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Hey, Apple shares a little bit lower in today's trade.
This, as one of the world's largest market cap companies, as you know, took the rare step of cutting about one hundred jobs. It happened in its digital services group. It's part of a shift and priorities for the critical division at least that's according to people with knowledge of the matter.
Well reporting this out as he does all things Apple. Back with this is Bloomberg News Chief Technology correspondent Mark Germ and he joins us from Los Angeles. Mark. When we talk about Apple, we talk about a company that, as of its latest filing, as about one hundred thousand employees around the world. The cut of one hundred people, it's not huge, but as you write, it's pretty rare for Apple to do layoffs.
What's going on one hundred in context of how big Apple is and in context of the size of the layoffs that some of Apple's peer group have done is very minimal. But layoffs at Apple, no matter how many people are involved, have an outsized influence. Right, It's an outsized understanding of what's going on here. Apple simply does not do this. They've done it four times this year, four times. Right. They've probably done four rounds of layoffs in the twenty years prior to this year.
Wow, So this is notable.
At the beginning of this year, you had one hundred and twenty one people at an AI serie related operations group in San Diego, California. The end of February, you had several hundred people across two projects that were shut down, one the self driving car initiative, the other a micro led project. Right, And if you really look at it, both of those have to do with cost cutting. Even
the San Diego one has some cost cutting involved. There cut to the services division, which by the way, is Apple's fastest growing and one of its most important organizations in the entire company, one that most people would probably believe would never face any layoffs. That is where the cuts happened. So about one hundred jobs mainly across Apple Books and Apple News. We're talking about engineers, we're talking about design, we're talking about software quality assurance and testing.
These people worked across many different platforms within Apple Services. Some of them probably touched the App Store, some of them probably touched Apple Music and Apple TV to some extent. So that's one hundred resources there. And if it wasn't purely a cost cutting move, Apple probably could have relocated those people to other teams from the get go. To be fair, they're getting sixty days notice here, they have
sixty days to find another job within Apple. I would venture to guess that far fewer than half of the one hundred people will find a new job within Apple in the next two months. So most of those people probably will be leaving the company in sixty days from yesterday when this was announced internally, So this is quite a big deal, although it is one hundred people comparatively.
Yeah, and if you're one of those one hundred, it certainly doesn't feel like a small job cut. Having said that, Mark, why is it then happening? As you said four times this year, this does not happen at this company, So why is it. It's a company that's got a very rich balance sheet, it's got lots of cash.
What's going on.
So let me start with yesterday's cut.
So Apple Books is not a big part of the overall PI of revenue for the Apple Services organization, right, It's probably one of their weaker services. They don't invest a ton in it. It's not a true money maker. Apple News doesn't make a ton of money either, even though there's advertising, even though there is that subscription which I believe is now thirteen dollars a month, So it's
simply less of a priority. So there's a bit of a priority shift in Apple Services towardstreaming, video, streaming music, gaming, the App Store and such. Remember there was that app store reorganization a couple of weeks ago, which meant that they probably had to reallocate some resources related to that as well. Now, in terms of the layoffs and totality, I think it shows that, you know, Apple is bracing for some sort of recession or trying to get ahead
of the possibility of a recession. Obviously we've seen stats out there, and Apple wants to be a leaner company, right, They're not able to spend extra few billion a year at this point, or they don't want to spend an extra few billion a year at this point on bets like the self driving car, like the micro led project that they believe there's a strong chance will never come
to fruition. Right, Apple can continue to spend a billion a year on each of those projects, rack up a bill of an extra ten billion over the next five years and get absolutely nowhere. But they decided to save that ten billion and probably reinvest it into bigger priorities like generative AI. They're working on the tabletop robotics project that I reported all and they're working on a new iPad that's going to require a lot of R and D. This is a nineteen inch iPad that can fold in half.
They need to reduce some R and D to redesign the iPhone. They need to put money into shrinking down their components and making them more efficient so they can roll out new form factors. There are some health technologies that they want to roll out. But you know, the big picture here is AI and probably reinvesting that money into artificial intelligence development.
Mark Apple as a lean company. I didn't think i'd hear you say that. How would you describe Apple? How'd you characterize Apple in terms of it being a quote unquote lean company.
I watched this great interview with Luca Maystree, the outgoing CFO, earlier this week, and he said that he runs the company with about ten percent in his finance office. The amount of people he had, Well, he was a CFO with other public companies prior, even though Apple's market cap is ten times the size, if not more than those companies. Right, he worked at Xerox, he worked at General Motors, a
few other companies before Apple. Those are big companies internationally, right, they're global titans as well.
