Treasury imposed restrictions that made it difficult to access funding. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Alisa Parenti. This is bloomberg, and Bloomberg Technology is next. Emily im emily chang and this is Bloomberg Technology. Coming up, amazon arrives at your front door after a 1 billion deal to buy a smart home tech company. The ecommerce giants larger delivery strategy. Widget for the sky and raising the stakes for disney and fox. The allout bidding war erupting between the three big media players. Activity for fitbit hits alltime low. Shares tank post earnings. But first to our lead. Amazon has agreed to buy a californiabased Smartphone Company that makes video cameras, doorbells, and other tech. It is valued at about 1 billion and pushes amazon further in the smart home market. J. P. Morgan chase advising on this deal. Joining us now with more details is alex. It was not long ago that ring was booted off of shark tank. Alex just five years ago. The ceo with on shark tank asking for 700,000, saying it to getued at 7 million it now fastforward half a decade later, and they are worth 1 billion to amazon. A nice little ending here for ring. Perhaps a look back to the sharks and say, look at what we have done. For amazon, it is an important step as they continue to push into the more consumer facing hardware. We have seen amazon in the past six months or so really tried to embed themselves in consumerss homes. You saw it with amazon key, where you can unlock it for delivery folks so they can deliver packages, and you have seen it with amazon echo. This fits nicely within the entire ecosystem because, you know what . Goal is not selling hardware but getting more products on ecommerce platform and get you to open your pocketbook a little more. Emily talk about how this fits into the deliberate strategy. Obviously amazon has been focused on that last mile. Now they have this Concierge Service keyword amazon can go in your home and drop packages. How does it tight together . Alex when you use a ring smart camera come even have the person on the ground talk to it. If you are on your phone or tablet or pc, you can talk back, so that kind of actual relationship where you are not just a watch, but you can engage with the person who is there, if it is in amazon delivery person who they say is verified, you can open the door for them, tell them where to leave something. That amazon has been pushing Services Like housecleaning and dog walking. Anyone who is showing up at your door can potentially be let inside when youre not there. You cant spending within that broader amazon platform. Emily what do you make of the price of this deal . Will disclosure, i own a ring doorbell, and i was shocked. The product is good, but 1 billion . Alex there are reports from last year from others saying they were valued around 450 million so that is a twotime bump. For amazon, it is a small check size. A person familiar with the matter told me jp morgan advised ring. Amazon do not have an advisor with them. They just shelled out the money for this deal so it seems to be another one of these small things that amazon has been collecting as it continues to fill this set of tools it has to keep getting into peoples homes. Emily they did a big deal with whole foods last year. Do you think amazon will be more acquisitive in the future . Alex i can tell you now covering tech m a, they are definitely number one on my list. We are waiting for the next big deal from them. Dont have anything in the hopper that i know about right now. Does not mean there isnt something that can change. Whole foods or shows up with your food, you talked to your ring camera, you get them in the door. Emily all right. Thank you so much for breaking that one down. Now and earnings news, square reported fourthquarter sales that topped analyst estimates with a nice consecutive quarter. In more than two years as a public company, square has moved beyond the iconic payment dongle to be a onestop Business Manager for small and midsized Business Managers. Coming up, shares of fitbit hit an alltime low on disappointing earnings and forecast, someone is next for the Wearable Company . We will hear from the ceo james park. If you like bloomberg news, you listen to us on the bloomberg and sirius xm. This is bloomberg. New note from michael takes a closer look at Apples Health unit. Apples plan to start onsite medical connects for its workers may go beyond its own employees if it succeeds. This comes after a cnbc report that said apple was starting clinics for its workers. Remember, ceo tim cook told investors the company can make a significant contribution to the health care space. Fitbits longerterm outlook is facing challenges amidst falling demand. Shares in a new alltime low tuesday on disappointing earnings results, so what is the next step . Lets get to cory johnson, who is standing by in new york. Cory yes im. Thank you very much. Not a great quarter, at least according to wall street with stocks selling off today. James park, the ceo joins us quite a bit, and you care about the stock more than i do, but in terms of the size of the company and with the opportunity is, if you asked one of this to you still if the Fourth Quarter sales would be below 