Miss. While streak drills wework, facing questions about its finances. We get a read on investor appetite ahead of a potential ipo. First, shares of qualcomm falling in after hours trading after the chipmaker gave a downbeat fourthquarter sales forecast. At the highend, qualcomm is looking at 5. 1 billion sales. Analysts predicted that is in 5. 7 billion. Line with a warning issued back in april. Demand for smartphones, particularly in china, would be weak ahead of the introduction of 5g. Joining us is mike regan and sarah mcgregor. Explain whatf all, we are seeing driving this drop. How much does it have to do with china . Mike the revenue forecast for the current fiscal quarter was very light. The eps for the quarter also really light, and adjusted eps of as much as. 75, and the street was looking for 1. 10. It boils down to qualcomms basic business model. It has a controversial practice selling chips to manufacturers, they license chips to them, and they want royalties equal to a certain percentage of the value of the device. Caused a lot of litigation problems for qualcomm. They settled earlier with apple this year. There are a lot of questions about similar case brought by the federal trade commission. A judge in the ninth circuit actually 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. That means, you know, qualcomm was very upbeat about the prospects for 5g in their earnings report, saying their design wins have doubled. 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. So qualcomm has 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 this year. Emily quite a roller coaster for qualcomm, over the last couple years given the attempted broadcom takeover over as well. They also had to cut off supplies, or at least some, to huawei after the Trump Administration blacklisted it in the midst of the trade war and National Security concerns. Sarah, give us the latest on talks between the u. S. And china. We know they have ended, and theres a new set of talks on the calendar for september. Do we know if they agreed on anything . Sarah we were left with very few clues about what was actually discussed in this meeting. What we do know, officials really just met for about half of the day, and they said they will reconvene in september, which is weeks away. Beyond that, they described the talks as constructive, but no real indication of concrete progress that was made. If we listen to the analysis coming out in the hours since the talks ended, it seems like the sides are sort of settling in for a slow burn in negotiations from now on. The fact they are not doing a lightning round of negotiations out of these meetings in shanghai that just ended suggests things arent at an accelerated pace at this point. There was speculation, even from trump himself, that the talks could extend up to or even past the 2020 elections. That doesnt seem like an unlikely time horizon at this point. Emily mike, what does this mean for qualcomm . More uncertainty something i assume investors will not like . Mike absolutely. Especially in the chip space. There was a rally in chip stocks since the g20 meetings when it seemed like there was some progress being made. It doesnt seem at there was a huge selloff in chip stocks because of these recent trump as sarah indicated make it sound like these negotiations could drag on past the election. I think thats largely because, while thats happening, tensions arent exactly escalating. Hes not made any new threats of tariffs new tariffs at the moment, but obviously thats something that could change day by day. Chip stocks, it has been a noisy quarter for chipmakers. Because of the trade tensions. , some customers accelerated purchases of chips earlier in the year to get ahead of what they consider to be an escalating trade tension situation. So it is definitely causing noise in the earnings report. It is not the first Thing Companies are talking about but that could change if it looks like tensions are going to ratchet up, that more tariffs could be in store. Emily what is the likelihood we are in for the long haul here , and this drags into 2020 and past november . Sarah increasingly, it looks like there is no quick solution to this trade war. If there is a provisional or halfway deal, its not clear that the Trump Administration would go for that. It has promised to get tough on china. Its hard to imagine trump would go back on his election bid and say he got anything less than widescale reforms to chinas economy and brought them to their knees. So it might be a safer bet for trump to continue the negotiations and hope that the economy ticks along. He got a rate cut today. Whether it is big enough or not, that will help keep the economy chugging. I think this might be a safe for strategy but we will have to see day by day how things play out. In the meantime, the Trump Administration is still moving forward. They have export controls area there are a lot of other strings they can pull that have impact on china that may put them in the corner as well. Emily all right. Thank you so much for the additional context. Coming up, apple looking at life beyond the iphone. Les, wherend wearab those businesses are going next. This is bloomberg. Emily apple generated less than half of total quarterly revenue from a iphones for the First Time Since 2012. Is it a sign that the company is moving beyond the flagship product . The move is not as easy, for life beyond the iphone to be successful. Apple will need to keep selling the smartphones, or make the Services Good enough for those on rival mobile devices to switch. For joined we are joined by an analyst, who has a buy rating on apple. Tom, what is your take on the now shrinking part of the pie the iphone has . Tom the good news for apple, they have investors to focus on whats next for apple, and you