman years ago, who's one of the top

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Speaker 2: tech credit analysts.

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Speaker 4: I'm like, what are we hiring a tech credit analysts?

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Speaker 4: They don't issue any debt? Was IRA in the market concreation?

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Speaker 6: Yeah, And now in many ways even credit investors are

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Speaker 6: overexposed to tech debt. So when it comes to Oracle

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Speaker 6: needing more capital, how are these I don't know how

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Speaker 6: are How is the fundamental performance going to affect how

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Speaker 6: it and when it seeks that capital, whether it's equity,

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Speaker 6: whether it's dead.

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Speaker 5: So they have raised debt this year, they're saying they're

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Speaker 5: not going to do any more debt rays in twenty

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Speaker 5: twenty six it's going to be most likely and next

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Speaker 5: year affair. But you know, remember one thing in this case,

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Speaker 5: they have said that they will maintain good credit quality

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Speaker 5: out there, so they have to be very cautious about that.

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Speaker 5: So Oracle is a name it has backing off, you

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Speaker 5: know obviously not not just Larry Allison, but also a

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Speaker 5: very strong, fundamentally cash rich software business, and I think

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Speaker 5: that helps out. But to be very frank, the numbers

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Speaker 5: we're talking about is no longer you know, ten to

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Speaker 5: fifteen billion in capex. We are talking about seventy billion

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Speaker 5: in north of that. So this is a you know,

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Speaker 5: the kapex numbers just keep on getting bigger and bigger.

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Speaker 2: And you know, your industry technology software in particular HOURCK

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Speaker 2: has historically been characterized by amounts of free cash flow.

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Speaker 2: That's no longer the case here. How long is is

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Speaker 2: that going to be the case for your world?

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Speaker 5: So the one part is this has been bifocated into

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Speaker 5: two different groups within software. One is that's dedicated to

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Speaker 5: AI infrastructure, so that's Oracle Cloud Infrastructure, Cold Weave and

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Speaker 5: Nevius and those guys. The other companies which are Salesforce

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Speaker 5: and Adobe and those they are still pure software. Their

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Speaker 5: caplex is not going at that same rate, but they

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Speaker 5: have a different risk, which is getting disrupted by AI.

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Speaker 5: On one hand, the other group is benefiting from AI

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Speaker 5: build up. The other one is under threat. So there

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Speaker 5: are three or four dimensions that you have to play

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Speaker 5: with right now. It's no longer an easy case that

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Speaker 5: just buy the software names and you know it'll just

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Speaker 5: going to go up.

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

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekday the ten astern on Applecarplay and Android Auto with

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Speaker 1: the Bloomberg Business app. Listen on demand wherever you get

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

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Speaker 2: SpaceX ipo pricing after the close tonight, ready to trade tomorrow.

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Speaker 2: Lots of the headlines crossing the tape. SpaceX ipo said

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Speaker 2: to draw more than seventy billion dollars in retail orders,

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Speaker 2: and remember SpaceX said that it was going to allocate

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Speaker 2: at least twenty percent of its IPO to retail investors.

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Speaker 2: And also seeing a headline, SpaceX said to allocate less

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Speaker 2: than ten percent of IPO.

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Speaker 4: To international orders. That's a little bit unusual here.

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Speaker 2: So we'll get to see price tonight and get a

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Speaker 2: trading tomorrow, and that should be will be the largest

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Speaker 2: IPO of all time by far. George Ferguson, he's a

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Speaker 2: senior aerospace, defense and airlines analysts.

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Speaker 4: For Bloomberg Intelligence. He's been writing.

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Speaker 2: Research on SpaceX on.

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Speaker 4: The Bloomberg terminal.

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Speaker 2: So if you want to get full research on this

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Speaker 2: company this transaction, go to Bigo on the terminal and

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Speaker 2: that's where you'll find it. And George's been the analyst

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Speaker 2: on that. George, what are you hearing here as we

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Speaker 2: approach the end of this road show? What have you

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Speaker 2: been hearing back from clients? How they're maybe just looking

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Speaker 2: at this company, positioning this company because there's a lot

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Speaker 2: going on here.

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Speaker 7: There is a lot going on, and so I think

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Speaker 7: what we're hearing from folks is that there's still I

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Speaker 7: think a bit of a dearth of information. You know,

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Speaker 7: people are looking for I think decent models on the

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Speaker 7: near term to get their arms around it. I think,

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Speaker 7: you know, the challenge here is really this is a

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Speaker 7: long term play on AI and XAI specifically, and I

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Speaker 7: think you know, when you're all done, I think you

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Speaker 7: I don't know, if you close your eyes and sign

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Speaker 7: on the dotted line or whatever, you go on a

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Speaker 7: trip of the elon Musk for AI and connectivity into space.

