Daybreak Holiday: Apple's New CEO, Oracle Earnings, Paramount Deal

0:00Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

0:42Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person. How you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com. Dog grooming genius here. Most people see a busy dog salon, but I see operational excellence.

1:18Thanks to Genius from Global Payments. Scheduling, personalized. Checkouts, instant. Absolutely genius. From game day crowds to every groomer in this shop, Genius keeps everything flowing seamlessly. Flawless execution. Big league reliability for any business. That's Genius.

1:44Hello, everybody. Thank you so much for joining us for this special edition of Bloomberg Daybreak. U.S. markets are closed for the Labor Day holiday. I'm Nathan Hager. Coming up this hour, we'll update you on where a mega media merger stands on the legal front. Bloomberg Intelligence Senior Litigation Analyst Jennifer Rhee will join us on Paramount Skydance's$110 billion takeover of Warner Brothers Discovery. Plus, big tech in focus this week. Bloomberg's Brody Ford will join us from San Francisco to get a set for Oracle's earnings on Wednesday. Also Wednesday, Apple holds its biggest product launch of the year, helping to kick off the tenure of Apple's first new CEO in 15 years, John Ternus.

2:26And for more on this, we are pleased to welcome Bloomberg's top reporter on the Apple and consumer tech beat, Mark Gurman, is with us from Los Angeles. Thanks so much for being here, Mark. I hear so much about a foldable phone coming, a foldable phone coming in Cupertino this week. Is that all we're expecting? Hello. It's not all we're expecting, but that is going to be the centerpiece of Apple's launch on Wednesday. Samsung, some of the Chinese companies have been offering foldable phones for many years at this point. But now Apple's getting in the game, which is going to make it a lot more mainstream.

2:59and their differentiator there is that their version is a bit shorter and wider, which means it has an aspect ratio that is more interesting and it's a better viewing experience for video and for book reading and for gaming. And so this should be a little bit of an interesting concept. When closed, it's about the size of a passport. And when opened, it's about the size of a small iPad. So that's going to be pretty interesting, but it's also going to be fairly expensive coming in at over$2 ,000. Wow. So how much are we expecting this to resonate with consumers at a price point like that? I don't think the first generation of this product is going to be a mainstream device by any means.

3:42I think this is going to be a product bought by early adopters. It's going to be a product bought by people coming over from the Android ecosystem. And it's going to be a product bought by the people at the very high end of the Apple ecosystem, right? the people who are going to always buy the top-end version of the Apple products, the most expensive Apple products. Now, don't get me wrong. Apple has tried this early adopter product strategy before. Remember the Apple Vision Pro launch two years ago. That was$3 ,500. That was very expensive but also very heavy and very cumbersome. That product really didn't resonate.

4:17But I think this foldable will do much better than that. How so? Why could this one do better than, as you say, the Vision Pro that kind of went by the wayside, I think? Well, believe it or not, foldable phones are more mainstream than headsets, right? Like price aside, a headset is something you got to put on your head. A headset is something that you got to boot up. Limited content offerings, limited applications, limited use cases, two hours of battery life. And, of course, also very heavy. But a phone is a phone. and there's going to be some interesting capabilities there. And also that's a big price difference too,$1 ,500 in between.

4:54You know, this is also coming after Apple raised prices on some of its existing lineup, including Macs and iPads, to come out with a new product at an even higher price point like that. What does that do for consumer sentiment potentially? Apple rolled out a recent program called Apple Upgrade where now you could lease your phone, lease your iPad, lease your Mac, lease your watch. And so you're paying a monthly fee that's less than an installment and sort of like leasing a car. And at the end of your lease term, you could sign up for a new phone or you can pay off the balance and keep the current phone.

5:27But the reality is, is that most people don't pay full prices for their phones, right? A lot of people are using training programs, financing, installments. And so, yeah, there'll be the sticker shock of$2 ,000 plus. But when reality comes down to it, you're not paying that. You're paying something month to month on your phone bill, most likely. Is that expected to be a significant revenue driver for Apple going forward, the upgrade strategy? I think so. I think over time, a lot of people, particularly in the U.S., will move from paying full price sticker for Apple products at the Apple online store and Apple retail stores and do that leasing program.

6:08It's pretty compelling and it's pretty easy to use. It's really interesting as well to see a major product launch like this coming after years where the iPhone hasn't really upgraded significantly over its last several cycles. And to have John Ternus come in just over a week after taking over as CEO to come out and be the face of a product launch like this. How much is riding on John Ternus when it comes to getting this product launch right? Well, it's no coincidence. Typically, when Apple does these types of big transitions, they're doing it at the very end of the year or at the very beginning of the year.

