tv Bloomberg Technology Bloomberg June 14, 2019 11:00pm-12:00am EDT
♪ emily: i'm emily chang in san francisco, and this is "bloomberg technology." under report, the u.s. justice department is close to approving the sprint-t-mobile merger despite early hurdles in the way of a deal. what are the chances the $26 billion transaction goes through? u.s. government agencies prepare for antitrust investigations, who will come out on top? ipoc for the buying spree during
chewing dot-coms first day of buying has really been seen since the 2008 crisis. the u.s. justice department is nearing approval of t-mobile's $26 billion merger with sprint. this is according to "the new york times." a group of states sued to block the deal claiming pressure on the justice department. our reporter joins us from new york, what do we know? reporter: the doj has been continuing negotiations with sprint and t-mobile about how to approve the deal. sprint and t-mobile have promised to do vest a number of assets that include the prepaid phones. also some spectrum assets to the sec. they are working with the doj to potentially offload some other assets. they have a list of buyers the doj would be comfortable going to. sprint and t-mobile are working
with them, that includes dish and others. what the doj wants is for a fourth carrier to be set up out of this deal. even after sprint and t-mobile merge, which would take the players in the market from four to three, the doj want somebody to provide vital competition to these guys. emily: how would the fourth carrier work? would the fourth carrier actually stand a chance? nabila: that is why spectrum assets are being discussed as something these companies have to divest. the doj wants them to pave the way for a competitive fourth carrier. that is why you see someone like dish in the mix. they already have national infrastructure. they would be more able to build a new network. dish already has a lot of spectrum as well. the doj is leaning towards buyers who could provide this
kind of competition. emily: thank you so much. the u.s. government is sharpening its antitrust scrutiny of big tech. formal inquiries could be forthcoming, the justice department and ftc have divvied up antitrust oversight or apple, amazon, facebook, and google. tech leaders are stepping up lobbying efforts. apple ceo tim cook visited the white house to discuss efforts to develop job training programs. google ceo touted creating jobs at an oklahoma data center to cnn, arguing bigger can be better. joining us is roger mcnamee from washington. you have been liaising with some of the people who will make decisions, what is your argument to them? roger: the tone of the government has changed so
dramatically in recent months. i think there is an awareness everywhere that -- especially google and facebook but also amazon and apple have issues that really are bad for the economy, competitors, and bad for consumers. you see all of the big four being investigated at the moment. the cases are very different. the one against apple i think is trivial. it relates to the app store and i think could be resolved by them changing the way they price to the developer. the one at amazon is more structural. i think amazon provides a really valuable service in a way that will survive antitrust investigation, even if they have to make pretty profound changes. google and facebook, the google is completely different. the issues go to the heart of the business models. there is no easy fix. that doesn't mean the antitrust investigations will lead to
actions. i believe the investigations are going to look really seriously at ways to force change in the business model. emily: all we know is the doj and ftc have divided oversight over possible investigations. what is your sense over the investigations and if they will actually happen? roger: i am obviously not in a position to know the answer to that question. i surely would love to know the answer. here is what i believe. there are signals coming out of ftc relative to facebook that are inescapable. we have heard indications that it might be a $5 billion fine, there would be other actions resulting from the violations of the consent decree from 2011. there is more evidence as we saw earlier this week, the wall street journal reporting that there might be evidence that mark zuckerberg knew about the privacy violations taking place.
if that evidence proves to be valid, this situation i think has become more extreme than even what has been discussed. i don't think a $5 billion fine will move the needle on facebook. i think the market has discounted that. we shouldn't assume that is all there is on that case area on google, we are earlier in the process. the situation is very clear cut in two different ways. google's monopoly in search, advertising, and on android are so powerful and so obvious that it is really impossible for me to imagine the department of justice won't initiate some kind of investigation. we have to see where that leads. emily: let's stick with facebook. what do you think would move the needle? obviously cofounder chris hughes one of the earliest employees at facebook has argued for breaking up facebook.
