tv Bloomberg West Bloomberg September 8, 2016 11:00pm-12:01am EDT
mark: you are watching bloomberg west. let us begin with a check of your first word news. donald trump is attempting to clarify his original position on the iraq war. a day after being accused of flip-flopping, he spoke in cleveland. >> i opposed going in. and i opposed the way hillary clinton took us out. >> mrs. clinton will convene a meeting of national security advisers on friday. she says killing the leader of the islamic state will be a top priority of her presidency.
political leaders plan to end a standoff involving planned parenthood that is holding up a funding bill for the zika virus. it would be involved in a stopgap spending measure avoiding a government shutdown. the flag that was raised at ground zero went missing but has resurfaced. forensic analysis confirmed its authenticity. it is back on display at the september 11 memorial museum. global news 24 hours a day powered by our 2600 journalists in more than 120 countries. i am mark crumpton. this is bloomberg. "bloomberg west" is next. ♪
emily: i am emily chang. this is "bloomberg west." wall street has apple shares sliding. what do investors want? could google and apple give traditional carmakers a run for their money? we will check out a new report. on car technology. the playstation 4 lands in november. we will hear from the sony chairman on what to expect from the latest hardware. investors and analysts taking stock of the iphone seven a day after announcing the coming upgrades. appleshare sliding in thursday trade, down 2% in the close. one key metric is not available. that is opening weekend sales numbers. in a statement today, apple announced it is changing its practice saying we are now at a point where we know before taking the first customer order
that we will sellout of iphone sevens. these initial sales are governed by supply and not demand. analysts have had mixed reaction to the iphone seven with wells fargo downgrading apple on thursday. here is what other analysts have told us. >> for now, they have delivered on the expectations. they had to deliver an iphone with minor improvements. what they have done successfully with this launch is to have cleared some differentiation between the plus and the seven release. >> i think they delivered enough upgrades on this new phone to get a massive base of people who have old phones to continue to upgrade to the new iphone. >> we are looking for 5% growth in fiscal 2017 and we are not looking for 37% growth that we saw in fiscal 2015. this is nice because you have a
cycle that can extend beyond a single iphone. emily: joining me now to discuss, is bob o'donnell. and benedict evans. benedict, what do you make of apple not releasing pre-ordered numbers? benedict: it is an inside baseball thing i would be doing if i were an equity analyst. who upgraded a year ago? what was the release date in china? what is happening with the moves to subscription plans? there is a lot of internal mechanics over the cycle and super cycle -- and what they look like in terms of upgrading regarding apple and generally in the market. i am glad i don't have to worry
about that stuff anymore. there is a more general point. the specific point of this product is that it goes on as a curve of innovation and improvement. smartphones are getting to the point where the s curve is flattening out. the difference between iphone seven and iphone eight is always going to be relatively smaller. you are feeling a little bit of fatigue in the general slowdown. a broader point would be that apple sells devices at close to $700 and there are only a few people that will buy those. the market overall is starting to slow down. emily: a mixed reaction to suppliers today as well. apple had a rough day. bob: apple has set the expectations in the past of giving away those numbers so there is a concern that the reason they are not giving it away is because the numbers are not good. emily: that is always the speculation that apple creates
those lies. bob: you could say a number of companies do that. they have been building these for months. a certain number gets to the stores and they keep manufacturing to fill the chain. the difference is that we are at the top of the s curve of the innovations data and things are lengthening. in the u.s., people are paying full price for your phone. if you paid full price a couple of years ago, you will be incentivized to keep yours longer in addition to the fact that the innovations are slowing. i think we will see people who have an iphone that were going to upgrade anyway, upgrade, but i don't think we will see a big switchover because of this phone. emily: this is no doubt an incredible device. so much technology packed in. how significant is the camera update if indeed that is the most significant part of this new iphone? benedict: on the one hand, the chips get faster and the power of the device gets stronger but then apple picks a few things to pull out.
you can be cynical about talking about the camera. but particularly in the camera in the seven plus where you have two separate sensors combining images and doing clever image processing which is the kind of thing that is easier for apple to do because they make the chips and the widgets. that is a big step. it signals the things that apple can do but also because having those two lenses and the software showing, points to where apple's plans to be in the next few years will be. 3-d will be important. image sensing will be important. you can sort of see apple putting building blocks in place for what they will ship in a few years' time. use all that with a fingerprint sensor. with the bluetooth chip. they put building blocks out there. and then you see them filling in the blanks.
the camera is a nice -- but it is a bit of a building block for something else. emily: do you see the camera opening the door? environmental recognition and such that the iphone could usher in a new innovation in photography? bob: it is a nice camera. it does lay some groundwork for certain things. for vr and ar is key. apple did not increase the screen resolution here. and that is one of the challenges. if you have a vr headset, you need higher resolution and apple did not do that. but the leverage to use two cameras to do interesting things will be a building block. there are a lot of other things that have to happen for them to move forward in a big way. emily: would you say that apple has won the wars? what should the company's priority be?
