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tv   Whatd You Miss  Bloomberg  May 1, 2018 3:30pm-5:00pm EDT

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america has what he calls a duty and a responsibility all around the world. >> i know for certain that america cannot execute its duty, cannot achieve its objectives absent you all. absent executing america's foreign-policy in every corner of the world with incredible vigor and energy and i am looking forward to helping you all achieve that. mark: in a letter to employees, he promised to help them get swagger back. "the wall street journal" reports that the pentagon is investigating the allegations made against former white house physician run ajax, who is accused of drinking to excess on overseas trip, overprescribing medications, and mistreating lower ranking employees. the allegations emerged last week, prompting him to remove his nomination to be the veterans affairs secretary. the father of us killed in that
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february shooting at a florida high school is suing the armed officer who stood outside the building as people were being murdered inside. his 18-year-old daughter was one of 17 people killed at marjory stoneman douglas high school in parkland. andrew pollack has filed a wrongful death suit against scott peterson, saying he could have stopped the shooting. peterson resigned after the incident and video surveillance footage showed he never entered the building when the gunfire to again. in puerto rico today, thousands marched to protest pension cuts, school closures, and other looming austerity measures. the president said that the proposals would only hurt the island further. they are battling an 11 year recession and still struggling to recover from hurricane maria. the storm struck the island in september. global new -- this is bloomberg. ♪ -- global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries.
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i'm mark crumpton. this is bloomberg. ♪ julia: live from new york, i'm julia chatterley. joe: scarlet fu will join us live from the annual global milk and institute -- milken conference in california. julia: stocks are climbing from session lows and the dollar rally continues. kicking the can, president trump extends a temporary exemption from steel and aluminum tariffs to the eu, canada, and mexico. merger on the mind, the first since announcing plans to acquire sprint. moment of true for apple, reporting earnings after the bell following ominous signs that supplies suggest sluggish
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iphone sales. "what'd you miss" the milken global institute conference is underway in california. tensionsl these trade a hot topic. scarlet fu has been at the heart of the action speaking with the u.s. commerce secretary. take it away. that's right, i spoke with wilbur ross about this. lots of investors that we have spoken to has said that they have had conversations on the sidelines about mobile politics and trade relationship, the changing dynamics and what it means for their portfolios. for the most part they are optimistic about the economy. things could change how the administration proceeds. earlier you mentioned the headlines about the president sending the -- extending the deadline's year, sanctions on trade, steel and aluminum. that has been pushed out now to
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june 1 four u.s. canada and mexico as well. he said that when it comes to nafta discussions one of the real targets is to limit the stuff coming in from outside nafta. the free trade agreement is about the countries inside of the agreement. not about the countries from outside. to start front and center with the european negotiations because he has really taken the lead on that, leading discussions with european negotiators. i began by asking the secretary why he wasn't able to reach a deal on principle with the eu. >> we are having very productive discussions and we are hopeful that we can come to a mutually agreeable resolution that will protect the national interest, national security [inaudible] sounds like you are
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closer to agreement rather than father away from it. what would you be doing over the course of the next month to reach an agreement? >> i've been having discussions with commissioner maelstrom there. it's almost jeffrey j since we first came up with it. so, this will continue. europeanshat do the need to do to get permanent relief? >> the regulation for negotiation is within the contract, not the press release. we will have to turn different when we reach accord. scarlet: understood, but from the u.s. first -- european perspective they are saying that the u.s. is forcing them to make rules that go against trade agreements and if they complied they would have to meet with other wto countries, in which case companies like china would be a big beneficiary. how do you respond to that? >> that's really not a case.
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there are many technicalities to trade negotiations. it's an oversimplification to say that the only way they could give us an arrangement is if they give want to china. for example, they have a free trade agreement with mexico that go into europers duty-free. so, it clearly can be done. scarlet: one could make the observation that the europeans are offended for being asked to negotiate in the first place, they feel they are being asked to do so under threat. meantime the administration is annoyed that they have to go through the eu rather than the president going to would individual countries. this is a big picture question. how do you hold out on finding common ground on details when the u.s. and europe often don't see eye to eye on the big richer? >> i get it, it's a much
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more complicated situation than the european conditioner -- commissioner, the official trade negotiator, says for all of those countries. but those individual countries eventually have to approve things. scarlet: certainly a lot more work to be done here in the next 80 days. at leasteast -- julia: progress is being made as far as the eu is concerned and now we know they are heading over to china, nafta negotiations falling off. they have got a lot going on right now, clearly. joe: and him explaining the technicalities for why they could make the agreement for the u.s. but not china shows how many moving parts there are two an agreement like this. julia: absolutely. for thee adviser president coming out to say that
