Latest / Bloomberg Intelligence / SpaceX Wants Fee Cut From Bankers Chasing $500 Million Windfall

Transcript

SpaceX Wants Fee Cut From Bankers Chasing $500 Million Windfall · 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, Cocklay 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.
• 0:24
  Speaker 2: And a lot of the outlook of the markets will
• 0:25
  Speaker 2: depend on how this SpaceX mammoth IPO proceeds. Pricing could
• 0:31
  Speaker 2: take place next week, and then the stock could begin
• 0:33
  Speaker 2: trading potentially the day after. Shrinat Rajen is our chief
• 0:37
  Speaker 2: Wall Street course wanting here at Bloomberg News, and he's
• 0:40
  Speaker 2: looking at Paul's favorite angle of IPOs, which is banks
• 0:44
  Speaker 2: and banks getting paid to take this company public and tree.
• 0:47
  Speaker 2: Your reporting has found that Elon Musk is negotiating to
• 0:52
  Speaker 2: cut down the fees that bankers normally get paid. What
• 0:55
  Speaker 2: do bankers normally get paid? And what does Elon Musk
• 0:57
  Speaker 2: want to pay them?
• 0:58
  Speaker 3: Look, if you think about it in some way, SpaceX
• 1:01
  Speaker 3: is the Walmut of IPOs, right. It has all the
• 1:03
  Speaker 3: pricing power here. It is raising seventy five billion dollars,
• 1:06
  Speaker 3: So you shouldn't expect a typical IPOFEE. And to your question,
• 1:10
  Speaker 3: what a typical ipofee is most IPOs generally tend to
• 1:13
  Speaker 3: raise less than a billion dollars a few hundred million dollars,
• 1:16
  Speaker 3: and the banks would usually charge between four to seven percent.
• 1:19
  Speaker 3: But even when we talk about the League of mega IPOs,
• 1:22
  Speaker 3: that fee does get reduced drastically. But even in most
• 1:26
  Speaker 3: of those cases, almost all of those cases are usually
• 1:28
  Speaker 3: about one percent. That was the case with Facebook Uber
• 1:31
  Speaker 3: Ali Baba. You have to go back perhaps to twenty
• 1:34
  Speaker 3: twenty twenty ten and a very unusual public listing of
• 1:38
  Speaker 3: General Motors back in twenty ten, when the banks agreed
• 1:41
  Speaker 3: to a zero point seventy five percent fee on that IPO,
• 1:45
  Speaker 3: largely because the owner of GM at the time was
• 1:47
  Speaker 3: the United States government.
• 1:49
  Speaker 4: This is very different.
• 1:50
  Speaker 3: But also look at the quantum of money that SpaceX
• 1:54
  Speaker 3: is trying to raise. Seventy five billion dollars. So even
• 1:56
  Speaker 3: if they charge one of the lowest or offer one
• 2:00
  Speaker 3: of the lowest IPO fees on record, less than seventy
• 2:04
  Speaker 3: five bibs, less than zero point seventy five percent, I
• 2:06
  Speaker 3: would still amount to somewhere in the ballpark of five
• 2:08
  Speaker 3: hundred million dollars. And Paul will tell you that is
• 2:11
  Speaker 3: a pretty good payday for banks.
• 2:13
  Speaker 4: And this is how the road show is going to go.
• 2:15
  Speaker 5: It's like, I just want to hear Elon, give me
• 2:18
  Speaker 5: the vision, give me the pitch.
• 2:19
  Speaker 4: I don't need the CFO.
• 2:22
  Speaker 5: Total dress ball market. I don't need to talk about evaluation.
• 2:25
  Speaker 5: None of that's relevant. It's buy Elon's vision. And if
• 2:30
  Speaker 5: I'm Eli, I'm like, what am I paying you that for?
• 2:31
  Speaker 5: Can you have anything for that?
• 2:33
  Speaker 4: So any pushback on the banks by the banks.
• 2:36
  Speaker 5: On this or are they just looking at the long
• 2:38
  Speaker 5: game and saying this is Elon Musk and there's a
• 2:39
  Speaker 5: lot of business here.
