Hackers Exploit Microsoft SharePoint as Firm Works to Patch

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1:59Learn more at thehartford.com slash risk mitigation. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Staying in the TMT space, if you will, we're going to talk about checking with Anurag Rani. He's a Bloomberg senior tech analyst for Bloomberg Intelligence. Anurag, you know, Microsoft, as well as anybody, put into context for us this cybersecurity attack. It's been certainly at the top of the news here this morning, and it just kind of, I think, at least to me, it's surprising that a company with the resources and the technology expertise of Microsoft, that they could, in fact, still be subject to this type of risk.

2:55How should we think about it? Yeah, Paul, when it comes to almost all the major tech companies, this is probably the most important and biggest risk for them. And again, whether it's Microsoft or Amazon or Google, this is one of the biggest worries for all of us is you wake up one morning and you see a big outage out there. I mean, almost a year ago, we remember that CrowdStrike problem and what it did to airports and all the other things. Now, but in this particular case, I think it's a lot less problematic than what we saw a year ago. This is primarily based on certain on-premise software. I mean, there is an on-premise version of SharePoint software that they have.

3:35It's only affecting those particular workloads. So it's not as widespread as some of the other areas we have seen. Now, what does this mean for cybersecurity companies? I mean, it's a good thing for them. They are, I mean, to be honest, over the last 15 years that I can remember, they're probably the one area. It doesn't matter what the macro environment is. They continue to grow bigger and bigger. That's because there are so many little nuances that have to be protected. These networks have multiple software from multiple vendors. And a lot of these companies do some unique things, go prevent them, endpoint security, analytics, you name it.

4:12I mean, there is no shortage of, I would say, funding for a lot of those companies. So how do you characterize or how do investors characterize just cyber crime risk for some of the big tech names that, you know, the MAG-7 names or just the big tech names in general? It's something that we don't really talk about too often, do we? No. In fact, as I said, I mean, I've always said that this is probably the biggest risk that faces all of us. Because remember, think about it like AWS takes care of a lot of startups right now. You see a problem with that network, the rest of them go down. Same thing you could say with Google's cloud platform, Microsoft's cloud platform.

4:50This particular incidence is only for the on-premise application. So, you know, in a roundabout way, maybe this helps Microsoft in the long run that those customers say, you know what, I need to move online. I need to move more workloads to the cloud. But in totality, I mean, you look at it from a cyber insurance point of view, insurance companies don't even want to go down that route. I mean, this is one of the biggest hidden risks for all of us, especially as most of our savings are digital and placed not in safe boxes, but in investments somewhere digitally. And Anurag, in the tech space, we also had some IPO news.

5:26You had Figma looking to raise about a billion dollars U.S. IPO. What is Figma? What do they do? What's their market value? Yeah, this is probably one of the more interesting companies that I have come across in a long while. A few years ago, Adobe made a run for them, paid$20 billion to buy them. That deal didn't go through. Adobe ended up paying Figma a billion dollars as for a breakup fee. But now they're going public. It's a very unique software in their market. What they do, nobody else does it so well. They help you design application all the way from ideation to publishing applications, or you could say issuing applications out there for people.

6:06So we own a white boat. You want to discuss this idea with the team. Phenomenal software. It has very high market share. And at this point, to be honest, Adobe had one product that had some overlap with them. But frankly speaking, there isn't a large company out there that's a credible competitor for them. So we think this is going to be an area where we see strong interest. We anticipate sales growth north of 40 percent, both for this year and next year. We think revenue could be$1.6 billion by the end of next year. And, you know, our analysis indicates a post-evaluation somewhere between, you know, 19 and 23 billion dollars or 21 billion at the midpoint.

6:44And this proposed stock symbol for this pending IPO is FIG. Bankers are Morgan Stanley, Goldman Sachs, Allen & Company and J.P. Morgan. So the blue chippers there for that deal. And Anurag, in your software space, we've had a couple of pretty good deals this year. Circle Internet Group, CoreWeave. I mean, do you expect more? I think that, I mean, if you have the capacity to go out in this market and raise capital, this is really good valuations are very nice right now. I mean, I would strongly encourage if there is somebody who's looking at it. But at the same time, you know, there is an issue about do you want to go and see your work being scrutinized?

