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tv   Bloomberg West  Bloomberg  January 27, 2016 11:00pm-12:01am EST

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emily: i am emily chang. the federal reserve is leaving interest rates unchanged. the fed says it is closely watching how global pressures might affect the u.s. economy and it might slow future hikes if market lapses and global weakness continues.
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next let's take a look at the markets. here is how they are trading in the morning before the lunch break. in singapore, tokyo, mumbai. we saw a gain, a rally. i'm back in half an hour.
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emily: i am emily chang. this is "bloomberg west." another record quarter for facebook as it rakes it in for mobile video and instagram. share surpassed $100 in after-hours trading. ebay shares tank. wall street weighs in on apple, who is cutting their price target and why? facebook crushing fourth-quarter earnings as the company continues to rake in ad revenue from video, mobile, and instagram. overall revenue was $5.8 billion, up 57% year over year. shares spiking after hours, as much as 9%.
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sheryl sandberg talked about a shift on a conference call. >> if they want to reach their customers where they are, mobile is essential. our conversations with clients have shifted from when to how. emily: here with me to break it all down is our next guest and cory johnson. i heard you refer to facebook earnings with a word you have never associated with a company before -- fantastic. give me the high points. what is so fantastic? cory: this is a really big business growing at a rapid clip.
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it is interesting to see the user growth happening on top of user numbers. i track user growth sequentially. twitter cannot grow users at all. they are sucking more dollars. that is really impressive as they have done this pivot towards mobile. emily: it is really a continuation of a mobile story. mobile is where people spent the past holiday season and where facebook excels. what surprised you most about these numbers? >> facebook is executing extremely well. the trend i have been looking at is the growth in engagement in facebook. in 2009, half the people who used facebook used it every day. that number has gone up to 65%. people are using facebook more.
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because they have executed so well in their ads platform, people are using facebook more. i do not think there is a company executing better. cory: for facebook, it is not the case. more value for users when they use mobile. emily: we are still not getting a lot of information on what is going on with whatsapp and messenger and oculus. take a listen to what mark zuckerberg had to say about whatsapp. in our interview with the cfo, he said this is very much a year of experimentation when it comes to whatsapp and messenger. did you want to hear more?
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>> in the context of what they told us about whatsapp in the past, we got a lot. it sounds like they are going to forget the subscription model. we will probably not see any monetization for whatsapp until 2018. i think we have enough. emily: facebook is not in china, but they have not been immune to the overall market volatility. does it matter? cory: i do not think so. most of the slow down in china has been commodity related. the stock market is an indication of something, but not a clear indication of economic growth. i think what is happening on
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facebook, they are showing a dexterity around finding ways to profit from the environments they are in. when the world turn to mobile, they turn to mobile more successfully than anybody out there. emily: as someone who knows the innerworkings of facebook, what is their biggest challenge? everything looks great. what is the one thing they have to worry about? >> i see a lot of parallels to my previous employer, google. they have this amazing business in facebook and now they are trying to find the next big business. they are using this cash cow that is facebook to look at ai, internet.org, oculus, and virtual reality. it will be interesting to see which of those play out. on the 10-year horizon, and it matters that they find that next
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big bet. and technology, that is the most challenging thing a company can do. emily: we did not get any information about oculus preorders. you put a number on how much you think they will be bringing in from sales this year. could oculus be that next big business? >> longer-term, it definitely will be. how eager zuckerberg is to talk about oculus and he had some comments about how excited he is. he really wants to own this and that talks to this paradigm shift. facebook has a seat at that table. geeks are doing virtual reality. five years from now, it is going
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to be mainstream. this is a significant shift in computing and they are a leader. emily: mark zuckerberg did talk about fatherhood on the call. mark: on a personal note, over the last few months with the new addition in my family, i've been reflecting on the legacy we want to pass on to the next generation. i'm excited about our progress. if we continue to focus on solving the fundamental challenges facing the world, we can leave a better world for the whole next generation. emily: i love hearing about dads speaking about being dads. i thought it was sweet. you are going to be joining us a little bit later. turning now to the broader market, the nasdaq, the biggest laggard of the three major averages. a huge reason is apple. julie hyman from new york.
