Authorizing a twoyear milliondollar payment of former fifa Vice President michael plan 2011. I p[lantini in from new york, i am mark crumpton. Bloomberg west is next. Emily im emily chang and this is bloomberg west. Uber burning through a significantly more than 1. 2 billion in the first half of the year. We will take you through the unprecedented losses. May beriverless car tech racing ahead but who is writing the rules of the road . We will hear from the u. S. Secretary of transportation about self driving regulation. And could someone hack your pacemaker . We will take a look at the vulnerabilities of medical devices and a bold new call from carson block. To o ur lead, and mounting financial losses at uber. Conference call with investors, the head of finance explained that uber lost more money and the Second Quarter even it did in the first, totaling more than 1. 2 billion in just the first half of the year. Uber turned a profit in the u. S. In q1 but lost 100 million in q2. In the Second Quarter, investors were told losses exceeded 750 million. 4 billions lost over the course of its lifetime. But with more than 16 billion raised in cash and debt, how worrying are these losses . Here to help us break it down, our Bloomberg News uber reporter eric newcomer. It is growing fast but it is losing faster. How worried should we be . Money inr has a lot of the bank. They have a billion dollars in cash. They have a credit line of 2 billion and 1. 2 billion loans. They have the money. It is a matter of one can they turn around their burn rate . Buts something they can do the question is whether it will be as big of a business as it is today if they have to pull back on their losses. Emily where are these losses coming from, china, subsidies . Eric it is definitely subsidies. China mostly. In two years, they have lost 2 billion there, especially in the Second Quarter, they were getting ready to negotiate with deal. Em to cut a they had every incentive to get as much market share to say, we deserve this bigger stake in your company because we are a bigger stake of the market. So, they were going full tilt in china. Emily these are subsidies to drivers. Can they remain competitive . Eric when they are competing in a market with another player, drivers are super pricesensitive. Anyone in san francisco, new york or lyf and uber are competing you can see drivers with both apps. So, you have to make sure youre giving drivers the best paid, if you want them to work for your service. Emily didis going to get uber 1 billion for his china business. How much would these losses or change or decide what uber is no longer in china . Eric just the First Quarter of this year, uber was profitable in the united states, now it is losing 100 billion. Uber and changes profitability by saying, instead of taking 20 of bookings, we will only take 15 and all of a sudden things skyrocket. Without even knowing what their goals are the next quarter, it would be hard to guess exactly what is going to happen. , another new number in your reporting is that the evaluation is 69 billion. 5 billion, which is eyepopping. Explain that number. 62. 5 is the premoney evaluation. Then you get all of this money, you added up and then the post money evaluation for a while, uber was spending at 68 billion. Didi invests another 1 billion. We and up at six to 9 billion. Emily my favorite part of your story is where you talk about whether or not there is precedent for this and its hard to recall a company that lost this much money this fast. You mentioned amazon never lost more than 1. 4 billion in 2000. That was a lot 16 years ago. Eric they laid off 15 of the workforce. Emily is there any precedent for a company to lose this much money this fast even if it has this much potential . Eric i emailed a bunch of academics. We cannot figure out a lot of think it a lot of people pointed to amazon. I looked at cosmo the dot come lost together they only 1 billion. Even if you look at public chip makers, it is hard to find companies that have invested quite as much as uber. Ubers not buying big manufacturing facilities or anything like that. They are spending money on subsidies they go away after they have spent them. It is really unprecedented, but it has the ambition of amazon. We want to build this huge network. Emily they also have their projects, driverless cars. Eric newcomer, great reporting. Thank you so much. We are going to have much more coming on the future of transportation in our interview with secretary of transportation later this hour. Another story we are watching, apple is working on a video sharing app. As Company Looks to catch up with snapchat and facebook. They develop social media platforms. Whenews comes at a time s business is slowing. I want to bring in mark who broke the story. Explain how this would work. Mark apple sees that lots of users are hooked on snapchat, facebook messenger, twitter, instagram, and they want a piece big social, this Media Network industry. They are creating an application to allow users, and to do this under one minute, to record something, edited with filters and then be able to upload it and send it to any existing social network from within the app. They are entering this as the theact greaters, to push iphone to social network users. Emily is that in competition with facebook and snapchat, or would it be competitive . I would not say this would put apple in direct competition with snapchat and facebook, but it would put apple in competition in terms of eyeballs. Actually looking at these programs is really important. How many minutes a day people spend in each of these applications. Snapchats latest numbers indicate that people spend 15 minutes a day in the application. Apple can get those eyeballs, even a few minutes from snapchat, they are still going to have many more monetization opportunities. And it really pushes people to buy these products if they like the applications compatible to the iphone. Emily how much revenue could this add to the