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This is Bloomberg business Week, Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
We have a great guest, someone we turn too often when it comes to some of the big issues that are facing global relationships. Back with us, as Ed Price. He's a former British trade official. He's now nonresident Senior Fellow at New York University's advised members of the European and British parliaments. He's a former British trade official, and he writes often about politics, economic policy, and so much more. And he joins us now from upstate New York. Good to have you here. How are you?
I'm well, Carol, thanks again for having me.
How are you doing well? Trying to keep up and certainly taking our cues out of the White House and specifically just moments ago from the Oval Office. Let's start with I think what is top of mind? And it seemed to be top of mind for the discussion between the Prime Minister of Norway and President Trump just moments ago, and that is Russia Ukraine. US is expected to demand that Russia accept Ukraine's right to have its own army defense industry as part of a peace agreement between Moscow
and Kiev. And Kiev, how do you see these developments and where it might be going and in what might bring this to an end, if anytime soon?
Sure, So I'm very puzzled about the situation in Ukraine, honestly, because it seems to me from the outside that Putin has been slowly losing this war, and slowly losing this war, at least against his initial ambitions, which as we know, included the seizure of all of Ukraine and the installation of a puppet government. And so you go away and read about this, ask people that better informed than I,
maybe who travel more frequently over there. They'll tell you that Putin is doing pretty poorly and that the Russian economy is not in the sort of place that could continue this war for long. And so when I see President Trump announce that he's going to come up with a deal, I don't understand why he doesn't push forward with more weapons and more supplies to Ukraine in order
to push that deal forward, whatever it is. So it's very confusing because on the one hand, Trump seems to offer carrots to Putin, carrots that Putin hasn't asked for while withdrawing the stick. I haven't actually read the art of the deal. That might be how you're supposed to do it, but I'm not sure well, and.
It does to be fair to the president, something that he has been consistent about is the disdain that he has for the loss of life, and it's something that he mentioned several times today talking about the thousands of young people who continue to die in Ukraine each and every week as a result of this war. Could it be in your view that he just wants to end the fighting.
He may want to end the fighting, but I'm not sure that the same man who threatens Greenland, Panama and Canada with possible military action truly cares about the loss of life. So I would put that down to a nice talking point that he does well to repeat because it's a powerful one, and I should be careful myself as an analyst not to enjoy or celebrate wars, and we talk about this one in Ukraine very often. It
is indeed tragic. Now that might be cynicism. I don't look at President Trump at his entire policy agenda, his entire foreign policy agenda, and think this is someone who cares about lives. Need I remind the people watching or listening to this live stream that we've also been sending people without due process to El Salvador. So I would certainly take President Trump's concern for human rights or the loss of life with a pinch of salt.
The other thing is that the President has certainly talked a lot about and to be fair, it's and is maybe his quest and his mission to make sure that the US has what it needs for national security. And I think it's safe to say that a lot of nations are thinking about this at this point. He talked about Greenland important for international peace. You've been traveling ed. You've been not necessarily to Greenland anytime soon, but you
have been to Panama, You've been to Canada. I am curious what you've been hearing seeing when it comes to maybe a new global order.
Well, if there's a Bloomberg challenge for me to go to Greenland. I accept, and I'll put back. We'll work on it. Canada and Panama are in the same mood, and when an American citizen turns up and says, look, what do you think? The answer is not much. Both of those countries are very upset with the idea that the United States, the apparent champion of liberty and it's two hundred and forty nine year history, would be threatening
the annexation of allies. It's completely bizarre, and it's also something that I think is causing quite a lot of stress.
Now.
The Canadians and the people in Panama were very polite to me. That might be because they were misled by my accent and they, you know, they thought I was British. But as soon as I said, look, I'm actually American in a hotel lobby or even at the checkpoint, there were raised eyebrows. So we always talk about whether Trump is serious in his foreign policy script. I don't know if he is or not. I think is, but other people abroad do.
Do you think there's a legitimate argument for the United States to want to annex Greenland?
No?
I from a security perspective, ed, No.
