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tv   Bloomberg Technology  Bloomberg  February 13, 2019 5:00pm-6:00pm EST

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♪ emily: time emily chang in san francisco and this is "bloomberg technology." u.s.g up in the next hour, lawmakers blast t-mobile's proposed purchase of sprint. the heads of both companies testified before the new democratic-led household plus, putting a stake in the ground of silicon valley. but will the tech industry welcome the kingdom? and as t-mobile's john legere
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a new mobile network in japan. our top story -- sprint and t-mobile in the hot seat in washington as lawmakers grill them of their proposed merger. t-mobile ceo john legere and the before a appeared house subcommittee defending the megadeal against claims it is a threat to competition. >> our opponents are wrong when they claim that the merger will lead to higher prices. in fact, the opposite is true. consumers will win with lower prices and better services. how? out costs will drop sharply and the network capacity will expand tremendously. senatorsne democratic called for the deal to stop in a letter on tuesday, saying it would hurt consumers. toning us from washington
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discuss is georgetown law distinct fellow gigi stone, and a reporter who covers the sec. what was legere's message today? >>'s message was simple and one we have been hearing for a while, that it is good for because of such great advancements that it will make the company a stronger competitor to at&t and verizon. seems like not everybody is buying it. he fielded a lot of questions from democrats about coverage in rural areas, worries about possible price hikes. tell us more about what lawmakers biggest concerns are. it isfirst of all, important that the concerns of this hearing today are not just from democrats, they were bipartisan. as todd said, the concern that when you combine four mobilephone carriers into three, prices will go up because you
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are eliminating a competitor. in particular they were concerned about low income consumers because one of the things that has gotten lost in these merger discussions is the fact that if you combine t-mobile and sprint, you are combining three of the biggest mobile, whosein mobile, and metro pcs. harsha disproportionately impact on the low income consumers. what is fascinating is that in filings with the federal communications commission, sprint and t-mobile's economists have said that we know this will raise prices on consumers, but they use their cell phones a lot so those are fair costs which is a remarkable admission. emily: let's take a listen to some of the pushback. here is a congressman. >> that would take the prepaid market from where it is right doj's threshold, to a level that raises lots of
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red flags. these kinds of numbers historically have resulted in higher prices for consumers, less competition, and less innovation. in thedidn't john legere hearing promise that prices wouldn't go up? todd: he said it a couple of different ways, but i talked to doyle and doyle is not convinced and he wants regulators from the sec and justice department to take a quick look. -- fcc and justice department to take a quick look -- excuse me, deep look at it. there are lots of ways to justify the price after, saying that you got a lower price considering what you got. it is not trusted by some in washington. emily: gigi, is this a promise that legere would actually be held at two? this is interesting -- t-mobile has made a three-year pricing commitment not to change -- promising not to change the
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prices of rate plans. there are so many loopholes and that you could drive a truck through a. they could change their data caps, increase network quality, increase third-party charges. that " pricing commitment" is no commitment at all. there is a more important point. particularly in this administration policymakers have already said -- the assistant attorney general has already said we do not want to be overseeing merger commitments. we do not want to be acting as a regulator and looking at whether companies are abiding by their behavioral commitments. there is no appetite for behavioral merger conditions, and frankly, they don't work. they didn't work in the comcast-nbcu merger. bloomberg was one of the unfortunate non-beneficiaries of that. they don't work in other mergers. particularly in this administration, no one wants to
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be on the side of the fcc and the justice department of essentially engaging in price regulation. emily: legere had quite a few pronouncements at this hearing. take a listen to this one about huawei. >> that maybe clear, there is no -- let me be clear, there is no huawei in our government today and there will never be coming out today, not tomorrow, not ever. emily: of course t-mobile is in a case involving huawei, allegations they stole intellectual property from t-mobile having to do with robotic technology. todd, what do you make of that pronouncement from legere? >> i think it is one he could easily make. he even said that we have a history with the company indicating a bit of distaste with huawei given their legal entanglements. there was an indictment of hallway by -- huawei by officials alleging basil
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t-mobile secrets. do upon us look to the parent corporation softbank in japan and deutsche telekom in germany and say that there is huawei there? gigi, cant question, sprint survive without this deal? gigi: absolutely. the notion that sprint is a failing firm is nonsense. they are not even an ailing firm. they put out their third-quarter financials two weeks ago and they are gaining subscribers in the lucrative market and the revenues increasing in prepaid and postpaid. they've invested over $1.4 billion in new networks. there is nothing about their for thels, frankly, last several quarters that make anybody think or should make anybody think that sprint is anywhere near failing. in fact, they are on the uprising. there is no need to have this
