Is there really investor demand . Intel discloses this week that most of the processes running the World Computers and smartphones have a feature that makes them vulnerable to attacks. As the largest chip acre in the world, the impact is farreaching. Fixes are coming over the next few weeks and it sees no Material Impact to its business. Google says the issue affects other Semi Conductor firms. Microsoft, apple, and google says what we need to know. Google researchers found out that this might be a problem going back to the middle of last year. The idea was we get together, find a fix for this, then we put that fix in place, then we go and say, look, this is what happened. We sorted it out. Dont worry. Unfortunately, news intervened. People found out. They are now in scramble mode. We dont know the impact they will have on computers. Emily are there any legal issues . Regulators might look at this and say, hold on, you have one or two companies where everything depends upon. Why are we giving them so much power, so much influence and the potential to damage . Emily we are talking about almost every computer and smartphone and server out there. What are the potential impacts . First, no reports that anyone has exploited this vulnerability yet. So far is the important thing. If you have a computer at home, you have areas on your computers where passwords are stored, where Encryption Keys are stored. The normal programs dont have access to that data. This feature of chips allows access to that data for highlevel programs. Emily intel says they wont have a significant financial impact. How can that be . In the past, they have had to recall chips or fix patches. They say, look, this is the future of chips. This makes chips faster. Emily another thing that doesnt look good is that intel found out about this six months ago. The ceo sold a chunk of stock later in the year. What happened . This has created a water of attention. If you look at the filings, this was a regularly announced plan. They usually set out a plan where they say i am going to sell this amount of shares. The timing of this, whether intel really knew this was going to be such a big deal, that is all up in the air and we cant say with any concrete basis he knew. Emily we continue our coverage from the fallout of the news, speaking with brian white. Take a listen. What we are talking about is a feature that has been in processors for over 10 years, but he has discovered it, and it is used in intel and other designs. Arm licenses their designs to others. Everybody is impacted. What i find interesting as i was brought in a couple weeks ago by these companies, because they knew what was a big deal. In 20 years i have never seen three Companies Come together in a briefing to talk about the issues and how they are addressing it as an industry. That is an important side of the story that hasnt been told. There are a lot of problems. There are interesting ways the issue will be mitigated. I think we will see more discussions from apple and others. Emily do think they should have told consumers . I think they were going to. The transparency of the industry is working, working together, and with responsible disclosure, which is important. They found a vulnerability, find a manufacturer, working on a patch, and were planning to announce it. Somebody leaked information, and now it is public. It shows the community is taking security more seriously and more responsible. What is scaring us is this is ubiquitous. Emily how serious is this issue in terms of impacts . We dont know that anybody exporting this, but we dont know a lot of things about attacks happening. It is a fair point. It remains to be seen. The one that allows people access to private data is the one being talked about. This has been out there forever, and we are seeing this being addressed now. In theory, there are bad things that can happen, but it took 10 years to discover it. That should give you an idea of how hard it is to exploit these. Emily who could exploit this vulnerability and what would they do with this information . Those with significant resources. Google would spend the time to find this vulnerability. Those actors may have the ability to know how to actually access and take advantage of this flaw. What is important is there are no known attacks ongoing right now. We are still unsure if you can execute this remotely or you need to be on the user machine. There is a lot we dont know. It just reinforces two things, one, the software we are operating is quite secure. The second is that we know that if i determined adversary was to gain access to a machine, they are going to gain access. This is another way they may be potentially able to exploit. Emily what can consumers do . They need to update. There will be too. There will be software and hardware updates. It is easy to take down a Little Software update. The hardware update may be difficult, depending on how they push that out. It is going to be straightforward, given the attention this is receiving. I think the manufacturers are all over this and we will be protected. You need to protect your data and understand who is accessing it. Do extra precautionary measures. Make sure only certain people have access. Emily what do you think this foreshadows for the year ahead in cyber . As bad as this