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tv   Bloomberg West  Bloomberg  March 7, 2016 11:00pm-12:01am EST

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angie co. it is noon in hong kong -- data frome latest china shows that exports slumped in february, with shipments plunging 25% in dollar terms from a year earlier. it extended the stricken declines for 16 months, falling 14%. trade surplus has $32.6 billion. show contraction was less than expected in china due to a drop in consumer spending. figures also show that growth begin itsthe boj negative for a program designed to increase lending.
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another goldman sachs banker is caught up in the investigation into malaysian investment funds. sources say was subpoenaed by the justice department anin late february. he left early this year. headlines, powered by 2400 journalists in 150 bureaus around the world. let's take a look at the markets. hong kong and china are closed for lunch, but here's how they were trading in the morning session -- all in the red after export figures disappointed out of china. this is singapore, tokyo, and mumbai, down. the nikkei down 1.4%. time for bloomberg west. emily: i'm emily chang and this is "bloomberg west."
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a favorite new target eager to rein in skyhigh marketing budgets. amazon quietly changes course on encryption. bezos brings it back after public backlash. in his first interview since winston stott lost 50% of its value, i speak exclusively to jeff weiner. another twist in the standoff between apple and the fbi. the u.s. has appealed a brooklyn court's ruling that apple does not have to help unlock an iphone. the lawsuit shows apple did this routinely. the company has complied every time until now. in fact, apple helped open -- joining me now is adam, who covers apple for bloomberg news.
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adam: there are a lot of things in multiple coast. in california, you have the case involving the san bernardino shooter and in new york apple is battling the government. it shows what operating system was on the phone in question. in san bernardino, it was software called ios 8. it has hefty your encryption. this one is ios 7. what the government is saying is with this software system, apple has the capabilities to do it, they have done it in the past, and they should be helping. emily: it seems the government should be changing its rhetoric because it is just this one phone they are talking about and now we know there are 12, 14, multiple phones across the country where the government is asking apple to do this. you think they are trying to point out the -- i don't know, the hypocrisy in apple's own argument?
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adam: they are trying to show the inconsistencies. they go back and talk about how as far back in 2008, when the original iphone came out, there were some cases involving some crimes where they went to apple and asked for assistance. apple has been providing some level of assistance to the government, but they have been ratcheting that back and putting more protections in place in the area of encryptions. that is what steers us to what is happening in california. emily: how much does this undermine apple's argument that it should not do this for anyone, let alone the terrorist in san bernardino? adam: they put it on the umbrella that the government is overreaching under the centuries-old law, which is what the government is using to ask apple for assistance. apple is saying that that is going to far and company should not be compelled to provide this sort of assistance. emily: why did they not make a stand until now? adam: that is a good question
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and one they need to answer for. in the brooklyn case, the difference is that this is something judges typically sign and send the order on its way. in this case, the judge asked apple for its opinion on doing this. apple use that as an opportunity to contest it and say they were asking too much. what changed is the judge gave apple an opening. emily: what is the timeline? we are waiting for the government to respond to apple's responsively san bernardino case. adam: you have dual tracks going on. the next thing in san bernardino will be the government's reaction to apple's reaction, and from there this thing is going to get a lot of appeals. if apple loses in san bernardino, they are expected to appeal, and vice versa. this is ultimately going to be decided by higher courts or policymakers in congress. emily: thank you so much for bringing us that update.