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merger. the promises these companies are making, they are not merger-specific, they haven't proven they would actually come to be, and the harms to consumers far outweigh the alleged benefits of the deal. emily: all right, strong opinion there. gigi sohn, always good to have georgetown law, and bloomberg's todd shields. have this hour we will comments from the ceo of one of the biggest conglomerates in japan who says he is not using huawei in his new mobile network. we will bring you that later in the show. meantime, a story we are watching, google will invest $13 million in data centers and offices across the united states this year. ceo sundar pichai made any announcement in a blog post. the company is planning major expansion in 14 states including nebraska, nevada, ohio, and texas. pichai says the investment will create thousands of new construction jobs outside its
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traditional based in california. coming up, thanks to new software and services, cisco's second-quarter results were a standout. we will break down the numbers next. this is bloomberg. ♪
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emily: cisco out with an upbeat fiscal second-quarter report. it signals confidence that corporations are continuing to spend on computer networks. i wante on the details, to bring someone from bloomberg intelligence who follows the company for us. this is a company that is considered a bellwether for the global economy. what signals are we seeing? >> sure, in terms of the positive signals, not only the
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growth they delivered in the second-quarter results but also the forecast for the third quarter results. we are talking 4 to 6% growth. a you think about it, off murky global macroeconomy, it is very start. emily: give us the highlights. woo: quickly on the highlights come if you think of the cisco story, it is the transition from hardware to software and then what is driving the enthusiasm in the story today is the growth of 24% on a year on year basis, software growth of 18% on the euro year basis. those are the two metrics
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direction is going to continue, at least in the near term. emily: so how does this jibe with other indicators we are seeing, a massive slowdown in china, for example, general political and economic uncertainty? woo: sure, and that is a fantastic question, emily. if we look at the earnings season this past quarter, intel was talking about china being slow in terms of the server business. we are hearing data-center investment slowing down because we have seen a lot of clout companies consuming or consuming excess inventory. there is a couple things about cisco that is new to cisco. number one, they had a little china exposure. number two, if you think about it from where the drivers have been, it is more on the enterprise switching business as well as software. that is less exposed to some of the data center cloud investments that have been slowing down. i think that is one of the reasons why cisco has been able to exceed expectations. emily: cisco ceo chuck robbins
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has been out there ringing the privacy alarm bell along with apple ceo tim cook. is it part of a strategy? woo: i think it is part of a broader strategy. i think companies like apple as well as cisco are trying to be the parents in the room and trying to differentiate themselves from the other guys who do use data as part of the business model. cisco, given that they are hardware network and a lot of it traverses through some piece of cisco equipment, i do believe they want to ease investor expectations and user expectations in terms of privacy. aily: certainly seems like line has been drawn in the sand. woo jin ho, thank you for weighing in. this is the juicy 1 -- a former top lawyer at apple was responsible for making sure
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employees did not violate insider-trading laws. but he was the one of the geely buying and selling shares illegally -- illegally buying and selling shares -- he was the one allegedly buying and selling shares illegally. what exactly happened here? >> this is a bombshell. last year the securities and exchange commission notified apple that what is their most senior executives in the entire company, senior lawyers, had conducted insider trading based access to press releases and earnings results related to quarterly earnings reports. he initiated insider trading in 2011 and it picked up again in 2015 and 2016. apple seems to have confirmed that this indeed happened because they said they launched their own investigation last year and it ended up terminating or firing him. really a bombshell, clearly a black eye for apple, which
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mostly had a clean record in this regard since steve jobs was accused of options backdating in 2004, 2005. emily: apple in a statement told us after being contacted by authorities last summer, "we conducted a thorough investigation with the help of outside legal experts which resulted in termination." sounds like they took swift action. mark: they clearly took this seriously, and no matter how high-level an executive is an apple, they clearly don't get a pass here. we saw with the options backdating scandal, apple's cfo's cfo, two or three ago, the conclusion of that investigation. this man is listed on older , listed asilings director of many of the corporations and entities apple has acquired over the last
