'Bloomberg Technology' Full Show (10/27/2022)
ANNOUNCER: FROM THE HEART OF WHERE INNOVATION, MONEY AND POWER COLLIDE, IN SILICON VALLEY AND BEYOND, THIS IS "BLOOMBERG TECHNOLOGY" WITH EMILY CHANG. EMILY: I'M EMILY CHANG IN SAN FRANCISCO AND THIS IS "BLOOMBERG TECHNOLOGY." COMING UP IN THE SUN THAN 20% -- ADDING PAIN TO AN ALREADY HURTING TECH SECTOR. APPLE REVENUE BEAT ESTIMATES, BUT SHARES DROP WITH A STRONG DOLLAR WEIGHING ON RESULTS.
WE WILL HAVE THE DETAILS. AND WE ARE GETTING A GLIMPSE INTO ELON MUSK'S VISION FOR TWITTER, INCLUDING HIS HOPE TO AVOID "A FREE-FOR-ALL HEALTH SKATE. -- HELLSCAPE." ALL THAT ANY MOMENT, BUT FIRST A VOLATILE DAY LEADING TO APPLE AND AMAZON OUT AFTER THE BELL. ED LUDLOW IS HERE TO BREAK IT DOWN. ED:
YOU SAID IT, AMAZON IS GETTING PUBLISHED FOR -- IS GETTING ABSOLUTELY PUNISHED. IS FORECAST FOR REVENUE SIGNIFICANTLY BELOW WHAT THE STREET WAS LOOKING FOR. $143 BILLION TO $148 BILLION. THE OUTLOOK FOR OPERATING INCOME IS WEAK, AND THAT IS PUTTING IT MILDLY. WE HAVE BEEN SAYING ALL DAY THAT COMPANIES IN THERE'S EARNINGS SEASON WILL LIVE OUR DIE BY THEIR OUTLOOK FOR WHAT IS TO COME IN THE FINAL THREE MONTHS OF THIS YEAR. COMPARED TO OTHERS, THIS IS VERY WEAK. APPLE DOWN BY 1.3% IN AFTER-HOURS, PARING SOME OF THEIR EARLIER LOSSES. BUT IT WAS THE IPHONE SALES
THAT CAME IN WEAKER THAN EXPECTED, ALONG WITH SERVICES. A V DONE REVENUE IN THE QUARTER, BUT AS HE TALK ABOUT THE CURRENCY HEADWINDS, LOOK AT THE INVESCO ETF THAT TRACKS THIS. DOWN BY 1.4% IN AFTER HOURS, THAT IS A BIG MOVE FOR THE ETF THAT TRACKS THE SP 100 -- 500 SO CLOSELY. WE ARE LOOKING AT FRIDAY WHERE WE EXPECT MORE RIPPLES MORE BROADLY. META, THE STORY OF THE DAY THIS THURSDAY, ITS BIGGEST DROP SINCE FEBRUARY OF THIS YEAR. THE STOCK CLOSING AT ITS LOWEST
LEVEL SINCE JANUARY OF 2016. THE CONCERN, THE GROWING EXPENSES INTO 2023, WHICH META OUTLINE BETWEEN $96 BILLION AND $101 BILLION, THE OPPOSITE OF WHAT THEY HAVE BEEN CALLING ON MARK ZUCKERBERG TO DO. TWITTER, WE ARE INCHING CLOSER TO THE CLOSE OF THIS DEAL. WE HAVE REPORTED IN THE LAST 10 MINUTES THAT TESLA ENGINEERING TALENT HAVE BEEN INSIDE TWITTER SAN FRANCISCO HEADQUARTERS TODAY, EVALUATING AND SSA IN THE UNDERLYING CODE THAT POWERS THE PLATFORM TO HELP ELON MUSK UNDERSTAND IT.
WHAT THEY ARE CALLING CODE PARING, WHERE YOU WORK ON IT TOGETHER, BUT SIGNS FROM BOTH SIDES, THE DEBT SIDE AND EQUITY FINANCING SIDE -- WE ARE HEARING WE WILL GET A CLOSE OF THE DEAL ON FRIDAY, AS EXPECTED. EMILY: THANK YOU. I WANT TO DIG INTO THOSE AMAZON RESULTS. SHARES ARE TUMBLING DUE TO A HOLIDAY FORECAST THAT CAME IN BELOW EXPECTATIONS.
RACHEL TIPOGRAPH, CEO OF TIPO, JOINING US TO UNPACK THE RESULTS. NOT A WARM AND FUZZY OUTLOOK FOR AMAZON THIS HOLIDAY SHOPPING SEASON. WHAT IS YOUR TAKE ON THESE RESULTS? IS THIS INFLATION OR A BROADER DOWNTURN LOOMING? RACHEL: MACRO ECONOMIC ARE IMPACTING EVERYONE. AT THE END OF THE DAY, NET SALES DID INCREASE BY 15%, WHICH WAS IN RANGE WITH WHAT THE EXECUTIVES WERE EXPECTING, BUT NOT WHAT THE STREET WANTED. A BIG FOCUS WAS FOCUSING ON WHAT WOULD HAPPEN DURING THE FIRST-EVER PRIMARILY ACCESS EVENT THAT HAPPENED IN OCTOBER.
OVER 100 MILLION ITEMS WERE SOLD. ALL OF A SUDDEN, AMAZON WAS ABLE TO MOVE EXCESS INVENTORY. IT SHOWED DESPITE INFLATION, CONSUMERS WERE READY TO SHOP. AS LONG AS IT WAS ABOUT VALUE AND CONVENIENCE. WHAT WE SAW IS THAT CATEGORIES AT THAT PERFORM STRONGEST DURING THIS TIME WHERE HEALTH, PERSONAL CARE AND GROCERY. NOT NECESSARILY CONSUMER-ELECTRONICS OR TOYS.
WEATHERS CONTINUES TO SHOW IS CONSUMERS ARE WILLING TO SPEND, BUT SPEND ON NECESSITIES. EMILY: SO IT SOUNDS LIKE YOU ARE A LITTLE MORE OPTIMISTIC THAN THE TYPICAL DOOM AND GLOOM FORECAST WE HAVE BEEN HEARING, THAT SAID ON THE BACK OF NOT SUCH GREAT RESULTS OF MICROSOFT, META -- COULD IT GET WORSE THAN WE THINK? RACHEL: I THINK THAT AMAZON IS IN A VERY UNIQUE POSITION TO EAT THOSE OTHER COMPANIES' LUNCH. THE REASON WHY IS IF YOU LOOK AT AMAZON'S ADVERTISING BUSINESS IN THIS PAST QUARTER, IT GREW OVER 25%. IT'S THE THIRD LARGEST PLAYER IN ADVERTISING NOW IN THE U.S. THIS IS SIGNIFICANT.
