BI Weekend: New Disney CEO, AMD, PayPal Earnings

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1:32on low-quality stocks driving this short-term rally. Bloomberg Intelligence. With Scarlett Foo and Paul Sweeney. On Bloomberg Radio, YouTube, and Bloomberg Originals. On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll look at why advanced micro-devices suffered its worst stock decline in nearly nine years. Plus, to look at why PayPal shares experienced the biggest intraday drop in more than four years.

2:02But first, we begin with some news at the media and entertainment giant Walt Disney. And that's because Disney announced Josh DeMauro will succeed Bob Iger as CEO. DeMauro, a 28-year veteran of Disney, was chosen from among several internal candidates to lead the company at a critical time as it transitions from traditional TV viewing to the streaming era. Iger will stay on the board and serve as a senior advisor until he retires on December 31st. We were joined by Geetha Ranganathan, Bloomberg Intelligence Analyst on U.S. Media. We first asked Geetha about the succession plan and how it might differ from previous plans.

2:34Yeah, I think it was a very different time. March 2020, everything closes down, including, you know, Disney parks because of the pandemic. So it was kind of unfortunate the timing was all wrong, I would say, for Bob Chapek. And what happened then is, of course, movies were shut down, a big part of Disney's business, movies as well as the parks again. But then what really kind of shot into prominence at that point was the streaming business, a business that Bob Chapek was not really very familiar with. And while he did have some experience in content, obviously it was not enough. And we had a whole bunch of different missteps with the content part of the business, which kind of led to the whole mess that we saw follow.

3:22I think this time we're in a very, very different position. I think at that point, Disney was still kind of trying to figure out what it really was. Was it a TV company? Was it a studio? Was it a theme park company? Or was it really a streaming player? And I think now the pieces have kind of fallen in place. We are on much more steady ground, I would say. You know, they have their clear mandates, whether it is in streaming, whether it's in studio. You know, the clear what has really emerged clearly right now, Scarlett, is that Parks is the main core growth engine of the company. And I think that is reflected in this choice with Josh tomorrow.

3:55So, Geetha, Josh is a 28-year veteran of Disney, running the parks. But, of course, the other big part of the company is its entertainment business. Dana Walden, who runs the big part of that business, great reputation in Hollywood. It's important to keep her at the Walt Disney Company. Are they going to be able to do that? I absolutely think so. So, you know, obviously this was a very clever move by the board to kind of create this new role for Dana Walden, make her the president and the chief creative officer. They've never had this post before, but they specifically created this one for Dana Walden.

4:34So that, I think, really kind of, I think, dispels a lot of fears about what would happen from a creative perspective. You know, last time this was the same problem that, you know, many investors raised when Bob Chapek became CEO. So having her there in the creative role, I think, definitely plays very well with Hollywood, with the creative community and ensures that, you know, Disney will still have a top tier content coming to its streaming platforms for the foreseeable future. So Josh DiMero takes the job on March 18th. That's when the succession is effective. And we talked about how yesterday Disney came out with a forecast that was fairly tepid.

5:12And one way of looking at that is it kind of clears the deck, lets him start off with a clean slate and set expectations and kind of manage it for investors the way that he sees fit. At what point does he own everything that happens to Disney? So actually, a lot of the things that we're seeing right now with the parks has been under Josh tomorrow's watch. Remember, once Bob Chapek was promoted to the CEO position, Josh DeMauro assumed the role of chief of the parks. And so all of the different initiatives that we've seen, you know, whether it's Lightning Lane, whether it's Genie, whether it's the 60 billion dollar expansion, a lot of that has been, you know, Josh DeMauro's doing.

5:56So, yeah, I mean, of course, you know, I think the street is definitely going to give him a few quarters to kind of settle in. But he has pretty much been the architect along with Bob Iger, I'm sure, and the rest of the management team in kind of instituting the strategy and making the parks a prominent part of the portfolio going forward. So very soon, the short answer, Scarlett, is very soon. I think he owns pretty much all of this right away, in fact. Geetha, if I were Josh tomorrow, day one of my tenure as CEO, I would go and I would say, hey, explain to me why we are not spinning out our broadcast and cable networks.