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couple decades. very high level, and he was terminated at the end. $227,000 and additional profit and allowed him to avoid $377,000 in losses. with him leaving or is there a strong bench? mark: apple revamped part of its legal department when his former general counsel retired from working in a technology company leading apple. kay adams came from honeywell, the new general counsel, and shoveled it there. there is a deep legal bench. $225,000 or so, as you said, is the seller at that level
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$2 million base salary and an additional $2 million in stock options. it is good to see apple taking swift action. emily: bloomberg tech's mark gurman, thank you for filling us in on that one. coming up, akamai's fourth-quarter numbers are out. what to expect for the rest of 2019. they have a unique view of what is going on across the internet. technology and follow us on tictoc on twitter. this is bloomberg. ♪
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emily: nasa's opportunity, the
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mars rover, was supposed to last three months. but today after 15 years, its mission was finally declared complete. flight controllers tried numerous times to make contact with the vehicle and sent one final series of recovery commands as will is one final wake-up song, billie holiday's "i'll be seeing you." there was no response from space. had a good run, though. akamai reported better-than-expected third-quarter results tuesday. his as the cloud security business grew 39% over the quarter. akamai also announced a joint venture with the largest bank in blockchain-er a new based online payment. joining us is ceo tom leighton. tell us about the new payment network. tom: pretty exciting. the goal is to replace the legacy transaction system for -basedg with a blockchain system that will be much faster,
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more scalable more efficient, and of course, secure. emily: you have a very unique view of what is happening across the web. we were speaking about cisco's earning results earlier which were very positive amidst all of these economic headwinds, economic slowdown in china, general economic and political uncertainty. are you seeing that reflected across spending? tom: in our business we are doing very well and looking forward to a strong your ahead. cybersecurity is not something that is negatively impacted by those trends. every enterprise needs security solutions more than ever. that is a good reason why our security business is growing so rapidly. 2019, welook ahead to are seeing a strong year for growth and with our earnings-per-share, we forecast the midpoint of the range at 14% year-over-year in 2019. emily: how big is the addressable market for your security products? tom: i think it is very large.
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today we focus on the denial of service prevention and something application layer attacks -- stopping application layer attacks for consumer websites. there is a much bigger market protecting enterprises with their employees and applications and data from, for example, data breaches. we have developed a new zero-trust security architecture we are bringing to market, and we think the potential market for that is even bigger than what we are doing with denial of service prevention and application-layer protection. emily: does akamai have any business in china, and if so, will it be impacted by the trade issues? tom: we do have business in china, both from non-chinese companies delivering content into china and also for chinese companies that want to deliver content outside of china. that business has been growing rapidly. so far there has not in a major impact with some of the challenges in the region. we have excellent relationships
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with major chinese companies and carriers. i think we are in a good position now. emily: there seems to be growing tension between consumers who want to trust their tech companies and the products that they use and the business models of these tech companies trying to squeeze as much value out of the data as possible. do you think there is a fundamental disconnect emerging? tom: this is a certainly a challenging area. in a scenario we are working on from the perspective of keeping user data private and making sure that it is only used in the ways that users want it to be used and respecting the laws that are being put into effect in several countries around the world. the general data privacy regulations. so we actually help our customers respect to those regulations by making sure that the data stays where it is supposed to and is only used it
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in ways it is supposed to be used. emily: do you think it is working? tom: i think it is early days and a very complicated set of regulations. a perfect the inherent tension between -- it reflects the inherent tension between having your data used in good ways but not in ways you cannot control that are not so good. it is hard to legislate that. emily: all right, tom leighton, ceo of akamai always good to have you with us. thanks for stopping by. tom: thank you. emily: coming up, tesla rushes to get model threes to china before the tech world expires. later in the show, tech giants from softbank to facebook to amazon have done business with saudi arabia in the past. now the kingdom wants to rent some space in silicon valley. but times may have changed. this is bloomberg. ♪
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emily: this is "bloomberg technology." daybreakloomberg australia. at the global tech stories of the day. idi: apple's claim to unveiled new video subscription offerings next month. it's the first major new digital services from the country -- from the company since 2015. it's similar to amazon's prime video. it will include tv shows and movies, all funded by apple.
