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tv   Bloomberg West  Bloomberg  October 27, 2015 11:30pm-12:01am EDT

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emily: apple polishes up some better-than-expected quarterly results. will it be a happy apple holiday? ♪ i'm emily chang. this is bloomberg west. we are all earnings with twitter share is taking a hit as user growth well in the third quarter. plus mobile magic from alibaba. the giant beach despite concerns about the broader economy.
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ibm investors feeling very blue today as the company revealed the sec is investigating accounting presses best practices. apple shares are getting ever so -- gaining ever so slightly in after-hours trading. beating estimates. sales up 22%. that key iphone unit sales number fell slightly short. still, i spoke with the cfo over the phone, and he told us that we feel very good about her iphone business which continues to grow a number of places around the world. we doubled in china and in many places that continue to see growth. we have not seen any sign of economic slowdown at any point in time. joining me now is an industry analyst at blogger.
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alex, i want to start with you. let's talk about this iphone number and guidance for the forward-looking quarter. it was a little bit light on guidance, and little bit light on the iphone number. alex: it is typical for apple should be conservative. and in this i macroeconomic environment you want them to be conservative if you look at what is going on in china, they are up 10% and increasing. look at the gross margin number. the phones coming up. a lot of really good news in this report that is very contrary to a lot of concerns coming in. emily: let's dig in the china specifically. tim clark saying on the call -- tim cook saying on the call
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that apple is on track to hit 40 stores in china in the middle of 2016. they're continuing to invest heavily. there have been sirens about the -- there have been some concerns about the broader health of the chinese economy. does this put some of those concerns to rest? ace doubling year : on year into not just a macro climate but also a declining headwind in terms of the exchange to the dollar. we are seeing a phenomenal story on china. let's not also forget that 120% growth in terms of apple's itunes app store revenues in china, which means it is not just the phones that is constant and doing well. emily: tim cook in china just last week. he was posing as doors and hiking along the great wall. obviously, it is a hugely
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important market for apple. i want to check a little bit more about the watch. they did say that watching sales are up sequentially, which i -- watch sales are up sequentially, which i guess you would hope, but they left the june quarter with 700 places where they sell the apple watch around the world. they had in september with 5000 locations. what do you think about how well the watch is actually doing? alex i think the apple marketing : machine is still in full force. the apple watch is not the center of this story. the apple lawsuits to evolve, -- the apple watch needs to evolve, the battery life needs to go up, the acts need to become more stable. but apple will polish them as much as they can. it is really still all about the iphone. if you look at the revenue for the iphone, of over 40% year-over-year. the world's largest company growing revenues. samsung is an absolute train wreck right now. china, whether or not apple is slowing, it is having some issues.
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that is because it is delivering the world's smartest smart computer. emily: i come back to this question, it is apple overdependence on the iphone. if you look at ipad sales, they are down again. replacement sales were probably longer than people were anticipating in the big -- beginning. we're seeing some level of cannibalization of the product portfolio. this is something they have seen before, they're not worried about it. are you worried about it? are you worried that they are focusing too heavily on the iphone? horace: we cannot play this game that what are we trying to worry about. the fact is that the iphone is a tremendous success story. every other product would be everyone else's dream. let's talk about ipad for a minute. although it has been declining for a long time, perhaps what we're seeing is that it is a product that everybody on the planet will end up owning. it is saturating 40% of the
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addressable market. love those people are not giving it up. -- but those people are not giving it up. those enterprises are not moving to another type of product. it is the highest satisfaction rating ever seen. it is perhaps more of a niche that we thought. but a niche nevertheless. 40% 50% of a very large market. - it may not play against the iphone, but it does against the mac. emily: the new set-top boxes on -- box is on sale now. they think they can change the experience. we will be watching that. thank you. you're sticking with me to talk about alibaba. alibaba shares up more than 4% today, as much as earlier in the day after the company were ordered a massive 32% increase in sales in the second quarter. all of this thanks to a shift towards mobile shopping and
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increased promotions. this is ahead of next month 's single day. the biggest shopping day of the year. the ceo of a research firm that focuses on chinese to tumors -- chinese consumers joins us. and little bit of doom and gloom over the last year. shares not doing well. they have since recovered, is the worst over? brian: it is a good question and it a great quarter ended was driven by a number of different factors but the primary one is global uptake. the number one issue that they have alibaba is could they were to -- replace desktop with mobile. the answer this quarter was yes. i think they're on a good track. i expect to see similar results coming in the next few quarters. emily: what is the next test for alibaba, if they are doing well on mobile 20 say the next test is for this company?
