Agreement with the ftc for violating childrens privacy on youtube. Critics say its not enough. And slack john. Stock shares plunge after the companys first earnings reports since its trading debut. At issue, Service Problems and competition from microsoft. This week china and the , u. S. Announce that facetoface negotiations aimed at ending their tariff war will be held in washington next month. Skepticism on both sides for true progress remains high. This, of course, follows president trumps 15 tariff that became a reality last sunday. Dragging apple further into the trade war. While its flagship iphone is spared, some key products are not namely, apples pods, apple , watch. A Senior Research analyst joined us to discuss on before the tuesday latest round of talks were announced. Apple, like you pointed out, is kind of the clear one. Any company that has manufacturing in china is there but what is maybe potentially more interesting than that is that its starting to spill over into other countries. Other industries we had assumed were more resilient or tariff proof. For example, autodesk is an example. An Enterprise Software company, everyone thinks about it as being very defensive, but because its an Industrial Software company they are actually starting to see a softening outlook as a result of kind of the ongoing trade war. Now that the tariffs have kicked in and are a reality, not just a negotiating tactic, i think well see a lot of that go through and have people looking at individual companies and say, is this going to and say is this going to , impact, not necessarily the obvious ones like the apples or semiconductors. What are those Second Derivative plays . Anything in my mind related to design and manufacturing, would be that, so that would involve services. That would involve anyone who is doing outsourcing related that. That would also involve Software Companies like an autodesk, or others that have businesses in that sort of space. That may not be obvious on first glance. You mentioned individual companies and i wonder if its as simple as qualcomm by sales force or something more idiosyncratic given the trade tensions going on . Your second point is absolutely correct. You have to be specific about the individual companies, not just the sector. Thats why i used software as an example. Its thought of as being a lot more defensive but it turns out within software there are some cracks. If i were to ask you about zoom video, for instance, off the top of your head that wouldnt come to mind as an obvious impact, but a lot of Product Development comes out of china and thats how they have been able to be so profitable. Do these terrorists chip away at the advantage they have on the r and d side so its very much a company specific, not necessarily sector. Weve been within trade fights, lets recall march 2018. We are 18 months into it. Have companies been pressured on the margin side, on the bottom line . You mentioned maybe they had cut back on r and d but tech spending still feels a strong. Absolutely. Are you seeing margin pressure show up lately . Not really. Tech spending, the Business Model tends to be very strong. And outside of an actual macroevent that impacts the economy and impacts overall business spending i dont see that slowing down. If i think about what sector i would want to be invested in and have more peacefulness about some of these factors like break it like brexit and Tariffs Technology , specifically, software is the place to be right now. Sticking with tariffs, some are saying investors are looking to software as opposed to hardware as trade tensions escalate. Idc president crawford says tariffs are having less impact on it spending than was originally projected. We spoke to him on tuesday for more details. Tech spending has not been that significantly affected as a function of a lot of tariff talk. A lot of that has to do with kind of where we were in the tech cycle. Tech is infused into the economy. Its infused in our work lives, its infused in the infrastructure and how we entertain ourselves. There was a huge data center buildout. Storage spending was really high. If you look at Infrastructure Spending last year, it was over 20 . If we went back three years and said we thought fort wayne have chuck were you would be 20 as a buildout of the cloud no one would have taken it seriously. That really muted the impact. Last year we saw 9 growth overall which is very high. Where are we in that cycle now . As you look forward to the rest of 2019 or 2020, are we in that cycle where we can still start to see tech spending or are we starting to see some uncertainty start to play in . Its interesting, were starting to see that shift now. Were starting to see where customers are starting to take a pause. Starting to lock up and say, look, we cant run our business by these little bits of information that come out. We have to really understand and be able to understand the long term impact of imposed tariffs Going Forward. So what weve seen is that were starting to see a deceleration. And were seeing a deceleration in spending overall but its primarily that we are seeing customers take a pause. We are also starting to see that the infrastructure buildout, companies are starting to take a step back from that and starting to slow down there overall spending. So our expectation for spending this year is somewhere around about between 4 and 5 for overall tech spending. When you talk about customers there is hardware and software. It appears software has been relatively insulated compared to , hardware. Is that accurate . Absolutely. We have to remember as a Service Economy what the long term impact of a Service Economy impacts are much more muted in terms of overall spending. Companies dont necessarily move away from their salesforce. Com subscription or work day subscription over time but you can definitely say as employees, well make you have your