>> apple and google both won the smartphone war in different ways. they both have the things that they wanted. apple in particular has an echo system that is large enough to be self-sustaining. they have the developers. you do have a little bit of a feeling now that for apple the new iphone is a little bit like the new mac. but in the short term, you think about vr and ar. and in the five year view, the mythical car. those are the things that the next take steps in innovation will come from there. the only thing apple can do to get people angry is to change how the handphone works.
apple needs to get people more angry if they are going to disrupt things and change things. emily: we will talk about the mythical car in a moment but before we head to break, i want to ask you about the watch. we had a guest yesterday who thinks everyone will have a smart watch like everyone has a smart phone. but another guest said that is a huge stretch. what do you think? benedict: as many people have said, the curse and the blessing of the watch. as an accessory. there will be 6 billion adults on earth and 5 billion people with a telephone. all of those telephones will be smartphones in some way. 2.5 billion smartphones on earth
right now. there are not many other consumer electronic products that are that big. if the phone is your universal product, i don't think the watch is a universal product. it cannot be your only device. you have to have some other thing. that makes me think that it is probably an accessory and a device that will have -- apple has sold 10,000-15,000 more of these things and they will keep selling them and they are a good way to drive people to the iphone but i don't think you iphone but i don't think you will see 5 billion people with a smart watch. but at the point that you did, it would be an irrelevant conversation. it would not really be about phones and watches anyway. emily: what a future we are heading to. you are both sticking with me. coming up, should carmakers
emily: the ride hailing battle is heating up in india. the deal gives ola drivers discounts in insurance and maintenance services in hopes of building a dedicated customer base. this follows uber announcing that india will be the next battleground. automakers may have good reason to fear competition from tech companies according to a recent study by technology research.
this survey suggests these tech giants should be taken seriously. benedict evans, partner at andreessen horowitz. and bob is with us also. one of the things that surprised me most is you have a lot of customers who would definitely buy a car made by apple or google. bob: 1000 u.s. consumers who own cars or were planning to buy one and they were trying to get a sense of what the issues were that were important. in terms of the brand, what was fascinating was that over 50% of americans said they would modestly consider, and in the case of google cars, 59 percent and apple cars, 52%, they would consider purchasing those and 12% said they would absolutely buy an apple car and 11% that they would purchase a google
car. this was a hypothetical situation. the point was very specifically -- hey, if this was to occur, what is your level of consideration. the results were fascinating. exactly as you said at the beginning, most people had written apple off -- but i even gave people the option to say -- would you not even care about them? 20% said they would not consider an apple car. 22% said they would not care for a google car. but bottom line, a lot of people said they would think about it. emily: the apple car is completely mythical at the moment. do you think detroit and carmakers should be worried about apple and google making their own branded cars? benedict: fundamentally, in the car industry in the next 20 years, the move to electronic and software and autonomy.
the move to electric is fundamentally part of the car industry because it changes the core ways you build a car. it shifts into things where the traditional carmakers do not have a lead in expertise and understanding. when you then later on set semi autonomy and full autononomy, you start getting a picture in which this reminds me very much of what happened in the phone industry. we started out with nokia being the people that knew how to make phones. and it was hard for anyone from the tech industry to come in. apple then came in with the device that everyone in the phone industry laughed at but three years later, they were laughing on the other side of their face. the transition to electric on the one hand and the potential transition to semi-autonomy and full autonomy on the other would completely reset the stage of the industry.
the making, the integrating of the systems, creating the user experience and creating the actual software that might drive these things around, that is not somewhere that traditional automakers have any lead. all bets are off. emily: interesting. you also gathered some interesting data about ridesharing. there are twotrends going on right now. more and more people using ridesharing services but also companies like uber trying to automate ridesharing and getting self driving uber vehicles on the road. bob: if you survey the u.s., it is different than if you surveyed silicon valley. 80% of u.s. citizens have either never used ridesharing or only a few times.
