'Bloomberg Technology' Full Show (11/09/2021)
From the heart of where innovation money and power collide. In Silicon Valley and beyond. This is Bloomberg Technology with Emily Chang. I'm Caroline Hyde in for Emily Chang and this has been my technology coming up in the next hour. Bitcoin soars and Coinbase slumps. The biggest U.S. crypto currency exchange reported third quarter results that missed Wall Street
estimates. As for why nothing transactions users are declining. Plus woman whose data breach nightmare. The trading brokerage says five million email addresses were compromised in the attack. Can the company truly live up to its safety. First mantra since executives often tout the future of health. Post pandemic. My conversation with the CEO of Color on making healthcare easier. And the series A funding. The company just got to make that a reality.
We'll get to all of it in good time. At first let's get a look at the markets. U.S. stocks actually halted the longest winning streak since at least 2017 in times of the S&P 500 sending major indices a little bit lower off their all time highs. Could it get to you can break it down for us. Well Caroline after an eight day winning streak stocks taking a little bit of a
breather ending in the reading of the S&P 500 down zero point four percent. And big tech not coming to its rescue at all. You'll see the New York thing and even the Sox index ending flat on the day that was the outperforming for most the session. What stayed in the green all session long cryptocurrency is up three point six percent. I want to dive closely into the semiconductors into the chip makers. Check out check out this terminal chart. We know that Eevee have been very very hot lately. We know they've been surging. Would take a look at what had ex-husband those chip makers. A little known fact.
ATV engine takes more chips than a regular engine does. And the stock market seems to really know that trading in lockstep not just for the past couple months but really since November 9 since that big Pfizer announcement about the vaccine. So you can do see that's a trade. Very very predictable. Something to watch if and when that relationship diverges. Let's just get to those earnings stories though because that seems to be the hot topic after the bell into your down zero point three percent after hours much more intraday after falling the most on February almost 4 since February. Shery Ahn me on shrinking margin forecast. And you have door dash of course higher on the day seven point eight percent after hours. This coming after they announce a. Excuse me. Aye aye. All stock deal with finished food delivery company
Walt Enterprise for seven billion euros. That's eight point one billion dollars. And then of course we have Coinbase missing their estimates tying that to lower volatility in the quarter third quarter saying that while that retail volume that was driving the crypto space well they slowed down a little bit. Those shares down 10 percent after hours. We can get more into that topic more to the crypto space with our very own up low. Yeah I want to look at some of the specific numbers because there are some key words throughout the shareholder letter that really give it away. So let's bring them up. Yes there was a miss on the top and bottom line. But if you look at that trading volume overall it's much softer compared to the prior quarter
around three hundred and twenty billion or so in the third quarter down from 460 billion dollars in the second quarter. Here's what's so astonishing. You read the shareholder letter pretty. And the word volatility appears 17 times over in reference to greater volatility or lower volatility. But the big takeaway is that trading volumes were down quarter on quarter. And clearly the market not liking it down almost eleven percent in after hours. Let's get into the meat of this with Brett
Harrison FTSE U.S. president. A fellow U.S. regulates a crypto exchange. A lot to unpack here. Brett what's your take on these Coinbase numbers. Yeah definitely a lot to unpack here in the shareholder letter. You know Coinbase as a business really developed as a retail focused business. Now they have now you know 70 million users. They have around 7 million monthly active users. And as we know retail really loves to trade crypto right now
when it's moving a lot especially when it's moving up a lot. So for example we've seen crypto volumes really pick up on exchanges across the U.S. in the last several weeks. That's cryptos have reached an all time high. But earlier on in the bit of the quarter we were seeing general lower trading volumes lower volatility. And that seems to have a huge effect on the amount that retail wants to actually transact. And so we're seeing a lot of mentions in the Coinbase slider about how much
their business is really correlated with the volatility of the crypto market. So Coinbase is talking in the shareholder letter about how the company is a long term investment. Doesn't want investors to pay attention. Quarter to quarter. But one of the things that analysts really cottoned on to in the quarter was how use of the
app spikes after listing of Shiba Inu coin of course. They want to move into NFTE non fungible tokens as well. What is the future for the platform. Overall. Yeah one thing that really stuck out to me in the letter was the fact that a Bitcoin trading on the exchange and in general Bitcoin dominance in the crypto market cap as a whole keeps going down. And the amount of users that are using more advanced features of
exchanges are ISE on Coinbase are going up. So you see people trading alternative coins the theorem Salina these different coins certainly on our exchange. You know a theorem and Florida have been steadily growing in volume and people are using things like their earned product. They're staking product and now they're getting into NF Keys. And so they are just like RTX you
