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joint news conference at the white house where they stressed the importance of the special between the two countries. may is the first foreign leader initially with trump since the inauguration. he confirmed he accepted an invitation from queen elizabeth. may and mexico's nieto have put some of their differences over the border wall line them. ne-- on a today on a arranged phone call. they held discussions on the trade deficit, drug trafficking to work together. global news 24 hours day powered y more than 2,600 journalists and analysts in more than 120 countries. this is bloomberg.

bloomberg technology. tech's cloud addiction could drive a trill dollars into the sector over the next five years and we'll break down vmware's big quarter with the c.e.o. and as the international space station floats toward retirement the start-up of a private space station. amazing. but first, the man for fort grow structure expected to dramatically. big tech ll the companies, earnings, growth. more than a trillion dollars in or pending will be directly indirectly shifted towards the cloud over the next five years the company that went at least a

rillion of that, microsoft, represented right here. glad to have you here. thanks. >> we'll have a conversation. i really think this is truth, really re in this dramatic time in technology, where all the big companies articularly the hardware slingers are losing their business of selling stuff to companies because all of these ompanies are looking to the cloud but your company has made this dramatic turn where you had in e 15% of revenues all this cloud business. >> look, we're really excited about the results we just posted. what we're more excited about is the momentum we're seeing with the microsoft cloud. track for our $20 illion commercial runway by fy 20018 and posted $14 billion in the last announcement and we're aerospace to agriculture big companies are etting their business on the microsoft cloud. >> 95% growth, faster than growing, a services

smaller business but probably number two by most estimates. customers is it getting? >> in the last six months alone we've announced major agreements g.e., boeing, bmw, renault sap -- mars, >> planet mars? >> no, the candy company. be ychi, that would really cool. >> enterprises around the world are betting their business on cloud.rosoft what we see fueling this is digital. as companies try to reinvent themselves with cloud they are choosing microsoft for that. >> i suspect you have a way in using ft -- everyone is microsoft in some way whether it's their debtsk top software, something. how many of these are core microsoft customers that are moving business to the cloud used to using e microsoft for a lot of other things not just desk-top applications? >> we're seeing growth from all sorts of customers. traditional en

microsoft customers that have come to trust our credibility over the last several decades as well as new customers that are areas like the internet of things and the of artificial intelligence to reinvent their businesses. land o lakes, most known for butter and dairy but they have a $13 billion agricultural business fueled by the microsoft cloud. >> in terms of profitability, trillion dollar number that gardner has, i think it's wrong for a lot of reasons but one i don't think those dollars will shift. i think fractions of those dars will go to the cloud an most of will disappear. do you guys have the same notion as microsoft that the it spend not be all moved to the cloud but companies will be able to spend less because they go to cloud? >> it's a pretty interesting thing to think about. we used to think about our total opportunity as the number of p.c.s and data servers object planet but now actually do look at our opportunity relative to the total addressable market for it span.

you think about what's happening in digital transformation big companies their eing are betting entire digital aviation business on the cloud and moved to using a.i. technology so they can better address irlines around the world more nimbly and at a better scale. this doesn't just translate to it cost translation. new business growth that's coming from it that we've never been able to address. a land o lakes or a bit fortune 500 company where to nking about go. i'm talking to west, now i'm ibm andto microsoft and others. why should i go to microsoft? >> well, it's really simple. day it becausehe of our scale, the trust and security we've built into the enterprise d our credibility and experience with working customers in this space. we frankly know what it takes to able to partner with industries and the world. take for example the connected space which we think there is a lot of opportunity in. e're not taking the tact of

building cars but rather we have major contracts with bmw, volvo, toyota, just about every auto manufacturer on the planet where connectedwering their car strategy. it's that eco-system, enterprise skabl and credibility that makes microsoft a differentiated choice in the space. >> you're faced with a dilemma to allow open systems customers to move on unless they find a cheaper price, but the to have would like that ability, or closed systems that might work before because databases that are databases.microsoft amazon is certainly going towards that specific api approach. your take? >> we think open is the right way to got. frankly, that's a big part of ur business today, more than 2/3 of the work loads we run today are open source work loads. they are nonmicrosoft work loads but when it comes to the enterprise, again, big usinesses, when they are betting the farm, when they are thinking about how they the trustthey want to

that microsoft can provide. >> will your business be bigger five years from now? >> that's our intent. >> good to know. that.uck with the battle of redmon versus seattle is on. very much, appreciate it. from microsoft. you.hank >> coming up, discussing vm ware's latest earnings and behind their double digit growth. bloomberg technology now live twitter right now bloombergtechtv. this is bloomberg.

