Skip to main content

tv   Bloomberg Technology  Bloomberg  June 19, 2019 11:00pm-12:00am EDT

11:00 pm
emily: i am emily chang in san francisco and this is "bloomberg technology." coming up, slack prepares to hit the public market, expected to get a valuation near $17 billion. the latest on the imminent direct listing. target on big tex. protesters descend on the google shareholder meeting. executives, pay for
11:01 pm
and asking the question, where is larry? sandberg speaks. the facebook coo weighing in on the cryptocurrency. first, to our top story. slack is hitting the public markets with a direct listing on thursday. we are waiting to see what the reference price will be. we could get that at any moment. will the software maker find itself in the beyond meat camp with a sizzling debut, or will it be more like a sizzle like uber and lyft? to discuss, i want to bring in a partner at venture partners. before that she was the head of product growth that slack. under her watch slack grew from half a million to almost 6 million. and, a new column out on slack. i will start with you. as a former head of growth, you have a beloved product, but revenue growth is slowing down. at this can that be point re-accelerated? potentialas a lot of
11:02 pm
in front of it. a generation of people are used to communicating synchronously, using the internet, are coming into the workforce. emily: you think that it could re-accelerate and start to grow faster than it has? >> i cannot make predictions on how slack will do but i am excited but i am excited about the collaboration space and slack is poised to continue to be an outlier. slack'se have heard projected valuation anywhere from $16 billion to $20 billion. how does that compare to the crop of enterprise software makers trading him a public market? -- on the public market? >> a lot of these young and fast-growing companies are treating at what seems to be historically rich valuation at least compared to their revenue. you mentioned the column that i wrote about this new stratosphere of valuations of multiples of revenue.
11:03 pm
-- trading atrd 20 times forward revenue, which i do not think we have seen it before, historically. a lot of promise, but investors are paying a steep price to get in. emily: zoom went public and had a big pop. it is profitable. profits are slim, but they are there. slack is unprofitable. when you were there, how much of a priority was profitability? how do you imagine it is today? >> we were focused on driving up retention and the top line growth. we were confident that people would pay for slack overtime. emily: that is another question. i know that you think this is one of the risks. in a macroeconomic downturn, or a volatile market, will companies simply decide that they don't need slack?
11:04 pm
is it nice to have or it is a need? >> to be fair, i have to give slack credit in that there is a lot of slack envy in the silicon valley. and014, 2015 and glow -- growth really accelerated, people thought it might be the next chatter or other messaging software is that came before slack and didn't last and slack has. but you are right that we have not seen a lot of these software companies tested by an economic downturn. what happens if the company decides that they need to trim the budget? they look for areas to cut and may be messaging software that is an add-on to email or other longer-standing, entrenched technologies companies by may be no longer necessary. i think that remains a risk for all of these young companies. emily: we live in the silicon valley. many people cannot live without slack.
11:05 pm
do you think it is in the nice to have category or need to have? if you believe it is in the need to have, our big legacy business is going to recognize that? >> i think it is in the need category. we cannot imagine a world without email, texting, instant messaging and things like slack. slack is well-positioned to continue to be that because it is the winner today. emily: talk to us about the vfl sub the company. it is very unique. -- the ethos of the company. it is very unique. you have a blog post out about the ceo. the unique ways that he would kick off a company meeting and how that has been integrated into the product. is everybody going to get it? the process -- >> that process that went into
11:06 pm
building slack is different. looking forslack is is joy, engagement and for people to love it and i think it has been successful in that. emily: are investors going to buy this story? they haven't marketed the shares in the traditional way and are relying on their good name and the folks who know what the product is like to buy in. >> it is a wildcard when you have this process. it is a little bit less handholding by bankers and other financial professionals, but at this year, if you look at business software companies, this is a category that investors love. you saw what happened to zoom video and pager duty. companies that were warmly greeted by investors. what you have seen is that people who were stock buyers understand the business model of software service. they see predictable growth
11:07 pm
software youiption can model it out for years and years in siri. what you have seen so far is that these business software companies are the stars of the stock market. emily: we will see if they buy into slack. we are waiting for the reference pricing at any moment. thank you so much. i should note that bloomberg lp is an investor in slack. oracle recorded quarterly sales topped estimates, marking the second-largest software maker's return to growth. sales from cloud services and atense support was unchanged $6.8 billion in the quarter. oracle announced an alliance with microsoft, forging a partnership between them. the alphabet annual shareholder meeting became a moment to call out the company. we will look at what workers and
11:08 pm
activists want google to answer for. that is next. this is bloomberg. ♪
11:09 pm
11:10 pm
emily: alphabet shareholders asking the big question, where is larry? protesters descended on the meeting location in sunnyvale, california, holding up signs reading "not ok google." google workers, shareholders, and activists protested a range of issues, including payouts to china, contractor rates, and payouts to former executives accused of sexual harassment. they said their massive size comes with a deep sense of responsibility to create things that improve people's lives. he added google benefits society
11:11 pm
as a whole, but the alphabet ceo was not there. to tell us more, here is garrett. where was larry, garrett? what could be more important? garrett: i do not think he was sick. i do not know where he was. the chief legal officer of google did respond to one question, saying that he was busy. larry goes to every board meeting, he is engaged with the company, but that was not enough for quite a few people who felt like this was the only opportunity that a lot of smaller investors get to ask questions to the ceo. at a meeting like this, once a year, most ceos of even holding companies do show up to keep up the appearance, but he did not show up to this one. emily: none of the proposals passed. the proposal calling for google to clawback the compensation of
11:12 pm
executives that have gone and have been paid out, despite sexual misconduct. none of those passed. is there a sense that the relationship between workers and shareholders and google management is fraying? good track of a how google employees are feeling. there are tens of thousands of google employees around the world and tens of thousands of contract workers who do not have all the rights the core employees do. when you look at some of the activist employees, leading these protests against the company, they are a small portion. it is difficult to know what the actual feeling about the company is. i talked to a lot of googlers and they are a small share of the overall but it seems at least the ones i talked to, i try to talk to a wide range of employees who support these activists, they say everything is changing. this isn't the company it was
11:13 pm
five or 10 years ago in terms of everyone being on the same page. emily: talk to us about how change can happen. if it is not with these proposals passing, to be fair, these proposals almost never pass. how can employees, shareholders push for change at a company where even the ceo does not show up to the general meeting? it is not is sort of, just google dealing with this where we have these founders who have complete control over their companies and may not be involved day-to-day. mark zuckerberg is the public face of his company, and he can decide what happens. he can theoretically fire the entire board if he wanted to. as these companies are at the center of a lot of political and societal questions, people want accountability and it is difficult when it comes down to one or two people who may not even show up to an event like this. googleas been change at
11:14 pm
over the last few months. they have gotten rid of forced arbitration in response to a lot of protests and noise being generated by these people. so i think the company is still very aware of its perception. it believes, like the quote you showed, they are in the world to do good, they are a force for making the world a better place for people. i think most of the people that work there including executives elite that. when you call them out like this, it is a way to slowly make change at the company. the pace of change isn't as fast as some of the activists want it to be. been: there certainly have some changes but many more being called for. thank you for that update. meantime, the slack reference price just posted. $26 a share. this is not an opening price. this is a direct listing so this price will merely serve as a guide.
11:15 pm
believe $26math i per share would give slack a valuation in the range of $17 billion, what the company was targeting in the lead up to this, but it is more than twice as much as the valuation slack back insed money at august. we will be watching to see how the opening price compares to the reference price when shares start trading tomorrow. meantime, quibi, the new streaming service from jeffrey katzenberg and meg whitman, is not launching until 2020, but it is already raking in the ad dollars. the service hit when hundred million dollars in ad revenue. ceo meg whitman sat down at the conference in france to discuss what is drawing people in before quibi is even taking off. meg: this is a mobile only platform with hollywood quality content in quick bites, married with a fantastic tech platform that allows video to be viewed
11:16 pm
on mobile in a whole new way. they are excited that it is targeted to the millennial audience in a brand safe and geyer meant -- environment, targeted to millennial's on the go. they think it is a unique opportunity, and that is how we were able to announce today that we have six of the most iconic, innovative brands as launch partners. caroline: over 100 million already signed up. million you want from advertisers. quibi is also a subscription model. how will the business model be bit -- be divided? meg: one is $4.99 a month, plus advertising and $7.99 a month without ads. our estimation is that 75% of customers will pick the ad supported version because it is cheaper and we think the advertising will be high-quality . it will match the content on the app. it is similar in some ways to
11:17 pm
the hulu pricing model. about 70% of their users have chosen the ad-supported version. caroline: some of the supporters are hollywood makers of content. when you have disney supporting you, disney is also launching disney plus. will you be friend mise -- frenemies? how do you see the competition? meg: the top hollywood studios .re all investors in quibi they made available their best show runners and i.t. and they successful.e they view this as a growth opportunity for the studios. they are launching their own ott subscription service but it is high-quality, longform, living room oriented television. we are short form, on the mobile, on the go viewing. we don't actually, we don't
11:18 pm
think this is competitive. it is an additive thing for their studios to make money. competitionybe the is the likes of you tube or facebook. interesting that you brought up your distinctive factor is that there is brand safety. everything is chosen by quibi. how are you seeing the reaction from capitol hill and consumers? the power that social media has, and how that fits within the social media and advertising realm? meg: advertising has gone through a major disruption in the last decade. whenever there is a big change, regulators want to see what is happening. we said, we have a very clear view of what we want to offer consumers. we thought something that hasn't been offered is a mobile only, brand safe environment where we are being quite conservative on how we are using data and share data with advertisers.
11:19 pm
id orl not share device personal information and we want to be conservative. advertisers, some of them wanted access to that but they understood that this is a different time and place for a brand-new platform and we have a chance to go from the ground up. ceo meg whitman speaking with caroline hyde. coming up, are you packing your suitcase? it is one of the busiest times of year for the travel industry. and markettrade war volatility impacting summer plans? our ceo with mark -- conversation with mark okerstrom is coming up next. later, sheryl sandberg speaks out. our conversation with her covering all the hot topics. sheryl: we are calling for regulation. not just saying we will deal with it reluctantly, but we are calling for it. we don't just want to be at the table, we want to be of knowledge and that companies like ours shouldn't make as many
11:20 pm
decisions as we do. we know that. ♪ ♪
11:21 pm
11:22 pm
emily: last week we learned that airbnb is expanding its expedia -- experience business and doubling down on tourism. seek tort -- they broaden revenue growth in advance of an ipo likely next year. are trying players to be a one-stop shop for vacation needs. how are traditional travel sites trying to compete? we are joined by expedia ceo, mark okerstrom. you might not like the use of the word traditional. mark: what's up with that? we are the future. emily: exactly. airbnb is one part of it. you have startups like lyric that are doing alternative accommodations. how do you compete and keep up with that? mark: we have always been at the forefront of travel. we have been at this for 20 years. one thing that has been consistent -- emily: hence the word
11:23 pm
traditional. mark: how about traditional? one thing that has been consistent is this is an incredibly competitive industry. despite the competitive forces, expedia did bookings multiple the size of airbnb and these players. topave thousands of engineers and data scientists in the world focused on travel, and that is how we stay ahead. emily: let's talk about the short-term rental business. you recently rebranded. mark: what do you think? know. i don't mark: you will get used to it. emily: why? why not consolidate homeaway? mark: vrbo has been around for a long time. if you go back in time, people used to talk about getting a vrbo for the weekend. as we went through ended a 10 of research in the u.s. and internationally about all of the different names we could call the new vrbo, vrbo was the one
11:24 pm
that resonated the most. so we decided to put all of our effort behind that brand. we are excited about rolling it out globally. emily: will we be seeing you make acquisitions and investment in this phase? mark: it is always part of the playbook, so i would never say never. but we are pretty happy with what we've got in alternate accommodations and we are pretty excited about all of our efforts behind vrbo. emily: let's talk about macroeconomic issues. it is june and peak travel season. trade have a u.s.-china war, market volatility, an incredible amount of political uncertainty around the world. how is that impacting traffic? mark: so far, so good. it looks like a healthy travel environment to us. recent research done by expedia here in the u.s. says 85% of people in the u.s. are planning on taking a trip this summer. 15% was for budget constraint.
11:25 pm
this is consistent with what we have seen. americans are traveling, and global travel industry looks pretty healthy. so far, so good. emily: are you thinking about it? do you have a plan b for if things go south? which, who knows in this environment? mark: we are fortunate that we are a global business. in good times and bad times, we definitely see the shift in travel patterns, but people often just take their trip as the last thing they cut. maybe they will take a trip closer to home, they won't take the trip overseas, but they travel. if you look at the results 10 years ago, they were some of our strongest years. emily: you are looking into how ai can change the travel experience and boost your numbers. what are some early things you are finding? mark: we sit on reams of data. 750 million visits to expedia group properties every single month. that gives us an incredible
11:26 pm
amount of understanding around what travelers are looking for, how we can tailor our search results. how we can tailor the recommendations we give, the advertising we show. and that is just the beginning. we are using ai to help with informing lodging partners with pricing tactics, to help them price more effectively. both in alternative accommodations and the traditional lodging space. and honestly i think we are just hitting started. emily: as you have gotten more one stop shoppers, google is doubling down on travel as well. how well positioned in 10 seconds are you? mark: in 10 seconds? amazing. we have been doing the one-stop shop before it was cool. we have been doing it for 20 years. about search and booking and taking care of people during the trip and no one else can do it. emily: ceo of expedia, mark okerstrom, thank you. coming up, our exclusive interview with sheryl sandberg.
11:27 pm
what they are doing ahead of the 2020 election to avoid a repeat. this is bloomberg. ♪
11:28 pm
11:29 pm
11:30 pm
emily: this is "bloomberg technology." i am emily chang in san francisco. facebook coo sheryl sandberg says the social network is working to put safeguards in place to stop election interference ahead of the 2020 u.s. election, but is it too little, too late? she spoke to caroline hyde in an exclusive interview. and talked about the scrutiny. sheryl: you see something that is targeted to you and you think it has violated your privacy to get there, it's really creepy and scary and a lot of people believe that. if you understand the truth, which is we have not given any individual information, but we
11:31 pm
have just taken that ad and shown it, all of a sudden, it is a better experience. we have to do a much better job explaining our business model and explaining why targeted advertising is so important to small businesses around the world so that people feel more comfortable because it is a great service. caroline: in a one-on-one message, you would still see that ad, but it would not feel creepy because it is a one-on-one message? sheryl: we are working on it. but again, if you believe no one is reading your messages -- and let's be clear, no one is reading your messages -- that is a good experience. if it is targeted to you and you are worried about how that happens, that is less comfortable, so that's why we need to make the case in a clearer way. caroline: i like that you brought up this has become a focus point, privacy, and we have heard mark saying, "i realize i did not get it quick enough. i made a mistake here." do you think facebook -- have
11:32 pm
you come to understand the way in which the consumer is viewing privacy and how you are building your culture and the way the customer is doing your business model? sheryl: there is a growing understanding of how important privacy is and how we have to protect it. we were allowing people to share too much data early on before 2014. if i used an app, i would share my information and i could share my friends' information. it's really hard to remember. n excuse,is not a because i think we could have done better. we were hoarding data. people were very concerned that we were a wild garden and we could not share. we had this vision that we would enable you to make your apps more social. you have a playlist, we are friends, i want to hear your playlist. my friend has a birthday, i want to import that to my calendar. those are great experiences. what we have learned over the
11:33 pm
years is we need to share the minimal amount of data in ways people really understand it and have full control so we can create those experiences, and i think we are doing that now. we are also looking for the best models around the world. in europe, gdpr is the most far-reaching privacy legislation that has been passed. it did not pass anywhere else in the world, but we took those same controls and made them available everywhere because we know people care about their privacy and we know we need to give them the tools to understand this. it is your information. you choose to share it with your friends on facebook. you can choose to share it with businesses or not. that is up to you and we need to make it clearer how that works. caroline: do you think the anger that you saw, that you witnessed was justified? how did you take it personally? sheryl: this has been hard, you know? as anyone who kind of wakes up in the morning and is working hard and trying to do the very
11:34 pm
best i can, being attacked -- and being attacked personally not something i've experienced before and definitely hard, but i think it should be hard because mark and i and the other is big leaders, and even our employees, we have a really big responsibility. i have a really big responsibility. there are things we missed. we wish we had understood the russian interference in the u.s. election. we didn't miss it. we have worked hard to get ahead of it and i think we have done much better in the eu elections, the u.s. midterms, but the fact that this is hard is important because we have a responsibility to people around the world who are using our services. we have a responsibility and i have a responsibility to protect them. caroline: it is really nice to hear you say that. thank you. what i like you bringing up is gdpr, eu elections. we are already talking about the 2020 elections in the u.s. are the right safeguards in place, do you think? sheryl: we are definitely
11:35 pm
working at building them. if you think about what happened during the elections on our platform, if you go back to 2016, we were worried about foreign actors interfering, but what that meant at the time was primarily hacking into data. that is what foreign actors did. we built up the sensors there. i think we had a really good track record. what we really did not foresee at all -- we missed it, everyone missed it, but that is on us -- a new, more insidious threat where people did not hack in and take stuff but they wrote fake stuff. once that happened and we understood it, we knew we needed to put serious engineering, serious money behind it. we have put billions of dollars , butrejecting our platform we also need a better relationship. the u.s. department of homeland security has a task force on it now. they did not have that then. we work with them very closely. in the eu, we had a very local approach. we took everything we learned in the u.s. but worked with experts from 28 countries and had a
11:36 pm
local operations center here, and we were able to systematically find and take things down. we are now taking down one million fake accounts a day, almost all we take down before anyone has seen them. i am never, ever going to say to you or anyone else we know everything that is happening on facebook. we don't. but here's what we know -- we know we can come together with governments around the world and other companies to do better. we know that we are doing better. we have seen it in the eu, we have seen that we can take down these coordinated behaviors now. we know that new threats have not been invented and we have to be really vigilant to prevent against them, and that is what we are doing. in the eu, in the u.s. midterms, and we are going into elections around the world and the u.s. 2020 elections, we are going to be as prepared as we possibly can. bloomberg's -- emily: bloomberg's caroline hyde there with facebook coo sheryl sandberg. coming up, more of that conversation including what she
11:37 pm
has to say about facebook's new cryptoplay, libra, which is already facing major blowback on capitol hill. this is bloomberg. ♪
11:38 pm
11:39 pm
emily: facebook made big headlines announcing its own digital currency, but lawmakers are already calling for the social network to stop developing it immediately until regulators weigh in. coo sheryl sandberg says lots of details still need to be worked out. she also talked about facebook's m&a strategy in this exclusive interview with our own caroline hyde. at the international festival of creativity. take a listen. >> it's interesting when you think about m&a because instagram is so big now, but when we bought instagram, it had 13 employees -- 13. i remember when the announcement happens and some of the banks would call, like, "we are here to do your integration work," and we were like, "we have already given them a badge and a
11:40 pm
computer." we were good to go, but instagram was small. we will see what happens with m&a. we are not in the market with big acquisitions, but a lot of the acquisitions we made were not big at the time. caroline: and they have now become enormous platforms we know well. going back to the regulatory conversation, just to be topical, i'm sure most of you know crypto in the audience. i'm not banking on everyone having used it, but the libra announcement -- what exactly is it going to do for those in the audience? how are advertisers going to use it as well as the consumer base? sheryl: -- base? sheryl: well, we have not launched anything. we have done an announcement and even once we do, we are pretty far away from advertisers using it. let me talk more about what this is about. we are a technology company, obviously, but we are a technology company that wants to bring everyone along. mark's vision was give people a voice all around the world. the idea that you could give people a voice who never had it before. there are 4 billion people in
11:41 pm
the world who do not have access to the internet, and that is something we have worked on. we have now connected 100 million through programs we have around the world, largely with carriers. there are one billion people in the world who are not connected to the financial system. let's talk about what that means. that means if you have one dollar, you have nowhere to keep it that is secure. not a surprise, bad for everyone, but particularly bad for women. there are 100 million women in the world who are sending what is called remittances, which means most of them are leaving their homes, working often in other people's homes so they can send money back to their families, and they are paying huge fees and 20% more than men. we want technology to help everyone. what we announced yesterday is the formation of a global association -- the libra association. it will be based in geneva. we have 27 partners -- some incredible partners, paypal, mastercard, visa, vodafone,
11:42 pm
lyft, realer, companies as well as ngo's and nonprofits, and what we would like to do is help their be a cryptocurrency that is more inclusive. we are a long way from launch. we know we have a lot of work to do. but this was an announcement of what we would like to do with a roadmap for people to jump in and help us do it. we are going to not run this. it is going to be an association, not reporting to facebook. caroline: your immediate response to the regulatory scrutiny -- we've already had maxine waters in the u.s., and plenty of congresspeople speaking out about how you already. halted how do you feel about the initial take-up of this? sheryl: well, we announced it early. all we have done so far is published a white paper. we announced the formation of an association and that's because we know we have a lot of people to work with. we know this is a heavily regulated space. we need to talk with people,
11:43 pm
meet with people, and that is what we're doing, and we are then going to launch. emily: facebook coo sheryl sandberg with bloomberg's caroline hyde. for more on libra and the controversy, i want to bring in bloomberg's kurt wagner. caroline mentioned that maxine waters, the chair of the financial services committee, called on facebook to stop developing libra immediately. you have senator mark warner saying he is concerned facebook is using their dominance to dominate another industry. sheryl sort of glazed over it. where is facebook now? regulators have called them out. >> i think there is a misunderstanding from some people that facebook just totally dropped this yesterday without having told anybody about it. that is not actually the case. as the company has said, as they told us, they have been in touch with some regulators. they have talked with people about this. we don't know exactly who or to what depth they have gone in that conversation, but i do think the initial gut reaction -- and part of this is
11:44 pm
facebook's fault, right? we've spent so many years criticizing facebook for its privacy issues, its ability or inability to handle data that as soon as we hear facebook and banking, personal finance coming together, it is a scary idea. a lot of politicians are saying they want to learn a lot more about this before they model -- muddle it up. muddling thehey issue? >> i don't know that they are muddling issues. this is not a topic you can quickly come to consensus on. when we talk about personal finance, global finance, those have really deep and important questions for consumer practices. i don't necessarily think it is muddling. i just think it is more complicated than you can do overnight. emily: how does facebook envision the currency being used? she talked about remittances. there certainly are other use cases. kurt: there are and the
11:45 pm
remittance use case is something facebook has talked a lot about. you can send money to family and friends. there is a peer-to-peer element to this. the way i think they envision ed this being used through apps is through whatsapp and messenger, so if you are on their messenger platforms there will be a wallet that will exist in those and you can send to friends or again maybe buy something from a retailer. you have an exchange with the customer service person at macy's or nordstrom and you pay right there through the app. i think they see this as a very commerce friendly thing with them. what we do not know is if people will actually adopt it and say we trust facebook with this information. emily: you wonder, given the firestorm that facebook has been over the last years, if they were prepared for this kind of push back. people have said, it's such a aeat counter narrative, it is democratized currency, and very
11:46 pm
quickly it went south. kurt: well, it is a grand vision, right? there is some confusion she even cleared up on stage. this is not something that launched, right? this is a plan. facebook yesterday said, here is what we want this to look like, not here is what it is. with a lot of plans, there is a grand vision, and there is a best case scenario. which is that, this changes the world of banking. all of a sudden, the fees that come with sending money to family and friends overseas this appears and you can send it -- disappears and you can send it over night. that is not going to happen at least right away. emily: what are your sources telling you? kurt: this is not going to scare them away. i think they were pretty prepared for this. in fact, it would have been pretty naive of them to launch this and think known was going -- no one was going to ask these types of questions. i don't think this is going to slow down their process, at least right now. emily: kurt wagner, who covers facebook for us. thank you for weighing in. still ahead, trade war uncertainty is looming over apple. new reports say apple is asking
11:47 pm
its china-based suppliers to consider moving production elsewhere. this is bloomberg. ♪
11:48 pm
11:49 pm
emily: xiaomi plans to spend another $725 million to expand its chinese retail network over the next three years to stave off huawei. bloomberg is reporting the smartphone maker will grow its distribution channels and invest in rewards programs for its partners and sales staff. they now command 12% of the smart phone market versus huawei 24% according to the markets. bloomberg has learned tesla is
11:50 pm
overhauling its organization in asia to focus more on china. the company is about to start manufacturing in the world's largest electric car market. ceo elon musk betting on china to boost sales and restore investor confidence, which has slumped along with tesla stock. apple is considering moving 15% to 30% of its hardware out of china according to a new report. -- report from the nikkei. the tech giant is said to have asked major suppliers major suppliers including fox tron, to evaluate the cost and feasibility of the move as the u.s.-china trade war continues to escalate. china accounted for more than 20% of apple's revenue last year. joining us from new york to discuss, managing director dan ives. this would be a huge shift in apple's longtime strategy for the production of its devices. what's your take? dan: it would be massive. and ultimately, we think best case, 5%, 7% of production could
11:51 pm
go to india over the next 12-18 months, but this would be a gargantuan type of shift for apple. that's why right now it speaks to these headwinds. what we see with u.s., china, how much of an impact it has had, we have had to think twice about betting the farm on china. emily: talk to us about how apple would do this. foxconn has said it could move production for u.s. iphones outside of china, but where does it go? where can it go as fast as it needs to go, potentially? dan: they can paint a rosy picture, but their hands are tied at this point. ultimately, apple has made its bed in china. that is where the company's focus. obviously, foxconn, 1.4 million chinese that they employ, and that is really something that could disrupt the food chain, could disrupt the supply and
11:52 pm
-- supply perspective and ultimately lead to more costs for apple. i think right now, this is a poker game that they are playing and i continue to think that they are not going to move reduction out of china, but -- production out of china, but ultimately, it really comes down to u.s.-china trade talks as they continue to be the poster child for that situation. emily: our reporter who covers apple for bloomberg technology joins us now. what exactly do we know about what apple asked suppliers to do and whether or not the suppliers are actually going to do this? mark: apple asked for between 15% and 30% of production to be explored, to be moved out of china, but i essentially agree -- but i tend to agree with dan here as he was saying to you in this conversation. it is a little bit of poker. apple needs the help of some of these suppliers in order to work with the chinese government, to work with the u.s. in order to get these things resolved.
11:53 pm
my opinion is if they are going to start shifting things out of china, it's going to be a gradual process. this is not something that is going to take overnight. this is something that if apple were to go full throttle on this, this could take five to 10 years. it would require building new facilities and i think moving things from china to vietnam, malaysia, india, and other countries in asia, that is more of a stopgap. if you are going to move everything out of china, you might as well go all the way and move it to the u.s. the manufacturing world is moving towards automation, towards robotics and apple has the money to potentially put together a breakthrough facility like we have never seen before. where they could manufacture everything using robot it -- robotics. and very few human talent here in the states. emily: yet, despite the fact that apple is one of the richest companies in the world, has a huge stockpile of cash, they have kept production in china for a reason. in part, i imagine it is because of cost. could you see, despite the rise
11:54 pm
of automation, which will come, but it is going to take time, apple really moving its production to a more expensive place? >> i think the robotics aspect of it and automation will eventually solve that. for now, the technology to do that is not there yet. going to other places in asia that will solve the cost problem, it will not be much more expensive than it is in china. they are doing their checks here, balancing everything out, and they probably realize avoiding the tariffs will save them money in the long run is -- run if moving to malaysia, vietnam, thailand, some of those other countries, but eventually, if they are going to revamp their entire supply chain -- to be honest, this is not an easy thing. they have had this infrastructure for decades in china that could pop out hundreds of millions of devices each year. they are not going to just throw that all away to move to malaysia or indonesia long-term. there has to be a bigger play here. apple has invented so many things.
11:55 pm
it has been the first technology giant to so many things. my true feelings, and this is just opinion right now, if they are going to do this, they're going to do it big, and it's going to take a long time. dan, we don't know what this trade war is going to be. it is hard to imagine the u.s. and china going back to the way it was. no matter what the outcome is, do you think apple should diversify anyway? do you think they should move it out of china or to the united states, no matter what happens? "bloomberg technology." -- dan: it all comes down to what happens to $325 billion. if that threat is ultimately just talk and never happens, i don't think anything changes for apple in china. that would be a strategic move, a blunder if they moved out of china. as long as the trade deal gets done, there's no more tariffs. ultimately, it would be major disruption and cause more
11:56 pm
problems than success if they ultimately did that. the only way they did that and are forced to do it is if a trade situation continues to spiral more negative. 5%t like i think, best case, to 7% in the next 18 months. that's why right now, apple's hands are tied. there is a poker game and cook is essentially a pseudo-ambassador between the u.s. and china. emily: we are obviously watching to see where the chips fall with these tariffs, how that impacts apple. thank you both. that does it for this edition of "bloomberg technology." we have coverage throughout the day on bloomberg television and radio thursday. interviews and analysis be sure , to tune in. bloomberg tech is livestreaming on twitter. you can check us out @technology and be sure to follow our global news network tictoc on twitter. this is bloomberg. ♪
11:57 pm
we're the slowskys.
11:58 pm
11:59 pm
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.
12:00 am
announcer: the following is a paid program. the opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. announcer: the following is a paid advertisement for the worx hydroshot. the worx hydroshot, the world's first portable power cleaner that lets you clean anytime, anywhere, fueled by a battery, 20-volt vote lithium --


info Stream Only

Uploaded by TV Archive on