know getting into the NAFTA space. They're looking to make longer term investments in the Web 3 ecosystem and provide more of a diverse experience than just simple buying and selling bitcoin. Well on that point Covid means my Bloomberg terminal really quick. And look at this chart. Bitcoin had an astonishing rebound since July but it's lagged the Bloomberg Galaxy Crypto Index which of course includes other coins including E. I'll hold you to a yes or no answer. Is this a maturing crypto
currency market. Or is this still nascent to the mind of retail investors institutional investors. I think it still makes sense. You know a lot of the largest institutions in the US especially have yet to be able to tap the full potential of crypto because of various compliance issues regulatory issues that are preventing a lot of these major institutions from getting into crypto currencies. You know we're just starting to tip toe into institutional adoption by the first Bitcoin futures ETF being released. But that's just the beginning. And until we see more better regulatory clarity that allows for these different institutions to get into crypto currencies like Bitcoin like a theorem. Only then are we going to really start to see more of a maturing off of this market. So full disclosure my husband works over as a senior manager at Coinbase so I lay down too much into the intricacies of that business. But I will ask you about that regulatory question and of course I'm sure you're talking to
regulators yourself. How swiftly are we going to see. Well unless nascent regulatory framework here in the United States that's a great question. Talking to regulators and thinking about the regulatory landscape right now is a major part of what we are doing. It RTX because we truly believe that the long term viability of this industry rests on the ability for exchanges like ours licensed gatekeepers in this ecosystem to be able to interact cooperatively and collaboratively with regulators. The S.E.C. to see FTSE with lawmakers and it's very clear this is top of mind for these agencies that we want to get to a place where there's a good federal regime that is regulating its crypto currencies and other kinds of crypto assets. You know all of the discussion around the infrastructure bill passing was really the beginning of all that. And we think that this is imminent for for some sorts of decisions or at least the beginnings of bills to start
coming out that really try to shape the future. This is supposed to look like in a way that makes people feel that this is no longer a fringe industry. This is a properly regulated trading industry that that everyone should have some way of taking part in in a safe and regulated matter. And in a way what is evident that FTSE no longer so fringe just the fact that Christie's you know the aged auction house is once again auctioning off and FTSE tomorrow that of peoples. People made the 69 million dollar splash at the beginning of this year. How do you think such an auction is tonight will help affect and FTSE look at FTSE are rolling in their adoption. It helps that now exchanges actually centralized exchanges not just defy exchanges like RTX like
Coinbase or jumping into the NAFTA space. NAFTA have a lot of appeal for people outside of crypto because they make crypto relatable. I mean thinking about things like layer one block chains and staking and wallets and addresses can be something that's hard to get people working the lines around. But the idea of a collectible a piece of art where you can trace the origin of the art to a particular creator or mincer that has a lot of appeal and analogy to other kinds of collectibles and communities in the world other kinds of art communities. I think that NFTE is something that's really going to help the world get more into crypto not less. And I think that seeing these auction houses really equate and tease with other forms of art it's only
going to help that general adoption of entities. RTX U.S. President Brett Harrison great to have some time with you. And of course Ivory and Ludlow great questioning and great analysis from the team. We thank you both. Meantime let's take a look at Apple. CEO Tim Cook has been talking about crypto currencies as well. Looking at the features that there are no immediate plans for Apple to accept crypto for its products. Cook also revealed that he personally invests in crypto currency but that he doesn't have any plans for Apple to invest in the asset. Coming up behind the tech industry boom into the stock market's hottest and most profitable sector Mark Mahaney. That's Gloria's eye out with a new book on how investors can identify future
winners in this space. I'll check in next. Does it mean that. Mark Mahaney of Evercore ISI has been covering Internet stocks on Wall Street since 1998. Morgan Stanley Citibank RBC Capital Markets. He has seen the boom in the tech industry become the stock market's hottest and most profitable sector. And now he's out with a new book titled Nothing But Net takes a look at the underlying drivers of tech outperformance and how investors can identify future winners in this space. Mark joins us now. And Mark I mean brave to take on writing a book not for the faint
hearted not for those with with out as much time as you have as well as when you're trying to work on the side. What what sparked the idea. Why sign up for such a Herculean task. Well I do enjoy writing. I've been covering tech stocks and Internet stocks for 25 years. I didn't want to take us a chance a stab at stepping back and thinking about big lessons. And then I was a little bit inspired by a classic book. Peter Lynch is one up on Wall Street written in 1980. Just great fundamental advice for four retail investors even institutional investors about how to tap into the market. My thought I want to do
