♪ emily: i am emily chang and this is the best of "bloomberg technology" will be bring the best top interviews from the week in tech. it could be the biggest deal of the year and change the way you watch tv come a getting regulators to clear the at&t proposal to buy time warner could be tough. we will hear from the ibm ceo and dive into big blue big bets on watson. our conversation with twitter investor steve, the former microsoft chief ways and on the road ahead. to the megadeal everyone is talking about, at&t agrees to buy time warner.

politicians and competitors are raising the red flag. at&t and time warner do not directly compete with each other, critics of the deal say it would concentrate too much power in the media industry into a few hands. the acquisition would give at&t ownership over hbo, co -- cnn, content like "game of thrones" -- the former ceo -- >> i believe they are smart business people who understand the value of an independent, strong, thriving and aggressive cnn. for now, there is no reason to doubt it. the real test will come when a company like at&t which is going to find itself in more controversial news stories than time warner, the entertainment warner -- entertainment company

had. we will see how tolerable -- tolerant they are of being covered aggressively by the network they own. emily: how hard to sell will it be to regulators? >> i think for now you have to take at&t at its word and it will be a tough sell in washington. this is ve similar to a deal that comcast did when it acquired nbc universal and that deal was approved by regulators, but comcast had to agree to a lot of tough conditions that has really hamstrung nbc in the way can do business. emily: john, gerry mentioned comcast acquisition of nbc. did that impact nbc at all in your experience? john: it doesn't seem to have from the outside, except maybe providing a little more clarity of management, little more strategic management. cnn has been through several rounds of acquisitions in its lifetime and there are a lot of

people still at cnn who lived through the acquisition of turner broadcasting buy time warner and the merger of aol and time warner in the difference here of course is the earlier acquirer's had a journalistic heritage, both of them did. at&t does not. in a strange way, that may help and make it easier because this is a vertical integration and not horizontal there will not be as much fighting over common ground as there would have been say if rupert would have succeeded in acquiring time warner. could you imagine? not only fox news and cnn trying to live together, but fx cable channel and tnt or tbs fighting over the pie. maybe it will be easier to get along because of that. emily: rich greenfield was on bloomberg television earlier today talking about the

inefficiencies of it table companies and why this could be a smart move. take a listen to what he had to say. rich: the internet disrupts inefficiency. you had to buy an entire package of channels and you do not want most of them and most of the channels like amc, you may love the walking dead, but you are paying for the entire year for one show. the internet disrupts that and i think that is the early stages of what is happening just like it happened in music and publishing. we see that unwind and jack -- jeff bucher is at time warner was smart enough to get out. emily: given what is going on in the broader landscape, at&t integrating, directv, verizon trying to buy yahoo!, why did at&t want to do this and do this right now? gerry: you can see the line between entertainment, telecom,

and technology are starting to blur. the trend happening in the television industry is more and more people are cutting the cord. the pay-tv industry has peaked and is starting to decline and that is putting pressure on both at&t which delivers video service through directv and time warner which makes its money off of selling both advertising on television and collecting subscriber fees. emily: john, do you think at&t owning cnn could help cnn in anyway? if you were running cnn what would you be thinking? john: there is always the possibility of getting more resources to fund the kind of acquisition or internal development or rmb that is -- r and d that is going to be required as the landscape changes. in the past 12 months facebook and snapchat have gotten to 20 billion video views delivered per day.

that is four times what it was a little over a year ago. where is that number going to be by the time this deal clears regulatory hurdles? media environment -- that is the media environment at&t and time warner finds them in, the one where the consumer is the biggest distributor of content in the world. you are watching video that your friends sent you featuring sometimes your friends and emily: john, do you think at&t sometimes famous people who you say that feel you know. that is all threatening to escape the control of a content creators and content distributors so at&t and time warner are trying to wrap their arms around that. what it means for cnn is they have to figure out ways when this tv remote -- that is what your phone is today -- the battle for that tv remote means every content creator weather news or entertainment or sports have to figure out a way to

become must-have content that a viewer will pay for. emily: staying with this story come earlier today i caught up with one of at&t's a guest rivals, the t-mobile ceo jon leger who did not hold back when he slammed the deal as a diversity tactic on the back of at&t's lackluster earnings results. jon: ever since they bought directv they have not gained a single postpaid customer and

