tv Best of Bloomberg Technology Bloomberg October 15, 2016 11:00am-12:01pm EDT
♪ emily: i'm emily chang in this is the best of "bloomberg technology," where we bring all of our top interviews for some samsung ending production of a note 7 smartphone. we will dive into the stock meltdown that followed. it would be the biggest social media ipo since twitter. snap gets closer to a public offering. twitter buyers appearing to cool their interest on a potential deal.
that is all ahead. first, to our lead. samsung officially ended production of the galaxy note 7 smartphone act reports the replacement phones had the same overheating battery problem the original devices that were recalled. the company slashed the profit forecast and cut third-quarter $2.3ating profit by billion. as muchd it could much a $17 million in lost sales. we cut up with john butler and our guest host that day john, take a listen. hrough manygone t iterations of the samsung note series. it is interesting because it was a new category that samsung introduced many years ago that focuses on larger devices and screens and capability. what we found in the iterations
3,4,5,6, lives in evolution towards higher and higher energy density within the battery pack. seven from from the the five is actually almost a 22% increase in density. that is stuff into a smaller and smaller area. and what samsung is doing is quite astounding. they are competing against two diametrically opposed consumer needs -- speakerphone but more portability. what happens? everything gets squeezing of this evolution of the note series and now they've got to the point where they are hitting some of these pain points in design. they can be overcome. what thedon't know
root cause of these battery failures are. it is very alarming and obviously a safety concern. knock samsung for innovating. emily: they said it was energylly because of a issue. john butler, talk to us about how important samsung smartphones are to the overall business. this is a huge company. how devastating a potential hit from this particular issue could be financially. what is really hard on samsung is the fact that this is their flagship phone. the note is without a doubt the phone you see most often in their advertising but the galaxy f7 and f7 edge probably come in a close second. iteally hurts to have to recall the phone a second time. i think that is where that a bit
of the damage comes in in terms of the brand. and the financial damage you alluded to before. i wuould point out the note 5% of salesobably at any given quarter 10% of mobile phone sales. contain the can damage particularly asm wey roll into next year. my suspicion a stable royalty introduction of the next note. emily: you invest in countless companies that are built on the back of the smartphone. how big a problem do you think this is? say. is hard to he said the revenue breakdown for samsung. a sense is that they have near-term problem getting to the next couple of weeks to the next one. i expect they will issue a new one but it don't have any information about that most the
midterm problem is one of trust. will people think about -- the emememes are brutal. the long-term problem is a hardware soul in an internet software world. emily: they are working on the note eight, which is supposed to come at an months. how they solve this hardware problem if any the problem is related to everything being so tightly packed in there, and these batteries being denser than ever. hardware problem that can be solved or have the reached the limit? >> it is really about solving these issues and a manufacturing issue. what really happened here is the hyper competitive market has forced samsung to -- things like this get glolost through the cracks.
they need to go back to work out these quality issues. this is achievable. you can have a long-lasting phone with a large screen it is just that being the first to push in this space and being the first to do this type of design you take the risk of spectacular failures like this. about john, but thought china specifically. china were initially left out of the recall now this applies to all of them around the world. this is a hepa competitive market -- hypercompetitive market. but this is mean in china specifically? is tough because globally people would look at it and say apple and now google are probably the competitors to watch. once you're in china have to makes verye, which good high-end phones and i think
they are android-based. as people look at samsung and say i need an alternative i don't want to go down market within the brand vitiligo? -- where do i go? the answer may be in china huawei. if you want to move out of the samsung family might consider vevo, these are all great brands. china is a crowded market with good competitors. emily: wayne, do you think we design and the circuitry could fix the problem? could they do something that takes the pressure off the battery? anye: sure, the -- as with consumer electronic and semiconductor product the industry follows the law of smaller and smaller circuitry. the next generation of chips will require less power, the
next-generation displays will be less power-hungry. hopefully, those design evolutions will compensate for the need to pack in that high density of a battery. but again, i think it is really about this fast paced animation. apple only releases one new generation of product the year. samsung is releasing multiple products thought the course of the year. trying to get new design doubt and differentiate being in the forefront is the risk that happens when you are a market leader. have somen, we questioned on twitter. a kind of phone do you use? john: i carry around at iphone 7 plus right now. i like the bigger battery. it is hard for me to believe smaller screens, entity that will reduce our desire for more and more energy. emily: do you give samsung credit for trying?
