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tv   Bloomberg West  Bloomberg  July 20, 2016 6:00pm-7:01pm EDT

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military coup. after meeting with military advisers, he said the measure was being taken to counter threats to turkish democracy and was not intended to curb basic freedoms. texas senator ted cruz and indiana governor mike pence take the spotlight tonight on day three of the republican national convention in cleveland. senator cruz says he has no plans to endorse donald trump who mocked him and his family. trump and hence are in cleveland that will make their first joint appearance at the convention tonight. cleveland police say two officers suffered minor injuries when they were assaulted during a flag burning protest. several arrests were made. the protest made it difficult for convention delegates and reporters to enter the arena. german chancellor angela merkel made it clear there will not be exit fromt the u.k. the european union until official notification. she did offer theresa may time
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for government to invoke the article 50 notification, something may said she would not do this year. global news for hours a day powered by more than 2600 journalists and analysts in more than 120 countries. "bloomberg west" is next. emily: i'm emily chang and this is "bloomberg west." paradeh earnings continues. we will break down earnings from intel and other heavy hitters. and all of branch extended any brutal rideshare is this in china. and spotify pumps up the jam. we will break down the news of an upcoming ipo with the bloomberg reporter who broke this story. intel reporting earnings that slightly beat analyst estimates.
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shares dipping in after-hours trading as much as 3%. the company reported revenue of 30 teen .5 ilion dollars. net profit of $1.3 billion, down 51%. the key number to watch is the data center business and the challenges intel is seeing there. we will be breaking down all the numbers, but first i want to hear from stacy smith, the intel cfo. stacy: relative to the second quarter, we came in right online. we did little better in terms of profit for our expectations. when you dissect the revenue, , data market was stronger center was in line and it was offset by memory and other things. wecific to the pc category, think there was less of an inventory burn, but we continue
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to be cautious as we go into the back half of the year. emily: where do you see the bright spot? do you see improvement in the u.s. or does it spread abroad? stacy: the driver right now is what is going on in the cloud and the data center and we are poised for a strong second half. we have insight into what cloud customers are looking to purchase and we have new customers coming in and technology that would allow them to buy a richer mix of products. what we have seen is the same as we have seen in the last six months -- mature markets are doing relatively better than emerging markets. there are some pockets of strength. we are continuing to watch it. there is concern about
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the data center business and that your most profitable business won't be able to make up for weakness and this is the second-quarter growth in that unit has fallen below 10%. will we get back to that mid teens type of growth we have gotten used to? : we are protecting low double-digit growth. that would imply we have a growth rate in the mid-teens in the back half. i think we have line of sight at that of old-growth rate. if the buying patterns of some of the customers, it is a richer product mix. the longer-term drivers of the data center is the internet of things that you talked about earlier. all of these devices connecting to the cloud infrastructure, the data we look at says in 2020, a person will generate 1.52 bytes. a connected car will generate
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almost three times that amount of data per day. we think that is a big driver of the industry looking forward. emily: how much of a percentage of sales or dollar number do you see contributing to intel's bottom line? stacy: it is on its way to being a $3 billion business. we are seeing growth that was in the high teens and this year, we expect it to be in the teens again. it is growing fast and it is a very profitable business. the driver is there such an explosion of devices that require computational power and conductivity and we are uniquely situated as a leader in both of those categories. emily: bloomberg and others have reported you've gotten a big breakthrough when it comes to mobile phone chip parts. is the order coming from apple and is this for the iphone? they seek: i'm not going to talk
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about specific design wins. our mobile strategy is to leverage the progress we have made in the 3-d world and when we get to 5g, we will move from being a fast follower to being a leader and when we couple that with the capability we have in cpus and graphics, we have an incredible array of products we can put together for our customers. we are really excited about where we are and the strategic advantage that gives us. emily: the intel cfo, stacy smith there. was your take away from that conversation? guest: i like the intel story and i like how it is positioned. they are downplaying the tc market. they -- i like the fact they don't play expectations. with respect to the data center, there's concern that growth may
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be slowing but one of the things i have maintained from the start is that this is a lumpy business. it terribly inconsistent with the four top u.s. guys doing a lot of the buying for the public cloud market. when you have that level of concentration, you are going to get some lumpiness. the first half is below the 10% mark, the second half well above, so you get a full year distribution of revenue in the double-digit range. maybe it ends up being 12% or 13%. -- you have a2016 secondnter improving half high confidence and pcs, one quarter does not a trend make but if the u.s. is improving and inventory cuts are iferating and shockingly,
