Struck with farc rebels last year. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im Alisa Parenti. This is bloomberg. Bloomberg technology is next. Carolineemily im emily chang. This is bloomberg technology. Coming up, the tech entrepreneur with big plans to be marylands governor. Alex ross joins us to discuss the growing divide between tech and politics. Plus, our conversation with Hiroshi Lockheimer, the mind between behind the most popular operating system on the planet. Mapping the road ahead for android. And our extensive interview with famed Venture Capitalist fred wilson. He tells us where he is placing his bets and why he is still bullish on jack dorsey. First, u. S. Stocks turning their worst performance this year turned in their worst performance this year. President trump asked james comey to drop the investigation into former National Security advisor Michael Flynn. The crisis threatens to derail the policy agenda that helped push equities to recent highs. Techres were not shares were not immune to the selloff. For more, we are joined by our Bloomberg News stock reporter, abigail doolittle. Abigail what a selloff, as you mentioned, the worst selloff since september of last year, the worst of the year on this shift in sentiment. Youtive to the nasdaq, as mentioned, underperforming, both the dow and the s p 500, by about 80 basis points, down on the day. Some of the biggest drags are the biggest tech names, including apple, microsoft, facebook. Apple down more than 3 , its worst day in more than a year. Thats the magnitude of the sentiment shift here. Microsoft down in a big way. Its worst since june of last year, since the time of the brexit. A big turn in sentiment. The reason it matters is tech has been the best sector of the year. Will it hold up . We can see that todays decline shows in that chart. That goes right to the heart of whats happening today and questions askedis a shift in faith whether or not President Trump will be able to put through some sort of tax reform. Have a verye could difficult time and may not repatriate that huge cash pile. Apple is the biggest member waiting in both the s p 500 and the nasdaq. Weighting ining the dow. Emily what about the chipmakers . Their losses even bigger. Abigail being dragged down by lots of the usual suspects. Texas instruments, broadcom. Valuation concerns. This has been a highflying sector, so investors taking a bite out of that today on this day. Isk big riskoff the vix is up more than 40 . Weve been talking about the complacency. Its starting to reverse. Plunging in the aftermarket, down more than 7 after they issued a very disappointing Sales Guidance for the fourth quarter. Its going to be interesting to see whether this selloff continues into tomorrow or if its a oneday blip. Emily we will talk more about cisco later this hour. Abigail doolittle, thanks so much for that update. The volatility in the markets triggered by volatility in the white house. President trump faces the deepest crisis of his presidency on reports that now former fbi director james comey wrote in a memo that the president asked him to stop investigating his first National Security advisor, Michael Flynn. For more now, we are by alex ross in new york, a bestselling author, former advisor to secretary Hillary Clinton at the state department, who has Just Announced he is running for governor in maryland on the democratic ticket. Thanks for joining us. Lets get right to it. Do you think what trump has done, allegedly, is grounds for impeachment . Alex i do. If he is seeking to shut down an Ongoing Investigation by the fbi, its a demonstration of his lack of fitness for the office. He has are the proven incapable of basically the executive functions of the presidency and, now, clearly and not surprisingly to a lot of us, he lacks the moral and ethical backbone necessary to be president. It would not surprise me if before 2020, we have a president pence. Emily so, what could next steps be an independent commission, a special prosecutor . How can this Republican Congress get behind it . Alex appoint a special counsel. There are a few republican members of congress who are suggesting this. Unfortunately, too many of these folks are licking their finger, holding it up to see which way the wind is blowing, and they are afraid of their approach trump their protrump base. A lot of them, i think, have forgotten why they came to washington in the first place. They are focused on their reelection, their popularity. We will see how many dignified men and women do come forward from both parties and insist on a special counsel. Emily trump is the reason you decided to run. Why . Alex talent is everywhere and opportunity is not. The simple fact of the matter is, in places like coal country, where i grew up, people overwhelmingly voted for donald trump as they felt so disconnected from our politics and from our politicians. So, the reason im running for governor of maryland is to try to respond to the legitimate needs of struggling people in the workingclasses and try to figure out how this innovationbased economy can work for more people. Emily talk to me about your accomplishments, alex. What have you done that you want voters to know . Alec we need entrepreneurs, people who have been successful in business getting in and doing the hard work of government. As we transition from an industrialbased economy into an informationbased, technologyrich economy, we need folks like me, who have worked in that world, to understand what the really tricky policy challenges are, so we can figure out how people in our stagnating middle and working classes can go from an industrialbased economy to a technologybased economy. Thats what i done the last 23 years and its what i hope to do as a public servant. Emily tech has been proposed as the solution to everything. I know that you think an increasing computer