shery: it is what rpm here in hong kong. i'm shery ahn with a hot dust of the update. remains untainted on this thursday. it is expected to plunge as say thel backers structuring must outweigh wise -- buys. toshiba fell as much as 26%, the most important case -- the most in four decades. it could come to more than $6

billion in losses. is not enough evidence to arrest syndrome ceo. he is a -- accused of perjury and bribery and paying millions in return for influence. the investigation will continue. global news 24 hours they powered by more than 2600 journalists and analysts in more than 120 countries, you are watching bloomberg. let's get a check of the markets. after trading just getting underway in hong kong. composite remains unchanged. tokyo think this. this is bloomberg. ♪ caroline: this is bloomberg technology.

netflix's "crown jewels" beat estimates again. new customers flock to see original content. plus salesforce ceo marc benioff joins us taking down rising competition in the cloud. and why a judge decided not to arrest samsung's heir apparent. what is next for south korea's most valuable company. first to our lead. netflix shares spiking in after-hours trading. they report their biggest quarter ever. they added more than 7 million subscribers to finish the year with 94 million members. the company credits the popularity of original content including "the crown" and new seasons of "gilmore girls" and "black mirror." this is one of investors chief concerns. joining us now, cory johnson. walk us through.

it looks pretty record. cory: those are some great numbers here. there were some terrible numbers here. the first show they mentioned was luke cage. it was my favorite show a netflix, so it was interesting. that is part of their long-term plan. thissn't too long ago company rented dvds. most of their spending right now is going towards original content including luke cage where they are thinking it's not just luke cage, but daredevil, jessica jones, iron fist, they will have their own avengers. part of the marvel universe. they are thinking of how they are going to build a mountain of original content. they have spent a fortune on marketing. this is the biggest spin they have ever had. the numbers they put up in terms of marketing spent were not only greater than ever before. it even shows an increase. it is 11.5% of revenue. they just raise a bunch of money

in the debt market to buy more content. they are plowing get into marketing. they actually saw not only great success in buying subscribers internationally, also buying subscribers domestically. there was a take-up in the domestic subscribers. it looked like that market was completely saturated. this last quarter they grew at 4%. function of how much you spend. what we want to see is how long the subscribers stick around. caroline: it is interesting. sales are still up. you are seeing earnings, despite marketing, still beating. it looks as though the market is liking it from a sharing point of view. the cost of all this, not just of marketing, but $6 billion being promised to spend, is this

bells anding alarm long-term? >> it is a way to see where the content cost is happening. netflix said in the press release that gross margins don't show you what they are. this is hollywood. it shows you whatever cost they want to show. they said that will is going on with this thing was the recognition of content costs, not the actual content costs. there was one number. you can see it trading up. everyone is ignoring me. they spent about $100 for every new subscriber they got. they will have to keep those subscribers for 35 years. that is not feasible. content cost has to come down.

the cost person's driver has to come down. can still make inroads into countries they are big yet. if you look at the u.s., 50% of broadband homes. far less if you're looking at the united kingdom. there is still room to grow. cory: if they can grow that much. any kind of increase was interesting to them. you can sell a dollar for $.50 for only so long. when is it going to show up for this company? the cash flow numbers were stunningly bad. the amount of my these guys are going through. we see those numbers and they are positive numbers. they have to have a go up in order to pay for this content. with that big raise to spend on content, 600 $18 million in 13 weeks. million in 13 weeks. that is $7 million a day. how do you do that? all of this content in all of this marketing. they can't do this forever.

there is cash flowing out of the door and incredible sizes. they are hoping they can outlast their competitors. i don't know what the plan is. if costs go up, and running out of places to grow and burning through this cash flow it could be a real problem. eventually the piper is going to have to be paid. caroline: we will see how they trade up tomorrow. cory johnson, editor at large. staying with netflix, it has been 10 years since the company made its strategic shift away from dvds into streaming. we look back at the company's evolution. >> in 2007 netflix announced a bold departure from its dvd rental business. watch instantly allowed users for the first time to stream a library of a thousand movies and tv shows over the internet.