touched on a lot of it. But as we saw today in qualcomms earnings, you have a mature market for smartphones, and you have seen it in the iphones with declining unit sales the last couple quarters, and i anticipate that will be the case until we have a 5g device, likely next fall. For apple, it is really about payments, about Financial Services beyond payments, health care. As you talked about, premium video content. Advertising, but in a way that protects the privacy of the consumer, too. I think the story for apple, either the service of story or the nonhardware story depending you want to phrase it is a good one, and investors are warming theo it, which is why stock is up after the Earnings Announcement last year. Emily they do go handinhand. For people to use the services, they need to use the iphone, and for more people to use the services, may be people need to use the iphone. How does apple drive in the midst of a smartphone slump . Tom the key for apple has been the install base. Iphoned news, fewer users are switching to other devices, but they are holding onto their iphones for an extended time. To the extent we have a catalyst on the horizon, what would inspire them to upgrade . A 5g device. That looks like it will happen next year. So long as they can maintain their install base and key people keep people using apple products, it is easier to overlay the services on top, premium news, premium video, et cetera, and that has the stock wellpositioned here. Emily we were thinking, yesterday a guest said Many Apple Services are pretty mediocre. There are some doing increasingly well, like apple pay. Do you see apple being able to appleize some of these other services and make them great, like they have done with some hardware products . That is an excellent question, and b, we certainly dont think mediocre when we think apple. The premium video content, they lined up a plus hollywood talent, oprah winfrey, steven spielberg. You bring up a great point with apple pay. Some years ago, my expectations were really low for apple pay, and they have been far exceeded. Part of what they are doing in hardware is more than the smartphones, to the extent you see strength in wearable devices like the apple watch. So im a believer that generally speaking lowquality and apple dont go handinhand, so i would never think of their products or services as lowquality. I think of the a plus hollywood talent they have. I think of the success they had with apple pay. I expect that to extend to some other products and services. Emily looking out into the future, do you see the iphone continuing to be a shrinking part of the pie . And how long does it get in terms of a percentage of revenue share . Tom another excellent question. And absolutely. For apple to be successful, five years from now smartphone sales may have to be less than one third of total revenue. We had thestion, if conversation six to 12 months ago, where is apple in the smart home . The concern was, and there still is today, that alexa or Google Assistant devices will dominate the internet of things within the connected home. The homepod i think was disappointing for apple, so we will see if there is another way for them to go after the connected home. But a Healthy Apple five years from now generates less than a third of total revenues from smartphones. Emily less than a third, coming down from two thirds. Tom forte, always good to have you here for your insights on the show. Coming up, spotify, secondquarter earnings and a miss on subscribers. The ceo said thats on us. We discussed the. Streaming company next this is bloomberg. Emily spotify shares fell the most in almost five months after slower subscriber growth. The Music Streaming Company reportedly ended the most recent quarter with 108 million subscribers to the premium service, a shade below the 108. 5 million forecasted. Lucas, what happened . See spotify ass a growth story, a momentum stock. That is what ceo daniel ek has said, so each quarter, they expect spotify to not just hit their numbers that to beat them considerably as another company like netflix has done quarter after quarter. The problem with spotify earnings, they tend to be pretty good at forecasting, so the numbers are either slightly above or slightly below, and investors almost always react negatively. Down fivehas traded out of six times after issuing earnings, although on the whole the stock has done just fine. Emily what does the podcast bet have to do with it . Spotify says it is working, but clearly not enough to be the estimates . Lucas one challenge for spotify, unlike video streaming company, spotify has fixed costs. The 9. 99, the six dollars that it collects from you, a majority of that goes directly to music rights holders. So spotify is trying a lot of things to reduce the cut that it pays right holders to be more profitable. One of those things, selling tools and services, and the other is podcasting, opening up a whole other area of audio programming. The issue right now, it cannot carve out podcasting from its revenue pool, so podcasting mostly just adds to cost, because theres not a good way to make a bunch of money for it, not good Advertising Technology around it, and subscriptionwise it is not saving the money, so it is just a good talking point for them right now, not anything making a difference in numbers. Emily how is competition shaping up . Example music eating into the pie . Lucas they say no. Apple music has grown quite a bit, but spotify grew 30something percent yearoveryear, and they say based on numbers from apple, they are growing half that rate. Amazon, youtube have grown, but spotifys still clearly the market leader. The big question, how long can the growth continue . Ofthis five years unimpeded growth, or will it slow down more quickly, and can they find a way to