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mexico and canada will get a further extension to that 30 days. the underlying currents are there. what did he have to say about china? as he mentioned to you, negotiations some happen in the press, they happen in a conference room. some administration officials are now actually heading to china? that's right, he's going there tonight along with the treasury secretary. commerceoday the secretary was quoted as saying that the u.s. trade deficit with china was due partly to evil practices, a strong characterization. i asked him what he meant is that term. take a listen. transfers,echnology forced joint venture agreements. ciber breaching. tradecial barriers to
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beyond the standard regulatory high tariff barriers. china, as you probably know, talks a lot about free trade, but their behavior is highly protectionist. much more protectionist than uri. scarlet: is that productive characterization before you meet with them? >> is not characterization, those are fact. scarlet: there are reports that they will be cutting the trade deficit by $100 billion and are changing their gold to dominate certain technologies. how would you respond? wilbur: i think "the new york times," the source you are -- quoting, must have suddenly develop psychic powers. they seem to know that we -- know what we are asking. we will see what comes out of the actual negotiation. i also asked wilbur
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ross that, for investors, what is his message to them? he says that the endgame is to trade picture overall and protect intellectual copyright. there are two gangways to get there. and he says right now we are in the negotiation phase. great interview, thanks, scarlet. will bep, jay hooley our guest. we will be back with scarlet momentarily. for now, from new york, this is bloomberg. ♪
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julia: "what'd you miss" scarlet fu's on-site at the milken global conference. and she is joined by a special guest. scarlet: thank you. i'm here with jay hooley, starman -- chairman and ceo of state street. a great to speak with you. >> good to be here. scarlet: i know that you just moderated a panel on challenges in a short-term world. we have higher rates than last year, a pickup of volatility, a lot more geopolitical noise. what does it mean for long-term investors? is it more challenging? we had a great panel and it is on how you invest long-term in a short-term world. 'sstainable investing, efg
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once the fed and now here to stay. the big takeaway was that the that controlers assets,a trillion in how do they influence particularly public companies to think longer-term? they are doing that through things like governance, influencing the board in their view on the environment. .hey don't have a choice they have to invest in public equities. they are trying to use the voice with their affect -- assets. scarlet: what more needs to be done? jay: if you look at the environmental governance and social, environmental is pretty well developed. people pretty well understand the effect on a company. i think that governance has worked and you see increasingly asset management leading into
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issues, one of the things we are particularly focused on. the part that is least developed is the social part. there's no standardization, that's part of the problem. jay: exactly. one of the gentlemen who runs the superannuation fund has received the integrated package that evaluates in six different dimensions how sustainable a company's investment and return is. we need more standardized reporting. one of the things that we are trying to bring to our asset manager clients at state street. so that there is a way to look at companies through a more sustained lens. scarlet: you are a pioneer in passive investing, still with the biggest and most liquid
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exchange traded products. but looking at blackrock and vanguard, they have a clips to you when it comes to assets. is there a strategy to catch up and what is it? jay: we have a multipoint strategy and asset management. the number one strategy is to invest franchises and we have seen progress over the last couple of years. the passive etf's get used interchangeably. etf's were initially a way for institutions and individuals to get cloture. exposure to japanese banks, exposure to this and that, exposure to technology, but they have transformed the investing world and are now being used as whening or components combined together to produce certain outcomes, often called solutions. the point of mentioning that, scarlet, is i think the etf industry as a long way to run
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because of the way that these component parts are being utilized, d engineered, and then recompiled to produce different outcomes. in the institutional world and in the retail world. we are investing in product innovation, distribution. we think that they will continue to be a winning hand. ultimately, doesn't it come down to cost? a lot of people are saying that it became a race to the bottom with cost and that is what retail investors look at verse. julia: -- jay: one of the major sub segments generating most of the flows these days, some call them low-cost. growth. that we think state street entered into six months ago, with a core set of funds.
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get used as these building blocks that i mentioned, which is why they are growing at the rate that they are, but there's another real product innovation in the industry that tends to come with attractively for us, higher fees. so, it continues to be a very attractive business for us. scarlet: i remember in years past there was a lot of handwringing over passive picking market share and people were saying that passive would not work once the market hit sums he bumps and there were more volatile times returning. did you get a sense of there was more this year than in years asked? scarlet: -- jay: we are in a time with market volatility that favors the more active investor. the premise that active investing has gone away is a false premise. the overall pie is growing. etf is still taking share, but
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as you get to these kinds of markets, which i would argue are more normal markets, where you have the kind of volatility that we have, it does favor the active investor. i think, you know, if you look at broadly passive and the alternative segment, they are all growing at different rates. the good news is that the overall pie is growing as people save more and institutional investors have more to invest. scarlet: let's talk more about state street. $555 million cost-saving program . what kind of edge do you anticipate it will give you over your rivals in technology? jay: you mentioned that we administer a service that has $33 billion in assets. imagine the data. we are on a -- we are at seven years into a journey to digitize that.
