One official calling it the fight of a lifetime. Corporate ventures Data AnalyticsCompany Enters the vc world. We will get the details with their ceo. First, our top story. Facebook has confirmed it will resume collecting and transcribing some user audio clips from its inhome video device portal. I spoke to facebooks Vice President for virtual and augmented reality at the launch of the new generation of portable devices. He oversees hardware and devices and facebook. Take a listen. We are so excited about our new products. We have a 10 inch and eight inch hd screen and they are for most, who love them the and they are designed to look like picture frames. They can fit into anyones home as easily and naturally as if it was a picture frame. It will even show pictures when it is not in use. Taylor and another really cool thing you guys are launching is the tv portal as well. Tell me about that. Portal tv takes advantage of what is already the biggest screen and peoples homes, the tv, and terms it turns into an immersive video calling device. Taylor one thing that struck out to me was the price point, 149. It feels like youre really trying to push into what is already a competitive space. Roku, apple tv, how do you stand out . We think the most important thing that people do is connect with each other. Until now, all these devices were not really focused on that. If they were focused on connecting you with content, which is great, and they are useful, but when it comes to connecting to people that you care the most about, that was missing. With portal, you can use facebook, messenger, whatsapp to connect with the people you care most about in a really rich, immersive way with cameras that follow you around the room and your hands free and you and your kids can connect with your grandparents or your friends without holding the phone and , your arm getting tired and fitting everyone in the shot. Taylor you mentioned cameras. I have to bring up, on the portal, of course, there was the button where you can turn the camera off. Privacy has been a huge concern. Was that the focal point of making sure it was very easy for me to turn the camera on and off . Yes. People have never experienced anything like portal before. It has a camera and microphone. We wanted to make sure everyone felt comfortable and in control of that experience. These generations of portals dont just have control of the camera and microphone, they actually have integrated shutters to cover the camera so you can see that it is not seeing you. Taylor what about the microphones . They have an active light when they are disabled so you know they are disabled and alternatively, you can turn it on if you want to use an assistant like alexa. Hey, portal,y, mi i still being recorded . It sends a sort of voice click to the servers to get an answer back to you. Differs from the default, we might improve the quality over time, but you can disable that on the device itself or facebook activity log. All of privacy data, that, has been a big focal point of facebook. It is now the right time to be launching new products, where there is a camera, where there is a microphone . Right now, there is so much scrutiny and arguably, the least amount of trust in facebook . Now is the best time to launch a product like this. Connecting with those you care about is the essence of what facebook does, and thats what these devices are centered around. Video calling to the people you care the most about. We have taken every precaution we can to make sure people feel comfortable with the devices in their homes and the control they have in those devices. When they have experience of connecting someone they care about who doesnt live nearby, they will experience Something Special for them. It comes at a time when antitrust scrutiny is highest. Looking at big tech, when you think of facebook. Think of the app and software. Is now the time to think about tech, going into your phone and your tv . The smartest category is so new. This is only been on the market for two or three years now. Its really early and Everyone Wants to experiment and see what kind of value we can create. Its not very big yet, but growing yearoveryear. If people decide they are excited about video calling for the home, and i think they will be, i think ordo will be a great fit for them. If it is something not fitting for the marketplace, then we will try other things. Taylor that was facebooks Andrew Bosworth speaking to me earlier. Joining me now to discuss this further is our Bloomberg Technology reporter. Kurt wegner covers facebook. I want to talk about the privacy issues that are going on and the opt out button. It is not opt in. Does that go far enough to quell our concerns about privacy . Reporter i think the big issue we have seen so far with these transcription happenings that have been a big issue with tech is that people just didnt know about it. People were not aware that the audio they were giving these companies was being transcribed at all. I think at the very least, facebook is at least acknowledging this. They made the opt out thing their presentation with the press yesterday. They say that privacy is important, you would think they might make it the default if its how they truly felt. At the same time, at least they are acknowledging it in a way that a few months ago these companies were not doing. Taylor and what do you make of your living, and room, cameras and microphones, when trust in that company is at an alltime low . I asked than this yesterday as well. It seems crazy, right . The timing for facebook to be adding not only a device to your home but one that has a camera and a microphone on it, it doesnt feel like the right time. At the same time, when is going to be the right time for facebook . A year ago, it would not be any better. A year from now, will it be better . I kind of understand why they are pushing forward, because you dont really know when is going to be the right time for that, but certainly more than almost any company, they have been dealing with the privacy issue and there is a trust issue also. Its hard to get into someones living room