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pcs return to low declines or growth in developed markets, we could see some terrific headway made by intel because it is uniquely situated in the market. respect to the internet of things, it's a small business, so it's not going to be a big deal. emily: what about the mobile phone is this? analysts believe apple is moving a big order from qualcomm to intel for the iphone seven. if that is the case, and he would not comment on it directly, how big a break could that be for intel? guest: qualcomm did say something on their earnings call saying they factored in a modem loss as one of the large vendors and one of the large vendors at does only consume their modem is apple. so there is fire where there is smoke. this is a big deal for intel.
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the fact they can win sizable he in the modem business is a big deal and the fact that is apple, which is a technology leader is an even bigger deal. in a lot of ways, intel is particularly well-positioned. the stocks have moved substantially over the last 20 days. semi-conductors tend to be pretty fickle. emily: i did ask for clarity on what is going on with the mcafee business. we have reported they are looking to potentially unloaded. but a cedi business is doing tied to the pcis market. what should intel do with it? guest: there was a little bit of head scratching when intel did acquire the business, but i spoke to brian a year and a half ago about how security was
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important at the cpu level and he had a solid answer of how become critical at every level from the application to the operating system to the chip level. a little bit of a head scratcher as to why they are unloading the business, but you can probably command higher valuation now that security has become part of their chip does this. i think intel is pretty well-positioned. i see no complaints. emily: thank you so much. in other earnings news, qualcomm seeing a significant beyond profits reporting as the chipmaker extends its reach into the world's biggest smartphone market and that is china. sales came in just over $6 billion and for the first time,
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they have not posted double-digit percentage declined. big part of its mobile chip business, potentially to intel. qualcomm shares still rising after hours. results are out trump d-day one year after its split from paypal. projected revenue beating estimates and its customer base up 4%. it is a sign of efforts to attract customers are gaining traction. shares popping over 8% at one point. coming up, uber investors said to be pushing for a truce with its biggest rival in china. could there be a partnership in the near future? afterp seeing shares rise second-quarter earnings beat on sales and profits keeping its outlook study. ♪
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emily: apple may have cleared the final hurdle to entering the fastest-growing smartphone market. the country is expected to give them the green light for the very first apple store. strictone maker may get sourcing rules for foreign retailers. tim cook visited in may to lobby personally. saysalyst from needham pokemon go could add as much as $3 billion to apple's bottom line because the craze hits to the investment quality. it's the platform for the wealthiest consumers and keeps 30% of pokemon's go revenue. candy crash generated $10 billion year with just a 10th of the number of pokemon go
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players. uber investors have a message for management -- cut your losses in china. institutional investors are pushing for a partnership with the number one right taylor in china. they told bloomberg news backers for both companies have discussed a deal. uber is burning through as much as up ilion dollars year to expand its business in china. eric newcomer joins us rum new york. both of these companies are bleeding cash in china, taking each other on and yet it sounds like investors have had discussions about teaming up or making a deal, but that companies have yet to do this. what do we know? guest: we are in a state of mutually does -- mutually assured discovered -- mutually assured distraction. subsidizingh
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heavily and uber is losing at least a billion dollars the year, maybe more. investors are looking at that and saying this could be a bad investment or could hurt our ability to make a lot of money. i think they are very concerned about the losses in china. emily: is this something uber investors are pushing for? guest: there are talks on both sides. the talks are a little louder on both side -- on the uber side, but there's a lot of channeling going on. emily: we recently's spoke with the president about the competition and i asked her about uber. listen to what she had to say. would like to focus on ourselves rather than looking at others. in its ine industry the sea stage right now, there's
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a lot of room for everyone to grow in the markets but for us, it's to focus on what we had to achieve. she says there's a lot of room for everyone to grow. why strike a deal now? it's a question of whether both companies think they can exist. who has more leverage to get the other to cut a deal? this could go on. their investors see a lot of trouble and would like a resolution, but both companies are fierce competitors and maybe hardened. we do know that there are relationships am both sides, so there's a line of dialogue between the two companies. they have met and talked before, so there is a dialogue there. what would a deal look like?
