Transcripts For BLOOMBERG Bloomberg West 20160123 : vimarsan

Refused. Joaquin El Chapo Guzman may end up in a u. S. Facility soon. Guzman was recaptured six months after he escaped a security a top security prison. Officials had thought it would take a year for him to answer charges here. The approaching winter storm takes aim at the northeast corridor. All flights have been scrapped for now. Delta has counseled more than airlineshts, american is grounding at least 2000. It could be one of the worst ever storms to hit the eastern seaboard. Emily im emily chang. Coming bloomberg west. Up, the polish is back on apple. Investors snap up shares ahead of the countrys next earning report. Pay to play. Writes a 1 billion check to apple. Hightech firms to practice what they preach when it comes to diversity. We will debate the issue. Shares of apple over 5 . The stock outperform in s p and the nasdaq year to date me at still another apple search is being predicted and investors seem to be listening. Take a listen. We have looked at the historical trading over the past 10 years, and we are not at historical lows, but we are near historical lows, so that gives us confidence going into this despite the skepticism. Emily joining me is our editorrg contributing and adam, who covers apple for us. Adam, i will start with you. Put this into context given all context we have heard. And another investor thinks apple shares will increase because of the next iphone. Adam there is a lot of volatility around the stock lately. People are waiting to see what the company is going to do next. There is a lot of report coming out of the supply chain with weakness in the iphone. Other people like gene munster is saying some of these concerns are overstated and this is a cyclical dip. This will pick back up in the fall when new products rollout. Emily other analysts, not so bullish. How about you . Paul i think i just lost you. Emily while we get that fixed, talk to us about how that plays out for apple. Adam last year they made a big hay about the new products coming out. Essentially having this new ensemble around the iphone. The music product everything hinges on the iphone. This next model, new features will go a long way in determining how the investors feel in the company. Emily lets talk about the 1 billion google reportedly paid search bar keep it on the iphone. This is something our legal reporter doug out of a Court Transcript from oracle to google. Something unrelated, explain what this 1 billion number means. Adam when you search for something, say you are searching for a certain kind of shoes, it goes through google. What google pays apple is a big secret. They do pay to be the service there. Now this information came out in court filings. Google and apple try to have this information redacted from the court records. Emily it suddenly disappeared. We spoke with gene munster about this. There have been rumors about how much google actually pays for this service. It sounds like a big number. But in context they generated 3 billion in revenue from that. What that implies is a 33 attack, traffic acquisition costs. That is more than a typical traffic acquisition costs, but less than what had been rumored. In some ways if you are going to ask me to guess before i saw the number, i would have guessed it was closer to 1. 5 billion. Paul, obviously google and apple are fierce and pedicures. At what point does apple say, we dont need your billion dollars . For their sake i hope never. That is a big chunk of change to give up on. You look at mozilla, it became a lifeline keeping that company alive. These things tend not to go away. It is an important line. Emily paul, gene munster is bullish on apple. A lot of other analysts, not so much. How do you think apples story plays out this year . Did gene stop being foolish bullish at any point . No fault of jean. I am still very concerned about apple in the current calendar fiscal year. I think you are going to see negative yearoveryear comparable declines. I think iphone seven, it is difficult to see this is the blockbuster upgrade we saw on the six. This is just going to be a mutation on the product from everything we hear. Further of course, so much of the growth has been coming from asian markets and we have seen what is happening in terms of the recession and broad economic decline. I dont see a recently optimistic. Emily what is going to be the next most significant product on apple . They are focusing on the near term, some of Services Like apple pay or music. Those are really incremental. Another analyst was saying for an iphone apple gets about 300 in profit. To get even 100 from apple pay require 60,000 transactions. These Services Require so much volume to add up to make up for any sort of decline in the iphone. Emily thank you so much. Our bloomberg and she beating our bloomberg contributing editor, you are with me for the show. Apple isnt the only place google is putting its money. Google is also paying back taxes to the u. K. Government. Google is adopting a new approach and that is a set of going back to 2900 britain is the secondbiggest market after the United States the news comes as the Financial Information was disclosed also emerging is googles android operating system generating 31 billion in revenue. U. S. Stocks closed higher after a wild week of swings that remy has the rapid new york. Ramy closing at a session high of 90. 