>> vm wares shares up more than 3%. analysts wrong?

with revenueo that from the virtual cloud fort company.ructure 8.8%. 2.03 billion from a year before. networking , software and demand for the core behind all wing but of this, the c.e.o., help us to break it down. always good to see you even virtually. when we look at this quarter of longer trend, if we look back over the last vm endar year and where is ware and where is it transitioning to do more? >> thank you. always great to be here with you and have a chance to chat. this was a great quarter. performance across ll of our gos, across the new product lines. exceeded our expectations. it was a perfect quarter in so

dimensions. we've really been building the year hroughout with multiple quarters and we feel like our strategy has just esonated very well with customers and they are getting increasingly confident with how enable this mobile cloud experience for them in a multicloud world and be part of their digital future. been a good time for the company. >> how is it change something we just talked about how their embracing the cloud and how many companies are shifting work loads towards the loud but they aren't doing it at home so they are not rushing out to buy vm ware for their servers. wondered how your business is changing on the face? >> >> we think about that most are building new work loads. less of shifting work loads cloud. a lot of on premise environment. 20-30 until s are

it's 50-50 cloud on premise. he strategy is to be uniquely positioned across the two. nable customers to increase flexibility and a hybrid environment that combines those two together without needing to hange their application while they harness this incredible power that the public cloud is offering. partnerships with ibm and amazon have really resonated in marketplace. the growth of our cloud network has been extremely well received in the marketplace. and the core, premise products have done very well also. seeing it on both sides of our business. >> what is the amazon to nership, describe that me? >> what we announced back in ware and s that vm amazon were coming together, the lead in the public combined with private cloud were coming together to have this vm ware of the full software on the global skabl available with the amazon footprint and that brings the

of those two worlds together and it had an incredible residence. we've been overwhelmingly positive -- had positive customers and ur increased their strategic confidence going forward in strategy so it's brought the two and we're quite excited about that. it's not available yet. nextll be in the middle of year but we've already started to see customers increase their vm ware c commitment to as a result of that announcement a couple of months ago. things that, there is speculation, in the way it's going to grow going forwards, is hat you will have different kinds of customers going to different vendors and, certainly will be exceptions, but that big s&p 500 companies that used to doing a lot of business with microsoft will go the two guys with the dogened a computer and a power point presentation going web services, and for the heavy compute stuff you will see them looking to google and

ibm. i wonder how you see that playing out from your standpoint? there will behink a multicloud future. it's not just different kinds of customers but different kinds of work loads as well. you just had microsoft on. 365, i'll get that for microsoft cloud. my new app development, i want amazon, maybe google and some of their big data services will be the best place. many cases, rectory, cost driven, latency, my iot factory, will be on premise. t's a multicloud future and vm ware strategy is to give the software, management, networking and tools, that our customers take advantage of all of them and they have the ability to say we'll have the best of cloud. just like vm ware gave customers andibility of their servers franchise in the past we'll give them flexibility and control of cloud services in the future and that strategy is resonating very well with customers.

so i'll bet you had an eyebrow raise when you saw the for app ng paid dynamics, even on projected revenue growth, which was with you probably 10 imes next year's revenues and wonder what you make of that kind of valuation in a company space?r >> i was a bit startled by the acquisition. sysco, that's ee an important partner for us. complementary to us, at the app layer versus us with the infrastructure layer. i think overall, it's everybody ising, this tech opportunity moving beyond traditional it, breaking at, tech is out of tech. in the digital future every of ness and every aspect every business becomes a technology opportunity. so we believe we're coming into accelerated growth for tech overall and we're quite