something similar except using today's household names like Amazon Netflix Facebook and Google. I thought I could pull together those lessons. I enjoyed the process. And let's talk about some of that fundamental advice because a lot of it comes down to perhaps not looking at fundamentals in the way we used to suddenly with value stocks. I think that's true. You know I if I step back if there's one thing I try to get across to people one thing only it's remember that the phrase D.H. Q or the acronym GHQ dislocated high quality companies. I think the best way you can invest in the market is trying to mitigate valuation risks and mitigate fundamentals risks. And you do the first by looking for stocks
when it corrected 20 or 30 percent. The second though is the more important thing. And you try to find these high quality assets that have facing large total adjustable markets. Excellent management team super strong consumer value propositions and companies that are really good at product innovation. If you put that package together those can be really good sustainable investment long. I think that's another thing I'm trying to get across in this book. You don't need to trade
to make really good money you know with lots of caveats right there. You'll need to trade and make really good money investing in stocks. If you invest rather than trade. Yeah sort of buy and hold. And many didn't when it came to the likes of Apple and Amazon if I can sort of be paid a dollar for every story of someone who says that they sold out at the wrong time. How how much perseverance how much patience that investors need to ride out the promise of no job today. But John tomorrow. We're investing for the business but in longer term you'll get your profit. You needed to have that. One thinks I'm going to cut this both ways. Caroline Hyde I look for management teams that are truly relentless. I would love to see founder led
companies. They don't always succeed of course. But if you look at the history of tech stocks the biggest winners have always always been founder led founder Ron obviously but founder led for multiple years. The biggest tech market cap names in the world at best founders both for two decades. You know you get that kind of consistency in investment parlance. Sources saying that you know past performance is no indicator of future performance. And that's true when it comes to management teams and especially product innovation which is so critical in tech.
Actually I think that good successful product innovation is usually a harbinger of the ability of a company of a management team more to do more than that. So you stick with that that stock that company through the ups and the downs of the markets and through company misses. I haven't seen really even the most successful companies avoid MIS. From time to time we'll talk about some of the funny moments within the book some of them particular anecdotes or experiences that you really had to share. Well I'll tell about one of my worst stock calls wasn't funny for me at the time but I had a sell on Google at the time of its IPO. Right on TV right after their first earnings the stock was gapping up and I was
referred to as Chapter 3A Matt Miller on my face from one of the wiser tech columnists a strategist on the street. And he was right. But it was a great learning. A moment for me and step back and think about well you know where's the real product innovation going on sector. Leave aside valuation. Valuation is super important. But to me it's almost the last thing you should do. You should really check off the boxes find a high quality asset and then think about valuation. I mean one of the mistakes
I made early on focusing on valuation first find a really good asset and then think about entry prices rather than go the other way. Well then bring it to the here and now Mark because it's very hard not to look at valuation first and foremost. You've had the run up in stocks that we have. And when you see that like the darlings of today the Tesla suddenly take a nosedive to the tune of 11 percent. They will have idiosyncratic reasons. Reasonings around that. But what now. Valuations. Is it now a good time to still be looking at growth names. I think so. But you can always find dislocated stocks. So that
was one of my learnings lessons in the book. Even the best highest quality assets gets to get dislocated. Tradeoff 10 20 30 percent from time to time sometimes because of company mis missteps. But sometimes just because the market rolls over it happens. Even the mighty Amazon is a 30 percent roll off. And when you see that in the highest quality assets that's why you should buy or add to positions. So I look at companies today the highest all of the Internet companies that I
look at. Which would I say are most dislocated today. Three ideas come to mind. First is Amazon. It hasn't dramatically corrected but stocks flatlined for about 18 months now. I think that the cash future cash potential is growing. I think that's great stock to buy. If you're willing to look out 12 months or more. Second is Facebook highly controversial. The great business model wonderful value proposition. That's the second. Third controversial is Uber. And I think that that's the least it's least proven to be is still relatively new. But the total just bull markets are massive here and it's one of the leaders in that market. What's your great value proposition to tumors drivers merchants etc.. My mahaney always great to have your
