tv Bloomberg Technology Bloomberg January 5, 2017 12:00am-1:01am EST
1:00 p.m. in hong kong. i'm rishaad salamat with an update. china's services sector grew the most in 17 months in december. the reading is 53.4, up 3/10 of a point from the previous month. is it assigned the chinese economy is perhaps showing stability? reading weighest have seen since july 2015 and the fourth consecutive expansion. an executive is jailed for witness.
they will admit 16 charges. a south korean think take says soul may be a cancer manipulator -- a currency manipulator. there could be fears and accusations against korea. we are seeing equities. we have japan flirting between the gain line today. it is accelerating. it is actually just down by a fraction. looking at hang seng, 1.3% to the outside. best to the upside. ♪ caroline: i am caroline hyde. this is bloomberg technology.
the tech surprise stories of 2017. we discussed the potential winners that investors should keep an eye on. a car that talks to your house. we head to ces and talk cloud control. as cyber security concerns surrounding russia are front and center, we hear from the former cia director on the president-elect's approach. first to our lead. tech sector surprises of 2017. amazon will undergo a major investment cycle. customers that investors have worried about original content. they could shut out big bucks and still boost its margins. the company says the number of merchants using its logistics services is up 70%. the virtual assistant makes
waves at ces. for more on amazon and the rest of the top tech surprises, we are joined by mark. great to have you. let's kick it off with amazon. you say the money can still come in in terms of profit. >> the one big difference between amazon today and 10 or 15 years ago is they have amazon web services, the cloud service, 10xh has margins 10 ask -- greater than its core retail services. they have more cash with which to make investments. they are saying quite loudly they will make aggressive investments. they have reached a scale they can do that and still run the business properly. that cloud cushion allows them to do that. caroline: it is one of your top picks for 2017. they're comparing facebook and netflix. let's have a look at where
potentially they could perform versus s and p. not so pretty last year. they did lag in the s&p 500 overall as a benchmark. what about 2017? >> 2015 was the year of dramatic outperformance. it is rare to see outperformance two years in a row. stocks were up over 80%. going into 2016, frankly up until the trump election, the sector had outperformed. we have had this trump rotation away from growth. i am not sure how long that lasts. i fully respect that will be headwind for a while. first with netflix, we think they can add more subs in u.s. and international markets. if we are right on that, the stock goes higher. secondly, facebook modestly outperformed the market, but it is dramatically derated. multiples come down a lot. we could make the money on the long side. both estimates and multiples.
caroline: looking at the chart, they actually performed in order better. google was the laggard for 2016. looking at the overall market, i want to dig into google. you say that finally, some of their outside bets could actually bring in some money? >> that would be a surprise. we think it is something that probably won't happen. the odds are greater than the market ascribes to. netflix has come down because people have become skeptical about the other bets. what about nest and home automation? google fiber has been caught -- cut back. the market has tuned off and tuned out that segment. there are some interesting bets in there. when it comes to autonomous vehicles, there are one or two or three winners. google could be one of those. when is hard to know. any one of those bets start to
show any materiality, that will be the surprise for investors. caroline: you actually think the market is too optimistic on twitter? >> that stock has underperformed two years in a row. we think it could be the case again this year. the street believes there will be the acceleration of growth this year. that could be a risk. we actually think there is a reasonable scenario in which revenues decline. we're not seeing it in terms of advertiser interest. president-elect trump is interested in twitter. "tweeter-in-chief" is what i think they call him. we haven't seen major advertisers fully embrace twitter. they seem to be pulling away from the margin. that is a problem. caroline: twitter does not look too pretty. a little more about the politics side of things.