41. The s p and the dow were so close to doing the same. But all three indexes did close out the week in the green and that was the first time for so 2016. Much of it had to do with technology and energy stocks. On the s p, energy was the biggest gaining sector. Tech was the secondbiggest. Up nearly 3 . Lets look at the nasdaq. Company stocks, amazon closed 3. 7 higher. That was the biggest jump since october. The online retailer plans to add more than 7000 jobs in europe. The copy has invested 15 billion the company has invested 15 billion euros on infrastructure and operations. David einhorn is betting against amazon and netflix. Those positions were disclosed to clients. Facebook shares rose about 4 . That was the biggest jump since november. Two analysts note say instagram would drive sales and be an important catalyst. Both firms have an outperform or positive rating. Back to you. Emily speaking of amazon, the company is offering full refunds to anyone who has purchased a hoverboard. Regulators are investigating 40 cases of hoverboards exploding or catching fire get the catching fire. The Consumer Product Safety Commission is looking into the lithium ion batteries used to power the hoverboard. The government hopes other retailers will follow amazons lead. Coming up, how Technology Made income inequality worse. One of the news from economic just one of the views from the World Economic forum in davos. A ride on a billionaires private jet isnt a bad way to get around. For one person it could be the best day ever. We will explain later. Emily more from the World Economic forum in davos. You anp, we bring excerpt from our interview with michael freeze. Stephanie ruhle asked which issues are keeping him up at night. Usually we would say regulation. But regulators in europe have it right. They have it right on Net Neutrality, on consolidation, on telecom single markets. Im nervous by nature about certain things that im pretty relaxed. I cant control china. I cant control the price of oil. I cant control consumer demand. We have to power through this uncertainty at Uncertain Times and do it we can do for our consumers. I have to be careful. I think around the Net Neutrality they can. Is a very healthy balance. We can provide Specialized Services and they can do what they do you they struck a healthy balance there. Emily Erik Schatzker sat down with the managing director of p gp mutual growth fund. We could see a reset for fundamentals for unicorns. There was a lot of enthusiasm and capital that came in to the market from investors that have historically invested i say they may look like tourists. Very incredible public investors a very credible public investors that have not done that kind of investing before. I think we are going to see a lot of that value retreat. Erik and then they are going to regret those investments. They will likely regret those investments and you will see a reset back to fundamentals. Ultimately valuations have to be based on a multiple of cash flows, not on a multiple of revenue or theoretical cash flows. The fundamental discipline around value investing, i think you will see it reenter the equation. Emily finally, has Technology Made income inequality worse . Thats what said when she sat thats what uc berkeley professor laura tyson said when she sat down with tom keene. Take a listen. Technology has been a great boon to productivity. It has reflected tremendous innovation, but it also has displaced lots of workers, it is laborsaving, it is skilled biased so it helps those at the top, it is a major contributor to income inequality. To income inequality because of that. It is also the case that productivity gains from the technology have not been broadly shared, in part because technology has been wiping out middle income jobs. Emily the future of work was a davos this year, and in particular, how should Business Leaders address the fact that technology could reshape the way entire industrys function . David kirkpatrick brings us his update from davos. David there is a huge question that comes up time and time again about what technology is going to do to jobs. One session i was attending on the travel industry, one of the travel industry ceos said he thought the biggest single issue they are going to have to deal with is what is going to happen once all the jobs in their industry start to go away . He is thinking about what are the political ramifications and what does it mean for their role in the community. One of the people he has invoked most art who wrote to talk about this issue and it was a big defining issue last year as well. The concern of techs roll on job creation and job destruction is not going to go away. And we are likely to be hearing about that for some years to come. Emily David Kirkpatrick in davos. A stock we are watching shares of sprint climbing the most into an half years. The nations fourthlargest wireless carrier moved up the date it will report earnings. That reassured investors about its turnaround. Sprint fell to multiyear lows earlier this week. The company is expected to report its first full