tv Bloomberg West Bloomberg May 25, 2016 11:00pm-12:01am EDT
mark: i am mark crumpton. let's start with a check of your first word news. the head of the transportation security administration acknowledges wait times at airport security check point have increased significantly. but he told the house homeland security committee that more than 760 screeners will be hired by mid-june. >> clearly the summer travel season will be busy and the tsa and congress and travelers working together can improve the passenger experience while we maintain the security we need. mark: most screeners will be sent to airports in chicago, new york, los angeles and atlanta. a state department audit blames
hillary clinton and previous secretary of state for poorly managed e-mail practices and systemic weaknesses related to communications that started before her tenure as secretary of state. but her failures were singled out as more serious. an aide to donald trump says there's a call to break a weeks long impasse over an endorsement from the speaker, which trump aides believe is imminent. a jailed ukrainian pilot has been released and sent home from russia. she was exchanged for two russian serviceman being held by ukraine. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. "bloomberg west" is next.
emily: i'm emily chang and this is "bloomberg west." microsoft has the tech giant , waved the white flag in the smartphone wars? at&t makes its move on yahoo! after holding back in the bidding war, they are now all in. we will tell you what the power play means for verizon. peter thiel strikes back. how he's been secretly funding hulk hogan and multiple cases against a stalker. microsoft and out of the smartphone wars. microsoft is giving up on handsets. they've announced 1800 job cuts and a right down close to $18 billion, all tied to its acquisition of nokia. the ceo says we are focusing our phone efforts where we have differentiations and we continue to innovate across devices and cloud services across all mobile platforms. the problem, microsoft could
never make a dent in an industry dominated by apple and google android. but those giants are struggling to maintain momentum. it gives us an opportunity to revisit the smartphone wars. who is winning today, who may be the next company to follow microsoft out of the ring? joining us is the director of mobile device research. microsoft has all but given up. does it mean they have given up? guest: they gave up in the device war. in terms of software, they haven't. they mentioned a third of their customers in the fortune 500 have managed a management suite. they have downloaded software to mobile devices, alternative devices. the way they will target the nonmobile markets may be different than the way they want to go in. i think they are taken -- taking the right approach and will probably be a more profitable
pathway over time. emily: microsoft did not have a lot of market share to begin with, but who gains momentum and who loses? guest: i wouldn't say there's much left to grab. they were at a point were there was less than 1% of the market. we are seeing big shifts in the vendors outside of apple and samsung, which are the giants. even in this most recent quarter, we saw two new chinese companies under the top five. -- enter the top five. predominantly done all their business domestically in china, and now are getting into the 15%, 20% business internationally. we are seeing big shifts. if you look back three or four years, we have seen this come and go over time. those are the companies that we
are seeing today. if you asked me the question two years later, you will see more localized players, because it won't always be chinese. emily: does this mean no phones or tablets for microsoft? john chen: i think it is a refocus back on software. they are in business to grow and create margin, not in businesses that really have no margin. this business was a tough one and that's the business steve ballmer pushed as his last assignment. i think they probably would not have made that decision. my belief is that they are cleaning up what was part of the old team and this is the right approach and they are repositioning the company around mobility and the cloud. so it comes in a different form.
these software subscriptions, i get those across any device i have. they don't care what device you have they just want the software , on it. that has been resonating with cios and cto's we speak with. and that is why you see their enterprise business do so well. emily: are there any other small market share players you can see getting out of the business? paul: i think those localized players will come and go. which ones at now, time will tell. as we start to see the middle east come on board, and we see localized players in india, there are a couple of big name players that have been around that are facing challenges. from a hardware perspective, there is a turning point that could go out of business. sony is in that same space. i hate to call the demise of anyone but there's no question they are struggling to make money on hardware. microsoft is not out of mobile,
they are just in it in a different, much more profitable way. emily: isn't nokia still licensing its name? paul: you will see nokia come back. they have made public announcements about that. the challenge is, they are trying to come back from how well microsoft actually took the brand. selling off the future phone space is a pretty big piece of the market. i think that holds a lot of weight there and it comes with supply chain agreements that will help drive the market under nokia's brand. whether or not they can revive with smart and android, i think that will be a lot tougher. emily: what is the future of microsoft when there is not a lot of mobile device growth? --n chen: you're seeing this as a real focus point they're pushing toward.
