tv Best of Bloomberg Technology Bloomberg January 9, 2017 12:00am-1:01am EST
shery: it is 1:00 p.m. in hong kong and i have an update on the top stories. president-elect donald trump is facing pushback against his america first policies, where he wants data industry to stop making -- once the auto industry to stop making cars in mexico and bring the jobs back home. won't change the industry simply because a tycoon sends a tweet. china's demand for semiconductors brought its best operating profit in three years. two senior executives were due to be questioned today over the influence peddling scandal surrounding the president.
they are not accused of any wrongdoing. mcdonald's has sold 80% of its china and hong kong operations to a consortium. 52%.are taking mcdonald's will retain 20%. the deal is set to include 20 years of franchise rights with a value of more than $2 billion. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. let's get a check of the markets. afternoon trading just getting underway in hong kong in china. the hang seng index marginally higher. this is bloomberg. ♪
caroline: i'm caroline hyde and this is the best of "bloomberg technology," where we bring you all the top interviews of the week in tech. coming up, all the industry leaders from this week's consumer electronics show, including our extended conversation with i.a.c. founder and chairman barry diller. plus, aol c.e.o. tim armstrong joins us as verizon continues to it's yahoo! options. and tesla swerves. the electric carmaker's recent delivery numbers missed estimates. first to our lead and the biggest tech trade show of the year, the consumer electronics show took over las vegas this week here in the united states. the annual spectacle offers an early glimpse at the top tech to watch, from home improvements to driverless technology. another big scene -- the path forward for media and new competition in the field. alex webb caught up with the media and industry leader, iac
founder and chairman barry diller. take a listen. barry: if your stock is subject for more than a day or two to his comments being a negative drag on you, then you've got a very lousy business and it's all, you know, all today's ridiculous silliness. alex: there were other merger efforts last year. cbs-viacom obviously fell apart. do you see the likelihood of that deal being resurrected? barry: should never have happened anyway. alex: why do you think that? barry: if you are a cbs shareholder -- excuse me, if you're on the committee representing the shareholders, you're not going to buy viacom at anything but a bargain sale price. if you are on the other side, on the special committee, you are not going to sell it at anything other than a premium. it's never happening anyway so i don't know why anyone made news noise. alex: how would you turn around paramount? or can it be done? barry: if you make good movies, it turns.
it ain't hard. movie business is the simplest business compared to what's going on here, the changes in the world, i mean, narrative story telling on a big screen or small screen -- but on a big screen is very simple -- you have a story, you tell it, and viable -- and people either like it or not. there's no tech involved. there's no -- you know, it's quite binary. alex: on the flip side a lot of tech companies are increasingly looking at the content base of netflix and amazon has made huge strides. there's been a lot of talk about the prospect of apple getting into the space. do you think companies need to own content to get into them? barry: no. alex: why is that? barry: all of the content -- if you own content, you want to distribute it everywhere. so these tech companies who are engaged in distribution -- what apple is doing and amazon has with prime, etc. -- they're essentially distributors, they can buy anybody's content. they don't need to own directly
the content. if they're going to actually begin to produce content themselves, then that's another thing. but, you know, that's something you have to really not have tech aptitude for but you actually have to have an ability to make editorial choices. alex: the signs dealing with lionsgate, i'd like to hear how it came about, actually? barry: we're developing video into a platform for everybody to use, and we have gone to many, many people and one of the recent places we went and said why don't you put your programming on video, on our platform, and they said yes, and we're going to do much more of that. alex: are there deals impending we need to keep an eye out for? barry: yes. alex: can you give us a time frame, weeks, months? barry: no, no. look, we're very much now in business. so weeks, months, years. we're going to be at this.
