Van into a crowd of people. The driver expressed support for Islamic State and searched online for information about the attack on a nightclub in florida. I am mark crumpton. Bloomberg west is next. Emily i am emily chang, and this is bloomberg west. Investors are dumping netflix shares after reporting its lowest subscriber growth in year. Can it recover . We will break it down. Softbank throws down its biggest arm. Let yet,a a bid for what the deal means for semiconductors. Chuck robbins speaks to us about brexit, m and a, and whether or not he is backing donald trump. Hours, plunging after down 15 on disappointing earnings. Subscriber growth dropped with only 1. 7 million new subscribers this quarter. Reed hastings says it is due to price increases, not market saturation. With new members, we have not seen any effects. We changed our prices last october. We have had a couple quarters of great growth. This is around change resistance. Whatever the price is for something, people do not like it to go up. But the new pricing is working great. Emily netflix is seeing sales and Profit Growth from fastgrowing international markets. What are investors looking for . I want to bring in cory johnson and paul of comscore. They do not believe this is due to market saturation. It is simply because netflix raised their prices. These new prices are kicking in. Is that the reason . Cory i wish i could just listen to reed. Look, here is what we know. They lowered the cost of marketing at the same time they raised the prices last quarter. We can see that u. S. Subscriber growth fell to 0. 3 . I think it is the lowest they have ever reported. They added fewer subscribers and spent money marketing. International was not terrible in terms of growth. But here they are, spending so much, being forced to raise prices because content costs are getting out of control. 12 billion in offbalance sheet costs, and subscriber growth is falling. Maybe they cannot afford the hits like they used to. It is a competitive world. They acknowledgment that acknowledged that. But even if the numbers of people watching content are not substantial, it is certainly hurting them on the content cost side, causing them to raise prices. That is causing subscriber growth to slow. Emily on the other hand, when it comes to international growth, that is incredibly varied. How much can we expect netflix to grow internationally . The International Component is key for netflix. The deal for the star trek series to be shown on netflix internationally within 24 hours of airing is part of the strategy. Churn is the big deal. A little price increase can turn a lot of people away. When you have so much competition for entertainment, i worked a lot on the movie side, we see this all the time. Getting audiences in the theater takes a lot of work in terms of the marketing that you do for these movies. You have to have compelling content. When your competition is netflix, hulu, amazon, all these entertainment platforms are vying for the hearts and minds and dollars of the consumer. It is rough seas. A one or two dollar increase can turn away subscribers. That is their challenge. They were predicting 2. 5 million subscribers. It came in at 1. 7 million. It is all about the content, price, and competition. All of those are in play for netflix. Emily what about the price on making original content . They are spending 13. 2 billion to make original content. We ask this every quarter. Is that going to pay off . Well, that is the hope for netflix and every content creator. By the way, netflix has terrific content, but that comes with a price. We, as the consumer, expect the price is never to go up for us. We want that great content and leave it up to the creators like netflix to do that however they need to do it. I just want to keep my prices the same and get great content. It is not necessarily the most fair model for the consumer to have, but the pressure is not on us to make the stock price go up. The pressure is on Companies Like netflix to provide content, a model that makes them profitable, and make some of this great content possible to deliver to the consumer. It is a tough business on all sides, no question. Emily they announced a deal to stream cbss new star trek series, the first deal with a streaming competitor internationally. Is,i guess the question from a content perspective, can they keep up momentum with amazon and everyone else making original shows . What are you watching . Emily bloodlines. Game of thrones is over. It is a bad world. Cory i do not know if they have followup hits like they had with house of cards and oranges the new black. I tried daredevil and cannot stick with it. Costs,hey advertise Gross Margins will be a trailing indicator of rising prices and content. We know that prices are rising. We know that amazon and netflix else,lu and everyone content prices are rising. We see the growth margins coming down at netflix. We have to look at how expensive it is getting for them. When netflix was brandnew, they could feel legitimately, who knows how big this can be . Maybe now they know. Maybe it is not infinite. Ul, thankry johnson, pa you so much for breaking it down. Investors are waiting for news of the companys pending sales. Revenue was down, and profits missed at nine cents a share. Detendra. Now, they missed on some of these numbers. What are your takeaways . The numbers do not matter as much. We see investor focus on the sale. Bidsusly, the deadline for was today as well. Showing anys is not signs of reversal. Was focused ona making the business easier to sell. Emily talk to us about the sale and the latest updates. Today, as we understand it, final bids are due. What is the latest . , we have a couple bidders entities like verizon at the top of the list. Today, they are going to receive final bids. Hopefully they get a number that justifies a move forward and they act on it. It is the same story repeated quarter after quarter. It is all about how quickly they can get this done. Emily what about Marissa Mayers future . Do we know yet . After the sale, it is kind of doubtful she would stay