you are saying this is still a bit of a concern when it comes to the fang investment. overall, maybe one of the surprises is trump doesn't change the outlook at all? been ae clearly has rotation toward new areas. this has been a very slow growth economy for a while. premium growth stocks, the high quality ones have outperformed. now that the rest of the economic growth seems to be picking up, i get the point that you need less for the premium. in terms of whether trump would have an impact on the internet stocks, it is unlikely. there are two areas we watch out for -- net neutrality, and then this talk about these border adjustments taxes or putting taxes on changing how you would allocate cost to companies, that is something that can have a material negative impact on amazon. we don't think that will come to pass, but those are two watch areas for us.
caroline: it did not come to bear, but will they get bought out this year? >> we like the company fundamentally. we have liked it for the last 2.5 years as a strategic asset. it is a great playoff local advertising, albeit in the u.s., and possibly local transactions. there are a range of bidders out there, any more willing seller. you finally have a seller that is willing to sell. caroline: great reading your note, loved having you on the show. from rbc capital markets. on the latest tech funding board, apple is planning to invest $1 billion in soft banks giant new technology fund for global startups. foxconnins qualcomm, and others in contributing to the $100 billion fund. apple said it has been working closely with softbank for many years. they hope it will speed the development of text that may be
strategically important to apple. softbank ceo told president-elect donald trump last month that about half of the fund would be invested in the u.s., creating about 50,000 new jobs. coming up, we will speak to the ceo of harman live from ces. the company rolls out new innovations in the blooming industry of authentec. all episodes of bloomberg technology are now live streaming on twitter. this is bloomberg. ♪
caroline: let's head to las vegas, nevada, where the consumer electronics show is underway. harman, one of the leaders in the automotive industry, is creating a new platform called ignite to make tech inside cars more straightforward. we're joined by the ceo. welcome to the program. apparently ces is all about autonomous vehicles and voice commands. it looks like your concept car has a bit of both. >> there must be a lot of echo here. could you same that one time? caroline: talk to us about your concept car. tell us what you have been announcing at ces. >> first of all, last year it was all about connectivity.
we were doubling down all of us in the industry. this year, we are showing in life technology in limitation, the four pillars of conductivity. that is cloud applications, that is collaboration of many technologies from apple, samsung, ibm, google. the third is customization. more and more auto buys asian is getting complicated for users. we want to bring the human side to machines. the fourth -- most important for me -- the hacking, cyber security. you cannot have a home connected car unless you have secure network and cyber security is important around it. these are conductivity, the megatrends we are showing here in the home as well as in the car and enterprise. >> you are talking about driving in a self automated car.
it is already seamlessly talking to your garage and talking to you. when is this a reality, not a concept? >> it is actually more than a concept now. as technology, i think it is ready. the infrastructure, roads and city, we are not ready to deploy. we have 800 million cars on the road today. they are driven by humans and not intelligent. from a driving point of view, i think five-10 years for a sweet spot where you start to see proliferation of these technologies. a lot of things also have to catch up -- cyber security networks and the whole infrastructure has to really evolved. we cannot risk the data and human life. this is a weak spot right now. the germans, the japanese, the americans are spending hours and
hours discussing how to implement cyber security in the cars. it will be really exciting in terms of implementation. caroline: who wins? the tech giants or the car giants? >> i think consumers win. we had a clear segregation of responsibility. the car companies have the expertise making cars. the technology application providers have a role to play. we have to bring in the user interface, the human touch. the whole customization. i carry my personality for my clouds to the bedroom to the living room to the office to the car without sacrificing or compromising. that is our role. we are also showing a professional implementation, working with ibm to how we can bring that technology to hospitals.
we will free up medical professionals time and get the basic information and test results from last week. itemized visitation hours. i think the technology is coming. i really focused on the consumer. caroline: who has the data? who owns the data? well the car companies own the data, will the technology giants of the data? >> i think again it is a convergence. there is a lot of debate. should apple or google get into carmaking? we collaborate with apple and google, but we also compete. we have taken a position with samsung coming in, announcing that position that samsung and harman will get into carmaking. we are with daimler and already and gm and ford and chrysler. our role is to mature the
technology and apply it, keeping an eye on user interface. technology is only as good as it is simple to use. that is what we are bringing to market. the convergence of car and application service providers like harman. caroline: how is the integration? >> i think integration has not started. that can only start once the deal is consummated. right now the process is happening. by the middle of the year, it should close. regulatory authorities will evaluate it. i am very happy. i personally visited the top 10 or 15 investors one-on-one. they are very happy with the premium they got. it is a great complementary deal for the stakeholders.