and we think because we have an independent platform that is actually not owned by any of the totalitarian companies, that we have a niche or a chance because of that independence we can barrel through. alex: does that mean now quite often when you talk about online video services for tv series, films, you tend to talk about netflix and amazon and people go netflix, amazon, video. -- vimeo. will it be direct to what we're doing? barry: indirect. netflix is always going to be -- unless they monumentally screwed up -- they have such prize worldwide now i don't think anybody will be close to netflix. but that doesn't mean they take essentially the market share of the world. i just don't think anybody will be as large. but plenty of room for niche programmers and programmers that have many, many millions of
subscribers, just not to their level. alex: what do you think of the way the cable tv bundling, is it dead? are these new approaches killing it? barry: i don't think anything really kills anything like dead-dead, but look -- alex: how about unraveling? barry: you've had for 40 years or so, you had cable being the only place that you could get a bundle of programming. that's ended. now you can get -- all you need is an internet connection and you can get all the cards -- a la cart or little bundles, etc. so cable just has to evolve and it cannot -- its space of warehousing everything and selling it for one package price is gone. alex: what do you think sales work? you mentioned a few possibilities. what are you bullish on a model that does go through? barry: goes where? alex: the successful way for a
cable package to evolve? barry: i think the cable operators are essentially now in the data transmission business and no longer really in the program business. they used to be in the program business and at very healthy margins, there was a decrease as programmers asked more and more money. now when you have so many different alternatives, you're in the data business. that's their competitive edge. alex: does it explain some of the rationale behind the tnt-time warner deal -- there has been skepticism, not from a trump view, but from optical business, is there logic behind the deal? barry: i don't think there's a lot of industrial logic behind it because i don't think a data company needs to own a content company or a tech company, data company. at&t needs to own content. it can buy the content at fair market prices. no content, i think, in this
area is going to be particularly exclusive. caroline: still ahead, we'll hear from aol c.e.o. tim armstrong, who is still hopeful that verizon's yahoo! deal will go through. we will ask him about the potential hiccups next. and a reminder that all episodes of "bloomberg technology" are now live streaming on twitter. check us out weekdays at 5:00 p.m. in new york and 2:00 p.m. in san francisco. this is bloomberg. ♪
caroline: alibaba cracks down on fake vendors, this time taking legal action against two sellers. it is suing the parties for selling counterfeit swarovski watches and seeking $200 million in damages. it's part of an aggressive plan to combat fake goods from popping up on the site. alibaba has reported it took down 80 million product listings down and closed 180 store platforms in the last 12 months. cybersecurity is a hot topic from washington to wall street, especially in light of this week's u.s. senate hearing on capitol hill to determine whether the russians did in fact hack the presidential election. and yahoo! announced last month that it suffered its second major data breach, one of the largest in history. leaving some to question whether verizon will follow through on its $4.8 billion acquisition of the company. bloomberg's cory johnson caught up with aol's tim armstrong for more from the consumer electronics show in las vegas.
tim: the yahoo! deal is strategic for us to the 2020 goals. we are hopeful it will close. the process for us is split in two areas -- what is the integration and strategy planning with marissa and executive team at yahoo! which has gone very well and we have close relationships with them. the second piece is the information that's come out about the breaches and what the effect of that is. verizon is handling the breach research with yahoo!. yahoo! is going through their investigation. so we won't have any comments on that because yahoo! hasn't finished that investigation yet , but on the strategy and execution side of things, we're on track and hopeful the deal will close overall, but we'll know more in the first half of this year, and i think that yahoo! team is doing a thorough investigation, so i'm sure they'll have more to say about it in the time period in front of us. cory: is it theoretically possible that these series of hacks and the public's knowledge of them has any affect on the
brand, and damages the brand of yahoo! in any way? tim: you know, i think that's one of the things yahoo! is looking at and will continue to look at is the total affect of what the breach was and what the outputs of them are and of course we have a viewpoint on that as well. but i think from a standpoint of where we sit right now heading into 2017, you know, our strategy is clear heading towards 2020 -- yahoo! is one piece of that strategy overall so as we get information about the breach, we'll update people on that and yahoo! will as well. but i'd say from what our goals are an what we've been tasked with getting done with yahoo!, you know, it remains on track and the breach is a piece of research and information and investigation that's still ongoing. cory: i think that the size of the business of yahoo! is not properly understood, generally. because it's just such a very big business and so many users. when you look at that asset, what do you see that holds such
value, because the noise in the headlines and the concern over the breach, i think, tends to dominate the discussion -- what do you see as the underlying asset and its value? tim: you know, cory, we live in a world today in which there's hundreds of billions of dollars and there's billions of consumers coming online that are all digital first and mobile first. yahoo! is one of the largest footprints in the world on the consumer side and has a very sizable advertising business and an ecommerce business in asia. so from our standpoint, you know, when we look at this asset, the combined asset would have over a billion consumers, you know, do billions and billions of in ad revenue and dollars have a very big footprint in mobile added with verizon, which is very strategic, the verizon opportunity with data and targeting and getting the mobile consumers is huge. so you know, i think there is the breach information and breach investigation, but from a business strategy standpoint, especially when you look towards the next 5-10 years, the assets coming together represent a very
unique opportunity and very unique scale and look, we've gone from company consolidations to industry consolidations and, you know, verizon has been very forward thinking, very clear and very clear on the execution of where they think the world is going in media and in wireless and mobile and we're excited about it. we're excited about yahoo! and excited about the team overall , and there's this one issue that needs to get resolved. but i would look through that from my side, on the integration side, to look at the strategy and i think the strategy remains intact. cory: i think it's interesting, also, the strategy of the consolidation is very different from at&t to verizon. when i look what's happening on the verizon side, i see you guys putting together a big pile of assets, you know, you mentioned tech crunch and yahoo! sports, if you will, and pulse and aol and all these smaller pieces of content but a kaleidoscope of them, whereas at&t seems to be going big with time-warner, hbo, that's their content play.
