tv Bloomberg Technology Bloomberg June 5, 2017 11:00pm-12:01am EDT
alisa: i am alisa parenti from washington and you are watching "bloomberg technology." let's start with a check of your first word news. there has been speculation that president trump would invoke executive privilege to prevent former fbi director james comey from providing potentially damaging testimony. here is white house deputy press secretary sarah huckabee sanders. >> the president's power to exert executive privilege is very well established, however, in order to facilitate a swift the facts sought by the senate intelligence committee, president trump will not exert executive privilege regarding james comey's scheduled testimony. alisa: he is scheduled to appear before the senate intelligence committee thursday.
president trump today made the case for privatizing the air traffic control system. trump says the overhaul would improve customer service by reducing costs, wait times, and technology. trump says the current system is stuck painfully in the past. the u.s. supreme court has agreed to take up a major digital privacy issue. it will consider whether police need a warrant to review records from cellphone towers. law enforcement often uses such records to track the location of suspects. recent rulings have been protective of digital privacy rights. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti. this is bloomberg. "bloomberg technology" is next. ♪
caroline: i am caroline hyde in london. this is "bloomberg technology." coming up, our exclusive interview with apple c.e.o. tim cook. emily chang will speak with him from apple's worldwide developers conference in an extended interview later this hour. the u.k. prime minister calls for greater regulation of the internet following the terrorist attacks in london. but tech firms are pushing back. fitbit falls to third place in the wearable device market while apple steals the spotlight. can it make a comeback? first, apple's worldwide developers conference kicked off in san jose, california. we will be speaking with tim cook later for an exclusive interview from the annual event. dc is one of apple's biggest events for the year setting the stage for hardware and software that will hit the market over the next 18 months.
this year, the company announced updated macbooks and a major overhaul of the operating system and topped it off with something brand-new from the company. there is apple senior vice president of worldwide marketing with the formal announcement. >> it is absolutely beautiful and we call it homepod. yes. [applause] caroline: that is right. apple is going after amazon and google with a new home smart speaker called the homepod. joining us is cory johnson. and mark gurman. you have been there from the early hours. mark, you have always tantalized us with the latest product that will be unveiled. is the homepod the big announcement today? >> i think the homepod is definitely the product of the day. it is the first new piece of apple hardware significant in
two or three years since the apple watch was announced in 2014. it puts apple right into the living room space, the home space, gives them a new hub. do you think this will increase apple music subscriptions? cory: it probably will. not the first time trying to put a speaker in the house. they tried this about 10 years ago for the same price point and it was a dismal failure. this is an expensive device, more expensive than the competing products from amazon and google. they claim it is a much better speaker. they claim it will replace all of that stuff. there are a lot of unknowns as to how the products work. people have a lot of questions about how well this works, how much it will work with other platforms like spotify. and that will matter a lot. >> at the conference, they did not say anything about a development kit for companies like uber and lyft to develop apps for it.
caroline: i'm looking at the announcements and how this feeds into how apple is trying to change its overall business model. i'm going into the bloomberg if you want to tap into your bloomberg. you can get the graph on bloomberg television. have a look at what we have got. this is apple's segment revenue breakdown. this shows how important the iphone still is. we are talking $137 billion worth in terms of revenue last year. compare that to the next best, services, $24 billion. how much do these announcements and the focus on where developers can take this feed into how they want to change their business model and not only about the iphone? cory: hardware drives headlines for apple. it is all about the gadgets. that is what the headlines tend to be. the reason people are interested in apple's stuff is not that the hardware is innovative.
