Latest / Bloomberg Intelligence / BI Weekend: Oracle Earnings, Novo Cuts, Anglo Deal

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BI Weekend: Oracle Earnings, Novo Cuts, Anglo Deal · Bloomberg Intelligence

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Speaker 5: Each and every week, we provide in depth research and
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Speaker 5: hundred and thirty industries are analysts cover worldwide.
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Speaker 3: Today, we look at one of the biggest mining deals
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Speaker 3: in over a decade.
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Speaker 5: Plaus Well look at why the Danish drug maker Novo
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Speaker 5: Nordist is cutting about eleven percent of its workforce.
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Speaker 3: But first we begin with earnings from the computer tech
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Speaker 3: company Oracle.
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Speaker 5: This week, the company gave an aggressive outlook for its
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Speaker 5: cloud business, causing the stock to surge the most since
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Speaker 5: nineteen ninety two.
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Speaker 3: For more, guest host Alexis Christophers and I were joined
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Speaker 3: by anor Agrana, Bloomberg Intelligence technology analyst. We first asked
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Speaker 3: on Aroan to break down Oracles earnings and the company's
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Speaker 3: major stock jump.
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Speaker 6: Oracle is a very unique company because it has your
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Speaker 6: traditional software but also a few years ago it started
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Speaker 6: a cloud business called Oracle Cloud Infrastructure, something very similar
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Speaker 6: to what Aws Tells or Microsoft Azure. And one of
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Speaker 6: the advantages it has is it just rents out it's
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Speaker 6: you know, servers for people to go out and train
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Speaker 6: their AI models or you know, run their applications on it.
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Speaker 6: So this is really a new business for them, you know,
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Speaker 6: just came up the last few years, and that's where
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Speaker 6: the biggest growth is and that's what's driving the stock.
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Speaker 3: What's happening with the rest of the company, its operations,
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Speaker 3: it's software bil business. Is it still cutting costs for instance,
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Speaker 3: and reducing headcount.
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Speaker 6: The advantage Oracle has compared to let's say a company
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Speaker 6: like core v for Nebus, is that it has a
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Speaker 6: very high margin database business and very high margin application business.
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Speaker 6: These businesses have gross margins, you know, let's say north
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Speaker 6: of ninety percent. Now when you marry that with a
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Speaker 6: massive AI infrastructure business where you need to spend a
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Speaker 6: lot of money, that's problematic for somebody that doesn't have that.
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Speaker 6: But Oracle has that luxury that it can spend billions
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Speaker 6: of dollars. You know, before we were thinking they're going
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Speaker 6: to spend you know, somewhere in the low thirty billion range,
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Speaker 6: which was already higher than what they had guided, and
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Speaker 6: you know, even the street was expecting. They came out
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Speaker 6: and said they're going to spend over thirty five billion
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Speaker 6: and you know the next financial year. So that's a
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Speaker 6: lot of money going into expanding data center, buying chips
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Speaker 6: by you know, creating a new infrastructure to fulfill this demand.
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Speaker 7: When you look at the competition here, Microsoft, Amazon, Alphabet,
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Speaker 7: what does Oracle or how does Oracle differentiate itself not
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Speaker 7: only for the customer, the client, but for investors.
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Speaker 6: Yeah, and one of the things I would say is
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Speaker 6: everybody is having a good time in this particular party.
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Speaker 8: It's not just you know, one company that's scaling it.
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Speaker 6: It's just the size of their business is far smaller
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Speaker 6: than it is for let's say AWS or Microsoft. You know,
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Speaker 6: in the last financial year, the revenue was you know,
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Speaker 6: roughly about ten billion or so. Aws's rund rate is
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Speaker 6: one hundred and twenty five billion. Microsoft's business is seventy
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Speaker 6: five billion. Google's business is fifty billion. So you know, please,
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Speaker 6: you know, you've got to take that with the context
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Speaker 6: of how big Oracle's cloud infrastructure is compared to some
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Speaker 6: of the bigger vendors out there.
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Speaker 3: You know, honrog it feels like Oracle kind of came
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Speaker 3: from out of nowhere with its you know, contributions to
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Speaker 3: the AI space and being such a big player. Certainly,
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Speaker 3: the bookings of almost half a trillion dollars caught my eye,
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Speaker 3: and it's more than four times what it was the
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Speaker 3: same time last year. Are there any other kind of
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Speaker 3: dark horses out there that you would be keeping your
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Speaker 3: eye on that could be the next Oracle, which is
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Speaker 3: already feels like it's the next in.
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Speaker 6: VideA, Yeah, I think one of the things you have
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Speaker 6: to think about it is it's not easy to come
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Speaker 6: up with this structure. A lot of business like this
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Speaker 6: because you need billions of dollars to create a data
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Speaker 6: center or to lease out a data center, then buy
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Speaker 6: equipment like in Vidia chips and computing equipment. There are
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Speaker 6: a handful of companies like you know, core beav of Nebeus,
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Speaker 6: which are smaller neo cloud players that specialize in renting
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Speaker 6: and VideA GPUs to customers. Now, the bigger vendors have
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Speaker 6: the capital that they are also expanding it. But again,
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Speaker 6: as I said, given the size of the increment that
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Speaker 6: they are seeing, you know, you're not getting that same
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Speaker 6: growth rate.
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Speaker 7: Do you think there's a little over exuberance though in
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Speaker 7: the market, especially with so much talk about whether or
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Speaker 7: not we are in an AI bubble and what happens
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Speaker 7: if it starts to deflate.
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Speaker 8: Yeah.
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Speaker 6: See, one of the things you have to remember is
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Speaker 6: for Oracle, at least they have this backlock of ordos
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Speaker 6: coming in and it's coming you know. For example, one
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Speaker 6: of the biggest customers right now is open Ai. If
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Speaker 6: Opening Eye continues to expand revenue at a good pace
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Speaker 6: over the next several years, they are going to be
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Speaker 6: spending a lot of money to train their models in
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Speaker 6: order to stay ahead. So I think there is a
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Speaker 6: lot of relationship over there. If let's say you and
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Speaker 6: I don't use chat GPT as much, that would have
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Speaker 6: an impact on open Aiy's revenue, That would have impact
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Speaker 6: downstream revenue on all the other players, you know, whether
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Speaker 6: that's in Verdiao Oracle.