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because this business of billions was once about processing and pricing and technology, but it's turning into a data and business. for state street, i think that i'm a little bit biased, but we were early to recognize that seven years ago and we have got a head start on investing and are starting to now bring together the real-time data that we hold on behalf of our ryan with other data insights to create information that they couldn't get on their own. the key to all of this, as is obvious to you, it's not so much the data or the insight that you create, timing is everything. in the financial markets, the winners trade on informational in that -- informational advantage that i think is going to define not only hours yes, but our ability to help customers succeed. the fearless girl, the
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statue that was commissioned of the girl facing off against a charging bull on wall street. there is a replica of that here. what kind of reception have you gotten to it? as you of your campaigns mentioned earlier was to add more women. what have you heard? the i would say that fearless girl, which was introduced a little over a year ago on international women's day, was really designed to send notice to the companies that we invest in that they need to pay attention to board diversity. we have done some work and fact checked it extensively that more diverse boards produce better sustainable outcomes and results . the statute was meant to call attention to the firm's, some 25% of the russell 3000 have no women on their board. 150 of the 700 and 50 that didn't now do, based on our
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outreach. i think that she stood for diversity on corporate boards, but she now stands for something much greater than that. none of us could have thatipated the tension underlies the issue of gender diversity. you have seen over the last year in many different forms, you know, what that means to everybody. j hooley, thanks so much. --jay hooley, thanks so much. julia: from new york, this is bloomberg. ♪
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julia: "what'd you miss" waiting for apple earnings, no better than apple's of liar. julie hyman is here and she just give me a thumbs up on corvo. not an intuitive
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pronunciation. a chipmaker that makes radiofrequency chip in various smartphones. the company got upgraded over barclays. the analysts upgraded it to overweight. saying that it is finally positioned to regain some of its all acoustic wave share. bulk acoustic wave is a type of chip that it, one of these radiofrequency chips. if it is going to gain share, that would be good news, in erie, for corvo, accounting for the share boost. also in fairy it would be positive if apple in general was doing well, selling more fun as people are estimating, so there eight is also tied up in how apple is doing. joe: but it could be an example of winning shares from another some fire, not necessarily something that could give us a read throughout the mac row? julie: correct. you are seeing suppliers besides them rise in the session.
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here's a bit of a breakdown that we got from sdlc, our function on the bloomberg that shows us companiest various are on apple. serious,e revenue at honda, corvo, there was 46%. quite a large chunk for that circuit on there. you have a lot of companies in the ecosystem that we talk so frequently about. again, not all of them are available today. sky works is up in today's session. and there have been real concerns with these semi conductors in this sector of the market. what's interesting is that the semi conductor index has done better than apple itself. and that these suppliers that we are talking about, corvo is the white line. julia: the perfect tease to
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apple earnings. thank you so much, julie. the market close is next. four minutes until the close, this is bloomberg. ♪ retail.
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under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. [cheering] julia: "what'd you miss"
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stock performance off session lows. [closing bell] julia: we are awaiting earnings from apple, snap, and t-mobile. joe: scarlet fu is in beverly hills, california, at the annual local milken institute conference. tuning in live on twitter? welcome to our closing bell coverage every weekday. let's give you a look at where the major averages closed ahead of what's going to be a busy session of after-hours earnings. the nasdaq is gaining my 9/10 of 1%. the s&p 500 is higher by one lows of 1%, hitting the that have rallied subsequently. industrials are under pressure after u.s. manufacturing data remaining underwater in the broader sectors. industrials, energy underwater. all price moves there as well. utilities underwater.
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financials managing to gain some ground with similar story on real estate and the tech sector is well and truly in focus. apple gaining ahead of earnings. earlier --e much much lower earlier in the day. this is pretty impressive. it really is those industrials that explain the laggards. some of them really getting hammered. a lot of that is this good as it gets feeling that we got from caterpillar last. and the softness in manufacturing data as well. let's see what they say. in the meantime, apple reporting q2 numbers after the close. the headliner is that a seasoned analyst is estimating fiscal quarter shares up $2.54 on revenue at $60.9 billion with estimates for iphone sales as well, the gulf, coming in at
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53.2 million units for the order with an average selling price of $740. that is what we're watching for. here with more on what we should back, mark kamen joining us from san francisco. fromk lehmann joining us -- san francisco. the concerns that people are talking about are justified? mark: you heard a lot in the recent headlines about slowing the land -- demand and a topline number with fear. that will not a clip expectation and that is well discussed and baked into the stock but as the year progresses you get a better handle on iphone sales for the year and what's going on with the ecosystem going forward. the noise will be forgotten and that is a stock will want to pay attention to. just to be clear, as you know, the stock is well-off recent highs because of the
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iphone weakness that has been well telegraphed. you are saying that this is essentially temporary noise and it is plausible that apple could return to its winning ways? i am. clearly that is the bellwether product for them. headline shipment numbers will be crucial. as you go through the rest of the year you will want to continue to pay attention to the stock. they will always be coming out with new products and innovations and the more that we rely on the top line number to decide whether we want to own the stock were not, the less i think -- in fact, i think investors should pay more attention to the ecosystem of microsoft. this was clearly a software company that decided they were not just a desktop company, they became more full service and you saw the effect on their stock and apple has proven with their ecosystem and the things that they are doing that this is not just about a phone, it's an ecosystem. this is an-- joe:
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ongoing problem for apple, that they don't get the credit for their service that other companies do. is this your view that there is a rancho revenue chunk there that deserves a higher moral? it is. -- mark: as the world gets more prosperous, more people will be a little own the phone globally, not just in the states. but over time and you have over one billion embedded devices and that is growing every quarter it becomes a more ubiquitous device and what they are able to do ai,king and health care, vr, all the other things we keep hearing about the layout overtime, over time the multiple will improve and you will be talking more and more about that and less and less worrying every quarter about the headline number. julia: as you have said numerous times, a lot of these stories
