Microsoft CEO on Antitrust in Big Tech

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. One of the things that we've been watching, certainly we continue to get some earning stories. Tim and Mattel reported out after the Clothes you were breaking it down. Stock is down about one point seven percent.

That despite the company coming out and surpassing analysts estimates for the fourth quarter, they had a lot of kind of beats, if you will, in terms of their metrics. I caught up earlier with the chairman CEO of Mattel, Enn Cries. He was in l A. We talked about a lot of things, and in this excerpt he talks about why this quarter is just one step in Mattel's long term stret g check it out. This is not

just about the quarter or the year. It's about a multi year turn around that is tracking very well, which puts us in a strong position to continue to increase profitability and accelerate growth in one and beyond. You know, talk to us about that because you know, reading through last night some of the research and there are you know, folks saying, well, listen, it's really because of the pandemic.

Families our home, they've had a fine different ways to spend time with their families, games, you name it, and kids, you know, being at home that parents are spending a lot more on toys. Talk to us a little bit about what you have been doing to really kind of juice some of the brands that have been you know, that have been in your portfolio for for a long time.

The demand driven by COVID is difficult to quantify, as the industry was projected to grow even before the pandemic, and we believed that much of our overall performance has been driven by the work of our organization and by the strength of our brands and quality of our products. So you know, we relieved the categories where we are a global leaders. Vehicles and infant or the pre school will continue to perform well and we expect to accelerate

the growth and increase overall share. Listen, I have grown up with Mattel. I'm from a large family, you know. Inheriting my older sisters, Barbies was a big thing. And then I've got a seventeen year old where I've Bitty Baby Kit, Marie Grace. These were all throughout my home. Um, so tell me a little bit about some of the brands. Talk to me about Barbie. Barbie continue to go from strength to strength, up eighteen in the quarter and for

the year, with retail sales up more than thirty. Barbie ended up being the overall number one toy property globally for the industry both in the fourth quarter and full year. The Barbie Dreamhouse was the number one toy in the US in the fourth quarter and the full year. I had one of those in my house. I had one of those in my so you know exactly what I'm talking about. So it's been really, you know, an incredible monta year journey for Barbie. UM carrying the flag for

diversity and plusivity and purposeful play. But you know what what is Um, what is interesting is that you know, without taking anything away from the incredible success of Barbie, this is you know, very much a story about the matel playbook, because the Barbie success is driven by the same mythodology, same capabilities, uh, same approach UM that we that we applied across our entire product offering about brand. So it's about brand, purpose, design, lead, innovation, cultural relevance

and executional accident. There's a reason why you play without toys. It's beyond the play system. Our toys carry, you know, carry messages. And it's very clear with Barbie, as I mentioned earlier, carrying the flag for diversity inclusivity. UM evolved in body, ethnicity, storytelling and likewise American Girls one of the most rich brands in terms of content and messaging about the historical doll figures and teaching and and and you know, working with parents as a trusted partner, we

evolved and developed their children. It was, as you said, really a blowout year, a blowout quarter for you guys. Um, is this as good as it gets? Well, absolutely not. We just announced that we expect to accelerate growth and also provided guidance, or I should say, so you know, guidance but goals. But twenty two and twenty three, where we UH still expect to achieve mids single mid single digit digit growth in our top line and and on profitability.

We also expect to achieve between seven hundred and seventy five to eight hundred million dollar IBIDA adjusted IBIDA in one. This is following a growth of almost six hundred million dollars between two thousand and eighteen to two thousand and twenty, and we expect to achieve mid teen UM offered an

income margin by twenty three. So from where we see today, you UM, you know, you should expect to see us accelerating our top line growth and continuing to improve profit ability, not just in one, but for the two years after that. You know what I'm curious to you about is you know how important You've heard you talk a lot about, you know, growth and director consumer UM. I did a lot of buying online UM when I was buying from

my daughter years ago. E commerce the strength that you've seen, does that become an even bigger part of the business going forward? I'm curious about that. Yes, this was another major driver for US and part of a big part of US says. In the quarter and in the year, e commerce grew significantly for US and continue to maintain momentum. In the fourth quarter we grew, and for the full year, we were up at this point online retail and ew

commerce represents about a third of our retail sales. We were the number one manufacturer in e commerce in the US in the fourth quarter, and we grew our e commerce here in the US in the fourth quarter and the full year. All right, And that was matelsa EO you know on Cries catching up with him earlier to talk about their latest quarter really the outlook, and you can hear more of that interviewed him. It's coming up on our weekend show. It's also going to be on

our podcast feed at Bloomberg dot com. But you know, he said, obviously they got a kick from the pandemic, but they've also been putting some strategies into place to really you know, kind of set demand four years to come. Yeah, you know, we talk a lot about pandemic trends, and I think one pandemic trends that trend that actually makes me smile is the idea of parents and grandparents spoiling their children because they've been stuck inside and buying them dolls.

