WEBVTT - Tech Giants Deliver for Market

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic from Bloomberg Radio Facebook. As you know,

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<v Speaker 1>we just broke down there earning stock still up about

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<v Speaker 1>four point seven percent in the after I was for

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<v Speaker 1>some inside as only he can do, is Bloomberg Radio

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<v Speaker 1>host Paul Sweeney, who hosts like, I don't know what

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<v Speaker 1>twenty shows here at Bloomberg the Ken I know, and

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<v Speaker 1>you do it. Well, Um, this feels like a blockbuster quarter.

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<v Speaker 1>We knew though the comparisons were going to be somewhat easy, right, yeah,

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<v Speaker 1>we we did it. This is that. This really is,

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<v Speaker 1>you know, as the analysts like to say, a blowout

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<v Speaker 1>quarter and me, you think about a company that's got

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<v Speaker 1>twenty six billion dollars of quarterly revenues of growth. It's

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<v Speaker 1>just extraordinary. And they did it the old fashioned way.

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<v Speaker 1>They raised prices by about and they sold at twelve

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<v Speaker 1>percent more D units and so that'll add up to

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<v Speaker 1>a really good top line. And then the profit margins

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<v Speaker 1>were so much better than the street had been forecasting,

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<v Speaker 1>which led to a big epspat as well. Did you

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<v Speaker 1>feel like after you saw Google's numbers yesterday you knew

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<v Speaker 1>that Facebook was probable we're gonna have a pretty good

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<v Speaker 1>quarter as well. I did, I really did, because these

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<v Speaker 1>are the two players, and maybe along with the Amazon

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<v Speaker 1>now that really dominates. Did your advertising to look at

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<v Speaker 1>some of the smaller companies like Pinterest, who reported and

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<v Speaker 1>disappointing numbers yesterday, and you know Snapchat and Twitter, they

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<v Speaker 1>you know, they kind of play with the crumbs that

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<v Speaker 1>are loved by the Googles and the Facebook and the

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<v Speaker 1>Amazon's here. So you saw some really strong numbers, really

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<v Speaker 1>strong metrics out of Google and Facebook saw you know,

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<v Speaker 1>experienced a similar type of marketplace. So walk us through

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<v Speaker 1>some of the other metrics, because I think one of

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<v Speaker 1>the concerns is, well, I don't know where should we go,

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<v Speaker 1>Like first quarter daily active users, there's so many headlines

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<v Speaker 1>that come across the Bloomberg. Tell me what else you

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<v Speaker 1>think are our audience needs to know about, Paul, I'll

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<v Speaker 1>tell you what that what advertisers look at, they look

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<v Speaker 1>at the size of the audience and and for uh,

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<v Speaker 1>you know Facebook, that's monthly active users, average users that

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<v Speaker 1>grew and that was better than a forecast. And then

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<v Speaker 1>the second question is how engaged are is that audience

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<v Speaker 1>with your products, because the more engaged they are, the

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<v Speaker 1>more they are likely to be influenced by advertisement. And

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<v Speaker 1>for Facebook that's daily active users UM and the daily

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<v Speaker 1>active users also came in a very strong relative to expectations.

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<v Speaker 1>So Fama ad salesman for Facebook, it's a pretty easy

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<v Speaker 1>sell for me. That's it. Like, so I do think

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<v Speaker 1>about kind of in this world, right, people are constantly

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<v Speaker 1>trying to get our attention and sell us stuff. And

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<v Speaker 1>I said earlier when it comes to something like Facebook,

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<v Speaker 1>you know, Instagram, what'sapp, I mean, they are very much

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<v Speaker 1>aggressively looking to use those channels right to sell stuff.

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<v Speaker 1>I know my eighteen year old it's often how she shops.

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<v Speaker 1>She's following influencers and she's on Instagram and she sees

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<v Speaker 1>something and then she finds out where you know, it's sold.