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are playing out over time. clearly many analyst are expecting a bump up on the capital return of buybacks or a shift as far as the dividends are concerned. what do you think is already baked into the cake as far as share price is concerned? i think they will talk about capital redeployment. they have seen the effects of tax policy on the company and what they are doing. i think that the acquisition spree that we have seen big companies go on will not abate. they are very acquisitive, though they are much more quiet as a company about that. there will be much more discussion about what they are doing. clearly the home is becoming a more ubiquitous center for a lot of people. i think that apple will be met -- be no different. autonomous seems to be more of a back order discussion, that was
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quickly coming down the horizon. things like health care. the wearables market that they talk about. all of these different places. in terms of brand loyalty and how the consumer feels about this company, it really is second to none and i think that premium multiple is really desired and will be garnered over time but right now we are really focused on that headline number and that is what investors will look at as they do the roof shortly. is stickinglehmann around, but we have results now for t-mobile. the adjusted coming in at 2.96 logan dollars. the estimate there was $2.81 billion, better as far as the depreciation and amortization. as far as the eps is concerned, 78 cents there. the estimate coming in at 71. we had a range, but significant their relative to the average expected. on the revenue line, 10.46 logan
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dollars. a beat as far as revenues and a beat on the adjusted eps numbers as well. brittct of the takeover -- bid for sprint, the managing director for equity research and wells fargo, jennifer joins us by phone from chicago. great to have you with us. i've just taken a run through the numbers and it's clearly better than expected. i'm sure that what you want to hear is -- what do you think about sprint and how will this progress? jennifer: thank you for having me. earnings is 100% around france right now. him to sayou expect on the call today question mark the share price reaction that we saw in the deal was prospect of yesterday and it was muted to negative. jennifer: i think of the biggest question is the regulatory
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hurdles. companies seemed more confident than what we are hearing from d.c. former fcc staffers, talking about business as an uphill battle. i think we are just going to be range bound and in a holding pattern with these stocks until we get more tangible signs for how washington thinks of the deal. i have to say, i'm still not totally satisfied with understanding the market reaction to the deal news on monday morning. going into last week, seemed like we knew there was a decent chance that a deal would be announced over the weekend, or something like that. was there something specific in the announcement when it came to the regulatory side that was disappointing? language or a strategic argument, something that wasn't there that would explain that once we got the news, we saw such a swift reaction? that's a good question.
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so much of this is art, not science. the call, seems like they gave the ftc the heads up right before the call. there are open questions as to whether they are worth the channel in d.c., plus the uncertainty around at&t and time warner, while it is somewhat apples to oranges, but as it is a vertical merger getting a hardluck, what does that mean for a purely horizontal merger? grounds, competition you are talking about the number three and number four players. when you combine them, it takes us down to three. what is the strongest argument? over the last few hours they said -- look, we need to compete china in combining our best way to be more competitive and it will be a benefit consumers going forward rather than the opposite. is that the strongest argument that they have? jennifer: i
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think they are making and saying all the right things, but you market concentration index matters and in that more metro market, there are probably some triggers for that, where market concentration can be seen. additionally, t-mobile is a victim of its own success. so much against the big alliance it's really a weak player. they have done a very good job of building a brand, success, having customers come to them. what happens to the marketplace if the deal doesn't go through? sprint, how are they going to hang in there and be the fourth player? do they dwindle further over time? i think that t-mobile can stand on its own feet, but don't forget that sprint is the
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only five g spectrum, a point being forgotten. if you talk to china and listen the spectrum is, we often thought it is the best spectrum out there. we have to look at the parent company of sprint. man is very committed to the spectrum. i wouldn't lose a lot of sleep about sprint going away. depending on how this goes in d.c. good point. jennifer joining us by phone there from chicago, thank you for your site. coming up, snapchat first-quarter earnings looking out any moment. we will bring you the results when they cross. from new york, this is bloomberg. ♪
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mark: i'm mark crumpton, with first word news. scattered vandalism marking mayday in france. thousands of demonstrators marked across paris to oppose the economic policy of the president. police say about 20,000 demonstrators to art. the violence was blamed on what was described as hundreds of masked individuals. in britain and the eu they are still trying to find common ground over the irish order issue, which reportedly poses the greatest risk to a final deal. talks resume this week in brussels and the people saying there must you a solution by the end of june. the u.k. deputy president secretary davis addressed the issue today.
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>> its october, if we hit the commission timetable. we will deal -- detail that in legal terms as october be the departure. that's a better target, of course. u.k.'s preferred option is to avoid the need for tariffs and goods checked at the border between ireland and northern ireland. the united nations security council delegation has visited the former home to hundreds of thousands of rohingya muslims who fled the military led violence. the kuwaiti ambassador to the u.n. has said that the council is not asking the myanmar government for something new. >> there are a number of united nations that are safe to many u.n. conventions. the return strategies should be compared to international standards.
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this is why we think it should be in bold -- involved in the process. the the ambassador -- mark: ambassador added that the return has to be safe, voluntary, and dignified without conditions. more than 12 million turkish retirees, or 15% of the population, will get a check in the mail from the government one week before june elections. the payment will be the first of two tied to national holidays, yet to many they look like a more blatant and expensive ever to purchase support for president erdogan one, who is seeking to extend his 16 years in power. the two payments will cost turkey about $6 billion. global news, at tech talk on twitter, powered by 2700 journalists and analysts in 120 countries. i'm mark crumpton. this is bloomberg. ♪
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keya: snap reporting quarter one earnings numbers. i think this tells the story. third revenues, $230.7 million. as expected. deviating substantially from the first order. what hundred $91 million versus an estimated 190 or million dollars, having not performed on the angle, it was white painful with an average revenue per user for the first order. that is quarter on quarter, adjusted even for the loss in the first quarter, $217.9 million. the estimated loss is less than that. wherever you go here, actually, they have underperformed. joe: the stock, getting demolished, as you can see. down 11% after hours.