7:21Public funding is also very good. There is so much private capital out there. So it really depends on what somebody is doing. Last year, we saw an IPO came out service site. And just in the first two months or first two quarters of their coming out as an IPO, they actually thought demand go because people recognize what this company is. I think the same could happen to Figma when, you know, a lot of people don't know what these guys do. And, you know, that recognizes the value of the software or the company just by going public. All right. Very good. Anurag Rana, Senior Technology Analyst, Bloomberg Intelligence.

7:53He's in our Chicago. You were talking a little bit about Microsoft. They got the cyber security issue that it is dealing with. Plus, we got some IPOs in the software space picking back up. It's always a good sign here. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right. Well, earlier this morning, Verizon CEO Hans Vestberg, he talked to us, talked to Bloomberg Shinali Basik about some of the things that the company is doing right now.

8:28They just had their earnings report, but now we want to get the analyst view on that. So for that, we'll bring in John Butler. He's Bloomberg Intelligence Senior Telecom Analyst on these Verizon earnings. So, John, good beat, second quarter revenue, raise the profit outlook. What's making the company so optimistic? So I would characterize, when I look at Verizon, I think of the phrase game of the inches, right? I think the improvements here, quarter in and quarter out, are incrementally better. They're edging towards that acquisition of Frontier, which is really going to change the game for them.

9:07But in the meantime, they put a lot of changes in place in terms of their go-to-market strategy, how they're combating promotions coming from T-Mobile and AT &T. And on the margin, quarter in and quarter out, I just see them doing a better and better job. I think all the actions they've taken are starting to work. And so taking the long view here, I really think Verizon is improving just quarter in and quarter out. And this was another quarter where you could look at it in isolation and say, you know, it was a solid quarter, a little bit mixed on some of the metrics. But I think I'm balanced better than last quarter and last year.

9:55John, what's kind of the positioning of Verizon in the marketplace? Like I've been a longtime Verizon wireless customer since the beginning of cellular service, actually. And I guess I was initially drawn to it because I thought they had the best network. So quality. Is that still the case? Because it seems like T-Mobile's gotten a lot better in quality and AT &T. I don't know. Yeah, you know, Paul, you bring up a good point. I think there's a question mark out there as to whether Verizon still has the best network versus T-Mobile and AT &T. But I think they have a slight edge there in terms of coverage.

10:34And it's interesting. A lot of people ask me about wireless. Who has the best network? Who should I choose? And the one thing that people are always asked about is how's their coverage? I think coverage is very important to people. And I think when you think on that metric, in terms of that metric, Verizon delivers the bars on your smartphone probably more than T-Mobile and AT &T. In terms of download speeds, though, I suspect that T-Mobile probably is gaining the edge here. Now, what about prices? Did Verizon increase their prices? If so, did that help? So we did see all the carriers are increasing prices right now.

11:18As the market matures and new user growth is slowing considerably, considerably. The only way you're going to grow that important service revenue metric is by raising prices. They tend to do it on older plans. Verizon's done it over the past six months, as if you look over the past year, so has AT &T and T-Mobile. That's flowing through and it's helping to boost the service revenue. I think over time, they're adding in those little extras like, you know, device insurance and perks like, you know, added content that you can purchase at a discount through Verizon. And I think all that together is going to continue to provide a lift to service revenue.

12:05It's nothing special. Again, I'm looking forward to that Frontier acquisition where they're going to buy, you know, access to 2 million fiber broadband subscribers and 8 million fiber homes pass because once they get Frontier under the hood, they're going to be able to bundle that wireless service with fiber. And I think that's going to help to really drive renewed subscriber growth. So, John, use of cash here. How do they kind of allocate it between debt reduction? They've got a lot of debt on their balance sheet versus funding that big, juicy 6 % plus dividend yield. So they're doing both, Paul.

12:49I think free cash flow is going to get a lift from H.R.1, the new tax legislation. It's also a very cash flow rich business. As we exit the year this year, they'll have most of their sell sites upgraded with the new C-band, mid-band spectrum, which, again, is improving network speeds and enhancing their coverage. So that whole project is going to begin to wind down a bit as we get to year end. So they'll be able to sort of maintain spending without having to increase it, which is constructive to free cash flow growth. All right, John, thanks so much. We appreciate it. As always, John Butler, Senior Telecom Analyst for Bloomberg Intelligence.

