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All right, there's been a lot of US CEO changes in the telecom space lately, Paul, but now we're getting one in the retail space. The biggest retailer, walmart announcing CEO Doug McMillan will retire in February and he will be replaced by the current head of walmart Us, Jen Bartash, has covers retail, staples and packagews for us here at Bloomberg Intelligence. Jen, was this a surprise or was this a finely planned succession plan?
Good morning? So it's the surprise is really only in the timing, not in the selection of who is actually going to succeed Doug McMillan. So, well, you know, John Ferner has been in a position for the last six years as CEO of walmart Us. Everyone has presumed that he would be the heir apparent to the CEO role, So it's really just a matter of the timing of it that has caught people a little bit by surprise.
Today I'm looking at this guy, the mister McMillan. He's only fifty nine years old. Now what I mean is this this isn't that's kind of young, right.
It is reasonably young. He's been at the Helm since twenty fourteen, you know, and I will say to his credit, you know, he's really implemented a cultural change at Walmart. If you think back to you know, the the early knots, you know, Walmart had a bit of a reputation as maybe a bully with some of their suppliers and partners, you know, and the culture has really evolved to where it's much more of a technology led company. They're willing to experiment. They try, they fail, they move on. They've
tried different strategez. They're not afraid to back away when they're not panning out and to delve into something new. And that cultural shift really is attributed to Doug McMillan. And you know, as as for the timing, you know, it just maybe he feels that it's his time to have left his mark on the company and move on.
What does this mean for a company? Like Target or anyone else that competes with Walmart. Does this present an opportunity or are things just go exactly as they were at Walmart, where the strategy remains consistent and there's no real entry point for someone who has maybe been and also ran to kind of close the gap.
I think that's a great question. And when it comes to tactics, we're not expecting any major pivot and strategy by John Ferner when he takes over as CEO. But to be fair, I mean, Walmart is firing on all cylinders at the moment, and they're gaining market share, they're growing their top line, growing their profits, so they're doing
quite well. That said, you know, at TAR we also had a new CEO announced not long ago, you know, and for Michael Fidelke, who's who's moving into the CEO role, it's much more about the focus on targets, transformation and
you know, and and a transfer a turnaround plan. Now, whether that presents an opportunity with a change at Walmart as well, that's a little hard to a little hard to say, because you know, I think first, Target's got to get their house in order before they go after other people's other people's houses as well.
All Right, So stepping back here, what's the play for Walmart? If you're an investor in Walmart today? Why are you in an investor in Walmart today?
Well, you know, Walmart is is has done an admirable job of you know, increasing the breadth of their business while simultaneously becoming more focused. If you think over the last several years, they've they've shed they've exited some of their international markets where they weren't performing well. They've really focused on technology, the implementation of things like AI to support their business. Their digital sales growth is growing, the
marketplace for for for online sales is growing. So you know, when you look at it from an investor perspective, there are a lot of things that are happening at Walmart
that should lead to consistent future growth. And you know that also includes, you know, a lot of the It includes the efforts that they're making to bring higher income households into their into their into their group and and if they're able to successfully retain those households going forward, that just sets up a whole new wave of potential growth for for for Walmart in the long run. With
a much more robust or customer. And so those those are the kinds of things where you look at them and you look at them relative to competitors, and how those those peers are valued. And although you know, from a evaluation perspective, you know Walmart is, you know, more expensive than it had been, there's still a lot of opportunity to grow.
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Let's move now to the pharmaceutical sector with a big purchase here by Murk, a nine point two billion dollar purchase of Sidara Therapeutics for twenty one excuse me, two hundred and twenty one fifty a share in cash. Madison Muller is our Bloomberg News healthcare reporter and she joins us now and Madison this is all about filling the pipeline because Murk is losing patent protection on one of its blockbuster drugs.
Exactly, and this is sort of the perpetual problem for pharmaceutical companies is that they face these patents for huge blockbusters that end up accounting for a large majority of their sales. I mean, in Merk's case, almost half the company's revenue last year came from Katruda, which is facing a patent expiration in twenty twenty eight. This is a cancer drug, one of the best selling pharmaceutical products of all time, and so Merk has been looking for other
products to replenish its pipeline. Like you said, this is one of them. They did another deal earlier this year, and so looking to flu treatments, which flu even though we have vaccines, anti virals for the vaccines are effective, but for a long time, scientists, researchers, drug makers have been hunting for more effective and different products to help prevent the flu, which lots of Americans die from still each year.
So where would keep Where would Mark like to be in terms of I mean, I guess when you're thinking back, having half your sales tied to one drug, well, it's a great drug and it's all good. That's probably not what you want from a diversification standpoint. What does Merk say about what they'd like to be?
Yeah, I mean It's interesting because a lot of pharma companies end up facing this problem. I mean, we look at Nova Nordisk, and they have they're facing a similar issue. I mean, they're not necessarily looking at patent expirations, but they're looking at government price negotiations and cuts for their best selling drugs, Ozebic and Wagovi. The majority of their sales come from those products, and so a lot of times pharmaceutical companies end up in this situation where they
have one product accounting for the majority of sales. And so, you know, Merk is not taking this approach to like looking to just one company, you know, big deal one company to get another blockbuster to replace ki Truda. They're looking to have sort of one analyst, which we have in the story called it a string of pearls M and a approach you know, looking to more like bite sized deals to sort of diversify that it's pipeline and look to a couple different products to hopefully, you know,
replenish that. Abvi was in a similar situation with its best selling drug human Era, and they now have and that was an arthritis drug. They now have two arthritis treatments that are sort of accounting for like half and
half of what Humaira was bringing in. So it's interesting and all the pharmaceutical companies are sort of taking different approaches to how they're doing but how they're doing it, But it seems like sort of doing this string of pearls approach, having a couple of different products is the way that they're thinking about it right now.
