tv Bloomberg West Bloomberg July 20, 2015 11:30pm-12:01am EDT
emily: ibm shares falling in after-hours trading. what do investors want to hear from ceo ginni rometty? ♪ i'm emily chang. this is a special "bloomberg west," live from new york. paypal soars. i talked to the ceo in an exclusive interview. a number of wall street analysts turned optimistic ahead of apple earnings tomorrow. we will have everything you need to know.
taylor swift teams up with jd.com. all that ahead. ibm shares are lower after a 13th straight quarter of declining revenue. sales came in below the estimate. the company did beat on earnings-per-share. joining me to break down the numbers, anurag, james, and tim. anurag, i want to start with you. it's great to see you here in person. it seems like investors are split over ibm's future. you have people who are very optimistic and say that if ibm can transition into a mobile/cloud/social company, things look a lot better. which side are you on? anurag: they are both accurate in a way. the question is how long should you wait for it to happen. cloud is a small portion of the
revenue for them. emily: what numbers are standing out to you right now? tim: a couple of things. this is a company still in transition. today where they have a backlog of 122 billion orders, services are up 17%, you could see that they are moving forward, not backward. i have followed ibm from the beginning. it is a company that is struggling. i think that the fundamentals suggest they are making progress. emily: looking at the headline numbers, what is standing out to you? james: it's interesting. these guys missed on the top
line, as you talked about, and they missed in a couple of key areas. they missed on software and in global technology services. those are two areas we think are facing significant business transitions that -- software is a service. that cements our negative basis. from an earnings perspective it looks like their tax-free was lower than expected. emily: ibm is making some hard choices as it becomes a new business. i want to talk about watson. this is something that ginni rometty is hugely optimistic about. she thinks this is the future of ibm. is it, really? anurag: you can see all the artificial intelligence would be one of the major drivers for technology for years to come. they have a massive services business and a very big
software business, but the analytics business is a very small piece of the pie. emily: what do you think about some of these strategic initiatives? james: ibm has a lot of resources and very intelligent people. the issue is when will this move the needle. they have some very large legacy businesses. ginni rometty has said she thinks watson will be a $1 billion business by 2018. even with their stated goals it's not going to be a needle mover. we think ibm can be successful in a lot of these businesses long-term, but we are concerned that the legacy business are what's going to drive the stock over the next couple of years. emily: 13 straight quarters of revenue decline. what are we going to be talking about with ibm a year from now? anurag: a lot of the same things. emily: when are we going to see a major change? anurag: you've got to be patient. emily: is it a five-year horizon, 10-year horizon? anurag: it could be five years to 10 years before we see it. emily: anurag, james, tim, thank you all. we will continue to follow ibm
aggressively. today in drive, autonomous vehicles have a new test track. university of michigan created a course designed to resemble a city and suburbs. the project has stoplights buildings, even mechanized pedestrians. the facility will give the auto industry a hub that can be used by anyone researching autonomous cars. ford, general motors, and toyota have all collaborated on the course. still to come, my exclusive interview with paypal ceo dan schulman. we discussed his plans and whether or not he has heard from carl icahn. plus, taylor swift and a chinese e-commerce giant.
of the $225 million they already raised in the last year. now to paypal, the hottest new single company in town. the online payments giant started trading on nasdaq today, leaving its ebay days behind. shares rose nearly 11% today already valued at much more than ebay. i spoke earlier with chief executive dan schulman about his plans for the newly independent company. dan: paypal is the world's largest peer-to-peer platform. one of our services brands is venmo. venmo is growing by leaps and bounds. it's really the way the millennial generation manages and moves money. our platform enables people to transfer money seamlessly, easily, very inexpensively. we can partner with any one of a number of different platforms out there to help them. i think in our future, there will be a lot of partnerships with technology companies going forward. we have 17,000 people across the world.