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Speaker 2: Yeah, I'm just looking at the FA function and there's

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Speaker 2: some analyst consensus numbers out there. So just count to

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Speaker 2: your twenty five about nineteen billion of revenue. Count to

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Speaker 2: your twenty six to forecast is for close to thirty

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Speaker 2: billion calendar twenty seven, forty eight billion on calendar twenty eight,

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Speaker 2: sixty three billions, So some serious revenue growth there.

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Speaker 4: Howard investors kind.

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Speaker 2: Of valuing this thing, is this a multiple of revenue

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Speaker 2: because there's you know, not a lot of earnings yet.

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Speaker 7: So for you know, for all the businesses at Bloomberg Intelligence,

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Speaker 7: we undertook our analysis based on some of the parts,

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Speaker 7: and every single one of the businesses was valued based

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Speaker 7: on revenue. Right, So I based a launch on revenue,

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Speaker 7: and I used rocket Lab as it's nearest peer. Multiples

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Speaker 7: there at rocket Lab or seventy times revenue. I mean, wow,

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Speaker 7: that's no pun intended. That's astronomical to what I'm used

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Speaker 7: to in the in the aerospace world. John Butler did

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Speaker 7: it on the on the connectivity piece. He's again using revenue.

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Speaker 7: Although that's one business where they're going to make some profit.

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Speaker 7: I think, you know, we're going to put out a

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Speaker 7: model next week. I think John's looking at sort of

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Speaker 7: four billion kind of profit out of that business. But

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Speaker 7: then the AI business is the sort of the big

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Speaker 7: sucking sound in the middle of this, and that's going

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Speaker 7: to be I think a loss for the year, a

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Speaker 7: big loss. I think it's something like eight billion. Man

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Speaker 7: Deep Singh leading the charge on that side of it. Again,

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Speaker 7: valued it on revenue. Look, we don't think it's going

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Speaker 7: to be profitable for at least the next couple of years.

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Speaker 7: The question is how far out you want to take

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Speaker 7: your model. I think again, the AI business will be

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Speaker 7: heavy in the investment phase, and so you're just not

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Speaker 7: going to see profitability in that business. I think your

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Speaker 7: connectivity business, you know, you will see profitability out of

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Speaker 7: that business. But that's a little bit of a you know,

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Speaker 7: you're it's competition with terrestrial providers. The product is valuable,

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Speaker 7: but it's got more latency again than the terrestrial providers.

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Speaker 7: So it's a growth business. But not a exponentially growth

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Speaker 7: owing kind of business, and the launch business is a

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Speaker 7: bit flatish. So I think it's really all about how

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Speaker 7: you think about AI long term investment in data centers

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Speaker 7: and getting into space. The launch business is really about

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Speaker 7: lifting it into space as cheaply as possible, and that's starship.

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Speaker 2: Now they're gonna be raising seventy five a billion dollars

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Speaker 2: at the price in this IPO. I got a sense

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Speaker 2: just thinking about these businesses Georgie and looking at their

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Speaker 2: capital needs, that they're going to need more money. How

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Speaker 2: do they expect the finance their growth going forward? Is

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Speaker 2: this more equity?

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Speaker 3: Is it debt?

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Speaker 4: What do we know?

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Speaker 5: Yeah?

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Speaker 7: My guess is that you're going to have to see

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Speaker 7: more equity because again you're inside businesses that aren't really

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Speaker 7: generating well, not even aren't really aren't generating sufficient cash

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Speaker 7: for investment. So I feel like they're going to have

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Speaker 7: to come back to the equity markets. You could try

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Speaker 7: to pile a bunch of debt in it, there's not

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Speaker 7: much in there right now, not sure how you'd support it, right,

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Speaker 7: So I think I feel like you're going to be

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Speaker 7: back for that, right, So, I think some of these

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Speaker 7: AI busines. This is a little bit out of my space, right, man,

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Speaker 7: deep does it more? I think it's all about look

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Speaker 7: at what you need now to keep your investment going

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Speaker 7: to strut to try to stay in the lead on AI,

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Speaker 7: and then figure out your financing as you go. Right,

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Speaker 7: you can't look too far down the road. These are

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Speaker 7: big numbers, I.

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Speaker 2: Think, so before we let you go, George, I mean,

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Speaker 2: it really comes down to Elon and AI. If you

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Speaker 2: believe in both of them, you kind of close your

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Speaker 2: eyes and jump in.

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Speaker 7: I think that's exactly it, right. The valuation again, is

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Speaker 7: much larger than what I'm used to dealing with an

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Speaker 7: aerospace defense. It's a very large valuation. Elon's going to

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Speaker 7: have the majority of the B shares, which are a

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Speaker 7: ten vote compared to one vote for the A shares.

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Speaker 5: Yep.

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Speaker 7: I think you're going on a trip with Elon. You

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Speaker 7: got to believe in his vision for the future. If

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Speaker 7: you're going to step into this and you're not looking

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Speaker 7: at evaluations intensely.

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

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am.

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Speaker 3: He's done on.