It's completely insane. Because whatever the gain in annex in Greenland, there would be a loss in the EU as an ally. And you know, you could never fully sit down with the eyes and ears of God and calculate what that net calculation would be. But I'm pretty sure you could take a rough estimate and say, okay, we expand our presence in Greenland, we formally change the deed, we say we own it, and we put a few more troops in there. Just imagine how annoyed and disgusted Denmark, France
and other EU countries would be with US. I mean they could turn around and say, well, look, if the United States is actually willing to cross frontiers and take land that doesn't belong to them, maybe a deal with Beijing, which to be fair to the Chinese, you know they haven't actually done that. Maybe a deal with China is in our interests long term. So I think it's there's absolutely no argument for it when you sit down and
do the next calculation. If you have a simple view of the world and you think this is mine, that's theirs, then you of course, like we said before, you can draw a sharpie around an area and say it's mine. But I don't think that that's taking into account the second order effect of losing the Europeans.
Well, just a reminder of what the President said last month in an address to Congress, quote, we need Greenland for national security and even international security, and we're working with everybody involved to try to get it. One way or the other, We're going to get it.
You know.
One of the things I think about ED two as we are watching kind of the back and forth between world leaders, I guess what I'm most obsessed with is US and China, just because they are the two big economies and determine and control. I think it's safe to say so much. Having said that, what is you know, the strategic balance as China is not that China. It was five years ago or ten years ago that maybe needed an a SIST or twenty years ago, right when
so many different global companies set up shop there. We've been talking a lot about the EV market and BYD and the advancements that China has made technologically in this world. And they have done this largely by supporting so many of their industries and helping them develop. So I do wonder. We had the Whirlpool CEO on yesterday, who manufactures about
eighty percent here in the United States. Eighty percent of their supply chain is here, and is someone I would say safe to say supportive of some of the terraff pushback to help him develop his domestics.
He's already got the domestic production, so he's in a good position.
It's in a good position. So what is like as you talk to world leaders as you travel you know some of the argument many would say that Trump has makes some sense in terms of developing some industries here, protecting our national security. What is the balance for any nation US, China or the Europe region to have that and yet kind of get along on a global basis, which is necessary for things like climate change, the environment, and so much more.
Well, let's go through the exercise, Carol, and let's be fair to President Trump. I think that he deserves an A plus on his report cards for identifying global problems. This is the man that's identified that the Breton Woods trade imbalance, that is that other countries have a higher tariff rate than the US. He's the man that identified that that's out of date, and he joined the dots between that and an unsustainable fiscal position in the United States.
He's also right to be fair to the president to point out that great power politics and great power behavior is a feature, not a of history, and that the United States should be ready at some point in the twenty first century for conflict. So the president, from you know, some analyst like me, gets an A plus on identifying
the problems. Where we run into trouble is the execution and the suggestion that Donald Trump, alone, in his sort of chaotic ad hoc behavior, is helpfully moving the United States, its allies, and the world back into a new, more helpful equilibrium. So I don't think that that's what he's doing. Yes, the United States cannot continue to borrow the way it's
borrowing and subsidize the world's security. But the way to fix that is to keep our allies closer, is to do trade deals with the people that like us, and maybe even reduce tariffs with them. So he has to get what A D A D minus. You know, I don't want to fail the guy out right, because he's the President of the United States and his success is
everybody's success. But this sort of right, this chaotic approach to things, is not going to bring the world into so far as I can see, any new equilibrium, despite what Scott Besson and Marco Rubio tried to do. After Trump has spoken which is toned up in the press and say actually this is what he really meant.
Yeah, it's why folks like David Brooks of The New York Times has said, you know, the President is maybe the wrong answer to the right question, because I think many would say, whether it's tariffs or geopolitics or positions in the world, that he's brought up a lot of issues that need to be dealt with and discussed ed. We apologize things have gotten a little hectic today and obviously we had to listen to President Trump there at the White House. But we hope we can get you
back real soon. Really appreciate you weighing it. Ed Price always timely, senior fellow at NY You non resident senior fellow, former British trade official, joining us once again here on Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and the Android Auto with the Bloomberg Business app, or watch us live on YouTube.
All right, folks, we've been watching some of the airlines. I feel like we've been watching them for a few weeks at this point. But we did have American come out withdrawing its full year earnings out look, joining a growing number of companies that say unease about the US economies, making it difficult to forecast how the year will play at.
You also had Alaska Air saying second quarter earnings will come in below Wall Street estimates, and then Southwest Air raining and growth this year as volatility surrounding US trade policy is chilling out consumer demand on air travel. I'm just hoping fares come down. But we are watching this sector. We've got a great voice to talk about it.
Yeah, it's great to add back with someone who knows the industry so well. Sheila Kaiaalu's here. She's managing director and equity research at Jeffrey. She joins us here in the studio. How bad is it for airlines right now?
