tv Bloomberg West Bloomberg May 17, 2016 11:00pm-12:01am EDT
mark: you are watching the request. the u.s. senate passed legislation that would allow 9/11 victims and their families to sue the saudi government for any role it may have played in the attacks. >> we have a good relationship with the saudi's and we want to keep it a good relationship. but when a government participates in terrorism, they should pay a price. and it will be worse if they are not brought to justice, because it will encourage others to do it. senator schumer speaking of the sponsor. the white house has promised to veto the legislation, saying it could expose americans overseas to legal risk.
the mexican president wants to legalize gay marriage. today he signed initiatives to amend the constitution and the federal civil code. gay marriage is already legal in some parts of mexico. bernie sanders looks to continue his winning streak in today's kentucky and oregon primaries. kentucky is considered the bigger prize. front runner hillary clinton has a significant delegate lead. donald trump and london's first muslim mayor have taken verbal shots at each other. but he extended an olive branch. he invited donald trump to london to meet his family and the british public. global news 24 hours a day, powered by her 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. next is "bloomberg west." ♪
emily: i'm emily chang and this is "bloomberg west." coming up, mr. cook comes to mumbai. ceos is on the apple itinerary for the very first time. will britain stay or will it go? sidesoft ticks -- picks in the great brexit debate. company chairman john thompson joins us to explain. shares took another dive. but first, to the lead. apple ceo tim cook set his sights on the massive market potential of india. he kicks off his first visit to the country wednesday. besides an unconfirmed meeting with the prime minister, he's pushing for opening of his first retail store in the nation and announced an accelerator program for ios developers in bangalore. so why now? india is clearly a market to lucrative to ignore. first salesd its
decline in a decade. but indian shipment rose 66%. it's described as where china was 10 years ago, saying there is great opportunity there. the opportunity could come in the form of one billion smartphone shipments that's up for grabs. joining us is david kirkpatrick, delprawford democrat -- at. you guys have been doing a lot of work on the potential of the indian market. how big could this market be for apple? >> it could be very large for apple. when you look at the largest market, india in the last quarter alone, with over 560 million shipments, and apple, like a lot of other markets, was focused on the premium end of the market. they ship 90% of their units at price points over $525.
the huge part of the market they are not participating in. they're going to need to go down market to penetrate companies like lenovo. they have some work to do, but what they are doing is targeting a market where they can grow, but they will have to alter a couple of parts of their strategy to target it. emily: why did it take so long? it is a huge country, that is obvious. why did it take so long for tim cook to visit india? >> they had a great run in china and they have been busy there. india is a country where there are a lot of barriers to entry. one of the things cook is trying to negotiate is to expedite the process of being allowed to open new apple stores, which the government has to approve. they have a lot of laws that prefer products made in india.
apple's products are not currently made there. there are a lot of barriers that exist there. it's a very nationalistic kind of government, but i think the opportunity is huge. but price is a gigantic challenge for apple. emily: part of the hope is that apple can open apple stores in india, but what difference will it make if the phones are four times more than what customers are willing to pay? >> that's why they have to play the game across multiple dimensions. they do need stores because it is an aspirational brand. western brands can be very popular in india, but they will be most popular with the richest people and the most demanding customers. what they need to do beyond that , as we've developers seen in western markets, specific use cases that indian customers have. this is something nokia did very well 15 years ago. with things like life tools.
they helped farmers understand real-time prices for crops so they could eliminate waste when bringing products to market. nokia did that and got a loyal base in india. apple needs to do the same thing. they need to get developers to study the local use cases. the last part, they need products well below the lowest point where they are today, which is $525. they need to be $150 and $200 long-term to really penetrate the market. emily: connectivity is still a huge problem in india. you still have so many people who are still not online. how much of an issue is that going to be for apple? >> i think connections and broadband and wireless generally is growing very rapidly in india. no country is going to be left behind, especially one as savvy as india. it has a very smart government in terms of understanding that connectivity is key to economic growth.
