1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:18,560 Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 4 00:00:18,640 --> 00:00:21,920 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:21,960 --> 00:00:23,120 Speaker 1: us live on YouTube. 6 00:00:23,640 --> 00:00:25,680 Speaker 2: AT and T reported some numbers. There are some pretty 7 00:00:25,680 --> 00:00:28,600 Speaker 2: big numbers and subscribers. I noted stock's kind of flat today, 8 00:00:28,640 --> 00:00:30,640 Speaker 2: but it's up twenty percent year to date. Let's break 9 00:00:30,680 --> 00:00:34,200 Speaker 2: it down with John Butler, Bloomberg Intelligence senior telecom analyst 10 00:00:34,240 --> 00:00:38,559 Speaker 2: and the pride of Lafayette College. Out there. John, talk 11 00:00:38,560 --> 00:00:40,840 Speaker 2: to us about AT and T. That's a competitive business 12 00:00:40,840 --> 00:00:42,040 Speaker 2: there in What did they deliver? 13 00:00:43,360 --> 00:00:45,800 Speaker 3: Boy, it is a tough business, Paul, and I'll tell 14 00:00:45,800 --> 00:00:49,120 Speaker 3: you what. As quarters go for AT and T, I 15 00:00:49,120 --> 00:00:52,959 Speaker 3: would say it was a relatively unremarkable quarter. And in 16 00:00:53,000 --> 00:00:56,080 Speaker 3: telecom that's a very good thing. I mean, I seem 17 00:00:56,160 --> 00:00:59,440 Speaker 3: to just say a quarter and in quarter app AT 18 00:00:59,560 --> 00:01:02,880 Speaker 3: at T is the steady hand in the space here. 19 00:01:02,960 --> 00:01:03,800 Speaker 4: I mean, they just. 20 00:01:03,800 --> 00:01:07,640 Speaker 3: Have done a great job of setting a foundation for 21 00:01:07,720 --> 00:01:11,080 Speaker 3: a very good business and just executing on that plan. 22 00:01:11,160 --> 00:01:14,160 Speaker 3: They do a quarter in quarter out and two Q 23 00:01:14,520 --> 00:01:15,720 Speaker 3: was no exception here. 24 00:01:16,680 --> 00:01:19,520 Speaker 5: What are you expecting, Like, how are AT and T 25 00:01:19,600 --> 00:01:23,319 Speaker 5: and specific metrics like hash floor and net ads really 26 00:01:23,440 --> 00:01:26,319 Speaker 5: playing out compared to its competitors in this space. I 27 00:01:26,360 --> 00:01:29,679 Speaker 5: feel like the network space is really very challenging because, 28 00:01:29,760 --> 00:01:31,720 Speaker 5: as Paul and I talked about, it's so easy to move, 29 00:01:31,800 --> 00:01:34,000 Speaker 5: especially these days when you can keep your cell phone number. 30 00:01:35,840 --> 00:01:38,720 Speaker 3: Yeah, I mean, what you're talking about is switching activity. 31 00:01:38,800 --> 00:01:41,240 Speaker 3: And if there was anything this quarter that sort of 32 00:01:41,280 --> 00:01:45,319 Speaker 3: caught my eye, it was the churn number. And by 33 00:01:45,319 --> 00:01:47,639 Speaker 3: the way, I wasn't alone. I mean, there were tons 34 00:01:47,720 --> 00:01:51,480 Speaker 3: of questions on the call from analysts about churn and 35 00:01:51,560 --> 00:01:54,880 Speaker 3: for our listeners, churn is a measure of, on a 36 00:01:54,960 --> 00:01:59,559 Speaker 3: net basis, what percent of people left the brand during 37 00:01:59,600 --> 00:02:02,640 Speaker 3: the core and AT and T. For AT and T 38 00:02:02,720 --> 00:02:06,680 Speaker 3: it was point eighty seven percent. A year ago it 39 00:02:06,800 --> 00:02:11,079 Speaker 3: was point seven percent. So we saw this seventeen basis 40 00:02:11,120 --> 00:02:15,799 Speaker 3: point increase, which to me is not incredibly remarkable. It's 41 00:02:15,880 --> 00:02:19,880 Speaker 3: not alarming per se, but it could be sort of 42 00:02:19,919 --> 00:02:24,040 Speaker 3: a hint that the subscriber acquisition and retention costs are 43 00:02:24,040 --> 00:02:26,320 Speaker 3: going to go up a little bit, and that could 44 00:02:26,320 --> 00:02:30,880 Speaker 3: put a squeeze on the margin and as you said, Isabelle, 45 00:02:30,919 --> 00:02:36,200 Speaker 3: there's just this very competitive market out there. The cable 46 00:02:36,240 --> 00:02:40,560 Speaker 3: operators are really leaning into these low priced plans, and 47 00:02:40,639 --> 00:02:43,880 Speaker 3: it's just making life that much tougher for AT and 48 00:02:43,919 --> 00:02:47,720 Speaker 3: T Verizon and T Mobile. Again, though, I go back 49 00:02:47,760 --> 00:02:50,239 Speaker 3: to the fact that AT and T just is a 50 00:02:50,440 --> 00:02:54,400 Speaker 3: steady performer here. They have a great device promotion out there. 