tv Bloomberg West Bloomberg September 6, 2016 11:00pm-12:01am EDT
nina: you are watching "bloomberg west." let's start with a first look at your first word news. polls show that the race for the white house is tightening. hillary clinton is leading donald trump 48-42, while a cnn survey has both pulling within the margin of error. today, donald trump took aim at obama administration policies at the veterans department. mr. trump: you have illegal immigrants that she wants and he once treated better than veterans. treated better than people in this room. let me tell you, folks.
i think they have their priorities mixed up. that's going to change so fast. nina: meanwhile, on the democratic side, hillary clinton spoke to reporters today on a flight to tampa. ms. clinton: clearly, his tax returns tell a story that the american people need and deserve to know, and his continuing claim that he cannot release his tax returns because he is under audit has been disproved repeatedly. nina: hurricane newton slammed into los cabos on the southern tip of california. southern tip of baja california. tourists huddled in hotels. there are no reports of any fatalities.
emily: i am emily chang. this is "bloomberg west." coming up, apple playing the waiting game with investors. will the company's new product launch be enough to boost sales? we will break it down. we will catch up on the ongoing war for the cloud. and tencent is now officially china's most valuable company. we will take a look at the bigger forces in play. apple is breaking its own habit. typically, even number of years mean a dramatically different iphone model. but the new iphone will not be a major departure from recent models. for apple fans looking for a wow product, our columnist says they will have to wait another year.
>> it has been an awful year for apple, at least by the company's high standards, and i have an uninspiring message for fans and investors. wait until next year. apple revenue has declined for the last two quarters, and probably will continue to fall for the next six months. the last time apple sales dropped for 12 months straight was 2000 one. -- 2001. mark zuckerberg was still in high school. the company's wizards are keeping busy, but the next year won't be a blockbuster. the newly updated iphone will be shown at an event on wednesday. no matter what they are called, they will be more like a tweaked version of the iphone 6 us. also coming are fresh models of mac computers and a second generation apple watch. none of these products will bring surprises, but they should
help apple sales grow again. at least modestly after this holiday season. with big hopes for a major sales rebound in 2017. expectations are apple will pull out a dramatically different iphone year from now with a new type of screen that could spark a wave of sales. it has been five years since tim cook took over as apples ceo, and the company has become more financially successful, but it does not have a breakout new category under his watch. wait until next year isn't a great rallying cry, but it is the best apple can do. emily: and now, while wednesday's event may not be the most groundbreaking showcase apple has ever held, it is arguably apple's most crucial event in years. in the three months since the iphone 6 release, apple sold 75 million phones.
many had two-year contracts, which means many people will be looking to upgrade. plus, samsung has had to recall its new phones due to exploding batteries. joining me in the studio are a bloomberg news reporter who has had a steady supply of scoops over the last few weeks, and reported what he expects will be in the phone. one, a new camera. a rebooted button for home. no headphone jack. we will talk about that in a moment. who are they targeting? >> everyone who can buy an iphone is an important customer for apple, but we should look at iphone 6 users. it came out in 2014. the reach of that lunch was extraordinarily significant. this was the first time apple really embraced the large phone market. the screen is over 4.5 inches.
like you said, the two-year contracts are expiring on carriers around the world. we are going to see a lot of people upgrading solely because of that. the samsung thing you mentioned, all the bad pr, bad marketing samsung is getting because of the battery issue, batteries reportedly exploding, a lot of people might want to reconsider getting a samsung phone, and the alternative to that would probably be an iphone for many people. emily: the galaxy note seven recall could cost them $1 billion. talk to us about the timing of this given that samsung is not going to be able to get new notes into stores until after new iphones are in stores. >> right, well, emily, samsung has a practice of trying to get out ahead of apple on some of these key announcements.
clearly, that is what they tried to do with the note seven. they tried to move very quickly. but they lost the time advantage. they have to recall the note seven's that are on the markets because of the exploding battery problem you talked about. they are going to try to get new ones back on the shelves, but as you say, it is going to cost them a lot of money. one of the executives called it "a heartbreaking event." emily: it is a critical time for apple because this is the first time ever they are unveiling new iphones when iphone sales are declining. would you agree that this is one of the most crucial -- and this is arguably the most watched tech event of the year -- is this the most crucial? mark: i think it is crucial for two reasons. one, you mentioned the quarterly year-over-year drops in sales. apple wants to show it will avoid a q1 year-over-year drop.
