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BGC's Gillis Downgrades Apple to SELL on Product Pipeline (Aud) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleven, Washington, d C.
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  Speaker 1: Bloomberg to Boston, Bloomberg Twell hundred to San Francisco, Bloomberg
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  Speaker 1: around the globe the Bloomberg Radio plus Appen Bloomberg dot com.
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  Speaker 1: This is taking stock. I'm Kathleen Hayes along with pim Fox. Yes,
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  Speaker 1: the cat was out of the bag over the weekend,
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  Speaker 1: but it's confirmed today that Horizon is buying Yahoo's web
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  Speaker 1: assets for four point eight billion dollars. Oh, this means
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  Speaker 1: for the by rating the Colin Gillis of Beach e
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  Speaker 1: Z Partners has had on Yahoo and Oh, by the way,
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  Speaker 1: ahead of Apple's earnings tomorrow, PIM, he's downgraded Apple to
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  Speaker 1: a cell. Yeah, the sheriffs of Apple are down about
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  Speaker 1: one and a half percent right now. And right now,
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  Speaker 1: let's go to Charlie Pellett in the Bloomberg News from
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  Speaker 1: for Bloomberg Business Flag and I thank you very much, PIM,
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  Speaker 1: thank you, Kathleen, and worse Verizon and Yahoo the day's
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  Speaker 1: top business story. We are brought to you by se
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  Speaker 1: I have evolving investor and regulatory demands affected your investment
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  Speaker 1: firms operational redness. Imagine transforming your business with SEIS Global
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  Speaker 1: Platform at se i C dot com slash. Imagine Verizon
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  Speaker 1: buying Yahoo's web assets, sending the company's to decade run
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  Speaker 1: as an independent business. Verizon will pay cash in the
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  Speaker 1: deal that includes Yahoo real estate, but excludes some intellectual property,
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  Speaker 1: which will be sold separately. Yeah who shares They are
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  Speaker 1: lower now by two point five percent. As for Verizon,
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  Speaker 1: they are also lower down six tenths of one percent.
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  Speaker 1: Tim arns Strong is the CEO of Verizon's A O
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  Speaker 1: L business, and on Bloomberg Television and Radio this morning,
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  Speaker 1: he talked about integrating Yahoo. By the way, we we
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  Speaker 1: work in Silicon Valley all the time. We have a
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  Speaker 1: big office is a multiple officers there, and the Yahoo
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  Speaker 1: team we've spent time with um. I think we both
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  Speaker 1: have a similar strategy and similar outcomes, and there may
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  Speaker 1: be synergies in the deal, but this deal is about
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  Speaker 1: growth and we're going to focus on the growth areas.
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  Speaker 1: Synergies will come, but it's got to start with strategy
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  Speaker 1: structure and then cost structure as the third item, and
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  Speaker 1: also a name changed too, because Yahoo will wind up
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  Speaker 1: changing its name. It will be left with stakes in
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  Speaker 1: Alabama Group Holding and Yahoo Japan, with the combined market
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  Speaker 1: value of about forty billion dollars. Federal Reserve policymakers begin
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  Speaker 1: meeting tomorrow, and when the Monetary Policy Panel meets Tuesday
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  Speaker 1: and Wednesday, a majority of investors expect them to do
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  Speaker 1: what they've done at every meeting this year. That is nothing.
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  Speaker 1: Tenure down to thirty seconds, ye old one point five
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  Speaker 1: seven Gold down five tenths of one percent. And now
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  Speaker 1: let's take a look at the other stories making news.
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  Speaker 1: Thank you, Charlie from the Blueberg newsroom. I'm Matt Miller.
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  Speaker 1: Matt Miller. This is Bloomberg, and we thank you, and
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  Speaker 1: again recapping, we do have the SMP five hundred index
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  Speaker 1: trading lower, down eight points to sixty six. That is
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  Speaker 1: a drop of four tenths of one percent. I'm Charlie
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  Speaker 1: Pellett and that's a Bloomberg business flash. You're listening to
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  Speaker 1: Taking Stock with Kathleen Hayes and Pimpbox on Bloomberg Radio.
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  Speaker 1: So it's the end of an era, or at least
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  Speaker 1: the end of a big chapter for Yahoo in the
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  Speaker 1: beginning of its new existence is part of Horizon Communication
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  Speaker 1: safter Verison agreed to buy Yeah whose web assets for
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  Speaker 1: four point eight billion dollars, ending the company's two decade
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  Speaker 1: run as an independent business that took it from a
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  Speaker 1: Stanford University startup at the dawn of the Internet Age two. Unfortunately,
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  Speaker 1: for Yahoo also ran behind nimbler online rivals such as
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  Speaker 1: Google and Facebook. So what does it mean for investors?
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  Speaker 1: What does it mean for the company moving ahead? Colin
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  Speaker 1: Gillis is here to answer all of these questions. He's
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  Speaker 1: Director of Research and senior Technology Analysts at b g
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  Speaker 1: C Partners. Colin, Welcome, Hello, Kathleen. So we knew Verizon. Yeah,
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  Speaker 1: who was going to get bought by somebody? Verizon's name
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  Speaker 1: had been bandied about. Let's start by what this means
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  Speaker 1: for Yahoo? What is it now? Well, you know, it's
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  Speaker 1: out with a whimper, uh, and it will become folded
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  Speaker 1: into Verizon. They suggested that the transaction will close in
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  Speaker 1: the beginning of next year and we'll see what happens
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  Speaker 1: to the brand name itself. But Verizon is interested in
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  Speaker 1: the piping, the ad technology that powers Yahoo as they
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  Speaker 1: seek to get more into advertising expand some of their
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  Speaker 1: video offerings become more than just a carrier that competes
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  Speaker 1: on data and pricing. Con I can't resist it. Tell
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  Speaker 1: me how much did Microsoft offer for Yahoo at one point?