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horace: it is along the lines of mobile. as we saw, the comparable item here is facebook. when it came out of the gate after the ipo, people were skeptical because it was not tracking well on mobile. once they got their strategy right, they shifted everyone to mobile, and use mobility as a sustaining story for them. i think we need to see how well that continuing as a story going forward. let's not forget that one billion people are on facebook and we have to see the same time over 1.2 billion overall rate we need to see how far they will stretch in that domain. it is in -- it is doing extremely well. emily: one thing i want to know his clarity on the investment strategy. at what point are we going to see some kind of coherent
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strategy. or are they really just experimenting? brian we're talking about a : company with a ton of cash. amazing operating margins. they have the capital to spend. i do see a path there. i see them investing in four different areas. one is picks and shovels. they're are really looking to do is not out the infrastructure and the systems of the logistics so they have smooth sailing and a strong run for the e-commerce. virtual marketplaces or good non-consumer good services are their investment scenarios like local service providers, they are looking for commerce to be bigger than physical product. the investment scenarios like africa and india also really matter in right now. this company continues to invest in marble.
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-- in mobile. i think they have crossed the chasm. they are building out a very successful mobile business. they are more stressful than our friends at facebook. emily: that is a bold statement. we don't know -- we do know when facebook went public, they had zero revenue coming from mobile, so they are coming out ahead on that front. we will keep a close eye on singles day coming up the second week of november. now i want to talk about twitter. stalling user growth continuing to drive the stocks down. jack dorsey's troubled turnaround. that is next. ♪
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♪ emily: twitter shares are taking tanking after hours even though third quarter relative the expectations. the company reported a slowdown in user growth. additional the microblogging platform recording a loss. joining me now, david. this is like the third quarter in a row where we see slowing down user growth. we have to give jack dorsey some time, but can he really this -- re-accelerate can he reacts ellery this?
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david they are wanted tying each : musa -- monetizing each user more. it is about making money. that is not so bad. you have to give jack a little time to really start making the very significant changes that he intends to make a twitter. he had a big vision about a much more user-friendly company that has not had time to implement yet. emily: jack dorsey has been speaking about moments, the the future of twitter. i have been using it. i am impressed. he said this is one step toward amplifying. let's take a listen. jack dorsey: moments is just a start of boulder's application. i challenge our teams to the on assumptions of what makes twitter the best way to share something. i'm confident our ideas will make us more powerful. emily: are you optimistic? lou: i am not optimistic. not because i do not think he is incredibly brilliant, but because the task is very hard.
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metrics are going the wrong way, and it is here hard to turn things around. and it is not being brilliant that turns it around. there's a lot of luck in serendipity that is involved. 300 million is a big number, and it does look like they are going to get there. emily: when you look at future of the product we have moments now, but what is next? will we be looking at another metric entirely? twitter now saying they're going to focus on monetizing lockdown users? david: for years, i have been negative on twitter. but i am actually more positive than i have been for a long time. it is partly because of jack being there. it is also because of what jack is saying. not following the orthodoxy is likely right. twitter has been embedded in a lawsuit very narrowminded
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verybedded in a lot of narrowminded assumptions about what the company was and could be. that has to be thrown out the door and turned into a user-friendly company. i think it can be. i think there is a huge appetite for the instantaneous broadcast services for individuals that twitter offers. we were talking before about how they should go to longer tweets. jack has set 140 characters is idiotic. when you can put a video on there, that does not make any sense. emily: there are two camps. those who say twitter should stay at 140 characters and some who say they shouldn't. this is archaic. also saying they will start a big tv ad campaign with the world series. are you bullish on jack dorsey in general? david: the fact that he is doing two things at once, i'm not of the lease that that is a bad thing. i think he has seen a lot of
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things at square that he would not otherwise see. this might actually be hopeful for twitter. i know that positive on the tv -- i am not that positive on the tv campaign. day, thed of the problem that twitter has is a majority of people who go to twitter do not become active users. so the product has to fundamentally changed. emily: a lot of questions for this new ceo. thank you both. i will let you argue off-camera. [laughter] coming up, t-mobile with mixed third-quarter results. ♪
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emily: kind of a tough day for t-mobile.
