After two fairly uneventful twitter isl debates out with a new label that flags tweets that break laws. May make President Donald Trump walk a fine line on the social media site. Tesla has set a new record for quarterly vehicle deliveries. On tuesday they handed over 95,000 vehicles to customers in the Second Quarter beating estimates. This is due to accelerated shipments from china and u. S. Consumers are rushing to buy model three sedans. Thatmusk told employees the company was close to setting an alltime record urging them to go all out in the last few days of june. Caught up with on the model three side you have to separate the lineup. On the model three side this was a blowout quarter that exceeded expectations. You had this up and down quarter where we hit a trough of everyone concerned about demand for the model three. Towards the emd of the quarter you saw analyst commentary pick up more. X frontodel s and model they still have a problem. 20 , about 17,000 cars were model x or s. Those are the highermargin or price vehicles. What remains to be seen here is how much this big jump in deliveries was at the expense of profitability are good profitability. Max, give me your take in san francisco. Craig says good news but he wonders about profitability. Is this good news for elon musk . Any time you blow estimates out of the water you have to look at it as a win. Coming into the emd of this quarter you had concerns with demand and logistics. Could tesla literally get these cars to people in a timely and costeffective manner . On the logistics piece they are performing well despite some acknowledged the difficulties. Acknowledged difficulties. The question is what happens in the long run. Consumers in the u. S. Are rushing to buy these model threes and take advantage of the tax incentive. Also have people not buying more expensive cars. We dont know how this will shake out. Tesla is still a relatively new brand. It will be interesting to see what happens if and when they refresh these luxury lines. That could be just the thing that causes people who are model three buyers to want to trade up. That tax credit, as it shrinks, how much of a headwind was that this quarter tailwind. With that tailwind removed how much do car sales slow . That will be the big question on the Conference Call for earnings. The tax credit will go from 3750 down. At the emd of 2018 Fourth Quarter was the previous record and a lot of that and that being consumers going out to buy the model three and s and x before the tax credit was cut in half. People under appreciated how much of that was demand being pulled ahead into the Fourth Quarter of last year. That fueled a big dropoff in the First Quarter this year. The question is can they sustain this momentum with the model three even the smaller amount of support from the federal government. Is a morningstar analyst joining me from chicago. We have been having a discussion here where it seems to be like we are in the all clear, model threes coming in better than expected. Fundamental analysis full in the demand and profitability mix of the s and x which are key given their highermargin cars, getting elon to the profitability where he needs to be. All this controversy around the demand problem i dont believe there is a model three demand problem. And x are getting old to consumers. Thing but it is all about profit and the cash flow. We wont know until we get q2 results how much this shift matters. X year over down 21 . Analysis sayyour in terms of the pastor profitability for tesla. When do we get there they went down a couple quarters last year and it is not impossible. Thes hard to say what is Tipping Point because they are still growing internationally. You have the china factory coming online and the european factory. You have new models and the trick is how do you balance profitable growth . Is hard for any start up and they are a pretty big start up. Is the chinese demand where it needs to be . Demand, we dont really know at this point because they are not set up with that factory that is going up here shanghai. When they do that they will avoid import tariffs that affect any car built outside of china. We dont really have a true sense of demand for tesla in china because they are so priced out of the market. There is a buzz in china of this around elon musk that we see around the world. We dont know how much Untapped Potential there is for china. Is not something that is going to come for free. It costs money to build up a plan and they are doing borrowed with local banks. There is a possibility it will not have a huge drag on earnings of the company. Going to be more of a 2020 story as we see local production start on the model three. As we look at the emd of 2019 and 2020, what do you see as the biggest left side tail risk downside . Tweets, ismusks is it profitability, what do you see as the biggest left side tail risk event . Two things. One is general economic risk which is felt by any company in the business cycle. We are light cycle late cycle for the auto business. Bigger,g would be a longer term happening of what happened in june when sentiment and fear started to get into the name. This is a name that is always traded more on option value. It has always been yuan is a brilliant guy but when people free kick elon is a brilliant guy. If all the sudden the street looks at the more downside reasons to fear tesla rather than be optimistic the stock will get pounded pretty hard. Caroline half of the year is already in the bag and we have seen 22 Tech Companies hit the market. This is bloomberg. Caroline 2019 has been a big has for tech ipos but there been a shadow hanging over newly traded companies. Google and amazon have a significant hold on many Tech Companies that have hit the market. Lyft spent 90 million on google ads in a single year. Those people went to an Apple App Store and downloaded the was app and google maps powering it. This was on amazon servers using amazon web services. On top of that google