Transcripts For BLOOMBERG Best Of Bloomberg Technology 20170

For those in the states to the banned nation. 2. 1 million vehicles were sold worldwide in 2016. In 2016 by toyota. Last time i checked, shares were under a bit of pressure. Unchanged at the moment. We have news coming to you all day, everyday. We have the world covered. Caroline i am caroline hyde. This is the best of Bloomberg Technology, where we bring you all our top interviews this week from tech. Coming up, the tech earnings season heats up, alphabet, microsoft and intel reporting this week. Cis the dow clarkson locks in above 20,000. Verizon targets charter communications, but will it help verizon keep pace with at t . And cisco swoops in. The ceo told us a 3. 7 billion acquisition terminates the first major tech ipo of 2017. First, to our lead, a huge week for tech earnings. Alphabet, microsoft, intel, qualcomm all reporting. This at a time when the dow jones was beyond the 20,000 level for the first time. Lets kick things off with alphabet reporting on thursday. Our conversation with adam burke. Take a listen. You have to take a step back. Here is a company that makes massive amounts of money, has massive levels of growth and yet people are finding those little areas. The problem is always expectations. Obviously we will talk more about this, but the ad click numbers is clearly a challenge for them. Whats good is we are seeing them spend money on some other of these other bets that i think will pay off. In the short term, there is extra money being spent, but i think they have a number of very interesting opportunities. Google recognizes that they have to extend pardon me, they have to extend the on to the beyond the advertising business model. These bets are surely going to start to pay off. We are starting to see spending in those areas where we will see growth later. Caroline lets take a look at the advertising revenue element when you add them. Im seeing cost per click falling 15 . But they are still managing to lure in more people to buy those adverts. They are going up 36 . Is there worry about that . To a degree, that the declining cost per click is interesting. Conversion rates are still low on mobile devices, so therefore the advertisers that are marketing those businesses are less inclined to pay up for clicks that happen on mobile devices. That is all more or less to be expected. I think the bigger question is around the click metric in general. We are hearing from our customers they are starting to question how valuable our clicks are overall. Caroline explain that. Obviously, the Search Engine is googles cash cow. It has been for some time. The default behavior for an ad on a Search Engine is to click it and to click all those blue links. In youtube, you are viewing an ad. So that could be a very good thing for google. You are opening up to a whole new range of use cases, a whole new range of verticals. You dont tend to click to convert to buy laundry soap unless you are shopping on amazon, that can open up a pbg category, but the whole click metric will get a lot of noise the bigger and more important youtube gets. Caroline we are just hearing from the ceo of the google admin of the business, and he said the the key power, the three biggest bets, youtube is the first one, cloud, and hardware. Lets dig in with you more on cloud and the hardware. Cloud, they say, is their fastestgrowing area of business. But they have tough competition from amazon and microsoft. They do. Microsoft also showed big growth, but it is a large area. There is a lot of opportunity for everybody. This is a case of raise all boats kind of thing. I think we will see google kind continue to expand that cloud business, and if they can start to leverage some of their machine learning, some of their ai capabilities and integrate that into their cloud offering, that could differentiate from somewhat from both what microsoft and amazon are doing. Both of those companies are doing that, as well, but they each have their own special sauce, special flavor. On the other side, this is a company that is hardly dependent on one area. It does raise some concerns longterm. How long can they possibly sustain that . So lets look at what they are doing. They spent a lot of money advertising the pixel. That is part of the reason why the costs were so high. We have all seen the ads, nice piece of hardware. Google home looks like a very nice piece of hardware. They have daydream on the Virtual Reality side. There are a number of areas they are starting on and will take a while, but they are laying a foundation to do some nice growth in hardware and Additional Services on top of that hardware. Caroline back to the youtube element of business, you think this could become the powerhouse Going Forward . When does it start to show its dominance . They dont really break it out for us. Yeah, i absolutely think it is a huge opportunity. I think where people get it somewhat wrong or diminish the opportunity is thinking of it as tv dollars moving through online video. That is not all it is. It is actually a growing the pie scenario, because it is all kinds of businesses where the owner has an iphone 7 and can create a quick video and promote that on youtube and facebook. Caroline it might be a pixel. Exactly, yeah, but that is an example of an advertiser who never would have bought a tv ad. So all those tv ads will likely move towards digital, but it also opens up a whole new set of demand because of lower friction and lower barrier to entry. For digital video. Caroline that was adam burke and bob odonnell. Speaking of alphabet, the company has ended its 12 year relationship with one of washingtons most prominent lobbying groups. The group is no longer lobbying on behalf of google. They had longstanding ties to the Democratic Party and hillary clinton. This change coincides with googles bid to hire someone for conservative outreach, and of course as a Republican Administration takes the white house. Staying on the earnings beat this week, sap raised its targets for 2020, citing a surge in customer purchasing of the latest applications at a faster pace. The updated outlook came out with the companys fourthquarter sales, which were in line with estimates. Sap is transitioning from software installed on customer computers to online Cloud Computing tools. The ceo spoke with bloomberg tv about the companys strength in the u. S. Marketplace. Clearly any Enterprise Company operating in the Global Economy is almost always running sap, so we like to think that our purpose in the United States will only get stronger because we can help the new president take cost out of the equation where it should and focus on growth where you can. That is why you need mobile Global Players like sap to be great partners, and we will be. Caroline still ahead, appdynamics was on track to be the first major u. S. Tech ipo, that was before cisco snapped it up this week. We speak with the cisco Ceo Chuck Robbins on the acquisition later this hour. And another possible megadeal as verizon approaches charter about a possible tie up. All the details, ahead. This is bloomberg. Caroline and now to some big deal news of the week, Verizon Communications ceo has approached Liberty Media about a possible tie up with charter communications. A verizoncharter combo would create a telecommunications and cable giant, bolting the company to the number one spot of u. S. Internet providers. Here is some of the background behind this move. A combination of verizon and charter would not be a merger. It would be a megamerger, and it is not the first one we have seen recently, like at t 109 million bid for time warner. And charters own recent move to acquire Time Warner Cable and bright house last year. Now valued at 103 billion, this acquisition may charter the secondlargest cable operator in the u. S. , just behind comcast. Currently