it is that the software is innovative. that is what this event is about. we had 5300 developers from 75 countries here to find out about the software and how they can develop software for these devices. the devices matter. but the ability to develop for those devices for the programmers to make money is what matters here. i think what you have heard, the consistent theme here was use of artificial intelligence, machine learning, and siri as the headliner for all of that. and incorporating siri into a lot more stuff whether the home pod or the messenger applications. that was a big part of the focus here, trying to get developers excited about using the ai stuff and siri. caroline: mark, take us from ai to ar. this was one of your big scoops, focusing on augmented reality. how much of a hint did we get on
that? >> augmented reality is very interesting because apple did something it normally does not do. it announced augmented reality. it mentioned those words on stage for the first time i believe. this is a hot new area. but they did not announce any products or initiatives related to ar. cory: the development kit was cool. >> but nothing apple branded to inspire developers to do new things. before they did ai, they introduced siri. with the home devices, they have home kit. we saw the health stuff before the apple watch, the home integration before the home pod. now we are seeing ar for developers before we see a big push from apple. cory: it is interesting. the cutting-edge product is pokemon go, not an apple product but uses the iphone or android
phones to propagate that to the world. they used it on stage showing we can make it better. we can help you with the development kit that i thought looked cool. >> pokemon go, they had to create an engine to do this. apple says we have our own engine. it is better and you can use it. i'm sure there will be a ton of new apps with the ar integration in the future. caroline: what about wearables? fitbit has dropped to third place. there seem to be an upgrade for the operating system for the watch? >> for the second time in two years, they are revamping, redesigning the core of the operating system. last year, they made it easier to navigate. this year, they are putting more attention integrating siri into the watch face. i could lift my wrist and look at it and it will tell me all
about my day, what is going on in the future, boarding passes, and whatnot. cory: you come to an apple event and not wear your apple watch? i do not even own an apple watch. there was not a lot of mention of the airpods. >> the air pods. they could have added enhancements. i was hoping they would add it where you can tap to go to the next song. maybe they will the future. caroline: it was a down day on the stock market. why not more enthusiasm? cory: it is hard to connect the dots. that is why the stock is down today. in terms of the development of apple's business, by announcing products with great fanfare that will not be on the market for a while, it will keep sales through the end of the year. it could be a combination of investors seeing good things and what they announced and concern about short-term results for
those product lines that will take headwind knowing replacements are coming down the line. some of it not until december. caroline: great as ever. it has been a long day. thank you so much, cory johnson and mark gurman, live from the wwdc. stay tuned. it is our exclusive with apple c.e.o. tim cook. that extended interview later this hour. now a story we are watching for you. alphabet crossed a major milestone in the session. shares traded above $1000 a share for the first time ever. google is among the tech giants seeing record-setting gains this year. the stock is up more than 25% in 2017. more tech companies hit all-time highs in the session including microsoft, amazon, and nvidia.
prime minister theresa may calls out the tech community after the attacks in london saying the industry should do more to stop the spread of terror online. what comes next and the impact on the election days away. bloomberg is live streaming. check us out @bloombergtechtv weekdays. this is bloomberg. ♪
potential option has emerged. an all-stock deal that would avoid the need for financing. it would let deutsche telekom avoid paying a premium for sprint with long-term upside. t-mobile has an enterprise value of more than $80 billion compared to about $70 billion for sprint. social media platforms are under heavy scrutiny following the terror attacks in london over the weekend. speaking on sunday, prime minister theresa went directly after the tech industry saying it needs to step up its work to fight terror. >> we cannot allow this ideology the safe space it needs to breed. yet that is precisely what the internet and big companies that provide internet-based services provide. we need to work with allied democratic governments to reach international agreements that
regulate cyberspace to prevent the spread of extremist and terrorism planning. caroline: tech firms say they already police their platforms and are working to form a common database to more easily identify terrorist posts and flag them for removal. what might be next and how could this affect the u.k. elections? we are joined by sasha havlicek and the c.e.o. of newswhip. great to have you on the show. explain about the institute for strategic dialogue and whether you feel more regulation is the answer. >> we have been working to combat extremism of all varieties for over a decade now, both off-line and no more and more online. we have done a lot of work with internet companies but also government on this issue. there is a challenge. we see terrorists and extremists deploying professionally online.
