tv Bloomberg West Bloomberg June 19, 2015 10:30pm-11:01pm EDT
emily: uber is becoming the most popular kid on wall street. what you need to know about the company's reported $2 billion credit line. ♪ emily: i'm emily chang and this is "bloomberg west." the eu tells google to brace for big fines. how big a threat is brussels to silicon valley? twitter is making a push into live events. we will take a look at the company's dramatic new media strategy. drone startups are racking up record amounts of cash. all of that is ahead on "bloomberg west." first, $2 billion -- uber is
finalizing a $2 billion line of credit. we already knew they were talking to banks, but this is double what we previously thought. that is because more banks wanted in. morgan stanley, bank of america, barclays, deutsche bank, hsbc, jpmorgan, suntrust bank -- all of them lining up, some of them committing more money. uber is getting half a percentage point below what competitive rates are out there. is it a sign of uber moving towards an ipo? they already have plenty of cash on hand. we have paul sweeney joining me now from new york and cathie woods. paul, i want to start with you. why is uber taking out this line of credit if they don't need the money? paul: it is the first step of going public. we have seen this move in the past from other early-stage companies, tech companies that are really hot on wall street. by going to your banks and
singing we want a line of credit which we think most large companies should have, it shows that a lot of these banks are committed to the company. they look at the commitments made at the credit companies as a precursor, a gauge at how much the companies could depend on these investment banks. yes, it is always nice to have a lot of credit in the marketplace before going public, but it is also a little bit of a road test. emily: cathie, you actually think uber could use this money because they have some important things they want to buy. what can they do with this? cathie: we know we are bidding for a mapping service that microsoft owns through nokia. i remember nokia bought it for $8 billion about 10 years ago.
now we here it might only go for $3 billion. we think it is more valuable than that. emily: uber interested in buying nokia's mapping technology as they try to build out its own mapping system. paul, did you take a line of credit as a sign that uber is closer to an ipo, closer than we previously thought? paul: they are having absolutely no trouble raising significant capital in the private market at extremely attractive valuations which kind of suggests they could be in no rush to coming to the public markets. this is a company that is growing dramatically. they have a very high visibility with not just institutional investors but retelling investors. if you are an investment banker and you are pitching uber, it is a very attractive pitch that says we believe the markets would be receptive.
i'm sure they are getting pressure, but at the moment i don't think they need to but at some point it is very clear they will likely become public and this might be an initial first step to test the waters. emily: it is a company that is growing dramatically but also evolving. we know they are working on self-driving cars. we know there could be some big changes to its business model. the california labor commission has ruled that uber must consider all of its employees drivers which would mean $20,000 extra per employee. this is just one ruling in california. cathie, does that give you any pause about this potential $50 billion valuation? cathie: we step back with a
company like uber. we are very thematically oriented where our focus is entirely on disruptive innovation. we look at the five court wins they had before the california ruling as precedent. this will probably take years to repeal. what it will do is accelerate the trend to the autonomous vehicle market and then they don't have to worry about drivers. we think that is going to happen much more quickly, perhaps by 2020, as google had been projecting. emily: wow. uber self-driving cars by 2020? what do you think of that? paul: i know the folks in silicon valley think this is sooner on the horizon than a lot of other investors do. in terms of uber, it is one of the challenges as they think about the cost structure of their business in terms of having drivers employed or independent contractors. it applies to a whole host of the service companies that are coming up across the board and all these apps that are
available. they rely on a very similar model. this is a very big issue for uber. the technology enabled service industry. as cathie suggested, this will take a long time to why this through the legal system. that'll think that legal argument in california will stop any ipo for uber whatsoever. emily: we are looking at $50 billion valuation for uber potentially. $24 billion for airbnb. $10 billion for dropbox. $16 billion for snapchat. cathie, as someone who is normally investing in public companies, with all these private companies staying private longer, how does that impact the bets you are taking? cathie: we think the market that uber is going after is almost a half-trillion dollar market. if you look on our site, we have a study on that. we drive 3 trillion miles in
this economy so we have a very big market ahead of us for what could be a winner takes most. that is obviously what they are going after. uber is working with another company. tesla is thinking about this market. they seem to be pretty close to google. we don't know for sure. we have alibaba with lyft. we don't know who apple is going to work with. they all know this is the ultimate mobile device. it is very technology oriented and that auto companies maybe have a little trouble getting into it because essentially what these companies are pulling together is a $450 billion autonomous electric vehicle market which we think could leave the traditional automakers in the dust. emily: uber certainly has us all asking a lot of questions about
