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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide a DEPP research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today, we'll break down an internal review of the IT company super Microcomputer.
Plus we'll discuss how the automaker Stilandas is faring after the early departure of its CEO.
But first we begin with a big deal in private credit.
This week, Blackrock agreed to buy HPS Investment Partners in an all stock deal valued roughly twelve billion dollars.
It's a purchase that will propel the world's largest asset manager into the highest ranks of private credit.
For more. We are joined by Neil Sipes, Boomberg Intelligence financials analyst.
We first asked Neil where exactly this purchase leaves black.
Rock top five in private credit now and notably top five in alternatives as a whole. And so you know, they've long been top ten in the space, you know, rivaling the names like a Blackstone Apollo. But when you think about Blackrock, you're thinking about eleven and a half trillion dollars in assets, a couple hundred billion in alternatives. That's pretty small piece of the pie for them, So you don't necessarily think of them as a main leader
in the alternative space, in private market space. But what we've seen so far this year is three transactions GIP, Prequin now HPS, and they're really pushing into this space because that's where the growth is and that's where the fees are.
It's just a phenomenal to you can do with all stock as well. How cool is that if you're Blackrock, who's HPS or the ex Goldman guys. Is that kind of how big are they in the space.
Yeah, so they're about one hundred and fifty billion now, and like you noted, I mean Blackrock had about eighty billion in private credit prior to this, so it really more than doubles that business for them. And I think you know what you're seeing a little bit of Blackrock is sort of this catch up game. As I just noted, those three transactions really geared towards the private markets this year, and they're paying, you know, heftier prices for these types
of transactions. I noted this is where the growth is, this is where the fees are. You know, the twelve billion dollars price tag for HPS, that's about eight percent of assets thirty times you know, fee related earnings. So they're sort of playing catch up in this space. And when you think about HPS, one hundred and fifty billion is not small, but that's about one percent of Blackrock as a whole, right, But when you look at the fees that HPS generating, that's almost five percent of what
BlackRock's revenue is. So you can sort of think about the dichotomy there of aligning the organic growth opportunity more with the revenue opportunity.
Are there more hps's out there?
There may be.
I don't think we're gonna I mean, I won't say I don't think we're gonna see Blackrock do anymore, because they are showing that they're taking initiative to really beef up in a space that you could argue they were a little bit under indexed versus some of their traditional competitors in the space. So we'll be interested to see
what is potentially coming down the road. But again, let's remember that they are sort of digesting a handful of transactions that are pretty sizable in what we'll call transformational for a business that you're typically thinking of sort of the index and passive type products.
At the end of the day, who competes with black Rock really aren't they just full?
Okay, what is Blackron now at this point?
Yeah?
What is Blackrock now?
With this one?
Blackrock is I guess I'll say everything sort of in the asset many.
There are dinner thingsgiving and like someone's like, hey, what's Blackrock and you're like, it's everything.
Yeah, it's a little bit of everything now in the asset management space, and again I think they're really filling out that space where they were maybe least index two and you know, really focusing in on where the fees are. And that's what this private credit transaction is going to do.
So are some of the big private equity guys too, like Blackstone et cetera. Are they also just massive asset managers now too, rather than just private equity guys.
So they are, and I mean they're sizable, and it's it's a different realm that we're talking about than black Rocks eleven trillion. We're talking about single digit trillions and high hundred billions. But again, you know that size is not necessarily representative of the fees that these that these firms are generating. So you think about the names like a Blackstone, Apollo, Ares, KKR, Carlisle, all of those.
As a group.
I mean, that's where that explosive growth has been in asset management, aside from that passive, low fee type space. That's right, You're seeing those longer duration assets, those private markets really being where investors want to allocate their cash. You look at the expectations for allocations to increase pretty much broadly across the spectrum in private markets. That's where some of those will call them smaller, more specialized alternative managers.
Are winning our Thanks to Neil Siites Bloomberg Intelligence Financials Analysts.
Each week we look at research from Bloomberg and EF previously known as New Energy Finance.
They're the team of Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and ag sectors.
This week we took a look at BNF's outlook for US natural guests from what we were joined by Enrique Gonzales b n EF, head of US Gas Research.
First we asked n Rique where we stand now with gas and where the US will stand under Donald Trump administration.
