tv Bloomberg Technology Bloomberg January 18, 2017 12:00am-1:01am EST
>> it is 1:00 p.m. in hong kong. here's an update of your top stories. validityecides on the of an arrest warning -- warrant. ands accused of bribery in influence scandal. measures to cool china's property market appeared to be having the desired effect. data shows new home prices rose and 46 of the 70 cities tracked by the government last month. that compares with 55 in november. china is encouraging policies that -- the property market.
political elites are being urged -- donald trump's policies. it was warned that a trade war would cause losses to both sides. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you are watching bloomberg. let's get a check on the markets. trading just under one -- way. the shanghai composite is gaining 3/10 of 1%. you are watching bloomberg. ♪ caroline: coming up, the
chipmaker in the crosshairs. we break down the case against qualcomm as the fight over licensing heads to the court. plus, will snap open up? the secrecy under the spotlight, as they are -- they prepare to go public. in the tangled web, succession plan with several companies in total disarray. criminal charges from j wiley. and first to the lead, a bloomberg scoop. u.s. regulators filing against qualcomm for using unfair practices to license its technology. digging into the details, the federal trade commission said they force apple to exclusively use its face time in return for lowering the rate charged. the world biggest maker of semiconductors was under investigation by the fcc. a major fine was possible. qualcomm makes the bulk of its
profits from licensing. reaction was swift on the news. shares tumbling 5.6% at one point, down 4%, up $4 billion wiped off the capitalization. now we have cory johnson, and the new piece of information in is the apple claims that seem to be here. the fact that this is stifling competition. that is the bombshell today. we have had general accusations, obscure accusations, but this is like specifically saying, no, qualcomm, you used your position to basically force apple to take your chips, and that was competition. caroline: this is an ongoing scene. south korea just last month seemed to be fighting to the tune of less than $1 billion. cory: it hits at the heart of the business model for qualcomm.
fundamentally, they invented chips they think are great, then make licenses for people to install those chips. they gained influence by having a standard written specifically for qualcomm chips. this does get to the heart of the model, the relationships they have with companies they -- that make phones. there is no one bigger than apple. caroline: it is a special model that qualcomm has actually developed here. how much do you think they can fight this in the courts? ian: the record is almost flawless. they never lose. when you look at the headlines and trouble they have had over the years, they have only ever lost one case against qualcomm five or six years ago. everything else gets here after year, they do a deal. to pick up on what cory said, what the license, the fundamentals are going to do,
what happened with the chips and chip design, that is another bit of it. what today has tried to establish for the first time is a link between those two things. that is the biggest threat to their business so far. caroline: if we are thinking of losers and winners here, the fact that maybe they do end up being thought as guilty, rather it might seem to occur, who does help? do smartphones get cheaper? cory: they would absolutely get cheaper. around, wes can shop could end up with lower pricing. that is what that gets down to, were the vendors, was apple or samsung, able to go out and find the safest or cheapest chips they could get, or were they compelled to go to qualcomm because of other power it has in the marketplace? caroline: who is doing the talking? is apple or executives there coming to the ftc saying we have been hard done by?
ian: if you read around page 25 of the filing, there is a lot of specifics about agreements between the companies, deals that were signed, renegotiated, re-signed. hard to imagine that came to the ftc in a dream and that they didn't get that information from somewhere. cory: and apple has everything to gain here. apple would like to play the providers against each other. they have been unable to do that according to this complaint. caroline: so do we see any share reaction? ian: intel managed to take some of the orders away from qualcomm last year. cory: in the apple phones. ian: in the apple phones. a lot of beneficiaries there. a lot of copies of try to go against them over the years and they have just faded away. caroline: give us a timeframe here, something they are talking about over the course of weeks or years?
ian: years. you have to think, even if -- first of all, it is a court case. it is not just a judgment. you have to go to court. you have all of what that entails. qualcomm cannot afford to let us go. they will have to appeal this as far as they possibly can. caroline: cory, are you surprised we did not see more than $4 billion? how much of a threat to we think this is? cory: the other aspect is, it was friday. we have another administration coming in. this is a democratically controlled ftc. that will change on friday. the result will be that initially it will have two members, which is very explosive, by statute five members, and the party that controls the white house will be able to control that organization with three members there. so that is one of the reasons you saw this happen today, because they want to get it done. you saw a strenuous response from the republicans.