• 2:41
  Speaker 3: The latter, Yes, yes, and yes that is. I cannot
• 2:44
  Speaker 3: imagine a scenario where the banks have a lot of
• 2:46
  Speaker 3: position to push back. You already have twenty three banks
• 2:49
  Speaker 3: signed up for this, and again five hundred million dollars.
• 2:51
  Speaker 3: You're talking about the lead banks getting probably rough one
• 2:54
  Speaker 3: hundred million dollars a year, that's my guess, and it
• 2:56
  Speaker 3: trickles down from there. But as everyone who's anyone is
• 2:59
  Speaker 3: signed up for this because you don't want to miss
• 3:00
  Speaker 3: out on the biggest IPO that matters.
• 3:02
  Speaker 2: Okay, twenty three banks sign up for this, Why does
• 3:05
  Speaker 2: SpaceX need twenty three different banks to help it sell this.
• 3:08
  Speaker 3: Ipocover every corner of possible investors and make sure you
• 3:12
  Speaker 3: can get to your one point eight perhaps even the
• 3:14
  Speaker 3: two two point two trillion dollar valuation. Of course, our
• 3:16
  Speaker 3: reporting shows that the bankers have been dialing it back
• 3:19
  Speaker 3: on what the potential valuation could be for SpaceX. But
• 3:23
  Speaker 3: all of these banks will serve a different purpose. You
• 3:26
  Speaker 3: can see someone like a City Group perhaps tap to
• 3:29
  Speaker 3: go after retail investors overseas because of their strengthen those markets,
• 3:33
  Speaker 3: or a Bank of America looking at retail investors in
• 3:36
  Speaker 3: the United States Common Sachs Morgan Stanley, JP Morgan. These
• 3:39
  Speaker 3: are the banks that will be really strong with the
• 3:40
  Speaker 3: big institutional investors investors, like say a Black Croc in
• 3:45
  Speaker 3: the United States, or the Saudi Sovereign fun PIFF. These
• 3:49
  Speaker 3: are some of the names that are already out there,
• 3:50
  Speaker 3: But these are the names that these big banks have
• 3:53
  Speaker 3: to arrange and make sure that they're able to line up.
• 3:56
  Speaker 3: Because even if it's Elon Musk and even if you
• 3:59
  Speaker 3: believe this multiplanetary Grand Vision, seventy five billion dollars is
• 4:04
  Speaker 3: seventy five billion dollars on the back of the surprise
• 4:08
  Speaker 3: stealth eighty billion dollars raised by Google. There's so much
• 4:11
  Speaker 3: money going around, so it's kind of extraordinary what's happening
• 4:14
  Speaker 3: in this market. In a span of ten days, if
• 4:17
  Speaker 3: everything goes right, Goldman, Morganzini and the others would have
• 4:20
  Speaker 3: raised over one hundred billion dollars in new equity. I
• 4:24
  Speaker 3: can't think of a quarter where they would have raised
• 4:26
  Speaker 3: that much, or even the six months gotten to Anthropic
• 4:28
  Speaker 3: or open A having it.
• 4:30
  Speaker 5: So you got to get ready. When are we going
• 4:33
  Speaker 5: to get the road show schedule? So I'm not that
• 4:35
  Speaker 5: in my inbox because I'm the first person you're going
• 4:37
  Speaker 5: to afford it to. When are we going to get that?
• 4:39
  Speaker 3: You will be the first person I have forwarded to
• 4:41
  Speaker 3: when I get it and when I have a better
• 4:43
  Speaker 3: sense do we.
• 4:43
  Speaker 5: Have any idea when that's going to be made available?
• 4:46
  Speaker 5: Like are they going to Boston? Are they going to London?
• 4:47
  Speaker 5: And they can do a rubber check in lunch here
• 4:49
  Speaker 5: in New York? Do we know any of that stuff?
• 4:50
  Speaker 3: I mean, imminent has to be the best on seeing
• 4:53
  Speaker 3: considering they want to very cris next week they're playing
• 4:56
  Speaker 3: a very trace of the best. Or it could also
• 4:57
  Speaker 3: mean that I just don't know.