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the pay service will launch by summer. you questions surrounding uber's license to operate in the city of london. the city's taxi drivers brought a legal challenge against a aling that granite uber probationary license to operate in the u k k london's transit authority had previously revoked an earlier permit over safety concerns. initial offerings are plentiful despite a rocky pasture for cryptocurrencies. about 70% a holding token sales. another 17 are planning ipos as of last week. the market is at a fraction of what it was back in 2018 but still it is bigger than it start of 2017. the difference is that most ipos are launching overseas instead of in the u.s. and are targeting wealthy investors. those are your top global tech stories of the day that we are watching. of japan'stin is one
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biggest conglomerates and in the crosshairs of the trade war. range of about a issues including have trade tensions are impacting business. he gave me an unexpected answer and talked about why rakuten has orsen not to go with huawei zte as it is ambitiously building a new mobile network in japan. >> when we are deciding what kind of network event were going i ask if i should use the japanese network or not. i kind of sense the potential myself something thehappen to prohibit
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chinese network to be used. use huaweid not to or zte because of the risk. so i don't know if it is true or choose this.d not if i had chosen that, i could nokia.i chose basically, we are building our own hardware. maybe in the next generation we will do our own. it's a totally different concept. , we want i.t. company to build all the technology by ourselves. others are system incubators. emily: do you think the huawei
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or gte business could be seriously compromised as a result? hugess they are still companies on the chinese market. >> i don't know what is going to buten, to be very honest, as far as the telecom industry is concerned, it is very vendorst to use chinese for a while. emily: fascinating revelation there, something we didn't know. this is a big e-commerce conglomerate but has these plans to build japan's fourth wireless network, somewhat controversial plans because he says he can do it with just $5.5 billion, but he said he is not using huawei or zte equipment aggressive
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concerns about espionage. however, the japanese government didn't seem to share those concerns. every interesting, given all the controversy around huawei right now. the t-mobile chairman testifying equipment willi never be in the t-mobile network. not looking good for huawei shery: very interesting, other governments like new zealand are well.g huawei as i have to be honest, i used to shop at rakuten, i am a big fan. i love their products. now they're trying to take on softbank and amazon. what did the ceo say on that? emily: it's interesting, because rakuten has been struggling to take on amazon. amazon in japan is in some ways
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.eating out rakuten so the decision to build a new mobile network is part of a strategy to globalize the on simply an e-commerce giant. i asked who's the bigger threat, he said both our competitors, but interestingly, he was one of his first clients when he was an investment banker before he started the company. so this is part of a longer conversation you will see on an upcoming edition of studio 1.0. we talked about his ambitions, taking on not just amazon but softbank and the wireless industry in general. it is a fascinating conversation. the battle of the billionaires. emily: always fun to talk about. we have much more ahead, so stick with us. this is bloomberg. ♪
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emily: saudi arabia is looking for office space in san francisco for public investment funds. the saudi fun has made several large investments in tech recently. this move comes months after saudi arabia faced international condemnation for the killing of journalists jamal khashoggi at its is dual consulate. istanbul -- at its consulate. what is your take on the unabashed expansion of the saudi investment fund into silicon valley? >> it is obviously a hot market and there is lots of foreign
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investment in silicon valley. the concern is one of values and whose values are driving the creation of new products, services, and apps. we've seen some outcry over the creation or support of an app led by the saudi government that allows people to track female associates or relatives. these are concerning kinds of applications and we would obviously want to espouse values of equality and liberty. part of my organization's name is democracy and technology. the question is what kind of values are we embedding in the technology in our daily lives? emily: do you think these companies that have done business with the saudi's in the past will change their tune? nuala: it has been an age-old debate. it is a conflict up laws and cultures. the international internet
