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tv   Bloomberg West  Bloomberg  December 29, 2015 11:00pm-12:01am EST

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toshiba is gaining after the newspaper said it is planning to sell its health device unit. according to the report, fujifilm is one of the potential buyers. toshiba says no caps off has yet been chosen. south korea's factory output unexpectedly fell. exports suffered from weak to the rateaul said
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rise and china is a slowdown are also factors. lg display and lg electronics are both climbing today. reports that samsung will spend nearly $13 billion to make flexible displays for iphones. noble is down again after being cut to junk by movies. low profitability at its core operation. criticism of accounting practices. quick check of the markets trading here in asia-pacific.
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sidecar the rideshare delivery service stalls out. prime time for amazon. the same day delivery service is about to get a major expansion. the exit strategy. for a runbe the name down wall street? fairchild says it has a cash share from the group. it turns down a similar bid from china resources things and capital management. shares of fairchild are
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searching in after-hours trading. selena is following the story. selena: we don't exactly know what is new here. fairchildeport that was sticking with the takeover offer on semiconductor. even after receiving this higher offer. we don't exactly know who this .arty g is we are assuming it is coming from china resources holding group. paying the breakup fee cory: interesting. they have decided to turn course, abandon the acquisition. even though it will cost money, they will pay that together whatever the assets are. selina: it looks like whoever this party g is, they are upping the offer. not only are we offering a higher bid, but we will also pay
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this breakup fee. cory: that will make the biggest difference. the one to watch in what might be the biggest year ever for m&a. thank you very much. amazon has been a powerhouse this year and it does not seem to be slowing down. gene munster came out with a new report which estimated the same hour shipping option will grow 15% to 20% in the near future. in the past few months, prime now has rolled out 15 additional metro areas. gene joins me now from minneapolis. cold? gene: we got some snow, too. cory: look, this service is a really interesting business from amazon and expensive.
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talk about how this has worked for amazon thus far. gene: i think it is good to have some perspective on what they are doing. if you think about amazon overall, they have 20% share of the overall e-commerce market in the u.s. they don't have any of the traditional bricks and mortar retail shares. what this prime now, one our offer is the instant gratification for the customer and people who want things right now. as you mentioned, they doubled the numbers of cities so there are 26 cities. it is not a lot but a big effort they have made in the last two months. the last peas is the number of items you can get is still relatively small -- 28,000 on average which is up from 26,000 a couple of months ago. there is a lot of room to grow in terms of the number of skus. we see this is having a profound impact on amazon taking what they had on traditional retailers and tightening it.
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one area feels that instant gratification segment. cory: i could quite hear the number of items but talk about the number is and why it is so significant. gene: right now, it is relatively small. it is significant because it has room to grow. to put it into perspective -- amazon has a one-day delivery option which is free. the one-hour costs eight dollars. the one-day option has 2 million items that is available. traditionally, over 250 million items. 28,000 items is really small but they are items you run into cvs or walgreens and pick up. i think that number will go to a million over the next few years and the number of cities will go from 26 today to properly 150 -- probably 150. cory: the capital expenditures would decrease because not adding much distribution centers or the village centers as they
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say. there is a whole new project now. gene: that is right. they call them self centers. there was a lot of leverage coming out of the traditional business. it will be hard to really figure out how much of an impact this prime now will have on the margins, but will be in the investment phase. i think they will be rewarded. this gets them to the concept that they can continue to grow units at a healthy 15% to 20% pace which would be gaining, continuing to gain market share and retail and that is what investors are keyed on. cory: interesting. does this track back to when they first decided they have to pay state sales taxes, regional sales taxes, so they rather would do that rather than approaches than the other retailers in america. they had a different approach
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where the own the distribution chain as well is the products. gene: that is exactly right. you can trace this back to that point which was a couple of years ago where they threw in the towel and agreed to work with the states with sales tax. at that point, nexuses went away and it opened up the door for them to invest more aggressively in every state. cory: maybe expand the list of companies with whom they compete for beyond -- once it was barnes & noble and then fantasies of walmart and now it is all kinds of retailers. gene: it is. the ones that are most obviously will be impacted will be target or a walmart. those retailers will try to find their own way to get this one-hour option. the growth in prime is amazon said the added 3 million prime users in one week. to put that into perspective, they have about 60 million prime