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guest: that's a good question. they have a separate chinese entity, so you can imagine them buying it and and having a stake in it. you can imagine them having a profit-sharing agreement or even the ability to get each side to subsidize, but i think those are some of the options. emily: are there regulatory issues that could pop up here? price fixing? i know china is a different market, but what happened to fair competition? is a very different market. uber has faced problems because one company has been favoring its investment and dd is making it difficult over there. every country has its own competitive dynamics and it's hard to say what chinese thelators would say about
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tie up in china but you are right to ask the western and probably chinese government would have to look at it. know that they have a yft.nership with l what happens in the united states? could we see a partnership tween the two of them? that's a smart question. i think it's unlikely that you see a partnership, but if didi says we are not going to make a truce with uber, do they say we are not going to call a truce in china? there's definitely what happens in china has global ramifications. didi shares investors, so it is a global fight. you are talking about
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the potential for didi to buy list? i don't want to speculate. they hired a bank known for selling companies, i think it is reasonable to watch. emily: our bloomberg news reporter who broke the story, thank you very much. still ahead, spotify is reportedly preparing to go public. what will it mean for the future of music streaming and the company? those details, next. this is bloomberg. ♪
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emily: former u.s. attorney general eric holder is joining airbnb, working to fight discoloration on the platform after a study found posts showing bias based on how names found. airbnb has faced lawsuits alleging bias. eric holder says airbnb is looking to create a community where everyone can belong and i'm eager to help them craft policies that will be the model
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for sharing a commitment to diversity and inclusion. spotify is planning to go public in the second half of 2017 according to multiple people. the company raised up ilion dollars from convertible debt from investors valuing the company at eight ilion dollars. still, they face heavy competition from apple and the company has yet to be profitable. what do we know? alex: they are looking to go public in the second half of next year, but before they get there, they have some work to do. number one on that list is improving margin. according to our sources, spotify's margins are at 815% rose margin. compare that to pandora at 47% and apple music at 40%. lagging obviously
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behind when it comes to profit potential. that will be important when they get to the public markets. if you look at the landscape, pandora is a pure play company and its stock has been beaten up as they look to become profitable. apple backing them with all that money coming from apple plus other revenue stream. when it comes to spotify's future, it's going to mean getting expenses down and most of those expenses are contracts with music labels. emily: when it comes to labels and artists, there is still a battle with these streaming services. many have refused to put their music there. who has the most bargaining power and how well situated is modified? alex: spotify is fairly well situated. they make up a large percentage of where the music goes for these labels. label sidet on the
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is right now, 55% of your sales come to us. if spotify wants to get that below 50%, they argue it is below market value already. is where the push and pull is going. right now, they are at a deadlock. when it comes to warner and universal but they are not in agreement. frankly, taylor swift and some of the others have been unique situations. the majority of artists right now it seems cannot afford to pull their services off a service like spotify. emily: apple is making big changes to the music service. how formidable a competitor will apple be? that's the gorilla in the room.
