Latest / Bloomberg Intelligence / Caesars Agrees to Be Taken Over by Fertitta in $5.7 Billion Deal

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Caesars Agrees to Be Taken Over by Fertitta in $5.7 Billion Deal · Bloomberg Intelligence

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  Speaker 2: All right, it's Thursday, but there's still some MNA deals
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  Speaker 2: to talk about. It's a fairly sizable one, if not
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  Speaker 2: one that we had anticipated for a while.
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  Speaker 3: Yeah, and I'm glad we have our next guest because
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  Speaker 3: it's all about that side of the balanchie.
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  Speaker 4: All right, let's talk to Jody Lorii.
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  Speaker 2: Jody Lorii is one of our credit analysts here and
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  Speaker 2: she covers the travel and leisure sector for us here
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  Speaker 2: at Bloomberg Intelligence. And it's about Caesar's agreeing to buy
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  Speaker 2: i should say, being taken over by Tomyan Fertita. Fertida
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  Speaker 2: Entertainment is paying Caesar's shareholders thirty one dollars a share
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  Speaker 2: in cash. But in order to pay that cash, they're
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  Speaker 2: going to have to take out some debt. So, Jody,
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  Speaker 2: this is something that you know, feels like it's a
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  Speaker 2: long time coming because till and Fertida has been working
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  Speaker 2: on this for a while, right.
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  Speaker 5: Right, so, Scarlett, I mean, I think you know this
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  Speaker 5: has been rumored about since actually around the time of
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  Speaker 5: the IDEs of March. I was super excited that the
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  Speaker 5: announcement would happen on the eides of March, just for
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  Speaker 5: all the references with Caesar's. Unfortunately we had to wait
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  Speaker 5: another couple months. That said, I think, you know, it's
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  Speaker 5: been so compelling about this story, and I think what
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  Speaker 5: sort of brings up a lot of uncomfortableness in the
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  Speaker 5: bond market is the history with the name. Now, mind you,
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  Speaker 5: the Caesars now is actually El Dorado that bought Caesars
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  Speaker 5: out of bankruptcy, and that's not the same Caesars that
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  Speaker 5: we're talking about. That was the leverage buyout that went
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  Speaker 5: through the restructuring. And even so, I think a lot
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  Speaker 5: of bondholders, for good reason, are a little bit uncomfortableable
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  Speaker 5: by this story in general.
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  Speaker 3: So I've got a net det the EBATA and I
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  Speaker 3: went through the Chase Manhattan Bank credit training program way
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  Speaker 3: back in the nice nice to do that, But I've
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  Speaker 3: got EBATHA of only like three points. I got north
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  Speaker 3: of six times on the leverage basis. Thirty people like you.
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  Speaker 3: You guys don't like that.
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  Speaker 4: No, no, we don't, Paul.
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  Speaker 5: And to make matters worse, the big question that we're
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  Speaker 5: grappling with is whether or not the change of control
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  Speaker 5: provision gets executed. Not to go into too much detail,
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  Speaker 5: but to make it as simple as possible. In the
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  Speaker 5: course of a transaction, there's some bond terms that allow
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  Speaker 5: bondholders to put the bonds back to the company, and
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  Speaker 5: so in those instances you get one hundred and one
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  Speaker 5: percent of par and that's not potentially happening here. We're
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  Speaker 5: not sure at the moment. And what we're seeing though,
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  Speaker 5: is that if you look at the bonds, they're not
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  Speaker 5: trading like they would be put back at one hundred
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  Speaker 5: and one percent of par. So every indication we're seeing
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  Speaker 5: is that perhaps that's not going to get executed, which
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  Speaker 5: means that is only you know, about a six billion
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  Speaker 5: dollar price tag in terms of borrowing as opposed to
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  Speaker 5: an eighteen billion dollar price price tag in terms of borrow.
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  Speaker 5: So that's a big nut to sort of rapple with.