i wonder if you can contrast those two strategies for me. tim: sure. so first, i know that time warner strategy well. i was that time warner, which spun out of aol, and i have a lot of respect for jay fuches and the team at time-warner and randle at at&t and know their strategy but don't know their business model. but i do know the verizon business model and the verizon plan and the aol plan, which is essentially to bet on where the future is going, which is very strong connectivity with 5-g and connecting everything and everybody with fiber and speed and wireless connectivity, and the second piece is really digital consumption of content. you don't have to look far and wide to see how much the linear tv landscape has changed to a digital focused consumer. i think if you contrast the strategies, you look out five or 10 years, that digital focus, mobile focus, content strategy that verizon has put in place i
think is a very strong strategy, and after spending 20 years in silicon valley in new york and across the globe, around the world of digital, we want our bet with verizon because we think digital and mobile in the conductivity that 5g is going to offer is going to be a tremendous, tremendous asset overall. so you have two big companies, two strategies, and a lot of room for tail winds in the future of growth, so i think it will be interesting to see where we end up 5-10 years from now , but i feel very confident in what verizon strategy is and the leadership at verizon has done a very good job over the time executing long-term strategies , so i don't have any doubt that we'll be in the running and a big player in the future. caroline: coming up, bit coin's rally has a new year lease of life. the currency is hitting multi year highs as it kicks off 2017. what's behind the jump? next. plus, teslas fourth quarter
caroline: it was the best-performing currency of 2016 and it looks like bitcoin has room to run this year. this week, the currency topped $1,000 for the first time in three years. we're joined by the managing partner of the newly launched firm of heroic ventures to discuss what's behind the pop. michael: 95% of what happens on the block chain is bitcoin
reactions and is very much the thing people know and understand, but there are other things that are coming. there are dozens of crypto currencies that launched called alt currencies. --the a couple have drained on the couple have gained traction. one people may know is called theriam, from guys from new york and trained on one of the most reputable coin exchanges called coin base. i should disclose i'm not a shareholder but use it. there's another one called ripple, which is a crypto currency being put together in conjunction with a whole bunch of banks looking to do some sort of oversighted, understood collateral work together collaboratively to manage a currency called ripple. but there are others, one called monero which is anonymous and z-cash which is anonymous and the frontier is powerful. why is bitcoin easy to -- wise bitcoin so good? because it is easy to understand. it is simple to understand and looks like the dollar and at the euro. but also it's a cheap imitation
and can't do the regular thing. but the excitement of the block chain is partly due to the fact that a token or coin in the block chain cannot only have a currency value that's but also havee preset instructions, called a smart contract. you can preload the together within a set of rules to vote your shares a certain way or get married or get divorced if we want to get divorced under certain conditions with if/then statements preloaded. caroline: a derivative basically? michael: a derivative with rules that are preset and you are committed to behave under certain circumstances and everyone under the contract can know the contract is self-executing and self-realizing. there's a lot of exciting new stuff happening on the frontier with monero and theriam and not just bitcoin, but bitcoin still has the awareness of the public. caroline: it's interesting because we were talking about movements in twitter and china. china seems to be a real driver of trading in bitcoin. is it -- what has fostered this sudden resurgence to three-year highs -- is it geopolitical risk or the fact that bitcoin is
being used more widely nowadays? is it the fact that currencies are open to perhaps deflation? michael: i think that's a good question, and if i had to sit here to answer the question, i would say it's mostly a speculative to return in fortunes. there could be geopolitical risk that people are buying bitcoin than gold. it was in favor for a while and superhot and too hot and people took money off the table and is coming back in favor. the chinese in bitcoin are a big part of the puzzle. the chinese are mining so much bitcoin and have so much control of the bitcoin block chain that there's a risk in the community and a sense in the community that in fact china could take control of the bitcoin currency and that worries some of the people on the frontier. there's also a sense that bitcoin is not fully truly anonymous. and if you're a rebellious believer in the revolution of crypto currency -- would you don't have to be, caroline -- is that some of the more truly anonymous currencies like monero and z-cash are the wave of the future.