13:33When your options are limited, so are your opportunities. At CBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

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15:27Whether you're gearing up for fall events or simply planning ahead for the season, 4imprint can help your brand show up, stay useful, and make connections that last. Explore the possibilities at 4imprint.com. 4imprint. 4certain. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's go back to the car business. And we talk about a name we don't talk, I don't think, enough about or as much as maybe we could.

16:03And that is Stellantis. Think about the old Chrysler with Fiat and all that kind of stuff. I'm not sure what all the brands are there, but they took a$2.7 billion charge here. Steve Mann, our global autos and industrials research analyst for Bloomberg Intelligence, he joins us here. Steve, what's going on with our friends at Stellantis? Yeah, so they reported the preliminary first half numbers today. They booked a loss and a charge of$3.3 billion. And a lot of that is, you know, canceling the fuel cell R &D business. They're canceling like an EV for Maserati, taking some other charges on recalls and tariffs.

16:46So overall, at the end of the day, I think if you listen to the call, there's really no new bad news, which is good news for the company. I don't think it can get any worse. so then that's why the stocks actually reacting positively at the moment Steve what about the president's efforts to dial back the support for EVs is that affecting them as well you know they are revisiting the Evie business nuts dialing back not so much in Europe but revisiting it definitely in North America and one thing that it's it's really bad for the quarter for them was really their North American business. Their North American business drives most of the profit.

17:30Shipments were down 25 % in the first half year on year. And a lot of that is controllable. One of the things, a couple of things that they are doing to kind of arrest that decline is not only cutting back on production, but they're relaunching a couple of popular models that they've discontinued. One of them is the Jeep Cherokee. It's going to come back later this year and more importantly to stop market share loss on their Ram trucks is they're going to reintroduce the V8 so you know they can you know they delayed they didn't really say cancel but to delay the EV product for the Ram trucks but now into reintroducing the the V8 which is you know the biggest engines you can get for a gasoline engine you can get on a on a truck.

18:19So where is Stellantis in the world of big auto? How do you how do they position themselves? I think about Ford, GM, Volkswagen, the Chinese players. I'm just not sure where to put Stellantis these days. Yeah, I think, I mean, they do have an important role to play in the auto market. They're really strong in Europe, particularly in their, what they call the BNC segment, which is the hatchback, the compact, subcompact segment. They also have really high market share in their commercial vehicle business. This is like their Ram Transit van that you see a lot of contractors use. They have 30 % market share in Europe.

19:02And again, Ram Truck is one of the most popular pickup trucks in the U.S. market. Unfortunately, Ford and GM has taken share from them because they didn't have the V8. when they you know talked about EVs and more fuel-efficient trucks but you know the US market is quite different on commercial users do love the power the torque so they're really interesting reintroducing the VA just to try to bring gain more market share back and they have a new CEO Antonio Fallosa he's in office for roughly a month so he's just getting there what are some of the top items on his agenda has he talked about it No, but we'll hear more about it on July 29th.

19:48So today's call was just a preliminary call on first half. We're going to hear from the new CEO on the 29th. And I think a lot of the questions still in the air is, you know, what is the strategic direction for the company in terms of EVs? How are they going to manage the tariffs, which is still a big unknown because, you know, The negotiation is still ongoing with Europe. And then, you know, what are they going to do with some of the kind of slower performing brands like Maserati, which is really draining a lot of their cash? All right, Steve, thanks so much. Appreciate that. Global Autos Research Annals for Bloomberg Intelligence.

20:31You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, Lisa Mateo, Paul Sweeney, live here in our Bloomberg Interactive Broker Studio, streaming live on YouTube as well. I consider myself a pizza aficionado. So by definition, I'm not really a Domino's person because I live in a world where there's great local pizza. But for a lot of the world, that's not the case. And so they depend on the Domino's world.

21:05And they came out and you saw that in the numbers today. Some pretty good numbers. Let's break it down with Michael Halen, Senior Restaurant and Food Service Analyst for Bloomberg Intelligence. So some pretty good news out of Domino's. Mike, what did you take away? Yeah, listen, they have some nice tailwinds this year. Stuffed Grouse Pizza has done really well. It's really driven some strong same-store sales here in the first half. You know, the industry's about flat in the U.S., and, you know, they drove almost a 3.5 % comp here in the second quarter. So outperforming the market by a pretty significant margin.