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Speaker 8: But frankly speaking, we are not there yet.
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Speaker 3: It doesn't feel like this is a situation where it's
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Speaker 3: a zero sum game Oracle wins and Microsoft, Google and
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Speaker 3: Amazon lose, or is it.
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Speaker 6: So there are a few companies that fall into this pocket,
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Speaker 6: you know, and those include Amazon Web Services, Microsoft, Google
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Speaker 6: Cloud Code, viv Oracle, and Nabius for example. So these
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Speaker 6: are the ones that are seeing extra spending right now.
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Speaker 6: But when you look at on the application side, you know,
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Speaker 6: whether that's Salesforce or Workday, those guys are not seeing
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Speaker 6: that benefit because they're not in that infrastructure game. So
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Speaker 6: there's a huge difference between two vendors, or between the
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Speaker 6: two category of vendors.
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Speaker 8: Right now.
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Speaker 6: We are more in the built phase of AI, not
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Speaker 6: the implementation phase of AI.
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Speaker 7: You know, it's hard to believe, Scarlett, but this stock
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Speaker 7: and is now worth more than has a larger market
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Speaker 7: cap than Walmart, Eli, Lilly, JP, Morgan Chase.
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Speaker 3: Yeah, that is pretty remarkable, and again it feels like
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Speaker 3: it kind of came from out of nowhere.
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Speaker 7: You're right on that, which is why I brought up,
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Speaker 7: you know, Amazon, Microsoft, right on your rog I mean,
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Speaker 7: the fact that those were the names we were really
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Speaker 7: talking about when it came to AI and then sort
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Speaker 7: of Oracle comes out of out of the blue.
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Speaker 6: Yeah, but that's the whole point this particular infrastructure. If
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Speaker 6: you're going to run large models, it's very unlikely you
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Speaker 6: going to do it in house. I mean, you can
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Speaker 6: do it, but you required a lot of investment going in.
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Speaker 6: You're better off renting out data center capacity or computing
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Speaker 6: capacity from one of the cloud vendors. And Oracle has
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Speaker 6: the money to spend it, and they have the relationship
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Speaker 6: with Nvidia to get those GPUs. And on top of that,
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Speaker 6: they're offering this to customers and saying here's my equipment,
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Speaker 6: come and test it out the way you like it. Amazon,
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Speaker 6: on the other hand, thought example sells it as a package,
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Speaker 6: and that's where you're you're seeing some distinction. And also
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Speaker 6: the size, as I mentioned, before our.
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Speaker 5: Thanks to Honor Agrana, Bloomberg Intelligence technology analysts.
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Speaker 3: We move next to news in the telecommunications space.
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Speaker 5: This week, the space tech company SpaceX agreed to buy
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Speaker 5: wireless spectrum from EchoStar for about seventeen billion dollars in
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Speaker 5: cash and stock.
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Speaker 3: And this comes weeks after EchoStar agreed to sell spectrum
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Speaker 3: licenses to AT and T for about twenty three billion
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Speaker 3: dollars in an all cash transaction.
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Speaker 8: For more.
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Speaker 5: Guest host Alexis Christopherus was joined by John Butler, Bloomberg
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Speaker 5: Intelligence Senior telecom analysts. We first asked John how this
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Speaker 5: deal will help SpaceX.
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Speaker 9: So the key to this deal is a spectrum called
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Speaker 9: AWS four. So if you look at Starlink and it's
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Speaker 9: sprivals in the satellite space, they all hold spectrum, but
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Speaker 9: they're not allowed to offer wireless spectrum, I'm sorry, wireless
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Speaker 9: services over that spectrum. AWS four spectrum, according to the FCC,
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Speaker 9: can be used flexibly. It's called flexible use spectrum, meaning
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Speaker 9: the satellite providers can offer anything from mobile services to
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Speaker 9: satellite data, downlinked services, video, whatever. It's open use spectrum
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Speaker 9: if you want to think of it that way. And
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Speaker 9: so Starlink getting its hands on this key spectrum will
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Speaker 9: allow them at some point in the future to potentially
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Speaker 9: enter the wireless market as a competitor to AT and T,
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Speaker 9: Verizon and T Mobile.
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Speaker 7: So EchoStar's shareholders seem to like this deal. What are
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Speaker 7: they going to do with the proceeds? What will Echo
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Speaker 7: Star do with the proceeds of the sale?
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Speaker 9: So for EchoStar, it's a very good deal as well.
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Speaker 9: They have really struggled to get their wireless service off
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Speaker 9: the ground. They've been building this five G wireless network
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Speaker 9: and have a relatively weak prepaid brand called Boost and
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Speaker 9: they've really struggled there. So this brings in much needed
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Speaker 9: funds for them to pay down debt. They've been a
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Speaker 9: bit stretched on that front, over leveraged, and you know,
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Speaker 9: this deal, together with a deal a couple of weeks
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Speaker 9: ago with AT and T, is going to bring in
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Speaker 9: billions of dollars to reduce debt. That's number one. And
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Speaker 9: number two, it brings in fresh capital for them to
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Speaker 9: invest in the business. And I have a feeling they're
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Speaker 9: probably going to take a step back and reevaluate the
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Speaker 9: strategy here based on the fresh funding and decide what
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Speaker 9: the best avenues of growth may be going forward.
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Speaker 7: I'm wondering if this is going to satisfy the FCC
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Speaker 7: this deal, because I know that they were sort of
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Speaker 7: on EchoStar's case, if you will. They wanted them to
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Speaker 7: sell some of their airwaves as the company looks to
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Speaker 7: roll out it's five G technology. I know they sold
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Speaker 7: some spectrum licenses to at and recently. So do you
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Speaker 7: think this is going to sort of take the FCC
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Speaker 7: off their backs?
