Transcripts For BLOOMBERG Bloomberg West 20151028 : vimarsan

Ibm revealed the sec is investigating accounting practices. Apple shares are getting ever so slightly in afterhours trading. 31 . T rose sales up 22 . That key iphone unit sales number fell slightly short. Still, i spoke with the cfo over the phone, and he told us that we feel very good about our iphone business which continues to grow a number of places around the world. There are many places that continue to see growth. We have not seen any sign of economic slowdown at any point in time. Joining me now is an industry analyst and blogger. Alex, i want to start with you. Lets talk about this iphone number and guidance for the forwardlooking quarter. It was a little bit light on guidance, and little bit light on the iphone number. It is typical for apple should be conservative. And in this i macroeconomic environment you want them to be conservative if you look at what is going on in china, they are up 10 and increasing. Look at the gross margin number. The phones coming up. A lot of really good news in this report that is very contrary to a lot of concerns coming in. Emily tim cook saying on the call that apple is on track to hit 40 stores in china in the middle of 2016. Theyre continuing to invest heavily. There have been concerns about the Broader Health of the chinese economy. Does this put some of those concerns to rest . Doubling year on year into not just a macro climate but also a declining headwind in terms of the exchange to the dollar. We are seeing a phenomenal story on china. Lets not also forget that 120 growth in terms of apples Itunes App Store revenues in china, which means it is not just the phones that is constant and doing well. Emily tim cook in china just last week. He was posing at stores and hiking along the great wall. It is a hugely important market for apple. I want to check a little bit more about the watch. They did say that watch sales are up sequentially, which i guess you would hope, but they left the june quarter with 700 places where they sell the apple watch around the world. They exit september with 5000 locations. What do you think about how well the watch is actually doing . I think the apple marketing machine is still in full force. The apple watch is not the center of this story. The apple lawsuits to evolve, the battery life needs to go up, the apps need to become more stable. But apple will polish them as much as they can. It is really still all about the iphone. If you look at the revenue for the iphone, of over 40 yearoveryear. The Worlds Largest company roaming revenues. Samsung is an absolute train wreck right now. Slowing, it is having some issues. Emily i come back to this question, it is apple overdependence on the iphone. If you look at ipad sales, they are down again. Replacement sales were probably longer than people were anticipating in the big beginning. Were seeing some level of cannibalization of the product portfolio. This is something they have seen before, theyre not worried about it. Are you worried about it . Are you worried that they are focusing too heavily on the iphone . We cannot play this game that what are we trying to worry about. The iphone is a tremendous success story. Every other product would be everyone elses dream. Lets talk about ipad for a minute. Although it has been declining for a long time, perhaps what were seeing is that it is a product that everybody on the planet will end up owning. It is saturating 40 of the addressable market. Those enterprises are not moving to another type of product. It is the highest satisfaction rating ever seen. It is perhaps more of a niche that we thought. But a niche nevertheless. 50 of a very large market. It may not play against the iphone, but it does against the mac. Emily the new settop boxes on sale now. They think they can change the experience. We will be watching that. Thank you. Youre sticking with me to talk about alibaba. Shares up more than 4 today, as much as earlier in the day after the company were ordered a massive 32 increase in sales in the second quarter. All of this thanks to a shift towards mobile shopping and increased promotions. This is ahead of next month single day. The biggest shopping day of the year. The ceo of a Research Firm that focuses on chinese consumers joins us. And little bit of doom and gloom over the last year. Shares not doing well. They have since recovered, is the worst over . It is a good question and it a great quarter and it was driven by a number of different factors but the primary one is global uptake. The number one issue that they have alibaba is could they replace desktop with mobile. The answer this quarter was yes. I think theyre on a good track. I expect to see similar results coming in the next few quarters. Emily what is the next test for alibaba, if they are doing well on mobile, what do you say the next test is for this company . It is along the lines of mobile. As we saw, the comparable item here is facebook. When it came out of the gate after the ipo, people were skeptical because it was not tracking well on mobile. They shifted everyone to mobile, and used mobility as a sustaining story for them. I think we need to see how well thats continuing as a story going forward. Lets not forget that one billion people are on facebook and we have to see the same time over 1. 