Latest / Bloomberg Intelligence / EA Agrees to $55 Billion Sale in Largest Leveraged Buyout on Record

Transcript

EA Agrees to $55 Billion Sale in Largest Leveraged Buyout on Record · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Apple, Coarclay, and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:23
  Speaker 2: Again.
• 0:24
  Speaker 3: The big story on the MNA front Electronic Arts going
• 0:27
  Speaker 3: public via LBO. How about that kid's fifty five billion dollars.
• 0:31
  Speaker 3: JP Morgan advising Goldman Sachs. On the other side of
• 0:35
  Speaker 3: the deal, JP Morgan r in a twenty billion dollars
• 0:37
  Speaker 3: check to get this deal done.
• 0:39
  Speaker 2: What's the mean for the gaming business?
• 0:41
  Speaker 3: Nathan Nadu joins us here technology research channel for Bloomberg Intelligence.
• 0:44
  Speaker 3: He's based in London. Nathan, what's the how's this price
• 0:48
  Speaker 3: tag look for you? How's the evaluation here?
• 0:51
  Speaker 4: The valuation is at a twenty to thirty percent premium
• 0:54
  Speaker 4: versus the last recorded market CAB before this deal was announced.
• 0:58
  Speaker 4: And it seems like, you know, is a premium deal,
• 1:02
  Speaker 4: but actually, you know, EA has a lot going for it.
• 1:06
  Speaker 4: It is actually launching a new battlefield game and there's
• 1:10
  Speaker 4: a strong prospect for this game. And actually the game
• 1:13
  Speaker 4: is now in prely release, and even then he has
• 1:16
  Speaker 4: already smashed all prior records set by the biggest game
• 1:19
  Speaker 4: in that genre, and that genre is first person should
• 1:22
  Speaker 4: and that game that's dominated that genre is called Duty
• 1:25
  Speaker 4: from Microsoft. So Betterview six is looking to be a
• 1:29
  Speaker 4: successful launch. And next year we have FIFA, and obviously
• 1:33
  Speaker 4: we know that EA has the biggest soccer game in
• 1:35
  Speaker 4: the industry, and that's FIFA. What was called FIFA but
• 1:38
  Speaker 4: now it's called EA Sports FC. And next year FIFA
• 1:41
  Speaker 4: World Cup will be a special one because it will
• 1:43
  Speaker 4: be hosted across three cities, including the US, and if
• 1:48
  Speaker 4: people don't know, US is actually the biggest market in
• 1:51
  Speaker 4: terms of revenue for all kinds of sports game. So
• 1:53
  Speaker 4: that's the second thing going for EA that I think
• 1:56
  Speaker 4: it's going to lead to at least two rounds circumstensus
• 1:59
  Speaker 4: be on EPs er share. So I think for e A,
• 2:03
  Speaker 4: this is a this this this is actually a good deal,
• 2:06
  Speaker 4: and we can talk about the common struggles faced by
• 2:10
  Speaker 4: you know, game publishers and how these deals would make
• 2:12
  Speaker 4: sense for e A as well as the investors in
• 2:15
  Speaker 4: this context.
• 2:17
  Speaker 5: So yeah, let's do that.
• 2:18
  Speaker 6: Because you mentioned a bunch of the titles and these
• 2:20
  Speaker 6: are you know, very valuable franchises. These this is a
• 2:23
  Speaker 6: top quality IP, whether it's E Sports, FC.
• 2:26
  Speaker 5: Madden, NFL, the SIMS battlefield.
• 2:29
  Speaker 6: What does ownership by private equity, by private investors allow
• 2:34
  Speaker 6: e A to do that it can't do as a
• 2:36
  Speaker 6: publicly traded company.
• 2:38
  Speaker 4: I think it's all down to funds. So publishers. Game
• 2:43
  Speaker 4: publishers in general have been have been facing two struggles.
• 2:46
  Speaker 4: First one is gamers attention spend and playtime are increasingly
• 2:50
  Speaker 4: getting limited. The reason is people are sticking to brands
• 2:54
  Speaker 4: or franchises that they have played for a long time.