is, it is going to lead to better things. What you do when you find these weaknesses is you redesign things. To address a point you raised, it is common in the security world for people to tell people about an issue and give them time to fix it. Normally what project is they give people three months. Because this was deep level, they needed more than three months. They were scheduled to do it january 9. It was six months past when they got it, because they knew they needed the extra time. Bottom line, we will see more awareness of how this process occurs in more sensitivity to what is going on, people having to figure out how they do this. It is going to be hard. The firmware stuff can be hard to update. Apple will probably do it as a combined update. It gets messy. Emily we know companies are cooperating more clearly. The vulnerabilities being discovered are more specific, yet hackers are also getting better. Is anything changing . Are we under a less or more of a threat . Understand you are adequately equip. Remember to protect the data. That is were security needs to live. It is not about just protecting the software. It is understanding your data and who interacts with it. It is a layered approach. It is basic training. It is all those elements together that are going to increase our cyber hygiene and make us better. Emily those brian white and bob. Barclays analyst says apples offer to replace iphone batteries cheaply could mean a big drop in future sales. He writes that apple may sell up to 16 million fewer iphones this year. The analyst expects some customers to take it manage the discarded batteries and skip potential upgrades to newer models in 2018. Coming up, tesla pushes back a key Production Target again, raising questions about whether they need to raise more cash. Later, we hear from the blackberry ceo. This is bloomberg. Emily a group has advantage its plans to merge with moneygram international. The company failed to win approval from the committee on Foreign Investment in the United States. The panel has become more active in blocking chinese investments in american companies. Last year, the Company Offered cash for money gram. The deal was valued at 1. 2 billion. Tesla pushed back a Production Target yet again after shipping fewer cars than expected last quarter. The Company Expects to hit producing 5000 cars a week, delaying the goal by another three months. We broke down the numbers with max taft in. Why are these numbers so bad . Max they are bad because this is now another delay. Elon musk last year said he hoped to be hitting this 5000 a week go by the end of the year, then it was three months, now six months. As bad as these numbers are, tesla has done a good job of managing expectations. If you look at what analysts were saying at the beginning of the week, a lot of people were expecting some disappointment. Basically, elon musk has has conveyed to investors and the public that he wants to get this right. That gives ammunition to skeptics. Emily we have a chart showing production on the bloomberg here. It shows the number of cars produced every quarter. Overall, they are holding about steady, but what do the numbers overall indicate about how hellish production is . Max it is below what we were expecting. I wouldnt read too much into the production numbers of the more expensive luxury cars, because a lot of Consumers Want this model three. Tesla already has claimed a big chunk of the luxury car market. The real question is, after you get into the mass market 35,000, 40,000 current, whether the company can do things the Car Companies have been able to do. Elon musk has done a fantastic job of getting analysts, everybody to see this as a bet on the future. The future gets closer each quarter, and each quarter that tesla isnt able to get this massmarket electric car we have been promised, the sales pitches going to get harder, and it is going to continue to cause people to ask questions about the companys future. Emily why is wall street focused on this when the numbers are still small . Max four tesla to justify this enormous valuation, it needs to be a mainstream car company. It needs to produce these massmarket numbers. To meet the Ambitious Goals that elon musk has set for himself and humanity, as he would put it. If you want to get us off of fossil fuels, you need to get the cost of electric cars down. It is good to sell luxury suvs, but if you really want to make a dent in the universe, so to speak, then you need to sell these massmarket cars. Emily analysts are saying tesla is way ahead of the competition still. Put this in broader context. Max any problem that elon musk and tesla are going through at the moment, his competitors are going to have to go through it. What tesla has said is one of the big problems happening is at the factory where they are making these battery packs. Any other company that wants to make these electric cars is going to have to deal with battery production issues. The other side of that is these are companies that are experienced in dealing with supply chains, manufacturing big pieces of machinery. Tesla has less experience. Maybe they will be will to deal with a faster. That said, tesla has done well as far as getting people to buy electric cars. The model s has outpaced expectations. Emily we will hear from the