Lowered iphone x shipment projections for the next quarter. Sales have declined. The iphones high price and a lack of groundbreaking innovations. We talked to Bloomberg Technologys alex webb. Alex the iphone x was released six weeks after the iphone 8. There was a fear if they got too close to samsungs highend smartphone. Cory competition is another part of this . Alex exactly. Particularly in china, a lot of the local manufacturers are coming out with products that have very similar features. Nobody quite yet has the Face Identification or the sensor that the iphone has. Some of these analysts were writing earlier today, that has not been enough. Cory a big part of the apple isategy of the phones drumming up the marketplace with potentially new applications that we have not seen. The phone could do really cool face recognition stuff. It has interesting features that other phones did not have, but there are not really any uses for them yet. Alex apple is very secretive about what they have in the pipeline, in terms of hardware. When they unveiled the phone in september ahead of its release in that is not a huge timeframe november, for developers to start coming up with new tools. It could be that in the coming year, we see far more compelling animations with these sensors. Cory will never know the mix between iphone eight and iphone x, but if they sell more iphone x, both the top and bottom line are going to do so well. There is always this chatter saying that china or india are not going to buy this expensive phone. Would we have seen as quite the opposite. They are willing to pay for the luxury item. Alex the other thing you have to think about is the iphone 8 is largely the same form factor as the iphone 6. There is not a whole a lot of change between the three generations of phones. T means the materials admissibility materials have come down. But the price point is still pretty high. The components are very cheap for them. Cory so Gross Margins might be , better on the iphone 8 . Alex not that they might be better. Cory to be clear, the estimates, it is the biggest firstquarter that apple has ever had. 10 yearoveryear Revenue Growth with the most Profitable Company in the world. Alex absolutely. Apple itself does not break out any iphone revenue numbers. And so, what we are going to be seeing is the forecast might already take into account some of the demand. Cory that was Bloomberg Technologys alex webb. David westin and alix steel spoke to gene munster. He says, dont worry, be happy. Gene if you take the numbers for face value, for the production and the march quarter, that would imply about 50 of the phones and the next year will be the iphone x. That is the 1000 plus phone. And analysts are expecting that number to be 25 to 30 . This is expected, number one. Number two, it is a positive. David take us back to the Fourth Quarter of 2017 for a minute. They brought the eight and the 10 out at the same time. Do we have any indication whether they made up the disappointing sales with the iphone x . Gene we have a little bit of an indication by looking at the supply. And we talked to some of the builders, the suppliers. They have been struggling to keep up. If you look at the inventory in the u. S. , we checked this every day thing at 140 stores every day. And they are reaching full supply. They are as they are at 97 as of yesterday. If there was not a lot of demand for the iphone x, you would have more supply. The numbers are going to be reported in the next three weeks, and i think they will do better than expected in terms of the iphone x. If i was going to boil the whole down over the next two quarters is this idea is that the average selling price of the iphone is going to be going up, and that will be the key factor investors will be focusing on. David there are reports that there is some resistance on the price because as you say, it is over 1000. Do you know if customers are getting pricesensitive when it comes to apple . Think the simple takeaway is this. They are going to go up asps are going to go up meaningfully, we think they will be of greater than 15 this year. The vast majority of people who buy iphones, greater than 80 globally, buy it on a monthly basis. Alix does that mean that apple has to sell less of those iphone xs if there isps are going to go up that much . Gene it can fire on those cylinders. If you look at the bank for your bang for your buck your phone is the highest , utility that you are going to get for any technology. I think people recognize that. People recognize the value bet they are getting. David what about overseas . China has been a big target for apple. The we have a sense of how they are doing, for example, in a china . Gene dont have as good of a sense there. It has been boom or bust. They did exceptionally well in china, and the last two years has been more difficult. I suspect the first days of the iphone x will do well in china, but then competition will probably chip away. Munsterat was gene speaking to david westin and alix steel on bloomberg daybreak americas. Coming up, big tech, big gains. Facebook, google, and amazon allsop doubledigit gains this year. Could be headwinds on the horizon. In a tumultuous 12 months for uber. We delve into ubers biggest roadblocks for 2017. This is bloomberg. Cory to close out 2017, Tech Companies are holding on to some historic gains. It was driven by fastgrowing sales, record profits, and hopes of continued growth. But a big tech reckoning could come in 2018 in the form of government oversight and he fractured relationship with users. I love the way that you have covered these companies because youre looking at a lot of these ro these very the companies with a skeptical eye. When you look at them, who is at the top . It has been an interesting year. All of these companies have posted tremendous financial successes, and it definitely grown much bigger than what many thought at the beginning of the year, and their own right. At the same time, we saw all of this regulatory scrutiny across all the companies. The elections certainly did not help with that scrutiny. But as we looking to 2018, i think you can handicap