700 million, hard to imagine it would fall after 571 million. What is going on with the demand for fitbit products . James 2017 was evidently a challenging year and played out a lot differently than expected. For us, the shift from basic activity trackers to more fully featured smart watches is happening even faster than we anticipated. We did launch our first smart watch into the category in q4, and it did outsell our prior highest product search, but it was not the mass appeal shipment unit driver that we anticipated, and that was reflected in our financials, and that is what investors are reacting to. Cory strikes me as a really interesting problem. When i looked at the apple watch which launched after fitbit, it was a product in search of a youth i a use. Fitbit had a use. Sort of athletic or a physical fitness focused product. As you move from bands that just to watchps or altitude as i do more, the you start to lose that focus . How do you make it a massmarket product not just for runners, but for people who want to lose 10 pounds . James absolutely i think we. Ill help maintain kee a line that is coming in product features. There are specific health and fitness apps, the long battery , andover four days helps our app is the number one app on itunes and android for health and fitness. Platform independence plays a key role, especially as we try to integrate deeply in the health care system, so the focus on health and fitness regardless of the device is a winning strategy. Ionic was17, while not the success we anticipated, we achieved a lot as a company. We did meet our fullyear guidance and earnings. We actually exceeded our projections for cash flow, and we are incredibly operationally efficient. We ended up with 50 million below our target that we had stated to investors. We deepened our reach in health care, and one of the more interesting aspects if you think about not just devices, but our active user base grew to over 25 million users even if our shipments declined. Cory what is the dynamic . How do you ship fewer products that have more users . I did not understand that. James one of the things investors have been concerned about the past is, what is our level of retention and usage . Is this a product that people buy and put in their drawer after a few weeks or months . What we are devastating is that even though shipments declined and the active user base grew, that means we are Getting Better at getting people to stay longer on our devices and platforms, and that is actually going to be important as we start to shift our Business Model from being device centric to one that is more around software paid services. Cory lets talk about that, the shift in the business. Thea long time, it seemed real leg up in terms of unit sales might be the market, going into a big company and getting everyone to wear fitbit. In our company, bloomberg, if you wanted to youre stuck using a fitbit and another application from you get credit towards buying stuff for gift cards and so on. Now you are talking a lot about health care and have been for more than a year. Is that different than a corporate focus, or is that one in the same . James it is a little bit different. Primarily our Enterprise Business before had been selling devices to enterprises. ,e have had large installations 40,000, 50,000 units. We had a several hundred thousand unit deal with target, but the difference is what our Business Model is behind our health business. We are moving to one that is were based around pmpm, per member per month, which is becoming in nature and more predictable. One of the more interesting things is also looking at risk sharing models where we happened to participate in share of any savings and Health Care Costs that we achieve for our users. Cory you are getting that now . You have done deals like that . James there are promising steps. Deals with Blue Cross Blue Shield of south carolina. Around diabetes management has the potential to move to a risk sharing payment model. These are the kind of contracts that will be really significant, more than 1 or 2 of revenue per deal . James you know, it is hard to say what the revenue outlook will look like. We are taking a lot of concrete steps in 2018, and you can expect to see health care being a more meaningful part of our business going forward. Cory in terms of product mix going forward, you suggested that to commend you, inventory was not a big problem. Usually there is something that does not work the way it expected to, inventory blows up in Consumer Electronics and has been the death of many companies. That has not happened to you. Particularly as you are moving into new products, are they on the immediate horizon . You announced a deal with adidas today. James definitely last you at this time, our inventory overhang was a huge issue, and it took us much of the first half of the year to work through that area i think one of the highlights coming into 2018 is we are coming in with a relatively clean inventory position. We took a market rollout. We are still launching in select countries right now. And 79 million in the bank in terms of cash. The Free Cash Flow as you mentioned is bumpy from quarter to quarter as you alluded to a big Fourth Quarter, but the Fourth