blackberry ceo, next. Later, we will speak with microsoft. This is bloomberg. Emily google saved billions of dollars in taxes in 2017 with its structure. The setup involves shifting revenue from one irish subsidiary to one Dutch Company with no employees, and then on to a bermuda mailbox owned by another ireland registered company. Blackberry has signed a deal with chinese internet giant i do to work on a driverless car software. The operating system and in car Entertainment Software will be bundled with baidus self driving car platform, apollo. We spoke with john chen about the deal. John we have been working with most everybody in the ecosystems. This is one of the latest announcement latest announcements that a number of partners signed up. We have qualcomm and others. This just happened to be the next major partners we signed on. Emily how does this help blackberry push into the self driving car industry . John we are providing, in all pieces, we are providing the safety operating systems, safety and security operating systems for Autonomous Vehicle and platform. When we first talked about me taking this job, was to create a category for us to dominate in. We certainly are doing extremely well. Emily how will blackberry help baidu become a dominant player in the car industry, which is their goal . John it is quite ambitious, creating the baton and is platform, the Autonomous Vehicle platform. They are putting together some code and a lot of partnership. They pulled us in as their operating system platform. With that, they should be rather complete in going after the Auto Industry. I assume the Auto Industry will go beyond just the auto that you and i know of today. They are going to provide maps and Digital Information also. I think this is a pretty good partnership, and we are bringing some good things together. Emily talk to us about the impact you see of this partnership on blackberries business. Give us any hard numbers, if you can. John i cant give you any hard numbers. I know you have to ask. It is going to be our growth platform. My growth is on the Enterprise Software, especially with security and cybersecurity. The next leg of our growth is with the auto. We are going to go beyond auto into the iot world. It is a huge market, and it is growing. We are very fortunate. Emily are there any other partnerships with other automakers in the works, and how do you plan to pursue more partnerships . John you should expect us to continue to expand our ecosystems. Our attention the last two or three years has been winning new design, joining new partnerships, creating new platforms, like the one we just announced. Humanmachine interface. All really good, new stuff, some of them a little scifiish. Emily how does this fit into the context of blackberries broader turnaround strategy . What else is working . It has evolved considerably since you have taken it over. John that is a great question. I would not call us in a turnaround mode anymore. We make money. We generate growth in the right area. We have a very good footprint in the cybersecurity enterprise. Those are growing. The last quarter, the billings in the Enterprise Software grew 20 . We are announcing really big design wins. I am hoping to see more, and you should expect to see more. When we married the two together in the future, we are going to have a platform of security for iot management. As i said, i am excited about the future of the company. We are executing to it. We are showing results. It is not just the strategy or piece of paper like the first time you when i spoke. Now, we are really delivering. I am very pleased we are doing that. Emily that was john chen. Coming up, the iranian government is cracking down on social media, as ways of protests gripped the country. A reminder, all episodes are now Live Streaming on twitter. This is bloomberg. Emily welcome back to the best of bloomberg technology. I am emily chang. Antigovernment protests have swept across iran this week. Technology is playing a crucial role. Is to grow is blocked in the country. We talked about this with a former analyst. This is not really surprising. Iran has already had a number of social media sites and applications blocked prior to this. Facebook and twitter had already been blocked. They have done this in the past, restricted access. There has been additional blocks put on. Telegram channels have been blocked. We are seeing that there have been potential internet shutdowns in various parts of the country as well. None of it is surprising. The iranian government taking on a higher form of censorship now, as they are trying to crush any form of dissent. Emily i am recalling the use of twitter back in the day years ago which precipitated the blocking of twitter. Talk to us about how protesters are using technology in iran today, how it has evolved from those years. Technology has been critical, obviously now compared to 2009 you have had a rise in not just the number of individuals using iphones in mobile devices, but you have had growth in terms of individuals all over the globe using social media and different applications to communicate. In some cases, encrypted applications. This helps them organize, communicate, coordinate, and spread ideas in opposition to him the government. We have seen ideas protesting the economy there and