they want to lead with this solution. if you look at their business, they are outpacing most of their peers. they are outgrowing that space. have a number of brand-new releases and coming out next week, they have a brand-new launch of their database which i think will help them. they have a whole suite of new apps. analytics, communications, there are different ways they are going down that we think are more back to the core of what microsoft was, which was a true enterprise software company. they do care about the consumer, but they understand what they are good at and i think they are going back to their core, which is a good thing. they don't want to accept the operating margin decline that they have seen and they want to improve slowly on the operating margin line.
this will be a multi-year shift. this hybrid cloud last quarter , was one of the worst they had in a couple of years. you will see that perpetual cloud -- they are pulling along a big business, but we think they are architecting the right future, it is just going to take time. emily: thank you both for joining us. staying in the smart phone market hsbc says lenovo is , facing a mobile crisis. the stock has slumped during the year, and at least three analysts have cut their ratings in the last month alone. lenovo had focus on personal computers, but hoped smartphones would help with the pc industry. it bumped motorola mobility in 2015. they may report a 38% decline when they report earnings later thursday. a stock we are watching after-hours as hp ink is projecting profits that may fall short of estimates. this is the smaller half of
the old hewlett-packard that sells computers and printers area the ceo has stepped up efforts to boost profitability since the split from hp enterprise but faces serious , sales declines among its core products. desktop and laptop sales fell nearly 10% from a year ago and , printer sales were down 16%. a story we are watching, the latest set up for theranos. bloomberg has just learned the company is being accused in a lawsuit of misleading consumers about the accuracy of its blood test results and reliability of its technology. today's lawsuit was filed in san francisco and seeks class action status on behalf of consumers is -- whose blood was tested in the company. in response, the lawsuit filed today, they say is without merit, and they will defend itself. federal prosecutors in san francisco and federal and state health regulators are also investigating the company.
alibaba says they are cooperating with the probe, but the shares are down the most in three months from this news. at&t may be competing over more than wireless customers with verizon. bloomberg news wrote the story that at&t is making a bid for yahoo!. it is a change in course for the telecom giant. it decided against making an offer last month. their presence pits them against their rival verizon, which has , long been considered the front runner. the reporter who helped break the story joins us from new york. lay it out for us. who are the bidders? verizon may have been the front runner, but did not have the highest bid. and: that's right. verizon is the company people assumed would be the front runner. they own a business doing something similar with aol, so they thought it made the most sense. to be clear, this was an asset
we think attracted 40 expressions of interest when it came into the market. now, at&t are also interested where we have an at&t versus horizon scrap for this. emily: what would at&t get out of owning yahoo!? what would they do with the yahoo! assets? ed: it's not exactly clear because yahoo! is an interesting amalgamation with various businesses under it. and at&t could take them in all kinds of directions. but one thing that would be interesting is a sort of algorithmic advertising business. at&t could pair that with its mobile devices, so we could see it do something like that and that would set it up as a competitor to what verizon is doing. emily: could this come down to a two way bidding war? it could, potentially.