owns 5 of lyft. Google is buried deep within the digital economy. When you look into it you see how concretely they are the infrastructure behind how these companies work. In some ways it is a blessing and did some ways it is a curse. You focus on amazon and google and from the blessings side do you see this as a good element that these companies have so much riding on but for future Revenue Streams . There is good and bad. Computingts of cloud is that it allows Startup Companies that want to go public eventually or are going public to avoid infrastructure crossed. Needs atreat your i. T. Variable costs rather than big fixed costs. Build up aeed to large i. T. Department to scale up a business. That is the magic behind amazon ure services and microsoft az and google cloud. There is no doubt that in order to scale up on the internet you are going to pay one of those three cloud providers. If you a consumer need to get consumers to use your service or your application you will be spending money with google, facebook, that is how you get Brand Awareness on the internet. I dont know if they are told l keepers but tol they are the biggest channels out there. Companies that are successful are Companies Like uber that are successful longterm that can avoid having to only get traffic through those paid channels. 17 of these recent 22 ipos mention google or amazon in their statement. They worried if they clamp down to hard and push for breakups this could impact downstream . You could say look how powerful these companies are we surely need to break them up. You could also say they are not interested in disrupting the Smaller Companies because they are their customers and they want them to keep growing. Lyft to keep using its services and paying for them. I dont think by breaking up these companies you would disrupt the web in a deep way. You can still buy google maps from google maps limited and Cloud Services from google Cloud Services limited. A topice this will be of conversation when it comes to antitrust. Theline before we go to antitrust equation lets talk about the fact that you cover lyft and pinterest. When you saw this competitive exposure and general exposure in terms of a supply side need from amazon or google did you see that as much of a risk factor . Would you like them to invest in their own independent service . No. I did not see it as a risk factor. If they are going to have a Cloud Services provider it is going to be one of three names. Zure, or google cloud and the chances are it would be aws. They have almost 50 of the market share. What they would go public with if they had not done that would look different and you would have a lot more spending. Capex spending. It raises the question of wire you trying to verbally integrate and build up that infrastructure and manage those data centers and server stacks when there are three companies doing a phenomenal job of allowing you to outsource it . Its a great question i had not thought about before but i do see that as a competitive i dont think that is a dependence risk and there is the option of switching. Snapchat went public and migrated from googled amazon. As long as you can from google to amazon. As long as you can shift there is not as much of a risk. What about the regulatory viewpoint we are seeing from capitol hill on amazon and google . Of them being so intertwined with the rest of the tech ecosystem . Possibly. Regulatory risk is something that has become a major investor issue across technology. A call earlier today with an antitrust expert to talk about the risk of these platforms. I think the chances of these companies doing forced to divest assets is extremely unlikely. Regulators ment i think it would be hard to do that. Changes thatnes or are modest at the margins. , on thek comment president ial democratic debates. All. Ech did not come up at it was concerns over whether amazon is paying its fair share of taxes. The best Political Barometer isnt it does not come up in a president ial debate it probably does not matter. Bloomberg paschi school of a potential deal with broadcom. Analysts are divided over strategy ahead. At t is considering to sell its Regional Sports networks. Bloomberg learned the networks could fetch up to 4 billion. Including rights and the pittsburgh penguins. Broadcom is in works to buy the Cyber Security firm symantec. With an analyst on wednesday for the details. Symantec passes the smell test for broadcom. 52 operating margin say for them to consider an acquisition it has to be immensely profitable. Are not a lot of companies that can reach or have the potential to reach 60 plus the threshold or third old hurdle rate for them to look at acquisition. Their last one is performing very well. When you look at symantec, it has shades that are similar to ca in terms of the businesses. One already at a 50 operating margin and was tweaking could get to 60 . The other you can drop into the and strip it of cost, mostly marketing and sales cost to drive operating margins. On that angle it would be immensely profitable and an extension of what they have with ca. Caroline we have been waiting for years to work out what they the going after after qualcomm deal fell away. What makes symantec more vulnerable to being bought out . There has been a lot of drama at symantec. Ousted, there is an accounting investigation and there were a few board seats lost so there is a it is vulnerable for a takeover. Talking we were just about the tmobile and sprint deal and the regulatory issues. Will there be regulatory issues with this deal . Before broadcom went after qualcomm they had a singapore headquarters. They have moved totally to the u. S. To try to alleviate that issue. Cybersecurity is a National Security concern and semantic works for the u. S. Government. Something investors will be watching to see how it goes. Review. Uld be an eu putting regulatory concerns to one side, you have spelled out why you think this might be a perfect fit. Arer analysts and investors