• 2:57
  Speaker 4: And in fact, New Zoom published data saying that eighty
• 3:00
  Speaker 4: percent of playtime tend to go back to the sixty
• 3:03
  Speaker 4: or so titles, leaving only eight percent of playtime for
• 3:07
  Speaker 4: brand new IP. And this is actually in favor of
• 3:10
  Speaker 4: EA because we mentioned those valuable IP. In fact, if
• 3:13
  Speaker 4: we look at global unit sales, EA has topped twenty
• 3:18
  Speaker 4: has four of those top twenty selling IP globally, he
• 3:23
  Speaker 4: has four out of the twenty. So that is actually
• 3:25
  Speaker 4: a pretty enticing deal thing for companies like private equity
• 3:30
  Speaker 4: because you know, profit generation is key. And what this
• 3:33
  Speaker 4: means is that EA has franchises that can bring in
• 3:37
  Speaker 4: recurring revenue. We talked about EA Sports FC, we talk
• 3:40
  Speaker 4: about MET and MFL and they actually revived a new franchise,
• 3:43
  Speaker 4: College Football, and you know, it was one of the
• 3:46
  Speaker 4: best selling titles in the US last year. So recurring
• 3:49
  Speaker 4: revenue is key here. And the second struggle that I
• 3:52
  Speaker 4: was going to go into is development cost is really high,
• 3:55
  Speaker 4: especially in the US, so that means that we publishers
• 3:59
  Speaker 4: actually have a cost disadvantage when compared to Eastern developers.
• 4:02
  Speaker 4: For example, you know, salaries for game engineers in China
• 4:07
  Speaker 4: is more than half the level in California, and personnel
• 4:12
  Speaker 4: cost game engineers is a huge part of developing a game.
• 4:16
  Speaker 4: So you know, tens and actually launched a new game
• 4:19
  Speaker 4: in the same genre as Better Few six and that
• 4:21
  Speaker 4: scaltalk course is doing really well. And what that costs
• 4:25
  Speaker 4: disadvantage is stopping EA from is continuously to push out
• 4:30
  Speaker 4: a strong salence of content to essentially extending the shelf
• 4:34
  Speaker 4: life of any game, and Eastern developers can do that
• 4:37
  Speaker 4: better because of that cost edge.
• 4:40
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 4:47
  Speaker 1: You're listening to the Bloomberg Intelligence podcast Catch US Live
• 4:51
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 4:54
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 4:57
  Speaker 1: get your podcasts, or watch US Live one.
• 5:01
  Speaker 3: Carnival Cruise Line raised its full year earnings forecast for
• 5:05
  Speaker 3: the third straight quarter, citing a record pace for forward
• 5:08
  Speaker 3: bookings and improving net yields.
• 5:10
  Speaker 2: So what's the stock do it? Trades off three and
• 5:12
  Speaker 2: a half percent?
• 5:13
  Speaker 7: Go figure?
• 5:13
  Speaker 2: Maybe our next guest can help us out here. Brian Egger.
• 5:16
  Speaker 3: He covers his gaming stuff, the lodging stuff, the crew stuff,
• 5:19
  Speaker 3: all the fun industries outter He's been doing on Wall
• 5:22
  Speaker 3: Street for a very long time. One of the top
• 5:24
  Speaker 3: folks in the street in his industry.
• 5:25
  Speaker 2: He's Bloomberg Intelligence. Joining us live here in our Bloomberg
• 5:28
  Speaker 2: and Interactive broker studio. Brian Carnival. It seems like I
• 5:30
  Speaker 2: do know, pretty good quarter for them, what you hear?
• 5:33
  Speaker 8: Yeah, very strong third quarter. You know the fifty percent
• 5:36
  Speaker 8: book for next year or so. On the surface, these
• 5:38
  Speaker 8: results are really good, and it was initially a bit
• 5:40
  Speaker 8: of a head scratcher to see the sell off. I
• 5:42
  Speaker 8: think there are two ways in which maybe they're being
• 5:45
  Speaker 8: perceived as conservative. The one is that their yield growth
• 5:48
  Speaker 8: guidance for the fourth quarter, while it's certainly very solid
• 5:51
  Speaker 8: in there in the mid fords, you know, with a
• 5:54
  Speaker 8: little bit below consensus, maybe the street got a little
• 5:57
  Speaker 8: bit heav itself. The second thing is for all of
• 5:59
  Speaker 8: their optimists about bookings and direction of yields, they are
• 6:03
  Speaker 8: very conservative and how they're deploying capital. They've only got
• 6:06
  Speaker 8: about one percent annual yield growth for this year in
• 6:09
  Speaker 8: the next two years, so they're growing very effectively, but
• 6:12
  Speaker 8: they are also very measured in how they deploy capacity.