what is next for them. cathie and paul, thank you both. record amounts of cash are flowing into drone startups. heavyweights like kleiner perkins, lightspeed are in the hunt for an early winner in what become an $82 billion industry. investors have pumped $210 billion into drone startups this year which is about double for all of 2014. google, ge, and qualcomm are jumping on the drone funding bandwagon. with funding comes jobs. when the faa finalizes its unmanned vehicle regulations the industry will create 70,000 u.s. jobs and have an economic impact of $13.6 billion within three years. we will see. there are still concerns about privacy, better batteries and long-distance capabilities. coming up, the potential hefty
provider has shut down the site for being politically incorrect. the european union is telling google to get ready for big fines. it says the penalties could be big enough to stop google from blocking competitors in shopping comparison searches. the competition watchdog may also tell the search giant to change how the shopping services are displayed. just how big can this be and what it could mean for google's european business? andreas joins me now from d.c. he is an attorney that specializes in competition law counseling. eileen is also joining me. andreas, these fines are supposed to be big enough to act as a deterrent. how big could they be? andreas: in the european union there is a regulation that determines how much the maximum is. however, within the range from zero to the maximum, the commission and specifically the
director general for competition has what the regulation itself calls wide discretion. there is a formula that they use to get to a starting point which usually relates to the sale, the turnover, revenue essentially. 25% of the effective turnover. that is multiplied by the years of the allegedly infringing conduct -- in this case, the tying of the vertical search to their own product. they would reach the maximum limit potentially of the 10% of annual revenue. in this case with $66 billion in annual revenue, that could reach the number we have seen in the news which is up to $6 billion. emily: eileen, what do you make of these moves by the eu? is this political?
would you go as far as the say this is protecting us or are there real legal issues? eileen, you take it. eileen: as an american being here in britain as part of the eu, to me and looks largely protectionist and politically motivated. the precedent of eu having done this before -- in both cases it was american companies. it strikes me as this probably would not happen if these companies were european-based or founded. emily: google does own 90% of the search market in europe. andreas, do you think this could have a real impact on google's business, the bottom line or will they really be compelled to change some of their practices?
andreas: that is the key question, right? the fine itself google could live with. google is not worried about the fines so much about their business practices. when you look at the revenues, the vast majority comes from search and ads. the whole vertical search piece which is the piece of the old commission which had already have this going on for five years, since november 2010. that is the piece they are focusing on. that is the meat and potatoes of google when it comes the revenues. google would be more worried about of changing its business practices than paying out a fine just like it did with the ftc a couple of years ago where it entered into a very lenient, voluntary agreement. sorry -- emily: i want to get to eileen because she is joining us from london.
i'm curious. what do people in europe think of google? who would benefit from this? is it startups? what other companies would benefit if google were to somehow change its business? eileen: i think the philosophical point is this could increase the opportunity for competition from startups or other companies whether they are telecom operators or their entities are in europe. they have given this opportunity to compete since google has the 90% market share. on the other hand, it is growing much greater with startups in europe and i am sure they are thinking if we get to wait certain size, we're at a risk. that is, from a startup point of view, a good problem to have. i don't think startups necessarily get any impact from this. they are numbers that any startup could dream up. it does however look like there is agenda from the european
union. in my be a little embarrassing in terms of what europe thinks of tech innovation and what happens when large platforms are developed and successful. emily: embarrassing is a strong word. microsoft and intel went through similar situations with the eu. how did this affect them? andreas: the largest fine to date has been levied against companies several years ago. in terms of conduct, we have the doj and the ftc and we have the eu commission and they are the two big dogs. whenever there is an actual change in conduct that is imposed, not just finds, it affects companies greatly. how do you distinguish between the u.s. and eu market in the globalized economy? you get your supplies from asia,
you sell in europe and you source into the u.s. as well. it is difficult. although, google has shown us in china and other countries that it can actually tailor its allusions to different geographic markets and jurisdictions. for instance, the right to be forgotten in europe. google has implemented that. they are capable of making changes. emily: they also made a pretty big dramatic exit from china and their business has suffered significantly because of that. they are still operating out of hong kong but it is made a big challenge for the business. ok, andreas and eileen, thank you both. now today in out of this world nasa has announced a mission to jupiter's moon europa. a spacecraft is slated to launch by 2020. the craft is looking for water beneath the moon's icy surface. another nasa funded project has come to an end.