you have seen about a 20 x spike in monero in the past few weeks partly due to the fact it's coming online and is a sort of mainstream alt currency exchange but still in the early days, indeed. caroline: rebellious or not, are -- if i am a believer that cryptic currencies will eventually come, when is 2017 the year we see it become more adopted more widely, will it become something everyone will know? michael: what's so amazing, the real missing part of the link so far is when will crypto currency, including bitcoin, get wide, actual practical adoption ? and it is still missing, even in palo alto where i live or san francisco where i hang out with you on a rainy day. stories used to take it. you used to be able to buy coffee and equine. why would you, nobody knows, it used to be able to. now you can't. there's been a rollback of some of the applications. i do think they're coming. as the banks in particular, as
the clearing-houses in particular start to bless the block chain and have investment funds that are targeted for the block chain and have all these activities for the block chain and for bitcoin, you'll see more and more adoption. but does it change my day to day life? no. can you spend your life through bit coin? no, but i did find one founder this year. i met a lot of founders in 2016. one founder doesn't have a bank account or uses checks or use a credit card. the only way to pay him or get paid by him is through crypto currency, which is kind of weird. it's a first. it equals one, one founder whose entire financial life is crypto currency. caroline: to some other big news of the week, tesla hitting speed bumps. the carmaker's latest delivery numbers missed estimates great tesla delivered -- missed estimates. tesla delivered 22,000 cars in the last quarter, below expectations and 2016 the company produced nearly 84,000 vehicles and deliveries totaled about 76,000, also below company guidance. greenberg editor at large cory
-- bloomberg editor at large cory johnson joined us to discuss. cory: the company said we'll deliver this and when analysts said that seems high, they said , no, we will deliver this. buy our stock and we'll deliver these numbers. they put the numbers in the share release and the newsletter and in their 10-q's and does not deliver what they said they would. in fact, in the quarter they just announced, they delivered fewer model s's then in a year ago and fewer than the last quarter. model s sales are falling by any measure and model x sales are not anywhere near what model s is and there's been delay after delay for the model 3. none of this is good news. caroline: what about the model three? there is a lot of backlog and this is the more priced friendly version. are we worried, therefore, about them getting off the machine? cory: what we know is they've consistently missed virtually every deadline they've set. we can expect this deadline might be missed or maybe they'll make this latest delayed deadline -- they keep pushing it back by quarters, halves of the
years and then full years. we'll see if they get to that. we also don't know what the price will be. these deposits are not actually deposit. they are deposits for a place to be in line because in most places they can't legally take deposits, but these are also fully refundable. for a lot of customers we expect they might be trying to get a foot in the door. a lot of people want these cars that they have not seen before, but a lot of people also probably want the option to get the car and it's really a price on the option, not ultimately going to take the car. caroline: trading off 2% is not a massive concern it seems for the market. cory: it's not until it is. look, this is a cold stock, it's a stock people want to believe the very best in. but the numbers here aren't very strong. you saw the big dip in the stock afterwards. but this is yet another company i think with a short-term trade in the market doesn't reflect the valuation of the company. the valuation of the company is based on hope for something that has yet to be delivered, obviously because the company doesn't have a generation of free cash flow or consistency really in anything here except for these announcements that get
people excited but even this one is probably worrisome. if it's going to be a big business, it's going to have to grow. if the main product is selling less than it has last quarter and last year, that's bad news. caroline: talking big businesses and valuations, apple missed out -- apple is the most viable company in the world. expansion looking at india and china slowing down and the west slowing down and maybe hitting roadblocks of its own looking at india? cory: the development for apple in the last 24 hours are very interesting in india. they're pushing ahead in india bigtime. they hope to get concessions from the government in terms of manufacturing cost and taxes, what instead they got was absolutely -- they got whatever the cricket equivalent is of the heisman, that's what they got. i'll explain the heisman to you later. you can tell me the cricket great -- cricket. caroline: we'll do a swapping. cory: in college football there's a big award called the heisman -- anyway, they hope to get a break but they're still hiring and have fox coming in the country with maybe foxcon will make phones for the iphone and maybe
they'll make samsung phones and continue doing things like that. another manufacturer apple used in the past is coming into india. some of their positions for hiring shows they are hiring operations managers and people who run factories or deal with factories in india and apple is clearly moving into this market , and they need to to recapture growth in the iphone they haven't had in the last year. caroline: bloomberg editor at large, cory johnson. coming up, with cybersecurity concerns surrounding russia front and center, we hear from former c.i.a. director jim woolsey on the president-elect's approach. and if you like bloomberg news, check us out on the radio. you now can listen on the bloomberg radio app, bloomberg.com and in the u.s. on sirius x.m. this is bloomberg. ♪