51 00:02:55,240 --> 00:02:59,000 Speaker 3: They continue to rely on that to drive subscriber growth, 52 00:02:59,080 --> 00:03:01,160 Speaker 3: and a continues to work for them. 53 00:03:01,639 --> 00:03:04,480 Speaker 2: Hey, John, I know that the Verizon another stock that 54 00:03:04,520 --> 00:03:07,840 Speaker 2: you cover. On their call, they used, I guess, the 55 00:03:07,919 --> 00:03:11,000 Speaker 2: opportunity for President Trump's tax and spending bill to boost 56 00:03:11,040 --> 00:03:15,520 Speaker 2: some of their full your guidance metrics. ATT did not 57 00:03:15,600 --> 00:03:16,160 Speaker 2: do that, did they. 58 00:03:17,480 --> 00:03:20,720 Speaker 3: No, they're actually this is interesting, Paul. They're taking all 59 00:03:20,800 --> 00:03:24,120 Speaker 3: the savings and they're driving it back into upgrading the 60 00:03:24,160 --> 00:03:27,600 Speaker 3: five G network, which they've been doing. It's nothing that 61 00:03:27,639 --> 00:03:30,880 Speaker 3: they've been ignoring it by a long shot, but they 62 00:03:30,919 --> 00:03:35,040 Speaker 3: are trailing Verizon and T Mobile just a bit in 63 00:03:35,080 --> 00:03:39,320 Speaker 3: the deployment of what's called midband spectrum, which is very 64 00:03:39,400 --> 00:03:42,920 Speaker 3: high capacity. So you know, the download speeds on your 65 00:03:42,960 --> 00:03:46,880 Speaker 3: phone are dictated by how much spectrum is deployed in 66 00:03:46,960 --> 00:03:49,880 Speaker 3: the network, and they're going to take those savings and 67 00:03:50,160 --> 00:03:55,000 Speaker 3: just lean hard into deploying more spectrum on a nationwide 68 00:03:55,040 --> 00:03:58,839 Speaker 3: basis to get network speeds and network coverage up. 69 00:04:00,160 --> 00:04:03,160 Speaker 5: Is broadbandsila growth driver for AT and T or are 70 00:04:03,160 --> 00:04:04,440 Speaker 5: there signs of a slowdown? 71 00:04:07,000 --> 00:04:08,400 Speaker 4: You know, it's a great question. 72 00:04:08,640 --> 00:04:12,200 Speaker 3: So the other I guess word on this report in 73 00:04:12,240 --> 00:04:16,760 Speaker 3: my eyes was the fact that they just missed analyst 74 00:04:16,880 --> 00:04:23,080 Speaker 3: expectations for fiber net additions, the net new subscriber additions 75 00:04:23,080 --> 00:04:26,320 Speaker 3: that they had during the quarter in their fiber broadband business. 76 00:04:26,960 --> 00:04:30,480 Speaker 3: Having said that, they continued to quarter and in quarter 77 00:04:30,560 --> 00:04:35,320 Speaker 3: app deliver very stable results there. So I think the 78 00:04:35,360 --> 00:04:39,720 Speaker 3: fiber broadband business is healthy. It's actually healthier in many 79 00:04:39,760 --> 00:04:44,719 Speaker 3: ways than the mobility business, which is hyper competitive. But 80 00:04:44,880 --> 00:04:48,279 Speaker 3: to me, AT and T out of all the big 81 00:04:48,360 --> 00:04:52,600 Speaker 3: three is doing a great job just laying that foundation 82 00:04:52,839 --> 00:04:58,240 Speaker 3: for future growth by continuing to roll out new coverage 83 00:04:58,279 --> 00:05:02,240 Speaker 3: areas for fibers, I think they've done a great job. 84 00:05:02,279 --> 00:05:05,040 Speaker 3: There is sort of the summary statement that i'd make. 85 00:05:05,120 --> 00:05:07,880 Speaker 3: I'm broadband all right, John, thank you so much for 86 00:05:08,000 --> 00:05:08,359 Speaker 3: joining us. 87 00:05:08,400 --> 00:05:10,719 Speaker 2: Appreciate it as always John Butler, he's a senior telecom 88 00:05:10,760 --> 00:05:12,960 Speaker 2: analyst for Bloomberg Intelligence. 89 00:05:14,839 --> 00:05:18,520 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 90 00:05:18,600 --> 00:05:22,000 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 91 00:05:22,120 --> 00:05:25,159 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 92 00:05:25,200 --> 00:05:28,160 Speaker 1: get your podcasts, or watch us live on YouTube. 93 00:05:28,400 --> 00:05:30,720 Speaker 2: Paul Sweeney live here with you in the Bloomberg Interactive 94 00:05:30,720 --> 00:05:34,440 Speaker 2: Broker Studio. Streaming live on YouTube here, Ray Smack. In 95 00:05:34,440 --> 00:05:36,400 Speaker 2: the middle of earning season, let's talk toys. That sounds 96 00:05:36,480 --> 00:05:39,520 Speaker 2: kind of fun. Hasbro reported numbers. It looks solid to me. 97 00:05:39,600 --> 00:05:42,600 Speaker 2: They beat, they raise their guidance, get the stocks down 98 00:05:42,600 --> 00:05:44,600 Speaker 2: three percent. I just don't get this whole stock thing. 99 00:05:44,880 --> 00:05:47,400 Speaker 2: Lindsay Dutch, she's the pro. She understands what's going on here. 100 00:05:47,400 --> 00:05:51,200 Speaker 2: She's a consumer hardlines analyst at Bloomberg Intelligence. Lindsay talked 101 00:05:51,160 --> 00:05:54,200 Speaker 2: to us about what we learned from Hasbro and the 102 00:05:54,240 --> 00:05:54,880 Speaker 2: toy market. 103 00:05:56,200 --> 00:05:59,640 Speaker 6: Yeah, hi, Paul, Hi aswell. Thanks for having me so yes, Paul, 104 00:05:59,760 --> 00:06:02,720 Speaker 6: just as you said, you know, strong quarter a really 105 00:06:02,720 --> 00:06:06,080 Speaker 6: a continuation from the first quarter, where all the strength 106 00:06:06,120 --> 00:06:09,840 Speaker 6: is really coming from Magic the Gathering, Monopoly Go and 107 00:06:09,960 --> 00:06:13,640 Speaker 6: Hasbro's digital gaming business. What we did not learn from 108 00:06:13,680 --> 00:06:17,120 Speaker 6: the release is really about the consumer and what the 109 00:06:17,160 --> 00:06:20,000 Speaker 6: outlook is for toys in the second half, and that's 110 00:06:20,040 --> 00:06:23,039 Speaker 6: causing a lot of uncertainty. You know what that back 111 00:06:23,120 --> 00:06:26,160 Speaker 6: half might look at look like I was. 112 00:06:26,120 --> 00:06:29,000 Speaker 5: Going to ask how exposed is haspro to current consumers 113 00:06:29,000 --> 00:06:33,200 Speaker 5: spending trends, Like, especially in the toys and entertainment area, 114 00:06:33,240 --> 00:06:36,200 Speaker 5: do we see more middle income shoppers buying haspur or 115 00:06:36,240 --> 00:06:37,800 Speaker 5: what kind of consumers are you seeing? 