• 4:59
  Speaker 4: It could be.
• 4:59
  Speaker 2: I don't with the timeline here that we've been reporting
• 5:02
  Speaker 2: according to our understanding, is pricing next Thursday, correct, Okay,
• 5:06
  Speaker 2: and always, always, always to stock them begins training the
• 5:09
  Speaker 2: following day.
• 5:10
  Speaker 3: That's the goal that's so up and usually that's what happens.
• 5:12
  Speaker 3: And again, these things can move around a day or two.
• 5:15
  Speaker 3: But when you're talking about one point in a trillion,
• 5:16
  Speaker 3: when you're talking about colonizing Mars, there's the day here
• 5:19
  Speaker 3: or that really matter.
• 5:20
  Speaker 4: It touches just thirty seconds on the Google. What's the
• 5:23
  Speaker 4: buzz out there in the marketprice about the Google deal?
• 5:25
  Speaker 6: And nobody expected that?
• 5:26
  Speaker 4: What a surprise move.
• 5:27
  Speaker 3: We've all been talking about this seventy five billion dollar raise,
• 5:30
  Speaker 3: the largest public listing on record, and out of nowhere
• 5:33
  Speaker 3: Google comes across. And it's hard to compare the data
• 5:36
  Speaker 3: because of the different chanches that are involved in this
• 5:38
  Speaker 3: eighty billion dollar that Google is raising. But if I
• 5:41
  Speaker 3: had to stick my neck out, I would think that
• 5:43
  Speaker 3: this is the largest equity raise ever you have. Berkshire's
• 5:46
  Speaker 3: the anchor investor, a bingchunk that gets priced today, another
• 5:49
  Speaker 3: piece that gets priced in a few weeks.
• 5:52
  Speaker 4: Eighty billion dollars. Never seen anything like that old.
• 5:55
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 6:02
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 6:06
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 6:09
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 6:12
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:16
  Speaker 5: Anthropic is they filed first? It seems like they beat Chat, GPT,
• 6:20
  Speaker 5: whatever that thing is, Open ai, all that kind of
• 6:23
  Speaker 5: stuff coming to the public markets.
• 6:25
  Speaker 4: I guess it's a little bit of a race.
• 6:26
  Speaker 2: To Yeah, and it definitely feels like open ai has
• 6:28
  Speaker 2: lost the momentum with the trial, the court case between
• 6:31
  Speaker 2: Elon Musk and Sam Altman, and Anthropic is all that
• 6:34
  Speaker 2: anyone's talking about, right Claude over Chat, GPT, YEP all
• 6:37
  Speaker 2: day long.
• 6:38
  Speaker 4: Matthew Bloxham joints us here.
• 6:39
  Speaker 5: He's the senior media tech analyst for Bloomberg Intelligence based
• 6:42
  Speaker 5: over there in London.
• 6:44
  Speaker 4: Matthew, what do you expect?
• 6:45
  Speaker 5: I mean, we're gonna get SpaceX kicking off Thursday.
• 6:48
  Speaker 4: Presumably of the road show. But let's talk about Anthropic here.
• 6:52
  Speaker 5: These two big AI IPOs that are coming down the
• 6:56
  Speaker 5: pike here what do you think investors are gonna be
• 6:59
  Speaker 5: looking for.
• 7:02
  Speaker 7: Well, I think with an anthropic, you know that they're
• 7:05
  Speaker 7: just kind of looking for as much detail as they
• 7:07
  Speaker 7: can get about the kind of revenue model, the momentum
• 7:12
  Speaker 7: behind it. Obviously, we've been hearing data points recently that
• 7:14
  Speaker 7: you know, we're kind of back end of last year
• 7:17
  Speaker 7: that maybe the annualized revenue run rate was around the
• 7:19
  Speaker 7: kind of ten billion dollar market could be closer to
• 7:22
  Speaker 7: fifty billion dollars by the end of the year, and
• 7:25
  Speaker 7: where they are on that pathway, and what the economics
• 7:29
  Speaker 7: of the business looked like.
