Why microsoft is boosting its videogame investment. Developingid to be an augmented reality headset that could be in store by 2019. A couple of things will set this apart from available ar devices. It will contain its own display. It will also have its dedicated operating system. I sat down with mark gurman who broke this story. I think we had an in depth look at a lot of projects. At apple, there is this team newing on two headsets and systems for the iphone. The new headset they are working on is one that runs its own operating system and doesnt have to have an iphone attached to it. They are working on another headset that is like an oculus ar and strap it on your head. This is only what they are doing for testing and leveraging the Ar Technology parried emily seems like they are focusing on ar. Agree that vr has great applications for education, but ar is like a watcher that you can use in your daytoday life. Ar headset has several application. To what tima listen cook have to say parried tim with Core Technology as a in them, the first thing most important thing is to build the foundation, and then do many things peary but you have to have a solid foundation. Developers will love what they find in the ar. Emily he is talking about bart kit forlopers the ar developers. Iday marking its territory how are they marking its territory . There creating an ecosystem of developers who will create ar apps. They are also putting themselves out there saying, we are an ar company. There was a eightmonth period of time when they were talking about it, talking about it was the next big thing. But to see how quickly they show their cards is a big step for the company. Emily what sort of realworld applications do you imagine . They are developing a new offering system. Ros. Called this is going to have all sorts of applications. Maps, text messages, Virtual Meeting rooms with avatars, watching 360 degree video, all sorts of stuff. Emily you have another scoop on the ipad. Strong numbers on the ipad. Theres surprising because have been concern the ipad was on its way out, but clearly not if you look at the sales. At the end ofid 2015 is moving ipad to an ipad pro, positioning it as a computer replacement. Emily they got rid of the mini. They still sell it, but they have not updated it. Ipad, theyck to the moved to this ipad pro structure and a lot of people have been liking the keyboards. They are going all in on the pro approach. They have a regular ipad with the tenant screen. Ipad with the 10 inch screen. It has become popular. Emily we are seeing a family of devices like we are seeing with the phone in a range of price ranges. How do you see the cannibalization arising . We thought it had to be something, right . You got the ipad would cannibalize the mack. Was inarted to happen 2015, ipad sales slow down and mac sales shot up. Here we are in their q4 earnings from a week ago and they present higher numbers, is very strong year over year Revenue Growth in both the mac and ipad growth. There is no canalization going on. Apple sold 7 billion of bonds as proposed new tax lows laws had been a washed. Apple was sitting on 270 billion in cash and marketable securities, 94 was outside of the u. S. The company is selling bonds to fund its Share Repurchases and dividends. Coming up, a surprise for snap investors as tencent buys a 10 stake. Winds tencent see in the company what does tencent see in the company . Later, the startup expanding further into food and grocery with amazon expanding further into food and grocery to go headtohead with amazon. This is bloomberg. Has been a while lead week for snap, the Company Reported disappointing earnings results, setting the stock of medically lower. Tencent bodygiant 12 stake in the company. Whought up with sarah frier cover snap for Bloomberg Technology to talk about the details of the deal and snaps strategy to combat slower user growth. This is a great time to be buying up snap stock has it has really declined stock because it has the decline since its ipo. The stock is not hostile according to our sources, but strategic. They will be getting input on snaps direction, which is very interested interesting. Said in his stablehip he is very in his leadership. He said he will the design the app to make it appealing. Emily we have a chart showing what happened. The stock dropped after hours after this tencent deal news. What can we expect Going Forward . A habitencent has had of buying up stakes in companies and then eventually taking them over. Does not look like that is what is happening here on the outset. Do goodsee if snap can on its own and build advertising business. What we saw in the last quarter is that they are in the beginning of this selfserve advertising, and that they need some time to proved advertisers they can get a return investment before that becomes a bigger business for them. Emily tencent is the owner of the chat. Of wechat. Can we expect them to have decisionmaking . Sarah as it has always had an aberration for we chat and tencent, he has spoken about that in his public appearance. This is something he has some reverence for. He had paid comments about facebook. I think he does see snap as more of a messaging plan. Emily that was sarah frier. Meantime, lawmakers are still hammering out details on tax reform. Any changes to the Corporate Tax rate could have huge implications for tech firms. I caught up with steve ballmer, owner of they l. A. Clippers and former microsoft ceo to talk about what we know so far about the gop tax overall plan. Steve a couple of things are number one, the were trying to do is make sure that people can take a look at the plan in the context of history. That is important. Ask,r two we, you have to what are the goals of this plan because through the data, we want to hold government accountable for achieving the goals. Is a goal to approve standard of living . If so, form home . Is it the goal to reach tribute is the