Lowered iphone x shipment projections for the next quarter, citing weak demand late in the holiday season. Iphone sales have declined by 10 Million Units next quarter. Other analysts cite the iphones high price and a lack of groundbreaking innovations. We talked about that to Bloomberg Technologys alex webb. Alex the iphone x was released six weeks after the iphone 8. And so there was a fear that maybe if they got too close to the release date of samsungs next highend smartphone which will probably come in march, there would not be enough demand to sustain the demand they otherwise have to get. Cory competition is another part of this . Alex exactly. Particularly in china, a lot of the local manufacturers are coming out with products now, which have a better price point than what apple is able to offer, but have similar very 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 to bring up demand for the product. Cory it seems like a big part of the apple strategy of the phones is drumming up the general marketplace of potentially new applications and stuff that we have not seen. The phone could do really cool facial recognition stuff or could, but there are not a one of applications for it. It has interesting features that the earlier phones did not have, but there are not really any uses for them yet. Alex it is the kind of curse to being apple. They are very secretive what they have in the pipeline in terms of hardware. When they unveiled the phone in september ahead of its release in november, that is not a huge timeframe for analysts for developers to start coming up with new tools. It could be that in the coming year, 18 months, we see far more compelling innovations, which use these 3d sensors. Cory we will never know the mix between iphone 8 and iphone x, but if they sell more iphone xs, both the top and bottom line, because the phone is so expensive, are going to do so well. There is always this chatter, saying china is not going to buy the expensive phone, india is not going to buy this expensive phone. We have seen quite the opposite. China is 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 shape and design as the iphone 6. There is not a huge amount of change between these three generations of phones, 6, 7, and 8. That means the bill of materials has come down. But the price point is still pretty high. It is not the end of the world if apple is selling iphone 8, rather than iphone x. The 8, three or four years, then the components are very cheap for them. Cory so, Gross Margins might be better on the iphone 8 . Alex it is hard to tell. There are estimates that say they will be better but not have been significantly worse than on the x. Cory to be clear, the estimates, even though the numbers have come down, it is the biggest firstquarter that apple has ever had. They are still predicting 10 yearoveryear Revenue Growth on one of the biggest, most Profitable Companies in the world. Alex absolutely. Apple itself does not break out any iphone revenue numbers. And so what we are going to be seeing . Cory specific iphones. Alex that means that, of course, the forecast, the revenue forecast for apple that they have made themselves, that might already take into account some of these slackening demand. Cory that was Bloomberg Technologys alex webb. For more reaction of the forecast, 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 in the march quarter, that would imply about 50 of the phones in the next year will be the iphone x. That is the 1000 plus phone. And investors are expecting that number to be 25 to 30 . So this is i think expected, number one. And number two, i think it is actually a positive. David that is the First Quarter of 2018. Take us back to the Fourth Quarter of 2017 for a minute. They brought the 8 and the 10 out at the same time. The 8 sales were disappointing because people were waiting for the x. They were going to make it up with the 10. Do we have any indication whether they made up the disappointing sales with the iphone x in the Fourth Quarter . 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, we looked at about 140 stores every day. And they are just reaching full supply. They are at 97 as of yesterday. My point is this, if there was not a lot of demand for this phone, the iphone x, you would have more supply. I think this is 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 apple story down over the next two quarters into one thought, it is this idea that asp, 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 talk about the asp, specifically because there are , reports that there is some resistance on the price, because as you say, it is over 1000. Do we know if in fact customers are getting pricesensitive when it comes to apple . Gene we can look back at what the supply is, and the supplier remains tight, an indication that the demand is good. I think the simple takeaway is this. The asps are going to go up meaningfully. We think they are going to be up greater than 15 this year. Its important to note the vast majority of people who buy iphones, greater than 80 globally, buy it on a monthly basis. And so you are talking about going from 40 to 48 a month, and that 8 difference is ok for most people. Alix does that mean that apple has to sell less of those iphone xs if their asps are going to go up that much . Gene it can fire on those on both cylinders. If