Telecom giant huawei says there has been a dramatic slowdown in sales growth in the midst of the trade war. In exclusive interview, he hints at even tougher days ahead. Capital one shares drop after a data breach. The company saying data on 100 million customers hacked. All of it stored on Amazon Web Services. A former amazon employee has been charged. But first to our top story, apple 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 chafkin from bloomberg businessweek, and we also have the sin of this trust Portfolio Manager with as. Walk me through this. Iphone sales missed estimates, Services Missed estimates, the forecast beat. What about all of these other indicators . It is an interesting report. If you would have told me they would have missed on both services and iphone revenue, i would have said, they were not going to beat 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 for revenues and also services. Emily we have the president warning that the trade war may not get better anytime soon. That could directly impact the iphone max. If tariffs come into play on the iphone, what do they do . The reality is, for years, apple has in counting on expansion, selling iphones in china. It has been able to do that for some extent, but as we are seeing, the numbers just arent there, and the outlook is not great. You have the possibility of tariffs, further barriers. Also, these Chinese Companies will be pushing harder in the domestic market in china. At the same time that apple is trying to get in there, and tushie the government helping those companies along. So there are a lot of quote unquote headwinds for apple. Good news is that the services thing, even though it is not exactly where they would like it, it is pretty strong. Is that a place where iphone revenue, this has been an iphone company for years, it is now half of apples revenue. It is probably a good sign because we have heard tim cook over and over again say that they want to increase Services Revenue, and that is finally happening. Emily apple ceo tim cook speaking now saying he is thrilled to see a return to growth. Dan, you own a couple hundred thousand shares of apple. Health concerned are you about this tariff issue . Dan as max was saying, the ,ariff issue is a double whammy you have retaliatory tariffs in regards to certain things like glass covers, sensors that are shipped into china that could be potentially on a tariff watch 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 average selling prices compared to the competition, or do they just absorb the tariffs into their profit margin . How does that work into the International Expansion the theme where you have average incomes in countries like india and china that are a fraction of what they are here in the u. S. . It creates a conundrum for apple Going Forward. It is an issue in terms of trying to model out what will happen with apple with these offices. Emily meantime, they want to push the Services Business, they still hit a record, but in order for their services to grow come at a have to keep getting new devices into the hands of customers, right . Yes, it is a circular thing. On one hand, services are replacing iphone sales, but on the other hand, you cannot have iphones. Without more is apple making all this money in Services Revenue because good . Services are really or is it because they have set up this business where you kind of have no choice . If you have an apple and you have to buy an app, that is recurring revenue in apples pocket that will never go away. What we ared, seeing in terms of revenue growth, is it really innovation or more like a very powerful, Mature Company flexing its muscles and collecting revenue . And i think depending on what you think the answer of the question is is how you will value the stock. If you see lots of growth ahead, it will be much more optimistic. One analyst is saying that trading and other programs helped iphone sales in the last quarter. ,our investors across big tech dan. How concerned are you about big tech with regards to apple and other big tech companies, with saying it is opening an antitrust investigation into facebook, and the d. O. J. Looking at big tech in general. Dan in the 1990s, you had investigated, in kind of a similar situation of being a monopoly. It came out as a low fine. Million ofwhat, 200 a fee, and all of a sudden facebook pays 5 billion. ,so it is really unprecedented and it is something to be concerned about. But quite frankly, it doesnt seem like the street is that word. They had a good quarter, good revenue advertising growth. But otherut there, than paying a fine, i just cant see them breaking google or up. Book, or even apple what are you going to do . It just seems like something that is out there, like a black cloud. I dont really think wall street believes that the federal trade commission or the department of justice will come in 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 and that is a good sign if you are an investor i think the real excitement is 5g. Have been talking about apple going 5g next year. That could open up a lot of territory in terms of new territory, and you experiences. We know maybe are apple was becomes more useful. The watch has been doing really