Transcripts For BLOOMBERG Best Of Bloomberg Technology 20240714

With the chairman in the midst of a sales lunch, whose as the company has a plan b. And the cost of being cool. A former executive testifies the Company Fired thousands of workers in recent years in an effort to compete with Companies Like google and amazon. The latest on multiple age discrimination lawsuits facing big blue. Our top story of the week, apple earnings. The tech giant forecasting revenues that topped analyst estimates, and services now contribute to a fifth of total sales. They also reported the iphone represented 45 of revenue, the first time it has made up half of sales. In a way, this is progress towards apples less reliance on the flagship product and more on new lines of business. I got reaction from bloomberg businessweeks max chafkin and a Portfolio Manager, dan morgan, who manages apple stock for his clients. Dan it was interesting, if you would have told me they would have missed on both services and revenue, i would have said there was no way they would beat on top and bottom line. But as you mentioned, wearables, 5. 5 3 billion, that was a big plus. They also used about 21 billion of cash on the quarter to repurchase shares and increase the dividend. I think they kept it at . 77. So they did some other things to kind of help along, which initially would have thought would have been a tough quarter for them at least based on the fact that they missed estimates on iphone revenues and also services. Emily still, we have got the president warning that the trade war is not going to get better anytime soon, that could impact the iphone max. If tariffs come into play on the iphone, what do they do . Max the reality is, for years, apple has been counting on global expansion, selling lots and lots of smart phones in china. And it has been able to do that to some extent, but as we are seeing, the numbers arent there , and the outlook is in great because you have the possibility tariffs, further barriers, and these Chinese Companies will be pushing harder and harder into the domestic market in china at the same time that apple is trying to get in there. And potentially the government helping those companies along, so lots of quote unquote headwinds for apple. The good news is, the services thing, even though it is not exactly where they would like it, it is still pretty strong. Iphoneretty amazing that revenues, this has basically been an iphone company for years, and it is now half of apples revenue. It is probably a good sign because we have heard tim cook say over and over again that they want to increase Services Revenue, and here it is happening. So that is good news for investors. Emily the Earnings Call has begun, apple ceo tim cook speaking right now, saying he is thrilled to see a return to growth. Dan, you own a couple hundred thousand shares of apple. How concerned are you about this tariff issue . Dan the tariff issues as max was saying, it is kind of a double when he in regards to shipping phones with the company , then you have the Trump Administration. Then you have things like glass covers, sensors that are shipped into china that could be potentially on a tariff watch with the Chinese Government. And the big question going forward, and maybe max can talk about it too, is what does apple do . Do they try to raise prices, which they already have extremely high average selling prices compared to the competition, or do they just absorb the tariffs into the margins, and how does that work into the International Expansion theme, where you have annual average incomes in india and china that are a fraction of what they are here in the u. S. . It does create a conundrum going forward. It is definitely an issue in terms of trying to model out what will happen on apple with these tariffs. Emily meantime, they wants to push the services business. They still hit a record in the services business, though lighter than what analysts had predicted. But in order to grow, they have to keep getting devices in the hands of consumers. It is kind of a circular thing where, on one hand, services are replacing iphone sales, but on the other, you cant have Services Without iphones. And i think there is some question, is apple making all this money in Services Revenue because their services are really good, or is it because they have set up this business where you kind of have no choice if you have an iphone and you want to buy an app, that is a current revenue that is never going to go away, or not for a long time. In terms of revenue growth, is this real innovation or is this a powerful, Mature Company kind of flexing its muscles and collecting revenue . And i think depending on what you think the answer to that question is is how you will evaluate the stock. If you see lots of growth ahead, you will be much more optimistic. Emily that was max chafkin and synovus Portfolio Manager dan morgan. Apples biggest rival also reported earnings this week. Samsung shares fell wednesday after the company said secondquarter profit more than halved from a year earlier. The ongoing global trade dispute and smartphones slump taking a bite out of their business. I got details from selina wang in hong kong. Selina we already received a profit warning from samsung, so they actually Beat Estimates on some fronts. The big story has been an industrywide story, around these memory chips. The whole industry has really suffered from low demand, falling prices, part of that because of the overhang from the trade war, economic global uncertainties, as well as slowing demand from these Data Center Players. But we pick up in the second half of the year. A big sign was they expect these Data Center Players to reconsider purchasing again. And we also saw declines in their mobile division. 