sheryl sandberg has impart responded saying china isn't going to break up its big tech companies. we heard the same argument to cnn, bigger can be better and more successful. roger: it is pretty obvious that bigger has been fantastic for shareholders. in terms of broad competitiveness and especially innovation, big has been a disaster. the silicon valley entrepreneurial community has seen its entire world distorted. you have to avoid -- every startup has to have a plan to avoid google and facebook. it has driven a ton of money into businesses that are more capital-intensive like services your parents used to provide for you. or higher risk and probably lower returns like crypto and transportation like scooters. the case here for doing an investigation is clear cut.
i think the china rationale is nonsense. where i think that the regulation needs to go two ways, you need antitrust to improve the competitive environment. i would look to the way at&t was handled where the patent portfolio was put into the public domain. they were restricted to a space smaller they really competed in. their own infrastructure was used to create competitors. all of those work here. you also have to go after the core business model. you have to go after what the harvard scholar calls surveillance capitalism. this notion that these companies can either acquire or through surveillance capture and data avatar. really a date a voodoo doll for each person in the population. they use that for their own gain
over the objections or without the knowledge of the consumer. that business model is extremely dangerous. we are going to need a different kind of regulation. one that is new to this kind of economy. it will probably take a while. that is a very important thing to do. i think regulators are aware. emily: regulation is one thing, a breakup is another thing. do you think facebook and google should be broken up? if so, how? roger: i think there are lots of ways to look at this. most of the discussion to date has been about the merger activity that shouldn't have happened. therefore, unwinding things like instagram and whatsapp. unwinding the mapping products at google and some of the other things google has acquired. you have to look at all of the alternatives. when they broke up at&t, they broken up horizontally, by region. you have to look at every possibility. at the end of the day, breakup will not be helpful if you do not go after the business model. what the professor calls surveillance capitalism is
itself a very severe problem for the economy and especially consumers. it is the reason why we face threats to public health, democracy, privacy, and competition. you have to go after that. you can't just break them up and leave it alone, you have to do with the business model. emily: roger, you are sticking with us. we will be talking more about this through the half-hour. coming up, perhaps no industry has more at stake than semi conductors in the u.s.-china trade war. we are already seeing the impact of the cut sales outlook. shares are plunging. we will discuss next. this is bloomberg. ♪
to 5% wiping out most of this year's gain. other chip stocks went out with it. broadcom was a major supplier to huawei. the chipmaker also provides chips to apple, which could be under threat of president trump's tariffs after the g20. for more on the impact we are joined back again by roger mcnamee, cofounder of elevation partners. nobody knows what president trump is going to decide. based on what we know so far, how devastating do you think this dispute is going to be for u.s. companies? roger: the problem with this whole thing is we have no visibility. there is nothing about this trade war that makes any sense at all. we have the extraordinary, symbiotic elation ship with china. it was based on a goal of giving consumers the broadest possible choices in product at the lowest possible price.
in that context we overlook a lot of espionage and clear manipulation of markets that was detrimental to some american vendors. it worked out great for tumors. to me, it is ok to make a change in that larger context to say we are going to optimize the needs and will tolerate some price increases. that is not what is going on. what we are going on is self-inflicted. we are unwinding globalization. we are unwinding this constructive symbiotic relationship without replacing it with something we understand no one can plan for. i look at this and see nothing but downside. in my mind, i don't know what huawei is going to do. this will engender competitors to broadcom. maybe it doesn't last that long but people aren't going to look
at trade with the u.s. the same way after this. they will need to. they will have more leverage for negotiating. what a waste. emily: the skeptics would say the trade relations with china have been very unfair, stealing intellectual property from the united state. they have been the benefactors of a massive trade deficit that the u.s. has suffered from. does something need to change? could that change perhaps be better than the change that the administration is pushing now? roger: let's unpack that. the first part of it is it is demonstrably true that technology vendors in particular have suffered a lot of industrial espionage. some brands have suffered from counterfeiting. there obviously has been a prioritization of the needs of consumers. you going to walmart and 90% of the products are made in china at incredibly low prices. if we are going to move off of optimizing for consumers, that is totally rational. you want to do it with a clear
