Why A TikTok-Microsoft Deal Solves A Lot of Problems

And obviously this story started at the end of last week and then there was all sorts of reports coming out over the weekend. Today, the latest is that it looks like Microsoft is now trying to buy TikTok with Trump's approval and is trying to get back in the game, so to speak. So let's bring in a Bloomberg opinion columnist who's been writing about this. Take him. Thanks for joining us. Take him. What is this all about? It's obviously,

I mean, very tenuously about national security. What would you say the reason behind this whole escapade on the part of President Trump is, um, it's tough to say. I mean, it all started at the beginning of July last month, when Secretary Stayed from Pale said, they're looking at it concerning banning all these Chinese apps based on national security ascerns.

And I'm sure part of this political because everyone has opinion on TikTok, and every time they talked about TikTok, they dominate the headlines, so that that's the issue national and gaty privacy concernance according to the government, UM there hasn't been any faster evidence that they proved or presented

uh to substant substantiate those concerns. But it looks like with this latest Trump phone call with the CEO of Microsoft, they're gonna have forty five days to come to some kind of agreement and this would actually solve a lot of the concerns that people have and actually makes sense for Microsoft too. So today is this kind of the latest step and maybe the most important step, and what is appearing to be evolving a cold war, a technology

cold war between China and the West. I think so I mean this for some reason, TikTok, and like I said, it is because it's a very popular topic has become like defront in this rising political and economic tension war between the US and China. Trump has repeatedly said that he's considering getting the app to retaliate against China over how they handle the virus. So it's becoming that key

vector in the rising tensions between the two countries. But you know, just taking everything that China has innovated, let's say, or in taking Chinese companies and having US companies buy them for parts, is that really a solution here? I think it's a solution in the short term. Um, it does make sense for Microsoft to take over the US stuff basically ensure there will be no privacy issues, no security issues, but also opens the door, like you said,

to other potential retaliation. And you know what's the stop. The main issue with TikTok is because it's owned by a Chinese company, right, Does that mean every Chinese company that owns something that becomes popular in the US or buy something in the US? Is that like in play now? So it opens the cannon worms that we're really going to see how it turns out in the next few months to a year. So to your column is out and it's in uh, you know, it's a title, the

TikTok Microsoft deal might solve everything. How do you feel what's what's your thesis behind that. So, like like we said, if Microsoft does consummate this transaction, they could protect the US consumer privacy. It's a hundred million Americans now TikTok came out with that number on Saturday for the first time, so that's a huge portion of the American population. So data security wise, it protects UM Americans data it And then from Microsoft, it really helps their advertising business which

has kind of been floundering. They have the being searchtensined and the big question last week with the antitrust hearing everyone saying oh there's big tech is they have all this market power and anti trust. What this deal does from Microsoft and kind a strangely for the ad market, is that adds a big third player the digital ad market that's dominated by Google and Facebook. So it counterintruvely makes UM the market more competitive in terms of the

anti trust issues. And then from Microsoft this huge base of a hundred million consumers, they could cross promoted across their other consumer businesses where they have the Xbox gaming constable business, they could use this as a key tenant of their cloud service where they're the number two player ask for Amazon. And they also have this thing where on TikTok right now, a lot of the creators can

do video sprains very similar to Amazon Twitch. So this is like a new market where creators can do streaming of whatever they want and they get paid the small gifts. It's clearly a great deal from Microsoft, right, I mean we have we have snapped now as well also trying to develop something quickly that would compete with it. I mean, obviously it's a great deal for Microsoft. But how unusual is it that a president would get involved to this extent.

I mean, if we're concerned about national security and you know, Americans privacy and so on, are we really just handing over those concerns to another private company will be at a US one. Isn't this a regulator's job? I agree with you, it's a total regulators shop. And this is very strange in the way Trump has been unilaterally making these decisions, and traditionally it's been much more of a

multilateral do process oriented process. And this is kind of strange where all of a sudden they've been looking at TikTok league last year in the sixty story view and then right before election, you know, they're really bringing up to the forefront. So the timing is strange, and the d process death only questionable in terms of what's going on, and they still haven't presented clear cut evidence that TikTok, which the company thoroughly denies, has data process the issues.