42 decline in operating income. Of course, the whole industry has been dealing with problems, but samsung did say profitability was eroded because of intensifying competition in these low to midrange markets. So, some samsungspecific issues, but theyve also been dealing with a lot of global geopolitical overhangs. Emily talk to us about how the tradenk the u. S. China war and the dispute between japan and south korea are impacting samsung specifically. Selina one of the biggest overhangs for them is how long this u. S. China trade war will drag on for and how much it will have a slowdown on Global Growth, which impacts purchases of smart phones as well as all of the components. The japansouth korea spat is also a huge concern for investors. There was a lot of questions from analysts on the call about how they are going to minimize the impact. We did not hear a lot of details from executives. We know so far that they have enough components for now, despite the export curbs, but the problem is if these do drag on, if they become even broader, how will samsung find alternate suppliers . That is going to be very difficult and it could lead to production issues. On the huawei front, that is a doubleedged sword. On one hand, as huawei suffers from challenging demand abroad, that is a place for samsung to come in on the smartphone front, but in terms of their profitable chip business, that could be a huaweig i if is really damaged and isnt able to purchase as many components. Emily meantime, samsung has also faced branding issues. They tried to launch a full double phone to much fanfare. They pulled it back, how are issues impacting demand for the samsung phones . Selina as you mentioned, they have had a slew of branding problems. And have been seeing declining profits in their mobile division. They also made a statement that smartphone sales will be similar to april and june. It suggests the launches of these new, flashy phone models maybe not as successful. But some of the bright spots in samsung earnings, one of them is displays is the led displays. We saw apple come out with earnings recently that had strong results, stronger demand than it expected, so that is expected to be a bright spot in this display screen area. Another bright spot executives touted on the Earnings Call is the development of 5g and the growing demand for 5g chips. However, that is still very early stages, and there is a lot of skepticism among investors about how that will play out for the rest of the year. It is worth pointing out that another reason why there was such a negative share impact after their announcement was that they actually ended up delaying the announcements in shareholder return plans until next year, citing concerns to Global Growth and geopolitical uncertainty. Emily that was bloombergs selina wang from hong kong. Coming up, the federal trade commission has slapped facebook with the largest fine in history for privacy violations. But will facebook learned its lesson . We talk about it with a dissenting ftc commissioner, who says the fine is not enough. And if you like bloomberg news, check us out on the radio. Listen on the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Emily last week, the federal trade commission formally announced the details of it 5 billion settlement with facebook for years of privacy violations. As part of the settlement, facebook must submit to oversight from an independent committee as well as new privacy certifications and assessments. But while the fine was the largest ever imposed by the ftc, many lawmakers and privacy groups are arguing the company got off too easy. U. S. F. T. C. See commissioner Rebecca Kelly slaughter, voted against the government. Settlement. Rebecca i voted against the settlement because when you look at the terms taken as a whole, not just the fine at the injunctive relief, i was not convinced it would do enough to change facebooks behavior and make sure that in the future, they kept their promises to the f. T. C. And to their consumers. Emily what would have been better . Fining zuckerberg directly, thatw you have suggested the f. T. C. Should have sued facebook, should have sued zuckerberg perhaps personally . Rebecca realistically, you have to look at what our options were. Here, it would have made a lot of sense to take facebook to court. To say, you may not agree to a settlement we think will change your behavior, so we will pursue the terms we care about in court. Open litigation in a public court of law would provide transparency and accountability that i think are missing from this settlement. I also think the settlement is missing meaningful limits on how facebook collects, uses, and shares data. And i would have really liked to see that. Emily suing facebook directly would have been a riskier path, wouldnt it . You could have risked losing the suit. Rebecca i agree. And if you think the entire point of litigation is the outcome at the end of the day , the remedy that we can get and you think the remedy in this settlement was enough to change facebooks behavior, that i would have supported it. But if you dont think the remedy change their behavior, you can think of other advantages litigation could have in terms of public accountability, public transparency about what the company did and who knew what in the compan. And, at the end of the day, we the ftc are not a private corporation. We are not just making an expected value calculation. We are trying to work in the interest of the American Public and we have an obligation to seek justice, even if we are not guaranteed to achieve it. Emily i spoke