The Supply Chain, Semiconductors, And Real Estate

joining us here, huge global company, Verizon Business Consumer. How has your business changed in the last two years? Hey, good morning everyone. Look, it's been a good time for us. You know, as networks become even more important as people work from home, remote work is more prevalent networks and what we offer becomes really important. And for us, it's also where we are launching five G you know, we are right now at the cusp of a second phase of the five G era where we turn on our

ce band network in a few weeks times. So it's it's it's just a great time to be in this business. So you are the chief revenue officer. I don't know how deep into the tech you are, but you have to have some um view on the safety of five G. All of a sudden, for the first time last week, I'm hearing that it's capable of messing with airplanes altitude sensors and maybe you would make landing dangerous. To me, it's pretty binary. Either it's dangerous or it's not. What's

the deal, It's not dangerous. Look, safeties are most important to us, and it's kind of number one in what we do. All we that are forty countries around the world that have five G networks in the same CE band that we operate in. Planes takeoff, planes land there really well, one of the countries is France. You know,

American planes go in and get out there. What we are proposing is a kind of a similar approach to what's there in France, where we kind of have an exclusionary zone just outside the airports where we have lower power levels so there's no interference that way. You know. We give the f A and the FCC six months to work this out, but we feel very confident and

we just can't wait to launch the network. I mean, even if you didn't have that sand path, what if you had the strongest, most powerful five G signals right up the tower. Um, would it interfere with I mean, aren't the bandwidths different? Isn't Isn't there someone who made sure that this is a different part of the frequency before they sold you, um, this bundle? Yeah, exactly. Look,

you know we spent fifty three billion dollars for it. Uh. And the laws of physics are the same either in the United States or in France or any of the other countries. In fact, in the US, the guard band are kind of the protection band between the spectrum we use and then the spectrum the airlines use. Is one of the largest in the world, so there are two different spectrums. We have a very large guard band, and with us, you know, lowering power levels and other technical

things around airports, we see absolutely no risk. So Sampath gives a sense advertising again a huge company. Um, how what's the are you know, managing through the pandemic? How has Verizon done? How has Verizon adapted? A couple of things, you know, One, we have to balance out four of our stakeholders, you know, whether it's employees, customers, shareholders, and broader society. So just having that balance has been a good framework for us to get through. The second is

that personal safety is important for our teams. But we also realized that the service we operate networks is kind of the backbone of the global economy today. It's the rails on which most of the economy runs on. So for us, it's been a careful balance of the four stakeholders as well as ensuring that our networks up and running at the same time. Now it's also the same time we decided to deploy five G. More broadly, Actually, it's been a little faster than what we had planned

because our construction has not stopped. We've moved applied faster. So you know, a little bit of good and bad, but overall is just a great time to be here. The other thing I've noticed, um from the consumer side, people have been using more data than ever on a

level that they probably wouldn't have imagined. Not just consuming um, you know, uh media content like television shows and movies, but they're doing all of their banking online, and they're starting their cars with their phones and controlling their home HVAC systems with their phones. And you know, this was what was forecast to happen, but I don't think anyone expected it to boom all of a sudden happening side of the period of one year. Um, how is that

for you? Are you still offering unlimited data packages or people using fort sixty gigs a month? Yeah, people are using a lot of data. As you said, they use it for everything. I wish I could say everything is for great to you with my kids use it for a lot more gaming than they need to. But yes, definitely a lot of data consumption that's gone, which is why the five G network is critical because one of the biggest advantages of five G if you get more

throughput and more speed. So we're literally adding a ton and a ton of a technical term, a ton of capacity in the network. All right, Sam Path, thank you so much for joining us. Really appreciate getting your thoughts there, Sam Path, so many on a Ryan, chief revenue officer

for Verizon. I was just typing out a letter to some of the producers upstairs at the Quick Take at Bloomberg Quick Take, a little pitch for them because I said, you should have me on more I can talk about cars, and they were like, yeah, all you want to talk about is cars, But I said, look, it's at the center of the economy, probably more so UM that any time since Henry Ford started his production line, because these vehicles use more and more chips, especially as they produce

UM more hybrids and e vs than they ever have before. It's it's connected to the labor story, it's connected to UH consumer spending, and it's just amazing. Let's let's focus in on the chips part of it, because we have not Cool Dougal Uh. He is a senior VP and General manager of Automotive UH for qual Calm right now, and they are I'm gonna get the biggest not Cool correct me if if I'm wrong, the biggest automotive chip maker in the world. I would like to see the

fastest going. Good morning, gentlemen, the fastest growing all right. I just know because UM I was at the Munich Auto Show. I spent a lot of time at car shows, and UM I noticed so many products there, UM, from the trucks to the cars to Ducati motorcycles are packing qual Calm chips UM, and you can't make them fast enough. Right, Are you still at a point where your order books are completely full and you just can't ship them quickly enough.