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pandora is like radio, there's some narrowing down of preferences, but apple and spotify are the comp here. spotify is spending a lot of money on r&d. they are working on things like analytics to make the music you listen to more catered to your taste or building out their ad plat form or video if that is something consumers want. offerare things that they to a certain extent in those are the two that will and up going head-to-head. emily: our bloomberg news reporter who broke that story. thank you very much. we will be back with more and talk about a big acquisition for dollar shave, next. ♪
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mark: i'm mark crumpton. let's begin with a check of your first word news. u.s. attorney general loretta lynch is acknowledging the difficulties police face
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following the ambush style murders of officers in dallas and baton rouge. >> law enforcement is feeling under siege because of these incidents and they are tragic. many of the efforts the department is engaging in go back several years to when we saw police officers come under attack and federal agents come under attack in the beginning of the administration. lynch said of the apprehension of the police and the communities they serve, that it is not a situation for growth and does not ring out the best in us. most voters want the president to focus on race relations according to a washington post survey. 80% of americans say race relations is the top issue. people in the u.k. have signed up to vote for the nations next labor leader in the u.k.. jeremy corbyn faces a challenge from: smith. the results will be announced on october 24. u.s. senators are pointing
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fingers at the pharmaceutical industry for america's opioid crisis. in a letter to the dea, they say the industry is at fault for decades of misleading information about narcotics and say the medical community bears responsibility for its role in overprescribing them. thursday morning in sydney. i'm joined by my colleague paul allen for a look at the markets. paul: let's start in new zealand, all ready trading for 30 minutes and looking pretty good. may be reacting to an unscheduled assessment of economic conditions released by the reserve bank of new zealand this morning. quite explicit saying further policy easing will be required. they wanted near the middle of the 1% to 3% target range.
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the new zealand dollar behaved as you would expect, dropping, almost off .8%. already achieving one of his aims, saying a lower exchange rate is needed. nikkei futures looking positive at the moment. we expect them to be off to a good start in australia. we will keep an eye on the gold well, evolution and oil as with courtly production numbers out today. their bidpdate us on for oil. i'm paul allen in sydney, australia. emily: this is "bloomberg west" and i'm emily chang.
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-- terms of the deal were not disclosed, but according to sources, it is worth a billion dollars. model isave's consumer eating into the share of razor brand and is on track to close in on 200,000 -- $200 million in sales this year. i guessed from new york, a -- an early investor in dollar shave and one of the first board members. you got 10 times return on this investment and this is a company not a lot of traditional investors wanted to back, yet they prove they can compete with gillette. what do you think it is that made dollar shave successful in a market where there were very established incumbents? guest: it's a very special company. low turn rates
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and extremely high loyalty, which is important. they were disruptive going after the razor category because they had a great al you play, one third the price of gillette razors. all of that couple together produced and incumbent killer that has eaten a lot of market share and is growing steadily. so different from any other commerce stories. do you make of unilever buying a shaving company? big deal, not a just the amount, but that's the kind of thing we have not seen much happening in europe, making a bold that. unilever into the u.s. and into a new market and gives them additional skills, talents and assets. i think it is going to be the shape of things to come. emily: you think more big buys
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are coming from european companies? guest: not just european. we've seen a number of large deals in europe from asian buyers. the we are going to see is company's make a transformation and we will have to go for assets were they cannot just hold themselves. emily: you made a point of saying a lot of investors just did not want to invest in this company. tell me about the initial pitch and what might have turned investors off. guest: the commerce space is hard and has low multiples and does not attract as much capital. what is different here is this is a company with low return rates and highly pretty revenue, tremendous loyalty and super strategic. what we have going on is a decline in physical retail. we have an over dependency on
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legacy brands spending on tv ads where attention is shying away from. so you have a company that is really reaching consumers on the social channels where they spend their time and a company into the direct to consumer business. companies are going to have to become direct to consumer companies. they have amazon on the rise and going into many of these categories themselves. as an investor, it was an easy decision for us because it it a lot of our criteria. emily: i remember when my husband started ordering razors from them and i thought how can this company make money selling razors this cheap. you referred to this as a full stack consumer company. that advantageous when trying to take on amazon? what kinds of companies can take
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on amazon? first, this is a company that makes a lot of their own products. 50 or 80 different skews, the majority of which they make themselves. they make products and market them directly and don't even use creative service agencies or madison avenue advertising agencies. they make their own creative and acquire customers themselves. we call them. . they operate every component to build the company and develop expertise in each of those layers. company traditional customers are retailers, so they are good at locking store shelves, but that is a skill that is becoming decreasingly important. typicalhis is not your technology company. do you think of them as a technology company? guest: going forward, i think
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every company will have to become a technology company in every segment. all of the companies have to go through that and the biggest difference is to go directly to consumers without having to go through retail. is access -- is essentially a retail business and there are two challenges there. one is you have to lose a lot of margin doing that and the other issue don't know your customer. by going direct to consumers, you better margins and you can target them and have a direct relationship. emily: and gillette started its own its subscription service to compete. we are going to talk a little more about that. thank you so much for joining us. on the state of global tech investing and what the exit phot means for the, day cycle.