• 6:16
  Speaker 8: So all this is really good, but they do mention that,
• 6:18
  Speaker 8: you know, they can afford to they can really be
• 6:20
  Speaker 8: judicious on expense growth because they're only growing capacity at
• 6:23
  Speaker 8: a very modest pace.
• 6:25
  Speaker 6: Is that a bad thing to be conservative? How does
• 6:27
  Speaker 6: Carnival compare with Norwegian or Royal Caribbean.
• 6:30
  Speaker 8: Yeah, so if you look at Norwegian Wild Caribbean, they're
• 6:33
  Speaker 8: anticipating or actually scheduling about a mid single digit, call
• 6:37
  Speaker 8: it five percent ish level of annual capacity growth for
• 6:41
  Speaker 8: twenty twenty six, twenty seven to twenty eight. You know,
• 6:43
  Speaker 8: it's closer to one percent for Carnival, maybe two percent
• 6:46
  Speaker 8: in twenty twenty eight. So they're just taking a more
• 6:48
  Speaker 8: conservative tack. And I think they're equally long term optimistic
• 6:53
  Speaker 8: about their ability to penetrate the vacation market, but they're
• 6:56
  Speaker 8: going about it in a much more measured way.
• 6:58
  Speaker 7: And then that sense it could strike people's conservative.
• 7:01
  Speaker 2: Talk to us about capacity.
• 7:02
  Speaker 3: I mean, if they added a couple of ships, would
• 7:03
  Speaker 3: they sell them out?
• 7:05
  Speaker 4: Yeah?
• 7:05
  Speaker 7: I mean certainly.
• 7:06
  Speaker 8: Their their auquancy is back to pre pandemic levels. Their
• 7:10
  Speaker 8: yield growth against that capacity increase is positive, and we
• 7:13
  Speaker 8: were looking at we've seen steadily increasing yield expectations throughout
• 7:17
  Speaker 8: twenty twenty five, and they've got the free cash let.
• 7:20
  Speaker 8: But I think they just want to build this out slowly,
• 7:22
  Speaker 8: you know, and maybe strike people some people as being
• 7:24
  Speaker 8: too slowly.
• 7:25
  Speaker 3: Hey, not for nothing. You get paid a lot of
• 7:28
  Speaker 3: money here, Josh Weinstein. Fourteen million in cash compensation for county.
• 7:32
  Speaker 3: You're twenty four fourteen million in stock twenty eight million
• 7:35
  Speaker 3: to drive a cruise ship round.
• 7:36
  Speaker 7: That's not too bad.
• 7:37
  Speaker 5: Nice job if you can get it right.
• 7:39
  Speaker 6: So here's my question to you, Brian, how do roil
• 7:42
  Speaker 6: Caribbean Norwegian Cruise and Carnival. How do they grow their
• 7:46
  Speaker 6: market are they stealing from each other or is there
• 7:48
  Speaker 6: still a big base from which to grow.
• 7:50
  Speaker 8: There's definitely a penetration opportunity. Just back up for a
• 7:52
  Speaker 8: second on Carnival. Their goal is to become investment grade,
• 7:55
  Speaker 8: So part of the conservativism I think you're seeing, which
• 7:58
  Speaker 8: may be a head scratch. They want to get to
• 7:59
  Speaker 8: invest grade and I think that's probably priority one, shifting
• 8:04
  Speaker 8: some of the enterprise value from bondholders.
• 8:06
  Speaker 7: To equity holders.
• 8:08
  Speaker 8: That being said, yes, they see opportunity to grow a
• 8:11
  Speaker 8: relatively underpenetrated overall vacation market, but they're going about it
• 8:16
  Speaker 8: with kind of balance sheet being front center if that
• 8:18
  Speaker 8: helps it all.
• 8:20
  Speaker 3: The only thing I know about the cruise business is
• 8:22
  Speaker 3: what I learned from Disney, who got into the business
• 8:24
  Speaker 3: fifteen twenty years ago and it's been a great business
• 8:27
  Speaker 3: for them.
• 8:27
  Speaker 2: How do you stratify the cruise market?
• 8:30
  Speaker 3: Now, I'm going to be the very very top mind you,
• 8:32
  Speaker 3: but how does the cruise industry kind of stratify itself?
• 8:35
  Speaker 4: Yeah?