• 7:31
  Speaker 8: Yes, it's similar to space. You know, you just kind
• 7:33
  Speaker 8: of live off.
• 7:34
  Speaker 7: Breadcrumbs and suddenly you get a big download of data
• 7:37
  Speaker 7: that kind of really helps you to understand the business
• 7:39
  Speaker 7: model more.
• 7:40
  Speaker 2: Matthew, we characterize open ai and Anthropic as being in
• 7:45
  Speaker 2: a race, but is it actually like that if you
• 7:48
  Speaker 2: have Anthropic going public before open Ai, does that mean
• 7:51
  Speaker 2: there's less demand for open AI's IPO.
• 7:54
  Speaker 7: Yeah, you know, I think it's definitely right to characterize
• 7:57
  Speaker 7: this as the race, regardless of what the companies might say.
• 8:00
  Speaker 7: You know that these are huge numbers that companies are raising.
• 8:04
  Speaker 7: Me we don't know yet how much either of these
• 8:06
  Speaker 7: companies will look to raise, but you know, if SpaceX
• 8:08
  Speaker 7: is looking to raise seventy five billion and Google's out
• 8:11
  Speaker 7: there looking to raise eighty billion, it's going to be
• 8:14
  Speaker 7: in the tens of billions of dollars. And there's only
• 8:16
  Speaker 7: so much capital out there, and so, you know, I
• 8:20
  Speaker 7: think it's definitely better to go earlier than later, because
• 8:24
  Speaker 7: if you go later, you're at risk that either the
• 8:28
  Speaker 7: capital flow is dried up, or that those IPOs that
• 8:31
  Speaker 7: went before you didn't go so well, or the market's
• 8:34
  Speaker 7: taken a bit of a turn, and so you're kind
• 8:36
  Speaker 7: of left, you know, maybe either having to accept a
• 8:38
  Speaker 7: lower evaluation or a small amount of money. So I
• 8:42
  Speaker 7: think going sooner it is always better than going later
• 8:46
  Speaker 7: when you're raising money.
• 8:48
  Speaker 4: I'm an old ev to ebit that guy.
• 8:49
  Speaker 5: Maybe I'll go a little price to free cash flow.
• 8:52
  Speaker 4: But I don't know how you're going to value.
• 8:54
  Speaker 5: This these AI stories based out the market is going
• 8:57
  Speaker 5: to be valuation sensed at all?
• 9:00
  Speaker 4: Or is it just you take what you get.
• 9:04
  Speaker 8: I think it's a little bit of both. But I mean, yeah,
• 9:07
  Speaker 8: you know, I mean, we what have we got to
• 9:08
  Speaker 8: play with? Nothing?
• 9:09
  Speaker 7: Really more than ev to sales, and they're pretty eyewatering multiple. Yeah,
• 9:14
  Speaker 7: even on that kind of forward multiple trillion dollars, anthropics
• 9:19
  Speaker 7: going to be on about twenty time sales. So yeah,
• 9:22
  Speaker 7: you are having to extrapple extrapolate many years out to
• 9:27
  Speaker 7: kind of reconcile that with any bit dar musciple or
• 9:31
  Speaker 7: and earnings multiple. And there's clearly a huge number of
• 9:35
  Speaker 7: assumptions you're having to put in to get to those
• 9:37
  Speaker 7: kind of forward estimations. So yeah, it's it's a kind
• 9:42
  Speaker 7: of a moonshot trade, real, isn't it That you know,
• 9:44
  Speaker 7: you're kind of buying into the fact that, in some way,
• 9:47
  Speaker 7: shape or form, these companies that are coming to market
• 9:49
  Speaker 7: are going to be the foundational businesses of the next
• 9:53
  Speaker 7: thirty forty to fifty years of technology. And yeah, you
• 9:58
  Speaker 7: know it's going to work out eventually.