they have a head start. we have seen little to compete with that message of hatred online. we see little professionalization of the credible voices that can counter the space. in many ways, this is where tech companies can be the most effective and support upscaled endeavors in this space. there is more they can do. they have admitted that. they have committed to setting up an industry body to drive not only counter speech in the space and education, but also technological innovation because there is more that can be done to identify and get rid of the most egregious content swiftly. the thing we need to be worried about always is the overstepping of those lines. there is a lot of gray area content, very difficult to identify what in all cases
should and should not come down. that expertise often does not sit within the internet companies. i don't think anyone wants them to take on a full editorial role with regard to content. caroline: where do you think the battle at the moment is between tech versus government? do you have a view on the response thus far? >> i think we have seen with these problems have emerged before, the platforms have responded quickly. newswhip tracks the sharing of different forms of content online and quantifies the data very exactly. what we saw in the u.s. election, a large amount of fake news was spreading online. we saw much less in the french election and even less in the run up to the u.k. election. i think the tech companies do not want governments to come in. they will race to solve those problems through technological means themselves before laws get drafted hopefully and be successful in doing that.
that is the strategy we will see here. >> the u.k. government and theresa may is talking tough on this, but i think the u.k. government also would prefer an industry led solution. they have the best wherewithal to drive the technological response. they're putting pressure on now to make sure the internet companies follow through on the promises they have made. but there is also something to be said for engaging -- for letting certain types of accounts stay up online. we do a lot of work monitoring and identifying extremists prior to the law-enforcement phase, prior to them crossing the threshold to terrorism. there are ways in which we can engage further upstream those sorts of individuals and make a change in their attitudes and behavior.
the issue is whether we drive them underground too far. there are constituencies we want to watch and engage with successfully. those engagements have to be done carefully. they have to be done by people with an understanding of the issues. we work a lot with networks of former extremists to reach out to those people online, credible voices within communities use peer-to-peer engagements. internet companies have been solid behind those sorts of activities. facebook has launched a major initiative to support counter-space and so has google, especially work on digital literacy and citizenship. internet citizenship has been a major thing. how do we get young people understanding how quickly they can fall into the rabbit hole of extremist communications online. caroline: what you do is monitor the narratives. throughout the u.s., the u.k., the french election, you have seen changes.
what about the effects ahead of the u.k. election? do you monitor currently what we are seeing in terms of internet dialogue and how this is affected by terrorist activity? that's what we are monitoring and focused on is what content is being shared. it is a strong indicator of what people are interested in and talking about. you could call the u.k. election -- we are seeing a lot of sharing of articles and a reasonable amount of sharing of policy-focused stories. most are about foxhunting or sales of arms to dictatorships. these are the things being talked about. there was a good deal of engagement on the statements made by each of the party leaders following the terror attacks in manchester. there was not any big subsequent move of the narrative after that.
i think conservatives are seeing an angle for attack here on labour. still the most engaged to stories in the run up to the election are about foxhunting. caroline: which amazes me. very quickly. are you optimistic we can see some sort of internet-based internal help to help prevent the spread of extremism online? >> i agree there will always be a gray zone. like twitter removing 300,000 extreme accounts. facebook has designed itself as a hostile zone for terrorism. there will always be the gray zone. at what point does supporting a political cause in the middle east bleed into expressing an extreme view? this discussion is not going to go away.
>> which is why i would say it has to be a partnership between the tech companies and civil society. that is the partnership needed to respond to this challenge properly. caroline: thank you very much. it was wonderful having you both join us. thanks to sasha havlicek and in new york paul quigley, c.e.o. of newswhip. coming up later in the hour, our exclusive interview with tim cook from the worldwide developers conference. emily chang is sitting down with him this moment. we will bring you the conversation as soon as it wraps up. a reminder of our new interactive tv function. you can find it at tv on the bloomberg. you can watch an interview or send our producers a message. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪ ♪
caroline: now a few stories we are following. a spacex rocket over the weekend has delivered a resupply mission to the international space station. the dragon ship last dropped off a shipment three years ago. the space shuttles often made return trips before they were retired in 2011. this brings elon musk one step closer to reusing spacecraft. now to a stock we are watching. shares of snap fell after j.p. morgan lowered the price target by 10%. $20.$18 to
it downgraded based in part on fewer people flocking to the platform. j.p. morgan says users are not expected to join snapchat as fast as previously expected. harvard university has withdrawn the acceptance of 10 incoming freshman because of a social media message. students a shared offensive memes. harvard reserves the right to withdraw admission if a student engages in questionable behavior. we continue our coverage of the apple developers conference. emily chang sitting down as we speak with c.e.o. tim cook. we bring you that exclusive interview later in the hour. if you like bloomberg news, check us out on the radio. you can listen on the bloomberg radio app, bloomberg.com, and in the u.s. on sirius xm. this is bloomberg. ♪
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it all adds up to our most reliable network ever. one that keeps you connected to what matters most. >> this is the latest first word news. muddy waters founder says he is ready to reveal a new hong kong listed stock he is shorting. companiesnumber of are committing "fraud." he is also worried about china's borrowing binge. china is a massive asset incredible i don't think it will be bond market. if i had to pick where this starts, and this is better than throwing a dart, i would say
shut banking wealth management products. the top u.s. diplomat in china is said to have re-signed in protest at president trump's with a draw from the paris climate accord. until the most senior new ambassador arrived. he quit at the weekend, saying he disagreed with the president's decision. the state department has confirmed he is gone, but one say why. president trump has renewed his criticism of london's mayor, initially criticizing the mayor saying london had new reason to be alarmed, now escalating that, tweaking that his comment was a pathetic excuse. it comes just ahead of thursday's general election.