when people dont trust you. Taylor when we talk about timing, this is a very competitive space. You had comcast make an announcement, facebook, coming Companies Like roku, apple tv. This is very competitive. How does facebook stand to differentiate themselves . They were very clear about this yesterday. The differentiator is the video calls. They think people are going to use portal to do what looks like a face time call on your phone, but this is through their hardware, and in some cases also , through your tv set. They think that that differentiates them from all the others. We asked what about the idea of having netflix or hbo apps on these devices . They said theres a ton of places you can already go to do that stuff. Our differentiator is the video camera. I think it would make sense if they had both. That is what they are leaning into. Taylor speaking of other hardware, its interesting that they have amazons alexa supported on their platform. When would we see facebook come out with a version of amazon alexa or google home . An actual device you can talk to . Reporter you can talk to this one. You can talk through alexa or you can say hey portal. That will make it up for basic commands or request. Those are the things that actually they are collecting and starting to transcribe. The bigger question is, when are they going to have their own assistant . The software that you might say, hey, portal, and they might have software that will actually give you a bunch of different options versus basic demands. Right now, they dont have any plans to remove alexa and build their own thing. Clearly with the software they are Getting Started on that. I would expect, i dont want a timeline on it, but sometime in the future this is a goal for , them to have an assistant that works much more expensively than what they have now. Taylor you and i have joked a little bit, we talked about the monthly active users daily , active users, its hard to talk about hardware because it feels relatively new. Its not a big part of their overall strategy. Where does hardware fit into facebooks total revenue . Reporter it doesnt fit into revenue really at all right now. They dont talk about how many portals they have sold or oculus or other types of hardware that they build. They are an advertising business, for the most part. They see this as a very longterm bit. In years,erhaps perhaps in decades, you might not use your phone in the way you use it now. You might use another type of device. I think they are trying to figure out what the device is going to be. Will it be at a home thing like a portal . Will it be ar glasses . I think when they figure the next wave of hardware comes around, they dont want to be in that dependency, they want to build it themselves. Taylor our coverage on facebook now. As always, that is kurt wegner for Bloomberg Technology. Thank you for joining me. Staff, hesent to his wrote, after 16 years at apple, i decided the time is right for me to step away from our remarkable company. Apples marketing chief is known for leading the secretive culture and directing product features is taking over in the interim. This comes right after apple hosted the annual fall iphone event in cupertino last week. Of course, it does come during a year when another highprofile executive departure at apple has come including former senior Vice President at retail, and the design chief. Coming up, continued fallout for wework after delaying its ipo. We discussed job cuts and faltered Holding Plans in london. Thats next. This is bloomberg. Taylor hours after announcing plans to delay an initial public ing wework made a small , round of job cuts in a new york city unit. This affected fewer than 10 employees. Deals for two london buildings leased to the startup are on the ropes. It is unclear if it has anything to do with the delay of the ipo. Joining me to discuss is an executive director and our Bloomberg Technology ellen hewitt, working tirelessly for us. You. Start with put 10 employees into perspective. Reporter it is definitely a small job cut. 1200rk employees less than in the world. This is something as an indication of ways in which in the next month, as they wait to weworkgo public again, could show ways they can cut back on cost. This is a small unit that ran a retail concept, not close to the main businesses that wework runs, but everyone is watching closely. Taylor is this the type of expense tightening belttightening that you would , want to see from the company . This is a drop in a very vast ocean. As she said, this company employs 12,000 employees. Less than 10 is not going to cut it. The Company Needs to show is a year from now, where is the cash burden going to look like . The company is burning 200 million per month. They have a lot of liabilities. A couple billion dollars they need to pay out every year. These are big numbers. The Company Needs a lot of cash. 10 employees is not going to cut it. Taylor is the bigger issue for you the cash burn and not the hyper valuation . Cash burn is the issue. The company has about 3 billion right now in cash. 1 billion and change in debt. They hope they can raise a lot of debt and some cash in ipo. They need at least three to years of runway. Foursimple math, 200 million a year three or four years of , runway, this Company Needs about 10 billion in cash sitting on the balance sheet. Taylor talk to me here about the timing of that. I spoke with an analyst yesterday who says he would like to see wework hold off from raising more money until the First Quarter of next year. Does that fit within your timeline of when you look at the company and talked to all the notlysts, perhaps trying to do the offer the rest of the year . We will have to see how they approach this. There are certain aspects of the Credit Facility they are hoping to get that as far as i understand they are limited to being available only if they do it in calendar year 2019. There is a deadline that is waiting in the current set up a which is that they could get the 6 billion in credit but only if an ipo is in the next calendar year. If they end up pushing the ipo into 2020, the going