• 10:01
  Speaker 2: For you remember peg ratios and eyeballs and all the
• 10:05
  Speaker 2: different metrics that used to come up with during the
• 10:07
  Speaker 2: dot com bubble days. It feels like a total addressable
• 10:10
  Speaker 2: market is a new one for this era. So, Matthew,
• 10:14
  Speaker 2: before we say goodbye to you, as people investors get
• 10:18
  Speaker 2: ready to partake in these IPOs, they're likely going to
• 10:22
  Speaker 2: lighten up in some of their exposure to existing TACH
• 10:25
  Speaker 2: holdings because otherwise they have too much concentration risk. What
• 10:28
  Speaker 2: kinds of companies are most at risk?
• 10:29
  Speaker 8: Then? Yeah, I mean it's a good question, isn't that.
• 10:34
  Speaker 7: I mean, you know, it could be everything from like
• 10:39
  Speaker 7: you know, and video TSMC. You know, I think you're
• 10:44
  Speaker 7: kind of clearly going to be needing to think about
• 10:46
  Speaker 7: companies where you have had great performance and that perhaps
• 10:50
  Speaker 7: you're kind of prepared to do a bit of profit taking,
• 10:53
  Speaker 7: maybe taking the view that actually, you know, even if
• 10:55
  Speaker 7: you sell a bit of Nvidia intrinsically, you're kind of
• 10:59
  Speaker 7: going to get some benefit and some indirect exposure by
• 11:02
  Speaker 7: kind of playing it through one of these other names.
• 11:04
  Speaker 8: So yeah, it's a tricky one.
• 11:06
  Speaker 7: But I think probably a lot of portfolios are already
• 11:09
  Speaker 7: inherently kind of fairly concentrated. So you know, given the
• 11:13
  Speaker 7: numbers we're talking about, you're going to be helping to
• 11:15
  Speaker 7: look at these like meg A cappams to kind of
• 11:17
  Speaker 7: trip exposure.
• 11:20
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 11:25
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
• 11:28
  Speaker 1: weekdays at ten am Eastern on Apple, coarcklay and Android
• 11:31
  Speaker 1: Auto with the Bloomberg Business app, Listen on demand wherever
• 11:35
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 11:39
  Speaker 5: Well, we've been talking about Victoria's Secret all morning. Some
• 11:42
  Speaker 5: really really strong numbers beat the street pretty handily, and
• 11:46
  Speaker 5: we're seeing a stock of forty five percent here today.
• 11:49
  Speaker 4: So that's a good news there.
• 11:50
  Speaker 5: Mary Ross Gilbert, she covers the retailers for Bloomberg Intelligence.
• 11:54
  Speaker 4: Mary will talk to us about Victoria's Secret. What seems
• 11:57
  Speaker 4: like a huge turnaround.
• 11:57
  Speaker 9: There, Paul, you're at absolutely right. Hillary super is really
• 12:02
  Speaker 9: executing supremely her team, you know Hillary and her team.
• 12:07
  Speaker 9: So when you look at the results today, the comparable
• 12:10
  Speaker 9: sales were up thirteen percent. Now, remember they are cycling
• 12:15
  Speaker 9: declines of comp sales in the first quarter for like
• 12:18
  Speaker 9: the past three to four years, so that is helping. Still,
• 12:23
  Speaker 9: this is a big increase, seeing a double digit increase
• 12:25
  Speaker 9: in comp sales. But it's not just that. It's also
• 12:28
  Speaker 9: they're selling more at full price. They're attracting a younger cohort.
• 12:33
  Speaker 9: So the eighteen they saw a lot of strength in
• 12:36
  Speaker 9: eighteen to twenty four year olds, but they also saw
• 12:40
  Speaker 9: strength in households earning under fifty thousand and households earning
• 12:45
  Speaker 9: over two hundred thousand. So that's really saying something about
• 12:50
  Speaker 9: what's happening here with the brand. So they have great
• 12:53
  Speaker 9: franchises that they've created, So they have like the Dream
• 12:56
  Speaker 9: Angels and you know a lot of these are the
• 12:58
  Speaker 9: innovative lines that they've come out with in bras. You know,
• 13:02
  Speaker 9: their lace collection is hugely popular, you know, within Pink.