the ceo explained the move saying mainstream consumer adoption of online movie watching will take a number of years. the time is right for netflix to take the first step. analysts were skeptical. there were just as many hold as by ratings on the stock. consumers saw something different and signed on in droves. by the end of 2010 subscribers had grown to 20 million. at the same time, blockbuster filed for bankruptcy. netflix set its sights on a new venture in 2013. original content. launching what would become an arms race amongst its arm -- amongst its rivals, netflix spent an estimated $100 million on two seasons of its first original series, house of cards. original hits don't come cheap. by 2016, netflix had produced 600 hours of original content at

$500 million. they plan to shell up another $6 billion this year. that is nearly the double the programming budget. positive freeted cash flow in two years. it is on the hook for $14 billion in future payments. cash flow concerns aside, reed hastings bet on streaming video is paying off. netflix now has over 90 million global subscribers and makes 94% of its revenue on streaming video. caroline: a story we were watching, alibaba's jack ma addressed one of the biggest global issues looming around the upcoming trump presidency -- a trade war between the u.s. and china. he said a trade war would spell disaster for the world and that he would do anything in his power to prevent it from happening. alibaba has a large part of its

business tied into the u.s. giving a strong incentive. says was that come to assess was the calm -- salesforce.com from devils, switzerland discusses competition and why he is not worried. ♪

caroline: the u.s. department of labor has filed a lawsuit against oracle america alleging pay discrimination. they pay caucasian male workers more than their counterparts. a spokeswoman for oracle said the complaint is politically motivated based on false allegations. oracle values diversity and

inclusion. oracle shares were little changed in wednesday trade. now to an oracle competitor. it is been a challenging few months for salesforce.com. they have slowed growth but the company has seen a strong start to 2017. shares have jumped year to date. the forecasting sales will jump 21%. speaking to bloomberg, marc benioff discussed the growth of the company and its competition. >> we had to do what we were doing from the beginning. help them connect with their customers in a new way. that is why so many companies here, using salesforce. there is this sea change going on. companies are working hard to develop that customer intimacy.

>> you have a lot of competition. jeff bezos just bought the largest house in washington. i think it is the size of delaware. how do you compete with other pretenders to what you invented? amazon is a great partner of ours, actually. and a great customer of ours. amazon uses salesforce to connect its people. we work with a lot of amazing retailers. i have a feeling you know who he is. those guys, those next generate -- generation retailers who are getting slaughtered in the brick-and-mortar world, they need to connect with a new way through retail. >> they are exciting times. i guess everybody is making money, but you have your

critics. how are you going to position salesforce with new technology? you are one of the few technology guys and happy valley here. how are you going to reposition for the next five years? i can't imagine where the iphone 7 is in five years. business, started our crm or customer management was nascent. it will be the largest segment of enterprise software by 2020. we are number one in that segment. we are continuing to innovate and look for ways we can become more successful. >> in your world, we are going to go through a phone. how do salesforce, your competitors handle the cloud through whichever phone you have in your hand, business or personal. >> that is fascinating. you just made a huge shift in your mind from where we started with personal computers.

the most popular computer today is the mobile phone. everybody can have a computer far more powerful than the most powerful macintosh. that is something now in your pocket. now computers are going to disappear. you see things like alexa, google home and others. we are just talking to our computers, talking to our watch. that is an incredible next-generation of computing. >> i came here with a theme, the idea of davos and the uncertainty of the uncertainty. i've never seen so much lack of confidence here in public policy philanthropy. what would be your counsel to

mr. trump as he becomes president? what is his first to do list? >> when we were here in 2009 and 2010 -- things were a lot worse. people were pretty dour. they were really worried. we were on the brink of a global financial collapse. i think they have political anxiety but i don't think they have economic anxiety. caroline: that was mark benioff at the world economic forum. netflix shares remaining higher in after-hours trading. the ceo spoke just moments ago on the earnings about the company's global ambitions, we will bring you more on netflix earnings throughout the hour. >> international expansion has been remarkably steady. if you don't look at it by the