• 8:36
  Speaker 8: I mean I think they, I think convincingly argue that
• 8:39
  Speaker 8: they are relatively affordable form of vacation. The package product,
• 8:43
  Speaker 8: the value is very good for the consumer, but it
• 8:46
  Speaker 8: runs across different tiers from luxury side you know, Seaborn,
• 8:51
  Speaker 8: Windstar Oceania Region seventies to the more mass market like
• 8:54
  Speaker 8: Carnival cruise line. So they run the gamup, but the
• 8:58
  Speaker 8: overall spectrum tends to be generally, you know, relatively affordable
• 9:02
  Speaker 8: and part of that package vacation product people buying cruises beforehand,
• 9:06
  Speaker 8: buying stuff on the cruise with a good share of
• 9:08
  Speaker 8: wallet left over.
• 9:10
  Speaker 7: That works to their favor.
• 9:11
  Speaker 5: How brand loyal are cruising fans?
• 9:14
  Speaker 6: I mean, if you are a carnival person, are you
• 9:16
  Speaker 6: a Carnival person for life?
• 9:17
  Speaker 8: Yeah, there's certainly some brand loyalty. And remember they've they've
• 9:21
  Speaker 8: got kind of as an industry, they've companies got two goals.
• 9:24
  Speaker 8: One is to drive bookings for their particular brand, and
• 9:27
  Speaker 8: they do that through new hardware with all the bells
• 9:30
  Speaker 8: and whistles. The other is to drive the overall awareness
• 9:33
  Speaker 8: of the value of cruising relative to other forms of vacationing.
• 9:36
  Speaker 8: And so you know, they've kind of got that dual mandate.
• 9:40
  Speaker 2: So you're sitting on the Jersey Shore Sunday after in around.
• 9:43
  Speaker 6: Five sweety's sitting on there. Okay, go ahead, all this.
• 9:47
  Speaker 3: Every Sunday during the summer, you'd see this massive cruise
• 9:50
  Speaker 3: ship coming out of New York Harbor. I think it's
• 9:53
  Speaker 3: the Star of the Seas.
• 9:54
  Speaker 7: Yeah, that's a new one. Yeah, I mean.
• 9:56
  Speaker 2: Things massive, and they filled that thing up.
• 9:59
  Speaker 8: Oh just and that's a that's a Royal Caribbean ship.
• 10:01
  Speaker 8: But I will point out that one of the things
• 10:03
  Speaker 8: Carnivals pointing to is, you know, they've reached the thirteen
• 10:05
  Speaker 8: percent return on invested capital this year, so they're kind
• 10:08
  Speaker 8: of getting to that double digit return pace that they targeted.
• 10:11
  Speaker 8: So there are their argument would be that they fill
• 10:14
  Speaker 8: it up, they get good pricing and relative that their
• 10:17
  Speaker 8: investments are getting, you know, solid low teens returns on
• 10:21
  Speaker 8: incremental invested capital with an opportunity to take that higher.
• 10:24
  Speaker 8: So as long as they can get that return, I
• 10:26
  Speaker 8: think they can convincingly say we're getting there. But obviously,
• 10:29
  Speaker 8: in the case of Carnival, through relatively conservative capital to
• 10:33
  Speaker 8: point I.
• 10:33
  Speaker 3: Mean Star of the Sea, Icon of the Seas, they
• 10:36
  Speaker 3: have a massive passenger capacity with the ability to hold
• 10:39
  Speaker 3: over seventy six hundred passengers and a large group and
• 10:43
  Speaker 3: for somebody who doesn't like people like me, that would
• 10:46
  Speaker 3: be that's a tough.
• 10:46
  Speaker 2: No, it's not.
• 10:47
  Speaker 8: It's not the misanthropes favorite vacation activity. But you know
• 10:50
  Speaker 8: they do get good economies by they were those field
• 10:53
  Speaker 8: peoples and.
• 10:54
  Speaker 2: You know how big those things.
• 10:55
  Speaker 6: Well, I'm always talking with my friend who suggests that
• 10:57
  Speaker 6: instead of retiring to a nursing home or tournament community,
• 11:00
  Speaker 6: just go on.
• 11:01
  Speaker 5: A cruise trip.
• 11:01
  Speaker 2: I've heard that's heard that too.
• 11:03
  Speaker 3: You know, you know it's a big cruisers Charlie Pellett,
• 11:05
  Speaker 3: and he doesn't like cruise the Caribbean.
• 11:07
  Speaker 5: He was cruises like adventurous places.
• 11:10
  Speaker 3: Yeah, like I'm going to I'm cruising to Turkey and
• 11:13
  Speaker 3: I don't know Antarctica, ger Yes, that's what Charlie.