Services Business . This could increase engagement, increase interest in the hardware, but what about the Services Business that tim cook is trying to grow . Services business grew 20 yearoveryear in the quarter, netting 6 billion in revenue for the past quarter which is a big increase in the Services Business and then prior years. We will not know how much this application if it launches will affect the revenues in the Services Business until we know how they monetize it. The application is an Early Development within apple. I do not even think they know exactly how they want to make money from this product yet. Emily when might we see this . Mark right now the plans call for release sometime next year in 2017 as a standalone app to download from the app store. But it is to be seen if apple ends up launching it. They have created applications in the past to kill them and development. We will see how this goes. Know youst question, i said they are not necessarily in direct competition with facebook and snapchat, but these platforms already have well entrenched ways that users get their video up on these networks. We have seen google try and fail many times to get into social networking. Do you think it is too little too late for apple . Mark i think it a little too late for apple because they identical tois what every player is doing. But the design, this application is focused around being able to record a video, edit, it, ship it anywhere, send it to friends all under one minute. The goal to be able to do this onehanded, making it quick and easy for users. Will see if apple is able to reach that goal. Emily looking forward to seeing it. Thanks so much. Well, gamestop shares are taking a big hit in afterhours trading. The video Game Retailer posting a sales decline of 10 . The Second Quarter is typically the slowest of the year for games. That number was steeper than the maximum 70 7 decline. Gamestop has been trying to reduce its dependence on physical game sales. Coming up , the on orthodox pairing of a team of hackers and shortsellers. We are talking about the complicated ethics of carson blocks lifechanging short next. This is bloomberg. Emily carson block has set his sights on a new target, st. Jude medical. The Muddy Waters Research founder warns that tens of thousands of americans are living with ticking time bombs in their chest. Pacemakers and a fib relators that could be compromised by hackers. In a nightmare scenario, could be tempered with. Medtechnerability Holding Steady to the security flaws in medical devices and found that st. Judes stood out in a bad way. Saint judes stock sunk on the news. Erik schatzker sat down with carson block with an interview and asked about the ethics of publishing information that could be dangerous in the wrong hands. Carson somebody might make the argument, if you kept your mouth shut, everybody would be safer, but with a really . This is a dangerous world. If you believe that, if you believe it is quite possible that state actors are aware of this already. Moren, we have to be concerned with nonstate actors, but we believe that the balance of interest is clearly in informing people of the risks and holding the Company Accountable so that something can be done. I do not believe that sticking sand andd in the pretending a problem does not exist and hoping nothing goes wrong, i do not believe that is the ethical course of action ever. A public formt in as opposed to a private channel . Do not have confidence that saint jude would do anything to make patients aware of this. Erik why not just inform the fda . Carson there is precedent for, there is a research who identified flaws in an insulin pump. Heinformed the fda and became frustrated because Nothing Happened and he went public. I think the fda, it sounds as though they are more concerned about Cyber Security and more attuned to the risks, but ive never dealt with the fda. We feel it is important that users know and we do not necessarily have confidence in saint jude and maybe even some of the institutions of government that the right thing is going to happen. Large company, very political connected. It could bring a lot of pressure to bear on the fda if there was a private backed channel discussion. This is just the real world here. Erik how many people are at risk . The number ofdes implantable device users, we do not know how many still have devices, but over the past, since 2008, looks like there have been in the u. S. About 1. 1 million of these devices implanted. Thats including crts. I want to make clear, people really should read our report because there is important detail in there that we cant get into here. But one of the things that is important caveat is that medtech and pacemakers. Because of lack of device they were not able to test so, so the crt remains the reticle. Fda is not creating this is a critical issue, why should investors feel any different . That is draft guidance which they have given industry time to comment on. There will be a version that goes effective that extra guardsmen resemble that. Over 90 of medical device been initiated by manufacturers. That is probably because there is the sort of damocles were the fda says, you do not recall this, we will. So, you should look like youre wearing the white hat here. That guidance shows the fdas current thinking on Cyber Security and is really important for people to understand that in ce there is actually, an example of an implantable cardiac device that is compromised and where the fda says, ok, this would likely rise to the level of, this would be an uncontrolled risk that would mandate some sort of remediation. So, based on that draft guidance, it is clear to us, our interpretation of the draft guidance, that the st. Jude implantable devices fall b far below the standard establishe guidance. We say that there is risk of having to recall their devices, it is based on looking at that which does illustrate the fdas thinking on the matter. Erik these are Draft Guidelines