tv Bloomberg Technology Bloomberg October 27, 2017 11:00pm-12:00am EDT
>> i'm a alisa parenti from washington and you are watching "bloomberg technology." spain's central government in madrid has fired the catalan government and dissolved its parliament. that is after the declaration of independence. spain's government was granted the authority as part of emergency measures. it is calling for a new regional election. press secretary sarah sanders says the white house supports the spanish government's constitutional measures. state department spokeswoman heather says both nato allies cooperate closely to advance shared security and economic priority. the state department published a
list of businesses and individuals at risk for u.s. sanctions because of links to russia. nearly a month after that list was due. the penalties were required by sanctions bill congress passed in july. another high-profile republican retirement could be on the horizon. "the atlantic" reports orrin hatch is telling friends he plans to retire at the end of his term. "the atlantic" also reports mitt romney plans to run if hatch steps down. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪
emily: i'm emily chang and this is "bloomberg technology." the iphone x era begins, but the waiting. -- the waiting period goes into overtime. expedia's lousy summer. shares dive on the heels of an earnings report that disappointed. we will hear from the new ceo. a $450 million tie up that puts the self driving sector on notice. the ceo joins us to discuss the partnership. if you haven't already pre-ordered your iphone x, get ready to wait. the first batch sold out in minutes in places like california, the u.k., and hong kong. apple said demand is off the charts. demand for the iphone x coupled with recent apple supply issues
means it could take up to six weeks to get your hands on one in the states. joining us to discuss, brian white. and, roger, managing director at elevation partners. roger, i want to start with you. a lot of things make this iphone update unlike any other. first of all, there was the iphone 8 just a few weeks ago. a major design upgrade. how do you expect the demand curve to play out? roger: the category itself is so mature that you wouldn't expect explosive growth. apple has a couple things playing its way. the thing with the x is they do move a bunch of technology pieces forward in a really important way. overlookhardware folks is the other stuff in the apple ecosystem. -- with what just
happened at equifax, security should be on the minds of every smartphone user. apple is beginning to differentiate from google and the android universe. likely to play in their favor. with the x, they are bringing a product at a very high price point. it is going to be interesting to see how that affects the demand curve. the ecosystem is becoming more differentiated in a way that is going to be valuable to people. emily: brian, what are you hearing when it comes to how supply will impact demand and how many phones are going to sell? >> there's a shortage situation. we were in china a couple weeks ago. the issue is not totally complete. they are going to be able to ship, we are thinking, 27
million units in the december quarter. things are progressing. that has really been the issue. emily: roger, what do you make about this new strategy? roger: the way we need to look at it is, there isn't anyone out there buying their first smartphone, certainly no one above the age of 18. what you have is a market that is segmenting in ways that apple can get to buy having a broader product line. there are a lot of people for whom the original formfactor is still the way to go. there are people who want to have all the latest technology pieces. i like apple's strategy. effectively, they have four or five different products in the market at the same time. strategy wortha trying.
the 6 and 7 are a lot cheaper to make than they were when they first came out. i like that apple is going to have low price point phones that do the full apple experience even now that they have these higher-priced phones. emily: when it comes to the iphone x, brian, will the fact that this phone is more difficult to make, and they are having supply issues, will that impact unit sales? there's a couple interesting dynamics. one thing we learned in china, there is a voracious appetite for this iphone x. they are raising the price here. the other thing we noticed was the iphone 8 was fairly muted, but there was a trade down to iphone 7. they are really able to bifurcate the smartphone market with this strategy. now they play in the ultra
luxury segment and they can offer lower price points with the iphone 7. i think some of this will take a little revenue away from the december quarter, but it is going to make a less seasonal march quarter, a less seasonal june quarter. what we saw today is this narrative around weakness of this iphone cycle was really put to rest. emily: roger is nodding vigorously. time, does this wait this open an opportunity for samsung or google to get in and steal iphone customers? roger: we're going to find out. from apple's point of view, there is a smoothing effect of having more products in the marketplace. it may be that the 8 winds up becoming more successful when the 11 comes out. from apple's point of view, some people need a new phone now.
they are going to wind up with an 8. a lot of people will say, the 7 is a really capable phone. i'm going to take one of those. when you are in a mature market, having more products at more price points is a plus. emily: analysts are projecting an average revenue at $86 million for the holiday quarter. with apple earnings coming next week, what are you expecting? brian: i think the earnings and the outlook are going to be less vibe aroundhan the this iphone x cycle. any revenue we don't get, you are going to report that in the march or the june quarter. it is the iphone x cycle that matters, not the quarter or the outlook. emily: brian white, thank you so much for joining us. we will be covering apple earnings next week.