Quarter numbers not that bad. You have a very long runway in this business even though you lost money in the quarter. You actually generated cash flow. James one of the things investors to look forward to is us remaining disciplined on Free Cash Flow. Even last year despite our challenges, we only consumed about 25 million in cash. In 2018, our outlook is actually to break even on a Free Cash Flow basis while we work through this transition. Cory yeah. Your stock is not reflecting some of the positive things. For the sake of all the people that can get fit, i hope it rectifies itself. Very kind of you to join us today. Really appreciate it. James thanks. Emily thank you so much. Cars are getting ready for the biggest road test in california, that is. The staten april 2, department of Motor Vehicles has authorized the first trial for consumer passenger rides without a passenger at the wheel. Until now, self driving cars needed a backup driver at the wheel. Participating vehicles will have a backup driver, but this one will be patched in via remote to take over if needed. Coming up, comcast sets the stage to take over sky, challenging 21st century fox and disney with an offer. We will talk about the Massive Media bidding war, next. This is bloomberg. Emily netflix continues to ramp up its spending. This easytofollow the ceo said they will spend up to 8 million on content this year. s hundred original shows and movies on a platform over the original 2018 700 shows and movies on the platform over the course of 2018. Everyone is shooting for sky. Disney has offered to buy much of fox to get it. Comcast is offering 31 billion for the company. Early tuesday morning, sky said it was premature for anyone to be doing anything because it is not yet have a firm offer from comcast. Here to break it down for us is the head of research for Bloomberg Intelligence and chris. First, layout were each of these offers stand or does not stand for sky. Well, right now, as you mentioned, fox is saying there is not an official offer out here so there is really nothing they can commit to on their rent will have, but they highlevel meetings and most likely come out with their own proposal that would at least match what comcast is offering. They have to. They cannot let a higher bid stay out there. Paul, lets talk about why comcast would want sky. The ceo spoke on a call earlier today. Take a listen to what he had to say. We have admired sky for a long time, and when it became clear that not only was sky for was but that every share going to potentially have a change of ownership, we thought now was the time to make the superior cash proposal. We think sky is an outstanding business. Emily so read between the lines for us. What is he saying . Here for big thing Brian Roberts is comcast, while a fantastic company in the u. S. With cable and entertainment assets, it is really underrepresented in the international marketplace. Does not have many businesses outside of the u. S. , so the acquisition of sky would you medically increase their National Exposure to the media business. You think about the paytv business in america. It is highly concentrated, saturated, maturing, cord cutting, so it is a very challenged business. Internationally starting in the u. K. And other parts of europe where sky operates, less penetration on the paytv side. More opportunity for growth, so if you are Brian Roberts and comcast, it is a nice diversification move for you. Emily sky is definitely feeling the love even though it is not on paper yet. Take a listen to what the disney ceo had to say a couple months ago. Sky is just an amazing platform. Not only does it provide consumers with a great Consumer Experience in terms of access to the programming, but also creates a of great programming from sports to news to all forms of entertainment. We have actually distributed to of our programming on sky. We are extremely impressed with the user interface, their ability to attract and retain customers, the Value Proposition to their consumers, and that obviously is a real crown jewel in the assets of 21st century fox. We certainly will be looking forward to having the opportunity to have sky be part of our company. Emily chris, does he really want to buy sky . Chris yes, absolutely. You almost have to feel sorry for him. He was embarrassed announcing this expansion of disneyland with star wars land, and across the channel comes the rebel fighters. He was saying on mondays tech conference very similar to what roberts was saying that he needs interNational Exposure, to tv business in europe is not declining like it is in the u. S. , and their assets like a direct to Consumer Service is similar to what he is trying to do in the u. S. A lot of things that bob iger wants at sky. He will have to work with the murdochs for some sort of a competitive bid. Emily how do you expect thoughts and disney to respond . Paul i think they will respond. I dont think they will let this unchallenged. If you are bob iger, you have to sit back and think, how badly do you want to be in the european paytv business . I think probably disney will come back and be the bidde two practical over topr of comcast because disney will have a cleaner regulatory pass to approval even though 