tv Bloomberg West Bloomberg February 16, 2016 11:00pm-12:01am EST
china is stepping up support for its economy by wrapping up spending and considering new measures for back lending. beijing will make more money available to local governments and minimal amounts banks must set aside to cover bad loans may be reduced. let's take a look at the market. hong kong and china are closed for lunch. but they fell in the morning session. after two days of gains, the japanese stocks as well as singapore are all down. i will be back in half an hour. ♪ emily: this is bloomberg west. last year's growth stocks are this year's biggest losers. a dramatic revaluation. groupon shares get a huge boost
on news that alibaba has taken a big stake. major investors weeding out large-cap technology out of their portfolios. the major revaluation of technology stocks underway in 2016. we will focus on three companies in particular, netflix amazon and activision blizzard. there was a time when the only thing they had in common was the description as growth stocks. today the businesses bleed together. they all are creating content for us, streaming video. huge swings from 2015 into 2016.
all the stocks have been slammed in 2016. more than 20% declines. what do we read into this? david, should we be thinking of this as a sector wide story? david: i just came from giving a speech. one of the things i was saying about the world we live in is that industries no longer exists. everything is bleeding into everything else. what kind of a company is amazon? you have amazon web services but
make enterprise software and they make tv shows. they are an opportunistic company that does everything. emily: technology is sort of infusing all industries. would you agree that we can't really think of technology as a separate industry anymore? cory: technology is what happens to a company a company like cisco is a technology company because they empower other people to use technology. we talk about companies where the end product is consumed using digital bits and bytes like netflix or an activision those a very different kind companies. the way you read it was as growth stocks. that may be more useful way to look at things. we see very different companies. activision you have very big and successful company. make a lot of profit even as revenues are shrinking. and amazon revenues are growing rapidly.
very different characteristics of these different companies. emily: although each of these companies has their own individual story, if you look across the board technology has taken an incredible beating compared to other industries. sherry: you're right that technology has fallen further. it has fallen faster in the last couple of months than anybody else. it is still not inexpensive. compared to the s&p 500. that is really the other thread that is unifying the companies that you mentioned set by the market.
high valuations this year have been a recipe for falling prices. emily: they all overlap. should we be more concerned about their strategy in this particular space given how much you have to invest and how important it is to have hit after hit after hit? how many house of cards can netflix have? how many transparents can amazon have? david: i don't see why that should stop now just because we are in a stock market downturn. frankly those companies have what it takes to succeed long-term. the real issue is these companies were bid up so hugely in recent years that we are in a period of repositioning. they are going to take a hit. they're taking a hit from a very high position.
corey: i am very slow to ascribe things to changes in the market. i think changes in the underlying business are more important.+++ this. the companies that have lost the most on a percentage basis. tesla is down, two things. more stocks are down the just the nasdaq itself. the core weight of nasdaq will be suffering or more. the more this economy, tesla, western digital, those guys have really suffered this year. you saw tesla down 36%.
western digital down about 29%. that is a lot of pain for companies with prospects of that changed dramatically. the market looks at minor changes as dramatic indeed. emily: one point you have made is that even as tech stocks have been coming down they are still brought the expensive. all three of these stocks actually closed in the green today. is this really going to be a story for the rest of the year? shira: that is a fair question. narratives of the market change from day to day. it is hard to extrapolate what is going to happen by this point in december. i will not make any market predictions. the thing that has changed is the valuation. it is not the prospects of these company systematically changed. they are still the companies
that we thought they were. the thing that has changed is the market appetite for risk. the risk is reflected in those high valuations which means the companies don't meet or exceed what investors expect of them. they will get punished. emily: we have seen their fourth-quarter earnings reports which definitely caused investors to get a little antsy. david: in up times good companies can become fads. netflix and amazon have been fads in the markets who is not illogical that they should be dropping. but they are still incredible businesses. i think they got a little more attention than they deserved earlier on. emily: thank you very much. speaking of the selloff in technology, the latest
regulatory findings from several companies confirmed there is less enthusiasm for apple this year. david einhorn's greenhorn capital slashed its stake in apple. carl icahn also sold 7 million shares in apple. this means he still owns more than 45 million shares in the company. apple stock is down more than 8%. we will dig into the company's latest multibillion-dollar debt offering later this hour. apple is not the only technology stock getting weeded out of portfolios. druckenmiller cut the stake in facebook. the former internet darling groupon making a comeback. making wall street take notice. check out this chart as we head to break. the nasdaq biotech index seeing its biggest two-day rally since october.
