Palo Alto Networks, CyberArk Reach $25B Deal 

24:24But in a recent memo to employees, Dario, the CEO of Anthropic, indicated that he may be a little more open to that Middle East money than he had been in the past. The quote in your story from Dario in that memo, unfortunately, I think no bad person should ever benefit from our success. It's a pretty difficult principle to run a business on. I mean, almost biting the ham that is potentially going to feed in a memo to staff. But clearly, Qatar so wants in and you have to take the money if you're going to expand in terms of infrastructure, right? Right. And we'll see if they actually end up. I mean, maybe he will.

24:57Daria will change his mind if he's able to get some of these Silicon Valley VCs to line up and invest, say, a billion dollars in the round. The challenge is he needs five billion dollars for this financing. And for the most part, the venture capital firms in Silicon Valley, they're not investing$1 billion in a round like this. Unless you're iconic. Exactly, unless you're iconic, which is a very, very large fund and known for managing the wealth of people like Zuckerberg and Jack Dorsey. But I think by and large, there's not really a way forward for Anthropic without raising money from some of these Middle East funds.

25:29We just showed on the screen OpenAI, XAI and Anthropic. We've reported recently on all of them. What does this landscape look like right now for the model makers and raising some cash. I mean, it's an incredible moment. OpenAI valued at over$240 billion, Anthropic$170 billion, XAI in talks for$200 billion. I've never seen anything like this before, and I think there's nowhere to go but up for the time being. We'll see. Right. Bloomberg's Kate Clark and the team just smashing it on staying on top of rounds that we still think are yet to close.

26:06welcome back to bloomberg tech we have a lot on our plate when it comes to the public markets today and look we managed to drive higher even in the face of the anxiety of what the fed will or will not do later today and indeed what earnings will or will not show as we get towards meta and of course microsoft but there's some others on deck as well flinging on because i want to show that actually one company is doing particularly well after its earnings ea fc sports There's a good trend there in line. We're also seeing Battlefield 6, a lot of anticipation for that game. We're up 6.4%, best day since February for EA.

26:36I'm looking at Arm Holdings flat as a pancake at the moment, as we anticipate whether it can meet those 12 % revenue growth anticipation. And also remember, this is a company that trades above the 12-month price target on average from analysts. So will they manage to vindicate some of the run-up in their shares? I'm looking at Qualcomm, no run-up in their shares. They've been lower throughout the year. They're down again 1.24%. Ed, a lot of this about concerns of their exposure to iPhones, to China, and notably, of course, to the auto sector too. Yeah, Arm and Qualcomm posting earnings at the same time is not that unusual, but it keeps one man in the Bloomberg newsroom very busy, and that man is Ian King, who leads our semiconductor coverage.

27:14You know, one a chip maker, one a chip design software maker, but some stuff is analogous. I think we'll start with Qualcomm. You know, they want to tell a story where they're diversifying away from smartphone to automotive other areas. But we will be very zeroed in on the health of the smartphone market. Yeah, I mean, that's been the tale under the CEO, Cristiano Ormond, who I believe you're going to be speaking to tomorrow. He certainly made progress in things like auto. He certainly made progress in things like PCs. And that's great. But unfortunately, he's still beholden massively to the smartphone market.

27:49and nobody is excited about the smartphone market anymore, at least in terms of growth. And that's what we're up against this quarter where we might see some tariffs have it weighing upon that. I mean, it is interesting that the IoT space is where they've been trying to focus. So, too, is a diversification into autos. And Arm, as well, the design company, has been trying to diversify. Is that going to have paid off? Yeah, it's a very similar story in that, again, they're trying to get into the data center. They're trying to be part of this massive AI infrastructure build-out. But on a sort of, hey, what have you done this quarter basis, in terms of where their revenue is coming in, it's like, well, what's going on in the smartphone market?