THE REASON WHY IS BECAUSE CHANGES IN THE COOKIE LIST INTERNET THAT NEGATIVELY IMPACTED ALPHABET AND META ARE BENEFITING AMAZON. AMAZON HAS SO MUCH FIRST PARTY DATA. AND THEY ON THEIR DSP, AND THEY BUILT OUT SELF-SERVE CAPABILITIES THAT CATER TO THE SMALL AND MEDIUM BUSINESSES, SO THEY ARE IN A POSITION RIGHT NOW TO SIGNIFICANTLY GROW THEIR ADVERTISING BUSINESS, WHICH HAS INCREDIBLE MARGINS. BUT CAN OFFSET LOSSES IN OTHER PARTS OF THE BUSINESS, WHILE ALPHABET AND META ARE STRUGGLING. EMILY: HOW IS THIS IMPACTING THE BRAND
THAT YOU WORK WITH, AND OBVIOUSLY YOU HELP THEM GROW BUSINESSES AND PARTNER WITH THE HEALTH OF AMAZON AND OTHER BIG EMAAR -- OTHER BIG E-COMMERCE COMPANIES? RACHEL: WE WORK WITH HUGE COMPANIES AND THE DURING TRYING ECONOMIC TIMES, YOU CANNOT STOP SPENDING. YOU CAN LOOK AT PROCTOR AND GAMBLE, YOU CAN LOOK AT COCA-COLA, OVER THEIR 100 YEAR HISTORY THEY ALWAYS SPEND DURING TRYING TIMES AND THEY ALWAYS COME OUT AHEAD. THAT SAID, CFOS AT THOSE ORGANIZATIONS WANT EVERY SINGLE DOLLAR TO BE ABLE TO WORK REALLY HARD. AND THAT IS WHY AMAZON IS IN A UNIQUE POSITION, WITH ITS ADVERTISING BUSINESS, BECAUSE IT HAS A REALLY REALLY STRONG RETURN ON INVESTMENT. AND SO, RIGHT NOW WHAT WE ARE SEEING ACROSS FORTUNE 1000 CONSUMER PACKAGED GOOD COMPANIES IS IF THEY HAVE A DOLLAR TO SPEND, THEY ARE OFTEN MOVING IT INTO ENVIRONMENTS LIKE RETAIL MEDIA, WHERE THERE IS GOING -- WHERE THERE IS GUARANTEED RUI. EMILY:
YOU HAVE INTERESTING THOUGHTS ABOUT BUY NOW, PAY LATER AND HOW IT MADE THE CURRENT CONSUMER SITUATION WORSE. CAN YOU SHARE THAT? RACHEL: ABSOLUTELY. IF YOU LOOK AT 2020 AND 2021, WHICH HONESTLY ARE ANONYMOUSLY YEARS, WE ALWAYS -- ANOMALY YEARS, WE ALWAYS GUIDE OUR FOLKS TO LOOK AT 2015. BUT IN 2020 AND 2021, CONSUMERS WERE TRAINED IT TO SPEND MONEY THAT THEY DO NOT HAVE. AS INTEREST RATES HAVE RISEN,
ALL OF A SUDDEN CONSUMERS ARE RECOGNIZING THAT THAT BUY NOW, PAY LATER A VALUE PROPOSITION WILL PUT THEM IN MAJOR DEBT AND COST OF THEM SO MUCH. AND SO I SHARE THIS BECAUSE THERE WAS A LOT OF FAKE MONEY BEING SPENT IN THE ECOSYSTEM. AND IF YOU REMOVE THAT, ALL OF A SUDDEN VERY QUICKLY YOU WILL SEE TRENDS THAT LOOK LIKE 2019. IN THE LONG RUN, I THINK THIS
WILL BENEFIT CONSUMERS BECAUSE HOPEFULLY IT WILL PREVENT THEM FROM GOING INTO DEEPER DEBT OR DEBT ALTOGETHER. EMILY: ALL RIGHT. RACHEL, FOUNDER AND CEO OF MIKMAC, REALLY INTERESTING INSIGHTS FROM YOU. THANKS FOR SHARING ALL OF THAT. THE NATIONAL LABOR RELATIONS BOARD'S HAS THE CEO OF AMAZON VIOLATED LABOR LAWS WHEN HE TOLD ME THIS ABOUT WORKERS EARLIER THIS YEAR.
>> WE HAPPEN TO THINK THAT THEY ARE BETTER OFF WITHOUT A UNION FOR A NUMBER OF REASONS, INCLUDING THE FACT THAT IT IS MUCH HARDER WHEN YOU HAVE A UNION TO HAVE A DIRECT RELATIONSHIP WITH YOUR MANAGER AND TO GET THINGS DONE QUICKLY. EMILY: THE COMPLAINT AGAINST HIM FOLLOWS ANY NUMBER OF BIG TECH UNION VOTES FROM WORKERS AND IN A STATEMENT AMAZON SAYS THE COMMENTS LAWFULLY EXPLAIN AMAZON'S VIEWS ON UNIONIZATION AND AT THE WAY IT COULD AFFECT AT THE ABILITY OF EMPLOYEES TO DEAL DIRECTLY WITH MANAGERS, AND THEY BEGAN WITH A CLEAR RECOGNITION OF OUR EMPLOYEES RIGHT TO ORGANIZE AND IN NO WAY CONTAIN THREATS OF REPRISAL. WE HAVE TO DIG INTO APPLE RESULTS. POSTING WEAKER THAN EXPECTED IPHONE SALES IN ITS LATEST QUARTER. A PRINTABLE ANALYST AT FORRESTER RESEARCH IS WITH US NOW. WHY ARE INVESTORS SO SEEMINGLY UNHAPPY WITH THIS REPORT? JULIA: IT IS HARD FOR ME TO SAY WHY INVESTORS ARE SO UNHAPPY WITH THE REPORT, BUT ONE OF THE THINGS I LOOK AT MORE BROADLY IS IT IS NOT THEIR BIG QUARTER. THEY GOT PRODUCT OUT, EVEN
THOUGH CONSUMERS COULD ORDER PRODUCTS THEY STILL HAD DELAYS IN SHIPPING. THEY JUST ANNOUNCED A NEW TABLET LINEUP NEXT WEEK. SO, THAT QUARTER WILL BE WHAT IT IS GOING TO BE, BUT IT IS IMPORTANT FOR EVERY MANUFACTURER TO RECOGNIZE OF THE HOLIDAY SEASON. AT THAT IS WHAT IS MOST IMPORTANT FOR THEM IN THE REST OF THE YEAR. EMILY:
LET'S TALK ABOUT THAT. SOME WORDS FROM TIM COOK HERE. HE SAYS AS WE HEAD INTO THE HOLIDAY SEASON WITH OUR MOST POWERFUL LINEUP EVER, WE ARE LEADING WITH OUR VALUES IN EVERY ACTION AND DECISION WE TAKE. WE ARE COMMITTED TO PROTECTING THE ENVIRONMENT, SECURITY AND PRIVACY, AND CREATING PRODUCTS AND SERVICES THAT COULD UNLOCK HUMANITY'S FULL CREATIVE POTENTIAL. WHEN YOU LOOK AT WHAT IS AVAILABLE THIS HOLIDAY SEASON, THE WAY THAT THEY ARE KEEPING MANY OF THEIR PRICES THE SAME, HOW OPTIMISTIC ARE YOU THAT THEY WILL BE ABLE TO MOVE A LOT OF PRODUCT? JULIA: I HAVE OPTIMISM.