i don't think that will be the primary thing holding them back. for apple to build a product for under $150 is a gigantic ship -- shift from anything they have done. i don't see why they can't do it, and i've often said that in a lotwth solution of other countries where they are hugely aspirational. the middle class is coming up, but price is going to be a big deal and apple will have to make a fundamentally different strategy to achieve that. emily: last question, we talked about the smartphone market in china as well. can india make up for that or are they on a completely different scale, india versus china? >> india is on a large scale. in terms of total units, they are about half the size, but they're still the second-largest
country. from a total available market standpoint, they can provide a growth engine for apple. last quarter, apple grew over 50%. apple can definitely grow in that area. let me say, other premium smartphone vendors are growing. xiaomi is almost twice the size as apple in india today. it can be done, they just need a wider range of products to do it. emily: crawford, thank you so much, and david kirkpatrick, for speaking with me. speaking of good well trips, jack ma had lunch with president obama on tuesday. although the meeting was not on the public schedule, reporters spotted him on white house grounds and a spokesperson confirmed the closed-door meeting. they had previously shared a stage last fall and discussed
emily: microsoft has chosen a slide in the brexit debate. it says the country should remain in the eu. brits will vote on whether to stay or go. i spoke with microsoft chairman john thompson about the decision and started off by asking how he thinks the ceo is doing given that thompson led the search committee that hired her. >> none of us could've possibly
imagined back in 2013 that the perception of our company would have changed as profoundly as it has in just a little over two years. i think a lot of it has to do with satya himself, the fact that he is a very brilliant but very humble man, the fact that he is a very effective communicator who is willing to engage, as well as listen as much as talk. i think the commendation of -- combination of those things have made a remarkable difference in the world perception of microsoft. emily: how has he done when it comes to changing the culture? what has worked and what has not? it can be hard for a ceo to single-handedly change culture. john: i don't think he has done with the cultural change but i think he's made the right starting position. first, it's about thinking
horizontally about the companies capability to share those things more broadly. next, it's about creating an ecosystem for the company that candidly invites people in who heretofore might've been viewed as competitors or archenemies. third, it's about encouraging our team to take more risks. encouraging them to think outside the normal box of microsoft, to push the edge. he did that when he created azure. he did that when he was in the ng business. a lot of the things he had is practical experiences in prior roles really set the foundation for how he would like for the entire team to operate. emily: what would you like to see the company focusing on in the coming years? >> i think the focus is very good right now. were focused on cloud and the hybrid model of the cloud, the application services that we can deliver not just in the cloud
but to mobile devices. if i would like to see something change, it's more about pace. from my days at ibm, we never seem to be running fast enough. that is always the case with an established enterprise. while you believe you are moving fast, you are not moving as fast as of the start up who wants to eat your lunch. emily: how aggressive would you want to be in terms of monetizing the cloud, which seems to be the future? john: it's not common to have something of that size and scale in triple digits, but it could grow at twice that rate. , given that there seems to be a titanic shift going on in the industry where everyone is moving to the cloud. so why should we not capture more of that? if we invested more, how much more would our revenue growth be? that is a topic of discussion we
are always going to have. are we moving fast enough to take advantage of this incredible opportunity that's ahead of us. emily: how do you see the cloud war is playing out? >> if you look at history, what you see is that in a category typically there are two or three leaders in that category. we find ourselves in the interesting and lofty position of being one of the one or two. the leaders in the cloud space right now. the question is, can we sustain that position and move further toward being the number one in the space? emily: can you do it? amazon is giving you a run for your money. john: we have a lot more work to do to catch up. the question becomes, of all the players who want to be number three in the space, can they catch up not just with microsoft
