Van into a crowd of people. The driver expressed support for Islamic State and searched online for information about the attack on a nightclub in florida. I am mark crumpton. Bloomberg west is next. Emily i am emily chang, and this is bloomberg west. Investors are dumping netflix shares after reporting its lowest subscriber growth in year. Can it recover . We will break it down. Softbank throws down its biggest arm. Let yet,a a bid for what the deal means for semiconductors. Chuck robbins speaks to us about brexit, m and a, and whether or not he is backing donald trump. Hours, plunging after down 15 on disappointing earnings. Subscriber growth dropped with only 1. 7 million new subscribers this quarter. Reed hastings says it is due to price increases, not market saturation. With new members, we have not seen any effects. We changed our prices last october. We have had a couple quarters of great growth. This is around change resistance. Whatever the price is for something, people do not like it to go up. But the new pricing is working great. Emily netflix is seeing sales and Profit Growth from fastgrowing international markets. What are investors looking for . I want to bring in cory johnson and paul of comscore. They do not believe this is due to market saturation. It is simply because netflix raised their prices. These new prices are kicking in. Is that the reason . Cory i wish i could just listen to reed. Look, here is what we know. They lowered the cost of marketing at the same time they raised the prices last quarter. We can see that u. S. Subscriber growth fell to 0. 3 . I think it is the lowest they have ever reported. They added fewer subscribers and spent money marketing. International was not terrible in terms of growth. But here they are, spending so much, being forced to raise prices because content costs are getting out of control. 12 billion in offbalance sheet costs, and subscriber growth is falling. Maybe they cannot afford the hits like they used to. It is a competitive world. They acknowledgment that acknowledged that. But even if the numbers of people watching content are not substantial, it is certainly hurting them on the content cost side, causing them to raise prices. That is causing subscriber growth to slow. Emily on the other hand, when it comes to international growth, that is incredibly varied. How much can we expect netflix to grow internationally . The International Component is key for netflix. The deal for the star trek series to be shown on netflix internationally within 24 hours of airing is part of the strategy. Churn is the big deal. A little price increase can turn a lot of people away. When you have so much competition for entertainment, i worked a lot on the movie side, we see this all the time. Getting audiences in the theater takes a lot of work in terms of the marketing that you do for these movies. You have to have compelling content. When your competition is netflix, hulu, amazon, all these entertainment platforms are vying for the hearts and minds and dollars of the consumer. It is rough seas. A one or two dollar increase can turn away subscribers. That is their challenge. They were predicting 2. 5 million subscribers. It came in at 1. 7 million. It is all about the content, price, and competition. All of those are in play for netflix. Emily what about the price on making original content . They are spending 13. 2 billion to make original content. We ask this every quarter. Is that going to pay off . Well, that is the hope for netflix and every content creator. By the way, netflix has terrific content, but that comes with a price. We, as the consumer, expect the price is never to go up for us. We want that great content and leave it up to the creators like netflix to do that however they need to do it. I just want to keep my prices the same and get great content. It is not necessarily the most fair model for the consumer to have, but the pressure is not on us to make the stock price go up. The pressure is on Companies Like netflix to provide content, a model that makes them profitable, and make some of this great content possible to deliver to the consumer. It is a tough business on all sides, no question. Emily they announced a deal to stream cbss new star trek series, the first deal with a streaming competitor internationally. Is,i guess the question from a content perspective, can they keep up momentum with amazon and everyone else making original shows . What are you watching . Emily bloodlines. Game of thrones is over. It is a bad world. Cory i do not know if they have followup hits like they had with house of cards and oranges the new black. I tried daredevil and cannot stick with it. Costs,hey advertise Gross Margins will be a trailing indicator of rising prices and content. We know that prices are rising. We know that amazon and netflix else,lu and everyone content prices are rising. We see the growth margins coming down at netflix. We have to look at how expensive it is getting for them. When netflix was brandnew, they could