I feel like I remember that once upon a time, a lot of these companies that were losing patent protection on their drugs would come out with like a tweak to the drug. You know, maybe it's in gel capsule form as opposed to tablet form, and that would you know, extend the patent for a little bit longer. Is that something that they still do?
Yeah, I mean it is. It's definitely something that they still do. There are lots of ways to extend a patent, you know, getting a new indication for pediatrics or different formulations or combinations, but again, it sort of only gives you a couple more years. It doesn't extend the product's lifeline by like another ten years, which that's what we're looking at, where these companies have to think decades, you know, maybe a decade or more in advance about what's happening
in terms of their pipeline. So while that's somewhat of a temporary solution or something that can be done earlier in a product's lifeline, it's like, once you get to this point where it's sort of crunch time, they need to be thinking about what more can we bring in to make up for this is.
The Trump administration and the regulators. Are they okay with these deals? I mean, do they ever challenge any of these deals or are they kind of under the radar.
So far it's sort of under the radar. I mean, this one's interesting. Actually, there was another analyst note this morning about how they don't think that the FTC per se, we'll have a problem with this deal. But it's interesting to do a deal in the infectious disease space given the Department of Health and Human Services stands on vaccines infectious disease right now, and while this isn't a vaccine, it's just an interesting time in that space in general.
So while there might not be additional FTC scrutiny, it might be something. And you know, again this is sort of hypothetical, but just like given the climate right now, is something that HHS could potentially keep an eye on or look at.
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A lot of news into telecomspaceically, we had a lot of change in the CEO suite. We've got a lot of stuff happening here. Verizon's out with a big story I want to get to about cutting costs there. John Butler joins us. He covers all the telecom stuff for Bloomberg Intelligence. Let's start with Verizon here planning to cut about fifteen thousand jobs. It's about fifteen percent of the workforce. I mean, this is big. What's going on?
That is a lot. So they have a new CEO, Dan Shalman. He's been on the board for a long time, so he's had a front row seat to what Hans Vesperg was doing. And his feeling was that Vesperg who was leaning into a network first strategy. So he was out there telling everyone Verizon has the best network. It's the only reason to be with us. It's the best reason to be with us, and it just wasn't resonating. I think Shulman saw it and said, we need to
be consumer first, not network first. So he took over. I think it was October third, at the beginning of October. He's new at the company, but again, I'm sorry he's new in the role, but he's not new at the company, and so I think my hope is at least that these cuts are carefully considered, because just as you say, with cutting fifteen to twenty percent of the workforce at a telecom risk cutting into bone, not just not just fat.
And he was at at and T before. He's this is a telecom guy, right.
He was at Virgin Mobile too. He has telecom experience, and he also helped to sort of pull PayPal out of the dredges. I think they headed back there during his tenure as well. So it was a little bit of a controversial ride for him there, But I think he has the kind of telecom experience and board experience at Verizon to bring some changes to the organization. When I talked to the company about his naming as CEO. The answer was, we're bringing him in as a change agent.
We really need shake up here.
For and that's an industry that could probably use it a little bit. I mean, John Ledger T Mobile did such a great job as a change.
He did, so what he recognized is that consumer wireless is a consumer retail business, right. They have brand spokespeople, they advertise on the Super Bowl, they have free Tuesday, you know, tea Mobile Tuesday giveaways, and Verizon seems off base there. I don't think they really hit the ball well when it comes to being in the consumer retail business and.
They think they think my thing is they always they're a bell company, so they have some of that legacy.
Yeah, it's in the culture there and hopefully Shulman can sort of instill that excitement in the consumer. That's his big challenge.
But I mean that's a business, the wireless business, that's a tough business. It's very competitive. Top blank growth really not there for in a large so maybe cutting costs is a way to deliver cash it earnings.
It's part of it. I think they also need to move into adjacency. So if you look in Canada at the carriers there, like Rogers owns the Toronto Blue Jays and Rogers Center Stadium. They're in media, you know, they're they're tapping a lot of different adjacencies to make up for that slow growth and wireless.
All right.
Another story that is really front and center for me in it for a lot of the kind of telecom equity investors and bond investors is SATs Echo Star.
Yeah.
And finally, Charlie Ergen is the CEO and founder of Ecostar finally selling the spectrum. Is that what's going on? Because he bought a lot of spectrum.
It has been a crazy ride. So EchoStar, as you know, their roots were in satellite delivered PayTV. That market is dying with a capital d and his decision was, let me take the capital I have and get into the consumer wireless business and compete with AT and T Verizon and T Mobile. And I think every analyst, including myself, asked, what are you doing?
You know?
And he bought a treasure trove of spectrum and he was sitting on it. He was beginning to deploy it. He was building his own wireless network, but they weren't getting any subscribers. And I think the FCC looked at it and said, we need more spectrum in the hands of people that can really fill the air waves. And so they started to get pressured a lot by the FCC, and that prompted the sales spectrum to STARLINKH and AT and T.
I guess the good news is he is selling the spectrum for a lot of money. The stocks up, It's tripled this year. That's the good news. The bad news it took him about fifteen years steam to do what we all knew almost fifteen years ago, which is either build a network or you flip the spectrum and we make money. I eat either way, but right, woll it took a long time for him.
Well, not only that, I always thought with they were Dish as a PATV provider, it's a strong brand name. I need become what's called a mobile virtual network operator MVNO, where you basically have AT and T and Verizon run the network for you. You do the billing, customer care, most importantly the marketing, and so you're out there with a Dish wireless brand. You don't have to worry about spectrum or network operations. And they just decided to do the network themselves.
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