emily: at&t is phasing out its u-verse tv service. it is pushing customers toward its newly acquired directv. it is giving up its plan to compete directly with cable through telephone lines. it has the benefit of lower hardware programming costs. this shift is the first part of a plan to create a home getaway. within three years it will consolidate all at&t services and act as a central hub for any device. if you didn't make the cut to attend warren buffett's annual berkshire hathaway shareholder meeting, you can still catch the
action. yahoo! will offer the annual meeting on a webcast. it will be there for on-demand viewing for 30 days. last year the meeting lasted seven hours. groupon shares surging for a second straight day after significant investment by alibaba. the stock's jumps to some 83% in just two days. it is down 50% over the last 12 months. the chinese sees commerce giant bought a share in groupon. what does this mean for investors? what is groupon now? gil: it is mostly a goods site.
most of the revenue comes from just selling merchandise off its website. the other has these local deals that as it was originally. it is the sales of goods that are doing very well. i would say the more interesting part especially with alibaba is the local deals site. emily: they said they bought a very small stake in groupon in order to share ideas. we are prepared to share. what in the world can alibaba do for groupon the justifies a huge stock jump like this. gil: it is really what groupon can do for alibaba. there is a strategic and
tactical imperatives. alibaba is a company that thinks in decades. the company that was founded in 99, he wants them to your -- be around three centuries. planning horizon is a competitive advantage itself. that is how he sees the entry into the u.s. market. a long-term imperatives. what he is doing now is planting seeds. these are seeds that he is planted in order to learn about the u.s. market. see what it is about. when the full entry into the u.s. market is ready they will be prepared. the tactical side is that they are run like a hedge fund. they took a look at zulily and then invested. they knew there was value that it was later realized by qvc. they are in the market. they realize there is still value in that market.
you have a long-term strategic aspect but also the short-term practical hedge fund aspect when you look at what alibaba is doing. david: i completely agree. they are like a really well-informed tech savvy portfolio investor that these deal companies are very common in china. i'm sure there run at a profit. they so that groupon was really cheap compared with their analysis. they have $850 million in cash. they have 80% brand recognition in the united states. this is amazing for any company. at the time their market cap was only about $1.3 billion. alibaba is just a smart investor. i think they will do well. emily: that is interesting that
they are taking a big stake in the company for not buying it outright. rich williams: we think the company is undervalued. our focus is a team is not just on things like acquisitions are focuses on building a great business. long-term what would have to do no matter what. we see the long-term potential in local and unlocking the value there. that is what we're focused on. emily: so many people think of groupon is this daily deals site. how optimistic are you about groupon's long-term future? i would be cautious.
they are no longer driven by the local business. most of the money is going from selling goods to citizens is very hard to make money. amazon at their scale doesn't make money selling directly. is not necessarily a very profitable business to be growing. they have people going to the website but not necessarily sure that in itself is worthwhile. in terms of the groupon perspective, alibaba putting a stake in it means it is not going to zero. there's value just in knowing that. if you are thinking of betting against groupon. emily: alibaba has been touted as a company to make huge tech purchases. thank you so much.
another stock on the rise is on semiconductors. after its takeover target fairchild semi rejected a higher competing offer from chinese investors. at least one analyst has noted that's decision to go with the the lower bid is most likely a judgement the chinese investor wouldn't have gotten approval of necessarily. a remarkable consideration from citigroup. teslas battery business gets a boost. we'll take a look at what the company has planned for 2016. the nasdaq 100 just had its best rally of the month. the movers so far are gilead and cisco. more of bloomberg west next. ♪
emily: gucci, prada, amazon? there's a rumor that amazon will launch its own clothing line. it has a ready made inroads into the fashion industry acquiring several fashion sites. up 91% from the previous year. amazon's vice president says a private label fashion line waiting to fill the gaps left by other brands that refuse to sell with the e-tailer. analysts at citigroup are saying alphabet should buy aig to expand into thin tech. aig has come under pressure from activists to improve its accountability. google's parent company has been giving it so into the insurance market. lay out the plan.