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Speaker 2: I do.
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Speaker 9: I mean, I think Starlink was working with the FCC.
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Speaker 9: They had written a letter about Echo Stars under use
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Speaker 9: of this spectrum. Starlink obviously really wants to get their
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Speaker 9: hands on it, and I think the FCC really took
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Speaker 9: their side on this one. I think they understood that
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Speaker 9: echo Star, being the only owner of this flexible use spectrum,
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Speaker 9: had not really put it to use to date, so
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Speaker 9: in their view it was being underutilized and being such
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Speaker 9: a critical asset, felt that, you know, sale might make sense,
10:43
Speaker 9: and so they really EchoStar really got into it with
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Speaker 9: the FCC trying to protect those licenses. But in the
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Speaker 9: end here I think, if you want to think of
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Speaker 9: it this way, the FCC won the day and net.
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Speaker 9: I think it's a good deal for both Echo Stars
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Speaker 9: and Starlink and the FCC.
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Speaker 7: Now I know SpaceX or Starlink had a deal with
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Speaker 7: T Mobile, right, how is this spectrum acquisition with EchoStar
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Speaker 7: different if at all?
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Speaker 9: So? I think ultimately Starlink could go from being a
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Speaker 9: partner with T Mobile to being a competitor of T Mobiles.
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Speaker 9: As I said a moment ago, this spectrum opens the
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Speaker 9: door for them to get into wireless directly without having
11:28
Speaker 9: to partner with a terrestrial carrier. The current deal with
11:32
Speaker 9: T Mobile basically has Starlink. I think the best way
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Speaker 9: to think about it is they're almost like a tower company.
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Speaker 9: They're providing the space based cell sites if you will,
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Speaker 9: to carry T Mobile traffic, and they get paid a
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Speaker 9: fee for that, but they're not earning the level of
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Speaker 9: profits that you could as as a direct carrier. So
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Speaker 9: down the road, Starlink, understanding this, wants to enter the
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Speaker 9: cellular business directly. They have a lot to do before
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Speaker 9: that that happens, but I think it longer term puts
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Speaker 9: the deal with T Mobile in jeopardy.
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Speaker 7: The seventeen billion dollars a fair price for this for
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Speaker 7: these spectrum licenses.
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Speaker 6: Do you think you know?
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Speaker 9: Spectrums a very liquid market, so it's tough to gauge valuations.
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Speaker 9: But in my mind, I look at it as a
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Speaker 9: fair price given the potential again for Starlink to enter
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Speaker 9: this huge market. Down the road.
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Speaker 3: Our thanks to John Butler, Bloomberg Intelligence, senior telecom analyst.
12:37
Speaker 5: Coming up, Well, look at how the US's ability to
12:39
Speaker 5: assess data on climate change is being impacted by the
12:42
Speaker 5: Trump administration.
12:43
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 3: depth research and data on two thousand companies at one
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Speaker 3: hundred and thirty industries.
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Speaker 5: I'm Normal Indo.
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Speaker 3: And I'm Scarlet Food. This is Bloomberg.
13:00
Speaker 1: Is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on
13:05
Speaker 1: Bloomberg Radio.
13:06
Speaker 5: I'm Scarlet Foo and I'm normal in a filling in
13:09
Speaker 5: for Paul Sweeney. We move next to a major deal
13:11
Speaker 5: in the mining industry.
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Speaker 3: This week, the global mining company Anglo American agree to
13:15
Speaker 3: acquire Canada's natural resource company tech Resources.
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Speaker 5: It's a so called zero premium deal and this deal
13:21
Speaker 5: will create a more than fifty billion dollar company and
13:24
Speaker 5: one of the biggest mining deals in over a decade.
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Speaker 3: So for more guest host Alexis Christophers and I were
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Speaker 3: joined by Richard Burke, Bloomberg Intelligence senior basic materials analysts.
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Speaker 3: We first asked Richard what a zero premium transaction actually is.
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Speaker 4: So what they've done is it's a merger of equals,
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Speaker 4: and it's kind of interesting even though it's it's labeled
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Speaker 4: mergers equal that American Angle shareholders are going to end
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Speaker 4: up owning Butts two thirds of company roughly, and tech
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Speaker 4: is shareholders going to end up owning a third company. Well,
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Speaker 4: it's gonna be headquarter in Canada, the board is going
14:01
Speaker 4: to be fifty to fifty the city, and the management's
14:04
Speaker 4: gonna be fifty to fifty. So even though it's kind
14:06
Speaker 4: of you know, no premium merger equals kind of you know,
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Speaker 4: the the governance issues kind of point to merger of
14:15
Speaker 4: equals and that's really probably structured in order to get
14:19
Speaker 4: approved by the Investment Act Kada Investment Act. And also
14:23
Speaker 4: the Kevil family that owns Tech has two classes shore olders,
14:28
Speaker 4: class Class A and Class B. Class A is super
14:31
Speaker 4: voting rights. He's owned, he owns majority of those shares,
14:36
Speaker 4: so he has to approve this deal. In the past,
14:39
Speaker 4: he you know, Glenn Corter, when Glencourt tried to buy
14:42
Speaker 4: them about two years ago, he kind of vetoed the deal.
14:45
Speaker 4: So the deal and go through. So there's kind of
14:47
Speaker 4: a unique structure this deal to kind of you know,
14:51
Speaker 4: fitted through final approval makes sense.
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Speaker 3: Okay. So there was also language in the statement of
14:57
Speaker 3: this so called merger of equals that would allow both
14:59
Speaker 3: firms to con that are unsolicited proposals and for the
15:03
Speaker 3: deal to end if there's a better offer. Does that
15:05
Speaker 3: mean they're angling for some counter offer from someone else.