feel legitimately, who knows how big this can be . Maybe now they know. Maybe it is not infinite. Ul, thankry johnson, pa you so much for breaking it down. Investors are waiting for news of the companys pending sales. Revenue was down, and profits missed at nine cents a share. Detendra. Now, they missed on some of these numbers. What are your takeaways . The numbers do not matter as much. We see investor focus on the sale. Bidsusly, the deadline for was today as well. Showing anys is not signs of reversal. Was focused ona making the business easier to sell. Emily talk to us about the sale and the latest updates. Today, as we understand it, final bids are due. What is the latest . , we have a couple bidders entities like verizon at the top of the list. Today, they are going to receive final bids. Hopefully they get a number that justifies a move forward and they act on it. It is the same story repeated quarter after quarter. It is all about how quickly they can get this done. Emily what about Marissa Mayers future . Do we know yet . After the sale, it is kind of doubtful she would stay on board. Whoever comes in might want their own management team. There are different pockets of assets that bidders are strategically positioning for. It is very dicey. Emily all right. We are going to continue to follow that, of course. If final bids came in, we are expecting movement in the next eight weeks. Rendra, thank you so much. Reports almost coincides with Marissa Mayers fouryear anniversary on the job. We decided to take a look at mayer in 2012 when she stepped in the role. Here she is after becoming ceo. We know that the next pintrest, spotify, or facebook is in the audience. I am thrilled to be here with yahoo as a sponsor. I would like to give a shout out to the designers and engineers that we are hiring. [laughter] [applause] emily now she has done a lot of hiring and firing as ceo of yahoo . What else was going on in the valley four years ago . Lets take a look. It has been four years since Marissa Mayer walked into yahoo . We called it the Silicon Valley surprise. She had been running googles search groups as one of its first employees. Wall street knew she faced an almost impossible task. Inoo have seen four ceos five years and was becoming notorious for poor management. Stock was at 15. 65. Lets bring this into perspective. Search accounted for 36 of yahoo s business. Facebook have been public for three months. Twitter was a private company. Google did not have an alphabet of bella. 289 billion. Was flashforward four years. The acquisition, tumblr. The switch to mobile, which brings yahoo 1 billion in ad revenue. Top line continues to decline. And at t on verizon the table. The new owners will have to decide who takes up her mantle next. A 17thup, ibm reported straight quarter of revenue decline. Why is stock rising . Sprint shares dropped 5 monday on fears softbanks purchase of arm could leave the carrier cash starved. This is bloomberg. Estimates beat despite a 17th straight quarter of revenue decline. On that on watson bet watson may be paying off. Up in afterhours trading. Anand, why are shares up it revenue is down . This has been a meh quarter for ibm. The Group Includes watson, cyber security, all posted growth. One of the interesting parts, Revenue Growth of this particular group has been declining year on year. Something to watch over the last four quarters and into the future as well. The other segments continue to post weak numbers on a cost to currency basins and as reported. The hardware sector continues to be a thorn in ibms back. Bloomberg intelligences you on this is that it is a meh quarter. Emily ibm is undergoing a major transportation in business transformation in business. How does that go aside from topline numbers . This is a large, strategic transformation. It is not one they can undergo easily. A substantial cost relocation, substantial function morphing of the company to change from what used to be traditional Systems Services to this cloud company. So the workforce has to be substantially different both in size as well as in focus. It is not an easy transformation. Progress is slow. One of the things that concerns us is that growth in the strategic comparative section is slowing relative to what it was three or four quarters ago. Emily how would you rate your confidence in the ceo . Adjusted for the size of the task at hand. Our Services Analyst will tell you that other companies are doing a better job. If you look at the size and scope of the transformation ibm is going through and continues to go through, on a sizeadjusted basis, it is above average performance. The final scorecard remains to be told. Emily stay with me. I want to get to another major story in the chip industry. Surging after is softbank agreed to by the designer for 32 billion. It is the biggest takeover since the country voted to leave the european union. Selena wang joins us along with anand srinnivasan. Did brexit has something to do with this . Armhey have been talking to on and