she very unusually published her complaints, setting the groundwork for how the ftc would look at it as early as next week. caroline: the battle continues and commences. thank you, great to have you back in the house. later in the hour, we headed to the world economic forum in davos, switzerland. we talk about what a new president means for the company. deutsche bank has reached a final settlement with the u.s. justice department over the handling of mortgage-backed securities leading up to the financial crisis. they agreed to pay $7.2 million. that is according to the doj. early tuesday, the ceo spoke on a bloomberg panel about future plans. he stressed technology going forward. john cryan: we end up placing our bets on technology. we are not sure of the fundamental nature products will change much. although relation tends to
impact that. -- regulation tends to impact that. we don't think the demands of our clients will change too much. that will help us protect ourselves and the new technology to improve our controls. caroline: how will snapchat's parent company transition to a public company? we will look at the road ahead for their highly anticipated ipo. and a reminder that all episodes of bloomberg technology are live streaming on twitter. check us out at 5:00 in new york, 2:00 in san francisco. this is bloomberg. ♪
the reason, the plunge in the pound for the new brexit vote. pence will now59 cost 99 pence. the company already raised the price of hardware products to account for the drop in value. as reported last week, snapchat is going to london despite the brexit concerns. they are gearing up for an ipo, and snapchat's secretive culture is now coming into focus. the ceos leadership style is getting tested as he convinces investors of the potential. they have been reluctant to release details not required to divulge. joining us is alex. and in san francisco, sarah. alex, this is an interesting turn of events. if you are an investor getting into the snap ipo, it is hard to get much more details that is legally necessary.
alex: that will be one of the linchpins for this offering going forward, their secretive company, and they are really young. you are going to need to see some visibility into the future. you'll recall right now they are on file confidentially. there has been some information people have been able to get their hands on this. but until we see the actual s-1, we will not see that filed publicly. we don't have the balance sheet or things like that. it all pays into the really close to the vest culture that evan siegal has maintained. when you think about this offering, it is a social media company, the last one to go out was twitter. there was kind of an overhang, because twitter did not lay out a huge strategy when it went public. that kind of came back to bite them later. when investors are considering
whether to hold onto the stock, they will need more strategy wise than what evan is usually willing to give out. caroline: sarah, this is something that you have been running up against for years. evan siegel on background reporters and notably, not even doubled holding much to his own team. sarah: being an employee for snapchat is like being someone on the outside in terms of what you get to know. employees there don't get a heads up on what products people are working on. they don't get to use their phones at the new year's party. little things. the offices are not in a corporate campus like facebook or google, they are scattered around various office buildings. there are no all hands meetings like are the staple of startup culture here. so a lot of people are kind of in the dark with snapchat about where the company is heading. evan siegal will have to tell investors on the roadshow not
just about where the company has been, but where it is heading. like alex said, this is the time to explain the long-term vision for what snap is and can be. caroline: certainly, alex, investors will need some soothing if they can't get much control of the overall company. if it looks like maybe evan spiegel is copying mark zuckerberg. alex: it is a lot of trust in -- trust that they have to put into evan spiegel. and what we are talking to, he is a visionary ceo. trust him, he has won the millennial cohort over now. they will have to with this kind of striated employee base, evan is the guy who is in control. he is the one who sees the full picture of what is going on, and it is a big app. he also is the one they're going to have to trust to control the
information flow. we have seen that come out in the ipo process itself. this coming out party for the company, the company's scolding their bankers and threatening to cut if it keeps leaking. a lot of onus is going on evan. after some of the missteps with some of the very big founder led ask ofes, it is a big investors. it is the first tech company in a long time, but the long-term investors you really want to buy into these public offerings, they are the ones they need to convince this is a company to buy into, not for the ipo or the next year but the next five to 10 years. to do that, it will have to be a net -- bet on spiegel. caroline: what are you hearing about how well the culture change goes with evan spiegel? does he really understand what it is like being public? sarah: the nature of how the
company is run so far, probably give as little information as we -- he can. for evan, what is it worth it to him to expound more on what snapchat is going to plan to do, given like you mentioned earlier , the threat from facebook? facebook has copied snapchat over and over. the instagram product, the story product named after the snapchat's stories. they already have 150 million daily users, the same number of people snapchat gets for its global audience. there is some product secrecy and business vision secrecy, right, but even when we talk to people who know the kind of information he is giving investors, the bare minimum, they don't let people into the fold unless they absolutely they have to. he has been meeting with bankers