WE JUST PUT OUT OUR HOLIDAY FORECAST AND WE ARE FORECASTING AN INCREASE IN ONLINE SPEND OF ABOUT 14.6%. WHEN WE SURVEYED CONSUMERS, 18% SAID THEY WILL SPEND MORE THIS YEAR THAN LAST YEAR. WE STILL HAVE ABOUT 40% SAYING THAT THEY WILL SPEND LESS. WHEN WE TALK TO CONSUMERS ABOUT
HOW THEY ARE FEELING ABOUT THE ECONOMIC HEADWINDS, WE DO HAVE, DEPENDING ON THE QUESTION YOU ASK, BETWEEN 39% TO 41% ONLINE CONSUMERS SAYING THAT THEY WILL DELAY MAKING PURCHASES, THAT THEY ARE WORRIED ABOUT THE ECONOMY, THAT THERE ARE THINGS THEY WILL PULL BACK ON. AND NOT MAKING PURCHASES AND THEY WANT TO MAKE. IF YOU ASK THEM ABOUT HOW THEY ARE DOING, 50% ARE WORRIED ABOUT THE ECONOMY, WORRIED ABOUT THEIR MONEY, AND THEY EXPECT TO SLOWDOWN PURCHASING THIS HOLIDAY SEASON. IT WILL BE A QUESTION OF WHAT
IS THAT MAKES? IS THE 18% THE AFFLUENT APPLE RELIES ON? IT WILL STILL BE A GOOD HOLIDAY SEASON, BUT IT MAY NOT BE WHAT EVERYBODY WANTED IT TO BE AS WE LOOK AT FORECASTS FROM EARLIER IN THE YEAR. IT WILL BE A TOUGH SEASON. EMILY: CHINA HAS BEEN A HUGE MARKET HISTORICALLY FOR APPLE. TIM COOK WAS THE ARCHITECT OF APPLE'S CHINA STRATEGY AND WE ARE IN THE MIDDLE OF A POTENTIALLY HISTORY MAKING DECOUPLING OF THE U.S. AND CHINA. HOW IS APPLE HANDLING THAT AND HOW MUCH WILL IT IMPACT OR HURT APPLE OVER THE LONGER-TERM? JULIA: I THINK THAT THAT IS ALWAYS A HARD QUESTION BECAUSE THE DEVIL IS IN THE DETAILS. ONE THING THAT HAS BEEN INTERESTING ABOUT WATCHING CHINA FROM THE CONSUMER STANDPOINT IS THE CHINESE ARE STILL FAR MORE IN LOCKDOWN THAN WE ARE IN THE U.S. OR EUROPE, SO THERE IS MORE
CONSUMPTION OF ONLINE MEDIA, VIRTUAL WORLDS. WE SEE INTEREST IN THE METAVERSE AND STREAMING MEDIA, THINGS THAT KEEP THEM ENTERTAINED AT HOME. IT IS HARD FOR ME TO SAY WHAT WILL HAPPEN IN CHINA, BUT IT IS A VERY DIFFERENT ENVIRONMENT THAN WE HAVE IN THE U.S. IN TERMS OF OUR MOBILITY AND HOW MUCH WE ARE DEPENDING ON ELECTRONICS TO KEEP US ENTERTAINED. THE ABILITY TO WORK, STAY IN TOUCH WITH FAMILY AND FRIENDS AND SO FORTH. SO IT WILL BE INTERESTING TO WATCH. EMILY: I HAVE TO ASK ABOUT THE
CONTROVERSY OF CHANGES IN APPLE 'S AD TRACKING POLICIES, META HITTING BACK WITH HOW MUCH IT IS HURTING THEM, AND VENUE HAVE SKEPTICS AND CRITICS SAYING APPLE IS NOT DOING THIS TO PROTECT PRIVACY, BUT TO ADD TO APPLE'S OWN BOTTOM LINE. WHAT IS YOUR TAKE? JULIA: THERE IS A LITTLE BIT OF BOTH, BUT I DO NOT KNOW IF ANYBODY IS CRYING FOR, YOU K NOW, APPLE OR GOOGLE'S DIMINISHED ABILITY TO MONETIZE A CONSUMERS. THESE COMPANIES HAVE GROWN WEALTHY BY DOING SO OVER THE PAST COUPLE DECADES.
AS WE ARE LOOKING AT THE VALUES CONSUMERS HAVE, YOU KNOW, TIM COOK HITS ON THEM -- IT'S ABOUT PRIVACY, SECURITY AND RESPONSIBILITY. AND IT IS ABOUT THE ENVIRONMENT. IT IS ABOUT TRUST. WHEN YOU LOOK AT THE THINGS THAT CLIENTS ARE ASKING ABOUT, IT IS ALL OF THOSE. IT IS TRUST, THE ECONOMY, BEING GREEN, SECURITY AND PRIVACY. AND I THINK THAT IS REALLY THE LONG GAME. DO I THINK ADVERTISING WILL CONTRIBUTE SUBSTANTIALLY TO APPLE'S BOTTOM LINE IN THE NEXT FIVE YEARS? I WOULD BE SURPRISED IF IT GETS TO BE THAT BIG.
THIS IS ABOUT APPLE -- EMILY: RIGHT, I UNDERSTAND. ALWAYS GREAT TO HEAR FROM YOU. THANK YOU SO MUCH FOR STOPPING BY. WE ARE LISTENING TO THE APPLE
CONFERENCE CALL AND WE WILL BRING YOU MORE HEADLINES AS WE GET THEM. ELON MUSK'S MESSAGE TO TWITTER ADVERTISERS AND WHAT WE ARE HEARING ABOUT HIS VISIT TO THE COMPANY HEADQUARTERS. THAT'S NEXT. THIS IS BLOOMBERG. ♪ >> ELON MUSK HAS TRIED TO ACQUIRE AND WALK AWAY FROM ACQUIRING TWITTER. HERE IS HOW WE GOT HERE. APRIL 4, A FILING REVEALS ELON MUSK HAS RAPIDLY BECOME THE LARGEST TWITTER SHAREHOLDER. APRIL 14, IN A FILING, MUSKA SAYS HE WILL BUY OUT STOCKHOLDERS IN A CASH DEAL AND TAKE TWITTER PRIVATE. THE OFFER IS A 54% PREMIUM OVER
THE PRICE IN JANUARY. ON MAY 17, AFTER ELON MUSK AND THE TWITTER CEO HAVE IT OUT, MUSKA TWEETS HE WOULD NOT PROCEED UNLESS TWITTER CAN PROVE BOTS ARE LESS THAN 5% OF ITS USERS. JULY 8, ELON MUSK BACKS OUT OF THE DEAL, SAYING THAT TWITTER MADE MISLEADING REPRESENTATIONS OF WHERE THE BOTS ISSUE. JULY 12, TWITTER SUES ELON MUSK
TO FORCE THEM TO COMPLETE THE DEAL. MUSK COUNTERSUIT. OCTOBER 4, AFTER A TROVE OF INNER CIRCLE TECHS ARE REVEALED IN COURT FILINGS, ELON MUSK REVIVES HIS BID AT THE ORIGINAL OFFER PRICE, POTENTIALLY AVOIDING A COURTROOM FIGHT. OCTOBER 6, THE DELAURO CHANCELLERY JUDGE PAUSES THE CASE, GIVING THE PARTIES MORE TIME TO COMPLETE A DEAL. ON 5:00 P.M., IT HARD DEADLINE IS SET, OTHERWISE THE TRIAL RESUMES IN NOVEMBER. EMILY:
TO SOME OF THE M -- JUST SOME OF THE ELON MUSK TWITTER SAGA WE HAVE BEEN LIVING THROUGH, BUT FINALLY THE DEAL SEEMS IMMINENT. IN A TWEET TO ADVERTISERS, ELON MUSK SAID HE WANTS TO MAKE TWITTER A TOWN SQUARE WITH HIGHLY RELEVANT ADS AND LESS OF A FREE FOR ALL HELLSCAPE. WE ARE BRINGING IN SARAH FRIER. OUR LATEST REPORTING IS
ENGINEERS FROM TESLA HAVE GONE TO TWITTER TO REVIEW THEIR CODE, AND THAT THE TWITTER CODE HAS BEEN FROZEN AHEAD OF A PENDING DEAL, SO NO CHANGES CAN BE MADE AT THE 11TH HOUR. WHAT IS THE LATEST? SARAH: IT LOOKS TO US THAT THE TESLA ENGINEERS ARE THERE TO REVIEW THE CODE, TO HELP ELON MUSK ASSESS IT AND TO THINK ABOUT WHAT NEEDS TO BE DONE. COMPANIES THAT HAVE BEEN AROUND FOR AS MANY YEARS AS TWITTER HAS, THEIR CODE CAN BE CONFUSING TO NEWCOMERS, SO HE IS BRINGING IN TRUSTED FOLKS FROM HIS COMPANY, TESLA, WHICH HE ALSO RUNS. IN TERMS OF THE NOTE TO ADVERTISERS THIS MORNING, I THINK ELON MUSK IS TRYING A LITTLE BIT OF A REVERSAL OF WHAT HAS BEEN SAID OUT THERE ABOUT WHAT HE IS GOING TO DO.