verizon is the number one mobile carrier and the number two telecommunications provider, but the company has been facing a slowdown in its core wireless business. This proposed deal would bring together thousands of miles of fiber optic internet capacity at a time of soaring demand for faster broadband. Tempting as the industry gets more saturated and consumers cut the cord. Caroline quite a bit of information to go through in this potential tie up. Joining us from new york is walter who focuses on this and has a neutral rating on verizon. Welcome to the show, walter. Thank you for your time. Verizon numbers as we saw this week were looking pretty intense. With this tie up be helpful with charter . Walter the tieup with charter would not cure the ills of the wireless business, which is having issues. Their competitors are offering unlimited plans, and verizon has resisted that probably because they have 100 million customers, and it is unclear if the network could handle that type of usage. So with charter and 5g, that is a section of the market. It is unclear how high quality the assets are that charter has that would enable 5g versus comcast to have much better investments historically. It doesnt shore up anything. It just adds a different business and one that generates its own free cash flow. Caroline i think what is interesting here, we are starting to see a division in the ranks of what the best tactic is for the future. You have at t and time warner saying content is king, and then we see infrastructure isnt really up to much. Walter for a while, the ceo of verizons strategy was to go wireless, and they were shutting ding a lot of fixed stuff, and all of a sudden you have an issue where wireless is not the best thing or the only thing for them to do. So it seems there is a lot of pressure on the company in order to make some sort of changing transaction for them. I think your own, bloombergs own alex sherman talked today about them looking at 10 companies. That makes a lot of sense to us. They have issues in the wireless business. There is a whole host of companies they are looking at, and now with the new administration, there tends to be this anything goes mentality where you can proceed with any type of transaction at this point, it seems like, right . Caroline maybe not an at ttimewarner one. What about the other 10 companies that verizon could be looking at . Who would be a good fit in your point of view . Walter if they are interested in fiber, that would make a lot of sense if they want to have a wireless capacity. And hurt tmobiles ability to get capacity, then they should buy dish. If they want content, maybe they should look at disney. If they want to diversify the slowing business that they have and get more slowing business and more diverse, maybe they should look at vodafone. There are so many different options that verizon could look at Going Forward. The fact that they are talking to charter is i think it is interesting. It is not really surprising given the challenges they face. And a bigger question for comcast, if we are in an anything goes environment, why shouldnt comcast also be looking at charter . Maybe this whole conversation with liberty is just liberties liberty saying to comcast, why dont you guys, take a look at us and really all these deal start together some pace . Caroline so regulatory hurdles, seeingu forcing for fewer in this new administration, or is the land not clear yet . Walter the land is not clear. Doj should have major issues with these printtmobile transaction, and yet the market thinks with great confidence that that transaction can get done. On the fcc times of things, with the new chairman of the fcc, i think the perception is that there is not going to be as much problem with transactions or the fcc using the power they have to evaluate these things based on the public interest, but the doj is a methodical type of organization. So we are skeptical that if sprint and tmobile tried it that they would be successful. If we are wrong and the market is right, then again, why shouldnt comcast be looking at charter . Caroline we have to get back to earnings now as it was a big story in tech this week. Cory johnson joined us with bob odonnell to dig through the takeaways. The azure business continues to grow for them, nearly doubled, and there is no sign of that slowing down. There is a huge opportunity, as we discussed briefly before, amazon, google, and microsoft all driving this business. A lot of interest there, and we are seeing each of these vendors and microsoft in particular trying to focus on adding interesting artificial intelligence, speech recognition capabilities, so that other developers can take advantage of this on, if theyre going to use microsofts cloud services. So we will see more exciting developments. The office 365 business is very interesting as well because they successfully moved from this model where we used to pay for a copy of office to now where we pay a subscription. And in the long run, that has some nice financial benefits. We are seeing some of the opportunities they are driving from that as well. Interestingly enough, even the Windows Business did ok. Caroline that old chestnut. They still had some opportunity. And of course they are heavily involved with gaming. That is a hot area as well. So they are nicely positioned as we move forward. Caroline what about the acquisition of linked in, cory . Did we get any hints about how thats adding . Cory they are very much separate businesses now, but how long will that be the case . Microsoft more than any company has screwed up merger after merger after merger going back decades, so can this one be different . They certainly hope so. The plan is to keep this as a separately operated company. The results of course in the First Quarter that it will be consolidated, but the question is, how much will this be in the future . Bob one thing i would jump in briefly, with office 365, there is a very interesting mix between some of the linkedin capabilities with office as you tie Contact Information from outlook and other things into linkedin. That seems like a reasonable mix. We will see what happens. Caroline more sales potential there. What about intel . I know you have been all over these earnings today, cory. Cory intel is really interesting. With all the companies we are talking about today, we are talking about this seismic change in computing, moving from Companies Buying lots of equipment to companies borrowing equipment and doing it over the cloud. So what you saw from the intel result is intel trying to wrestle with that issue where they had this profitable business, pc contracting, server business also very profitable, trying to move into a lower margin environment with more memory. When i talked to the ceo, the chief financial manager, what he had to say about the pc market was interesting. Intel saw rising sales into a shrinking market with pcs, so we enter the year with a somewhat cautious view for the pc cap here. They expect pcs to continue to contract, and they are worried about that, but at the same time, they think their datacenter business might be strong. So when they look at how they can guide towards flat margins and growth that is still growing, you know, in its own shrinking industry, that is by selling better stuff in the data centers and by trying to keep those margins together on the other side. We expect the average selling price will be a little bit better for all of their products as they bring new products for the data center business, then he looks down at the market and that this im time, we are looking for higher growth with lowmargin products of memory and modem. More lowmargin, which will hurt their highmargin business on the data center side. Caroline that was editor at large cory johnson and bob odonnell of technical assist research. Coming up, chinas biggest