and some other investors, as well, have been trying to spread the message as best they can, but until we see the s-1, the roadshow, it is very unclear where this company will guide us for the long term. caroline: and anyone can give us the information if you can. thank you very much for your time. now on wednesday, federal reserve chair janet yellen will appear right here in san francisco to talk about monetary policy. our live coverage begins at 3:00 p.m. eastern. this is bloomberg. ♪
he spoke from us in davos, switzerland. >> the story is multi-faceted and linked. instability in europe, a wildcard in the white house. it should be a great year for news. when we think about the news business, raw materials we make money out of, it will be plenty to run. caroline: thompson went on to say they have not given final numbers for the last quarter, but the subscriber numbers they have never seen before. companies worldwide are trying to prove u.s. job creation to president-elect trump. now they are seeing repercussions at home. one such company is foxconn. they are trying to assure china they will not pull capital out of the country. they employ about one million workers in china. the interest of potential u.s. expansion after the ceo wanted to invest $50 billion in the
u.s. to create 50,000 jobs. we are lucky to have this man right here in san francisco. you just put out a story about this. how much did foxconn promise? >> not at all. this is the funny thing about it. if you look at what he said after he met with donald trump, they never promised to invest any more money in the u.s. they merely said they will look into it, and they are looking at the possibility of maybe investing in the u.s. the head of foxconn is being very careful. , but he isommitting willing to let the u.s. administration, the trump administration, believe they will. foxconn will want incentives. they built out their whole factory and manufacturing base in china on the back of incentives. wherever they go, they want tax breaks, cheap land, cheap power, supply of labor and all those things.
he knows will be very difficult to achieve in the u.s. if donald trump and tim cook want that, they will do it. but at this stage is not promising anything. when he turned around to china and says, don't worry that, we will stay in china, they are promising what he has been promising anyway. there is not a lot of change there. caroline: in terms of how crucial foxconn is to china, give us an idea. tim: more than $75 billion have been non-cash assets. basically yes, 75% of their assets are in china. as you say, one million workers. they are very important for the china economy. they are actually the largest exporter out of china in terms of commodities are actual physical products. they are crucial not just to
china alone but very specific areas in china. caroline: kind of interesting they seem to be playing trump here in the way you are saying. alibaba chairman over here trying to get some sort of hope to donald trump. how much on the ground are people worried about the president-elect or chinese companies exporting to the u.s.? tim: there is the idea of a trade war, and the u.s. won't win. but there is also a concern that china retaliates, china may make it difficult to import into china. look at apple. china is a very important growth market for everybody. the u.s. has to decide how that will work. what is interesting is jack ma and others are friends. they talk a lot. they are probably talking about the strategy for dealing with
president-elect donald trump and his policies, and the importance of those companies together for the u.s. could be very big. but i caution, don't bet too much on it. a lot of these promises should be taken with a grain of salt, because lots of big numbers are coming out that you need to drill down into the reality of those numbers and whether they will play out. caroline: it is great to have you here for the week. i hope we can have you on again. it is great digging into the story. i urge people to go look at the gadfly. thank you for joining us. the door is revolving at a few major tech companies. baidu has hired former microsoft ceo as president chief operating officer. he will be overseeing a new phase of growth to the chinese search giant. microsoft's main focus has been artificial intelligence. mattel is reaching outside the toy industry.
a google executive will succeed their ceo. mattel says the of appointment is effective february 8. sinclair, a board member, will stay on as executive chairman. yet another revolving door, one of silicon valley's biggest players may be looking for a new job. peter thiel has been a vocal supporter of donald trump. he is looking at a 2018 bid for the governor of california. this is according to a report from politico. back to come, we head dallas. -- davos. we talk about the incoming trump administration. this is bloomberg. ♪
we can wait and see how this develops. >> hong kong regulators have filed a lawsuit against ubs and kpmg over the handling of the ipo in 2009. the claim relates to misconduct in the ipo prospectus and financial statements for 2009 and part of 2010. they have been suspended since january 2011. australia's government has sold its biggest ever bond, issuing $7 billion of notes during in december 2021. the offering was snapped up by the governmentas try to bring in budget deficit. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you are watching bloomberg. it's get a check on the markets.