roger mcnamee is sticking with me for the hour. facebook, twitter, and google have agreed to another hearing on capitol hill. to lawyers are confirmed appear before the senate judiciary committee on october 31. the next day, they are scheduled to attend more hearings on russian exploitation of their networks. facebook said it will start disclosing more about political ads. political advertisers will have to verify their identities and locations. their ads will be appended with a "paid for by" disclosure. we're going to talk about that more later. expedia tumbling on the earnings results. we will hear from ceo mark about what happened and if online travel can bounce back. this is bloomberg. ♪
emily: shares of expedia sank in friday's trading session, marking the worst performance since 2013. the site posted earnings that missed expectations, blaming hurricanes for the drop in bookings. ceo,ght up with expedia's who took the helm in august, and discussed the results. >> the short-term results are all about the weather. $15 million to $20 million of impact from the storms. we expect another $10 million next quarter. we are investing into strength. we have over the course of the last three years tripled our ability to add new properties. strength, we want to invest in. we've also taken homeaway from
an online listings business into a real e-commerce business. we look forward to demonstrating solid results on the back of the investments we announced yesterday. emily: if we continue to see the adverse weather patterns due to climate change in the u.s. and worldwide, should the market reevaluate expedia and the travel industry as a whole? >> i think it is too early to do that. i've been at expedia for 11 years. anytime we see natural disasters, volcanoes over iceland, hurricanes or storms in the u.s., there's an impact in the near term for that destination, but generally travel patterns change. humans like to get out and explore the world. storms the rest activity for a -- depress activity for a short-term.
emily: you said that trayvon go, your hotel comparison site, will also have challenges. tell us about the core problem and why it is not living up to its expectations. mostivago is one of the well-known brands in travel. they've got a management team that has built this business from nothing into a very significant business. it is an advertising platform that advertisers love to be part of. what is happening is that triv ago is changing the way the marketplace works. it can cause some volatility. advertisers are trying to test what is it that makes the channel most attractive. trivago is testing how they make the marketplace more attractive for advertisers. that is causing some volatility.
given that this is a great business loved by consumers and advertisers, after this volatility, things will normalize. emily: the u.k. just launched a probe into hotel booking sites including expedia and trivago. how much of a concern is this? this is about marketing tactics, what they are calling pressure selling and how discounts are applied. >> we are a leader in this interest we and we have been helping the u.k. look into this matter. without getting into the looking we are open to at all the practices and making sure consumers are being treated right. that is what we strive to do. i think everything will be fine. we are working with the u.k. on this. emily: in terms of international
expansion, which markets are you most focused on? >> the world is our oyster, is what i would say. it is a $1.3 trillion industry. we are number one in the u.s. notnd the world, we are number one in many countries. our focus will be to establish that position. relevanta is, locally on a global basis. we're looking at europe, asia, latin america, and saying, what are the most attractive countries that we can establish a number one position for the local consumer? emily: you became ceo when dara khosrowshahi went on to become ceo of uber. seems like a natural fit. have you had any discussions to that effect? yet, but weangible
know how to get hold of each other. i think there's a possibility for something great. i look forward to talking about this in the future. emily: you said the focus now is organic growth, not m&a, which was very much a focus for dara khosrowshahi. you said a company like hotels tonight is on the "let's have a beer and talk about it" list. how long is that list? >> the list is long. m&a is in our dna. i was involved in all the acquisitions we've done. we will continue to look for acquisitions when they make sense. the essence of the message is, we have assembled an incredible portfolio of assets, and we are a leader in this industry. now it is about us becoming more locally relevant on a global
basis and executing faster. when we do that, i think we will execute to our full potential. m&a will be part of it. emily: my conversation earlier with mark, ceo of expedia. roger still with me here in san francisco. one thing we didn't get to, political issues impacting the travel industry as well. roger: it seems the trump administration's decision to now have interviews of people coming to the united states from believe 100 destinations, and restrictions placed on immigrants, on students, all those things are going to have some impact on travel. it does seem to me that if i were trying to be a ceo of a travel company, my list of things to worry about is getting longer. the hurricanes may be gone, but
bad weather is going to be a continuing thing. to the extent the united states is unfriendly to people who want to visit, or to our own people, that is going to cost them as well. emily: would that make you have a negative outlook on all? roger: it wouldn't be on my list of focus areas. i don't seeat it, what makes it a compelling story right now. the political headwinds, the weather headwinds, the stock is down a ton. it is more interesting today than it was yesterday. emily: roger mcnamee with me for the hour. delphi sent to acquire new economy. we will get insights on the deal. this is bloomberg. ♪
learned delphi has agreed to purchase nutonomy for $450 million. nutonomy previously partnered with major automakers including jaguar, peugeot, and lyft. delphi is in the process of splitting into two companies, with one producing trains and the other developing self driving systems. joining us from boston, nutonomy ceo karl iagnemma. great to have you on the show. what distinguishes you from the pack? karl: we've got unique technology that we've been developing that draws on my background at m.i.t. we've been in this space longer than just about any other startup. we've got more cars on the road, more miles under our belts. that is really what set us apart. emily: why go with a supplier
rather than an auto manufacturer? karl: the suppliers fit in a really interesting position. they can sell to the fleet markets, and they can also sell to their traditional oem customers. a supplier like delphi sits at a very strategically valuable point in this industry. emily: you've been testing autonomous cars in singapore. will we see you doing the same in boston? karl: we are today. we are going to be expanding in the coming weeks and months. we are introducing our technology to members of the public in boston and getting everyday people into our cars and letting them experience what it is like to ride in a self driving car. even though a lot of people have heard about this technology, you have experienced it. -- few have experienced it.