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♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. >> it is 1:30 p.m. in hong kong. in talksonfirmed it is with its chinese partner to boost holdings in its securities business on the mainland. the bank is holding its greater china conference in shanghai. they retain every confidence and beijing's economic strategy. intereste a strong increasing our footprint in china. we will increase our headcount over the years to come. we want to build a long run, steady presence in china, and that is part of our strategy,
yet we like partnering, so it is shifting the ways, talks are still ongoing. slowdia says growth will to a three year of 7.1% in the 12 months through march before the effect of the cash crackdown is known. the statistics ministries latest forecast is not include data from november. prime minister theresa may has signaled integration and lawmakers are her priorities. about the right relationship. the latest star wars installment top the chinese box office, $30 million since friday, featuring prominent roles for two chinese
actors, but faces competition from the romantic comedy some like it hot. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. up on howa check markets have been trading. >> a bit of a mixed picture for asian equity markets. japan closed for public holiday. ,he regional indexes flat weakness from southeast asian markets, although china, australia, and new zealand in the black. .1%, solidng up support from energy players, even though crude oil has it. it is on the back of that , sending energy players across the region higher. .9%,sx 200 has closed up in the black every day of the
year, holding at levels we have not seen since may 2015. the shanghai composite also higher in afternoon trade. we will be live from london at the top of the hour. this is bloomberg. ♪ caroline: welcome back. security are and emerging as a major tech concern and came to a head this week at the senate cyber security hearing, where russia was front and center. u.s. intelligence official stood firm on their conclusion that russia was behind hacks of the u.s. presidential election. officials said only russia's most senior officials could have authorized it. we spoke to build very for the latest. she's saides fight
they have more confidence than they did an october when they first released a report saying russia was behind it and that was the case. they pushed back against the public criticism they have received by donald trump, who said earlier this week that a briefing had been delayed and that he thought it was because they had to still build their case. spy cheats will be in new york prison in that case to the president-elect tomorrow. caroline: in talking to trump's pushback, he took to twitter once again, his favorite form of discussion and he's talking , actually about his association potentially with julian assange saying he's denying he's in , agreement with julian assange but saying he's a big fan of , intelligence. we're seeing the tweet right now on our screens and what about this so-called unhelpful criticism? they didn't feel it was going in their way, but we too critical of donald trump as they could have been. bill: right. these guys all speak in a very
nuanced tone and they didn't single out trump or his criticism directly. they did say that, you know, public criticism of their work isn't helpful, it's not good for moral. i think it's something they would prefer happen maybe behind the scenes. these are by nature very skeptical people. the intelligence community, spies, they are skeptical by nature, they ask a lot of questions, so they're accustomed to that. i don't think they're accustomed to being put in the public eye front and center. we've never really seen a time in the past when an incoming president so blatantly and publicly questioned their work before he takes office. remember, there's a whole range of issues that the president-elect, when he takes office, will have to count on the intelligence agencies for, whether it's the latest assessments of islamic state to china's moves in the south china sea. without that kind of information, a president is
essentially flying blind. ♪ caroline: in the meantime trump continues to weigh appointments related to national security. this week we learned former indiana senator dan coats is set to be trump's leading candidate for director of national intelligence. former c.i.a. director jim woolsey spoke to bloomberg about how we should be focusing on the bigger picture as trump transitions into power. ♪ jim: this is a minor blip. the intelligence business is full of controversy and arguments about assumptions and why did you do this, why did you issue that then, and what do you mean by weapons of mass destruction, on and on. this is a hiccup. david: respectfully, though, it seems like the president-elect is taking a different tone with the intelligence community than the acting president has and previous presidents have. what's the relationship supposed to be like and what's it been like historically between the president and the intelligence community? jim: well, the president ought
to by a few months, i think into his 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 fairly technically complex. but as you learn about them, you get to do a better job, i think, of understanding what we know and what we can draw conclusions from. so it's a kind of an older teacher- student relationship but the student is the president , of the united states and the holder of the position that one might say is most important or powerful in the world. so it's a different kind of relationship. the presidents i've worked with, four presidents, two republicans and two democrats, they've all been willing to hear out a different take on things. and i have no reason to believe that donald trump won't do the same.
