Pentagon was not taken by surprise when north korea fired off that missile on july 4. Global news 24 hours a day powered by more than 2700 journalists and analysts in 120tries in countries. I am Alisa Parenti and this is bloomberg and Bloomberg Technology is next. Caroline im Caroline Hyde in london in for emily chang. This is Bloomberg Technology. Coming up, the bloodbath at microsoft as the Software Giant thes its full attention to clouds. While thousands of employees are out of work. Plus, the investors banking on britain to keep its title and bragging rights of europes leading tech hub. Are pumping billions into londons Technology Sector despite brexit. In battle the cofounder resignation and downward spiral or the chinese tycoons plea for more time to reap high and his focused on electric cars. To our lead. A major reshuffling going on at microsoft. The tech giant confirmed it is cutting thousands of jobs. The number of jobs ranges from 30005 thousand and most of those jobs in sales and outside the u. S. That is out of the companies 000 person workforce are the move is part of the companys reorganization to better focus on cap selling close suffer. Allokesperson told us like companies, we evaluate our business on a regular basis. This can result in increased investment in some places and from time to time redeployment in others joining us now to discuss is cory johnson in San Francisco. Imlondon, frederick who pleased to stay is staying with me the entire hour. Cory, bring us up to speed. There is a focus going on in terms of the cloud and a. I. , and the memo that bloomberg saw on monday seems to say that this is because of a huge 4. 5 trillion market opportunity. Cory it is about a big shift at microsoft. The world go from a Client Server network two things happening on the cloud to a different way to sell software. Pcs are not the center of the environment. Microsoft built its business and built its staff around the notion of pcs. As theyve made this pivot, they have decided some people are not going to bureau long for the to be along for the ride. They made some disastrous acquisitions, most notably nokia. Having to write off those acquisition means writing off a lot of jobs. If you go to the bloomberg terminal, there is a wonderful function called ms equity go and type in loss. And you see a table with each one of those news stories on the job losses. But you can see the longterm stock price as it goes across there. And all of those little circles are job cuts. If i zoom in, this is to he 14. Playoff, playoff, playoff this is 2014. Layoff, layoff. Even as the stock creeps up, people are losing their jobs like crazy. You can imagine the big changes going on. Caroline lets get the take of an investor, because frederick, when you look at these sorts of moves, the focus is on the rivalry between amazon, ibm, and google, microsoft. All of them want into the cloud and want into a. I. Frederick absolutely. For a company like microsoft, they are from both sides. They have a very strong position in the enterprise world and come a certainly, google, which is a consumer facing company is now a. I. Firstion as an company. That is bound to impact the enterprise world. On the other side, the smallest startups from emerging in the enterprise world from Silicon Valley. Guess what . We are looking to and attacking as well the larger Enterprise Business of microsoft. Us throughory, talk it. It is interesting some of the reports are saying that most of going tooffs are happen outside the united states. Is there any reason as to why we will not see the rest of the International Business hit more . Cory a real focus on getting his house right first. If you look at the annual cuts, while these really big and they certainly are, the 3000 cuts while these numbers look really big. What you really see if we go from 18,000 in 2014 to only and im sure does not feel like only to those people losing their jobs today but over the course of the next year but nonetheless, when you go from 18,000 to fewer than 4,000 this is a lot more finetuning than it is a massive change for microsoft. They took the big pain early, which is what all of the management people say you have to do when you look at the word ld ioof layoffs. So, when you look at these pictures we see from their headquarters in redmond, in the sunny seattle, yeah, not so sunny up there. Maybe this time of year. Indeed, it is the kind of move you would expect this coming to make as it starts to whittle down as opposed to taking giant cuts. Caroline you mentioned there how also microsoft and amazon and ibm and google are seeing the rise of these startup culture starting to eat into some other pie. You mentioned dropbox. Where are the opportunities to be investing in a. I. And enterprise startups at the moment . The case of theosoft, every task in enterprises going to be somehow a. I. Enabled to a certain level. In the making. Microsoft has got to react. I completely agree with what has been said. The scale of microsoft, it is not that big a change. Absolutely. Over the years, they have had not so great track record of making acquisitions. Atting the advertising space the wrong time and mobile making the wrong pick. Goingg bet for them was after lincoln which was not a big asset but not so much in terms of number of employees going after linked in. We are interested in where they are going next. And dropbox could be targets for them as well. Caroline do we think m a is in the cards . In the cards been for a long time. But i think one of the most important metrics to look at is the revenue foper employee. What is the productivity . If you look over the course of the last 10 years what you see are two things. When economic results really hurt the company. In 2009 and the recession starts in 2008, there was a big drop in productivity, revenue per annum employee. In 2014 when they had to make those first big cuts, a big decline in revenue per annum employee. Andyou see a little bit 2016. You can see that microsoft has taken the seriously. They want to grow their productivity. They want to grow revenue. Per employed. That is the length we should imagine microsoft trying to run their business. And clearly, taking a big step here, smaller step than they have taken the past, but trying to get that revenue per employee up. Caroline see how analysts react to this, 27 buys and only two sells. Cory johnson, always great to get your perspective. Felix capital and managing partner is sticking with me. And a stock we are watching shares of continue to fall since its public debut. Share closed at 8. 