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tv   Bloomberg Technology  Bloomberg  October 18, 2016 6:00pm-7:01pm EDT

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warplanes are halting air strikes on the besieged city of aleppo. it is intended to give civilians safe passage out of the city. german chancellor angela merkel will host a peace summit in berlin tomorrow. it is her first meeting in more than a year with russian, ukrainian, and french presidents, although she is downplaying expectations for any significant progress. for the first time ever, donald trump is on pace to outspend hillary clinton on tv ads this week. he is expected to spend $40 million on ads, compared to $10 million for clinton. -- $14 million on ads, compared to $10 million for clinton. folk magazine is officially backing hillary clinton for president. vogue magazine is
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officially backing hillary clinton for president. it is the first time the magazine has ever backed a candidate. global news 24 hours a day powered by 2600 journalists in more than 120 countries. this is bloomberg technology. emily: i am emily chang and this is bloomberg technology. coming up, intel sinks in after-hours trading despite beating estimates. we will rake down the chipmaker's fourth-quarter warning. plus, our exclusive conversation with the newly minted ceo of the benefits.
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zenefits. first, to the lead. intel missed estimates. manufacturers will again be sitting on a stockpile of chips. cory johnson spoke with intel's executive vice president stacy smith right after earnings were released and asked about the outlook ahead. take a listen. an outstanding third quarter and our view of the second half is up significantly from where we were 90 days ago. it's a combination of strength in the pc business, but as you see, we had record revenue in our strategys playing out. specific to the pc segment, we are up from when we initially
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set the guidance for q3. we are up nearly a billion dollars in revenue. biggestegment is the piece of that. we are seeing market strength particularly in business pcs. seeing our customers starting to put a little more inventory in place as they anticipate sales in the fourth quarter. the fourth quarter, we are expecting a normal pc market. we think some of that inventory gets consumed. we will back that up with a second-half that is much stronger than we thought. past, inventory makers would try to manage stuff by getting it in early. not characterize it as excess inventory in any shape or form. i think what we have seen is that they are managing
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inventory, and as they saw in demand strengthening, they put a little more inventory in place. i don't think it's excess inventory. i think it's a lean baseline being strengthened. there are pockets of strength all over, but the main difference from the guidance we had 90 days ago is that the business client was stronger, particularly in mature markets. i think there are large enterprises upgrading computers. installedook at the base of computers, it has gotten to be fairly old. with the new devices in the marketplace, they are thin, light, great battery power, lots of performance. i think that's a compelling upgrade for employees of large companies. >> what is the effect on margins of that mixed shift? in ourink you can see it q3 results. -- justjust ahead of
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shy of 60 5% gross for the company. that's three points higher than we expected when we started the quarter. what you are seeing it intel is a combination of in demand and great execution. we have the best manufacturing technology out there coming down the cost curve fast. we are executing on restructuring, so we are getting a little bit of leverage there. that has resulted in great topline and bottom-line growth for the company. intel executive vice president stacy smith. editor at large cory johnson joining me now. how troubling is the fourth-quarter outlook to you? y: it depends on a customers. how honest are intel's customers being with them? intel has had relationships with these managers for 30 years. there is not an issue where the
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customers have to over order, but he talks about them ordering in advance of the fourth quarter, but operating lien. word. an important tech companies blow up when they get too much in the pipeline. we see certain shareholders today saying i don't believe it. -- if they areg pulling orders forward from q4 , maybe inventory in q4 is going to be a problem. emily: shares still down after hours. talk about was going on with the pc market. over the past few quarters, there were signs that maybe it had bottomed out. : his commentary suggests maybe it has. his commentary both on the conference call a hand in our interview was a little more bullish than the numbers might reveal. we will see how it plays out.
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the we know, generally, is inventory cycle of smart phones and pcs are being stretched out longer and longer. we may never get to the numbers we hit in 2011. that may be peak pc, as they say in the oil business. emily: thank you. yahoo! beating estimates in the third quarter. a rare bit of good news after a large-scale hack of user data was publicized last month, threatening the purchase of the company's main web assets by verizon. marissa mayer send out a statement saying --
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e marketer senior forecasting analyst martin joins us now with more. martin, with this deal pending and in a very gray area, how important are these numbers today? martin: the numbers are where we expect them. we see earnings and margins basically where we expect. i think the data breach is still a concern. the reason for that is that , aoo! has a lot of users global audience, and basically, you know, different countries have a different take when it comes to data concerns and privacy. we can see this having an effect in general for their ad yahoo! mailcause works as a gateway, basically, for a lot of their services, and had products, and other
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properties. products,-- and add and other properties. it drives people to their music and sports. it could affect them in the future. emily: we have no indication that the deal is not goingo have beenough there warning signs from verizon's general counsel. what have you heard? deal be compromised? martin: in general, we don't think the deal could be compromised. that would indicate a lot of legal consequences, and i don't think either company would be interested in that at this point. the door toopens negotiation. we think probabl having this problem with yahoo! mail opens the door for verizon to egotiate with yahoo!