I mean, doll sales surging nine per cent for all the pemic I know. And they were struggling a lot with Barbie is an American girl, So they definitely think it looks like things are back on track. So be sure to check out that full interview. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich from Bloomberg Radio. In this latest episode of Bloomberg Studio One point Oh, host Emily Chang sits down for

an exclusive interview with Microsoft CEO Satya Nadela. In this excerpt, Nidela discusses anti trust issues facing the tech sector. Take a listen. You need to have a business model, um that really is aligned with the world doing well. I think that's what's being litigated right, which is there are certain categories of products where the unintended consequences of the growth on that category or lack of competition in it

creates issues. And so that's what I think people are all looking at and saying, hey, what's the fixed for that? But I don't think big by itself is bad or but competition is good. And every business, in particular the businesses that are large and have high scale, the unintended consequences of your scale cannot be dealt after the fact.

They need to be dealt while you're scaling. So when it comes to the d platforming of President Trump, Facebook or a Twitter, Google or YouTube or Twitch have the power to say who we can and cannot hear from, and if not, who should. Yeah, I mean, this is another one of those places where I think unilateral action by individual companies in democracies like ours is just not I think long term stable. We do need to be able to have framework of laws and norms which are

societal norms around even internet safety. Uh. And what is the public square that really is in a lot indment with a thriving democracy. So we just need to get to a stable state, uh in that because otherwise, depending on any one individual CEO in any one of these companies to make calls that are going to really help us maintain something as sacred and as important as our democracy in the long run is just no way at least I, as a citizen, would advocate for now. Slack

has alleged that Microsoft combining teams into offices anti competitive. Um, what's your response to that? How does the landscape change now that Slack has been bought by Salesforce and as part of this bigger entity. I think both Slack and Salesforce have been successful. For example, I always point out that when we think about what they were able to do, I always ask the question would Slack have even existed if it was not for the free access they had

on top of say the Windows platform. They didn't have to call Microsoft, they didn't have to go through any of our app stores, they didn't have need any uh, you know, off of permission. Compared to any of the other platforms that they're available on, we perhaps provide the most open platform and Windows and even on Office five you can in fact use all of the APIs that we expose, integrate with any application, and people use it.

If you look at even the usage reports, this Slack usage and Microsoft three five years, it's so and same thing with Salesforce. So the fact that they're combining will compete with them, and they will also cooperate with them and provide them access to our platforms. And I think they should measure it by what type of success they've had on top of our platform. You worked at Microsoft through its own antitrust battles, You remember what that was like.

It's been called the Lost Decade, if you will. What cultural risks do you believe these companies face, even if they're not broken up. What's happening on the inside as

these investigations play out. So I don't know if there are real parallels between what happened with Microsoft and any of them, but I would say I think the core, as I always go back, is you know, if you have a business and a business model where when you are doing well around you, people are doing well, and that is something that your own employees feel, then I

think things will work out culturally. When that is not true, I think it's very very hard because one of the things I feel is, as somebody said, you've got to keep it simple. What do you say, what you do, and what you think all need to be consistent. You can't sort of have a real distance between those three things. And that's what at least would be my advice and

to anybody, and starting with ourselves. All right, That was of course Bloomberg Studio at one point, Oh check it out, you can see that entire interview that's going to happen at five thirty pm Moll Street Time on Bloomberg TV, And of course that's host Emily Chang sitting down for that exclusive with Microsoft CEO such An Adela, who was the cover story for Bloomberg Business Week. Um, I'd have to look at I have to pull it out and

tweet it, but some time ago. But it was a really nice deep dive into kind of who he is and how his approach has differed from some of the

other folks who've been or who did run Microsoft. I love that answer that he gave to Emily's question about Salesforce and Slack teaming up, I mean, without skipping a beat, Nidela talks about the Windows platform and the way that Slack was able to succeed because it was on the Windows platform, and he did say, you know the fact that they're combining, we'll compete with them, but we'll also cooperate with them, sort of the the frenemies idea with

these companies. They're also big that they have to work together, but you know they're also competitors. Yeah, I mean, this is what's interesting about the technology environment, right, Like you do have to, you know, work with them, you know, work with others, work with your competitors often. Um. But it makes for a kind of an interesting environment. And you're right he didn't miss abeed Um, that's for sure.

So check that out that full episode Road Journal. Yeah, but you let me drive, no no, no no drug home please, I'll do the right drivel. I want to drive, Just drive, baby, it's the questions trying. This is the drive to the globe. Com Me thanks, we'll drying us down on Bloomberg Radio. All right, it is time for the Drive to the close.

Just about eleven minutes left in today's trading session. It does feel like another day where we're just trying to take it in, trying to slow it down a little bit and see where we go from here in terms of inflation, in terms of growth, a lot to get to. Let's bring in David Diet's back with us, managing principal and senior portfolio strategist at Pepack Private Wealth Management. They've got eight billion in assets under management. David once again

joining us on the phone from Summit, New Jersey. It is kind of I don't know, David, We've we've been bouncing around the last couple of days kind of quietly, what do you I don't know, how do you see the market environment right now? Well, we've had a wonderful period since the pandemic low March twenty three UM, and really for a good reason. We've got UH, you know, two vaccines being rolled out now a third one from Jane Jay soon to be approved. That's the key factor

that's gonna drive consumers re engaging with the economy. Of course, the Federal Reserve has done the right thing, lowering interest rates down to close to zero UM, stabilizing all things having to do with credit, giving UH investors tremendous confidence corporate earnings, you know, Carol, at the start of TO four they're projecting double digit year over year losses. But now we may actually have a chance to have our first year over year slight gained since the pandemic started.