here is julia. >> things are looking writer than they were earlier. we're seeing most of the asian markets in the black. we have seen the yen retreat against the dollar. that has given a boost to the nikkei. it started the session in the red but some gains in late trade, particular from a lot of these steel players. this rally ing hong kong, along with emerging assets, getting a very strong lead. the index is over 1%. only one stock is actually in the red today. china doing quite well. up one half of 1%. we sell fewer chinese city home prices rise. we are seeing some more upward pressure from this market. it has been a lot of speculation about state intervention you'd australia has closed lower, down hortense a 1% -- 4/10 of 1%.
most of southeast asia is stronger. we will be live from london at the top of the hour. this is bloomberg. ♪ caroline: this is "bloomberg technology." i am caroline hyde. let's return to our top story. qualcomm is in hot water with u.s. -- the u.s.. people familiar with a matter of the u.s. antitrust division filing against a qualcomm, a lawsuit saying qualcomm forced apple to use its processes. this was in return for lowering the patent royalty it charged. take a look at the investor reaction. shares plunging dramatically in the session, closing down about 4%. that was $4 billion that was wiped off in terms of market cap. before the story broke, we met inwith qualcomm's chairman davos.
we asked how they are reconciling the incoming administration. paul: we may be democrats and republicans, but we are all americans, and we want the administration to succeed. in democracy, there are differing points of view. we want more jobs. we want great trade agreements. we were really happy when the president tweeted about our oneweb satellite system. there are a lot of areas where we see alignment, and where there is alignment, we will work hard together, and when there is disagreement, we will also express our point of view. erik: what do you disagree on right now? paul: i would say immigration. i would not say that we know enough to say that we disagree, but i think that the american dream and the notion of the melting pot has caused the best and the brightest to come to the united states and give us innovation, and i think that is an advantage for the country. so that is one that i single out. erik: anything that president-elect donald trump has
said that concerns you personally or professionally? >> no one wants to have a trade war. for example, in china, where we have sort of gotten through our difficulties there, we're trying to be a liaison, helping the situation, helping promote understanding, so i think that is an opportunity for us. erik: to the degree that you can do that, who do you reach out to specifically in the incoming administration to help give qualcomm a voice? paul: i think there are a lot. it is a broad range of people, the transition team in the new administration, but you look at us as democrats, but we have plenty of republicans in qualcomm, as well, and the senior team is pretty well mixed. there are relationships there. we've been working with conservative organizations for a very long time.
we are happy to see the focus on innovation and the focus on intellectual property and these kinds of things are important. erik: is the industry well represented with peter thiel? paul: we are not necessarily a silicon valley company. represented,ech is there were some concerns from many people in the tech community. personally, i do not have a relationship with peter thiel. i certainly see him at some conferences, but it is good to have someone on the inside who understands tech. erik: he was talking about no innovation left in smartphones. what do you think? paul: i disagree. we have the gigabit coming down to your pocket and virtual reality, and you do not have to have extra stuff around. uses the camera to figure out the environment and you can walk around and use virtual reality right away.
erik: so what would have motivated him to say that, if you are so confident that we can walk around with this magical thing in your pocket? paul: whether they are innovating as fast or not, people like to handicap this. well, this is happening, this is not happening, but what is going on behind the scenes is there is a lot of new technology being created, and 5g is an example. will build new technologies that are not just faster, but they will be ready for mission-critical applications, apps, like health care, automotive. they will be ready for the internet of things applications, industrial uses, and we are interested in agricultural uses . in some rural parts of the world, can they have tags on all of their cows so they know where they are wandering off to? : the biggest ever
semiconductor acquisition, how smooth will that be with the regulatory pressure you are still under in a number of localities around the world? paul: so we think that is a very complementary thing. a lot of synergies. obviously, people get concerned from a regulatory standpoint, and there is also concern if you are getting too vertical or getting into a market and having to big of a stake in the market. but i think this is complementary. erik: if asked, would you be willing to spin off the manufacturing facilities? paul: that is not our first thought. i am not sure why someone would ask us to do that, but we will listen to what the regulators have to say, for sure. those are interesting saps -- f abs, they are pretty profitable. so we are happy about those. caroline: that was the paul jacobs, the qualcomm chairman, speaking with erik schatzker. now, another story we are watching. facebook ceo mark zuckerberg in
court to defend facebook against claims that oculus stole the rift technology along with key intellectual property. zenimax said facebook completed their acquisition with "full awareness" that their tech was misappropriated, it alleges. if they win, this would re-white -- rewrite facebook being at the forefront of the virtual reality boom. coming up, a right-wing scandal shaking up the power structure in samsung with a massive investigation. next. and a quick programming note. "with all due respect" will be airing special episodes all this week. they will be taking a look at the key issues facing the incoming administration. that is 9:00 p.m. eastern, 6 :00 pacific.