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emily: perhaps a discount is in store. how much do you think this affects their core business? a lot of people who engaged with yahoo! go through mail. in different countries, they might have different concerns. it's a global audience yahoo! has with their male property. emily: i did speak with marissa mayer the day the deal got announced. she is still working at yahoo! she has agreed to see this deal through. take a listen to what she had to say. >> i got two priorities. one is seeing the transaction through the close. but also watching over the value of our asian assets and the equity stakes we have there. moving forward, we will ultimately figured out.
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test figure it out. emily: what is the number one out. -- figure it emily: what is the number one be doingoo! needs to now? martin: reassuring users that this is not going to have an effect on their engagement. you for joining us. two stocks we are watching now. ibm sank on tuesday but paired that lost to about 3%. this after monday's reports field skepticism about the fundamental health of the company. netflix shares spiked, putting to rest investor concerns about slowing growth, at least for now. after a scandal
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enefits isar, zan relaunching. ♪
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emily: now to zenefits. the hr software maker has relaunched. the ceo resigned after failing to comply with state insurance regulations. they have paid about a million dollars in fines and renegotiated a lower valuation with investors to avoid a potential lawsuit. i sat down with the new ceo, who took over in february, and asked him how the company has changed. david: we have completely fixed that problem. in fact, i think we got so good
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we are now anhat industry leader in compliance. emily: talk to me about the first day, you become ceo and go back to the company. what do you say to employees? david: i sent a letter to employees that i reiterated at the company meeting. i said the company has a compliance problem. it was bigger than a failure of technology and process. easilyhings were pretty fixed. but it was also a problem of culture. the culture did not prioritize compliance. fix this problem and not end up in some other hot water, we had to improve our culture and adapt it to a later stage. emily: let's talk about the culture. conrad created a program that .llowed cheating on the test there were reports of unlicensed
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brokers selling insurance. infamous reports of sex and the stairwells. how do you change the culture and are you sure the culture has changed? david: some of this is the press getting carried away. emily: it didn't happen? david: well, the stairwell story blew up. of truth to a lot the fact that on licensing, the company did not prioritize compliance the way it should have. towas important for us change the culture of the company. the way we did that was declared new company values and we really made compliance central to everything we have done. emily: what was turning point for you when you really felt you were back on the right track? david: one turning point was when we got praised by an insurance commissioner for writing the ship, her term. think of a bunch of startups that at various points have gotten into regulatory
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trouble, but i am hard-pressed to think of any that have ever been praised by a regulator the been after itss problem. getting praised by regulators was a turning point. and i think today is a huge turning point. emily: how big is the market for all in one hr and how big a piece of that pie do you think zenefits can get? david: it's a huge market. ont businesses are doing hr paper, in file cabinets, with spreadsheets. they are using multiple systems that don't talk to each other. it's very fragmented. what we have seen is that since zenefits came to market with the idea of all-in-one hr, virtually every company in the hr space has copied it, and not just startups following on our heels, but the big companies. madever mistakes zenefits
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in the past, the one thing i got right was this market position. everybody is trying to copy that. emily: you are trying to close on the controversy. you are saying to your competitors, when they go low, we go high. david: these problems are things we have already solved. i think what customers care about his product. what we have launched today is a innd-new payroll system california. it's cheaper and more integrated with time, attendance, and tracking. customers care about who has the best product. here customers also may
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care about the election and serving some all -- small businesses. what are your thoughts on clinton versus trump? generally, i try not to get involved for the simple reason that the country is very polarized about politics. the last thing i think you want to see is ceo's bringing that polarization into the company. i try to avoid political stance. i do get asked about it a lot. i have talked to other ceos about their support. peter thiel is donating $1.2 million to donald trump even as these sexual assault allegations roll in. you are good friends with peter. about have any thoughts this? david: i respect everyone's right to have the room political opinions. peter is a great friend and has been a great board member. what he does on his own time with his own money is his business.