it was higher if you are based in the city versus the suburbs. or if you were younger, it skewed higher. but when i delved into why you use ridesharing services, it tended to be supplemental use. after i was drinking. or if i was traveling. the people that use ridesharing as a true car replacement was a fraction of a percentage. i think it will be a long time before it will make a big impact on car purchase. i also specifically asked if ridesharing used autonomous cars, how would that impact your usage of them? not surprisingly, more people said they would use it less. even people in the city said they would stop using them if they used autonomous driving. emily: what do you make of those findings? do you see the ridesharing industry as one that is monopolistic, where there are
just a few players in the world or is it more fragmented? benedict: it is always tough to ask people what they think about a product that does not exist. we don't know what it means fully to have a semi-autonomous vehicle. how or what people will think about a fully autonomous car made by apple in 10 years time -- what would people have thought about the iphone or mobile phones a few years ago? i take it with a little bit of salt. to your other question, you could argue this both ways. there was a school of thought that said you would have a network in effect for each city. and both uber and lyft showed us that was not true. there were economies of scale.
on the other hand, what we have seen clearly in china is that uber had to give up on going in alone there. just because you are in silicon valley and have great software people, that is a much broader story. silicon valley is not the only place to build great software. emily: benedict evans, partner at andreessen horowitz, you will stay with us. bob, thank you for bringing us that study and for joining us. up next, twitter stock price seems to be at the mercy of sales speculation with big swings in both directions this week. we will focus on that next. this is bloomberg. ♪
every time there is a whisper of a sale. why has it not happened yet? ben evans is still with me. i interviewed a member of the board last week and he says they need to consider the right options and that statement has been analyzed. do you see twitter getting bought in its near future? benedict: it is not like it is an obvious thing that someone else would say. like microsoft buying linkedin. on the other hand, it is a company that has always struggled to turn the light of the product into a world company. the levels of indirection within the company and the product have never quite gelled. that has kind of always been the case.
there has always been a problem of the core question -- you sign up and you get a blank sheet and you don't know what to do. you have to invest your time to build the graph and the set of people that you follow. when you put that effort in, it becomes tremendously valuable. but they have had a problem finding ways of broadening that product out to get users. it has never been quite clear how you would do that. there are 1000 analogies to think about twitter, but i'd like to say that they almost discovered it as opposed to creating it. emily: do you think that jack dorsey, that this is something he can do independently even though twitter has not been able to do it in its history? or does the buyer have to change this?
could they re-accelerate user growth and make this a product that everyone appreciates and understands instead of a few hundred million influencers? benedict: frankly, i do not know. i do not know mr. dorsey. but there has always been that struggle of how you get beyond the core base and those that are willing to pump that time into the product. there is also that existential question -- is it actually possible to do that? it is not slick and easy or fun in the way that snapchat is. it does not appeal to that part of the hierarchy of needs. it is not clear what that product would be or how you would create that. twitter has done a lot of interesting things but we don't know what the new thing would
samsung shares have taken a hit after regulators cautioned over the use of its latest smartphone on planes. it is being recalled because the battery can catch fire and explode. the faa says the phone must not be turned on or charged on the plane and should not be left in checked baggage. rally,setting global japan's sovereign debt had investors their biggest losses in the past two months. analysts say stimulus has pushed
worldwide bond markets into a single entity, stoking concerns that any policy reversal could spark a global selloff. china has begun radiation tests on its border with north korea. -- on the was near 68th anniversary of the country's founding. stocks areated jumping. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries, this is bloomberg. >> we are seeing a stronger yen today reversing that weakening we saw in the last session. higher by 4/10 of 1%, that is being felt among japanese
stocks. we are seeing the japanese stock market coming back from its lunch break, gaining 1/10 of 1%. we are seeing it come up from that negative territory. 1%.ing 1/10 of we have to talk about japan's debt market because we might see the world's second-biggest debt market unraveling. japanese yields have been rising after falling to record lows. after that monetary experiment and the bank of japan, we are seeing more than eight point $5 trillion of sovereign debt around the world has fallen to expansehose as the boj its holdings. analysts are concerned this may problems for other markets around the world. hensing -- hang seng
index has been surging in positive territory. casino stocks in macau, one of the gainers. we could see more stability in the gaming industry. this is bloomberg west. a tech giant released an updated model of its important products and we are not talking about apple. sony and its two new playstation ur. in november, it will begin selling a souped-up version of its console. it can run virtual reality games. also replacing the assisting the us for -- ps 4.
the ps3 had a lifecycle of three -- of nine years. why the rush? cory johnson caught up with sony playstation chief and asked him that. >> playstation 4 will be making its fourth christmas this year. we are constantly updating the machine to give it more abilities and features. this time, we are concentrating on the display aspects of it. we brought 4k gaming into the living room. as well as more support as well. we are using our power against the technology to get more features and abilities to users and developers. >> when you imagine how this will affect your base here, what numbers are we at?