global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. a check on the asian markets, risk off taking hold, gold and the yen higher. traders turning cautious about supply concerns. an outlier in philippine bonds climbing. the yen is putting pressure on stocks, aussie shares falling over 1% ahead of the rba policy decision, faltering .25% as we had that current account deficit deeper than expected. we are seeing the yuan extend gains. the offshore overnight interbank rate has dropped to 2.5%. the hung saying is edging closer seen,000, developers leading the charge in hong kong
as well as the region, real estate up .3%. health care biggest rack along with energy stocks, so asian stocks are on course to fall for the first session as the risk off sentiment is taking a hold ahead of that jampacked event. ♪ caroline: this is "bloomberg technology." i am caroline hyde in london. we are diving back into our top story of the day. that is apple's worldwide developers conference. emily chang is currently speaking with tim cook in an exclusive interview from the annual event. cook spoke about one of the major announcements, the apple homepod. >> apple is a company that deeply cares about music and wants to deliver a great audio experience in the home. we feel like we reinvented it in the portable player area and we think we can reinvent it in the home as well. caroline: the home pod is apple's answer to the amazon echo and google home.
emily asked about competition heating up and if apple is late to the game. >> for us, it is not about being first. it is about being the best in giving the user and express that delights them every time. we do not let that impatience result in shipping something not great. caroline: more of that exclusive interview ahead. that is not all apple announced. it laid out its plans for the ios 11. the next major update will aim to improve on core technologies that power the operating system and introduce new features. joining us from wwdc, bob o'donnell, friend of the show, and the asymco founder. thank you for joining me. what stood out for you looking
at the new operating system in particular? what about the software update? >> there were a lot of nice software updates we saw on ios 11, particularly on the ipad. we saw apple put a lot of love toward the ipad. it brought a number of capabilities people have been asking about for years, including a file system which seems simple but is a very big deal for a lot of ipad people. that was important. the imaging capabilities were important. the most exciting thing is the ar kit that will enable ios applications to do augmented reality. they had impressive demonstrations. it looks like cool technology. we will be anxious to see what developers can do with that. caroline: talk about asymco's work. you put out an article in january saying how apple is set
to earn $1 trillion in revenue from the ios ecosystem by the middle of this year. is this going to be set on that particular direction you think? >> absolutely. we have new numbers that confirm the trajectory we have seen already growing for the ecosystem. not only do we have 180 billion downloads, we also have this huge number, $70 billion paid to developers which we can now not only do we have 180 billion calculate that about $100 billion is what consumers have been spending. on top of that, you have the apps that are free but enable huge ecosystems. they are all built on top of ios and their economies depend on ios to a large extent. very much assists with that strategy and trajectory.
