shery: it is 1:00 here in hong kong. here are your top stories. largest pc maker plunging by two thirds to $98 million last quarter. pc makers are struggling as people often for smartphones instead. hp.vo stayed just ahead of sources tell bloomberg that china's security regulator is considering regulating frequencies. we are told that they may restrict secondary issues to once every year. sources say the plans are not yet finalized.

the boj governor says falling back profits presents a new challenge that may trigger a different financial crisis. a self approach to regulation is said to be the most effective if profits continue suffering. the bank has been praised for actively taking risks. global news 20 for hours a day powered by 2600 journalists and analysts. this is bloomberg. let's now get a check on the markets in play, trading getting way underway in hong kong. this is bloomberg. ♪ caroline: this is bloomberg technology.

coming up, the gamble on software returns up mixed results. break down the earnings for the second quarter. and we preview the opposite could finally end its long dance with verizon. and the cyber threat from russia is linked to russian intelligence and we speak with an is a director general chief alexander. first to our lead. cisco shares popping in after-hours trading. second-quarter revenue was over $11.5 billion, just beating estimates. the forecast may fall short of those projections. cisco has been struggling to jump start sales growth, ships to software-based services. joining us to dig into those numbers is cory johnson. we are seeing the function, if you are looking at it come a shares fell in after-hours

trading, popping slightly higher. it seemed to be in line. cory: second quarter often tougher cisco. this is another slow turn that is cisco as they moved through security, more towards software. you see the turn of their business. when it comes to burning surprises, you know that is a phrase that gets the hackles of my era. if you go to my bloomberg terminal you can get this great command, this is the sixth column, it shows the percentage of surprise. if i scroll back through 2016, 2015, 2014, all green. as far back as we can see. cisco has beaten its earnings-per-share estimates

when it comes to adjusted earnings. the fact that the company beats by a penny is so meaningless with this company because they manage expectations and guidance. you have to look under the covers to see what is going on. >> you will see that fourth quarter is declining on stagnant sales. where are they struggling? >> e.m. sales. it shows you this turn. you look at sales numbers, you can look at billions of dollars. what we see when it comes to the percentage changes, you can see the turn. despite billions of dollars in acquisition, you see a decline in sales that we have it seen in an norm us distress. one of the reasons you are

saying that, it is a slow down in the service providers who are big customers, just not spending as much. >> they have been struggling to get into the software side of things. software is where you need to make acquisitions if you're going to be pushing forward. perhaps not quite the right one. >> they have done better than their competitors. or god for bid hewlett-packard. all of these companies, go back to their old competitors. nowhere near as successful.

we were on a different world of we were on a different world of technology. every company doesn't have to build their own service in the back room. they don't have to have the computing infrastructure. that was the great stuff of ibm and dell. those businesses, in a world where google is starting to big a big business providing computer power in the cloud, which would have hurt them more have a not been better prepared for this. i think that is why you don't see them freaking out on these results. >> that reason acquisition of at dynamics. >> we were pleased to provide customers with deep analytics across the data center, the

network and applications. customers are seeing access through intelligent networks. caroline: talk to us about the third quarter. we still think shares are up two percentage points. when do we see the real dividend stops payout? >> dividends increase for this company. we think it is the stewardship, pretty good. the is you a lot of stock options. there is also throwing more and more free cash flow. they can afford to do that. this is a slow turn. if you look at this number, sales per employee, you have this big sales stuff. things are consistently good for cisco.

those numbers have generally been better over the course of the next few years. that is an important metric. they have an army of sales providers. they get in close with their customers. management responds. they strip down a lot of leaders helping them respond to customers more quickly. it seems i it has been a smooth transition. >> liking that graphic there. thank you very much, cory johnson breaking everything down for us. a story we are watching now, bloomberg worst forced report on a little known option to uber's employees. a program that let those who work for the company for years so back as much as 10% of their uber shares. the plan at well below 10

billion for employees. it is meant to give employees an incentive to stay since the company has no initial public offerings inside. coming up, verizon is close to a renegotiated deal. but the surprise is just how little that discount is. we will break down the deal next. this is bloomberg. ♪

caroline: revamped market strategies helping groupon

shares fall after the company posted sales that eat analyst estimates. they jumped more than 40%, the biggest gain since july 2016. now verizon is getting close to a renegotiated deal. the new deal would reduce the price of the original $4.8 billion deal. verizon had balked at the first price. now both companies are expected to share ongoing legal responsibilities related to the hacks. joining me now, alec sherman who helped break this story. talked to us about this discount. isn't that much? >> it is not that much. i think yahoo! shareholders are going to walk away from this fairly happy because there was a risk that verizon may walk away from the entire deal altogether.

