tv Bloomberg Technology Bloomberg May 24, 2017 5:00pm-6:01pm EDT
bill. it will reduce the deficit over the next 10 years by $110 billion. but the cbo says 23 million people plan to lose coverage after 10 years. the father and brother of suspected suicide bomber salman abedi have been arrested in libya. police also detained a fifth person in connection with monday's deadly attack. british soldiers are providing additional security at major public events and potential soft targets. president trump has not decided if the u.s. will remain a part of the paris climate accords according to the secretary of state rex tillerson, as pressure pope francis top remain in the pact. president trump will spend the night at u.s. ambassador's residence in brussels after meeting with the belgian prime minister. trump is on a five leg journey,
his first official trip overseas. global news 24 hours a day, powered by 2600 journalists in 120 countries. i'm alisa parenti. this is bloomberg. "bloomberg technology" is next. carolyn: i'm caroline hyde. this is "bloomberg technology." the manchester terror attack brings the battle over encryption front and center. a snapchat snapshot. why muddy waters founder says snap may be a short. billion bet's $4
on invidia. the chip makers successful entry into the automotive market. first, let's get some fresh news straight out of washington. the congressional budget office is just out to claire revised plan to repeal and replace part of the affordable care act. it reportedly reduce the federal deficit over the next 10 years and that is 32, billion less than an earlier version of the legislation. let's head to the white house with the reporter. shannon, remind us how this particular legislation, the undoing of obamacare was different from the original. on: people may remember we did have a congressional budget office report for a previous bill. the mos significant amendment is that it would allow statest to opt out of providing certain
benefits and change the way they charged people premiums. with that change, as you mentioned, it still has a $119 billion reduction to the deficit that is 32 billion less than an earlier version and it would leave 23 million people expected to lose their health insurance by 2026, 1 million fewer than the previous bill. they also mentioned in this report that these changes to the amendment made would destabilize the insurance market in some places by allowing these waivers and allowing states to opt out of benefits. of thet about 1/6 population to be living in places where the market would actually become more destabilized, which is already an issue that republican seven talking about current about the concerns about stability in the insurance market. shockingthis is quite
to be leaving 23 million stranding without insurance coverage and 10 years. how does this bode for the political process, for a getting ratification to the rest of the houses? i think everybody in congress in the house knew this bill was going to leave millions of people uninsured, but would go to reducing the deficit. the senate is not willing to let this many people go uninsured. that is one of the issues they have been grappling with, trying to come up with a system where they do not have summary people losing insurance coverage. that's going to be difficult to do because whatever the senate passes is going to have to go through the house and they are going to have to mesh those two. paul ryan, the architect behind his bill, put out a statement touting the benefits this bill provides as reducing the deficit. and he also reiterated a point which he keeps repeating that the obamacare marketplaces are
not sustainable, they are not working for people. so they have to do something. but as the republicans always leave out here is that hthey h ave done everything they could to d stabilize the obamacare market. and cause insurers to want to pull out because of all of the risk and uncertainty about what the system is going to look like a few years from now. while there have been fundamental problems going on with the obamacare marketplace, republicans have been exacerbating them and they use that as a talking point for why then you need to agree to their plan. carolyne: the battle continues. thank you very much, indeed. now let's turn our attention back to technology. carlosoton block raises concern about snapchat. in an interview with erik schatzker, he had this to say about snap. >> we are not short snap at present. we might be short in the future.
three areasock has of concern, including governance issues, company ethics, and the strength of snap's business model. joining us in san francisco is a medications analyst and cory johnson. -- is a communications analyst . carson block, i am looking at the bloomberg fontaunction. 35 million is the short interest out of snap, 14% of the equity float. much more than facebook but twitter has got double that, 63 million. let's face it. carson block would not be the only one with a short interest in the stock. that, first of all, the size of the short, 15% is a lot but let's keep in mind the stock has come off quite a bit. a lot of people may have been short the stock earlier in taken their money and run. i think that carson's right to
look at some sort of fundamental problems in the business model of snap, some things that were looking like they're getting better leading to the ipo and allowed optimistic business analysts to look at the model and say, things are getting better. their first quarter got worse and that is disconcerting. the user number growth has been really anemic since the introduction of the competition from facebook, both in instagram stories on the facebook stories. but if you look at the user growth numbers, what you see as the numbers are not growing that much anymore. they had been growing in double digits and those numbers now -- in the bloomberg terminal, 166 million users at the end of the last quarter. while that was a 5% increase, it had been growing at double-digit rates before the introduction of stories. there's a fundamental problem there with adding new users in the face of bigger user base that facebook and whats app and so on.