• 13:07
  Speaker 9: The turnaround at Pink has been phenomenal and it's really
• 13:10
  Speaker 9: resonating there. I mean, they have these tots that are
• 13:13
  Speaker 9: selling out, so SATs well we're talking about tots specifically
• 13:20
  Speaker 9: within the Pink franchise, but yes, Victoria's Secret also has tots,
• 13:26
  Speaker 9: but Pink does as well. And there were a number
• 13:29
  Speaker 9: of pieces for Spring in summer that sold out, including
• 13:34
  Speaker 9: a really cool Duffel bag. So they're really hitting the mark.
• 13:37
  Speaker 9: You know, they have this wonderful fragrance and beauty franchise
• 13:41
  Speaker 9: that's like a two billion dollar business and they saw
• 13:44
  Speaker 9: strength and double digit gains across you know, all categories,
• 13:48
  Speaker 9: and the momentum should continue in the second half. So
• 13:52
  Speaker 9: it appears that the guidance, which is really going to
• 13:55
  Speaker 9: be sort of drawn back to more single digit gains.
• 14:00
  Speaker 9: Really looks like they could be beatable. There's going to
• 14:02
  Speaker 9: be some product launches in the second half. They're going
• 14:05
  Speaker 9: to really heat up the campaigns and all of that
• 14:09
  Speaker 9: is really I mean, did you know that Victoria's Secret
• 14:13
  Speaker 9: has seventy seven million Instagram followers?
• 14:16
  Speaker 4: Okay, that is news.
• 14:17
  Speaker 2: But I'm looking at Pousweny and he's going to tell
• 14:20
  Speaker 2: me that he's not surprised given that Victoria's Secret used
• 14:23
  Speaker 2: to be a big, big brand, you know, with the
• 14:26
  Speaker 2: fashion shows and everything. Is that something that the CEO
• 14:29
  Speaker 2: Hillary Sooper is going to bring back? I mean, the
• 14:31
  Speaker 2: company now has the momentum or has a company effectively
• 14:35
  Speaker 2: moved away from that former profile.
• 14:38
  Speaker 9: Well, let's make it clear. And the reason why their
• 14:41
  Speaker 9: ticker symbol vsx Y very sexy, right, I mean it's important.
• 14:47
  Speaker 9: That's a big part of the Victoria's Secret brand franchise
• 14:51
  Speaker 9: is sexiness. And so Scarlett speaking to the fashion show,
• 14:55
  Speaker 9: the fashion show is already back. They had a great,
• 14:59
  Speaker 9: my bad show last year. That's okay, and this year
• 15:04
  Speaker 9: I'm sure it's going to be great. It's much more inclusive.
• 15:07
  Speaker 9: It's from a woman's point of view on you Know
• 15:10
  Speaker 9: What is Sexy and it's really a fantastic show. But
• 15:16
  Speaker 9: they also have a number of other campaigns that they do.
• 15:19
  Speaker 9: They do a lot in New York City, just on
• 15:22
  Speaker 9: the street and they post it on social media. All
• 15:25
  Speaker 9: of those things are resonating and you see a lot
• 15:28
  Speaker 9: of strong sales within the stores. The culture there, I
• 15:31
  Speaker 9: think has always been very positive because employees who work
• 15:35
  Speaker 9: there love their jobs, and you would experience it if
• 15:38
  Speaker 9: you go in there. They'll they're so engaging, they help
• 15:42
  Speaker 9: you out, they know how to size you, and they
• 15:45
  Speaker 9: show you so much of their product, and so I
• 15:47
  Speaker 9: think they get a lot of conversion with that kind
• 15:50
  Speaker 9: of engagement in the stores.
• 15:53
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 16:00
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 16:04
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 16:07
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 16:10
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 16:14
  Speaker 4: And I saw the blowout Dell earnings last week.
• 16:17
  Speaker 5: Did I run out and buy HPE stock Hewlett Packard
• 16:21
  Speaker 5: like a direct competitor?
• 16:22
  Speaker 8: Know?
• 16:23
  Speaker 5: And what an HPE do yesterday blowout numbers. Stocks up
• 16:26
  Speaker 5: twenty five percent today fifty two week high, all time high.