6:45Now, they're doing this one on September 1st, completely intentionally timed for Ternus to be the one to introduce this product. They want to give him these air pockets, right, to have these major products at the beginning of his tenure. Now, don't get me wrong. All these devices were led by Ternus in the development process, but it was still Tim Cook's Apple when this was being developed. And Tim Cook was a big proponent of doing a foldable iPhone, doing more smart home devices, doing more in the TV space. Ternus led the development, and he's going to be the one to introduce it. But it's going to be a while until we see what are the new types of products developed entirely under Ternus' watch.

7:24Are we expecting then that Ternus is going to be spearheading a lot more new product for Apple, given his background as the hardware chief in Cupertino for so long? Let's be honest. Ternus has been there the last 25 years, and he was the hardware chief for the last five, six years. And so he has been there, and I'm not sure there's been anything under his watch that he was unable to do with Cook as CEO, right? So I don't think anything is going to change in terms of being wholly new immediately. It's going to be a while until we really see the impact of Ternus as CEO. Speaking with Mark Gurman, who covers Apple for Bloomberg News, getting us ready for the next product launch, probably one of the biggest events for Apple coming up later this week with the release of the expected foldable iPhone.

8:16And, of course, the first big event for John Ternus as CEO. How much of a change are we expecting when it comes to the direction of Apple with Ternus at the helm and Tim Cook still in the company as an executive chairman? I don't think anything's going to change for the next two or three years. I really don't. Anything of large significance. I think there's going to be a lot of continuity there. I mean, if you look at the pay packages, Ternus and Cook are basically getting paid the same. It almost feels like a co-CEO situation, right? So I honestly don't think there's going to be a ton of changes imminently.

8:53I really don't. And when it comes to the type of focus that Ternus is going to have as CEO, given his hardware background, not necessarily having the same kinds of focus that Cook had in the past when it comes to services and dealing with government officials in particular, how do you see Ternus sort of navigating that? Well, during Tim Cook's tenure, he didn't get involved in product development pretty much anything close to anything other than a demo. Here's what I expect from Ternus. Ternus is not going to touch much on the procurement side, on the operational side, potentially on the government affairs side.

9:30He's going to be focused on product development. So it's essentially the opposites. But the through line here is that they both are focusing on the things that they know best and where they can make the biggest contributions to the company. And so Ternus' place to make the most contributions is on product development. It's on engineering. Tim Cook's biggest place to make an impact was on operations, was on government relations, was on supply chain, was on procurement. And so they both have picked their spots. And Apple did super well with Cook picking the right spots. And I anticipate Apple to continue to do super well with Ternus picking his spots correctly.

10:04How do you see Ternus picking his spots when it comes to artificial intelligence? We haven't even touched on that aspect of the business here. Are we expecting much further clarity on how Apple is integrating AI into its product at this event this week? So the AI push for Apple this fall will be in the smart home. They're going to launch a new smart home device, almost like an Amazon Alexa, their Echo Show, so a speaker with a display. and this is going to have deep AI integration, deep Siri integration, being able to control your home, being able to give you access to your personal content using AI-based facial recognition so when a person walks up to it, it recognizes who they are and it can tailor the content specific to them.

10:47All the new Apple devices are going to have Siri AI and so that is going to be the through line there for Apple's product rollouts for this year, next and beyond. But in terms of major blockbuster new chat GPT, competition, something to really go head to head with Claude. None of that is coming anytime soon. How do you see Siri AI performing? Does it stack up to other chatbots effectively now after all this time where we've talked about Apple trying to or needing to play catch up? Siri from the last 15 years or so, it didn't even play in the same universe as ChatGPT or Claude or Gemini, right?

11:27Siri AI enters that universe. It has chatbot-like functionality. You have LLMs, you have similar underpinnings to Google Gemini and their offerings there. But it's nowhere near as effective. It's nowhere near as fast. It's nowhere near as capable. And I guess one good comparison, a very simplified comparison, it's like you've got iMovie, right? The basic movie editing suite on Apple products. And then you've got Final Cut Pro and ChatGPT, Cloud, or like Final Cut Pro and Siri AI is like iMovie. And before Siri AI, Apple didn't even have an iMovie in the AI space. When it comes to Apple's stock performance, there's been a lot of comparison to the company to, you know, others in the Mag 7 and, you know, whether Apple's focus is different from some of those when it comes to AI.

12:18Is AI integration going to be important for investors going forward when it comes to this stock continuing to rally the way it had in the Tim Cook era? I think we'll have to see, right? There was a point where any AI related news over the last two years would move the stock prices of any of these companies in the Mag7 to a very significant degree. When Anthropic and OpenAI IPO, right, we will see if that will have the same impact, right? Like if there's AI news related to some of these other companies, will it really move the needle as much? And so I think only time will tell. It's possible we're in a bubble.

