Transcripts For BLOOMBERG Bloomberg Technology 20171002

Following the death of antonin scalia. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am alisa parenti. This is bloomberg. Bloomberg technology is next. Emily i am emily chang and this is Bloomberg Technology. Coming up, oracle opens up adding new features to take on amazon in the cloud. We will discuss the potential competitive advantage with the c. E. O. A new status update pledging more cleanup. The social network is adding over 1000 ad reviewers in the wake of the congressional investigation into russias involvement in the 2016 u. S. Election. The big vote at uber on what could be the largest private stock sale in history. We will discuss the potential 10 billion deal and the race to keep Travis Kalanick in check. Oracle is taking the fight to amazon. Larry ellison is calling the new Database Service a revolutionary technology will take the Cloud Computing business to the next level. New features will improve speed, efficiency, and pricing. Oracle sales tied to the new Cloud Technology rose more than 20 in the last quarter and made up more than 16 of overall revenue. Cory johnson caught up with mark hurd at the oracle open world event in San Francisco and asked about the announcement. It is called the autonomous database. It is not a highly automated database. It is truly an autonomous database. People spend hours tuning databases trying to get them to perform an patch them which has become a more wellknown word over the past few months than ever before. All of this stuff that had to be done technically now is going to be done automatically, autonomously, done by us. There are a whole set of implications out of this. Suffice to say it is an extremely significant, a lot lower cost, much more secure, much more automated. Set of fantastic announcements from our product team. Larry made that last night. What is the technology that allows it to work more quickly . Done in really all machine to machine learning. Without getting into machine learning, when you get into the technology, we tried to stay away from that last night and talk more about what it does. It is basically our computers basically getting smarter and smarter. More data the computer has, the smarter all of the decisions the computer makes. Something as simple as being able to scan your data to understand potential intrusions, anomalies, and then go through all of this in a lot of detail. I know we dont have a lot of time right now. This is basically technology doing the work. Today, computers can recognize faces better than humans can. Cory Larry Ellison said on the Conference Call recently there were not a lot of obvious targets for oracle which seemed to me to be a different view on what is in the marketplace. You have a robust m a team within oracle. Is that a change with the notion you have acquired what you need to acquire and acquisitions might slow down . I would not expect much of a change in our behavior. We have always been disciplined. Whether you hear from larry or me, you will hear the same story. We look at things that make strategic sense for us. We do not buy things to buy things. They have to make sense strategically. They have to make sense financially for us or we do not do them. And third, it has to be something we can run, that we can optimize when it gets inside the all oracle emily. We use those filters. Compared to a decade ago where there were lots of potential targets, the market is consolidating. The market is changing. The market is dynamic. I dont think it takes a lot of analysis to say there are less targets than before. We will continue to be discerning. At thehere are proposals white house of repatriation of assets from overseas. I wonder how that might change the plans. What oracle hire more or acquire more if there was a tax holiday to bring cash back . Lets be clear. We have been running the company in a way to invest into the company regardless of repatriation. For us, we are hiring as we speak. As you look and listen to lots of different changes in our industry, that is not as. We have been investing. Seven or eight years ago, our headcount was about 9000. It is now 40,000. A lot of that is organic hiring in r d and sales. We would love to repatriate our cash to the u. S. And there is no question we would invest it in the u. S. Cory when i covered your less turning in earnings announcement, your competitors were quick to complain of your growth rate. I wonder what you make of your cloud growth rate and how it compares to competitors. Lets talk about our growth rate. I would love it. Thank you for asking the question. Our growth rates are the highest they have been in years. Last quarter, we grew the company in total revenue 7 . That is total revenue of everything. Our cloud revenue was higher. Revenue growth rate higher than any of our competitors. Last year, we booked over 2 billion in new club bookings. This time last year, have many people saying i do not think you will get that done. We did and beat it. Our growth rate in q1 in bookings was higher than it was the year before in q1. There are lots of people that say lots of things. I say read the numbers. We are in as good a position. Our applications business is growing. We made the biggest database announcement weve ever made. We are excited around here. Emily that was oracle c. E. O. Mark hurd speaking earlier with cory johnson. Cory johnson joins us from new york along with