July 30, 2025 • 42 mins
Bloomberg’s Caroline Hyde and Ed Ludlow speak with the heads of Palo Alto Networks and CyberArk about the $25 billion acquisition deal the cybersecurity companies have reached. Plus, investors look for signs of growth and payoff from AI spending as big tech companies prepare to release earnings. And Anthropic nears a fundraising deal that would value the AI startup at $170 billion.
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Eva Low in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up. All eyes on Tech
earnings today, Meta and Microsoft, but also chip names Quote
Common Arm all reporting after the closing.
Speaker 3 (00:30):
Bell, pus Palo Alto Networks buys cyber arc from about
twenty five billion dollars in cash and stock.
Speaker 4 (00:35):
We'll discuss with the two companies.
Speaker 2 (00:37):
And then propis nearing a deal to raise as much
as five billion dollars, which would value the AI startup
at one hundred and seventy billion dollars.
Speaker 3 (00:46):
Meanwhile, let's talk about the public markets. That topic not
on there yet, but we look actually a little bit
of risk on attitude ahead of a huge day.
Speaker 5 (00:54):
Ed.
Speaker 3 (00:54):
You mentioned the earnings after the bell. We've also got
the FED decision that comes slap bang in the middle
of the trading day. Scott Besson, Treasury Sector. He's saying
he wants a little bit of imagination from the Fed.
We're up three ten percent, big tech manager to drive
us forward. What are you looking at on the micro points?
Speaker 2 (01:09):
Yeah, and usually I'm going to go to the private
market's big story that bloomboag broke in the last twenty
four hours and Thropic raising five billion dollars one hundred
and seventy billion dollar valuation. Later in the program we'll
get the details from Kate Clark who broke that story.
But it's a massive jump from the valuation earlier in
the year. Earnings is everything right now? We get the
first of the two mag seven names after the bell.
(01:31):
Two more tomorrow, but we're looking at capital expenditures. That's
the clear story for both Meta and Microsoft. And then
in the chip sector you have arm and you have Qualcom.
We're thinking smartphone, we're thinking laptop and tariffs probably as well.
My goodness, what an afternoon rim.
Speaker 3 (01:45):
For and we brace ourselves. Let's get more ahead of
those big tech earnings. Meta, Microsoft here to talk about
what to expect. Bloomberg's ran Vastelica and look, the valuations
are enormous that these companies, the expectations are high. What
will we hear on capital expenditure? Do you think is
it going to rise?
Speaker 6 (02:01):
I'd say that's the consensus right now, especially at Meta,
which has been extremely aggressive and it's all of its
AI plans. I'm sure you saw the story that Bloomberg
had about the two hundred million dollars pay package for
one AI engineer. Age a lot of acquisitions. They've been
doing a lot of talent buying, and of course a
lot of spending on data centers and video chips, so
(02:22):
on and so forth. So I think especially there people
are expecting to see a lot of spending, and also
at Microsoft, maybe a little bit less aggressive there, but
certainly these are two of the biggest customers for Nvidia,
and there are also two of the biggest outperformers this year,
at least among big tech. If there's any disconnect between that,
that's going to be the real focus for tonight.
Speaker 5 (02:41):
Ryan.
Speaker 2 (02:42):
I really appreciated how you and fully said sort of
framed it in your story. Meta has captual expenditure growth
of one hundred percent year on year, probably Microsoft thirty percent.
But on the top line you're going to get fifteen
percent growth from fourteen percent growth respectively. Where is it
that the cell side of most focused. What is the
metric that they're looking for? I think, particularly in Microsoft's
(03:03):
case as well.
Speaker 6 (03:04):
Microsoft, the focus is as usual still going to be
on the pace of Azure growth, that's its cloud computing business.
People are also looking to see if they say anything
about what kind of impact AI is having on sort
of overall demand for office for with its copilot product,
you know, things like that. That's going to be a
real focus for them. I think people are growing more
comfortable with the level of AI spending, so long as
(03:27):
these companies can show that they are seeing a return
on this. Last week, of course, we had Alphabet also
increase its capec planned by quite a bet. People were
okay with that because people feel like, you know, this
stuff is going to pay off, especially over the longer term.
They are really sort of developing a mode in terms
of their AI businesses. So so far we haven't seen
too much caution, but like you said, expectations are getting
(03:48):
higher and higher. The stocks have been doing extremely well
this year. It wouldn't necessarily be surprising if we did
see a pullback on these news.
Speaker 3 (03:55):
Roun Less, Seleka is going to be all over those
numbers when they break up to the bell. Let's now
turn to our first guest ude. Charuvaru's portfolio manager at
Harding Lovner, a fifty five billion dollar asset manager, you
have Microsoft, you're Meta and your global strategy among them.
An easy question or maybe a simple question, we'll see
how hard it is to answer. Is it vindicated this
(04:17):
couple expenditure increase.
Speaker 7 (04:19):
Look, the capital and expenditry is bigger than what we've
seen for many years, and let's say in historical, historically
high proportions. Now as in thisss we patient right now.
I don't know how long our patients will last if
we don't hear the real monetization and prioritization story from MITA.
Speaker 3 (04:34):
I'm going forward, let's talk about the prioritization. Interestingly, Mark
Zuckerberg has put out a post both video and text
today trying to say why personalization is important when it
comes to superintelligence labs. Do you understand the business case
as to why Meta needs to win that race?
Speaker 7 (04:51):
I understand the business case because if they don't do it,
someone else will get someone else will do it, and
then engagement goes to the person who does it. So
that's the first reason I think why he's doing it
from that perspective to increase engagement and then convert that
to monetization later on.
Speaker 5 (05:06):
But what's less clear is what that.
Speaker 7 (05:08):
Means for the next nextam that they want to hit,
Because at the end of the day, there's a limited
advertising market and as much as Medica wants to, they
can't be one hundred percent of the market. So they've
got a ceiling. They need AI to raise that ceiling.
And that's where the question mark for us as a
mess comes to.
Speaker 5 (05:26):
Boody forgive me on this one.
Speaker 2 (05:28):
Sometimes markets and Wall Street and technology investors can have
short memories. Do you remember when we were talking about
the year of efficiency and if I were to show
you this chart of capital expenditures from Meta and you
look at the beautiful green column that shows seventy two
billion dollars at the upper end of the range and
the idea maybe that column could go up even more,
(05:51):
how do you reconcile that as a META investor?
Speaker 7 (05:54):
So I think when we lou as Meta investors, what
we see right now is revenue growth. Revenue growth has
been come from their core business, which is their advertising business.
So what they've spent on AI so far has been
driving that growth and has been improving the rate of
change of growth over the.
Speaker 5 (06:10):
Last few years.
Speaker 7 (06:11):
So that justifies the valuation for now.
Speaker 5 (06:14):
The question is.
Speaker 7 (06:15):
If they continue on for two year, three year, that's
when as investors we start getting worried. And I think
if you go back five years, that's what happened with
the reality labs. Like the first year of reality labs,
they can hear real idea, people say hey, look, we
can understand what it is. But then you got to
the third and fourth here and said, well, we'll hang on.
Speaker 5 (06:32):
Always sees losses.
Speaker 7 (06:33):
We're just not seeing the revenue generation coming out of this.
So we were at that early stage. So that's why
as investors were patient. But I think we are going
to be asking more and more questions, what's the monetization
story and what's the next step that we should be
looking at as a product from this business.
Speaker 2 (06:52):
I'm jumping ahead twenty four hours to Apple, but the
news story this morning was the President talking about tarifs
with India. So we did the analysis and we looked
at the phone supply chain and assembled phones coming out
of India, and we have that data. It's a really
interesting market for Apple, but the story still seems to
be a heavy reliance on supply chain and end market
(07:13):
in China for Apple.
Speaker 7 (07:15):
Yeah, I mean at the end of the day that
Apple still remains a bit primarily doing by two things,
won their services and then the phone growth. What we
what we haven't seen is an expansion into a new
product line, something that I think is required for Apple
to take the next step from from A for its
evaluation to make even more sense. What will what would
(07:36):
what these tariffs will do is make the price approyance higher.
Speaker 5 (07:39):
And that's what we saw.
Speaker 7 (07:40):
And I think Verizon's results they said there's there's been
some pull forward or buying your phones. What that What
that means for Apple, I'm not sure yet. They're coming
up with a fold of phone. How that will impact
investor demand?
Speaker 1 (07:53):
How?
Speaker 5 (07:54):
Sorry?
Speaker 7 (07:54):
Consumer demand is also questionable. So from the way we
stand right now with Apple is it's an expensive evaluation.
Speaker 5 (08:01):
If there is no next story to this.
Speaker 3 (08:04):
Let's go to the story of Microsoft as they come
out after the ball as well. It's interesting we talked
how do I with Apple a little bit with Matter
as well with their hardware. Microsoft, the winning formula has
been Cloud and Azure. How much do you need to
see how much AI is incrementally improving and fast tracking
that growth?
Speaker 7 (08:21):
So I think it's not how much it's such a
trajectory that we want to see. We want to see
positive trajectory compared to last quarters, and then we'll want
to see comparison of them to Google. Google showed a
thirty plus percent growth in their cloud business. We want
to see roughly around that at least for Microsoft, and
then from that point of view, they've got other leavers.
(08:41):
It's not just cloud growth, it's also as I said,
office You know, how much is office take up going
how much are people going up up the pumium teers
in Apple subscriptions to take on AI. So it's not
just how much cloud, how much cloud AI is coming through,
how much AI is percolating into other products that they're selling,
and what premium pricing can they get out of.
