tv Bloomberg Technology Bloomberg October 24, 2019 11:00pm-12:00am EDT
without intel. we find out why new user growth and twitter did not transfer into ad sales. we hear from the cfo. amazon shares plummeting. for the first time in over two years, the company reported a decline in quarterly profit. most notable, amazon issued a -- a weak this is not bringingforecast. the sales boost investors are hoping for. was about sales short. to write down all of his numbers, i'm joined by darren baker -- to talk about all of these numbers, i am joined by darren decker. you estoril -- you are still
turning a profit. >> we knew that one-day shipping would bring some cost with it for a couple of quarters. are spending a lot on content, aws, advertising division. goingis a spending cycle on that actually makes the next couple of quarters -- the anxiety would continue from a cost perspective. where it is paying off, you are seeing an impact on the retail side because of one-day shipping. it will pay off long-term in terms of market share, revenue growth. cost variability is concerned, we can continue for a few quarters. >> are you concerned about the rate of spending? -- side ofand signed that income statement.
-- side of that income statement. is this one quarter? should we brush it off? >> i don't think it is one quarter. over the last couple of years, amazon proved they could drive profitability. they emphasized aws and advertising. what you saw in 2019 is that increased spending on the things that will drive more customers to use amazon all over the place. one day shipping, getting those products no matter what they are back on the shelf. what you will see over time is well strategy is domination. anywhere you can buy a product online, they want to offer that to you and they will figure out how to monetize it in other ways. dominance -- is marketshare dominance the right way ? >> they have proven that it works. with aws specifically, there are concerns about growth slowing. they are the marketshare leaders. adjustment needs to be
happening in terms of what the expectation should be for that revenue size. us. is not concern you saw a growth acceleration this quarter. advertising will take the center stage. >> we talked about aws. we are showing the revenue growth for amazon web services. how concerned are we that this is slowing? it is slowing multiple quarters in a row. >> there is concern that it is slowing. i think there is a big market for them to continue to go after. i believe microsoft is doing a good job. google is investing heavily in web services. amazon has a big leg up. >> he brought a microsoft yesterday. microsoft will structurally benefit more from the shift to the cloud. even more so than amazon.
are we beginning to see amazon web services and their cloud products lose a little bit of that market share? >> i am not sure about that. that is the hybrid cloud strategy they have been successfully executive. that should continue to benefit them. google has also stepped its game up quite a bit in the past couple of quarters. you will see those results. hold theirzon can growth over there in the 30% plus range. disclosure of advertising will become more critical. this business can be significantly bigger than what it is right now. they have the opportunity and better targeting in many ways. they have a very good roi attentional.
as this business gets bigger, they might pull the disclosure. your number how aws was disclosed in 2015. also, the profitability was changed. you remember how aws was disclosed in 2015. also, the profitability changed. >> why are we looking at a lower forecasted fourth quarter? they are looking at consumer spending and making sure they are being conservative for what is usually a very big holiday season with them. i do agree that when it comes to the areas of market share and the investments they are making and their ability to juice more revenue out of that through advertising, i think they're going -- they have a lot more opportunity. >> interesting conversation. it is their hardware products. things like alexa should enable more shipped and revenue growth to the cloud.
do you see them continuing to integrate the hardware with the software? online, ifout that it is still only 12% of the product use, it comes from a surface someone paid for. you can imagine there is a much more opportunity to grow that online. once you start integrating voice and at an whole foods, they made a very strategic place here. >> let's not forget there is a grocery business, there is a whole foods purchase. have we learned anything about the integration of the groceries? >> the expectations for that business remains in the single digits. they are performing and -- in single digits. it is reflected in the expectations. wasfourth-quarter revenue about international growth slowing down. that might play a role and dig deeper.