the game that has been going on, who has more to lose? i think yahoo! has more to lose. they would have been in a difficult position and they would have to rerun that sales option. they probably would not have gotten the high of a price. i think yahoo! has to walk away from this thing. we are happy with a discount of 250 million. that could go up a little bit. >> i spoke to the ceo of aol last week. the desire was really there to get their hands on yahoo! and its consumers. >> i'm hopeful the deal closes. we have a high appreciation for yahoo! overall. that is how simple it is. >> the valley change has been negotiated now. what about the next step for

both? >> you have the reason about why verizon was able to accept such a low discount. part of why they want yahoo! is so they can move on to whatever else is next for verizon. we have reported there was a conversation between verizon's ceo and libertarian -- liberty media, about a massive deal for charter communications. we don't know if that is going to happen but verizon was looking at 10-12 acquisitions of size after a yahoo!. it allows them to move over. you have to think there is a high likelihood that could be a bigger deal than yahoo!. yahoo!'s internet business is only a small fraction of the larger companies you mentioned.

yahoo! japan and alibaba. they were willing to accept the discounted price. not only to get a buyer for their property but so that they couldn't monetize yahoo! japan. which is the crux. it is some ongoing buy this stuff from them? are they going to trade for a while? all of those are outstanding questions. >> i want to make the most of you while you are on this show. we are talking deals there. >> apple has this enormous cash pile. pile. hundreds of millions of dollars. tim cook has signaled that apple may be finally willing to do some bigger deals. they've never really done deals in the 40 plus year history of the company.

they've grown products. we have not seen it. my colleague and i dug deep and that print by haven't they done this? they are just not structured to do big deals as a company. they don't have a big m&a team. they don't like working with investment bankers. the mechanics of being able to do a deal is not easily there for them. they have scratch their heads and said you want us to do bigger deals. why haven't we seen it? their corporate coulter isn't structured to do this unlike at&t which we have seen by directv. i have spent hundreds of billions of dollars on acquisitions. caroline: maybe the infrastructure is not there. many have spent hours hypothesizing what they could buy. who actually would apple be

looking to buy? >> great question. the three main targets are tesla, netflix, and disney. that is who they suspect apple will buy. you're going to pay a company that keeps paying more and more money for content. netflix has capped its stock price high by adding customers. there is a synergy there. netflix is a subscription business. that is how apple monetizes. through itunes that is. from disney, there used to be a strong connection with steve jobs, who was on the board. there are a lot of synergies between disney's content and apple.

that would mean apple is getting into the themepark business. even the cable tv business. if they did by disney you would have to wonder are their divestments they want to make? or do they want to take on that enormous company? caroline: on top of all of your hard work, thank you for spending some time with us. wall street meets silicon valley at the goldman sachs technology conference. highlights from our exclusive interview next. and our interactive tv function. you can find it at tv on the bloomberg. you can watch us go and see interviews to dive into the things we talk about. this is for bloomberg subscribers only. ♪

caroline: now to a stock we are watching.

shares of tesla near record highs. only a handful of analysts have begun to include the deal in their forecasts. others are waiting on more information. as we mentioned earlier deals like cisco and at dynamics, they are assuring in an aggressive era of tech m&a. we spoke about the rising number of tech deals and ipo activity in the space at goldman sachs technology conference. >> there is certain lots of capital available for companies that are growing pre-tech companies growing, a lot of that capital is available privately. last year was an historically low year in terms of ipo activity. things add been flow but gravitate back to the mean.