Speaker 5 (09:00):
That is what we focus on.
Speaker 3 (09:01):
And what was so shrewd of Setia and Microsoft writ
large was their relationship with open Ai very early in
things and integrating that within but almost there's a frenomy
relationship going on. There's a competitive instinct. We understand that.
Of course open Ai trying to restructure its own self
into a for profit and maybe we see Microsoft have
access to their technology for a bit longer. On the
(09:22):
back of that, how do you think that relationship is
going and how much do you think Microsoft can compete
almost against the company it helped more.
Speaker 7 (09:28):
Yeah, Look, it's hard to sit from the outside and
say how that relationship is going.
Speaker 5 (09:33):
But what we can see is.
Speaker 7 (09:34):
A open AI is now going aggressively into the enterprise
software space.
Speaker 5 (09:39):
What that means that.
Speaker 7 (09:40):
If not today tomorrow, they will start competing with Microsoft
on certain product lines, not across the board, but on
certain product lines. So that will put strains on that relationship,
and that will mean how do they negotiate the technology
transfer between those two and how do they translate in
terms of distribution Because my open AI is using Microsoft
in dis vision at this point in time, So to
(10:01):
me it's uncertain right now. But if you had to
pick someone who's got an advantage, it's probably his open
ai more than Microsoft at this point of time.
Speaker 2 (10:10):
Gooday, we're making a really big deal of the next
two days. We have a FED meeting, We have two
earnings tonight that we really care about to tomorrow. On
the byside, do you look at it that way? Is
anything that happens in the next forty eight hours going
to change your strategy or your approach?
Speaker 5 (10:26):
Look? We're long term investors.
Speaker 7 (10:28):
We manage a diversify a portfolio global stocks, and we
have investment horizons of three to five years. So what
happens in the next two days gives us an indication
or whether our investment mile posts and investment thesis are
going on track. And if something's really off, then we're like,
we'll have.
Speaker 5 (10:44):
To figure out.
Speaker 7 (10:44):
But I don't expect there to be any short term
news that will change our strategy dramatically, but it will
keep us on our toast and trying to understand what's
happening in the world and is the direction of all
the things in terms of the company fundamentals traveling in
the way that we wanted to whether we should react
to it, But it's unlikely that we're going to be
too reactive to whether the FED raises us interest rates
(11:06):
or keeps interest rates from outflet.
Speaker 2 (11:07):
Today Udae Truviu from Harding Lovna, Thank you very much.
Now coming up on the show, Palo Alto Networks has
agreed to buy cyber Arc Software in a cash and
stock deal valued at about twenty five billion dollars. We
speak with Palo Alto Network CEO Niickesh Aurora and cyber
Arc executive Chair Udi mccardi. That's next. This is Bloomberg Tech.
(11:37):
Palo Alto Networks has agreed to purchase cyber Arc Software
in a cash and stock deal, valuing the cybersecurity company
at about twenty five billion dollars. Joining us to discuss
the deal, Nikesh Aurora, Palo Alto Networks CEO, and Udi McCarty,
cyber Arc Software Executive Chair. Gentlemen, welcome to Bloomberg Tech.
We're grateful for your time. Nikesh. I'll start with you
(11:57):
if I may. How much was this deal? And I
want to focus on the technology landscape here. How much
was this deal? A direct response to the wiz Google
deal and generally the domains the hyper scalers are focused
on right now when it comes to security, well, I.
Speaker 8 (12:13):
Think these are very different transactions. Set look from our perspective,
if you look at the last two years or two years,
what has gone on. What has gone on is that
we're seeing this huge conversation about AI now most lately
and I just saw your segment prior to this.
Speaker 5 (12:27):
You guys are talking.
Speaker 8 (12:27):
About billions of dollars being spent. Well, what's those billions
of dollars going to result in the billions of dollars
are going to result in tremendous amounts of AI adoption
around the world on two vectors. One, we get very
smart models out there that are going to be executed
by companies. On the other side, there's going to be
tremendous amounts of agents out there that are going to
start accomplishing.
Speaker 5 (12:46):
Tasks on our behalf.
Speaker 8 (12:47):
Now, if you imagine the proliferation of agents for companies
for individuals, you're creating a whole new attack surface from
an identity perspective. The more agents, the more possibilities of
agents can be hijacked, taken over and be used for
cyber attacks. In that context, it became impetative for us
as a comprehensive cybersecurity player to make sure we have
(13:08):
the identity solution in the market.
Speaker 5 (13:09):
And if you look at the market and the.
Speaker 8 (13:11):
Identity space and make you talk more about it, the
number one company who understands identity security in the world
is cyber arc, So we think they're poised at the
right place to be able to capitalize on that opportunity
of AI being deployed everywhere. At the same time, we
need to have a platform that reacts in real time
because AI is going to make it easier for attackers
to go and attack people quickly. So from both those vectors,
(13:33):
it became impetative for us to make a move and
deliver an identity capability in our portfolio to make sure
that we can secure our customers. So that's why this
makes sense.
Speaker 2 (13:43):
If AI agent and the offering there is absolutely critical.
What cyber aarre going to get from this relationship being
a part of pallelto networks, particularly with your existing partnerships
and customer base.
Speaker 9 (13:55):
Oh absolutely, Look, as the founder here, we had the
vision of that identity is a security problem, not a
maagement problem. And then the attackers followed them in ninety
percent of attacks. That's how they how they get in
and also how they how they propagate. And as the
cash said, there's an inflection point because you add on
top of that into that fire you had machine, you
(14:16):
add machine identities and AI agents that behave like a
machine and and somewhat like and they're also relentless like
a un so they behave like a machinery, relent like you.
So we we are excited to join Palo Alto because
of the scale and the technology integration so that we can
bring forward.
Speaker 10 (14:34):
We already have integrations that we started to work on
as a partnership, and we just solve that.
Speaker 9 (14:39):
Pal Alto with its platforms, can correlate the data, can
leverage insights to stop attacks in seconds.
Speaker 5 (14:47):
And together we can bring identity security.
Speaker 10 (14:49):
To tens of thousands of organizations out We're proud at
cyber We're proud to have eight thousand customers out there, Palotas,
seventy thousand Glass customers. We have many joint channel partners
and together we're really going to.
Speaker 4 (15:04):
Go global, going global.
Speaker 3 (15:07):
Nikesh and I get this from the platformization strategy that
you have. In particular, talk to us about the operating
margin and how you ensure that that remains amplified because
you don tuckins, you're an inquisative guy. How does this
in the longer term feed profitability, feed the growth story
of Palo Alto Networks.
Speaker 8 (15:25):
Well, Carol and I've always maintained for the last seven
years that if you want to be successful in enterprise,
you want to be a large enterprise software company, you
have to scale. If you look at every enterprise company,
look at the top ten, all those companies enjoy higher
margins and that's driven by the efficiencies that they get
from go.
Speaker 5 (15:41):
To market and sales and marketing.
Speaker 8 (15:43):
I think the fact that we can work with cyber
arc to work at three levels. One, we think there's
a huge opportunity accelerating the top line for cyber Arc
and identity with the partnership power out. We have a
global presence. We have more presence in Europe they do.
We have more presence in Asia Pacific. We have product
together which allow us to innovate and drive.
Speaker 5 (16:02):
The top line.
Speaker 8 (16:03):
Couple with the fact that we have a reasonably efficient
backbone we run our infrastructure on. You know, we're pushing
twenty eight twenty nine percent margins and we have set
a target north to thirty percent for our company. That's
going to be a huge step up from where cyber
our corporates and we think we can get them there
and collectively perhaps aim for hire not just that on
on the margin side, but also on the cash flow
side as a consequence on us being able to drive
(16:24):
better margin. So we think there synergy is built in
driving top line. There's synergies in bringing our scale capabilities
to cyber Arcs backbone and infrastructure, and think we already
articulated that this is going to be both gross margin
and revenue a creative right from day one.
Speaker 5 (16:41):
In addition to that, we expect.
Speaker 8 (16:43):
We'll get to cash flow accretion and about FY twenty eight.
But this doesn't include all the go to market top
line capabilities that we're going to spend the next few
months making sure we get them executed and implemented collectively
or be ready to execute in cases where we need
to merge them together.
Speaker 3 (16:56):
OTI, are the CEOs that you've been speaking to and
the ones that you're now going to win over with
this combination. Are they as aware of agentic AIS risk
factors as you think they should be.
Speaker 9 (17:07):
It's the number one thing they're hearing from their chief
security officers when they ask and when board members ask.
Speaker 10 (17:12):
What are you worried about now? Is the proferation of
agents and like I said, relentless agents that want to
get the job done. And of course in any simulation
of an attack.
Speaker 9 (17:21):
They find that identity is the source of right attacks
get is.
Speaker 10 (17:24):
So identity is top priority for organizations already and sprinkled
with AI on top, it's rising up there and it's
one of the biggest maybe top concerns you see as
chief security officers and.
Speaker 2 (17:36):
CIOs nikkeish I spent all morning staring at cyber Arcs
share price chart over the last few years, even as
well or not it Yeah, so I'm sure you'll tell
me that this is worth every single penny, but just
use it to say how pressing it was to get
this deal done, the technology environment and the kind of
(17:56):
core competencies that you acquired, even the premium that you
may be paying.
