DealBook Interview: Stanley Druckenmiller

Stanley Druckenmiller was interviewed by Andrew Ross Sorkin on DealBook. Among other things, they talked about IBM, Amazon and Netflix. The transcript below contains these parts. 

Andrew Ross Sorkin: Help us with this. Ginni Rometty was here earlier this morning and I quoted you about your view in particular about IBM and the buybacks. When you look at IBM now, she made an argument, may have been persuasive to some, may not have been to others, about the fact that a company like that needs time to shift. She made the argument that this is not a secular shift for her company, and by the way I wouldn’t even argue she made it as a cyclical shift, she just sort of suggested that they are in a transformation period. Do you buy that?

Stanley Druckenmiller: No. I was looking at Amazon, and I was looking at IBM the other day. The last 19 quarters Amazon has missed their quarterly earnings nine times. They don’t give a damn. IBM has missed three quarters since 2006. They really care about their quarterly earnings. It’s an interesting transformation, ’cause I heard a little bit of your questions, and it’s not just the 14 quarters in a row of down sales. Their R&D has shrunk as a percentage of sales. They’re under major attack from Amazon, Palantir, all these companies out there eating away, and their R&D has shrunk in absolute terms, and as a percentage of their sales. Over the same time, I think it’s gone from like 6.2 to 5.9%, on shrinking base. Amazon on exploding sales is going from 5% to 10%. Now who’s investing for the transition? What kind of transition is that when you’re shrinking your R&D. They bought back 43 billion in stock at an average price of 189. They say they’re stored to capital and returning value to shareholders. I don’t know how you buy something at 189, and its 142. That’s not my kind of return to shareholders. But, so no, I don’t, I don’t believe in the transition.

ARS: You mention Amazon.

SD: Yeah.

ARS: Is that a stock that makes sense to you?

SD: Oh, yeah. I love Amazon.

ARS: Because?

SD: Because they’re investing their future. Bezos is a serial monopolist. He’s come up with this AWS, ok, which is absolutely exploding. I don’t know how many people here are small businessmen and women. If you’re starting a business today, you don’t need a technical department, you don’t need a back-office. You can use AWS. By the way, it’s just ripping to shreds the 10 or 15 consultant you have from IBM on your firm, that you used to need because now you’re going into the cloud. And in retail they were 22% of U.S. sales growth this year of retail, one company. And he’s just sitting there with narrow margins and when he has enough share of market, whenever he wants he can get those margins up.

ARS: But why are you convinced he’s gonna do that? He may never do that? And does it matter?

SD: What do you mean why… ’cause he’s a businessman and I see its strategy and I think it’s genius.

ARS: But you’re convinced that he will at some point…

SD: Of course, of course he will. I’d probably be dead, but of course he will.

ARS: By the way, in the similar vein, how do you feel about a company like Netflix?

SD: That man went to boat, and he walks on water as far as I’m concerned. Same thing. You know, I only heard 30 seconds, I was in the gym. When he said; if you manage for quarterly earnings you’re dead, and then somebody on CNBC says, what’s easy for to say with a stock price like that. Why do you think he has a stock price like that? Because he’s thought about the long-term and not cared about quarterly earnings and all the short-termism the whole time.


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