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users. that is important because when people invest $20 a year in prime, they go to amazon first. while these other retailers like walmart and target will have other options, it is going to begin to go for them to get over that psychological hurdle for consumers because they will go to amazon first. cory: i have not thought about that. they added 5% in one week. what is the average spending of a prime customer compared to a normal customer? gene: it tends to be three to four times a year. that psychological impact -- once people invest $100 the year, they will go to amazon first. you see this step up about three to four times want to become a prime user. cory: how do you know that? i don't doubt you. gene: we have done surveys over
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the past four years tracking this. our numbers tend to be closer to three times. there are other places that is a third party which talks about being four times. cory: wow. fascinating. i want to talk about apple. there has been a lot of discussion about demand for the s phones, whatever. i wonder that the latest news suggest the numbers are 5% too high. what are we hearing about the weak demand? gene: one way to look at it is it will be in impact to the march quarter and that may or may not happen. looking at the supply chain, it has not been a good indicator because when apple goes into a cycle, they traditionally give big numbers for the supply chain to build.
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as they go through it, they contract the numbers. this is consistent with what we have seen. second, investors are concerned about this. when we talked to investors, they don't want to own apple until the march quarter because they think it will be a difficult guidance. ultimately, we feel that is missing the whole point, that they are going into what should be a strong back half of 2016 and a strong 2017, and there are some fundamental things changing about how people are buying iphones. they are buying them on an annual basis. it is a longer term several year impact. my thinking on this whole issue about the march quarter is it is missing the point. the point is who cares about the march quarter? there are some good things coming over the next year and a half. cory: very interesting. the program where you can pay to be guaranteed the new iphone every year.
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gene: that is it. when you think about the big leverage to the apple model, it is changing the buying dynamics that has an impact. we think moving it from a 24 month average upgrade cycle today to a 15 month over the next several years can add 5% growth for several years. additionally year after year. this is a big deal that people do not fully have not factored in. cory: you say for several years because you think they will continue and more and more people will adopt the program so it will be three or four years until everyone is on it? gene: exactly. it will take four years for people to get on it. the first quarter you will see impact is december 2016. our best guess is it will compress a month or so per year. separately, the iphone upgrade program, we recently did a survey of 1000 iphone buyers who bought phones and apple stores in the u.s.
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35% have taken the option to upgrade annually. we thought that number would be closer to 20% when it first started. cory: very interesting stuff. you can see why gene munster is the ax of the stuff. thank you for your work. merry christmas. gene: thank you. cory: coming up, we will have someone who knows. bill gurley is next. from one hack attack to a box office bomb, sony hopes to put 2015 in the rearview mirror. ♪
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grubhub said his decision was for personal decisions, not due to any disagreements. gurley left benchmark in 2011 due to rising competition. emily chang sat down with bill gurley. the same venture capitalist talked about what he sees to google's business and the future of e-commerce. bill: you start your searches with amazon with prime checked. the second thing you do if that does not work is uncheck prime. then, if that does not work, you go to google. it is a reversal. google has gone from being the starting point to the search of last resort. that is pretty powerful. amazon threatens a much broader segment of google's search traffic with this e-commerce. emily: when you say search of
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last resort, that google will be the search of last resort, what does that mean for google? bill: what i see happening is two things. one, they have this thing called google express which i kind of see as a chaotic response to this problem. ok, well, we're going to make it possible to close the loop on a google transaction, but it is not set up in an optimal way. i have a hard time believing that that is anyway optimized at a level that makes economic sense. emily: do you think google is serious about delivery? what about instacart? it is being touted as a win-win for instacart and retailers, covering the last mile. target is trying it in minneapolis. does it have it locked down?