what percentage of users do you feel are going to want this upgrade and not wait for the next generation? >> in the marketplace now, we have 40 million playstation 4's worldwide. we believe that bringing out playstation 4 in november -- we look to have a great year ahead of us against both platforms. >> that was such a hedge. i will accept that as a nonanswer. but for the hard-core game audience, they feel this will be a big step up. are there things in this that will expand your audience? >> we are looking at a target of another 20 million units worldwide this year. we are chasing a significant target. both platforms give us a chance to do that. next month in october, we are also introducing playstation vr. >> talk to us about that. i feel like oculus gets so much
attention. but you have this massive base with a machine that can run some pretty complex software. what are your expectations around that and how do you start to grow that business with a new experience that gamers have not experienced before? >> this is entirely new. it is a completely new way to experience this. we will be launching the platform on october 16. 20 new titles. 50 by the end of the year. we think this will allow people to experience entertainment in a way they have never experienced before. the time has come. 2016 will be the year of vr. >> how different is the experience in terms of duration of play? some people say that people get dizzy or tired of playing. the experience is so immersive. that goes against the joy of playing madden football for 18
hours straight. >> there is still a joy of playing for many hours straight. we found in our experiments, that it is so intense and immersive that it tends more to an arcade gaming experience. we will be learning new things every day with this. >> do you have new partners with this? >> our development partners are taking part in creating content. our internal studios will be bringing out a half-dozen games. we will be seeing people like warner bros. with the batman series and electronic arts with their star wars series coming to vr as well. emily: chairman of sony interactive entertainment worldwide speaking with cory johnson.
playstation makes up just half of the two main competitors in the console world. the archrival is the xbox made by microsoft. that company could not let yesterday's announcement go unremarked. scorpio will be the most powerful console ever made. they pointed out that the ps4 does not support blu-ray. we have been tracking this rivalry between sony and microsoft. joining us now with that context. how does this latest announcement position sony versus microsoft ahead of the holidays? >> they have already done a good job outperforming microsoft. that extension should continue. we have a strength of not just content studios and the titles they have but also a large base. microsoft does not have that at the moment. as far as microsoft solution being more powerful, in the end developers look for a common denominator.
even if that comes out next year, i don't think it will impact sony's momentum as much. emily: what do we know about the effects of the ps4? >> they did not give too many details other than it is more powerful graphic wise. because they are positioning for virtual reality which requires more power, thye want to make sure that developers have the hardware for them to develop a fixed -- over the next couple of years. emily: cory made an interesting point talking about the halo around oculus because of the facebook mark zuckerberg affect. are virtual realities the same as playstation users? >> within the gaming community, largely i would say. there is an overlap. but as a future for oculus -- it
is beyond gaming. vr is gaming centric. but if you look at the projections, ar and vr, are where the big bucks will be. emily: oculus and htc having a much bigger market? >> potentially, long-term but i don't think sony's momentum and ability to corner the market will go away anytime soon. emily: let us go beyond gaming and the advantage of 4k capability. >> the advantage for now is having netflix in 4k -- it helps put the content momentum forward. so far, we have seen larger installed software. sony doing this, microsoft doing this can help its content to push and hopefully we will see
better resolution content in many games. emily: thank you for joining us. one stock we are watching -- micro focus. a british software company that scooped hp enterprise asset on wednesday. investors of micro focus got a good deal sending shares up by 22% on thursday. micro focus is known for purchasing older software programs and cutting costs and improving profit margins. it is the biggest acquisition of a u.k. buyer. the fall in the pound after that made these kinds of deals more expensive for u.k. buyers. up next, there is no shortage of big tech backers after apple dropped a great deal last spring. details are next.
they received banking from silicon valley giants. didi's evaluation has jumped. the leading ride hailing app in china just received a $119 million from foxconn. on top of its recent $7.3 million funding round led by apple. it has had a series of successes. joining us now to discuss, from new york, selena. what do you make of this new investment? >> this is interesting. didi is getting another big name investor. it makes a lot of sense on that new investor's side. they are the world's largest manufacturer and they have been struggling from the global smart
phone and pc slow down. they are looking to diversify away from that. they have made other investments in the auto industry. they are invested in an electric car company and with didi, it will be interesting to see what collaborations they will see from this. emily: didi said they are focused on innovation and execution and exploring opportunities though there are no concrete plans for operation. how do you imagine they could collaborate? >> there are no plans outlined yet but you can imagine a whole world of possibilities. didi has a ton of data. i think when we put apple into this picture, the possibilities of that even more interesting. apple made a $1 billion investment. for instance, picture an ecosystem where apple may use foxconn to assemble their electric vehicles and then you distribute that smart vehicle over didi's platform. this is all speculation. the role of apple in this is unclear but it is interesting to
see what will come out of this. emily: especially as this apple car is still a mythical creature that may or may not exist. when you look at a company like didi, we were talking about this earlier in the show, do you believe it is shaping up to be a monopolistic type of war? didi versus uber worldwide? where are their rising places including in india when you look at ride hailing worldwide? >> i don't think it will be a two world monopoly. didi is the dominant player in china but they do have a lot of smaller upstarts competing. it is a huge market. they have a lot more saturation to reach in china. as for india, there are local players there as well. all over southeast asia.