if you look at this quarter, the fact that one-day shipping is spending,ng in retail even if it is early, it is actually showing signs. it really does this most around them. -- frees offering three two-day shipping. amazon will have already invested and had that lead to protect that her. >> final thoughts, if they do have that to protect against competition, amazon shares going back a year. underperforming. is it a regulatory overhang? are we not seeing these shares going higher? >> it is that reaction to world
dominance. is labor strikes or regulatory concerns. thank you both for joining. shares of microsoft rose on thursday. fourth-quarter results -- third quarter results were better than expected. microsoft should be able to quote: whether any storm. they are trading near an all-time high. track, googleping employees says the company is trying to keep them from seeking out and it is using google chrome to do so. you can listen in on the bloomberg app and on sirius xm in the u.s.. this is bloomberg. ♪
once famous for toouraging its employees speak out if they saw things that they thought was wrong. workers now monitoring attempts to organize protests and discuss labor rights. increased amidst competition between alphabet management and employees. tom giles is here to talk about it. what are employees saying? >> there is a memo that has been circulated. we don't know how widely. the concern that has been raised is that this tool is a new extension that is used internally. the same way we use tools here to set up meetings and all of that. this one sends up a red flag or some kind of flag when some
organizes a meeting that occupies a certain number of rooms or involves a certain number of people. threshold,ches that it is 10 runs, 100 people. it gets flagged. google has come back and said to us the memo misinterprets this. this is something we put in place to cut down on misuse of space, things along those lines. i think all of us who work in places where there is a scarcity of office space or concerned spam, itconcerns about could be normal to wonder if this is being allocated. in the google setting when it has been escalation between employees and management tension over organization and protests and management decisions, there have been walkouts that have involved thousands of people. -- is ifrn is this is
this is an attempt to attempt down organizing and keep us from raising protests. >> to be fair, i want to bring up google's statement in response. they said the claims about the operations are categorically false. it is a pop-up reminder that asks people to be mindful for adding a meeting to the counter a large number of employees. what is the take from google's perspective? >> there consensus is this memo is misinterpreting the intent of this tool. what we have done as reporters is we have spoken to people who are familiar with the situation. they are familiar with the contents of the memo. they have done some research, there is engineers at google. they are very good at what they do. they have look at the tools and done their own analysis of it. they have raised some of the same concerns that were outlined in the memo. >> there has been growing
tension between google and their employees. remind us about some of the tensions we have been feeling. >> there were concerns about a particular executive walked away with a lot of money after being accused of misconduct. that was one of the things that raised a lot of concern. employees have also raised concerns about google's willingness to go out and court government contacts -- contracts to use google technology for the military. is there artificial intelligence, is that facial recognition? are those going to be used for purposes that people within the rank and file disagree with? googlehis maybe not a problem? there has just become increasing frustration between employees and management. >> there is increased willingness for companies
throughout the technology industry. silicon valley and beyond to protest, to walk out, to raise questions about how our technology -- is our technology being used for the right purposes? to make a lot of better place? to make the world more violent? these are valid questions. increase in the willingness and frequency of employees raising these questions. >> it is bloomberg's tom giles getting the scoop. coming up, micron has a new chip that says -- that they say will make datastorage centers faster. this is bloomberg. ♪
investigated. growinghumer says it is in popularity in the u.s. and it creates national security risks. they have boy's concerns of the chinese government could make the company behind tictoc -- they have voiced concerns that the chinese government could make the company behind tictoc. micron announced it is forging ahead independently with new memory technology called three dx -- 3dx. formwill forms data -- data drives that provides faster access to data that existing models. who better to tell us more than the micron ceo? thank you so much for joining me. talk to me about this new chip. >> please to be here.
it is a kind of memory that is thang you faster speeds flash memory. higher.sities that are it is ideally suited for data center replication, memory and storage. this is to escalate the workloads that require high speeds. aat we introduced today was drive that is the fastest drive in the world. >> is this really banking on the future of the cloud? it is technology that works well in data replications. they can also be deployed to other in market applications such as mobile or other intelligent devices. no doubt, data centers are big.
they are requiring the ability to process a lot of data. they want to gain more insight on the data. that means you have to be able to have memory solutions. you have to store data and access at best. they need the kind of solutions that micron made. devices thatligent they had, from smartphones to automobiles. >> you previously was working with intel on this. why the boat to go it alone? alone -- why it the move to go it along? >> now we can bring the technology to a broad set of manage thes and
roadmap. >> you talk a lot about smartphones. how much of a tailwind are we expecting from 5g? can you incorporate that into your analysis? >> it will be a growth driver for many years to come. 5g is also about machine to machine connectivity. it is going to bring about many devices that will be disconnected for each other. 5g is able to give you access to data and give you rich experiences. you can watch it on your phone. you can watch different perspectives of a game that is being broadcast to you. when you play all that on your smart phone, it means more
memory and more storage. 12 gigabytes phones were announced. a terabyte of storage was announced. >> one of the phones that has 5g already is why went. .elp -- huawei how are you rrelat -- relationships with them now? a large and important customer of micron. memory andwith our solutions that went into very different markets. the earnings are less than what they would have been if huawei was not on the listing. >> are you working with the trump administration to clarify any confusion about licenses to apply for, how to get around some of the export bans?