off for a few years. He says it is not because of brexit. It has more to do with the timing of sales in stakes in certain companies. Armse most of ours customers are in the u. S. And asia, they were not really affected. That said, the pound did drop. A 42 premium is high. Emily what does this mean for arm and the rest of the chip industry as we go through this broader shift in computing to mobile and internet of things . The fact this is an intellectual property company, this is not a chipmaker, they provide the intellectual property that chips can be made from. R or Hardware Company were to acquire the deal, there would be substantial revenue loss from arm. This was two steps removed, customer to carrier. In a sense, this deal makes a lot of sense. It makes sense that a thirdparty, two steps removed, has acquired the company. Downstream, they should not see change on left unless softbank tries to get involved and change the scope of supply or who it supplies to. On paper, nothing should change. Emily what about the price tag . 32 billion. Is that worth it . Isa high price tag, but arm acquiring a slice in every single mobile Computing Device on the planet and the future internet of things devices. For them, this is a company with a lot of i. P. It has low hardware costs and very high margins, north of 95 . This is a big bet on a lucrative business and the internet of things. Emily what about sprint . What does the acquisition actually mean for sprint . Sprint stock actually fell after the announcement. Investors are worried this means softbank employees have left less time and resources to dedicate to sprint. It means less resources to help with the turnaround effort. Yoshi says heasa has confidence in sprint, investors clearly do not agree with that perspective. Emily big deals have a history of not working out. Are you more optimistic about this deal than others . Even though they have a checkered past, we are seeing microsoft buying linked in, d ell, these massive deals, we have yet to know how they play out. This deal is different. As large as it is, the scope of this deal is different. This is birds of a slightly twoerent feather, not companies trying to benefit from a strategic play. One plus one makes three. Not that kind of deal. We think arm makes sense. Not messing with arms management, hiring plans, makes sense. It makes sense that the buyer in this case, softbank, are outside of the scope of the chip industry, particularly handset chips and hardware in general. The fact that the buyer is from japan adds another twist in detail. All in all, we are optimistic on the execution of this deal. Selena, we will be watching. Thank you very much. Meantime, siva is enjoying a nice pop off the tie up, rising to its highs level in four years on speculation it could be softbanks next targets. They envision software for car safety. Next, we kicked off our weeklong series in food tech. Ceoit down with beyond meat mark brown on bloomberg west. Emily the doors are revolving it lending club. They have a new chief capital officer, patrick dunn, previously in charge of blackrocks San Francisco operations. Lending club is trying to win buyers after the ceo steps down in may. Coming up, our exclusive interview with cisco Ceo Chuck Robbins on the president ial election and how everything in our world will be connected in the next decade. If you like bloomberg news, listen on the Bloomberg Radio xm. And on sirius lets begin with a check of your first word news. Swiftent erdogans crackdown on suspected coup plotters could jeopardize his position in nato. The u. S. And the eu are monitoring a widespread purge which began over the weekend. Eu laws bar capital punishment. People in turkey have been dementing the Death Penalty route for those responsible. An officer in the freddie gray case has been acquitted. Brian rice faced charges of Reckless Endangerment and negligence in office. An investigator looking into russian doping says the states Cheating Program resulted in 312 falsified results. The deceit lasted from 2011 through at least last years world swimming championships, longer than previously known. Venezuelans 35,000 crossed the border into columbia over the weekend to hunt for food and medicine in short supply at home. Venezuela is struggling through triple digit inflation and a collapse in oil prices. It is the second weekend in a row venezuela has open borders after a crackdown on smugglers a year ago. Global news 24 hours a day powered by 2600 journalists in 100 point countries. I am mark crumpton. It is just after 6 30 monday in new york. In sydney, paul allen has a look at the markets. Good morning. Paul new zealand has been trading for 30 minutes. So far, looking pretty flat. Off by. 1 . In australia, a flat story expected. Rio tinto shares will be in focus. They released production figures for the second quarter, in line with estimates. Ore million tons of iron for the quarter. The reserve bank of australia will release minutes of the july meeting. We are looking for guidance