Strategy and a new hiring feature. First, our top story. More worries for wework. Pressure is mounting to oust ceo adam neumann after the delayed ipo. The board was supposed to meet today but they are likely going to meet later this week. Ellen huet covers startups and she joins me. Why the shakeup . Ellen insane week in the last week or two. Pressure first to delay the ipo and now it seems like there are reports to consider replacing the ceo, adam neumann. A lot of back and forth within the board. Maybe delay the ipo october and later. We seem to be watching as it unfolds. Possible Board Meeting this week, not expected today but likely very soon. Taylor who wants adam neumann out . Ellen that is most likely softbank. They hold two board seats. It seems like they also have support from benchmark. One board seat has been an early investor. Some viewers they remember was also instrumental in the ousting of Travis Kalanick from uber. It nevertheless remains, at least softbank and benchmark are in favor of getting adam neumann out as ceo. Taylor support seems to be wavering a little bit. Ellen it has been an aboutface. Softbank has been a staunch supporter. They have been the only investor since 2016, pouring tons of money into this company. Their chairman has shown a lot of support for adam. They have been portrayed in the media as kindred spirits. It seemed like they had been aligned on the incentives, the purposes and goals of the company, and now it seems like the support is shifting. Taylor we thought we would get that Board Meeting today, on monday, we didnt. Anything on what we can expect this week . Ellen we have been trying to report the latest developments. We will be looking for this meeting. I dont anticipate it will be decided in one day. This is a huge change for the company. A ceo who has been a cofounder since the very beginning. Ideas, vision, personality. Similar to uber, very hard to separate the culture from the personality of the ceo. Changing anything about the position will be a huge shakeup at the company. Taylor the saga continues. Thank you to bloombergs ellen huet. Abby, how concerned are you now . What does this board shift into you . I think ellen hit on a lot of the high points. The concern for investors will go back to the governance side as well as the business fundamentals. When you have a ceo in play like this, you have to question which are being driven the most by that. It tells us that the governance house is very much not in order. Taylor gene, give me your thoughts on a potential board shakeup it is that enough to squash some of the investor concerns . Gene far from it. I think this will take a year or so. I think the set up piece, ellen really captured it when she talked about the infusion of adams views with the company. I dont think he will survive as ceo. I think he will be some kind of executive chairman. An organization like this in high growth mode to align with more scrupulous public investors is a most difficult agenda. Ultimately, i think this will take a lot of time. I think there will be some changes in terms of late stage private investing because of the result of this. Taylor what is it about adam neumann . Is it the spending more than the income, his quirkiness, his management style . What is it investors are so concerned about . Gene he is perceived as being reckless. When you look at the evolution of a company, there is a period when recklessness is seen to change the world. There are several factors we have talked about that play into it. The list is long. Ultimately, i think it creates some anxiety around investors about what is going to happen. It really is an openended question when you hear stories about the party type of culture. That recklessness does not sit well with public investors. Taylor abby, explain for us the role of the board. We know Corporate Governance 101 is to hold the ceo accountable. Is the Board Holding the ceo accountable . Abby i think it goes beyond that. The first rule of governance is the business judgment rule. The Board Members have to act in the interest of the overall corporation. They have a duty of loyalty and a duty of care. When they look at the role of the ceo, they have to ask themselves, is the ceo the right person to lead the organization . A lot of problems coming up, related to what gene just said, why are we facing this issue now . Is this not something that was known to this board and this team and private investors . Taylor we did know about it in the case of facebook. Why now, why the focus on adam newman and we work when zuckerberg got away with it . Abby the private markets have pushed and pushed and we got that breaking point. The outrage really sort of drew the line. People can talk about the Public Market environment, other public role models, but i think he got pushed one step too far. I was thinking about elon musk. Talk about these ideas of Tech Companies where you have Mark Zuckerberg it was ok, though shareholders are ok with Mark Zuckerberg running the company. Why is there this concern over adam neumann at wework . Is it because the company is not profitable . Gene the exception to the rule, i think Mark Zuckerberg is one. The line is drawn generally around what i refer to as recklessness in the past. Drug usage, which is common in the tech community. I think there is a level, awareness of that that gets public investors more concerned. I think a culture that is not as respected as they should be, that is a concern, too. I know it is easy to say negative things in an environment like this. I think the simple take away, if you look at somebody like Mark Zuckerberg, even though he had a break things type of mentality, i think those two former pieces, he was measured and respected. I think that is why the differences. In the brief time we have, i want to quickly taylor mentioned, i think there will be some changes. I think this concept of super Voting Rights will probably go away over