It seems like it's stabilizing. It was pretty bad a month ago, and it.
Was when we yea heard from Delta with drawing.
Yes, Delta with drawing. We downgraded the sector to half cell ratings and underperform ratings. But that news the sort of price.
Dan.
That's why you're seeing American and Southwest kind of tread water today because we've seen this tape before with domestic leisure really being the soft spot off peak hours Tuesday Wednesday, Blying really not getting passenger demand. Southwest putting up seventy three percent load factors. That means the plane is about three forts full, should be eighty two to eighty five percent full. So we've seen that that's where the maronment that's.
More than three percent. I was kind of shocked when I went to look at what the price was. I thought, Okay, it's going to be selling off. But you're saying most of that stuff is it's starting.
To get its chriced in because we've heard it now for a month and it seems like the consumers able to hold stable. But we also have a pause on tariff, so let's see how that works itself out. We heard from Boeing this week, we heard from General Electric and Raytheon. These are aftermarket suppliers on engines, et cetera, and so what they're doing is they're cutting their departure forecast from
mid single digit to low single digit. That means the numbers of planes that are taking off, but that's based on what's already happened with Delta and United cutting capacity and even Southwest cutting mildly, and they're not really seeing further weakness internationally. That's what we're hearing. That the market's holding stable over the last six to eight weeks from the fall off we saw starting March first.
So how's business travel?
Corporate travel seems like it's okay, but it depends on the sector in the airline. You know, Southwest was a little bit more robust. American has a very idiosyncratic story because they removed their corporate booking channels last year, so they have a super easy comp United and Delta called out weakness obviously across government customers and certain manufacturing markets like autos and even aerospace where they saw softness, but financials tech was still holding up.
So we'll see not a great reveal, but we've got like two, three, four trips going out to the West Coast in like the next month or so.
Yeah, and we've booked zero tickets at this point. That's fun to do.
I have one booked, I have one book So what are the airlines doing in terms of pricing? I know, somebody else who was looking for a flight and saying, well, wait are there's some softness and it was so expensive. I think you go to Puerto Rico or something like a hearing in terms of pricing.
Well, I haven't checked out Puerto Rico flights. I wish I would, but I met it's a Brazil and Paris and a Dallas trip coming up, and none of them are book yet. You know, folks post pandemic are booking closer in and so you don't have flights book neither do I. We haven't seen that price. I haven't seen the pricing softness. No, but the airlines are calling it out,
especially in that domestic leisure market. So if we were going to Florida and May, we'd probably get a discount a ticket, or you know, Southwest called out that route from Tucson to Albany. I'd like to know the guy doing that route.
But that's where they're seeing that weakness. I love you and Tucson in Albany that we're just going to say, yeah.
Yeah, I do wonder about just really what's happening when you think about demand from the perspective of international travel. You said that it's kind of holding up. But at the same time, we're hearing reports that travelers coming to the US from outside of the US are holding off, and we're seeing that fall a little bit. Is that showing up yet in results or in bookings, especially for the summer?
It seemed like for now international still holding up, especially with europe strength there. We heard some rumblings about Canadian weakness. Folks have sort of put an end to that, saying it's only down ten percent, not the significant numbers we've seen. So ten percent is something, it's significant, but we were seeing numbers in the realm of seventy percent, so the ten percent definitely scaled it back. So Canada is an
area we've heard weakness. We saw some European airlines call out weakness coming into the US versus US originated flights to Europe are still holding out pretty well, which is interesting.
Yeah, I'm kind of surprised because I do feel like there's some headlines on stories that are like, oh my god, nobody's coming in, you know, traveling to the US and or you know, even traveling elsewhere. Can we talk a little bit about Boeing, Sure, tell me you're thinking, you know, you cover the company. They've reported first quarter results exceeded Wall Street estimates. You know they've done a deal, right,
getting rid of their flight navigation unity. What's how are you thinking about next six twelve months for Boeing or even longer term.
I love Boeing when folks get negative, so the days when it hits one forty, when we hear about people canceling airplanes or thoughts of that. But you know, Kelly Orper, yesterday the Bowing CEO said there's no change in the skyline. Folks are waiting six years for the aircraft. They've been waiting since twenty nineteen. Right Southwest is still waiting. We're all waiting for airplanes to be delivered. No one's moving out of line. The only customer who is is China.