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allows for the export of u.s. centric values by u.s. countries -- u.s. companies. we are at the conversational point about saudi arabia that we have been at about china and other countries and how they run their internal operations and how to use. -- and how they use technology. emily: so where do you think this goes? there have been private talks about whether softbank -- whether they should take softbank money. do you think the issue dies, or does it continue to be an issue? i have yet to hear someone say we didn't take that $500 million because it came from softbank. difficultnk it's very when there is that kind of money on the table to make those kind of choices for corporate leadership. but i do think the conversation is going to continue about the values and the norms and the
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democratic principles bedded in the products and services to companies are creating and the sources that only a fun but of revenue from the sales of those products. i see those calls coming as much from with silicon valley and the employees of these companies as i do from outside and from groups like mine. i think it is a conversation we are just beginning in many parts of this country and around the world. this is not the last we will see of it. a recent poll shows that facebook is one of the countries least trusted institutions. google and amazon are toward the top, yet facebook just reported earnings they keep growing. it doesn't seem to be losing users. people are still using it. how do you square that? nuala: it's a terrific platform him as useful and it's free.
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i do think we are hunting conversation about the use of information and the use of personal information by companies of all kinds, not just in the tech sector. that may account for some of the difference in the various brands truck -- trust factors. conversation about the use of personal information by all companies and respect and dignity that companies allow their customers, employees, and partners. i think we will see comprehensive privacy law in the united states in the near term to put us back on the global playing field about privacy and data. emily: how much do you think consumers want comprehensive privacy regulations? nuala: the pendulum has swung in a direction that more and more average users realize they're
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not getting a fair deal, as people in other parts of the world are getting in the protection and use of data and the disclosure of how the data are being used by the company. i think there's a practical reality, people want to use the services and be part of the internet economy, but they want to have more balance of power between the individual and the companies themselves. emily: is that trend on a collision course with the business model of these companies that make money based on how much data we share with them and how much they can squeeze more value out of it? nuala: data is a source of power for many internet companies. i think there will be real changes and a come to the table meeting of all the companies and how they are using data and how the various business models work. hopefully we will see a race to the top in the conversation that has begun i number of ceos across the united states in what their commitments are to the use of data about their customers. emily: can the u.s. catch up to europe at this point? that may not be the
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perfect model for the united states. they have different enforcement mechanisms but there are global principles about dignity, transparency, accountability, about how these companies expand what they do and get consumer buy-in and do the right thing. as technology becomes embedded in the walls of our houses and the dashboards of our car, we want to know that we are being treated fairly and certain uses are simply out. it will be a slightly different american model, but the principles will be the same. emily: thanks so much for joining us back here. always good to have you. 2019 saw news outlets like buzzfeed and the huffington post cutting staff. it did not end with them. what is next for journalism and journalists in the digital age ♪
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-- in the digital age? this is bloomberg. ♪
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emily: the start to 2019 has been sobering for the journalism industry's. major publishers laid off thousands of employees. it is becoming the norm for journalism since the advent of the internet. at least 30% of newspapers experienced layoffs, the numbers 23% for digitally native outlets. your company maintains one of the world largest digital ad exchanges. it will be a full-time cloud-based service. many of these outlets launch with much fanfare and grew quickly, and now they are scaling back. what is happening? isthe underlying question
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the business model, and the business model is one of advertising. overall advertising is doing extremely well. it grew at twice the rate of the economy. digital advertising group 15% and facebook group 30%. there was a lot of money being made in advertising but there is a symmetry here. a lot of people's time is spent outside googleps and facebook, but the ad dollars are not matching that today. what is going on is that when you advertise on facebook, you reach a huge audience with a lot of data. so it is scaled, it's efficient, effective, and actually pretty easy. ad dollars are shifting over there, but markers want to be able to spend in more than two places. ,o the rest of the open web
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they need an advertising model that works more like what works on facebook and google. emily: i don't spend all my time on google and facebook. the problem. i would call it people based marketing. what we need is a system that operates like people based marketing for the open web. so that the ad dollars can follow the users and the attention that being generated by all those great outlets with great journalist. emily: how do you do that? you lean on companies like mine to innovate more and to get closer and provide a compliment to those big systems. emily: isn't that bad for google, your new partner? multifaceteds a player. they are a competitor and now a
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technology vendor. so we embrace all those aspects. that is sort of the way the world works. emily: do you think the google and facebook model are under threat by relying so much on digital data? tim: no, they have a very strong position. they have a great trade-off between consumers and advertisers. emily: what about amazon? tim: it's really three players, not just the two players. is building a very large advertising business very quickly. it has a number of great assets, amazing consumer data. of merchants who want to reach those consumers. emily: do you expect the ad business to feel the backlash -- around consumer concerns around privacy? tim: it already has. anyone who is a practitioner of
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advertising understands, consumers need to understand what is going on, they need to participate and embrace the system. emily: how do we do that? of: the right kind regulations are going to be a good thing. what we worry about, 50 different sets of laws would be a big problem. if we could have one standard set of laws, ideally as global as possible, that enable permission-based marketing, that is a good thing. that's where we need to get to to build trust. emily: fascinating. glad to have you back on the show. as many modelng threes to china as it can before the trade war truce with the u.s. expires on march 1. elon musk fears the two countries could ratchet tariffs backup. that would make electric cars more expensive in china and raise the cost of components china sends to you is simply
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plants. is the rush warranted? >> it is warranted in the sense that the trade situation between the u.s. and china is very volatile, and that tesla is a narrow band to be successful. as we been talking about for basically a year, they are under this production crunch and also scrambling to generate as much revenue and profit as possible. being able to get these cars possiblea before 25% tariff hike will be good for them. it shows how dependent tesla is on china. we saw a few weeks back, elon musk going to china, unveiling this money feel that will be the site of a factory.
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this company needs to do a lot of business in china to have the future that it's ceo wants it to have. atly: i have a chart looking tesla's revenue in china over the last several quarters. third four ine china, about 6% of global revenue. do you expect that to significantly increase with this china plant? tesla needsy, and it to increase. the demand for electric cars, china is the biggest market by a lot. some of that has to do with subsidies the chinese government is giving to buyers and the fact that there are really low-cost electric cars in china, but if you want to look at a market that is embracing this technology like nobody else, that is china. and obviously this is a huge market, if tesla wants to be a leading global manufacturer, it needs to have chinese sales role commensurate with the size of the market. emily: so what types of tariffs
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might tesla face once this truce wears off? >> we don't know. it would be like a tit-for-tat situation where the chinese government would be responding to the trump administration. you could imagine an automobile tariff, that was talked about last year. there is also a cutout that the chinese government made for electric car manufacturers in the country, where before manufacturers had to have a local partner, now the chinese government is saying it is ok for tesla to open a factory on its own. you can imagine if the trade war intensifies, that could change as well and that would have huge applications for tesla. emily: the model three is coming in droves to china's shores. thanks so much for that update. that does it for this edition of "bloomberg technology."
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thursday we will speak with the ceo of surveymonkey on their earnings results. follow our global breaking news network tictoc on twitter. this is bloomberg. ♪
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>> a very good morning, i'm haidi stroud-watts here in sydney where australian markets have just opened for trade. sophie: welcome to "daybreak: europe." haidi: our top stories this thursday, investors are awaiting trade numbers out of china. president trump

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