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to another story that we are watching. alibaba opening the week with a pop on news that the affiliate that owns alipay is raising money. that valuation would make alipay more valuable than uber. i want to bring in author and china tracker gordon chang. gordon, what you make of this news, especially given the broader news? gordon: this is good news for alibaba because it shows that in affiliate has a high valuation. the other thing that is really important is in the first round
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of financing, the state took 12.4% interest through two entities. this time you have a state bank. you basically have the government taking bigger and bigger interest in the financial. i don't think that can be a good thing. emily: this is a company we have been expecting to go public at some point. i find this interesting, especially given the business climate in china. david: i am not sure about gordon's point. i would like to as gordon why it is bad. it is even possible to do it without government involvement? i think, if i were an investor, i would be reassured by that. gordon: in china's system, of course the government has interest in your business because of what david is
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referring to. you get a favored position. this is really not good for china because you have a company that is involved with some of the most innovative going on in the chinese economy and now you have the dead hand of the state rank -- state bank wanting to take it over. i don't find that to be a good thing. it is a lot of things about the chinese economy. emily: what is your take on how this fits into the broader climate? we have been talking a lot about valuation in the united states. this number, doesn't strike you as extremely high? david: it strikes me as of certainly high. i don't understand how it could possibly be a legitimate valuation. they haven't achieved it, they are just trying to get it. it does not make sense to me. i think long-term, the chinese economy and e-commerce and payments in e-commerce in the chinese economy is a huge opportunity. going back to the government versus alibaba, alibaba is a
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surprisingly strong counterweight to the government. as companies go, i would say it is one of the stronger ones and i think jack ma has always like to play a little to the edge. he knows that you can't really cross the government. i think they will continue to have quite a bit of authority over the company direction. emily: we are seeing another alibaba affiliate buying the china lottery, which is something that alibaba has stayed away from because of government regulations. what do you make of this? gordon: i don't think this is a good one, either. alibaba has a core business. they can expand it into rural areas. they can expand it into the united states. instead, we have seen, even before the ipo, alibaba buying into business is kind of like a scattergun shot. i think they need to concentrate on what they are best at. when you see at, the markets don't like this. alibaba and stock drops every time he makes an acquisition.
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that is not a good sign. emily: what is a progress report on alibaba's push into rural china? they bought a big stake in sunni. is it working? gordon: it is certainly working. they have 12,000 or so rural centers. they plan on going to 100,000. i don't doubt they will make it. that will not be a material factor in the next couple of years. they have this big head start. this will be huge because there are so many people in rural china that have had no access to online shopping. this is a good thing. emily: gordon chang and david
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kirkpatrick, with me for the rest of the show. coming up, activist investors appeared to have a new favorite techtarget this year, but will they help or hurt this budding industry? later, my in depth interview with lincoln ceo jeff weiner. how hindsight changed his thoughts on yahoo!'s uncertain future. ♪
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emily: shares plummeted monday because late on friday, the company announced that its ceo and cfo had sold the majority of their personal stakes. not a boost of confidence for
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investors, especially since the disclosure came after dismissing doubts about their business model. just eat is the u.k. version of grubhub and it is facing local competitors and the come additive -- the possibility of amazon and uber encroaching on their home turf. they have a limited window when they can legally sell shares. investors have found a new favorite lace to circle -- the software market. look at the recently disclosed 8.9% stake in technology. this particular space is looking increasingly attractive to activists and a big reason why is spending habits. mandeep singh joins us from new york. also still with us is david kirkpatrick.
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what do you make of these trends? >> what happens is when you are a small growth company like click and cornerstone, you have two choices. either you have to keep delivering on sales growth or you have to start proving profitability. what has happened with quick and cornerstone is growth is tapering. what typically happens is you will have a bad quarter, valuations correct, they come down quite a bit. the difference is with autodesk, it is a case of business model transition. they are transitioning from a license model to a subscription model. it is about operational improvement. i think the playbook is slightly different in case of smaller versus large companies, but it all comes down to valuations coming down, margins being
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lowered, what it could be, and that is a perfect setting for an activist to get involved. the software feels like a -- emily: does software feel like a clunky sector? david: i think there is a lot of innovation. carl at autodesk has a long-term view, but maybe that is what investors don't like. i am not as familiar with the other companies. i don't see a fundamental problem in this sector, no. emily: connect the dots for us about activists in software and tableau shares which have been smashed. mandeep: every six months, things change. data management companies were
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doing exceptionally well until last year when the focus was on big data. now the focus is shifting towards artificial intelligence. what typically happens when growth starts to slow is these companies get acquired by oracle, ibm, microsoft, and this kind of consolidation has taken place in the past. ibm acquired spss. there was massive consolidation it while back. at that time, b.i. was hot. once growth started to slow, there was consolidation. emily: i spoke with the ceo of symantec last week.