year of subscriber gains in eight years. As winter break, check out what is trending. Uploaded byis video astronaut scott kelly, showing how he and fellow astronauts play pingpong with a drop of water. Emily now to airbnbs courtship with regulators. Global policy. Attendees were told, work with us and we will collect millions of dollars in taxes for your city. This is part of the latest push for corporate regulators. I spoke to our guest about this last month. A lot of cities are getting the basic point. This is a new thing that came out of the economic dislocation in 2008. Emily yahoo , saying it will decide its next strategic step after the Company Reports earnings. According to reuters sources, the company also rebuffed several potential buyers for core internet assets. The business has been scrutinized over the past few months. Star board values threatened ceo mercer mayer with the Marissa Mayer with the possibility of a proxy fight, unless the Committee Makes significant changes to its leadership and strategy. Our bloomberg can jupiter Paul Kedrosky is here bloomberg contributing editor Paul Kedrosky is here. Brian, the story is changing by the hour every day. Things are changing. What do we know, what dont we know . Ryne sandberg the upcoming brian the upcoming quarterly call is going to be interesting. Marissa mayer she will say we are going to do this revamp to make the Company Strong again, that will be interesting. We are looking at efficiency, things like that. How it all shakes out . He dont know. We dont know. That is why people arent just are interested in knowing what are you going to doing, marissa . How is this going to shake out . Emily yahoo is closer to considering selling off its core business to what happened here . Paul it reminds me of this whole oregon militia thing. It feels like a hostagetaking. You have an executive team that has control with a bunch of assets. For reasons, including perversity and ego, those include the alibaba shares, it seems clear in terms of all of those pieces the Company Formerly known as yahoo , they are all going to get the outside of this company, whether it is three months, six months, or 12. Emily mast this member met, mass dismemberment that. That sounds bloody. What about alibaba . In some ways, i think yahoo has been trying to rid itself of what some might call a millstone. Alibaba has this massive amount of valuation stuffed inside of yahoo . Of late, getting rid of this thing has become more of a burden. Just last month they said we are going to change course after a year. Instead of doing a spinoff we are going to do a reverse spin. There are some changes that look maybe even sell the core. Like they are going to be happening. Some people wanted it to happen more quickly than others. That is going to be a key driver, how fast is this all going to happen. And will that be enough for investors . Emily will a proxy fight materialize here . Paul if there is not a clear path, you will see a proxy fight within the quarter. Emily brian . They are not shy when it comes to proxy fights. Yahoo has dealt with a lot of investors before. I would not be surprised at all. It is no secret they know this is waiting in the wings, that investors are not happy. These decisions would be made. Decisions would be made with that calculus in mind. Emily we will be listening to that call february 2. Thanks so much. Paul, youre sticking with me. Coming up is Silicon Valley just too white to attract black coders . We discuss why it is more than an hr concern. Emily im emily chang and this is bloomberg west. More highlights from davos, particularly how to find hightech skilled workers. Anchorrg Stephanie Ruhle talk to john the workforce. The first issue is where the money will come from to generate the opportunity. It will be Mediumsized Companies that will employ the changes. You have to develop a set of skills. How do you retrain in the internet of everything and we look at how you change the education system. Can you imagine the french state partnering with a american hightech company . That would never have occurred normally. But it speaks to how dramatic the changes are. And how uniquely cisco is positioned. Reporter there are these big, beautiful ideas here in the mountains of switzerland. Could all this get put on hold while some any companies can be put in survival mode while shares continue to lower . Our competitors are small startups. If you watch every ceo in the u. S. , 90 know they have to become a digital company. Only 10 have a plan to get there. If they do not change 40 will disappear. Jamie dimon understands that. Doug understand that at walmart. Mary understands that mgm. They will do this because it is survival. What happens if you do not change . Stephanie does that mean this will be a big acquisition year . There is like all changes in the economy. Cisco manages extremely well. We emerge from many challenges stronger. That is when you begin to lose market share. We have no competitors from 15 years ago who exist today. Stephanie wow. The companies who are bigger and stronger, they are a shadow of where they were at that time. This is what every company has to do. You either disrupt or you will be disrupted. And that is what leadership is about. Cisco