all we do is focus on digital payments. they have platform advantages. we have platform advantages. potentially bringing those two platforms together in partnership could create a very powerful value proposition for consumers. emily: what's it like working with carl icahn? dan: we have shareholders across the world right now, as you can see from our early trading. there is a lot of interest in paypal. i think what we really want to focus on is just creating a great company going forward, focus on customers, focus on what customers need. and if we can do that, hopefully we will be a great investment for all shareholders.
emily: what about carl specifically? have you guys talked? dan: we have not talked yet. i've been out on the roadshow, speaking to different investors, getting their feedback, learning what they expect from us, what growth opportunities they have for us. it has been tremendously valuable for both parties. emily: are you worried about -- potential agitation? dan: i'm not. carl and other investors are the same. they want great value to be delivered for investors and for customers. as long as we stay focused on that, that's the right thing to do. emily: a lot of people talk about paypal as an acquisition target now that it's separate from ebay. what do you think will happen? dan: we were split apart to
create two great companies. ebay will be a fantastic company. we were set up to really capitalize on the changing chessboard that is going on in digital payments right now. and we think we have tremendous opportunity. our addressable market now could be as large as $25 trillion. and focusing in on that and delivering value to customers will deliver value as an independent company to shareholders, and we are very focused on that. emily: so, you see staying as an independent company? dan: i do. emily: i want to bring in two former paypal executives. now the president of a north america technology company. and an early employee of paypal. when carl icahn floated this idea that paypal and ebay should go their separate ways, you said "i've been saying this all along."
what can paypal do now that it couldn't do joined to ebay? >> you are right that this is something i've been saying for years, that paypal should be it's own company, free to pursue its own destiny, out of the shadow of ebay. i have been saying it for years. elon musk has been saying it. i think carl icahn got on the bandwagon and made it happen because, quite frankly, ebay management fought this tooth and nail. emily: it's interesting, i asked john donahoe, now paypal's chairman, no longer ebay ceo, why not. take a listen to what he had to say. john: i built relationships. i reached out to many of that founding generation. they've been great counselors max, reid, peter, and others. i've listened and introduced
dan to many of them as well. no one knows what the future will bring, but we have a proud heritage and tradition here. we always welcome ideas and feedback. emily: what's your take on that response? david: i think it's a giant missed opportunity. one of the reasons i was in favor of the spin out was to create a separate paypal board distinct from ebay, you could include this founding dna on the board. look at the options here. you've got the paypal mafia. you want to put them on the board not just for what they did at paypal, but what they've done since. elon musk, reid hoffman, chad hurley -- the list just goes on and on of extraordinarily accomplished people who are still very involved in silicon valley. i don't know how you don't ask
those people to be on the board, or at least have one of those people on the board, because it is important to have people understand the paypal product. look is that who they replaced them with. i was looking at the board members. there was a guy who was ceo of freddie mac during the housing bust. i guess the guy who was ceo of lehman brothers wasn't available. it doesn't make sense. emily: what's your take on this, as somebody who worked at paypal? cameron: i think it's a great move. competition is heating up. payments are super hot. emerging markets are the area of focus for paypal. i think that this move makes them independent and they can move much more nimbly and quickly to counter what some of these other people are doing. emily: what kind of challenges
is paypal going to run into in places like brazil and china? kamran: everyone looks at the opportunity in the tens and millions of users. payments are hard in those countries. in brazil, 50% of people don't even have credit cards. if you look at one of our customers on facebook, you print out an invoice and take it into a convenience store or bank branch, you pay cash, and that's how you're paying for advertising on facebook.
