tv Bloomberg Technology Bloomberg February 28, 2019 5:00pm-6:00pm EST
emily: i'm emily chang in san francisco and this is "bloomberg technology." hour, tech names plunge. in a single day, hb think drops , fitbit sinks 14%, and all on the back of earnings. what does it mean for the rest of tech? could uber make a big global play ahead of its planned ipo? ahey are in talks to buy middle east competitor.
after dropping a few cryptic hints on twitter this week, we have coverage of elon musk's tesla news. we begin with breaking news. tesla mystery solved. elon musk is launching a new model three at a lower base price of $35,000. the news first broke in the electric car blog -- in an electric car blog after elon musk teased news on twitter. now we know what it is about. tesla is holding an event at this hour where we presume they will announce this officially. tesla halted new car orders on his website. to discuss we have gene munster on the phone in minneapolis, and we have our bloomberg automotive reporter, keith. what we know so far? priceng with a lower model three with a shorter range
gives you on the opportunity to saleshese ambitious volume targets. they are planning to produce 400,000 model threes this year. that's a lot of model threes. overan't sell them all at $50,000. having a lower price model three should bring in new customers, value customers. the average price of a car in the u.s. is $37,000 so this makes it a joe average kind of tesla for the first time. ene, hasn't tesla promise to the price would eventually come down to $35,000, it just took time to get there? gene: this was the original promise two years ago. this isn'tpects, news, but in other respects, this is probably the biggest news since the model three was announced. -- simple math was that most many people felt for this car to get to $35,000 was impossible. i think that is what is so
important here. sound5,000, it does not so significance, but comparing it to the rest of the car usually you these are 70,000 plus. you can quickly see why tesla's , theyrket share last year can maintain that kind of share, at least in the near term. emily: tesla is already way card in the electric market. it's will be hard for other automakers to catch up. tesla shares are halted as we wait for them to officially announce what we believe will be a lower cost, $35,000 base price for the model three. keith, why did it take these two years to get here? kevin: it is typical of automakers. i know tesla is not a typical automaker, but you usually start with a higher price models
because it gives you the biggest profits. then, you move down the price letter and put out the lower-priced models to go for volume. you need to get critical mass going with high-priced ones. now, he has these ambitious production targets. in order to sell the cars, he needs to have a lower price model. emily: how many more cars do you think tesla will be able to sell at this price? how does this change or model? -- your model? we are concerned relative to their 400,000 expectations. we probably need to rethink what our estimates will be for this year and next year. if you look at the broader market, there is 80 million vehicles sold per year. 1% of those last year were electric. there's no question 100% of vehicles, that might be to do -- might be 10 or 30 years from
now, but that is where we are going. this could be a significantly bigger company because of the price. this week, we covered the news the sec has asked a judge to hold musk in contempt around the production numbers. do you think some of these legal issues could impede tesla's progress this year? kevin: they could impede elon's progress for sure. once again, he put out a tweet that said they were at a 500,000 rate on the model three when they are going to produce 400,000 this year. he continues to tweet unfettered. that is the issue the sec has. had choicee, you words about musk's latest tweets. you say he has been reckless. how concerned are you these issues will continue to affect his leadership and possibly the company?