But they've been reducing for a while.
China's been reducing. They've been about twenty percent of deliveries. They're actually only five to seven percent of the official backlog, but Chinese operators use undisclosed, So yesterday we know that it's about fifteen percent of deliveries this year. In the first quarter, Boeing delivered eighteen aircraft to China. They expect another fifty for the full year, and our estimates are around four hundred and seventy five. So China is a risk and probably why Boeing didn't sound a little bit
more bullish. But they seem like things are working well with the ramp on the three seven and all the rest of the skyline.
The President sending a message on his social media platform this morning about Boeing, saying, quote, Boeing should default China for not taking the beautifully finished planes that China committed to purchase. This is just a small example of what China has done to the USA for years, the Washington involvement with Boeing, for better or for worse. I mean, there's been a lot of criticism too, come from the President about the new version of Air Force one, the
seven forty seven. Ken Boeing just sell those planes to other countries because there is such a backlog if China were to dry up.
I think there was a headline about an hour ago saying Air India might buy those Chinese planes. So here's a note we put out three weeks ago. It was called how many planes does it take to get to the bottom of the trade deficit? When you think about aerospace and defense. It is the only manufacturing center with a sector with a sixty two billion dollar surplus. So what can you buy if you have a trade deficit that costs seventy million or four hundred million an airplane?
It's easily trackable. So we did a note where we looked at every one point of reduction to the Chinese US deficode, which is two hundred and finety five billion is about fifty plans. So obviously it would take a lot of planes from China.
To offset it.
But it's a good chip President Trump could put on the table for folks.
All right, on your radar for Boeing last twenty seconds, just watch what.
Free cash flow and max production. That's all that matters.
All right, great stuff, Thank you so much, sheille I really appreciate it. She's managing director and equity research over at Jeffreys, joining us here in studio.
This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car 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 played Bloomberg eleven thirty.
Three point eight percent of the upside is where we see shares of Alphabet, the parent company of Google. The company reported first quarter revenue and profit that exceeded analysts expectations. It was bullied by continued strength in its search advertising business. And that's exactly where we want to go.
Now.
We've got back with us Mark Douglas. He's president and CEO of Mountain. The company is software that helps companies target advertising on smart TVs. He understands the ad spend market. He joins us from Miami. Mark, good to talk with you again. Does this surprise you given the trends that you're seeing when it comes to advertising?
Not given the trends I think the trends for I want to talk more specifically about Google.
Yeah.
I think we started the you know, we started the year and I think everyone literally everyone was very optimistic about the economy, you know, Q one and Google's reporting on those results, I think they did very well. I think there were concerns and continue to be concerns about whether AI on their platform, meaning in your search results, is going in some way negatively impact the search business. But I think as an investment even there just provide
some comment on that. Look, I'd rather have Google competing with themselves than allowing other people to compete with them. So I think even that's a positive if in the future it does have some you know, negative impact.
Well, you know, it's funny that you say that, you know, and I'm looking at our right through by our Davy Alba. But this whole idea that you know, alphabet, Google has to show right that it still has momentum and search, advertising and cloud, but at the same time show that it's as it makes incredible investments in the AI build out, as the world kind of shifts in that direction, that it's also there as well. It's really tricky, and this
is what our man Deep Singh said. You know, this is a company that's got seven apps with over i think two billion monthly active users. It's bread and butter is still Google, right, and it's search business. But as people move to chat, Gibt or Gemini like, that's a tough transition. It's got to juggle a lot.
Yeah, and then like I said, I think if I'm an investor in Google, the I always say to my company, better we compete with ourselves than we allow someone else to do it. So if I'm an investor, what I'm looking for is that the management team is awake, they're alert, and they're ready to compete. And I think Google's showing that and what they're doing with Gemini, and they're showing that they can still navigate search also with a company
with that scale. You mentioned the tremendous scale they have. Honestly, you can find you can always squeeze out more revenue and as a result, more earnings. So I think it also shows that they can manage the business in order to find those extra dollars if they need to, while they might be challenged in other areas.
Is this the classic innovator's dilemma? Though Google's core search business is so profitable and it's so entrenched, and it's so ingrained and pretty much almost every country in the world, you have to say almost that there is a concern that it doesn't want to cannibalize that with investment in Gemini.
Yeah, that's what you don't want to see what you want them to be like, like you almost wanted to be two separate companies, and they just go at it and made the best you know, part of Google win.