15:09
Speaker 4: Well, I think it would be a hard press, I doubt,
15:14
Speaker 4: in order to get it through the Canadian Investment Act,
15:16
Speaker 4: which you know, copper is now being considered a critical
15:20
Speaker 4: material critical mineral. Canada has said they don't want to
15:24
Speaker 4: see any of their mining companies go away. So would
15:27
Speaker 4: somebody come in who can pay that much, be willing
15:31
Speaker 4: or to PHP or Rio Tinto, be willing to move
15:34
Speaker 4: their headquarters from where they're at to Canada. I highly
15:38
Speaker 4: doubt it. So, but I think you have to put
15:41
Speaker 4: that language in the deal that hey, we're open to.
15:44
Speaker 10: So it's like boilerplate, language plate and also prevent that
15:47
Speaker 10: you know't get sued by shareholders that you have to
15:50
Speaker 10: go out and looked at for all deals.
15:52
Speaker 8: Right.
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Speaker 7: Do you think that this deal though, between Anglo American
15:55
Speaker 7: and Tech is going to be the thing that sort
15:57
Speaker 7: of ignites more M and A in this industry?
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Speaker 4: I think you know, they used to be saying I
16:04
Speaker 4: used to cover oil and gas industry years ago before
16:07
Speaker 4: more focused on Melson mining. There's you used to be
16:10
Speaker 4: on saying it's cheaper draw on Wall Street and then
16:12
Speaker 4: drill up in the field. And that seems to be
16:16
Speaker 4: happening in If you look at how much it costs
16:21
Speaker 4: to you know, get a new copper, deposit up and
16:25
Speaker 4: writing also how many years were permitting and all the
16:28
Speaker 4: other things that happens, you can see that maybe you
16:33
Speaker 4: sit down and look at this and say, Okay, maybe
16:36
Speaker 4: cheaper draw out, you know, mine on Wall Street, then
16:39
Speaker 4: go out and make the.
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Speaker 5: Mine our Thanks to Richard Bork Bloomberg Intelligence Senior Basic
16:44
Speaker 5: materials analysts.
16:45
Speaker 3: We now moved to some news in the pharmaceutical space.
16:47
Speaker 5: This week, the Danish drug maker Novo Nordis announces it's
16:50
Speaker 5: cutting nine thousand jobs globally. This equals about eleven percent
16:53
Speaker 5: of its workforce. The company also cut its profit forecast
16:56
Speaker 5: for the third time this year as it fights to
16:58
Speaker 5: recover ground in the obesity dry market.
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Speaker 3: For more on this, guest host Alexis Christophers and I
17:03
Speaker 3: turned to Sam Fazzelli, Bloomberg Intelligence, Director of Research for
17:06
Speaker 3: Global Industries and senior pharmaceuticals analysts. We began by asking
17:10
Speaker 3: Sam to talk about the larger changes taking place at NOVO.
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Speaker 11: The story here is that this is not the first
17:15
Speaker 11: time they've lowered guidance for the year. I mean this
17:17
Speaker 11: time there's an impact on the EPs front from obviously
17:20
Speaker 11: the cost of restructuring, assuming they can get it all
17:24
Speaker 11: done this year, but it's a pretty chunky one. Nine
17:26
Speaker 11: thousand people, about eleven percent of the workforce, and a
17:28
Speaker 11: lot of that.
17:29
Speaker 8: Coming from Denmark.
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Speaker 11: If you read the essence of the press release that
17:33
Speaker 11: they put at there's a couple of things that they
17:35
Speaker 11: bring out.
17:35
Speaker 8: They want to invest more on R and D Well.
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Speaker 11: What I think this is telling you is that the
17:40
Speaker 11: growth that they had planned for the next five years,
17:43
Speaker 11: they may be thinking maybe that won't come as test
17:45
Speaker 11: as we were expecting it because of competition from Lily,
17:49
Speaker 11: compounders and other products potentially coming to market to the
17:52
Speaker 11: pace that they were hoping. So if you want to
17:54
Speaker 11: keep investing in R and D, you need to liberate
17:55
Speaker 11: some cash. And also it looks like that they're also
17:58
Speaker 11: thinking about changing the world that they're doing their marketing
18:02
Speaker 11: because of the different channels that they're getting involved with
18:04
Speaker 11: now direct to consumer, that is not something that Prauma
18:07
Speaker 11: has done very often before. In fact, only Lily had
18:09
Speaker 11: done it prior to this, also for obesity drugs, So
18:13
Speaker 11: maybe the costs of that are different. And there's an
18:15
Speaker 11: element that they keep that they've referred to in there,
18:17
Speaker 11: which is a culture of performance related reward, and you
18:24
Speaker 11: think to yourself, well, what was it before? So it
18:27
Speaker 11: seems like that they want to make it much harder
18:30
Speaker 11: focus on you've got to deliver because we need the growth.
18:34
Speaker 8: So that's the interesting wle to.
18:35
Speaker 7: Watch, you know, Sam, I think to a lot of
18:37
Speaker 7: casual investors who don't deep dive into you know, Novo
18:41
Speaker 7: Nordisk the way you might say, would look at this
18:44
Speaker 7: and say, listen, they have the most popular weight loss drugs, right,
18:47
Speaker 7: will go vi Ozempek. Why is this company having these
18:51
Speaker 7: problems when you drill down or is it just a
18:55
Speaker 7: problem with having to scale too quickly? Is it that
18:58
Speaker 7: the company isn't nimble enough, just sort of change with
19:02
Speaker 7: the times.