Speaker 8 (18:01):
So yet six and a half seven years ago and
I joined Power Alta, we were an eighteen billion dollar
market cap company. The only way we got where we
did north of one hundred and twenty five is by
making sure we had a point of view of what
where the world is going to go in the next
three to five years, What do we need to have
in terms of capability to make that happen and be
executed relentily towards it. I'm telling you today the collective
(18:23):
start price of cyber arg and poal Aalta are an
all time low because the next five years from now
you will see the demand for a comprehensive security suite
across multiple platforms where the only players in the industry
who are going to be able to deliver that. You'll
see a huge focus on identity. They haven't even talked
about how we can take what cyber Arc does from
eight million users to hundreds of millions of users. So
(18:44):
from that perspective, we have to do this deal now.
Is going to take us six to nine months to
close it. It's going to take us eighteen to twenty
four months to get the products in play in line
to get go out there and conquer this market. But
we're not going to get to a turn of fifty
two pillion dollar market cap company if we don't make
these now and worked relentlessly for the next five years
to get there.
Speaker 3 (19:03):
Nicashaura, talking of that market capitalization, we thank you of
Palo Alto Networks and Udi McCarty of cyber Arc. Great
to have your gentlemen joins.
Speaker 4 (19:17):
Anthropic.
Speaker 3 (19:18):
It's reportedly close to funding a deal, a new funding
deal in fact, that would value at one hundred and
seventy billion dollars. Zai startup is looking to raise as
much as about five billion Iconic capital leaving the round
we understand for more. Let's get to believe the most
cap Clark who helped break this story. And what's phenomenal
is the valuations, but also the change in valuation.
Speaker 11 (19:37):
Absolutely. Yeah, the company was valued at sixty billion just
a few months ago, so this is really a tremendous
leap for Nentropic.
Speaker 2 (19:44):
Kay, You've got some interesting details in the reporting about
some of the financials ARRR in particular, what do we learned?
Speaker 11 (19:51):
So the company's at about five billion dollars in recurring
revenue and it's projecting to reach nine billion by the
end of the year.
Speaker 2 (19:59):
You also managed to name some of the big name
investors that are going to participate in This is interesting
because of recent reporting around Anthropic and Dario ami Day
and his I guess shift in position on where they're
willing to take capital from.
Speaker 11 (20:13):
Yes, so it's not surprising there are a few sovereign
wealth funds that are interested in investing Anthropic. One of
those funds is Qatar Qatar Investment Authority. And the reason
why this is interesting is Anthropic has in the past
said that it wasn't interested in taking money from some
of these giant Middle East sovereign wealth funds, citing national
security concerns, but in a recent memo to employees. Dario,
(20:36):
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.
Speaker 3 (20:42):
The code in your story from Dario that memo, Unfortunately,
I think no bad person should ever benefit from our success.
Is a pretty difficult principle to run a business on.
I mean, almost biting the hand that is potentially going
to feed in a memo to staff. But clearly QATARS
wants in, and you have to take the money if
you're going to expand in terms of infrastructure, right.
Speaker 11 (21:04):
Right, And we'll see if they actually end up. I mean,
maybe he will. Daria 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 one billion dollars in around
like this unless you're Iconic, exactly, unless you're Iconic, which
(21:26):
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 aanthropic without raising money from some of these
Middle East funds.
Speaker 2 (21:38):
We just showed on the screen, open Ai, 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.
Speaker 11 (21:48):
I mean, it's an incredible moment opening eye valued it
over two hundred and forty billion, Anthropic one hundred and
seventy billion, XAI and talks for two hundred billion. Like this,
I've never seen anything like this before, and I think
there's nowhere to go but up for the time remating.
Speaker 2 (22:02):
We'll see right wienboth k Clark and the team just
smashing it on, staying on top of rounds that we
still think are yet to close.
Speaker 4 (22:15):
Welcome back to Bloomberg Tech.
Speaker 3 (22:16):
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 delayed 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 we
want to show that Actually one company is doing particularly
well after its earnings, EA FC Sports.
Speaker 4 (22:37):
There's a good trend their line.
Speaker 3 (22:39):
We're also seeing Battlefield six a lot of anticipation for
that game. We're up six point four percent best Stations
February for EA. I'm looking at Armholdings flat as a
pancake at the moment, as we anticipate whether it can
meet those twelve percent revenue growth anticipation. And also remember
this is a company that trades above the twelve month
price target on average from analysts, So will they manage
to vindicate some run up in their shares. I'm looking
(23:01):
at qual Comm, no run up in their shares. They've
been lower throughout the year. They're down again one point
two four percent ed. A lot of this about concerns
of the exposure to iPhones, to China and notably of
course to the auto sector too.
Speaker 2 (23:14):
Yeah, armon Qualcom posting anythings at the same time is
not that unusual, but it keeps one man in the
bloomberg USUA and very busy. And that man is Ian King,
who leads US semi conduct to coverage. You 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
(23:35):
diversifying away from smartphone to automotive other areas, but we
will be very zeroed in on the help of the
smartphone market.
Speaker 12 (23:42):
Yeah, I mean, that's been the tale on the CEO
of Christiano Orman, who I believe you're going to be
speaking to you tomorrow. He's certainly made progress and things
like auto. He's certainly made progress in things like PCs,
and that's great, but unfortunately he's still beholden massively to
the smartphone market. And nobody is excited about the smartphone
market anymore, at least in terms of growth, and that's
(24:04):
what we're up against this quarter, where we might see
some tariffs have it weighing upon that.
Speaker 3 (24:08):
I mean, it is interesting that the IoT space is
where they're trying to been focus. So too is a
diversification into autos in arm as well. The design company
has been trying to diversify. Is that going to have
paid off?
Speaker 12 (24:21):
Yeah, it's a very similar story in that again, you know,
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, you.
Speaker 5 (24:35):
Know, where their revenue.
Speaker 12 (24:37):
Is coming in into It's like, well, what's going on
in the smartphone market? How 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.
Speaker 2 (24:53):
Between the two companies, ARM and its relationship with Qualcom,
there is some tension, some beef, as the kids would say,
why and what's going on?
Speaker 12 (25:02):
Yeah, I mean there's 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.
Qualcomm acquired made an acquisition of another license of ARMED technology.
(25:26):
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.
Speaker 2 (25:35):
The kids don't say beef anymore. According to Bloomberg Tech
producer Marguerite Gallerini. But we will still be watching out
for something Bloomberzi and 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 Qualcom.
I think, you know, I always look at the earnings
print and the commentary and then try and get a
bigger picture on the smartphone market. Sometimes christianom On can say,
(25:58):
here's what we see, you know, the world in our
key end end market. What will you be looking for beck.
Speaker 5 (26:06):
To see you ed.
Speaker 13 (26:07):
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.
Speaker 4 (26:15):
This is not the biggest growth market for AI right now.
Speaker 13 (26:18):
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.
Speaker 4 (26:35):
So you're twenty twenty eight, you're twenty twenty nine, you're twenty.
Speaker 13 (26:38):
Thirty, especially as AI moves more towards the edge, and
when you see AI move more towards the edge, Qualcom
would become more interesting at that time.
Speaker 3 (26:49):
More interesting in the longer term, in the near term,
talk to me about the valuation of AM because it
has basically risen above where most analysts think it should
be a currently price stack.
Speaker 13 (27:01):
Yeah, you know the that's a great point that the
one thing about ARM is this evaluation for me is
not justified the royalty rates they've doubled with V nine,
the architecture of V nine.
Speaker 4 (27:11):
But ultimately, why would I pay more.
Speaker 13 (27:15):
On the sales valuation for ARM than I would Nvidia, Broadcom,
these massive design companies that are taking market share versus
a royalty rate and somewhere in the four percent range. Uh,
to 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,
(27:36):
But would you have rather owned ARM or Apple?
Speaker 5 (27:38):
Apple? Of course?
Speaker 4 (27:39):
And I think something very similar is going on with
the you know AI.
Speaker 3 (27:43):
Okay, let's talk about the hair and now and what's
happening in AI and what we're about to hear off
to the bat as well, cause I know you have
a very keen focus on the Metro and the Microsoft
story as well. Look, all these companies are going to
vindicate the amount that they are currently spending on that
underlying infrastructure.
Speaker 13 (28:00):
When I look at these companies, I think Microsoft is
the one putting.
Speaker 4 (28:04):
Forward, putting its best foot forward.
Speaker 13 (28:08):
This company. The last time it gave us a number,
it was thirteen billion on Azure with a one and
seventy five percent growth rate sometime in twenty twenty six.
Speaker 4 (28:18):
I wouldn't be.
Speaker 13 (28:18):
Surprised if Azure reaches forty billion contribution from AI.
Speaker 4 (28:22):
That is a massive number.
Speaker 13 (28:24):
And then keep in mind it's not just the size
of that number for Microsoft, it's the rapid at sent
in reaching that number, and that piece, I think really
does separate Microsoft as the enterprise AI juggernaut.
Speaker 4 (28:39):
BEV.
Speaker 2 (28:39):
I really appreciate that explanation because what Microsoft does right says,
here is a percentage point growth figure for Azure, and
here is a points contribution specifically from AI. It'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
(29:00):
out the other side.
Speaker 13 (29:03):
When we are talking about forty billion potentially in twenty
twenty six. I would say, yes, we are reaching a
scale that is very meaningful, reached.
Speaker 4 (29:12):
It very quickly.
Speaker 13 (29:13):
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 of heart.
Speaker 2 (29:28):
I'm going to ask you something which might be a
little unfair, but 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
(29:49):
the marketplace, you.
Speaker 4 (29:52):
Know, on the public markets.
Speaker 13 (29:54):
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.