116 00:06:38,520 --> 00:06:42,400 Speaker 6: Yeah, so the toy business typically grows with GDP. It 117 00:06:42,480 --> 00:06:45,280 Speaker 6: has been you know, coming down a bit challenge over 118 00:06:45,279 --> 00:06:48,000 Speaker 6: the past couple of years. After the peak during COVID 119 00:06:48,040 --> 00:06:50,839 Speaker 6: when everyone was stuck at home buying a lot of toys. 120 00:06:51,080 --> 00:06:53,280 Speaker 6: This year was supposed to be a turnaround year for 121 00:06:53,600 --> 00:06:56,360 Speaker 6: toys and then early this year, you know, we got 122 00:06:56,400 --> 00:06:58,840 Speaker 6: hit with the tariff news, which created a lot of 123 00:06:58,920 --> 00:07:02,760 Speaker 6: uncertainty in the business. One is, you know, we don't 124 00:07:02,800 --> 00:07:05,280 Speaker 6: know how the consumer is going to react to broader 125 00:07:05,279 --> 00:07:10,520 Speaker 6: price increases, and we do expect increases on toys very specifically, 126 00:07:11,400 --> 00:07:14,520 Speaker 6: so companies like Hasbro and Mattel, you know, some of 127 00:07:14,520 --> 00:07:17,840 Speaker 6: the biggest toy makers in the globe, you know, are 128 00:07:17,880 --> 00:07:22,680 Speaker 6: really faced with that challenge in second quarter. Normally retailers 129 00:07:22,760 --> 00:07:27,080 Speaker 6: already start buying their holiday inventory. That didn't happen this year. 130 00:07:27,200 --> 00:07:31,000 Speaker 6: Those retailers, Walmart, Target, took a pause. So normally by 131 00:07:31,040 --> 00:07:33,440 Speaker 6: now we would sort of get a sense of holiday 132 00:07:33,800 --> 00:07:36,520 Speaker 6: But because of that pullback, you know, Hasbro saw their 133 00:07:36,560 --> 00:07:39,520 Speaker 6: consumer products segment see a sixteen percent decline in the 134 00:07:39,560 --> 00:07:43,120 Speaker 6: second quarter revenue because of that hold on those orders. 135 00:07:43,720 --> 00:07:45,360 Speaker 2: I would have thought they would have tried to front 136 00:07:45,440 --> 00:07:48,120 Speaker 2: run the tariffs. Here, what's the company saying about when 137 00:07:48,160 --> 00:07:51,520 Speaker 2: they expect some of these retailers to place their orders. 138 00:07:52,600 --> 00:07:55,400 Speaker 6: So they expect the orders to be sort of made 139 00:07:55,480 --> 00:07:58,400 Speaker 6: up in the third quarter. And the challenge with that is, 140 00:07:58,440 --> 00:08:00,800 Speaker 6: you know, some of those hotter toys that do sell 141 00:08:00,840 --> 00:08:04,200 Speaker 6: out maybe in the early holiday shopping season, there will 142 00:08:04,240 --> 00:08:06,760 Speaker 6: be very little time to sort of replenish on that end. 143 00:08:07,160 --> 00:08:10,760 Speaker 6: So Hasbro did continue their production, which you know they 144 00:08:10,800 --> 00:08:13,880 Speaker 6: do still make about fifty percent of their toy products 145 00:08:13,920 --> 00:08:16,760 Speaker 6: in China. They continued in May. You know, they took 146 00:08:16,800 --> 00:08:19,280 Speaker 6: some of that inventory on their books in the second quarter. 147 00:08:19,320 --> 00:08:21,760 Speaker 6: That's why we saw the inventory come up there. You know, 148 00:08:21,800 --> 00:08:24,280 Speaker 6: they're hoping that the retailers, you know, place more of 149 00:08:24,320 --> 00:08:27,640 Speaker 6: their orders in the third quarter, you know, ahead of holiday. 150 00:08:28,200 --> 00:08:30,640 Speaker 6: You know, the risk is they just don't really know 151 00:08:30,920 --> 00:08:33,480 Speaker 6: what those pre order will be and there will be 152 00:08:33,600 --> 00:08:37,520 Speaker 6: limited time for additional orders like in that fourth quarter 153 00:08:38,120 --> 00:08:40,160 Speaker 6: right before holiday. 154 00:08:40,400 --> 00:08:43,000 Speaker 5: To your point. In April, the company warned the Times 155 00:08:43,080 --> 00:08:47,000 Speaker 5: CLID impact profits by as much as sixty million two 156 00:08:47,080 --> 00:08:49,160 Speaker 5: hundred and eighty million this year, and they did reduce 157 00:08:49,160 --> 00:08:51,839 Speaker 5: their Chinese manufacturing output to less than forty percent, or 158 00:08:51,880 --> 00:08:54,400 Speaker 5: at least plan to by twenty twenty six. If they 159 00:08:54,440 --> 00:08:56,600 Speaker 5: do that, will they pass on the cost to consumers? 160 00:08:56,640 --> 00:08:58,920 Speaker 5: And do you think consumers will bear the brunt of 161 00:08:58,920 --> 00:08:59,440 Speaker 5: that burden. 