well. This business is bigger than the ipad right now. It will be interesting to see if 5g can bring it all together somehow. Emily tim cook saying the app store up in the double digits. This is significant as they try to grow their services portfolio. He is saying monthly viewers on the apple tv app are up 40 year over year. Jan, which service are you most excited about to come this fall . Is it apple tv 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. They are mostly gaming. You have apple care which nobody ever really talks about, where it is this warranty on your phone, where if you drop it, they will replace it or fix it. Then there is apple tv. They came out with a new package on their apple tv, it was met with not too much of an applause compared to say netflix, amazon, disney and fox. Spaces evergrowing. You see more people writing apps, more gaming. Where the action is, this music, the tv. That is what Everyone Wants to talk about. They have to decide if apple wants to spend more than a billion dollars in content, try to compete with netflix in bringing out shows. I think that is the more exciting component on the service side, seeing what they will do with that on the entertainment side. Emily we will be speaking about huawei a lot later in the show. Huawei is a leader in 5g. While it is a big competitor with apple in the smartphone business and has become sort of 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. But as max was saying, the next cycle in the phone business is 5g. The possibility of a foldable phone is being talked about going into 2020. As you mentioned before, the phones expected to come out this speak arei11 so to not going to be viewed as being overly dynamic and forcing people to upgrade, so that roadmap to 5g, and also that roadmap to 6g, with the acquisition of the modem business from intel, all are very interesting for apple Going Forward. Emily tim cook confirming on his call that cart is launching in august. They are doing that in partnership with goldman sachs. We will continue to monitor headlines of the call. Dan morgan, thanks so much for stopping by. Max, you are sticking with me. Chipmakers reported earnings. Shares fell after the Company Reported secondquarter results. Earningspershare fell in line with analyst estimates but the company gave a softer thirdquarter forecast. Coming up, huawei is caught in the middle of a trade war and president Trumps National security concerns. Our exclusive conversation with the chair of the Chinese Telecom giant, next. This is bloomberg. Emily huawei continues to face the fallout of the Trump Administrations attempts to thwart it. And we are beginning to get a picture of what that means. While his sales growth dropped droppeds sales growth in the first half of the year. 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. Mr. Hua we dont know when the u. S. Will make a decision on android, and one that season will come, so 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 for our new smartphones, we have the ability to develop our own operating system and ecosystem to become the basis of our services to the customers. Tom give us a sense how much you have had to change your supply chain to mitigate these pressures . Is there more to be done . Mr. Hua the entity 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. But u. S. Suppliers suddenly stopped supplying us, so we had to make adjustments to our supply chain, including our process of purchasing, manufacturing, and living products. We will do the adjustments to our supply chain. 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 huawei 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 . Mr. Hua although the u. S. Has been launching a Campaign Among its allies, it is up to each country to decide its partners based on its own development demands telecommunication , demands and carrier Infrastructure Construction demands. I think there might be some impacts in places like australia, but there are others who are willing to work with huawei. Tom when it comes to components, you have said that you are still blocked from some of your key suppliers. Can you give us clarity on of suppliers are, and the success have had, or not, on finding alternative suppliers to fill those gaps . Mr. Hua we might have some components we cant buy from the u. S. , but we will use our own components to supplement. Smartphone operating systems like googles operating system and ecosystem havent resumed business with us yet. We are working to find a way to patch this hole. We hope to see good news, but if there isnt any, we will try to enhance our own capabilities. Tom do you expect huawei to be conversations when trade negotiators meet in the next few days in shanghai . Will they be discussing huawei, and do you welcome the backing of the Chinese Government for your company . Mr. Hua huawei is purely a company. When two countries talk, they talk about topics. In the talks between china and the u. S. , they will talk about big topics. For us huawei only needs to do , its own job, like what i just said. We need to patch up the holes, manage continuity, as well as ensure product delivery. We do not sell to the u. S. What we do care about is doing a solid job in making sure the products