time. This tech company now not only having power around politics, media, the economy, this is a perfect example of why 20 to one Voting Rights isnt appropriate. Taylor abby, you are nodding your head. Abby i think gene is spot on. I think we will see a lot of changes in the private market. It may be has not surprised people that the litany of ceos you are talking about are sort of the bad boys of silicon valley. Bad boys need good parents. This is where the board has to step in. Taylor gene, let me get comments about the basic fundamentals. How does a 10 billion to 15 billion valuation feel to you, a good value . Gene i think that is the right range. Given the Revenue Growth which we talked about, probably closer to 10. I think some of the language has been changed. That probably favors kind of the low end of that. The challenge, when you think about the valuation, there is probably no good comp. This is a tech company in quotes, but a Real Estate Company in practice. I think it feels closer to that range, 1015. Taylor if they dont do an ipo this year, how does their Balance Sheet look . Gene it starts to get stressed at sometime next year. That is why i think adam starts to move toward a chairman role. The Balance Sheet needs work and will need some help. Close to 1 billion. 700 million seems to be the number that would get them to a more appropriate ipo. Taylor if you look at a chart here that i am showing our bloomberg audience, it is that the bondholders have held in pretty well. I believe i was reading that there might be a clause that if there is a management change, bondholders would have to get bought out at 101 cents on the dollar. Gene news to me. That could impact some of the forces at play. Ultimately, if it is just 101 , i think that doesnt change kind of how i feel ultimately that change at the top is needed here and we will get that. Taylor it is a roundtable monday. Loup ventures cofounder gene munster, and Abby Alderman in san francisco. Coming up, we will discuss the focus of facebooks antitrust probe by the ftc, next. Taylor federal prosecutors are conducting a probe of ecigarette maker juul according to a report by dow jones, citing people familiar with the matter. The investigation is being led by the u. S. Attorneys office of the Northern District of california. The fda and several state attorneys general are investigating juul. The Trump Administration said earlier this month that it planned to ban most flavored ecigarettes. A Company Spokesman has denied it markets to teens. Social Media Company snap is reportedly talking to regulators about the way facebook allegedly tries to thwart competition. It is reported that the snap legal team had been keeping a dossier nicknamed project voldemort on facebook tactics. For more, i will bring in michael, research analyst, who joins me from new york. What is your take on this report . Michael my reaction is that they are probably one of a laundry list of companies that the ftc is probably currently reaching out to to have a better understanding of if they are acting as a monopolist. Facebook had a negative impact with regards to emulating what they had done with stories. There is probably a little bit of an ax to grind, a baseline. We have been hearing it from large advertisers as well that the ftc has been reaching out. Taylor you cover facebook as well as snap. I wonder how much of this is normal cost of doing business and how much is facebook really overstepping the bounds . Michael it is hard to say. I have some Firm Opinions looking at the big names that are at this point under the scrutiny of the government i think, and a lot of cases, when i look through what facebook has done, definitely what they are doing with cambridge analytical was a little bit aggressive last year. I think they are a tough competitor. I think they have definitely emulated competitors in the past, they have done so with snap. I think the tactics about going ahead and trying to publish influencers gets a little close to the line but i dont know if that in itself makes facebook a monopolist. Taylor depending on how these discussions go, what is the real threat that facebook would be broken up . Michael it is something you have to respect. I think you are seeing that in facebook, google, and amazon stock. Investors dont know quite how to handicap it. If i were to roll things forward by a few years. Lets say, for example, instagram was broken off of facebook, i think you would ultimately have Value Creation because i would suspect the instagram assets growing at a much faster rate than facebook. Facebook would probably be showing much better margin at the core. He would have necessity to reduplicate some of the targeting infrastructure and sales but ultimately i dont think it would be a game changer in terms of just being company ending. Would it disruptive . Certainly. Taylor what we have heard is the market actively pricing in, lets call it a conglomerate discount to facebook . Michael one of the examples i would point to out of earnings that i thought was probably the biggest surprise, amazon, google, facebook, currently being investigated, is basically google where you had numbers go up by 11 , the stock went up 9 after earnings and is basically down a couple of percent since then. What you are seeing, reaction to earnings, reflecting some degree of a government overhang. Either a discount, then what investors think it should be worth, it is hard to say. It is a bit of an art form when it comes to multiples but i have talked to frustrated google and facebook bulls who have loftier expectations about where the multiples could go in the short term. Taylor is the only way to get ahead of this from a tech Company Perspective to self regulate . Michael i think it is a little bit harder for the government to come through with nuances for what you are able to do with regards to advertising. There have been attempts over the years. I think the nuances