goal to redistribute money, borrow farm the future borrow from the future . I do believe in balancing the budget. Will we achieve that will he not . Will jobs grow or not to support that. . I care a lot about opportunities for kids born in tough situations. Say, you know, i wish there was more in the plan from a tax perspective to support those low income kids. Emily us talk about microsoft. You are one of microsofts larger shareholders. Would you like to see a provision whereby companies when they repatriate cash, they have to invest in jobs and higher more people in the United States or invest 10 in r d . Simplifying i think the tax code on companies with foreign earnings is important. I think letting u. S. Companies be competitive internationally, and im speaking as a former ceo , i think those things are important. Society does have to decide whether those things will accrue to the benefit of people who own share, or whether somehow people who own shares will wind up redistricting some of that tax gained other people in society . Either through the kinds of requirements you talk about for me investment in r d a new jobs, or simply and other forms come increasing the taxes on shareholders as opposed to the taxes on corporations to be revenue and incomeneutral, so shareholders dont necessarily see a windfall. Emily microsoft has a huge operation in puerto rico. The house bill put a 20 tax on offshore affiliates, including puerto rico even though it is a part of the United States. How concerned are you about this . Steve well, i am not concerned about it at all. Notion ofg run, this becoming more competitive and more consistent with global tech standards will be a very good thing. , theyies like microsoft only to their shareholders to do the best job that they can to optimize taxes in the context of the tax code. Myse Companies Including former company, microsoft, has done that. Is there isk read not likely to be much difference areerms of profits that available for the shareholders of these Big Companies. Emily we have seen the Tech Companies facebook, twitter, testify before congress. You suggested that there is not a lot that these companies can do when it comes to fake news and such. Are you more or less concerned after he and testimony given that a lot of these companies were unprepared for the questions . Steve well, let me correct you a little bit. I said, these companies will never be able to get to ground zero and unlimited this notion of fake news. Can they do better . Of course, they can always do better, but it is a statistical gain. How much of these, this, you know, alternate fake news thinking the screen . Say is worthould pushing from a government perspective is this notion of being better and having a way to characterize what it means to be better and a set of standards in which the companies can be held. I think that is very hard to do. The bullied pulpit of government may be the best way to get there doubt. And the hearings you talk about, we will put companies on the hot seat in terms of what they are going to do to ensure integrity and what people consume on their site. But at the end of the day, they are open. People can say what they want to say. Random american citizens, in addition to you know, bad actors him outside the United States. So my that was conversation earlier with former microsoft ceo steve ballmer. Coming up, our interview with outgoing cisco executive John Chambers who spend billions of ciscos money on startups and now he is applying to those lessons to his own startup. And uber is teaming up with nasa. Thats right. Nasa, to get its line cars back off the ground. Details next. This is bloomberg. Emily tech giant cisco has always been involved in startups under ceo John Chambers, the Company Acquired dozens of firms, spending billions of dollars in seen cells grow from 1 billion to more than 40 billion over his 24 years at the helm. Johnjohnson spoke with chambers and asked whether the u. S. Government gets it when it comes to startups . I think only halfway. We are viewing this as transactions not part of the bigger picture. The u. S. Has led in startups, but we are not at all today. In the first five years of this decade, we only grew our Startup Community by 12 over five years. Australia, france, india grew 40 to 60 . The chinese grew by 100 . 500 startupsrew per day. We have to disruptor get disrupted. Youre announcing country such as france, which was the last place you are i would have done business three or four years ago to become the startup nation of europe. You watched president Emmanuel Macron lead in changing a country. They dont do it by transactions. They do it by combining the whole picture together. Gdp growth, startups, that is where all job creation will occur. How does that tie into your Education System, your security . The u. S. Is the only country in the world that does not have a national, digital policy. For starters, that is the number one job creation engine everywhere in the world. We are behind. And while tax policy change is lagging in there rest of the world in the areas we must lead. This is a step we should have done 15 years ago. We need to think about what we want to paint a picture of optimism. And creating incremental jobs in this next decade. 