take and reflections as well in your new book. Nothing but Net. Go check it out. And thank you for joining us. Meanwhile coming up Robin Hood struggles continue. The company revealed its biggest data breach in the history valuable data that was stolen and what that means for the company's safety first mantra. That's next. This has been. Let's talk about Hertz the car rental company ending the day down more than 90 percent on his first day of trading after raising one point three billion and an IPO. And the debut kind of debut coming back to the market striking a turnaround for the Florida based company. Come on darling. A mean stock traders of course after it filed for bankruptcy last year. IBEX Erik
Schatzker spoke with Mark Fields interim CEO and Greg O'Hara the company's chairman about the IPO and plans to add Teslas to the fleet. We know our corporate travelers want electric vehicles to go visit their clients and do business in. We know our leisure travelers want electric vehicles. It's a great way for them to try electric vehicle without committing. And specifically they want Teslas. They they like Tesla's and they'd like to rent Tesla's. So in combination with understanding the demand is there and an opportunity to get a very hot product an amazing product that allows us to put it in the hands of people who want. It was an easy decision for us. Tom at the IPO price of twenty nine dollars a share you've pretty much tripled your money in the space of four months which in and of itself is remarkable. As you know there are some skeptics out there haters who might call them haters. They don't believe in your story. They say Perch doesn't have a firm order for Tesla as they see
Elon Musk as dumping model threes. What can you say right here right now to address some of that. Let's call it confusion. Well I think that there's no question that there's an incredible amount of demand for our products generally. We have a very robust environment for the rental car industry. We expect that to continue. We're very focused on bringing products into our
fleet. As Greg mentioned that we know people want to rent. There's no question they want to rent Teslas. There's no question that they want to rent you know higher value vehicles from all the OEM. There's no question it's a big move afoot to electrification. So you know for the people who doubt what we're doing you know we we would simply ask that they stay tuned and watch. We have to come because we think that this is just the beginning of an effort to put Hertz at the center of mobility in a way to serve our OEM partners and to serve our customers to provide a better rental experience and a better corporate partnership with those parties. Marc these other guys here Tom and Greg they're financial guys right. You're a real economy
good guy CEO. You ran Ford. You know all about operations and execution. What are the biggest challenges. Hertz has to overcome in this move to electrification and the transition to what we might call shared mobility. Yeah. Well first off first off I don't look at it as challenges. I look I'm at a huge opportunities because we're really staking ourselves out. I think a very important place. And as Tom mentioned this mobility ecosystem wherever Mobility 2.0 goes obviously clearly as we look to lead in electrification making sure we get our charging infrastructure in place. That's happening as we speak and then
be able to you know that first mover advantage of learning how to manage these large electrified fleets I think is going to give us a very big competitive advantage not only in the near-term as Tom and Greg said to get customers into these vehicles that they want to drive. But more importantly you know in business you have to start looking around the corner. So as you think about autonomy down the road those a large electrified fleets I think were going to be well positioned to work with a lot of different partners to make that happen. Makes Erik Schatzker with the Hertz executives that now 7 million customers of Robin Hood were hacked the largest in the company's history. Even some personal data like names birth
dates zip codes exposed. Robin Hood isn't going giving exact details on how the heck happened. But it is a bit of irony and was a customer support staff who helped the and gain access during a phone call. Joining me now. Prevention on investing and was actually also on air broke this. You did expertly yesterday when it all occurred. What now. What do we learn. It's amazing because seven million accounts for about a third of Robin Hood users. So the scale of this hack is enormous. So the three hundred and ten customers were most worried about. They have names zip codes and personal details exposed. And those are the
most vulnerable group here because once those details are exposed that could lead them to other issues down the road because those are things that verify other aspects of their online behavior. But many of these users a lot less is exposed. So could it have been worse. Yes. However it also happened for vulnerable areas for Robin Hood which has been investing in customer safety. It this happened as you said through a customer representative. Ironic because people complained they never had one. Exactly. Interestingly also Charlie Wells of Bloomberg has been talking to a lot of users who have been very nonchalant about this issue. They say it's part of the course of doing business online. But with that said should there be more financial losses for these customers which have not happened as we know to this point then that would pose a much bigger risk for Robin Hood. Jihye Lee when it comes to crypto people always worried about you know certain parts of that crypto currencies