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emily: this is "number of west." i'm emily chang. my guest invest in companies that leverage technology in interesting ways. you can see the companies he is investing in their. --ot of lifestyle plans lifestyle brands there. you think silicon valley investors with never invest in the company's you invest in? it is a billion dollar
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company that has gone public. we have been talking to a number of investors in silicon valley andt is a form for fashion independent boutiques across the world. what is it about your investments at turn silicon valley off? we are not trying to be anti-silicon valley. we are going after companies that are different. there's plenty of talent and capital and we are based in london and we have been looking at opportunities that are potentially very large and in particular, we are looking at founders building new consumer brands. at the intersection of technology and creativity.
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emily: how different is the funding environment in europe versus silicon valley? silicon valley is the place with the most capital and talent in one place. london is the place to be in europe with more and more capital and more and more talent. but still, it is a market where there is less capital and less competition but more of that, so the market is maturing. emily: i would love for you to share your personal perspective about brexit. you are from france and built a business in london, yet you could not vote. tell me about the experience. i was not in england when the vote happened.
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i thought he welcome sign at the airport and did not feel welcome at all. that was just a sentiment. but we underestimated the likelihood of it. not just us and our company, but anerally, london is such amazing, multicultural environment. we just did not think it would happen. emily: you think it is an accident of history? guest: today, so many people who voted said if i had known, i would not have voted or if i knew this would happen, i would have went and voted. i think the vast majority of people would vote against brexit today. we are in this very weird situation where you have no leadership in place to make brexit happen in most people don't believe in >> because they were in the other camp for the most part. when you put someone in place
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who doesn't believe in the mandate, i don't see how these things can work well. emily: what does brexit mean for your business? guest: that's a good question. there will be plenty of uncertainty for next year. the best out come for england the way theresa may has resented it is to get as close to the u.k. situation as it is today. work, we try to find the best founders wherever they are. thatll continue to do this we will be much more careful on how we invest in england, and vastly and i think it is underestimated that the talent would never come to london.
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we backed a u.s. company with spanish founders in the technology for marketing space. expand ingested to europe, london was the place. if that decision would be made today, we would look at dublin, barcelona, berlin, i don't know the answer, but at least the question would be right. softbank do a huge deal. will this kick off a wave of potentially,est: assets became cheaper on selling terms in the u.k.. there's not a vast amount of tech companies. fact that this happened, which was unthinkable before is maybe a sign of the times. it is a very uncertain time.