The other thing they wanted to Google wins. That's the point, right, Like you said, you like to be competing with yourself forgive me go ahead.
No exactly.
The other thing to remember, you know, mobile was a big threat to Google. Yeah, like like Google was all desktop and you have your browser out. That's still you know, obviously a huge part of their business. And people were very worried about whether, you know, people were going to search on mobile and if they did, whether they were
going to respond to the ad. So, I mean, it's not the first time Google has been challenged by new technologies and they you know, honestly kudos to them, because I expected Gemini to to possibly cause some problems in Q one and the yeah, in terms of their revenue, and obviously it hasn't.
Hey, one last question on the upcoming call with analysts, what do you what would you be asking?
What do you want to hear the I would be all about Gemini and how AI results at the top of the search page, which essentially I have replaced the paid you know, the click ads, the paid ads at the top of the search page for a lot of the searches. I would want to ask every possible question I can on data related to how that's impacting this that their search revenue. There's search results, responses to the searches, everything, and try, if I'm an analyst, try to model that out.
All right, we're talking, of course with Mark Douglas, president and CEO of Mountain. We want to bring into the conversation Man Deep. Seeing he is senior tech industry analyst at Bloomberg Intelligence, just coming in the studio. It's a little crazy, so he hasn't heard everything that Mark had to say. But Mark said, you know, he's curious about Gemini is something he's going to be looking out on the call. Man Deep, you told us, you told us what to do. Man dprrect you NonStop because you said
it's all about search. So walk us through what they got in and how it how it's sees, how it looks for you because investors like it.
Yeah, I mean the Google Services revenue was a slight beat, but what was really impressive was the margin beat on the Google Services.
And a lot of.
It is because everyone thought, because they're adding AI overviews, that's going to hurt the margins of search.
Oh it didn't happen.
Why didn't Why didn't that happen?
What's because you have to explain this from the perspective of a Google user, like the experience, if we get the if we get the answer with the AI overview, we're not looking at ads, We're not clicking on things.
Yeah, why doesn't it hurt?
Because they have so many different types of queries on Google Search that some of those queries they are able to monetize it just through ads on AI overviews. Remember, Google never went away from ads, even though they integrated elements. Ads has always been a core part of of the Google dot Com offering, even with the AI overviews, and they somehow weave the ads in a way where they're able to charge for those ads. That's what makes them so special.
I can't I never look at an AD on like what is wrong?
Right?
When I look at an AI overview answers.
On whether it's you know, an informational query versus an e commerce query or a travel query or an auto query. The pay change is so dynamic that they are able to weave in the right ads with the right kind of target.
What about with the Gemini app and like the app experience, are they able to make money doing that yet?
Does that matter? I mean You have to.
Remember Google does five trillion. Search is a year five.
Trillion, So you know, even if they monetize twenty to twenty five percent, which is the case, seventy five percent of the queries are not monetized. Imagine how much power they have in terms of the targeting they have with the ads as well as the number of queries. Even if chatgip he's taking some volume. Yeah, brilliant is a lot. Mark.
I want to bring you back in as we've got Mandeep seeing Brilliant part of our Bloomer Intelligence team. Mark Douglass, President and Chief executive Officer Mountain, really great perspective in terms of advertising within this world. But you mentioned something about Gemini that you want to hear on the call. Just lay it out again for man Deep so that we can kind of dig into that with him.
Yeah, I mean, I think it's similar comments, which is the Google as a company. I think what's most important to see is that they let the different parts of the company compete. So Gemini competes with with with search results, because if they don't compete with themselves, then open ai and others are going to do the competition for them, and so I think it's important that they let them compete.
It appears they are. And I also agree with the other comment that he just had in terms of scale of their business is like, you know you can increase search results, you know, eight search results one half of one percent, and b they have a lot of levers to pull and I think they're doing a good job pulling them to be able to navigate this linemup right now.
And the point about Gemini not only does it like there's a competitive aspect, but also you learn so much more about the user. Imagine they are on Gmail Maps Search. Now you've got one more app where you have your user, You're learning about their type of queries. How would their AT targeting become suddenly because they are facing through Gemini now, so there's one more surface that you are adding, and it complements their AT targeting.
Mark brings up this concept of great to compete with yourself and so essentially that's kind of what Alphabet's doing right with Google Search and then Gemini. But is it a guarantee that everybody who's been using Google is just going to easily just kind of segue into Gemini. Can we assume that that will happen.