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bill: there are couple of questions about that situation that i do not know. one of them is how many people need that amount of care, you know? my wife is a huge fan of instacart. i have to constantly remind people that redband had remarkably high scores. everybody loved it until it went out of business. if you give the consumer more value than you charge them for, they will love you, too, which leads to the old saying about handing out dollars for $.35. the thing -- one question is what percentage of the population wants that much touch? the second question is core economics. we are in a period where the chosen unicorns are being given hundreds of millions of dollars and we don't have disclosure. you just have to ask yourself how much margin is there? doesn't have to be priced at a premium or not? economics would be very difficult.
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emily: do you think instacart can be the next -- bill: that is a loaded term because you are implying bankruptcy. emily: that is the point. bill: i don't know. i do think it is a question of whether you can generate enough cash flow from having that type of operation. there are not that dramatically high. emily: he did not invest in instacart because he thinks that is what uber will do. what do you think about that argument? bill: i shouldn't speak on behalf of mr. sacca. one thing that happens in silicon valley, it has been highly cyclical, the more we get into peaky territory, the more optimistic we get about business models that are lower margin.
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it is like the last time all of this happened was in 1999. what were the names? cosmo, right? it is the same -- i the smartphone helps a little bit because you have more data and transparency, but we will see. the question for all of those things have to do with economics. core economics. cory: that trip down memory lane was thanks to bill gurley. we will hear from chris sacca and what he thinks uber will be worth now. we will look at how the film business is trying to keep its hottest title from leaking online. ♪
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cory: a hacker group claims it is selling high-quality copies of "the hateful eight." hacking continues to be a major problem for hollywood and sony in particular. company is still trying to recover from last year's hack attack linked to "the interview." that is all we were talking about last year. most of the movies this year have not delivered in the box office. "paul blart 2," "chappie," not so much. joining me now is lucas shaw. i do like the filmmaker who made it. i have not seen much that he has done since district 9. that is the case where you make one movie and then they give you bigger budgets than you deserve.
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cory: you are not alone. talk to me about what this means for sony. james bond stuff, you put daniel craig and james bond together and you will sell some tickets. what about the capacity of having good movies right now with such turnover about the publication of the dirt with a hack? lucas: sony is at a juncture right now where after all of that happened, there was a change in leadership below the boss, michael linton. they brought in a new head of the film studio and even the process of putting his stamp on the business. you'll see the effects of that for a year or two because they have a bunch of projects in development from the prior regime. the real question for sony will be how they replace the bond franchise if they lose it. is an open question and one of
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the biggest ones because sony's rights lapse after spectre. we don't know who will release the next one. cory: i did not know it would be an open target. i would imagine other franchises like marvel and star wars, they are trying to hit that. lucas: disney is one of the people we can certainly rule out because the only light to release movie that they own. they did have a deal with dreamworks. if you look at marvel, lucasfilms, it is something they bought and then they can use all the different properties in theme parks and toys, so on. mgm and the family and the estate controls the ultimate bond license. they have a co-finance, coproduction deal. those other kinds of deals that are really popular. warner bros., fox has done some of them.
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cory: we appreciate that. glad you are here to help me. lucas shaw in los angeles. still ahead, the winners and losers of 2015. we will crunch the numbers and tell you what to look out for in 2016.
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corey: the founder of lowercase capital was an early investor in kickstarter. we asked him about google's self driving cars. chris: nobody will tell you that self driving cars are a bad idea. stuff they're doing in health could change the world. stuff they are doing and robotics could change everything.