The US is the largest exporter of lergy in the world, and in the short term we have a considerable amount of new capacity coming online and that was bound to happen regardless of whether we had Trump or Camela in office. But yeah, we have Plaque Mindes and the Corpus Christie Stage three expansions coming in this December or early next year, and then the Golden Pass LNG terminal as well, so giving us more than seven BC of the seven billion cubic feet per day of new export capacity out of
the US, so further consolidating that role. And then where the change could be more significant is in the medium term with the terminals coming later this decade for it, and especially with the discussions of Trump lifting the DOE Non Free Trade Agreement Permit post because this is a key permit that the terminal terminals need to be able
to reach their final investment decision. And there's a few high profile projects there such as the the CPTW expansion from ben through Global and then we also have a subine Pass Corpus Christie expansion alongside other projects that are targeted for them.
So basically, if you're not exporting energy to a free trade agreement country, then you're no longer allowed to exit to do it. But many said that was like an export thing that they were doing that really wasn't going to hole. It was just an election thing. So that's what we're referring to. So that would really help get a lot more investment in.
There is the expectation in your world of natural gas that a Trump administration combined with republic controlled Congress, this is going to be the time to get stuff done. Whether it's a pipeline or refinery or anything.
You know.
Going back to the idea of the LNG terminals, it's definitely yeah, you have more support to get this project. Still, I think moving to the idea of pipelines new like interstate pipelines, that's a bit there needs to be more change. It's a bigger conversation, but there's definitely more momentum than we would have otherwise had.
So to that point, and it's a good one that you make because a lot of the gas that we have is in Appalaysia and it's really hard to get that gas out. It's in the northeast, you don't have a lot of takeaway capacity, and you do get a ton of gas from also shale productions, so within New Mexico as well as Texas. So there is that What do you think we're going to be able to do in terms of getting pipelines in to get gas out of Appalachia.
Yeah, so I would say that's not my subject matter expertise the policy behind the pipelines, but I think there is space to have more discussions about what can be done to get some more gas from But if.
We don't, we wind up getting a glut at some point of gas because there's just too much, we can't get it out. Therefore, gas prices here in the US kind of really sink.
Yeah, and when we've already seen this happen, especially this early November when the weather was pretty warm, I've seen, Yeah, Appalachia can't really send more gas out, there's no internal demand in the basin. And then we've seen producers actually curtel production because the prices have dropped below the level they need to continue producing even from existing wells, and they're well below the break events in some cases for
new wells. So we've already seen that have an impact in production in Appalaysia and as well in other parts of the country. You have the Haynes Bill as well, that's closer to the Gulf and where a lot of the rhetoric is that we the production to meet the demand from these new allerg terminals is going to come from there due to the location. But they do have higher break events and higher costs than in the Northeast.
Coal.
What's going on with coal and what do you expect under Trump administration? Happened to the coal industri in this country.
Yes, so there's been a a lot of discussion now about potentially rolling back some rules from the EPA or just having or being easier on pollution from coal. I've seen I think it was Duke Energy as well discuss the possibility of keeping some of their coal plants operating
for longer. So that is a possibility and what it could mean for gas and for power sector gas consumption could be pretty interesting because over the last ten years, one of the main roles of gas in the power sector has also been replacing, right this retiring cult coal plants, which has been a benefit in the sense that we've seen lower emissions as well, but this could be more difficult. If the coal plants stay operating longer, you might not see gas taking over in the same way it had been.
That's interesting. That would remove like this very cannibal market function basically for gas and coal is the coal is it green coal, is it like nice coal that we can all get behind, or is it still dirty coal that eventually is just going to have to be phased out.
Yeah, and there's a lot of discussion as well about integrating carbon capture for coal, try to make make it cleaner, but yeah, the economics are difficult, and especially in the short term, we probably won't see a lot of that happen, so it could result in emissions even increasing.
Is there the expectation on our Trump administration is that just a whole move to renewables will slow down and maybe slow down materially or is it just too much momentum.
Yeah, No, definitely parts for example of the Inflation Reduction Act or are repealed or there's some changes in that sense,
we could see slower deployment of renewables. All leagues in vnf IN or clean energy teams look in a lot of detail into this, but yeah, this could lead to an interesting dynamic where you have less coal retirements, but maybe you have a slower deployment of renewables, where gas maybe doesn't grow because there's less coal, but takes over some of this generation that would be needed that would
otherwise come from renewables. So I think there's a very interesting, very interesting analysis and a conversation to have about how this gap is going to look.
Thanks to Enrique Gonzalez b n EF, head of US Gas Research.
Coming up, we're going to break down potential scenarios related to President like Donald Trump's proposed tear ups.