caroline: startup zoom valued at $1 billion after the latest funding round. samsung is facing some serious challenges within its ranks, a month-long investigation into board member and heir apparent j wiley is coming to a head. he may be arrested due to allegations of bribery. peter elstrom joins us live from
tokyo. fascinating. and with the arrest of jay y. lee, what would it mean for samsung and its leadership? peter: the special prosecutor was set up to investigate the broader scandal that has been gripping south korea for months now. they are investigating the president of the country, she is been impeached. investigators are looking at how the biggest companies in korea were paying money to a confidante of park's and what they were getting in return, and they have honed in on samsung. they are looking at tens of millions of dollars given to a foundation by this friend of park's, and they were checking into allegations that samsung paid this money, including one billion yuan for a horse for the
daughter, in exchange for a very important succession plan at the company. caroline: who could step into the breach? executives? family members? peter: it is early days. samsung has denied the allegations. they say this money was not given for any influence. instead, they say it was for sports activities. jay y. lee took over the job, the only son of lee kun-hee, and this has forced outsiders to begin to examine possibilities beyond jay y. lee, if he is not able to take the job. there are three ceo's in samsung electronics who are trusted. one or two of them could be considered if jay y. lee is not able to fill the duties. he also has a daughter who runs the hotel chain for samsung.
and she is a possibility some people are beginning to talk about. that would be a tremendous break from korean culture, because typically it is the son who could take on the duties. but it is being discussed in a preliminary fashion. caroline: seeing those incarcerated working, to actually retain some control when they are in jail. jay y. lee, if he did, indeed, end up in jail, could he still theoretically run the company? peter: that is right. i think to western ears, we see something like this, a prosecution, a criminal prosecution, which sounds so serious, like it would incapacitate somebody. in the case of korea, this is something that has actually happened a number of times before. at least five big leaders have been convicted in the past. they have been convicted, and they came back to their companies. it does not mean that they would be disqualified in the long term. that certainly would not be the
case for jay y. lee, who has not been prosecuted yet, but there are a couple of cases where leaders have gone into jail and continued to run their companies from jail. it is an unusual dynamic in korea. caroline: and 1 his own father was aware of because he himself was convicted of criminal activities. peter: that is right. that is right. he was convicted early on and pardoned by the president, and he came back to run the samsung group. it was for similar kinds of allegations of bribery and the like. so in the case of jay y. lee, again, it is early. samsung has denied that there was any kind of ill intention with these contributions. prosecutors are not going to determine whether this continues while he is in jail or not. caroline: peter elstrom, from tokyo, thank you.
caroline: now, some breaking news for you. as we said earlier, qualcomm is poised to be sued by the ftc, with allegations pertaining to licensing. qualcomm says the cases flawed and based on misconceptions. they said they never threatened to withhold supplies and are responding in any mailed statement. they are saying that u.s. regulators are, in fact, wrong. meanwhile, facebook has just revealed a massive survey. the social media giant unveiled a survey in partnership with world bank and the organization of economic coordination and development.
