Advisory against the carrier setting disturbing incident reported by africanamerican passengers. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. On the alisa parenti. This is bloomberg. Bloomberg technology is next. Emily coming up, apples most advanced handset hits stores next week. What the success of the iphone x could rise in fall on its ambitious key feature. The new facial Recognition Technology set the Gold Standard for the industry . Well explore. Amazon gets a spare key. A new delivery feature that lets couriers income even when there is nobody home. A new price system in the pipeline to better navigate the highs and lows of the u. S. Box office. How Regal Entertainment plans to rip the script on how viewers pay. First, to our lead. Interest continues to grow over the iphone x as the countdown to his november 3 release begins. This is one of the most ambitious devices apple has ever brought to market. The technology posed several challenges, however, from facial recognition to 3d features. Alex len has been covering whats been going on behind closed doors and whether the tech jan will be ready to get the phone in the hands of consumers next week. Alex jones joins us right now. You have a new story out right now today were the main headline seems to be that apple, at least from where it started with facial Recognition Technology, decided to downgrade that technology in order to produce an adequate mass scale. Please clarify what i said. Technology was previously only in the microsoft connect, the large hardback book. They reduced it down to a few centimeters across and a few millimeters deep. The margin of error in that is tiny. In order to make it possible for their suppliers and component makers and assemblers, who build them into a package and are of the to the foxconns world, they had to reduce the specifications in order to ship it in the quantities needed. Emily is the Technology Going to be any different than advertised . A consumer perspective, i dont think anybody will be able to tell the difference. The difference they were talking about, one in 50,000 people could spoof your fingerprint. Face id, one in a million. From our sourcing, they cut some thehese specs off before one million figure, but the likelihood is it will be infinitely better than touch id. Emily bloomberg claim that it reduced the accuracy spec or face id is false and we expect face id to be the new Gold Standard for facial authentication. The quality and accuracy have not changed. It continues to be one in emily probability of a random person unlocking your iphone with face id. That perhaps suggest that happened before they released that number. We stand by our reporting. Have good confidence in the people we spoke to. I think this is about the tolerance of where apple potentially started versus what they will live up to when they shift. The fact is, if they live up to that one in a million, then they have not reduced it, and the consumer will never know. If there is a reliability problem, if people experience situations in the light, in ways that do not necessarily recognize it, that would be an issue. Fiona believe that is the case. Apple is standing by this technology. We have said we think they will be summer between 3 million and or million devices at launch. We have no reason to believe it will not be a successful launch. Emily marcus through hell apples facial technology is expected to work. There are three components that matter. The illuminator, which is like a torch which sees a face. It passes on the action to what they call the dot projector, which is competition of the intense. The flash is 30,000 dots at your face. The infrared camera then detects that, put that through the algorithms and recognizes this is the person that i should allow or not allowed to unlock the phone. Emily how difficult would you say is it to manufacture this kind of technology at scale . Theyre difficult. These are position products. We have heard a lot of rumor and innuendo that youll has been a problem. Manufacturing yields of 60 , 50 . Those are unacceptable when you think about a highvolume manufacture product. 90,e have to come up to the even 70 overtime. I think they will get better. This is a very expensive product, a premium price point. There is going to be followed over some of those components, when we see that in the comply chain. Emily are there other components causing issues . Alex it seems they have broken the back of oled. Well,ood projector as this inferred laser, they had some problems with that. Projectoron the dot was at 20 at one stage, 40 for the illuminate. Crawford we believe apple will ship optimistically 37 million. We are now feeling that is at the highend. Not only based on the components we are talking about today but also based on oled availability. Samsung has the absolute lion share of the screens locked up. They take a significant amount themselves. We are not willing to say all little will not be a constraint Going Forward and certainly into next year. Emily that is shipping, what about demand . Are you expecting demand to be higher than ever despite this 