concerned. i want to make it clear i'm a believer in the tesla story and elon musk and i think he is better as part of the company. couldonce hopeful he change, and unfortunately, he will not change. he's going to continue to do reckless things on the edges, and i hope this recklessness does not impact the business. the company has a wonderful mission, and they are in a great place to change the world. emily: we continue to get headlines out of this official tesla news conference. tesla is shifting worldwide sales to online only and says the model three will have 220 mile range. what does that mean? gene: it means it's a great car. other electric cars that are in
40,000 to 45,000 range are not the card you want. -- not because you want. -- not the cars you want. when you compare, at this price point, it will be a 2% plus market share -- 80% plus market share and close to 100% market share. i think the car companies, the industry will go through an incredible turbulence in the tot few years because to try build something comparable they can do at skill and make money on is a problem i don't think they are capable of solving. emily: tesla doesn't do much traditionally. is there any other automaker that has online only sales? kevin: no. the automakers use the traditional dealer network. how has been explicit and he wants to sell direct to consumers, which has gotten him
in trouble with state regulators who are tight with traditional dealers. he is finding a model that works for tesla. the important thing about this car, it won't have quite the range of the more expensive models, but it will bring in new customers that will be the seed corn for this brand. this will give them a future beyond the wealthy people who have been able to afford tesla before this. emily: i still remember being asked tesla the day the model three was unveiled, taking a test drive in one of those early models, gene. what does this cost? what does it mean in terms of tesla making money? they can get the car down to this price, but how will it impact tesla's bottom line? gene: what they have said versus what it will look like initially are two different things. likelytial units will not be profitable. i can't imagine the making money on them through the next several
months, but they have ambitions. they talk about the december quarter and the gross margins should be 20% on the model three. that was with an average selling price of over $50,000. $35,000,ale it back to the math is there. i think that is the real substance here is that they are able to produce a car -- the average price will be close to end -- close to $40,000 at the end of the day. as long as they can keep it to 5% or better margins on that, i think investors would be thrilled because of the size of this growth curve being one of the biggest waves coming in tech. emily: getting more details from the tesla news conference, not only our sales shifting to online only, but tesla says all of the sales online combining with other costs, efficiencies will enable them to lower the cost of all cars by 6% on
average, allowing them to get to the $35,000 model three price point. what does this all add up to, keith? keith: tesla sees competition coming from the german luxury makers. others are trying to get ahead of that. they are trying to build a critical mass so they can control the lion share of the electric market. emily: kiefer bloomberg news out of detroit and gene munster, thank you both. terminal users can follow along with all of the latest analysis. check out our tliv blog. if you like bloomberg news, check us out on the radio. listen on the bloomberg app, bloomberg.com, and, in the u.s., sirius xm. this is bloomberg. ♪ sirius xm. this is bloomberg. ♪
emily: a handful of tech names got dragged through the red thursday after reporting disappointing earnings results. p ink.itbit, hp think -- h a fourth-quarter earnings season has helped fuel a 23% rally since the market about bottomed out. i want to get to new york where we are joined by a senior research analyst. areel, all of these different companies, but tech is a common theme. what do they have in common a side from tech daniel: -- tech? daniel: if you look at some of the companies today, there are specific stories like hewlett-packard where people are worried about the printing supplies growth and printing supplies contributes to a percentage of the profit.
if we look at booking or box or fitbit, those are concerns around competition and the need to invest to differentiate. if we think about what is going on in technology, a lot of the key secular trends remain healthy. the move to the cloud, the digitization of society, we see a lot of opportunity even with some of the macro headwinds. we would highlight cisco, which is a leader in networking that has transformed its next toward software and services. earningsmargins and will be better than market expects -- than the market expects. motorola solutions is a leader in public safety pivoting the faster growth areas like video. they have an excellent management team that has been able to execute on transitioning the company to new areas and expand margins. another name we like is also debt -- alphabet. newer areas like the google cloud platform are somewhat
underappreciated. havenger-term, they opportunities in areas like autonomous driving with waymo. the other one to highlight is apple where we think the strength of the ecosystem is underappreciated. there are concerns about the iphone and china, but the install base is growing and user satisfaction is high. they are doing a good job in services and wearables. the wearables helps demonstrate innovation is alive and well. we expect the environment to remain choppy. companies have great visibility, but those able withtegrate -- innovate products and services, can create additional shareholder value over the next one to two years. emily: some names we talk about on the show all the time are apple and alphabet. some names we don't hear often, fitbit,th hp ink,
box, how does what is happening with them fit into what is happening with big tech? >> dan's point is right. there is this secular shift toward cloud technology, but that means there are a handful of high growth cloud software andanies, like workday , and they have had really impressive stock price run ups, even accounting for the dip in stock market prices around september and october of last year. what that means is that now, those stocks are looking pretty expensive. expensive relative to themselves and the overall stock market. ,he piece i wrote today said look, the growth rates are coming down for those high-growth stopped were companies-- software and the valuations are going up. that sets them up for a greater, if and when there is any hiccups
in performance. or the macro environment. curious to your outlook on the big tech names you did not mention. what about the others like facebook, netflix? ,aniel: we like facebook and while we think there is a lot of work they need to do around data, security, privacy, i think the company and management team is appreciating the severity of the situation. greatereeing a willingness to change and try to improve the health of the platform. what is interesting is that, despite all of that, the metrics of the underlying business remain healthy. if we look at some of the other platforms underneath the facebook umbrella, you have instagram showing very strong newer properties like whatsapp and messenger that we think could be increasingly monetized overtime.