19:04
Speaker 11: Well, Nobodordisk has been a poster child of how you
19:07
Speaker 11: grow from a small company selling to a relatively basic
19:11
Speaker 11: set of products twenty thirty years ago to one that's
19:14
Speaker 11: become essentially one of the innovators in this space. They
19:17
Speaker 11: brought the first JL we want to market, so we
19:20
Speaker 11: can't fault them for that. It's just that I think
19:22
Speaker 11: this growth that they had to go through where the
19:25
Speaker 11: planning was done, you know a lot of I mean,
19:27
Speaker 11: we have one hundred billion dollar market potential for more
19:30
Speaker 11: obesity as a whole, right, So it's just difficult, I think,
19:34
Speaker 11: to judge into this space. And maybe the previous CEO
19:37
Speaker 11: had looked and said, I'm pretty sure we're going to
19:39
Speaker 11: be fifty percent of that market. We need to plan
19:42
Speaker 11: for that growth. And then two things changed. Competition from
19:46
Speaker 11: really is superintense. They have what I would call it
19:49
Speaker 11: a better drug in terms of the efficacy profile that's
19:51
Speaker 11: been shown in head to her trials. And then of
19:55
Speaker 11: course you've got on top of that compounders that don't
19:57
Speaker 11: seem to be don't seem to be going way, they
20:00
Speaker 11: keep taking cheaper generics or generics manufactured, they'll try to
20:04
Speaker 11: making the drugs. So that's where I think the new
20:08
Speaker 11: Area issue is in that we all expected the FDA
20:11
Speaker 11: to really clump hard down on that and they haven't
20:16
Speaker 11: made issue, you know, statements, but they're allowing them. They
20:19
Speaker 11: even found areas outside the US where these compound compounders
20:23
Speaker 11: can get their drugs from, which is counterintuitive.
20:26
Speaker 5: Our thanks to Sam Fazelli, Bloomberg Intelligence, Director of Research
20:29
Speaker 5: for Global Industries and senior pharmaceuticals analysts.
20:32
Speaker 3: This week we focus on a Bloomberg Big Take story
20:34
Speaker 3: entitled Trump is Unwinding Climate Science at a Dangerous Pace.
20:38
Speaker 3: You can find it on Bloomberg dot Com and the Terminal.
20:41
Speaker 5: The story looks at how mass firings, regulatory rollbacks, program closures,
20:44
Speaker 5: and funding cuts across agencies have threatened the US's ability
20:48
Speaker 5: to gather and says data on climate change, and this
20:50
Speaker 5: is under the current Trump administration.
20:52
Speaker 3: For more guestos, Alexis Christophers and I were joined by
20:55
Speaker 3: Eric Roston, Bloomberg Climate reporter. We began by asking Eric
20:59
Speaker 3: to explain how President Trump's policies are impacting the ability
21:02
Speaker 3: to gather data.
21:03
Speaker 2: Whether you are a mayor of a city, or head
21:09
Speaker 2: of an insurance company or head of an agriculture company,
21:14
Speaker 2: everyone throughout the economy, public and private sector needs good
21:19
Speaker 2: information to make good decisions, and the US in recent
21:24
Speaker 2: decades has had the global leadership role in developing the
21:29
Speaker 2: kinds of data that everybody needs in order to see
21:33
Speaker 2: what's coming, to set insurance rates, to understand whether we
21:37
Speaker 2: should build a house here, to understand if this floodplane
21:40
Speaker 2: is going to be like a bad place to build houses.
21:45
Speaker 2: And so that's the data we're talking about here, is
21:49
Speaker 2: actionable data that people in the economy have come to
21:53
Speaker 2: rely on to make decisions. To cite one of the
21:58
Speaker 2: many examples we talk about it in in the story,
22:02
Speaker 2: the US produces it's supposed to be not more than
22:06
Speaker 2: every four years national Climate Assessment, which is a huge
22:12
Speaker 2: amount of time, a huge amount of time, and they take,
22:15
Speaker 2: you know, years to develop, hundreds of people to write,
22:18
Speaker 2: and thousands of papers that they're based on. And you
22:22
Speaker 2: see these reports. Cite it in Travelers earning calls and
22:26
Speaker 2: Chipotle earning calls and reports in Marriott, you know, brands
22:30
Speaker 2: we see every day understand the material and understand the
22:34
Speaker 2: needs of this material. I'm not putting words in their mouth.
22:36
Speaker 2: I'm just pointing out that they say things like this,
22:39
Speaker 2: those were taken away from public view. So I think
22:44
Speaker 2: that's an interesting place to start on because like, yeah,
22:47
Speaker 2: the government, like any government, can be cut right and
22:52
Speaker 2: save money, and it's just the nature of bureaucracy. But
22:57
Speaker 2: why are some of the most authoritative and well vetted
23:02
Speaker 2: scientific reports ever written being taken away from public view
23:08
Speaker 2: where they've been for many years?
23:11
Speaker 3: All good questions, and I'm sure that we won't get
23:13
Speaker 3: answers to them right away either. So what does it
23:16
Speaker 3: mean if you're a company like Travelers and you're relying
23:18
Speaker 3: on that data? Do you can you go to private
23:20
Speaker 3: sources for that kind of information? Does that exist?
23:24
Speaker 2: It's that's a great question. And if we had like
23:28
Speaker 2: another two hours, I'd love to, you know, because we've
23:30
Speaker 2: spent a lot of time in the last few years
23:33
Speaker 2: on the private sectors, you know, filling a hole in
23:39
Speaker 2: useful climate data that that businesses the businesses needs. So
23:44
Speaker 2: the short answer is, yes, some of this this this data,
23:50
Speaker 2: A lot of it is like translated into the language
23:52
Speaker 2: of risk for companies, it does exist. The bigger concern is, like,
23:58
Speaker 2: that's a tiny fraction of what we're talking about here.
24:02
Speaker 2: You know, we're talking about, you know, very sophisticated computer
24:07
Speaker 2: models that like the entire world relies on to make
24:10
Speaker 2: sense of you know, observations we see and weather stations
24:14
Speaker 2: and in you know, in other sources and a particularly
24:20
Speaker 2: you know, I don't know, I'll get in trouble for
24:22
Speaker 2: saying this, but this could be described as like the
24:25
Speaker 2: most boring kind of data is also some of the
24:28
Speaker 2: most important, and that is unsexy data. Unsexy data. It's
24:33
Speaker 2: like continuous monitoring data. It's you know, it's very important
24:38
Speaker 2: for some kinds of data that you have a complete,
24:42
Speaker 2: unbroken record. The most iconic one in this space is
24:47
Speaker 2: the CO two measurements from Hawaii and Mauna Loa that
24:52
Speaker 2: have been going on since the late nineteen fifties and
24:55
Speaker 2: are largely responsible for the discovery of global warming. Like
25:00
Speaker 2: that data set, one of the most famous data sets
25:03
Speaker 2: ever collected, was slated for closure in the recent White
25:10
Speaker 2: House budget.