1000 price tag . Our expectation is there will be unsatisfied demand. This is a hot product. They will not be able to meet initial demand in q4, we dont believe. To take away,ting this is one detail of the story which apple has not been happy with. We go into great depth with the supply chain. The takeaway is they have broken the back of a lot of the problems they have had with a 3d sensors. Please read our story. There are others as well. Emily the order start on friday. You can go to the store and buy it the following friday, if you stand in line, presumably. How do you expect the demand and supply curve to unfold . Crawford i think they are going to be fairly supply constrained. Our expectation is a run for million at launch. They probably ship optimistically 37 million, probably more realistically 30 million range for q4. Our expectation is, as you get out into next year, we are looking at 50 of phones highend. 240 Million Units next year. Not all iphone x. Half of those will be the larger size, which the x will be included. Emily iphone 8 . Crawford our expectation is pretty strong. For this quarter, about 15 million. Itx one interesting idea, will be important to have the iphone x in stores. There are probably a lot of iphone 8 buyers waiting to hold a two by two saying, do i want to pay more to buy this . Emily alex webb, thank you. Crawford, always great to have you here on the show. Thank you both. Twitter, facebook, google, maybe appearing on capitol hill earlier than planned. Three have been invited to a Senate Hearing tuesday. The Senate Committee on crime and terrorism wants to discuss Russian Election interference and the use of the companys platforms by extremist groups. Top lawyers will be appearing on the hill the day after to publicly testify about russian meddling in the 2016 u. S. Elections. Leighton, tom discuss his Companies Big earnings beat. Bloomberg tech is live in streaming on twitter. This is bloomberg. We arethe stock watching, advanced micro devices, plunged more than 13 in the session. Its worth performance in five months. Shares are under pressure after the Company Reported fourthquarter revenue may drop 15 from the previous quarter. Meantime, the Company Reported a profit and sales beat in the current quarter. Bright spotlight in todays mix bag of earnings, akamai technologies, a provider of content delivery and Cloud Security posted revenue earnings that topped estimates thanks to strong video traffic from large customers. Tom layton, the ceo of akamai technologies, expanded on the companys performance earlier. I think so. People are watching a lot more video online, at Higher Quality levels get as much as thats happening, it is really the tip of the iceberg. We have 60 terabits per second last quarter. What is that . That is 12 Million People watching at reasonable quality levels. You can imagine a future world with 100 million, a billion people watching, maybe even highquality. So a lot of runway left there, i think. I was looking at analyst notes. They boasted the price tag of 270, an analyst at quarterly execution was dollar. What is it about the current Industry Environment that is coming together right now for you . In addition to media and video, there is a lot of interest in cybersecurity. You look at the headlines every week of the latest disaster. That is where we had really compelling solutions. That business for us now is half a billion in revenue and roaming in the high 20 . We just unveiled our latest technology to use Machine Learning to differentiate between thoughts and humans. Humans, when they hold a mobile phone and are tapping, have a much different dynamic than a would coming into still your identity or hack into an account to steal your money. On the enterprise side, the old notion that you have a perimeter , corporate firewall like the motor around the castle does not hold any more. Scarlet what does it look like now . We are in a world now where you cannot trust anybody, even your employees, because they are getting infected. They take their devices, they go to websites, click on the wrong link, get infections, and then come inside, import it. Once behind a firewall where youre in the corporate perimeter, it runs wild and you get these big data breaches. What other new products are you looking at, will those be the Growth Drivers next year as well . I think so. Theyre all bots, kinds, a lot of them bad but not all, a very fastgrowing product area for us. Stopping the account takeovers is important. Stopping enterprise employees from getting infected, even if they do click on it that link, so we have new products in market there that i think will sustain a lot of growth for our Cloud Security business. On the media side, not only is there more traffic because more people are watching but we just unveiled under technology where overthetop is ahead of satellite. Typically, if you watched online, you would be 10 to 90 seconds behind satellite. The touchdown had taken place, a minute later you are seeing it. Now we beat the satellite, which is very cool. That is a good the vomit from where you stand, certainly. I