He gave this example.
So he said his investor relations group has two people. He says that Apple's hedge fund. That's Brayburn Capital out of Nevada. They manage Apple's cash, right, several hundred billion dollars, he says, that's seven people, right, And so I think those are some good examples of how lean they run in terms of their R and D budget. Over the past few years, I've seen the overall company y R and D budget either stay stagnant or grow less than
five percent on an annual basis. And if you compare that to the R and D budget growth of companies like Meta and Google and Microsoft.
It's slim right.
Apple knows that the iPhone and some of their other products and services are going to continue to print a lot of cash and a lot of money. Right, They don't want to upset the status quo and risk doing something that is going to put the company in a bad position. Now, what I will tell you is Apple as an issue here where they're not really reinventing themselves. They're not really moving the needle. They are very far behind in artificial intelligence, robotics in some other areas, and
there is a lot of catchup to do. They have become too reliant on this annual September formula of new iPhones, Apple watches, and AirPods does great for the stock, make shareholders happy. There's not a lot of needle moving there, and so I believe the company needs to take more risk.
And so I guess the hope as a consumer and someone who watches the company, and maybe the hope for employee morale the people who are still there, is that this amount of money could be reinvested in other areas that will allow Apple to pursue new growth opportunities and create some really cool products. When was the last time you waited in line for an Apple product, and when you got your hands on that device for the first time, you were amazed. I have never seen anything like this before.
I can give you a few examples. There was the iPad Air in twenty thirteen. There was the first retina iPad the Air before that, the iPhone four with that threat and display in that glass back in front design with the aluminum band around the edges.
That was pretty incredible. But it's been a while.
Maybe the twenty eighteen iPad Pro, maybe the original Apple Watch, maybe the AirPods, but it has been a serious number of years since the last time. I feel like they came out with something that was really earth shattering, and I think COVID played.
A part in it.
Right between across the pandemic or the hide the Pandemic, Apple was able to churn out products still at an amazing pace. They were able to get out the iPhone twelve with five G only with about a month and a half to lay right in the height of COVID. That is crazy that they were able to do that,
and that was a major accomplishment. But that what people don't realize is how many years of R and D how many years of Apple working on these new types of form factors and products and software and services that they normally be doing during COVID, how much of that was just pushed to the wayside in order to prioritize the products they had to get out right and everything else going on with the pandemic working from home versus
the office. So there's a bit of a delay there, and I think it's going to take a few more years for them to.
Catch up, all right.
And for me, I think it was when I got my Apple Watch, which was the second version, and it's I don't even have it on right now.
I mean I haven't touched upgrade.
She still has the second version of the Apple Yeah, anti collectors.
You'll get some new ones in a few weeks.
Hey, listen, you mentioned the CFO that you listened to that conversation about being lean and how he ran his office and his team. He is stepping down from the job at the end of the year. It sounds like he's not leaving the company, but are they getting ready in terms of a younger c suite thinking about the company moving forward.
I've been writing a lot about this and my latest point of view and You can read my power on column this weekend on Sunday at Bloomberg dot com to get more insight on this. But they've come up with a new Formula's a succession here, right, do everything you can to make sure the old guard, Kim Cooks most trusted lieutenants don't really leave the building. The last you know, four major executive departures.
They didn't let them leave.
Well, I mean they didn't you know, handcuff them to their office or anything like that, right, but they gave them enough money and enough of a business card and responsibility to stay. Phil Schiller is not marketing chief anymore. He runs the app store. Dan Riccio is love hardber Engineering chief. He runs the Vision pro. Now you have LUKEA. Maistreet who's no longer CFO, and he's going to run ISMT, which by the way, is probably the most controversial and
boring division in the entire company. So you know, you can see what they're doing here. They're trying to keep the band together as long as possible because I don't think they they're I think they're a little afraid of evolving and reinvention and risk taking. Given that you don't want to upset something that is working so well, but you also have to at the same time balance, you know, long term management of the company. And so that's really
the succession story there. Kevin Perrick, he basically came to Apple alongside Bucca may Street. In two thousand and thirteen or so, Park joined the company. He's been the heir apparent. Apple has been signaling this CFO transition for months now. I wrote about it earlier this year. They have been showing off Parick so to speak to financial institutions, investors, financial analysts and the like. They've been talking him up
externally and internally. He has been really shadowing Luca has been involved in every CFO related meeting over the last year or so they've been preparing for this. It was down to two candidates at the end of last year, so Kevin, Parrit and cr Ac. When Casey apparently found out that, you know, she wasn't going to be the replacement, she left. Maybe I think that was at least a
component of her leaving Apple. At the beginning of this year, she became the CFO of Sonos, So it seems clear that she wanted a public company CFO role, and Sonos is a great brand despite the issues they've been facing lately.