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<v Speaker 1>Everything you know has a tag on it. I mean

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<v Speaker 1>that they're looking to boost right in terms of their business. Yeah,

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<v Speaker 1>that's the one one area that they'd really like to develop,

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<v Speaker 1>and that's kind of the shopping aspect, shopping shopping mechanism

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<v Speaker 1>on Facebook. It's got such a big audience, it's such

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<v Speaker 1>an engaged audience, and and there's and you write the

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<v Speaker 1>influence influencers are such a big part of the retail

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<v Speaker 1>landscape these days. You don't want to lose those people

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<v Speaker 1>to as they you know, close your wrap and open

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<v Speaker 1>up the Amazon app. So you want to try to

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<v Speaker 1>build that e commerce business. And so they did launch

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<v Speaker 1>a business called shop about a year ago, but it

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<v Speaker 1>really hasn't done that much. So I think that's gonna

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<v Speaker 1>be one of the areas on the conference call um

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<v Speaker 1>that investors are gonna want to get some more clarity. Okay,

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<v Speaker 1>so are there is there anything in this quarter that

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<v Speaker 1>bothers you at all? Well, I mean the comparisons are

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<v Speaker 1>gonna get tougher, which they kind of called out for

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<v Speaker 1>the third and fourth quarter of this year, so you're

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<v Speaker 1>not got And so they said, kind of the revenue

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<v Speaker 1>outlook in terms of growth rates is similar in the

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<v Speaker 1>second quarter then when they saw in the first course.

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<v Speaker 1>So that's good. Then the comparisons get tougher, and I said,

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<v Speaker 1>sequentially the growth rates will slow. So that's that's an issue.

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<v Speaker 1>The other issue, which well in that's will they be

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<v Speaker 1>hip to that? Do you think at that point? Because

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<v Speaker 1>you know, yeah, we'll see that. That's that's why they're

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<v Speaker 1>calling it out so early here you know. Um, if

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<v Speaker 1>you didn't already know it, now you do, um and UM.

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<v Speaker 1>So the other thing is Apple computers changing the way

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<v Speaker 1>their apps target users. Right out, you have you opt out.

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<v Speaker 1>You have to physicality to say opt out. I don't

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<v Speaker 1>want you to track me Facebook when I go to

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<v Speaker 1>other apps. Now Apple saying we're going to change that.

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<v Speaker 1>Now you have to opt in to say yes, Facebook, Yes,

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<v Speaker 1>and all these other apps, I want you to follow me,

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<v Speaker 1>uh as I traverse all around the Internet. Now, the

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<v Speaker 1>question is that could be a real issue for digital

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<v Speaker 1>advertising dollars um if people start, you know, failing to

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<v Speaker 1>opt in. Um. So we'll have to see how that

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<v Speaker 1>plays out. We have to see how Facebook reacts. But

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<v Speaker 1>typically when those things kind of happen, and we saw

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<v Speaker 1>something similar in Europe, what it does is actually benefits

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<v Speaker 1>of the incumbent players because advertises feel like I'm just

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<v Speaker 1>gonna go where I know the audience is, you know.

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<v Speaker 1>So we'll have to see how that plays out. Listen

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<v Speaker 1>to our Kurt Wagner tech reporter here a Bloomberg News

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<v Speaker 1>his boy Facebook is he is great is big these days?

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<v Speaker 1>Head count as at the end of March with sixty

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<v Speaker 1>four employees up over a year ago. That's a lot

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<v Speaker 1>of new employees to add during a pandemic. But it

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<v Speaker 1>says something. I guess they're busy and they're growing. Yeah,

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<v Speaker 1>and I've got two sons graduating from college in a

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<v Speaker 1>matter of a week or so. So I'm like, call

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<v Speaker 1>up Google, they're hiring, go to Silico, to Stilson Valley

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<v Speaker 1>because those books that they're hiring, Well, it's funny that

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<v Speaker 1>you say that. Kurt's wig Ken swig if Swig Equities

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<v Speaker 1>was on with us and he's a real estate investor

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<v Speaker 1>in entrepreneur and he said, you know, look at who

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<v Speaker 1>is tapping into real estate, Like in New York. It's

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<v Speaker 1>the Amazon's, it's the Googles, it's the Facebook. You know,

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<v Speaker 1>they're not running to shut down offices or have everybody

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<v Speaker 1>work from home. They're tapping into office space big time.