So you do you think this is kind of a done deal with Microsoft or we're gonna get other bidders coming in here, because I'm sure a lot of other tech companies would love to get the US operations of TikTok. I think if it happens, it's going to be Microsoft because, like I said, the anti trust issues with I'm sure Amazon, Facebook, all these guys who love to buy TikTok, but they

have for the anti trust issues. So the one that makes sense is Microsoft because they have the whole in their consumer social media segment, and they have the technical know how, the financial resources to get down quickly. And the funny thing is TikTok's founder used to work on Microsoft, so there's a lot of connections there. That's not The deal that I was talking about was the deal with

music companies to add songs to videos. So just this morning we heard that a snap and secured rights from Warner Universal Publishing and Merlin which sounds very close to what the TikTok experience would be right to ten seconds, and you can add sort of songs and so on. Is there any guarantee that all of these users that loved TikTok when it was a Chinese owned company would stay with TikTok wants a Microsoft own company, I mean something,

there's something different about Microsoft own TikTok. TikTok then bye Dance TikTok. I think they're definitely gonna stay. My I'm slightly less confident in TikTok stability in a date like two or three years out as Microsoft buys them, because it was a different engineering team in different sense, but at least in the mix short and intermediate term, there's no doubt TikTok us static. Microsoft buys them because it

means they're app survived. Um, they're basically like crying and depressed over over the weekend thinking that it's going to get banned because Trump said he was going to ban on Saturday and that hasn't happened. So yeah, Microsoft buying it would be the apps users will be very happy. Interesting, well fascinating story to follow in the coming week and months as you suggested take take him technology calumnists for

Bloomberg Opinion. You can read all of Tay's work and that of our fine Bloomberg opinion columnists at Bloomberg dot com, slash Opinion or O. P. I. N. Go on the terminal. Lots of great work there, and again the very interesting deal, a lot of folks saying this really, you know, sets down the marker for a cold war and technology be team between China and the West um and that could have ramifications for years to come. And Bloomberg will certainly

follow that story. This is Bloomberg Markets with Paul Sweeney and Bunny Quinn on Bloomberg Radio. Well, we got some better than expected manufacturing dated this morning, so that's a great time to chat about the auto business. Alan Baum, auto analysts and principal Bauman Associates, joins us this morning. Alan, thanks so much for joining us here. Let's step back just give us Allen maybe the thirty thousand foot view of the US auto industry. And I want to start

with production. What are the factories doing terms of production? How open are they? Well? Production has actually done much better uh than expected and frankly better than the market needs.

It to do. Now, that's obviously not true in the area of the vehicles that are doing the best, trucks and SUVs, But in general, UH production is getting the inventories back to a reasonable level, again with some exceptions in pickups where you you generally like to have a lot of inventory because there's a lot of diversity within

the product line. UM. That's said, that means that we're in a position where as we expect sales to be quite shoppy now through the next couple of months because of the virus, UH production will will start to pull back a little bit unless the automakers go ahead and make those vehicles and then get themselves in a in a bit of a pickle because of H too much inventory and then apps to need to go to incentives. Who will surprise us today, Well, unfortunately, not that many

automakers report UH. This is something that was started by General Motors a couple of years ago, and most of the industry has has followed. All we're gonna see today is Hyundai, Toyota, Honda, Mazdao, UM and I might have might have missed UH company or or so UM what we've already seen Hyundai and and Toyota and Mazda report UM,

and Toyota uh was down. Uh. There the the group they're they're certainly the full line automakers, very much exposed to both the car and the truck market, whereas Hyundai is increasingly moving over to the crossover side. They had a one percent gain UM, which is in large part the same story as the last few months. New product has helped them a lot, particularly on the crossover side. So, Allen,

where are we on the demand side? I have some anecdotal evidence from a buddy mine who manages a dealership here in New Jersey, and he was kind of surprised that how strong the sales have been as they reopened their dealership. Um, how are you viewing the demand side? Well, we've got short term pent up demand from the March April May period. Uh that has has really propelled the market.