being exposed and being hacked in other parts. Exactly. So cryptocurrency currencies is one part of this. But again remember personal information how much information do they really get. If they had gotten Social Security bank account or debit card numbers which they had not gotten as we know at this point it could have been worse. We also know Robin Hood
importantly has hired Mandiant to be investigating this a little more. We don't have all the details on how this breached happened as we know through a phone call to a customer service representative. Definitely not something you want to see happen to other brokerages though. As we know all of them are vulnerable. And interesting that actually the shares are only off about a percent in the last three days. Shows you the nonchalant ness. Right. I mean if you're a user here you have
been hacked somewhere before. But at the same time again 7 million customers is no small number. And isn't Sonali Basak. Thank you so much for all of that. Coming up we're going to be starting to look at the end now. We say it is a pandemic. What happens to all those Covid testing sites. One company thinks it has the answer. That's next. This has been that. This is Bloomberg Technology and Caroline Hyde Neil. Now let's get back to the financial markets. A tweet and two days of being dropped to 100 billion dollars. A market capitalization lost hundreds of stories in the media and Senate Tuesday DAX latterly
the breakdown on Tesla. We want to have the answers why bathing is important to take stock of what's happened quite literally. You see we're six down almost 17 percent. In fact from Thursday of last week when Tesla hit a record high of one thousand two hundred twenty nine dollars and 91 cents. And there's a lot going on right. Elon Musk saying we're asking Twitter should I sell 10 percent of my stake. You don't have Michael Berry of the big short fame tweeting that Elon Musk wants to sell his stock because he's under pressure to meet his debt obligations. A lot to unpack. Convince my Bloomberg terminal. Look at this shot because Michael Burry at least got me thinking about short interest. Short interest has kind of touched up a little
recently. It's three and a half percent of the Tester's flow. And you can see that chart the yellow line being test share price. Yes. Okay. Short interest is not there anymore. And the shorts have not been successful historically when it comes to that stock. So can we rule that out as it is an option for what's happening with Tesla stock. Hard to say. Come back to me in the studio and bring up a tweet from Elon Musk the tweet from over the weekend about whether or not he should sell 10 percent if his stake. You have some Wall Street analysts saying on Tuesday it at least gives investors an excuse to sell. They may still believe in the long term thesis when it comes to Tesla but there's been this series of negative news and a lot of people have ridden this stock right to that fresh record high made a lot of returns in the process.
So that seems to be the thinking on Tuesday. We don't know yet if you let Mr. Slide selling. But what we do know now is that with a tweet you get an excuse a lot to unpack Caroline Hyde how we love CEOs that tweet and the impact that it can have at leveling. We thank you so much. Always so smart. Meanwhile the end potentially of a global pandemic could be near. We're on a downward trend. We want to keep going on a downward trend. We're not going to be having to wear masks forever. He is hoping at least of course that was Dr. Anthony Fauci the director of the National Institute of Allergy and Infectious
Diseases speaking earlier on Bloomberg about Covid cases starting to plateau. And while we're not out of the woods yet let's not say that. But we are starting to look at the future at least. And that's exactly where my next guest is currently focusing. He's the CEO of Color Health. And on Tuesday the company announced 100 million dollars in series A funding that looks to expand its than 60 500 Covid testing sites and offices and schools. Joining me now the CEO and co-founder often Rocky. It's great to have some time with you often. And first of all almost 100 million dollars. What are you gonna do with it. Caroline. Well thank you for having me on today. Maybe I'll start off by
just sharing a little bit about what color actually does. So we are the company that provides essential and public health care services in the context of where people's lives actually happen. And so you know over the last couple of years we've been building and deploying services across across the US in very different settings whether it's like schools universities workplaces even. Can you say things like churches. So now we're running almost like 7000 either testing or vaccine sites. And so
to your question about well we're planning on doing with this fundraise but also just generally in our operation is that we found is that in general when we're thinking about health equity and access to essential health care services one of the biggest factors in people being able to access basic health care is the immediacy of access and simplicity of access. And that's the big driver for everything that we do which is to take these essential services and deploy them in the context of people's lives. So I'm happy to walk through a few examples of that if that's helpful. I'm interested. As you walk through those examples because I know that you've been you know offering Covid services to the likes of California Massachusetts the state governments the universities. But there's also an awful lot of other places that want to become closer to all of us. Give us access something you've CBS and think the pharmacies on the High Street.