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it is a bummer to see that youtube isn't more social. i have no doubt about facebook's ability to make attain its relevance and reinvent itself. they have used their money to out and buy the coolest stuff. zuckerbergto execute that stuff for a quickly. he was right on top of instagram. kevin walked away from that deal at about $400 million and it is probably worth more than 600 million today. i'm sure he could have had more. it is not our place to question a guy like that. he sold the company and made a ton of money and he has gone off to execute what he wanted to do. kevin is having an amazing life.
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he is being a dj at clubs in las vegas. he drinks the best bourbon. he was at fashion week in paris. i don't feel bad for kevin at all. snapchat is very real. those guys came up to me after an event that i did once and they said we are big fans. i said i don't really get it. i didn't pass as much as i didn't follow up. i passed on dropbox. i told eric not to invest in gopro. i focused so much on the negative case that i miss to the positive. i said this is really dangerous. somebody could get rated murdered.
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i didn't pass on uber. i was lucky to be one of the first investors. i think they have used aggressive tactics. that is truly limitless. i don't think it is worth less than 200 when they go public. they are delivering packages in hong kong right now. there's a cool company called ship that i didn't invest in because i thought it was something uber will do. travis's ambition is boundless.
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you know the culture of secrecy that we have here in silicon valley. jo pete you don't tell people your numbers. you don't tell people your business model. stories of founders living lavish lives have all started to attract more and more attention more and more posers. with that attention comes sloppy discipline and a ton of money. 12 companies ran live code, there were 15 of us in the room. we could ask questions, walk up and try it. the deals did not get done that day. demo day today has more than 80 companies with just three minutes, no live code.
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half the deals are done before they even present. it speaks to a desperation on the part of a lot of investors to be part of this game. a lot of investors that are raising should not raise. they're taking money away from companies that should be using that money. taking talent away from companies that could use that talent. taking investor and advisor attention away. a lot of waste is happening in the valley right now. there were naive investors throwing out term sheets with nine figures and no diligence. investing in lift, there publicly stated rationale was that must be worth twice as much as uber.
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lift will go away because travis is not going to buy it. uber is a better company. lower pickup times and higher-quality of service. i am a huge investor in the company. i would never buy shares of lift because they will not be able to compete. icon just made a big mistake. there will be a downturn in silicon valley. it is inevitable. they won't see all that money come back. there are multiple ways to define the bubble. a lot of these companies are going to go away.
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will it be like the year 2000? no, because this is still the epicenter of innovation. there is nobody normal left here anymore. all the actual normal regular people have been priced out. the biggest problem is that computer science programs are so lucrative now that kids don't need to pay money. they have never waited tables are parked cars. we have a generation of software engineers working at these companies who have very little compassion. increasingly limited worldview that is out of touch with how the rest of the world lives. i would like to see more people get the hell out of here. be around real people every now and then. we don't have anyone here who represents the voice of the normals. and they are not even our neighbors anymore.
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corey: a pretty good year for the companies under the umbrella of google. remember this robot? try to carry supplies for u.s. marines. the robot you'll has been put out to pasture because its gas powered engine is just too loud. i will let that take place as long as humanly possible. google glass, images of that were posted on the fcc's website. the glasses designed to be used on the job. a foldable hinge to make it easier to put away. after the break, sun edison shares falling for a second day.
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raising some concern that the current concerns that the shares have been diluted in the process. 3-d systems shares continue to fall as they say they will stop the production of their consumer 3-d printer, the cube. not so much. the consumer platform cuba five will also go away. we will hear from sales forces marked video off coming up next. after this message. ♪
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corey: mergers and acquisitions are riding high as 2015 comes to an end. a big jump from recent years. he says forget consolidation, focus on innovation. mark: i don't see a mass consolidation. i see mass innovation. there is more innovation happening in our industry today than ever before. there are more new companies getting created the never before. i know even without talking to you that your phone is off the hook with people talking to you about getting on this show to talk about their incredible new company. this city of san francisco is sold out. there is no commercial real estate. there are more companies that
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have been created in the last three years that in the history of the city. you look at the mass innovation. what is bubbling up is all these great companies like salesforce that are redefining our industry. those existing legacy players like hewitt packard and cisco, they are redefining who they are and that is completely appropriate. in this new world. uber has a heart. i think is really important. i said this to travis in our discussion yesterday. it is on youtube or you can look in my twitter feed. travis does a lot of amazing things. they deliver christmas presents for free through the cars.
