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tv   Bloomberg West  Bloomberg  October 28, 2015 8:30pm-9:01pm EDT

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what's my credit score? your credit score is 650. that's magic! no, that's credit sesame.com you get so much more than a free credit score so do more with your score at credit sesame.com >> latest results from paypal's first solo earnings report. i am cory johnson, in for emily chang. a bleak picture for gopro, taking a beating as the company reports a tepid third quarter. ibm doles out assets for the weather company. and will talk to a ceo about the disappointing earnings, weird
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guidance, and a big stock drop. l'sst of all, paypau third-quarter sales missed the estimates. it was the first report from july separation of ebay. some of the analysts were wrong -- they $2.28 billion, according to bloomberg. they face competition from square, android pay, apple pay. joining me to discuss what they mean, paul and tom. tom, let me start with you. in the quarter, this was baked in after the company split. but they appear to be doing better, after the analysts try to understand the business. tom: here is what happened. paypal split from ebay. what we thought was going to paypal was that theopa
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supposed to take off. now we saw ebay exceeding expectations. paypal comes out of the gate and a kind of flopped. they're looking at take home grade, per transaction, and they are seeing it drop. you are seeing a lot of purchasing power. cory: it is fairly interesting paul, went company does an ipo, they make sure they have a surprise in the first quarter. what is there to be concerned with in the paypal model? paul: the issue here, it is not a volume business. we saw the total payment volume increase double-digit's once again. that is kind of supported by the sense that -- electronic payments are going to be a very strong secular growth story
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across the industry. he saw that in the paypal numbers. tom mentioned the rate. payt of companies have to more attention, investors are paying more attention to it, becomes more competitive in the take rate. one of the metrics where investors will see competition. we will see electronic payment companies be aggressive on the rates they charge their customers. as of that is one of the key metrics in the model that i think disappointed investors a bit this quarter. cory: tom, one of the things that strikes me when i look at the financials. which i met i did not do until today. of slowdown and the addition new customers is made up for by the fact that existing governors spend more and more on paypal or are using the service. what are we seeing this quarter in terms of people using the business? tom: i don't think the problem is the gross number of people
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using. i think what you have a at is what happens down the road. something that you and give all in talking about is competition in this arena. it seems like every other week we hear another player getting into, hey, we are going to get into electronic payments. we will make it easier for you to pay for stuff on your cell phone, mobile phone. just this week, jpmorgan entered the fray. you add on top of the names you mentioned -- google, apple, square, strike -- it would cause me a bit of concern. what you have to do is give your new customers and incentive to come to you. so you have to let your customers -- you will give them a very small percentage. but you will keep a very small percentage. and that hurts the bottom line. and that is where investors are looking, is paypal the gross business we thought it was going to be -- the growth business we thought it was going to be? cory: paul, the venue for
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payments is moving, too. where probably at a place , and of next year maybe two years from now, most of the purchases that are happening online -- and there will be more of them -- not be happening on a desktop somewhere. they will be having on a mobile device. and on the devices themselves, you have apple pay which can use the websites. same with android pay. square has some interesting business there, too. maybe paypal is not in the right place at the wrong time. paul: paypal initially made its pay on a desktop environment. for they're making good strides in mobile, as well. across the board, whether it is a social media site like facebook or search site like google, it is all about mobile. the digital ecosystem, wherever you are coming have to have a very aggressive and viable mobile strategy.