28:32How many units shipped? And so we've got these kind of dual cross-currents for both companies going on. And unfortunately, at the moment, there's a considerable concern that the smartphone market just isn't that great a place to be. Between the two companies, Arm and its relationship with Qualcomm, there is some tension, some beef, as the kids would say. Why and what's going on? Yeah, I mean, there's a legal case which is dragging on. Qualcomm already won one round of it. We're looking at maybe we're going to appeal that. Lots of tension going on there. But basically because Arm is trying to essentially become more of a chip maker, more like Qualcomm.

29:12Qualcomm acquired, made an acquisition of another licensee of ARM technology. So there's this tangled dispute. But fundamentally, it's because these two companies are essentially becoming more competitors than partners than they were in the past. The kids don't say beef anymore, according to Bloomberg Tech producer Marguerite Gallerini. But we will still be watching out for something. Bloomberg's Ian King, thank you very much. I want to stay on Semiconductors and bring in Beth Kindig, lead tech analyst at IO Fund. And I'll start with Qualcomm, I think. I always look at the earnings print and the commentary and then try and get a bigger picture on the smartphone market.

29:47Sometimes Christiane Armand can say, here's what we see around the world in our key end market. What will you be looking for, Beth? Great to see you, Ed. There's many reports tonight. And when I think of Qualcomm, very briefly, what I would say is being hung up in that mobile market. This is not the biggest growth market for AI right now. You can see that evidence many places, whether it's Apple, Qualcomm, pick anywhere really in the mobile stack. For me, Qualcomm is more of an automotive story. I would look more closely at Qualcomm toward the second half of this decade. So your 2028, your 2029, your 2030, especially as AI moves more toward the edge.

30:33And when you see AI move more towards the edge, Qualcomm would become more interesting at that time. More interesting in the longer term. In the near term, talk to me about the valuation of Arm, because it has basically risen above where most analysts think it should be currently priced at. Yeah, you know, that's a great point. The one thing about Arm is this valuation for me is not justified. The royalty rates, they've doubled with V9, the architecture V9. but ultimately why would I pay more on the sales valuation for Arm than I would NVIDIA, Broadcom, these massive design companies that are taking market share versus a royalty rate somewhere in the 4 % range.

31:18To me it just makes much more sense to participate directly and we've already seen that during the mobile era. Would you have rather owned Arm? It was a private company but would you have rather owned Arm or Apple? Apple of course and I think something very similar going on with AI. Okay, let's talk about the here and now in what's happening in AI and what we're about to hear after the bell as well, because I know you have a very keen focus on the Metra and the Microsoft story as well. Look, are these companies going to vindicate the amount that they are currently spending on their underlying infrastructure?

31:51When I look at these companies, I think Microsoft is the one putting forward, you know, putting its best foot forward. This company, the last time it gave us a number, it was$13 billion on Azure with a 175 % growth rate. Sometime in 2026, I wouldn't be surprised if Azure reaches$40 billion contribution from AI. That is a massive number. And then keep in mind, it's not just the size of that number for Microsoft. It's the rapid ascent in reaching that number. And that piece, I think, really does separate Microsoft as the enterprise AI juggernaut. Beth, I really appreciate that explanation because what Microsoft does right, it says here is a percentage point growth figure for Azure and here is a points contribution specifically from AI.

32:40It's a different way of communicating than, say, Alphabet does or Meta does. But is it enough for an investor like you to say, I understand where all this investment has gone, what's coming out the other side? When we are talking about 40 billion potentially in 2026, I would say, yes, we are reaching a scale that is very meaningful, reached it very quickly. And again, it is that contrast that you pointed out, Ed, which is that many of the peers are not discussing specifics in terms of dollar or growth rate from AI. And it is that contrast where Microsoft stands apart. I'm going to ask you something which might be a little unfair.

33:23But if we put Meta and Microsoft as direct competitors in an AI race, and let's just throw open AI in there as well and Anthropic, how would you rank them? You know, Meta has been putting out a lot even this morning about their vision for superintelligence. But where would you rank the competencies and leadership in the marketplace? On the public markets, I have to go with Microsoft because of the real revenue that is there. Meta is my number two out of those bigger tech companies. So Amazon, Alphabet, they would rank much lower. I don't like Meta's valuation. This valuation is at a historic high.