caroline: they talked up a lot that it was not about the amount of users they had but it was the level of addiction, the use of this particular app. >> well, that's what the bulls are banking on. the engagement growth by these tv shows, exclusive content, that part of the audience is becoming harder to address. if you look at the tv viewership it is been on the decline. look, this is it not is difficult that io get. we have it on a platform so we may be able to convince advertisers longer-term. what cory mentioned about user growth, that is a big concern. either they have to shift investor focus to provide better engagement metrics on a consistent basis so that at least investors can see -- it is still a show me story. caroline: the addressable
market. b.i. they have done some great charts showing that actually if you snapat the age rang e that targets, you go worldwide and they will never become a one billion player and the same way that facebook is and maybe twitter aimed to be. user growtht how differs from those two big players. cory: the focus on it young users limits the size of the audience. the real problem is not necessarily the audience or the size of the audience, but the ability to monetize that. we have this amazing thing that this company has -- valuation, negative margins but not negative operating margins. the actual product itself, which should be really cheap to provide, costs more than the revenues they are taking in. the gross margins, they are losing money with every single sale. just the gross margins are
negative. while those are getting better got ag into the ipo, they lot worse afterwards. it starts to suggest this company cannot actually control the gross margin issues. there was some commentary in the the cost ofbout what they are playing to google for cloud hosting and amazon and the long-term contracts they have there. youou look at those costs, see those negative gross margins, it is disconcerting because it is expensive to provide all of those really arsuableb bunny era filters and rainbows. is expensive stuff. caroline: we will see if that becomes a reality with carson block. yourer, great to have insights. popping an extended trading as much as 9%. the company reported earnings that showed accelerating sales amend them in the second quarter
familiar with the situation. softbank is closed is $93 billion vision find. at the time disclosed it owned an unspecified stake in california's nvidia. the chip maker's stock is up 30% this year. given the company a market value of $80 billion. an much of nvidia's games are being driven by expanding into new markets such as automotive's. nvidia's revenue from that unit dropped 24% from the same period a year ago but competition is growing from other tech giants and automakers. we are joined from san francisco. danny, thank you. revenue growth, 24% is an attractive part of the business. what about the partnerships? just joined forces with toyota. >> we have been working with the many different automakers,
mapping companies in many startups. in fact, creating a self driving car is a very complex problem. all of the technology, our hardware in the software, is the foundation upon which many automakers and other partners are developing self driving vehicles, cars, tracks and shuttles. caroline: so, it is all about the autonomous vehicle, and before it seems to be the entertainment of a car that you thisdine out on, but is going to be your revenue, autonomous driving? what you're seeing over the years, which is over a decade now, is driving those touchscreens and cars like the tesla, the audis and hondas. so, we bring a lot of computing horsepower into the vehicle, originally for graphics but now to process all the information coming into the car. so, an semi autonomous vehicle will have a lot of sensors coming in. where working with volvo, her
sadie spence and tes-- and mercedes-benz and tesla. baydu in china for mapping. the technology we have developed is enabling a whole new revolution in transportation for processing all of the data from cameras and radar. that all has to have to be understood much like a human would understand that information but we are doing that inside a supercomputer. caroline: what is amazing is, of course, the spectrum of companies you're working with but also the competition is heating up, mobilized by intel. how does this make it a more crowded space? >> this is a brand-new industry, really. the whole self driving space is wide open. we have been focused on taking supercomputing technology, our hardware and software, like google and amazon and facebook for really high