our guest host for the hour david kirkpatrick. ,o you believe what they say that this can take on amazon in the cloud . Cory if you think about what oracle has done in the cloud, they have tried to offer apps. Oracle was databases forever. You think about databases as the ground on which all applications will grow. The company 10 or 15 years ago took that database business and with an acquired software. Over time, it grew these other vertical businesses on top of the horrible horizontal base of the database. Now they are going to the cloud. They recognize all databases might still be on premise. But they will build applications on the cloud. They have a lot of success selling applications. What they are announcing this week is a real change in their cloud offerings of database. They recognize there is a much cruder product that has evolved at amazon that they have to take on at a price point different from anything they have done before. Emily david, oracle has been playing catchup for some time. Do you believe this is a moment when they can move to the forefront and compete with competitors at the top of the game . Gain theyre not going to the market reputation of aws in the next five years. That does not mean they are not the 50,000 pound gorilla in Enterprise Software that can have enormous impact. I think they are smart to be putting a lot of emphasis on security which is the obsession of Business Leaders right now. If they can differentiate and say we are more secure than aws and we can respond to threats faster, that is powerful. I think they will end up being an important player longterm. The reality is aws defines Cloud Computing now and will continue to for the for seeable future. How would you compare oracle to salesforce . Is doing onerce thing and Cloud Computing which is crm. Oracle is trying to do everything else. They are trying to do Human Resources management software. They are trying to do crm to compete with oracle. The database is the core of all of that. For them to have the most competitive database in the marketplace is essential for oracle because there are lots of competitors. Microsoft has a product. Offerings onons the database which are surprisingly robust. Oracle databases on amazon web services. For them to get database right creates a position for them to be strong on the enterprise. It serves to make sense of their acquisition on the hardware side. Notion these guys can make sense of this whole puzzle amazon put together, oracle is in a sweet spot to do that. Emily cory johnson, editor at large, thank you for the interview. David kirkpatrick, you are with me for the hour. Coming up, tesla sales break records in the third quarter. We break down the numbers plus what it means for future demand of the model 3. Livemberg technology is streaming on twitter weekdays at 5 00 in new york, 2 00 in San Francisco. This is bloomberg. Emily now an update on teslas vehicle deliveries in the third quarter. They shipped more than 36,000 cars an s. U. V. s including a Record Number of model s and x sedans. David, what do you make of the latest numbers . Shares in the aftermarket trades did well. I think people read the first paragraph of the press release and said great sales for model s and x. The shares shot up. As you read through, you see there are production bottlenecks for the model 3. That makes orr breaks tesla Going Forward in terms of cash flow and profitability. I think investors looked at that and said, are we going to have another set of delays from tesla . They tend to miss targets and scheduling. I think some investors said here we go again, and the shares are now down significantly from where they were close today. Emily elon musk has set ambitious goals. I believe it was to be producing 20,000 cars per month by the end of the year. Does that seem plausible . This is early production. Elon has said they would really get into the bigger production numbers in the Fourth Quarter. The fact that they are having some bottlenecks now is not surprising for the third quarter. The Fourth Quarter will probably get a better idea of where they are getting the plant up and going. Investors see this as a company that has never done mass production before. Have had s and model x good numbers but are still relatively small volumes. I think they are taking a cautious approach and thinking maybe we will not see a big boost to earnings and cash flow in the Fourth Quarter. It might take longer. Until they see things smooth out, maybe they are being cautious. The shares are not taking. They are just taking a hit after hours. It does tell investors this is a learning express for tesla to get the model 3 going. Emily what are we seeing in terms of demand for the model 3 and how that is impacting demand for the model s and model x . That was a big question going to this. Would people who could afford a lot more tesla just get a car now . E and get the model 3 that does not seem to be the case. You can reserve a model 3. Production has started. There is a lot of hype over it. If you have been waiting for your model 3, there is some inkling you could get it in the next year. The model s and model x did well. People are still buying them even though they have a chance to get in line for the model 3. I think that helped the shares early on. Model 3 is make or break. That is the big car everyone is waiting on. Wait. Could be a emily david welch from detroit, thank you for the update. Facebook is