Approach to this roller coaster ride. And after some fairly uneventful president ial debates, twitter is out with a new label that flags tweets that break the rules. The move might even make donald trump walk a fine line on the social site. Tesla set a new record for quarterly vehicle deliveries, on handing over 95,000 vehicles tuesday to customers in the second quarter, beating average analyst estimates. This is due to accelerated shipments to europe and china. And u. S. Consumers rushing to buy sedans before the tax credit is shrunk in half. Elon musk told employees the company is close to setting an alltime record, urging them to go all out in the last days of june. Taylor riggs caught up with an analyst and bloomberg correspondents on tuesday. On the model 3 side, this was a blowout quarter and exceeds everybodys expectations. I think you sort of had this upanddown quarter where you had a trough of everyone getting concerned about demand for the model 3. Toward the end of the quarter, you started to see the analyst commentary pick up where people were a lot less concerned about that. On the model s and model x front, they still have a problem. 95,200 was the total for deliveries. Less than 20 of that, about 17,650 of those were model s and model x. And those are the highermargin, higherpriced vehicles in the lineup. What remains to be seen here is how much this jump in deliveries was at the expense of profitability. Taylor max, give me your take in san francisco. You have heard craig say it is good news but you wonder about the profitability. Is this a clear win for elon musk or do we face headwinds on the horizon . Max any time you blow the estimates out of the water this way, you have to look at it like a win. Coming into the quarter, you have two concerns. One was demand, the other piece was kind of logistics. Could tesla get the cars to people in a timely and costeffective manner . And so, id say on the logistics piece, they are performing well despite some acknowledged difficulties. Now, on the demand side, the real question is, what happens in the long run . You have consumers in the u. S. Rushing to get these model 3s, to take advantage of this tax incentive that will shrink. You also have people not buying the expensive cars. We dont know how this will shake out. Tesla is still a relatively new brand. It will be interesting to see what happens if and when they refresh these luxury lines. That could be just the thing that causes people who were model 3 buyers to trade up. Taylor that tax credit, as it shrinks in half, how much of a headwind tailwind was that this quarter and, going forward, with that tailwind removed, how much do car sales slow . Craig that will be the big question on the Conference Call for earnings in a few weeks. The tax credit is going to go 3750 down. What we saw at the end of 2018, the Fourth Quarter was the previous record for deliveries and a lot of that ended up being , in hindsight, a lot of consumers going out to buy the and s and x. Before the tax credit at that time was 7,500 before it was cut in half. I think people underappreciated how much of that was demand into theld ahead Fourth Quarter of last year. That is part of what fueled the big dropoff this year, so that is the big question for the third quarter, can they sustain that momentum even with the smaller amount of support from the federal government . Taylor i now want to bring in in david whiston, a morningstar analyst joining me from chicago. , weve been having a discussion rate seems we are in the all clear. Model 3s coming in better than expected. From your fundamental analysis, fold in the demand and profitability mix of the s and x, which are key given that they are highermargin cars to get elon that profitability to where he needs to be. David for all this controversy around the demand problem, i have never believed there was a model 3 demand problem. But the model s and x seem to be getting old for consumers, so to speak. They do have an upgraded range. But you are right. Volume is one thing, but it is also about profit and cash flow. We wont know until we get q2 results how much the shift matters. The x and s yearoveryear, despite these good numbers, the s and x yearoveryear was still down about 20 . Taylor david, what does your analysis say about the path to profitability for tesla . We have heard elon musk talk about this a lot. When do we get there . David they did it for a couple of quarters last year. It is not impossible. It is hard to say exactly what is the Tipping Point because they are still growing internationally. You have the china factory coming online. You will have the european factory. You still have more new models coming out. The trick is, how do they balance profitable growth . It is very hard for any startup to do and they are a pretty big startup now, so to speak. Taylor craig, is the chinese demand where it needs to be . Craig the demand we dont really know at this point, in part because they arent set up with that factory going up near shanghai. Once they do that, they will avoid those import tariffs that affect any car built outside of china. We dont have a true sense of demand for tesla in china. They are so priced out of the market. I think there is sort of a buzz in china of this brand and this aura around elon musk that we see around the world. But we dont really know yet how much sort of Untapped Potential there is for china. As david was saying, that isnt something that is going to come for free. It costs money to build up a plant. They are doing a lot of borrowing with local banks. There is a possibility it wont have a huge drag on the earnings of the company. But that is something that will be more of a 2020 story as we see local production start. Taylor as we look forward to the end of 2019 and 2020, what do you see as the biggest left side tail risk downside . Is it elon musks tweets, is it profitability, the fact that they need to raise more cash, is it demand headwinds . What do you see as the biggest left side tail risk event . Probably two things. One is general economic risk that applies to any company. We are late cycle for auto sales for example. At the same time, that is a new product. But the other point would be a bigger, longerterm happening of what happened in late may and early june when the sentiment and fear started to come into this name. This is a name that has always traded on option value, what it will look like in 2025 and 2030. Elon musk is brilliant. But when people start to freak out they have a lot of debt. , and they have billions in debt due, some of it is convertible and could get paid off, but if all of a sudden the street looks , at the downside reasons to fear tesla rather than being optimistic, the stock will get pounded pretty hard. Caroline coming up, half of the year is already in the bag and we have seen 22 Tech Companies hit the public market. Will the momentum continue . We discuss. This is bloomberg. Caroline 2019 has been quite the year for tech ipos with big names going public. But there is a significant shadow or two hanging over these newly traded companies. Both google and amazon have a significant hold in a number of the Tech Companies that hit public market. On monday, we spoke about the interesting story. Lyft spent 90 million on google ads in a single year. Last year. Those people went to an apple app,tore, downloaded the and when they opened it, google apps was powering the maps behind it. All of this was posted on amazon servers which has a 300 Million Contract with them through the next three years to pay for all of that. On top of it, google owns 5 of lyft and has a board seat. It is obvious that google and amazon are deep within the digital economy. But when you look at these filings, you see how concretely they are the infrastructure behind how many of these companies work. Caroline in some ways, this is a blessing. And in some ways, a curse. Mark, you focus on both amazon and google. From the blessing side, do you see it as a good element that these companies have so much riding on them, whether financially or from their future revenue stream . Mark there is good and bad. The benefits of Cloud Computing is that it allows Startup Companies to avoid a lot of infrastructure costs. You can treat all of your i. T. Needs as variable costs rather than big fixed costs. , you dont need to buy and build up a very large i. T. Department to scale up a business. That has been the magic behind aws, amazon web services, also behind microsoft azure and google cloud. In many ways, what they are offering is a real benefit to these companies. Theres no doubt that in order to scale up on the internet, you probably need to pay one of those three cloud providers. And then, if you are a consumer Oriented Service and you need to get consumers to use your service, get to know you, you will probably be spending money with google, facebook. Probably just those two. That is how you get Brand Awareness on the internet these days. I dont know if they are tollkeepers, that might be too strong a word, but they are clearly the biggest channels out there. And you are going to be dependent on them. And companies that investors like to look at, like uber and lyft longterm, companies that can create brands that are Strong Enough that they can get paid without those channels. Caroline your piece also shows that some of these companies are mentioning google and amazon in their statement. Is this something regulators are looking at . Are they worried that if they down too hard or push for are they worried that if they clamp down too hard or push for breakups and the like that Elizabeth Warren is looking at that it could impact these Companies Downstream . On the one hand, you could say look how powerful these companies are, on the other hand, you could say they are not necessarily interested in disrupting these Smaller Companies because they are their customers. They want them to keep growing. Google wants lyft to keep growing and use google maps and pay more for it every year. You can look at it from both directions. As this argument comes forward, i think youll see arguments from both sides. But i dont necessarily think that by breaking up these companies you would necessarily disrupt that web in a deep way. You can still buy google maps from google maps limited and buy Google Cloud Services from Google Cloud Services limited. We will see how it plays out, but i am sure this will be a topic of conversation when it comes to antitrust. Caroline before we go to the antitrust equation for the behemoths, i want to talk about the fact that you cover lyft and pinterest as well. When you saw that in their filings they do show competitive exposure and general exposure in terms of supply side needs from amazon and google, did you see that as much of a risk factor . Does that worry you . Would you like them to invest in their own independent service, for example . Mark i think the answer is no. I didnt see it as a risk factor. I had not thought about it in the way you set up the question. If they didnt if they were going to have a Cloud Services provider, it was either going to be aws, azure, or google cloud. Chances are, it would be aws. That is usually the lead cloud provider. They have almost 50 market share. If they didnt do that, then the p l they would have gone public with would have looked a lot different. And you would have a lot more capex spending. It would probably be frankly a less attractive Business Model and you would also raise the question, why are you trying to vertically integrate, manage all those data centers, server stacks, when there are three companies doing a phenomenal job of allowing you to outsource it . I will just twist that question back at you, a great question that i had not thought about. But i dont see that as a competitive issue, i dont think that is a dependence risk. And there is an option, by the way, of switching. We have seen