WE ALL KNOW HE HAS THIS FREE-SPEECH PLAN FOR TWITTER. WHAT THAT IS GOING TO MEAN IS LIFTING UP MODERATION STANDARDS AND BRINGING ON CONTENT THAT COULD MAKE ADVERTISERS UNCOMFORTABLE. SO I AM NOT EXACTLY SURE HOW HE WILL DO BOTH THINGS AT ONCE. AS I WROTE TODAY, YOU CAN'T HAVE A COMMERCIALLY VIABLE SOCIAL NETWORK, WHEN THE ADVERTISERS WANT TO BUY PROMOTIONS ON AND PEOPLE WANT TO JOIN, WITHOUT SOME LEVEL OF CONTENT MODERATION. THERE HAS TO BE SOME LINE THAT HE WILL DRAW, AND HE WILL HAVE TO FIGURE OUT WHAT KIND OF BALANCE HE WILL GO WITH. EMILY: HOW ARE TWITTER EMPLOYEES FEELING ABOUT IT? WE KNOW HE WAS AT HEADQUARTERS YESTERDAY. THERE WAS A PICTURE POSTED OF
EVERYONE GATHERED AROUND HIM. SOME PEOPLE WERE SMILING. IT DID NOT LOOK SO POTENTIALLY DOOM AND GLOOM. OF COURSE, YOU CAN ONLY GET A FEW PEOPLE IN ONE PHOTO.
HOW ARE THE EMPLOYEES OF FEELING ABOUT THIS, GIVEN HE SAID THAT THERE ARE REPORTS HE COULD CUT UP TO 75% OF THE WORKFORCE? HE IS BRINGING IN ENGINEERS TO LOOK AT THE CODE. SARAH: HE TOLD TWITTER EMPLOYEES HE DOES NOT PLAN TO CUT 75% OF THE STAFF. HE CLAIMS HE DOES NOT KNOW WHERE THAT NUMBER CAME FROM.
OF COURSE, AS WE PREVIOUSLY REPORTED, IT CAME FROM HIS PRESENTATION TO EQUITY INVESTORS. SO, I THINK THAT THERE IS A LOT OF MAYBE PUTTING DOWN THE HATCHET. AND ALL THE TENSION BETWEEN MUSK, TWITTER AND ELON MUSK, YOU KNOW, COMING TO A PLACE WHERE THEY CAN WORK TOGETHER. WHERE HE CAN WORK WITH THEIR PARTNERS AND ADVERTISERS. WHERE HE IS SAYING, I COME IN PEACE. I'M GOING TO BE THE BOSS HERE AND I AM GOING TO CARE ABOUT THIS. HE COMES IN WITH THIS
PERSPECTIVE, OR HE SAYS IN HIS LETTER TO ADVERTISERS, THAT HE IS DOING THIS FOR HUMANITY. HE HAS A GRANDIOSE VISION FOR WHAT TWITTER CAN BE UNDER HIS WATCH. AND I THINK THAT THAT KIND OF MESSAGING ACTUALLY DOES APPEAL TO TWITTER EMPLOYEES. THEY TEND TO SAY THAT THEY ARE IN IT FOR THE IMPACT THAT CAN HAVE ON THE WORLD, ON OUR CULTURE AND ON OUR POLITICS. LIKE, THEY CAN BEGIN DIFFERENCE. SO I, THINK THAT IS HISTORICALLY WHY PEOPLE HAVE JOINED TO TWITTER AND NOT MAY BE OTHER BIG TECH COMPANIES. SO, IT WILL BE INTERESTING TO SEE IF MUSK CAN ACTUALLY COME IN PEACE, EVEN THOUGH HE WILL CERTAINLY HAVE TO CHANGE QUITE A BIT, CUT STAFF, AND DRAMATICALLY PIVOT THE COMPANY IN HIS VISION. EMILY: HE IS TALKING TO EMPLOYEES,
WALKING AROUND WITH A KITCHEN SINK, GIVE US THE TICK-TOCK OF THE NEXT 24 HOURS -- WHEN DOES THE DEAL GET SEALED? WE ARE ALREADY HEARING LARGE CAPITAL WILL REPLACE TWITTER IN THE S&P 500. SARAH: IT IS A MATTER OF TIME BEFORE THE SHARES STOP TRADING ON THE OPEN MARKET. THAT WILL BE THE FIRST PUBLIC SIGNAL, PERHAPS, THAT THE DEAL IS DONE. WE ARE ALSO LOOKING AT FILINGS THAT MIGHT HAPPEN IN DELAWARE. WHATEVER IS BEING DECIDED NOW, IT IS NOT FINAL UNTIL YOU GET THE KEYS, LIKE WHEN YOU BUY A HOUSE. ALL THESE LITTLE STEPS HAVE TO BE DONE BEFORE WE CAN SAY THE DEAL IS CLOSED.
BUT IT'S VERY MUCH ON TRACK. THERE ARE UNLIKELY TO BE, I SAY THIS WITH A GRAIN OF SALT, RIGHT? THERE'S UNLIKELY TO BE STUMBLING BLOCKS BETWEEN NOW AND FRIDAY. WHICH IS WHEN THE JUDGE HAS SAID THAT THIS NEEDS TO BE COMPLETE -- SHE WANTS THE EMAIL IN HER INBOX BY 5:00 P.M.