34:02Meta has participated in very explosive trends such as mobile and social media. I can't justify Meta's valuation either right now. Meta lower, though, is easily my number two, second to Microsoft. And then let's look a little further afield, if we may. So Microsoft meta tonight, Apple and Amazon tomorrow. Which of the evenings are you most excited about? I will be bold and say I'm not interested in Apple or Amazon at this time as an AI investor. I want to see more from these companies. AWS needs to get up off the floor a little bit here and start to accelerate. Apple, similar to Qualcomm, you know, they are the smartphone market.

34:42They are the edge AI. There will be a moment when that will lead. It's not right now. Beth Kindig, not excited about the calendar of the 48 hours to come. We are excited to have Beth Kindig, lead tech analyst at IO Fund, back on the show. Thank you very much. Caroline, you've got some news. I do. It's time now for Talking Tech Ed. And first up, Tesla, well, it's agreed to buy$4.3 billion worth of U.S.-built batteries from LG Energy Solution. It's all according to a source familiar with the deal. Now, LG Energy revealed the contract without noting the customer in a regulatory filing. Tesla is working to expand its supply from non-China-based suppliers, of course.

35:20Plus, Foxconn, well, it's formed a pact that should help its push into AI hardware. Now, a share swap deal with Taiwan's Teco Electric and Machinery many underscores Foxconn's ambitions to move beyond iPhone and server manufacturing into fuller AI data center construction. And in a reversal from the Australian government, YouTube will be included in a social media ban for children under 16. Platforms including Instagram, TikTok, and now YouTube, will face fines of up to$32 million if young teens use their service starting on December the 10th. YouTube's position is that it's not a social media company yet.

35:54Okay, coming up, cyber security top of mind today in M &A. We're going to speak with Cato Network CEO Shlomo Kramer after it recently raised some new funding. Also one of the early investors into Palo Alto Networks. It would be great to get his take. Stay with us. This is Bloomberg Tech. The people who seem to get more done than everyone else. They're not working longer hours or running on more caffeine. They've just stopped wasting time on the stuff that doesn't move work forward. Switching apps, re-explaining context, hunting for files. Those aren't small inefficiencies. They're hours wasted every week.

36:32Superhuman Go gives you those hours back. From the makers of Grammarly, Go is an AI assistant that sits inside every tab and tool you already use, always available and already aware of what you're working on. Ask it to draft something, summarize a long thread, pull up a file, or prep you for a meeting. Go handles it without you ever leaving the page you're on. This is what it looks like when AI actually fits into your work, instead of adding to it. It's like having a teammate whose only job is to help you be better at yours. Go keeps up so you can move forward. With Go working with you, you can show off what you do best.

37:12Superhuman Go. Find out more at superhuman.com. That's superhuman.com. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Our hometown is not a test tube. 90 miles northeast of Nashville, a battle for the future of America plays out in one small town.

37:57Developers with right-wing ties have purchased hundreds of acres of land. We need cities on a shining hill. This is Our Town, a podcast about what happens when a small town becomes the site of a social experiment and fights back. Guess you didn't move in on a bunch of dumb hillbillies now, did you? Listen to Our Town on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

38:28Cyber M &A is dominating headlines this morning as Palo Alto Networks and Cyber Up reached a$25 billion deal. Here to discuss some of those trends, the landscape and their own fundraising, Shlomo Kramer, Cato Networks CEO. Cato Networks is an Israel-based network security company, valuation of almost$5 billion, Shlomo. And you've been raising funds in a Series G. I'm really interested in, as someone who put the first seed check in, you were one of the first board members of Palo Alto Networks. What do you make of this platformization, this idea to be going broader and broader as cybersecurity companies?