at the moment there are other , parties interested. it would not be a very contested auction. there's at least one more round to go through. probably three or four more weeks left to run. from everything we are being told there's still a lot of , potential buyers. thosecould come down to two but it is not there yet. emily: what about price? we have reported bid, and other reports that have much lower numbers. has that happened? are they getting lower bids? weekhere was a report last were suggested the bids 50% below expectations. from what we understand, that was gobbledygook and the bids are coming in closer to the range of between $4 billion and $8 billion, which is a large
range, which is why we may be seeing this situation with verizon, despite being a logical buyer, not the highest bidders. emily: thank you for putting those gobbledygook rumors to rest. coming up, a genetically engineered mosquito that could stem the spread of the zika virus. we will hear from the man leading the charge, next. ♪ emily: on wednesday, members of
has been reported in 62 countries and the viruses linked to 544 travel related cases in the u.s. a u.k.-based biotech firm once the fda to invoke emergency powers to provoke a medical response in the absence of other alternatives. since 2002 they have been developing mosquitoes that are genetically engineered to stem the virus. our reporter visited the company to see how these insects would help. >> this is the lab at the forefront of the fight against the zika virus using genetically modified mosquitoes. >> we have created a strain of the mosquito that spreads dengue and zika virus. everything here carries a self- limiting gene. we released the males into the wild and the offspring inherit the genes and die. s, one is a two gene
self-limiting gene in the second one turns the insect red, allowing them to be tracked. >> what we are doing is giving the mosquito the biggest disadvantage -- it cannot reproduce effectively. we've been testing this in another -- a number of countries ande 2009, in malaysia, panama. the bulk of the work has been done in brazil. if you conduct a program releasing these mosquitoes, you can bring the wild population down by over 90% in just six months. >> it has so far proven an effective tool that could be scaled up. millions of mosquitoes could be bred in a lab like this in a matter of months. the technology is not without its critics, but they say the system is safe. they say there's little evidence that wiping out this variety of mosquitoes would damage the ecosystem. these scientists say that with the right approval they are , ready to expand the fight against the zika virus.
emily: joining me now for more is the ceo of the company. first of all, explain a little bit more about how your technology works, and once you release these mosquitoes and the wild, what the actual impact is. >> once we release them, we release males. they don't bite and they go off and do what male mosquitoes do best, which is looking for the females. when they find them, they mate with them and every time they mate with a female, those offspring will die. what we have shown in various field trials is that we can by overhe population 90% in about six months, which is an unparalleled level of control. emily: you first develop this back in 2002. you have been working on this for years. explain that if these emergency
powers are invoked what that would enable you to do. if we had the emergency authorization, that would enable us to set up programs to protect people. at the moment, we have to go through a regulation process. and the fda have come out with a preliminary review of no significant impact, meaning it is safe to humans and the environment. the emergency would allow us to get quicker into position where we can deploy these and protect people from these mosquitoes. emily: and you have applied to the fda for an approval for trial in the florida keys. would these emergency powers impact the trial? hadyn: not necessarily. the process in the keys is a
formal approval process, where you got it -- go through regulatory system and go through one a trial as a way of bringing all it -- all of the process together. you need to go through that process anyway. the emergency powers would let us protect many more people. the authorization under emergency approval only lasts as long as the emergency is there. you would still go through on both parts. emily: you testified the mosquitoes could be targeted to a very specific area. how do you do that? hadyn: it is down to the biology of the mosquito. mosquitoes don't fly very far. they only fly about 200 yards in their lifetime. because we are releasing male mosquitoes, they don't travel that far and you can target these mosquitoes to areas of a city or town or country where you think there is the greatest
risk and have high mosquito numbers or disease transmission. because they don't fly very far and the offspring die, the effect is very localized and very controlled. emily: the world's attention is focused on zika, but how could genetic engineering of insects, what else could that be used to potentially prevent, like dengue fever or yellow fever? hadyn: the sad fact is the mosquitoes adding the zika virus also spreads yellow fever, and another that and spread through the caribbean with over a million cases in 2014. this one species is public enemy number one when it comes to spreading diseases in our towns and cities. genetic engineering can also be used for controlling insect pests that damage crops.