25:11
Speaker 5: Hard thanks to Eric Roston Bloomberg Climate Reporter, Coming up,
25:14
Speaker 5: look Ahead to a potentially big m and a deal
25:17
Speaker 5: in the banking sector.
25:18
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
25:21
Speaker 3: depth research and data on two thousand companies and one
25:23
Speaker 3: hundred and thirty industries.
25:25
Speaker 5: You can access Bloomberg Intelligence via Bigo on the terminal.
25:28
Speaker 3: I'm normal Linda, and I'm Scarletfoo. This is Bloomberg.
25:38
Speaker 1: This is Bloomberg Intelligence with Scarlettfoo and Paul Sweeney on
25:43
Speaker 1: Bloomberg Radio.
25:45
Speaker 3: I'm Scarletfoo and I'm normal Linda, filling in for Paul Sweeney.
25:48
Speaker 3: We moved to some news in the banking sector this week.
25:51
Speaker 3: PNC Financial Services agreed to buy First Bank for about
25:53
Speaker 3: four point one billion dollars, adding more than twenty six
25:57
Speaker 3: billion dollars in assets and branches in Colorado and Araa, Arizona.
26:00
Speaker 5: The acquisition will triple the number of P and C
26:03
Speaker 5: branches in Colorado, and it will give the combined company
26:05
Speaker 5: more than fifteen percent of deposits in the state.
26:08
Speaker 3: Guest hosts Alexis Christophers and I were joined by Herman Chen,
26:11
Speaker 3: Bloomberg Intelligence, senior analysts for US regional banks. We first
26:15
Speaker 3: asked Herman if bank regulators are going to be okay
26:17
Speaker 3: with the deal of this size.
26:19
Speaker 10: The regular toory landscape has been really great for banking
26:23
Speaker 10: and getting bank deals done. That's why you've seen some
26:26
Speaker 10: more bank deals over the past couple of months. You
26:29
Speaker 10: saw Huntington, which is based in Ohio, go into Texas
26:32
Speaker 10: for Vera Techs. And you've see an emerging of vehicles
26:35
Speaker 10: in the Southeast with so Novas and Pinnacle. And this
26:39
Speaker 10: is sort of like the third large regional bank deal
26:41
Speaker 10: over the past couple months. So it just sort of
26:44
Speaker 10: signals that the bank the Trump administration is really open
26:47
Speaker 10: it for a bank of an am.
26:48
Speaker 3: And this is not PNC's first attempt at real expanding
26:52
Speaker 3: its Colorado presence. It had previously sought to open sixteen
26:55
Speaker 3: locations in Colorado. Why is Colorado such a hot market
26:58
Speaker 3: for P ANDC?
26:59
Speaker 10: Right, I would take step back and sort of highlight
27:02
Speaker 10: that the P and C, which is mostly in the Northeast,
27:07
Speaker 10: mid Atlantic Midwest, that they've expanded across the Sun Belt
27:12
Speaker 10: states in Colorado with the twenty twenty one deal for
27:15
Speaker 10: BBVA USA, and they sort of double down on those
27:18
Speaker 10: markets with this expansion plan to grow organically by opening
27:23
Speaker 10: up new branches and this deal that they announced really
27:25
Speaker 10: sort of supports that growth and accelerates it in Colorado
27:29
Speaker 10: and in Arizona.
27:30
Speaker 7: So I'm just wondering, as you look out onto the
27:32
Speaker 7: landscape now, who might be the next takeover candidate. Who
27:36
Speaker 7: might we be talking about in the not too just
27:38
Speaker 7: in future.
27:39
Speaker 10: Yeah, So you've seen some of these deals where these
27:42
Speaker 10: slower growth Midwest banks grow into areas like Texas, Florida, Colorado.
27:49
Speaker 10: So the banks are sort of smaller in size, and
27:53
Speaker 10: we're talking about the first banks about twenty billion in assets,
27:57
Speaker 10: so banks of slimmer of that size, these higher growth
28:01
Speaker 10: markets are really attractive to some of these larger institutions.
28:06
Speaker 3: So with this purchase, PNC's total assets approaches six hundred
28:10
Speaker 3: billion dollars. It will bring it closer to the number
28:12
Speaker 3: one regional bank, which is US Bank Corp. Is Uanrup
28:15
Speaker 3: still a regional bank, Yeah.
28:18
Speaker 10: I would say there are three super regional banks, and
28:21
Speaker 10: that will put p and C, US Bank Corp and
28:24
Speaker 10: Truest where they're sort of below that seven P fifty mark,
28:28
Speaker 10: but larger than your typical regional bank. And they PNC
28:33
Speaker 10: now is a coast to coast lender, so and have
28:36
Speaker 10: operations all from the Northeast all the way down to Florida, Texas, California,
28:41
Speaker 10: So you can't really call them a regional bank at
28:44
Speaker 10: this point. I would view them as more super regional.
28:48
Speaker 7: And I want to tie it back to the FED
28:50
Speaker 7: in interest rates, because don't all roads really lead there
28:53
Speaker 7: at this point, And I want to talk about what again,
28:56
Speaker 7: if this is going to be an environment of lower
28:58
Speaker 7: interest rates for the foreseeable future, what is this going
29:01
Speaker 7: to mean for the banks, but especially these smaller regional banks,
29:03
Speaker 7: because I'm thinking it may even squeeze their profitability more.
29:06
Speaker 8: Yeah.
29:07
Speaker 10: Yeah, it's interesting because we had a few FED rate
29:10
Speaker 10: cuts at the end of last year, and the regional
29:13
Speaker 10: banks that I cover were able to navigate that pretty well.