emily: there's a bill enabling self driving car testing in the u.s. working its way through congress. what will this bill change for you? there's some criticism that this would allow you to test self driving cars without adequate safety restrictions and oversight. karl: what is really important about this bill is it is going to create a uniform playing field. today, if you are testing in massachusetts, california, michigan, you are playing by different sets of rules. when you think about investing, it is difficult when you don't have uniformity and clarity around the regulation. the federal guidance will provide that uniformity and clarity. emily: earlier this year, you announced a partnership on a passenger service. you've said that partnership
will continue. can you tell us more? karl: that partnership is ongoing. we like and respect the guys at lyft. there were engineers in our offices this past week. we will be moving forward very soon, in the coming weeks. emily: karl iagnemma, ceo of nutonomy, ask for joining us on "bloomberg technology." overn ceo jeff bezos added $10 billion to his fortune. on friday.ed the bump in price o allowed bezos to leapfrog bill gates. google shares hit a record high. next week, the company heads to washington for hearings on
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mark: i am mark crumpton. you are watching "bloomberg technology." let us get a check on first word news. prime minister mariano rajoy says spain is firing the catalan government. the governor has been authorized to dismiss the regional government and curtail the catalan parliament powers. rajoy is calling for a new regional election on december 21. the white house says it looks forward into an awarding of a contract which would help restore puerto rico's power grid. the company is located in interior secretary ryan zinke's
hometown. >> the federal government has nothing to do with this contract. this is something solely determined by the puerto rican government. as i said, we will look forward to the audit to see if there are any other issues beyond that. mark: secretary zinke he said he had "absolutely nothing to do with the awarding of the contract." about 75% of puerto rico remains without power more than a month after the hurricane. defense secretary jim mattis visited a u.s.-south korean military observation post. he looked across the border into north korea. secretary mattis was briefed on conditions along the border created by a true salt of the korean war in 1953. mattis emphasized the push for diplomatic solutions to tensions with pyongyang, but added america is prepared to military action of the north does not hold development of missiles that can strike the united states. a spokesperson for the u.s. led coalition said he incorrectly
announced a cease-fire has been reached between the iraqi government and the kurdish minority. the colonel says while talks are ongoing and clashes have stalled, an official cease-fire has not been declared. long simmering tensions between the capital city of the kurdistan region and baghdad escalated after the kurds held an independence referendum last month. australia's high court disqualified the country's deputy prime minister over a 116-year-old constitutional ban on dual citizens serving in parliament. barnaby jones says he always prepared for the outcome. >> i respect the verdict of the court. we live in a democracy. i thank the court for their deliberations. mark: the ruling could cost
the government its slim majority in parliament. he says he renounced the new zealand citizenship here unknowingly received from his father. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. ♪ emily: "bloomberg technology." i'm emily chang. shares in amazon, microsoft, and alphabet hit records friday. the tech giants reported earnings that showed a strong revenue and profit growth of the internet has shoppers and advertisers for businesses. next week will be a big week for facebook, twitter, and google as the three send representatives to capitol hill on whether new laws are needed to regulate social media. facebook announced transparency rules for political ads. the move will bring the rules closer to what is required of traditional mediums like
television. still with us, roger mcnamee. what is your take on these new rules? roger: i think it is an important step. until today, facebook has been in a deny, obfuscate, do not cooperate mode. this is a small, but really important step to accept responsibility. facebook's position has been, they weren't responsible. they weren't going to attempt to police it. this says, yes, we have to police. it is not going to prevent a reoccurrence, but it is so much better than where they were yesterday. i'm really appreciative that they are beginning to recognize and act upon this notion that we live in a democracy and the country should be concerned about foreign countries interfering in our elections. emily: how much responsibility do you believe facebook bears in