but pass microsoft and amazon? we are not going to sit idly by and rest on the past success. we have got to double down as a company to make sure they do not catch us. you are also a big startup investor. how important is the cloud strategy to the livelihood of any start up today? john: it has to be cloud-based. no one is looking for a perpetual license model anymore. i can remember, mark thornburg said to me years ago, i only invest in annuity revenue streams. i thought that was odd. that was five or six years ago. well, guess what? if it's not recurring revenue, they are not interested, because it has a predictability that once you capture that customer
the sustainability is pretty powerful. i don't think there will be significant investments made in hardware any longer. hardware will be necessary because all applications run on some hardware layer, but proprietary hardware solutions, i am not sure that is to say -- sustainable any longer. emily: microsoft came out saying they are against the u.k. pulling out of the eu. hq has said the same thing. what are the implications for u.s. technology companies if brexit happens? >> you don't want any more geopolitical instability. we have enough instability in the global economy as it is. to the extent that there is a material change in the eu consortium, that creates geopolitical instability and that is not good for the
environment, be it the business environment or the citizens of the european community. emily: what about china? have any technology companies cracked code in china? >> i think you know the answer to that, and it is no. were trying to hold to our standards and principles as a company, but find a set of things we can make as concessions to the chinese government that gives us access to the billions of users that are there. it is balancing the standards we have and the consistency we want as we run our business with the interests that we have been having access to those users. emily: could india be a replacement market for china? >> no. it certainly could be a supplemental market, but you
something that is -- 1.8en people being billion people big and growing at 7%. that is down from 11%-12%, but you cannot replace china. you can certainly augment china by having a stronger focus in india, but you cannot replace it. emily: you were ceo of semantic for many years and you're going through another ceo transition. what you think about what is going on there? >> it's a huge personal disappointment. i spent 10 years there and i thought we were on a very good path. obviously we were not. i think it's time for not just the team of the company but the board of the company to do a little self reflection on, have we made the right calls? have we made the right calls on people, have we made the right calls on ourselves? it's time for a lot more self reflection, but i don't know, i'm not involved in the company
at all. emily: yahoo! is going through another existential crisis. what would you say to marissa mayer right now? john: hang in there. i had activist investors engaged at semantic, but only for a brief time. one of them was carl icahn. fortunately for us, because of the volatility of our stock, carl icahn bought low and sold out. we never really got the public exposure that marissa mayer has gotten. i think she started with a tough hand that was dealt to her and quite frankly, she needs to play it out. don't let an activist push you to do something you don't strategically believe in. to the extent that her board supports her, then hang tough. emily: diversity is an issue we have talked about a lot when it comes to the technology industry and the lack thereof
when it comes to women and minorities. given how many years you have spent in the industry, where have you seen the most progress and where is there still the most work to be done? >> some of the more established companies have clearly done a better job. older companies like ibm have done a terrific job of at least raising the issue and trying to do something about it. it ultimately comes down to the numbers, not the words. numbers don't necessarily support the words right now. i was quite shocked when i came to the valley in 1999 and everyone was so enamored of the fact that i was the highest-ranking african-american in the valley. i'm like, what's the big deal? i now recognize that it is a big deal. we need to do a better job of diversity and inclusion. i think companies like microsoft and google are working hard at it, but they have to double down or triple down to make real progress. emily: that was john thompson,
microsoft chairman and longtime tech executive and investor. i now want to bring in our news reporter who covers microsoft. what do you think is the most important thing he said in that conversation? >> the scorecard he gave for microsoft is very similar to what investors would. particularly with regards to the cloud business shared they must do more and faster and the cloud businesses have to continue to grow at an increasingly rapid rate as some of the traditional businesses start to decline. this is still a company whose revenue is in decline. emily: obviously the cloud is doing well. >> a lot of those businesses are still reasonably small, compared to microsoft overall. they are behind amazon in cloud infrastructure. as he mentioned, they are growing more than 100%, but they need to be a larger percentage of the microsoft revenue because traditional software businesses are starting to atrophy.