21st century fox is already possibly a year into their transaction and the regulatory process. Disney will have a better and easier pass and might be the preferred bidder. Emily give us a little more detail on what fox is dealing with and u. K. Regulators and how that plays into this equation. Yes. this is a deal the murdochs have been doing for quite a long time. They keep doing things that anger the u. K. Regulators. This issue is still unresolved. It has several months away. Right now, disney and fox down by the terms of their merger agreement would be difficult for disney to make a bid for sky without some sort of agreement between fox and then, but certainly from everything we have seen, it would be ifentially and easier bid disney or comcast directly acquired sky because there is a feeling about how the murdochs have run things. Emily all right. We will keep watching this. Chris, thank you, as well as paul sweeney a Bloomberg Intelligence. Coming up, a case of the u. S. Government versus microsoft heading for the highest court in the land. What it means for the future of your data stored overseas. That is next. Bloomberg technology is Live Streaming on twitter. Check us out 5 00 p. M. In new york, 2 00 p. M. In san francisco. This is bloomberg. Mom you called . Oh hi sweetie, i just want to show you something. Xfinity mobile find my phone. [ phone rings ] look at you. This tech stuff is easy. [ whirring sound ] you want a cookie . Its a drone i know. Find your phone easily with the xfinity voice remote. One more way comcast is working to fit into your life, not the other way around. Im Alisa Parenti in washington and you are watching Bloomberg Technology. The same federal judge President Trump accused of mishandling fraud allegations against the now Defunct Trump University has sided with him on a challenge to building a border wall with mexico. Rejectedzalo curio arguments but a state of california that the administration overreached by waving laws requiring environmental and other reviews before construction could begin. Us vulcans dont plan on pursuing legislation to ban weapons or expand background checks. Conversely steve scalise, himself a victim of gun violence, focused on the lack of preemptive action. There are laws on the books that were not enforced and were not properly lamented. What angered me the most is when i see breakdowns with law enforcement. The fbi had this guys name on a silver platter. Alisa and hit by the heaviest snowfall in half a century as a siberian storm front sent temperatures plunging. Im Alisa Parenti, this is bloomberg. Just after 5 30 p. M. Here in washington on tuesday evening, 630 wednesday evening. Emily were setting up for a busy day in asia as we get hawkish comments from Jerome Powell while gold is faltering policy that on tightening shaping up and oil under pressure after dropping the most in two weeks. Explosive u. S. Show growth threatens rebalancing. Checking in on features in japan and australia, on the data docket, pmi readings for china, to the Lunar New Year holidays. Retail salesget and having data from japan. The report will be on deck and in hong kong. We will get the first budget from the administration. In hong kong, up next, more with Bloomberg Technology. Emily this is Bloomberg Technology. The u. S. Supreme court had a case that had farreaching impact. The government wants microsoft to turnover emails stored in a giant server farm in ireland. Microsoft says it doesnt have to think to the stored Communications Act of 1986. It is a prime example of the law not keeping up with modern technology and as lawenforcement officials and Tech Companies eagerly awaiting the outcome. The vp of policy from the center for democracy and technology. Also with us, a bureau chief has been covering microsoft for more than a decade. Lay out what the argument is here and how this case will proceed. The emails were stored in ireland and they went straight from microsoft. They say give us the emails directly. It was passed in 1986 and , it is anply international law. The stored communication is dead. It was passed in 1986. That is 20 years before the advent of cloud services. Since the u. S. Government didnt go through the Irish Government to request the emails, they dont have to turn them over. You filed a brief supporting microsoft, why . We are word with the practical result of this is going to be. In which anyworld government can reach into any nation and grab data thats there, but is not only chaos for peoples privacy, it undermines the entire idea of cloud computing, that you get the same services in the cloud as you would if you catch information on your own servers. If you have nations reaching into each others sovereign borders and grabbing that data, it is manifestly not true. It is not good for privacy or u. S. Cloud computing. Several justices expressed support for the government side. There are some real concerns there. Us about how the justice has responded to both sides today. The justice is pushing back a little bit. Why does microsoft have to decide to store this data overseas . It is part of the Value Proposition of cloud services. If you are in ireland and the data is stored, the u. S. Has closed rings down. You have chief Justice Roberts and