opportunity that and vm ware is uniquely positioned to benefit from it. >> i would imagine you've got to think some of these unicorn companies are overvalued and we so blow up in r the next year? >> well, you know, i think we ent through a major adjustment in valuations early last year, valuations, there haven't been that many ipos, there has steady stream of that but not crazy amounts of it going forward. been a 't think it's particularly overheated market. his was, as i say, surprising, at the valuation that was paid for it. vm ware has a tremendously record, we've used them strategically. we've been a disciplined buyer nd i think what's differentiated us in the ema market is that, of the acquired ompanies, we've had extraordinary success rate of the companies we've brought in and we'll continue to use them an important part of our strategy. >> the prices are getting

higher. gelsinger, glad to have you on. thanks. appreciate it. we're stock that watching right now, company sinking as much as 10% on friday, the second worst performing tech s&p 500. a weak outlook to its latest earnings reports. sell-off has been going on since billion of the month, dollars in market cap. u.s. deal to ond buy a money transfer service but why payment? going to uncover some secret paying points in the payment business. this is bloomberg.

>> this week, two companies make big bets in the payment industry. buying u.s. money transfer

b ande money gram and air b looking to amp up its expertise, looking at tilt. we'll talk more about this, the and in new pple york, tim. do you see a connection between these two companies coming, or companies ese four coming together? >> i think there is no question there is a question, and part of is represented by the complexity of our payments infrastructure. just these two companies but everybody. they are talking about spending million to $20 million to solve their payments problem, a re they have, you know, traveler, a guest, paying in australian dollars being hosted host in the uk, in british ounds, enabling that payment, collecting the payment, dispersing the payment, that's complicated ry thing to do because our global and structure is so slow can have an error rate of 10%.

>> is this the same thing ripple is trying to do? sure. why can't value move as innovation moves today. can't stream video but i get to london in the next three or four days? i toastest way for you and to get $10,000 from there is to fly there. i wonder when we see the notion, that they are looking to a beachhead into the u.s. for payments? >> exactly. suchinted out, payments is a paying point for global commerce, and especially in e-commerce. hen you think about it e-commerce is all about not using cash, so the paying points logistics, actually fully moving a product from a to b. user interface and apple, trying to decide that you want payments.e it and for jack and financial, buying

gram, it helps to solve that given that jack mar did you want to do more in the u.s. he said, a million small to medium enterprises in the u.s. goods to china. but they don't really have a that.ts platform to do pay is very big in china but it doesn't exist in the u.s., so by he's actually helping aid this flow of goods from the .s. to china and so that's really one of the reasons why he would want to do this purchase. >> i'm surprised that we haven't google, facebook and amazon look at the banking sector or at payments in some big serious way. i'm surprised, but i read a that ugted people are very willing to look at those companies if they were to a service and yet they haven't. why do you think? study was just done that said one out of three consumers changingwould consider their financial institution

to -- and i think actually, what really that we're seeing, i agree with what tim said but the cquisition, almost a billion dollars to expand into this -- e, i think is coming coming to fruition, the it rwoman talked about almost two years ago, she said the banks' biggest competitor the new ager banks, of digital companies where the trust and brand relationship and touch points are high. should be more worried about facebook, apple and ansome. the we're seeing with financials acquisition is maybe the first shot across the bow. anks have an opportunity to upgrade their infrastructure and provide better services, better capabilities such that they can a level playing field. >> is it a zero sum game where the transactions and fees might same, just move to new technologies, or do you think overall just as we were businessg in the cloud earlier in the show, the value -- the value of what you but the money being spent is a lot less?

