Ahead of an ipo. Red herring disclosed slowing User Engagement and rights treatment. I think anything at 20 billion, you have to justify the violation. I think they danced around the issue of user growth, alluding to issues of the android. Monetization they touched on lightly, but as the story progresses, you will need to see more metrics. Cory we were joined for more. We were outside the Mandarin Oriental today trying to grab investors to hear their case. To their point, when asked what was your big takeaway still on your mind, user group was a lot of what the investors said to us. I heard instagram being called out by investors who point to the stories feature instagram introduced that mimics snapchat. Others brought up the new whatsapp feature rollout. Yes, snap is pointing to internal issues, like needing to build out on the android platform in noncore markets, but investors question the competition factor, and it will be on their mind when they are running comps. Cory the monetization issue is the euphemism if there ever was one. Tons of people are using the income, but not tons of revenue for the app. I think the underlying opportunity for snap is around the data and the audience. As you know, they skew to a much younger audience. It is a content creating machine, and tapping into that and using that data more effectively than their peers is where the opportunity lies. Cory is advertising the only real opportunity for these guys in terms of revenue . Theres nothing wrong with an advertisingonly model. There are different ways you can monetize around what you are calling advertising, very targeted marketing, and marketing dollars are getting more segmented, so a larger opportunity will be around using that data. Cory the valuations here for this business are outstanding. The most basic concept of business is to sell something more than it cost, but that is not what snapchat does. Did you get a feeling this would be a Good Business or bad business, but a very high price. A few noted that we did see the price come down. They were looking at valuations around 30 billion to 35 billion, so expectations have come down as more information about the company has come out, so when you look at where they are spending money, the profitability factor is the next step for them. They talk about that as phase three. Phase one was development, phase two is user growth development, and phase three will be profitability. The biggest cost is their technology infrastructure. There was conversation around that today. The company says it expects the cost of infrastructure to eventually decline as google cloud and amazon compete on pricing. It also says it is open to building its own infrastructure, so a bit of new commentary around that right now, and that is important because that is the bulk of their expenses right now, and outpaced revenue. Cory i bet you would have no complaints if any of your investments could go public at 17 time sales. That is an awesome number. I think they are banking on monetization and taking advantage of the massive amount of users and content. It is up to them. It is their game to prove that out. It is common for startups to prove that out in the Public Markets where they feel they can build predictability into their business, and that will be the name of the game. Investors care about predictability and being able to demonstrate growth while being able to predict and build that predictability into their business. Cory i still think this gross margin issue is a serious one. This negative Gross Margins over the last year, and the last two quarters looked better, but those are quarters where they are dressing up the ipo, so i would discount it. These Gross Margins are generally horrendous in this business. Were not talking operating margins. Were not talking expenditures on the cloud. We are talking about those basic pieces of what they sell. It comes back to a couple of different issues. One is the fundamental cost infrastructure. And they have been on a tear in terms of user and content growth, and that has forced them to not focus on cost until they got to size and could take advantage of scale and think about creating a competitive dynamic and their own infrastructure. Google also made a very similar exercise when they first started out and built a phenomenal, low cost structure on Gross Margins over time. Cory u. S. Tech giants continue to face regulatory hurdles, and this time it is microsoft, facing european privacy probes for windows 10 even after making changes. Regulators from seven countries are concerned that microsoft is failing to meet fundamental privacy requirements. Microsoft says it will continue to cooperate. Still ahead, elon musk delivered a mixed bag amid sprawling vehicle sales, declining Gross Margins, and a nearly 1 billion cash burn. All the details ahead. All the episodes of Bloomberg Technology are Live Streaming on twitter. Check us out at bloombergtechtv, 5 00 on wall street, 2 00 on the west coast. This is bloomberg. Cory on the earnings front, hp reporting better demand for computers and printers, and thats because they Sell Computers and printers. Up 3 , 13 billion for the first fiscal quarter. Tesla ceo elon musk, a mixed bag for the fourth quarter. He says the massmarket model three car will arrive, and the first ships in july. They plan to spend 2. 