on board. Whoever comes in might want their own management team. There are different pockets of assets that bidders are strategically positioning for. It is very dicey. Emily all right. We are going to continue to follow that, of course. If final bids came in, we are expecting movement in the next eight weeks. Rendra, thank you so much. Reports almost coincides with Marissa Mayers fouryear anniversary on the job. We decided to take a look at mayer in 2012 when she stepped in the role. Here she is after becoming ceo. We know that the next pintrest, spotify, or facebook is in the audience. I am thrilled to be here with yahoo as a sponsor. I would like to give a shout out to the designers and engineers that we are hiring. [laughter] [applause] emily now she has done a lot of hiring and firing as ceo of yahoo . What else was going on in the valley four years ago . Lets take a look. It has been four years since Marissa Mayer walked into yahoo . We called it the Silicon Valley surprise. She had been running googles search groups as one of its first employees. Wall street knew she faced an almost impossible task. Inoo have seen four ceos five years and was becoming notorious for poor management. Stock was at 15. 65. Lets bring this into perspective. Search accounted for 36 of yahoo s business. Facebook have been public for three months. Twitter was a private company. Google did not have an alphabet of bella. 289 billion. Was flashforward four years. The acquisition, tumblr. The switch to mobile, which brings yahoo 1 billion in ad revenue. Top line continues to decline. And at t on verizon the table. The new owners will have to decide who takes up her mantle next. A 17thup, ibm reported straight quarter of revenue decline. Why is stock rising . Sprint shares dropped 5 monday on fears softbanks purchase of arm could leave the carrier cash starved. This is bloomberg. Estimates beat despite a 17th straight quarter of revenue decline. On that on watson bet watson may be paying off. Up in afterhours trading. Anand, why are shares up it revenue is down . This has been a meh quarter for ibm. The Group Includes watson, cyber security, all posted growth. One of the interesting parts, Revenue Growth of this particular group has been declining year on year. Something to watch over the last four quarters and into the future as well. The other segments continue to post weak numbers on a cost to currency basins and as reported. The hardware sector continues to be a thorn in ibms back. Bloomberg intelligences you on this is that it is a meh quarter. Emily ibm is undergoing a major transportation in business transformation in business. How does that go aside from topline numbers . This is a large, strategic transformation. It is not one they can undergo easily. A substantial cost relocation, substantial function morphing of the company to change from what used to be traditional Systems Services to this cloud company. So the workforce has to be substantially different both in size as well as in focus. It is not an easy transformation. Progress is slow. One of the things that concerns us is that growth in the strategic comparative section is slowing relative to what it was three or four quarters ago. Emily how would you rate your confidence in the ceo . Adjusted for the size of the task at hand. Our Services Analyst will tell you that other companies are doing a better job. If you look at the size and scope of the transformation ibm is going through and continues to go through, on a sizeadjusted basis, it is above average performance. The final scorecard remains to be told. Emily stay with me. I want to get to another major story in the chip industry. Surging after is softbank agreed to by the designer for 32 billion. It is the biggest takeover since the country voted to leave the european union. Selena wang joins us along with anand srinnivasan. Did brexit has something to do with this . Armhey have been talking to on and off for a few years. He says it is not because of brexit. It has more to do with the timing of sales in stakes in certain companies. Armse most of ours customers are in the u. S. And asia, they were not really affected. That said, the pound did drop. A 42 premium is high. Emily what does this mean for arm and the rest of the chip industry as we go through this broader shift in computing to mobile and internet of things . The fact this is an intellectual property company, this is not a chipmaker, they provide the intellectual property that chips can be made from. R or Hardware Company were to acquire the deal, there would be substantial revenue loss from arm. This was two steps removed, customer to carrier. In a sense, this deal makes a lot of sense. It makes sense that a thirdparty, two steps removed, has acquired the company. Downstream, they should not see change on left unless softbank tries to get involved and change the scope of supply or who it supplies to. On paper, nothing should change. Emily what about the price tag . 32 billion. Is that worth it . Isa high price tag, but arm acquiring a slice in every single mobile Computing Device on the planet and the future internet of things devices. For them, this is a company with a lot of i. P. It has low hardware costs and very high margins, north of 95 . This is a big bet on a lucrative business and the internet of things. Emily what about sprint . What does the acquisition actually mean for sprint . Sprint stock actually fell after the announcement. Investors are worried this means softbank employees have left less time and resources to dedicate to sprint. It means less resources to help with the turnaround effort. Yoshi says heasa has confidence in sprint, investors clearly do not agree with that perspective. Emily big deals have a history of not working out. Are you more optimistic about this deal than others . Even though they have a checkered past, we are seeing microsoft buying linked in, d ell, these massive deals, we have yet to know how they play out. This deal is different. As large as it is, the scope of this deal is different. This is birds of a slightly twoerent feather, not companies trying to