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julie: all three major averages did sell off on the day. some investors were disappointed the fed was not more dramatic in its language expressing concern over the market turmoil we have seen this year. it is monitoring developments. the nasdaq was the worst performer of the three major averages. the nasdaq 100 lagged on the day with apple accounting for nearly a third of that index's decline alone. apple closing at its lowest since july of 2014 and having its biggest one-day decline in about two years. apple falling after it forecast a sales decline this year for the first time in about a decade. a lot of analysts have been talking about such a decline in the weeks leading up to this report, looking at supply chains and saying that iphone demand
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was weakening. the suppliers themselves saw declines on the day. it was a mixed picture as far as magnitude. amazon, netflix, microsoft, and google continuing the declines we have seen thus far this year. emily: julie hyman in new york. we will dig more into apple and wall street's reaction to earnings from yesterday, coming up. we are also watching qualcomm. it has seen revenue drop more than 10%. shares are little changed, but they are down more than 30% in the last year. ebay shares getting hammered and extending trading as the company looks forward to more of an earnings squeeze. paypal, a completely different story. details, next.
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emily: amazon is out with fourth-quarter results on thursday. >> the facts of amazon are astounding, meaning from the very first hour of the first day, what amazon and jeff bezos has said, we are going to build infrastructure to serve customers. we don't care about anything else. it is an endless period of investment. jeff bezos will be the richest person in the world within, i don't know, certainly within five to seven years.
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emily: the threats of amazon continue to weigh heavily on ebay. ebay shares tanking as the company's first-quarter forecast overshadowed a report that came in line with estimates. it looks like paypal continues to benefit since the split, what about the survival of its former parent company? gene, was carl icahn's push the right call? >> i have not gone back and looked at total valuations.
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for investors, it has been the right thing because it has allowed them to parse out a good business in paypal and an average business in ebay. from that context, it was the right thing to do. emily: he has swapped out his ebay for paypal shares. martha stewart left the platform. here is the ceo on the call talking about where he is investing and where he is not. >> they could throw a lot of money at short-term growth and we are not doing that because we are being disciplined about our investments and we are investing in the platform and a new business opportunities that we think will be important for ebay two or three years from now. emily: mike, do you believe in ebay? mike: the long-term future, it is somewhat challenged. they are competing with alibaba
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and amazon and walmart and companies that are pure plays as well as legacy companies. they have a very large mobile commerce presence, but i do not see them growing it at the same rate of other companies. emily: anything to suggest that his focus is working? gene: you could have gone back over the last four years and picked anyone of the ebay conference calls and it would have been the same thing. we just keep hearing about the long-term and their near-term challenges. they are losing share. some nice valuation support to the stock. that is why we have it rated neutral.
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emily: what about paypal? the split has been good for paypal, but shares are down since these two companies separated. anything to suggest we should be a little less confident in paypal? >> paypal is simply the most attractive large-scale pure play company in the world. it is a really exciting company and a really exciting team. they have pulled back on the in-store focus and have really gone out to e-commerce and mobile commerce. mobile commerce was 25% in q4. really exciting for them and it is nice to see their strategy
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paying off with uber and airbnb and facebook messenger. emily: would you agree? >> we are on a different page. we have paypal under weighted. they are doing a phenomenal job at desktop and mobile browser, the future will have to include point of sale. you will see other players getting more aggressive. facebook talked about payments tonight. emily: gene munster, you are sticking with me. let's take a look at what is trending right now. the face of microsoft windows phone to a photo from his
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holiday vacation in japan. he did it from an iphone. the twitterverse was quick to point out the gaffe. speaking of the iphone, sales may be slowing, but apple is at record profit. we will take a deep dive into what wall street is saying about the company's road ahead. ♪
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emily: the revolving door at twitter swings again. kevin weil was one of four profile executives who left twitter this week. twitter is close to hiring former apple communications executive. shares of apple closing in the red.
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tim cook telling shareholders that apple is feeling global growth pains. >> we are seeing extreme conditions, unlike anything we have experienced before. major markets -- brazil, russia, japan, canada -- have been impacted by slowing economic growth, falling commodity prices and weakening currency. emily: some analysts are cutting their price targets. has the mighty apple fallen? gene munster is still with me. when i spoke to the cfo of apple yesterday, he emphasized currency issues.
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is that the real problem or is it the reliance on the iphone? >> the reliance on the iphone is a great strategy. the downside of that is we are all waiting to see if apple can introduce a device that has the financial and social and cultural impact of the iphone. the iphone is so powerful. i got rid of my watch and i use my iphone as my clock. i stopped using my ipad as much because the iphone got bigger. it is cannibalizing all of these new devices apple is working on. emily: you cut your price target on apple, as did others. why? gene: we had to bring our
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earnings down because we are being more conservative. we wanted to take a more prudent approach. emily: having worked at google and facebook and closely with apple, which company are you most optimistic about? bret: i would probably say google. they have a unique set of assets where they own some of the most important services and they also own the most widely distributed it operating system. i do not think there are many other companies that have that broad suite of services on mobile. emily: alphabets market cap is approaching apples.