You know, a lot of lease leases were extended, UM and Uh it became a good deal, particularly in the earlier part of the of this May June July period to come in and and get a get a product, as I say, particularly with high incentives. Those incentives have actually backed off dramatically because they're they're simply in the high uh demand uh segments. Uh, there's not as much product uh and so no reason for the automakers or

the dealers to offer those high incentives. In fact, the automakers and the and the dealers are making more per vehicle right now than they do normally, again, because those incentives are down, and because fleet sales have almost dropped to to to nothing uh and of course those were less generally less profitable UH sales. That said, I'm expecting

a rather uh poor uh fall period. Um. Again, going back, of course to the virus, what we're also seeing is that UM, you know, there there's a lot of talk, even uh from me a few months ago that might have said, well, this is not going to be quite as bad as it might otherwise be because new cars

are bought by upper income people. In fact, we are seeing the luxury carmakers, particularly the Mercedes and and the BMW's of the world, not doing well at all uh and and I think that's attributed to the fact, not necessarily the buyers don't at the income but because they're they're they're so concerned about what the process of recovery is going to be, either for their own businesses or for the the economy as a whole. And how uh

they clearly don't have to buy. And with the decline and uh in availability in some cases and incentages in the other, uh, they're not. So if that's the case with wealthy buyers, what's the case with less wealthy buyers that might be hoping for a new stimulus check or waiting on you know, the extension of federal benefits to add too unemployment benefits statewise in order just to live,

never mind drive well. Yeah, and and those less wealthy buyers, as you say, very correctly, uh, the the almost the last thing that they're going to think about is a new car, and even a late model used car. I mean, this is this is the time. Uh. And and those those volumes are a little depressed, as some people hold

onto their lease cars beyond uh the expiration of their lease. Uh. And so clearly, as you say, you're gonna be paying the rent and uh and giving yourself uh fed and and uh in your home as opposed to buying even a used car. And and uh, as as I said a minute ago, uh, increasingly that new car buyer is the upper income buyers. So those uh now that's not to say, of course that uh the unemployment search has not affected across the board, but it certainly has a

greater impact on that lower income person. So, Allen, let's just real quickly here. What's the impact of any so far on the electric vehicle market stemming from the pandemic? Well, you know, the problem is UH that uh a number of new vehicles have been delayed a little bit new launches um, and the volumes were pretty modest, uh even with the launches, with the obvious exception of Tesla. UH and and Tesla, just as its stock seems to be on another plane, uh, some of its sales are on

another plane as well. UM because uh and and I will be one of the first pisode that the uh the competition the Tesla faces is a lot less obvious than it than it might seem. And what I mean by that is as other automakers UH introduce electric vehicles, some of them frankly with a lot less uh interest or excitement if you will, UH than a player like Tesla, UM with their own marketing efforts, UH leading the way in that lack of excitement if you will, UM that

those those sales are not gonna be great. Uh and uh. We've also seen UM in part because of regulatory issues here in the US, where they at least temporarily have backed away, and in Europe where those requirements are quite strong. Uh and uh, the automakers have focused on the markets where they need to meet regulations. Alan, thank you, always a pleasure to speak with you. That's allan Bomb, a Bomb and associates. And don't forget a little later on

we get July auto sales numbers. This is Bloomberg. Robert Thompson is CEO of Clinical Reference Laboratory. It's one of the largest privately held clinical testing labs in the US. Well now it's developing a rapid response COVID test, basically one with the forty eight hour turnaround period. Let's check in with Mr Thompson now to see how the development of this test is going, not only development of the test, but also FDA emergency approval. Robert, thank you for joining us.

First of all, how does your rapid response test differ from others that are almost on the market. So our test is a saliva based test. Um It's called CRL rapid response and saliva allows for easy, frequent testing. It's much more pleasant than the traditional nasal swabs, and it allows for the testing of large populations quickly and cost effectively. Alright, So, Robert,

one of the key things is turnaround times. Um, you know, we talk about we're doing millions and millions of tests, but they're really, for many people ineffectual because the turnaround times can take you know, seven, eight, nine days and therefore kind of defeats the whole purpose. Give us a sense of how sure, how much confident do you have in your hour turnaround time? Well, I have a great

degree of confidence in it. We have invested heavily in automation, which has allowed us to really radically expand the number of tests that we can do in any given day. Um, we're planning on fifty US per day and actually have the ability to scale beyond that if need be. So, how does the FDA emergency approval work? Are there stag disolves? How do you sort of distinguish yourself from you know, I'm sure tens, if not hundreds of other companies trying