intends to partner in a way that no other company has ever done with all the major governments in the world and we are on our way to doing that. Emily Stephanie Ruhle and david westin with John Chambers in davos. You can find us full interview at bloomberg. Com. Emily it is no secret silicon , valley has a diversity problem. A big one. Many companies are attempting to correct it. Pinterest hired its first head of diversity. Following facebooks announcement of an internal Program Designed to manage unconscious bias in its hiring process. Still diversity figures are , barely moving. Why doesnt Silicon Valley hire black coders . Black coders as they went west for jobs. They found a of factors that could take decades to correct. Joining me now, my guests. Lets put this into context. Google has embedded people at Howard University and there has hire fromlack Howard University. Facebook and dropbox and pinterest have gone there and hired no one. Is Silicon Valley to white to too white to attract like people . When youre talking about Companies Going out to and doing things for the pipeline as people call it, there is a presumption that the problem is with the students coming in and not with the companies themselves. If companies are not changing the very fabric of the way they are looking at recruiting, at inclusion within their teams then you are going to see the same things happening over and over again. The solutions have to be a lot more layered and nuanced than that. Emily carla . Nicole i absolutely agree with carla. We Work Together a lot of this. If a Company Wants to attract more Diverse Talent it is like a flywheel. The first few revolutions of trying to attract Diverse Talent are incredibly difficult. They take more energy. As you prove that you are serious about this and as your top talent from backgrounds that are underrepresented gets retained, they beget more Diverse Talent. Those first few revolutions of the flywheel are where most companies are falling flat. Emily let me take this one step further. Is Silicon Valley racist . I think what is interesting about that question is that it assumes that a body of people is one thing, that they are all bad are all good. Or all good. I think a lot of the work that has been done in the last year is nuanced the situation that we are in the middle of. Emily is that a yes . The systems at play are not built in a way that drums of draws inclusion. Emily nicole . Nicole i would say it reflects the values of the United States overall, and we see too much systemic racism embedded. Embedded in the way we recruit, hire, and retain talent from underrepresented backgrounds. Emily another problem and you alluded to this at the beginning. A group of people is blamed rather than the system itself or the people who are doing the hiring. The other thing that this article pointed out is the past code skews white. White people learn to code earlier whereas maybe black people starting college and they are not as advanced when the graduate. What you think about that . This is why we invest in organizations because there is a bit of truth to that although to say that the problem is that what kids need to learn how to code earlier is taking on one piece of the puzzle. Like black girls code or hidden genius project. Getting kids to code younger and younger will not solve the pipeline with their looking for a job if we have not fixed for the pipeline leads. You can increase the pipeline, but if it leads to a sewer, who cares . Emily i was speaking with mike morris of sequoia about women in particular. He blamed the pipeline and said there is not enough women studying computer science. Take a listen. We have many more working in our China Business than we do in our u. S. Business. Why is that the case . I think the issue begins in the high schools. Where women particularly in america and in europe tend to elect not to study the sciences when they are 11 and 12. So suddenly the hiring pool is much smaller. Emily you think it is a python problem . Some would say you not looking hard enough. We look very hard. We hired a young woman from stanford who is every bit as good as her peers and if there are more like her we will hire them. What we are not appear to do is to lower our standards. Prepared to do is lower our standards. Emily does that make your blood boil . A little bit. [laughter] there is a big presumption that we know what the bar is. And truly, we work with 40 Companies Across the Portfolio Companies this year. We worked with 70 companies over the time that we have been an organization. It is abundantly clear to us that we do not know what the bar is as a tech community. Emily it is clear there is a problem, there is disagreement about why the problem exists but now that we know there is a problem, how do we fix it . I can just see quotas or oronscious bias training Networking Events or the list goes on. There are so many ways to try to fix the problem. What is the number one thing that companies should do . I think it is important to point out and this is not to just correct my title, our chief diversity officer is our ceo and he is asserting and he will continue to assert that. We do not have people with diversity in their title. That allows the company to be taken off the