5 billion by june in capital expenditure. Musk also announced Jason Wheeler is leaving the company after 15 months on the job. Here he is on the quarterly call. First of all, i would like to announce that our cfo Jason Wheeler has decided to leave tesla in april. He will pursue opportunities in public policy. Jason will be replaced cory musk says initial production on the massmarket model three electric car are on track for the second half of 2017, but with cash burn accelerating and losses mounting, how long can combined tesla and solarcity go before diluting shareholders . I dont think it is so much of a concern because they are in the Capital Investment mode and still ramping up production of the model three. They will build gigafactories and the solar shingle. If you believe in the story, you want to see them invest capital in the company. Cory im not good at math, but if they got 3 billion and they burn through 1 billion a quarter, this is not a pretty story a year from now unless they sell more stock or borrow more money. They will probably go back to the Capital Markets again sometime between the spring in the summer, as they have for the past two years because manufacturing cars is a capitalintensive business, and this is a company in its investment and build out stage. They are ramping up production of the next model, the model three. They are still building out their dealer network, and they are ramping up production of the new solar shingles. Cory you mentioned. Michael, talk to me about what you see in this quarter for tesla. A couple of questions, first of all, how well have they integrated solarcity and what are the benefits that will come from the integration of solarcity . Will they get at costs . With they be able to sell more of the shingles . And the second thing is, some of the other services they are talking about, whether it is ridesharing or autopilot, how quickly are those going to roll out . That is part of what people are looking for, not just the equipment, moving the metal, but other services that will be internet based and technologybased. Cory ivan, what is the biggest risk to the stock . If you look at the stock price of the last year, it is not as exciting if you look at the last six months or 34 months. What do you think the preeminent risk is for this business . That there would be a softness in sales for the model three and overall softness and all the vehicles. So the risk is the public stops buying teslas, but so far the demand has been strong and delivery amounts have been hampered by production and not demand. Cory let me push back on that. In the last seven quarters, four of them has seen sequential declines from vehicles sold, so it does seem the model s is still selling, but they sold fewer in the Third Quarter than the fourth quarter. I think the demand and production is still strong, and they are still strong in anticipation of the model three. The model three will be the game changer for them because it moves them from a niche carmaker to a mainstream carmaker, and the number of model threes projected will significantly exceed those of the x and s together. The jury is still out on whether they can sell enough model threes to become profitable. Up to now, they have been a luxury car. Going forward, the question is whether they can turn to the mass market, especially as the big automakers will be in this business bigtime also. I do agree. Cory they have lost money on every sale. If there are the same net margins for the model three as the model s, making a lot of cars will be bad for them, not good news. That math is not correct. They do not lose money on every car. Cory sure they do. They sell for 80,000 and cost 84,000 to make, its not like that. Cory gross margin, but not the operating margin. And that is Capital Investment, so they are not losing money on the sale of the car. If you look at the gross margin on sales for the big automakers, ford and gm, they are trying to get to 10 . The gross margin on the publicly traded retailers like autonation is also 10 . You put that together, that is 20 . Tesla is exceeding that because they are the manufacturer and retailer. They have a gross margin on the sale of the car of 22 . The losses are coming from the Capital Investment. They are investing in the buildout of each model line and now the model three and the buildout of solarcitys solar shingles. Cory as you mentioned, the models are different, so the gross margin is affected by that. The operating margin, research and development, marketing costs, that is why the company has never made a penny, so in fact it is not profitable, but well say they are continuing discussions to another day. Michael, when you look at this company. Are you inspired by with what the Company Makes and what they are doing . Or are you discouraged by the continued cash flow losses and operating profit losses as well . The biggest concern around this company is whether or not they will be able to long term charge a premium for their vehicles and whether or not as they expand production they will have enough margin in each vehicle to make money once they take account of their Capital Investment as well as their individual production selling costs. Cory right, ivan, let me give you the last word. There is so much to chew on this thing. As i was saying, if they were losing money on the actual sale of the car, where the cost to produce the car was greater than the sale price, that would be bad, but it is positive. They are investing in r d, marketing, and the factory, and the gigafactory, because the biggest constraint of the electric car is battery technology, and they have invested in a number of technologies, battery technology, aluminum welding technology, so if you look at this ramp up, it is not unusual for a company to invest money, especially a capitalintensive business like auto manufacturing, and not make money for a number of years, but demand is still strong for the car. I think there will not really be competition between other electric cars. I think the competition will be between electric cars and gas cars, because still tesla is not really an electric car. It is a highperformance, luxury car that happens to have an electric drivetrain, so i think people looking at the performance and the luxury and Technology Features is what is driving the purchases. Cory coming up, ciscos chairman puts