162 00:09:00,559 --> 00:09:05,400 Speaker 6: Yes, so Hasbro is using multiple mitigation strategies. You know, 163 00:09:05,440 --> 00:09:07,680 Speaker 6: they have been very focused on cutting costs. You know, 164 00:09:07,720 --> 00:09:10,840 Speaker 6: prior to tariffs, they sort of accelerated some cost cutting 165 00:09:11,559 --> 00:09:15,720 Speaker 6: at the corporate level. They will be raising prices, I 166 00:09:15,760 --> 00:09:19,360 Speaker 6: think selectively on toys. They are also just going to 167 00:09:19,800 --> 00:09:23,520 Speaker 6: not sell certain toys in the US if it can't 168 00:09:23,559 --> 00:09:26,040 Speaker 6: it doesn't make financial sense to do so if they 169 00:09:26,080 --> 00:09:29,760 Speaker 6: can't raise the price and consumers would not buy it 170 00:09:29,800 --> 00:09:30,920 Speaker 6: at that price. 171 00:09:31,000 --> 00:09:31,840 Speaker 5: So they're sort of. 172 00:09:31,880 --> 00:09:34,960 Speaker 6: Using a mixed strategy. They had predicted tariffs to cost 173 00:09:35,000 --> 00:09:38,840 Speaker 6: sixty million to one eighty million on an annual basis. 174 00:09:39,360 --> 00:09:42,840 Speaker 6: Three months ago, they sort of dropped that impact closer 175 00:09:42,840 --> 00:09:46,280 Speaker 6: to the sixty million side. That's because of the lower 176 00:09:46,360 --> 00:09:50,280 Speaker 6: rate on the Chinese imports. They are working to diversify 177 00:09:50,360 --> 00:09:53,360 Speaker 6: the supply chain, but that will take time. The goal 178 00:09:53,400 --> 00:09:56,400 Speaker 6: of less than forty percent that's really by twenty twenty seven. 179 00:09:56,800 --> 00:09:58,880 Speaker 6: So in terms of this year, you know where their 180 00:09:58,880 --> 00:10:02,319 Speaker 6: supply chain is. They're sort locked in with that at 181 00:10:02,320 --> 00:10:04,400 Speaker 6: the moment, and they kind of have to work with 182 00:10:04,440 --> 00:10:06,840 Speaker 6: the price increases and sort of balancing where do I 183 00:10:06,880 --> 00:10:09,800 Speaker 6: increase price and not hurt the demand even more? 184 00:10:10,160 --> 00:10:13,320 Speaker 2: All Right, Lindsay, thank you so much. We appreciate your analysis, 185 00:10:13,360 --> 00:10:17,199 Speaker 2: Sir Lindsay Dutch. She's a consumer hardlines senior retail analyst 186 00:10:17,360 --> 00:10:20,280 Speaker 2: for Bloomberg Intelligence space down there in our Princeton, New 187 00:10:20,360 --> 00:10:23,520 Speaker 2: Jersey campus, talk just about Hasbro, the toymaker. Had some 188 00:10:23,559 --> 00:10:25,440 Speaker 2: really good numbers and some good guidance, but there's still 189 00:10:25,480 --> 00:10:30,120 Speaker 2: tariff concerns out there surrounding this industry as well as others. 190 00:10:30,120 --> 00:10:31,400 Speaker 2: Stock trading off a little bit. 191 00:10:33,080 --> 00:10:36,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 192 00:10:36,880 --> 00:10:39,920 Speaker 1: weekdays at ten am Eastern on Apple cocklay and Android 193 00:10:39,960 --> 00:10:43,280 Speaker 1: auto with the Bloomberg Business app. Listen on demand wherever 194 00:10:43,320 --> 00:10:46,400 Speaker 1: you get your podcasts, or watch us live on YouTube. 195 00:10:47,080 --> 00:10:49,400 Speaker 2: Right in the middle of earnings here today we saw Hilton, 196 00:10:49,800 --> 00:10:53,120 Speaker 2: the hotel company, I reported numbers and they lowered expectations 197 00:10:53,120 --> 00:10:56,520 Speaker 2: for net income and saying that demand for US hotel 198 00:10:56,679 --> 00:10:59,720 Speaker 2: bookings declined in the second quarter. Let's get the break 199 00:10:59,760 --> 00:11:01,280 Speaker 2: at that a little bit more detail, because boy, I 200 00:11:01,320 --> 00:11:03,280 Speaker 2: get on a plane, it just seems like it's packed, 201 00:11:03,320 --> 00:11:06,720 Speaker 2: and I assume those people are staying at hotels and everything. 202 00:11:06,800 --> 00:11:09,400 Speaker 2: Let's check in with Jody Lori, senior credit analyst for 203 00:11:09,400 --> 00:11:13,240 Speaker 2: Bloomberg Intelligence. She covers all the fun stuff, the gaming business, 204 00:11:13,320 --> 00:11:15,480 Speaker 2: the hotel business, the casino, the cruise is all that 205 00:11:15,520 --> 00:11:18,760 Speaker 2: good stuff. So she has a great view on the 206 00:11:18,800 --> 00:11:21,640 Speaker 2: consumer and kind of what's happening out there in that 207 00:11:21,760 --> 00:11:24,280 Speaker 2: part of the economy. Jody, what did you learn from 208 00:11:24,440 --> 00:11:26,400 Speaker 2: Hilton here? What are they saying about their business? 209 00:11:28,000 --> 00:11:29,960 Speaker 7: So, Paul, I mean, I think what's so interesting is 210 00:11:29,960 --> 00:11:33,280 Speaker 7: they definitely tried to provide an upbeat, optimistic view. The 211 00:11:33,280 --> 00:11:36,040 Speaker 7: amount of times that they talked about the thawing that 212 00:11:36,679 --> 00:11:40,240 Speaker 7: after the freeze from tariffs was sort of interesting to hear, 213 00:11:40,320 --> 00:11:41,760 Speaker 7: and I mean, I think it fits a little bit 214 00:11:41,840 --> 00:11:43,880 Speaker 7: with the conversation that we've been having with clients is 215 00:11:43,920 --> 00:11:47,679 Speaker 7: that what we've been seeing in our data is twenty 216 00:11:47,880 --> 00:11:51,960 Speaker 7: twenty five summer should still be pretty strong, but I 217 00:11:51,960 --> 00:11:54,160 Speaker 7: think as we get into the latter part of the 218 00:11:54,240 --> 00:11:57,320 Speaker 7: year and then into next year, it's a little bit uncertain. 