it is very strategic. caroline: will you be making any more acquisitions? you made one yourself after being purchased by samsung. are you on the m&a trail yourself? >> if you want to be fast to the market, you have to be alert and agile. sometimes you have to do your own development organically. we have announced partnerships. we will definitely make some unique technology acquisitions, especially in the area after safety and sensor detection and technology. we have the confidence and data. they have the whole thing with cyber security wraparound. caroline: let us know you make those deals. thank you for joining us live from ces. tomorrow we continue our coverage from ces with the iac chairman. sticking with headlines. there was an announcement
regarding live streaming platforms. the company announced a pact with cbs, the most-watched network in the united states. this is along with 35 other channels, including abc, fox and tbs. it will launch in the next few months and will cost less than $40 a month. they plan to speed up a network. the company is set to test a 5g high-speed network by beaming direct tv now to some users. it has reached speeds of up to 14 gigabytes a second. they believe it may be a faster option than fiber-optic cable. from the cheapest power on earth, just keep looking to the skies. how coal powered energy could fall to solar, next. this is bloomberg. ♪
thanks to continued adoption in china and other parts of the world. additional currency, which just turned eight years old, reached a new high of $1150. coming up, we will hear from a former cia director jim wolfe. dan coats could be the director of national intelligence. next, we are going to be talking about solar, turning to renewable energy. there seems to be a bright side to seeking the cheapest power on earth. solar power is more affordable than coal in some parts of the world. can coal come back, or has solar won the war? that chart told a thousand words. the absolute slumping and cost of producing solar energy. what is behind all of this?
>> i think it surprised a lot of people. him and most of it is improvements in technology as well as looking at subsidies that have helped the industry along. they gained economies of scale, and that is what is about. improvement and expansion in production. caroline: we have a great chart showing how much the cost of solar farms has increased. by 2025, we're looking at the dollar per kilowatt, which is quite phenomenal. what countries are leading the charge? i'm assuming it is the sunnier climates like the middle east? >> they certainly help. solar is much more effective in solar climates. it is true even in germany.
they led the way insular expansion. early on, they spent a little more so they could advance the industry. it is not going to matter within a decade. whether you are a sunny country or a somewhat rainy country. even your home in england would probably be a good place for solar. caroline: really? they are growing wine in england now. give us a sense of whether we will see donald trump, who had so much talk of the resurgence of coal, is all that talk? can coal have any sort of resurgence? >> coal is more expensive than a number of other energy technologies. if you look at the economics of building a new plants now, solar is half the cost of coal. caroline: what intrigued me
about the first chart, yes there is a plummeting in the cost of producing solar energy. wind looks pretty cost-effective too. wind and up being the most efficient. what happens perhaps when wind is not blowing the sun does not shine? >> the wind blows stronger during the night generally. solar obviously during the day. i think you will see both of them continue to expand. it is going to require all kinds of energy, because solar and wind do not always go. you're going to need some generation that is there when the wind does not blow. that is usually natural gas and nuclear. less so coal plants. caroline: so talking of nuclear, i was just coming from berlin where they have been returned to out of nuclear. where does nuclear fit into all of this? >> nuclear is a lot more
expensive. it is harder to gauge, because there is so much cost overrun. it takes so many years to build. one of the advantages solar has is once you have the panels, you just drop them on a roof or on the ground. you can put up a plant in six months. a new coal plants takes years to develop. a new nuclear plant could take a decade. solar is so much less than that. it is advanced to the point you don't need to worry about the time so much. caroline: bloomberg's chris martin, great to have you. to another story we are now watching -- alibaba continues to crack down on fake vendors, taking legal action against two sellers. it is suing the two parties for selling fake swarovski crystals, and they're seeking $2.5 million in damages. this is all part of an aggressive plan to combat fake goods from popping up on the site. alibaba reported it took down
1:30 p.m. in singapore. i'm rishaad salamat with another update. japanesee going on companies to raise wages and changing the corporate work culture. the japanese prime minister saying he is determined to exit the nation with the help of the business sector, also saying a strong business sector brings political stability. pick forump's secretary of state has divested himself of $400 million. he will separate himself from any government decision on the company for a year if he is concerned.