starting to turn into a situation that is going to stop growing. the question for investors has them thew do you make future. how do you deal with the competitors who are trying to catch up in the case of google and ibm. emily: john thompson there, and deena bass. thank you so much. coming up, it's no secret that america's infrastructure is crumbling. how will a fleet of autonomous robot boats help? ♪
making it the largest shareholder. in a letter to the board, he suggested pandora should explore the potential value to shareholders that can be realized in a sale. pandora was said to have them the help of morgan stanley earlier this year but with the reestablishment of tim westergren as ceo, the idea appeared to be off the table. it is full steam ahead. emily: he said he was surprised by tim westergren returning to the helm of pandora. shares closed 6% higher in tuesday trading. coming up, will the fiasco spell -- of lending club spell trouble for the wider online lending space? and if you like bloomberg news, check us out on the radio at bloomberg.com. more on bloomberg west, next.
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>> the top stories in this hour. asian stocks have fallen after strong eta fuel the case for more hawkish policies. have going --s gone from losses to gains. oil is extending its seven-month high. chineses spread to more cities last month. places climbed in 55 cities. beijing's third-highest ranking official says that hong kong
should actively participate in china's development as part of a belt in road initiative. in an audience of political leaders. hong kong's prosperity is important to china. those are the headlines from bloomberg news, powered by 2400 journalists in -- around the world. here is juliet. very positive position for the u.k. 225. now higher by 4/10 of 1%. we appear to have taken that when this -- weakness that came through. it rise against its
major peers. in shanghai, the market going down right 1.7%. and underperformer in the region. coming through today, although they were -- across the board. you can see that there is no stocks out of the 50 in this index in the black at the moment. weakness.ing you can see hong kong bail international. jerkthe exception of the -- crudethe felony above the $40 per barrel. we also had some good movement from base metal and iron ore. around one half a percent.
quick look at the japanese yen. it is down around attentive 1%. 1/10 of 1%. that is the state of play across markets across asia. emily: lending club ending the day down after falling nearly 60% after the ceo said he was stepping down. lending club said it might look at debt sales to restore investor confidence. the sec is investigating. subpoenaed thes company for more information. lending club said it was not surprised to receive the subpoena, and said it has
engaged in the orderly and productive dialogue with counsel. the company said it was pleased with the positive interactions that have occurred today. thai savage.y with you,start because you are a big investor in semtech. now this. what you make of what is happened here? >> there is excitement about the category, and i think it is for a good reason. it is hard for banks to lend to individuals and small business. when this concept of a to came p are too. to peer lending came
around, there was a huge amount of excitement about it among venture capitalists. $3 billion invested last year, devon billion dollars of underwriting against the balance sheet, and as things go up, we also can go down. we have seen this in the past four. a number of post paypal companies that had been created ran into trouble and a number of them are five. emily: there was skepticism around lending club before this happened, just about the risk involved in peer-to-peer lending. >> it's a good question. i think if you look at one of the challenges for the business model, it is not highly aligned among the investors. the balance sheet risk is being born not by the companies underwriting it, ultimately with institutional investors of hedge funds, and his third parties have gotten scared, liquidity has gone away from that market. there has been a misalignment between the keepers of the balance sheet and the creators of the balance sheet. i think the best companies and
long-term survivors will maintain some of that risk on their balance sheet. emily: david, what is your take away here? david: it's a complex story and it's sad to see a company that carried with it so much excitement and promise really attacked on so many fronts and the stock is one third of what it was. i was somebody who was looking at this whole industry and thinking, the old banks are in deep trouble. they must be all rubbing their hands with glee at this point. i would like to ask, if somebody was investing in the space, do you ever worry if the culture of silicon valley, which came out of the semiconductor industry and software, is the possibility there that the companies that are emerging that are disrupting all these other industries now may not really be sufficiently global, worldly, control oriented to play in a game like
banking and some of the other industries we are seeing startups targeting at the moment? >> it's a great question. these are financial services companies first, technology companies second. the companies that will succeed and have success -- historically, they are companies with management teams with strong credit cultures that understand they are financial beinges businesses powered by a new generation of technology, not the other way around. emily: some of the other players in the space, shares are down. you have private companies. which are the competitors that you think have real potential? >> the companies that will succeed have a combination of shared risk.