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is another company at the lower scale but they have been showing some momentum, but not so with snap. julia: numbers are disappointing and they are not even in the same league as facebook or instagram. is that were design issue that is alienating. let's bring in jennifer fritzsche. -- bring in brian wieser. it's a disappointment? ryan: if you temper expectations, it's not so bad. , it can beiche durable. might not be overly profitable .nd not as large as might think eventually people will grow in the market cap that they have. negative, it'sy
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to say that expectations have often been well out of whack with reality on this one. sound,e core business is it's just going to be small? it.n: that's the biggest problem is they have to grow into the valuation they went public with that has never made much sense. there are a lot of novel elements. time spent onsen, the platform looks reasonably good. i don't use metrics like that. and wonder if there's a differentiated proposition for advertisers. joe: the narrow group of users that is flowing the door off, by theve been alienated redesign? that has been an ongoing part of
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the story. i'm not seeing that data here, with more time spent metrics to work with. unfortunately, the data is always worth it comes to that kind of measurement, generally. it's an advertiser stream, if they can latch onto it. when you talk about the kind of engagement you are talking about, never mind daily active that fore you saying an advertiser it project -- prospect? my estimate is that maybe 5% of all pb gets guaranteed on 18 to 34. it's not that confident a targeting god. need a muchsers bigger demo. but for certain kinds of music studios and
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films studios, who have always been so positive on it, there are niche groups disproportionately inside of .hose groups joe: after hours, the stock is very close to its all-time lows. we are basically there. this doesn't have the after-hours chart. looking at that, it's pretty ugly. we are basically more or less right back down there arian julia: intensive -- right down there. julia: you can see that we are down now significantly on double digits. 16.4% now. if that's about investors beginning to re-think x dictations as far as this is concerned, what does snap have to do to shore up longer-term confidence in the product?
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brian: i suspect they will talk a lot about moving towards profitability if recent press commentary is correct. they may have well reset expectations internally so that they won't lead capital for the next few years. they may try to do hill within the take on snapchat. joe: what do you think of this idea that it could be a's -- sound business, just small and not nearly as big as people expected? julia: niche. joe: good word. julia: i have a college and high school senior and i asked them this overtime, small sample, but my elder daughter is using the product less and less.
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i see her here, mail eldest, during ottawa teenagers to. but the reach that we thought would be 5030 and tightening, that's not existing for snap. figuring out what to do with that is job number one for them. but if that 15 to 30 gets narrower, that's not great for revenues or profitability. over time we have got to focus on that. profilehere are high citizens criticizing the company. what is your daughter --what is she doing with the time that she used to spend on snap? one is going to work, the other is going to college, but obvious they are big consumers. the younger generation and
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around the volvo will life. they are different consumers and are from consumers of the data can users of the product. i think that facebook, it reminds me of those people who get in the rock 'n roll hall of fame who sell a couple of hundred million albums and no one admitted to buying it. facebook people are on all day long, they just never admit they are on it. if they have the lion's share of lion share of the advertising dollar, twitter is a good, that's the first lays people turn to for news and i think i have a lot of advertising dollars. others have struggled to crack the lot jam at the top and snap is no different. they are having a harder and harder time getting the right eyeballs and data to the people. .> it's really difficult to say i try to focus on aggregated data that i can see from other hardy.
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the point is that data is pretty limited. data from third parties on under 18. can't be tracked. we really don't know. you can also never of the count on the data provided by a company in its usage. you don't have a third-party measurement provider, it's less easy to transfer. it's hard to say, but i can tell you that the data that i see for the u.s., 18 plus adults, looks pretty good on a per user basis. keeping it small in terms of the aggregate number. --you havene down gone down from $10, but you are our optimist today. -- thank you so much. mark lehmann jennifer fritzsche ,ark lehmann --mark lehmann you're sticking around.
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estimates coming in at 52 .3 million units for the quarter with an average selling rights of $740. we are talking to you about your expectations as far as these numbers are concerned. to reiterate, you said that actually with all of the concerns and noises from the fires right now, the number of units will be critically important in this quarter? something with a four in front of it, people are quick to put a negative spin on it. i think that something close to that, the 50 million unit number, will assuage some of the fears we have had. it's a long year and the first quarter is not exactly a bellwether for the rest of the year. the stock has been volatile, as have been the tech bellwethers of the year. over time, the trend is still that you want to own this stock. joe: as you mentioned earlier,
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lots of focus about what they will say for the rest of the year. what's the focus? mark: clearly you want to see what they are doing domestically, you want global growth numbers because the u.s. will have slowed. you want a topline number that is going to meet or beat expectations. they want to talk about other markets. they have done an unbelievable job of under promising and overdeliver and. they've got a great command of what's going on behind the scenes and don't want to get ahead of announcement. he wants to be prepared for those. they do a wonderful job with that, clearly. with other things like wearables in the home, you will want to see movement on that, places like television. you want to see that. julia: greg wrapup. still ahead, as we discussed, just moments away now from the apple q2 earnings numbers. all of that, straight ahead.
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from new york, this is bloomberg. ♪ mr. elliot, what's your wifi password?
