Transcripts For BLOOMBERG Bloomberg Technology 20170317 : vi

BLOOMBERG Bloomberg Technology March 17, 2017

Than 120 countries. I am Alisa Parenti. This is bloomberg. Bloomberg technology is next. Caroline i am caroline hyde. This is bloomberg technology. Coming up, mulesoft surges on the first day of trade. Why some are calling it a better metric than snap. Companies are starting to develop tunnel vision when it comes to self driving technology. The clouds are clearing for oracle after earnings showed Strong Demand for its cloud services. We bring you c. E. O. Mark hurd later this hour. But first to our lead, mulesoft surges in its public debut. The Company Raised 221 million after pricing shares at 17 apiece. That gave mulesoft a market value of more than 2 billion on pricing. It may not have the name recognition of snap. As stock was closely watched perhaps a more realistic metric for the health of the ipo market. Alex barinka caught up with the c. E. O. And asked why he thought demand was so high for the stock. What investors are looking for is growth. They are looking for a wellrun company and something with a big opportunity in front of it. We have all those things. Break down for us what you do for your customers like cocacola or bank of america. All of these companies have to deal with a massive explosion of applications, data, and devices. And connecting those things together is incredibly difficult and expensive. We help them build out an Application Network to make those connections happen. The Application Network connecting all those different technologies is something likes of oracle does an ibm does. And a lot of providers write their own code to compete with what mulesoft offers. How are you making sure you are the goto . The big challenge for everybody is how to do it without writing custom code. 99 of the world is still writing custom code. We have to provide the best product and platform to do that. We provide amazing Developer Experience to make it easy for them to develop this integration. You talked about investors need for growth. Over the past 18 months, we have seen an interesting shift. It went from wanting Revenue Growth to being more concerned about profitability. When i look at your financials, Free Cash Flow specifically, it was down 44 two years ago. Last year down 4 . It seems like you have reigned in cost. What were you thinking about in the runup to the echo . How important was profitability to show investors you can get there one day . The key is to have a balance. It is not growth at all cost or profitability at all cost. You want to grow in a sustainable way. We have been raining in the cost but also growing extremely well, growing 71 last year. Keeping the growth up but also being very cost cautious at the same time. That cost consciousness has descended on Silicon Valley lately. What was the catalyst for you to say we need to take a good look at where we are spending money . Was it getting ipo ready . Were some of your backers advising you on these things . Where did the real decisionmaking come in . As you get bigger and build a larger company, with the growth rates, you want to show and demonstrate you can build a company that has a Sustainable Business model. We knew at that point we needed to start showing that. When i look at where your revenue is coming from, a lot of it is from the recurring Revenue Streams you talked about. Some of it is revenue from installing and getting the product in there. Where is the growth going to come from . The flagship product . A new line . What are you looking at . It will be the flagship product. It is 1520 of our revenue. It will be the Application Network we help people build out that will continue to be the growth driver for mulesoft. Caroline dallas mulesoft c. E. O. Greg schott speaking with alex barinka on the first day of trading. Is the first of a handful of Software Companies planning to go public in the near future. The market could be heating up. While snap could be a cautionary shares fell below 19 for the first time. Alex barinka is with us for more. And our guest host this hour is David Kirkpatrick. Alex, great interview. Remind us why they are raising this money. Shares up significantly. It looks like they could be pressed for cash in the future. Greg told me the cash is probably going to go to mostly general corporate expenses. He also talked about acquisitions. When asked him what areas he would look to buy for, he said ckobably a tech in tu acquisition insecurity. He means buying small teams and products he could add on to the mulesoft platform. Million, some of that buying out competitors. Caroline fascinating. David, i want to get your idea of the sentiment. This is the third tech ipo we have had. Do you think the door is open for software . It seems like it has. Regardless of performance of snap postipo, i think it showed you could do something successful from the raising point of view. Tech companies have donald trump to thank because the market is superstrong. Snaps incredible marketing machine to thank for making it clear this kind of thing is possible. It was great for all of these enterprise Tech Companies that a Consumer Company went first week as people always understand and get more excited about Consumer Companies because they can relate to it. These are the real Media Companies the economy depends on. I think it is healthy and we will see a lot more coming out. Stay right there because we have been chatting about snaps ipo. It is the unusual lack of Voting Rights that was a key concern for some investors when it began trading in the United States. It is now reportedly causing problems in the u. K. As well. Bloomberg was the first report that a group of Fund Managers are lobbying against including snap in the londons Stock Exchange due to Corporate Governance