Transcripts For BLOOMBERG Bloomberg Technology 20170505

History. It will relocate 27,000 students at the end of this month. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. From washington, i am alisa parenti. This is bloomberg. I am emily chang, this is bloomberg technology. Stage in take center france, with the president ial election days away. How big tech is mobilizing to prevent viral misinformation from influencing the vote. Earnings bonanza with apple and facebook leading the charge, we break down the latest headlines of this week in tech. Free original content courtesy of youtube. Bet oneo giants big celebritydriven shows. The nasdaq and s p 500 closed at new, alltime highs. U. S. Stocks rose for the Third Straight week. Abigail doolittle joins us now from new york. What happened in this session in tech stocks in the week in general . We started off, relatively lackluster session, and on the close, both the nasdaq and s p 500 finishing at record highs. A lot of this has to do with tech, the bestperforming sector of the week, relative to the best stocks for the nasdaq. It helped of the nasdaq rise of third week in a row. Some of the best weeks since november of last year. They posted a solid march quarter, beating estimates by 1. 5 . There drug numbers were good enough. That stock went up quite nicely on those results. Softwareinner, a company. They are saying some of the could include bain and carlyle. They have a 23 billion market cap. They may not choose to sell themselves that all three of but it shot up higher on the week around as big investors. The possibility they may by cit rix. And analyst said it has to do with a report out of europe suggesting demand for travel is very strong. Interesting, on the day the stocks were down as hotels say they will fight the monopoly these two Online Travel agencies have formed. Itll be interesting to see how that lays out. Emily we saw moves on the back of apple earnings, where did we end up . Abigail another record for apple. They put up a march quarter that was disappointing. They beat on earnings, missed on revenues. They are getting a pass on iphone 8 super cycle. We are waiting to see. That is where the pressure is for the back half of the year. Ande hop into the bloomberg take a look, this is a longerterm chart. And 2013, the Stock Plunged in a big way. That was around disappointment for the iphone 5. Then it shot up in a huge way. The disappointment was on the iphone 6s. The iphone 7 has been stronger. Everyone is looking forward to the iphone 8. If you look at the move up between the blue lines, we could see choppiness. The technicals here are mainly pretty solid. Lets rounded out with netflix. Netflix did trade higher on the week, having its best week, up a second week in a row. Deal,g on that baidu their entry into china. Netflix could potentially be bought by apple with that huge apple cash pile of more than 250 billion. Microsoft and intel were among the bed best stocks for the nasdaq. 9 laptopt released a 99 with an intel chip inside. Tech was the best sector on the week come a really helping the nasdaq. Abigail doolittle in new york, thank you so much for that update. Mentioned, a lot of Earnings Report cards over the past couple weeks from the biggest tech companies, apple alphabet, microsoft amazon. The majority have beat on revenue and earnings. What is the mean for the health of tech stocks, can they keep it up . Joining me, tom, great to have you here. Can tech stocks keep up with this optimism . Optimism is real, the big changes happening in the ecosystem are these moves to the cloud. Anytime you see 50 growth year over year in the u. S. , Large Enterprises starting to move, that drives operating income and growth. Emily so it is worth it . Tom in the private markets we version, when you had me on the show 18 months ago, the theate market valuation, same company in the private markets was twice what it was in the public. That is no longer the case. Emily you talked about a spike in venture debt. Why is that a trend . Tomasz one way is to raise equity dollars. They invest dollars to buy shares and that dilutes the company. We by 25 of the company. But there is a recent trend where companies borrow. It is happening more and more and growing faster than equity investment. That is because this kind of forncing is nondiluting founders. As Companies Stay private longer and longer, like uber, 10 years before they go public. Instead of raising that preipo round, they raise about 2 billion a day. Emily when you talk about private companies reverting to the mean, are and airbnb an exception . Tomasz they are. Emily are they the only exception . Tomasz no. What i mean by reverting to the mean, Exceptional Companies will command exceptional prices. Two were year two or three years ago many were demanding exceptional prices. The middle class of companies are not growing as fast, are not as iconic. Companies isthose lowering. Emily is it a reckoning . Tomasz no, a slow correction, not as dramatic as 2000. Added. Jobs report you have the chairman of alphabet say he does not think robots will take all our jobs. He