40 of them will go away and there will be huge productivity. If we are going to get 25 million jobs, it has to be through a started community. It cannot be at the end you make great we are now. We dont have a cohesive place to tie together. Valleyut even of silicon Silicon Valley seems to be the envy of the world. People are saying, were creating the Silicon Valley of israel, the ocean. It seems like Silicon Valley is still being held up as a model. What needs to happen . John we talked about Silicon Valley as being the example for the rest of the world. It disrupt, make and you have to disrupt as opposed to being disrupted, it has to be across all 50 states, not just Silicon Valley. Silicon valley is out of touch with the rest of america on how we create jobs. As i go around the world, lets use india as an example, modi is looking to create silicone valleys for his people. He is talking about gdp growth not a 5 in getting excited. He is talking about 7 to 10 . Jpmorgan predicted that india would grow 10 per year. India is growing because of the digital agenda through job creation and inclusiveness across the board. That is what you see in france, which is the last place you would have done business three years ago, and is now the startup place of europe. We need to do this in every city in our country and we do not have a plan to do it. We have to bring education with us all the young people can participate in this future. Cory can there something that can be done with cash repatriation to encourage startups . We saw that coming when its a buybacks and dividends, not going into hiring or rmb. It is when into the shareholders pockets. If the goal is to encourage startups and the goal is to encourage business investment, what necessary policy needs to be attached to any repatriation taxation policy . John we have to think about how to solve the problem. We need a competitive tax system. Dropping the Corporate Tax rate to 20 is a great start. We have to combine when you repatriate money, will this great opportunity for startups . The answer is yes. There will be a number of startups in creating market were startups see a pattern. The major thing we cannot fall into the trap is there is no golden solution. You have to say, how do combine is in a policy that combines start of engines with tax policy, with education, thinking about how do we have a national started mentality . How do we capture the imagination of the democrats and republicans, not to argue about tax policy, but talk about the future in terms of the opportunity and hope that American Children will have a better life than their parents. And change in our Education System. Frances changing their whole Education System around digitization. They will do it first with pilots and across the whole country. Why isnt the u. S. Talking about changing the educational system that is broken . The takeaway is about innovation with speed. We are too slow and we dont have a national policy. This is something that the democrats and republicans should be all over. Taxation and repatriation is one element of the equation. Cory what are you doing in the world of startups . John i have a lot of limitations. You think about startups, the big picture is simple. That is where all the job creation will,. I wouldested 10 invested 10 to 12 startups throughout the u. S. And around the world. They willvary from a drone start up they will vary from a drone start up to transparency and open government, to social media and how that will change the customer experience, from security to around phones to a company like pen drop that we talked about in february from fraud detection to voice identification tour next source of protein, which will be from crickets and insects. You will consume the majority of protein on animals from areas like crickets. Cory the start with the cricket idea. I think the problem is so interesting. You mentioned that protein is so expensive. It is also the most timeconsuming thing to create. It takes three years to raise a cow before it can be used in the food chain. That has a big impact on the environment. Talk about this cricket investment. John when i went to the at theual Mohammed Clinton global initiative, the last thing i was going to do wasnt ask in the next generation thats the last thing i was going to invest in the next generation of food supply. Basically crickets could be the most say form of protein, race at 1 of the space. We are running out of space to have the amount of meat protein and agricultural proteins generated. It does 17 the Environmental Impact and lowers cost. You combine all this together. The best way you conserve the environment is what car you drive or your home. It is the protein you put on your plate. 15 tots will be a staple 20 15 to 20 years from now the majority of the protein you consume. It isa leap of faith, but talking about the transition of the internet of things. Capturing the cloud capability to grow these faster and safer than we have ever done before. John chamberss begin with bloombergs cory johnson. Withg up, microsoft is out a new console and plans on boosting its videogame investments. We will bring you all the details, next. Reminder, all episodes are livestreaming on twitter. Check us out. This is bloomberg. Emily welcome back to the best of Bloomberg Technology. Im emily chang. Been aft has long dominant software company, but one as its greatest Success Stories the xbox. The latest console was made available to the public this release of the microsoft will increase inhouse video games, including starting or acquiring studios to do so. Cory johnson spoke with fill spencer, microsofts head of gaming. Gaming is a huge business globally and growing double digits. Assets withs unique the products we build. This is a category we want to be in and we want to invest in. Daughters are obsessed with microsofts minecraft. On their phone, they take the games everywhere. It seems like it is a vision of a modern success were a game came out of nowhere like a tetris. You hit on a really important part that players are playing the games across every device. We are connecting those players across all of those devices. Minecraft, can play someone could be on Nintendo Switch playing with somebody on an iphone. They are using xbox live in playing together in the same world. For us, the console is an important part. The connecting the gamers were ever they are is the vision of microsoft. Cory which brings us back to this device. Spend hundreds of millions if not more developing a new xbox console . Phil you want to reach gamers on every screen. X the company is the most