to do various things in terms of testing. So the FDA processes is a rigorous multi month process where they make you, uh, you go through a set of clinical trials where you're comparing your product to other approved products on the market. We compared ourselves to those sort of six inch deep UH deep sinus and pea swabs um and we showed a hundred percent agreement with those, so we're uh as accurate as the n P swab is. The goal here is really to provide a service to

get America back to work and school. So we paired the the test itself with a with a web application which uh sort of pre registers a test whether you're doing it at home, or you're doing it in a school cafeteria, or you're doing um, doing it in a workplace, and we deliver the result back to the you know, the employee or the student back over that that same app So we've wrapped an entire solution around the very accurate, quick and easy test UM. All right, so you received

the clinical research laboratory received the approval. What are next steps? We've been able to operate as a lab developed test for some time, so we have we have aggressively built out our capacity. So at this point, there were a bunch of our clients that were waiting for the eu A before they started testing. So we've really the phones

have been ringing off the hook. Here we have banks, airlines, sports teams, auto manufacturers, retailers, financial organizations, and universe cities all under contractor in the process of contracting with us UM. As an example, University of Kansas, we will be handling over twenty five students as they returned to to school over the next three weeks. We'll be testing all of them upon entry. So, Robert, I mean, this sounds amazing.

And you know, if everyone in the country were to get one, you know, on a twice weekly basis, we'd probably really tump down this thing. What are the barriers to something like that happening? Really, the restriction on capacity is more about the availability of the testing equipment than anything else. Most of these tests at our lab and a QUEST and lab corps as well, we rely on automation in the form of liquid handling robots, and those

have been very hard to come by. Uh. Gradually, the supply chains are expanding and we're beginning to see not only in our lab but in other labs UM the ability to ramp up for auctions significantly. The f t A also recently approved pooling, which I know QUEST and lab corps are going to be using which will expand their capacity to test, especially in low prevalence areas, by four to five times. So, Robert, is a scenario for you. You mentioned a test as a capacity that you could

increase from. There is it does it make sense to you to license your technology out to maybe some of these bigger testing companies UM. We are having conversations with some additional laboratories UM, in particular in the university space. There have been some labs that have that have expressed an interest. There are other labs working on saliva based testing. You'll be hearing more about it in the coming weeks, just because of the ease of use and the and

the accuracy of the test. We partnered with a couple of companies or Shure Technologies for the collection device which preserves the sample for shipping to the labrary tory for up to twenty one days, and with Codiagnostics, who's our partner for probes and primers, which is you know, sort of think of it as the chemicals that that detect the viral nucleic acid UM and both of them together it creates a very unique and sensitive tests were more

sensitive statistically than the other products on the market, Robert, how much does it cost and how long does it stay valid for? So if I'm tested today and I meet somebody later that hazard, you know, will I need another test tomorrow? It is always. All of these viral tests are a spot in time. So the most companies are creating and universities are creating sort of a regular frequency of testing, a cadence of testing to try to keep you know, as you were calling it tamped down

on the on the number of outbreaks. The other aspect of this is that we have to respond quickly when there is an outbreak. We can't wait fourteen days or even seven days for results, as you were saying earlier, they have to get results back in twenty four forty eight hours. Okay, Robert, really really exciting news. The best of luck to you in the company. Robert Thompson, CEO of Clinical Reference Lab talking about a rapid COVID nineteen

tests using saliva, key thing, twenty four hour turnaround. Very excited to speak with our next guest. He is known the country over after the very popular documentary on cheer leading called Cheer but also because many people need to buy his stuff Adam Bloominfeld is CEO at Varsity Brands and he joins us now from Pharmas, Texas. Adam, thanks for joining. Talked to us about how the pandemic has impacted sales and also subscriptions, for example to your internal

TV service. Well, thank you Vannie and Paul for having me. Um. I will tell you that the pandemic has been no friend to anybody that serves schools, as you will probably imagine. But that being said, we have pivoted pretty hard to

a virtual world here at Varsity Brands. For those who don't know, we're comprised of b Sen Sports does sporting goods apparel across the country, Varsity Spirit as cheered dancing band as your reference, and Hearth Jones is our achievement arm that does class rings, caps and gowns and diplomas. And I will tell you that post pandemic, we have really started engaging with our clients a different way, UH, most notably to a program called Impact Now, which launches