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rolling out third-quarter earnings that missed expectations. analysts have been looking for $.30 a share with revenue of $8.2 billion. one bright spot, and added 2.3 million new customers in the corridor. -- in the quarter. i got to sit down with the ceo and ask about the new customers and the recent data hack. john: i think things will settle down. what we did is we actually increase the amount of growth that we forecast for this year and kept our adjusted ebita guidance the same. our service revenue growth was 11% year-over-year. i think there is a short-term issue where people have misinterpreted last quarter's tax rate is a jumpoff point and now it has normalized. and the one time metro pcs decommissioning cost. but the net income in the earnings-per-share of $.15,
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which we announced, it is directly in line with what we expect to do and will continue to do. they are quite good results, and they understand they are. emily: let's talk about these new customers. where are they coming from? are they coming from at&t? john yes, yes, and yes. : it is very important, one of the things we track is gracious. for q3 we were 1.8 to 1. 1.33 against verizon. 2.1 with sprint. we were gaining against all of them. that is 10 quarters and a row positive against the industry. seven quarters in a row positive against everybody. nine quarters in a row over spreads. -- over sprint. in the last seven days, to keep you up-to-date, it is up to 1.9 to one. we continue to take customers for everybody. -- from everybody. but as he saw, they clearly are the largest donator that this
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point point. with the at&t results. emily: i made a t-mobile customer, and i came from verizon. three weeks into my new teen all -- t-mobile membership, my data was hacked via experience i got a letter in the mail saying i was one of those 15 million people. my question to you is what went wrong? and what are you going to do about it that what is different from one and every other ceo has done? john: i think i have already done something different than any ceo has ever done, obviously these you take place with -- experian where there was a , breach, and 15 million people, yourself included were potentially impacted. but what we did is we immediately -- emily: are you saying maybe i wasn't? i did get a letter in the mail.
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john: i think got a letter from experian explaining to you that you are one of 15 million customers whose data may have been impacted, and it is best to take all precautions and join up with the free service and credit monitoring that we offer. emily: as i understand it, there are systems that may be more expensive to have and take time to upgrade. are you working on upgrading internally that might prevent another breach? john: i think this is a significant oversimplification. this was a database maintained by a subsidiary with tremendous -- subsidiary or with experian subsidiary of experian with tremendous harsh and applied by us as well as experian.
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there was a breach of some sort that is still being completely understood uninvestigated by authorities. and we as well as every other major company in the world are investing heavily in all forms of protection against these types of things ever happening again. emily: let's talk about the network. i will say that the network was good enough for me to switch. anecdotally, i still do have some problems with it. some dropped calls. depending on where i am. what is in it for me in terms of the longer-term? i year from now, two years from now, why should i remain a customer? how much better as they know are to be? john: first of all, i do not want to assess whether the people are actually hanging up on you, or dropped calls. [laughter] kidding aside, this year, with one million square miles of lte, you can expect to have what you already have, which is the fastest 4g lte in the u.s., but also the fastest growing network and the united states that is my -- in the united states. that is my commitment to you and the rest of the customers. emily: for the record, nobody hangs up on me.
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i hang up on them. another story we are watching, this is important. ibm shares taking a hit after the company discloses that the he is looking into the way it accounts revenue recognition. this is the second federal probe into ibm in as many years. our bloomberg reporter who covers ibm is with us now. what are they looking into here? jing: they do not give many details as far as i know, they can only speculate. they are looking into how ibm accounts for a revenue that is recognized over eight timeframe -- over eight span of time. how much is being recognized and at what time it is being recognized. emily: what is this signify for the broader industry? trust and integrity, that is the most important thing. jing: for the broader industry, if you look at their shares, they are going through a transition where they are
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looking at business deals with shorter waits and higher frequencies. they have all shifted how they are accounting for it as well as to these out of service models. the changes for how you account for revenue. emily: what does this mean for investors and ibm? the company has been trying to make a big transition. jing: for investors, it is another challenge that ibm has to face. ibm is looking at this multiyear transition where they are moving from one business will to an entire new business model. this is another signal that things may not be going as well. emily: there was something similar that happened a couple of years ago in a cloud revenue related rope that ended with no action. he will keep us updated on this story. thank you all for watching. it has been a big day. tomorrow, we have another round of tech earnings that you do not want to miss. ♪
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