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i think paypal is there. they are competing against more standalone mobile players such as square, strike. but i think a power has done a good job migrating to the desktop to the mobile. that is what investors will be looking for going forward. cory: i think paul sweeney does a good job, almost as good as tom. the camera on a stick, the company having a hard time -- earning $.13 a share in the quarter, which is not what the industry was expecting. gopro also missing analyst estimates, though the analysts were wrong, they did not do the $400 million in revenue. they would take some of the cash from the ipo and spend it by buying back shares, so soon
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after going to the market to say we need money to grow our business. now they will get you to take some stock away. wasceo said the quarter clearly more difficult than expected. biduing with earnings, reporting third-quarter results. they have been a top provider of search for china. beeneos top priority has online. part of that research is not in beijing, but right in google's backyard. bloomberg west had an exclusive look at its lab in sunnyvale, california. >> speech recognition, artificial intelligence, all part of the work done here at baidu usa. the silicon valley arm of the chinese research giant. >> i think we're in a unique position to be the best in silicon valley. and to put them together, to
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create things that no one has seen yet. >> meet the mastermind behind google brain, what most ambitious artificial intelligence projects to come out of google x. ng made a big splash when baidu recruited him to run the lab in sunnyvale, less than five miles from google headquarters. ng: i think there is a huge gap between what we can do and what we have a copper so far. >> what is next is one of the first projects to emerge from baidu. a sort of robocop meets web in md, ask a doctor. >> the system really has a lot of intelligence built into it. first of all, the . app, toan talk to the describe their symptoms. refer toymptoms will
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deep speech with voice recognition, and they can decide if they need to see a doctor. >> this is all part of the ceo's grand vision. connect withers nearby businesses through the smartphones. he believes and is so deeply, evil that billions of dollars, risk investor relations, and sacrifice profit today. all without a money back guarantee on future growth. >> in china, we see your cell phone increasingly becoming a remote control for the physical environment around you. people are transacting so much more often online in china than they do in the u.s. baiduve his commitment, has already tapped into $12 billion worth of cash with products like ai personal assistant. they're made a dozen investments , including $169 million in a
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uying program. billionset aside $3.2 for online to off-line research. the number is unexpected to grow. >> i think if we could get speech recognition to a level it nationaletel -- 99% -- that would be. great,. . punishing after a big slowdown in the biggest part of akamai's business. the ceo toby what is going on, next. is going on, next.
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cory: one of the biggest stock movers and all technology today was akamai. funding the most in six years, after forecasting a week fourth quarter. they help speed up the delivery of content on the web, all the stuff you are doing on your phone or devices go through their pipes. a lot of it does. but it is a challenge for their own customers, including apple should be more traffic into in-house. or as the ceo of akamai is to call it, diy. in your call, i found a little confusion. you talk about the media business slowing down, the
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in-house content delivery networks, but you also said you were bullish about the future of this. what evidence do you have that media business is going to get better? >> the media business never grows linearly. traffic overtime grow substantially, revenues grow, but the media business always has ups and downs. last year was a very of year was a very up here, more traffic than projected. and q3 was good. but we are looking ahead to q4 and thinking that maybe traffic will not be growing as it has. but the business as a whole is very strong, my long-term outlook -- medium and long-term outlook on the business -- is very strong. cory: i like your optimism. can i trust you? i wonder what gives you that faith that when the world changes, these in-house content delivery networks being built, you guys can capture a lot of the business going forward in a better pace? tom: in-house do is not a new
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phenomenon. few largest customers have been doing that for a decade. and we have always competed with it very successfully, and our job is to provide a better service at lower cost. and we have a very good track record of doing that. cory: when you look at that business, too, and i will paraphrase your conference who, for those customers have grown their do-it-yourself network, that akamai sort of functions as the overflow. and overflow is a great business in a flood. in a four-year drought, not so much. is that a fair categorization as to where you sit>? ? tom: i don't think so. we have a very good relationship
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with our largest customers. the largest ones do have their internal efforts, we work closely with them. i will customize more as shared traffic. when there is more traffic to go around, i would classify that as good. we have a close relationship, and we are not an overflow service. y: your security business is killing it. you pointed out on the call that your cloud security business can be one of the biggest in the world. tom: that puts us in a very small group of cloud security companies. and i think the nice thing here in you know, we have been the media business before. in the past, it was the business. now it is less than half. you see in the same order that media traffic is slowing down, you see security blowing it up.