we are hopeful , but when you look at the world these companies operate in, if they are able to grow and access capital privately and there aren't other pressures from shareholders, these companies are putting off the opportunity to come for the public markets longer. the capital for growth is available privately. i would expect to see more companies coming back to the public markets then we saw last year but that process is going to be a methodical process. >> we saw plenty of consolidation on the cash balances. we might see yet more cash if we see money come from back from abroad. >> m&a activity in the tech space is pretty active. we have been involved in 14 m&a transactions since the first of the year. that is more than we have seen since the year 2000 to see that activity. there are a number of reasons

why that is occurring. one of the things that is happening, you have a number of large companies that are growing very quickly. facebook grew over 50% on the $28 billion revenue base. those companies are growing. they are generating cash, generating market cap. they are taking away revenues in some way. that is what some of these businesses are in a place where they have to think of strategic options more carefully. we are going to continue to see consolidation. activities will continue to be high this year if the environment stays the way that it is now. it could be a relatively good m&a year. caroline: let's talk about disruption.

let's talk about how goldman sachs is evolving. lloyd blank find said back in 2015, goldman sachs is a technology company. do you have more engineers and bankers at the moment? >> we clearly are using technology in our business much more than we would have 10, 15 years ago. if you go back 15 years, the way people traded equities was voice to voice, person-to-person. now it is through a vast system of connectivity. that is a massive shift in the staff that you need, the assistance you need. that is going on in most aspects of the business. we hire all different kinds of people. we have a diverse workforce. we need different kinds of talent. we have increased the stem graduates we are hiring because

there is more engineering work. as we look to make technology investments that can serve more clients we need those kinds of people. i would not say more versus finance majors are others that come from a business background. as you and i discussed before we came on, the quality of our people to attract great people to differentiate the fund has changed our business. caroline: does your culture have to change to attract these people in? do they want more flexible working? >> i don't think it is fundamentally different. young people coming into the workforce want to work for a great organization with terrific people that serve clients, gives an opportunity to learn, grow and accept. we have always been focused on creating the best work environment for a long-term growth, positive experience, economical employees.

we believe we do that. it is a positive cycle. caroline: you have got into digital lending. how does it go there? >> that is a new business for us, a new platform. we are in an interesting position. given our balance sheet and our funding, without the commercial banking competitors, and a position where we can build a tailored technology product. we have a targeted universe we are going after. we are excited about the growth opportunity. so far it is off to a good start. we are excited. caroline: my conversation with david solomon at the company's tech conference. still to come, general keith alexander joins us to joins us to discuss more.

that is next on bloomberg. ♪

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shery: china's efforts to shore up the yuan have depleted to $1.06 falling trillion in the biggest foreign creditor to the united states, japan, also cut back holdings for the second year. sources say u.s. intelligence agencies are investigating the contact between president trump's associates and the russian government including communications during and after the election.

leading republicans have joined democrats for a deeper look at the connections between donald trump and russia. banks to has asked pitch for a role in advising on the sale of its last remaining operations in australia for coal. after receiving unsolicited approaches from potential buyers, it could be worth $1.5 billion. -- in advanced discussions to purchase a stake of a motor group. the private equity firm is in $450 million.bt the singapore-based company provides research and development services. global news 24 hours a day powered by 2600 journalists and analysts, you are watching

bloomberg. let's get a check on the markets in the asia-pacific region. reporter: there a mixed today. the u.s. treasury pile and the end giving the indication that it is a safe haven play rather than i guess investors -- [indiscernible] data andcountry index that record high yesterday. the nikkei is off. strong yen. positivity coming through in the age share index in hong kong, trading high. closed higher by 1/10 of 1% and shanghai is also checking in higher. in hongalling sharply kong. earnings missing estimates. telstra also coming through with a profit.

domino's pizza is a standard after his forecast data we are going to be live from london at the top of the hour. this is bloomberg. ♪ >> you are watching bloomberg technology. let's start with a check of your first word news. this is bloomberg technology. our top story, cisco shares still up in after-hours trading. the company reporting second-quarter revenue was over $11.5 billion, just eating estimates. it may fall short of analyst projections. working to jumpstart sales growth, since the network industry shifts to software-based services. u.s. officials are investigating the extent of contact between donald's advisors and russian intelligence before the election. michael flynn step down this week. developers are the latest example of national concern about russia's capabilities and the insulins on the national

security of the u.s. someone with expert knowledge, keith alexander. at the helm, in town for the rsa conference. welcome to bloomberg technology. you have plenty of clients looking at what they can provide you. i want to ask about the executive order that many are anticipating. what do you want to see on this executive order? >> i doubt want to get out in front of the president. what he gave to the press about addressing government, aggressively getting there i.t. infrastructure ready, getting government to work together and addressing the key problems,