are delivered to our customers. Huaweithat was the , speaking to hua bloombergs Tom Mackenzie. Here to continue the conversation, om malik, a partner at true ventures, and max chafkin. Hes saying, we will either get a good deal or no deal at all, which cant be good news for huawei. Max no, it is not. Telecom companies, almost more than any other company in the economy, are dependent on these Global Supply chain. While he is talking about le in thethe ho android system, that is a big hole. Lots of powerful Consumer Electronics companies have tried developing their own systems besides android, and it has pretty much been unsuccessful. Microsoft is probably the most valuable company in the world, the Windows Phone isnt anywhere. Samsung has tried, and i think it is really hard to see huawei getting it together quickly. I think they need a deal. Om i think this is a shortterm problem for huawei. In the long term, they realize the u. S. To get off dependency on Semiconductor Components and software. I think that is one of the main huawei is going to try to create its own operating system. In their products have not gone down, they have gone up. Which tells you that nationalism is not in their favor right now. That cannot be good for guys like samsung. Emily you are saying that no matter how the trade war resolves, whether in the u. S. Or chinas favor, that the damages are ready done, that Chinese Companies will focus on being more selfsustaining, more selfsufficient, without relying on u. S. Operating systems. Om exactly. They are one of the largest tech markets right now, so it makes sense for them to not be dependent on others. They have the whole 2025 white paper out there. They want more freedom further sector, i think that has become even more critical for them after this trade war. Emily so it doesnt matter if the trade war ends in three hours, months, years. Max i agree. But it is a long project. 2025 is a long way away. Maybe not in the scheme of National Planning or whatever, to take someng time for china to get its modems and software to where these u. S. Suppliers are now. Says, in the as om long run, if Chinese Computers can only by chinese phones, huawei will grow at it will hurt apple, samsung, and all these American Companies that have really counted on china as an export market. Emily i am curious about your conversations with folks in the Silicon ValleyTech Community about how much of a threat huawei actually poses. I have spoken to ceos who dont believe huawei poses in the threat at all. Om its the same thing, in the late 1990s, everyone thought linux would destroy microsoft, and it didnt. But it took away a lot of Growth Opportunities. I think that is what huawei is. There is really little Growth Opportunities for u. S. Telecom companies out there the world, because huawei, either because of its Pricing Power or because of its subsidizing, it is making inroads in africa, places like sri lanka, southeast asia. These were traditionally american markets. These are no longer american markets. So in a longterm, this is very detrimental to the u. S. Tech sector. We have to remember, u. S. Companies have to think in threemonth increments. China is a country thinks in terms of 10year and 20year national plans. I think it is a whole different way of thinking about the future and china, and i think that is a challenge have as Silicon Valley, and technology sector. Emily we will talk more about this a little bit later on in the show. Bloombergs max chafkin, thank you. Om malik of true ventures, you are staying with us. Elon musk cant stay off of twitter. What the ceo is tweeting about now is regards to production numbers,. This is bloomberg. Bloomberg. Emily an elon musk tweet about tesla production is raising questions again. He tweeted that he plans to produce 1000 solar roofs per week by years end. The problem is, musks tweets on production numbers need preapproval under his agreement with regulators. Tesla nor the f. T. C. Have commented thus far. First quarter profits that missed estimates for nintendo. Nintendo says operating income fell about 10 . It left its fullyear forecast unchanged. Investors callers currently underway. Ceo tim cook given a glowing review of how wearable devices fared in the second quarter. More on apple, coming up next. This is bloomberg. An absolutely blowout quarter for wearables. Where we had accelerating growth of over 50 and a new High Water Mark for services, where we sat and alltime revenue record of 11. 5 billion. When you step back and consider wearables and services together, two areas where we have strategically invested in the last several years, they now approach the size of a fortune 50 company. Emily this is bloomberg technology. Im emily chang in san francisco. Apple shares in the green after reporting thirdquarter results. Services seemed to be the main theme of the quarter, a fifth of total sales for a whole. The call is still underway, with apple ceo tim cook expanding on the companys plan for the new apple credit card being launched with goldman sachs. Tim 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 and more instances. On a related note, thousands of apple employees are using apple card every day in our beta test, and we begin we plan to