said, i will not take the position because no one knows the answer. Well we have a tremendous dislocation and jobs, i am not you agree with him . Tomasz when the first dishwashers came out, it was the first robot in the house. People were terrified dishwashers and businesses would be out of a job. But we still have half a Million People with that job. With thea Panel Chairman and tesla. There are as many people employed per car produced in the tesla factory as in any other factory in america. What ends up happening with machine running automation, it is not that we have fewer jobs read but that humans do changes. We focus on more interesting, cerebral work, as opposed to more manual. Emily lets talk about self driving cars, uber and alphabet are in the middle of a lawsuit over whether or not technology, i. T. Was stolen. If self driving cars are a success, what is the mean for these people who have been building cars in the first place . And driving them . Tomasz there are five stages of automation. We will not get to that in 15 years. Emily we will still have to have steering wheels. Tomasz or companies that offer to drive trucks with remote controls, like we drive drones in the military today. It will be another 15 to 25 years. The idea is that during that time, people will be able to learn new skills and still be employed. It is not a discontinuity where tomorrow, 19 million cars sold in the u. S. Each year will suddenly become a fully automated and everyone will be without a job. It is a much more gradual change. Emily what are the new skills . Eight imagine driving trucks at the same time instead of one. The gig economy is fragmenting labor. One thing we are pursuing inside our firm is a new forms of education. More vocational education. What those skills are going to be is still to be determined. We are hopeful that as we invest and build the next generation of educational institutions, people will be ready. A trend, automation is private companies are reverting to the mean, where you see the most potential . What you putting your bets on . Tomasz Machine Learning and artificial intelligence. We have been working on speak recognition. We believe speech recognition is the new form of humancomputer interaction. You can speak three times faster than you can type. It is more convenient to speak to a computer. Another big area of focus is machine translation, wondering which to another. Computers can do that better than humans. We are continuing to look for investments in that kind of way. Emily you are here a year ago. What it will be what will we be talking about a year from now . Tomasz very big ipos. We have seen Nine Companies go public through may. At a twotime space since last year. Airbnb, mostnd things point to those being two years out. Point, they will go out. You still have interest. Recent markets have shown that there is a lot of appetite for highgrowth technology companies, the average gain is 35 . , so lots ofe open companies will be going out at the same time. Emily thank you so much for joining us, great to have you. Coming up, is Warren Buffett saying byebye to big blue . Why the investor is cutting his stake in ibm. Bloomberg techs Live Streaming on twitter weekdays 5 00 p. M. In new york. This is bloomberg. Emily ahead of its annual shareholder meeting, Berkshire Hathaways ceo announced he would be ceo Warren Buffett announced he would be tricking his influence. One point trading at its lowest level since november. Johnson i bring in cory in new york. What is your read on this . Cory the fundamentals of ibm are not the kind he likes. He is not afraid to step into a business to turn around and make progress. If you look at ibms progress his first purchase was of a lowerlevel. He bought a lot of stock when it was at its alltime highs in 2012 and 2013. It has been a money losing position for Warren Buffett, a difficult one. The corporate results reflect a business that is contracting, not growing, which is what buffett wants. Emily how much has he lost . Cory we do not know what he has paid for the stake itself. Fundamentally, it is a s business. F ibm if you look at the sales figures, they have been drinking every year. Grow the bottom line. But if you look at the even audit growth, there is not been any. It has been falling 5 , 7 , 11 . It is not only getting worse, but worse faster. That is a great concern and not the type of business he wants to be involved in. Emily buffett said in the past he does not understand technology. He has a stake in apple but does not own an iphone. In fact, he has a flip phone and is quite happy with it. Does this prove maybe he should not be investing in a sector he does not understand . Cory really what he does not understand is the valuation of tech stocks. Stocks that are valued on what they have yet to do as opposed to what they have been doing. Intrinsic value and the Free Cash Flow generation from the business is always at the cone. Have been covering technology so long, it is hard to believe companies that have not done anything yet. It is hard to do it venture capitalists do. To discount future cash flows. There was