>> i think there is no doubt that the cost and friction this will come down dramatically over the next 10 years. we can have debates about who and what technologies will win but at the end of the day the banks will continue to be at the center of this. i think some, for example, the bit coin community have argued down own with the banks, with the government, down -- >> general services j.p. morgan?n and >> the banks aren't going away, the governments aren't going currency isn't going away so ripple takes the point, how do we enable banks to on that level playing field by selling them the same kind of technologies that bit is built upon such that they can have real-time and anliation real-time, aerate, we talk about reliable, vm ware reliability at a very high level. our global financial has maybe one nine of reliability, error rate of 5% to 10%. here, 90% of bit coin trades are happening in

china. are they thinking about that in the way money is being transferred out of china and wants to get a piece of that? basically, they already have so much in the area of financial services. he very fact that put it into another company, they have money market product, all sorts of other things like insurance loans, and doing some kind of block chain technology, i don't think they bit coin o much into itself, but as a technology itself would make sense for them to look into. solve any necessarily problem because they have already got an infrastructure in you point out so much of the transaction, volume, does go through china or from hinese, in and out of the country and internally, so learly the chinese community and the chinese users are willing to adapt, that are purely mobile. bank for o physical them to deal with and they don't mind. you very much.

appreciate it. with the up, what's up romance between president trump is that why tesla shares are rising? next. this is bloomberg.

courtney: i am courtney collins, and you are watching bloomberg technology. donald trump and theresa may have kicked off a new era in u.s.-u.k. relations. they held a joint news conference at the white house today and stressed the importance of good relations between the two countries. mr. trump: governments must be responsive to every day working people, must represent their own citizens. madame prime minister, we look forward to working closely with

you as we strengthen our mutual ties in commerce, business, and foreign affairs. courtney: theresa may is the first foreign leader to meet officially with trump since the inauguration. she confirmed trump has accepted an invitation to queen elizabeth's birthday dinner. angela merkel faces a turning point in the development of the european union. she says the need to stay together is all the more important and that france and germany are bound by their response to extremism. high-speed trains can help keep track of potential criminals. belgian, france, and the netherlands are introducing passport checks on euro star and your rail services. trump is considering lifting sanctions against russia, according to kellyanne conway. she also said if vladimir putin and wants to join forces against

isis, the administration is listening. russia says the next round of syrian peace talks in geneva would be postponed until february. the u.n. mediated talks in switzerland had been scheduled for february 8. rebels fighting to remove bashar al-assad declined an invitation to meet in moscow. hamas concluded a successful visit to egypt, the first by the group's leader imore than three years, according to egypt's state-run news agency. they discussed israel's blockade, palestinian reconciliation, and lingering power outages. the u.n. mediated talks in switzerland scheduled for february 8. several factions led an delegation to the negotiating table this week in kazakhstan. and hamas conclude aid to egypt, theit first by the group's leader in years according to egypt's state-run news agency which says a delegation returned

with security and political authorities. blockade,ss israel's palestinian reconciliation and lingering power outage driving theive protests across strip. global news 24 hours a day, powered by more than 2600 journalists and analysts and more than 120 countries. i'm courtney collins. this is bloomberg. >> i'm cory johnson. facebook c.e.o. mark zuckerberg has just come out against trump's executive orders. zuckerberg posted -- trump signed an executive order

aims to deny federal funds so-called sanctuary cities shield undocumented aliens. 25,000 jobs they're touting yet they happen to be doing rounds of layoffs, potentially thousands of people. they did their third round in november, we reported. so it sort of shows a lot of appearances,or political theater. the actual job numbers aren't

clear. .> things on thesere focusing new areas, all of the cloudy old things they're selling that, revenue is falling faster than new stuff can make up for. rommety talkginny about we're remixing all of people. they promised to hire in the midwest and then fired people. the timing is -- results,gle's alphabet of all the companies that reported yesterday, i felt quarter and the analysts, you see a company, fourth-quarter revenue growth is ago,e digits three years 22% revenue growth for one of the biggest companies in the history of the world.

-- amazed by that. of growth.wed a lot that was the theme, the growth of profit coming through cloud computing server industry. >> it's interesting, you referred to it as cloudy stuff. more clarity at least that they're focused. other, group it in right? it's the other category. again, it's going to be all delivered as a service. to your point, office 365, be doing well.to you have the company talking about margin improvement and be the theme of a lot of the enterprise tech companies. spent so much over the past few years trying to ramp up on data center capacity, selling intel does that play into data centers and now it isms like some of that