quarter, what we have seen, europe as a whole has been picking up momentum for us. we are just getting started in asia. ♪

caroline: in 2016 we saw a number of businesses get disrupted by tech giants, get hit by regulators, and responsibility of silicon valley commented question. will 2017 debate the consequences of their business? i asked who will lead the way, regulators or the tech titans like facebook and google? >> the smart businesses, including the ones you mentioned

have gotten to where they are because they are forward thinking. they don't want to wait for a regulator to tell them what to do. they want to be ahead of that. not just because they are good people but because that is the smart thing for their business, to ensure the sustainability and longevity of their businesses. >> sometimes a company that is expanding is disrupting and has negative repercussions. some taxi drivers will be displaced and not have jobs. there is going to be some automation that means those of less skilled will find themselves under employed for what they would wish. does the company's health tackle that? >> you can't be disruptive and not break some eggs. all of these companies are creating much more value than they are destroying. they are creating more opportunities than they are eliminating.

there's always going to be some portion of the workforce trained in a specific skill who may not be able to transition to the new skill. the may not be able to make that transition. the vast majority will. not only that, these technologies will attract more people to that job and grow the workforce as well. >> would it be uber's responsibility to re-skill people? >> i don't think question of responsibility. it's a question of strategy. if your business requires somebody to re-skill a group of people and incur some expense in doing that, your business is not going to grow.

we have to build a business that somebody can teach themselves. star earning money in a flexible way. without any kind of specific training or retooling. that is what they are doing. >> we might see companies reevaluate how they talk to their user base. 2017, is that the year for that? >> we are very excited about what we have in our work folio. we have been doing this for 20 years. many of these businesses have been growing a very exciting businesses in market positions that are reaching a point where some of them could tap public markets and that would get them to the next stage of their growth and development.

>> is the ipo the way to go? how do you feel the market is shaping up? >> the entrepreneurs we know always think about the ipo because it is a step in the path to being the company they want to be, the resources to be able to take on the whole world with their platform. it is not an end within itself. it is a step along the way. it can come along after an ipo. that is kind of a final transaction. that is something where a team has to actually sell their baby. the entrepreneurs we work with want to push that off as long as they can.

they want to keep building their company. >> the investment opportunities, many vcs have been building up funds. have they been able to find the assets they wanted to the money to work on? >> we've had a very active quarter. the last quarter of last year. we continue to see exciting opportunities in europe and in the u.s. >> what sort of verticals are you most excited about? >> we continue to invest in consumer propositions. that is always something we have been active then. we continue to see exciting things there. on the deeper technology, on the deeper technology, enterprise infrastructure side. we are seeing some interesting opportunities. caroline: said -- chairwoman

janet yellen spoke wednesday from the commonwealth club here in san francisco on the goals of monetary policy. she showed optimism in block chains. >> it's promising the technologies we use ourselves in many financial institutions looking at it. it could make a big difference to the way in which transactions are cleared and sold in the global economy. >> coming up, the south korean court has objected -- rejected the arrest warrant for sims and ceo. this is bloomberg. ♪

here int is 1:30 p.m. hong kong. i am shery ahn with an update of the top stories. tech caps on shares are set the shares are seta the plunge. they are weighing buys around 10 to one. they are said to be leaning toward bankruptcy to shield them from liability. china's injections into money markets are heading for a record. they dumped about $28 million. taking injections this week above $150 billion. that is unprecedented going back to 2008.

they're waiting to restart a nuclear reactor. the website says a satellite picture indicated new activity at the site. south korea is reporting signs that the north may soon fire a long-range ballistic missile. no plan for a state even though the two carriers are exploring further corroboration. they say they may be approaching a cochair deal. much as 40%.y as you are watching bloomberg.

let's get a check of the market. trading in the asia-pacific. >> a bit of a mixed picture today. we have seen an upside coming through from the nikkei 225. some export stocks, the hang seng down. the biggest change is the vegemite deal. we also saw good deals coming through from steel players. you are seeing some weakness coming through from these energy players. still very much trading off that 2.7% slump that we saw during the new york session. shanghai has turned negative. quite a lot of speculation.