a clue however that it was not his kind of company. When the annual letter comes out from berkshire hathaway, i have gone to to a quiet room on a saturday morning to go through the letter. Heot to a section where talks about the kind of businesses he likes and is not. I think we have the exact text of the letter available. He talks about how he and charlie look at the stock market. Charlie and i cringe when we hear analysts talk about managers that make the numbers. Business is too unpredictable for the numbers to always be met. Ibm always makes its adjusted number. They talk about that in press releases to journalists. But the stock tends to suffer because they focus on making adjusted numbers, not making the business any better. That was the clue that Warren Buffett had given up on ibm. Emily cory, our bloomberg editor at large in new york, thank you. Coming up, youtube betting big on original content to round up ad dollars. We bring you the latest from los angeles. This weekend we bring you our best interviews from the week. Tune in this saturday for the best of bloomberg tech. This is bloomberg. Emily a story we are watching, city analysts wrote a note on apple acquisitions. The targets, netflix, disney, hulu, tesla. They said netflix would be apples best bet. The iphone maker could use 1 3 to buy netflix, and 2 3 for buybacks. Youtube is planning to expand original content. They are getting even bigger. A halfy the announced dozen original Series Available for free on the worlds most Popular Video website. The alphabetowned Company Hopes to attract viewers and advertisers. Here with more on the expansion plans. What do you make on the reality is succeeds . My first take was, oh no, more tv. My friend said the handmade scale is great. But now i have to subscribe to hulu, too. Thethey invented video on internet. Push by thema huge in the last year or so. They have 35 channels coming out, a typical cablelike bundle they are offering. Withave youtube red original programming for 10 a month. Some you will be able to watch for free. It is a big push to captures some of those original programs. Googlebig picture, crushed print advertising and this is their chance to bring analytics to the tv world and get that revenue. Interviewed the youtube ceo toward the end of last year and asked her about her vision for the future. She said she imagines the youtube will be a platform for all of these different Media Companies. Take a listen. If you fast forward 10 years, you will see a new generation of Media Companies that have strong followings, are able to create amazing content. They will global, interact with their fans in all sorts of amazing ways. I am looking forward to being part of that. Emily we know anything about the numbers . Can youtube or is youtube competing with netflix, hulu, amazon . Can they give them a run for their money . Chris no doubt about it. These online Video Companies are promoting their wares. A lot of amazing technology, targeted advertising, tracking every single viewer. We see a dramatic turnaround even for youtube. Just a month or so ago, big advertisers were canceling. There was controversy, they did not want their ads placed next to beheading videos. Johnson, is now an advertiser for a big youtube show. They are embracing online advertising. With all this spending, you will see viewers. Emily how is it different from what you to have done in the past . Chris they had a push five years ago to produce 100 million to produce original content. This time there is an effort to create content with people that have both online followings and traditional followings. Ellen degeneres, for example. A lot of this is timing. This is the Tipping Point this year for online tv. Emily comedian kevin hart, a lead ellen degeneres, others will be producing these scripted shows. You will be charged and watching all the new original content out there. Thank you so much. Coming up, we bring you the top tech headlines of the week, including the possible criminal probe into uber. If you like Bloomberg News check us out on the radio and sirius xm. This is bloomberg. You are watching bloomberg technology. Lets start with the check of your first word news. French president ial candidate Marine Le Pen was pelted with objects at a local cathedral. Protesters are mostly supportive of emmanuel macron. Coveragering special of the french president ial election runoff result on sunday. Activist with the Environmentalist Group greenpeace unveiled a banner from the eiffel tower contain the French National motto. It was removed after 45 minutes. A conservative cleric running thepresident of iran, said nuclear deal with the u. S. Must be respected. They said despite issues that exist, the deal should be considered legitimate. Are hoping to in florence, italy, European Commission president opened his state of the e. U. Address today was a direct swipe at britain. I made a decision between english and french. [applause] surely, english is losing importance. [laughter] ahead of formal talks for britains exist on the block from the e. U. Will negotiate with the u. K. In full transparency. He