j clayton has been nominated to head the sec. there was a demonstration of the banks near headquarters. a long history of its executives taking senior posts in the government. the backd to target again on the 17th of january. very 20 hours after the exempt. ivan rogers quit on tuesday, saying he told the government they are not prepared to leave the eu. let's have a look at what has been going on as far as the trading day goes. japan? >> we had that really solid start to the trading year for japanese equities.
saw the dollar weaken after the fed released its latest minutes from its december policy meeting. that is coming off of that game. also some of the oil producers. bank and insurance stocks looking quite good. a really solid day. into this bull market territory, closing high. once again coming through from those gold players. we did see the pmi rising more than what it did in previous months. energy stocks leading this hang seng. you can see petrochina and shen pot energy doing concurrently good. weak dollar is really
helping a lot of the emerging markets. philippines up by 1.8%. this is a live picture of hong kong harbor. this is bloomberg. caroline: this is "bloomberg technology. cyber threats and security are emerging as a major concern for 2017 at comes to head this week. senator john mccain has scheduled a hearing of the armed services committee to tackle the issue of foreign cyber threats, but president-elect trump continues to cast doubts. he said the intelligence briefing was delayed until friday. a former indiana senator is said to be trump possibly leading candidate for director of national intelligence. the cia director, jim woolsey,
spoke to bloomberg about how we should be focusing on the rigor -- bigger picture, trump's transition into power. >> this is a minor blip. the intelligence business is full of controversy and arguments about assumptions and why did you do this or issue that? what do you mean by weapons of mass destruction and on and on. this is a hiccup. >> respectfully, it seems like the president-elect is taking a different tone in previous presidents have. what has it been like historically between the president and intelligence community? >> the president ought to buy a few months into its administration have been taught a good deal by the intelligence community about how things work.
it takes a bit of time because some of these areas are technically complex. but as you learn about them, you get to do a better job understanding of what we know and what we can draw conclusions from. so, it's an older teacher-student relationship and the student is the president of the united states and the holder of the position one might say is the most important and powerful in the world, so it is a different kind of relationship. i have worked with for presidents, two republicans and two democrats. they have all been willing to hear a different take on things. i have no reason to believe donald trump won't do the same. i think it is important the intelligence community helps the new president and not sit back and criticize. >> i have heard past presidents talk with reverence about the
briefings a receive and how awesome for lack of a better word it is to get that information. is donald trump spending enough time in class? are you satisfied he is being briefed enough? >> there is more than one way to run a class. in the two years i was director for president bill clinton, he never had a morning briefing. he did not like to be briefed. he did not like to have stuff read to him. he was a speed reader and i suppose is still a speed reader and he likes to go through things quickly and ask questions on the side or right a note in a book of briefings. the fourth point seems to be to track what kaplan has in his new book, bill clinton did things like that all the time, which
was different than sitting there and taking the morning briefing, but that is the way he wanted to work. however the president of the united states wants to have information presented to him, people need to accommodate and not sit back and grumble about it to the press. david: let's return to that previous tweet and say he was perhaps joking about the matter here. i wonder what you would say to someone in the intelligence community who doesn't welcome this kind of skepticism and wonder it's about publicity associated with the job and the question of the president-elect's commitment to the intelligence community and the job it does. >> i would say pull yourself together and get back to work or find a different job. intelligence is important enough, tough enough, and from time to time, angry enough that it is important not to get distracted by small matters. you have to call it straight. if someone comes at you, whether
it's a cabinet secretary or vice president or national security advisor and tries to push you off a point and you think you're right, you address it clearly. i believe based on a couple of meetings i have had with them, that donald trump is a fair-minded and balanced individual. he talks rationally and reasonably about matters in small groups. the only time i've seen him in front of thousands of people is in an auditorium, and in that, he is very bombastic and a different kind of approach, but a lot of people said they thought that was worthless and was not going to go anywhere, but i got him elected president of the united states and did not elect any of the people who are skeptical. caroline: it was a former cia director speaking on bloomberg television.