plan that everybody understands and agrees to. china understands and agrees to. i'm perfectly happy to have the conversation about re-optimizing for american corporations over american consumers area what i'm not prepared to do is buy into the nonsense that the trade deficit is a problem that is what drives the incredibly low inflation we have had for so long. it is about the fact that we have this symbiotic relationship where we use our capital, our high-value currency. we use our vine -- buying power. we take advantage of china investing a ton of money and infrastructure. if we want to change that, let's do it with a plan, not with knee-jerk activity that leaves businesses with no way to plan and consumers with higher prices and event. emily: let's talk about apple. tim cook was meeting with the president this week. there has been this threat of
tariffs on apple products for many months. it has not really hit apple, yet. there certainly could be a sentiment change in china where chinese consumers decide not to buy apple products. they have said they could manufacture u.s. pound i found -- iphones outside of china. you have analysts saying a potential hit has already been built into the stock and if the trade war is resolved apple could bounce back. roger: i think this is a really important set of questions not just for apple shareholders but everybody in the tech sector. apple took a massive hit just a few months ago. the business in china for iphones has slowed down dramatically. you have to believe there is no way it could read on as hard. it is what it is. smartphones are mature, they will not come back. apple's best opportunity in smartphones is to convert form
-- from selling them to be $1000 apiece, to be a subscription where you pay monthly. they have the balance sheet to do that. i think that would allow them to gain a lot of market share. that is the single biggest thing for investors to look for. i have no reason to believe it will happen or not happen. it could happen and is really a logical thing for apple to do. it is so hard for android to respond. relative to apple's other things going on, apple has done a really good job of maintaining good relationships with the chinese government and with our government. i think apple has worked really hard not to be a source of conflict for anybody. there is no way they can overcome the tsunami of a change in trade strategy from globalization to nationalism. at the moment, we are heading in that direction. that makes beaded -- me very uncomfortable.
♪ emily: as we head into the 2020 election facebook is facing controversy over fueling hate speech in myanmar. they largely ignored it over suggestions it was leading to violence. the new york times reports they have spread to india, where facebook has 340 million users. all of this impacting recent elections. cofounder of elevation partners and author roger mcnamee, this is a prom you been talking about for a long time but this latest
twist that the hate of this one particular group has spread to india has impacted elections. some of the stories are incredibly horrifying. facebook says it has stepped up efforts to combat this particular issue. have you seen much progress? roger: the really sad thing is there has been no substantive progress on any of these issues. there is a basic reason why. facebook and google are in the business of first gathering our attention and holding our attention. it turns out for most human beings, the things that stimulate our engagement and keep us active and emotionally focused on context are stuff that appeals to our lizard blade -- brain, hate speech and conspiracy theories are amazingly constructive for the business model of these companies.
this is why they go out of their way to say things that make it sound like they care deeply. they move very slowly on substantive change. there is no way you could use moderators at the scale of facebook or google to protect users. you have to change the way that the algorithms work. you have to recognize that it is not a free-speech issue we are talking about. it is an issue of amplification of the worst voices in society. they have the means to do this. for business reasons, they have chosen not to do so. they keep hoping that the fear and anger that we all feel over these things will pass. the problem is, there is just too many of these stories. every day is something new. they cannot help themselves. they keep stepping in it.
emily: this deed fake video issue seems to be getting under the skin of congress, nancy pelosi hasn't returned a couple of calls from mark zuckerberg. advertisers have spoofed mark zuckerberg in a deed fake video. both of these videos they said we will leave this up. we will do you prioritize it, flag it, is this a different issue? roger: it is part and parcel the same thing. it is completely ridiculous area their position is indefensible. what we are talking about with deep fakes is context that has no social purpose. other than princess leia in the star wars movies, i don't know if there has been a constructive use of a deed fake. i don't understand why stanford university and other places develop this stuff. this is like human cloning. it is obviously a bad thing. we should not be enabling people to develop this.
we surely should not allow platforms to host this. right now, the platforms are saying you should only regulate the people who create this stuff. that is nonsense. the platforms have to be responsible. if they don't have an incentive it will keep coming back. it is really hard. they will have to put their best people on it. i view this like chemical companies in the 50's which work amazingly high-growth and profitable. they could pour waste products, mercury and other things like that to pollute freshwater without any cost or consequence. what is going on with google and facebook is they are creating digital spills because they don't have to pay the cost. it is way past time to make them pay.
they still do dumb stuff. facebook released a product called study where they pay people in order to spy on them. get a grip. that stuff is totally inappropriate. emily: i have about a minute left but i have to get your thoughts on facebook potentially launching a new cryptocurrency. how optimistic are you about it? roger: what could go wrong? cryptocurrencies have had all kinds of issues. coins that disappear, fraud, all kinds of challenges. i want to believe the people of facebook are smarter than the people that have done crypto elsewhere. this company needs another regulatory more ash like it needs a hole in the head. their ability to understand this is a time to clean house, einstein's definition of insanity was doing the same thing over and over and expecting a different result. emily: running into a commercial break. would love to continue this conversation but we have to let you go. thank you so much. we will be speaking with
♪ emily: this is "bloomberg technology." continuing our look at the u.s. government versus huawei. the trump administration assured congress federal agencies will meet on the band with deals. that means the government can't enter into contracts with huawei or buy from them. this deal prohibits those bills was passed in 2018. >> i support that decision because i think this is a critical national security issue. in all my conversations with the intelligence community, they made clear that if huawei is
allowed to dominate the 5g infrastructure, the future around the world, that will compromise our national security interest and those of our allies. emily: our next guest is no stranger to international disputes and trying to resolve them. anya manwell is a strategist. thank you so much for joining us. is the u.s. taking the right stance on huawei? anya: huawei is a problem in 5g and we are overreaching. on the 5g network, it will run all of our communications going forward and the internet. you don't want anyone company, chinese were not with the ability to mess with our electricity grid or tell all of the self running cars to run off the road. that is the right thing to do. the executive order that has
just come out that says google can't put android on huawei phones i think is overreaching. i haven't heard any security experts say their phones are a problem in any way. emily: the u.s. government seems to be concerned about national security, espionage, i spoke to a government official last week who had oversight into the u.s. position on huawei. he never admitted although i asked several times if there was evidence of espionage. he continued to say that huawei is perfectly capable of espionage and interfering with national security. let's say we don't have evidence of espionage, given that huawei is capable of this, potentially. is this the right move? anya: that is the difficulty of 5g. it is like saying someone has a gun but they haven't shot it yet. the capability that anyone company creates all the 5g networks around the world will have two spy is enormous.
huawei has been caught spying before. we are right to be worried about that. emily: earlier on bloomberg television we spoke with senator rick scott of florida, talking about the trade war. he took quite an extreme position. sen. scott: i don't think any american should buy one chinese product. we shouldn't do any business, we shouldn't buy anything from them. they are our archenemy. emily: that basically means no american should buy at 90% of anything in walmart. anya: i disagree 100% with that position. best case scenario would be where we compete with china. we realize they will be a competitor but we don't build a wall. we can't shut them out entirely. you mentioned our fastest growing export markets, walmart, boeing, that market is closed. hundred of thousands of
americans will lose jobs. the idea that we will completely decouple these economies makes no sense. emily: some will argue china has cut off many u.s. companies, shutdown facebook, twitter, google has left the country. what substance is there to the argument that we are already in the middle of a tech cold war? anya: i think we are waking up to a little bit late. the chinese have been stealing our trade secrets. they are encouraging students at u.s. universities to buy. they are handing over intellectual property. all of those things are problematic and need to be stopped. completely stopping doing any business with china like we are starting to do is not the answer. we have to compete.
we need to support our own r&d, get better at stem research, create a fair playing field. they are not letting our companies in so doing that. instead of picking trade fights with every other ally, we should be working with them to work against china's market. emily: what would some concrete steps be for working with other allies to work against china? anya: for starters, we should have joined the transpacific partnership. both the bush administration and obama administration supported. the trump administration pulled out. we should take the lead in studying the global values for technology. after world war ii, we created the iea on nuclear power. we created the world health organization. we need to be doing the same thing on ethics and ai, all of those things were china is net
and neck with us. they are setting the standards and we are not. emily: the cover story of this month's issue of businessweek has to with chinese cancer researchers in the united states. united states it appears has pushed some of these researchers out of positions. some of them have gone back to china. is that too extreme? anya: this is a perfect example of the overreach and where it is difficult to get right. it is 100% clear that the chinese party is encouraging some chinese students and researchers in the u.s. to buy. it is clear. does that mean all of them are spies? absolutely not. in my view, the answer is xenophobia, which we are leaning towards. the story says something like the fbi is finding many of them are completely patriotic americans and haven't done anything wrong.
we do need to crack down hard on people who are a problem and keeping chinese students out of our universities and telling the researchers to go home is the right way. emily: do have concerns this could spread to other countries? india is considering raising tariffs on u.s. imports. anya: the india situation is little bit different. we just canceled the gsp. that allows them to bring things in at preferential rates because they are considered a developing country. india's pretty -- protectionist. we should be working with india, japan, israel, europe. say hey, china, here is where you are overreaching. we will check you. we will all work together. emily: you also give a ted talk that is worth watching about the u.s.-china tech cold war. thank you for stopping by. coming up, analysts are split on twitter's growth outlook. is it time to sell? we will talk about the future of the social media company next. this is bloomberg.
♪ emily: wall street appears to be at odds over twitter. shares tumbled on thursday after they/the product to $25, in an interview, analysts warned of weak third-quarter results. michael: it is double the evaluation of google and facebook. i don't think it makes any sense. the deceleration on top riding -- line margin pressure, that is our call. emily: alan gould affirmed it by rating, joining us to discuss is bloomberg's kurt waggoner. what is going on with these different analyst calls in the midst of antitrust, trade war, and all of that? kurt: super clear.
i'm actually kind of surprised just because twitter has been probably the quietest of all the big tech companies. talking about facebook, google, alphabet. we don't talk much about twitter anymore. it is interesting this is coming up. they certainly have not been part of the same conversation. maybe there is some relief that there not involved. emily: what could be driving such different calls? >> they are showing some good signs with user engagement and investment. they are doing in fixing the trust issues and health issues. they are showing some early signs of success. last is the question that is what you see this dichotomy. when you compare it google or facebook, they have better margins.
twitter is trending higher than them. that is why you see the question's terms of longevity of road. they are able to show consistency going forward, that is when there will be more confidence. emily: what is the biggest obstacle? is it misinformation? we know they have been continuing to take down accounts. kurt: twitter has been around 13 years. it is not as if people who don't know what twitter is, i think the thing twitter has always struggled with is creating something that is easy to use and convincing pull this is worth downloading. so much of twitter is public. anytime the president tweets, you could see those on television. you could see it in the news. there is not a huge motivation for a lot of people to while and download the app. i continue to think twitter's biggest challenges convincing people that being on twitter is necessary. emily: twitter/ceo tried to push
the idea of people who see tweets but didn't log into the platform. that didn't go off so well. organic user growth isn't happening, is it just about revenue? >> they are buying themselves time to grow the overall base of users by focusing on the active users. whatever growth they are pushing is getting more of the users that are already logged in. after seeing results from that, make some progress and you see more conversations happening organically from beyond the core users, then you can focus on the larger group. just focusing on the daily active users and buying themselves time to fix the bigger problems. emily: who are twitter's biggest competitors today? there are concerns with
snapchat, facebook, that doesn't seem to be as much of a threat. is it instagram? is it the pushback against social media in general? kurt: the news industry is a competitor and benefactor. i'm on twitter all day long and contributing. if i could get information and other places, i think that is may be their biggest threat. twitter is a place for news. a place to grab what is happening right now. i think it does it better than most. i think that is a threat. facebook used to be. i think facebook is used in a different way now than twitter. i really think they are almost competing with the people who make it a really valuable platform. emily: we will be watching to see who is right. online pet supply retailer chewy soared nearly 60% in its trading debut friday after raising $1 billion in its ipo. the store saw shares rise after
an opening price of $36. the offering was the sixth-largest in the u.s. this year and one of only 10 online ipo's for users to surpass the $1 billion mark. >> we have a very diligent cash flow management approach. we will use it to invest in infrastructure. reporter: what proportion of that proceeds will go to the service? >> a portion of the 90% could go to a service. reporter: you can't tell us how much that would be? >> no. reporter: you will focus on technology. one of the things chewy has been able to do is capture a big portion of the online pet supply market. amazon has a big proportion and we are seeing other retailers pushing into this area.
how do you plan to maintain that market share? >> there is a lot more growth in front of us. if you look at the number of households in the u.s., we are about 10% penetrated. we have shown a unique ability to grow. we have strategic verticals such as private brands and we recently started offering prescription medication. we want to keep it at the center of the equation. there is so many of these that we are firing on constantly. there is a lot more front of us. reporter: you plan to add services? >> our mission statement is to become a destination for pet parents everywhere. it is part of creating the one-stop pet shop. we will remain open-minded and thinking about services from the marketplace as well. reporter: in the last year are
so you have seen enormous sales growth. he grew by more than $1 billion last year. how do you intend to grow that and keep up that pace? investors will be looking for that. >> $70 billion market. expect to grow, there is not really a secular ship from online. we are coming right into the mixing creating that. our active customers spend more and more the longer they stay with us. our private brands are getting healthier. we have a lot more to do. a lot more customers to add. we really continue on the propositions we have been on. reporter: a big portion is through automatic renewal. i will portion do you see that growing? >> we have continued to grow that. it provides us a predictable revenue stream. it went from low 60's to exiting 20 at 67. we will continue to help our customers fill baskets. look at the newer verticals we are launching. that is how the number stays
healthy. reporter: a number of companies are moving to improve the service. how long could be a differentiating factor? >> if you think about this category, pets is the only category where the customer first themselves as a pet parent. we have because we wanted, not because we needed. we constantly are building, training, learning. our customer service is scaling below our revenue. it is an honorable proposition, we will keep doing more of that. emily: that was to ease ceo. meantime, the founder of zoom video has jumped into the ranks of the world of people since his company went public. shares of zoom have soared 180%. that means the ceo joins the bloomberg billionaires index with a net worth of about $5.3 billion. still ahead, dgi has come down to earth. why the company is rolling out a new robotic tank marketed to
♪ emily: employs a box media will get minimum salary guarantees and parental leave as part of their first union contract. the staff ratified its first collective bargaining agreement a week after the employees held a one-day walkout to pressure management. the effort went public almost two years ago where they announced an organizing campaign. dgi's robot is the first ever ground-based robot for the company. it is a toaster size device that people can build at home and turn into a battle bot. ashley's two young sons got the first look at the new product. >> this thing right here might as well be the loch ness monster
with an iphone 11. it is a highly guarded secret. anyone who knows about it or has seen it has been forbidden from admitting that it exists for months. that is of course until it made its way here to my kitchen counter. now, to you. say hello to dgi's latest creation. the robo master f1. you all know dji, the world's largest drug maker and perhaps china's most popular tech company. people obsess over the products. they deliver, bringing out one new drone after another. now dji has decided to bring its towns to the ground. with the robo master s1 it built a robot consumers that want to
drive around really fast and shoot each other with pellets and lasers. if there is one thing the world really needed, it is the violence of videogames brought to real life. the idea for this new robot started here, the annual robo masters competition they hold in shenzhen. college engineering students show up for couple weeks and try to destroy each other with a variety of robot you it is a lot of fun. the big idea then was to shrink these robots down to little ones. so regular people could build and then use in their own battles. this fella is the lead of the design team who help bring this device to life. can you walk me through some of the parts?
>> this is a video transmitter. here is the camera. 90% of them are made of water. it smashes and disappears. this indicates the hip point. >> that is the object of the game to chase each other around. is there a laser? >> yeah, you always aim at the center, you should be fine. >> frank lang, the founder, you can't buy one and play with it. no, you must first assemble it by hand and learn things along the way about robotics.
here's a group of youngsters they to its product testing didn't pegs. >> this teaches the programming language. it could be used with the autonomous driving car, we don't have the function, kids have to learn how to program themselves to achieve the functionality. >> the hope is this will teach kids a few things and get them hooked on robotics so they turned into a worldwide sports phenomenon of sorts. >> we hope in the future robotics will be a major sport like football and basketball. that is our vision for this product. >> i'm coming for you.
we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not.
>> the following is a paid advertisement for the worx hydro shot. featuring a long time expert and seasoned do-it-yourselfer. the worx hydroshot, the world's first portable power cleaner that lets you clean anytime, anywhere, fueled by a battery, it is self-contained and pressurizes any water source. grab and go to clean anywhere and everywhere, leaving dirt and grime where it belongs. you can even