companies. Snapchat went public and migrated from google to amazon. As long as you can migrate, i dont think there is risk. Caroline what about the risk from a competitive perspective, from the regulatory viewpoint that we are starting to see coming from capitol hill upon amazon and google . Do you think there is a risk that they are seemingly so intertwined with the rest of the tech ecosystem . Mark possibly. Regulatory risk has clearly become a major investor issue across technology. We actually just hosted a call earlier today with an antitrust expert to talk about the risks these large platforms face, particularly google, but also amazon and facebook. I think the chances of these companies having to be forced to divest assets is extremely unlikely. I generally think if a company says they hold assets for multiple years, i think the government regulators would be loath to unwind that and it would be very hard to do. I think you are looking at fines or modest changes in business practices. I would make one quick comment, we just listened to a weekend of president ial democratic debates. And big tech didnt really come , except for the one time it did was over concerns of whether amazon is paying its fair share of taxes. The issue of google or facebooks strong market positions didnt come up. That is probably the best political barometer. If it didnt come up in a president ial debate, it probably doesnt matter. Caroline still ahead, bloombergs scoop of a potential deal with broadcom and a Cybersecurity Firm. Analysts are divided over the strategy ahead. We will hear from one next. This is bloomberg. Caroline at t is considering selling its Regional Sports network is a plan to reduce net. Reduce debt. The sale would include tv rights to teams such as the Pittsburgh Penguins and the houston rockets. And another scoop, broadcom is in advanced talks to buy a Cybersecurity Firm symantec. It would mean profitable expansion. We spoke with an analyst for the details. I think symantec passes the smell test for broadcom. Broadcom has 52 operating margins big for them to consider an acquisition, it has to be immensely profitable. There are not a lot of companies that can reach 60 plus i would say would be the threshold for them to look at acquisition. The last deal they did which was computer associates, ca, is performing extremely well. And when we look at Something Like symantec, it has shares similar to ca. In terms of the two businesses, one already 50 operating margin and another with some tweaking could get to 60 . The other they could drop into this platform and strip it of costs mostly marketing and sales , costs, to drive operating margins further. From that angle, it would be a profitable deal and extension of the portfolio they have. Caroline interesting, because we have been waiting for years for what they would work out to go after ca and after qualcomm fell away. What makes symantec vulnerable to being bought out . Reporter there has been a lot of john mack at symantec. The ceo has been ousted a few months ago. There had been an accounting investigation and an activist investor came on the scene, pressuring the company and got a few board seats. It is a vulnerable time for symantec for a takeover. Caroline we were talking about the tmobilesprint deal and regulatory issues, are there going to be regulatory issues with this particular deal considering broadcom in the past wasnt able to get past qualcomm . Liana before this, they had a singapore headquarters. They have now moved totally to the u. S. To alleviate that issue. But cybersecurity is a National Security concern and symantec does do work for the u. S. Government. So the review is something investors will be watching to see how it goes. There could also be an e. U. Review. No slam dunk for any large deal where there is a National Security element. Caroline you really have spelled out why you think it is a perfect fit and why it might be good for the business. Interestingly, other analysts or investors are questioning managements Strategic Direction here. Do you think it is the right direction to be going more focused on cybersecurity . We have seen others do it. I think broadcom is focused singularly on capital returns to the shareholders. Driving free cash flow, driving profitability. Understand this was a company , that was on the cusp of 50 operating margin, which no other company in the past had been able to approach in the Semi Conductor land. With the ca deal, they were able to push it closer. Now running about 52 . For them, to be able to expand and build on that, they need something outside of hardware, something outside of semiconductors. Typically, Software Companies tend to have extremely high Gross Margins and spend a lot of money acquiring new clients. The strategy with ca is dig deep and allyoucaneat strategy. It is dig deeper into existing clients, dont worry about getting new clients. For example, in sears case, there was about 100 billion of year so thosen a , costs went away. With symantec, it would be easy to go back to the same clients with a bigger portfolio and drive profitability. That is why we think it is a perfect fit. Caroline interesting. We have seen shares of symantec closing 14 higher. What sort of premium do you envisage . This is a company that has been under some duress. Could there be a bidding war . Could it go higher . Harsh it is possible other people could come in. I am not an expert on m a or Investment Banking aspects of the deal. But we think the premium of current prices would still work as far as broadcoms ability to take it and generate returns, particularly given the success they have had with software in the past. Caroline both of these companies have private equity background and history. Will pe be in any way involved in this . Liana symantecs board has private equity representatives from bain and silver lake. They will definitely have to be involved somehow, they are major shareholders in the company. Broadcom