his weight behind a company that provides phone security. Why voice fraud is a 10 billion problem just in the u. S. This is bloomberg. Cory another twist in the Insider Trading case of billy walters. They will allege he made 43 million on inside information, and they will have to show he had a history of trading in apple in 2013. Prosecutors have yet to reveal the details, but walters was indicted last year for trading on tips fed to him by tom davis. Steve jobs presented the plans for an new ringshaped campus, the last public event before his death, now apple says it will start moving into that facility in april. The opening day had been set for 2015, but apple face budget overruns and delays. The cost is said to have hit as much as 5 billion, but a 1000seat auditorium in the building will be named after steve jobs. The call center business, phone calls, billions of dollars, stock transfers, product purchases, but also one of the Fastest Growing forms of cybercrime. Pindrop is fighting phone fraud. We spoke to cisco chairman John Chambers and the ceo of pindrop. The business where they are asking you questions to identify yourself is a really bad idea. One, because it frustrates you. It doesnt catch very much fraud. Right now in the u. S. Alone, they are losing 10 billion to voice fraud, and even more so yeah, 10 billion a year, because every single call when we started the company, one in every 2000 calls was fraudulent, now it is one in every 900, so there are so many calls coming into these call centers because what they have realized is that people secure the online and physical side, but it is the easy thing to pick up a phone and get them to do your bidding. These call centers are about customer service, so they are not catching the fraud. All these questions are translating to in additional 12. 8 billion asking people stupid questions. Cory how big is this business . John it is big in terms of the opportunity. You think about the 22 billion being spent on fraud or fraud prevention, and it upsets customers. You think what the real takeaway is. Tt will become a digital world. This is the company that would lead in security and authentication, so its not just about how you prevent fraud. They detect 80 of fraud calls with less than 1 false positives. Almost every major Security Breach you read about, 61 started with the a voice call into the company. Cory i would imagine your job is to create jobs at pindrop, but take calls away from the call centers. It empowers callcenter agents to do their job better. They are treating everyone who comes to them like a criminal, so now for 99 of the calls they can treat you with a wonderful customer experience, and for the 1 that is not good, they can treat those fraudsters. If you have a wonderful customer experience, you will call back with your smart phone or your standard phone, and when youre making all of those calls, because you make those calls when you really are in need of something by giving people a great customers experience, you will get them to come back over and over again, which means more jobs. Cory how many times have you been to the white house in your life . John probably 30 or 40. Cory thats what i figured. You know how that place works better than any other ceo in Silicon Valley. I wonder what you make of the Trump Administration and the approach to business. John let me first say that when you set a goal 4 gdp growth and a goal of 25 million to 30 million jobs, attainable. Oddly enough, the role models are india and france. The Prime Minister of india is focused on 1. 1 million jobs a month, growing at 7 gdp, and he thinks he can grow at 10 , that means the per capita income doubles every 10 years. France, refocused cisco two and a half years ago, they realigned and digitized in the country. Guess what was the top venture Capital Investment location in europe all last year . It was france. The Large Companies will shed jobs unfortunately around the world, so all job growth will be from the startups, and instead of doing 90 on the nasdaq and 35 on the stock exchange, we need to do three to five times that to get the growth we need. That is why Companies Like this are creating jobs. It will be a job creator for the future and a great investor when it goes public. Cory we shouldnt be talking about carrier and ford and united technologies. I think it is important to retain the jobs we got and i think the administration is right, doing a good job on it, but in terms of creating 25 million new jobs, all startups. Im talking to the ypo group once year at their meeting in vancouver, and it will be all about their job growth. When you are looking at startups growing 100 and the number of people per year, that is what we have to do at a larger magnitude going forward. He set an audacious goal, and then you think about how to make it happen. What is fun for me is being an advisor, a great industry where they should leave their industry but also their ability to go through the transitions. Now youre talking about voice going digital, and what this company is positioning themselves to do in terms of security and authentication is really exciting. Cory coming up, our exclusive interview with arms ceo simon segars next. And if you like bloomberg news, check us out on the radio. You can listen to us on the Bloomberg Radio app, bloomberg. Com, or in the u. S. On sirius satellite radio. This is bloomberg. With x1 you get the best of the oscars. Youre a funny guy. Funny how . How am i funny . Scorsese finally wins. Could you double check the envelope . Show me best picture. Whats the difference . Show me best actor. I do not take tonight for granted. Thank you so very much. Get all the greatest scripted and unscripted oscar moments on xfinity x1. The oscars, live sunday, february 26th 7ea4p on abc. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Cory welcome