protesting the ideology in some cases as well. I think is the technology being critical. It is worth noting that, even though the government in iran is taking steps to quell protesters by blocking their axes, the iranians have gotten savvy about workarounds. A lot of them have ways to access these platforms even though the government has prohibited them. Emily we should note that the use of technology has a dark side, including telegram. Telegram has been reportedly used by terrorists to communicate. Is that correct still . Absolutely. Its one of the other areas the applications have been used for have not been for peaceful protests, but also by terrorist organizations. This is Something Technology companies have been grappling with consistently over the last year or two. Terrorist organizations using telegram on public and private channels. They are spreading their propaganda. It is something my organization has actually been pressuring Tech Companies on in terms of cracking down on content which violates terms of service in the case of terrorism. In the case of iran, much of the protests that have gone on are peaceful protests and demonstrations, things that the United States government is in full support of. Emily what has telegram in particular done to combat the use of its platform for terrorists . You are seeing the Tech Companies become a bit more responsive. You saw youtube, part of google, takedown videos recently. Telegram still has a ways to go. A lot of these channels are closed. In some cases, there is encrypted communication. Personally we think telegram , should be enforcing its terms of service. Any content that violates it should be taken down, not be permitted, and users that are affiliated with terrorist organizations should have their accounts suspended. This is something we have seen Tech Companies be more responsive on over the past year after coming increased pressure not just from the European Union but from capitol hill. Particularly in light of the recent hearings on russia propaganda, lots of concerns about the actors using these platforms in ways that are in violation of the terms of service. Emily we talked about this over the years, but what do you expect to come from Tech Companies this year like facebook and twitter when it comes to combating these issues headon . What do you hope to see . You are going to see a continued buildup of pressure from capitol hill. You will see more hearings centered on terrorist used of platforms. You will see a push for more regulation in this area. If you dont see the Tech Companies start to take specific measures to show progress to get these actors off their platforms. We have a list of individuals that are on sanctions lists. You cant do business with those actors. If you do, you are in violation of these sanctions policy. In a similar way, our opinion has been they should not have free reign promoting terrorist content to operate in virtual safe havens on platforms. You will start seeing more public pressure. Im optimistic you will see Tech Companies be more responsive. I hope it doesnt take more terrorist attacks and deaths before they do so. We do see online radicalization becoming a problem in europe. Emily that was tara. Many companies protested the immigration policy. One was brad smith. Kwok in france walter tom keene and Francis Francine lacqua asked smith about the role of technology over the next five years. We are seeing technology have several important impacts. With the advent of Artificial Intelligence, we will see an ongoing impact on not just businesses and government, but also economies and jobs. I think people are bracing for that, but we are still looking to the future without a clear sense yet of what exactly which jobs will be eliminated, which new jobs will be created, what new skills people will need in order to take these jobs. The other thing to think about is the International Aspects of this. At one level, Information Technology has become more global. The industry has become more global. This is another area where ian has said we have seen the rise of china, chinese tech leaders emerge as global tech leaders. At the same time we are seeing , fragmentation in the Technology Sector at the same time. Five years from now, we may see more of that fragmentation. Tom part of your charm is you are not in Silicon Valley. You are in seattle, washington. I guess thats the real world. Silicon valley is a pinata for washington. How afraid should San Francisco and the cliche of google or apple, your competitors, how afraid should they be of washington in 2018 . Brad most people seem to think seattle is right next door to Silicon Valley or part of it. I think for all of us there is increasing tension between the west coast and east coast. I think we have seen this unfold over the last decade. You see political commentators in washington, d. C. Identify the tech sector as a pinata, as you mentioned. It is not just those on the left. It is those on the left, center. I dont know that people have yet transferred that concern about technology into a defined course of potential medical political regulation, but that could come. I think it behooves us in the tech sector to be listening to that. We should be addressing the concerns and acknowledging the concerns. Silicon valley has sometimes been slow