29:15
Speaker 10: They're able to keep their net interest margins, which is
29:18
Speaker 10: a key metric for profitability, fairly stable. And that's one
29:22
Speaker 10: of the reasons why they've been able to do that
29:24
Speaker 10: is they've been able to lower their deposit costs, which
29:28
Speaker 10: was one of the things that really is a key
29:31
Speaker 10: metric for banks to really show top line growth. On
29:36
Speaker 10: top of that, lower interest rates could help loan growth.
29:41
Speaker 10: You've seen some companies like Rockets Mortgage be very abuiliant
29:48
Speaker 10: for lower interest rates, and so that could help improve
29:51
Speaker 10: some of the demand for lending, and that's something that
29:54
Speaker 10: we're seeing so far over the first half of the year.
29:57
Speaker 3: So they'll make it up in volume what they lose
29:58
Speaker 3: in profitability, they plan.
29:59
Speaker 10: To we can make it in volume. You'll see some
30:02
Speaker 10: dents in like the rates that they charge for loans,
30:06
Speaker 10: but they'll also make it up in volume and lowering
30:09
Speaker 10: their funding costs.
30:10
Speaker 3: When you look at the landscape overall of M and
30:12
Speaker 3: A in the banking sector, it feels like we've been
30:14
Speaker 3: waiting for something to happen for a long time, and
30:16
Speaker 3: maybe this is kind of the domino, the first domino
30:19
Speaker 3: that falls. Yeah, well, the big banks and I'm here,
30:22
Speaker 3: I'm talking about the JP Morgans, the Bank of America's,
30:24
Speaker 3: Wells Fargo's. Will they play any role in this consolidation.
30:27
Speaker 10: They're already too big, So there's that they are prohibited
30:34
Speaker 10: from from doing such deals because they just have dominant
30:37
Speaker 10: market share in their markets. One thing that we did
30:40
Speaker 10: see during the height of the regional banking crisis a
30:43
Speaker 10: couple of years back is that JP Morgan bought First
30:46
Speaker 10: Republic in an FDIC failed bank acquisition. So if we
30:51
Speaker 10: in the sense that if there we do get to
30:55
Speaker 10: a place like that, that's when the big banks can play,
30:58
Speaker 10: but in a straight man a type scenario.
31:01
Speaker 3: To clean up messes.
31:02
Speaker 2: They can clean They can.
31:02
Speaker 10: Clean up messes, but they can't outworthy buy a bank
31:06
Speaker 10: at this point, they're just way too big.
31:08
Speaker 7: And just what about the consumer out there only shopping
31:11
Speaker 7: for the best deal. You know, it used to be
31:13
Speaker 7: that these smaller regional banks would be the place to
31:15
Speaker 7: go for the better CD rates, right or a more
31:17
Speaker 7: friendly friendly mortgage terms. Is that still the case?
31:21
Speaker 8: Yeah?
31:21
Speaker 10: Sure, So that's what really great about these markets that
31:25
Speaker 10: P and C is going to where they can have
31:27
Speaker 10: really dominant market share in Denver and Arizona, and just
31:31
Speaker 10: having that marketing and having the branches really helps with
31:36
Speaker 10: deposit taking and helping your consumer.
31:39
Speaker 5: Out our Thanks to Herman Chan, Bloomberg Intelligence senior analysts
31:43
Speaker 5: for US regional banks.
31:44
Speaker 3: This week we focus on another Bloomberg Big Take story
31:47
Speaker 3: entitled Tesla's dangerous store design can trap people inside. You
31:51
Speaker 3: can find it on Bloomberg dot Com and The Terminal.
31:53
Speaker 5: This story looks at how some of Tesla's design features,
31:56
Speaker 5: like door handles are confusing occupants and first responders, and
31:59
Speaker 5: this worsening injuries and damage caused by survivable crashes.
32:03
Speaker 3: So for more on this guest host Alexis Christophers and
32:05
Speaker 3: I were joined by Craig Tdrudell, Bloomberg Global Autos Editor.
32:09
Speaker 3: We began by asking Craig to give us his main
32:11
Speaker 3: takeaways from this story.
32:13
Speaker 12: This is a company that you know from the from
32:15
Speaker 12: the beginning, you've heard Musk talk about, you know, just
32:18
Speaker 12: how safe his vehicles are, and you know, even just
32:21
Speaker 12: very recently, the company has posted on X if you
32:25
Speaker 12: love them, put them in a Tesla. That's the kind
32:27
Speaker 12: of language that you see and hear from from Tesla
32:31
Speaker 12: and from Musk. I think what happened here with the
32:35
Speaker 12: doors is, you know, sort of from the beginning, an
32:37
Speaker 12: attempt to kind of innovate what I think Tesla's critics
32:41
Speaker 12: would say didn't need innovating. We didn't need to change
32:44
Speaker 12: the way that you know, a door opens and closes.
32:48
Speaker 12: It's it's intuitive. Everyone knows how to do it. You
32:50
Speaker 12: sort of know how to do it when you're three
32:51
Speaker 12: or four years old and you know the company wanted
32:56
Speaker 12: to go to this, you know, new different sort of
32:58
Speaker 12: path breaking approach of handles that would be flushed to
33:03
Speaker 12: the to the doors for better aerodynamics. And and also
33:07
Speaker 12: you know, if you think about a battery powered car,
33:10
Speaker 12: it's it's very quiet, right, you don't have engine noise
33:13
Speaker 12: to drown out any sort of you know, whistles or
33:15
Speaker 12: anything like that. So the smoother the surfaces, the flatter everything,
33:19
Speaker 12: the better in terms of not just aerodynamics, but also uh,
33:23
Speaker 12: you know, this sort of getting rid of any any noise.
33:26
Speaker 12: And so while while those all you know, are understandable
33:30
Speaker 12: reasons to sort of make some design changes, what we
33:34
Speaker 12: found in the course of reporting of this story is just,
33:37
Speaker 12: you know, some sort of tragic consequences of those decisions
33:40
Speaker 12: in terms of, you know, how difficult it is both
33:43
Speaker 12: for you as an occupant to get out and also
33:45
Speaker 12: for first responders to get to you, to open the
33:48
Speaker 12: doors and get to you, and in situations where maybe
33:51
Speaker 12: you're incapacitated or you're having trouble with the doors.