They want to be able to give me my flu shot to be able to walk in and continue the testing that they've currently provided when they get the vaccines. How are you going to tackle this sort of a competitive space. Yes. So I think it's first of all I think it's such a vast and challenging problem that I don't think there's going to be a single way to do it. But I think one of the things that we have seen time and time again across different industries is that when you bring immediacy when you take things closer to people you actually get an exponential increase in utilization of various services. What happened for example in retail and e-commerce and other services like that. And the way we think about it is like when you think
about like say schoolchildren for example right now we're running thousands of both testing and vaccine sites in schools. And when you think about how do you serve the school based community. The most logical and in low friction place to do that is in schools. And so you know the way we think about it is like I think it's going to there is a there's a place for centralized health care which is the traditional model we came from. But when we look around the world and you know as well as other examples of other industries the ability to take things into the context of people's lives and their communities we believe to be one of the biggest things we can do for public health. Absolutely. I mean goodness being able to get my free shot here and work at seismic so easy when you've got a busy life. I'm trying to catch my own kids myself. I'm interested in you know as you look at a four
point six billion dollar valuation now you're a company that knows how to pivot. You are doing what it was at genetics genetics testing originally. And sort of like the competitor twenty and me and you pivoted and you pivoted. Well I'm interested in therefore what how your relationship evolves not only with companies with governments but also the insurers. Are you going to be working in lockstep with them. Because what's so interesting about Covid is almost we didn't have to worry about the insurer. It was the federal government that wanted to put these things in our arms. It's it's a great question. I think one of the effects of the Covid crisis obviously it's been an incredibly challenging
window of time for for all of humanity. But I think in these times of crisis what tends to happen as well is that it creates a mobilization that moves people out of a local maximum. And the thing that we've seen is that all of the key stakeholders in health care and in public health have dramatically changed their approach. Like we're seeing that with innovative departments of public health like in California Massachusetts a number of other states some of the largest manufacturers in health care kind of services and supplies like Thermo Fisher for CAC and so on have all taken a very big step up to drive access and immediacy of these services. And so I think like the and the other big thing that's really changed is our own expectations. Like through the last couple of years we've all seen that it is possible for us to receive basic services in a way that's way more convenient as part of our lives. And I think that expectation is not going to change is
not going to go back. And I think that is one of the biggest shifts I think that's happened in the entire industry at least for the. It's like you know 20 years. And so I think this is going to be a big shift that when we look back I think a decade from now we're going to see as one of the big threshold moments for how we think about public and population health. And often you are mentioning how you've looked at other countries and seen how perhaps they more efficiently do things than versus the US. Are you looking at international expansion yourself as well. So we have in fact actually pre Covid. We were doing a fair
amount of non US work but through the Covid crisis there has been such a huge need locally that that has been the biggest kind of driver of our own focus just to be able to serve our community and kind of you know the the the country where we were where all of us color our most are mostly living. But frankly like the same pattern of using technology to distribute basic building blocks of health care I think is actually something that is going to play in a number of other countries slightly differently because the the way the finances work it will be different through a single payer system versus not. But the essence of the distribution through a technology first and high leverage model I think it's something that's actually going to apply quite globally. So not just in the U.S. kind of healthy. Othman Iraqi thank you so much for joining us and sharing in your news. Congratulations on the fund raise. Meanwhile it's one of the most storied companies in U.S. history. General Electric. On Tuesday the company's chairman and
CEO Larry Culp took the big but long overdue step perhaps to many to break up the company into three publicly traded companies. Culp told me about Elliott about why he made the move. Now. I think the board in the leadership team are firmly of the view that on three distinct bottoms these businesses will be more focused. They'll be higher. Greater level of accountability. We should have sharper capital allocation more strategic flexibility. And frankly things can be good for the team as well. Right. The team that we have today certainly the team that will build over time. We all know that today's talent markets are more mission and purpose driven. We'll stand up to new boards full of strong directors with domain expertise. And I think we'll end up with investor bases focused on these pure plays investors that are probably under invested in G.E. today. You put all that together. It's clear this is the best path for
us to unlock and create value going forward. There aspect you've learned from bitter experience. I have that there's no such thing as a free lunch. You have to pay something to get anything. And obviously there are some benefits that we'll go through that you think you'll see. But are you giving up something in the so-called s word synergy. Because it was
thought that General Electric did have some benefits for example and some of their research work that maybe research you did on new hydrogen powered turbines would help you in aviation. Are you going to give up some of that. David the G.E. team's hard for me for the last three years that I will bet on the benefits of focus every day far more than the often illusory benefits that come from synergies. Now we certainly enjoy those synergies today in certain places but more and more we've been running the company on a decentralized basis not as one g e not as even the four reporting segments but the 30 panels that deal with customers that compete in the markets every single day. So if there are synergies that we enjoy today will work to continue those of course. But the vast majority of the benefits here will come from focus. So that's why you're doing it why you're doing it now. What about the timing now. Why not a year ago two years ago or a year from now or two years from now. Well we've had a
lot of work to do to take care of the balance sheet. We've reduced our debt load by over 75 billion over the last three years. We also needed to strengthen our core operations. And if you look at what we'll do this year in terms of our adjusted free cash flow should come in around five billion dollars. I think those two proof points needed to be in hand before we
could even entertain a question like this. It certainly helps being on the other side or increasingly on the other side of a pandemic. But also our customers want G.E. at its best focused on them whether it be our utility customers coming out of COP 26 dealing with the energy transition our air framers and our airline customers dealing with the post Covid recovery in that space let alone everything that's happening in precision health care. What's going to happen. The General Eric name. What's
going to happen. The logo. And then we all know it's been there forever. Who's going to get that. Well I think everybody wants to make sure they hang on to their they're part of the brand right. The monogram was recently order evaluated at nearly 20 billion dollars of brand value. It means a tremendous amount in each one of these markets. So we don't have a definitive brand
plan today. We'll work through that as we will work through other questions in the months to come. But rest assured every business will share the G.E. heritage. So one way to put it what you're doing is unscrambling the omelette. So you've got an awful lot of things to work out over the next two or three years no question about it. But one thing that has been a significant factor for you and for general before you were there is this legacy sort of health care long term contracts. Where are those going to go. Those are long term care insurance business as we'll stay with the core corporate entity which will be in effect G.E. aviation. So as we go forward G.E. as you know it today at a corporate level will spin healthcare will spin power.