have been the biggest contributor to our success. i can only say in the short term this distraction with them trying to take over the entertainment industry is going to be a boom for the short-term future of t-mobile's growth. emily: what about the long-term? your competitors are making moves that they believe put themselves in a better position for the future, a more powerful position and more diversified position. what happens over the longer term when you are just a carrier? jon: again, what is important is even at&t announced today and verizon in the last week that they are diversifying because the business they are in is shrinking. we are the reason that is shrinking. we have a sustainable growth business in the wireless industry. verizon and at&t need to create new revenue streams. each new one is falling off. when you move more to the strategic concept of how do you take the 70 million customers that we have with these mobile devices and provide them access to all of the content they want to view, i do not see the need to own and control the content the way at&t is. already with binge on and t-mobile 1 we have the ability for customers to view on a mobile basis and there are so many ways i can innovate to be an aggregator of content in a search and discover capability on content by others and a big part of this deal with at&t in

-- and time warner will be them ensuring the government that they are not going to close down option hourly for everybody else on the content they have. certainly i would hope so. emily: in the meantime, 18 he will tell the 100 channel plus online streaming service directv for $35 a month and experience with a la carte distribution of programming. randall stephenson talked about new ad models to support cost at the wall street journal conference this week. randall: that $35 price point, these content costs will not be flat. how do we develop new ad models to allow us to keep the price point in check offsetting the price increase on content? i think that is really important. emily: qualcomm agreeing to call nsp on friday, an 11% premium on wednesday's closing price. conference this week. they are the biggest provider of chips to the auto industry. our conversation with ibm chairman and ceo jenny lenity and why she says watson stands

out from the competition. this is bloomberg. ♪

emily: ibm teaming up with slack, gm as the company expands its reach of watson's artificial intelligence technology. ibm put a huge bet on watson being a huge part of the companies future and the announcement are coming out of the world of watson conference in las vegas. we spoke with ibm ceo ginni rometty.

ginni: right now watson already touches hundreds of millions of consumers and by the end of next year we are on path to be one billion. it will be one billion and you just mentioned some of the customers that we are partnering with. he mentioned general motors coming out in the 2017 videos, onstar go, a partnership about using your time in your vehicle in a personalized and safe way, or teva is the world's largest generic manufacturer and what we are doing all around making the whole process in the kind of delivery of drugs in a different way with watson. he talked about slack and we just announced last week the work now out and available with quest diagnostics which really makes precision medicine

available to almost everyone in the united states. emily: let's start with the gm partnership bringing watson to the road. give an example of how watson will be powering a new driver experience. ginni: this idea, keep it simple, but it is interacting -- gm has about 1.5 billion pieces of information from connection and you, individually, print -- for mentioning -- permission and what happens here. everything from having a prescription to pick up on the way home, went to get off early to go get it, pre-ordering, paying for your coffee, another example would be, you are going to run out of gas getting to the right place paying ahead at the pump for you to get your gas and it goes on and on from there. this is just the beginning and there are a number of partners as part of this first round coming, exxon mobil, mastercard, a whole group being added on. in a very permissioned way. it changes the experience because people on average than 38,000 or 37,000 hours in the car. emily: tech companies from apple to google to uber are vying for control of the car.

what makes you think watson and ibm and gm plus ibm have something special that other technology companies cannot replicate? ginni: in this case, using watson and the artificial intelligence cannot replicate it and therefore gm has data that cannot be replicated either. others have other kind of data on their own that can be used. i can see us being able to play a role across many different parts in auto. whether it is daimler car to go or work with honda on batteries, many different places that this kind of cognitive intelligence will come into play and it isn't just autonomous driving. we participate in autonomous driving with subsystems in the car. it is a whole continuum of opportunities out there and they will be all different forms whether ridesharing, autonomous driving your own car, and a wide variety of ways you will dissipate. emily: you say watson is differentiated because every client basically gets their own individual version of it. as i understand, ibm will not own or use the data.