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  Speaker 5: Is whether they have to refinance all that almost twelve
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  Speaker 5: billion dollars of debt or if they just have to
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  Speaker 5: issue new debt. And lever up the balance sheet further,
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  Speaker 5: and bond holders are along for the ride.
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  Speaker 2: Okay, So anyway you look at it, there's gonna be
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  Speaker 2: a lot of moving parts here in order to get
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  Speaker 2: this deal done. Jody, you mentioned that there's some discomfort
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  Speaker 2: here for Caesar's bondholders. Is this going to get in
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  Speaker 2: the way of there being enough demand? I mean, is
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  Speaker 2: this going to affect pricing and the concessions that might
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  Speaker 2: need to be made?
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  Speaker 5: I think Scarlett, it really depends on timing. It depends
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  Speaker 5: on the communication. We've been really sort of surprised over
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  Speaker 5: and again by the appetite of bondholders and potential creditors
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  Speaker 5: out there.
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  Speaker 1: Now.
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  Speaker 5: Will they have to pay up for it? It's very possible,
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  Speaker 5: And I think that that creates the sort of interesting
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  Speaker 5: component too, is that if you're talking about a company
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  Speaker 5: that is already having issue US from a profitability perspective,
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  Speaker 5: CASHUW hasn't been where it wants to be. Management was
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  Speaker 5: focused up until Icon got involved last year. They were
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  Speaker 5: actually focused on deleveraging, but they weren't getting ebadah up.
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  Speaker 5: So they were bringing down debt and they were refinancing debt,
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  Speaker 5: and they were improving the capital structure. But Ebidah wasn't budging.
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  Speaker 5: So now we're in a scenario where we say, okay,
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  Speaker 5: we're going to, you know, lever up the company further
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  Speaker 5: from a net profit a cashlow standpoint, What does that
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  Speaker 5: necessarily mean if you know they're going to be paying
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  Speaker 5: up on an interest basis. So it's really a complicated conversation,
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  Speaker 5: and I think it's one where nobody's going to be
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  Speaker 5: looking at this lighthearted when they're when they if and
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  Speaker 5: when the deal goes through and if and when they
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  Speaker 5: do issue debt.
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  Speaker 4: I think there's going to be a.
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  Speaker 5: Lot of people calling over many documents to decide if
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  Speaker 5: it makes sense for them.
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  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 3: Scarlet Film Paul Sweeney live here in our Bloomberg Interactive
• 5:13
  Speaker 3: Broker's studio, streaming live on YouTube as well a lot
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  Speaker 3: of tech news as always, and so fortunately we have
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  Speaker 3: an expert that can help us out here. Caroline Hyde,
• 5:21
  Speaker 3: b Tech co anchor.
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  Speaker 4: For Bloomberg News.
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  Speaker 3: Journey us here in our studio, Caroline, let's start with Snowflake.
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  Speaker 3: There's a software company that said we're doing just fine,
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  Speaker 3: thank you, and the stock is up like thirty percent
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  Speaker 3: or something crazy.
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  Speaker 6: It is adding twenty two.
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  Speaker 7: Billion dollars to its market cat on the day it
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  Speaker 7: is surging thirty five percent because its product revenue is
• 5:42
  Speaker 7: up thirty four percent, and it guided that that's the
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  Speaker 7: kind of rate you should be expecting. This growth rate
• 5:47
  Speaker 7: is going to be about thirty one percent for the
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  Speaker 7: full year, and it's all about AI.
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  Speaker 6: Being intertwined into this business.
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  Speaker 7: They've got Cortex, which is their coding tool, more than
• 5:55
  Speaker 7: seven thousand subscriptions to that already, and it's just adding
• 5:58
  Speaker 7: to the annual revenue run rate where you can see
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  Speaker 7: monetization of generative AI. And also look, they're striking big
• 6:05
  Speaker 7: deals with Amazon, which seems to be a bit of
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  Speaker 7: a win win. Yes, Amazon gets six billion dollars of
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  Speaker 7: Snowflakes for infrastructure and chips, but Snowflake in return gets
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  Speaker 7: more deeply intertwined into Amazon's business model.