there was quite a bit of state intervention coming through into that market. you are seeing things mixed across the southeast asian markets. we are going to be live from london at the top of the hour. this is bloomberg. caroline: this is bloomberg technology. netflix up after hours. that is the biggest quarter ever. 7 million added. that beat analysts' estimates. that brought its total user base, 94 million. a big draw for those new users have been original content. certainly been relatively addicted to the crown as of late. spending a concern for investors. about $6 billion is what they are looking to spend next year.

i want to check out one particular area of the bloomberg crate analysts recommend nations always check it out on your terminal, go to the stop you are looking at. this shows you how many analysts are saying, by this stock. 60% still say buy. we will be in $143 per share. that is trading around 150 times earnings, based on 2017 estimates. you see the price target, 12 month price target, is actually lower than the $130 we saw track from yesterday's trading. we are looking to see if those price targets could be matched to raise where the netflix stop currently trades. now, let's get back to one of our other key top tech stories around the globe. a south korean court rejected a request to issue an arrest warrant to samsung's heir apparent. is the investigation completely over? a senior director at the korean institute of america joins me.

gentlemen, welcome to "bloomberg technology." jeffrey, i want to ask you first the key question. as the investigation continues, how much of this has had a damaging effect on samsung within south korea? >> we have to keep in mind that for south koreans, this would not be something out of line. many south korean business leaders, including jay lee's father, have been convicted of white-collar crimes. the samsung chairman was convicted twice of white-collar crimes. because of his economic benefit for the nation, he was given two presidential pardons by two separate presidents. he continued his chairmanship throughout his life. his son is preparing to take

that chairmanship most likely. he technically is second in command of the empire. caroline: troy, elaborate, even if this isn't much of a surprise potentially to those in south korea, how much should international investors and consumers brace themselves for change? >> initially you won't see much change at samsung. even if they were to face continued legal issues, i think you would see this plan continue. the larger question at least for investors will be, are the prosecutors able to actually tie samsung to the government and coercing it to vote for the merger through the national pension fund. that will be the real key for investors going forward. caroline: how do you react to that, if that is the key question? how much more broadly does this affect conglomerates within south korea? are we going to see a changing of the relationship between the

government and these huge conglomerates? >> it's hard to tell at this point. it is very traditional and south korea for businesses to get donations, and sometimes even bribes, two government officials. this is something that goes back into the country's authoritarianism in the past. businesses get favors from the government and the government gives favors to these businesses. that's how the south korean nation was built initially with the nexus of business and politics. with these allegations, we are seeing this question over whether samsung was coerced into giving a donation to this crony, or whether samsung willfully went into this trying to get benefits for this merger that was going to happen, trying to get the national pension service to vote for that merger that got jay lee more power.

caroline: you actually feel that perhaps this isn't the particular leader to be bashing right now, because jay lee is progressive compared to many within the conglomerates of south korea. will we see change if he is indeed ousted? >> that the interesting thing about this story. if you look at what samsung has done since he is coming to power, he has essentially made it more progressive. he's taken and allowed employees to not necessarily address each other by title. he's asked his own guards not bow to him. he is really tried to loosen the company up and move it more towards international standards. there is still more to do, that it is something he has pushed forward. he's a much more humble, much more laid-back individual. and so, if he were to be brought down by something that was an old-school korean type of scandal, i think it would actually be very detrimental. one, the question becomes, how would these reforms stay at samsung. two, because of samsung's

importance of the broader economy, it is a symbol of the way it should go. caroline: a quick glance, jeffrey. how much do you think this will change rivals? will samsung be as important to the economy going forward? >> yes, i think samsung will be. it makes up a large part of the south korean economy. if you are apple, some other company and you need to put in an order for parts for displays for semiconductors, samsung is often one of the first choices because they can make things faster than a lot of other companies can, and they make it as high quality. they have a reputation as a fast follower. in hardware, they are often at the leading edge. caroline: i want to see how this story continues to unravel.