why is that important and what advantage does that give you over other companies like google, amazon, microsoft that are pushing hard on ai? ginni: as you know we have been building watson for quite a period of time, a decade even before jeopardy and in five years how far we have come making strategic decisions that make watson the ai platform for business and knowing what matters to business. in every business you have accumulated a lot of information, it is yours. the value is yours, the ip is yours and so should be to competitive advantage. we have made a choice where we will bring data and watson and algorithms and you bring your data, but the insight goes to you as a client we are able to separate those so they do not train the base platform. you make choices on that and a client that is extremely important because there is not a client in any industry that is not going to have the basis of their competitive advantage be this information. everyone we know.

in my mind and in clients eyes, this is one of the most important decisions we made. emily: you have been hard at work transforming ibm and watson is a huge part of that. how would you evaluate your progress so far given that transformations in tech are not easy? ginni: and you know we are 105 and the only one that made it through multiple transformations and eras of technology and i am proud. 400,000 ibmers and when we did earnings you stop -- you saw the should you do are now $32 billion in size, 50% growth, 40% of ibm and watson is the silver thread through those and in many parts of our base system. if you look at the big technology services business, much of what they are doing is pointing clients to the cloud and watson is a piece of that.

emily: ibm has several legacy businesses in addition to new businesses you are pushing into and investors seem to be focused on legacy businesses. how should we think about the performance of these legacy businesses versus the newer businesses over the short term in the long-term? ginni: one thing is i do not think of them as legacy businesses. we have divested a set of businesses we thought were, at a tithing and better with others, but the businesses we have are really core franchises that we run and if you look at global technology services or systems, these are really important part that have been modernized many times. they may not be in growing markets, but modernized whether it is blocked chain mobility, security, and to have watson be part of them. they are an important piece. if you look it will be due to run the banks and airlines and manufacturers of the world, they work together.

the announcement with gm is a good example. we have been doing work in our global services through on star and that formed as a platform of knowledge that moved into what we did with onstar go with watson. they are two different markets, but related to each other. what we call strategic imperatives, businesses we are building and new and now a scale at $32 billion and 40% of the company and the other businesses, the core franchises while they may not be building, they are profitable and solid we did with onstar go with businesses together. emily: that was ibm ceo ginni rometty from las vegas. coming up, we had back to the world of watson conference is beat with slack ceo stewart

butterfield and steve ballmer is known for sounding off and he says twitter is the best way to do it. he will make the case for twitter's independence this hour. this is bloomberg. ♪ butterfield and steve ballmer is known for sounding off and he says twitter is the best way to

emily: the secret of silicon valley startup may be headed to an ipo. alex clark said that company is going to go public. it was pre-receive i-8 at $20 billion and the ceo plans to reach profitability by next year. now back to the ibm world of watson conference in las vegas where slack and ibm are teaming up to bring watson to the global community of developers and enterprise users.

we caught up with slack ceo stewart butterfield. stewart: one of the ways we will integrate watson technology in a direct way is to increase cap ability of slack bought -- slackbot. that is just scratching the surface. there are thousands of developers creating applications for slack for customers to use to interact with systems for business workflows, processes they use. on the one hand like setting up an extension cord or a meeting time and a lot of those are very integrate watson technology in a direct way is to increase cap ability of slack bought -- slackbot. that is just scratching the surface. dumb, they are useful, but they are dominant to the extent we can help developers leverage technology to make applications smart, make a scheduler that understands presidents and what kind of meetings can be shuffled around. approaching human level intelligence in simple applications. emily: you are using ibm ai, what is slack building in-house and how do you decide what to build in-house versus from outside? stewart: the surface area for this intelligent technologies is really broad.

we have a group in your called search learning and intelligence and there is value in super keyword searching so we are working on that and improving technology and working on things that are particular to people's use of slack, things like recommendations on channels that people should join or channels people should leave. where i think there is intersection and where we can really collaborate with the ibm are dominant to the extent we team is on things like summarization of information you missed while you were out and helping you catch up from a day of travel or you mentioned a really capable and intelligent chief of staff able to read your messages for you and distill it down to the few things that matter and maybe make proactive

information -- think she should take care of. i am lucky to have someone like that, but even she is not capable of reading every single message and the watson powered bot is theoretically capable of that. emily: slack seems to be a target, you have everyone from microsoft and facebook trying to do what you do, let's start with microsoft. they are reportedly trying to take you on and they have some tools in place like yammer, office, skype, dear concerns about that? stewart: we welcome the opportunity to compete. one of the challenges is this is a brand-new category and not everyone knows about it. mica soft is getting the -- microsoft getting the seal of approval on this category will help a bit. if you ask professors -- our investors what they said before slack generally they say nothing. you can imagine what kind of challenge it is when you come

