16. It is not letting up with the cycloned bomb getting ready to hit the east coast with snow and high winds. More than 2000 flights have already been canceled. This is bloomberg. Im Alisa Parenti. Bloomberg technology is next. And thism emily chang, is bloomberg technology. Tesla struggles to manufacture for the masses, pushing back a crucial Production Target. Plus, blackberry Ceo John Chen joins us to talk about the companys partnership with baidu and its push into self driving cars. Hasssaging app used in iran been blocked as a wave of antigovernment protests sweeps through the country. How social media is shaping the sentiment. Tesla has pushed back a Production Target for its allimportant model 3 yet again, after shipping fewer cars than expected last quarter, shedding more light on elon musks production hell. They expect to hit 5000 cars per week to the second quarter, delaying the goal by three months. Tesla trailed analysts estimates of just over 2900 units. Max, why are these numbers so bad . Max they are bad because this is now another delay from elon musk last year said he hoped to have 5000 per week by the end of the year, then it was three months, now it is six months. As bad as these numbers are, tesla has done a pretty good job managing expectations. If you looked at what analysts were saying at the beginning of the week, a lot of people were expecting some sort of disappointment. Basically, musk has conveyed to investors and the public that they want to get this right, that this is taking a long period of time. That said, it gives plenty of ammunition to skeptics who are questioning whether tesla will be able to meet these what really are wildly ambitious production goals, whether they happen in the middle of next year or even later than that. Emily we do have a chart showing production on the bloomberg here. It shows the number of cars produced every quarter. They are holding about steady. What do the numbers overall indicate about just how hellish production is . Below what we way were expecting. I wouldnt read too much into the production numbers of the , which are model x the more expensive luxury cars. A lot of Consumers Want this model 3, the massmarket car. Tesla has already claimed a pretty big chunk of the luxury car market. The real question is, once you get into the massmarket, 35,000, 40,000 car range, whether tesla can do the kinds of things that these big car companies, gm, toyota, have been able to do. Hasright now, elon musk done a fantastic job of sort of getting analysts, getting everybody to see that this is a bet on the future, but the future gets closer and closer each quarter and each quarter that tesla isnt able to get to this massmarket electric car that we have been promised for a decade, the sales pitch is going to get harder, and its going to continue to cause people to ask questions about the companys future. Emily so, why is wall street so focused on this, when the absolute numbers we are talking about here are still so small . Max for tesla to justify this enormous valuation, it needs to be a mainstream car company. To be a mainstream car company, it needs to be able to produce these massmarket numbers, and not just to justify its valuation, but to meet the Ambitious Goals that elon musk has set for himself and for humanity as he probably would put it,. Ff you want to get us off o fossil fuels, you need to get the cost of electric cars down. Its all well and good to sell 100,000, 120,000 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 and still, analysts are saying tesla is way ahead of the competition. Put this in the broader context for us. Max thats the bull case here, which is that any problem in one must are going through at the moment, his competitors are going to have to go through it. What tesla has said is one of the companys big problems is where they are making the battery packs. To other company that wants make a massmarket electric car will also have to deal with battery production issues. The bet would be that, you know, toyota, gm will have to go through this as well. These are companies that are really experienced that dealing with supply chains, dealing with manufacturing, big hulking pieces of machinery. Tesla is less experienced there. Maybe they will be able to deal with it faster. That said, you have to admit that tesla has done pretty well as far as getting people to buy electric cars. The model s has outpaced expectations of where they were a couple years ago. Emily all right, max chaffin of bloomberg. Thank you so much for that update. Barclays analyst mark moscow its a barclays analyst says apples offer to replace batteries cheaply may mean a hit to sales. Analysts expect some customers to take it manage of the discounted batteries and skip potential upgrades to newer models in 2018. Coming up, blackberry takes to the road with chinese internet giant baidu. We will speak with blackberry Ceo John Chen. Bloomberg tech is Live Streaming on twitter. This is bloomberg. Emily intel has confirmed the report, saying that its chips contain a feature that makes them vulnerable to hacking. It said other companies semiconductors are also successful susceptible. Intel is working with chipmakers and operating system makers to develop an industrywide approach to resolving this issue. Microsoft says it has already resolved the issue with a security fix for this chip. News coming out of blackberry, the ontariobased company has signed a deal with chinese internet giant baidu to Work Together on driverless car software. Blackberrys vehicle operating system and in car Entertainment Software will be bundled into baidus self driving car platform. Baidu has been signing up dozens of partners around the world, in a bid to eventually become the driverlessinant software technology. How did this deal, bow deal come about . John how did this deal come about . Emily yes. John we have been