Transcripts For BLOOMBERG Bloomberg West 20151020 : vimarsan

That he is not getting answers about the controversy. Youtube adds marketing features. First though, to our lead. Ibms thirdquarter results, the company saying it turned a 3 billion profit, but revenue was down 14 . This is the 14th straight quarter of yearly decline. Big blue missing wall street estimates on the sales side as it struggles to turn the business around. To refocus on cloud, security, analytics. Ibm reduced its fullyear earnings per share guidance. Tom giles joins me. It does not look good. Do you see something i dont . Tom there are signs of hope, evidence the transformation is happening. It is just not happening quickly enough. ; she wants to focus on cloud, analytics, and security. But revenue in those areas is up, but it is not growing as quickly as it did in the last quarter. Tom when you are the management of ibm, you have to look for the Silver Lining somewhere. The doubledigit growth is a positive sign. The problem the conversion is not happening quickly now. When it does happen these are , potentially some of the lower margins kind of businesses, so profitability will continue to be a challenge. But these are valuable , businesses, this is the wave of the future. This is the way people will want their software delivered. They want the analytics that ibm is investing in, but it is just a big ship. And as you know turning a big , ship takes a lot of time. This is a multiyear turnaround effort. Emily what about in the broader tech landscape . We have seen ibm unloading things. Could we see ibm spinning some more stuff off or doing some kind of big merger . Tom how can they do something that is really transformational . They have made these acquisitions throughout. They will continue to invest in those kinds of things. It is difficult even if you bought something really big. How transformational what it really be for them . How do you incorporate that into what is already a Large Business . With a lot of different things. Is there an activist who wants to get into the stock and wants to pressure them for something specific . Some kind of a spinoff. Here is the challenge. If there was low hanging fruit, wouldnt they have already pursued that . They have embarked on restructuring. They have been upfront and straightforward about revised estimates. It did take a while. But they did come out of those. The problem is they have been buying back stock and issuing dividends. The investors we talked to, you can only rely on that for so long. Emily what about watson . Because i reason they spoke with john kelly, who is number two in ibm. He is talking about how watson is the future. Take a listen to what he told me. It is growing very rapidly, fastestgrowing segments. As a form Watson Health and look at applying watson to other areas like iodine and education, we will grow those businesses as well. Emily he says watson is already incremental to their business. And it is going to be huge. Should we believe him . Tom it is going to be big if you are a small company. There are definitely putting a lot of emphasis on it. You have seen the commercials. There are very clever. Yes enormous dylan. Theyre putting a lot of investment in it. But you are talking about less than a billion dollars in revenue, and how quickly that could be something really material to an ibm, not overnight. Emily we will keep covering this story. Tom giles, great to have you back here in san francisco. Another stock we are watching, sandisk shares surging in afterhours trading on news that the chipmaker is in advanced talks to sell itself to Western Digital. According to people familiar with the deal, it could happen as soon as this week. Last week, we reported that sandisk had spoken to Western Digital and Micron Technology about a deal, adding to the last month they got a billiondollar deal from a Chinese University adding to the , funding it has available for deals. Theranos, the blood testing two startup, facing growing scrutiny over the accuracy of its technology. I sat down with a partner, an early investor in the company, as part of an exclusive wideranging interview. I asked him if he still stands by the company. And the coo of homes, after reports that the tests are unreliable. We deftly stand behind them because we want them to succeed. We do not have the answers to the questions swirling around right now. Which is, can i give you an answer to the questions others are asking . Heres what i can to you. I remember meeting her when she was still a student. Elizabeth holmes. Yes elizabeth holmes. As a teenager, she started the company with great passion. I remove or my partner saying, she is like steve jobs. This is long before she was wearing that black turtlenecks. I did not see what he was referring to, and a even ready down on a piece of paper to my myself that he said that. But, it was fascinating. She had that mesmerizing zeal to revolutionize. The entire medicine. It was these special kind of needles. We were the very first, we wrote a 500,000 check. She has been somewhat independent. She is been going at it all on her own. Emily do you guys have an observer on the board . Have you had an observer on the board . No. ; emily so, i interviewed elizabeth last week and i had the same impression. She is impressive. I want them to succeed. But there are people out there who think it is a fraud. Is it a fraud . Do you think it can recover . Steve there were some reporters that kept accusing them of fraud. In the darkest of times, 2008, when everything was just looking terrible. It is really frustrating to get kicked when you are down by someone on the outside. I understand people want to critique anyone who is flying high. I think they have done something remarkable. Emily you guys have such a tough