this hasn't happened in nearly 15 years. i think investors might be a little worried if the quarterly drop happens for the holiday quarter, which is apple's most important quarter. they now put all of their eggs in that holiday quarter basket. at the same time, even though samsung has the bad pr, it ups the ante for apple. if they don't leverage the opportunity, that could be bad news. now they have a very clear runway, and they should take advantage of that. emily: peter: what are samsung's projects in the pipeline that will compete with apple this quarter? and is there any indication the battery issue could extend beyond the note seven? peter: there is not an indication it will extend beyond.
samsung's approach is different than apple's. they tend to have a broad lineup of products because they want to compete. mark referred to apple's move into big screen phones. of course, samsung got there first. i think one of the challenges for apple with this product introduction is that in two key markets, it is going to be a challenge for them to penetrate. in india, which is now the fastest growing smartphone market in the world, they are really struggling because their phones are priced so high compared to competitors. they are, samsung is the number one competitor. they have work to do in these key markets. emily: mark, you told us there may be no headphone jack on the new iphone. this may be one of the most controversial moves apple has made. what are consumers saying about this?
is the rest of the industry ready to catch up? mark: the iphone seven being introduced tomorrow will not have a headphone jack. apple will ship a new type of ear pod headphones that can plug into the charger, so the charger will be doing double duty. we'll see. emily: and everyone will have to buy new headphones. mark: people do not want to carry around an extra cord to get the headphones they already have to work. that could be a bit of an issue. emily: thank you so much. i know you will be covering the event tomorrow, as will we. a special hour of coverage starting at 10:00 a.m. in san , francisco, 1:00 p.m. in new york, in addition to our regular hour of "bloomberg west."
will tencent has become china's most valuable company, breaking into the world's 10 largest public companies, including apple and alphabet. many point to tencent as an example of an economy leaving the government behind. peter, tell us what is behind this shift? peter: tencent has come on strong. they have two instant messaging platforms. they also own games companies and a bunch of other companies. their market has come on strong, as has alibaba, the second-most valuable internet company in new china this point. for a long time in china, state backed companies were the most valuable companies in the sector. petro china and others.
you are seeing a shift driven by innovation in china. tencent is a good example of that. state owned companies no longer dominate the economy the way they once did. emily: is this something you expect to keep up? you mentioned alibaba. there is baidu. how do you expect these companies to evolve over the next 5-10 years? peter: tencent has been building on its success. it recently bought a game company from finland. alibaba has made very ambitious plans not just for e-commerce in china, but to move beyond china to southeast asia in particular, and probably other regions as well.
emily: box is going after businesses, and more businesses. it is aimed at being a one-stop shop for companies that need to deal with heavy loads. we caught up with ceo aaron levie, who thinks his software is better than anything currently on the market. take a look. >> the idea was simple. we wanted to make it easy for
people to share, access, and collaborate around their information and files from anywhere. we have 60% of the fortune 500 companies. and yet, at the same time, even though we have been able to accomplish quite a bit, everything in business and work is still changing pretty dramatically. when we look at how enterprises work today, there is still a hodgepodge of solutions around storage, collaboration, workflow, and we don't think companies are going to be able to operate in a modern way of that is the set of tools they are left with. what we have been doing for the last couple of years is reimagining what work will look like in the future, and how we can be at the center of that, not only as an application to use, but ultimately, where all of the work will come together. our new application helps you streamline the teamwork you are doing. we have not had a simple software or things like processing invoices, sales
contracts, employee invoicing, all of these things that people do thousands of times a month. we want to dramatically simplify that. we announced box relay, which was jointly developed with ibm. emily: how long have you been working on this with ibm and what was their role? >> about a year. we announced the partnership last year. the separate roles are -- it is built on the box platform, so it uses the same data, security, collaboration box has and is built on our user experience. but it uses a lot of ibm has workflow and technology. that is what comes together as a very simple solution. emily: what do you see as the
competitor for box relay? aren't there already workflow management tools out there? >> our core focus is around content. it has to have a document at the center of what you are trying to do, whether that is an invoice, contract, hr process. others do task management or customized workflow. this will live among those solutions, but what it is really replacing is a lot of the legacy content management and collaboration technology companies have had to invest in that don't pay off once they have these tools. emily: we have reported the dropbox is potentially going public. in 2015, dropbox boosted its share of the market, giving it a lead over box in file sharing. also growing 80% in that part of the market.