working with most everybody in the ecosystem. This is the latest announcement of a number of partners we have signed up. We have qualcomm and others all in the last, id say, fou ror four or five months. This just happened to be the next major partners we signed up. Emily how does this help lack blackberrypushs blackberrys push into the self driving car industry . John we are providing safety and security in the operating system for the Autonomous Vehicle and the platform. Of ourhow one strategies. As you know very well, when we first talked about me picking up this job, it was to create a new category for us to dominate in. I wouldnt use the word dominate, but we certainly are doing extremely well in that category. Emily so, how will blackberry help by do become a dominant player help baidu become a dominant player in the car industry, which is their goal . John baidu is quite ambitious in creating the autonomous platform, the Autonomous Vehicle platform. And so, theyre putting together ase code and they pull us in their operating system platform. I pointed out the fact that they picked us because of the safety and security certification that we have at qnx. With that, they should be rather. He rather complete i assume the Auto Industry will go beyond the auto that you and i know of today. They are going to provide maps and Digital Information also. So, i think this is a pretty good partnership. We are bringing some very good things together. Emily so, talk to us about the impact that you see of this partnership on blackberrys business. Give us any hard numbers, if you can. John i cant give you any hard numbers. You know that. I know you have to ask that. Its going to be our growth platform. Growthknow today, might business my Growth Business is on the Enterprise Software, especially with security and cybersecurity. The next leg of our growth is with auto. This is why this is so important. We will go beyond the auto and go into the eot or iot world. Its a huge market and its growing it is growing. We are fortunate we can play well with it. Emily are there any other partnerships with other automakers in the works, and how do you plan to pursue more partnerships . John oh, yeah. You should expect us to continue to expand our ecosystems. I think our attention the last couple years has been joining up with new partnership, creating new platform, like the one we just announced, humanmachine interface. All really good, new stuff. Some of those are a little scifiish, but its going to happen. You should expect blackberry to continue to grow the partnership and ecosystem, and we are working on that. Emily so, how does all of this fit into the context of blackberrys broader turnaround strategy . Tell us what else is working and whats not working and how this business evolves, as it has evolved considerably since you have taken it over. John thats a great question. I awould not call us in turnaround mode anymore. We make money. We generate growth in the right area. We have a very good footprint in the cybersecurity enterprise for regulated industry in we generate growth in the right area. Particular, like the banks and governments and health care. Those are growing. Last quarter, we announced our billings on the Enterprise Software grew 20 . Qnx organization, focusing on design wins, we are announcing big design wins. Im hoping to see more, and you should expect to see more. When we marry the two together in the future, we are going to have a platform of security for iot management. Said, im very excited about the future of the company. We are executing to it. We are showing the results. So, its not just a strategy on a piece of paper, like the first time you and i spoke. Now we are really delivering. Vein of thee questions i have to ask, john, youve been on the board of disney for more than a decade now. Im curious what you think of the acquisition of the fox asset, a massive acquisition, and how you see that setting disney up for the future. John well, you have to ask that. You know i never answer questions about disney. Any questions about disney, you have to ask the disney management. But thank you for asking the question. Emily all right. John chen, ceo of blackberry. Always great to have you on the show. Thank you so much for stopping by. John thank you. Emily we have some news coming in from intel now. Talking a little bit more about this security flaw in their chi ps, saying the exploit allows access to privileged information. It does not allow malicious code to infiltrate the computer or stop the computer, but they say that fixes to this attack will take some time to deploy and that those fixes are coming over the next two weeks. Coming up, spotify preps for its unconventional public offering. The latest details and what it means for startups looking for an exit, ahead. This is bloomberg. Emily they are buying a brazilian right hailing company ing company, putting themselves in direct competition with uber. Last year, they led a 100 Million Investment in the brazilian company. The terms of the cash deal were not released. The move is a signal that the industry may become dominated by Global Companies instead of local monopolies. Spotify has confidentially filed for its ipo, according to a person familiar with the matter. Spotify will go ahead with the plan to skip a traditional stock sale and list its stock directly. It avoids underwriting fees and restrictions of stock sale by sir current owners. Joining us, alex barinka and lucas shaw. Lucas, i will start with you. What do you make of the timing . Why now . I know we were expecting this, but now we know. Lucas the timing is spotify has planned to go public either late in 2017 or early 2018. It really came down to when they could get their books in order. They felt they could close their books from an accounting perspective in just a couple weeks. Financially, they have really never needed to go public just to raise money, which is why they are taking this unconventional path of a direct listing as opposed to a more traditional ipo. They were under pressure to do so as quick as possible to get out from underneath the terms of this convertible debt that they had raised. So, it was really just a matter of the fastest they could do it that they were comfortable with, they were going to, so now they are clearly comfortable. Emily alex, how is a direct listing different from a typical listing . Alex in a classic ipo, you hire bankers. They help you go out on a roadshow, craft a story, figure out what sort of valuation investors are willing to swallow. Emily that costs money. Alex they pay the underwriters anywhere from 2 to 2. 