6:32They are businesses that are in a secular decline. They're dragging down our multiple. Let's cut them loose. Do you think that's even an option for the Walt Disney Company? I think it is. I think everybody is considering that right now. I mean, we've just seen what Warner Brothers Discovery has been able to achieve by kind of separating out its studio and streaming from the TV networks business. So I definitely would not rule that out. I'm sure Disney will consider and Josh tomorrow will consider all options once he becomes CEO. What happens to Jimmy Pataro over at ESPN? I mean, does that become part of the spin out as as Paul was talking about it?

7:10Because there's different parts of Disney's media business that are slowing down that are no longer the crown jewels the way they once were, whether you're talking about the network television or whether you're talking about ESPN or whether you're talking about the movie business? Yeah, I think sports is still very core to Disney. I mean, they are. So if you just kind of look at the U.S. sports landscape, ESPN actually owns majority of the marquee U.S. sports, right? Almost about 40 percent of all sports viewing happens on ESPN platforms. So obviously it's still very core to the company. As far as Jimmy Pitaro is concerned, Scarlett, I mean, yes, he was one of the, you know, candidates that they were considering to take on this job.

7:51But I think he himself had many times indicated that he was not really interested in the top spot. I think he kind of carries on business as usual. With ESPN, you know, it's a little bit of a wait and watch what exactly happens with the strategy. It is really instrumental, I think, to their streaming business, because, you know, as they kind of mentioned on their earnings call, you know, a lot of people taking the bundle. The ESPN streaming plus the Disney plus the Hulu. So it is a critical portion of that. So I'm not really sure how exactly a spin out would work. But of course, again, you know, we are in a very, very different time and age.

8:25And everybody is thinking about all possible options when it comes to media. Our thanks to Geetha Ranganathan. She is our U.S. media analyst. We move to some news in the energy space. And this week, the German energy company Siemens Energy announced it will invest a billion dollars in manufacturing capacity in the U.S. over the next two years as power demand surges. The company said most of the funds will be spent on expanding existing sites in North Carolina, Florida, Texas, Alabama, and New York, as well as a new plant in Mississippi. We are joined by Siemens Energy CEO Christian Brough. We first asked Christian what the goal of the Siemens Energy investment is.

8:59First of all, obviously, it's a goal to keep up with the fantastic growth which we see currently in the electricity market. And, you know, gas turbines, great, making sure that the AI transformation can really be fueled with electricity as one of the hottest markets you can see globally at the moment. And we are obviously trying to keep up with our customers and we're trying to bring all this equipment what is needed, gas turbine, transformers and the likes. This means we are expanding a lot of our industrial footprint here. We are hiring people, adding factories to keep up with that. And this is obviously one important step really to create also this energy dominance, what the US is looking for.

9:38You recently met with President Trump. What was the takeaway from your meeting there? How related is that meeting to your announcement of the investments in the U.S.? Well, there was a, let's say, reception in Davos, right, which was a big group meeting. So what for me is important that the Trump administration is very approachable for us. And I have to say I'm very grateful for that. At the moment, my key interactions is really with the secretaries in terms of really understanding, hey, what needs to be done? How do we need looking forward on the opportunities? And this is taken up excellently at the moment.

10:12That is my main interaction also with the Trump administration. Christian, how would you characterize the U.S. energy grid here as you get set to increase your investment here? Yeah, I mean, first of all, what you see, the U.S. market on the grid side is influenced by two things. The one thing is that you have a massive investment wave ongoing just for replacement, refurbishment of existing facilities. This is very much a utility-driven business, which is very active, which sometimes gets overlooked seeing the data center discussion. And at the same time, you obviously have an unprecedented growth in electricity on the data center side, which does require heavy investments into the grid side as well.

10:51And we need to understand also how do we operate all the things. I mean, everybody easily talks about gigawatts of additional electricity. There's not so many sites today in the U.S. which like a one gigawatt type of consumption. This will require grid stabilization, and this is what we are trying to contribute. So what we are doing here is building factories for switchgear, transformers, components which supply to that industry, and obviously also bringing up people who can help to do this overarching design on the grid side. We believe that is, let's say, really a long run, and we will see it for a long time, because electricity grid is an important backbone of the critical infrastructure.