into a brand-new company would people have no idea what they would even use this for. i believe in our ability to produce a product that people truly love and people list slack as a perk in job prescriptions and we have this organic growth usually unseen. here at ibm we started with 5000 people using ibm at the beginning of this year and ended up with 30,000 and up because you pushed, but because people love the product that find utility in it and it spreads. i think they will have to compete on that basis. emily: do you have similar feelings about facebook's new product question mark -- new product? facebook has a lot of things like microsoft does as well, but they are still facebook. stewart: i do not know if you have ever seen the photo of 1977 era microsoft whether -- where they are all hippies and look

crazy and nobody thought they could take on ibm in the operating system. but then they went up against google and they put a lot of money and effort into competing on search and microsoft is still very successful come but they were not able to capture google on search and then you have google pouring everything they have into taking down facebook on the social side, but they google pouring everything they have into taking down facebook on the social side, but they were not able to catch facebook on social and now you have facebook up against step that -- snapchat. if you are a large incumbent and many lines of business and you are going up against a small, capable startup that has a lot of traction, it is very difficult for you to compete. emily: apple posts the first annual sales declined in its 2001 and that is despite better-than-expected iphone sales. why the company is betting big on the holidays, next. check us out on the radio, you can listen on the bloomberg radio app, bloomberg.com, or on sirius xm. this is bloomberg. ♪

emily: welcome back to the best of bloomberg technology. apple posted fourth-quarter sales that fell 9% and brought the company the first sales decline since 2001, in line with analysts' estimates. it sold 45.4 million handsets, but remember, it included 2 weeks' worth of iphone 7. apple said revenue between $76 billion and $78 billion. the program director joined us and a bloomberg tech reporter. take a listen. >> the highlight is apple will return to growth or the q1 a holiday, so they say. they are usually pretty good about those estimates. it is above some analysts' estimates we were looking at during the past week. everything is pretty much in line with expectations. emily: i spoke with apple's cfo and we asked about the samsung issue and how much apple will benefit from the recall. he talked about supply constraint as it pertains to the

iphone 7 plus. he said it is difficult to tell where we are constraint and everything we produce we can sell right now. it is difficult to determine the factors that drive this. he is talking about samsung here. more people coming to the ios platform than ever before. ryan, what did you make of the comments? if you want an iphone 7 plus, you cannot get it for weeks. ryan: in some sense, that is a good problem to have. the note 7 with regards to this, samsung is going to leave -- lose customers to apple. we estimated to be a small percentage. we think note seven users, somewhere probably under 25% >> i do not think it is the latter. i think every year, even if they do not change the look of iphone, there are new components, especially with the chip, it takes nine extra steps. hundreds of millions of units per year, the ramp up time plays a lot when they start building them. a lot of other factors going in.

will they ever solve it? i do not know. emily: next quarter, we will see perhaps the clear impact of what is going on with samsung and the pixel smartphones coming gout. i want to talk about china. we saw a decline. let's look at it over the longer term. if you look over the last couple of years, we are still growing hundreds of millions of units 23% year over year. tim cook has been asked about china and india. let's take a listen. tim cook: we are very bullish on china. we continue to see a middle-class that is booming. there might be some sort of a new normal in the economy. a new normal there is still, you know, a good growth rate. emily: ryan, how big of a deal

is the new normal? ryan: it is a really big deal. there are a lot of changes in china. china has had bad publicity because it is a market that has slowed down. what we have seen is growth in the premium segment. tim cook talks about the middle class. that is where they are seeing business for iphone and things like math. emily: let's turn to alphabetic with earnings. we broke down the numbers. take a listen. >> those expectations given the fact that google, the core

business, growth would not have been as robust as what they reported. a very strong number. only decelerate a one point. it was a solid print that beat estimates as well. slight in the margin expansion, did not really command. increments in investments and that was ok. they announced a share buyback of over $7 billion. i need to go back to my desk to figure it out. over overall, it was a solid quarter. emily: more, we spoke to a high level alphabet executive. the quarter focused on growth. we are seeing transition. also, focused on google cloud and google play. mark: we do not know exactly what to the revenue numbers are.

