Chinese Telecom Giant huawei says there has been a dramatic slowdown in sales growth in the midst of the trade war. He hints at even tougher days ahead. Capital one shares drop after a data breach. They say data on 100 million customers hacked. All of it stored on Amazon Web Services. A former amazon employee has been charged. Shares spiking after hours after reporting thirdquarter results. Revenue topped analyst estimates. Apple saying it remains optimistic about potential sales of new Iphone Models set to hit the market in the fall. For more on Apple Earnings as they are unfolding, we are joined by max from bloomberg businessweek, with me in the studio. Walk me through this. Iphone sales missed estimates, Services Missed estimates, the forecast beat. What about all of these other indicators . Is an interesting report. I would have said there would be no way they would be on top and bottom line. Wearables was a big plus. They also used about 21 billion of cash on the quarter to repurchase shares and increase the dividend. They did some other things to kind of help along which initially you would have thought would have been a tough quarter for them, at least based on how they missed estimates on revenue and also services. We have the president warning that the trade war may not get that are anytime soon. If tariffs come into play on the iphone, what do they do . Onthey have been counting expansion, selling iphones in china. The outlook is not great because you have, as you said, the possibility of tariffs, further barriers. Also, these Chinese Companies will be pushing harder in the domestic market in china. There is potentially government helping those companies along. Lots of quote unquote headwinds for apple. Thoughvices thing, even it is not exactly where they would like it, it is pretty strong. This has basically been an iphone company for years and is now below apples revenue. It is probably a good sign because we have heard tim cook say over and over again that they want to increase and it is finally happening. Cook speaking now saying he is thrilled to see a return to growth. How concerned are you about this tariff issue . Whammys kind of a double. You have retaliatory tariffs in regards to certain things like glass covers, red nice sensors that are shipped into china that could be potentially on a tariff watch with the Chinese Government. With the Chinese Government. The big question Going Forward is just what does apple do . Do they try to raise prices, they already have extremely high selling prices compared to their competition, or do they absorb it into the profit margin, where incomes annual average in india and china that are a fraction of the u. S. It is issue it is an issue in terms of trying to model out what will happen with these tariffs. Record iny did hit a the Services Business but in order for that to grow, they keep having to get devices in the hands of consumers. Is kind of a circular thing , on one hand, services are replacing iphone sales but come on the other, you cant have Services Without iphones. Are they making this revenue because services are really good or because they have set up this business we really have no choice. And wantve an iphone to buy an app, that is recurring thatthat will weigh will not go away at least for a long time. Is this a powerful, Mature Company flexing its muscle and collecting revenue . If you see lots of growth ahead, you will be much more optimistic. Emily tim cook saying wearables and services now approach the size of a fortune 50 company. Also saying that trade in helped with iphone sales in the last quarter. You are invested across big tech, as i understand it. The ftc say specifically they have opened an antitrust investigation into facebook. The doj looking into big tech in general. That is a caveat that is completely different than, say, the 1990s, microsoft getting investigated in kind of a similar situation. It came out as a low fine. All of a sudden, facebook pays 5 billion. It is really unprecedented and something to be concerned about. Quite frankly, it doesnt seem the street is that worried. Good advertising revenue growth. , ier than paying a fine dont see them breaking google up for facebook up. It just seems like it is something that is out there like a black cloud. It doesnt seem that wall street really believes that they will come in here and break this up. Emily we are expecting new iphones to be unveiled in september. Our colleague mark gurman has reported these will be incremental upgrades, not a design overhaul. They are going to bring in more revenue in general than we thought they would. Max that is a good sign obviously if you are an investor. These 5g phones, i think people talked about apple going 5g next year. That could open up a lot of territory in terms of new services, new experiences. Maybe all of a sudden your watch gets much more useful. The watch is doing well. This is this is bigger than the bigger this business is than the ipad right now. See if be interesting to 5g can bring it all together somehow. Emily tim cook saying the app store all in the double digits. The and monthly viewers on the apple tv app are up he is saying monthly viewers on the apple tv app are up 40 year on year. What are you most excited about. Apple plus, apple news, applecart, apple arcade . Dan when you look at the service segment, it is kind of a third, a third, a third you have the apps. You have apple care which nobody talks about, where if you break your phone they will replace it or fix it. There is the tv. They came out with a new package on apple tv. It was met with not much of an applause compared to netflix, amazon. You see more people writing apps, more gaming. , this music,ion is the tv. Than aants to spend more billion dollars in content, try to compete with netflix. I think that is the more exciting component on the service side, seeing what they will do on the entertainment side. Emily we will be speaking about huawei a lot later in the show. A leader in 5g and competitor to apple in the smartphone business, and has become sort of a pawn in the u. S. China trade war. Apple isnt putting out a 5g phone this year. We expect that next year. Does that mean apple will be behind . Dan that is always the concern, that huawei or maybe samsung will be ahead of them. The next cycle is this 5g. The possibility of a foldable phone is being talked about going into 2020. As you mentioned before, the isnes coming out this fall not really going to be viewed as overly dynamic in forcing people to upgrade. 