on where we might be heading in august with potential deflation expected here next week. Japan, nikkei futures looking positive. It is the first chance for a market to react to the softbank takeover of arm. I am paul allen for bloomberg in australia. We are nearing the oneyear mark since Chuck Robbins stepped in as ceo of cisco. The company has made 15 acquisitions and reorganized the management team. Robbins promises he does not have his head stuck in the sand when it comes to new technology. We spoke with him in an interview in san jose and asked about his strategy for cisco on m and a. Our strategy is, first and foremost, to look at where the market is going and what our customers need. We look at what is our capability and where we need to leverage m and a. We look at where we need to leverage new partnerships. What we have found is that the speed at which we need to move, we have had a greater affinity for smaller, very aligned acquisitions. Emily will we see more of those . We will always be opportunistic when Companies Line up with strategic direction. Emily what areas are you targeting . I. O. T. Is important for us right now. The Jasper Acquisition was a core one. We have been active in securities. Over the last 15 months, they are areas of cloud, securities, analytics. Those are the key areas going forward. Expect we will continue to align around those areas. Emily some say that ciscos security offerings are not integrated enough to implement. Is that an area you will push on . Go back five years, that was definitely the feedback we got. David and the team have done a great job of building architecture and delivering internalization and acquisitions. They have given the significant integration of those two capabilities. We willook at i. O. T. , operate in this massively distributed world. The network has to play a huge role in security. That is one of the announcements we made last week. Machine learning analytics capability that begins at the edge of the network. That is fundamentally what he will have to do from a security perspective. Emily you guys are a huge business. You have an office in turkey. There have been events unfolding. What does instability like that mean for your business . Stage three years ago and told our team we were writing a different roller coaster every week. That is the world we are living in. Constantlyis the changing geopolitical landscape, technology transitions, these are things we have to deal with. There is certainly a tremendous loss of life, which is the real issue. We see so much tragedy around the world right now. It is disheartening. We take all the things that are going on geopolitically, from a Global Economic perspective, and focus on the things we can control. Then we move on. Emily what about brexit . What does that mean for your Global Outlook . First of all, i think brexit was unfortunate for the european union. They were moving towards continuing to create a single market. They created a single trading market. Effectively creating a digital market going forward. That has the potential to set them back. For us, we do not have operations in the u k we necessarily used to do business across europe. For us, the global or macro implications are probably similar to what other countries would see. Obviously, the currency situation creates challenges. We will navigate our way through. Customer in the u. K. Emily i know you normally vote republican. Other republicans say donald trump is not someone i can get behind. Can you . What we care about are the policies that the candidates represent. We are going to focus on the policies regardless of who gets elected. Our customers, our employees, our business, there are things that are important. Inclusion, tax reform, immigration reform, patent reform. All these things matter. When i spent time in washington with either side of the aisle, those of the things we focus on. Emily that is not a yes or no. Why not . Well, i think that, fundamentally in this country and around the world, there is so much divisiveness. I think it is more important to focus on what we can do together to bring people back together. That is the most important thing to me. Focusing on policy and not contribute into divisive miss is where i am going to say. Emily others have said donald trump is not good for innovation or Silicon Valley. I think that once we get drivingthe election, job growth and innovation in this country, focusing on trade, 75 of the gdp and 95 of people do not live in the united states. Trade is important. All those things will get at the issue that needs to be dealt with in the country, which is driving more growth. That is how we are going to lift the middle class. Those are the areas were going to focus on helping the next president drive. Emily cisco is a large organization. Do you think it is not your place to take a side publicly . I think what our employees expect is that we are going to work on the things they care about. ,very individual, every person has the right to feel the way they