hook. That become somebody elses job and i do not have to worry about it. The point being that there is no single solution. That any director of diversity can bring upon a company and suddenly magically make it better. It is hundreds of things that add up to recruiting differently. Hiring differently, retaining people, using different kinds of language, coming up with career paths for different types of people, changing your thing from changing everything from the physical layout of a tech space to making sure you have decent parental leave policies. It is all these things that will actually fix the problem. When we relegate it to one department or we see hr will take care of that, it is never going to be sustainable or scalable inside a company. Emily this is a problem that i am glad you guys are tackling. We will continue to cover it. Thank you both. President obama will ask congress for 95 million to harden defenses against computer hacks. Last year the government pro personal records of about 20 Million People was hacked were hacked in an attack that some believe traces back to the chinese government. They announced they will create an agency to oversee security clearances for government workers and contractors. As many as 900 jobs could be on the line at vmware. This is according to a person familiar with the matter. The Software Maker is said to be eliminating positions under a restructuring plan. It is reeling from weaker bookings and concerns about the acquisition of its parent company, emc. Emc is being acquired by dell and it is in the middle of a costcutting program. The job reductions may be announced on tuesday when they Company Report Quarterly Earnings or day before. Coming up, the socalled seasonal price cuts are sticking around a lot longer than you might think. We will dig into the price war next. A rough week for ibm. Big blue tumbled to its lowest level in more than five years after a disappointing earnings report. Emily did you know Ride Sharing Services are increasingly relying on older drivers to power their fleet . Uber partners with aarp to recruit retirees. One big benefit, insurance stats show they have fewer crashes. Uber is bringing in the new year by lowering prices. The Company Announced it was cutting rates by 10 to 45 in 100 cities across the country. But this is the third year in a row uber discounted fares. Are they seasonal and what is that doing to their bottom line . Joining us to discuss, our startups reporter eric newcomer, and still with us Paul Kedrosky. Eric, lay out your argument. Youre saying that the price cuts will last longer and it will affect the bottom line. How so . Yeah. The price cuts are seasonal in that january is a slow time. They want to increase demand which they think is good for the company and the drivers. If you look at the past price cuts, many of these cuts could stay, lower fares per ride for drivers. Some of them will go back up not to the full rate and a couple went accept to where they were before they started. It is a way to shift down the fares and make it cheaper and drive demand. Which obviously on a per ride basis cuts into the amount of money the drivers and over uber makes. Emily uber was surging last night. If you were on wall street how would you be looking at uber . Do you think that the financials ultimately work out . Paul i am nervous about the financials. Travis knows exactly the same thing that you and i are talking about. Travis cline the company ceo and founder he believes that this is a game that is a natural, it is not a natural monopoly. There are not 100 Different Companies providing uberlike services. You can begin to bring prices back up and generally significant cash flow. I see these as part of the longterm strategies forcing strategy of driving consolidation forcing people out , of the market and making sure that the cash flows are there whenever there is a remnant couple of providers. Emily do you think lyft will become a formidable rival . Absolutely. They have the investments. And the cash on hand to withstand this price war. That is in part who this is directed at is lyft. There is the two large players but there is this consolidation that uber expects, leaving us with competitors. Emily it is expanding their food delivery program. Do you think this can become a significant revenue stream . At some point. Uber has raised over 10 billion and this is something base he is promising and fits into their logistics business. There is a lot of opportunity. Some of the reaction from Public Markets about their competitors might be a little strong. It seems pretty far away. Emily grubhub is down 10 on this news. Do you see this becoming a big business for uber, can they take food Delivery Global . I think it is more of a trojan horse. This is an experiment in moving nonhuman things from point a to point b. We have been moving humans and there is this idea that it will turn into some form of courier service. This is part of the further experimentation seeing what it is like to move urgent things from point a to point b. That has always been that conversation around this company is how quickly will they go there and what is the path to get there . I think that is part of the i half. Would not focus on food delivery as being