job because you want to invest in breakthrough technology. How do you separate something possible from something impossible . Steve there are people walking in our door every week. Every day, sometimes. But, certainly it we does not go by that somebody has not gone is equally insight excited. This is the future of you name it. That is what makes my job fascinating. I keep hearing the potentials. Some of them are dead wrong. Sometimes if they are really an interesting sector of the economy and doing things that are not understood by most, some esoteric technology, or some Business Model that has never been tried. Like uber. And youre scratching your head wondering if you believe them or not. I think the best partnerships are when the Venture Investors or whoever is doing the first round of investments believes , almost as passionately as the entrepreneurs themselves. When we first invested in tesla, i was convinced that all vehicles will be electric. I will defend and debate that. It was not my idea, it was his, but i fully buy it. When i hear elon musk explaining it, he has won me over. It is hard to describe when that clarion bell hits and you see the future. And ive been wrong and i will be wrong again. But when it is right, it is a remarkable thing. Emily you can catch the full interview next month during studio 1. 0. It kicks off november 6. Pressure mounts on Marissa Mayer to control a mass exodus at yahoo . We will tell you about the latest executive jumping ship. Plus more of my conversation , with mike moritz, his thoughts on the state of tech valuations now versus 1999. Emily more drama in the Tech Industry, amazon and the New York Times continue their backandforth today over workplace angst at the ecommerce giant. Two months after the death reported on a bruising workplace. Jay carney has responded in a blog post. He shared internal records of the exemployees featured in the article. He criticized their failure to that their sources. The executive editor fired back in his own post. The article and a reporter saying that the reaction to the story from other exemployees leaves no doubt this was an accurate portrait. Speaking of challenges marissa , mayer loses a second top lieutenant in a month. To develop an officer has left yahoo for a position at square, running the business financing unit for the Ceo Jack Dorsey called square capital. This weeks after chief marketing officer left the company. But it could be one of the , biggest blows to her turnaround plans so far. Our head of global tech coverage brad stone broke the story. , it seems like this is one after the other. They were like the top two people. Brad jackie was managing the spinoff of the alibaba assets. Really nothing more important or , strategic for yahoo or its investors. This is 24 billion of value inside yahoo . Which itself is only valued at slightly over 39 in market capital. She is kind of managing this process. It is probably close to done. Of course, there are some tax questions. But if you are an investor, you , are very confident when jackie reses is at the helm. Emily who is left . Brad there is a team there, but each departure brings another mountain of bad publicity. There is this question, and she has never managed to outrun it, throughout her tenure, of what is yahoo minus the alibaba assets . What does it want to be . She has steered in the direction of search. 2004, 2005. Circa it is a media play . They have hired folks like katie couric. Is it an advertising play . Shes never really managed to kind of figure out are really commit to one of those directions. I think that strategic uncertainty is why she is off people along the way. Emily how big of a win is it for jack dorsey of square . The guy who is now running to companies. Brad she is going to go on to square capital. It is a small living program. By some estimates, the fastestgrowing part of square. There is always some uncertainty about his ability to run both companies. Emily thank you so much. To michael moritz, one of the stars of Venture Capital and chairman of sequoia capital. An early investor in apple, google, yahoo , and paypal. During the 2008 financial crisis, sequoia coined a phrase that encapsulated the Tech Industry pain. Saying, rest in peace good times. I asked him what todays headlines would be. Michael it is a more rational time the 1999. Because i do not think there is , a universal feeling that every company is going to be a massive success and people will be more discriminating. But there are you can look at yesterdays incredible story in the wall street journal about theranos to understand and i do not pretend to know about the details of that company. But if similar things are true , about other companies that have very high valuations, in the same collection of unicorns are a handful of companies that are going to become the Great Technology companies of the next 10 and 20 years. Emily what does that mean . Michael they will fail. Emily the theranos story is a perfect example. How many of these are out there . Do you worry that there are few, quite a few . Michael i do not worry about it. It is the war of corporate business evolution. If people get too big for their britches, if the companies are run poorly, if the product or service does not fulfill its promise, the companies deserve to fail. Emily how protected our late stage investments . Michael many late stage investments are not really investments, they are just disguised forms of debt. They are very well protected. Many of them are very well protected because of the terms investors have put around them. The ratchets, the liquidation preferences. These are not really equity investments, they are debt. Emily is that a dangerous trend . These ratchets and the guarantees that investors will get a certain amount back. Michael if the company does not perform, yes. It is high risk poker. Emily you can catch the full interview next month during our new season of studio 1. 