feel about the candidate they are going to support. Across cisco, employees support either candidate. I think our job is to represent the bigger issues that are important to our employee base, our business. That is what we will stay focused on. Emily cisco Ceo Chuck Robbins. We will keep the conversation going. What he had to say about the management turnover we have seen in the last year coming up. On is jumping the most in three months on the back of an upgrade from piper jaffray. Shares jumped 11 monday. This is bloomberg. Emily we are back with more of our exclusive interview with Chuck Robbins as we near the oneyear anniversary since he took over from john chambers. As the world shifts to mobile and the cloud, robbins says he is not in denial. There are so many transitions going on. You have to fundamentally look at them through the lens of what opportunity they provide for you. You cannot be in denial. I told our team that denial is the first step to death. You have to take a look at these transitions, understand the implications. What matters to the customer . On cannot get so locked up the technology itself that you lose sight of what the business issue is that the customers focused on. That is what they are trying to solve. We will remain agnostic. Support cloudbased models, softwarebased models, hardwarebased models. Emily meg whitman in particular has been critical of the dell deal. Doesnt this combination become more of a competitor than a partner for you . I spent a lot of time talking to mike. We had a tremendous relationship with emc. We have customers that enjoy the integrations of our solutions. Back to that customer. The customer does not want to see us have a battle in the middle of what theyre trying to achieve. We believe that, if you look at our portfolio today, with the exception of the systems that have been there for a couple years, we think there is an opportunity to continue to deliver integrated solutions to customers. Emily you have lost a lot of business in china in particular. You have been reporting improvement. Sales are increasing fast. When does that market get to the size it should be in ciscos portfolio . China has been a great market for 20 years. We clearly had challenging times timeframe. Snowden our employees have been fantastic. We had great relationships with customers there over the last two decades. The key for companies to be successful in china is to go in and make sure youre focused on a winwin situation. I know that sounds cliche. Ensuring that you are doing things that are good for your business, but you also have to be focused on things that are good for the committee community. Helping china achieve some of its objectives around innovation. If you do those and understand those, i think you will be successful going forward. Emily how to get your sales to change from a onetime big buy to this recurring sales structure . Well, it is an issue for us to work through for the entire company. But the great thing about cisco reason, thrive on change. John did a great job of continuing to evolve the Company Based on transitions in the market. That is what allowed us to stay relevant to this day. Our sales force is, in many ways, pushing us. They are hearing it directly from the customer. All the classic things you do with a Sales Organization around compensation and motivation. But based on how the Customer Feedback comes directly to them, i think it will be easy to move them. Emily there has been a lot of turnover in management ranks. A lot of johns top lieutenants are gone now. Why was that housecleaning necessary . We had to move forward. The thing we do not write articles about our the people who are still here. And theeloped Leadership Team built a tremendous bench. We went through this discussion when i took the job. There are many individuals. I asked, can you commit for three years . Many had aspirations to become ceos and have become ceos. The bench allowed us to create a Leadership Team that put us in a position to really execute more effectively in the future. If you just look at the innovation that we have built inhouse and announced even in the last four or five weeks, it is a sign of what you will see from us in the future. Emily you talk about self driving cars. You are going beyond, talking about Smart Manufacturing and cities. What sort of i. O. T. Applications are missing . Early applications, manufacturing is on fire. We announced a partnership where we helped connect robots in a manufacturing facility, delivering analytics. Smart cities are something we have been working on for a decade. The opportunity to do that at scale is now really here. Connected spaces. If you walk around our facility, the horizontal use of connected spaces is tremendous. The connected vehicles, on the jasper platform, there are 8 million vehicles connected. Year, therealendar were more cars connected to the internet than mobile phones for the first time ever. We are in a major transition right now. You will see everything connected in the next