performance computing. now we're bringing that into the car. nobody else really has the technology to, the hardware or software from the auto industry to do that. it is coming from outside. and we are partnering with the automakers to bring this to market. caroline: i think what is fascinating is also the simulations you are doing. they're much spoken by waymo, the miles on these self driving companies. a lot of companies are using this to simulate this sort of data. can you tell us how it works and if the regulators are going to like it? >> i think they will. basically to train a car how to drive like a human you need to give it a lot of data. and that comes in the form of video from cars driving around, mapping data is used in this process. but the reality is we need to simulate all these different possible scenarios what could happen while cars are driving. so, we're going to use the combination of actually driven miles and using deep learning, we are training these neural
nets to understand how to react in hazardous situations. we don't always see hazards while we are driving but we can simulate those hazards. using our graphics technology, we can produce potentially dangerous scenarios. kids walking in front of vehicles, running a red light, somebody driving recklessly. all that can be done inside the computer and we can iterate and simulate much faster than real-time. so we can simulate millington lines of miles of driving in just one day. caroline: danny, therefore, is your business ready and able and where it needs to be to take on this mammoth task? if you have got the talent in-house, are you struggling to bring yet more in? what about research and develop it and the like? >> great questions. the reality is nvidia is an a.i. company. whether it is automotive or even finance, our hardware and software, our deep learning expertise has revolutionized all
of these types of industries. so we have a lot of a.i. talent in-house. we are always hiring more. what we are also doing is helping to train others. incident.eep learning we work with many universities who are changing their curriculum to train a whole new wave of engineers and data scientists will understand deep learning, understand artificial intelligence and how the gpu, our graphics processing units, hoping to revolutionize all these industries. caroline: we look forward to therning how loved -- how revolution continues to the u.k. is on its highest level of alert in the wake of a terror attack in manchester. the potential conflict is brewing between tech giants and authorities. and what they can access in and corrupted. we will discuss that next. a feature i would like to bring to your attention is our new interactive tv fountain. you will find it on tv go. if you miss an interview, you
caroline: the u.s. government has given an update on expanding its current laptop ban o flights. nthe department homeland security has decided not to widen the ban in airline cabins to flights leaving the u.s. for other countries or on domestic legs. however, the agency has not made a decision about incoming flights from europe. meanwhile, the u.s. airline travelers will face more scrutiny of. electronics larger than mobile phones in a dozen domestic airports the tsa says passengers be asked to send large electronics including tablets through x-ray screenings sen. lee: from their carry-on. -- separately from their carry-on.
the screening may be extended nationwide. meanwhile, there's continued fallout from the worst terror the united kingdom in a decade. they raised the threat to its highest level. the minister reinforce the demand to allow access to encrypted messages as part of its investigation, urging facebook and twitter to go after terror posts on their sites. early we spoke with jeremy karn about the next step. jeremy they have said two things. mediawould like to social companies to do a much better job of trying to police content on their sites, taking down posts from terrorists or terrorist sympathizers, those who would be encouraging extremism. they really want the social media companies to close down those accounts. to delete this content, remove users who are repeatedly reposting any content that would praise these attacks. the other thing is that the home secretary has said she would
like companies to end end to end encryption. this is a messaging service like app, that are encrypted across the communication chain so the government cannot access them. she would like these companies to be responsive in particular requests where they want access to this information that government begin at access. the companies always say they cannot do this but she is asking them to come up with a way where they can meet these requests. caroline: this feels like déjà vu. we think of san bernardino and the u.s. and apple taking on the u.s. government. what argument are we likely to hear from those who have the end what are weption, going to hear and respond? y themselves do not have access to this information. in order to meet this request, they would have to build a back door. that is what you saw tim cook saying in the apple case, what the fbi was asking for was a back door.