with core facebook, you have this transition to stories and it will take time, but the results and outlook suggests there is quite attractive growth. netflix, what we think is interesting here is that the to pushhas continued ahead with differentiated and unique content. they have coupled that with a direct relationship with their users. they are helping to redefine the television experience. companies, there is execution risks and competition, but we think there -- they are very interesting. another name we like is amazon. theyeason they remained -- remain interesting is that they are executing well in their core e-commerce business and doing a terrific job with the amazon web services. when we speak to customers, suppliers, the shift to the cloud is very much in its infancy. we think they will have attractive growth for several years to come.
to empathize with amazon, they have an advertising business that is growing quickly. we think that is somewhat underappreciated. the key trends around cloud, mobile, social, they are not without complications, certainly in terms of the social elements and privacy. we think more regulation is necessary, but if these companies can invest appropriately and continue to innovate, we think there is additional value to be created. emily: more regulation could be coming, especially with the ftc forming a new task force to look at past acquisitions. today aboutece out the stock bubble in the cloud. explain. atra: it is about looking how extensive the cloud stocks have gotten, relative to their expected revenue over the next year. apologizewith -- i
for this acronym, i came up with a fake acronym, putins to describe those stocks because every stocks need its own acronym these days. i looked at the median multiple, how much are investors paying for each dollar of future revenue. all 17 of the grouping of cloud companies that we looked at, they are all trading above the tune of your multiple average. that implies -- two year multiple average. if they don't deliver on the growth promises, we might see we seeck brings periodically from these high-growth high expectation cloud companies. emily: so much to discuss and follow. this idea was just released of the new faangs.
emily: uber is expanding its operations in the middle east. they reportedly are in advanced talks to buy a dubai-based rival. no final agreements have been reached but the companies could announce deals in the coming weeks that would value the new company at $3 billion. this is as uber pushes growth preparing for its upcoming ipo. joining us to discuss is eric newcomer who covers uber. what do we need to know about this company? >> this is a moment where uber might acquire the company internationally rather than retreating. uber seems to be willing to pay
up big price tag, 3 billion. this is not a done deal by any means, but it looks likely a 3 billion -- at 3 billion, uber could acquire the careem business and there would be some sort of combined force in the middle east. emily: what is uber's position in the middle east right now? eric: they have been competing back and forth aggressively. two strong players there potentially, coming together. like in a lot of markets, uber positioned itself as bringing the technology and efficiency while competing against local players that have the local knowledge and hometown advantage. emily: give us an update on how internationally about retreating from china and russia. retreating from southeast asia. lyft in the context that doesn't have much international
business at all. businesses- lyft's focused mostly on the united with a slight focus on canada. uber is all over the world. latin america is an important market. they are trying tactics to get into places like japan. it is still very much a global business in the middle east. i think we will see a lot more, and i'm excited to see more, when they buy their -- file their s-1 in a couple of months. the dow will tell us more about globally, ison, affecting their business, but uber definitely still has a global footprint. don't forget they have stakes in those companies that they left behind, whether it is grab or deedee, uber still has stake in those companies. emily: could a big you liked
this impact the timeline to ipo? onc: they have been working this for a while, so i think it has been on their mind. it's not a surprise. we have been watching this for quite some time. little timey need a to update things, but i don't think it changes the game. all we can say is uber is hoping to go sometime this year, probably the first half. i don't think this will affect that to dramatically. us in eric newcomer, for new york, thank you so much for that scoop. tesla is putting a $35,000 version of the model three on the market. what does it mean for the company and the future of electric cars? we will discuss that's next. can in stonework grow -- insta work grow from its early
emily: this is "bloomberg technology: global link" where we join daybreak estoril you to bring you global news. let's get a look at the global tech stories of the day. softbank's vision fund is betting big on the chinese car market. the fund is investing one $.5 billion in a chinese car trading evaluation ofing more than $5 billion as a competes in a segment that has
remained largely resistant to disruption. is french telecom giant asking huawei to except france's terms to supply five g technology, including access to equipment used in core networks, and today's -- antennas, motherboards, encryption keys, and code. a group of i.t. consultants fighting the trump administration's plans to increase limitation on h-1b .isas are seeing ants much higher denial rate, as high as 40%, compared to just 1% for big tech companies like google and microsoft. these are some of the global tech stories we're watching today. we continue with our coverage of tesla, tesla finally 35,000 dollars version
of the model three sedan on the market almost three years after ceo elon musk started taking for.s obviously a big milestone against this $35,000 number, but you'rel the add-ons, at a bigger number, but how much demand do you think this will drive? >> we have been waiting for this vehicle for a long time, so i atthink there are a lot of peoe already in line. have some people who have gotten tired of waiting and have moved on. incremental demand may come from more of this new distribution model they are talking about where they will do it all online, a selling method that will be very interesting to see if that succeeds or not. it's really easy for the consumer, but at the same time, we're talking about a vehicle here, not ordering a shirt from
amazon. haidi: online means there will also be fewer people who will need to sell these cars. does this mean there will be more layoffs as well? >> i was wondering if that was included in the 7% headcount reduction he announced earlier or not. i suspect it's not, but i have not heard from the company to announce that, but i suspect yes, a lot of people as stores will lose their jobs. haidi: will that drag demand was emily's question as well, but should we worry about demand and losses in states that will not allow sales without a dealer franchise? >> that is a great point. that is an issue that has been going on for a long time with tesla. there are very powerful organization, well-connected in washington. dealers are not opposed to tesla, they just want to have tesla franchises, too, is my
take on that. restrictive, in particular a state like texas, which is one of the largest markets in the country, but tesla has still been able to get their vehicles in the hands of customers in those states. buy themtechnically from a tesla store in another state and someone delivers the vehicle to you in texas. emily: tesla does have 35 brick and mortar stores in california 7%ne, and they did mention of the workforce would be laid off in january. what are some of the challenges you foresee with this online only model? >> the big one i think would be will it get past any legal issues? that,t too worried about but as we were just discussing,
tesla has been operating for a number of years already, and it has not slowed them down a ton. i think the next big thing is -- buy consumers be willing to the vehicle on their phone or laptop or whatever it may be in great volumes? this strategy works very well when the customer knows for sure that they want a tesla. they can go online and configure whatever tesla they want, just like if you want to buy a porsche 911 or high-end corvette. it would nice to go to chevrolet.com, configure your car, and have it delivered to you without leaving your house. tesla wants to go that route. tesla is not held back the cause they do not have franchised dealers. they own all their stores right now, but there are people that want to compare may be a tesla mercedes,nd audi or -- compare may be
maybe a tesla model three two udi ordi -- -- to an a mercedes. is potentiallyod a smart move, but will it be 2ough to get people buying million 3 million vehicles? it just remains to be seen if they can do it, but making the experience easier in retail is a smart move. hard to imagine anyone making a purchase as big as a car without test driving at first, but that said, musk speaking at this news conference saying introducing the car at cries, thousand dollar he says it is excruciatingly difficult to make this car for $35,000 and will be financially
sustainable. how much pressure will this price put on tesla's bottom line? >> well, at the same time, you will have a lot of cost going on . the theory is eventually, you make it up in volume. ultimately, it's hard to say how many consumers, but certain consumers that want that $35,000 car, they will want other features, and suddenly they are spending $42,000 or $46,000 or whatever it may be, up to $60,000. ultimately a pickup truck is coming down the road. that is a huge segment. haidi: we are getting news from nasdaq saying the tesla stock at five: 40trading p.m. eastern. we saw the stock to drop as soon
as the announcement was made, though throughout the day, it actually rose. what are we expecting this announcement to do for share prices? >> i would be surprised if we had a rampant spike. that's not new information. we have been waiting a number of years for. there were earlier comments from elon that it would probably happen at some point in 2019. there's also that old cliche, buy the rumor, sell the news, so i would not be surprised if we saw a decline on this. now that we know, there's no reason to get hebdo about whatever the announcement is going to be because you know what the announcement is. $35,000 model three is only going to come in black. any additional color will be at least $1500. our detroit euro chief had some funny commentary saying that his inneranneling
henry ford who famously said that any customer can have any color car that they want so long as it is black. to point thatt out. i was thinking the same thing before we went on the air. that is another example of if you want a different color, fine, but you have to give us more money. tooyears, i have never hung much on that $35,000 price tag because it does not work that way. it is not that simple. from -- a vehicle can range from a starting price of $30,000 and with all the features be up to $55,000. as long as you want it in black, and there's a lot of people waiting for this car, and, frankly, a model three is a great looking car, too, so it should do well. so much for you
emily: a new startup is making waves in the gig economy, vc'sng one high-profile attention. the company connects workers with employees in the hospitality industry. does the gig economy have more legs? what kind of jobs are we talking about? really, any position suitable for the hospitality industry --
,estaurants, catering companies so dishwashers up to cooks, servers, pretty wide variety, but we have about 10 positions we focus on. emily: how do businesses deal with it now? >> is a wide variety of ways, but mainly windows. ways that has been exciting for us is servicing a set of businesses who really do not have any good options today. they don't have linkedin. they don't have recruiters. they are winging it and we think we can be a valuable tool for them. uber lede success of to a rash of "uber for this" or "uber for that" industries. what makes you think this will not just be a flash in the pan?
wechsler discovered is a large pool of workers that want to be part of the gig economy, but they are immigrants, college students, they do not have a nice car, but they have a skill, a desire for economic opportunity, freedom, flex ability, but they are not , aving for uber or lyft number of companies, so we found a way to help them monetize their time and skills. emily: there's increasing visibility to benefits or lack thereof for contract workers. how do you deal with that? question.really good all of our profession is our contractors -- all of our professionals. we help them get workers compensation is contractors and our workers make about $140 on average for a gig. we think that is on the high-end
of all the alternatives that are available, about 150% of minimum wage. workers get paid very well and what they see in the app when they accept a gig is what they make. we're not playing any games of smoke and mirrors. emily: so what is the competition out there? >> as i said before, the biggest competition is a sign on the window or doing nothing at all. show dishwashers does not up, most of the time they are managing without that dishwasher. emily: is this something that task rabbit would do? >> i think there is a lot of places people could go, but they are coming to us more and more and one of the reasons is quality, speed, and convenience. we've that our professionals. we are able to fill 97% of our gigs in 24 hours and businesses are able to pay professionals
through our app in a convenient way, so we manage a lot of the workflow and matching. emily: how big do you think this market can be? is potentially as $70 billion company. task rabbit ended up being something much, much smaller. very different companies, but how big do you think the market is? >> we think it is very big. there's probably about one million businesses in hospitality and those businesses employ about 50 million people, and that is just in the u.s. one of the exciting things has been if we are able to deliver quality professionals to small businesses as scale very easily, we can actually help set them up for success in a world with uber geeks and post mates and door dash. you can latch onto a lot of
these services, but one of the reasons we started was there is no efficient infrastructure to service all these customers coming in, so we think there's an opportunity to make the market eager by providing quality labor at the touch of a button. emily: with this ever involves helping uber find drivers or some of these other gig economy stay running? >> we have always followed our users. they have taken us in different directions and they continue to find ways to add value with them, just listening closely to our professionals and partners. emily: thank you so much for stopping by. we continue to follow breaking news out of the tesla news conference. elon musk saying he does not expect tesla to be profitable in the first quarter. we've been talking about the economics of offering of $35,000 more with the add-ons and what that means for the bottom line, but news elon musk does not
the outlook for credit given the lack of certainty of the direction in the u.k. economy. emily: youtube announces it is banning comments on some videos with minors. the company says it disabled comments from tens of millions of videos that could be subject to predatory behavior and will continue to do so in coming months after several large companies including at&t, disney, and call-up told this spending from the platform after reports of bullying in the comment section. how exactly are these changes going to work? >> they are going to use a type of machine learning software that is going to scan each video and see if the video features a , and that is 13 and under if it decides there is a child 13th or under in the video, it
will get rid of the comments section. we talked a lot about how i still has a lot of work to do and a lot of improvements to make. how will and i be able to tell for sure if someone is under 13 or not? ai be able to tell for sure? >> i would not be able to tell. youtube is making the decision that it will probably err on the side of -- like if there's a video of someone who is 14 but they are not sure, at this point, they would probably get rid of the comments section in that video as well because right now they are on the defensive. emily: youtube did release a statement saying no form of content that endangers minors is except a blunt youtube, which is why they terminated channels that attempt to in danger children in any way, and this is on the back of a horrifying story with her was commentary beneath some videos that led to some sort of pedophilia ring. the impetus was quite extreme.
and getting rid of comments for youtube is kind of a big deal because it's a huge part of the social aspect of the platform. how does this fit into the bigger picture of everything youtube is trying to deal with? offrom the point of view comments and social, youtube is not much of a social media entity unless you have the comments section. they have held onto comments for ever. i expect they are often very toxic. >> they have resisted getting rid of comments in the past as well. if you are a video creator and you are doing a valid job, comments are great because you find new viewers there, you get feedback from viewers, so it's very valuable for creators and youtube has to balance. it needs all these creators to create content, so it is a big deal that they are getting rid of some of the comments. emily: is youtube leading here
or just playing catch-up? >> as usual, they are playing catch-up. three years ago or maybe more, they were having similar problems and they always say they are going to fix it. the main problem comes down to the fact that it is an internet platform and does not want to be responsible for the content because it is impossible to check everything properly. even if this software does work a little bit, they do not want to be responsible for it. they want people who post the content to be responsible for it. that is the key difference. to time they are forced become responsible, they don't like it at all. emily: here they are taking some responsibility. thanks so much for that update. just out -- hbo's ceo is stepping down after nearly three decades at the cable network. he made the announcement to hbo staff in a memo saying hard as it is to think about leaving the
company that i love and the people i love in it, it is the right time for me to do so. inant to turn to lucas shaw los angeles. obviously, this is big news and interesting in the context of the acquisition. what is happening behind the scenes? this week, at&t, which is acquiring or has acquired time warner got the final sign the the doj's case to block merger was not going to succeed and once they knew the deal was done, they could start making changes at the different tv networks that they planned. turner in particular was one area where at&t had been very hands-off and we're starting to see the shakeups from that. there is a report out there that number two athe turner, is also leaving. the previous head of turner has already left. we are seeing what this reorganization of warner media, what used to be time warner, is going to look like now that it is owned by a phone company.
i got off the phone with one of the biggest executives in tv and the since was he felt like it was the right time now, that he was not going to have quite as much autonomy and there was going to be a reorganization that might put him under a couple of extra layers. he is used to running this network with almost complete autonomy. said, this is fairly abrupt. if you look at his legacy and what hbo has accomplished in the last three decades, it's pretty incredible. however, there's more competition today than ever before. do you think at&t executives were not happy with its rio's and his most recent performance? >> i don't think they were unhappy with the performance of hbo. to your point, he is a titan of the tv industry. he has been at the network for the past 25-some years. he has seen it grow from a a few subscribers to one of the biggest tv networks in the world. he was there when they green lit
"game of thrones," which is by some counts the biggest show in the world, but i think they want to better integrate some of the different divisions of warner media, if its distribution, advertising, finance, legal, they see a chance to run things differently. there are reports they will have a network group. there would be more of a studio group that would combine warner brothers, the studio out here in los angeles with some of the production that happens for the new york networks. whenever you talk about a big reorganization, the people who run those businesses are probably not going to be happy that some new owner is telling them there is a better way to do what they have been doing, especially when you are someone like richard pressler who feels he has done a great job the past several years and is nobody who can do a better job than him. it is poetic as we prepare for the last season of game of thrones. we will continue to follow this
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haidi: a very good morning. australian markets have just opened for trade. i'm shery ahn in hong kong. sophie: and i'm sophie kamaruddin. asia." to "daybreak haidi: a weak start at best for fell for atrade third straight session. we are also watching developments on the trade front. larry kudlow says the u.s. and china are close to