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<v Speaker 1>They are. And that's it's good to see. And uh,

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<v Speaker 1>you know, it's good for the city of New York.

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<v Speaker 1>And because it's prime real estate and it's a lot

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<v Speaker 1>of it, and we see it from all these companies,

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<v Speaker 1>whether it's an Amazon or Facebook or Google. They are

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<v Speaker 1>still so much in the investment mode. You look at

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<v Speaker 1>their R and D, you look at their investments and

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<v Speaker 1>property plan equipment in terms of you know, new real

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<v Speaker 1>estate all around the country. Uh, they are still very

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<v Speaker 1>much in the growth mode, still very much in the

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<v Speaker 1>investment mode. So um and when they make this much

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<v Speaker 1>cash it, I guess it's easy to see why. Yeah,

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<v Speaker 1>it's interesting. I was just passing something about UM. You

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<v Speaker 1>mentioned earlier about Apple and having to opt in, and

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<v Speaker 1>it looks like Facebook had made some comments about that.

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<v Speaker 1>Here it is, Facebook listed ad targeting as a head

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<v Speaker 1>wind again primarily because of changes to Apple iOS fourteen,

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<v Speaker 1>but that was listed as a headway in last quarter

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<v Speaker 1>as well. So you know, as an investor, the regulatory environment.

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<v Speaker 1>You know, Paul, we talked about this a lot. It

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<v Speaker 1>does feel like these big tech companies are increasingly under

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<v Speaker 1>the gun when it comes to lawmakers and policymakers. A

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<v Speaker 1>lot of times it's just talk. I don't know, it

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<v Speaker 1>feels a little different what's on your radar when it

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<v Speaker 1>comes to possible, uh, things that might be a drag

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<v Speaker 1>on a company like Facebook going forward. When I talked

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<v Speaker 1>to tech investment bankers that that I know, they say

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<v Speaker 1>that Google and Facebook are really on the sidelines right now.

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<v Speaker 1>It feels that way in terms of M and A

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<v Speaker 1>because UH and sizeable leminary because they know that they're

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<v Speaker 1>being targeted by the regulators. UM So I think the

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<v Speaker 1>risk is very low that they would ever be broken up,

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<v Speaker 1>for example, but they know that the regulatory bar for

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<v Speaker 1>making any kind of acquisitions uh is really high, and

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<v Speaker 1>so they're just kind of staying on the sidelines, keeping

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<v Speaker 1>their heads down, trying to stay out of, you know,

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<v Speaker 1>the cross hairs. And then we'll see what happens going forward.

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<v Speaker 1>But um it is an issue, and we've talked about

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<v Speaker 1>it a lot that you know, the US regulators and

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<v Speaker 1>even the folks in Congress, they've taken a very light

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<v Speaker 1>hand really over the last fifty or sixty years towards

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<v Speaker 1>US technology and allowed the Silicon Valley to grow and

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<v Speaker 1>make all these great innovations. But that feels like it

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<v Speaker 1>might be changing a little bit because you've got these

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<v Speaker 1>mega mega companies like Amazon, like Google, like Apple, like

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<v Speaker 1>Facebook that are just so pervasive across all of our lives.

