Sherman after blistering hearings. Net flux netflix stocks fall for the most almost 15 billion wiped off it work it cap. Will the streaming giant recover . Shares story, microsoft topping after fourthquarter results that topped estimates. Continuing strengths in Cloud Services. Up aeo is working to keep steady flow of cloud deals to narrow the gap with Market Leader amazon and offering bundles including office, windows and other security products. To unpack it all, we are joined by aaron paynter, who spent 14 years at microsoft in the u. S. , brazil, france and china, where he served for a few years. Also, bloomberg intelligence. Another big order from microsoft as expected. What is the top take away . Almost every line item was good. We didnt find any mistakes so far or anything negative. The big deal is going to see how they can come up with First Quarter numbers and the next fiscal year for them. The big question is, can microsoft keep it up now that expectations are so high . Can the company continue to deliver in a new economy . Cloud reach was the first provider for these services and we have expanded it to amazon in the last few quarters because there is enormous demand from customers. I think this is only the beginning of an Incredible Movement that will continue. Emily are you saying the cloud will continue to grow, it is not a zerosum game . Aaron absolutely. Every study tells us we are in the very early lead. Microsoft is on the verge of becoming the corporate cloud. After their big employee summit with many partners, the big theme was trust. Not just a trust with partners, but in the enterprise and theships they have enterprise reach they have. That is the differentiator. Emily when you are the most valuable company in the world, and microsoft does now have more than 1 trillion market cap, more than amazon, apple, you have a target on your back. What are the challenges . What are the potential obstacles lying in microsoft way . Anurag macro concerns are the only things that could prevent any kind of that could provide headwinds. Services isor cloud so large and were just seeing the tip of the iceberg. At this point, the market potential in the enterprise space is enormous. Microsoft is better positioned than any company out there. Cloud, pcond the sales still a big part of microsoft business. What is happening between the United States and china, a huge issue, given the u. S. China supply chain. Even that you worked in china for many years, what do you think the u. S. China trade war how will that impact commercial sales . Focusedicrosoft is very on 7 billion. They keep talking about the reach. If you like amazon is leading the world in cloud at the amazon conference, at google, you feel like they want to. Microsoft feels like they can. They have this incredible reach of every person in the world and how they can tap them into some cloud service. It is hard to ignore china. Emily if you cant ignore china, what could a potential impact of the trade war be . This seems to be not subsiding anytime soon. If tensions remain as they are, what does that mean for microsoft . Aaron microsoft strength in china has been around Cloud Services. Early in that market, amazon caught up fast. Amazon and azure, the market has been looking to go go global or access Cloud Services outside of mainland china. That market has potential to go strong, regardless of any iron curtain that might fall. They microsoft felt antitrust pain in the 1990s with big antitrust hearings, but they have been largely out of the spotlight, with the recent raft of hearings at amazon, google, facebook, apple all in the spotlight. How can microsoft use that to its advantage . Anurag it is one of the biggest things for them, because they have embraced opensource more than any other company. Of azure is on opensource, which is truly remarkable for a company that didnt believe in these kinds of products. Of being policy friendly with their rivals, people to appraise any other product from their competitors. That will play in their hand as regulars look at companies. Thank you so much for joining us. Just how dangerous is Facebook Libra . We will ask the congressman who thinks it could be more dangerous than 9 11. Our congressmen our conversation with congers been brad sherman is next. You can listen on the bloomberg app, bloomberg. Com and in sirius xm. This is bloomberg. Emily for two days this week, facebooks Stephen Marcus was peppered with questions about the newly proposed cryptocurrency, but there was one question or statement that seemed to catch him completely off guard. Take a listen. By. Sherman we are told some that innovation is always good. The most innovative thing that happened this century is when Osama Bin Laden came up with the innovative idea of flying to airplanes into the towers. That is the most consequential innovation, although this may do more to endanger america than even that. Emily that was representative brad sherman of californias 30th district, who joins us from washington. Thank you so much. Certainly a very provocative statement we heard you make. What exactly did you mean . Rep. Sherman let me clarify. A zuckerberg is not as evil as Osama Bin Laden, because the harm that zuckerberg will do is an unintended product of his effort to make hundreds of billions of dollars more. But the fact is, in creating a tool for drug dealers, that is going to result in debts on the streets of america every day. By creating a tool for tax evaders, that is going to mean that the federal government cant Fund Cancer Research or cant fund the defense of the United States to the degree that we would like to. And by providing a method for sanctions evaders who are going to make it much more