>> we have apply for licenses. licenses have not been granted yet. you would know when we got granted. without a grant of licenses, it will potentially lessen our opportunities with huawei in terms of future business with them. company with a diversified portfolio and a broad set of customers. >> here is your total revenue. of course, a portion that is just under a half or so coming from china. where else can you ship that revenue given all of the headwinds? >> they are a global company.
i think the numbers you are looking at are related to that aspect. if you look at chinese ourquartered companies, revenue is a possibility percent. with a well diversified set of customers, their supply in china might be adding it with them as well. >> we know it all comes down to the prices. i'm going to show one more chart here to our bloomberg guardian's -- audience. we thought we would see bottoming out. what do you see? are we at the bottom? do we see prices to go higher?
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billion, the average analyst expectation. what would be your first question? >> if we look at the results for third quarter, there were some really strong points, revenue came in on high-end of the guidance. that was 15 of the 19 fast quarters. flipside, there was a ws growth. if you look at the after market reaction, the stock was down six or 7%. primarily because aws revenue growth decelerated about two points to 35% year-over-year. this result of a ws will bring greater focus to the event in december. their largest conference in vegas.
the question is around whether their focus is greater on these partnerships which are larger contracts. >> i pose >> the same question to andrew. pose the same question to andrew. -- greaterthe look growth? this is down to about 35%. is this your biggest concern? andrew: absolutely. increasingly, as aws goes, amazon stock goes. that is what analysts are looking at. last quarter, that was the first time we saw the growth rate deathblow 40% year-over-year. i call it the potential canary in the cold nine -- coal mine. it is something to be concerning. strong this really
topline momentum. they are gutting of the lower for the fourth quarter as analysts were expecting. >> is that a broad consumer problem? -- is that angram amazon problem? >> it doesn't seem to be the amazon problem. the retail year-over-year growth in north america accelerated to 28% if you exclude whole foods. we have seenighest since the third quarter of 2017. the online store sales grew 22%. that is a six-point acceleration. because of is likely the crime on amazon stock lines. long do you let that
investment go on? assuming they will gain market share at the expense of profit? thatu start to get nervous they will be able to make all those investments on one day delivery? >> i think they are sound investments. they will pay really profound long-term dividends. you are already seeing them. you have seen that extend into quarter three. it is positioning them well for quarter four. let's focus on quarter four. the consumer spending environment has been free strong. it is a walkie -- wonky q4. we shrink from a 32 daisies in between days giving and christmas to a 26 date season. that has nothing to do with whether or not consumers want to
spend. amazon is going to feel that. everyone else will feel that. >> i show up terminal chart here for the audience which shows amazon on a normalized basis has been under running the broader retail index. is that a regulatory overhang or something much more specific that people are not buying the stock right now? >> there could be three reasons. the other -- one is the antitrust issue. we had the political environment . that could be pressuring the stock. the second is operating margins. the guidance was over 250 basis points. that is primarily due to the one day crime. they are going to expand internationally.
that is a little bit of an overhang. the third is a ws growth. it is decelerating. these three seem to be pressuring the stocks. >> very attractive. andrew, your take. is the valuation attractive? >> i don't see the long-term concerns outside of aws. tohink there is potential buy the dip here. i want to focus on the advertising business. that is becoming more and more important. like aws, it is extremely high margin. that we accelerated back from the 30% growth rate up to 44% this quarter. i think there is a lot of runway ahead of that business. that is tightly linked to what is happening in e-commerce. i think those two businesses
have a lot of momentum right now. as long as aws does not become an increasing drag. >> you heard it here first. both for joining. twitter's massive mess. experts weigh in on the performance of their advertising business. our conversation with twitter cfo that siegel. he is next. this is bloomberg. ♪
analysts say it is getting hard to poke holes in the tesla forecast. first quarter results boosted analyst confidence in microsoft. they raised the price target to 165. microsoft is a core holding that has both defensive and offensive attributes. meanwhile, bernstein initiated palatine with a $29 price target. the analyst said palatine is leading the constructive wave of connected fitness with meaningful opportunities for growth and women and prescription revenue. those are a look at your top tech calls. shares closed down by the most in five years after reporting quarterly results that though short of wall street estimates.
the daily active users rose 4%. i spoke with net siegel -- ned siegel. >> advertiser sentiment continues to be strong. we did see more seasonality than we expected in july and august. we also had a couple of product related issues were some settings did not work as expected. that impacted us by about three or more points in quarter three. we expected to have four or more points of impact in quarter four. >> facing those settings is important. how will that impact your finances given more into 2020? we are working hard to remediate these things. it means communicating clearly so people understand when something did not go the way we expected it to to the people who are affected to our other stakeholders, there were tweets about this stuff during the course of the quarter.