Yeah, we could do a whole segment on those app issues. Mark, we have twenty eighty two. Yeah, we have twenty seconds left. Very briefly, what about filling Tim Cooks shoes twenty seconds?
I wrote earlier this year. My belief is that John turnis the senior VP of hardware Engineering. He's still not fifty. Tim cook stays around another three.
To five years.
Turnas is the only one that would have a long runway a CEO and Apple board can make a strong argument about getting a hardware person back in those shoes.
All right around the world.
And Apple of Apple and about what seven eight minutes, nine minutes. You did it as you always do. Mark German, thank you, Thank you. He is Bloomberg News Chief Technology correspondent Mark German.
And apples hedge fund Rayburn. It's a type of Apple.
Lean lean Apple Apple like sticking with me.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business app, or watch us live on YouTube.
Let's get a view of the private mind.
Yep, that's because NFL owner is voted to allow private equity firms to buy stakes in their franchises and move expected to attract billions in fresh capital while boosting team valuations that have already been surging.
Yeah. During a special one day league meeting in Minneapolis, the group loosen some of the strictest ownership rules in professional sports to allow private equity to own it as much as ten percent of a team. That's according to the NFL. You know who was there, Randall Williams was there and he's fresh off a plane from Minneapolis. Wow, we've all we've all been there.
You have been there.
You right into the office. Yeah.
Absolutely, Thank you all for having me.
Yeah, thanks so much for joining us. Randall's Bloomberg News US sports business reporter. He's the perfect guy to have on talking about this. When this broke yesterday, we read your story on air. Randall, it's the red headline. A big deal. I was being a little cynical in my analysis of this. I was like, Oh, you know, a bunch of folks get together who own assets that are worth a lot of money, and they vote to open
up to allow them to become worth more. AM I do I look at the AM I looking at this incorrectly.
I think there's an argument for both. There are a lot of private equity pros in the NFL, but they're invested individually, and the NFL has limited the role that they can play as individuals in investing through funds. So I think they've structured it in a way so that it isn't unfair, or it isn't. Yeah, it isn't unfair for some of these NFL owners. I think I did a really good job.
But doesn't it by bringing in a new group of investors just automatically the demand will increase the value of these teams. So those existing NFL owners are like, yeah, come.
On, right, thousand percent. I mean, there is an expectation that a couple of these deals will happen before the end of the year. I've had NFL executives and in their in their building their HQ and NFL team executives say they expect these deals to go fast and furious.
Because an NFL team is so expensive that they're only a handful of individuals.
Or thirty two of them, and technically thirty one.
Really and if you think about who can actually afford to buy a new one or to buy a team that goes up for sale. Yeah, there's a small number of people because these these are so expensive. So if now you're allowed to sell ten percent to private equity, you're opening up the available pool of purchases just so many more people. Doesn't that just automatically increase the value for sure?
But there's only four groups. Arctose Aries Sixth Street in a consortium that consists of Dynasty and Curtis Martin led this other group. It's Dynasty, it is I'll have to pull up the names.
It's fine.
He's off of Dynasty, CVC, Blackstone, and Carter all together at the same time. And so those four will get the first right and then eventually they may open it up to more firms, but they'll have to be pre approved and the NFL will do its due diligence.
There what's the due diligence like? It kind of sounds like a credited investors You know, you can.
First of all, you have the money. You have to have the money. If you don't have the money, there's no way. So it starts with the funds, and then I think it depends on how you're going to invest. One of the things that the NFL CFO was saying was that each of these funds have a different strategy for how they're investing in sports teams, and so that for a team perspective, what you're going to expect is a team may not want to do a deal with one for one fund. They may want to do something
with somebody else. So they have enough capitals for them to have a wide variety of choices.
How much, say, will private equity investors they have in this zer row?
How do you know that?
I mean, if you're anteing up, I mean, what are the limitations on how much a private equity firm can put in a team?