Renewables will retain aviation as well as our long term care insurance operation. In addition to some other liabilities. G.E. CEO and chair Larry Culp speaking with my colleague David Westin a little earlier. Meanwhile coming up more earnings. We'll talk to Blue Aprons President CEO. That's Laura Finley about their third quarter results and what's next for the milk provider as we come hopefully slowly out the other side of the pandemic. And as we head to break let's take a look at postmark
shows. The online fashion marketplace slumping after hours after fourth quarter revenue and adjusted adult forecast. They missed estimates. We'll keep an eye on this story. Let's bring back. Let's talk about the shares of the market provide a blue apron clawing back Tuesday after well dropping 40 percent in premarket trading. This after the company missed third quarter estimates and posted well perhaps a bigger loss compared to a year
previously. Was the outlook moving forward and how is the company managing with. Well what we hope is a post pandemic world for some in some of the supply chain issues. We will face this. Ask blue aprons president CEO in a friendly who joins us now. And thank you so much for spending some time with us. Let's talk first and foremost about well the future as we look at a loss that continues. Do you hope to gain profitability. How do you see the world evolving in meal kits. And indeed now you're branching into deliveries now of a fully made process food. So we see this as a pretty pretty standard impact of seasonality
with a little bit of a twist this time. So Q3 in the market industry tends to be the highest cost quarter. No matter what because of the fact that we're very concerned about food safety and it's the summer months. So we tend to use extra packaging extra ISE et cetera. So Q3 is historically usually our lowest revenue quarter and highest cost quarter and that's pretty consistent in the industry. Based on seasonality what we saw this year was actually a very interesting spike in pent up travel demand that actually came into the business just from people who were trying to get travel in before school started.
Maybe they hadn't been able to travel earlier because of Covid. The interesting aspect about this quarter is we demonstrated what we had intended to which is we've been really focused the last two years on building value per customer. And so our revenue per customer a levy and orders per customer remain extremely high and post pandemic trends. Even with the high travel that we actually saw this quarter. So we look at that as a very positive sign ongoing for the business. When we think about the ability to drive customer growth on top of that and then push towards profitability. But at this point with the 78 million that we just raised and closed this past
Thursday into the business we're really going to lean into marketing to scale on top of that and focus on growth for the next year to really drive that customer acquisition number up on top of those key customer metrics have been so strong. And you're also changing what you can offer to the customer at the moment. You have still well the ingredients being delivered the menu option. But you now have heat meat which is sort of your foray into prepared single serving meals. How is that going and
who are you're really targeting in that. It's really about flexibility. So the thing is we want to provide very high quality meals to our customers and make sure we're meeting their needs where they are. So the core meal kit is still very successful for us. We have the highest quality ingredients very high animal welfare standards and great recipes. Now we've also introduced you can buy single boxes on our market where you can actually just buy a reconfigured box without a subscription. And then we layered heat meat on recently as well to give people different options to be able to add more food more meal occasions with heat meat. Specifically what our customers were looking for were the ability to
supplement their core meal boxes with prepared meals for lunches or for on the go when the kids are going to soccer practice or something and you need something really quick. But they wanted the blue apron quality. So this is becoming very additive to the business as we expand. And then we continue to introduce new products that will actually open up new audiences to us as well. It's interesting that you're talking about you know costly ISE can be in the summer and how that is a difficult element. All I can think of is some supply chain issues in the moment.