internet giants are vying for the attention of smartphone users for the Lunar New Year holiday. We will take you inside the tencent headquarters in shenzhen for a closer look at its mobile payment strategy. And a reminder that all episodes of Bloomberg Technology are now Live Streaming on twitter, check us out weekdays at 5 00 p. M. In new york, 2 00 p. M. In san francisco. This is bloomberg. Caroline it seems samsung isnt the only company with battery issues. Hb has recalled over 100,000 lithiumion batteries from laptops. It is not new but instead an expansion of the 41,000 recalled back in june 2016. The Consumer Products Safety Commission said the reason for the recall is possible overheating that can pose fire and burn hazards. Hp says it will provide a free replacement for each eligible battery. Now the chinese Lunar New Year tradition of handing out cashstuffed red envelopes has entered the 21st century. It has migrated to the smartphone with millions of people expected to send gifts to digitally this year. According to tencent, users sent more than 8 billion in digital envelopes in one day last year. Mobile transactions have doubled. Bloomberg News Reporter Tom Mackenzie went inside tencents headquarters in shenzhen. Tom Chinese New Year is a boon for mobile payment companies, thanks in large part to the digitization of this centuriesold tradition. Well over one billion mobile transactions are expected this year as people fire off virtual red envelopes via their phone. Valued at just 32 million in 2012, chinas mobile Payment Market was worth 1. 8 trillion last year. According to hide research. Tencents wechat and alibabas affiliated alipay are the two biggest rivals in this space. Their apps allow you to do everything from buying a latte to taking out a personal loan. It is all about getting an edge. In recent years, we have seen many players emerging in the mobile payments markets, including banks and other thirdparty payment platforms. The competition is so fierce, it is almost brutal. Tom with more and more chinese embracing mobile payments, alipay and wechat have come to dominate with 90 market share, and that has drawn the attention of regulators who are expected to ramp up controls this year. The peoples bank of china wants Bloomberg Technology<\/a>, where we bring you all our top interviews this week from tech. Coming up, the tech earnings season heats up, alphabet, microsoft and intel reporting this week. Cis the dow clarkson locks in above 20,000. Verizon targets charter communications, but will it help verizon keep pace with at t . And cisco swoops in. The ceo told us a 3. 7 billion acquisition terminates the first major tech ipo of 2017. First, to our lead, a huge week for tech earnings. Alphabet, microsoft, intel, qualcomm all reporting. This at a time when the dow jones was beyond the 20,000 level for the first time. Lets kick things off with alphabet reporting on thursday. Our conversation with adam burke. Take a listen. You have to take a step back. Here is a company that makes massive amounts of money, has massive levels of growth and yet people are finding those little areas. The problem is always expectations. Obviously we will talk more about this, but the ad click numbers is clearly a challenge for them. Whats good is we are seeing them spend money on some other of these other bets that i think will pay off. In the short term, there is extra money being spent, but i think they have a number of very interesting opportunities. Google recognizes that they have to extend pardon me, they have to extend the on to the beyond the advertising business model. These bets are surely going to start to pay off. We are starting to see spending in those areas where we will see growth later. Caroline lets take a look at the advertising revenue element when you add them. Im seeing cost per click falling 15 . But they are still managing to lure in more people to buy those adverts. They are going up 36 . Is there worry about that . To a degree, that the declining cost per click is interesting. Conversion rates are still low on mobile devices, so therefore the advertisers that are marketing those businesses are less inclined to pay up for clicks that happen on mobile devices. That is all more or less to be expected. I think the bigger question is around the click metric in general. We are hearing from our customers they are starting to question how valuable our clicks are overall. Caroline explain that. Obviously, the Search Engine<\/a> is googles cash cow. It has been for some time. The default behavior for an ad on a Search Engine<\/a> is to click it and to click all those blue links. In youtube, you are viewing an ad. So that could be a very good thing for google. You are opening up to a whole new range of use cases, a whole new range of verticals. You dont tend to click to convert to buy laundry soap unless you are shopping on amazon, that can open up a pbg category, but the whole click metric will get a lot of noise the bigger and more important youtube gets. Caroline we are just hearing from the ceo of the google admin of the business, and he said the the key power, the three biggest bets, youtube is the first one, cloud, and hardware. Lets dig in with you more on cloud and the hardware. Cloud, they say, is their fastestgrowing area of business. But they have tough competition from amazon and microsoft. They do. Microsoft also showed big growth, but it is a large area. There is a lot of opportunity for everybody. This is a case of raise all boats kind of thing. I think we will see google kind continue to expand that cloud business, and if they can start to leverage some of their machine learning, some of their ai capabilities and integrate that into their cloud offering, that could differentiate from somewhat from both what microsoft and amazon are doing. Both of those companies are doing that, as well, but they each have their own special sauce, special flavor. On the other side, this is a company that is hardly dependent on one area. It does raise some concerns longterm. How long can they possibly sustain that . So lets look at what they are doing. They spent a lot of money advertising the pixel. That is part of the reason why the costs were so high. We have all seen the ads, nice piece of hardware. Google home looks like a very nice piece of hardware. They have daydream on the Virtual Reality<\/a> side. There are a number of areas they are starting on and will take a while, but they are laying a foundation to do some nice growth in hardware and Additional Services<\/a> on top of that hardware. Caroline back to the youtube element of business, you think this could become the powerhouse Going Forward<\/a> . When does it start to show its dominance . They dont really break it out for us. Yeah, i absolutely think it is a huge opportunity. I think where people get it somewhat wrong or diminish the opportunity is thinking of it as tv dollars moving through online video. That is not all it is. It is actually a growing the pie scenario, because it is all kinds of businesses where the owner has an iphone 7 and can create a quick video and promote that on youtube and facebook. Caroline it might be a pixel. Exactly, yeah, but that is an example of an advertiser who never would have bought a tv ad. So all those tv ads will likely move towards digital, but it also opens up a whole new set of demand because of lower friction and lower barrier to entry. For digital video. Caroline that was adam burke and bob odonnell. Speaking of alphabet, the company has ended its 12 year relationship with one of washingtons most prominent lobbying groups. The group is no longer lobbying on behalf of google. They had longstanding ties to the Democratic Party<\/a> and hillary clinton. This change coincides with googles bid to hire someone for conservative outreach, and of course as a Republican Administration<\/a> takes the white