2 billion overall rate we need to see how far they will stretch in that domain. Emily one thing i want to know is clarity on the investment strategy. At what point are we going to see some kind of coherent strategy. Are they really just experimenting . Were talking about a company with a ton of cash. Amazing operating margins. They have the capital to spend. I do see a path there. What theyre really looking to do is not out the infrastructure and the systems of the logistics so they have smooth sailing and a strong run for the ecommerce. Virtual marketplaces or good nonconsumer Good Services are their investment scenarios like local service providers, they are looking for commerce to be bigger than physical product. The investment scenarios like africa and india also really matter in right now. This Company Continues to invest in mobile. I think they have crossed the chasm. They are building out a very successful mobile business. They are more successful than our friends at facebook. Emily that is a bold statement. They had zero revenue coming from mobile, so they are coming out ahead on that front. We will keep a close eye on singles day coming up the second week of november. Now, i want to talk about twitter. Stalling user growth continuing to drive the stock down. That is next. Emily twitter shares are taking after hours even though Third Quarter revenue beat expectations. The Company Reported a slowdown in user growth. Additional the microblogging platform recording a loss. Joining me now, david. This is like the Third Quarter in a row where we see slowing down user growth. We have to give jack dorsey some time, but can he really celebrate that can he really accelerate this . Cory was talking about how each useronetizing more even though they are not getting users. It is about making money. That is not so bad. You have to give jack a little time to really start making the very significant changes that he intends to make a twitter. He had a big vision about a much more userfriendly company that has not had time to implement yet. Emily jack dorsey has been speaking about moments, the future of twitter. He said this is one step toward amplifying. Lets take a listen. Moments is just a start of boulders application. I challenge our teams to the on assumptions of what makes twitter the best way to share something. Im confident our ideas will make us more powerful. Emily are you optimistic . I am not optimistic. Not because i do not think he is incredibly brilliant, but the task is very hard. Metrics are going the wrong way, and it is here hard to turn things around. Theres a lot of luck in serendipity that is involved. 300 million is a big number, and it does look like they are going to get there. Emily when you look at the future of the product, we have moments now, but what is next . Will we be looking at another metric entirely . Theyre going to focus on monetizing logged out users . I am actually more positive than i have been for a long time. It is partly because of jack being there. It is also because of what jack is saying. Not following the orthodoxy is right. Twitter has been embedded in a lawsuit very narrowminded assumptions about what the company was and could be. That has to be thrown out the door and turned into a userfriendly company. I think it can be. I think there is a huge appetite for the instantaneous broadcast services for individuals that twitter offers. We were talking before about how they should go to longer tweets. Jack has said 140 characters is idiotic. When you can put a video on there, that does not make any sense. Emily some say this is archaic, and some say it is good. Also saying they will start a big Tv Ad Campaign with the world series. Are you bullish on jack dorsey in general . The fact that he is doing two things at once, im not of the belief that is a bad thing. He has a lot of things that square that he would not otherwise see. This might actually be hopeful for twitter. I know that positive on the tv campaign. At the end of the day the problem that twitter has is a majority of people who go to twitter do not become active users. So the product has to fundamentally changed. Emily a lot of questions for this new ceo. Thank you both. Ill let you argue offcamera. [laughter] coming up, tmobile with mixed thirdquarter results. I talk to the ceo about what lies ahead. Emily kind of a tough day for tmobile. Rolling out thirdquarter earnings that missed expectations. Analysts have been looking for . 30 a share with revenue of 8. 2 billion. One bright spot, it added 2. 