219 00:11:57,360 --> 00:12:02,319 Speaker 7: And I think they were trying to that economic data 220 00:12:02,640 --> 00:12:06,640 Speaker 7: is positive for them and will provide for additional sort 221 00:12:06,640 --> 00:12:09,320 Speaker 7: of demand, but it's still a little bit you know, 222 00:12:10,200 --> 00:12:12,240 Speaker 7: it's still a little bit hazy, at least for me, 223 00:12:13,000 --> 00:12:14,800 Speaker 7: and I mean more than anything, you know, they're so 224 00:12:14,880 --> 00:12:18,400 Speaker 7: focused on giving back to shareholders that and. 225 00:12:18,320 --> 00:12:21,480 Speaker 2: There's a credit analyst that's not something you necessarily. 226 00:12:21,559 --> 00:12:23,640 Speaker 7: Yeah, yeah, you know, Hilton's one of those companies that 227 00:12:23,679 --> 00:12:25,839 Speaker 7: we say, if they wanted to be investment grade, they 228 00:12:25,880 --> 00:12:28,560 Speaker 7: probably could work to it yesterday and would have been 229 00:12:28,600 --> 00:12:32,520 Speaker 7: investment grade five years ago. But you know, from a 230 00:12:32,520 --> 00:12:34,400 Speaker 7: margin standpoint, they're so much stronger than a lot of 231 00:12:34,400 --> 00:12:36,960 Speaker 7: their peers. But from a leverage standpoint, they just they're 232 00:12:37,000 --> 00:12:39,680 Speaker 7: happy being around three times three and a half times, 233 00:12:39,679 --> 00:12:42,560 Speaker 7: and they've indicated that they want to be a little 234 00:12:42,559 --> 00:12:45,000 Speaker 7: bit higher than where they currently are, So I mean, 235 00:12:45,040 --> 00:12:47,600 Speaker 7: I think they're going to invest in organic growth and 236 00:12:47,760 --> 00:12:49,520 Speaker 7: look at ways to sort of grow some of their 237 00:12:49,559 --> 00:12:52,280 Speaker 7: newer brands like Spark, which they've been talking about. And 238 00:12:52,320 --> 00:12:55,280 Speaker 7: the most interesting thing related to that is it seems 239 00:12:55,320 --> 00:12:59,280 Speaker 7: like they're looking outside the US for growth opportunities. And 240 00:12:59,360 --> 00:13:02,040 Speaker 7: maybe that's a function of the fact that while they 241 00:13:02,040 --> 00:13:05,679 Speaker 7: think the US is still having decent momentum, perhaps they 242 00:13:05,720 --> 00:13:08,520 Speaker 7: need to sort of look outside to sort of really 243 00:13:08,520 --> 00:13:09,200 Speaker 7: see the growth. 244 00:13:09,720 --> 00:13:12,120 Speaker 5: Where are they finding that growth elsewhere? And is that 245 00:13:12,200 --> 00:13:15,040 Speaker 5: in relation to just the lower consumer confidence in the 246 00:13:15,120 --> 00:13:18,000 Speaker 5: US and the decline of international travelers. So then they 247 00:13:18,040 --> 00:13:21,000 Speaker 5: just decided maybe looking elsewhere US better. What was the 248 00:13:21,120 --> 00:13:21,960 Speaker 5: rationale behind that? 249 00:13:22,880 --> 00:13:26,360 Speaker 7: So they actually talked about on the first quarter, they 250 00:13:26,360 --> 00:13:30,520 Speaker 7: talked about Canada and Mexico demand, and they said specifically 251 00:13:30,600 --> 00:13:32,600 Speaker 7: that it's such a small percentage, just like one percent 252 00:13:32,600 --> 00:13:35,559 Speaker 7: of their total revenues is Canada and Mexico, and inbound 253 00:13:35,679 --> 00:13:38,319 Speaker 7: US is certainly a large portion, I think, larger than 254 00:13:38,320 --> 00:13:41,400 Speaker 7: they sort of indicate. But I think they're also sort 255 00:13:41,400 --> 00:13:42,959 Speaker 7: of saying, Okay, yeah, it's going to be an effect, 256 00:13:43,000 --> 00:13:45,120 Speaker 7: but it's not that much effect. I think they are seeing. 257 00:13:45,200 --> 00:13:47,559 Speaker 7: And what we sort of heard on this most recent 258 00:13:47,640 --> 00:13:50,080 Speaker 7: call is that there is an element of trickle down 259 00:13:50,120 --> 00:13:55,720 Speaker 7: effect related to what's going on in the US, the 260 00:13:55,760 --> 00:14:01,200 Speaker 7: prevalence of travelers coming into the US VERSUS historically because 261 00:14:01,200 --> 00:14:05,440 Speaker 7: of the tariff and geopolitical environment, and so, you know, 262 00:14:05,679 --> 00:14:08,920 Speaker 7: they mentioned Saudi Arabia, they mentioned India, they mentioned turkeya 263 00:14:09,080 --> 00:14:11,600 Speaker 7: on the call, and I think they're looking at anywhere 264 00:14:11,640 --> 00:14:14,800 Speaker 7: there's potential growth opportunities. I mean, Hilton's so large and 265 00:14:14,880 --> 00:14:18,280 Speaker 7: global that it's not really surprising to me, but it 266 00:14:18,320 --> 00:14:20,240 Speaker 7: is sort of interesting when you hear a company that's 267 00:14:20,240 --> 00:14:24,680 Speaker 7: seventy five percent US dominant that they are sort of 268 00:14:24,720 --> 00:14:26,000 Speaker 7: looking to expand elsewhere. 