it with amazon likely to be in the driver seat when it comes to favorable winds with the regulatory environment. As you move it the list, i think google is next. They used to be the politically savviest. Then you have facebook. They are drawing higher from both sides of the political spectrum which i think will get , worse as we approach the midterm elections in 2018. I think that scrutiny will only get worse from here, at least from a headline perspective. Headlines fake news you are predicting. But twitter, facebook, youtube, part of google. Do you think that actually hurts Financial Results . Over the weekend, facebook introduced this feature that lets you find out if you reach we did or let you find out if retweeted or did o reposted something from a fake news site. I thought it was an interesting response, but done very quietly over the weekend. It is full steam ahead for all these companies. Facebook continuing to gain share versus traditional media outlets. Google, the same story there. Twitter is trying to carve out their own path, but at the end of the day, these companies will continue to grow. Thats not going to affect their Financial Results. You have to think about it from a stock perspective, the degree of multiple expansion that is in there. We have the earnings power, but at the same time valuations have been steadily rising for all of these companies. They are still relatively attractive for valuation relative to their growth rate, but i think that is something investors will need to consider. Cory so, do think that is something that investors will do we separate investment results from some of these other companies . You mentioned legal problems potentially not looming for amazon. Amazon comes into your business model, every ceo in america is scared of that, whether it is a small or a large business. I wonder if regulatory concerns will concern amazon . Sure. I think it will, but it will will come, but it will come later. Right now, you are in a situation where you have amazon moving closer to all the federal agencies. You have them shopping around their second headquarters, where cities aree clamoring to get that. Cory they are going to make political problems. At the same time you also , have all of these centers that are going to open up from a headline perspective, new jobs, and whatnot. So i think amazon is safe for now, but once you triggered some major headlines such as reaching up to 1 trillion in value, i think that will reopen the floodgates for regulators to come in. Right now, regulators will be more focused on things that could potentially effect the election. Because if this was actually an issue, the ftc wouldve scrutinized the whole foods hell of a lot. Ore cory you are putting your faith in government regulators . Really, james . James i am just saying that there are priorities and incentives. What are the regulators incentivized to do . To attack the things that can affect their political prospects. Cory yeah. I will get it. I will give you that. Im just giving you a hard time. James the bigger story for 2018 is that all of these companies have been growing in their own right. But i think what you will see in 2018 is for them to start to encroach on each others territory. You have the google versus amazon battle brewing. You have the google versus facebook battle brewing. I think those battles will continue to escalate. It will be a question if not these companies will get bigger, but will they be a zero sum type of aspect . I think that will be interesting. Cory it is curious that with the duopoly in advertising of facebook and google, you have amazon growing a big advertising business. With devices like echo, you see amazon getting into certain their own way. Jamejames exactly. You are eliminating the need to search on google explicitly. When you look at google, the product listings have been the bread and butter for the company in recent years. Then you look at the content side of the equation, where amazon is likely going to be the biggest content spender in the industry, potentially even eclipsing netflix. What are the implications there for youtube and facebook as well . Technologies most obnoxious product of 2017 maybe have been fake news. We are going to look at fake news and what social Media Companies can do to contain it. 2017 is the year that we realized how quick and easy spreading misinformation on social media is, and how profitable the spread of fake news could be news can be. Before the u. S. President ial election, fake news was a get rich quick scheme. We also learned that it was a l to disrupt his democracy it was a tool to disrupt democracy. This is done with 80,000 posts boosted by 100,000 in advertising spending. These ads are just the tip of a very large iceberg. It resulted in google, facebook, and twitter of testifying in hours of congressional hearings about russias tactics and how to try to stop them. But it is not limited to the u. S. The spread of a fake news became a global issue in 2017. France and germany successfully fighting and their own election. Meantime, other governments are using facebook as a to will to spread propaganda as a toll tool to spreadgandas a propaganda. Just what can we do to raise this and due to rein this and . Critics worry about social Media Companies taking too many liberties and going to far with their censorship. Twitter said that they shut down thousands of accounts. No matter what the sites do, one thing is for sure. Fake news is going to get harder to stop. Facebook often argues that it is a technology company, not a media company. Well, to take on fake news in 2018, it may have to be both. Cory that was bloombergs sarah frier. Coming up, we will talk about punctuated equilibrium. A big idea that helps explain innovation. Plus, amazon could be a big holiday winner with 4 Million People trying amazon prime. We will take an indepth look at ecommerce giants, amazon. This is bloomberg. Cory he has been part of the fabric of Silicon Valley for a while now. He is now the ceo of c3iot. He is focused on what he calls the digital transformation. Whenever we sit down, he seems to have some big ideas. We are