we recently caught up with nicola mendelsohn. nicola: they're feeling confident about where the business is right now. what is interesting is the outlook for six months on. they're feeling much more confident. anyone can go to the survey and take a look at different countries and how they are feeling. one of the things that stuck out to me when i was looking at it is that the uk's small businesses were feeling much more confident than the rest of europe about the outlook for their businesses. and then when we start to look further into the survey, you can see that businesses are really more likely to be working internationally and selling around the world if they are embracing align technology. -- online technology. that is something different with the mobile technology. you know, when i was growing up, my parents had a small business, and my grandparents had a small
business. they could only sell in the geographical vicinity of the areas they were in. but now, with customers, you can actually sell anywhere in the world, and the survey also looked at the challenges businesses are facing in that respect. caroline: could you see any of the nuances coming up post the brexit vote, and the election of donald trump? did you see that coming to the fore for the u.k. and other businesses? nicola: after brexit, businesses in the u.k. are feeling very confident. one of the things that stuck out to me is how women and how female business owners are feeling at the moment when it comes to their businesses and their outlooks, as well, and actually, a lot of that is really contrary to what we might think conventional wisdom would say. businesses that maybe market online, we might not necessarily think that they are being run by women, but, actually, what this
is telling us is that women are actually using online tools to market their business and to grow their business more so than men, and why that matters, why that is important, they are the businesses more likely to be trading internationally, and crucially, they are the businesses looking to expand and employ more people in the not-too-distant future. so a very strong correlation to the digital economy. caroline: and what is the role of facebook going forward? this is called the future of business survey. where do you see yourself in it? you recently launched facebook for work. is it because you want to be much more enterprise focused? nicola: we take our responsibility with the way we work with our partners around the world very seriously. the facebook at work, where that came from was different organizations coming to us and saying to us, "tell us about how you run facebook as a business," and the way we run facebook as a business is through workplace.
we use facebook, we use groups, messenger, to connect around the world in a very efficient way. it came from partners saying, "tell us what you do," and now we have expanded and we have thousands of companies around the world utilizing workplace is a way of bridging the gap from the ceo to the person on the factory floor. we are seeing businesses of all different sizes embracing it because it can allow them to be closer to the people working for them and allow really great efficiency between the ceo and the different people within the organization. caroline: i like how you mentioned responsibility there. you talk about your responsibility to your partners. there is an age of responsibility of facebook, particularly when it is post-u.s. election, assuring it does not allow echo chambers to build and that it can fight back against terrorist data or pictures or video and, indeed, some of the fake news.
can you tell us a little bit about what you think the responsibility of facebook is now in 2017? nicola: we do take our responsibility in this area very seriously. it is something that matters to us. what we want to make sure is that facebook as a place that people can come and connect to the things that matter to them, and if it is on the issue of a hoax or something like that, we have talked a lot recently about the things we are doing to address that issue, and one of the things that we are doing is making it simpler for people if they see something out there that they think it is a piece of information that is not right or a hoax, they can report it. we're also looking to partner with more third parties around the world that can do fact checks. so it is something that we are working on and are aware of, and we do take responsibility. caroline: that was facebook's nicola mendelsohn. programmingiginal
has remade the media landscape, but it comes at a cost, particularly as competition heats up at amazon. more on netflix ahead of the earnings, and the numbers do not lie. reporter: in the third quarter, netflix added 3.5 million streaming customers in total, topping estimates domestically and internationally. the company has 47 million customers in the u.s. and 39 million more around the world. you see here how the growth rate, the orange line, for international outpace is a more mature u.s. market, which is the white line. there is a 50%/50% revenue split. original programming is a major factor in overseas expansion because netflix owns global rights to most of the content. originals telecast last
year, 1/5 were on streaming services, such as netflix. that is a much bigger piece of the pie from just five years ago. of course, this original content comes with a higher price tag than reruns. 's content hasx i topping $5 billion in 2016. whatever happens with the results, netflix will definitely be a stock to watch. on average, the stock price has moved in 15% in either direction after each of its quarterly reports in the last seven years. you can see big swings there. we will see if netflix can keep that some -- subscribe growth going as the price of content increases. the report after wednesday's closing bell. caroline: that does it for this edition of "bloomberg technology." we have more great voices coming out of davos on wednesday. paypal ceo dan schulman will be joining us. all episodes are now live
for: gold and yen declined the first time in eight days while pound retreats on yesterday search following theresa may's brexit speech. manus: china hopes prices rise in the fewest cities in the -- in 11 months, signaling the government curbs are taking effect. the pboc pumps record funds into the financial system before the lunar new year. samsung hangs in the balance. the company's heir apparent has just left court as he awaits the court's decision on his possible arrest. he's being investigated on bribery.