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Speaker 1: Apple cocklay and Android auto with the Bloomberg Business App.

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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 4: Nike tough times there.

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Speaker 2: I mean, you think about Nike is the trailblazer for

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Speaker 2: ath leisure type in this country, and of course the

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Speaker 2: shoes and the Jordan's and all that, But the stock's

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Speaker 2: having a problem.

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Speaker 4: The company's having a problem.

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Speaker 2: So let's break it down with Lily Meyer, Bloomberg retail reporter,

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Speaker 2: talk to us about Nike yet.

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Speaker 4: I know when new CEO came in, but he's not

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Speaker 4: been able to work magic yet. What's going on with Nike.

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Speaker 8: Yeah, so when the new CEO, Elliott Hill, came in,

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Speaker 8: everyone was static, you know, the stock shot up and

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Speaker 8: then internally people were popping bottles for Saco. They made

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Speaker 8: a mocked up meme of the Obama Hope poster with

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Speaker 8: Hill's face on it. But while he's been in the rule,

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Speaker 8: the stock is down now forty five percent, and he's

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Speaker 8: really focused on getting the company back to sport and

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Speaker 8: that's been a big struggle.

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Speaker 6: What is his bigger challenge getting Nike back on track

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Speaker 6: in North America or getting Nike back on track in China, because.

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Speaker 3: Both of these are huge.

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Speaker 6: I mean, the US is the whole market, but China

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Speaker 6: was where the growth was really happening.

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Speaker 8: Yeah, so in North America things are getting better, but

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Speaker 8: I would say greater China still remains one of the

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Speaker 8: bigger challenges. And I think, you know, more broadly, showing

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Speaker 8: up at big sports moments has been a challenge for Hill,

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Speaker 8: which is what the story gets into.

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Speaker 3: Explain what you mean by that.

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Speaker 8: Yeah, So for example, the World Cup, you know, is

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Speaker 8: about to kick off, and first Nike's World Cup jerseys

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Speaker 8: had this design flaw. So if you look at them,

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Speaker 8: the shoulder puckers up and that's for both players and

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Speaker 8: in fan jerseys and people you know immediately saw that,

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Speaker 8: and then the jerseys. There's also been struggles to get

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Speaker 8: them to retailers on time as well.

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Speaker 2: You know, how important is having the player endorsement as

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Speaker 2: a strategy, as a marketing strategist, product launched strategy. I mean,

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Speaker 2: they nobody did it better, They pioneered it, they perfected

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Speaker 2: with Michael Jordan, but.

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Speaker 4: Now we see other athletes going different places. What did

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Speaker 4: they say about that? How important is that?

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Speaker 1: Yeah?

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Speaker 8: I don't know if they've spoken to that explicitly recently,

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Speaker 8: but I think, you know, it remains one of the

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Speaker 8: ways that Nike can get in front of shoppers. I

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Speaker 8: think with basketball and signature shoes, I'm not sure that

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Speaker 8: market is exactly the same as it was years ago,

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Speaker 8: but I do think getting athlete endorsement and having people

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Speaker 8: on the corridor on the field wearing their shoes remains

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Speaker 8: a big deal. The London Marathon recently Adidas one with

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Speaker 8: their shoe, their new running shoe that's five hundred dollars.

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Speaker 8: Two of their athletes beat the sub two hour marathon

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Speaker 8: record and so that was It's a huge moment for

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Speaker 8: them as a brand and still kind of shows the

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Speaker 8: way that shoes show.

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Speaker 2: I saw Steph Curry, he's now doing he left under armours.

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Speaker 6: Now for Chinese Leaning, yes exactly, of course, the brand

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Speaker 6: that was formed by the Chinese gold Olympic medal gymnasts,

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Speaker 6: who was a big, big star in the nineteen eighty

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Speaker 6: four Olympics in La Yeah. I remember watching that with

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Speaker 6: my parents and being a really big deal and I

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Speaker 6: just gave away my age. Let's go back to Nike

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Speaker 6: for a moment here, because what is Elliot Hill's strategy?

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Speaker 6: I mean, and is he thinking outside the box because

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Speaker 6: he's someone who, if I remember correctly, he was an

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Speaker 6: Internet Nike and he's kind of a Nike lifer. He

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Speaker 6: retired and he's come back. Is he capable of bringing

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Speaker 6: in like a new idea, a new way of thinking.

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Speaker 3: Yeah, that's a great question.

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Speaker 8: So I think a lot of his strategy has been

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Speaker 8: restoring Nike to what it was prior to its last CEO.

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Speaker 8: So under John Donaho, who is the CEO before Elliott,

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Speaker 8: Nike went really into lifestyle shoes. It went really into

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Speaker 8: which direct to consumer channels. That's when it cut ties

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Speaker 8: with retailers like Macy's and Amazon. And so I would

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Speaker 8: say Elliott Hill so far has been trying to get

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Speaker 8: Nike to what it was in the past.

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