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they are doing amazing things with our veterans. doing amazing things with k-12 schools. they need to communicate the good side of what they do. we hear so much about the bad side. i would like 10 travis to bring out that narrative a little more. i said that to him in our keynote. i think that would be an amazing next step. we have a lot of companies that are doing this charitable effort. pledge 1%.org. we are not just about a new technology model like the cloud or a new business model. we are also about an incredible new philanthropic model which is the deep integration of our business with our community.
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helping others to be successful. some countries are afraid. they get too fixated on the shareholder idea that all that matters is shareholders. i think you know that the business of business is not business. the business of business is improving the state of the world. it is not about your shareholders it is about your stakeholders. your employees, your customers, but also your community, the environment. these are all stakeholders. all of these have to be successful to make our business is successful. corey: that was the ceo of salesforce. more concerns about china's antiterrorism law. companies must supply decryption and other technical support.
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the european chamber of commerce is the latest group to raise concerns about intellectual property, market access, and censorship. apple and ibm have already raised concerns. ford is making the batmobile of your dreams a reality. a new patent has been filed. pimco's executive vice president will be joining us as well is the former ceo of morgan stanley. ♪ ♪
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corey: holy batmobile, batman. ford maybe taking that concept as an inspiration. according to the patent office, ford has filed for a patent that can transform a car's rear wheel into a self-propelled unicycle. you can set navigate through city traffic and fight crime if you are so inclined. it aims to improve communication between cars and other vehicles. that masks not required. the year that wasn't in technology ipos. u.s. listed proceeds dropped by nearly 40%. 23 technology ipos this year, down from 55 in 2014. the absence of big deals. unicorns stayed private and cap their lofty valuations.
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they shunned the stock market altogether. i am surprised because these companies have venture investors. we have had a booming market that wasn't up this year. it certainly wasn't down. we didn't see those big deals this year. brian: the correction in the market in late summer really hurt. if you look at the last 10 years, as the overall market goes up the ipo market tends to follow it. that was it. corey: in the last days of august when bankers were crossing their cheese and it just spoke them.
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brian: you have to realize there are a lot of these deals in the pipeline. a lot of documents to prepare. tons of momentum. when the market corrects, it sets everything back by about 90 days. if you just for that, the market is about where it was last year. it is differently down. corey: what you think of the ultimate plans for these unicorn companies? a terrific piece in the new york times about a fallen unicorn in good technology that was supposed to be acquired by blackberry. they had to borrow money from blackberry during the negotiations. it went out at less than $500 million when it was finally acquired.
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brian: if you have fundamental performance, you are profitable and your sales are growing. positive cash flow. then the ipo market is still very attractive. for 2016 it is not going to be bad if the market keeps going up. even with tech companies, if you have some realm of reasonableness about performance, you tend to do well in the ipo market. you may not get that market valuations like twitter had. those were really odd times. you can't expect that. if you are really growing and you have a good business model, the ipo market is still a very attractive choice. corey: we have seen these offerings where you see them selling such a small number of shares. they actually cash out. what companies you see on the horizon that may go out into this market?
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brian: nutanix, twillo, uber are three of them. if the stock market continues to rise, you will see more of them. the market, if it shows a six-month correction where people feel that things are stabilize, these companies will go out into the market. there are good companies out there. corey: companies that are really enterprise technology focus not consumer facing. brian: that is another good point. if you have a customer base and the sales are growing, you will do ok now whether you are
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consumer-based.
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