Why microsoft is boosting its videogame investment. Developingid to be an augmented reality headset that could be in store by 2019. A couple of things will set this apart from available ar devices. It will contain its own display. It will also have its dedicated operating system. I sat down with mark gurman who broke this story. I think we had an in depth look at a lot of projects. At apple, there is this team newing on two headsets and systems for the iphone. The new headset they are working on is one that runs its own operating system and doesnt have to have an iphone attached to it. They are working on another headset that is like an oculus ar and strap it on your head. This is only what they are doing for testing and leveraging the Ar Technology parried emily seems like they are focusing on ar. Agree that vr has great applications for education, but ar is like a watcher that you can use in your daytoday life. Ar headset has several application. To what tima listen cook have to say parried tim with Core Technology as a in them, the first thing most important thing is to build the foundation, and then do many things peary but you have to have a solid foundation. Developers will love what they find in the ar. Emily he is talking about bart kit forlopers the ar developers. Iday marking its territory how are they marking its territory . There creating an ecosystem of developers who will create ar apps. They are also putting themselves out there saying, we are an ar company. There was a eightmonth period of time when they were talking about it, talking about it was the next big thing. But to see how quickly they show their cards is a big step for the company. Emily what sort of realworld applications do you imagine . They are developing a new offering system. Ros. Called this is going to have all sorts of applications. Maps, text messages, Virtual Meeting rooms with avatars, watching 360 degree video, all sorts of stuff. Emily you have another scoop on the ipad. Strong numbers on the ipad. Theres surprising because have been concern the ipad was on its way out, but clearly not if you look at the sales. At the end ofid 2015 is moving ipad to an ipad pro, positioning it as a computer replacement. Emily they got rid of the mini. They still sell it, but they have not updated it. Ipad, theyck to the moved to this ipad pro structure and a lot of people have been liking the keyboards. They are going all in on the pro approach. They have a regular ipad with the tenant screen. Ipad with the 10 inch screen. It has become popular. Emily we are seeing a family of devices like we are seeing with the phone in a range of price ranges. How do you see the cannibalization arising . We thought it had to be something, right . You got the ipad would cannibalize the mack. Was inarted to happen 2015, ipad sales slow down and mac sales shot up. Here we are in their q4 earnings from a week ago and they present higher numbers, is very strong year over year Revenue Growth in both the mac and ipad growth. There is no canalization going on. Apple sold 7 billion of bonds as proposed new tax lows laws had been a washed. Apple was sitting on 270 billion in cash and marketable securities, 94 was outside of the u. S. The company is selling bonds to fund its Share Repurchases and dividends. Coming up, a surprise for snap investors as tencent buys a 10 stake. Winds tencent see in the company what does tencent see in the company . Later, the startup expanding further into food and grocery with amazon expanding further into food and grocery to go headtohead with amazon. This is bloomberg. Has been a while lead week for snap, the Company Reported disappointing earnings results, setting the stock of medically lower. Tencent bodygiant 12 stake in the company. Whought up with sarah frier cover snap for Bloomberg Technology to talk about the details of the deal and snaps strategy to combat slower user growth. This is a great time to be buying up snap stock has it has really declined stock because it has the decline since its ipo. The stock is not hostile according to our sources, but strategic. They will be getting input on snaps direction, which is very interested interesting. Said in his stablehip he is very in his leadership. He said he will the design the app to make it appealing. Emily we have a chart showing what happened. The stock dropped after hours after this tencent deal news. What can we expect Going Forward . A habitencent has had of buying up stakes in companies and then eventually taking them over. Does not look like that is what is happening here on the outset. Do goodsee if snap can on its own and build advertising business. What we saw in the last quarter is that they are in the beginning of this selfserve advertising, and that they need some time to proved advertisers they can get a return investment before that becomes a bigger business for them. Emily tencent is the owner of the chat. Of wechat. Can we expect them to have decisionmaking . Sarah as it has always had an aberration for we chat and tencent, he has spoken about that in his public appearance. This is something he has some reverence for. He had paid comments about facebook. I think he does see snap as more of a messaging plan. Emily that was sarah frier. Meantime, lawmakers are still hammering out details on tax reform. Any changes to the Corporate Tax rate could have huge implications for tech firms. I caught up with steve ballmer, owner of they l. A. Clippers and former microsoft ceo to talk about what we know so far about the gop tax overall plan. Steve a couple of things are number one, the were trying to do is make sure that people can take a look at the plan in the context of history. That is important. Ask,r two we, you have to what are the goals of this plan because through the data, we want to hold government accountable for achieving the goals. Is a goal to approve standard of living . If so, form home . Is it the goal to reach tribute is the goal to redistribute money, borrow farm the future borrow from the future . I do believe in balancing the budget. Will we achieve that will he not . Will jobs grow or not to support that. . I care a lot about opportunities for kids born in tough situations. Say, you know, i wish there was more in the plan from a tax perspective to support those low income kids. Emily us talk about microsoft. You are one of microsofts larger shareholders. Would you like to see a provision whereby companies when they repatriate cash, they have to invest in jobs and higher more people in the United States or invest 10 in r d . Simplifying i think the tax code on companies with foreign earnings is important. I think letting u. S. Companies be competitive internationally, and im speaking as a former ceo , i think those things are important. Society does have to decide whether those things will accrue to the benefit of people who own share, or whether somehow people who own shares will wind up redistricting some of that tax gained other people in society . Either through the kinds of requirements you talk about for me investment in r d a new jobs, or simply and other forms come increasing the taxes on shareholders as opposed to the taxes on corporations to be revenue and incomeneutral, so shareholders dont necessarily see a windfall. Emily microsoft has a huge operation in puerto rico. The house bill put a 20 tax on offshore affiliates, including puerto rico even though it is a part of the United States. How concerned are you about this . Steve well, i am not concerned about it at all. Notion ofg run, this becoming more competitive and more consistent with global tech standards will be a very good thing. , theyies like microsoft only to their shareholders to do the best job that they can to optimize taxes in the context of the tax code. Myse Companies Including former company, microsoft, has done that. Is there isk read not likely to be much difference areerms of profits that available for the shareholders of these Big Companies. Emily we have seen the Tech Companies facebook, twitter, testify before congress. You suggested that there is not a lot that these companies can do when it comes to fake news and such. Are you more or less concerned after he and testimony given that a lot of these companies were unprepared for the questions . Steve well, let me correct you a little bit. I said, these companies will never be able to get to ground zero and unlimited this notion of fake news. Can they do better . Of course, they can always do better, but it is a statistical gain. How much of these, this, you know, alternate fake news thinking the screen . Say is worthould pushing from a government perspective is this notion of being better and having a way to characterize what it means to be better and a set of standards in which the companies can be held. I think that is very hard to do. The bullied pulpit of government may be the best way to get there doubt. And the hearings you talk about, we will put companies on the hot seat in terms of what they are going to do to ensure integrity and what people consume on their site. But at the end of the day, they are open. People can say what they want to say. Random american citizens, in addition to you know, bad actors him outside the United States. So my that was conversation earlier with former microsoft ceo steve ballmer. Coming up, our interview with outgoing cisco executive John Chambers who spend billions of ciscos money on startups and now he is applying to those lessons to his own startup. And uber is teaming up with nasa. Thats right. Nasa, to get its line cars back off the ground. Details next. This is bloomberg. Emily tech giant cisco has always been involved in startups under ceo John Chambers, the Company Acquired dozens of firms, spending billions of dollars in seen cells grow from 1 billion to more than 40 billion over his 24 years at the helm. Johnjohnson spoke with chambers and asked whether the u. S. Government gets it when it comes to startups . I think only halfway. We are viewing this as transactions not part of the bigger picture. The u. S. Has led in startups, but we are not at all today. In the first five years of this decade, we only grew our Startup Community by 12 over five years. Australia, france, india grew 40 to 60 . The chinese grew by 100 . 500 startupsrew per day. We have to disruptor get disrupted. Youre announcing country such as france, which was the last place you are i would have done business three or four years ago to become the startup nation of europe. You watched president Emmanuel Macron lead in changing a country. They dont do it by transactions. They do it by combining the whole picture together. Gdp growth, startups, that is where all job creation will occur. How does that tie into your Education System, your security . The u. S. Is the only country in the world that does not have a national, digital policy. For starters, that is the number one job creation engine everywhere in the world. We are behind. And while tax policy change is lagging in there rest of the world in the areas we must lead. This is a step we should have done 15 years ago. We need to think about what we want to paint a picture of optimism. And creating incremental jobs in this next decade. 40 of them will go away and there will be huge productivity. If we are going to get 25 million jobs, it has to be through a started community. It cannot be at the end you make great we are now. We dont have a cohesive place to tie together. Valleyut even of silicon Silicon Valley seems to be the envy of the world. People are saying, were creating the Silicon Valley of israel, the ocean. It seems like Silicon Valley is still being held up as a model. What needs to happen . John we talked about Silicon Valley as being the example for the rest of the world. It disrupt, make and you have to disrupt as opposed to being disrupted, it has to be across all 50 states, not just Silicon Valley. Silicon valley is out of touch with the rest of america on how we create jobs. As i go around the world, lets use india as an example, modi is looking to create silicone valleys for his people. He is talking about gdp growth not a 5 in getting excited. He is talking about 7 to 10 . Jpmorgan predicted that india would grow 10 per year. India is growing because of the digital agenda through job creation and inclusiveness across the board. That is what you see in france, which is the last place you would have done business three years ago, and is now the startup place of europe. We need to do this in every city in our country and we do not have a plan to do it. We have to bring education with us all the young people can participate in this future. Cory can there something that can be done with cash repatriation to encourage startups . We saw that coming when its a buybacks and dividends, not going into hiring or rmb. It is when into the shareholders pockets. If the goal is to encourage startups and the goal is to encourage business investment, what necessary policy needs to be attached to any repatriation taxation policy . John we have to think about how to solve the problem. We need a competitive tax system. Dropping the Corporate Tax rate to 20 is a great start. We have to combine when you repatriate money, will this great opportunity for startups . The answer is yes. There will be a number of startups in creating market were startups see a pattern. The major thing we cannot fall into the trap is there is no golden solution. You have to say, how do combine is in a policy that combines start of engines with tax policy, with education, thinking about how do we have a national started mentality . How do we capture the imagination of the democrats and republicans, not to argue about tax policy, but talk about the future in terms of the opportunity and hope that American Children will have a better life than their parents. And change in our Education System. Frances changing their whole Education System around digitization. They will do it first with pilots and across the whole country. Why isnt the u. S. Talking about changing the educational system that is broken . The takeaway is about innovation with speed. We are too slow and we dont have a national policy. This is something that the democrats and republicans should be all over. Taxation and repatriation is one element of the equation. Cory what are you doing in the world of startups . John i have a lot of limitations. You think about startups, the big picture is simple. That is where all the job creation will,. I wouldested 10 invested 10 to 12 startups throughout the u. S. And around the world. They willvary from a drone start up they will vary from a drone start up to transparency and open government, to social media and how that will change the customer experience, from security to around phones to a company like pen drop that we talked about in february from fraud detection to voice identification tour next source of protein, which will be from crickets and insects. You will consume the majority of protein on animals from areas like crickets. Cory the start with the cricket idea. I think the problem is so interesting. You mentioned that protein is so expensive. It is also the most timeconsuming thing to create. It takes three years to raise a cow before it can be used in the food chain. That has a big impact on the environment. Talk about this cricket investment. John when i went to the at theual Mohammed Clinton global initiative, the last thing i was going to do wasnt ask in the next generation thats the last thing i was going to invest in the next generation of food supply. Basically crickets could be the most say form of protein, race at 1 of the space. We are running out of space to have the amount of meat protein and agricultural proteins generated. It does 17 the Environmental Impact and lowers cost. You combine all this together. The best way you conserve the environment is what car you drive or your home. It is the protein you put on your plate. 15 tots will be a staple 20 15 to 20 years from now the majority of the protein you consume. It isa leap of faith, but talking about the transition of the internet of things. Capturing the cloud capability to grow these faster and safer than we have ever done before. John chamberss begin with bloombergs cory johnson. Withg up, microsoft is out a new console and plans on boosting its videogame investments. We will bring you all the details, next. Reminder, all episodes are livestreaming on twitter. Check us out. This is bloomberg. Emily welcome back to the best of Bloomberg Technology. Im emily chang. Been aft has long dominant software company, but one as its greatest Success Stories the xbox. The latest console was made available to the public this release of the microsoft will increase inhouse video games, including starting or acquiring studios to do so. Cory johnson spoke with fill spencer, microsofts head of gaming. Gaming is a huge business globally and growing double digits. Assets withs unique the products we build. This is a category we want to be in and we want to invest in. Daughters are obsessed with microsofts minecraft. On their phone, they take the games everywhere. It seems like it is a vision of a modern success were a game came out of nowhere like a tetris. You hit on a really important part that players are playing the games across every device. We are connecting those players across all of those devices. Minecraft, can play someone could be on Nintendo Switch playing with somebody on an iphone. They are using xbox live in playing together in the same world. For us, the console is an important part. The connecting the gamers were ever they are is the vision of microsoft. Cory which brings us back to this device. Spend hundreds of millions if not more developing a new xbox console . Phil you want to reach gamers on every screen. X the company is the most important. It is the customer experience. They move from device to device. We have a unique capability on television. 1f, great value in gaming. You can play the games on your television. Go on someone wants to their phone stay connected, we can bring no services to the gamers. Cory how important is market share . For he metrics i look engagement of players, how many monthly active players you have across any device, and what is your software and Service Revenue looks like for those players . Boxes are not big part of the business. The margins on the boxes are minimal. We subsidize the boxes to get them out there. But we want people on their phones to play our games and bring our services through mixer and xbox live. Bring whatever device you have. Greatevision, it is a communal atmosphere with people sitting on a couch with controllers playing. That is a part of that is a big part of the gaming ecosystem. Cory the xbox live and the like have been important to your success. I still nokia to have their cell phones and have their speakerphones i still know kids that have their cell phones and their speakerphones out. Live is on android. We see people on those devices that we dont see on other devices. You want to match the customer and the device on the right device. You want to meet them on every device that the right services. Make sure you focus on the customer with the device they want to use. Ofy what does the right Development Cost for a serious console game right now . ,hil from 1 million now youre talking about the ecosystem. You have people starting games with an idea. And i thing about this game today is you can put an idea out there and grow the community. We have a Game Preview Program that allows people to ship unfinished games and get feedback from the community and grow those games. One of our biggest hits is player unknown battlegrounds, one of the hottest games on pc today. But it ships early and it has not hit 1. 0. It is in a prebeta phase with 18 million players playing already. Gamer, butnot a big i love me some [laughter] phil there are very expensive games with high production quality. What is the topoftheline development . Phil you can build a game for 100 million easily. In a way, once or starts growing and people are playing, and you have games like a minecraft that have been played for years, you want to continue to feel that ecosystem and give them more content. Players stay engaged with games for an awful long time. If you continue to bring them great content, that is awesome is a business. Cory i dont want to downplay this, but it is iterative compared to other devices, quickly, will we see more releases in this industry Going Forward, or is this a special time in between consoles when the market is ready for this kind of thing . Phil the customer will tell us. Just being honest, we are trying something with this xbox that is compatible with anything you ever purchased that plays all the same games, but keep you capability on a 4k television that no one has seen. If people react to it well, we will create stateoftheart hardware for people to use on their television. Emily uber has teamed up with nasa to bring their flying taxi service. The partnership will focus on new technology to manage air traffic and get uber abridged regulators. Jeff holden spoke exclusively to bloombergs jeff ludlow. Uberys corroborating with will increase speed to market. Nasa, the inventor of new airspace management technology, the framework set your standard called you tm. Utm. With uber air, will be having a lot of aircraft flying over cities. In order to manage that air traffic in a way that is efficient and save, any new technologyut. Utm is the answer to that. It represents a formal Collaboration Agreement between uber and nasa. Many people forget that nasa is the national era not ask and Space AdministrationNational AeronauticsSpace Administration, and are connected and engaged with military bodies. Makes sense toon bring this to market as fast as possible and it is a part of making this uber air vision a reality. That is exciting and nasa is a big partner. A cynic would say this is pie in the sky thinking. The way we are approaching it oceanare not boiling the and trying to change the technology at the same time. Nasa is developing the framework and may have a model forecasting these conditions. We are engaging with them in the last stage. Working in dense, urban environments. Uber is developing the technology to implement this. We will be building the technology that the aircraft will talk to and navigating airspace. We are not to try to boil the ocean and change it all at once, but work next to existing air Traffic Control systems and implement utm through airspace. This approach is the crawl before you walk and walk before you run. Nasa is bringing their expertise on airspace. Gathering of the forces and skills to make this happen as fast as possible. When you are developing the craft itself, there is an issue of size and weight. Have you thought about that . What is the next step for uber in looking at that research . Is that another thing you need to do to speed up the project . That is something we are looking at closely right now. You can assume we will be digging into that deeply. The Battery Technology of today if we take ao lithiumion batteries and package them for a uber air vehicle, we could fly 25 miles, not 60 miles. We have a 60 mile target for our launch in 2023. We are watching demonstrators in 2020, but by 2023, we want to be doing full missions. There are advancements that need to happen on the battery, but it does require real work. And not doing work on the underlying technology, but also mass manufacturing those batteries. Uber will play role in that. How difficult will regulations be . We have been pleasantly surprised. We took the approach of embracing the regulatory regime, faa, nasa plays a portion, air Traffic Control environment, etc. There is a lot of military stuff. There are ordinances, zoning regulations. Uberstyle,g it to focusing on the outcome we are trying to achieve and working closely with regulators to make this a reality. That is not necessarily ubers history. A lot of people thought we would make it happen. What we found are two things. One thing we found one thing is true. The regulators are embracing this. It is the excitement of the vision that gets people rallied around, and the believability of riding in the sky. Seems like a reasonable Business Model and everyone believes in it. The other piece is uber has grown up as a company. What we do today as a Large Company on the global stage, we have to be much more thoughtful and careful and, you know, and our approach is different from when we are a startup. Those things have come together to inform our military approach. Emily that was jeff holden. Fantasies for stein draft kings has announced they will livestream top european professional basketball this winter. Tracking customers in the u. S. And canada watch the matches on the companys mobile phones and then enter money contest centered around the league. Up, another food delivery start up is gearing up to take on amazon fresh and insta cart. The expansion into Online Grocery delivery, next. And Congress Continues to make the case for Holding Big Tech more accountable. We wthis is bloomberg. Caughtmarch membership sams club and chinese ecommerce jd. Com are teaming up to offer online to offline delivery of frozen products to consumers in china. New Service Provides sameday delivery of more than 300 items included meat, seafood, ice cream, and local delicacies. This Service Permit in beijing and shanghai this year. This service premiered in beijing and shanghai this year. Post make this looking to bring customers groceries to s isomers post mate looking to bring customers groceries t. I sat down with the ceo. We felt in so Many Companies , we to be like postmates could borrow another name. Emily youre taking on amazon. What makes you think you can do that . Delivering groceries extremely five fast. Were not trying to be whole foods, more like a trader joes concept. What Grocery Stores a partnering with . A bunch of them. One in l. A. That is family owned and part of the community there. Emily what about trader joes . Not with trader joes. Emily trader joes is a favorite. Like to control the operations here, so we work with places that do the pick and pack and handle the on the ground logistics so we can do the delivery. Emily what makes you able to delivery food that quickly and at that price . Is that sustainable . We are making money on it and it is sustainable. 399 is a great price. We has spent the last 56 or six years we has spent the last five or six years putting out the infrastructure. That allows us to attack the new verticals and do it in a vary proficiently. Emily they there have been a lot of Food Companies that have come and gone. Where you see this space going . Do you see one or two leaders . Do you see therell always be a large number of competitors . What separates the weak . If you look at local commerce, it is still highly underpenetrated. Food is 550 billion. 600 billion of that is groceries. The market is still very young. Everybody is growing and grabbing market share. I think this will go on for a while. Emily and you are spending globally. Were launching in mexico next week. We are launching in hawaii. Emily i am from hawaii, so a white is part of it United States. We are super excited about that, but mexico city is the First International city. From there on, we have our eyes on canada and will look at more countries in south america. And we also believe there are some asian markets interested. Emily as a customer, i understand you have cheaper options, subscription options, but when i go to postmates and get my order run up, it says deliver is 16. How do you get around that, or is this something that is going to cost more in the customers who want it will pay for it . First, we have the lowest delivery fees in the market. No service fees, no markup. We used to have a delivery fee based by distance. Even for out a network merchants, the highest delivery fee you will see is 5. 99. Monthe actually did last is we decreased our Consumer Prices by 32 . Emily which brings me to the question, you raised 300 million. Could this be profitable at that price . Absolutely. As a continent as a company, we are profitable and generate revenue and profit for the company. A milestone we achieved three or four months ago. We are stream excited about it. We have Gross Profit Margins that we are very excited about come around 40 currently come up over 10 Percentage Points from last year. We are doing everything we can to create a business that is sustainable while growing fast. Emily what kind of money are the postmates taking home . It depends. The compensated per delivery. There is a bracket veterans 18. And there are couriers that can earn 30 or 40 an hour. Coming up, big Tech Companies have long used a 20yearold law to shield themselves from what their users post online. But could that be changing soon . We will discuss, next. If you like bloomberg news, check us out on the radio on our bloomberg app. This is bloomberg. Emily apple party made a big splash in the content rates when it announced it was invested 1 billion in video. Now, it has outbid one of its rivals, netflix for a new show starring Jennifer Aniston and reese witherspoon. It will be the first recurring tv role for Jennifer Aniston since friends. You can add the two actresses to its stable of content creations. For gears, a crackdown on big tech has run into a wall call the 1996 Communications Decency act. It keeps Internet Companies being held legally liable for content that users post on the websites. But that may change. Take a listen. Uber this responsibility. You have created you bear these responsibilities. You have to be the ones to do something about this. We talked about this existential threat to the tech. When you hear senator feinstein saying things like you are responsible for this content, that has not been the case up until this point. And if we see some real action in that way, it could change the economy of the internet. What could likely happen . The problem from big techs perspective and the problem being responsible for content is there is too much content for them to watch as it goes up. So, it would be a policing nightmare. The raising the season the reason the senators are bringing up is about russian interference. Seem, i would agree with that statement, Big Companies can afford it. Google has to monitor it on youtube which songs are being used and pay rights to those some owners. But what it might hurt her Smaller Companies who might lack the resources. Google and facebook are not lacking in resources, but Startup Companies are. Right. Tension inays a these policies. Google and facebook are able to handle any increases in migratory costs, but tech as a whole would be in a more complicated position. We will see how this plays out. The first battle in this had nothing to do with the russian interference. It came via a sex trafficking for sixe advocates trafficking victims want a law that would make it easier to go after platforms that enable sex traffic. And there are platforms that have targeted these things and we have the whole issue of the dark web. Absolutely. And so, what happened this week, or last week, was that the internet association, trade group for the big Tech Companies number dropped its opposition to this bill that would put more of an onus on tech platforms to watch for six trafficking. Six trafficking. Just for the sex trafficking part of it. It is largely interpreted as the general atmosphere has turned against tech. They have been fighting that bill hardin thought maybe, this isnt the hill we want to die on. As we think about the russians and the fake news. Creatively, figured out the things that really pushed buttons in the u. S. Election and caused chaos and leave people to vote with their worst intentions. The other thing that happened was people reach we did that stuff. Do is tellhey could someone, you were reach waiting fake news during the election that you were retweeting fake news during the election. Absolutely. They dont want to claim responsibility for what is going on a platform. They would like this to be seen as a conversation that we are facilitating and he will provide the tools behind the scenes. It seems like the information has come out. We only let a certain number of people see this in the number got bigger. It seems like they didnt really want to talk about how their service worked. I think people who reposted this stuff, they bear some responsibility. New howe if facebook many impressions were guarded, they could fix this. Wonder if they were going to have this conversation, maybe it would have been better to put everything on the table at first and take your hit and have a conversation about it. Instead, we have had this conversation over and over with each consecutive revelation. That does it for this edition of the best of Bloomberg Technology. We will bring you all the latest of tech throughout the week. Tune in each day, and remember all episodes of Bloomberg Technology are Live Streaming on twitter. Check us out. That is all for now. This is bloomberg. Pres. Trump American Energy will power the future. We have become an Energy Exporter for the first time ever. We produce more oil at home than we have in 15 years, more natural gas than ever before, and nearly everyones energy bill is lower because of it. 40 years ago, these with images that rocked the u. S. Now, america has gone from Energy Crisis to energy success. Pres. Trump powered by new innovation and technology, we are on the cusp of a new energy revolution. And it is all thanks to shale. Our big case is for shell to grow 7 Million Barrels per day