THAT IT IS DONE. EMILY: SOME PEOPLE MAY NOT BE GETTING SLEEP TONIGHT, AND I HOPE ONE OF THEM IS NOT YOU, SARAH. THANK YOU SO MUCH. WE WILL BE RIGHT BACK WITH MORE "BLOOMBERG TECHNOLOGY," AFTER THIS BREAK.
THIS IS BLOOMBERG. EMILY: MICROSOFT OUT WITH ITS FIRST-EVER RAPPORT ON MEDIUM PAY FOR ITS WORKFORCE. IT SHOWS WOMEN DO BETTER THAN THE U.S. AVERAGE, BUT BLACK AND HISPANIC EMPLOYEES REMAIN UNDERREPRESENTED IN HIGHER LEVEL ROLES. EMPLOYEES OF COLOR, OVERALL, MAKE LESS. TESLA IS FACING A CRIMINAL
INVESTIGATION INTO A SELF-DRIVING SYSTEM. THE U.S. JUSTICE DEPARTMENT IS INVESTIGATING WHETHER THE COMPANY MADE MISLEADING CLAIMS ABOUT TESLA CARS' ABILITY TO DRIVE THEMSELVES. THE S.E.C. IS LOOKING AT TESLA AS WELL. WHAT IS THE CONSUMER WANT IN THE INFLATIONARY ENVIRONMENT? EMILY: WELCOME BACK TO "BLOOMBERG TECHNOLOGY", I'M EMILY CHANG SAN FRANCISCO. LET'S GET BACK TO THE AFTER HOURS ACTION, APPLE AND AMAZON. BACK TO ED LUDLOW, INVESTORS SEEM TO LIKE WHAT THEY ARE HEARING FROM TIM COOK ON THIS CALL? ED: THEY LIKE WHAT THEY ARE HEARING FROM TIM COOK. THE HEADLINES CROSSING THAT THEY ARE NOT GIVING REVENUE GUIDANCE BECAUSE OF UNCERTAINTY IN THE MACRO PICTURE.
TOTAL COMPANY REVENUE GROWTH WILL DECELERATE COMPARED THE FOURTH QUARTER, THE FISCAL FOURTH-QUARTER, AND MACRO DECLINED SUBSTANTIALLY IN THE HOLIDAY QUARTER. NOT THINGS THE MARKET LIKES, APPLE NOW DOWN 2.6%. THERE IS A POCKET OF STRENGTH, WHICH WAS THE MACBOOK, A LOT OF BUYERS WERE FIRST-TIME BUYERS PERHAPS BECAUSE OF CUTTING EDGE TECHNOLOGY. THIS IS WHAT TIM COOK HAD TO
SAY ABOUT THAT. >> OUR MAC CUSTOMERS HAVE BEEN RAVING ABOUT THE POWER OF M2 SINCE THE ARRIVAL OF OUR NEWEST MACBOOK AIR AND MACBOOK PRO THIS SUMMER. THEY'RE INCREDIBLY LONG BATTERY LIFE, STUNNINGLY RICH DISPLAY AND LIGHTNING FAST SPEEDS ARE A SIGNATURE PART OF THE MAC EXPERIENCE AND HELP DRIVE AN ALL-TIME RECORD REVENUE FOR MAC DURING THE SECOND QUARTER. ED: THAT'S THE STORY OF APPLE SO FAR, WE WILL BRING THE LATEST AS IT CROSSES THE BLOOMBERG. THE INVESTOR BASE IS NOT IMPRESSED WITH THIS OUTLOOK FOR THE FOURTH QUARTER.
HOW OFTEN HAVE YOU HEARD AMAZON SAY MACROECONOMIC CONDITIONS ARE TOUGH? HAT TIP TO EDITOR NICK TURNER FOR THAT ONE. AN INTERESTING BRIGHT SPOT, INTEL IS A LITTLE BASTION OF HOPE, IT IS UP 3%. REVENUE IS NOT GOOD BUT THERE IS BASICALLY A PLEDGE FROM THE COMPANY TO CUT COSTS, TO GET THIS COMPANY BACK ON TRACK AND INVESTORS SEEM TO BE BUYING THE STORY WITH THAT STOCK, UP ALMOST 4% IN AFTER-HOURS. EMILY: ED LUDLOW, THANK YOU, I WANT TO DATE IN NOW TO SHOPIFY'S RESULTS BUCKING THE TREND WITH SHARES RISING THE LAST COUPLE OF DAYS AFTER THEIR NUMBERS CAME OUT. THE PRESIDENT HARLEY FINKELSTEIN IS WITH US. SO HARLEY, HOW DID YOU MANAGE
TO BUCK THE TREND, WHAT IS SHOPIFY DOING THAT EVERYONE ELSE AIN'T? HARLEY: WE ARE HAPPY WITH HOW THINGS CAME OUT. THE ROLE SHOPIFY IS PLAYING IS NOT THAT OF A TYPICAL SOFTWARE COMPANY. ONE OF THE THINGS I MENTIONED ON THE CALL QUITE A BIT WAS THE MERCHANT SERVICES ATTACH RATE. THAT IS THE AMOUNT OF SERVICES AND THE VALUE WE CREATE FOR MERCHANTS. THE BIG DIFFERENCE IS WE ARE
NOT JUST AN E-COMMERCE COPY. WE ARE THE LOGISTICS PARTNER, AND WITH AUDIENCES WE ARE NOW THEIR ADVERTISING PARTNER, TOO. THAT WAS REALLY GOOD. ON THE REVENUE SIDE, REVENUE
CAME IN AT $1.4 BILLION. BUT I ALSO THINK WHAT THE STREET WANTED TO SEE WAS OPERATING DISCIPLINE. WE SAW THAT WITH ADJUSTED PROFIT OF OVER 86 MILLION DOLLARS. WHEN THEY SEE THAT PLUS YEAR ON YOUR DECLINING OPERATING EXPENSE GROWTH, AND $5 BILLION OF CASH ON THE BALANCE SHEET, THEY SEE SHOPIFY AS A LONG-TERM VARIABLE COMPANY. EMILY: INVESTORS ARE LOOKING AT THIS AS A SIGN THAT SHOPIFY'S WORST DAYS ARE BEHIND IT Q UOTE-UNQUOTE.