thank you very much indeed. the at&t ceo remains confident about one of the biggest mergers on the books in 2017. randall stephenson expects confidence that the deal with time warner will go through. >> the confidence level is fairly high. it is a straightforward business combination, a vertical merger, which means we don't compete with them. and so this merger closes. today after it closes, the telecom industry looks exactly like it does today. so, from letter of the law, this is probably a deal that ought to be approved, we think. caroline: coming up, one of you earliest executives opens up about the company's future and the looming $4.8 billion verizon deal. an exclusive with the former yahoo! president next. this is bloomberg. ♪

caroline: a bloomberg scoop on two of the biggest companies in tech. google announced it will purchase a twitter on business that provides a software toolkit for mobile app's and is part of the deal, will google also get a popular tool for tracking software failures. the company's did not disclose financial terms. looking ahead to this week's inauguration and the key issues that will impact the future of washington's relationship with silicon valley or, earlier we sat down with susan decker. we started by asking her about trump's approach to technology and the changes that will come with this new administration. susan: the relationship between silicon valley and washington is a very good question and one

that i think was due for some conversation this year regardless of whether hillary had won or trump won. there are some broader economic factors out there. a generation today where our children at the age of 30 are -- fewer than half of them are likely to be making more than their parents in income, which is a big reversal from the trends in america for many years, were each set of parents to like they wanted their kids to have it better than them. there are many reasons than that. tech does play a role, in the sense that a lot of the great innovations here that have added so much to this economy, in the bay area and other economies, haven't necessarily been shared by all of america. i think the anxiety around that has been bubbling for some time. regardless of who is sitting in the white house, i think it's an issue and it will be a really important issue how those tensions get resolved in the next year.

there are different ways to solve them. both silicon valley and washington need each other, in many important ways. it's important that silicon valley not find itself two years from now with the public perception that wall street has with washington. and i think that's a risk, if there isn't some olive branches extended in both directions. caroline: how potentially can silicon valley step up to the responsibility to ensure the globalization works for the many and not just the few? is it about skills they can provide? how can they ensure they are more inclusive? susan: the skill set is a really good one. ultimately, there has to be some transfer of some of the wealth that is created here, and displaces workers elsewhere to those families. how that transfer happens is not necessarily the responsibility of silicon valley.

but they can certainly do things, like try to educate people in certain regions that may be losing jobs in coding. there are definitely think silicon valley can do. they also may find themselves in more regulated position or taxed in certain ways that help transfer some of that wealth. to me, the core issue, where it would be done right is if nothing in washington and -- and the restricting the free flow of labor and capital that is what's creating this innovation, if tariffs and other forms of regulation that try to keep jobs here and set of allowing foreign challenge workers to stay here and keep the cost of producing low. i think that would be a bad outcome. if we could keep free capital and labor and innovation going here, and then with the benefits of that figure out how to help

the people who are displaced from self driving cars and trucks drivers, etc, that would be important and silicon valley needs to step up and look for ways they can help. caroline: more of our exclusive with susan decker coming up next. bloomberg television will continue its covered from davos, switzerland, speaking with the goldman sachs chairman and ceo lloyd blankfein. tune in to that conversation at 6:00 a.m. eastern. "all due respect" will add special episodes all this week on bloomberg television, taking a look at the key issues facing the incoming trump to dramatic rpm -- 9:00 p.m. this all leads up to bloomberg special coverage of president-elect trump's inauguration on friday. this is bloomberg. ♪

caroline: now back to our

exclusive interview with susan decker. in part two of our conversation, i asked her to reflect on her time as president and what she thinks of the $4.8 billion verizon deal. susan: i think based on where yahoo! was in the last year, he was an inevitable outcome that it was supposed to be sold. the fact that it was sold to verizon in some ways is very logical, they own aol and there's probably a good consolidation opportunity to look at the properties a well has and the ones yahoo! has, which ones overlap, cut some cost. i can see the business logic behind it. caroline: why was it inevitable? susan: because the core issue at yahoo! is that no administration that has been running it has been able to solve, is what the core distinction is in consumers minds and what makes yahoo!