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so sophie, i have an xfi password, and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. julia: breaking news. apple reporting its fiscal second-quarter numbers. i will give you a quick sense of what we are seeing. revenues coming in at $61.1 billion, but then they estimated. second-quarter earnings per share coming in at $2.73. the estimate on at one at $2.64. beat on the top line and earnings. 52.2 million units sold. the estimate is 52.3 million. line with estimates really are also announcing a $100 billion buyback program. i have seen estimates up to $200
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billion. so it was different on each on that. right now, $100 billion of buybacks. reducing dividends as well by 16%. $100 billion for the buyback program. a 16% rate in the dividend. beat on the revenues and earnings per share. looking at what i can see as well as forecasts are concerned. joe: important detail, 31% increase in that services revenue. this is helpful to some of their hardware numbers. julia: that is huge. joe: a hard time getting a second product line going. this is one area that seems to have serious robust growth. we see a combination of the buybd increased dividend, pretty nice after-hours reaction there, up nearly 5%. julia: that is an credible. the iphone bringing in two thirds of their revenue right now but that segment continuing to play into the numbers here as well.
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trying to see if we can see some forecasts of the third quarter as well. this is pretty critical as well. third-quarter revenue estimates 51.5 to $53.5 billion. the consensus, 62. joe: important detail from bloomberg's ian king in the top line blog. the unit growth, revenue growth from 14%. you see the benefit of the mix. even total volume not blowing the doors off. higher from the iphone x helping the revenue growth. nearly 5%. julia: the average selling price coming in at $728 per phone compared with the average estimate of $740. off bruce'such expectations, but overall, bumping up the revenue line despite what we are seeing as far as the underlying details are concerned.
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this current quarter, between 60 and $62 million. joe: interesting detail here that might tell us about how investors are seeing this report. some of the suppliers we were talking about earlier in the day, they are also up in after-hours trading. one 4%. part of this reaction is rough on a mental result, not just a result of the buybacks and the dividends. because if it were just the financial engineering, you would not see that bleed through to the suppliers. julia: brightpoint. absolutely. we will come back and dig around the numbers against rick emily chang is in beverly hills where she had just spoken to apple ceo tim cook. give us the details. emily: the question is about the iphone x and the future of the iphone x given that suppliers have reported some weakness going into this quarter.
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that said as you have been reporting, in line on iphone sale units in line on revenue in general. when i asked specifically the questions surrounding the iphone x, he said it was the most popular iphone every week in the quarter. is the first time since we put that the top iphone has been the best-selling. that is an incredible results if you think about it. there are a lot of questions about the price. when apple comes out with new phones in september as we expect them to come up with a stick to pushing9 price that is $1000? there are concerns about the price. he said he does not have concerns about the price. he thinks it is price for the value that it is. it has leading innovation that sets us up for the next decade. of a priceon decrease their. if anything, we will see that the love when apple comes out -- we will see that go up when
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apple comes out with a new product. now down to $728. that is down from 700 $96 the last quarter, which signifies people were buying fewer higher-priced loans this quarter. cook attributes that to internal inventory. it is not as big as the holiday quarter, but it is a significant decrease in the average selling price quarter to quarter. something else i want to point india continues to remain a huge opportunity he said. they turn in the best first half in india ever. also, china. we saw a this quarter decrease in china. this time, they are back to growth. growth in greater china. 21% year-over-year prevent the strongest growth rate in 2.5 years. he said he feels fantastic about it.
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a great quarter in china. the iphone x was the best-selling smartphone in the country for the quarter. we talked about wearables and watch. i found his comments about apple music in particular interesting, especially given that we have direct listing over the last two weeks and the fact that it has turned into a two horse race essentially in the music streaming business. you have to think that he said he does not think about it that way. he sees it differently. you can get to a very small number relative to the population. the challenge is not competition with each other but convincing a that do note subscribe to a streaming music service to subscribe to one. that is where the opportunity is. we in a good position to do that. they have exclusive interviews and content apple now has 40 million paid subscribers and 8 million subscribers in trial.
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julia: great work. thank you for that. let's get to context on the apple results. mark is still with us. let's begin in the studio here. what do you make of those numbers and to what extent does this silence the critics for at least one quarter? >> i think what we can see from the results is the company is able to drive growth along several different areas so the iphone, the execution in that business was solid. i think the growth in services shows that apple has really built out a differentiated ecosystem that customers value when we think about what they are doing with the watch and other things. still a lot of innovation here. lastly, i will point out that we saw they increased to the stock buyback and the dividend. this is a company that is very shareholder friendly and very focused on the long-term. so we like what we see. julia: $100 billion in share
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repurpose is to act to the $210 billion buyback program to be completed in the fiscal third quarter. thank you. joe: mark, how about you? what is your headline from this number? mark: well, it is credible we talked about the beginning of the show, which is the top line number that had a five in front of it. restrict below the line was terrific as well. i think the growth of accessories clearly is the driver going forward to the model, and i think you saw the buyback, which is clearly something financially that shareholders are happy to see. this is a bellwether stock. we saw the same kind of price reaction in amazon and facebook. technologyfearful of stocks going to quarters and a lot of people got caught on the wrong side and i think you will see that in the action tomorrow like we saw in the aftermarket today. julia: you have service revenues ago, and we are talking a potential growth in services that contrasts with the decline in every other segment.