decade. Emily our exclusive with cisco ceo, Chuck Robbins, one year in. We will kick off a deep dive into the food Tech Industry and breakdown which areas investors are pouring money into. That is next. Tomorrow, do not miss our interview with dominic caruso, johnson and johnson cfo. For theood tech is ripe picking according to eric schmidt. During the annual shareholder dt the suit food tech as one of the areas ripe for investment. Thate kicking off a series has investors chomping at the bit. James joaquin and Angel Investor brian franks joins us now. You are investing at the seed stage, and you are looking at a later stage. How would you describe this moment in food today . Consumers are interested in their food, making sure it is sustainable, making sure it is healthy. 20 years ago, it was about the micro eight and tv dinners. It is nothing short of a revolution. Consumers are understanding that what they eat is connected to their health and the health of the planet. They are changing preferences, especially millennial consumers. Emily what are the most exciting trends in food now . One of the biggest things we are seeing is alternative proteins and replacement for animalbased products. Is onbased dairy and meat the rise. We can see that with the purchase of whitewave. Emily maker of the silk almond milk i love. James, how do you define food tech . There is a trend on delivery, instacart, and changing the way food is actually made. We have been investing in food and food tech for years. We have been working on this for a while. We think of food tech as applying new technology and intellectual property to creating food. We invest in traditional Food Companies as well. We do not include delivery Companies Like instacart. We think those are operational companies, not really about the creation of a food brand. Emily what about kind bar, which has an innovative manufacturing process but you are not altering proteins . Packagednot consider goods to be in food tech unless there is a huge achievement they have reached. Xe are looking 10 or 100 improvements. Some of those products could have innovations baked in. In a lot of cases, it is just trying to get another product on store shelves. We do not see that as radical improvement. Emily investment in Food Technology spiked last year and dropped off this year. Is that because of the environment or some sort of skepticism . We are seeing a healthy environment in deals at the early stage. Brian can speak to this as well. The dropoff in dollars has to do with megarounds that occurred in the last two years. 15 million plus dollars going into an early stage food tech company. Solidors want to see traction and revenue and margins before they write large checks. James is right. A lot of money is going into food. Ecommerce, which people consider part of the ecosystem. Last year, 1. 6 billion went into food ecommerce alone. Spaceeaves a lot of open for investors like myself to invest in the rest, creation to consumption. Technologies that can radically improve all the aspects of making food, delivering it. Emily there seem to be conflicting trends. Maybe they are not as conflicting is the inside. A return to whole foods, where my food comes from. There are Companies Like soylent, where you are drinking a meal in a cup. Is soylent the big thing of the future . I do not know the company and have not tried the product. I can tell you where investors and beyond we are investors in beyond meat. That is a manufactured meat using plants. The company has put a lot of r and d into it. We are investors in urban remedy, which is whole food as medicine. Emily what do you think about soylent . It is an interesting product that is attempting to do what a lot of products have done in the past, giving us nutrients we need in a convenient package. I also see the interest in organic, Natural Foods is going growing. We need to increase production and maintenance. One of the biggest problems we need to tackle is food waste. 40 of edible food is wasted in our system. Emily food tech is different from consumer tech. What are the Biggest Challenges that food Tech Companies will face in the next decade . Biggest challenges . If they arecompany, actually a brand and bringing food to market, they are a Consumer Packaged Goods Company at the end of the day. Their Technology Helps differentiate them, but they need a team that had understands the economics and margins in a Consumer Packaged Goods Company. If they treat it like a technology company, that could be a mistake. Emily james, brian, thank you so much for joining us. That does it for this edition of bloomberg west. A lot more on food tech later this week. And katie stanton. From our studios, this is charlie rose. Charlie for the third time in 18 months, the flacks have been lowered to half staff. More than 80 are dead in the resort city of nice. A tunisian me cm national drove a truck through the streets. Let me begin with many of the questions on peoples minds. Why is this happening . What can be done about it