uber cut their losses in china which is great for didi but they are rapidly trying to partner with other companies to gain in that south asia market. i think we have to remember that this is a very fast-moving space in ridesharing and there are always new companies popping up. emily: these companies still losing a lot of money. selena wang, thank you so much. tivo shares plunge more than 7% at one point on thursday. an unusual move on a day when two companies complete an already announced deal. they said they were buying the pioneer in april. robert stone wrote today that the issue was a result of merging two tickers. the plan was to list those shares.
tivo shares quickly recovered after that. dow technologies plans to cut 2000-3000 jobs. the cuts will mostly be felt in the u.s. in the supply chain, administrative, and marketing positions. dell is looking for cost savings in the first 18 months after the transaction. the newly formed company has 140,000 employees. this is the biggest tech deal in history. tomorrow, on bloomberg, peter on the surveillance. later, a conversation with the vanguard group founder. join us on the 40th anniversary of index investing. that is at noon in new york. coming up, some college students may soon be getting their burritos delivered via drone. the details behind the new project by alphabet wing. that is up next. this is bloomberg.
emily: now, to a story we are watching. google has a history of acquisitions. add apogee to that list. it announced today that it -- it makes programs that developers use to connect with outside apps and services. the deal shows google is willing to invest. the company expects the deal to be completed by the end of the year. google is taking food deliveries to new heights. it sounds like a dream come true for many college students, drones will soon be delivering burritos on the campus of virginia tech. it is an experiment coming out of google's moonshot project wing.
it has gotten the green light from the faa. bloomberg aviation safety reporter aaron levin has been reporting on this story and joins us from washington. this is a partnership with chipotle. explain how these tests will work. >> this is not just for college kids. some of us would very much like to have a burrito delivery also. this will be a limited initial test. but it is significant in that it is the first time they are delivering products to real people. they are going to have a drone that will pick up the burrito or whatever people want from a chipotle truck and fly it across a field to students and other volunteers. the people who will be collecting this will be protected so they can live up to the faa requirements to protect people on the ground.
it is a really important first step toward an eventual drone burrito delivery. emily: i am right there with you. what does this tell us about how items like burritos are going to be delivered via drone in the future? >> there are a couple of clues. it is a wide open thing. a lot of this is going to be altered as we move forward. there are some clues. they very much want to do this by robotic, automatic devices. in this case, there will be people standing by to take over if the drone goes astray but that is one of the key elements of the test. can they essentially program these devices to fly over where a specific person is standing and drop this drone down by a winch.
there are still a lot of little details to work out. gps will get you within 20 feet of the person but they will have to do all sorts of tests to augment this and make sure they get it right on the money. emily: anthony foxx was talking about new rules and guidelines being put in place to govern drones. take a listen to what he said. >> this will open the door to many new commercial uses. on the other hand, as we have commercial uses, hobbyists, like the integration of all of those different uses into a single system will be the most beneficial part of this. emily: for so many years, the drone industry has grumbled that
the u.s. drone industry has fallen behind the rest of the world in terms of commerce. does this test signal a shift? >> i would say yes. for the last several months, most of the industry folks i have spoken to have done an about-face and said the u.s. government is moving much faster than before. they have put in place new regulations that just went into affect a week or so ago that allow much more widespread commerce. this is another example. they are allowing this test to go forward. automated drone sites are technically not allowed under the new u.s. regulations but the faa is being very flexible and saying -- if you have someone outside that can take control, we are all for you testing this out. it really does seem to be moving forward. emily: aaron levin, our bloomberg news reporter.
quick it's noon here in hong kong. south korea says the north conducted a nuclear test this morning. the president strongly condemned what you calls jong a pause provocation, warning it would ultimately lead to self-destruction of that nation. china is putting the worst of its factory gate behind it after prices decreased last year. polling .8% in august. consumer prices rose 1.3%, the most in almost the year.