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they have taken a stake in symantec. >> we have a three-year transformation of the company and i think this is an important inflection point for investors saying, now it is time to get in the story. emily: a bit more optimistic there. is symantec in this narrative? mandeep: with companies of that size, it is about divesting of business, making operational improvements, bringing the margin back up to where it has potential, and these things take a while. it is possible. time and again we have seen companies have to diverge as this is to focus on their core,
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which was the case with symantec, and i think will be the case with autodesk. they have divested one of their businesses. that is what i expect. emily: thanks so much. guest host david kirkpatrick, you are sticking with me. the sec slapping verizon with a $1.35 million fine. the company failed to tell customers about a tracking technologies that fall you from website to website. super cookies can track customers across websites. amazon reverses course on encryption. why the about-face? ♪
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emily: netflix shares plunging 6% in trading after itt research noted the 2016 domestic
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streaming estimates outlook is too aggressive. they anticipate -- netflix anticipates that streaming substitutions will increase by 1.34 million. they missed their fourth-quarter estimate last year. amazon is reversing course on encryption. the e-commerce giant will restore the security option on its fire devices following customer backlash. they decided to remove encryption on their devices. cory johnson has been following this story. is it opt-in or opt-out? cory: you complain were for devices that don't get ads or pay more for ads when you login. with the existence of identity
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theft, this could not come at a worse time for amazon. emily: why did they do it in the first place? cory: they have not said. they have been asked and did not say. it may have been for simplicity of use. amazon is an important player in the world tablets. they have in any given year anywhere from the top four or top seven. they sold over 19 million devices in the last three years alone. with the market share hovering in the top five, top six in the quarter, and having sold over 19 million devices, they are a very important company in the world of tablets and their cyber security approach is felt by tens of millions of users. emily: we talked about amazon at go, which could become -- amazon echo, which could become a another big item.
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they are lowering encryption on their tablets and publicly coming out and saying they support apple. david: i think there is an overwhelming and somewhat surprisingly large support for apple's position in the entire tech community. i think amazon clearly believes in encryption given their support of apple, but even going back to why apple is fighting the case in brooklyn earlier, i think mood has shifted and it is surprising even people in tech how many other people in tech agree with them. there is almost a uniform view that the government should not have the right to have backdoors into this product and that things should be encrypted for the safety of consumers. emily: how important is this as a branding issue? cory: it is important also as a consumer issue. echo increases their visibility as a tech company. they also have amazon web services as one of the most important services on the
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internet. i think that is why the corporate concern about privacy is so concerned about amazon. it is crucial for amazon when it comes to technology. emily: you also have a big series coming up this week about amazon prime video. cory: the company is going to sell over $2.5 billion of content over the counter your. i was in hollywood last week at the premiere of a new show. i talked to some the people in hollywood and even people in hollywood are shocked by that number. emily: netflix is spending just south of $5 billion. cory: amazon doubling its spend
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every year. they are in a very serious important player -- they are very serious and important player. the competition is done by disney, hulu, showtime, hbo, amazon, and netflix. we are to look at what that means, who is leading the effort at amazon, and what that means. emily: amazon has a couple of hits on its own. this used to be netflix's game. is it anyone's game? david: anyone that has multibillions to spend. if i was in hollywood, i would feel nervous because these companies are gigantic as this is and have gigantic ability to raise capital and borrow if they want to because these are the areas. i am amazed by the numbers you are talking about here. emily: david kirkpatrick and cory johnson. thank you both.