I mean, Google is still the verb and I don't think it's changing anytime soon. Yes, you can say chat GPT for certain informational queries and for certain queries, chat GPT does a great job. But if you're thinking about the Google ecosystem, you know, the all the apps that you are used to using on the consumer side on a day to day basis, it's hard to take yourself out completely from the Google ecosystem. You'll still be using
Gmail apps, YouTube, even if you use chat GPT. I mean a lot of times chat GPT shows you a search result and then you go to maps to search for you know, the exact address that chat GPT show.
Right right, hey man d Alphabet shares up four percent in the after hours, Meta platforms up two point three percent. Amazon shares are hired by one percent. All happening because of what we heard from Alphabet. Is this just a huge sigh of relief when it comes to megacap tech, I mean, is everything okay?
Are we out of the world.
I'll wait for the call, because remember Liberation Day was April second.
Yeah, this is through March thirty first. We don't even know.
It's a great impact of tariffs was I mean, all that happened at the beginning of two Q So maybe I think too far fashion thinking, you know, we're out of the woods. But it's a good print.
It's a good point. It's a good point. Mark, come on, Beck, And I'm curious if you have a question for man deep saying, like, you know, you follow this market, you follow this company. I'm just curious.
Yeah, I actually want to take the conversation slightly to another part of Google's business. One of the things, you know, I'm still very much an active engineer, and one of the things I'm saying is Google be very aggressive are capturing market share in the Google Cloud business. And that's not something I think many people are talking about today, but that's potentially, you know, setting up from some really good results in that part of the business in the future.
So I'm curious, Mandy, if you have any thoughts on that part of Google.
Yeah, I mean it goes to the point about you know, then having this huge infrastructure that powers their family of apps also powers the cloud business. And thirty percent growth on a fifty billion dollars runderrate is very impressive, right. The problem for Google is it doesn't generate the same kind of profitability that search does, and that's why investors don't care that much. But look, I think they could
even grow faster on the cloud side. They're probably somewhat supply constraint that everyone is in terms of AI infrastructure, so that cloud business could continue to compound at twenty five thirty percent clip. For a while, we've.
Been talking about how the stock has really popped in the after hours. It's off some of its highest levels in the aftermarket, Mandi, but still up about four percent. But that point that you said, this is through March thirty first, not before kind of the stuff hit the fan right and has really kind of changed the environment. Is that a very very important caveat because these are the kind of companies right in the next week or so, these big megacap tech companies that were like, what do
they have to say in this environment? So I'm just curious if you have to be kind of smart as we go through and.
Not to take both sides. But on the top line, I think search Beat wasn't that impressive as it was the last time around. It's more the margin expansion because everyone thought AI overviews would hurt margins. So clearly they have executed very well on that. The buyback and the dividend is a good capital allocation. But in the end, you know, search Beat wasn't that impressive. You know, for a five percent increase in the stock.
Would a five percent boost to its dividend happen if Alphabet were concerned about the environment in the current quarter and for the remainder of the year, Mande, I mean clearly, like is that an indication that things are pretty good? If we look at that as a potential sign of guidance.
It's more the fact that they traded a much lower multiple than their peers, you know, Microsoft and Amazons, So from that perspective, you could say management feels their stock is cheap. But look, they're making this acquisition of wiz where they are paying thirty three billion dollar money. It's going to close, so it's not going to affect the
free cash flow this year. But if they spend seventy five to eighty billion dollars in data center capex and then thirty three billion dollars in this acquisition, then you know, you're not able to fund all these buybacks and dividend with your free cash flow.
Anymore.
I wonder if both of you. I'm looking at our market's live blog and our macro strategist, one of them writing that the headline is a beat, but it was driven by advertising where revenue rows eight and a half percent from a year earlier. That's not going to help
the rest of the Magnificent seven very much. Mark, you have any thoughts on that, because we are getting ready to have all of these names and numbers and results coming at us, and we know investors love to know what the mag seven are doing.
Well, I think it indicates that Q one was a healthy environment for Google and likely for other companies, especially in tech. I think they question on Q two very valid question fall investors, But I think for Q one, I think maybe people are mixing these quarters together in their mind. Q one solid for Google, guessing is probably educated guess solid for these other big tech stocks.
Also.