president-elect donald trump is stepping up his criticism of the intelligence community while bringing up a controversial figure. he said julian assange said a 14-year-old could have hacked john podesta. he also said russians did not give him the info. now to a story we are following -- an online publishing company, medium, is cutting a third of its staff and changing its business model. the company has relied on the same model as other media companies to make money, placing ads on articles. williams called that model broken to the job cuts fall on the sales and business side. coming up, after months of anticipation, another glitzy unveiling in the electric car start up. not everything went smoothly on stage. we will tell you why. ♪
>> ford and toyota have formed a consortium in attempt to control how apple and google connect smartphones to their cars. goal is to speed up development of the auto industry standards for in vehicle apps and promote more choice in how smart things integrate with dashboard displays and voice recognition. staying with car tech, ces has brought us another glitzy unveiling from the much-hyped electric car start up, faraday. the company came back with its first production model and they
claim it can outpace a tesla model s in one mode and claiming it is the fastest electric car. it is backed by an ambitious billionaire come at the founder and ceo of a chinese tech conglomerate. joining us for more is cory johnson and selina wang. that was one of the fastest -- facial recognition, but an ambit of an embarrassment on stage. cory: it does not self park as you might expect. even a cheap ford can do it. it's interesting to see him any companies can work with this. we tend to focus on tesla because it's a silicon valley company but automakers from startups like this or companies like ford and many others, audi and bmw, all working on a lot of these ideas. tesla might have pointed the way but a lot of companies are
coming fast into the space. caroline: the chinese billionaire was at the event. it was him -- he called it a bit lazy. tell us more of at the billionaire behind this company. guest: he is very well-known in china and is known for being very brash and ambitious, sometimes too ambitious. he started out as a local i.t. guy at bureau and made his fortune in a publicly traded company which is like the netflix of china. from there, he has expanded into a slew of other businesses ranging from smartphones, virtual reality headsets, you name it and he has expanded into it. but we are seeing that he may
have expanded to aggressively. he wrote in an internal memo that they are moving too fast and having trouble raising cash. but he is a very brash and well-known person in china. he says apple is a slow innovator and we can beat elon musk at tesla. cory: when the model s was unveiled, elon musk could not get the car to open and another time he smacked his head when he was trying to show the headroom. he's a tall guy but these live demos a la steve jobs are hard to pull off and it's interesting that you see every ceo who think they have to go out on stage in a black turtleneck and introduce their product as opposed to a cars and other devices used to be released. caroline: talk to us about the
money being put into this particular element when it comes to the billionaire. how much money is he winning or losing? guest: he put in $300 million of his own money into this. he has a unique way of funding his ventures. we learned that you can reserve this car for $5,000. it is unclear how much it will retail for when it comes out in 2018. i think after last year, there's a lot of skepticism around faraday futures since they did not release any functioning car, merely a concept car. this year we got a functioning car but there are still a lot of questions about how they're going to make money. it is unclear what the business plan is going to look like. caroline: $5,000 to order. talk to us about what is going on at tesla. they do have a factory and it is up and running.