you get an't think lot of credit for trying and the smartphone market. people return their phones it is pretty tough. samsung is huge. withwill have to come up something new. google is shipping one just as big. they love to compete. emily: the will talk about that right now. my guest host for the hour. john lam, thank you both for weighing in. >> thank you. >> thank you. " isomberg technology streaming today and we as if you'd still by smartphone. the results are in 72% said no, the timing of these numbers couldn't be better for apple with the release of the iphone 7 or google which just announced plans to launch its own high-end phone. who stands to benefit the most in the galaxy note 7 debacle? earlyn the newsroom,
numbers show that our numbers show that people could be really affected by this. what does it mean for apple and google? marc: this is happening now right ahead of the holiday season the most important quarter for every technology product maker and consumer product maker especially apple google and samsung. this is huge news for google because their phone is coming out two weeks from now. apples phones are coming up for two weeks -- in two weeks now. take a deluded to go into this massive holiday season. for samsung this is awful it will miss the boat of the most important quarter. --ly: i was thinking speaking with a global vice president and competitor to samsung and he didn't seem to hugelyt would be a long-term problem. like a listen to what he had to say. >> they will recover and get
their branded back for some it small mistake that will cost until he. and don't think this is a long-term problem. their event incident of lithium-ion batteries overheating in the past. samsung and dell had it with laptops, boeing had it with airplanes. problemgree this will also blow over mark: as every year goes by, the throughf the enwnews different social media platforms that are faster paced more people read about it. whenever this boeing issue happen if he years ago as many people did not hear about that. samsung is a brand that is continuing to grow quarter after going against the titan of the technology world, apple and google. this is really a historical move
and one of the worst consumer tech battery related issues to date. the note 7 only represent a small percentage of the company's overall sales. from my marketing perspective sporty damaging. emily: samsung's name is on all of its products. do you think they should ditch the note eight and rebrand? i don't think so that probably won't call it that in china. or they will in china because of that of a numerology stuff. i think people like the note, and the big screen. maybe they will call it the big galaxy? emily: this week, a supreme court showdown between apple and google began to whether they should keep all of the patent awarded oneafr accusing samsung of copying the design of the iphone. that amount is equal to
of snapchat but of the company has chosen morgan stanley and goldman sachs to lead the ipo. they recently rebranded snap has of $18te market value billion after the last funding around making it the largest since twitter.o we caught up with the ipo reporter from new york. we know that morgan stanley is sachs. with goldman is it surprising? this is a lot of the banks that extended the credit line as well. perhaps little bit of a pay to play there. but we know if snapchat is now of underwriters and a prepping ipo documents looking to go public as early as next month. really some momentum here in terms of an actual offering from one of these big unicorns without might've been further off than anyone of us expected. emily: facebook didn't go public
for eight years, uber and airbnb are still fundraising list of what to investors make of the fact that snap is doing this now if it happens? alex: but they will pay attention to is the fundamentals of the company. they're still developing relationships for content like the nfl. they're making this foray into consumer pructs like the glasses they announced recently pushed of whether or not these things are going to materially add to the bottom line and where margins will be will be the top things investors will pay attention to. talking to people out in ipo land on the west coast in the investors had people are fairly excited to get one of these big notable names. when you think about the momentum play, we have seen the smaller tech stocks trade up quite a bit after the ipo it with a big name like this you
have to think there are some of this scarcity effect that could potentially play into a public listing. emily: you have to wonder are they going public because they want to because -- or because they have to? has it been difficult to raising money given they are still in the early stages of developing this product? alex: they are, and they have funding sources like equity or the credit line they extended it to need the additional liquidity. decided like they have it is time to move on. looking at who is running this company, you have some former bankers and some smart folks in here. if they are ready to go and get public and be financially reporting in front of public investors in dealing with at quarterly cycle, that is something many tech companies have been hesitant to do. moving in that direction after
stomach these decisions at these points. emily: who is on snapchat? who are the people advising evan spiegel? you mentioned the chief energy officer and startek banker at credit suisse. he is bent to some coo's and some ceos who else is helping to march this forward? is currently standing in as cfo. he is the face of the company, n importantbe a person. looking at his experience he is a chief strategy of us member he was the guy who basically was responsible at credit suisse for leaving -- leading the alibaba ipo which is the biggest listing
that folks of cat about in the past decade. when it comes down to the actual ipo itself, without a doubt you have to expect that he will have opinions and the guidance for this company as they march through this process. emily: like the adventure partners of the first institutional funding round in snapchat back in 2012. jeremy, partner at lightspeed joined us on the set to discuss. jeremy: you are very lucky. one of my partners had a doctor who was going to school at one of the high schools were snapchat was popular. he noticed his daughter was using this app of the time and asked her about it and said it three apps everybody has at school. it is angry birds, instagram, and snapchat. he said he had heard of two of those with nothing third one. that's how we first heard about it and after a little bit was able to connect with the ceo of