To the customer. You know, that's right. We've been able to stay ahead of the challenges that the industry has had because we prioritize automotive over our other businesses, just

because of the complexity of the auto industry. But we consider ourselves MATH bought in a very fortunate position because you know, we uh, I would say, human as far back as a decade ago, made the call that automotive was a very important adjacency forkcom to start to focus on and invest in as this market goes through a significant amount of transformation, and we are seeing a lot of the dividends of the investments we've made back then pay out as we look ahead. Now, cool, maybe you

can settle an argument. Matt and I were just having literally here in the studio about you know, I was questioning, why are we still having such a pronounced chip shortage on a global scale. Matt says, it was, you know, just unprecedented increase in demand across a range of products. I said, no, no, no, I think it's got to

come from the supply side. That maybe plant closures in Asia, and so that really came on the supply side, but so long ago, I know, But I'm just thinking, these chip guys have got to figure this thing out, so settle this debate for us. I think there are there are a few different things going on, and I think first of all, electrification is creating the need for new

architectures for vehicles. So there is a lot of focus as you look at the next generation modern cars to move towards an architecture that relies on semiconductors much more heavily as it has. As you know, the the car industry is moving more towards the mobility business, which means you have to be able to have a tremendous amount

of software and semiconductors that power that software. UH. What compounds become flexity is as we went through COVID UH, the automotive architecture has relied on a variety of different vintages of semiconductors. As architectures and automotive haven't evolved for a long period of time, there is a dependency on

older architectures that use semiconductors in lagging process notes. That's when most of the complexity is where you've been developing semiconductors on older notes for a long period of time that that have a lot more complexity to modernize. The complexity is much less when you talk about the next generation notes. So what we are starting to see is

a significant transition towards newer notes. You can't completely get yourself out of the depends on older notes, but a significant faster transition to newer nodes, which obviously places to our advantage. I've noticed some some carmakers are just dropping functions completely because they don't have the chips to power them. For example, about ten years ago, a lot of the carmakers started offering the style start technology where your motor switches off at a stoplight. UM. Car guys hate it

right and always try and disable it. Now I've noticed some car makers like GM, I'm building a truck on their website and they say, uh, no stops to feature anymore. So you get fifty dollars back. Are you are you going to see more of that you think the cool or less of that? Are Are we at a point where this is getting better or we're or still worse?

I think it's an excellent question. I think that's an example of the dependency on a small micro controller that is in short supply and it's going to be harder

to get around. The transition we are seeing pollen mat is that those steps of functions are moving to software, so where you have much harder performance application processors that the auto industry is now embracing, and a function like stop start can actually be integrated as a software function into the higher end processor as opposed to rely on

a simple discrete micro controller. So you will start to see examples like this play out, and that functionality gets subsumed into larger application processors that then manage that functionality to software. All right, Nicole, here's the money question. When is this chip shortage going to be addressed? Here? When are we making back to more normalized supply demand. Well, you know, I think it's a complex question because it is a bit different for each automaker. Everybody has a

slightly different type of challenge too. Smaller automakers are going to be able to get around it faster, especially if they move to newer architectures. The larger ones that have a lot more complexity, lot more diversity across their uh their portfolio, have a lot more dependency on the complexity of the semiconductor crisis. But I would imagine, you know,

in the I think we are. I think towards the end of twenty two we should certainly start to see the industry come out of a lot of this complexity on the whole. From our perspective, we have actually been able to stay ahead of this challenge, but clearly we supply a portion of the overall semiconductor portfolio within a vehicle n cool what's the smartest car out there? What's the what's the coolest, high highest tech vehicle that you

could buy right now? Yeah? I think, you know, there are several because we have so many different partners and

customers that we work with. But you know, one thing that we are very proud of is the fact that the strategy that we've laid out over the last five years has now culminated into working called the Snap Drag and Digital Chassis, which is basically enabling automakers with the newest tech, the latest semiconductors in software, connected to highly complex ecosystems, whether it's in the autonomous space or in the digital cockpit experience or five connectivity, and bringing that