shaking out and we're seeing the fruits of those labors. elon musk shows up at the 20-some peoplere gathered in a room with the president and yet the stock, with no other changes in the business, missing their fourth and year-long goal for shipping cars, stock is rallying the trump rally. >> not many changes in the business itself but changes in environment. elon has quickly developed this relationship. have hist hurt to relationship with peter teal but this relationship -- >> peter teal at paypal. ran paypalusly before he was fired there. spacex andsted in tesla. teal and muskago a long way back. teal, obviously, trump's right-hand man, ambassador to valley, has presumably

helped broker connection between there's a perception of the connection between trump and musk that could benefit tesla but also the fact that elon -- tesla develops as far here.they make the cars they don't import like other automakers. case, morganhe stanley analyst adam jones said not part of the investment thesis. ande looking at the model 3 integrations from solar city and doesn't u.s.a." thing, fundamentally change the business itself. >> i don't know if we expect clean energy subsidies to come than the obamare administration so if the subsidies go away, the cars are excessive. >> import taxes for competitors. app dynamics -- you're an i.p.o. reporter and

no i.p.o.'s so you got lots of snowboarding but this year we expected a lot of deals, a big deal this week publicd away from the markets, cisco buying app dynamics. >> it was supposed to be the u.s. tech i.p.o. of the year. there are no technology or communication companies on the road right now through basically mid february looking to go public so we have all of this be aabout this is going to i.p.o.'s and a for for an exit environment investors. we haven't seen it yet. looming is the company but in terms of the little ones, mill soft aiming to go public as as the first quarter but talking to sources around this appdynamics deal, i will say the

fact that it was bought for $3.7 billion when the market value $1.7ooking at closer to billion had it listed, that good thing for companies considering, to potentially helping valuations for companies. fantastically growing public software company, flow, profitable. >> investors are excited. was bloomberg i.p.o. editor. and tech up withp, talks to team amazon. what's next? human sacrifice? dogs and cats living together? mass hysteria? we will discuss.

>> paypal talking with amazon remember of old, i anti-amazon.as the it's kind of amazing that these guys might finally get together. >> right, right. of course, when they split from ebay a couple of years ago, this was the thought that this was the one big retailer they would like to have. the question is, does it make sense for amazon?

aazon is the one site, destination site where you go cardsve various payment already stored. so i'm not sure what they gain by adding paypal, especially in the u.s., as a new option. cory: the paypal business has this rich history of data, right? they have an understanding of how ebay's business has worked for so many years. could that treasure trove of information be available to amazon with this partnership? >> that is one thing. the other thing i have been thinking about is that as an asset, it has really exploded. right?nmo, is extended venmo with merchants. my thought is, what is a new asset that would perhaps be interesting to amazon, these millions of millenials, maybe than just the core paypal

app, they'd want to add the venmo customers. from paypal's side, i think so being a direct option for amazon sales, it's really two million plus merchants. paypal has 15 million globally now and that's a new base of merchants that would be them.tive to >> paypal back in the day was blowing through about a hundred million dollars in cash flow per quarter. accumulated deficit of nearly $3 million. it was not by anyone's imagination a successful enterprise. but now it is quite a profitable business on its own. >> absolutely. a the end of the day, it's payment protssing company. where they have really succeeded is on the mobile side of the business. that has exploded. and now with the one touch buying on your mobile device. really starting to gain increased usage. paypal customers are coming back much more often to use the

service. that is what is driving the whole shift to mobile. and the fact that there have been so many tech companies that theirried to come into turf but really at the end of the day, the alternative payment online anyway continues to be paypal's. cory: thank you very much. we appreciate it. up next, meet the commercial space venture trying to replace the international space station in the next decade. the acxiom space c.e.o.

cory: the international space station is headed toward retirement, set to be decommissioned around 2024.