the percentage of the other revenue grew almost 40%. amazon also had a rough quarter. ads did well. many saying that google is far behind in the industry. emily: sindar, take a listen to what he had to say. sindar: scaling up to partnerships is a big focus. we are establishing a large cloud machine group so we can take advantage of working with our cloud customers and make machine learning more accessible to all of them. i would a engineering and

marketing and as we head into 2017, i expect clout to be one of our biggest investments. emily: back to the advertising business, adam, this is your business. mobile is driving the ship. they are seeing a great presence on desktop. what is your take away? adam: he is similar to what was the in past announcements, the growth in click is staggering. on desktop. it really makes up for anything that might be happening on the cpc side that is decreasing faster than people expect. it shows the shift. it shows it is not a perfect the transfer, it grows the pie. people are spending more time on computing devices. it is increasing the volume. emily: it is a two-way race between google and facebook? adam: we are seeing growth across all of our channels. google and facebook are a massive share. we are seeing a really strong environment right now for performance marketing. we are seeing all channels grow.

emily: turning now to amazon out with earnings this week. shelley joined us with former amazon executive. take a listen. >> investors were certainly ratcheting up the stock past $800. on the comments, we are going to keep seeing profits every quarter and that is not is what amazon is about. emily: as somebody was worked at amazon and with the jeff bezos, bring us to how he thinks about this. >> you have to grow fast or you are dying slow especially in e-commerce today.

if you look at quarterly earnings, emily, they added $7 billion year on year. if you put that in a bit of a perspective. emily: and blood -- blackstone lost that much. guru: they are still in the black, which is not expect of amazon. think about the $7 billion they have added, in fact more than the combined revenue of bed in the last quarter. that is a model. -- bed bath and beyond in the last quarter. emily: amazon have such powerful market share, mind to. shelley, what would you point out about cloud? amazon seems to be so far ahead. shelly: it has had quite a few years ahead. cloud business is around $10 billion. microsoft is $2 billion. as they are big competitors. amazon does need to be worried about it.

that is where all of their profit is coming from. they are still ahead. amazon can use that money to plunge it into the other investments, groceries, building more warehouses to have afor holiday goods they will sell. emily: still ahead -- steve ballmer shares his thoughts on twitter and holds little back. our convo. all episodes of bloomberg tech streaming. this is bloomberg. ♪

emily: twitter showed initial signs of progress when the company reported third-quarter results. revenue beat estimates, helping jack dorsey make the case for staying independent wall trying to restore growth. twitter sketched out a restructuring. first step, eliminating 9% of its workforce. we caught up with a major twitter investor steve ballmer. take a listen to his take on twitter staying independent. steve: i think twitter is an -- asset. donald trump tweaking doubt late at night and everybody wants to talk about it. there is no vehicle that lot -- lets you speak out broadly to an audience. could the product be easier to use? of course, the product could be easier to use. could it benefit from additional innovation that takes a in surrounding areas? yes. the cost structure, there is rumor that are working on it. i see a lot of potential. emily: do you see twitter having a future as an independent company? steve: i think that twitter would be great as an independent company and acquisitions that makes sense. emily: anything you heard about? steve: i read what everybody else read in the paper. emily: what about going private? steve: it is a distraction. it would be better to put energy into innovation. emily: interesting. with rumors about you being and to buying the company and heavyweights getting together to buy the company. any truth? steve: no interest in me buying the company. emily: anybody is buying the company?

steve: nobody has reached out to me. i think it is easy to question. people, including me, would like more out of twitter. certainly, as a shareholder, it would be more confident if he was focus in twitter. emily: is it possible to be ceo of two public companies? steve: it is not possible for me to comment because i have never. i speak to the management team one quarter after earnings. i certainly share opinions that i have. they listen to them. emily: what to do you tell them? steve: the same things i talked to you about. product innovation. real opportunities. i have. simplifying the product. cost structure. do they have it where they want to be? emily: what would you like to see happening with twitter?

would you like them to stay independent? what would you like to see? steve: work on the things they need to do from a product and cost structure standpoint. and be open, always open to opportunities to be independent. but also make a cell that seems appropriate. emily: how excited are you about the live streaming? steve: it proves the power of twitter. how it works from a business model perspective, we will learn. it shows the power of the brand. emily: my conversation with steve balmer, who only all shares in twitter, microsoft, and a few index funds, so his opinion matters. he will be joining me november 6. catch my full conversation with steve balmer then.