was noticing that you were one of the 18 ceos invited to the white house this year. You had also served on george w. Bush cost Information TechnologyAdvisory Committee as well. What do you see in terms of a continuation in commitment to monetizing and securitizing government in i. T. Infrastructure . Has that been consistent, is there followthrough . Tom the Major Tech Companies want to help the government modernize i. T. And better protect themselves, so we do a lot of work in washington to help the government. Irrespective of administration, thats really important to do. Sticking with the topic, executives from facebook, google, twitter will be capitalized testifying on capitol hill next week on russian intervention. What do you want to hear come out of that . Tom a serious concern, these are unusual times. We want to be sure the internet is used for good and not to do bad things. Privacy is another major issue right now. How do you balance law enforcements need with the need for the citizen to have privacy . Tech is right in the middle of it. It is hard for the loss to keep up. Tech is moving so fast. Think we should consider these companies a public utility as sometimes suggested . Tom its very different from a normal public utility, these are obviously very large, powerful Companies Providing a lot of great services. It is just now we are the middle of some of these issues around potentially things that do with the election being influenced by social media or manipulated news. It is really amazing what happened over the last decade. That was tom litton, ceo of akamai technologies. Coming up, will a new Pricing Strategy incentivize moviegoers . We will dig into Regal Cinemas latest test. And our interactive tv conscience, check it out, right on the bloomberg. If you miss an interview, you can go back to it, you can send our producers a message. Play along with the charts we show you on air. This is for bloomberg subscribers only. This is bloomberg. Winning overle is mobilephone customers with giveaways. The company added more than 6000 subscribers in the third quarter. Now is twice as many as sprint. It had a less than 300,000. Tmobile is a champion of charitable commerce, giving away perks like rides, Dunkin Donuts products, and Netflix Services to all subscribers. Regal Entertainment Group is testing demandbased pricing for tickets, potentially leading for higher prices for top hits and low prices for flops. This would be a major shift for an industry that typically uses a onesizefitsall approach. The company is working with an app maker which has lobbied the unit is to try dynamic pricing. Joining us now is under should securely. Explain why they are doing this. Anousha what is have frequently about the theater industry is innovation has not come to it. This is really probably one of the more conservative i would say chains taking the bull by the horns and addressing an issue that the industry is facing now, which is a very low turnout at the box office, struggling in terms of revenue this year. Especially over the summer it was very disappointing. That is reflected in their share. ,mc and regal, the two leaders seeing their share prices fall considerably this year. So when this actually mean if you go to a movie that is popular or good, the price would be higher, and a movie not doing so will would be lower . Anousha we dont know what the parameters are. When i reached out to regal for more details, they are quite reticent to give too much detail about how exactly they will do this. Whats clear, they want to make more money in quiet time, and busy times, and to use something makeapps and tickets to group bookings, make it more opportunistic when you go to the movies, and to Work Together to try and find some kind of trend in pricing that will help that, being flexible in pricing. The interesting thing is studios really do not want, by and large, to have a price put on the movie that indicates maybe it is not very good. It is sort of like a fine line. Hey will have to tread around they can maybe charge more in what they expect to be busy. But not necessarily charge less for films that people dont like. It is going to be a tricky one. Emily how do we expect studios to react to this . Anousha when i spoke to executives in private these are very tense conversations. The movie industry is at a critical juncture. Cinema and exhibitors are under pressure, as our movie studios, to address the rising trend of netflix, amazon, streaming in general, people not going to movies. They are very sensitive conversations. What ive been hearing is that studios generally dont want that kind of dynamic pricing or commoditization of movies. At the same time, theaters have to find some way of addressing the lack of attendance. Something probably in the middle will happen. Thisanalyst pointed out year, amc suggested something similar in terms of dynamic pricing. In other industries, its commonplace. Music, sports. Emily you also have a startup like movie pass that has this controversial once a month 10 if to see a movie every day you like. Do we know how that experiment is working . Anousha we know its very popular. They just upgraded the expectations for their subscriber count, increased the around how many subscribers they have, now 600,000. Whether that ends up being a business that works, we will see, but definitely there is demand for it. That is a major threat. The other major threat we are reporting on his premium videoondemand. Movie studios saying, people want movies at home sooner, so they are trying to pressure studios to release their new movies, reduced exclusivity period that is typically given to theaters eminem show them at home sooner so they can make more money. Theres a lot of different pressures and delicate negotiations going on, and testing whats possible. Shock, reporting in hollywood, thank you for joining us. Up, prominent Venture Capital firm in Silicon Valley is investigating whether its Founding Partners is guilty of misconduct. We will have that story next. If you like the bloomberg, you can listen to us on the radio. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Lets begin with a check of first word news. President trump has described as sad reporting that Hillary Clintons president ial campaign and the Democratic National committee paid for Political Research that ultimately produced a dossier about trumps alleged ties to russia. Pres. Trump i understand they paid a tremendous amount of money. Hillary clinton always denied it. The democrats denied it. Now because it is coming in a court case, they said, yes, they did it. Putin still has to announce if he will run for a fourth term. No candidate has emerged as a major rival or front runner. The Prime Minister of singapore has suggested today that the inn u. N. Lost credibility canceling the transpacific partnership. It goes beyond the participants in the tpp. It is a way to make both sides of the pacific and to strengthen their considerable rationale for america to be focused and engaged in the region. Tpp agreement and 12 nations was among the largest in history. Brazils president has been hospitalized. His office as he is suffering from neurological problems. Day,l news, 24 hours per powered by more than 2700 journalists and analysts in over 120 countries. It is just after 5 30 p. M. In new york. Paul allen has a look at the markets. Paul it looks like a bit of a down day on the markets. We have brent crude flat askx futures also up. Anz out with full year earnings. Cash profit up 18 to 6. 9 billion. Return on equity rising to 12 and the debt interest margin slipping a little. The aussie dollar is weaker around . 77 following wednesdays week cpi. Emily one of Silicon Valleys top investors is being investigated for potential miss contact. They say that in investigating steve german cities who sits on jervidson who sits on the board of tesla. Partners nding around the Founding Partners should be careful. Predatory behavior is rampant. Security within the firm creating files on women to potential violations of revenge borporn laws. Insidenot set foot Silicon Valley investment. We will say that there are not many details. What do we know . We know what the firm has confirmed to other outlets. Over the summer, they hired a law from to look into allegations of potential misconduct against one of the Founding Partners. We dont know much more than that. We dont know if it was within the firm or between him and thattial entrepreneurs and kind of thing. Emily keri made the statement and said, the situation is a typical. I was not seeking investment or trying to further my career. We understand that she and jurvetson were involved in some kind of personal relationship. Thesaid after she wrote post you was contacted by the attorneys working on the investigation. We know that Steve Jurvetson is on the board of tesla and spacex. We know he is charismatic. He is a wellknown investor and he has a particular interest in space and fringe technology. He has a close business relationship with elon musk. He is also a personal friend. He is a person who is in the orbit of some of the top entrepreneurs, top ceos, top investors in Silicon Valley. Emily he invested in hotmail in the early days. I believe jurvetson is the firm that threw tesla a lifeline in the early days. This is just a theory. The latest in a series of scandals involving tech companies, chris sacca, dave mccourt, Travis Kalanick who resigned amid these issues of sexual harassment. Talk to us about the climate. I think the climate is a time unlike another time we see. There are allegations about this coming out. A lot about recent behavior but sometimes older. Women feel more emboldened to speak up. They say, i experienced this behavior and it was wrong. The way to stop it from happening in the future is to name names. The example that you brought up with this woman who said she had a great area, the personal experience with Steve Jurvetson, undermines underlines how fluid the lines are between investors in Silicon Valley. You are not working together until there is an investment, but there is a lot of networking. Sometimes it is versatile. There are these sometimes it is personal. There are these hierarchies. Managers