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  Speaker 6: They can build out to yet more customers.
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  Speaker 7: And also they get more efficient, cheaper chips, so the
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  Speaker 7: ideas they bring down their own computing costs.
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  Speaker 2: Okay, so that's the kind of news that investors want
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  Speaker 2: to see.
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  Speaker 4: Marvel is a.
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  Speaker 2: Chip maker, right it is, and the stack is down,
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  Speaker 2: but the headlines sound pretty positive.
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  Speaker 7: Yeah, Like this is a company that's many had been
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  Speaker 7: excited running into. Like it was up about one hundred
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  Speaker 7: percent so far yet today and the rally had been
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  Speaker 7: extending overnight.
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  Speaker 6: Maybe we pull back a bit today.
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  Speaker 7: Maybe there is profit taking, but shares initially postmarket had
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  Speaker 7: been in the pre market had been higher.
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  Speaker 6: Is the results of the outlo look pretty good.
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  Speaker 7: It's all about again AI, It's all about a six,
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  Speaker 7: It's about custom chips being built. This is about the
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  Speaker 7: future of how we're not just in video as the
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  Speaker 7: only key winner. Look with Amazon and Striking, it's deal
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  Speaker 7: with Snowflake. It's seeing its graviton chips being used a
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  Speaker 7: little bit more, maybe replacing an Intel and Bloomberg Intelligence
• 7:06
  Speaker 7: is saying around Marvel that that they're raising the fiscal
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  Speaker 7: twenty twenty seven twenty eight sales outlooked by about five
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  Speaker 7: percent ten percent. Stronger data center demand is really what's
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  Speaker 7: driving this as accelerating growth. This is what investors want
• 7:18
  Speaker 7: to see, a reacceleration of growth, organic acceleration of growth,
• 7:23
  Speaker 7: and that is coming in the back of whether it's
• 7:25
  Speaker 7: AI adoption, whether it's AI infrastructure, no matter how you
• 7:28
  Speaker 7: cut it.
• 7:28
  Speaker 6: But maybe with.
• 7:29
  Speaker 7: Some of these stocks, they have just run so far
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  Speaker 7: so fast. Remember, like the likes of Snowflake have been
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  Speaker 7: pretty been nut running into these Now it's.
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  Speaker 3: Interesting you mentioned, like with Snowflake, if you put up
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  Speaker 3: the numbers, and that's what a lot of like Agrana
• 7:39
  Speaker 3: was saying, Hey, these software companies, they've been beaten up,
• 7:42
  Speaker 3: so the only recourse you have is to put.
• 7:44
  Speaker 8: Up the numbers.
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  Speaker 3: Snowflake did. I thought Salesforce did last night as well,
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  Speaker 3: but stocks only up like one percent and their guidance
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  Speaker 3: was a little tipid relative to expectations. So agreed, Maybe
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  Speaker 3: they didn't get the convincing job that they needed.
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  Speaker 7: I mean, what more can Mark Benioff say apart from
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  Speaker 7: repeating that it was a record quarter and is record
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  Speaker 7: sales and record cash pile. But people really want to
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  Speaker 7: see this acceleration of organic growth. Now we know that
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  Speaker 7: mar Benioff has been very good at acquisitions over the years,
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  Speaker 7: and Informatica was helping with this latest quarter and we
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  Speaker 7: saw an addition of revenue there. But how much of
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  Speaker 7: this is actually Salesforce's bread and butter, more subscriptions, more
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  Speaker 7: bums on seats is kind of the way they're still
• 8:21
  Speaker 7: currently asking for to be paid here and with Anna
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  Speaker 7: Agran has done such great work from Bloomberg Intelligence side,
• 8:27
  Speaker 7: saying like there.
• 8:28
  Speaker 6: Is still actually apart from AI.