caroline: bob, i want to dig into some of the other niche areas within the operating system that were announced. a lot of work on ai. they have been unveiling the new rival to amazon's echo. what about siri? will we find it easy to talk to these new ai devices unleashed by apple? >> i think so. i think the big news with siri is getting lost a little bit because what i see interesting around siri is this idea of what i call contextual intelligence. in other words, you want to make it be aware of where you are, what you are doing, and make recommendations based off that. some of those things are subtle. we saw apple introduce a number of these things. they leverage machine learning and ai. they generally seem to be doing that. one of the big things i think
was missed was the fact they are now doing a lot of this learning on the device. that is a big deal. a couple of years ago, apple started talking about doing some of this and people wrote it off like there is no way can do it because the general thinking at the time was that you need huge data centers to do this work. now we have realized you can do that on the device. that is a big step forward. all of a sudden, it makes apple look pretty smart when they talk about doing the device-based app. >> i tweeted and said siri is going to get to know you, track you, and be smart about you. but apple themselves do not make that claim. siri is your friend and confidant. but apple is completely oblivious. that is the distinction in their strategy versus google that keeps the knowledge centralized. >> exactly. the trick will be how well siri works on the speaker and in general. >> some will say having it
centralized makes you smarter. that is what we are seeing laid out, whether apple thinks having local intelligence versus central intelligence. that is the really big question here. caroline: the big question for me is whether this shifts the business model anytime soon. i'm going to show the chart again on the bloomberg. you can type in the number 8254. i'm looking at how much revenue is dominated by the iphone. $24 billion. does this push up where we see services revenue going? >> i think it does to some degree, especially the speaker. they will focus on making it part of apple music, really integrating it. they want to drive more people to using apple music. i think siri is going to start to become more of a platform and
we will start to see services layered on top of that. >> $100 billion a year is the run rate. this is a bogey. the apple can get there. remember the iphone gets huge margins, higher than anyone else by far and still consistently higher for many years so far. the reason it is so high is because of everything else we talk about as being insignificant. all those things add up and make the iphone that franchise that is so valuable. we point at it and say where is the hardware when it is the software driving the ecosystem and that loyalty and satisfaction we are seeing. the numbers are not telling the whole story. caroline: horace, what about this rival to paypal's venmo with apple pay starting to galvanize itself? should paypal be worried? >> i think it might be an
accidental victim. apple is not out to get people. i think it is trying to make the experience better and bring peer-to-peer payment within its platform. it is trying to get money from this. are they a bank by default? they may be outsourcing some of that. they want to make a great experience. it is the same thing with apple pay. some said it would be a monster in terms of revenue because apple wants to be a bank, but that is not their business model. i think it is one of those little pieces that are building blocks. >> exactly. i don't think it will be a huge moneymaker for them. it is a convenience. it is something people can do within the messaging app. this is what we see with messaging platforms in china and other places. apple is expanding messaging to be able to do more things. we are seeing them build these
mini platforms within the platform. messaging be one and siri another. i think that is what we can expect from the moving forward. caroline: we will see who wins out when it comes to keeping us addicted to that particular platform. bob o'donnell, great to have you. asymco cofounder, horace dediu, great to have you join us from wwdc. ahead of the shareholder meeting, tesla reached out via twitter. the company tweeted questions for elon to answer before the shareholder meeting tomorrow. questions range from pricing to third-party services. there were a few lighthearted queries. one user asked for the best wine after a successful shareholders meeting. elon musk answered, "california cabernet." keeping it local. emily chang just sat down with tim cook.