if they do that, they say it is not just government that can use this. this could fall into the hands of someone else. and you could end up with hackers having access. we just had this ransom are attack that use and exploit the national security agency had come up with. you will see something social media companies saying if we do this, you're opening up a can of worms and allow a common element to use this as well potentially. caroline: yet, have we heard much of a response from technology companies? overseas, they can lightly highlight the efforts they have had to tampa and down terrorist activity. and the misuse of their social media outlets -- they have had to tampen down the terrorist activities. jeremy: they have not yet. they very well may. a talking point for amber rudd or for the government come i think you will have to see response from the tech companies. caroline: that was some of my
conversation with our bloomberg technology's reported. coming up, a short seller carson block is raising concerns about snapchat's parent company. we will dig into his research on snap. if you like bloomberg news, check us out on radio. you can listen on the bloomberg radio app and on xirius xm. this is bloomberg. ♪
points to potential consequences after the cbo estimate showed as many as 23 million fewer people would be without health insurance by 2026. the cbo also says the bill reduce the federal deficit over the next 10 years by $119 billion. the father and brother of the manchester suicide bomber salman abedi have been arrested in libya. the ap reports a six person has been arrested in connection with monday's deadly attacks. suspected suicide bombers struck near a bus terminal in indonesia's capital city today, killing at least three policeman. officials say another five officers and five civilians are wounded. the officers had been guarding a local parade. britain's political leaders will resume campaigning on friday. officials say prime minister theresa may's conservatives will resume full national campaigning on friday. the opposition labour party will
pursue a similar timetable with the election on june 8. brazilian president michel temer upress abling to say revolt within his party. they're pushing for a resignation in the wake of last week's accusations. according to lawmakers, the task is to annul the 2014 election results. global news 24 hours a day powered by 2600 journalists in 120 countries, i am alisa parenti and this is bloomberg. it is just after 5:30 p.m. wednesday in washington good7:30 thursday morning in sydney. we are joined by paul anil with a look at the markets. good morning to you. -- paul allen. paul: more strength in asx futures come up .2%. keep an eye in the new zealand dollar. budget asyce's first finance ministers due to be handed down at 2:00 local time.
the surpluses expected to come $2 billion figure. and we can expect to see the generosity in the lead up to an election in new zealand later this year. weakerutures are looking traded out of chicago. south korea will make a rate decision at 9:00 local time. expect to see that rate on hold due to concerns over householdd debt. we are expecting gdp for the first quarter out of singapore. more from "bloomberg technology" next. ♪ caroline: this is "bloomberg technology." i'm caroline hyde in london. our top story to carson block's new search into snapchat.
the short-sellers do not have a position investing against the company but it has areas of concern. let's take a look at the bloomberg. type in g#btv. type in 6944 and we bring you this chart. what we are analyzing his analyst target prices. we'retly the mean -- starting to see shares of snapchat in the yellow basically gather around the median price target of analysts which is roundabout 22. i also like this in this chart, the vast difference in viewpoints. check out the bottom redline. the lowest price target is just $9.00. upside, some are looking pretty optimistic that we will reach somewhere in the line of $31. clearly, huge disparity that at the moment we are seeing a gathering around the median overall price target.
now let's get to erik schatzker -- who said that with carson block and asked him about his new search into snap. >> we have done a decent amount of work on snap. we're not short snap at present. we might be short in the future. but we have really three categories of concerns. so, corporate -- erik: we should remind everyone that this is the owner of snapchat. carson: yes, exactly. we have corporate governance concerns and some of those are well-known but they are also, say, real questions about the ethics of the company and that is something that's not well known. but also, and this is the area where we're really trying to form a view, questions about the business model and strategy. coupled with the fact that effectively has a lot of debt in the form of commitments to amazon web services and google for cloud hosting. erik: let's take them one by
one. you say some of the corporate governance concerns are well-known. they might be known to many people but not all people. one thing some people who may own the stock are looking at the stock may not know about is the fact there are no voting rights for the shares. first company i've ever seen that has no voting rights. on the surface, that strikes me as a corporate governance concern. is that what chiefly concerns you? carson: that is not the chief concern for that is definitely a concern because the ceo evan spiegel, he strikes me as one of the founders who you don't necessarily want around to run a mature company. erik: why? carson: at this point, this gets to the ethics concerns we have. ok, getting the other -- the other well-known corporate governance concern is he got an $800 million stock bonus on ipo. no strings attached to it.