All right, Mark, we're going to leave it there with you. Thank you so much, So good to check in with you once again. Mark Douglas, President and CEO of Mountain joining us from Miami. Your thoughts on that, man deep in terms of what's to come. I mean, there's alphabet and how they make money, and then there's the rest. Is there any assumptions we can make or not? Really, they're all kind of different.
Yeah.
I think after the call we'll have a better sense of how they are viewing the environment. I mean, the whole thing about Chinese advertisers pulling back, and Alphabet in general has a broader swath of advertisers on their platform. When you think about Meta, even though you know it's duopoly and Meta probably is more skew towards I would say retail, and yeah, it doesn't have as much autos exposure as Alphabet has, so there is some nuance with
regards to their advertiser base. Would say Alphabet is more diversifying. So if Chinese advertisers are pulling, that will hurt metamore for sure.
Alphabet doesn't give guidance. So what do investors look for on the call to understand the current climate. Well, so CFO commentary, I mean, is there anything there that could move the needle?
I think whatever they say around chat, GPT and LLMS and just overall color around competition, because this is the first time everyone cares about, you know, comments related to search. I mean, up until two quarters back, it was like Oh, okay, Google is a monopoly. Everyone knows that at pricing may go up and down depending on the cyclicality of the economy. But now the competitive threat is real.
But the competitive threat's the competitive threat with AI and lllms. What about the just the idea that if it's an economy where there's uncertainty, marketers pull back from advertising. That would hit this company very hard.
Yeah, but I think what they showed in the is ad pricing actually rent up.
For the first quarter.
For the first quarter.
This is not the second quest.
It's not gonna again. If you think about online ads, Google is the last place where advertisers will pull back because it's the highest ROI out spend.
You you get you actually you pay for what you get. Essentially, yeah, you're not buying it.
If you're looking for customers online, Google is still the best place because it's the most effective. Remember, they collect data from eight apps that you're interfacing with, and that's why the ad is so targeted. Google Metal also has four apps, but then Google probably has more data about you in terms of targeting you.
That's why they're so effective, right.
Really specific data right of exactly what you are doing to instent of it on any given No, that's why I don't understand why they're showing me the car searches.
But I don't know why they keep showing me cars. I'm not buying cars.
No, it's really fascinating, Men Deep, Thank you as always always, Men Deep saying, of course, senior tech industry analysts with our Bloomberg Intelligence team, shares off a bit, folks, up about three point nine percent in the aftermarket, definitely off its best levels of the day. Sales beat estimates on Google Search advertising.
Yeah, in just a few minutes, we're going to be speaking to Ed Ludlow on Intel because shares of Intel in the aftermarket down six point three percent.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Well, shairs of Intel are selling off in the after hours, down right now by about five point three percent. It's attempting this comeback under a new CEO, lit Bhutan, and it gave a week forecast for current period. Also said it's cutting workers to bring costs in line with the business's smaller side. With more on Intel, we head out west to talk to the co host of Bloomberg Technology at Ludlow, who caught up earlier with Intel's CFO to talk about the earnings and the outlook. He joins us
from the Bloomberg San Francisco News Bureau. What did you learn ad from Intel's CFO.
Yeah, I think quite a lot.
Intel is still very far from where it wants to be, from where its customers want it to be, and the only way to get there is to readjust the makeup size of the workforce and also you know, look very closely at the balance sheet, and so like the major step that they're taking is pulling back on op X and CAPEX. They confirmed our reporting that there is going to be layoffs frankly, and that that thos layoffs are
going to be in middle management. But it's really a story about a company that has a new CEO who's like, you know what, we are going to just get focused on technology. Although you know, as I said that, you've got a bit of sense of deja vous, because that was kind of the story the last time we had a new ZEO.
I was going to how many years have we been talking about a turnaround at Intel?
Yeah, so I was just wanting and king about Bloomberg's and king about this. It's like, what is the single head line on Intel, what is the new focus and where are they going to pull back? You know, Pat Gelsinger really wanted Intel to be a contract manufacturer to the world, right do what TSMC does alongside having its own products. Bhutan has just sent an email to employees this afternoon that we've seen and read and basically reading between the lines, I think that that is not a
priority for him, the contract manufacturing bit. I think he's acknowledging and Dave Zinzna went through this on the phone with me that customers want one thing right now right, which is AI accelerators, high performance GPUs or AI chips that are involved in the training and inference stages of large language models and AI models. And Intel's just not been at the races there. So materially, what they're doing is they're cutting out middle management. They're going to rehire
better people in the engineering space. And you may have seen a headline on the terminal just a couple of minutes ago they're going to make people come back to the office four days a week, which is interesting because like they're kind of late to do that in all the names we cover here.