working with some of the Worlds Largest corporations to a plow cloud computing, artificial intelligence, and take advantage of the internet of things to engage in what is being called digital transformation. Cory basically taking advantage , of companies and always digital . Yes. They are now using this new generation of Information Technology that is, mine in the 21st century to change everything about the way they manage their business processes, design product, deliver products, and deliver services. This is like nothing we have seen before. Cory i love your idea about how we look at technology to see new things. There is this idea of punctuated equilibrium, notion from geology, which basically says, at a time you have seen it, it is too late. The big changes in evolution happen even faster than we can record them. In geology, if we see a new animal, thes or new big change of this coming into existence has are ready happened. The same idea applies to technology . I think so. I give this some thought, attempting to explain what is going on where we are seeing an exponential growth rate in the adoption of these new technologies. Computing, artificial intelligence. The other aspect of this that i could not quite explain, like you i have been in business for , a few decades now. As we have moved from mainframe computing to personal computing to the internet, all of these decisions were made by the cio. Cory right. Now these digital transformations are driven by the ceo. Attractive figure but was i tried to figure out what this was all about because it is massively disruption. I took a page out of evolutionary biology. If you look at the early additions of the origins of species, darwin thought that speciation of the planet would have a continuous function. Everything just constantly cory right. It wasnt until this century that evolutionary biologists said that it did not happen this way. Speciation was not a continuous process. Drama and explain the gaps in the fossil records. Darwin could not explain the gaps in the fossil records. Going back, even in the last 400 years, we have had 6 mass extinction events. The most recent being when the meteor hit the earth. 85 of the species on earth disappeared, including the dinosaurs. After we have this mass extinction event, you have a massive speciation. Case, it was good for us because mammals filled the space. Its like what is going on in the corporate world. Of the fortune2 52 of theies fortune 500 companies have disappeared. Cory some have gone away through because of fraud. Hewlettpackard or maybe ibm is next, who knows. Then you have what you talk about everyday on the show, is this mass speciation that is going on. This new dna, the airbnb, the ubers the amazons. When the big chain was there was no the big change was when there was no iphone and now we have one. The big change is the one that matters. The Telecommunications Industry as you and i knew it, is gone, replaced by the portable computer and the portable communication devices. Cory are there still companies out there that can reinvent themselves enough to survive this new digital age . If you o i think if you look at what is going on, it is in the funniest of places. Now in rome, department of defense. These are companies cory the department of defense does not have a choice, it has to evolve. Massive, massive, and these are ceos. You say, why is a ceo at the table making these Technology Decisions . He or she was never there before. The fear is, you either get on the train, or youre going to be on the tracks. nobody ever got fired for buying ibm, maybe somebody will fired for buying ibm now. If you are a walmart and youre looking at amazon coming down the tracks, you are in a world of hurt. You dont adopt, you dont it is not is going going to end well. It sounds like what you are cory it sounds like what you are talking about with artificial intelligence, youre really talking about process. It changes everything. I used to think that the internet of things was about the censoring of value change. It is in. It is a change in the form it isnt. It is a change in the form factor of computing devices. Smart meters, cars, thermostats, refrigerators, everything is a computer. The power of the network is the function of 50 billion notes squared. That is a pretty Artful Network par 4 network. Bitcoin is not, the highest rising cryptocurrency. We get the ceo of ripple who will tell us that will happen with all the tens of billions of dollars of ripple that his company is sitting on. A reminder that all episodes of Bloomberg Technology are Live Streaming on twitter. This is bloomberg. Cory welcome back to the best of bloomberg technolgy. Technology. Im cory johnson. Dahlia exploded last year, up more than 21,000 , more than any other cryptocurrency. The ceo of ripple joined us. Ripple has functionality that bitcoin can only dream of. There is a lot of hype in this space. Cory you think . [laughter] [laughter] but there is a lot of reality. Ripple is very focused on how we create, it is a multichilean dollar problem. If we can reduce the friction, using Blockchain Technology can create value for consumers. The whole ecosystem. Anyone who was traveled overseas and goes to an atm machine, and see the massive fees often from the same bank they use from their native country knows what a problem this is. That,e looking for beyond i guess. Even within the banking community, there are a few banks that sit on the top of the whole Global Payments structure. All the other banks pay them to settle the global liquidity required for commerce, small business, retail. Across the board, it is amazing we live in a world where to send money to london today, the fastest thing for you or i to do newark and to jfk or fly the money to london. That is crazy. We live in the age of the internet cannot move our own money in realtime. And as you said, the cost can be really high. Cory it is a fascinating thing. It should be as easy as sending an email. Sale for thisthe business, to whom do you make a sale . We are the business of selling technology to banks. Part of that is software sale. Part of it is for customers who take adva