269 00:14:26,520 --> 00:14:29,880 Speaker 2: Hey, Trinty, we're hearing from you know, a number of 270 00:14:29,920 --> 00:14:34,160 Speaker 2: companies that depend upon travel that maybe international travel inbound 271 00:14:34,240 --> 00:14:38,120 Speaker 2: to the US is less than than it maybe in 272 00:14:38,200 --> 00:14:42,080 Speaker 2: past periods, maybe in part because of all this tariff discussion, 273 00:14:42,120 --> 00:14:45,040 Speaker 2: people deciding not to spend their travel dollars in the US. 274 00:14:45,160 --> 00:14:46,280 Speaker 2: What's Hilton say about that? 275 00:14:47,960 --> 00:14:52,120 Speaker 7: So, Hilton didn't so much talk about it on this call, 276 00:14:52,560 --> 00:14:54,680 Speaker 7: per se, but they danced around it a little bit, 277 00:14:54,800 --> 00:14:58,000 Speaker 7: saying that they think that you know that with the 278 00:14:58,080 --> 00:15:01,640 Speaker 7: tariff situation sort of it hasn't resolved itself by any measure, 279 00:15:01,680 --> 00:15:05,600 Speaker 7: but with us getting over that shock of Liberation Day, 280 00:15:06,120 --> 00:15:09,000 Speaker 7: that they're now seeing that demand is picking up. They're saying, 281 00:15:09,040 --> 00:15:12,560 Speaker 7: you know, business conference travel, and so I mean, I 282 00:15:12,560 --> 00:15:14,920 Speaker 7: think they're sort of dancing around it. But if we recall, 283 00:15:15,120 --> 00:15:17,320 Speaker 7: I mean a lot of the companies in my space 284 00:15:17,400 --> 00:15:19,640 Speaker 7: still having gone back to pre COVID levels when it 285 00:15:19,640 --> 00:15:21,680 Speaker 7: comes to inbound US. I mean, we like to talk 286 00:15:21,680 --> 00:15:25,360 Speaker 7: about United Parks, which is formerly SeaWorld, because they talk 287 00:15:25,440 --> 00:15:27,680 Speaker 7: about it in their Florida Parks that they still haven't 288 00:15:27,720 --> 00:15:31,720 Speaker 7: seen the return of international travelers to pre COVID levels. 289 00:15:32,240 --> 00:15:34,600 Speaker 7: And so you add on top of that the tariff 290 00:15:34,600 --> 00:15:37,800 Speaker 7: effect in the geopolitical environment, you say, okay, if we 291 00:15:37,800 --> 00:15:40,480 Speaker 7: weren't back to pre COVID levels, and then you have 292 00:15:40,760 --> 00:15:42,920 Speaker 7: this component to it, I don't know if we'll get 293 00:15:42,960 --> 00:15:44,440 Speaker 7: back to pre COVID levels sometime soon. 294 00:15:45,480 --> 00:15:48,400 Speaker 2: Jody, thanks so much. I always appreciate checking in with you. 295 00:15:48,480 --> 00:15:51,120 Speaker 2: Jody Lourie, she's a senior credit analyst for Bloomberg Intelligence, 296 00:15:51,160 --> 00:15:53,560 Speaker 2: talking to us a little bit about the Hilton numbers. Again, 297 00:15:53,600 --> 00:15:55,320 Speaker 2: the company took down a little bit of guidance and 298 00:15:55,400 --> 00:15:59,240 Speaker 2: maybe citing some of the uncertainty surrounding the tariffs they 299 00:15:59,400 --> 00:16:02,120 Speaker 2: cited as well as reduced. They also call that reduced 300 00:16:02,240 --> 00:16:05,760 Speaker 2: government travel. So maybe the whole doge thing people with 301 00:16:05,840 --> 00:16:07,880 Speaker 2: some of the government employees are maybe traveling aple I 302 00:16:07,920 --> 00:16:08,640 Speaker 2: hadn't thought about that. 303 00:16:08,800 --> 00:16:11,680 Speaker 5: Business are also reducing travel, Like I mean, I don't 304 00:16:11,680 --> 00:16:13,880 Speaker 5: want to single out Bloomberg, but everyone like you only 305 00:16:13,920 --> 00:16:16,320 Speaker 5: really travel when it's mandatory. If you can do zoom, 306 00:16:16,440 --> 00:16:18,520 Speaker 5: you should do zoom. So we see it really. 307 00:16:18,880 --> 00:16:21,720 Speaker 2: But off to account that not our salesforce. Our salesforces 308 00:16:21,760 --> 00:16:25,680 Speaker 2: out there all the time pressing the flesh with Bloomberg customers, 309 00:16:25,720 --> 00:16:28,600 Speaker 2: and that's a good thing. That's how it's done. 310 00:16:29,440 --> 00:16:33,160 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 311 00:16:33,240 --> 00:16:36,600 Speaker 1: weekdays at ten am Eastern on Applecarclay and Android Auto 312 00:16:36,720 --> 00:16:39,800 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 313 00:16:39,840 --> 00:16:42,800 Speaker 1: get your podcasts, or watch us live on YouTube. 314 00:16:43,040 --> 00:16:46,680 Speaker 2: Switch gears to Technology Here we check in with Anaagrana, 315 00:16:46,720 --> 00:16:49,520 Speaker 2: Senior Tech Out also Bloomberg Intelligence, Honra. A lot of 316 00:16:49,560 --> 00:16:51,600 Speaker 2: news is going to be coming our way from your 317 00:16:51,640 --> 00:16:56,880 Speaker 2: tech space starting tonight after the clothes, we'll have Google Tesla, 318 00:16:56,960 --> 00:16:58,800 Speaker 2: then all the other tech names will be coming out 319 00:16:58,840 --> 00:17:01,240 Speaker 2: as well. I want to start with mike Soft. Can 320 00:17:01,280 --> 00:17:03,640 Speaker 2: you give us a summary or update of what's happening 321 00:17:03,680 --> 00:17:07,720 Speaker 2: with this software cyber breach here doesn't seem to be 322 00:17:07,800 --> 00:17:11,560 Speaker 2: impacting the stock that much. What's Microsoft saying? If anything? 