you look at the bang for your buck, your phone is the highest utility that you are going to get for any technology. I think people recognize that. Even though that is a big number, 1000, i think people recognize the value bet they are getting. David what about overseas . China has been a big target for apple. There has been thought that when you get up to those kind of prices, it will get crowded because there are a lot of cheaper competitors over there. Do we have a sense of how they are doing, for example, in china . Gene dont have as good of a sense there. It has been boom or bust. The iphone 6 cycle, they did exceptionally well in china, and the last two years has been more difficult. I suspect the first days of the iphone x is going to do well in china, but then competition will probably chip away. Cory that was gene munster speaking to david westin and alix steel on bloomberg daybreak americas. Coming up, big tech, big gains. Facebook, google, amazon all saw doubledigit gains this year. In revenue. It could be headwinds on the horizon. Plus a tumultuous 12 months for uber. We delve into the ride hailing apps biggest roadblocks for 2017. This is bloomberg. Cory as we close out 2017, Tech Companies are holding on to some historic gains. The nasdaq 100 up 30 on the year. 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 in a fractured relationship with users. We spoke with an analyst. I love the way that you have covered these companies because youre looking at a lot of these very Big Companies but with a skeptical eye, on some of the top issues we have seen them show. When you look at them, who is at the top in the coming year . James it has been an interesting year because all of these companies have posted tremendous financial successes, and definitely grown much bigger than what many thought at the beginning of the year in their own right. At the same time, we saw all of this regulatory scrutiny across all the companies. The election certainly did not help with that scrutiny. But with looking into 2018, i think you can handicap it with amazon likely in the drivers seat when it comes to favorable winds with the regulatory environment. But as you move down that list within the fang group, i think google is next. They used to be the politically savviest. But then you have facebook. I think they are drawing ire from both sides of the political spectrum, which i think will get worse as we approach the midterm elections later in 2018. I think that scrutiny will only get worse from here, at least from the headline perspective. Cory so bad fake News Headlines is what you are predicting for twitter. Twitter, facebook, youtube, part of google. Do you think that actually hurts Financial Results . Over the weekend actually, facebook introduced this feature that lets you find out if you actually retweeted or reposted something from a fake news site. I thought that was an interesting response, but done very quietly over the holiday weekend. James i think financially speaking, it is full steam ahead for all these companies. You have amazon getting even share, facebook continuing to gain share versus traditional media outlets. Google, the same story there. Twitter, you know they are trying to carve out their own paths, going more niche, but at the end of the day, these companies will continue to grow. Thats not going to affect their Financial Results. Cory what you are saying is a lot of headlines who cares if it will affect their Financial Results. James you do have to think about from a stock perspective, the degree of multiple expansion that is in there. Obviously 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 you know, i do think that is something investors will definitely need to consider. Cory do we separate investment results from some of these other companies . One of the things you mentioned legal problems potentially not looming for amazon. But boy, there is no company that scares they used to say when mike wallace would knock on the door dont answer because 60 minutes is outside. Amazon comes into your business model, every ceo in america is scared of that, whether it is a Small Business or a large business. I wonder if there is a time that regulatory concerns will concern amazon . Not least because this president does not like the washington post, which is owned by jeff bezos. James sure. I think it 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 with the aws. You have them shopping around their second headquarters, where all of these cities are clamoring for the attention to get that. Cory which means you will tick off every single city you do not choose. They are going to make political problems. James at the same time, you also have all these new Fulfillment 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 trigger some major headlines such as reaching up to 1 trillion in value, i think that that will reopen the floodgates for regulators to come in. Because right now, i think regulators will be more focused on things that could potentially affect the election. Because if this was actually an issue, the ftc wouldve scrutinized the whole Foods Acquisition a hell of a lot more than just a one sentence response, which we think was, wasnt cory you are putting your faith you are putting your faith in government regulators . Really, james . You are . James i am just saying that there are