the second is to make the setting work the way we had expected it to. and then we work with partners and we think internally about the best way to make sure that we are giving people as good an experience as possible on twitter. that means the tweets they see and adds they seek were respecting the settings. give them a away to good experience. an example would be measurement partners who helped advertisers understand the success of their campaign. we are working hard to get them better deity -- data. >> a lot of people said this was one of the first signs you have broken some trust with customers an opportunityas for regulators to talk to them about data privacy. >> we are always in touch with regulators all over the world. ofis an important part understanding their priorities and the principles we used to make decisions about what
questions we ask people, how we display our policies on the service and how they play out in the product we deliver. >> when we do that, we find we can come to better conclusions and we can lay our policies out better for people and they can understand our business better as well. >> know that you fix the privacy control, what do you tell advertisers about why they can come back from the platform? >> advertisers never really left the platform. you have $79 of ad revenue in the third order. although we group revenue 9% year-over-year, we had double-digit revenue growth. what we saw in july and august was really seasonal. we explained what happened. we talked about what we are doing to remediate. we help them understand the use cases that we think twitter is best for advertisers.
launch as the place to new advertising service. if you are one or brothers and launching the joker, if you show the trailer, all over the internet, it ends up being seymour on twitter in the first hour than anywhere else. sometimes by twice as much. whether it is the women's world cup, the beginning of the college football season or any other big event where people are learning about it and talking about it on twitter, this is the place for advertisers to be. those vestiges have really resonated with advertisers. theou were talking about monetizing of daily active users. out and said ime was a positive sign of ongoing product improvement. some of those are like topics. >> some of it has>> rolled out already. other things will move out all-time -- overtime. as they go through on boarding,
there is always something happening on twitter. that gives us a better opportunity to do a better job of helping people trust the information they see on twitter. >> that was twitter cfo, ned seagle. i want to bring in the marketers to react to the earnings. about 20% inoff thursday training. what is your take on that topline revenue mess? >> bad day for twitter. ned said all the right things. a few things are pretty concerning to me. one is the fact that the ad targeting issues they have had over the quarter where they have had to make some changes, turn off some targeting, it is something they have to fix. on the other hand, advertisers really come to these platforms
for the ad targeting. of whether toine shut off some things or keep offering things that advertisers might expect to get. if they don't get them on twitter, they might go somewhere o get them. that is one big concern. >> do advertisers stay with twitter? given they no longer have that targeted advertising? >> that is a very good question. platforms will start to face more issues about ad targeting. we have seen over the past several quarters, the facebook cfo also referring to headwinds related to targeting. those have not impacted facebook see the yet but we targeting drumbeat and issues related to targeting. the regulators are looking at privacy. they are all looking at these companies and saying when is enough enough?
what twitter is doing is admirable. it is taking steps to shut off things that are potentially concerning or damaging. advertisers are going to continue to want that. they will continue to look forward where they can. >> twitter is one of the few companies within tech that has stayed away from antitrust. they steadily away from regulators when it came to data privacy. any hint that they had been abusing some of the customer privacy now brings in the tension of regulators. >> yes. surprised if it does start to draw more attention. facebook has been in the limelight for months and months. regulators will want to go through all of these issues. >> no signs of antitrust why comes to twitter? >> as far as i know. not yet. >> think you for joining me.
toward ai powered checkboxes to meet that need. by next year, 85% of all such interactions will occur via chatbot. one company looking to leverage that is total performance. formance.r it provides customer service experiences. they have entered into a partnership with facebook in nigeria. eleperfrom -- of t teleperformance. tell me about the chat that you recently had with facebook and your businesses. >> thank you for having me. i don't know if i'm going to speak a lot about our recent partnership in nigeria. it is a premier for us in the country.
all the companies all around the want to deliver much better customer service to their customers because the customers have taken the power. the idea of chatbots is very interesting. do you see chat bots becoming more a part of your business? >> the first time i heard about the chatbots, i was although depressed. my job is to have a service of people. guess what?
never grown more than over the last five years. we need the chatbots to help. they help us to better serve customers. the customers still human being. >> how are you also using ai and your business in content moderation? >> and content moderation, i isld say typically, ai relevant for 95% of the world. ai has difficulty in contextualizing and
understanding in making the difference between what is offending and not offending. what is part of a story. the role of ai is to eliminate maybe 95% of business. there are 5%s that of these issues that need to be reviewed by human beings. it is something that is never going to end. >> critics would say that chatbots and ai are replacing human jobs. how do you respond? >> this is what i wanted to tell you. today, we employ more than 300,000 people all around the world.
we continue to grow organically around 8-10% per year. live -- to ai to deliver more sophisticated services. this is very simple interactions. that is a good thing. it is time that you come to a , if you enterion in and ai discussion, i don't know how you will finish. locates thehe ai information and then makes sure we are going to reassure you and you have to make sure you're going to get your help. >> that was daniel de leon. iel julien.-- dan
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