Speaker 4 (30:05):
I don't like Meta's valuation. This valuation is at a
historic high.
Speaker 13 (30:11):
Meta 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.
Speaker 2 (30:25):
And then let's look a little further afield, if we
may so, Microsoft, Medatoni, Apple and Amazon tomorrow. Which of
the evenings are you most excited about?
Speaker 13 (30:35):
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 Qualcom. They're the
smartphone market. There the EDGAI. There will be a moment
when that will lead. It's not right now.
Speaker 2 (30:58):
Bethkin Dig not excited about the calendar of the forty
eight hours to come. We're excited to have Beth Kindig
lead tech hand lists at Iofund back on the show.
Thank you very much, Caroline, you've got some news I do.
Speaker 3 (31:09):
It's time now for talking tech ad and first up, Tesla. Well,
it's agreed to buy four point three billion dollars worth
of US built batteries from LG Energy Solution. It's all
according to a source familiar with the deal, and that
LGA Energy revealed the contract without noting the customer in
a regularly filing. Tesla is working to expand its supply
from non China based suppliers of course, plus fox Cone,
(31:29):
and it's formed a pact that should help it's push
into AI hardware now I share swap deal with Taiwan's
Techo Electric and Machinery when it over schools fox CON'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
band for children under sixteen. Platforms including Instagram, TikTok and
(31:52):
now YouTube will face fines of up to thirty two
million dollars if young teens use their service starting on December.
The tenth YouTube position is that it's not a social
media company.
Speaker 5 (32:02):
Yet, okay.
Speaker 2 (32:04):
Coming up, cybersecurity top of mind to day in m
and A, We're going to speak with Cato Network CEO
Shlomo Kramer after it recently raised a new funding Also,
one of the early investors into Palo Alto Networks. Be
great to get his takes.
Speaker 5 (32:15):
Stay with us. This is Bloomberg Tech.
Speaker 3 (32:26):
Cyber m and A is dominating headlines this morning as
Palo alter Networks and cyber arct reached a twenty five
billion dollar deal. Here to discuss some of those trends,
the landscape and their own fundraising. Shlomo Kramer, Cato Networks
CEO Cato Networks as an Isabel based network security company
valuation of almost five billion dollars, and you've been raising
funds in a series g I'm really interested in as
(32:48):
someone who put the first seed check in. You were
one of the first board members of palowel To Networks,
what do you make of this platformization, this idea to
be going broader and broader as cyber security companies, right.
Speaker 14 (32:59):
So, I think it's ridge too far, and we've seen
the next generation growth of parlor decelerating of a number
of quote recently, and that's because they didn't They don't
really have a platform the core business, the network security business.
(33:19):
They have platformization, which is a promise, which is a
course to know 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 peer play
(33:40):
security company. I think the only one that pulled it
off is Microsoft because they owned the underlying.
Speaker 5 (33:47):
Operating system.
Speaker 14 (33:49):
But 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.
Speaker 3 (34:05):
And this is a philosophical difference you have. And ultimately,
while you went out and set up Cato Networks in
many way, and by you, I mean you've tooken Checkpoint public,
you took in Heber public. You're a man who knows
how to build businesses. But I'm interested you build Cato Networks.
What is it that you're seeing. Why is it people
are still putting money into when you're not yet a
public business.
Speaker 14 (34:25):
First of all, because we are going at forty six
percent y of the year, that's our last published results.
And we are at the beginning of a huge market,
the remaking of the network security marketing.
Speaker 5 (34:39):
It's a seismic change.
Speaker 14 (34:41):
It's interesting that Parol is now expanding beyond that because
there's so much work to be done here. It's one
hundred billion dollar market that is going to be re
architectured in the next ten years because of the way
are and that's the network security, networking, network security, not
including everything that AI will bring, and so it's really interesting.
(35:05):
It's a huge opportunity. It's just the beginning in the
next three years, sixty percent of enterprises are going to
start the migration to SAS. Based on Gardner, less than
fifteen percent have started it, and it's going to be
eighteen ninety percent of that market is going to transform
(35:26):
form appliances to SAS. So it's I think that's why
cato as, the only platform that was built for SAS
actually inventing the category, is continuing to go so fast,
and that's why we are going to be laser focused
in the next decade on network security, SASS, identity and SAS.
Speaker 3 (35:47):
For those who want clearly into the Lingo Secure Access Service.
Speaker 5 (35:50):
Edge exactly, Thank you, Shlomo get.
Speaker 2 (35:53):
I get the different domains like cyber arc is an
identity squority 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 Nikosh about this
morning was how much pressure there is coming from the hyperscalers.
You know, think about Google Cloud and its acquisition of Whiz.
They have offered more their own security tools. Are they
(36:17):
your competitors?
Speaker 5 (36:18):
Not at all? Zero pressure.
Speaker 14 (36:20):
Microsoft has been the at least on the network security side.
Speaker 5 (36:24):
We see zero pressure.
Speaker 14 (36:26):
The only player that came in is Microsoft, and we're
not seeing them. They definitely do not have the cloud
on the network side. Another example why different geographies in
the organization needs different leaders.
Speaker 5 (36:43):
And yeah, and so.
Speaker 14 (36:47):
The network securities that we are not seeing any of
the hyperscalers and I'm not expecting any of them coming
in any time soon.
Speaker 2 (36:56):
Put it another way, after a big piece of femina
and you're in history, and I appreciate you just raised funds,
but do you think that somebody might look at cater Networks.
Speaker 14 (37:07):
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 digitively transforming it to the cloud.
(37:32):
This is a ten years journey that we are excited
to embark upon.
Speaker 4 (37:37):
Tenure journey.
Speaker 3 (37:38):
Look, you just someone who I said at the start
takes companies public a Series G already worth almost five billion.
I mean, what are going to be the perfect precision points?
So then taking this company public?
Speaker 5 (37:48):
This is a good question.
Speaker 14 (37:49):
And we continuously evaluate that we are as a hyper
growth company. So we have options, both on the public
and the private, and will continue to considered both options.
I can tell you that we're as a company keep
a very high level of readiness, so once we decide
that this is the right moment, it will not take
(38:12):
us a long time to be public.
Speaker 2 (38:14):
Shlomo Kramer of the Cato Networks, it's great to have
you back on the show.
Speaker 4 (38:18):
Thank you very much.
Speaker 5 (38:19):
Think okay.
Speaker 2 (38:21):
It was almost an historic day for Australia's space ambitions.
Gilmore Space launched It's made in Australia Aris orbital rocket
payload a small jar of vegemite spread for toast, but
the rocket didn't get very far, crashing just fourteen seconds
after liftoff. Still, the company sounded up beat, posting on
(38:41):
X big step for launch capability team, safe data in hand,
eyes on test flight two. We'll keep tracking what's going
on in Australia space industry.
Speaker 3 (38:49):
Carac I'm ama mite gal, well, then a vegemite gal.
But I like that payload.
Speaker 4 (39:00):
Pigma CEO Dylan Field.
Speaker 3 (39:02):
There's already a massed a billion dollar fortune as the
company ready is to IPO this week, it would seem
but the co founder of the design software company could
receive another two billion dollar pay package if the company
stock hits certain goals. This is Figma's IPO is already
approaching forty times I've subscribed. It's sort according to sources.
Let's get to bloom nexs. Tom Maloney has really written
about the pay package here and look, this is a theme.
(39:24):
This is about really tying in the key man in
building this business for the longer term.
Speaker 15 (39:29):
Yeah, that's absolutely right, and that's what they've done. Just
last month they in a new compensation deal for him,
and that's going to give him up to twenty nine
million shares. As you mentioned, it's split into a performance
target where he has to get the share price up
to between sixty and one hundred and thirty dollars if
that kicks in. He's got ten years to do it.
And then there is a time besting portion of that
(39:52):
deal as well. All up, it could be worth four
billion if he hits the top of that share price range.
Speaker 2 (39:59):
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.
Speaker 15 (40:20):
That'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
A B and B in the article. I was just
actually looking at an older story we did on the
Ruvian founder who had a very similar package. We wrote
(40:41):
about that he could make billions. That was when Rivian
had one hundred dollars price handle. Today it's trading at thirteen,
So that just didn't go anywhere for him. So, you know,
sometimes these Moonshop packages really work out and other times
they don't, and.
Speaker 3 (40:54):
Sometimes you get a tattoo because of it. I mean,
I think it's actual enterprise is Taser maker. Basically Rick
Smith had a tattoo, got certain amount of benchmarks through
his two and a half billion dollar 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 pay package has meant so much for Delaware
and the court fight there.
Speaker 15 (41:13):
Yeah, Look, I think at the end of the day,
even 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. But at
the same time it received investor support. I mean, they
just voted for it again. So if you're an investor
and you see your share price go up by you know, three, four, five,
(41:36):
ten times, then I guess you're inclined to be generous.
Speaker 2 (41:40):
Right, Tom, just really quickly remind us of what happens now,
when's pricing, when's listing, how over subscribed around is just
the other details?
Speaker 15 (41:49):
Yeah, forty times oversubscribed pricing today, Trading begins tomorrow. You know,
I didn't mention he has a twenty twenty one pay
package that he is still collecting on. Depending on how
pricing shakes out, that could vest in the very near
future as well. So adding moret toy is wealth.
Speaker 5 (42:09):
Yeah.
Speaker 2 (42:10):
Wow, Of all of the IPOs we've covered, Carroe, take
a look at that chart in how much demand there
is for Figma. Bloomberg's Tom Maloney with a great hand
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 Caroen,
my goodness, Brace basically.