60t roadmap to 5g and also with the acquisition of the modem business from intel, all very interesting for apple Going Forward. Emily tim cook confirming on his call that apple card is launching in august. They are doing that in partnership with goldman sachs. Dan morgan, thanks so much for stopping by. Max, you are sticking with me. Also, chipmaker amd reporting earnings. Shares fell after the Company Reported secondquarter results. Earningspershare fell in line with analyst estimates but the company gave a softer thirdquarter forecast. Huawei caught in the middle of a trade war and president Trumps National security concerns. The chair of the Telecom Giant, next. This is bloomberg. Emily huawei continues to face the fallout of the trouble administration the Trump Administrations attempts to thwart it. Tom mackenzie sat down for an exclusive interview with the huawei chair on the companys shenzhen campus. They talked about how they can survive without googles android operating system. We dont know when the u. S. Will make the decision on android and when that decision will come. We have to make preparations for our products. We will evaluate our strategy for the overseas market. If we are not able to use android, we have the ability to develop our own operating system and ecosystem which would become the basis of our services to the customers. Tom give us a sense how much you have had to mitigate the supply chain. Have you mitigated these changes or is there more to be done . The list put into place by the u. S. Was disruptive to our supply chain as we had already made plans to use components from the u. S. U. S. Suppliers suddenly stopped supplying us. We had to make adjustments including our process of purchasing, manufacturing, and delivering products. We will do the adjustments. We will change to other suppliers and use our own chips for the core components. I think the damage to the u. S. Suppliers is even bigger than it is to huawei. We will have to manage continuity internally. The damage to the u. S. Supplier is direct as they lose a customer. If the u. S. Removed while away from the entities list, that would be a solution. Tom what impact are you seeing on demand for your 5g equipment given the u. S. Campaign to block access to huawei . Although the u. S. Has been launching a Campaign Among its allies, it is up to each country to decide its partners based on demands, telecommunication demands, and infrastructure demands. I think now there would be some impacts in places like australia, but there are others willing to work with huawei. Tom when it comes to components, you say you are blocked by some key suppliers. Can you give us clarity on of those suppliers are and the success you have had, or not, of finding alternative suppliers . We might have some components we cant buy from the u. S. , but we will use our own components to supplement. Software operating systems like googles operating system and ecosystem havent resumed business with us yet. We hope to see good news, but if there isnt any, we will try to enhance our own capabilities. Away toyou expect while expect huawei to be part of the negotiations when negotiators meet in shanghai . Do you welcome the backing of the Chinese Government for your company . Huawei is purely a company. When two countries talk, they talk about topics. In the discussion between china and the u. S. , they will talk about big topics. Huawei only needs to do its job. Patch up the holes, manage continuity, as well as ensure delivery. We do not sell to the u. S. What we do is a solid job in making sure the products are delivered to our customers. Emily here to continue the partner atn, a ventures, and max chafkin. Saying, we will either get a good deal or no good deal or no deal at all, which cant be good news for huawei. Companiesig telecom are dependent on globalization, Global Supply chains. For huawei, they are talking about patching the whole lacking the android system, that is a big hole. A lot of powerful Consumer Electronics companies have tried to develop their own systems and it has pretty much been unsuccessful. Mostsoft is probably the valuable company in the world, the Windows Phone isnt anywhere. It is hard to see huawei getting it together quickly. I think they need a deal. I think this is a shortterm problem for huawei. In the long term, they realize they have to get off u. S. Dependency on Software Component on smartphone components and software. I think that is one of the reasons why huawei will try to develop its own system. Gone in products havent down, they have gone up. That cannot be good for guys like samson. Samsung. Emily you are saying that no matter how the trade war resolves, that the damage is already done, that Chinese Companies will focus on being more selfsufficient. Om exactly. They are one of the largest tech markets. It makes sense to not be appended on others. The wholee the hole 2025 white paper out there. I think that becomes more critical for them after this trade war. Emily so it doesnt matter if the trade war ends in three hours, months, years. 