this week. Actually, we're helping fifty five million kids across the country, UH with masks, signage both inside the school and outside the school, and empowerment journals so that kids can get used to journaling and dealing with the problems attendant to anxiety, depression, isolation during the kinds of events that we're seeing right now. So it's curriculum for schools to get through back to school, get there safely and securely. And it's been the biggest pivot that we've made so far, uh,

in the sixteen weeks of the pandemic. So, Adam, what's your sense from the schools that you deal with. What percentage would you say are going to try to reopen virtually versus physically or maybe even a hybrid. Yeah, it's a total hybrid. In the checkerboard. We have schools in Georgia that are opening today, we have schools on the West Coast that have deferred or gone virtual for the entire fall season, and then we have many schools as

you mentioned, that are in between. Um. I've seen a lot of schools in the last two weeks announced a hybrid model where kids will be on campus two to three days in high schools per week and then virtual the other times. Interestingly, we're seeing a number of districts use extracurricular activities its sport, cheer outside of school activities as a way to keep the kids engaged outside of the classroom, even if they can't stay engaged inside the classrooms.

So Vaine acquired you back in two thousand eighteen. Right, how much has Beyan been involved since the beginning of the pandemic? And you know, how much has your actual revenue been impacted? So Bank Capital, which bought the business about two years ago, Uh, majority of the business, Charles Bank Capital Partners still thing has been extremely involved. Um. You know, they sit on our board as you would imagine, and have been incredible thought partners for the last sixteen

to twenty weeks but also the last two years. I can't tell you. I've been in the public markets before our business was public, before going private twenty years ago, and the the amount of progress and change you can make with private equity, thought leadership and that kind of attention to detail is unmatched, in my opinion, compared to other ways of running a business. So I'm grateful to

have them. Having said that, we've seen revenue to your question down as much as when the pandemic started, and it's improved gradually. So I would tell you that revenue is down in the range now depending on division and it varies between b SM Sports, Varsity Spirit and herf shones. But what we have done is important is kept our two thousand cell in the marketplace. Uh not on furlough,

but in the market this entire pandemic. It's been expensive, it's been a real investment by the company, but it's increased the engagement. We're using these tools like virtual graduation. We had never nearly a thousand virtual graduations. This year they help two hundred and fifty kids graduated virtually, and virtual fittings and cheer competitions that are online um through Varsity Spirit. These kind of events helped the schools stay

engaged with the kids. Were doing virtual press conferences through sport and through the athletic directors and the coaches, so they look like a college coach or a professional coach when they're having these meetings with their kids and they're talking to their parents. All of these tools, which have been candidly invented over the last three months, would have

taken us three years during normal times. Has been kind of the secret sauce to stay engaged with these schools and keep the kids engaged with their coaches and their administrators. How about on the sports side. What what are you finding the schools are thinking about their fall sports schedule. You know, it's a mixed bag. Um, We've got an

number of delays. So I will tell you that the pre eminent thought is to delay until the middle of September end of September, but still have the sports season. Some schools are talking about having the games without the fans, or having the fans socially distanced. Um. There are other parts of the country, namely the Southeast, where sports are starting on time and there are no restrictions with respect to who plays or who comes to the games and watches.

And then in the Northeast you have examples of some schools that are differring uh sports until later in the fall or into the winter. So you know, to the earlier comment, it really is a mixed bag out there.

I think over the next thirty days, if there's a stabilization with what's going on with infection rates, hospitalization, mortality, I think you're going to see schools come to a firm conclusion they have to by nature of the academic calendar, and by the middle the end of August, I think you're gonna need decisions be made on how to actually come back with the sports in the fall. And I'm real quick because we're out of time, but you do employe.

Varsity itself employs around about nine thou have you had to make offs? Are you considering furlows layoffs? We have had layoffs. We have had furloughs. We are doing everything we can to keep employees employed and bring people back to the business. And our number one focus beyond safety and security is getting all of our teammates back into the family as fast as possible. Very interesting, Adam Blumenfeld,

CEO of Varsity Brands. We really appreciate that UH schools trying to figure this out, um and both from an academic perspective and then an extracurricular perspective, And as Adam was mentioning, kind of a patchwork across the country, no real consistency, but I think the local communities are trying to figure out what works best for them and as well as you know, again academically than sports and all the extra curriculars. Very interesting perspectively there. Thanks for listening

to the Boomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, You Can oh Is, catch us worldwide at Bloomberg Radio m