11:32And this is why I feel very comfortable with the investment we're doing, and I'm very happy with the market here. So I want to pick up on where you just left off, bringing in more people to design some of the grid work there. Talk to us about jobs. How many jobs will your initiatives create? What kinds of jobs are they going to be? What level, what kind of education is needed? How much training will there be in order for you to find the right people for those jobs? Yeah, right. I mean, we had today an organization with around 12 ,000 people in the U.S., right? And we're going to add another 1 ,500 on top of that.

12:06And this will be accompanied by a lot of education and training programs. A lot of this will be blue-collar working jobs, also in the factories, making sure that we can produce, and also that we have people going out in the fields and fixing things. So this will go through training academies, which we built up in parallel in this. You know, we have one big new facility coming up in Jackson, Mississippi. which will obviously also will be with one training center. We have a big site in Charlotte, which we also will increase on that. At the same time, building up factories is also then coming with some engineering work on the white color side.

12:45So it will be both. But the big thing, and this is why we went out, is really, hey, this is, I would call it a blue color wave now, really, in terms of really getting educated workers. That is my biggest constraint at the moment also in the market. And it goes down to the construction workers, really people in the factories. And we should never, ever underestimate the need to finally get something done. And that will require more people, more skilled labor. And we will definitely contribute to that and to help to build up that workforce. Our thanks to Siemens Energy CEO Christian Brough. Coming up, a look at why obesity data from drugmaker Pfizer underwhelmed investors.

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14:43This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. We move to some news in the biotech sector. This week, shares of Pfizer fell after the drugmaker revealed limited data from one of its new obesity treatments. It showed people lost up to 12.3 % of their body weight compared to those on a placebo at 28 weeks. And of course, this comes after Pfizer battled to buy weight loss startup MetSera late last year, with no new drug approvals expected this year. And the limited data released means the prospects for MetSera's farthest long drug do remain unclear. For more on this and the latest in the biotech sector, we heard from Sam Fazelli, Bloomberg Intelligence, Director of Research for Global Industries and Senior Pharmaceuticals Analyst.

15:24We began by asking Sam about how investors were impacted by this limited obesity data. Yeah, yeah. So look, they paid$10.1 billion for this. Is it all to do with that or is it people being reminded again that the next three, four years, there's a major headwind from generic drugs coming for some of their key products on the market, iBrands. extendi etc so that's partly the issue and and you know in order to deal with that you need assets and drugs that are going to try and hopefully fill the gap and maybe this is the problem with the data the thing is we've looked at the data as you know we have very deep obesity analysis we've looked at the data and it's not terrible but as i said the other day when rosh reported some numbers I think folks are getting over this percentage here, percentage there.

16:14You can only do the point going forward. You can't, unless you give out somebody like 30, 40 % weight loss, which of course nobody wants. So this is getting to a point where now it comes to the nuance. And unfortunately, we don't have a lot of the nuance that we need to know about this data set. Tolerability. And it is good because it's a once-monthly injection after the first few weeks. So it's well set up. But the market obviously doesn't like it because they're not getting enough information about how good actually it is. Sam, it seems like if you want to be an investor in big cap pharma, you really have to be a stock picker.

16:48I've got stocks like Pfizer and Bristol on a trailing 12-month basis that are down. But I've got stocks like Johnson & Johnson and Eli Lilly and Abbevy. They're all big. And is that just because they've got the right portfolio of drugs and the others don't? Entirely. Entirely about that. What you don't want is looking into the abyss of generic drugs coming for your big earners with no obvious pipeline versus, let's take Johnson & Johnson in this case. They have a phenomenal set of drugs for the multiple myeloma space or other oncology spaces. This is a powerhouse. And, of course, they've also still got the other divisions, medical devices, growing quite nicely.

17:34So and no massive, I mean, there's one that's coming up, a big hole that's coming in terms of generics, but they've still got these things that are growing at phenomenal speed. And one of their one of the drugs, Darzelex, is very close to 20 billion dollars. And that's just one indication in multiple myeloma. So they've done everything right in that case. And that's what the market likes. So in other words, Sam, this is something that can be managed. The fact that Pfizer hasn't managed this well raises a lot of questions here because, I mean, it's not like just one day they woke up and, oh, you know, there's suddenly a lot of competition for some of their bestselling drugs or people are no longer paying up for COVID treatments, COVID vaccines.