00 a thursday compared to its ipo price. Its significant cut from its initial target price. Back then it was as high as 17. 00 a share. Now, coming up , we dive into the European Tech scene. How london plans to defend his title as the tech hub. We are Live Streaming on twitter check us out. 5 p. M. New york, 2 00 p. M. San francisco, 10 00 p. M. Right here in london. This is bloomberg. Caroline now a story we are watching. Uber is officially rolling out p an in app pick u option. Customers will be asked of they would like to leave a tip. It is a major reversal for the embattled company. Lyft has always allowed gratuities. Meanwhile, london appears to be defending his title as europes tech capital according to london partners, an agency for the city. Venture capital firms drove more than 2. 3 billion into the citys Technology Center since last years brexit vote. Continuing to outpace other european cities, including dublin, berlin and amsterdam. One firm is Felix Capital was just announce it is raising 150 million in its second funding round. The firm backed some of the citys biggest successes. Still with us is the founder and managing partner frederic. Congratulations. It is your second fun. Only two years ago you raised 120 million. Now you are back for more. Is there any point, the fact you are londonbased make any money questions about brexit . Frederic clearly, when we started two years ago, that was a big there was no question about it. Especially with their positioning around the creative class. Brilliantsuch a example of technology and creativity living together. Two years postbrexit, clearly there were some questions. That has not stopped investors from backing us, but the question was what kind of are you going to be able to find in london . Based on the way we work, we based ono after where they are. We do not expect to do everything just in our home home turf in london. I first met in portugal where he started this company which became a Global Platform for fashion. And convince, find the entrepreneurs to work with us. A portuguese leader now living here. You are in goop, which is a u. S. Based company. What are you focusing on with this second fund . Where do you see the opportunities lying for you . Frederic the second fund is very much a validation of our original a couple of years ago. It is too early. We back companies for the very longterm. It takes 5, 7, 10 used to build the company. The premise behind felix as we believe there is an opportunity to have a venture firm that focuses on the lifestyle. By this we mean the emergence of by first brand led founders which are impacting the way we lead our lives, the way we aspire in different lifestyle segments from fashion to beauty to food to wellbeing. Everything is changing to digital. We are looking for those founders whove got a sense of what people want. Were Building Communities in a very authentic, organic way. Caroline you are going to be writing checks for 5 million. What sort of level do you see yourself going in at now . Its a seed round, series a or b . Frederic that is why want to be a flexible investor. We are not dogmatic that want to be the first investor. We want to back the best founders in the segments we believe in, where we can see a very big opportunity. Caroline how do you find these founders, how are you seeking them out . Frederic it is both an art and assigns. We used data, we look at signals. These days, you can track things, you can measure looking at the number of life on instagram, and twitter. But, at the same time, we are very centric. At data, we like to see passion, we like to see emotion between consumers and products, a service or brand. So we combine both art and science. Our business is always about making decisions on the partial data, it is never black and white, it is always gray. Be askingim going to you later about the geopolitics in europe versus the u. S. Versus the u. K. And brexit but i want to ask about valuations because we are looking at companies, the nasdaq is down percentage point on thursday trading. We see facebook dominating the most valuable companies in the world. How is it affecting the private sectors and the companies you want to back . Frederic our business is as we invest really early, way before, but valuations are always impacted by [indiscernible] investing early, valuations become more of, it is more of a dilution for founders. 