i think that it's important that the intelligence community help the new president and not kind and criticize.re, commence david: let me take your metaphor about teaching. i heard past presidents talk about the immediate reverence they have of the reports they receive on a daily basis, those briefings and how awesome it is for lack of a better word to get this information, playing out the metaphor further, is donald trump spending enough time in class, is he briefed enough? jim: there's more than one to be briefed about in class, you can have seminars, lectures, lots of things, and the two years i was ahead of the intelligence for president clinton, he never had a morning briefing. he didn't like to be briefed. he didn't like to have stuff read to him. he was a speed reader, is, i suppose still, a speed reader and he liked to go through things quickly and then maybe ask some questions on the side,
write a note in a book or a book of briefings, jim, the fourth point seems to me to track what kaplan has in his new book, have you read it yet? bill clinton did things like that all the time, which was different than sitting there and taking the morning briefing but , that's the way he wanted to work. and however the president of the united states, and in this case to be for the next four years anyway, donald trump, wants to have information presented to him, people need to accommodate him and not kind of sit back there and just kind of grumble about it to the press. david: let me return to the that previous tweet and give him the benefit of the doubt and say perhaps he was joking about the matter here, i wonder what you'd say to the intelligence community who doesn't welcome this kind of skepticism from the president-elect who wonders about the publicity associated with his job to question perhaps the president-elect's commitment to the intelligence community and the job that it does. jim: i'd 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's important not to get distracted by small matters. you got to call it straight if somebody comes at you, whether it's the cabinet secretary or vice president or even the president, national security advisor, and tries to push you off a point and you think you're right, you address it clearly, here's why i think this is right. and i believe, based just on a couple meetings i've had with him is donald trump is a fair-minded, balanced individual who talks rationally, quite reasonably about matters in , small groups. caroline: coming up, the tech surprise stories of 2017, from fan dominance to yelp m&a. we discuss the winners investors
caroline: online publishing company medium is cutting half its staff or roughly 30 people announcing changing its business model. the company started by twitter , founder ed williams, has relied on the same thing others have survived on, placing ads in articles. on wednesday, he called that broken. the job market falls on the company sales and business side. we're continuing to monitor the departures at twitter. kathy chen, the company's top executive in china is leaving twitter after eight months on the job. chen announced she's taking time off to pursue more international opportunities. she was hired to seek out new advertising revenue and other
business in china and taiwan. now to tech sector surprises of 2017. r.b.c. is predicting amazon will undergo a major investment cycle this year. well, that's not a concern for investors who worried about the company's bets on original content and ramped up shipping efforts. but r.b.c. says amazon reached a point where it can shell out big bucks and still boost its margins. this as the company says a number of merchants using the logistics service rose 70% to more than $2 billion in 2016 and its virtual assistant alexa makes waves in new partner home appliance partnerships. and for what to watch this year, we caught up with r.b.c. capital markets analysis mark mahaney. mark: the one big difference between amazon today and 20 years ago is they have this business called a.w.s., amazon web services, the cloud business, which have margins 10-x greater than the core business, 25% operating margins versus 2.5%, 3% and what it means is they have more cash to make investments and are saying
it loudly we'll make aggressive , investments but believe we've , reached a point of scale to do that and run the business profitably. i think that cloud cushion, the cloud cash cushion allows them to do that. caroline: one of your top picks in terms of investments. and facebook and netflix, let's look potentially where the fangs could perform versus s&p. we have a chart for you, and we saw last year, not so pretty. they did lag the s&p overall as a benchmark. what about 2017? mark: 2015 was the year of dramatic outperformance. it's rare, very rare to see outperformance two years in a row especially that magnitude , and that group of stocks rose 80% in 2015. going into 2016, frankly up until the trump election, the sector had outperformed and then we had the trump rotation away from growth. i'm not sure how long that lasts. i fully expect that will be a head wind for a while but think there are one or two interesting
stories in the large cap internet space and among the fang names. versus netflix, we believe they can add new subs in the market, and if we are right on that the stock goes , higher. secondly, facebook modestly outperformed the market this last year but dramatically de-rated and the multiples come down a lot and is at a point the first time in three years we think we can make money on the long side both in upper estimate revisions and the multiple going up. caroline: looking at the chart, facebook performed in order of their letters, facebook and amazon and google is lagging for 2016. but therefore, they cannot beat the overall market. google i want to dig into the laggard of 2016 because you say that actually finally some of their outside bets could actually bring in some money? mark: that would be a surprise and when we say surprise we , think it's something that probably won't happen but the , odds are greater than the market ascribes to. netflix is also, its multiple has come down because people have become skeptical about the