18:15In terms of management, do investors need to question whether Pfizer has the right management in place? yeah i mean look this is a tough game right not a game of course but this is a very tough set of issues to deal with creating pipeline takes a lot of effort let's take eli lily for years nobody was paying too much attention to their potential margin expansion that was coming and they were arguing for it etc maybe they were lucky they hit on these obesity drugs look at astrazeneca It took quite a lot of pain for Pascal Soriot to right that ship when he took it. So management's part of it. Then you need to be lucky.

18:57You cannot have just one or the other. And pipeline, you know, we'll see what Pfizer shows us. Over time, they have assets that are in early development. We need to start seeing their fruit. Our thanks to Sam Fizelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analyst. We move to some news in the tech space. This week, advanced micro devices suffered its worst stock decline in almost nine years after its sales forecast underwhelmed investors. It's a sign that AMD is not making the AI inroads that Wall Street had anticipated. Separately, the semiconductor manufacturer's Texas Instruments reached an agreement to buy the U.S.

19:32chip firm Silicon Laboratories for about$7.5 billion. This deepens TI's exposure to several longstanding markets for chips, including the home appliance, power, industrial, and medical device sectors. For more on all of this, guest host John Tucker and I were joined by Kujan Sobhani, Bloomberg Intelligence Senior Semiconductor Analyst. We began by asking Kunjan if investors overreacted or if there is actually something fundamentally wrong with AMD's latest report. There was nothing fundamentally wrong in this report. There were a lot of good things to take away, but it comes down to, you know, when you become an AI darling, you set up really, really high expectations.

20:06and when you take out the China revenue, which was not included in the guidance and the expectations, the beat came out pretty modest, which I guess people didn't like and was not at par against the really high expectations that you have now every quarter from these companies. Like they used to ask in the old westerns, is there room enough for the two of us in this town? Is there room enough for them and NVIDIA? There is right now. I mean, look, the tide is lifting all boats. There is so much demand for accelerator chips that there's room for AMD as a GPU provider. There's even room for other folks like Broadcom and Marvell as an ASIC provider.

20:45So there's plenty of demand right now. Do we like management? Lisa Su, I think, when I just see her interview, she seems super on top of it. Yeah, I mean, like I said, fundamentally, nothing changed. Their CPU story continues to become stronger. Nobody's paying attention to it right now because all the focus is on GPU and competing with NVIDIA. But people are forgetting inherently, if you look at two years back, this was really a CPU company. The GPU storyline remains intact. We didn't expect any fireworks coming into this earnings. We don't expect it until really 4Q of 2026. So the market is aware of this.

21:23We really have to wait until the 4Q 2026. This is when they will be really put to test if they can really execute their first server-level solution or not. So there's nothing changed that we saw should really concern us. And how important is China in all this? I thought the export restrictions were lifted. I mean, what's taking so long? Well, so the export restrictions are different for each chip. So the MI308, which they were able to ship, had already licenses approved prior. So that's a different chip. The newer chips that now is in the news when it comes to NVIDIA is the H200s, and equivalent, it will be the MI325.

22:04Licenses for those have not been granted yet. Even though the White House has said that, yes, these companies can start shipping these products yet, the formal licenses have not been granted. Kujan, some M &A in your space. Texas Instruments has reached an agreement to buy Silicon Laboratories for about$7.5 billion here. What's going on here with TI? Yeah, so just to give some context, this is sort of this size of the deal they have not done in the past. The last time they did a deal like this was buying National for about$6-7 billion in 2011. So this is not their typical nature. So a bit of a surprise.

22:41Strategically, it fits well. their industrial segment which is their largest segment and that's where they want to be focused has a missing piece when it comes to wireless connectivity in iot so silicon lab gives them that portfolio financially however it's a lot more important uh they have reiterated that this does not change their pre-cash flow trajectory this does not change their dividend path and this does not increase the most important thing is the capex so all those things we really like if they're able to execute to that, get the cost synergies, then this will be a really good deal for them.

23:14Also remember, TI has been on a spending spree for the last three to five years, building up a lot of capacity. So this will help bring more loading to their internal factories and bring more manufacturing internal to own TI and help with utilization. Our thanks to Kunjan Sabani, Bloomberg Intelligence Senior Semiconductor Analyst. We move now to some news from fintech company PayPal. This week, PayPal reported quarterly profit and revenue that missed analyst expectations. The company also said HP CEO Enrique Lores will take the top job from Alex Criss, whose turnaround plan failed to meet targets.