Speaker 3 (42:29):
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, Qualcom ARM.
Not to mention, of course, a key IPO were looking
for that pricing too.
Speaker 4 (42:46):
This is Bloomberg Tech.
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Eva Low in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up. All eyes on Tech
earnings today, Meta and Microsoft, but also chip names Quote
Common Arm all reporting after the closing.
Speaker 3 (00:30):
Bell, pus Palo Alto Networks buys cyber arc from about
twenty five billion dollars in cash and stock.
Speaker 4 (00:35):
We'll discuss with the two companies.
Speaker 2 (00:37):
And then propis nearing a deal to raise as much
as five billion dollars, which would value the AI startup
at one hundred and seventy billion dollars.
Speaker 3 (00:46):
Meanwhile, let's talk about the public markets. That topic not
on there yet, but we look actually a little bit
of risk on attitude ahead of a huge day.
Speaker 5 (00:54):
Ed.
Speaker 3 (00:54):
You mentioned the earnings after the bell. We've also got
the FED decision that comes slap bang in the middle
of the trading day. Scott Besson, Treasury Sector. He's saying
he wants a little bit of imagination from the Fed.
We're up three ten percent, big tech manager to drive
us forward. What are you looking at on the micro points?
Speaker 2 (01:09):
Yeah, and usually I'm going to go to the private
market's big story that bloomboag broke in the last twenty
four hours and Thropic raising five billion dollars one hundred
and seventy billion dollar valuation. Later in the program we'll
get the details from Kate Clark who broke that story.
But it's a massive jump from the valuation earlier in
the year. Earnings is everything right now? We get the
first of the two mag seven names after the bell.
(01:31):
Two more tomorrow, but we're looking at capital expenditures. That's
the clear story for both Meta and Microsoft. And then
in the chip sector you have arm and you have Qualcom.
We're thinking smartphone, we're thinking laptop and tariffs probably as well.
My goodness, what an afternoon rim.
Speaker 3 (01:45):
For and we brace ourselves. Let's get more ahead of
those big tech earnings. Meta, Microsoft here to talk about
what to expect. Bloomberg's ran Vastelica and look, the valuations
are enormous that these companies, the expectations are high. What
will we hear on capital expenditure? Do you think is
it going to rise?
Speaker 6 (02:01):
I'd say that's the consensus right now, especially at Meta,
which has been extremely aggressive and it's all of its
AI plans. I'm sure you saw the story that Bloomberg
had about the two hundred million dollars pay package for
one AI engineer. Age a lot of acquisitions. They've been
doing a lot of talent buying, and of course a
lot of spending on data centers and video chips, so
(02:22):
on and so forth. So I think especially there people
are expecting to see a lot of spending, and also
at Microsoft, maybe a little bit less aggressive there, but
certainly these are two of the biggest customers for Nvidia,
and there are also two of the biggest outperformers this year,
at least among big tech. If there's any disconnect between that,
that's going to be the real focus for tonight.
Speaker 5 (02:41):
Ryan.
Speaker 2 (02:42):
I really appreciated how you and fully said sort of
framed it in your story. Meta has captual expenditure growth
of one hundred percent year on year, probably Microsoft thirty percent.
But on the top line you're going to get fifteen
percent growth from fourteen percent growth respectively. Where is it
that the cell side of most focused. What is the
metric that they're looking for? I think, particularly in Microsoft's
(03:03):
case as well.
Speaker 6 (03:04):
Microsoft, the focus is as usual still going to be
on the pace of Azure growth, that's its cloud computing business.
People are also looking to see if they say anything
about what kind of impact AI is having on sort
of overall demand for office for with its copilot product,
you know, things like that. That's going to be a
real focus for them. I think people are growing more
comfortable with the level of AI spending, so long as
(03:27):
these companies can show that they are seeing a return
on this. Last week, of course, we had Alphabet also
increase its capec planned by quite a bet. People were
okay with that because people feel like, you know, this
stuff is going to pay off, especially over the longer term.
They are really sort of developing a mode in terms
of their AI businesses. So so far we haven't seen
too much caution, but like you said, expectations are getting
(03:48):
higher and higher. The stocks have been doing extremely well
this year. It wouldn't necessarily be surprising if we did
see a pullback on these news.
Speaker 3 (03:55):
Roun Less, Seleka is going to be all over those
numbers when they break up to the bell. Let's now
turn to our first guest ude. Charuvaru's portfolio manager at
Harding Lovner, a fifty five billion dollar asset manager, you
have Microsoft, you're Meta and your global strategy among them.
An easy question or maybe a simple question, we'll see
how hard it is to answer. Is it vindicated this
(04:17):
couple expenditure increase.
Speaker 7 (04:19):
Look, the capital and expenditry is bigger than what we've
seen for many years, and let's say in historical, historically
high proportions. Now as in thisss we patient right now.
I don't know how long our patients will last if
we don't hear the real monetization and prioritization story from MITA.
Speaker 3 (04:34):
I'm going forward, let's talk about the prioritization. Interestingly, Mark
Zuckerberg has put out a post both video and text
today trying to say why personalization is important when it
comes to superintelligence labs. Do you understand the business case
as to why Meta needs to win that race?
Speaker 7 (04:51):
I understand the business case because if they don't do it,
someone else will get someone else will do it, and
then engagement goes to the person who does it. So
that's the first reason I think why he's doing it
from that perspective to increase engagement and then convert that
to monetization later on.
Speaker 5 (05:06):
But what's less clear is what that.
Speaker 7 (05:08):
Means for the next nextam that they want to hit,
Because at the end of the day, there's a limited
advertising market and as much as Medica wants to, they
can't be one hundred percent of the market. So they've
got a ceiling. They need AI to raise that ceiling.
And that's where the question mark for us as a
mess comes to.
Speaker 5 (05:26):
Boody forgive me on this one.
Speaker 2 (05:28):
Sometimes markets and Wall Street and technology investors can have
short memories. Do you remember when we were talking about
the year of efficiency and if I were to show
you this chart of capital expenditures from Meta and you
look at the beautiful green column that shows seventy two
billion dollars at the upper end of the range and
the idea maybe that column could go up even more,
(05:51):
how do you reconcile that as a META investor?
Speaker 7 (05:54):
So I think when we lou as Meta investors, what
we see right now is revenue growth. Revenue growth has
been come from their core business, which is their advertising business.
So what they've spent on AI so far has been
driving that growth and has been improving the rate of
change of growth over the.
Speaker 5 (06:10):
Last few years.
Speaker 7 (06:11):
So that justifies the valuation for now.
Speaker 5 (06:14):
The question is.
Speaker 7 (06:15):
If they continue on for two year, three year, that's
when as investors we start getting worried. And I think
if you go back five years, that's what happened with
the reality labs. Like the first year of reality labs,
they can hear real idea, people say hey, look, we
can understand what it is. But then you got to
the third and fourth here and said, well, we'll hang on.
Speaker 5 (06:32):
Always sees losses.
Speaker 7 (06:33):
We're just not seeing the revenue generation coming out of this.
So we were at that early stage. So that's why
as investors were patient. But I think we are going
to be asking more and more questions, what's the monetization
story and what's the next step that we should be
looking at as a product from this business.
Speaker 2 (06:52):
I'm jumping ahead twenty four hours to Apple, but the
news story this morning was the President talking about tarifs
with India. So we did the analysis and we looked
at the phone supply chain and assembled phones coming out
of India, and we have that data. It's a really
interesting market for Apple, but the story still seems to
be a heavy reliance on supply chain and end market
(07:13):
in China for Apple.
Speaker 7 (07:15):
Yeah, I mean at the end of the day that
Apple still remains a bit primarily doing by two things,
won their services and then the phone growth. What we
what we haven't seen is an expansion into a new
product line, something that I think is required for Apple
to take the next step from from A for its
evaluation to make even more sense. What will what would
(07:36):
what these tariffs will do is make the price approyance higher.
Speaker 5 (07:39):
And that's what we saw.
Speaker 7 (07:40):
And I think Verizon's results they said there's there's been
some pull forward or buying your phones. What that What
that means for Apple, I'm not sure yet. They're coming
up with a fold of phone. How that will impact
investor demand?
Speaker 1 (07:53):
How?
Speaker 5 (07:54):
Sorry?
Speaker 7 (07:54):
Consumer demand is also questionable. So from the way we
stand right now with Apple is it's an expensive evaluation.
Speaker 5 (08:01):
If there is no next story to this.
Speaker 3 (08:04):
Let's go to the story of Microsoft as they come
out after the ball as well. It's interesting we talked
how do I with Apple a little bit with Matter
as well with their hardware. Microsoft, the winning formula has
been Cloud and Azure. How much do you need to
see how much AI is incrementally improving and fast tracking
that growth?
Speaker 7 (08:21):
So I think it's not how much it's such a
trajectory that we want to see. We want to see
positive trajectory compared to last quarters, and then we'll want
to see comparison of them to Google. Google showed a
thirty plus percent growth in their cloud business. We want
to see roughly around that at least for Microsoft, and
then from that point of view, they've got other leavers.
(08:41):
It's not just cloud growth, it's also as I said,
office You know, how much is office take up going
how much are people going up up the pumium teers
in Apple subscriptions to take on AI. So it's not
just how much cloud, how much cloud AI is coming through,
how much AI is percolating into other products that they're selling,
and what premium pricing can they get out of.
Speaker 5 (09:00):
That is what we focus on.