box grew 40%. does that concern you? >> it is comparing apples to oranges. we focus on the large markets. they focus on small businesses and and users. the products people are buying are pretty different when you break down the numbers. in the past quarter, we grew our large deal segment alone customers over 100,000 dollars that signed up in q2 over 50% year-over-year. we are still growing significantly and key segments of the large enterprise market. the figures don't break down the numbers accurately. emily: going public, does that change the competitive landscape for you? >> i think it will make the financial comparison more transparent, so that will be easier to answer these kinds of questions in the future.
we have a lot of respect for dropbox and what they have been able to build. it will be interesting to see how they do publicly. emily: what about microsoft? they have been increasing their work in the cloud. they have a larger share of the business segment than box does. how do you take them on? >> they are becoming a significant partner with us. we will be talking to them at the conference tomorrow about strategy. there will be things with microsoft office, outlook, azure, using our services. i like to think of them as a partner. in general, what we are all trying to do is -- we think the way enterprises work today is way too slow, way too complicated, and spending way too much money on i.t. we want to move all of that to the cloud and i think there is an opportunity for all of us. emily: box ceo aaron levie. coming, is elon musk feeling the heat from wall street?
emily: elon musk pleading with employees to show investors the numbers they want to see. in a letter obtained by bloomberg, he wrote -- the third quarter will be her last chance to show that tesla can be at least positive cash flow before the model reaches full production. he added that pushing results into positive territory would -- wall street is notoriously split on tesla stock.
analysts currently have seven buys, seven holds, five sell ratings on the stock. talk to us about the schism between fundamental and true believer investors. people are so polarized on either side. >> it is fascinating. when you listen to the tesla earnings calls, you have analysts who really dig into the financials. others think big vision, what's next? a big part of the investor thesis is you either believe in elon musk or you don't. emily: obviously, merging with solar city, trying to get us to mars. he says they are on the razors
edge of a good q3. what is actually possible? >> it's all about third-quarter sales. the model three is not out yet. the question is, is anticipation of the model three cannibalizing sales of the model x and model s? what is the number they have to meet in order to show profitability? emily: how close are they to being cash flow positive? >> that i don't know offhand. quarter by quarter, it is a race to show profitability. once they start ramping up
production, it is going to be difficult. this is like the first quarter of 2013 all over again, which is the only quarter tesla has had profitability so far. emily: the solar city merger had some people saying this is the best idea ever, this is the future, and other people saying this is a horrible idea, both of these companies are having trouble. >> if the sec approves the merger, both boards have to vote on it on a special date. that could come as early as october. people are split on it. stocks took a deep dive when it was announced. then they recovered. there is a question about bandwidth than being able to add on while they build a gig of factory and tried to launch a new car and build out their sales reserves network. emily: we will be watching for more rallying e-mails between now and then. thank you. coming up, snapchat is on track for explosive growth, projected to hit $1 billion in ad revenue next year. we will hear from the analyst
angie: the head of san francisco fed has revised expectations that a rate hike could be imminent. williams said the u.s. economy is in good shape and rate hikes make sense sooner rather than later. investors have cut their bets on interest-rate hikes being raised -- rather, happening at all this month. a decision will be driven by the stability of economic fundamentals and growing caution about the risks of expansion. shower, reports from japan
board members are struggling to reach consensus on strategy. employment may have peaked. china's top four lenders reported the biggest fall in staff numbers in at least six years in the first half. analysts said, years after expansion, technical advancements and cost-cutting employment. david: we are looking at some of the markets across the asia-pacific taking a break. you see a rally for most of the markets. you see japan reopening. we see some pressure. we hope it alleviates. this is one of the markets i think we have seen at paz.
23,772, we have seen a breakout here for the hang seng. it's gone too far, if you will. valuations versus the pe multiple and your momentum indicator. for some people, it is still a buy. you are still getting very good value. big trades are just over 11 estimated earnings. let's have a look at japan. reopening from the lunch break. pushing towards session lows again. chart look at the today of the asx 200. nothing much really when it comes to reactions to the gdp -- and fact,h can
you can make an argument that we see them down. speaking, asia is looking like this, despite weakness across some markets. overall, we are still higher for the day. that means we are pushing toward a new one-your high on the msci asia-pacific index. ♪ emily: this is "bloomberg west." i am emily chang. snapchat is said to have explosive growth in ad revenue. it generated $370 million in 2016, a projected figure of $1 billion in 2017. here with us now are the bloomberg news reporter who covers snapchat and in new york, kathy boyle, the market analyst who wrote the report.