reduce costs they pay labels, by podcasting or other means . Emily lucas shaw, thank you for that context. After a year and a half of searching for the home of a second headquarters, amazon chose to split its campus between crystal city, virginia and long island city, new york. Shortly after the decision, we saw the downhill of the new york campus as local politicians pushback and amazon pulled out. Since then, u. S. Cities have upped the ante to persuade the seattle giant to bring new jobs to other locations. One city, nashville, tennessee. Amazon announced its Operational Center of excellence would move to the city, to the tune of 5000 jobs. We caught up with tennessees governor about the move and plans to bring other tech giants to the state. We are a state with a very business friendly environment. No income tax. Very little business taxes. A Regulatory Environment friendly to businesses. So Companies Know that about states. Were very fiscally soundly managed. Companies know that, sort that out, and then they look at incentive packages states have to offer. We certainly deal with companies that way, incentivize companies to come there then they look at workforce development, and we made a tremendous push in our state to create workers for companies that are coming there. Particularly Tech Companies and technologybased companies. Our administration has done something, the future of workforce initiative, establishing the kinds of education, curriculum and pathways that create the workers of the future. Emily there are some Tech Companies already there. Lyft, postmates, mitsubishi moved some operations there. What in the future can you offer Tech Companies . You are making the case here in San Francisco this week, to put a bet on tennessee. Governor lee i think the biggest thing we can do, show to them our commitment for workforce. Technologyrelated jobs require a workforce of the future, and they require an education system, i believe, that understands the needs of that workforce. Weve created something called futuree act, the workforce initiative. Those are legislative initiatives that in fact create workers of the future, changing the way middle schools and high schools look, and ultimately 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 they can add the 1000 jobs they need. Or amazon will know the 5000 jobs they will need to fill, there wo will be a workforce too it. That investment is important. Emily nashville overwhelmingly rejected a transit bill that would have brought light rail to the city. Do you see a risk that nashville or tennessee might not learn the lessons of seattle, which sought rising housing costs and a traffic crunch because they didnt move fast enough when amazon came calling . Governor lee we have to lean on this. What i think is most important that we have to do, and we talk about this in the department of transportation, other municipal leaders. We need to think about 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, thats what we need to be investing in from the transportation standpoint. We do have to stay ahead of that curve,. In our major cities in tennessee, we want to be ahead of the growth curve as much as theible, so we can not make same mistakes other cities have had to make and have had to learn. We will learn from their mistakes and not remake them. Emily as we are having this conversation, you have capitol hill increasing scrutiny of big tech. The department of justice, ftc opening antitrust reviews into big tech, ftc looking ats facebook specifically. Facebook, google, amazon, do you think these companies are too big . ,overnor lee first of all washington has an opportunity and they have a role they play in the topics you are talking about. But i am a business person, who sees these companies primarily as an opportunity to create jobs. When the market allows them to grow and flourish and create more jobs, thats good for states like tennessee. If they are in our state and growing and flourishing, i think thats good. Emily what would you say to those who say these companies are stifling innovation, or need more regulation . Anernor lee i think theres appropriate place for regulation in our world. Safety, forof, for protection of rights, thats really important we look at that. But government needs to stay out of businesses to the degree they can. Theres a right balance there, and we have to find that balance. But i am a free market person, who believes businesses when thriving are really good for the economy and really good for jobs. Emily our conversation with tennessee governor bill lee. Well, if you want to short beyond meat, you will have to pay for the privilege. The cost for shorting the veggie burger maker is the highest among all u. S. Stocks. Beyond meat has risen over 700 at almostipo in may, 45 of the free float has been borrowed for shortselling. Coming up, testimony in age discrimination cases against ibm indicates the company may have 100,000 many as workers. Details and reaction from the company next. This is bloomberg. Emily this is bloomberg technology. Well, it finally happened. The fed delivering its first Interest Rate cut in over a decade. Here is fed chair jay powell, announcing the news. We decided today to lower the target for the federal funds rate by. 25 . Of 2 to 2. 25 . The outlook looks favorable, and this is designed to support that. Emily the news sent u. S. Equities into the red, fueling speculation the central bank is not necessarily at the start of an easing cycle. I want to bring in pimm fox, in new york. The president tweeting his displeasure, saying as usual powell let us down, but at least is ending quantitive quantitative tightening, which should not have started in the first place. We are winning anyway, but not getting much help from the Federal Reserve. [laughter] what does th