• 11:16
  Speaker 7: People pair a premium for those.
• 11:17
  Speaker 5: Yeah, so's he's that kind of cruiser.
• 11:19
  Speaker 8: Well, I'm just saying on average, the customer pays the premium.
• 11:22
  Speaker 3: We talk about going investment grade again, day one or
• 11:26
  Speaker 3: day two of the pandemic. Who are the first companies
• 11:28
  Speaker 3: going to the bond market the cruise industry because those companies.
• 11:31
  Speaker 2: Knew, oh boy, this is not gonna be good for its.
• 11:34
  Speaker 8: Back from their break and therefore trying to run the
• 11:36
  Speaker 8: business in a measured way.
• 11:38
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 11:45
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 11:49
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 11:52
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 11:56
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:00
  Speaker 3: AI and we're talking to technology. You're talking AI, and
• 12:03
  Speaker 3: you know, people trying to figure out how do you
• 12:05
  Speaker 3: get exposure to it beyond you know, the chip manufacturers.
• 12:07
  Speaker 2: I get Nvidia, maybe beyond some of.
• 12:09
  Speaker 3: The software players like Microsoft, What how about computer hardware
• 12:13
  Speaker 3: and storage?
• 12:14
  Speaker 2: Go figure, well, we get somebody here that can help
• 12:16
  Speaker 2: us out on this stuff.
• 12:16
  Speaker 3: Wujino, Bloomberg Intelligence, Senior Technology Analysts. Which let's talk about
• 12:21
  Speaker 3: some of this hardware and storage companies that that you cover.
• 12:25
  Speaker 3: Super Micro is one of those companies that stock has
• 12:29
  Speaker 3: done really really well this year.
• 12:32
  Speaker 2: Talk to us about that company. How do you approach
• 12:35
  Speaker 2: this company, super Micro Computer.
• 12:37
  Speaker 9: Yeah, hey, Paul, So super Micro's actually been a very
• 12:40
  Speaker 9: controversial name throughout the year, but at the end of
• 12:43
  Speaker 9: the day, they're highly exposed to the three into twelve
• 12:47
  Speaker 9: billion dollar AI market. And you know the fact of
• 12:50
  Speaker 9: the matter is, even though they've had choppy execution. They
• 12:56
  Speaker 9: are one of the market leaders there and as these
• 12:58
  Speaker 9: deals come through, expect super Micro to continue to be
• 13:02
  Speaker 9: involved in those deals and possibly win their fair share.
• 13:05
  Speaker 3: Just looking at your research, which you can do folks
• 13:07
  Speaker 3: going B I go on the Bloomberg terminal nets, reaccess
• 13:10
  Speaker 3: all the Bloomerg intelligence investment research, you write super Micro's
• 13:14
  Speaker 3: AI rack system expertise, and at short delivery times position
• 13:17
  Speaker 3: a company to boot sales seventy four twenty twenty six.
• 13:23
  Speaker 2: That is extraordinary.
• 13:25
  Speaker 7: Yeah.
• 13:25
  Speaker 9: So look, if you think about some of these hyperscale
• 13:28
  Speaker 9: cloud providers as well as as neo clouds and the
• 13:31
  Speaker 9: neo clouds I define as these newer AI infrastructures and
• 13:37
  Speaker 9: service vendors like a core Weave or a LAMB, time
• 13:41
  Speaker 9: to market means a lot, right, and if you can't
• 13:44
  Speaker 9: deliver the equipment to their to their specs in a
• 13:47
  Speaker 9: timely manner, you're not going to win those deals. There
• 13:50
  Speaker 9: are actually two companies that have done that, super Micro
• 13:54
  Speaker 9: is one and Dell. So if you can ship the
• 13:57
  Speaker 9: AI servers, get the GPUs as quickly as possible, the
• 14:00
  Speaker 9: likelihood is you're going to win the deals. Now, keep
• 14:03
  Speaker 9: in mind these these guys were only generating roughly three
• 14:05
  Speaker 9: billion dollars in revenue about five years back, and now
• 14:08
  Speaker 9: we're talking about revenues closer to forty billion dollars in
• 14:11
  Speaker 9: fiscal twenty seven and thirty three billion dollars in fiscal
• 14:15
  Speaker 9: twenty six.
• 14:15
  Speaker 3: Extraordinary and just super micro stock is a fifty five
• 14:19
  Speaker 3: to fifty two.
