And we hear from the viagogo chairman and founder after that stubhub cash deal from ebay. First, our top story. Five years ago, alibaba pulled off its biggest ever ipo on wall street, and today, it rang up the biggest share sale in hong home in hong kong in 10 years. The listing is being seen as a triumph for a stock exchange. Stars toyears it lost u. S. Rivals. This comes as prodemocracy protest have gripped the city for weeks. Joining us from washington, john freeman, Vice President of Equity Research at cfra. If you take a look at the company raising an additional 11 billion, where do you see that company in terms of that use of cash . Thank you for having me. It will be interesting to see what they do with the extra cash. I think that brings them to about 43 billion in total, 21 in net cash. I would like to see them invest more heavily into the Cloud Business, which is 8 of revenue now, it was growing 64 yearoveryear growth in the last quarter. We have seen this movie before, how the Cloud Business scales with amazon. With amazon, it is 12 of revenue, 70 of profit. As it crosses the breakeven point soon and they can offer additional services, i think that would be a good way to spend the money. I am sure they will invest some of it along those lines as well as Artificial Intelligence and cognitive computing. I think those are the things i would like to see them focus on with the use of cash. Taylor i want to take a look at a chart i am showing here. It is showing basically alibaba continuing to gain ahead of other big rivals in china we know like tencent, extending that lead, extending that outperformance. Have they not done enough in the Cloud Computing and other sectors you mentioned . It seems, at least from the stock price, they are well ahead of rivals. John they certainly are. But like amazon, when amazon was valued previously, no one really saw the Cloud Business coming. For alibaba, it was more anticipated. Perhaps the cloud, to a large degree, the stock could reflect some of the optimism of that Cloud Business. I think a lot of people dont realize what kind of Earnings Growth that can propel. In the past, Revenue Growth has been well over 40 , but it has Earnings Growth has actually lagged behind Revenue Growth. And sort of the scale efficiencies of the retail business, that can reverse and is likely to reverse such the Earnings Growth will exceed Revenue Growth in the low 30s for the next three years. That is pretty compelling for a stock that is trading at 24 times earnings. You usually dont see that here in the states for a tech company like that. Taylor you have mentioned amazon a few times. I think, over the years, as we have tried to define this company, we would offthecuff say it is the amazon of china. I have heard maybe that is not accurate. As you take a look at this big company with tentacles in many business lines, how do you categorize alibaba . John i think it absolutely is the amazon of china. If you want a revolving door pitch of what it is, that is how you would describe it. Of course, there are significant differences. But they are dominant in ecommerce in china just like amazon is dominant in ecommerce in the united states. They do direct sales as well as support a thirdparty platform for thirdparty sellers. They have a Cloud Business. They are getting into the media and entertainment side. Alibaba of course is also involved in payments, that kind of area, relative to amazon. I do think the companies are similar. One of the things that are propelling alibaba to faster topline growth is the fact that ecommerce is a larger percentage of chinese commerce. Which is of course, growing faster, retail growing faster than the states. Cloud is a lower level on an absolute basis. Therefore it has a chance to really shine. The amazon Cloud Business growing at about 40 . Alibaba, 64 . I think that is what you want to focus on. Those fundamentals. That is how i view the company. Taylor one headline in your Research Says patriotism does not go far in equity investing. As we switch from fundamentals to looking at this hong kong listing, does the company today, given its chinese base, create some goodwill with hong kong by listing with hong kong . John absolutely. Absolutely. I think that is reflected in the fact that this is not an ipo. I heard the word ipo thrown around with this listing. There is nothing initial about it. It is a secondary offering. Normally with a secondary offering, which is diluted, which is, a little more than 2 degree, the stock price declines a little bit. In this case, it went up. That is because mainland chinese were able to purchase shares for the first time directly. That is good. But i think at the end of the day, stock prices reflect Earnings Growth. As a fundamental investor, you need to look at that in evaluating alibaba. Taylor fundamental and patriotic analysis. That is john freeman at cfra. Thank you. Dell is exploring a sale of its cybersecurity business in hopes of garnering at least 1 billion for rsa security. The Company Acquired rsa security through the 2016 takeover of emc, that went for about 2 billion. On tuesday, the computer maker reported thirdquarter earnings with profits topping wall street estimates. For more, lets head to new york where bloomberg deals reporter , liana baker has been covering the story. We are getting the earnings just in the last few minutes or so. The bottom line, the company releasing corporate demand for computers. Walk me through your takeaway. Liana dell sales only grew about 1 , less than analysts thought by a small margin. Earnings did beat analyst estimates. It did say it would try to pay off about 1. 