2025 is a long way away. Maybe not in the scheme of National Planning or whatever, but it will take some time for china to get its motives and software its modems and software to where these u. S. Suppliers are now. If chinese consumers can only by chinese phones, then huawei will grow, and it will hurt apple, samsung, and all these American Companies that have counted on china is a market. In theim interested Tech Community about how much of a threat huawei poses. I have spoken to ceos who dont think huawei poses a threat at all. Om its the same thing, in the late 1990s, everyone thought microsoft, destroy and it didnt. Huawei, because of its pricing makingsubsidizing, it is inroads in africa, places like sri lanka, southeast asia. These were traditionally american markets. In the longterm, this is very detrimental to the u. S. Text. U. S. Tech sector. U. S. Companies have to think in three month increments. Inna is a country thinks three year, 10 Year National plans. I think that is a challenge we and as silicon valley, technology sector. Emily we will talk about this little bit later in the show. Bloombergs max chafkin, thank you. Ventures, youue are staying with us. Elon musk cant stay off of twitter. What he is tweeting about now in terms of production numbers, next. This is bloomberg. Tweet abouton musk tesla production, he says he plans to produce 1000 solar roofs per week by years end. On problem is, musks tweets production numbers need preapproval for his deal with regulators. That quarter profits missed estimates for nintendo. Operating incomes fell about 10 . Fullyear forecast unchanged. Apples investor call currently underway. Ceo tim cook given a glowing review of how wearable devices fared in the second quarter. More on apple, coming up next. Quartersolutely blowout for wearables. Accelerating growth of over 50 and a new high watermark for 11. 5es, a new record of billion. When you step back and consider wearables and services together, two areas we have invested in the last few years, they now approach the size of a fortune 50 company. This is bloomberg technology. Im emily chang. Apple shares in the creep after reporting thirdquarter results. Services the main theme of the quarter, a fifth of total sales. The call still underway with tim cook, extending the companys plan for the new apple credit card being launched with goldman sachs. Transit integration is a major driver of a broader digital wallet adoption and we are going to keep up this push to help users leave their wallet at home in more instances. Thousands ofnote, apple employees are using apple an toevery day and we pl begin the rollout of applecart in august. Us, on malik. Ith you have been to every apple event for the last 20 years. So, what is your take on the Services Business and how do you expect it to evolve . Om im surprised how fast it has grown. How mediocreprised many of its offerings are, even now. Apple music versus spotify. You can see little differences. Apple pay is a great service. Clearly better than anything google has to offer in the market. They are like kind of middleoftheroad in the services, but they have such a huge platform and they can make a lot of money doing what they are doing with services, even if they are just mediocre or middleoftheroad. How microsoft used to make money i offering products that are good, not great. Emily do you think any services that will or can become great . Om i think apple pay is a great service. I think i can get better and better with time as the adoption grows in more places. Emily how concerned about you are about johnny ives exit . Or as iphone sales plateau whatever happens, the device itself becomes less important to the overall portfolio, what the new apple looks like. Om i think everything changes. We all grow out of our roles or importance in a company or in life. I think that is the case with johnny ives. I think he along with steve jobs a portfolio of amazing products. The products that have become iconic and society changing. But, he wants to do something else. Apple has the kind of move on too. Apple is becoming more of a mature, Older Company which is not as much as a revolutionary the way it used to be. A big company, a trillion dollar company. It has to behave like one. I talked to you about this previously. Johnny ives or summit else, people will come, people will go. This company has to figure out a way to last longer. Sort of how it goes from being apple of steve jobs to apple of the future, like walt disney of walt disney to Disney Company uptodate. That is the transition apple needs to make. Emily do you think we will see apple continue to innovate radically in hardware and or software or no . Om radically is a very strong word. I think they will try a lot of interesting things. They still have the design dna. Those days of taking wild gambles probably are not going to be there as much, mostly because steve jobs could get the company to make, bet big on a decision. Betting big on cdrom, usb. Those things were pretty radical at the time. We forget how much there was around those decisions. He could do it because he was steve. I think now they have to play it a little bit safe. Emily you really closely followed the telecom industry. What do you think about the choices apple has made, not investing in 5g this year . We are expecting it to come next beingas huawei is penalized by the United States and that could thwart its efforts to grow its 5g business. Om i think 5g rollout in the world has been vastly overstated. I think it is a much slower rollout than most people realize. I think right now, you are seeing a lot of work between tmobile and verizon. The rollout of 5g is happening in two, three tiny markets in the u. S. Worldwide too, it is a much slower rollout. Apple has time to get it right. Apple has the time to get the iphone for the 5g world. Remember, there is a huge battery overhead for 5g. All these companies talking about 5g, when their battery start running out in one hour or so emily they will not care about 5g. Om samsung is an affordable phone, and how did that work out . I think being early is sometimes not the best decision. Emily historically, apple has not been first. They say they are the best. Om malik, thank you so much for stopping by. Well, one language should a car speak . 5g or wifi . The answer could determine who leads the way when it come