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should apple be worried that it could soon be surpassed as the world's most valuable company? gene: i expect apple's multiple to expand. investors will quickly get through this and realize they have totally sandbagged expectations and going into the new cycle. even though it is a close race, i think you will see apple shares accelerate over the next few months. emily: interesting stuff. thank you for joining us. who may be having the best day ever? not so much a who, but a what. it has to do with an ancient chinese board game. we will hear from chris painter, the u.s. head of cyber issues. what policy changes washington has in store for big tech. ♪
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emily: i am emily chang. this is "bloomberg west." a look at the stories making . sharp is stronger. they offer to buy $1.6 billion.
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sharp is facing a lower offer. facebook sword in extended trading after delivering another quarter of record sales. one and a half billion users logged on every month. about 80% of revenue came from mobile devices. video ison hours of watch on the site daily. consumer engagement with videos is growing. the fact that so much video is being concerned -- consider -- consumed on a platform. let's check in and how the markets have been trading.
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some say with the fed, this is a good sign. it a lot going to see of robust buying. tomorrow we are also expecting cpi inflation numbers coming out of japan. 1/10 ofrecasted to rise 1%. for the second time this week,
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they injected the most cash into its financial market ahead of the lunar new year. we are going to reopen on hong kong and china on the top of the emily: last week, the white house announced a new federal entity that will oversee background checks on government employees. the president plans to ask congress for $95 million that will go toward increased data security and new i.t. capabilities. six months after hackers obtained the personal information of over 20 million federal employees. a very interesting time in cyber security. right at the center is chris painter. he sat down with elliott gotkine in tel aviv to discuss the state of cyber security. >> many companies have woken up
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to the fact that cyber security is their number one threat. how does it rank in the pantheon of threats from the u.s. government's perspective? >> president obama made this one of the priorities of his administration when he came in. a lot of the efforts have been dedicated to trying to raise awareness within the business community, government community. it is a high priority in the united states. when my office was created about five years ago, we were the first one to have a foreign ministry that looked at the international aspects of this. it has risen to the level of a political issue, a policy issue.
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>> is it possible to isolate it - chris: this is one of the top threats we face. >> jpmorgan, u.s. government, social security numbers, can you guarantee a data breach will not happen again? chris: it is hard to say that you are 100% protected. it is always a battle between
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the defense and the offense. i think we are better and we are striving to be better yet. >> is your worst nightmare an attack on critical infrastructure? does that keep you up at night? chris: we are worried about attacks on critical infrastructures. we are concerned about attacks on financial systems. we are concerned about attacks where they tried to change data so that data is not reliable anymore. irs, health services, lots of issues. we are also looking at the technical challenges, but we are also worried about the policy challenges. we have countries with a very different view about technology and how the internet works and how it should be open and transparent and there should be good connectivity.
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do you worry that other allies will not take these threats as seriously? every country could be the weakest link. attackers will try to route their attacks and criminal actions through third-party countries to evade detection. one of the big efforts we have done in the u.s. and we have partnerships with countries around the world is to do more capacity building around the world so countries have good strategies in place. having every country have a national strategy, have all of those building blocks in place. that is the core part of our
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strategy in africa and latin america and asia. emily: u.s. coordinator for cyber issues, chris painter. u.s. government inspectors say medical testing startup theranos broke at least five regulations in its california lab. it has 10 days to show it is taking action to fix the problem. the company has released a statement. the latest setback for the high-profile startup which is under fire. something we are digging out about, softbank says it is going to open a phone store that is staffed almost entirely by peppers. the tokyo store will be open on march 28 and will be run by five
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to six of these robots. if you are looking for a completely machine run experience, you will not find it here. human staff are still need to be present to check customer ids. when we return, congress has doubled visa fees. will it really hurt business? "bloomberg west" continues next. ♪
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emily: we are continuing to watch facebook. facebook revenue growth accelerating in the last quarter as it turned up the ad sales. facebook continues to dominate in the united states and canada. rupert murdoch is taking aim at alphabet tax deal with the u.k. he took to twitter to criticize google. he was referring to the agreement to pay $185 million in taxes dating back to 2005, a deal defended by david cameron. a subject resonating with the global tech community, the future of skilled foreign workers. congress doubled the fee.