12:55We'll know soon, right? The IPOs of OpenAI and Anthropic are going to tell us a lot. Well, how much pressure do you think John Ternus is under coming in as CEO after the spectacular run we saw from Tim Cook over the last 15 years, almost 2300 percent gain for Apple stock in his tenure? I don't think he's under much pressure, I'll be honest with you. I mean, Tim Cook is still there. He's still intimately involved. The pressure is going to really be on Ternus when Tim Cook actually takes a step back, but that has not happened. And so let's have this conversation in three, four years, see where we're at and if the pressure's on.

13:33But he has been handed an amazing product roadmap. The next three, four years of product rollouts are gonna be chock full. More new products in the next three years than we've seen over the last 15 years. And so it's an amazing time for him to be walking into the space. It's a ready-made situation for him. Do you see the return of one more thing when Ternus makes the stage this week? Ooh, that's a good question. And I'm not so sure about that. He's got to remake Apple in his own image. All right. Very good. Well, we'll be looking forward to Ternus taking that stage in Cupertino, California for the first time as CEO of Apple.

14:11Thanks for this, Mark. Really great to have you on with us. That's Mark Gurman of Bloomberg News. And stay with us for complete coverage of that iPhone launch and Ternus' debut on stage coming up this Wednesday. Up next, it hasn't been a good year for Oracle shareholders. Will this week's earnings turn things around for that tech company? That's straight ahead on this special Labor Day edition of Bloomberg Daybreak. It's 20 minutes past the hour. I'm Nathan Hager. This is Bloomberg.

14:54and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans. You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale.

15:32To stay ahead, you need the tools that give you a competitive advantage built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move it on match speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win.

16:08That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

16:29The world is transforming faster than ever, and standing still isn't an option. At Oppenheimer, we're working at the forefront of the innovation economy to invest where progress begins, finding opportunities that build and protect wealth for individuals and institutions that want a seat at the edge of tomorrow. Put the power of Oppenheimer thinking to work for you. Wealth management, capital markets, investment banking.

16:59Welcome back to this special edition of Bloomberg Daybreak. I'm Nathan Hager. U.S. markets are closed on this Labor Day holiday. Well, it has certainly been a bumpy ride for Oracle investors after the stock hit an all-time high just over a year ago. It's lost more than half its value since then. So this week's going to be one to watch as Oracle reports earnings Wednesday. For more on what to expect, we're pleased to welcome Bloomberg News reporter Brody Ford getting ready for those results from San Francisco. Brody, what can we expect? Hello. Hey, thank you for having me. Oracle is one of the most interesting stories in tech right now because they levered a super profitable traditional software business to go all in on AI data centers.

17:46And because of that, their stock is trading as a bit of a barometer for how the market's feeling about the whole AI data center, you know, neocloud bet. And as you said, they shot up incredibly late last year because of this huge open AI contract. Then in the following months, the market got quite nervous because they said, wait a second, how long is this really going to take to come to fruition? How much money is it going to cost? And so Oracle results are really watched as a kind of metric of that progress. How quick are the data centers coming online? What's the demand look like? How much are you spending?

18:27A lot on Wall Street seem to think that the negativity toward Oracle may have hit its peak. We've seen a couple of pretty favorable analyst reports come out over the last week or so saying that there is probably more potential than downside, but it's been a very volatile company over the last couple of months, and it's always going to be an interesting one to watch earnings of. Well, what's the potential? What is the heft behind some of the bullish sentiment around the stock heading into this print? The bull case is that there's a lot of bad news already priced in here. We've seen a lot of reports of delays at data centers, of the financing taking more money than expected, of banks being uncertain about lending to the data centers about open ai losing competitive ground so pretty much all of the kind of negative headlines that could come out that could dent this stock kind of already have right and so if they come out and say the sites are progressing as we hoped we're starting to see some revenue ramp we're turning on these servers handing them over to open ai and our our sales are going up as a result or maybe that you know we aren't going to need to pull out more money our debt picture is looking good.

19:50These are the kind of things we could hear on the call that might help flip the sentiment around on Oracle. On the other side of the coin, I mean, we've seen in the past, a lot of stocks get hammered if they raise their capital expenditure guidance more than Wall Street analysts might like. What's the possibility of that happening? Yeah, it's all about that CapEx. And it seems like for every hyperscaler, every data center developer, it's been kind of up and to the right. Every time you think that you've gotten a grasp around how much these data centers are going to cost, it just seems to escalate further.