5we invest x, 1, 3, or million, or where does that money take the company. Do we believe that the post evaluation will be fair . We need to be disciplined. But the same time, eventually, a dealld not be losing on valuation because if the company works, valuation usually nowill not be as critical. That you 150 million race, you had plenty of that youre not naming who your investors were less time. It was unilever. Who, is it institutional money, is a global money . Frederic we are a start up in Venture Capital. Two years back us ago was very high. To our surprise, the Investor Base of the trust fund was very institutional. People understand the venture business. There were opportunities to invest across the u. S. And asia and china and chose to back felix because they thought we were offering something different, something they did not have in their portfolio. The reason why we started felix was to do something that did not exist in the markets, where reached give the opportunity to our investors to access a different opportunity. But even more importantly, we want to offer something to founders they do not get in the market. So, the Investor Base is very traditional, pension funds, foundations, family offices. And for the first time now with a new fund we have investors from asia and we were able to and get people that can back is for the longterm. Caroline fascinating. We will be digging in so much more with the Felix Capital founder. We will be talking much more about the brexit debate. Coming up, with the release of the u. S. Jobs report coming up friday, we will hear from the ceo of hubspot. And what needs to be done to close the gap. This is bloomberg. Basedne berlin soundcloud is cutting nearly half of its staff. Its a costcutting move designed to increase its war chest against bigger rivals like spotify and apple music. Sound cloud warned it was at risk of running out of cash. Operations be consolidated into its headquarters in berlin and an office in new york city. Offices in San Francisco and london will be shuttered. And the Bigger Picture on jobs here, of course, looking at the united states. After years of the payroll growth of 200,000 a month, hiring has been disappointing. More and more companies are complaining they cannot find the right kind of workers and particular troop in tech. On the eve of the june employment report tomorrow, or International Economics reporter Michael Mckee joins us from cambridge, massachusetts, for more on what people are calling, mike, the skills gap. Mike yeah, caroline. If you are hightech company you have a presence in boston to google, amazon, they are all here. With more worldclass universities in one place than almost anywhere, it is no surprise. What is a surprise is the size of the skills gap here. In fact, in massachusetts they are range last in the u. S. For companys ability to hire and attract tech talent. We sat down with brian halligan, the founder and ceo of the sales and market and Software Company hubspot. Here we probably got 1600 employees and 300 openings right now. Mike how long will it take you to fill those . Well fill all of those but it is continually rolling and we have new openings. In any given time over the last couple years weve had at least a couple of hundred openings. Were always hiring, always growing, 1700 people today. A year ago we had 1100. We are constantly filling new spots. Mike is there a war for talent . Do you have google and amazon trying to raid you . We have a huge war for talent. Funny story. We did in overcoming boss thing , where i command the front desk and i answered the phone and i had a headset on. It was fabulous. And i got about 30 calls over the three hours i get it, and im going to guess half of them were from headhunters recruiting into our organization. Theyre just pounding in here. There is not much i can do about that. I do not hang up. We try to make it a fabulous place to work. And make it a fabulous place to work and attract the people and develop them and if they love it here, they will not lead. That is our attitude on it. Mike for a guy the center of higher tech education, he is critical of the way the bosses are the Business Schools are preparing your students. I do feel the universities, theyre on the cutting edge. What happens in the universities, if the Computer Science class is out of date, theyre teaching a class in fortran or pascal, an old software language, the students sideselves are doing d projects. This do for up to speed on the latest technologies. Where the schools, i have noticed, are way behind are in marketing pete we build software to help people market better. And most schools are teaching the marketing playbook that worked in the 1990s, not the iny book that works 2017. Very few schools are teaching how to sell it in the way that matches the way people buy. Were trying to work with local universities we work with harvard and m. I. T. , on some programs like that and we have our own academies that teaches people how to do that kind of stuff. Andreessensmark maxim that every company is a Software Companies these days, every Company Needs software engineers. He says he does not see things Getting Better anytime soon. Over the long haul in the united states, i just see the Computer Software industry eating up more and more industries. And every company today to a certain extent is becoming a Software Company. It is run by software. And so, i think the problem gets more acute overtime and Companies Like hubspot will have to be very competitive. We will have to make it a great place to work, and have to open new location for people will have to train people. Over the next 10 carbon 20 years, it will get 21020 tight. It will get hubspot already has its own academies. You and i should have on into Computer Programming years ago. We would be rich today. Caroline woulda, coulda, shoulda. Great to see you on the banks in massachusetts. Michael mckee. Coming up, the best possible outcome for brexit. Well discuss our investors approach to start funding in the u. K. And across the european region. This is bloomberg. Alisa you are watching Bloomberg Technology. Lets start with a check of your first word news. World leaders are arriving in hamburg, germany ahead of the g20 summit. Canadas Justin Trudeau, australias Prime Minister malcolm turnbull, and british Prime Minister theresa may all touchdown today. Ve President Trump and japans shinzo abe Angela Merkel will play host in her hometown. In the u. S. , the lockdown of