39:01Right. So I think it's a bridge too far. And we've seen the next generation ARR growth of Palo decelerating over a number of quarters recently. And that's because they don't really have a platform at their core business, their network security business. They have platformization, which is a promise, which is a crusade to nowhere. It's a promise that will never materialize. And the extension to a completely new platform, the identity platform, has failed in the past to any pure play security company. I think the only one that pulled it off is Microsoft because they owned the underlying operating system.

39:51but customers want a platform-based solution, but they want to choose the network platform, the endpoint security platform, the identity security platform, and the cloud security platform. And this is a philosophical difference you have and ultimately why you went out and set up Cato Networks in many ways. I mean, you've taken Checkpoint Public, you took Imperva Public, you're a man who knows how to build businesses, But I'm interested as you build Cato Networks, what is it that you're seeing? Why is it people are still putting money into you when you're not yet a public business? First of all, because we are growing at 46 % year over year.

40:31That's our last published results. And we are at the beginning of a huge market, the remaking of the network security market. It's a seismic change. It's interesting that Panlaw is now expanding beyond that because there's so much work to be done here. It's a$100 billion market that is going to be re-architected in the next 10 years. Because of AI? That's the networking network security, not including everything that AI will bring.

41:06So it's really interesting. It's a huge opportunity. It's just the beginning. In the next three years, 60 % of enterprises are going to start their migration to SASE based on Gartner. Less than 15 % have started it, and it's going to be 80%, 90 % of that market is going to transform from appliances to SASE. So I think that's why Cato, as the only platform that was built for SASE, actually inventing the category, is continuing to grow so fast. And that's why we are going to be laser focused in the next decade on network security, not identity. And sassy for those who aren't completely into the lingo, secure access service edge, Ed.

41:53Exactly. Thank you. Shlomo, I get the different domains, like CyberArk is an identity security and privileged access management. But what you both have in common is the enterprise market. And one of the things I was asking Udi and Nikesh about this morning was how much pressure there is coming from the hyperscalers. Think about Google Cloud and its acquisition of Wiz. They have offered more of their own security tools. Are they your competitors? Not at all. Zero pressure. Microsoft has been, at least on the network security side, we see zero pressure. The only player that came in is Microsoft, and we're not seeing them.

42:33They definitely do not have the cloud on the network side. another example why different geographies in the organization need different leaders. And so the network security side, we are not seeing any of the hyperscalers, and I'm not expecting any of them coming in anytime soon. Put it another way, after a big piece of M &A in your industry, and I appreciate you just raised funds, but do you think that somebody might look at Kato networks? I think we are building here a long-term independent player, and that's the goal. And as I mentioned before, this is very early in the game on transforming the network security market, network and network security market from the second generation appliance-based and digitally transforming it to the cloud.

43:35This is a 10-year journey that we are excited to embark upon. 10-year journey, look, you're someone who I said at the start, takes companies public. A Series G already worth almost$5 billion. I mean, what are going to be the perfect precision points for then taking this company public? This is a good question, and we continuously evaluate that. We are a hyper-growth company, so we have options both on the public and the private, and we'll continue to consider both options. I can tell you that we as a company keep a very high level of readiness. So once we decide that this is the right moment, it will not take us a long time to be public.

44:17Shlomo Kramer of the Cato Networks, it's great to have you back on the show. Thank you very much. Thank you. Okay. It was almost an historic day for Australia's space ambitions. Gilmore Space launched its made-in-Australia Ares orbital rocket. payload a small jar of Vegemite spread for toast but the rocket didn't get very far crashing just 14 seconds after liftoff still the company sounded upbeat posting on x big step for launch capability team safe data in hand eyes on test flight 2 we'll keep tracking what's going on in Australia's space industry car I'm a Marmite gal well then a Vegemite gal but I like that payload

45:03Figma CEO Dylan Field has already amassed a billion-dollar fortune as the company readies to IPO this week, it would seem. But the co-founder of the design software company could receive another$2 billion pay package if the company's stock hits certain goals. This is Figma's IPO is already approaching 40 times oversubscribed. It's all according to sources. Let's get to Bloomberg's Tom Maloney. He's really written about the pay package here. And look, this is a theme. This is about really tying in the key man in building this business for the longer term. Yeah, that's absolutely right. And that's what they've done.