Is So the reason that this is happening is because when Josh Harris raised money last year, he had I would say significant difficulty doing it. Is six billion dollar team and he has to put up a lot of money by himself. I believe his ownership group is twenty plus. The cap for an ownership group is twenty five. That raised concerns if you have private equity who can offer ten percent. Let's say an average NFL valuation by Sportico is five point nine to three billion. That's five hundred
million right away. They have to hold the team for six years, so then you have a little bit more leeway.
Other leagues having done this, Yes, what have we learned?
Well, the NBA, MLS, all of the other leagues allow this. The NFL's rules are the strictest. They also have the highest valuations. The NBA's are the most expansive. The ARCTOS specifically, is a pioneer in this private equity sports space. I expect them to be one of the first, just because there they've been the most active.
Hey, what was this meeting? Like you were actually did you actually get to go into the meeting?
Of course not, of course not. But a lot of the NFL owners meetings are watching the owners come in saying hi, hello, how you doing, Watching the NFL's employees come in, Hi, Hello, how you doing? And then they go, you know, they'll walk past, they'll they'll speak, and when it's meeting time, it's meeting time. You don't hear anything unless you have sources like the really really good reporters. And then you sit and wait, you wait to hear what happens. You get to ask questions to Roger Goodell,
Jerry Jones is always going to talk to you. That's fun, guy. But it's quite the interesting meeting because I'll say, at the March and May league meetings it's a lot more free flowing. Owners bring their families, coaches bring their families. They're more relaxed, they're happy to talk to you. In the season. Absolutely not, it's a competition, huh.
You know in your story, though, you say the move to allow private equity and to ownership has the potential to shift how teams are run. Limited ownership partners have traditionally been friends, former players and local celebrities. I mean, this definitely does change the dynamics. We'll find out I guess over time what that actually means.
But it's going to be different.
It's going to be different. There's an example in the story where I talk about how the Atlanta Falcons welcome some new limited partners, but they won't be able to sell to private equity. Only people that can sell are family limited partners and controlling owners. So if you just happen to have a piece of the team, but you are not a member of the family that owns the team, you're out of luck. But if you own a piece of the team, and you're a member of the family, it's a good time for you.
So we'll still have family ownership.
Of course, of course you got to protect the f on my ownership.
That's really fair, and that's kind of in.
The family ownership will get di looted a little bit.
Technically, it depends. It depends on the relationship within the families. So if you have a sibling that you don't get along with and they want out, this is an opportunity for them to get out.
So it's also an opportunity for some of these families to cash in on an asset that has insuest in value quite a bit.
Absolutely. I mean there are some as you said there, you know, there's these are family run businesses, but if your money is all tied in the family, you might not have unlimited cash flow to be able to spend on the things you want to spend on. This liquidity is an option for that. And then there's a stadium part of it. Some of these NFL owners and teams want to host a Super Bowl, they want to host an NFL Draft, an NFL combine without a stadium or a facility that can show off that can really be
a state of the art arena. It's not going to happen. So if you have private equity coming in paying for some of these renovations or new stadiums.
It helps ten seconds. So the next thing you watch now is the deals to start happening.
Of course, of course the green light is officially lit.
Maybe get some sleep too, I'm gonna try.
It's not a lot of work ahead.
I have got a lot of work doing a lot of work on this.
Thank you all for having Thank you.
Randa Williams, Bloomberg News US Sports business reporter. Check out all his work at the Bloomberg Terminal and of course at.
Bloomberg dot com.
You're listening to the Bloomberg Business Week podcast. Listen live each weekdays starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Many kids across the country are already back in school after summer break. Can you believe that?
That is crazy? Like I just I don't know.
I can feel it though, and like this city's winding down, gave the city's winding on.
We do it a little differently we do in New York.
Yeah, we start later after.
Labor day, after labor day, New Jersey.
To wait, California. Did you grow up that way?
I don't even remember.
Okay, we didn't. We were after every day.
Well in New Jersey.
Yeah.
Yeah. Many of the kids when they go back to school, or maybe they're back in school, they'll take language classes. Maybe they'll learn Spanish, Mandarin, French, or they'll do what I did. What's that? Nothing? Take Latin? Yeah, not the most practical of languages when it comes to world. That's pretty good. Well, you don't have to be in school to learn a new language. There's no shortage of apps
and services out there to help you do that. Do a lingo, Rosetta Stone Memorized, and more, such as Babbel Back with Us as Julie Hansen, us CEO of Babbel, She joins us from New York. Julie, good to have you with us. Happy almost September. Back to school. I mentioned a few names there, some of them publicly traded, including due Lingo. How do you differentiate given that when you google language learning apps just like five up there that are just sponsored results. There's a lot of competition
in your space. How do you do it?