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doing a lot of investments there, that is a great success story going forward for us. cory: tom leighton, i appreciated. an interesting quarter, we appreciate your time. if you are watching the world series last night, you know the broadcaster at fox sports had some issue. an unrelated incident, a number of google fiber customers in kansas city lost internet just before the game started. the outage did not last too long, but it did force people to miss an amazing in the park home run on the first pitch of the game. google quickly apologized, saying we know it couldn't have happened at a worse time. the first time in the history of the world series. it was restored by 10:15 local time. kansas city the first city to have access to google fiber, which now covers nine cities. we would tell you about big plan to buy the weather
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company. details on a multibillion-dollar deal, next. ♪
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cory: shrinking profit margins have been driving a wave of mergers in the chip business. another big deal, texas instruments is looking to acquire maxim. maxim stock jumping on the news. the deal might not happen, they might ask for too much money. the maxim does not need as much help as some of the smaller sierra.s, such as pcm
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joining us from new york is alex sherman. alex, these are companies that i have covered for more than a decade. and they have been on their own for so long. what is driving this right now? corey, isome of this, allly a product of, well, of my friends are doing it. why don't i? we have seen so many semiconductor deals already that they simply beget other deals. if you are texas instruments and you see a votto and intel all doing deals, these are to think to yourself that maybe the window is now for me to get in on this and increased scale, when all of my other peers -- some of them are direct competitors -- are getting bigger. in the broader secular industry,
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growth is slowing. and his company's across-the-board need to come up with new ways of growing. companies a way that with slowing growth look to boost profit. cory: the bankers are out there shaking the trees, going to all the companies and say is or any point at which you would sell? xyzyou will believe this, semiconductors is willing to sell/ . alex: the ceos of a lot of these companies have been around for a while, the founders are getting older. they may want to do new things. i think bankers basically target those companies. i dorms of maxim today, not think they fall in the category of a company that needs to do something. it is an $11 billion company. it already has a lot of scale that the peers do not. but if texas instruments is
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going to come around and throw out a 50% premium, it may be hard for maxim to say no. that is the process, the due diligence the company is going through now. ceo of think you said semiconductors age at a greater rate. that is sad. there are so many. i want to talk about ibm. woodbine the weather company's beital assets, they will not buying the tv business itself. earlier today, the senior vice president of ibm joined bloomberg talk about why ibm wanted to do this deal. >> the weather company has a very high-volume platform underlying their capability that people are accessing through their mobile devices. it is cloud-based. platformting a high
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for the internet of things, specifically around weather. we will extend that. and we're going to bring watson to bear on this. and as you know, one the largest, most powerful cognitive systems. so this high-volume platform plus watson will be unmatched in the industry. cory: that was john kelly. deal actually makes a time of sense to me. the weather channel is a data business more than anything. alex: right, so the nuts and bolts of the deal are the weather company are selling the digital assets but not the tv channel. ibm will basically by the website, the data behind the website, the applications. the mobile app is actually the fourth most use app in the united states. it will be integrated with watson, as you just heard. they're paying a price of about $2 billion we hear.
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when the private equity firms bought the weather company back in 2008, the weather channel was maybe the most valuable asset in there. the value on that asset is probably only a couple of hundred million dollars. and they are holding onto it as ibm buys virtually the rest of it. cory: this really is a data plan. the way the company gathers data for its forecast is fairly amazing. have 1000 commercial air flights the given data on a regular basis. 64,000 weather stations that are gathering data. , 220,000 meteorologist who interpret the data and they run that through an end up with an enormous the accurate thing that people are using online 2 billion times a day. is saying that this state is not consumer facing. i think that is the point you
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are getting too. you can use this data for government enterprises, airline companies. this is ibm's new strategy. cory: agriculture. do that,y want to transition away from an old legacy enterprise company and become a cognitive computing company using data and all of these different industries to sort of self them back to the market. and relying on things like watson to drive revenue for the next generation of technology. cory: it seems like a better use of capital then share buybacks, and a lot cooler. alex: a better use of capital than some of these legacy to legacy deals we have seen. i will not name any exactly. it is a less risky use of capital that way. some of those deals maker not be good. but ibm is certainly looking ahead. they're still in trouble, though. they do not have topline growth. cory: we don't have time for you to name names. alex sherman, thank you for
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watching bloomberg west. tomorrow, earnings from linkedin and solar city. ♪
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♪ announcer: from our studios in new york city, this is charlie rose. charlie: urban meyer is the head football coach at ohio state university. the buckeyes are the defending national champions. he is one of two coaches to win a national championship at two different schools. he had previously won two titles at the university of florida. ohio state defeated oregon in the first-ever college football playoff last season. 42-20. that run was made possible in the arm of a third string quarterback. he writes about last year's team and much more in "above the line."

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