33:56
Speaker 7: Yeah, I mean the stories that you highlight, Craig were
33:58
Speaker 7: really popping and disturbing. I mean, one a little eighteen
34:03
Speaker 7: month old girl was stuck in the car her parents
34:07
Speaker 7: couldn't get her out, and that was one of the
34:09
Speaker 7: better stories. It had a better ending. They were able
34:11
Speaker 7: to get her out. I mean, I'm surprised that the
34:13
Speaker 7: National Highway Traffic Safety Administration isn't really cracking down on Tesla.
34:17
Speaker 7: What are they saying about all of this?
34:20
Speaker 12: I think that was one of the more interesting, you know,
34:23
Speaker 12: issues with this story is is that Nit's a you know,
34:27
Speaker 12: a lot of complaints, a lot of safety concerns come
34:29
Speaker 12: across their their proverbial desk, if you will, and at
34:34
Speaker 12: times it will take all of a single complaint or
34:37
Speaker 12: you know, a handful of owner surveys that that will
34:43
Speaker 12: sort of get its attention and lead to communication with
34:46
Speaker 12: manufacturers of hey, you need to take a look at this,
34:49
Speaker 12: and sort of, you know, the agency will sort of
34:52
Speaker 12: put its thumb on the scale in terms of, you know,
34:55
Speaker 12: a potential recall. In the case of this story, what
35:00
Speaker 12: NITSA told us is that they are in communication with
35:03
Speaker 12: Tesla to gather additional data and determine whether a quote
35:07
Speaker 12: full investigation unquote is warranted. That does allude to this
35:12
Speaker 12: idea that there may be some sort of initial investigating
35:16
Speaker 12: going on, but in terms of a formal probe that
35:19
Speaker 12: has not been initiated at least as of yet.
35:24
Speaker 3: Okay, so that's where the regulators stand. What's interesting to
35:27
Speaker 3: me as well is that other ev makers have kind
35:31
Speaker 3: of taken Tesla's design and copied it. They are also
35:34
Speaker 3: doing the same thing. So this now goes beyond Tesla vehicles,
35:38
Speaker 3: doesn't it.
35:39
Speaker 12: Yeah. And I think what was interesting to us and
35:42
Speaker 12: sort of you know, kind of trying to get a
35:44
Speaker 12: sense for just how problematic this is for other manufacturers.
35:49
Speaker 12: I think, you know, there was nothing that stood out
35:51
Speaker 12: more for me was, you know, looking at JD Powers
35:56
Speaker 12: study that they do every year. It's called the Initial
35:59
Speaker 12: Qualities the IQs. You might be familiar from with you know,
36:03
Speaker 12: car companies you know, put making this, you know, a
36:07
Speaker 12: point of emphasis in their ads or their commercials when
36:10
Speaker 12: they do well in that. In that study, and in
36:13
Speaker 12: twenty twenty three, uh, they had a record high number
36:16
Speaker 12: of problems per US vehicle in the US market and
36:21
Speaker 12: one of the things that they pointed to as a
36:22
Speaker 12: reason for this was was doors. And they kind of
36:26
Speaker 12: poked fun a little bit at the industry that they
36:28
Speaker 12: you know, researched by saying, this wasn't something that we
36:31
Speaker 12: needed to change, you know it was working. We weren't
36:33
Speaker 12: getting complaints from people that we survey for this study,
36:37
Speaker 12: and you know, now this is a percolating problem area
36:40
Speaker 12: was the phrasing that they used. And seven of the
36:43
Speaker 12: ten most problematic models in this respect were EV. So
36:46
Speaker 12: what we're seeing is a lot of sort of you know,
36:49
Speaker 12: taking after Tesla in terms of door design. And for
36:52
Speaker 12: the most part, what we're seeing is is sort of
36:55
Speaker 12: you know, copycatting or taking after EV for EV right,
36:59
Speaker 12: you know, trying to feel a model Wi Fighter that
37:02
Speaker 12: also has you know, doors that are similar to the
37:04
Speaker 12: model Y.
37:05
Speaker 7: I'm wondering, I don't think your story got into the
37:08
Speaker 7: story got into this, Craig, But what's the legal ramifications
37:11
Speaker 7: here for for Tesla? You know, I would imagine the
37:14
Speaker 7: lawsuits are piling up. I mean if certainly, if my
37:17
Speaker 7: child was stuck in a Tesla and I couldn't get
37:19
Speaker 7: him out, I might be suing Tesla.
37:21
Speaker 12: We are aware of a handful of lawsuits and I
37:24
Speaker 12: think you know, one of the complicating factors here is
37:27
Speaker 12: is Tesla uh pushes its its customers into arbitration for
37:31
Speaker 12: for these sorts of of suits that this is part
37:34
Speaker 12: of the sort of purchase agreement when you buy it
37:36
Speaker 12: a Tesla, that is something that you know, liigans are
37:40
Speaker 12: going to have to sort of overcome because of that
37:43
Speaker 12: sort of policy on the part of the company. I
37:45
Speaker 12: think another sort of complicating factor here is that you know,
37:48
Speaker 12: one of the uh you know, uh a couple that
37:53
Speaker 12: that we speak with in the story, they had no
37:55
Speaker 12: inclination to sue Tesla immediately after the crash. It took
37:59
Speaker 12: one of the first responders coming to them after the
38:01
Speaker 12: fact and saying, hey, we really had a hard time
38:04
Speaker 12: getting to you, and it was because of your vehicle.
38:07
Speaker 12: That is part of the issue here. You don't necessarily
38:10
Speaker 12: know right off the bat, Hey something wasn't right here.
38:14
Speaker 12: I need to do some investigating hard.
38:17
Speaker 5: Thanks to Craig Trudell, Bloomberg Global Autos Editor.
38:20
Speaker 3: That is this week's edition of Bloomberg Intelligence on Bloomberg Radio,
38:23
Speaker 3: providing in depth research and data on two thousand companies
38:26
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