get pretty granular and it is challenging. We have certainly been a little bit more negative with regards to google. We think things like the play store in apples case, itunes, to come in and say, 15 feels like a more appropriate cost of doing business. That is my suspicion. Taylor what Tech Companies do you like that dont have that regulatory overhang . Michael we are huge fans of snap, huge fans of twitter, both of which i think are going ahead, executing fabulously. Twitter, lets take that for the first example, is a name i am hearing more and more from investors. They want to own into the election year. They have a sizable presence in japan so they should benefit from the olympics. Meeting earlier today with snap, i think their execution is phenomenal. There has really been a massive turnaround at the senior ranks. User growth is rebounding. We think trends are looking strong. Taylor thank you. That was Michael Levine of pivotal research. Coming up, life on the roadshow. Peloton highlights to potential investors. What to expect ahead of the ipo, next. This is bloomberg. Taylor google bracing for another landmark privacy decision from the eu comedy right to be forgotten law that passed five years ago. The law forces the Tech Companies to delete personal information upon requests. The court is questioning whether the law should be applied globally. A decision could be reached as soon as tuesday. Still with google. Company workers will again listen to audio snippets of people speaking to a digital assistant if users give the company permission. Google paused all human review in july. Under the policy, google will tell users that they could be listened to if they opt in. Executives at peloton hope hotels will propel investor demand. John foley helps highlight the bike and treadmill at a luxury hotel in new york. He said subscribers will to continue the peloton while traveling. In june, they had bikes and 700 hotels. This years sales trading debuts thursday. Coming up, apple is making a supply chain shift amid the u. S. China trade fight. Where they are building, when, and why, next. Roku shares in vocus. We dig into the companys fundamentals. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Taylor this is bloomberg technology. Im taylor riggs. Now for the latest on trade and tariffs. Apple says the next version of its mac pro desktop will be assembled in texas after the Company Received tariff waivers. The company on friday was rented exclusion from the Trump Administration on several parts, including processors, power components and the computer casing. It will include components made by more than 12 u. S. Companies. For more, im joined by mark gurman in los angeles. Is this part of a broader trade deal . Mark thank you for having me. I dont think so. It is very possible they can use this they will be manufacturing this computer, which they have been doing for six years in texas, to maybe influence the Trump Administration to go easy on them on december 15 when the iphone, ipad and other important products are due to be hit with tariffs. Taylor you brought up december 15. We know the mac pro was made in the u. S. Why cant they make all of those other products that are facing future tariffs to to avoid those tariffs too . Mark to be clear on the mac pro, it is not completely made in the u. S. Primarily, the casing and other important components are made in china. Then, they are exporting them to the u. S. For what is known as final assembly. Whereas in china, the iphone is primarily made there, all the components and the phones actual production. Why cant they make the iphone and ipad here . They are more complex than the mac pro. The mac pro is basically a mishmash of components that are easier to assemble rather than something as small as a mobile device. Taylor do you have any sense of tim cooks conversations with the president . How did this come about . Mark apple has been lobbying the Trump Administration for relief on tariffs for over a year. They started by lobbying against publicly the apple watch last year, they got a brief waiver on that. They save some money there. Trump has notably been meeting with tim cook. There have been dinners, white house meetings, oval office meetings. A famous photo of tim cook along with President Trump and john bolton at the time in the oval office. Clearly, he has been working behind the scenes to make sure apples business is as safe as possible from the impact these tariffs will have on Many American companies. Taylor i have to note that the mac pro being mostly, as you mentioned, assembled in the u. S. A win for apple, consumers. You wonder if this also feels like a win for trump too. 12 u. S. Companies will be participating in this, made in texas. How important is it that 12 of those companies are u. S. Companies . Mark this is all p. R. , right . This is not a big change in their strategy. The previous model was manufactured in the u. S. Even the Trump Administration will very likely flaunt this. Trump talked about apple building big, beautiful plants in the u. S. Whether or not that is actually true. And making a point that he has apple on his side, calling tim cook one of his good friends. From a strategic standpoint, i am not sure much has changed for apple. From trump, it is a p. R. Win. Taylor another day, another apple product, another tariff. That was mark gurman. Since the streaming wars has begun and Big Companies have gone into the game, it has been bad news for roku. Cheaper Services Like apple tv plus are making investors worried about how roku will be able to compete. Are investors overreacting . I ask rosenblatt security analyst Mark Zgutowicz on the phone from minneapolis and woo jin ho. Mark, let me start with you. Is the market overreacting . Mark thanks for the question. I would say first off, more recently, the market has been reacting to comcast and the streaming box set. They are new to the market. They came in with the