p. C. s for five years instead of four. Well push our Service Structure out another year. We are seeing that hardware is the first stuff that gets muted and smartphones is something that really gets muted because its just not that hard for a consumer to say im going to wait another year before i buy another smartphone. That was crawford del prete. Coming up, 170 million, thats what google will have to pay as part of an agreement with the ftc for violating childrens privacy on youtube. But does that really make a dent for the tech behemoth . You can listen to us on the Bloomberg App and on sirius xm. This is bloomberg. Apple is returning to the bond market after an absence of almost two years. It borrowed 7 billion. Apple is joining a slew of companies that are rushing to the Investment Grade market after the labor day holiday. The company has more than 200 billion in cash and securities on its books. Apple is developing in screen sinker print technology for its iphones. Bloomberg has learned the feature could be available on next years phones. Apple has had fingerprint scanning since 2013 but its integrated in the iphones home button. The new technology will allow users to scan fingerprints on a large portion of the display and it would work for the current face i. D. System. And another fine for google. This time youtube has agreed to pay a record 170 million to settle claims that it violated childrens privacy laws. Most of the money will go to the federal trade commission. 34 million will go to new york state. Youtube has been accused of failing to obtain parental consent in collecting data on kids under 13. We spoke with the Vice President of net choice and bloomberg technologys ben on wednesday to discuss. Net choice is a tech lobbying group that counts google as a member. Its certainly easy for google to pay it. Its a drop in the bucket compared to their annual revenue. It is, however, a very large fine by the standards of childrens privacy. 30 times larger than the previous record which came in february with tictoc, similar issues, collecting email addresses and names without proper consent. You have a lot of people saying this isnt going to make a dent in googles Business Practices but its certainly setting a record for this particular space. So, carl, taking flip side, give us your breakdown. What do you make of the fine and the ruling to limit some of the ads and commenting on childrens videos . You know, thanks for asking. The fine is 30 times larger lynn any prior fine under, larger than any other fine. That the ftc was able to extract this find, given that i think its gone well beyond of the statutory limits of what the law allows. Essentially youtube is a general audience website. Every user on youtube says they are over the age of 13. The terms of service say if youre under the age of 13, dont use youtube. So there is really no there or there for the ftc to bring this action. I think it sets a dangerous precedent by Going Forward by suggesting that a general audience website is now going to be decided by the ftc to be a child directed website and subject to coppa. I would say for anyone who operates a website, talking about harry potter or the avengers or anything that could possibly be related to children, needs to be worried that the ftc may be coming for them next. To be fair weve got and let of push back from some members of congress we have a treat from a senator. We have a sent we have a tweet from senator ed markey. Hes saying that youtube knowingly broke federal law. Tracking kids in order to rake in advertising dollars without permission from parents, but the ftc let google off the hook with a drop in the bucket fine. Not a single google executive or investor will bat an eye. What do you make of that, and frankly, the reaction from senators . So, senator markey should know very clearly what the law doesnt and doesnt allow since he helped write it when he was in back in when he was in congress back in 1998. Under the law there are two ways to be subject, you knowingly collect from people under the age of 13. Youtube did neither of these in this case. So i think for a lot of people who are saying its not enough, i think for a lot of those individuals, it will never be enough. I think for them whether the fine was 170 million or 170 billion, it will never be enough for a lot of people who just fundamentally dislike these platforms and their right to give us Free Services as for all the antitrust issues surrounding google and other technology giants, we caught up with former acting chairwoman of the ftc, Maureen Ohlhausen on thursday, who weighed in on the issues at work. The fine is only one part of the remedy in any of these cases, the facebook case, google case, there are extensive provisions in the settlement orders that require google to go above and beyond what the childrens Online Privacy protection act requires, so now, they are having to screen content to see if its child directed, and then to impose the parental notification and consent provisions on that kind of content. The fine is only one part of the equation. You really have to look at the conduct obligations that are being imposed going ahead. The u. S. Led the charge in this particular respect. Do you think others might look into the child part of the equation, if any laws have been broken, perhaps not abided by in quite the way they would like in other parts of the world . Its certainly possible, and each country might have a different approach to childrens privacy. The way congress struck the balance in the childrens Online Privacy protection act is to have parents make the decision whether information about their children could be collected through online sites and services. In that way, what they are trying to balance is, you know, incentives to create child directed content against the desire to make sure children are being protected. And thats the way weve struck the