Justice Alito pushing back on the idea that this could really impair u. S. Law enforcement and with this really hamper investigation by u. S. Law enforcement . Chief Justice Roberts saying that my email distort halfway across the world just because i asked for it. Otherve some of the justices, like a justice. Otomayor your pushing back on it one of the technologies and the government seems to agree on. The Supreme Court usually doesnt wait for that sort of thing. The bill may not get past. Its not the first one of its kind that been introduced. The other ones havent gone anywhere. Is their fear of u. S. Retaliation by customers . Microsoft has been trying to make the Business Case for a long time. Trust them and its not just microsoft, but other Cloud Companies took a real hit when it came to the snowdon revelations and the worry that the nsa was going to spy on services. It becomes the norm that you are not protected by your own. Rivacy laws it is not unreasonable to think customers will work for domestic providers that maybe more attuned to their own laws. This really is a problem that stems from an out of date law that shouldve been updated a long time ago. , we really can be updated. It is congressional inertia at its worst. Emily when do you expect will get a ruling . Think we are waiting for the summer. Hearing june. It is up to them. Emily you mentioned some new legislation. Will we see a refresher, a fresher framework . The legislation that was proposed, it gives the Justice Department a lot of what it wants. The Justice Department has the right to show this data overseas. To say when a piece of data or a lot of data whose laws dont allow for this sort of thing to ask a court take that into account. As mentioned this issue of of companies. Using u. S. Providers. What happens when a Foreign Company like alibaba, the question microsoft has raised, what happens if the chinese says we want data stored in the alibaba server that is in california. It brings up a set of issues. The Seattle Bureau chief, thank you. Thank you both for joining us. In the latest revolving door in technology, picturesque has named their first chief operating officer. They are looking to scale internationally ahead of an ipo. Former executive at square and google for the position. They most recently scored a Business Leader over the revenue product and international expansion, customer support, and partnership. Francis ray, the woman uber and how isnthelp just a month. They will continue to serve as just an advisor as she embarked a her own projects to advise Leadership Development program for executives centering on women and minorities. Coming up, we will bring you coverage from barcelona. How the company is taking the augmented reality system public. This is bloomberg. Emily at mobile World Congress in barcelona, google talked about how its bringing its augmented reality system out of beta with new features. R and aresident of the our business operations, they joined to talk about the release with Caroline Hyde. Take a listen. It is a developer platform for augmented reality on top of android. Is 100 are excited about million phones have that on board. We have simplified those phones to build a highperformance arx. s is. Building that. We have that global screen for developers to build a really delightful looks. s. And you can have a stormtrooper standing next to you from star you cango shopping or get account couch right from the living room. And education were you have kids walk around this film that they have. Are you hoping for the next money to be made off of one of these . Now, it is all about enabling developers to make a our experiences. Those making the next pokemon go. Shopping. Educational experiences. Cultural expression. We see that as being a very broad platform. And over time, money will come. It is adding value to you. How will we see this . Powerfulespecially phone. This works on highend phones because it meets certain performance. A certain type of camera. Over time, we will build that. Nd also the mediumrange billions of forms will have a our capability. How will you oversee vr as well. When can we buy the hardware that will make it much more userfriendly . That is where the team started, Virtual Reality and it has added augmented reality as one of it. Augmented reality brings digital objects into your physical world. And virtuality reality capturing of the real world is where we are listening. Imagine we can go more. We can see that as the use case. See the product called exhibition. We hold it out to students in the u. K. And the u. S. On a physicalng phil tripp, you can put on a very simple cardboard. This is what it is resonating mvr, capturing systems. Cardboard on the low end and a dream. Or you can simply slip the phone into a beautiful comfortable cloudbased viewer which is the vr video. How important is it to google as a whole . Ar and vr are for immersive computing. Computing networks more like we do with humans. Instead of looking at a small attract itlass, you with computing in 3d. Google lens, for example, is one of the technologies where it sees what planet that. The idea of recognition and enhancing that or augmenting that in the real world. End or he justne have the goggles and go from