• 14:20
  Speaker 2: Percent year to date, So it's just extraordinary, all right.
• 14:23
  Speaker 3: When I think hard dis drive, I think the little
• 14:25
  Speaker 3: thing in my PC under my desk. But when we're
• 14:28
  Speaker 3: talking about the cloud, we're talking about something totally different.
• 14:31
  Speaker 3: Talk to us about kind of that the hard drive.
• 14:34
  Speaker 3: A company like Western Digital provides the stack.
• 14:38
  Speaker 9: I will tell you know, we've been very bullish on
• 14:42
  Speaker 9: the hard disk drive market for a couple of years now,
• 14:45
  Speaker 9: and it's really starting to materialize, not only Western Digital
• 14:48
  Speaker 9: but also Seagate. If you think about the hard disk
• 14:51
  Speaker 9: drive market, we're talking about a forty billion dollar in revenues,
• 14:56
  Speaker 9: splitting roughly forty percent of it going to Western Digital,
• 15:00
  Speaker 9: forty percent going to Seagate. And at the end of
• 15:03
  Speaker 9: the day, a lot of the data that's generated by
• 15:06
  Speaker 9: AI needs to be stored somewhere, right, and it's going
• 15:11
  Speaker 9: into the Western Digital drives as well as the Seagate drives.
• 15:14
  Speaker 9: And if you see the last month, the AI story
• 15:17
  Speaker 9: has really started to materialize. Western Digital stock is up
• 15:21
  Speaker 9: about forty over over the past month and because of
• 15:25
  Speaker 9: the strong demand by the hyperscale cloud providers, these guys
• 15:30
  Speaker 9: have lead times of over eight weeks visibility going into
• 15:36
  Speaker 9: six quarters, and this is leading to price hikes. This
• 15:39
  Speaker 9: is a commodity market that tends to have five percent
• 15:42
  Speaker 9: annual pricing declines. Pricing stay stable. Not only stay stable,
• 15:47
  Speaker 9: it's probably gonna rise over the next six weeks.
• 15:50
  Speaker 2: I mean, you've been bullish on Western Digital for a
• 15:52
  Speaker 2: couple of years. I missed that. Too bad for me.
• 15:55
  Speaker 3: A year to date, Western Digital stock is up one
• 15:58
  Speaker 3: and fifty five percent. This isn't any stock, folks. This
• 16:00
  Speaker 3: is a company with a market cap of forty billion dollars.
• 16:04
  Speaker 3: So woods from your perspective on the hardware networking side
• 16:08
  Speaker 3: of the business, kind of where are we in this
• 16:11
  Speaker 3: AI play?
• 16:12
  Speaker 2: What are your companies kind of telling you?
• 16:14
  Speaker 9: Yeah, A lot of my companies are telling me it's
• 16:16
  Speaker 9: still in the early early days, right, but it's also
• 16:20
  Speaker 9: going through a lot of disruptions as well, and some
• 16:23
  Speaker 9: of the I guess legacy companies like Cisco, like an HPE,
• 16:31
  Speaker 9: it still considers a smaller fraction of the business to
• 16:34
  Speaker 9: really make any impact, but they're going to be involved
• 16:37
  Speaker 9: in some way or another.
• 16:38
  Speaker 3: Now.
• 16:39
  Speaker 9: In terms of the hyperscale cloud providers, there are a
• 16:42
  Speaker 9: small sub segment outside of the GPUs that are going
• 16:46
  Speaker 9: to benefit the optical names in particular because there is
• 16:51
  Speaker 9: this need for speed to traverse the data, to have
• 16:54
  Speaker 9: the data traverse through the networks. You know, my colleague
• 16:58
  Speaker 9: Jake Silverman, he covers those names. Companies like Coherent, companies
• 17:03
  Speaker 9: like Lumentum. They've actually benefited quite a bit from a
• 17:08
  Speaker 9: hardware perspective. Arista Networks. They have strong exposure to companies
• 17:13
  Speaker 9: like Meta and they have a very They've actually seen
• 17:18
  Speaker 9: their stock double over the past year or so. And
• 17:20
  Speaker 9: also another small company called Celestica based out of Canada.
• 17:24
  Speaker 9: They've been beneficiarias from from this AI span.
• 17:27
  Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
• 17:32
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 17:36
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,
• 17:39
  Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
• 17:43
  Speaker 1: You can also watch US live every weekday on YouTube
• 17:47
  Speaker 1: and always on the Bloomberg terminal