concerns because of the nonvoting shares. Ipo, in the runup to the this was something investors were talking about. This is the first time we saw a u. S. Company come to market with zero in terms of Voting Rights for those that were going to invest. It was. In the u. K. , those are not the only ones concerned. I talked to a number of Fund Managers. It was the index funds that do have the Biggest Issue because when the stock gets in, they have no say. They are the ones pushing the governance issues when it comes to executive pay, buybacks and dividends. There are several groups in the u. S. A lot of the managers belong to. I am thinking of the state streets of the world, big names that hold a lot of the stock in the u. S. In these index funds. This issue will be one that will continue to rear its head as snap continues to trade. Frankly, if this stock goes up into the right, these may not be concerns brought up. Now that it is falling down closer to the 17 share price, these concerns are going to come close to the forefront if this Company Struggles more often than not. One they certainly will be looking at as they are still locked up in the stock. David, you are the man with your finger on the pulse when it comes to the start of community. Will take thehey approach snap did or do you think it was a oneoff . I hope not. I do not think they will. People like alex and myself have been talking about this throughout the ipo process for snap. Mentality of wall street seems to want to disregard this inconvenient fact. These guys are geniuses, let them have their way. I think it was a mistake. We may begin to see it really was a serious mistake that could hurt them. I do not think Companies Need to do this. I think it is a little hubris that led to it in the case of snap. I would say definitively not expect to see this a lot more. Caroline alex, youre speaking to bankers hoping more companies will be coming out with ipos. Do you know if we might be seeing some of the bigger, slightly older startups like pinterest . I know we have to wait another year for airbnb. Spotifyl also throw in the mix. They convert more equity the longer they wait. Those are some of the bigger names. Cloudara is looking at just over 4 billion market value. The majority of Tech Companies that go public in a given year, the vast majority are going to be enterprise which is why mulesoft is so important because it is an indicator that a company with revenue not profitable is able to drum up demand for the stock. Caroline 1 billion in the first day of trading. Alex barinka was all over it today. David kirkpatrick is sticking with me. Another story we are watching from great britain, google announced changes to its advertising policies after major including theu. K. British government pulled their ads off the platform because of appearing alongside offensive content including antisemitic videos. Google made nearly 8 million in ad revenue in the u. K. In 2016. The company said it would give clients more control over where their ads appear. Apple will set up two more Research Centers and boost investment in china. Is it enough to take on its local smartphone rival . We will discuss. This is bloomberg. Caroline now a story we are watching. Chip businessry is attracting bidders. The bank of japan is considering a joint. Offer with u. S. Bidders the numbers of interested parties may. Increase beyond the current 10 sales to makeking up for a multibillion dollar writedown in its nuclear operations. Apple has revealed it will spend at least half 1 billion to set up two additional Research Centers in china. It represents the single Largest Overseas market. The iphone has lost ground to local rivals. Still with us, guest host of this hour, David Kirkpatrick in new york. This is sort of like a tested way to cozy up to the government and maybe curry favor and do your business some good. David probably more than any other country on the planet, it really works in china to show you as a company are willing to help the government achieve its own goals. And their goals include increasing research in china, developing more competence among the research community, ultimately will include training more people. I am sure apple will get involved in that. Microsoft got a lot of mileage when they started helping entrepreneurship in china. I wrote a big piece for fortune about this. Microsoft china until the day it did that and everything took off. Windows got licensed legally. All kinds of things. A little investment can go a long way. The baidu chair was discussing china perhaps becoming a hot spot in terms of tech entrepreneurialism and talent and perhaps luring away from the u. S. Does this suggest we could see tech talent mother countrys move to china . David i think probably yes. I was super impressed by the interview last week. Really impressed. I have talked to people about it. I think he said a lot of things that surprised me about china wanting to be a magnet for skilled immigration. That was a very new idea. I think if the u. S. Continues on this path of going towards a more closed mindset with our own economy, you are going to see a lot of other countries making hay with that. Even u. S. Companies helping those other countries make hay with it. Country that is a has got a huge tech marketplace, huge tech industry. We cannot take them for granted. We cannot take our Competitive Position with them for granted. I am afraid the way washington rhetoric is going we are taking a lot of this for granted. Caroline apple certainly cannot take it for granted. When you look at the market , china seems to be losing its luster. Smartphones being made in china are so powerful with a good price point. Do you think apple can start to win back some market share . It is crucial when it comes to 20 of its revenue. David that is not the