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our exclusive interview with lincoln ceo jeff weiner. we get his take on yahoo!, china, and more when we return. ♪
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yvonne: it is 12:30 here in hong kong, with an update of top stories. china exports slumped again in february, plunging 25% in dollars terms from a year earlier. imports fell 14% while the trade surplus halved. the fourth-quarter gdp contracted less than expected, following an annualized 1.1% to two a drop in consumer spending. the yen rose for a second day, trading around 113. hsbc has approved china's credit card market. it paves the way for it to join citigroup and bank of east asia as the only foreign card issuers
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in china. it's not known when the approval was given; nor are there any details on how the business will be rolled out. imports slumped in city despite a record gain for iron ore and news of a joint venture with baley. spike on monday before the deal was announced. the accord offers them the opportunity to buy a minority stake in for trtescue. ores togethernd can meet the market needs for our customers in china; it will provide a blend that is ideally suited to minimize the cost of the supply chain. buy aly, it's for vale to potential stake in fortescue's shares on market, a minority interest. yvonne: and those are the headlines, powered by over 2400
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journalists in 150 bureaus around the world. let's check in on how the markets are trading in asia-pacific. here's shery. losing,sian markets are china on the lunch break, falling before it headed to lunch. that's with telecom leading. the hang seng index is down. china,trade data out of showing that exports fell the most since the global financial crisis. the nikkei is also down 1%, for a second consecutive day. a stronger yen. thedata out japan show fourth-quarter gdp contracted an annualized 1.1% in the fourth quarter. of 1% down despite a weakening korean won.
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also losing 7/10 of 1%. we are counting down to the reopening hong kong and china at the top of the hour. emily: this is "bloomberg west"" this season we kick off season four. "studio 1.0." i sit down with a c.e.o., first interview he has done since it was slashed in half. the stocks plummeted over 40%. linkedin's shares and they are down 49%. last week, he decided to give away his entire $14 million stock bone just back to the employees. i started by asking about his reaction to the freefall. >> i think it was a surprise.
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we weren't expecting that kind of response. and when you look at the core elements of our business, they remain healthy. if you look at north american fuel cells, growth cells has remained consistent. sponsor updates, business line, still the fastest growing business. and post the launch of our re-imagined and seen an acceleration on engagement. the core elements of the business. emily: you gave a speech to employees at a meeting and you said linkedinis the same company. how do you feel about this, not the c.e.o., but you? >> i'm not sure it stinks. there were some surprises. you want to make sure you are there for the people that matter
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most. create value for our members and customers and nothing whatsoever has changed. emily: do you think you can accelerate growth? >> as we continue to execute, you want to address opportunities. emily: has this impacted morale at all? >> it brings people closer together. and the more you go through these kinds of challengeses and meet these challenges head on and successful and nothing fundamental has changed. the stronger the team becomes, the stronger we become as a company. emily: you have talked about compassion nature management. give me an example of where you have applied it? >> i apply it in every interaction. putting in the person's shoes and undering their perspectives. and you are going to disagree. they are trying to get one over on you. it's a zero-sum game.