20:31And so Oracle has tried to do some kind of interesting strategies to avoid that cash crunch. For example, they're having some of their customers try to pay them up front for some of the components so that the CapEx isn't quite so severe. But we have to remember that Oracle is the first of the hyperscalers to go free cash flow negative. This happened a couple of quarters ago, and it was really this kind of landmark moment where one of the world's greatest profit machines went free cash flow negative and said that we're going to really invest heavily in this technology. And at that time, everybody thought Larry Ellison was crazy.

21:10There was a lot of negativity out there. But what's happened since then? We've seen Google do that. We've seen Amazon do that. And so this investment cycle in hopes of a future AI payoff, it looks a little less crazy today than it maybe did six months ago. So that said, I mean, even in the last reporting cycle, we saw Oracle guide for about 70 billion in CapEx in the next fiscal year, guiding for billions in debt, potentially to finance all that spending as well. If we see those numbers move up even further, I mean, how could investors react to that? It's a good point, and it really depends what the trajectory is on the revenue realization, because these data centers, they take a while to come online, right?

21:59From the time you ink a contract with a customer, it might take you two years to get that data center built and get the servers put in there. And so probably even more than the financing, it comes down to how quickly do they come online? How quickly do you start getting revenue from that? We have to remember that one of the biggest AI contracts out there, maybe the largest cloud contract in history, is between Oracle and OpenAI. OpenAI committed about$300 billion to Oracle over about five big data centers. One of them is starting to come online. That's in West Texas and Abilene. There's four other big sites that are closely watched as kind of barometers of this hyperscale development.

22:47all over the U.S. So any updates on those, how quickly they come online will be very closely watched. One in New Mexico in particular has been in the news a lot because it's received a lot of local backlash. As we know, data centers have become this very politically toxic thing. And the question is, does that actually delay development for any of these centers? Speaking with Brody Ford, a reporter for Bloomberg News, getting a set for Oracle earnings due out on Wednesday. Looking ahead to these results, as you know, Brody, there's so much competition now in the cloud space. You've got players like Oracle and NeoClouds as well.

23:32When you talk about Oracle sort of being a harbinger of AI sentiment, how does Oracle stack up to so many of the other players in this space? Something interesting about Oracle is that they got a lot of their big data center projects moving a little sooner than some of the other neoclouds. And so I'd say they have an advantage there. But it's right now we're in this moment where demand looks insatiable. All you can hear from every neocloud, whether it's, you know, N-Scale or CoreWeave. I mean, there's a whole bunch of alphabet soup companies that it's impossible to keep track of. All you hear from them is that demand is insatiable, that customers are willing to sign super expensive short duration contracts because the AI labs are just so in need of computing power.

24:22As long as that continues, things look very good for the neoclouds. Still, when you talk to people in the industry, most agree that this can't continue forever. There's going to be a moment where the AI labs say, all right, maybe we still need more compute, but we're not so underwater. Demand isn't so insatiable. Most don't think that's coming tomorrow or the next day, but at some point it will come and some are going to end up getting caught and looking kind of at risk, right? So it's all about the demand picture. Right now, it looks good. All of the reads we've gotten from Oracle competitors, other neoclouds have been pretty positive, but it's very closely watched.

25:10Certainly, we've been hearing from a lot of these companies talking about massive backlogs in AI orders. How do we expect Oracle to answer some of the questions that are certain to come up in the call when it comes to managing the backlog? One thing that's interesting on Oracle that often gets forgotten is their massive traditional software business. The tool that built the house is the Oracle database, and they also have a suite of applications, whether it's human resource management or sales management. And a lot of those tools have gotten caught up in this whole SaaS apocalypse narrative, right?

25:45A lot of the stock weakness through this year is probably due to that because a lot of people were worried that AI makes it easier to replace traditional software. And if Oracle is able to show that, hey, that isn't happening, we're holding on to our applications business, it's helping us print free cash flow. Maybe we're even upselling a bit with our AI in the apps. It's a bit of a forgotten piece of the Oracle story, but it's one that could give a lot of comfort to investors and help the stock out if they show they're not getting eaten by AI. And generally, the sentiment on application software has improved quite a bit in the last month or two.

26:24I mean, I think a lot of us remember early this year, if Anthropic, they would announce a plug-in for a tech company, a plug-in for a software function, And the company that makes the leading provider there would lose, you know, 10, 20 percent of their stock in a single day. Things have improved quite a bit since then for software companies. Now, you mentioned as well some of the consumer backlash that we're starting to see from artificial intelligence, nimbyism around data centers, that sort of thing. Could that be a weight on Oracle stock at a time when, as we've been saying, Oracle is trying to recover from losing half its value since last year?