Speaker 3 (09:01):
And what was so shrewd of Setia and Microsoft writ
large was their relationship with open Ai very early in
things and integrating that within but almost there's a frenomy
relationship going on. There's a competitive instinct. We understand that.
Of course open Ai trying to restructure its own self
into a for profit and maybe we see Microsoft have
access to their technology for a bit longer. On the
(09:22):
back of that, how do you think that relationship is
going and how much do you think Microsoft can compete
almost against the company it helped more.
Speaker 7 (09:28):
Yeah, Look, it's hard to sit from the outside and
say how that relationship is going.
Speaker 5 (09:33):
But what we can see is.
Speaker 7 (09:34):
A open AI is now going aggressively into the enterprise
software space.
Speaker 5 (09:39):
What that means that.
Speaker 7 (09:40):
If not today tomorrow, they will start competing with Microsoft
on certain product lines, not across the board, but on
certain product lines. So that will put strains on that relationship,
and that will mean how do they negotiate the technology
transfer between those two and how do they translate in
terms of distribution Because my open AI is using Microsoft
in dis vision at this point in time, So to
(10:01):
me it's uncertain right now. But if you had to
pick someone who's got an advantage, it's probably his open
ai more than Microsoft at this point of time.
Speaker 2 (10:10):
Gooday, we're making a really big deal of the next
two days. We have a FED meeting, We have two
earnings tonight that we really care about to tomorrow. On
the byside, do you look at it that way? Is
anything that happens in the next forty eight hours going
to change your strategy or your approach?
Speaker 5 (10:26):
Look? We're long term investors.
Speaker 7 (10:28):
We manage a diversify a portfolio global stocks, and we
have investment horizons of three to five years. So what
happens in the next two days gives us an indication
or whether our investment mile posts and investment thesis are
going on track. And if something's really off, then we're like,
we'll have.
Speaker 5 (10:44):
To figure out.
Speaker 7 (10:44):
But I don't expect there to be any short term
news that will change our strategy dramatically, but it will
keep us on our toast and trying to understand what's
happening in the world and is the direction of all
the things in terms of the company fundamentals traveling in
the way that we wanted to whether we should react
to it, But it's unlikely that we're going to be
too reactive to whether the FED raises us interest rates
(11:06):
or keeps interest rates from outflet.
Speaker 2 (11:07):
Today Udae Truviu from Harding Lovna, Thank you very much.
Now coming up on the show, Palo Alto Networks has
agreed to buy cyber Arc Software in a cash and
stock deal valued at about twenty five billion dollars. We
speak with Palo Alto Network CEO Niickesh Aurora and cyber
Arc executive Chair Udi mccardi. That's next. This is Bloomberg Tech.
(11:37):
Palo Alto Networks has agreed to purchase cyber Arc Software
in a cash and stock deal, valuing the cybersecurity company
at about twenty five billion dollars. Joining us to discuss
the deal, Nikesh Aurora, Palo Alto Networks CEO, and Udi McCarty,
cyber Arc Software Executive Chair. Gentlemen, welcome to Bloomberg Tech.
We're grateful for your time. Nikesh. I'll start with you
(11:57):
if I may. How much was this deal? And I
want to focus on the technology landscape here. How much
was this deal? A direct response to the wiz Google
deal and generally the domains the hyper scalers are focused
on right now when it comes to security, well, I.
Speaker 8 (12:13):
Think these are very different transactions. Set look from our perspective,
if you look at the last two years or two years,
what has gone on. What has gone on is that
we're seeing this huge conversation about AI now most lately
and I just saw your segment prior to this.
Speaker 5 (12:27):
You guys are talking.
Speaker 8 (12:27):
About billions of dollars being spent. Well, what's those billions
of dollars going to result in the billions of dollars
are going to result in tremendous amounts of AI adoption
around the world on two vectors. One, we get very
smart models out there that are going to be executed
by companies. On the other side, there's going to be
tremendous amounts of agents out there that are going to
start accomplishing.
Speaker 5 (12:46):
Tasks on our behalf.
Speaker 8 (12:47):
Now, if you imagine the proliferation of agents for companies
for individuals, you're creating a whole new attack surface from
an identity perspective. The more agents, the more possibilities of
agents can be hijacked, taken over and be used for
cyber attacks. In that context, it became impetative for us
as a comprehensive cybersecurity player to make sure we have
(13:08):
the identity solution in the market.
Speaker 5 (13:09):
And if you look at the market and the.
Speaker 8 (13:11):
Identity space and make you talk more about it, the
number one company who understands identity security in the world
is cyber arc, So we think they're poised at the
right place to be able to capitalize on that opportunity
of AI being deployed everywhere. At the same time, we
need to have a platform that reacts in real time
because AI is going to make it easier for attackers
to go and attack people quickly. So from both those vectors,
(13:33):
it became impetative for us to make a move and
deliver an identity capability in our portfolio to make sure
that we can secure our customers. So that's why this
makes sense.
Speaker 2 (13:43):
If AI agent and the offering there is absolutely critical.
What cyber aarre going to get from this relationship being
a part of pallelto networks, particularly with your existing partnerships
and customer base.
Speaker 9 (13:55):
Oh absolutely, Look, as the founder here, we had the
vision of that identity is a security problem, not a
maagement problem. And then the attackers followed them in ninety
percent of attacks. That's how they how they get in
and also how they how they propagate. And as the
cash said, there's an inflection point because you add on
top of that into that fire you had machine, you
(14:16):
add machine identities and AI agents that behave like a
machine and and somewhat like and they're also relentless like
a un so they behave like a machinery, relent like you.
So we we are excited to join Palo Alto because
of the scale and the technology integration so that we can
bring forward.
Speaker 10 (14:34):
We already have integrations that we started to work on
as a partnership, and we just solve that.
Speaker 9 (14:39):
Pal Alto with its platforms, can correlate the data, can
leverage insights to stop attacks in seconds.
Speaker 5 (14:47):
And together we can bring identity security.
Speaker 10 (14:49):
To tens of thousands of organizations out We're proud at
cyber We're proud to have eight thousand customers out there, Palotas,
seventy thousand Glass customers. We have many joint channel partners
and together we're really going to.
Speaker 4 (15:04):
Go global, going global.
Speaker 3 (15:07):
Nikesh and I get this from the platformization strategy that
you have. In particular, talk to us about the operating
margin and how you ensure that that remains amplified because
you don tuckins, you're an inquisative guy. How does this
in the longer term feed profitability, feed the growth story
of Palo Alto Networks.
Speaker 8 (15:25):
Well, Carol and I've always maintained for the last seven
years that if you want to be successful in enterprise,
you want to be a large enterprise software company, you
have to scale. If you look at every enterprise company,
look at the top ten, all those companies enjoy higher
margins and that's driven by the efficiencies that they get
from go.
Speaker 5 (15:41):
To market and sales and marketing.
Speaker 8 (15:43):
I think the fact that we can work with cyber
arc to work at three levels. One, we think there's
a huge opportunity accelerating the top line for cyber Arc
and identity with the partnership power out. We have a
global presence. We have more presence in Europe they do.
We have more presence in Asia Pacific. We have product
together which allow us to innovate and drive.
Speaker 5 (16:02):
The top line.
Speaker 8 (16:03):
Couple with the fact that we have a reasonably efficient
backbone we run our infrastructure on. You know, we're pushing
twenty eight twenty nine percent margins and we have set
a target north to thirty percent for our company. That's
going to be a huge step up from where cyber
our corporates and we think we can get them there
and collectively perhaps aim for hire not just that on
on the margin side, but also on the cash flow
side as a consequence on us being able to drive
(16:24):
better margin. So we think there synergy is built in
driving top line. There's synergies in bringing our scale capabilities
to cyber Arcs backbone and infrastructure, and think we already
articulated that this is going to be both gross margin
and revenue a creative right from day one.
Speaker 5 (16:41):
In addition to that, we expect.
Speaker 8 (16:43):
We'll get to cash flow accretion and about FY twenty eight.
But this doesn't include all the go to market top
line capabilities that we're going to spend the next few
months making sure we get them executed and implemented collectively
or be ready to execute in cases where we need
to merge them together.
Speaker 3 (16:56):
OTI, are the CEOs that you've been speaking to and
the ones that you're now going to win over with
this combination. Are they as aware of agentic AIS risk
factors as you think they should be.
Speaker 9 (17:07):
It's the number one thing they're hearing from their chief
security officers when they ask and when board members ask.
Speaker 10 (17:12):
What are you worried about now? Is the proferation of
agents and like I said, relentless agents that want to
get the job done. And of course in any simulation
of an attack.
Speaker 9 (17:21):
They find that identity is the source of right attacks
get is.
Speaker 10 (17:24):
So identity is top priority for organizations already and sprinkled
with AI on top, it's rising up there and it's
one of the biggest maybe top concerns you see as
chief security officers and.
Speaker 2 (17:36):
CIOs nikkeish I spent all morning staring at cyber Arcs
share price chart over the last few years, even as
well or not it Yeah, so I'm sure you'll tell
me that this is worth every single penny, but just
use it to say how pressing it was to get
this deal done, the technology environment and the kind of
(17:56):
core competencies that you acquired, even the premium that you
may be paying.
Speaker 8 (18:01):
So yet six and a half seven years ago and
I joined Power Alta, we were an eighteen billion dollar
market cap company. The only way we got where we
did north of one hundred and twenty five is by
making sure we had a point of view of what
where the world is going to go in the next
three to five years, What do we need to have
in terms of capability to make that happen and be
executed relentily towards it. I'm telling you today the collective
(18:23):
start price of cyber arg and poal Aalta are an
all time low because the next five years from now
you will see the demand for a comprehensive security suite
across multiple platforms where the only players in the industry
who are going to be able to deliver that. You'll
see a huge focus on identity. They haven't even talked
about how we can take what cyber Arc does from
eight million users to hundreds of millions of users. So
(18:44):
from that perspective, we have to do this deal now.