to your colleague, nnoah phillips. I told him about your response to the deal. He voted in favor of the deal. Take a listen to what he had to say about your suggestion that a lawsuit wouldve been a better route. Noah i dont think that is an accurate characterization of the state of play. The remedies we have achieved, both financial and injunctive, meaniohave been achieved through a court process. In a in normal litigation, you are weighing the certainty of less against chance of more. The in this case, were facing against the certainty of more and the uncertainty of getting even less. Emily what is your response to that, commissioner . Rebecca respectfully, i disagree. I dont think the terms on the table were enough to guarantee that facebooks behavior would change, or even necessarily to make it likely, because they didnt impose any public accountability on transparency, or any meaningful limitations in terms of how facebook uses data. So i would rather take the chance in court, and i think the process of litigation can make a big difference in how a company behaves. Deterringl is the company from doing something wrong and deterring other companies from doing something wrong, the prospect of a public trial can have a very deterrent effect even if the remedy at the end of the case may be different from what you can get in a settlement. Emily what about the zuckerberg personally . What kind of punishment or more extreme penalty would you have liked to have seen on him . Rebecca what i am going for is public accountability and transparency. The settlement the ftc entered into excused mr. Zuckerberg, and all other executives at facebook from any liability, and i didnt think the investigation that we did justified that excuse. I didnt think we had a basis to say that they should have no liability to react at a minimum, i would have liked to see some transparency, some testimony, some documents in court that gave us better insight into where the liability was appropriate. Emily are you concerned facebook will not learn its lesson . Do you think facebook will simply slide back to its original state of play, and given that there are no structural changes to the Business Model year, rings would just go back to the way they were . Rebecca fundamentally, that is my concern. I think that is why it is important for the ftc to use the tools and resources it has, limited as those may be, to fight as hard as they can to change the behavior of Companies Breaking the law, and teach them a lesson that it is not worth doing it again in the future, and he can simply pay a fine to make it go away. Emily in the meantime, the ftc has opened an antitrust investigation into facebook. What can you tell us about that investigation, or at the very least, your position on whether facebook is too big . Rebecca unfortunately, i cannot tell you anything about the substance of a particular investigation, this or any other. I do think that the f. T. C. Has an obligation to look into questions of antitrust violations. Those are often going to be by big companies, and all than investigations where it is appropriate to do so. U. S. Fcc commissioner Rebecca Kelly slaughter. ,coming up, weak smartphone demand and a downbeat forecast, we talk about the impact of trade tensions. This is bloomberg. Emily chipmaker qualcomm gave a downbeat Sales Forecast yesterday. At the highend, qualcomm is looking at 5. 1 billion in sales, while analysts predicted that is in line with a warning 5. 7 billion. Issued in april that demand for smartphones, particularly in china would be week. I got a run done with bloombergs Senior Market editor in new york. That forecast was very light. The eps forecast for the quarter was also really liked. They see adjusted eps of as much as . 75. The street was looking for it 1. 10. All boils down to qualcomms basic Business Model. It has this controversial practice of his set of just manufacturers,o they license them, and they want royalties equal to a certain percentage of the value of the device. This has caused a lot of litigation problems for qualcomm. They actually settled with apple earlier this year. There are a lot of questions about similar case brought by the ftc. A judge in the ninth circuit ruled against qualcomm. They are waiting for an appeal and there is not a lot of clarity in todays Earnings Reports. They may be getting into it on the call as we speak but not a lot of clarity about when they can expect resolution on this idea. Qualcomm was very upbeat about the prospects for 5g in their Earnings Report saying their design wins have doubled over the last few months, but investors are not sure what that revenue stream is going to look like, because of this unsettled issue with the ftc. They also came out and said , until they get a deal with huawei over the same issue, it is unclear if huawei will make additional payments to them, also saying that huawei is taking market share in china , which sort of has ramifications for the entire space. Qualcomm has really been on a roller coaster ride this year. It is down 18 . More than 20 now if these declines hold tomorrow. Still up 29 on the year. So, quite a wild ride for qualcomm this year. Emily President Trump abruptly escalated his trade work with china thursday, tweeting quote the tariffs will put an additional tariff of 10 on the remaining 300 billion of good and products. This does not include the 250 billion dollars already tariffed at 25 . It included a raft of consumer and tech goods, including most of apples major products. Earlier, trump was asked if he is concerned about the market reaction. Take a look at what he had to say. Pres. Trump i am not concerned about that at all. People dont