swaying this election? roger: huge. i think it occurred in a different place than people realize. they were essential to trump's role that and the facebook has played in polarizing the country cannot be overstated. their basic strategy is not to bring people together. it is to push them into little groups of like-minded people. when you are on facebook, you can easily get the impression that everyone agrees with you. the things facebook shows you are all things they think you like. the problem here is, for any individual, there could be millions of different things they show us, but they pick 10 or 20 to put in your newsfeed. they aren't there because they make you healthy or happy. they are there because they
maximize facebook's profit. facebook's profit is maximized by appealing to fear, anger, and other deep emotions. if you think about that, fear and anger were the basis of trump getting elected. they were the basis of brexit happening in the u.k. they were the basis of alt-right movements in germany and france. when i look at what is going on, facebook has an opportunity to help repair some of the damage. emily: let me ask the same question about twitter. what responsibility does twitter electionwaying this due to russian interference? roger: there were a group of platforms the russians used together. they would start on 4chan and then move on to twitter, and once they got to a certain level, they blow it out
globally on facebook. they did a lot of stuff inside google to affect the way people get search results, and the use of youtube. it was almost like a symphony with the russians conducting it. thingsblem is that the that made it possible in the first place are still in place. we should anticipate that in 2018 we won't just have the russians trying to manipulate the outcome, you will have people from all over the place. if you are a corporation and you don't like some law, you can use all those same techniques. the problem is that facebook in particular has a business model based on appealing to your deep emotions. they make you vulnerable by getting you addicted to their product. the 1.3 billion people on facebook every day, that doesn't
make facebook a bad company, but they have a responsibility. emily: how do we prevent this from happening? do we rely on these companies? do we rely on government regulations? roger: we can't count on the companies. it has been public pressure that has brought these very small changes. appetite for heavy government regulation. we've been in a mode where we are deregulating. this has to be public pressure. consumers and employees of these companies have to work together to say, enough is enough. facebook, google, you have won. you have achieved these massive monopolies. there's nobody coming to take it away. it is time to recognize that you need to cooperate with everybody
and find ways to open source the investigations so that we can have millions of eyes looking to try to prevent our system from being sabotaged. man who was the guy who was in egypt during the arab spring. his whole hypothesis is that we can have the whole world helping protect democracy. emily: did he work at google? quora.kee he worked at what we need to do is get everybody reengaged in democracy. we've become complacent. we are not taking responsibility for protecting this thing. emily: what about google? roger: some parts of their problem are easy to solve. they are making good steps towards the use of youtube by
extremists to recruit and train. they have a thing called jigsaw. the thing they haven't done anything about is the fact that if there's a conspiracy. and you look it up in google search results, in all probability the top results will be dominated by the conspiracy theory, not the facts. these are not things where you can put 5, 10, 20, 30,000 people and police it. the other rhythms create this problem. the business model of these companies creates the problem. i would like to see them say, we may not be quite as profitable, but at least we're going to live in a country where democracy still works. emily: i wonder how likely that is. we had carly fiorina on earlier, talking about the scale of these companies. mega-tech what these companies need to think about,
and what the american people need to think about, the power they are amassing his enormous. the power to influence in all kinds of ways. i find it disingenuous for facebook to say, we didn't know our platform was being misused. emily: you've been fairly vocal that the power of these companies is dangerous. what do we do about that? roger: public pressure is the most important starting point. we need to have an education campaign. people don't know the problem. the acting attorney general made a statement yesterday that was transparently ridiculous. he was saying the american public is too smart to fall for russian ads. he doesn't understand what happened.