how do you expect snapchat to rake in almost a billion dollars of ad revenue next year? >> they have several products. they have snapped ads in multiple forms. they have sponsored geo-filters and sponsored lenses. there are multiple versions of those as well. there are quite a few products in quite a few places. there are multiple channels for snapchat to draw in ad dollars. emily: but how does snapchat get over the fact that the content disappears and there is not a way to make it go viral? >> i think it's the appeal to the millennial audience and knowing you will get 100% of their attention when the ad is served. it may not go viral, but it is impactful. emily: snapchat may be the next something. but people continued to talk about the drawback that the content is ephemeral. >> and they are not getting a lot of data on it.
there is not a lot of specific demographic targeting. but to her point, what is also interesting about snapchat ads is that sometimes they are integrated with the user content itself. they might use a lens by taco bell or by gatorade. a geo filter is something they put over their own snap. it's my head with a taco bell taco in my hand. you are making yourself into an ad, the people see it as fun. but there are drawbacks in terms of the data, the targeting, and the way this can scale. emily: how do you view those drawbacks, which some might call advantages? >> the time someone spends engaging with a brand, even if they'd never send it, it's highly valuable.
yes, the targeting has not been as robust as other platforms like facebook, but snapchat is adding more and more targeting capabilities, and that is something we think is really going to attract ad dollars going forward. >> executives from snapchat are going to be meeting with high level advertisers at the end of the month. what do you think will be their main message to advertisers to get them to spend more? >> i think it will be api, automated buying of ads. i think measurement will be a key message because it was one of the early criticisms of snapchat. advertisers were spending the money but not really able to
understand how well it was working. i think i key discussion will be measurement and targeting. emily: how do you expect snapchat's revenues to evolve over the next three years? >> the video ad unit is a key source of revenue. right now, a lot of the revenue is coming through their discover editions, which is the publishing content. but video ads with a different channel within snapchat. emily: how about international revenue? >> the bulk of the revenue now is coming from the u.s., but going forward, we see little larger share will be coming from international markets, primarily the u.k., western europe, but also canada. emily: there have been some interesting discussions and
reports that snapchat may be potentially working on hardware, maybe its own augmented reality glasses. it did buy a company that has a smart glass product. they are hiring glasses designers. what do you think they might be working on? >> so, when you use snapchat, a lot of what you are using is your location. a lot of what the geo filters do is give some sort of image or addition to your current context. say you walk into a tiffany's and you take a snap. you can overlay some kind of photo of rings. what they can do in the future is give deals that way. they can help you experience your world through snapchat that way. they have not been clear about what their plans are, but definitely people are using snapchat as a way to interact with their everyday world. they have the geographic filtering now, but they have to
figure out if it is something people would wear on their faces. emily: with virtual reality, headsets are all the rage. do you see this as a potential form of revenue? >> i wouldn't see it in the short-term. snapchat is all about content creation and consumption. if they can come up with a piece of hardware that fosters that or fuels that among users, that would be great, but i don't see it as something in the short term that will be a great ad revenue generator. emily: well, it is certainly fun to talk about. thank you both. staying with social media, facebook's new seed turns 10 years old today. in what else but a facebook post, mark zuckerberg detailed the creation of the product saying --
boarding passes by hand. this is the latest in a string of computer errors impacting airline carriers. a month ago, delta lost 100 million dollars in revenue due to a system outage. the nfl season is set to kick off and that can mean only one thing. fantasy football is back. online fantasy sports leagues have become big business. but there are questions about the legality of the practice. we sat down with the ceo of draftkings and asked about regulatory impacts on his company. >> they were all things we were doing or in the process of doing anyway. i think people who might have gone on before were hesitant because they did not know if there was oversight. now that they know there is oversight, they will be more apt to play the game. >> what does this do to
profitability? you are still in the start of phase. you haven't turned to profit yet. will this extend the time before you get to profitability? >> i don't think so. while taxes do have some impact relatively speaking, they will not change the economics of the business. regulatory fees are things we always devote to products and features anyway. in the short term, there is a caused. taxes in the long term will have an effect, but not that much. >> there have been reports about possible criminal insider trading with employees trading when you changed your policy. has that hurt your business? are people more leery about fantasy sports than they used to be? >> i think in some of the beginning stages of the press accusations, may be. but since then it has come out that there was not any impropriety. the problem here is not whether
something happened. the issue is making sure people feel safe. what we do is going to create an environment that allows people to do that. for us, and brazing regulation, making sure people know that there is oversight, whether or not they thought there was something happening they did not like before, going forward, they know they will be protected and overseen by the government. >> looking at the overall business growth and development, how much room is therefore competition? how many players can be in this market? there are reports you might merge with your biggest rival? >> i think competition is always in the cards. it is an early industry. it is going to create a lot of interest among other players. yahoo! joined in last year. i think we will see other companies that have been watching as carefully take a real hard look at us.