IT'S A TOUGH JOB ENVIRONMENT, INFLATION IS WEIGHING ON EVERYONE, IS THE WORST OVER? HARLEY: SHOPIFY WAS THIS INCREDIBLE COVID STORY. MARCH 2020, PHYSICALLY RETAIL SHUTS DOWN PERMANENTLY AND ALL THESE PHYSICAL RETAILERS MOVED ONLINE AND MOST CHOSE SHOPIFY. WHAT MOST MISSED WAS THAT THE TRUST WE BUILT IN THE COVID PERIOD WAS NOW THAT STORES ARE REOPENING THEY ARE USING US TO REPLACE THEIR SYSTEMS AS WELL. TALKING ABOUT SOME OF THE MACRO TREND OF THE CONSUMER, THIS IDEA OF OMNI-CHANNEL IS NOW STEADY STATE. THE MOST MODERN BRAINS NEED TO SELL EVERYWHERE, ONLINE, OFF-LINE, ONLINE MARKETPLACES. SHOPIFY GIVES THEM THE TOOLS TO
DO SO. I DON'T KNOW WHAT WILL HAPPEN IN TERMS OF THE FUTURE BUT SEPTEMBER WAS A GOOD MONTH FROM A CONSUMER SPEND. OCTOBER LOOKS PRETTY GOOD, TOO. OUR MERCHANTS ARE GETTING SET UP FOR A GOOD HOLIDAY SEASON AND WE WANT TO BE THERE TO SUPPORT THEM ON THAT. EMILY: INVESTORS WERE NOT HAPPY WITH AMAZON'S RESULTS. THERE HOLIDAY FORECAST WAS NOT GREAT. WHAT'S YOUR READ ON THAT AND WHAT IT ALSO COULD VOTE FOR SHOPIFY -- BODE FOR SHOPIFY? HARLEY: WE ARE DEALING WITH AN INFLATIONARY ECONOMY, NO DOUBT ABOUT THAT.
THE DIRECT TO CONSUMER BUSINESS WHERE BRANDS SELL WITH NO INTERMEDIARIES, THERE IS MORE MARGIN AND SO THE DIRECT TO CONSUMER MODEL OPERATES IN THIS ENVIRONMENT BETTER THAN A THIRD PARTY SELLER WHO IS ALREADY OPERATING ON RAZOR THIN MARGINS. SO FAR, JUST THIS QUARTER, SPANX OR ALO YOGA, THESE BRANDS ON SHOPIFY ARE DOING REALLY WELL. WE THINK THE CONSUMER REMAINS STRONG, WE WILL SEE WHAT THE HOLIDAY SEASON COMES FROM. THE MOST IMPORTANT THING IS WE ARE THERE TO SUPPORT THEM.
EMILY: YOU HAD BEEN AT VIORI. HARLEY: GREAT BRAND. EMILY: LET'S TALK ABOUT YOUR LOGISTICS AND FULFILLMENT NETWORK. YOU'VE BEEN DEVELOPING THAT, WHERE DOES IT STAND NOW AND WHAT ARE YOUR AMBITIONS WHEN IT COMES TO INVESTING, AND POTENTIAL ACQUISITIONS? HARLEY: WE'VE MADE A LOT OF PROGRESS. THE GOAL IS TO BUILD AND TO AND
LOGISTICS NETWORKS. YOUR PRODUCT IS MADE AT THE FACTORY TO WHEN THE CONSUMER GETS IT, WE WANT TO HANDLE THAT FOR ALL OF OUR MERCHANTS. THE KEY IS WE WANT TO MAKE IT SO THAT WHEN YOU SHOPIFY AND USE OUR LOGISTICS PRODUCT, YOU DON'T HAVE TO FIT ABOUT LOGISTICS. THE KEY THING I MENTIONED ON THE EARNINGS CALL IS SHOT PROMISED, THIS IDEA THAT WHEN YOU USE OUR FULFILLMENT PRODUCT, YOU CAN PROVIDE AN ANTICIPATED DELIVERY DATE WITH CERTAINTY TO YOUR CONSUMER. IN EARLY TESTING OF SHOP
PROMISE, WE KNOW CONSUMERS WILL SPEND MORE WHEN THEY KNOW WHEN TO ANTICIPATE. WE ARE TRYING TO BUILD OUT LIKE -- SO THAT OUR MERCHANTS WOULD HAVE TO THINK ABOUT LOGISTICS, WE WILL TAKE CARE OF IT. SECOND, WE CAN PROVIDE IN ANTICIPATION OF WHEN THE PRODUCT WILL GET INTO THE HANDS OF CONSUMERS. THIS WAS A PARTNERSHIP WE HAVE WITH FLEX PORT, FROM PORT TO FULFILLMENT WE ACQUIRED A COMPANY THAT DOES BALANCING FRANKLY BETTER THAN ANYONE ON THE PLANET. THIRD, FROM THE CONSUMER TO THE -- IS WHERE SHOP FULFILLMENT RAMPS UP AND WE HAVE PARTNERS ALL OVER THE U.S. USING OUR SOFTWARE, OUR ROBOTICS TECHNOLOGY.
AND WE ARE CREATING THIS LOGISTICS NETWORK. THE KEY REALLY IS THE SHOP PROMISE TO GIVE EVERYONE THE SAME TOOLS THAT AMAZON HAS WITH AMAZON PRIME, AND WE CAN DO THAT. EMILY: IN PERSON SHOPPING IS BACK, AND I CAN IMAGINE BACK EVEN BIGGER THIS HOLIDAY SEASON. HOW IS SHOPIFY PREPARING TO ADAPT, AND WHAT ARE YOU PLANNING FOR? HARLEY: YOUR 100% CORRECT IT IS BACK. IT WENT AWAY OBVIOUSLY DURING THE PANDEMIC, BUT WE ALWAYS BELIEVED THE FUTURE OF RETAIL IS GOING TO BE RETAIL EVERYWHERE.
THE CONSUMER MAY WANT TO BUY ONLINE OR OFF-LINE, ON INSTAGRAM, SNAP, TIKTOK OR IN PERSON. THOSE ARE THE TOOLS WE HAVE BEEN BUILDING. THIS PAST QUARTER, YOU SAW 35% INCREASE YEAR ON YEAR OF POINT-OF-SALE. AT THE SAME TIME FROM LARGE EMERGENCE HAVE REPLACED THEIR DE-COMMERCE SYSTEMS WITH SHOPIFY. BUT ALSO THIS QUARTER ALONE, MORE THAN EIGHT RETAILERS WITH MORE THAN 25 LOCATIONS REPLACE THEIR EXISTING TRADITIONAL POINT-OF-SALE SYSTEM WITH SHOPIFY. ONE MERCHANT OF OURS REPLACED
US IN 175 LOCATIONS. WE ARE REALLY SCALING UP WITH POINT-OF-SALE PRO TO HELP LARGER RETAILERS WHO LOST STORES REPLACE AND MODERNIZE THEIR IN-STORE EXPERIENCE. IF YOU ARE A CONSUMER AND YOU BUY SOMETHING ONLINE, THEN YOU WENT TO THE STORE A WEEK LATER, THEY SHOULD HAVE THE SAME SET OF INFORMATION. ONE SET OF CUSTOMER DATA AND INVENTORY. BEING OMNI-CHANNEL WILL BE LIKE TALKING ABOUT THE COLOR TV. IF YOU DON'T SAY COLOR TV BECAUSE EVERYTHING IS BASICALLY A COLOR TV.
EVERYTHING WILL BE OMNI-CHANN BYE DEFAULTL IN THE FUTURE. EMILY: IT WILL CERTAINLY BE AN EVENT FOR HOLIDAY SEASON. COMING UP, WE ARE SEEING A DECOUPLING BETWEEN CRYPTO AND STOCKS, WHY? WE'LL DISCUSS. THIS IS BLOOMBERG. ♪ EMILY: ETHEREUM IS TRANSITIONING TO LOW ENERGY CONSUMPTION AT A TIME OF CRISIS. WHICH SHOULD IN TURN BUMP UP DEMAND AND ADOPTION.