sonali: if google were to buy aig its market value is more than $64 billion. the enterprise value is more than $90 billion. google's biggest deal was 10 billion dollars when it bought motorola mobility. a number of companies could get some help from big data. hard deal for google. david: she has got it right. aig can use this. almost any company could use the infusion of energy that google would give them. is there any reason why google should remotely contemplate such a thing? of course not. google will get into insurance by building something from
scratch. the one time they bought a big old company was motorola and it didn't work out for them. why would they do it? there's no way they would do it. emily: insurance is an industry that has not been disrupted by technology. i keep hearing about insurance startups that are trying to disrupt the industry. what is actually happening in this arena? sonali: they need disruption. margins are shrinking. people are having to raise rates for coverage. people would like to use the data to figure out how investors are behaving. how to make the business more profitable. you have say cyber insurance. you have companies getting hacked by cyberattacks you will
need more talent than what a typical underwriter used to have. emily: if you think of insurance is one of the last frontiers of tech disruption. david: i think it makes perfect sense. the industry is going to change it is just a matter of who is going to change it. the insurgents or the incumbents? the reality is some small company will come along and do it way better with far more efficient resources, not all the old overhead a giant like aig has. thank you very much for joining us today. emily: what happens to your iphone when you're done with it. we will go behind the curtain at the recycling center after this. you can listen to us on the radio on bloomberg radio.
leaders have wrapped up their summit in california calling for a peaceful resolution for regional dispute. their final statement avoided direct reference to beijing whose claims to most of the south china sea is disputed. president obama: i believe the asean alliance will be a foreign policy priority of my presidency. those are the headlines. here is heidi. sentiment has taken a tone to
the negative that we have gained early this morning. we have seen declines now. we've had japanese folks rally over 8% over the past two sessions. we have seen a little bit of profit taking. --estors struggled to find we see losses in shanghai, as well as southeast asia. we are also seeing forex moves. japaneseriving after equities are seeing strength after two days of trading. the people's bank of china is also weakening the currency. the most was january 7. that is playing around the region. offshore is trading into the downside. we are see the effect across other currencies.
one is also a weekend --the won has also weakened. ♪ emily: apple in focus today with icahn cutting his stake by 48.8 million shares. apple is selling billions of bonds. apple plans to sell securities and bonds maturing in 30 years. here to discuss, our bloomberg reporter, adam, and tim culpin. still with me, david kirkpatrick. adam, what is your read on icahn and einhorn cutting back? >> kind of reflective of the
tough quarter apple had. the stock price has been reflective. a few different catalysts for apple stock in terms of getting it going. there is either a strong earnings performance or new category. we just went through an earnings season where they are showing signs of slowing down. people are waiting to see what the new product will be. emily: tell us what we are expecting in terms of rollout. we have heard a potential march event, the iphone 7. >> this year seems like it will be an update to the existing product category. last year, there was a lot of attention to apple music, apple watch, apple tv. this year, you see new iphones, ipads. >> do you think we will see aggressive updating of the watch or a new version? >> we have not seen it yet, but there are expectations it will happen later in the year.
it has been compared to how it is with the iphone, how the original one was a little thicker and heavier and over time, it slimmed down. emily: we will bring in tim on this incredible story he wrote about iphone recycling. first, apple has so much cash already. why sell these bonds? >> it gives them more cash in the united states is one thing. a lot of their cash is overseas. this will allow them to do a buyback aggressively and they can do some acquisitions as well. for a company in apple's financial position, the markets are favorable. they can get the sort of cash for next to nothing. >> and effective lending from some of the money outside of the u.s.