difficult for the federal government to prevent iran and north korea from developing nuclear weapons. Zuckerberg doesnt intend any of those objectives. He is just intentionally disinterested in whether that occurs. The fact is that the power of the dollar, our ability to control our banking system, is a key to the economy of the United States, which saves at least 100 billion per year in borrowing costs, because with a we are the reserve currency of the world. It is key to our sanctions program, which is most effective when we control dollar transactions. It is effective in our efforts to prevent drug kingpins and human traffickers. Whichtent of this libra, i call a zuckbuck. The intention is to undermine that whole effort. I know zuckerberg is under attack because he undermines american privacy. His response is to become a privacy advocate for tax evaders, terrorists, sanctions evaders, drug dealers. Folks whoose are the shouldnt have financial privacy. Emily we will get there. Statement on the 9 11 , obviously what you got our attention. Some americans might have been offended, some might have thought it was too far. What is your reaction to that . Rep. Sherman the number of deaths that will occur in america if this is successful in playing the role it is intended will exceed what we lost on 9 11. The additional heroin debts, the inability to fund cancer the lack of success of our sanctions will be very important. They will not be all of the sudden. They will not be one big picture, one big day. By a reporter,ed does that make a zuckerberg as evil as Osama Bin Laden . Clearly not. To cause was trying american debts, zuckerberg is just disinterested and whether they occur. Bucks aspeaking of zuck you call it, you have said you want Mark Zuckerberg to testify. What do you want to hear from him that you did not hear from david marcus . Rep. Sherman we are getting a confused and contradictory report from marcus. He is telling us they are going to abide by the antimoney laundering and know your customer rules that we impose on our banks, but then he is saying that there will be others who create separate wallets that will be formed in other countries and one wonders whether a Company Creating a tehran ismoscow or going to follow the antimoney laundering rules. A promise, then paints a picture in which facebook would be incapable of carrying it out. Likewise, marcus promises that there will be no printing of additional money, they will have reserve, but describes a system for governing the libra in which facebook will not be in control, so who knows what they will be able to do . We need to iron this out. When we get contradictory information from the employee, we need to hear from the ceo. Emily what do you think le here should be versus zuckerberg himself. Rep. Sherman we should be prohibiting cryptocurrencies. They disempower the federal government and there is an anarchist, libertarian strain that says every time the federal government is disempowered, americans should be happier. It is funny. I have got republican colleagues who want america to be strong and the u. S. Government to be weak and that doesnt actually work. Emily are you saying you think cryptocurrency should be illegal . Rep. Sherman absolutely. I have advocated that for a long time. Think of it. The purpose of cryptocurrency serves no function unless somebody is engaged in various transactions. That is why 46 of Bitcoin Transactions are from people who are doing things illegal under u. S. Law. According to an academic peerreviewed study. Whether they are evading sanctions, evading tax laws or dealing drugs. Bitcoin is aow small baby here. You cant buy a pack of gum for bitcoin. It has to have an offramp that you can convert into a sovereign currency. This proposal solves that problem and will allow drug dealers to move seamlessly from drug deal to money they can spend on luxuries. To liberateance those who hate federal laws, whether it be antidrug laws or antihuman trafficking laws, tax laws or sanctions. This is a chance for them to get around on the most effective controls that we have and that is why it is popular. Emily facebooks crypto issue is just one of many issues that facebook is dealing with, along with fake news, misinformation, Election Hacking by foreign countries. Do you think facebook should be broken up . I think first and foremost, facebook has to be kept out of the cryptocurrency business. They say they want to provide services to the unbaked. The place where we have the most theyked is india and if did this system using u. S. Dollars or using the local currency in india, they could be successful. They could help people, but by going to cryptocurrency, they are prohibited from doing business in india. Zuckerberg doesnt want to help poor people in india. He wants to make huge amounts of money and create a circumstance where he can do the one thing he cant do now, and that is print his own money. The u. S. Government used to have the1 reserve rule for dollar. We got away from that and if zuckerberg can do the same thing, he can do what really only the u. S. Federal government can do to the extent that we do it, and that is print money. He has got what seems to be all the money in the world, but he wants to print more. Emily what about the broader argument that big tech is too big . Elizabeth warren is calling for the breakup of facebook, apple, amazon, google. Do you agree . Rep. Sherman i am on the Financial Services committee. Focus on the Financial System these other antitrust issues, i think Elizabeth Warren has some good arguments, but i come onto the show to talk to you about things i have thought through and can add something to the discussion. Cryptocurrencies serve no purpose