understand what happened. Emily to discuss, we are joined reporter,omberg trade sarah mcgregor, and no bloomberg businessweeks max chafkin. What does he think people dont understand . Max the theory from the Trump Administration is, number one, this a temporary thing, all part of a negotiation, the art of the deal, and basically, tru supporters basically agree with that. The other piece of this is that is American Companies at depth. The reason you dont see the apple stock tanking right now is contractpple uses manufacturing, and in the long run, they can shift manufacturing out of china if they needed. Obviously, it would be a pretty big lift for them and a bit of a nearterm disaster. Emily so, sarah, as usual, there is ambiguity on the length of time this would be imposed, the president indicating it could go up or down, be short or longterm. Give us the details. Sarah so trump, when he spoke with reporters after he announced the 25 tariffs in a tweet, said it could go beyond 25 if he had to go there, so it just creates a whole new world of uncertainty for the business community. Companies like apple, for instance, this is a 10 tariff that trump announced today, when they first announced the 300 billion possibility of tariffs on the final batch of imports 25 ;china, the rate was 10 is not quite there yet. Still, this is the part of chinas imports that will hit consumers. Even a 10 tariff, if a company cannot eat that up, it will be passed onto the consumer. Everything from childrens clothes to toys, your iphone, this raises the possibility of those prices going up. Emily now, thus far, apple goods like the apple watch and air pods have not been tariffed, max. So how do Companies Deal with this uncertainty . Sarah and i were talking yesterday, and she indicated it is increasingly looking like there is not going to be a shortterm resolution. Max i think you are seeing companies talking more and more about manufacturing outside of china. Manufacturing in india or other countries would be a possibility. The entire highend forfacturing ecosystem Consumer Electronics is in china right now. The other thing is they could raise prices, as sarah says. Part of the problem is, already, the iphone is kind of under pressure from consumers. Consumers have been hesitant to upgrade. The upgrade cycles are getting longer. And you wonder, if you start raising prices given a little bit, that could change the economics for apple. Emily coming up, u. S. Sanctions continuing to bite the chair oe. They say there has been a dramatic slowdown of sales growth in the midst of a trade war. In an exclusive interview, they ung hue, he hints that even tougher days ahead. Check out our global breaking news tictoc on twitter. This is bloomberg. A emily welcome come back to the best of Bloomberg Technology i am emily chang. We are beginning to get a picture of what that means. Sales growth dropped dramatically in the first half of the year amid u. S. Sanctions. Bloombergs Tom Mackenzie sat down with an exclusive interview set down for an exclusive interview with wallys chairman. He talked about how the business can survive without googles operating system. We dont know when the u. S. Will make the decision on android and when that decision will come, so we have to make preparations for our products. We will evaluate our strategy for the overs is market. If we are not able to use android for our new smartphones, we have the ability to operate a new system and the ecosystem to provide services for our customers. Tom give us a sense of how fundamentally you have had to change or some why chain to mitigate some of these pressures. Have you completed those changes, or is there more to be done . List put intotity place by the u. S. Was disruptive to our supply chain as we had already use plans to use components for our business. But they stop supplying us, so we had to make changes to our supply chain. We will do the adjustments to our supply chain, we will change to other suppliers and use our own chips for the core components. I think the damage to the u. S. Suppliers is even bigger than it is to huawei. We will have to increase our workload and manage continuity but the damage to the u. S. Suppliers direct as they lose a customer. If the u. S. Removes huawei from the entity list, that would be a solution. Tom what impact are you seeing for demand for your equipment given the campaign on its allies around the world by the u. S. To block your supply . The u. S. Has been launching a campaign amongst allies, it is up to each country to decide its partners based on its own development demands, telecommunication demands, and carrier Infrastructure Construction demands. I think now there might be some impact in places like australia but there are others who are willing to work with huawei. Tom when it comes to components, you say that you are still blocked from some of your key suppliers. Then you give us some clarity on who does why is far and the success you have had or not of finding alternative companies or alternative suppliers . We might have some components that we cant live from the u. S. , but we will use our own components to supplement. Smartphone operating systems like googles operating system and ecosystem have not resumed business with us yet. We are working to find a way to patch this hole. We hope to see good news, but if there isnt any, we will try to enhance our own capabilities. Tom do you expect huawei to be part of the conversations when the trade negotiators meet in the next few days in shanghai . Will they be discussing well way and you welcome the backing of the Chinese Government for your companies . Huawei is purely a company. When two countries talk, they talk about big topics. Wants to doei only its own job, like what i just said. We need to patch up the holes and manage continuity as well as ensure product delivery. We dont sell to the u. S. What we do care about is doing a solid job to make sure the products are delivered to our customers. Emily that was bloombergs Tom Mackenzie with on its list of interview with huaweis chairman. So what language should a car speak . 