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  Speaker 1: About ten times more pim Can you hear me? Now?
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  Speaker 1: There was a lot of value that's been destroyed by
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  Speaker 1: various management teams trying to turn this company around, so
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  Speaker 1: the spring, but they didn't do too badly. Write all
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  Speaker 1: those management teams they managed to take home quite a
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  Speaker 1: nice little packet. Yeah, of course, that's right. Uh, And
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  Speaker 1: that is quite tough if you think about how much
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  Speaker 1: the current management team has been paid to. Really, just
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  Speaker 1: how much is uh Marissa Mey are going to take home? Well,
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  Speaker 1: we'll have to see what the final figures, but you know,
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  Speaker 1: something north of a hundred million UH is expected. Well,
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  Speaker 1: so the very least, I guess we could say that
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  Speaker 1: Verizon did a good job just sitting and waiting right
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  Speaker 1: as a disc got more affordable. There is that there
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  Speaker 1: is that, that's right, um, and you know it's also
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  Speaker 1: hopefully they'll preserve employee jobs. Right, But it's not done.
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  Speaker 1: There's still going to be a holding company left, right,
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  Speaker 1: that's going to be turned into a an investment advisory
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  Speaker 1: company that's going to have the assets of Ali Baba,
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  Speaker 1: Yahoo Japan and cash in there using for investors, then
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  Speaker 1: what do I what do I own? What should I buy?
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  Speaker 1: You know you had a buy rating on Yahoo before, correct,
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  Speaker 1: that's right? And you know what you're hoping to see
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  Speaker 1: is that there is a discount that these assets trade
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  Speaker 1: to parity. Because Ali Baba is a publicly traded stock,
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  Speaker 1: we know that you know it's worth you can take
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  Speaker 1: a quote, you know, X number of dollars to share
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  Speaker 1: saying with Yahoo Japan and the value of the assets,
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  Speaker 1: and this holding company trades at a material discount to that.
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  Speaker 1: And we're hoping to see that gap closed now that
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  Speaker 1: there's no longer concerned that management be spending that money
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  Speaker 1: and Wasteand I want to turn your attention out of
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  Speaker 1: tomorrow and Apple, and really you downgraded the shares of Apple.
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  Speaker 1: I don't get this at all. Explain it? Okay, Well,
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  Speaker 1: you know we put a cell on it, and um,
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  Speaker 1: you know we have long been uh neutral, we've been positive.
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  Speaker 1: Right now we're out there saying we think the upcoming
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  Speaker 1: iPhone cycle is going to disappoint people. And typically Apple
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  Speaker 1: works on a tick talk basis, which means that you
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  Speaker 1: get a major update with a new form factor which
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  Speaker 1: is the tick, and then the next year you gotta
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  Speaker 1: talk it's an s upgrade. It's more incremental this year
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  Speaker 1: or than we expect a tick talk talk. We expect
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  Speaker 1: another incremental update happening in two thousand and sixteen is
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  Speaker 1: Apple gears up the big push the tenth anniversary iPhone,
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  Speaker 1: which will be a redesign in and this could cause
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  Speaker 1: numbers to come down in September and December as people
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  Speaker 1: wait to hold off to up read their phone. I
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  Speaker 1: like your Haiku. It has become clear that the muse
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  Speaker 1: that drove Apple has gone somewhere else. I know it's
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  Speaker 1: a bit sad, but you know, if you think about
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  Speaker 1: the degree of just iteration that we've had happening at Apple,
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  Speaker 1: you know, we haven't really opened up major new product categories.
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  Speaker 1: At some point, people are not going to be caring.
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  Speaker 1: You will not care so much about just a slightly
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  Speaker 1: better camera or slightly faster processor, a little bit more memory, right.
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  Speaker 1: They want to see new form factors. And quite frankly,
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  Speaker 1: the whole market itself it's slowing down. Smartphones grew less
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  Speaker 1: than one percent in its entirety last quarter. So you
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  Speaker 1: don't want to pay a ten multiple for a stock
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  Speaker 1: that's yielding two point three that is arguably at least,
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  Speaker 1: if not the largest and best UH mobile communications manufacturer
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  Speaker 1: in the world. Yep, you know, and in fact, because
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  Speaker 1: I look out at the next billion dollars in value, Right,
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  Speaker 1: is that going to be on the positive side. On
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  Speaker 1: the negative side if iPhone unit continue to come down, Right,
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  Speaker 1: there is ample room for air to come out of Apple.
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  Speaker 1: It's still the largest company on a per on, on
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  Speaker 1: a strict market account valuation. You can talk about ratio
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  Speaker 1: is all you want, right, but it's still north of
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  Speaker 1: five billion dollars half a trillion dollars. And so we've
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  Speaker 1: seen nine consecutive quarters of iPad revenue declining. This is
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  Speaker 1: the third consecutive quarter where iPhone revenue is going to decline.
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  Speaker 1: So we have to be careful that Apple is not
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  Speaker 1: starting a long term negative downtrend. All right, We're gonna
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  Speaker 1: leave it there, Thanks very much. Colin gillis joining us
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  Speaker 1: as the technology analyst and director of research at the
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  Speaker 1: b g C Partners. Talking about Apple shares of Apple
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  Speaker 1: today down about one and a half percent, trading at
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  Speaker 1: ninety dollars and one cent signed fim Fox, my co
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  Speaker 1: host Kathleen Hayes, this is bloomberg. As the Democrats get
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  Speaker 1: their convention underway in Philadelphia, we're going to step back
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  Speaker 1: This is coming up on Bloomberg Radio.