they are like a bank. >> one thing they are doing that is unique in this bond offering is the so-called "green bonds" which are loans that have to be used for certain renewable energy projects, sort of an emerging deal to give it a boost. emily: tim, you have a story out today. apple has a dedicated facility to destroy not only iphones but laptops and ipads. tell us about these facilities. there is one in hong kong you go very in depth on in what they mean. >> apple is not the only one in the recycling program. hp, amazon, lenovo, all these companies trying to recycle goods. apple is far more strict and rigorous than any other company according to my report. having spoken to various people
in the reverse supply chain, they are calculated about the process. they are secretive about it in terms of the methods they go through. essentially, the goal is to reduce the amount of landfill for these products. when a shipment of old iphones comes into this factory in hong kong, the first thing they do is weigh it. as they go through the process of pulling it apart and putting it into component pieces, they actually weigh it at every step of the process. they send this data back to apple to ensure it is being done correctly. apple monitors the process rigorously throughout the process. almost as much secrecy as the
process for building a phone, they do very similar for destroying a phone. >> i can imagine another reason apple might do this. we have seen pictures in the past of children disassembling products in a big pile with toxic materials. apple has gotten so much grief for issues regarding their workers in china and elsewhere. do you suppose it could be one of the motivations here, that they do not want to take any risk they might be seen to be endangering the lives of people disassembling? >> that is very true, a very good point. i spoke to lisa jackson, the head of their environmental division. she admitted that people expect a higher standard from apple than they expect from others. they have a higher standard for themselves. they are rigorous to avoid chemicals getting leached into landfills. they have to be put in controlled facilities for long-term storage. the other reason they are rigorous is they do not want to see any parts of the iphone get out into a secondary market.
you can imagine the strong market for any of the components inside a device to be resold, repaired, or reverse engineered. they want to make sure they are controlled in that. emily: lisa jackson has become more prominent at the company. how much of this is because of her? >> she was brought in several years ago. she has taken on a higher profile. tim cook has been elevating the profile of senior executives on the team. given her history in the environmental protection agency, makes a lot of sense she would be taking leadership. but this is stuff apple has been doing for some time. like tim said, this is something a lot of companies are trying to. do. based on what tim is reporting, it's sounds like apple is very secretive. emily: secretive? apple? shocked. adam, tim, thank you. david kirkpatrick, you are sticking with me.
the hoverboard battle continues. future motion quietly dropped its case against competitor changzhou over a patent infringing board. future motion caused a stir after encouraging federal marshals to raid changzhou's display. changzhou is asking for compensation for damage to reputation. a boost for tesla's battery business. we look at the hawaiian solar farm that may be used soon to test the power pack for electric storage. china is building a telescope meant to read information about galaxies far away. there is a problem in the way, 9000 to be exact. that story next. the nasdaq had its best two-day gain since october led by
♪ emily: in this edition of out of this world, china's state-run news agency reporting 9000 people need to move to make room for the world's largest radiotelescope. the project is called the 500 meter aperture spherical telescope and is expected to be completed in september. it will be able to detect radio waves emitted by distant galaxies and tell us what they are made of and how far away they are. in order to read the signals, the telescope has to be in a remote spot.
the government is resettling residents in nearby counties and paying them $2500 apiece. solar city has chosen tesla to provide batteries for 13 megawatts of storage on the hawaiian island of kauai. the project would mean residents and businesses could use clean energy at night. tesla shares spiked on the news. for more, i am joined by dana hall and david kirkpatrick. i think we need to lay out elon musk's relationship to the companies. >> obviously, elon is the largest shareholder of tesla and the chairman of solar city and the largest investor of solar city, run by his cousins. not quite sister companies, but close. emily: tesla has been quiet since the battery announcement. what have they been up to and what does this mean?
>> this year, i think we will see deployments. they announced tesla energy, batteries for homes, utilities, and businesses. the announcement today was that solar city and tesla are teaming up to use these batteries on kauai. emily: given the complex relationship, should we be questioning this at all? >> that is a good question. what is interesting is that everyone in the solar industry is looking for a storage solution. i am sure solar city did a competitive bidding examination. we think of tesla being a car company, but they are also a battery company. emily: you have been on the show when we were talking about tesla. there are many people critical of the company in general. maybe they make great cars, but it is not a great business.