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and that may be the further thing. they may be having a bad day. and you may be talking about something that they are not as knowledgeable about and don't want to show that vulnerability. emily: some of the most successful c.e.o.'s have been ruthless like steve jobs. they are known for things completely uncompassion nature. >> different styles work for different people, different companies and different situations. the worst thing somebody could do is emulate what somebody else does because that person has had success. what works for steve or what works for others and people like that may not work and more often than not does not work for other people who try to employ that
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style and people just don't follow. i think it depends. emily: more of my interview where we discuss his relationship with his partner. bmw says the cars will be robe ots on wheels. it features a retract i believe steering wheel to switch between manual control. bmw said, most vehicles will probably be completely self-driving. people will get around. how will we justify the existence of vehicles, a brand for the individual and sheer driving pleasure are the focus of everything. "bloomberg west" continues next. ♪
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emily: jeff weiner joined the company in 2008. i asked him to talk about the secret to their relationship. >> there is a lot of mute tall respect and we were friends. if you ask reed the question, it turns out that he'll tell you the story and veer bait im, so there is something to that, just in and of itself, we see the relationship so similarly. one of the most frequently questions i was asked, waste my relationship. that was code for what kind of drama is there and the former c.e.o. to the newly hired professional c.e.o. and there was no drama. what people didn't realize was i didn't join linkedin because of
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reed and the opportunity to work together. he is one of the most thoughtful people i ever had a chance to work with. emily: you said you never aspired to become c.e.o. >> i didn't aspire to be c.e.o. because i have seen particularly in publicly-traded companies and that could be a rough ride. it wasn't about the title but was about a sense of purpose. emily: you have given a lot of thought to the future of the workforce and how it's changing and i would love it if you could paint that picture for us. >> it is a significant issue in southern european issues, you have youth unemployment hovering 50%. where people don't feel like they have access to opportunity. they don't feel like they have a bad voice and bad stuff starts to happen. fragmentation of work by virtue
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of the sharing economy and some of these new marketplace environments where people can set their own hours. emily: how do you plan to account for the 1099 economy, the uber drivers, people who are freelancing or have multiple jobs. >> they have their profiles on linkedin. and that's how opportunity accrues to them. emily: do you think this is a dangerous trend. do you think companies like uber should make it full-time? >> clearly, things are changing and have to revisit as a society the laws and regulations that govern the way companies used to operate. when you are working, there should be certain benefits that are afforded to individuals. emily: you said creating economic opportunity is the greatest issue of our time. women are critically
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underrepresented in technology. why do you think that is? >> you have a pipeline issue where you may have had historically fewer graduates with specific degrees in engineering per se. and that now starts to improve, which is wonderful, hopefully we will see the gap. and we are casting as wide a net as possible. emily: women are 90% of technical and 30% in leadership roles. >> i'm not happy but is it moving in the right direction, yes? we want as inclusive a base and employees as we have for our membership. and that certainly is the goal. emily: would you advocate hire women just to see what happens?
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>> i don't think we should be hiring people to see what happens or hiring people in a way that reduces the bar. we should be hiring the best possible person for the role. and one of the things we can do to improve diversity is employ techniques which the nfl has used. they aren't mandating you have to hire these kinds of people, whether he gender or ethnic-based. you need to interview people that is representative of the -- and more inclusive of the population that you are drawing from. and they have had amazing success with regard to improvements and diversity inclusion as a result of that. emily: up next, i asked him about his past at yahoo! and marissa myers strategy. we remember a technology preliminary year, tomlinson developed the first
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person-to-person email in 1971 while working for raytheon. he said don't tell anyone. email wouldn't take off until many years later and would become part of modern life that we now take for granted. more of "bloomberg west", next. ♪
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emily: unlocking an iphone doesn't present a burden on apple. this comes as prosecutors appeal a brooklyn judge's decision that apple didn't have to unlock the iphone of a convicted drug dealer. mack with jeff weiner. we know he was executive vice president at yahoo! where he ran the company's network division.