The cost of food in particular going up. How is that affecting your business. We've definitely seen cost pressures when it comes to food when it comes to logistics. And we try to manage that very carefully on the food side. What's interesting about Blue Apron is we are a direct supply model. So 70 percent of what we put in the box comes directly from the producer and we have great relationships with the suppliers in order to maintain quality at a reasonable price. And so we're very focused on continuing to manage those costs without sacrificing anything about the experience in the box. And we did see a lot of those cost impacts come into Q3 which is expected.
We also saw a lot of the logistics costs come into Q3 as well. But what we think we've seen at this point based on our discussions and negotiations with our suppliers is that most of that impact is already visible. So in other words what you're seeing in Q3 as far as impact. Again that's always our highest cost quarter anyway is really something that we can predict and manage going forward. And we expect margin to actually recover coming into Q4 and then of course into 2022. Thank you for being
so transparent with us. Thank you for coming on telling us about the new products produced Date President S.A. and defending quite some time with that. Well coming up on line insurance company Lemonade sets its sights on autos. I'll speak with the CEO and you try them about their expansion plans on their latest earnings. Every. Insurance technology company Lemonade rolling into the car insurance business and in the process it's acquiring competitor Metro Ma a data science company focused on auto insurance but eliminates stock actually was down as you see in point eight percent. Some one of the biggest falls since March following the announcement even as the company recently posted strong third quarter results beating estimates and boosting its revenue forecast for the full year. Dive into all of it with the CEO Daniel Schreiber. And Danny what do you make of investors reaction to the purchase.
I'm honestly not that much. We tend to try and shy away from the gyrations of any particular day. As you said today we announced stellar results. I think for the quarter we surprised. I think I exceeded a lot of market expectations 101 percent growth in revenue. So feeling good about the fundamentals trying to manage the business rather than the stock. And then having launched car insurance just last week an overnight last night announcing the acquisition of Metro Mail we feel the winds and our sale and a lot of opportunity ahead of us. Are you worried though that perhaps investors are also sort of stating a kind of a concern here in terms of the price being paid or or how you're going to be adding to the symbiosis of the two businesses what you think you need to prove to them. Actually almost all of the analysts who cover us brought out
very positive coverage to the market reaction in terms of the stock price is not reflecting what we're hearing from the institutional investor base or from the retail investor base. So we do see this oftentimes acquisitions get rewarded. So to speak with negative returns on the first day as investors digest the news and update their models. I'm actually incredibly optimistic. There's I think tremendous synergies in the deal that we've just announced. We're acquiring a company that has over 150 million or roughly 150 million dollars of insurance premium. We're paying an enterprise value of just 200 million dollars. They have 250 million dollars in the bank and they've got 10 years of experience in using data science for CAC insurance. Having monitored billions of miles and let the A.I. algorithms crunch those they really one of a kind and have
capabilities that are unavailable to our competitors and I think put us in a very strong position as we enter this new market space. I can see that it helps certainly with your offerings and being able to offer many types of insurance across one particular person. So I could get my renter's insurance so I can get my pet insurance. They get my car insurance for their house. Add profitability. Daniel. So you're absolutely right. We ISE period 16 months ago just as homeowners and we've since added pat and life and now a car. So we're certainly moving at a fast clip. Profitability in the long run I think we'll benefit tremendously from this. We're entering such a huge market. Ostensibly an almost unlimited market from where we're standing. We're talking massive like 300 billion dollars in the US alone. So for us this creates tremendous
headroom. Not that we were particularly cramped to start with but it really does help with the unit economics because the bundling and the cross selling highway the great unlock of value and profitability come from. So as we launched Patch Insurance for example we suddenly saw 30 percent of our sales coming at zero customer acquisition cost because existing customers were buying pet insurance and increasing their premiums three or four fold. So hundreds of percent increase. So we've seen the same as we launch life and car really is the biggest unlock of all. In a sense we've been operating with one hand tied behind our back. We try selling homeowner's insurance which is the bulk of our business without the ability to bundle coinsurance and you're at a distinct disadvantage. So being able to have these capabilities I think unlocks tremendous value for existing business. And when you look at a one point four million customers they are spending today of a billion dollars on
coinsurance. They've just not had the opportunity to spend it with us. And I think from all perspectives it's got to be good news. SHRIVER Great to have some time with the talking through the business model and indeed showing off your beautiful artwork behind paint flowers lemonade. We thank you. That does it for this edition of Bloomberg Technology. Make sure you tune in tomorrow. Jordache CEO is Jamie.
2021-11-10 21:56