boomer's caitlin meehan has this wentt on the work that into the international space station. 1984 state of the union address, president ronald reagan called on nasa to develop a permanently manned space outpost and do it within a decade. that sparked the most complex engineering project in history, the international space station. five different space agencies representing 15 countries cooperated on the $100 billion project. assembly began in 1998 and it took 40 missions and 13 years to complete. roughly the size of a football field and weighing more than 160 -- 860,000 pounds, it's the havest structure humans ever put into space. it costs an estimated $3 billion with somemaintain estimates putting the cost at $4 2020.n annually by annual budget was $19 billion but so far we don't

know what the trump store fortion has in research goals and space funding. both the u.s. and russians these agencies have said they will use the iss until 2024, at which time a commercial outpost might be available. cory: that was the caitlin meehan. next?t's how about a private space station? that is the idea behind axiom space. they want to run a commercial theost to host tourists in future. they said it could be a $37 billion business by 2030. i spoke to the ceo. he ran the iss for nasa, so he knows how this should work. he explained why there is a need for continued research on board a space station. >> gravity is such a big player in the way interactions occur. when you remove that, you can see the other dominating factors, and when you see the other dominating factors, you can learn more about how to deal like cancers and evolutions

and things ofs that notch. from a research perspective, it because gravity plays such a big role on the learn so much in orbit. from a manufacturing standpoint, there are a number of reasons manufacturing can benefit from this. there is a fiber that when pulled in orbit, you have a very no gravity so there's no settles, you get this very homogeneous material. in doing that, you get are 100 timeshat the capability of optical fibers today. the ground the performance is so high, you can pass infrared through these and that's a huge market potential there. to get the cost of getting there and back down. right.tly our objective is to build a facility that is much lower cost, increase the access, and reduce the complications you have to go through today to fly. we are building an environment

that is plug and play when you get to orbit. we're going to have plugs like home andin your laboratory on orbit. there will be special space connectors. the software will be like plugging into your laptop. the computers we are designing for our module have kind of like cell phones, very small computers, and when they get old, we are not going to try to build that same computer, we are just going to get the latest technology and fly it, and users can do the same thing. these are the steps we are taking to drive cost down. and make access more possible. cory: talking about usability, like working in someone's office or something, is a lot more familiar. >> we are trying to drive all the cost down. today to build a piece of space-flight hardware is because you'ree driven to space flight parts.

special specifications for space flight and things of this nature come, rightfully so, from years of experience with human spaceflight. but what we have found over the years of working on iss is that there are critical functions you have to worry about and protect for. the environment, for instance. you have to hold pressure in the shell. we will build that to normal space qualifications like you normally have to. but all of the research stuff is not space flight critical. we can use components on the ground to the maximum possible. or those you can buy on the ground. cory: this doesn't step up the cost? >> absolutely. when i left the program, that's our laptopsbuying at the end. we were not making modifications. we were buying them basically -- not at costco, but on the and, -- on the internet we bought the wanted.mputer we cory: there is so much effort going into space tourism. i think of richard branson. what is the role of space

tourism in this new space you're building? >> that's a great question. you hear about that a lot, wealthy individuals that have iss. to a handful that have done that. there is a market for that. branson is doing, blue origin, is giving people an opportunity, at a very low cost, my opinion, to see the curvature of the earth that you short period of micrographity and have a limited of space.blackness there are other adventures, the balloon, and other ideas you have seen as well. tourism on orbit is something people want to do. people want to spend time in microgravity, get over feeling ill for the first few hours and then have the view, see the talk aboutbe able to it while you are up there, quality time. that is a market. cory: what does that have to do with the size of what you are building? >> you have to accommodate them,

view, good good place to stay. cory: how many? >> our particular module will house seven, with crew quarters. we're doing that because we want to choose from any commercial access to space and the largest is a version of crew.agon with seven we will procure that service and accommodate them in orbit. cory: what is the life expectancy of your space station? >> we're going to build it. each structure will be built for years and expect to extend that. our space station starts as a module on iss. the next components come up for the whole thing separates. all of the major components will be able to be replaced, so stay incally, you could orbit forever but it's design.ble if manufacturing takes off, which i think it will, we could have a special module just for manufacturing. if the airlock gets old, we can

putw the air lock away and a new one up there. we're building a design that's in orbit and can stay indefinitely. cory: legos in space. >> very similar to legos in space. that middle lego that everything attaches to is the most challenging one, the node. but that will be able to be replaced. that was axiom's c.e.o. that does it for this edition of bloomberg technology. earnings season continues next week, results from apple, amazon. and we will break down the results right here in bloomberg tv. this is bloomberg. ♪

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