making a push to revamp ad buying. What the social media giant turned over to lawmakers, next. This is bloomberg. Facebook is planning to overhaul its political ad rules in the wake of the congressional investigation into russias involvement in the 2016 u. S. Election. The Company Plans to hire an additional 1000 employees to review ads that run on the site as facebook also says it now has toded over information congressional investigators regarding the 3000 ads relevant to the probe. , alister to discuss bar and david kirkpatrick. We got news about what facebook handed over to congress. Adam schiff said the american the wayeserve to see the Russian Intelligence Service manipulated and took advantage of Online Platforms to stoke and amplify political tensions. This is from representative adam schiff on the house intelligence committee. What did we learn today . We got details on what the ads looked like. There were three examples that came out. Group. A gun rights another was an lgbt group. Another was for dog lovers that people are scratching their heads about. Maybe it is to plant the seed to place political commentary later. Next with its comes to testifying because before congress . What else . Thing adamresting schiff said today is they are looking at how these ads were targeted. You can target very specifically on facebook. They are going to look at how these russian ads were targeted. This is a democrat speaking so you have to be careful. He said if there are any similarities between the way the Trump Campaign targeted their political ads, that will raise some eyebrows. Emily interesting statement from zuckerberg over the weekend. He said for those i hurt this year, i ask forgiveness and will tried to be better. I will work to do better. David, you know zuckerberg well. What do you make of that statement . David it is kind of extraordinary. In the notes i think you earlier, i said he is capable of admitting when he is wrong. That is the cool thing about it. He is not the kind of guy that can never admit error. What is interesting now is the idea he is more or less equating himself with facebook. That is sort of strange a company that has 2 billion customers and one of the most Profitable Companies that has ever existed, etc. It is a weird moment we are in. Certainly, no company would want to have been pulled as far into this election controversy as facebook now has been. I absolutely believe him that he wants to do the right thing. I think it is an enormous of right things he has before him to do and he does not even know how to do all of them. Emily alistair, is 1000 people enough . Is it possible . Advertisingo the programs is they are easy to use and automated. One of the jobs these 1000 people are going to do is check advertisers. You will have to authenticate yourself more than you had to in the past. I think there are 2 million advertisers on facebook. I imagine those 1000 people will only look at ads triggered by some sort of Software Algorithm as to this one looks mysterious, we better have a human look at that. They would need hundreds of thousands of people if they were going to have humans look at all of these. It will be a mixture of the two. Emily we saw this morning again the problem of fake news. We saw stories incorrectly identify the shooter in las vegas across the internet. David, is it possible to get a handle on all of this . David i dont think anybody really knows. Not justhe problem is facebook but in google and amazon we have these new colossi that have disproportionate weight from any other commercial enterprise in terms of human occasions in the way we Live Communications and the way we live. I dont know if we have factored in how to manage them or if the leaders of these companies have done that. I think it is a strange moment, like i said before. And we dont really know what to do next. Emily it is interesting. There is a great story in the New York Times how fake news helped to start a rally in a small town in the United States, a political rally. There are elections going on around the world of all kinds. Can facebook stay on top of federal, state, and local elections around the world . I think this is a broader theme with all these big u. S. Internet companies. They were built on software and automation. They are realizing now they are going to have to use a lot more people. I think the real challenge is going to come with whether the software they develop will be able to handle this type of thing with fewer humans or they wont or will they have to hire thousands of people. If they do, they will not make near as much money as they used to. Emily david, how do you think this plays out . David i agree doing the right thing will cut into profitability of facebook and google as these issues move forward. I will say i am confident zuckerberg and facebook will continue taking extremely aggressive moves on the social behalf of all of us trying to do the right thing. They really want to be good contributors to social concorde. They are in a very difficult position. I think you will see Congress Come down on them hard. You will probably see some laws come into play that will apply to them specifically, which they do not want but will have to accept. That will happen in the e. U. And elsewhere as well. It is a whole new era for the relationship between regulators and these companies. Emily david kirkpatrick, you will be back. Alistair barr, thank you so much. We will be back with more Bloomberg Technology after this quick break. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Mark i am Mark Crumpton in new york. You are watching Bloomberg Technology. Lets begin with a check of worst word news. President trump and mrs. Trump and Vice President mike pence and mrs. Pence led the nation in a moment of silence. Of 58 people and the wounding of over 500 others at an outdoor Music Festival was the worst mass shooting in modern u. S. History. The president and first lady are scheduled to travel to las vegas on wednesday. Islamic state is claiming responsibility for the attack. But f. B. I. Special agent in charge says that has not been verified. As this event unfolds, we have determined to this point no connection with an International Terrorist group. As this investigation continues, we will continue to work with our partners to ensure this is thoroughly and absolutely investigated. Mark authorities believe the suspected shooter, stephen paddock, after the loan. His motive is still unknown. Authorities say he killed himself. Gabrielle giffords is calling on lawmakers to pick up gun control legislation. She was gravely wounded in an assassination attempt six years ago. She and her husband made comments outside the u. S. Capital. Secretarye press Sarah Huckabee sanders says president is focused on the victims of the shooting and this is a time to unite the country, not to renew the gun control debate. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. I am Mark Crumpton. This is bloomberg. It is just after 5 30 in new york. 8 30 Tuesday Morning in sydney. Paul allen has a look at the markets. Good morning. Paul good morning. The new Zealand Stock Exchange has been trading for about 30 minutes. Modestly up by about six points at the moment with the u. S. Index nearing record highs. U. S. Manufacturing the highest in 13 years. That is translating into gains for the asx as well. I begs showing 33 your pardon,. 3 rise when we get trading underway in australia. Look at the aussie dollar. That went below . 78 u. S. Overnight before recovering. We have the reserve bank of australia meeting today. The cash rate likely to remain unchanged at 1. 5 . We might see more optimistic commentary no timing i suspect. Japan, nikkei futures showing positivity. China and south korea markets closed as the golden week holiday runs all week. I am paul allen in sydney. More from Bloomberg Technology next. Emily this is Bloomberg Technology. Im emily chang. Vanity fair summit is underway in l. A. It is an event that aims together the biggest names in tech, media, business, and politics to talk about issues and innovations shaping the future. On sunday, the new list was released. A number of new names joined the most prestigious names in tech. Joining us from l. A. , jon kelly. I will be seeing you for the summit tomorrow. Lets talk about this list. A lot of newcomers. More notable additions this year. Our list is different. It is not algorithmic. It attempts to measure influence. The list was going to have to change in the trump era. I think you will find names that would have been surprising in another year like Robert Lawler Robert Lawler robert mueller. What we are seeing more than anything is the collision of media and technology, platforms trying to get in front of as many people as possible. We have noticed changes on the list have to do with everyone getting into the technology business. Now it seems like everyone else is in everyone elses business. Media is the way to do that in 2017. Emily what about the notable folks who fell off. Who does not make the cut this year . I think what will get more attention is who dropped. Some of it is not a surprise. Kalanick, obviously, suffered the same fate losing his job. One note close observers will pick up is it has moved from being about unicorn culture in Silicon Valley to being about where Silicon Valley meets wall street meets washington. It is a global domination of the conversation. All of these things are fighting for your attention. We are trying to carefully pick the ones dominating that. Emily i found it interesting travis was on the list at all given the turn of events. You did add dara khosrowshahi. The uber engineer who kicked off the uber sexualharassment investigation. David kirkpatrick is still with us. You know a lot of these people. What is your take on who made it and who did not, who moved up and down and which way . David i love the list. It is a zeitgeist embracement. It is quite a list of people. I applied you for having broadened it the way you have. It is an amazingly interesting aggregation. I happen to endorse the inclusion of katrina lake why im writing about this week. That is an astonishing company that will be in the news more. Travis kalanick belongs on the list. He is still making big waves if youre talking about power and influence. Right below the tech leaders, it is astonishing. They get you thinking about what is happening in modern culture. Emily that is an interesting point, david. Jon, how do you decide on the political side given the upheaval happening in washington and around the world . To answer your previous question, we debated long and hard about where travis would be on the list. David makes a good point. It would be hard to disqualify him given the potential inroads he has to return as c. E. O. There are a number of board circumstances you could see following to place for him. It does seem