priorities and there are incentives. What are the regulators incentivized to do . It is incentivized to attack the things that, you know, can affect their political prospects. And amazon cory yeah. I will give you that. Im just giving you a hard time. James i think 2018, the bigger story for 2018, 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. And i think that those battles will continue to escalate. So it will be a question of not will these Companies Get bigger, but will there be a zero sum type of aspect . Where share shifts will start to occur between the two 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. And with the lock on search that google has, with the devices like echo, you see amazon getting into search in its own way. James exactly. You are eliminating the need to you are a eliminating the incentive to search on google explicitly when, you can introduce a discovery mechanism on amazon. When you look at google, the product listings have been the bread and butter for the company in recent years. As you shift that away, and 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, you know, so what are the the implications there for youtube and facebook as well . Cory technologies most noxious product of 2017 maybe have been fake news. s sarah frier looks at the fake news hits of the year and what social Media Companies can do to contain it. Sarah 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 can be. Before the u. S. President ial election, fake news was a get rich quick scheme to cash in on online advertising, but this year we learned it is also a tool to disrupt democracy. The kremlinbacked Internet Research agency reached over 150 million americans on facebook with inflammatory posts intended to stir conflicts over issues like race and religion. This is done with 80,000 posts million americans on facebook boosted by 100,000 in ad spending. These ads are just the tip of a very large iceberg. Sarah and it resulted in google, facebook, and twitter all 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 fake news became a global issue in 2017. France and germany successfully fighting it in their own election. Meantime, other governments are using facebook as a tool to spread propaganda. A genocide in myanmar, the rohingya muslims, and an attack in the philippines, and much more. So just what can big tech do to rein this in . Facebook is trying the human route, hiring thousands of people to sit through that content, but critics worry about social Media Companies taking too many liberties and going too far with their censorship. Twitter said that they shut down thousands of accounts. They are taking steps to get tougher on extremists. 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, Silicon Valley silicaand valleys joinsys tom us to talk about punctuated equilibrium. A big idea that helps explain innovation. Plus, amazon could be a big holiday winner again, announcing 4 Million People trying amazon prime in just one week. We will take an indepth look at the ecommerce giant. This is bloomberg. Cory he has been part of the fabric of Silicon Valley for a while. He is now the ceo of c3iot. He is focused on software for what he calls the digital transformation. Whenever we sit down, he seems to have some big ideas. Tom we are working with some of the Worlds Largest corporations to apply cloud computing, artificial intelligence, and take advantage of the internet of things to basically engage in what is being called digital transformation. Cory basically, taking companies that are not yet digital in all the ways in they can work in getting there. Tom yes. They are now using this new generation of information, this new step function that has come online in the 21st century to change everything about the way they manage their business processes, design products, deliver products, and deliver services. This is really like nothing we have seen before. Cory i love your idea about how we kind of look at technology to see new things. You found this idea of punctuated equilibrium, a notion sort of from geology, which basically says tell me if i am paraphrasing right by the time you have seen it, it is too late. The big changes in evolution happen even faster than we can record them. So in geology, if we see a new plant species or new kind of animal, the big change of this in coming into existence has already happened. The same idea applies to technology . Tom i think so. I gave 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. Elastic cloud computing, internet of things, artificial intelligence. The other aspect of this that i could not quite explain, like you, i have been around this 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. Tom and now these digital transformations are all being driven by the ceo. I tried to figure out what this was all about because it is massively disruptive. So i took a page out of evolutionary biology. And if you look at the early additions of the origins of species, darwin thought that speciation of the planet would have a continuous function. It took place like it would in information technology. Moores law is a continuous function. That everything doubles every 18 months. Cory right. Tom but it wasnt until, what, this century that evolutionary biologists said led by Stephen Gould that it did not happen this way. Speciation was not a continuous p