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and we talked about the turnaround strategies. >> trying to change the culture of an organization is prohibitively difficult. i think marissa walked into a situation that she must have known was going to be challenging to the point there was probably not a huge probability. credit to her for still taking on the role and i think she was able to make some changes there in terms of the culture and in terms of the development culture and the transition to mobile. but that's a really, really challenging situation. in terms of not just the culture but in terms of the legacy assets and way people used yahoo!, the world has evolved dramatically from the earliest days from the consumer web and
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so trying to navigate that, it's tough, it's hard. in terms of where they are now, it sounds like they are very seriously evaluating to sell the company. emily: is that the right call? >> i'm not in marissa's shoes. i can't see the leading indicators or the future road map. and one of the reasons that marissa has been reluctant to sell the company because she may have been excited or confident and create value. there is a whole host of valuables when you are on the outside looking in that you really have to put yourself in her shoes. emily: what do you think is the best and worst case scenario? >> it is being used by millions of people on a global basis. if it is sold, it sold to an acquirer that recognizes the value that not only that yeah who creates. and that is how marissa is
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trying to do what's best. emily: how do you make sure that linkedin is not the next yahoo!? >> if i didn't worry, i wouldn't be doing my job. only the paranoid survive. it's the right level of focus in terms of the broader landscape and never losing sight. emily: facebook is chewing it up. can linked i --linkedin do it? >> it's highly fragmented and it can be highly efficient and target the right decision makers so we are going to continue to focus on building up that part of our business.
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emily: one thing you have on facebook is china. you guys have found a way to penetrate china. how would you rate your progress in china? do you feel like you have cracked the code, do you feel like there is a lot more work to be done there? >> i would hardly suggest we have cracked the code. china is a highly competitive landscape. and it exceeded our expectations. when we started, roughly a year ago, we amassed roughly four million members in english in 10 years. we have seen that substantially grow. and in terms of our core businesses, talent solutions, marketing solutions, et cetera, there a lot of room for growth and early days and focused on getting the membership before we
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prioritize modernization. we are pleased where we are. emily: you mentioned you had to make compromises and ask users to crens sore themselves. how do you navigate that process? how often has that happened? >> we started to navigate that process before we launched. we spent the better part of 18 months understanding who we were as a company, our culture and values, what it would meet in terms of compliance and despite all of those discussions, the first time you are asked to censor a member or take down a profile, it's gut-wrenching, those members are creating value for those members is why we do what we do. china plays an enormous role and by virtue of our presence in china, we can not only connect our chinese members and enable
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to live the kind of life they want to live but better connect companies within china to the global economy and that's going to create more value for everybody. emily: do you think that facebook and twitter have a chance in china or are they so different that aren't going to make it work there? >> we are a platform that is creating opportunity. and the chinese are expanding ranks of their middle class. in twitter and facebook, you have platforms that are oriented towards facilities and so it's different. it doesn't mean it's not possible but it's not different. emily: my conversation, check out the entire interview at bloomberg.com. and still with me my guest host c.e.o., david, linkedin stocks haven't recovered and you said
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they don't look that bad but clearly investors have a problem with this company. i was speaking with an investor over the weekend was disappointed how linkedin communicated this to the street. >> it is interesting listening to jeff and it was a great interview, but i think clearly something has been missing in the way they are explaining their business and the questions you asked him about growth are ones that i don't think he fully answers but again, he is still growing fairly well, but the question remains, is this a massive startup growth opportunity or a steady as she
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goes kind of long-term business sort of value stock over time. i don't think the answer is clear, although my opinion, my gut is the opportunity for linkedin is massive. emily: i wonder for any company, where the growth story just simply changes? >> you asked him that and maybe. but my gut is it has nt happened for linked in. it is still a fairly young business that is beginning to figure out the ways to quote, unquote,mon advertise. i think it's position in the global economy is unique and it is a global social network with the highest quality demographic in every country where it operates and getting started with advertising and media publishing. i think it is a fantastic marketplace for content and a place that is going to continue to matter for global growth. and that's why the chinese government wants linkedin in
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there. emily: do you think that china could change linkedin's growth story? >> possibly over time. china is a big question mark. but i want to make sure i fit in this point. it's amazing what a great business leader he is. and considering how cynical americans are now about business, more people should hear him talk. emily: i have been trying to get him on the show for a long time and he finally agreed when he found out we were going to be talking about the elephant in the room. as always, david, great to have you. as we wrap up this hour, one thing, passengers on alaska airlines flight will witness a total solar eclipse. they changed the time so
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passengers could see the entire event. lucky to have a ticket to that one. thanks so much for watching. ♪
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