once at that share risk with their investors long-term. management teams that are credit culture first, not technology first, and companies that understand how to maintain liquidity on their balance sheet. ultimately that is key. emily: in general, is there a bubble, and if not, what are the bright spots and areas that may be overinflated? the question applies -- >> the question applies not just to tech, but the venture capital category at large. a tremendous amount of capital has gone into next-generation categories and there have not been a lot of exit. m&a has been very disciplined. the result is excess supply versus demand. emily: is that a bubble? so how does that play out? >> the best companies will survive and the ones that have troubled business models will
run into real trouble. in the financial services category, trouble would come faster, because the companies are subject to the liquidity market. there is basically a 12 month clock driven by cash on the balance sheet. so we know they have 12 months to figure it out. emily: thank you so much for joining us. amazon has entered the crowded industry of new york city restaurant delivery. the company announcing it is partnering with over 350 manhattan eateries. it is available only to members of amazon prime and will not charge any additional delivery fees but will charge participating restaurants 27.5% of each order. that is almost double what some competitors charge. coming up, a fleet of autonomous that will fix
emily: a story we are following, intel sale luring potential bidders. many said to be interested in the portfolio. the firms have requested information about the asset with a combined valuation of about a billion dollars. first round bids are expected by next month. switching gears to facebook, ceo mark zuckerberg will meet with downrs that the site play facebook is saying it cannot
manage its algorithm. the senator goes on to say is that if faced is saying it is -- facebook is saying it is all algorithm raised but it is not, that is the problem. what exactly do we know will happen at this meeting, how many people will be there, and will mark zuckerberg be there personally? >> it is a meeting with mark zuckerberg and the senator's right, facebook has no legal obligation to have unbiased trending topics. however as ceo, mark zuckerberg is interested in making sure he does not alienate a large portion of his user base and that he does not ruffle feathers with conservatives in the ad cycle of election spending. emily: another story posted by
an anonymous person who said they work in the facebook trending section, listen to what they had to say. "there is no political bias that i know of, and we were never told to suppress conservative news. there is extraordinary talent on the team, but poor management coupled with intimidation, favoritism and sexism has resulted in a deeply uncomfortable work environment." facebook responded saying facebook provides everyone with a respectful and safe working environment. facebook does not tolerate unlawful harassment of any kind and we take any allegations very seriously. david, what do you make of that? david: you have to believe that department of facebook is under intense scrutiny. the management is going to change. there are a lot of changes coming there. that is a sort of shocking report.
not that you can't expect that kind of thing in a giant company. maybe it explains where the disgruntlement emerged that led to the original report. i don't know. i do think that the whole story has gotten very fuzzy because people have the idea that if it is algorithmic, it must be objective and unbiased, but algorithms are as biased as anything created by people. i think facebook's message has been a little confusing and it's not entirely clear what they are saying in terms of how much people to determine what the ordinary user of facebook sees. there are bigger questions about the mammoth amount of control that facebook has over the information flow of an increasing percentage of the planet. emily: this person talks about joining facebook, they thought it was a dream job but said it was a toxic work environment. describe for us how the trending topics team works. is this something that is
completely separate? >> a pretty high up executive at facebook, he could be reporting directly to mark zuckerberg at this point. this team is leading up to actual employees of facebook, but it is mostly contractors. some who are not even journalists who are the first line of defense of picking out which stories are trending and they flag it to the journalists and the journalists write the headlines and put them up in the order, in the place that they fit. i think what this raises is the issue of what facebook should have in-house versus through contractors. i think that the company has a whole army of contractors testing every aspect of its products.