house. Staying on the earnings beat this week, sap raised its targets for 2020, citing a surge in customer purchasing of the latest applications at a faster pace. The updated outlook came out with the companys fourthquarter sales, which were in line with estimates. Sap is transitioning from software installed on customer computers to online Cloud Computing<\/a> tools. The ceo spoke with bloomberg tv about the companys strength in the u. S. Marketplace. Clearly any Enterprise Company<\/a> operating in the Global Economy<\/a> is almost always running sap, so we like to think that our purpose in the United States<\/a> will only get stronger because we can help the new president take cost out of the equation where it should and focus on growth where you can. That is why you need mobile Global Players<\/a> like sap to be great partners, and we will be. Caroline still ahead, appdynamics was on track to be the first major u. S. Tech ipo, that was before cisco snapped it up this week. We speak with the cisco Ceo Chuck Robbins<\/a> on the acquisition later this hour. And another possible megadeal as verizon approaches charter about a possible tie up. All the details, ahead. This is bloomberg. Caroline and now to some big deal news of the week, Verizon Communications<\/a> ceo has approached Liberty Media<\/a> about a possible tie up with charter communications. A verizoncharter combo would create a telecommunications and cable giant, bolting the company to the number one spot of u. S. Internet providers. Here is some of the background behind this move. A combination of verizon and charter would not be a merger. It would be a megamerger, and it is not the first one we have seen recently, like at t 109 million bid for time warner. And charters own recent move to acquire Time Warner Cable<\/a> and bright house last year. Now valued at 103 billion, this acquisition may charter the secondlargest cable operator in the u. S. , just behind comcast. Currently verizon is the number one mobile carrier and the number two telecommunications provider, but the company has been facing a slowdown in its core wireless business. This proposed deal would bring together thousands of miles of fiber optic internet capacity at a time of soaring demand for faster broadband. Tempting as the industry gets more saturated and consumers cut the cord. Caroline quite a bit of information to go through in this potential tie up. Joining us from new york is walter who focuses on this and has a neutral rating on verizon. Welcome to the show, walter. Thank you for your time. Verizon numbers as we saw this week were looking pretty intense. With this tie up be helpful with charter . Walter the tieup with charter would not cure the ills of the wireless business, which is having issues. Their competitors are offering unlimited plans, and verizon has resisted that probably because they have 100 million customers, and it is unclear if the network could handle that type of usage. So with charter and 5g, that is a section of the market. It is unclear how high quality the assets are that charter has that would enable 5g versus comcast to have much better investments historically. It doesnt shore up anything. It just adds a different business and one that generates its own free cash flow. Caroline i think what is interesting here, we are starting to see a division in the ranks of what the best tactic is for the future. You have at t and time warner saying content is king, and then we see infrastructure isnt really up to much. Walter for a while, the ceo of verizons strategy was to go wireless, and they were shutting ding a lot of fixed stuff, and all of a sudden you have an issue where wireless is not the best thing or the only thing for them to do. So it seems there is a lot of pressure on the company in order to make some sort of changing transaction for them. I think your own, bloombergs own alex sherman talked today about them looking at 10 companies. That makes a lot of sense to us. They have issues in the wireless business. There is a whole host of companies they are looking at, and now with the new administration, there tends to be this anything goes mentality where you can proceed with any type of transaction at this point, it seems like, right . Caroline maybe not an at ttimewarner one. What about the other 10 companies that verizon could be looking at . Who would be a good fit in your point of view . Walter if they are interested in fiber, that would make a lot of sense if they want to have a wireless capacity. And hurt tmobiles ability to get capacity, then they should buy dish. If they want content, maybe they should look at disney. If they want to diversify the slowing business that they have and get more slowing business and more diverse, maybe they should look at vodafone. There are so many different options that verizon could look at Going Forward<\/a>. The fact that they are talking to charter is i think it is interesting. It is not really surprising given the challenges they face. And a bigger question for comcast, if we are in an anything goes environment, why shouldnt comcast also be looking at charter . Maybe this whole conversation with liberty is just liberties liberty saying to comcast, why dont you guys, take a look at us and really all these deal start together some pace . Caroline so regulatory hurdles, seeingu forcing for fewer in this new administration, or is the land not clear yet . Walter the land is not clear. Doj should have major issues with these printtmobile transaction, and yet the market thinks with great confidence that that transaction can get done. On the fcc times of things, with the new chairman of the fcc, i think the perception is that there is not going to be as much problem with transactions or the fcc using the power they have to evaluate these things based on the public interest, but the doj is a methodical type of organization. So we are skeptical that if sprint and tmobile tried it that they would be successful. If we are wrong and the market is right, then again, why shouldnt comcast be looking at charter . Caroline we have to get back to earnings now as it was a big story in tech this week. Cory johnson joined us with bob odonnell to dig through the takeaways. The azure business continues to grow for them, nearly doubled, and there is no sign of that slowing down. There is a huge opportunity, as we discussed briefly before, amazon, google, and microsoft all driving this business. A lot of interest there, and we are seeing each of these vendors and microsoft in particular trying to focus on adding interesting artificial intelligence, speech recognition capabilities, so that other developers can take advantage of this on, if theyre going to use microsofts cloud services. So we will see more exciting developments. The office 365 business is very interesting as well because they successfully moved from this model where we used to pay for a copy of office to now where we pay a subscription. And in the long run, that has some nice financial benefits. We are seeing some of the opportunities they are driving from that as well. Interestingly enough, even the Windows Business<\/a> did ok. Caroline that old chestnut. They still had some opportunity. And of course they are heavily involved with gaming. That is a hot area as well. So they are nicely positioned as we move forward. Caroline what about the acquisition of linked in, cory . Did we get any hints about how thats adding . Cory they are very much separate businesses now, but how long will that be the case . Microsoft more than any company has screwed up merger after merger after merger going back decades, so can this one be different . They certainly hope so. The plan is to keep this as a separately operated company. The results of course in the First Quarter<\/a> that it will be consolidated, but the question is, how much will this be in the future . Bob one thing i would