Is going to take us six to nine months to
close it. It's going to take us eighteen to twenty
four months to get the products in play in line
to get go out there and conquer this market. But
we're not going to get to a turn of fifty
two pillion dollar market cap company if we don't make
these now and worked relentlessly for the next five years
to get there.
Speaker 3 (19:03):
Nicashaura, talking of that market capitalization, we thank you of
Palo Alto Networks and Udi McCarty of cyber Arc. Great
to have your gentlemen joins.
Speaker 4 (19:17):
Anthropic.
Speaker 3 (19:18):
It's reportedly close to funding a deal, a new funding
deal in fact, that would value at one hundred and
seventy billion dollars. Zai startup is looking to raise as
much as about five billion Iconic capital leaving the round
we understand for more. Let's get to believe the most
cap Clark who helped break this story. And what's phenomenal
is the valuations, but also the change in valuation.
Speaker 11 (19:37):
Absolutely. Yeah, the company was valued at sixty billion just
a few months ago, so this is really a tremendous
leap for Nentropic.
Speaker 2 (19:44):
Kay, You've got some interesting details in the reporting about
some of the financials ARRR in particular, what do we learned?
Speaker 11 (19:51):
So the company's at about five billion dollars in recurring
revenue and it's projecting to reach nine billion by the
end of the year.
Speaker 2 (19:59):
You also managed to name some of the big name
investors that are going to participate in This is interesting
because of recent reporting around Anthropic and Dario ami Day
and his I guess shift in position on where they're
willing to take capital from.
Speaker 11 (20:13):
Yes, so it's not surprising there are a few sovereign
wealth funds that are interested in investing Anthropic. One of
those funds is Qatar Qatar Investment Authority. And the reason
why this is interesting is Anthropic has in the past
said that it wasn't interested in taking money from some
of these giant Middle East sovereign wealth funds, citing national
security concerns, but in a recent memo to employees. Dario,
(20:36):
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.
Speaker 3 (20:42):
The code in your story from Dario that memo, Unfortunately,
I think no bad person should ever benefit from our success.
Is a pretty difficult principle to run a business on.
I mean, almost biting the hand that is potentially going
to feed in a memo to staff. But clearly QATARS
wants in, and you have to take the money if
you're going to expand in terms of infrastructure, right.
Speaker 11 (21:04):
Right, And we'll see if they actually end up. I mean,
maybe he will. Daria 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 one billion dollars in around
like this unless you're Iconic, exactly, unless you're Iconic, which
(21:26):
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 aanthropic without raising money from some of these
Middle East funds.
Speaker 2 (21:38):
We just showed on the screen, open Ai, 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.
Speaker 11 (21:48):
I mean, it's an incredible moment opening eye valued it
over two hundred and forty billion, Anthropic one hundred and
seventy billion, XAI and talks for two hundred billion. Like this,
I've never seen anything like this before, and I think
there's nowhere to go but up for the time remating.
Speaker 2 (22:02):
We'll see right wienboth k Clark and the team just
smashing it on, staying on top of rounds that we
still think are yet to close.
Speaker 4 (22:15):
Welcome back to Bloomberg Tech.
Speaker 3 (22:16):
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 delayed 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 we
want to show that Actually one company is doing particularly
well after its earnings, EA FC Sports.
Speaker 4 (22:37):
There's a good trend their line.
Speaker 3 (22:39):
We're also seeing Battlefield six a lot of anticipation for
that game. We're up six point four percent best Stations
February for EA. I'm looking at Armholdings flat as a
pancake at the moment, as we anticipate whether it can
meet those twelve percent revenue growth anticipation. And also remember
this is a company that trades above the twelve month
price target on average from analysts, So will they manage
to vindicate some run up in their shares. I'm looking
(23:01):
at qual Comm, no run up in their shares. They've
been lower throughout the year. They're down again one point
two four percent ed. A lot of this about concerns
of the exposure to iPhones, to China and notably of
course to the auto sector too.
Speaker 2 (23:14):
Yeah, armon Qualcom posting anythings at the same time is
not that unusual, but it keeps one man in the
bloomberg USUA and very busy. And that man is Ian King,
who leads US semi conduct to coverage. You 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
(23:35):
diversifying away from smartphone to automotive other areas, but we
will be very zeroed in on the help of the
smartphone market.
Speaker 12 (23:42):
Yeah, I mean, that's been the tale on the CEO
of Christiano Orman, who I believe you're going to be
speaking to you tomorrow. He's certainly made progress and things
like auto. He's certainly made progress in things like PCs,
and that's great, but unfortunately he's still beholden massively to
the smartphone market. And nobody is excited about the smartphone
market anymore, at least in terms of growth, and that's
(24:04):
what we're up against this quarter, where we might see
some tariffs have it weighing upon that.
Speaker 3 (24:08):
I mean, it is interesting that the IoT space is
where they're trying to been focus. So too is a
diversification into autos in arm as well. The design company
has been trying to diversify. Is that going to have
paid off?
Speaker 12 (24:21):
Yeah, it's a very similar story in that again, you know,
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, you.
Speaker 5 (24:35):
Know, where their revenue.
Speaker 12 (24:37):
Is coming in into It's like, well, what's going on
in the smartphone market? How 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.
Speaker 2 (24:53):
Between the two companies, ARM and its relationship with Qualcom,
there is some tension, some beef, as the kids would say,
why and what's going on?
Speaker 12 (25:02):
Yeah, I mean there's 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.
Qualcomm acquired made an acquisition of another license of ARMED technology.
(25:26):
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.
Speaker 2 (25:35):
The kids don't say beef anymore. According to Bloomberg Tech
producer Marguerite Gallerini. But we will still be watching out
for something Bloomberzi and 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 Qualcom.
I think, you know, I always look at the earnings
print and the commentary and then try and get a
bigger picture on the smartphone market. Sometimes christianom On can say,
(25:58):
here's what we see, you know, the world in our
key end end market. What will you be looking for beck.
Speaker 5 (26:06):
To see you ed.
Speaker 13 (26:07):
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.
Speaker 4 (26:15):
This is not the biggest growth market for AI right now.
Speaker 13 (26:18):
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.
Speaker 4 (26:35):
So you're twenty twenty eight, you're twenty twenty nine, you're twenty.
Speaker 13 (26:38):
Thirty, especially as AI moves more towards the edge, and
when you see AI move more towards the edge, Qualcom
would become more interesting at that time.
Speaker 3 (26:49):
More interesting in the longer term, in the near term,
talk to me about the valuation of AM because it
has basically risen above where most analysts think it should
be a currently price stack.
Speaker 13 (27:01):
Yeah, you know the that's a great point that the
one thing about ARM is this evaluation for me is
not justified the royalty rates they've doubled with V nine,
the architecture of V nine.
Speaker 4 (27:11):
But ultimately, why would I pay more.
Speaker 13 (27:15):
On the sales valuation for ARM than I would Nvidia, Broadcom,
these massive design companies that are taking market share versus
a royalty rate and somewhere in the four percent range. Uh,
to 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,
(27:36):
But would you have rather owned ARM or Apple?
Speaker 5 (27:38):
Apple? Of course?
Speaker 4 (27:39):
And I think something very similar is going on with
the you know AI.
Speaker 3 (27:43):
Okay, let's talk about the hair and now and what's
happening in AI and what we're about to hear off
to the bat as well, cause I know you have
a very keen focus on the Metro and the Microsoft
story as well. Look, all these companies are going to
vindicate the amount that they are currently spending on that
underlying infrastructure.
Speaker 13 (28:00):
When I look at these companies, I think Microsoft is
the one putting.
Speaker 4 (28:04):
Forward, putting its best foot forward.
Speaker 13 (28:08):
This company. The last time it gave us a number,
it was thirteen billion on Azure with a one and
seventy five percent growth rate sometime in twenty twenty six.
Speaker 4 (28:18):
I wouldn't be.
Speaker 13 (28:18):
Surprised if Azure reaches forty billion contribution from AI.
Speaker 4 (28:22):
That is a massive number.
Speaker 13 (28:24):
And then keep in mind it's not just the size
of that number for Microsoft, it's the rapid at sent
in reaching that number, and that piece, I think really
does separate Microsoft as the enterprise AI juggernaut.
Speaker 4 (28:39):
BEV.
Speaker 2 (28:39):
I really appreciate that explanation because what Microsoft does right says,
here is a percentage point growth figure for Azure, and
here is a points contribution specifically from AI. It'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
(29:00):
out the other side.
Speaker 13 (29:03):
When we are talking about forty billion potentially in twenty
twenty six. I would say, yes, we are reaching a
scale that is very meaningful, reached.
Speaker 4 (29:12):
It very quickly.
Speaker 13 (29:13):
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 of heart.
Speaker 2 (29:28):
I'm going to ask you something which might be a
little unfair, but 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
(29:49):
the marketplace, you.
Speaker 4 (29:52):
Know, on the public markets.
Speaker 13 (29:54):
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.
Speaker 4 (30:05):
I don't like Meta's valuation. This valuation is at a
historic high.
Speaker 13 (30:11):
Meta 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.
Speaker 2 (30:25):
And then let's look a little further afield, if we
may so, Microsoft, Medatoni, Apple and Amazon tomorrow. Which of
the evenings are you most excited about?