WE ARE JOINED NOW FROM NEW YORK TO EXPLAIN, DO YOU EXPLA -- DO EXPLAIN, SONALI. >> THERE ARE QUESTIONS AND WHAT THE MARRIAGE DATE FOR ETHEREUM. OUR PEOPLE TRADING THEORY AND MORE ON THE FUNDAMENTALS THAN THE MACRO STORY? SINCE THE MERGE, IT IS FLAT TO DOWN. IN THE LAST ONE MONTH PERIOD IT IS UP NEARLY 15%, SIGNIFICANTLY OVER A SEVEN-DATE PERIOD. YOU ARE SEEING POSITIVE IMPACTS ON ETHEREUM WHEN IT COMES TO PRICING. ONE OF THE REASONS IS PEOPLE BELIEVE THERE IS MORE DEFLATIONARY IMPACT WHEN IT COMES TO ETHEREUM. SUPPLIES UNDER PRESSURE WHICH
WOULD HAVE IMPACT ON THE PRICING. BLOOMBERG INTELLIGENCE HAS MORE INFORMATION ABOUT ETHEREUM, THEY ARE POSITIVE ABOUT THE TRENDS IN TERMS OF USAGE OVER THE LONGER TERM. THE REASON I BRING THIS UP, EMILY, IS WHEN I TALK TO MY SOURCES NOT JUST IN CRYPTO BUT THE BANKING INDUSTRY, THEY ARE WATCHING ETHEREUM CLOSELY ON WHAT IT COULD MEAN IN TERMS OF THE NEXT CRYPTOCURRENCY THAT COULD REALLY FORM A BACKLOG TO THE FINANCIAL SYSTEM.
THE MORE YOU SEE ETHEREUM SUCCEED, THE MORE YOU SEE TRADITIONAL PLAYERS ALSO MORE COMFORTABLE WITH THE NETWORK ITSELF. WE SHOULD TURN OUR ATTENTION TO WHAT THIS MEANS FOR THE BROADER NETWORK. PEOPLE ARE TRADING MORE ON FUNDAMENTALS AND LESS ON THE MACRO STORY IS REALLY IMPORTANT TO A LOT OF LARGE INVESTORS. THERE ARE QUESTIONS ABOUT HOW THAT IS STARTING TO FORM IN THE MARKET, ESPECIALLY AS YOU'RE SEEING SOME MORE MACRO PICKUPS COME TO THE FOREFRONT, AND INFLATION AS STICKY AS IT IS. EMILY: BITCOIN HAD A COUPLE OF STRONG SESSIONS EARLIER THIS WEEK, IT IS BACK ABOVE 20, AND YET WE HAVE HAD SEVERAL GUEST ON THIS SHOW SAYING IT IS GOING TO GO DOWN TO 12 OR 13. IS IT REALLY DECOUPLED FROM THE
REST OF THE MARKET, OR IS THIS JUST A BLIP? >> TO YOUR POINT, IT IS HELD ABOUT $20,000 AND HAS FACED PRESSURE ON OF THE LAST 24 HOUR PERIOD. $20,000 IS AN IMPORTANT PSYCHOLOGICAL LEVEL TO HOLD ON. WHEN YOU TALK TO FOLKS SURVEYED BY BLOOMBERG, PEOPLE REALLY SAY THAT IT'S NOT GOING TO BREAK IN OR OUT OF A VERY LARGE RANGE. $12,000 WOULD BE LOWER THAN THAT RANGE, SO IF IT DROPS TO THAT POINT YOU HAVE A LOT MORE PSYCHOLOGICAL ISSUES WHEN IT COMES TO TRADING BITCOIN, ESPECIALLY A LARGE LEVERAGED EVENT LIKE YOU SAW EARLIER THIS YEAR WITH THREE ARROWS OR ANYBODY ELSE. IF IT WERE TO FALL THAT MUCH, IT WOULD BE CONCERNING BUT YOU HAVE TO TAKE NOTE THAT YOU SAW MASSIVE TECH FIRMS REPORT EARNINGS THAT WERE VERY DISAPPOINTING. YET BITCOIN HOLDS UP GENERALLY IN THE FACE OF THAT.
WHEN BITCOIN HAS BEEN TRADING CORRELATED TO THE NASDAQ FOR A WHILE. I WILL REFER BACK TO A NOTE A COUPLE DAYS AGO THAT CRYPTO HAS TRADED IN LOW CORRELATION TO THE S&P FOR MOST OF ITS LIFE BUT IN THE LAST EIGHT MONTHS, IT WAS VERY CORRELATED TO THE NASDAQ. AND HE SAYS, THERE ARE RISK ASSETS STRUGGLING.
THE S&P WAS DOWN, TREASURIES ARE DOWN, THE GALAXY CRYPTO INDEX WAS UP 3.7% IN THAT SAME TIMEFRAME. NEAR-TERM SIGNS OF DECOUPLING, DOES IT HOLD IS THE MAIN QUESTION FOR THE MARKET. EMILY: BLOOMBERG'S SONALI BASAK, AS ALWAYS, APPRECIATE IT. COMING UP, OVERSTOCK, WE WILL TALK ABOUT THAT AND MORE WITH IT CEO JOHN JOHNSON. THIS IS BLOOMBERG. ♪ EMILY: MORE EARNINGS TODAY. INCLUDING OVERSTOCK. MISSING ESTIMATES OF RISING INFLATION, I WANT TO DATE INTO THE NUMBERS AND E-COMMERCE TRENDS WITH JONATHAN JOHNSON, THE CEO. THEY DO SO MUCH FOR JOINING US,
EARNINGS BEAT BUT WE SAW REVENUE DROPPED MORE THAN 30%. WHAT IS DRIVING THIS, INFLATION? IS IT THIS PENDING DOWNTURN? JOHN: IT'S A LOT OF THINGS. PANDEMIC NUMBERS WE GREW REALLY WELL. IT'S A VERY PROMOTIONAL ENVIRONMENT. MANY OF OUR COMPETITORS HAVE
TOO MUCH INVENTORY AND ARE WORKING TO LIQUIDATE THAT. THAT MAKES THE ENVIRONMENT MORE DIFFICULT. AND OF COURSE, THERE IS INFLATION AND INTEREST RATES. WHEN INTEREST RATES RISE, HOUSING SALES GO DOWN, THAT HURTS OUR BUSINESS AS A HOME FURNITURE RETAILER.