jump in briefly, with office 365, there is a very interesting mix between some of the linkedin capabilities with office as you tie Contact Information<\/a> from outlook and other things into linkedin. That seems like a reasonable mix. We will see what happens. Caroline more sales potential there. What about intel . I know you have been all over these earnings today, cory. Cory intel is really interesting. With all the companies we are talking about today, we are talking about this seismic change in computing, moving from Companies Buying<\/a> lots of equipment to companies borrowing equipment and doing it over the cloud. So what you saw from the intel result is intel trying to wrestle with that issue where they had this profitable business, pc contracting, server business also very profitable, trying to move into a lower margin environment with more memory. When i talked to the ceo, the chief financial manager, what he had to say about the pc market was interesting. Intel saw rising sales into a shrinking market with pcs, so we enter the year with a somewhat cautious view for the pc cap here. They expect pcs to continue to contract, and they are worried about that, but at the same time, they think their datacenter business might be strong. So when they look at how they can guide towards flat margins and growth that is still growing, you know, in its own shrinking industry, that is by selling better stuff in the data centers and by trying to keep those margins together on the other side. We expect the average selling price will be a little bit better for all of their products as they bring new products for the data center business, then he looks down at the market and that this im time, we are looking for higher growth with lowmargin products of memory and modem. More lowmargin, which will hurt their highmargin business on the data center side. Caroline that was editor at large cory johnson and bob odonnell of technical assist research. Coming up, chinas biggest internet giants are vying for the attention of smartphone users for the Lunar New Year<\/a> holiday. We will take you inside the tencent headquarters in shenzhen for a closer look at its mobile payment strategy. And a reminder that all episodes of Bloomberg Technology<\/a> are now Live Streaming<\/a> on twitter, check us out weekdays at 5 00 p. M. In new york, 2 00 p. M. In san francisco. This is bloomberg. Caroline it seems samsung isnt the only company with battery issues. Hb has recalled over 100,000 lithiumion batteries from laptops. It is not new but instead an expansion of the 41,000 recalled back in june 2016. The Consumer Products<\/a> Safety Commission<\/a> said the reason for the recall is possible overheating that can pose fire and burn hazards. Hp says it will provide a free replacement for each eligible battery. Now the chinese Lunar New Year<\/a> tradition of handing out cashstuffed red envelopes has entered the 21st century. It has migrated to the smartphone with millions of people expected to send gifts to digitally this year. According to tencent, users sent more than 8 billion in digital envelopes in one day last year. Mobile transactions have doubled. Bloomberg News Reporter<\/a> Tom Mackenzie<\/a> went inside tencents headquarters in shenzhen. Tom Chinese New Year<\/a> is a boon for mobile payment companies, thanks in large part to the digitization of this centuriesold tradition. Well over one billion mobile transactions are expected this year as people fire off virtual red envelopes via their phone. Valued at just 32 million in 2012, chinas mobile Payment Market<\/a> was worth 1. 8 trillion last year. According to hide research. Tencents wechat and alibabas affiliated alipay are the two biggest rivals in this space. Their apps allow you to do everything from buying a latte to taking out a personal loan. It is all about getting an edge. In recent years, we have seen many players emerging in the mobile payments markets, including banks and other thirdparty payment platforms. The competition is so fierce, it is almost brutal. Tom with more and more chinese embracing mobile payments, alipay and wechat have come to dominate with 90 market share, and that has drawn the attention of regulators who are expected to ramp up controls this year. The peoples bank of china wants Companies Like<\/a> ant financial to register their deposits at stateowned banks. It is also developing its own crypto currency to be used in online transactions. We follow all the regulatory guidelines in the institution of financial services, and as that adapts as it will continuously adapt and continue to adapt, we adjust our models to reflect what the regulations require. Tom chinas banks are certainly feeling the pain. Market Research Firms<\/a> estimate lenders here lost about 22 billion in payment revenue to alipay and wechat in 2015. That disruption is not stopping at chinas borders. Ant financial is trying to capitalize on the 150 million chinese who travel abroad every inr, teaming up with vendors key tourist destinations. It has also invested in indias paytm and is eyeing further expansion elsewhere. Most of the activity in this region, but we look closely at the u. S. , europe, and what is the right strategy there as well, and so we really do have a global perspective and global ambition, and we will roll that out as we determine the right partners. Tom chinas mobile payment giants are on a roll, but succeeding abroad is likely to be their biggest challenge yet. Caroline bloomberg News Reporter<\/a> Tom Mackenzie<\/a> joins us live now from beijing. Thank you for getting up so early for us, tom. You talked in the piece, you interviewed a lady who spoke about the brutal competition that there was. Who are the Key Competitors<\/a> to the likes of alipay and wechat . How are they tackling it . Tom first of all, there is a lot of bloodletting between alipay and wechat, and wechat has expanded its market share in 2014 from 11 to 20 , whereas alipay has seen its market share fall off from 82 to 68 in the same period. You have the other competitors, apple pay, they launched. We also have huawei, they have their own payment system. Samsung, of course, android. Most people have baidu or jd. Com with a jd finance, the Wealth Management<\/a> side of things. In terms of what alipay and wechat are offering, they have got this ecosystem, so apps within an app that makes it easy to use their mobile Payment Systems<\/a> to do all these sorts of things, whether that is managing your wealth or buying flights to travel abroad. So for the challenges, they have to take on that element of things. In terms of apple, they have the brand strength, they are still a very popular smartphone maker, but they use the nfc codes instead of qr codes that are so popular in china, and it will lead to a challenge for apple to carve out market share here. Caroline you mentioned global expansion, india. What is happening there . Tom so alipay have been leading the march on this one. They teamed up with banks in europe, stores in london. They have also teamed up with verifone in the u. S. So alipay making a big push on this. It comes down to branding and brand recognition. Have they got that . They have clout, can they take on apple in the u. S. . That will go for the Chinese Tourists<\/a> that travel abroad every year, 150 million as it stands. Caroline that was bloomberg News Reporter<\/a> Tom Mackenzie<\/a> from shenzhen, china. Up next, appdynamics ipo was officially squashed. We will dive into what this means for 2017s pending batch of ipos. And if you like bloomberg news, check us out on the radio. You can now listen on the Bloomberg Radio<\/a> app and on sirius xm. This is bloomberg. It is 1 30 in hong kong. The white house says green cardholders will not be affected by President Trump<\/a>s immigration order. So, several companies have come into all of this. Google morning staff from the seven listed countries involved to not leave the United States<\/a>. Microsoft calls the order misguided and nike says they dont support the policy. Toyota is no longer the biggest selling carmaker. Theyve had the worst year in its history. Volkswagen managed a managed 10. 