benefit from a strategic play. One plus one makes three. Not that kind of deal. We think arm makes sense. Not messing with arms management, hiring plans, makes sense. It makes sense that the buyer in this case, softbank, are outside of the scope of the chip industry, particularly handset chips and hardware in general. The fact that the buyer is from japan adds another twist in detail. All in all, we are optimistic on the execution of this deal. Selena, we will be watching. Thank you very much. Meantime, siva is enjoying a nice pop off the tie up, rising to its highs level in four years on speculation it could be softbanks next targets. They envision software for car safety. Next, we kicked off our weeklong series in food tech. Ceoit down with beyond meat mark brown on bloomberg west. Emily the doors are revolving it lending club. They have a new chief capital officer, patrick dunn, previously in charge of blackrocks San Francisco operations. Lending club is trying to win buyers after the ceo steps down in may. Coming up, our exclusive interview with cisco Ceo Chuck Robbins on the president ial election and how everything in our world will be connected in the next decade. If you like bloomberg news, listen on the Bloomberg Radio xm. And on sirius lets begin with a check of your first word news. Swiftent erdogans crackdown on suspected coup plotters could jeopardize his position in nato. The u. S. And the eu are monitoring a widespread purge which began over the weekend. Eu laws bar capital punishment. People in turkey have been dementing the Death Penalty route for those responsible. An officer in the freddie gray case has been acquitted. Brian rice faced charges of Reckless Endangerment and negligence in office. An investigator looking into russian doping says the states Cheating Program resulted in 312 falsified results. The deceit lasted from 2011 through at least last years world swimming championships, longer than previously known. Venezuelans 35,000 crossed the border into columbia over the weekend to hunt for food and medicine in short supply at home. Venezuela is struggling through triple digit inflation and a collapse in oil prices. It is the second weekend in a row venezuela has open borders after a crackdown on smugglers a year ago. Global news 24 hours a day powered by 2600 journalists in 100 point countries. I am mark crumpton. It is just after 6 30 monday in new york. In sydney, paul allen has a look at the markets. Good morning. Paul new zealand has been trading for 30 minutes. So far, looking pretty flat. Off by. 1 . In australia, a flat story expected. Rio tinto shares will be in focus. They released production figures for the second quarter, in line with estimates. Ore million tons of iron for the quarter. The reserve bank of australia will release minutes of the july meeting. We are looking for guidance on where we might be heading in august with potential deflation expected here next week. Japan, nikkei futures looking positive. It is the first chance for a market to react to the softbank takeover of arm. I am paul allen for bloomberg in australia. We are nearing the oneyear mark since Chuck Robbins stepped in as ceo of cisco. The company has made 15 acquisitions and reorganized the management team. Robbins promises he does not have his head stuck in the sand when it comes to new technology. We spoke with him in an interview in san jose and asked about his strategy for cisco on m and a. Our strategy is, first and foremost, to look at where the market is going and what our customers need. We look at what is our capability and where we need to leverage m and a. We look at where we need to leverage new partnerships. What we have found is that the speed at which we need to move, we have had a greater affinity for smaller, very aligned acquisitions. Emily will we see more of those . We will always be opportunistic when Companies Line up with strategic direction. Emily what areas are you targeting . I. O. T. Is important for us right now. The Jasper Acquisition was a core one. We have been active in securities. Over the last 15 months, they are areas of cloud, securities, analytics. Those are the key areas going forward. Expect we will continue to align around those areas. Emily some say that ciscos security offerings are not integrated enough to implement. Is that an area you will push on . Go back five years, that was definitely the feedback we got. David and the team have done a great job of building architecture and delivering internalization and acquisitions. They have given the significant integration of those two capabilities. We willook at i. O. T. , operate in this massively distributed world. The network has to play a huge role in security. That is one of the announcements we made last week. Machine learning analytics capability that begins at the edge of the network. That is fundamentally what he will have to do from a security perspective. Emily you guys are a huge business. You have an office in turkey. There have been events unfolding. What does instability like that mean for your business . Stage three years ago and told our team we were writing a different roller coaster every week. That is the world we are living in. Constantlyis the changing geopolitical landscape, technology transitions, these are things we have to deal with. There is certainly a tremendous loss of life, which is the real issue. We see so much tragedy around the world right now. It is disheartening. We take all the things that are going on geopolitically, from a Global Economic perspective, and focus on the things we can control. Then we move on. Emily what about brexit . What does that mean for your Global Outlook . First of all, i think brexit was unfortunate for the european union. They were moving towards continuing to create a single market. They created a single trading market. Effectively creating a digital market going forward. That has the potential to set them back. For us, we do not have operations in the u k we necessarily used to do business across europe. For us, the global or macro implications are probably similar to what other countries woul