5g, wifi . The answer could determine who will lead the way when it comes to developing self driving cars. Billions of dollars could be at stake. So could thousands of lives. Bloombergs ed ludlow has the story. That talk to each other, interact with traffic lights and even see around corners. The advent of 5g could make this real, bringing the faster speed and bandwidth needed for autonomous vehicles. But it is not the only option. It up against a more established wifibased technology. There is a debate about which is better. The choice is between the existing wifi standard called src, or dedicated shortrange v2x. Unications, or c china was the first to make that decision to use dsrc for its cars. The focus is leading to this market advantage and frankly, they will be saving hundreds if not thousands of lives, much sooner than we will as we fumble to determine which is the standard that is best for the a. Ngtime road ms for the rest of the world. Ed in the u. S. And europe, there is a late on which technology to use. Settling the standard matters. If the federal government mandated technology today, it is estimated up to eight inch one million car crashes and 54,000 that could be prevented. So how will the technologies differ . Both are designed to correct cars to other vehicles and infrastructure around them. But the text can also harness a 5g networks wider coverage, and crucially, its lower latency. That one millisecond delay rate in 5g, to let a car know that there is a car coming around the corner that you cannot, will be critically important. Today it might be 10, 20, 30 milliseconds and we had crucially important to safety labels. Ed backers like chipmaker nxc argued that it is a better option because the technology is mature and ready for davone osman now. But supporters say that it has superior range and is more secure. There is a startup that will build his car in china and bring the car to market with safer driving capabilities. 5g will allow vehicles to talk to infrastructure, allow vehicles to talk to each other. Autonomous driving can use up to 1. 5 terabytes of data per hour. That data needs to come into the vehicle and leave the vehicle. Ed cv to ask you can evolve with each generation of Cellular Networks starting with 5g,. It will be as simple as switching the modem. Critics of the standard say that technology is outdated and not appropriate for the cars of tomorrow. So which will prevail . X is now backed by a trade Group Representing carmakers, and chipmakers like qualcomm. Vehicles are becoming more timeless, relying upon cameras and sensors. When we start blending in 5g and cameras and sensors, we will get to see if are more transformative experience. Ed a European Commission plan for the wifibased standard was defeated, opening the door for a 5g standard supported by bmw. In the u. S. , they have put off making a decision. But ford is not waiting. X in itsany deployed cv2 cars from 2022. General motors is currently the only u. S. Lawmaker. Carmaker promoting the standard. In the longterm, the u. S. , korea and japan will deploy the option as they aggressively networks. E g for now, it is left to automakers to fight out over which standard to adopt. Ed ludlow, bloomberg news, San Francisco. Emily coming up, age discrimination claims against ibm indicates the company may have fired as many as 1000 workers 100,000 workers over recent years. Details on the lawsuit, next. And, demand is growing for manmade jets to fly everything networks, to satellites, to engagement rings. I go to the one of the top producing labs and take a look. Next. Emily ibm has laid off as many as 100,000 workers in recent years, according to a recent lawsuit. In fact, big blue is facing several lawsuits, claiming age discrimination against Older Workers. In one suit, a former employee alleges that it was all part of s attempt to appear cool and trendy as it tried to appeal to millennials. Our correspondent has details from new york. Olivia we have a classaction lawsuit filed in manhattan and different civil suits filed across the country, from california, pennsylvania, and texas. The similar thread is they are alleging ibm has been firing its older employees in order to bring in and retain new, younger workers. They actually call these cases a fire and hire discrimination scheme. And they allege that ibm has been carrying out this resource action, the term the company uses for laying off employees, since as far back as 2014. Emily ibm in the statement we wanted to target higher value opportunities for our client in the last five years. The Company Hires employees every year. Tell us more about how the company is responding. Olivia ibm is a 108yearold company and for the past seven years straight it has faced fading revenues, and it has been trying to reinvent itself. It has kind of totally missed the mark in the Cloud Computing revolution and has been lagging behind the likes of amazon, microsoft, and google for about a decade now. So the company is on this new growth trajectory. It is bringing in hybrid cloud and trying to become a whole Different Company that focuses on newer technologies like Artificial Intelligence and hybrid cloud. And it just a acquired another company in a 34 billion acquisition. So part of this strategy of