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<v Speaker 1>It's just not some industrial company or railroad company out

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<v Speaker 1>in the Midwest. These are the companies that that we

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<v Speaker 1>touch every single day, and it goes to data privacy,

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<v Speaker 1>data integrity. UM. So there's a lot of issues and

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<v Speaker 1>a lot of layers, and uh, it's definitely a risk

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<v Speaker 1>out there, I think for a lot of investors in

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<v Speaker 1>Silicon Valley. Hey, listen, since I have you, because you know,

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<v Speaker 1>we've been following, you know, some of these big tech

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<v Speaker 1>names and we're waiting Apple. Uh, they should cross and

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<v Speaker 1>about I don't know about eight minutes from now here,

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<v Speaker 1>and just you know, it's a little bit of a

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<v Speaker 1>mixed bag Microsoft versus Google. You know what we're getting

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<v Speaker 1>with Facebook, We'll see what we get with Apple. How

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<v Speaker 1>do you do you see any consistent themes or anything

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<v Speaker 1>as we go from report to report. Well, it's interesting.

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<v Speaker 1>I think the you know, for the software side of

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<v Speaker 1>the technology space, UM, it's really all about the cloud. Um.

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<v Speaker 1>And there's lots of applications for the cloud, and there's

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<v Speaker 1>lots of different layers of it that the you know,

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<v Speaker 1>the on arack Ranas and the man deep things of

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<v Speaker 1>the world, Bloomberg Intelligence they know really well. But but

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<v Speaker 1>what we do know is that cloud computing and all

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<v Speaker 1>its applications is probably one of the it's probably the

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<v Speaker 1>biggest growth in tech spending, and that theme is still

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<v Speaker 1>very strong, and it's a very competitive race between Amazon

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<v Speaker 1>and Amazon Web Service, Microsoft with it as your Play.

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<v Speaker 1>Google's in there as well, IBM has a place, So

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<v Speaker 1>there's a lot of big competitors there, but it is

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<v Speaker 1>growing very quickly and the pandemic just accelerated that. Again

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<v Speaker 1>as more and more companies we're looking to put more

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<v Speaker 1>and more of their data distributed on the clouds, so

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<v Speaker 1>all of us working for home could have better use

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<v Speaker 1>of it and we could use our applications on it.

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<v Speaker 1>So big, big growth area there. And then the second

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<v Speaker 1>area that we're seeing from these consumer technology companies who

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<v Speaker 1>like the um you know, the facebooks of the world,

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<v Speaker 1>is that advertising dollars continue to flow to these digital platforms.

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<v Speaker 1>And again the pandemic probably played a role as an

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<v Speaker 1>accelerant there. As we're all spending more and more time

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<v Speaker 1>on our devices here, right, and I would assume that

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<v Speaker 1>we're going to continue. I mean, sure, we're gonna go

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<v Speaker 1>back out and we're gonna travel and we're gonna live,

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<v Speaker 1>but we have gotten so much increasingly used to doing

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<v Speaker 1>everything on our phone right and online, that that that

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<v Speaker 1>stuff doesn't go away. No, it doesn't. And you know,

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<v Speaker 1>another big area because we're spending so much more time

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<v Speaker 1>on our digital appliances is security. And we hear that

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<v Speaker 1>a lot from the technology investors is that that is

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<v Speaker 1>a great growth area with the technology spend, which is

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<v Speaker 1>sixth security. The more time we spend, the more data

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<v Speaker 1>we put up on the cloud or put store on

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<v Speaker 1>our devices, um, the security has got to be a

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<v Speaker 1>lot better because we know there are a lot of

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<v Speaker 1>bad people out there with you know, you know, really

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<v Speaker 1>looking to hack into a lot of these systems. So

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<v Speaker 1>that's gonna another growth story as well. I hear a

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<v Speaker 1>lot of people who are saying, I keep getting messages

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<v Speaker 1>change my password. They're not, it's not complicated enough, or

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<v Speaker 1>you've got to you know, you've got security concerns. Paul Sweeney,

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<v Speaker 1>love you, Love you. That was so great. Paul Sweeney,

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<v Speaker 1>co host of Bloomberg Surveillance and Bloomberg Markets. Catch him

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<v Speaker 1>on Bloomberg Radio with Tom Keane from nine to ten

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<v Speaker 1>and of course Matt Miller from ten to noon. Shares

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<v Speaker 1>a Facebook by the way up four point eight percent.