3 million. They are struggling with their image. General motors have their numbers out next week, if they fall short, vw will be the number one for the first time ever. Its resident will stay on the role until his term ends. He is taking responsibility for his role. Toshiba is considering selling assets including a stake in its chip business to rebalance the books. I do feel a big responsibility for what happened this time, but it is up to the Nomination Committee<\/a> to decide my future. I am determined to complete my task until march. Advisor to the bank of japan says there is no chance rates will be raised to the 2 target. The banks commitment to the number means it is a short of reaching its goals. The bank could be potentially forced to buy more bonds. Minister theresa may is to meet with the leader of scotland. A judge ruled that scotland need not be consulted about brexit. It will require the approval of British Parliament<\/a> but not regional lawmakers, which could mean a second referendum on scottish independence. We have the world covered. But have a look at the trading day. The markets in this part of world are shut for the holiday. Japan and australia are trading down. We have a lot of Political Uncertainty<\/a> in the u. S. , the japanese market and. Caroline welcome back to the best of Bloomberg Technology<\/a>. I am caroline hyde. Cisco is making an acquisition, the worlds biggest networking maker of networking gear is acquiring appdynamics for 3. 7 billion. Cisco snapped the Software Maker<\/a> before it planned to go public this week. That was the first major u. S. Technology ipo. Bloombergs daybreak america team spoke to the ceo of cisco Chuck Robbins<\/a> on the news. Chuck yesterday was a great day for us. We had on display two great levers of how we drive innovation. Our portfolio. In the morning, we launched cisco smart board, which will revolutionize meetings and business. One of the headlines is that it was one of the coolest products cisco has built. In the afternoon, we made the acquisition of app dynamics, which we think is a fantastic acquisition for us. If you look at them, what they do is they translate application performance into Business Insights<\/a> for the customer, and they do it across private and public cloud, so we think the synergy of what we see at the infrastructure level and what they see at the application layer actually creates visibility that no other company in the industry can provide to our customers. We are excited about it. I was there yesterday. 15 minutes after we made the announcement, i addressed the employee base, and i think they are pretty excited as well. It was a good day for us. I have a couple of questions about the deal itself. You paid a pretty high price, 3. 7 billion. The reports were the ipo would go in for Something Like<\/a> half of that. And also, it is a startup, so it is not about making money. Is it diluted, is the price right, and at what point does it become accretive . Chuck when we looked at the company, there were a few things we looked at that are important to understand. First, they are the best company in this space. Secondly, they are growing twice as fast as their nearest competitor. Third, they are growing faster than any publiclytraded Software Company<\/a> today. Caroline that was Chuck Robbins<\/a>. Staying with ciscos latest acquisition, the recordbreaking sale values appdynamics at about 18 times recent months. That is very good for investors. One of those investors joins us now. I have to say, hats off to you. Congratulations. How much did you put in series a, and what is the reward . We made the series a investment back in 2008 i think a total round of 5. 5 million, and it was about 12. 5 million at the time. Caroline so it is valued at 11. 5 million, now valued at 3. 7 billion. That must be such a reward for you. Did it take you by surprise . Talkserstood there were late at night and hotels. When did you get the offer on the table . We actually signed the agreement with cisco literally minutes before we announced yesterday. We were proceeding down the path to be a Public Company<\/a>, and you know, i think the strong belief in the Company Management<\/a> team and the board that this could be a multibillion dollar business looking forward. You know, cisco and the company did not know each other. A few days ago, chuck, the ceo of cisco invited the ceo of appdynamics over to his home, and that led to intense conversations. The cisco team and the appdynamics team came to the conclusion that merging with cisco could accelerate the mission of the company and gain market share much, much faster. Caroline do you think it would have got a 3. 7 billion valuation anytime soon . You know, it is hard to really tell because we did not go public, but the ipo roadshow was very, very strong. Within a couple of days, the offering was completely subscribed. That data we have is that we had gone public tomorrow, it would have been a very, very strong ipo and likely traded up. Caroline it is fascinating. You have been on the board of appdynamics, in fact, greylock helped this company grow. It was the first offices that were provided. They were working in greylock with you when the company was first born in 2008. Do you think apart from the price tag, cisco is the right way to go rather than listing . I think every company has to make their own determination whether they continue as a Public Company<\/a> or are acquired at some point in the lifecycle. I mean, cisco is clearly a worldclass Technology Company<\/a> with worldclass reach and incredible resources. I think cisco can be an excellent home for appdynamics, both in terms of extending reach for the product line very, very quickly over the Worlds Largest<\/a> enterprises and also in terms of synergy. With the infrastructure monitoring data that cisco has, combining that data with the application and Business Performance<\/a> data that appdynamics has can be powerful looking forward. Caroline what does this say to the highly developed valued unicorns out there at the moment looking at the market, wondering whether to ipo, wondering whether to be acquired . Do you think this might put off others going public . I dont think so. Because i think actually, the indication from the roadshow that the company undertook is that the Public Market<\/a> seems to be very, very open and very receptive for the best of technology businesses. I was in the roadshow, a group lunch in san franciso two days ago, and it was standing room only. The room was full of Public Market<\/a> investors. There was a very rich dialogue going on. Just this morning, my email is full of email messages from Public Market<\/a> investors around the country saying, hey, congrats. We really kind of wanted to purchase stock in this company. Caroline with the first major tech ipo down the drain, what is next for Tech Companies<\/a> pondering going public . Will this spark a flurry of tech m a . We caught up with Pwc Technology<\/a> leader and a bloomberg reporter. Cisco did come in at 3. 7 billion valuation, a lot higher than the 1. 