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We begin in the tech space with the it company super Micro Computer.
This week's shares a super Micro jump after the company sat an independent review of its business found no evidence of misconduct.
However, the re you did recommend the appointment of new top financial and legal leadership, including a new CFO, chief compliance Officer, and general counsel.
For more. We were joined by Wouchin Hope, Bloomberg Intelligence Senior Technology aannelists.
You first asked Wujin to remind us what the problem is that super Micro has been trying to correct a.
Couple of things.
There was a short sell of report back in August, citing that there was some fraud you know, with internally, and essentially because of that, there was an internal investigation and they delighted their ten K and ten Q filings. What super Micro is essentially saying their internal investigation has found nothing or no evidence of fraud, but the ten K and ten Q filings still have yet to be filed.
But it's not every day that a big four accounting firm does what happened here basically says, you know, they really can't rely upon the management team and they and they just walk away from an account that doesn't happen.
Yeah, no, Paul, I think between your lifetime and my lifetime in the financial industry, probably four or five.
Times, right, So, yeah, it doesn't happen. It doesn't happen.
They did find an alternative bdo USA, and you know, quite quite frankly, with the special investigation you know, being completed without evidence of fraud, it actually almost gives them a BDEO a safety net to actually expedite the ten Q and ten K filing sign off in my opinion.
So does this put all the questions to bed at this point?
No, not necessarily, quite frankly, I mean let's see what Bdo says. I do think they're going to try to push along the filings as quickly as possible, possibly by year end. You know, the deadline is sometime in late February, but you know, I do think they'll try to push it along. Now, I will tell you. The other question is that was there so much reputation damaged because of this?
Did they lose business?
So, assuming they can put this issue behind them, what is the story for this company here, super Micro News? How do you position it within your tech stocks?
Yeah?
Look, super Micro has been one of the hottest companies within the hardware industry. They were on the forefront or the poster child of AI servers. And you've seen a rapid rise in sales, going from a billion dollars or three billion dollars in annual sales and they were on track to about twenty six to thirty billion dollars in annual sales and fiscal twenty twenty five, right, and this is over a span of four years.
Now, they didn't.
Retract a guidance, but they didn't affirm guidance either. So the question is is that, look, what is the real sales going into fiscal twenty five. We do have a scenarios scenario analysis that in the draconian way, it's going to be sixteen billion dollars in sales. Right, that's far off of the twenty six on the low end, but you know, it's still sixteen billion dollars in sales as super Micro could deliver on the AI story alone.
And this is AI netlike hardware right versus AI chips for example from in Video right, So a competitor would be like Dell right, like an AI server play exactly. So if I was a customer and I was like, you know what, super Micro, I need to go somewhere else. Is the only other option Dell? Or are there other players out there?
Oh yeah?
Look, if we go back to last May at Video's conference, there were a host of AI server companies that will only to partner with Nvidia.
So Supermarker is not the only game in town. Now. There is Dell nor Hpe.
There are some Taiwanese ODMs that are more than happy to assemble AI servers out there. So we've seen the because of the growing competitive pressure, we've seen margins compress as a result for the industry.
So they sacrifice it feels like the CFO here. How does the street feel about the rest of the management team, the leadership as well as the board.
Well, look, the main issue in my mind was not only the CFO but also the board. When you have the wife of the CEO as a member of the board and a seventeen year old a person on the board who's been on for about seventeen years, there's very limited independence. Quite frankly, I do think there needs to be some sort of overhaul of the board. And I've said in the past on this show and I have written that I think the CEO may need to be promoted to a chairman role and I may need CEO.
Now is this what part of all of this has to do with just going from a company in the Russell to the company in the S and P and is growing super fast and having different kind of analysts coverage And how much of this was gonna come kind of no matter what.
Yeah, you know, that's a good question, Alex. You know, look, this used to be a Russell company or a mid cap company, and it was under the radar for a lot of analysts, and now we're talking about being in the S and P. Five hundred index and you're gonna have a lot of magnifying glasses on the financials. And keep in mind, you know, it's only been about five to six years back where they were delicted from the NASDAC and for them to do this again, it's quite frankly shameful in my mind.
Now.
If there is no wrongdoing here, shame on me. Right, But you know Fuolmi wants, you know, shame on them. Fool me twice, Shame on me. So you know you're going to see a lot of scrutiny going forward. I don't know if they'll come back this.
Have they lost customers to any material basis?
Nothing reported as of yet.
What they said on the last earnings call was that there were a couple of customers who you know, they're trying to retain.