45:35Just last month, they inked a new compensation deal for him, and that's going to give him up to 29 million shares. As you mentioned, it's split into a performance target where he has to get the share price up to between$60 and$130. If that kicks in, he's got 10 years to do it. And then there is a time vesting portion of that deal as well. All up, it could be worth$4 billion if he hits the top of that share price range. Tom, for lots of our audience on Bloomberg Tech, this is just like core to the story of founding a company and taking it public and growing a startup. The numbers that we went through in terms of like his ultimate comp from this, how does it rank with some of those kind of big name IPOs where the CEO stands to benefit?

46:22That's a good question. I mean, you know, it's so hard to do comparisons between these kinds of packages because the stock prices move around so much. Some of them really work out and some of them don't. We mentioned B &B in the article. I was just actually looking at an older story we did on the Rivian founder who had a very similar package. We wrote about that. He could make billions. That was when Rivian had a$100 price handle. Today it's trading at$13, so that just didn't go anywhere for him. And so, you know, sometimes these moonshot packages really work out and other times they don't. And sometimes you get a tattoo because of it.

46:58I mean, I think it's Axol Enterprises, Taser, MakerBase, and Rick Smith had a tattoo when he got a certain amount of benchmarks through his$2.5 billion pay package. Is there ever any sort of saltiness coming from the future investor base about this? Look, I just think of what Elon Musk's pay package has meant so much for Delaware and the court fight there. Yeah, look, I think at the end of the day, even with Musk, I think that's a great example. it's a massive package. And I think a lot of people on the outside are upset about it. At the same time, it received investor support. I mean, they just voted for it again.

47:32So if you're an investor and you see your share price go up by, you know, three, four, five, ten times, then I guess you're inclined to be generous. Right. Tom, just really quickly remind us of what happens now. When's pricing, when's listing, how oversubscribed around is, just the other details. Yeah, 40 times oversubscribed pricing today. Trading begins tomorrow. You know, I didn't mention he has a 2021 pay package that he is still collecting on. Depending on how pricing shakes out, that could invest in the very near future as well. So adding more to his wealth. yeah wow of all of the ipos we've covered caro take a look at that chart and how much demand there is for figma bloomberg's tom maloney with a great handle on the numbers but this is one maybe one of the year it's an ipo of the year sadly that does it for this edition of bloomberg tech but caro my goodness uh brace basically brace brace and we are anticipating so much in terms of after the bell don't forget to check out our podcast you can find on the terminal as well as online on Apple, Spotify, and iHeart, Meta, Microsoft, Qualcomm, Arm, not to mention, of course, a key IPO.

48:47We're looking for that pricing too. This is Moonberg Tech. Before you sign off, you tuned in for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codex in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more.

49:27Have you ever wondered how Jesse Cole took the Savannah bananas from this? We had a$6 million failure last year. We're going to have bigger ones as we go. To this? We've got shareholders, investors that reach out to us regularly. And the answer is always no. Or why Elle Duncan would say this about a Netflix sports broadcast. Sometimes we're going to take really big swings and we're going to freaking whiff. Then the deal is the show for you. It's a Bloomberg podcast hosted by me, Alex Rodriguez. And me, Jason Kelly. We talk to the biggest names in the world of sports and business, including NBA Hall of Famer Tracy McGrady on one of his biggest blunders.

50:02I think I've created something magical. Mm-hmm. Well, I struck out. and you'll even get some of my baseball hot takes. I've had owners tell me it doesn't matter. The game has to be fixed. It's broken. If we have to lock out the whole year, we will. New episodes air every Thursday. Don't miss out.