LOTS GOING INTO IT. THE GOOD NEWS IS WITH ALL THAT HEADWIND, OVERSTOCK IS PROFITABLE FOR ITS 10TH CONSECUTIVE QUARTER. WE'VE GOT A BURIED ASSET-LIKE BUSINESS MODEL THAT WORKS. EMILY: HOW IS OVERSTOCK RESPONDING? THERE IS CRITICISM THAT GROWTH IN ADVERTISING IS OVERSHADOWING RETAIL ON THE WEBSITE AND THAT THERE ARE TOO MANY PROMOS. JOHN: IN A HIGHLY PROMOTIONAL MARKET, WHERE COMPETITORS ARE HOLDING MORE AND MORE SALES, WE HAVE TO BE THERE. OUR VIEW IS WE'RE ALWAYS GOING
TO PROVIDE SMART VALUE TO OUR CUSTOMER, WHICH MEANS THE BEST PRODUCT THEY CAN AFFORD FOR THE AMOUNT OF MONEY THEY ARE SPENDING. REALLY QUALITY PRODUCT. WE PROMOTE. WE ARE ALSO IN THE MIDDLE OF LAUNCHING THE NEW MARKETING CAMPAIGN THAT ASSOCIATES OUR BRAND MORE WITH HOME. WE ARE A 100% HOME FURNITURE AND HOME FURNISHINGS COMPANY. WE GOT A NEW AD TITLED "COME ON, GET COMFY," WE'VE GOT SOCIAL MEDIA BRAND INVESTORS THAT HAVE SIGNED ON REALLY PUSHING OUR MOBILE APP.
THERE IS A LOT OF MARKETING PUSHING OVERSTOCK SALES THAT ARE NOT JUST PROMOTIONS. EMILY: LET'S TALK ABOUT THE BROADER LANDSCAPE, AMAZON'S STOCK WAS PUMMELED TODAY, NOT A BRIGHT SPOT FOR THE HOLIDAY QUARTER. I'M CURIOUS IF YOU ARE EXPECTING TO FEEL SIMILAR TRENDS. JOHN: IT'S A VERY COMPETITIVE MARKET IN A TOUGH ECONOMY. OUR TOP LINE SALES WERE DOWN YEAR-OVER-YEAR SIGNIFICANT LATE, WE'RE NOT PLEASED WITH THAT.
BUT IT IS INCUMBENT UPON ALL BUSINESSES WHEN THAT HAPPENS TO MANAGE THE BOTTOM LINE AND MAKE SURE YOU ARE PROFITABLE. TODAY IT IS LIKE WE ARE HIKING DOWN TO THE GRAND CANYON. AND WE ARE GOING TO HAVE A LONG HIKE UP AT SOME POINT. IN ORDER TO HIKE UP THAT NORTH RIM, EVERY HIKER NEEDS ENERGY AND FUEL, AND FOR A RETAILER THAT MEANS YOU NEED LOTS OF INVENTORY AND A STRONG BALANCE SHEET. OVERSTOCK HAS BOTH. I THINK THAT BODES WELL FOR US IN THE FUTURE. EMILY: LET'S TALK ABOUT INVENTORY BECAUSE YOU HAVE BEEN DIVERSIFYING PRODUCTS, AND I'M CURIOUS HOW THAT IS WORKING OUT, FOR EXAMPLE, WHEN AMAZON DIVERSIFIED RETURN RATES WENT UP. ARE YOU GETTING MORE RETURNS AND HOW WOULD YOU SAY YOUR
RETURN OPERATION COMPARES? JOHN: WE ACTUALLY BEEN FOCUSING. WE WENT FROM BEING A GENERAL MERCHANDISER, AND OVER SIX QUARTERS WE GOT RID OF EVERYTHING THAT WASN'T RELATED TO HOME. WE ARE REALLY A HOME FURNISHINGS COMPANY. THE LAST THREE YEARS, WE HAVE DOUBLED THE AMOUNT OF HOME PRODUCT WE HAVE ON SITE. THAT DOESN'T MEAN TENS OR HUNDREDS OF THOUSANDS MORE, IT MEANS MILLIONS MORE PRODUCTS. WE HAVE ALWAYS BEEN GOOD AT MANAGING RETURNS ON HOME FURNITURE AND FURNISHINGS. THE DIFFICULT THING TO DO, WE
THINK IT IS ONE OF THE CHARACTERISTICS THAT SETS US APART. WE ARE ALL ABOUT EASY DELIVERY AND SUPPORT FOR OUR CUSTOMERS. THEY KNOW THAT IF THEY BUY SOMETHING FROM US, THEY ARE GOING TO HAVE A GOOD EXCRETES ON THE BACK END THAT'S GOING TO BE DELIVERED WELL AND ON TIME. AND DIFFER ANY REASON THEY WANT TO RETURN IT, WE ARE GOOD AT FACILITATING THAT RETURN AND WE ARE GETTING EVEN BETTER WITH OUR PARTNERSHIP WE ARE PILOTING WITH UBS RIGHT NOW. EMILY: GIVE US A STATUS ON THE SUPPLY, IS THE WORST BEHIND US? JOHN: I THINK MOST RETAILERS ARE FLUSH WITH INVENTORY. WE ARE FLUSH WITH INVENTORY, TOO.
THAT PIECE OF THE SUPPLY CHAIN IS NOT A CONCERN. IF CUSTOMERS ARE WORRIED ABOUT GETTING PRODUCT ON TIME FOR THE HOLIDAYS, YOU COME TO OUR SITE, PUSH CLICK TO ORDER AND WE ARE PACKING AND SHIPPING THAT DAY OR THE NEXT. SO THERE ARE NO WORRIES THERE. ON THE SUPPLY CHAIN FRONT, STUFF BEING MANUFACTURED OVERSEAS, THAT SUPPLY CHAIN IS RUNNING FAIRLY SMOOTHLY. CONTAINER COSTS HAVE GONE WAY DOWN, PORTS AREN'T CLOGGED LIKE THEY WERE BEFORE.
THE POINT WHERE THERE ARE STILL SUPPLY CHAIN CONSTRAINTS IS FROM THE DISTRIBUTION CENTER TO THE CUSTOMER. THAT'S MOSTLY A CUSTOMER EXPENSIVE BECAUSE OF HIGHER FUEL, MORE SURCHARGES. THAT MEANS IT IS EITHER BEING PASSED ON TO THE CUSTOMER OR IN OUR CASE, EATING PART OF OUR GROSS MARGINS. EMILY: WHAT ARE GOING TO BE THE MOST POPULAR ITEMS THIS HOLIDAY SEASON? JOHN: WE'VE GOT A LOT OF INVENTORY. WE HAVE GIVE DOUBLE PRODUCTS,
LOTS OF HOME APPLIANCES. BIG BRAND NAMES LIKE KITCHENAID, MR. COFFEE, CRUISING ART -- CUISINE ART. THESE ARE HIGHLY GIFTABLE, WE'VE GOT LOTS OF THEM. THE OTHER THING IS HOME IMPROVEMENT. PEOPLE ARE STAYING AT HOME AND THEY WANT TO SPRUCE IT UP. EMILY:
SOME GIFT IDEAS, TOO THAT I HAD THOUGHT OF. JOHN JOHNSON, CEO OF OVERSTOCK, THEY DO SO MUCH FOR JOINING US. AND THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY". FRIDAY, WE'VE GOT ROSS GERBER, YOU WILL BE TALKING ABOUT ELON MUSK AND MORE, A BIG TESLA INVESTOR WHO IS NOT SUCH A FAN OF TWITTER.
AND WE WILL GIVE YOU AN UPDATE ON THE DEAL. THIS IS BLOOMBERG.
2022-10-28 21:12