How much more? Okay, So just pure valuation perspective, How do we know how to value this company when they're all these questions.
Look at the end of the day, and Paul taught me, well, it's all about cash flow and earnings.
Nice John, And I don't know what.
I don't know what earnings is In our scenario model, we have a buck sixty in earnings go going forward, and hardware companies of this ilk Ai companies are ranging anywhere between ten to fifteen times. So if my buck sixty is right and it's going at around, let's just say at the high end fifteen to sixteen times. No, it seems like from a valuation standpoint, it's training at the fundamentals all right.
Thanks to Woojin Hoo, Bloomberg intelligen Senior technology analyst.
This week, we focused on a Bloomberg Big Take story titled A Roadmap through the Drama and Realities of Trump's Trade War.
You can find it on Bloomberg dot Com and the Terminal. The story looks at president like Donald Trump's proposed herfs.
Everyone from Wall Street investors to foreign governments are trying to map out Trump's tariff plan and a fog of uncertainty, and Bloomberg Economics has mapped out a plausible scenario for what lies ahead.
For more on this, we were joined by Brendan Murray, Bloomberg Global Trade Editor.
We first asked Brendan to break down that latest research.
So, if you add up all of the tariff threats that incoming President Trump made over the past week, about half the world's population of eight billion people would be hit if you take the countries that he targeted. So there's a lot to unpack here. And so what we tried to do was separate the rhetoric, the late night social media posts from the more procedural approach that Trump administration is going to have to take when it comes
to rolling out tariffs. We talked to people who were in the previous Trump administration and supervised the last design of the tariff package, and we got a sense for how this next wave would be rolled out. So what
we came up with Bloombery Economics. Crunch these numbers, and you're looking at three waves of tariff starting in the summer of twenty twenty five, and by the end of it, at the end of twenty twenty six, the average tariff rate in the US is going to go up by about triple, so from three and a half percent to about seven or eight percent. So and Shina is going to bear the brunt to that.
Did tariffs generate revenue for the US government?
Yeah, they sure do. The customs revenue, you know, the Treasury reports those once a month, and they would generate revenue for the US government. Weather they'll generate enough to close the gap that tax cuts extending task will create is a whole other question. You have to go back one hundred, one hundred and fifty years to see when tariffs were actually a sizeable part of the US budget. At the moment, they're the tiny fraction of overall US government revenue.
What I also find interesting in the piece, you guys talked about how the tariffs will mostly be on intermediate and capital goods. First of all, what does that mean specifically, and then what does that mean for say a small business versus me.
Yeah, those are not final consumer goods. Those are parts and machinery that go into the making of consumer goods. So the thinking there would be number one, is that you could source those from another country other than China if the US put tariffs on these capital and intermediate goods. So that would be the first consideration is could you
replace what you already get China from somewhere else? And the idea and then the goal there would be to soften the inflationary impact that that we pay at the store at Target or Walmart or werver we're shopping for consumer goods. That the goal would be to soften the inflationary impact. But there comes a time when you can only put tariffs on so many goods and then you start to hit those those products that we pay for it as consumers.
What most economists think the retaliation will be on a part of these governments, because that's also at a level of concern. How do we expect some of these foreign governments to respond.
Well, if you listen to President elect Trump, he would say that, look, I threatened these tariffs against countries and they come to the negotiating table when they give us what we want at fairness and trade, or in the case of Canada and Mexico over the past week, more border security to prevent the flow of fentanyl and illegal migration. So it's something other than just a way to collect
revenue or to fix trade imbalances. It's to President Trump, a way to exert form policy priorities as well, right.
Which makes even more difficult to game out right, because you don't know how much of that is going to be just a strong arm to get other things, and how much of it is actually going to be implemented, and then what the retaliatory factor are. What's the level of conviction When you were speaking to say Anawan and Bloomberg Economics and other peers in the area. What's everyone's conviction on their calls right now?
No one can make a call right now with any high level of confidence there as we lay out in this Big Take story, there are just a lot of unknowns, you know how, the degree to which the president elect is threatening rather as opposed to know things that he'll follow through on. So this is what we call a
plausible scenario. It's one that's based on the modeling that Bloomberg Economics does, the reporting that our Bloomberg News reporters have done, speaking to people who were there for the first time, and gaming out how it might happen the second time. So it's a it's an attempt to describe the method that will come with a lot of the perceived madness of trade wars and the second Trump administration.
Our thanks to Brendan Mary, Bloomberg Global Trade.