323 00:17:13,280 --> 00:17:15,280 Speaker 8: I think the news is out and frankly, you know, 324 00:17:15,600 --> 00:17:19,000 Speaker 8: apart from the one big breach last year where crowds 325 00:17:19,000 --> 00:17:22,520 Speaker 8: tried really got hurt, these breaches typically don't have that 326 00:17:22,600 --> 00:17:25,439 Speaker 8: big un an impact on the stock, frankly because you know, 327 00:17:25,480 --> 00:17:29,720 Speaker 8: it's a small portion of the one particular application, and 328 00:17:29,960 --> 00:17:31,959 Speaker 8: you know, I think the news story is far bigger 329 00:17:32,000 --> 00:17:34,120 Speaker 8: than what it has an impact on the stock. In fact, 330 00:17:34,160 --> 00:17:37,040 Speaker 8: if anything, people will be more inclined to buy Microsoft 331 00:17:37,119 --> 00:17:39,960 Speaker 8: security products to protect themselves down the road. They would 332 00:17:40,000 --> 00:17:42,439 Speaker 8: be more inclined to move more workloads to the cloud 333 00:17:42,480 --> 00:17:45,359 Speaker 8: to make sure that the you know, the online version 334 00:17:45,400 --> 00:17:47,639 Speaker 8: of the software was not impacted. So if you know, 335 00:17:47,920 --> 00:17:51,320 Speaker 8: it just sells by itself, some of the security products, 336 00:17:51,359 --> 00:17:54,680 Speaker 8: and these beaches obviously not a good headline for the company, 337 00:17:54,680 --> 00:17:56,800 Speaker 8: but you know, these things do happen quite a bit. 338 00:17:57,440 --> 00:17:59,480 Speaker 5: How is the cloud business looking like these days, I 339 00:17:59,480 --> 00:18:01,320 Speaker 5: feel like it's one of the main drivers that growth 340 00:18:01,320 --> 00:18:04,080 Speaker 5: through many companies, from Amazon to Microsoft. As we're talking 341 00:18:04,080 --> 00:18:06,399 Speaker 5: about to most of the big tech giants. Is it 342 00:18:06,480 --> 00:18:09,040 Speaker 5: competition becoming more fierce than is there a leader emerging 343 00:18:09,080 --> 00:18:09,639 Speaker 5: in this space? 344 00:18:11,160 --> 00:18:14,200 Speaker 8: See, the leader was always Aws, But frankly speaking, over 345 00:18:14,200 --> 00:18:16,920 Speaker 8: the last two years, Microsoft has really narrowed the gap 346 00:18:17,160 --> 00:18:18,960 Speaker 8: because of its open Ai relationship. 347 00:18:19,200 --> 00:18:21,359 Speaker 4: They're the only company who's really. 348 00:18:21,520 --> 00:18:24,520 Speaker 8: Seeing the biggest benefit of you know, all the searchers 349 00:18:24,560 --> 00:18:28,320 Speaker 8: we're doing in chag GPT because open Ai runs primarily 350 00:18:28,359 --> 00:18:31,840 Speaker 8: on Microsoft's cloud network. So when they report next week, 351 00:18:31,880 --> 00:18:34,159 Speaker 8: we are expecting a big number coming out of that 352 00:18:34,720 --> 00:18:38,000 Speaker 8: AI contribution. So Microsoft, I think, is the bigger beneficiary 353 00:18:38,119 --> 00:18:40,600 Speaker 8: right now amongst all the big, bigger vendors. 354 00:18:41,440 --> 00:18:45,400 Speaker 2: So you know, it's interesting is it worth investors ranking 355 00:18:45,480 --> 00:18:47,320 Speaker 2: kind of who are the big cloud players, who are 356 00:18:47,320 --> 00:18:49,520 Speaker 2: the big AI players? Is it worth it? Or is 357 00:18:49,520 --> 00:18:52,520 Speaker 2: it better just to say, you know, AI is going 358 00:18:52,600 --> 00:18:54,879 Speaker 2: to kind of be all over the tech stack, and 359 00:18:55,240 --> 00:18:56,680 Speaker 2: I just got to be long tech. How do you 360 00:18:56,720 --> 00:19:00,960 Speaker 2: think about really getting quality exposed to that theme? 361 00:19:02,480 --> 00:19:04,560 Speaker 8: Yeah, when you look at cloud, I think all of 362 00:19:04,600 --> 00:19:07,480 Speaker 8: the top four vendors will flourish and flourish well. When 363 00:19:07,520 --> 00:19:12,399 Speaker 8: that would be Aws, Microsoft, Google, and then Oracle after that, 364 00:19:12,480 --> 00:19:14,280 Speaker 8: so all four will make a lot of money. 365 00:19:14,520 --> 00:19:16,440 Speaker 4: Then you want to dissect each one of them. 366 00:19:16,840 --> 00:19:19,760 Speaker 8: Within this group, Microsoft is the one that's seeing the 367 00:19:19,960 --> 00:19:21,640 Speaker 8: current direct benefit. 368 00:19:21,440 --> 00:19:24,760 Speaker 4: And that's because of open Ai. The other two, whether. 