the battery thing is a whole new aspect to it. >> it is not a great business because it has not ever made any money. but they keep getting all this incredible capital from investors. i think the battery business is a good business. building the world's largest battery plant is a questionable thing. panasonic provided a huge amount of financing, didn't they? >> they are partners. >> i do think the world needs a better way to store energy, especially as we move towards solar. if they could really do something fundamentally different, they would be important. but they are basically using the same technology in batteries as everybody else. is it really fundamentally different? >> it is fundamentally different in that they have thermal management systems. for the cars, they could go for an extended period without overheating. they are basically repackaging the car battery for utilities scale. the fact they have driven so
many miles is impressive to utilities, which are slow to come around to this technology idea. you are seeing tesla go head to head with large suppliers. >> there's more performance data for these batteries than competing batteries? >> in a utility model. emily: what is coming up this year in terms of power wall? >> power wall is for the home, and you have not seen a lot regarding that. the first is from green mountain energy in vermont. you will see power walls in vermont. they also have interest from consumers in germany. emily: this deal needs regulatory approval by the hawaiian utilities commission. talk about the state of play when it comes to the relationship between regulators in the utility industry and integrating storage. >> it is complex.
energy storage is a new technology that all utilities are interested in. it is like peanut butter and jelly with solar and stores together. we have this energy without a way to store it. there is capacity not being utilized. you are seeing utilities looking at storage for renewables. i think they will get the regulatory approval. i do not sense any opposition to it. solar city and utility have asked for fast tracking approval. emily: thank you so much for joining us. david kirkpatrick sticking with me. speaking of lithium-ion batteries, they are just not for adults, apparently. radio flyer is teaming up with tesla to manufacture a mini model s with a lithium-ion battery pack, working headlights, and a sound system. they also have a itty-bitty tesla car cover. the car comes with its own
charging port. not sure how i feel about that part. at $499, it is not cheap, but maybe radio flyer will announce a more affordable model next year. who is having the best day ever? she is short, fashionable, and moving into a killer new house. do not miss neil cashcary on bloomberg at 8:30 new york time. ♪
as the taxi industry. kalanek railed against regulation at a conference in vancouver. he drew parallels to laws that drove others out of business. he also took aim at didi kuaidi and irrational funding driving the industry. he claims his chinese competitor continues to buy market share while remaining unprofitable. it is time to greet the week. we look at the biggest events in tech. i'm joined by bryan womack and david kirkpatrick. i want to start on oculus rift. preorders start today, but it is expensive. $1499 for the computer and headsets. >> gamers will pay a lot for cutting-edge technology. it is essentially a gaming technology at this point.
we are not using it for virtual travel replacement, which we will probably eventually do. emily: are we sure that oculus is the best headset out there? >> for now, it is widely agreed it is. emily: for facebook, how big do you think this will be? >> in the context of their business, it is insignificant. emily: and will be? >> will be because zuckerberg believes augmented reality will be the next interface for everything in computing, certainly for social. we can imagine we are with other people in a way we cannot today. it is really transitional. from the standpoint of facebook, virtual reality will not be a huge business. virtual reality will be a nice business for oculus, but the long-term is interface play.
emily: also coming up, the yahoo! mobile developers conference. what is going to happen there? >> this is the first big talk marissa will be at. emily: she is speaking. >> one of the keynotes. a couple weeks ago, we found out that yahoo! was going to sell, potentially. there was this huge plan to cut costs. we will look into her vision for mobile. this is from an acquisition in 2014, when the company bought flurry. this is something that yahoo! has taken on to use as, here is where we are in mobile. emily: another interesting development is yahoo! will be streaming the berkshire hathaway conference.
>> they have had some nice things. just a couple months ago, they had the nfl. emily: a little buggy. >> not too bad. i had a good experience. yahoo! has some nice content. this shows they are a platform that people care about. emily: what is the latest when it comes to selling the company versus turning around the company versus a reverse spin off? what are you hearing? >> we know they made a big announcement in february. we know there are going to be people interested. we reported folks like verizon out there. we do not know what will happen yet. let's be honest -- there are a lot of moving parts. i think, longer-term, there can be some interesting things that will happen, but it is early. emily: how did this year play out for marissa mayer? >> i think a developer's conference is something she has to love as a consummate geek herself. she has got to feel good about
that. but it does seem like, by the end of this year or soon, we will see two companies, one possibly owned by verizon or someone like that, and the other is the alibaba holding company, which is probably what the shareholders really want. emily: it may well be yahoos last year as yahoo! as we know it. thank you for joining us. brian will be all over the conference later this week. it is time to see who is having the best day ever. barbie has a new dream house and hoverboard. her internet connected home uses voice commands to flip the lights and operate the elevator. there is a party mode that handles flashing lights and music and a hoverboard which is a tiny drone.