i think the competition is going to identify. >> so we are not going to see you merge with fan dual? >> not next week. >> compare the business today with where it was a year ago. what is the level of participation this week of this year compared to this time last year? >> this week is tough to predict because so many of our players don't actually come in to the lineups until the days right before the games. i think we will learn a lot in the next few days. the preseason, you can only do so much, but the preseason is up 70% year-over-year. i think that is a good sign for where we will be when the nfl season starts. >> how do you challenge the vision that it is a very few people making all the money and
benefiting off the retail, casual participants. how do you make sure i am not a patsy for the guys who are pros? >> the key is transparency and making sure people can play whoever they want. the best of the best are going to win the most. the key is if you are a casual player who just wants to play with your friends, you don't have to play with tiger woods on the golf course. you can play in an amateur tournament with a few buddies. that is what we are tying to create. we have leagues that allow you to form groups of friends, and to know exactly who you are playing against. i think we'll think we can beat our friends. whether we can or can is a different matter, but we all think that. emily: on today's funding board, takeaway.com plans to raise $195 million in an amsterdam ipo in the coming weeks.
kobe bryant made waves in silicon valley last month when he announced his new title -- a venture capitalist. his firm's first investment was in a chinese at tech startup. i sat down with vipkids's ceo and asked her what it was like to have an nba legend on her team. >> when we started to a half years ago, nobody was working with five-year-old kids online. i strongly believe this is working. kids are so curious and they want to learn. it's the most amazing thing you can do. >> there is also huge cultural interest in trying to learn english, and to a certain
extent, pressure for kids to learn english, isn't there? >> it combines curiosity and motivation. what we are trying to teach the children is not esl. we are trying to teach them common core based content, subjects like math, science, social studies, language arts. this opens the entire universe. emily: it reportedly took kobe bryant five minutes of listening about your company to decide he wanted to invest. what did you say that was so convincing? >> there is a hero behind the whole story. the founder love to the idea and had so much passion about changing the landscape. he had done a lot of work behind the scenes, told kobe's team about a vip kids. what i think lead kobe to make the decision is the same passion we both share about education.
he thinks it adds value to society to help children learn and grow. he was so motivated and inspired. emily: in addition to the capital his firm is giving you, what else do you think he brings to the table? >> kobe loves storytelling. also architecture. how do we go global, not only helping kids in china, but what about the future of all the other kids that learn about the world through language itself? the value is obvious. also, we are hiring about a
thousand teachers a month, working with them part-time. and kobe is now going to the teachers and saying hey, come work with the kids. help me. help education. emily: what can you learn from him? >> he is such an inspirational figure himself. he stood at the nyse and said i would like to help you guys work on more content. i would like to illustrate to the kids that they need to be persistent, patient, learning. very personal. he is an inspiration to a generation. emily: you guys have teachers all over the world and you have built your own conferencing software. why is that? >> the whole learning system should be in place to create the best efficacy and learning outcome. on skype, you don't have data or connectivity to the kids. from our own system, everything can be analyzed. it can be converted in efficacy studies and help us build a
better curriculum. emily: can this industry continued to be so fragmented or do you see some consolidation here? >> consolidation. online brings about the best resources across the globe, and also students. now we see 50% of our students spread across the country. a brand that is trusted so much by the parents and teachers that they all went to come for is borderless, not geographically related at all. right now, we are already taking up 50% of the market share for kids under 12 to learn online. we are going to rock and roll. emily: when we talk about entrepreneurship in china, what you think entrepreneurs in silicon valley can learn from entrepreneurs in china and vice versa? >> this week, we will be talking
to a lot of scientists and researchers about curriculum and everything. the kind of research and dedication to quality is something chinese entrepreneurs can learn from american entrepreneurs. emily: that was the cio of vipkids. nasa is gearing up for a seven-year mission to land on an asteroid left from the creation of our solar system. a probe is set to blast off from cape canaveral on thursday. the destination is a rock that passes earth every six years and passes so close, that over the next 200 years, scientists give it a one and 2700 chance of hitting us. scientists hope to learn about the solar system, the projection