laying off Older Workers and bringing in new, younger workers is actually to turn the company around and become, as we read in this deposition, a cooler trendier company where young , talent would want to work for ibm in a similar way that they want to work for google or amazon. Emily that was bloombergs olivia carville. After year and a half of searching for the home of its second headquarters, amazon chose to split its campus between crystal city in virginia, and long island, new york. Shortly after the decision was made, we watched the downfall of the new york campus as local politicians pushed back, and amazon pulled out. Then, cities have upped the ante to try to persuade the giant to bring jobs to a new location. One area is nashville, tennessee. Amazon announced last year that its Operations Center of excellence would move there and create 5000 jobs with it. We caught up with tennessee governor bill the and asked him about the move, and asked how he plans to bring other Tech Companies to his state. Isl we are a state that ver we are a state that has a very business friendly environment, we have a low income tax regulatory , a environment that is friendly to businesses. Companies know that about states. We are fiscally soundly managed. Companies know thatm so they sort that out. Then they look at incentive packages that states have to offer. We certainly deal with companies in that way. We incentivize companies to come there. Then they look at things like work first amendment. We have made a tremendous pushed in our state to create workers for companies who are coming there, regularly Tech Companies and Technology Based companies. Our administration has done something called a future Workforce Initiative that is establishing the kinds of curriculum and pathways that will create workers of the future. Emily there are some Tech Companies already there. Lyft has an operation there. Mitsubishi, others have moved their operations there. What in the future do you think you can offer Tech Companies . You are obviously making the case here in San Francisco this week to put a bet on tennessee. Thgov. Lee i think the biggest thing we can do is show to them our commitment for workforce. Technology related jobs require a workforce of the future, and they require an Education System that i believe understands the needs of the workforce. We created something called the give act. The governors investment in education act, the futures Workforce Initiative. Those are legislative initiatives that in fact create workers of the future. It changes the way our middle schools and high schools look. Ultimately, it changes the type of skills that people and workers in tennessee have. We need to be a place that when lyft is looking to expand their operations in tennessee, they know that they can add the thousand jobs they need to, or amazon will know that the 5000 jobs that they are going to need to sell, that there will be a workforce out there to do it. Our investment in that is very important. Emily voters overwhelmingly rejected a transit bill that would have brought light rail. Do you see a risk that nashville or tennessee might not learn the lessons of seattle which saw a rising housing costs, a traffic crunch because it didnt move fast enough when amazon came calling . Gov. Lee yeah, we have to lead on this. What i think is most important that we have to do, and we were talking about this in our department of transportation but with other municipal leaders is we need to think about what transportation is going to look like in the future. Investing in a multibilliondollar system that may be antiquated by the time it is built is not what we want to happen. I think transportation is rapidly changing. If you talk to some of the companies here about how people are going to move, that is what we need to be investing in from a transportation standpoint. We do have to stay ahead of the curve in our major cities in tennessee. We want to be ahead of the growth curve as much as possible so that we can not make the same mistakes that other cities have had to make and had to learn. We are going to learn from their mistakes and not we make them. Emily my conversation there with governor bill lee of tennessee. Officesharing startup wework prepares for an ipo, reportedly looking to go public in september, in what is expected to be the secondbiggest initial Public Offering of the year. Wework is targeting a share sale of 3. 5 billion. I got insight from bloombergs ellen hewitt. Ellen we dont know a lot, we work is hosting one today. That they have analyst coming in to hear the hedge, learn about their Business Model and get a sense of how they might be covering it. Most analysts who attended had and to agree not to discuss what was shared until the actual ipo. Emily how typical is this . I do not remember them having an analyst day before they actually went on a roadshow. The situation is that the s1 has not yet been made public. We know they filed confidential sec lastwith the december, and instead filed confidential documents last april and announced they have filed those documents but we still have not gotten to see them. The company is aiming to do an ipo in september based on our reporting. So maybe theres a chance but in the next month, we might get to look at the documents that show their earnings, losses, all the nittygritty, which certainly many of these people are excited to look at. It has been a company that has gotten a lot of attention for its unusual financial metrics, tda,nitiadjusted a biebi things like that. Emily lets talk about what analysts are actually looking for. What are the questions they want answers to . I think they are trying to assess this as