• 16:31
  Speaker 4: So there you go.
• 16:32
  Speaker 5: The AI story is a live and well and that's
• 16:35
  Speaker 5: part of the tech stack.
• 16:36
  Speaker 4: Who Jinho joins is he knows what's going on there.
• 16:38
  Speaker 5: He's a senior technology channels, a Bloomberg intelligence down there
• 16:41
  Speaker 5: in our Princeton campus which talk to us about HPE.
• 16:44
  Speaker 5: What did you learn from their results last night?
• 16:46
  Speaker 6: Yeah, hey, hey, Paul, blowout. As an understatement, there's a
• 16:52
  Speaker 6: couple of things going on. I think we're starting to
• 16:55
  Speaker 6: shift from a cyclical upswing to maybe a secular multi
• 17:03
  Speaker 6: year adoption phase for traditional servers, as corporate enterprises UH
• 17:09
  Speaker 6: start to adopt AI into the workplace, which may be
• 17:13
  Speaker 6: driving better margins as well as a stronger growth for
• 17:17
  Speaker 6: a longer period.
• 17:19
  Speaker 2: Let me ask a dumb question, moujen, what is the
• 17:21
  Speaker 2: difference between Heleett Packard Enterprise and hele Att Packard UH
• 17:25
  Speaker 2: trading their the ticker HPQ. I both are seeing benefits
• 17:29
  Speaker 2: tied to AI. But I just want someone to kind
• 17:31
  Speaker 2: of break it down.
• 17:33
  Speaker 6: Yeah, yeah, from a straightforward basis, Scarlett, if you think
• 17:37
  Speaker 6: about Heltt Packard UH inc UH, they only sell laptops
• 17:42
  Speaker 6: and PCs as well as a sizable printer business. Uh.
• 17:47
  Speaker 6: And that was a function of the split several years
• 17:49
  Speaker 6: back HPE Helip Hockard Enterprise.
• 17:52
  Speaker 5: Uh.
• 17:53
  Speaker 6: They sell servers for corporates as well, and data centers
• 17:57
  Speaker 6: that have AI data centers and and and and they said,
• 18:00
  Speaker 6: is one networking business for for corporate So think about
• 18:03
  Speaker 6: corporate it versus personal it.
• 18:06
  Speaker 5: Which how does HPE and Dell stack up in this
• 18:10
  Speaker 5: new world where again they're trying to take advantage of
• 18:14
  Speaker 5: this AI spin.
• 18:15
  Speaker 6: Yeah, so that there's a you know, there's a couple
• 18:18
  Speaker 6: of things where they're similar and where they differentiate. Look,
• 18:23
  Speaker 6: Dell is a market leader in AI servers. They're on
• 18:27
  Speaker 6: pace for about sixty billion dollars in AI servers and
• 18:29
  Speaker 6: stuff that they sell to the neo clouds such as
• 18:31
  Speaker 6: an IBS and core Weave and Vulture for instance. Right,
• 18:37
  Speaker 6: Dell HP's presence in that business isn't as sizable. They're
• 18:42
  Speaker 6: probably on pace for about six billions a one tenth
• 18:44
  Speaker 6: the size of Dell for this year. Where they where
• 18:48
  Speaker 6: they're both seeing the momentum is enterprise it.
• 18:51
  Speaker 4: Look, I think where.
• 18:53
  Speaker 6: The street, including myself have gotten it wrong was that
• 18:56
  Speaker 6: this memory inflation was going to impact demand right, there
• 18:59
  Speaker 6: was a big pull forward in demand, so we thought
• 19:02
  Speaker 6: for this quarter. We drove the upside in the quarter
• 19:04
  Speaker 6: as well as the next quarter, but we thought that
• 19:06
  Speaker 6: units were going to start dwindling. And what both Dell
• 19:10
  Speaker 6: as well as HPE confirmed was that this is going
• 19:13
  Speaker 6: to be durable and sustaining going over to the next
• 19:16
  Speaker 6: several quarters, which is driving not only sales growth but
• 19:18
  Speaker 6: also earnings growth.