There is a lot, Tim and Carol, thanks for having me. It is a competitive space. But I think there really are two big players in the market, and Babel is one of them. Our differentiation is all about our pedagogy. But I can use that term or you know, the kind of the way we approach the learning, the seriousness of it, and the effectiveness of it. You know, we have studies that have shown that Babel is more effective
than others in actually learning a language. But a lot comes down to also your personal style, the way you learn. Everyone learns differently, so we try to make sure we reflect all the different ways of learning in the app, writing, reading, speaking, of course the most important.
Hey, how do you measure success?
Because I think about we talked with you, wasn't it around like the New Year, and we talked about how people in the New year sometimes are like I want to learn to do this or that, I want to lose weight, I want.
To learn a language.
So I am curious, how do you guys measure success that people act actually have become have learned the language? And can converse and are fluent even.
Yeah, that is a great question, and I can assure you we spend so much time on that topic.
There's really two main ways to think about it.
One is against the SEAFER, the common European frame of reference, which is kind of a formal way of evaluating language abilities, and that is that's very common in Europe.
Everyone knows it.
But even here in the US that framework is understood and used in some circles, and so we measure people's advancement against it. But at the same time, the most important thing and what we're trying to do in babble, because we know will never make you fluent, No app will make you fluent, So we're trying to help you
get comfortable having a conversation. So we actually ask our users to evaluate subjectively, personally their view of their progress, and that's for us, the like they're kind of their own personal learner. Success rating is our number one way of looking at it, because at the end of the day, if you're you know, a B one on the C for scale, but you can't speak, then are you really making the progress you want? Or if you're a sloppy a something but you're you're getting out there and making
conversation like that's really more success in many ways. So those two.
Ways you said that no app will will make you fluent, but can developments with AI and perhaps maybe a conversation partner that is a bot eventually make you fluent. Like, do you think that no app will ever make you fluent or are we on a on a sort of pace to get to that at some point in the near future.
Well, fluence is a very high bar. Fluent is you know, live there, speak it like in.
That language, right, Yeah, that's what they always say.
Exactly exactly, And when I got to that point in college, when I dreamt in French, it was incredibly thrilling.
It's long gone.
By the way, I know a place where you can work on it.
We completely agree with you that a chat bot can serve that purpose.
In fact, in our.
US product where for English speakers learning Spanish, we have rolled that out already and people are very engaged with it. It doesn't judge you. I mean, it gives you feedback, but you're not embarrassed in front of the AI. You know, it's very effective. We didn't, by the way, just throw an LLM in the app and say have at it like we had a kind of an expert train at for a considerable period of time and that's what makes it successful. But absolutely that is going to help more and more.
What's the demographics.
Is it a lot of people maybe younger starting jobs or what is it?
Is there some kind of.
I'm always curious about, like the folks using your platform, It.
Is a mix. Honestly, it's not school kids. We are not aimed at that at that market for various reasons. In many ways, our best users are older, you know, over call it forty five, because they have time, you know, they have time in their lives to pursue this. But it's really all ages and people, you know, starting from eighteen and up. So the remember that in the US, you know, in grade school, only twenty percent of students
ever take a language. By the way, the state with the highest percentage of kids taking a second language in public high school is New Jersey. So well done there.
Yeah, that is just.
I took a lot of Spanish.
I probably took maybe ten years starting in fifth grade.
We will do the interview in Spanish, maybe in.
Can we try French.
I'm a little better at that, But I also.
Think, you know, it's interesting.
I have a daughter who, when she was younger, she was learning Chinese, then she learned fro like in Latin, she did really well. Like I think there are people that can just take to learning a language pretty quickly. I mean, I've traveled with her overseas and she can converse and understand, and I feel like I can do that a little bit when I've been in some Spanish speaking countries.
But it's just interesting.
I do think there are people who have a knack for learning it.
Is that a fair thing to say?
No question?
Okay, I mean we believe anyone can learn a language, but there's no question that some people take to it more instantly. And aren't we all better at the things we enjoy? I think it kind of lines up pretty closely there.