possible. To go back to davids point. We are trying to measure influence. I know it is less algorithmic than other lists. We are looking for who has absolute power in the conversation, in the zeitgeist. We think about those things. This year, it was different. Doingare a lot of people civic duties, whether that is journalism or running a federal investigation, that have more influence than people running some of the most influential Technology Platforms on the planet. David i have spent 25 years at fortune, so i know what it is like at a magazine. How hard is it to move around the pieces . You must be putting postits on the wall and having big debates. Talk about what it is like figuring it out as a group and how many people are involved. We asked about 10 or 12 , not justs to join staff. We wanted to be intentionally large and messy. We want to be able to have a large pool of names to choose from. Begin with is probably twice the size or more. You whittle it down. You allow yourself to change it up. There is a consequential meeting we have toward the end of the process where we go through it all. That is when we are down to about 100 plus. We are literally figuring out what the top 25 look like. Are we being consistent . Who are the most impactful media c. E. O. s . We are looking in each sector to make sure we have those right. And then you play it out on a more global level. It is intentionally messy. Do it intentionally because that is the only way to get it right. Emily jon kelly, editor of the hive. Tomorrow. L see you david, you are sticking with me. Tuesday, bloomberg will be live interviewing top tech and media executives. Additionalsaying an 2. 5 million u. S. Consumers could have been affected by its massive data breach. The company says an outside Cybersecurity Firm completed its review and boosted the total estimate of impacted consumers to more than 145 million. Review showed no evidence the hackers accessed databases located outside the United States. Four. E. O. Testified before separate congressional panels starting tuesday. Ubers board has a big day tuesday with a possible recordbreaking deal. That and their london legal troubles our next. This is bloomberg. Emily now to a story we are watching on a new round of funding from investors that will help bankroll ubers rival in india. It will help continue the focus on india and build a supply of vehicles and drivers. Tomorrow, ubers board of directors is set to vote on continue the deal with softbank. Inside a major goals board room to create it will voting power among shareholders, move it closer to an ipo in the next couple of years, and limit Travis Kalanicks power. He shocked many by naming john members to vacant board seats he controls. Eric newcomer joins us. Our guest host, david kirkpatrick. I dont understand how any of this make sense. In thely, taking a stake biggest ridehailings around the world. Ridehailing is a good business, you invest of all of in all of them. They seem to compete in a zerosum atmosphere spending money on subsidies that cut into each other. One of the reasons the softbank deal could get done is the hope it creates space for a grand bargain afterwards. That is on the horizon. We have to see whether uber is able to seal the deal. I think that is a hope down the road. Emily a critical vote potentially happening tomorrow any Board Meeting about the softbank deal. What are the terms they are discussing . It is going to be a crazy Board Meetings. We have had so many. It is a double feature in that they are deciding governance terms, how control of the company works, changing shareholder agreements, that is part one. Part two is that needs to happen for the softbank deal to go through because investors like benchmark have suggested they will hold up the works if governance reform does not happen. Governance reform has been a major component of the softbank deal. We have two major pieces influx. Emily what is your take on the new Board Members . Are they travis allies . Are they going to be on his side . There certainly former titans of industry, people that could have legitimately been on ubers in a normal process. There are lots of questions. The fact that they are willing to join the board in this strange process where the board is not consolidated. I think it has some people asking whether they make since to stay on the board longterm if travis loses the power struggle. Maybe you will win with three people on his side. These two new Board Members, his seat. So much is unclear. It is not even clear if these new members will vote tomorrow in the decisions that will be made. They will probably be there. Will they vote when they are playing catch up on everything . It is hard to say. So many questions. Emily david, the palace intrigue continues. What is your read . David the only thing that compares to it is the h. P. Board about 10 years ago. I think this is the most amazing board dynamic i have ever seen. Listening to eric makes me they had beene interviewed and were possibly being considered for the board anyway which kalanick would have known. What does he think he is going to get from them . That is the key thing i do not understand. These are not shy people. We will probably hear them get asked this in the near future. They will have to have some kind of answer. How much are they his people and how much are they objective Board Members like they ought to be . I am nonplussed. My jaw is hanging open. Emily