• 19:20
  Speaker 4: When it comes to HPE.
• 19:22
  Speaker 2: They also announced that a partner at Elliott Investment Management,
• 19:26
  Speaker 2: Chris hu, would join the board of directors. I know,
• 19:29
  Speaker 2: last July is like a million years ago, especially when
• 19:31
  Speaker 2: you look at the stock price for HPE, but this
• 19:34
  Speaker 2: was a company that was engaging with activist investors. Is
• 19:38
  Speaker 2: it safe to say that Elliott's kind of happy with
• 19:41
  Speaker 2: what we've seen here?
• 19:43
  Speaker 6: I don't know, scarling twenty five percent stop going up
• 19:46
  Speaker 6: after turning the board, Elliots should be pretty happy and look,
• 19:50
  Speaker 6: to be fair, Elliott was highly involved with the Juniper
• 19:54
  Speaker 6: prior to the to the acquisition as well that I
• 19:57
  Speaker 6: believe they were a board member, so I'm not surprised.
• 20:01
  Speaker 4: Called with HPE.
• 20:03
  Speaker 5: What's the visibility on forward bookings for these companies like
• 20:07
  Speaker 5: the HP and Dell, do they How does that look
• 20:09
  Speaker 5: right now?
• 20:10
  Speaker 6: Yeah? So from a from a from a del Ai
• 20:14
  Speaker 6: service standpoint, it's it's fairly strong. Right. The backlog on
• 20:18
  Speaker 6: the AI service, I think it's closer to about twenty
• 20:21
  Speaker 6: seven to thirty billion dollars going forward, So they have
• 20:24
  Speaker 6: a fair amount of visibility. You know, they don't give
• 20:27
  Speaker 6: water bookings for the traditional server business. But one thing
• 20:31
  Speaker 6: that I can say about HPE is that these guys
• 20:34
  Speaker 6: gave at fiscal twenty twenty seven guidance. We're still in
• 20:37
  Speaker 6: the middle of their fiscal twenty twenty six, so six
• 20:41
  Speaker 6: quarters of forward guidance. That takes a lot of number
• 20:45
  Speaker 6: one guts, but also a strong confidence in their bookings
• 20:50
  Speaker 6: and their backlog to give that kind of guidance, and
• 20:52
  Speaker 6: on top of that with strong learnings growth. Their guidance
• 20:55
  Speaker 6: implies about four dollars plus in earnings when consensus was
• 20:59
  Speaker 6: at the high two news, so you know, to give
• 21:03
  Speaker 6: that the sales growth as well as earnings guidance, I
• 21:05
  Speaker 6: mean that's a lot of visibility.
• 21:07
  Speaker 2: Yeah, that is, and it's pretty incredible. I wonder to
• 21:10
  Speaker 2: what extent Paul, We're going to see other companies start
• 21:12
  Speaker 2: to do that because so far it isn't necessarily rewarded
• 21:16
  Speaker 2: companies that is for for looking that far out.
• 21:18
  Speaker 8: Yep.
• 21:19
  Speaker 5: What's the next thing we're looking for, which just in
• 21:22
  Speaker 5: terms of your world and to see kind of where
• 21:25
  Speaker 5: the demand is coming from.
• 21:27
  Speaker 6: Yeah, from from my world. Look, earnings is died down.
• 21:30
  Speaker 6: A couple of things that we're looking for. We have
• 21:33
  Speaker 6: the computext conference that's going on right now, so we've
• 21:36
  Speaker 6: seen some of the chip maker names benefit as well.
• 21:39
  Speaker 6: But there's going to be some AI server news as well,
• 21:41
  Speaker 6: about optics news. And then on top of that we
• 21:45
  Speaker 6: have some conferences, so we'll probably get a follow up
• 21:47
  Speaker 6: from HPE from their Discovery conference coming soon.
• 21:51
  Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
• 21:56
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 22:00
  Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
• 22:03
  Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
• 22:07
  Speaker 1: can also watch us live every weekday on YouTube and
• 22:11
  Speaker 1: always on the Bloomberg terminal