I'm thinking about what you've talked to us language. Yeah, I took Spanish, well, Latin was what I took in high school. And then when I got into college, there's this very strange program. They said, this is true, are you to go overseas? I'd go overseas for my first semester freshman year, so I frantically worked on Spanish but I'll tell you what, Julie, it didn't stick for me until I got there and moved in with a family that only spoke Spanish, and I had to be speaking
in Spanish completely immersed. I mean, there's no there's no substitute for that, Julie. As you mentioned one hundred percent.
This summer, our family went on a vacation in France and I went back to the town in which I was an au pair back in college, and I was reminded, you know, kids are the best language teachers a their vocabulary is a little simpler and but be they have no mercy. So that's just really a great way to learn.
So I am curious about you know, I always think about someone who's listening. So to start, you just you just dive in, right, You just start from the beginning and just start going with it. Don't get discouraged. Like, what is your advice for someone who's learned a language, a second language or first language.
Yeah, that's exactly right everything you said. Just start and also be consistent. You know, binge learners as people who do it hour one day and then nothing for the next six You're not going to learn as fast. You're not going to retain it as well as if you do ten to fifteen minutes every day, and we've shortened our lessons over time so that you know, hey, if you've got five minutes, that works too. So absolutely is the repetition. But just start and have fun with it.
And also the more ways you can learn, the better you use the app, but also watch a movie in your target language, or have a conversation if you can, or all of those things cumulatively are the best way.
Or go to France, Okay, just hang out there, no parents, Yeah, go back in time and do that. Sounds pretty good. Julie Hansen. Always good to check in with you. Thanks so much for joining us. Happy end of summer, Happy Labor Day. As US CEO of Babbel joining us from New York.
I'm brother Mack.
Journal.
How about you let me drive?
Oh no, no, no, no, who's going to drive?
Alright?
Please gravel?
Let's wait, I want to drive.
It's a good question.
This is the drive to the globe. We'll buy around other don on Bluebirg Radio.
All right, everybody, we've got eighteen minutes left in today's trading session, and then add another twenty minutes on top of that, and then we'll get in video earnings.
I'm just trying to put it all together.
This is your super Bowl.
So roughly forty minutes more or less. That could change narrative thirty eight.
Minutes, sentiment if the countdown is on.
If the countdown is on.
And as a reminder, we're going all in on in video in our four o'clock Wall Street Time hour.
As we should.
You know, like we talk about it's been kind of you know, it's been kind of quiet. We keep, you know, ticking off things. Our next guest has some thoughts on Invidia.
Yeah, Jeffaclain, managing partner at Solidarity Capital, is with us, joining us from Utah. Jeff happy in video earning. Stay, how are you?
I'm doing great.
Everyone's the edge of their seat over here for the big day.
Yeah you got what are you guys doing to celebrate.
Pop and open some doctor Peppers, you know, and just waiting to hear Jensen preach the good work.
Okay, Well, let's talk a little bit about that. The doctor is in That would be doctor Pepper, Naja, that's the doctor. What do you think about in Nvidia?
Look, I mean they are a massive driver to the economy and to the market right now, and I think there's I don't think there's a single company that's more tied to how the S and P is going to do tomorrow than in Vidia, and so I think they're going to come out really strong today. The question for Nvidia long term is how do they keep it up?
I mean, the numbers are just astronomical at a company there's eyes to continue to set the standard on beating earnings by insane amounts and growing at this incredible piece. How do they keep it up is really the big question long term. And does someone try to steal their lunch? Like does someone come in and what are their threats? That's the big question. But I think today's going to be a big day for them.
All right, So this is obviously a company that's on your radar. Do you suggest to your clients to investors to own it? Do you own it?
Great question?
And so we like it if you're already in it, if you got in early, and video is a great spot if you're buying in trying to buy in now at this price point of where they're at, We're a no on new money going into in video. Simply from a valuation perspective. I mean their valuation numbers are off the charts when you really dial in and look at it. I mean they're treating at forty times revenue. That's a
big number and hard to swallow. And so as you look hopefully, I think it's a great company if they stub their foot and you can get it down a good value cuation by emotional trading in the market. Great. But for new money going in, it's a tough one to say yes to.
But you're not willing to sell yet, no.
I if you're in now, this is actually a great question because guess who is selling Jensen? Yeah, yeah, he sold like a half a billion dollars in the past month.
And a half, the tiny fraction of what is interesting.