to do. Tom lets move to the commonwealth of massachusetts and talk to ian bremmer about the tech comments. What a great phrase. What does it mean for us . The president microsoft said in increasingly looks like you will see fragmentation. As we move from the information revolution to data revolution, it is more top down. The way people are engaging and the filters they see to engage in commerce or surveillance, those are increasingly either coming from fragmented Companies Competing with each other or through the chinese government. You those are two completely different models. That is not the u. S. Led globalization that we have been thinking about the last 40 years. You can make an argument that the facebooks and googles and microsofts are easily as strategically important for the United States, for our economy and national security, in the next 10 years, as lockheed and raytheon were during the cold war. I dont think the u. S. Government is prepared to align with these companies that way. I dont think the understand how to do it. I also think Silicon Valley libertarianism is i think that will be incredibly important space to be a leader in. Francine if you have these transformational changes and how you retrain people and educate people for jobs we dont know of yet, who and how do you educate to give it to be able to do that retraining . Brad when you look at Government Support or investment in Artificial Intelligence, one would be hardpressed to find a government that is more focused or determined than the chinese to make this area a success. You can contrast that what we see in washington, d. C. Were this administration is more focused on traditional manufacturing and the socalled digital or new economy. We see an enormous divergence there. When you then get into the area of skills, i think it is a lot harder to find a government that is really out at the forefront yet. Him in the United States, we see some leadership at the state level, which is not surprising. Colorado, the governor has been very focused on this. Look at the united kingdom, which has been investing in getting coding into schools. It is such early days when we think about the impact of Artificial Intelligence on jobs. I know think any government has formulated a strategy to address it. Francine a lot of people expect a lot of these changes to happen in the next 10 to 15 years. Are we underestimating or overestimating . Brad over the next two decades, it is going to be an Artificial Intelligence era. It is going to touch virtually every job that exists today in every country in one way or another. Emily that was brad smith on bloomberg surveillance. Coming up, spotifys unconventional public offering. What it means for startups looking for an exit, ahead. This is bloomberg. Emily a company is buying 99 taxes. It puts the company in direct competition with uber. Last year, the company led an investment in the brazilian company. Terms of the deal were not released. The industry may become dominated by Global Companies instead of local monopolies. Spotify has confidentially filed for an ipo. Lets according to a person familiar with the matter. Spotify will go ahead with the plan to skip a traditional stock and list it directly. And the stock will list on the new york stock exchange. We spoke about it. Spotify has planned to go public. It really came down to when they could get their books in order. They felt like they closed their books from an accounting perspective in just a couple weeks. They are comfortable with that. Financially they never needed to , go to public just to raise money, which is why they are taking this path. Emily how is a direct listing different . In a classic ipo, you hire bankers. They tried to determine valuation. This cuts out a lot of that. They pay the underwriters anywhere from 2. 5 , which is what snap did. With this, it is different. He came out and said, look, our stock is trading now. In the past direct listings i have looked at, these Small Companies that have listed, they basically just open the shares on day one like a normal open auction. That can inject some questions. Is there enough supply, enough demand, where does the price stand . These are things that could inject volatility into the shares. It seems like, if they are moving ahead with this, they say they dont need to go out and scream their story from the rooftops take a classic ipo, and they dont need 14 banks coming in, telling them how to sell their story. Emily what does this mean for the economics of the early investors . Does it mean more money for everyone in the end . Those investors who choose to sell when they have the opportunity are going to make a killing. The company is valued at as much as 20 billion. While i am sure there will be some complications as to who gets to pull out money when or the terms, most of the early investors, should they choose to him sell, are in line to make a killing. I do think that avoiding the underwriting fees may be somewhat of a automation, but the choice to go with a direct listing reflects the company led by a guy who really enjoys doing things differently from how the system tells him he needs to do him him it. That is a big automation. Emily is it the right strategy, and is there a president to this . The direct listing president isnt there for a big company. It