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<v Speaker 1>We are awaiting Apple earnings. They're going to cross in

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<v Speaker 1>any minute. This is Bloomberg Radio. So definitely our top

0:10:48.520 --> 0:10:51.640
<v Speaker 1>story right at this moment is Apple. Charlie breaking down

0:10:52.320 --> 0:10:55.199
<v Speaker 1>the numbers the quarter. The stock is up about three

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<v Speaker 1>percent in the after hours. Big headlines Apple authorizing an

0:10:59.040 --> 0:11:02.560
<v Speaker 1>increase of nine d billion dollars to its existing buyback program.

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<v Speaker 1>Second quarter revenue big beat, huge beatty eight billion versu

0:11:06.880 --> 0:11:10.040
<v Speaker 1>an estimate of seventy seven point three bill billion. If

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<v Speaker 1>you go through all of their product lines and business sectors,

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<v Speaker 1>big beats in those as well. Let's get to it though,

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<v Speaker 1>and what you need to know about the quarter from

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<v Speaker 1>Bob O'Donnell. He's president chief analyst at Technolysis Research. He's

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<v Speaker 1>based in Foster City, California, and that's where we find

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<v Speaker 1>him on this Wednesday. Bob, nice to have you here.

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<v Speaker 1>We've said a lot I feel like today, but it

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<v Speaker 1>looks like a blowout, blockbuster quarter. Yeah. Absolutely, And you

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<v Speaker 1>know what's fascinating when you look through is there was

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<v Speaker 1>a lot of focus on what services we're gonna do.

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<v Speaker 1>It looks like services did okay, but really the big

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<v Speaker 1>stuff was good old iPhones and Max and that you know,

0:11:49.920 --> 0:11:52.400
<v Speaker 1>those are the things that are really crushing it for him,

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<v Speaker 1>and you know from a regional perspective. Again, obviously we're

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<v Speaker 1>just going through this live here, but the China numbers

0:11:58.240 --> 0:12:01.520
<v Speaker 1>are also looking really good, almost double from a year ago.

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<v Speaker 1>So that's that's a clear sign of the fact that

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<v Speaker 1>the iPhone twelve having five G that's what was critical

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<v Speaker 1>for China because five G networks are very widely available

0:12:13.280 --> 0:12:15.520
<v Speaker 1>in China and without a five G phone, Apple was

0:12:15.559 --> 0:12:19.240
<v Speaker 1>at a real disadvantage. So the iPhone twelve selling through

0:12:19.320 --> 0:12:21.880
<v Speaker 1>China and clearly in big numbers, that's got to be

0:12:22.040 --> 0:12:24.440
<v Speaker 1>a big person of the reason there. And then Max

0:12:24.559 --> 0:12:28.079
<v Speaker 1>the M one, that's Apple's custom chip that they created

0:12:28.760 --> 0:12:32.920
<v Speaker 1>based on ARM architectures. Um, they've done this for the iPhone,

0:12:33.640 --> 0:12:37.520
<v Speaker 1>but they introduced that last fall for the Mac and clearly, uh,

0:12:37.559 --> 0:12:39.040
<v Speaker 1>they had a lot of success with that. And of

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<v Speaker 1>course just last week we saw them introduce M one

0:12:42.080 --> 0:12:45.440
<v Speaker 1>based Imax and even brought the M one to the iPad.

0:12:45.679 --> 0:12:48.360
<v Speaker 1>So you know, we've got this custom silicon story that

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<v Speaker 1>Apple's telling. Um, we've got the five G story that

0:12:51.840 --> 0:12:55.640
<v Speaker 1>Apple's telling. And look, the service businesses, all these other

0:12:55.679 --> 0:12:57.920
<v Speaker 1>things are also doing well. Not that they're doing they're

0:12:57.920 --> 0:13:01.240
<v Speaker 1>not doing as well, um, but those that's kind of

0:13:01.280 --> 0:13:04.360
<v Speaker 1>those traditional Apple businesses that the one seemed to seem

0:13:04.520 --> 0:13:06.640
<v Speaker 1>to be the shouts. Hey, hang on for a second.