3 million new customers in the quarter. I got to sit down with the ceo and ask about the new customers and the recent data hack. I think things will settle down. What we did is we actually increased the amount of growth that we forecast for this year and kept our adjusted ebita guidance the same. I think there is a shortterm issue where people have misinterpreted last quarters tax rate is a jumpoff point and now it has normalized. And the one time metro pcs decommissioning cost. That is directly in line with what we expect to do and will continue to do. They are quite good results, and they understand they are. Emily lets talk about these new customers. Are they coming from at t . Yes, yes, and yes. It is very important, one of the things we track is gracious. For q3 we were 1. 8 to 1. We were gaining against all of them. That is 10 quarters in a row positive against the industry. Seven quarters in a row positive against everybody. Nine quarters in a row over sprint. In the last seven days, to keep you uptodate, it is up to 1. 9 to one. We continue to take customers from everybody. But as we saw, they clearly are the largest donator at this point. Emily im a tmobile customer, and i came from verizon. Three weeks into my new membership, my data was hacked. I got a letter in the mail saying i was one of those 15 million people. What went wrong . And what are you going to do about it that is different from every other ceo has done . I think i have already done Something Different than any ceo has ever done, obviously these you take place with experian, where there was a breach, and 15 million people, yourself included were potentially impacted. But what we did is we immediately emily are you saying maybe i wasnt . I did get a letter in the mail. I think you got a letter from experience explaining to you that you are one of 15 million customers whose data may have been impacted, and it is best to take all precautions and join up with the free service and credit monitoring that we offer. Emily there are systems that may be more expensive to have and take time to upgrade. Are you working on upgrading internally that might prevent another breach . I think this is a significant oversimplification. This was a database maintained by a subsidiary with tremendous harsh and applied by us as well as experian. There was a breach of some sort that is still being completely understood and investigated by authorities. And we as well as every other Major Company in the world are investing heavily in all forms of protection against these types of things ever happening again. Emily lets talk about the network. I will say that the network was good enough for me to switch. Anecdotally, i still do have some problems with it. Some dropped calls. Depending on where i am. What is in it for me in terms of the longerterm . Two years from now, why should i remain a customer . First of all, i do not want to assess whether the people are actually hanging up on you, or dropped calls. [laughter] kidding aside, this year, with one million square miles of lte, you can expect to have what you already have, which is the fastest 4g lte in the u. S. , but also the Fastest Growing network in the United States that is my commitment to you and the rest of the customers. Emily for the record, nobody hangs up on me. Another story we are watching, this is important. Ibm shares taking a hit after the Company Discloses that the sec is looking into the way it accounts revenue recognition. This is the second federal probe into ibm in as many years. Our bloomberg reporter who covers ibm is with us now. What are they looking into here . They do not give many details as far as i know, i can only speculate. The sec is looking into how ibm accounts for a revenue that is recognized over a span of time. Emily what does this signify for the broader industry . Trust and integrity, that is the most important thing. For the broader industry, if you look at their shares, they are going through a transition where they are looking at business deals with shorter waits and higher frequencies. They have all shifted how they are accounting for it as well as to these out of service models. The changes for how you account for revenue. Emily what does this mean for investors and ibm . The company has been trying to make a big transition. For investors, it is another challenge that ibm has to face. They are looking at this multiyear transition where they are moving from one Business Model to an entire new Business Model. This is another signal that things may not be going as well. Emily there was something somewhere that happened a couple of years ago in a cloud revenue related probe that ended with no action. You will keep us updated on this story. Thank you all for watching. It has been a big day. Tomorrow, we have another round of tech earnings that you do not want to miss. From our studios in new york city, this is charlie rose. Charlie senator Bernie Sanders is a democrat in for the democratic nomination for president. He is down for his advocacy of greater economic equality for all americans. He refers to himself as a democratic socialist. He continues to draw huge crowds. He and secretary clinton spoke at the Jefferson Jackson dinner in iowa. Senator sanders today some are tr