i think it is great they can go after india and china, but it's not going to be easy. emily: it was interesting he suggested partnering with facebook. the guys who are running facebook messenger -- what do you make of the suggestion they could potentially partner with facebook rather than compete? kamran: payments is hard. facebook's core business is advertising and/or games. they are looking to partner with players. things keep evolving and moving quickly. it is definitely an interesting space to watch. emily: you said paypal could be a $100 billion standalone company. what will it take to get there? do you still own shares? david: i do still own shares. i think that paypal product needs to be updated. there hasn't been a focus on innovation the last 10 to 15 years. the product needs to be updated for all the waves that have happened over that time -- social, mobile. those are all areas they need to focus on. they focused on those areas through acquisition. the company has made some good acquisitions with braintree and
venmo, but i think they need to innovate internally as well. emily: he talked about they have $6.6 billion on the balance sheet. they are going to spend it, but he also wants to innovate organically and from within. david sacks and kamran zaki, thank you both. well, jd.com is creating a u.s. mall. it will sell american products ranging from converse to raybans. it will also be the first retailer to sell authorized taylor swift merchandise in china, including a line
exclusive clothing designed by taylor swift herself. this as the company looks to close the gap the between itself and alibaba. the parent company of uniqlo determined that the company's strategy was not in line with their china strategy. what to expect from apple's third-quarter earnings. and stephen hawking supporting a $100 million alien hunt. bernie sanders is the latest political candidate to up his snapchat game. ♪
emily: it is time now for "the daily byte," one number that tells a whole lot. today's number is $100 million. stephen hawking and yuri milner are backing a $100 million alien hunt, the first of its kind. participants plan to investigate 10 times the amount of sky that has been previously researched through the use of high-powered telescopes. hawking said, "we believe that life arose spontaneously on earth, so in an infinite universe, there must be other occurrences of life." toshiba -- almost triple the company's earlier estimate. toshiba overstated its bottom line under pressure from management.
the president is scheduled to hold a news meeting tomorrow. the company has lost $3.6 billion since may 8, when they canceled the year-end dividend. apple stock is jumping as analysts prepare for the third quarter earnings. shares were up as much as 3% today. another big question, whether we will learn more about the apple watch. the company has said it will not break out watch sales. the ceo said he is happy with how the product is selling. we have with us our bloomberg news reporter tim higgins, who covers apple from san francisco. what do we know about how the watch has been selling? what new details are we expecting? tim: they have been pretty clear they are not going to release sales results for the watch.
it will be in with "other." it will be looked at closely to try to get an indication of how the watch has been doing. emily: it leads one to believe maybe they are not doing that well. frank: i think apple is a conservative company. they don't want to talk about something less than a full quarter's worth of sales. they also want time to that just how people are adapting to it, so they can build -- time to adjust to how people are adapting to it, so they can build a storyline. emily: there is a report out of kgi that apple iphone sales are going to fall this quarter.
>> we have seen it suggested that iphone sales are going to rise. emily: this would be a painful sales drop. what's your take on the sales report? >> when we look at the big picture, we expect uplift from the iphone 6 to play out over two years. it would be pretty surprising to see a drop in this quarter after two so strong quarters. there seems to be pent-up demand for a larger screen iphone. it seems unlikely that will happen. emily: what about china? the smartphone market is saturating. other smartphone makers are feeling the pinch, but apple has defied the odds. how is apple tv momentum going in china asked apple keeping the momentum going in china? >> the stock issues -- in the chinese market, there is concern that will bleed into the middle class buyer. analysts we talked with think that the previous quarter was pretty strong in china.
continuing signs there has been greater interest. people that had bought cheaper phones in the past are being encouraged to buy these larger-screen iphones. emily: there has been a huge selloff in china. any indication about how that has impacted apple? >> you know, no. the reports coming back about the small percentage of the total population in china that is actually involved in the stock market suggest there is not going to be a broad impact unless it impacts the mood. if you are talking about people were feeling the hurt from the stock market decline, that seems to be a smaller chunk of the population. it's only if it alters the fundamental mood of the company, and i don't think we are seeing signs of that. it is kind of opaque in china. it's hard to figure out what's happening. emily: frank, tim, we will be all over apple earnings tomorrow. that does it for this edition of "bloomberg west."
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