the company and told us at the time he was growing so fast he couldn't pay the server bills. emily: the tablet also but when facebook was looking to go public and all of the rage and nobody could imagine a world where facebook wouldn't be the dominant social network. i'm curious what was the reception at the firm. was it a slamdunk? is there some skepticism around it -- was there some skepticism around it? newhere is always companies and opportunities. if you entrepreneur who you believe in and a vision you believe in and in this easy to get excited about that company. nature can share details of a timing but given that facebook waited eight years to go public and over -- uber is would snapchat
go public now? >> i would let the company answer that. emily: what about people beyond -- i know that snapchat has a broader demographic but it is mostly millennials hardly differentiate themselves from facebook and twitter? talk about that better than i can. is a questionable to feature the future of the company what you see that is different than some of the pitfalls we have seen or have to deal with? to have the needs combination of growth and engagement. engagement leads to long-term retention. snapchat hase net demonstrated in spades both incredible engagement. people who use it using many times a week leading to long-lasting -- you create new habit. when you have -- when you become
bmw sayse ceo of he's looking to electrify the brand. bmw ceo says new or models of the longer range of charge and sat down for exclusive interview with matt miller. take a listen. >> that is a challenging goal. we will see what is the outcome. we know there are three drivers is --at julia goals, one
for electric vehicles. one is the range, that is something we need to be faster to invest more. thecity like los angeles where we are here toda they're nearly perfect in many areas but many parts of europe and other countries across the globe it is difficult and frustrating. the third pillar is some attractive pricing. financial support for the electric. i call it also marathon not a sprint. with a marathon you know the same decided if you win or lose later on somewhere in a climate are in 30. you need some time for this move and development. it is clearly an important street teaching -- important judy chu gary to invest in. -- important to begin with. >> you will develop those two
electric cars very soon but of over the next 10 usually have 10 or 15 new models you want to make 20% of your sales electric? open point how many models to be have in the future. is you see we are now in phase two. the bmwill electrify brand and the mini brand and also invest heavily into electrified motorcycles. also an urban concept and a positive future. it wouldn't be difficult to guess how many products we will offer. and how much incentive we will see in the future. it might happen that we see a range of maybe 15% or 20% or 25% in the next 10 years in terms of percentage of electrified vehicles. ceoy: that was the bmw harold kruger with matt miller. coming up with a dell with all four of boesch's cofounders
emily: the right to become a public traded company wasn't always smooth sailing but all for them stuck with it i spell it all of the cofounders are with when you conversation that of the big picture at every stage along our journey it is still true today we thought about the size of our opportunity and of the executed against that has always held a
deeply rooted believe we can create a lot more versus as part of a larger organization. we take those overtures .eriously >> what year was this? citrix.or 2011 emily: was a tough -- that tough? things that's not a lot talked about -- it doesn't really become about you anymore. it was probably more about the set of employees for whom it would have been a life-changing opportunity.
you are making decisions for them of, are you willing to take this risk and potentially have a much larger success. the decision almost tips in favor of selling even though you may want to keep this company going. there was this factor of, there were a lot of people who are materially affected. were there any one of you leaning towards, we should sell it? were 100%end we behind, we have to keep this independent. emily: there were multiple opportunities. then there were times when we thought there were opportunities and their words.
we thought we were having a meeting with a big company where we thought they wanted to buy us. pitch.our best we pitched our heart out and we never got called back. you always want to try and adapt .o the circumstance it was conveniently timed around when we were doing our retreat. was 12, 14 hours straight of cons, everyos,
single factor you can consider. we did not go in with a particular position but we debated the heck out of it for a long time. tell me about the road to going public. was that hard? >> something even shortly after we turned down that acquisition board,we had said as a let's go big. we are going to build a large independent public company. planning well in advance, did all the things you would expect. weeks after we had
probably filed, that is when the markets went in a southern direction and sentiment changed around high-growth, high burn companies. we spent nearly a year publicly on file. how did you get through that? clear andd to be as transparent as possible. to communicate regularly. emily: how do you deal with that? >> and because of the quiet period, we weren't able to
respond to a lot of these not nice things. we don't want to over emphasize that this is a big deal. i think the key was being transparent, highly communicative. it's one of those situations where now that you are a couple years out -- it really tests organization.your it is an instant calling of who run. its for the long who wants to build a long-term business.
focusingramatically moments. a probably helped that we had close founding team and we never doubted the mission we were on. iswas difficult and it probably ultimately a positive >.erience to go through >> from an overall business point of view, we saw very viscerally the need to improve our operating profile. it was something we knew intellectually and talked about with our executive team. the company seeing that was helpful, especially looking back
at the late stage private .ompanies emily: what was going through your head? .> it was exciting it was incredible energy. emily: you have amazon and google and microsoft working hard to on the cloud. are you concerned about that? recentlyof the moves you have seen recently, whether amazon, google or whatever, have been positive to art's chatterjee policy, long-term aspects. the biggest issue five years ago was convincing people of the cloud and convince large enterprises they can move dearest important information to the cloud. now is expensive because we were only 200 employees telling general electric and walmart and
procter & gamble that they should do this. emily: that was all for of box -- four of box's cofounders 10 years after their first major investment. in this edition of "out of this world," president obama is invigorating his call to send u.s. to mars by the 20 30's and return them safely to earth. he wrote that the long-term goal will be to one day remain on the red planet for an extended amount of time. he also calls attention to cooperation between the government and private space companies, without naming elon musk's company by name. he had the 2030 timeline but the initiative attracted little attention. coming up, our conversation with twitter cofounder. why he hopes they stay independent. plus, how he is planning to take a virtual reality mainstream. this is bloomberg. ♪
emily: story we are watching, you new data from idc shows that pc statements -- shipments declined. k ship 68 million machines globally in the third quarter, down from nearly 71 million this time last year. idc says the u.s. proves to be a bright spot. unit sales rose 2% for the second straight quarterly gain. rivalry firm has a more pessimistic snapshot, showing a five point 7% slide globally for one year earlier and little change in the united states. the buyer that twitter is said to be cooling off. they attracted interest from off, google, salesforce and disney. all of those suitors are unlikely to make an offer.
jack dorsey penned a 408 internal memo to employees this week, rallying stuff around twitters streaming strategy writing "we can do this. people choose us for news because we had the past this. let's extract to be the first, the first place people check to see what is happening in the first place to break what is happening." because up with biz stone -- we caught up with biz stone. biz: it has always been a thing. ever since 2008-2009. people made offers that we always declined. the first famous one was the facebook offer, which is raced on a joke. [laughter] i will tire the whole story some other time. -- i will tell you the whole story some other time. emily: mark zuckerberg made an offer -- biz: i met i made u -- i made up a number that was way too big to accept. what is it like?
i do not follow the small ups and downs. i do not look at the stock on a quarterly basis. i think great leadership thinks in terms of decades and not quarters. i am just waiting. jack -- in the grand scheme of things, jack has just gone the job basically. people say one year, that is nothing. that is one quarter of how long we go to high school. emily: how do you think he is doing so far? biz: great. emily: why? biz: the first and he did was reset expectations. this is what the truth is. he did not care what happens. he said, this is the truth. now we are reciting. he said about what he always
does, which is thinking long-term. making moves. and that translates to me into putting certain projects on trajectories and putting the right people in the right places. that may take a while. once it is all set up, you execute. and things go really well. or they don't and you redo that idea. emily: you said about six months ago that wall street thinks in corridors, jack thinks in decades. to think wall street will give him that much time? biz: no. foster will not give him that much time. emily: then what? biz: i'm not a financial guy. i do not know then what? do they give up? i do not know. twitter is basically something we cannot and invent -- uninvent anymore.
then use its up close twitter. it has changed democracy, politics, news, everything. it is not going away. the world needs twitter and it is here to stay, so you cannot give up on that. it is expected forever. [laughter] emily: i know you are so close to jack. what do you know about the potential sale? what tino but with the board and jack once? bi -- whatz: -- what do you know about what the board wants and what jack wants? biz: i know nothing. we stopped talking shop long ago. jack will run something by me, like he does and the people, but i'm on the board and i never think to ask.
i even forget there is a board of twitter. i feel like that chapter is over for him. emily: what do you think will happen? how do you see this playing out? biz; worked -- biz: what? emily: the sale, how the board will play out? biz: i do not even know they were presale. someone asked it to the convene independent company and of course, are you crazy? it has hundreds of millions of people that use it every day and it has billions, multiple, tens and billions of users every day. when you compare that to a tv network, it is crazy.
emily: i recently spoke to chris, and he said twitter is an incredible story of underachievement and potential never realized. he said he is hoping for a sale. how do you react? bi i am not hoping for the same thing. z: -- biz: i'm not hoping for the same thing. you cannot say never. there are still many years ahead of twitter as an independent company. there is much time to adapt, improve and move with the time. emily: that was twitter cofounder biz stone. still ahead, sony is banking on virtual reality, hoping to bring the new headset to the mass market. we will head from sean -- we will hear from shawn layden next. this is bloomberg. ♪
emily: sony is officially competing with oculus and htc in virtual market for gamers. the vr headset is available worldwide with many calling it an inflection point for the industry. this is because it is a high-end device competing with the risk but aimed at the mass market. tens and millions of console gamers. we cut up with shawn layden -- we caught up with shawn layden to discuss. shawn: we will have about 20 or 30 and tracking about 50 front end of 2016. >> there are industrial uses, i am curious, what are the potential market you are looking at? gaming is a big one, but is your horizon bigger? shawn: it has to be. our entree into vr is into gaming.
is our real house, if you will, and that is where we are attacking the market from. we have had interest from places as far as hollywood studios, music and record companies to the smithsonian. they're looking at vr as a new medium for entertainment and education. >> do you expect the killer app for the game that works the best may be different than what works for playstation? shawn: i'm sure that will be true. we have a number of games. virtual reality is a greenfield technology, place no one has really gone before, so we are trying to learn what please best and that imris of environment. you will see a lot of experimentation and the next 12 months to 18 months. >> talk to us about the cycle because you have to have exciting games to get consumers
to go out and lay down $500 on hardware. gamers or programmers kind of wait for the audience to come. where are you in that cycle? to have an of games out there to bring good that consumer audience? to go out and lay down $500 on shawn: vr for playstation's id compatible with the others, so you're halfway to the experience. embedded in that way. as far as content, we have a wide array we are coming out with now, from not only independent developers but from the names you know and trust, like electronic arts and warner bros.. there are looking at vr but it is a new technology and we are finding out exactly what plays best and that experience. corey: as the development process goes on, how is developing virtual reality games different than a first-person shooter game that has lots of thought about the environment the player is in?
shawn: we still have yet to establish the syntax and grammar. we are trying to design where the idea of narrative is not linear but all around you and the player can go and do whatever they want at any time and can see things occurring behind them, in front of them. it creates a new experience and i think our designers are looking at what special features that allows. >> my husband says i am stubborn. i have to go back to numbers. and they don't have early numbers but what kind of market size to think it is personae -- it is for sony? one number i saw his a billion market for the players this year. you are smart guys. you look at market size and potential. how big the market could it be in terms of revenues? shawn: vr allows itself to be a broader experience than straight had gaming.
we launched playstation 1, 2, 3, 4, the fastest platform of all time, but honestly, the idea of virtual reality comes perpendicular into that business model. we will have to learn how big is big on that but i believe in my heart it is a broad tent and can appeal to a wide range of users. corey: why is it a broader range than gaming? shawn: it allows a different experience. as you get your hands on some of the gaming kits, we have high-powered, high intense action games. i think there is a very deep experience when you have avr, slower, more exploratory. a lot of the detective and adventure and investigative games are doing pretty well in our customer feedback, so i think there is a broad range.
once you put the headset on, it is intuitive so we can appeal to a large audience. emily: sony playstation chief shawn layden speaking to carol massar and cory johnson. our guest, david kirkpatrick review have thoughts on the future of vr because you do not think game you'll take it to the masses. if not, what will and will it get there? david: i think sony is smart to embrace vr. even noting my own feelings about sony, they are shifting because they seem kind of out of it in recent years and this could really improve their brand image, even if gaming is not going to be a gigantic market for them. i think the social experiences that vr can create our the big opportunity lies. oculus, owned by facebook, had the big event last week. zuckerberg gave a demonstration on stage.
the part that i do not think was sufficiently enough written about and talked about was the social vr experiences he demonstrated. they have two different ways that facebook and oculus are developing social vr. i think for things like travel experiences, or you can really model an entire city with photographic vr and taliban with travel with friends, it may be more like shared experiences -- to get involved with new technology. i do believe this could be as big as smartphones but it is not anywhere near that or anywhere time soon and it will not get there with games alone. emily: that was david kirkpatrick. that does it for this edition of the "best of bloomberg technology." we will bring you the latest in tech throughout the week. wednesday and thursday is broadcasting live, bringing your interviews of the leaders in
♪ "bloomberg best," stories that shape the week. samsung pulls the plug on its flagship phone and earning seasons kickoff with earnings from big banks. saudi arabia sales ahead with the blonde debut and fractions at the fed. >> it is about labor market slack. in anoda keeps cold interview. the boj governor says he will stay on the stimulus train. >> we have to continue our monetary policy. >>