and so, i am doing the latter. i cannot imagine a situation where i would not because i think it is in the best interest of america to do it and i am first and foremost an american. caroline: that was tim cook on why he did not join trump's business council. we are staying on apple and our exclusive interview with tim cook. you have been writing plenty of articles today. one is talking about the profit margins that are golden handcuffs for the company and the company's financial success is holding it back. talk about why they are taking a leaf out of amazon's book and whether that may be worrying for investors. >> the thing that worries me is apple has traditionally in the last few years stuck to these margin targets of about 38% to 40% of gross profit, which is profit -- sorry, revenue after they pay for the cost to produce
a product. that is a pretty fat profit margin for a company in hardware and maybe any tech company. the thing that worries me is that by maximizing gross margins and other kinds of profits, is apple missing out on opportunities to do some experiments where maybe they can sell hardware at or below cost as amazon does to get more people to use its other technologies, whether apple music or to download more apps or use apple video services or itunes? i wonder if maximizing for hardware profits is hurting apple in the long run. caroline: this is where we are starting to see a higher price point when you look at the home pod. amazon and google are much cheaper. do you have a sense of how much these will fly off the shelves? sometimes price point is an attraction because you feel it
is the luxurious object. >> apple is no stranger to charging premium prices for products. particularly in the iphone line, apple is no longer a premium product. the $700 or more that apple charges for iphones is pretty much in line with what other high-end smartphones cost these days. that has also been true even for some of their newer product lines. apple is no longer a premium product. but you are right. the homepod speaker is at a premium to devices like amazon echo. apple pointed out today if you look at the price of a high-end speaker, non-smart speakers for the home, those are significantly more money than what apple isd
charging so it is trying to thread this line between the cost of most home speakers and the cost of the smart speakers meant to be a gateway to google and amazon technologies. caroline: do you see apple having to follow amazon's lead? do you think it answers the question set by your other great article, that now it should not be missing the future as you thought? >> my concern on that point is if you look at where technology is going, it is increasingly the case that the future is being dictated by smart software, artificial intelligence, and other kinds of technologies sifting data and making decisions from reams of data, whether that is driving a car without a human driver or giving companies decisions to fix a factory line before it breaks down. apple has been traditionally weak in those categories of software and artificial intelligence. the worry is all the things it is doing now are not necessarily fixes to future-proof the company for this kind of software driven future.
caroline: perhaps that is why the share price did not move much today. >> it could be. a lot of the things apple announced today were refinements. caroline: the homepod was really the only new thing. thank you for your analysis. the biggest video game of the year is just a week away. one company says its gaming system is the one to beat. sony has announced it sold almost 60 million playstation 4 consoles since its launch in 2013 with one million playstation vr headsets sold since the 2016 launch. microsoft longer reveals sales but recent estimates say sales could be below 13 million. the nintendo switch is too new to compare but about 14 million
caroline: the story of the day, apple's worldwide developer conference has been going on throughout. bloomberg has been live at the event in san jose, california. emily chang just wrapped up an exclusive interview with tim cook and joins us now from california. amazing conversation. talk us through some of the highlights. emily: thanks so much. just finished a wide-ranging interview with tim cook. we are starting to get a sound out for you now. we started on the newest hardware of the day. that is the homepod. he says this is something apple has been working for four years
on, which means they started working on this before the amazon echo even came out. you will notice apple is focusing on how this can reinvent music in the home. not all of the other potential use cases. i started off by asking why anyone should by this over amazon echo or google home. >> apple is a company that deeply cares about music and wants to deliver a great audio experience in the home. we feel like we reinvented it in the portable player area and we think we can reinvent it in the home as well. emily: will i be able to make a phone call with this device? will i be able to order groceries? he said not to think about it that way yet, to focus on the music use case, but to assume that is just the beginning. in terms of why did it take so long, the fact that so many people are now saying finally?
take a listen to what he had to say. >> for us, it is not about being first. it is about being the best and giving the user an experience that delights them every time. and so, we do not let that impatience result in shipping something just not great. emily: that is a refrain we have heard from apple before when it comes to other new products. we also wanted to talk about tim cook's relationship with donald trump. tim cook called the president last week when there was some confusion about whether or not president trump would be withdrawing the united states from the paris accord. he urged the president to remain part of this landmark agreement and trump made a different decision. i asked what that means for cook's relationship with the president. take a listen. >> i think he did listen to me. he did not decide what i wanted for him to decide. i think he decided wrong.
i think it is not good, not in the best interests of the united states what he decided. emily: i asked why it is worth continuing to work with this administration. tim cook made it clear he believes if you have an opportunity to work with the administration to help the american people, you take that opportunity. you do not walk away from the table. he also made a point to mention he did not join the president's council by choice. take a listen to why. councils and committees to be terribly productive. but it was not about not wanting to advise on something where i thought we could help or had a point of view that should be heard. and so, i am doing the latter. i can't imagine a situation where i would not because i think it is in the best interest of america to do it. and i am first and foremost an
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