he can leave the company now and he will still receive stock. partly, that is to more than replace the almost $300 million he sold on it ipo. so, that is really -- erik: that is a red flag? you normally do not want to see that conflict of interest or that outright money gap. the actualthat, ethics concerns, there is a whistleblower lawsuit that has been recently filed by a former employee who is hired to lead their growth team. late 2015.d in he was only with the company for three weeks before he was fired. and in his lawsuit, he is snaping that the time that was telling investors and advertisers they hit 100 million users it was about 80. there are other issues. at the time, they were apparently telling everybody
they were growing double digits, month on month, in terms of daily users. he said it was really quarterly low to mid single digits which is what we see now with the first quarter as a public of a. -- company. erik: let's say he is right. who is to say that evan spiegel in his mid-20's is not going to "grow out of this" stuff, grow up and start running snap like, you know, the public company? carson: one thing i do want to emphasize before answering that question and that is that is a key question, we have actually diligenced the whistleblower. his name is anthony pampliano. everything that has come back indicates that he is a very stand up guy, very honest. erik: he checks out. carson: at this point, i would say it is probable what he is
saying is correct. now, in terms of that question of can a zebra change its stripes? let's say spiegel was problematic, can he straighten out? here is the real problem i have with that. he has just been massively unethicalor this problematic behavior,. so, people who are positively rewarded or positively sanctioned for tha really do nott see, them all of a sudden i having this moment where they say, you know what? that was great back then but now is the time for me to really tow the line. erik: the incentives are not lined up in the right direction? carson: people like that have to have something bad happen before they correct the behavior. erik: a 26% dropping the stock price is something bad. before we run out of time, let's get to the business model and strategy issues because it
sounds as though they might even be more important than the ethics and corporate governance issues. do not do aus, we lot of for looking analysis, so this is the piece we really want to work on more to come to view. now, there is this, so -- the: you know about some of stuff. everything snapchat does, facebook seems to replicate. carson: there are some important differences. one of the qualities on snap is the younger generation, they think of facebook as we thought of oldsmobile. we are not interested in it. they are not going -- they are not going to go to facebook to that, which i actually think is a very salient powerpoint is that snap is great when you are a teenager in high school and you have your cliquiees. but as you get to college and start thinking about applying for jobs, that is when you want to embrace the wider world and snap with its focus on much tighter social networks as
the world, say, the like facebook is not well-suited for that. so, the counterpoint to the piece on snap is that today's teenagers will become tomorrow's use facebook as the primary social network going forward. so, it is not that we see a real generational difference. carson block, the founder of muddy waters capital with erik schatzker. now, coming up, we dive into the european tech landscape. irm believes that europe is the most important national stop on the way to an ipo. this is bloomberg. ♪
factors weigh before taking the ipo plunge. one of them is if they are ready for international expansion. the report provided a guide to overseas expansion and found that at least 30% of revenue tech companies comes from international markets, led by europe. joining us is the index ventures partner. the great piece of work. all about expanding into europe, it seems to be a guide to u.s. startups and how to make their presence felt on the side of the atlantic. talk to us about the data point that u.s. tech companies have 30% of their revenue internationally. how crucial is that? >> thanks for having me. it's a really interesting data point. we find it is pretty critical, a good indicator that you have reached global scale or you are on your way to reaching global scale. it shows the diversity of business.
it means your business has more customers that diversify the base. it's frankly we have something we've found across a number of companies. it is a lower threshold companies like facebook or linkedin when they went public, facebook was 44%. lincoln was 46%. h 30% number should indicate to aat company that they are about to hit the global scale and they should expand. europe is their first destination. caroline: snapchat did not have that much international presence. potentially this would be a short. they were 13% presence in europe, 8% rest of the world. our they are outliers when they have less international presence that can still ipo successfully? they fast followed with opening an office in london which i thought was a great move. overall has been a good story. life in the news but still a very strong performance. so, i think you will see
companies like that that have more potential to try to catch up quickly. caroline: what is interesting is you are saying, go to europe. this is where you are seeing the theirtics weigh out, dominant revenue stream comes from your. why not asia? is a an amazing market. lots of big companies there. we think asia is a great destination. but what we found is that if you are company that started in, say, north america and you want to have your first step to global expansion, europe is really the best place to go. thee are a few factors to first is the similarity of customers, whether it is consumers for social kinds of businesses or enterprises for b to b companies. they are similar to the ones you find in north america. their buying behavior, the way they think about infrastructure, it is easy to go to europe from the u.s. even take the learnings from the
way you have expanded and take that to asia. but sometimes asia is a little bit harder. if you look at a company -- that did a decent job. they had to set up a separate infrastructure in asia and set up a joint venture. from the business complexity, it is a little bit harder. we've also seen companies that have tried to go to both geos at the same time and sometimes they succeeded and sometimes they failed. we see copies like google that have not made it there yet. caroline: when you are talking to your portfolio companies eyeing up the ipo landscape and decided to come to europe, way are they looking to lock down? london is the biggest tech hub. but there is a concern, there is brexit. are you saying, go to berlin? ya: for example, when we expanded drop box, we had a great opportunity because we had a lot of customers in europe.