streaming box back in march. They will offer the box for free. There is a pretty significant overreaction to that announcement, given rokus leadership lead, if you will, in streaming devices. We estimate they have 35 penetration of u. S. Broadband households. We see that reach continuing to be extended, not only relative to comcast but relative to amazon fire devices. Taylor woo, let me pull you in here. Up until very recently, analysts were pretty bullish on the stock. What happened in the last week . Woo jin sure. Thanks. I think we should talk more about the last couple of weeks. As we think about the bullishness on the stock, it is more along the lines of the International Expansion opportunity. There was a lot of talk there. Prior to the apple tv plus announcement, the ceo of roku disclosed some of his near term International Expansion. That was a little bit underwhelming because they announced only one tv partner versus the six or seven they have today. And then, like mark said, more of the comcast announcement with the free device offering as well as facebooks device offering. Taylor mark, how much of that International Growth and International Expansion can you factor into a longterm sales growth for roku . Mark we have very modest expectations. I sort of look at international as somewhat of a call option on the stock. If you look at the expectations, we have only about 40 million u. S. Households as active accounts. Depending on how people are modeling the growth, i think there is still some room in the stock as it relates to international. We sort of look at international option here. Taylor you were talking a lot about penetration rate. I wonder, when we measure current demand, how elastic are customers . Could you very easily switch or do you see demand holding in there . Mark well, i think it is very easy to switch, but i think habits are hard to break. You think about how roku is being used today in the household, it is an aggregation device. It is whether you are watching apple tv, netflix, hulu, what have you you are watching all of your tv programming from one device. I think roku does that very well. You are not paying for it on a monthly basis. I dont know that switching costs necessarily are relevant if you will in rokus marketplace today. If you think about comcast, they own the broadband pipe, but they are late to the game. Roku has roughly 35 penetration. We estimate amazon fire has 25 penetration of homes. It is a big hill to climb. You are fighting against the brand that is a household name in training. Taylor you started off the conversation talking about the last few weeks. I wonder how much of this was really the multiple and the price and the sentiment getting ahead of itself a little bit. Woo jin sure. If you think about valuation price of the last couple of weeks, it was trading around 11, 12 times sale. I fall back to the international enthusiasm. Where we are in the multiples, we are about eight times forward sale. The way way we are measuring valuation is relative to the consumer facing, ad generating internet names. A Value Proposition for roku long term is more of the ad revenue it can generate off of the video streaming, more so than any type of subscription. Taylor that was Mark Zgutowicz of rosenblatt securities. Woo jin ho, you will stick with me because i want to stick with streaming wars. Days after resigning, bob iger floated the idea of the merger between two companies if steve jobs was still alive. That was from an excerpt in his upcoming memoir. For more on how these friends went from friends to foes, austin carr, and still with me, woo jin ho of bloomberg intelligence. Woo, set up this conversation of where we are in the streaming wars. Who in your analysis is poised to benefit from the structural shift of streaming . Woo jin sure. If you look at the streaming vendors right now, it has always been or has been the standalone streaming vendors. We started with netflix with going from disc to an overthetop model. Now we are starting to follow along with new players such as disney coming out with their disney plus, as well as apple tv plus coming up in november. If you look at the top five streaming platform players today, it is going to be netflix and then we drop down to youtube, hulu and then hbo. I think disney and apple will be very fast followers. Taylor austin, let me bring you in. You heard disney and apple could have been sort of these big powers at work, but i love the quote you led off with in your story that said it was so dependent on steve jobs being alive to get this done. Why was it so dependent on having steve jobs still in the picture . Austin what bob iger was getting at was the close relationship that these two had, both when they were on each others boards. Bob iger was close with steve throughout the acquisition of pixar. Hes of course been close personally. In that excerpt, he disclosed that steve jobs was one of the first he was one of the first that steve jobs disclosed his cancer and Health Issues to more than shareholders. He really talked up that close relationship and how even more so than under tim cook there was more likelihood they would have merged together and created this really Unprecedented Partnership between the distribution side and the content side, which is what woo jin was talking about. All the streaming wars goes down to owns the platform and who owns the content and which is more valuable. Taylor bringing this to present day, i wonder how likely would be a merger. Apple, 200 billion of cash on the Balance Sheet. What would a merger look like today . Austin it would be complicated which is why there was a lot of hedging in that article about this is years in the past, a hypothetical. Even if steve jobs was still around, it may have something they considered somewhat seriously but not something that would have happened. The reason is, the reason it is so intriguing is it goes back to that apple tv plus