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the new rules disproportionally affect indian i.t. companies. thank you so much for being here. how much do indian tech companies use these visas? >> thank you for having me. it is a very interesting concept. most of the revenue comes from the u.s. most of the employees live outside of india. the third-largest i.t. company announced that the ceo is going to be based in the u.s. if you look at 2014, if you have those graphics, it gives you a
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sense of just how many visas we filed. in 2014, the top four companies are u.s. companies. everyone is taking a step back. we need these people to be able to do high quality work on-site. why this increase in fees? india's i.t. association has said $400 million in terms of impact. they could see about a .3% impact in terms of margin. what they are really complaining
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about is why have these visa fees been increased now? they were not expecting any changes. the u.s. is going into elections, the timing was off. emily: do these new firms make it harder for u.s. tech companies to hire indian engineers? >> if you have 50 employees, 25 of them already have visas, you
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have to show there isnt an american who fits the role -- only then can you go ahead and hire an indian worker. you have the scrutiny, the paperwork, the documentation as well as having to go through multiple agencies. emily: interesting. thank you so much. soon you may have options when it comes to your set-top box. tom wheeler wants to allow set-top boxes to be sold independently of retail outlets instead of rented solely from television providers. this sets up a battle. the cable industry makes an estimated $19.5 billion a year renting the boxes. samsung electronics posting numbers that missed estimates. cory johnson with us to break it down. we have been poring through apple's results.
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cory: very different than u.s. companies. in korea, the first week of january, we knew the top line numbers were disappointed. we did not know the bottom line. maybe the profits will be not so bad. the prediction was 5.4 trillion. the numbers are much worse. 3.24 trillion. that is a lot lower than the analysts. it is even lower than last year. it shows you how they are having to go downstream across a lot of industry groups for samsung. samsung is caught in between. they are not super low end. they are feeling the squeeze. you can see that in the report.
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emily: cory johnson, thank you so much. when we return, how many calories do you burn on your commute? we take a look at the new transit app hitting l.a. more of "bloomberg west," next. ♪
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emily: spotify wants to borrow $500 million from investors. the loan could be exchanged for stocks when the company goes public. the swedish company has raised more than $1 billion since it was founded nine years ago.
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staying in europe, this week saw more challenges to uber's push in france. a paris court ordering the company to pay $1.3 million to cabdrivers. striking french taxi drivers blocked access to airports and set fires to tires on tuesday. the company has agreed to deactivate drivers for specific reasons. the city of l.a. has a new plan to help residents get around. the go l.a. at developed by xerox brings together transport options. allowing residents to compare
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prices to how many calories they will burn on the way to their destination. here to tell us more is chief technology officer from xerox. uber and lyft are sworn enemies. how did you get them to partner with you? >> it is a great day for the city of l.a. and the citizens. a partnership with xerox, we are launching this app called go l.a. it makes very transparent to the citizens the variety of transportation options available. it is a hyper-localized trip planner for the citizens as well as officials. to address your question, all of the options.
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options, public transportation options, all of the alternative ways of getting around. car sharing, uber, lyft, and any additional local transportation. how many calories you're going to burn, the cost, your carbon footprint, how fast, etc.. we brought together all of these partners. it is a way for it to be visible and to be able to choose uber when appropriate versus lyft. emily: how connected are you to their api?
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>> the first version of the app is to show all of the options and the cost. in the next generation, we will include payments. xerox is the largest provider of transportation solutions to governments throughout the world. we provide solutions such as parking, tollbooths, public transportation. 37 billion transportation transactions a year. there is already a lot of payment processing. we will provide that for anybody within this new marketplace. in a very hyper localized way. we talked to all of our partners.
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emily: it is interesting that xerox is doing this. xerox is synonymous with copy machines. 3-d printing technology. how does this fit into your vision of the future for the company? >> we are a very large business process service provider. transportation solutions, a significant global business, over 30 countries. we are in health care, financial services. you can look up how can we give access to our customers. how can we give our customers access and insight into all the data that we currently process
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for them so they can create valuable options. like making the city more livable. the officials will have the tools to know where there is congestion in my city. where do i need more buses or trains or bikes? or where do i need less? it is providing services of massive scale. emily: we will have to leave it there. thank you so much for joining us. who is having the best day ever? google computers, google has developed the first artificial intelligence able to beat some
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professional human players at a 2500-year-old chinese board game. you go has 200 possible choices for moves.
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