• 8:30
  Speaker 7: There is a reticence in it spending right now. We
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  Speaker 7: are nervous about the macro, so is Agent Force going.
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  Speaker 6: To make up for that? The annual revenue run rate
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  Speaker 6: there is going to be one point two billion dollars.
• 8:40
  Speaker 6: That's nothing to be sniffed at.
• 8:41
  Speaker 7: But in the grandest scheme of revenues for Sniff, for CRM,
• 8:44
  Speaker 7: for Salesforce, it's.
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  Speaker 6: Only a few percentage points. We need to see more
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  Speaker 6: addition there.
• 8:49
  Speaker 2: I think great context and Caroline, before we let you go,
• 8:52
  Speaker 2: I understand that you were part of a team that
• 8:54
  Speaker 2: won an Emmy.
• 8:55
  Speaker 7: We did little tired today because the Emmy's first time.
• 9:00
  Speaker 6: Going, and yeah we won for Primer.
• 9:02
  Speaker 7: We do on Bloomberg Originals, we do a really interesting
• 9:06
  Speaker 7: twenty minute primer on anything to do with technology. Really
• 9:09
  Speaker 7: we've had it was our first series that was up
• 9:11
  Speaker 7: for the award, and then all about magnets and how
• 9:14
  Speaker 7: important geopolitically they are, why China versus us?
• 9:17
  Speaker 2: What?
• 9:18
  Speaker 6: And these things keep coming back. We've got the latest we.
• 9:20
  Speaker 7: Just finished the latest series series too, where it's about
• 9:22
  Speaker 7: nuclear it's about semiconductors, it's about things that you're hearing
• 9:25
  Speaker 7: about time and time again. How can you get an evergreen,
• 9:29
  Speaker 7: non hyped view on what this technology really means? Cut
• 9:32
  Speaker 7: through the jargon and we won an Emmy.
• 9:33
  Speaker 6: And so excited. Well, they're back being like etched into.
• 9:37
  Speaker 6: Apparently they're quite expensive.
• 9:39
  Speaker 7: You get one for free, which Alan Jefferies has got,
• 9:42
  Speaker 7: who's the amazing producer on the show.
• 9:44
  Speaker 6: And apparently we've got to wait a few weeks for ours.
• 9:46
  Speaker 2: You have to order the rest.
• 9:47
  Speaker 6: You've got to order the rest. I see, Yeah, just
• 9:49
  Speaker 6: walk around.
• 9:51
  Speaker 7: I've got a lot of photo I'm just gonna I'm
• 9:52
  Speaker 7: gonna throw photos you way.
• 9:53
  Speaker 2: We can dine out on that one while stay with us.
• 9:57
  Speaker 2: More from Boomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Applecarclay and Android Auto
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• 10:12
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• 10:15
  Speaker 3: Well, one of the derivative plays of the growth of
• 10:18
  Speaker 3: AI has been who's going to potentially lose in an
• 10:21
  Speaker 3: AI world? And a lot of folks were calling out,
• 10:23
  Speaker 3: you know, earlier this year software stocks, particular software as
• 10:26
  Speaker 3: services stocks, YEP names we've kind of all thought of
• 10:30
  Speaker 3: as kind of teflon names like a Salesforce dot Com.
• 10:33
  Speaker 3: Salesforce reported numbers last night. I don't know, the numbers
• 10:36
  Speaker 3: looked really good to me. The stocks up one percent,
• 10:38
  Speaker 3: But they got to convince the street that they can
• 10:41
  Speaker 3: continue to grow in a world of AI. So did
• 10:43
  Speaker 3: they get it done last night? An rog Rana joins
• 10:45
  Speaker 3: this technology analysts for Bloomberg Intelligence, Honra, What did you
• 10:49
  Speaker 3: hear from CRM Salesforce from their quarter?