and they have yet to be finalized. We do not know necessarily what the calendar for that is. In the meantime, what reaction are you hoping for . What needs to happen if your short is going to be successful . Is what were hope happens and there is what probably one happens. I have been probably shorting companies for six years. Very seldom have they ever said, you know what, some of this criticism is valid. We are expected to be told patient security is number one. These guys are shortsellers, looking to profit on the back of a price decline, etc. Erik dont be full by a wolf in sheeps clothing. On they could take it seriously. They could investigate this. And they could without kicking and screaming recall the devices and stop selling them until they fix the problems. Erik what if that does not happen . Carson we are hoping that the fda, which we are expecting to facilitate a dialogue between the fda and medtech, we are hoping the fda says you need to recall these devices. Emily muddy waters founder carson block with Erik Schatzker there. Besides the ethics of possibly tipping off hackers to this vulnerability, there is the ethical question of why. Earlier, matt miller and scarlet fu asked the ceo to clarify her firms business arrangement with muddy waters. What we are interested in achieving is mitigations. We also want the consumers critics are going to say they are interested in achieving profitability for you maximize profit by going to carson block and publishing this short, rather than going to saint jude first. That carsonieve has a track history of holding Large Companies accountable. And that is why we are excited to partner with muddy waters. Not only do we want saint jude to be held accountable but to respond but we want the patients and the public to be aware. The public has a right to know. About the risks associated with this bit of technology. And we felt very strongly that st. Jude medical were likely to act, shut this up and potentially do nothing. Matt medtch is for profit. This is a Business Model to make money. Justine we are research company. We incur a lot of expenses. This is not lightweight equipment, this is not software only. Our lab has a lot of hardware. We are looking to recover our costs. But our motivations here are to hold them accountable so mitigations can be done as quickly as possible. Keep in mind, that is not going to be a small undertaking because of these inherent vulnerability throughout the system. And draw attention to the public patients are aware of the risks associated with the technology is coming out of st. Jude medical. Matt what do think about the companys response . St. Jude says the allegations are untrue. Their chief technology officer. He says there are several errors place. Urity measures in we conducted security measures and an ongoing basis. We work on merlin at home and on our devices. Justine what i do know is that we found fault abilities across the ecosystem. We developed what we called proof of concept to demonstrate those phone abilities. Chaininggether by these of all abilities together, we put together three different scenarios which we reproduce internally under controlled conditions. We demonstrated to muddy waters and they reproduce them as well. We have definitely verify the existence of these vulnerabilities that are used, are present in saint equipment that is being deployed today. Scarlet you are monetiz ing your research. Tell us how you would make money off of passing on this information to muddy waters . Do you make money regardless of whether muddy waters goes through with a short and makes money off of it or is it only if the short makes money . Matt; are you paid a fee. Justine we are paid on a fee basis and as consultants. Our compensation with muddy waters is connected to his investment. Emily medsecs ceo. Cyber Security Experts say the actual risk of hacks against saint jude patients is theoretical. There have been no publicly documented cases of medical devices being hacked. Singapore is the first place in the world to achieve one important self driving car milestone. Details next. This is bloomberg. Emily two stocks were watching today. Vital plungingo with bigtime rival in the car website world. Amazon unveiled amazon vehicles which will feature images and specifications on thousands of car models. You can Research Cars on the site but you cannot buy them. Similar to other sites, its designed to complement amazons other marketplaces. Rest ofe has beat the the world in the first public trial of driverless car technology. A group of residents can hail six self driving taxis with their smartphones. A startup called nutonomy is running the trial and talks of three other Asian Countries as well as unnamed u. S. And u. K. Cities about Holding Similar self driving taxi trials. Coming up, staying with car tech. Do not miss our conversation with anthony foxx on how the government is trying to stay ahead of self driving cars and drone regulation next. You can listen on a Bloomberg Radio app and bl oomberg. Com. This is bloomberg. Mark you are watching bloomberg west. Your first word news. Brazil said it was temporarily suspended after lawmakers engaged in a shouting match during deliberations over whether to remove president rousseff from office. [speaking portuguese] silencio. Rousseff isent accused of illegally shifting money between government budgets to mask deficits. She denies any wrongdoing. There has been no claim of responsibility following wednesdays attack on the American University of afghanistan that left 13 people dead and three dozen wounded when two attackers believed to be members of the taliban were killed by police. Santos isn president moving quickly to hold a National Referendum on a peace deal with parc rebels. He delivered the final text of the deal to congress and declared a ceasefire with the rebels. Farc declared a unilateral ceasefire over a year ago when president santos refused to grant a formal truce until negotiations ended. The second p