balance in the u. S. , through Congress Making that decision. And clearly some lawmakers are not always drilled with not always thrilled with how policies are enacted by the ftc. He mentioned about the sweetheart deal for facebook. That sweetheart deal was a 5 billion fine. A significant chunk of change even though it pales in comparison to facebooks overall revenue. What did you make of that ruling on facebook in terms of privacy and how it changes the mode of conduct and how Business Practices will unfold for businesses Going Forward . The facebook order, settlement is quite extensive, and it requires facebook to create new types of oversight and monitoring and reporting, having obligations going up to the board level. Its quite extensive. Of course, a 5 billion fine dwarfs any other fine. I wouldnt call it a sweetheart deal. I think it was a rather strong message. Do you think Tech Companies are in general getting the message that, rather than having to respond to such accusations coming from regulators such as the ftc, they can somehow start to get ahead of the curve and ensure they are abiding by the letter of the law and the general meaning of the law before they are hounded by you, for example . I think youre right about that. I think they are, you know, paying even more attention to some of these issues. A lot of the companies have paid close attention to these issues but i think its really become a board level issue in a lot of companies, because there is not just the impact, you know, from an investigation and a fine, whatever, you know, the fine may be or what the obligations Going Forward are. There is also a reputational impact on these companies and i think they care about that. But i also think it highlights the fact that, you know, privacy law that is we have in the u. S. , federal trade commission has done a good job with the law thats been given and congress did pass the childrens Online Privacy protection act, but i think its highlighting the desire to have maybe an additional federal privacy law that would, you know, give Additional Guidance to consumers and enforcers. Coming up, slack slumps. Shares tumble this week after the company disappointed with its first report as a public company. Why sales are slowing next. Plus, taking on tesla. Porsche powers up its electric sports car but will it be enough to charge past the model 3 . This is bloomberg. While the company beat analyst expectations for Second Quarter revenue and earnings it projected slower sales growth for the second half of the year. Slack said revenue will be 154 million in the third quarter, signalling strong competition may dent the Software Makers rapid rise. We caught up with bloombergs nico grant, and on the phone, Research Director larry on wednesday, right after the results were announced. Its pretty stiff competition but what microsoft is trying to do is push Microsoft Teams and this type of collaboration into the infrastructure, and so it becomes kind of this horizontal service that everyone in the company has access to. And we can tell you, based on our surveys in this past year, that office 365 is increasingly being at contributed to industry collaboration. In previous years it was more associated as an outsourcing service. So in my opinion, you know, as microsoft has succeeded with teams, its also succeeded in building awareness of the need for collaboration and the ability to collaborate more effectively in the cloud, which should indirectly help slack and increase interest in the market overall. I want to bring in nico grant. Hes been covering slack for us at bloomberg technologies. Give us your top takeaways. What happened to the top line Revenue Growth . Taylor, this is an instance in which slacks status was not good enough. Weve seen for years that slack was one of the most hyped unicorns in sylvan in silicon valley. It rated at least 1. 3 billion because of all that anticipation, and the stock it raised at least 1. 3 billion because of all that anticipation, and the stock went down 15 today. The stock went down about 20 after that first top when it went public in june. And the reason why is because the company is decelerating. And so whether we consider the revenue forecast for fiscal 2020, which was just short of the consensus estimate of wall street analysts or we consider the growth in the number of paid customers and large customers but for many metrics, slack is not growing as quickly as it once did. There is a lot of gravity when it comes to these cloud Applications Companies and the larger that you get the more difficult it is to continue growing at the same rate, but slack is a money losing company, and so, you know, from an investor perspective, if youre not making money, then you need to be growing, and if youre not making money and youre not growing as quickly as we want you to, then were a little bit concerned. Not only did it get the investment perspective but you got the word from the c. E. O. I just spoke on the phone with the slack cofounder as well as the cfo, and butterfield said basically, you know, this is very strong growth for our business. The cfo echoed that sentiment. They said that when you consider the amount of customers who are spending more than a hundred thousand dollars each year with slack, think of the largest businesses in the world that number increased by 75 to 720 but thats still a slower pace of growth, and they are very much looking forward to a current product that they have coming out right now which they think can continue to improve things. But they are going to focus about the customer stories basically. Tell them, you know, what companies are using slack. They have seen lots of growth in europe, including germany. They are also seeing growth in the u. S. , they say, but essentially, they are sticking to their line of, this is good enough, even as investors clearly are not happy right now. I want to bring in larr