there. Ar is on the other side where through a phone, you can bring objects into your physical world. Investing all three of them to bring them at scale. Is this something that you are in a place to keep up with . Been investing in ar with a project angle since 2014. So we recognize augmented placey is an important for emergence. And over time, we did not need the hardware. And these capabilities lead to android it like we do with the iphone. Things to Caroline Hyde in barcelona. Ande man who leaves what mcafee is doing to protect all of that. Next. This is bloomberg. Emily a followup on the story we covered on monday, facebook was to set the record straight. Donald trump spent slightly more than Hillary Clinton ahead of the general election after a former employee wrote an article for wire thats a trump was targeting people in more rural areas and likely paid less or add per ad. To a tweet from andrew bosworth, trump actually spent slightly more and most of those months. The chart only counter the price of ads based on the number of people those ads were guaranteed to reach. They have been protecting networks and computer for years. We caught up with chris young at the mobile World Congress in barcelona were they talked about the state of cybersecurity and how you can protect the internet of things. We are doing a few things. Really interesting innovation. We took the Amazon Alexa Skills and have a voice command capabilities for one of our products called a secure home platform. We announced a partnership basically bringing security to the home router. Devices andonnected they basically, the devices can be attacked. Cameras being recruited in the botnets and we see those things happen. The secure home platform extended security at any connected device in the household. And using the voice command, it is really simple so people can have security inherent in their home. In germany, it went through do you find veryal world operating similarly. That being said, the privacy laws and regulations and expectations around privacy tend to be quite different between and among countries. But the good news is, International Standards like to gdp are, for example, it will good, dataive privacy standards that will permeate countries around the world including the u. S. And raise the bar for security which is also the way to go. The bar needs to be raised because the malware is coming. Do we see is still grow exponentially . Attacks are one of those items that continues to rise. They are not just using malware, they are finding ways to compromise the username and password. So they can get into your account without using malware. They are executing their attacks faster and more broadly across different devices. One of the things youre doing with the platform is to try to protect multiple devices in the home. The problem is growing and it is becoming harder to detect in some ways. Part of the goal for mcafee is to take some of that complexity out of the factor for the user, whether we are in a home or a Business User as well. How likely are we to see increases in attacks as more and more devices come online. The internet of things. Chris more devices mean more attacks, points of entry. There is more surface area for attacks. A botnet was used to attack a dime a couple years ago. It we dont hear about it in the headlines as much now, but theyre alive and well. Theyre adding new devices every few minutes. These largescale botnets they go after connected devices continue to proliferate. And that will spot new types of attacks and point the finger to why we have good, Strong Security that extends all the way to the home and not just on peace the but to protect all devices at home. Chris young, ceo of mcafee speaking to bloomberg and our own Caroline Hyde. That does it for this edition of Bloomberg Technology. A reminder, were livestreaming on twitter weekdays at 5 p. M. In new york, 2 p. M. In san francisco. Thats all for now. This is bloomberg. Mom you called . Oh hi sweetie, i just want to show you something. Xfinity mobile find my phone. [ phone rings ] look at you. This tech stuff is easy. [ whirring sound ] you want a cookie . Its a drone i know. Find your phone easily with the xfinity voice remote. One more way comcast is working to fit into your life, not the other way around. Sure. Momwhats up, son . Alk . I cant be your it guy anymore. What . You guys have xfinity. You can do this. Whats a good wifi password, mom . You still have to visit us. I will. No. Make that the password you stillohave toovisit us. Thats a good one. Seems a bit long, but okay. Set a memorable wifi password with xfinity my account. One more way comcast is working to fit into your life, not the other way around. 7 00 a. M. In hong kong, live from bloombergs asia headquarters. Im yvonne man, welcome to daybreak asia. And then there were four. The fed chairman says strengthening data might mean a rate hike briefing. U. S. Stocks sold off on jay powells more hawkish tone and asia pacific markets are expected to follow suit. Im betty liu in new york or it is just after 6 p. M. On this tuesday. Oh dropping the most amid new warnings about u. S. Show production in the opec led market, rebalancing in washington. Getting tough with china. Slapping tar