exactly. How independent these Board Members are is the big question. How much leverage does travis have over them . Does he have the power to fire them if they do not vote like he wants . These are the questions being posed to me now. People are trying to figure out if we will embrace these Board Members and believe they are independent or not. Emily i cannot let you go without asking about london. Ubers head of london is out. Dara khosrowshahi is there this week. He is flying there right now. Emily he looks to reinstate their license. A peacekeeping mission. Uber is still operating in london. It does not seem they will have to stop. Is going to make peace with london. Far more important decision is at home. I am sure he will be calling in to work on his board problems at home while in london. Emily more to come this week, apparently. Eric newcomer, our valeant uber reporter. David kirkpatrick, c. E. O. Of techonomy. Thanks so much for stopping by. Areng up, u. S. Regulators investigating a Popular Exchange for cryptocurrency. We will bring you the details, next. A reminder of our interactive tv function. Find it at tv on the bloomberg. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Emily a change at the top. The chairman and founder will retire in june of next year. The move will hand the helm to the companys two chief executives. It confirmed longstanding speculation and establishes a formal secession plan at the manufacture of chips for apple. He used his retirement announcement to issue a 2017 revenue forecast that surpassed estimates. Bitcoin and other cryptocurrencies have surged this year. Regulators and financial executives are concerned it is a bubble destined to pop. Coinbase is facing scrutiny from the commodity futures trading commission, the cftc. Regulators have requested more information about an incident in june when ethereum suffered a flash crash, plummeting more than three headed 70 370 in a matter of milliseconds. We are joined by emily katz who broke the story. What more do we know about what the cftc is looking into . Sent coinbaseve a letter with a list of questions asking for more information about the flash crash in june. We know they have asked about back upial let me and explain what happened during the flash crash. There was a big 12. 5 million trade. That triggered all of these cascading sell orders. Within 45 milliseconds, the price lunged plunged. The cftc is asking coinbase for more information about the initial 12. 5 million trade as well as about margin trading which is something coinbase used to offer as an option. Margin trading is when you borrow money to buy or sell more of an asset than you might otherwise be able to. Coinbase has suspended that option. Those are two by the things we know cftc is asking coinbase for more information about. Emily what do we know about how coinbase is currently regulated . Coinbase is currently regulated three patchwork system of state regulations. They have licenses in a few dozen difference states as well as puerto rico. They are not currently regulated by the cftc. It is kind of this regulatory gray area for cryptocurrencies. Have said some of these might be securities and should be regulated as such. The cftc has said we think they are commodities. It is kind of a gray area. Emily we saw today Goldman Sachs is exploring starting its own coin trading venture. You have regulators looking into this. You have legitimate banks looking to make a bigger bet on cryptocurrencies. What do we see more of in the future . We definitely see more in and companies coming entering this space, and more established companies. It is interesting goldman might be entering. They could be a formidable competitor for someone like coinbase given how many more they would have and the level of trust they might have with customers being an incumbent bank. Emily what do you see coming next when it comes to these regulatory issues . Hopefully we will see more cftc. Ce from the sec and in the last couple of months, we have seen china and south korea ban these initial Coin Offerings. It seems like what is next would be more either guidance or regulation from u. S. Regulators. Emily what about the other cryptocurrencies, bitcoin aside . We were talking about ethereum. What trends are we seeing across the spectrum . With all the different cryptocurrencies, just this year alone, more than 2 billion have flowed into the initial when offering space Coin Offering space. We are seeing more Startup Companies and more concern there might be fraud in the space, which is why i think regulators are starting to crack down. Emily lily katz, thanks so much for stopping by. That does it for this edition of Bloomberg Technology. Reporting will be from the vanity fair new establishment summit. We will be on bloomberg all day with a great lineup of guests. A reminder. We are Live Streaming on twitter. Check us out weekdays, 5 00 in new york, 2 00 in San Francisco. That is all for now. This is bloomberg. From our studios in new york city, this is charlie rose. Conversationght, a with the man who negotiated Irans Nuclear deal with the United States and directly with the secretary of state john kerry. We spoke at the asia society in an extended conversation about iran, its neighbors, terrorism, nuclear weapons, and the u. S. iranian relationship. This is an expert excerpt from my conversation last night in which they talk about some of the accusations against iran