those were in the right venue and what our nation needs to get started on this. the key thing you see in his his approach is he is delivering on a campaign promise, that we will take cybersecurity seriously and address this problem, and we need government and industry to work together. caroline: iron net does look to the government as potential clients. were you privy to conversations as they work towards this? >> they do. they reached out. they give people more than just me, people that can really read. they give them a chance to look at this and give advice. that was one of the great privileges, to sit in there is one of the advisors, i thought that was a great way to build on it. you can see they are taking that

input and continue to refine that executive order in a thoughtful way. caroline: some of the other people you look to, giuliani, does he have the relevant expertise? >> he has the management and leadership insights. how do you bring industry and government together? what is he bring to the table, he can be one of the people that helps bring industry and government together. that is as important as technical folks like myself and others to talk about the problem. >> let's talk about russia and all of this comes on the back of revelations ussia was behind cyber attacks in the run-up to the election.

how concerned are you? >> i take a slightly different and probably unique view. when a new president comes and office, one of the things we ought to do is say is there a way we can work with other nations? how do we do that? what is the right relationship united states should have with russia, with china, with others. can we help the world? step one, research that. can we come up with a relationship? fine those limits and set this according to what his administration is going to do. one of the things i take comfort in, some of the people he has brought into the cabinet, the secretary of state, this is a great individual. and secretary defense. a personal friend. tremendous capabilities. you put those people together, he is putting together people who will give him candid advice.

that is what he is seeking. candid advice. it was amazing to see him go around the table, talk to people, get their insight, listen. i thought, that is the president our nation needs to see. he is listening. he is getting this right. he is going to address problems that we need addressed. that is a good thing. the first step is, we don't want to step out with a let's go to a conflict. is there a better way to do this? we should research that first. caroline: is the research to close? one person stepped down. can you talk to us about whether that is a weakness at the moment?

is that a worry? what about who can fill michael flynn's shoes? >> they selected somebody already. i think that is out there. i'm not breaking it now. i know bob. he worked closely with general mattis. he was at centcom at the same time. he will do a great job. you have other great people in this. you have katie mcfarlane. then on the homeland security you have tom bossert. he has great people there. the good part is, he is reaching out getting good talent. caroline: could we see the relationship with trump and some of the u.s. secret services be impossibly damaged? do you think there is any vitriol coming back? >> isil none of that. in the room that i was an you

could say the same thing for the director of the nsa. i saw it not at all. completely professional. i think the president is looking at these things. at the end of the day, when i saw him reaching out to that with mike rogers, i don't see that happening. caroline: can you give us a global perspective of where they are in need of great cybersecurity, preventative measures, getting potential calls. is the u.s. a key concern? >> the u.s. is in part because we are a country, when you look at how do you tack the united states, terrorism. cybersecurity. those of the two vectors.

we have done a good job blocking terrorism. we need to keep that out. that is a key for our future. a lot of work. our cyber defenses are not there. we have not fixed government. we do have the government industry partnership. we would see after the fact and government, that is not where we need to be. it needs to be defensive. we need the ability to defend the nation at network speed. if somebody tries to her desk, we can stop it. before the attack cripples us. those are the things i see the biggest needs. things we have to move forward on. when i think about the greatest concern i have. i look at that and think, these are issues. we don't need a pearl harbor. the part that i found comforting was trump listen to those people.

we are going to make a steps. i don't know they will get it all done this week but i think they will address that. i think you will see movement on it. we have to get industry and government to work together. it starts with the first step. caroline: where is the number one threat coming from? >> it depends on what is going on. several countries. what i'm concerned about is if we have more issues with iran, what goes on with iran once iran is done with saudi arabia. does that come back to haunt us as it did in 2012 when they attacked against our banks? when you look at that, does that come back to haunt us here in 2017? other countries could wish us harm depending on how our diplomatic relations go. you think about it, cybersecurity, cyber attacks are being used as an element of

national power. those countries that cannot wield the physical attack can wield a cyber and hope to get away from it. we have to be prepared for that. caroline: it has been great having your perspective on that. coming up, we dive into the vacation rental space. how he things president trump's stance on immigration will impact the sector. if you have a bloomberg terminal check out tv . you can interact with us directly. this is bloomberg. ♪

caroline: competition and the vacation rental market is ramping up at a fierce pace. a major contender is homeaway.