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his services were the real growth is generated for apple? in particular the app store, what you're seeing is apple is attracting developers to write applications and users are downloading them and paying for them where they see value. so i think the ability to bring together the app developers and users on that platform is powerful. and then of course you have apple increasingly getting users to sign up for more icloud storage as an example. we heard about music and little earlier. there were a number of things underneath that are growing and we think can contribute nicely overtime. julia: tim cook said that. the company has 270 million paid subscribers, but 100 million more than a year ago. daniel: i think that is right. if you think about the install base of over one billion devices , we are actually relatively early in the services story. apple is a big company and it
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takes quite a lot to move the needle, but i think the 31% growth of what is actually very big business space to the fact that there is more left as we think about the next few years. julia: $30 billion business now. joe: massive business. on this idea of a gigantic apple install base out there, can you see the directory continue for a wild where it is, ok, yes, you're not getting that many new people into the apple ecosystem, but the apple ecosystem is so big and so immovable that they just ramp up that monthly subsumes revenue, whether it is icloud, app store, new subsections, and really crank that number up? mark: well, we talked about the top line iphone number. it is the best razor blade model of all time. they are selling $100 razors as opposed to five dollar razors. they are just going to have so
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many touch points within the consumer for all different demographics and different geography that that will become that install base. the beauty of this product is that overtime globally, it has garnered the number one perception amongst consumers that is the best device. that is obviously a truthful statement and a perception. i think it is very hard to change. very hard to change your device. if you look around the room and talk to your colleagues, how many have changed their device and switched from apple to something else? it is a small handful, at least in my world. that will continue and drive the revenue services over time, and we will continue to see an expansion based o on the products. julia: i want to bring in the numbers again. iphone sales falling 32% in terms of units, 38% in terms of revenue. the average selling price $728 per phone. the estimate was $740.
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ok, these results are solid versus expectations, but we see the direction here is more challenged. do we see a pickup whether we would domestically in the u.s. or to the chinese angle as well with the cycle of the next 12 to 18 months? because a lot of concerning signs underlined this. daniel: i think you have a couple of dynamics at work here. most would agree the smartphone market is more mature than a few years ago. but the other thing when you think about seasonality here, we are going to a seasonally weaker theod of the year so decline are expected. as we move into the summer and into the hall, i think the market is going to get potentially more excited about growth for the iphone. of course, it will be dependent on the products. julia: yes. joe: headlines crossing right now that the apple ceo is saying the homepod speaker is still in its very early days. you were talking about the cost of switching into a new ecosystem.
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it is not like nobody is making inroads into it. one of the most glaring examples is amazon and the success it has had with its home speaker. is that a source of worry down that apple cannot come up with a big second product, maybe it loses in-home connectivity ncv is only -- and tv and suddenly it looks more robust than we thought? daniel: it is a fear. obviously, amazon's product is spectacular. recognition from consumers has been asked spectacular. yousef transactions this quarter like with the next product and a ring product. you see places where the home is getting very expensive to get into and the more time you have delaying to get into their product like apple has, you fear that. my money is still on tim cook, although competing with jeff bezos cannot refine, but they have that embedded consumer who elect to have a unified offering like they have with the phone,
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but there is plenty of room for both of them. less penetration for those products. i am not coming out yet. amazon has a huge head start with their product. julia: just a reminder for our viewers and those that have the bloomberg terminal, all sorts of nuggets. one thing from ian king. the revenue is more than three times twitter's annual sales. $178 themarket high of highest price apple has reached intraday since april 18. joe: remarkable. julia: yes. joe: in terms of the service revenue, when we compare apple and twitter and facebook amazon, a difference with apple. they are not really in the business of selling your data or selling access to your data. that is a point to cook has made. it is a very different privacy proposition for the user. click here going forward that here is a company that is
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putting it straightforward. ukrainians and get stuff. there is that you pay it and you -- you pay it and get stuff. is part of apple's advantage that their business model is driven by selling devices and is a really integrated product with hardware, software, and services. it is not about monetizing data, if you will, the way some of the other platforms do. i think what is important when we think about apple is that the company takes user data, trust, privacy, and all of these issues that speak to the importance of the user experience very seriously. they are very methodical about how they deliver new products and services which take a lot of that into account because it is not just about selling the next device. it is about their longer-term relationship with users and the ability to have a relationship
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which is beneficial to the users and obviously is able to create value for apple and its constituents. julia: if you go back a year or a year-and-a-half, they were being criticized by the security forces in the u.s. by not allowing access to certain phones. a very different angle taken with that. joe: very true. julia: great to get the context. thank you. more analysis of apple's pretty solid q2 earnings. what does the future look like? what is the strategy. . -- strategy? this is bloomberg. ♪
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julia: apple numbers just crossing. let's go straight to mark, who is our global apple consumer electronics reporter.
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i believe you have spoken to apples cfo. tell us more. mark: i just got off the phone with the apple cfo. basically ran down the numbers that we got today. revenue sales beat iphone sales in line with expectations and our guidance is a little higher. wall street is expecting for the third quarter. he went into detail on services. i asked what was the driver of services growth and what is the biggest driver of services revenue in general? he indicated that was the app store. he talked about apple subscriptions. a lot of people like to talk about these instructions that amazon prime and methods are getting. he said apple is there with 270 million paid subscribers across apple's own services like apple music in addition to these inspection services sold by third-party companies on the app store on the iphone. joe: one of the questions with regards to the success of the iphone x is whether it is priced too high. what did he say about that?