together to help automakers make a much larger step up in terms of modernization. We've been working with General Motors for a number of years, but over twenty years. And Mary Burton announced the partnership with us UH can see yes a few days ago. We are very part of the Altar Cruise work that we've been doing with them, which is a level three door to door autonomous service. We made an announcement with the bub back in November

on Ada. Wal Boy has been working with us. Difficult to pick one of my favorite customers, all right, Nicole Nicole Naldgal, Senior VP and General Manager Automotive for Qualcom. I don't know. They need to get more chips out into the marketplace. That's what their customers are demanding. We'll see how long that plays out. We talked about that they'll Take two again buying who are they buying? Other things? Premium twelve billion? Large? That size. I didn't know there

was that arm for words with friends. It's not even scrabble, it's an also ran. All right, let's check in with an expert here on this deal. I mean Ben Sad he is t MT analyst at Bloomberg Intelligence. I mean, thanks so much for taking a time here. Is this a good deal for Take two? Their stock is trading down? Yeah? I mean thanks for having me and and I think this is a very good deal for for Take two, especially as when you look at the numbers in this deal.

First of all, it looks like this is the largest video game deal ever from a mini stand point. And second of all, Take two previously they had almost ten percent of theirselves from mobile, and this deal is gonna, you know, the next few years is gonna push that to over fifty serves of going to mobile. And that's important because mobile is that first is growing. Uh you know gaming, Uh certainly, I just I find that so hard to believe because I don't know what you can

do with mobile. I I love video games I have ever since, not Pong, but you know, Galactica and all the way through, um Super Mario Brothers with Nintendo three and none of the Daga up through. You know. Now I'm playing Xbox all the time, Call of Duty and even Red Dead unfortunately I hate it, but I play it. Um, what can you do on mobile? There's like, aside from Angry Birds, right, how can it can't even get complex enough?

You know, First, I would say you actually impressed me earlier when you mentioned Collegual Vision, which is, you know, one of the oldest came in conforts even before Autari, so that was gooding knowledge knowledge there I didn't you can know about that. But from gaming, you know, mobile has been very successful because we don't target gamers. They

target uh segment in the population called hyper hyper casual gamers. Right, somebody just plays can division a little bit, plays some puzzles or something, or farm reels or world with friends, and that's why this segment has imploded in the last few years, and especially in Asia it has been doing really really well. So really, if to focus on the hyper casual quote unquote gamers, that's why there is a huge success in this platform. I also wonder about the

lack of gamers. Are we worried that, you know, the world just isn't producing enough young people. We're gonna actually read a book, We're gonna, we're gonna we're gonna have enough video games for sure, But are there enough consumers for all this content? Yes? Absolutely, I think overall globally, if you include the hyper casual gamers, there's over three billion gamers right now. So it's not going to be the lack of gamers, especially with this new generation there

are basically born in gaming. If you think about Fortnight and other games like that. Gaming has become much more mainstream than news to be back then, and now it's all one handed, any billion dollar global industry. So the industry is growing, the user basis growing, so it's not going to be lack of gamers. I think to your point, it's probably the lack of contact. And especially during the pandemic. All the major video game makers were impacted by the pandemics,

but they have lower content that they expected. Uh, and talking about this deal here quickly, Uh, Take two kept delaying news about g t A six content of for six, which is one of the major games being awaited in this industry. And this is why this deal kind of makes sense to uh, you know, to remove some of the headaches in the top line that this company with you facing, all right, I mean, thanks so much for bringing us up to date on this big deal in

the gaming space. I mean, Ben sad tmt Annalys, Bloomberg Intelligence, Matt, I got, I guess, I gotta. I mean, if you're still there, are you a gamer too? Yes? Three years gaming I started actually on the Commodore sixty four playing space Taxi and Mule, and I've noticed a lot of these games are coming back now you can get them on your phone. That to me is an interesting thing that these um vent games are coming back. Oh yes, look,

especially the indie companies. They are smaller ones. They make games like that because the cord of love of resources. And that's why you see Netflix, even Netflix getting into that. So, yes, those are coming back because they have a lot of interesting stolis there. Very cool. Okay, Paul, you're not a gamer, of course not. I'm an adult. Okay, I bet you would like Mule. I'm gonna show you Mule during the break and then we'll see if, um, if you can get into it. It's really it's a market. Okay. I

aged out after Atari. How about that? The Goldman sacks that I grew up with and I competed against was investment banking and investment banking, and that was basically and bankers and traders, bankers and traders. But since the Great was running it then so John Whitehead, uh, it might even been like yeah, probably Core designed for a while there. I'm going back in the day. Um but they've always

been the big bank, the big trading desk. But really since Great Financial Crisis, they've been really branching out into more consumer businesses. And I saw them some news there Goldman adds GM credit cards to its Marcus consumer business. I just shook my head. But what happened to my old Goldman sex? All right? Shanani Basket, Wall Street reporter for Bloomberg News. She joins the shore. She follows the