meets with President Trump in brussels may 26. The e. U. s chief negotiator responded today to claim that the block is responsible for uncertainty leading up to the brexit. The only calls of uncertainty is brexit. The only way to remove uncertainty and to protect rights properly is through article 50 agreements. He also said before trade negotiations begin, he wants to ensure the rights of People Living and working in the u. K. Antie. U. German chancellor Angela Merkel is standing tough against President Trumps demand that germany pay more for natos defense. Nato countries are decided to contribute 2 of their Gross National product on defense. Germany includes foreign aid in that total, but mr. Trump does not. Merkel says she stands by her countrys spinning approach. A deal to set up four state zones in wartorn syria goes into effect today. Is still between russia, turkey, and iran would ban military action in those areas. From washington, im alicia parenti. This is bloomberg. Emily this is bloomberg technology. Im emily chang. Earnings season is just about to wrap up and almost all of the tech giants have reported, including apple and facebook. Next week, we will get scott numbers stock numbers. To break it down, we have our bloomberg tech editor and are bloomberg tech reporter. Lets start on apple. Shares ended up 4 . There is concern about the iphone, but there is optimism about services. What is the big takeaway . The actual number of iphone compared to the year before, but the iphone revenue went up, which means they sold that a lot of people bought the high end iphones. That bodes very well for the new iphone coming up later this year. From that point of view, it is good. Could you add in the services business, which means if you dont buy an iphone, you may subscribe to apple music, download apps. Uply he also played wearables. [no audio] away,is not going to go they are still working on it the air pods especially, you could have a lot of new Technology Based off voice interactions. Emily lets talk about facebook. The biggest concern is that they are running out of space in the core apps mark. Issues about these violent content and what they are going to do to police that. They said they are going to thise the ad load, but at point, it was not news. Their deadly trying to want the markets about that incident are going to calm down. On the other hand, i think people are really excited about instagram. It is a place for people really want to advertise. That is going to absorb some of this concern. And then like you said, video it feels like they are trying to figure it out. Emily there adding 3000 people to police it. There was just a report saying they were going to do premium stuff, so they are committing to video, even though as a user, they have definitely not figured it out. Think is theo you can do to succeed and original content . They pulled back from betting on sports content, which is the best example. Everyone is getting crazy for sports and paying so much. They are not going to do that. They are being a little tentative, but the opportunities await too big. If you can grab a third of what youtube does, it would be a huge business. Emily snap is coming. What can we expect . Quarter, we really get to see them as a public company, so it is super important. Are they a highgrowth company are not . There will be this big debate around sort of user growth versus how well they monetize their existing users. Top would much prefer monetize the users we have. They are super engaged, much more on facebook and instagram. We will continue to come out with new products. Pay attention to that. Dont Pay Attention to the fact we are not facebook or some huge, International Global business growing at the same degree. Dont treat us like twitter. Emily shares of 30 of the ipo. Lets talk about uber. Every day, another uber story. Now they are facing a criminal probe. What is the latest . We found up to the city of portland, there was this extensive document that included this mention that the u. S. Justice department was investigating uber. People are seizing on this idea that so the Justice Department is using is uber looked what into to obscure itself to make it hard for people to find uber drivers. It is called greyball because they are operate in a gray area legally. I think in general, the is an Amazing Company and it has won in its market, and now, they are missing it all up. Self drivingeat car program, then they hired this guy who is obviously a little crazy. Then they messed it up and a lot of people have left. Their tripping over themselves right now. Emily i have heard anecdotally that lyft is getting moment him. Some people are saying that they are deleting uber and going with lifting. Most of the drivers seem to prefer lyft. What we take away with that . I saw a bunch of lyft people the other day and they were just glowing like they all had weddings or something. They are also happy. [laughter] everyone is very happy over there. Uprything just keeps coming on the uber front and it is a lot of old stuff. Their old skeletons getting doug out of the closets getting dug out of the closets. They have to figure out how to they overcome all of this history. Part of the hope is the report, a new coo, those things happen in may say, stop it is us for making a lot of mistakes. We are going to start to see that messaging of the new uber over the next couple of months. Emily all right. Thank you both. Said that apple shares were up 4 . That was snap. Apple shares are up 1. 