education will lead to economic betterment. Is learning how to code all its going to take . Alec absolutely not. Computer code is the alphabet that much of the future is going to be written in, and its important for todays kids to be literate in that language. Right now in the United States of america, there are 500,000 unfilled jobs that require Computer Science skills. The on employment and underemployment we have, there are half a million jobs just begging for people who have very basic computer coding skills to take them. 20,000 in my home state of maryland. I do think, while making sure that every kid from kindergarten through 12th grade is computer literate, its not going to solve all the problems, but what it is going to do is help make sure the kids from every zip code can help fill those half a million empty jobs. Emily speculation has swirled that mark zuckerberg, the founder of facebook, is considering a president ial run. There was a report that sam altman of why, nader of ycom binator may be considering a run for california governor. What do you make of these reports . Alec its the same thing that threw me into the run for governor. A lot of us care deeply about the rise of the rest. Those of us who have worked in the innovation economy and do believe that it can help more people you can do a lot in the private sector. You can build your workforce. But there are some things that only government can do, like run our public schools. When i im encouraged hear about people like mark and sam i dont know if theyre going to run or not. But i think its good for people who have been in a little bit of a bubble, who have been successful, to say, you know what, im going to go out and try to solve problems behind just macs beyond just maximizing shareholder value. Emily as long as they are not President Trump . He was a businessman, too. Alec he was a terrible businessman. He inherited a couple hundred Million Dollars from his daddy. If he had just put that in an index fund, he would be richer than he is today. Nobody with that many bankruptcies im going to call successful. Emily thanks so much for joining us. Alec thanks for having me. Emily the patent battle between qualcomm and apple is heating up. The chip company has sued assemblers of the iphone for allegedly not paying patent royalties. Among those qualcomm has sued, foxconn and pegatron. Foxconn pays contractors to make its phones. Part of that money is used to cover royalties. Coming up, the annual google io conference kicks off in mountain view, california. We will hear from the man behind the companys android operations, the row she lock timer. Hiroshi lockheimer. This is bloomberg. Conferencegoogle i o is taking off in mountain view, california. Among the new developments, a new supercomputer chip. Google is making its digital assistant available on the iphone to compete with apples siri. Google also unveiled updates to android, the most dominant operating system in the world. We spoke to Hiroshi Lockheimer about some of the most exciting announcements. Hiroshi we announced a lot today at i o. There are now 2 billion monthly active devices in the World Running android. Thats a huge number. Its hard to even comprehend, but we are really excited about that. We also announced the beta for android o, our next release of android. Also a new configuration of android, android go, which is aimed at devices in emerging markets, devices that have one gigabyte of ram or less, and making that experience great for those users. Those are some of the examples of a lot of things that we announced today. Emily what progress you think you have made over the last year with android n . Nroshi we announced android last year and launched in the fall. Many devices are now upgrading to android n. Theres a lot of good stuff in there and the rollout continues,. Emily with android o, what sort of new security features are you integrating . What are you doing to combat fragmentation . Around fragmentation, there is a lot that we are doing. Its something we have been working with the industry on for many years now. Specifically, this year, we announced what we call project treble. A project a bige industry, its deal. We have completely redesigned the bottom part of android that deals with the hardware to make it really easy for manufacturers and operators, the people who sell android devices, to update these devices and have a quicker turnaround time. Emily and what about security . What new security precautions have you introduced . The world is weathering another global cyber attack. Hiroshi around security, we have been doing a lot for many years now. One of the things we realized was, a lot of what we have been doing has been behind the scenes. Theres a lot of protections we put in place. The architecture of android to begin with, but also protections put into place through google play. We scan all of your apps all the time. We realized no user of android was aware that we were doing this. We have now put these systems front and center for the users so they can see what we are doing, so that they can have a sense of security that actually reflects the real state of the world. We call that google play protect. That is something we will be rolling out soon. Emily last year, you released something called instant apps. What kind of progress have you made there . Hiroshi weve been in beta with some with instant apps since the last i o. We have been improving the infrastructure for that. Starting this week, we are expanding that so that anyone, not just the beta, any developer can develop instant apps, which facilitates making it easier for users to get their apps, without having to go through the installation process. Emily pixels, the new phones that google has been making, reportedly havent sold very well. How has that impacted android . Hiroshi the pixel is an Android Phone developed