should not date people who are their direct reports, but it is less clear in this world between investors and onto for newers entrepreneurs. Emily the spokeswoman for dfj said the firm hired a law firm after hearing indirect accusations about jurvetson. The form has not received a formal report of claims against jurvetson or other investors. A lot of questions. Not a lot of answers. We will continue to report this story. Threes being sued by engineers accusing the right hailing giant of discriminating against women and people of color. Pays womenat uber and people of color less than their peers and does not promote them as frequently as males, whites, and asians. Penalties under this act can amount to billions of dollars. Uber declined to comment. How to keep reengineering success. The microsoft ceo sat down with David Rubenstein to share his secrets. We will hear some of that next. Emily success brings an inevitable problem. How to keep reengineering it . Our test told the carlyle founder on the latest episode of this show. You are running the microsoft is this solutions division, but then they say we want you to run the search business called bing. Did you say, you cannot compete against google . Or, i would be happy to do that . I had just been promoted to lead our Business Solutions team. I was loving that job. It is something i had aspired to do. Steve comes around and says, i have an idea. I think you should run this group that has high attrition. We have a tough task. I dont know if it is a good carrier move, but i need help. Think wisely and choose. [laughter] and i was like, wow. This is an interesting choice. I remember distinctly going that night to the building in which the team and our search team was housed. It was 9 00 or so. The parking lot was full. People were in. I said, what is the deal . These people are working and inspired. I said, i have to join this team. And cost me to not take the easy path. If you do a good job, maybe you will have another job. If not, you wont. Then they ask you to run another business, your Cloud Computing is this. How did it happen that amazon became a giant in cloud, and microsoft, right nearby, wasnt . When a Company Become successful, there is this beautiful cycle that gets created between your concept of product, your capability, and your culture. You have all of these three things fall into gear. They are working super well. The concept that is successful might run out of gas. It is not going anymore. You need new capabilities. To have the new capability, you need a culture that allows you to grow. Growinger business was double digits. It was highmargin. You look around on the other side of the lake. A very low margin business called the cloud. People were saying, why would we do that when we have such an amazing, fastgrowing, highmargin business. That is the challenge to see these secular trends long before they become conventional wisdom. Change the model, change or technology and change the product. In tech, it is unforgiving. I think all of us have to deal with tech now. He would go on to discuss the issue of pay equity for women and what steps he is taking to address the challenge at microsoft. Almost everything you have done since you have been ceo has worked perfectly. The stock is up, the market value is up, everybody likes it. The only thing i could find that anybody criticized you for was, you gave a statement about womens pay and you correctly changed your position the next day. Can you explain what happened . Absolutely. I was asked about pay equity. I give such an absolutely nonsensical answer which maria, the interviewer, was kind enough to correct me on stage. Question using a my own personal experience without understanding the broader context, the depth of is question, which is, what a person like me, the ceo of a company, doing to make sure that women can fully participate in our companies and in our economies, equal pay for equal work, and more importantly, equal opportunity for equal work. It is not about what works for you and what career advice do you have . It was a great learning moment. When i speak to women who are close to me, senior, successful women that are key to microsoft and hear their personal experiences, that is when it struck me how the job of the ceo is to make sure that everyone, whether it is gender diversity or ethnic diversity, can first come into the company, do their best work, so we can help all caps to. That is a realization which help our customers. That is a realization which i thought i had. An glad that i messed up so publicly, internalized it. Did you hear from your wife at that point . Absolutely. At that point my mom was alive. I heard from my mom and my wife. I evenze it more than did growing up. The tradeoff that my mom had to make, the system that she was working in did not support her reentry into the workforce after sister. Myself and my you have about 125,000 employees. What percentage are male . What percentage are female . How many senior women do you have . Technology is not a field where many women have risen to the top. One of the things we have made Good Progress on is womens representation. We have a long way to go. In tech, we have a particularly difficult issue in terms of gender diversity, but lets start with the progress. In the last year, we have gone ofm you improved to 27. 7 women coming into the organization. In the technology side, where we have improved by 4 points. I would say that is movement in the right direction, but not enough. One of the things the board did was to change the compensation system for me and my direct of board directive board. To say numeric progress, aside from the programs we do and everything, lets tie compensation to real numerical progress. We are doing everything, but it is going to take continuous the vigilance,tinuous continuous push. Emily you can watch the full episode of the David Rubenstein show with his guest this week, nadella, 9 00 p. M. New york time. Amazon has a new service that will let them into your home. By the retailort giant to make sure that you never miss a package. You have had to follow bill gates and steve ballmer, two legendary figures. Steve said, if you do this well, we will be happy . If you do a good job, maybe you will have a job, if not, you wont. Emily as we have been reporting, more than 200 cities are bidding to secure the location of amazons second headquarters. The chairman and ceo spoke to bloomberg at the future Investment Initiative in riyadh and says he is betting on one city in particular. It will crate so much demand. Cities are excited to have them. They are not building their own building . They do not want another allen street, but balance sheet, but they are building another distribution center. Think the zeitgeist of boston. The other places they might go are the southeast, atlanta, raleigh, durham. Atlanta is affordable. Its a transportation hub. Emily and other amazon news, the retail giant would like to make missed deliveries a thing of the past. And new service will let amazon deliver packages into your home and it will let selected Services Like house cleaners and dog walkers in while you are away. It will film the person entering your home. Joining me to discuss is mark gurman. How does this fit into the hardware strategy . It is interesting. Every other week we are talking about a new echo, new fire tv, new tablet. Now it is security cameras. Nest came out with theirs. This is amazons approach. They are tying it to how they make money, packaages. This is another tool amazon is helping selling to help get their stuff. Emily this would literally be the delivery person entering your home . What about security concerns . We have not heard back if amazon has an insurance program, liability, terms of service. Are you waviving your right to sue amazon or file a complaint if something goes wrong . Im sure that the people are vetted. The reality is that letting a person into your home is not an easy thing. Emily how do they convince people this is worth it . In terms of buying the hardware, it is a nobrainer purchase. If you look at the specs, the video quality, the app integration, it is 120. That is about half the price of mast and other smart home camera makers. Key, it of the amazon is a tougher sell. Emily how does this fit in . Does it fit in with the echo and other amazon devices . All the devices are designed to sell you more stuff. This is another conduit of that system. They will also be selling it subscription service. That is another way to make money. Emily how does this fit into the broader delivery efforts . Amazon is trying to take on more of the Delivery Logistics problem. Taking it away from ups and fedex. There is another element. Amazon is getting more competition. There was a time when you could not think of anyone other than amazon, now there is walmart. They have a Similar Service and amazon is fighting back with a more integrated approach. Watchingat will you be as you head into the holidays . It will be interesting to see how the Different Companies create their platforms as a way to lock people into their ecosystem. There will be people who buy apple devices, google, next, amazon. Pick up additional heat up and you will see everybody try to get a piece of every device. Emily what is the hottest speaker on the market . Stay tuned to gadgets with gurman, my blog. We will be comparing everything down the road. I have been listening to the sonos 1 at home. It is a sewn us speaker with sonos speaker with alexa. Emily thank you for stopping by. That does it for this edition of bloomberg technology. Earnings will be in full swing thursday. Twitter, amazon, microsoft, intel. Just a few of the companies reporting. We are Live Streaming on twitter. Check us out on bloomberg tech tv. That is all for now. This is bloomberg. Announcer from our studios in new york, this is charlie rose parade charlie several republicans have began to speak out. Today, jeff flake announced he will not run for reelection in 2018. In his appearance this morning, senator bob corker says the president was dividing the nation. I wasr corker i guess hoping he would bring out the best in the nation. What president s do is try to unify around common