369 00:19:24,560 --> 00:19:28,000 Speaker 8: It's Amazon or Google, will start to see more and 370 00:19:28,040 --> 00:19:31,080 Speaker 8: more revenue flow in because of the applications people are 371 00:19:31,119 --> 00:19:33,919 Speaker 8: building on their cloud platform. And then lastly on the 372 00:19:33,920 --> 00:19:37,000 Speaker 8: Oracle side, they are benefiting in another part of cloud, 373 00:19:37,160 --> 00:19:39,840 Speaker 8: which is more on the infrastructure side where they're getting 374 00:19:39,840 --> 00:19:42,639 Speaker 8: a lot of money or you know, future funding from 375 00:19:42,680 --> 00:19:45,320 Speaker 8: open Ai to create their data centers to help train 376 00:19:45,400 --> 00:19:47,840 Speaker 8: the bottle. So each one is slightly different, but I 377 00:19:47,840 --> 00:19:50,560 Speaker 8: would say as as you mentioned, the total basket you 378 00:19:50,560 --> 00:19:51,880 Speaker 8: know should do well over time. 379 00:19:52,440 --> 00:19:54,600 Speaker 5: You cover tech and next week is a big week 380 00:19:54,680 --> 00:19:58,200 Speaker 5: for those companies and beyond tech. Be am author expected 381 00:19:58,240 --> 00:20:01,080 Speaker 5: to deliver nearly fifteen percent of profit growth and robust 382 00:20:01,119 --> 00:20:04,240 Speaker 5: demand for AI and that's compared to the virtually no 383 00:20:04,359 --> 00:20:06,080 Speaker 5: growth for the rest of the four hundred and nine 384 00:20:06,160 --> 00:20:08,959 Speaker 5: or three stocks. Are you watching anything any specific company 385 00:20:08,960 --> 00:20:11,679 Speaker 5: you're excited about and you mentioned you're looking at cloud, 386 00:20:11,720 --> 00:20:14,480 Speaker 5: but is there anything else that is factoring in your outlook? 387 00:20:15,720 --> 00:20:17,159 Speaker 4: So there can be two elements of it. 388 00:20:17,240 --> 00:20:19,919 Speaker 8: One is the cloud, the AI side of spending, and 389 00:20:19,960 --> 00:20:22,720 Speaker 8: the non AI side of spending. What we saw from 390 00:20:22,840 --> 00:20:26,080 Speaker 8: SAP yesterday and Inphasis this morning, and then you know, 391 00:20:26,160 --> 00:20:29,040 Speaker 8: taught at a couple of weeks ago, so that the 392 00:20:29,240 --> 00:20:32,439 Speaker 8: non AI tech spending is under pressure. People are not 393 00:20:32,520 --> 00:20:36,120 Speaker 8: spending as much because they are not sure how the 394 00:20:36,160 --> 00:20:39,000 Speaker 8: tariff related uncertainty is is playing out, so they're seeing 395 00:20:39,000 --> 00:20:42,560 Speaker 8: a delay in closing, closing of deals. 396 00:20:42,160 --> 00:20:43,639 Speaker 4: And everything around it. 397 00:20:43,920 --> 00:20:48,080 Speaker 8: But on the AI side, we anticipate strong results from Microsoft, 398 00:20:48,160 --> 00:20:51,600 Speaker 8: for example. So that's there the two dichotomy over there 399 00:20:51,640 --> 00:20:54,199 Speaker 8: between the two vendors. The third thing that we are 400 00:20:54,240 --> 00:20:56,600 Speaker 8: watching is actually what happens on the margin side of 401 00:20:56,680 --> 00:20:59,240 Speaker 8: things because a lot of these companies are investing very 402 00:20:59,280 --> 00:21:02,159 Speaker 8: heavily in AI. Because of that, the margins are going 403 00:21:02,160 --> 00:21:04,840 Speaker 8: to get squeezed. And for that, what we think is 404 00:21:04,880 --> 00:21:07,720 Speaker 8: going to happen is they're going to take reduction in force, 405 00:21:08,119 --> 00:21:10,600 Speaker 8: either through not hiding at the same pace that they 406 00:21:10,640 --> 00:21:13,440 Speaker 8: have been or basically laying off a portion of their 407 00:21:13,480 --> 00:21:15,919 Speaker 8: workforce in order to counter some of that pressure. So 408 00:21:16,080 --> 00:21:18,199 Speaker 8: those are the three theams that we are most interested 409 00:21:18,280 --> 00:21:18,879 Speaker 8: in right now. 410 00:21:19,480 --> 00:21:23,000 Speaker 2: An Agrana absolutely, thank you, appreciate on Agrana Tech Analysts 411 00:21:23,000 --> 00:21:27,040 Speaker 2: Bloomberg Intelligence Agrana Mandeep Sing. Those are our two senior 412 00:21:27,080 --> 00:21:31,320 Speaker 2: tech analysts. They manage our global technology research effort for 413 00:21:31,400 --> 00:21:33,960 Speaker 2: Bloomberg Intelligence. We have close to I think twenty analysts 414 00:21:34,040 --> 00:21:37,400 Speaker 2: covering technology on a global basis, a lot based in Asia, 415 00:21:37,560 --> 00:21:40,240 Speaker 2: based in the US, and based in Europe. And that's 416 00:21:40,240 --> 00:21:41,840 Speaker 2: the way you have to cover it, folks. Tech is 417 00:21:41,880 --> 00:21:44,600 Speaker 2: an all compassing sector. It's the biggest part of the 418 00:21:45,000 --> 00:21:49,080 Speaker 2: SMP five hundred and you have to have the complete coverage, 419 00:21:49,520 --> 00:21:51,240 Speaker 2: and we do on a global basis, I think the 420 00:21:51,280 --> 00:21:54,439 Speaker 2: best tech research on the street with the best data. 421 00:21:54,920 --> 00:21:59,600 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify 422 00:21:59,800 --> 00:22:03,280 Speaker 1: and anywhere else you get your podcasts. Listen live each 423 00:22:03,280 --> 00:22:07,040 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 424 00:22:07,160 --> 00:22:10,720 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 425 00:22:11,119 --> 00:22:14,080 Speaker 1: You can also watch us live every weekday on YouTube 426 00:22:14,440 --> 00:22:16,680 Speaker 1: and always on the Bloomberg terminal