questioning the management strategic direction. Do you think it is the right direction to be going, more focused on cybersecurity . How does this fit with broadening outside of the chip space . Broadcom is focused singularly on capital returns to shareholders driving Free Cash Flow and profitability. This was a company that was at the cusp of a 50 operating margin in a region no other company had been able to approach in the Semi Conductor land. To push thele envelope closer to 53 and a last quarter, now running at 52 . For them to be able to expand and build on that they need something outside of hardware and Semi Conductors. Typically Software Companies have extremely high Gross Margins and tend to spend a lot of money acquiring new clients. Is a digegy with ca deep and allyoucaneat. You dig deep into existing clients and dont worry about getting new clients. About 1 roughly billion spent on acquisition of new clients per year. That cost went away. It would be easy to go back to clients with a bigger portfolio and drive profitability. That is why i think it is a perfect fit. Caroline symantec closing about 14 higher. What sort of premium do you envisage . Someis a company under duress, could there be something more, could it go higher . It is possible that other people could come in. I am not an expert on investment think a premium from current prices would still work as well as broadcom possibility to take it and generate returns given the success they have had with software in the past. The board of semantic has private equity representatives from bain and silver lake. They will have to be involved somehow. Broadcom was built up through private equity roots. Is heavy here but we dont know the structure of the deal and how they will participate. Twitter announces a rule that might cause problems for President Trump himself. Bloomberg technology is Live Streaming on twitter. To follow our breaking news network tictoc on twitter. This is bloomberg. Caroline welcome back to the best of bloomberg technology. The u. S. President routinely posts comments that might get a lesserknown person suspended. Now twitter will hide rule behind acontent warning label that will say the tweet has been left out because of legitimate public interest. Users will need to click past the emily chang caught up with label to see the post. Emily chang caught up with several other individuals. Kurt there wasnt that moment where everyone was like, there is this fake news going viral, and that is is what facebook and the point. That is is what facebook and twitter want. They had teams in place ready to pounce in case there was that moment, but as far as i can tell there did not seem to be. Emily maybe they were doing their job . Kurt i guess that is the idea. Emily lets talk about this tweet flag. It doesnt just apply to politicians. Withplies to anyone 100,000 followers or more. David it is just politicians. It is even more specific to donald trump. If you remember, this two years ago, he tweeted at kim jongun and said, rocket man, you will not be around much longer, and or some kind of threat like that. And a lot of people asks, hey, wouldnt this normally get a user suspended . Twitters response was politicians have tweets that are so newsworthy we do not take them down. Now we will know which of those tweets may violate the rules, but they are labeled as newsworthy and therefore allowed to stay up. Emily you have been talking about how difficult it is for these companies to flag content that breaks the rules or crosses a line. Do you think this will work . David well, it is definitely a step in the right direction. We need to acknowledge that some very famous and powerful people are misbehaving, but i also think that twitter has rightly acknowledged up until now that certain people on twitter are of a different nature than others. You know, even that it is also a lot of judgment calls required. Even that tweet you cited about kim jongun, i think could be debated whether that is a violation of the rules. Is that a country threatening another country or an individual threatening an individual . But nonetheless, this is the right kind of step to take, and im glad to see it happening. President ise always quick to talk about conservative bias on social and there was an expectation he could get angry or tweet about this new rule, see hefar as i can still has not mentioned it. Naomi, is there any pushback or reaction from washington . Naomi it is pretty quiet, but a bit of a bold move for twitter given the repeated accusations by republicans in washington that Tech Companies like twitter are biased against them. They have held multiple congressional hearings on this topic, and polls show public trust in some of the tech platforms is waning. The republicans have not showed signs of slowing those criticisms down. So this, you know, looks like an issue that just gave them more ammunition to continue making those claims. Emily meantime, one of the biggest flareups on social media recently was the nancy pelosi video where she was slurred in to make her appear drunk and facebook decided to leave that video up with a flag. Mark zuckerberg did say a couple of days ago that there was an execution mistake. By which atcess hand was not necessarily perfect, but they stood by the decision. Take a listen to what he had to say. Mark it took a while for our systems to flag that in full Fact Checkers to rate it as false. Once they did, they were able to rate it within an hour, but it did more than a day for our systems to flag it. And during that time at got more distribution than our policy shouldve allowed, so that was an execution mistake. I think that what we want to be doing is ipving execution bu i do not think we want to go far towrd sing hat a private company pvents you from saying something it thinks is factually incorrect to another person. Emily david, i really would love to hear your reaction to this. Is it another facebook sorry, not sorry moment . David you know, i think facebook