great. in my mind, it was all about content. with yahoo! they are still struggling with what their core identity is because they did not get really great at the thing they had a core identity in. they had gotten sort of mediocre and everything because they were spread so broadly. by the time the last year came along, it needed to be sold. i sort of wish it had been sold to a company that was -- i don't know what verizon will do. i hope they revitalize that spirit and make it unique again. i think either way it needed to become private or semiprivate. by being in verizon, even though it's a public company, it's a small part and they will be able to take the steps that are hard and long term in nature, but couldn't have been taken when it was a public company because of all the media scrutiny. whether it was a private eye or -- private buyer or whether it becomes a subsidiary of a public

company, this is a good home in the sense that i think they can probably make some tough decisions. caroline: was some of the media scrutiny unfair on marissa mayer? susan: probably. i think she was dealt a tough hand. i would say really, some of the seeds of the challenge that yahoo! were sewn very early. when you inherit a company that's already operating certain ways, it isn't easy to change it. there are certain things she probably wishes she did differently, just like all of us probably wish we did certain things differently. i think she did the best she could, and unfortunately it wasn't enough. caroline: what about the hacks that seem to have come with disclosures much later than the actually occurred. how would that affect the price point with verizon? how much do you think marissa mayer and people at the helm of yahoo! would be taking this on stability for that?

susan: i don't know how it will affect the price, if at all. it is certainly possible there could be a renegotiation to some degree. i don't think it will stop a deal from going through. and, sure, i think the leadership of the company should always take responsibility when something goes awry on their watch, even though if whatever happened had seats in a previous administration. i don't know anything about the background of that. if the right thing to do to step up when you are leaving a company. caroline: what are you going to look back on. do you think it was correct to get into alibaba or a chinese company, looking at value abroad and the way they seem to? susan: i do. if you look at the original stake in alibaba, started in 2005, that would be worth $70 a yahoo! share today. it was sold the years, in pieces. today it's worth considerably less than that. but still, if it was the single biggest value creator in yahoo's

history. it's a sad sunset for this company. we all had a great love for yahoo. we wish it were different. it did innovate in many ways and create some great value and there are some wonderful leaders who are all over the valley now. caroline: are there many other companies over there at the moment that you think are excelling or perhaps you are worried about the need to be looking at their strategy? susan: we are in an unusual situation here for silicon valley. we touched on it earlier. you have companies like apple, google, facebook, amazon, microsoft, in the top 10 in market cap in the world. if you think about the top companies, silicon valley and north to seattle are a big part

of that. it's very important that this relationship with washington gets resolved in an effective way. caroline: a man who has spoken about the way it is divided is warren buffett, a man you work alongside of berkshire hathaway. is this something you see being returned to investors at any point? susan: i would say it's possible. i don't think there's pressure in the next several years to be returning that cash. one of the things that is so remarkable about berkshire hathaway is, it is a collection of businesses that generate a lot of cash. and many of them generate more than they need. and others are quite capital-intensive, like the railroad businesses. you have insurance and consumer businesses that generate cash, and a cash free way to allocate cash to businesses that need them.

that's been a wonderful model. but it isn't a model that is even every year. a major acquisition could come up, and it's good to have the resources on the balance sheet to be ready for that kind of acquisition coming up. as long as the core capital allocation proposition is working for investors, taking capital that's not productive and putting it into highly productive uses in a value created way, i think investors will be tolerant of short periods of time where the cash builds up before the next deal. caroline: that was susan decker, director of berkshire hathaway and former yahoo! president. that does it for this edition of "bloomberg technology." on thursday's show, we will be speaking to bret taylor. taylor comes with years of experience in tech as a cocreator of google maps. this is bloomberg. ♪

manus: rates going up. janet yellen says the fed's coast -- close to the fed projections. draghi divergence. ecb watchers will be looking for clues about the direction of policy and the central bank's first meeting of 2017. cuts, the german lender is set to tell employees that job cuts are on the way. after slashing bonuses for senior staff.