by the Hardware Team within google. On the platform side, i work with everyone, all the youfacturers, lg, samsung, name them. We dont really comment on any particular device. We are just happy to have more Device Manufacturers targeting their user segment. Thats what makes android great. It is a scaled ecosystem across multiple partners. Emily you have announced new auto dashboard systems with volvo and audi. What is androids strategy in the car . Hiroshi we have a number of products available for the car. The first one we call projected mode, which enables a customer to take their Android Phone, plug it into their car, and have the phone power the cars infotainment system. Thats been available for a while now. Volvo announced is actually running android itself in the car directly, so that you dont need a phone anymore. Its kind of a behind the scenes thing. Its how the Car Manufacturers are making their cars. Using android,be which makes it possible for Android Developers to bring their apps and services easier into the car environment. Emily the redesign of the iphone from apple later this year. How dohead of android, you brace yourself for the iphone revamp . Hiroshi its an exciting time to be a consumer, because there is so much going on, so many manufacturers working on interesting innovations. I think its a good thing. It keeps the android manufacturers on their toes. It makes them work harder. It makes us work harder. I think its great. Caroline are you wearing an android smart watch . Whats holding android back in wearables . Hiroshi i am wearing an android smart watch now. Our platform available to anyone to build products with. Thats our strength. We have a lot of partners now in the fashion industry, as well as Consumer Electronics industry, building android wearbased wat ches. Emily Hiroshi Lockheimer there. We will have more coverage from google i o later in the hour. We will speak with googles Vice President of engineering. Coming up, shifting from hardware to software. A disappointing fourthquarter sales forecast. We will break down the numbers, next. This is bloomberg. Emily cisco shares plunging over 8 posttrading after posting thirdquarter earnings. Shares down 8. 37 after hours. This, after a disappointing sales forecast. Revenue was relatively in line with analyst expectations, while profit per share was slightly higher. The Company Giving that disappointing forecast, highlighting the challenges facing its multibilliondollar hardware business as the industry shifts toward siebert cheaper softwarebased networking products. Joining us, our Research Analyst who covers the company. What do you make of the progress or lack thereof on the transition from hardware to software . Its a long process. Its going to take a while. I think maybe some investors are getting impatient with the transition. Core networking business is on a slight decline. Theres a lot of headwinds in that business. Moving into the software space, i think cisco is meeting some Good Progress there, but its going to take a while to offset that huge amount of revenue in the networking space. Cisco is normally thought of as a bellwether for the tech industry. With all of the uncertainty, cisco could conceivably benefit concede benefit from because they have so much cash overseas, but with trumps future in question, what does that mean for cisco . Glenn i wont comment on the political landscape. Should that tax holiday come through, it will be a real boon for cisco shareholders. An enormous amount of cash overseas, as do other tech companies, like apple and microsoft. If they can bring that back, they are going to use some of it for expansion through m a, but a lot of that is going back to the shareholders. I think we will see that across the tech industry. Emily what sort of m a are you expecting . Glenn more software. The ceo has made it pretty clear going to turn this company into a software company, hishis most recent and most recent acquisitions are indicative of that. It will be more software assets, for sure. Potentially some storage, but there has been a lot of debate about that. Emily cisco did make a small acquisition called mind meld, meaning they are entering a very big battlefield of ai. What is the potential for cisco when it comes to Artificial Intelligence . Glenn every tech vendor on the planet wants to get in on the ai game, and for good reason. The algorithms and the technology that goes into these various things that people like to call Artificial Intelligence future,ings are the because it gives you the ability to make sense out of enormous amounts of data. We are swimming in data. We have to try to make heads or tails out of the needles in the haystack. And, you know, it gives the tech company some stickiness, in the sense that, for most of this technology, it is pretty easy to reverse engineer it and to compete with a product that is like the one that you are copying. And there is a constant game of leapfrog that just keeps going on. Stickyd analytics is because it is hard to reverse engineer. You can hide a lot of the magic under the covers. If youre going to buy technology in this field, you are probably going to keep buying it for a while. That makes for good longterm revenue and profits for the Company Selling it. Emily glenn, were still feeling the ripple effects of the rent somewhere the ransom ware hack attack. Clearly, there are renewed concerns around security. What does that mean for cisco . Glenn cisco and other vendors thesecurity Space Companies are all benefiting from the mass hysteria and justified paranoia around this. But where we see the real future for security is Building Security into these technologies. Cisco has done a lot to build security into the networks. Emily ok. Glenn and thats great, but we have to expand that baked insecurity across the board. Baked in security across the board. Emily thank