the endgame. It is a step along the way to becoming a courier company. Emily all right, Paul Kedrosky with us until the end of the covers uber. O coming up, a wild Weekend Review by tech traders. We will to you who came out on top next. West. This is bloomberg im emily chang. Heartbreaking story gone viral. We are all too familiar with the that usually accompanies us and breakup that watching your heart break in real time is no longer science fiction. That story sweeping the internet today after a tel aviv law students fitbit captured the moment his boyfriend dumped him over the phone. His heart rate was an average 72 beats a minute until he took the call. Over, it shot was up to over even hitting 118 at 80, one point before going back to normal. Another feature on your wearable technology. It was a wild week in the markets and tech stocks led the way. The s p tech index and the s p 100 saw big moves. Onestop us all a lot of volatility, facebook, which saw its biggest weekly gains in two months. It is dropping the subscription fee for whatsapp. Also launching a realtime sports platform to directly compete with twitter. What do you think are the most significant things that happened with facebook this week . The things that happened with facebook in terms of how it moves, the bottom line for the company, what happened was not that substantial. Whatsapp cost them 19 billion to acquire that they had not done a whole lot with it in terms of generating revenue and now they are pulling virtually the only source of revenue which is that one dollar year subscription. Whatsapp is operating independently from messenger and their other Communications Services which was terms of the deal to get this thing acquired. They still need to figure out how to make money from this thing. There was a Sports Feature that the added, you can track live sports which is cool as a sports consumer but this is something they should have had a long time ago. I do not think it will be a giant revenue source. It will be nice during the super bowl. Emily paul, when you look at the stable of tech giants apple, facebook, google do you see one of those is more stable than the rest, do you differentiate . Paul hugely. Oh, this week was a good example. I will put netflix aside. I have some biases. We talked about that earlier in the week. Facebook, amazon, and google, those three in particular really for me look not just like survivors. Google has been a survivor. They are twice as old as most of these companies now. But both in terms of having built a platform that got them to where they are as well as going to the future including , consolidating a bunch of these others who are not going anywhere. You will see a lot of consolidation. These three are three of the key consolidators that we will see in technology is twice 16 plays 2016 plays out. They recovered very quickly from the weakness in tech. Emily bloomberg reported that David Einhorn is shorting netflix and amazon. Mark trouble for netflix. emily we saw a earnings this domestic subscribers not looking that great. International seems to be keeping them afloat. Mark you can see it when you talk to the company that they are emphasizing international now. They recently had the surprise announcement at the Consumer Electronics show that they were turning on Something Like 100 new countries. They were like, were ready to go international. Investors still want to see what is happening in their main market in the u. S. And things are slowing there. That is a problem because that is their core market. That is the highest end consumer. It is one of the most expensive places to subscribe and netflix bills itself as the future tv and it is where hbo and showtime and these services are moving to this internet model of subscriptions. Netflix is not going as fast as they want. Emily does David Einhorn have it right . Paul he was wrong on netflix last year so lets give him another year to see if it works out. I think he is right in that there are some huge gaining factors for netflix this year. There was a great data that came out of australia showing that they pulled in Something Like a year of traffic growth into six weeks when netflix showed up. This is really fascinating. But its important. People stand back and say we cannot have that. That is a natural gate to growth for the company. Youre not allowed to be the entire pipe. Emily we will keep our eye on paul. Thanks so much. We leave you with someone who may be having the best day ever. Journalistpost Jason Rezaian is home. He was released from iran in a prisoner swap last week. He had been recovering at a Military Hospital in germany. Jeff bezos personally flew to germany to meet rezaian and bring him home. The paper tweeted out this photo. He said he is looking forward to a warriors game or two and wars. Star a great dating great a great day in deed. Welcome home. That does it for this edition of bloomberg west. That is all today from san francisco. Have a wonderful weekend. The following is a paid advertisement for time lifes video collection. Hi, dean. Hi there. [laughter] bob. From the battlefield to the white house, from hollywood to the heartlands, americas entertainer was bob hope. Oh, this room is so dull and depressing tonight. If only e