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maybe sex in the stairwells is a myth that didn't happen, but one thing zenefits points to is the rise of the broux coulter in silicon -- in silicon valley. culture i am curious how -- bro culture in silicon valley. i am curious how your thoughts on diversity have evolved. david: we have always sought to find greate and to talent wherever we can. we believe in that. they: talk to me about products you are announcing today. how difficult were those to nail down and how do you move forward? david: it was a lot of work. ofefits built the idea
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all-in-one hr, but no one can do everything, certainly not do it well. the only way to be a true all-in-one is to create the ecosystem. we have launched an app store for small businesses. easily onstall apps your phone with a couple of clicks. we have launched this with companies like google, salesforce, e shares. the list goes on and on. this is a giant expansion in the all-in-one category. we are the first company to go from trying to do it all ourselves to including these specialty apps. technologyou think can really solve all the problems in hr. some of the problems are benefits. some are work and family policy. i wonder if some of those cannot other kindsd need of solutions. david: we know according to the
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small business administration that small business owners spent about a quarter of their time dealing with hr tasks. compliance is a big issue with them. much moreakes this manageable. we surveyed customers and asked how much time does zenefits help you save. the average was a month of time. that's amazing to give back to a small business owner in month of time by taking this administration off their plate. from: how far are you away settling with everyone? you have made some settlements and you have some cases open. david: we have been very forthright with regulators and they have been very quick to settle with us. we have settled with about nine states. california is our lead regulator, so that is still outstanding, but i feel pretty optimistic we are going to have all of these problems behind us by the end of the year. emily: zenefits ceo david sachs.
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still to come, review of google's new pixel smartphone are out. how much of a dent couldn't make in a market dominated by apple a marketuld it make in dominated by apple and samsung? we will discuss. this is bloomberg. ♪
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emily: a story we are watching, tesla says buyers for new vehicles can expect to receive their cars as soon as may 2018. the update was initially interpreted as a delay. tesla said in a statement -- separately, tesla is scheduled
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to unveil a new product on wednesday. airbnb is teaming up with solar city to encourage hosts to install solar panels. those renting on airbnb can now get up to $1000 back if they use solar city to set up the system. existing customers who become credit to get a $100 stay in another airbnb property. , samsung is dealing with the biggest smartphone recall of all time, but our next guest says it's not as bad as it sounds. we will catch up with the head of creative strategies next. this is bloomberg. ♪
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when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. great, that's what i said. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. >> let's begin with a check of your first word news. president obama is responding to
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claims made by donald trump that the november presidential election is rigged. mr. obama: i would advise mr. trump to stop whining and go try to make his case to the voters. if he got the most votes, it would be my job to welcome mr. trump regardless of what he said about me or my differences with -- on opinions, and as skirt his officeover to where there would be a peaceful transfer of power. >> hillary clinton and donald trump take the stage tomorrow night in las vegas for the third and final debate. chris wallace says he plans to ask questions on debt, immigration, the economy, and the supreme court. last month was the hottest month on record since record-keeping began. it marks 11 consecutive months of record high temperatures. go blues 24 hours a day powered
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by more than 2600 journalists -- dayal news 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. we have a look at the markets. adam, good morning. adam: we should have a bit of green on the screen when i could eat underway across asia. trading getsy underway across asia. get a little bit of a rollover from the strong u.s. session and the rally there. the big news today, intel after the bell. close a onkeeping a those in asia who supplied to intel. on the suppliers in to intel.upply
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big gaming groups are facing a lot of offshore competition. they are going to merge in a deal that is valued around $10 million. adam hage in sydney. more bloomberg technology next. emily: this is bloomberg
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technology. it seems verizon maybe getting impatient with yahoo!. yahoo!'sof progress on investigation into a 2014 data breach is causing some misgivings internally about the deal. alex sherman's with me now from new york. all, do we have any indication whatsoever that verizon could actually pull out of this deal? yet.t we don't have any evidence at this stage that verizon wants out. it sort of behooves verizon to take this stance whether or not they won out. at this stage, all of the leverage in this deal swings verizon's way. nore may be -- there's downside to saying there may be an adverse material affect to the hacking because the worst thing that can happen is verizon
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gets no discount. what they are hoping for is a discount on the deal announced several months ago. at the extreme, they would pull out of the deal entirely, but there is no real evidence yet that verizon wants to walk away. emily: the investigation is ongoing, and verizon says it has gotten little information and wants more. what is it that verizon wants and needs to know? going to have to figure out how material this is. this becomes a legal issue quickly. it will be turned over to the lawyers, probably on both sides, , does this in fact warrant a material adverse effect clause, which is standard for any m&a transaction. the lawyers will have to get together to figure out ok, what
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exactly is the monetary amount of damage here? does that in fact become material? if it is, what then? verizon went through an arduous process to acquire yahoo!. to walk away and come away with nothing is a lot of work for zero. angle on this would be we still want to buy yahoo!, but maybe we can buy them for less. maybe we can settle before we go to court and have to litigate for months on both sides. usly: alex sherman keeping up-to-date in san francisco. thank you so much for joining us. reviews are in for the first real made by google phones. many are calling the new pixel handsets the best android phones on the market. that sent shares about the bet to a record high. of course, there is -- shares of record high.