there are contractors all around the country who help. it is a big question. all right sarah frier, and david kirkpatrick you are , sticking with me. this week, we follow a group of engineers working on a fleet of autonomous boats that could help fix america's decaying bridges. >> it's no secret that america's infrastructure is crumbling. we have more than 600,000 bridges and almost 70,000 desperately need repairs. to secure the future of our infrastructure, we must have timely and effective inspections. but currently, inspections involve costly teams of divers performing time-consuming, dangerous, and tedious work.
today, a group of florida atlantic university engineers are putting something new in the canal. a team of autonomous vehicles. self piloted boats that cannot only navigate through the water but work with each other. carl has been working on autonomous boats for 25 years. today he is demonstrating how his machine learning programs can be used for bridge inspection. tell me about the experiment you are conducting right here. >> we have a team of unmanned service vehicles working with the bridge inspector to look at the condition of the underwater structure of the bridge. one of the vehicles has an underwater acoustic imaging system. it basically is looking at the underwater structure. there is a computer on board that takes in information from
the sensors and makes decisions. rather than programming them to handle a scenario in a specific way, to follow behavior responses instead, they can handle a wider range of scenarios. >> improving the safety of our infrastructure is not the only application for the autonomous technology. it could have huge effects on shipping, construction, and search and rescue. it also points to a changing paradigm of how we can work alongside machines. as robots and computers become more capable, our traditional divisions of labor are evolving, allowing humans and robots to each focus on what they do best. emily: coming up, the hot new topic of silicon valley is self driving cars. what about trucks? getting ready to retrofit 18 wheelers, next. ♪
emily: self driving cars are all the rage in silicon valley but we will still need to wait a few years before they hit the market. but what about trucks? otto is a startup. they say that in 14 short weeks, the company has created self driving software that can be retrofitted onto existing trucks. here to tell us more are cofounders. you both have quite the pedigree. i wonder, if some people find self driving cars scary, self driving trucks, 18 wheelers, takes it to a whole new level. what makes you think this can be done on a massive scale and safely? >> thanks for having me. cars are scary, trucks are scary, and trucks are also unsafe.
the reason we felt an obligation to start the company is we had the knowledge and understanding that the technology can be applied to society sooner than later. if you think about trucks, they are inherently unsafe. we have over 4000 deaths a year on public roads. a lot of issues from pollution to congestion, we believe we can be a solution for society. emily: are there still things a human will need to do? >> the first step is elevating the driver to a supervisor for the truck and basically having the truck drive itself for hundreds of miles. while the person is supervising
for fueling, for observation, for supervising the drive. initially, the driver is still there. emily: eventually, no driver. >> in the eventual future, but it will take a while. and the need for the trucks to be fueled and safely driven, and initially the drivers are , iting 9-10 hours per day will empower them to take the truck and drive it 24/7 and finish the job and get back to their family. emily: david kirkpatrick is still with us. jump in here. david: i love the idea. it strikes me that public support for this could grow much more rapidly than for self driving cars. i think most american think that trucks are driven dangerously
and we know the drivers don't get enough sleep. we are always surrounded by them on the highway in ways that feel unsafe. the idea that they could be driven with the more reliable manner in a computer augmented approach is a great idea. i'm curious, do you think this kind of thing -- do you agree with this point and do you think this could catch on more rapidly than self driving cars? >> that is our intent. the intent is to move as fast as we can. we do believe this problem can be solvable. that's why we took that on. the highway is a more concentrated environment. there are no pedestrians or crosswalks or stop lights. you are at a much higher vantage point. you are taking a look much further down the highway,t's
definitely see it as a problem that can be solved. think about the energy we all use driving in city streets versus driving on the highway for hours and hours, basically just trying to keep the car or truck between two lanes. emily: it is a fascinating problem you are tackling. we will keep our eyes on you guys. thank you for joining us. kirkpatrick, always a pleasure to have you. it's time to find out who is having the best day ever. today's winner is all of us. it turns out that gmo's are not harmful to human health. he comes after two years of research and a 388 page report. overall the report sees no correlation between eating genetically engineered crops and cancer, kidney disease or allergies. this will allow farmers to