Speaker 13 (30:35):
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 Qualcom. They're the
smartphone market. There the EDGAI. There will be a moment
when that will lead. It's not right now.
Speaker 2 (30:58):
Bethkin Dig not excited about the calendar of the forty
eight hours to come. We're excited to have Beth Kindig
lead tech hand lists at Iofund back on the show.
Thank you very much, Caroline, you've got some news I do.
Speaker 3 (31:09):
It's time now for talking tech ad and first up, Tesla. Well,
it's agreed to buy four point three billion dollars worth
of US built batteries from LG Energy Solution. It's all
according to a source familiar with the deal, and that
LGA Energy revealed the contract without noting the customer in
a regularly filing. Tesla is working to expand its supply
from non China based suppliers of course, plus fox Cone,
(31:29):
and it's formed a pact that should help it's push
into AI hardware now I share swap deal with Taiwan's
Techo Electric and Machinery when it over schools fox CON'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
band for children under sixteen. Platforms including Instagram, TikTok and
(31:52):
now YouTube will face fines of up to thirty two
million dollars if young teens use their service starting on December.
The tenth YouTube position is that it's not a social
media company.
Speaker 5 (32:02):
Yet, okay.
Speaker 2 (32:04):
Coming up, cybersecurity top of mind to day in m
and A, We're going to speak with Cato Network CEO
Shlomo Kramer after it recently raised a new funding Also,
one of the early investors into Palo Alto Networks. Be
great to get his takes.
Speaker 5 (32:15):
Stay with us. This is Bloomberg Tech.
Speaker 3 (32:26):
Cyber m and A is dominating headlines this morning as
Palo alter Networks and cyber arct reached a twenty five
billion dollar deal. Here to discuss some of those trends,
the landscape and their own fundraising. Shlomo Kramer, Cato Networks
CEO Cato Networks as an Isabel based network security company
valuation of almost five billion dollars, and you've been raising
funds in a series g I'm really interested in as
(32:48):
someone who put the first seed check in. You were
one of the first board members of palowel To Networks,
what do you make of this platformization, this idea to
be going broader and broader as cyber security companies, right.
Speaker 14 (32:59):
So, I think it's ridge too far, and we've seen
the next generation growth of parlor decelerating of a number
of quote recently, and that's because they didn't They don't
really have a platform the core business, the network security business.
(33:19):
They have platformization, which is a promise, which is a
course to know 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 peer play
(33:40):
security company. I think the only one that pulled it
off is Microsoft because they owned the underlying.
Speaker 5 (33:47):
Operating system.
Speaker 14 (33:49):
But 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.
Speaker 3 (34:05):
And this is a philosophical difference you have. And ultimately,
while you went out and set up Cato Networks in
many way, and by you, I mean you've tooken Checkpoint public,
you took in Heber public. You're a man who knows
how to build businesses. But I'm interested you build Cato Networks.
What is it that you're seeing. Why is it people
are still putting money into when you're not yet a
public business.
Speaker 14 (34:25):
First of all, because we are going at forty six
percent y of the year, that's our last published results.
And we are at the beginning of a huge market,
the remaking of the network security marketing.
Speaker 5 (34:39):
It's a seismic change.
Speaker 14 (34:41):
It's interesting that Parol is now expanding beyond that because
there's so much work to be done here. It's one
hundred billion dollar market that is going to be re
architectured in the next ten years because of the way
are and that's the network security, networking, network security, not
including everything that AI will bring, and so it's really interesting.
(35:05):
It's a huge opportunity. It's just the beginning in the
next three years, sixty percent of enterprises are going to
start the migration to SAS. Based on Gardner, less than
fifteen percent have started it, and it's going to be
eighteen ninety percent of that market is going to transform
(35:26):
form appliances to SAS. So it's I think that's why
cato as, the only platform that was built for SAS
actually inventing the category, is continuing to go so fast,
and that's why we are going to be laser focused
in the next decade on network security, SASS, identity and SAS.
Speaker 3 (35:47):
For those who want clearly into the Lingo Secure Access Service.
Speaker 5 (35:50):
Edge exactly, Thank you, Shlomo get.
Speaker 2 (35:53):
I get the different domains like cyber arc is an
identity squority 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 Nikosh about this
morning was how much pressure there is coming from the hyperscalers.
You know, think about Google Cloud and its acquisition of Whiz.
They have offered more their own security tools. Are they
(36:17):
your competitors?
Speaker 5 (36:18):
Not at all? Zero pressure.
Speaker 14 (36:20):
Microsoft has been the at least on the network security side.
Speaker 5 (36:24):
We see zero pressure.
Speaker 14 (36:26):
The only player that came in is Microsoft, and we're
not seeing them. They definitely do not have the cloud
on the network side. Another example why different geographies in
the organization needs different leaders.
Speaker 5 (36:43):
And yeah, and so.
Speaker 14 (36:47):
The network securities that we are not seeing any of
the hyperscalers and I'm not expecting any of them coming
in any time soon.
Speaker 2 (36:56):
Put it another way, after a big piece of femina
and you're in history, and I appreciate you just raised funds,
but do you think that somebody might look at cater Networks.
Speaker 14 (37:07):
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 digitively transforming it to the cloud.
(37:32):
This is a ten years journey that we are excited
to embark upon.
Speaker 4 (37:37):
Tenure journey.
Speaker 3 (37:38):
Look, you just someone who I said at the start
takes companies public a Series G already worth almost five billion.
I mean, what are going to be the perfect precision points?
So then taking this company public?
Speaker 5 (37:48):
This is a good question.
Speaker 14 (37:49):
And we continuously evaluate that we are as a hyper
growth company. So we have options, both on the public
and the private, and will continue to considered both options.
I can tell you that we're as a company keep
a very high level of readiness, so once we decide
that this is the right moment, it will not take
(38:12):
us a long time to be public.
Speaker 2 (38:14):
Shlomo Kramer of the Cato Networks, it's great to have
you back on the show.
Speaker 4 (38:18):
Thank you very much.
Speaker 5 (38:19):
Think okay.
Speaker 2 (38:21):
It was almost an historic day for Australia's space ambitions.
Gilmore Space launched It's made in Australia Aris orbital rocket
payload a small jar of vegemite spread for toast, but
the rocket didn't get very far, crashing just fourteen seconds
after liftoff. Still, the company sounded up beat, posting on
(38:41):
X big step for launch capability team, safe data in hand,
eyes on test flight two. We'll keep tracking what's going
on in Australia space industry.
Speaker 3 (38:49):
Carac I'm ama mite gal, well, then a vegemite gal.
But I like that payload.
Speaker 4 (39:00):
Pigma CEO Dylan Field.
Speaker 3 (39:02):
There's already a massed a billion dollar fortune as the
company ready is to IPO this week, it would seem
but the co founder of the design software company could
receive another two billion dollar pay package if the company
stock hits certain goals. This is Figma's IPO is already
approaching forty times I've subscribed. It's sort according to sources.
Let's get to bloom nexs. Tom Maloney has really written
about the pay package here and look, this is a theme.
(39:24):
This is about really tying in the key man in
building this business for the longer term.
Speaker 15 (39:29):
Yeah, that's absolutely right, and that's what they've done. Just
last month they in a new compensation deal for him,
and that's going to give him up to twenty nine
million shares. As you mentioned, it's split into a performance
target where he has to get the share price up
to between sixty and one hundred and thirty dollars if
that kicks in. He's got ten years to do it.
And then there is a time besting portion of that
(39:52):
deal as well. All up, it could be worth four
billion if he hits the top of that share price range.
Speaker 2 (39:59):
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.
Speaker 15 (40:20):
That'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
A B and B in the article. I was just
actually looking at an older story we did on the
Ruvian founder who had a very similar package. We wrote
(40:41):
about that he could make billions. That was when Rivian
had one hundred dollars price handle. Today it's trading at thirteen,
So that just didn't go anywhere for him. So, you know,
sometimes these Moonshop packages really work out and other times
they don't, and.
Speaker 3 (40:54):
Sometimes you get a tattoo because of it. I mean,
I think it's actual enterprise is Taser maker. Basically Rick
Smith had a tattoo, got certain amount of benchmarks through
his two and a half billion dollar 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 pay package has meant so much for Delaware
and the court fight there.
Speaker 15 (41:13):
Yeah, Look, I think at the end of the day,
even 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. But at
the same time it received investor support. I mean, they
just voted for it again. So if you're an investor
and you see your share price go up by you know, three, four, five,
(41:36):
ten times, then I guess you're inclined to be generous.
Speaker 2 (41:40):
Right, Tom, just really quickly remind us of what happens now,
when's pricing, when's listing, how over subscribed around is just
the other details?
Speaker 15 (41:49):
Yeah, forty times oversubscribed pricing today, Trading begins tomorrow. You know,
I didn't mention he has a twenty twenty one pay
package that he is still collecting on. Depending on how
pricing shakes out, that could vest in the very near
future as well. So adding moret toy is wealth.
Speaker 5 (42:09):
Yeah.
Speaker 2 (42:10):
Wow, Of all of the IPOs we've covered, Carroe, take
a look at that chart in how much demand there
is for Figma. Bloomberg's Tom Maloney with a great hand
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 Caroen,
my goodness, Brace basically.
Speaker 3 (42:29):
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, Qualcom ARM.
Not to mention, of course, a key IPO were looking
for that pricing too.
Speaker 4 (42:46):
This is Bloomberg Tech.
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