0. , had Youtube Gaming shows me how they are ready to take on the competition. Plus, drafting pleads not guilty. They say that employees could not have cheated on band all. Emily to a story we are watching, an external investigation has found that a draftking employee did not use proprietary information to win the money. According to them the employee , could not have used Insider Information to place a bet on fan duel. Because he did not have access to the data until 40 minutes after the lineup was locked. The incident led new York State Attorney general to start a probe. The controversy could impact the sites popularity. Player spent about 800,000 last on these companies this past weekend than the weekend before. On to another online industry and that is gaming. Not just gaming people watching , other people play games. Apparently this business is , booming. You may or member that amazon bought twitch for a billion dollars last year. Youtube doubled down with its own platform. Each month, youtube says that gamers are watching 144 billion minutes of gaming videos and live streams. One gamer is estimated to be worth 12 million and the company just released a beta version of sponsorship that allows viewers to subscribe to their famous gamers for a monthly fee. Joining me now, is the head of youtubes Global Gaming partnership. Ryan wyatt. It is an honor to have you here in the studio. We have a bit of a demo and you are going to explain to me why people love watching other people. We have Youtube Gaming. This is something we launched at the end of august. To give you an idea, to kind of walk you through you have the , ability to add different game pages. People are interested in many different games that are out there. You can go all the way back to 1996, as well as some of your favorite creators. There he is, 39 million subscribers. He has more subscribers in the population of canada. Emily you just added away for people to subscribe to their favorite gamers for a monthly fee. We are always looking for new ways of revenue streams. We added sponsorships. Creators are generating ad revenue. They being play before their video content. They have been making great money off of that. Now we added another way for people to support their favorite creators. Emily 144 billion minutes of other people watching people. Break that down for me. How many people are we talking about . You are talking hundreds and hundreds of millions of users consuming gaming content. Emily twitch has 1. 7 million. 12,000 making a decent living. How does you to compare . We have tens of thousands of people making a decent living across the board. Not just in the gaming vertical, but among other verticals, including sports, news, gaming, beauty gurus. It has been pretty impressive. Emily talk to me about how you can see some of these these guys have a lot of equipment with them. You have to quite a significant operation to make a living. There is a technical prowess that you need to be able to Live Streaming capture. We try to simplify it. We integrated the playstation 4 last month. You can go immediately and lock into youtube and start Live Streaming rectally from your console. We also did something called mobile capture. On your android phone, you can use your selfie cam. The idea for youtube is how people broadcast venture across the board. Were trying to make it easy. You do not need a high level of technical savvy. Emily there are big prizes for the players. Mr. Wyatt let me show you this real quick. These are two korean teens playing the league of legends image of qualifiers. This is the end of the match. We have hundreds of thousands of people watching live on youtube. Beatingm ended up another team and theyre going to go in the world finals for a chance to win 2. 1 million. Emily how profitable will this business be for you . Mr. Wyatt the advertising revenue, we give a majority of it to the creators. But alas for us to also capitalize on the advertising revenue. Emily where is this industry going . Im curious and how this fits in with the broader entertainment group. As far as i am told, this is still kind of a niche thing. In some ways. When you talk about hundreds of millions of people, at the same time, it isnt. We have 76 yearoveryear growth. It is continue to grow really fast on the platform with no indication of slowing down. It is hard to wrap your head around where this is going to go. Emily how many minutes you spend watching games . Mr. White 20 minutes to 30 minutes a day to be honest with you. I like watching sports. Im an unfortunate Cleveland Browns fan. Theyre people who watch cooking shows. Yet people who watch the kardashians or reality. I do not know it is that crazy that people want to watch content that they are interested in and want to be entertained by. Emily i did tell people we were going to be playing games. We cannot do that for technical reasons. We will have to make good on that. I think you would have a blast playing video games. Emily i will come down to youtube. Ryan wyatt thank you so much for , joining us. I am warming up to the idea. That does it for this edition of bloomberg west. Thank you so much for watching. I am headed to austin this week. I will have that for you later this week. From our studios in new york city, this is charlie rose. She opened her renowned restaurant 40 years ago. Emphasis on local, organic ingredients help to galvanize the local movement. She created the edible schoolyard in 2005. It teaches children the important and growing, cooking, and sharing food. President obama awarded her the National Humanities medal last month. Her new cookbook is called my pantry. She