announcement. We might remember oprah famously saying why did i partner with apple . Because they are in a billion pockets, yall. They have their iphones, ipads, macbooks. Every different device you can imagine, they are in the pocket of consumers. Inversely, they have no content. Some stock analysts have described their launch of tv plus as building a house without furniture. They dont have that tremendous back catalog of content in movies and tv shows which is what they are trying to build out and what disney could have offered them. Taylor well, the streaming wars discussion continues. That was austin carr and woo jin ho. Coming up, we hear from the ceo of vimeo on why the company is staying out of the streaming space and the road to become public. This is bloomberg. Taylor in the age of streaming wars, vimeo is a turning attention more people behind the cameras as it announces a new tool that lets businesses, brands and agencies sign and hire worldclass video professionals to create content. Vimeo ceo anjali sud spoke to ed hammond on how this move the company forward. Anjali this really is not a new offering. It is another way for us to lower those barriers for businesses and make it easier. We dont think of ourselves as a marketplace business. We are a software as a service or staff business, but we have this wonderful community, this Creative Community of scale. So the ways we can leverage it to add more values to our users is a differentiator. Ed you are also a premium content business. You cannot access it for free. But you have set in the release today there will be no commission vimeo takes, so how do you monetize this business . Anjali this is not really a separate revenue line for us. The reason we are doing it is to increase engagement or attention on the platform. Like any good staff business, we are interested in building longterm values and relationships with our customers. The vast majority of revenues annual subscription plans. For us, this is about the more people coming to the platform can make video, the more value they are finding, the more they will engage with our tools. That is good for our revenue line. Ed does it give more power to the businesses who are using the site to access content because now they can come and say this is the kind of video we want . Almost a commission we want to put out there. All right, we are well equipped to provide this because of x, y, z reasons. Anjali if you are business or brand or startup, you need to make video every day. You are making video for social media. The audience almost expect netflixstyle content. The demand is there but it is really hard. It is hard to figure out who you can work with, find someone in your budget. In many cases, businesses are not taking about video. They are thinking about growing their business. This is really about lowering those barriers. What we found is there is a high demand for this, from both sides of the community. Ed it is impossible to talk about vimeo without looking at where you are heading in terms of becoming a standalone public company. Vimeo is one of the two companies under the iac umbrella that has its own results broken out. Talk to us about the path to ipo and where you are headed on that. Anjali look, its really true. For vimeo, ipo is not a business strategy. It is a funding vehicle. With iac, we have a wellfunded, longterm shareholder. Our focus is really genuinely not about ipo, it is about capitalizing on this massive market, 20 billion market, for serving the people behind the camera and not investing in content like so many others are doing. But investing in the businesses and creators that are making that content. Taylor that was vimeo ceo anjali sud talking to bloombergs ed hammond. Still ahead, trying to face the music. The First Investor day for alibaba without jack ma at the helm. Investors have a long list of questions for the ecommerce giant. We will speak to one of them next. This is bloomberg. Taylor china ecommerce giant alibaba is holding their annual investor conference. It comes after the backdrop of a worsening outlook for chinas economy. The government has increased as chinas sprawling sector which includes alibaba. Over the weekend, hangzhou officials in a move they say was to facilitate communication and expedite projects. Joining me on the phone from that meeting is rbc analyst zach schwartzman. Thank you for joining me bright and early over there in china. Let me start with the basics. It is all about ecommerce. Makes up 86 revenue for alibaba. What do you need to hear from the company about their ecommerce . Zach, let me know you can hear me on alibaba. We do know have their investor meeting that is coming up. It was really interesting, 70 is expected to come from those lower tier cities. What do you need to see in terms of growth . With these Strategic Investments alibaba has made. Some of those investors are the logistics platform, others in local consumer services. Update we think this is going to allow them to gain more market share, 1. 3 trillion dollar opportunity. Upi love that you brought delivery. What do you need to hear from the company about food delivery . What is interesting and what is that it is one of the largest payment platforms. They have the offline transaction data so they can have great targeting for new people ordering and consumers ordering food and can provide a lot of data to restaurants. They have the prior purchase history. Giant goes internet to ai and cloud, can you further assume Margin Expansion with a shift to cloud . Cloud is still not profitable for alibaba. That may happen over the next couple of years. Most analysts are not modeling that. 50 adjusted 15 adjusted. Because of these investments the we think it will 33 thete from 29 and next fiscal year. We will have to leave it there. That does it for this edition of bloomberg technology. Check us out. This is bloomberg. 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