big china question in my opinion. I think a lot is riding on the next iphone coming out this fall being a major shift and move forward with fundamentally new qualities. I have heard a lot of people saying they think it will do really well. I have yet to your argument about light it will be so different from the extremely good iphone i have in my pocket now. Andt were really cool different, the chinese will respond to that as well as any country. Goes to be a Global Market phenomena, china will go along with that. If it is a slightly better smartphone, i think there is plenty of competition that will hurt it in china in particular. Caroline i have been having this discussion that at the moment the top of the pack does seem to be alphabet. It seems to be amazon that can do no wrong. You are looking also at the likes of microsoft managing to get on track when it comes to cloud. What boat did apple miss . Shouldnt it have gotten outside of the Consumer Technology or is it waiting to reinvent what we need to be by next . David i would not say apple missed some boat when their stock is at an alltime high. Apple did the most amazing thing inventing the iphone and tim cook scaling it. Steve jobs and tim cook was an amazing combination. One thing apple has never understood is social. Not even in the slightest. You have to kind of get that. Maybe even when we are talking about a i were the quantity of the data makes it work, and even amazon has that more than apple. And they are doing a timeless a. I. A time with a i it may make a difference. Apple has not understood how to think about a community of people in technology. That probably is hurting them. They are great at a personal device, not a community. Caroline suddenly trying to talk of the Services Side of the business and the billion units. David kirkpatrick will be sticking with us. Several tech stocks hit alltime highs this week. We heard david talking about apple. Facebook did, too. Oracle will show if the momentum is in the market. This is bloomberg. Caroline now we discuss the current ipo market earlier. What about the wider market . Abigail doolittle joins us from new york with more. Stocks across asia, europe, and the u. S. Finished higher on the week. How did tech fare in the bush context . It was a solid week for stocks around the globe, especially in the u. S. Tech outperformed the other major averages when we look at the weekly change. The nasdaq is up top. This is the tech heavy index, up nearly. 7 . Last week, it was a decline. Before that were six up weeks. Over the last eight weeks, the nasdaq has been up seven. A bullish stretch. For what is behind that strength, we are looking at big names like apple and tesla. Onle hitting a record high bullish comments from Goldman Sachs on iphone shipments. Adobe also at a record high. Nvidia up for two weeks in a row. Tesla having its best week since july of last year. Some real strength. One stock that stands out is not a part of the nasdaq. But oracle, what a quarter. They beat earnings by 14 . What investors really liked from oracle is the fact clouds sales grew 11 . They are hot on the growth in the cloud. Oracle on pace for its best week or did have its best week since december of 2014. Some real strength. Very interesting is the fact we have all of these stocks at record highs but oracles last record is back in 2000. Something we saw with microsoft not long ago. Microsoft did shatter it a few months ago. Maybe that is ahead for oracle. Caroline we are going to be bringing sound from the oracle c. E. O. In a moment. You mentioned tesla as well. This is a top player in the nasdaq. Big news this week. What has been the investor reaction to the stock conference . Earlier today, i did read from kevin the big news is what youre talking about. The capital raised, 1. 4 billion. The fact it will not dilute shares. Investors like this. It gives investors confidence the model 3 will hit production on time. He makes the point we could see back funding in 2018. He does not think this is the First Capital raise. Overall, this stock is on fire. We take a look at the bloomberg. This is a longerterm chart. We see the stock trading in a major range. From the ipo in 2010, up more than 1400 . That is incredible. This chart shows uncertainty between the bears and bowls. The bulls are very positive on elon musks vision. Goals of think of the the vehicles in 2018 unattainable. Plus the high cash burn. bearisha 26 shortage. It will be interesting to see if the bulls can push through or the bears take it back down to the bottom of the range. Caroline watch out for bearish bets. Nvidia is a favorite chipmaker. It has had a standout 12 to 18 months but also been good this week. Incredible week. Up very strongly. I did reach out to another Bloomberg Intelligence analyst and he said it is on the paccar announcement. They are doing so much to upgrade their auto chip business plus the core gaming. Lots of good stuff for nvidia. He did point out valuations. Something to keep an eye on for nvidia and other chip stocks. Caroline lots of good stuff as ever from abigail doolittle. Thank you very much. Coming up, vindication for yahoo . We explain why next. This is bloomberg. Alisa i am Alisa Parenti and you are watching bloomberg technology. Lets start with a check of your first word news. President trump met with Angela Merkel for the First Time Since he won the election. They discussed trade at a News Conference after the white house meeting. President trump im not an isolationist. Im a free trader but also a fair trader. Our free trade has led to a lot of bad things happening. You look at the deficits we have and you look at all of the accumulation of debt, we are a very powerful country. We are a very strong country. Alisa the u. S. Is inve

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