7 billion they were going for, but this is not a common occurrence. We saw bluecoat get bought by symantec, but they were not on the road yet. This company, appdynamics, had done all of their meetings, they had done their roadshows, investors were excited, and i guess cisco was more excited and willing to pull the trigger on a buyout. Caroline could this be a theme, could roadshows just make it all the more hot for bigger Tech Companies<\/a> to buy in and then take them off the market . This coming year, there are a lot of companies coming in. There are 30 or 40 companies we are expecting to have a good chance to come out this year, but we purposely use the language that they will have an exit this year. That doesnt necessarily mean they will have an ipo, but they will have an exit. I think a lot of those companies, if you get into the midrange evaluation group, i think a lot of those companies absolutely are willing to do a dual track and see what their options are. Caroline theres one man out there who is hoping this does not become a theme. We did speak to tom farley am a the president of nike earlier. Have a listen. We are expecting 10 ipos and the next three weeks, including four on friday, three operating company ipos and a closed end funds. Those 10 ipos, they are really big ipos. Caroline alex, this must have got bankers concerned . It does. And the deals tom is talking about some of those are big sponsored companies outside of tech that we have been waiting to see for a while. Laureate, children, Companies Like<\/a> window and door maker. They are clearing out the pipeline, because last year was so choppy in equities, and now we have this trump rally, and so people are taking advantage of it. It is a different story with some of these growthier Tech Companies<\/a>. Investors want to buy in, but there is no supply. And there is still no supply. We have heard about all of these Companies Going<\/a> public, but it will be interesting to see who does kind of test the waters next. Our sources tell us kneel soft could go next. All of these smaller names, but to your point, they are also the ones that when the strategics feel like theyre willing to write the checks that make the valuations they did for the last private round, these are the same Enterprise Companies<\/a> we might see get bought out by the likes of cisco. I agree. If you look at last year, i get it was a record year after a record year, but there was something really interesting about that record last year. A lot of the bigname Technology Companies<\/a> were not the ones who were doing the buying. You go off the traditional serial acquires, they were not actually buying. Caroline the pool is becoming wider. And yet they are interested. They see a lot of these Companies Bringing<\/a> disruptive technologies, cloud, ai, deep learning. Those are attractive assets that are disrupting every industry, and so it is not even just the ciscos, the hps, the walmarts it could be the walmarts of the world. It could be ford, png being acquired i these companies as well. Caroline coming up, more on President Trump<\/a>s meetings with Business Leaders<\/a> this week. How some Tech Companies<\/a> are aligning themselves with the administration. Plus, President Trump<\/a> is making good on his pledge to take down his predecessors prized initiative, but there is one obama effort impacting tech that might be embraced by the new administration. More on that story, next. This is bloomberg. Caroline President Trump<\/a> met with Business Leaders<\/a> at the white house on monday morning, showing that job creation is a top priority. Tech companies around the world are eager to align themselves with the new administration. Lets focus on two of them, foxconn and ibm. First, foxconn, the biggest manufacturer of apple devices , may build a u. S. Factory, a major investment for the company that could create tens of thousands of jobs in President Trump<\/a>s first year in office. Then there is ibm. It pledged to hire 25,000 workers over the next four years, but a new report from bloomberg found big blue cutting jobs as it touts its hiring plans. We discussed President Trump<\/a>s job agenda in a roundtable with the gadfly columnist and Bloomberg Technology<\/a> editoratlarge cory johnson. Alternative facts are not limited to the White House Press<\/a> conferences apparently. The notion ibm is hiring and making press releases and talking at trump tower, meeting with trump tower, talking about adding jobs and spending 1 billion to do so, but at the same time, the company has been cutting jobs, and cutting them rather aggressively. In fact if you look at the number of employees for this ,ompany, what we have seen there are pictures at trump tower, who was part of the transition team, it would. They would be hiring more in the u. S. And spending 1 billion on training, and we see ibm cutting. The number of employees has been declining dramatically over her tenure as ceo. Whereas at the same time, the revenue flow has been declining. If we go to the bloomberg terminal, there is this great command called loss. You type in ibm loss, which you see is a list of all the job cuts. We can scroll through there deftly, and on and on. If you look at this chart, there is a circle whenever it was cut and you can see the stock prices you can see coming down over time even as they have been buying back shares and cutting jobs, thats another way to visualize those job cuts. Caroline they could take half if they are taking cost cory and lowering the share. And earningspershare gets higher. Even then, it has not helped. Caroline lets talk about foxconn. You put out a piece on bloomberg gadfly. You are not buying all the pr around what seems to be a deal coming from foxconn and touting that apple might support them in building this big factory here in the United States<\/a>. And one of the things we need to understand is that foxconn chairman terry gore pointed out it is a wish and not a promise. That is a really important caveat from the billionaire chairman of foxconn. He has make governments around the world believe that maybe he might invest in their countries, but has not always followed through. You cant always blame him for that, because often it is the government and the officials in the government that are getting ahead of themselves, but he has been patient, but also aggressive, going to various governments and saying if you want me in your backyard, you have got to offer incentives. He said that very clearly at the weekend, at the year end party, that he would be looking at looking for the best deal he can get. If that works out, that means tax incentives, cheap land, electricity, all those things that cost money. If you can get the good deal, then sure, he would consider it. It would be mad not to consider it. Caroline tit for tat, not all one way for donald trump. David, weighin here and give us your view on all this pr and whether ceos are learning a new way to address job hirings and firings. David we are living in a world where appearances seem to matter more than ever, and sometimes more than fact. In terms of foxconns building a plant in the u. S. , i think it is an interesting possibility. It would be politically hugely advantageous for apple if they could point to a considerable amount of their own sourcing coming from the u. S. From a very prominent plant. As tim points out, you know, these are auctions where companies are asking people to bid for their business, and from foxconns point of view, it only helps to have these reports out there. But ironically in my opinion, a plant like this is so automated today, that increasingly these Companies Really<\/a> dont care where it is. In the past, they might have needed it to be in china because it was a very labor intensive business, but increasingly it will not be labor intensive, and so i dont think we are talking about nearly the number of jobs bandied about, and i think it is a matter of where they get the incentives. It is not about labor cost anymore because automation is what determines the success of these plants. Cory and i think one of the reasons these things were made in china is because the labor is so cheap. They created a process that was labor intensive because labor was so cheap. But as the cost of labor has risen in china, there is more use of automation than any other part of the country, to davids point. That worldwide decline in manufacturing