a Real Estate Company or tech company. It is something wework has gone back and forth on for many years about how it presents its identity. It wants to be seen as a tech company in part because it is interested in getting that sort of multiple in the markets, and it would be a much more valuable proposition for wework to be seen as such. Of course, people look at it and think that this is a company that takes on leases, rents out smaller parcels of real estate and should be considered more like a Real Estate Company or an investment that is modeled more on how real estate models are done. Emily you mentioned the more unconventional metrics. There has also been controversy around the founder and how much money has been taken off the table. What is the status of that . That is still part of the story of wework but i think the poll be trying to get there hands around in terms of deciding how they value these companies. You mentioned the founder and ceo has taken out loans against some of his holdings. Wework has also reportedly sold some of his equity in the company. He is also rumored to have personal holdings of real estate that wework has taken leases on. The company has made steps to try to resolve some of those perceived conflicts of interest, but it is something i imagine is a big question on a lot of analysts and investors minds. Do we think this might be a problem for the company as it goes public . Emily do we have a sense of how much money they are making, if they are profitable . Do we know . They are not profitable. Thats why we talked about communityadjusted ebitda. That is a metric by which they see themselves as profitable on a building by building basis, almost what you might think of the equipment of the unit economicstype approach. An existing building that has been in place for 12 or 18 months, does that building itself make positive profit . And they say yes, but it is removing a lot of expenses other people think should be counted into the greater calculations. [laughter] emily that was bloombergs ellen huet. Coming up, Lab Grown Diamonds in Silicon Valley. They supply everything from five g networks, satellites, to engagement rings. I visit one of the top labs to see myself. And try a couple on. Next. This is bloomberg. Emily finally, you may think of diamonds as a girls best friend, what you may not know is that they are considered to be the computer chip tragic best friend, a viable and even superior alternative to silicon. In Silicon Valley they are being used to fuel advances in 5g, satellites, quantum computing. I recently visited a lab that grows diamonds, and learned how they are made, what they are for, and, of course, tried on a few. It sparkles. It shines, and it is oneofakind. Isnt a product of mother nature. Instead, it comes from a lab in a process that is shaking up the 80 billion diamond industry. How long does it take from start to finish to grow a two carat diamond . It takes a couple weeks and a couple more weeks to finish it and do a polished gemstone. Emily Lab Grown Diamonds have the same characteristics income as mined stones without the controversy of their origin. You start with this foundational piece. Once it is in the reactor, carbon atoms start to come down one at a time and connect to the diamond below it. Atom by atom, a growing diamond. All of the reactors we created inhouse. Not just built, but designed inhouse. That is where all the magic happens. Emily martin and his team at Diamond Foundry in San Francisco have been making these gems. Silicon technology, and we recognized that the technologies we use can also be applied to grow diamonds of a highquality, in ways that previously were impossible. Emily but they are not the only ones. There is new Diamond Technology in st. Petersburg, technologies in singapore, and even in the centuriesold them on business, debeers is getting in the act. In 2018, it launched a Fashion Jewelry retailer called light box jewelry, targeting younger consumers with lab diamonds and selling them for 800 a carat; 1 10 of the price of other manmade stones, and 1 10 of the price of an actual jim. But questions remain of how well manmade diamonds will hold their value. Debeers will probably will produce 35 cubits of natural diamonds this year. You look at the global output of manmade diamonds produced for jewelry, it is probably 5 million carats. But it was well under one million carats just a few years back. Emily last year a major win for producers of manmade diamonds when the federal trade commission amended its jewelry guidelines, clarifying a diamond is a diamond, regardless of its origin. Currently, manmade diamonds account for just 1 of the 14 billion global rough diamond market. That number is expected to grow to 7. 5 by as early as 2020. Much of that growth is in the luxury jewelry market. But the real money opportunity is to use what they have developed in this lab to fuel the future of Silicon Valley. We know in our past, we developed the first time and wafer. That will enable a lot of ournology applications, for electronics 5g networks. , these applications go anywhere from quantum computing to hightech laser and optics equipment. I think we are probably still a good 10 years away. Emily ultimately, diamonds are forever, but consumers now have a choice, and the prospect of them enabling advances in technology of the future is bright. That does it for this edition of the best of Bloomberg Technology. We will bring you all the latest in tech throughout the week. Tune in. Every day at 5 00 p. M. In new york, 2 00 p. M. In San Francisco. And we are Live Streaming on twitter, and also follow our global breaking news network tictoc on twitter. This is bloomberg