it is much more environmentally friendly because you are only targeting one insect each time that is causing the problem, whether it is spreading the disease in town or actually competing with mankind for its food sources. we can look at controlling insects in agriculture, and public health, and in animal health as well. emily: it is fascinating work you are doing. thank you for joining us today. coming up, revelations that one of silicon valley's most prominent investors has been financially backing a lawsuit that could topple gawker media. we will discuss the fallout. you can now hear us on the bloomberg radio app on sirius xm. more "bloomberg west" next. ♪
>> the top stories of this hour. energy producers as asian stocks rally. dropped 7% from an high. the regional benchmark headed for its best today gain. fell.a shares it is being investigated by u.s. regulators. the sec is looking into their accounting standards and whether it violates any laws. the g-7 summit begins shortly in japan with china high on the
agenda, but low on the guest list. they will be greeted by the the landister, reclamation are set to dominate. those are the headlines on bloomberg news, powered by over 2400 journalists in 150 bureaus let's get theld, latest from the markets is japan comes back online. >> we are seeing stocks in the .egion hold at a one-week high japan coming back online by half of 1%. even though we are starting to see the young rebound against the dollar, that is the second gain, which was up by one and a half percent yesterday. the estoril you and share market pretty flat there, some good games coming through new zealand
as the country headed down its budget. pretty good games coming in from singapore. breakgoing into its lunch now. we're seeing the rebound starting to increase prices the way into transportation stocks, and also weakness coming through in hong kong. we just want to show you what these $50 plans are doing to oil. also, they increase their stocks by 50%, a look ahead, they're up by 5%. here are some of the other energy producers from hong kong, all looking pretty good. that, upking a look at
by 6/10 of 1%. the first time we have seen brent crude above that since november of last year. emily: billionaire investor and facebook investor peter thiel with a defamation lawsuit that resulted in a lawsuit. it was filed by former pro web -- wrestler hulk hogan. the ruling on his case threatened the websites very existence. it is completely legal for them however, hisits, involvement highlights how a well-funded individual can hold sway over a media organization. that they did not
respond to requests for comment. me, the technology law attorney. i will start with you, what is your take on this. >> it is quite a shocking revelation but we should all use the caveat that this is based on a single report from an ominous -- an anonymous source. i am pretty sure there is another shoe to drop your. this is quite something. emily: what is the other shoe? but thereo not know, is another chapter to the story. i don't think this is the end. this is what we have talked about in private on many occasions -- the role of technology in everyday life and
society is so much more now that every little action gets magnified, and every little thing has an impact. the scale of money being made in silicon valley has not been seen before. everything we see, including the it -- supposed actions of peter thiel, which i have no idea if they are for real or not, they are magnified because of the scale with which things can happen. ist he is doing with gawker very threatening for the future of media. emily: i will tell you that i personally confirmed this information that we reported. the tweets have been flying over this incident and i wanted to read a few of them. first, you think you could buy a thicker skin with a billion dollars. another one, good for him, gawker is an amoral mess.
another one, if leaders want to destroy media, they should get it the old-fashioned way by buying them and letting incompetent grandchildren ruin him. let's talk about legal issues on all sides. third parties funding lawsuits is nothing new and not illegal. guest: not new, not illegal. i don't think there are huge first amendment issues here. the first amendment is not implicated in the sense that the possibility of lawsuits based on disclosure of private facts, the possibility of lawsuits based on libel has always been there. i think the bigger issue here and the issue that is less sexy for the perspective of the media is that jury verdict are often out of control in terms of the amount awarded. it's a florida thing and we have a small town, st. petersburg in florida where this jury came up , with this huge amount. i think that's bigger issue more
than the constitutional issue. if there is a concern going forward, its the copycat effect. the copycat effect is always out there when something gets this much press but it is a short-term issue. emily: we have heard that the appeals in this particular case could go on for years, but there are bigger implications. peter thiel is a board member of facebook which just found itself embroiled in its own controversy that it was biased against conservative news stories. the irony being that peter thiel is a delegate for donald trump. he's called gawker the silicon valley equivalent of al qaeda. what does it mean for facebook? guest: facebook has to tread carefully. they got into trouble when mark andreessen made comments. as a company and as a ceo, you have to be careful who you surround yourself with. every action of those
individuals has an equal and opposite reaction on your company, your stock -- emily: shouldn't the board represent a diverse viewpoint? guest: yes, on the corporate level. because facebook is such a part of people's lives, it is essentially the media for most people. it needs to tread that path very carefully. i have always believed facebook should have the equivalent of an ombudsman in the company so that they can portray if they are doing things right. emily: the journalist who wrote this story has been on twitter defending the original story saying it was common knowledge that peter thiel was gay and nobody felt they could talk about it.