that cannot be met by the u. S. Dollar, except for drug dealers, human traffickers, tax evaders and sanctions evaders. Emily message received. Congressman brad sherman, thank you so much for joining us. Good to have you. Coming up, customers hitting pause on netflix. Behind the most underwhelming Second Quarter, subscribers in the u. S. Senates 2011. What it means as competition turns up the volume. You can check us out at technology and be sure to follow our Global News Network at tictoc on twitter. This is bluebird. This is bloomberg. Emily the Smartphone App face app went viral this week with its popular aging filter. Democratic leaders are calling a National Security risk. Ftc,letter to the fbi and Senate Minority leader urged the agencies to look into privacy risks posed by the application. He is concerned americans personal information may end up in the hands of the russian government. The app founder is russian. Location ince apps russia raises questions regarding how and when the Company Provides access to the data of u. S. Citizens to third parties, including foreign governments. The Democratic National committee has sent in email to all campaigns with a warning not to use the app. The founding has denied sending any user information to the russian government. Investors byed reporting a drop in u. S. Customers and Slower Growth overseas. He declined raising fears that the streaming giant is losing its momentum just as competitors compare to pounce. The Second Quarter represents the biggest lack i since 2011, when the Company Split its dvd and streaming businesses. We are joined by analyst eric. What went wrong and can that looks recover . Thanks for having me. They raised prices and at the same time had a fairly weak content slate. According to netflix, that is what caused the under hit on subscribers. Was you look at content, it very weak, particularly compared to competitors like hbo, who had the final season of game of thrones, which is a big cultural moment. Netflix get back to growth this Current Quarter and through the rest of the year, just as disney, apple, warmer warner all plan their own services . Netflix has a strong content slate, so that is good for them. Also helping them is that a lot netflixe who left looking at numbers they released in earnings and compared to guidance, it seems a lot of people who left were on lower tier plans, so not the people who are most engaged with netflix. Netflix will need to gain these people back, but at the same time, that content slate should be able to draw a significant amount of people in, specifically when you have hit shows like stranger things, orange is the new black. That is great for netflix. When you talk about other Services Like disney, hbo and others, they dont hit until the end of this year or early next year. When you talk about netflix and their 60 million u. S. Subscribers, you are comparing them to other subscriptions that have zero subscribers. Emily they currently have zero, but which do you believe will pose the biggest threat to netflix . Eric i think disney ultimately will pose the biggest threat. Disney currently own hulu, which is the number three Largest Streaming Service in the u. S. , when you take netflix as number one and amazon prime as number two. Disney already has a lot of experience in this field. Second, they are price competitive and household names. When you compare disney plus, theyre pricing at around seven dollars, and rumors of a bundle hulu currently has 30 million u. S. Subscribers. It is a competitive package and they should be able to scale up quickly. Emily thanks so much for stopping by. Eric thank you. Emily Customer Data is at the heart of a controversial new medical plan in the u. K. Former u. K. Science minister is proposing to sell patient to but forising debt, English National health service, which provides free medical care to more than 55 million residents, some are sounding the alarm. Englands National HealthService Provides free care to everyone who walks into the hospital or doctors office. As costs rise, that puts the system under increasing pressure. Billions of dollars are trying to put to better use. After taking care of everyone in the country for seven decades, the nhs has Lifelong Medical records of practically all of its residents, some 55 million people. That is exactly the kind of data that Companies Want to run through ai on rhythms to answer questions like which drugs work in which patients, when are people with a chronic illness likely to get worse, how can we tell when symptoms patients with similar symptoms have different illnesses . As valuable as this data is, it is very private. And it belongs to patients. How do you make sure that they benefit from the research it enables and are not harmed if it gets into the wrong hands . That issue has come up again and again with hospital records. A former u. K. Science minister has experience with the u. K. Beginning at a young age after he was born blind in one eye. Health care entrepreneur, he believes the nhs has an obligation to share its data with companies that want to analyze it. Signing up nhs hospitals to put patient records into a database to send to health care companies. Companies have to use the company for patient benefit. Companies only get the results of data analysis, not any patient data. The nhs division called trust gets financial return. Time will tell whether the company can help the nhs turn patient records into gold. John lower men, bloomberg news, london. Coming up, this week on capitol hill, all eyes on big tech. We talk with a. C. L. About a big tech breakup, his thoughts on Facebooks Libra and more. This is bloomberg. 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