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mark: i asked him if you think that is priced too high. he rejected the idea. he claims the iphone x is the top-selling iphone model in terms of mix this quarter and the q1 holiday quarter. he said this is the first time the high-end top-tier iphone was the top seller in the mix. previously the more expensive phones did not sell as well. it is diversified away from the critical iphone handsets right now. the services sector of the business seeing huge revenue growth as well. gave you a bit more detail about what fundamentally is driving that. tell us more on that note. mark: the app store is one of the biggest drivers of the overall services to go along with the subscriptions. considerations to services is apple music that has 40 million subscribers now, as well as they get a little bit of a percentage, less than 1% of each transaction dr. apple pay
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depending on the retail and partner there. it is a wide array of services. that is going to grow considerably with video efforts as well as efforts in news content. joe: what are you going to be listening for a mccaul? what are your -- for on the call? what are you looking for? mark: iphone revenues are strong, up 4% year-over-year, but we cannot let that mask the fact that the iphone sales are falling. apple has an iphone problem to so to speak. any growth might seem like a lot for apple but another therapeutic type of unit growth that the company is used to and what analysts and investors have come to expect from the company so we will be looking for clues for apple's next big thing whether that is additional services or hardware areas like augmented reality and the are and stop driving cars to see where we will get product from apple that create growth that we have seen in the past from products like the iphone and ipad.
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the ipad by the way is on the same scale as the iphone. only 6% year-over-year revenue growth and 2% revenue growth, which is not that impressive. julia: very quickly, what about the capital returns pushing him an additional $100 billion out to shareholders in the form of buybacks and a 60% rise in the dividends as well? what did he have to say about that? enter thatd not get t much in our conversation but there is an increase in the share of buyback program is a bloc blockbuster number. $15 -- it has been a $50 billion increase. some projected it would be up to $150 billion, but it looks like apple is meeting this in the middle between what has been previously done and the high-end expectations. that jump in the dividend is also considerable, it is another
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way to show people and ask them to invest in apple stock saying this product will result in getting $.74 per share in your pocket every quarter now. julia: yes, stick with us is the message. thank you for that. great work with the cfo. daniel is still with us. we have not talked in that much detail about china. i feel like this is a factor as far as apple is concerned. you have 100 million phone users in china. i believe between 60 and 70 million have potential a great cycle potential in the next 12 to 18 months. we saw strength in numbers here after some recent declines. what do you make of china? it is a sensitive time given the broad negotiations going on. daniel: i think the company strategy in china has been very deliberate. it started their several years ago, and they have been steadily to other tiers of cities
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besides just shanghai and beijing. what we are seeing this quarter their labors of paying off. i think what is critical to point out on the services business is that the app store in china is bigger than in the united states as we understand it. so that tells you that even though you have product cycles user community, the ecosystem in china is very healthy, so i think that sets the company up nicely over the next several years. we also heard remarks about india. i think while there are certainly key differences between india and china, when you can see from apple's strategy is they are going about things with a very long-term focus. so while there are risks around growth in the smartphone market, replacement rates getting longer , this obviously inherent technology risk, this is a
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company that has been able to build differentiated products and really give users an experience that they value, you are able to do that globally. joe: just talking to mark for all that talk about revenue and services and everything, there is still the lack of unit growth. with theit growth handset. is it in your view a done deal more can you see another pickup at some point or re-acceleration of the number? daniel: i think it is possible to get a reacceleration. depending on the product lineup and presumably we are learning about what the new devices are sometime in september, depending on how they price them and where we come out on that elasticity curve, that has the potential to drive units, but think what is important is if they are able to deliver value to their customers. ,f you have modest unit growth the value to apple is growing and you are seeing that evidenced in services. .hat is a win for the company it is not just about driving unit growth if the product and
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user experience is not what people have come to expect from the company. in our view, that is the most important thing for the company. julia: very important. daniel, thank you so much for your insight. great to have you with us. coming up, joe. joe: coming up, what you need to know for tomorrow's trading day. this is bloomberg. ♪ this is bloomberg. ♪
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julia: "what'd you miss?" obviously a mixed performance as far as the major averages or concerned. solid earnings from apple. snapped a big disappointment. missing estimates across the board, whether it is revenue, the lost we got, and the daily active users. joe: bruno. -- brutal. julia: an interview with iran huffington at 5:00 p.m. new york time. joe: don't miss this, the fed announces its decision tomorrow. tune in for ou
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mark: i'm mark of the new york. you are watching "bloomberg technology." here is a checker first word news. sarah huckabee sanders denied reports that chief of staff john kelly is being considered for veterans affairs secretary.
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sanders also dismissed reports that kelly made disparaging remarks about president trump she says the president and kelly are "very happy with his current position." "the wall street journal" reports there are investigations into ronnie jackson. he is accused of drinking to excess on overseas trips, overprescribing medications, and mistreating lower ranking employees. the cia declassified more information about gina haskell's career today, but the juppe dossier fail to disclose details on assignments that the new york times reported involved the president's nominee to lead the agency come overseeing the torture of terrorism suspects abroad. california is among 17 states suing the administration over its plans to rewrite fuel efficiency standards. the proposal by epa regulators looks to scrap emissions standards for vehicles manufactured between 2022 and

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