jobs is something that even alternative facts cant rescue us from, but is an important issue in the politics. I think this story cannot be divorced from politics weather for foxconn or ibm. Caroline staying with the new trump administration, one important issue under obama may that looks like it may continue under President Trump<\/a>, obamas tech surge. They pull people into the highest branches of federal government. Bloombergs head of Global Technology<\/a> coverage brad stone joined us to explain. The tech surge, who will trump appoint . Who will succeed megan smith of cto . Can trump draw the same group of people to keep this going . But on the policy side, you are right. There are plenty of questions. The fcc chair seems to be very much against net neutrality. That is worrying to some in Silicon Valley<\/a>. All these other issues where Silicon Valley<\/a> politically differs from the Administration Even<\/a> at the same times as they look forward to tax holidays and a lower Corporate Tax<\/a> rate. Caroline interesting you say Silicon Valley<\/a> differs from washington in some respects. It is fascinating what is going on with twitter, which we will get into in a moment. But elon musk said that rex tillerson, he isnt backing rex tillerson. He is exceptionally competent. His team is now the usa. It is interesting that he would now want to get in bed with the new administration. We look at twitter being deployed. It is still being deployed by donald trump, does that surprise you . No, that has been his primary communication mechanism for so long. It was effective for him during the campaign. It is obviously a mouthpiece directly to the people. Of course the masses arent quite on twitter or embracing it, but it allows him to get an unfiltered message out there. But with elons tweet and other Business Leaders<\/a> take a role in the administration, taking the opportunity to get their policy priorities passed in this new environment, so i think there is some cautious outreach on both sides, and twitter of course is the venue of choice. Caroline will it be adopted more widescale by other politicians . I dont know. Trump is pretty singular in his ability to get attention via tweet. He tweets impetuously, lets say. It is not really in the character of other politicians. He is unique. We also looked at whether this is good for twitter, and i dont know that it is. Caroline for more on what trumps tweet means, catch the latest episode of our podcast. You will find new episodes on itunes every tuesday. Coming up, Online Pharmacy<\/a> help pack is aiming to shake up the pharmacy package business. We visit the pharmacy startups headquarters next. This is bloomberg. Caroline spending on prescription drugs in the u. S. Hit a record 425 billion last year, and demand for pharmacy is Pharmacy Services<\/a> is growing as the u. S. Population ages. And yet 50 of americans fail to take their frequently complex drug combinations correctly. Pill pack seized the opportunity to simplify the process. Our reporter visited the startups headquarters in somerville, massachusetts. Reporter pill pack is taking on the neighborhood pharmacy. A traditional Retail Pharmacy<\/a> is all about prescriptions, they dont think of the overall value of the consumer. Reporter the Online Pharmacy<\/a> has a different approach. Instead of seven or eight different bottles, you get one of these boxes. Reporter that box is delivered every few weeks. Pills are sorted in individual packets by the time and date they should be taken. This is one for 8 00 a. M. , you have one for 12 00 p. M. , and one for 8 00 p. M. Reporter the ceo is focused on the 30 million americans who take five or more prescriptions a day. They are ultimately the highest Value Customer<\/a> in the market. Reporter parker launched pill pack in 2014, now with 120 million in funding. So down from about 200 people a year ago to roughly 600 today. Reporter at the headquarters in somerville, massachusetts, in a recently expanded 50,000 square foot distribution warehouse in manchester, new hampshire. Reporter here, robots help sort pills, and the majority of pill packs employees employees handle claims, shipping, and program its online tools. How hard would it be for another player to just replicate that exact model . The system, the clinical system, the automation, all of that had to be built from scratch, and these are 1500 billion dollar companies. So if they wanted to do it, they could. It would just take a long time. Reporter a Bloomberg Intelligence<\/a> analyst sees little reason to mimic the model. They have their work cut out if they really want to tackle this problem and push cvs and walgreens off the pedestal. There are about 425 billion in in prescription drugs. 90 of that is going to the retail corner pharmacy. Reporter and just like those competitors, pill pack labeled itself an online Retail Pharmacy<\/a>, not simply a mail order service. This is not a regulatory definition. This is a business definition that varies amongst pharmacies. It is not new type of service we do not fit any of the existing buckets particularly well. Reporter that distinction is at the center of the public contract dispute with express scripts. Most prescriptions in the u. S. Are managed by prescription benefit managers like cvs caremark, united health, and express scripts. Typically mail order pharmacies are reimbursed at a lower rate than retail pharmacies or a Specialty Pharmacy<\/a> for dispensing a prescription, so my guess is that pill pack is at higher rate than the traditional mailorder rate we see out there. Reporter the dispute puts one third of their orders at risk. Part of that negotiation was around rates, but that was not the core negotiation. The core negotiation was do consumers ultimately have the ability to choose what pharmacy they want to use, and that is why we fought that battle. Reporter another battle is helping patients take the drugs they are told. According to the new England Health<\/a> care institute, it costs the u. S. 300 billion a year. There are handful of standups sort of doing the same day deliveries as pharmacies, but that is a different solution. The secret sauce of pill pack is not delivery. Reporter pill packs goal is to make taking pills easy. That might help patients take their meds on time. Caroline a story to leave you with, a disturbance in the force at disney this week can be described in one word, excitement. That is after the announcement of the next installment of the star wars saga, episode vii, entitled star wars, the last jedi. The star wars spinoff rogue one released last month as a part of the 1 billion box office. The last jedi will hit u. S. Theaters on december 17. And that does it for this edition of best of Bloomberg Technology<\/a>. Next week, we have a terrific lineup of exclusive interviews, including conversations with the ceo of dropbox and the ceo of slack. Tune in each day at 5 00 in new york, 12 00 in san francisco, 6 00 a. M. In hong kong. Remember all episodes of Bloomberg Technology<\/a> are Live Streaming<\/a> on twitter. Check us out. Anna global employers from google to General Motors<\/a> joining the backlash against trumps immigration. He says the green card holders will not be affected. Manus the dollar slides closer to a month low. Investors seek safety in gold. Anna theresa may meets with scotland, after they were ruled they had no legal right to challenge frexit. Manus overturning the establishment tomorrow beating the former Prime Minister<\/a> to win the french socialist president nomination","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia802909.us.archive.org\/27\/items\/BLOOMBERG_20170130_050000_Best_of_Bloomberg_Technology\/BLOOMBERG_20170130_050000_Best_of_Bloomberg_Technology.thumbs\/BLOOMBERG_20170130_050000_Best_of_Bloomberg_Technology_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240627T12:35:10+00:00"}