• 10:55
  Speaker 8: So one of the most important things we learned yesterday
• 10:58
  Speaker 8: was they are actually pivoting very strongly towards AI and
• 11:02
  Speaker 8: you know, instead of subscription but usage based products. And
• 11:06
  Speaker 8: the momentum is high. But what happens is whenever you
• 11:09
  Speaker 8: go through this transition. When you don't grow seats, you
• 11:12
  Speaker 8: will see a little bit of blip in terms of
• 11:14
  Speaker 8: the bookings growth. So organically, if you take out Informatica acquisition,
• 11:19
  Speaker 8: we are still looking at you know, soft eight nine,
• 11:22
  Speaker 8: ten percent or so booking growth at this point. And
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  Speaker 8: I think that's where some of the concerns are. On
• 11:28
  Speaker 8: the positive side, as I said there, usage of token
• 11:31
  Speaker 8: is actually skyrocketed, and the company actually was very confident
• 11:35
  Speaker 8: in calling out a second half rebound in organic sales growth,
• 11:39
  Speaker 8: and I think we're all trying to figure out whether
• 11:41
  Speaker 8: that will happen or not, right.
• 11:42
  Speaker 2: And of course, Salesforce's own AI tool is called Agent Force,
• 11:46
  Speaker 2: and that's something that has actually seen a revenue pick
• 11:49
  Speaker 2: up over the past couple of months and years. Anraj,
• 11:52
  Speaker 2: you had mentioned the Informatica purchase. Does the advent of
• 11:56
  Speaker 2: AI and the threat of it taking over software copanies
• 12:00
  Speaker 2: are taking over the roles of software companies mean that
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  Speaker 2: Salesforce needs to do more M and A.
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  Speaker 8: So I think the problem you know, the company like Informatica,
• 12:10
  Speaker 8: which is a company that does software for data management.
• 12:13
  Speaker 8: I think this is where the biggest difference is going
• 12:15
  Speaker 8: to be between consumer AI and enterprise AI because data
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  Speaker 8: is the biggest differentiator for enterprise AI. So company needs
• 12:23
  Speaker 8: to all the companies in the world need to figure
• 12:25
  Speaker 8: out what is their data strategy. How are they going
• 12:27
  Speaker 8: to take a look at their internal data, whether that's
• 12:30
  Speaker 8: finance data, customer service data, how are they going to
• 12:33
  Speaker 8: pull all of that together, and then they're going to
• 12:36
  Speaker 8: train that or find you that with a a large
• 12:39
  Speaker 8: language model. And that's where Informatica comes in. So to
• 12:42
  Speaker 8: your broader questions, salesforce should be doing more acquisitions, but
• 12:46
  Speaker 8: frankly speaking, yesterday we saw a massive buyback and I
• 12:49
  Speaker 8: think that's what I like more at this point, given
• 12:51
  Speaker 8: where the stock is, rather than acquisitions.
• 12:55
  Speaker 4: Anna Rad talk to us.
• 12:56
  Speaker 3: About how these software companies typically generate the revenue interested
• 13:00
  Speaker 3: in them in the seat, the per seat model, how
• 13:03
  Speaker 3: that works, and how AI may disrupt that, because that's
• 13:07
  Speaker 3: what I'm understanding, is maybe a risk point.
• 13:10
  Speaker 8: That is single biggest important factor right now. In fact,
• 13:13
  Speaker 8: that's the reason we are not so polished in terms
• 13:16
  Speaker 8: of the organic growth rate of software right now because
• 13:19
  Speaker 8: the number of seats are not growing, people are not
• 13:21
  Speaker 8: hiring at that same pace they were. In fact, you
• 13:24
  Speaker 8: see layoffs right now. So when you see that, you know,
• 13:26
  Speaker 8: whether you're selling HR software or software to salespeople, you're
• 13:30
  Speaker 8: going to see a decline in that. What Microsoft is
• 13:34
  Speaker 8: basically telling people is it's not going to be just
• 13:36
  Speaker 8: a subscription based model anywhere. It's going to be subscription
• 13:39
  Speaker 8: and a usage based models, which is just because you
• 13:42
  Speaker 8: have a subscription to Gemini or a Copilot, that doesn't
• 13:45
  Speaker 8: mean you can just burn all the tokens that you want.