does make me think back to google. It was a different kind of ipo. They had to cut the price down, cut the number of shares. They came out a year later and sold 4 billion worth of stock. There is a president for doing things differently. This will be the first real test case. When i talked to my sources in the ipo world, nobody has really come out and said i want to do this next. Everyone is going to watch this carefully, especially the Biggest Companies who dont need the capital. This might be something that is considered. It is a big if right now. Emily we know the valuation is high, but what do we know about spotifys financial and engagement situation as compared to apple music . The revenue has been ruling rapidly, along with its user base. The arrival of apple and competitors, if anything, helped spotify. Spotify now has more than 60 million paying customers, more than 140 million users, and its margins have improved. It has negotiated new deals with all major rights holders, record labels, publishers. Most of the people who pored over different filings they issued say that picture looks better and better. They have real cash flow, which a lot of startups dont. Emily quickly, talk to us about the implications of this lawsuit we just learned about. There are a lot of songwriters upset with spotify, because they feel like they never had their work licensed or not getting paid enough. But if i thought it settled this case last year, but some other songwriters filed suit recently. They have asked for more than they are likely to get. This is something spotify would like to do away with before it goes public. Emily that was lucas shaw and alex barinka. Coming up, we previewed the worlds biggest gadget show. If you like bloomberg news, check us out on the radio. You can now listen on the Bloomberg Radio app. This is bloomberg. Emily lyft is said to show off a fully automated Ridesharing Service next week. Lyft and uber are betting driverless vehicles will be a Pivotal Point to their business prospects. Staying with ces, google is setting up a booth for the first time in years. Executives will be roaming the showroom. We caught up with all the details. We expect more of last year, which was home speakers and alexa were the big part of the show in las vegas. Now, a lot more competitors. Google is pushing speakers. Apple is working on one. Samsung and Chinese Companies are there. What we are seeing this year is a lot of the major Tech Companies here and china are working on Artificial Intelligence and features where you have software combining with hardware. Emily what is googles interest here . Google is a lot in hardware this year. They have their pixel line. Google wants to make sure they dont see the living room and a lot of the home spaces to competitors like amazon, apple, facebook. Google is aware the future is moving to a world of using devices beyond the phone. Emily my question was going to be, does it seem like anyone is in the lead when it comes to the living room . Amazon got a head start with echo. Apple is coming to market soon. The market is still pretty young. Amazon has a big lead with developers, which is key. That is still pretty premature. I think this is a chance that school, apple, companies coming out of china, they can make a market. Emily when we say executives will be roaming the showroom, what does that mean . Apple executives dont even wear name tags. This will become much more of a priority for companies. My colleague wrote a good story about this. Down the supply chain, you need more hardware to keep up with expansion and software. This is where the show is major for Car Companies. The epicenter is gravitating towards Silicon Valley and las vegas. Car companies will be prowling the showroom floor for the same reason. Emily the chairman executive is stepping down from alphabet. He is still on the board. There is questions about why this is happening out. Is there something bigger at play . I dont know about something bigger. He stepped down from a larger role. The google ceo has become much more of a public face. Eric schmidt was with the hillary campaign. He has been in bc since the election and follmann a little bit. You have the general counsel, Government Affairs team. They got there. Google does not have a Global Policy chief. They have an interim person right now. Its unclear if there reevaluated their strategy in d. C. And globally. Emily that was mark bergen. Be sure to tune in to our coverage of the worlds biggest gadget show, including our interview with the sony ceo on tuesday. That does it for this edition of the best of bloomberg technology. Tune in each day, 5 00 p. M. In new york. All episodes are Live Streaming on twitter. You can check us out. That is all for now. This is bloomberg. Shery coming up on bloomberg best, the stories that shaped the week in business around the world. A new year brings a new assessment of global risks from eurasia group. Distinguished guests delve into the details. The number one risk ceos see out there is geopolitical. This transition from the u. S. Is going to china. China is creating an alternative. The unpredictable and the leaders, the lack of a north star with the United States stepping back in so many ways. Shery mifid ii rules take effect, and the u. S. Releases the old years file jobs report