Wait, so they haven't been coming to the office four days a week.
Is this the recipe for making Intel again a dominant chip player?
I don't.
I don't want to confuse our audience. But basically, in the history of Silicon Valley and the world of technology, Intel is at its origin. Right when we think about the early days of semiconductors and the cutting edge of semiconductors and an annual cadence where technology got better, Intel was like the leader there and for a long time
it has not been. It has fallen away. And you know, Zinzna when we was on the phone with me, and you know there's a reason that zins and the CFO was on the phone with me, right lit Bhutan is very early, it's just been at the company a couple of weeks. But they are trying to address culture. They think that basically that the culture that needs to be there to be like roofless and win and get ahead
in the world of technology is not in place. And so yes, there will be a reduction enforce that will target middle MA, but I was surprised as anyone to see that part of that strategy is getting people to come back to offices, not just here in the valley but around the world.
Is the reporting that the Bloomberg News team did earlier this week around the layoffs that was confirmed today are those we discussed?
It?
Are those numbers consistent with what we learned today publicly from Intel.
So what Dave's inside of the CFO said to us on the phone was, I'm paraphrasing, but it was an interesting number because I don't quite have one yet myself.
But the reason he doesn't is.
That he knows what the opex and capital expenditures targets are. Now those are firm, right and you guys may have gone over those on air, but they've reduced op X and CAPEX for the full year CAPEX by about two billion dollars, and then op X came down a similar
amount as well. And from that and knowing where in the ORG they're going to cut middle management, Dave knows what the end goal is, but he said, I don't have a percentage of overall workforce net what the layoffs will be, but they were confirmed there will be a reduction in middle management. And you know, the quote was very simple that they are going to cut out the bureaucracy that currently is in that company as well.
So the CEO saying in a statement, I'm taking swift actions to drive better execution and operational efficiency while empowering our engineers to create great products. We're going back to basics by listening to our customers and making the changes needed to build the new Intel. So it's top customers, Dell, Lenovo, HP, Microsoft, Amazon, What do those customers want? What do they want from Intel?
They want better products that where the technology can do better things. And on the phone, Dave was pretty forthright in saying that trust with their customers is not really in a great place at the moment. You know, Bhutan in that statement you just referenced, said that a lot of their problem right now and the reason that he's going to have to take severe action is due to prior actions the company has taken. And I think he
was of course talking about the last leadership team. You know, the story of Intel is the stockstown five percent right, well almost six percent. We should like be clear that things have not improved, and you know, nor would you expect them to. It's only been a few weeks that the new CEO has been in place, but you know they beat in the first quarter where very simply there
was a pull forward. Right those customers you just listed ordered chips in advance of tariffs coming, and hence the outlook for the current period is not great because they took from what they would normally order now into that first quarter, and the second quarter is not great.
You know.
So there's a lot that needs to be done here. Designing and building cutting edge chips is what they plan to do.
Can I talk about William with Ed?
You could do whatever you want. This is America, you can do it.
Ed's been riding in these forever. You know.
It took me to my last I guess a couple of trips ago to San Francisco to do this.
I guess it change man, change myself road in a WEYMO.
But Romaine brought this idea up on the close that you know, it's in the other bets category of alphabet and there are you know, questions about how much these vehicles cost. What is the current valuation. You've written about this a few months ago. What is how is WEIMO valued?
As a business.
I listened to your conversation with the clothes anchors and with Mandeep as well. Astonishing what you guys got through that Weimo what we reported in its most recent private funding rounds forty five billion. But there are a few things that I think remain. In particular, I'd love to discuss this with Weimo has outside investors, and it is
a material hardware company that's very different to Chrome. Yeah, you know what Romain was talking about is the valuation that that Chrome was assigned in the course of this antitrust trial. That fifty billion dollar Chrome valuation was given by the Duck Duck go CEO. But at the core of Chrome is that it's underlying technology is open source. So Microsoft's Edge browser is made of the same code base that Chrome is. They're they're not apples to apples.
But he is right in the long term, like Waimo has a viable teacher. Many would think it's just that like that is far away, it is super far away.
Well appreciate you joining us, great perspective. Ad La Low, co host of Bloomberg Technology in San Francisco.
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