in a bold move, french streaming service expand into the crowd a u.s. market. we will catch up with the ceo. our caroline hyde. this is bloomberg. ♪

emily: the french streaming group, deezer, is looking to expand into the u.s. it is a cutthroat business where spotify and apple music are already competing. i sat down with deezer's ceo and asked how the entry into the u.s. market is going. >> we have seen good traction when it comes to new customer registration. we have seen good feedback when we talked to the customers. we have been here for a while in the united states. we had a cricket and partners so it is not a completely new entry, but our business has been received quite nicely. emily: your biggest competitor in europe is the same as here

and that is spotify. what differentiates your service? hans-holger: we have a different approach when it comes to what we will give the consumer. we try to have a individual private so people can have the music they want. the second point is we have diversify the product into nonmusical features. we have over 40,000 hours of podcasts. we do live sports streaming. we like to work with partners. we have big partners like at&t and vodafone and these types of companies. we are slightly different than spotify. emily: you canceled your ipo and plans, but spotify is moving forward with their spring has that made you reconsider your plans? hans-holger: we canceled the ipo because -- we always knew we could go back to the private market. music they want. we could go to our existing share holders. we raised money. we raced 100 million euros in the last couple of months. we have flexibility. we can wait and see. we can decide to go to an ipo later. choices a good thing to have nowadays. emily: act of the time you said the markets was volatile. how would you characterize the market to go private now? hans-holger: it has changed a bit.

when it comes to streaming, people realize it is a way to look at the future. people can see the change in the economics when it comes to labels. people can see the maturity because it is in the beginning of market penetration. we have less than 10% in the world. i think the sentiment is probably better than a year ago and the financial markets will be more positive. emily: deezer does not have a free part like spotify. would you consider using it? pandora has been free but they are trying to convert for users to paying users. hans-holger: we have a free model as well and other european markets. we have this as a way to convert into using partners. it is a useful model.

it is a business within itself. a way to get customers in a covert them. it is one of the many ways of how we sell the product. it is not a bad way to do it but in the not -- but not the only way. emily: how do see the music streaming wars playing out? do you see multiple winners or single? hans-holger: i think like every business, you will have a couple of players. it is now winner takes it all. you have different regions. music is very local as well. the product we offer is very local. there will be different offers for each of them. i think it will be a couple of players in the field. the key factor is you need a very good, strong product. emily: staying with a music streaming, soundcloud is looking to stay independent.

eric was responding to reports that it is on the market but he's a it is focused on growing. bloomberg's caroline hyde spoke to the cofounder. she began by asking about the focus on revenue growth. take a listen. >> it has been an exciting year. we started the year not being commercial. in march, we launched with soundcloud go which is a subscription service. we have rolled out six international markets in the last six months for particularly on the revenue side. the last market was canada. that was last week.

caroline: can you give us a sense of numbers when you talk about growth? eric: we're not talking about subscription on the outside. what i can they is there has been a lot of demand from users. we are effectively a global platform. 175 million users on the platform. there's been a lot of requests for the type of features that you have to pay for. things like offline seeking and removing. anything you would find on another subscription service through major labels and so on, we have all of them on soundcloud. available, it is a compelling offer. caroline: how has the u.s. been identifying the spotifys, the pandoras. how are you positioning yourself?

eric: it is kind of a social network where creators share what they do and share in real-time and connect. it is very vibrant and different in many ways. also, our audience is very young. we talk a lot about what we call generation c, which is the teenagers of today. it is easy to think about generations. the millennials have the ipod as their first gadget. and supercomputers and the iphone or android device.

that is a very different world. as they are able to connect and a very authentic way to artists and what they do on the platform. soundcloud fits their way -- life in a way others do not. we are hiring more aggressively than add there. we are growing extremely fast. we are very excited about where things are headed for emily: that was caroline hyde interview with soundcloud's eric. that does it for this edition of for the best of bloomberg technology. we will bring you the latest through the week and catch of the latest episode of "studio 1.0." one of the most controversial venture capitalists and silicon valley. this is bloomberg. ♪