Editor, coming up on the program will break down earnings from software provider Salesforce.
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Thirty to move next to the auto sector and Stialantis. Stalanta's CEO, Carlos Taveras recently resigned and this has left automaker without clear leadership at a time of significant up people in the industry.
For more, we were joined by Steve Man Bloomberg Intelligence, Global Autos and Industrials and Research Channels. We first asked Steve for his take on the most recent news.
Probably a bad timing for the CEO to make an exit at the moment. You know, they are facing really tough market conditions, you know, in Europe, in the US, and you know, to a certain extents some emerging markets. So you know, Carlo has been you know, he's been very good at controlling costs and that's what we need at the moment to adjust to the current market condition.
So what's your read then on why now?
Well, I think you know they've you know, Carlos and the management team has done a lot, He's made some management changes, uh, to really bring down the inventory in the US. That's where the pain is.
You know.
They they typically get you know, adjusted operating income of double digits in the teams, but that's been down to single digit and last quarter. So there's a lot of work to be done to actually bring down inventory in the US so they can actually try to get some you know, pricing on their new new models that's coming out at the moment. So a lot of work to be done. But it's it's really out of his control at the moment. He's done all he's can Carlos. That is,
it's really something who can he can? He cann't control. It's the market. Every automaker is facing a similar situation around the world.
And I think what we're seeing, I guess what I'm piecing together from reading your research and reading the Bloomberg News reporting here is and kind as it relates to the global auto industry. You're up in a tough place because again, like everybody else, they're not sure about this transition to EVS yet. At the same time, China is flooding the market with electric vehicles, so it makes it even tougher for the incumbent manufacturers. Where are we in that process?
Yeah, I mean, it's it's an interesting industry right now to follow because there's all these Dynams makes. There's new competitor. It's it's becoming the eight hundred pound gorilla China, which you know, it's coming into the market, not just in Europe, they're thinking about coming into North America. We'll see how that goes with Trump in the office. But you know,
EV is tough. You know, a lot of countries in Europe have cut back subsidies for consumers, so you know you hear Volkswagen cutting closing plants, two three plants in Europe. So it's it's going to take time to work out. I think we're going to see pain three twenty twenty five.
Well, where is the biggest pain point? Because you just listed off a lot of stuff, And when I think about carmakers, I think, ooh, evs right, Like, it's not yet really profitable for these guys to make them. But you've got to make them in order to make the prices lower and make them competitive and kind of put it out there and get the supply. Is that really the issue in addition to Chinese competition or a traditional auto landscape also struggling when it comes to I should say.
That's very good question. It's it's really not about evs. You know, EV only makes up you know, less than ten percent of a lot of these companies annual sales, So it's not really EV. It's really the ice vehicles that you know, during COVID, we had a lot of
shortages because of the supply chain constraints. But over the past couple of years, with that supply chain constraint going away, they've been producing a lot of vehicles and they're refilling that inventory and with higher interest rate over the last you know, past past few quarters, you see that inventory,
inventory piling up, and now they can't sell. They sell the cars, but at the same time they're they're gonna have to drop prices, and the worry is it's gonna spiral out of control, not only for Stilentists or Nissan, but for the rest of the auto industry. You know, price cutting is not where the where the industry needs to go.
Right now, So talk to us about Stillantis to their brands in North America, how are they faring?
Then?
Yeah, that's also a very good question. I think Carlos really had, the former CEO of Silenti's is, really had a tough job. Not only does he need to manage uh, the the new market conditions that he's seeing in a lot of developed markets. But look, you know, Stillenti's is really an amalgamation of brands that a lot of brands that a lot of automakers didn't want, right. You know, I think you know, in the North American market, you know, I think GM and four are probably more of the
go to brands. You know, third is is you know the Asians. Uh, and then you know Stillentis is you know Jeep and Dodge in Chrysler. Uh, they're kind of uh, they're famous brands, but it's not in at the top of the consumers wish list. And you can say that say the same thing over in Europe as well with Fiat.
Right, because I guess from what I hear, and this is, let's be clear, just a Matt Miller thing like trucks, right, Like trucks is the thing like pickup trucks is the thing those stuff the Stlanta's. What's their market share in that arena?
Well, they still have you know, their top three their third behind Ford and GM Chevrolet. You know they you know, when they came out with the new redesigned Ram truck a few years ago, they did did reach the number one market position in the US, but it has since then has fallen off. And you know, their vehicles are getting old. Their their their pickup trucks needs a new redesign.