1 billion in debt. That is the story with dell. Dell has longterm debt of about 47 billion. The shares did not really move after its earnings today and they will have a call later. Taylor i want to talk about that deal, this cybersecurit ies space, selling off 1 billion. Is this because they wanted 1 billion to pay down some debt or are they exiting the cybersecurity business that they dont want to be in . Liana as i understand, even if dell gets over 1 billion for rsa, a pioneering Cybersecurity Company it got through acquisition a few years ago, that will not move the needle for paying off debt. They still have 47 billion in longterm debt. But it will help the Company Become leaner. They are really more focused on pcs, storage, infrastructure, and cybersecurity is not a huge focus for them anymore. It has been reported dell has looked before in selling a stake at secure works, a Cybersecurity Services provider. 1 billion, even if it does not does sell, will not be a huge needle mover but it is a big story because rsa is a big name. Taylor its also a big story because the one billiondollar price tag is notably less than what they paid for it a decade or so ago. Is that indicative of the changing landscape among cybersecurity businesses . Liana rsa is a good business. It was founded in 1982 and has high margins. Emc, which dell bought a few years ago, had purchased the company in 2006 and that was a different time. The cloud was just getting off the ground. There are so many Cybersecurity Companies that focus on what rsa focuses on, which is connected corporate employees to their networks. Clients with of tokens in their pockets that generate random codes to let them on the corporate network, but it is a different time. There are newer companies out there, that we talk a lot about. Taylor liana baker from bloomberg, thank you for joining us. Coming up, more tension between google and employees as the Company Fires four workers tied to protests. We have the story next. This is bloomberg. Taylor more tension between management at google and the companys activist workers. Google fired four employees for what they say was violation of Data Security policies. But some supporters of the fired workers say that organizing activities led to their dismissal. Some google staff have been protesting the companys work with the military, amongst other reasons. To discuss all of this, we are joined by rbc capital analyst mark mahaney, and our bloomberg analyst. What do we know about the firing . Alastair four employees. We know a couple of their names, we dont know the other two. All four have been involved in protesting some of the contracts that google has with, for instance, customs and Border Protection agency with the u. S. Government. They have also been protesting some of the things happening in the past couple of years at google, including how the company has handled sexual harassment. The connection between all of those is basically that they have either been involved in or helping lead some of the internal protest. Taylor at what point do you look at this and fold this into your fundamental analysis, if at all . Mark four layoffs on an Employee Base of 110,000, that qualifies as immaterial. If it leads the company to not participate in areas that are potentially commercially attractive like defense contracts, there could be an issue for wall street. There have been some internal dissension, but you would expect it. We are in the bay area, an unusually woke community. You have very actively involved, some of their employees are very actively and politically involved. I dont think this is terribly surprising. I think you would find it in other companies. But a street perspective, only if it really leads to missing out commercial opportunities. Taylor this is not a oneoff situation. Like mark was saying, this is happening a lot at a lot of different tech companies. Where does this sit in terms of size and scope, and increasing distrust between staff and management . Alistair i think google has had a great history where employees have been empowered to say a lot of things on internal message boards, share their thoughts. A lot of the amazing rings google has come up with over the years has come from that. They empower engineers and harness that. Some of that goes away, which is not great. But in general, if the Company Steps away from any other contracts, that would be bad, but i think this latest skirmish is an example of where the company is trying to get everyone back to work and focus on products and strategies. Taylor i want to switch gears a little bit and look at a story from earlier today. We know google had bought fitbit. We learned that facebook was the original anonymous bidder. Will take over fitbit. Where do you see all of these big tech players vying for the wearable space . Mark they are vying for the wearable space. We had google for fitbit, 2 billion cold cash. Facebook for control labs, roughly 500 million. Amazon with two more wearables product, echo loop and frames. When you see three of the major faang names start investing in wearables, we should start paying attention to the space as investors. Not material in the next 23 years, but possibly the next 35 years. Snapchat is another company that has invested aggressively. I dont know if this is the next compute platform like mobile phones, probably not. Or there is something here, companies would not be investing in the space. Taylor what is it about wearables . Alistair i think it is partly ambient computing. We had pcs, then laptops, then phones, then something that is wearable is even more connected with you, goes with you. Maybe in the future, things like Speaker Technology they have, you would be able to just be able to say things and get information that way. I think thats one part. The other part is the data, that google is very interested in how in health technology. If they have that data, it can inform some of the work they are doing in that area. Taylor we have been talking about google, facebook, twitter a little bit. To the campaign ad policies of these companies. Google seems to have been coming in the middle with facebook