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<v Speaker 1>Just got um. It's been talking about an overflow of newsday,

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<v Speaker 1>but it's all good stuff. Amazon just crossing the Bloomberg

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<v Speaker 1>terminal to boost pay by at least fifty cents to

0:13:15.760 --> 0:13:18.600
<v Speaker 1>three dollars an hour to over five hundred thousand of

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<v Speaker 1>its staff members, rolling out pay boosts from mid May

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<v Speaker 1>through early June. Uh to invest over a billion dollars

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<v Speaker 1>in incremental pay for certain staff. We probably will hear

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<v Speaker 1>a little bit more about that tomorrow when the company

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<v Speaker 1>reports its latest quarterly results. Amazon shares let me just

0:13:34.200 --> 0:13:35.960
<v Speaker 1>take a quick check here in the after hours up

0:13:36.000 --> 0:13:38.319
<v Speaker 1>about eight tens of a percent, and just quickly want

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<v Speaker 1>to mention Verizon exploring a sale of its media assets,

0:13:43.160 --> 0:13:45.920
<v Speaker 1>including A O, L and Yahoo. This is coming from

0:13:45.920 --> 0:13:49.959
<v Speaker 1>Dow Jones. Uh. Yeah, could value Verizon meeting media assets

0:13:49.960 --> 0:13:53.679
<v Speaker 1>at four to five billion dollars, so a lot going on.

0:13:53.760 --> 0:13:56.439
<v Speaker 1>Quick check though of the stock here in the after

0:13:56.520 --> 0:13:58.840
<v Speaker 1>hours shares a Verizon just down a hair down about

0:13:58.840 --> 0:14:01.560
<v Speaker 1>one tenth of one percent um and it thoughts on

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<v Speaker 1>Amazon and Verizon there Bob, Well, you know the interesting

0:14:05.400 --> 0:14:08.160
<v Speaker 1>Amazon they've been. They've caught a lot of grief lately

0:14:08.240 --> 0:14:11.040
<v Speaker 1>in terms of you know, their worn't place standards and

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<v Speaker 1>and everything else. But another interesting data point just came

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<v Speaker 1>out today is that Amazon was ranked as the number

0:14:17.320 --> 0:14:19.600
<v Speaker 1>one place to work by linked In. Linked into a

0:14:19.680 --> 0:14:22.720
<v Speaker 1>huge study of the top fifty companies to work at

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<v Speaker 1>in America, and Amazon came out number one. Interesting, was

0:14:26.080 --> 0:14:28.560
<v Speaker 1>also in the top ten. Um A, T and T

0:14:28.760 --> 0:14:32.160
<v Speaker 1>was in the top ten, IBM an alphabet. Verizon was

0:14:32.200 --> 0:14:34.960
<v Speaker 1>also I believe in the top twenty. But anyway, you

0:14:35.000 --> 0:14:37.960
<v Speaker 1>know that, I think it's interesting segment. And we'll see

0:14:37.960 --> 0:14:40.520
<v Speaker 1>what happens with Amazon's earnings tomorrow. Yeah, exactly. And I

0:14:40.560 --> 0:14:42.640
<v Speaker 1>know we've been here at Bloomberg Business Week doing a

0:14:42.680 --> 0:14:46.040
<v Speaker 1>lot of reporting about and Bloomberg News just Jeff Bezos

0:14:46.080 --> 0:14:49.200
<v Speaker 1>thinking about his legacy, you know, uh, and what's to come,

0:14:49.320 --> 0:14:51.320
<v Speaker 1>and so thinking a little bit more broadly about that. Bob,

0:14:51.400 --> 0:14:54.120
<v Speaker 1>thank you so much, really appreciate you breaking down Apple

0:14:54.160 --> 0:14:57.119
<v Speaker 1>with us. Bob o'donnald, President, chief Analyst. I took analysis

0:14:57.120 --> 0:14:59.800
<v Speaker 1>research on the phone from Foster City, California,