So the improvements versus expectations have been wonderful. And that's not just on earnings, it's also on sales, and the beats have been some of the best we've seen in the last decade. Of course, they're putting the finishing touches on a fiscal stimulus package which will help the most challenged Americans get through this period. So there's a lot

of tail wind here for the market. What do you make of fed chair Palace comments earlier today, quote, we are still very far from a strong labor market whose benefits are broadly shared. Look, you're talking about the market. We've had record highs earlier this week, but still millions of Americans struggling to find work. Um. What do you make of of what Power commented on earlier today? Well, he's absolutely right. We've got a lot to a lot to do in terms of getting the rate of unemployment down.

I think he'd be the first to admit that there's a strong role for fiscal stimulus to narrowly target those Americans, those main street businesses that are still challenged amid these pandemic woes and just lowering interest rates everywhere. Um, is kind of a blunt tool to achieve that, although certainly a necessary one. We were most focused on his comments on inflation. Um, you know, that's the big problem. He said he's going to keep that those interest rates down

low until we're well past the two inflation rate. Well, you know, if you look at the commodity market, Tim inflation is starting to move with commodities like oil, lumber, and corn moving up. And of course the other thing I look at is the built in inflation expectations. When you look at tips treasury inflation protection securities versus conventional treasuries, they're not forecasting two point two over two percent in terms of inflation the next ten years. So inflation expectations

are moving up. So do you anticipate, h David, that we could see significant inflation and yet still have millions of workers out of work? You know? Unfortunately I've been doing this long enough. I saw that in the seventies. They called that stag inflation. So it's more than theoretically possible. Um. Certainly in the financial markets, in the commodity markets we are seeing in inflation. And the spack market, the I p O market, the cryptocurrency market we are seeing huge inflation.

So obviously there there is two economies out there. That's one of our concerns here as as a nation. Um. But certainly, if the vaccines are successful and people re engage, you could see a rush to travel or rush to eat out, a rush to to take advantage of a lot of things. But that may not be enough to get everyone who's most challenged back to work. So certainly that is a possibility. So David, where are you seeing

opportunity right now? I know you have a focus on dividend paying stocks, City Group for eyes and XS on um. Why are you optimistic there? So you know, I think that the next thirty basis points in terms of interest rate move is more likely to be up then down. And when interest rates move up, of course, the highest duration bonds in the market go down the hardest, and

the short duration go down the least. So if you take the analogy to the stock market, growth stocks, where they're being valued on earning to be going out years if not decades um, maybe have the biggest challenge there. In a higher interest rate environment, well, dividend paying stocks so called value stocks, where there's more cash flow immediately

more dividends may actually hold up better. And of course, large swaths of the that economy, like for example, financials, why actually do better if their most important product, their loans, can attract a higher interest rate. So did you say specific names forgive me? Yeah? So for me, the quintessential um pandemic recovery plate is Exxon Why because you know, we didn't use fossil fuels last year because everyone's locked down.

I mean, just think back to last Thanksgiving. Everyone stay at home, and what are we gonna do next Thanksgiving. We're gonna see Grandma, we're gonna see the kids, We're going to travel, right, and so energy use, I think it's going to explode um and and and you know a few years ago fossil fuel prices where a hundred dollars a barrel. Right now sknocking on sixty and so then I'm looking at, well, what if I'm wrong? So I'm looking for the biggest publicly trade player out there.

That would be Exxon, who, by the way, is paying a seven point four percent dividend. You have to have a very high treasury before you're not gonna be making more money with the xcen did um than than the than the treasury. And of course, Excellence making all the right moves now to protect that dividends slash capital expenditures, which, by the way, if all energy producers slash capital expenditures, that's gonna reduce supply. That's gonna push up UM prices

when the demand recovers. Yeah, I was going to ask you about that supply demand equazing because I feel like pre COVID we were still talking that there was a fair amount of supply still in the system. You really do think that that gets that dramatically changes when we come back. Well, unfortunately, I mean we were you know, people have very little confidence as to the continuing demand on fossil fuel prices for many reasons, including the political

winds and so forth. So whatever people were going to do in terms of exploration before, they're not going to do it now. And so ironically that will have to Tennessee to push up prices so that I think, um deserve someplace in your portfolio. All Right, we gotta run. Hey, David, thank you so much. David. It's managing principal senior portfolio strategist over at Pepack Private Wealth Management, aprilion in Assets under Management, joining us on the phone from Summit, New Jersey.

Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Sarah to Bloomberg Global News