• 13:48
  Speaker 8: You will get up till a certain amount tokens to burn,
• 13:51
  Speaker 8: and after that you're going to be charged or metered
• 13:54
  Speaker 8: for that use. We see that in coding tools right now.
• 13:57
  Speaker 8: We see that with cloud computing services that's on AWS infrastructure,
• 14:01
  Speaker 8: and I think a lot of that model comes to
• 14:03
  Speaker 8: the SaaS model that instead of just being seat based,
• 14:07
  Speaker 8: it's going to be either entirely consumption based or a
• 14:09
  Speaker 8: combination of consumption and subscription.
• 14:12
  Speaker 2: Is that something that investors have priced in already on
• 14:15
  Speaker 2: RUG or is that something they're still working out.
• 14:18
  Speaker 8: I think one of the negative things about the software
• 14:21
  Speaker 8: industry is that because of that disruption in the model,
• 14:24
  Speaker 8: they will not be as profitable at this point. And
• 14:26
  Speaker 8: that's partially the reason why the valuations are going down.
• 14:30
  Speaker 8: A lot of these companies are making slow pivot to
• 14:32
  Speaker 8: that shift because on the buyers side, you really don't
• 14:36
  Speaker 8: want to sign up Fork for an unlimited plan without
• 14:39
  Speaker 8: knowing what your token bill will be by the end
• 14:42
  Speaker 8: of the month or the end of the quarter. At
• 14:44
  Speaker 8: the same time, the software company does not want to
• 14:47
  Speaker 8: give up that nucrative, very high margin seat based business.
• 14:51
  Speaker 8: So I think what we are seeing is a little
• 14:52
  Speaker 8: bit of both. Companies are experimenting with pricing models that
• 14:56
  Speaker 8: are consumption based, the buyers are doing the same thing.
• 15:00
  Speaker 8: I think we will it will take I think two
• 15:02
  Speaker 8: to three years before we finally figured out what combination
• 15:05
  Speaker 8: of seed based and consumption based model wins. We think
• 15:09
  Speaker 8: it's going to be more of an enterprise agreement where
• 15:12
  Speaker 8: somebody like a salesforce or a microsoftware tele company, you
• 15:16
  Speaker 8: spend this much money with me every month, and we're
• 15:19
  Speaker 8: going to give you all these products that go with it.
• 15:23
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 15:30
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• 15:40
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• 15:44
  Speaker 2: Cool shares are up sixteen percent on better than expected results.
• 15:48
  Speaker 2: When I say better, it just means compared to estimates,
• 15:50
  Speaker 2: because the numbers are still going in the wrong direction.
• 15:53
  Speaker 2: We're still looking at a loss for the bottom line,
• 15:56
  Speaker 2: and comparable sales continue to be in the negative rain
• 16:00
  Speaker 2: Mary Ross Gilbert is our senior equity analyst covering retail
• 16:03
  Speaker 2: and joins us now with more. Especially's let's start with
• 16:06
  Speaker 2: Coles because I mentioned comparable sales down one point one percent. Analysts,
• 16:10
  Speaker 2: we're looking for a drop of one point seven percent.
• 16:13
  Speaker 2: What is Coals doing differently to stem the tide?