Wall Street beat closely. Goldman's continuing to expand out its consumer business, right, yeah, listen, this is the second big partnership that Goldman is announcing here with General Motors. Of course, we know they had that big relationship with Apple before. What you're seeing here is Goldman start to branch into new places, so card business. To what extent do they have their ambition to launch their own credit card without the co brand? And also what does General Motors give them?

General Motors already has billions of customers in their own credit card business, so now by partner with Goldman, the hope is they could really expand on the millions of customers they've been able to amass with Apple. To your point, General Motors was previews a slee An investment banking client, which they then converted now into what you're what do you not buy? It, Matt, is that you know what,

grass grows faster than Goldman Sacks business. This has been years in the making, and they seem to have done very little with Apple. I mean, they could take over your life if they wanted to. Apple and Goldman Sacks together you could do everything one stop shop, um from savings to checking to investment, credit card, I mean, you name it. They're just not doing it. Marcus has taken forever to get off the ground. Forever and ever and ever and ever we've been talking about it. You were

in high school to that that's not true. I mean, in the last couple of years they have and remember these are very highly regulated businesses. To your point, Goldman makes a couple hundred million a quarter on their consumer business Revolute and and twenty six they came out of the gates running, ready to win, picking up customers by the millions. And where are they based in Europe exactly.

So it's been a lot harder in the US for the big banks to really get their technology in line, which is what makes these partnerships and these efforts so interesting. They just need to buy the technology. They already run the government, right, so they don't need to worry about regulations. The government buys them. Let's the idea of the government allowing Goldman Sacks to buy like a Stripe, for example,

which is a lot more back end infrastructure. The biggest payments companies in the US, Matt, the biggest tech companies are all back end financial, back of credit cards. They're not consumer facing businesses. All Right, we're gonna have the Super Bowl this year where so Fi Stadium in Los Angeles. So far as a brand, I know, so it's a brand that Goldman Sacks knows. So to Matt's point, I'm almost at the point by a former set Goldman Sacks banker.

There's a dollar say it's only ten billion dollar company, so you buy that with a couple of partners pocket change. But at least that gets you a brand awareness, because I think the MAT's point, one of the things that I'm surprised about is the brand value. The brand awareness of Marcus, I think is still obscure to what you can get from it. They just launched investing products. They have had that savings product. This is the year that

they're probably going to open a checking account. Once they open that checking account is when they can be a real full scale bank for consumers in a bigger way. But to your point, they are not that yet by any means. I mean, remember when we all got so excited about the Apple card before it came out. Oh my god, Apple is going to release a credit card. This is gonna change finance forever. I gotta get one. Do you have an Apple card? Do you have an

Apple Card? No? Neither. When I use Apple Pay, neither do I. Of course we all use Apple Pay. But look, they could just do so much. The first site that I made the Apple page paying my subway. Listen there. The car business is a harder one too, because you have a Chase Sapphire, or you have City Group, the biggest card tossure in the world, your Barclays. You're competing, and they both offer better rewards programs than Apple and Goldman Sax. Why not, because it's hard to think of

offering a good rewards program. The numbers are there, all you have to do is beat the numbers, and they make a ton on interest rates already. They don't need to worry about the padding they have that well. Actually, the interest rates are not making anything off of right now because people are paying back their cards. But this is this is why this is now into this year a big deal because people are starting to borrow again at a much bigger scale than they're taking out any

other type of loan. And so to get into it now is a good time. But yes, it is an extraordinarily hard time to get in the card business because people want rewards. They want them and all forms, shapes and sizes for different products. They want them in crypto sometimes. So if you can't give your client everything, then can you compete in the space is a perfectly legitimate question.

All right. I think we're saying basically, this isn't a typical Goldman business because it hasn't just got that that traction that you would expect, uh, this Goldman effort to do. But we'll see how they continue to invest in it, and we'll see how it continues to grow into the business. Shanelli Bassek, thanks for joining us Wall Street reporter for Bloomberg News. Joining us here in a Bloomberg interactive Brooker Studio.

Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller, I'm on Twitter at Matt Miller three. Put on false Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio