tv Bloomberg Technology Bloomberg October 15, 2019 5:00pm-6:01pm EDT
joins me.dent his new venture. and, the head of colibra, david marcus, joins us for an exclusive interview. continues to, -- continues to captivate investors. easing weoptions for work's cash crunch. continuedon the turmoil at we work is bloomberg 's leon a baker who has been covering all the facets of the story. talk to me about the softbank side of this. they are hiring some bankers with the restructuring. what are they hoping to get? >> it doesn't seem like there is
an investment banker right now who is not on the we work situation. they are working with houlihan loki, soft --, restructuring specialists. they want to make sure that the assets are ok, that they understand where the leases are, what is the value. they are brought on to help softbank figure out if it wants to plow more money into we work. the we work board has hired another boutique investment bank, advising board members on wework should take. should they take a risky high-yield bond package that j.p. morgan is organizing? two options,ose what does it seem like wework is weighing doing more at this point? liana: we have reported they are
leaning more toward the jp morgan debt package because it is less onerous for some of the investors in wework. if softbank were to invest more, i have heard some people describe it as crammed down financing, where the terms would hurt the early investors in wework and some of their employees. that might be one of the reasons why wework is leaning toward this jp morgan $5 billion debt package. nothing is certain. wework said they are talking to investors. there is no package on the table. taylor: amidst all of this, we did hear that the communications chief officer did resign last week. is that a one-off situation or is that more of the broader turmoil going on? it seems there is ongoing
bad news. earlier this week, there was a story about formaldehyde in the phone booths. losing a communications officer is a bad sign. but there are plenty of pr advisers out there i'm sure to help the company. also crept into some of the bank earnings calls tuesday but not in a good way. jp morgan, which is crafting the roughly $5 billion financing package, said exposure to wework ."s "not material >> our private investment portfolio was burdened by certain negative valuations, including a $80 million mark in our physician with the we -- in our position with the we company. goldman, i think the key
is writing down their investment by $80 million. do i have that right? >> you do have that right. it could have been worse. jeffrey had a small stake in wework and they wrote down their investment by $100 million. a much bigger write down when you take uber and trade web together. jp morgan would not really give us any color on the size of the write-down, but remember that jp morgan's exposure was a lot different. thathad funds invested made them all together one of the biggest investors. taylor: i want to take a look at jp morgan's exposure. some of the bonds were hitting a
record low on this. 13 had yields at about percent. when you tie in jp morgan's exposure, and that deal, what is the appetite for any deal that has a 15% coupon or so attached to it? debt, no5% is risky doubt about it. right now, pretty weak at this part of the year when the markets overall look pretty choppy. with that said, it is crunch time for jp morgan to look out. dozens of investors here willing to buy these bonds at a much higher yield or to get into this debt at a much higher yield. the idea is to compensate these investors here for what they are taking on. welor: you mentioned, as were talking about goldman sachs, not only their investment in wework, but also some of the
investments in uber as well. walk me through that right down, $270 million or so on uber. sonali: these are marked to market investments. they have a part of the business, called inl, that seems to be a pretty opaque part of the business. i think investors will want more clarity into the next year as goldman gives investors more idea of the overall strategy. these investments really matter. they have private equity and debt investments. so, uber, trade web, this is a big part of their public equity portfolio. it is a very specific part of their holdings. it goes to show you, these investments are volatile. investors knew that they would be. it worked the other way when investments were up. taylor: we have a quote hear
from david solomon of goldman sachs, who was mentioning apple card, really highlighting what a success it has been for them. what do we know about apple card as goldman looks to pushover a little bit into that consumer side of the business. sonali: it just launched, it was only this summer. if you know anyone who has it, it is a pretty sleek looking card. we don't know anything really about the profitability metric but it has been one of the best launches of a card out there. the credit card space is enormously competitive. jp morgan has their own rollouts. the partnership with apple is quite significant. thanks for joining me. coming up, where are the laughs? standup specials on netflix are
are scrolling through your netflix queue, chances are pretty good you will see a ton of comedy specials, but that is about to change. after pouring hundreds of millions of dollars into programming, netflix is cutting back. there will still be comedy specials, but just not as many with names like jerry seinfeld and patton oswald. i am joined by bloomberg's lucas shaw in los angeles. why the change? netflix funded really and unprecedented amount of standup comedy over the last few years.
aboutf this was just banking a huge library so people had something to come and watch. people are looking at the roster, perhaps they realized that they don't need quite so many or now that they have that library they can slow down their spending. last year, they were releasing more than one a week. taylor: the strategy, is it the right move for the company? lucas: i do think it was an effective way of bringing in big talent. ellen generous, chris rock. the company's response was not that they were abandoning stand-up comedy but that they were reevaluating or reassessing . more investment in things like sketch comedies. then these collections of shorter standup episodes of
up-and-coming comics. they were investing in new areas they thought might bring in new customers. netflix is always looking for ways to optimize their spend and bring in new subscribers. if they feel like they have a lot of the new stand-up comedy fans, maybe they feel they have the opportunity to bring in sketch comedy fans given that that is a different audience member. taylor: this is a company that spends $15 billion on content. any idea what the priorities are going forward? lucas: international is the biggest one. they already have a ton of comedies, dramas scripted programs in the u.s. all of the growth going forward, or most will be international. 72 million of the projected million new customers are supposed to come out of the u.s. latin america, even africa and the middle east. shaw,: bloomberg's lucas
thanks for joining me. i want to stick with netflix because as we talk about the new content strategy, we look ahead to third earnings with dan morgan. he joins me from atlanta. a chart i am showing in my bloomberg -- it shows a drop off in subscriptions. is this your biggest concern when it comes to earnings? dan: in the second quarter, a bit of a disappointment in terms of missing estimates. as your other guest was saying, looking at 7 million on this upcoming quarter. aboutllion international, 800,000 domestic. really the driving force in subscribers. ,e don't have the competition
apple at 499 a month, disney at $6.99 a month, they will be releasing those services in the month of november. after this, it will be full on in terms of competition. taylor: when that competition comes online in the coming months, what do your estimates say about the drop in top or bottom line estimates when you look at the fundamentals of netflix, given the new competitive environment? know if they change quite yet. we have to see of people will drop netflix and go to disney or pick up apple and so forth. it could be kind of a soft change, which is that most people will maintain netflix and maybe add disney or another service down the road. either think it is an or.
we have to reduce estimates in terms of subscribers, earnings. i think it is more just, let's see how this impacts the numbers and go from there. i still think you are intact fundamentally with the netflix story. taylor: how worried are you about cash burn? you are looking at a company that, on an annual basis, goes through $3.5 billion of negative free cash flow. the reason why cash flow is important, and coming into this quarter, the numbers about $9 billion cash burn. if they are burning through cash, and a lot of it is going into content, $15 billion for the year, $17.5 billion for next year. burn,think about the cash they have to have money on the balance sheet. the issue debt. they've got about $12 billion in
debt right now. as they work through the balance sheet and pull money out of the money market or cash area, then they have to come back and issue more debt to counter that. it is a fierce cycle. we are obviously focused on how much they are burning on the quarter, will they have to issue more debt, how long will the cash and balance sheet sustain themselves. taylor: i take a look at your notes and i will also look forward to ibm, earnings which will come tomorrow. you are looking at a top and bottom line decline on the year-over-year basis in the quarter. what are you looking for that drives those declines. we are looking for a2.7% drop in revenues, about 22% drop in earnings-per-share. someone said there is a slowness
in the international finance area. again, and this red hat acquisition gets fully integrated, we are looking for negative impact earnings for 19 and 2020. really not until 2021 do we start to see the blossoming of the red hat deal supposedly. until then, they are still kind of stock in that enterprise mainframe server business which is very competitive and they have been, negative growth on the top and bottom line. we still have kind of a wait and see attitude on ibm. taylor: if the stock is undervalued, why has it not been rewarded by cash? why aren't they being rewarded for that? dan: you would think they would be because they pay a huge dividend. the technology sector -- apple
decentthat has a dividend. i think what it is kind of showing, even though they are conserving cash, there is skepticism on the street of whether this hybrid will pay off for them. you are still seeing a massive dividend without a lot of value guys going to the name and driving the stock up. taylor: thank you for joining me. it is never too early to start your holiday shopping. ingle unveiled new products its annual event in new york. join us for a conversation with the google vice president of devices and services, next. this is bloomberg. ♪ ♪
newest smartphone alongside several new smart home devices at its annual hardware event in new york. it comes on the heels of other product announcements from rivals microsoft and apple. westin spokeavid with sarah: -- spoke with rick osterloh. rick: we are focused on building the best possible experience. we bring the latest innovations. have always been great with cameras. we have the awesome photography experience that we added to that today with a great zoom experience and another number of tricks we are doing with machine learning. we also have a new google system running on these devices. the speech models are running really fast. ui that is easy to use.
we think this will bring help to our users and we think a lot people will like it. how much will you compete on price with some of those competitors? atk: pixel 4 will start $799. we also offer a new range of whichts called pixel 3a, offers a much lower price point, starting at $399. we think that portfolio appeals to people looking for a great affordable phone and a premium flagship phone. david: the google ecosystem, how open or closed will it be? he works with nest phenomenon, i think you have cut back on, haven't you? we are migrating all of
our developers so we have one standard interface to how you interact with google services. of course, android, the fundamental system our phones are built off of, has been opened since its inception. i think that is one of the key characteristics, that sony people can build a great product line off of android. avid: there is talk about possible acquisition of fitbit. does the antitrust inquiry allow you to look for things to buy? rick: we don't comment on any speculation about acquisitions so i can't comment. david: but you are not out of it. rick: we are always looking at strategic options. privacy.lk about as we move into this world with the internet of things. i have nest and things like
that. there's a lot of talk about privacy and how we can trust our data. how can you reassure a customer that it is not being used for things that should not be used for? privacy and security are at the core of everything we are doing. announcements on how we give users options to manage privacy. google always wants to make sure that users are in control and have clear transparency for what is going on with their data. now you can go to your google account, see what is happening with your web and activity, your youtube history, location history, there are really easy settings to delete data automatically, turn on any information that is collected. users really are in control. with products in the home, there are products in your day-to-day life,. simple off-oner switches so you can turn
microphones and cameras off. we have indicator lights to let you know when something is recording. we also just added a great new capability with google assistant where you can delete data by just saying, please delete the data from the past day. it will do it for you. we are focused on engineering great privacy and security solutions for our users. google'shat was hardware chief rick osterloh, spooking -- speaking with bloomberg's david westin. later, we will speak with google's vice president of hardware design. still to come, he turned around target and made apple the place to be. his new company. we hear from ron johnson just ahead. later, the conversation with david marcus, the man leading facebook's foray into cryptocurrency. this is bloomberg. ♪ from the couldn't be prouders
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this is bloomberg technology. i'm taylor riggs. when you think of e-commerce, your first thought is you order a delivery from a company like amazon and the package arrives and that is pretty much it. but four years ago, the company called enjoy looking to change the whole experience. when you purchase on enjoy, you get a representative who visit your home, helps you set up the new technology with the goal of helping you get the most out of your purchase. enjoy was founded by ron johnson who helped to make target a cool place to visit. apple, he wasat
the driving force behind the apple store and genius bar. let's talk about enjoy. what is it, how does it work? ron: it is really simple. when i was at apple, we built a new channel for apple with the apple retail store and it is a great way for apple customers to buy and created a gold standard for creating apple products. amazonnow shopping on for about 25 years, but all it does is get to the door. what enjoy does is deliver a retail experience in your home. if you order a new iphone from at&t, in the shopping cart, you used to pick shipping and now you pick ready to go, which is another word for enjoy. one of our trained experts will not only bring the product you want to buy, but they will bring a full retail experience into your kitchen, your family room. taylor: how does your business model work? does the consumer pay for it? ron: it is completely free.
taylor: how do you make money? ron: retail stores are extensive. with apple, you have to build out the story, you pay rent, hire employees. that cost a lot of money. we now focus on the experice encial part of of the shopping experience. it would be lower cost to deliver. for a lot of companies in the physical world, premium products invest a lot in their last mile which is the store. in the online world, we all have the same last mile. it ends up at the doorstep. the only question is how fast it gets there. taylor: you just closed new funding round. what are you doing with the money? ron: we are expanding. we announced last week, on a tober 29, we will be in toronto with a great partnership with rogers. the leading carrier for the canadian market. we now serve over 60% of the
households in the u.k. three partnership with -- through a partnership with british telecom. we are expanding to new countries, new products and it has been a lot of fun. taylor: you brought up apple several times. i would be remiss if i didn't mention the current concerns. how do you respond to that? ron: that has not been my experience. two weeks ago on a sunday, i walked into my local apple store, knocked on the door, did i know the employees. i was able to get a new iphone, activated on the spot. great accessories. last friday in new york city, i got up early and went to the new fifth avenue apple store. the nicest door i have ever been to. apple is doing really great. retail is hard though. when you have busy stores, you are not going to be perfect. i don't apple is doing their best to deliver a great
experience. taylor: you talk about retail, you are also with jcpenney, for example. what do you make of the general landscape as you take a look at the retailers? companies like jcpenney are struggling and others like walmart are getting it. how do you differentiate? ron: customers are really savvy. they want newness and the products they buy, shopping experiences. companies in the middle who have not been updating their stores and their websites and their products, i call tiredness. the customer does not like to go to tired retail. they like things new and exciting. we are in a world where we are post-digital. disruption from online shopping is over. all of the great physical retailers have figured out how to compete, their stocks are at all-time highs. target, walmart, best buy. they have advantages built in. if i am a target
customer, i could order online, have it delivered to me. i could drive and pick it up if i want it now. i can shop the old-fashioned way. even in the store, there is lots of technology deployed. you can check out on your own. the retail stores have fought back. the better stores have never been better. but the problem is a lot of these mid, large retailers like macy's, jcpenney's and sears, they don't have a great future because it is hard. taylor: we will give you the last word on enjoy. what is the next thing for the company? ron: the next thing will be next year when you see all these enjoy mobile stores driving around town. we will go where were they? were they hiding in plain sight? everybody will see us next year. taylor: that was ron johnson, the ceo of enjoy. thank you for joining me.
google'snow leads design as vice president of hardware design. i spoke to ross earlier in new york about the company's philosophy in product design and sustainability. ivy: coming late to the game in hardware gave us the ability to stand back and think about how to differentiate and be authentic to our brand. the words we came up with human, optimistic and bold. for us, the word human is about not just how something looks, but how it feels. making sure all of our products, when you hold it in your hand, it has the tactful feeling. that is why we do a lot of our home products with fabric and speakers, because there are many ways you can let sound through. we felt like the tech to let he ility isrtant -- tact important. this idea of optimistic is
really -- what we do is through our color pops -- on our phone, we usually pop the button with a contrasting color like an orange pop on a black-and-white phone. little surprises of color wherever possible is how we deliver on optimism. obold is really trying new things, new finishes, new materials. our first v.r. headset was covered in fabric and not black plastic. we really try to fit our products through the tactility, the color and the way they feel, not just how they look. taylor: when we take a look at your nest products, you talk about a lot of them being made from recycled products. where are you on your goal of sustainable sourcing? ivy: we are really excited that this year, all of the nest products are using 100%
recyclable plastic. but, we also launched a new innovation which is actually bottles the fabric from that get kind of chopped up and extruded and then knitted together, so that each one liter bottle is making more than two of our nest minis. so, not only are we using recycled plastic, but our fabric is now made of recycled bottles. we are going to continue to up the ante. design is really looking at sustainability through three lenses. material, longevity, and repair ability. i think we have to be constantly -- when we design thinking about all three aspects, and you will continue to see throughout the years, us actually addressing all of those areas. taylor: how are you
incorporating some of the concerns about privacy into how you design products? ivy: yeah, so privacy is absolutely on the top of everyone's mind. our goal is to continue to make simpler for the consumer to be in control. i think it is a very personal thing, the degrees and types of privacy people want in exchange for the function and help the product gives. from the hardware side, we are looking to make sure buttons that turns things off are easy to find. i know from the software side, we have recently launched a bunch of new privacy aspects to, again, get control on things like youtube and search and really making it much easier for consumers to choose what those privacy settings should be. taylor: that was my conversation with ivy ross, google vice
losing sevente partners for its libra cryptocurrency, facebook got 21 to sign on the dotted line on monday. for more, i go down to kurt wagner. kurt: i am joined by facebook's david marcus who is in washington, d.c. today. he is the head of libra inside of facebook and one of the cofounders of the libra cryptocurrency. thank you for being here. i know it has been a very busy week for you. i want to start with what happened yesterday. you were in geneva for the first
official meeting of the libra association. walk me through what happened yesterday and what you guys were able to accomplish. david: that is right. yesterday, we have the inaugural council meeting in geneva. it was an awesome moment where 21 companies came together -- venture firms -- came together and started working on not only establishing a governance model for the association, but also distribute a different roles. a board was elected. i was lucky enough to also be elected on the board with four other amazing individuals that i am really looking forward to working with. the big change is fundamentally, yesterday, this product moved from being facebook led to being led by this association of which we are one of 21 members now, and in the future, one of 100. one of five board members.
really looking forward to the next stages here. it was just great to feel the passion and the energy in the room, and the commitment from all of these parties that are now really going to work on really trying to change the status quo for people all around the world when it comes to access and cost of financial services. kurt: i know when you initially thought of this first meeting, there were other companies you thought would be there -- visa, mastercard. a lot of these companies announced last week they were leaving the association. what was happening behind the scenes as these announcements came out around the same time on friday? david: first, i have to say, i said this publicly, i want to thank these companies were coming along on the journey. when you are in the payments space, wanting to really explore something that could potentially be disruptive and wanting to lean in like this is really remarkable. it is to be commended. towards the end of last week,
there was a lot of pressure mounting. i totally respect the fact those businesses and those leaders have a responsibility to their shareholders, employees and stakeholders. given that you don't need to be a member of the association to build on top of the libra network, all of these companies will still have the ability to build on top of libra. i understand they don't want to do the heavy lifting by our side at this moment in time, and that's ok. we are going to move forward. we are going to add more members going forward, and the next two quarters. we're going to work really hard together to address all of the legitimate concerns that were raised by regulators and stakeholders around the world before this moves forward. kurt: a lot of the companies that did leave late last week, they are payments companies, financial services companies. theoretically, companies familiar with the road ahead. are you worried they may be know
something that you are unaware of here? david: no. i want to strongly state that. i don't believe we are unaware of anything. i just believe when your core business is in this space and you probably receive a lot of thenure not to press on, at some point, you have to make a decision on this high-risk project -- because it is a project, an idea right now that we believe will see the light of day, but there is a lot of hurdles we need to clear. and, your core business -- again, you have to put your core business and your own business interests first versus a project like this that is high beta. i understand that. that we are in this space, they would receive a lot of pressure and want to prioritize their own business. kurt: i want to talk about some of that pressure. there was a letter a few democratic senators sent to the
companies urging them not to join the association. it read in many ways kind of like a threat. did you take it that way when you read the letter? david: i don't know. what did it sound like to you? kurt: it did sound a little bit threatening. if you join, you will have a tougher road ahead. have you been surprised by the pushback you have received from regulators? david: again, i say there are two tracks here. there is the engagement on the regulatory front where we have had very constructive conversations. there are questions, legitimate questions. we need to bring the right answers to those questions. now, we have the ability to do so. since yesterday, we finally have a governance model, an association that was fully formed. it is hard for us to speak on behalf of of all of these prospective members before they became members. now, the association can take this on and really make progress on these questions. of say that for these types
letters to be circulated for a thing that is an idea, a project, and telling people you should not explore innovation and a project at a time where not only here in this country, but all around the world, the core of our financial system has not evolved much. consumers all around the world are paying the price for it. i think we should ask ourselves whether this is the right approach if we want to really lower costs and lower the barriers of access of financial services for all of the people that deserve better in the world. kurt: when you guys announced the formal association yesterday, you said there were as many as 1500 organizations interested in joining. can you give us a sense of how soon you will be expanding the association and who will join? david: these other the types of things i cannot talk about anymore from calibra, because this is now in the hands of the
libra association. what i understand from the process the libra association is running is that they will work towards welcoming more members in the next two quarters. my guess is they will share more about new members as they join. kurt: but, banks. there has been a lot of talk. do you think that will be big banks joining you guys? david: i want to put it out there. from our standpoint, when we started this, as you have seen, we have welcomed all kinds of different companies from existing incumbents in the payment space. everyone who wanted to participate in this big idea of bringing to market something better than the current system that leaves so many people behind. i, i think that -- again, cannot speak for the whole association, but i think we would all collectively welcome banks to participate. certainly, those banks that are forward-looking and ready to try to do better on the core system
for moving money around the world. kurt: we will obviously be following closely. that was david marcus from facebook's calibra. taylor, back to you. taylor: that was bloomberg's kurt wagner. still ahead, companies are promising more opportunities for women. we find out if they are keeping their word, next. this is bloomberg. ♪
rachel, what were your key takeaways? rachel: for years, we have been talking about the glass ceiling, the invisible barrier, not imaginary. in reality, women get tripped up at the first step up to manager. for every 100 men hired or promoted to manager, only 72 women are. that means that the manager level, two thirds of the managers are men and women effectively cannot catch up. taylor: how has this changed from previous years? as you look at this study, does 2019 bring anything new when it comes to the managerial position? guest: we have the first step up to the manager cap for the first time but we are putting a huge spotlight on it, because this is where be lose the qualified supply of women leaders. often times, h.r. leaders are asking why are there not more women candidates? if you don't promote them at the very first step, you should not
be surprised they are not on the radar. bigor: has there been disparities in tech versus other broader sectors? lareina: different sectors look different but the big themes is whenever we talk about the lack of revisitation, people say people are opting out. for five years in a row, six hundred companies, 22 million people, women are not opting out. we know women are speaking up. they are asking for raises and promotions. women are doing their part, so now the question is what could companies be doing? taylor: how do we fix this problem? lareina: the first thing is you actually look to see what is working. this year, we have one thing that is working really well. in a world for the last decade or two, we have not been able to have positive news, this year, there are more women at the top. for the last five years, we have seen a 24% increase in women at the very top table, making the most important decisions and guiding companies and being a
role model for all of those women who want to rise up. that is the good news. then you say what do companies do right? it is a lot of practices that we talk about. we can discuss these but are things like do you have unbiased review? are you being a sponsor and providing opportunities for women to climb up and succeed? taylor: what is the best way to fix the culture, if there is a big culture problem? rachel: we found this year that employees care about two things. they care about opportunities for themselves, which makes sense. here's the interesting part -- they care about fairness. they want the system to be fair for everyone. that goes from white men to black women. companies use being fair, not only are they going to get better outcomes in the pipeline, they will have happier employees. taylor: finally, is there a way to incentivize companies?
is there data or statistics that shows us improvements on the top or bottom line of the company if there is a female manager, a female on the board of directors? what does the data tell us? lareina: one is that if you have more diverse teams, either racial diversity or gender diversity, profit ability is higher. it also tells us companies today, more and more senior managers are being held accountable for gender parity and that is great news. taylor: we could go on forever. thank you so much. my thanks to rachel thomas of lean in and loareina yee of mckenzie. that does it for this edition of bloomberg technology. bloomberg technology is livestreaming on twitter. check us out. be sure to follow our global breaking news network, tictoc, on twitter. this is bloomberg. ♪
haidi: welcome to daybreak australia. i'm haidi stroud-watts. shery: i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. we are counting down to asia's major market open. ♪ haidi: the top stories we are covering in the next hour. china puts pressure on president trump's mini deal. beijing is linking higher agricultural purchases to the reduction of u.s. tariffs. sterling reaches a four-month high
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