• 16:17
  Speaker 9: Yeah, Scarlett, So what Coles is doing is they've really
• 16:20
  Speaker 9: ramped up their private brands. Those are the opening price
• 16:24
  Speaker 9: point items, and these are the things that their low core,
• 16:27
  Speaker 9: low income consumer really wants. And so they're seeing success
• 16:33
  Speaker 9: in women's particularly with their so Junior's line. So that's
• 16:37
  Speaker 9: their own proprietary brand, so Soo, and that was up
• 16:41
  Speaker 9: ten percent in the quarter. The overall proprietary brands was
• 16:45
  Speaker 9: up six percent. But remember that they're also cycling a
• 16:48
  Speaker 9: period in which private brands was you know, previously de emphasized,
• 16:52
  Speaker 9: and so with the current CEO, Michael Bender, when he
• 16:56
  Speaker 9: came on board, that was the first thing he did
• 16:58
  Speaker 9: was ramp up private and that's the reason why you're
• 17:01
  Speaker 9: starting to see sales lift there. But Scarlett, you raised
• 17:05
  Speaker 9: a valid point. Sales were still down. They were down
• 17:08
  Speaker 9: one point one percent. They were cycling four years of
• 17:11
  Speaker 9: stack declines, really three if you exclude twenty twenty one
• 17:16
  Speaker 9: when they were really benefiting from that sort of post
• 17:19
  Speaker 9: COVID lift. So you know, yeah, it's sales are not
• 17:24
  Speaker 9: in the right direction yet.
• 17:25
  Speaker 4: Could they get there by the fourth quarter?
• 17:27
  Speaker 9: Maybe all of the initiatives that they're doing with these
• 17:30
  Speaker 9: deal bars, you know, these are items that are priced
• 17:33
  Speaker 9: at like four ninety nine, five ninety nine, and you
• 17:37
  Speaker 9: know everything is under ten dollars. Same with the toy
• 17:42
  Speaker 9: towers that they have, and then also they have impulse
• 17:45
  Speaker 9: items and so all of those little things add to
• 17:48
  Speaker 9: the basket and that's helping to minimize the declines and sales.
• 17:53
  Speaker 9: But again they're cycling four years of stack declines going forward.
• 17:58
  Speaker 9: So that makes for an easy comparison. And when we
• 18:00
  Speaker 9: look at the data, we're seeing that the second quarter
• 18:03
  Speaker 9: is tracking in line to slightly better than consensus estimates
• 18:07
  Speaker 9: for one percent sales decline in the second quarter.
• 18:11
  Speaker 4: Is this how much of this is?
• 18:13
  Speaker 3: Kind of the market they're in the segment they're in
• 18:16
  Speaker 3: versus their own execution.
• 18:19
  Speaker 9: Well, actually, Paul, so it's really it's their own execution.
• 18:24
  Speaker 9: And so the current CEO, and he's like the fourth
• 18:27
  Speaker 9: that they've had in the last probably four years, it
• 18:30
  Speaker 9: seems like he's making the most progress. But again, you know,
• 18:35
  Speaker 9: we are coming from a long period of sales declines.
• 18:39
  Speaker 9: So but these little initiatives seem to make sense. They're
• 18:44
  Speaker 9: doing a better job with planning an allocation. So their
• 18:47
  Speaker 9: spring seasonal merchandise was up in the quarter, so that
• 18:51
  Speaker 9: was encouraging, and they learned that because they sort of
• 18:53
  Speaker 9: missed sales in the fall last year. The other thing
• 18:56
  Speaker 9: is they've right sided their promotional activity.
• 18:59
  Speaker 4: They stab on that during the crucial holiday period.
• 19:03
  Speaker 9: So now they've really ramped that up because let's face it,
• 19:06
  Speaker 9: in the first quarter, there was a two point six
• 19:10
  Speaker 9: billion dollar gain just in off price sales just from
• 19:14
  Speaker 9: the Big three, So they're continuing to lose share to
• 19:18
  Speaker 9: the Big three and off price you know, we just
• 19:21
  Speaker 9: had Burlington's numbers out today.
• 19:23
  Speaker 4: Their comparable sales were up six percent.
• 19:26
  Speaker 2: Yeah, and then let's not even get into the tjx's
• 19:29
  Speaker 2: of the world, which are kind of into their own category.