6 . Neutrality rules are fated to change according to the fcc chairman. He recently gave more on his of neutralityate while speaking at the rightleaning American Enterprise institute friday saying, you do not need a weatherman to know that the wind is blowing towards modification or elimination. To fcc will vote on may 18 formally begin the process of loosening regulations that enforced and that neutrality rules for Internet Service providers. Disney could be headed to the top of the summer box office. The studio hope to capitalize on the power of proven franchises, pulling out sequences sequels. Guardians could top 1 billion in global ticket sales. Seasonmer movie generates domestic box office. The world turns to Francis Bacon of the country built for its next president , and the polarized race is getting heated. We will discuss how big the product we will discuss how big the problem is and what tech giants are doing about it. Emily ahead of the french president ial election this sunday, there is widespread anxiety that fake news could sway the vote. Have bigger problem is this for france . What is being done to combat it ahead of the election . We are joined from new york by the ceo of news whip. Francisco isn sarah frier. Paul, i want to start with you. That theeen a report links shared on social networks and france around the election are fake news. Is that accurate . Paul that is reasonably accurate. There is a fake news problem without any doubt, but what we like to do is try to quantify how about the problem is. When we are talking about fake news, we are talking about the stories that are out now and bipartisan reporting. So, a lot of websites specialize in doing that. When we looked at data from the last two months leading up to the french president ial election, we see they can news is a problem, but not a huge problem. The most top 200 shared stories 20 of those are the partisantype sites. 72 out of the top 200 stories last year were fake. Almost 40 of the stories were fake in that instance third but in thatd the instance, but only 20 in the french instance. Emily but you dont want any of the news stories you read to be fake. What is facebook doing about this . What is twitter and google doing about this . They have one big lesson under their belt. Sara the first thing they did since november was it meant that they had a problem, right . They saw it happening and there was his public uproar. Then they decided, we have to tackle this problem, but we dont know exactly how. Solutions theyof are trying to figure out. At the same time, these platforms dont want to be arbiters of what is true or false. So, facebook is teaming up with journalists, so was google, to factfinders what have to say about the post on their networks to make it clearer for people that maybe they wont get is easily misguided. Emily google backed a collaborative effort called crosscheck around the French Election, and they are using some of your technology at new whip. How is that working . Paul crosschecked is about the truth getting it boots on faster. It is a collaborative project started by the first that news coalition. They have 37 news rooms across france spotting very early on, when a new trend is emerging on social media, like a new video, a new piece of content, or a new where our Technology Comes in is the are really good at spotting content as it starts to trend. So the journalists can spot coming very early on. At the instance of the first big fake story about the french candidate macron say you think finance by saudi arabia, that was spotted by journalist within an hour. Pin were able to stick a into a very quickly. This awareness upfront to fake news is why we are seeing less of it in the French Election than we saw it back in the u. S. Election last year. Aside from the quantity of it, what other trends are you seeing emerging in the fake news that is specifically focused around the French Election . Leastthere has been at two fabricated stories, but there has not been as much as the u. S. As i part of it is that the pirates have not come to town. The runup to the u. S. Election,ou had macedonian teenagers content farms in california alternate out stories that they reckoned one side of the other wanted to read. Study byere was a facebook release last week saying that pointed to of,rmation operation, sort those people that they fake accounts under real peoples names to try to spread information and comments and message groups around the web, and they actually got rid of 30,000 accounts in france, spreading information. It is less dramatic, but there is a lot of coordinated efforts to misinform. Emily everything to the question can fake news that brings me to the question can fake news really