he tweeted journalism for outing a person, consider whether it makes defamatory assumptions. the reporting indicates peter thiel was stung by this original story in 2007. was that fair game? guest: it was fair game. when we talk about libel and slander, truth is an absolute defense. although it may have been a private facts, and from his personal perspective, the press saying he was gay when he was not public with that might be unfortunate from a personal perspective, but if it is true, it is not libel or slander. it can be disclosure of a private fact, which can be actionable. guest: i think people have a choice to live their life whichever way they want. i don't really care but i would say because we live in the times we live in, the attention on technology and the industry we
are part of is much more. it's not just technology, it's about the cult of personality and the spectacle of technology and you are beginning to see more and more of that happen, so you will see more such actions happen all the time. i think the industry which was very small and focused on doing technical things is now touching society in many ways and the scrutiny is much higher. emily: peter thiel funded an organization to protect the rights of journalists. do you think this could set a precedent that would jeopardize freedom of the press, or is that taking it too far? guest: i think it is taking it way too far. this is an action about a video and i hate to see law made around sex videos, certainly constitutional laws. i am hard-pressed to see this as
a constitutional issue. i do see it as an issue of a jury awarding damages that are over the top. emily: marc grossman, thank you for joining us on the show. to another story we are following, transfer lies have joined the unicorn club, raising $26 million in its latest round led by an investment that is term. techcrunch is reporting this brings the companies valuation to over a billion dollars, making it one of london's few unicorns. they did not officially disclose their valuation. it also includes andreessen horowitz, peter thiel and richard branson. coming up, eric schmidt on health, politics and more. we have his exclusive interview from the bloomberg breakaway summit. and we will review all of our
watching video streaming , services like netflix and itunes could see more regulation in the european union. proposals published on wednesday say 20% of video libraries will need to be dedicated to european content as a way for europe to support its domestic energy -- entertainment industry. abovenow, netflix is just
what was set. eric schmidt spoke at the bloomberg breakaway conference and spoke about the big breakthroughs in technology he sees ahead. we asked if the private sector is better at investing than the government. eric: i'm not ready to fall in the traditional cynicism about government. spend too much on the wrong things, but i would just like to have a little bit of it on these things that are moving shots, enormous scale things that can benefit the country. john: you gave the example of health. what's another example? eric: i will give you two examples -- the health thing is -- it can be understood as analog meets digital. up until now, doctors have been living in an analog world and it's incredibly painful and complicated. we have been living in this digital world where we understand scalable systems.
we have finally been able to break through with modern monitoring systems the , sequencing machines and all of that kind of stuff, so you can get proper personal medicine and really change things. there is a technology that you can reassemble and do gene editing. this is transformative not just of a little city like new york but of the whole globe. that is how profound this is. it is a race. there is a similar one with ai whichchine learning, google is trying to do, primarily. that's one category. in energy, the most interesting question to me is can you -- i will say it rhetorically -- can you solve climate change which i'm sorry to say is actually true, and case you are concerned. it is true that carbon does lead to these things. there's some evidence the
current relative lull in warming that has slowed down a bit will actually get worse pretty soon. i can go on and on about that. there are people debating whether the solutions are sufficient to solve this problem 100 years from now and if they are not, the most likely solution is nuclear. nuclear has a zillion problems. it has never been able to be driven by the private sector alone. here's the question and i don't know the answer -- do you need a federal program to drive safe nuclear? that is an example of the kind of debate. i'm not taking a position because i'm not a physicist. john: out of the existing candidates, i know you are a supporter of hillary, in general, do you see any sign that they are thinking in these ambitious ways on the presidential trail? eric: it is important to remember that campaign seasons
are a silly season. i don't worry too much about it. it's more of a question of do you believe the presidency and the leaders in europe understand the importance of science and so forth. there has been a problem on the republican side that there's a group of republicans, but not all of them, who do not admit to the importance of science and i mean that specifically the technology platforms. i don't know, whatever the prejudice is, and maybe there's a similar group on the democratic side. it is a real problem when science is politicized. where does that matter to you? if we have not figured out how to do stem cells from blood, you might be dying from some disease because of some advanced technique now available is not available to you. this stuff matters. remember all of the debates
-- a solar powered airplane on its way to allentown, pennsylvania. it is in a journey around the world. the solar impulse ii took off from ohio earlier on wednesday. the flight was expected to take about 17 hours. the plane will make one more stop in new york before crossing the atlantic ocean to europe.