six scientists have come out of isolation. they were living under a dome on a dormant volcano in hawaii for eight months. it provided an atmosphere similar to mars. next, one week after dick costolo announced he was stepping down as ceo of twitter, the company is hinting at a new streaming strategy. we have all the details. ♪
emily: we turn to the daily byte, one number that tells a whole lot. today's byte is 65%. that is how much google searches for e3 increased this year. it is the most interest the gaming conference has gotten since it started following searches in 2004. most of the traffic from taiwan, the u.k., the u.s. and canada.
nintendo and xbox are the other terms trending this week. if you have not been following e3, microsoft is allowing xbox 360 games work on the xbox one. nintendo is bringing back its star fox franchise with a new game for the wiiu. and bethesda hosted the world premiere of its new fallout 4 game which is already sold out at every major retailer offering preorders. project lighting -- the name of that feature twitter has created in curating tweets and coverage of live events. it comes a week after dick costolo announced he is stepping down on july 1. what is twitter hoping to accomplish with this new product? where is the future of digital media headed? joining me is hayes davis, sarah frier and nathan brown. sarah, is project lightning as dramatic as it sounds?
how exactly would this work? sarah: what this would do is help people understand why to use twitter. there is a lot of confusion among people who are not journalists and politicians and celebrities. thinking this is a product that is not for me. this could help bring people in -- people who want to be first to know what is happening with the charleston shootings or maybe first to know what is happening in sporting events. it would be organized in one place. it would really help twitter with its value proposition and its advertising. it would allow them to sell different kinds of ads and monetize it differently. emily: i wonder how big a business shift this is. one headline said twitter is killing twitter to save twitter. hayes: i think that is a little extreme. twitter has been a transformative media company since the beginning. i think they are really starting to own that identity with
project lightning. for me, twitter is hugely important during live events. i think everybody looks at twitter as a second screen sometimes maybe even a first screen during those types of events, and this is a great way of organizing that content. emily: the problem is some of that content is still hard to find for even power users. nathan, what do you make of this shift? they are talking about potentially bidding on the rights to stream the first ever streamed nfl game. that is a big deal. that is bound to be a big change in their strategy. nathan: it is a major move and a significant one. who knows how sincere that bid actually was? i do think in terms of positioning they really wanted to show they are sincere about capturing audiences around live events and live events being so important for them as a lot of
their content is so ephemeral. emily: what interests me is they might even hire journalists. they might even hire journalists to curate these tweets. what do you think of that? hayes: that is fascinating. that is a very important change. twitter has been this reverse chronological timeline forever and having actual human beings curate things at scale would be a big challenge. i do think that'll help to surface the best content that is available. emily: sarah, what should we read into this given the leadership changes happening at twitter with dick passing the baton to jack dorsey as interim ceo? is this a change in vision even though jack dorsey has been saying there will not be one? sarah: this is something that dick has been working on for a while. actually, jack dorsey says he supports this. whether the new ceo comes in -- that is if it is not jack or someone internal -- whether that
person comes in and says i don't like the strategy and let's do something different, i don't know that would -- it could completely change everything. for now, this is going in line with what investors are telling twitter they want. they want information organized around live events. you were talking about video. they could stream award shows or sports games. it is really a big opportunity. emily: nathan, we only have about 30 seconds but can you see twitter dominating all screens not just the computer and your phone, but also television? nathan: i don't know about dominating television, but i think they could be the number one provider of information for the second screen experience. i think organizing people and communities and engagement around that content is what they will do and what they do best. emily: nathan brown, sarah frier and hayes davis -- thank you all for joining us. happy friday. ♪
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