• 19:31
  Speaker 2: I want to get your take on a more traditional retailer,
• 19:34
  Speaker 2: kind of a legacy retailer, and that's GAP. GAP will
• 19:37
  Speaker 2: be reporting results as well. It's got a number of
• 19:39
  Speaker 2: different brands, Old Navy, Banana, Republic, and of course the
• 19:42
  Speaker 2: I guess they call it just the blue brand Gap. Overall,
• 19:46
  Speaker 2: I think about Gap and how it's really picked up
• 19:49
  Speaker 2: a lot of cachet of late. There's a collaboration with
• 19:52
  Speaker 2: I think Victoria Beckham, was.
• 19:53
  Speaker 4: It absolutely yeah?
• 19:55
  Speaker 2: And things like that get people's attention. I don't know
• 19:58
  Speaker 2: if it's translating into sales though, is it.
• 20:01
  Speaker 4: Oh, it absolutely is translating into sale. I mean sales.
• 20:05
  Speaker 9: When you look at their comparable sales gains, they've been
• 20:07
  Speaker 9: higher than that of Old Navy. Old Navy is their
• 20:10
  Speaker 9: largest brand's about fifty six percent of revenues. Gap is
• 20:14
  Speaker 9: the next largest brand, and that's you know, almost thirty
• 20:17
  Speaker 9: percent somewhere around there. And so no, they've been experiencing
• 20:21
  Speaker 9: very strong comp gains there. I think what they're looking
• 20:25
  Speaker 9: for in the quarter is, you know, somewhere around that
• 20:28
  Speaker 9: three to four percent for the Gap brand.
• 20:31
  Speaker 4: So you're right, you're seeing some strength.
• 20:33
  Speaker 9: And I think that these collaborations, the campaigns all create
• 20:38
  Speaker 9: a wonderful halo. And when you speak to millennials and
• 20:42
  Speaker 9: gen z, you will hear them talk about Gap. So
• 20:46
  Speaker 9: in fact, I'm wearing a collab from last year. This
• 20:50
  Speaker 9: is Gap ex Melbourne. It's a favorite golf brand and
• 20:55
  Speaker 9: I really like it and I hope they come out
• 20:57
  Speaker 9: with another one that one and then Dohan like the
• 21:00
  Speaker 9: Doan collab as well.
• 21:01
  Speaker 4: So it does work, by it does work.
• 21:06
  Speaker 3: So what are your companies Mary, What are they saying
• 21:09
  Speaker 3: just about the consumer in general these days?
• 21:12
  Speaker 9: Paul, What we're finding out is that the consumer, even
• 21:16
  Speaker 9: at the very low end, is really proving resilient. So
• 21:21
  Speaker 9: in fact, that was something that Burlington noted that they
• 21:24
  Speaker 9: haven't seen any signs of weakness. And of course in
• 21:28
  Speaker 9: the off price their customer base, most of their customers
• 21:32
  Speaker 9: are really at the very low end. They go paycheck
• 21:34
  Speaker 9: to paycheck, and Coles is sort of similarly positioned in
• 21:39
  Speaker 9: terms of their core customer so same sort of thing,
• 21:43
  Speaker 9: except it's hard with Coles because there's other issues going
• 21:46
  Speaker 9: on in terms of execution. But generally, with all the
• 21:49
  Speaker 9: retailers that have reported so far, we're not seeing any
• 21:53
  Speaker 9: pushback or signs of hesitancy on the consumer part. So
• 22:00
  Speaker 9: I still think that if there's some fresh newness or
• 22:04
  Speaker 9: something that's exciting and they have to have it, maybe
• 22:07
  Speaker 9: they might pass up on buying a favorite food brand
• 22:10
  Speaker 9: in the grocery store or cut back there. But if
• 22:13
  Speaker 9: there's something that really makes them happy, I think they're
• 22:16
  Speaker 9: going to make that discretionary purchase, particularly since really with
• 22:21
  Speaker 9: a low unemployment rate, when you have a job, you
• 22:24
  Speaker 9: feel pretty good.
• 22:26
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