the online sports store fanatics is poised to become one of the biggest players in sports merchandise. that's thanks in part to a deal with the nfl players association. but right now, the focus is on the nba and the golden state warriors. warriors merchandise is the highest selling in the league. jersey outsells all other players and 48 of 50 states. but with the team trailing the oklahoma city thunder, 3-1, how does it affect fanatics? the ceo joins us now. last time, steph curry was the best-selling jersey but it has become even more so. guest: the warriors and curry are really a sensation. 200%arriors sales are up over laughter, when they had already won the championship. but the story within the story has been curry. the number one selling jersey. what is cool to see it how he's bringing in new segments of
fans. his its sales are up 1000% with women and 400% with kids. he is a great role model and athlete, and great for business. emily: how much does the business depend on the dubs winning? i am not complaining, but it is a big part of your business. guest: wins and losses are a big part of licensing. we are already the number one player in the world in the business. what is interesting is that we have a diversified business much , like a stock portfolio. we expanded internationally with acquisitions and european soccer. we run about 150 universities. over the course of the year, you have big markets in small markets, and a blended outcome. that's part of our value proposition is we bring that scale to any given team. if you are having a tough year, it's going to be a tough financial year. we have a full portfolio and can generally ride the growth of e-commerce.
emily: so if they lose, no biggie for fanatics? guest: correct. for fanatics, we have a huge portfolio. right now, you have the nhl playoffs. we just had the nfl draft. mlb is a huge business because the cubs are a hot story. our whole business is whatever team is winning, we are there to service that demand. no one team or player has a significant impact on our results. emily: you guys have mastered the art of getting merchandise out quickly. we have seen this backfire, like beckham came on the scene, they could not get merchandise fast enough and then his popularity had eclipsed. how important is that and how do you do that? guest: it is absolutely essential. we have built one of the most non-demand businesses
here in an on-demand economy. on theenovo w championship, we had villanova championship merchandise listed for sale along with a whole assortment of merchandise. much of it is virtually merchandise that is digitally rendered. we can do a big push out to make fans aware and manufacture and print on demand after the fact. a big part of our business is data analytics to be prepared for those moments and as we see demand come in, go into production. emily: your new deal with the nfl is your first foray into licensing. is it just the beginning? guest: we do have licensing with lots of leagues and schools. the nfl relationship is a big, long-term deal for licensing rights. licensing will be a big part of our business, and it brings interesting, unique merchandise
into the on-demand business. and we have seen tremendous adoption of everything we have put in the market so far. emily: great to have you back on the show. time to find out who is having the best day ever. today it is the u.s. state of michigan. google plans to open a self driving development center in the home of the auto industry. the tech company is running to have autonomous cars for companies like uber and gm is investing in the technology. earlier this month google joined , forces with fiat chrysler to build 100 self-driving cars based on the chrysler hybrid powered minivan. that does it for this edition of bloomberg west. tomorrow, we sit down with the biggest competitor to uber in southeast asia. that's all for now from san francisco. ♪