The Information's TITV
00:08:10 · Akash Pasricha, Barton Crockett
[00:08:10] S0: Yeah. I just wondered if maybe people were gaming less here, if they were tied together or what's [00:08:16] S1: Yeah. I mean, apparently, they're... You know, on the on the iPhone, they're seeing pressure in the App Store from that category. And so, yeah, so that that's a headwind. I think that that is not clear a 100 in my mind what is behind that, but, you know, we do see a consumer that is stretched in many ways. I mean, they have new toys to play with in terms of AI, and they have a lot of pressures in terms of inflation. And, you know, and this is a highly discretionary, obviously, you know, clicking around on a stupid game on your iPhone, pretty discretionary. And people do that when they're looking to kill time, and they don't worry about spending a couple of bucks. But if you're more worried about a couple of bucks, and maybe you're spending more time on something else, that seems to be pressured. [00:08:59] S0: So Ternus made the decision last night to bring on the COO for part of the conference call, and he also took a fair share of the questions I saw as well with the CFO, Kevin Parekh. What did you make of that decision? [00:09:17] S1: Well, I think he's highlighting a talented executive who's been promoted into a more prominent position, And this is, you know, I think great. I mean, I think that they, you know, should highlight him. I think the answers were very helpful and, you know, and I applaud it. Think it's great thing to do.
00:09:17 · Barton Crockett, Akash Pasricha
[00:09:17] S1: Well, I think he's highlighting a talented executive who's been promoted into a more prominent position, And this is, you know, I think great. I mean, I think that they, you know, should highlight him. I think the answers were very helpful and, you know, and I applaud it. Think it's great thing to do. [00:09:37] S0: Did you... I'm just asking here, did you see it at all as a change in the way he runs the company? Or maybe you could make the argument too, perhaps, he was not as much in the details as perhaps the COO was in terms of how... In so far as how he answered the questions. Did you see that come across at all? [00:10:00] S1: Well, I mean, you know, certainly, you know, the chief operating op... You know, Apple has, you know, vast operational exposures and, you know, and Tim Cook kind of came up through that operational side and Ternus came up through the product side. So, you know, I think if that's the gist of your question, I think it makes sense. I mean, they're, you know, Ternus has his strengths and he's bringing up someone beside him who also, you know, has great strengths that are complimentary. So put them all on the call, and I think that's great. Why not?
00:10:00 · Barton Crockett, Akash Pasricha
[00:10:00] S1: Well, I mean, you know, certainly, you know, the chief operating op... You know, Apple has, you know, vast operational exposures and, you know, and Tim Cook kind of came up through that operational side and Ternus came up through the product side. So, you know, I think if that's the gist of your question, I think it makes sense. I mean, they're, you know, Ternus has his strengths and he's bringing up someone beside him who also, you know, has great strengths that are complimentary. So put them all on the call, and I think that's great. Why not? [00:10:32] S0: Right. And last question for you, Barton. So we had the story this week about Apple's robot ambitions, and this is another category that they are likely to try to expand in. What do you make of that? And also, where are we on sort of the AI headwinds that we talked about with Apple and Siri? It's not the first thing that people talk about anymore, although it was them being behind on AI. So have we weathered that storm, and does that tell us anything about how their robot ambitions might go?
00:11:07 · Barton Crockett
[00:11:07] S1: Well, look, you know, I think they're two separate things. I mean, I would say in terms of their AI execution, clearly, were dead in the water and now, you know, they're they're treading water, you know, and they're certainly not in the race, you know, their capabilities are not, you know, leading edge, but at least they have something that's credible. And, you know, they did that by, in part by working with Alphabet and in part by changing their team around and, you know, and that's helpful that they're making progress there. You know, I think the real question for Apple is what is the next big thing that really accelerates growth? And this is a stock you love to own when they're coming up with some disruptive new innovation. Obviously, did that with iPhone, they did that to a smaller degree, you know, with the watch and, you know, what could that next thing be? You know, maybe it's robots, you know, not based on the form factors we're seeing in Home View or anything related to that, but, you know, they have skills all around that. Maybe in, you know, coming years, they could come up with something that is exciting, and an Apple robot running around your home could be pretty cool. Maybe they do that in AR glasses, you know, where Meta's been showing some traction, you know, and maybe they they are able to innovate better in AI, and we're certainly seeing, you know, Meta innovate with their muse and, you know, and there is every reason to think that Apple could do that. I'm not sure they've shown the skill to do it, but, you know, if I was to bet on their disruptive innovation, it'd be more on the hardware side than on the AI kind of software front, but we're looking for something, and, you know, and one of those things maybe is it.
00:12:48 · Akash Pasricha, Tore Svanberg
[00:12:48] S0: Right. Well, Barton, I want to thank you for coming on. That is Barton Crockett from Rosenblatt Securities here on TITV. Marvell agreed to buy Lumentum, a market leader in lasers and optics technology used in data centers. Our read here at the information, the deal comes to around $80,000,000,000 Marvell shareholders will own two thirds of the new company. Lumentum shareholders will own one third. That is assuming that the deals go through after what is likely to be a careful antitrust review. Here to offer some analysis is Tore Svanberg, Managing Director and Senior Semiconductor Analyst at Stifel. Tore, welcome to the show. It's great to have you here. [00:13:27] S2: Yes. Thank you for having me on. Appreciate it. [00:13:30] S0: Okay. So we'll get to the price here in a second because the valuation is really interesting. Just remind us though, Marvell and Lumentum, what type of chips, what type of lasers exactly do they do? How does their technology intersect with each other even before this acquisition? [00:13:47] S2: Yeah. So if you think about Marvell, they are a networking semiconductor company. They do serve both optical and copper connections. But as I'm sure you know, optical connections are becoming more and more important. And Lumentum, of course, they sell optical components and lasers. So by combining the two under one house, Marvell sees the opportunity of this extreme co design to develop some of the best solutions for all the four networks within AI infrastructure.
00:13:47 · Tore Svanberg, Akash Pasricha
[00:13:47] S2: Yeah. So if you think about Marvell, they are a networking semiconductor company. They do serve both optical and copper connections. But as I'm sure you know, optical connections are becoming more and more important. And Lumentum, of course, they sell optical components and lasers. So by combining the two under one house, Marvell sees the opportunity of this extreme co design to develop some of the best solutions for all the four networks within AI infrastructure. [00:14:21] S0: So just to be clear, these are the chips, these are the lasers that they connect different chips together within a server. They connect different servers together. They also connect different data centers together. Is that right? [00:14:35] S2: Yeah. So when you think about the four AI networks, there's basically scale across, scale out, scale up, and scale in. Today, most of the AI infrastructure is in scale out and scale across, and those do use optical connections today. However, the next generation networks are going to be scale up and scale in. Those are based on copper connections today. But because the speeds are expanding so exponentially, that's where optical technology is now set to solve some major issues. [00:15:08] S0: Right. The idea here, just to recap for folks, scale out and scale across, this is between servers and then between different data centers. Scale in and scale up is basically within the chip and then up inside the servers. Is that right?