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of course, there is a gaping samsungthe market after discovered their phones have a tendency to overheat and explode. class action lawsuit was just filed against the company in new jersey. how are all of these developments shaping the smartphone wars? a creative development analyst is with me in studio. did you find what out about sam sung in particular and how damaging this could he? >> we knew samsung had pretty loyal buyers. around 60% of their customers -- of apple customers say they will buy another apple phone. we found only a 20% impact on their base, that they would strongly consider not buying a samsung product. where we saw the biggest impact was people who do not have a
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samsung product. they said they now would strongly consider not buying a samsung product. a war.this is doesn't every point count? >> no question. we thought it would be wider because of how highly publicized this has been. awareness is off the charts. we thought it would be high. only 20% of their customers said it would have a negative impact. for the most part, they still have a strong affinity for their brand. about let's talk awareness. samsung has set up stations and airports where customers can exchange their phones. some people aren't aware of it. some people love their phones so much they don't want to turn them in. >> the note seven was a beloved product. people don't want to give it back. they really wanted that product. it is to give it up,
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it's the right thing to do because they are being banned all over the place and there are safety concerns. emily: and yet, samsung still doesn't know what caused this. isn't that a cause for concern? need a public statement from them to know that they have solved the problem and that it won't happen again. about googletalk and the new pixel phones. reviews are mostly positive. will google get a big bump from this debacle? tofor google, it's going take some time. we asked questions around the pixel. most consumers had no idea what the pixel was. those that did had privacy concerns. , they saidthan not google has to prove they are a quality phone maker before they will consider it. that is annexes base hard-core loyalty base.
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you have htc customers. i think there is a market opportunity for google. the margins they are making on hardware could be quite lucrative. this is going to be a multiyear strategy. what about apple? one of the things you found out .s that ios is the highest ever >> apple keeps taking share from a platform standpoint. we have known the iphone was the largest brand out there, but to see ios continue to gain share shows that we are seeing a trickle rate of switchers from android. we are still seeing around a quarter of android customers saying they have strong intent .o switch to iphone about 44% of apple's u.s. they intend toay
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upgrade. than we lot higher thought. we are seeing an old base of iphone 6 and six ace that are going to upgrade in the next six months. they: what happens in upgrade cycle? who wins? who loses? >> apple has a much larger upgrade cycle coming, as long as they could meet demand. it will be a return to growth quarter. monthsk the next six will be a steady trickle rate. we expect a good run. that could cause a lot of people to question what will happen next year. emily: how much does samsung lose? >> and again, our take away from the note is that it's probably not going to cause a mast affection, but it will affect people on the fence -- mass
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defection, but it will affect people on the fence. samsungo see churn from to apple, and i think that will play in his well. emily: always great to have you on the show. great research. check it out. a stolen e-mail leaked by wikileaks shows tim cook was on hillary clinton's short list for vice president. the e-mail from campaign manager john podesta discussed a first cut of people to consider. the list, bill and melinda gates, elizabeth warren, and bernie sanders. apple isn't commenting. we will speak to the president and cofounder of lyft on why he thinks car ownership will be a thing of the past. this is bloomberg. ♪
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emily: a story we are watching. london regulators have stepped up a battle with uber. all drivers are required to meet requirementanguage to get a taxi license. the new rule comes after uber successfully sued to block that requirement when it only applied to drivers from non-english speaking countries. the proposal was considered discriminatory. this comes as london tries to protect its historic black cab industry. ft is ratcheting up the competition and driving full force into driverless technology. uber publicly tested its own self driving fleet in pittsburgh earlier this fall. manifesto predicts 'sat by 2021, most of lyft
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writes will come from driverless cars. he joins me now to discuss his aggressive forecast. majority of rides will be autonomous. emily: tell us what you are doing now to get there that fast. isone of the biggest things that the cost of transportation is coming down. people think about a $200-$300 monthly car payment. it's actually about $750 with aboute costs added in, $9,000 a year for the average american. we are adding products that bring down the cost. share a ride and get it at a lower cost. we are beginning various tests on the autonomous and that will allow us to add additional products that bring down the cost even further. emily: how much of an impact is this having on fundamentals right now. >> in major cities, it could be
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up to 50% of all the rides. emily: you have a partnership with gm --re business is selling their business is selling cars. ?re you on the same page >> one thing that is super interesting about general motors is that a lot of their profits are coming from rural environments and urban environments is a big opportunity of growth for both us and them. inot of when i talk about the vision is what is going to change in urban america -- what i talk about in the vision is what is going to change in regards to car ownership in urban america. a big reason they invested in our company is because they agreed that a large percentage of urban americans are going to switch to transportation as a service, which is what we do. emily: talk about what sort of steps you are taking together to realize the future. >> one is vehicle access.