cory: tesla has a history of not getting its deadlines and missing its own estimates. production is hard. tesla, this quarter, said they had production problems, they have the same excuse for missing numbers in the first quarter. these are recurring problems. it's hard with this business. when they want to get too much larger level, they would have two more than double production this year and the next, which they have been unable to do to get to the level they want to produce. caroline: shares are up more than 4% even though we saw them fall yesterday. the giga factories up and running and have hit their deadline. cory: the factory is running, how much they are producing is the question. we will see what they produce over time.
there is demand for this product. there are dozens of competitors who can hang a battery in your garage for questionable use. caroline: what do you think about the debate when it comes to ces, is it the tech companies or auto companies -- what is the value in selling these cars? where does the billionaire vision go? guest: they have a unique vision. i sat down with him at the headquarters and he laid out a very rod vision of what he wants the consumer to experience. you have a cell phone and start watching a movie on it and then hail an autonomous electric vehicle where you continue to watch the movie in the car and then exit the car, finish where you left off and watch on a vr headset and continue on their smart tv.
so cars are an integral part of this vision because he sees the future of electrical cars, that vehicle is another place to watch contact. -- content. this company started as a software content maker and all of these devices, hardware, cars and smartphones are all just shells to hold their software. so he has a very broad vision. caroline: selina wang and cory johnson, as always, thank you very much. still ahead, it is one of the few companies whose name has become a verb. we are talking about xerox. ceo jack jacobson's next. this is bloomberg. ♪
business services unit. the ceo said that while the company remains optimistic despite declines in its business. >> just about a month ago, we operate in an $85 billion market and we have in the market leader for the past seven years, 28 consecutive quarters. we are a company built on innovation. we have 12,000 active patents and are one of the top patent producing companies. we're going to invest in that $85 million growth market. they range anywhere from 2% to about 15%. we're going to couple that with the largest product launch in the history of xerox. >> what are some of those growth markets?
>> we have about $11 billion in revenue. $3.5 billion is what we call document management services. we do business today with all the largest corporate entities around the globe -- government agencies, small, medium business markets, graphic communications and school administrations. the largest companies around the world don't want to worry about their print. they want to worry about their core competency. our core competency is about taking a document from creation to communication. if they want to integrate an interface with the cloud or do mobile print, if they want to translate in 35 different languages, those are the things we do. vonnie: are you going to expand into other countries? guest: i think we are well established. it's all about how do we gain more share?
even though we are the market share leader, there are more opportunities. what i tell my team is there is still an opportunity even though we are the clear leader. vonnie: how do you anticipate the new administration affecting the relationship of those companies? guest: i think the market has responded positively to the new administration. we expect to see regulatory reform and tax reform. what we are hopeful for is where we operate on a global basis, that we will be able to do it on an equal playing field and this administration will do that. vonnie: what does that mean, equal playing field? there is a risk our relationships may go sour. where are you proactively managing that risk? guest: we don't think it will be a significant risk at all. when i talk about equal playing field, is to make sure there are tariffs in certain countries, if we have a product going into the
u.s. as opposed to a global entity, that they are on an equal playing field. how do we stay close to our customers? this is a company built on innovation and if we have an energized salesforce and bring technology to the forefront of our customers, that is a winning formula. >> have you had any communication with the incoming administration about jobs? we have heard about jobs coming into the u.s. are being salvaged. is that something you'd be looking to open a kind of dialogue? guest: i have not had any personal interaction with the administration. vonnie: would you be interested in some kind of incentive to keep jobs here or expand here as opposed to externally? guest: we are always open to listening to any incentives that would be good for our business,
shareholders or customers. a $150ung has set up million venture capital fund, the first in the u.s. for them. it will make it easier for the south korean tech giant to invest in early-stage startups. the fund has made six investment and is based in mountain view, california. that does it for this edition of "bloomberg technology." we will continue our coverage of ces with a great lineup including barry diller and shane ward, appearing on bloomberg television. be sure to turn in -- tune in for those interviews. all of our episodes of bloomberg technology are streaming on twitter. that is all for now. this is bloomberg. ♪