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emily: you mentioned there are not a lot of large tech companies. why aren't there more $10 billion tech companies in europe? guest: i think it is a question of time. we have the potential to become the largest platform for fashion luxury in the world and we believe if we get there, we need to give it time. happen seen a few things in europe that were not have thing before. the acquisition for 10 billion worth somewhere between $5 billion and eight alien dollars, they are some large ones. the markets are similar to the u.s. in aggregate, but are much
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more right meant it. the abilityt help but we did see the competition rising and more capital coming to europe. emily: interesting stuff. thank you so much for giving us the view from the other side of up, weld for coming continue our week long focus on food tech. we will hear from a ceo who want to make life easier for those with food sensitivities. this is bloomberg. ♪
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emily: qualcomm and ebay injuring a boost to their shares. intel dipping despite a beat. we will keep an eye on developments as shares move. we are continuing our week long series on the multibillion-dollar food hack industry. with food allergies on the rise, one san francisco startup believes it has found a way to
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make eating out less stressful for those with food sensitivities. they have a handheld device that can test for gluten levels right at the table. take a look. >> we are going to test some food. gluten-freepposedly coffeecake. we will test it to see if it is. take a little sample of the coffeecake. you need a p sized portion. put it into the top of the capsule and twist this cap. put it in, turn it on and start the test. is 25% of theeen food at restaurants labeled gluten-free is actually not. doctors have expressed an interest in being able to use this to help patients understand what food is safe for them and what food isn't.
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emily: hungry, anyone? joining me for moore is the ceo. we just saw their how it works. talk to me about the technology. chemistry-based technology, we have been working on it for 10 years. we recognized an opportunity as a way to quickly get information into this vice. the accuracy in terms of specificity, we are developing to 99%. restaurantsften do they it's gluten-free? found 25% of the time, labeled gluten-free items are coming up as positive for gluten in our testing. you have a one in four chance of
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getting sick when you are eating out. emily: why is that? guest: i think it's to do with ms. can indication, cross-contamination and kitchens are chaotic. it is hard to know exactly what you are putting in front of someone. sean parker has invested in research around allergies. where is this going? guest: people are more and more becoming aware of how food affects them whether they have a food allergy or food sensitivity. food as medicine and understanding how it affects your body. wanting information about what is exactly in their food and how it affects them. emily: this is not currently approved by the fda. are you seeking it? guest: we are validating our based on what is proper for food testing.
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emily: we have seen companies out there like 23 and me and they ran into trouble with the fda. should you be more cautious? we are cautious. we opened up a dialogue and we understand what we can and cannot say. we are not diagnosing anything. we are giving you an extra piece of information for what is in your food. emily: how big a market do you think this is? guest: their 50 million people whether you have food allergies or sensitivities that need to know what is in their food. their health depends on it. we've seen an increase in people with food allergies, so it's a growing market and there's a lot of opportunity. in terms of financials, how much can you guys -- guest: this is aliens of dollars
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in nothing like this exist right now. people are clamoring for better information. next for yous guys? are you planning to make future kinds of devices? guest: gluten is just the beginning. we are rolling out with peanut and dairy next year and we want to get to the point where what ever you care about, we will give you that immediate information and you will know. emily: are restaurants going to be filled with people pulling out allergy detection devices before they eat? we see it as ubiquitous as a salt-and-pepper shaker in a couple of years. restaurants want to serve a great eating experience and this just gives them better information. there's an app components are you can test what you tested and share that with the community for people with similar dietary files. emily: thank you so much for
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stopping by. now onto the day in tech history, 47 years ago today, neil armstrong and was older and the first humans to take a stroll on the moon. at 10:30 9 p.m. with more than a billion people watching and listening at home, armstrong , that's famous quote one small step for man, one giant leap for mankind. they traveled 240,000 miles to the lunar base all with less computing power than an iphone five. tune in tomorrow. we will continue chewing the fat with the ceo of the on to me. that's all today from san francisco. this is bloomberg. ♪
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♪ >> from our studios in new york city, this is "charlie rose." are in cleveland for day two of the republican national convention. donald trump has been nominated after a floor fight yesterday's part he did anger with the gop. it comes at a time the party intended to coalesce around the nominee. the trump campaign is facing m byges of plagiarism melania trump. -- regarding melania trump.

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