be stopped or prevented . Paul it is hard. People have predispositions for liking certain kinds of stories, and if you have certain opinions of politicians. People are opting into fake news a little bit as well. It is hard for the platforms because they are developed algorithms serving you the stuff you want. If you want fake stuff, it is hard for them to strengthen and protect that. Important thatis journalists and people in media are able to step outside of their own culture bubbles and see what stories are trending in the worlds if they are not normally a part of, or looking at. 2016, we saw on our platforms, gettingx was ofting 2x the amount attention that hillary was getting. Talkedsarah, you and i to about fake news. They take a very, very seriously. On whetherr read facebook and get this under control . Sarah the Company Needs to take a few is a because it is not an issue for their revenue compared but it is an issue their revenue, but it is an issue. We get more and more of our news passively. I think this is going to be a situation like spam, like hacking you can only move as fast as you can to fix a problem, but somebody will find youre always one step ahead. Emily sarah frier and paul quigley we will be watching the French Election intensely this weekend. Bloomberg tv and radio will bring special coverage of the french residential runoff on sunday. Next, we will look at the funding of Biotech Research as the industry faces an uncertain future to the policies of President Trump. This is bloomberg. Emily welcome back to bloomberg technology. Im emily chang next week, the Trump Administration these of biotech leaders talking about future funding for research in the industry faces a lot of uncertainty under the new president. Bloomberg television will be in the hub of biotech in boston for a special week of programming shining a light on tech and the biotech ecosystem. Bloombergs Caroline Hyde will be presenting special coverage and joins us. Fillingu, caroline for in for me while i was gone. You did an amazing job. Tap next week . Caroline. Now i am on the east coast. I got tonside scoop it see what the highest academic places such as harvard, and i am getting the towards the tour of all tours. To the woman at the helm. We will see the administration talking to biotech leaders, and the concern of the pulling back in funding coming from the administration scared have a listen of what she told me earlier. Thisworked with Congress Spring trying to make a case of how research operates, and how universities are dependent on a Longstanding Partnership with the federal government that are on federal support. We have been concerned about immigration issues and the free flow of talent. The greatest advantage as a country this year has been the pole on that we can pull people into the u. S. And we benefit greatly by that. Caroline it is interesting that academia is singing from the y same hymm sheet as seems as though the president of harvard is worried about the attraction of u. S. Universities amid the administration. More worried that they will not have the same pool of talent that is currently helping build new companies. Many of whom said the companies are actually led by foreign students. We have heard that same sentiment at code that same sentiment echoed. We have such a vibrant Innovation Community in so many dimensions here and it is exciting to see it growing an exciting to see the output, and i think that having Mark Zuckerberg comeback will be a great moment for everyone to celebrate him, and remind ourselves of the many ways in which we have been innovators will continue to be innovators. Interesting, talking very highly of the rolling within the ecosystem. Universities and schools based in boston and in massachusetts in general, helping to build a thriving tech hub. Mark zuckerberg will come back to speak at harvard may 23. Emily caroline, you are so kind to say my name in the same sentence as Mark Zuckerberg and bill gates. The city has been focused on building innovative hubs. What have you seen . Caroline it blows my mind. It is the lifeblood of boston, too. Growthrd of all of the state product, all the money that massachusetts makes comes from tech, notably, about half of the payrolls across massachusetts are in tech and biotech. Amazing statistics. Emily Caroline Hyde in boston with a big week a special coverage next week. Think so much, caroline. We will be seeing you all week long. Have a great weekend. Do not forget to catch special coverage of boston 5 00 p. M. Eastern. Of course, we are Live Streaming on twitter. Have a wonderful, weekend. From our studios in new york city, this is charlie rose. Charlie the house of representatives approved the American Health care act this afternoon. Republican legislature plantar appeal and replace key parts of the Affordable Care act. The vote marks a significant victory for President Trump and House Republican leaders. Their earlier efforts to repeal obamacare failed to unite conservatives and moderates within the house gop. As republicans have not getty read the legislation most republicans have not yet read the