and customer support was really the key driver. so, based on that we went with doubling. -- dublin. use londonnies may because it is great for financial services, enterprise company and a great talent hub. we see berlin and amsterdam's as great destinations and paris as well. a great: i;'ve got question from a viewer and they are asking about valuations. looking at technology valuations on the s&p 500 being at elevated levels, the highest in, since 2008. earnings.times the does that mean is it a great time to start an ipo? ilya: we are pretty bullish on this window. if you look at the recent outcomes, whether it is snap we just talked about, you see huge -- pops after these companies went public. that is a lot of pent-up consumer demand and demand for
tech. tech's never been stronger and will continue to increase. we are quite bullish on encouraging our companies to go out. . they have everything it takes having a presence in europe is a big part of that. caroline: we wish you well with all of that. get them ipo'ing here as well. thank you very much for joining us. he world'some, t leading maker of drones is out with a new device that will take off from the palm of your hand. the dji spark next. this is bloomberg. ♪
just added a major -0- serena williams will join the board of the online: provider where she is expected to advocate for diversity throughout silicon valley. joining williams will be brad smith. they replaced meg whitman and t he chairman. williams says she will use the role to foster a more inclusive environment in the technology industry. employees,y's 650 minorities make up 14% of staff. meanwhile, the world's leading maker of drones is betting on a new unit that fits in the palm of your hand. dji unveiled at smallest camera drone in new york. it is looking to win the consumer market. we attended the event and took the new drone for a spin. reporter: i am here at grand central terminal for the chinese dji's unveiling of its smallest drone yet.
i have it right here in my hand. it weighs less than a can of sode. a. it's only $499. dji is hoping to step into a new ballgame, hoping to reach the masses. it ashley takes off and flies directly from your hand -- it actually takes off. in my hand, i am holding the drone that was launched last fall. the newest spark from today. this tiny thing has a ton of technology and a lot of same features. in the larger drones. how did you get it so small? michael: you know, overtime, our first product is about this big. it was just the brains, the chip happening inside here. over time, we have been able to make it smaller and smaller and more energy efficient, adding avoidingures like opi
obstacles. we have done a lot of work to shrink this down and provide a powerful system that anybody can use. reporter: do think this is going to expand the total market of dji? michael: when looking at the overall market for dji, consumers have a few berries. the first is price. lot of, you have an out o technology. we also have ease of use. everyone can move their head around and cap buttons on their smart phone to use the system. then it is about relevance. we made this as easy as possible to get up in the air and tell great stories. reporter: we are standing here at grand central terminal for a reason. what does the u.s. market mean for dji? as you grow the consumer segment? michael: the u.s. remains the
largest market in the world. what we have seen here is a lot of interest in drone technology. 46% of the customers that we hodl are interested -- hold are interested in buying a drone this year. we feel like this system overcomes a lot of the various that allows them to get into the market. reporter: let's talk about competition. the chinese of start has flooded ithe market. where do you think this stands? drone towe want this be people's first experience with a drone. we look at reviews and try out this technology c consumers might interested. but then they dropout because they feel like it is too hard to use. we put a lot of intelligence in the system. so that anybody can get it up in the air. we've found that by having better technology, consumers have a lot more confidence. more willing to give it a shot. reporter: can you show me how it works? let's do it.
do i let go? ok. michael: there we go. now it's just hovering. reporter: ok. oh. amazing. how do i bring it back? michael: raise your arms and go like this. reporter: it is coming back. michael: bring your head to your chest. walk to it and put your hand underneath. just like that. there you go. reporter: now, dji is operating in a very competitive space the drone market is still very small but it is expected to grow very quickly to more than $11 billion in revenue by 202. 0. dji is betting that with this tiny drone a gig at the masses to want to take a personal drone wherever they go. time will tell if dji's going to be able to reach the masses it hopes it will. caroline: very cool. now that does it for this
announcer: from our studios in new york city, this is "charlie rose." charlie: we begin this evening with terrorism overseas. deadly suicide bombing at manchester arena monday night left 22 dead and more than 50 injured. in the deadliest terrorist attack in britain since 2005, when explosives on london's transit system killed 52. isis has claimed responsibility for the attack which took place rande concert. police identified the bomber as 22-year-old salman abedi, a british citizen. president trump condemned the attack tuesday calling the perpetra