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we wanted to make car ownership optional for passengers. we have also made it optional for drivers. a driver who doesn't own a car or have access to a vehicle that qualifies on our platform can rent a car by the weak and drive on the platform. that is one thing we are doing. the second thing is planning for this autonomous transition. will have more specifics to announce in the months ahead. emily: can't wait to hear them. elon musk has said he wants to create driverless teslas but these would still be cars people own. you disagree. why? likes there is a benefit to the large fleet operation that lyft already does. , justers, in the future like they pay for netflix or
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spotify, we believe they will pay a monthly subscription for transportation. take care of your parking, fueling, cleaning and maintenance. you won't have to worry about that and you will get a consistent experience. want,er experience you and we can offer you without hassles. in a world where you have private ownership, you will not have a consistent experience and cars will not be available at the times they are most needed. emily: there has been a lot of change in the ridesharing business. you have a previous alliance with dd and olap. how does the partnership between guys? uber affect you do you think they sold you out? not want to invest capital in china. they have a different regulatory structure, and that played out.
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that deal happened right after some major regulatory changes took place. we believe all along that would be a market that behaved very differently. innever made investments china come and we believe that paid off. emily: are you still working with didi? differentu land in a country, you can use the services that resulted from the deal we happen at them. emily: -- have with them. about talk to me fundamentals. in this environment, do you need to show profit sooner than later ? craig's i think that's important in any business. i think -- >> i think that's important in any business. i think we are showing the right and we have raised $2
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billion to invest in future growth. want us to betors aggressive and make sure we capture as much market share as possible because of the future opportunities. have inow much do you the bank? >> we have raised $2 billion and the majority of that is in the bank. the capital around ridesharing changed? >> i haven't noticed a change. overall, it has changed, but it's hard to find an industry with so much upside as people change over to transportation as a service. so, uber is no longer hemorrhaging billions of dollars. what is the route to you gaining sustainable market share when you have a competitor that is potentially stronger than ever? >> people forget that we grew up in this environment. we were born in an environment
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where it uber had raised more capital than us. lessifference today is than it has been historically. in asaid, when you invest smaller player, it can be more efficient to gain share. year over year, we have grown our share in the u.s. think in what city do you you are doing best over it? >> san francisco has been incredible for us. new york has been one of the fastest in terms of year-over-year growth. emily: would you expand internationally? >> yes. emily: where? >> where we go first is something we will announce later. emily: there were reports that to sell itself and had difficulty. what is your response to that?
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where are you in a year, five years? >> we are not for sale, to be clear. my cofounder and i have been working on this vision of making transportation more affordable and sustainable for almost nine years now. our goal is to continue to do that until transportation is than carrdable ownership. emily: thank you for being on the show. tomorrow, do not miss our exclusive conversation with it the dell ceo and founder, michael dell. 1:00 p.m. newt york time. coming up, or of it all makes a comeback. why this launch was -- orbital makes a comeback. why this launch was so important to future contracts. ♪
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emily: in this edition of out of this world, orbital launched a rocket for the first time since losing a rocket two years ago. thelies are bound for international space station. along with spacex, orbital holds to first commercial contract carry supplies for nasa. the company had been launching atop the atlas five rocket while its own was grounded. trending, cbs turning the hit a mobile game candy crush into a tv show. the network has signed on for an hour-long live action game show involving contestants, and one giant interactive game board. king has not been able to
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replicate the success of its original hit game so it is looking for other means of making money from its property. this he dishfor bloomberg technology. -- this, -- a dish and edition of bloomberg technology. , all episodes are now live streaming on twitter. at 6:00 out weekdays p.m. in new york, 3:00 p.m. in san francisco. that's all from san francisco. this is bloomberg. ♪
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♪ announcer: from our studios in new york city, this is "charlie rose." charlie: the campaign to retake modal in iraq begin this morning. iraq's military says it has already inflicted heavy losses of life and equipment on isis, ashton carter called it a decisive moment in the fight against islamic state. up to one million civilians could be caught in the crossfire of what could become a major humanitarian crisis.

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