Their SUVs are going through that process right now. They need to come out with new products to really excite the consumers.
Our thanks to Steve Man, Bloomberg Intelligence Global Autos and Industrials Research analyst, this.
Week's Salesforce shares hit a record high after the company reported better than expected their quarter revenue.
This boosts hopes for the companies much hyped artificial intelligence strategy. For more. We were joined by anarag Rana, Bloomberg Intelligence Technology analyst.
We first asked an Arok what the street liked about recent Salesforce numbers.
I think when you'd really peel the numbers on sales and backlog, they were pretty much in line. But I think what is really happening, and something that we highlighted during a preview w some notes that we wrote earlier in October, they released a new product called Agent Force,
which is truly their AI product. Now that's not going to drive revenue over the next twelve months, but it really changes the shape of the company and with the direction it's going in, and I think that's what investors are buying in right now, along with their steady margin expansion. Margins were so good that has been a big story for them as well. So I think on all fronts
they're doing well. And as I said, the sales growth is not going to show up time near term, but I think they have a clear strategy how they're going to play this game.
So to this point, if Salesforce are doing this well without Agent Force materially contributing to its bottom line, I mean, what kind of upside do we really have and when do they read sort of full to that?
Yeah, I think I would agree with you on that, because you know, people are buying into that without seeing the results. And I think this is truly what we have seen a lot in the software space is people really figured out which are the companies that will benefit in the long run, and a lot of that, you could say, value realization happens sooner, you know, when the revenue realization is so perhaps down the road there will be a time when the software space may not see
evaluation uptake, but the sales growth will go up. But you know, one of the things you have to think about it when former salesforce point of view, they have two really critical products. One is sales automation for salespeople and the other is customer service products for customer service people and in enterprises AI and is the biggest beneficiary
to those customer service people chat pots AI agents. We recently did a conference and when we ask the question as to how many people use chat pots, it's still less than twenty percent at this point. So that is the direction where the world is going in terms of working with retailers, working with you know, airlines, and these guys are right in the middle of it all.
Right, So what's getting the market all excited here this AI product? What is their AI product and what is it supposed to do? Because I actually moderated a panel with the salesforce executive and I forgot everything.
You told me so think about it. I actually have a very interesting demonstration if you go to YouTube and look at their Dreamforce and demo. It was actually pretty interesting because they did Sacks Fifth Avenue. So think about it this way, Paul, you you buy. You know, the presenter bought a jacket from Saxs Fifth Avenue, didn't like the the size or something, just went to the chatpot
and say can you find me a different size? And can you the chatbot basically took care of everything, basically knew what size this person was, was able to return the jacket, you know, send another one to this person's address, or that matter.
If it wasn't.
Available, you could go to the store and pick it up without the intervention of a human. That level of sophistication coming into a chat pot so quick in the game, I think it's really what people are getting excited about.
And put some numbers on that, like how much is that going to do for them in terms of revenue? And how much do they charge for like that chatbot? So say like that chatbot works for me for two minutes, what's the translation of money?
So the pricing starts at two dollars per conversation. Now the question is what does that mean? So when you look at you know, a person calling at and D or Hoverizon, that call could cost as much as ten to fifteen dollars. If it's a quasi mix of an automated chat pot and a customer service person, you know, that call could be seven dollars eight dollars per conversation.
Salesforce is pricing at two dollars or so, so it will force companies to fix their customer service because think about it, if you're an insurance company, if you are a phone company, that's really a very large portion of your cost. Amazon's already doing so much of that in the chatbot. If you are used to returning things on Amazon through their chat pot, it's actually pretty impressive right now. But it is still rule based, which is if it can only do so much based on the data that's available,
it doesn't take you to the next level. And this is what Salesforce is saying is the direction of that is that the agent or the chat pot is able to execute a transaction for you without getting a human involved in it, which is refund the money for you return your things, give you an alternative of whatever you were doing before without any person getting in and that really saves costs.
All right, so this coman's got like thirty nine to forty percent EBITDA margin. Pretty much all of that goes down to the free cash flow line.
What do they do with their cash right now? They're buying back shares. I'm sorry, Paul, but that's exactly what most software companies do when they have it. Now, think about it this way. Just one and a half two years ago, this was almost ten percent reach points lower because they were spending even more on sales and marketing. The big story for salesforce in the last one and a half years has been a really improvement in bulgins our.
Thanks to Anna Rograna, Bloomberg Intelligence technology analyst.
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