they announced they surpass 2 million unique offerings. thanks to further integration with expedia, which acquired the company in 2015. it is on the hunt for new acquisitions and partnerships to ramp up its had a great. john cam is live from austin, texas. new offerings, give us how you are beefing up a potential to compete with airbnb that seems to be getting into the vacation rental space that much more. is that a worry? >> when we start to think about this industry, one of the things going in our favor, we look at the recent years.

it is really growing 30-40% year over year. when you look at the overall marketplace it is rife with opportunity -- right with opportunity. where i think we are strong is our roots, we grew up with having inventory that was associated with being private and home oriented. beach houses, mountain cabins. we think that these are properties that consumers are going to love. i'm not focused on the competition as much as i am focused on taking advantage of the opportunity in front of us. a growing awareness among the travel market, making sure we have properties that fulfill their needs. caroline: how are you going to get those new properties coming to you? if they are looking for their own? >> the way to think about it, as long as you have command in a particular market, it is not

about acquiring the most, the question is do you have this election for the target audience you are targeting? we specialize in focus on families. our properties, when we look at the value proposition, we want to give them a kitchen. we want to make that experience easier for them to book. this is where we really do shine. we are doubling down and making sure this gets easier. >> let's talk about the ease of booking. half currently, how we you sure all of them are? can all of them become the 2 million that you have? >> i don't think all of them are going to be instantly bookable. we have a number of properties, if they have 22 bedrooms, there may be a q&a back-and-forth they

need to have before a booking is made. there may be some questions that the owner has for the traveler and questions that the traveler has for the owner. as you get to more luxury properties there is to be more communication. is it the right answer for those cases? >> how about the company expedia, we might see yet more competition. some other players becoming more fully fledged travel companies looking to get into flights and businesses. is this something -- [inaudible] >> the travel industry has always been competitive. the thing that keeps you competitive, the things you invest in that make you great his relentless focus on the user.

there's a million things in travel you have to get right. this is not a game were you say i have a big idea. it takes time and investment. expedia, we are getting better at that every single day. that is the thing that we bet on. caroline: talk to me about the regulatory risk. you have a president who was himself a hotelier. is this something you have considered? >> one of the things we try to stay focused on, you can do a lot of speculative -- speculation in terms of what is going to happen next. and what people's incentives are. i have not heard anything in regards to being proposed that

would be coming from the offices of the president. until that happens we don't want to speculate because you can waste a lot of energy. >> we will let you conserve your energy for the time being. thank you for joining us. great to have you on the show. facebook is looking to boost its live sports streams. our conversation with the global head of sports, next. ♪

caroline: a story we are watching. amazon and google turning their popular smart features into home phones. amazon's echo and the google home could be used to make or receive calls, diminishing the landline business. it could be a major disruption for traditional telecom firms and take attention away from smartphones.

facebook is looking to put its sport streaming portfolio -- adding live games. scarlet fu sat down with the global head of sparks asking what is missing from the current level of sports broadcasting. like sports is inherently social. when you are in the stadium, the interactive environment is a must as important as what is happening on the field. we think combining sports content, where you have all of your friends, you can have that same interaction on a global or digital scale. whether it is a game on the platform order headlight -- highlights, or conversation happening, those conversations are happening on facebook every day. it is already the world's largest stadium per se.

we think there is an opportunity to bring that and are active to what you think of with consuming sports. it had always be one way because most of it has been consumed on television. >> talk about the integration number to reality and what you are doing. >> it is very early days in virtual reality. >> but it is something everybody gets excited about. >> we think there is great potential. the promise of vr, you can be watching a game in virtual reality as if you are there, and around you can be all of your friends the matter where they are located. my father lives in detroit, we can be watching a game together. we think that is the holy grail. there is a number of stuff --

steps that need to happen. we think it is not just a different experience, it's unique way to connect with people. caroline: facebook's global head of sports, speaking with scarlet fu. that does it for this edition of bloomberg technology. a quick programming note. tom keene will speak with the stanley fischer. look for that in new york, 11:38 0 a.m. in london. this is bloomberg. ♪

roar, traders tuned out. the first record high in 18 months. inflation sensation. u.s. consumer prices increase the most in four years. where does rising inflation leave the fed? and the trump tension rises. administration rights more fires at home. ♪