other bets, where is the money coming out of autonomous vehicles? , and what about nest and home automation? about nest and home automation? we haven't seen anything. google fiber has been cut back. the market has tuned out that segment and we think there's enough interesting bets that are put in there and enough people and when it comes to autonomous vehicles, that's probably three winners and we think google could be one. when it's hard to know. we think if any one of those bets shows materiality at all that would be the surprise for investors. caroline: talking of winners to losers, you think the mark is too optimistic on the pain side of it is twitter? mark: that stock underperformed two years in a row. we think it could be the case again this year, it's our sell in the large cap space and the streak believe there is will be reacceleration of growth, even modest. caroline: revenue could rise 10%. mark: that could be a risk and there's a reasonable scenario under which revenues decline. this company literally goes x growth. we are not seeing it in terms of advertiser interest. i know president-elect trump is
interested in it. caroline: what did you call him? mark: president-elect trump, tweeter in chief. caroline: i love that. mark but outside of that, we : haven't seen major advertisers fully embrace twitter and in fact at the margin seem to be pulling away from it. that's a problem. caroline: twitter doesn't look pretty despite the tweeter in chief as you call him. more on the politics side, you're saying this is still a bit of concern when it comes to the fang investment, but overall, maybe one of the surprise causes that actually trump doesn't change the tech outlook at all. mark: two things. one, clearly there has been a rotation towards new areas. this has been a very slow growth economy for a while and so premium growth stocks like the fang names, internet names, high-quality have outperformed. ones, now the rest of the economic growth seems to be ticking up, i get the point that you just less of a need to pay for premium and growth because there's growth in other parts of the economy. in terms of whether trump would have an impact on the internet stocks, you know, it's unlikely
but there are two areas we look out for, net neutrality and changes there could affect netflix and the talks of the border adjustment taxes or putting taxes on changing how you would allocate cost to companies, that's something that could a material negative impact on amazon. we don't think that will come to pass, but those are two watch areas for us. caroline: one outside bet to leave us wowing, it didn't come to bear but will yelp get bought , out this year? mark: we like the company fundamentally and that said we liked it in the last 2.5 years, as a strategic asset, 2.3 billion, a local payoff in advertising just be it in the u.s. and possibly local transactions. we think there's a range of bidders out there and think there is a more willing seller than a year ago. in order to have a sale it takes two and this time you have a seller this time willing to sell. caroline: that was r.b.c. capital markets analyst mark mahaney. in another funding board this
week, silicon valley startup proterra raised $140 million in the first and final funding round as it ramps up manufacturing ahead of a potential i.p.o. the electric transit busmaker expects to go public this year or early 2018. gm and another venture are said to be backers. the vehicle can travel 350 miles on a single charge. coming up, after months of anticipation, another glitzy unveiling for an electric car startup, faraday future, but not all went smoothly onstage. we'll tell you why. a reminder that all episodes of bloomberg technology are live streaming on twitter. check us out weekdays 5:00 p.m. in new york and 2:00 p.m. in san francisco. this is bloomberg. ♪
aat chrysler unveils battery-powered self driving minivan. the chrysler portal has a 250-mile range. the software would take care of most of the driving, however, it's a concept car and there's no guarantee it will ever be built. intel is seeking to buy a stake in the mapping consortium named here, which is jointly owned by german automakers. ntel must pass a german anti-trust inquiry before the sale proceeds. they applied monday and will receive an answer for the application in a month. and ford announced it's canceling plans to built a $1.6 billion plant in mexico. instead it will spend $700 million expanding the existing plant in michigan to build self-driving and electric vehicles. ford c.e.o. mark fields explain ford's dominance in the hybrid and electric market in bloomberg. mark: we're the number one seller of plug-in hybrids in the united states today and number , two seller overall for electrified vehicles, so we want
to build on that. you can see that through our announcements today. keep in mind we only talked about seven of the 13 electrified vehicles coming, so there's more to come. caroline: staying with car tech. tsx 2017 boot up a glitzy unveiling of the car startup faraday future. after showing off their concept car last year, the company came back with a first production model called the fs-91 and faraday claims it can pass the model s in a ludicrous mode, going from 0-60 in 2.39 seconds. also like tesla, it is backed by a ambitious billionaire. the founder and c.e.o. of the .ech conglomerate