we need to have this conversation and get everybody up to speed on the facts. bots and groups and events and coordination across multiple platforms, those things are much more important than the advertising was. the fixes are really important, but they are only a piece of it. the reason we are going to play whack-a-mole is because the algorithms that determine what people see in facebook and google in particular, they are easy to manipulate because they favor things that are either angry or fearful. that got this huge problem campaigns that have a negative message get much better support because their messages get shared a lot. the remain campaign around brexit came in saying, stay the
course, be sensible. nobody shared that. the other side says, these immigrants are going to take away your job and culture. people shared that like crazy. whatever number of dollars the leave campaign spent, leveraged enormously by people sharing. emily: we are going to be covering these hearings all week long. i knew you would have a lot to say. roger: the hearings are just members ofking to congress. we don't have the real people. they are going to dodge. it looks like they are setting up twitter to be the fall guy. don't fall for that. emily: roger mcnamee, you are sticking with me. quick disclaimer, bloomberg's parent company is developing a global breaking news video network for twitter. uber's new u.k. nonexecutive
chair is a former senior adviser to the bank of england. revokeddealing with a london license and the departure of its northern european head. she is also a former executive of libor. the ride hailing company also announced its new chief legal counsel, tony west from pepsico. a cybersecurity company makes its public trading debut. you will hear from the ceo next. this is bloomberg. ♪
ipo reporter in new york. he discussed the next big thing in cybersecurity. ,> the space in the cyber world i know it sounds basic, but giving the company asset inventory or visibility is the next big thing in cyber. is that where a lot of the incursions are coming in? you worked at mcafee. what is the number one place where your clients are concerned that bad actors get their hands on data? >> what we've seen is an incredible growth in what you would call iot, the number of devices coming onto a network. house, theour thermostat and tv and security cameras are paired with a network. 's areios -- what cio
dealing with is this explosion of devices. many don't have security on them. you can do the best job possible on 99% and the bad actor is going to find a way in. we didn't think twice until a bot had taken over those. all these devices become a vector. ceo's heads are on the table potentially if someone gets into their employees' devices. equifax obviously comes to mind. what would be the timeframe before we see something as big and resounding as the equifax hack? >> sadly, we see those on a frequent basis. these are the companies that spend the most money on i.t. ceo's are accountable these days. if you are going to take your customers' data online, you have a responsibility to keep it
safe. when you have a company that doesn't make the headlines, there's consumer confidence that comes with that. forescout has $116 million of fresh cash. where are you going to let that to work? >> we have 17% of the global 2000 that uses our product at scale. many of those organizations do not have a strategy in place for visibility. you ask a cio if they know with clarity what is on their network, the answer is no. we are a financially responsible company, but we will continue to invest back in engineering and sales so we can help keep the world a safer place. emily: that was for scout's ceo speaking with our own alex. coming up, baidu posted its worst day since july 2015.
emily: alibaba's vice-chairman is buying a big chunk of brooklyn's basketball team. from thed to buy russian billionaire. the bill would value the nets at $2.3 billion. he would have the right to buy the remaining stake of the team in 2021. the sale will not include the arena. the nets declined to comment on the story. forecastingr lower-than-expected revenue, baidu is asking investors for patients. shares fell as much as 10% due to the news. baidu appears to be suffering from self-imposed curbs.
joining me now to discuss, selina wang. also with me, our guest post, roger mcnamee. behind us about what is the numbers and the future here. selina: forecasts missed their targets. they had the ad restrictions. the earnings came just days after the chinese party conference. the positive side is that this might just be a one-time problem. but overall, there's still political headwinds. they have a big content section which is up for stronger censorship restrictions overtime. tightenen xi gradually policy. emily: roger, what is your take on what we are seeing? roger: i'm curious about your thoughts on this.
we're always going to have things like this. there is a bit of a black box to the government policy around china that will be an issue every quarter for the indefinite future. you are always going to have these moments of uncertainty, where the numbers are affected by some government policy or by trying to get out of the way of government policy. selina: investors have to realize there will be a damper on profits. they have to have a large staff to watch over content. there is not a really clear directive to the public. they have aller: these initiatives, driverless cars and other humongous investment categories that may pay off, but which create a drag that the investors are bearing
the full cost of, with uncertainty on the regulatory side in the core business and the future business. emily: we talked about the regulatory risks facing u.s. tech giants. what do you think as that applies to the chinese tech giants? roger: i at least have some frame of rest for help -- frame of reference for how u.s. regulation works. china a is a different culture. i spent a lot of time figuring out the chinese market as it was beginning and realized if i wasn't going to live there, there was no way to be an expert. i basically stopped investing in china, knowing -- investing directly. to me, the expertise necessary to compete with the locals was more than i could do from california. emily: what are the trends that you believe we should be
watching? selina: when you talk to people close to buy do, they say business as usual. they are doubling down on artificial intelligence. they also have the benefit that china has said they want to be the leader in ai over the next several years. they are going to be backing companies like baidu and alibaba which just announced they are putting $15 billion into ai. they have state backing for things like ai, but also government headwinds. emily: selina wang, thanks so much. roger mcnamee, always great to have you. thanks for being so generous with your time. thank you all for watching. that does it for this edition of "bloomberg technology." we are live streaming on twitter weekdays, 5:00 p.m. in new york,