on one side, twitter on the other. How do you view googles political ad policy . Mark i think it is still a work in progress at all three of these companies. Twitter made a statement about not allowing political advertising. I know we talked about that before. That struck me as sort of an extreme position. There seems to be increasing pressure on these companies, if they are going to accept political advertising, they them. Fact check that would be a great solution for facebook, they said are not going to fact check but they probably should. That is personal opinion. The only reason it matters, we have a major election coming this year and there is a fair amount of revenue associated with this. We think there will be at least 2 billion spent online trying to influence peoples political opinion and how they vote. That is a good thing, but how it is spent people want to see more transparency, that is the basic thing that most voters, citizens want to see. They should offer that. None of them are actually doing a great job of showing Greater Transparency but they should be able to do it. Taylor bloombergs alistair barr, thank you for joining us. Lucky for us, mark mahaney will be sticking around. Coming up, his top tech picks for 2020. What he sees as the stock most undervalued. That is next. This is bloomberg. Taylor we are wrapping up thirdquarter earnings and the Communication Services sector posted some strong topline Revenue Growth yearoveryear. The best of all the s p sectors. The bottom line is telling is a telling us a different story. Taking a look at earningspershare growth yearoveryear, relatively muted. Still with us, rbc analyst mark mahaney. What happened in the Third Quarter in the middle of that income statement where profitability growth was less than topline Revenue Growth . Mark i think at the top of that list would be amazon. They surprised on profits because they are doubling down on this oneday investment, making prime oneday. That is an expensive investment. I think there is a more interesting story at the other side of the profitability curve. We saw some companies that brought forward their profitability timelines. Uber and lyft. Snapchat is just about print its first positive ebitda quarter. Pinterest is turning the corner on profitability, too. I was struck by the positive Inflection Points rather than the negative ones. Taylor you brought up lyft and uber. Are you confident that 2021 targets are intact . Mark no. I think they have a high profitability of getting thereby insurance costs. It is a big expense. I think they also have pricing power. I think these companies, as private companies, were run really inefficiently, really aggressively, more growth, which means a lot of wasteful spending. You bring them public, public investors come in and say, we need profits. The management teams are responding to that. I think theres a lot of room to take out excess cost without sacrificing growth. Weve seen it the last two or three quarters and i think we will see that in the next two or three quarters and we will become more confident in 2021 profitability. Taylor how much of a hit for uber was the london news this week where they temporarily did not get their license reviewed . License renewed . Its a big issue. Tbd. I want to be careful here. I dont think they have been kicked out of london. This has happened to them before, where they have had their license threatened. They will appeal the decision, be able to continue to operate for a couple of months. I assume there will be able to work it out with the london powers that be, the taxi commissions. There is no doubt that uber and lyft have taken on taxis. They have done it in multiple markets. Consumers have voted strongly that they like ridesharing services. I assume consumers in london will speak up too. It is not over yet. They have not been kicked out yet. My guess is that, as happened about a year ago, they will stay in the market, they will just have to work on more concessions. Taylor in your recent note wrapping up thirdquarter earnings, what surprised me was facebook remains one of your largecap top picks. As you take a look back at where this company has run with all the regulatory scrutiny, why facebook . Mark you are right facebook, microsoft, google, amazon, apple. Facebook is certainly in the crosshairs. Im not sure they have done anything that cuts across antitrust lines but they have had issues with data privacy, user data protection. We are focused on that, concerned about that. That said, i think that is more than priced in. You can buy the stock at a discount to the growth rate. I think the fundamentals are the strongest in the largecap internet space in terms of Free Cash Flow generation. Taylor another big theme of the year, the streaming war. Disney . Where do all of the streaming wars fit into your thesis . Mark there clearly is a major Inflection Point here. Netflix went out on a limb and said we think there could be a market for streaming. I guess everybody has finally agreed. Everybody will step in. But the biggest competition for netflix has launched, that is disney. Look at netflixs stock. When it finally started trading up was the first day disney was out because that risk is in the stock. It is safer to get in the water. Right now, this is a scale business. Whoever has the most subs can afford to spend on content. Netflix has the most global subs today, and my guess is in three years, it still will. There could be a lot of upside in netflix shares starting right here. Taylor we have about 30 seconds. Take a look at this chart. What you think is the biggest play in streaming is roku. They are crushing it. Crushing the shorts, crushing everyone, but it has been volatile. Why roku . Mark if you are going to be a streaming provider and you want to advertise your service, why dont you market to all those people already using roku devices . And if