and we discussed with cory johnson and selina wang. cory: it's amazing to see how many companies work in this technology. it's not all tesla's game and we talk about it because it's a silicon valley company. but the automaker startups like this or companies like ford and many others, audi, b.m.w. all working on a lot of these ideas, porsche, a lot of interesting work around electric cars. tesla might have pointed the way but a lot of companies are , coming very fast on this phase. caroline: the chinese billionaire was there at the event and it was him that was embarrassed the car , didn't quite park and i think he called it a bit lazy that day but tell us about the , billionaire behind this company. selena: the billionaire behind it, he goes by y.t. and is well known in china and known for being very brash and very ambitious, sometimes too ambitious. he actually started out as the local i.t. guy on the tax bureau and made his fortunes on the publicly traded company which is like the netflix of china and growing very fast but from there expanded into a slew of other businesses ranging from smart phones, to headsets, t.v.'s,
movies, smart bikes, you name it, and he's expanded into it. recently we're seeing he may have expanded a bit too aggressively. he wrote to an internal memo to employees they're moving too fast and having trouble raising cash. but again, he's a very brash, well known person in china. he says things like apple is a very slow innovator and we can outbeat elon musk and tesla. caroline: outbeat another rather ambitious man, elon musk. self you pointed out the parking problem, and when it was built in los angeles, elon musk couldn't get the trunk to open and when they got another model he got out of his car and smacked his head, showing the head room and showed how little it has. now he is a very tall guy, but nonetheless these live demos, ala steve jobs are hard to pull off and interesting you see every c.e.o. of every industry thinks they have to go on the stage in blue jeans and a black turtleneck and introduce their products as opposed the way cars and other devices used to
be released. caroline: one of the things i find a tech conference is that the technology doesn't work as well as wi-fi. talk about the money put into this, when it comes to the billionaire, how much is he winning or losing and when do they start to sell? selena: he put $300 million of his own money into this and has a unique way to finance his ventures and he takes his shares and plows it in his adventures. we learned that you can reserve this car for $5,000. it's unclear how much this is going to retail for when it comes out, apparently, in 2018. i think that after last year's ces there was skepticism around his futures as they didn't release any functioning car but merely a concept car and this year we got a actual functioning car but still have a lot of , questions hanging in the air, lots of skepticism around how are they going to make money. this is expensive to produce and unclear what the business plan
is going to look like. caroline: 5000 dollars to order, and it was only $1000 when it came to tesla, talk to us more about what's going on in tesla and it's not all about cars and they do have a giga factory and that is running and they hit their deadline. cory: tesla has a history of not hitting the deadlines and missing its own estimates. as we discussed, it's also interesting this production issue which will happen to all , these carmakers. production is hard. tesla this quarter said they had production problems and couldn't get out as many cars as they had liked, and they had the same excuse for missing numbers in the first quarter. these recurring problems of producing as much as they thought they were and doing it successfully is really hard with the business that's the model x and model s. when they want to get to a much larger level, they'd have to more than double production this year and the next year, which they've been unable to do in order to get the level of model 3 they want to produce. caroline: the giga factory, the shares are popping up more than
4% though we saw them fall yesterday on concerns of the car part of the business, giga factory up and running they hit their deadline? cory: the factory is running, but how much they're producing though is a question mark. we will see what they actually produce over time, and if there is demand for this product. where there are dozens and dozens of competitors who can hang a battery in your garage for unquestionable use. caroline: selina, what do you think of some of the debate that is going on when it comes to c.e.s., of course who wins , whether it's indeed the tech companies or auto companies but faraday wants to own the data and what's the advantage in , selling these cars, is it more of what they make on the profitability on the car itself or where does the billionaire's vision go? selina: i want to talk about it in the context of leeco, i sat down with y.t. at their headquarters a few months ago and he laid out this very broad vision of what he wants the consumer to experience. so imagine this. you have your leeco cell phone
and start watching a leco movie on it and you may hail an autonomous leeco vehicle where you continue to watch the movie in the car and you exit the car , finish where you left off watch it on a leeco head set and , continue on a leeco smart tv. so as you can tell from the scenario, cars are an integral part of this vision, because y.t. sees the future of electronic vehicles, and that vehicle is another place to watch content and remember this company actually started as a software contentmaker and all of these devices and hardware, cars, smart phones, you name it, it is all just shells to hold all their software. so in the context of y.t., it's a very broad vision he has. caroline: that was bloomberg's technologies, selina wang and our editor at large, cory johnson. that does it for this edition of best of bloomberg technology. we'll bring you the latest in tech throughout the week. tune in each day 5:00 p.m. new