21:41They also rolled out DoorDash to all their stores in the second quarter. And so they're going to start ramping up the marketing there. And that should give a nice boost to the shares over the next 12 months or so and maybe beyond. And so, yeah, for those two reasons, you know, we expect them to continue to outpace their QSR pizza and QSR burger competitors throughout the year end. What about their loyalty programs? I know a lot of analysts were saying, you know what, this is going to be a big, big boost for them. Did it help out? Yeah, that's been, that was the other thing they cited. And so, you know, they rely heavily on households making, you know,$50 ,000,$60 ,000 a year and below.

22:25And so, you know, as everyone knows, that's been a very weak segment of the restaurant industry for the last few years due to all the inflation, right? And so to bring people back in, they started lowering the redemption, the number of points needed to make redemptions on the loyalty program. And it's been successfully bringing in more carryout consumers, which are typically lower income. Right. And so by bringing those consumers in, you know, it's definitely given a boost to their traffic over the last three quarters or so. So what's Domino's and some of the other restaurant chains that you cover, Mike, what are they saying about tariffs and how that might impact their costs and how much of their costs will they take in margin versus pass along to consumers?

23:12Is there a consensus building? It depends on the chain. But, you know, luckily restaurants source a large majority of their product in the country in which they're operating. Right. So Domino's operates in over 80 markets and all of their product, you know, all of their countries largely source everything domestically. Right. And so restaurants are in a good space. You know, the restaurants companies, the stocks got hammered back in April. I think that was largely a case of the baby being thrown out with the bathwater because restaurants have very low exposure to tariffs. And I think we've seen that in the rebound since April.

23:54Some of the restaurant names we cover, two ones that we like, Shake Shack and Cracker Barrel, they rallied 100 % over the last couple months. And I think they're in a good place because, you know, if people do recognize some price increases at retail, at the mall, stuff like that, whatever it is, 15, 20 percent, they're not going to see those same increases in restaurants and may, you know, look at it as a better value. So people are still dining out as much as they used to because I know I consider myself thrifty. So I cook the entire week and then we pick one night where we go out to eat. It's a Friday, you know, because mama don't cook on Fridays.

24:31So do you see that kind of a change in the habits of the people who are going to eat out? Well, we've seen that. There's no doubt, especially due to all the inflation. We've seen traffic decline now for several years in a row. But restaurants have been able to, you know, the ones that are doing well, have been able to more than offset that with price increases. And obviously the best performers of the bunch are absolutely able to drive traffic. And that's really about providing a very good experience. Right now, people are very discerning about where they're going to spend their restaurant dollars.

25:07When they go out, they want to make sure they're not going to have a bad experience. And so they're continuing to go to places, you know, think Texas Roadhouse is one that really stands out. They're going to a place where they know they can get good value on the plate for what they pay, a very consistent experience, right? And because of that, you're seeing a wider divergence between the winners and losers in the restaurant space. Mike, how about labor? President Trump has effectively shut the southern border. Have your companies who typically who rely to some degree on that labor force, are they seeing it yet?

25:44Yeah, you know, everybody's logged on to E-Verify. And most of our chains, you know, are making sure that their employees have papers and are operating legally. It's more of an impact to, I would say, the independent restaurants in the country. But then, you know, what happens is that ends up being a price competition. And so it drives up prices for labor. And we're seeing another year of about 4 % to 5 % wage rate inflation in the restaurant industry this year. And are we changing how people are changing how they eat, right? So in the last 30 seconds or so, GLP-1s, are restaurants cutting back on those portions, making things smaller, you know, less on your plate?

26:27Well, they are, but mainly because of inflation. Oh, there you go. You know, GLP-1s, you know, over time, you know, we expect that to be the biggest way to combat that, is to decrease the portion sizes and to make sure you have some healthy options on the menu. Michael Halen, thanks. We always appreciate chatting with you, getting the lay of the land in the restaurant business. Again, Domino's put out some good numbers here today, so good for them. Michael Halen, Senior Restaurant and Food Service Analyst for Bloomberg Intelligence. He's based down there in our Princeton office. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts.