Transcripts For BLOOMBERG Bloomberg Technology 20180104

Legal, Jeff Sessions has directed federal prosecutors to use their own discussed discretion in enforcing federal law. Global news 24 hours a day, powered by more than 2700 bloomberg, Bloomberg Technology is next. I am emily chang and this is Bloomberg Technology, coming out on up on the intel chip saga, how a design flaw could impact almost every computer, smartphone, and server. We will tell you what you need to know and one startup is looking to take up the likes of tesla, google, and uber and autonomous driving, how is startup is already Testing Systems on audi suvs. Industry watchers are closely following apple next step but its future iphone batteries across the company billions that could cause the coming billions. Intel stocks under pressure as fallout continues from the chip design, the company and other chipmakers and Software Companies are coming to grips with the vulnerability that leaves than a comparably massive ber of devices acceptable susceptible to hacking and slowdowns with google discovering it could give hackers unauthorized access to Sensitive Data and the remedy. Ould drag device performance intel says fixes are coming over the next few weeks and no Material Impact to its business and microsoft says it has issued a security fix for intel and armed ships. Joining us is our tech reporter ian king. Put this into context. Walk us back through the timeline, when did intel find out and how long has the Tech Industry thing keeping this a secret . Ian google and academic researchers found that this may be a problem in the middle of last year. The idea was to get together and find a fix. We put the fix in place and then we say, this is what happened and we put it out, do not worry. Unfortunately, news intervened and people found out. They are in a scramble mode or intel was forced to come out and say it was not just us. Have all ofo not these fixes in place and we do not know the impact on computers. Emily are there any legal issues . Ian nobody has said anything yet but this is the kind of thing that classaction lawsuits are designed for. May look at this and say, hold on, you have one or two companies who everything depends upon, why are we giving them so much power and so much influence and the potential to damage . Emily talking about almost every computer, smartphone, and server, what are the impacts . What does this fall mean . Flaw mean . Ian no reports that anybody has exploited this vulnerability. It,eople did not know about maybe they were working on it and maybe now they know about it, they are working on it here so far is the important thing. If you have a computer at home, you have areas on the computer where passwords are stored, where Encryption Keys are stored, in a normal course of events, programs you use do not have access to that data. Allows, ine of chips theory, access to the data for highlevel programs and makes it more vulnerable. Emily intel says they will not have a significant Financial Impact but how could that be . Ian in the past they have recalled chips like a carmaker but this time they say this is a feature of chips and it makes them faster and they work as they should. We have no liability. Emily another thing that does not look good is that intel found out about this six months ago and their ceo sold a very large part of his stock later in the year. Ian this has created a lot of attention. If you look at the filings as we did, this was a regularly announced plan, executives usually set out a plan where they say in advance, i will sell this shares amount and that ensures they do not have suspicion of trading on insider information. Whether he knew this would be such a big deal, that is up in the air and we cannot say with concrete basis that he knew it was coming. Emily he now close the minimum amount of stock . Ian that is correct. Emily is that typical . Ian the lowest point in five years in terms of his holdings. Emily apple, google, microsoft, all working on fixes or have completed fixes. , theyare people who say will fix this but not everyone is going to update their devices. Right . What longerterm implication . Ian as you said earlier, this may affect performance of computers. A situation where do not fix it and take the risk and fix it and maybe it slows down and is no longer useful. Fors a difficult situation a lot of computer owners and computer operators to be in. At the same time, some details and we do not know how it will play out. A big concern is how data centers will be impacted because usedthey do naturally is three uses on the same computer, one of the concerns is that this issue makes that less safe. That could have a big impact. Emily our tech reporter ian king who covers the chip industry. Thank you for the update and we will talk about this after the next break. Said hisrk zuckerberg personal goal for 2018 is fixing facebook. He posted his objectives on his facebook page. Comeocial network has under criticism for failing to prevent russia from meddling in the 2016 u. S. Election and not doing enough to curb cyber hate. He said his company had a lot of work to do. More on the bug that may impact every computer processor made since 1995, how should companies and consumers react . And Bloomberg Technology is livestreaming on twitter. 5 00 p. M. In new york and 2 00 p. M. In san francisco. Micheleprint has hired cohen as president and chief financial officer, the 65 euros left a 65yearold company as investors grew unsettled over their profit outlook and debt load with sprint shares falling 5 on the news in fridays the trading session on thursday and fallout continues from the intel chip saga, they say it is working with hardware makers and operating systems on the issue and will design future chips to avoid the problem. Microsoft, google, and amazon say they have issued updates for their cloud and Software Systems but we are waiting to you from apple. We reached out for comment from apple and joining us now is. Rian white and bob odonnell has moresay this story nuanced than intel did not tell us something. We are talking about a future feature that has been a processes for over 10 years and nobody discovered it until now and it is used in intel, arm designs tod chip apple, qualcomm, everybody is impacted. I was it fascinating that brought in a couple of weeks ago by the companies to get a sense, they knew it was a big deal and in 20 years as an industry analyst, i have never seen three Companies Come together in a briefing to talk about the issue and how they are addressing it as an industry. That is an important side of the story that has not been told. There are a lot of problems to be clear, but there are interesting ways the issue will be mitigated and we will see more discussions from apple and other people. Emily should they have told consumers . I think they were going to. Emily it has been six months . The transparency of the industry is working, theyre working together, responsible disclosure, important, they found the vulnerability and inform the manufacture and working on a patch and were going to announce it, we believe next week but somebody leak the information and now it is public. It shows that the community is taking more seriously security and this is ubiquitous, the processors are in everything we operate. If there are issues at this level, where are there not issues . Emily how serious of it is it in terms of impact . We do not know anyone exploiting the flaw but we do not know a lot things about attacks happening as we speak. A fair point and it remains to be seen, some variants are worst than others, very and three which allow people to get access to private data is being talked about, the one most people are trying to address immediately. You will see some variations play out. This has been out there forever. We are seeing it being addressed now. In theory, there are bad things that can happen but the fact it took 10 years to discover it could give you a sense of how hard it is to exploit it. Emily who could exploit this vulnerability and what could they do with that information . I would suggest those that have significant resources, for example, google has significant Security Team and they can spend the time necessary to find this vulnerability. Those actors such as nationstates may have the capability to know how to access and take advantage of this flaw. What is important is there are no known attacks that are ongoing right now. We are still not sure if we can execute this remotely or you need to be on the user machine. There is a lot we do not know ,ut it reinforces two things increasingly the software they are operating is secure. And we knowat that, if a determined adversary wants to gain access to our machines, they will gain access, there is no way they will not find a way in. This is another way they may potentially be able to exploit. Emily what should consumers do . They need to update, there will be two types of updates, Software Updates and hardware updates. It is very easy to take down your software update, we do it often on our iphone and everything in the house. The hardware update may be more difficult, depending on how they push it out. It will be straightforward, given the attention this has received. The manufacturers all over this and we will all be fairly protective. However, it is important is that it enforces you need to protect your data and you need to understand who is accessing that data. Just like we do with our personal data at home, do precautionary measures for what is most important and make sure that only certain people have access to it. Emily what does this foreshadow for the year ahead . I think it will focus a lot of attention, in some ways, i have seen people write articles, as bad as this is, it will lead to Better Things because what you do when you find weaknesses is you redesign things in different ways and rebuild the hardware to do this. To raise a point you raised earlier, it is common in the security world for people to tell people about an issue and give them time to fix it. Normally, what project zero does is give people three months. Because this was deep level stuff, they needed more than three months and they were ,cheduled to do a january night next tuesday was the scheduled date which was six months when past when they got it because they needed extra time. We will see more awareness of how the process occurs and more sensitivity to what is going on and people figuring out how they do this. We need better update policies because it will be hard, for more stuff can be hard to firmware stuff can be hard to update, apple will do it with a os combined. Emily quickly, we know companies are cooperating and we know that folder abilities are vulnerabilities are more specific but hackers are getting better. If anything changing . Less or more of a threat . Keep it in perspective and understand the threat and what you need to do to make sure you are adequately protected. And remember to protect the data. That is where security needs to live. It is not about protecting the software, it is understanding the data and understanding Human Interaction with the data. It is a layered approach and basic training. It is all of the elements together that over time will increase our cyber hygiene and make us better. Emily brian white, great to have you back and bob odonnell you are sticking with me for the hour. Coming up, the race for fully Autonomous Cars ramping up, annual global sales could reach one million one billion dollars by 2025. Emily private Equity Firm Silver Lake has taken a majority stake in wp engines, silver lake invested 250 million to help the web tech startup by up investors and expand internationally. They built tools to better operate websites based on wordpress and opensource to use and manage websites and applications. Driverless cars are prepared for liftoff, according to a new study the company says Autonomous Cars are launching first in the u. S. In the next couple of years and will reach one million in annual global sales by 2025. That number will increase drastically with analysts germany carlson says self Jeremy Carlson joining us is Jeremy Carlson still with us is bob odonnell. What makes you think they will in up so fast, multimillions 2040 . We took a close look at a lot of factors. Technology, regulation, consumer interest, and all of them will help bring the technology to market early on. We expect, over the later parts of the forecast, into the 20 30s, that the servicebased Business Model, mobility as a service is really going to start to drive demand for a lot of the alternatives to vehicle ownership. Emily are these cars that still need a human driver in the driver seat . No, they will be fully Autonomous Vehicles. Standard called the levels of automation by the society of automotive engineers, level four and level five which means they can go places without a human driver behind the wheel. Supervising or controlling or anything. Early on, they will be limited to certain areas and certain speeds and certain neighborhoods. We will certainly expect that to expand over time. And relatively quickly. Emily do you agree with these numbers . Bob that is seven years from now, most people cannot think two years from now. It is interesting, you have the auto and Tech Industry going, we cap Autonomous Cars, they are here, and people say 2021 and some people say 2022 and now it is 2025 before we get to 1 million. It is possible to see the numbers by then but so much has to happen between now and then. Here is my concern, my big concern is around any fatalities or injuries caused by these cars. If that happens early on, unfortunately, you will see regulation after regulation, and that will push all it back. They could completely change this to emily when it comes to regulation and safety, what needs to happen between now and 2030 to get your target . Two parts to the regulatory puzzle we have to solve, and he is right, there is work that needs to be that needs to be done initially and plenty of work that will need to happen over time to continue to create these paths for deployment and allow it at that scale. There are two factors, the autonomous technology, allowing rules that would regularly govern drivers to govern a machine. Secondly, the Business Model side. Some restrictions in some markets around the ride hailing Business Model that we expect will contribute to quite a bit of that demand early on. And a good portion of it over the link of the forecast. Issuesthere are so many and so many different manufacturers and companies vying for a piece of the market. Many of theough cubbies have been working on the cars for a long time, we are not merely their . Bob no, it is incredibly hard to be this right and we are talking about people lives. Talking about computers and data, now add in the equation of this is impacting peoples lives. It is significantly Higher Standards for safety and for backup and everything else, backup systems i should say. I think it will be a very challenging path. You have 20 of Tech Industry observers that has said this is a 20 year, 30 year thing and we are getting too far ahead of ourselves and sitting unrealistic setting unrealistic expectations. The Ridesharing Services and robo taxis will be the most how most people will see this first. Emily how many cars are personal transportation and how many are robo taxis and airport shuttles and the like . Exactly, early on the vast majority for the first couple of years, the entirety of these fully of pharmaceuticals will be deployed Autonomous Vehicles will be deployed, mobility fleets which allow manufacturers and operators to do more with the vehicles. You understand where they are being operating operated and who is operating them and the economics of repairs and maintenance of the vehicles. It means you are able to learn from what the vehicles are doing, much easier than you could if they were in the hands of consumers. , a lot of reasons that make us believe mobility as a service, specifically the ride hailing Business Model, is the way the most vast majority of interact withwill fully Autonomous Cars for the first several years and probably well into the middle of the 20 20s. Over the end of the forecast a rise in, 20 years out from this forecast verizon, 20 years from this, we expect Autonomous Vehicles to represent a good portion of the fully autonomous market. Ihsy Jeremy Carlson, market principle auto analysts, thank you. Bob odonnell, you are sticking with us. The former head of google car project is now taking on the tech giant within Autonomous Car startup of his own. We will talk about his new project next. This is bloomberg. Alisa claiming responsibility is a bombing in Afghanistan Islamic state. The bombing took place as officers were monitoring protest s by shopkeepers in eastern kabul. The treasury secretary set up sanctions against key entities involved in irans Ballistic Missile program. More aren s he says likely. The south korean president and President Trump agreed that no military drills it during the olympics. They agreed that the gains it should remain peaceful. Ump attorney general sent a cease and desist letter about his bookf fire and fury. Thanktook to twitter to the president for the publicity. This is bloomberg. We are joined by david ingles for a look at the markets. It was certainly a good morning and a good day on wall street. We hit the doubt 25,000 the dow hit 25,000. David it is quite the leg up. It is 24 degrees fahrenheit in new york. Empty. Ss half is a record high. We are pushing the ceiling in the asiapacific. We are seeing weakness in new zealand. In japan, we will probably get marginal gains. Best start of the year going looking96 and lok to build on those gains. More from Bloomberg Technology next. Emily this is Bloomberg Technology. Three Autonomous Car pioneers are taking on their former employees head on. Teslaser head of othersot and two have come together to develop a Company Called aurora. They will curate selfdriving cars for hyundai and vw. Drew has been doing Machine Learning before it was at this big thing. Sterling has shipped products and my experience at google, we got a long way down the road w ith vehicle technology. Emily you ran the google self driving car unit for a long time. What are you doing differently at aurora . When we started at google, it was not clear this is going to be anything. We were cautious about how we were going to build our team. Now we have the experience we can build from. We have these three great leaders and a core of amazing talent around them. Mily some observers would say google is taking a long time. Why does it take so long to get to market . Day, soive cars every we taken for granted. The getting to the point where vehicles are better than humans, it takes a lot of work. 99. 999 percentng of the time. A selfdrivingn car in 2011 and i rated one a muchago, i did not see difference. What would you say . The hard part is the tricky things happen rarely. What we are doing with this technology is, we are trying to save life on the road. You have to drive about 81 million miles before someone dies. If you drive around the city for an hour, the vehicle may seem thatit is doing well, but may not be the case. Happenans, rare events an accident is reported to police one in every 100,000 miles. Self driving cars, we are still assessing where they are. People are pushing to get to these big numbers for performance. Can eliminate all of these accidents. The key will be finding a threshold where we can have them on the road so they cans start to save lives. We need to find an appropriate and safety. Epticism emily you guys are partnering with hyundai and volkswagen. Why . They are great companies. It is hard to imagine companies with a greater impact than those two. Offer what does aurora that waymo does not . We are approaching the industry in the spirit of partnership. We have an immense amount of respect for what volkswagen can do in building the vehicles. If we can get this technology to market quickly, we can start saving lives. Emily quickly means when . Within the next five years, you will probably see this. A stake in they get aurora, hyundai or ball flight . Or ball flight in v olkswagon . I dont want to talk about the financial side. Emily looking at the broader self driving car industry, how do you see if it evolving . Do you see any winners . I think there will be a handful of winners at the end of the day. At some point it will be good enough. At that point, partners will want to use it. Well see improvement to the i city around us. At that point, the company that will bring the technology to scale will see the benefits. It will be an Important Technology for each of the Major Players to have a stake in. Emily will apple have a stake in this market . I would not count them out. They are an incredible company. The Tech Companies have great capability and the auto guys do too. Emily one of auroras stated values is no jerks. We do not have time for interpersonal garbage. We wanted to be about how do we solve the problem. Rly oreating people poo over inflating egos. Emily . Competitionis the for self driving cars how the competition for people to work on selfdriving cars . Greatgive them a environment to work in and teach. I think people want to really do something that matters. Emily employees at the white house will no longer be able to use their personal phones at work. Thee house aides say change is not due to concerns that staffers have been leaking to knees off with news o utlets. We talked about the streaming music landscape next. This is bloomberg. Emily disney will find out soon if the force has awakened in china. Star wars has never had the same following there as elsewhere. Globally, the movie has taken in over 1 billion at the box office. A new report said there were a record 377 billion songs streamed over 2017. Ceo of as now is the start up that handles the licensing of popular songs for Game Developers and ecommerce sites. Spotifysu think of unconventional listing . It is an exciting time in the industry. Historically companies have had challenges in raising capital and licensing. When there is a positive exit, it shows a positive sign. Startups get excited but it is also great for the broader industry. More capital. Has 70 million constructors subscribers, how much room is there to grow . Room through wearable devices and other technologies. The Largest Age Group in the United States is young adults, gen x. We see this continued growth of music consumption to be alive and well. Emily when you look at the broader market, how do you see the various players taking pieces of the pie . We have seen apple try to take a bigger piece of this pie and failing to some degree. Been and youtube have trying to do that. Better guys have opportunity. There has been a problem with the big Record Companies to align themselves to closely with apple and google. Spotify works, great with that. Is not the only player. People have the echo. There are other companies that a re trying to innovate and integrate music into their product. Obviously spotify is a subscriptionbased model. These companies, once you buy the product, it is one and done. But now there is room to inject subscriptionbased thesis. Emily what is the biggest threat to spotify . They have significant challenges. The licenses are complex. They are governed by the labels and the publishing companies. They have to make sure they keep the labels happy. The beautiful thing about technology is there are always folks that come to town to challenge. The labels are dependent on streaming services. Music is growing because of streaming services. They have to work with these companies. Fundamentally, their longterm health is dependent on having platforms through which their music is going to be played. Emily there has been a lot of interesting m and a in the industry. Apple buying shazam. It is interesting. Musically. Followsnese company pogram. Ham fli that was a billion dollar exit. Hear are not exits we about. Sold a should controlling interest to a equity group. Emily i was literally looking at pandora stock. Pandora has not fared well. Is trading at a 52week low. Pandora went through its share of challenges. It had numerous neardeath experiences. People forget, spotify, the output, they said you are never going to get your deal done. Turningid a great job it on its head, and now spotify is saying were going to do differently and prove everybody wrong. Emily there will be a lot to watch. Glad you are here to let us regularly. Coming up, could apples iphone battery fix threaten the upcoming divan for its super cycle of demand for its super cycle of devices. To be thet aims first carrier to provide 5g to customers this year. This pits the wireless giants against each other in a race to upgrade. Wall street is trying to get a sense of the bigger impact of apples battery controversy. Theport from Barclays Says Battery Replacement may cause consumers into delay paying for an upgrade. Will this hurt sales . This is not a massive number in the scheme of things but it could be a big enough number to knock it in one direction. Apple needs the revenue going into this year. Longterm it is not a big problem for apple, but if people are looking at this quarter by quarter, it could be a hit. Both of my kids have phones that had issues and then we replace the battery. Were perfectly fine for a year and a half. It does make a difference. Now that iphone x is past the early adopters, we are hitting the mainstream. Not doing as well as we thought. Basis,m a quarterly this could be a noticeable number. Emily could there be a longterm impact . For a long time we have been thinking that what apple does is chips toin new, shiny run the old software. Works perfectly well on the old software. They say that we do not build redundancy into their phones. The time it takes for people to upgrade their phones has been two years. Now it is three years. Iphone 6 is exactly who they are and nowto have upgrade they do not need to. Lets look at this from a customer perspective. Hey appreciatet t that apple is willing to do this. Magazinellboard reporting that jimmy i is l eaving apple in april. It is slightly incremental news. Iovine, we interviewed him last year. He is an impressive guy. Really is an empire builder. And thats they are building it building that apple is not innt arm that he is charge of emily was he going to stay at apple long . No. He is a Music Industry guide. Apple leads on music. Culturally they like having taylor swift and drake in ads. Give 50 of the revenue to the labels. Emily we will be watching to see if it is august indeed. Thank you as always for joining us. That does it for this edition of Bloomberg Technology. Remember we are livestreaming on twitter. That is all for now. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Kong, weere in hong are live from bloombergs asian headquarters. Strength, strength to the gallup top 25,000 for the opped time the dow t 25,000 for the first time. A sporting agreement. Freezeorea agreed to annual military drills during the winter olympics. Betty steve bannon pledging support for President Trump but their bitter and public falling out is splitting the republican rt