But he owns so much, Yeah, he's worth so much. Maybe he wants to buy a yacht. I don't know, but that's an interesting data point to.
The least, or some new leather jackets.
I don't know.
I don't know.
Yeah, he sounds like he works a lot.
Yeah, listen, I get it, And you're right. When it's such a big part of your portfolio. How many times do we talk to folks like yourself or other money managers who say, you know, don't have all your eggs in one basket, even if you out those eggs.
Hey, you know who you can't say that too? Is someone like Steve Bomber seriously, because he did leave all his eggs in one basket. Yeah, and it worked out well. Yeah, great, And Bill Gates didn't. Bill Gates diversified and he moved away from Microsoft, and if it would have held on a Microsoft, he would be wealthier.
Like, I know, he's having such a tough time right now. All right, little sarcasm there, but no having said that though, is there something like Jensen Wong though, because of his connection with this company that when he is the ultimate insider that he is selling, does it potentially those send a message even a little bit?
Yeah for some people. I mean I don't put a lot of weight into this specific instance, one because he owns so much of it. But also two, I mean we know he's grinding. I mean he's given all these talks about suffering and wishing suffering upon Stanford students so they could learn things in life. He's put on a long track record. We have zero concerns around Jensen and his activity here. But it is an interesting data point of is it at a momentary kind of top where
he's taking advantage of it. That's something to keep in mind. As for anyone who's not in n video right now and thinking about getting in, it's an interesting data point of how is the right time to get in? I would hesitate on that point.
You make the point of that there are several customers that make up a good portion of revenue. Alphabet Meta, Microsoft, super Micro is a big customer. Yeah, gonna go talk a little about super Micro, and my decliner is just a deep teas. There is there concern though, as our own Ian King pointed out our Chip King here at Bloomberg that with a big portion of CAPEX being spent individually by these companies, there's not so much room for growth from these companies. And and Nvidia has to diversify.
Where do they diversify their revenue?
Yeah, And that's the catch is that these companies it's not just a small amount. I mean Microsoft alone almost accounts for twenty percent of the revenue at Nvidia. That's such a huge number that not only do they need diversify, I think the bigger risk to them is microft saw saying why don't we do this ourselves? We have the capex, we can easily acquire the talent, why not do it ourselves?
And so Nvidia is going to have to expand the scope of who they're going after, but it's going to take a whole lot of companies, as you might imagine, to make up for a Microsoft, you know, is around twenty percent, you have Meta around ten percent, Alphabet seven percent of in Nvidio's revenue. Those are big numbers and with what comes with that concentration risk is if you stub your toe or if Microsoft or Meta wakes up tomorrow and says, forget you in a video, We're going
to do this ourselves. We're going to build our own stuff. That becomes a problem. Now, how they stay ahead of that is they continue to iterate with Blackwell and other type of the next gen stuff that they're working on that's obviously going to be hugely important. And that's really what I think everyone's waiting for Jensen to talk about today. Where are they at with the next gen stuff and what does that look like from a timeline perspective.
Hey, rybod, I do want to mention a headline crossing the Bloomberg terminal, and that is the Telegram ceo been charged in France for alleged criminal use of the app, his app, you might recall, over the weekend, Pavlodorov, the CEO of Telegram, was arrested outside of Paris. Authorities alleged that he he's Russian born, he's a billionaire, he founded the service back in twenty thirteen, that he had failed to fight crime committed on the app by its users, including
the spread of child sexual abuse material. So there's been some concern with his arrest about free speech in terms of social media and media. But nonetheless, the Telegram CEO has been charged in France for the alleged criminal use.
Of his app.
Okay, Jeff, we only have about thirty seconds left with you, but we got to get your thoughts on Nike very briefly. It's not just in Nvidia out there. What's going on with Nike for you.
Nike is violating the maximum of Warren Buffett around a hamstand which should run a successful company could run it someday, and the ceo is failing. I mean, it is an incredible marquee brand. I can't tell you how many Nike shoes I have in my closet, but according to my wife, too many. And so it's an incredible company and he's tanking it. They have to make a change. Bill Ackman got involved with Nike, and I hope he makes the move. I'm a big Nike fan from a long term investor perspective.
I think it has a massive moat around its business. But they have a management consultant guy screwing it up, and they need a product guy in there.
All right, interesting stuff your perspective. Nike shares down about twenty four percent year today. Jeff McLain, Magic partner over at Solidarity Capital of joining us.
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