5 , which is what snap did. With this, its different. They basically come out and say, look, our stock is trading now. We dont know how the mechanics are going to work. In the past listings ive looked at, Small Companies that have listed, they basically just open the shares on day one, like a normal open auction, and that can inject some questions. Is there enough supply and demand . Where does the price stand . These are things they will have to suss through that could inject a lot of volatility to the shares. It seemed like if they are moving ahead with this, they say they dont need to go out and scream their story from the rooftop like a classic ipo and they dont need 14 banks coming in, telling them how to sell their story. Emily lucas, what does this mean for the economics of the early investors . Does this mean more money for everyone in the end, who is already an insider . Lucas those early investors will make a killing, if you are to believe recent reports about what the company is now valued at, which is 15 billion, as much as 20 billion. The last time they raised money in the spring of 2016, they were valued at 8. 5 billion. While im sure there will be some complications as to who gets to pull out money when, most investors, should they choose to sell are in line to make a killing,. While im sure there will be some complications as to who gets to pull out moneyi do thine underwriting fees might be somewhat of a motivation, but i think that the choice to go the direct listing reflects the company led a company led by a guy who really enjoys doing things differently from how the system tells him he needs to do it, and thats a big motivation here. Emily so, the question is, is it the right strategy . Is there any precedent for this . How has that played out . Alex the direct listing precedent isnt there for a big company, but this does make me think of google. Google went out with a dutch auction, a different kind of ipo. Down. Ad to cut the price they had to cut the number of shares down. Then they came out a year later and sold 4 billion worth of stock, and there were some questions about dilution. Down. They had to cut the number of shares down. There is a precedent for doing things differently. This will be the first real test case. When i talked to my sources on the street who are in the ipo world, nobody has really come out and said, hey, i want to do this next, but everyone is going to watch this very carefully, especially the Biggest Companies who dont need the capital that would be raised from an ipo. Right now. If we have to see how this gets executed. Emily we know the valuation is high. What do we know about spotifys financial situation and engagement situation, as compared to, lets say, apple music . Lucas spotifys revenue has been growing rapidly, along with its user base. It made more people aware of the fact that there were these services where you could stream millions of songs ondemand. Spotify now has more than 60 million paying customers, more than 140 million users. Its margins have improved. It negotiated new deals with all of the major rights holders, the record labels and publishers, that gave it slightly better terms. Most of the people who have poured over the different filings they have issued say the picture looks better and better. They have real cash flow, which a lot of startups dont at this point. Emily quickly, lucas, talk to us about the implications of this lawsuit we have just learned about. Lucas there are a lot of songwriters who are upset with spotify because they feel like they never had their work licensed, so they are not getting paid enough. Spotify thought it had settled this case last year, but some other songwriters have filed suit recently, asking for more. They have asked for more than they are likely to get, but this is a headache spotify would like to do a do do away with before it goes public. Emily lucas shaw and alex brink a thank y alex bar inka, thank you. We explore the evolving role of tech for those hitting the streets. Listen on the Bloomberg Radio bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Alisa im Alisa Parenti in washington, and you are watching bloomberg technology. There is here is your first word news. Existing sanctions could be used against the u. S. By the u. S. Against human rights violators. 21 people were killed and more than 1000 arrested during protests over the last week. A turkish banker has been convicted in new york of helping eran is made iran evad financial sanctions. He was found guilty of bank fraud and conspiracy. He works for one of the few authorized to hold money for iran. President trump has picked his replacement for u. S. Attorney for the Southern District of new york. He is a law partner to former new york city mayor rudy giuliani. Trump wants him to be confirmed within the next 120 days. Two new u. S. Senators took their oaths of office today. Smith takes al frankens vacated seat. Speciales comes off his election victory over judge roy moore last month. Jones arrival mirrors the gop Senate Majority to 51 49. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im Alisa Parenti. This is bloomberg. Just after 5