to have to start the process back a little further. Talk to banks again to renegotiate this opportunity to get credit. Taylor you are nodding. Talk to me about that fundraising environment. Is it that . Is it equity . You mentioned, they need cash relatively soon. I agree. Theres a contingency that if you raise a 3 billion cash round through the ipo, you get 6 billion in debt and this has to happen close by the end of this year. There is a deadline they are working against. They work backwards. If you were to raise 3 billion in cash, we can settle so many shares and part with ownership dilution. It is up to the existing investors how much dilution are they willing to accept and for what valuation . If they knew to do this careful math of getting to 9 billion in cash by the end of this year. Taylor we worked in a quiet period not being able to respond to the comments, so be fair to them, we should note that. I want to be careful to not directly relate these stories, but these buildings in london seem to be on the ropes. Walk me through those deals. Who is backing out . Reporter it seems like the potential buyers for these buildings in london are starting to get cold feet. We dont dont know, want to imply causality connected to the delayed ipo, but i certainly think anyone in a deal with wework right now is looking carefully at the financials of the company, the plan for the ipo, and making those considerations. One of the buildings is the wework waterloo in london, sort of this big campus with a skate park and stuff. Even that is hitting a little bumps along the way and we are not really sure why. Taylor we will have to leave it there. For joining me. Coming up, more exclusive interview with the ibm ceo. Why she thinks blockchain is all about trust. This is bloomberg. Ibmor earlier today, announced it would open the First QuantumComputation Center in an effort to expand its slate of condom computers and further realize the next business potential of the nextgeneration technology. The realworld application of quantum, and for that matter, blockchain, is something bloombergs Caroline Hyde covered when she sat down with the ibm ceo, ginni rometty. When i look at the future of technology, were all about applying it to business but we built some of the worlds leading technologies. Yes, cloud and ai, everyone talks about that today. Artificial intelligence and cloud. Much more to be done there, by the way. We will park those for a minute. The next two, blockchain and quantum. As often is the case with new technologies, people overestimate in the beginning and then underestimate in the long term. But blockchain, if you said, what is one word you would associate with blockchain . I would say trust. You dont even have to use the right kind of blockchain. Which is not always the case today. Blockchainhing, what should do, it would put trust trust between parties who dont even know each other, so it would make trusted transactions , and it would do what the internet did for communications between lots of parties. What it allows you to do is, you and i could share a transaction together, i dont have to see anything you dont want me to see. Once a transaction is completed, it cannot be erased. Think of a ledger. Why do we each keep our own checking accounts . Do we trust what the bank says . Today, we probably do. In the old days, we probably mailed a check and we would check our own notes. It is the same idea of a blockchain. It is what it is doing. A big application right now is food safety. One out of 10 people get sick. 600 Million People or more in the world get some kind of illness from food safety. It costs a lot of money. You have seen it where they have been recalls on spinach and the like. We started something called food trust. Think about this. Walmart. These are competitors in the world willing to join on. Unilever, driscoll strawberries and the like. They are saying we will put our data on here about what row in the farm this came from. From farm to fork. And weere is an issue have done millions and millions of transactions already through this i can pinpoint where the bad spinach is, versus call it all back. One third of the food is wasted in this world. That is one. And quantum, i jump over to quantum, just as i said lock chain and trust, quantum will solve problems with todays traditional computers, that no matter how fast they are, cannot solve. Traditional computers, zero and one. We learn about that with computers. Quantum bits have infinite states. Today, even if you have the best supercomputer, you could never model. It would run forever. I exaggerate a little but to show you that, its an approximation. Why do biology labs still do live . They cant get an exact simulation done. What quantum will do is things like Drug Discovery material , sciences, risk management, logistics. These are incredibly difficult. A you wanted to truly model molecule of caffeine, you would need a computer 1 10 the size of this planet if you actually wanted the actual simulation. Already with our quantum systems, we have made commercial ones available through the cloud, because they operate colder than outer space. You have daimler working on new materials like batteries and cars. J. P. Morgan is working on things like how to price different options, how to look at risks differently, and Drug Discovery. We have a huge network of clients and now is the time to start to get used to it. Now you say the word trust. I would add one side of quantum. There is a dark side. Quantum can break traditional encryption. That has protected most of the world. We announced new systems last night that to prepare for quantum already. Already our security in them to , secure whats inside our systems to run the missioncritical systems, they are quantum safe. We have been equally building something called lattice cryptography. It is a kind of encryption that quantum cannot break. This goes back to responsible searches. That is something that quantum cannot break. If im going to build a to will that is so powerful, i owe it to society to be sure if it has a downside, that i address that. We want to prevent that thin